Case Digest (G.R. No. 20588)
Facts:
The case involves the Asiatic Petroleum Company (Philippine Islands), Ltd. as the plaintiff and appellant, and Francisco Hizon y Singian and Justino A. David as the defendants. The civil action was initiated in the Court of First Instance of Pampanga to recover the sum of P51,560.12 from Justino A. David, the principal debtor, and Francisco Hizon y Singian, who acted as surety. The case arose from a contract made in 1916, where David was appointed as the selling agent for the plaintiff in San Fernando, Pampanga, and surrounding areas. Over five years, David received various consignments of petroleum products, leading to a debt of nearly P60,000, which was later reduced to P40,786.98. The trial court ruled in favor of the plaintiff, ordering David to pay the principal amount and Hizon to pay a portion not exceeding P5,000. David did not appeal, but both Hizon and the plaintiff contested the ruling. Hizon argued for complete absolution, while the plaintiff sought to hold him jo...
Case Digest (G.R. No. 20588)
Facts:
Parties Involved
- Plaintiff and Appellant: The Asiatic Petroleum Company (Philippine Islands), Ltd.
- Defendants: Francisco Hizon y Singian (surety) and Justino A. David (principal debtor).
Nature of the Case
- The plaintiff filed a civil action in the Court of First Instance of Pampanga to recover P51,560.12 from Justino A. David (principal debtor) and Francisco Hizon y Singian (surety) for an alleged balance due upon liquidation of accounts.
- The trial court ruled in favor of the plaintiff, ordering David to pay P40,786.98 and Hizon (as surety) to pay up to P5,000. David did not appeal, but both the plaintiff and Hizon appealed the decision regarding Hizon's liability.
Background of the Transaction
- The plaintiff, a corporation engaged in selling petroleum products, entered into a contract (Exhibit B) with Justino A. David in 1916, appointing him as its selling agent in San Fernando, Pampanga, and neighboring towns (Guagua, Angeles, San Simon, Capas, Magalang, and Mabalakat).
- Over five years, David received and sold petroleum products on behalf of the plaintiff. By 1921, David owed the plaintiff nearly P60,000, later reduced to P40,786.98.
Surety Agreement
- Francisco Hizon y Singian signed a suretyship agreement (Exhibit B-1), obligating himself to answer jointly and severally for David's obligations under the agency contract.
- The suretyship agreement was appended to the agency contract (Exhibit B) and was signed and notarized on November 17, 1916.
Dispute Over the Scope of the Surety
- Hizon claimed he only agreed to be liable for David's obligations as an agent in San Fernando, not in the other towns listed in the contract.
- Evidence revealed that the names of the additional towns (Guagua, Angeles, San Simon, Capas, Magalang, and Mabalakat) were inserted into the agency contract after Hizon signed the suretyship agreement.
- A copy of the agency contract preserved in the official archives did not include the names of the additional towns, supporting Hizon's claim.
Issue:
- Whether Francisco Hizon y Singian, as surety, is liable for the entire debt incurred by Justino A. David as the plaintiff's agent.
- Whether the insertion of additional towns into the agency contract after Hizon signed the suretyship agreement discharged him from liability.
Ruling:
- The Supreme Court reversed the trial court's decision in part, absolving Francisco Hizon y Singian from liability entirely.
- The Court held that Hizon was only liable for David's obligations as an agent in San Fernando, not in the other towns added to the contract without his consent.
- The alteration of the principal contract (agency agreement) without the surety's consent discharged Hizon from liability under the suretyship agreement.
Ratio:
- Alteration of Principal Contract Discharges Surety: Under the law of suretyship, any material alteration of the principal contract without the surety's consent releases the surety from liability. This principle applies under both civil and common law.
- Scope of Surety's Liability: Hizon's liability was limited to the obligations incurred by David as an agent in San Fernando. The insertion of additional towns into the agency contract after Hizon signed the suretyship agreement constituted a material alteration that increased his risk without his consent.
- Good Faith of the Surety: Hizon's claim that he only intended to be liable for obligations in San Fernando was supported by evidence, including the unaltered copy of the agency contract preserved in the official archives.
- Technical Defenses: Although Hizon did not specifically plead the alteration of the contract in his answer, the Court allowed the defense because the evidence proving the alteration was discovered after the answer was filed.
Conclusion:
- The Supreme Court ruled in favor of Francisco Hizon y Singian, absolving him from liability under the suretyship agreement. The alteration of the principal contract without his consent discharged him from any obligation to the plaintiff.