STANDARD-VACUUM OIL COMPANY, PLAINTIFF, VS. LORETO PAZ AND GLOBE ASSURANCE COMPANY, INC., DEFENDANTS. GLOBE ASSURANCE COMPANY, INC., CROSS PLAINTIFF AND APPELLANT, VS. LORETO PA…

Upon a complaint of Standard Vacuum Oil Company against Loreto Paz, as
principal debtor and Globe Assurance Company, Inc., as surety, the Court of
First Instance of Manila (in Civil Case No. 33561 of its docket) rendered
judgment condemning both defendants, jointly and severally, to pay plaintiff the
sum of P13,984.76 with interest at 12% per annum from the date of filing of the
complaint until fully paid, plus 25% of the principal as attorney’s fees and
costs; and on the cross-claim of the surety, sentencing cross-defendants spouses
Loreto Paz and Maxima Paz^[1] (as
indemnitors) to pay the surety company such amount as may be paid by the latter
to plaintiff Stanvac, with 12% interest from date of such payment until fully
reimbursed, plus 15% of the principal judgment as attorney’s fees and costs.

Globe has brought the present appeal.

The facts are succinctly stated in the decision of the lower court, Judge
Magno S. Gatmaitan, presiding, as follows:

“On September 21, 1953, Loreto Paz entered into a sales agreement with
plaintiff which has not been exhibited in the record; two years after that, on
April 12, 1955, he entered into another sales agreement, Exhibit ‘A’. According
to witness Roberto Maglaya of plaintiff, the first agreement of September 21,
1953, is exactly the same as the second agreement of April 12, 1955, because
this is a regular company form, the only difference being one of dates and that
the second agreement is only a continuation of the first; after the second
agreement had been executed or about four (4) months (i.e., on 4 August 1955)
thereafter, Globe Assurance executed undertakings of suretyship Exhibits ‘C and
‘D’ in favor of plaintiff to guarantee the fulfillment by Loreto Paz of his
obligations; plaintiff, pursuant to the sales agreement fur-nished various
quantities of petroleum products unto Loreto Paz; of these amounts there was due
and owing as of April, 1957, the sum of P13,984.78 according to Exhibit ‘B-1’;
it is this amount which is the object of the present complaint. * *
*.”

Appellant Globe Assurance Company, Inc., in this instance, assigns four
specific errors allegedly committed by the lower court, all of which, however,
may be reduced to the single basic contention that appellant’s liability is
limited strictly and exclusively to the terms of the Reseller Sales Agreement
dated September 21, 1953, specifically referred to in appellant’s undertaking of
suretyship, Exhibits C and D, and does not extend to the obligations of Paz
under the Reseller Sales Agreement executed on April 12, 1955.

We find the stand of appellant untenable.

The contention of appellant would have validity if it be considered that the
execution of the April, 1955 agreement has for its effect the termination of the
September, 1953 contract. But, this is precisely not the intention of the
parties as shown by their leaving in blank the spaces in the sentence “This
cancels and supersedes Reseller Sales Agreement
No……………….dated……………….” found in paragraph 18 of the
April, 1955 agreement. The sole witness presented testified that the latter
contract is a mere continuation of the first. Appellant’s attorney admitted it
is a “renewal” of the former. Both agreements (which are admitted to be
identical in terms) provide that they shall remain and continue in force
indefinitely “subject to thirty (30) days’ written notice of cancellation from
either party to the other”. Under the circumstances, the obligation of the buyer
under the September, 1953 agreement (which was guaranteed by the appellant) was
a continuing one until terminated by cancellation in writing. And, since the
contract of 1955 did not terminate that obligation but merely continued or
renewed it, the liability of the surety remained unaffected.

Moreover, as the trial court found, the undertaking’ of appellant under its
suretyship agreement comprehends more than the specific obligations of the
Reseller Sales Agreement. Paragraphs 1, 2, and & of the Undertaking of
Suretyship read:

“1. Whereas, on September 21, 1953, a certain Reseller Sales Agreement was
entered into between STANDARD VACUUM OIL COMPANY, a foreign corporation
organized under the laws of the State of Delaware, U.S.A., duly licensed to
transact business in the Philippines, and having its principal office therein in
the City of Manila (the ‘SELLER’) and LORETO PAZ, of Highway 54, Makati, Rizal
(the ‘BUYER’) which said Reseller Sales Agreement is herein incorporated by
reference and made a part hereof; and

“2. Whereas, we desire to guarantee to the SELLER the faithful performance on
the part of the BUYER of all the covenants contained in the said Reseller Sales
Agreement, the payment of the purchase price of the gasoline, kerosene, fuel
oil, diesel oil, grease, lubricating oil, and merchandise, in general, that the
SELLER has heretofore sold, and may hereafter sell, on credit to the BUYER; the
payment of all sums of money advanced by the SELLER at the request and for the
account of the BUYER in connection with the business of the SELLER; and the
payment of all rentals due from the BUYER to the SELLER on any lease agreement
heretofore entered into or which may hereafter be entered into between the
SELLER and the BUYER.

“3. NOW, therefore, for and in consideration of the premises, we Globe
Assurance Company, Inc. of Manila, hereby jointly and severally, agreed to
reimburse the SELLER for any loss that it may suffer through any default of the
BUYER.”

It would seem clear from the above-quoted provisions that Reseller Sales
Agreement was mentioned in Paragraph 1 merely to indicate that a relation of
Seller and Buyer was created between Stanvac and Paz. Under paragraph 2,
appellant warranted to guarantee, not only the compliance by Paz of the
covenants in the Reseller Sales “Agreement, but specifically (1) “the payment
of, the. purchase price of the gasoline, kerosene, fuel oil, diesel oil, grease,
lubricating oil and merchandise in general that the Seller has sold or may sell
on credit to the Buyer before and after August 4, 1955” (date of the
undertaking); (2) “the payment of all sums of money advanced by the Seller at
the request and for the account of the Buyer in connection with the business of
the Seller”; and (3) “the payment of all rentals due from the Buyer to the
Seller on any lease agreement heretofore entered into or which may hereafter be
entered into between the Seller and the Buyer”. (Note that these last two
undertakings are not in any manner contained or mentioned in the Reseller Sales
Agreement, which fact supports the conclusion of the court that the suretyship
contract is more comprehensive than the Reseller Sales Agreement.) In paragraph
3, appellant expressly agreed “to reimburse the Seller for any loss that it may
suffer through any default of the Buyer.” The only limitation to these broad
terms of the undertaking of appellant is that the liabilities of the Buyer must
have been incurred in connection with the business relationship into which Buyer
and Seller had entered during the existence of that relationship. Considered in
this light, the account and the amount involved in this case come within the
terms of the suretyship agreement.

Appellant argues that the payment by the Philippine American General
Insurance (Philamgen) of the sum of P15,000.00 on account of defendant Paz’
total indebtedness to Stanvac amounting to P28,984.75, shows that the bond of
said company (Philamgen) was the one which secured the fulfillment of the
Reseller Sales Agreement of April 12, 1955 (Exh. A). There is absolutely no
evidence on record supporting this inference. On the one hand, Stanvac had the
right to cover the total indebtedness which far exceeded the guarantee
subscribed by appellant; on the other, this is expressly authorized in the
following quoted provision of appellant’s undertaking of suretyship:

“We expressly agree with the Seller that our liability- under the terms of
this Undertaking of Suretyship shall in no way be affected by any other security
that the Seller has heretofore received, or may hereafter receive, from the
Buyer or from any other person.” (2nd par., par. 8.)

Finding the decision appealed from in accordance with law, the same is hereby
affirmed, with the costs against the appellant. It is so ordered.

Paras, C. J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L.,
Gutierrez David, and Paredes, JJ., concur.

Judgment affirmed.

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^[1] The spouses Paz were declared in
default for failure to appear and answer both the complaint and the cross-claim
fited against them.