LA FABRICA DE CERVEZA DE SAN MIGUEL, PLAINTIFF AND APPELLEE, VS. ABELARDO HIZON ET. AL., DEFENDANTS AND APPELLANTS.

This action was commenced in the Court of First Instance of the
City of Manila on the 16th day of July, 1925. Its purpose was to recover of the
defendants the sum of P14,052.16 for “Royal Soft Drinks” and beer furnished by
plaintiff to the defendant Abelardo Hizon as its agent. The other defendants
were included, as sureties of said Abelardo Hizon.

The defendants Abelardo Hizon, Cayetano Arnedo, Atanacio
Mercado, Soledad Mercado and Felino Hizon filed a demurrer on the ground of
ambiguity and insufficiency of facts to constitute a cause of action, which
demurrer was overruled. All of the defendants answered, denying generally and
specifically each and every allegation of the complaint. Abelardo Hizon in his
amended answer alleged, by way of special defense and counterclaim, (a)
that should a liquidation of the transactions between him and the plaintiff be
made, the result would be a credit in his favor and against the plaintiff in the
sum of P559.38, plus the sum of P550 for containers returned by him to the
plaintiff and (b) that he suffered damages in the sum of P25,000,
arising from the termination of his agency by the plaintiff, without reasonable
cause and in violation of the terms of their contracts; and prayed for a
judgment against the plaintiff for said amounts.

Upon the issue raised by the above pleadings, the cause was
brought on for trial before the Honorable C. A. Imperial, judge, on the 25th day
of February, 1926. After hearing the principal witness for the plaintiff, by
agreement of the parties, the court appointed Mr. Vicente Fabella, a public
accountant residing in the City of Manila, as referee “con facultades para
recibir las pruebas que las partes y sus abogados presenten.”

The trial was continued before the referee, at the conclusion
of which and pursuant to a stipulation, the parties presented their written
“statements” in support of their respective claims. After a consideration of the
evidence adduced during the trial and the said written “statements,” on
September 10, 1926, the referee submitted his report to the court, in which he
arrived at the conclusion that the defendant Abelardo Hizon was indebted to the
plaintiff in the sum of P12,586.62. As to the liability of the other defendants,
the referee says in his report:

“(d) Los Exhibits H, I, J y K establecen de que los
otros demandados nan prestado fianzas solidariamente con el obligado principal,
Abelardo Hizon, y que dichas fianzas han sido prestadas en las formas y
cantidades siguientes: por Cayetano Arnedo y Soledad Mercado solidariamente
hasta la cantidad de tres mil pesos (Exhibit H); por Atanacio Mercado y Graciana
Mercado hasta la cantidad de dos mil pesos garantizada con primera hipoteca de
cierto terreno a favor de la San Miguel Brewery (Exhibit I); por Tiburcio
Mercado y Felino Hizon solidariamente hasta la cantidad de seis mil pesos
(Exhibit J); y, por Porfirio Espinosa y Chua Uy Kioc solidariamente hasta la
cantidad de tres mil pesos (Exhibit K); cuyas fianzas ascienden a un total de
catorce mil pesos.”

By permission of the court, on October 27, 1926, the defendant
Abelardo Hizon filed a long memorandum in which he contested various items
allowed by the referee in favor of the plaintiff and against the defendant. On
November 15, 1926, the Honorable C. A. Imperial, judge, rendered a judgment,
based on the report of the referee, in favor of the plaintiff and against the
defendants for the sum of P12,586.62, ordering the defendant Abelardo Hizon, as
principal, and the other defendants as sureties, to pay jointly and severally to
the plaintiff the said sum of P12,586.62 with legal interest from the date of
the filing of the complaint, and costs.

By reason of several motions for reconsideration and new trial
filed by the attorneys for the defendants, the court on December 28, 1926, set
aside its decision of November 15, 1926, and issued the following order:

“Con el fin de que las partes y sus respectivos abogados tengan
oportunidad de discutir ampliamente el informe por escrito presentado por el
arbitro (referee) nombrado se deja sin efecto la decision dictada en el
asunto con fecha 15 de noviembre de 1926, y se senala a vista el referido
informe del arbitro para el 8 de enero de 1927, a las 8.30 a. m., en cuya fecha
y hora los abogados de todas las partes interesadas compareceran y expresaran
sus puntos de vista acerca de dicho informe.”

On January 11, 1927, after a consideration of said motions for
reconsideration and new trial, the court, finding that said motions were,
without merits, revived its judgment of November 15, 1926, above stated. From
said judgment the defendants appealed.

Appellant Abelardo Hizon now contends that the lower court
committed an error (a) in overruling his demurrer and (b) in
not allowing his counterclaim for alleged damages arising from the closing of
his agency. He also makes other assignments of error in which he contends that
such and such amounts or items should not have been charged against him.

The other appellants contend, in substance, that the lower
court committed an error—

(a) In not absolving them from all liability under the
complaint;

(b) In not holding that they were jointly and
severally liable with the appellant Abelardo Hizon only to the extent of their
respective bonds;

(c) In holding them liable for obligations contracted
by Abelardo Hizon prior to the execution of their bonds; and

(d) In not giving them an opportunity to present their
proof in support of their objection to the report of the referee.

It appears from the record that the defendant Abelardo Hizon
had been acting as agent for the plaintiff for the distribution and sale of
“Royal Soft Drinks” and beer in the Province of Tarlac and in some of the towns
of Nueva Ecija and Pangasinan, from 1922 to 1925 under the terms of
“cartas-contratos” dated December 29, 1922, December 29, 1923 and December 29,
1924; July 9, 1923 and July 9, 1924; December 11, 1923 and December 11, 1924
(Exhibits A to G). It was provided in said contracts that “la San Miguel Brewery
se reserva el derecho de cancelar este contrato en cualquier tiempo durante el
mencionado periodo si hay suficiente motivo para ello, a fin de proteger los
intereses de esta Fabrica.”

Under the terms of said contracts and pursuant to the practice
of the plaintiff, the defendant Abelardo Hizon as agent, was to have an account
with the plaintiff, on which will be debited the prices of all products ordered
by him at the time of their shipment. Credits will be taken on said account for
remittances made by the agent as well as for the return of containers (cases and
bottles) and also for commissions, discounts and freight (Exhibits A to G).

To guarantee the performance of his obligations with the
plaintiff, the defendant Abelardo Hizon jointly and severally with his
codefendants executed and delivered in favor of the plaintiff four bonds as
follows:

Exhibit H, by Abelardo Hizon, as principal, and
Cayetano Arnedo and Soledad Mercado as sureties, solidariamente, for
the sum of P3,000.

Exhibit I, by Abelardo Hizon, as principal, and
Atanacio Mercado and Graciana Mercado, as sureties, solidariamente for
the sum of P2,000;

Exhibit J, by Abelardo Hizon, as principal, and Felino
Hizon and Tiburcio Mercado, as sureties, solidariamente, for the sum of
P6,000; and

Exhibit K, by Abelardo Hizon, as principal, and
Porfirio Espinosa and Chua Uy Kioc, as sureties, solidariamente, for
the sum of P3,000.

In June, 1925, by reason of the failure of Abelardo Hizon to
comply with his obligations with the plaintiff in regard to payment of his
accounts, the agency was closed by the plaintiff with the acquiescence of the
defendant Abelardo Hizon (Exhibit B-1). At that time he was behind in his
accounts with the plaintiff in the sum of P13,613.32 as follows:

	Statements of Accounts
	Exhibit L
	Exhibit M
	Exhibit O		P2,919.63
	Exhibit P		4,949.66
	Exhibit Q		509.50
	Exhibit R		575.40
	Exhibit S		834.90
	Exhibit T
	Exhibit U		1,885.39
	Exhibit V		914.24
	Exhibit W		893.60
	Exhibit X		131.00
			———–
	Balance against Abelardo Hizon		13,613.32

The defendant Abelardo Hizon presented documentary evidence
only, through the attorney for the plaintiff, consisting of Exhibits 1,
2, 3, and 4. The intent and purpose of said exhibits not having been explained
during the trial, and the same not being self-explanatory, we are at a loss to
appreciate their full evidentiary value. According to the record said exhibits
“hacen referencia segun el (Abelardo Hizon) a los Exhibits L a X.” The other
defendant presented no evidence whatsoever.

In connection with said Exhibits 1 to 4 of the defendant, the
plaintiff further presented Exhibits C-1 to F-1 and, with said exhibits,
explained in detail the correctness of the items or amounts questioned by the
defendant in his Exhibits 1 to 4.

The referee, after a careful consideration of the evidence
adduced during the trial and of the written arguments or “statements” filed by
the parties pursuant to a stipulation between them, found that certain
objections or “reparos” made by the defendant Abelardo Hizon in his written
argument, should be sustained and, accordingly, reduced the claim of the
plaintiff from P13,613.32 to P12,586.62 as follows:

	Exhibit O reduced from P2,919.63 to	2,857.11
	Exhibit P reduced from 4,949.66 to	4,043.28
	Exhibit S reduced from 834.90 to	827.10
	Exhibit U reduced from 1,885.39 to	1,835.39
	Exhibit Q as claimed by plaintiff	509.50
	Exhibit R as claimed by plaintiff	575.40
	Exhibit V as claimed by plaintiff	914.24
	Exhibit W as claimed by plaintiff	893.60
	Exhibit X as claimed by plaintiff	131.00
		————
	Total	12,586.62;

which is the amount allowed by the lower court in favor of the
plaintiff and against the defendants jointly and severally.

It is now contended on behalf of the appellant Abelardo Hizon
that the lower court committed an error in overruling his demurrer and in not
allowing his counterclaim for alleged damages arising from the cancellation by
the plaintiff of his contracts as agent.

The demurrer was without merits. It was based on the grounds of
ambiguity, and insufficiency of facts to constitute a cause of action. Such
alleged defects are not found in the complaint. The claim for damages is without
any foundation whatever. In the first place no evidence of damages was produced
during the trial; and, besides, his contracts as agent were cancelled by the
plaintiff by reason of his failure to comply with his obligations. The contracts
themselves specifically reserved to the plaintiff the right so to do, as stated
above. Furthermore, he agreed to the cancellation of said contracts. (See
Exhibit B-1.)

It is also contended on behalf of Abelardo Hizon that the item
for ice and tumblers, amounting to P1,079, should not have been allowed in favor
of the plaintiff, inasmuch as the contracts on which he was sued refer
exclusively to “Royal Soft Drinks” and beer. The evidence shows, however, that
there was an oral understanding between him and the plaintiff, that if this
article (ice) were not paid in cash, the same would be charged on his account or
else deducted from his remittances. Therefore, the inclusion of that amount in
the judgment is not an error. Counsel specify in his brief twenty-three other
items, contending that the same should not have been allowed by the lower court.
In answer to this contention it may be said that after a careful examination of
the evidence we are satisfied that a preponderance of the same shows that the
items were a proper charge on the accounts of the defendant.

The first contention of the other appellants, as above stated
is, that the court erre.d in not absolving them from all liability under the
complaint. It is argued that the obligation of the appellants, as sureties for
Abelardo Hizon, was extinguished in view of the fact that the contracts of
Abelardo Hizon with the plaintiff had been renewed without their consent or
knowledge. This contention cannot be sustained. The bonds executed by the
sureties contained the following proviso: “Entendiendose que esta obligacion de
iianza subsistira durante cualquier prorroga o renovacion de todos o cualquiera
de los contratos arriba mencionados.” Therefore the renewal of the contracts did
not extinguish the liability of the sureties on their bonds.

The second contention of the appellants is, that under the
terms of their bonds they are liable severally with Abelardo Hizon, only to the
extent of the amounts specified in the bonds and not for the total liability of
Abelardo Hizon as held by the trial court. We have carefully examined the bonds
and, under the terms thereof, we agree with the appellants that their liability
to the plaintiff is limited only to the amounts specified in their respective
bonds. The pertinent portions of said bonds, showing the extent of the liability
of the sureties, are as follows:

“Exhibit H

“Por tanto, nosotros Abelardo Hizon como obligado principal,
Cayetano Arnedo y Soledad Mercado, como fiadores nos obligamos solidariamente a
favor de la San Miguel Brewery por los saldos deudores de las cuentas que dicho
Abelardo Hizon contraiga o haya contraido con la San Miguel Brewery hasta la
referida cantidad de tres mil pesos (P3,000) segun los terminos de las
cartas-contratos reseñadas, a cuyo pago nos obligamos por nosotros y por
nuestros herederos y sucesores.

“Exhibit I

“Por cuanto, dicho D. Abelardo Hizon y la San Miguel Brewery
han convenido en que dicho credito de diez mil pesos (P10,000) as como todas las
demas obligaciones contraidas por el Sr. Hizon en los mencionados contratos,
esten garantizados con varias fianzas por un valor total de diez mil pesos
(P10,000), y que de esta cantidad, dos mil pesos (P2,000) esten garantidos con
hipoteca sobre ciertos inmuebles por uno o dos fiadores;

“2. Esta hipoteca la otorgan Don Atanacio Mercado y Da.
Graciana Mercado con el fin de garantir el pago de las cuentas que dicho D.
Abelardo Hizon contraiga a la San Miguel Brewery hasta la cantidad de dos
mil pesos (P2,000), etc.

“Exhibit J

“Por cuanto, dicho Agente (Abelardo Hizon) esta obligado a
prestar fianza, adicional a las otorgadas hasta la fecha, a satisfaccion de la
San Miguel Brewery por los saldos deudores de las cuentas expresadas en
el parrafo anterior, hasta la suma de seis mil pesos (P6,000);

“Por tanto, nosotros, Abelardo Hizon como obligado principal y
Felino Hizon de San Fernando, Pampanga y Tiburcio Mercado de Mayantoc, Tarlac
como fiadores, nos obligamos solidariamente a favor de San Miguel Brewery por el
saldo deudor de las cuentas antes expresadas, etc.

“Exhibit K

“Por cuanto, dicho Agente esta obligado a prestar fianza
adicional a las otorgadas hasta la fecha, a satisfaccion de la San Miguel
Brewery por los saldos deudores de las cuentas expresadas en el parrafo
anterior, hasta la suma de tres mil pesos (P3,000);

“Por tanto, nosotros, Abelardo Hizon como obligado principal y
Poriirio Espinosa, de Tarlac, Tarlac, y Chua Uy Kioc de Tarlac, Tarlac, como
fiadores, nos obligamos solidariamente a favor de San Miguel Brewery por el
saldo deudor de las cuentas antes expresadas, etc.”

From the above-quoted portions of the bonds, it clearly appears
that the liability of the sureties is limited to the respective amounts therein
specified. Therefore, that part of the judgment, holding them jointly and
severally liable with Abelardo Hizon for the latter’s total obligation to the
plaintiff in the sum of P12;586.62, should be modified.

It is also contended that Exhibit I is not a bond, but a
mortgage on a parcel of land situated in Pampanga, and that the judgment of the
court, in so far as it affects said alleged mortgage, is null and void. A
reading of said Exhibit I shows that even though it is designated in the body of
said document as “hipoteca” its spirit, intent and purpose is that of a
bond. The parties who signed said document executed the same, having in mind
that it was a bond and not a mortgage. They signed the document as follows:

“ABELARDO HIZON

“Obligado Principal

“GRACIANA MERCADO

“Fiadora

“ATANACIO MERCADO

“Fiador“

If the parties intended the document to be a mortgage, only
Graciana Mercado and Atanacio Mercado would have signed the same as
“mortgagors,” and Abelardo Hizon would not have signed the same, inasmuch as he
did not have any right, interest or participation in the land described in the
document. Therefore, the contention of counsel cannot be sustained.

Counsel also contends that the lower court erred in holding the
defendants liable for obligations contracted by Abelardo Hizon prior to the
execution of their bonds. This contention is without any foundation altogether.
Under the terms of the bonds the sureties bound themselves to answer for “Los
saldos de las cuentas que dicho Abelardo Hizon contraiga o haya
contraido,” under his contracts as agent for the plaintiff.

In the last assignment of error counsel contends that the lower
court did not give the defendants an opportunity to present evidence in support
of their objections to the report of the referee.

This contention is not supported by the record. As above
stated, counsel for Abelardo Hizon, by permission of the court, filed a
memorandum contesting various items which had been allowed by the referee in
favor of the plaintiff. In said memorandum counsel specified all of the items
objected to, with his reasons for so objecting. The trial judge rendered his
decision after considering all of the evidence, the report of the referee and
the defendants’ objections thereto. And not only that, but in order to give full
and complete justice to the defendants, the court in its order of December 28,
1926, above quoted, set aside its decision and set the eause for further hearing
on January 8, 1927, with special reference to the report of the referee. By
reason of the failure of the attorneys for the defendants to appear, and after
considering their motion for reconsideration and new trial, the court on January
11, 1927 revived its decision of November 15, 1926, and reproduced the same by
incorporating at the beginning thereof the following paragraphs:

“La decision dictada en este asunto el dia 15 de noviembre de
1926 se dejo sin efecto, por orden dictada el 28 de diciembre de 1926, para dar
oportunidad amplia a los abogados de todas las partes interesadas de discutir
los meritos del informe por escrito presentado por el arbitro que ha sido
nombrado por convenio de todas dichas partes.

“En la vista de dicho informe del arbitro comparecio el abogado
Marcial Cordero, en representation del codemandado Abelardo Hizon, y en el
escrito que ha presentado aparecen los fundamentos que se alegan para que dicho
informe sea desaprobado, se conceda reapertura de juicio y que se dicte despues
sentencia a favor de dicho demandado. El abogado de los otros demandados en vez
de puntualizar sus objeciones contra el informe, someti6 una moci6n por escrito
solicitando transferencia de vista de dicho informe. Esta petition se ha
denegado, por no estar bien fundada. Ninguno compareci6 por el abogado de la
entidad demandante.

“Los meritos del asunto no han cambiado enteramente, y las
conclusiones de hecho y de derecho expuestas en la decision dictada el 15 de
noviembre de 1926 deben ser mantenidas. El informe del arbitro, con sus
conclusiones, esta enteramente de acuerdo con los hechos y esta sostenido por
las pruebas presentadas por todas las partes y esta fundado en la
ley.”

From the foregoing it appears that the defendants were given
every opportunity to present evidence in support of their objections to the
report of the referee. The assignment of error, that the defendants did not have
their day in court, is without any foundation.

In accordance with all of the foregoing, we are of the opinion
that the judgment appealed from should be and is hereby modified. Therefore,
Abelardo Hizon is hereby, sentenced to pay to the plaintiff the sum of
P12,586.62; and his codefendants, as sureties, are hereby sentenced to pay to
the plaintiff, jointly and severally with Abelardo Hizon, the proportional parts
of said sum as may be covered by the amounts of their respective bonds. In all
other respects, the judgment appealed from is hereby affirmed, with costs. So
ordered.

Street, Malcolm, Villamor, Ostrand, Johns, Romualdez,
and Villa-Real, JJ., concur.