G.R. No. L-45821; April 12, 1939
SOCONY-VACUUM CORPORATION (formerly the Standard Oil Company of New York), petitioner, vs. LEON C. MIRAFLORES, respondent.

FACTS

Petitioner Socony-Vacuum Corporation obtained a judgment against its agent, Chan To, and respondent Leon C. Miraflores. Chan To was indebted to the corporation. On January 16, 1933, Miraflores executed a mortgage in favor of the corporation to answer for “all acts and defaults of the agent, Chan To, from January 16, 1933.” Chan To incurred new obligations after that date but made remittances exceeding those new obligations. The corporation applied part of these remittances to Chan To’s pre-January 16, 1933 debt. It then sued to recover a balance, seeking to hold Miraflores liable under the mortgage. The trial court absolved Miraflores from liability for the pre-mortgage debt. The Court of Appeals affirmed.

ISSUE

Whether respondent Miraflores, as mortgagor, is liable for the agent’s indebtedness incurred prior to the execution of the mortgage contract on January 16, 1933.

RULING

No. The Supreme Court affirmed the dismissal of the petition. The mortgage contract expressly limited Miraflores’s liability to acts and defaults of the agent occurring “from January 16, 1933.” The general rules on application of payments (Civil Code, arts. 1171-1174) apply only to the debtor (Chan To) who owes several debts, not to a third-party mortgagor/surety like Miraflores. A contract of suretyship cannot be extended beyond its specified limits and will not be given retrospective effect to cover defaults prior to its execution, unless a clear intent to assume such liability is shown. Here, the clear terms of the mortgage contract prohibited holding Miraflores liable for the pre-existing debt.

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