G.R. No. C.A. No. 7411 ; April 29, 1946
Manila Motor Company, Inc., plaintiff-appellee, vs. Fidelity and Surety Company of the Philippine Islands, defendant-appellant.

FACTS

The plaintiff, Manila Motor Company, Inc., filed an action against E. Schaare & Company, its partners (E. Schaare, Hans Huber, Lulu Benner), and the Fidelity and Surety Company to recover sums due from the liquidation of two agency contracts. The first cause of action sought P18,918.47 from all defendants related to an agency in Cebu, guaranteed by a P10,000 surety bond from the appellant. The second cause of action sought P4,087.59 from all defendants except the surety company for an agency in Iloilo and Negros. At trial, the plaintiff and the defendants (except the surety company) stipulated that the total liability of E. Schaare & Company was P14,044.30, with only P215.96 attributable to the Negros Occidental agency. The Court of First Instance of Manila sentenced all defendants to pay P14,044.30 jointly and severally, limiting the surety company’s liability to its P10,000 bond with interest. The surety company appealed.

ISSUE

The primary issue is whether the appellant surety company is liable under its bond for the obligations of the partnership E. Schaare & Company arising from the Cebu agency contract, particularly for the value of secondhand cars sold in Cebu that originated from sales in Bacolod, Negros Occidental.

RULING

The Court affirmed the judgment against the appellant surety company, holding it liable under its bond up to P10,000. The bond, originally guaranteeing the obligations of E. Schaare individually under the Cebu contract, was expressly extended by the appellant through subsequent communications (Exhibits C-2, C-3, E, E-1, and F) to cover the liabilities of the partnership E. Schaare & Company after it assumed the Cebu agency on November 1, 1934. The Court rejected the appellant’s claim of clerical error, noting its consistent references to “E. Schaare & Company” and its awareness of the partnership’s existence. Regarding the secondhand cars, the Court found that the sales occurred in Cebu for the plaintiff’s account, making them liabilities under the Cebu agency contract guaranteed by the bond. Paragraph 6 of the contract, which mentioned a 120-day sale period from shipment from Manila, was interpreted as defining the time for sale rather than restricting liability to only those cars shipped directly from Manila. The appellant’s liability was thus upheld for the Cebu transactions within the bond’s limit.