G.R. No. 18774 and 18876. March 27, 1923.
EL VENCEDOR, plaintiff-appellee, vs. JUAN S. CANLAS, JOSE S. GALANG, MELCHOR DULAY, ALFONSO ROSARIO, DOMINGO PAYAUAN, and DOMINGO MATABANG, defendants-appellants.

FACTS

Juan S. Canlas was the sales agent of El Vencedor on a commission basis. An accounting on June 30, 1920, revealed Canlas owed P5,039.67 for merchandise, which he claimed was due to uncollected credit sales made without authority. El Vencedor demanded a bond to continue the agency. On September 10, 1920, defendants Melchor Dulay, Alfonso Rosario, Domingo Payauan, and Domingo Matabang executed a joint and several bond for P2,500, guaranteeing Canlas’s faithful performance as agent. On September 15, 1920, defendant Jose S. Galang executed a separate bond for P1,500, guaranteeing the return of goods and merchandise Canlas might have. The sureties had no knowledge of Canlas’s pre-existing debt at the time of execution. After the bonds were executed, El Vencedor furnished additional merchandise worth P194.99, which Canlas failed to account for. El Vencedor sued to recover the total debt of P5,039.67 from Canlas and to enforce the bonds against the sureties. The trial court held the sureties liable on their bonds for the full amounts (P2,500 and P1,500, respectively), considering the bonds retrospective to cover the pre-existing debt.

ISSUE

Whether the suretyship bonds are retrospective, thereby making the sureties liable for the agent’s debts incurred prior to the execution of the bonds.

RULING

No. The bonds are not retrospective and only cover liabilities incurred after their execution. A contract of suretyship is strictly construed and cannot be extended beyond its specified limits. It is not retrospective, and liability for defaults occurring before its execution arises only if such intent is clearly indicated. Nothing in the bonds indicates an intent to cover pre-existing obligations. The sureties had the right to rely on the presumption that their undertaking was prospective. Therefore, the sureties are liable only for the merchandise furnished after the bonds’ execution, valued at P194.99, which Canlas failed to account for. The judgment is modified accordingly.