GR L 10894; (March, 1958) (Digest)
G.R. No. L-10894; March 24, 1958
PACIFIC TOBACCO CORPORATION, petitioner, vs. THE COURT OF APPEALS and MANILA SURETY and FIDELITY CO., INC., respondents.
FACTS
Matias Defensor, as attorney-in-fact for Domingo Ramos, negotiated with Pacific Tobacco Corporation for Ramos’s appointment as its exclusive agent in Negros. On January 5, 1952, Ramos executed a special power of attorney in favor of Defensor and, as principal, together with Manila Surety and Fidelity Co., Inc. as guarantor, executed a surety bond (Exhibit B) in favor of Pacific Tobacco in the amount of P10,000. The bond’s condition was that if the principal (Ramos) would account for all products received from the company in an amount not exceeding P10,000, the bond would be void; otherwise, it would remain in force. Using the power of attorney, Defensor signed a contract (Exhibit A) with Pacific Tobacco appointing Ramos as the sole distributor of its products in Negros, with a credit limit not exceeding P5,000 at any time, and requiring Ramos to post a P10,000 surety bond. Ramos received goods totaling P10,187.40 but paid only P600, leaving a balance of P9,587.40. Pacific Tobacco demanded payment from the surety company, and upon its failure to pay, filed a suit against Ramos and the surety company for collection. The Court of First Instance of Manila held both liable. The surety company appealed to the Court of Appeals, which reversed the lower court’s decision, absolving the surety company from liability.
ISSUE
Whether the Manila Surety and Fidelity Co., Inc. is liable under its surety bond (Exhibit B) for the unpaid balance of the goods delivered to Domingo Ramos by Pacific Tobacco Corporation.
RULING
The Supreme Court affirmed the decision of the Court of Appeals, holding that the surety company is not liable. The bond (Exhibit B) secured only the accounting for the products received by Ramos or the proceeds from their sale, not the payment of the purchase price. The contract (Exhibit A) appointed Ramos as a distributor, which was a buyer-seller relationship, not an agency. There was no meeting of the minds between Pacific Tobacco and the surety company regarding the bond’s coverage for the distributor contract. Furthermore, there was no evidence or allegation that Ramos failed to account for the goods or their sale proceeds. Therefore, Pacific Tobacco had no cause of action against the surety company under the bond.