Asiatic Petroleum Co. v. De Pio
REITERATIONFacts
The Antecedents: Potenciano de Pio entered into a contract of agency with Asiatic Petroleum Co. (Philippine Islands) Ltd. for the municipality of Nueva Cadiz. De Pio violated the contract, causing a loss of P10,758.66 to the company. To secure itself, the company obtained indemnity bonds. One bond, dated July 30, 1920, made F. B. Murillo and G. Ybañez jointly and severally liable for P10,000. Another bond, dated December 6, 1920, made Leon Barilea and E. Tupas jointly and severally liable for P15,000. Procedural History: The Asiatic Petroleum Co., Ltd. filed an action in the Court of First Instance of Iloilo to recover P10,758.66 from the defendants. The trial court rendered judgment against Potenciano de Pio, Gregorio Ybañez, Felipe Murillo, Leon Barilea, and Epifanio Tupas jointly and severally for P10,000 with legal interest. It also rendered judgment against Potenciano de Pio, Leon Barilea, and Epifanio Tupas jointly and severally for P758.66 with legal interest and costs. Gregorio Ybañez, Leon Barilea, and Epifanio Tupas appealed. The Petition: The appellants, Gregorio Ybañez, Leon Barilea, and Epifanio Tupas, sought to overturn the decision of the trial court regarding their respective liabilities.
Issue(s)
Whether the indemnity bonds were sufficiently connected to the contract of agency. What is the precise liability of each appellant under the respective indemnity bonds.
Ruling
The judgment of the trial court is affirmed with respect to Potenciano de Pio, Gregorio Ybañez, and Felipe Murillo. The judgment is modified with respect to Leon Barilea and Epifanio Tupas, limiting their liability to P8,187.58, understood as additional and secondary to the liability of the other defendants.
Ratio Decidendi
On the connection between indemnity bonds and the contract of agency: The Court found that despite the vague wording in the indemnity bonds referring to "el agente nombrado en dicho convenio," "dicho agente," and "el referido agente" without explicitly naming the agent, the connection was established by three circumstances. Firstly, all defendants admitted the genuineness and due execution of the written instruments sued upon in their pleadings. Secondly, during the trial, the attorney for the plaintiff presented Exhibits B and C as bonds related to Exhibit A (the agency contract), and these documents were admitted without objection from the defendants' counsel. Thirdly, Epifanio Tupas, one of the defendants, testified on direct examination that he signed an "una fianza adicional y secundaria" in favor of the company, identifying Potenciano de Pio as the principal debtor. The Court held that the appellants were estopped by their own testimony, and that defects in evidence could be cured by subsequent evidence introduced by the adversary or brought out on cross-examination. On the precise liability of each appellant: Regarding appellant Ybañez, his liability was fixed by Exhibit B at P10,000. The Court rejected his argument that Exhibit C was intended to substitute Exhibit B or that his liability was limited to the debt existing on December 6, 1920, finding no support in the wording of the exhibits or oral testimony. Concerning appellants Barilea and Tupas, who signed Exhibit C on December 6, 1920, obligating themselves for P15,000, the Court noted that the plaintiff alleged it was an additional bond, and a defendant testified it was signed as additional and secondary to the first bond. The Court acknowledged the plaintiff's admission that Barilea and Tupas were responsible only for indebtedness incurred by Potenciano de Pio after December 6, 1920, amounting to P8,187.58. This was based on the principle that indemnity contracts are strictly construed and generally cover only losses incurred after execution, unless a contrary intention is manifest, which was not shown here. Therefore, their liability was limited to P8,187.58, and was additional and secondary.
Main Doctrine
Indemnity contracts are strictly construed to confine liability to the precise terms specified, and generally cover only losses incurred after execution unless a contrary intention is manifest.