Unformatted text preview: the second reason it advanced in support of the decision now
under appeal – because the rules on application of payments, giving preference to secured obligations are
only operative in cases where there are several distinct debts, and not where there is only one that is
partially secured – the error is of no importance, since the principal reasonbased on the Bank's negligence
furnishes adequate support to the decision of the Court of Appeals that the surety was thereby released. Art. 1887 Agent Should Carry Out Agency In Accordance with Instructions of the Principal
An agent is required to act with the care of a good father of a family and becomes liable for the
damages which the principal may suffer through his nonperformance.
The Philippine National Bank had opened a letter of credit and advanced thereon $120,000.00 to
Edgington Oil Refinery for 8,000 tons of hot asphalt. Of this amount, 2,000 tons worth P279, 000.00 were
released and delivered to Adams & Taguba Corporation (known as ATACO) under a trust receipt guaranteed
by Manila Surety & Fidelity Co. up to the amount of P75,000.00.. To pay for the asphalt, ATACO
constituted the Bank its assignee and attorneyinfact to receive and collect from the Bureau of Public
Works the amount aforesaid out of funds payable to the assignor under Purchase Order No. 71947.
PNB was negligent in its duty under the power of attorney to collect sums due to debtor from the
latter’s debtor, thereby allowing such funds to be exhausted by other creditors.
The Court ordered defendants, Adams & Taguba Corporation and Manila Surety & Fidelity Co., Inc.,
to pay plaintiff, Philippines National Bank, the sum of P174,462.34 as of February 24, 1956, minus the
amount of P8,000 which defendant, Manila Surety Co., Inc. paid from March, 1956 to October, 1956 with
interest at the rate of 5% per annum from February 25, 1956, until fully paid provided that the total amount
that should be paid by defendant Manila Surety Co., Inc., on account of this case shall not exceed
P75,000.00, and to pay the costs;
Court of Appeals rendered an adverse decision and modified t...
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- Fall '14
- gutierrez hermanos, B.A. Finance Corporation