104 PHIL 806



Dy Eng Giok was a provincial sales agent of distillery corporation, with the responsibility of remitting sales proceeds to the principal corporation.  He has  a  running  balance  and  to  satisfy payment,  a  surety bond  was  issued with petitioner as guarantor, whereby they bound themselves liable to the distillery corporation.   
More  purchases  was  made  by  Dy  Eng  Giok  and  he  was  able  to  pay  for these additional purchases.  Nonetheless, the payment was first applied to his  prior  payables.    A  remaining  balance  still  is  unpaid.    Thus,  an  action was  filed  against  sales  agent  and  surety  company.    Judgment  was rendered in favor of the corporation.   


The  remittances  of  Dy  Eng  Giok  should  first  be  applied  to  the  obligation first contracted by him and covered by the surety agreement.  First, in the absence   of   express   stipulation,   a   guaranty   or   suretyship   operates prospectively  and  not  retroactively.    It  only  secures  the  debts  contracted
after  the guaranty  takes  effect.    To  apply  the payment  to the  obligations contracted  before  the  guaranty  would  make  the  surety  answer  for  debts outside the guaranty.  The surety agreement didn't guarantee the payment of any outstanding balance due from the principal debtor but only he would
turn out the sales proceeds to the Distileria and this he has done, since his remittances  exceeded  the  value  of  the  sales  during  the  period  of  the guaranty.   
Second, since the Dy Eng Biok’s obligations prior to the guaranty were not covered,  and  absent  any  express  stipulation,  any  prior  payment  made should be applied to the debts that were guaranteed since they are to be regarded as the more onerous debts.