BA Finance Corporation v. Court of Appeals
REITERATIONFacts
The Antecedents: Renato Gaytano, doing business as Gebbs International, obtained a loan of P60,000.00 from Traders Royal Bank (TRB), secured by a deed of suretyship from the Gaytano spouses. Philip Wong, as credit administrator for BA Finance Corporation (BAFC), issued a letter to TRB unconditionally guaranteeing full payment of the loan up to P60,000.00 upon non-payment by the Gaytano spouses. Procedural History: Partial payments were made, leaving a balance of P85,807.25. When the Gaytano spouses defaulted, TRB filed a complaint for sum of money against them and BAFC as an alternative defendant. The trial court dismissed the case against BAFC, ordering the Gaytano spouses to pay TRB. The Court of Appeals reversed the trial court's decision, holding BAFC jointly and severally liable with the Gaytano spouses. The Petition: BAFC filed a petition for review on certiorari, assailing the appellate court's ruling that it was jointly and severally liable, arguing that the letter of guaranty was invalid, that it was not guilty of estoppel, and that the letter was ultra vires.
Issue(s)
Whether BA Finance Corporation is jointly and severally liable with the Gaytano spouses despite the alleged invalidity and ultra vires nature of the letter of guaranty. Whether BA Finance Corporation is guilty of estoppel for failing to disallow or cancel the letter of guaranty.
Ruling
The petition is GRANTED. The assailed decision of the respondent appellate court is REVERSED and SET ASIDE, and another one is rendered dismissing the complaint for sum of money against BA Finance Corporation.
Ratio Decidendi
On the issue of joint and several liability and the validity of the letter of guaranty: The Supreme Court found the petitioner's contentions meritorious. It reiterated the settled rule that persons dealing with an assumed agent are bound at their peril to ascertain not only the fact of agency but also the nature and extent of the agent's authority. The burden of proof rests upon the party alleging agency to establish it. In this case, the respondent bank failed to satisfactorily prove that Philip Wong, the credit administrator, acted within the scope of his authority when he issued the letter of guaranty. While Wong was authorized to approve loans, the memorandum delegating his lending authority did not expressly vest him with the power to issue guarantees. The phrase "contingent commitments" in the memorandum could not be interpreted to mean guarantees, as guaranty is not presumed and must be expressed. The Court cited Harry Keeler v. Rodriguez and Director v. Sing Juco in support of these principles. On the issue of estoppel: The Court found no basis for the appellate court's conclusion that BAFC was estopped from alleging lack of authority. The respondent bank did not present any evidence, other than Wong's testimony, to show that the transaction was entered into the official records of BAFC, which would indicate notice or knowledge and subsequent ratification. Therefore, it would be unfair to hold BAFC guilty of estoppel without clear proof. The Court emphasized that the representation of an agent cannot, by itself, serve as proof of his authority, citing Velasco v. La Urbana.
Main Doctrine
A corporation is not bound by a contract of guaranty entered into by its employee if the employee acted beyond the scope of his authority, and the party dealing with the employee failed to ascertain the extent of his authority. Guaranty is not presumed and must be expressed.