United Coconut Planters Bank v. Planters Products, Inc., Janet Layson and Gregory Grey
REITERATIONFacts
The Antecedents: Respondent Planters Products, Incorporated (PPI), a fertilizer manufacturer, entered into an arrangement with respondent Janet Layson for the delivery of fertilizers to her, payable from the proceeds of a loan that petitioner United Coconut Planters Bank (UCPB) extended to her. Layson executed documents, including pagares on the dorsal side of a UCPB promissory note, stating she had an approved loan of P200,000.00 with UCPB-Iloilo Branch. The branch manager, respondent Gregory Grey, accepted the assignment and guaranteed payment within 60 days from PPI's invoice. Layson also executed a Letter Guarantee binding herself to pay PPI if UCPB did not. Subsequently, Layson, with Grey's connivance, withdrew the P200,000.00 loan. PPI delivered fertilizers to Layson based on these documents. UCPB denied liability when PPI presented the documents for collection, claiming the transactions and guarantees were unauthorized and void. Procedural History: Consequently, PPI sued Layson, UCPB, and Grey for breach of contract with damages before the Regional Trial Court (RTC) of Makati. Grey died during trial, and no heir substituted him. The RTC absolved UCPB, finding that Grey acted in excess of his authority and that the pagares were void under banking laws. Layson was held liable to PPI, with Grey found subsidiarily liable. PPI appealed to the Court of Appeals (CA). The CA reversed the RTC, holding UCPB jointly and severally liable with Layson for P200,000.00, finding UCPB bound by Grey's undertaking as an assignment of credit. The CA deleted the award for attorney's fees and ruled that PPI failed to prove subsequent assignments. The Petition: UCPB filed the present petition for review, challenging the CA's decision. The core issues are whether UCPB is bound by Grey's undertaking to deliver the loan proceeds to PPI and, if not, whether UCPB is entitled to attorney's fees. UCPB argues that Grey acted in his personal capacity and exceeded his authority, as bank guarantees are regulated and require board approval, which was absent. Furthermore, Grey's authority for extending unsecured loans had a P10,000.00 ceiling, requiring committee approval for higher amounts. The petition seeks to reinstate the RTC's decision absolving UCPB.
Issue(s)
Whether or not UCPB is bound by Grey's undertaking to deliver to PPI the proceeds of the bank's loan to Layson in payment of fertilizers. Whether or not UCPB is entitled to an award of attorney's fees.
Ruling
The Court GRANTS the petition, REVERSES the decision of the Court of Appeals, and REINSTATES the decision of the Regional Trial Court of Makati.
Ratio Decidendi
On the first issue of UCPB's liability: The Court held that UCPB is not bound by Grey's undertaking. The CA erred in considering the pagares as an assignment of credit binding on the bank. While a corporation is liable for acts of its officers within their apparent authority, Grey's undertaking was made in his personal capacity, not in representation of UCPB, as he signed under his own name without any allusion to the bank. Furthermore, Grey's undertaking was a guarantee, a regulated transaction under Republic Act 8791, requiring board authority, which was not shown. The evidence also indicated that Grey acted in connivance with Layson to lure PPI into delivering fertilizers on credit, and that Grey lent Layson the ₱200,000.00 without proper authorization, exceeding his unilateral lending authority of ₱10,000.00 and lacking the required committee approval for higher amounts. Therefore, UCPB was absolved of liability. On the second issue of attorney's fees: The Court affirmed the CA's deletion of attorney's fees. Attorney's fees are awarded when a party is compelled to litigate due to another's baseless suit or bad faith. In this case, PPI had good reason to implead UCPB because its branch manager played a pivotal role in the anomalous transaction, thus, PPI did not act in bad faith in impleading the bank.
Main Doctrine
A bank cannot be bound by the unauthorized guarantee of its branch manager acting in a personal capacity, especially when such guarantee is a regulated transaction requiring board approval and is not made in the name of the bank.