Merchant v. International Banking Corporation
REITERATIONFacts
The Antecedents: The plaintiff, E.B. Merchant, initiated an action against the defendant, International Banking Corporation, based on a promissory note. The payment of this note was allegedly guaranteed in writing by the defendant. A copy of the note, including the written guaranty, was attached to the complaint. The guaranty was signed, "For the International Banking Corporation, R. W. Brown." Procedural History: The defendant's answer generally denied the allegations in the complaint. It raised defenses asserting that the defendant lacked the corporate charter authority to enter into such a guaranty contract, that no agent or officer was authorized to do so, and specifically that R.W. Brown was not authorized to execute the guaranty on behalf of the defendant. Crucially, this answer was not sworn to. The Petition: The plaintiff presented the promissory note with the guaranty and a notarial protest as evidence and rested its case. The defendant presented no evidence.
Issue(s)
Whether the defendant's failure to deny the genuineness and due execution of the guaranty under oath constitutes an admission of its validity and the authority of the signatory. Whether the defendant, under its charter, had the capacity to enter into a contract of guaranty.
Ruling
The judgment was entered in favor of the plaintiff.
Ratio Decidendi
On the issue of the defendant's failure to deny the guaranty under oath: The Court held that the defendant's failure to specifically deny the genuineness and due execution of the guaranty under oath, as required by section 103 of the Code of Civil Procedure, constituted an admission. This admission encompassed not only the signature of R. W. Brown but also his authority to execute the contract on behalf of the defendant. Furthermore, it implied the defendant's capacity to enter into such a contract. The Court cited supporting jurisprudence from Minnesota and California to underscore this principle. The Court also clarified that its prior ruling in Vicente Nery Lim-Chingco vs. Crisanta Terariray did not contradict this doctrine. On the issue of the defendant's capacity to enter into the contract: The Court implicitly ruled that the defendant had the capacity to enter into the contract of guaranty. This was based on the legal effect of the unsworn answer, which, by operation of law under section 103 of the Code of Civil Procedure, deemed the genuineness and due execution of the instrument admitted. This admission extended to the defendant's power to undertake such a guaranty.
Main Doctrine
A failure to specifically deny the genuineness and due execution of a written instrument under oath in an answer constitutes an admission of its genuineness, due execution, and the authority of the signatory to bind the principal, as well as the principal's capacity to enter into such a contract.