GR 123650; (March, 2009) (Digest)
G.R. No. 123650 & G.R. No. 123822; March 23, 2009.
WESTMONT BANK (formerly ASSOCIATED CITIZENS BANK and now UNITED OVERSEAS BANK, PHILS.) AND THE PROVINCIAL SHERIFF OF RIZAL, Petitioners, vs. INLAND CONSTRUCTION AND DEVELOPMENT CORP., Respondent. / WESTMONT BANK (formerly ASSOCIATED CITIZENS BANK and now UNITED OVERSEAS BANK, PHILS.), Petitioner, vs. COURT OF APPEALS and INLAND CONSTRUCTION AND DEVELOPMENT CORP., Respondents.
FACTS
Inland Construction and Development Corp. (Inland) obtained loans from Associated Citizens Bank (later Westmont Bank). To secure payment, Inland executed real estate mortgages over three properties. It also issued promissory notes, including Promissory Note No. BD-2884-77 for P880,000.00. Inland defaulted on its payments. By a Deed of Assignment dated May 26, 1978, Felix Aranda (Inland’s President) and Inland assigned, and Horacio Abrantes and Hanil-Gonzales Construction & Development Corp. assumed, the obligation under Promissory Note No. BD-2884-77. The bank’s Account Officer, Lionel Calo Jr., signed for the bank’s conformity to the deed. When the bank later sought to foreclose the mortgages, Inland filed a complaint for injunction. The trial court ruled in favor of Inland, finding the bank ratified Calo’s act. The Court of Appeals affirmed the ratification but reversed the perpetual injunction, ordering Inland to pay the bank P186,241.86. The bank filed separate petitions assailing the finding of ratification.
ISSUE
Whether the bank ratified the Deed of Assignment where its Account Officer, Lionel Calo Jr., signed for its conformity, thereby binding the bank to the assumption of the obligation by Abrantes and Hanil-Gonzales.
RULING
Yes, the bank ratified the Deed of Assignment. The general rule is that without board authority, no person can bind a corporation. However, if a corporation consciously lets an officer or agent act within the scope of apparent authority, it is estopped from denying such authority. The records show Calo was assigned to transact on the bank’s behalf regarding the loan transactions of Inland, Hanil-Gonzales, and Abrantes. Since the bank conducted business through Calo, he was presumed to have authority to sign for the bank. The bank cannot feign ignorance of the Deed; assignee Abrantes notified the bank of the assumption in a July 26, 1979 letter. The bank’s failure to repudiate Calo’s act within a reasonable time, and its subsequent acts like restructuring the assignee’s loans which included the P880,000 obligation, constitute ratification. The Court of Appeals decision was affirmed.