G.R. No. 177921 ; December 4, 2013
METRO CONCAST STEEL CORPORATION, ET AL., Petitioners, vs. ALLIED BANK CORPORATION, Respondent.

FACTS

Petitioners, Metro Concast Steel Corporation and its individual officers/guarantors, obtained loans and trust receipt accommodations from respondent Allied Bank. They defaulted on these obligations. To settle the debt, petitioners negotiated the sale of the corporation’s scrap metal assets to Peakstar Oil Corporation. Petitioners alleged that Atty. Peter Saw, a member of Allied Bank’s legal department, actively participated as the bank’s agent in these negotiations, drafting the Memorandum of Agreement (MoA) and receiving the initial payment from Peakstar. Based on this involvement, petitioners contended that the bank, through its agent, consented to the payment scheme under the MoA, and thus, the failure of Peakstar to pay constituted a force majeure that extinguished their liability to the bank.
The Regional Trial Court (RTC) dismissed Allied Bank’s collection complaint, ruling that the causes of action had been extinguished. It found that Atty. Saw’s actions bound the bank, making Peakstar’s default a force majeure that released petitioners from their obligation. The Court of Appeals (CA) reversed this decision, holding petitioners solidarily liable for the debt. The CA found no evidence that Atty. Saw was authorized to act as an agent for the bank in the Peakstar transaction, and that his actions were merely those of a mediator.

ISSUE

Whether the Court of Appeals erred in reversing the RTC and holding petitioners liable, despite the alleged agency relationship between Allied Bank and Atty. Peter Saw in the settlement transaction with Peakstar.

RULING

The Supreme Court denied the petition and affirmed the CA’s ruling. The legal logic centers on the principles of agency and the burden of proof for payment or extinguishment of an obligation. An agency relationship must be proven by clear evidence, showing the principal’s consent for the agent to act on its behalf and the agent’s acceptance. Petitioners failed to substantiate their claim that Atty. Saw was Allied Bank’s authorized agent in the Peakstar sale. His actions in drafting the MoA and receiving payment were not shown to be within the scope of any authority granted by the bank. At best, he acted in a personal or unofficial capacity. Consequently, the MoA and Peakstar’s subsequent default did not bind Allied Bank or operate to extinguish petitioners’ primary loan obligations. The defense of force majeure is unavailing as the failure of a third-party buyer to pay is a business risk inherent to petitioners’ chosen mode of settlement, not an unforeseeable or irresistible event that legally prevents debt payment. The bank’s right to collect from the original debtors and sureties remained intact.