GR 94566; (July, 1992) (Digest)
G.R. No. 94566 July 3, 1992
BA FINANCE CORPORATION, petitioner, vs. HON. COURT OF APPEALS and TRADERS ROYAL BANK, respondents.
FACTS
On December 17, 1980, Renato Gaytano, doing business as Gebbs International, obtained a P60,000.00 loan from respondent Traders Royal Bank, secured by a deed of suretyship from the Gaytano spouses. Prior to this, in a letter dated December 5, 1980, Philip Wong, as Credit Administrator of petitioner BA Finance Corporation, wrote to the bank unconditionally guaranteeing full payment of the loan up to P60,000.00. The Gaytano spouses defaulted, leaving an unpaid balance of P85,807.25. Respondent bank filed a complaint for sum of money against the Gaytano spouses and, alternatively, against BA Finance Corporation. The Gaytano spouses presented no defense. Petitioner corporation raised the defense that its credit administrator lacked authority to bind the corporation. The trial court dismissed the case against BA Finance Corporation, holding only the Gaytano spouses liable. The Court of Appeals reversed, holding BA Finance Corporation jointly and severally liable with the Gaytano spouses. Hence, this petition.
ISSUE
Whether the credit administrator of BA Finance Corporation had the authority to bind the corporation through a letter of guaranty, thereby making the corporation liable for the loan obligation.
RULING
No. The Supreme Court ruled that the credit administrator, Philip Wong, lacked the authority to bind BA Finance Corporation in a contract of guaranty. The burden of proving the agent’s authority lies with the party dealing with the agent, here respondent bank. The bank’s only evidence was Wong’s testimony and a memorandum on his lending authority, which authorized him to approve loans but did not expressly grant him power to issue guarantees. The Court held that guaranty must be expressly authorized and cannot be inferred from vague or general terms like “contingent commitments.” Wong’s unsupported claim of past similar transactions and authority was insufficient. Furthermore, the corporation could not be estopped from denying liability, as there was no proof it had knowledge of the guaranty or ratified it. The petition was granted, reversing the Court of Appeals and reinstating the trial court’s dismissal of the complaint against BA Finance Corporation.