CASE: BA Finance Corp. v.

CA, Traders Royal Bank

DATE: July 3, 1992
FACTS:
The Gaytano spouses took out a loan of P60,000
from Traders Royal Bank (third person). As
security for its payment, they executed a deed of
suretyship with BA Finance Corp. (principal) in
favour of Traders.
In a letter addressed to Traders, the credit
administrator of BA Finance Corp., Philip Wong
(agent), undertook to guarantee Gaytanos loan.
However, upon the spouses refusal to pay their
loan balance, Traders filed a complaint for sum
of money against the former and BA Finance as
an alternative defendant.
BA Finance argued that its credit administrator
had no authority to bind the corporation.
Both the trial court and the Court of Appeals
ordered the spouses and BA Finance to jointly
and severally pay Traders.
BA Finance: The letter guaranty issued by the credit
administrator was ultra vires for being issued beyond
the scope of the authority of its employee. It cannot
also be guilty of estoppel because it had no
knowledge of the letter guaranty.
ISSUES: 1) Whether or not the credit administrator
exceeded his authority when he issued the guaranty,
thus binding BA Finance in the loan transaction (NO)
a) Traders failed to prove that the credit
administrator with whom it transacted acted
within his authority when the latter issued the
guaranty in favour of the spouses.
b) The Court, citing the case of Keeler v.
Rodriguez, held that persons dealing with an
assumed agentare bound at their perilto

c)

d)

e)

f)
g)
h)

i)

ascertain not only the fact of agency but also the

nature and extent of authority. In case its nature
and extent was controverted, the burden of proof
is on the persons dealing with the assumed
agent.
Thus, as applied, the burden of proof is on
Traders to prove that the credit administrator
with whom they transacted acted within the
authority.
The only evidence they presented was the credit
administrators testimony he said he had
authority to issue guarantees as can be gleaned
from the memorandum issued to him by BA
Finance.
However, the Memorandum only authorized him
to approve loans up to P350,000 without any
security requirement. It didnt confer upon him
the power to issue guarantees.
The representation of one who acts as agent
cannot serve as proof of his authority to act as
agent or of the extent of his authority.
His claim that he entered into similar
transactions in the past had no weight for his
failure to show documents or records.
His actuations were understandable for he would
naturally prevent personal liability from
attaching to him. The rule is clear that the agent
who exceeds his authority is personally liable
for damages.
Also, BA Finance cannot be held in estoppel for
Traders did not show any evidence aside from
the testimony that the disputed transaction of
guaranty was entered into the official records. It
would have shown knowledge and ratification
on the part of BA Finance.

DECISION: Petition granted.