Case Digest: WESTMONT BANK v. INLAND CONSTRUCTION AND DEVELOPMENT CORP. 582 SCRA 230 (2009)

WESTMONT BANK v. INLAND CONSTRUCTION AND DEVELOPMENT CORP. 582 SCRA 230 (2009)

If a corporation, however, consciously lets one of its officers, or any other agent, to act within the scope of an apparent authority, it will be estopped from denying such officer’s authority.
Respondent Inland Construction and Development Corp. (Inland) obtained various loans from petitioner Westmont Bank (Westmont). To secure the payment of its obligations, Inland executed Real Estate Mortgages over three real properties and issued promissory notes in favor of the bank. By a Deed of Assignment, Conveyance and Release, one Felix Aranda, assigned and conveyed all his rights and interests at Hanil-Gonzales Construction & Development Phils. Corporation (HGCDP) in favor of Horacio Abrante. Under the same Deed, it appears that HGCDP assumed the obligations of Inland. Westmont’s Account Officer, Lionel Calo, Jr. (Calo), signed for its conformity to the deed. Inland was subsequently served with a Notice of Sheriff’s Sale foreclosing the real estate mortgages over its real properties prompting it to file a complaint for injunction against the Westmont. In its answer, Westmont underscored that it had no knowledge, much less did it give its conformity to the alleged assignment of the obligation. The trial court found that Westmont ratified the act of Calo. It accordingly rendered judgment in favor of Inland. On appeal, the appellate court affirmed the trial court’s decision insofar as it finds Westmont to have ratified the Deed of Assignment.

 
ISSUE:

Whether or not Westmont Bank ratified the Deed of Assignment.

HELD:

The general rule remains that, in the absence of authority from the board of directors, no person, not even its officers, can validly bind a corporation. If a corporation, however, consciously lets one of its officers, or any other agent, to act within the scope of an apparent authority, it will be estopped from denying such officer’s authority.The records show that Calo was the one assigned to transact on petitioner’s behalf respecting the loan transactions and arrangements of Inland as well as those of Hanil-Gonzales and Abrantes. Since it conducted business through Calo, who is an Account Officer, it is presumed that he had authority to sign for the bank in the Deed of Assignment. Unmistakably, the Court’s directive in Yao Ka Sin Trading is that a corporation should first prove by clear evidence that its corporate officer is not in fact authorized to act on its behalf before the burden of evidence shifts to the other party to prove, by previous specific acts, that an officer was clothed by the corporation with apparent authority. In the present petitions, Westmont Bank failed to discharge its primary burden of proving that Calo was not authorized to bind it, as it did not present proof that Calo was unauthorized. It did not present, much less cite, any Resolution from its Board of Directors or its Charter or By-laws from which the Court could reasonably infer that he indeed had no authority to sign in its behalf or bind it in the Deed of Assignment.