G.R. No. 123650, 23 March 2009


Inland Construction and Development Corp. obtained various loans and other credit accommodations from petitioner, then known as Associated Citizens Bank (which later became Westmost Bank) in 1977. To secure the payment of its obligations, Inland executed real estate mortgages over three real properties in Pasig City. Inland likewise issued three promissory notes in favor of the bank, in various amounts and maturity dates.

When the first and second promissory notes fell due, Inland defaulted in its payments. It, however, authorized the bank to debit ₱350,000 from its savings account to partially satisfy its obligations.

It appears that by a Deed of Assignment, Conveyance and Release dated May 2, 1978, Felix Aranda, President of Inland, assigned and conveyed all his rights and interests at Hanil-Gonzales Construction & Development (Phils.) Corporation in favor of Horacio Abrantes (Abrantes), Executive Vice-President and General Manager of Hanil-Gonzales Corporation. Under the same Deed of Assignment, it appears that Abrantes assumed, among other obligations of Inland and Aranda, Promissory Note No. BD-2884-77 in the amount of ₱800,000 as shown in the May 26, 1978 Deed of Assignment of Obligation in which Aranda and Inland, on one hand, and Abrantes and Hanil-Gonzales Corporation, on the other. The bank’s Account Officer, Lionel Calo Jr., signed for its conformity to the deed.

On December 14, 1979, Inland was served 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 bank and the Provincial Sheriff of Rizal at the Regional Trial Court of Pasig City. The trial court found that the bank ratified the act of its account officer Calo, thus:

x x x x. Culled from the evidence on record, the Court finds that the defendant Bank ratified the act of Calo when its Executive Committee failed to repudiate the assignment within a reasonable time and even approved the request for a restructuring of Liberty Const. & Dev. Corp./Hanil-Gonzales Construction & Development Corp.’s obligations. Clearly, the assumption of the loan was very well known to the defendant Bank and the latter posed no objection to it.

The trial court found that the bank ratified the act of its account officer Calo, thus it accordingly rendered judgment in favor of Inland. The bank appealed the trial court’s decision to the Court of Appeals which decision appealed from is hereby AFFIRMED only insofar as it finds appellant Associated Bank to have ratified the Deed of Assignment (Exhibit “O”), but REVERSED in all other respects. Hence this petition.


Did the C.A. erred in affirming the finding of the trial court that the petitioner have ratified the deed of assignment.


The petitions fail.

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. In the instant case, both the assignors (Aranda and Inland) and assignees (Abrantes and Hanil-Gonzales) in the subject deed of assignment have been major clients of Associated Bank for several years with accounts amounting to millions of pesos. For several years, Associated Bank had, either intentionally or negligently, been habitually clothing Calo with the apparent powers to perform acts in behalf of the bank.

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.

In the present petitions, petitioner-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. The petitions are DENIED. The decision of the Court of Appeals in AFFIRMED.

*Case Digest by Paul C. Gandola, Refresher, Andres Bonifacio Law School, SY 2019-2020