G.R. No. 94566 - BA Fice Corp. vs. Court of Appeals

Renato Gaytano, doing business as Gebbs International, applied for a twenty-five (25) month term loan amounting to P60,000.00 with Traders Royal Bank on December 17, 1980.
To secure the loan, the Gaytano spouses executed a deed of suretyship, thereby undertaking to pay the loan amount—including interests, penalties, and other bank charges—jointly and severally.
In connection with the loan application, BA Finance Corporation, represented by its Credit Administrator Philip H. Wong, issued a letter of guaranty on December 5, 1980, undertaking an unconditional guarantee for full payment up to a maximum of P60,000.00.

The letter guaranty was addressed to Traders Royal Bank and indicated BA Finance Corporation’s willingness to guarantee the loan upon default by the Gaytano spouses.
The guarantee, however, was later contested by BA Finance Corporation on the ground that the credit administrator, Philip H. Wong, lacked express authority to bind the corporation to such a contract.
The internal memorandum provided by BA Finance Corporation outlined Wong’s lending authority, which included specific limits for various types of loans, but did not expressly include the power to issue guarantees.

Partial payments were made on the loan, ultimately leaving an outstanding balance of P85,807.25.
With the Gaytano spouses’ refusal to pay their obligation, Traders Royal Bank commenced action by filing a complaint for sum of money against both the Gaytano spouses and BA Finance Corporation as an alternative defendant.
While the Gaytano spouses failed to present any evidence in their defense, BA Finance Corporation contested liability by asserting the lack of authority of its credit administrator to issue the guaranty.

The trial court rendered a decision on December 12, 1988, awarding judgment in favor of Traders Royal Bank against the Gaytano spouses and dismissing the case against BA Finance Corporation without pronouncement as to cost.
On appeal, the Court of Appeals on March 13, 1990, modified the trial court decision by ordering that the Gaytano spouses and BA Finance Corporation be held jointly and severally liable for P85,807.25, including interests, penalties, and additional charges.
BA Finance Corporation submitted a petition for review on certiorari, challenging the appellate decision by raising issues about the ultra vires nature of the letter guaranty, the lack of authority of its credit administrator, and the improper application of the doctrine of estoppel.

Whether the letter guaranty issued by BA Finance Corporation was valid and enforceable given that it allegedly exceeded the scope of the credit administrator’s authority.
Whether the contents and form of the letter guaranty were sufficiently clear to imply an express authorization by BA Finance Corporation.

Whether Philip H. Wong, as credit administrator, acted within the limits of his authority as prescribed in the internal memorandum of BA Finance Corporation.
Whether the absence of any explicit provision authorizing the issuance of a guarantee precludes the extension of such power through general or vague language (e.g., “contingent commitment”).

Whether BA Finance Corporation is estopped from denying the authority of its credit administrator based on its failure to repudiate or cancel the letter guaranty.
Whether the testimony of Philip H. Wong, absent corroborative documentary evidence, is sufficient to establish that the corporation had knowledge of and ratified the guaranty.