Case Digest version

Business Organization – Partnership, Agency, Trust – Existence of Agency – Lack of

Authorization

In 1999, Amos Francia was convinced by the bank manager of Westmont Bank to make
an investment in Westmont Investment. Since the interest rate offered was impressive,
Amos was convinced, he invited his siblings to join in the investment and so they
invested an aggregate amount of P3.9 million. When the investment matured, the
Francia siblings demanded the retirement of their investment but Westmont Investment
advised them they have no funds. Westmont Investment then requested for an
extension. At the same time, Westmont Investment advised the Francias that their
money was borrowed by Pearlbank. When the extension asked by Westmont expired,
they again were not able to pay up and so the Francias sued Westmont Investment.
Pearlbank was impleaded in the complaint.

In its defense, Westmont Investment alleged that it was merely acting as an agent of
Pearlbank; that Pearlbank authorized Westmont Investment to borrow money on its
behalf; that Westmont Investment merely brokered a “loan transaction” between
Pearlbank and the Francias. To support its claim, Westmont provided documents
showing that Pearlbank borrowed an amount equivalent to the investment of the
Francias.

ISSUE: Whether or not Westmont Investment is an agent of Pearlbank.

HELD: No. The evidence presented is not sufficient to prove that an agency existed
between Pearlbank and Westmont Investment hence, only Westmont Investment is
liable to pay the Francias. Pearlbank did not authorize Westmont Investment to borrow
money for it. Neither was there a ratification, expressly or impliedly, that it had
authorized or consented to said transaction. In fact, Pearlbank questioned Westmont
Investment’s practice of naming Pearlbank as a “borrower” of certain investments made
by other investors with Westmont Investment. Also, the Francias had no personal
knowledge if Pearlbank was indeed the recipient/beneficiary of their investments. The
Francias have always maintained that they only transacted with Westmont Investment
and never with Pearlbank. The fact that the Francias impleaded Pearlbank in their suite
is understandable (it does not defeat their suit) because they only impleaded Pearlbank
to protect their interest when they found out that Westmont was already bankrupt.