MARYLOU B TOLENTINO V PHILIPPINE POSTAL SAVINGS BANK

GR NO 241329, NOVEMBER 13, 2019, SECOND DIVISION

PONENTE: REYES, A, JR

NATURE OF THE ACTION: GUARANTY; DEED OF ASSIGNMENT

FACTS:

Enrique obtained a 3.5M loan from the respondent to finance his low-cost housing project. At
that time only 50% was released. To expedite his project, he borrowed from petitioner a 1.5 M loan in
which they agreed, through a deed of assignment with conformity of the respondent, that the remaining
proceeds of the loan be conveyed to petitioner. However, that did not happen because the loan was
released to Enrique. Thus, petitioner filed a complaint to which respondent answered that it cannot act
as a guarantor, and that Amante acted in his personal capacity.

ISSUES:

WHETHER RESPONDENT ACTED AS GUARANTOR OF ENRIQUE

WHETHER AMANTE BINDS RESPONDENT IN APPROVING THE LOAN

RULING:

1) No, the contract is not one for guaranty but for deed of assignment. A contract of guaranty
is an undertaking whereby the guarantor shall pay the debt of the debtor in case the latter
fails to pay. It requires exhaustion. A contract is not what the parties define but which the
law deems it to be. Here, the contract manifested the intention of the parties to enter into
assignment of rights since it does not provide for the remedy of exhaustion which is an
element of guaranty. Although the contract contains the word guaranty, it does not mean
that it is a contract of guaranty. Thus, respondent is liable to petitioner for the proceeds of
the loan as mandated in the deed of assignment since the prohibition to enter into contract
of guaranty does not apply anymore because there is no contract of guaranty to speak of.
2) Yes, Amante in approving the loan binds respondent. Under the doctrine of apparent
authority, a bank holding out its officers and agent as worthy of confidence will not be
permitted to profit by the frauds they may thus be enabled to perpetrate in the apparent
scope of their employment; nor will it be permitted to shirk its responsibility for such frauds,
even though no benefit may accrue to the bank therefrom.  Accordingly, a banking
corporation is liable to innocent third persons where the representation is made in the
course of its business by an agent acting within the general scope of his authority even
though the agent is secretly abusing his authority and attempting to perpetrate a fraud upon
his principal or some other person for his own ultimate benefit. Thus, applying the basis
above, Marylou may, therefore, safely assume that his representations were made pursuant
to, and under the authority of PPSBI.