By: Atty. Gregorio B. Austral, CPA
The doctrine of apparent authority
Established are the following pertinent facts: (1) respondents failed to pay their monthly amortizations for the months of January to March 2005; (2) respondents received a demand letter requiring them to pay the remaining balance of the promissory note; (3) when respondents asked petitioner’s In-House Collector whether they could still pay their installment in arrears, she accommodated them and instructed respondents to pay over the counter or deposit the necessary amount to their account, subject to the debit agreement; (4) on April 2005, respondents deposited in their account the amount of P52,196.57 corresponding to the unpaid monthly amortizations; and (5) notwithstanding, the In-House Collector recommended the filing of a complaint against respondents despite depositing the amount necessary to pay their arrears.
Under the “Doctrine of Apparent Authority“, acts and contracts of the agent, as are within the apparent scope of the authority conferred on him, although no actual authority to do such acts or to make such contracts has been conferred, bind the principal. In the case of Citystate Savings Bank v. Tobias, We have further explained:
The doctrine of apparent authority or what is sometimes referred to as the “holding out” theory, or the doctrine of ostensible agency, imposes liability, not “as the result of the reality of a contractual relationship, but rather because of the actions of a principal or an employer in somehow misleading the public into believing that the relationship or the authority exists.” It is defined as:
[T]he power to affect the legal relations of another person by transactions with third persons arising from the other’s manifestations to such third person such that the liability of the principal for the acts and contracts of his agent extends to those which are within the apparent scope of the authority conferred on him, although no actual authority to do such acts or to make such contracts has been conferred. (Citations omitted)
Succinctly stating the foregoing principles, the liability of a bank to third persons for acts done by its agents or employees is limited to the consequences of the latter’s acts which it has ratified, or those that resulted in performance of acts within the scope of actual or apparent authority it has vested. (Citations omitted)
As applied to corporations, the doctrine of apparent authority provides that “a corporation is estopped from denying the officer’s authority if it knowingly permits such officer to act within the scope of an apparent authority, and it holds him out to the public as possessing the power to do those acts.”
This was Our ruling in the case of Westmont Bank v. Inland Construction and Development Corp., (Westmont Bank Case) wherein we upheld the account officer’s authority to act on behalf of Westmont Bank, after it has been shown that the bank conducted its business through the account officer. As observed therein, the account officer was the one assigned to transact on Westmont Bank’s behalf respecting the loan transactions and arrangements of respondents therein. We held that since it conducted business through its account officer, it is presumed that he had to sign for the bank in the Deed of Assignment.
In the instant case, the In-House Collector, Manalo, had apparent authority to act on behalf of petitioner. Records show that she was assigned to monitor the payment of credit loans of respondents and recommend whether or not legal actions should be instituted against them. Petitioner did not deny nor refute such fact. In fact, when Manalo recommended that a case be instituted against respondents, petitioner obliged. Likewise, there is nothing on record that would suggest that Manalo acted outside the scope of its apparent authority.
Pursuant to the Westmont Bank Case, petitioner is bound by the actions of its In-House Collector. Whatever Manalo decides or does within the scope of her apparent authority, they are deemed the decisions and actions of petitioner. Thus, in so advising respondents to settle their arrears, petitioner, through Manalo, had clearly exercised its option not to render the promissory note’s remaining balance due and demandable. Likewise, petitioner opted, again through Manalo, not to terminate the ADA. To recall, after respondents defaulted in their monthly amortizations, they consulted Manalo and asked if they could still pay their arrears. Manalo gave them the chance to settle their account and gave them instruction to deposit in their savings account the amount of P52,196.57 corresponding to the unpaid monthly amortizations, subject to the debit arrangement to which respondents complied. (Equitable Savings Bank, Inc. v. Paulino, G.R. No. 221614 (Notice), [March 9, 2022])