Bank of Commerce vs. Goodman Fielder International Philippines, Inc.

A letter stating a client "has arranged for a credit line" subject to compliance with bank policies constitutes a mere certification of a pending application, not a bank guaranty, where the circumstances show the applicant had yet to submit requirements and the creditor had sufficient time to verify the approval.

Respondent Goodman Fielder required a credit line or bank guaranty from Keraj Marketing Company as a prerequisite for a distributorship agreement. Keraj's representative, Sunil K. Amarnani, applied with Bank of Commerce but requested a conditional certification before submitting the required documents. The bank's branch manager issued letters stating Keraj "has arranged for a credit line" subject to compliance with bank policies. Respondent subsequently entered into the agreement, but Keraj defaulted, prompting respondent to claim against the bank guaranty.

• The Distributorship Prerequisite: Respondent Goodman Fielder required a ₱500,000.00 credit line or bank guaranty from Keraj Marketing Company, represented by Amarnani, before entering into a distributorship agreement.
• The Letter-Certifications: Pending the submission of required documents, Amarnani requested a conditional certification from Bank of Commerce branch manager Aragon stating he was "arranging" for a credit line, admitting he had yet to comply with the requirements. Aragon issued a letter on August 23, 2000, stating Keraj "has arranged for a credit line" subject to compliance with bank policies. A similar letter for ₱2,000,000.00 was issued on October 18, 2000 for Bacolod RK, another entity owned by Amarnani.
• Non-Compliance and Default: Neither Keraj nor Bacolod RK pursued their credit line applications or submitted the required documents despite follow-ups from the bank. Respondent entered the Distributorship Agreement with Keraj on October 2, 2000. Upon default by Keraj and Bacolod RK, respondent demanded payment from petitioner, interpreting the letters as bank guarantees.

• Interpretation of the Letters: Petitioner argued that the letters were mere certifications of a pending credit line application, not bank guarantees, as no actual guaranty was approved due to the non-submission of required documents.
• Apparent Authority: Petitioner maintained that the doctrine of apparent authority does not apply because the letters explicitly stated the credit line was subject to compliance with bank policies.
• Estoppel: Petitioner argued that it is not estopped from denying liability on a guaranty that was never issued.

• Interpretation of the Letters: Respondent countered that the letters clearly showed approval of the credit line application, as the word "guaranty" is not strictly required, and the intention to guarantee was evident from the specified amounts and the limitation of the credit line's use.
• Apparent Authority and Estoppel: Respondent argued that it relied on the apparent authority of the branch manager, and the bank is bound by his acts and estopped from denying liability.

• Nature of the Letters: Whether the letter-certifications issued by the branch manager constituted bank guarantees.
• Apparent Authority: Whether the doctrine of apparent authority applies to bind the bank.
• Estoppel: Whether the bank is estopped from denying liability on the purported bank guarantees.

• Nature of the Letters: The letters did not constitute bank guarantees. Interpreting the instrument under Section 13, Rule 130 of the Rules of Court, the phrase "has arranged for a credit line" subject to compliance with bank policies, issued merely two days after the applicant admitted not yet knowing the requirements, cannot be construed as an approved guaranty.
• Apparent Authority: The doctrine was inapplicable. The circumstances negated the existence of a guaranty, and respondent had 39 days before executing the agreement to verify the credit status but failed to do so. Reliance on the "check writer" impressions on the letters was misplaced, as the wordings of the letters prevailed.
• Estoppel: The bank was not estopped. No representation of an existing guaranty was made; the letters merely certified a pending application subject to unmet conditions.

• Interpretation of Instruments according to Circumstances — Under Section 13, Rule 130 of the Rules of Court, for the proper construction of an instrument, the circumstances under which it was made, including the situation of the subject and the parties, may be shown to place the judge in the position of those whose language is to be interpreted. Applied to demonstrate that the phrase "arranged for a credit line" subject to compliance meant a pending application, not an approved guaranty.

• "For the proper construction of an instrument, the circumstances under which it was made, including the situation of the subject thereof and of the parties to it, may be shown so that the judge may be placed in the position of those whose language he is to interpret."

• BPI Family Savings Bank, Inc. v. First Metro Investment Corporation, G.R. No. 132390, May 21, 2004 — Cited by the trial court regarding the public's right to rely on the trustworthiness of bank managers. The Supreme Court implicitly distinguished the case, as the circumstances here negated the existence of a guaranty and the reasonableness of respondent's reliance.

• Section 13, Rule 130, Rules of Court — Provides that for the proper construction of an instrument, the circumstances under which it was made may be shown. Applied to interpret the letter-certifications as mere certifications of pending applications rather than bank guarantees.

Lucas P. Bersamin, Roberto A. Abad, Martin S. Villarama, Jr., Maria Lourdes P. A. Sereno