NYCO Sales Corp vs BA Finance Corp G.R. No.

71694
August 16, 1991

FACTS:
Nyco Sales whose president and general manager Rufino Yao is engaged in the
business of selling construction materials.

Fernandezes acting on behalf of Sanshell Corporation approached Yao for credit

accommodation. They requested Nyco thru Yao to garant Sanshell discounting
priveleges which Nyco had with BA Finance.

Fernandezes went to Yao for the purpose of discounting Sanshells BPI PDCs on
the aount of Php 60,000 payable to Nyco. Nyco then thru Yao endorsed the check
in favor of BA Finance. BA Finance then issued a check payable Nyco which
endorsed it in favor of Sanshell which made use of the negotiation. Nyco
executed a Deed of Assignment in favor of BA Finance with the conformity of
Sanshell. Under the deed, the subject of Assignment was the BPI PDC Check.

Agreed that there will be a Continuing Suretyship Agreement whereby

Fernandezes unconditionally guaranteed to BA Finance the compliance of all
indebtness of Nyco. The check was subsequently dishonored by the drawee bank
upon presentment for payment. BA Finance reported the matter to the
Fernandezes and issued a substitute (Security Bank) check with the same
amount to BA Finance which was again subsequently dishonored.

Despite repeated demands, Nyco and the Fernandezes failed to pay the
obligation. BA Finance then instituted an action to the court. Nyco and
Fernandezes were considered in default. TC ruled in favor of BA Finance ordering
the Fernandezes and Nycho solidarily to pay the former. Nycho moved to set
aside the order and impleaded Sanshell. TC ruled in favor of BA Finance.

With regards to the Fernandezes, the TC denied the cross claim of Nycho
because it seems that Fernadezes never received the cross claim of Nycho and
have not been declared in default.

Upon appeal, affirmed TC decision with modification with respect to the running
time of interest running from February 19, 1979 instead of February 1 1979.

Hence this appeal.

NYCHOS CONTENTIONS:

o Discharged of liability when BA Finance failed to give a notice of dishonor.

o No novation when BA Finance accepted SBTC check.
o Yao as President is not authorized to enter into credit assignment with BA
Finance since there is no Board Resolution authorizing the same.

ISSUE:

Whether or not Nyco is liable for the acts of its president.

RULING:

YES.
The by-laws of Nyco expressly authorized its President to enter into contracts,
borrowing money , signing, indorsing checks in behalf of the compant. Also, it
appears that the same kind of transaction already happened between Nyco and BA
Finance.

Hence, Nyco is placed from estopped from denying Yaos authority because of its
silence just to escape liability.