Topic: SPA, Written/oral Agency

PITC v.
THRESHOLD PACIFIC CORP (2018)

Topic: SPA, Written/oral agency
PARTIES:
 Petitioner: Philippine International Trading Corporation
 Respondent: Threshold Pacific Corporaion
FACTS:
 The present controversy involves three key instruments executed between PITC and TPC: (a) the
Import Financing Agreement; (2) 1st Addendum to the IFA; (3) 2nd Addendum to the IFA.
o IFA – The parties, PITC represented by its President Jose Yulo and TPC represented by its
Managing Director Eduardo Cuales, executed the IFA whereby PITC agreed to assist TPC
financially in the amount of P50M for the latter’s importation of urea fertilizers.
o 1st Addendum to the IFA – Due to exigent circumstances (as a result of APSAI’s
members’ urgent fertilizer requirements vis-à-vis the delay in the importation of the
fertilizers, PITC and TPC amended the IFA through this document. In the addendum, PITC
agreed to disburse the first tranche of the subject loan, in the amount of P5.8M to
enable TPC to purchase fertilizers from the domestic market for resale to APSAI
members.
o 2nd Addendum to the IFA – As a result of further delay in the ship of the imported
fertilizers, the parties further amended the IFA in order to meet APSAI’s urgent request
for additional fertilizer.
 On this occasion, instead of opening another letter of credit, PITC issued a check in the amount
of P5M directly payable to TPC. Upon receipt of the proceeds, TPC issued a promissory note
undertaking “to pay solidarily to the order of PITC” the principal amount on April 15, 1994.
 On July 7, 1994, claiming that TPC failed to pay the outstanding obligation, PITC filed a complaint
for sum of money before the RTC, alleging that when deposited by PITC, all the post-dated
checks issued by APSAI returned for various reasons such as “Drawn Against Insufficient Funds”
or “Account Closed.” Despite all the demand letters and notices sent by PITC to APSAI for the full
cash settlement of these returned checks, as well as demand letters to TPC for the payment of all
its obligations under the Financing Agreement, APSAI failed and refused and continues to fail and
refuse to make good the face value of these checks while TPC failed and refused and continues
to fail an refuse to make full payment of all its obligations to PITC.
 PITC avers that TPC is liable for P13M under the express provisions of the Financing Agreement.
 TPC and Cuales denied liability in the subject transactions and argued that: (1) the IFA and its first
and second addendum, fail to express the true intent and agreement of the parties; (2) that the
real intent and agreement of the parties, (PITC, TPC and APSAI) is that the urea fertilizer is to be
purchased by plaintiff for distribution and sale to APSAI. TPC’s participation is merely to ensure
that the urea fertilizer be delivered to APSAI. Thus, TPC is merely an agent of PITC, with regard to
the sale of urea fertilizers to APSAI.
 In support of their defense that they were merely acted as an agent of APSAI, TPC summarized
the following acts:
o PITC required APSAI to issue postdated checks for the purchase of fertilizers;
o APSAI was also required by PITC to execute Real Estate Mortgages in favor of PITC with a
total appraised value of P11M;
o The expenses relative to the deliveries of the fertilizers were paid/reimbursed by PITC to
TPC;
o The Land Bank Advice of Letter of Credit was opened by PITC for the first tranche of the
loan of APSAI directly in favor of supplier La Filipina Uy Gongco without the participation
of TPC whatsoever;
o APSAI acknowledged the receipt from TPC the sum of P4.9M representing the second
tranche of fertilizer credit availament while the balance was returned by TPC to PITC
o PITC send several demand letters to APSAI demanding the making good of the postdated
checks it issued in favor of PITC;
o PITC released the loans espire non-submission by TPC of the assignment/endorsement
of the sugar/molasses quedans;
o No importation was ever made and all the purchases of the urea fertilizer were sourced
locally by APSAI.
 The RTC found TPC and Cuales solidarily liable to PITC and ordered them to pay PITC. The RTC
found that: an accommodation party assumes the obligation in favor of a third party precisely
binds himself to pay the obligation when it becomes due. TPC and Cuales became directly liable
for the obligation to pay the loan regardless of their actual personal interest and that TPC did not
present sufficient evidence to show that they were mere agents of APSAI. Verily, APSAI executed
real estate mortgages and issued post-dated checks to secure the payment of the IFA loan.
However, APSAI’s provision of security and collaterals for the IFA does not automatically make
TPC and Cuales its mere agents.
 The CA ruled in favor of TPC and Cuales, finding that the IFA and its addendums were simulated
and did not reflect the true intention of the parties. The CA concluded that TPC and Cuales were
mere agents of APSAI and should not be held liable for their principal’s default in the loan
payments.
ISSUES/HELD:
 W/N TPC was merely acting as an agent for APSAI and thus, cannot be held liable to PITC.
o NO. The loan agreement does not expressly stipulate an agency between petitioner PITC
and respondent TPC.
o A plain reading of the loan’s stipulation reveals that: (1) TPC, as borrower, applied for
financial accommodation from PITC to fund for its importation of urea fertilizers; (2)
upon importation, TPC will sell these fertilizers to APSAI; (3) the principal amount of
P50M shall be payable in 4 installments, plus interests and penalties; (4) to secure the
payment of the principal, TPC agreed to provide PITC, among others: (a) postdated
checks issued by APSAI and payable to PITC; (b) sugar quedans; (5) in case any one of the
postdated checks issued as security fails to clear for whatever reason, entire obligation is
immediately due and demandable.
o The primary rule in interpreting contracts is that when an agreement is clear and
unequivocal on its face, the courts are bound to respect and uphold its tenor based on
the stipulations’ express language.
o From the above-enumerated loan provisions, it is clear that there is no express
stipulation constituting TPC as APSAI’s agent.
o TPC and Cuales failed to prove their claim that it was involved as APSAI’s agent merely to
ensure the delivery of fertilizers to the latter.
o In general, agency may be express or implied. However, an agent must possess an SPA if
he intends to borrow money in his principal’s behalf, to bind him as a guarantor or
surety, or to create or convey real rights over immovable property including real estate
mortgages.
o While the SPA may be either oral or written, the authority given must be express. In
other words, there must be a “clear mandate from the principal specifically authorizing
the performance of the act,” not merely overt acts from which agency may be inferred.
o Consequently, the agent’s “authority must be duly established by competent and
convincing evidence other than the self-serving assertion of the party claiming that such
authority was verbally given.
o These supposed acts of contemporaneous and subsequent to the loan do not outweigh
the loan instrument’s express language: that respondent Cuales as its representative,
executed the loan and bound respondent TPC as debtor-borrower. Thus, TPC shall be
liable to pay PITC, the creditor, the principal loan plus interests and other charges when
these become due.
JUDGMENT: Petition is GRANTED.

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PITC v.

THRESHOLD PACIFIC CORP (2018)

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