Country Bankers Insurance Corporation v. Keppel Cebu Shipyard

Summary

This commercial law case involved Country Bankers Insurance Corporation's (CBIC) liability on a P3,000,000 surety bond issued by its agent Bethoven Quinain to guarantee Unimarine Shipping Lines' ship repair obligations to Keppel Cebu Shipyard. When Unimarine defaulted on P3,850,000 in repair costs, Cebu Shipyard sued all parties including CBIC. The core legal issue was whether CBIC could be held liable when Quinain exceeded his written authority, which limited him to P500,000 bonds only for government agencies. The Regional Trial Court and Court of Appeals held CBIC liable under agency law principles, but the Supreme Court reversed, finding no ratification or agency by estoppel. The Court emphasized that parties dealing with agents must verify their authority and cannot blindly rely on agent representations. This case clarifies the boundaries of agent authority in commercial suretyship and the due diligence required of third parties in agency relationships.