Asahi Motors v. First Standard Lending Corporation

Summary

Asahi Motors, through manager Eduardo Lao Jr., executed an undertaking making the company solidarily liable with borrower Audie Valdez for a P250,000 vehicle loan if registration documents were not delivered within one month. When both Asahi failed to deliver documents and Valdez defaulted, First Standard Lending Corporation sued for P327,606.00. Asahi argued Lao lacked authority to bind the company as guarantor without special power of attorney under Article 1878 of the Civil Code. The Supreme Court upheld lower courts' findings of solidary liability, reasoning that First Standard relied on the undertaking, Asahi benefited from the loan proceeds, and the company held out Lao as having such authority. The Court emphasized equity considerations, noting Asahi's remedy was to pursue Lao separately if he exceeded authority, but could not escape liability to the prejudice of First Standard who acted in good faith.