Rural Bank of Bombon (Camarines Sur), Inc. v. Court of Appeals
REITERATIONFacts
The Antecedents: Ederlinda Gallardo executed a special power of attorney in favor of Rufino S. Aquino, authorizing him to secure a loan or mortgage her paraphernal property covered by TCT No. S-79238. Gallardo delivered the special power of attorney and the owner's copy of the title to Aquino. Subsequently, Aquino executed a Deed of Real Estate Mortgage in favor of Rural Bank of Bombon (Camarines Sur), Inc. (Rural Bank) over the said property, purportedly as security for loans totaling P350,000.00 plus interest. Gallardo and her husband filed an action against Aquino and the Rural Bank, alleging that Aquino absconded, mortgaged the property for his personal loans, and that the mortgage deed incorrectly named Aquino as the mortgagor instead of Gallardo, despite Aquino acting as her attorney-in-fact. They also claimed Aquino waived Gallardo's rights under Section 12, Rule 39 of the Rules of Court and appointed the bank as receiver without authority. Procedural History: The Regional Trial Court (RTC) initially dismissed the complaint for annulment of mortgage and awarded damages to the Rural Bank, lifting a temporary restraining order. However, the Court of Appeals (CA) reversed the RTC's decision, declaring the deed of real estate mortgage unauthorized, void, and unenforceable against Gallardo, and made the preliminary injunction permanent. The CA ordered the Rural Bank to pay costs. The Petition: The Rural Bank filed a petition for review, assailing the CA's decision and arguing that the mortgage was valid because Aquino was expressly authorized by Gallardo and that the Special Power of Attorney did not specify the loan was for Gallardo's benefit, thus it could be for Aquino's use.
Issue(s)
Whether the Deed of Real Estate Mortgage executed by Rufino S. Aquino in favor of the Rural Bank of Bombon (Camarines Sur), Inc. is valid and enforceable against Ederlinda Gallardo given that Aquino signed the deed in his own name. Whether the Court of Appeals erred in declaring the Deed of Real Estate Mortgage unauthorized, void, and unenforceable against Ederlinda Gallardo, considering the principles of agency and the specific stipulations of the Special Power of Attorney.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals, holding that the Deed of Real Estate Mortgage dated August 26, 1981, executed by Rufino S. Aquino as attorney-in-fact of Ederlinda Gallardo, in favor of the Rural Bank of Bombon (Camarines Sur), Inc., is unauthorized, void, and unenforceable against Ederlinda Gallardo. The Court upheld the CA's reversal of the RTC's summary judgment.
Ratio Decidendi
On the validity and enforceability of the Deed of Real Estate Mortgage: The Supreme Court affirmed the ruling of the Court of Appeals that the Deed of Real Estate Mortgage was unauthorized, void, and unenforceable against Ederlinda Gallardo. The Court reiterated the general rule in the law of agency, as applied in Philippine Sugar Estates Development Co. vs. Poizat, which states that for a principal to be bound by a mortgage on real property executed by an agent, the instrument must, on its face, purport to be made, signed, and sealed in the name of the principal. It is insufficient that the agent was authorized; the agent must have acted in the principal's name. In this case, Rufino S. Aquino signed the Deed of Real Estate Mortgage in his own name as the mortgagor, without any clear indication that he was signing for and on behalf of Ederlinda Gallardo in his capacity as her attorney-in-fact. The CA correctly observed that while the deed mentioned "attorney-in-fact of Ederlinda H. Gallardo," this was merely descriptive of Aquino's person, and he signed plainly as mortgagor. On the Court of Appeals' decision and the principles of agency: Furthermore, the promissory notes were also signed by Aquino and his wife as mortgagor and spouse, respectively, without any mention of acting for Gallardo. This indicated that the loans were personal to Aquino. The Court also noted that the deed stipulated the loan was for "fishpond (bangus and sugpo production)," which was Aquino's business, not Gallardo's. The Special Power of Attorney did not grant authority for Aquino to obtain a loan for his own benefit, nor did it authorize Gallardo to be a surety for Aquino's personal loans, which would require a special power of attorney under Article 1878 of the Civil Code. The Rural Bank, by dealing with Aquino and his wife in their personal capacities and not inquiring whether the loans benefited Gallardo, ignored Aquino's representative capacity. Therefore, Gallardo's property was not liable on the mortgage because she never executed it, either in person or by attorney-in-fact acting in her name.
Main Doctrine
A deed of real estate mortgage executed by an agent in his own name, without clearly indicating that he is acting for and on behalf of the principal, binds only the agent and not the principal, even if the agent was authorized to mortgage the property. The principal's property is not liable on such mortgage.