Bank of the Philippine Islands v. Cayetano
REITERATIONFacts
The Antecedents: Respondent Leonor C. Cayetano executed a special power of attorney authorizing her daughter, Teresita C. Tabing, to contract a loan not exceeding P300,000.00 and to mortgage two lots owned by Cayetano. Tabing obtained a P100,000.00 loan from petitioner Far East Bank and Trust Company (FEBTC), secured by a real estate mortgage over Cayetano's properties. Tabing and her husband signed the mortgage document in their individual capacities without indicating they were acting on behalf of Cayetano. FEBTC foreclosed the mortgage due to non-payment, and the properties were sold to FEBTC. Subsequently, FEBTC consolidated its title. Over five years later, Tabing, on behalf of Cayetano, attempted to repurchase the properties, but FEBTC refused. Respondents then filed a complaint for annulment of the mortgage and foreclosure. Procedural History: The Regional Trial Court (RTC) of Naga City, Branch 61, ruled in favor of the respondents, declaring the real estate mortgage void and unenforceable against Cayetano, and annulling FEBTC's titles. The RTC found that the agent (Tabing) did not execute the mortgage in the name of the principal (Cayetano) and that there was non-compliance with the publication requirements for the foreclosure sale. The Court of Appeals affirmed the RTC's decision, holding that the mortgage was void because it was not executed on behalf of the principal. FEBTC's motion for reconsideration was denied. The Petition: This case is a petition for review under Rule 45 of the 1997 Rules of Civil Procedure, as amended. Petitioners Far East Bank and Trust Company (now Bank of the Philippine Islands) and Rolando Borja seek to set aside the decision of the Court of Appeals. The core issue presented is whether a principal is bound by a real estate mortgage executed by an authorized agent in her own name without indicating that she was acting on behalf of the principal. Petitioners argue that the principal is bound by the mortgage, citing equity principles and the doctrine of laches due to the respondents' significant delay in questioning the mortgage and foreclosure.
Issue(s)
Whether the principal is bound by the real estate mortgage executed by the authorized agent in her own name without indicating the principal. Whether the respondents are barred by laches from assailing the mortgage and foreclosure sale.
Ruling
The petition is GRANTED. The Decision of the Court of Appeals and the Regional Trial Court are SET ASIDE. The complaint for annulment of mortgage and extrajudicial foreclosure with damages and cancellation of titles filed by respondents is DISMISSED.
Ratio Decidendi
On the issue of whether the principal is bound by the real estate mortgage executed by the agent in her own name: The Court reiterated the general rule in the law of agency that to bind the principal 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 not sufficient that the agent was authorized to make the mortgage if the agent did not act in the name of the principal. In this case, the mortgage document was signed by Tabing and her husband in their individual capacities, without any indication that Tabing was acting as attorney-in-fact for Cayetano. Therefore, the mortgage bound only Tabing and her husband, and not Cayetano. The Court cited The Philippine Sugar Estates Development Co., Ltd., Inc. v. Poizat, et al. and Rural Bank of Bombon (Camarines Sur), Inc. v. Court of Appeals as precedents. On the issue of laches: Despite the nullity of the real estate mortgage as to Cayetano, the Court found that the principle of laches was applicable. Laches is the negligence or omission to assert a right within a reasonable time, leading to a presumption that the right has been abandoned. The Court noted that respondents had knowledge of the mortgage and the foreclosure proceedings, yet they failed to file an action to annul the mortgage for over five years. Their lawyer merely requested a postponement of the auction sale, and they only questioned the transaction after negotiations to repurchase the property failed. This undue delay in asserting their right, coupled with the prejudice that would be caused to FEBTC, barred them from assailing the mortgage and foreclosure sale.
Main Doctrine
A real estate mortgage executed by an agent in her own name, without indicating that she was acting on behalf of the principal, does not bind the principal, as the agent alone is bound thereby. However, the principal may be barred from assailing the mortgage and foreclosure sale on the ground of laches if they unduly delay the assertion of their right.