Philippine National Bank v. Tan Ong Sze
REITERATIONFacts
The Antecedents: The Philippine National Bank (PNB) filed a complaint against Tan Ong Sze for the recovery of a loan amounting to P300,000, evidenced by a promissory note dated May 23, 1922, and secured by a mortgage on real property in Iloilo. The loan was allegedly executed by Tan Bunco, Tan Ong Sze's attorney-in-fact, under a power of attorney. The mortgage stipulated a 10% attorney's fees for foreclosure. The debt, with interest, amounted to P357,075.80 by November 14, 1924. Procedural History: The defendant, Tan Ong Sze, denied the genuineness and execution of the note and mortgage. The initial trial court dismissed the complaint due to PNB's failure to present the original power of attorney. PNB appealed, and the Supreme Court remanded the case for a new trial, allowing PNB to present the power of attorney and other evidence. In the second trial, the lower court ruled in favor of PNB, ordering Tan Ong Sze to pay P414,333.35 with interest and attorney's fees, and foreclosing the mortgaged property upon failure to pay. The Petition: Tan Ong Sze appealed the second decision, assigning errors related to the trial court's findings on the scope of the power of attorney, the execution of the note and mortgage, her liability, and the alleged ratification of Tan Bunco's acts.
Issue(s)
Whether the power of attorney granted to Tan Bunco authorized him to borrow money and mortgage the defendant's properties. Whether the defendant ratified the acts of Tan Bunco in executing the promissory note and mortgage.
Ruling
The Supreme Court reversed the decision of the lower court, dismissing the complaint. The dismissal was without prejudice to any legal rights or remedies PNB may have against Tan Ong Sze. Costs were awarded to the appellant.
Ratio Decidendi
On the authority of the attorney-in-fact to borrow money and mortgage property: The Court held that the power of attorney, which granted Tan Bunco the authority "to sign, seal and execute, and as my act and deed, deliver any lease, any other deed for conveying any real or personal property," did not implicitly grant the power to borrow money or mortgage real property. The Court extensively cited legal authorities and jurisprudence, including Cyclopedia of Law and Procedure and Ruling Case Law, which state that authority to mortgage or borrow money is not to be inferred from a general power to manage or even sell property. The power to convey is distinct from the power to mortgage. The Court emphasized that such powers must be expressly granted and cannot be extended by implication, as they are among the most dangerous powers a principal can confer upon an agent. The Court found that the language of the power of attorney was confined to conveying property, not encumbering it through loans and mortgages. The lower court's theory that a mortgage is a conveyance and thus included in the power to convey was rejected as not being supported by authority. On the issue of ratification: The Court found no legal evidence in the record to sustain the lower court's finding that the defendant had ratified the acts of her agent. The record did not show that Tan Ong Sze had any knowledge of the execution or existence of the note or mortgage, or of the transaction itself. Therefore, the defendant could not be deemed to have ratified the acts of her attorney-in-fact.
Main Doctrine
The power to sell and convey real property does not carry with it, by implication, the authority to borrow money or to execute a mortgage on real property to secure the payment of a debt. Such authority must be expressly granted.