Rural Bank of Bombon v CA G.R. No.
95703 | August 3, 1992 Quick Summary: Ederlinda Gallardo transacted with Rufino Aquino, contracting him to be her agent and providing him with a Special Power of Attorney authorizing him to mortgage her property in her behalf for the purpose of securing loans from banks. She provided him with the TCT to the property as well. Rufino Aquino secured a loan from Rural Bank of Bombon for the amount of PhP350,000.00 as principal and chargeable with a 14% interest per annum. In the contract of mortgage, he represented himself to be the attorney-in-fact of Gallardo, but proceeded to sign his name as mortgagor. He even got his wife to sign the documents as wife of mortgagor. Gallardo, upon knowing of the transaction, went to court to secure the annulment of such contract since she was allegedly surprised to find out that her property was already mortgaged and correspondence regarding the contract of mortgage were not being sent to her, and instead sent to the address of Aquino, who has since disappeared from Bulacan and now resides in Camarines Sur. Further, the mortgage was secured to pay off personal loans of Aquino and to establish his personal fishpond business. RTC issued a TRO restraining Rural Bank of Bombon to foreclose the mortgage. In his Answer, Aquino alleged that Gallardo owed him money and it was already the responsibility of Aquino to take care of payments due. RTC ruled in favor of Aquino and Bank of Bombon. CA reversed the ruling of the RTC and held that the Deal of Real Estate Mortgage was not valid. It not binding on the principal Gallardo since it was executed not in her name as principal but in the personal capacity of the Aquino spouses. Issue: WON the Deed of Real Estate Mortgage executed by Rufino S. Aquino as attorney-in-fact of Ederlinda Gallardo in favor of the Rural Bank of Bombon is valid. Held: No. Aquino signed the Deed of Real Estate Mortgage in his name alone as mortgagor, without any indication that he was signing for and in behalf of the property owner, Ederlinda Gallardo. He bound himself alone in his personal capacity as a debtor of the petitioner Bank and not as the agent or attorney-in-fact of Gallardo. Ratio: It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real property executed by an agent, it must upon its face purport to be made, signed and sealed in the name of the principal, otherwise, it will bind the agent only. It is not enough merely that the agent was in
fact authorized to make the mortgage, if he has not acted in the name of the principal. Neither is it ordinarily sufficient that in the mortgage the agent describes himself as acting by virtue of a power of attorney, if in fact the agent has acted in his own name and has set his own hand and seal to the mortgage. This is especially true where the agent himself is a party to the instrument. However clearly the body of the mortgage may show and intend that it shall be the act of the principal, yet, unless in fact it is executed by the agent for and on behalf of his principal and as the act and deed of the principal, it is not valid as to the principal. (Philippine Sugar Estates Development Co. vs. Poizat) Bank cannot rely on Article 1883 to bind the principal Gallardo. It is not applicable to the case at bar. Article 1883 states in such case the agent is the one directly bound in favor of the person with whom he has transacted, as if the transaction was his own, except when the contract involves things belonging to the principal. There is no principle of law by which a person can become liable on a real mortgage which she never executed either in person or by attorney in fact. Here, Aquino acted purportedly as an agent of Gallardo, but actually acted in his personal capacity. Involved herein are properties titled in the name of respondent Gallardo against which the Bank proposes to foreclose the mortgage constituted by an agent (Aquino) acting in his personal capacity.