Philippine National Bank v. Sta. Maria, G.R. No.

L-24765,
[August 29, 1969], 139 PHIL 781-790)

FACTS:
The sugar crop loans were obtained by Maximo from the plaintiff bank under the power of the attorney,
executed in his favor by his brothers and sisters to mortgage a 16-odd hectare parcel of land, jointly owned
by all of them

Valeriana the sister of Maximo alone also executed in favor of her brother Maximo a special power of
attorney to borrow money and mortgage any real estate owned by her.

Maximo applied for two separate crop loans with the PNB, one in the amount of P15,000 but only
P13,216.11 was extended by the PNB and the other for P23,000 but only P12,427.57 was extended by the
PNB

As security for the two loans, Maximo executed it in his own name in favor of PNB two chattel mortgages,
guaranteed by the surety bonds for the full authorized amounts of loans executed by the Associated
Insurance & Surety Co., Inc.

Plaintiff Bank filed the case on February 10,1961 against defendant Maximo Sta. Maria and his six brothers
and sisters and the Associated Insurancs & Suret Co., Inc. for the collection of unpaid balances of two
sugar crop loans

The Trial Court rendered judgment in favor of the PNB.

Maximo did not appeal but his siblings appealed and contended that they had given their brother Maximo
the authority to borrow money but only to mortgage the real estate jointly owned by them and that if
they are liable, the liability should not go beyond the value of the property which they had authorized to
be given as security of the loans obtained by Maximo. They further contended that they did not benefit
whatsoever from the loans.

ISSUE:
WON the SPA issued by the siblings of Maximo makes them liable for the loan obligations of Mariano?

RULING:
NO. The authority granted by defendants-appellants (except Valeriana) unto their brother, Maximo, was
merely to mortgage the property jointly owned by them. They did not grant Maximo any authority to
contract for any loans in their names and behalf. Maximo alone, with Valeriana who authorized him-to
borrow money, must answer for said loans and the other defendants- appellants' only liability is that the
real estate authorized by them to be mortgaged would be subject to foreclosure and sale to respond for
the obligations contracted by Maximo. But they cannot be held personally liable for the payment of such
obligations.

A special power of attorney to mortgage real estate is limited to such authority to mortgage and does not
bind the grantor personally to other obligations contracted by the grantee, in the absence of any
ratification or other similar act that would estop the grantor from questioning or disowning such other
obligations contracted by the grantee.|||
BA Finance Corp. v. Court of Appeals, G.R. No. 94566,
[July 3, 1992]

FACTS:
On December 17, 1980, Renato Gaytano, doing business under the name Gebbs International, applied for
and was granted a loan with respondent Traders Royal Bank in the amount of P60,000.00. As security for
the payment of said loan, the Gaytano spouses executed a deed of suretyship whereby they agreed to
pay jointly and severally to respondent bank the amount of the loan including interests, penalty and other
bank charges.

In a letter dated December 5, 1980 addressed to respondent bank, Philip Wong as credit administrator
of BA Finance Corporation for and in behalf of the latter, undertook to guarantee the loan of the Gaytano
spouses. The letter reads:

"This is in reference to the application of Gebbs International for a twenty-five (25) month term loan of
60,000.00 with your Bank.

"In this connection, please be advised that we unconditionally guarantee full payment in peso value the
said accommodation (sic) upon non-payment by subject up to a maximum amount of P60,000.00.

"Hoping this would meet your requirement and expedite the early processing of their application.

"Thank you.

Very truly yours,

Partial payments were made on the loan leaving an unpaid balance in the amount of P85,807.25. Since
the Gaytano spouses refused to pay their obligation, respondent bank filed with the trial court a complaint
for sum of money against the Gaytano spouses and petitioner corporation as alternative defendant.

The Gaytano spouses did not present evidence for their defense. Petitioner corporation, on the other
hand, raised the defense of lack of authority of its credit administrator to bind the corporation.

ISSUE:
WON BA Finance is liable for the guarantee made by Peter Wong?

RULING:
NO.
Although Wong was clearly authorized to approve loans even up to P350,000.00 without any security
requirement, which is far above the amount subject of the guaranty in the amount of P60,000.00, nothing
in the said memorandum expressly vests on the credit administrator power to issue guarantees. We
cannot agree with respondent's contention that the phrase "contingent commitment" set forth in the
memorandum means guarantees. It has been held that a power of attorney or authority of an agent
should not be inferred from the use of vague or general words.
The sole allegation of the credit administrator in the absence of any other proof that he is authorized to
bind petitioner in a contract of guaranty with third persons should not be given weight. The representation
of one who acts as agent cannot by itself serve as proof of his authority to act as agent or of the extent of
his authority as agent.

Wong's testimony that he had entered into similar transactions of guaranty in the past for and in behalf
of the petitioner, lacks credence due to his failure to show documents or records of the alleged past
transactions. The actuation of Wong in claiming and testifying that he has the authority is understandable.
He would naturally take steps to save himself from personal liability for damages to respondent bank
considering that he had exceeded his authority. The rule is clear that an agent who exceeds his authority
is personally liable for damages.

As to the Bank, it is a settled rule that persons dealing with an assumed agent, whether the assumed
agency be a general or special one are bound at their peril, if they would hold the principal liable, to
ascertain not only the fact of agency but also the nature and extent of authority, and in case either is
controverted, the burden of proof is upon them to establish it (Harry Keeler v. Rodriguez, 4 Phil. 19).
Hence, the burden is on respondent bank to satisfactorily prove that the credit administrator with whom
they transacted acted within the authority given to him by his principal.

Director of Public Works v. Sing Juco, G.R. No. 30181,

From Torrens certificate of title No. 1359, relating to land in the municipality of Iloilo, it appears that on
September 28, 1920, the title to the property described therein was owned, in undivided shares, by
Mariano de la Rama, Gonzalo Mariano Tanboontien, Sing Juco and Sing Bengco. The interest vested by
said certificate in Mariano de la Rama was subsequently transferred by sale to Enrique Echaus. It further
appears that on November 23, 1920, the owners of the property covered by said certificate conveyed it
by way of mortgage to the Philippine National Bank for the purpose of securing a credit in current account
in an amount not in excess of P170,000, with interest at the rate of 12 per cent per annum. The
indebtedness covered by this mortgage has not been satisfied, and upon the date of the decision of the
court below it amounted to the sum of P170,000, plus interest at 12 per cent per annum form November
24, 1920.

The land above referred to contains an area of nearly 16 hectares, or to be exact, 158,589.44 square
meters according to the certificate. It is located on "Point Llorente" at the mouth of Iloilo River, near the
City of Iloilo, and it is of so low a level that, prior to the improvement to which reference is to be made, it
was subject to frequent flooding. In 1921 the Government of the Philippine Islands was planning extensive
harbor improvements in this vicinity, requiring extensive dredging by the Bureau of Public Works in the
mouth of said river. 'The conduct of these dredging operations made it necessary for the Director of Public
Works to find a place of deposit for the dirt and mud taken from the place, or places, dredged. As the land
already referred to was low and easily accessible to the spot where dredging was to be conducted, it was
obviously to the interest both of the Government and the owners of said land that the material taken out
by the dredges should be deposited on said property.
Accordingly, after preliminary negotiations to this effect had been conducted, a contract was made
between the Director of Public Works, representing the Government of the Philippine Islands, and the
four owners, M. de la Rama, Sing Juco, G. M. Tanboontien and Sing Bengco, of which, as modified in some
respects by subsequent agreement.

In connection with the making of the contract above-mentioned, the Director of Public Works required a
bond to be supplied by the owners in the penal amount of P150,000, approximately twice the estimated
cost of the filling, conditioned for the payment of the amount due from the owners. This bond was
executed contemporaneously with the main contract; and in connection therewith it should be noted
that one of the names appearing upon said contract was that of "Casa Viuda de Tan Toco," purporting
to be signed by M. de la Rama, by virtue of a power of attorney.

The dredging operations were conducted by the Bureau of Public Works in substantial compliance, we
find, with the terms of said agreement; and after the account with the owners had been liquidated and
the amount due from them determined, demand was made upon them for the payment of the first
installment. No such payment was, however, made, and as a consequence this action was instituted by
the Director of Public Works on October 14, 1926, for the purpose of recovering the amount due the
Government under the contract from the original owners of the property and from the suretyship, and to
enforce the obligation as a real lien upon the property. In said action the Philippine National Bank was
made a party defendant, as having an interest under its prior mortgage upon the property, while Enrique
Echaus was made defendant as successor in interest of M. de la Rama, and Tan Ong Sze widow of Tan
Toco, was also made a defendant by reason of her supposed liability derived from the act of De la Rama
in signing the firm name "Casa Viuda de Tan Toco," as a surety on the bond.

On the part of Viuda de Tan Toco the defense was interposed that the name "Casa Viuda de Tan Toco,"
signed to the contract of suretyship by Mariano de la Rama, was signed without authority.

ISSUE:
WON Vda. de Tan Toco is personally liable by virtue of the surety on the bond upon the contract of
suretyship, in case the four principal obligors should not satisfy their indebtedness to the Government, or
if the land should not sell for enough to satisfy the same.

RULING:
NO. It will be remembered that said contract purports to have been signed by Mariano de la Rama, acting
for this defendant under power of attorney. However, the SPA only expressly authorized de la Rama for
the conveyance of the property, and not for a contract of suretyship. The clauses in the SPA relate more
specifically to the execution of contracts relating to property; and the more general words at the close of
the quoted clauses should be interpreted, under the rule ejusdem generis, as referring to contracts of like
character.

Power to execute a contract of so exceptional a nature as a contract of suretyship or guaranty cannot be

In article 1827 of the Civil Code it is declared that guaranty shall not be presumed; it must be expressed
and cannot be extended beyond its specified limits. By analogy a power of attorney to execute a contract
of guaranty should not be inferred from vague or general words, especially when such words have their
origin and explanation in particular powers of a wholly different nature. It results that the trial court was
in error in giving personal judgment against Tan Ong Sze upon the bond upon which she was sued in this
case.

Rural Bank of Bombon (Camarines Sur), Inc. v. Court of Appeals

FACTS:
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.

RULING:
NO.

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.
In view of this rule, Aquino's act of signing 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, 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.

Article 1883 of the Civil Code relied upon by the petitioner Bank, is not applicable to the case at bar. Herein
respondent 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. Under these
circumstances, we hold, as we did in Philippine Sugar Estates Development Co. vs. Poizat, supra, that
Gallardo's property is not liable on the real estate mortgage: "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. It should be noted that this is a mortgage upon real property, the title to which cannot be divested
except by sale on execution or the formalities of a will or deed. For such reasons, the law requires that a
power of attorney to mortgage or sell real property should be executed with all of the formalities required
in a deed.