EN BANC

G.R. No. L-24765             August 29, 1969

PHILIPPINE NATIONAL BANK, plaintiff-appellee,

vs.
MAXIMO STA. MARIA, ET AL., defendant,
VALERIANA, EMETERIA, TEOFILO, QUINTIN, ROSARIO and LEONILA, all surnamed STA.
MARIA, defendants-appellants.

Tomas Besa and Jose B. Galang for plaintiff-appellee.

G.P. Nuguid, Jr. for defendants-appellants.

TEEHANKEE, J.:

In this appeal certified to this Court by the Court of Appeals as involving purely legal issues, we hold
that 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.

Plaintiff bank filed this action on February 10, 1961 against defendant Maximo Sta. Maria and his six
brothers and sisters, defendants-appellants, Valeriana, Emeteria, Teofilo, Quintin, Rosario and
Leonila, all surnamed Sta. Maria, and the Associated Insurance & Surety Co., Inc. as surety, for the
collection of certain amounts representing unpaid balances on two agricultural sugar crop loans due
allegedly from defendants. 1

The said sugar crop loans were obtained by defendant Maximo Sta. Maria from plaintiff bank under
a special power of attorney, executed in his favor by his six brothers and sisters, defendants-
appellants herein, to mortgage a 16-odd hectare parcel of land, jointly owned by all of them, the
pertinent portion of which reads as follows:

That we, VALERIANA, EMETERIA, TEOFILO, QUINTIN, ROSARIO and LEONILA all
surnamed STA. MARIA, sole heirs of our deceased parents CANDIDO STA. MARIA and
FRANCISCA DE LOS REYES, all of legal age, Filipinos, and residents of Dinalupihan,
Bataan, do hereby name, constitute and appoint Dr. MAXIMO STA. MARIA, of legal age,
married, and residing at Dinalupihan, Bataan to be our true and lawful attorney of and in our
place, name and stead to mortgage, or convey as security to any bank, company or to any
natural or juridical person, our undivided shares over a certain parcel of land together the
improvements thereon which parcel of land is more particularly described as follows, to wit:

"Situated in the Barrio of Pinulot, Municipality of Dinalupihan, Bataan, containing an

area of 16.7249 hectares and bounded as follows to wit: North by property of
Alejandro Benito; on the Northeast, by public land and property of Tomas Tulop; on
the southeast, by property of Ramindo Agustin; on the southwest, by properties of
Jose V. Reyes and Emilio Reyes; and on the northwest, by excluded portion claimed
by Emilio Reyes."

of which parcel of land aforementioned we are together with our said attorney who is our
brother, the owners in equal undivided shares as evidenced by Transfer Certificate of Title
No. T-2785 of the Registry of Deeds of Bataan dated Feb. 26th 1951. (Exh. E) 2
In addition, Valeriana Sta. Maria 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, granting him the
following authority:

For me and in my name to borrow money and make, execute, sign and deliver mortgages of
real estate now owned by me standing in my name and to make, execute, sign and deliver
any and all promissory notes necessary in the premises. (Exh. E-I)3

By virtue of the two above powers, Maximo Sta. Maria applied for two separate crop loans, for the
1952-1953 and 1953-1954 crop years, with plaintiff bank, one in the amount of P15,000.00, of which
only the sum of P13,216.11 was actually extended by plaintiff, and the other in the amount of
P23,000.00, of which only the sum of P12,427.57 was actually extended by plaintiff. As security for
the two loans, Maximo Sta. Maria executed in his own name in favor of plaintiff bank two chattel
mortgages on the standing crops, guaranteed by surety bonds for the full authorized amounts of the
loans executed by the Associated Insurance & Surety Co., Inc. as surety with Maximo Sta. Maria as
principal. The records of the crop loan application further disclose that among the securities given by
Maximo for the loans were a "2nd mortgage on 25.3023 Has. of sugarland, including sugar quota
rights therein" including, the parcel of land jointly owned by Maximo and his six brothers and sisters
herein for the 1952-1953 crop loan, with the notation that the bank already held a first mortgage on
the same properties for the 1951-1952 crop loan of Maximo, 4 and a 3rd mortgage on the same
properties for the 1953-1954 crop loan. 5

The trial court rendered judgment in favor of plaintiff and against defendants thus: 1äwphï1.ñët

WHEREFORE premises considered, judgment is hereby rendered condemning the

defendant Maximo R. Sta. Maria and his co-defendants Valeriana, Quintin, Rosario,
Emeteria, Teofilo, and Leonila all surnamed Sta. Maria and the Associated Insurance and
Surety Company, Inc., jointly and severally, to pay the plaintiff, the Philippine National Bank,
Del Carmen Branch, as follows:

1. On the first cause of action, the sum of P8,500.72 with a daily interest of P0.83 on
P6,100.00 at 6% per annum beginning August 21, 1963 until fully paid;

2. On the second cause of action, the sum of P14,299.79 with a daily interest of P1.53 on
P9,346.44 at 6% per annum until fully paid; and

3. On both causes of action the further sum equivalent to 10% of the total amount due as
attorney's fee as of the date of the execution of this decision, and the costs. 6

Defendant Maximo Sta. Maria and his surety, defendant Associated Insurance & Surety Co., Inc.
who did not resist the action, did not appeal the judgment. This appeals been taken by his six
brothers and sisters, defendants-appellants who reiterate in their brief their main contention in their
answer to the complaint that under this special power of attorney, Exh. E, they had not 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 at all, their liability should not go beyond the value of the property
which they had authorized to be given as security for the loans obtained by Maximo. In their answer,
defendants-appellants had further contended that they did not benefit whatsoever from the loans,
and that the plaintiff bank's only recourse against them is to foreclose on the property which they had
authorized Maximo to mortgage.
We find the appeal of defendants-appellants, except for defendant Valeriana Sta. Maria who had
executed another special power of attorney, Exh. E-1, expressly authorizing Maximo to borrow
money on her behalf, to be well taken.

1. Plaintiff bank has not made out a cause of action against defendants-appellants (except
Valeriana), so as to hold them liable for the unpaid balances of the loans obtained by
Maximo under the chattel mortgages executed by him in his own name alone. In the early
case of Bank of P.I. vs. De Coster, this Court, in holding that the broad power of attorney
given by the wife to the husband to look after and protect the wife's interests and to transact
her business did not authorize him to make her liable as a surety for the payment of the pre-
existing debt of a third person, cited the fundamental construction rule that "where in an
instrument powers and duties are specified and defined, that all of such powers and duties
are limited andconfined to those which are specified and defined, and all other powers and
duties are excluded." 7 This is but in accord with the disinclination of courts to enlarge an
authority granted beyond the powers expressly given and those which incidentally flow or
derive therefrom as being usual or reasonably necessary and proper for the performance of
such express powers. Even before the filing of the present action, this Court in the similar
case of De Villa vs. Fabricante 8 had already ruled that where the power of attorney given to
the husband by the wife was limited to a grant of authority to mortgage a parcel of land titled
in the wife's name, the wife may not be held liable for the payment of the mortgage debt
contracted by the husband, as the authority to mortgage does not carry with it the authority
to contract obligation. This Court thus held in the said case:

Appellant claims that the trial court erred in holding that only Cesario A. Fabricante is
liable to pay the mortgage debt and not his wife who is exempt from liability. The trial
court said: "Only the defendant Cesario A. Fabricante is liable for the payment of this
amount because it does not appear that the other defendant Maria G. de Fabricante
had authorized Cesario A. Fabricante to contract the debt also in her name. The
power of attorney was not presented and it is to be presumed that the power (of
attorney) was limited to a grant of authority to Cesario A. Fabricante to mortgage the
parcel of land covered by Transfer Certificate of Title in the name of Maria G. de
Fabricante.

We went over the contents of the deed of mortgage executed by Cesario Fabricante
in favor of Appellant on April 18, 1944, and there is really nothing therein from which
we may infer that Cesario was authorized by his wife to construct the obligation in
her name. The deed shows that the authority was limited to the execution of the
mortgage insofar as the property of the wife is concerned. There is a difference
between authority to mortgage and authority to contract obligation. Since the power
of attorney was not presented as evidence, the trial court was correct in presuming
that the power was merely limited to a grant of authority to mortgage unless the
contrary is shown.9

2. 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, as
erroneously held by the trial court.
3. The fact that Maximo presented to the plaintiff bank Valeriana's additional special power of
attorney expressly authorizing him to borrow money, Exh. E-1, aside from the authority to
mortgage executed by Valeriana together with the other defendants-appellants also in
Maximo's favor, lends support to our view that the bank was not satisfied with the authority to
mortgage alone. For otherwise, such authority to borrow would have been deemed
unnecessary and a surplusage. And having failed to require that Maximo submit a similar
authority to borrow, from the other defendants-appellants, plaintiff, which apparently was
satisfied with the surety bond for repayment put up by Maximo, cannot now seek to hold said
defendants-appellants similarly liable for the unpaid loans. Plaintiff's argument that "a
mortgage is simply an accessory contract, and that to effect the mortgage, a loan has to be
secured" 10 falls, far short of the mark. Maximo had indeed, secured the loan on his own
account and the defendants-appellants had authorized him to mortgage their respective
undivided shares of the real property jointly owned by them as security for the loan. But that
was the extent of their authority land consequent liability, to have the real property answer
for the loan in case of non-payment. It is not unusual in family and business circles that one
would allow his property or an undivided share in real estate to be mortgaged by another as
security, either as an accommodation or for valuable consideration, but the grant of such
authority does not extend to assuming personal liability, much less solidary liability, for any
loan secured by the grantee in the absence of express authority so given by the grantor.

4. The outcome might be different if there had been an express ratification of the loans by
defendants-appellants or if it had been shown that they had been benefited by the crop loans
so as to put them in estoppel. But the burden of establishing such ratification or estoppel falls
squarely upon plaintiff bank. It has not only failed to discharge this burden, but the record
stands undisputed that defendant-appellant Quintin Sta. Maria testified that he and his co-
defendants executed the authority to mortgage "to accommodate (my) brother Dr. Maximo
Sta. Maria ... and because he is my brother, I signed it to accommodate him as security for
whatever he may apply as loan. Only for that land, we gave him as, security" and that "we
brothers did not receive any centavo as benefit." 11 The record further shows plaintiff bank
itself admitted during the trial that defendants-appellants "did not profit from the loan" and
that they "did not receive any money (the loan proceeds) from (Maximo)." 12 No estoppel,
therefore, can be claimed by plaintiff as against defendants-appellants.

5. Now, as to the extent of defendant Valeriana Sta. Maria's liability to plaintiff. As already
stated above, Valeriana stands liable not merely on the mortgage of her share in the
property, but also for the loans which Maximo had obtained from plaintiff bank, since she had
expressly granted Maximo the authority to incur such loans. (Exh. E-1.) Although the
question has not been raised in appellants' brief, we hold that Valeriana's liability for the
loans secured by Maximo is not joint and several or solidary as adjudged by the trial court,
but only joint, pursuant to the provisions of Article 1207 of the Civil Code that "the
concurrence ... of two or more debtors in one and the same obligation does not imply that ...
each one of the (debtors) is bound to render entire compliance with the prestation. There is a
solidary liability only when the obligation expressly so states, or when the law or the nature of
the obligation requires solidarity." It should be noted that in the additional special power of
attorney, Exh. E-1, executed by Valeriana, she did not grant Maximo the authority to bind her
solidarity with him on any loans he might secure thereunder.

6. Finally, as to the 10% award of attorney's fees, this Court believes that considering the
resources of plaintiff bank and the fact that the principal debtor, Maximo Sta. Maria, had not
contested the suit, an award of five (5%) per cent of the balance due on the principal,
exclusive of interests, i.e., a balance of P6,100.00 on the first cause of action and a balance
of P9,346.44 on the second cause of action, per the bank's statements of August 20, 1963,
(Exhs. Q-1 and BB-1, respectively) should be sufficient.
WHEREFORE, the judgment of the trial court against defendants-appellants Emeteria, Teofilo,
Quintin, Rosario and Leonila, all surnamed Sta. Maria is hereby reversed and set aside, with costs in
both instances against plaintiff. The judgment against defendant-appellant Valeriana Sta. Maria is
modified in that her liability is held to be joint and not solidary, and the award of attorney's fees is
reduced as set forth in the preceding paragraph, without costs in this instance.