Rural Bank of Bombon V CA

11.
Rural Bank of Bombon v CA This is especially true where the agent himself is a party to
G.R. No. 95703 | August 3, 1992 the instrument. However clearly the body of the mortgage
may show and intend that it shall be the act of the
Quick Summary: 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
Ederlinda Gallardo transacted with Rufino Aquino, principal, it is not valid as to the principal. (Philippine
contracting him to be her agent and providing him with a Sugar Estates Development Co. vs. Poizat)
Special Power of Attorney authorizing him to mortgage her
property in her behalf for the purpose of securing loans Bank cannot rely on Article 1883 to bind the principal
from banks. She provided him with the TCT to the Gallardo. It is not applicable to the case at bar. Article 1883
property as well. states “in such case the agent is the one directly bound in
favor of the person with whom he has transacted, as if the
Rufino Aquino secured a loan from Rural Bank of Bombon transaction was his own, except when the contract involves
for the amount of PhP350,000.00 as principal and things belonging to the principal.”
chargeable with a 14% interest per annum. In the contract
of mortgage, he represented himself to be the attorney-in- There is no principle of law by which a person can become
fact of Gallardo, but proceeded to sign his name as liable on a real mortgage which she never executed either
mortgagor. He even got his wife to sign the documents as in person or by attorney in fact.
wife of mortgagor.
Here, Aquino acted purportedly as an agent of Gallardo,
Gallardo, upon knowing of the transaction, went to court to but actually acted in his personal capacity. Involved herein
secure the annulment of such contract since she was are properties titled in the name of respondent Gallardo
allegedly surprised to find out that her property was against which the Bank proposes to foreclose the mortgage
already mortgaged and correspondence regarding the constituted by an agent (Aquino) acting in his personal
contract of mortgage were not being sent to her, and capacity.
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.

Rural Bank of Bombon V CA

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11.

RTC issued a TRO restraining Rural Bank of Bombon to

It is not enough merely that the agent was in fact

Neither is it ordinarily sufficient that in the mortgage the

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