CELESTINA T. NAGUIAT, petitioner, vs. COURT OF APPEALS and AURORA QUEA?O, respondents. G.R. No.

118375 | 2003-10-03 Doctrine: A loan contract is a real contract, not consensual, and, as such, is
perfected only upon the delivery of the object of the contract. Facts: Queaño obtained a loan amounting
to 200,000 due on 11 September 1980 evidenced by a promissory note from Naguiat and issued for a
loan secured by a real estate mortgage. in the amount of P200,000.00, which is secured by a real estate
mortgage. The loan proceeds was endorsed by Nuguiat through two checks amounting 95,000. Aside
from the PN, Nugiat issued a Security Bank check amounting to 200,000 due on due date. On maturity
date, the check was dishonored for insufficiency of funds. Queaño received a letter from Naguiat’s
lawyer, demanding settlement of the loan. Shortly thereafter, Queaño and Ruebenfeldt met with
Naguiat. At the meeting, Queaño told Naguiat that she did not receive the proceeds of the loan, adding
that the checks were retained by Ruebenfeldt, who purportedly was Naguiat’s agent. Naguiat applied
for the extrajudicial foreclosure of the mortgage. Queaño filed the case before the RTC, seeking the
annulment of the mortgage deed. RTC declared the Deed of Real Estate Mortgage null and void which
the CA affirmed. Issue: Whether Queaño had actually received the loan proceeds which were supposed
to be covered by the two checks Naguiat had issued or indorsed. Held: No. No evidence was submitted
by Naguiat that the checks she issued or endorsed were actually encashed or deposited. The mere
issuance of the checks did not result in the perfection of the contract of loan. For the Civil Code provides
that the delivery of bills of exchange and mercantile documents such as checks shall produce the effect
of payment only when they have been cashed. It is only after the checks have produced the effect of
payment that the contract of loan may be deemed perfected. Art. 1934 of the Civil Code provides: "An
accepted promise to deliver something by way of commodatum or simple loan is binding upon the
parties, but the commodatum or simple loan itself shall not be perfected until the delivery of the object
of the contract." A loan contract is a real contract, not consensual, and, as such, is perfected only upon
the delivery of the object of the contract. In this case, the objects of the contract are the loan proceeds
which Queaño would enjoy only upon the encashment of the checks signed or indorsed by Naguiat. If
indeed the checks were encashed or deposited, Naguiat would have certainly presented the
corresponding documentary evidence, such as the returned checks and the pertinent bank records.
Since Naguiat presented no such proof, it follows that the checks were not encashed or credited to
Queaño’s account.

Naguiat vs CA and Queaño

GR No. 118375, 03 October 2003
412 SCRA 591

FACTS
Queaño applied with Naguiat a loan for P200,000, which the latter granted.
Naguiat indorsed to Queaño Associated bank Check No. 090990 for the
amount of P95,000 and issued also her own Filmanbank Check to the order
of Queaño for the amount of P95,000. The proceeds of these checks were to
constitute the loan granted by Naguiat to Queaño. To secure the loan,
Queaño executed a Deed of Real Estate Mortgage in favor of Naguiat, and
surrendered the owner’s duplicates of titles of the mortgaged properties. The
deed was notarized and Queaño issued to Naguiat a promissory note for the
amount of P200,000. Queaño also issued a post-dated check amounting to
P200,000 payable to the order of Naguait. The check was dishonoured for
insufficiency of funds. Demand was sent to Queaño. Shortly, Queaño, and
one Ruby Reubenfeldt met with Naguiat. Queaño told Naguiat that she did
not receive the loan proceeds, adding that the checks were retained by
Reubenfeldt, who purportedly was Naguiat’s agent.

Naguiat applied for extrajudicial foreclosure of the mortgage. RTC declared

the Deed as null and void and ordered Naguiat to return to Queaño the
owner’s duplicates of titles of the mortgaged lots.

ISSUE
Whether or not the issuance of check resulted in the perfection of the loan
contract.

HELD
The Court held in the negative. No evidence was submitted by Naguiat that
the checks she issued or endorsed were actually encashed or deposited. The
mere issuance of the checks did not result in the perfection of the contract of
loan. The Civil Code provides that the delivery of bills of exchange and
mercantile documents such as checks shall produce the effect of payment
only when they have been cashed. It is only after the checks have been
produced the effect of payment that the contract of loan may have been
perfected.

Article 1934 of the Civil Code provides: An accepted promise to deliver

something by way of commodatum or simple loan is binding upon the
parties, but the commodatum or simple loan itsel shall not be perfected until
the delivery of the object of the contract. A loan contract is a real contract,
not consensual, and as such, is perfected only upon the delivery of the
objects of the contract.

CELESTINA T. NAGUIAT,

petitioner, vs.

COURT OF APPEALS and AURORAQUEAÑO,

respondents.

G.R. No. 118375 October 3, 2003Facts:

Queaño applied with Naguiat for a loan in the amount of P200,000.00, which Naguiat granted. Naguiat
indorsed to Queaño Associated Bank Check for the amountP95,000.00, which was earlier issued to
Naguiat by the Corporate Resources FinancingCorporation. She also issued her own Filmanbank Check,
to the order of Queaño, and for theamount of P95,000.00. The proceeds of these checks were to
constitute the loan granted by Naguiat to Queaño. To secure the loan, Queaño executed a Deed of Real
Estate Mortgage in
favor of Naguiat, and surrendered to the latter the owner’s duplicates of the titles covering the

mortgaged properties. Queaño issued to Naguiat a promissory note for the amount of P200,000.00, with
interest at 12% per annum. Queaño also issued a Security Bank and TrustCompany check, postdated for
the amount of P200,000.00 and payable to the order of [Link] presentment on its maturity date,
the Security Bank check was dishonored for

insufficiency of funds. Queaño received a letter from Naguiat’s lawyer, demanding settlement of

the loan. Queaño and one Ruby Ruebenfeldt (Ruebenfeldt) met with Naguiat. At the meeting,Queaño
told Naguiat that she did not receive the proceeds of the loan, adding that the checks

were retained by Ruebenfeldt, who purportedly was Naguiat’s agent.

Naguiat applied for theextrajudicial foreclosure of the mortgage. Before the scheduled sale, Queaño
filed annulment of the mortgage deed.

Issues:

(1) Whether or not petitioner can foreclose the mortgage properties.(2) Agency by estoppel between
petitioner and Ruebenfeldt.

Rulings:

(1) Absolutely no evidence was submitted by Naguiat that the checks she issuedor endorsed were
actually encashed or deposited. The mere issuance of the checks did not resultin the perfection of the
contract of loan. For the Civil Code provides that the delivery of bills of exchange and mercantile
documents such as checks shall produce the effect of payment onlywhen they have been cashed. It is
only after the checks have produced the effect of payment thatthe contract of loan may be deemed
perfected. A loan contract is a real contract, not consensual,and, as such, is perfected only upon the
delivery of the object of the contract. In this case, theobjects of the contract are the loan proceeds
which Queaño would enjoy only upon theencashment of the checks signed or indorsed by Naguiat. Since
Naguiat presented no such proof,

it follows that the checks were not encashed or credited to Queaño’s account

. No compellingreason to disturb the finding of the courts a quo that the lender did not remit and the
borrower didnot receive the proceeds of the loan. That being the case, it follows that the mortgage
which issupposed to secure the loan is null and void.(2) The existence of an agency relationship between
Naguiat and Ruebenfeldt issupported by ample evidence. Naguiat instructed Ruebenfeldt to withhold
from Queaño thechecks she issued or indorsed to Queaño, pending delivery by the latter of additional
collateral. Itwas also Ruebenfeldt who accompanied Queaño in her meeting with Naguiat.

PEOPLE OF THE PHILIPPINES

vs.
MIZPAH R. REYES

G.R. Nos. 74226-27 July 27, 1989

FACTS: Spouses Julio Rizare and Patricia Pampo owned a parcel of land in Lipa City registered in their
names under a TCT. Both are now deceased and were survived by the following children: the accused
Mizpah R. Reyes and the complainants. In 1983, the complainants discovered from the Register of Deeds
(RD) that the subject property had already been transferred in the name of Mizpah Reyes, single, under
a TCT. They alleged that the conveyance was through a deed of sale executed and signed by their
parents. Upon examination in the RD of the document, they found that the signature of their parents
were falsified and that accused also made an untruthful statement that she was single although she was
married. The N.B.I. found that the signature of Julio Rizare was genuine but that of Patricia Pampo was
forged. The complainants filed 2 informations against Reyes for falsification and for allegedly making an
untruthful statement of fact in the deed of sale. The trial court granted the motion of Reyes to quash the
informations stating that the lapse of more than twenty (20) years before the two informations were
filed, the crimes for which the accused, Mizpah Reyes, are charged have already prescribed. The People
now filed an appeal in the CA who affirmed the decision of the RTC. The CA ruled that the prescriptive
period started when the deed of sale was registered in the RD and not when the falsification was
discovered. Hence, this petition for review on

certiorari

ISSUE: W/N the petitioner’s action against Reyes has already prescribed.

HELD: Yes, the action has already prescribed. The rule is well-established that registration in a public
registry is a notice to the whole world. The record is

constructive notice

of its contents as well as all interests, legal and equitable, included therein. Under the rule of notice, it is
presumed that the purchaser has examined every instrument of record affecting the title. Such
presumption is irrebutable. This presumption cannot be overcome by proof of innocence or good faith.
The notarized deed of sale was registered on May 26, 1961. The criminal informations for falsification of
a public document having been filed only on October 18, 1984, or more than ten (10) years from May
26, 1961, the crime for which the accused was charged has prescribed. The Court of Appeals, therefore,
committed no reversible error in affirming the trial court's order quashing the two informations on the
ground of prescription.

G.R. No. 95703 August 3, 1992

RURAL BANK OF BOMBON (CAMARINES SUR), INC., petitioner, 

vs.
HON. COURT OF APPEALS, EDERLINDA M. GALLARDO, DANIEL MANZO and RUFINO S.
AQUINO, respondents.

L.M. Maggay & Associates for petitioner.

GRIÑO-AQUINO, J.:

This petition for review seeks reversal of the decision dated September 18, 1990 of the Court of
Appeals, reversing the decision of the Regional Trial Court of Makati, Branch 150, which dismissed
the private respondents' complaint and awarded damages to the petitioner, Rural Bank of Bombon.

On January 12, 1981, Ederlinda M. Gallardo, married to Daniel Manzo, executed a special power of
attorney in favor of Rufina S. Aquino authorizing him:

1. To secure a loan from any bank or lending institution for any amount or otherwise
mortgage the property covered by Transfer Certificate of Title No. S-79238 situated
at Las Piñas, Rizal, the same being my paraphernal property, and in that connection,
to sign, or execute any deed of mortgage and sign other document requisite and
necessary in securing said loan and to receive the proceeds thereof in cash or in
check and to sign the receipt therefor and thereafter endorse the check representing
the proceeds of loan. (p. 10, Rollo.)

Thereupon, Gallardo delivered to Aquino both the special power of attorney and her owner's copy of
Transfer Certificate of Title No. S-79238 (19963-A).

On August 26, 1981, a Deed of Real Estate Mortgage was executed by Rufino S. Aquino in favor of
the Rural Bank of Bombon (Camarines Sur), Inc. (hereafter, defendant Rural Bank) over the three
parcels of land covered by TCT No. S-79238. The deed stated that the property was being given as
security for the payment of "certain loans, advances, or other accommodations obtained by the
mortgagor from the mortgagee in the total sum of Three Hundred Fifty Thousand Pesos only
(P350,000.00), plus interest at the rate of fourteen (14%) per annum . . ." (p. 11, Rollo).

On January 6, 1984, the spouses Ederlinda Gallardo and Daniel Manzo filed an action against
Rufino Aquino and the Bank because Aquino allegedly left his residence at San Pascual, Hagonoy,
Bulacan, and transferred to an unknown place in Bicol. She discovered that Aquino first resided at
Sta. Isabel, Calabanga, Camarines Sur, and then later, at San Vicente, Calabanga, Camarines Sur,
and that they (plaintiffs) were allegedly surprised to discover that the property was mortgaged to pay
personal loans obtained by Aquino from the Bank solely for personal use and benefit of Aquino; that
the mortgagor in the deed was defendant Aquino instead of plaintiff Gallardo whose address up to
now is Manuyo, Las Piñas, M.M., per the title (TCT No. S-79238) and in the deed vesting power of
attorney to Aquino; that correspondence relative to the mortgage was sent to Aquino's address at
"Sta. Isabel, Calabanga, Camarines Sur" instead of Gallardo's postal address at Las Piñas, Metro
Manila; and that defendant Aquino, in the real estate mortgage, appointed defendant Rural Bank as
attorney in fact, and in case of judicial foreclosure as receiver with corresponding power to sell and
that although without any express authority from Gallardo, defendant Aquino waived Gallardo's
rights under Section 12, Rule 39, of the Rules of Court and the proper venue of the foreclosure suit.

On January 23, 1984, the trial court, thru the Honorable Fernando P. Agdamag, temporarily
restrained the Rural Bank "from enforcing the real estate mortgage and from foreclosing it either
judicially or extrajudicially until further orders from the court" (p.36, Rollo).
Rufino S. Aquino in his answer said that the plaintiff authorized him to mortgage her property to a
bank so that he could use the proceeds to liquidate her obligation of P350,000 to him. The obligation
to pay the Rural Bank devolved on Gallardo. Of late, however, she asked him to pay the Bank but
defendant Aquino set terms and conditions which plaintiff did not agree to. Aquino asked for
payment to him of moral damages in the sum of P50,000 and lawyer's fees of P35,000.

The Bank moved to dismiss the complaint and filed counter-claims for litigation expenses, exemplary
damages, and attorney's fees. It also filed a crossclaim against Aquino for P350,000 with interest,
other bank charges and damages if the mortgage be declared unauthorized.

Meanwhile, on August 30, 1984, the Bank filed a complaint against Ederlinda Gallardo and Rufino
Aquino for "Foreclosure of Mortgage" docketed as Civil Case No. 8330 in Branch 141, RTC Makati.
On motion of the plaintiff, the foreclosure case and the annulment case (Civil Case No. 6062) were
consolidated.

On January 16, 1986, the trial court rendered a summary judgment in Civil Case No. 6062,
dismissing the complaint for annulment of mortgage and declaring the Rural Bank entitled to
damages the amount of which will be determined in appropriate proceedings. The court lifted the writ
of preliminary injunction it previously issued.

On April 23, 1986, the trial court, in Civil Case No. 8330, issued an order suspending the foreclosure
proceedings until after the decision in the annulment case (Civil Case No. 6062) shall have become
final and executory.

The plaintiff in Civil Case No. 6062 appealed to the Court of Appeals, which on September 18, 1990,
reversed the trial court. The dispositive portion of the decision reads:

UPON ALL THESE, the summary judgment entered by the lower court is hereby
REVERSED and in lieu thereof, judgment is hereby RENDERED, declaring the deed
of real estate mortgage dated August 26, 1981, executed between Rufino S. Aquino
with the marital consent of his wife Bibiana Aquino with the appellee Rural Bank of
Bombon, Camarines Sur, unauthorized, void and unenforceable against plaintiff
Ederlinda Gallardo; ordering the reinstatement of the preliminary injunction issued at
the onset of the case and at the same time, ordering said injunction made
permanent.

Appellee Rural Bank to pay the costs. (p. 46, Rollo.)

Hence, this petition for review by the Rural Bank of Bombon, Camarines Sur, alleging that the Court
of Appeals erred:

1. in declaring that the Deed of Real Estate Mortgage was unauthorized, void, and
unenforceable against the private respondent Ederlinda Gallardo; and

2. in not upholding the validity of the Real Estate Mortgage executed by Rufino S.
Aquino as attorney-in-fact for Gallardo, in favor of the Rural Bank of Bombon, (Cam.
Sur), Inc.

Both assignments of error boil down to the lone issue of the validity of the Deed of Real Estate
Mortgage dated August 26, 1981, executed by Rufino S. Aquino, as attorney-in-fact of Ederlinda
Gallardo, in favor of the Rural Bank of Bombon (Cam. Sur), Inc.
The Rural Bank contends that the real estate mortgage executed by respondent Aquino is valid
because he was expressly authorized by Gallardo to mortgage her property under the special power
of attorney she made in his favor which was duly registered and annotated on Gallardo's title. Since
the Special Power of Attorney did not specify or indicate that the loan would be for Gallardo's benefit,
then it could be for the use and benefit of the attorney-in-fact, Aquino.

However, the Court of Appeals ruled otherwise. It held:

The Special Power of Attorney above quoted shows the extent of authority given by
the plaintiff to defendant Aquino. But defendant Aquino in executing the deed of Real
Estate Mortgage in favor of the rural bank over the three parcels of land covered by
Gallardo's title named himself as the mortgagor without stating that his signature on
the deed was for and in behalf of Ederlinda Gallardo in his capacity as her attorney-
in-fact.

At the beginning of the deed mention was made of "attorney-in-fact of Ederlinda H.

Gallardo," thus: " (T)his MORTGAGE executed by Rufino S. Aquino attorney in fact
of Ederlinda H. Gallardo, of legal age, Filipino, married to Bibiana Panganiban with
postal address at Sta. Isabel . . .," but which of itself, was merely descriptive of the
person of defendant Aquino. Defendant Aquino even signed it plainly as mortgagor
with the marital consent yet of his wife Bibiana P. Aquino who signed the deed as
"wife of mortgagor."

xxx xxx xxx

The three (3) promissory notes respectively dated August 31, 1981, September 23,
1981 and October 26, 1981, were each signed by Rufino Aquino on top of a line
beneath which is written "signature of mortgagor" and by Bibiana P. Aquino on top of
a line under which is written "signature of spouse," without any mention that
execution thereof was for and in behalf of the plaintiff as mortgagor. It results, borne
out from what were written on the deed, that the amounts were the personal loans of
defendant Aquino. As pointed out by the appellant, Aquino's wife has not been
appointed co-agent of defendant Aquino and her signature on the deed and on the
promissory notes can only mean that the obligation was personally incurred by them
and for their own personal account.

The deed of mortgage stipulated that the amount obtained from the loans shall be
used or applied only for "fishpond (bangus and sugpo production)." As pointed out by
the plaintiff, the defendant Rural Bank in its Answer had not categorically denied the
allegation in the complaint that defendant Aquino in the deed of mortgage was the
intended user and beneficiary of the loans and not the plaintiff. And the special power
of attorney could not be stretched to include the authority to obtain a loan in said
defendant Aquino's own benefit. (pp. 40-41, Rollo.)

The decision of the Court of Appeals is correct. This case is governed by the general rule in the law
of agency which this Court, applied in "Philippine Sugar Estates Development Co. vs. Poizat," 48
Phil. 536, 538:

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. The Court of Appeals further observed:

It will also be observed that the deed of mortgage was executed on August 26, 1981
therein clearly stipulating that it was being executed "as security for the payment of
certain loans, advances or other accommodation obtained by the Mortgagor from the
Mortgagee in the total sum of Three Hundred Fifty Thousand Pesos only
(P350,000.00)" although at the time no such loan or advance had been obtained.
The promissory notes were dated August 31, September 23 and October 26, 1981
which were subsequent to the execution of the deed of mortgage. The appellant is
correct in claiming that the defendant Rural Bank should not have agreed to extend
or constitute the mortgage on the properties of Gallardo who had no existing
indebtedness with it at the time.

Under the facts the defendant Rural Bank appeared to have ignored the
representative capacity of Aquino and dealt with him and his wife in their personal
capacities. Said appellee Rural Bank also did not conduct an inquiry on whether the
subject loans were to benefit the interest of the principal (plaintiff Gallardo) rather
than that of the agent although the deed of mortgage was explicit that the loan was
for purpose of the bangus and sugpo production of defendant Aquino.

In effect, with the execution of the mortgage under the circumstances and assuming
it to be valid but because the loan taken was to be used exclusively for Aquino's
business in the "bangus" and "sugpo" production, Gallardo in effect becomes a
surety who is made primarily answerable for loans taken by Aquino in his personal
capacity in the event Aquino defaults in such payment. Under Art. 1878 of the Civil
Code, to obligate the principal as a guarantor or surety, a special power of attorney is
required. No such special power of attorney for Gallardo to be a surety of Aquino had
been executed. (pp. 42-43, Rollo.)

Petitioner claims that the Deed of Real Estate Mortgage is enforceable against Gallardo since it was
executed in accordance with Article 1883 which provides:

Art. 1883. If an agent acts in his own name, the principal has no right of action
against the persons with whom the agent has contracted; neither have such persons
against the principal.

In such case the agent is the one directly bound in favor of the person with whom he
has contracted, as if the transaction were his own, except when the contract involves
things belonging to the principal.
The above provision 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. For the same reason that the
personal signature of Poizat, standing alone, would not convey the title of his wife in
her own real property, such a signature would not bind her as a mortgagor in real
property, the title to which was in her name. (p. 548.)

WHEREFORE, finding no reversible error in the decision of the Court of Appeals, we AFFIRM it in
toto. Costs against the petitioner.

SO ORDERED.

.R. No. L-24679 October 30, 1975

ALFREDO N. FRIAS and BELEN LUSTRE, petitioners, 

vs.
ANASTACIA ESQUIVEL, FELISA ESQUIVEL, ROSA ESQUIVEL, SANTIAGO ESQUIVEL,
ROSALIA ESQUIVEL, CEFERINA ESQUIVEL, PERPETUA P. ZARAGOZA, RICARDO
ESQUIVEL, VICENTE ESQUIVEL, ORLANDO ESQUIVEL, REYNALDO ESQUIVEL, and ALVARO
ESQUIVEL, JR. respondents.

Ignacio Nabong for petitioners.

No appearance for respondents.

MUÑOZ PALMA, J.:

This is a petition for review of the decision of the Court of Appeals in CA-G.R. No. 28717-R dated
September 26, 1964 and its resolution in the same case dated May 29, 1965 ordering the
segregation, from the parcel of land registered in the name of herein petitioners, the spouses Alfredo
Frias and Belen Lustre, of 116.31 square meters in favor of three (3) of herein private respondents
(defendants-appellants below), namely, Ricardo, Reynaldo and Alvaro, Jr., all surnamed Esquivel,
on the ground that the contract conveying their interest on the said parcel of land in favor of
petitioners is null and void as to Ricardo who was then insane, and unenforceable as to Alvaro, Jr.
and Reynaldo who were then minors because the said contract of conveyance was signed in their
behalf by their mother, herein respondent Perpetua P. Zaragoza, who at the time of the execution of
said contract had already lost parental authority over them for having contracted a second marriage.
The case at bar is not actually the first time in which petitioners and private respondents had
elevated to this Court what appears to be a multi-faceted controversy over the parcel of land
involved in the instant petition — a residential lot situated in Jaen, Nueva Ecija, with an area of 1,357
square meters, originally forming part of the hereditary estate of respondents' predecessors-in-
interest, the spouses Victoriano Esquivel and Catalina Villamanca who, after their demise left as
heirs of their various properties, including the said lot, their six (6)surviving children, namely, herein
respondents Anastacia, Ceferina, Feliza, Rosalia, Rosa and Santiago, and their five (5)grandchildren
from a deceased child (Alvaro Esquivel, Sr.),namely, Alvaro, Jr., Orlando, Reynaldo, Ricardo and
Vicente and the latter's mother, herein respondent Perpetua P. Zaragoza.

In G.R. No. L-8825, promulgated on April 20, 1956,  aforementioned respondents, with the exception
1

of Anastacia Esquivel, tried to impugn the validity of deed of sale of the said lot dated July 16, 1951
executed by Anastacia in favor of petitioners on the ground that the lot did not belong exclusively to
her but in common with the other respondents herein. The attempt was, however, only partly
successful. It was found out that Ceferina, Feliza, Rosa and Rosalia already parted with whatever
right, interest or participation they may have had in the said lot in favor of Anastacia way back in
1946 as shown by their affidavits which, this Court held, substantially complied with the requisites of
a valid extra-judicial partition. Their brother, Santiago, on the other hand, was held estopped from
denying the said partition on account of his silence while the trial of the annulment case in the
court a quo was in progress which was deemed to be tantamount to his acquiescence thereto.

We, however, held, as to the other complainants therein, that —

A different consideration should be made with regard to the heirs of Alvaro Esquivel.
There is no dispute that at the time of the partition made in 1946 they were minors
and were merely represented by their mother who was neither their legal guardian
nor the administrator of their property ... [under] section 553 of the Code of Civil
Procedure ... [in which] the father or mother is only deemed to be the natural
guardian of his or her minor children and not of his estate unless ordered by the
Court... This requirement of the law not having been followed, it is evident that the
partition in so far as said minors are concerned is of no validity and should not be
allowed to stand to their prejudice. In this sense, the land in question should still be
deemed as community property as to which the rights of the minors should be
respected.

In view of the foregoing findings and conclusions, this Court declared in the dispositive portion of its
judgment —

Wherefore, the decision appealed from is modified in the sense that the deed of sale
in question is valid only in so far as plaintiffs Santiago, Feliza, Rosalia, Rosa,
Ceferina and Anastacia are concerned, but is invalid with regard to the minor heirs of
the late Alvaro Esquivel, subject to any adjustment that the heirs may deem proper to
make which would safeguard the rights of the minors. The Court reserves to spouses
Frias whatever action they may deem proper to take to protect their interest. No
pronouncement as to costs.

Apparently in pursuance of what this Court said in the foregoing decision, the surviving spouse of the
late Alvaro Esquivel, Sr. (who, in the meantime, had contracted a second marriage) and their
children executed, on February 15, 1957, in favor of the Frias spouses, petitioners herein, a deed of
sale of their one-seventh (1/7) interest and participation over the parcel of land in question. It will be
noted, however, that when this deed was signed, only three (3) of the five children were of age,
Alvaro, Jr. and Reynaldo being then only 19 and 17 years old, respectively. Their mother Perpetua,
nevertheless, signed the said contract in their behalf and in her capacity as their natural guardian.

The execution of the foregoing deed of sale of the lot in question failed, however, to produce
complete accord between the contending parties.

It appears that way back in March, 1952, petitioners had commenced proceedings for the
registration of the said lot in their name under the Land Registration Act. Their application was
opposed by respondents. Due to the aforementioned action for annulment of the deed of sale
executed by Anastacia, the registration proceedings were held in abeyance pending final
determination of the said civil case.

Thereafter, on October 2, 1957, after Our decision in the annulment case (L-8825) and after the
execution of the aforesaid deed of conveyance by Perpetua Zaragoza and her children, the Land
Registration Court rendered judgment adjudicating the lot in question to herein petitioners and
ordering its registration in their name. The decree of registration was subsequently issued by the
Land Registration Office on December 11, 1957 in favor of petitioners.

On December 8, 1958, a petition to re-one the said decree of registration was filed by a certain
Rosario Esquivel-Gonzales in her capacity as guardian ad litem of the minors Alvaro, Jr. and
Reynaldo Esquivel and of Ricardo Esquivel who was considered by the appointing court as a non
compos mentis. This petition, which was denied by the Land Registration Court, was brought to this
Court on appeal in G.R. No. L-17366. We affirmed the appealed order in a decision dated July 31,
1962 on the ground that the facts relied upon in the petition "do not constitute the extrinsic fraud
required as justification for the granting of the relief sought by them."

While having the lot in question registered in their name, petitioners also filed in the Court of First
Instance of Nueva Ecija the instant civil suit praying that they be declared the owners of the
aforementioned lot; that the defendants therein be compelled to remove an uninhabited house
contructed by the latter thereon; and that they pay accumulated rentals arising from the house's
occupancy of the lot until its removal therefrom, plus costs.

On August 25, 1960, the trial court rendered its decision on the case, the dispositive portion of which
reads as follows:

WHEREFORE, the Court renders decision in favor of the plaintiffs and against the
defendants declaring that the plaintiffs are the lawful owners of the land bought by
them from Anastacia Esquivel and Perpetua P. Zaragoza, except a portion of the
same with an area of 77.54 square meters, which shall be segregated from the oft-
repeated land [for the minors Alvaro, Jr. and Reynaldo] on the eastern side from
north to south of the same land; to remove the uninhabited house from the land
where it is now erected; to pay monthly rental of P20.00 a month from February 28,
1957, the date of the filing of the complaint, up to the time it is completely removed
from the same place; to pay the sum of P200.00 as fee of the plaintiffs' counsel, and
to pay the costs.

The above decision was appealed by respondents to the Court of Appeals which, on September 26,
1964, rendered judgment affirming the same. *

On May 29, 1965, acting on a motion for reconsideration filed by Ricardo Esquivel through his guardian, and, finding that he was insane at
the time the lot in question was sold to the petitioners on February 15, 1957, the Court of Appeals modified its previous judgment by ordering
the segregation from the land in dispute of an area of 38.77 square meters "in favor of Ricardo Esquivel in addition to the 77.54 square
meters already ordered segregated in favor of Reynaldo and Alvaro, Jr., both surnamed Esquivels."
On June 28, 1965, petitioners, not being satisfied with The Court of Appeals' decision, filed before
this Court the instant petition for certiorari.

It is contended by petitioners that the Court of Appeal erred in ordering the segregation of 38.77
square meters each for Reynaldo, Alvaro, Jr. and Ricardo Esquivel from the lot in question for the
following reasons: (a) The torrens title issued to them "is absolute, conclusive and indefeasible, and
immune from collateral attack, and is subject only to the exception in Section 38, Act 496, for a
petition for review and for damages."; and (b) "The petitioners, for having paid P500 for the 'equity' of
the minor heirs of Alvaro Esquivel, must stand as the absolute owners of the land in question without
a defeasance."

A person who succeeds in having a piece of real estate registered to his name is, no doubt,
insulated by law from a number of claims and liens. There are, however, a number of instances or
causes by which such insulation may be cut loose. The registered owner for instance, is not
rendered immune by the law from the claim that he is not the real owner of the land he had
registered in his name. This Court had thus in a number of case prescribe reconveyance of the
registered land to the rightful but as yet unregistered owner.  Indeed, Section 102 of Act 496, after a
2

description of the procedure to be pursued to enable a person wrongfully deprived of his land or any
interest therein as a result of the application and operation of the Land Registration Act, to recover
from the Assurance Fund the losses or damages he had sustained, states:

... That nothing in this Act shall be construed to deprive the plaintiff of any action
which he may have against any person for such loss or damage or deprivation of
land or any estate or interest therein without joining the Treasurer of the Philippine
Archipelago as a defendant therein.

The above-quoted proviso to Section 102 of Act 496 constitutes sufficient statutory authority, aside
from the dictates of equity, under which the remedy of reconveyance may be invoked. It must be
conceded, nevertheless, that this remedy cannot always be availed of by an aggrieved claimant, as
when the rights of innocent purchasers for value will be 
affected.3

Contrary then to the argument of petitioners, the rule of indefeasibility of a torrens title is not "subject
only to the exceptions in Section 38, Act 496, for a petition for review and damages."

In the case at bar, petitioners' complaint that they be declared the owners of the lot in question was
diametrically disputed by respondents who alleged that they are the only owners in common of the
said lot by virtue of Our decision in L-8825. The nature of respondents' opposition amounts to an
action for reconveyance which sufficiently vested and clothed the court below with authority to
adjudicate and settle the question of ownership of the lot in dispute.

In this connection, We do not find any error in the conclusion reached by the court below and the
Court of Appeals that the said lot should be considered as owned in common only by petitioners
Alfredo Frias and Belen Lustre-Frias and Alvaro, Jr., Reynaldo and Ricardo Esquivel who are some
of the private respondents in the case at bar.

In L-8825, it was categorically declared that herein respondents Santiago, Feliza, Rosa, Rosalia and
Ceferina, all surnamed Esquivel, and Perpetua P. Zaragoza no longer possess any right, interest or
participation in the disputed lot (which is the same lot involved herein). The same is obviously true of
Anastacia Esquivel who was the one who sold the said lot to the petitioners.
In the case of the children of legal age of the late Alvaro Esquivel, Sr., namely, Vicente and Orlando,
who executed the deed of conveyance of their interest and participation in the said lot dated
February 15, 1957 in favor of petitioners, the obvious conclusion is that their interest and
participation in the said lot already belongs to petitioners..

On the other hand, the matter of Ricardo Esquivel and his then minor brothers, Alvaro, Jr. and
Reynaldo, deserves a different consideration.

It is not denied that the late Alvaro Esquivel, Sr. died intestate, and that at the time the
aforementioned deed of conveyance dated February 15, 1957 was executed by Perpetua P.
Zaragoza in behalf of the said minors she had already married for the second time. In view of this,
she already lost at that time her parental authority over the said unemancipated children. Section
328 of the New Civil Code provides that — 4

The mother who contracts a subsequent marriage loses the parental authority over
her children, unless the deceased husband, father of the latter, has expressly
provided in his will that his widow might marry again, and has ordered that in such
case she should keep and exercise parental authority over their children...

Inasmuch as Perpetua P. Zaragoza does not appear to have been appointed a judicial guardian of
her minor children with the power to sell their property, the aforesaid deed of conveyance insofar as
Alvaro, Jr. and Reynaldo are concerned is, therefore, unenforceable. Articles 1403 (1) and 1317 of
the New Civil Code both specify that unlaw ratified by the person on whose behalf it has been
executed, a contract entered into in the name of another by one who has no authority or legal
representation, or who has acted beyond his powers, is unenforceable. In the case at bar, there are
no real and definite traces of ratification made by the said minors of the disposition of their interest in
the disputed lot which their mother made in their behalf. Indeed, both the trial court and the Court of
Appeals found no such evidence, thereby rendering untenable petitioners' claim that they already
paid for the said minors' "equity" in the lot in question.

With regard to Ricardo Esquivel, the Court of Appeals found him to be insane at the time of the
execution of the deed of conveyance on February 15, 1957. This finding which is not disputed,
shows that the said deed is void as to him for as correctly held by the Appellate Court there was lack
of authority on the part of his mother Perpetua P. Zaragoza to sell his portion, she not having been
appointed judicial guardian of said Ricardo Esquivel.

But while We agree with the conclusion of the Court of Appeals on the ownership of the lot in
controversy, We do not subscribe to its approval of the manner in which the trial court physically
partitioned and assigned specific portions of the lotto Alvaro, Jr. and Reynaldo Esquivel. It does not
appear that the trial court made use of, or followed, the rules prescribed for the judicial partition of
properties owned in common. The procedure concerning partition prescribed in the Rules of Court,
designed to provide a just and equitable settlement of the relative rights of co-owners by securing to
them the benefits of a trial during which the details of partition will be taken up, should have been
followed. .

An independent action for partition is not necessary, however, in the instant situation. All the parties
involved in the case at bar appear to be the only ones claiming an interest in the said lot. Hence, to
afford them complete and adequate relief and to avoid a protracted and unnecessarily burdensome
litigation, a partition of the lot in question in this very action is the most logical and equitable path to
pursue. Note that both contending parties in their respective pleadings in the court a quo pray that
they be granted such further and other relief as may be just and equitable under the premises, and
the partition of the lot is well within the general relief prayed for.
ACCORDINGLY, the decision of the Court of Appeals dated September 26, 1964 as modified in its
resolution of May 29, 1964 as modified in its resolution of May 29, 1965 is hereby AFFIRMED, with
the following modification: (1) the trial court shall proceed with the partition of the lot in question, in
accordance with pertinent provisions of Rule 69 of the Rules of Court, among petitioners herein and
Alvaro, Jr., Reynaldo and Ricardo Esquivel; and (2) the aforementioned private respondents who are
co-owners of the property of petitioners shall not be made to pay any share in the rentals and the
amounts awarded by the trial court in favor of the latter. The case at bar is, therefore, remanded to
the court a quo in order that it may proceed as indicated. Without pronouncement as to costs.

SO ORDERED.
NAPOCOR v. National Merchandising Corporation

Facts:
 National Power Corporation (NPC) and National Merchandising Corporation (Namerco), as
representative of International Commodities Corporation (ICC) in New York, executed in Manila
a contract for the purchase by NPC from the New York firm of 4,000 long tons of crude sulphur
for its Maria Cristina Fertilizer Plant in Iligan City at a total price of P450,716.
o A performance bond of P90,143.20 was executed by the Domestic Insurance Company
in favor of the NPC to guarantee the seller's obligations.
 Stipulations under the contract of sale:
o The seller would deliver the sulfur at Iligan City within sixty days from notice of the
establishment in its favor of a letter of credit for $212,120
o Failure to effect delivery would subject the seller and its surety to the payment of
liquidated damages at the rate of two-fifth of one percent of the full contract price for
the first thirty days of default and four-fifth of one percent for every day thereafter until
complete delivery is made 
 Through a letter, the NPC advised John Z. Sycip (president of Namerco) of the opening of letter
of credit for $212,120 in favor of ICC. 
 Notice of the letter of credit was received by cable by the New York firm on November 15,
1956 (Exh. 80-Wallick).  Thus, the deadline for the delivery of the sulfur was January 15, 1957.
 The New York firm was not able to deliver the sulfur due to its inability to secure shipping
space. 
o Because of this, from January 20 to 26, 1957 there was a shutdown of
the NPC's fertilizer plant because there was no sulfur.  
 The Government Corporate Counsel rescinded the contract of sale due to the New York firm’s
nonperformance of its obligations. He also demanded from Namerco the payment of
P360,572.80 as liquidated damages.  Demand was made upon the surety.
o Basis of computation of liquidated damages – 115-day period between January 15, 1957
(deadline for delivery of sulphur) and May 9, 1957 (Namerco was notified of the
rescission)
  (Civil Case No. 33114) NPC sued the New York firm, Namerco and the Domestic Insurance
Company for the recovery of damages. TC dismissed the case as to the New York firm for lack of
jurisdiction as it was not doing business in the Philippines.
 (Civil Case No. 37019) On the other hand, Melvin Wallick, as the assignee of the New York firm,
sued Namerco for damages in connection with the same sulfur transaction).  
 The two cases, both filed in the Court of First Instance of Manila, were consolidated.  A joint trial
was held.  The lower court rendered separate decisions in the two cases on the same date.
o CC 33114: although the records on appeal were approved in 1967, inexplicably, they
were elevated to this Court in 1971.  That anomaly initially contributed to the delay in
the adjudication of this case.
o CC 37019: TC dismissed Wallick's action for damages against Namerco because the
assignment in favor of Wallick was champertous in character.  

Issues:
(Defendants’ appeal, L-33819)
1. WoN the delivery of the sulfur was conditioned on the availability of a vessel to carry the
shipment
 NO
 The documentary evidence belies these contentions.  The invitation to bid issued by the NPC
provides that non-availability of a steamer to transport the sulfur is not a ground for
nonpayment of the liquidated damages in case of nonperformance by the seller.
 Namerco's bid or offer is explicit.  It provides that it was "responsible for the availability of
bottom or vessel" and that it "guarantees the availability of bottom or vessel to ship the quantity
of sulfur within the time specified in this bid".

2. WoN Namerco acted within the scope of its authority as agent in signing the contract of sale
 NO
 Even before the contract of sale was signed, Namerco was already aware that its principal was
having difficulties in booking shipping space.  
o One day before the contract of sale was signed, the New York supplier
advised Namerco that the latter should not sign the contract unless Namerco wished to
assume sole responsibility for the shipment.
 Sycip (Namerco's president) replied in his letter to the seller that he had no choice but to finalize
the contract of sale because the NPC would forfeit Namerco's bidder's bond if the contract was
not formalized.
 In its letters, the New York firm informed Namerco that it disclaimed responsibility for the
contract and that the responsibility for the sale rested on Namerco.
 Therefore, Namerco is liable for damages because under A1897 of the Civil Code.
o The agent who exceeds the limits of his authority without giving the party with whom he
contracts sufficient notice of his powers is  personally liable to such party.
 Since Namerco, as agent, exceeded its authority, in effect, it acted in its own name.

3. WoN the contract was enforceable

 YES
 Namerco: A1403 CC provides that a contract entered into in the name of another person by one
who has acted beyond his powers is unenforceable. Therefore, the stipulation for liquidated
damages was allegedly unenforceable.
  A1403 refers to the unenforceability of the contract against the principal.  In this case, the
contract containing the stipulation for liquidated damages is not being enforced against its
principal but against the agent and its surety.
 It is being enforced against the agent because A1897 implies that the agent who acts in excess
of his authority is personally liable to the party with whom he contracted.
 Therefore, Namerco is bound by the stipulation for liquidated damages in the contract.

4. WoN NPC is entitled to liquidated damages

 YES
 The contention that only nominal damages should be adjudged is contrary to the intention of
the parties (NPC, Namerco and its surety) because it is clearly provided that liquidated damages
are recoverable for delay in the delivery of the sulfur and, with more reason, for non-delivery.
 No proof of pecuniary loss is required for the recovery of liquidated damages.  The stipulation
for liquidated damages is intended to obviate controversy on the amount of damages.  
 There can be no question that the NPC suffered damages because its production of fertilizer was
disrupted or diminished by reason of the non-delivery of the sulfur.
 The parties foresaw that it might be difficult to ascertain the exact amount of damages for non-
delivery of the sulfur.  So, they fixed the liquidated damages to be paid as indemnity to the NPC.

NPC’s appeal, L-33897 – The contentions of the parties have already been resolved in the preceding
discussion. The Court finds no sanction or justification for NPC’s claim that it is entitled to the full
payment of the liquidated damages computed by its official.

Amount of damages: P45,100 – bidder’s bond or to about 10% of the selling price of the sulfur

Fraud cannot be presumed but must be proved by

clear and convincing evidence. Whoever alleges fraud
affecting a transaction must substantiate his
allegation, because a person is always presumed to
take ordinary care of his concerns, and private
transactions are similarly presumed to have been fair
and regular. To be remembered is that mere allegation
is definitely not evidence; hence, it must be proved by
sufficient evidence. Metropolitan Fabrics, Inc., et al. v. Prosperity Credit
Resources, Inc. et al., G.R. No. 154390, March 17, 2014.
AGENCY

G.R. No. 179909 : January 25, FAR EAST BANK AND TRUST COMPANY (NOW BANK OF THE
PHILIPPINE ISLANDS) AND ROLANDO BORJA, DEPUTY SHERIFF,Petitioners, vs. SPS. ERNESTO
AND LEONOR C. CAYETANO,Respondents.

Facts:

Respondent Leonor C. Cayetano (Cayetano) executed a special power of attorney in favor of her
daughter Teresita C. Tabing (Tabing) authorizing her to contract a loan from petitioner in an amount not
more than three hundred thousand pesos (P300,000.00) and to mortgage her two (2) lots located in
Barangay Carolina, Naga City with Transfer Certificate of Title Nos. 12304 and 11621. For the approval of
the loan, Cayetano also executed an affidavit of non-tenancy. Petitioner loaned Tabing one hundred
thousand pesos (P100,000.00) secured by two (2) promissory notes and a real estate mortgage over
Cayetanos two (2) properties. The mortgage document was signed by Tabing and her husband as
mortgagors in their individual capacities, without stating that Tabing was executing the mortgage contract
for and in behalf of the owner (Cayetano). Petitioner foreclosed the mortgage for failure of the
respondents and the spouses Tabing to pay the loan. A notice of public auction sale, to be conducted on
September 18, 1991, was sent to respondents. The latters lawyer responded with a letter to petitioner
requesting that the public auction be postponed. Respondents letter went unheeded and the public
auction was held as scheduled wherein the subject properties were sold to petitioner for one hundred
sixty thousand pesos (P160,000.00). Subsequently, petitioner consolidated its title and obtained new titles
in its name after the redemption period lapsed without respondents taking any action. More than five (5)
years later, Tabing, on behalf of Cayetano, sent a letter dated September 10, 1996 to petitioner
expressing the intent to repurchase the properties for two hundred fifty thousand pesos (P250,000.00)
with proposed terms of payment. Petitioner refused the offer stating that the minimum asking price for the
properties was five hundred thousand pesos (P500,000.00) and it was not amenable to the proposed
terms of payment. Petitioner nevertheless gave respondents the chance to buy back the properties by
joining a bidding to be set in some future date. However, respondents filed on December 18, 1996 a
complaint for annulment of mortgage and extrajudicial foreclosure of the properties with damages in the
RTC of Naga City. Respondents sought nullification of the real estate mortgage and extrajudicial
foreclosure sale, as well as the cancellation of petitioners title over the properties.

Issue: Whether or not the principal is bound by the real estate mortgage executed by the authorized
agent in her own name without indicating the principal

Held: 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 166 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. [EMPHASIS SUPPLIED] Thus, while Poizat may have had the authority to borrow money
and mortgage the real property of his wife, the law specifies how and in what manner it must be done,
and the stubborn fact remains that, as to the transaction in question, that power was never exercised. The
mortgage in question was executed by him and him only, and for such reason, it is not binding upon the
wife, and as to her, it is null and void. In Bombon, respondent Ederlinda M. Gallardo (Gallardo) authorized
Rufino S. Aquino (Aquino) to contract a loan from any bank and secure it with mortgage on her property.
Gallardo also delivered her owners copy of Transfer Certificate of Title to Aquino. Aquino obtained a loan
from petitioner bank and executed a deed of real estate mortgage without indicating that he was acting in
behalf of Gallardo. At the beginning of the mortgage deed, it was mentioned that the mortgage was
executed by Aquino, attorney-in-fact of Gallardo, together with a description of his legal capacity to
contract. Gallardo and her husband filed a complaint for annulment of mortgage against the petitioner and
Aquino and one (1) of the grounds raised was that the mortgagor in the deed was Aquino instead of
Gallardo. The trial court ordered the suspension of the foreclosure of the real estate mortgage until after
the decision in the annulment case shall have become final and executory. The dismissal of the complaint
for annulment of mortgage was appealed to the Court of Appeals which reversed the trial court and
declared the mortgage contract void and unenforceable against Gallardo. Upon elevation to this Court, we
held that "Aquinos 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 M. 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." In the fairly recent case of Gozun v. Mercado, respondent Mercado denied
having authorized his sister-in-law (Lilian) to borrow money from petitioner who gave her "cash advance"
of P253,000.00 allegedly for allowances of poll watchers. Petitioner sued respondent to collect on various
sums due from the latter including the "cash advance" obtained by Lilian. The trial court found for the
petitioner and ordered the respondent to pay all amounts being claimed by the petitioner. The Court of
Appeals reversed the trial courts decision and dismissed the complaint for lack of cause of action. When
the case reached this Court, petitioner argued that respondent had informed him that he had authorized
Lilian to obtain the loan and hence, following Macke v. Camps which held that one who clothes another
with apparent authority as his agent, and holds him out to the public as such, respondent cannot be
permitted to deny the authority. We sustained the Court of Appeals ruling on the matter and held that
respondent was not liable for the "cash advance" given by petitioner to Lilian who signed the receipt in her
name alone, without indicating therein that she was acting for and in behalf of respondent. She thus
bound herself in her personal capacity and not as an agent of respondent or anyone for that matter.

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 Dealof Real Estate
Mortgage was not valid. It is 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 ofthe
principal. Neither is it ordinarily sufficient that in the mortgage the agent describes himself
as acting by virtueof 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 state s “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.

Development Bank of the Philippines, petitioner, vs. Court of Appeals, Mylo O. Quinto and Jesusa
Christine S. Chupueco, respondents.G.R. No. 109946 | 1996-02-09

DOCTRINE: It is the registration and issuance of the certificate of title that segregate public lands from
the mass of public domain and convert it into private property.

FACTS: The petitioner, Development Bank of the Philippines granted a loan amounting to 94,000 to Sps.
Santiago and Olivia Olidiana secured real estate mortgage on Lot 2029 with Tax Declaration No. 2335/1
which at the time subject by a free patent application/sales application with the Bureau of Lands.
Subsequently in 02 November 1978, Sps. Olidiana filed an amendment of their application relinquishing
the property to Jesusa Christine Chupuico and Mylo O. Quinto, subsequently titles where issued on the
name of both respondents. On 23 April 1979, Sps. Santiago executed additional mortgage on said
property for subsequent loan amounting to 62,000. Thereafter Sps. Santiago became in default on their
obligations. DBP filed an extrajudicial foreclosure, DBP being the highest bidder. A certificate of sale
was issued in favor of DBP, however when the affidavit of consolidation and the certificate of sale is to be
registered, it was discovered that titles were issued on said respondents. DBP filed a motion for quieting
of title and cancellation on annulment of certificate of title. Trial court ruled that Sps. Olidiana were not yet
absolute owners of the property at the time the real estate mortgage was issued for they were not yet
owners of the property as it is a public land. Upon appeal, Court of Appeals ruled in favor of the
respondents as well, hence this instant petition.

ISSUE: Whether the real estate mortgage over the property is valid.

HELD: No. In Visayan Realty, Inc. v. Meer we ruled that the approval of a sales application merely
authorized the applicant to take possession of the land so that he could comply with the requirements
prescribed by law before a final patent could be issued in his favor. Meanwhile the government still
remained the owner thereof, as in fact the application could still be canceled and the land awarded to
another applicant should it be shown that the legal requirements had not been complied with. What
divests the government of title to the land is the issuance of the sales patent and its subsequent
registration with the Register of Deeds. It is the registration and issuance of the certificate of title that
segregate public lands from the mass of public domain and convert it into private property. Since the
disputed lot in the case before us was still the subject of a Free Patent Application when mortgaged to
petitioner and no patent was granted to the Olidiana spouses, Lot No. 2029 (Pls-61) remained part of the
public domain. With regard to the validity of the mortgage contracts entered into by the parties, Art. 2085,
par. 2, of the New Civil Code specifically requires that the pledgor or mortgagor be the absolute owner of
the thing pledged or mortgaged. Thus, since the disputed property was not owned by the Olidiana
spouses when they mortgaged it to petitioner the contracts of mortgage and all their subsequent legal
consequences as regards Lot No. 2029 (Pls-61) are null and void. In a much earlier case we held that it
was an essential requisite for the validity of a mortgage that the mortgagor be the absolute owner of the
property mortgaged, and it appearing that the mortgage was constituted before the issuance of the patent
to the mortgagor, the mortgage in question must of necessity be void and ineffective. For, the law
explicitly requires as imperative for the validity of a mortgage that the mortgagor be the absolute owner of
what is mortgaged.

Spouses Genato vs. Viola, GR No. 169706,

February 5, 2010
OCTOBER 13, 2018

FACTS:

In October 1991, a complaint titled “VILLA REBECCA HOMEOWNERS

ASSOCIATION, INC. versus MR. WILLIAM GENATO and spouse REBECCA
GENATO” was filed with the HLURB. The said complaint was verified by 34
individuals, including the respondent herein, who referred to themselves as the
“Complainants” who “caused the preparation of the foregoing Complaint”. The
complaint stated that on various dates, complainants executed Contracts to Sell and/or
Lease Purchase Agreements with the Sps. Genato pertaining to housing units in Villa
Rebecca Homes Subdivision. Sometime thereafter the HLURB issued a cease and desist
order (CDO) enjoining the collection of amortization payments. This CDO was
subsequently lifted. Thereafter, complainants went to the Sps. Genato with the intention
of resuming their amortization payments. The latter however refused to accept their
payments and instead demanded for a lump sum payment of all the accrued amortizations
which fell due during the effectivity of the CDO.

On March 8, 1995, the Housing Arbiter rendered a Decision ordering complainants to

resume payment of their monthly amortization from date hereof pursuant to the
agreement.

On May 26, 2000, Arbiter Marino Bernardo M. Torres issued the Writ of Execution. In
connection therewith, the sheriff seized Rita Viola’s two delivery trucks and 315 sacks of
rice. Respondent Viola then filed an Urgent Motion to Quash Execution, with Prayers for
Issuance of Temporary Restraining Order, Clarification and Computation of Correct
Amount of Money Judgment and Allowance of Appeal.

On December 15, 2000, Arbiter Torres issued an Order denying respondent Viola’s
motion to quash the writ of execution and directed her to pay the Sps. Genato the

amount of ₱739,133.31.
Petitioners contend that the CA erred in ruling that the lack of jurisdiction of the

court over an action cannot be waived. They submit that “jurisdiction of the court over an
action” is different from “jurisdiction over the person”. They say that the latter was what
the HLURB was referring to because it stated that Rita Viola was never impleaded. They
contend that jurisdiction over the person can be conferred by consent expressly or
impliedly given, as in the case of Rita Viola.

On the other hand, respondent contends that the HLURB did not acquire jurisdiction
over her person since she was not a party to the case; hence, the HLURB decision is a
nullity as against her and therefore never acquired finality. With a void judgment, the
resultant execution was likewise void.

Hence, this petition.

ISSUE:

Whether or not the honorable Court of Appeals erred in ruling that the HLURB has not
acquired jurisdiction over the person over the person of the respondent Rita Viola.

HELD:

Yes, the Court of Appeals has acquired jurisdiction over the person of the respondent.

It is not the caption of the pleading but the allegations therein that are controlling. The
inclusion of the names of all the parties in the title of a complaint is a formal
requirement under Section 3, Rule 7 of the Rules of Court. However, the rules of
pleadings require courts to pierce the form and go into the substance. The non-inclusion
of one or some of the names of all the complainants in the title of a complaint, is not
fatal to the case, provided there is a statement in the body of the complaint indicating
that such complainant/s was/were made party to such action. This is specially true
before the HLURB where the proceedings are summary in nature without regard to
legal technicalities obtaining in the courts of law and where the pertinent concern is to
promote public interest and to assist the parties in obtaining just, speedy and
inexpensive determination of every action, application or other proceedings.

Respondent Viola, although her name did not appear in the title as a party, was one of
the persons who caused the preparation of the complaint and who verified the same.
The allegations in the body of the complaint indicate that she is one of the
complainants. She categorically considered, and held out, herself as one of the
complainants from the time of the filing of the complaint and up to the time the
decision in the HLURB case became final and executory. To repeat, the averments in
the body of the complaint, not the title, are controlling. Hence, having been set forth in
the body of the complaint as a complainant, Viola was a party to the case.

For clarity, the complaint should have been amended to reflect in the title the individual
complainants. There being a “defect in the designation of the parties”, its correction
could be summarily made at any stage of the action provided no prejudice is caused
thereby to the adverse party. In the present case, the specification of the individual
complainants in the title of the case would not constitute a change in the identity of the
parties. Only their names were omitted in the title but they were already parties to
the case, most importantly, they were heard through their counsel whom they
themselves chose to prepare the complaint and represent them in the case before the
HLURB. No unfairness or surprise to the complainants, including Viola, or to the Sps.
Genato would result by allowing the amendment, the purpose of which is merely to
conform to procedural rules or to correct a technical error.

The error or defect is merely formal and not substantial and an amendment to cure such
defect is expressly authorized by Sec. 4, Rule 10 of the Rules of Court.

Moreover, it was only when the final and executory judgment of the HLURB was
already being executed against Viola that she, for the first time, reversed her position;
and claimed that she was not a party to the case and that the HLURB did not acquire
jurisdiction over her. Viola is estopped from taking such inconsistent positions.
Where a party, by his or her deed or conduct, has induced another to act in a
particular manner, estoppel effectively bars the former from adopting an inconsistent
position, attitude or course of conduct that causes loss or injury to the latter. The
doctrine of estoppel is based upon the grounds of public policy, fair dealing, good
faith and justice, and its purpose is to forbid one to speak against his own act,
representations, or commitments to the injury of one to whom they were directed and
who reasonably relied thereon. After petitioners had reasonably relied on the
representations of Viola that she was a complainant and entered into the proceedings
before the HLURB, she cannot now be permitted to impugn her representations to the
injury of the petitioners.

Final and executory judgment may no longer be modified

The April 27, 1999 HLURB Resolution, reinstating the December 18, 1996 Decision,
has long been final and executory. Nothing is more settled in the law than that a
decision that has acquired finality becomes immutable and unalterable and may no
longer be modified in any respect even if the modification is meant to correct
erroneous conclusions of fact or law and whether it was made by the court that
rendered it or by the highest court of the land. The only recognized exceptions to the
general rule are the correction of clerical errors, the so-called nunc pro tunc entries
which cause no prejudice to any party, void judgments, and whenever circumstances
transpire after the finality of the decision rendering its execution unjust and
inequitable. None of the exceptions is present in this case. The HLURB decision
cannot be considered a void judgment, as it was rendered by a tribunal with
jurisdiction over the subject matter of the complaint and, as discussed above, with
jurisdiction over the parties. Hence, the same can no longer be modified.