Friday, December 16, 2011

FAR EAST BANK & TRUST COMPANY vs. SPS ERNESTO & LEONOR CAYETANO GR No. 179909, January 25, 2010

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VILLARAMA, JR., J.: 

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 and to mortgage her two lots. Petitioner loaned Tabing P100, 000.00, secured by two promissory notes and a real estate mortgage over Cayetano’s two 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 Cayetano. Petitioner foreclosed the mortgage for failure of spouses Tabing to pay the loan. The mortgaged properties were sold to petitioner through public auction. Subsequently, petitioner consolidated its title and obtained new titles in its name after the lapse of redemption period. Five years later, Tabing, on behalf of Cayetano expressed the intention to repurchase the properties for petitioner gave respondent the chance to buy back the properties by joining a bidding. Respondent however, filed a complaint for annulment of mortgage and extrajudicial foreclosure sale as well as the cancellation of petitioner’s title over the properties. The Regional Trial Court ruled in favor of respondents, holding that Cayetano cannot be bound by the real estate mortgage executed by Tabing unless it is shown that the same was made and signed in the name of principal. The Court of Appeals affirmed the RTC’s ruling.

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: NO. It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real property executed by an agent, it must upon its face purport to be made, signed and sealed in the name of the principal; otherwise, it will bind the agent only. It is not enough 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 in his own hand and seal to the mortgage. Notwithstanding the nullity of the real estate mortgage executed by Tabing and her husband, we find that the equity principle of laches is applicable. Records show that respondent could have filed an action to annul the mortgage on their properties, but for unexplained reasons, they failed to do so. They only questioned the loan and mortgage transactions after the lapse of more than five years from date of foreclosure sale.


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4 comments: on "FAR EAST BANK & TRUST COMPANY vs. SPS ERNESTO & LEONOR CAYETANO GR No. 179909, January 25, 2010"

Anonymous said...

Hi. Thanks for sharing your collection of case digests from decisions penned by J. Martin Villarama in preparation for the 2012 bar exams. God bless. :)
-rocksaltandcheese

Schizophrenic Mind said...

You're welcome! I'm glad you appreciate it! =)

Anonymous said...

thanks a lot for sharing your digests... good luck sa bar exams.

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