Personal liability

One of the practices used in obtaining a loan from a bank is for the borrower to appoint another person as his or her attorney-in-fact or agent in negotiating for and getting the loan. This is what Mila did. And this is what got her into trouble.

Mila was a married woman who had her own separate paraphernal property consisting of two parcels of land duly titled. She signed a special power of attorney designating Ben, a family friend, as her agent to “secure a loan from any bank of financial institution for any amount or otherwise mortgage the abovementioned properties and in that connection to sign or execute any deed mortgage or other documents necessary in securing said loan.” Thereupon she gave the special power of attorney and her owner’s copy of the Transfer Certificate of Title to Ben.

Subsequently Ben executed a deed of real estate mortgage over the said properties in favor of a bank. He signed said deed plainly as mortgagor with the marital consent yet of his wife. The three promissory notes secured by said mortgage was also signed by Ben on top of a line beneath which is written “signature of mortgagor”, and by his wife on top of a line under which is written “signature of spouse”. In all these loan documents there was no mention that he signed them for and in behalf of Mila as mortgagor. Thus it is clearly borne out by these documents that Ben was the intended user and beneficiary of the loans for his bangus and sugpo fishpond.

When Mila discovered the transaction and after learning that Ben had left his residence and transferred to an unknown place, she and her husband filed a suit against Ben and the bank for the annulment of the mortgage since it was executed to secure the personal loans of Ben and not in her behalf and therefore not enforceable against her. The bank contended that the mortgage is valid because Ben was expressly authorized by Mila to mortgage her property under the special power of attorney she signed in favor of Ben. Was the bank correct?                 

No. Ben’s act of signing the deed of real estate mortgage in his name alone as a mortgagor, without any indication that he was signing for and in behalf of the property owner Mila, bound himself alone in his personal capacity as debtor of the bank and not as the agent or attorney-in-fact of Mila. Under the law on agency, in order to bind the principal (Mila) to a mortgage on real property executed by the 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 sufficient that in the mortgage deed itself the agent describes himself as acting by virtue of a power of attorney, if in fact he acted, signed and sealed the mortgage in his own name (Rural Bank of Bombon vs. Court of Appeals, 212 SCRA 25).

Note: Books containing compilation of my articles on Labor Law and Criminal Law (Vols. I and II) are now available. Call tel. 7249445.

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