Veloso v CA

Applicable Provision: Art. 1878

Facts:
Petitioner Francisco Veloso was the sole owner of a registered
parcel of land in Tondo, Manila, which he acquired in 1957.
His wife Irma, armed with a general power of attorney, sold said
lot to the respondent spouses Escario in 1987.
Petitioner filed an action for annulment of the deed of sale and
reconveyance of property
Issue: Whether a general power of attorney may authorize an
agent to sell real property.
Held/Ratio:
Yes.
Although sale of real property requires a special power of
attorney, if a general power of attorney expressly grants the power
to sell to the agent, there is no need to execute a separate special
power of attorney.
The assailed power of attorney had the following provision: To
buy or sell land, more specifically TCT No. 49138
Thus, said power of attorney sufficiently authorized the wife to
sell the property.
Therefore, the sale is valid.
Lim Pin v. Liao Tan (ROG)

FACTS: A compromise agreement between Lim Pin represented by son

George Hung and Liao Tan was made incident to an unlawful detainer
complaint filed by Tan against Pin. On hearing, Lim Pin was absent. Her son
George Hung who attended with his mother all previous hearings was
present together with counsel. Liao and counsel were also present.
Through court's initiative the compromise agreement was formulated and
executed.

A motion for reconsideration was filed by Lim Pin assailing the compromise
agreement: 1) that she never authorized her son nor her counsel on record
(Attorney. Pastor Mamaril) to enter into such compromise agreement and
2) that had she been present when said agreement was prepared; she
would not have acceded thereto.

Tan filed opposition to MR and prayed that son George Hung and Attorney.
Pastor P. Mamaril be cited for contempt" in the event they should belatedly
deny that George Hung was duly authorized by his mother to enter into the
compromise agreement.

TC: MR denied George Hung cited for contempt of court. Writ to execute
issued.

Lim Pin: Judge should not have allowed her son George Hung and her then
counsel, Attorney. Pastor Mamaril in her absence to enter into compromise
agreement with Tan. Considering that such compromise agreement would
impose onerous obligations upon her, such as a tremendous increase of
rentals in the premises being leased from Tan from P1,500.00 a month to
P5,000.00 a month and that said agreement contained admissions by her,
the respondent Judge should have required a written authority and power
of attorney from her son and counsel.

ISSUE: WON Judge shouldve required written authority and Power of

attorney before allowing Lim's son and counsel to act on her behalf on
compromise agreement? NO

HELD: 1) Power of attorney need not be written but authority must be duly
established by evidence.

Art. 1878 NCC: a special power of attorney is necessary to compromise, to

submit questions to arbitration, to renounce the right to appeal from a
judgment, to waive objections to the venue of an action or to abandon a
prescription already acquired.

Section 23 of Rule 138 on Attorneys and Admission to the Bar governs the
authority of attorneys to bind their clients and provides that "Attorneys
have authority to bind their clients in any case by any agreement in

relation thereto made in writing, and in taking appeal, and in an matters of

ordinary Judicial Procedure, but they cannot, without special authority,
compromise their clients' litigation or receive anything in discharge of their
clients' claims but the full amount in cash."

The requirements of a special power of attorney in Article 1878 of the Civil

Code and of a special authority in Rule 138 of the Rules of Court refer to
the nature of the authorization and not its form. The requirements are met
if there is a clear mandate from the principal specifically authorizing the
performance of the act.

Mandate may be oral or written BUT vital that it must be express. If the
special authority is not written it must be duly established by evidence
other than mere assertion of counsel.

2) Judge considered evidence before allowing son to execute agreement on

mom's behalf.

Here, it was shown that Judge took necessary precautionary measures and
acted on the basis of satisfactory evidence when he allowed the
compromise agreement to be executed by George
Hung the petitioner's son.

Prior to hearing, Lim Pin had repeatedly asked court to approve her
proposal for monthly increase of 500php + that increases be pegged at
that rate till monthly rental reaches 5k. on Dec 1977. But at the time, Tan
not amenable to it, but Tan later changed her mind so court later asked
George to execute agreement.

There were other reasons which led the lower court to a finding that
George Hung had the full authority to enter into the compromise. The court

itself observed during the earlier hearings and it is not disputed that ...
defendant Lim Pin could not decide on anything without first consulting her
son." George Hung's later denial that he never manifested his authority to
represent his mother was rejected by the court. As a matter of fact, this
sudden turnabout of George Hung led the court to cite him for contempt.
He was fined Two Hundred Pesos. The citation for contempt was never
appealed.

3) Even assuming George acted without authority, agreement would not be

void, merely unenforceable, and capable of being ratified.

The compromise agreement was ratified by the petitioner when a few days
after the promulgation of the questioned judgment and before the filing of
a motion for reconsideration, she filed a Motion To Withdraw Deposits, a
consignation case pending before the same court between the same
parties. Such motion's expressly stated purpose was to withdraw deposit
made in order implement compromise agreement.

IGNACIO VICENTE VS AMBROSIO GERALDEZ

52 SCRA 210 Business Organization Corporation Law Delegation of
Corporate Powers Compromise Agreement
FACTS: In 1967, HI Cement Corporation was granted authority to operate
mining facilities in Bulacan. However, the areas allowed for it to explore
cover areas which were also being explored by Ignacio Vicente, Juan
Bernabe, and Moises Angeles. And so a dispute arose between the three
and HI Cement as neither side wanted to give up their mining claims over
the disputed areas. Eventually, HI Cement filed a civil case against the
three. During pre-trial, the possibility of an amicable settlement was
explored where HI Cement offered to purchase the areas of claims of
Vicente et al at the rate of P0.90 per square meter. Vicente et al however
wanted P10.00 per square meter.
In 1969, the lawyers of HI Cement agreed to enter into a compromise
agreement with the three whereby commissioners shall be assigned by the

court for the purpose of assessing the value of the disputed areas of claim.
An assessment was subsequently made pursuant to the compromise
agreement and the commissioners recommended a price rate of P15.00
per square meter.
One of the lawyers of HI Cement, Atty. Francisco Ventura, then notified the
Board of Directors of HI Cement for the approval of the compromise
agreement. But the Board disapproved the compromise agreement hence
Atty. Ventura filed a motion with the court to disregard the compromise
agreement. Vicente et al naturally assailed the motion. Vicente et al
insisted that the compromise agreement is binding because prior to
entering into the compromise agreement, the three lawyers of HI Cement
declared in open court that they are authorized to enter into a compromise
agreement for HI Cement; that one of the lawyers of HI Cement, Atty.
Florentino Cardenas, is an executive official of HI Cement; that Cardenas
even nominated one of the commissioners; that such act ratified the
compromise agreement even if it was not approved by the Board. HI
Cement, in its defense, averred that the lawyers were not authorized and
that in fact there was no special power of attorney executed in their favor
for the purpose of entering into a compromise agreement. Judge Ambrosio
Geraldez ruled in favor of HI Cement.
ISSUE: Whether or not a compromise agreement entered into by a lawyer
purportedly in behalf of the corporation is valid without a written authority.
HELD: No. Corporations may compromise only in the form and with the
requisites which may be necessary to alienate their property. Under the
corporation law the power to compromise or settle claims in favor of or
against the corporation is ordinarily and primarily committed to the Board
of Directors but such power may be delegated. The delegation must be
clearly shown for as a general rule an officer or agent of the corporation
has no power to compromise or settle a claim by or against the
corporation, except to the extent that such power is given to him either
expressly or by reasonable implication from the circumstances. In the case
at bar, there was no special power of attorney authorizing the three
lawyers to enter into a compromise agreement. This is even if the lawyers
declared in open court that they are authorized to do so by the corporation
(in this case, the transcript of stenographic notes does not show that the
lawyers indeed declare such in open court).

The fact that Cardenas, an officer of HI Cement, acted in effecting the

compromise agreement, i.e. nominating a commissioner, does not ratify
the compromise agreement. There is no showing that Cardenas act binds
HI Cement; no proof that he is authorized by the Board; no proof that there
is a provision in the articles of incorporation of HI Cement that he can bind
the corporation.

COSMIC LUMBER vs. COURT OF APPEALS (CA)

Petition for review on certiorari of Court of Appeals decision
(CA decision: dismissed the case, against Cosmic Lumber)
FACTS:
- Cosmic Lumber Corporation executed a SPA to Villamil-Estrada as
attorney in fact, to wit: (1) to initiate, institute and file an ejectment

Facts: Perla executed a Special Power of Attorney (SPA) in favor of her

husband, JulianD. Mercado (Julian) over several pieces of real property
registered under her name, authorizing the latter to perform the following
acts: 1. To act in my behalf, to sell, alienate, mortgage, leasea nd deal
otherwise over the different parcels of land described hereinafter x x x 2.
To sign for and in my behalf any act of strict dominion or ownership any
sale, disposition, mortgage, lease or any other transactions including quitclaims, waiver and relinquishment of rights x x x 3. To exercise any or all
acts of strict dominion or ownership over the above-mentioned
properties ,rights and interest therein.On the strength of the aforesaid SPA,
Julian obtained a loan from the respondent. Stillusing the subject property
as security, Julian obtained an additional loan from the respondent.It
appears, however, that there was no property identified in the SPA and
registered with the Registry of Deeds. What was identified in the SPA
instead was the property different from theone used as security for
loan.Julian defaulted on the payment of his loan obligations. Thus,
respondent initiated extra- judicial foreclosure proceedings over the
subject property which was subsequently sold at publicauction wherein the
respondent was declared as the highest bidder. Petitioners initiated an
actionfor the annulment of REM constituted over the subject property on
the ground that the same wasnot covered by the SPA and that the said
SPA, at the time the loan obligations were contracted,no longer had force
and effect since it was previously revoked by Perla. In the absence
of authority to do so, the REM constituted by Julian over the subject
property was null and void;thus, petitioners likewise prayed that the
subsequent extra-judicial foreclosure proceedings andthe auction sale of
the subject property be also nullified.
Issues: (1) Whether or not there was a valid mortgage constituted over
subject property.(2) Whether or not there was a valid revovation of SPA.(3)
Construction of powers of attorney.

MERCADO vs. ALLIED BANKING CORP.

Rulings: (1) In the case at bar, it was Julian who obtained the loan
obligations from respondent which he secured with the mortgage of the
subject property. The property mortgaged was owned by his wife, Perla,
considered a third party to the loan obligations between Julian and
respondent. It was, thus, a situation recognized by the last paragraph of
Article 2085 of the Civil Code that third persons who are not parties to the
principal obligation may secure the latter by pledging or mortgaging their
own property. There is no question therefore that Julian was vested with
the power to mortgage the pieces of property identified in the SPA,
however,
the
subject property was not among those enumerated therein. Julian was not
conferred by Perla with theauthority to mortgage the subject property

executed over the said

made without her consent and made in excess of the

authority given his husband and therefore it was null and
void.

(2) The said SPA was revoked by virtue of a public instrument executed by
Perla. To address respondents assertion that the said revocation was
unenforceable against it as a third party to the SPA and as one who relied
on the same in good faith, the rule is that an agency is extinguished,
among others, by its revocation (Article 1999, New Civil Code of the
Philippines). The principal may revoke the agency at will, and compel the
agent to return the document evidencing the agency. Such revocation may
be express or implied (Article 1920, supra).

Issue:
- W/N de Coster is also liable as to the debt incurred by his
husband
Held:
- No! Husband has no authority to execute a promissory note
in behalf of his wife or to make the latter liable as an
accommodation maker. Also, the debt was a preexisting
debt of the husband wherein the wife was not a party and
has no legal obligation to pay.
- The obligation of the husband stated in the power if attorney
was to borrow money for or in account of his wife as her
agent as her attorney in fact. That does not carry with it the
power to make his wife liable as a surety for his preexisting
debt
- Also, the husband, the agent of his wife, failed to represent
the interest of his principal in court. This gave the principal
the authority to obtain relief under section 113 of the Code
of Civil Procedure.

under the terms of the SPA, the real estate

property are therefore unenforceable.

(3) Rule of strict construction- where the terms of the contract are clear as
to leave no room for interpretation, resort to circumstantial evidence to
ascertain the true intent of the parties, is not countenanced. The law is
that if the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulation
shall control. The clear terms of the contract should never be the subject
matter of interpretation. Equally relevant is the rule that a power of
attorney must be strictly construed and pursued. The instrument will be
held to grant only those powers which are specified therein, and the agent
may neither go beyond nor deviate from the power of attorney. Where
powers and duties are specified and defined in an instrument, all such
powers and duties are limited and are confined to those which are
specified and defined, and all other powers and duties are excluded.
Qualification of the rule- this is but in accord with the disinclination of
courts to enlarge the authority granted beyond the powers expressly given
and those which incidentally flow or derive therefrom as being usual and
reasonably necessary and proper for the performance of such express
powers.

BPI vs. De Coster

Facts: De Coster, La Orden and Poizat issued a promissory note in
favor of BPI for P292,000
- The promissory note was secured by several mortgages on
the several properties of the debtors
- The debtors defaulted so BPI asked the court to foreclose
the mortgages
- CFI issued an execution order against the three debtors
- Gabriela de Coster, wife of Poizat, complained that at the
time of the filing of the complaint she was in Paris and was
absent in the Philippines .and has no knowledge of the
actual facts. De Coster also alleged that the mortgage was

Philippine National Bank v Sta. Maria 29 SCRA 303 Case Digest

Philippine National Bank v. Sta. Maria, 29 SCRA 303
Concept: Art. 1207. The concurrence of two or more creditors or of two or
more debtors in one and the same obligation does not imply that each one
of the former has a right to demand, or that each one of the latter 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
Facts:

Special power of the attorney to mortgage real estate is limited to

such authority and does not bind the grantor personally to other
obligations contracted by the grantee

The sugar crop loans were obtained by Maximo from the plaintiff
bank under the power of the attorney, executed in his favor by his brothers
and sisters to mortgage a 16-odd hectare parcel of land, jointly owned by
all of them

Valeriana the sister of Maximo, 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.

Maximo applied for two separate crop loans with the PNB, one in the
amount of P15,000 but only P13,216.11 was extended by the PNB and the
other for P23,000 but only P12,427.57 was extended by the PNB

As security for the two loans, Maximo executed it in his own name in
favor of PNB two chattel mortgages, guaranteed by the surety bonds for
the full authorized amounts of loans executed by the Associated Insurance
& Surety Co., Inc.


Plaintiff Bank filed the case on February 10,1961 against Defendant
Maximo Sta. Maria and his six brothers and sisters and the Associated
Insurancs & Suret Co., Inc. for the collection of unpaid balances of two
sugar crop loans

The Trial Court rendered judgement in favor of the PNB

Maximo did not appeal but his siblings appealed and contended that
they had 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, the liability should not go beyond the value of the property which9
they had authorized to be given as security of the loans obtained by
Maximo. They further contended that they did not benefit whatsoever from
the loans.

Padilla for Carmen E. de Foerster, the wife of U.E. Foerster, which was
consequently withdrawn by the couple and a certain V. Bacaldo
(stenographer of Foerster).

Issue: W/N the siblings are only liable for the value of the land?

The drug company saw fit to stand on the proposition that checks drawn in
its favor were improperly and illegally cashed by the bank for Foersters
personal account.

Held: Yes, except for Valeriana who issued a separate Special Power of
Attorney authorizing Maximo to borrow money.

In Bank of P. I. v. De Coster, "where in an instrument powers and

duties are specified and defined, that all of such powers and duties are
limited andconfined to thosewhich are specified and defined, and all other
powers andduties are excluded.

In De Villa vs. Fabricante, 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'sname, 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 authorityto contract
obligation.

Maximo and Valeriana are the only ones liable for the loans and that
the other siblings liability only correspond to real estate mortgage and the
foreclosure and sale of mortgage.

Maximos argument that "a mortgage is simply anaccessory

contract, and that to effect the mortgage, aloan has to be secured" falls,
far short of the mark.Maximo had indeed, secured the loan on his own
accountand the defendants-appellants had authorized him tomortgage
their respective undivided shares of the realproperty jointly owned by them
as security for the loan.But that was the extent of their authority land
consequentliability, to have the real property answer for the loan incase of
non-payment.

The outcome might be different if there had been anexpress

ratification of the loans by defendants-appellantsor if it had been shown
that they had been benefited bythe crop loans so as to put them in
estoppel.

Under the Art. 1207, Valeriana is only jointly liable with Maximo
INSULAR DRUG COMPANY VS NATIONAL BANK
Facts: U.E. Foerster was formerly a salesman of the drug company for
the island of Panay and Negros. He also acted as a collector of the
company, mainly taking checks from the Iloilo branch of the drug company
and depositing them to the company account with Philippine National
Bank. Upon examination of the checks deposited by Foerster with PNB,
there were several indorsements guaranteed by the PNB manager Angel

When the Manila office of the drug company investigated and discovered
the anomalies, Foerster committed suicide. Although there was no
evidence showing that the bank knew that Foerster was misappropriating
the funds of his principal, the Insular Drug Co. claims that it never received
the face value of the 132 checks in question covering a total of Php 18,
285.92.

Issue: Whether the bank is liable for the amount indorsed and withdrawn
by Foerster using company checks even if the latter is an agent of the drug
company.
Whether the bank is liable for the negligence of its agents when they
allowed encashing of the checks without prior authority from the company.
Ratio: Yes on both issues. The bank is liable for the amount withdrawn by
Foerster and will have to stand the loss occasioned by negligence of its
agents.
The right of an agent to indorse commercial paper is a very
responsible power and will not be lightly inferred. A salesman
with authority to collect money belonging to his principal does not
have the implied authority to indorse checks received in payment.
Any person taking checks made payable to a corporation, which
can [be acted upon] only by agents does so at his peril, and must
abide by the consequences if the agent who indorses the same is
without authority.
The fact that the bank acted in good faith does not relieve it from
responsibility. The bank could tell by the checks themselves that the
money belonged to the Insular Drug Company and not to Foerster, his wife
or his clerk. When the bank permitted the withdrawals without the
authority from the drug company, the bank made itself responsible to the
drug company for the amounts represented by the checks.

The bank could have relieved itself from the responsibility had it proven
that the money withdrawn by Foerster passed to the drug company but it
hasnt done so.
HODGES V. SALAS AND SALAS 63 Phil. 567
Facts:On September 2, 1923, the defendants executed a power of attorney
in favor of their brother-in-law Felix S. Yulo to enable him to obtain a loan
and secure it with a mortgage on the real property described in transfer
certificate of title No. 3335. The power of attorney was registered in the
registry of deeds of the Province of Occidental Negros. Acting under said
power of attorney, Felix S. Yulo, on March 27,1926, obtained a loan of
P28,000 from the plaintiff, binding his principals jointly and severally, to
pay it within ten (10) years, together with interest thereon at 12 per cent
per annum payable annually in advance, to which effect he signed a
promissory note for said amount and executed a deed of mortgage of the
real property. It was stated in the deed that in case the defendants failed to
pay the stipulated interest and the taxes on the real property mortgaged
and if the plaintiff were compelled to bring anaction to recover his credit,
said defendants would be obliged to pay 10 per cent more on the unpaid
capital, as fees for the plaintiff's attorneys. The mortgage so constituted
was registered in the registry of deeds of the Province of Occidental Negros
and noted on the back of the transfer certificate of title.The defendants
failedto pay at maturity the interest stipulated which should have been
paid one year in advance. Plaintiff therefore brought an action for
foreclosure of the mortgage. The trial court ordered in favor of the
defendants and held that the loan and the mortgage were illegal.
Issue: Whether or not the loan obtained and the mortgage executed by
Yulo was valid and therefore defendants are bound to pay?
Ruling: Yes. The loan obtained and the mortgage executed by Yulo
was valid and therefore defendants are bound to pay for it. By virtue of the
authority conferred by the defendants by executing a power of attorney,
agent Yulo was authorized to borrow money and invest it as he wished,
without being obliged to apply it necessarily for the benefit of his
principals.
VELOSO v. CA G.R. No. 102737; August 21, 1996
Ponente: J. Torres Jr.
FACTS: Petitioner Francisco Veloso was the owner of a parcel of land
situated in the district of Tondo, Manila, with an area of 177 square meters.
The title was registered in the name of Francisco A. Veloso. The said title
was subsequently cancelled and a new one issued in the name of Aglaloma
B. Escario, married to Gregorio L. Escario, on May 24, 1988.

On August 24, 1988, petitioner Veloso filed an action for annulment of

documents, reconveyance of property with damages and preliminary
injunction and/or restraining order. Petitioner alleged therein that he was
the absolute owner of the subject property and he never authorized
anybody, not even his wife, to sell it. He alleged that he was in possession
of the title but when his wife, Irma, left for abroad, he found out that his
copy was missing. He then verified with the Registry of Deeds of Manila
and there he discovered that his title was already canceled in favor of
defendant
Aglaloma
Escario.
The transfer of property was supported by a General Power of Attorney
dated November 29, 1985 and Deed of Absolute Sale, dated November 2,
1987, executed by Irma Veloso, wife of the petitioner and appearing as his
attorney-in-fact,
and
defendant
Aglaloma
Escario.
Petitioner Veloso, however, denied having executed the power of attorney
and alleged that his signature was falsified. He also denied having seen or
even known Rosemarie Reyes and Imelda Santos, the supposed witnesses
in the execution of the power of attorney. He vehemently denied having
met or transacted with the defendant. Thus, he contended that the sale of
the property, and the subsequent transfer thereof, were null and void.
Defendant Aglaloma Escario in her answer alleged that she was a buyer in
good faith and denied any knowledge of the alleged irregularity. She
allegedly relied on the general power of attorney of Irma Veloso which was
sufficient in form and substance and was duly notarized.
ISSUE:

Whether there was a valid sale of the subject property

HELD:
Yes,
the
sale
of
the
subject
property
is
valid
The Supreme Court held that an examination of the records showed that
the assailed power of attorney was valid and regular on its face. It was
notarized and as such, it carries the evidentiary weight conferred upon it
with respect to its due execution. While it is true that it was denominated
as a general power of attorney, a perusal thereof revealed that it stated an
authority
to
sell.
Respondent Aglaloma relied on the power of attorney presented by
petitioner's wife, Irma. Being the wife of the owner and having with her the
title of the property, there was no reason for the private respondent not to
believe, in her authority. Thus, having had no inkling on any irregularity
and having no participation thereof, private respondent was a buyer in
good faith. It has been consistently held that a purchaser in good faith is
one who buys property of another, without notice that some other person
has a right to, or interest in such property and pays a full and fair price for

the same, at the time of such purchase, or before he has notice of the
claim or interest of some other person in the property.