1

Litonjua vs Fernandez et al
FACTS: brokers alimario and fisico offered to sell to petitioners litonjua two parcels of land . Brokers told petitioners that they were authorized by
respondent Fernandez to offer the property for sale.
Petitioner litonjua made ocular inspections and found there are some people who gather coconuts.
Later, petitioners met with Fernandez, they agreed that petitioners will buy the land at 150 per sqm and Fernandez will shoulder all taxes.
They agreed to meet on a later date to finalize the sale and on that date, Fernandez will show an SPA authorizing her to sell the property in behalf of the
owners.
Litonjua made demands to Fernandez.
Fernandez in reply denied having agreed to shoulder the taxes, to meet on a later date to finalize the sale, and some tenants appeared, the barangay
captain refuses to issue clearance. And I informed my broker that due to the alleged tenants, owners are changing their minds to sell the property.
Fernandez said
Then litonjua filed a case.asdadsad
Respondents were declared in default.
Respondents aver that they authorized the broker to look for a buyer on a best offer basis. And when she met with petitioners, she told them that she
could not bind the owner of the properties as she had no written authority. She contacted a co-owner cousin and said that there were tenants and decided
they were no longer interested in selling the property.
TC ruled in favor of litonjua
CA reversed
ISSUE: WON THERE is a perfected verbal contract to sell?
HELD: NONE
Petitioner contends that the letter reply of Fernandez is a sufficient note or memorandum of the perfected contract, thus removing it from statute of frauds.
NO, the letter could not be said to be a sufficient memorandum, it is very clear that respondent did not accept the condition. Also, a note or memorandum
must be complete in itself and cannot rest partly in writing and partly in parol. Also, such note to be binding, must be signed by said party or by his duly
authorized agent in writing.
Also, there is no evidence that owners specifically authorized Fernandez to sell the property.
For a sale of piece of land thru an agent to be valid, authority must be in writing. Also here is no evidence that the owners ratified all the actuations of
Fernandez.
Also petitioners are uncertain of the specific areas they are going to buy.
The failure of respondent Fernandez to object to parol evidence to prove (a) the essential terms and conditions of the contract asserted by the petitioners
and, (b) her authority to sell the properties for the respondents-registered owners did not and should not prejudice the respondents-owners who had been
declared in default.
DOCTRINE: SPA in writing; piece of land
A note or memorandum must be sufficient in itself to remove it from the application of statute of frauds.

3
VELOSO VS CA
MANALAYSAY-Veloso v. CA
Doctrines
: Documents acknowledged before a notary have the evidentiary weight with respect to their due execution.
There was no need to execute a separate and special power of attorney since the general power of attorney had expressly authorized the agent of attorney in
fact the power to sell the subject property.
The separate power of attorney can be included in the general power of attorney when the act of transaction for which the special power is required is specified
therein.
Whether the instrument be denominated as general power of attorney or special power of attorney, what matters is the extent of the power or powers
conferred upon the agent or attorney-in-fact. If the power is couched in general terms, then only acts of administration may be deemed granted although the
instrument may be captioned as special power of attorney; but where the power, for example, to sell or mortgage, is specified, there can be no doubt that the
agent may execute the act, although the instrument is denominated as a general power of attorney.
(Veloso vs. CA) A notarized power of attorney, however, carries the evidentiary weight conferred upon it with respect to its due execution.
Facts : (innocent purchaser for value; wife; general power of attorney)Francisco Veloso is the owner of a parcel of land (177square meters) located in Tondo, Manila. The land was covered by a TCT and registered under his name.
However, the TCT was cancelled a new one was issued in the name of Aglaloma Escaro.
Veloso claimed that he was the sole owner of the property and he never authorized anyone to sell the land, not even his wife. He further alleged that he was in
possession of the title but when his wife, Irma, left for abroad, he found out his copy was missing. He went to the Register of Deeds to verify and he found out that
his TCT was cancelled and is now under the name of Escario.The wife sold the land thru A general power of attorney and a deed of absolute sale executed by his wife, Irma as his attorney-in-fact supported the TCT. However,
Veloso denied executing the power of attorney. 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 prayed that a temporary restraining order be issued over the land.
Veloso testified that he acquired the subject property from PBC and it did not belong to the conjugal partnership.
Issues: W/N there was a valid sale of the subject property. Is a general power of attorney sufficient for the sale of the petitioners house?
Held/Ratio: YES. The assailed power of attorney was valid and regular on its face. It was notarized and therefore has evidentiary weight with regard to its due
execution. Furthermore, if the General Power of Attorney expressly granted the power to sell the property to the agent/ attorney in fact, there is no need to execute
a separate and special power of attorney. The special power of attorney can be included in the general power when it is specified therein the act or transaction for
which the special power is required. 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, to wit:
To buy or sell ---- lands, tenements and hereditaments or other forms of real property, more specifically TCT No. 49138,upon such terms and conditions and under
such covenants as my said attorney shall deem fit and proper.
Whether the instrument be denominated as general power of attorney or special power of attorney, what matters is the extent of the power or powers
contemplated upon the agent or attorney in fact. If the power is couched in general terms, then such power cannot go beyond acts of administration. However,
where the power to sell is specific, it not being merely implied, much less couched in general terms, there cannot be any doubt that the attorney in fact may
execute a valid sale. An instrument may be captioned as special power of attorney but if the powers granted are couched in general terms without mentioning
any specific power to sell or mortgage or to do other specific acts of strict dominion, then in that case only acts of administration may be deemed conferred. Even
assuming that the General Power of Attorney and Deed of Sale is void, Aglaloma Escaro is still the lawful owner of the property. She is deemed an innocent

4
purchaser for value because she relied on the General Power of Attorney presented by Velosos wife, Irma. There was no reason for Escaro not to believe in
Irmas authority as she is the wife of Veloso and was in possession of the title of the land. She is a buyer in good faith
Finally; the trial court did not err in applying equitable estoppel in this case. The principle of equitable estoppel states that where one or two innocent persons must
suffer a loss, he who by his conduct made the loss possible must bear it. From the evidence adduced, it should be the petitioner who should bear the loss.

SAN DIEGO SR., VS ADELO NOMBRE AND PEDRO ESCANLAR

FACTS:
Adelo Nombre was a duly constituted judicial administrator of the intestate estate, in his capacity as administrator he leased one of the properties of the
estate (a fishpond) to Pedro Escanlar. The term of the lease would be 3 years, this transaction was admittedly done without the previous authority or
approval of the Court. Nombre was then removed as the administrator and was replaced by Sofronio Campillanos.
Escanlar was cited in contempt for refusing to return the fishpond to Campillanos. Later on Campillanos, filed a motion to be allowed to lease the same
fishpond to petitioner San Diego Sr. for 5 years with a rental of P5,000. Nombre filed an opposition stating that he had already leased the fishpond to
respondent Escanlar. The lower court declared the contract of lease with Escanlar as null and void for having been entered into by the previous
administrator, Nombre, in bad faith and was fraudulent for the imminence of Nombres removal as administrator.
CA gave due course to petition and decided that no such limitation on the power of a judicial administrator to grant a lease of property placed under his
custody is provided for in the present law. The executor or administrator has the power of administering the estate of the deceased for purposes of
liquidation and distribution. Therefore, he may exercise all acts of administration without special authority of the court. He may then lease the property
without securing previously any permission from the court.
Petitioner intervened in the case at bar and moved for the reconsideration of the judgment of the CA.
ISSUE:
WON a judicial administrator can validly lease property of the estate without prior judicial authority? YES
WON the provisions of the NCC on Agency should apply to judicial administrators? NO.
HELD:
The SC thought that it is important to note that lease has been considered an act of administration.
Petitioner contends that Art 1878 par 8 is the limitation to the right of a judicial administrator to lease real property without prior court authority and
approval if it exceeds one year.
JUDICIAL ADMINISTRATOR
AGENT
Before appointment, he must file a bond
Need not file a bond to be appointed an agent
He is subject to special provisions of law and orders He is answerable only to his principal.
of the appointing court

5
The court also found that petitioners legal standing to pursue this case is doubtful and he can no longer be leased the property for Campillanos, new
administrator, renewed the contract with Escanlar, old lessee.
CA affirmed.
Doctrine: rules on agency does not apply to judicial administrator

6
EMMA ACENAS AND ALBERTO ACENAS VS ANGELA SISON AND TEOFILO SISON
FACTS:
Angela Sison executed a promissory note promising to pay Acenas 8,160 pesos in 26 installments, failure to pay for two consecutive instalments would
make the balance due and demandable. Because of Angelas failure to pay, she was sued and her husband was joined as a defendant, Mr Sison denied
liability stating that he was not a party for he did not sign the promissory note.
CFI held the husband and wife (sisons) solidarily liable on the note made by the wife. During the hearing of the case, the counsel for defendant (Sisons)
moved for the postponement of the hearing hereof in view of the absence of his clients and that he needs time within which to confer with them for the
purpose of amicably settling this case. When the court stated that the defendant had no special defense for the case, the court suggested that it would be
of the best interest of the latter if the counsel for defendant terminates the case by way of judgment on the pleadings or confession of judgment . Counsel
for defendant offered no objection and asked that confession of judgment by the defendants be entered in this cas e provided that the writ of execution
should not be issued until June 30, 1960, to which counsel for plaintiffs agree.
ISSUE
WON Sisons counsel had authority to agree to a confession of judgment in behalf of his clients, specifically Mr. Sison? NO.
HELD:
It was undisputed from the facts that counsel wanted to move for the postponement of the case because he had to confide with his clients, so it clearly
established that he had no authority to make such decisions for them and yet he agreed to a confession of judgment which was beyond the authority
provided for him by his client, Mr. Sison.
It was error for the trial court to have accepted the confession without ascertaining his authority to do so, at least with respect to Teofilo Sison, for with
respect to Angela, there is no objection that she is liable.
DOCTRINE: an act of agent exceeding the authority conferred upon him, does not bind the principal.

DUNGO VS LOPENA
Anastacio Dungo and Rodrigo Gonzales purchased 3 parcels of land from Adriano Lopena and Rosa Ramos for the total price of P269,804.00. P28.000.00 was
given as down payment withthe agreement that the balance of P241,804.00 would be paid in 6 monthly installments.
To secure the payment of the balance, the Dungo and Gonzales executed over the same parcels of land Deed of Real Estate Mortgage in favor of Lopena and
Ramos. This deed was duly registered with the Office of the Register of Deeds Rizal, with the condition that failure of the vendees to pay any of the installments on
their maturity dates shall automatically cause the entire unpaid balance to become due and demandable.
Dungo and Gonzales defaulted on the 1st installment.
Lopena and Ramos filed a complaint for the foreclosure of the real estate mortgage with the CFI of Rizal

7
There were 2 other civil cases filed in the same lower court against the same defendants Dugo and Gonzales. The plaintiff in one was a certain Dionisio Lopena,
and in the other case, the complainants were Bernardo Lopena and Maria de la Cruz. All3 cases arose out of one transaction. In view of the identical nature of the
cases, they were consolidated by the lower court into just one proceeding.
This present decision refers solely to the interests and claim of Adriano Lopena against Anastacio Dugo alone.
Before the cases could be tried, a compromise agreement was submitted to the lower court for approval. It was signed by Lopena and Ramos on one hand, and
Gonzales, on the other. It was not signed by Dungo. However, Gonzales represented that his signature was for both himself and the Dugno. Moreover, Dugo's
counsel of record, Atty. Chan, the same lawyer who signed and submitted for him the answer to the complaint, was present at the preparation of the compromise
agreement and this counsel affixed his signature thereto. This compromise agreement was approved by the lower court on the same day it was submitted.
Subsequently a so-called Tri-Party Agreement was drawn. The signatories to it were Dugo and Gonzales as debtors, Lopena and Ramos as creditors, and, one
Emma R. Santos as payor.
When Dugo and Gonzales failed to pay the balance, Lopena and Ramos filed a Motion for the Sale of Mortgaged Property. Although this last motion was filed ex
parte, Dugo and Gonzales were notified of it by the lower court. Neither of them filed any opposition thereto. The lower court granted the above motion and
ordered the sale of the mortgaged property.
The 3 parcels of land were sold by the Sheriff at a public auction where at herein petitioners, together with the plaintiffs of the other two cases won as the highest
bidders. The said sheriff's sale was later confirmed by the lower court. Before confirming the sale, the lower court gave due notice of the motion for the
confirmation to the herein petitioner who filed no opposition therefore.
Dugo filed a motion to set aside all the proceedings on the ground that the compromise agreement was void ab initio with respect to him because he did not
sign the same. Consequently, he argued, all subsequent proceedings under and by virtue of the compromise agreement, including the foreclosure sale, were void
and null as regards him. This motion to set aside was denied by the lower court
Dugo filed a Notice of Appeal from the order approving the foreclosure sale, as well as the order denying his motion to set aside. The approval of the record on
appeal however, was opposed by the respondent spouses who claimed that the judgment was not appealable having been rendered by virtue of the compromise
agreement. The opposition was contained in a motion to dismiss the appeal. The lower court dismissed the appeal
ISSUES/HELD Was the compromise agreement, the Order of the same date approving the same, and, all the proceedings subsequent thereto, valid or void
insofar as Dungo is concerned?
YES
Dugo - the Compromise Agreement was void ab initio and could have no effect whatsoever against him because he did not sign the same. Furthermore, as it was
void, all the proceedings subsequent to its execution, including the Order approving it, were similarly void and could not result to anything adverse to his interest.
It is true that a compromise is, in itself, a contract.
ART. 2028. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced.
Moreover, under Art. 1878 of the Civil Code, a third person cannot bind another to a compromise agreement unless he, the third person, has obtained a special
power of attorney for that purpose from the party intended to be bound.
Although the Civil Code expressly requires a special power of attorney in order that one may compromise an interest of another, it is neither accurate nor correct
to conclude that its absence renders the compromise agreement void. In such a case, the compromise is merely unenforceable. It must be governed by the rules
and the law on contracts.
ART. 1403. The following contracts are unenforceable, unless they are ratified :Those entered into in the name of another person by one who has been given no
authority or legal representation, or who has acted beyond his powers
WON Dugo had ratified the compromise agreement. YES
The ratification of the compromise agreement established by the Tri-Party Agreement. It is to be noted that the compromise agreement was submitted to and
approved by the lower court. Now, the Tri-Party Agreement referred itself to that order

8
Rivero v. Rivero - When it appears that the client, on becoming aware the compromise and the judgment thereon, fails to repudiate promptly the action of his
attorney, he will not afterwards be heard to contest its validity
This Court has not overlooked the fact that which indeed Dugo was not a signatory to the compromise agreement, the principal provision of the said instrument
was for his benefit. Originally, Dugo's obligation matured and became demandable on October 10, 1959. However, the compromise agreement extended the date
of maturity to June 30, 1960.More than anything the compromise agreement operated to benefit of Dungo because it afforded him more time and opportunity to
fulfill his monetary obligations under the contract. If only for this reason, this Court believes that the herein petitioner should not be heard to repudiate the said
agreement.
The compromise agreement stated "that, should the defendants fail to pay the said mortgage indebtedness, judgment of foreclosure shall thereafter be entered
against the said defendants:" Beyond doubt, this was ratified by the Tri-Party Agreement when it covenanted that - If the MAYOR defaults or fails to pay anyone of
the installments in themanner stated above, the MAYOR and the DEBTOR hereby permit the CREDITOR to execute the order of sale referred to above (the
Judgment of Foreclosure), and they (PAYOR and DEBTOR) hereby waive any and all objections or oppositions to the propriety of the public auction sale and to
the confirmation of the sale to be made by the Court.
Dugo - even assuming that the compromise agreement was valid, it nevertheless could not be enforced against him because it has been novated by the TriParty Agreement which brought in a third party, Santos, who assumed the mortgaged obligation of Dungo.
Novation by presumption has never been favored. To be sustained, it need be established that the old and new contracts are incompatible in all points, or that the
will to novate appears by express agreement of the parties or in acts of similar import.
An obligation to pay a sum of money is not novated, in a new instrument wherein the old is ratified , by changing only the term of payment and adding other
obligations not incompatible with the old one or wherein the old contract is merely supplemented by the new one
Dungo claims that when a third party, Santos, came in and assumed the mortgaged obligation, novation resulted thereby inasmuch as a new debtor was
substituted in place of the original one.
In this kind of novation, however, it is not enough that the juridical relation of the parties to the original contract is extended to a third person ; it is necessary that
the old debtor be released from the obligation, and the third person or new debtor take his place in the new relation. Without such release, there is no novation ; the
third person who has assumed the obligation of the debtor merely becomes a co-debtor or surety. If there is no agreement as to solidarity, the first and the new
debtors are considered obligation jointly. There was no such release of the original debtor in the Tri-Party Agreement.
It is a very common thing in the business affairs for a stranger to a contract to assume its obligations; while this may have the effect of adding to the number of
persons liable, it does not necessarily imply the extinguishment of the liability of the first debtor). The mere fact that the creditor receives a guaranty or accepts
payments from a third person who has agreed to assume the obligation, when there is no agreement that the first debtor shall be released from responsibility, do
not constitute a novation, and the creditor can still enforce the obligation against the original debtor .
The Tri-Party Agreement was an instrument intended to render effective the compromise agreement. It merely complemented and ratified the same. That a third
person was involved in it is inconsequential. Nowhere in the new agreement may the release of Dungo be even inferred.

Doctrine: a compromise agreement for and on behalf of another by a person not authorized is unenforceable. SPA is necessary to compromise

9
Lim pin vs Liao Tan
Spouses Conchita Liao Tan and Tan Cho Hua alleged in their complaint for unlawful detainer that the plaintiff Conchita LiaoTan, as owner of a parcel of
registered land with improvements located at Francisco Street, Caloocan City, had leased a portion of it, more particularly known as 91Francisco
Street, Caloocan City to defendant Lim Pin on a month to month basis but that the latter starting April, 1977had not paid the agreed rental stipulated for
such month and the succeeding months thereafter. And that despite demand, the defendant refused to vacate the leased premises.
Defendant Lim Pin, filed her Answer denying the material allegations of the complaint and protesting the alleged highly " unconscionable and
unreasonable "increase of rental demanded by plaintiffs.
On the scheduled October 19, 1977hearing, defendant Lim Pin was absent. Her son George Hung who attended with his mother all the previous
hearings was present together with the defendant's counsel. Plaintiff Conchita Liao Tan together with her counsel was also present. Through the
initiative of the court a quo, the subject compromise agreement was formulated and executed and it finally became the basis of the October 19,
1977judgment.
The aforesaid judgment was the subject of a motion for reconsideration filed on October 28, 1977 by defendant Lim Pin on the following grounds: 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.
Petitioner argues that the respondent Judge should not have allowed her son George Hung and her then counsel, Attorney. Pastor Mamaril in her
absence to enter into the October 19, 1977compromise agreement with the private respondent Conchita Liao Tan assisted by her counsel. Said
agreement contained admissions by petitioner, the respondent Judge should have required a written authority and power of attorney from her son and
counsel. Her objections to the validity of the compromise agreement are premised on Article 1878 of the Civil Code and Rule 138, Section 23 of the Rules
of Court.
Issue: Whether the respondent Judge committed grave abuse of discretion in allowing the October 19, 1977 compromise agreement in the absence of the
petitioner. NO.
HELD: Article 1878 is found in Title X of the Civil Code on Agency. It states that 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. As early as 1906, this Court in Strong v.Gutierrez-Repide (6 Phil. 680) stated that such a mandate may be either oral or written,
the one vital thing being that it shall be express. And more recently, We stated that, if the special authority is not written, then it must be duly established
by evidence:... the Rules require, for attorneys to compromise the litigation of their clients, a special authority. And while the same does not state that
the special authority be in writing the Court has every reason to expect that, if not in writing, the same be duly established by evidence other than the
self-serving assertion of counsel himself that such authority was verbally given him.

10
Whereupon the following took place: (1)The court asked George Hung whether he was willing to enter into the compromise agreement and whether he
had the authority of his mother to enter into such a compromise agree ment; (2) The defendant's counsel confirmed in open court the assurance of
George Hung that he had the full authority of his mother to enter into a compromise agreement : (3) After the formulation of the compromise agreement the
Judge explained in Tagalog to both parties, including George Hung its terms and conditions after which the same was reduced into writing; (4) George
Hung willingly signed the compromise agreement, the terms and conditions of which were those originally proposed by the petitioner herself. Hung was
all the while assisted by their counsel.
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.
And finally, even assuming that George Hung and the petitioner's counsel acted without authority, the compromise agreement itself was not null and void.
It would be merely unenforceable, capable of being ratified. (Dungo v. Lapena, 6 SCRA 1007). The compromise agreement was ratified by the petitioner
when, on October 24, 1977, a few days after the promulgation of the questioned judgment and before the filing of a motion for reconsideration, she filed
an "Ex-Parte Motion To Withdraw Deposits" in Civil Case No. 11709, a consignation case pending before the same court between the same parties.

PNB VS STA MARIA

FACTS: QUICK FACTS:
[6 brothers and sisters executed PA in favor of Maximo Sta. Maria; power to mortgage does not include power to loan] Disinclination of courts to enlarge
an authority granted beyond the powers expressly given and those incidentally flowing therefrom as being usual or reasonably necessary and proper for
the performance of such express powers. The authority granted by defendants-appellants (except Valeriana) unto their brother, Maximo, was merely to
mortgage the property jointly owned by them, not to contract for any loans in their names and behalf. Maximo alone, with Valeriana who authorized him to
borrow money, must answer for them; other defendants-appellants' only liability is that the real estate authorized by them to be mortgaged would be
subject to foreclosure and sale to respond for the obligations contracted by Maximo. But they cannot be held personally liable.
Facts:
The said sugar crop loans were obtained by defendant Maximo Sta. Maria from plaintiff bank under a special power of attorney, executed in his favor by
his six brothers and sisters, defendants-appellants herein, to mortgage a 16-odd hectare parcel of land, jointly owned by all of them
In addition, Valeriana Sta. Maria 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 Sta. Maria applied for two separate crop loans, for the1952-1953 and 1953-1954 crop years, with plaintiff bank, one in the amount of
P15,000.00, of which only the sum of P13,216.11 was actually extended by plaintiff, and the other in the amount of P23,000.00, of which only the sum of
P12,427.57 was actually extended by plaintiff.
As security for the two loans, Maximo Sta. Maria executed in his own name in favor of plaintiff bank two chattel mortgages on the standing crops,
guaranteed by surety bonds for the full authorized amounts of the loans executed by the Associated Insurance & Surety Co., Inc. as surety with Maximo
Sta. Maria as principal.
TC held co-defendants liable as well
Defendants contend that they did not benefit at all. The SPA given is limited to mortgage, and not to borrow money.

11
Held: a special power of attorney to mortgage real estate is limited to such authority to mortgage and does not bind the grantor personally to other
obligations contracted by the grantee, in the absence of any ratification or other similar act that would estop the grantor from questioning or disowning
such other obligations contracted by the grantee.
Ratio:
1.Plaintiff bank has not made out a cause of action against defendants-appellants (except Valeriana), so as to hold them liable for the unpaid balances of
the loans obtained by Maximo under the chattel mortgages executed by him in his own name alone.
This is but in accord with the disinclination of courts to enlarge an authority granted beyond the powers expressly given and those which incidentally flow
or derive therefrom as being usual or reasonably necessary and proper for the performance of such express powers.
2. The authority granted by defendants-appellants (except Valeriana) unto their brother, Maximo, was merely to mortgage the property jointly owned by
them. They did not grant Maximo any authority to contract for any loans in their names and behalf. Maximo alone, with Valeriana who authorized him to
borrow money, must answer for said loans and the other defendants-appellants' only liability is that the real estate authorized by them to be mortgaged
would be subject to foreclosure and sale to respond for the obligations contracted by Maximo. But they cannot be held personally liable for the payment of
such obligations, as erroneously held by the trial court.
3.The fact that Maximo presented to the plaintiff bank Valeriana's additional special power of attorney expressly authorizing him to borrow money, Exh. E1, aside from the authority to mortgage executed by Valeriana together with the other defendants-appellants also in Maximo's favor, lends support to our
view that the bank was not satisfied with the authority to mortgage alone.
4.The outcome might be different if there had been an express ratification of the loans by defendants-appellants or if it had been shown that they had
been benefited by the crop loans so as to put them in estoppel.
5.Valeriana's liability for the loans secured by Maximo is not joint and several or solidary as adjudged by the trial court, but only joint , pursuant to the
provisions of Article 1207 of the Civil Code that "the concurrence ... of two or more debtors in one and the same obligation does not imply that ... each one
of the (debtors) is bound to render entire compliance with the prestation.
Plaintiff contends that a mortgage is simply an accessory contract, and that to effect the mortgage, a loan has to be secured" 10 falls, far short of the
mark. Maximo had indeed, secured the loan on his own account and the defendants-appellants had authorized him to mortgage their respective undivided
shares of the real property jointly owned by them as security for the loan. But that was the extent of their authority land consequent liability, to have the
real property answer for the loan in case of non-payment.
Liability is joint, obligation is presumed to be joint.

12
Commercial Bank v. Republic Armored CarServices Corp. al
FACTS
Defendants were given credit accommodation by Commercial Bank in the form of an overdraft line to which they drew regularly certain amounts.
Demands were made for the payment of the drawings but defendants have failed to pay the amounts demanded. Commercial Bank thus filed
complaints against them.
Defendants in their answer admit the opening of the credit line in their favor and that demands for the indebtedness were made upon them,but
allege as special defenses that the directors and officers of the defendant corporation deliberately defrauded and mismanaged the said corporation
breach of trust in order to deprive Damaso Perez of his control and majority interest in the defendant corporation, as a result of which fraud,
mismanagement and breach of trust the defendants suffered tremendous losses; that the amounts drawn by defendant corporation upon the credit line
were received and used by the former directors and officers and same constitute part of the funds of the defendant corporation misapplied and
mismanaged by said former officers and directors of said corporation.
ISSUES WON the obligation of the defendants-appellants to pay for the amount due under the overdraft line ceases due to the misappropriations on
mismanagement of the funds of the corporation by the directors and employees thereof. NO.
RATIONALEThe obligation of the defendants-appellants to pay for the amount due under the overdraft line is not in any way qualified; there is no
statement that the responsibility of the defendants-appellants for the amount taken on overdraft would cease or be defeated or reduced upon
misappropriations on mismanagement of the funds of the corporation by the directors and employees thereof. The special defense is, therefore, a
sham defense.
Under general rules and principles of law the mismanagement of the business of a party by his agents does not relieve said party from the responsibility
that he had contracted to third persons, especially in the case at bar where the written agreement contains no limitation to defendants-appellants' liability.
Bicol Savings and Loan Assoc. v CA
March 31, 1989Melencio-Herrera, J.
FACTS:
Juan de Jesus was the owner of a parcel of land in Naga City. He executed a Special Power of Attorney in favor of his son, Jose de Jesus: "To negotiate,
mortgage my real property in any bank either private or public entity preferably in the Bicol Savings Bank, Naga City, in any amount that may be agreed
upon between the bank and my attorney-in-fact. "Jose de Jesus obtained a loan of P20,000 from petitioner bank. To secure payment, he executed a deed
of mortgage on the real property referred to in the Special Power of Attorney. Then, Juan de Jesus died. Jose failed to pay the loan. Hence the bank
extra-judicially foreclosed the mortgage. In the subsequent public auction, the mortgaged property was sold to the bank as the highest bidder to whom
a Provisional Certificate of Sale was issued. Private respondents failed to redeem the property within one year from the date of the registration of the
Provisional Certificate of Sale. Hence, a Definite Certificate of Sale was issued in favor of the bank. They negotiated with the bank for the repurchase of
the property. But no agreement was reached. The bank subsequently sold the properties to third parties. Private respondents filed a Complaint with the
CFI of Naga City for the annulment of the foreclosure sale or for the repurchase by them of the propert y. It dismissed the case, ruling that the title of the
bank over the mortgaged property had become absolute upon the issuance and registration of the said deed in its favor.CA reversed the ruling of the CFI.
It applied Article1879 and stated that since the special power to mortgage granted to Jose de Jesus did not include the power to sell, the foreclosure
proceedings and auction sale held were null and void because the Special Power of Attorney given by Juan de Jesus to Jose de Jesus was merely to

13
mortgage his property, and not to extra-judicially foreclose the mortgage and sell the mortgaged property in the said extrajudicial foreclosure. The
bank should have resorted to judicial foreclosure.

ISSUE:
WON the agent-son exceeded the scope of his authority in agreeing to a stipulation in the mortgage deed that petitioner bank could extra-judicially
foreclose the mortgaged property.
HELD:
NO. The sale proscribed by a special power to mortgage under Article 1879 is a voluntary and independent contract, and not an auction sale resulting
from extrajudicial foreclosure, which is precipitated by the default of a mortgagor. Absent that default, no foreclosure results. The stipulation granting an
authority to extra-judicially foreclose a mortgage is an ancillary stipulation supported by the same cause or consideration for the mortgage and forms an
essential or inseparable part of that bilateral agreement. The power to foreclose is not an ordinary agency that contemplates exclusively the
representation of the principal by the agent but is primarily an authority conferred upon the mortgagee for the latter's own protection. That power survives
the death of the mortgagor. The right of the mortgagee bank to extrajudicially foreclose the mortgage after the death of the mortgagor Juan de Jesus,
acting through hisattorney-in-fact, Jose de Jesus, did not depend onthe authorization in the deed of mortgage executed by the latter. That right
existed independently of said stipulation and is clearly recognized in Section 7, Rule 86 of the Rules of Court, which grants to a mortgagee three remedies
that can be alternatively pursued in case the mortgagor dies, to wit: (1) to waive the mortgage and claim the entire debt from the estate of the mortgagor
as an ordinary claim; (2) to foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and (3) to rely on the mortgage exclusively,
foreclosing the same at any time before it is barred by prescription, without right to file a claim for any deficiency . It matters not that the authority to
extra-judicially foreclose was granted by an attorney-in-fact and not by the mortgagor personally. The stipulation in that regard, although ancillary, forms an
essential part of the mortgage contract and is inseparable therefrom. No creditor will agree to enter into a mortgage contract without that stipulation
intended for its protection.