G.R. No. 95703, 3 August 1992


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: – To secure a loan from any institution for any amount or mortgage the property at Las Pinas, Rizal. 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. The property was secured for a loan in the total sum of Three Hundred Fifty Thousand Pesos only (P350,000.00), plus interest at the rate of fourteen (14%) per annum. Spouses Gallardo filed an action against Rufino Aquino and Rural Bank. They alleged that Aquino mortgaged the property to pay for his personal loans, from the same Bank.

The trial court 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.” Aquino, in his answer, alleged that the spouses allowed him to mortgage the property and use the use the proceeds thereof to compensate for the pre-existing obligation of P350,000 that the spouse owed him. The trial court lifted the TRO against the bank and ordered the foreclosure proceeding against the mortgaged property. The Spouses Gallardo appealed to the Court of Appeals (CA). The CA reversed the trial court and held that Rufino Aquino had no authority to mortgage the land. Thus, this appeal against the decision.


Whether the Deed of Real Estate Mortgage executed by Aquino, as attorney-in-fact of Ederlinda Gallardo, in favor of the Rural Bank of Bombon is valid.


No. 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.

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

*Case digest by Krishianne Louise C. Labiano, JD – 4, Andres Bonifacio College, SY 2019 – 2020