SAMSON CHUA, VIRGINIA C. LIM, TERESITA C. TAN, DANILO CHUA AND WILLIAM CHUA, PLAINTIFFS- APPELLEES, VS. FAR EAST BANK AND TRUST COMPANY AND CLAUDIO ARUGAY, DEFENDANTS-APPELLANTS.
SANTIAGO-LAGMAN, J.:
“WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants;
(a) Ordering the defendants;
- To execute in favor of the plaintiffs the Deed of Release and Discharge of the Deed of Real Estate Mortgage and its amendments (Exhs. “E, E-1 and E-2”);
- To return to the plaintiffs the T.C.T Nos. 60128, 124789, 186787, 186788 and 1867789;
- To pay to the plaintiffs for damages they suffered for the failure and refusal of the defendants to execute the Deed of Release and Discharge and to return the five (5) Transfer Certificates of title in the amount of P1,000,000.00.
- To pay to the plaintiffs attorney’s fees in the amount of P200,000.00; and
- To pay the costs.
SO ORDERED.”
Culled from the decision of the court a quo, the antecedent facts[2] are as follows:
“Evidence for the plaintiffs tends to show that on February 3, 1994, the plaintiffs executed a Special Power of Attorney (Exh. ‘B’) constituting their mother Gloria Ocampo as their attorney-in-fact to apply for an Irrevocable Domestic Standby Letter of Credit in favor of Farmix Fertilizers Corporation with the defendant Far East Bank and Trust Company (FEBTC) and to use as guaranty against a loss that the defendant FEBTC may suffer under the Irrevocable Domestic Standby Letter of Credit, over a parcel of land covered by T.C.T No. 60128.
On February 8, 1994, three (3) of the plaintiffs, namely; Samson Chua, Danilo Chua and William Chua executed a Special Power of Attorney, constituting their mother Gloria Ocampo as their Attorney-in-fact to enter into a real estate mortgage contract as security for all present and future obligations of Gloria Ocampo with Farmix Fertilizers Corporation that maybe charged against an Irrevocable Domestic Standby Letter of Credit issued by the FEBTC, over a parcel of land covered by T.C.T No. 124679.
On March 2, 1994, the defendant FEBTC issued Irrevocable Domestic Standby Letter of Credit No. 15 in favor of Farmix Fertilizers Corporation for the account of Ms. Gloria Ocampo for the sum of not exceeding Five Million Pesos (P5,000,000.00).
On March 29, 1994, the plaintiffs executed another Special Power of Attorney, constituting their mother Gloria Ocampo as their attorney-in-fact to apply for an Irrevocable Domestic Standby Letter or Credit in favor of suppliers of Ms. Gloria Ocampo for fertilizers and to use as guaranty against a loss that the defendant FEBTC may suffer under the Irrevocable Domestic Standby Letter of Credit over three (3) parcels of land covered by T.C.T No. 186787, T.C.T No. 186788 and T.C.T No. 186789.
On April 4, 1994, Ms. Gloria Ocampo executed a Deed of Real Estate Mortgage in favor of the defendant FEBTC to answer for any payment made by the defendant Bank to Farmix Fertilizers Corporation or Fertiphil Corp., under the Irrevocable Domestic Standby Letter of Credit issued or to be issued by the defendant FEBTC in favor of Farmix Fertilizers Corporation or Fertiphil Corporation.
On August 10, 1994, the Deed of Real Estate Mortgage as amended increasing from P3,600,000.00 to P4,948,000.00 the amount secured by the Real Estate Mortgage and on July 15, 1997, the Deed of Real Estate Mortgage, as amended, was again amended by increasing from P4,948,000.00 to P5,590,000.00, the amount secured by the Real Estate Mortgage.
On April 5, 1995, the defendants established and issued in favor of Farmix Fertilizers Corporation, as renewal for another year, Irrevocable Domestic Standby Letter of Credit No. 074-00019/DLC 95 for the account of Ms. Gloria Ocampo.
On August 2, 1995, the defendants issued in favor of Fertiphil Corporation a Bank Undertaking in the amount of Two Million (P2,000,000.00) Pesos to finance the purchases of Ms. Gloria Ocampo from Fertiphil Corp. up to August 2, 1996.
On August 12, 1997, the defendant FEBTC, as a renewal for another year of the Bank Undertaking issued in favor of Fertiphil Corporation the Irrevocable Domestic Standby Letter of Credit No. 074-0000223/DL97 terminating on October 31, 1998.
With the expiration of the Irrevocable Domestic Standby Letters of Credit, and the Bank Undertaking, without any liability attaching to any of them, the Deed of Real Estate Mortgage as amended, has been released and discharged and of no further force and effect and the Special Powers of Attorney, executed by the plaintiffs in favor of Ms. Gloria Ocampo to guarantee the payment of the amounts the defendant FEBTC may be obligated to pay to Farmix Fertilizers Corporation or Fertiphil Corp. under the Irrevocable Domestic Standby Letters of Credit, and the Bank Undertaking have been exhausted and have become functus officio.
With the Real Estate Mortgage over the plaintiffs’ parcel of land covered by T.C.T. Nos. 60128, 124679, 186787, 186788 and 186789 having been discharged and of no further force and effect, and the Special Powers of Attorney, having become functus officio, the plaintiffs requested the defendants for execution of the Deed of Release and Discharge of the Real Estate Mortgage and its amendments, and the return of T.C.T Nos. 60128, 124879, 186787, 186788 and 186789 covering the parcels of land described in the three (3) Special Powers of Attorney, but the defendants failed and refused to execute the Deed of Release and Discharge, and to return the said certificates of title, in spite of repeated demands.
On account of the unjustified failure and refusal of the defendants to return the five (5) certificates of title, the plaintiffs were unable to make use of the Certificates of Title in carrying out their own respective businesses, to their damage and prejudice in the amount of not less than One Million (P1,000,000.00) Pesos.
Having been compelled to litigate for the enforcement of a clear legal duty of the defendants, the plaintiffs engaged the services of counsel for the sum of P200,000.00, plus a fee of P2,500.00 for each day appearance of counsel in Court in this instance, and have to incur expenses of litigation in the sum of not less than P50,000.00.
Evidence for the defendants tends to show that on March 2, 1994, plaintiffs, as represented by their mother, Gloria Ocampo, applied with defendant FEBTC’s Urdaneta City Branch for the opening of an Irrevocable Domestic Standby Letter of Credit (Standby LC) for P5,000,000.00 as guaranty for the former’s obligation with Farmix Fertilizers Corporation.
As principal security, for the Standby LC, plaintiffs, through Gloria Ocampo, executed a Real Estate Mortgage (REM) in favor of defendant FEBTC over five (5) parcels of land covered by T.C.T Nos. 60128, 124679, 186787, 186788, and 186789 of the Register of Deeds of Pangasinan.
Under the terms of the REM, plaintiffs agreed to constitute the properties covered thereby as collateral not only for the Standby LC but for any and all obligations which they or their mother then anticipated to later obtain from defendant FEBTC as well.
Expectedly, on July 18, 1994, Gloria Ocampo obtained a loan from defendant FEBTC for P7,500,000.00 subject to the condition that the excess value of the mortgaged collaterals on the Standby LC, shall be used as security therefor.
Expectedly, too, the Standby LC line of plaintiffs was twice extended on he first up to 31 March, 1996; the second until 31 October, 1997 subject to the same condition that it shall continue to be secured by the REM.
On 2 August 1995, plaintiffs again, as represented by their mother, secured a Bank Undertaking from FEBTC for P2,000,000.00 to finance the former’s purchases with Fertiphil Corporation, subject to the condition that the Bank Undertaking shall be secured by the REM.”
Hence, the present Complaint[3] for the Release and Discharge of Mortgage, the Return of Certificates of Title and Damages, filed by the plaintiffs-appellees against the defendants-appellants. On February 26, 1999, an Answer with Compulsory Counterclaim[4] was filed by the latter.
On March 5, 1999, a Motion to Dismiss Counterclaim[5] was filed by the plaintiffs-appellees and an Opposition[6] thereto was filed by defendants-appellants on March 18, 1999.
On April 6,1999, an Order[7] was issued by the court a quo denying the plaintiffs-appellees’ Motion to Dismiss Counterclaim.
Pre-trial having been terminated, trial on the merits ensued.
On November 10, 2000, the assailed Decision was rendered by the court a quo in the manner heretofore mentioned.
Not satisfied, defendants-appellants filed the present appeal where they interposed the following-
“ASSIGNMENT OF ERRORS[8]
I
“THE TRIAL COURT ERRED IN ORDERING THE DEFENDANTS-APPELLANTS TO EXECUTE A DEED OF RELEASE AND DISCHARGE OF THE DEED OF REAL ESTATE MORTGAGE AND ITS AMENDMENTS (EXHS. ‘E, E-1, AND E-2’), CONTRARY TO THE EXPRESS PROVISIONS OF THE DEED OF MORTGAGE.II
THE TRIAL COURT ERRED IN ORDERING THE DEFENDANTS-APPELLANTS TO RETURN TO THE PLAINTIFFS T.C.T. NOS. 60128, 124789, 186787, 186788 AND 186789 CONTRARY TO LAW AND THE EVIDENCE.III
THE TRIAL COURT ERRED IN ORDERING THE DEFENDANTS-APPELLANTS TO PAY TO THE PLAINTIFFS UNWARRANTED AND UNPROVEN CLAIMS FOR DAMAGES.IV
THE TRIAL COURT ERRED IN TOTALLY DISREGARDING, EVEN IN THE FACE OF OVERWHELMING EVIDENCE, THE COUNTERCLAIMS FOR PAYMENT BY PLAINTIFFS OF THEIR PAST DUE ACCOUNTS.”
The appeal is devoid of merit.
Defendants-appellants assert that the court a quo erred in ordering them to execute the deed of release and discharge of real estate mortgage and to return the titles to the plaintiffs-appellees, which are contrary to the provisions of the deed of mortgage and the evidence adduced.
We are not persuaded.
On February 3, 1994, February 8, 1994 and March 29, 1994, plaintiffs-appellees executed three (3) Special Power of Attorney[9] (SPA) appointing their mother Gloria Ocampo (Gloria for brevity) as their attorney-in-fact, to do the following acts, to wit:
1) to apply for a Bank Guaranty and use and offer as guaranty all their rights, shares, interests and participations in a parcel of land registered in their names under TCT No. 60128;
2) to enter into a real estate mortgage contract in favor of Farmix Fertilizers Corporation as security for all present and future obligations of GLORIA OCAMPO affecting subject property registered in their names under TCT No. 124879;
3) to apply for a bank guaranty and use and offer as guaranty all their rights, shares, interests and participations for the parcels of land registered in their names under TCT. Nos. 186787, 186788, 186789).
These SPAs’ were annotated at the back of the said TCT’s,[10] which are all in the names of the plaintiffs-appellees. A reading of The Real Estate Mortgage[11] dated April 4, 1994, and its amendments[12] dated August 10, 1994 and July 15, 1997, shows that they were all signed by Gloria, as mortgagor, in favor of the defendants-appellants, as mortgagee, without any indication whatsoever, that she was signing and executing these documents in behalf of the plaintiffs-appellees who are the registered owners of the subject properties. In fact, even the said SPAs’ were not mentioned therein. Thus, it is presumed as it is obvious, that Gloria acted only in her personal capacity as debtor of the defendants-appellants and intends the ordinary consequences of her voluntary act.[13]
It is a general rule in the law of agency that, in order to bind the principal by a mortgage on a real property executed by an agent, it must be 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. This is especially true where the agent himself is a party to the instrument. However clearly the body of the mortgage may show and intend that it shall be the act of the principal, yet, unless it is executed by the agent for and on behalf of his principal and as the act and deed of the principal, it is not valid as to the principal.[14] Verily, it is an essential requisite for the validity of a mortgage that the mortgagor be the absolute owner of the property mortgaged.[15]
In view of this rule and applying the said principle of law in the instant case, Gloria’s act of signing the Real Estate Mortgage and its amendments[16] in her name alone as mortgagor, without stating that she was signing for and in behalf of the property owners, she bound herself alone in her personal capacity as debtor of the defendants-appellants and not as the agent or attorney-in-fact of the plaintiffs-appellees.
It is a standard practice for banks, before approving a loan, to send representatives to the property offered as collateral in order to assess its actual condition and to investigate who are the real owners thereof. Banks are expected to exercise more care and prudence than private individuals in their dealings, even those involving registered lands, for their business is affected with public interest.[17]
Upon the foregoing, We find that the court a quo did not err in ordering the discharge of the plaintiffs-appellees from the mortgage and the return to them of the subject TCTs’, unless the same have been used for some other purposes.
We, however, find the awards for damages, attorney’s fees and costs to be without basis. It is essential that the claimant (plaintiffs-appellees) must satisfactorily prove during the trial the existence of the factual basis of the damages and its causal connection to defendants-appellants’ acts.[18] In this case there was none. The same is true with respect to the awards of attorney’s fees and costs. As a matter of sound policy, an award of attorney’s fee remains the exception rather than the rule. It must be stressed that it is necessary for the trial court to make express findings of facts and law that would bring the case within the exception. In fine, the factual, legal or equitable justification for the award must be set forth in the text of the decision. The matter of attorney’s fees cannot be touched once and only in the fallo of the decision, else, the award should be thrown out for being speculative and conjectural.[19]
WHEREFORE, the decision appealed from is AFFIRMED with MODIFICATION that the awards for damages, attorney’s fees and costs of suit in favor of the plaintiffs-appellees, are DELETED for lack of basis.
SO ORDERED.
Guevara-Salonga, (Chairman) and Pizarro, JJ., concur.
[*] Re-raffled to the present Ponente on March 24, 2004
[1] Record, pp. 310-319, Rollo, pp. 75-84
[2] Ibid, pp. 310-316
[3] Ibid, pp. 1-8
[4] Ibid, pp. 33-50
[5] Ibid, pp. 67-72
[6] Ibid, pp. 76-89
[7] Ibid, p. 90
[8] Rollo, pp. 45-46
[9] Exhibits for Plaintiffs, pp. 1, 5, 12
[10] Ibid, pp. 2-4, 7-9, 14-22
[11] Ibid, p. 23
[12] Ibid, pp. 24-25
[13] Rule 131, Section 3 ( c ) of the Rules of Court
[14] Rural Bank of Bombon, Inc. v. Court of Appeals, 212 SCRA 25, 30
[15] Development Bank of the Philis. Court of Appeals, 253 SCRA 414, 420
[16] Exh. E, E-1, E-2, Exhibits for the Plaintiffs, pp. 23-25
[17] Philippine National Bank v. Heirs of Estanislao Militar and Deogracias Militar, 467 SCRA 377, 388
[18] Air France v. Court of Appeals, 171 SCRA 399, 405
[19] Amelia J. De los Santos v. Jebsem Maritime, Inc., GR. No. 154185, November 22, 2005