THE PHILIPPINE NATIONAL BANK, PLAINTIFF AND APPELLEE, VS. PAZ AGUDELO Y GONZAGA ET AL., DEFENDANTS. PAZ AGUDELO Y GONZAGA, APPELLANT.

The defendant Paz Agudelo y Gonzaga appeals to this court from the
judgment rendered by the Court of First Instance of Occidental Negros,
the dispositive part of which reads as follows:

“Wherefore,
judgment is rendered herein absolving the defendant Mauro A. Garrucho
from the complaint and ordering the defendant Paz Agudelo y Gonzaga to
pay to the plaintiff the sum of P31,091.55, Philippine currency,
together with the interest on the balance of P20,774.73 at 8 per cent per annum or P4.55 daily from July 16, 1929, until fully paid, plus the sum of P1,500 as attorney’s fees, and the costs of this suit.

“It
is hereby ordered that in case the above sums adjudged in favor of the
defendant by virtue of this judgment are not paid to the Philippine
National Bank or deposited in the office of the clerk of this court,
for delivery to the plaintiff, within three months from the date of
this decision, the provincial sheriff of Occidental Negros shall sell
at public auction the mortgaged properties described in annex E of the
second amended complaint, and apply the proceeds thereof to the payment
of the sums in question.

“It is further ordered that in
case the proceeds of the mortgaged properties are not sufficient to
cover the amount of “this judgment, a writ of execution be issued
against any other property belonging to the defendant Paz Agudelo y
Gonzaga, not otherwise exempt from execution, to cover the balance
resulting therefrom.”

In support of her
appeal, the appellant assigns six alleged errors as committed by the
trial court, which we shall discuss in the course of this decision.

The following pertinent facts, which have been proven without dispute
during the trial, are necessary for the decision of the questions
raised in the present appeal, to wit:

On November 9, 1920,
the, defendant-appellant Paz Agudelo y Gonzaga executed in favor of her
nephew, Mauro A. Garrucho, the document Exhibit K conferring upon him a
special power of attorney sufficiently broad in scope to enable him to
sell, alienate and mortgage in the manner and form he might deem
convenient, all her real estate situated in the municipalities of
Murcia and Bacolod, Occidental Negros, consisting in lots Nos. 61 and
207 of the cadastral survey of Bacolod, Occidental Negros, together
with the improvements thereon.

On December 22,1920, Amparo
A. Garrucho executed the document Exhibit H whereby she conferred upon
her brother Mauro A. Garrucho a special power of attorney sufficiently
broad in scope to enable him to sell, alienate, mortgage or otherwise
encumber, in the manner and form he might deem convenient, all her real
estate situated in the municipalities of Murcia and Bago, Occidental
Negros.

Nothing in the aforesaid powers of attorney
expressly authorized Mauro A. Garrucho to contract any loan nor to
constitute a mortgage on the properties belonging to the respective
principals, to secure his obligations.

On December 23, 1920,
Mauro A. Garrucho executed in favor of the plaintiff entity, the
Philippine National Bank, the document Exhibit G, whereby he
constituted a mortgage on lot No. 878 of the cadastral survey of
Murcia, Occidental Negros, with all the improvements thereon, described
in transfer certificate of title No. 2415 issued in the name of Amparo
A. Garrucho, to secure the payment of credits, loans, commercial
overdrafts, etc., not exceeding P6,000, together with interest thereon,
which he might obtain from the aforesaid plaintiff entity, issuing the
corresponding promissory note to that effect.

During certain
months of the years 1921 and 1922, Mauro A. Garrucho maintained a
personal current account with the plaintiff bank in the form of a
commercial credit withdrawable through checks (Exhibits S, 1 and T).

On August 24, 1931, the said Mauro A. Garrucho executed in favor of the
plaintiff entity, the Philippine National Bank, the document Exhibit J
whereby he constituted a mortgage on lots Nos. 61 and 207 of the
cadastral survey of Bacolod, together with the buildings and
improvements thereon, described in original certificates of title Nos.
2216 and 1148, respectively, issued in the name of Paz Agudelo y
Gonzaga, to secure the payment of credits, loans and commercial
overdrafts which the said bank might furnish him to the amount of
P16,000, payable on August 24, 1922, executing the corresponding
promissory note to that effect.

The mortgage deeds Exhibits
G and J as well as the corresponding promissory notes for P6,000 and
P16,000, respectively, were executed in Mauro A. Garrucho’s own name
and signed by him in his personal capacity, authorizing the mortgage
creditor, the Philippine National Bank, to take possession of the
mortgaged properties, by means of force if necessary, in case he failed
to comply with any of the conditions stipulated therein.

On
January 4, 1922, the manager of the Iloilo branch of the Philippine
National Bank notified Mauro A. Garrucho that his promissory note for
P6,000 had fallen due on December 27, 1921, giving him a period of 10
days within which to make payment thereof (Exhibit O).

On May 9, 1922, the said manager notified Mauro A. Garrucho that his commercial credit was closed from that date (Exhibits).

Inasmuch as Mauro A. Garrucho had overdrawn his credit with the
plaintiff-appellee, the said manager thereof, in a letter dated June
27, 1922 (Exhibit T), requested him to liquidate his account amounting
to P15,148.15, at the same time notifying him that his promissory note
for P16,000 giving as, security for the commercial overdraft in
question, had fallen due some time since.

On July 15, 1922,
Mauro A. Garrucho, executed in favor of the plaintiff entity the deed
Exhibit C whereby he constituted a mortgage on lots Nos. 61 and 207 of
the cadastral survey of Bacolod, together with the improvements
thereon, described in transfer certificates of title Nos. 2216 and
1148, respectively, issued in the name of Paz Agudelo y Gonzaga, and on
lot No. 878 of the cadastral survey of Murcia, described in transfer
certificate of title No. 2415, issued in the name of Amparo A. Garrucho.

In consideration of the credits, loans, and commercial overdrafts
amounting to P21,000 which had been granted him, Mauro A. Garrucho, on
the said date of July 15, 1922, executed the promissory note, Exhibit
B, for P21,000 as a novation of the former promissory notes for P6,000
and P16,000, respectively.

In view of the aforesaid
consolidated mortgage, Exhibit C, the Philippine National Bank, on the
said date of July 15, 1922, cancelled the mortgages constituted on lots
Nos. 61, 207 and 878 described in Torrens titles Nos. 2216, 1148 and
2415, respectively.

On November 25, 1925, Amparo A. Garrucho
sold lot No. 878 described in certificate of title No. 2415, to Paz
Agudelo y Gonzaga (Exhibit M).

On January 15, 1926, in the City of Manila, Paz Agudelo y Gonzaga signed the affidavit, Exhibit N, which reads as follows :

“Know all men by these presents:
That I, Paz Agudelo y Gonzaga, single, of age, and resident of the City
of Manila, P. I., by these presents do hereby agree and consent to the
transfer in my favor of lot No. 878 of the Cadastre of Murcia,
Occidental Negros, P. I., by Miss Amparo A. Garrucho, as evidenced by
the public instrument dated November 25, 1925, executed before the
notary public Mr. Genaro B. Benedicto, and do hereby further agree to
the amount of the lien thereon stated in the mortgage deed executed by
Miss Amparo A. Garrucho in favor of the Philippine National Bank.

“In testimony whereof, I hereunto affix my signature in the City of Manila, P. I., this 15th day of January, 1926.

“(Sgd.) PAZ AGUDELO Y GONZAGA.”

Pursuant to the sale made by Amparo A. Garrucho in favor of Paz Agudelo
y Gonzaga, of lot No. 878 of the cadastral survey of Murcia, described
in certificate of title No. 2415 issued in the name of said Amparo A.
Garrucho, and to the affidavit, Exhibit N, transfer certificate of
title No. 5369 was issued in the name of Paz Agudelo y Gonzaga.

Without discussing and passing upon whether or not the powers of
attorney issued in favor of Mauro A. Garrucho by his sister, Amparo A.
Garrucho, and by his aunt, Paz Agudelo y Gonzaga, respectively, to
mortgage their respective real estate, authorized him to obtain loans
secured by mortgage on the properties in question, we shall consider
the question of whether or not Paz Agudelo y Gonzaga is liable for the
payment of the loans obtained by Mauro A. Garrucho from the Philippine
National Bank for the security of which he constituted a mortgage on
the aforesaid real estate belonging to the defendant-appellant Paz
Agudelo y Gonzaga.

Article 1709 of the Civil Code provides the following:

“Art.
1709. By the contract of agency, one person binds himself to render
some service, or to do something for the account or at the request of
another.”

And article 1717 of the same Code provides as follows:

“ART.
1717. When an agent acts in his own name, the principal shall have no
right of action against the persons with whom s the agent has
contracted, or such persons against the principal.

“In such
case, the agent is directly liable to the person with whom he has
contracted, as if the transaction were his own. Cases involving things
belonging to the principal are excepted.

“The provisions of this article shall be understood to be without prejudice to actions between principal and agent.”

Aside from the phrases “attorney in fact of his sister, Amparo A.
Garrucho, as evidenced by the power of attorney attached hereto” and
“attorney in fact of Paz Agudelo y Gonzaga” written after the name of
Mauro A. Garrucho in the mortgage deeds, Exhibits G and J,
respectively, there is nothing in the said mortgage deeds to show that
Mauro A. Garrucho is attorney in fact of Amparo A. Garrucho and of Paz
Agudelo y Gonzaga, and that he obtained the loans mentioned in the
aforesaid mortgage deeds and constituted said mortgages as security for
the payment of said loans, for the account and at the request of said
Amparo A. Garrucho and Paz Agudelo y Gonzaga. The above-quoted phrases
which simply described his legal personality, did not mean that Mauro
A. Garrucho obtained the said loans and constituted the mortgages in
question for the account, and at the request, of his principals. From
the titles as well as from the signatures therein, Mauro A. Garrucho,
appears to have acted in his personal capacity. In the aforesaid
mortgage deeds, Mauro A. Garrucho, in his capacity as mortgage debtor,
appointed the mortgage creditor Philippine National Bank as his
attorney in fact so that it might take actual and full possession of
the mortgaged properties by means of force in case of violation of any
of the conditions stipulated in the respective mortgage contracts. If
Mauro A. Garrucho acted in his capacity as mere attorney in fact of
Amparo A. Garrucho and of Paz Agudelo y Gonzaga, he could not delegate
his power, in view of the legal principle of “delegata potestas delegare non potest”
(a delegated power cannot be delegated), inasmuch as there is nothing
in the records to show that he has been expressly authorized to do so.

He executed the promissory notes evidencing the aforesaid loans, under
his own signature, without authority from his principals and,
therefore, were not binding upon the latter (2 Corpus Juris, pp.
630-637, par. 280). Neither is there anything to show that he executed
the promissory notes in question for the account, and at the request,
of his respective principals (8 Corpus Juris, pp. 157-158).

Furthermore, it is noted that the mortgage deeds, Exhibits C and J,
were cancelled by the documents, Exhibits I and L, on July 15, 1922,
and in their stead the mortgage deed, Exhibit C, was executed, in which
there is absolutely no mention of Mauro A. Garrucho being attorney in
fact of anybody, and which shows that he obtained such credit for
himself in his personal capacity and secured the payment thereof by
mortgage constituted by him in his personal capacity, although on
properties belonging to his principal Paz Agudelo y Gonzaga.

Furthermore, the promissory notes executed by Mauro A. Garrucho in
favor of the Philippine National Bank, evidencing loans of P6,000 and
P16,000 have been novated by the promissory note for P21,000 (Exhibit
B) executed by Mauro A. Garrucho, not only without express authority
from his principal Paz Agudelo y Gonzaga but also under his own
signature.

In the case of National Bank vs. Palma Gil (55 Phil., 639), this court laid down the following doctrine:

“A
promissory note and two mortgages executed by the agent for and on
behalf of his principal, in accordance with a power of attorney
executed by the principal in favor of the agent, are valid, and as
provided by article 1727 of the Civil Code, the principal must fulfill
the obligations contracted by the agent; but a mortgage on real
property of the principal not made and signed in the name of the
principal” is not valid as to the principal.”

It has been intimated, and the trial judge has so stated. that it was
the intention of the parties that Mauro A. Garrucho would execute the
promissory note, Exhibit B, and the mortgage deed, Exhibit C, in his
capacity as attorney in fact of Paz Agudelo y Gonzaga, and that
although the terms of the aforesaid documents appear to be contrary to
the intention of the parties, such intention should prevail in
accordance with article 1281 of the Civil Code.

Commenting on article 1281 of the Civil Code, Manresa, in his Commentaries to the Civil Code, says the following:

“IV. Intention of the contracting parties: its appreciation.—In
order that the intention may prevail, it is necessary that the question
of interpretation be raised, either because the words used appear to be
contrary thereto, or by the existence of overt acts opposed to such
words, in which the intention of the contracting parties is made
manifest. Furthermore, in order that it may prevail against the terms
of the contract, it must be clear or, in other words, besides the fact
that such intention should be proven by admissible evidence, the latter
must be of such character as to carry in the mind of the judge an
unequivocal conviction. This requisite as to the kind of evidence is
laid down in the decision relative to the Mortgage Law of September 30
1891, declaring that article 1281 of the Civil Code gives preference to
intention only when it is clear. When the aforesaid circumstance is not
present in a document, the only thing left for the register of deeds to
do is to suspend the registration thereof, leaving the solution of the
problem to the free will of the parties or to the decision of the
courts.

“However, the evident intention which prevails
against the defective wording thereof is not that of one of the
parties, but the general intent, which, being so, is to a certain
extent equivalent to mutual consent, inasmuch as it was the result
desired and intended by the contracting parties.” (8 Manresa, 3d
edition, pp. 726 and 727.)

Furthermore, the
records do not show that the loan obtained by Mauro A. Garrucho,
evidenced by the promissory note, Exhibit B, was for his principal Paz
Agudelo y Gonzaga. The special power of attorney, Exhibit K, does not
authorize Mauro A. Garrucho to constitute a mortgage on the real estate
of his principal to secure his personal obligations. Therefore, in
doing so by virtue of the document, Exhibit C, he exceeded the scope of
his authority and his principal is not liable for his acts. (2 Corpus
Juris, p. 651; article 1714, Civil Code.)

It is further
claimed that inasmuch as the properties mortgaged by Mauro A. Garrucho
belong to Paz Agudelo y Gonzaga, the latter is responsible for the acts
of the former although he acted in his own name, in accordance with the
exception contained in article 1717 of the Civil Code. It would be an
exception if the agent, acting in his own name in connection with the
properties of his principal, does so within the scope of his authority.
It is noted that Mauro A. Garrucho was not authorized to execute
promissory notes even in the name of his principal Paz Agudelo y
Gonzaga, nor to constitute a mortgage on her real properties to secure
such promissory notes. The plaintiff Philippine National Bank should
know this inasmuch as it is in duty bound to ascertain the extent of
the agent’s authority before dealing with him. Therefore, Mauro A.
Garrucho and not Paz Agudelo y Gonzaga is personally liable for the
amount of the promissory note Exhibit B. (2 Corpus Juris, pp. 563-564.)

However, Paz Agudelo y Gonzaga in an affidavit dated January 15, 1926
(Exhibit AA), and in a letter dated January 16, 1926 (Exhibit Z), gave
her consent to the lien on lot No. 878 of the cadastre of Murcia,
Occidental Negros, described in Torrens title No. 5369, the ownership
of which was transferred to her by her niece Amparo A. Garrucho. This
acknowledgment, however, does not extend to lots Nos. 207 and 61 of the
cadastral survey of Bacolod, described in transfer certificates of
title Nos. 1148 and 2216, respectively, inasmuch as, although it is
true that a mortgage is indivisible as to the contracting parties and
as to their successors in interest (article 1860, Civil Code), it is
not so with respect to a third person who did not take part in the
constitution thereof either personally or through an agent, inasmuch as
he can make the acknowledgment thereof in the form and to the extent he
may deem convenient, on the ground that he is not in duty bound to
acknowledge the said mortgage. Therefore, the only liability of the
defendant-appellant Paz Agudelo y Gonzaga is that which arises from the
aforesaid acknowledgment, but only with respect to the lien and not to
the principal obligation secured by the mortgage acknowledged by her to
have been constituted on said lot No. 878 of the cadastral survey of
Murcia, Occidental Negros. Such liability is not direct but a
subsidiary one.

Having reached this conclusion, it is
unnecessary to pass upon the other questions of law raised by the
defendant-appellant in her brief and upon the law cited therein.

In view of the foregoing consideration, we are of the opinion and so
hold that when an agent negotiates a loan in his personal capacity and
executes a promissory note under his own signature, without express
authority from his principal, giving as security therefor real estate
belonging to the latter, also in his own name and not in the name and
representation of the said principal, the obligation so contracted by
him is personal and does not bind his aforesaid principal.

Wherefore, it is hereby held that the liability contracted by the
aforesaid defendant-appellant Paz Agudelo y Gonzaga is merely
subsidiary to that of Mauro A. Garrucho, limited to lot No. 878 of the
cadastral survey of Murcia, Occidental Negros, described in Torrens
title No. 2415. However, inasmuch as the principal obligor, Mauro A.
Garrucho, has been absolved from the complaint and the
plaintiff-appellee has not appealed from the judgment absolving him,
the law does not afford any remedy whereby Paz Agudelo y Gonzaga may be
required to comply with the said subsidiary obligation in view of the
legal maxim that the accessory follows the principal. Wherefore, the
defendant herein should also be absolved from the complaint which is
hereby dismissed, with the costs against the appellee. So ordered.

Avanceña, C. J., Malcolm, Hull, and Imperial, JJ., concur.