G.R. No. 95703 August 3, 1992
RURAL BANK OF BOMBON (CAMARINES SUR), INC., petitioner, vs. HON. COURT OF APPEALS, EDERLINDA M. GALLARDO, DANIEL MANZO and RUFINO S. AQUINO, respondents.

FACTS

On January 12, 1981, Ederlinda M. Gallardo executed a special power of attorney in favor of Rufino S. Aquino, authorizing him to secure a loan and mortgage her property covered by TCT No. S-79238. She delivered the special power of attorney and her owner’s copy of the title to Aquino. On August 26, 1981, Aquino executed a Deed of Real Estate Mortgage in favor of the Rural Bank of Bombon over the said property to secure loans totaling P350,000. The deed stated the loans were for “fishpond (bangus and sugpo production).” The promissory notes were dated after the mortgage deed. In the deed and the notes, Aquino signed as the mortgagor, with his wife Bibiana signing as “wife of mortgagor,” without indicating he was acting as Gallardo’s agent. Gallardo and her husband filed an action to annul the mortgage, alleging Aquino used the loan for his personal benefit and that the mortgage was unauthorized. The trial court dismissed the complaint and upheld the mortgage, but the Court of Appeals reversed this decision.

ISSUE

Whether the Deed of Real Estate Mortgage executed by Rufino S. Aquino is valid and enforceable against Ederlinda Gallardo.

RULING

No. The Deed of Real Estate Mortgage is unauthorized, void, and unenforceable against Ederlinda Gallardo. The Court applied the general rule in the law of agency that for a mortgage on real property executed by an agent to bind the principal, it must upon its face purport to be made, signed, and sealed in the name of the principal. Here, Aquino signed the deed and promissory notes in his own name as mortgagor, with his wife consenting, without indicating he was acting for and on behalf of Gallardo. Therefore, he bound only himself in his personal capacity. Furthermore, the special power of attorney did not authorize Aquino to obtain a loan for his own benefit or to constitute Gallardo as a surety for his personal obligations, which would require a special power under Article 1878 of the Civil Code. The mortgage deed explicitly stated the loan was for Aquino’s fishpond business. The Court affirmed the decision of the Court of Appeals, declaring the mortgage void and ordering a permanent injunction against its enforcement.