QUESTION NO.

5 (2004):

TOPIC: AGENCY; REAL ESTATE MORTGAGE

CX executed a special power of attorney authorizing DY to secure a loan from any bank and
to mortgage his property covered by the owner’s certificate of title. In securing a loan from
MBank, DY did not specify that he was acting for CX in the transaction with said bank.

Is CX liable for the bank loan? Why or why not? Justify your answer.

Yes. CX is liable for the bank loan. Under Article 1878 (7) To loan or borrow money, unless
the latter act be urgent and indispensable for the preservation of the things which are under
administration. In this case, even though the agent did not specify that he was acting for the
principal CX in the transaction, as long as he was executed a power of attorney authorizing
him to secure a loan from any bank, is sufficient. The creditor should acquire the execution of
a power of attorney in order that one may be understood to have granted another the
authority to borrow or loan on behalf of the former.

Vis-à-vis the cases of Phil. National Bank vs. Sta. Maria, 29 SCRA 303 and De Villa vs.
Fabricante, 105 Phil. 672, the court held that: Only the defendant Cesario A. Fabricante is
liable for the payment of this amount because it does not appear that the other defendant
Maria G. de Fabricante had authorized Cesario A. Fabricante to contract the debt also in
her name. The grant of such authority does not extend to assuming personal liability, much
less solidary liability, for any loan secured by the grantee in the absence of express
authority given by the grantor. The outcome would be different if the authority given were
“to borrow money and mortgage.”

In the case at bar, CX through a special power of attorney, authorized DY to borrow money
from any bank and to mortgage his property covered by the owner’s certificate of title. Hence,
CX shall be liable for the bank loan and on the foreclosure of the mortgage should default of
payment of the loan occur.