Far East Bank vs.

Cayetano

Doctrine: However clearly the body of the mortgage may show and intend that it shall be the act of the
principal, yet, unless in fact 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.

Principal: Leonor C. Cayetano (mother)

Agent: Teresita C. Tabing (daughter)

Facts:
1. Respondent Leonor C. Cayetano executed a special power of attorney in favor of her daughter
Teresita C. Tabing authorizing her to contract a loan from petitioner in an amount not more
than P300,000.00 and to mortgage her 2 lots located in Barangay Carolina, Naga City.
2. For the approval of the loan, Cayetano also executed an affidavit of non-tenancy. Petitioner
loaned Tabing one hundred thousand pesos (P100,000.00) secured by two (2) promissory notes
and a real estate mortgage over Cayetanos two (2) properties. The mortgage document was
signed by Tabing and her husband as mortgagors in their individual capacities, without stating
that Tabing was executing the mortgage contract for and in behalf of the owner (Cayetano).
3. Petitioner foreclosed the mortgage for failure of the respondents and the spouses Tabing to
pay the loan. A notice of public auction sale was sent to respondents. Cayetano’s lawyer
responded with a letter to petitioner requesting that the public auction be postponed.
Respondents letter went unheeded and the public auction was held as scheduled wherein the
subject properties were sold to F.E. Bank for P160,000.00. Subsequently, petitioner consolidated
its title and obtained new titles in its name after the redemption period lapsed without
respondents taking any action.
4. More than five years later, Tabing, on behalf of Cayetano, sent a letter to petitioner expressing
the intent to repurchase the properties for P250,000.00 with proposed terms of payment. F.E.
Bank refused the offer stating that the minimum asking price for the properties was P500,000.00
and it was not amenable to the proposed terms of payment. F.E. Bank nevertheless gave
respondents the chance to buy back the properties by joining a bidding to be set in some future
date.
5. However, respondents filed a complaint for annulment of mortgage and extrajudicial
foreclosure of the properties with damages in the RTC of Naga City. Respondents sought
nullification of the real estate mortgage and extrajudicial foreclosure sale, as well as the
cancellation of petitioners title over the properties.

RTC: In favor of respondents.

1. Held that the principal (Cayetano) cannot be bound by the real estate mortgage executed by
the agent (Tabing) unless it is shown that the same was made and signed in the name of the
principal; hence, the mortgage will bind the agent only.
2. Also found that there was no compliance with the requirement of publication of the foreclosure
sale in a newspaper of general circulation as provided in Act No. 3135, as amended. Such
requisite must be strictly complied with as any slight deviation therefrom will render the sale
voidable.

CA: affirmed RTC decision.

1. Held that it must be shown that the real estate mortgage was executed by the agent on-behalf
of the principal, otherwise the agent may be deemed to have acted on his own and the
mortgage is void.
2. However, it further declared that the principal loan agreement was not affected, which had
become an unsecured credit.
The Court of Appeals denied petitioners motion for reconsideration, hence this petition.

Issue: WON the principal is bound by the real estate mortgage executed by the authorized agent in her
own name without indicating the principal.

Ruling: No, principal is not bound. SC cited several cases, including Poizat case (Gabriela de Coster and
her agent-husband Juan Poizat) wherein it ruled:

It is a general rule in the law of agency that, 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. 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
in fact 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.

Notwithstanding the nullity of the real estate mortgage executed by Tabing and her husband, SC found
that the equity principle of laches is applicable in the instant case. Laches is negligence or omission to
assert a right within a reasonable time, warranting a presumption that the party entitled to assert it
either has abandoned it or declined to assert it.

In the present case, records clearly show that respondents could have filed an action to annul the
mortgage on their properties, but for unexplained reasons, they failed to do so. They only questioned
the loan and mortgage transactions in December 1996, or after the lapse of more than five (5) years
from the date of the foreclosure sale. It bears noting that the real estate mortgage was registered and
annotated on the titles of respondents, and the latter were even informed of the extrajudicial foreclosure
and the scheduled auction. Instead of impugning the real estate mortgage and opposing the scheduled
public auction, respondents lawyer wrote a letter to petitioner and merely asked that the scheduled
auction be postponed to a later date. Even after five (5) years, respondents still failed to oppose the
foreclosure and the subsequent transfer of titles to petitioner when their agent, Tabing, acting in behalf
of Cayetano, sent a letter proposing to buy back the properties. It was only when the negotiations failed
that respondents filed the instant case. Clearly, respondents slept on their rights.

Wherefore, petition is granted.

ACE NAVIGATION V. FGU INSURANCE

Doctrine: -
Principal: CARDIA Limited
Agent: Ace Navigation

Facts:
1. Cardia Limited (CARDIA) shipped on board the vessel M/V Pakarti Tiga at Shanghai Port China,
165,200 bags of Grey Portland Cement to be discharged at the Port of Manila and delivered to
its consignee, Heindrich Trading Corp. (HEINDRICH). The subject shipment was insured with
respondents, FGU Insurance Corp. (FGU) and Pioneer Insurance and Surety Corp. (PIONEER),
against all risks.
2. The subject vessel is owned by P.T. Pakarti Tata (PAKARTI) which it chartered to Shinwa Kaiun
Kaisha Ltd. (SHINWA). Representing itself as owner of the vessel, SHINWA entered into a charter
 party contract with Sky International, Inc. (SKY), an agent of Kee Yeh Maritime Co. (KEE YEH),
which further chartered it to Regency Express Lines S.A. (REGENCY). Thus, it was REGENCY that
directly dealt with consignee HEINDRICH, and accordingly, issued Clean Bill of Lading No. SM-
1.
3. The vessel arrived at the Port of Manila and the shipment was discharged. However, upon
inspection of HEINDRICH and petitioner Ace Navigation Co., Inc (ACENAV)., agent of CARDIA,
it was found that out of the 165,200 bags of cement, 43,905 bags were in bad order and
condition.
4. Unable to collect the sustained damages from the shipper, CARDIA, and the charterer,
REGENCY, the respondents, as co-insurers of the cargo, each paid the consignee, HEINDRICH,
the amounts of P427,036.40 and P284,690.94, respectively, and consequently became
subrogated to all the rights and causes of action accruing to HEINDRICH.
5. Thus, respondents filed a complaint for damages against the following defendants: "REGENCY
EXPRESS LINES, S.A./ UNKNOWN CHARTERER OF THE VESSEL 'PAKARTI TIGA'/ UNKNOWN
OWNER and/or DEMIFE (sic) CHARTERER OF THE VESSEL 'PAKARTI TIGA', SKY INTERNATIONAL,
INC. and/or ACE NAVIGATION COMPANY, INC."
6. PAKARTI and SHINWA alleged that the suits against them cannot prosper because they were
not named as parties in the bill of lading. Similarly, ACENAV claimed that, not being privy to the
bill of lading, it was not a real party-in-interest from whom the respondents can demand
compensation. It further denied being the local ship agent of the vessel or REGENCY and
claimed to be the agent of the shipper, CARDIA. SKY denied having acted as agent of the
charterer, KEE YEH, which chartered the vessel from SHINWA, which originally chartered the
vessel from PAKARTI. SKY also averred that it cannot be sued as an agent without impleading
its alleged principal, KEE YEH.
7. HEINDRICH filed a similar complaint against the same parties and Commercial Union Assurance
Co. (COMMERCIAL) which was later consolidated with the earlier case. However, the suit against
COMMERCIAL was subsequently dismissed on joint motion by the respondents and
COMMERCIAL.

RTC: Dismissed the complaint. Defendants’ counterclaim also dismissed it appearing that plaintiffs are
not in bad faith in filing the present complaint against them. Defendant Pakarti and Shinwa’s cross-
claims against their co-defendants are likewise dismissed for lack of sufficient evidence.

Respondents appealed.

CA: Modified RTC decision.

1. Defendant-appellees P.T. Pakarti Tata, Shinwa Kaiun Kaisha, Ltd., Kee Yeh Maritime Co., Ltd. and
the latter’s agent Sky International, Inc. are declared jointly and severally liable, and are directed
to pay FGU Insurance Corporation as actual damages.
2. defendant CARDIA and defendant-appellee ACENAV are declared jointly and severally liable
and are hereby DIRECTED to pay FGU Insurance Corporation as actual damages.
3. Finding that the parties entered into a time charter party, not a demise or bareboat charter
where the owner completely and exclusively relinquishes possession, command and navigation
to the charterer, the CA held PAKARTI, SHINWA, KEE YEH and its agent, SKY, solidarily liable for
70% of the damages sustained by the cargo. This solidarity liability was borne by their failure to
prove that they exercised extraordinary diligence in the vigilance over the bags of cement
entrusted to them for transport. On the other hand, the CA passed on the remaining 30% of
the amount claimed to the shipper, CARDIA, and its agent, ACENAV, upon a finding that the
damage was partly due to the cargo's inferior packing.

Respondents appealed by certiorari. They further contended that ACENAV is a ship agent and not a
mere agent of CARDIA.
Issue:
WON ACENAV may be held liable for the damages caused by its principal.

Ruling: No. Assailed decision of CA is reversed, complaint against ACENAV is hereby dismissed.

Records show that the obligation of ACENAV was limited to informing the consignee HEINDRICH of the
arrival of the vessel in order for the latter to immediately take possession of the goods. No evidence
was offered to establish that ACENAV had a hand in the provisioning of the vessel or that it represented
the carrier, its charterers, or the vessel at any time during the unloading of the goods. Clearly, ACENAV's
participation was simply to assume responsibility over the cargo when they were unloaded from the
vessel. Hence, no reversible error was committed by the courts a quo in holding that ACENAV was not
a ship agent within the meaning and context of Article 586 of the Code of Commerce, but a mere agent
of CARDIA, the shipper.

On this score, Article 1868 of the Civil Code states:

ART. 1868. By the contract of agency, a person binds himself to render some service or to do something
in representation or on behalf of another, with the consent or authority of the latter.

Corollarily, Article 1897 of the same Code provides that an agent is not personally liable to the party
with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without
giving such party sufficient notice of his powers.

Both exceptions do not obtain in this case. Records are bereft of any showing that ACENAV exceeded
its authority in the discharge of its duties as a mere agent of CARDIA. Neither was it alleged, much less
proved, that ACENAV's limited obligation as agent of the shipper, CARDIA, was not known to
HEINDRICH.

Furthermore, since CARDIA was not impleaded as a party in the instant suit, the liability attributed upon
it by the CA on the basis of its finding that the damage sustained by the cargo was due to improper
packing cannot be borne by ACENAV. As mere agent, ACENAV cannot be made responsible or held
accountable for the damage supposedly caused by its principal.