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BPI V.

DE COSTER

FACTS: Defendant Gabriela Andrea de Coster y Roxas executed a Special Power of Attorney in favor of her
husband. This authority gave Jean M. Poizat (agent/husband) the power to loan and borrow money in her
behalf. The agent was able to obtain a loan from BPI, secured by a chattel mortgage on the steamers of
his company, Poizat Vegetable Oil Mills and a real mortgage over a property, which is also subject to
another mortgage in favor of La Orden de Dominicos. Defendants defaulted on their obligations to BPI
and La Orden de Dominicos. Thus, both creditors prayed for the forclosure of the mortgaged properties.
RTC declared the defendants in default for their failure to appear and ruled in favor of the plaintiffs. De
Coster alleges that she never had any knowledge of the actual facts until she read about her default in the
newspapers, since she was not in the Philippines when the summons were served; that her husband fled
the country; that the mortgages executed by her agent/husband was without marital consent; and that
he did not have any authority to make her liable as surety on the debt of a third person—it being a
personal debt of her husband and his company.

ISSUE: W/N the principal-wife, Gabriela De Coster y Roxas, is liable for the mortgage executed by her
agent/husband, Jean Poizat

HELD: NO. The note and mortgage show upon their face that at the time they were executed, the agent-
husband was attorney-in-fact for the defendant wife, and the bank knew or should have known the nature
and extent of his authority and the limitations upon his power. Par. 5 of the Power of Attorney authorizes
the agent/husband for and in the name of his wife to “loan or borrow any sums of money or fungible
things, etc.” This is taken to mean that he only had the power to loan his wife’s money and to borrow
money for or on account of his wife as her agent and attorney-in-fact. It does not carry with it or imply
that he had the legal right to make his wife liable as a surety for the preexisting debt of a third person. It
is fundamental rule of construction that where in an instrument powers and duties are specified and
defined, that all of such powers and duties are limited and confined to those which are specified and
defined, and that all other powers and duties are excluded. The fact that the agent-husband failed and
neglected to perform his duties and to represent the interests of his principal is NOT a bar to the principal
obtaining legal relief for the negligence of her agent. It is apparent from the face of the instrument that
the whole purpose and intent of the power of attorney was to empower and authorize the agent-husband
to look after and protect the interests of the wife and for her and in her name to transact any and all of
her business. But nowhere does it provide or authorize him to make her liable as a surety for the payment
of the preexisting debt of a third person. Thus, the agent-husband does not have the authority to sign the
note and to execute the mortgage for and on behalf of the wife as her act and deed, and that as to her
the note is void for want of power of her husband to execute it.

LECTURE NOTES (ARTICLES WERE NOT WRITTEN, PLEASE READ CODALS)

What are the classifications of agency contracts?

A. Express agency; implied agency

The contract of agency is perfected by mere consent. Under Article 1869, an agency may be expressed or
implied from the act of the principal, from his silence or lack of action, or failure to repudiate the agency;
agency may be oral, unless the law requires a specific form.
Express agency is an actual agency created by the written or spoken words of the principal authorizing
the agent to act on behalf of the principal. In express agency, authority is directly granted to or conferred
upon the agent or employee in express terms, and it extends only to such powers as the principal gives
the agent in direct terms, with the express provisions controlling.

Implied agency- Agency is created by implication when, from the nature of the principal’s business and
the position of the agent within that business, the agent is deemed to have permission from the principal
to undertake certain acts. In other words, implied agency involves permission to act, even though
permission is not explicitly established orally or in writing. An implied agency is frequently established by
the conduct and communication of the parties and the circumstances of the particular case. Generally,
one should look from the viewpoint of the principal and the agent to determine whether the agent has
implied authority.

An agency relationship may be implied, inferred, or based on apparent authority. Implied or inferred
agency is actual authority given implicitly by the principal to his agent circumstantially proved, or
evidenced by conduct, or inferred from a course of dealing between the alleged principal and the agent.
Authority can be implied only from facts. Implied powers must be based on some act or acquiescence of
the principal, express or implied.

B. Agency by estoppel; no consent – Arts. 1900, 1911, 1921, 1922

Under Article 1873 of the Civil Code, if a person specially informs another or states by public
advertisement that he has given a power of attorney to a third person, the latter thereby becomes a duly
authorized agent, even if previously there was never a meeting of minds between them.

Under Article 1911 of the Civil Code, even when the agent has exceeded his authority (i.e., he acts without
authority from the principal), the principal shall be solidarily with the agent if he allowed the agent to act
as though he had full powers.

One who clothes another apparent authority as his agent, and holds him out to the public as such, can
not be permitted to deny the authority of such person to act as his agent, to the prejudice of innocent
third parties dealing with such person in good faith and in the following pre-assumptions or deductions,
which the law expressly directs to be made from particular facts, are deemed conclusive.

For an agency by estoppel to exist, the following must be established:

(a) the principal manifested a representation of the agent’s authority or knowingly allowed the agent to
assume such authority;

(b) the third person, in good faith, relied upon such representation;

(c) relying upon such representation, such third person has changed his position to his detriment. An
agency by estoppel, which is similar to the doctrine of apparent authority, requires proof of reliance upon
the representations, and that, in turn, needs proof that the representations predated the action taken in
reliance.

C. Agency by operation of law – Arts. 1869, 1884(2), 1930, 1931


Agency by Operation of Law: Agencies recognized by courts -- e.g., family relationships, emergency
situations -- in the absence of any formal agreement, confirmation, or act or omission by the principal that
implied the agent's authority.

Other acts of strict dominion- Article 1878 (12)

Art. 1878. Special powers of attorney are necessary in the following cases:

(12) To create or convey real rights over immovable property;

“There is no documentary evidence on record that the respondents-owners specifically authorized


respondent Fernandez to sell their properties to another, including the petitioners. Article 1878 of the
New Civil Code provides that a special power of attorney is necessary to enter into any contract by which
the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable
consideration, or to create or convey real rights over immovable property, or for any other act of strict
dominion. Any sale of real property by one purporting to be the agent of the registered owner without
any authority therefore in writing from the said owner is null and void. The declarations of the agent alone
are generally insufficient to establish the fact or extent of her authority.”Litonjua v. Fernandez, 427 SCRA
478, 493 (2004).