Villaluz vs. Land Bank of the Phil.

GR No. 192602

Facts:

Sometime in 1996, Paula Agbisit (Agbisit), mother of petitioner May S. Villaluz (May), requested the
latter to provide her with collateral for a loan. At the time, Agbisit was the chairperson of Milflores
Cooperative and she needed P600,000 to P650,000 for the expansion of her backyard cut flowers
business.[4] May convinced her husband, Johnny Villaluz (collectively, the Spouses Villaluz), to allow
Agbisit to use their land, located in Calinan, Davao City and covered by Transfer Certificate of Title (TCT)
No. T-202276, as collateral.[5] On March 25, 1996, the Spouses Villaluz executed a Special Power of
Attorney[6] in favor of Agbisit authorizing her to, among others, "negotiate for the sale, mortgage, or
other forms of disposition a parcel of land covered by Transfer Certificate of Title No. T-202276" and
"sign in our behalf all documents relating to the sale, loan or mortgage, or other disposition of the
aforementioned property." On June 19, 1996, Agbisit executed her own Special Power of Attorney,[8]
appointing Milflores Cooperative as attorney-in-fact in obtaining a loan from and executing a real
mortgage in favor of Land Bank of the Philippines (Land Bank). On June 21, 1996, Milflores Cooperative,
in a representative capacity, executed a Real Estate Mortgage[9] in favor of Land Bank in consideration of
the P3,000,000 loan to be extended by the latter. On June 24, 1996, Milflores Cooperative also executed
a Deed of Assignment of the Produce/Inventory[10] as additional collateral for the loan. Land Bank
partially released one-third of the total loan amount, or P995,500, to Milflores Cooperative on June 25,
1996. On the same day, Agbisit borrowed the amount of P604,750 from Milflores Cooperative. Land
Bank released the remaining loan amount of P2,000,500 to Milflores Cooperative on October 4, 1996.
[11] Unfortunately, Milflores Cooperative was unable to pay its obligations to Land Bank. Thus, Land
Bank filed a petition for extra-judicial foreclosure sale with the Office of the Clerk of Court of Davao City.
Sometime in August, 2003, the Spouses Villaluz learned that an auction sale covering their land had been
set tor October 2, 2003. Land Bank won the auction sale as the sole bidder. The Spouses Villaluz filed a
complaint with the Regional Trial Court (RTC) of Davao City seeking the annulment of the foreclosure
sale.

Issues: whether Agbisit could have validly delegated her authority as attorney-in-fact to Milflores
Cooperative

Ruling: Citing Article 1892 of the Civil Code, the RTC held that the delegation was valid since the Special
Power of Attorney executed by the Spouses Villaluz had no specific prohibition against Agbisit appointing
a substitute. Accordingly, the RTC dismissed the complaint... the CA affirmed the RTC Decision... the
petition is DENIED. The Decision dated September 22, 2009 and Resolution dated May 26, 2010 of the
Court of Appeals in CA-G.R. CV No. 01307 are AFFIRMED Principles: the rule is that an agent is allowed to
appoint a sub-agent in the absence of an express agreement to the contrary and that "a scrutiny of the
Special Power of Attorney dated March 25, 1996 executed by appellants in favor of [Agbisit] contained
no prohibition for the latter to appoint a sub-agent."[15] Therefore, Agbisit was allowed to appoint
Milflores Cooperative as her sub-agent. Articles 1892 and 1893 of the Civil Code Art. 1892. The agent
may appoint a substitute if the principal has not prohibited him from doing so; but he shall be
responsible for the acts of the substitute:(1) When he was not given the power to appoint one;(2) When
he was given such power, but without designating the person, and the person appointed was notoriously
incompetent or insolvent.All acts of the substitute appointed against the prohibition of the principal shall
be void.Art. 1893. Tn the cases mentioned in Nos. 1 and 2 of the preceding article, the principal may
furthermore bring an action against the substitute with respect to the obligations which the latter has
contracted under the substitution.

DBP V. CA

Gr. No. L-109937

- Good Faith and Redemption A mistake upon a doubtful or difficult question of law may be the basis of
good faith.

FACTS: Spouses Piñedas are registered owners of a parcel of land in Capiz, which they mortgaged to DBP
to secure the loan (P20,000) they obtained from the latter. Piñedas eventually defaulted, prompting DBP
to extra-judicially foreclose and take possession of such property. The Ministry of Justice, then, opined
through its Opinion No. 92 (’78) that lands covered by P.D. No. 27, to which the subject property was
included, may not be the object of foreclosure proceedings. The Piñedas, then, sought to redeem such
property (with P10,000 as downpayment) but was denied as the land was allegedly tenanted. They then
sought the cancellation of the title and specific performance, stating that DBP acted in bad faith when it
took possession of the property andcaused the consolidation of its title in spite of the fact that the 5-
year redemption period expressly stated in the Sheriff’s Certificate of Sale had not yet lapsed and that
their offer to redeem was within the redemption period.

ISSUE: Whether or not DBP acted in bad faith when it took possession of the property

RULING:

NO. DBP’s act of consolidating its title and taking possession of the property after the expiration of the
redemption period was in accordance with Sec. 6 of Act No. 3135, which states that if no redemption of
a foreclosed property is made within one year, the purchaser (DBP) is entitled as a matter of right to
consolidate and to possess the property. In addition to this, it was in consonance with Sec. 4 of the
mortgage contract between DBP and the Piñedas where they agreed the appointment of DBP as receiver
to take charge and to hold possession of the mortgaged property in case of foreclosure. In fact, without
DBP’s act of consolidating its title, the Piñedas would not be able to assert their right to repurchase the
property within 5 years, which would begin to run after the expiration of the one-year period. Thus, its
acts cannot be tainted with bad faith nor did it impair Piñedas’ right to repurchase. It may also be argued
that P.D. No. 27 was already in effect when DBP foreclosed the property. However, the legal propriety of
the foreclosure of the land was questioned only after Opinion No. 92 (’78) was issued, which happened
almost 2 months after DBP consolidated its title to the property. By law and jurisprudence, a mistake
upon a doubtful or difficult question of law may properly be the basis of good faith. Art. 526 of NCC
states that “a possessor in good faith is one who is not aware that there exists in his title or mode of
acquisition any flaw, which invalidates it.” Moreover, Art. 527 of NCC provides “good faith is always
presumed, and upon him who alleges bad faith on the part of the possessor rests the burden of proof.”
Thus, it is incumbent on the Piñedas to prove that DBP was aware of the flaw in its title (nullity of the
foreclosure), but this they failed to do.

G.R. No. 205657 INTERNATIONAL EXCHANGE BANK NOW UNION BANK OF THE PHILIPPINES vs SPOUSES
JEROME AND QUINNIE BRIONES, AND JOHN DOE

Facts: Spouses Briones took out a loan which was executed though a promissory note which appointed
the bank as attorney-in-fact of the spouse with the obligation among others to file an insurance claim in
case of loss or damage to the vehicle of the car. The vehicle was subsequently carnapped. iBank instead
of filing for insurance filed in behalf of Spouses it collected from former. Now respondents was forced to
claim for insurance.

Issues:

1) Whether an agency relationship existed between the parties.

2)Whether the agency relationship was revoked or terminated when Spouses Briones themselves
claimed for insurance.

3) Whether petitioner is entitled to the return of the mortgaged vehicle or, in the alternative, payment of
the outstanding balance of the loan taken out for the mortgaged vehicle.

Rulings:

1) The Supreme Court ruled in affirmative. All the elements of agency exist in this case. Under the
promissory note with chattel mortgage, Spouses Briones appointed iBank as their attorney-in-
fact, authorizing it to file a claim with the insurance company if the mortgaged vehicle was lost
or damaged. Petitioner was also authorized to collect the insurance proceeds as the beneficiary
of the insurance policy. Sections 6 and 22 of the promissory note state: The MORTGAGOR agrees
that he will cause the mortgaged property/ies to be insured against loss or damage by accident,
theft and fire . . . with an insurance company/ies acceptable to the MORTGAGEE … ; that he will
make all loss, if any, under such policy/ies payable to the MORTGAGEE or its assigns … [w]ith the
proceeds thereon in case of loss, payable to the said MORTGAGEE or its assigns … shall be added
to the principal indebtedness hereby secured … [M]ortgagor hereby further constitutes the
MORTGAGEE to be its/his/her Attorney-in-Fact for the purpose of filing claims with insurance
company including but not limited to apply, sign, follow-up and secure any documents, deeds . . .
that may be required by the insurance company to process the insurance claim … In case of loss
or damage, the MORTGAGOR hereby irrevocably appoints the MORTGAGEE or its assigns as his
attorney-in-fact with full power and authority to file, follow-up, prosecute, compromise or settle
insurance claims; to sign, execute and deliver the corresponding papers, receipt and documents
to the insurance company as may be necessary to prove the claim, and to collect from the latter
the proceeds of insurance to the extent of its interest. (Emphasis supplied, citation omitted)
Article 1370 of the Civil Code is categorical that when “the terms of a contract are clear and
leave no doubt upon the intention of the contracting parties, the literal meaning of its
stipulations shall control.” The determination of agency is ultimately factual in nature and this
Court sees no reason to reverse the findings of the Regional Trial Court and the Court of Appeals.
They both found the existence of an agency relationship between the Spouses Briones and
iBank, based on the clear wording of Sections 6 and 22 of the promissory note with chattel
mortgage, which petitioner prepared and respondents signed.

2) The Court ruled that the agency was not revoked. In the promissory note with chattel
mortgage, the Spouses Briones authorized petitioner to claim, collect, and apply· the insurance
proceeds towards the full satisfaction of their loan if the mortgaged vehicle were lost or
damaged. Clearly, a bilateral contract existed between the parties, making the agency
irrevocable. Petitioner was also aware of the bilateral contract; thus, it included the designation
of an irrevocable agency in the promissory note with chattel mortgage that it prepared for the
Spouses Briones to sign.

3) The Court ruled that it was as the agent, petitioner was mandated to look after the interests
of the Spouses Briones. However, instead of going after the insurance proceeds, as expected of it
as the agent, petitioner opted to claim the full amount from the Spouses Briones, disregard the
established principal-agency relationship, and put its own interests before those of its principal.
The facts show that the insurance policy was valid when the vehicle was lost, and that the
insurance claim was only denied because of the belated filing. Having been negligent in its duties
as the duly constituted agent, petitioner must be held liable for the damages suffered by the
Spouses Briones because of non-performance of its obligation as the agent, and because it
prioritized its interests over that of its principal. Furthermore, petitioner’s bad faith was evident
when it advised the Spouses Briones to continue paying three (3) monthly installments after the
loss, purportedly to show their good faith. A principal and an agent enjoy a fiduciary relationship
marked with trust and confidence, therefore, the agent has t