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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Agency is extinguished by the death of either the principal or the agent. Thus, any act by the agent subsequent to the principal’s death is void ab initio, unless the act fell under the exceptions established under Articles 1930 and 1931 of the Civil Code.
On March 12, 1998, Meliton Alova executed a Special Power of Attorney (SPA) in favor of his daughter, Jessica Alova Uberas over a parcel of land registered in his name under Transfer Certificate of Title No. (TCT) T-60482 registered in his name under Transfer Certificate of Title No. (TCT) T-60482. The subject property is conjugal property of Meliton and his wife, respondent Felicidad Alova. Meliton died on October 31, 1998.
After Meliton’s death, Jessica applied for and was granted a Credit Line Agreement by petitioner San Miguel Foods, Inc. (SMFI). On September 2, 2003, using her late father’s SPA, Jessica secured the loan by a Real Estate Mortgage constituted over the subject property.
Using the credit line, Jessica purchased poultry products from SMFI amounting to PhP495,194.80 which she failed to pay. Hence, SMFI sent a Demand Letter o Jessica and her husband, Jubert Uberas.
SMFI also sent a letter addressed to Meliton and Felicidad, informing them of the unpaid credit purchases of spouses Jessica and Jubert. In the letter, SMFI stated that the credit account of spouses Jessica and Jubert with it is secured by a real estate mortgage over the subject property that is registered in the name of spouses Alova, and that if the obligation remained unpaid, it would institute foreclosure proceedings.
In July 2005, Felicidad and her other daughter, respondent Decelyn Alova Pution received a Notice of Extrajudicial Sale informing them of the extrajudicial foreclosure of the subject property. Respondents, through counsel, then sent a letter to the Office of the Provincial Sheriff of Negros Occidental requesting for the cancellation of the extrajudicial foreclosure for being illegal. However, for failure of spouses Jessica and Jubert to settle their account with SMFI, the foreclosure of the mortgage pushed through where SMFI emerged as the winning bidder at the public auction.
Subsequently, respondents filed a Complaint for Declaration of Nullity/Annulment of Real
Estate Mortgage and Extrajudicial Foreclosure Sale with Damages before the Regional Trial Court (RTC), on the ground that the real estate mortgage was executed by Jessica (using the revoked SPA) despite the latter’s actual knowledge of her father’s death.
The RTC declared the Real Estate Mortgage null and void insofar as the one-half pro-indiviso share of Meliton Alova over Lot 24 with TCT No. T-60482 is concerned. It ordered the Register of Deeds of Bacolod City, to annotate on TCT No. T-60482 the 1/3 share in the name of Decelyn Alova Pution and the remaining portion in the name of San Miguel Foods, Inc.
The Court of Appeals (CA) granted respondents’ appeal. The CA ruled that the real estate mortgage is void ab initio. It discussed that one of the modes of extinguishing a contract of agency is through the death of either the principal or the agent, with the exceptions provided under Articles 1930 and 1931 of the Civil Code, meaning the agency subsists despite the death of either party. Hence, this petition for review.
The issue in this case is whether the CA erred in nullifying the real estate mortgage and the proceedings conducted pursuant to it.
The Supreme Court Decides
The Supreme Court partly granted the petition for review. It ruled that the real estate mortgage and foreclosure sale are not entirely void. They remain valid with respect to Jessica’s undivided share in the subject property as a legal heir of Meliton. Hence, when Jessica executed the real estate mortgage over the property in her personal capacity, she effectively encumbered her undivided share to secure her obligation to SMFI. Consequently, the real estate mortgage and the foreclosure sale in favor of SMFI are valid, but only to the extent of Jessica’s share in the property.
At the time when Jessica executed the real estate mortgage over the subject property, she was well aware of her father’s death. Moreover, there is no showing that Articles 1930 and 1931 of the Civil Code are applicable. Hence, Meliton’s death effectively extinguished the agency between Meliton and Jessica.
As for Felicidad, she likewise cannot be bound under the SPA. Notably, she was not the one who executed the SPA in favor of Jessica. She merely gave her marital conformity. Under the principles of agency, Felicidad cannot be considered as a principal.
The case is remanded to the RTC for the determination of Jessica Alova Uberas’ share in the said property, and for the annotation on Meliton Alova’s Transfer Certificate of Title No. T-60482 of the respective shares of his heirs, as well as the share of San Miguel Foods, Inc., which acquired Jessica’s interest.
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.
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