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Petitioner: Philippine National Bank

Defendant: Paz Agudelo, et al

- Defendant Paz Agudelo y Gonzaga and Amparo Garrucho, executed an SPA to Mauro
Garrucho, whereby it confers the latter the authority to sell, aliente, mortgage,
or otherwise encumber the properties of the defendants in a manner or form Mauro
would deem be convenient. However, nothing in the SPA confers Mauro to contract a
loan and mortgage the properties to secure his obligations.
- On December 23, 1920 and August 24, Mauro Garrucho contracted credits and loans
to Petitioner PNB and mortgaged the properties of Amparo Garrucho and Paz Agudelo,
to secure payment of his loans, credits and commercial overdrafts for the amounts
of P6,000.00 and P16,000.00 respectively, in which, it is stipulated that
Petitioner would take possession of the mortgaged properties by means of force if
necessary should he fail to comply the conditions.
- Mauro failed in complying the conditions of the mortgage, thus on July 15, 1922,
he was prompted to execute the deed of mortgage in favor of PNB. However,
petitioner bank cancelled the mortgage deeds.
- November 25, 1925, Amparo Garrucho sold her lot to Paz Agudelo,
- Petitioner Bank then executed a complaint against Paz Agudelo and Mauro Garrucho.
The CFI of Negros Occidental ruled in absolving defendant Mauro Garrucho and
ordered defendant Paz Agudelo to pay the said loan amount and attorney's fees.
Defendant then appealed on the ruling.

Issue: WON defendant Paz Agudelo is liable to pay the loan contracted by Mauro

- No, The special power of attorney does not authorize Mauro A. Garrucho to
constitute a mortgage on the real estate of his principal to secure his personal
obligations. Therefore, in doing so by virtue of the document, he exceeded the
scope if his authority and his principal is not liable for his acts.
- nothing in the said mortgage deeds to show that Mauro A. Garrucho is attorney in
fact of Amparo A. Garrucho and of Paz Agudelo y Gonzaga, and that he obtained the
loans mentioned in the aforesaid mortgage deeds and constituted said mortgages as
security for the payment of said loans, for the account and at the request of said
Amparo A. Garrucho and Paz Agudelo y Gonzaga.
- the promissory notes executed by Mauro A. Garrucho in favor of the Philippine
National Bank, evidencing loans of P6,000 and P16,000 have been novated by the
promissory notes for P21,000 executed by Mauro A. Garrucho, not only without
express authority from his principal Paz Agudelo y Gonzaga but also under his own
signature. plaintiff- appellee has not appealed from the judgment absolving him
(Mauro Garrucho)
- ART. 1709. By the contract of agency, one person binds himself to render some
service, or to do something for the account or at the request of another.
- ART. 1717. When an agent acts in his own name, the principal shall have no right
of action against the persons with whom the agent has contracted, or such persons
against the principal. In such case, the agent is directly liable to the person
with whom he has contracted, as if the transaction were his own. Cases involving
things belonging to the principal are excepted.