Celestina Naguiat v. Court of Appeals and Aurora Queaño (G.R. No. 118375. October 3, 2003)

Topic: Kinds and Form of Agency; Agency by Estoppel

Ponente:Tinga, J.

Nature: RTC - ; CA - ;SC – Petition for Review on Certiorari under Rule 45

Doctrine:

Quick Facts: Queaño filed a complaint before the Pasay City RTC for cancellation of a Real Estate Mortgage she had entered into with petitioner Naguiat because she never received the checks corresponding to the loan from Marilou Farralese who behaved as an agent of Naguiat. The RTC rendered a decision, declaring the questioned Real Estate Mortgage void, which Naguiat appealed to the Court of Appeals. After the Court of Appeals upheld the RTC decision, Naguiat instituted the present petition.

Facts:

Aurora Queaño applied with Celestina Naguiat for a PhP 200K loan, which the latter granted. Naguiat issued 2checks, each for the amount of PhP 95K, to Queaño. The proceeds of these checks were to constitute the loan Naguiat granted to Queaño. As security for the loan, Queaño executed a Deed of Real Estate Mortgage in favor of Naguiat. She also surrendered the owner’s duplicates of the properties’ titles to the latter, and issued a promissory note for PhP 200K and a postdated check for the same amount payable to the order of Naguiat. Queaño’s check was dishonored for insufficiency of funds, so Naguiat wrote her to demand settlement of the loan. Queaño and Ruby Ruebenfeldt met with Naguiat. Queaño told Naguiat she did not receive the proceeds of the loan, adding that the checks were retained by Ruebenfeldt, purportedly Naguiat’s agent.

It turns out that Naguiat had instructed Ruebenfeldt to withhold from Queaño the checks she issued or indorsed to Queaño, pending delivery by the latter of additional collateral. Also, Ruebenfeldt had served as agent of Naguiat on the loan application of Queaño’s friend, Marilou Farralese, and it was in connection with that transaction that Queaño came to know Naguiat. It was also Ruebenfeldt who accompanied Queaño in her meeting with Naguiat and on that occasion, on her own and without Queaño asking for it, Reubenfeldt actually drew a check for the sum of P220,000.00 payable to Naguiat, to cover for Queaño’s alleged liability to Naguiat under the loan agreement

Naguiat applied for extrajudicial foreclosure of the mortgage so the sheriff scheduled the foreclosure sale. Queaño filed for the annulment of the mortgage deed with the Pasay City RTC, which eventually stopped the auction sale. RTC declared the deed null and void, and ordered Naguiat to return the title duplicates. CA affirmed in toto the RTC decision. Hence, the present petition.

The presumption of truthfulness of the recitals ina public document was defeated by the clear and convincing evidence in this case thatpointed to the absence of consideration. Naguiatdid not present evidence to support her claimthat Queaño received the loan proceeds. Thedelivery of bills of exchange and mercantiledocuments such as checks shall produce theeffect of payment only when they have beencashed. Being a real contract, a loan contract isperfected only upon the delivery of the object of the contract (in this case, the loan proceeds).

Issue: (1) Is Ruebenfeldt an agent of Naguiat? (2) Did Ruebenfeldt’s withholding of the checks corresponding to the proceeds of the loan sufficient ground to void the loan?

Held: (1) Yes; (2) Yes..

Ratio: Ruebenfeldt served as Naguiat’s agent on the loan application of Queaño’s friend, Marilou Farralese, and it was in connection with that transaction that Queaño came to know Naguiat. Naguiat instructed Ruebenfeldt to withhold the issued checks from Queaño pending delivery by the latter of additional collateral. Ruebenfeldt went with Queaño in the latter’s meeting with Naguiat, and on that occasion, without Queaño asking for it, Ruebenfeldt drew a check for PhP 220K payable to Naguiat, to cover for Queaño’s alleged liability under the loan agreement. The CA recognized the existence of an “agencyby estoppel citing CC 1873, to wit:

Art. 1873. If a person specifically 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, in the former case with respect to the person who received the special information, and in the latter case with regard to any person. The power shall continue to be in full force until the notice is rescinded in the same manner in which it was given. (n)

At the very least, because of the interaction between Naguiat and Ruebenfeldt, Queaño got the impression that Ruebenfeldt was Naguiat’s agent. Naguiat did nothing to correct Queaño’s impression.

One who clothes another with apparent authority as his agent, and holds him out to the public as such, cannot 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 honest belief that he is what he appears to be.

Note: More fundamentally, whatever was the true relationship between Naguiat and Ruebenfeldt is irrelevant in the face of the fact that the checks issued or indorsed to Queaño were never encashed or deposited to her account of Naguiat. The lender did not remit and the borrower did not receive the proceeds of the loan. That being the case, it follows that the mortgage which is supposed to secure the loan is null and void. The consideration of the mortgage contract is the same as that of the principal contract from which it receives life, and without which it cannot exist as an independent contract. A mortgage contract being a mere accessory contract, its validity would depend on the validity of the loan secured by it.