Del Rosario vs. Abad

A power of attorney is not an agency coupled with an interest, and therefore is not irrevocable, merely because it declares itself to be so; the interest must be stated in the instrument, and absent such statement the agency terminates upon the principal’s death, rendering a subsequent conveyance by the agent null and void. A power of attorney executed within the five-year prohibitory period under Section 116 of the Public Land Act would also constitute an encumbrance or alienation of homestead land in violation of that statute.

The plaintiffs are the children and heirs of Tiburcio del Rosario, while the defendants are Primitivo Abad and his son Teodorico Abad. The controversy concerns a parcel of land in Nueva Ecija originally granted to Tiburcio under a homestead patent issued pursuant to the Public Land Act (Act No. 2874). That statute restricts encumbrance or alienation of homestead land from the approval of the application and for five years from issuance of the patent, while allowing mortgages or pledges only on improvements or crops.

The plaintiffs are the children and heirs of Tiburcio del Rosario. On 12 December 1936, the Secretary of Agriculture and Commerce, by authority of the President of the Commonwealth of the Philippines, issued homestead patent No. 40596 to Tiburcio del Rosario under the Public Land Act (Act No. 2874). The homestead, with an area of 9 hectares, 43 ares and 14 centares, was situated in barrio San Mauricio, municipality of San Jose, province of Nueva Ecija. On 11 February 1937, the Registrar of Deeds in and for the province of Nueva Ecija issued original certificate of title No. 4820 in the name of the homesteader.

On 24 February 1937, Tiburcio del Rosario obtained a loan from Primitivo Abad in the sum of P2,000, with interest at 12% per annum, payable on 31 December 1941. As security for payment, he mortgaged the improvements of the parcel of land in favor of the creditor. On the same day, the mortgagor executed an “irrevocable special power of attorney coupled with interest” in favor of the mortgagee, authorizing him, among others, to sell and convey the parcel of land. Thereafter, the mortgagor and his family moved to Santiago, Isabela, and established a new residence.

Sometime in December 1945, Tiburcio del Rosario died, leaving the mortgage debt unpaid. On 9 June 1947, Primitivo Abad, acting as attorney-in-fact of Tiburcio del Rosario, sold the parcel of land to his son Teodorico Abad for and in consideration of the token sum of P1.00 and the payment by the vendee of Tiburcio del Rosario’s mortgage debt to Primitivo Abad. Teodorico Abad took possession of the parcel of land. Upon the filing and registration of the deed of sale, the Registrar of Deeds cancelled original certificate of title No. 4820 in the name of Tiburcio del Rosario and issued transfer certificate of title No. 1882 in favor of Teodorico Abad.

On 29 December 1952, the plaintiffs brought suit against the defendants to recover possession and ownership of the parcel of land, damages, attorney’s fees, and costs. The defendants answered the complaint and prayed for its dismissal, damages, attorney’s fees, and costs. The parties submitted the case upon an agreed statement of facts, and the facts material to the controversy were undisputed.

• Homestead Prohibition Period: Defendants-appellants, as the appealing parties, contended that the power of attorney was to be availed of by the agent after the lapse of the prohibition period of five years, and that Primitivo Abad in fact sold the parcel of land on 9 June 1947, after the lapse of such period.
• Reimbursement: Defendants-appellants claimed that the trial court should have directed the appellees to reimburse Teodorico Abad for what he had paid to Primitivo Abad to discharge the mortgage in the latter’s favor as part of the consideration of the sale.

• Agency Coupled with Interest: Whether the special power of attorney executed by Tiburcio del Rosario in favor of Primitivo Abad was an agency coupled with an interest and irrevocable, such that the sale to Teodorico Abad after Tiburcio’s death was valid.
• Homestead Prohibition: Whether the power of attorney and sale violated Section 116 of the Public Land Act, which prohibits encumbrance or alienation of homestead land within five years from issuance of the patent.
• Reimbursement: Whether the plaintiffs-appellees must reimburse Teodorico Abad for the amount he paid to Primitivo Abad to discharge the mortgage as part of the consideration of the sale.

• Agency Coupled with Interest: No. The mere statement that the power of attorney was coupled with an interest did not make it so; the interest had to be stated in the instrument, and the mortgage on improvements was not such an interest. The agency terminated upon Tiburcio del Rosario’s death, so the sale to Teodorico Abad was null and void.
• Homestead Prohibition: Yes, as to the power of attorney. Executed on 24 February 1937, within five years from the 12 December 1936 homestead patent, it would have subjected the homestead to an encumbrance in violation of Section 116 of the Public Land Act; nothing in the instrument allowed its exercise only after the prohibition lapsed.
• Reimbursement: No. Because the sale was null and void, the appellees could not be compelled to reimburse Teodorico Abad for what he paid to Primitivo Abad; his right of action was against Primitivo Abad, without prejudice to the latter’s right to foreclose the mortgage on the improvements.

• Agency Coupled with Interest: The Court examined the power of attorney, which described itself as an “irrevocable special power of attorney coupled with interest.” It held that such a recital did not create an agency coupled with an interest or clothe the agency with irrevocable character. The interest must be stated in the power of attorney. The mortgage on the improvements in favor of Primitivo Abad was not such an interest; it was not mentioned in the power of attorney and had nothing to do with it, and could be foreclosed separately upon default. Because the agency was not coupled with an interest, it was terminated upon the death of Tiburcio del Rosario in December 1945. Primitivo Abad could no longer validly convey the parcel of land to Teodorico Abad on 9 June 1947. The sale was therefore null and void.
• Homestead Prohibition: Even assuming the irrevocable power of attorney was lawful and valid, it would subject the parcel of land to an encumbrance. The homestead patent was issued on 12 December 1936, and the power of attorney was executed on 24 February 1937. Section 116 of the Public Land Act prohibits encumbrance or alienation of land acquired by homestead from the date of approval of the application and for five years from and after the issuance of the patent or grant. The power of attorney thus fell within the prohibited period. Appellants’ contention that the power of attorney was to be availed of after the five-year period was not supported by its terms; nothing in the instrument stated that it could only be exercised after the prohibition lapsed.
• Reimbursement: Because the sale to Teodorico Abad was null and void, the appellees could not be compelled to reimburse him for what he had paid to Primitivo Abad to discharge the mortgage. Teodorico’s right of action was against Primitivo Abad, without prejudice to Primitivo Abad’s right to foreclose the mortgage on the improvements if the mortgage debt was not paid by the appellees as heirs and successors-in-interest of the mortgagor.

• Agency Coupled with Interest — An agency coupled with an interest is irrevocable, but a mere statement in the power of attorney that it is coupled with an interest is not enough. The interest must be stated in the power of attorney. In this case, the mortgage on the improvements in favor of the agent was not such an interest, especially since it was not mentioned in the power of attorney and had nothing to do with it. Without an agency coupled with an interest, the agency terminated upon the principal’s death, and the agent could no longer validly convey the land.
• Homestead Prohibition under the Public Land Act — Lands acquired under the free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of approval of the application and for a term of five years from and after the date of issuance of the patent or grant, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period; but the improvements or crops on the land may be mortgaged or pledged to qualified persons, associations, or corporations. Any encumbrance or alienation in violation of the prohibition is null and void. The Court applied this rule by holding that the power of attorney, executed within the five-year period, would have subjected the homestead to an encumbrance in violation of the law.
• Effect of a Void Sale on Reimbursement — Where a sale is null and void, the vendee cannot compel the lawful owners or heirs to reimburse the consideration he paid to the unauthorized agent. The vendee’s right of action is against the agent, without prejudice to the mortgagee’s right to foreclose a valid mortgage on the improvements if the mortgage debt remains unpaid.

• “A mere statement in the power of attorney that it is coupled with an interest is not enough. In what does such interest consist must be stated in the power of attorney.” — This passage states the controlling rule on agency coupled with an interest and explains why the power of attorney in this case was not irrevocable.
• “As the agency was not coupled with an interest, it was terminated upon the death of Tiburcio del Rosario, the principal, sometime in December 1945, and Primitivo Abad, the agent, could no longer validly convey the parcel of land to Teodorico Abad on 9 June 1947.” — This is the ratio decidendi for the nullity of the sale: the agency had already terminated by the principal’s death.
• “Lands acquired under the free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of the issuance of the patent or grant, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period; but the improvements or crops on the land may be mortgaged or pledged to qualified persons, associations, or corporations.” — This is the statutory provision applied by the Court to hold that the power of attorney, executed within the prohibitory period, would have violated the Public Land Act.
• “As the sale to Teodorico Abad is null and void, the appellees can not be compelled to reimburse Teodorico Abad for what he had paid to Primitivo Abad. The former’s right of action is against the latter, without prejudice to the right of Primitive Abad to foreclose the mortgage on the improvements of the parcel of land if the mortgage debt is not paid by the appellees, as heirs and successors-in-interest of the mortgagor.” — This passage resolves the reimbursement issue and preserves the mortgagee’s remedy against the improvements.

• Section 116, Public Land Act (Act No. 2874) — Provides that lands acquired under the free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of approval of the application and for five years from and after the issuance of the patent or grant, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period; but the improvements or crops on the land may be mortgaged or pledged to qualified persons, associations, or corporations. The Court applied this provision to hold that the power of attorney, executed on 24 February 1937, within five years from the 12 December 1936 homestead patent, would have subjected the land to a prohibited encumbrance.
• Section 122, Public Land Act (Act No. 2874) — Provides that the encumbrance or alienation of lands acquired by free patent or homestead in violation of the prohibition is null and void. The Court relied on this provision in treating the sale and the power of attorney as invalid under the homestead law.

Paras, C.J., Bengzon, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., and Endencia, JJ., concurred.