San Miguel Foods, Inc. vs. Alova and Pution

A mortgage executed by an agent after the principal's death is void, but if the agent signs in her personal capacity and is a co-owner of the property, the mortgage is valid to the extent of her undivided share.

Meliton Alova executed an SPA in favor of his daughter, Jessica, over a parcel of conjugal land. After Meliton's death, Jessica used this SPA to secure a credit line and mortgage the property to San Miguel Foods, Inc. (SMFI) for a personal obligation. Upon default, SMFI foreclosed. The respondents (Meliton's widow and another daughter) sued to annul the mortgage and foreclosure.

• Filed in RTC (Civil Case No. 05-12639).
• RTC declared the mortgage void as to Meliton's 1/2 share but valid as to the shares of his wife (Felicidad) and daughter (Jessica) under succession.
• CA modified, declaring the entire mortgage and foreclosure void.
• SC partly granted SMFI's petition.

• Meliton Alova (principal) executed an SPA for his daughter, Jessica (agent) over conjugal land (TCT T-60482).
• Meliton died on October 31, 1998.
• On September 2, 2003, Jessica used the SPA to secure a personal credit line from SMFI with a real estate mortgage over the property.
• Jessica defaulted; SMFI foreclosed.
• Respondents (Felicidad Alova and Decelyn Pution) filed a complaint for annulment.

• The SPA bore the marital conformity of Felicidad, binding her share.
• It had no knowledge of Meliton's death.
• Even if the agency was extinguished, the mortgage should be valid as to the shares of Felicidad and Jessica.

• The SPA was revoked by Meliton's death, making the mortgage void ab initio.
• Jessica signed the mortgage in her personal capacity, not on behalf of Meliton.
• The entire mortgage and foreclosure proceedings are void.

• Procedural Issues: N/A
• Substantive Issues:
  1. Whether the agency was extinguished by the principal's death.
  2. Whether the real estate mortgage is valid despite the agent's knowledge of the principal's death.
  3. Whether the mortgage is valid as to the agent's own share in the property.

• Procedural: N/A
• Substantive:
  1. Yes. Agency is extinguished by the death of the principal (Art. 1919, Civil Code). Exceptions under Arts. 1930 and 1931 do not apply.
  2. No. The mortgage is void as to the principal's (Meliton's) share because the agent (Jessica) acted after the agency was extinguished and signed the deed in her personal capacity, not as an agent.
  3. Yes. The mortgage is valid as to Jessica's undivided share in the property. As a co-owner by succession, she had the right to mortgage her share (Art. 493, Civil Code). The case is remanded to determine her exact share.

• Extinguishment of Agency by Death — Agency is personal and is extinguished by the death of the principal or agent (Art. 1919, Civil Code). Acts done after death are void unless covered by Arts. 1930 (common interest) or 1931 (agent's ignorance of death).
• Agent Must Act in Principal's Name — To bind the principal, the agent must execute the contract in the name of the principal. If the agent signs in her personal capacity, she binds only herself (Philippine Sugar Estates Dev. Co. v. Poizat doctrine).
• Co-Owner's Right to Mortgage Share — Each co-owner has full ownership of their undivided share and may alienate or mortgage it, with effect limited to their portion upon partition (Art. 493, Civil Code).

• "In order to bind the principal by a mortgage on real property executed by an agent, it must upon its face purport to be made, signed and sealed in the name of the principal, otherwise, it will bind the agent only." (Citing Poizat)
• "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."

• Philippine Sugar Estates Dev. Co., Ltd., Inc. v. Poizat — Established that an agent must sign a mortgage in the principal's name to bind the principal.
• Rural Bank of Bombon v. CA — Applied the Poizat doctrine; mortgage signed by agent in his own name binds only him.
• Far East Bank & Trust Co. v. Spouses Cayetano — Mortgage signed by agent and her husband in their individual capacities did not bind the principal.
• Bucton v. Rural Bank of El Salvador, Inc. — Agent signing in her own name without indicating agency binds only herself.

• Civil Code, Art. 1868 — Definition of agency.
• Civil Code, Art. 1919(3) — Agency extinguished by death of principal or agent.
• Civil Code, Art. 1930 — Exception: agency continues if constituted in common interest of principal and agent.
• Civil Code, Art. 1931 — Exception: acts done without knowledge of principal's death are valid for third persons in good faith.
• Civil Code, Art. 2085 — Essential requisites of a mortgage contract.
• Civil Code, Art. 493 — Rights of a co-owner over their undivided share.