PRESIDENTIAL DECREE No.

1529

AMENDING AND CODIFYING THE LAWS RELATIVE TO REGISTRATION OF PROPERTY

AND FOR OTHER PURPOSES
Section 66. Trust with power of sale, etc., how expressed. If the instrument creating or declaring
a trust or other equitable interest contains an express power to sell, mortgage or deal with the
land in any manner, such power shall be stated in the certificate of title by the words "with power
to sell", or "power to mortgage", or by apt words of description in case of other powers. No
instrument which transfers, mortgages or in any way deals with registered land in trust shall be
registered, unless the enabling power thereto is expressly conferred in the trust instrument, or
unless a final judgment or order of a court of competent jurisdiction has construed the
instrument in favor of the power, in which case a certified copy of such judgment or order may
be registered.

Article 1877 of the Civil Code of the Philippines

An agency couched in general terms comprises only acts of administration, even if the principal
should state that he withholds no power or that the agent may execute such acts as he may
consider appropriate, or even though the agency should authorize a general and unlimited
management.

This means, an agent, even if given a general power of attorney, cannot do acts of ownership
over the principal’s properties, unless specifically authorized in the general power of attorney
over a specific property. In which case, that document becomes a special power of attorney
already, insofar as that specific property and transaction is concerned.

Under Article 1878 of the Civil Code, a special power of attorney is necessary in cases where
real rights over immovable property are created or conveyed.

In LRC Consulta No. 123, Register of Deeds of Albay, Nov. 10, 1956, it stated that:

Whether the instrument be denominated as "general power of attorney" or "special power of

attorney", what matters is the extent of the power or powers contemplated upon the agent or
attorney in fact. If the power is couched in general terms, then such power cannot go beyond
acts of administration. However, where the power to sell is specific, it not being merely implied,
much less couched in general terms, there can not be any doubt that the attorney in fact may
execute a valid sale. An instrument may be captioned as "special power of attorney" but if the
powers granted are couched in general terms without mentioning any specific power to sell or
mortgage or to do other specific acts of strict dominion, then in that case only acts of
administration may be deemed conferred.

These are necessary over the following cases, according to Article 1878:

1) To make such payments as are not usually considered as acts of administration;

2) To effect novations which put an end to obligations already in existence at the time the
agency was constituted;

3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a

judgment, to waive objections to the venue of an action or to abandon a prescription already
acquired;

4) To waive any obligation gratuitously;

5) To enter into any contract by which the ownership of an immovable is transmitted or acquired
either gratuitously or for a valuable consideration;

6) To make gifts, except customary ones for charity or those made to employees in the business
managed by the agent;

7) To loan or borrow money, unless the latter act be urgent and indispensable for the
preservation of the things which are under administration;

8) To lease any real property to another person for more than one year;

9) To bind the principal to render some service without compensation;

10) To bind the principal in a contract of partnership;

11) To obligate the principal as a guarantor or surety;

12) To create or convey real rights over immovable property;

13) To accept or repudiate an inheritance;

14) To ratify or recognize obligations contracted before the agency;

15) Any other act of strict dominion.

There was also nothing in the language of the SPA from which we could deduce
the intention of Perla to include the subject property therein. We cannot attribute
such alleged intention to Perla who executed the SPA when the language of the
instrument is bare of any indication suggestive of such intention. Contrariwise, to
adopt the intent theory advanced by the respondent, in the absence of clear and
convincing evidence to that effect, would run afoul of the express tenor of the
SPA and thus defeat Perlas true intention.

JMA House, Incorporated v. Sta. Monica Industrial and Development

Corporation,[13] thus:
 
[T]he law is that if the terms of a contract are clear and leave no doubt upon
the intention of the contracting parties, the literal meaning of its stipulation
shall control. When the language of the contract is explicit, leaving no
doubt as to the intention of the drafters, the courts may not read into it [in]
any other intention that would contradict its main import. The clear terms of
the contract should never be the subject matter of interpretation. Neither
abstract justice nor the rule on liberal interpretation justifies the creation of
a contract for the parties which they did not make themselves or the
imposition upon one party to a contract or obligation not assumed simply or
merely to avoid seeming hardships. The true meaning must be enforced, as
it is to be presumed that the contracting parties know their scope and
effects.
Angeles v. Philippine National Railways (PNR), G.R. No. 150128, 31 August 2006

A power of attorney is only but an instrument in writing by which a person, as

principal, appoints another as his agent and confers upon him the authority to
perform certain specified acts on behalf of the principal. The written authorization
itself is the power of attorney, and this is clearly indicated by the fact that it has
also been called a letter of attorney. Its primary purpose is not to define the
authority of the agent as between himself and his principal but to evidence the
authority of the agent to third parties with whom the agent deals.
The letter under consideration is sufficient to constitute a power of
attorney. Except as may be required by statute, a power of attorney is valid
although no notary public intervened in its execution

MERCADO vs. ALLIED BANKING CORPORATION G.R. No. 171460 July 24, 2007
The law, which must look after the interests of all, cannot permit a man to express
himself in a vague and general way with reference to the right he confers upon another
for the purpose of alienation or hypothecation, whereby he might be despoiled of all he
possessed and be brought to ruin, such excessive authority must be set down in the
most formal and explicit terms, and when this is not done, the law reasonably presumes
that the principal did not mean to confer it.

** In this case, we are not convinced that the property covered by TCT No. 106338
registered with the Registry of Deeds of Pasig (now Makati) is the same as the subject
property covered by TCT No. RT-18206 (106338) registered with the Registry of Deeds of
Quezon City. The records of the case are stripped of supporting proofs to verify the
respondents claim that the two titles cover the same property. It failed to present any
certification from the Registries of Deeds concerned to support its assertion. Neither did
respondent take the effort of submitting and making part of the records of this case
copies of TCTs No. RT-106338 of the Registry of Deeds of Pasig (now Makati) and RT-
18206 (106338) of the Registry of Deeds of Quezon City, and closely comparing the
technical descriptions of the properties covered by the said TCTs. The bare and
sweeping statement of respondent that the properties covered by the two certificates
of title are one and the same contains nothing but empty imputation of a fact that could
hardly be given any evidentiary weight by this Court.

Having arrived at the conclusion that Julian was not conferred by Perla with the
authority to mortgage the subject property under the terms of the SPA, the real estate
mortgages Julian executed over the said property are therefore unenforceable.

***Elaborating, respondent claims to have carefully verified Julians authority over

the subject property which was validly contained in the SPA.

Arrofo v. Quio,[20] we have elucidated that:

 
[Settled is the rule that] a person dealing with registered lands [is not
required] to inquire further than what the Torrens title on its face
indicates. This rule, however, is not absolute but admits of
exceptions. Thus, while its is true, x x x that a person dealing with
registered lands need not go beyond the certificate of title, it is likewise
a well-settled rule that a purchaser or mortgagee cannot close his eyes
to facts which should put a reasonable man on his guard, and then
claim that he acted in good faith under the belief that there was no
defect in the title of the vendor or mortgagor. His mere refusal to face up
the fact that such defect exists, or his willful closing of his eyes to the
possibility of the existence of a defect in the vendors or mortgagors title,
will not make him an innocent purchaser for value, if it afterwards develops
that the title was in fact defective, and it appears that he had such notice of
the defect as would have led to its discovery had he acted with the measure
of precaution which may be required of a prudent man in a like situation.

***Byputting blinders on its eyes, and by refusing to see the patent defect in the
scope of Julians authority, easily discernable from the plain terms of the SPA,
respondent cannot now claim to be an innocent mortgagee.
 Abad v. Guimba,[21] we laid down the principle that where the mortgagee
does not directly deal with the registered owner of real property, the law requires
that a higher degree of prudence be exercised by the mortgagee, thus:
 
While [the] one who buys from the registered owner does not need to look
behind the certificate of title, one who buys from [the] one who is not [the]
registered owner is expected to examine not only the certificate of title but
all factual circumstances necessary for [one] to determine if there are any
flaws in the title of the transferor, or in [the] capacity to transfer the land.
Although the instant case does not involve a sale but only a mortgage, the
same rule applies inasmuch as the law itself includes a mortgagee in the
term purchaser.[22]

Article 1403, Civil Code of the Philippines.

On a last note, we find that the real estate mortgages constituted over the subject
property are unenforceable and not null and void, as ruled by the RTC. It is best to
reiterate that the said mortgage was entered into by Julian on behalf of Perla
without the latters authority and consequently, unenforceable under Article
1403(1) of the Civil Code. Unenforceable contracts are those which cannot be
enforced by a proper action in court, unless they are ratified, because either they
are entered into without or in excess of authority or they do not comply with the
statute of frauds or both of the contracting parties do not possess the required
legal capacity.[26] An unenforceable contract may be ratified, expressly or
impliedly, by the person in whose behalf it has been executed, before it is
revoked by the other contracting party.[27] Without Perlas ratification of the same,
the real estate mortgages constituted by Julian over the subject property cannot
be enforced by any action in court against Perla and/or her successors in interest.

Incapacity to buy:
Agents, the property whose administration or sale may have been entrusted to them, unless the
consent of the principal has been given;
*This incapacity rests on the principle that the agent and principal rest on one juridical person.
The agent stands on fiduciary relationship with his principal. He is prohibited to buy the property
he is supposed to sell unless the principal consented thereto.
To render an account of his transactions and to deliver to the principal whatever he may have
received by virtue of the agency [Article 1891, Civil Code];