The Philippine National Bank v. Paz Agudelo y Gonzaga

Summary

The Supreme Court reversed a lower court judgment that held Paz Agudelo y Gonzaga liable for mortgage obligations contracted by her agent Mauro A. Garrucho. The Court applied Civil Code provisions on agency, particularly Article 1717, ruling that when an agent acts in his personal capacity without express authority from his principal, the principal is not bound by the agent's obligations. Garrucho had obtained loans from Philippine National Bank and secured them with mortgages on his principal's properties, but executed all documents in his personal capacity and exceeded his authority under the power of attorney. The Court emphasized that the bank should have verified the agent's authority before dealing with him. Since the principal obligor Garrucho was absolved and the plaintiff did not appeal that ruling, the Court applied the legal principle that accessory obligations cannot be enforced when the principal obligation is discharged, ultimately absolving Agudelo y Gonzaga from liability.