Civil Law Digest: GONZALO TUASON v. DOLORES OROZCO [G.R. No. L-2344, February 10, 1906]

TUASON V. OROZCO 

FACTS:

In 1890, Enrique Grupe and Dolores Orozco (wife of Juan Vargas) obtained a loan from Gonzalo Tuason secured by a mortgage on the property. The mortgage property (house) was referred to in the power of attorney executed by Juan Vargas, instituting Grupe as his agent. In the SPA, Enrique Grupe, was authorized to dispose of all his property, and particularly of a certain house and lot known as No. 24 Calle Nueva, Malate, in the city of Manila, for the price at which it was actually sold. He was also authorized to mortgage the house for the purpose of securing the payment of any amount advanced to his wife, Dolores Orozco who, inasmuch as the property had been acquired with funds belonging to the conjugal partnership, was a necessary party to its sale or incumbrance.

In the instrument evidencing the debt, Enrique Grupe acknowledges to have received from Gonzalo Tuason as a loan, the sum of 3,500 pesos in cash, to his entire satisfaction, which sum he promises to pay within one year thereafter. 

To secure the payment of the 2,200 pesos delivered to Dolores Orozco, Grupe mortgaged the house and lot referred to in the SPA. This instrument of debt was duly recorded in the Registry of Property.

TUASON filed this complaint for the recovery of the debt against the mortgaged property. 
However, Orozco denied having receiving the 2,200 pesos. She claims that the instrument is evidence of a debt personally incurred by Enrique Grupe for his own benefit, and not incurred for the benefit of his principal, Vargas.

ISSUE:

If the debtor can foreclose the mortgage to fulfill the liability of the principal incurred by his agent.

HELD:

YES. 

A debt incurred by the agent is binding directly upon the principal, provided the former acted, as in the present case, within the scope of his authority. (Art. 1727 of the Civil Code.) 

The fact that the agent has also bound himself to pay the debt does not relieve from liability the principal for whose benefit the debt was incurred. The individual liability of the agent constitutes in the present case a further security in favor of the creditor and does not affect or preclude the liability of the principal. 

In the present case the latter's liability was further guaranteed by a mortgage upon his property. The law does not provide that the agent can not bind himself personally to the fulfillment of an obligation incurred by him in the name and on behalf of his principal. On the contrary, it provides that such act on the part of an agent would be valid. (Art. 1725 of the Civil Code.)

The above mortgage being valid and having been duly recorded in the Register of Property, directly subjects the property thus encumbered, whoever its possessor may be, to the fulfillment of the obligation for the security of which it was created. (Art. 1876 of the  Civil Code and Art. 105 of the Mortgage Law.)