C.N. HODGES vs.

CARLOTA SALAS and PAZ SALAS

(GR No. G.R. No. L-42958. October 21, 1936)

Facts:

The defendants, Salas and Salas, executed a Power of Attorney in favor of their brother-in law
Felix S. Yulo to enable him to obtain a loan and secure it with a mortgage on the real property
described in transfer certificate of title No. 3335. Under the said Power of Attorney, Yulo
obtained a loan, hence binding his principals jointly and severally to pay it within 10 years
subject to interest. In effect he signed a promissory note for the amount borrowed and executed a
deed of mortgage of the real property.

However, the amount loaned was not delivered to Yulo but rather the plaintiff and the agent, Yulo
had an agreement that the amount be used to pay the personal debts of the agent.

The defendants failed to pay at maturity the interest stipulated which should have been paid one
year in advance. Thus, plaintiff, Hodges therefore brought an action for foreclosure of the
mortgage. The defendants then counters such action that Yulo acted in excess of his authority.

Issue:

Whether or not, Felix Yulo, being the agent, was authorized to borrow money and use it as he
wished for his personal gain by virtue of the authority conferred by the defendants.

Ruling:

In the case of Manila Trading & Supply Co. vs. Uy Tiepo, the court held that an agent who used
the borrowed money for his personal gain or benefit is deemed to have exceeded the authority
conferred upon him under the power of attorney in which case should have been specific and
limited to a certain extent.

As substantially provided under Article 1881 of the Civil Code that an agent must act within the
scope of his authority and may do such acts as may be conducive to the accomplishment of the
purpose of the agency.

In the case at bar, Yulo exceeded the authority provided under the Power of Attorney by using the
loaned money for his personal benefit.