Agency Requiring Special Power of Attorney

Special powers of attorney are necessary in the following cases:

(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. (Art. 1878, CC)

May an agent specifically authorized to sell a property empowered to mortgage said property?

No, the agent is not empowered to mortgage the property. A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell. (Art. 1879, CC) If the agent mortgage the property, the contract is unenforceable. 

May an agent specifically authorized to compromise submit to arbitration?

No. A special power to compromise does not authorize submission to arbitration. (Art. 1880, CC)

Rationale: A principal may authorize his agent to compromise because of absolute confidence in the latter’s judgment and discretion to protect the former’s rights and obtain for him the best bargain in the transaction. If the transaction would be left in the hands of an arbitrator, said arbitrator may not enjoy the trust of the principal.

What happens if the agent is specifically authorized to submit to arbitration?

Then the arbitration award binds the principal, provided that the agent acted within the scope of his authority.

Jurisprudence:

● The right to commence action for collection of debts owing to principal is not an incident of strict ownership, which must be conferred upon express terms. (Germann & Co vs. Donaldson, G.R. No. L-439, November 11, 1901)

The power to legally compel the payment of debts owing to the principal is an express grant of the right to bring suit for the collection of such debts. (Germann & Co vs. Donaldson, G.R. No. L-439, November 11, 1901)

● Unless the contrary appears, the authority of an agent must be presumed to include all the necessary and usual means of carrying the agency into effect. (Macke vs. Camps, G.R. No. 2962, February 27, 1907)

● A power of attorney “to loan and borrow money” and to mortgage the principal’s property does not carry with it or imply that that the agent has a legal right to make the principal liable for the personal debts of the agent. (BPI vs De Coster, G.R. Nos. 25642 & 25643. November 12, 1926)

● Although the Civil Code expressly requires a special power of attorney in order that one may compromise an interest of another, it is neither accurate nor correct to conclude that its absence renders the compromise agreement void. In such a case, the compromise is merely unenforceable. (Dungo vs Lopena, G.R. No. L-18377, December 29, 1962)

● Special power of the attorney to mortgage real estate is limited to such authority and does not bind the grantor  personally to other obligations contracted by the grantee. (PNB vs. Sta. Maria, G.R. No. L-24765, August 29, 1969)

● There was no need to execute a separate and special power of attorney since the general power of attorney had expressly authorized the agent or attorney in fact the power to sell the subject property. The special power of attorney can be included in the general power when it is specified therein the act or transaction for which the special power is required. (Bravo-Guerrero vs Bravo, G.R. No. 152658, July 29, 2005)

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Agency