QUESTION NO. 4: Angela lent Basilio P 1,000,000.00.

To secure the loan, Basilio mortgaged a

parcel of land which he owns. In the real estate mortgage contract, Angela was given the power
to sell the land, with the proceeds to be applied to the payment of the loan and interest
thereon. Two years later, Basilio received an attractive offer for the mortgaged property and
gave notice to Angela that he was revoking her special authority to sell, although he assured
her that the mortgage would remain in force and effect. Angela challenges the revocation at
will, but Basilio counters that the mortgage more than sufficiently protects her credit. Decide.

ANSWER: A contract of agency exists between Angela and Basilio. By a contract of agency, a
person binds himself to render some service or to do something in representation or on behalf
of another, with the consent or authority of the latter. ( Article 1868 of the New Civil Code) In
the situation cited, Angela was given a power to sell the land mortgage by Basilio in the real
mortgage contract. Here, agents power to sell the land arises from the authority to sell
granted by the principal. Under a contract of agency, the principal gives to the agent the power
to do something for him and in his name.
As a general rule, the law recognizes the power to revoke an agency relationship by the
principal as an agency is a highly personal relationship and one built on trust and confidence.
(Villanueva, Cesar. Agency, Trusts, Partnerships and Joint Ventures, p.223) However, the sole
exception to the revocability rule of every agency relationship is when it comes to agency
coupled with interest. An agency is deemed as one coupled with an interest where it is
established for the mutual benefit of the principal and of the agent, or for the interest of the
principal and of third persons and it cannot be revoked by the principal so long as the interest
of the agent or of a third person subsist. (Lim vs. Saban 447 SCRA 232 (2004) In the case, the
authority to sell granted to Angela was for her benefit as the proceeds thereof would be
regarded as payment for the loan. A power to make a collection or sale out of the proceeds to
pay an existing debt due to the agent from the principal is a power coupled with interest.
Furthermore, under article 1927 of the New Civil Code, an agency cannot be revoked
when: a) a bilateral contract depends upon the agency for its fulfillment; b) it is the means of
fulfilling an obligation already contracted; and c) a partner is appointed as manager of a
partnership and the removal from management is unjustifiable. In the situation, the authority
to sell the land granted by Basilio to Angela is a means for the fulfillment of the mortgage
contract as the proceeds thereof would be applied to the payment of the loan and its interest
thereon. An agency coupled with interest cannot be terminated unilaterally by the principal
not until after the interest terminates. (De la Rama Steamship Co. vs. Tan, et. Al., 99 Phil. 1034)
Hence, Basilio cannot unilaterally revoke the agency unless he first pays Angela otherwise he
would be liable for damages.