In Philippine law, a Special Power of Attorney (SPA) is a powerful legal instrument that allows one person (the Principal) to authorize another (the Agent or Attorney-in-fact) to perform specific acts on their behalf. However, a common point of confusion arises when the Principal passes away: Can the Agent continue to use that SPA to sell property, withdraw funds, or sign contracts?
The short answer, governed by the Civil Code of the Philippines, is generally no.
The General Rule: Extinguishment of Agency
Under Article 1919 of the Civil Code, agency is extinguished by several causes, the third of which is the death of the principal or of the agent.
The legal rationale is that the relationship between a Principal and an Agent is founded on personal trust and representation. Since an Agent only derives their authority from the Principal, that authority cannot exist if the Principal no longer exists. Upon death, the rights and assets of the Principal are immediately transferred to their estate and heirs; therefore, the Agent no longer has a legal personality to represent.
The Exceptions: When an SPA Survives Death
While the general rule is that the SPA dies with the Principal, Article 1930 provides two specific exceptions where the agency remains in full force:
- If the Agency was constituted in the common interest of the Principal and the Agent: This occurs when the Agent has a financial or legal stake in the object of the agency.
- Example: A Principal owes the Agent money and executes an SPA allowing the Agent to sell a piece of land to satisfy that debt. Because the Agent has an interest in the transaction to recover their credit, the power survives the Principal's death.
- If the Agency was constituted in the interest of a third person who has accepted the stipulation in his favor: If the SPA was created to fulfill an obligation to a third party, it remains valid.
Validity of Acts Performed Without Knowledge of Death
There is a "saving clause" in Article 1931 regarding the validity of an Agent's actions immediately following the Principal's passing.
An act done by the Agent without knowledge of the death of the Principal is considered valid and fully effective, provided that the third party who contracted with the Agent also acted in good faith.
- The Caveat: Once the Agent becomes aware of the death, they must cease all actions under the SPA. Continuing to use the document while knowing the Principal is deceased may constitute fraud or lead to the nullity of the contract.
Legal Consequences of Unauthorized Use
If an Agent continues to use an SPA after the Principal’s death (outside the exceptions mentioned above), the following consequences may arise:
- Nullity of the Transaction: Any sale, transfer, or contract entered into may be declared void because the Agent lacked the capacity to represent the deceased.
- Liability for Damages: The Agent may be held personally liable to the heirs of the deceased for any loss of assets or damages incurred due to the unauthorized acts.
- Criminal Liability: In cases where the Agent deliberately conceals the death to withdraw bank funds or transfer titles, they may face criminal charges for estafa or falsification of public documents.
Practical Implications for Heirs and Third Parties
- For Banks and Government Agencies: Most institutions (like the LRA or BIR) require a fresh verification of the Principal’s status. If a bank discovers the Principal is deceased, they will immediately freeze the accounts and require Letters of Administration or an Extrajudicial Settlement of Estate instead of an SPA.
- For Buyers: If you are purchasing property from an Agent using an SPA, it is vital to verify that the Principal is still alive. A transaction finalized after the Principal's death—even if the SPA looks valid on paper—can be tied up in litigation by the rightful heirs for years.
Summary Table
| Scenario | Status of SPA |
|---|---|
| Principal is alive | Valid and effective. |
| Principal dies (General Rule) | Extinguished/Invalid. |
| Principal dies (Agent has interest in the object) | Remains Valid. |
| Agent acts without knowledge of death | Valid (if in good faith). |
| Agent acts knowing the Principal is dead | Void and potentially criminal. |
In the Philippine context, death effectively terminates the mandate of the Agent. The proper legal route following a death is no longer through an SPA, but through the settlement of the decedent's estate.