DIEGO V FERNANDO
August 25, 1960 | REYES, J.B.L., J.. | Review | Antichresis
PETITIONER: CECILIO DIEGO
RESPONDENT: SEGUNDO FERNANDO
SUMMARY: Fernando mortgaged two parcels of land to Diego to secure a P2k loan without interest. The land was placed in
Diego’s possession after executing the deed of mortgage. Fernando defaulted in payment, prompting Diego to file an action to
foreclose the mortgage. Fernando argued that the true transaction between them was one of antichresis. The SC ruled that it
was still a mortgage.
DOCTRINE: To be antichresis, it must be expressly agreed between creditor and debtor that the former, having been given
possession of the properties given as security, is to apply their fruits to the payment of the interest, if owing, and thereafter to
the principal of his credit.
FACTS:
1. Defendant Segundo Fernando DEBTOR executed a
deed of mortgage in favor of plaintiff Cecilio Diego
CREDITOR over two parcels of land registered in his
name to secure a P2k loan without interest, payable
within four years from the date of the mortgagee. After
the deed’s execution, possession of the mortgaged
properties was turned over to the mortgagee.
2. The FERNANDO defaulted despite several demands,
prompting Diego to file the present action for
foreclosure of mortgage. Fernando argued that the true
transaction between them was one of antichresis, not
mortgage, and that Diego had allegedly received a total
of 120 cavans of palay from the properties given as
security, which, at the rate of P10/cavan, represented a
value of P5.2k and that his debt had already been paid
with plaintiff still owing him a refund of about P2,720.
3. The CFI rendered judgment against the FERNANDO,
having found that nothing indicated that the contract was
not a true contract of mortgage; that the fact that
possession of the mortgaged properties were turned over
to the mortgagee did not alter the action; that the parties
must have intended that the mortgagee would collect the
fruits of the mortgaged properties as interest on the loan,
which agreement is not uncommon; and that the
evidence showed that plaintiff had already received 55
cavans of palay during the period of his possession.
ISSUE: WoN the contract between the parties was one
of antichresis – NOT ANTICHRESIS BECAUSE NOT
STATED THAT FRUITS ARE TO BE PAYMENT
FOR INTEREST
HELD: Judgment modified.
RATIO:
1. It is not an essential requisite of a mortgage that
possession of the mortgaged premises be retained by the
mortgagor. To be antichresis, it must be expressly agreed
between creditor and debtor that the former, having been
given possession of the properties given as security, is to
apply their fruits to the payment of the interest, if owing,
and thereafter to the principal of his credit.
2. Thus, if a contract of loan with security does not
stipulate the payment of interest but provides for the
delivery to the creditor by the debtor of the property
given as security in order that the latter may gather its
fruits, without stating that said fruits are to be applied to
the payment of interest, if any, and afterwards that of the
principal, the contract is a mortgage and not antichresis.
Hence, the contract in question here is a true mortgage
and not an antichresis.
3. However, this does not mean that appellee, having
received the fruits of the mortgaged properties, will be
allowed to appropriate them for himself and not be
required to account for them to the appellant. The
contract clearly provided that the loan was without
interest within four years from the date of the
instrument. There being no evidence that the parties had
intended to supersede such stipulation when the
possession of the properties was turned over the appellee
by another allowing the latter to collect the fruits as
interest on the loan.
3. The appellee’s true position under his contract with
appellant is a ‘mortgage in possession’; that is, ‘one who
has lawfully acquired actual or constructive possession
of the premises mortgaged to him, standing upon his
rights as mortgagee and not claiming under another title,
for the purpose of enforcing his security upon such
property or making its income help to pay his debt’. As
such mortgagee in possession, his rights and obligations
are similar to that of an antichretic creditor, with a right
to collect the credit with interest from the fruits,
returning the balance, if any, after deducting the
expenses.
4. Thus, the appellee, like an antichretic creditor, must
account for the value of the fruits received by him and
deduct if from the loan obtained by the appellant.
According to the TC’s findings, appellee had received
55 cavans of palay from the mortgaged properties until
the time he filed the action. At the rate of P9/cavan, as
admitted by the parties, the total value of the fruits
appellee received was P495. Deducting this from the
P2k loan, the appellant has only P1,505 left to pay to the
appellee.