DURAN vs.

IAC

FACTS : Petitioner Circe S. Duran owned two (2) parcels of land which she had purchased from the
Moja Estate. She left the Philippines in June 1954 and returned in May 1966.

In 1963, a deed of sale of the said lot was made in favor of Circe’s mother and mortgages the same
to private respondent Erlinda B. Marcelo-Tiangco. When petitioner came to know about the
mortgage made by her mother, she wrote the Register of Deeds of Caloocan City informing the latter
that she had not given her mother any authority to sell or mortgage any of her properties in the
Philippines.

When her mother failed to redeem the mortgage properties, foreclosure proceedings were initiated
by private respondent Erlinda B. Marcelo Tiangco and, ultimately, the sale by the sheriff and the
issuance of Certificate of Sale in favor of the latter.

Petitioner Circe S. Duran claims that the Deed of Sale in favor of her mother Fe S. Duran is a
forgery, saying that at the time of its execution in 1963 she was in the United States. On the other
hand, the adverse party alleges that the signatures of Circe S. Duran in the said Deed are genuine
and, consequently, the mortgage made by Fe S. Duran in favor of private respondent is valid.

ISSUE : WON private respondent was a buyer in good faith and for value.

HELD :

Good faith consists in the possessor's belief that the person from whom he received the thing was
the owner of the same and could convey his title. Good faith, while it is always to be presumed in the
absence of proof to the contrary, requires a well-founded belief that the person from whom title was
received was himself the owner of the land, with the right to convey it. There is good faith where
there is an honest intention to abstain from taking any unconscientious advantage from another.

In the case at bar, private respondents, in good faith relied on the certificate of title in the name of Fe
S. Duran and as aptly stated by respondent appellate court "[e]ven on the supposition that the sale
was void, the general rule that the direct result of a previous illegal contract cannot be valid (on the
theory that the spring cannot rise higher than its source) cannot apply here for We are confronted
with the functionings of the Torrens System of Registration. The doctrine to follow is simple enough:
a fraudulent or forged document of sale may become the ROOT of a valid title if the certificate of title
has already been transferred from the name of the true owner to the name of the forger or the name
indicated by the forger."

Thus, where innocent third persons relying on the correctness of the certificate of title issued,
acquire rights over the property, the court cannot disregard such rights and order the total
cancellation of the certificate for that would impair public confidence in the certificate of title;
otherwise everyone dealing with property registered under the torrens system would have to inquire
in every instance as to whether the title had been regularly or irregularly issued by the court. Indeed,
this is contrary to the evident purpose of the law.

ARENAS vs. RAYMUNDO

FACTS : Estanislaua Arenas was the owner and proprietor of the jewelry, alleged that the jewelries
was delivered to Elena de Vega to sell on commission, and that the latter, in turn, delivered it to
Conception Perello, likewise to sell on commission, but that Perello, instead of fulfilling her trust,
pledged the jewelry in the defendant's pawnshop and appropriated to her own use the money
thereby obtained.

Conception Perello was prosecuted for estafa, convicted, and the judgment became final; that the
said jewelry was then under the control and in the possession of the defendant, as a result of the
pledge by Perello, and that the former refused to deliver it to the plaintiffs (owner), wherefore
counsel for the plaintiffs asked that judgment be rendered sentencing the defendant to make
restitution of the said jewelry and to pay the costs.

The trial court rendered judgment sentencing the defendant to restore to the plaintiff spouses the
jewelry described in the complaint, the right being reserved to the defendant to institute his action
against the proper party. The counsel for the defendant excepted to this judgment, asked that the
same be set aside, and a new trial granted. This motion was denied, exceptions was taken by the
appellant, and the proper bill of exceptions was duly approved certified to, and forwarded to the clerk
of this court.

ISSUE : WON defendant Raymundo is entitled to retain the thing pledge.

HELD : The aforementioned decision, No. 3890, Varela vs. Finnick, recites among other
considerations, the following:

The exception contained in paragraph 3 of said article is not applicable to the present case
because a pawnshop does not enjoy the privilege established by article 464 of the Civil
Code. The owner of the loan office of Finnick Brothers, notwithstanding the fact that he acted
in good faith, did not acquire the jewels at a public sale; it is not a question of public property,
securities, or other such effects, the transfer, sale, or disposal of which is subject to the
provisions of the Code of Commerce. Neither does a pawnshop enjoy the privilege granted
to a monte de piedad; therefore, Josefa Varela, who lost said jewels and was deprived of the
same in consequence of a crime, is entitled to the recovery thereof from the pawnshop of
Finnick Brothers, where they were pledged; the latter can not lawfully refuse to comply with
the provisions of article 120 of the Penal Code, as it is a question of jewels which has been
misappropriated by the commission of the crime of estafa, and the execution of the sentence
which orders the restitution of the jewels can not be avoided because of the good faith with
which the owner of the pawnshop acquired them, inasmuch as they were delivered to the
accused, who was not the owner nor authorized to dispose of the same.

Even supposing that the defendant Raymundo had acted in good faith in accepting the pledge of the
jewelry in litigation, even then he would not be entitled to retain it until the owner thereof reimburse
him for the amount loaned to the embezzler, since the said owner of the jewelry, the plaintiff, did not
make any contract with the pledgee, that would obligate him to pay the amount loaned to Perello,
and the trial record does not disclose any evidence, even circumstantial, that the plaintiff Arenas
consented to or had knowledge of the pledging of her jewelry in the pawnshop of the defendant.

For this reason, and because Conception Perello was not the legitimate owner of the jewelry which
she pledged to the defendant Raymundo, for a certain sum that she received from the latter as a
loan, the contract of pledge entered the jewelry so pawned can not serve as security for the payment
of the sum loaned, nor can the latter be collected out of the value of the said jewelry.

Article 1857 of the Civil Code prescribes as one of the essential requisites of the contracts of pledge
and of mortgage, that the thing pledged or mortgaged must belong to the person who pledges or
mortgages it. This essential requisite for the contract of pledge between Perello and the defendant
being absent as the former was not the owner of the jewelry given in pledge, the contract is as
devoid of value and force as if it had not been made, and as it was executed with marked violation of
an express provision of the law, it can not confer upon the defendant any rights in the pledged
jewelry, nor impose any obligation toward him on the part of the owner thereof, since the latter was
deprived of her possession by means of the illegal pledging of the said jewelry, a criminal act.

Between the supposed good faith of the defendant Raymundo and the undisputed good faith of the
plaintiff Arenas, the owner of the jewelry, neither law nor justice permit that the latter, after being the
victim of the embezzlement, should have to choose one of the two extremes of a dilemma, both of
which, without legal ground or reason, are injurious and prejudicial to her interest and rights, that is,
she must either lose her jewelry or pay a large sum received by the embezzler as a loan from the
defendant, when the plaintiff Arenas is not related to the latter by any legal or contractual bond out of
which legal obligations arise.

ALCANTARA vs. ALINEA

FACTS :

Plaintiff filed a complaint to order the defendant to deliver to him the house and lot claimed and pay
him in addition the rent and cost of the action. He alleged that the defendants borrowed from him a
sum of money under a agreement that if, after the expiration of the loan, said amount should not be
paid it would be understood that the house and lot owned by the defendants be considered as
absolutely sold to the plaintiff for the said sum; the time of payment has expired and no payment has
been made, the defendants refuse to deliver the said property.

Defendants answered denying all the allegations except those which were expressly admitted, and
alleged that they offered to pay the plaintiff, but the plaintiff refused to accept the same, therefore
they persisted in making said offer and tender of payment, placing at the disposal of the plaintiff the
said amount first tendered; and defendants asked for the costs of action.

The trial court rendered a judgment ordering the defendant to deliver the property to the plaintiff and
to pay the cost of action. The defendants asked for a new trial of the case on the ground that the
findings of the court below in its decision were plainly contrary to law, which motion was overruled.

ISSUE : WON the contract of sale is valid.

HELD : Either one of the contracts are perfectly legal and both are authorized respectively by articles
1451, 1740, and 1753, and those following, of the Civil Code. The fact that the parties have agreed
at the same time, in such a manner that the fulfillment of the promise of sale would depend upon the
nonpayment or return of the amount loaned, has not produced any charge in the nature and legal
conditions of either contract, or any essential defect which would tend to nullify the same.

If the promise of sale is not vitiated because, according to the agreement between the parties
thereto, the price of the same is to be the amount loaned and not repaid, neither would the loan be
null or illegal, for the reason that the added agreement provides that in the event of failure of
payment the sale of property as agreed will take effect, the consideration being the amount loaned
and not paid. No article of the Civil Code, under the rules or regulations of which such double
contract was executed, prohibits expressly, or by inference from any of its provisions, that an
agreement could not be made in the form in which the same has been executed; on the contrary,
article 1278 of the aforesaid code provides that "contracts shall be binding, whatever may be the
form in which they may have been executed, provided the essential conditions required for their
validity exist." This legal prescription appears firmly sustained by the settled practice of the courts.
The property, the sale of which was agreed to by the debtors, does not appear mortgaged in favor of
the creditor, because in order to constitute a valid mortgage it is indispensable that the instrument be
registered in the Register of Property, in accordance with article 1875 of the Civil Code, and the
document of contract, Exhibit A, does not constitute a mortgage, nor could it possibly be a mortgage,
for the reason of said document is not vested with the character and conditions of a public
instrument.

By the aforesaid document, Exhibit A, said property could not be pledged, not being personal
property, and notwithstanding the said double contract the debtor continued in possession thereof
and the said property has never been occupied by the creditor.

Neither was there ever any contract of antichresis by reason of the said contract of loan, as is
provided in articles 1881 and those following of the Civil Code, inasmuch as the creditor-plaintiff has
never been in possession thereof, nor has he enjoyed the said property, nor for one moment ever
received its rents; therefore, there are no proper terms in law, taking into consideration the terms of
the conditions contained in the aforesaid contract, whereby this court can find that the contract was
null, and under no consideration whatever would it be just to apply to the plaintiff articles 1859 and
1884 of the same code.

The contract ( pactum commissorium) referred to in Law 41, title 5, and law 12, title 12, of the
fifth Partida, and perhaps included in the prohibition and declaration of nullity expressed in articles
1859 and 1884 of the Civil Code, indicates the existence of the contracts of mortgage or of pledge or
that of antichresis, none of which have coincided in the loan indicated herein.

Separate Opinions

WILLARD, J., dissenting:

This contract violates the fundamental principle of the Spanish law, which does not permit a debtor,
at the time he secures a loan of money, to make an agreement whereby the mere failure to pay the
loan at maturity shall divest him irrevocably of allow his interest in the specific property mentioned in
the agreement without any right on his part to redeem or to have the property sold to pay the debt.
(Civil Code, arts. 1859, 1872, and 1884.) I therefore dissent.

UY TONG vs. CA

FACTS :

Petitioners Uy Tong and Kho Po Giok (SPOUSES) used to be the owners of Apartment together
with the leasehold right over the land on which the building stands. The land is registered in the
name of Ligaya Investments, Inc.. It appears that Ligaya Investments, Inc. owned the building which
houses the apartment units but sold said apartment and leased a portion of the land in which the
building stands to the SPOUSES.

Spouses purchased from private respondent Bayanihan Automotive, Inc. (BAYANIHAN) 7 units of
motor vehicles. The transaction was evidenced by a written "Agreement" wherein stated that if the
vendee fails to pay, the vendor shall become automatically the owner of the apartment.
Spouses failed to pay the balance of the purchased, due to this Bayanihan filed an action for specific
performance.

The trial court rendered a judgment in favor of Bayanihan ordering the defendant to pay the balance
to the plaintiff and in the event of failure to do so , they are hereby to execute the deed of absolute
sale and or the assignment of the leasehold right.

An order for execution pending appeal was issued by the trial court and a deed of assignment was
executed by the Spouses over the apartment together with the leasehold right over the land on
which the building stands.

Notwithstanding the execution of the deed of assignment the SPOUSES remained in possession of
the premises. Despite the expiration of the said period, the SPOUSES failed to surrender
possession of the premises in favor of BAYANIHAN. This prompted BAYANIHAN to file an ejectment
case against them. This action was however dismissed on the ground that BAYANIHAN was not the
real party in interest, not being the owner of the building.

After demands to vacate the subject apartment made by BAYANIHAN's counsel was again ignored
by the SPOUSES, an action for recovery of possession with damages was filed. The case was
decided in favor of bayanihan.

Not satisfied with this decision, the SPOUSES appealed to the Court of Appeals. The respondent
Court of Appeals affirmed in toto the decision appealed from. A motion for reconsideration of the
said decision was denied by the respondent Court.

ISSUE : WON the deed of assignment is null and void because it is in the nature of a pactum
commissoriumand/or was borne out of the same.

HELD : The prohibition on pactum commissorium stipulations is provided for by Article 2088 of the
Civil Code:

Art. 2088. The creditor cannot appropriate the things given by way of pledge or
mortgage, or dispose of the same. Any stipulation to the contrary is null and void.

The aforequoted provision furnishes the two elements for pactum commissorium to exist: (1) that
there should be a pledge or mortgage wherein a property is pledged or mortgaged by way of security
for the payment of the principal obligation; and (2) that there should be a stipulation for an automatic
appropriation by the creditor of the thing pledged or mortgaged in the event of non-payment of the
principal obligation within the stipulated period.

A perusal of the terms of the questioned agreement evinces no basis for the application of
the pactum commissorium provision. First, there is no indication of 'any contract of mortgage entered
into by the parties. It is a fact that the parties agreed on the sale and purchase of trucks.

Second, there is no case of automatic appropriation of the property by BAYANIHAN. When the
SPOUSES defaulted in their payments of the second and third installments of the trucks they
purchased, BAYANIHAN filed an action in court for specific performance. The trial court rendered
favorable judgment for BAYANIHAN and ordered the SPOUSES to pay the balance of their
obligation and in case of failure to do so, to execute a deed of assignment over the property involved
in this case. The SPOUSES elected to execute the deed of assignment pursuant to said judgment.
Clearly, there was no automatic vesting of title on BAYANIHAN because it took the intervention of
the trial court to exact fulfillment of the obligation, which, by its very nature is ". . anathema to the
concept of pacto commissorio" [Northern Motors, Inc. v. Herrera, G.R. No. L-32674, February 22,
1973, 49 SCRA 392]. And even granting that the original agreement between the parties had the
badges of pactum commissorium, the deed of assignment does not suffer the same fate as this was
executed pursuant to a valid judgment.

This being the case, there is no reason to impugn the validity of the said deed of assignment.

DBP vs CA

FACTS :

Plaintiff Lydia P. Cuba obtained loans from the Development Bank of the Philippines under the terms
stated in the Promissory Notes. As security for said loans, Cuba executed 2 deeds of assignment of
her leasehold rights over the subject fishpond. Plaintff failed to pay her loan.

Without foreclosure proceedings, whether judicial or extra-judicial, defendant DBP appropriated the
Leasehold Rights of plaintiff Lydia Cuba over the fishpond. DBP executed a Deed of conditional sale
of the leasehold rights in favor of the Cuba. Letter to repurchase was sent by Cuba to DBP, which
the latter accepted.

After the Deed of Conditional Sale was executed in favor of plaintiff Lydia Cuba, a new Fishpond
Lease Agreement was issued by the Ministry of Agriculture and Food in favor of plaintiff Lydia Cuba
only, excluding her husband;

Plaintiff Lydia Cuba failed to pay the amortizations stipulated in the Deed of Conditional Sale. Then,
entered with the DBP a temporary arrangement whereby in consideration for the deferment of the
Notarial Rescission of Deed of Conditional Sale, plaintiff Lydia Cuba promised to make certain
payments as stated in temporary Arrangement. Defendant DBP thereafter sent a Notice of
Rescission thru Notarial Act which was received by plaintiff Lydia Cuba. After the Notice of
Rescission, defendant DBP took possession of the Leasehold Rights of the fishpond.

DBP took possession of the Leasehold Rights over the fishpond in question, DBP advertised in the
SUNDAY PUNCH the public bidding 1984, to dispose of the property;Thereafter executed a Deed of
Conditional Sale in favor of defendant Agripina Caperal.Thereafter, defendant Caperal was awarded
Fishpond Lease Agreement by the Ministry of Agriculture and Food.

Trial Court resolved the issue in favor of CUBA by declaring that DBP's taking possession and
ownership of the property without foreclosure was plainly violative of Article 2088 of the Civil Code
which provides as follows:

Art. 2088. The creditor cannot appropriate the things given by way of pledge or
mortgage, or dispose of them. Any stipulation to the contrary is null and void.

The trial court also declared invalid condition no. 12 of the Assignment of Leasehold Rights for being
a clear case of pactum commissorium expressly prohibited and declared null and void by Article
2088 of the Civil Code.
CUBA and DBP interposed separate appeals from the decision to the Court of Appeals. The former
sought an increase in the amount of damages, while the latter questioned the findings of fact and
law of the lower court.

The CA reversed the decision of the trial court declaring that the act of DBP in appropriating Cuba's
leasehold rights and interest under Fishpond Lease Agreement was valid, also with regard the
deeds of assignment executed by Cuba in favor of DBP; the deed of conditional sale between CUBA
and DBP; and the deed of conditional sale between DBP and Caperal, the Fishpond Lease
Agreement in favor of Caperal, and the assignment of leasehold rights executed by Caperal in favor
of DBP.

ISSUE : WON the deed of assignment was a pactum commissorium contrary to Article 2088 of the
Civil Code.

HELD :

We do not, however, buy CUBA's argument that condition no. 12 of the deed of assignment
constituted pactum commissorium. Said condition reads:

12. That effective upon the breach of any condition of this assignment, the Assignor
hereby appoints the Assignee his Attorney-in-fact with full power and authority to
take actual possession of the property above-described, together with all
improvements thereon, subject to the approval of the Secretary of Agriculture and
Natural Resources, to lease the same or any portion thereof and collect rentals, to
make repairs or improvements thereon and pay the same, to sell or otherwise
dispose of whatever rights the Assignor has or might have over said property and/or
its improvements and perform any other act which the Assignee may deem
convenient to protect its interest. All expenses advanced by the Assignee in
connection with purpose above indicated which shall bear the same rate of interest
aforementioned are also guaranteed by this Assignment. Any amount received from
rents, administration, sale or disposal of said property may be supplied by the
Assignee to the payment of repairs, improvements, taxes, assessments and other
incidental expenses and obligations and the balance, if any, to the payment of
interest and then on the capital of the indebtedness secured hereby. If after disposal
or sale of said property and upon application of total amounts received there shall
remain a deficiency, said Assignor hereby binds himself to pay the same to the
Assignee upon demand, together with all interest thereon until fully paid. The power
herein granted shall not be revoked as long as the Assignor is indebted to the
Assignee and all acts that may be executed by the Assignee by virtue of said power
are hereby ratified.

The elements of pactum commissorium are as follows: (1) there should be a property mortgaged by
way of security for the payment of the principal obligation, and (2) there should be a stipulation for
automatic appropriation by the creditor of the thing mortgaged in case of non-payment of the
principal obligation within the stipulated period. 11

Condition no. 12 did not provide that the ownership over the leasehold rights would automatically
pass to DBP upon CUBA's failure to pay the loan on time. It merely provided for the appointment of
DBP as attorney-in-fact with authority, among other things, to sell or otherwise dispose of the said
real rights, in case of default by CUBA, and to apply the proceeds to the payment of the loan. This
provision is a standard condition in mortgage contracts and is in conformity with Article 2087 of the
Civil Code, which authorizes the mortgagee to foreclose the mortgage and alienate the mortgaged
property for the payment of the principal obligation.

DBP, however, exceeded the authority vested by condition no. 12 of the deed of assignment. As
admitted by it during the pre-trial, it had "[w]ithout foreclosure proceedings, whether judicial or
extrajudicial, . . . appropriated the [l]easehold [r]ights of plaintiff Lydia Cuba over the fishpond in
question." Its contention that it limited itself to mere administration by posting caretakers is further
belied by the deed of conditional sale it executed in favor of CUBA.

DBP cannot take refuge in condition no. 12 of the deed of assignment to justify its act of
appropriating the leasehold rights. As stated earlier, condition no. 12 did not provide that CUBA's
default would operate to vest in DBP ownership of the said rights. Besides, an assignment to
guarantee an obligation, as in the present case, is virtually a mortgage and not an
absolute conveyance of title which confers ownership on the assignee.

At any rate, DBP's act of appropriating CUBA's leasehold rights was violative of Article 2088 of the
Civil Code, which forbids a credit or from appropriating, or disposing of, the thing given as security
for the payment of a debt.

The fact that CUBA offered and agreed to repurchase her leasehold rights from DBP did not estop
her from questioning DBP's act of appropriation. Estoppel is unavailing in this case. As held by this
Court in some cases, estoppel cannot give validity to an act that is prohibited by law or against public
policy. Hence, the appropriation of the leasehold rights, being contrary to Article 2088 of the Civil
Code and to public policy, cannot be deemed validated by estoppel.

BUSTAMANTE vs. ROSEL

FACTS : Norma Rosel entered into a loan agreement with petitioner Natalia Bustamante and her
late husband Ismael C. Bustamante for the sum of P 100,000 and putting as collateral portion of his
parcel of land and in the event that she failed to pay, the lender has the option to buy or purchase
the collateral.

When the loan was about to mature, respondents proposed to buy the said collateral guarantee.
Petitioner, however, refused to sell and requested for extension of time to pay the loan and offered
to sell to respondents another residential lot located at Road 20, Project 8, Quezon City, with the
principal loan plus interest to be used as down payment. Respondents refused to extend the
payment of the loan and to accept the lot in Road 20 as it was occupied by squatters and petitioner
and her husband were not the owners thereof but were mere land developers entitled to subdivision
shares or commission if and when they developed at least one half of the subdivision area.

Hence, petitioner tendered payment of the loan to respondents which the latter refused to accept,
insisting on petitioner's signing a prepared deed of absolute sale of the collateral.

Respondents filed with the RTC a complaint for specific performance with consignation against
petitioner and her spouse. Respondents sent a demand letter asking petitioner to sell the collateral
pursuant to the option to buy embodied in the loan agreement.

On the other hand, petitioner filed in the RTC a petition for consignation, and deposited the amount
of P153,000.00 with the City Treasurer.
When petitioner refused to sell the collateral and barangay conciliation failed, respondents
consigned the amount of P47,500.00 with the trial court.

Trial court rendered a decision denying the plaintiff's prayer for the defendants' execution of the
Deed of Sale to Convey the collateral in plaintiffs' favor and ordering the defendant to pay the loan
with interest thereon.

Respondents appealed from the decision to the Court of Appeals. The Court of Appeals rendered
decision reversing the ruling of the RTC. Hence, this petition.

ISSUE : WON the stipulation in the loan contract was valid and enforceable.

HELD :

We note the eagerness of respondents to acquire the property given as collateral to guarantee the
loan. The sale of the collateral is an obligation with a suspensive condition. It is dependent upon the
happening of an event, without which the obligation to sell does not arise. Since the event did not
occur, respondents do not have the right to demand fulfillment of petitioner's obligation, especially
where the same would not only be disadvantageous to petitioner but would also unjustly enrich
respondents considering the inadequate consideration (P200,000.00) for a 70 square meter property
situated at Congressional Avenue, Quezon City.

Respondents argue that contracts have the force of law between the contracting parties and must be
complied with in good faith. 21 There are, however, certain exceptions to the rule, specifically Article
1306 of the Civil Code, which provides:

Art. 1306. The contracting parties may establish such stipulations, clauses, terms
and conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.

A scrutiny of the stipulation of the parties reveals a subtle intention of the creditor to acquire the
property given as security for the loan. This is embraced in the concept of pactum commissorium,
which is proscribed by law. 22

The elements of pactum commissorium are as follows: (1) there should be a property mortgaged by
way of security for the payment of the principal obligation, and (2) there should be a stipulation for
automatic appropriation by the creditor of the thing mortgaged in case of non-payment of the
principal obligation within the stipulated period. 23

In Nakpil vs. Intermediate Appellate Court, 24 we said:

The arrangement entered into between the parties, whereby Pulong Maulap was to
be "considered sold to him (respondent) . . . in case petitioner fails to reimburse
Valdes, must then be construed as tantamount to pactum commissorium which is
expressly prohibited by Art. 2088 of the Civil Code. For, there was to be automatic
appropriation of the property by Valdes in the event of failure of petitioner to pay the
value of the advances. Thus, contrary to respondent's manifestation, all the elements
of apactum commissorium were present: there was a creditor-debtor relationship
between the parties; the property was used as security for the loan; and there was
automatic appropriation by respondent ofPulong Maulap in case of default of
petitioner.
A significant task in contract interpretation is the ascertainment of the intention of the parties and
looking into the words used by the parties to project that intention. In this case, the intent to
appropriate the property given as collateral in favor of the creditor appears to be evident, for the
debtor is obliged to dispose of the collateral at the pre-agreed consideration amounting to practically
the same amount as the loan. In effect, the creditor acquires the collateral in the event of non
payment of the loan. This is within the concept of pactum commissorium. Such stipulation is void.

All persons in need of money are liable to enter into contractual relationships whatever the condition
if only to alleviate their financial burden albeit temporarily. Hence, courts are duty bound to exercise
caution in the interpretation and resolution of contracts lest the lenders devour the borrowers like
vultures do with their prey.