Diego v. Fernando
REITERATIONFacts
The Antecedents: Defendant Segundo Fernando executed a deed of mortgage in favor of plaintiff Cecilio Diego over two parcels of land to secure a loan of P2,000.00, without interest, payable within four years. Possession of the mortgaged properties was turned over to the mortgagee. The debtor failed to pay the loan after four years. Procedural History: Plaintiff filed an action for foreclosure of mortgage. Defendant's defense was that the transaction was one of antichresis, and that the loan had already been paid with the fruits collected by the plaintiff. The Petition: The defendant appealed the judgment of the Court of First Instance of Nueva Ecija, which found the transaction to be a mortgage and ordered foreclosure in case of non-payment, with modifications regarding the amount due.
Issue(s)
Whether the contract between the parties is one of mortgage or antichresis. Whether the mortgagee in possession is liable to account for the fruits of the mortgaged property.
Ruling
The judgment of the lower court is modified. The principal recovery of the plaintiff is reduced to P1,505.00. The plaintiff is obligated to render an accounting of all fruits received from the properties from the time of the filing of the action until full payment, or until foreclosure, which shall be deducted from the total amount due.
Ratio Decidendi
On the issue of whether the contract is a mortgage or antichresis: The Court held that the contract is a mortgage and not antichresis. While possession of the mortgaged properties was transferred to the mortgagee, there was no express agreement that the fruits would be applied to the payment of interest and principal. The Civil Code defines antichresis as a contract where the creditor, having been given possession of the property, is to apply its fruits to the payment of interest, if any, and thereafter to the principal. The absence of such an express stipulation, coupled with the fact that the loan was stated to be without interest, indicates that the parties intended a mortgage. The transfer of possession does not, by itself, alter the nature of the mortgage. The Court cited Legaspi and Salcedo vs. Celestial (66 Phil., 372) and Article 2132 of the Civil Code. On the issue of the mortgagee's liability for fruits: The Court ruled that the plaintiff, as a "mortgagee in possession," must account for the fruits of the mortgaged properties. Although the contract was a mortgage, the mortgagee in possession has obligations similar to those of an antichretic creditor. This includes the duty to account for the rents and profits, which are to be applied towards the discharge of the mortgage debt. The Court referenced Macapinlac vs. Gutierrez Repide (43 Phil., 770) and Enriquez vs. National Bank (55 Phil., 414). Since the loan was without interest and there was no express waiver by the mortgagor of his right to the fruits, the mortgagee cannot appropriate them. The trial court found that the plaintiff had received 55 cavans of palay, valued at P495.00, which must be deducted from the P2,000.00 loan. Therefore, the principal recovery is reduced to P1,505.00. The Court also clarified that legal interest from the filing of the action is permissible because the debt was not discharged, but the fruits received after the filing of the action must also be accounted for and deducted.
Main Doctrine
A contract where possession of mortgaged property is transferred to the mortgagee, but without an express agreement that the fruits thereof shall be applied to the payment of interest and principal, is a mortgage and not antichresis. The mortgagee in possession must account for the fruits received, which shall be deducted from the principal debt.