G.R. No.: 3227

Parties:
Plaintiff-Appellee: PEDRO ALCANTARA
Defendants-Appellants: AMBROSIO ALINEA, ET AL.

FACTS:
Pedro Alcantara filed a complaint against Ambrosio Alinea and Eudosia Belarmino, seeking the delivery of a house and lot and payment of monthly rent. Alcantara alleged that on February 29, 1904, the defendants borrowed 480 pesos, payable in January 1905. The agreement stipulated that if the loan was not repaid by the due date, the house and lot owned by the defendants would be considered absolutely sold to Alcantara for the said amount. The defendants failed to pay the loan by the stated deadline, and despite this, they refused to deliver the property to Alcantara, depriving him of potential rents.

The defendants, after their demurrer was overruled, generally and specifically denied the complaint’s allegations. They claimed the 480 pesos included interest, with the principal amount being only 200 pesos and the interest being 280 pesos. They admitted that the document falsely stated the debt as 480 pesos due to mutual agreement. As a special defense, they alleged they offered to pay 480 pesos, but Alcantara refused to accept it. They maintained their offer to pay and asked for costs.

The Court of First Instance ruled in favor of Alcantara, ordering the defendants to deliver the house and lot and to pay costs, but made no finding on damages due to a lack of proof. The defendants excepted to this decision and moved for a new trial, arguing the findings were contrary to law. This motion was denied, and they again excepted.

ISSUE:
Whether the contract, which combines a loan with a promise of sale of specific property conditioned upon non-payment of the loan at maturity, is valid and enforceable under Philippine law.

RULING:
The Supreme Court affirmed the judgment of the lower court. The Court held that the contract was a valid combination of a loan and a promise of sale. It reasoned that the Civil Code permits such agreements. The Court found no violation of articles 1451, 1740, 1753, 1875, 1859, 1884, or Law 41, Title 5, and Law 12, Title 12 of the Fifth Partida. The Court distinguished the contract from a mortgage, pledge, or antichresis, as the property was not registered, was not personal property, and the creditor never took possession or enjoyed the fruits of the property. Citing the principle that the will of the contracting parties is the law of contracts, the Court concluded that since the defendants agreed to the terms, and the loan was not repaid, the promise of sale should be carried into effect. The Court found the document authentic and efficacious, as recognized by the defendant and witnesses.

Dissenting Opinion:
Justice Willard dissented, arguing that the contract violates a fundamental principle of Spanish law, which prohibits debtors from making agreements at the time of securing a loan whereby mere failure to pay at maturity irrevocably divests them of their interest in specific property without any right of redemption or sale to cover the debt. He cited Civil Code articles 1859, 1872, and 1884.