GR 138141; (November, 2000) (Digest)
G.R. No. 138141 ; November 15, 2000
AMELIA MARINO, petitioner, vs. SPOUSES FRANCISCO AND GLORIA SALCEDO, respondents.
FACTS
Spouses Salcedo obtained a loan from Amelia Marino and her late husband, secured by a real estate mortgage on their property. After failing to pay, the parties executed a subsequent Agreement before a Barangay Captain, stipulating that upon the Salcedos’ failure to pay their obligation, they would “surrender voluntarily the real estate mortgaged to the mortgagee.” The Salcedos again defaulted. The Marinos filed a motion for execution in the Municipal Trial Court (MTC) to enforce this surrender clause. The Salcedos opposed, arguing the Agreement was void for violating the prohibition on pactum commissorium under Article 2088 of the Civil Code, which forbids automatic appropriation of mortgaged property by the creditor upon default.
The MTC initially denied execution but later granted it, ruling the clause only provided for surrender of possession, not automatic appropriation of ownership, and thus was not pactum commissorium. The Salcedos then filed a complaint for recovery of possession in the Regional Trial Court (RTC), which dismissed it. The Court of Appeals reversed the RTC, declaring the stipulation a prohibited pactum commissorium and ordering the recovery of possession by the Salcedos.
ISSUE
Whether the stipulation in the Agreement for the voluntary surrender of the mortgaged property upon default constitutes a pactum commissorium, thereby rendering it void.
RULING
Yes, the stipulation is a pactum commissorium and is void. The Supreme Court affirmed the Court of Appeals’ finding that the clause violated Article 2088 of the Civil Code. The legal logic is clear: a pactum commissorium is a stipulation authorizing the creditor to appropriate the mortgaged property upon the debtor’s failure to pay, which is expressly prohibited. The Court rejected the petitioner’s argument that the Agreement merely provided for a surrender of possession, akin to an antichresis. The stipulation for “voluntary surrender” of the property upon default was an automatic mechanism for transferring possession without the requisite foreclosure proceedings. Such an arrangement circumvents the legal process for the enforcement of a mortgage, which requires a public sale, and allows the creditor to gain control of the property extrajudicially. This is the precise evil the prohibition seeks to prevent. Consequently, the Agreement, containing this void stipulation, could not be enforced to justify the writ of execution that dispossessed the Salcedos. The Supreme Court, however, modified the appellate decision by remanding the case to the MTC for further proceedings on the factual issue of the parties’ true intention behind the Agreement, to ensure the right to a full hearing.