G.R. No. 219071 , August 24, 2016.
SPOUSES CHARITO M. REYES and ROBERTO REYES, and SPOUSES VILMA M. MARAVILLO and DOMINGO MARAVILLO, JR., Petitioners, vs. HEIRS OF BENJAMIN MALANCE, namely: ROSALINA M. MALANCE, BERNABE M. MALANCE, BIENVENIDO M. MALANCE, and DOMINGA M. MALANCE, represented by BIENVENIDO M. MALANCE, Respondents.

FACTS

Benjamin Malance owned a 1.4017-hectare agricultural land in Pulilan, Bulacan. On June 26, 2006, he obtained a loan of ₱600,000.00 from Charito M. Reyes and Vilma M. Maravillo (the Magtalas sisters), as evidenced by a notarized “Kasulatan Ng Ukol sa Utang.” The Kasulatan stipulated that the Magtalas sisters would have the right to the fruits of the land for six years or until the loan was fully paid. Benjamin died on September 29, 2006. His heirs (respondents) later discovered petitioners cultivating the land. Doubting the Kasulatan’s authenticity, the heirs filed a Complaint for Recovery of Possession, Declaration of Nullity of the Kasulatan and Damages. They alleged Benjamin was mentally incapacitated when he signed, and that his signature was forged. Petitioners defended the Kasulatan’s validity, asserting it was executed before a notary public while Benjamin was of sound mind, and that they were rightfully in possession under its terms. The Regional Trial Court (RTC) dismissed the complaint, upholding the Kasulatan as a valid contract of antichresis. The Court of Appeals (CA) affirmed the Kasulatan’s validity as a contract of antichresis but ruled that only ₱218,106.84 of the loan was proven to have been received by Benjamin (for medical and funeral expenses). The CA computed the fruits of the land and directed the Magtalas sisters to surrender possession to the heirs upon payment of the outstanding balance of ₱4,320.84. Petitioners sought review, contending the full ₱600,000 was received and that legal interest should be imposed.

ISSUE

1. Whether the Court of Appeals erred in ruling that only ₱218,106.84 of the ₱600,000.00 loan was received by Benjamin Malance.
2. Whether legal interest is due on the loan despite the absence of an express stipulation.

RULING

1. On the Proceeds of the Loan: The Supreme Court ruled that the CA erred. The Kasulatan was irregularly notarized as it did not reflect competent evidence of Benjamin’s identity as required by the 2004 Rules on Notarial Practice. This stripped it of the presumption of regularity accorded to notarized documents. Consequently, its due execution and authenticity had to be proved under the rules for private documents. Petitioners successfully discharged this burden. The notary public, Atty. Cenon Navarro, testified that he prepared the Kasulatan per the parties’ agreement and witnessed the exchange of the full ₱600,000. The respondents’ offered receipts for medical and burial expenses were merely to show where Benjamin spent part of the loan, not to limit the amount received. Therefore, the Court found that Benjamin received the full ₱600,000 loan amount.
2. On the Imposition of Interest: The Supreme Court ruled that no legal interest is due. The Kasulatan was correctly characterized by the RTC and CA as a contract of antichresis under Article 2132 of the Civil Code. In a contract of antichresis, the creditor’s right to the fruits of the property is in lieu of interest, unless there is a stipulation to the contrary. The Kasulatan contained no stipulation for the payment of interest. Therefore, the Magtalas sisters, as antichretic creditors, were only entitled to apply the fruits of the land to the principal obligation. The Court affirmed the CA’s computation of the fruits, which showed that after applying the fruits for 6.66 years, the outstanding principal was only ₱4,320.84.
Final Disposition: The petition was PARTIALLY GRANTED. The CA’s ruling that the Kasulatan is a valid contract of antichresis was AFFIRMED. However, the finding that Benjamin received only ₱218,106.84 was REVERSED and SET ASIDE. The Court declared that the full ₱600,000 loan was received. The Magtalas sisters were ordered to surrender possession of the land to the Malance heirs upon the latter’s payment of the outstanding principal obligation of ₱4,320.84. No interest was imposed.