G.R. No. 31284 , October 28, 1929
CASIANO JAVIER, plaintiff-appellant, vs. MARIANO CABANOS, defendant-appellee.

FACTS

On September 11, 1922, Casiano Javier executed a deed of sale with pacto de retro over certain lands in favor of Mariano Cabanos for P10,806, with a repurchase period of four years. Javier later filed a case alleging the contract was a usurious loan disguised as a sale. The parties compromised, stipulating that: (1) the debt was reduced to P10,000; (2) the deed would be considered a mortgage; (3) Javier would execute a new mortgage deed; (4) the redemption period would extend to September 11, 1927; and (5) Cabanos would remain in possession of the property until full payment. A judgment was rendered based on this compromise, and Javier executed the mortgage deed (Exhibit A). When Javier failed to redeem, Cabanos sought to enforce the mortgage. Javier argued that Cabanos, as a mortgage creditor in possession, was akin to an antichretic creditor and should account for the fruits of the property, applying them to the debt.

ISSUE

Whether the contract, as reformed by the compromise agreement, is one of antichresis, obliging the creditor in possession to account for the fruits of the property and apply them to the payment of the debt.

RULING

No. The Supreme Court affirmed the lower court’s judgment with modification. While the contract may be classified as antichresis because the creditor remained in possession, the parties’ compromise agreement clearly intended that the fruits received by Cabanos would compensate for the interest on the loan. The Court reasoned that since the original pacto de retro arrangement involved Cabanos enjoying the fruits in lieu of interest, and the parties, in converting it to a mortgage, deliberately maintained Cabanos’s possession without altering this understanding, the fruits were deemed to offset the interest. Therefore, Javier was still obligated to pay the principal debt of P10,000 to recover the property. The Court eliminated the specific payment period and order for public auction from the counterclaim portion of the lower court’s decision.