GR 43673; (October, 1938) (Digest)
G.R. No. 43673 , 43674. October 24, 1938.
LICERIO LEGASPI and JULIAN SALCEDO, plaintiffs-appellants, vs. DAMASO CELESTIAL, defendant-appellee.
FACTS
Plaintiffs Legaspi and Salcedo loaned money to defendant Celestial, secured by real property consisting of salt beds. The contracts (Exhibits A and C-1) stipulated that during the loan term, the creditors would administer the salt beds, using half of the products for maintenance and improvements, and keeping the other half for themselves. No explicit interest was stipulated. Plaintiffs filed actions to recover the loan amounts. Defendant contended the contracts were antichresis, obliging plaintiffs to account for the fruits (salt produced) and apply them to the debt. The trial court agreed with the defendant, declaring the contracts as antichresis and ordering plaintiffs to render an account of the fruits.
ISSUE
Whether the contracts in question are contracts of mortgage or contracts of antichresis.
RULING
The Supreme Court reversed the trial court, holding the contracts to be mortgages, not antichresis. The Court ruled that a loan contract secured by real property, which does not stipulate payment of interest but provides for the creditor’s administration and enjoyment of the property’s fruits, without stipulating that such fruits are to be applied to interest and then principal, is a mortgage contract. The essential elements of a mortgage under Article 1857 of the Civil Code were present. The creditor’s right to administer and enjoy half the produce was considered a form of compensation for the loan, not a stipulation for the application of fruits to the debt as required in antichresis. Consequently, the defendant’s debt was declared paid (pursuant to a stipulation where defendant agreed to pay the principal sum), the securities cancelled, and the defendant’s counterclaim dismissed.
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