G.R. No. L-5358, March 16, 1911
LEE LIONG, plaintiff-appellant, vs. ISIDORO HIZOLA, defendant-appellee.

FACTS

On September 27, 1905, defendant Isidoro Hizola executed a public instrument in favor of plaintiff Lee Liong, acknowledging receipt of P4,358.50 and mortgaging two agricultural properties as security. Hizola did not deny the instrument’s legitimacy but claimed he owed the balance of P3,910 from a land purchase to the deceased Yong Alam, not to Lee Liong. The administrator of Yong Alam’s estate intervened, asserting that the debt was part of the unpaid purchase price and that Lee Liong was acting under a power of attorney from Yong Ajiong (who claimed to be Yong Alam’s son). The trial court found that Lee Liong had only loaned Hizola P1,000 (secured by a mortgage for P1,150) and that the remainder of the P4,358.50 mortgage was based on a false consideration, as Hizola believed he owed Yong Ajiong the balance. The court declared the mortgage void except for the P1,150 portion and ordered Hizola to pay Lee Liong P1,150 and the administrator P3,910. Lee Liong appealed.

ISSUE

Whether the mortgage contract for P4,358.50 is entirely valid, or void in part due to a false consideration.

RULING

The Supreme Court reversed the trial court’s judgment. It found that the evidence sufficiently proved Lee Liong actually paid Hizola the full P4,358.50, not just P1,000. The P2,760 portion was loaned by Lee Liong to Hizola specifically to pay Yong Ajiong. The falsity of the consideration between Hizola and Yong Ajiong (i.e., whether Ajiong was truly the heir/creditor) does not affect the separate and valid loan obligation between Hizola and Lee Liong. The mortgage contract was based on a real and lawful considerationthe actual delivery of loaned money. Thus, Hizola is obligated to pay Lee Liong the full P4,358.50 plus legal interest from the filing of the complaint. The Court affirmed the validity of the entire mortgage.