GR No.
L-49090 February 28, 1947 in the case of relatives, the contract was not reduced to deed, but after the
TEODORA L. VDA. DE MIRANDA AND OTHERS, plaintiffs-
appellants,
vs.
IMPERIAL FELICIANO AND JUANA DE IMPERIAL,
defendants-appeals.
Mr. Manuel M. Calleja and Mr. Ramon C. Fernandez on behalf of the
appellants.
D. Toribio P. Perez on behalf of the appeals.
BRIONES, J .:
This is a prewar issue. The lawsuit was filed before the Albay Court of
First Instance on November 25, 1941, that is, almost on the eve of the
Pacific war. The Court handed down its sentence on March 17, 1943. The
matter was brought up before this Supreme Court, by virtue of the appeal
filed by the applicant on June 9, 1943. Before it could be decided, the file
was burned together with the other files of this Court in the conflagration
of Manila on the occasion of the battle of liberation. What we have,
therefore, before Us is a file reconstituted with documents provided by
the appellant's lawyers, namely: ( a ) copies of the record of appeal; ( b)
copies of the allegation submitted by the appellant's lawyers. The
appellant has not presented any allegation either by itself or through her
lawyer. The attorneys of both parties were duly notified of the
reconstitution proceedings by the commissioner of this Court, but the
only ones who have appeared have been the appellant's attorneys,
delivering copies of which mention has been made.
It is alleged in the application that before November 17, 1938, the
defendants, Feliciano Imperial and Juana de Imperial, owed Elias
Imperial the amount of P1,000; that, in consideration of this debt and to
guarantee its payment, they had assigned, as an antichresis, to said
Imperial Elias the possession and enjoyment of three plots of rice land of
their ownership; that on the aforementioned date November 17, 1938, the
defendants proposed to the applicant, Teodora L. Vda. De Miranda, who
lent them the amount of P1,000 to rescue Elias Imperial from the land,
subrogating herself as a creditor instead of them under the same terms
and conditions of the contract of antichresis concluded with the
latter; that since the plaintiff had the requested amount and, in addition,
the defendant is her crib, being a widow of a brother of this, I accept the
proposal, effectively delivering the amount of P1,000 to the defendants,
who in turn returned it to Imperial Elias for the rescue of the farms; that,
rescue and having registered Elias Imperial at the foot of the property
documents on the three plots of land, said documents were delivered at
the same act of redemption to the plaintiff who was then present in the
company of the defendant, as proof of the loan and of the transfer of the
new contract of anticresis; that since then the applicant was enjoying the
products, receiving her participation in the crops corresponding to 1939
and 1940 at the rate of two crops per year, and in the first harvest of
1941, that is, a total of 5 crops from November 17, 1938 until April
1941; that the plaintiff could no longer enjoy the second harvest of 1941,
that is, the one corresponding to October, since the defendants have since
resolved to appropriate such and subsequent harvests to the present; that
the harvest collected by the defendants in October, 1941, and that it
should belong to the plaintiff, was 50 palay cavans, whose market price
was at P2.50 the dig this is, a total amount of p120. Therefore, the
applicant asks that, "under the that the harvest collected by the
defendants in October, 1941, and that it should belong to the plaintiff, was
50 palay cavans, whose market price was at P2.50 the dig this is, a total
amount of p120. Therefore, the applicant asks that, "under the that the
harvest collected by the defendants in October, 1941, and that it should
belong to the plaintiff, was 50 palay cavans, whose market price was at
P2.50 the dig this is, a total amount of p120. Therefore, the applicant asks
that, "under theFirst reason for action , the defendants are ordered to
grant a mortgage document in favor of the applicant guaranteeing the
three plots of land mentioned above to ensure the payment of the
thousand pesos paid by her to Mr. Elias Imperial for account of said
defendants, setting in said document a period of three months for
payment, or the term that is reasonable according to the prudent
judgment of the Court and through an interest at the rate of twelve (12%)
percent per year; "and" under the second reason for action, the
defendants are ordered to pay the plaintiff the sum of P120 as the value of
the harvest of palay raised from the land plots described in this lawsuit
and illegally appropriated by said defendants, in addition to the costs of
the trial; "and" asks , finally, any other fair and equitable remedy. "
With respect to the first reason for action, the defendants defend
themselves claiming that they received only the amount of P500 from the
plaintiff, to which another P500 added to rescue the lands of Imperial
Elias; and that said P500 debt was more than paid with the products of
the land that the plaintiff received in 5 consecutive crops, "thus
automatically extinguishing the contractual rights and obligations of the
parties." Regarding the second reason for action, they deny it, and say
that the harvest harvested in October 1941 and all those that were
collected later legally belonged to the defendants; and that said October
harvest, as in the previous years, I report as participation 70 cavans of
palay.
this being the explanation of how the documents went to the plaintiff
holding them until the day of the hearing; (3) that, in addition to the 3
plots in question, the plaintiff enjoyed the products of a fourth plot of the
defendants, up to 10 palay cavans in each harvest; (4) that the 4 plots of
land the applicant received as a participation in the 5 harvests that a total
of 400 palay cavans collected, and that the dig was then quoted at P2.50
in the market; (5) that, therefore, the applicant made not less than P1,000
with the products received by her, and deducting from said sum the P500
owed by the defendants, plus P100 for interest at the legal rate, is still in
favor of these a balance of P400,
After seeing the matter, the Court handed down its sentence in which the
following facts are conclusively proven: (1) that for some 10 years prior to
November 17, 1938, the defendants had owed Eleas Imperal the amount
of P1,000: (2) that between the creditor and the debtors the accessory
contract of antichresis had been concluded by virtue of which he would
enjoy as he actually enjoyed during said 10 year period all the products of
the 3 lands mentioned above, considering said products as interests of the
money borrowed; (3) that, during and enjoying the land, not a single
grain of palay produced was applied to pay or repay the loan capital; (4)
that on November 17, 1938, the defendants received from the plaintiff not
P500, as those allege, but P1,000, to rescue farms from the hands of Elias
Imperial being the agreement between the parties that the plaintiff would
subrogate as a creditor instead of said Imperial Elias under the same
terms and conditions of the contract of antichresis concluded with it; that
"after careful consideration of the evidence and of all the concomitant
circumstances, the Court concludes and, therefore, so declares, that the
plaintiff paid the defendants P1,000 annually and that the agreement
between the parties was that the plaintiff would receive the products of
the 3 plots previously placed in anticresis in favor of Elias Imperial, as
interest on the loan until it was paid in full "; that, in effect, the applicant
was quietly receiving the products in 5 consecutive harvests, but after the
harvest of April, 1941,
From the facts established in the judgment, as it is extracted, it is clear
that the counting of anticresis on this matter is defined in article 1885 of
the Civil Code that stipulates the following: "The contracting parties may
stipulate that the interests of the debt with the fruits of the farm given in
anticresis. " However, the Court a quo, instead of applying said article as
it should due to imperative of the facts that it declares proven and
established in the trial, makes the following pronouncement: "However,
despite this agreement, the claim of the defendants that the amount of
the products received by the applicant must be applied to the payment of
the capital of its debt after deducting the interest at the legal rate, it must
be sustained. " That is to say, the Court applies to the case not article 1885
already cited but article 1881 of the Civil Code whose text is, namely: "By
the anticresis the creditor acquires the right to receive the fruits of a
property of its debtor with the obligation to apply them to the payment of
interest, if due, and then of the principal of your credit. " And the Court
bases its conclusion on the ruling issued by the previous Court of Appeals
in the case of Santa Rosa v. Noble (RG No. 43769, 35 Off. Gaz., 2734; The
Lawyer's Journal, Vol. V, No. 23, p. 1109), presentation by Judge Hon.
Jose Lopez Vito.
So the court quo, after making the corresponding arithmetic operation
applying the products, first, to the payment of the interest, and then to
the debt capital, allocates in favor of the plaintiff a balance of P435.17 and
orders that continue applying to satisfy the products of the land until its
full payment, or that the defendants solve it at once with interest at the
rate of 6 percent per year from May 1, 1941. Against the ruling so dictated
plaintiff has filed the present appeal, not raising more than questions of
law, namely: that the Court erred in not applying the present case in all
its rigor to article 1885 of the Civil Code; that the Court could not, of a
fiat, arbitrarily create for the parties a contract not concluded between
them; that article 1885 refers specifically to one type of antichresis and
article 1881 to another; that when the agreement is, as in the case at
hand, that the products of the farm given in anticresis are compensated
with the interests of the debt, no part of the products should be applied to
the amortization of capital; and that therefore, she, the appellant, has the
right to have her loan capital repaid, that is, the amount of P1,000, plus
the corresponding products or interests.
The Court a quo bases its ruling on said respective entirely similar cases,
especially since both come from the same region - the Bicol - and relate to
a contract very common in this region, the contract called alli vulgarly
"Sangla" or " pledge, "and that in the Visayas where the Cebuano dialect
is spoken and in Mindanao it is called" saop "and also" pledge
"sometimes.
It seems superfluous to say that only the judgments of this Supreme
Court feel jurisprudence or doctrine in this jurisdiction. However, this
does not start that a conclusion or pronouncement of the Court of
Appeals that covers some point of law not yet resolved in our
jurisprudence can serve as a legal norm to the lower courts, and that that
conclusion or pronouncement rises to doctrine if, after After being tested
in the court of judicial analysis and review, we found that it had sufficient
merits and carats for its consecration as a rule of jurisprudence. For this
purpose and for this purpose we have carefully and carefully examined
the judgment of the Court of Appeals in the aforementioned case of Santa
Rosa against Noble, from, as it is said, from the Bicolana region the same
as this one that concerns us.
Without subscribing - we are not now called to do so, nor do we need to
do so - the interesting findings that the Court of Appeals makes in said
judgment, we believe, however, that the Court quo erro when applied to
the present case, since there are both cases fundamental differences,
namely:
First difference : In the case of the Court of Appeals usury was an "issue,"
a capital point in controversy. That is why the Court says in its judgment:
"But the defendants argue that the contract consigned in Exhibit E is
usury, which raises the question of whether Law No. 2655 known by
Usury Law that establishes the interest rate that it is permissible to collect
on loans, it is applicable to anti-crisis contracts. " Although not stated in a
way, the Court of Appeals, in ruling that the Law of Usuara was
applicable, consequently setting the chargeable interest at the legal rate of
6 percent, practically prosecuted and declared as usury the contract of
anticresis that is tried.
In the case before us, the question of usury was never raised in the
allegations or in the trial; and in the sentence there is no pronouncement
of fact about usury; and since this appeal does not raise more than
questions of law by establishing and admitted without discussion the
facts set forth in the ruling, it is said that our power of review must
strictly and inflexiblely address such facts, without us be allowed to go
beyond your radio. After all, it is not surprising that the defendants did
not raise any question about usury, since for 10 years they had been
debtors of Elias Imperial without, apparently, differences that would
worsen their relations (in fact Elias declared at the hearing in favor of the
defendants),
Second difference : It is evident that the antichresis of the
aforementioned issue of Santa Rosa against Noble is the one defined in
article 1881 of the Civil Code, an antichresis in which "the creditor
acquires the right to receive the fruits of a debtor's property with the
obligation to apply them to the payment of interest, if they are due, and
then to the principal of your credit. " Here is what the Court of Appeals
says, in its ruling that we comment on, in this regard: "As to whether the
same rate established by the Law against Usury should be applied when
there is an express stipulation that the fruits will be commensurate with
the interest on debt under article 1885,Fourth: this is not the case that is
submitted to our consideration today, having declared that Exhibit "E"
falls under the provisions of Article 1881 of the Civil Code . "(Italics are
ours.)
On the other hand, the antichresis on which the present case is concerned
is that defined in article 1885, which provides "that the contracting
parties may stipulate that the interests of the debt be compensated with
the fruits of the property given in antichresis." Here is the final
pronouncement of the Court a quo on the particular: "After a careful
consideration of the evidence and all the attending circumstances, the
court concludes, and therefore holds, that the plaintiff actually loaned the
defendants P1,000, and that the agreement between the parties was that
the plaintiff would receive the products of the three parcels of land
formerly conveyed in antichresis to Elias Imperial as interests on said
loan until the same is paid . " 1 (Italics are ours.)
Existing, according to the same conclusion of the court to quo, that
agreement that the products of the farms be compensated with the
interests of the debt, in accordance with article 1885 of the Civil Code, it
is arbitrary to change it judicially, making for the parties a contract that
they have not celebrated, or to put it more specifically, transforming the
truly agreed pact into something that falls under an article of the code
that was neither in the mind nor in the will of the contracting
parties. Article 1255 of the Civil Code prescribes that "the contracting
parties may establish the covenants, clauses and conditions they deem
convenient, provided they are not contrary to laws, morals, or public
order." This excludes fiat contractsjudicial. Courts can interpret
contracts; what they cannot do is mold them, forge them for the parts.
We agree with the Court of Appeals that the contract called "sangla" or
"garment" (on real estate) in Bicol, "soap" or "garment" in Visayas and
Mindanao, actually has the characters of antichresis and, therefore, may
Be considered as such. In addition to the sale with a retro pact, that
contract is the best known and most common in our rural towns and
neighborhoods - the farmer and laborer use it, now to improve and
expand their crops, and to buy new land with which to increase their
possessions, already to marry their children and endow them, and even
sometimes to give a dignified and adequate burial to their dead. And why
not say so? The unfortunate passion for the game sometimes culminates
also in that contract to bitter the existence if not to work the ruin of the
small owner.
The question that we now have to determine is, is that of usury
automatically or ministerially applicable to anticresis, as seems to be
collected from the judgment appealed? Certainly not. Anticresis, as a
contract - either under article 1881, or under article 1885 of the Civil Code
- is not necessarily usury; It could be, that would, usury. But so that it can
be declared, it is not only absolutely necessary that usury be an "issue," a
contentious capital point in the allegations and in the trial, so that each
party has its "day in court," that is, that it can defend itself properly and
properly, but that, in addition, it must be demonstrated and established
positively that the usury is of such proportions that, on repugnant to the
conscience, incline the spirit to believe that, The contract has been used
as a disguise or device to violate or evade the law of usury. The reason for
this is very simple: in anticresis there is a contingent, random element, by
nature. The perception of the products by the creditor, which is its main
characteristic, is subject to various contingencies and contingencies. A
bad harvest may come, or none at all, already because a typhoon has
burst, already because the rivers have overflowed flooding, and because a
flock of lobsters has devastated the sowings and plantations, and because
deep social convulsions have subverted the peace and the order
preventing the tillage of the fields, etc., etc. Thus, articles 2, 3 and 8 of
Law No. 2655 on usury cannot be applied automatically to the
antichresis, For these refer to the perception of a fixed quantity of
products: the debtor has to deliver them indelibly, or its equivalent in
money, whether the harvest is good or bad, whether or not there is
any. The fact that sometimes in the anticresis the amount of the fruits,
when the liquidation is made, exceeds the rates established by the usury
law, does not make the usury contract, because the law assumes that such
excess is the dividend it collects the creditor in exchange for the risk and
contingency premium he has paid over the principal of his credit.
In American jurisprudence, certain types of contracts similar to our
"sangla" or "saop." as demonstrated by the following authorities:
In view, however, of the rule that a creditor's return need not be
limited to the statutory rate when it is affected by a contingency
putting the whole of it at hazard, a contract is ordinarily not
usurious under which the creditor is to receive, in consideration
of his loan or forbearance, property or services of uncertain value,
even though the probable value is greater than lawful
interest, unless the excess is so palpable as to show a corrupt
intent to violate or evade the usury laws , unless the contract is
made for the purpose of such violation or evasion. 2 (66 CJ, 212.)
Where the lender is to receive something else than money for his
loan, as property or services, the value of such profit being
necessarily uncertain, the contract is not usurious, even though
the probable value is greater than legal interest , unless the
consideration so given is so palpably in excess of the cetain profit
allowed by law as to show a corrupt intent to violate the usury
laws. "2 39 Cyc. 959; Wright vs. McAlezander, 11 Ala., 236; Rapier
v. Gulf City Paper C. , 77 Ala., 126. (102 Southern Reporter, p.
204.)
So, an agreement that instead of interest, the lender of money
should receive the rents and profits of certain land for a term of
years, is not usurious where no intention to evade the statue is
shown; and the fact that such rents and profits happen to
amount to more than lawful interests does not render the
contract usurious . 3 (Webb on Usury, p. 85.)
Manresa, speaking on the relative conveniences of antichresis despite the
fact that it sometimes lends itself as an instrument of usury, makes the
following wise observations:
By proceeding in this way the authors of the Code, responded
with great success to a need imposed by the modern principles
that inspire the laws of the mutual, according to which there is no
economic or legal reason to condemn the antichresis. In addition,
they thus attempted to avoid damages to the debtor who, in
another case, were unavoidable, since experience well palpably
had shown that, despite the prohibition of the laws, the antitrust
pact was very frequent in practice, because the prohibitive
provisions were circumvented, disguising the convention with the
form or name of sales under a retro pact, which far from favoring
the borrower, as the legislator proposed, was caused great
breach, since, unable to grant the creditor the enjoyment of the
fruits to apply them to the amortization of interests or to the
partial payment of capital, they were forced to dispose of the
assets in the indicated manner, detaching themselves from a
property that could hardly be re-acquired. . (Manresa, Com. To
Cod. Civ. Spanish, volume 12, page 545.)
The rule, then, is, or should be, the following: (a) the antichresis known in
this country with the vernacular name "sangla" or "saop" cannot be
prosecuted and declared as usury, unless usury in itself, an "issue," a
contentious point between the parties, arises in accordance with the
procedural rules established on the matter; ( b ) and for said contract to
be considered and declared usury, it is not enough that the products of
the property given in anticresis, when perceived by the creditor, exceed
the legal interest rates somewhat, but it is necessary that the excess be so
palpable, so repulsive and so shocking to the conscience that of
necessarily the sensation that the contract has been forged to hide the
risky intention of breaking or evading the law of usury; (c ) not mediating
these circumstances, the "sangla" or "saop" must be respected and its
compliance be expedited under article 1881 or article 1885 of the Civil
Code, as the case may be, and the courts will do nothing to change the
terms of the anticresis, which must be law between the parties.
The case at hand offers some difficulties with regard to the ruling that
must be issued. The plaintiff asks that the defendants be condemned and
obliged to grant in their favor a mortgage document on the three plots of
land to guarantee the payment of the P1,000 debt, "setting in said
document a period of three months for the payment, or the reasonable
term according to the relevant judgment of the Court and through an
interest at the rate of 12 percent per year; or instead, any other remedy
that may be appropriate. " In our opinion, this would only delay the final
disposition and liquidation of the matter to the detriment of the parties
and an expedited administration of justice.
The defendants having possessed the land plots by them transferred in
antichresis to the plaintiffs and having enjoyed their fruits from October
1941 to date, and the plaintiffs have agreed to agree to terminate the anti-
clerical contract when presenting the contract on November 25, 1941, not
to recover said plots of land, but to demand payment of the debts with the
corresponding interest from the aforementioned date, after revocation of
the appelled sentence, we dictate the following ruling:
(1) The defendants are condemned to pay the plaintiffs the amount of one
thousand pesos (P1,000), the amount of the latter's credit, with interest
at a rate of 6 percent per year as of November 25, 1941 in that the
application was filed, and the legal costs, said sum must be paid with
their interests and the costs to the plaintiffs, or deposited in the Court of
First Instance of Albay within the period of three months counted since
the present moratorium is officially lifted ;
(2) In the absence of payment, as ordered in the preceding paragraph, the
three plots of land on which this matter deals will be sold by the Sheriff at
public auction in accordance with the law on mortgage credit collection;
(3) In the meantime the payment is not made, as ordered in this
judgment, the amount owed with your legal interests and the judicial
costs will pass as a preferential lien on the three plots of land in
question. That's how it is ordered.
Moran, Pres., Feria, Bengzon, Padilla and Tuazon, MM., Are satisfied.
Separate Opinions
PARAS, J., dissenting:
Although the trial court held that "the plaintiff actually loaned the
defendants P1,000, and that the agreement between the parties was that
the plaintiff would receive the products of the three parcels of land
formerly conveyed in antichresis to Elias Imperial as interests on said
loan until the same is paid, "it nevertheless sustained, citing the decision
of the Court of Appeals in the case of Santa Rosa vs. Noble (35 Off. Gaz.,
2724), "the contention of the defendants that the value of the products
received by the plaintiff, after deducting therefrom the interests at legal
rate, should be applied to the principal of their debt."
The plaintiff has appealed; does not controvert the correctness of the
appraisal made by the trial court of the value of the products received by
her from the lots in question: but contends that said court should have
applied article 1885 of the Civil Code which provides that "the contracting
parties may stipulate that the interest of the debt be set off against the
fruits of the estate given in antichresis. " In other words, it is the view of
the plaintiff that the products, regardless of their value, should belong to
her in payment of the interest on defense loan of P1,000. This is also the
view expressed in the majority opinion.
I dissent. The right of the contracting parties to establish any pacts,
clauses, and conditions they may deem advisable, is subject to the proviso
that "they are not contrary to law, morals, or public order." (Article 1255,
Civil Code.) After the enactment of the Usury Law (Act No. 2655), which
fixes the rate of interest, in the absence of express stipulation, at six per
centum per annum (section 1) and provides (section 8) that "all loans
under which payment is to be made in agricultural products or seed or in
any other kind of commodities shall also be null and void unless they
provide that such products or seeds or other commodities shall be
appraised at the time when the obligation falls due at the current local
market price, "article 1885 of the Civil Code must be considered
modified, if not repealed under the repealing clause (section 11) of the time eliminate the element of chance that may prove disadvantageous to
Usury Law. In other words, any antichretic agreement, under either lenders who are to be paid in agricultural products.
article 1881 or article 1885, may now be validly enforced only in the light
of the provisions of the Usury Law. The unrestricted freedom conceded in The appealed judgment should be affirmed.
article 1855 was good before the Government had laid down its policy
regarding interest on loans.

Article 1881 sanctions, then, the general rule that must be

governed necessarily and necessarily provided that there is no
special pact indicated, and 1885 establishes the exception of that
rule in the event that said pact is stipulated.

This is a consequence of the freedom granted for the fixing of

interests, since it abolishes the legal rate by the law of 1856, the
parties can freely set the amount and condition of said interests,
and they can be paid in money than in kind, and, consequently,
the interests are compensated with the fruits. (12 Manresa, Civil
Code, page 482.)

The majority argue that the Usury Law cannot be applied because the
defense of usury was not set up. It appears, however, that, as amitted by
the majority, the defendant alleged in his answer that "the applicant
made no less than P1,000 in the products received by her, and deducting
from that sum the P500 owed by the defendants, but P100 for interest at
the legal rate, a balance of P400 is still in favor of these, so they ask for a
judgment against the plaintiff for the latter amount. " If this allegation
did not amount to a charge that the plaintiff received more than the legal
interest, it was sufficient to apprise the court and the plaintiff that it was
the contention of the defendant that the plaintiff had no right to apply the
products entirely in compensation of the interest notwithstanding their
agreement, and this issue should be decided in the light of existing law
which it was not necessary for the defendant to specify in his answer. We
would not thus be digressing from the issues raised by the parties, or
creating new ones, by simply adjudicating concrete cases conformably to
law.

. . . It is clear that the Courts may in each specific case appreciate

the nature of the obligation and conditions attached thereto, if a
specific agreement constitutes it for the purposes derived from
law. . . . (11 Manresaa, Civil Code, page 550.)

The contingent character of the arrangement contemplated by Article

1885, cannot warrant its continued existence. The Usury Law, which is of
later date and therefore controlling, protects borrowers and at the same