Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 46623 December 7, 1939
MARCIAL ASILAG, petitioner,
vs.
RA!AELA RODRIGUE", UR#ANO RO$UE, SE%ERO MAPILISAN &'( IGNACIO
DEL ROSARIO, respondents.
Luis M. Kasilag for petitioner.
Fortunato de Leon for respondents.

IMPERIAL, J.:
This is an appeal taken by the defendantpetitioner fro! the decision of the Court of
Appeals "hich !odified that rendered by the court of #irst $nstance of Bataan in civil
case No. %&'( of said court and held) that the contract E*hibit +%+ is entirely null and
void and "ithout effect, that the plaintiffsrespondents, then appellants, are the o"ners
of the disputed land, "ith its i!prove!ents, in co!!on o"nership "ith their brother
-avino Rodri.ue/, hence, they are entitled to the possession thereof, that the
defendantpetitioner should yield possession of the land in their favor, "ith all the
i!prove!ents thereon and free fro! any lien, that the plaintiffsrespondents 0ointly and
severally pay to the defendantpetitioner the su! of P%,''' "ith interest at 1 percent
per annu! fro! the date of the decision, and absolved the plaintiffsrespondents fro!
the crossco!plaint relative to the value of the i!prove!ents clai!ed by the
defendantpetitioner. The appealed decision also ordered the re.istrar of deeds of
Bataan to cancel certificate of title No. 23&, in the na!e of the deceased E!iliana
A!brosio and to issue in lieu thereof another certificate of title in favor of the plaintiffs
respondents and their brother -avino Rodri.ue/, as undivided o"ners in e4ual parts,
free of all liens and incu!brances e*cept those e*pressly provided by la", "ithout
special pronounce!ent as to the costs.
The respondents, children and heirs of the deceased E!iliana A!brosio, co!!enced
the aforesaid civil case to the end that they recover fro! the petitioner the possession
of the land and its i!prove!ents .ranted by "ay of ho!estead to E!iliana A!brosio
under patent No. %1'5( issued on 6anuary %%, %72%, "ith certificate of title No. 23&
issued by the re.istrar of deeds of Bataan on 6une 35, %72% in her favor, under section
%33 of Act No. (71, "hich land "as surveyed and identified in the cadastre of the
!unicipality of 8i!ay, Province of Bataan, as lot No. 39&, that the petitioner pay to
the! the su! of P1&' bein. the appro*i!ate value of the fruits "hich he received fro!
the land, that the petitioner si.n all the necessary docu!ents to transfer the land and
its possession to the respondents, that he petitioner be restrained, durin. the
pendency of the case, fro! conveyin. or encu!berin. the land and its i!prove!ents,
that the re.istrar of deeds of Bataan cancel certificate of title No. 23& and issue in lieu
thereof another in favor of the respondents, and that the petitioner pay the costs of
suit.
The petitioner denied in his ans"er all the !aterial alle.ations of the co!plaint and by
"ay of special defense alle.ed that he "as in possession of the land and that he "as
receivin. the fruits thereof by virtue of a !ort.a.e contract, entered into bet"een hi!
and the deceased E!iliana A!brosio on May %1, %723, "hich "as duly ratified by a
notary public, and in counterclai! asked that the respondents pay hi! the su! of
P%,''' "ith %3 per cent interest per annu! "hich the deceased o"ed hi! and that,
should the respondents be declared to have a better ri.ht to the possession of the
land, that they be sentenced to pay hi! the su! of P&,''' as value of all the
i!prove!ents "hich he introduced upon the land.lawphil.net
:n May %1, %723 E!iliana A!brosio, in life, and the petitioner e*ecuted the follo"in.
public deed)
+This a.ree!ent, !ade and entered into this %1th day of May, %723, by and bet"een
E!iliana A!brosio, #ilipino, of le.al a.e, "ido" and resident of 8i!ay, Bataan, P.8.,
hereinafter called the party of the first part, and Marcial ;asila., #ilipino, of le.al a.e,
!arried to Asuncion Roces, and resident at 2%3 Perdi.on <treet, Manila, P.8.,
hereinafter called party of the second part.
=$TNE<<ET>) That the parties hereto hereby covenant and a.ree to and
"ith each other as follo"s)
ART$C8E $. That the party of the first part is the absolute re.istered o"ner of
a parcel of land in the barrio of Aln.an, !unicipality of 8i!ay, Province of
Bataan, her title thereto bein. evidenced by ho!estead certificate of title No.
23& issued by the Bureau of 8ands on 6une %%, %72%, said land bein. lot No.
39& of the 8i!ay Cadastre, -eneral 8and Re.istration :ffice Cadastral
Record No. %'&(, bounded and described as follo"s)
Be.innin. at point !arked % on plan E&527(, N. 9(? 23@ =. 1%(.93 !. fro! B.B.M.
No. 2, thence N. 11? 2&@ E. 2'5.%& !. to point +3+, <. &? '5@ =. to point +&+, <.1? %'@ E.
%'(.31 !. to point +(+, <. 93? %5@ =. to point +&+, <. 39? &2@ =. 53.31 !. to point +1+, N.
5%? '7@ =. to point +5+, N. %? (3@ E. %52.53 !. to point %, point of be.innin., +Containin.
an area of 1.5&(' hectares. +Points %,3,1 and 5, B.8., points 2,( and &, stakes, points
(, & and 1 on bank of Alan.an River. +Bounded on the North, by property clai!ed by
Maria A!brosio, on the East, by Road, on the <outh, by Alan.an River and property
clai!ed by Ma*i!a de la Cru/, and on the =est, by property clai!ed by 6ose del
Rosario. +Bearin. true. Aeclination '? &%@ E. +<urveyed under authority of sections %3
33, Act No. 395( and in accordance "ith e*istin. re.ulations of the Bureau of 8ands,
by Ma!erto 6acinto, public land surveyor, on 6uly 9, %735 and approved on #ebruary
3&, %72%.
1
ART$C8E $$. That the i!prove!ents on the above described land consist of
the follo"in.)
#our B(C !an.o trees, fruit bearin.) one hundred ten B%%'C hills of ba!boo
trees, one B%C ta!arind and si* B1C boD.a trees.
ART$C8E $$$. That the assessed value of the land is P7(' and the assessed
value of the i!prove!ents is P91', as evidenced by ta* declaration No. 2&2%
of the !unicipality of 8i!ay, Bataan.
ART$C8E $E. That for and in consideration of the su! of one thousand pesos
BP%,'''C Philippine currency, paid by the party of second part to the party of
the first part, receipt "hereof is hereby ackno"led.ed, the party of the first
part hereby encu!bers and hypothecates, by "ay of !ort.a.e, only the
i!prove!ents described in Articles $$ and $$$ hereof, of "hich i!prove!ents
the party of the first part is the absolute o"ner.
ART$C8E E. That the condition of said !ort.a.e is such that if the party of the
first part shall "ell and truly pay, or cause to paid to the party of the second
part, his heirs, assi.ns, or e*ecutors, on or before the %1th day of Nove!ber,
%721, or four and onehalf B(FC years after date of the e*ecution of this
instru!ent, the aforesaid su! of one thousand pesos BP%,'''C "ith interest at
%3 per cent per annu!, then said !ort.a.e shall be and beco!e null and
void, other"ise the sa!e shall be and shall re!ain in full force and effect, and
sub0ect to foreclosure in the !anner and for! provided by la" for the a!ount
due thereunder, "ith costs and also attorney@s fees in the event of such
foreclosure.lawphil.net
ART$C8E E$. That the party of the first part shall pay all ta*es and
assess!ents "hich are or !ay beco!e due on the above described land and
i!prove!ents durin. the ter! of this a.ree!ent.
ART$C8E E$$. That "ithin thirty B2'C days after date of e*ecution of this
a.ree!ent, the party of the first part shall file a !otion before the Court of
#irst $nstance at Balan.a, Bataan, P. $., re4uestin. cancellation of >o!estead
Certificate of Title No. 23& referred to in Article $ hereof and the issuance, in
lieu thereof, of a certificate of title under the provisions of 8and Re.istration
Act No. (71, as a!ended by Act 27'%.
ART$C8E $$$. $t if further a.reed that if upon the e*piration of the period of ti!e
B(FC years stipulated in this !ort.a.e, the !ort.a.or should fail to redee!
this !ort.a.e, she "ould e*ecute a deed of absolute sale of the property
herein described for the sa!e a!ount as this !ort.a.e, includin. all unpaid
interests at the rate of %3 per cent per annu!, in favor of the !ort.a.ee.
ART$C8E $G. That in the event the conte!plated !otion under Article E$$
hereof is not approved by the Court, the fore.oin. contract of sale shall
auto!atically beco!e null and void, and the !ort.a.e stipulated under Article
$E and E shall re!ain in full force and effect.
$n testi!ony "hereof, the parties hereto have hereunto set their hands the
day and year first herein before "ritten.
B<.d.C MARC$A8 ;A<$8A-
B<.d.C EM$8$ANA AMBR:<$:
<i.ned in the presence of)
B<.d.C $88E-$B8E
B<.d.C -AE$N: R:AR$-HEI.
P>$8$PP$NE $<8ANA< J ss.
BA8AN-A, BATAAN J ss.
Before !e this day personally appeared E!iliana A!brosio "ithout cedula by
reason of her se*, to !e kno"n and kno"n to !e to be the person "ho
si.ned the fore.oin. instru!ent, and ackno"led.ed to !e that she e*ecuted
the sa!e as her free and voluntary act and deed.
$ hereby certify that this instru!ent consists of three B2C pa.es includin. this
pa.e of the ackno"led.!ent and that each pa.e thereof is si.ned by the
parties to the instru!ent and the "itnesses in their presence and in the
presence of each other, and that the land treated in this instru!ent consists of
only one parcel.
$n "itness "hereof $ have hereunto set !y hand and affi*ed !y notarial seal,
this %1th day of May, %723.
B<.d.C N$C:8A< NAEARR:
Notary Public
My commission expires December 3! "33.
2
Aoc. No. %59
Pa.e 21 of !y re.ister
Book No. $E
:ne year after the e*ecution of the afore4uoted deed, that is, in %722, it ca!e to pass
that E!iliana A!brosio "as unable to pay the stipulated interests as "ell as the ta* on
the land and its i!prove!ents. #or this reason, she and the petitioner entered into
another verbal contract "hereby she conveyed to the latter the possession of the land
on condition that the latter "ould not collect the interest on the loan, "ould attend to
the pay!ent of the land ta*, "ould benefit by the fruits of the land, and "ould introduce
i!prove!ents thereon. By virtue of this verbal contract, the petitioner entered upon the
possession of the land, .athered the products thereof, did not collect the interest on
the loan, introduced i!prove!ents upon the land valued at P&,''', accordin. to hi!
and on May 33, %72( the ta* declaration "as transferred in his na!e and on March 1,
%721 the assessed value of the land "as increased fro! P%,'3' to P3,%9'.
After an analysis of the conditions of E*hibit +%+ the Court of Appeals ca!e to the
conclusion and so held that the contract entered into by and bet"een the parties, set
out in the said public deed, "as one of absolute purchase and sale of the land and its
i!prove!ents. And upon this rulin. it held null and void and "ithout le.al effect the
entire E*hibit % as "ell as the subse4uent verbal contract entered into bet"een the
parties, orderin., ho"ever, the respondents to pay to the petitioner, 0ointly and
severally, the loan of P%,''' "ith le.al interest at 1 per cent per annu! fro! the date
of the decision. $n this first assi.n!ent of error the petitioner contends that the Court of
Appeals violated the la" in holdin. that E*hibit % is an absolute deed of sale of the
land and its i!prove!ents and that it is void and "ithout any le.al effect.
The cardinal rule in the interpretation of contracts is to the effect that the intention of
the contractin. parties should al"ays prevail because their "ill has the force of la"
bet"een the!. Article %39% of the Civil Code consecrates this rule and provides, that if
the ter!s of a contract are clear and leave no doubt as to the intention of the
contractin. parties, the literal sense of its stipulations shall be follo"ed, and if the
"ords appear to be contrary to the evident intention of the contractin. parties, the
intention shall prevail. The contract set out in E*hibit % should be interpreted in
accordance "ith these rules. As the ter!s thereof are clear and leave no roo! for
doubt, it should be interpreted accordin. to the literal !eanin. of its clauses. The
"ords used by the contractin. parties in E*hibit % clearly sho" that they intended to
enter into the principal contract of loan in the a!ount of P%,''', "ith interest at %3 per
cent per annu!, and into the accessory contract of !ort.a.e of the i!prove!ents on
the land ac4uired as ho!estead, the parties havin. !oreover, a.reed upon the pacts
and conditions stated in the deed. $n other "ords, the parties entered into a contract of
!ort.a.e of the i!prove!ents on the land ac4uired as ho!estead, to secure the
pay!ent of the indebtedness for P%,''' and the stipulated interest thereon. $n clause
E the parties stipulated that E!iliana A!brosio "as to pay, "ithin four and a half years,
or until Nove!ber %1, %721, the debt "ith interest thereon, in "hich event the
!ort.a.e "ould not have any effect, in clause E$ the parties a.reed that the ta* on the
land and its i!prove!ents, durin. the e*istence of the !ort.a.e, should be paid by
the o"ner of the land, in clause E$$ it "as covenanted that "ithin thirty days fro! the
date of the contract, the o"ner of the land "ould file a !otion in the Court of #irst
$nstance of Bataan askin. that certificate of title No. 23& be cancelled and that in lieu
thereof another be issued under the provisions of the 8and Re.istration Act No. (71,
as a!ended by Act No. 27'%, in clause E$$$ the parties a.reed that should E!iliana
A!brosio fail to redee! the !ort.a.e "ithin the stipulated period of four years and a
half, she "ould e*ecute an absolute deed of sale of the land in favor of the !ort.a.ee,
the petitioner, for the sa!e a!ount of the loan of P%,''' includin. unpaid interest, and
in clause $G it "as stipulated that in case the !otion to be presented under clause E$$
should be disapproved by the Court of #irst $nstance of Bataan, the contract of sale
"ould auto!atically beco!e void and the !ort.a.e "ould subsist in all its force.
Another funda!ental rule in the interpretation of contracts, not less i!portant than
those indicated, is to the effect that the ter!s, clauses and conditions contrary to la",
!orals and public order should be separated fro! the valid and le.al contract and
"hen such separation can be !ade because they are independent of the valid contract
"hich e*presses the "ill of the contractin. parties. Manresa, co!!entin. on article
%3&& of the Civil Code and statin. the rule of separation 0ust !entioned, .ives his
vie"s as follo"s)
:n the supposition that the various pacts, clauses or conditions are valid, no
difficulty is presented, but should they be void, the 4uestion is as to "hat
e*tent they !ay produce the nullity of the principal obli.ation. Hnder the vie"
that such features of the obli.ation are added to it and do not .o to its
essence, a criterion based upon the stability of 0uridical relations should tend
to consider the nullity as confined to the clause or pact sufferin. therefro!,
e*cept in case "here the latter, by an established connection or by !anifest
intention of the parties, is inseparable fro! the principal obli.ation, and is a
condition, 0uridically speakin., of that the nullity of "hich it "ould also
occasion. BManresa, Co!!entaries on the Civil Code, Eolu!e 9, p. &5&.C
The sa!e vie" prevails in the An.loA!erican la", as condensed in the follo"in.
"ords)
=here an a.ree!ent founded on a le.al consideration contains several
pro!ises, or a pro!ise to do several thin.s, and a part only of the thin.s to
be done are ille.al, the pro!ises "hich can be separated, or the pro!ise, so
far as it can be separated, fro! the ille.ality, !ay be valid. The rule is that a
la"ful pro!ise !ade for a la"ful consideration is not invalid !erely because
an unla"ful pro!ise "as !ade at the sa!e ti!e and for the sa!e
consideration, and this rule applies, althou.h the invalidity is due to violation
of a statutory provision, unless the statute e*pressly or by necessary
i!plication declares the entire contract void. . . . B%2 C. 6., par. (5', p. &%3,
Ne" Kork Cent. etc. R. Co. v. -ray, 327 H.<., &92, 1' 8a" ed., (&%, H.<. v.
Mora, 75 H.<., (%2, 3( 8a". ed., %'%5, H.<. v. >odson, %' =all, 27&, %7 8a"
ed. 725, -elpcke v. Aubu4ue, % =all. %5&, %5 8a" ed., &3', H.<. v. Bradly, %'
Pet. 2(2, 7 8a". ed., ((9, Borland v. Prindle, %(( #ed 5%2, =estern Hnion
Tel. Co. v. ;ansas Pac. R. Co., ( #ed., 39(, Northern Pac. R. Co. v. H.<., %&
Ct. Cl., (39.C
3
Addressin. ourselves no" to the contract entered into by the parties, set out in E*hibit
%, "e stated that the principal contract is that of loan and the accessory that of
!ort.a.e of the i!prove!ents upon the land ac4uired as a ho!estead. There is no
4uestion that the first of these contract is valid as it is not a.ainst the la". The second,
or the !ort.a.e of the i!prove!ents, is e*pressly authori/ed by section %%1 of Act No.
395(, as a!ended by section 32 of Act No. 2&%5, readin.)
<EC. %%1. E*cept in favor of the -overn!ent or any of its branches, units or
institutions, or le.ally constituted bankin. corporations, lands ac4uired under
the free patent or ho!estead provisions shall not be sub0ect to encu!brance
or alienation fro! the date of the approval of the application and for a ter! of
five years fro! and after the date of issuance of the patent or .rant, nor shall
they beco!e liable to the satisfaction of any debt contracted prior to the
e*piration of said period, but the i!prove!ents or crops on the land !ay be
!ort.a.ed or pled.ed to 4ualified persons, associations, or corporations.
$t "ill be recalled that by clause E$$$ of E*hibit % the parties a.reed that should E!iliana
A!brosio fail to redee! the !ort.a.e "ithin the stipulated period of four and a half
years, by payin. the loan to.ether "ith interest, she "ould e*ecute in favor of the
petitioner an absolute deed of sale of the land for P%,''', includin. the interest
stipulated and o"in.. The stipulation "as verbally !odified by the sa!e parties after
the e*piration of one year, in the sense that the petitioner "ould take possession of the
land and "ould benefit by the fruits thereof on condition that he "ould condone the
pay!ent of interest upon the loan and he "ould attend to the pay!ent of the land ta*.
These pacts !ade by the parties independently "ere calculated to alter the !ort.a.e
a contract clearly entered into, convertin. the latter into a contract of antichresis.
BArticle %99% of the Civil Code.C The contract of antichresis, bein. a real encu!brance
burdenin. the land, is ille.al and void because it is le.al and valid.
The fore.oin. considerations brin. us to the conclusion that the first assi.n!ent of
error is "ellfounded and that error "as co!!itted in holdin. that the contract entered
into bet"een the parties "as one of absolute sale of the land and its i!prove!ents
and that E*hibit % is null and void. $n the second assi.n!ent of error the petitioner
contends that the Court of Appeals erred in holdin. that he is .uilty of violatin. the
Public 8and Act because he entered into the contract, E*hibit %. The assi.ned error is
va.ue and not specific. $f it atte!pts to sho" that the said docu!ent is valid in its
entirety, it is not "ellfounded because "e have already said that certain pacts thereof
are ille.al because they are prohibited by section %%1 of Act No. 395(, as a!ended.
$n the third assi.n!ent of error the petitioner insists that his testi!ony, as to the verbal
a.ree!ent entered into bet"een hi! and E!iliana A!brosio, should have been
accepted by the Court of Appeals, and in the fourth and last assi.n!ent of error the
sa!e petitioner contends that the Court of Appeals erred in holdin. that he acted in
bad faith in takin. possession of the land and in takin. advanta.e of the fruits thereof,
resultin. in the denial of his ri.ht to be rei!bursed for the value of the i!prove!ents
introduced by hi!.
=e have seen that subse4uent to the e*ecution of the contract, E*hibit %, the parties
entered into another verbal contract "hereby the petitioner "as authori/ed to take
possession of the land, to receive the fruits thereof and to introduce i!prove!ents
thereon, provided that he "ould renounce the pay!ent of stipulated interest and he
"ould assu!e pay!ent of the land ta*. The possession by the petitioner and his
receipt of the fruits of the land, considered as inte.ral ele!ents of the contract of
antichresis, are ille.al and void a.ree!ents because, as already stated, the contract of
antichresis is a lien and such is e*pressly prohibited by section %%1 of Act No. 395(, as
a!ended. The Court of Appeals held that the petitioner acted in bad faith in takin.
possession of the land because he kne" that the contract he !ade "ith E!iliana
A!brosio "as an absolute deed of sale and, further, that the latter could not sell the
land because it is prohibited by section %%1. The Civil Code does not e*pressly define
"hat is !eant by bad faith, but section (22 provides that +Every person "ho is
una"are of any fla" in his title, or in the !anner of its ac4uisition, by "hich it is
invalidated, shall be dee!ed a possessor in .ood faith+, and provides further, that
+Possessors a"are of such fla" are dee!ed possessors in bad faith+. Article %7&' of
the sa!e Code, covered by Chapter $$ relative to prescription of o"nership and other
real ri.hts, provides, in turn, that +-ood faith on the part of the possessor consists in
his belief that the person fro! "ho! he received the thin. "as the o"ner of the sa!e,
and could trans!it the title thereto.+ =e do not have before us a case of prescription of
o"nership, hence, the last article is not s4uarely in point. $n resu!e, it !ay be stated
that a person is dee!ed a possessor in bad faith "hen he kno"s that there is a fla" in
his title or in the !anner of its ac4uisition, by "hich it is invalidated.
Borro"in. the lan.ua.e of Article (22, the 4uestion to be ans"ered is "hether the
petitioner should be dee!ed a possessor in .ood faith because he "as una"are of
any fla" in his title or in the !anner of its ac4uisition by "hich it is invalidated. $t "ill be
noted that i.norance of the fla" is the keynote of the rule. #ro! the facts found
established by the Court of Appeals "e can neither deduce nor presu!e that the
petitioner "as a"are of a fla" in his title or in the !anner of its ac4uisition, aside fro!
the prohibition contained in section %%1. This bein. the case, the 4uestion is "hether
.ood faith !ay be pre!ised upon i.norance of the la"s. Manresa, co!!entin. on
article (2( in connection "ith the precedin. article, sustains the affir!ative. >e says)
+=e do not believe that in real life there are not !any cases of .ood faith founded
upon an error of la". =hen the ac4uisition appears in a public docu!ent, the capacity
of the parties has already been passed upon by co!petent authority, and even
established by appeals taken fro! final 0ud.!ents and ad!inistrative re!edies a.ainst
the 4ualification of re.istrars, and the possibility of error is re!ote under such
circu!stances, but, unfortunately, private docu!ents and even verbal a.ree!ents far
e*ceed public docu!ents in nu!ber, and "hile no one should be i.norant of the la",
the truth is that even "e "ho are called upon to kno" and apply it fall into error not
infre4uently. >o"ever, a clear, !anifest, and truly une*cusable i.norance is one thin.,
to "hich undoubtedly refers article 3, and another and different thin. is possible and
e*cusable error arisin. fro! co!ple* le.al principles and fro! the interpretation of
conflictin. doctrines.
But even i.norance of the la" !ay be based upon an error of fact, or better
still, i.norance of a fact is possible as to the capacity to trans!it and as to the
4
intervention of certain persons, co!pliance "ith certain for!alities and
appreciation of certain acts, and an error of la" is possible in the
interpretation of doubtful doctrines. BManresa, Co!!entaries on the <panish
Civil Code. Eolu!e $E, pp. %'', %'% and %'3.C
Accordin. to this author, .ross and ine*cusable i.norance of la" !ay not be the basis
of .ood faith, but possible, e*cusable i.norance !ay be such basis. $t is a fact that the
petitioner is not conversant "ith the la"s because he is not a la"yer. $n acceptin. the
!ort.a.e of the i!prove!ents he proceeded on the "ell.rounded belief that he "as
not violatin. the prohibition re.ardin. the alienation of the land. $n takin. possession
thereof and in consentin. to receive its fruits, he did not kno", as clearly as a 0urist
does, that the possession and en0oy!ent of the fruits are attributes of the contract of
antichresis and that the latter, as a lien, "as prohibited by section %%1. These
considerations a.ain brin. us to the conclusion that, as to the petitioner, his i.norance
of the provisions of section %%1 is e*cusable and !ay, therefore, be the basis of his
.ood faith. =e do not .ive !uch i!portance to the chan.e of the ta* declaration,
"hich consisted in !akin. the petitioner appear as the o"ner of the land, because
such an act !ay only be considered as a se4uel to the chan.e of possession and
en0oy!ent of the fruits by the petitioner, to about "hich "e have stated that the
petitioner@s i.norance of the la" is possible and e*cusable. =e, therefore, hold that the
petitioner acted in .ood faith in takin. possession of the land and en0oyin. its fruits.
The petitioner bein. a possessor in .ood faith "ithin the !eanin. of article (22 of the
Civil Code and havin. introduced the i!prove!ents upon the land as such, the
provisions of article 21% of the sa!e Code are applicable, "herefore, the respondents
are entitled to have the i!prove!ents and plants upon inde!nifyin. the petitioner the
value thereof "hich "e fi* at P2,''', as appraised by the trial court, or the
respondents !ay elect to co!pel the petitioner to have the land by payin. its !arket
value to be fi*ed by the court of ori.in.
The respondents also prayed in their co!plaint that the petitioner be co!pelled to pay
the! the su! of P1&', bein. the appro*i!ate value of the fruits obtained by the
petitioner fro! the land. The Court of Appeals affir!ed the 0ud.!ent of the trial court
denyin. the clai! or inde!nity for da!a.es, bein. of the sa!e opinion as the trial
court that the respondents !ay elect to co!pel the petitioner to have the land. The
Court of Appeals affir!ed the 0ud.!ent of the trial court that the respondents have not
established such da!a.es. Hnder the verbal contract bet"een the petitioner and the
deceased E!iliana A!brosio, durin. the latter@s lifeti!e, the for!er "ould take
possession of the land and "ould receive the fruits of the !ort.a.ed i!prove!ents on
condition that he "ould no lon.er collect the stipulated interest and that he "ould
attend to the pay!ent of the land ta*. This a.ree!ent, at botto!, is tanta!ount to the
stipulation that the petitioner should apply the value of the fruits of the land to the
pay!ent of stipulated interest on the loan of P%,''' "hich is, in turn, another of the
ele!ents characteri/in. the contract of antichresis under article %99% of the Civil Code.
$t "as not possible for the parties to stipulate further that the value of the fruits be also
applied to the pay!ent of the capital, because the truth "as that nothin. re!ained
after payin. the interest at %3L per annu!. This interest, at the rate fi*ed, a!ounted to
P%3' per annu!, "hereas the !arket value of the fruits obtainable fro! the land
hardly reached said a!ount in vie" of the fact that the assessed value of said
i!prove!ents "as, accordin. to the decision, P91'. To this should be added the fact
that, under the verbal a.ree!ent, fro! the value of the fruits had to be taken a certain
a!ount to pay the annual land ta*. =e !ention these data here to sho" that the
petitioner is also not bound to render an accountin. of the value of the fruits of the
!ort.a.ed i!prove!ents for the reason stated that said value hardly covers the
interest earned by the secured indebtednes.
#or all the fore.oin. considerations, the appealed decision is reversed, and "e hereby
ad0ud.e) B%C that the contract of !ort.a.e of the i!prove!ents, set out in E*hibit %, is
valid and bindin., B3C that the contract of antichresis a.reed upon verbally by the
parties is a real incu!brance "hich burdens the land and, as such, is a null and
"ithout effect, B2C that the petitioner is a possessor in .ood faith, B(C that the
respondents !ay elect to have the i!prove!ents introduced by the petitioner by
payin. the latter the value thereof, P2,''', or to co!pel the petitioner to buy and have
the land "here the i!prove!ents or plants are found, by payin. the! its !arket value
to be filed by the court of ori.in, upon hearin. the parties, B&C that the respondents
have a ri.ht to the possession of the land and to en0oy the !ort.a.ed i!prove!ents,
and B1C that the respondents !ay redee! the !ort.a.e of the i!prove!ents by payin.
to the petitioner "ithin three !onths the a!ount of P%,''', "ithout interest, as that
stipulated is set off by the value of the fruits of the !ort.a.ed i!prove!ents "hich
petitioner received, and in default thereof the petitioner !ay ask for the public sale of
said i!prove!ents for the purpose of applyin. the proceeds thereof to the pay!ent of
his said credit. =ithout special pronounce!ent as to the costs in all instances. <o
ordered.
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