Republic of the Philippines SUPREME COURT Manila

EN BANC
GR No. L-49090 February 28, 1947
TEODORA L. VDA. De Miranda and others, plaintiffs-appellants,
vs. Feliciano IMPERIAL IMPERIAL AND JUANA, defendants-appellees.
Manuel M. Calleja and D. Ramon C. Fernandez on behalf of the appellants.
D. P. Perez Toribio appellees.
BRIONES, J. :
This is a matter before the war. The lawsuit was filed before the Court of First Instance of Albay on
November 25, 1941, ie, almost on the eve of the outbreak of the Pacific War. The Court delivered its
judgment on March 17, 1943. The matter was taken to before this Supreme Court under the appeal
filed by the applicant on June 9, 1943. Before he could decide, the file is burned together with the
other records of this Court in the conflagration of Manila for the battle of liberation. What we have,
therefore, before us is a reconstituted with documents provided by the lawyer of the appellant,
namely record: ( a ) copies of the appeal record (record on appeal); ( b ) copies of the argument
submitted by counsel for the appellant. The respondent has not submitted any allegation or if, or
through his lawyer. Lawyers for both parties were duly notified of the proceedings of reconstitution by
the commissioner of this Court, but the only ones who have appeared have been lawyers for the
appellant, delivering copies of which have been mentioned.
It is alleged in the lawsuit that before November 17, 1938 the defendants conjuges, Feliciano and
Joan of Imperial Imperial, Imperial Elias debian the amount of P1,000; that in consideration of this
debt and to guarantee payment had subsided, as antichresis Imperial Elias said the possession and
enjoyment of three plots of land paddy your propiedead; that on that date November 17, 1938, the
defendants proposed to the applicant, Theodora L. Vda.Miranda, who lend them the amount of
P1,000 to rescue Elias Imperial grounds, subrogated it as a creditor in place of Elias under the same
terms and conditions of antichresis concluded with the latter; that inasmuch as the applicant had the
quantity ordered and, moreover, the defendant is his sister, a widow of a brother of this, I accept the
proposal, effectively delivering the amount of P1,000 to the defendants, who then see the returned
Elias Imperial to rescue farms; that in the case of relatives, the contract was not reduced to writing,
but after I did the rescatey Imperial Elias stated at the foot of the ownership documents for the three
plots of land, the documents were handed in the act of redemption the applicant who was then
present in the company of the defendant as evidence of the loan and the transfer of the new contract
antichresis; that since the applicant was enjoying the products, receiving his participation in the
crops corresponding to 1939 and 1940 at a rate of two harvests a year, and the first crop of 1941, or
a total of 5 harvests from November 17 1938 to April 1941; that the applicant could no longer enjoy
the second harvest of 1941, ie corresponding to October, as the defendants resolved since such
appropriate harvest and subsequent to the present; the harvest gathered by the defendants in
October, 1941, and should belong to the applicant, was 50 cavanes of rice, whose price in the
market was at P2.50 the dig that is, a total of p120. Therefore, the applicant requests that, "under
the first ground of action , the defendants be ordered to accord a document of mortgage in favor of
the applicant to ensure the three plots of land mentioned above to ensure payment to the applicant
of the she pesos paid by Mr. Elias Imperial on behalf of such defendants, establishing therein within
three months to pay, or time that is reasonable in the prudent judgment of the Court and by interest
at the rate of twelve ( 12%) percent per year; " and "under the s econd cause of action , the

defendant is ordered to pay the applicant the sum of P120 as the value of the rice crop raised plots
of land described in this lawsuit and illegally appropriated by these defendants, plus court costs;
" and "calls, finally, any other just and equitable remedy."
Regarding the first ground of action the defendants are defended on the grounds that the applicant
only received the amount of P500, to which they added another P500 to rescue Elias Imperial
grounds; and that this debt was more than P500 paid with the products of the land that the applicant
received on 5 consecutive harvests, "this automatically extinguished the rights and contractual
obligations of the parties." Regarding the second ground of action, deny, and say the crop in October
1941 and all that were collected after they legally belonged to the defendants; and that the October
harvest, as in previous years, they reported as 70 cavanes participation of palay.
The defendants raised, moreover, in its defense a counterclaim alleging (1) that between the
applicant and the defendant, Joan of Imperial, a verbal agreement was held in vitud which is
received in that the sum of P500 to rescue terrnos refefridos, on the understanding that the applicant
would make theirs every product under the same terms and conditions of the previous contract with
Imperial Elias until your credit quedase entirely paid for such products: (2) that, indeed, the rescue
was undertaken by returning Elias Joan documents with a note of cancellation of the debt at the foot
of the same, but after the plaintiff took the documents provided under the pretext familiar with the
surrounding land, and this is the explanation of how the documents ended up in the hands of the
applicant holding them until the day of the hearing; (3) that, in addition to the 3 plots in question, the
applicant's products enjoy a fourth plot of the defendants amounts to 10 cavanes of rice each
harvest; (4) that the 4 plots the applicant came to receive as participation in the five crops that
collected a total of 400 cavanes of rice, and that then dig traded at P2.50 on the market; (5)
Therefore, the applicant made no less than P1,000 with the products received by it and deducting
from this sum owed by the defendants P500, P100 more in interest at the legal rate, still remains in
favor such a balance of P400, so ask for a judgment against the applicant issued by the latter
amount.
After seen the issue the Court delivered its judgment in which are estimated diguientes conclusively
proven the facts: (1) that for about 10 years prior to November 17, 1938 the defendants had Eleas
Imperal owing to the amount of P1,000: (2) between the creditor and the debtor was held accessory
contract antichresis under which one would enjoy as effectively enjoy during the period of 10 years
for all products of the 3 land that has been mentioned, considering these products and interests of
the borrowed money; (3) that during and enjoy the land, not a single grain of rice produced is aplicio
to pay or repay the principal of the loan; (4) that the November 17, 1938 the defendants received
from the applicant not P500, as those claims, but P1,000 to rescue farms hands of Imperial Elias
being the agreement between the parties that the applicant would be subrogated as a creditor
instead of the Imperial Elias under the same terms and conditions of the contract signed with this
antichresis;"After careful consideration of the evidence and all the attendant circumstances, the
Court concludes and, therefore, also states that the applicant pay the demandadosP1,000
atualmente and that the agreement between the parties was that the applicant would receive the
products placed above the 3 plots in antichresis for Elias Imperial, as interest on the loan until it was
entirely paid "; that, indeed, the applicant was quietly getting the products in 5 consecutive cosehcas,
but after harvest in April, 1941, the defendants completely dispossessed the plaintiff, appropriating
all crops.
Of the facts established in the judgment, as this is extracted, it is clear that the contato versa
antichresis on that matter is defined in Article 1885 of the Civil Code which stipulates that: "The
contracting parties may stipulate that offset the interest on the debt with the fruits of the property
given in antichresis. " However, the court a quo, instead of applying this article as it should by
imperative stating the facts proven and established at trial, made the following statement: "However,

despite this agreement, the claim that the defendants' the amount of the proceeds received by the
applicant should apply to the payment of the principal of its debt desu deducting the interest at the
legal rate, it must be sustained. " That is, the Court applies to the case not Article 1885 cited above
but Article 1881 of the Civil Code which reads as follows: "For the antichresis the creditor acquires
the right to receive the fruits of a property of his debtor's liability to apply to the payment of interest, if
they ought to have been, and then to the capital of your credit. " And the Court bases its finding in
the judgment delivered by the former Court of Appeals in the case of Santa Rosa against Noble (GR
No. 43769, Off Gaz 35, 2734;.. The Lawyer's Journal, Vol V, No. 23. p. 1109), presentation of Judge
Hon. Jose Lopez Vito.
So the court a quo, after making the corresponding arithmetic operation applying, first, the payment
of interest, and then to the principal of the debt, awarded for the applicant a balance of P435.17 and
orders will continue to apply to products satisfy the land until full payment, or rectify the defendants
at once with interest at the rate of 6 percent per year since 1 May 1941. Against the failure so
dictated the applicant has brought the present appeal, not asking more questions of law, namely that
the Court erred in failing to apply to this case in all its rigor to Article 1885 of the Civil Code; that the
Court could not, of a fiat, create arbitrarily for the parties not concluded a contract between
them; that Article 1885 refers specifically to a type of antichresis and 1881 article and article to
another;when the agreement is, as in the present case, the products of the farm given in in
antichresis be offset by interest on the debt, no part of the products should be applied to the
repayment of capital; and therefore, she, the appellant is entitled to be returned integral capital of
your credit, or the cantidada of P1,000, but the goods or interests.
The Court a quo founded his fault entirely analogous said two separate issues, especially since both
come from the same region - the Bicol - and relate to a contract very common in this region, there
commonly called the contract "Sangla" or " garment, "and that in the Visayas where the Cebuano
dialect is spoken and Mindanao is called" saop "and also" pledge "sometimes.
It seems superfluous to say that only the sentences of this Supreme Court case law or doctrine sit in
this jurisdiction. However, this did not start that a conclusion or to the Court of Appeals that covers
some point of law still unresolved in our jurisprudence can serve as a legal standard to the lower
courts, and that that conclusion or statement rises to doctrine if, after of being tested in elcrisol the
analysis and judicial review, hallaramos that had merit and sufficient carats for consagracioncomo
rule of law. For this purpose and for this purpose we have examined carefully and thoroughly the
Court of Appeal in that case against Noble Santa Rosa, coming, as stated above, the Bicol region as
well as the hand.
No sign - we are not now called for it, nor is it necessary to do so - the interesting insights that the
Court of Appeals made in that judgment, we believe, however, that the court a quo erred in applying
to this case, as there are between cases fundamental differences, namely:
First difference : In the matter of the Court of Appeals was usury "issue," capital controversial
point. So says this Court in its judgment: "But the defendants argue that the contract stated in Exhibit
E is usury, which raises the question of whether the Act No. 2655 known Usury Act that sets the rate
of interest it is permissible to collect on the loans, it is applicable to contracts antichresis. " Although
not say it in a way, the Court of Appeals ruling that the Act was applicable Usuara, consequently
fixing the chargeable interest in, practically prosecuted statutory rate of 6 percent and declare as
usurious contract that antichresis He was.
In the case before us the question of usury was not raised in the pleadings nor ever even inthe
trial; and the judgment there any pronouncement in fact usury; and inasmuch as in this appeal not
Planteam more issues of law that it being established and accepted without question the facts

contained in the sentenica, that is this review that our faculty has to adhere strictly and inflexibly to
such facts, without us be allowed to go beyond their radio.After all, it is not surprising that the
defendants have not raised any question on usury, as popr 10 years had been indebted to Elias
Imperial without, apparently, differences endeavor relationships (in fact Elias I stated at the hearing
in favor of the defendants), and we have seen that the applicant has only just subrogation instead of
Elias in the contract antichresis.
Second difference : Clearly antichresis that that case is Santa Rosa against Noble is defined in
Article 1881 of the Civil Code, antichresis "the creditor acquires the right to receive the fruits of a
building of the debtor the obligation to apply to the payment of interest, if they ought to have been,
and then to the capital of your credit. " Here is what the Court of Appeal, in its judgment that
commented on this subject: "As to whether the same rate set by the usury law should be applied
when there is an express stipulation that the fruits will began with debt interest pursuant to Article
1885, with quaere: not being the case that is submitted to our consideration today, having declared
us that Exhibit "E" falls low over the provisions of Article 1881 of the Civil Code ". (Emphasis added.)
Instead, the antichresis on that issue in the present case is defined in Article 1885, which provides
that "the contracting parties may stipulate that the interest on the debt with the fruits of the property
given in antichresis be compensated." Here is the strict ruling of the court a quo on the matter: "After
a careful consideration of the evidence and all the attending Circumstances, the court Concludes,
and holds THEREFORE, whos That the plaintiff 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 Said Imperial as interests on loan Until the
same is paid . " 1 (emphasis added.)
Exist, according to the same conclusion court a quo, that covenant that farm products to be offset by
interest on the debt, in accordance with Article 1885 of the Civil Code, the change is arbitrary court,
making for the parties to uncontrato they have not concluded, or to put it more specifically, truly
transforming the pact agreed to something that falls under an article of the code that was neither in
the mind nor the will of the parties. Article 1255 of the Civil Code stipulates that "contracting parties
may establish the covenants, terms and conditions as they see fit, provided they are not contrary to
law, morality or public order." This excludes contracts the fiat court. Courts can interpret
contracts; what they can not do is mold, for jarlos the parties.
We agree with the Court of Appeals that the contract called "Sangla" or "pledge" (on property) in
Bicol, "soap" or "pledge" in Visayas and Mindanao, really has the characters of the antichresis and
therefore can considered as such. Besides the sale pact retro, that contract is the best known and
usual in our towns and rural districts - Take hold of the peasant and farmer, and to improve and
expand their crops, and to buy new land to increase their possessions, and to marry their children
and provide them, and even sometimes to give a dignified and proper burial of their dead. And why
not say so? Per unhappy passion play culminating sometimes in that contract to embitter the
existence if north to work the ruin of the small owner.
The question we now have to determine is, namely: is automatic or ministerially antichresis
applicable to the usury, as appears to be inferred from the judgment appealed? Certainly
not. Antichresis as contract - either under Article 1881, and under Article 1885 of the Civil Code - it is
not necessarily usurious; it can be, that if usurious. But so that you can declare, is not only
absolutely necessary that usury be an "issue," a contentious capital allegations point and at trial, so
that each party has its "day in court," that is, that can defend properly and adequately, but also, must
be demonstrated and positively established that usury is of such proportions that, on shock the
conscience, tilt the mood to believe that the contract has been used as a costume or to artilugo
violate or circumvent the usury law. The reason for this is simple: in the antichresis there is a

contingent element random by nature. The perception of the products by the creditor, which is its
main feature, is subject to various contingencies and eventualities. There may come a poor harvest,
or none, and because he has vented a typhoon, and because they have overflowed rivers Coming
up a flood, and because a flock of locusts devastated crops and plantations, and because deep
social upheavals have subverted peace and order preventing tilling the fields, etcetera, etcetera. So
the antichresis can not automatically apply ministerially, Articles 2, 3 and 8 of Law No. 2655 on
usury, as these relate to the perception of a fixed amount of products: the debtor must submit
unswervingly or its equivalent in money, whether good or bad harvest, whether or not there. The fact
that sometimes antichresis the amount of fruits, to be the settlement exceeds the rates set by the
law of usury, usurious contract does not, because the law assumes that such excess is collecting the
dividend the creditor in exchange for the risk premium and contingencies which has paid up capital
of the credit.
In American jurisprudence also certain types of contract analogous to our "Sangla" or known
"saop." as they demonstrate 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 His consideration of forbearance or
loan, property or services of uncertain value, even though the likely 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 Such for the purpose of evasion or
violation. 2 (66 CJ, 212.)
Where the lender is to receive money for something else than His loan, as property or
services, the value of Such profit Necessarily Being uncertain, the contract is not
usurious, even though the likely 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 "February 39 Cyc 959;. Wright vs.
McAlezander 11 Wing, 236;. Rapier v C. Gulf City Paper. 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 thefact 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, lecturing on the relative convenience of the antichresis although sometimes, as a tool of
usury, makes the following pertinent observations:
In doing so the authors of the Code, they responded with great success to a need imposed
by modern principles that the laws of mutual inspiration, according to which there is no
economic or legal reason to condemn the antichresis. In addition, they sought thus avoid
damages to the debtor who, otherwise, were inevitable, since experience well palpably had
shown that, despite the prohicion laws, the anticretico covenant was very common in
practice, because the prohibitory provisions were being circumvented, disguising the
convention with the form or name sales pact retro, so far favored the borrower, as the
legislature intended, it caused him great grief, since it can not grant the creditor enjoyment of
the fruits to be applied to the repayment of interest or partial payment of principal, they were
forced to sell the goods in the manner, shedding a property that could hardly acquire
again. (Manresa, Comm. In Cod. Civ. Spanish, Volume 12, p. 545.)

The rule, then, is, or should be, the following: (a) the antichresis known in this country with the
vernacular name "Sangla" or "saop" can not be assessed and reported as usurious, unless usury in
itself it arises ocmo an "issue," a contentious issue between the parties, in accordance with the
procedural statutory rules on the matter; ( b ) and that the contract is considered and declared usury
is not enough that the products of the property given in antichresis to perciberse by the creditor
exceeds any legal fees both in terms of interest, but it must be as excess palpable, so repulsive and
so shocking to the conscience necessarily the feeling that the contract has been forged to hide the
malicious intent to violate or evade usury law; ( c ) no mediating these circumstances, the "Sangla"
or "saop" must be respected and compliance left expedited under Article 1881 or Article 1885 of the
Civil Code, as the case may be, and the courts anything done to change the terms of antichresis
which must be law between the parties.
The present case presents some difficulties with regard to the failure to be issued. The plaintiff
sought judgment and oblique to the defendants to grant in its favor a mortgage document on the
three plots of land to secure payment of the debt of P1,000, "setting therein within three months to
the payment or the time limit reasonable under the preduente judgment of the Court and by interest
at a rate of 12 percent a year, or in place, any other remedy ineligible ". In our view, this would only
delay the disposal and final settlement of the issue to the detriment of the parties and expeditious
administration of justice.
Having defendants possession of the plots of land for them in antichresis transferred to claimants
and enjoyed its fruits from the month of October 1941 up to date, and demostratod plaintiffs give its
agreement by teminado the contract to present anticretico demand the November 25, 1941, not to
recover these parceles of land, but to demand payment of the debt with interest from that date, upon
revocation of sentenciaapelada, we issued the following ruling :.
(1) the defendant was ordered to pay the applicants the sum of one thousand pesos (P1,000),
amount of credit of the latter, with interest at the rate of 6 percent a year from November 25, 1941 in
that the suit was filed, and the court costs and must be paid that sum with interest and costs to the
plaintiffs, or deposited in the Court of First Instance of Albay within three months after officially this
moratorium is lifted ;
(2) In default of payment, as is required in the previous paragraph, the three plots of land on which
deals with this issue will be sold by the Sheriff at public auction in accordance with the law on
payment of mortgage credit;
(3) Meanwhile no payment is made, as is ordered in this judgment, the sum owed their legal
interests and court costs pass as a lien (lien) preferably on the three plots of land in question. So it is
ordered.
Moran, Pres., Fair, Bengzon, Padilla and Tuazon, JJ., concur.

Separate Opinions
PARAS, J., dissenting:
, Although the trial court held That "the plaintiff whos 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 Said Imperial as interests on 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 interests at the 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 Should
Have Said court applied article 1885 of the Civil Code Which Provides That "May the contracting
parties That stipulate the interest of the debt be off in September 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 defendant's loan of P1,000. Also this
is the view Expressed in the majority opinion.
I dissent. The right of the contracting parties to Establish any PACTS, clauses, and conditions They
deem Advisable May, 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 That They Provide
Such products or seeds or other commodities Shall be appraised at the time When the obligation
falls due at the current market price locally, "article 1885 of the Civil Code must be Considered
modified, if not repealed under the repealing clause (section 11) of the Usury Law. In other words,
any antichretic agreement, Either under 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 article
1855 was good before the Government HAD ITS policy laid down Regarding interest on loans.
Article 1881 punishes therefore the general rule to govern necessarily always enforced and
that there is no special agreement indicated and 1885 establishes the exception to that rule if
the pact stipulated.
This is a result of the freedom granted to the fixing of the interest rate for legal abolished by
law in 1856, the parties are free to set the amount and condition of such interest, may
perceive them in money than in kind, and therefore compensated with the fruits interests. (12
Manresa, Civil Code, p. 482.)
That the majority argue the Usury Law can not 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 products received by it and deducting from this amount
the P500 owed by the defendants, more P100 in interest at the legal rate, still remains in favor of
these a balance of P400, so ask for a judgment against the applicant issued by 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 right not to apply the products entirely in compensation Their interest
notwithstanding of the agreement, and This Issue Should be decided in the light of Existing law
Which was it NOT necessary for the defendant to specify in His answer. We would not just thus be
digressing from the issues raised by the parties, or creating new ones, by simply adjudicating cases
concrete conformably to law.
. . . It is clear that the courts may in each case determine the nature of the obligation and
conditions attached to it, if the agreement is given to the effects from law. . . . (11 Manresa,
Civil Code, p. 550.)

The contingent character of the arrangement Contemplated by Article 1885, ITS can not warrant
continued existence. The Usury Law, Which is of later date and controlling THEREFORE, Protects
Borrowers and at the same time Eliminate the element of chance That May prove disadvantageous
to Lenders Who are to be paid in agricultural products.
The appealed judgment Should be Affirmed.

Footnotes
"After careful consideration of the evidence and surrounding circumstances, the Court
concludes, therefore also stated that the applicant now ready to P1,000 defendants, and that
the agreement between the parties was that the applicant would receive the products of the
three plots given above in antichresis Elias Imperial as interest on that loan , until it paid
regardless. "
1

"In view, however, the rule that revenue from a creditor should not be limited to the legal
rate when it is affected by a contingency that puts everything at risk, a contract is not
ordinarily usurious when the creditor receives in consideration of its loan or largesse,
property or services of doubtful value, even if it is greater than or legal interest rate, unless
the excess is so palpable that show a corrupt intent to violate or evade usury law, or unless
the contract was made for the purpose of such violation or evasion "(66 CJ, 212).
2

"When the contract is for the lender to get something other than money for his loan, that is,
in kind or services, siendoel necessarily uncertain value of such profits, usurious contract is
likely although the value is greater than the interest legal , unless the consideration is also
given so palpably in excess of the profit permitted by law it is deduced and demonstrated the
vicious intention of violating usury laws. " (39 Cyc, 959;. Wright vs. McAlexander 11 Wing,
236;. Rapier vs. Gulf City Paper Co., 77 Wing, 126.).
3

"So, a contract in which, instead of interest, the lender receives the income and gains some
ground for a period of years, is not usurious if it is proven that there was intent to evade the
law, and the fact that such income and gains mounted to or more than the legal interest rate
does the usurious contract . " (Webb on Usury, p. 85.)
4