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
1
"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. "
2
"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).
3
"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.).
4
"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.)
TEODORA L. VDA. De Miranda and others, plaintiffs-appellants,
vs. Feliciano IMPERIAL IMPERIAL AND JUANA, defendants-appellees.

GR No. L-49090 February 28, 1947

FACTS: Defendants Feliciano and Juana Imperial barrowed from plaintiff Miranda the amount
of P1,000; that in consideration of this debt and to guarantee payment they executed verbal
antichresis in favor of the latter. In an action filed by Miranda against Imperial, the lower court in
deciding based its finding in the judgment delivered by the Court of Appeals in the case of Santa
Rosa vs. Noble. Obtaining a negative judgment, appellant has brought the present appeal
claiming that the court erred in applying the case of Santa Rosa vs. Noble alleging that cases
decided by the court of appeals does not constitute precedent and hence may not be applied in
deciding cases.

ISSUE: Whether the decisions of the Court of Appeals constitute precedents.

HELD: Only the decisions of Supreme Court establish jurisprudence or doctrines in the
jurisdiction. However, this does not prevent that a conclusion or pronouncement of the Court
of Appeals which covers a point of law still undecided in our jurisprudence may serve as
juridical guide to the inferior courts, and that such conclusion or pronouncement be raised as a
doctrine if, after it has been subjected to test in the crucible of analysis and revision, this
Supreme Court should find that it has merits and qualities sufficient for its consecration as a rule
of jurisprudence.