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Diego v. Fernando (1960) Reyes, J.

FACTS: Fernando executed a deed of mortgage in favor Diego over two parcels of land tp secure a loan of 2k. After the execution of the contract, possession of the mortgaged properties were turned over to the mortgagee. Fernando failed to pay so Diego filed this action for foreclosure of mortgage. Fernandos defense was that the true transaction was one of antichresis and not of mortgage. Hence, Diego having received 120 cavancs at 10/cavan (5.2k), it is actually he who owes Fernando the surplus of P2,720. CFI: Found that it was indeed a Mortgage. The fact the properties were turned over to the mortgagee did not alter the transaction. CFI took the delivery as a manifestation of the intention to allow the mortgagee to collect fruits as interest. WoN the CFI erred in considering the delivery as intent of interest (Yes) Whether the contract is that of mortgage or of antichresis. (Mortgage) Fernando contends that a loan was without interest, coupled with the transfer of the possession, reveals that the transaction was in true an antichresis. Without merit. It is not an essential requisite of a mortgage that possession of the premises be retained. Antichresis: When expressly agreed between creditor and debtor that the creditor, having been given possession, is to apply their fruits to the payment of the interest, if any, and thereafter to the principal. o If a contract of loan with security does not stipulate payment of interest, but provides for the delivery to the creditor by the debtor of the property so that the creditor may gather fruits, without stating that said fruits are to be applied to the payment of interest, and then to the principal; the contract remains a mortgage. Needs to be stipulated for payment of interest. Aforementioned doesnt mean that the creditor, having received the fruit s, will be allowed to appropriate without accounting for them. The mortgage clearly provides that the loan was without interest. The CFI then is not authorized to infer by the transfer of possession of the collateral, absent a new contract, that the same had been verbally modified. American equity jurisprudence: Mortgagee in possession o One who has lawfully acquired actual or constructive possession of the collateral to him as a mortgagee and not claiming under another title, for the purpose of enforcing his security. As a mortgagee in possession, rights and obligations are similar to that of an antichretic creditor. For example: 1. That if the mortgagee acquires possession in any lawful manner, he is entitled to retain such possession until the indebtedness is satisfied and the property redeemed; 2. That the non-payment of the debt does not vest the ownership of the property in the creditor; 3. that the general duty of the mortgagee in possession is that of the ordinary prudent owner; 4. mortgagee must account for the rents and profits of the land, or its value for purposes of use and occupation; 5. that if the mortgagee remains in possession after the mortgage debt has been satisfied, he becomes a trustee as to the excess of the rents and profits over such debt; 6. that the mortgagor can only enforce his rights to the land by an equitable action for an account and to redeem. The fact that the debtor consented and asked the creditor to take charge of managing his property "does not entitle the latter to appropriate to itself the fruits thereof unless the former has expressly waived his right thereto " In the present case, the parties having agreed to loan without interest, Fernando not having expressly waived his right to the fruits, Diego therefore, like an antichretic creditor, must account for the value of the fruits and deduct it from the loan obtained Having received 55cavans at 9/cavan (495), Fernando only owes P1,505. Won CFI erred in ordering him to pay legal interest (No) Appellant claims since the latter is, up to the present, still in the possession of the properties and still enjoying its fruits, he is not entitled to legal interest. Without merit. Law allows creditor, absent stipulation to the contrary, legal interest from the debtors default. Nonetheless, Diego should account for the fruits he received and deduct it from the total amount due him. AFFIRMED