CHINA BANKING CORPORATION, in substitution of Filipinas Compania de Seguros, plaintiff-appellee, vs.

FAUSTINO LICHAUCO ET AL., defendants-appellants. G.R. No. L-22001 | 1924-11-04

DOCTRINE: The consideration of a mortgage, which is an accessory contract, is that of the principal
contract, from which it receives its life, and without which it cannot exist as an independent contract,
even if the obligation thereby secured is of a third person, and therefore it will be valid, if the principal
one is valid, and cannot be avoided on the ground of lack of consideration.

FACTS:

Lichauco & Company, Inc., has a loan with Filipinas Compania de Seguros (China Banking Corporation),
herein plaintiff. Spouses Faustino and Luisa Lichauco executed a mortgage in favor of the plaintiff upon
the property described in the document to secure the payment of a part of this loan in the amount of
P50,000 with interest at 9%. It was agreed that in case of nonfulfillment of the contract, this mortgage
would stand as security also for the payment of all the costs of the suit and expenses of any kind,
including attorney’s fees, which by way of liquidated damages are fixed at 5% of the principal. In
addition, it states that if Faustino and Luisa should fail to pay this amount of P50,000, the mortgage shall
be in full force and effect. Lichauco & Co., Inc., Faustino, and Luisa F executed another document, in
which, among other things, they ratified the former mortgage and stated that the payment of the
P50,000 shall continue to be secured in the same manner and with the same property, and shall earn
interest at 12%/year. Issue: Whether the obligation of Spouses Lichauco lacked consideration, because
what they guaranteed with the mortgage was a debt of Lichauco & Co., Inc.

Held: No. As a mortgage is an accessory contract, its consideration is the very consideration of the
principal contract, from which it receives its life, and without which it cannot exist as an independent
contract, although, as in the instant case, it may secure an obligation incurred by another (art. 1857 of
the Civil Code).