SPOUSES DAVID B. CARPO & and RECHILDA S.

CARPO, Petitioner,
vs.
ELEANOR CHUA and ELMA DY NG, respondents.
G.R. Nos. 150773 & 153599 | September 30, 2005
Tinga, J.:
Digest Author: Jude Fanila

Topic: Remedy of Creditor

Case Summary: Petitioners, Sps. Carpo borrowed from respondents, Chua and Ng. The loan
involved an accessory mortgage contract + interest. They defaulted, leading to foreclosure of the
mortgage. Sps. Carpo then tried to assail the validity of the mortgage by claiming that the
usurious nature of the interest on the loan rendered both the loan contract and the mortgage
contract as void.

SC denied the motion, stating that the invalidity of an accessory obligation cannot affect the
validity of the principal obligation IF they are divisible. Thus, the accessory obligation (payment
of the interest) being void did not affect the other accessory obligation (mortgage) as the
principal obligation (payment of the loan) was still valid.

Petitioners: Sps. David and Rechilda Carpo

Respondents: Eleanor Chua & Elma Dy Ng.

Doctrines Involved:
Jurisprudence – As held in Briones v. Cammayo and other prior cases, a loan with usurious
interest consists of principal and accessory obligations. The principal obligation (to pay debt) can
stand even if the accessory obligation (to pay interest) is void. This finds basis in NCC 1273 1 and
1420 which provides for the divisibility of contracts with illegal aspects.

Rule – The invalidity of an accessory obligation cannot affect the validity of the principal
obligation IF they are divisible.

Application - In the present case, the principal contract is the loan contract, with the mortgage
contract AND the interest rate as accessory aspects of the loan. Thus, even if the interest rate was
null and void, it does not affect the validity of the principal contract (payment) and, consequently
does not also affect the accessory mortgage contract

FACTS:
1. July 18 1995 – Sps. Carpo (Petitioners) borrowed from Chua and Ng (Respondents)
P175,000.
a. Payable within (6) months at an interest of 6% per month.
b. Security – Sps. Carpo mortgaged their house and lot in San Fracnisco, Camarines
Sur.

1
Art. 1273. The renunciation of the principal debt shall extinguish the accessory obligations; but the waiver of the latter shall
leave the former in force.
 2. July 8 1996 - Sps. Carpo failed to pay the loan upon demand, led to extrajudicial
foreclosure. Property was later sold in a public auction to the respondents for P367,457.
a. Sept 5 1997 – Sps. Carpo failed to redeem the property. Led to issuance of new
TCT in favor of Chua and Dy Ng.
3. March 23 1999 – Sps. Carpo continued to occupy the lot despite loss of ownership. Led
to the respondents obtaining a writ of possession against the Sps. Carpo. (1st civil case)2
4. July 23, 1999 – Sps. Carpo filed a complaint for annulment of deed of real estate
mortgage + the subsequent foreclosure proceedings. (2nd civil case)3
5. January 6 2000 – Due to pending proceedings, a TRO was issued against the writ of
possession previously obtained by the respondents by the RTC4.
a. Led to an appeal via a petition for certiorari and mandamus before the CA.
6. The 2nd civil case (annulment) was later dismissed on the grounds of it being filed out of
time and barred by laches. The RTC argued that the complaint was one for annulment of
a voidable contract (prescribes in 4 years). Led to an appeal.
7. The two cases were ordered consolidated upon motion of the petitioners. Leading to the
current case.

ARGUMENTS BEFORE THE SUPREME COURT:

 Petitioner’s Argument related to Doctrine:
o G.R. No. 150773. (1st case)
 (1) That under the doctrine in Medel v. CA the rate of interest stipulated in
the principal loan agreement is null and void. This nullity then affects the
validity of the real estate mortgage.
o G.R. No. 153599 (2nd case) – That a petition for certiorari and mandamus to the
CA assailing the TRO and writ of possession issued by the RTC was improper as
these could not have been the proper subjects of a petition for certiorari and
mandamus.
 Respondent’s Argument related to Doctrine: N/A

ISSUES + HELD:
1. W/N the deed of real estate and mortgage is void due to interest rate? – NO.
a. Interest Rate – as held in Medel v. CA an interest rate can be considered null and
void if it is excessive, iniquitous, unconscionable, and exorbitant based on NCC
13065. There, the figures were 5.5% interest per month (66%/annum total).

2
(SP) No. 98-1665
3
Civil Case No. 99-4376
4
Unstated which RTC, but this was the same one where the writ of possession was obtained from.

5
Article 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. (1255a)
 i. Similar Cases – SC previously annulled or adjusted interest in other cases
(72%/annum6 | 14%/annum7 | 36%/annum8 | 84%/annum9 |10 and
8%/annum10)
b. Present Interest – In the case, the interest rate was 6%/month (72%/annum).
c. RTC Application – The RTC refused to apply Medel because Medel did not
pertain to the annulment of a real estate mortgage but was instead a case for the
annulment of the loan contract itself. This leads to the sub issue of W/N the
invalidity of a stipulation on interest means the invalidity of the principal
obligation.
i. Relevance of sub-issue – Because the consideration for the mortgage
contract (accessory) is the same as the principal contract. Thus, the
validity of the mortgage depends on the validity of the loan(principal) it
secures.
ii. Jurisprudence – As held in Briones v. Cammayo and other prior cases, a
loan with usurious interest consists of principal and accessory obligations.
The principal obligation (to pay debt) can stand even if the accessory
obligation (to pay interest) is void. This finds basis in NCC 1273 11 and
1420 which provides for the divisibility of contracts with illegal aspects.
iii. Rule – The invalidity of an accessory obligation cannot affect the validity
of the principal obligation IF they are divisible.
d. Application - In the present case, the principal contract is the loan contract, with
the mortgage contract AND the interest rate as accessory aspects of the loan.
Thus, even if the interest rate was null and void, it does not affect the validity of
the principal contract (payment) and, consequently does not also affect the
accessory mortgage contract.
2. W/N Sps. Carpo are barred by Laches? – YES
a. Prescriptive Periods
i. Void Contracts – An action to declare a loan and mortgage contract void
for being contrary to publicpolciy has no prescriptive period. HOWEVER,
this does not apply to the Sps. Carpo as the loan and mortgage contracts
are valid.
ii. Voidable Contracts – NCC 1391 provides that in the case of undue
influence a contract is rendered voidable. Such actions prescribe in (4)
years.
b. Application – There was no showing of undue influence that vitiated the consent
of the Sps. Carpo in the loan and mortgage agreements. NCC 1337 defines undue

6
Solangon v. Salazar
7
Imperial v. Jaucian
8
Ruiz v. CA
9
Arrofo v. Quino
10
Cuaton v. Salud
11
Art. 1273. The renunciation of the principal debt shall extinguish the accessory obligations; but the waiver of the latter shall
leave the former in force.
 influence.12 The mere fact that the Sps. Carpo were financially distressed does not
mean that there was undue influence.
c. Laches – Even assuming there was undue influence, the Sps. Carpo are now
barred by Laches as they only raised the issue of vitiation of consent when the
writ of possession was issued (Jan 6, 2000) whereas they entered into the contract
in 1995. Thus, more than (4) years had already passed.
3. W/N the special civil action for certiorari and mandamus was seasonable filed? – YES
a. When special actions are available:
i. Mandamus – to compel the performance of a ministerial duty.
ii. Certiorari – A rule 65 certiorari may be filed within the (60) day
reglementary period to assail interlocutory orders.
b. Application – Both SPA’s were seasonably filed.
i. Certiorari - The January 6 2000, which granted the writ of injunction
suspending the writ of possession. An injunction’s period of efficacy is
indefinite and is interlocutory. The SPA challenging the order was filed
well within the (60) day reglementary period. (Date unstated).
1. On petitioner’s arguments – Petitioner’s argued that the Jan 6 order
was final, thus the (15) day reglementary period applies. This is
wrong as injunction is by nature interlocutory.
ii. Mandamus – The respondents were assailing the issuance execution of a
writ of possession. In an extrajudicial foreclosure, the issuance of such a
writ is ministerial in nature as the purchaser in a foreclosure sale is entitled
to a writ of possession as matter of right. Thus, proper subject of
mandamus.

RULING: WHEREFORE, in view of all the foregoing, the petitions are DENIED. Costs against
petitioners.

SO ORDERED.

DISSENT:

NOTES:

12
There is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of
a reasonable freedom of choice. The following circumstances shall be considered: the confidential, family, spiritual and other
relations between the parties or the fact that the person alleged to have been unduly influenced was suffering from mental
weakness, or was ignorant or in financial distress.