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.
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.

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.
 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 RTC 4.
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 1306 5.
There, the figures were 5.5% interest per month (66%/annum total).
i. Similar Cases – SC previously annulled or adjusted interest in other cases
(72%/annum 6 | 14%/annum 7 | 36%/annum 8 | 84%/annum 9 |10 and
8%/annum 10)
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

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)

6 Solangon v. Salazar
7 Imperial v. Jaucian
8 Ruiz v. CA
9 Arrofo v. Quino
10 Cuaton v. Salud
 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
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.

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.

12There 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.
 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: