1. SPOUSES CHARITO M. REYES and ROBERTO REYES vs.

HEIRS OF BENJAMIN MALANCE

GR No. 219071; August 24, 2016

FACTS:

Benjamin Malance was the owner of an agricultural land at Dulong Malabon, Pulilan,
Bulacan. During his lifetime, Benjamin obtained from the Magtalas sisters, who are distant
relatives, a loan as evidenced by a Kasulatan Ng Ukol sa Utang which stated that the
Magtalas sisters shall have the right to the fruits of the subject land for six years or until the
loan is fully paid.

After Benjamin passed away, his siblings, the Malance heirs, inspected the subject land
and discovered that the Magtalas sisters, their respective husbands and their father, were
cultivating the same on the basis of the Kasulatan. Doubting the authenticity of the said
Kasulatan, the Malance heirs filed a Complaint for Recovery of Possession, Declaration of
Nullity of the Kasulatan and Damages with Prayer for Writ of Preliminary Injunction and
Temporary Restraining Order against petitioners, before the Regional Trial Court of Malolos
City, Bulacan.

In their answer, petitioners denied that Benjamin had accumulated enough wealth to
sustain himself as his only source of income was his farm.

The RTC dismissed the complaint for failure of the Malance heirs to substantiate their
claim that Benjamin's signature was forged, and upheld the validity of the Kasulatan on the
ground that it is a notarized document which enjoys the presumption of regularity in its
execution. It declared the Kasulatan as a contract of antichresis binding upon Benjamin's
heirs - the Malance heirs - and conferring on the Magtalas sisters the right to retain the
subject land until the debt is paid.

The CA upheld the RTC's findings.

ISSUE:
Whether the Kasulatan is indeed a contract of antichresis.

RULING:
Yes. The Court, however, concurs with the RTC's finding, as affirmed by the CA, that the
Kasulatan is a contract of antichresis. Article 2132 of the Civil Code provides:

Art. 2132. By the contract of antichresis the creditor acquires the right to receive the
fruits of an immovable of his debtor, with the obligation to apply them to the payment of
the interest, if owing, and thereafter to the principal of his credit.

Thus, antichresis involves an express agreement between parties whereby : (a) the
creditor will have possession of the debtor's real property given as security; (b)such creditor
will apply the fruits of the said property to the interest owed by the debtor, if any, then to
the principal amount; (c) the creditor retains enjoyment of such property until the debtor
has totally paid what he owes; and (d) should the obligation be duly paid, then the contract
is automatically extinguished proceeding from the accessory character of the agreement.
 Bearing these elements in mind, the evidence on record shows that the parties intended
to enter into a contract of antichresis. While the Kasulatan did not provide for the transfer
of possession of the subject land, the contemporaneous and subsequent acts of the parties
show that such possession was intended to be transferred. Atty. Navarro testified that while
the Kasulatan only shows that the harvest and the fruits shall answer for Benjamin's
indebtedness, the parties agreed among themselves that the lenders would be the one to
take possession of the subject land in order for them to get the harvest. Indeed, such
arrangement would be the most reasonable under the premises since at that time,
Benjamin's medical condition necessitated hospitalization, hence, his physical inability to
cultivate and harvest the fruits thereon.
1. ACME SHOE, RUBBER & PLASTIC CORPORATION vs. HON. COURT OF APPEALS
GR No. 103576; August 22, 1996

FACTS:
Petitioner Chua Pac, the president and general manager of co-petitioner "Acme
Shoe, Rubber & Plastic Corporation," executed for and in behalf of the company, a
chattel mortgage in favor of private respondent Producers Bank of the Philippines. The
mortgage stood by way of security for petitioner's corporate loan.

In due time, the loan was paid by petitioner corporation. Subsequently, in 1981,
it obtained from respondent bank additional financial accommodations which were on
due date also fully paid.

The bank yet again extended to petitioner corporation a loan covered by four
promissory notes. Due to financial constraints, the loan was not settled at maturity.
Respondent bank thereupon applied for an extra judicial foreclosure of the chattel
mortgage, herein before cited, with the Sheriff of Caloocan City, prompting petitioner
corporation to forthwith file an action for injunction, with damages and a prayer for a
writ of preliminary injunction, before the Regional Trial Court of Caloocan City.
Ultimately, the court dismissed the complaint and ordered the foreclosure of the chattel
mortgage. It held petitioner corporation bound by the stipulations, aforequoted, of the
chattel mortgage.

Petitioner corporation appealed to the Court of Appeals which affirmed, "in all
respects," the decision of the court a quo.

ISSUE:
Whether or not chattel mortgage may secure after incurred obligations.

RULING:
While a pledge, real estate mortgage, or antichresis may exceptionally secure
after-incurred obligations so long as these future debts are accurately described, a
chattel mortgage, however, can only cover obligations existing at the time the mortgage
is constituted. Although a promise expressed in a chattel mortgage to include debts
that are yet to be contracted can be a binding commitment that can be compelled upon,
the security itself, however, does not come into existence or arise until after a chattel
mortgage agreement covering the newly contracted debt is executed either by
concluding a fresh chattel mortgage or by amending the old contract conformably with
the form prescribed by the Chattel Mortgage Law. Refusal on the part of the borrower
to execute the agreement so as to cover the after-incurred obligation can constitute an
act of default on the part of the borrower of the financing agreement whereon the
promise is written but, of course, the remedy of foreclosure can only cover the debts
extant at the time of constitution and during the life of the chattel mortgage sought to
be foreclosed.

Contracts of security are either personal or real. In contracts of personal

security, such as a guaranty or a suretyship, the faithful performance of the obligation
by the principal debtor is secured by the personal commitment of another (the
guarantor or surety). In contracts of real security, such as a pledge, a mortgage or an
antichresis, that fulfillment is secured by an encumbrance of property – in pledge, the
placing of movable property in the possession of the creditor; in chattel mortgage, by
the execution of the corresponding deed substantially in the form prescribed by law; in
real estate mortgage, by the execution of a public instrument encumbering the real
property covered thereby; and in antichresis, by a written instrument granting to the
creditor the right to receive the fruits of an immovable property with the obligation to
apply such fruits to the payment of interest, if owing, and thereafter to the principal of
his credit – upon the essential condition that if the principal obligation becomes due and
the debtor defaults, then the property encumbered can be alienated for the payment of
the obligation, but that should the obligation be duly paid, then the contract is
automatically extinguished proceeding from the accessory characterof the agreement.
As the law so puts it, once the obligation is complied with, then the contract of security
becomes, ipso facto, null and void.