Facts:

The case of Luisa Asis vs. Jorge Pardo involved a public contract executed on August 26, 1898, in Capiz, between Dona Luisa Asis y Diangco (the plaintiff and appellant) and Don Jorge Pardo y Acevedo (the defendant and appellee). Under the contract, Asis received a loan of 2,300 pesos from Pardo, secured by a mortgage on seven parcels of real estate. The contract stipulated that Asis would repay the loan within five years, applying the annual rents and profits from the mortgaged property toward the debt. It also granted Pardo the management of the mortgaged property, delaying Asis's enjoyment of it until full repayment. Additionally, the mortgage was to encompass all necessary apparatus for distilling nipa alcohol.

On February 22, 1902, Asis filed a complaint against Pardo seeking an account of his management and requesting that all profits generated from the property be reinstated to address her debt. The lower court incorporated the contract into its decision and found that

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Facts:

Background of the Loan and Mortgage Contract

• On August 26, 1898, in Capiz, Dona Luisa Asis y Diangco and Don Jorge Pardo y Acevedo executed a public contract.
• The contract provided for a loan of 2,300 pesos given by Jorge Pardo to Luisa Asis without interest.
• As security for the loan, Luisa Asis executed a mortgage on seven parcels of real estate.
• The agreement stipulated that Luisa Asis must repay the loan within five years and apply the annual rents and profits from the mortgaged properties toward reducing the indebtedness.
• It was agreed that Jorge Pardo would manage the mortgaged property, and its benefits would remain with him until the loan was fully repaid.
• The mortgage included not only the real properties but also all necessary appurtenances for the distillation of nipa alcohol such as manufactories, buildings, and apparatus.

Subsequent Modifications and Developments

• Subsequent to the original contract, Luisa Asis borrowed an additional 470 pesos from Jorge Pardo, adding to the original indebtedness.
• The operation of the distillery was at first managed by Jorge Pardo but later, the management of the nipa lands was transferred from him to Luisa Asis.
• Luisa Asis’s tenants delivered tuba to the distillery, and she received credit from Jorge Pardo for these deliveries.
• Two important settlement agreements were reached between the parties:
• The first settlement was on June 12, 1900.
• The second settlement was on January 1, 1902.
• The settlements were documented by written receipts stating a settlement of the products of the nipa lands and the distillery.
• Importantly, the written settlements did not specify any provision regarding the control or allocation of profits from the distillery or its apparatus.

The Dispute Raised

• Luisa Asis filed a complaint on February 22, 1902, seeking an accounting of Jorge Pardo’s management of the mortgaged property.
• In her complaint, she argued that the revenues from the distillery, which arose from the mortgaged property, should be applied toward the extinction of her indebtedness.
• The central question in this case focused on whether Jorge Pardo retained the usufruct (the right to enjoy the profits) of the distillery, or if those profits should reduce the outstanding debt.

Issue:

Contractual Interpretation and Subsequent Modifications

• Was the original contract of August 26, 1898, to be interpreted in isolation, or did the subsequent modifications and settlements change its terms?
• Does the alteration in the management of the nipa lands imply a concurrent right for Luisa Asis over the profits of the distillery?

Allocation of Distillery Profits

• Does the defendant, Jorge Pardo, still have the right to the usufruct of the distillery?
• Alternatively, should the revenue generated from the distillery be allocated toward repaying the debt owed by Luisa Asis?

Legal Basis and Contractual Construction

• What are the implications of the settlements made on June 12, 1900, and January 1, 1902, on the rights of the parties regarding the distribution of profits?
• Under which specific provision of the Civil Code (article 1282 as opposed to article 1283) should the dispute be resolved when considering the practical construction undertaken by the parties?

Ruling:

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Ratio:

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Doctrine:

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