G.R. No. L-3227 - Alcantara vs. Alinea

Case Summary (G.R. No. L-3227)

Facts: Nature of the Agreement and Possession

The defendants borrowed 480 pesos from the plaintiff under a written agreement that provided: if the loan were not repaid by the agreed date (January 1905), the defendants’ house and lot would be considered absolutely sold to the plaintiff for the same sum. The property was described in the instrument; the defendants remained in possession of the property after execution of the instrument; the plaintiff never took possession, did not enjoy rents, and the property was never registered as a mortgage or otherwise encumbered in the Register of Property.

Procedural History

Plaintiff sued on March 13, 1905, seeking delivery of the described house and lot and rent from February 1905 at 8 pesos per month, alleging nonpayment. Defendants answered, denying the allegations generally, asserting that the 480 pesos comprised 200 pesos principal and 280 pesos interest, and asserting as a special defense that they had offered and tendered payment of 480 pesos which plaintiff refused to accept. The trial court, after evidence and admission of Exhibit A (the written instrument), ordered delivery of the property to plaintiff and taxed costs against defendants. Defendants excepted, sought a new trial, which was denied, and appealed.

Legal Issues Presented

(1) Whether a combined transaction consisting of a loan tied to a conditional promise of sale (where failure to repay converts into a sale at the loan amount) is valid under the Civil Code or whether it is void as an unlawful pactum commissorium or as a disguised mortgage, pledge, or antichresis. (2) Whether the instrument constituted a mortgage or antichresis (which would invoke registration or possession requirements and possible prohibitions under the Civil Code). (3) Whether plaintiff was entitled to have the conditional sale enforced when repayment was not made.

Court’s Analysis on the Nature and Validity of the Double Contract

The court treated the relation as comprising two lawful contracts — a loan and a promise of sale — each authorized by the Civil Code (arts. 1451, 1740, 1753 et seq.). The court emphasized the general contractual principle that parties’ agreements are binding and that “contracts shall be binding, whatever may be the form in which they may have been executed” provided essential conditions exist (art. 1278). The court reasoned that the parties’ stipulation converting nonpayment into a sale did not alter the essential nature of either contract or introduce a legal defect rendering the transaction void. The court relied on the settled practice of courts and on Spanish precedents applying similar principles.

Characterization vis-à-vis Mortgage, Pledge and Antichresis

The court analyzed whether the instrument operated as a mortgage, pledge, or antichresis that would bring it within statutory prohibitions (including articles dealing with pactum commissorium). The court found: the instrument was not a mortgage because it was not registered in the Register of Property as required by article 1875 and because the instrument lacked the characteristics of a public instrument necessary to create a valid mortgage. It was not a pledge because the property was immovable, and pledges relate to movable property. It was not an antichresis because the creditor never took possession nor enjoyed the rents or fruits of the property, elements required by the antichresis provisions (arts. 1881 et seq.). Because none of those secured-interest forms existed, the court declined to apply the prohibitions attached to those arrangements (e.g., articles 1859 and 1884) to invalidate the agreement.

Evidentiary Findings and Effect of Exhibit A

Exhibit A, the written instrument, was recognized by defendant Alinea and by witnesses who signed it; the court deemed it an authentic and efficacious document under article 1225. The court accepted the uncontested fact that the 480 pesos remained unpaid and that defendants remained in possession. Given those factual findings and the court’s legal characterization, the court concluded that the plaintiff had the right to enforce the conditional sale as agreed by the parties.

Holding and Relief Ordered

The Supreme Court affirmed the trial court’s judgment ordering delivery of the described house and lot to the plaintiff and assessed costs against the appellants. The opinion directed entry of judgment consistent with this decision and remand for appropriate action to effectuate the judgment.

Dissenting Opinion

Justice

Case Syllabus (G.R. No. L-3227)

Case Citation and Dates

Reported at 8 Phil. 111, G.R. No. 3227, decided March 22, 1907.
Complaint filed March 13, 1905, in the Court of First Instance of La Laguna.
Contract (loan) dated February 29, 1904, with maturity in January 1905.
Trial court rendered judgment November 27, 1905.
This decision directs entry of judgment twenty days after notification and remand ten days thereafter.

Parties and Roles

Plaintiff and appellee: Pedro Alcantara.
Defendants and appellants: Ambrosio Alinea and Eudosia Belarmino, et al.
Trial judge: presided in the Court of First Instance of La Laguna (name not specified in source).
Appellate majority opinion authored by Justice Torres.
Concurrence by Chief Justice Arellano and Justices Mapa, Johnson, and Tracey.
Dissenting opinion by Justice Willard.

Material Facts

On February 29, 1904, the defendants Alinea and Belarmino borrowed from plaintiff the sum of 480 pesos, payable in January 1905.
The parties agreed that if the indebtedness was not paid at the expiration of the period, the house and lot owned by defendants in the town of San Pablo, Province of La Laguna, with the house constructed of strong materials, would be considered absolutely sold to the plaintiff for the said sum.
The superficial extent and boundaries of the property were described in the complaint (description not reproduced in the source excerpt).
Plaintiff alleged defendants failed to pay the amount upon maturity and refused to deliver the property, and claimed rent of 8 pesos per month from February 1905 in addition to delivery and costs.
Defendants acknowledged the 480-peso figure in the instrument but asserted that the principal was only 200 pesos and the remaining 280 pesos represented interest; they alleged they had offered and tendered payment of 480 pesos which the plaintiff refused to accept.

Procedural History

Plaintiff filed the complaint on March 13, 1905.
Defendants demurred to the complaint; the demurrer was overruled.
Defendants filed a general and specific denial except as expressly admitted, and raised as special defense their tender/offer of 480 pesos and their characterization of the amounts as principal and interest.
After trial and receipt of evidence and documents (including Exhibit A), the trial court on November 27, 1905, ordered delivery of the house and lot to plaintiff and taxed costs against defendants; the trial court made no finding on loss or damages for rents despite plaintiff’s claim.
Defendants excepted to the decision and moved for a new trial on the ground that the findings were contrary to law; the motion was overruled and defendants excepted to that ruling.
The case was brought to the Supreme Court by the defendants (appellants).

Claims and Relief Sought

Plaintiff sought a judgment ordering defendants to deliver the house and lot described in the complaint.
Plaintiff also sought rent at 8 pesos per month reckoned from February 1905 and costs of suit.
Defendants sought dismissal of plaintiff’s claims and requested the costs of action, asserting they had tendered payment of 480 pesos which plaintiff refused.

Trial Court Findings

The trial court found in favor of plaintiff and ordered defendants to deliver the house and lot and to pay costs.
The trial court did not make any finding with respect to loss or damages (i.e., did not rule on the claim for rents) due to absence of proof on those points.

Exhibits and Evidentiary Findings

The contract document, referred to in the opinion as Exhibit A, was recognized by defendant Alinea and by witnesses who signed it with him.
The trial court attached the documents presented in evidence to the record.
The Supreme Court treated Exhibit A as an authentic and efficacious document in accordance with article 1225 of the Civil Code.

Central Legal Issues Presented

Whether the combined instrument evidencing a loan and a conditional promise of sale (whereby nonpayment at maturity would operate as an absolute sale of the described real property for the amount of the loan) is valid and enforceable.
Whether the instrument constituted a mortgage, antichresis, or pledge (and thus possibly void under prohibitions in specific Code provisions), or whether it validly created a contractual promise of sale enforceable upon nonpayment.
Whether defendants’ tender of 480 pesos, which they alleged represented principal plus interest, constituted a valid defense to the plaintiff’s claim.
Whether the trial court erred in ordering delivery of the property absent specific findings on damages and rents.

Statutes, Doctrines, and Authorities Cited by the Court

Civil Code provisions cited: articles 1278, 1091, 1225, 1451, 1740, 1753, 1859, 1872, 1875, 1881, 1884.
Article 1278 cited for the rule that contracts shall be binding regardless of form if essential conditions for validity exist.
Article 1875 cited concerning the necessity of registration in the Register of Property for a valid mortgage.
Articles 1881 and following cited regarding antichresis and the requirements of possession and enjoyment by the creditor.
Articles 1451, 1740, 1753 and those following cited to show legality and authorization of loan and sale contracts in general.
Articles 1859 and 1884 referenced in the discussion of prohibited pactum commissorium but the court concluded these did not apply to invalidate the contract in the instant case.
Law 41, title 5, and Law 12, title 12, of the fifth Partida referenced in relation to pactum commissorium.
Novisima Recopilacion, Law 1, titl