ESSE!\"fw.

5 OPCREDITTRANSAC'flONS
ANDINSOLVENCYLAW

the Bank, but the Bank refused to permit redemption on the ground
that the periodfor redemptionhad already expired, ao that the Bank
now has absolute ownership of both properties. The Borrower and
Mr. Timbol came to you, on September 15, 2002, to find out if the
position of the Bank is correet. What would be your answer? State CHAPTER 14
your reasons.(2002Bar)
A:. a) The Bank is correet with respect to Primetown Corporation. ANTICHRESIS
Seetion 47 of the General Banking Law provides that a juridical
!)Ersonwhose property has been sold pursuant to an extrajudicial
foreclosure,shall have the right to redeem the property "until, hut Art. 2132. By the contract of antlchresisthe creditor
not after. the registration of the certificate of foreclosure sale" with acquires the right to receive the fruits of an Immovable
the Registerof Deedsand in no case more then three months after of his debtor, with the obligation to apply them to the
foreclosure,whichevercomesfirst. The same period already expired payment of the interest, If owing, and thereafter to the
in the presentcase. principal of his credit (1881)
However,the Bankis not correet with respect to the real estate
Art. 2133. The actual market value of the fruits at
morij(ageover the residential house and lot owned by Mr. Timhol.
Under Section47 of the General Banking Law, the mortgagor or
the time of the application thereof to the Interest and
debt.or,who is a natural person, whose real property has been sold principal shall be the measure of such application. (n)
for the full or partial payment of his (or another's) obligation shall Art. 2134. The amount of the principal and of the
have the right withinone year after the sale of the real estate, to
interest shall be specified in writing; otherwise, the
redeem the property.The one-year period is counted from the date of
regi.strarionof the certificateof sale and the same period bas not yet
contract of antichresls shall be void. (n)
expired in this case.
1. ANTICHRESIS. The elements of antichresis are as
follows: (1) the existence of the principal obligation to be secured;
(2) the property involved must be an immovable; (3) the person who
will constitute the antichresis must be the absolute owner of the
immovable; (4) the person who will constitute the antichresis must
have free disposal of the property; (5) the parties agree that the
creditor acquires the right to receive the fruits of an immovable of
his debtor; (6) the creditor has the obligation to appi)• the fruits of the
immovable to the payment of the interest, if owing, and thereafter
to the principal of his credit; and (7) the amount of the principal and
of the interest shall be specified in writing; otherwise, the contract
of antichresis shall be void.' Antichresis is colloquially known as
"sanglaang-perde. •~

'Articles 2132,2134, NCC; Aniceto Bangisv. Heirs of Serafin and Salud Adolro,
G.R. No. 190876.June 13, 2012.
2
Angeles v. Secretary of Justice, G.R. No. 142612,July 29, 2006, 603 Phil. gs.
103.

379
380 ESSENTIALS OF CR8DIT 1'RANSACTIONS
AND INSOl.VlsNCV LAW
a. The Supreme Court restated the requ1s1tes stating
that "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 an.y,
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 ag1:eement."'
b. The Supreme Court explained in Coton.er-Zacarias u.
Spouses Revilla:•
"Thus, antichresisinvolvesan express agreement between parties
such that the creditor will have possession of the debtor's real property
given as security,and such creditorwill apply the fruits of the property to
the interest owedby the debtor,if any, then to the principal amount.
The term. antichresis.has a Greek origin with ~anti' (against) and
'chresis' (use) denotingthe actionor giving a credit 'against' the 'use' of a
property."
Historically. 15th century B.C. tablets revealed that "antichresis
contracts were commonlyemployed in the Sumerian and Akkadian
Mesopotamian cultures." Antichresis contracts were incorporated in
Babylonianlaw, modifyingand combiningit with that of mortgage pledge.
Nearing the end of the classical period, antichresis contracta entered
Roman law that "adoptedthe conventionthat the tenant usufruct had to
be exactlycompensatedby the interest on the lump sum payment." During
the middle ages. canon law banned antichresis contracts for being a form
of usury. These contractsonly reappeared in the 1804 Napoleonic Code
that influencedthe lawsof mostcountries today. It bad been observed that
"antichresis contractscoexistwith periodic rent contracts in many property
markets."
c. What characterizes a contract of antichresis is that the
creditor acquires the right to receive the fruits of the property of his
debtor with the obligation to apply them to the payment of interest,
if any is due, and then to the principal of his credit.• A contract
'Reyesv. HeirsofBenjamin Malance.G.R.No.219071,August 24. 2016.
'G.R.No.190901,November 12,2014.
'Alojedov. Siongco,G.R.No.L-27084,December31, 1927:Adrid v. Morga,
G.R.No.L-13299, July25, 1960;Dizonv. Gaborro,G.R.No.L.36821, June 22, 1978-
.....
CHAPTER 14 - ANTIClffiESIS 381
is not antichreais if nowhere in the contract in question does this
character of application of the fruits appear.•
d. Under the provisions of the Civil Code, the creditor in
antichresis does not acquire title to the property by the failure of
payment of the debt, nor can the debtor recover the possession and
enjoyment thereof without first paying the creditor all that he owes.
On the other hand, the creditor is obliged to apply the fruits of the
property to the payment, first, of the interest due upon the debt, if
there is any, and then to the payment of the principal. Hence, the
creditor has a duty to render an account of said fruits to the debtor
and the debtor has a corresponding right to have the said fruits be
applied to the debt.'
e. De la Vega u. Ballilos' dealt with a contract called
mortgage by the parties but the court held that in reality it was a
contract of antichresis. It was agreed in the contract in that case
that the debtor shall assign and transfer possession of the land to
the creditor for his management and enjoyment.
f. There is no antichresis if there is no provision in the
disputed documents specifically authorizing the creditor to receive
the fruits of the land in question with the obligation to apply them
to the payment of interest if any was due, and to the principal of the
alleged loan.•
g. The Court explained that a stipulation authorizing the
mortgagee, for the purpose stated therein, to take possession of
the mortgaged premises upon the foreclosure of a mortgage is not
repugnant to either Article 2088 or Article 2137. On the contrary,
such a stipulation is in consonance with or analogous to the
provisions of Article 2132 of the Civil Code "regarding antichresis
and the provision of the Rules of Court regarding the appointment
of a receiver as a convenient and feasible means of preserving and
administering the property in litigation. "1•
'Alojadov. Siongco,G.R. No. L-27084,DetemberSl, 1927 (In this case, it
appearsthe parties'intentionwas that the vendorcouldrepureb&Be the land without
delaywhenhe bad the means to pay the purchaseprice).
'Diaz v. De Mendezona,G.R. No. L-24824,Januazy 30, 1926;Barretto v.
Barretto,37 Phil., 234.
'G.R. No.L-9957,August8, 1916,34 Phil. 683.
'Vda. ck Alvarezv. CourtofAppeals,G.R. No.110970, March16, 1994.
"'DevelopmentBank of the Phils. v. SpousesDoyon,G.R. No. 1671138,Mud,
25, 2009, 601 Phil. 401-♦14; Agricultutal and Industrial Bank v. Tambuntinc,73
Phil. 655 (1942).

382 ESSENTlAu; OF CREDITTRANSAC1'1ONS
A.'ID INSOLVENCYLAW
h. If a contract of loan with security does not stipulate the
payment of interest. and possession of the mortgaged property is
delivered to the mortgagee in order that the latter may gather its
fruits, but without stating that said fruits are to be applied to the
payment of interest. if any, and afterwards that of the principal, the
contract is a mortgage and not antichresis. 11
1.01. MORTGAGE IN POSSESSION. A mortgage, coupled
with delivery of possession of the land to the creditor, is antichresis."
Antichresis is similar to what is known as a "mortgage in possession"
as that term is understood in American equity jurisprudence.
A "mortgage in possesswn" is a transaction where "one who has
lawfully acquired actual or constructive possession of the premises
mortgaged to him, standing upon his rights as mortgagee and not
claiming under another title, for the purpose of enforcing his security
upon such property or making its income help to pay his debt." 13 In
fact, antichresis is also sometimes called "mortgage in possession."
"Antichresis" was a practice prevailing in the past. "It entailed
the lawful acquisition by the mortgagee of the possession, actually
or constructively, of the premises mortgaged, with the creditor
standing upon his rights merely as mortgagee, not as owner, for the
purpose of enforcing his security upon such property and allowing its
income to pay for the debt. In such agreement, the mortgagee would
be obligated to account for the fruits received from the mortgaged
property deductible from the total amount due the mortgagee from
the mortgagor, including, in this particular case, the value of the
improvementsintroduced by the mortgageein possession. "1<
e. The SupremeCourt explained in Macapinlac u. Gutierrez
Repide: 1•
"The respectiverights and obligations of the parties to a oontrect of
antichresis, under the CivilCode,appear to be similar and in many respects
identical with those recognizedin the equity jurisprudence of England and
Americaas incidentto the positionof a mortgagee in possession, in reference
"Diego v. Fernando,G.R. No.L-15128,August25, 1960. 109 Phil. 143-148.
'>rrillana v. Manansala,G.R. No. L-6752,April 29, 1955.
''Diegov. Fernando. G.R. No. L-15128, August 25. 1960 citing Diaz v. De
Mendewna, citing 27 Cyc.1237,48 Phil., 666.
"Nadal v. Court of Appeals, G.R. No. L-46623. March 4, 1994, 300 Phil. 753-
764.
11
43 Phil., 770 citing 3 Pom.Eq. Jur. secs. 1216-1218; Diegov. Fernando, G.R.
No. L-15128,August25, 1960.
CHAPTER14-ANTICHRESIS 383
to which the followingpropositions may be taken to be established,namely,
that if the mortgagee acquires possession in any lawful manner, he is
entitled to retain such possession until the indebtedne3Sis satisfied and
the property redeemed; that the non-paymentof the debt within the term
agreed does not vest the ownership of the propertyin the creditor;that the
general duty of the mortgagee in possessiontowardsthe premisesis that of
the ordinary prudent owner; that the mortgageemust accountfor the rents
and profit,, of the land. or it,, value for purpo5e8 of W!e and occupation, any
amount thus realized going towards the discharge on the mortgagedebt;
that if the mortgage remains in possessionafter the mortgagedebt has been
satisfied, he becomesa trustee for the mortgagoras to the excessof the rents
and profits over such debt; and lastly, that the mortgagorcan only enforce
his rights to the land by an equitable action for an accountand to redeem."
PROBLEMS:
1. On May 26, 1950, the defendant SF executed a deed of mortgagein
favor of plaintiff CD over two parcels of land registered in his name,
to secure a "2,000.00 loan, without interest, payable within four
years from the date of the mortgage. After the executionof the deed,
possession of the mortgaged properties was turned over to CD. SF
having failed to pay the loan after four years, the mortgageeCDmade
several demands upon him for payment; and as the demands were
unheeded, CD filed this action for foreclosureof mortgage.Defendant
SF's defense was that the true transaction between him and plaintiff
was one of antichresis and not of mortgage; and that as plaintiff,
CD, had allegedly received a total of 120 cavans of palay from the
properties given as security, which, at the rate of PI0.00 a cavan,
represented a value of P6,200.00,SFs debt had already been paid,
with CD still owinghim a refund of some P2,720.00.What oontractdid
the parties enter into?
A: The true position of CD herein under his oontract with SF is a
"mortgagee in possession" as that term is understood in American
equity jurisprudence; that is, "one who has lawfullyacquired actual
or constructive possession of the premises mortgagedto him, standing
upon his rights as mortgagee and not claimingunder another title, for
the purpose of enforcing his security upon such propertyor malringits
incnm" help to pay hi• debt: AB such mortgageein possession.CD's
rights and obligations ere similar to those of an antichreticcreditor.
In the present case, the parties havingagreedthat the loan was
to be without interest, and SF not having expresslywaivedhis right
to the fruits of the properties mortgagedduring the time they were in
CD's possession, the latter, like an antichretic creditor,must account
for the value of the fruits received by him, and deduct it from the
loan obtained by SF. Accordingto the findingsof the trial oourt, CD
had received a net share of 65 cauans of palay out of the mortgaged
384 ESSENTW1>OFCREDITTRANSACTIONS
ANDINSOLVENCY
LAW
properties up to the time he filed the present action; at the rate of
1'9.00per caoon (a rate admitted by the parties), the total value of the
fruits received by CD is P495.00.Deducting this amount from the loan
of1'2,000.00received by SF from CD, SF has only 1'1,505.00 left to pay
the latter. (Diegov. Fernando, G.R. No. L-15128, August 25, 1960)
2. In the year 1891, the plaintiff, Dionisia Valencia, and her deceased
husband. Daniel Adepueng, conveyed to one Severino Agbagala and
his wife Francisca Cadapan the land in question. Later, in the year
1899, Francisca Cadapan, wife of Severino Agbagala, conveyed this
same property to Juan Cagayat and Josefa Galendis. The possession
of the land passed to Pedro Acala, who is one of the Acalas, the
defendants in this case. In the year 1912, the defendants Acala sold
the land unconditionally to the defendant Bagayanan for the sum of
1'70.00.The pertinent part of the contract reads thus:
We,Daniel Adepueng and Dionisia Valencia, acknowledge being
indebted to Severino Agbagala in the sum of,.6, 75, which we will pay
with the fruits of the land the possession ofwhich we now turn over to
him. We haue mortgaged it for ,.6_75, it being covenanted that we may
redeem it by paying the same price, without taking into account the
fruits ofthe land and the interest on the money.
The memorandum mentioned in the agreement is as follows:
I, the undersigned, declare that the lot mentioned in the foregoing
document was mortgaged by me to the spouses Juan Cagayat and
Josefa Galendis for the same amount above-mentioned and with the
same condition. Paete, December 6, 1899. - Francisca Cadapan -
What is the nature of the contract?
A: The contract is antichresis. When the terms of a contract are clear
and leave no doubt as to the intention of the contracting parties, the
literal meaning of its clauses should prevail. Accordingly, the contract
is a contract of antichreeie and not of sale with the right of repurchase.
Such a contract should be classified as one of antichresis, by means
of which the creditor acquires the right to collect the fruits of the real
property turned over to him by his debtor, but with the obligation
to apply them to the payment of whatever interest is due and the
contracting parties may stipulate that the interest of the debt be paid
by the fruits of the property given in antichresis.
Hence, the antichretic creditor and his successors in interest
cannot acquire ownership by prescription of the realty given in
antichresis. That the defendants Acala could not sell unconditionally
the same land to their co-defendant, Bagayanan, is proved by the
agreed statement of facts according to which the possession of the
predecessor-in-interest of the Acala people was the same precarious
possession of his assignor Juan Cagayat. (Valencia v. Alcala, C.R. No.
/6256, September 28, 1921)
CHAPTER14 -ANTICHRESIS 386
2. DISTINGUISHED FROM MORTGAGE. In another
case, the parties entered into two contracts, one of which is entitled
•·Contract of Antichresis" under which the debtor agreed to turn over
to the creditors the possession of the salt beds so that the latter,
after paying the expenses for the production, administration and
harvest of the salt with 112of the produce, may keep the other half.
Jt is not stipulated that the net produce of the salt beds shall first be
applied to the payment of the interest, if any, and afterwards to that
of the principal of their credit. The contracts merely providethat the
creditors shall keep one-half of the products. The Court concluded
that the contracts are not contracts of antichresis explaining that:
"ln a contract of mortgage, the mortgagor, as a general rule, retsina the
possession of the property mortgaged as security for the payment of the sum
of money borrowed from the mortgagee, and pays the latter a certain per cent
thereof as interest on his principal by way of compensation for hie sacrifice
in depriving himself of the use of said money and the enjoyment ofits fruits,
in order to give them to the mortgagor. Inasmuch as it is not an essential
requisite of the contract of mortgage that the property mortgaged remain in
the possession of the mortgagor ({A)rticle1857 of the Civil Code),the latter
may deliver said property to the mortgagee, without thereby altering the
nature of the contract. It not being an essential requisite of said contract of
mortgage that the principal of the mortgage credit bear interest, or that the
interest, as compensation for the use of the principal and enjoyment of its
fruits, be in the form of a certain per cent thereof, such interest may be in
the form of fruits of the property mortgage, without the contract's longing
thereby its character of a mortgage contract. It is stipulated in the contracts
under consideration that, during the term thereof and while the total
amount of the loan remains unpaid by the debtor, the salt beds constituted as
security for the payment of said loan, shall be administered by the creditors
who shall destine one-half of the products thereof for the maintenance and
support of the croppers and the improvements of the property, keeping the
other half for themselves. It appears, therefore, that the debtor, instead of
paying a certain per cent of the principal of the loan as compensation for the
sacrifice made by the creditors in depriving themselves of the use of their
principal and the enjoyment of its fruits, so as to give them to the debtor,
has delivered to them the property constituted as a security for the payment
of the loan, so that they may administer and use it, enjoying its fruits, by
way of compensation for their said sacrifice in lending said debtor their
money. Therefore, the contracts, which are the subject matter of this action.
have all the essential requisites of a mortgage, enumerated in [A)rticle 1857
of the Civil Code and, consequently, are mortgage contracts.""
"Legaspi v. Celestial,G.R.Nos. L-43673 and 43674, October24, 193&
386 ESSENTIAi,$OF C'RElllTTltANSA("l'IONS CHAPTER
14-ANTICHBBSIS 387
ANDIN:':01.\lf;Nl'\' t.1111'

u. Antichresis Distinguished from Pledge and Formality Must be in writing,u Mustbe in writing and
Mortgage." the intereat and princi- lleptration i, neces-
pal must be apeciliedin aary to bind thirdper-
writing. IODS. However,it may
Points of lltil1be validevenif the
ANTICHR.ESIS PLEDGE
Distinction mortgageis Doi in writ-
As to perfection Coosensmal Contract Real Contract ing. 1Ubjec:tto the rem-
ediel availableto the
Property involved ImmovableProperty Personal Property mortgagee to compel
Formality Tbe interest and princi- The interest and the executionof the written
pal must be specified in principal need not be in instrument and regis-
writing. writing. However, the tration.
description of the thing Possession The creditor is in poesea- The creditor-mortgagee
pledged must be in a sion of the property. ia generally not in pos-
public instrument to af. sessionof the mortgaged
feet third persons. property.
As to fruits The creditor has the If the thing pledged Truces The Creditor is obligat- The Mortgageeis not ob-
right to receive the earns or produces fruits, ed to pay taxes on the ligated to pay the taxes
fruits, which will be ap- income, dividends or property unless there ia on the property.
plied to the interest and interests, the creditor a stipulation to the con-
principal. shall compensate what trary.
he receives with those
which are owing him.
b. Sale. In one case, the plaintiff contended that although
the original contract was one of sale w.ith right to repurchase, it
was converted into one of antichresis just because the vendee took
Point of ANTICHRESIS MORTGAGE possession of the land. The Court ruled that this argument is clearly
Distinctions untenable. ''What characterizes a contract of antichresis is that the
As to fruits The creditor has the Generally, the creditor creditor acquires the right to receive the fruits of the property of his
right to receive the has no right to receive debtor with the obligation to apply them to the payment of interest,
fruits, which will be ap- the fruits. if any is due, and then to the principal of his credit, and when such a
plied to the interest and
covenant is not made in the contract, which speaks unequivocally of
principal. -
a sale with right of repurchase, the contract is a sale with the right
Property involved ImmovableProperty only. Personal Property in to repurchase and not an antichresis." 18
Chattel Mortgage and
Immovable in Real Es- c. "In a pledge if the thing pledged earns or produces fruits,
tate Mortgage. -
income, dividends or interests, the creditor shall compensate what
he receives with those which are owing him. In the same manner,
in a 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

"Adrid v. Morga, G.R. No. L-13299. July 26. 1960. 108 Phil. 927-931.
171989 Bar Examinations.
 ESSENTIALSOF CREDITTRANSACTIONS
388
ANDINSOLVENCY LAW
principal of his credit. The debtor cannot reacquire enjoyment of the
immovable until he has actually paid what he owes the creditor.""
3. MEASURE OF APPLICATION. The actual market
value of the fruits at the time of the application thereof to the interest
and principal shall be the measure of the application of fruits to the
obligation.'°
a. In Enriquez u. National Bank," the Court ruled that a
creditor with a lien on real property who took possession thereof
with the consent of the debtor, held it as an "antichretic creditor with
the right to collect the credit with interest from the fruits, returning
to the antichretic creditor the balance, if any, after deducting the
expenses." However, the fact that the debtor consented and asked
the creditor to take charge of managing his property "does not entitle
the latter to appropriate to itself the fruits thereof unless the former
has expressly waived his right thereto." In antichresis, the creditor
does not automatically become the owner of the fruits because in
reality, the creditor becomes the owner of the fruits only after it
was applied to the interest or principal. The fruits belonging to the
debtor are applied in payment of an obligation. If the obligation
is fully paid, then the fruits shall pertain to the debtor, the owner
thereof.
b. In Diegou. Fernando," the antichretic debtor claimed that
the lower court erred in ordering him to pay legal interest on his
indebtedness to the plaintiff from the filing of the action, since the
latter is, up to the present. still in the possession of the properties
mortgaged and still enjoying the fruits. The Supreme Court ruled
that the trial court did not err in so holding, since at the time the
action was filedand up to the present, the debtor has not discharged
his indebtedness to the creditor, and the law allows the latter, in
the absence of stipulation as to payment of interest, legal interest
from the time of the debtor's default. However, the creditor should
be made to account for the fruits he received from the properties
mortgaged from the time of the filing of this action until full payment
by appellant, which fruits should be deducted from the total amount
due him from the debtor under the judgment.
''Ortiz•· Kay8lUlll.G.R.No. L-32974.July 30. 1979.
•Article 2133. NCC.
n55 Phil. 414.
"G.R No. L-15128.August 25. 1960.
CHAPTER
14-ANTICHRESIS 389
4._ STIPULATED INTEREST. The contracting parties
rnay stipulate that the interest upon the debt shall be compensated
with the fruits of the property that is the object of the antichresis."
In fact, the fruits shall first be applied to the interest rather than
the principal.
a. If the value of the fruits should exceed the amount of
interest allowed by the law against usury, the value shall be applied
to the principal." However, as noted in an earlier chapter, usury is
presently legally non-existent.
b. The defendant in one case entered into an agreement
with the plaintiff, whereby he renounced his right as the vendee buyer
with pacto de retro of the three land parcels belongingto the plaintiff
(vendor) for a fixed price and the defendant (vendee) agreed to limit
himself to be a mere creditor. The defendant, by agreement, did not
surrender the land and preferred to maintain the former relation
as to the lands. It was mutually understood that plaintiff would
continue making use of the capital (price that he received) during
the period of the contract and defendant would remain in possession
of the land, the interest on the capital being compensated by the
fruits of the land of the former. The Court concluded that the new
contract between the parties was in the character of a contract of
antichresis. Hence, the fruits received by the defendant from the
lands in question must be considered as compensation for the interest
which his capital should earn during the period of the contract, and
plaintiff must pay his creditor, the defendant, the amount of the
101,n (thP.pricP.prP.\rinu~lypaid) in order to recover the land which is
the subject matter of the antichresis. 11
5. FORMAL CONTRACT. The contract of antichresis
must be in writing. The amount of the principal and of the interest
shall be specified in writing; otherwise, the contract of antichresis
shall be void.26
a. In this case, the parties who claimed that there was
antichresis were indisputably unable to produce any document in
support of their claim that the contract was an antichresis, hence,
23
Article 2138, NCC.
"Ibid.
"Javier v. Cabanos. G.R. No. L-31284, October28, 1929.
'"Article 2134, NCC:Aniceto Bangis •· Hein oCSeralin and SaludAdolro.G.R.
No. 190875. June 13, 2012.

390 ESSENTIALS
OFCREDITTRANSACTIONS
ANDINSOLVENCY
LAW
the Court ruled that no such relationship existed between
parties."
6. DELIVERYOF THE IMMOVABLE.The property
involved is an immovable that is delivered to the antichretic creditor
as a security. There is no transfer of ownership to the creditor. The
debtor cannot reacquire the enjoyment of the immovable until full
payment of his obligation."
PROBLEM:
Olivia owns a vast mango plantation which she can no longer properly
manage due to a lingering illness. Since she is indebted to Peter in the
amount of P500.000.00she asks Peter to manage the plantation and apply
the harvest to the payment of her obligation to him, principal and interest,
until her indebtednessshaU have been fully paid. Peter agrees.
a) What kind of contract is entered into between Olivia and
Peter? Explain.
b) What specificobligations are imposed by law on Peter as a
consequenceof their contract?
c) Dees the law require any specific form for the validity of
their contract?Explain.
d) May Oli,~a re-acquire the plantation before her entire
indebtednessshall have been fully paid? Explain. (1995 Bar)
A: a) Olivia and Peter entered into a contract of antichresis. Article
2132of the NewCivil Code provides that by a 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. and thereafter to the principal of his credit. Under their
agreement, Peter acquired the right to receive the fniits from the
mangoplantationwith the obligation to apply said fruits to Olivia's
indebtedness.
b) Peterasantichreticcreditor must: (i) pay taxes and charges upon
the land and (ii)shoulderthe necessary expenses for preservation and
repair, whichhe maydeduct from the fruits. (Art. 2135, NCC)
c) The agreementmust be in writing. Article 2134 of the New Civil
Cod~provides_thatthe amount of the principal and interest must be
specifiedm wntmg;otherwise the antichresis will be void.
"&e Aniceto Bangis v. Heirs of Serafin and Salud Adolfo,G.R. No. 190875,
June 13.2012.
"Anicle 2136.NCC.
I'
CHAPTER
14- ANTICHRESIS 891
the d) No. Article 2136 specifically provides that the debtor cannot
re-acquire the enjoyment of the immovable without his first having
totally paid what he owes the creditor. However,it is the prerogative
of the creditor to return the property to the debtor in order to exempt
himself (the creditor) from his obligations to pay tues and expenses
under Article 2136 of the NCC. The debtor (Olivia) caMot re-
acquire the enjoyment unless Peter compelsOlivia to enter againthe
enjoyment of the property.
Art. 2135.The creditor,unlessthereis a stlpulation
to the contrary,is obligedto pay the taxesand charges
upon the estate.
He Is also boundto bearthe expensesnecessary
for Its preservationand repair.
The sums spent for the purposesstated In this
articleshall be deductedfrom the fruits.(1882)
Art. 2136. The debtor cannot reacquire the
enjoymentof the Immovablewithoutfirst havingtotally
paidwhat he owesthe creditor.
But the latter,in orderto exempthimselffrom the
obligationsimposeduponhim by the precedingarticle,
may always compel the debtor to enter again upon
the enjoymentof the property,exceptwhenthere is a
stipulationto the contrary.(1883)
Art. 2137. The creditor does not acquire the
ownershipof the real estatefor non-paymentof the debt
within the periodagreedupon.
Everystipulationto the contraryshallbe void. But
the creditor may petitionthe court for the paymentof
the debt or the sale of the real property.In this case,
the Rulesof Courton the foreclosureof mortgagesshall
apply.(1884a)
1. OBLIGATIONS OF THE ANTICHRETIC
CREDITOR.The New Civil Code imposes the following obligations
to the creditor:
(1) To pay the trucesand charges upon the estate, unless
there is a stipulation to the contrary - to be deducted from the
fruits;"
29
Article 2135,NCC.
 ,.
392 ESSENTIALS
OF CREDITTRANSAC'l'IONS
ANDINSOl,VENCYLAW
(2) To bear the expenses necessary for its preservation
and repair - to be deducted from the fruits.'°
a. Option to Exempt Himself. The creditor, in order to
exempt himself from the obligations imposed upon him to pay the
above-mentionedexpenses, may always compel the debtor to enter
again upon the enjoyment of the property, except when there is a
stipulation to the contrary."
b. In a contract of antichresis the creditor is obliged to pay
the taxes on the property, unless the contract says otherwise. In one
case, the contract between the creditor and the debtor said nothing
about taxes but the debtor paid the taxes on the property in the total
amount of 1'39,480.75 although the credit was only 1'26,000.00. The
Court concludedthat the debtor had already discharged his debt
(by advancingthe taxes which the creditor should have paid) and is
entitled to the return of the property free from all encumbrances."
Thus, although Article 2135 aUowsthe deduction of the sum spent
for taxes from the fruits, in reality, it is the antichretic creditor and
not the debtor whois liable to pay the taxes on the property.
2. REMEDIES OF THE ANTICHRETIC CREDITOR.
The creditor does not acquire the ownership of the real estate for
non-payment of the debt within the period agreed upon. Every
stipulation to the contrary shall be void."' The remedies of the
creditor in case of non-paymentof debt within the period agreed
upon when the fruits are not enough to pay for the obligation are as
follows:
(1) To abandonthe security and file an action for specific
performance;
(2) Petitionthe court for the payment of the debt or the
sale of the real property-the Rules of Court on the foreclosure
of mortgagesshall apply."
a. Stipulation. It was contended in another case that the
contracts in question were not mortgage, but antichresis. The Court
ruled that the distinction, however, was immaterial, for even if
'°Ibid.
"Article 2l36, NCC.
"RD.al•• v. Ta"""'°, G.R. No. L-4135,November 29, 1951.
"Article 2137, NCC.
''Ibid.
CHAPJ'ER14-ANTICHRESIS 393
the contracts were antichre&is, the e:rtrajudicial foreclosure of the
security is valid. Stipulations in a contract of antichresis for the
extrajud.icial foreclosure of the security may be allowed in the same
manner as they are allowed in contracts of mortgage and of pledge."'
b. Although the Civil Code states that the creditor does
not acquire through possession the ownership of the real property
delivered by virtue of an antichresis, for failure to pay the debt
within the stipulated time - any agreement to the contrary being
void - nevertheless, the debtor cannot recover the use of the real
property given in antichresis to the creditor, without previously
fully paying the creditor. If there is default, the creditor may ask
for the sale of the real property, which be possesses by virtue of the
covenant in antichresis, unless the pending debt is paid."
c. If a finding of the court is that the contract between the
parties is a contract of antichresis the court must order the payment
of the principal amount of mortgage before ordering the delivery of
the property to the debtor. Under Article 2136 of the Civil Code, the
debtor cannot reacquire the enjoyment of the immovable without
first having totally paid what he owes the creditor."
3. ACQUISITIVE PRESCRIPTION. The antichretic
creditor cannot ordinarily acquire by prescription the land
surrendered to him by the debtor. 38 The creditor holds the property
in the concept of a holder and not in the concept of an owner.
Possession of the creditor is not an adverse possession.
Art.2138.The contractingpartiesmaystipulatethat
the interestuponthe debt be compensatedwiththefruits
of the propertywhich Is the object of the antlchresis,
providedthat if the value of the fruits shouldexceedthe
amount of interest allowed by the laws against usury,
the excess shall be appliedto the principal.(1885a)
'·'Pardo De Tavera v. El Hogar Filipino, Inc., G.R. No. L-45963. October 12.
1939; El Hogar Filipino v. Paredes. 45 Phil., 178; Peterson v. Azadn, 8 Phil.. 432,437
"Barretto v. Barretto. G..R No.L-11933, December I. 1917.
·"Ramirez v. Court of Appeals, G.R. No. L.38185. September 24, I 986. 228
Phil. 280-290.
3'Trillano v. Manansala, G.R. No. L.6752, April 29. 1955; Borrello v. Barn•tto.
37 Phil.. 234; Valencia v. Alcala. 42 Phil., 177.
 :nu.-:M' OUiDIT Tll.A.,:\.\("1'10~~
,~1) .:$0!.\'f ..\C"\ L~\\

Art. 2139..The last f)ll'l9nlPh of Article 2085, and

Artides 2089 to 2091 .,. applicable to this contract.
(1886a)

a. indivisible. Antic:hresisis also indivisible and the rules

CHAPTER15
that apply to monglgl' and pledgeregarding indi~;sibility applies to
anucbresi.s.• For example.t'\'en if Lhecredit is partly satisfied, the FINANCIALLEASEAND OTHER
debtm ca=oi: ask for the l'ffilrn of part of the property.
FINANCINGTRANSACTIONS
b. Xature of Principal Obligation. The contract of
anric:h:re,,s may secure all kinds of obligations, be they pure or
s-ub)ealO a su,,-pensive
or resolutorycondition.'" In 1992, the Supreme Court observed that a financial lease
"instrument must seem an exotic creation in the eyes o( many civil
law jurists; for a financial lease does not fit neatly into the tight
and orderly categories of the Civil Code. But linancial leases are
quite commonplace in today's commercial and financial world
and the law must take B0COW1t of developments and practice in
that world."' Even then, the Supreme Court believed that there is
nothing contra legem or contrary to public policy in a financial lease
contractual arrangement.• Financial lease is a credit transaction
that is considered a species of secured financing.•
This Chapter discusses not only financial leaaes but also other
forms of financing, including, ueignment of credit and receivables
financing. These transactions are part of the business of Financing
Companies. The term Financing Companies is defined under Section
3(a) of Republic Act No. 6980, 88 amended by Republic Act No. 8556,
otherwise known as the Financing Company Act 88 follows:
(a) 'Financing companies' hereinafter
called companies, are corporations,except banks,
Investments houus, savings and loan associations,
Insurance companies, cooperatives, and other financial
Institutions organized or operating under other special
laws, which are primarily organlud for the purpose
of extending credit facHltlesto consumers and to
Industrial,commercial,or agrlc:ultural enterprises,by

1Beltran v. PAIC Finance Corporation,ti ol., O.R. Noe. 83113 and 83266, May
19. 1992.
2lbid.

'BA Fina.nu Corporation v. Hon. Court of Appeala, 0.R. No. L-106190.

Dea,mber 18, 1993.

•...-.i. z1ar,. ur.c 396

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