GUARANTY AND SURETY
4. Sps. Nestor and Ma. Nona Borromeo v. Court of Appeals
1. Palmares v. Court of Appeals
 Palmares is a surety as she bound herself jointly and severally
liable.
 The stipulation on the contract that the creditor may demand
payment from her when the debtor defaults did not remove the
contract from being a surety.
o A surety is an insurer of the debt and promises to pay
the principal when the debtor will not pay.
o A guarantor is an insurer of the solvency of the
principal debtor and promises to pay when the
principal debtor fails to fulfill his obligation.
o In this case, there is no showing that the creditor can
go after Palmares only when the spouses defaulted or
become insolvent
 Palmares being a surety is also supported of her act of offering
to pay when the principal debtor failed
 The promissory notes also provided that she waived her right to
notice and demand. In a suretyship, demand is not necessary.
2. E. Zobel, Inc. v. Court of Appeals
 E. Zobel argues that a guarantor, he lost his right to be
subrogated to the rights of the creditor for the failure of the bank
to register the chattel mortgage.
 E. Zobel is a surety and not a guarantor pursuant to the terms of
the continuing guaranty.
o “is now obligated to you as surety."
o E. Zobel also obligated itself to make a punctual
payment of the loan upon its maturity
o The bank also need “not result to all legal remedies and
exhaust the properties” of the spouses
o “assumes solidary liability”
 Being a surety, Art. 2080 does not apply. Art. 2080 is only
applicable to guaranty.
 Art. 2080: The guarantors, even though they be solidary, are
released from their obligation whenever by some act of the
creditor they cannot be subrogated to the rights, mortgages, and
preference of the latter.
PROVISIONS COMMON TO PLEDGE AND MORTGAGE
1. Sps. Nilo and Eliadora Ramos v. Raul Obispo
 Sps. Ramos mortgaged their property to secure the loan
obtained by Obispo.
 SC: An accommodation mortgage is allowed under the last
paragraph of Art. 2085: “third persons who are not parties to the
principal obligation may secure the latter by pledging or
mortgaging their own property.”
2. PNB v. Sps. Alejandro and Myrna Reblando
 Respondents (mortgagor) alleged that the mortgage was invalid
since they were not the owner of the mortgaged property.
 SC: The mortgage was valid. Respondents were the owner of the
mortgaged property. The lower courts just confused Lot No. 10
(the subject matter) with the other property Unit No. 10 which
was not owned by the respondents at the time of the mortgage.
3. Union Bank of the Phils. V. Alain Juniat, et al.
 Pledge shall not take effect against third persons if a description
of the thing pledged and the date of the pledge do not appear in
the public instrument.
 There can be no transfer of ownership if the delivery of the
property to the creditor by way of security.
 The right of foreclosure was being exercise by the sister company
of the creditor mortgagee. The SC ruled that the right of
foreclosure cannot be exercised by any person other that the
creditor-mortgagee.
5. Rafael R. Martelino, et al. v. National Home Mortgage Finance
Corp.
 Foreclosure of mortgage is also the mortgagee’s right in case
non-payment of a debt secured by mortgage. The mortgagee can
sell the encumbered property to satisfy the outstanding debt.
6. Development Bank of the Philippines v. Court of Appeals
 There is no pactum commissorium in this case. Condition no. 12
did not provide that the ownership over the leasehold rights
would automatically pass to DBP upon Cuba's failure to pay the
loan on time. It merely provided for the appointment of DBP as
attorney-in-fact with authority, among other things, to sell or
otherwise dispose of the said real rights, in case of default by
Cuba, and to apply the proceeds to the payment of the loan. This
provision is a standard condition in mortgage contracts and is in
conformity with Article 2087 of the Civil Code, which authorizes
the mortgagee to foreclose the mortgage and alienate the
mortgaged property for the payment of the principal obligation.
 However, DBP exceeded the authority vested by condition no. 12
as it appropriated and taken ownership of the leasehold rights
without foreclosure proceedings
7. Bustamante v. Rosel
 In the contract between the parties, it was stipulated that when
Bustamante fails to pay Rosel, Rosel has the option to buy the
collateral property for P200,000 inclusive of the borrowed
amount and interest in the loan.
 SC: There is pactum commissorium.
o In contract interpretation, determining the intent of
the parties in entering into the contract is necessary.
o In this case, the intent to appropriate the property
given as collateral in favor of the creditor appears to
be evident, for the debtor is obliged to dispose of the
collateral at the pre-agreed consideration amounting
to practically the same amount as the loan. In effect,
the creditor acquires the collateral in the event of non
payment of the loan. This is within the concept
of pactum commissorium. Such stipulation is void.
8. Ong v. Roban Lending Corporation
 There is pactum commissorium.
 The Memorandum of Agreement and the Dacion in Payment
contain no provisions for foreclosure proceedings nor
redemption. Under the Memorandum of Agreement, the failure
by the petitioners to pay their debt within the one-year period
gives respondent the right to enforce the Dacion in Payment
transferring to it ownership of the properties. Thus, respondent
automatically acquires ownership of the properties.
 Take note that true dacion en pago is a special form of payment
where the debtor alienates property to the creditor in
satisfaction of a monetary debt. In this case, the property was
used as a security. The alienation of the property is by way of
security and not to extinguish a monetary debt.
9. Sps. Lehner and Ludy Martires v. Menelia Chua
 Although there is no deed of mortgage executed by the parties,
it has been established that the intent of both parties is that the
subject property shall serve as security for the debt incurred by
Chua. Hence, there exists an equitable mortgage which is one
 which, although lacking in some formality, or form or words, or
other requisites demanded by a statute, nevertheless reveals the
intention of the parties to charge real property as security for a
debt, there being no impossibility nor anything contrary to law
in this intent.
 Since the original transaction between the parties was a
mortgage, the subsequent assignment of ownership of the
subject lots to petitioners without the benefit of foreclosure
proceedings, partakes of the nature of a pactum commissorium.
10. Leonides Mercado, et al. v. Court of Appeals
 Mercado assailed the validity of the hold-out agreement he
entered into with SMC. He claimed that the continuing hold-out
agreement allowed forfeiture without the benefit of foreclosure
and thus falls under the prohibition provided for by Art. 2088.
 The Court did not rule on the validity of the holdout agreement.
It held that the counterclaim by SMC is a compulsory
counterclaim since it also touched on validity of the holdout
agreement.
11. Fort Bonifacio Dev't Corp. v. Yllas Lending Corp.
 No pactum commissorium.
 To prove pactum commissorium, it must be shown first that the
subject properties were used as security for another obligation
either by mortgage or pledge. In this case, the subject properties
were not pledged because the things pledged were not placed in
the possession of the creditor.
(learning: there must be an intent to constitute the properties as
security before there can be pactum commissorium as opposed to a
dacion en pago where the properties used as payment to substitute
money payment are not securities or collaterals of the principal
obligation)
PLEDGE
1. Union Bank of the Phils. V. Alain Juniat, et al.
 Pledge shall not take effect against third persons if a description
of the thing pledged and the date of the pledge do not appear in
the public instrument.
2. Estate of Litton v. Mendoza & Court of Appeals
 Application of Art. 2097 which provides that the pledgor may
alienate the thing pledged but it is subject to the consent of the
pledgee and the pledgee shall continue to be in possession of the
thing pledged after he consents to the alienation.
 There must be notice and consent by the pledgee before the
thing pledged may be alienated.
3. Manila Banking Corporation v. Teodoro, Jr. and Teodoro
 This case focuses on the construction of a deed of assignment. A
deed of assignment can take the nature of sale, donation,
pledge, etc.
 In this case, the Court finds the Deed of Assignment to be a
pledge since there was no transfer of ownership and the subject
of the assignment was for security for the loan obtained by the
respondents. The Court relied on the intent of the parties and
not on the language of the contract.
4. Yau Chu v. Court of Appeals, et al.
 The thing pledged to secure the obligation in this case is a sum
of money deposited in a bank. The SC ruled that when the thing
pledged is money, the provisions of Art. 2112 on the foreclosure
of pledge need not be followed. What is important is that a
notice must be given to the pledger before the money is
encashed.
 In this case, there is also no pactum commissorium. Pactum
commissorium is not allowed to protect the pledgor or
mortgagor because the value of the property pledged or
mortgaged is more the debt. In this case, the value of the thing
pledged which is also a sum of money is less than the debt.
5. Citibank, Na & Investors Finance Corporation v. Sabeniano
 Application of Art. 2118: If a credit has been pledged becomes
due before it is redeemed, the pledgee may collect and receive
the amount due. He shall apply the same to the payment of his
claim, and deliver the surplus, should there be any, to the
pledgor.
 The Declaration of Pledge in this case was also not notarized and
the date of pledge was also not in the Declaration of Pledge.
6. Paray & Espeleta v. Rodriguez et al.
 Respondents obtained loan obligations from petitioners and
these loan obligations were secured by way of pledge of shares
of stock.
 The respondents defaulted. As such, the petitioners sought the
foreclosure of the pledge. However, respondents filed a
complaint seeking to annul the pledge agreements. The RTC
dismissed the complaint and gave due course to the public
auction.
 Before the public auction, the respondents made consignations
with the clerk of court representing the loan obligations. Despite
the consignation, the public auction pushed through.
 The respondents now assail the validity of the public auction
arguing that their consignations have extinguished the principal
obligation as well as the pledge.
 The CA ruled in favor of the respondents finding that the
consignation partakes the nature of redemption.
 SC:
o There can be no redemption of the thing pledged.
 The sale of the things in pledged is
extrajudicial in nature and thus, the rules on
redemption provided by the Rules of Court
do not apply.
 There is no law providing for the right of
redemption of personal property.
o If there are several things pledge, the pledgee may
auction all on a single occasion or to a single buyer.
o Assuming that the consignation is allowed, the
consignation made by the respondents do not
extinguish the principal obligation as it only covers the
loan amount and not the interests due. Art. 2105 of the
Civil Code does not allow a debtor to recover the thing
pledged without paying for the debt and its interest.
7. Roberto C. Sicam, et al. v. Lulu V. Jorge, et al.
 The owner of a pawnshop denied liability on the stolen pawned
items on the ground that the robbery was a fortuitous event.
 SC: A person is not liable when there is a fortuitous event only
when there is no concurrent negligence on his part. The owner
is liable for concurrent negligence. The law which governs
pawnshop is silent on the degree of diligence to be exercised by
a pawnshop owner. Under Article 2123 of the Civil Code, the
provisions of the Civil Code are supplementary to these special
laws. Art. 2099 provides that a creditor (owner of the pawnshop
in this case) shall take care of the thing pledged with the
diligence of a good father. The owner failed to exercise such
degree of diligence by admitting that no security measures were
 taken. As a result, the robbers were able to steal all the pawned
items.
8. Lim Tay v. Court of Appeals
 The private respondents obtained a loan from Lim Tay. As
security, both respondents pledged their respective shares of
stock. The respondents defaulted. Lim Tay now prays that the
shares of stock pledged be registered under his name.
 SC:
o The failure of the debtor to fulfill the principal
obligation does not automatically vest in the creditor
the ownership of the thing pledged. The creditor must
still go through the requirement of notice and public
auction under Art. 2112.
o Although there is delivery to the creditor of the thing
pledged, the debtor remains the owner of the thing
pledged.
9. Clementino Imperial v. Mariano Santiago
 Under Article 2112, a prosecutor is not allowed to conduct a
public auction of the thing pledged. Only a notary public can
conduct such public auction.
10. Insular Life Assurance Company v. Robert Young
 Young argues that the notice for the first and second public
auction must be embedded in two separate notices.
 SC: Under Art. 2112 of the Civil Code, there is no prohibition on
sending of one notice for both the first and second public
auction. The purpose of the notice is just to apprise the debtor
and pledger that the thing pledged would be sold in a public
auction.
REAL ESTATE MORTGAGE
1. Prudenial Bank v. Alviar & Alviar
 Respondents obtained a loan from the petitioner secured a real
estate mortgage with a dragnet clause. Subsequently,
respondents obtained other loans secured by mortgage of other
properties. Now, petitioner seeks to apply the first mortgage
with the subsequent loans pursuant to the dragnet clause.
 SC:
o The dragnet clause is valid.
o It must be pointed out that the subsequent loans were
covered by other mortgages. When the mortgagor
takes another loan for which another security was
given, it could not be inferred that such loan was made
in reliance solely on the original security but rather, on
the new security given. This is the reliance on the
security test.
2. People's Bank and Trust Company &Atlantic Gulf and Pacific Co.
of Manila v. Dahican Lumber Company, et al.
 The machineries and equipment are considered real property
pursuant to Art. 415 of the Civil Code.
 The parties also considered such movables as real properties and
as a result, they must be held in estoppel to question it.
3. Start Two (SPV-AMC), Inc. v. Paper City Corp of the Phil
 The parties stipulated that the mortgage covers the parcels of
land including the building and existing improvements thereon
as well as the machineries and equipment.
 Pursuant to this stipulation, the machineries and equipment are
included to the properties mortgaged.
4. Garcia v. Villar
 Galas mortgaged the property first to Villar as security for a loan.
She subsequently mortgaged the same to Garcia. Thereafter, she
sold the property to Villar alleging that the property was free
from lien. Upon failure of Galas to pay the loan due to Garcia,
Garcia moved for the foreclosure of the property. Garcia further
adds that he was subrogated to the rights of Villar as the first
creditor and therefore, he can foreclose the property.
 SC:
o The mortgage on a property may still be foreclosed
despite alienation. Thus, Garcia can still foreclose the
mortgage despite the sale of the property to Villar.
o However, Villar did not replace Galas a debtor to Villar
since the assignment of credit was made without her
consent. Thus, the obligation remains with the original
debtor, Garcia.
5. Korea Exchange Bank v. Filkor Business Integrated
 The action of a party is not determined by the title of the action
but by the allegations in the complaint.
 In this case, it is clear from the allegations of Korea Exchange that
the action is one of foreclosure of the mortgage pursuant to its
allegations.
6. Huerta Alba Resort, Inc. v. Court of Appeals
 Equity of redemption is applicable to judicial foreclosure. Right
of redemption is available only in extrajudicial foreclosure except
when the creditor-mortgagee is bank or a banking institution
pursuant to the General Banking Act.
 Equity of redemption may be exercised within 90 days before
judgment becomes final and even beyond the 90-day period
before the confirmation of the sale in the public auction. After
the order of confirmation, no redemption can be effected any
longer.
 In this case, petitioner seasonably failed to invoke equity of
redemption when it submitted its answer to the complaint for
judicial foreclosure. Its failure precludes it from doing so at the
late stage of litigation.
7. Grand Farms, Inc. & Philippine Shares Corporation v. Court of
Appeals
 The parties stipulated in the deed of mortgage that notice must
be sent to the petitioners on matters regarding the mortgage.
Hence, they argued that foreclosure was invalid because no
notice was sent to them.
 SC: Respondents admitted that no notice was sent to the
petitioner. Hence, such act violates the stipulation on notice in
the deed of mortgage causing the foreclosure to be defective.
8. Medida, et al. v. Court of Appeals
 The purchaser of a mortgaged property has only an inchoate
right until no redemption is made during the redemption period
allowed by law.
 Only upon the expiration of the redemption period, without the
judgment debtor having made use of his right of redemption that
the ownership of the land sold becomes consolidated in the
purchaser.
9. Spouses Yap v. Spouses Dy et al.
 The doctrine of indivisibility of mortgage does not apply once the
mortgage is extinguished by a complete foreclosure. Thus,
redemption may be made even only on some of the properties
foreclosed and not on the entire property.
10. Suico v. Philippine National Bank
 The Notice of the Sheriff’s sale stated the obligation of the
petitioner was only around 2M. Hence, the petitioner alleged
that the notice and the subsequent sale were null and void as it
depreciated the value of the possible bids.
 SC:
o The notice was given for the purpose of securing
bidders and to prevent a sacrifice of the property. If
mistakes or omissions occur in the notices of sale,
which are calculated to deter or mislead bidders, to
depreciate the value of the property, or to prevent it
from bringing a fair price, such mistakes or omissions
will be fatal to the validity of the notice and the sale.
o In this case, there was no such mistake. The highest bid
was around 8M which is more than the correct amount
of the obligation which is around 6M.
o Furthermore, since there is an excess, the 2M
difference of the price and the obligation must be
returned to the mortgagor subject to interest.
11. Cua Lai Chu, et al., v. Lacqui & Philippine Bank of
Communications
 A writ of possession may be issued despite of pendency of a case
questioning the validity of an extrajudicial sale.
 A purchaser at an extrajudicial foreclosure has a right of
possession of the foreclosed property during the 1-year
redemption period upon filing of the proper motion and posting
of the bond.
 The purchaser in an extrajudicial foreclosure will thereafter
acquire an absolute right of possession if upon the expiration of
the 1-year redemption period, no redemption was made.
 Furthermore, the petitioners cannot question the validity of a
foreclosure sale in opposing a petition for the issuance of a writ
of possession because such petition is in the form of ex parte
motion.
 The remedy of the petitioners is to have the foreclosure sale be
set aside and have the writ of possession cancelled on the
ground of the damages they have suffered because the
mortgage was not violated or the sale was not made in
accordance with the provisions of Act 3135.
12. Spouses Tolosa v. Unoted Coconut Plantes Bank
 After the consolidation of title in the buyer’s name (meaning,
there was no redemption within the 1-year redemption period),
the issuance of a writ of possession upon motion of the
purchaser becomes ministerial since the right to possess the
property became absolute.
 Questioning the validity of a foreclosure sale cannot be an
argument in opposing the issuance of a writ of possession.
13. BPI Family Savings Bank, Inc. v. Golden Power Diesel Sales
Center, Inc.
 When the foreclosed property is in the possession of a third
party holding the same adversely against the judgment obligor
(it is important that the third person is holding the property
adversely against the judgment obligor), the issuance of a writ of
possession ceases to be ministerial.
 In this case, Golden Power Diesel cannot be held to be holding
the property adversely against CEDEC (mortgagor who
mortgaged the property to BPI to secure loans). Golden Power
Diesel acquired the property from CEDEC through sale. Hence,
Golden Power Diesel merely steps into the shoes of CEDEC and
thus, it does not hold the property adversely against CEDEC. BPI
is entitled to a writ of possession.
14. Eufemia Balatico vda. De Agatep v. Roberta L. Rodriguez (not
discussed)
15. Corinthian Gardens Association, Inc. v. Sps. Reynaldo and Maria
Luisa Tajangco, et al. (not discussed)
16. Sps. Antono and Leticia Vegas v. SSS, et al.
 Article 1237 of the Civil Code cannot apply in this case since the
debtor (Reyes) consented to the transfer of ownership of the
mortgaged property to the Vegas. Although Paragraph 4 of the
mortgage agreement which states that Reyes must secure the
consent of SSS before selling the property, is valid and binding in
the sense that SSS cannot be compelled to recognize the sale
before the loan is completely paid, it does not absolutely forbid
her, as owner, from selling the property while the loan remained
unpaid. Such stipulation is against public policy, being an undue
impediment or interference on the transmission of property.
Article 2129 of the Civil Code gives SSS the option of collecting
from the third person in possession of the mortgaged property.
17. Sps. Samatra vs. Vda. De Parinas
 Sps. Samatra obtained loans and secured such loans with a
mortgage over some of their lots. While the mortgage was still
subsisting, they constituted their daughter as an agricultural
lessee over the mortgaged lots without the consent of the
mortgagee bank.
 Article 2130 of the Civil Code which renders void any stipulation
forbidding the owner from alienating the immovable mortgaged
(pacto de non aliendo) property. It is settled that a real estate
mortgage does not extinguish the title of the debtor. He does
not lose his right to use or dispose of the mortgaged property
(jus disponendi) which is one of the principal attributes of
ownership. Thus, in the case at bar, the mortgagor-spouses were
well within their rights when they constituted respondent as an
agricultural lessee and the legality of the leasehold contract
cannot be validly assailed on this ground.
CHATTEL MORTGAGE
1. PCI Leasing & Finance, Inc. v. Trojan Metal Industroes
 Financial Leasing: a finance company purchases in behalf of a
cash-strapped lessee the equipment the latter wants to buy but
due to financial limitations, is incapable to do so. The finance
company then leases the equipment to the lessee in exchange
for the latter’s periodic payment of a fixed amount of rental.
 In this case, TMI already owned the subject equipment. Thus,
their agreement is not a financial leasing.
 If the finance company purchased the equipment of a client with
the intention of leasing it back to the client, the lease agreement
was simulated to disguise the true transaction which was a loan
with security.
 Thus, the real transaction in this case is a simple loan secured by
a chattel mortgage. Hence, upon TMI’s default, PCILF was
entitled to seize the mortgaged equipment as a creditor-
mortgagee for the purpose of foreclosing the chattel mortgage.
2. ACME Shoe, Rubber & Plastic Corporation v. Court of Appeals
 A chattel mortgage can only cover obligations existing at the
time the mortgaged constituted and not subsequent loans
obtained.
 To cover such subsequent loans, new chattel mortgage or an
amendment of the old contract is needed to be made at the time
such loan is incurred.

3. Makati Leasing & Finance Corporation v. Wearever Textile
Mills, Inc.
 A real property may be considered as a personal property in a
chattel mortgage if the parties so intend and that no third
persons were prejudiced by such.
4. Servicewide Specialists, Inc. v. Court of Appeals
 Spouses Ponce bought a car from CR Tecson on credit secured by
a chattel mortgage. The credit was assigned by CR Tecson to
Filinvest which, in turn, assigned, the credit to Servicewide
Specialist.
 SC:
o In case of assignment of credit, only notice to but not
the consent of the debtor-mortgagor is necessary to
bind the latter. Spouses Ponce then sold the car.
o The consent of the creditor-mortgagee is required
when the debtor-mortgagor alienates the property
mortgaged to a third person.
 Since the assignee of a credit steps into the
shoes of the creditor-mortgagee to whom
the chattel was mortgaged, it follows that
the assignee’s consent is necessary in order
to bind him of the alienation of the
mortgaged thing by the debtor creditor.
o Although the spouses were not given notice of the
assignment of credit to Servicewide by Filinvest, the
spouses still failed to give notice to FIlinvest when they
sold the car. Hence, the sale was not binding to
Filinvest.
5. Rizal Commercial Banking Corporation v. Royal Cargo
Corporation
 Terrymanila obtained a loan from RCBC secured by a Chattel
Mortgage.
 On the other hand, Royal Cargo was one of the creditors of
Terrymanila. Royal Cargo filed a sum of money case with a
preliminary attachment over some of the properties of
Terrymanila. The court ruled in favor of Royal Cargo.
 Upon default of Terrymanila, RCBC moved to foreclose the
chattel mortgage which was granted. The public auction was
pushed through and RCBC, as the sole bidder, purchased the
personal properties. Royal Cargo move for reconsideration but
such was denied.
 Royal Cargo now assails the foreclosure asserting that it should
have been notified 10 days before the sale.
 SC: Royal Cargo is entitled of the 10-day notice but upon its filing
of a motion for reconsideration, it was already given notice.
o In chattel mortgage, a would-be redemptioner is given
the chance to redeem the mortgaged property only
before its sale. Such partakes the nature of an equity
of redemption.
o Royral Cargo was able to attach the right or equity of
redemption by Terrymanila. Hence, it is entitled the
10-day notice.
o However, upon filing of a motion for reconsideration
on the foreclosure suit, it was already given notice of
the public auction.
6. Servicewide Specialists, Inc. v. Court of Appeals
 Leticia Laus purchased on credit a Colt Galant from Fortune
Motors secured by a chattel mortgage on the property. Fortune
Motors assigned the credit in favor of Filinvest and Filinvest, in
turn, assigned it to Servicewide Specialists. When Laus defaulted,
Servicewied sued Hilda Tee and John Dee in whose custody the
vehicle was believed to be at the time of the filing of the suit.
 SC:
o The suit shall not prosper. Leticia Laus must have been
included being an indispensable party.
o The conditions which should be showed for the
foreclosure of the mortgage are:
 The existence of the chattel mortgage
 The default of the mortgagor
o Since the mortgagee’s right of possession is subject to
the default of the mortgagor, the inclusion of the
debtor or the mortgagor in the case may be required
to allow a full an conclusive determination of the case.
7. PAMECA Woode treatment Plant, Inc. v. Court of Appeals
 The mortgagor is entitled to the balance of the proceeds of the
auction sale upon satisfaction of the principal obligation and
costs. The creditor-mortgagor is barred from retaining the
excess.
ANTICHRESIS
1. Diego v. Fernando
 Fernando obtained a loan without interest from Diego and to
secure such loan, he executed a deed of mortgage. Fernando
further turned over the mortgaged property to Diego. Fernando
defaulted and so, Diego moved for the foreclosure of the
mortgage. Fernando argued that the deed of mortgage is
actually an antichresis and not a mortgage.
 SC:
o The deed of mortgage is a contract of mortgage and
not an antichresis. Although the possession of the
property was given to Diego and that the loan is
without interest, the contract remains a mortgage
because to be an antichresis, it must be expressly
agreed between creditor and debtor that the fruits
would be applied as payment.
o It must be pointed out that the delivery of the property
is not necessary in mortgage. In case the property’s
possession is delivered to the mortgagee, the
mortgagee in possession has similar rights and
obligations with an antichretic creditor. Thus, the
mortgagee in possession must account the value of the
fruits received by him, and deduct it from the loan
obtained by Fernando.