Kasilag vs Rodriguez (69 Phil 217)

FACTS

PROCEDURAL FACTS: This is an appeal taken by the defendant-petitioner (Kasilag) from the decision of the Court of Appeals which modified that rendered by the court of First Instance of Bataan. The said court held: that the contract is entirely null and void and without effect; that the plaintiffs-respondents (Rodriguez, et.al.), then appellants, are the owners of the disputed land, with its improvements, in common ownership with their brother Gavino Rodriguez, hence, they are entitled to the possession thereof; that the defendant-petitioner should yield possession of the land in their favor, with all the improvements thereon and free from any lien.

SUBSTANTIVE FACTS: The parties entered into a contract of loan to which has an accompanying accessory contract of mortgage. The executed accessory contract involved the improvements on a piece land, the land having been acquired by means of homestead. Petitioner for his part accepted the contract of mortgage.

Believing that there are no violations to the prohibitions in the alienation of lands Petitioner, acting in good faith took possession of the land. To wit, the Petitioner has no knowledge that the enjoyment of the fruits of the land is an element of the credit transaction of Antichresis.

ISSUE

1.     Whether or not the principal contract entered into is null and void.

2.     Whether or not the subsequent contract is null and void.

3.     Whether or not the Kasilag is a possessor in good faith of the land.

HELD

1.     The cardinal rule in the interpretation of contracts is to the effect that the intention of the contracting parties should always prevail because their will has the force of law between them. Article 1281 (now Art. 1370) of the Civil Code consecrates this rule and provides, that if the terms of a contract are clear and leave no doubt as to the intention of the contracting parties, the literal sense of its stipulations shall be followed; and if the words appear to be contrary to the evident intention of the contracting parties, the intention shall prevail. The contract should be interpreted in accordance with these rules. As the terms thereof are clear and leave no room for doubt, it should be interpreted according to the literal meaning of its clauses. 

The words used by the contracting parties in the contract clearly show that they intended to enter into the principal contract of loan in the amount of P1,000, with interest at 12 per cent per annum, and into the accessory contract of mortgage of the improvements on the land acquired as homestead, the parties having moreover, agreed upon the pacts and conditions stated in the deed. In other words, the parties entered into a contract of mortgage of the improvements on the land acquired as homestead, to secure the payment of the indebtedness for P1,000 and the stipulated interest thereon. 

Another fundamental rule in the interpretation of contracts, not less important than those indicated, is to the effect that the terms, clauses and conditions contrary to law, morals and public order should be separated from the valid and legal contract and when such separation can be made because they are independent of the valid contract which expresses the will of the contracting parties.

Principal contract is that of loan and the accessory that of mortgage of the improvements upon the land acquired as a homestead. There is no question that the first of these contract is valid as it is not against the law.

2.     Parties entered into another verbal contract whereby the petitioner was authorized to take possession of the land, to receive the fruits thereof and to introduce improvements thereon, provided that he would renounce the payment of stipulated interest and he would assume payment of the land tax. The possession by the petitioner and his receipt of the fruits of the land, considered as integral elements of the contract of antichresis, are illegal and void agreements because the contract of antichresis is a lien and such is expressly prohibited by section 116 of Act No. 2874.

3.     Despite the foregoing, SC found the defendant-petitioner Kasilag as a possessor of the land in good faith. Sec 433 of the Civil Code of the Philippines provides “Every person who is unaware of any flaw in his title or in the manner of its acquisition by which it is invalidated shall be deemed a possessor of good faith.” And in this case, the petitioner acted in good faith. Good faith maybe a basis of excusable ignorance of the law, the petitioner acted in good faith in his enjoyment of the fruits of the land to which was done through his apparent acquisition thereof.