francisco realty and development corp

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Francisco Realty and Development Corp. vs. Court of Appeals

Pactum Commissorium

Facts: A. Francisco Realty granted a loan of P7.5 M to spouses Javillonar, in

consideration of !ic!, t!e latter e"ecuted a promissory note, a real estate mortgage

over a certain property, and a deed of sale of said mortgaged property in favor of A.

Francisco.

#pon maturity, Javillonar spouses failed to pay, and as a conse$uence, A. Francisco

registered t!e sale of t!e mortgaged property, for !ic! a ne %C% as issued.

A. Francisco demanded possession of t!e mortgaged realty. &pouses refused to

vacate. 'ence, A. Francisco (led a case for possession )efore t!e R%C.

%!e spouses admitted t!at t!ey oed money in favor of A. Francisco )ut t!ey also

alleged t!at it as not t!eir intention to sell t!e realty as t!e deed of sale e"ecuted

)y t!em as merely an additional security for t!e payment of t!eir loan. R%C

ad*udged in favor of A. Francisco. +n appeal, CA reversed R%C decision and

dismissed t!e complaint against t!e spouses !olding t!at t!e deed of sale as void,

)eing in t!e nature of a pactum commissorium pro!i)ited )y la. 'ence, t!is petition

it! t!e &C.

Issue: !et!er or not t!e deed of sale e"ecuted )y t!e spouses as void, )eing in

t!e nature of pactum commissorium.

'eld: -es. Art. /00 of t!e Civil Code provides t!at t!e creditor cannot appropriate

t!e t!ings given )y ay of pledge or mortgage, or dispose of t!em. Any stipulation

to t!e contrary is void. !at is envisioned )y t!is article is a provision in t!e deed of

mortgage providing for t!e automatic conveyance of t!e mortgaged property in case

of t!e failure of t!e de)tor to pay t!e loan. A pactum commissorium is a forfeiture

clause in a deed of mortgage. %!e proscri)ed stipulation of automatic conveyance

must )e found in t!e mortgage deed itself.

1n t!e case at )ar, t!e stipulations in t!e promissory note provide t!at, upon failure of

spouses to pay interest, oners!ip of t!e property ould )e automatically transferred

to A. Francisco and t!e deed of sale in its favor ould )e registered. %!ese

stipulations are in su)stance a pactum commissorium. %!ey em)ody t!e to

elements of pactum commissorium, to it:

234 t!at t!ere s!ould )e a pledge or mortgage !erein a property is pledged or

mortgaged )y ay of security for t!e payment of t!e principal o)ligation

francisco realty and development corp

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