I. II.
SHORT TITLE: Tan Chun Tic vs. West Coast Life Insurance Co. and Locsin FULL TITLE: TAN CHUN TIC, plaintiff and appellee, vs. WEST COAST LIFE INSURANCE CO. and JOSE C. LOCSIN, Provincial Sheriff of Occidental Negros, defendants and appellants. No. 307882, 01 February 1930, Villamor, J.
III.
TOPIC: Pactum Commissorium
IV.
STATEMENT OF THE FACTS Go Chulian executed a mortgage in favor of Genoveva De Jayme over 2 parcels of land. The mortgage had a clause which allowed De Jayme to appropriate the lands to herself in case Chulian is unable to pay by March 20, 1926, thereby transferring ownership to her in that event. On September 16, 1925, West Coast Life Insurance Co. sued Chulian for the recovery of a sum of money. The 2 parcels of land owned by Chulian were attached on September 21, 1925. When the mortgage matured without Chulian’s payment to De Jayme, the latter assigned her right to Tan Chun Tic. Tan Chun Tic succeeded in having the titles to the parcels of land transferred to his name. He then petitioned for the lifting of the attachment on the parcels of land. West Coast Life opposed the said petition as West Coast Life claimed that the mortgage between Chulian and De Jayme was a pactum commissorium.
V.
STATEMENT OF THE CASE The instant complaint sought the annulment and cancellation of the preliminary attachment levied by the provincial sheriff on the petition of West Coast Life Insurance Company upon the property described in the two transfer certificates in the name of Go Chulian. The defendants demurred to the complaint on the ground that the same did not state facts sufficient to constitute a cause of action; however, the demurrer was overruled by the Judge. The defendants generally denied the allegations in their answer but were adjudged default by not appearing in the hearing. After the plaintiff had introduced his evidence, the trial court rendered judgment holding that the lots of the cadastre of Murcia, Negros Occidental, belong in fee simple to the plaintiff, and by virtue of the titles by the office of the Register of Deeds of the province be cancelled. Defendant West Coast Life Insurance Company appealed from the judgment invoking error of the trial court in holding that the stipulation of mortgage is under pactum commissorium and therefore null and void per Articles 1859 and 1884 of the Civil Code.
VI.
ISSUE: Whether or not the mortgage between Chulian and De Jayme was a pactum commissorium thus void per provision of law.
VII.
RULING: Yes, the mortgage is pactum commissorium as per the (old) civil code under Art. 1859, which provides that the creditor may not appropriate to himself the things given in pledge or mortgage, or dispose of them. The pactum commissorium, the additional stipulation to a contract of loan, whereby the thing pledged shall become the property of the creditor in the event of the non-payment of the debt within the term fixed, is void. The creditor has no right to appropriate the chattels and effects pledged, or to make payment to himself and by himself of his credit with the value thereof, for he is only allowed to collect the debt out of the proceeds of the sale of the effects and chattels pledged. On the other hand, the court impressed that what can be allowed is a stipulation of a promise to sell the mortgaged property to the creditor in case of non-payment, but not the outright appropriation for such constitutes pactum commissorium which is disallowed by law.
VIII.
DISPOSITIVE PORTION By virtue of the foregoing, the judgment appealed from is reversed, and the instant complaint should be, as it is hereby, dismissed, without special pronouncement of court. So ordered.
