Regulatory Framework and Legal Issues in Business

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Antichresis

Module 016: ANTICHRESIS (Arts. 2132-2139.)

Course Learning Outcomes:

1. State the definition of contract of antichresis, its characteristics and its
form.
2. Differentiate antichresis from pledge and real mortgage.
3. Explain the provisions of Articles 2132-2133 of the Civil Code of the
Philippines.

ANTICHRESIS
ART. 2132. By the 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 principal of his credit. (1881)

Definition of the contract of antichresis.

The above article defines the contract of antichresis.

Characteristics of the contract.

Antichresis is:
(1) an accessory contract because it secures the performance of a principal obligation.
Manresa, however, believes that it is an independent contract; and
(2) a formal contract because it must be in a specified form to be valid, i.e., “in writing.”

Delivery of property.
Antichresis requires the delivery by the debtor of the property given as security to the
creditor. But such delivery is required only in order that the creditor may receive the fruits
and not that the contract shall be binding.
The contract does not cover the immovable but only its fruits.

Right of creditor to the fruits.

Antichresis normally covers all the fruits of the encumbered property, but the law gives the
parties the freedom to stipulate otherwise. The reduction of the amount of fruits available
to the creditor does not vary the nature of the contract.
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Obligation to pay interest not essential.
The obligation to pay interest is not of the essence of the contract of antichresis, any more
than it is indispensable in a contract of loan.
The words “if owing” (interest) reveal that it is not essential that the loan should earn
interest in order that it can be guaranteed with a contract of antichresis, there being
nothing in the Code to show that antichresis is only applicable to securing the payment of
interest-bearing loans. On the contrary, antichresis is susceptible of guaranteeing all kinds
of obligations, pure or conditional.

Antichresis and pledge compared.

The distinctions are as follows:
(1) Antichresis refers to real property, while pledge, to personal property; and
(2) Antichresis is perfected by mere consent, while pledge is perfected by the delivery of
the thing pledged; and
(3) Antichresis is a consensual contract, while pledge is a real contract.
Both are similar in that the debtor loses control of the subject matter of the contract.

Antichresis and real mortgage compared.

The following are the distinctions:
(1) In antichresis, the property is delivered to the creditor, while in mortgage, the debtor
usually retains possession of the property;
(2) In antichresis, the creditor acquires only the right to receive the fruits of the property;
hence, it does not produce a real right, while in mortgage, the creditor does not have any
right to receive the fruits, but mortgage creates a real right over the property which is
enforceable against the whole world;
(3) In antichresis, the creditor, unless there is a stipulation to the contrary, is obliged to pay
the taxes and charges upon the estate, while in mortgage, the creditor has no such
obligation; and
(4) In antichresis, it is expressly stipulated that the creditor given possession of the
property shall apply the fruits thereof to the payment of interest, if owing, and thereafter to
the principal of the credit, while in a mortgage, there is no such obligation on the part of the
mortgagee.
Both are similar in that the subject matter is real property. Like pledge and mortgage,
antichresis gives a real and not merely a personal right if it is registered in the Registry of
Property.

Application of the fruits to interest and then to principal.

It is not an essential requisite to a mortgage that possession of mortgaged premises be
retained by the mortgagor.
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Antichresis

To be antichresis, it must be expressly agreed between creditor and debtor that the former,
having been given possession of the properties given as security, is to apply their fruits to
the payment of interest, if owing, and thereafter to the principal of his credit; so that if a
contract of loan with security does not stipulate the payment of interest but provides for
the delivery to the creditor by the debtor of the real property constituted as security for the
payment therefor, in order that the creditor may administer the same and avail himself of
its fruits, without stating that said fruits are to be applied to the payment of the interest, if
any, and afterwards to that of the principal of the credit, the contract shall be considered to
be one of mortgage and not of antichresis.
In a case, the court held the contract as one of mortgage in view of the existence of three
provisions which are indicative of the contract of mortgage: (1) The agreement that the full
amount of the indebtedness must be returned to the lenders before the borrowers could
demand the return of the property, which is contrary to an antichretic contract wherein the
products of the land should be applied to the interest and then to the principal; (2) the use
of the term “mortgage” in various parts of the contract; and (3) the agreement that the
lenders are not to pay rentals on the property in consideration of the fact that the
borrowers do not pay interest on the sum which they obtained as a loan.

ART. 2133. The actual market value of the fruits at the time of the application thereof
to the interest and principal shall be the measure of such application. (n)

Measure of application of fruits to interest and principal.

The contract does not cover the immovable but only its fruits. The fruits of the immovable
which is the object of the antichresis must be appraised at their actual market value at the
time of the application. “The foregoing rule will forestall the use of antichresis for purposes
of usury.” (Report of the Code Commission)

ART. 2134. The amount of the principal and of the interest shall be specified in
writing; otherwise, the contract of antichresis shall be void. (n)

Form of the contract.

Article 2134 is an instance when the law requires that a contract be in some form in order
that it may be valid and not only to affect third persons. Even if the antichresis is void, the
principal obligation, however, is still valid.
This article, like Articles 2133 and 2138, is intended to forestall the use of antichresis for
purposes of usury.

ART. 2135. The creditor, unless there is a stipulation to the contrary, is obliged to
pay the taxes and charges upon the estate.
He is also bound to bear the expenses necessary for its preservation and repair.
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The sums spent for the purposes stated in this article shall be deducted from the
fruits. (1882.)

Obligations of the antichretic creditor.

The creditor acquires, by virtue of the contract of antichresis, the right to enjoy the fruits of
the property delivered to him. This right carries two obligations (pars. 1 and 2.) which are
the necessary consequences of the contract because they arise from its very nature.
(1) Payment of taxes and charges upon the estate. — The creditor is obliged, unless there is
a stipulation to the contrary, to pay the taxes and charges upon the estate. If he does not
pay the taxes, he is by law required to pay indemnity for damages to the debtor. Where the
debtor has paid for the taxes on the property which the creditor should have paid, the
amount is to be applied to the payment of the debt, and the debtor is entitled to the return
of the property free from all encumbrances if he, in effect, by advancing the taxes, had
already discharged the debt.
(2) Application of the fruits of the estate. — Another obligation of the creditor is to apply the
fruits, after receiving them, to the interest, if owing, and thereafter to the principal (Art.
2132.) in accordance with the provisions of Article 2133 or 2138; hence, the duty of the
creditor to render an account of said fruits to the debtor, and the corresponding right of the
latter to apply the said fruits to the debt.
The sums spent by the creditor in fulfillment of the obligations under the article shall be
charged against the fruits of the property.

ART. 2136. The debtor cannot reacquire the enjoyment of the immovable without
first having totally paid what he owes the creditor.
But the latter, in order to exempt himself from the obligations imposed upon him by
the preceding article, may always compel the debtor to enter again upon the
enjoyment of the property, except when there is a stipulation to the contrary. (1883)

Right of antichretic debtor to reacquire enjoyment of property.

The property delivered stands as a security for the payment of the obligation of the debtor
in antichresis. Hence, the debtor cannot demand its return until the debt is totally paid.
However, if the creditor does not want to pay the taxes and incur the expenses necessary
for the preservation and repair of the property, he may compel the debtor to reacquire the
enjoyment of the same except when there is a contrary stipulation.

ART. 2137. The creditor does not acquire the ownership of the real estate for
nonpayment of the debt within the period agreed upon.
Every stipulation to the contrary shall be void. But the creditor may petition the
court for the payment of the debt or the sale of the real property. In this case, the
Rules of Court on the foreclosure of mortgages shall apply. (1884a)

Remedy of creditor in case of nonpayment of debt.

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Antichresis

If the debt is not paid, it is clear enough that the creditor does not acquire ownership of the
real estate since what was transferred is not the ownership but merely the right to receive
its fruits. A stipulation authorizing the antichretic creditor to appropriate the property
upon the nonpayment of the debt within the period agreed upon is void.
The remedy of the creditor is (1) to bring an action for specific performance; or (2) to
petition for the sale of the real property as in a foreclosure of mortgages under Rule 68 of
the Rules of Court. The parties, however, may agree on an extrajudicial foreclosure in the
same manner as they are allowed in contracts of mortgage and pledge.

Acquisition by creditor of property by prescription.

The creditor in antichresis and his successors-in-interest cannot ordinarily acquire by
prescription the land given to him, any agreement to the contrary being void.
Possession, for the purpose of acquisitive prescription, must be in the concept of an owner.
The possession of an antichretic creditor is not in the concept of an owner. He is a mere
holder placed in possession of the land by the debtor, the owner. He cannot acquire the
ownership of the real estate subject of the antichresis unless he repudiates his status as an
antichretic creditor.

ART. 2138. The contracting parties may stipulate that the interest upon the debt be
compensated with the fruits of the property which is the object of the antichresis,
provided that if the value of the fruits should exceed the amount of interest allowed
by the laws against usury, the excess shall be applied to the principal. (1885a)

Interest in antichresis subject to the Usury Law.

The antichretic creditor is under obligation to apply the fruits of the property in
satisfaction, first, of whatever interest on the debt is due, and secondly, to the payment of
the principal.
The fruits must be appraised on the basis of their actual market value at the time of the
application. If their value should exceed the amount of interest allowed by the Usury Law,
the excess shall be applied to the principal.
Note: The rate of interest on loan or forbearance of money, goods, or credit is no longer
subject to any ceiling prescribed under the Usury Law.

ART. 2139. The last paragraph of Article 2085, and Articles 2089 to 2091 are
applicable to this contract. (1886a)

Applicability of certain articles.

Please see comments under Article 2085 and Articles 2089 to 2091 which are provisions
on pledge and mortgage.
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References and Supplementary Materials
Books and Journals
1. Hector S. De Leon; Hector M. De Leon, Jr.; 2016; The Law on Sales, Agency and Credit
Transactions; 856 Nicanor Reyes, Sr. St. 1977 C.M. Recto Avenue, Manila Philippines;
REX Book Store

Online Supplementary Reading Materials

1. https://www.academia.edu/7330902/Credit_Transaction
2. http://www.chanrobles.com/civilcodeofthephilippines.htm
3. https://www.lawphil.net/statutes/repacts/ra1949/ra_386_1949.html
4. https://www.officialgazette.gov.ph/1949/06/18/republic-act-no-386/