Diego v. Fernando

Summary

This Supreme Court case involved a dispute between Cecilio Diego and Segundo Fernando over whether their agreement was a mortgage or antichresis. Fernando had executed a deed of mortgage for a P2,000 interest-free loan, transferring possession of the mortgaged properties to Diego. When Fernando failed to pay after four years, Diego sued for foreclosure. Fernando claimed the transaction was antichresis and his debt was satisfied by fruits Diego received. The Supreme Court ruled it was a mortgage, not antichresis, since there was no express agreement for applying fruits to interest and principal. However, as a 'mortgagee in possession,' Diego must account for fruits received. The Court reduced Diego's recovery to P1,505 after deducting P495 worth of palay received, establishing the principle that mortgagees in possession must account for fruits when the loan carries no interest.