FACTS:

The case involves a dispute over the nullity of real estate mortgages executed by petitioner Victor Binua in favor of respondent Lucia Ong. Petitioners, spouses Victor and Edna Binua, seek to declare the mortgages null and void on the ground that they were executed under fear, duress, and threat.

In 2006, petitioner Edna was convicted of estafa and ordered to pay respondent the amount of P2,285,000.00, with interest and damages. In an attempt to settle her indebtedness, petitioner Edna executed separate real estate mortgages over petitioner Victor's properties, covering a total amount of P7,000,000.00.

Petitioner Edna later filed a motion for a new trial, which was granted, and a decision was rendered ordering her to pay the respondent the amount of P2,285,000.00 as actual damages, with interest and other damages. The court ruled that the presentation of a promissory note novated the original agreement between the parties into a purely civil obligation.

However, petitioner Edna failed to settle her obligation, leading the respondent to foreclose the mortgages on the properties and becoming the highest bidder during the public sale. The petitioners then filed a case for the declaration of nullity of the mortgage contracts, alleging that the contracts were executed under duress, considering petitioner Edna's conviction and inability to freely enter into the contracts.

The Regional Trial Court (RTC) dismissed the complaint for lack of factual and legal merit, citing Article 1335 of the Civil Code, which states that a threat to enforce a just or legal claim through competent authority does not vitiate consent. The Court of Appeals (CA) affirmed the RTC's decision, ruling that the fear, duress, and threat alleged by the petitioners did not qualify as intimidation under the law since the threat must be of an unjust act.

The petitioners appealed to the Supreme Court, arguing that the RTC's findings were not supported by the evidence and that the mortgage contracts should be declared null and void due to fear, duress, and threat, as well as the imposition of a high interest rate.

ISSUES:

1. • Whether the mortgage contracts were executed under fear, duress, and threat
2. • Whether the mortgage contracts should be declared null and void

RULING:

1. The Supreme Court upheld the ruling of the lower courts and held that the mortgage contracts should not be declared null and void. The Court found that the fear, duress, and threat claimed by the petitioners did not qualify as intimidation under the law because the threat must be of an unjust act. The Court also cited Article 1335 of the Civil Code, which states that a threat to enforce one's claim through competent authority, if the claim is just or legal, does not vitiate consent. Furthermore, the Court noted that the petitioners themselves had sought a compromise by executing the promissory note and mortgage contracts, and that the judgment of conviction against petitioner Edna had already attained finality. Therefore, the Court found no reason to set aside the mortgage contracts.

PRINCIPLES:

• Fear, duress, and threat must qualify as intimidation under the law, with the threat being an unjust act.

• A threat to enforce one's claim through competent authority, if the claim is just or legal, does not invalidate consent.

• A compromise agreement, even if executed under fear or duress, may still be upheld if it benefits the party who alleged fear or duress.