G.R. No. 138210 - June 6, 2002
SPOUSES SINFRONIO PUERTO and ESPERANZA PUERTO, Petitioners, vs. HON. COURT OF APPEALS, HON. BR. 83 OF THE REGIONAL TRIAL COURT OF QUEZON CITY and SPS. INOCENCIO and ELEUTERIA CORTES, Respondents.
This is a petition for review on certiorari seeking the reversal of the amended decision1 dated February 4, 1999, of the Court of Appeals in CA-G.R. CV No. 32197, as well as its resolution2 dated April 5, 1999 denying the motion for reconsideration. The appellate court affirmed the decision3 dated January 18, 1991, of the Regional Trial Court of Quezon City, Branch 83, dismissing the amended complaint of petitioners (plaintiffs below) in Civil Case No. Q-21883.
From the conflicting versions of the parties, the Court of Appeals found the following facts which are culled from and duly supported by the records.
Petitioners spouses Sinfronio and Esperanza Puerto were the former registered owners of a house and lot located at 89 Kapiligan, Araneta Subdivision, Quezon City, subject of the present controversy. They bought this property from one Mrs. Luna but did not have the title immediately transferred to their names until they mortgaged the same to private respondents spouses Inocencio and Eleuteria Cortes.4 It appears that on May 8, 1972, petitioners executed, in favor of private respondents, a Deed of Real Estate Mortgage5 covering the said house and lot. This deed provides, among others, that petitioner spouses, obtained from private respondents a loan in the amount of
According to petitioner Esperanza Puerto, the Deed of Mortgage did not reflect the true intent of the parties, as in fact, the consideration of the mortgage was only
Esperanza testified that she reached a verbal agreement with private respondents on the following:8
Private respondent Eleuteria Cortes, on the other hand, testified that sometime in 1972, petitioners asked them for a loan of
When the loan matured on May 8, 1973, petitioners failed to pay the
On May 7, 1975, even after title to the property was transferred to private respondents, petitioners were allowed to stay on the property until they could find a new residence. However, after repeated extensions to stay, petitioners did not transfer. They then entered into a lease contract where petitioners would pay the respondents, as new owners,
Petitioners, for their part, alleged that when they failed to pay the loan, private respondents demanded a monthly interest of
On January 1, 1976, petitioner Esperanza and private respondent Eleuteria executed a contract of lease. Petitioners paid the "rent" on the first month but could not pay for the succeeding months allegedly because of the usurious demands of private respondents.
On August 20, 1976, petitioners filed an action against private respondents for the declaration of nullity of the Deed of Real Estate Mortgage, before the Court of First Instance of Rizal, Branch XVII. The complaint was amended on February 23, 1978 to include additional causes of action.11
The trial court dismissed the complaint as follows:
On appeal, the appellate court reversed the decision of the trial court, to wit:
However, private respondents filed motion for reconsideration that was granted by the appellate court. In its amended decision dated February 4, 1999, the Court of Appeals rendered judgment as follows:
Thereafter, petitioners filed a motion for reconsideration of the aforestated amended decision. On April 5, 1999, the Court of Appeals rendered its resolution denying petitioners' motion for reconsideration and their motion to set for oral argument, for lack of merit.15
Hence, the present petition, wherein petitioners aver the following "grounds" for review:
Principally, the issue for our resolution now is whether the contract between the parties, which is a loan secured by the deed of real estate mortgage, violated the Usury Law (P.D. 116). In the affirmative, we must also inquire into its effect upon the real estate mortgage that secured the loan and its subsequent foreclosure.
At the time of the questioned transaction, Act No. 2655, as amended by P.D. 116, known as the Usury Law, was in full force and effect. It is elementary that the laws in force at the time the contract was made generally govern the effectivity of its provision. Usury may be defined as contracting for or receiving something in excess of the amount allowed by law for the forbearance of money, goods or things in action.17 The Usury Law prescribed that the legal rate of interest for the loan or forbearance of any money, goods or credits, where such loan or renewal or forbearance is secured in whole or in part by a mortgage upon real estate the title to which is duly registered, in the absence of express contract as to such rate of interest, shall be 12% per annum.18 Any amount of interest paid or stipulated to be paid in excess of that fixed by law is considered usurious, therefore unlawful.
Petitioners contend that the Court of Appeals committed reversible error in upholding the lower court and declaring that the loan was not usurious, based on the following circumstances:
Petitioners further argue that the appellate court erred in not considering the fact that the subject property was purchased by the Puertos for only
Private respondents, for their part, insist that petitioners (the Puertos) borrowed
We have held in several cases that the rule that a petition raising a purely question of fact is dismissible, is not absolute. The rule admits of exceptions, one of which is when the Court of Appeals manifestly overlooked certain relevant facts or circumstances of sufficient weight or significance, which if considered, would justify a different conclusion.23 In our view, the instant case falls under this exception.
In its amended decision, the appellate court mainly based the re-evaluation of the evidence on record upon the finding that Esperanza admitted to having a hand in the valuation of the jewelry, which formed part of the total amount of the loan. It said that "the fact that Mrs. Puerto herself was a jeweler of long standing and the fact that she admitted that she had a hand in the valuation of the pieces of jewelry loaned her have created doubts on the court's mind as regards her allegation of a usurious transaction."24 However, we note that this premise is not accurate.
Eleuteria, in her direct examination, testified,
Patently, Esperanza bargained for a lower valuation of the jewelry and the price quoted was the lowest that Eleuteria could give. Said bargaining makes Esperanza's allegation that the interest of
Respondents want to impress upon us that pawnshop owners like them would grant a sizeable loan without requiring any interest and that after their generous offer to petitioner Esperanza who is in dire need of money, the latter would ask that she be charged 12 percent interest per annum.27 However, what is more plausible is that, after finding themselves in dire financial straits, petitioners were amenable to any stipulation in the loan agreement, even to tucking a
Moreover, we find it unlikely that respondent Eleuteria gave a loan in an amount much higher than the value of the security. She is after all a successful pawnshop businesswoman. We are unconvinced by her when she says that the value of the properties valued at
Indeed, the mortgage contract did not stipulate for payment of any interest. However, to conceal usury various devices have been adopted whereby the substance of the true agreement is withheld from what may be viewed on the written document. The cupidity of lenders and the willingness of borrowers to concede whatever may be demanded or to promise whatever may be exacted in order to obtain temporary relief from financial embarrassment, as would naturally be expected, have resulted in a great variety of devices to evade the usury law. To frustrate such evasions the courts are compelled to look beyond the form of a transaction and consider its substance instead.28 It is worth pointing out that respondent Eleuteria testified that she had her own lawyer correct some errors found in the mortgage contract, which she claims was prepared by the Puertos.29 The mortgage contract states that the
The natural inclination of parties to an illegal act is to conceal such illegality, making it extremely difficult to prove its existence by documentary evidence. It is precisely for this reason that we are constrained to look at collateral matters, even circumstantial evidence, to find the truth. Otherwise, a document apparently legal on its face could not be proved to be illegal and intended to evade the statute of usury.30 The real intention of the parties at the time the written instrument was made must be ascertained from the circumstances surrounding the transaction and from the language of the document itself.31 It will be noted that the usury law was in effect at the time Esperanza obtained the loan from Eleuteria. Petitioners needed financial assistance badly. The two women had known each other for a long time. The language of the contract leaves no doubt that the
Ordinary human experience tells us that as between the debtor and the creditor, the former stands on more perilous ground than the latter, and the two do not stand on equal footing.32 It is this inequality that deprives the debtor of any bargaining leverage. Eleuteria claims that it was out of pure generosity that she granted the loan without interest and it was petitioner who offered to pay an interest of 12 percent per annum.33 She points to their long friendship as the consideration for this arrangement. We are unconvinced. The records reveal that the women had for a long time done business with each other. Esperanza frequents Eleuteria's pawnshop for jewelry transactions. However, there is nothing to show that they were close friends. What appears from the records is that Eleuteria knew Esperanza long enough to entrust her with a substantial amount of money but without any special consideration. In fact, respondents wanted to protect their investment such that they first required petitioners to have the title to the mortgaged property transferred to petitioners' name before concluding the loan transaction.34 This would not appear to be the conduct of a trusting old friend. Private respondents even appointed themselves as receiver of the property in case of foreclosure. Evidently, theirs was a purely business deal.
In fine, we find that indeed the contract of loan secured by the deed of real estate mortgage is usurious. Under Section 2 of the Usury Law,35 the maximum rate of interest on a loan or forbearance of money secured by a mortgage upon real estate the title to which is duly registered, shall be 12 percent per annum. In the instant case, the
The primordial question to be resolved now is, what happens to the obligation of petitioner to pay the principal loan? We held in Briones vs. Cammayo:37
In a simple loan with a stipulation of usurious interest, the prestation of the debtor to pay the principal debt, which is the cause of the contract, is not illegal. The illegality lies only in the stipulated interest. Being separable, only the latter should be deemed void. To discourage stipulations on usurious interest, said stipulations are treated as wholly void, so that the loan becomes one without a stipulation as to payment of interest. It should not, however, be interpreted to mean forfeiture even of the principal, for this would unjustly enrich the borrower at the expense of the lender.
In addition, we award, by way of compensatory damages for the breach of the obligation of petitioners to pay the sum of money loaned, an interest in the amount of 12 percent per annum, to be computed from default, i.e., from judicial or extrajudicial demand in accordance with Article 1169.38 Such interest is not due to stipulation, for there was none, the same being void. Rather it is due to the general provision of law that in obligations to pay money, where the debtor incurs in delay, he has to pay interest by way of damages, in conformity to our ruling in Eastern Shipping Lines, Inc. vs. Court of Appeals.39
Going into the matter of the validity of the foreclosure, we find the foreclosure invalid as it stemmed from the enforcement of a usurious mortgage contract. This is in line with our ruling in Delgado vs. Alonso Duque Valgona.40 In said case, the trial court found usurious payment for parcels of land secured by a deed of mortgage and declared the mortgage deed void. Affirming the decision of the trial court, we held that the trial judge committed no error in declaring that instrument void, notwithstanding that the petitioners did not ask that the whole contract be annulled. We declared that it was not erroneous for the court to eradicate the evil root and branch, more particularly since the defendant therein had also asked that the mortgage be annulled.41
Thus, conformably to Delgado, since the mortgage contract is void, the foreclosure of the property provided for in said deed is ineffectual as well. Contracts and stipulations, under any cloak or device whatever, intended to circumvent the laws against usury shall be void.42 The parties then must restore what each had received from the other. Petitioners must pay the principal loan of
WHEREFORE, the petition is hereby GRANTED. The amended decision dated February 4, 1999 of the Court of Appeals and its resolution of April 5, 1999 are REVERSED and its decision dated September 30, 1998 is REINSTATED. No pronouncements as to costs.
Bellosillo, Mendoza, De Leon, Jr., and Corona, JJ., concur.
Search for www.chanrobles.com
|Copyright © ChanRoblesPublishing Company| Disclaimer | E-mailRestrictions|
ChanRobles™Virtual Law Library ™ | chanrobles.com™