Asturias v. Miras
REITERATIONFacts
The Antecedents: Nicolas Miras obtained a loan of P500.00 from spouses Laureano Asturias and Julia Orozco on November 1, 1928, secured by a mortgage on his land, with a stipulated interest of 3% per month. Miras paid only P30.00 as interest, and by 1930, his total indebtedness reached P830.00. To conceal the usurious interest, Miras executed a document of sale with right of repurchase (pacto de retro) for P830.00 on November 1, 1930, with the agreement that the spouses would gather and benefit from the fruits of the coconut trees on the land as payment for the 3% monthly interest on P830.00. Miras remained in possession of the land. After the death of Laureano Asturias in 1934 and Julia Orozco in 1937, Miras offered to redeem the property, but the spouses and later their successors-in-interest (petitioners) requested postponements, citing insufficient benefit from the capital and a drop in copra prices. Petitioners discovered the document in 1938 and partitioned the land among themselves, despite Miras continuing possession and paying land taxes. In 1943, some heirs of the creditor spouses reconveyed their share to Miras. When petitioners attempted to enter and fence the property in 1946 and 1948, Miras filed an action for forcible entry. In 1948, due to petitioners' refusal to allow redemption, Miras filed the present case. Procedural History: The Court of First Instance of Quezon Province declared the contract of sale with right of redemption as a mortgage with usurious interest and thus null and void. It ordered petitioners to vacate 4/5 of the land, pay P4,410.00 for coconuts gathered from 1931-1941 and 1946-1948 (representing usurious interest minus P500.00 capital), and return P30.00 paid as usurious interest from 1928-1930. The Court of Appeals affirmed this judgment in toto. The Petition: Petitioners sought review of the Court of Appeals' decision, arguing that the oral testimony of Miras varying the terms of the pacto de retro sale was inadmissible due to the survivorship disqualification rule, that their action had prescribed, and that they had acquired title by prescription. They also contested the order to refund usurious interest and land fruits.
Issue(s)
Whether the oral testimony of respondent Miras, tending to vary the terms of the pacto de retro sale, was admissible despite the survivorship disqualification rule. Whether the action filed by respondent Miras had prescribed. Whether petitioners acquired title to the land by acquisitive prescription. Whether the contract of sale with right of redemption was a mortgage with usurious interest and therefore null and void. Whether petitioners should be ordered to refund the usurious interest and fruits of the land.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals, upholding the declaration that the contract was a mortgage with usurious interest, null and void from its inception. The Court ruled that the action for its declaration of nullity is imprescriptible, and petitioners did not acquire title by prescription. Petitioners were ordered to refund the usurious interest and fruits collected.
Ratio Decidendi
On the admissibility of oral testimony: The Court held that the contention regarding the survivorship disqualification rule was untenable because no timely objection was made to the admission of Miras's oral testimony. Furthermore, one of the petitioners testified on similar matters, leading the Court to deem that the petitioners had waived the benefit and protection of the rule. Consequently, the findings of fact by the Court of Appeals, based on the properly admitted evidence, were conclusive. On prescription of the action: The Court found the claim of prescription to be without merit. It clarified that the action was primarily for reivindication or recovery of property and only incidentally to declare the contract null and void due to usury. The Court emphasized that a contract designed to hide a usurious agreement is illegal and void from its inception, and the action for its declaration of nullity is imprescriptible under Article 1410 of the New Civil Code, citing the principle that mere lapse of time cannot give efficacy to void contracts. On acquisitive prescription: The Court ruled that petitioners did not acquire title by acquisitive prescription. Their possession, which began in 1946 when they attempted to enter the property, was insufficient for prescription. Their claim that their possession dated back to 1930, when they gathered fruits as payment for usurious interest, was deemed groundless. Such possession was sporadic, by mere tolerance, and not in the concept of an owner, thus it could not be the basis for a claim of ownership by prescription. On the nature of the contract and usury: The Court affirmed the findings of both the trial court and the Court of Appeals that the contract, despite its form as a sale with right of repurchase, was in reality a mortgage with usurious interest. The agreement for the spouses to gather and benefit from the fruits of the land as payment for the stipulated 3% monthly interest on the loan clearly indicated a usurious transaction, which is illegal and void from its inception. On the refund of usurious interest and fruits: The Court found the decision ordering petitioners to refund the usurious interest collected in the form of fruits of the land since 1930 to be justified, as it was a consequence of declaring the contract null and void and ordering the return of what was illegally obtained.
Main Doctrine
A contract designed to hide a usurious agreement is illegal and void from its inception, and the action for its declaration of nullity is imprescriptible. Mere lapse of time cannot give efficacy to contracts that are null and void.