Chay v. Paulino
REITERATIONFacts
The Antecedents: The plaintiff alleged co-ownership of a lot with the defendants and prayed for its partition. The land in question was formerly jointly owned by the defendants and Hilarion Soriano. Hilarion Soriano conveyed his share to the plaintiff, making the plaintiff a co-owner with the defendants. Procedural History: Several third-party claimants appeared, including Hilarion Soriano. The trial court, reserving rights for other intervenors, decided the case solely between the plaintiff and intervenor Hilarion Soriano. The trial court rendered judgment in favor of the plaintiff against Soriano's third-party claim. The Appeal: Intervenor Hilarion Soriano alleged in his complaint in intervention that the deed of sale of his share to the plaintiff was not a genuine sale but a loan with usurious interest. He prayed for the annulment of the sale and reimbursement of usurious interest. The trial court's decision was based, in part, on Soriano's failure to make his defense of usury under oath, leading to an implied admission of the facts alleged in the complaint.
Issue(s)
Whether the failure of the plaintiff to file a sworn answer to the complaint in intervention, which alleged usury, constitutes an admission of the facts contained therein, specifically the existence of a loan contract and usurious interest. Whether the intervenor Hilarion Soriano sufficiently proved that the contract was a loan with usurious interest, despite the document being a deed of sale with repurchase.
Ruling
The Supreme Court affirmed the judgment of the trial court. It held that while the plaintiff's failure to file a sworn answer to the complaint in intervention implied an admission of the collection of usurious interest, it did not automatically establish the existence of a loan contract. Since the intervenor failed to present evidence proving the contract was a loan, and the deed itself indicated a sale with repurchase, the claim of usury could not be sustained.
Ratio Decidendi
On Issue 1: The Court interpreted Section 9 of Act No. 2655, as amended by Act No. 2992, to mean that the requirement of a sworn answer applies to the party against whom the action for recovery of usurious interest is filed. In this case, the plaintiff, as the original owner of the share and the recipient of the deed, should have filed a sworn answer to the intervenor's claim of usury. The failure to do so resulted in an implied admission of the facts alleged in the complaint in intervention. However, the Court clarified that this admission pertains specifically to the allegation of usurious interest being collected, not necessarily to the existence of the underlying contract of loan itself. The law was enacted to combat usury, and the oath requirement serves as a safeguard against false denials by the alleged usurer. On Issue 2: The intervenor Hilarion Soriano alleged that the transaction, disguised as a sale with repurchase, was in reality a loan with usurious interest. While the plaintiff's failure to file a sworn answer implied an admission of the collection of usurious interest, the intervenor still bore the burden of proving that the contract was indeed a loan. The Court found no evidence presented by the intervenor to support this claim. On the contrary, the deed of sale with repurchase itself, which was the evidence of record, conclusively showed that the transaction was a sale, not a loan. Therefore, as the contract was a sale and not a loan, the collection of usurious interest, as alleged, could not have occurred in the manner claimed by the intervenor, and the admission established by law did not apply to the existence of a loan contract.
Main Doctrine
The Court affirmed that under Section 9 of Act No. 2655, as amended by Act No. 2992, the failure of a party to file a sworn answer to a complaint alleging usurious interest results in the implied admission of the facts contained in the complaint. However, this admission pertains specifically to the collection of usurious interest, not necessarily to the existence of the underlying contract, which must be proven independently. The law's intent is to protect borrowers by requiring a sworn denial from the alleged usurer.