US v. Tan Quingco Chua; G.R No.

13708
J. Malcolm; January 29, 1919
FACTS:

On April 29, 1911, Pedro Andres borrowed the sum of P100 with interest of 24 cavanes
Constantino Tan Quingco Chua.
On July 9, 1911, the debt was raised to P125 with interest of 30 cavanes of palay.
Two years later, it became P226.70 and the same was secured by a pacto de retro with
the interest of 44 cavanes of palay annually.
When the debt was liquidated, it came out that Andres had an obligation of P274.20,
which he had promised to pay.
Thus, an action to recover the sum was filed and accordingly a judgment rendered
therefor.
For these reasons, on October 25, 1916, Andres executed a document which he sold a
parcel of land and a carabao for the amount of P684.20 to Tan, under the pacto de retro.
Consequently, the period of redemption was to be 5 months.
Meanwhile, Andres was to hold the land as a leassee and pay a rent of 90 cavanes of
palay.
Then a judgment of October 25, 1916, Andres paid to Chinaman P474 and turned over
the 98 cavanes of palay.
Thus, the Provincial Fiscal of Nueva Ecija filed an information charging Tan Quingco Chua
with the crime under the Usury Law which was predicated specially on the document
executed on October 25, 1916 by Andres.
The trial court found that Tan Quingco Chua had been proven guilty and sentenced to pay
a fine.

ISSUE:

Whether or not Tan Quingco Chua is guilty of the crime under Usury Law pursuant to the
accomplishment of what purports to be a pacto de retro?

RULING:

Yes. The Supreme court ruled that there is no doubt that the document in question
was not a true pacto de retro, but was a sham document to cover usurious financial
manipulation.
As the said document, framed with legal precision, was a token of a debt originally of
P100, grown to be P474.20, to which in this document was added P210 as interests, to
make a total of P684.20. Then on top of this latter sum was dumped 90 cavanes of
palay, denominated as rent, but which in reality was interest valued at P225 for the use
of P684.20 for five months.
The gist of the offense of usury for this jurisdiction is in actually taking unlawful interest.
Likewise, a corrupt intent is the essence of usurious transactions.
 The form of the contract is not conclusive. The cardinal inquiry is, Did the parties resort
to the transaction for the purpose of disguising usury in violation of law? The law will not
permit a usurious loan to hide itself behind a legal form. Parol evidence is admissible to
show that a written document- though legal in form was in fact a device to cover usury.
If from a construction of the whole transaction it becomes apparent that there exists a
corrupt intent to violate the Usury Law, the courts should and will permit no scheme,
however ingenious, to becloud the crime of usury.