AI-generated
Updated 21st February 2025
United States vs. Constantino Tan Quingco Chua
The case involves Francisco Constantino Tan Quingco Chua, who was charged with usury for charging excessive interest on a loan. The court found that the transaction, disguised as a pacto de retro sale, was actually a usurious loan, and Chua was convicted under the Usury Law.

Primary Holding

The court held that the transaction was a usurious loan disguised as a pacto de retro sale, and Chua was guilty of violating the Usury Law.

Background

The case originated from a loan of P100 made by Chua to Pedro Andres in 1911. Over five years, the debt grew to approximately P700 due to excessive interest. The transaction was later disguised as a pacto de retro sale to evade the Usury Law.

History

  • The case began with a loan in 1911, which escalated due to high interest. In 1916, the parties executed a pacto de retro sale to cover the debt. The provincial fiscal of Nueva Ecija filed a usury charge against Chua in 1916, leading to his conviction by the trial court. The case was appealed to the Supreme Court.

Facts

  • 1. In 1911, Chua lent P100 to Pedro Andres with interest of 24 cavanes of palay.
  • 2. By 1913, the debt had grown to P226.70, secured by a pacto de retro.
  • 3. In 1915, the debt was liquidated at P474.20.
  • 4. In 1916, Andres and Chua executed a pacto de retro sale for P684.20, including interest, with a rent of 90 cavanes of palay.
  • 5. The trial court found Chua guilty of usury and fined him P225.

Arguments of the Petitioners

  • 1. The petitioner (the government) argued that the pacto de retro sale was a sham to disguise a usurious loan, and that Chua had knowingly charged excessive interest.

Arguments of the Respondents

  • 1. Chua argued that the transaction was a legitimate pacto de retro sale and not a usurious loan. He also contended that evidence of prior transactions should not be admitted as they occurred before the Usury Law took effect.

Issues

  • 1. Whether the trial court erred in admitting evidence of transactions prior to the Usury Law.
  • 2. Whether the pacto de retro sale was a usurious loan in violation of the Usury Law.

Ruling

  • 1. The court ruled that the pacto de retro sale was a sham to disguise a usurious loan. The court held that parol evidence was admissible to show the true nature of the transaction. The court affirmed the conviction, finding that Chua had knowingly charged excessive interest in violation of the Usury Law.

Doctrines

  • 1. Usury Law (Act No. 2655): Prohibits charging excessive interest on loans.
  • 2. Parol Evidence Rule: Allows extrinsic evidence to show the true nature of a transaction, even if the contract appears legal on its face.
  • 3. Pacto de Retro: A sale with a right of repurchase, which can be used to disguise usurious loans

Key Excerpts

  • 1. "The law will not permit a usurious loan to hide itself behind a legal form."
  • 2. "The Philippines abound with such who exact their pound of flesh — and for these the law was intended and for these shall be enforced."

Precedents Cited

  • 1. Dunham vs. Gould (1819): Cited for the historical context and legal principles regarding usury.
  • 2. United States Bank vs. Waggener (1835): Cited for the principle that usury requires a corrupt intent to charge excessive interest.

Statutory and Constitutional Provisions

  • 1. Act No. 2655 (Usury Law): Sections 7 and 10, which prohibit excessive interest and provide penalties for usury.