G.R. No. 30048 , December 27, 1929
LO BUN CHAY, plaintiff-appellee, vs. ALBINO PAULINO, ET AL., defendants. HILARION SORIANO, intervenor-appellant.

FACTS

Lo Bun Chay filed an action for partition of a lot, alleging co-ownership with the defendants. The land was originally jointly owned by the defendants and Hilarion Soriano. Soriano had conveyed his share to Lo Bun Chay via a deed of sale, making Lo Bun Chay a co-owner in Soriano’s place. Among third-party claimants, Soriano intervened, alleging that the deed was not a true sale but a loan with usurious interest disguised as a sale with a right to repurchase. He sought annulment of the sale and reimbursement of usurious interest. The trial court ruled in favor of Lo Bun Chay, holding that Soriano’s complaint in intervention failed to verify the allegation of usury under oath as required by the Usury Law (Act No. 2655, as amended). Soriano appealed.

ISSUE

Whether the intervenor Soriano’s failure to verify his allegation of usury under oath constitutes an admission of all facts in his complaint, including the existence of a loan contract, or only the allegation of usurious interest.

RULING

The Supreme Court AFFIRMED the trial court’s judgment. The Court held that under Section 9 of the Usury Law, the requirement for a sworn answer applies to the person accused of receiving usurious interest, not to the person alleging it. Here, since Soriano (the intervenor) alleged usury, it was Lo Bun Chay (the plaintiff) who should have filed a sworn answer to deny it. Lo Bun Chay’s failure to do so implied an admission only of the allegation of usurious interest, not of the underlying contract being a loan. For the usury claim to succeed, Soriano must first prove independently that the contract was indeed a loan. The evidence, however, showed the contract was a sale with a right to repurchase, not a loan. Thus, without a loan contract, the admission of usurious interest was irrelevant. The dissent argued that admitting usurious interest necessarily admitted the loan contract, but the majority maintained that the two must be treated separately under the law.