GR L 10573; (April, 1957) (Digest)
G.R. No. L-10573; April 29, 1957
THE PEOPLE OF THE PHILIPPINES, petitioner, vs. HON. MACAPANTON ABBAS, Judge of the Court of First Instance of Sulu, 16th Judicial District and DATU MOHAMMAD DANIAL, respondents.
FACTS
An amended information was filed charging Datu Mohammad Danial with violation of the Usury Law. The prosecution alleged that on or about September 15, 1952, the accused made a loan of P3,000 to spouses Asaali Gani and Indah Atung Gani, secured by a contract purporting to be a “Deed of Sale of Real Property with Right to Repurchase” (pacto de retro sale) of a portion of their building. To cover up the usurious transaction, the document stated the amount as P5,500, when the true loan was only P3,000, with the additional P2,500 representing advance interest of P500 per month for five months. The accused was also alleged to have subsequently received additional interest payments. During the trial, the prosecution presented Asaali Gani as a witness and sought to introduce parol evidence to show that the deed of sale was in reality a contract of loan secured by a mortgage and was usurious. The defense objected on the ground that no evidence other than the contract itself should be allowed to alter its terms. Respondent Judge Macapanton Abbas sustained the objection and issued an order on March 28, 1956, definitively barring the parol evidence, reasoning that to allow it would establish a dangerous doctrine opening the door to fraud and harassment of creditors by defaulting debtors.
ISSUE
Whether the trial court erred in sustaining the objection to the introduction of parol evidence to prove that a document entitled “Deed of Sale of Real Property with Right to Repurchase” was in fact a usurious loan transaction.
RULING
Yes. The Supreme Court granted the petition for certiorari and set aside the order of the respondent Judge. The Court held that parol evidence is admissible to show that a written document, legal in form, was in fact a device to cover usury. The Court reiterated the doctrine established in Cuyugan vs. Santos (34 Phil. 113) and U.S. vs. Constantino Tan Quingco, Chua (39 Phil. 552), which allows looking beyond the terms of an instrument to ascertain the real transaction between the parties. The Court emphasized that if the whole transaction reveals a corrupt intent to violate the Usury Law, no scheme, however ingenious, will be permitted to obscure the crime. The Court found it improbable that the property in question, with an assessed value of P18,000 for one-half (and likely a much higher market value), was genuinely sold for only P5,500. This circumstance justified the introduction of parol evidence to prove the allegations in the information. The respondent Judge was directed to allow the prosecution’s question and to permit the introduction of parol evidence to prove the usurious loan. No costs were awarded.