FELIX ASTURIAS, ET AL., petitioners, vs. COURT OF APPEALS and NICOLAS MIRAS, respondents.
FACTS
Nicolas Miras obtained a P500 loan from spouses Laureano Asturias and Julia Orozco in 1928, secured by a mortgage on his land, with a 3% monthly interest. By 1930, his debt, including unpaid interest, totaled P830. To secure this amount, Miras executed a document styled as a sale with right to repurchase (pacto de retro) over the same land. An oral side agreement allowed the spouses to gather the land’s coconut fruits as payment for the interest, while Miras retained possession, cultivating other portions. After the spouses died, their heirs (the petitioners) partitioned the land in 1938, treating the document as an absolute sale, though Miras continued paying taxes and offered redemption. In 1946, petitioners attempted to take exclusive possession, prompting Miras to file an action for reivindication (recovery of ownership) and to declare the pacto de retro sale void as a usurious loan disguise.
ISSUE
The core issues were whether the contract was a true sale or a usurious loan in disguise; whether Miras’s action had prescribed; and whether petitioners acquired ownership through acquisitive prescription.
RULING
The Supreme Court affirmed the Court of Appeals, ruling the contract was an equitable mortgage securing a usurious loan, thus null and void. The legal logic proceeded as follows. First, the finding of fact by the Court of Appeals that the pacto de retro was a loan disguise was conclusive. Petitioners argued Miras’s oral testimony varying the written terms was inadmissible under the survivorship disqualification rule, but the Court held this objection was waived due to lack of timely objection and because petitioners themselves testified on the prohibited matters. Consequently, the factual determination stood.
Second, Miras’s action was imprescriptible. The Court characterized the suit as primarily for reivindication, with the nullity declaration being incidental. More critically, a contract designed to conceal usury is illegal and void ab initio for being contrary to law and public policy. Following Article 1410 of the New Civil Code, an action to declare the nullity of a void contract does not prescribe. The Court applied this principle retroactively, citing jurisprudence that mere lapse of time cannot validate a void contract.
Third, petitioners did not acquire title by acquisitive prescription. Their claim of possession since 1930 was based merely on sporadically gathering coconuts per the usurious agreement. This was possession by tolerance of the owner, Miras, who remained in actual possession of the land. Such tolerated possession does not constitute possession in the concept of an owner required for acquisitive prescription. Their adverse possession only began in 1946, and the complaint was filed in 1948, well within the prescriptive period. Therefore, the orders for petitioners to vacate, return the usurious interest (valued as fruits gathered), and refund other proceeds were upheld.
