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[No. 26085. August 12, 1927]

SEVERINO TOLENTINO and POTENCIANA MANIO,
plaintiffs and appellants, vs. BENITO GONZALEZ SY
CHIAM, defendant and appellee.
1. CONTRACTS; "PACTO DE RETRO;" MORTGAGE. Held,
That the con-tract which is copied in full in the decision is a
pacto de retro and not a mortgage; that at the time of its
execution and delivery the parties thereto intended to
execute a pacto de retro (a conditional sale) and not a
mortgage (a loan); that the vendor became a tenant of the
purchaser and not a mortgagor.
2. ID. ; ID. It has been the uniform rule of this court, due to
the severity of a contract of pacto de retro, to declare the
same to be a mortgage and not a sale whenever the
interpretation of

55

VOL. 50, AUGUST 12, 1927

559

Tolentino and Manio vs. Gon ale S Chiam

such a contract justifies that conclusion. There must be
something, however, in the language of the contract or in
the conduct of the parties which shows clearly and beyond
doubt that they intended the contract to be a mortgage and
not a pacto de retro.
3. ID.; EVIDENCE TO VARY TERMS OF. While it is a
general rule that parol evidence is not admissible for the
purpose of varying the terms of a contract, yet when an
issue is squarely presented, that a contract does not express
the intention of the parties, the courts will, when a proper
foundation is laid therefor, hear evidence for the purpose of
ascertaining the true intention of the parties. In every case
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in which the court has considered a contract to be a

mortgage or a loan instead of a sale with pacto de retro, it
has done so, either because the terms of such contract are
ambiguous or because the circumstances surround-ing the
execution or the performance of the contract were
incompatible or inconsistent with the theory that said
contract was one of purchase and sale.
4. ID. ; WHEN MAY BE REFORMED. It is a well settled rule
of law that courts of equity will reform a written contract
where, owing to mutual mistake, the language used therein
did not fully or accurately express the agreement and
intention of the parties. Relief, however, by way of
reformation will not be granted unless the proof of mutual
mistake be of the clearest and most satisfactory character.
5. ID.; RENTAL CONTRACTS; USURY. A contract for the
lease of property is not a "loan." Under the Usury Law the
defense of usury cannot be based thereon. The Usury Law
in this jurisdiction prohibits a certain rate of interest on
"loans." A contract of "loan" is a very different contract from
that of "rent." A "loan," as that term is used in the statute,
signifies the giving of a sum of money, goods or credit to
another, with a promise to repay, but not a promise to
return the same thing. In a con-tract of "rent' the owner of
the property does not lose his ownership. He simply loses his
control over the property rented during the period of the
contract. In a contract of rent the relation between the
contractors is that of landlord and tenant. In a contract of
loan of money, goods, chattels or credits, the relation
between the parties is that of obligor and obligee.
6. RENTS, CONTRACT OF ; DEFINED. A contract of "rent"
may be defined as the compensation either in money,
provisions, chattels or labor, received by the owner of the
soil or the property rented, f rom the occupant thereof.

560

PHILIPPINE REPORTS ANNOTATED

Tolentino and Manio vs. Gon ale S Chiam
7. LOAN, CONTRACT OF; DEFINED. A contract of "loan," as
that term is used in the statute, signifies the giving of a sum

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of money, goods or credits to another, with a promise to

repay, but not a promise to return the same thing. It has
been defined as an advancement of money, goods or credits
upon a contract or stipulation to repay, not to return, the
thing loaned at some future day in accordance with the
terms of the contract. The moment the contract is completed,
the money, goods or chattels given cease to be the property
of the former owner and become the property of the obligor
to be used according to his own will, unless the contract
itself expressly provides for a special or specific use of the
same. At all events, the money, goods or chattels, the
moment the contract is executed, cease to be the property of
the former owner and become the sole property of the
obligor. A contract of "loan" differs materially and essentially
from a contract of "rent."
8. USURY; DEFINED. Usury may be defined as contracting
for or receiving something in excess of the amount allowed
by law for the loan or forbearance of money, goods or
chattels. It is the taking of more interest for the use of
money, goods or chattels or credits than the law allows.
Usury has been regarded with abhorrence from the earliest
times.

APPEAL from a judgment of the Court of First Instance of

Manila. Diaz, J.
The facts are stated in the opinion of the court.
Araneta & Zarago a for appellants.
Eusebio Orense for appellee.
JOHNSON, J.:
PRINCIPAL QUESTIONS PRESENTED BY THE
APPEAL
The principal questions presented by this appeal are:
(a) Is the contract in question a pacto de retro or a
mortgage ?
(b) 'Under a pacto de. retro, when the vendor becomes a
tenant of the purchaser and agrees to pay a certain
amount per month as rent, may such rent render
such a contract usurious when the amount paid as
rent, computed upon the purchase price, amounts to
a higher rate of interest upon said amount than that
allowed by law?
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VOL. 50, AUGUST 12, 1927

561

Tolentino and Manio vs. Gonzalez Sy Chiam

(c) Ma
a

he c
ac i
e ide ce?

he

e e

ca e be

dified b

ANTECEDENT FACTS
S
a

ei e
i
he 28 h da
f N e be , 1922, he
e a
cha ed f he L
Rice Mi , I c., a iece
a ce f a d i h he camar n ca ed he e , i a ed
i he
ici a i
f Ta ac f he P
i ce f Ta ac f
he
ice f P25,000,
i i g
a
he ef i
h ee
i a
e . The fi
i a
e
f P2,000 a d e
bef e he 2d da
f Ma , 1921; he ec d i a
e
f
P8,000 a d e
bef e he 31 da f Ma , 1921; he
ba a ce f P15,000 a 12 e ce
i e e
a d e a d
a ab e
ab
he 30 h da f N e be , 1922. O e f
he c di i
f ha c
ac f
cha e a ha
fai e f he
cha e ( ai iff a d a e a )
a
he ba a ce f aid
cha e ice a
f he i a
e
he da e ag eed
, he
e
b gh
d e e
he igi a
e .
The a e
d e
he 2d a d 31
f Ma , 1921,
a
i g
P10,000 e e aid
fa a he ec d h
he d e da e . The ba a ce f P15,000 d e
aid
c
ac f
cha e a
aid
ab
he 1 da
f
Dece be , 1922, i he a e
hich i be e ai ed
be . O
he da e he
he ba a ce f P15,000 i h
i e e
a aid, he e d
f aid
e
had i ed
he
cha e
a fe ce ifica e f i e
aid
e ,
N . 528. Said a fe ce ifica e f i e (N . 528) a
a fe ce ifica e f i e f
N . 40, hich h
ha
aid a d a
igi a
egi e ed i
he a e f he
e d
he 7 h da f N e be , 1913.
PRESENT FACTS
O he 7 h da f N e be , 1922, he e e e a i e f he
e d
f he
e
i
e i
e a e e
he
a e a P e cia a Ma i (E hibi A, . 50),
if i g
2
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562

PHILIPPINE REPORTS ANNOTATED

Tolentino and Manio vs. Gon ale S Chiam

the latter that if the balance of said indebtedness was not

paid, an action would be brought for the purpose of
recovering the property, together with damages for non
compliance with the condition of the contract of purchase.
The pertinent parts of said letter read as follows:
"Srvase notar que de no estar liquidada esta cuenta el
da 30 del corriente, procederemos judicialmente contra Vd.
para reclamar la devoluci n del camarn y los daos y
perjuicios ocasionados a la compaia por su incumplimiento
al contrato.
"Somos de Vd. atentos y S. S.
"SMITH, BELL & Co., LTD.
"By (Sgd.) F. I. HIGHAM
"Treasurer.
"General Managers
"LUZON RlCE MlLLS INC."
According to Exhibits B and D, which represent the
account rendered by the vendor, there was due and payable
upon said contract of purchase on the 30th day of
November, 1922, the sum P16,965.09. Upon receiving the
letter of the vendor of said property of November 7, 1922,
the purchasers, the appellants herein, realizing that they
would be unable to pay the balance due, began to make an
effort to borrow money with which to pay the balance of their
indebtedness on the purchase price of the property involved.
Finally an application was made to the defendant for a loan
for the purpose of satisfying their indebtedness to the
vendor of said property. After some negotiations the
defendant agreed to loan the plaintiffs the sum of P17,500
upon condition that the plaintiffs execute and deliver to him
a pacto de retro of said property.
In accordance with that agreement the defendant paid to
the plaintiffs by means of a check the sum of P16,965.09.
The defendant, in addition to said amount paid by check,
delivered to the plaintiffs the sum of P354.91 together with
the sum of P180 which the plaintiffs paid to the attorneys
3

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563

Tolentino and Manio vs. Gon ale S Chiam

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for drafting said contract of pacto de retro, making a total

paid by the defendant to the plaintiffs and for the plaintiffs
of P17,500 upon the execution and delivery of said contract.
Said contract was dated the 28th day of November, 1922,
and is in the words and figures following: "Sepan todos por
la presente:
"Que nosotros, los cnyuges Severino Tolentino y
Potenciana, Manio, ambos mayores de edad, residentes en el
Municipio de Calumpit, Provincia de Bulacn, propietarios
y transeuntes en esta Ciudad de Manila, de una parte, y de
otra, Benito Gonz lez Sy Chiam, mayor de edad, casado con
Maria Santiago, comerciante y vecinos de esta Ciudad de
Manila.
"MANIFESTAMOS Y HACEMOS CONSTAR:
"Primero. Que nosotros, Severino Tolentino y Potenciana
Manio, por y en consideracin a la cantidad de diecisiete mil
quinientos pesos (P17,500) moneda filipina, que en este acto
hemos recibido a nuestra entera satisfaccin de Don Benito
Gonzalez Sy Chiam, cedemos, vendemos y traspasamos a
favor de dicho Don Benito Gonzalez Sy Chiam, sus
herederos y causahabientes, una finca que, seg n el
Certificado de Transferencia de Ttulo No. 40 expedido por
el Registrador de Ttulos de la Provincia de Tarlac a favor
de 'Luzon Rice Mills Company Limited' que al incorporarse
se denomin y se denomina 'Luzon Rice Mills Inc.,' y que
esta corporacin nos ha transferido en venta absoluta, se
describe como sigue:
"Un terreno (lote No. 1) con las mejoras existentes en el
mismo, situado en el Municipio de Tarlac. Linda por el O. y
N. con propiedad de Manuel Urquico; por el E. con
propiedad de la Manila Railroad Co.; y por el S. con un
camino. Partiendo de un punto marcado 1 en el plano, cuyo
punto se halla al N. 41 gds. 17' E. 859.42 m. del mojn de
localizacin No. 2 de la Oficina de Terrenos en Tr-lac; y
desde dicho punto 1 N. 81 gds. 31' O. 77 m. al punto

564

PHILIPPINE REPORTS ANNOTATED

Tolentino and Manio vs. Gonzalez Sy Chiam

2; desde este punto N. 4 gds. 22' E.; 54.70 m. al punto 3;

desde este punto S. 86 gds. 17' E.; 69.25 m. al punto 4; desde
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este punto S. 2 gds. 42' E., 61.48 m. al punto de partida;

midiendo una extension superficial de cuatro mil doscientos
diez y seis metros cuadrados (4,216) ms o menos. Todos los
puntos nombrados se hallan marcados en el plano y sobre el
terreno los puntos 1 y 2 estn determinados por mojones de
P. L. S. de 20 x 20 x 70 centmetros y los puntos 3 y 4 por
mojones del P. L. S. B. L.; la orientacin seguida es la
verdadera, siendo la declinacin magntica de 0 gds. 45' E. y
la fecha de la medicin, 1. de febrero de 1913.
"Segundo. Que es condicin de esta venta la de que si en
el plazo de cinco (5) aos contados desde el da 1. de
diciembre de 1922, devolvemos al expresado Don Benito
Gonzalez Sy Chiam el referido precio de diecisiete mil
quinientos pesos (P17,500) queda obligado dicho Sr. Benito
Gonzalez Sy Chiam a retrovendernos la finca arriba
descrita; pero si transcurre dicho plazo de cinco aos sin
ejercitar el derecho de retracto que nos hemos reservado,
entonces quedar esta venta absoluta e irrevocable.
"Tercero. Que durante el expresado trmino del retracto
tendremos en arrendamiento la finca arriba descrita, sujeto
a condiciones siguientes:
"(a) El alquiler que nos obligamos a pagar por
mensualidades vencidas a Don Benito Gonzalez Sy
Chiam y en su domicilio, ser de trescientos setenta
y cinco pesos (P375) moneda filipina, cada mes.
"(b) El amillaramiento de la finca arrendada ser por
cuenta de dicho Don Benito Gonzalez Sy Chiam, as
como tambin la prima del seguro contra incendios,
si le conviniera al referido Sr. Benito Gonzalez Sy
Chiam asegurar dicha finca.
"(c) La falta de pago del alquiler aqu estipulado por dos
meses consecutivos dar lugar a la terminacin de
este arrendamiento y a la prdida del derecho de
retracto que

VOL. 50, AUGUST 12, 1927

565

Tolentino and Manio vs. Gon ale S Chiam

nos hemos reservado, como si naturalmente hubiera
expirado el trmino para ello, pudiendo en su virtud
dichoSr. Gonzalez Sy Chiam tomar posesin de la finca y
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desahuciarnos de la misma.
"Cuarto. Que yo, Benito Gonzalez Sy Chiam, a mi vez otorgo
que acepto esta escritura en los precisos trminos en que la
dejan otorgada los cnyuges Severino Tolentino y
Potenciana Manio.
"En testimonio de todo lo cual, firmamos la presente de
nuestra mano en Manila, por cuadruplicado en Manila, hoy
a 28 de noviembre de 1922.
(Fdo.) "SEVERINO TOLENTINO
(Fda.) "POTENCIANA MANIO
(Fdo.) "BENITO GONZALEZ SY CHIAM
"Firmado en presencia de:
(Fdos.) "MOISS M. BUHAIN
"B. S. BANAAG"
An examination of said contract of sale with reference to
the first question above, shows clearly that it is a pacto de
retro and not a mortgage. There is no pretension on the part
of the appellant that said contract, standing alone, is a
mortgage. The pertinent language of the contract is:
"Segundo. Que es condicin de esta venta la de que si en
el plazo de cinco (5) aos contados desde el da 1. de
diciembre de 1922, devolvemos al expresado Don Benito
Gonzlez Sy Chiam el referido precio de diecisiete mil
quinientos pesos (P17,500) queda obligado dicho Sr. Benito
Gonzalez Sy Chiam a retrovendernos la finca arriba
descrita; pero si transcurre dicho plazo de cinco (5) aos sin
ejercitar el derecho de retracto que nos hemos reservado,
entonces quedar esta venta absoluta e irrevocable."
Language cannot be clearer. The purpose of the contract
is expressed clearly in said quotation that there can
certainly be no doubt as to the purpose of the plaintiff

566

PHILIPPINE REPORTS ANNOTATED

Tolentino and Manio vs. Gon ale S Chiam

to sell the property in question, reserving the right only to

repurchase the same. The intention to sell with the right to
repurchase cannot be more clearly expressed.
It will be noted from a reading of said sale of pacto de
retro, that the vendor, recognizing the absolute sale of the
property, entered into a contract with the purchaser by
virtue of which she became the "tenant" of the purchaser.
That contract of rent appears in said quoted document
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above as follows:
"Tercero. Que durante el expresado trmino del retracto
tendremos en arrendamiento la finca arriba descrita, sujeto
a condiciones siguientes:
" (a) El alquiler que nos obligamos a pagar por
mensualidades vencidas a Don Benito Gonzalez Sy
Chiam y en su domicilio, ser de trescientos setenta
y cinco pesos (P375) moneda filipina, cada mes.
"(b) El amillaramiento de la finca arrendada ser por
cuenta de dicho Don Benito Gonzalez Sy Chiam, as
como tambin la prima del seguro contra incendios,
si le conviniera al referido Sr. Benito Gonzalez Sy
Chiam asegurar dicha finca."
From the foregoing, we are driven to the following
conclusions: First, that the contract of pacto de retro is an
absolute sale of the property with the right to repurchase
and not a mortgage; and, second, that by virtue of the said
contract the vendor became the tenant of the purchaser,
under the conditions mentioned in paragraph 3 of said
contract quoted above.
It has been the uniform theory of this court, due to the
severity of a contract of pacto de retro, to declare the same to
be a mortgage and not a sale whenever the interpretation of
such a contract justifies that conclusion. There must be
something, however, in the language of the contract or in
the conduct of the parties which shows clearly and beyond
doubt that they intended the contract to be a "mortgage"
and not a pacto de retro. (International Banking

VOL. 50, AUGUST 12, 1927

567

Tolentino and Manio vs. Gon ale S Chiam

Corporation vs. Martinez, 10 Phil., 252; Padilla vs.
Linsangan, 19 Phil., 65; Cumagun vs. Allingay, 19 Phil.,
415; Olino vs. Medina, 13 Phil., 379; Manalo vs. Gueco, 42
Phil., 925; Velazquez vs. Teodoro, 46 Phil., 757; Villa vs.
Santiago, 38 Phil., 157.)
We are not unmindful of the fact that sales with pacto de
retro are not favored, and that the court will not construe an
instrument to be one of sale with pacto de retro, with the
stringent and onerous effect which follows, unless the terms
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f he d c e a d he
di g ci c
a ce e i e
i . (Ma a vs. G ec , supra.)
Whi e i i a ge e a
e ha
a
e ide ce i
ad i ib e f
he
e f a i g he e
f a
c
ac , b
he a i e i
a e
e e ed ha a
c
ac d e
e
e
he i e i
f he a ie , c
i , he a
e f
da i
i aid he ef , hea
e ide ce f
he
e f a ce ai i g he
ei e i
f he a ie . (Ma a vs. G ec , supra.)
I he e e ca e he ai iff a ege i hei c
ai
ha he c
ac i . e i is a pacto de retro. The ad i
ha he ig ed i . The ad i ha he
d he
e
i
e i
i h he igh
e
cha e i . The e
f he
c
ac
ed ab e c ea
h
ha he a fe f he
a d i
e i
b he ai iff
he defe da
a a
" a e" i h pacto de retro, a d he ai iff ha e h
ci c
a ce ha e e hich
d j if
i c
i g
aid c
ac
be a e e " a " i h g a a
. I e e
ca e i
hich hi c
ha c
ed a c
ac
be a
gage
a a i ead f a a e i h pacto de retro, i
ha d e , ei he beca e he e
f ch c
ac a e
a big
beca e he ci c
a ce
di g he
e ec i
he
e f
a ce f he c
ac
e e
i c
a ib e
i c
i e
i h he he
ha
aid
c
ac a
e f
cha e a d a e. (O i
vs. Medi a,
supra; Padi a vs. Li a ga , supra; Ma ag i vs. D
P ic , 34 Phi ., 325; R d ig e vs. Pa i
a a d De Je
,
37 Phi ., 876.)
56

568

PHILIPPINE REPORTS ANNOTATED

Tolentino and Manio vs. Gon ale S Chiam

I he ca e f Padi a vs. Li a ga he e
e
ed i
he c
ac
i dica e he a e f he c
e a ce f he
a d a " edged" i ead f " d." I
he ca e f
Ma ag i vs. D P ic , hi e he e d
ed he e
" a e a d a fe i h he igh
e
cha e," e i aid
c
ac he de c ibed hi e f a a "deb ," he
cha e a
a "c edi " a d he c
ac a a "
gage." I he ca e f
R d ig e vs, Pa i
a a d De Je
he e
h
e ec ed he i
e ,
i g
i face be a deed
f a e f ce ai
a ce
f a d, had e e ac ed
de a
e fa
e f
he
e f aid a d, "a h i i g
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'

'
,
." I

(38 P

vs.

., 157),
,

,
.
I

vs. S

(39 P

., 970),
,

"

."
R
,
C
G
E

C
P

D
S
C

S. A

I
C . (30 P
C
J

vs. P
., 27, 38),
U
S

S
. (See

C
56

VOL. 50, AUGUST 12, 1927

569

Tolentino and Manio vs. Gon ale S Chiam

S

1918. ) T
"A

,J

3,
:

1282

,
,

.A

1283,
,
." T

G
P
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P
E

I
C . I
11/21

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S
S

M .J

"I
,

,
. T

,
.* * * T
.

B
. H
.***T
. I
'
.'"
_______________
1

62 L

., 1177.
5 0

570

PHILIPPINE REPORTS ANNOTATED

Tolentino and Manio vs. Gon ale S Chiam

T
.T
,

,
pacto de retro
. A

1281

: "I
,
." A
1282

: "I
,
."

W
,
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reasoned decision of the late Chief Justice Arellano, one of

the greatest jurists of his time. He said, in discussing the
question whether or not the contract, in the case of Lichauco
vs. Berenguer (20 Phil., 12), was a pacto de retro or a
mortgage:
"The public instrument, Exhibit C, in part reads as
follows: 'Don Macario Berenguer declares and states that he
is the proprietor in fee simple of two parcels of fallow
unappropriated crown land situated within the district of his
pueblo. The first has an area of 73 qui ones, 8 balitas, and 8
loanes, located in the sitio of Batasan, and its boundaries
are, etc., etc. The second is in the sitio of Panantaglay,
barrio of Calumpang, has an area of 73 hectares, 22 ares,
and 6 centares, and is bounded on the north, etc., etc.'
"In the executory part of the said instrument, it is stated:
" That under condition of right to repurchase (pacto de
retro) he sells the said properties to the aforementioned
Do a Cornelia Laochangco for P4,000 and upon the
following conditions: First, the sale stipulated shall be for
the period of two years, counting from this date, within
which
5 1

VOL. 50, AUGUST 12, 1927

571

Tolentino and Manio vs. Gonzalez Sy Chiam

time the deponent shall be entitled to repurchase the land
sold upon payment of its price; second, the lands sold shall,
during the term of the present contract, be held in lease by
the undersigned who shall pay, as rental therefor, the sum
of 400 pesos per annum, or the equivalent in sugar at the
option of the vendor; third, all the fruits of the said lands
shall be deposited in the sugar depository of the vendee,
situated in the district of Quiapo of this city, and the value
of which shall be applied on account of the price of this sale;
fourth, the deponent acknowledges that he has received
from the vendor the purchase price of P4,000 already paid,
and in legal tender currency of this country * * *; fifth, all
the taxes which may be assessed against the lands surveyed
by competent authority, shall be payable by and constitute
a charge against the vendor; sixth, if, through any unusual
event, such as flood, tempest, etc., the properties
hereinbefore enumerated should be destroyed, wholly or in
part, it shall be incumbent upon the vendor to repair the
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damage thereto at his own expense and to put them into a

good state of cultivation, and should he fail to do so he binds
himself to give to the vendee other lands of the same area,
quality and value.'
*
*
*
*
*
*
*
"The opponent maintained, and his theory was accepted
by the trial court, that Berenguer's contract with
Laochangco was not one of sale with right of repurchase, but
merely one of loan secured by those properties, and,
consequently, that the ownership of the lands in question
could not have been conveyed to Laochangco, inasmuch as
it continued to be held by Berenguer, as well as their
possession, which he had not ceased to enjoy.
"Such a theory is, as argued by the appellants, erroneous.
The instrument executed by Macario Berenguer, the text of
which has been transcribed in this decision, is very clear.
Berenguer's heirs may not go counter to the literal tenor of
the obligation, the exact expression of the consent
5 2

572

PHILIPPINE REPORTS ANNOTATED

Tolentino and Manio vs. Gon ale S Chiam

of the contracting parties contained in the instrument,

Exhibit C. Not because the lands may have continued in
possession of the vendor, not because the latter may have
assumed the payment of the taxes on such properties, nor
yet because the same party may have bound himself to
substitute by another any one of the properties which might
be destroyed, does the contract cease to be what it is, as set
forth in detail in the public instrument. The vendor
continued in the possession of the lands, not as the owner
thereof as before their sale, but as the lessee which he
became after its consummation, by virtue of a contract
executed in his favor by the vendee in the deed itself,
Exhibit C. Right of ownership is not implied by the
circumstance of the lessee's assuming the responsibility of
the payment of the taxes on the property leased, for their
payment is not peculiarly incumbent upon the owner, nor is
such right implied by the obligation to substitute the thing
sold for another while in his possession under lease, since
that obligation came from him and he continues under
another character in its possession a reason why he
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g a a ee i i eg i a d b iga e hi - e f
e
he
hi g e e i a ca e f force majeure. S ch iabi i , a a
ge e a
e, i f eig
c
ac
f ea e a d, if e i ed,
i e
bi a , b
ib e a d a f , if
a i ag eed
, a d ch ag ee e d e
hi acc
i
ea
ig f
e hi ,
he
ea i g ha he i
i
e
e ef c
di ige ce i he ca e f a hi g
be gi g a
he .
"The
cha e a d a e, ce c
a ed, i a c
ac
hich b i
a e a fe
he
e hi a d he igh
i he hi g
d. A pacto de retro,
a e i h igh
e
cha e, i
hi g b
a e
a igh
i a ed
be ee he e dee a d he e d ,
he e d ha he
a e
a agai ac i e he
e hi
f he hi g
a ie a ed.
"' i
e, e
e i deed, ha he a e i h igh f
e
cha e i e
ed a a e h d f a ; i i i e
5 3

VOL. 50, AUGUST 12, 1927

573

Tolentino and Manio vs. Gon ale S Chiam

i e

e ha i
ac ice a
ca e
cc
he e he
c
ai
f a pacto de retro a e ea
he fi a cia
i fa e
;i i a ,
e i ab e ha i pacto de
retro a e e i
a i e e
f e i e e e, i he
f
f he ice f he ea e f he hi g
d, hich i
i a ed a a addi i a c e a .' (Ma e a, Ci i C de,
. 274.)
"B
i he
e e
ca e,
i e he hea d b
hi
c
, he e i
f ha
he a e i h igh
f
e
cha e, ade b Be e g e i fa
f La cha gc i
a he a
gage
ec e a a ."
We c e
a di c i
f he ec d
e i
e e ed ab e, a d ha i , a i g he a e i a
he
f
: Ma a e a cha ge hi a d d i h a i a i
f
he U
La
he g
d ha he a
f e he
a , ba ed
he ea a e f he
e ,a
a
i
a e f i e e ? Whe he e d
f
e
de a pacto de retro e
he
e
a d ag ee
a
a e a a ef
he
e
d i g he e i d f hi igh
e
cha e, he he eb bec e a " e a " a d i a
e ec
a d i he a e e a i
i h he
cha e a a
e a
de a
he c
ac f ea e.
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The appellant contends that the rental price paid during

the period of the existence of the right to repurchase, or the
sum of P375 per month, based upon the value of the
property, amounted to usury. Usury, generally speaking,
may be defined as contracting for or receiving something in
excess of the amount allowed by law for the loan or
forbearance of money the taking of more interest for the
use of money than the law allows. It seems that the taking of
interest for the loan of money, at least the taking of
excessive interest has ben regarded with abhorrence from
the earliest times. (Dunham vs. Gould, 16 Johnson [N. Y.]
367.) During the middle ages the people of England, and
especially the English Church, entertained the opinion,
then current in Europe, that the taking of any
5 4

574

PHILIPPINE REPORTS ANNOTATED

Tolentino and Manio vs. Gon ale S Chiam

interest for the loan of money was a detestable vice, hateful

to man and contrary to the laws of God. (3 Coke's Institute,
150; Tayler on Usury, 44.)
Chancellor Kent, in the case of Dunham vs. Gould, supra,
said: "If we look back upon history, we shall find that there is
scarcely any people, ancient or modern, that have not had
usury laws. * * * The Romans, through the greater part of
their history, had the deepest abhorrence of usury. * * * It
will be deemed a little singular, that the same voice against
usury should have been raised in the laws of China, in the
Hindu institutes of Menu, in the Koran of Mahomet, and
perhaps, we may say, in the laws of all nations that we know
of, whether Greek or Barbarian."
The collection of a rate of interest higher than that
allowed by law is condemned by the Philippine Legislature
(Acts Nos. 2655, 2662 and 2992). But is it unlawful for the
owner of a property to enter into a contract with the tenant
for the payment of a specific amount of rent for the use and
occupation of said property, even though the amount paid as
"rent," based upon the value of the property, might exceed
the rate of interest allowed by law? That question has never
been decided in this jurisdiction. It is one of first impression.
No cases have been found in this jurisdiction answering that
question. Act No. 2655 is "An Act fixing rates of interest
upon 'loans' and declaring the effect of receiving or taking
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a e ."
I i be
ed ha aid a e i
e a e a
a " a "
f bea a ce f a
e , g d , cha e
c edi , e c. The ce a idea f aid a e i
hibi a
ae f i e e
" a ." A c
ac f " a " i a e
diffe e c
ac f
ha f " e ". A " a ," a ha e
i
ed i he a e, ig ifie he gi i g f a
f
e ,
g d
c edi
a
he , i h a
i e
e a ,b
a
i e
e
he a e hi g. T " a ," i ge e a
a a ce, i
de i e
a
he f
e
a
e,
c di i
ha he hi g
i e i a e be e
ed;
de i e f
e
a
5 5

VOL. 50, AUGUST 12, 1927

575

Tolentino and Manio vs. Gon ale S Chiam

e

c di i
ha a e i a e
i
i d ha be
e
ed i h a c
e ai f i
e. The
d " a ,"
h e e ,a
ed i he a e, ha a ech ica
ea i g. I
e e
ea
he e
f he a e hi g. I
ea
he
e
f a e i ae
, b
e e he a e hi g
a ed. A " a " ha bee
e
defi ed a a
ad a ce e
f
e ,g d
c edi
ac
ac
i ai
e a ,
e
, he hi g a ed a
e
f
e da i acc da ce i h he e
f he c
ac .
U de he c
ac f " a ," a
ed i aid a e, he
e
he c
ac i c
e ed he
e , g d
cha e gi e cea e
be he
e
f he f
e
e
a d bec e he
e
f he b ig
be ed acc di g
hi
i ,
e
he c
ac i e f e
e
ide
f a ecia
ecific e f he a e. A a e e , he
e , g d
cha e , he
e
he c
ac i
e ec ed, cea e
be he
e
f he f
e
e a d
bec e he ab
e
e
f he b ig .
A c
ac f " a " diffe
a e ia
f
ac
ac f
" e ." I a c
ac f " e " he
e f he
e
d e
e hi
e hi . He i
e hi c
e he
e
e ed d i g he e i d f he c
ac . I a
c
ac f " a " he hi g a ed bec e he
e
f
he b ig . I a c
ac f " e " he hi g i e ai
he
e
f he e
. He i
e c
f he a e i
a i i ed a d i g he e i d f he c
ac f " e "
ea e. I a c
ac f " e " he e a i
be ee
he
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c
" a
be
a

ac
i ha f a d d a d e a . I a c
ac f
" f
e , g d , cha e
c edi , he e a i
ee he a ie i ha f b ig a d b igee. "Re "
be defi ed a
he c
e ai
ei he i
e ,
i i
, cha e ,
ab , ecei ed b he
e f he
i f
he cc a
he e f. I i defi ed a he e
c
e ai
f
he
e i
f
e c
ea
i he i a ce, a d i a
fi i i g
f a d
e e e ,i e
f
hei
e. I i ha , hich i
be
aid f
he e f a d,

576

PHILIPPINE REPORTS ANNOTATED

Tolentino and Manio vs. Gon ale S Chiam

he he i
e , ab
he hi g ag eed
. A
c
ac f " e " i a c
ac b
hich
e f he a ie
de i e
he he
e
c
ab e hi g, i
de
ha he a e
a
e i d i g a ce ai e i d a d e
i
he f
e ; he ea a c
ac f " a ," a ha
di
ed i he a e, ig ifie he de i e
f
e
he
c
ab e hi g
c di i
f e
i g a
e i ae a
f he a e i d
a i , i
hich
ca e i i ca ed e e a " a ." I he ca e f a c
ac f
" e ," de he ci i a , i i ca ed a "c
da
."
F
he f eg i g i i be ee ha he e i a ide
di i c i be ee a c
ac f " a ," a ha
di
ed
i he a e, a d a c
ac f " e " e e h gh h e
d a e
ed i
di a
a a ce a i e cha geab e
e
.
The a e f
e ,g d
c edi i ea i a ce ai ed
hi e he a
f e
be aid f
he
e a d
cc a i
f he
e
a de e d
a h
a d
diffe e c di i
; a f e a
e, fa
a d f e ac
e a
d c i e ca aci a d f he a e h ica a e
a ha e a diffe e
e a a e, de e di g
ca i ,
ice f c
di ie ,
i i
he a e , e c. H
e
a ha e a diffe e
e a a ed e
ca i , c di i
f b i e , ge e a
e i
de e i , ada abi i
a ic a
e , e e
h gh he ha e e ac
he
a e igi a c . A
e
he E c a, i he ce e f
b i e ,c
c ed e ac
i ea
e ca ed
ide f
he b i e ce e , i ha e a
ch highe e a a e
ha he he . T
ace f b i e
ca ed i diffe e
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,
,
.A
5

VOL. 50, AUGUST 12, 1927

577

Tolentino and Manio vs. Gon ale S Chiam

,
,
.I
.T

'
. T

"

"

,
,
. W
L
.
I

.I
.

D
. D
.
D
.D
. T
.T
A

.T
N . 2655.

pacto de retro

,
.T
T
central.com.ph/sfsreader/session/

,
/t/?o=False

.
,
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,
5

578

PHILIPPINE REPORTS
ANNOTATED

Tolentino and Manio vs.

Gonzalez Sy Chiam
. P
.
W
,
. T
,

.I
. T

.T
.
W
,
E

C,
361

C
,

,
,
,

.S

Avance a, C. J., Street, Villamor, Romualdez,

VillaReal, JJ.,
.
MALCOLM, J.,

I
. I
.T
. T

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at the rate of P375 per month and whereby' "Default in the

payment of the rent agreed for two consecutive months will
terminate this lease and will
57

VOL. 50, AUGUST 12, 1927

579

Visayan General Supply Co. vs. Iglesias

forfeit our right of repurchase, as though the term had
expired naturally" does mean something, and taken
together with the oral testimony is indicative of a subterfuge
hiding a usurious loan. (Usury Law, Act No. 2655, sec. 7, as
amended; Padilla vs. Linsangan [1911], 19 Phil., 65; U. S. vs.
Tan Quingco Chua [1919], 39 Phil., 552; Russel vs.
Southard [1851], 53 U. S., 139; Monagas vs. Albertucci y
Alvarez [1914], 235 U. S., 81; 10 Manresa, C digo Civil
Espaol, 3d ed., p. 318.) The transaction should be
considered as in the nature of an equitable mortgage. My
vote is for a modificati n of the judgment of the trial court.
Judgment affirmed.
____________

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