Facts:

The case involves Hilaria Aguilar as the plaintiff and appellant against Juan Rubiato, the defendant and appellant, along with Manuel Gonzalez Vila, the defendant and appellee. The dispute arises from a transaction that took place in early 1915 in Nagcarlan, Laguna, where Juan Rubiato was seeking a loan not exceeding P1,000 against his parcels of land valued at approximately P26,000. Manuel Gonzalez Vila, a procurador judicial, and others approached Rubiato and persuaded him to sign a power of attorney favoring Vila. This document allowed Vila to secure a loan on behalf of Rubiato, which included the authority to mortgage the land as collateral for the loan. On April 29, 1915, Vila executed a sale of Rubiato’s eight parcels of land to Hilaria Aguilar for P800, while stipulating a repurchase option within one year and arranging for Rubiato to remain as a lessee at a rental rate of P120 every three months. Importantly, neither Aguilar nor Rubiato engaged directly in the transactio

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Facts:

Background of the Parties and Property

• Juan Rubiato, the defendant, was a resident of Nagcarlan, Laguna, known to have owned various parcels of land valued at approximately P26,000.
• Rubiato expressed the desire to obtain a loan not exceeding P1,000 due to his financial needs.

Execution of the Power of Attorney

• In early 1915, two men—Manuel Gonzalez Vila, a judicial procumdor, accompanied by Gregorio Azucena and likely Marto Encarnacion—visited Rubiato’s residence.
• They induced Rubiato to sign the second page of a power of attorney (introduced as Exhibit A), purportedly granting broad powers including obtaining a loan with his lands as collateral.
• The document detailed that Rubiato owned eight parcels of land (planted with about 2,500 coconut trees), with boundaries and ownership documented in a possessory title issued in 1896.
• The power specifically authorized Manuel Gonzalez Vila to secure a loan in Manila for an amount not exceeding P1,000, either on conventional terms or under pacto de retro, with the lands being used as guaranty.

Transaction Conducted Under the Power of Attorney

• On April 29, 1915, Manuel Gonzalez Vila formulated a document (Exhibit C) which, under the guise of a sale, transferred the lands of Rubiato to Hilaria Aguilar of Manila.
• The transaction involved a sale price of P800, with the provision of a right of repurchase within one year.
• Rubiato was permitted to remain in possession of the properties as a lessee, with a stipulated lease rent of P20 to be paid every three months.
• It is unclear whether the proceeds of P800 were actually passed on to Rubiato, though it is undisputed that Hilaria Aguilar was never reimbursed the amount she advanced.

The Subsequent Legal Proceedings

• Upon the expiration of the one-year pacto de retro without repayment of the principal or lease rent, Hilaria Aguilar initiated legal action.
• The trial court, presided over by Judge Manuel Camus, recited a version of the facts and held that the power of attorney only authorized securing a loan through mortgage and did not extend to a sale of the property.
• The trial court rendered judgment awarding Hilaria Aguilar recovery of P800 with interest calculated at 60% per annum from April 29, 1915, to May 1, 1916, and at 12% per annum thereafter, along with costs against Rubiato.
• Both parties subsequently appealed the decision.

Issue:

Nature and Scope of the Power of Attorney

• Whether the power of attorney executed by Rubiato genuinely authorized Manuel Gonzalez Vila to sell the land, or whether it was limited to securing a loan through a mortgage.
• Whether the language and circumstances surrounding the execution of the power of attorney indicate that it was a sham document.

Assessment of the Transaction Price and Its Implications

• Whether disposing of lands valued at approximately P26,000 for an amount of P800 (and associated high interest) could be deemed a reasonable or valid transaction.
• Whether such an agreement reflects the true intention of Rubiato or constitutes a fabrication by the agents involved.

Interest Rate Computation Under Applicable Laws

• The appropriateness of applying an interest rate of 60% per annum before May 1, 1916, and 12% per annum thereafter.
• The effect of the Usury Law (Act No. 2655) and its prospective application on the agreed interest rates.
• Whether the imposition of an exorbitant interest rate post-enactment of the Usury Law renders the contract void or requires modification in favor of a legal interest rate.

Implications of Legal Doctrines and Precedents

• The applicability of the principle that documents executed under undue influence or as a sham have no binding effect.
• The relevance of previous case law (e.g., United States vs. Constantino Tan Quingco Chua) on non-retroactivity of usury laws and contractual obligations.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)