Title
Alburo vs. Mercado
Case
G.R. No. 19209
Decision Date
Nov 27, 1922
A 1916 contract for corn delivery was deemed usurious and void by the Supreme Court, awarding only the principal minus partial payment and sack costs.
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Case Digest (G.R. No. 19209)

Facts:

  1. Execution of the Contract: On August 15, 1916, Rosario Alburo de Mercado executed a document acknowledging receipt of P330 from Cayetano Alburo as payment for 300 sacks of corn to be delivered by Cayetano Alburo within October 1916. Failure to deliver would render Cayetano liable to pay P330 plus double that amount (P660) as interest.
  2. Payment and Delivery of Sacks: On the same date, Cayetano delivered P330 to Rosario. On August 25, 1916, he also delivered 220 empty sacks valued at P39.60.
  3. Partial Payment: On October 14, 1917, Carmen Alburo paid P150 on behalf of Rosario, which was credited to the contract.
  4. Plaintiff’s Claim: Cayetano filed a lawsuit claiming P510 (P330 + P660 interest) plus P39.60 for the sacks, totaling P549.60, as Rosario failed to deliver the corn.
  5. Defendants’ Defense: The defendants argued that the contract was void for being usurious under the Usury Law.

Issue:

  1. Whether the contract (Exhibit A) is valid or void for being usurious under the Usury Law.
  2. Whether the plaintiff is entitled to recover the claimed amount, including the alleged interest and the cost of the sacks.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Dissent

  1. Usury Law Violation: The dissenting justices agreed that the contract was usurious and void under the Usury Law. They argued that the document explicitly called for an interest rate of 800% per annum, which was clearly prohibited.
  2. Penal Clause as Indirect Interest: One dissenting justice added that even if the clause were treated as a penalty, it would still constitute indirect interest, which is prohibited under the Civil Code.

Conclusion:

The Supreme Court ruled that the contract was usurious and void, entitling the plaintiff only to the principal amount less the partial payment and the cost of the sacks. The judgment of the lower court was reversed, and the plaintiff was awarded P219.60 with 6% interest from the date of the decision.


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