G.R. No. 47069 - Mulet vs. People

Case Summary (G.R. No. 47069)

Factual Background

On July 25, 1929, Alexandra Rubillos and Espectacion Rubillos obtained from petitioner Mulet a loan of P550, payable within five years at thirty per cent interest per annum. In the deed of mortgage executed as security, the Rubillos caused the sum of P1,375 to be stated as the capital of the loan. The Court held that this figure did not represent an actual principal amount but instead reflected the computed total of the real loan and its interest: P550 as principal and P825 as total interest for five years at the stipulated rate.

Within four years of the mortgage’s execution, the debtors made partial payments totaling P278.27, which the Court described as payments on account of interest. Thereafter, they paid the whole principal of P550 in reliance on petitioner’s promise to condone the unpaid interest if they would pay the principal. After accepting the principal, however, petitioner informed the debtors that they still owed P546.73, which the Court treated as the balance of the usurious interest.

The Substitution with Pacto de Retro and Value Received

In October 1933, petitioner pressed the debtors to execute a deed of sale with pacto de retro in his favor over a parcel of land, as a substitution for the original mortgage which was thereafter cancelled. From the date of the new deed until 1936, petitioner received from the land’s products a total of P480, as his share.

Trial Court Proceedings and Appeal

For violation of the Usury Law, petitioner was prosecuted on November 18, 1936, and the trial court convicted him. On appeal, the Court of Appeals affirmed the conviction. The appellate decision included an order requiring petitioner to return P373.27, which it treated as the amount of usurious interest received beyond what the law permitted.

The Petition for Certiorari and the Issue Raised

In the instant petition for certiorari, petitioner challenged only the appellate portion ordering the return of P373.27. He argued that the amount had been paid more than two years before the filing of the complaint for usury, and that the return could no longer be ordered because the prescriptive period under section 6 of the Usury Law had expired.

The Court noted that the computation of P373.27 was derived by adding the usurious interest paid in cash (P278.27) and the amount petitioner received from the land’s produce (P480), then deducting from the aggregate the lawful interest allowed at 14 per cent, amounting to P385.

Court’s Ruling on the Correct Amount to be Returned

Although the appellate computation produced P373.27, the Court held that petitioner should return not P373.27 but P480. The Court reasoned that P480 was not usurious interest on the capital of the original loan. Instead, it was the value of the produce of the land that petitioner obtained under the pacto de retro transaction. The Court treated the unpaid balance of the usurious interest—P546.73—as the consideration for the pacto de retro sale.

Because the consideration was contrary to law, the Court held that the contract resulting from it was null and void under Art. 1275, Civil Code. Applying article 1305, in relation to article 1303 of the Civil Code, the Court ruled that where the nullity of a contract arises from the illegality of the consideration that constitutes a felony, the guilty party is subject to criminal proceedings while the innocent party may recover what it had given, including the fruits thereof.

With this modification—ordering petitioner to pay P480 instead of P373.27—the Court affirmed the judgment, and imposed costs against petitioner

Case Syllabus (G.R. No. 47069)

The case involved criminal usury proceedings for a loan transaction tainted by usurious interest, followed by a civil restitution order in favor of the offended debtors.
The petition for certiorari sought to overturn the portion of the Court of Appeals decision that ordered the return of an amount representing interest received in excess of that allowed by law.
The Supreme Court reviewed whether the restitution could still be ordered despite an alleged lapse of the prescriptive period under the Usury Law, and it also determined the proper amount to be returned.

Parties and Procedural Posture

Miguel Mulet appeared as the petitioner, having been convicted for violation of the Usury Law.
The People of the Philippines appeared as the respondent.
The petitioner was prosecuted on November 18, 1936, convicted by the trial court, and then affirmed by the Court of Appeals.
The petition for certiorari attacked only the appellate ruling requiring petitioner to return a specific sum representing excess interests.
The Supreme Court affirmed the judgment of the Court of Appeals, but it modified the restitution amount.

Key Factual Background

On July 25, 1929, Alexandra Rubillos and Espectacion Rubillos obtained from petitioner a loan of P550, payable within 5 years, at 30 per cent interest per annum.
The deed of mortgage executed as security misleadingly stated a capital of P1,375, although the actual principal was P550.
The stated “capital” of P1,375 was treated as including the actual principal of P550 plus total interest of P825, computed at 30 per cent per annum for 5 years.
Within four years, the debtors made partial payments totaling P278.27, representing payments on account of interest.
The debtors thereafter paid the full capital of P550, relying on petitioner’s promise to condone the unpaid interest upon payment of that capital.
After receipt of the P550 capital, petitioner allegedly informed the debtors that they still owed P546.73, characterized as the balance of usurious interest.
In October, 1933, petitioner required the debtors to execute in his favor a deed of sale with pacto de retro covering a parcel of land, replacing the original mortgage that was cancelled.
From the execution of the substituted deed until 1936, petitioner received a total of P480 as his share of the products of the land under the pacto de retro arrangement.
The criminal case resulted in conviction for violation of the Usury Law, and the appellate decision included an order of restitution for amounts deemed excessive.

Usury Transaction Structure

The initial mortgage instrument was treated as a device that effectively incorporated both principal and excessive interest into the “capital” figure.
The factual narrative emphasized that petitioner’s rights under the transaction ultimately demanded payment that included a remaining balance of interest treated as usurious.
The substitution of the mortgage with a deed of sale with pacto de retro was treated not as an independent and lawful settlement, but as a continuation of a transaction grounded on an illicit consideration.

Issues Presented

The primary issue was whether the appellate restitution order was barred because the amounts to be returned were allegedly paid more than two years before the filing of the usury complaint.
The petitioner anchored the prescription argument on section 6 of the Usury Law.
The case also required determination of the proper amount to be returned, given the trial court and appellate court methodology for computing restitution.

Parties’ Contentions

Petitioner argued that the return of the challenged amount was impermissible because the restitution