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Usury in Loan Recovery Case

The plaintiff corporation filed a lawsuit against defendants Chelda Enterprises and David Syjueco for unpaid loans totaling PHP 20,880 plus interest and fees. The defendants claimed the loans charged usurious interest rates between 2-2.5% per month, making the contract null. The court ruled that while usurious interest stipulations are null, the principal debt can still be recovered as the obligation to repay the principal is divisible from accessory interest obligations. Contracts of loan consist of a principal obligation to repay the debt as well as accessory interest stipulations, and the former can stand independently without the latter.

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228 views1 page

Usury in Loan Recovery Case

The plaintiff corporation filed a lawsuit against defendants Chelda Enterprises and David Syjueco for unpaid loans totaling PHP 20,880 plus interest and fees. The defendants claimed the loans charged usurious interest rates between 2-2.5% per month, making the contract null. The court ruled that while usurious interest stipulations are null, the principal debt can still be recovered as the obligation to repay the principal is divisible from accessory interest obligations. Contracts of loan consist of a principal obligation to repay the debt as well as accessory interest stipulations, and the former can stand independently without the latter.

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elle cotoco
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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[G.R. No. L-25704. April 24, 1968.

]
ANGEL JOSE WAREHOUSING CO., INC., Plaintiff-Appellee, v. CHELDA ENTERPRISES
and DAVID SYJUECO, Defendants-Appellants.
Burgos and Sarte for Appellants.
Luis Ma. Guerrero for Appellee.

Facts:
 Plaintiff corporation filed suit in the Court of First Instance of Manila on May 29, 1964
against the partnership Chelda Enterprises and David Syjueco, its capitalist partner, for
recovery of alleged unpaid loans in the total amount of P20,880.00, with legal interest
from the filing of the complaint, plus attorney's fees of P5,000.00. Alleging that post
dated checks issued by defendants to pay said account were dishonored, that
defendants' industrial partner, Chellaram I. Mohinani, had left the country, and that
defendants have removed or disposed of their property, or are about to do so, with intent
to defraud their creditors, preliminary attachment was also sought.
 Answering, defendants averred that they obtained four loans from plaintiff in the total
amount of P26,500.00, of which P5,620.00 had been paid, leaving a balance of
P20,880.00; that plaintiff charged and deducted from the loan usurious interests thereon,
at rates of 2% and 2.5% per month, and, consequently, plaintiff has no cause of action
against defendants and should not be permitted to recover under the law.  A
counterclaim for P2,000.00 attorney's fees was interposed.
 Plaintiff filed on June 25, 1964 an answer to the counterclaim, specifically denying under
oath the allegations of usury.

Issue:

Whether or not, the creditor may recover the principal of the loan with usurious interest?

Ruling:

Yes. As the appellant rely to the Art. 1411 of the new civil code, stating that the rule
of pari delicto applies where a contract's nullity proceeds from illegality of the cause or object of
said contract.
However, appellants fail to consider that a contract of loan with usurious interest consists
of principal and accessory stipulations; the principal one is to pay the debt; the accessory
stipulation is to pay interest thereon.
And said two stipulations are divisible in the sense that the former can still stand without
the latter.  Article 1273, Civil Code, attests to this: "The renunciation of the principal debt shall
extinguish the accessory obligations; but the waiver of the latter shall leave the former in force."

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