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Republic of the Philippines

G.R. No. L-25704 April 24, 1968
ANGEL OSE !ARE"OUS#NG CO., #NC., plaintiff-appellee,
C"EL$A ENTERPR#SES %&' $A(#$ S)UECO, defendants-appellants.
Luis A. Guerrero for plaintiff-appellee.
Burgos and Sarte for defendants-appellants.
*ENG+ON, .P., J.:
Plaintiff corporation filed suit in the Court of First Instance of Manila on Ma !", #"$% a&ainst the
partnership Chelda Enterprises and 'avid ()ueco, its capitalist partner, for recover of alle&ed unpaid
loans in the total a*ount of P!+,,,+.++, -ith le&al interest fro* the filin& of the co*plaint, plus
attorne.s fees of P/,+++.++. Alle&in& that post dated chec0s issued b defendants to pa said account
-ere dishonored, that defendants. industrial partner, Chellara* I. Mohinani, had left the countr, and
that defendants have re*oved or disposed of their propert, or are about to do so, -ith intent to defraud
their creditors, preli*inar attach*ent -as also sou&ht.
Ans-erin&, defendants averred that the obtained four loans fro* plaintiff in the total a*ount of
P!$,/++.++, of -hich P/,$!+.++ had been paid, leavin& a balance of P!+,,,+.++1 that plaintiff char&ed
and deducted fro* the loan usurious interests thereon, at rates of !2 and !./2 per *onth, and,
conse3uentl, plaintiff has no cause of action a&ainst defendants and should not be per*itted to recover
under the la-. A counterclai* for P!,+++.++ attorne.s fees -as interposed.
Plaintiff filed on 4une !/, #"$% an ans-er to the counterclai*, specificall denin& under oath the
alle&ations of usur.
After trial, decision -as rendered, on Nove*ber #+, #"$/. 5he court found that there re*ained due
fro* defendants an unpaid principal a*ount of P!+,!,6./+1 that plaintiff char&ed usurious interests, of
-hich P#,+%,.#/ had actuall been deducted in advance b plaintiff fro* the loan1 that said a*ount of
P#,+%,.#/ should therefore be deducted fro* the unpaid principal of P!+,!,6./+, leavin& a balance of
still paable to the plaintiff. (aid court held that not-ithstandin& the usurious interests
char&ed, plaintiff is not barred fro* collectin& the principal of the loan or its balance of P#",!%6.7/.
Accordin&l, it stated, in the dispositive portion of the decision, thus8
9:EREF;RE, )ud&*ent is hereb rendered, orderin& the defendant partnership to pa to the
plaintiff the a*ount of P#",!%6.7/, -ith le&al interest thereon fro* Ma !", #"$% until paid,
plus an additional su* of P!,+++.++ as da*a&es for attorne.s fee1 and, in case the assets of
defendant partnership be insufficient to satisf this )ud&*ent in full, orderin& the defendant
'avid ()ueco to pa to the plaintiff one-half <#=!> of the unsatisfied portion of this )ud&*ent.
9ith costs a&ainst the defendants.1wph1.t
Appealin& directl to ?s, defendants raise t-o 3uestions of la-8 <#> In a loan -ith usurious interest,
*a the creditor recover the principal of the loan@ <!> (hould attorne.s fees be a-arded in plaintiff.s
5o refute the lo-er court.s decision -hich is based on the doctrine laid do-n b this Court in Lopez v.
l !ogar "ilipino, %6 Phil. !%", holdin& that a contract of loan -ith usurious interest is valid as to the
loan but void as to the usurious interest, appellants ar&ue that in li&ht of the Ne- Civil Code provisions
said doctrine no lon&er applies. In support thereof, the cite the case decided b the Court of Appeals
in Se#astian v. Bautista, /, ;.A. No. #/, p. 7#%$.
5he Se#astian case -as an action for recover of a parcel of land. 5he Court of First Instance therein
decided in plaintiff.s favor, on the &round that the so-called sale -ith pa$to de retro of said land -as in
fact onl an e3uitable *ort&a&e. In affir*in& the trial court, the -riter of the opinion of the Court of
Appeals -ent further to state the vie- that the loan secured b said *ort&a&e -as usurious in nature,
and, thus, totall void. (uch reasonin& of the -riter, ho-ever, -as not concurred in b the other
*e*bers of the Court, -ho concurred in the result and voted for affir*ance on the &rounds stated b
the trial court. Further*ore, the affir*ance of the eBistence of e3uitable *ort&a&e necessaril i*plies
the eBistence of a valid contract of loan, because the for*er is an accessor contract to the latter.
Areat reliance is *ade b appellants on Art. #%## of the Ne- Civil Code -hich states8
Art. #%##. 9hen the nullit proceeds fro* the ille&alit of the cause or ob)ect of the contract,
and the act constitutes cri*inal offense, both parties bein& in pari deli$to, the shall have no
action a&ainst each other, and both shall be prosecuted. Moreover, the provisions of the Penal
Code relative to the disposal of effects or instru*ents of a cri*e shall be applicable to the
thin&s or the price of the contract.
5his rule shall be applicable -hen onl one of the parties is &uilt1 but the innocent one *a
clai* -hat he has &iven, and shall not be bound to co*pl -ith his pro*ise.
(ince, accordin& to the appellants, a usurious loan is void due to ille&alit of cause or ob)ect, the rule
of pari deli$to eBpressed in Article #%##, supra, applies, so that neither part can brin& action a&ainst
each other. (aid rule, ho-ever, appellants add, is *odified as to the borro-er, b eBpress provision of
the la- <Art. #%#7, Ne- Civil Code>, allo-in& the #orrower to recover interest paid in eBcess of the
interest allo-ed b the ?sur Ca-. As to the lender, no eBception is *ade to the rule1 hence, he cannot
recover on the contract. (o D the continue D the Ne- Civil Code provisions *ust be upheld as
a&ainst the ?sur Ca-, under -hich a loan -ith usurious interest is not totall void, because of Article
#"$# of the Ne- Civil Code, that8 E?surious contracts shall be &overned b the ?sur Ca- and other
special la-s, so far as the% are not in$onsistent with this &ode.E <E*phasis ours.>
9e do not a&ree -ith such reasonin&. Article #%## of the Ne- Civil Code is not ne-1 it is the sa*e as
Article #7+/ of the ;ld Civil Code. 5herefore, said provision is no -arrant for departin& fro* previous
interpretation that, as provided in the ?sur Ca- <Act No. !$//, as a*ended>, a loan -ith usurious
interest is not totall void onl as to the interest.
5rue, as stated in Article #%## of the Ne- Civil Code, the rule of pari deli$to applies -here a contract.s
nullit proceeds fro* ille&alit of the cause or ob)ect of said contract.
:o-ever, appellants fail to consider that a contract of loan -ith usurious interest consists of principal
and accessor stipulations1 the principal one is to pa the debt1 the accessor stipulation is to pa
interest thereon.
And said t-o stipulations are divisible in the sense that the for*er can still stand -ithout the latter.
Article #!67, Civil Code, attests to this8 E5he renunciation of the principal debt shall eBtin&uish the
accessor obli&ations1 but the -aiver of the latter shall leave the for*er in force.E
5he 3uestion therefore to resolve is -hether the ille&al ter*s as to pa*ent of interest li0e-ise renders
a nullit the le&al ter*s as to pa*ents of the principal debt. Article #%!+ of the Ne- Civil Code
provides in this re&ard8 EIn case of a divisible contract, if the ille&al ter*s can be separated fro* the
le&al ones, the latter *a be enforced.E
In si*ple loan -ith stipulation of usurious interest, the prestation of the debtor to pa the principal
debt, -hich is the cause of the contract <Article #7/+, Civil Code>, is not ille&al. 5he ille&alit lies onl
as to the prestation to pa the stipulated interest1 hence, bein& separable, the latter onl should be
dee*ed void, since it is the onl one that is ille&al.
Neither is there a conflict bet-een the Ne- Civil Code and the ?sur Ca-. ?nder the latter, in (ec. $,
an person -ho for a loan shall have paid a hi&her rate or &reater su* or value than is allo-ed in said
la-, *a recover thewhole interest paid. 5he Ne- Civil Code, in Article #%#7 states8 EInterest paid in
eBcess of the interest allo-ed b the usur la-s *a be recovered b the debtor, -ith interest thereon
fro* the date of pa*ent.E Article #%#7, in spea0in& of Einterest paid in eBcess of the interest allo-ed
b the usur la-sE *eans the -hole usurious interest1 that is, in a loan of P#,+++, -ith interest of P!+2
per annu* P!++ for one ear, if the borro-er pas said P!++, the -hole P!++ is the usurious interest,
not )ust that part thereof in eBcess of the interest allo-ed b la-. It is in this case that the la- does not
allo- division. 5he -hole stipulation as to interest is void, since pa*ent of said interest is the cause or
ob)ect and said interest is ille&al. 5he onl chan&e effected, therefore, b Article #%#7, Ne- Civil Code,
is not to provide for the recover of the interest paid in eBcess of that allo-ed b la-, -hich the ?sur
Ca- alread provided for, but to add that the sa*e can be recovered Ewith interest thereon fro' the
date of pa%'ent.E
5he fore&oin& interpretation is reached -ith the philosoph of usur le&islation in *ind1 to discoura&e
stipulations on usurious interest, said stipulations are treated as -holl void, so that the loan beco*es
one -ithout stipulation as to pa*ent of interest. It should not, ho-ever, be interpreted to *ean
forfeiture even of the principal, for this -ould un)ustl enrich the borro-er at the eBpense of the lender.
Further*ore, penal sanctions are available a&ainst a usurious lender, as a further deterrence to usur.
5he principal debt re*ainin& -ithout stipulation for pa*ent of interest can thus be recovered b
)udicial action. And in case of such de*and, and the debtor incurs in dela, the debt earns interest fro*
the date of the de*and <in this case fro* the filin& of the co*plaint>. (uch interest is not due
to stipulation, for there -as none, the sa*e bein& void. Rather, it is due to the &eneral provision of la-
that in obli&ations to pa *one, -here the debtor incurs in dela, he has to pa interest b -a of
da*a&es <Art. !!+", Civil Code>. 5he court a (uo therefore, did not err in orderin& defendants to pa
the principal debt -ith interest thereon at the le&al rate, fro* the date of filin& of the co*plaint.
As re&ards, ho-ever, the attorne.s fees, the court a (uo stated no basis for its a-ard, beond sain&
that as a result of defendants. refusal to pa the a*ount of P#",!%6.7/ not-ithstandin& repeated
de*ands, plaintiff -as obli&ed to retain the services of counsel. 5he rule as to attorne.s fees is that the
sa*e are not recoverable, in the absence of stipulation. (everal eBceptions to this rule are provided
<Art. !!+,, Civil Code>. ?nless sho-n to fall under an eBception, the act of plaintiff in en&a&in&
counsel.s services due to refusal of defendants to pa his de*and, does not )ustif a-ard of attorne.s
fees <Estate of Buan v. Ca*a&anacan, C-!#/$", Feb. !,, #"$$>. 'efendants, *oreover, had reason to
resist the clai*, since there -as et no definite rulin& of this Court on the point of la- involved herein
in li&ht of the Ne- Civil Code. (aid a-ard should therefore be deleted.
9:EREF;RE, -ith the *odification that the a-ard of attorne.s fees in plaintiff.s favor is deleted
therefro*, and the correction of the clerical error as to the principal still recoverable, fro* P#",!%6.7/
to P#",!7".7/, the appealed )ud&*ent is hereb affir*ed. No costs. (o ordered.