Garcia vs.

Matias (August 25, 1926) Facts: In four different occasions, the dependants sold the same parcel of lands to plaintiff in different amounts with the condition of the right to repurchase on or before a fixed date. Plaintiff alleged that the defendants ratified the said contract of sale by receiving an additional amount for the properties. However, in their answer, the defendants filed a counterclaim against the plaintiffs. They claimed that they did not receive the purchase price as alleged by the plaintiff. The defendants also said that the other three contracts made were actually a renewal of their contract of loan. They alleged that they executed such contracts because they asked for an extension. The plaintiffs agreed to such extension with a condition of the execution of the contracts and imposing to the defendants a higher interest rate. On trial, the court held that the contracts between the parties are usurious and void. It decided in favour of the plaintiff for the sum loaned in 1918 and imposed a legal interest on the amount. However, it also ordered the plaintiff to return the amount paid by defendants as usurious interests and to pay for the latter’s attorney’s fee. Issue: Whether or not defendants are entitled for the claim of attorney’s fees. Held: No, the defendants are not entitled for the claim of attorney’s fees. The defendant's claim for allowance of attorney's fees is founded on section 6 of the Usury Law (Act No. 2655 as amended by Act No. 2992), which provides that any person or corporation who shall have paid or delivered a higher rate of interest than that authorized by law "may recover the whole interest paid or delivered with costs and attorney's fees in such sum as may be allowed by the court in an action against the person or corporation who took or received it, if such action is brought within two years after such payment or delivery." As there was no proof to show that actual payment of interest was made, the court has to follow the well settled rule that usurious interest not actually paid but simply added to the capital from time to time cannot be regarded as taken or received by the lender within the meaning of the Usury Act. The instant case is not within the case for a special allowance of attorney’s fees covered in the Act. As there is no proof to show that payments were made on the usurious interest. Judgment is modified by absolving the plaintiffs from the counterclaim by defendants and for the return of the amount of interest. It further denied the claim for attorney’s fees of the defendants.