Case Digest (G.R. No. L-23559)
Facts:
On February 22, 1962, Aurelio G. Briones initiated a legal action in the Municipal Court of Manila against Primitivo P. Cammayo and his co-defendants, Nicasio, Pedro, Hilario, and Artemio Cammayo, collectively seeking to recover the sum of P1,500.00, along with damages, attorney's fees, and costs of suit. The defendants responded with specific denials and raised several special defenses, including a claim that the loan agreement was usurious. They contended that the real estate mortgage executed as security for the loan was intended to cover only P1,200.00, with the remaining P300.00 being withheld as advance interest for one year. The defendants argued that the loan was tainted with usury, rendering the contract void from the outset under Article 1407 of the Civil Code. They also filed a compulsory counterclaim, alleging that Briones had violated the Usury Law, causing them damages and attorney's fees.
On September 7, 1962, Briones filed an unverified reply denying...
Case Digest (G.R. No. L-23559)
Facts:
Parties Involved:
- Plaintiff-Appellee: Aurelio G. Briones
- Defendants-Appellants: Primitivo P. Cammayo, Nicasio Cammayo, Pedro Cammayo, Hilario Cammayo, and Artemio Cammayo
Nature of the Case:
- Aurelio G. Briones filed a case in the Municipal Court of Manila on February 22, 1962, to recover P1,500.00 plus damages, attorney's fees, and costs of suit from the defendants.
- The defendants executed a real estate mortgage as security for a loan of P1,200.00, but the plaintiff claimed the loan was for P1,500.00.
Defendants' Defense:
- The defendants alleged that the loan was usurious, as the plaintiff withheld P300.00 as advance interest for one year.
- They claimed that the contract was void under Article 1407 of the Civil Code due to usury.
- They also argued that they had already paid P330.00, which the plaintiff refused to acknowledge as part payment of the principal but instead treated as interest for an extension of the loan term.
Procedural History:
- The Municipal Court granted summary judgment in favor of Briones, ordering the defendants to pay P1,500.00 with legal interest from February 22, 1962, plus P150.00 as attorney's fees.
- On appeal, the Court of First Instance modified the judgment, reducing the amount to P1,180.00 (after deducting usurious interest and attorney's fees) with legal interest from October 16, 1962.
Issue:
- Whether the creditor (Briones) is entitled to collect the principal of the loan despite the contract being tainted with usury.
- Whether the creditor is entitled to collect interest on the principal, and if so, at what rate.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Concurring and Dissenting Opinions
Concurring Opinion (Justice Barredo):
- Justice Barredo agreed with the majority, emphasizing that the law proscribes only the collection of excessive interest, not the recovery of the principal. He noted that allowing the borrower to keep the principal would unjustly enrich them at the lender's expense.
Dissenting Opinion (Justice Castro):
- Justice Castro argued that Article 1957 of the Civil Code declares the entire usurious contract void, including the principal. He contended that the prestation to pay usurious interest is an integral part of the cause, making the entire contract illegal. He believed that the lender should not recover the principal, as this would undermine the policy against usury.
Conclusion:
The Supreme Court modified the lower court's decision, allowing Briones to recover the principal of P1,180.00 with legal interest from the date of filing the complaint. The Court reaffirmed that while usurious contracts are void as to interest, the principal remains recoverable to prevent unjust enrichment of the borrower.