G.R. No. 22678 - Lopez vs. El Hogar Filipino

Plaintiffs-appellants: Buenaventura Lopez and Rosario Javelona, husband and wife, residents of Silay, Occidental Negros.
Defendant-appellant: El Hogar Filipino, Sociedad Mutua de Construccion y Prestamos, a domestic corporation organized under Philippine Corporation Law, functioning as a mutual building and loan association.
Defendant-appellee: Registrar of Deeds of Occidental Negros.
The controversy arose from a P84,000 loan granted by El Hogar Filipino to the plaintiffs on March 17, 1920, secured by a mortgage on real estate and pledge of shares of stock.
Plaintiffs defaulted in monthly payments starting May 31, 1921; the defendant declared the loan due and payable after a 3-month delinquency as per contract clause 9.
The mortgaged properties were sold extrajudicially to El Hogar Filipino, which plaintiffs sought to annul on grounds of usury and irregularity.

Loan for P84,000 granted on pledge of 420 Class A shares subscribed by plaintiffs; monthly payments of P1 per share to cover dues until share value equals loan amount.
Partial prepayments allowed in minimum multiples of P200, applied to principal reducing interest proportionately.
Interest fixed at 9% per annum, payable monthly in advance.
Delinquency fines of 3 centavos per month per peso unpaid plus similar further penalty for continued delay.
Loan secured by first mortgage on real estate and pledge of shares as additional collateral.
Irrevocable powers of attorney granted to the association’s manager for rent collection and extrajudicial sale after notice if default persisted beyond three months.
Upon extrajudicial sale, association may bid and acquire property; if debt is paid within 30 days post-sale, sale is void.
Debtors to pay taxes, insure property, keep buildings repaired, and refrain from encumbrances or unauthorized leases without association’s consent.
Dues on shares continue until full payment or matured value reached; profits prorated to stockholders.
Payment and mortgage cancellation procedures outlined with respective fees to be charged to debtors.

Plaintiffs were not shareholders prior to loan.
El Hogar Filipino only loans to shareholders.
Plaintiffs remain in possession of mortgaged properties and refuse delivery to El Hogar Filipino.
Plaintiffs were obligated to pay P7,560 annually as interest plus monthly dues of P420 on shares.
Loan proceeds were partly applied to discharge prior lien (Philippine National Bank).
Premium of 16.67% of loan amount was deducted at loan inception, recognized by law, and considered a profit by the association.
Plaintiffs defaulted on tax payments for 1921 and 1922 which caused confiscation proceedings on the property.
Extrajudicial sale took place on June 29, 1922; defendant El Hogar Filipino was sole bidder and purchased properties for P87,505.53.
Defendant Register of Deeds refused to register sale pending case outcome.
Correspondences confirmed plaintiffs’ acknowledgment of debt and payment obligations.

Trial court initially declared contract usurious, mortgage void ab initio, extrajudicial sale void, and ordered return of paid interests and attorney's fees to plaintiffs.
On reconsideration, court maintained contract was usurious and clause 10 void but held defendant entitled to recover principal amount of P66,682 with legal interest.
Both parties appealed, plaintiffs contesting collection of principal and interest, defendant contesting finding of usury.

Whether the loan contract (Exhibit 1) is usurious and therefore void.
Whether clause 10 of the contract, authorizing extrajudicial sale of mortgaged property, is valid.
Whether El Hogar Filipino is entitled to collect the principal amount loaned notwithstanding the usury claim.
Whether plaintiffs are entitled to recover interests and attorney’s fees paid.
Whether the extrajudicial sale and subsequent transfer of title were valid.
The proper computation of the loan amount and interest considering premiums, fines, and other charges.
Applicability and interpretation of the Usury Law (Act No. 2655) and the Corporation Law (Act No. 1459) with respect to building and loan associations.
Whether loan purposes and nature (agricultural loan on a sugar plantation) fall within the scope of building and loan associations under the law.
Whether defendant is entitled to possession of the mortgaged properties after extrajudicial sale.