Case Summary (G.R. No. L-23559)

Usury Law Overview

• The Usury Law penalizes individuals or corporations that collect or receive interest rates exceeding legal limits for loans or forbearance.
• Debtors can recover all interest, commissions, premiums, penalties, and surcharges paid, along with costs and attorney's fees, within two years of payment (Section 6, Act 2655, as amended).

Creditor's Rights in Usurious Loans

• Even if a loan is deemed usurious, creditors are entitled to collect the actual loan amount and legal interest (Go Chioco vs. Martinez).
• Debtors in usurious contracts must pay the amount they justly owe to creditors (Gui Jong & Co. vs. Rivera).

Limitations on Recovery of Usurious Interest

• A usurious contract is void, and creditors cannot recover interest exceeding lawful rates.
• Debtors cannot unjustly enrich themselves by retaining the principal loan amount while avoiding repayment.

Capital Recovery Rights

• The Usury Law does not forfeit the lender's right to recover the actual loan amount.
• The law aims to prevent unjust enrichment of the debtor while allowing the creditor to recover the principal.

Divisibility of Loan Contracts

• A loan contract with usurious interest is divisible; the principal obligation remains enforceable despite the illegality of the interest.
• Article 1273 of the Civil Code supports that waiving the accessory obligation (interest) does not extinguish the principal debt.

Compatibility of Civil Code and Usury Law

• There is no conflict between the New Civil Code and the Usury Law regarding the recovery of excess interest.
• Article 1413 of the Civil Code allows debtors to recover all usurious interest paid, with interest from the date of payment.

Criminal Liability for Usurers

• The Usury Law provides for criminal prosecution of usurers, with penalties including fines and imprisonment.
• Convicted usurers may also be ordered to return all interest received in excess of legal limits.

Nullity of Excessive Interest Collection

• The law nullifies the collection of excessive interest but does not prohibit the recovery of the principal loan amount.
• The moral obligation of the borrower to repay the loan remains intact despite the usurious nature of the interest.

Implications of Article 1957 of the Civil Code

• Article 1957 declares contracts intended to circumvent usury laws void, allowing borrowers to recover under usury laws.
• The article emphasizes that the borrower may recover amounts paid as usurious interest, reinforcing the protection against usury.

Dissenting Opinions on Usurious Contracts

• Some justices argue that usurious contracts should be considered void in their entirety, including the principal.
• The dissent highlights that the stipulation to pay usurious interest is integral to the contract's cause, rendering the entire contract illegal.

Summary of Case Proceedings

• Aurelio G. Briones filed a suit against the Cammayo d...continue reading

Case Syllabus (G.R. No. L-23559)

Case Background

• On February 22, 1962, Aurelio G. Briones initiated legal proceedings against Primitivo P. Cammayo and his co-defendants to recover P1,500.00, alongside damages, attorney's fees, and costs.
• The defendants responded with specific denials and raised several special defenses, including a counterclaim regarding the alleged usurious nature of the loan agreement.

Special Defenses and Counterclaims

• The defendants claimed that the real estate mortgage was executed as security for a loan of P1,200.00, alleging a usurious agreement requiring them to pay P300.00 in advance interest for one year.
• They argued that actual payment towards the loan was made, amounting to P330.00, which Briones refused to acknowledge correctly.
• The defendants maintained that the loan was usurious and therefore void from the beginning, citing Article 1407 of the Civil Code.
• In their counterclaim, they sought damages and attorney's fees due to Briones's alleged violations of the Usury Law and expressed mental anguish from repeated harassment by Briones.

Court Proceedings and Rulings

• On September 7, 1962, Briones filed a reply denying the counterclaims.
• The Municipal Court granted the defendants’ motion for a summary judgment, leading to a judgment ordering the defendants to pay Briones P1,500.00 plus interest and attorney’s fees.
• The defendants appealed the judgment to the...continue reading