Angel Jose Warehousing Co., Inc. v
Chelda Enterprises and David Sy Jueco
GR No. L-25704, 24 April 1968
Bengzon, JP,. J.:
FACTS:
Plaintiff corporation filed suit in the Court of First Instance of Manila on May 29, 1964 against the partnership Chelda Enterprises and David Syjueco, its capitalist partner, for recovery of alleged unpaid loans in the total amount of P20,880.00, with legal interest from the filing of the complaint, plus attorney's fees of P5,000.00. Alleging that post dated checks issued by defendants to pay said account were dishonored, that defendants' industrial partner, Chellaram I. Mohinani, had left the country, and that defendants have removed or disposed of their property, or are about to do so, with intent to defraud their creditors, preliminary attachment was also sought. Answering, defendants averred that they obtained four loans from plaintiff in the total amount of P26,500.00, of which P5,620.00 had been paid, leaving a balance of P20,880.00; that plaintiff charged and deducted from the loan usurious interests thereon, at rates of 2% and 2.5% per month, and, consequently, plaintiff has no cause of action against defendants and should not be permitted to recover under the law. A counterclaim for P2,000.00 attorney's fees was interposed. Plaintiff filed on June 25, 1964 an answer to the counterclaim, specifically denying under oath the allegations of usury.
ISSUE:
Whether or not the creditor may recover the principal of the loan in a loan with usurious interest.
HELD:
Great reliance is made by appellants on Art. 1411 of the New Civil Code which states: When the nullity proceeds from the illegality of the cause or object of the contract, and the act constitutes criminal offense, both parties being in pari delicto, they shall have no action against each other, and both shall be prosecuted. Moreover, the provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall be applicable to the things or the price of the contract.
This rule shall be applicable when only one of the parties is guilty; but the innocent one may claim what he has given, and shall not be bound to comply with his promise. The Supreme Court do not agree with such reasoning. Article 1411 of the New Civil Code is not new; it is the same as Article 1305 of the Old Civil Code. Therefore, said provision is no warrant for departing from previous interpretation that, as provided in the Usury Law (Act No. 2655, as amended), a loan with usurious interest is not totally void only as to the interest. True, as stated in Article 1411 of the New Civil Code, the rule of pari delicto applies where a contract's nullity proceeds from illegality of the cause or object of said contract. However, appellants fail to consider that a contract of loan with usurious interest consists of principal and accessory stipulations; the principal one is to pay the debt; the accessory stipulation is to pay interest thereon. And said two stipulations are divisible in the sense that the former can still stand without the latter. Article 1273, Civil Code, attests to this: "The renunciation of the principal debt shall extinguish the accessory obligations; but the waiver of the latter shall leave the former in force."
