Private Development Corporations of the Philippines vs. IAC & Ernesto C. del Rosario, G.R. No. 73198, September 02, 1992
Subject: Obligations and Contracts
FACTS
On May 21,
1974, Davao Timber Corporation, DATICOR for brevity, and the Private
Development Corporation (PDCP) entered into a loan agreement. It was stipulated
in the loan agreement, that the foreign currency loan was to be paid with an
interest rate of eleven and three fourths (11-3/4%) per cent per annum on the
disbursed amount of the foreign currency; and the peso loan at the rate of
twelve (12%) percent per annum on the disbursed amount of the peso loan
outstanding, commencing on the several dates on which disbursements of the
proceeds of the loans were made.
A total of
P3,000,000.00 was already paid by Del Rosario to PDCP and which the latter
applied to interests, service fees and penalty charges, such that according to
PDCP, DATICOR still has an outstanding balance on the principal loan of
P10,887,856.99 as of May 15, 1983.
DATICOR filed
a case in the Court of First Instance of Davao Oriental seeking a writ of
injunction to prevent PDCP from foreclosing its properties in Davao, and
likewise praying for the annulment of the loan contract as it is in violation
of the Usury Law and damages.
The then
Intermediate Appellate Court set aside the decision appealed declared the
stipulations of interest in the loan agreement between DATICOR and PDCP void
and of no effect, as if the loan agreement is without stipulation as to payment
of interest."
ISSUE:
Whether or not
stipulations on usurious interest should be interpreted to mean forfeiture even
of the principal.
RULING
No
As held in
Angel Jose Warehousing Co., Inc. v. Chelda Enterprises, et.al., "In simple
loan with stipulation of usurious interest, the prestation of the debtor to pay
the principal debt, which is the cause of the contract (Article 1350, Civil
Code), is not illegal. The illegality lies only as to the prestation to pay the
stipulated interest: hence, being separable, the latter only should be deemed
void, since it is only one that is illegal."
In this case,
SC held that the law should not be interpreted to mean forfeiture of the
principal loan as that would be unjustly enriching the borrower. The unpaid
principal debt still stands and remains valid but the stipulation as to the
usurious interest is void, consequently, the debt is to be considered without
stipulation as to the interest. Furthermore, penal sanctions are available
against a usurious lender, as a further deterrence to usury. "The
principal debt remaining without stipulation for payment of interest can thus
be recovered by judicial action."
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