G.R. No. L-23559, October 4, 1971
AURELIO G. BRIONES, plaintiff-appellee, vs. PRIMITIVO P. CAMMAYO, ET AL., defendants-appellants.

FACTS

Aurelio G. Briones filed an action to recover a loan of P1,500.00 secured by a real estate mortgage from the Cammayo brothers. The defendants, in their answer, asserted the loan was usurious. They alleged that while the mortgage document stated a principal of P1,500.00, Briones actually delivered only P1,200.00, withholding P300.00 as advance interest for one year. They further claimed to have made interest payments totaling P330.00, which Briones refused to acknowledge as partial payment of the principal.
The Municipal Court granted a motion for summary judgment in favor of Briones. On appeal, the Court of First Instance also proceeded by summary judgment. It found the loan contract to be tainted with usury. The trial court then rendered a modified judgment, ordering the defendants to pay P1,180.00. This amount represented the stated principal of P1,500.00, less the P300.00 advance interest and P200.00 in attorney’s fees, plus legal interest. The defendants appealed to the Supreme Court, contending that the trial court erred in not dismissing the case entirely and in still ordering payment of the principal.

ISSUE

The primary issue is whether a creditor in a usurious loan contract is entitled to recover the principal amount of the loan from the debtor.

RULING

Yes, the creditor is entitled to recover the principal. The Supreme Court modified the appealed decision, ruling that Briones could recover the actual amount loaned, which was P1,200.00, not the P1,180.00 calculated by the trial court, plus legal interest from the filing of the complaint.
The legal logic is anchored on the interpretation of the Usury Law (Act No. 2655) and established jurisprudence. The Court clarified that while the Usury Law declares a usurious contract void and allows the debtor to recover any excess interest paid within two years, it does not provide for the forfeiture of the principal loaned. To rule otherwise would result in the unjust enrichment of the debtor at the creditor’s expense, as the debtor would be permitted to keep the money or property he actually received and used. The Court cited precedents like Go Chioco vs. Martinez and Lopez and Javelona vs. El Hogar Filipino, which consistently held that the lender retains the right to recover the money actually loaned and enjoyed by the borrower. The penalty for usury is the loss of the right to collect the unlawful interest, not the capital itself. The principal obligation remains due and demandable, but only the actual sum received by the debtor, plus legal interest, may be recovered. The Court distinguished the case from Mulet v. Viray, where the issue involved the recovery of illicit consideration in a pacto de retro sale, not the forfeiture of a loan’s principal.