G.R. No. 19826; March 31, 1923
LUCIANO DELGADO, plaintiff-appellant, vs. EDUARDO ALONSO DUQUE VALGONA, defendant-appellee.

FACTS

On February 1, 1918, defendant Eduardo Alonso Duque Valgona conveyed twelve parcels of land to plaintiff Luciano Delgado. To secure the payment of the P15,000 purchase price, Delgado executed a mortgage in favor of Alonso over those twelve parcels and two additional parcels he already owned. The mortgage stipulated that Delgado would pay the P15,000 principal within twelve years and pay interest of P2,250 per year, payable semi-annually, which amounted to an interest rate above 15% per annum, violating the Usury Law (Act No. 2655) which set a maximum of 12%. Delgado paid P2,625 as interest on February 1, 1919. When Delgado failed to make further payments, he filed an action to recover the P2,625 paid as usurious interest and to have the usurious stipulations declared null. Alonso, in his cross-complaint, asked for the contract to be set aside and for Delgado to pay him the P15,000 purchase price (minus the interest paid). The trial court declared the mortgage void, ordered Alonso to return the P2,625 to Delgado, and ordered Delgado to pay Alonso P15,000 with legal interest. Both parties appealed, but only Delgado assigned errors.

ISSUE

1. Whether the mortgage contract is usurious.
2. Whether the creditor (Alonso) can recover the principal sum (P15,000) in an action arising from a usurious contract.
3. Whether the plaintiff (Delgado) is entitled to attorney’s fees.
4. Whether the trial court erred in excluding evidence on Delgado’s separate claim against Alonso.

RULING

1. Yes, the mortgage contract is usurious. It expressly stipulates for interest at a rate exceeding the legal maximum of 12% per annum.
2. No, the creditor cannot recover the principal sum in an action on a usurious contract. The Usury Law (Act No. 2655) declares that a usurious contract is void, and the creditor shall have no right to recover the principal, interest, or any other charges. The trial court’s award of P15,000 to Alonso is reversed.
3. Yes, the plaintiff is entitled to reasonable attorney’s fees. Section 6 of the Usury Law allows the recovery of attorney’s fees in an action for the recovery of usurious interest paid. The Court awards P1,000 as attorney’s fees.
4. No, the trial court did not commit reversible error in excluding evidence on Delgado’s separate claim for a loan of P1,937.10 to Alonso. This claim was not included in the complaint, and the proper remedy is a separate action.

The judgment is modified. The mortgage is declared void. Alonso is ordered to return the P2,625 to Delgado, with legal interest from the filing of the complaint, plus P1,000 as attorney’s fees. The award of P15,000 to Alonso is reversed. However, as a condition for satisfying the judgment in his favor, Delgado is ordered to reconvey the twelve parcels of land to Alonso.