LIAM LAW, PLAINTIFF-APPELLEE, VS. OLYMPIC SAWMILL CO. AND ELINO LEE CHI, DEFENDANTS-APPELLANTS.

This is an appeal by defendants from a Decision ren­dered by the then
Court of First Instance of Bulacan. The appeal was originally taken to
the then Court of Appeals, which endorsed it to this instance stating
that the issue involved was one of law.

It appears that on or about September 7, 1957, plain­tiff loaned
P10,000.00, without interest, to defendant part­nership and defendant
Elino Lee Chi, as the managing partner. The loan became ultimately due
on January 31, 1960, but was not paid on that date, with the debtors
asking for an extension of three months, or up to April 30, 1960.

On March 17, 1960, the parties executed another loan document. Payment
of the P10,000.00 was extended to April 30, 1960, but the obligation was
increased by P6,000.00 as follows:

“That the sum of SIX THOUSAND PESOS (P6,000.00), Philippine
currency shall form part of the principal obligation to answer for
attorney’s fees, legal interest, and other cost incident thereto to be
paid unto the creditor and his successors in interest upon the
termination of this agreement.”

Defendants again failed to pay their obligation by April 30, 1960 and,
on September 23, 1960, plaintiff insti­tuted this collection case.
Defendants admitted the P10,000.00 principal obligation, but claimed
that the additional P6,000.00 constituted usurious interest.

Upon application of plaintiff, the Trial Court issued, on the same date
of September 23, 1960, a Writ of Attachment on real and personal
properties of defendants located at Karanglan, Nueva Ecija. After the
Writ of Attachment was implemented, proceedings before the Trial Court
versed prin­cipally in regards to the attachment.

On January 18, 1961, an Order was issued by the Trial Court stating that “after considering the manifestations of both counsel in Chambers, the Court hereby allows both parties to simultaneously submit a Motion for Summary Judg­ment.^[1] The plaintiff filed his Motion for Summary Judgment on January 31, 1961, while defendants filed theirs on February 2, 1961.^[2]

On June 26, 1961, the Trial Court rendered decision ordering defendants
to pay plaintiff “the amount of P10,000.00 plus the further sum of
P6,000.00 by way of liquidated damages …. with legal rate of interest
on both amounts from April 30, 1960.” It is from this judgment that
defendants have appealed.

We have decided to affirm.

Under Article 1354 of the Civil Code, in regards to the agreement of the
parties relative to the P6,000.00 obli­gation, “it is presumed that it
exists and is lawful, unless the debtor proves the contrary”. No
evidentiary hearing having been held, it has to be concluded that
defendants had not proven that the P6,000.00 obligation was illegal.
Confirming the Trial Court’s finding, we view the P6,000.00 obligation
as liquidated damages suffered by plaintiff, as of March 17, 1960,
representing loss of interest income, attorney’s fees and incidentals.

The main thrust of defendants’ appeal is the allegation in their Answer
that the P6,000.00 constituted usurious interest. They insist the claim
of usury should have been deemed admitted by plaintiff as it was “not
denied specifically and under oath”.^[3]

Section 9 of the Usury Law (Act 2655) provided:

“SEC. 9. The person or corporation sued shall file its
answer in writing under oath to any complaint brought or filed against
said person or corporation before a competent court to recover the money
or other personal or real property, seeds or agricultural products,
charged or received in violation of the provisions of this Act. The lack
of taking an oath to an answer to a complaint will mean the admission
of the facts contained in the latter.”

The foregoing provision envisages a complaint filed against an entity
which has committed usury, for the recovery of the usurious interest
paid. In that case, if the entity sued shall not file its answer under
oath denying the allegation of usury, the defendant shall be deemed to
have admitted the usury. The provision does not apply to a case, as in
the present, where it is the defendant, not the plaintiff, who is
alleging usury.

Moreover, for sometime now, usury has been legally non-existent.
Interest can now be charged as lender and borrower may agree upon.^[4]
The Rule of Court in regards to allegations of usury, procedural in
nature, should be considered repealed with retroactive effect.

“Statutes regulating the procedure of the courts will be construed
as applicable to actions pending and undetermined at the time of their
passage. Procedural laws are retrospective in that sense and to that
extent.”^[5]

“x x x. Section 24(d), Republic Act No. 876, known as the
Arbitration Law, which took effect on 19 December 1953, and may be
retroactively applied to the case at bar because it is procedural in
nature x x x .”^[6]

WHEREFORE, the appealed judgment is hereby affirmed, without pronouncement as to costs.
SO ORDERED.

Teehankee, (Chairman), Plana, Relova, Gutierrez, Jr., and De La Fuente, JJ., concur.

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^[1] p. 81, Record on Appeal.

^[2] p. 116, ibid.

^[3] Section 1, Rule 9.

^[4] “SECTION 1. The rate of
interest, including commissions, premiums, fees and other charges, on a
loan or forbearance of any money, goods, or credits, regardless of
maturity and whether secured or unsecured, that may be charged or
collected by any person, whether natural or judicial, shall not be
subject to any ceiling prescribed under or pursuant to the Usury Law, as
amended.” (Central Bank Circular No. 905, Series of 1982, 78 Off. Gaz.
7336).

^[5] People vs. Sumilang, 77 Phil. 764 (1946).

^[6] De Lopez, et al. vs. Vda. de Fajardo, et al., 101 Phil. pp. 1104, 1109 (1957).