GUI JONG & CO., PLAINTIFF AND APPELLANT, VS. JOSE RIVERA AND REGINA AVELLAR, DEFENDANTS AND APPELLEES.

STATEMENT

March 25, 1920, the defendants executed a mortgage to the plaintiff on all
the sugar cane planted and sown during the agricultural years 1920 and 1921 on
the hacienda Santa Julia, situated in the municipality of Himamaylan, Occidental
Negros, estimated to yield 2,500 piculs of sugar approximately, and upon ten
different carabaos, which are specifically described in the mortgage. Also
one-half of a parcel of agricultural land in the sitio of Kabigtagan,
municipality of Kabankalan, Province of Occidental Negros. containing an area of
thirty-two hectares, also specifically described. The mortgage recites that it
is executed as security for the payment to the plaintiff of the sum of P8,000,
with interest at the rate of 12 per cent per annum in the nature of a loan. Also
that:

“Fourth. The mortgagor is under obligation to consign to the mortgagee 2,500
piculs of sugar approximately of the crops mortgaged of the year 1920-1921
actually existing on the lands above indicated, which crop shall be 2,500 piculs
approximately.

“Fifth. The debtor hereby binds himself to sell to the mortgagee all the
sugar he may harvest up to the amount of P8,000, with interest thereon;
provided, that the purchase to be made by the creditor of said sugar must be on
the basis of P1.50 less for each picul than the price the same may have in the
Iloilo market on the date or dates of its arrival.

“Sixth. All transportation expenses and internal revenue shall be for the
account of the mortgagor.” It further provides that should the mortgagor violate
any of the conditions, he should pay the further sum of P500 as attorney’s fees.
The mortgage was duly signed, witnessed, acknowledged and filed for record.

For a breach of its conditions, the plaintiff commenced this action. Among
other things, the complaint alleges that between March 25, 1920, and April 15,
1921, plaintiff furnished the defendants various sums of money and merchandise,
on which the defendants agreed to pay interest at the rate of 12 per cent per
annum, the full amount of which with interest to April 15, 1921, is P18,166.79.
An itemized list of the items is attached to, and made a part of, the complaint.
It is then alleged that notwithstanding the provisions of the mortgage, the
defendants delivered only 866.20 piculs of sugar on February 14, 1921, the value
of which was P6,265.92, for which defendants were duly credited; that there is
now due and owing from the defendants to the plaintiff the sum of P11,900.87,
with interest from April 15, 1921, at the rate of 12 per cent per annum; that
under the terms of the contract, the plaintiff is entitled to recover P500 as
attorney’s fees, and prays judgment for the respective amounts, “and for such
other relief as the court may deem just and equitable.”

For answer, the defendants made a general denial, and, as a special defense,
“allege that the contract and contracts upon which the suit is based are
usurious in that the rate of interest is greater than that allowed by law, that
is to say, the same is in excess of 12 per cent and also because the contracts
called for payment of the alleged debt and loans in crops and there is no
provision in said contract and contracts that the said crops should be taken
over by the plaintiff at their market value,” and they pray that the complaint
be dismissed, the contract be declared null and void, and for damages resulting
from the attachment upon the property.

Upon such issues, the trial court found from the evidence that, under the
terms and conditions of the mortgage, the plaintiff had loaned and advanced to
the defendant, Jose Rivera, money and merchandise to the value of P18,166.79,
upon which the defendant had only paid P6,265.92, the agreed price of the 866.20
piculs of sugar, leaving a balance due and owing plaintiff of P1,900.87. The
court also found that all of the loan was usurious, with the exception of
P3,500, and rendered judgment for that amount, with interest on P1,500 at the
rate of 12 per cent from April 28, 1920, and legal interest on the remaining
P2,000 from the date of the filing of the complaint, and absolved the defendant
Regina Avellar, upon the theory that it had not been proven that she had
anything whatever to do with Exhibits 1 and 2, covering the P3,500 transaction,
and denied the right of the plaintiff to recover attorney’s fees. From this
decision plaintiff appeals, specifying the following assignments of error:

“1. The court erred in rendering judgment condemning the defendant Jose
Rivera to pay the plaintiff only the sum of P3,500 instead of P11,900.87, the
difference between the total amount advanced to the defendants, P18,166.79, and
the P6,265.92, value of the 866 piculs of sugar delivered by the defendants to
plaintiff.

“2. The court erred in not allowing P500 to plaintiff as attorney’s fees.

“3. The court erred in deciding that the P1.50 less per picul to be paid by
the plaintiff to the defendants was in the form of interest, and consequently
usurious.

“4. The judgment of the lower court is contrary to the weight of the
evidence.

“5. The judgment of the lower court is contrary to law.

JOHNS, J.:

It will be noted that the appellant does not make any assignment of error as
to the decision of the court in absolving the defendant Regina Avellar. Neither
is it discussed in its brief.

The mortgage was executed to secure the amount of the original loan of
P8,000, and the trial court found as a fact that all other amounts were advanced
and loaned to the defendant Jose Rivera upon the same conditions as those stated
in the mortgage. It specifically provides that the P8,000 shall draw interest at
the rate of 12 per cent per annum, and that the estimated crop of 2,500 piculs
of sugar shall be assigned to the mortgagee, and that the proceeds of sale shall
be applied in satisfaction of the debt. It further recites “that the purchase to
be made by the creditor of said sugar must be on the basis of P1.50 less for
each picul than the price the same may have in the Iloilo market on the date or
dates of its arrival.” In other words, that Jose Rivera bound himself to deliver
to the plaintiff the amount of the crop estimated to be 2,500 piculs, and to
sell it to plaintiff at P1.50 less than the mar- ket price of sugar.

If the transaction had been carried out as agreed upon between the parties,
the plaintiff would not only have received 12 per cent interest on the amount of
his loan, but in addition he would have received the further sum of P3,750, the
difference between the market price of the sugar and the price which plaintiff
was to pay for it. The plaintiff contends that he was to be paid the P1.50 per
picul for his commission and expenses in the handling and sale of the sugar. But
the mortgage will not bear that construction. It does not contain any provision
of that nature. It is very apparent that the promise of Jose Rivera to sell the
sugar to plaintiff for “P1.50 less than the market price, in addition to
interest at 12 per cent per annum, was one of the inducements for the making of
the loan.

We agree with the trial court that the mortgage upon its face should be
construed as a usurious transaction. It found that the total amount of
plaintiff’s claim was P18,166.79. But as pointed out in the appellees’ brief,
that amount includes interest on the loan up to the filing of the complaint, or
P1,394.34. Hence, it follows that, exclusive of interest, the actual amount
loaned to the defendant was P16,772.45. Deducting from this P6,265.92, the value
of the sugar delivered to plaintiff, it leaves a balance due and owing of
P10,506.53, which, exclusive of interest, is the amount which the trial court
found was due and owing from Jose Rivera to the plaintiff. As a matter of fact,
there is no dispute about the amount. In legal effect, the defendant admits that
amount to be correct, but contends that because the transaction was usurious, it
was void and, therefore, he is released from all liability, and that plaintiff
is not entitled to recover anything.

In other words, in legal effect, Jose Rivera admits that he got that amount
of money and that he owes it to the plaintiff, but because the transaction was
usurious, that he is released from the debt, and plaintiff cannot enforce his
claim. That position is not tenable. If the defendant had paid the debt and had
complied with his contract, he would then be in a position to recover any
usurious interest which he paid. But, here, the defendant breached the contract
and only delivered about one-third of the amount of sugar which he agreed to
deliver, and the court finds as a fact that, exclusive of interest, there is now
due and owing the plaintiff the sum of P10,506.53.

Upon what theory can the defendant breach his own contract and rely upon its
enforcement? Upon what legal principle can he deny liability upon a contract
which he repudiated and failed to perform ? How and in what manner has the
defendant paid the amount of the original loan, which he admits having received?
Upon what legal or equitable principle can he defeat the payment of the amount
of the original loan for the reason that he failed and neglected to perform his
own contract? By no fiction or rule of law would the fact that the interest was
usurious and was never paid by the defendant operate as a payment or
satisfaction of the original loan.

In any event, he should pay the plaintiff the amount which he justly owes
him. That question was squarely met and decided in the case of Aguilar vs.
Rubiato and Gonzalez Vila (40 Phil., 570), which upon legal principle was
followed in Delgado vs. Alonso Duque Valgona, decided by this court on March 31,
1923, and reported in the Philippine Reports, vol. 44, page 739, and which was
cited and approved in Go Chioco vs. Martinez, decided by this court on October
17, 1923, p. 256, ante, where the syllabus says:

“2. USURIOUS LOAN; ACTION TO RECOVER PRINCIPAL.— Under Act No. 2655, all
usurious loan is void, but this does not mean that the debtor may keep the
principal received by him as loan, thus unjustly enriching himself to the damage
of the creditor, but that the creditor has no right of action for the recovery
of the stipulated interest, although he may sue for the recovery of the
principal loaned.”

That is this case. Upon that decision the plaintiff is entitled to judgment
for the full amount of its claim against the defendant Jose Rivera.

The judgment of the lower court is reversed, and one will be entered here in
favor of the plaintiff and against the defendant, Jose Rivera, for the sum of
P10,506.53, with interest on P1,500 of that amount at the rate of 12 per cent
per annum from the 28th day of April, 1920, and with interest upon the balance
of that amount from April 19, 1921, the. supposed date of the filing of the
original complaint, at the rate of 6 per cent per annum, and with costs in this
and the lower court, but without attorney’s fees.

It further appearing that an attachment was issued and levied upon the
property of the defendant to secure plaintiff’s claim, it is further ordered
that the property so attached be sold to satisfy the judgment. So ordered.

Johnson, Street, Malcolm, Avancena, Ostrand, and Romualdez,
JJ., concur.