PALILEO VS COSIO 1955

Coming now to the merits of the case, we note that the lower court made the following
findings: On December 18, 1951, plaintiff obtained from defendant a loan in the sum of
P12,000 subject to the following conditions: (a) that plaintiff shall pay to defendant an interest
in the amount of P250 a month; (b) that defendant shall deduct from the loan certain
obligations of plaintiff to third persons amounting to P4,550, plus the sum of P250 as interest
for the first month; and (c) that after making the above deductions, defendant shall deliver to
plaintiff only the balance of the loan of P12,000.

Pursuant to their agreement, plaintiff paid to defendant as interest on the loan a total of
P2,250.00 corresponding to nine months from December 18, 1951, on the basis of P250.00
a month, which is more than the maximum interest authorized by law. To secure the
payment of the aforesaid loan, defendant required plaintiff to sign a document known as
"Conditional Sale of Residential Building", purporting to convey to defendant, with right to
repurchase, a two-story building of strong materials belonging to plaintiff. This document did
not express the true intention of the parties which was merely to place said property as
security for the payment of the loan.

After the execution of the aforesaid document, defendant insured the building against fire
with the Associated Insurance & Surety Co., Inc. for the sum of P15,000, the insurance
policy having been issued in the name of defendant. The building was partly destroyed by
fire and, after proper demand, defendant collected from the insurance company an indemnity
of P13,107.00. Plaintiff demanded from defendant that she be credited with the necessary
amount to pay her obligation out of the insurance proceeds but defendant refused to do so.
And on the strength of these facts, the court rendered decision the dispositive part of which
reads as follows:

:(1) the transaction had between the plaintiff and defendant as shown in Exhibit A is merely
an equitable mortgage intended to secure the payment of the loan of P12,000;(2) that the
proceeds of the insurance amounting to P13,107.00 was properly collected by defendant
who is not required to account for it to the plaintiff; (3) that the collection of said insurance
proceeds shall not be deemed to have compensated the obligation of the plaintiff to the
defendant, but bars the latter from claiming its payment from the former; and (4) defendant
shall pay to the plaintiff the sum of P810.00 representing the overpayment made by plaintiff
by way of interest on the loan. No pronouncement as to costs

El hogar

This litigation arose out a loan of P84,000 which the defendant El Hogar
Filipino had made to the spouses Buenaventura Lopez and Rosario Javelona on
March 17, 1920. Beginning May 31, 1921, the debtors failed to make the
monthly payments stipulated in the contract; wherefore, the board of directors
of El Hogar Filipino, at the expiration of the three months of delinquency
provided for in clause 9 of the document, Exhibit 1, copied hereinafter declared
the loan due and payable.

The mortgaged properties were sold publicly in an extrajudicial sale and were
purchased by El Hogar Filipino. The debtors filed a complaint, praying: (a) For
the annulment of the contract evidenced by Exhibit 1, as being usurious; (b) for
the annulment of the extrajudicial sale of the mortgaged properties, as well as
the cancellation of all registrations, annotations or recordations of the same and
of the certificates of title that may have been issued in that connection by the
register of deeds; (c) for the return of all the interest and fines paid by them; (
), in which it was held that the debtor seeking equity must do equity by
returning to the creditor the capital that he may have received. In
discussing the law applicable to the case, this court, among other things,
said the following:
The doctrine of that case we consider applicable here; and without
expressing any opinion upon the broader question whether capital lent
upon a usurious contract can be recovered in an aggressive action by the
creditor, we are content to hold that when the debtor in a usurious
contract sees fit, or finds it necessary to apply to the court for equitable
relief, he will, as a condition to the granting of such relief, be required to
restore what he received from the other party. In the present case both
parties are before the court in the attitude of suppliants, each asking relief
from the contract in question; and in order to avoid the possibility of
further litigation, as well as to secure complete justice, an order will be
entered requiring the plaintiff, as a condition of the satisfaction of the
judgment in his favor, to reconvey to the defendant the same twelve
parcels acquired by the plaintiff from the defendant.

 that the trial court erred in holding the entire contract void and in
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dismissing the complaint, because the interest was in excess of 24 per cent
per annum. The court said: "... In the opinion in the case of Go Chioco vs.
Martinez (45 Phil., 256), the majority of this court held that, in an action
upon a usurious loan, the lender can recover the capital actually lent,
together with interest thereon from the time of the institution of his action.
According to this doctrine, the contract is unenforcible only to the extent
of the stipulated usurious interest."