This case has been cited 161 times or more.
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2002-06-06 |
QUISUMBING, J. |
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| In a simple loan with a stipulation of usurious interest, the prestation of the debtor to pay the principal debt, which is the cause of the contract, is not illegal. The illegality lies only in the stipulated interest. Being separable, only the latter should be deemed void. To discourage stipulations on usurious interest, said stipulations are treated as wholly void, so that the loan becomes one without a stipulation as to payment of interest. It should not, however, be interpreted to mean forfeiture even of the principal, for this would unjustly enrich the borrower at the expense of the lender. In addition, we award, by way of compensatory damages for the breach of the obligation of petitioners to pay the sum of money loaned, an interest in the amount of 12 percent per annum, to be computed from default, i.e., from judicial or extrajudicial demand in accordance with Article 1169.[38] Such interest is not due to stipulation, for there was none, the same being void. Rather it is due to the general provision of law that in obligations to pay money, where the debtor incurs in delay, he has to pay interest by way of damages, in conformity to our ruling in Eastern Shipping Lines, Inc. vs. Court of Appeals.[39] | |||||