Rotaeche v. La Urbana
REITERATIONFacts
The Antecedents: Juan de Rotaeche, a common-stockholder of "La Urbana," Mutual Building and Loan Association, obtained a loan of P7,000 for ten years. He executed a mortgage deed acknowledging an indebtedness of P8,050, which included the P7,000 loan and P1,050 for a 15% premium for ten years, as fixed by the defendant's board of directors. Procedural History: The plaintiff did not consider himself bound to pay the premium for the entire ten years, but only for one year, amounting to P150. Consequently, he claimed P900 of the P1,050 premium paid, arguing that Act No. 3291, amending the Usury Law, limits the premium to two percentum per annum, computed in annual payments, implying it cannot be collected for more than one year. The Court of First Instance of Rizal upheld the legality of the deduction and absolved the defendant. The Appeal: The plaintiff appealed the decision, assigning as errors the lower court's holding that Act No. 3291 authorizes the collection of total premiums in advance and its failure to order the defendant to return the P900 claimed.
Issue(s)
Whether Act No. 3291 authorizes mutual building and loan societies to collect the total amount of premiums in advance. Whether the plaintiff is entitled to recover P900 representing the premium for nine years.
Ruling
The Supreme Court affirmed the judgment of the Court of First Instance, holding that the deduction of P1,050 by the defendant from the loan granted to the plaintiff was legal. The Court ruled that Act No. 3291 does not prohibit the advance collection of premiums, and the phrase 'computed in annual payments' refers to the rate, not the collection period. The premium rate of 1.5% per annum did not exceed the 2% limit, and the by-laws permitted total deduction.
Ratio Decidendi
On Issue 1: The Court held that Act No. 3291, which amended the Usury Law, does not prohibit the advance collection of premiums by mutual building and loan societies. Section 181 of the Corporation Law (Act No. 1459) explicitly allows for the deduction of premiums from the loan amount. Act No. 3291, while setting a limit on the premium rate at two percentum per annum, does not abrogate this method of collection. The phrase "computed in annual payments" refers to the calculation of the annual rate of the premium and does not restrict the period for which the premium can be collected or deducted in advance. Therefore, the power to deduct the total premium from the loan, as provided in the Corporation Law, subsists as long as the premium rate is within the statutory limit and the association's by-laws permit it. On Issue 2: The plaintiff is not entitled to recover the P900 claimed. The Court found that the premium rate charged by "La Urbana" was 1.5% per annum, which is within the 2% per annum limit set by Act No. 3291. Furthermore, the stipulation of facts indicated that the by-laws of the defendant society permitted the total deduction of the premium from the loan. Consequently, the defendant acted within its legal authority and the terms of its by-laws when it deducted the P1,050 premium from the P7,000 loan granted to the plaintiff. The plaintiff's contention that the premium could only be collected for one year was based on a misinterpretation of the phrase 'computed in annual payments'.
Main Doctrine
The Court affirmed that mutual building and loan societies, under Section 181 of Act No. 1459 (Corporation Law), are authorized to deduct the premium for a loan from the principal amount thereof. This power subsists even with the amendment introduced by Act No. 3291 to the Usury Law, which limits the premium rate to two percentum per annum. The phrase 'computed in annual payments' in Act No. 3291 refers to the rate calculation and not the period of collection, thus not prohibiting the advance collection of the entire premium as long as it adheres to the statutory rate and the association's by-laws.