Siga-an v. Villanueva (2009)
As explained by Villanueva, the presented
Chico-Nazario, J.
Facts:
 Alicia Villanueva filed a complaint against Sebastian Sigaan bec she wants a return of
her money (the excess interest she paid). Events according to her:
o Sigaan, the comptroller of the Phillipine Navy, offered to loan money to her.
She accepted because she needed capital for her office supply business
venture. She currently supplies office mat’l and equipment to the Phil Navy.
o She agrees to the loan of P540k. Loan was not in writing and there was no
stipulation as to payment of interest.
o She issues a check worth P500; as partial payment. 2 months later, she
issues another check worth P200k.
o Sigaan (who now received P700k from Villanueva) said the excess money
Villanueva paid would be applied as interest. But Sigaan still kept pestering
her for additional interest and threatened to block her transactions with the
Phil Navy if she won’t comply. Fearing this, she paid additional amounts
totalling to P1.2m. She asked for a receipt but was told that there was no
need bec they had mutual trust and confidence.
o She then consulted a lawyer who told her that Sigaan could not validly
collect interest because there was no agreement of interest. She demands
from Sigaan the return of the P660k.
 According to Sigaan, however:
o He did not offer to loan but was instead propositioned by Villanueva and
insists that there was no overpayment, as that there was a promissory note
by Villanueva admitting to having borrowed P1.24m.
o As payment, Villanueva issued 6 postdated checks. Only 1 was honoured.
He filed criminal cases against Villanueva (BP 22). In this BP 22 case,
Sigaan claims that Villanueva, in her testimony, admitted to having agreed
to a 7% interest. This should be an exception (to the rule that interests
should be in writing) because it would be unfair since Villanueva already
admits to the interest.
o Also Villanueva was already estopped from complaining because she was
given several times to settle her obligation but failed.
 RTC says: there was overpayment. Villanueva’s obligation only amounted to P540k
because there was no interest agreement. CA affirmed.
Issue: Was there overpayment? What about interest?
Held: [Yes. Sigaan should return the excess amounts.] [No interest to be paid by Villanueva.
However, Sigaan should pay interest on the amounts he should refund Villanueva.]
Ratio:
 SC defines interest: monetary and compensatory:
o Monetary interest: Interest is a COMPENSATION fixed by the PARTIES for
the use or forbearance of money.
o Compensatory: Interest imposed by LAW or by COURTS as PENALTY or
INDEMNITY.
 The right to interest arises only:
1. By a contract; or
2. By virtue of damages for delay or failure to pay the principal loan
RE: Interest should be stipulated in writing
 NCC 1956: Refers to monetary interest and mandates that no interest shall be due
unless stipulated in writing. So, it is allowed only when the following concur:
1. If there was express stipulation for interest payment
2. AND if the agreement was in writing
 In this case, the parties did not agree.
promissory note was in her handwriting because Sigaan told her to copy it and she did
because she feared the threats of Sigaan to block her deals with the Phil Navy. (this
was not rebutted by Sigaan so the SC believed this explanation)
o Clearly, there was NO CONSENT to the payment of interest, she was
coerced.
RE: Exceptions
 Sigaan’s claim that Villanueva admitting to the interest should be an exception, SC
says: In the BP22 case, Villanueva did not declare to have made an express
stipulation in writing as to the interest. There instances in which interest may be
imposed in the absence of stipulation, verbal or written, are:
1. NCC 2209: If obligation consists in payment of sum of money, no stipulation
on interest, and debtor incurs delay = legal interest 12% per annum
2. NCC 2212: interest due shall earn legal interest from the time it is judicially
demanded
 Under those 2 instances, interest MAY be imposed only as PENALTY or damages for
breach of CONTRACTUAL obligations and NOT for compensation for the use or
forbearance of money.
o MEANING: those 2 are only applicable to COMPENSATORY interests and
not to monetary interest.
o This case involves a claim for monetary interest. Compensatory is not
chargeable because it was not proven that Villanueva defaulted in paying
the loan.
RE: Solutio indebiti (NCC 2154: 1. if something is received where there is no right to demand it
and 2. it was delivered through mistake, the obligation to return it arises)
 Principle: no one shall enrich himself unjustly at expense of another
RE: Interest payment
 Eastern Shipping v. CA:
o when an obligation NOT constituting a loan or forbearance of money is
breached, interest on amount of damages may be imposed at the rate of 6%
per annum.
o When judgment awarding a sum of money becomes final and executory,
legal interest (whether loan/forbearance or money or not) shall be 12% per
annum from finality
o The INTERIM period is deemed a forbearance of credit
 Sigaan’s obligation arises from a quasi-contract of solutio indebitu and NOT from a
loan or forbearance of money. So:
o 6% per annum should be imposed on the amount to be refunded (as well as
to the damages and atty fees) from time of extra judicial demand (March
3, 1998) up to finality.
o Amount shall become 12% per annum from finality of decision up to its
satisfaction
Abella v. Abella (GR 195166)
In a loan or forbearance of money, according to the Civil Code, the interest due should be that
stipulated in writing, and in the absence thereof, the rate shall be 12% per annum.
Recently, however, the Bangko Sentral ng Pilipinas amending Section 2 of Circular No. 905,
Series of 1982:
Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and
the rate allowed in judgments, in the absence of an express contract as to such rate of
interest, shall be six percent (6%) per annum.
This Circular shall take effect on 1 July 2013.
FACTS: Petitioners alleged that respondents obtained a loan from them in the amount of
P500,000.00. The loan was evidenced by an acknowledgment receipt dated March 22, 1999
and was payable within one (1) year. Petitioners added that respondents were able to pay a total
of P200,000.00—P100,000.00 paid on two separate occasions—leaving an unpaid balance of
P300,000.00.
On March 22, 1999, respondents executed an acknowledgment receipt to petitioners, which
states:
This is to acknowledge receipt of the Amount of Five Hundred Thousand (P500,000.00) Pesos
from Mrs. Alma R. Abella, payable within one (1) year from date hereof with interest.
Annie C. Abella (sgd.) Romeo M. Abella (sgd.
In their Answer, respondents alleged that the amount involved did not pertain to a loan they
obtained from petitioners but was part of the capital for a joint venture involving the lending of
money.
Specifically, respondents claimed that they were approached by petitioners, who proposed that if
respondents were to "undertake the management of whatever money [petitioners] would give
them, [petitioners] would get 2.5% a month with a 2.5% service fee to [respondents]." The 2.5%
that each party would be receiving represented their sharing of the 5% interest that the joint
venture was supposedly going to charge against its debtors. Respondents further alleged that
the one year averred by petitioners was not a deadline for payment but the term within which
they were to return the money placed by petitioners should the joint venture prove to be not
lucrative. Moreover, they claimed that the entire amount of P500,000.00 was disposed of in
accordance with their agreed terms and conditions and that petitioners terminated the joint
venture, prompting them to collect from the joint venture's borrowers. They were, however, able
to collect only to the extent of P200,000.00; hence, the P300,000.00 balance remained unpaid.
Trial Court ruled in favor of petitioners. Ordering respondents to pay the petitioner the sum of
P300,000 with interest of 30% per annum.
The CA ruled that while respondents had indeed entered into a simple loan with petitioners,
respondents were no longer liable to pay the outstanding amount of P300,000.00. CA noted that
while the acknowledgement receipt showed that interest was to be charged, no particular
interest rate was specified. Thus, at the time respondents were making interest payments of
2.5% per month, these interest payments were invalid for not being properly stipulated by the
parties. Since petitioners' charging of interest was invalid, the Court of Appeals reasoned that all
payments respondents made by way of interest should be deemed payments for the principal
amount of P500,000.00.aThe Court of Appeals further noted that respondents made a total
payment of P648,500.00, which, as against the principal amount of P500,000.00, entailed an
overpayment of P148,500.00. Applying the principle of solutio indebiti, the Court of Appeals
concluded that petitioners were liable to reimburse respondents for the overpaid amount of
P148,500.
ISSUE 1. WON the party entered into a simple loan or mutuum as agreement?
2. Whether interest accrued on respondents' loan from petitioners, If so, at what rate?
RULING:
1. As noted by the CA and RTC, respondents entered into a simple loan or mutuum, rather than
a joint venture, with petitioners.
Art. 1933. By the contract of loan, one of the parties delivers to another, either something not
consumable so that the latter may use the same for a certain time and return it, in which case
the contract is called a commodatum; or money or other consumable thing, upon the condition
that the same amount of the same kind and quality shall be paid, in which case the contract is
simply called a loan or mutuum.
Commodatum is essentially gratuitous.
Simple loan may be gratuitous or with a stipulation to pay interest.
In commodatum the bailor retains the ownership of the thing loaned, while in simple loan,
ownership passes to the borrower.
Art. 1953. A person who receives a loan of money or any other fungible thing acquires the
ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and
quality.
2. 12% per annum. In a loan or forbearance of money, according to the Civil Code, the interest
due should be that stipulated in writing, and in the absence thereof, the rate shall be 12% per
annum.
Recently, however, the Bangko Sentral ng Pilipinas Monetary Board, approved the following
revisions governing the rate of interest in the absence of stipulation in loan contracts, thereby
amending Section 2 of Circular No. 905, Series of 1982:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and
the rate allowed in judgments, in the absence of an express contract as to such rate of
interest, shall be six percent (6%) per annum.
This Circular shall take effect on 1 July 2013.
Applying this, the loan obtained by respondents from petitioners is the conventional interest at
the rate of 12% per annum, the legal rate at the time the parties executed their agreement.
Proceeding from these premises, we find that respondents made an overpayment in the amount
of P3,379.17.
Petitioners Spouses Salvador and Alma Abella are DIRECTED to jointly and severally reimburse
respondents Spouses Romeo and Annie Abella the amount of P3,379.17, which respondents
have overpaid.

Leonides C. Diño, petitioner,vs. Lina Jardines, respondent.
G.R. No. 145871 January 31, 2006
AUSTRIA-MARTINEZ, J.
Facts:
On January 31 1987, Lina Jardines sold a parcel of land with improvements for P165,000 to
Leonides Diño through a Deed of Sale with Pacto de Retro. It was stipulated in the deed that
period of redemption would expire in 6 month or on July 29, 1987. Jardines was not able to redeem
the land. Hence, Diño filed a Petition for Consolidated Ownership with RTC Baguio on December
14,1992.
Jardines contended that the Deed of Absolute Sale did not embody the real intention of the parties.
The true transaction entered was one of simple loan and the Deed of Sale was only executed as
a security for the loan. Jardines claimed that she borrowed P 50,000 on the first week of January
with a monthly interest of 9% to be paid in 6 months. When it was insufficient for the construction
of her house, she again borrowed P30,000. It was never her intention to sold the house given that
her property is valued at P1.5 million. She already paid the P55,000 and was willing to settle the
unpaid balance but Diño insisted on appropriating the property. She was still in possession of the
property and was the one paying for the real estate tax
RTC: Pacto de retro sale
CA: Reversed; Equitable mortgage
Issue: True nature of the contract
Held: Equitable Mortgage
The Court affirmed the findings of the CA. The true nature of the contract entered by the parties
was one of equitable mortgage based on the fact that Jardines was still in physical possession of
the property and the one paying the real property taxes. This is also pursuant to Article 1602 of
the Civil Code. Moreover, it was also found out that the P165,000 supposed purchase price was
earning interest and in case of default, it shall bear 10% penalty charge. The above findings clearly
show that the intention of the parties was merely for the property to stand as security for the loan.
In addition, the agreed interest rate of 9% per month or 108% per annum, as claimed by
respondent; or 10% per month or 120% per annum, as claimed by petitioner, is clearly excessive,
iniquitous, unconscionable and exorbitant. Being so, the Court declared it as void and thus, it is to
be considered that the parties have no stipulation regarding the interest rate. In turn, the rate of
interest should be 12% per annum to be computed from judicial or extrajudicial demand, subject
to the provisions of Article 1169 of the Civil Code. As such, the 12% interest should be reckoned
from the date of extrajudicial demand which was March 12,1989.
Notes:
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following
cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
xxx xxx xxx
(5) When the vendor binds himself to pay the taxes on the thing sold;
xxx xxx xxx
Digest: Liam Law vs. Olympic Sawmill (GR L-30771, 28 May 1984)
Liam Law vs. Olympic Sawmill
GR L-30771, 28 May 1984
First Division
Melencio-Herrera (J)
Facts: On 7 September 1957, Liam Law (plaintiff) loaned P10,000.00, without interest, to
Olympic Sawmill Co. and Elino Lee Chi, as the latter’s managing partner (defendants). The loan
became ultimately due on 31 January 1960, but was not paid on that date, with the debtors
asking for an extension of 3 months, or up to 30 April 1960. On 17 March 1960, the parties
executed another loan document. Payment of the P10,000.00 was extended to 30 April 1960,
but the obligation was increased by P6,000 which formed 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. The defendants
again failed to pay their obligation.
On 23 September 1960, the plaintiff instituted the collection case before the Court of First
Instance of Bulacan. The defendants admitted the P10,000.00 principal obligation, but claimed
that the additional P6,000.00 constituted usurious interest. Upon the plaintiff’s application, the
Trial Court issued a writ of Attachment on real and personal properties of defendants. After the
Writ of Attachment was implemented, proceedings before the Trial Court versed principally in
regards to the attachment. On 18 January 1961, an Order was issued by the Trial Court allowing
both parties to simultaneously submit a Motion for Summary Judgment. On 26 June 1961, the
Trial Court rendered decision ordering defendants to pay the plaintiff the amount of P10,000.00
plus the further sum of P6,000.00. The defendants appealed before the then court of Appeals,
which endorsed it to the Supreme Court stating that the issue involved was one of law.
Issue [1]: Whether the allegation of usury should be made in writing and under oath, pursuant to
Section 9 of the Usury Law. Issue [2]: Whether the repeal of Rules of Court or any procedural
law is with retroactive effect.
Held [1]: Section 9 of the Usury Law provides that “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.” It 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 where it is the defendant, not the plaintiff, who is
alleging usury.
Held [2]: The Court opined that the Rules of Court in regards to allegations of usury, procedural
in nature, should be considered repealed with retroactive effect. It has been previously held
(People vs. Sumilang, and De Lopez, et al. vs. Vda. de Fajardo, et al.) that 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.
Comments (required in assignment): The last sentence of Section 11, Rule 9, of the 1997
Rules of Civil Procedure provides that “Allegation of usury in a complaint to recover usurious
interest are deemed admitted if not denied under oath,” and is similar in context to Section 9 of
Usury Law, which was raised in this 1984 case (although improperly applied). The reiteration of
matters pertaining to usury in the 1997 rules is perplexing as the 1984 decision itself admits that
“usury has been legally non-existent; as interest can now be charged as lender and borrower
may agree upon,” and that the “Rules of Court in regards to allegations of usury, procedural in
nature, should be considered repealed with retroactive effect.” These incongruent realities,
however, are secondary only to the fact that a mere Central Bank circular or memorandum
effectively suspended the application of the Usury Law to a degree tantamount to its “repeal”.