Sebastian Siga-an, petitioner, vs.

Alicia
Villanueva, respondent.
Facts: Respondent filed a complaint for sum
of money against petitioner. Respondent
claimed that petitioner approached her inside
the PNO and offered to loan her the amount
of P540,000.00 of which the loan agreement
was not reduced in writing and there was no
stipulation as to the payment of interest for the
loan.
Respondent
issued
a
check
worth P500,000.00 to petitioner as partial
payment of the loan. She then issued another
check in the amount of P200,000.00 to
petitioner as payment of the remaining balance
of the loan of which the excess amount
of P160,000.00 would be applied as interest
for the loan. Not satisfied with the amount
applied as interest, petitioner pestered her to
pay additional interest and threatened to block
or disapprove her transactions with the PNO if
she would not comply with his demand. Thus,
she paid additional amounts in cash and
checks as interests for the loan. She asked
petitioner for receipt for the payments but was
told that it was not necessary as there was
mutual trust and confidence between them.
According to her computation, the total
amount she paid to petitioner for the loan and
interest
accumulated
to P1,200,000.00.
The RTC rendered a Decision holding that
respondent made an overpayment of her loan
obligation to petitioner and that the latter
should refund the excess amount to the
former. It ratiocinated that respondents
obligation was only to pay the loaned amount
of P540,000.00, and that the alleged interests

due should not be included in the computation

of respondents total monetary debt because
there was no agreement between them
regarding payment of interest. It concluded
that since respondent made an excess payment
to petitioner in the amount of P660,000.00
through mistake, petitioner should return the
said amount to respondent pursuant to the
principle of solutio indebiti. Also, petitioner
should pay moral damages for the sleepless
nights and wounded feelings experienced by
respondent. Further, petitioner should pay
exemplary damages by way of example or
correction for the public good, plus attorneys
fees
and
costs
of
suit.
Issue: (1) Whether or not interest was due to
petitioner; and (2) whether the principle of
solutio indebiti applies to the case at bar.
Ruling: (1) No. Compensatory interest is not
chargeable in the instant case because it was
not duly proven that respondent defaulted in
paying the loan and no interest was due on the
loan because there was no written agreement
as regards payment of interest. Article 1956 of
the Civil Code, which refers to monetary
interest, specifically mandates that no interest
shall be due unless it has been expressly
stipulated in writing. As can be gleaned from
the foregoing provision, payment of monetary
interest is allowed only if: (1) there was an
express stipulation for the payment of interest;
and (2) the agreement for the payment of
interest was reduced in writing. The
concurrence of the two conditions is required
for the payment of monetary interest. Thus,
we have held that collection of interest
without any stipulation therefor in writing is

prohibited

by

law.

(2) Petitioner cannot be compelled to return

the alleged excess amount paid by respondent
as interest. Under Article 1960 of the Civil
Code, if the borrower of loan pays interest
when there has been no stipulation therefor,
the provisions of the Civil Code
concerning solutio indebiti shall be applied.
Article 2154 of the Civil Code explains the
principle of solutio indebiti. Said provision
provides that if something is received when
there is no right to demand it, and it was
unduly delivered through mistake, the
obligation to return it arises. In such a case, a
creditor-debtor relationship is created under a
quasi-contract whereby the payor becomes the
creditor who then has the right to demand the
return of payment made by mistake, and the
person who has no right to receive such
payment becomes obligated to return the
same.
The
quasi-contract
of solutio
indebiti harks back to the ancient principle
that no one shall enrich himself unjustly at the
expense of another. The principle of solutio
indebiti applies where (1) a payment is made
when there exists no binding relation between
the payor, who has no duty to pay, and the
person who received the payment; and (2) the
payment is made through mistake, and not
through liberality or some other cause. We
have held that the principle of solutio
indebiti applies in case of erroneous payment
of
undue
interest.
Article 2232 of the Civil Code states that in a
quasi-contract, such as solutio indebiti,
exemplary damages may be imposed if the
defendant acted in an oppressive manner.

Petitioner acted oppressively when he pestered

respondent to pay interest and threatened to
block her transactions with the PNO if she
would not pay interest. This forced
respondent to pay interest despite lack of
agreement thereto. Thus, the award of
exemplary damages is appropriate so as to
deter petitioner and other lenders from
committing similar and other serious
wrongdoings.
LIGUTAN VS. COURT OF APPEALSG.R.
No. 138677, February 12, 2 2376
SCRA !61
FACTS:Petitioners Tolomeo Ligutan
and Leonidas dela Llana obtained on May 11,
1981 a loan in theamount of P1!, !!!"!! from
res#ondent Se$urity %an& and Trust
Com#any" Petitionerse'e$uted a #romissory
note binding themsel(es, )ointly and se(erally,
to #ay the sum borro*ed*ith an interest of
1+"189 #er annum u#on maturity and to #ay
a #enalty of + e(ery month onthe
outstanding #rin$i#al and interest in $ase of
default" -n addition, #etitioners agreed to
#ay 1!of the total amount due by *ay of
attorney.s fees if the matter *ere indorsed to a
la*yer for$olle$tion or if a suit *ere instituted
to enfor$e #ayment" The obligation matured
on Se#tember 8,1981/ the ban&, ho*e(er,
granted an e'tension but only until 0e$ember
9, 1981"hen #etitioners defaulted on their
obligation, the ban& filed on 2o(ember 3,
198 *ith the 4TCof Ma&ati, %ran$h 153 a
$om#laint for re$o(ery of the due amount"6n
Se#tember +, 1988, the trial $ourt ruled in
fa(or of the ban&" -t ordered the #etitioners to
#ay, )ointly and se(erally, the sum of P115,

517"!! *ith interest thereon at the rate of

1+"189 #erannum, ser(i$e $harge and
+ #er month #enalty $harge, $ommen$ing
on May !, 198 untilfully #aid"The Court
of A##eals affirmed it but deleted the
ser(i$e $harge #ursuant to Central
%an&Cir$ular 2o" 83" 2ot fully satisfied
*ith the de$ision, both #arties mo(ed for
re$onsideration"Petitioners #rayed for the
redu$tion of the + #enalty for being
un$ons$ionable" The ban&, on theother hand,
as&ed that the #ayment of interest and #enalty
be $ommen$ed not from the date offiling of
$om#laint but from the time of default as
so sti#ulated in the $ontra$t of the #arties"The
#etitioner, before this Court, $ontended,
among others that the 1+"189 interest
and the#enalty of 3 #er month or 37 #er
annum im#osed by #ri(ate res#ondent ban&
on #etitioner.sloan obligation are still
manifestly e'orbitant, iniuitous and
un$ons$ionable" 4es#ondent ban&,*hi$h did
not ta&e an a##eal, *ould, ho*e(er, ha(e it that
the #enalty sought to be deleted by#etitioners
*as e(en insuffi$ient to fully $o(er and
$om#ensate for the $ost of
money broughtabout by the radi$al
de(aluation and de$rease in the #ur$hasing
#o*er of the #eso"-SS;:hether or not the
#enalty is reasonable and not
iniuitous"4L-2<:26, the #enalty is
not unreasonable" The Court held that the
uestion of *hether a #enalty isreasonable or
iniuitous $an be #artly sub)e$ti(e and #artly
ob)e$ti(e" -ts resolution *ould de#endon su$h
fa$tors as, but not ne$essarily $onfide to,
the ty#e, e'tent and #ur#ose of the #enalty,
thenature of the obligation, the mode of
brea$h and its $onseuen$es, the su#er(ening

realities, thestanding and relationshi# of the

#arties, and the li&e, the a##li$ation of *hi$h,
by and large, isaddressed to the
sound dis$retion of the $ourt" -n 4i=al
Commer$ial %an&ing Cor#" (" Court
of A##eals, for e'am#le, the Court has
tem#ered the #enalty $harges after ta&ing into
a$$ount thedebtor.s #itiful situation and its
offer to settle the entire obligation *ith the
$reditor ban&" Thesti#ulated #enalty might
li&e*ise be redu$ed *hen a #artial or irregular
#ayment is made by the#ayment" The
sti#ulated #enalty might e(en be deleted su$h
as *hen there has been substantial#erforman$e
in good faith by the obligor, *hen the #enalty
$lause itself suffers from fatal infirmity,and
*hen e'$e#tional $ir$umstan$es so e'ist as to
*arrant it" -n the $ase at bar, gi(en
the$ir$umstan$es, not to mention the re#eated
a$ts of brea$h by #etitioners of their
$ontra$tualobligation, this Court sees no
$ogent ground to ruling of the a##ellate $ourt