Wednesday, January 8, 2014

Case Digest: G.R. No. 173227. January 20, 2009

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 respondent’s 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 respondent’s 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 attorney’s 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.


  1. Hi

    Good day

    I just need some enlightenment with the issue we have right now. We are currently renting an apartment for almost a year now. It is 3 storey building and we occupy the second floor. Each unit has its own electric meter. We are a very good payer and we dont miss payments. Our relationship with our landlord is good as well. Last month (April) we received our meralco bill and we where a bit shocked because from our regular bills that ranges from 400-600php it went up to 1500php. We thought that it's because meralco has already implemented the electricity price hike. in short we paid our bill as we always do. Comes the Month of May we then received the meralco bill and to our dismay it really went over the top. Our electricity bill went up to 2500php. To think we only have 3 electric fans, 1 Led TV which we rarely uses, 1 laptop and 4 light bulbs and we actually stays at home only after our shift. we stay there for just to get a few hours of good sleep. So what we did was discuss the issue with the landlord and he was saying that they had to replace our meter. He cant actually explained the reason why it went that high. we were not happy with his answers and since he noticed that he then blurted that if we dont want to pay his doors are open for us to walk out and find another apartment. We said that it's not that we dont want to pay, we need an explanation first because we will not pay for anything that he cant explain. Then we meet half way , we agreed to pay just the half and he'll shoulder the other half of the bill. We also said that we will just finish our contract which will end on August. We thought that everything was settled. after a week another bill came to our door step amounting 700php and mind you it is also for the month of April. So we spoke to him and he said that we also have to pay that bill. What he wants us to do is pay two bills for april. His claims was when the meter was changed to digital the billing for the analog meter continued and over lapped. which we think is far from reality. If you'll check the billing statement you see that the bill worth 2500's billing period was april 11- may 11 and the other one is April 13 - May 13. We really that we are being mislead and we feel really violated. Is there anything that we could do to protect our right or do we even have a right as a lessee? Hope to hear from you soon thanks and God Bless :)

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