017 Siga-an v Villanueva GR No.

173227 Date: 1/20/2009 TOPIC: Compensatory, Penalty, or Indemnity Interest PONENTE: Chico-Nazario FACTS: 1. Alicia Villanueva (engaged in the business of supplying materials and equipment for the Philippine Navy) was approached by Siga-an (The PH Navy comptroller) 2. She agrees to the loan of P540k. Loan was not in writing and there was no stipulation as to payment of interest. 3. As payment, Villanueva Issues a 500k and 200k check to Siga-an. The payment totalled 700k, but her loan was only 540k. 4. Siga-an 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 wont comply. With fear, Villanueva kept paying interests which totalled to 1.2m 5. Villanueva consulted a lawyer which led her to file a complaint against siga-an to return the money (excessive interest) 6. RTC: There was overpayment. 7. CA: affirmed the RTC. ISSUE: Whether or not Villanueva overpayed since there was no agreement to the interest. HELD: Yes. Siga-an should return. Siga-an is now the one who pays interests on the amounts to be returned. RATIO: 1. The RTC did not make a ruling therein that petitioner and respondent agreed on the payment of interest at the rate of 7% for the loan. The RTC clearly stated that although petitioner and respondent entered into a valid oral contract of loan amounting to P540,000.00, they, nonetheless, never intended the payment of interest thereon. 2. Article 1956 of the Civil Code, which refers to monetary interest,20 specifically mandates that no interest shall be due unless it has been expressly stipulated in writing. 3. 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. 4. It appears that petitioner and respondent did not agree on the payment of interest for the loan. Neither was there convincing proof of written agreement between the two regarding the payment of interest. 5. There are instances in which an interest may be imposed even in the absence of express stipulation, verbal or written, regarding payment of interest. (e.g. upon default) 5.1 compensatory interest is not chargeable in the instant case because it was not duly proven that respondent defaulted in paying the loan. 6. 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. 6.1 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. CASE LAW/ DOCTRINE: No interest agreed upon, or no default = no liability to pay interest. DISSENTING/CONCURRING OPINION: - None KEYWORDS/NOTES: Compensatory interest: imposed by law or by courts as penalty or indemnity for damages