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Sebastian Siga-an, petitioner, vs. AliciaVillanueva, respondent.

Facts : Respondent filed a complaint for sumof money against petitioner. Respondentclaimed that petitioner approached her insidethe PN and offered to loan her the amountof

P!"#,###.## of $hich the loan agreement$as not reduced in $riting and there $as nostipulation as to the payment of interest for theloan. Respondent issued a chec% $orth P!##,###.## to petitioner as partial

payment of the loan. She then issued another chec% in the amount of P&##,###.## to

petitioner as payment of the remaining balanceof the loan of $hich the e'cess amount

of

P()#,###.## $ould be applied as interestfor the loan. Not satisfied $ith the amountapplied as interest, petitioner pestered her to

pay additional interest and threatened to bloc% or disapprove her transactions $ith the PN if she $ould not comply $ith his demand. *hus,she paid additional amounts in cash andchec%s as interests for the loan. She as%ed

petitioner for receipt for the payments but $astold that it $as not necessary as there $as

mutual trust and confidence bet$een them.According to her computation, the totalamount she paid to petitioner for the loan andinterest accumulated to P(,&##,###.##.

*he R*+ rendered a ecision holding thatrespondent made an overpayment of her loanobligation to petitioner and that the latter should refund the e'cess amount to theformer. t ratiocinated that respondent s

obligation $as only to pay the loaned amountof

P!"#,###.##, and that the alleged interests

due should not be included in the computationof respondent s total monetary debt becausethere $as no agreement bet$een themregarding payment of interest. t concludedthat since respondent made an e'cess paymentto petitioner in the amount of

P))#,###.##through mista%e, petitioner should return thesaid amount to respondent pursuant to the

principle of

solutio indebiti . Also, petitioner should pay moral damages for the sleeplessnights and $ounded feelings e'perienced byrespondent. /urther, petitioner should paye'emplary damages by $ay of e'ample or correction for the public good, plus attorney sfees and costs of suit.

Issue : 0(1 2hether or not interest $as due to

petitioner3 and 0&1 $hether the principle of solutio indebiti applies to the case at bar.

Ruling : 0(1 No. +ompensatory interest is notchargeable in the instant case because it $asnot duly proven that respondent defaulted in

paying the loan and no interest $as due on theloan because there $as no $ritten agreementas regards payment of interest. Article (4!) of the +ivil +ode, $hich refers to monetary

interest, specifically mandates that no interestshall be due unless it has been e'presslystipulated in $riting. As can be gleaned fromthe foregoing provision, payment of monetaryinterest is allo$ed only if: 0(1 there $as ane'press stipulation for the payment of interest3and 0&1 the agreement for the payment of interest $as reduced in $riting. *heconcurrence of the t$o conditions is re5uiredfor the payment of monetary interest. *hus,

$e have held that collection of interest$ithout any stipulation therefor in $riting is

prohibited by la$.

0&1 Petitioner cannot be compelled to returnthe alleged e'cess amount paid by respondentas interest. 6nder Article (4)# of the +ivil+ode, if the borro$er of loan pays interest$hen there has been no stipulation therefor,the provisions of the +ivil +odeconcerning solutio indebiti shall be applied.Article &(!" of the +ivil +ode e'plains the

principle of

solutio indebiti . Said provision provides that if something is received $henthere is no right to demand it, and it $asunduly delivered through mista%e, theobligation to return it arises. n such a case, acreditor-debtor relationship is created under a5uasi-contract $hereby the payor becomes the

creditor $ho then has the right to demand thereturn of payment made by mista%e, and the

person $ho has no right to receive such payment becomes obligated to return thesame. *he 5uasi-contract of

solutio

indebiti har%s bac% to the ancient principlethat no one shall enrich himself un7ustly at thee'pense of another. *he principle of

solutio

indebiti applies $here 0(1 a payment is made$hen there e'ists no binding relation bet$een

the payor, $ho has no duty to pay, and the person $ho received the payment3 and 0&1 the payment is made through mista%e, and notthrough liberality or some other cause. 2ehave held that the principle of

solutio

indebiti applies in case of erroneous paymentof undue interest.

Article &&8& of the +ivil +ode states that in a5uasi-contract, such as solutio indebiti ,

e'emplary damages may be imposed if thedefendant acted in an oppressive manner.

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Petitioner acted oppressively $hen he pesteredrespondent to pay interest and threatened to

bloc% her transactions $ith the PN if she$ould not pay interest. *his forcedrespondent to pay interest despite lac% of agreement thereto. *hus, the a$ard of e'emplary damages is appropriate so as todeter petitioner and other lenders fromcommitting similar and other serious$rongdoings.

LIGUTAN VS. COURT OF APPEALSG.R.No. 138 !!" Fe#$ua$% 1&" & &3!SCRA ' 1/A+*S:Petitioners *olomeo 9igutanand 9eonidas dela 9lana obtained on ay ((,

(4;( a loan in theamount of

P( <, <<<=<< fromres>ondent Se?urity @an and *rust+om>any= PetitionerseBe?uted a >romissorynote binding themsel0es, 1ointly and se0erally,to >ay the sum borroCedCith an interest of(D=(;4E >er annum u>on maturity and to >aya >enalty of DE e0ery month ontheoutstanding >rin?i>al and interest in ?ase ofdefault= -n addition, >etitioners agreed to>ay (<Eof the total amount due by Cay of

attorney.s fees if the matter Cere indorsed to alaCyer for?olle?tion or if a suit Cere institutedto enfor?e >ayment= *he obligation maturedon Se>tember ;,(4;(F the ban , hoCe0er,granted an eBtension but only until #e?ember

4, (4;(= hen >etitioners defaulted on their obligation, the ban filed on &o0ember 8,(4; Cith the "*+of a ati, @ran?h (!8 a?om>laint for re?o0ery of the due amount=)nSe>tember D, (4;;, the trial ?ourt ruled in

fa0or of the ban = -t ordered the >etitioners to>ay, 1ointly and se0erally, the sum of P((!,

!(G=<< Cith interest thereon at the rate of(D=(;4E >erannum, E ser0i?e ?harge andDE >er month >enalty ?harge, ?ommen?ingon ay <, (4; untilfully >aid=*he +ourtof A>>eals affirmed it but deleted the Eser0i?e ?harge >ursuant to +entral@an +ir?ular &o= ;8= &ot fully satisfiedCith the de?ision, both >arties mo0ed forre?onsideration=Petitioners >rayed for theredu?tion of the DE >enalty for beingun?ons?ionable= *he 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 asso sti>ulated in the ?ontra?t of the >arties=*he>etitioner, before this +ourt, ?ontended,among others that the (D=(;4E interest

and the>enalty of 8E >er month or 8GE >erannum im>osed by >ri0ate res>ondent banon >etitioner.sloan obligation are stillmanifestly eBorbitant, iniEuitous andun?ons?ionable= "es>ondent ban ,Chi?h didnot ta e an a>>eal, Could, hoCe0er, ha0e it thatthe >enalty sought to be deleted by>etitionersCas e0en insuffi?ient to fully ?o0er and?om>ensate for the ?ost ofmoney broughtabout by the radi?al

de0aluation and de?rease in the >ur?hasing>oCer of the >eso=-SS 3: hether or not the>enalty is reasonable and notiniEuitous=" 9-&H: &), the >enalty isnot unreasonable= *he +ourt held that theEuestion of

Chether a >enalty isreasonable oriniEuitous ?an be >artly sub1e?ti0e and >artlyob1e?ti0e= -ts resolution Could de>endon su?hfa?tors as, but not ne?essarily ?onfide to,the ty>e, eBtent and >ur>ose of

the >enalty,

thenature of the obligation, the mode of brea?h and its ?onseEuen?es, the su>er0ening

realities, thestanding and relationshi> of the>arties, and the li e, the a>>li?ation of Chi?h,

by and large, isaddressed to thesound dis?retion of the ?ourt= -n "iIal+ommer?ial @an ing +or>= 0= +ourtof

A>>eals, for eBam>le, the +ourt hastem>ered the >enalty ?harges after ta ing intoa??ount thedebtor.s >itiful situation and itsoffer to settle the entire obligation Cith the?reditor ban = *hesti>ulated >enalty mightli eCise be redu?ed Chen a >artial or irregular>ayment is made by the>ayment= *hesti>ulated >enalty might e0en be deleted su?has Chen there has been substantial>erforman?ein good faith by the obligor, Chen the >enalty?lause itself suffers from fatal infirmity,andChen eB?e>tional ?ir?umstan?es so eBist as to

Carrant it= -n the ?ase at bar, gi0enthe?ir?umstan?es, not to mention the re>eateda?ts of brea?h by >etitioners of their?ontra?tualobligation, this +ourt sees no?ogent ground to ruling of the a>>ellate ?ourt