- Petitioner
- Rolando C. de La Paz
- Respondent
- L & J Development Company
- Citation
- G.R. No. 183360
- Court
- Supreme Court
- Division
- Second Division
- Ponente
- Del Castillo, J.
- Decided
- September 8, 2014
Summary
Architect Rolando De La Paz lent P350,000 to L&J Development Company in December 2000 with orally agreed 6% monthly interest. L&J paid P576,000 in interest over 2000-2003 before stopping due to financial difficulties. When sued for collection, L&J claimed the interest rate was unconscionable. The Supreme Court held that without written stipulation, no interest is due under Civil Code Article 1956. The Court further ruled that 6% monthly interest (72% annually) would be unconscionable even if written, being contrary to morals and law. Applying legal compensation and solutio indebiti principles, the Court ordered Rolando to return the excess interest payments of P226,000 to L&J plus 6% annual interest. The decision reinforces that interest agreements must be in writing and unconscionable rates are void regardless of voluntary payment or who proposed the terms.
Intellegal Wiki · Key Holding
No interest is due without a written stipulation (Article 1956); a stipulated 6%-monthly (72% per annum) interest is unconscionable and void regardless of who proposed it, and excess payments are recoverable through solutio indebiti.
An editorially maintained summary of the rule this Supreme Court decision is cited for — not legal advice.