OBLICON
indebiti.
1. Siga-an v. Villanueva (Jan 20 2009 Chico-Nazario, J.)
FACTS:
 Alicia Villanueva filed a complaint for sum of money against Sebastian
Siga-an.
 Villanueva was a businesswoman engaged in supplying office materials
to the PH Navy Office (PNO) where Siga-an was a military officer and
controller.
 Villanueva claimed that sometime in 1992 Siga-an approached her and
offered to loan her 540k. Villanueva accepted because she needed
capital for her transactions with PNO.
 The loan agreement was not in writing and there was no stipulation
as to the payment of interest.
 Villanueva issued a check for 500k as partial payment to Siga-an. She
then issued another check for 200k for the remaining balance. Siga-an
told her that since she paid 700k, the excess will apply as the interest.
 However, Siga-an still pestered Villanueva to pay additional interest. He
threatened to block her transactions with the PNO and she agreed. She
asked for the receipts for the payments but he told her it was
unnecessary because of mutual trust. She alleged that she paid a total of
1.2M.
 Villanueva consulted a lawyer about the paying of interest despite
absence of agreement. The lawyer told her that Siga-an cannot validly
collect interest because of the absence of an agreement.
o Upon being informed, she sent a demand letter to Siga-an
asking for the return of the excess. Siga-an ignored her.
 Siga-an denied that he offered a loan to respondent. He averred that
Villanueva asked him to grant her a loan and that she paid it in full.
o He held that she asked him again for a loan and he granted it to
her. She then asked him to restructure the payment because she
couldn’t pay it in full and he accepted.
o She then asked for another restructuring but he rejected it. She
then proposed that she execute a promissory note and that she
would issue several postdated checks to guarantee payment.
o Villanueva executed the promissory note and 6 postdated
checks amounting to 1.240M. Siga-an enchashed the checks but
only 1 was honored. He demanded that Villanueva settle the
obligation but she refused and he filed a criminal complaint
against her for violating BP22.
 Siga-an insists that there was no overpayment because Villanueva
admitted in her promissory note that her monetary obligation amounted
to 1.240M inclusive of interests.
 The RTC ruled in favor of Villanueva. It held that since she only had to
pay 540k and that the interests should not be included in the computation
because there was no agreement pertaining to it, and that Siga-an
should return the excess payment pursuant to the principle of solutio
 The CA affirmed the RTC ruling.
ISSUE: W/N interest is due to Siga-an.
HELD: NO.
 Interest is a compensation fixed by the parties for the use or forbearance
of money. This is referred to as monetary interest. Interest may also be
imposed by law or by courts as penalty or indemnity for damages. This is
called compensatory interest. The right to interest arises only by virtue of
a contract or by virtue of damages for delay or failure to pay the principal
loan on which interest is demanded.
 Under Art. 1956 of the CC, 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 collection of interest without any stipulation in writing is
prohibited by law.
 Siga-an did not rebut Villanueva’s testimony that she merely copied a
promissory note made by the former since she was threatened.
Villanueva did not consent to the payment of interest and was merely
tricked into it. The promissory note is not an express stipulation of
interest.
 Siga-an contended that Villanueva admitted to agreeing on the payment
of 7% interest.
o The SC held that 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.
o Villanueva did not categorically declare in the BP 22 case that
she and Siga-an had an express stipulation in writing pf the
interest.
o Factual findings of the trial court deserve great weight and
respect especially when affirmed by the appellate court.
 Instances when interest may be imposed even without express
stipulation: (1) when debtor incurs delay, 12% interest per annum may
be imposed as indemnity for damages (Art. 2209 CC), (2) interest due
shall earn legal interest from the time it is judicially demanded, although
the obligation may be silent on this point (Art. 2212).
o These may only be imposed as penalty or damages for breach of
contract. They only apply to compensatory interest and not to
monetary interest.
 Siga-an contended that solutio indebiti does not apply to the case.
o Under Art. 1960, 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.
o 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.
o Villanueva was under no duty to pay interest to Siga-an. Since
the payment was a mistake and Siga-an received something
when there was no right to demand it, he has an obligation to
return it.
 Monetary award and Damages
2. Prisma Construction and Dev. Corp. & Rogelio Pantaleon v. Arthur
Menchavez (Mar 9 2010 Brion J.)
FACTS:
 Rogelio Pantaleon, president and chariman of the board of PRISMA,
got a 1M loan from Arthur Menchavez with a monthly interest of 40K
payable for 6 months, or a total obligation of 1.240M to be paid within 6
months.
o Pantaleon issued a promissory note and 6 postdated checks
corresponding to the schedule of payments. He signed it in his
personal capacity and as a member of the PRISMA BOD.
o Petitioners failed to completely pay the loan within the 6-
month period.
 As of January 1997, petitioners had paid 1,108,772. However,
respondents found that petitioners still had a balance of 1,364,151 to
which it applied a 4% monthly interest.
o In August 1997, respondent filed a complaint for sum of money
to enforce the unpaid balance and the 4% interest.
o Petitioners admitted to the loan but denied the stipulation on
the 4% monthly interest since it was not in the promissory
note. Pantaleon also denied personal liability.
 The RTC ordered petitioners to jointly and severally pay respondent
3,526,117 plus 4% monthly interest until the load was fully paid.
 The CA found that the parties agreed to a 4% monthly interest principally
based on the board resolution that authorized Pantaleon to transact a
loan with an approved interest of not more than 4% per month.
o However, it noted that 48% per annum interest was
unreasonable and should be reduced to 12%.
o It affirmed the RTC finding that PRISMA was merely an
instrumentality of Pantaleon that justified the “piercing of the veil
of corporate fiction.”
 Petitioners contend that the CA mistakenly relied on the board resolution
to conclude that the parties agreed to a 4% monthly interest since such
resolution was not a evidence of a loan but merely authorization for
Pantaleon to perform certain acts.
o They also aver that the 4% interest only covers the 6-month
period and cannot apply beyond it.
ISSUE: W/N the parties agreed to the 4% monthly interest.
HELD: NO.
 When the terms of a contract are clear and leave no doubt as to the
intention of the contracting parties, the literal meaning of its stipulations
governs.
o Courts have no authority to alter the contract by construction or
to make a new contract for the parties.
o It is only when the contract is vague and ambiguous that courts
are permitted to resort to the interpretation of its terms to
determine the parties’ intent.
 The Court noted that the agreed sum of 1,240,000 can be computed at
4% interest per month, but no such rate of interest was stipulated in
the promissory note; rather a fixed sum equivalent to this rate was
agreed upon.
 The payment of interest in loans or forbearance of money 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
(Art. 1956).
o The Court found that the 40K per month only applies to the 6-
month period as agreed upon by the parties in the promissory
note. Thereafter, the interest should be the legal interest of 12%
per annum because of the absence of a stipulation.
o The facts show that the parties agreed to the payment of a
specific sum of money of P40,000.00 per month for six months,
not to a 4% rate of interest payable within a six (6)-month period.
 The Court also held that the CA misapplied the case of Medel v. CA.
o In Medel, the debtors in a 500k loan were required to pay an
interest of 5.5% per month. Taken in conjunction with the
stipulated service charge and penalty, the SC found the interest
rate to be excessive, iniquitous, unconscionable, exorbitant and
hence, contrary to morals, thereby rendering the stipulation null
and void.
o Medel is not applicable because no other stipulation exists for
the payment of any extra amount except for the specific sum of
40k per month. Petitioners only assailed the 4% interest rate
since it was not agreed upon.
 Respondent avers that petitioners are estopped from disputing the 4%
interest beyond the 6-month period because they (petitioners) agreed to
it in the promissory note.
o The doctrine of estoppel is not applicable because under the
promissory note, what petitioners agreed to pay was the specific
sum of 40k/month for 6 months and not a rate of 4% interest per
6 months.
 The SC rejects the lower courts’ piercing the corporate veil of PRISMA.
o The doctrine of piercing the corporate veil applies only in 3
basic instances: a) when the separate and distinct corporate
personality defeats public convenience, as when the corporate
 fiction is used as a vehicle for the evasion of an existing
obligation; b) in fraud cases, or when the corporate entity is used
to justify a wrong, protect a fraud, or defend a crime; or c) is
used in alter ego cases, i.e., where a corporation is essentially a
farce, since it is a mere alter ego or business conduit of a
person, or where the corporation is so organized and controlled
and its affairs so conducted as to make it merely an
instrumentality, agency, conduit or adjunct of another
corporation.
o The SC sees no evidence of any unlawful act of PRISMA. While
Pantaleon denied personal liability, he made himself accountable
in the promissory note in his personal capacity and as authorized
by the PRISMA BOD.
3. Baldomero Inciong Jr. v. CA and PH Bank of Communications (Jun
26 1996 Romero J.)
FACTS:
 Inciong was found by the CA to be solidarily liable to pay the PBC 50k
with interest of 16% per annum until fully paid and 6% per annum on
the total amount due as liquidated damages or penalty, plus 10% total
amount due for expenses of litigation and attorney’s fees.
 Inciong’s liability resulted from a promissory note for the amount of 50K
which he signed with Rene Naybe and Gregorio Pantanosas holding
themselves jointly and severally liable to PBC.
 The promissory note’s due date expired without the promisors having
paid. PBC sent promisors telegrams demanding payment. Obligors did
not respond and respondent filed a complaint for collection of sum of
money against the 3 obligors.
o The complaint against Pantanosas was dismissed as prayed for
by respondent. Only the summons against Inciong was servced
as Naybe had gone to Saudi Arabia.
 Inciong alleged that sometime in 1983 he was approached by his friend
Rudy Campos who told him he was a partner of Pio Tio, the manager of
PBC’s Cagayan de Oro branch. Campos also told him that Naybe was
interested in contributing to a chainsaw venture.
o Pio Tio assured him that Naybe had the approval of a loan with
PBC to buy the equipment.
o Inciong agreed only to act as co-maker for the loan of 5K.
o He also alleged that 5 copies of a blank promissory note were
brought to him and he only signed one copy that indicated that
he bound himself for only 5K. He claims that that it was thru
fraud that he was made liable for 50K.
 According to the TC, the typewritten 50K on the
promissory note is directly below Inciong’s signature. His
uncorroborated testimony cannot prevail over the
presumed regularity and fairness of the transaction.
 The TC also held that even if the 5K was actually agreed
upon, it would have been merely collateral between
Inciong and Naybe and not binding upon PBC as the
creditor.
ISSUE: W/N Inciong is liable for the 50K loan.
HELD: YES.
 An affidavit executed by Pantanosas, an MTCC judge, supports Inciong’s
allegation that they were induced to sign the 5k promissory note, adding
that it was Campost who increased the amount.
o The Court held that the affidavit was merely intended to support
Inciong’s contention that the CA should have declared the
promissory note null and void since (a) the note was signed by
Judge Pantanosas outside the PBC premises, (b) the loan was
incurred for buying a secondhand chainsaw worth 5k, (c) even a
new chainsaw would only cost 27.5k, (d) the loan was not
approved by he board or credit committee which was the
practice, at it exceeded P5,000.00; (e) the loan had no collateral;
(f) petitioner and Judge Pantanosas were not present at the time
the loan was released in contravention of the bank practice, and
(g) notices of default are sent simultaneously and separately but
no notice was validly sent to him.
o The Court held that Inciong may no longer ventilate his factual
claims since the SC is not a trier of facts.
 There is also no merit in Inciong’s assertion that since the promissory
note is not a public document but a mere commercial paper which is not
signed by attesting witnesses, parol evidence may overcome its
contents.
o Parol evidence rule: When the terms of an agreement have
been reduced to writing, it is considered as containing all the
terms agreed upon and there can be, between the parties and
their successors-in-interest, no evidence of such terms other
than the contents of the written agreement.
o The rule does not specify that the agreement need to be a
public document. It is only required to be in writing since
“written evidence is so much more certain and accurate than that
which rests in fleeting memory only.”
 Fraud also cannot be proved by parol evidence. It must be established
by clear and convincing evidence and mere preponderance of it is not
enough.
 Inciong argues that since the complaint was dismissed against
Naybe, the principal debtor, and Pantanosas, his co-maker, he is
also released from the obligation.
o He cited Art. 2080: The guarantors, even though they be
solidary, are released from their obligation whenever by some
act of the creditor, they cannot be subrogated to the rights,
mortgages, and preferences of the latter.
 However, Inciong signed the promissory note as a solidary co-maker and
not as a guarantor.
o A solidary or joint and several obligation is one in which each
debtor is liable for the entire obligation, and each creditor is
entitled to demand the whole obligation.
o Art. 2047: By guaranty a person, called the guarantor, binds
himself to the creditor to fulfill the obligation of the principal
debtor in case the latter should fail to do so.
o The guarantor, outside of the liability he assumes to pay the
debt before the property of the principal debtor has been
exhausted, retains all the other rights, actions and benefits which
pertain to him by reason of the fiansa. The solidary co-debtor
has no other rights than those provided by the CC.
 Art. 1207: When there are two or more debtors in one
and the same obligation, the presumption is that the
obligation is joint so that each of the debtors is liable
only for a proportionate part of the debt. There is a
solidarity liability only when the obligation expressly so
states, when the law so provides or when the nature of
the obligation so requires.
o Since the promissory note expressly states that the 3
signatorues are jointly and severally liable, any one of them
may be proceeded against for the entire obligation. The creditor
has the choice to determine who will pay.
4. PH Commercial International Bank v. CA, Atlas Consolidated Mining
and Dev. Corp. (Jan 31 2006, Tinga J.)
FACTS:
 PCIB and Manila Banking Corp. were joint bidders in a foreclosure sale
of assorted mining machinery and equipment previously mortgaged to
them by PH Iron Mines, Inc.
 4 years later, Atlas purchased some of the properties owned jointly by
PCIB and MBC. The sale was evidenced by a Deed of Sale, with the
parties agreeing to an initial downpayment of 12M and the balance of
18M payable in 6 monthly installments. It was also stipulated that the
total purchase price would be finally adjusted to exclude items to be
retained by the Bureau of Mines.
o Express Provisions of Contract: (1) full and sufficient title to
the properties, (2) freeing the properties from all liens and
encumbrances, (3) freeing Atlas from all claims and incidental
actions of the National Mines and Allied Workers Union
(NAMAWU), and (4) full rights and capacity of the seller to
convey title to and effect peaceful delivery of the properties to
Atlas.
 The NAMAWU claim stemmed from a labor dispute
where it obtained a favorable judgment against PIM.
 Atlas issued a 12M Hongkong and Shanghai Bank Check to PCIB and
MBC. In a letter-agreement between PCIB and MBC, the final purchase
price was adjusted to 29,630,000.
o PCIB and MBC requested from Atlas the subsequent installment
payments of the balance: PCIB=63.1579%, MBC=36.8421.
 Atlast paid NAMAWU 4, 298, 307.77 in compliance with the writ of
garnishment to satisfy the final judgment of the labor dispute. PCIB and
MBC filed a petition seeking to annul the garnishment and to enjoin Atlas
from complying with it. The petition was dismissed, the Court stating that
it was right to omit the 4M from the 30M that Atlas had to pay the
petitioners.
 Atlas made its 6 monthly payments. According to them, apart from the
12M down payment and monthly installments, it should be credited
with its payment to NAMAWU as a consequence of garnishment.
Atlas claimed to have overpaid 370K. Following the payment
allocations, Atlas claimed that PCIB should reimburse it 233,684.23.
PCIB refused.
 PCIB contended that Atlas still owed it 900+K and that even before the
writ of garnishment was served to Atlas, the judgment in favor of
NAMAWU had already been partially satisfied in 600K.
o They argued that the total payments to NAMAWU exceeded
what it was entitled to and Atlas could not credit such amount in
the satisfaction of its obligation to PCIB.
 The TC upheld PCIB’s position and ordered Atlas to pay the 900+k. The
CA reversed the TC ruling by ordering PCIB to reimburse to Atlas what
the latter overpaid.
ISSUE: W/N Atlas underpaid PCIB.
HELD: YES.
 From the 29,630,000.00 total purchase price, PCIB claims that it is
entitled to receive 63% and acknowledge that it had received
6,819,766.10. PCIB also admitted to receiving 8,650,543.18 from the
monthly installments.
 The CA ruled that PCIB cannot demand from Atlas more than what it got
from MBC out of the down payment. The Court agrees.
 The case concerns a joint obligation. Art. 1208 of the CC mandates
the equal sharing of creditors in the payment of debt in the absence of
any law or stipulation to the contrary.
o The amount received by PCIB from the downpayment was given
to it my MBC because it was deposited in the latter’s account.
There was no agreement yet concerning the corresponding
share of each creditor. Before said date, Atlas could be
secure in the thought that the matter of sharing was best left
to the creditors to decide.
 o Whatever PCIB was entitled to from the downpayment was a
matter between them and MBC. The obligation was deemed
fulfilled to the extent of P12,000,000.00 on the part of Atlas when
the check was received by a representative of PCIB and
eventually deposited in the account of MBC.
 Anent the other issue, PCIB contends that Atlas cannot be credited for
paying the 4M because the remaining balance with respect to the
NAMAWU judgment was only 3M. Atlast insists that the creditable
payment to NAMAWU was 4M and that it should be the basis in
extracting the 63% share of PCIB.
o The Court disagrees.
o Atlas overpaid NAMAWU. It immediately paid NAMAWU
without consulting PCIB.
o Art. 1236 provides that whoever pays for another may demand
from the debtor what he has paid, except that if he paid without
the knowledge or against the will of the debtor, he can recover
only insofar as the payment has been beneficial to the debtor.
 PCIB is the debtor and it bought with MBC the garnished
properties. Atlas is the 3rd person who paid the obligation
of the debtor without their knowledge and consent.
 Since Atlas paid NAMAWU without PCIB’s consent,
Atlas may only recover from PCIB the amount that
benefitted PCIB.
o The overpayment to NAMAWU should be recovered by Atlas.