Liam Law v. Olympic Sawmill Co.

, 129
SCRA 439 (1984) Case Digest
Obligations and Contracts: Usurious Transactions – Article 1175

Facts:

On or about September 7, 1957, the petitioner loaned P10,000.00, without interest, to the respondent. The loan
became ultimately due on January 31, 1960 but was not paid. The petitioner asked for a 3-month extension, or up to
April 30, 1960. On March 17, 1960, the parties executed another loan document for the payment of P10, 000.00
extended up to April 30, 1960 but the obligation was increased by P6,000.00 to answer for the attorney’s fees, legal
interest, and other cost incident thereto. The petitioner again failed to pay their obligation by April 30, 1960. On
September 23, 1957, the respondent instituted a collection case. The petitioner admitted the P10, 000.00 principal
obligation but claimed that the additional P6, 000.00 constituted usurious interest.

Issue:

Whether or not the additional P6, 000.00 constituted usurious interest.

Held:

No. Usury has been legally non-existent. Interest can now be charged as lender and borrower may agree
upon. In the present case, the petitioner had not proven that the P6, 000.00 additional obligation was illegal.