Short answer. No. Article 1956 provides that no interest shall be due unless it has been expressly stipulated in writing. A purely verbal promise to pay interest cannot be enforced, so the lender recovers the money he actually lent but not the interest he says was agreed on.
What the law says
No interest shall be due unless it has been expressly stipulated in writing.
Civil Code, Article 1956 — Interest Must Be Stipulated in Writing. Read the full provision →
Two conditions in one short sentence
The rule is eleven words long and both halves bite. The stipulation must be express, so interest is never implied from the fact that money was lent, from the lender's expectations, or from what everyone in the neighbourhood charges. And it must be in writing, so a rate settled over the phone and confirmed by a dozen witnesses is still not collectible. A written acknowledgment of debt that says nothing about interest is therefore an interest-free loan, however clearly the lender remembers discussing five per cent a month.
What survives the missing stipulation
The principal is untouched. Article 1953 obliges a person who receives a loan of money to pay the creditor an equal amount of the same kind and quality, and that duty owes nothing to the interest clause. Separately, a debtor who is in delay may be liable for interest as damages rather than as a price for the loan: Article 2209 provides that where the obligation consists in the payment of money and the debtor incurs delay, the indemnity is the interest agreed upon, and in the absence of stipulation, the legal interest. That is a different claim, and it starts from the delay.
Interest already handed over
Borrowers often ask for years of paid interest back once they learn the rate was never written down. The answer is not automatic. Article 1960 provides that where the borrower pays interest without any stipulation for it, the rules on solutio indebiti or on natural obligations apply as the case may be — that is, it depends on whether the payment was made in the mistaken belief that it was owed, or made knowingly. Money paid with open eyes to satisfy a debt the payer recognised is not simply refundable on demand.
Dressing the charge up as something else
Lenders sometimes recast interest as a service charge, a processing fee, a discount deducted in advance, or a higher stated principal than was actually released. Article 1957 answers the manoeuvre directly: contracts and stipulations, under any cloak or device whatever, intended to circumvent the laws against usury are void. So the document is read for what it does, not what it calls itself. For anyone lending or borrowing now, the lesson is cheap to apply — put the rate, its basis and its due dates in the signed instrument, and keep a copy of what was actually released.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Spouses Salvador Abella and Alma Abella vs. Spouses Romeo Abella and Annie Abella, G.R. No. 195166, July 8, 2015 — read the decision on LawPhil →
- Commissioner of Internal Revenue vs. Filinvest Development Corporation/Commissioner of Internal Revenue vs. Filinvest Development Corporation, G.R. No. 163653 / G.R. No. 167689, July 19, 2011 — read the decision on LawPhil →
- Sebastian Siga-an vs. Alicia Villlanueva, G.R. No. 173227, January 20, 2009 — read the decision on LawPhil →
- Samson Ching vs. Clarita Nicdao, et al, G.R. No. 141181, April 27, 2007 — read the decision on LawPhil →
Related provisions
- Civil Code, Article 1956 — Interest Must Be Stipulated in Writing
- Civil Code, Article 1953 — Mutuum Transfers Ownership
- Civil Code, Article 1957 — Void Usury-Circumventing Contracts
- Civil Code, Article 1960 — Payment of Interest Not Stipulated
- Civil Code, Article 2209 — Interest on Money Obligations