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Herrera vs. Petrophil

The case of Herrera vs. Petrophil revolves around a lease agreement where the plaintiff-appellant claimed illegal deductions made by the defendant-appellee, arguing it violated the Usury Law. The ruling determined that there was no usury involved, as the deductions were considered a discount for advance rental payments rather than a loan or forbearance. The court clarified that usury requires specific elements, including a loan and an agreement for repayment, which were not present in this case.

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Adrian Estember
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28 views1 page

Herrera vs. Petrophil

The case of Herrera vs. Petrophil revolves around a lease agreement where the plaintiff-appellant claimed illegal deductions made by the defendant-appellee, arguing it violated the Usury Law. The ruling determined that there was no usury involved, as the deductions were considered a discount for advance rental payments rather than a loan or forbearance. The court clarified that usury requires specific elements, including a loan and an agreement for repayment, which were not present in this case.

Uploaded by

Adrian Estember
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Herrera vs. Petrophil G.R. No.

L-48349 December 29, 1986

Facts: On December 5, 1969, a "Lease Agreement" was entered into by the plaintiff-appellant and ESSO Standard
Eastern. Inc., (substituted by Petrophil Corporation) for twenty (20) years with a condition that monthly rentals should
be paid and there should be advance payment of rentals for the first eight years of the said contract. Pursuant to the
said contract, defendantappellee paid the advance rentals for the first eight years. On August 20, 1970, the defendant-
appellee, explained that there had been a mistake in computation, paid to the appellant the additional sum of
P2,182.70, thereby reducing the deducted amount to only P98,828.03. On October 14, 1974, the plaintiff-appellant sued
the defendant-appellee for the sum of P98,828.03, with interest, claiming this had been illegally deducted from him in
violation of the Usury Law. The defendant-appellee argued that the amount deducted was not usurious interest but a
given to it for paying the rentals in advance for eight years.

Issue: WON the defendant-appelle violated the usury law.

Ruling: There is no usury in this case because no money was given by the defendant-appellee to the plaintiff-appellant,
nor did it allow him to use its money already in his possession. There was neither loan nor forbearance but a mere
discount which the plaintiff-appellant allowed the defendant-appellee to deduct from the total payments because they
were being made in advance for eight years. The discount was in effect a reduction of the rentals which the lessor had
the right to determine, and any reduction thereof, by any amount, would not contravene the Usury Law. The difference
between a discount and a loan or forbearance is that the former does not have to be repaid. The loan or forbearance is
subject to repayment and is therefore governed by the laws on usury.

To constitute usury, "there must be loan or forbearance; the loan must be of money or something circulating as money;
it must be repayable absolutely and in all events; and something must be exacted for the use of the money in excess of
and in addition to interest allowed by law." the elements of usury are (1) a loan, express or implied; (2) an
understanding between the parties that the money lent shall or may be returned; that for such loan a greater rate or
interest that is allowed by law shall be paid, or agreed to be paid, as the case may be; and (4) a corrupt intent to take
more than the legal rate for the use of money loaned. Unless these four things concur in every transaction, it is safe to
affirm that no case of usury can be declared.

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