Dear PAO,
At present, I am unemployed and rely only on sidelines and small jobs. I have a friend who owes me a total of P4.7 million, which includes a P150,000.00 loan she borrowed a few years back. I would like to know how I can collect this debt from her?
Christine Craw
Dear Ms. Craw,
Article 1933 of the New Civil Code of the Philippines states:
“Article 1933. By the contract of loan, one of the parties delivers to another, either something not consumable so that the latter may use the same for a certain time and return it, in which case the contract is called a commodatum; or money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid, in which case the contract is simply called a loan or mutuum. xxx”
In simple terms, a loan agreement arises when one party (the creditor) delivers a sum of money to another (the debtor), with the understanding that the same amount shall be returned at a future date.
Before pursuing any legal action before the court, a creditor may send a demand letter to the debtor that the latter make good her obligation to pay. This is required considering that under the same Code, the delay in the performance of, or in this case payment of the loan amount, begins from the time the debtor is required to comply with the obligation to pay or to return the loan amount. Article 1169 provides:
“Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.”
In case you intend to recover only the P150,000.00 loan, we would advise you to file a small claims case with the first level court having jurisdiction over the place where you or nearest where your debtor lives. Cases of collection of money which do not exceed P1,000.000.00, exclusive of interest, damages, attorney’s fees and costs, are governed by the Rule on Small Claims. Such court proceedings are generally considered streamlined, faster and less expensive than ordinary court actions without the need of intervention of lawyers. Section 1, Rule IV of the Rules on Expedited Procedure in the First Level Courts (a.m. No. 08-8-7-SC, dated 1 March 2022) explicitly provides:
“Section 1. Scope. – This Rule shall govern the procedure in actions before the Metropolitan Trial Courts (MeTCs), Municipal Trial Courts in Cities (MTCCs), Municipal Trial Courts (MTCs) and Municipal Circuit Trial Courts (MCTCs) for payment or reimbursement of a sum of money where the value of the claim does not exceed One Million Pesos (P1,000,000.00).”
However, if you intend to collect on the whole P4.7-million total loan amount, you may want to consult a lawyer to determine the best way to recover it. Depending on the nature of the contracts constituting the whole amount, you may need to file cases which may not fall under the Small Claims Rule, but on other rules such as the Rule on Summary Procedure or the Rules on Civil Procedure. Such cases generally require the assistance of a lawyer considering that the procedure may be complex and nuanced in application.
We hope that we were able to answer your queries. This advice was based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.
Thank you for your continued trust and support.
Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to dearpao@manilatimes.net.
