Below is a general discussion of additional interest claims after a settled lending case under Philippine law. This content is intended for informational purposes only and does not constitute legal advice. Readers confronted with specific legal questions or disputes should consult a qualified attorney.

1. Overview of Lending Cases and Settlements in the Philippines

In the Philippines, lending arrangements are primarily governed by:

Civil Code of the Philippines (Republic Act No. 386), which provides the general rules on obligations and contracts, including provisions on interest.
Bangko Sentral ng Pilipinas (BSP) regulations, especially for banks, financing companies, and other lending institutions. BSP Circulars often set or update the legal or conventional interest rates recognized by courts.
Established Philippine jurisprudence, which guides the interpretation of the law concerning loan transactions and the imposition of interest.

When a lending dispute reaches the courts (or is in the process of litigation), the parties often opt to negotiate a compromise settlement or enter into a settlement agreement to avoid prolonged litigation. Once the dispute is settled—whether judicially (through a court-approved compromise agreement) or extrajudicially (through a private agreement)—the settlement ideally resolves all claims arising from the transaction, including principal, accrued interests, penalties, and other charges.

However, disputes sometimes arise regarding additional interest claims after the signing of a compromise agreement or after a case has been “finally” settled. Borrowers might question the validity of newly asserted interests or penalties that allegedly accrued outside or after the settlement terms. Creditors, on the other hand, might argue they reserved the right to such interest or that it automatically attached by operation of law.

2. Legal Interest vs. Conventional Interest

Before addressing additional interest claims post-settlement, it helps to understand two categories of interest recognized under Philippine law:

Conventional Interest – The interest rate agreed upon by the parties in a contract (e.g., a loan agreement). This must not be unconscionable or contrary to public policy, and it must generally be in writing (Article 1956, Civil Code).
Legal Interest – The interest rate imposed by law. Historically, the legal rate was 12% per annum (under Central Bank Circular No. 905), but was amended to 6% in 2013 (under BSP Circular No. 799, referencing the Supreme Court ruling in Nacar v. Gallery Frames [G.R. No. 189871, August 13, 2013]).

Depending on the nature of the debt and the applicable period—whether before judicial demand, after judicial demand, or post-judgment—legal interest may vary. Settlements will usually address which interest rate applies or may expressly waive certain interest claims.

3. Effects of a Settlement on Future Claims

a. Nature of a Compromise Agreement

A compromise is a contract where the parties make mutual concessions to end a dispute (Article 2028, Civil Code). Once a compromise agreement is perfected, it has the force of law between the parties (Article 2037, Civil Code) and becomes immediately binding upon them. If court-approved, it also attains the status of a final judgment.

b. Res Judicata and Waiver of Claims

A settlement or compromise approved by the court typically results in res judicata, meaning the dispute cannot be litigated again and the obligations are deemed extinguished except for any future obligations clearly and explicitly reserved.

If the settlement agreement covers “all claims of whatever nature” arising out of the loan obligation (including principal, accrued interest, penalties, fees), courts will generally disallow either party from bringing additional claims on the same cause of action, including extra or previously unmentioned interest or penalty charges.

c. Strict Construction Against the Drafter or Dominant Party

Under the rules of contract interpretation, a compromise is interpreted strictly but fairly. If the settlement is silent on certain fees or interest, courts may consider whether the parties intended to include or exclude it. A lender who wants to claim additional interest after a settlement should ensure that the settlement agreement either explicitly reserves the right to such interest or states that the settlement does not cover a particular period or amount.

4. Grounds for Claiming Additional Interest After Settlement

Despite the general rule that a full settlement extinguishes the obligation, certain scenarios might allow a creditor to assert additional interest:

Reservation in the Settlement Agreement
The settlement might expressly state that “interest from [a particular date] to [a subsequent date] shall remain collectible.” If these terms are clear and the borrower agreed, then a post-settlement claim could be valid.
Partial Settlement of the Debt
If the document was explicitly a partial settlement (e.g., “payment on account” without prejudice to the remaining balance of principal and interest”), additional interest on the unpaid principal balance may continue to run. Thus, after the partial settlement is concluded, the creditor may still demand interest on the remaining principal.
Default or Delay After Settlement
If the settlement agreement staggers payments (e.g., a restructured loan with installments) and the borrower subsequently defaults again, additional interest or penalty fees could accrue under the restructured terms.
Application of “Judgment Interest”
If there was a judicial judgment awarding a sum of money plus interest, then the post-judgment interest rate (currently at 6% per annum as clarified in Nacar v. Gallery Frames) will attach until full payment is made—unless the compromise or settlement supersedes the final judgment or includes a waiver of such interest.

5. Common Defenses Against Additional Interest Claims

Borrowers confronted with additional interest claims after settlement often raise one or more of the following defenses:

Full Extinguishment by Settlement
Arguing that the compromise agreement covered all obligations and extinguished all claims, making any subsequent interest claim barred by res judicata.
No Express Reservation or Ambiguity in the Agreement
If the settlement document does not clearly reserve the lender’s right to collect additional interest or is ambiguous, courts typically resolve such ambiguity against the party that drafted the contract (often the lender). This follows the principle of contra proferentem.
Unconscionable Rates
Even if the agreement’s terms appear to allow the imposition of a certain rate, the borrower can argue that the rate is unconscionable or excessive (for example, a monthly interest rate that effectively leads to a usurious arrangement). Courts in the Philippines have struck down unconscionable interest rates.
Invalid or Unenforceable Penalties
If the lender seeks additional penalty charges cloaked as “additional interest,” the borrower may question the validity of penalty stipulations or argue that the total charges far exceed the principal, which the courts usually view as inequitable or contrary to morals.

6. Illustrative Philippine Jurisprudence

Nacar v. Gallery Frames (2013)
- Clarified that the legal interest rate in the Philippines is 6% per annum (both for compensatory and moratory interest in the absence of a stipulated rate) after the effectivity of BSP Circular No. 799.
Development Bank of the Philippines v. Court of Appeals (and Related Cases)
- Highlighted that once a judgment becomes final and executory, the amount adjudged shall earn legal interest until fully satisfied, unless the parties arrive at a superseding compromise or settlement.
Reyes v. Sierra Madre Transit (and Similar Cases)
- Reiterated that a compromise agreement has the force of law between parties and cannot be set aside casually if both parties voluntarily agreed to it.

Although cases may differ by factual context, the Supreme Court consistently holds that once a compromise or settlement is executed—especially if approved by the court—any claim not expressly reserved or recognized therein is generally deemed extinguished.

7. Practical Considerations

Drafting Settlement Agreements Carefully
- Both lenders and borrowers should be thorough in addressing principal, accrued interest, penalties, attorney’s fees, and any other charges in the agreement.
- If there are terms meant to survive the settlement (e.g., interest on unpaid installments), these should be clearly spelled out.
Ensuring Clear Computations
- Ambiguities in computing interest (e.g., period covered, rate applied) often lead to further disputes. Precise computations and amounts due should be itemized in the settlement to reduce future disagreements.
Revisiting BSP Circulars and Court Decisions
- Lenders should keep abreast of the prevailing legal interest rates set by the Supreme Court and BSP. Imposing a higher rate than allowed by law (or an unconscionable rate) risks partial invalidation or outright nullification.
Documentation and Payment Receipts
- Borrowers should keep thorough records of all payments, including interest and penalties, to demonstrate that obligations have been fully discharged.
- Lenders should likewise maintain transparent ledgers to justify any remaining obligations or interest accruing after settlement.

8. Conclusion

In general, once a lending case in the Philippines is settled (whether by compromise or final court-approved agreement), it is presumed to dispose of the entirety of the dispute, including all interest accrued up to the date of settlement. Post-settlement claims for additional interest will typically only be successful if they are:

Explicitly reserved in the compromise agreement,
Part of a partial settlement that did not extinguish all obligations,
or related to a new default or breach after the settlement was executed.

Absent these specific grounds, courts tend to reject subsequent claims for interest as having been extinguished together with the principal obligation. As each case can turn on its particular facts and contractual stipulations, it is vital for any party—creditor or borrower—dealing with potential post-settlement interest to seek individualized legal advice to ensure their rights and interests are adequately protected.

Disclaimer: This discussion is provided for general informational purposes and should not be taken as legal advice. For any specific questions or disputes concerning additional interest claims after a settled lending case, consult a qualified lawyer who can address your particular circumstances under Philippine law.