Case Digest: De los Reyes vs. Alejado, 16 Phil. 499

De los Reyes vs. Alejado, 16 Phil. 499

Subject: Obligations and Contracts

FACTS

On January 22, 1905, Veronica Alojado borrowed P67.60 from Benito de los Reyes. As a condition for the loan, Alojado agreed to work as a servant for de los Reyes without any salary until she could repay the loan.

On March 12, 1906, Alojado left de los Reyes' house without having paid the loan. De los Reyes filed a complaint against Alojado for collection of the loan.

ISSUE

Whether or not Alojado's agreement to work as a servant without salary is valid.

RULING

No. The Supreme Court held that Alojado's agreement to work as a servant without salary is invalid. The Court reasoned that domestic service is always understood to be compensated and any agreement made in connection with a loan, whereby it is stipulated that, because of the loan, such domestic service shall be absolutely gratuitous, is contrary to law and good morals. The Court also held that Alojado's agreement is usurious. Usury is the lending of money at an excessive rate of interest. In this case, Alojado agreed to work for de los Reyes without any salary for an indefinite period of time. This is clearly an excessive rate of interest and is therefore usurious.