14 United States v. Diaz-Conde (42 Phil.

766)  Laws adopted after the execution of a contract, changing or

GR No. 18208, February 14, 1922, JOHNSON, J., DE GUZMAN
DOCTRINE: Ex post facto laws, unless they are favorable to the
defendant, are prohibited in this jurisdiction.
FACTS:
1. December 30, 1915- Bartolome Oliveros and Engrancia Lianco
executed and delivered to the defendants a contract evidencing
the fact that the former had borrowed from the defendants therein
the sum of P 300 and that they obligated themselves to pay an
interest of 5% per month, payable within the first 10 days of each
and every month (first payment to be made on January 10, 1916)
2. May 1, 1916- Act no. 2655 or the Usury Law became effective
3. May 6, 1916- a complaint was presented in CFI-Manila, charging the
defendants with violation of the Usury law. Defendants were
arrested, arraigned, and pleaded not guilty.
4. CFI judge found the defendants guilty and sentenced each to pay
a fine of P 120, and in case of insolvency, they will suffer subsidiary
imprisonment in accordance with the provisions of the law
 At the time of the execution and delivery of the contract
there was no law in force in the Philippines punishing usury;
but, inasmuch as the defendants had collected a usurious
rate of interest after the adoption of the Usury Law, they
were guilty of a violation of that law and should be punished
in accordance with its provisions.
5. The defendants appealed the decision of lower court stating the
following reasons:
 The contract was executed before Act No. 2655 was
adopted
 At the time of the perfection of the contract, there was no
usury law in force
 Usury law became effective only on May 1, 1916, 4 and a
half months after the perfection of the contract
 Usury law have no retroactive effect
 Usury law impairs the obligation of contract

ISSUE: WON Act NO. 2655 or Usury Law shall be given retroactive effect?
NO.
altering the rate of interest, cannot be made to apply to such
contract without violating the provisions of the constitution which
prohibit the adoption of a law "impairing the obligation of contract."
 The obligation of the contract is the law which binds the parties to
perform their agreement if it is not contrary to the law, morals or
public order.
 If a law impairs the obligation of a contract, the law is prohibited by
the Jones Law and is null and void.
 A law imposing a new penalty, or a new liability, or giving a new
right of action, must not be construed as having a retroactive
effect.
 Laws in force at the time the contract was made must govern its
interpretation and application. Laws must be construed
prospectively and not retrospectively.
 Ex post facto laws, unless they are favorable to the defendant, are
prohibited in this jurisdiction.
 Every law that makes an action, done before the passage of the
law, and which was innocent when done, criminal, and punishes
such action, is an ex post facto law.
 Act No. 2655 made an act which had been done before the law
was adopted, a criminal act, and to make said Act applicable to
the act complained of would be to give it an ex post facto
operation.
 A law may be given a retroactive effect in civil action, providing it
is curative in character, but ex post facto laws are absolutely
prohibited unless its retroactive effect is favorable to the defendant

HELD:
 When a contract contains an obligation to pay interest upon the
principal, the interest becomes part of the principal and is included
within the promise to pay. Interest is part of the contract.