A crazed villager decapitated his neighbour and displayed her severed head in a cemetery allegedly due to a money dispute.

The suspect Randy Maniego, 35, confronted his victim Gelly Recodo, 58, and her niece Bernalyn Abranilla, 33, while they were walking to a market in Sagay city, Negros Occidental province in the Philippines on November 26 morning.

Without provocation, Randy then allegedly began chasing the pair down while hacking at them with a large blade.

Bernalyn managed to escape with a wounded hand, but Gelly was not as fortunate - being cornered in a sugarcane field where Randy caught up to her when she stumbled on uneven ground.

Residents of the quiet town were thrown into a panic when they later witnessed the man - who previously had no records of crime or drug abuse - clutching Gelly's head by the hair as he trudged to the local cemetery some three kilometres away from the plantation.

In a final act of vindictiveness, he placed her disembodied head atop a stone cross on a tomb for all to see.

After receiving reports of the grisly killing, police quickly tracked down and detained Randy in the city's Maquiling village. He willingly gave himself up and did not resist arrest, local media reported.

Police Lieutenant Colonel Roberto Indiape Jr., Sagay city police chief, told local media: 'The suspect slashed one victim on the hand, but she ran away. The victim who was beheaded also fled but she was caught and cornered.

'When she tripped in the fields, he struck her on the neck, chopped off her head, and left her body in the tall grass.

'The suspect was furious at the victim because he had been taking care of her buffalo for almost 12 years. When she wanted to take the animal back to sell, he charged her for his service, but she could not pay up.'

The police chief added that Randy demanded a commission of 10,000 PHP (around 177 USD) from the sale, but Gelly had only given him 2,000 PHP (around 35 USD), fuelling the resentment that led to the crime.

In an interview with local radio reporters, Randy showed no remorse, coldly saying he and his 'selfish' victim are now even.

Meanwhile, Gelly's niece Bernalyn had lost a finger from the attack and is still recovering in a hospital.

Randy is facing murder and frustrated murder charges and is currently detained at the Sagay City Police Station.