Solid Homes, Inc. v. Court of Appeals
REITERATIONFacts
The Antecedents: Solid Homes, Inc. (petitioner) and Philippine Sunroof Corporation (respondent) entered into an Offsetting Agreement where respondent would deliver asbestos materials worth P632,500.00 in exchange for Lot No. 19, Block No. 9, Loyola Grand Villas, owned by petitioner. Respondent delivered the materials, and petitioner credited the amount. However, petitioner failed to deliver the lot as agreed. Respondent made oral and written demands for compliance, which petitioner failed to meet, even proposing to substitute the lot, which respondent rejected. Respondent then filed a case for rescission of contract. Procedural History: Due to petitioner's and its counsel's failure to appear for pre-trial, petitioner was declared in default. Respondent presented its evidence ex-parte. The Regional Trial Court (RTC) rendered a decision on April 17, 1984, rescinding the Offsetting Agreement and ordering petitioner to pay P632,502.40 with 12% interest from October 8, 1981, until fully paid, plus attorney's fees and costs. The Petition: The Court of Appeals (CA) modified the RTC decision, ordering petitioner to pay only the interest at 12% per annum from October 8, 1981, to April 27, 1984, and P5,000.00 as attorney's fees. The CA considered the delivered title to the lot as payment for the principal obligation, preventing further recovery of the principal amount to avoid unjust enrichment. However, it affirmed the award of interest due to petitioner's delay. Petitioner filed a petition for review on certiorari, assailing the CA's decision regarding the recovery of interest and the rate thereof.
Issue(s)
Whether the delivery of Transfer Certificate of Title No. 312433, by way of settlement in a criminal case, constitutes full payment of the principal obligation in the civil case, thereby precluding recovery of interest under Article 1235 of the Civil Code. If interest is recoverable, what is the proper rate.
Ruling
The petition is denied, and the decision of the Court of Appeals is affirmed in toto.
Ratio Decidendi
On the issue of whether the delivery of the title constitutes full payment and precludes recovery of interest: The Court affirmed the Court of Appeals' ruling that the delivered title should be considered as payment for the cost of the asbestos materials, the principal obligation. To allow further recovery of the principal amount after the delivery of the title would amount to unjust enrichment, which is contrary to law and good morals, citing Article 2142 of the Civil Code. However, the Court clarified that this consideration only applied to the principal obligation. The Court also noted that the RTC decision rescinding the contract and awarding interest was rendered on April 17, 1984, while the private respondent accepted the title on April 27, 1984. Therefore, the acceptance of the title occurred after a favorable judgment had already been obtained in the civil case, and the private respondent may have considered the receipt of the title as settlement for the criminal case, not necessarily as full payment of the principal obligation in the civil case without protest regarding interest. On the issue of recoverability of interest and its rate: The Court agreed with both the RTC and the CA that interest is recoverable because the petitioner incurred in delay in the settlement of its obligation. Article 2209 of the Civil Code provides that in case of delay in the payment of a sum of money, the indemnity for damages shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest of six percent per annum. The Court found that the rate of twelve percent (12%) per annum was expressly agreed upon in writing by the parties, as indicated in the invoices (Exhibits "C" and "D"), and this rate is sanctioned by Article 2209 of the Civil Code. The Court rejected the petitioner's contention that the private respondent's failure to object or protest the non-payment of interest at the time of acceptance bars recovery under Article 1235 of the Civil Code, given the timeline of events and the prior favorable judgment.
Main Doctrine
The delivery of a title to a lot, even if considered as payment for a principal obligation, does not preclude the recovery of interest if the debtor incurred in delay, especially when there was an express stipulation for interest. Acceptance of performance with knowledge of its incompleteness or irregularity, without protest, may deem the obligation fully complied with under Article 1235 of the Civil Code, but this does not apply if the acceptance occurred after a favorable judgment for rescission was rendered.