Biesterbos v. Bartolome
REITERATIONFacts
The Antecedents: Spouses Hendrik and Alicia Biesterbos (petitioners) entered into a Contract to Sell with Efren E. Bartolome (respondent) for a duplex residential house and lot. The property was mortgaged to PNB. The contract stipulated a downpayment of P1,000,000.00 and a balance of P1,000,000.00 payable by July 30, 1992. Respondent also agreed to advance P600,000.00 for an adjacent lot to be purchased by petitioners, who were to reimburse this amount, along with transfer costs, by July 30, 1992. Petitioners paid P972,486.00 as downpayment and later made subsequent payments, totaling P2,081,208.24. Respondent claimed a remaining balance of P710,713.16, later increased to P918,407.92 due to bank interests and charges. Petitioners denied receiving most demand letters but acknowledged a letter dated May 18, 1993. On July 3, 1993, petitioners informed respondent of their deposit of P521,691.76 at PNB, to be held in trust for him. Procedural History: Respondent filed a complaint for specific performance and damages against petitioners. The Regional Trial Court (RTC) denied petitioners' prayer for consignation. The RTC ruled that petitioners had complied with their obligations regarding the townhouse and lot, ordering respondent to execute the deed of sale and deliver the title. It ordered petitioners to reimburse P518,791.60 (balance of the P600,000.00 advance) and P2,900.00 for transfer costs, denying claims for damages and overpayment. The Court of Appeals (CA) affirmed the RTC decision but modified it to include 12% per annum interest on the P518,791.76 from the time of default until filing of the complaint. Upon reconsideration, the CA ordered the interest to run until full payment. Petitioners appealed to the Supreme Court, questioning the interest award. The Petition: Petitioners questioned the CA's award of 12% interest per annum on the P518,791.76, arguing it violated Article 2209 of the Civil Code as no interest was agreed upon, and that the interest period should not run from the time of default given their valid tender of payment.
Issue(s)
Whether the advance payment for the adjacent lot constituted a loan or forbearance subject to interest, and when default commenced. Whether petitioners' deposit constituted a valid tender of payment that suspended the running of interest. What is the appropriate interest rate and period for the obligation.
Ruling
The petition is partly GRANTED. The decision and resolution of the Court of Appeals are AFFIRMED with MODIFICATION. The legal interest of 12% per annum on the principal amount of P518,791.76 shall commence from May 18, 1993 (extrajudicial demand) until July 3, 1993 (notification of deposit). An additional 12% interest per annum shall be paid from the date of finality of the decision until full payment.
Ratio Decidendi
On the nature of the advance payment and the commencement of default: The Court affirmed the lower courts' conclusion that the agreement for respondent to advance P600,000.00 for the adjacent lot constituted a contract of loan or forbearance. Default occurs from the time the obligee judicially or extrajudicially demands fulfillment of the obligation. The parties stipulated on the authenticity of the demand letter dated May 18, 1993, which the Court considered as the date occasioning default. Therefore, the obligation to pay the P600,000.00 advance, less payments made, became due and demandable, and default commenced on May 18, 1993. On the effect of the deposit as tender of payment: The Court acknowledged that petitioners' letter of July 3, 1993, informing respondent of the deposit of P521,691.76 did not strictly constitute a valid tender of payment and consignation. However, it was considered an act of good faith to settle the obligation. Citing Gregorio Araneta, Inc. vs. De Paterno and Vidal, the Court held that equity and justice demand that such an act should suspend the running of interest on the outstanding amount. This is because the refusal to accept was not based on technical defects but on the respondent's dissatisfaction with the arrangement, and the debtor cannot be considered delinquent when offering payment in good faith. On the award of interest: Applying the guidelines in Eastern Shipping Lines, Inc. vs. Court of Appeals, the Court determined the appropriate interest rate and commencement. For an obligation constituting a loan or forbearance of money, the interest due is that stipulated in writing; if none, it is 12% per annum from default until satisfaction. The Court modified the CA's ruling by limiting the initial 12% interest period to run from the extrajudicial demand on May 18, 1993, until July 3, 1993, when petitioners notified respondent of the deposited amount. A subsequent 12% interest per annum was imposed from the finality of the decision until full payment, reflecting the period after the deposit was made available.
Main Doctrine
The advance payment by one party for the purchase of an adjacent lot for the benefit of the other party, to be reimbursed within a specified period, constitutes a contract of loan or forbearance. Default occurs upon extrajudicial demand, and the running of interest is suspended by a good faith tender of payment, even if technically defective, if the refusal to accept is based on grounds other than the defect.