Estores v. Supangan
MODIFICATIONFacts
The Antecedents: Petitioner Hermojina Estores and respondent-spouses Arturo and Laura Supangan entered into a Conditional Deed of Sale for a parcel of land. The parties stipulated various conditions, including the seller's responsibility to secure DAR clearances, relocate a house within the property, and ensure peaceful transfer of ownership. The respondent-spouses paid ₱3.5 million of the ₱4.7 million purchase price. Procedural History: After nearly seven years, petitioner failed to comply with her obligations. Respondent-spouses demanded the return of their payment. Petitioner acknowledged receipt of the money and promised to return it within 120 days, but respondent-spouses proposed a 12% compounded annual interest. Petitioner failed to return the money, prompting respondent-spouses to file a complaint for sum of money before the RTC, praying for the principal amount plus interest, damages, and attorney's fees. The RTC ruled in favor of respondent-spouses, awarding the principal amount with 6% interest and attorney's fees. The Court of Appeals modified the RTC ruling, affirming the 6% interest but computed from the date of demand (September 27, 2000), not from the contract execution. The CA also reduced the attorney's fees and absolved the agent, Arias, of solidary liability. Petitioner appealed to the Supreme Court. The Petition: The sole issue raised before the Supreme Court was the propriety of the imposition of interest and attorney's fees.
Issue(s)
Whether the imposition of interest is proper despite the absence of a stipulation in the Conditional Deed of Sale. Whether the applicable interest rate should be 6% or 12% per annum. Whether the award of attorney's fees is warranted and reasonable.
Ruling
The Supreme Court denied the petition for review, affirming the Court of Appeals' decision with modifications. The Court ruled that interest is proper even without stipulation, and the applicable rate is 12% per annum from the date of demand until full satisfaction. The award of attorney's fees was further reduced to ₱50,000.00.
Ratio Decidendi
On the propriety of imposing interest without stipulation: The Court held that interest may be imposed in the discretion of the court upon damages awarded for breach of contract, as provided by Article 2210 of the Civil Code. In this case, petitioner's failure to fulfill her obligations under the Conditional Deed of Sale constituted a breach, and her subsequent failure to return the ₱3.5 million despite demand placed her in default. The Court reasoned that petitioner had the use of the money from the time it was given until the present, thus entitling respondent-spouses to compensation for the deprivation of their funds. On the applicable interest rate: The Court clarified that while the general rule is to follow the stipulated rate, absent any stipulation, the rate of 12% per annum applies to loans or forbearance of money, goods, or credits. The Court interpreted the petitioner's obligation to return the payment upon failure to fulfill conditions as a "forbearance of money," which is akin to an involuntary loan. This is because the respondent-spouses were deprived of the use of their money pending the fulfillment of conditions, and when these conditions were breached, they are entitled to compensation for the use of their money. Therefore, the 12% interest rate, as provided under Central Bank Circular No. 416 and reiterated in Eastern Shipping Lines, Inc. v. Court of Appeals, is applicable from the date of demand, September 27, 2000. On the award of attorney's fees: The Court found that the respondent-spouses were compelled to litigate to protect their interest due to petitioner's failure to return the money. Article 2208 of the Civil Code allows for the recovery of attorney's fees in such instances. However, the Court found the amounts awarded by the RTC and CA to be excessive. Applying the principle that attorney's fees must be reasonable, the Court reduced the award to ₱50,000.00, considering it just and equitable under the circumstances.
Main Doctrine
Interest may be imposed even in the absence of stipulation in a contract, particularly when there is a breach of contract and the obligor is in default. Forbearance of money, goods or credits, even if not a loan, can be subject to 12% interest per annum from the time of demand.