Republic of the Philippines

Supreme Court
Baguio City

FIRST DIVISION

HERMOJINA ESTORES, G.R. No. 175139
Petitioner,
Present:

CORONA, C.J., Chairperson,
- versus - LEONARO-E CA!"RO,
BER!A#$N,
EL CA!"$LLO, and
%$LLARA#A, &R', JJ.
SO!SES ART!RO "#$
%A!RA S!ANGAN, Pro(ulgate):
Respondents' April *+, ,-*,
. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - .

D E C I S I O N

DE% CASTI%%O, J.&

"he only issue pose) before us is the propriety of the i(position of interest an)
attorney/s fees'

Assaile) in this Petition for Revie0
*
1*2 file) un)er Rule 34 of the Rules of Court
is the #ay *,, ,--5 ecision
,
1,2 of the Court of Appeals 6CA7 in CA-8'R' C% No'
+9*,9, the )ispositive portion of 0hich rea)s:

:;ERE<ORE, the appeale) )ecision is #O$<$E' "he rate of interest shall
be si. percent 65=7 per annu(, co(pute) fro( !epte(ber ,>, ,--- until its full pay(ent
before finality of the ?u)g(ent' $f the a)?u)ge) principal an) the interest 6or any part
thereof7 re(ain unpai) thereafter, the interest rate shall be a)?uste) to t0elve percent
6*,=7 per annu(, co(pute) fro( the ti(e the ?u)g(ent beco(es final an) e.ecutory
until it is fully satisfie)' "he a0ar) of attorney/s fees is hereby re)uce) to P*--,---'--'
Costs against the )efen)ants-appellants'

!O ORERE'
9
192
Also assaile) is the August 9*, ,--5 Resolution
3
132 )enying the (otion for
reconsi)eration'

Factual Antecedents

1
2
3
4
On October 9, *@@9, petitioner ;er(o?ina Estores an) respon)ent-spouses Arturo
an) Laura !upangan entere) into a Con)itional ee) of !ale
4
142 0hereby petitioner
offere) to sell, an) respon)ent-spouses offere) to buy, a parcel of lan) covere) by
"ransfer Certificate of "itle No' "C" No' @+>,- locate) at Naic, Cavite for the su( of
P3'> (illion' "he parties liAe0ise stipulate), a(ong others, to 0it:

. . . .

*' %en)or 0ill secure approve) clearance fro( AR reBuire(ents of 0hich are 6sic7:
a7 Letter reBuest
b7 "itle
c7 "a. eclaration
)7 Affi)avit of Aggregate Lan)hol)ing C %en)orD%en)ee
e7 Certification fro( the Prov/l' Assessor/s as to Lan)hol)ings of %en)orD%en)ee
f7 Affi)avit of Non-"enancy
g7 ee) of Absolute !ale

. . . .

3' %en)ee shall be infor(e) as to the status of AR clearance 0ithin *- )ays upon
signing of the )ocu(ents'

. . . .

5' Regar)ing the house locate) 0ithin the peri(eter of the sub?ect 1lot2 o0ne) by
spouses 1#agbago2, sai) house shall be (ove) outsi)e the peri(eter of this sub?ect
property to the 9-- sB' (' area allocate) for 1it2' %en)or hereby accepts the
responsibility of seeing to it that such agree(ent is carrie) out before full pay(ent of
the sale is (a)e by ven)ee'

>' $f an) after the ven)or has co(plete) all necessary )ocu(ents for registration of the
title an) the ven)ee fails to co(plete pay(ent as per agree(ent, a forfeiture fee of
,4= or )o0npay(ent, shall be applie)' ;o0ever, if the ven)or fails to co(plete
necessary )ocu(ents 0ithin thirty )ays 0ithout any sufficient reason, or 0ithout
infor(ing the ven)ee of its status, ven)ee has the right to )e(an) return of full
a(ount of )o0n pay(ent'

. . . .

5
@' As to the boun)aries an) partition of the lots 6*4,-*+ sB' (' an) 9-- sB' ('7 %en)ee
shall be infor(e) i((e)iately of its approval by the LRC'

*-' "he ven)or assures the ven)ee of a peaceful transfer of o0nership'

. . . .
5
152


After al(ost seven years fro( the ti(e of the e.ecution of the contract an)
not0ithstan)ing pay(ent of P9'4 (illion on the part of respon)ent-spouses, petitioner
still faile) to co(ply 0ith her obligation as e.pressly provi)e) in paragraphs 3, 5, >, @
an) *- of the contract' ;ence, in a letter
>
1>2 )ate) !epte(ber ,>, ,---, respon)ent-
spouses )e(an)e) the return of the a(ount of P9'4 (illion 0ithin *4 )ays fro( receipt
of the letter' $n reply,
+
1+2 petitioner acAno0le)ge) receipt of the P9'4 (illion an)
pro(ise) to return the sa(e 0ithin *,- )ays' Respon)ent-spouses 0ere a(enable to the
proposal provi)e) an interest of *,= co(poun)e) annually shall be i(pose) on the P9'4
(illion'
@
1@2 :hen petitioner still faile) to return the a(ount )espite )e(an),
respon)ent-spouses 0ere constraine) to file a Co(plaint
*-
1*-2 for su( of (oney before
the Regional "rial Court 6R"C7 of #alabon against herein petitioner as 0ell as Roberto
E' Arias 6Arias7 0ho allege)ly acte) as petitioner/s agent' "he case 0as )ocAete) as
Civil Case No' 9,-*-#N an) raffle) off to Branch *>-' $n their co(plaint, respon)ent-
spouses praye) that petitioner an) Arias be or)ere) to:

6
7
8
9
10
*' Pay the principal a(ount of P9,4--,---'-- plus interest of *,=
co(poun)e) annually starting October *, *@@9 or an esti(ate) a(ount of
P+,44+,4@*'54F

,' Pay the follo0ing ite(s of )a(ages:

a7 #oral )a(ages in the a(ount of P*--,---'--F
b7 Actual )a(ages in the a(ount of P*--,---'--F
c7 E.e(plary )a(ages in the a(ount of P*--,---'--F
)7 1Attorney/s2 fee in the a(ount of P4-,---'-- plus ,-= of recoverable
a(ount fro( the 1petitioner2'
e7 1C2ost of suit'
**
1**2


$n their Ans0er 0ith Counterclai(,
*,
1*,2 petitioner an) Arias averre) that they are
0illing to return the principal a(ount of P9'4 (illion but 0ithout any interest as the sa(e
0as not agree) upon' $n their Pre-"rial Brief,
*9
1*92 they reiterate) that the only
re(aining issue bet0een the parties is the i(position of interest' "hey argue) that since
the Con)itional ee) of !ale provi)e) only for the return of the )o0npay(ent in case of
breach, they cannot be hel) liable to pay legal interest as 0ell'
*3
1*32

$n its Pre-"rial Or)er
*4
1*42 )ate) &une ,@, ,--*, the R"C note) that Gthe parties
agree) that the principal a(ount of 9'4 (illion pesos shoul) be returne) to the
11
12
13
14
15
1respon)ent-spouses2 by the 1petitioner2 an) the issue re(aining 1is2 0hether . . .
1respon)ent-spouses2 are entitle) to legal interest thereon, )a(ages an) attorney/s
fees'H
*5
1*52

"rial ensue) thereafter' After the presentation of the respon)ent-spouses/ evi)ence,
the trial court set the presentation of Arias an) petitioner/s evi)ence on !epte(ber 9,
,--9'
*>
1*>2 ;o0ever, )espite several postpone(ents, petitioner an) Arias faile) to
appear hence they 0ere )ee(e) to have 0aive) the presentation of their evi)ence'
ConseBuently, the case 0as )ee(e) sub(itte) for )ecision'
*+
1*+2

Ruling of the Regional Trial Court

On #ay >, ,--3, the R"C ren)ere) its ecision
*@
1*@2 fin)ing respon)ent-spouses
entitle) to interest but only at the rate of 5= per annu( an) not *,= as praye) by the('
,-
1,-2 $t also foun) respon)ent-spouses entitle) to attorney/s fees as they 0ere co(pelle)
to litigate to protect their interest'
,*
1,*2

16
17
18
19
20
21
"he )ispositive portion of the R"C ecision rea)s:

:;ERE<ORE, pre(ises consi)ere), ?u)g(ent is hereby ren)ere) in favor of
the 1respon)ent-spouses2 an) or)ering the 1petitioner an) Roberto Arias2 to ?ointly an)
severally:

*' Pay 1respon)ent-spouses2 the principal a(ount of "hree #illion <ive
;un)re) "housan) pesos 6P9,4--,---'--7 0ith an interest of 5= co(poun)e) annually
starting October *, *@@9 an) attorney/s fee in the a(ount of <ifty "housan) pesos
6P4-,---'--7 plus ,-= of the recoverable a(ount fro( the )efen)ants an) cost of the
suit'

"he Co(pulsory Counter Clai( is hereby )is(isse) for lacA of factual evi)ence'

!O ORERE'
,,
1,,2


Ruling of the Court of Appeals

Aggrieve), petitioner an) Arias file) their notice of appeal'
,9
1,92 "he CA note)
that the only issue sub(itte) for its resolution is G0hether it is proper to i(pose interest
for an obligation that )oes not involve a loan or forbearance of (oney in the absence of
stipulation of the parties'H
,3
1,32

On #ay *,, ,--5, the CA ren)ere) the assaile) ecision affir(ing the ruling of
22
23
24
the R"C fin)ing the i(position of 5= interest proper'
,4
1,42 ;o0ever, the sa(e shall
start to run only fro( !epte(ber ,>, ,--- 0hen respon)ent-spouses for(ally )e(an)e)
the return of their (oney an) not fro( October *@@9 0hen the contract 0as e.ecute) as
hel) by the R"C' "he CA also (o)ifie) the R"C/s ruling as regar)s the liability of Arias'
$t hel) that Arias coul) not be hel) soli)arily liable 0ith petitioner because he (erely
acte) as agent of the latter' #oreover, there 0as no sho0ing that he e.pressly boun)
hi(self to be personally liable or that he e.cee)e) the li(its of his authority' #ore
i(portantly, there 0as even no sho0ing that Arias 0as authoriIe) to act as agent of
petitioner'
,5
1,52 Anent the a0ar) of attorney/s fees, the CA foun) the a0ar) by the trial
court 6P4-,---'-- plus ,-= of the recoverable a(ount7 e.cessive
,>
1,>2 an) thus
re)uce) the sa(e to P*--,---'--'
,+
1,+2

"he )ispositive portion of the CA ecision rea)s:

:;ERE<ORE, the appeale) )ecision is #O$<$E' "he rate of interest shall
be si. percent 65=7 per annu(, co(pute) fro( !epte(ber ,>, ,--- until its full pay(ent
before finality of the ?u)g(ent' $f the a)?u)ge) principal an) the interest 6or any part
thereof7 re(ain1s2 unpai) thereafter, the interest rate shall be a)?uste) to t0elve percent
6*,=7 per annu(, co(pute) fro( the ti(e the ?u)g(ent beco(es final an) e.ecutory
until it is fully satisfie)' "he a0ar) of attorney/s fees is hereby re)uce) to P*--,---'--'
Costs against the 1petitioner2'

!O ORERE'
,@
1,@2
25
26
27
28
29


Petitioner (ove) for reconsi)eration 0hich 0as )enie) in the August 9*, ,--5
Resolution of the CA'

;ence, this petition raising the sole issue of 0hether the i(position of interest an)
attorney/s fees is proper'

Petitioners Arguments

Petitioner insists that she is not boun) to pay interest on the P9'4 (illion because
the Con)itional ee) of !ale only provi)e) for the return of the )o0npay(ent in case of
failure to co(ply 0ith her obligations' Petitioner also argues that the a0ar) of attorney/s
fees in favor of the respon)ent-spouses is un0arrante) because it cannot be sai) that the
latter 0on over the for(er since the CA even sustaine) her contention that the i(position
of *,= interest co(poun)e) annually is totally uncalle) for'

Respondent-spouses Arguments

Respon)ent-spouses aver that it is only fair that interest be i(pose) on the a(ount
they pai) consi)ering that petitioner faile) to return the a(ount upon )e(an) an) ha)
been using the P9'4 (illion for her benefit' #oreover, it is un)ispute) that petitioner
faile) to perfor( her obligations to relocate the house outsi)e the peri(eter of the sub?ect
property an) to co(plete the necessary )ocu(ents' As regar)s the attorney/s fees, they
clai( that they are entitle) to the sa(e because they 0ere force) to litigate 0hen
petitioner un?ustly 0ithhel) the a(ount' Besi)es, the a(ount a0ar)e) by the CA is even
s(aller co(pare) to the filing fees they pai)'

Our Ru'(#)

"he petition lacAs (erit'

Interest may be imposed even in the
absence of stipulation in the contract


:e sustain the ruling of both the R"C an) the CA that it is proper to i(pose
interest not0ithstan)ing the absence of stipulation in the contract' Article ,,*- of the
Civil Co)e e.pressly provi)es that G1i2nterest (ay, in the )iscretion of the court, be
allo0e) upon )a(ages a0ar)e) for breach of contract'H $n this case, there is no Buestion
that petitioner is legally obligate) to return the P9'4 (illion because of her failure to
fulfill the obligation un)er the Con)itional ee) of !ale, )espite )e(an)' !he has in fact
a)(itte) that the con)itions 0ere not fulfille) an) that she 0as 0illing to return the full
a(ount of P9'4 (illion but has not actually )one so' Petitioner en?oye) the use of the
(oney fro( the ti(e it 0as given to her
9-
19-2 until no0' "hus, she is alrea)y in )efault
of her obligation fro( the )ate of )e(an), i.e., on !epte(ber ,>, ,---'

The interest at the rate of !"# is
applicable in the instant case


Anent the interest rate, the general rule is that the applicable rate of interest Gshall
be co(pute) in accor)ance 0ith the stipulation of the parties'H
9*
19*2 Absent any
stipulation, the applicable rate of interest shall be *,= per annu( G0hen the obligation
arises out of a loan or a forbearance of (oney, goo)s or cre)its' $n other cases, it shall be
si. percent 65=7'H
9,
19,2 $n this case, the parties )i) not stipulate as to the applicable rate
of interest' "he only Buestion re(aining therefore is 0hether the 5= as provi)e) un)er
Article ,,-@ of the Civil Co)e, or *,= un)er Central BanA Circular No' 3*5, is )ue'

"he contract involve) in this case is a)(itte)ly not a loan but a Con)itional ee)
of !ale' ;o0ever, the contract provi)es that the seller 6petitioner7 (ust return the
pay(ent (a)e by the buyer 6respon)ent-spouses7 if the con)itions are not fulfille)'
"here is no Buestion that they have in fact, not been fulfille) as the seller 6petitioner7 has
a)(itte) this' Not0ithstan)ing )e(an) by the buyer 6respon)ent-spouses7, the seller
6petitioner7 has faile) to return the (oney an)
30
31
32

shoul) be consi)ere) in )efault fro( the ti(e that )e(an) 0as (a)e on !epte(ber ,>,
,---'

Even if the transaction involve) a Con)itional ee) of !ale, can the stipulation
governing the return of the (oney be consi)ere) as a forbearance of (oney 0hich
reBuire) pay(ent of interest at the rate of *,=J :e believe so'

$n Crismina Garments, Inc. v. Court of Appeals,
99
1992 GforbearanceH 0as )efine)
as a Gcontractual obligation of len)er or cre)itor to refrain )uring a given perio) of ti(e,
fro( reBuiring the borro0er or )ebtor to repay a loan or )ebt then )ue an) payable'H
"his )efinition )escribes a loan 0here a )ebtor is given a perio) 0ithin 0hich to pay a
loan or )ebt' $n such case, Gforbearance of (oney, goo)s or cre)itsH 0ill have no )istinct
)efinition fro( a loan' :e believe ho0ever, that the phrase Gforbearance of (oney,
goo)s or cre)itsH is (eant to have a separate (eaning fro( a loan, other0ise there 0oul)
have been no nee) to a)) that phrase as a loan is alrea)y sufficiently )efine) in the Civil
Co)e'
93
1932 <orbearance of (oney, goo)s or cre)its shoul) therefore refer to
arrange(ents other than loan agree(ents, 0here a person acBuiesces to the te(porary
use of his (oney, goo)s or cre)its pen)ing happening of certain events or fulfill(ent of
certain con)itions' $n this case, the respon)ent-spouses parte) 0ith their (oney even
before the con)itions 0ere fulfille)' "hey have therefore allo0e) or grante) forbearance
to the seller 6petitioner7 to use their (oney pen)ing fulfill(ent of the con)itions' "hey
33
34
0ere )eprive) of the use of their (oney for the perio) pen)ing fulfill(ent of the
con)itions an) 0hen those con)itions 0ere breache), they are entitle) not only to the
return of the principal a(ount pai), but also to co(pensation for the use of their (oney'
An) the co(pensation for the use of their (oney, absent any stipulation, shoul) be the
sa(e rate of legal interest applicable to a loan since the use or )eprivation of fun)s is
si(ilar to a loan'

Petitioner/s un0arrante) 0ithhol)ing of the (oney 0hich rightfully pertains to
respon)ent-spouses a(ounts to forbearance of (oney 0hich can be consi)ere) as an
involuntary loan' "hus, the applicable rate of interest is *,= per annu(' $n Eastern
Shipping Lines, Inc. v. Court of Appeals,
94
1942cite) in Crismina Garments, Inc. v. Court
of Appeals,
95
1952 the Court suggeste) the follo0ing gui)elines:

$' :hen an obligation, regar)less of its source, i'e', la0, contracts, Buasi-
contracts, )elicts or Buasi-)elicts is breache), the contravenor can be hel)
liable for )a(ages' "he provisions un)er "itle K%$$$ on La(ages/ of the
Civil Co)e govern in )eter(ining the (easure of recoverable )a(ages'

$$' *(t+ re)"r$ p"rt(,u'"r'- to "# "."r$ o/ (#tere0t (# t+e ,o#,ept o/
",tu"' "#$ ,ompe#0"tor- $"m")e0, t+e r"te o/ (#tere0t, "0 .e'' "0 t+e
",,ru"' t+ereo/, (0 (mpo0e$, "0 /o''o.0:

1. *+e# t+e o1'()"t(o# (0 1re",+e$, "#$ (t ,o#0(0t0 (# t+e p"-me#t
o/ " 0um o/ mo#e-, (.e., " 'o"# or /or1e"r"#,e o/ mo#e-, t+e (#tere0t
$ue 0+ou'$ 1e t+"t .+(,+ m"- +"2e 1ee# 0t(pu'"te$ (# .r(t(#).
Furt+ermore, t+e (#tere0t $ue 0+"'' (t0e'/ e"r# 'e)"' (#tere0t /rom t+e
t(me (t (0 3u$(,("''- $em"#$e$. I# t+e "10e#,e o/ 0t(pu'"t(o#, t+e r"te
o/ (#tere0t 0+"'' 1e 145 per "##um to 1e ,ompute$ /rom $e/"u't,
(.e., /rom 3u$(,("' or e6tr"3u$(,("' $em"#$ u#$er "#$ 0u13e,t to t+e
35
36
pro2(0(o#0 o/ Art(,'e 1179 o/ t+e C(2(' Co$e.

,' :hen an obligation, not constituting a loan or forbearance of (oney,
is breache), an interest on the a(ount of )a(ages a0ar)e) (ay be
i(pose) at the )iscretion of the court at the rate of 5= per annu(' No
interest, ho0ever, shall be a)?u)ge) on unliBui)ate) clai(s or )a(ages
e.cept 0hen or until the )e(an) can be establishe) 0ith reasonable
certainty' Accor)ingly, 0here the )e(an) is establishe) 0ith reasonable
certainty, the interest shall begin to run fro( the ti(e the clai( is (a)e
?u)icially or e.tra?u)icially 6Art' **5@, Civil Co)e7 but 0hen such
certainty cannot be so reasonably establishe) at the ti(e the )e(an) is
(a)e, the interest shall begin to run only fro( the )ate the ?u)g(ent of
the court is (a)e 6at 0hich ti(e the Buantification of )a(ages (ay be
)ee(e) to have been reasonably ascertaine)7' "he actual base for the
co(putation of legal interest shall, in any case, be on the a(ount finally
a)?u)ge)'

9' :hen the ?u)g(ent of the court a0ar)ing a su( of (oney beco(es
final an) e.ecutory, the rate of legal interest, 0hether the case falls un)er
paragraph * or paragraph ,, above, shall be *,= per annu( fro( such
finality until its satisfaction, this interi( perio) being )ee(e) to be by
then an eBuivalent to a forbearance of cre)it'
9>
19>2


Eastern Shipping Lines, Inc. v. Court of Appeals
9+
19+2an) its pre)ecessor case,
Reformina v. ongol
9@
19@2 both involve) torts cases an) hence, there 0as no forbearance
of (oney, goo)s, or cre)its' <urther, the a(ount clai(e) 6i.e., )a(ages7 coul) not be
establishe) 0ith reasonable certainty at the ti(e the clai( 0as (a)e' ;ence, 0e arrive)
at a )ifferent ruling in those cases'

!ince the )ate of )e(an) 0hich is !epte(ber ,>, ,--- 0as satisfactorily
37
38
39
establishe) )uring trial, then the interest rate of *,= shoul) be recAone) fro( sai) )ate
of )e(an) until the principal a(ount an) the interest thereon is fully satisfie)'

The a$ard of attorneys fees is
$arranted


En)er Article ,,-+ of the Civil Co)e, attorney/s fees (ay be recovere):


. . . .

6,7 :hen the )efen)ant/s act or o(ission has co(pelle) the plaintiff to litigate 0ith
thir) persons or to incur e.penses to protect his interestF

. . . .

6**7 $n any other case 0here the court )ee(s it ?ust an) eBuitable that attorney/s fees
an) e.penses of litigation shoul) be recovere)'

$n all cases, the attorney/s fees an) e.penses of litigation (ust be reasonable'
Consi)ering the circu(stances of the instant case, 0e fin) respon)ent-spouses
entitle) to recover attorney/s fees' "here is no )oubt that they 0ere force) to litigate to
protect their interest, i.e', to recover their (oney' ;o0ever, 0e fin) the a(ount of
P4-,---'-- (ore appropriate in line 0ith the policy enunciate) in Article ,,-+ of the
Civil Co)e that the a0ar) of attorney/s fees (ust al0ays be reasonable'

*HEREFORE, the Petition for Revie0 is DENIED' "he #ay *,, ,--5
ecision of the Court of Appeals in CA-8'R' C% No' +9*,9 is AFFIRMED 0ith
MODIFICATIONS that the rate of interest shall be t0elve percent 6*,=7 per annu(,
co(pute) fro( !epte(ber ,>, ,--- until fully satisfie)' "he a0ar) of attorney/s fees is
further re)uce) to 58,888.88'

SO ORDERED'



#AR$ANO C' EL CA!"$LLO
Associate Justice


:E CONCER:



RENA"O C' CORONA
Chief Justice
Chairperson




TERESITA J. %EONARDO9DE CASTRO
Associate Justice
LECA! P' BER!A#$N
Associate Justice