Estores vs Supangan

Hermojina Estores vs. Spouses Arturo and Laura Supangan G.R. No. 175139 April 18, 2012 DEL CASTILLO, J.: Facts: 1. In Oct. 1993, Hermojina Estores and Spouses Supangan entered into a Conditional Deed of Sale where Estores offered to sell, and Spouses offered to buy a parcel of land in Cavite for P4.7M. 2. After almost 7 years and despite the payment of P3.5M by the Spouses, Estores still failed to comply with her obligation to handle the peaceful transfer of ownership as stated in 5 provisions in the contract. 3. In a letter in 2000, Spouses demanded the return of the amount within 15 days from receipt 4. In reply, Estores promised to return the same within 120 days 5. Spouses agreed but imposed an interest of 12% annually 6. Estores still failed despite demands 7. Spouses filed a complaint with the RTC against Estores and Roberto Arias (allegedly acted as Estores’ agent) 8. In Answer, Estores said they were willing to pay the principal amount but without the interest as it was not agreed upon a. That since the Conditional Deed of Sale provided only for the return of the downpayment in case of breach, they cant be liable for legal interest as well 9. RTC ruled saying that the Spouses are entitled to the interest but only at 6% per annum and also entitled to atty’s fees 10. On appeal, CA said that the issue to resolve is a. whether it is proper to impose interest for an obligation that does not involve a loan or forbearance of money in the absence of stipulation of the parties 11. CA affirmed RTC a. That interest should start on date of formal demand by Spouses to return the money not when contract was executed as stated by the RTC b. That Arias not be solidarily liable as he acted as agent only and did not expressly bind himself or exceeded his authority 12. Estores contends: a. Not bound to pay interest because the deed only provided for the return of the downpayment in case of failure to comply with her obligations b. That atty fees not proper because both RTC and CA sustained her contention that 12% interest was uncalled for so it showed that Spouses did not win 13. Spouses contend: a. It is only fair that interest be imposed because Estores failed to return the amount upon demand and used the money for her benefit b. Estores failed to relocate the house outside the perimeter of the subject lot and complete the necessary documents c. As to the fees, they claim that they were forced to litigate when Estores unjustly held the amount

Issue: Is the imposition of interest and attorney’s fees is proper? YES Interest based on Art 2209 of CC (6%) or under Central Bank Circular 416 (12%)? 12% Held: Interest may be imposed even in the absence of stipulation in the contract.  Article 2210 of the Civil Code expressly provides that “[i]nterest may, in the discretion of the court, be allowed upon damages awarded for breach of contract.”  Estores failed on her obligations despite demand. o She admitted that the conditions were not fulfilled and was willing to return the full amount of P3.5M but hasn’t done so o She is now in default The interest at the rate of 12% is applicable in the instant case.  Gen Rule: the applicable interest rate shall be computed in accordance with the stipulation of the parties  Exc: if no stipulation, applicable rate of interest shall be 12% per annum o When obligation arises out of a loan or forbearance of money, goods or credits  In other cases, it shall be 6%  In this case, no stipulation was made  Contract involved in this case is not a loan but a Conditional Deed of Sale. o No question that the obligations were not met and the return of money not made  Even if transaction was a Conditional Deed of Sale, the stipulation governing the return of the money can be considered as a forbearance of money which requires 12% interest  In Crismina Garments, Inc. v. Court of Appeals, Forbearance-- “contractual obligation of lender or creditor to refrain during a given period of time, from requiring the borrower or debtor to repay a loan or debt then due and payable.” o In such case, “forbearance of money, goods or credits” will have no distinct definition from a loan. o however, the phrase “forbearance of money, goods or credits” is meant to have a separate meaning from a loan, otherwise there would have been no need to add that phrase as a loan is already sufficiently defined in the Civil Code o Forbearance of money, goods or credits should therefore refer to arrangements other than loan agreements, where a person acquiesces to the temporary use of his money, goods or credits pending happening of certain events or fulfillment of certain conditions.  Estores’ unwarranted withholding of the money amounts to forbearance of money which can be considered as an involuntary loan so rate is 12% starting in Sept. 2000 The award of attorney’s fees is warranted.  no doubt that the Spouses were forced to litigate to protect their interest, i.e., to recover their money. The amount of P50,000.00 more appropriate