G.R. No. 111858 May 14, 1997
TROPICAL HOMES, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS & PEOPLE’S HOMESITE AND HOUSING CORPORATION, respondents.

FACTS

On December 21, 1964, PHHC sold twelve parcels of land to Tropical Homes, Inc. for a reduced price of P3.45 million. The contract stipulated specific installment payments and a provision that failure to pay the first amortization would render the entire balance immediately due and demandable, with PHHC entitled to liquidated damages equivalent to 25% of the amount due. Tropical Homes defaulted on its payments from the outset, failing to pay the initial P1,727,500.00 upon registration and subsequent installments. Despite making sporadic partial payments, the account accumulated interest, amounting to P1,866,454.12 by April 1967. Tropical Homes later proposed to settle this with a GSIS loan and time deposit certificates, which PHHC accepted, applying the loan proceeds and accepting the certificates as security for the remaining balance of P154,221.22. PHHC subsequently demanded payment of this balance, but Tropical Homes refused, claiming an overpayment and arguing it was not liable for accrued interest. This led PHHC to file a collection suit.

ISSUE

The primary issue is whether Tropical Homes is liable for the unpaid balance of P154,221.22, plus legal interest and the stipulated 25% liquidated damages, despite its claim of a novation or waiver by PHHC through a board resolution and subsequent conduct.

RULING

The Supreme Court affirmed the liability of Tropical Homes. The Court held that the PHHC Board Resolution No. 801, which Tropical Homes claimed amended the payment terms, was merely an internal directive for accounting purposes and did not constitute a contractual novation or a waiver of PHHC’s rights under the original contract. A waiver of rights must be clear and unequivocal, which was not present. The subsequent acceptance of the GSIS loan and time deposits was a mere conditional restructuring for the settlement of the already overdue obligation, not a new agreement extinguishing the old one. Consequently, the original contract, including the stipulation for liquidated damages, remained in force. The Court upheld the award of the unpaid principal balance. Regarding interest, it modified the appellate decision, applying a six percent (6%) per annum rate from judicial demand until the judgment’s finality, pursuant to Article 2209 of the Civil Code, as the parties’ stipulation was only for liquidated damages, not interest per se. Upon finality, the interest rate would increase to twelve percent (12%) per annum until full satisfaction, treating the period as a forbearance of credit. The award of liquidated damages equivalent to 25% of the total amount due was also sustained as a valid penalty clause.