G.R. No. 114051 August 14, 1995
DAVID INES and HORTENCIA CASTRO-INES, petitioners, vs. COURT OF APPEALS and DIONISIO GERONIMO, respondents.

FACTS

Petitioners, spouses David and Hortencia Ines, filed an action to annul a deed of sale covering their conjugal residential property in favor of respondents, spouses Geronimo. The Regional Trial Court declared the sale void as to David Ines’s one-half share due to forgery of his signature and declared the sale over Hortencia’s half as an equitable mortgage. It ordered the reconveyance of Hortencia’s share upon the return of the P150,000.00 consideration. Petitioners appealed to the Court of Appeals, arguing the husband’s forged signature rendered the entire contract voidable for lack of an indispensable party’s consent. The respondents did not appeal.
The Court of Appeals sustained the petitioners, declaring the deed of sale void in its entirety and ordering the reconveyance of the entire property. It also ordered petitioners to return the P150,000.00 consideration with legal interest from April 15, 1982. Petitioners moved for partial reconsideration, seeking to delete the award of legal interest, arguing that respondents, who did not appeal, could not be granted affirmative relief not awarded by the trial court. The motion was denied, prompting this petition.

ISSUE

Whether the Court of Appeals erred in awarding legal interest on the P150,000.00 consideration in favor of the respondents who did not appeal from the trial court’s decision which did not award such interest.

RULING

The Supreme Court found the petition unmeritorious, affirming the Court of Appeals’ award of legal interest, albeit modifying its commencement date. The legal logic is clear: the award of legal interest was not an unauthorized grant of affirmative relief to a non-appealing party but a necessary and equitable consequence of the appellate court’s ruling annulling the entire contract. When a contract is annulled, Article 1398 of the Civil Code governs, requiring mutual restitution, including the price with interest. This principle aligns with the prohibition against unjust enrichment under Article 22.
Furthermore, an appellate court has the authority to resolve issues not assigned as errors when necessary for a just and equitable resolution of the case, especially when closely related to a properly assigned error. The award of interest finds additional legal sanction under Article 2210 of the Civil Code, which allows discretionary interest on damages for breach of contract. The Court cited precedents where legal interest was sustained on appeal despite its absence in the trial court’s decision and the lack of an appeal by the beneficiary. However, the Court modified the interest’s start date, ruling it should run from the date of the trial court’s decision (July 31, 1990) and not from the contract’s execution date (April 15, 1982), in accordance with consistent jurisprudence. The decision was thus affirmed with this modification.