G.R. No. 141283 ; August 30, 2001
SEGOVIA DEVELOPMENT CORPORATION, petitioner, vs. J.L. DUMATOL REALTY and DEVELOPMENT CORPORATION, respondent.

FACTS

Petitioner Segovia Development Corporation and respondent J.L. Dumatol Realty and Development Corporation are domestic corporations engaged in real estate development. On March 2, 1989, they entered into three separate but identical contracts to sell involving three condominium units (Units 703, 704, and 904) in the Heart Tower Condominium in Makati City, with a total contract price of P6,050,000.00. The contracts contained an escalation clause and a cancellation clause allowing the seller to cancel the contract after notice and a grace period if the buyer failed to pay installments, with a penalty of 3% per month on unpaid installments. Respondent Dumatol paid a total of P4,500,000.00, but one check for P100,000.00 was dishonored, leaving a credited payment of P4,400,000.00. Due to Dumatol’s default, Segovia sent a notice of rescission for Unit 904 on November 5, 1990. A meeting on November 15, 1990, resulted in an agreement in principle for Segovia to withdraw the rescission subject to Dumatol paying the total balance plus interest and charges by December 7, 1990, and liquidated damages of P700,000.00. Dumatol disputed the computation, claiming the balance was only P1,977,200.00. On November 29, 1990, Dumatol filed a complaint with the HLURB. On December 4, 1990, Segovia sent notices cancelling all three contracts. On December 5, 1990, Dumatol consigned P1,977,220.00 with the HLURB. The HLURB Arbiter rendered a judgment on May 24, 1991, ordering Dumatol to pay Segovia the balance and ordering Segovia to pay Dumatol compensatory damages. On appeal, the HLURB increased Dumatol’s liability. The Office of the President modified the HLURB decision, further increasing Dumatol’s obligations. Dumatol appealed to the Court of Appeals, which nullified the Office of the President’s decision, finding the 3% penalty charge iniquitous and the consignation valid. Segovia then filed this Petition for Review on Certiorari.

ISSUE

The primary issues involve the validity of the consignation made by respondent Dumatol, the propriety of the 3% per month penalty charge, the imposition of a 6% per annum interest as damages, and the award of compensatory damages for unrealized profits.

RULING

The Supreme Court modified the Court of Appeals’ decision. It held that the consignation made by Dumatol was invalid because it was made after Segovia had already cancelled the contracts, and the tender of payment was not for the full amount due but only for the amount Dumatol computed. The Court ruled that the 3% per month penalty charge was iniquitous and unconscionable, reducing it to 1% per month or 12% per annum. It affirmed the deletion of the 6% per annum interest as damages, as there was no legal basis for its imposition. The Court also deleted the award of actual or compensatory damages in favor of Dumatol for unrealized profits, as such damages were not sufficiently proven. The case was remanded to the HLURB Arbiter for proper computation of Dumatol’s liability consistent with the Court’s guidelines.