G.R. No. 152529 , September 22, 2003
Sps. Hendrik Biesterbos and Alicia S. Biesterbos, Petitioners, vs. Hon. Court of Appeals and Efren E. Bartolome, Respondents.

FACTS

Petitioners, the spouses Biesterbos, entered into a Contract to Sell with respondent Efren Bartolome for a duplex unit in Baguio City for P2,000,000. The contract stipulated a downpayment of P1,000,000 and a balance due by July 30, 1992. It also required Bartolome to perform certain conditions, including clearing the title from a mortgage and making property improvements. A separate arrangement under the contract obligated the petitioners to reimburse Bartolome P600,000, which he advanced for their purchase of an adjacent lot from his brother, with this reimbursement also due by July 30, 1992. Petitioners paid the downpayment but failed to pay the full balance and the reimbursement by the agreed date. They made subsequent partial payments totaling over P2 million, but a significant balance remained. Bartolome made several demands for payment, culminating in a letter dated May 18, 1993. On July 3, 1993, petitioners, through counsel, informed Bartolome they had deposited P521,691.76 “In Trust” for him at a bank. Unsatisfied, Bartolome filed a complaint for specific performance and damages.

ISSUE

The primary issue is whether petitioners are liable for interest on their unpaid balance, and if so, the applicable rate and period for its computation.

RULING

Yes, petitioners are liable for interest. The Supreme Court affirmed the Court of Appeals’ finding that petitioners were in delay (mora solvendi) in the performance of their monetary obligation. An extrajudicial demand was validly made through Bartolome’s letter of May 18, 1993, which petitioners admitted receiving. This demand triggered their delay and the obligation to pay interest on the outstanding principal from that date. The Court clarified that the transaction was a contract to sell, not a loan (mutuum). Therefore, the interest due is not governed by the usury law but by Article 2209 of the Civil Code on damages for delay in the payment of a sum of money. The legal interest rate is twelve percent (12%) per annum. This interest runs from the date of extrajudicial demand, May 18, 1993, until July 3, 1993, when petitioners made a consignation by depositing the amount in the bank. The deposit, while a tender of payment, did not extinguish the obligation because it was not unconditional; it was held “In Trust,” allowing petitioners to retain control. Thus, interest continued to accrue on the remaining balance after the deposit. From the finality of this decision until full payment, the interest rate on the total judgment award is also twelve percent (12%) per annum.