GR 175139; (April, 2012) (Digest)
G.R. No. 175139; April 18, 2012
HERMOJINA ESTORES, Petitioner, vs. SPOUSES ARTURO and LAURA SUPANGAN, Respondents.
FACTS
The parties entered into a Conditional Deed of Sale in 1993 for a parcel of land. Respondents paid petitioner a total of ₱3.5 million. After nearly seven years, petitioner failed to fulfill her contractual obligations, including securing DAR clearance and relocating a house on the property. On September 27, 2000, respondents formally demanded a refund. Petitioner acknowledged the debt and promised repayment within 120 days but did not comply, prompting respondents to file a complaint for sum of money.
The Regional Trial Court ruled in favor of respondents, ordering petitioner to refund the principal amount with 6% interest compounded annually from 1993 and to pay attorney’s fees. The Court of Appeals modified this, setting interest at 6% per annum from the date of demand (September 27, 2000) until the judgment’s finality, and 12% thereafter until full satisfaction, while reducing attorney’s fees to ₱100,000. Petitioner elevated the case to the Supreme Court, contesting the imposition of interest and attorney’s fees.
ISSUE
Was the imposition of interest and attorney’s fees proper?
RULING
Yes, the imposition was proper but required modification in accordance with established legal principles. The Supreme Court clarified that the obligation to refund the ₱3.5 million arose from petitioner’s breach of contract, not from a loan or forbearance of money. Therefore, the applicable interest rate is governed by Article 2209 of the Civil Code for compensatory interest in case of delay.
The Court applied the guidelines from Eastern Shipping Lines, Inc. v. Court of Appeals. For such monetary obligations not constituting a loan, interest at the rate of 6% per annum shall run from the time of judicial or extrajudicial demand. Since respondents made a valid extrajudicial demand on September 27, 2000, the 6% interest should be computed from that date. However, once the judgment becomes final and executory, the rate increases to 12% per annum from the time of finality until full satisfaction, as this constitutes a forbearance of money by the judgment creditor. The Court thus modified the CA ruling, setting a uniform 12% rate from the date of demand until full payment, recognizing the period of delay as a de facto forbearance.
Regarding attorney’s fees, the Court found the award justified under Article 2208 of the Civil Code, as respondents were compelled to litigate to protect their rights. However, it further reduced the amount to ₱50,000.00, deeming it more reasonable and consistent with the policy that such awards must be moderate.