G.R. No. 74269 & 92137; November 27, 2006
SOLID HOMES, INC. and V.V. SOLIVEN REALTY CORPORATION, Petitioners, vs. HON. INTERMEDIATE APPELLATE COURT, BENJAMIN V. ZABAT and LUNINGNING ZABAT, Respondents. (Consolidated with G.R. No. 92137)

FACTS

Petitioners Solid Homes, Inc. and V.V. Soliven Realty Corporation are the owner and selling agent, respectively, of the Greenheights Newton Subdivision. In January 1976, through broker Pedro de la Peña, respondents Benjamin and Luningning Zabat agreed to purchase three adjacent lots to create a family compound. They executed reservation agreements for all three lots and delivered G.I. sheets valued at ₱14,291.60, which exceeded the down payment for the first lot. Petitioners applied the excess as down payment for the other two lots. However, petitioners sold Lots 2 and 3 to third parties in March 1976, claiming the Zabat’s reservation applications were late. Respondents, informed in May 1976, rescinded the contract, as the purchase of all three lots was their principal consideration.
Respondents filed an action for specific performance or rescission with damages. The trial court ruled in their favor, ordering petitioners to return ₱15,938.00 with legal interest, plus moral and exemplary damages and attorney’s fees. The Intermediate Appellate Court (IAC) affirmed but modified the interest rate to 12% per annum from the date of demand. Petitioners appealed to the Supreme Court in G.R. No. 74269 , contesting only the 12% interest rate. Separately, in G.R. No. 92137, petitioners challenged the partial execution of the judgment pending appeal, which the trial court granted on the ground that only the interest rate issue remained pending.

ISSUE

The consolidated petitions present two issues: (1) What is the correct legal rate of interest applicable to the monetary award? (2) Was the order granting partial execution pending appeal proper?

RULING

The Supreme Court ruled on both issues. First, on the applicable interest rate, the Court applied the guidelines set in Eastern Shipping Lines, Inc. v. Court of Appeals. The obligation to return the sum of ₱15,938.00 arose from a contractual breach leading to rescission. This constitutes a forbearance of money, not a loan or forbearance of money in a strict sense, but akin to it due to the delay in fulfilling a monetary obligation arising from contract. Consequently, the applicable rate is 12% per annum from judicial demand (the filing of the complaint on September 29, 1976) until June 30, 2013. From July 1, 2013, the rate is 6% per annum until full satisfaction. The IAC’s imposition of 12% from the date of extrajudicial demand (May 11, 1976) was incorrect, as interest in such cases runs from judicial demand.
Second, the Court upheld the propriety of the partial execution pending appeal. The trial court’s order was issued after the IAC decision and during the pendency of the appeal to the Supreme Court solely on the interest rate issue. The principal monetary award and the awards for damages had become final and executory. Execution of a final and executory judgment is a matter of right. The trial court correctly allowed partial execution for the amounts no longer contested, as the appeal on the interest rate did not affect the finality of the rest of the judgment. The Court found no grave abuse of discretion in the grant of partial execution.