G.R. No. 78380 March 15, 1990
METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM, petitioner, vs. THE HON. ROSALIO A. DE LEON, as Judge of the Regional Trial Court of Manila, Branch II, OSCAR V. ATAYDE, as Deputy Sheriff of the same court, INTEGRATED CONSTRUCTION SERVICES, INC. and ENGINEERING CONSTRUCTION INC., respondents.

FACTS

The private respondents obtained a final and executory arbitration award against petitioner MWSS, confirmed by the trial court on September 9, 1972. Subsequently, the parties entered into a letter-agreement dated October 2, 1972, which modified the terms of payment. Under this agreement, MWSS was granted concessions, including the payment of a straight 6% interest on the net award “without computing the period of time involved,” instead of the 6% per annum interest from the filing of the complaint as originally awarded. In exchange, MWSS agreed to pay the modified amount in full on or before October 31, 1972. MWSS failed to pay by this deadline and made only a partial payment on December 22, 1972, leaving a substantial balance.
After years of delay, the Supreme Court, in a prior mandamus proceeding (G.R. No. L-41117), ordered the execution of the unsatisfied balance of the award. The respondent judge then issued a writ of execution. MWSS argued that the amount due should only be the principal balance of P1,261,510.88, contending that the straight 6% interest under the 1972 agreement extinguished the running interest. The trial court, however, ordered the payment of this balance plus interest at 6% per annum from December 23, 1972. MWSS filed this certiorari petition, alleging grave abuse of discretion.

ISSUE

Whether the respondent judge committed grave abuse of discretion in ordering the execution of the award balance with running interest from December 23, 1972, despite the parties’ 1972 agreement providing for a “straight 6% interest.”

RULING

The Supreme Court dismissed the petition, ruling that the respondent judge did not commit grave abuse of discretion. The legal logic hinges on the conditional nature of the 1972 agreement and the principles of equity. The agreement, which granted MWSS the benefit of a straight 6% interest and other concessions, was expressly conditioned upon full payment by October 31, 1972. This created a reciprocal obligation where the concession on interest was the consideration for prompt payment. By failing to pay by the stipulated deadline and only making a partial payment, MWSS breached the condition precedent. Consequently, it forfeited the right to the concessional terms. The original terms of the final and executory award, which included interest at 6% per annum, thereby remained in force for the unpaid balance.
The Court emphasized that allowing MWSS to benefit from the straight interest concession despite its own delay and default would be grossly inequitable. It would unjustly enrich the debtor and penalize the creditors for the debtor’s failure to comply with a settlement designed for its own benefit. The award of interest from the date following the partial payment is a proper enforcement of the original judgment and a recognition that the judgment debtor cannot profit from its own delay. The respondent judge’s order was a correct application of law and equity to prevent MWSS from receiving a premium for its bad faith and protracted failure to satisfy a final judgment.