G.R. No. 79752 February 8, 1989
SOLID HOMES, INC., petitioner, vs. HON. COURT OF APPEALS and PHILIPPINE SUNROOF CORPORATION, respondents.

FACTS

The parties entered into an Offsetting Agreement whereby Philippine Sunroof Corporation (Sunroof) would deliver construction materials to Solid Homes, Inc., and in return, Solid Homes would sell a subdivision lot to Sunroof. Sunroof fully complied by delivering materials valued at P632,502.40. However, Solid Homes failed to deliver the corresponding title to the lot. Despite repeated demands, Solid Homes did not comply, prompting Sunroof to file a civil case for rescission. The trial court declared Solid Homes in default and, based on ex-parte evidence, rescinded the agreement and ordered Solid Homes to pay Sunroof the principal amount plus 12% interest and attorney’s fees.
While the civil case was pending, a related criminal case for non-delivery of title was filed against Solid Homes’ president. To settle the criminal case, Solid Homes delivered the title to the lot to Sunroof on April 27, 1984, which was after the trial court had already rendered its decision in the civil case on April 17, 1984. The Court of Appeals later modified the trial court’s decision, ruling that the delivery of the title constituted payment of the principal obligation, thereby preventing unjust enrichment. However, it upheld the award of 12% interest on the principal from the time of delay until the date the title was delivered, plus attorney’s fees.

ISSUE

The primary issues were: (1) whether the delivery of the title in settlement of the criminal case constituted full payment of the obligation, thereby precluding the recovery of interest; and (2) if interest was still recoverable, what should be the applicable rate?

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals’ decision. On the first issue, the Court held that the delivery of the title was correctly considered as payment of the principal obligation only. To allow Sunroof to recover the principal amount after accepting the title would result in unjust enrichment, which is prohibited by law. However, this acceptance did not extinguish the ancillary obligation to pay interest for the period of delay. Article 1235 of the Civil Code, which deems an obligation fully complied with if the obligee accepts performance without protest, was found inapplicable. The Court emphasized that Sunroof accepted the title in settlement of the separate criminal case, not as full satisfaction of the civil judgment it had already obtained. Since the civil judgment decreeing payment of interest preceded the delivery of the title, Sunroof had no reason to protest the non-payment of interest at that later event.
On the second issue, the Court sustained the imposition of 12% per annum interest. The legal basis was Article 2209 of the Civil Code, which mandates payment of the interest agreed upon if the debtor incurs in delay. The invoices presented as evidence contained an express written stipulation for 12% interest on all overdue accounts. Therefore, the contractual rate, not the default legal rate of 6%, rightfully applied. The Court distinguished this case from Reformina v. Tomol, which involved damages for injury and where no such stipulation existed.