Santos Ventura Hocorma Foundation, Inc. Vs. Ernesto Santos & Riverland, Inc. G.R. No.

1530004; November 5, 2004 Facts: On October 26, 1990, Santos Ventura Hocorma Foundation, Inc. (SVHFI) and Ernesto Santos executed a Compromise Agreement which amicably ended all their pending litigations. The pertinent portions of the Agreement include the following: 1. Defendant Foundation shall pay Plaintiff Santos P14.5 Million on a. b. P1.5 Million immediately upon the execution of this agreement and The balance of P13 Million shall be paid, whether in one lump sum or in installments, at the discretion of the Foundation, within a period of not more than two years from the execution of this agreement;

2.

Immediately upon the execution of this agreement Santos shall cause the dismissal with prejudice of Civil Cases; provided, however, that in the event that defendant Foundation shall sell or dispose of any of the lands previously subject of lis pendens, the proceeds of any such sale, or any part thereof as may be required, shall be partially devoted to the payment of the Foundations obligations.

In compliance with the Compromise Agreement, Santos moved for the dismissal of the aforesaid civil cases. He also caused the lifting of the notices of lis pendens on the real properties involved. For its part, petitioner SVHFI, paid P1.5 million to respondent Santos, leaving a balance of P13 million. SVHFI sold two real properties, which were previously subjects of lis pendens. Discovering the disposition made by SVHFI, Santos sent a letter to the petitioner demanding the payment of the remaining P13 million, which SVFHI ignored. Santos applied with the RTC for the issuance of a writ of execution of its compromise judgment. The RTC granted the writ. On November 22, 1994, petitioners real properties located in Mabalacat, Pampanga were auctioned. Santos and Riverland Inc. filed a Complaint for Declaratory Relief and Damages alleging that there was delay on the part of petitioner in paying the balance of P13 million. Court of Appeals ordered SVFHI to pay legal interest on the principal amount of P13 million at the rate of 12% per annum from the date of demand on October 28, 1992 up to the date of actual payment of the whole obligation; and (2) P20,000 as attorneys fees and costs of suit. Issue: Whether or not respondents are entitled to legal interest

Held: When respondents wrote a demand letter to petitioner on October 28, 1992, the obligation was already due and demandable. Petitioner incurred delay when it failed to pay its due obligation after the demand. Article 1169 of the New Civil Code provides: Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. In order for the debtor to be in default, it is necessary that the following requisites be present: (1) that the obligation be demandable and already liquidated; (2) that the debtor delays performance; and (3) that the creditor requires the performance judicially or extrajudicially. The requisites are therefore present: 1. The obligation was already due and demandable after the lapse of the two-year period from the execution of the contract. The two-year period ended on October 26, 1992. The obligation is liquidated because the debtor knows precisely how much he is to pay and when he is to pay it. 2. Petitioner delayed in the performance. It was able to fully settle its outstanding balance only on February 8, 1995, which is more than two years after the extra-judicial demand. Moreover, it filed several motions and elevated adverse resolutions to the appellate court to hinder the execution of a final and executory judgment, and further delay the fulfillment of its obligation. 3. The demand letter sent to the petitioner on October 28, 1992, was in accordance with an extra-judicial demand contemplated by law. Verily, the petitioner is liable for damages for the delay in the performance of its obligation. Interest as damages is generally allowed as a matter of right. Santos has been deprived of funds to which he is entitled by virtue of their compromise agreement. The goal of compensation requires that the complainant .This compensation is in the form of interest. In the absence of agreement, the legal rate of interest shall prevail which is 12% per annum.