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ESTORES V.

SPOUSES SUPANGAN, (2012)

definition from a loan. We believe however, that the


phrase forbearance of money, goods or credits is
meant to have a separate meaning from a loan,
otherwise there would have been no need to add that
phrase as a loan is already sufficiently defined in the
Civil Code.

(Compensatory, Penalty or Indemnity Interest)


*Forbearance of money

ISSUE: Whether it is proper to impose interest for an


obligation that does not involve a loan or forbearance of
money in the absence of stipulation of the parties.

HELD:
YES. Interest may be imposed even
absence of stipulation in the contract.

in

Forbearance of money, goods or credits should


therefore refer to arrangements other than loan
agreements, where a person acquiesces to the
temporary use of his money, goods or credits pending
happening of certain events or fulfillment of certain
conditions.

the

Article 2210 of the Civil Code expressly provides that


[i]nterest may, in the discretion of the court, be
allowed upon damages awarded for breach of
contract. In this case, there is no question that
petitioner is legally obligated to return the P3.5 million
because of her failure to fulfill the obligation under the
Conditional Deed of Sale, despite demand. Petitioner
enjoyed the use of the money from the time it was
given to her until now. Thus, she is already in default of
her obligation from the date of demand.
Forbearance is defined as a contractual obligation of
lender or creditor to refrain during a given period of
time, from requiring the borrower or debtor to repay
a loan or debt then due and payable. This definition
describes a loan where a debtor is given a period within
which to pay a loan or debt. In such case, forbearance
of money, goods or credits will have no distinct

In this case, the respondent-spouses parted with their


money even before the conditions were fulfilled. They
have therefore allowed or granted forbearance to the
seller (petitioner) to use their money pending fulfillment
of the conditions. They were deprived of the use of
their money for the period pending fulfillment of the
conditions and when those conditions were breached,
they are entitled not only to the return of the principal
amount paid, but also to compensation for the use of
their money. And the compensation for the use of their
money, absent any stipulation, should be the same rate
of legal interest applicable to a loan since the use or
deprivation of funds is similar to a loan.

Facts:

1. In Oct. 1993, Hermojina Estores and Spouses


Supangan entered into a Conditional Deed of Sale
where Estores offered to sell, and Spouses offered to
buy a parcel of land in Cavite for P4.7M.
2. After almost 7 years and despite the payment of
P3.5M by the Spouses, Estores still failed to comply
with her obligation to handle the peaceful transfer of
ownership as stated in 5 provisions in the contract.

10.

a. whether it is proper to impose interest for an


obligation that does not involve a loan or
forbearance of money in the absence of
stipulation of the parties
11.

4. In reply, Estores promised to return the same within


120 days

b. That Arias not be solidarily liable as he acted


as agent only and did not expressly bind
himself or exceeded his authority
12.

6. Estores still failed despite demands

8. In Answer, Estores said they were willing to pay the


principal amount but without the interest as it was
not agreed upon

9. RTC ruled saying that the Spouses are entitled to the


interest but only at 6% per annum and also entitled
to attys fees

Estores contends:
a. Not bound to pay interest because the deed
only provided for the return of the
downpayment in case of failure to comply with
her obligations

7. Spouses filed a complaint with the RTC against


Estores and Roberto Arias (allegedly acted as
Estores agent)

a. That since the Conditional Deed of Sale


provided only for the return of the
downpayment in case of breach, they cant be
liable for legal interest as well

CA affirmed RTC
a. That interest should start on date of formal
demand by Spouses to return the money not
when contract was executed as stated by the
RTC

3. In a letter in 2000, Spouses demanded the return of


the amount within 15 days from receipt

5. Spouses agreed but imposed an interest of 12%


annually

On appeal, CA said that the issue to resolve is

b. That atty fees not proper because both RTC


and CA sustained her contention that 12%
interest was uncalled for so it showed that
Spouses did not win
13.

Spouses contend:
a. It is only fair that interest be imposed because
Estores failed to return the amount upon
demand and used the money for her benefit

b. Estores failed to relocate the house outside the


perimeter of the subject lot and complete the
necessary documents
c. As to the fees, they claim that they were forced
to litigate when Estores unjustly held the
amount

The interest at the rate of 12% is applicable in


the instant case.

Gen Rule: the applicable interest rate shall be


computed in accordance with the stipulation of the
parties

Exc: if no stipulation, applicable rate of interest shall


be 12% per annum

Issue:
Is the imposition of interest and attorneys fees is
proper? YES
Interest based on Art 2209 of CC (6%) or under Central
Bank Circular 416 (12%)? 12%

o When obligation arises out of a loan or


forbearance of money, goods or credits

In other cases, it shall be 6%

In this case, no stipulation was made

Contract involved in this case is not a loan but


a Conditional Deed of Sale.

Held:
Interest may be imposed even in the absence of
stipulation in the contract.

Article 2210 of the Civil Code expressly provides that


[i]nterest may, in the discretion of the court, be
allowed upon damages awarded for breach of
contract.
Estores failed on her obligations despite demand.
o She admitted that the conditions were not
fulfilled and was willing to return the full
amount of P3.5M but hasnt done so
o She is now in default

o No question that the obligations were not


met and the return of money not made

Even if transaction was a Conditional Deed of


Sale, the stipulation governing the return of
the money can be considered as a forbearance
of money which requires 12% interest

In Crismina Garments, Inc. v. Court of Appeals,


Forbearance-- contractual obligation of lender or
creditor to refrain during a given period of time, from
requiring the borrower or debtor to repay a loan or
debt then due and payable.

o In such case, forbearance of money, goods or


credits will have no distinct definition from a
loan.
o however, the phrase forbearance of money,
goods or credits is meant to have a separate
meaning from a loan, otherwise there would
have been no need to add that phrase as a
loan is already sufficiently defined in the Civil
Code
o Forbearance of money, goods or credits should
therefore refer to arrangements other than
loan agreements, where a person acquiesces
to the temporary use of his money, goods or

credits pending happening of certain events or


fulfillment of certain conditions.

Estores unwarranted withholding of the money


amounts to forbearance of money which can be
considered as an involuntary loan so rate is 12%
starting in Sept. 2000

The award of attorneys fees is warranted.

no doubt that the Spouses were forced to litigate to


protect
their
interest, i.e.,
to
recover
their
money. The amount of P50,000.00 more appropriate