PEOPLE vs. CONCEPCION, 44 Phil.

126FACTS:
Venancio Concepcion, President of the Philippine National Bank and a member of
theBoard thereof, authorized an extension of credit in favor of "Puno y Concepcion, S.
en C.” to themanager of the Aparri branch of the Philippine National Bank. "Puno y
Concepcion, S. en C."was a co-partnership where Concepcion is a partner.
Subsequently, Concepcion was charged andfound guilty in the Court of First Instance of
Cagayan with violation of section 35 of Act No.2747. Section 35 of Act No. 2747
provides that the National Bank shall not, directly or indirectly, grant loans to any of the
members of the board of directors of the bank nor to agentsof the branch banks.
Counsel for the defense argue that the documents of record do not provethat authority
to make a loan was given, but only show the concession of a credit. They averredthat
the granting of a credit to the co-partnership "Puno y Concepcion, S. en C." by
VenancioConcepcion, President of the Philippine National Bank, is not a "loan" within
the meaning of section 35 of Act No. 2747.
ISSUE:
Whether or not the granting of a credit of P300,000 to the co-partnership "Puno
yConcepcion, S. en C." by Venancio Concepcion, President of the Philippine National
Bank, a"loan" within the meaning of section 35 of Act No. 2747.
HELD:
The Supreme Court ruled in the affirmative. The "credit" of an individual means hisability
to borrow money by virtue of the confidence or trust reposed by a lender that he will
paywhat he may promise. A "loan" means the delivery by one party and the receipt by
the other party of a given sum of money, upon an agreement, express or implied, to
repay the sum loaned,with or without interest. The concession of a "credit" necessarily
involves the granting of "loans"up to the limit of the amount fixed in the "credit,"

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[ GR No. 7593, Mar 27, 1913 ]

US v. JOSE M. IGPUARA +

DECISION

27 Phil. 619

ARELLANO, C.J.:
The defendant herein is charged with the crime of estafa, for having swindled Juana
Montilla and Eugenio Veraguth out of P2,498 Philippine currency, which he had taken
on deposit from the former to be at the latter's disposal. The document setting forth the
obligation reads :
"We hold at the disposal of Eugenio Veraguth the sum of two thousand four hundred
and ninety-eight pesos (P2,498), the balance from Juana Montilla's sugar. Iloilo, June
26, 1911. Jose Igpuara, for Ramirez & Co."
The Court of First Instance of Iloilo sentenced the defendant to two years of presidio
correccional, to pay Juana Montilla P2,498 Philippine currency, and in case of
insolvency to subsidiary imprisonment at P2.50 per day, not to exceed one-third of the
principal penalty, and the costs.

The defendant appealed, alleging as errors: (1) Holding that the document executed by
him was a certificate of deposit; (2) holding the existence of a deposit, without
precedent transfer or delivery of the P2,498; and (3) classifying the facts in the case as
the crime of estafa.
"A deposit is constituted from the time a person receives a thing belonging to another
with the obligation of keeping and returning it." (Art. 1758, Civil Code.)
That the defendant received P2,498 is a fact proven. The defendant drew up a
document declaring that they remained in his possession, which he could not have said
had he not received them. They remained in his possession, surely in no other sense
than to take care of them, for they remained has no other purpose. They remained in
the defendant's possession at the disposal of Veraguth; but on August 28 of the same
year Veraguth demanded of him through a notarial instrument restitution of them, and to
date he has not restored them.

The appellant says: "Juana Montilla's agent voluntarily accepted the sum of; P2,498 in
an instrument payable on demand, and as no attempt was made to cash it until August
23, 1911, he could indorse and negotiate it like any other commercial instrument. There
is no doubt that if Veraguth accepted the receipt for P2,498 it was because at that time
he agreed with the defendant to consider the operation of sale on commission closed,
leaving the collection of said sum until later, which sum remained as a loan payable
upon presentation of the receipt." (Brief, 3 and 4.)

Then, after averring the true facts: (1) That a sales commission was precedent; (2) that
this commission was settled with a balance of P2,498 in favor of the principal, Juana
Montilla; and (3) that this balance remained in the possession of the defendant, who
drew up an instrument payable on demand, he has drawn two conclusions, both
erroneous: One, that the instrument drawn up in the form of a deposit certificate could
be indorsed or negotiated like any other commercial instrument; and the other, that the
sum of P2,498 remained in defendant's possession as a loan.

It is erroneous to assert that the certificate of deposit in question is negotiable like any
other commercial instrument: First, because every commercial instrument is not
negotiable; and, second, because only instruments payable to order are negotiable.
Hence, this instrument not being to order but to bearer, it is not negotiable.
It is also erroneous to assert that the sum of money set forth in said certificate is,
according to it, in the defendant's possession as a loan. In a loan the lender transmits
to the borrower the use of the thing lent, while in a deposit the use of the thing is not
transmitted, but merely possession for its custody or safe-keeping.

In order that the depositary may use or dispose of the things deposited, the depositor's
consent is required, and then:
"The rights and obligations of the depositary and of the depositor shall cease, and the
rules and provisions applicable to commercial loans, commission, or contract which took
the place of the deposit shall be observed." (Art. 309, Code of Commerce.)
The defendant has shown no authorization whatsoever or the consent of the depositary
for using or disposing of the P2,498, which the certificate acknowledges, or any contract
entered into with the depositor to convert the deposit into a loan, commission, or other
contract.

That demand was not made for restitution of the sum deposited, which could have
been claimed on the same or the next day after the certificate was signed, does not
operate against the depositor, or signify anything except the intention not to press it.
Failure to claim at once or delay for some time in demanding restitution of the thing
deposited, which was immediately due, does not imply such permission to use the thing
deposited as would convert the deposit into a loan.

Article 408 of the Code of Commerce of 1829, previous to the one now in force,
provided:
"The depositary of an amount of money cannot use the amount, and if he makes use of
it, he shall be responsible for all damages that may accrue and shall respond to the
depositor for the legal interest on the amount."
Whereupon the commentators say:
"In this case the deposit becomes in fact a loan, as a just punishment imposed upon
him who abuses the sacred nature of a deposit and as a means of preventing the desire
of gain from leading him into speculations that may be disastrous to the depositor, who
is much better secured while the deposit exists than when he only has a personal action
for recovery.

"According to article 548, No. 5, of the Penal Code, those who to the prejudice of
another appropriate or abstract for their own use money, goods, or other personal
property which they may have received as a deposit, on commission, or for,
administration, or for any other purpose which produces the obligation of delivering it or
returning it, and deny having received it, shall suffer the penalty of the preceding
article," which punishes such act as the crime of estafa. The corresponding article of
the Penal Code of the Philippines is 535, No. 5.
In a decision of an appeal, September 28, 1895, the principle was laid down that:
"Since he commits the crime of estafa under article 548 of the Penal Code of Spain
who to another's detriment appropriates to himself or abstracts money or goods
received on commission for delivery, the court rightly applied this article to the appellant,
who, to the manifest detriment of the owner or owners of the securities, since he has not
restored them, willfully and wrongfully disposed of them by appropriating them to
himself or at least diverting them from the purpose to which he was charged to devote
them."
It is unquestionable that in no sense did the P2,498 which he willfully and wrongfully
disposed of to the detriment of his principal, Juana Montilla, and of the depositor,
Eugenio Veraguth, belong to the defendant.

Likewise erroneous is the construction apparently attempted to be given to two

decisions of this Supreme Court (U. S. vs. Dominguez, 2 Phil. Rep., 580, and U. S. vs.
Morales and Morco, 15 Phil. Rep., 236) as implying that what constitutes estafa is not
the disposal of money deposited, but denial of having received same. In the first of said
cases there was no evidence that the defendant had appropriated the grain deposited in
his possession.
"On the contrary, it is entirely probable that, after the departure of the defendant from
Libmanan on September 20, 1898, two days after the uprising of the civil guard in
Nueva Caceres, the rice was seized by the revolutionists and appropriated to their own
uses."
In this connection it was held that failure to return the thing deposited was not sufficient,
but that it was necessary to prove that the depositary had appropriated it to himself or
diverted the deposit to his own or another's benefit. He was accused of refusing to
restore, and it was held that the code does not penalize refusal to restore but denial of
having received. So much for the crime of omission; now with reference to the crime of
commission, it was not held in that decision that appropriation or diversion of the thing
deposited would not constitute the crime of estafa.

In the second of said decisions, the accused "kept none of the proceeds of the sales.
Those, such as they were, he turned over to the owner;" and there being no proof of the
appropriation, the agent could not be found guilty of the crime of estafa.

Being in accord with law and the merits of the case, the judgment appealed from is
affirmed, with costs.

Republic of the Philippines

Supreme Court
Baguio City

FIRST DIVISION

HERMOJINA ESTORES,

G.R. No. 175139

Petitioner,

Present:

CORONA, C.J., Chairperson,

- versus -

LEONARDO-DE CASTRO,

BERSAMIN,

DEL CASTILLO, and

VILLARAMA, JR., JJ.

SPOUSES ARTURO and
LAURA SUPANGAN,

Promulgated:
Respondents.

April 18, 2012

x---------------------------------------------------------------
----x

DECISION

DEL CASTILLO, J.:

The only issue posed before us is the propriety of the imposition of interest and
attorneys fees.

Assailed in this Petition for Review[1] filed under Rule 45 of the Rules of Court is the
May 12, 2006 Decision[2] of the Court of Appeals (CA) in CA-G.R. CV No. 83123, the
dispositive portion of which reads:

WHEREFORE, the appealed decision is MODIFIED. The rate of interest shall be six
percent (6%) per annum, computed from September 27, 2000 until its full payment
before finality of the judgment. If the adjudged principal and the interest (or any part
thereof) remain unpaid thereafter, the interest rate shall be adjusted to twelve percent
(12%) per annum, computed from the time the judgment becomes final and executory
until it is fully satisfied. The award of attorneys fees is hereby reduced to P100,000.00.
Costs against the defendants-appellants.

SO ORDERED.[3]
Also assailed is the August 31, 2006 Resolution[4] denying the motion for
reconsideration.

Factual Antecedents

On October 3, 1993, petitioner Hermojina Estores and respondent-spouses Arturo and

Laura Supangan entered into a Conditional Deed of Sale[5] whereby petitioner offered
to sell, and respondent-spouses offered to buy, a parcel of land covered by Transfer
Certificate of Title No. TCT No. 98720 located at Naic, Cavite for the sum of P4.7
million. The parties likewise stipulated, among others, to wit:
xxxx

1. Vendor will secure approved clearance from DAR requirements of which are (sic):
a) Letter request
b) Title
c) Tax Declaration
d) Affidavit of Aggregate Landholding Vendor/Vendee
e) Certification from the Provl. Assessors as to Landholdings of Vendor/Vendee
f) Affidavit of Non-Tenancy
g) Deed of Absolute Sale

xxxx

4. Vendee shall be informed as to the status of DAR clearance within 10 days upon
signing of the documents.

xxxx

6. Regarding the house located within the perimeter of the subject [lot] owned by
spouses [Magbago], said house shall be moved outside the perimeter of this subject
property to the 300 sq. m. area allocated for [it]. Vendor hereby accepts the
responsibility of seeing to it that such agreement is carried out before full payment of the
sale is made by vendee.

7. If and after the vendor has completed all necessary documents for registration of the
title and the vendee fails to complete payment as per agreement, a forfeiture fee of 25%
or downpayment, shall be applied. However, if the vendor fails to complete necessary
documents within thirty days without any sufficient reason, or without informing the
vendee of its status, vendee has the right to demand return of full amount of down
payment.

xxxx

9. As to the boundaries and partition of the lots (15,018 sq. m. and 300 sq. m.) Vendee
shall be informed immediately of its approval by the LRC.

10. The vendor assures the vendee of a peaceful transfer of ownership.

x x x x [6]

After almost seven years from the time of the execution of the contract and
notwithstanding payment of P3.5 million on the part of respondent-spouses, petitioner
still failed to comply with her obligation as expressly provided in paragraphs 4, 6, 7, 9
and 10 of the contract. Hence, in a letter[7] dated September 27, 2000, respondent-
spouses demanded the return of the amount of P3.5 million within 15 days from receipt
of the letter. In reply,[8] petitioner acknowledged receipt of the P3.5 million and
promised to return the same within 120 days. Respondent-spouses were amenable to
the proposal provided an interest of 12% compounded annually shall be imposed on the
P3.5 million.[9] When petitioner still failed to return the amount despite demand,
respondent-spouses were constrained to file a Complaint[10] for sum of money before
the Regional Trial Court (RTC) of Malabon against herein petitioner as well as Roberto
U. Arias (Arias) who allegedly acted as petitioners agent. The case was docketed as
Civil Case No. 3201-MN and raffled off to Branch 170. In their complaint, respondent-
spouses prayed that petitioner and Arias be ordered to:

1. Pay the principal amount of P3,500,000.00 plus interest of 12% compounded

annually starting October 1, 1993 or an estimated amount of P8,558,591.65;

2. Pay the following items of damages:

a) Moral damages in the amount of P100,000.00;

b) Actual damages in the amount of P100,000.00;

c) Exemplary damages in the amount of P100,000.00;

d) [Attorneys] fee in the amount of P50,000.00 plus 20% of recoverable amount

from the [petitioner].

e) [C]ost of suit.[11]

In their Answer with Counterclaim,[12] petitioner and Arias averred that they are willing
to return the principal amount of P3.5 million but without any interest as the same was
not agreed upon. In their Pre-Trial Brief,[13] they reiterated that the only remaining issue
between the parties is the imposition of interest. They argued that since the Conditional
Deed of Sale provided only for the return of the downpayment in case of breach, they
cannot be held liable to pay legal interest as well.[14]

In its Pre-Trial Order[15] dated June 29, 2001, the RTC noted that the parties agreed
that the principal amount of 3.5 million pesos should be returned to the [respondent-
spouses] by the [petitioner] and the issue remaining [is] whether x x x [respondent-
spouses] are entitled to legal interest thereon, damages and attorneys fees.[16]

Trial ensued thereafter. After the presentation of the respondent-spouses evidence, the
trial court set the presentation of Arias and petitioners evidence on September 3,
2003.[17] However, despite several postponements, petitioner and Arias failed to
appear hence they were deemed to have waived the presentation of their evidence.
Consequently, the case was deemed submitted for decision.[18]

Ruling of the Regional Trial Court

On May 7, 2004, the RTC rendered its Decision[19] finding respondent-spouses entitled
to interest but only at the rate of 6% per annum and not 12% as prayed by them.[20] It
also found respondent-spouses entitled to attorneys fees as they were compelled to
litigate to protect their interest.[21]

The dispositive portion of the RTC Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the

[respondent-spouses] and ordering the [petitioner and Roberto Arias] to jointly and
severally:

1. Pay [respondent-spouses] the principal amount of Three Million Five

Hundred Thousand pesos (P3,500,000.00) with an interest of 6% compounded annually
starting October 1, 1993 and attorneys fee in the amount of Fifty Thousand pesos
(P50,000.00) plus 20% of the recoverable amount from the defendants and cost of the
suit.

The Compulsory Counter Claim is hereby dismissed for lack of factual evidence.

SO ORDERED.[22]

Ruling of the Court of Appeals

Aggrieved, petitioner and Arias filed their notice of appeal.[23] The CA noted that the
only issue submitted for its resolution is 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.[24]

On May 12, 2006, the CA rendered the assailed Decision affirming the ruling of the RTC
finding the imposition of 6% interest proper.[25] However, the same shall start to run
only from September 27, 2000 when respondent-spouses formally demanded the return
of their money and not from October 1993 when the contract was executed as held by
the RTC. The CA also modified the RTCs ruling as regards the liability of Arias. It held
that Arias could not be held solidarily liable with petitioner because he merely acted as
agent of the latter. Moreover, there was no showing that he expressly bound himself to
be personally liable or that he exceeded the limits of his authority. More importantly,
there was even no showing that Arias was authorized to act as agent of petitioner.[26]
Anent the award of attorneys fees, the CA found the award by the trial court
(P50,000.00 plus 20% of the recoverable amount) excessive[27] and thus reduced the
same to P100,000.00.[28]
The dispositive portion of the CA Decision reads:

WHEREFORE, the appealed decision is MODIFIED. The rate of interest shall be six
percent (6%) per annum, computed from September 27, 2000 until its full payment
before finality of the judgment. If the adjudged principal and the interest (or any part
thereof) remain[s] unpaid thereafter, the interest rate shall be adjusted to twelve percent
(12%) per annum, computed from the time the judgment becomes final and executory
until it is fully satisfied. The award of attorneys fees is hereby reduced to P100,000.00.
Costs against the [petitioner].

SO ORDERED.[29]

Petitioner moved for reconsideration which was denied in the August 31, 2006
Resolution of the CA.

Hence, this petition raising the sole issue of whether the imposition of interest and
attorneys fees is proper.

Petitioners Arguments

Petitioner insists that she is not bound to pay interest on the P3.5 million because the
Conditional Deed of Sale only provided for the return of the downpayment in case of
failure to comply with her obligations. Petitioner also argues that the award of attorneys
fees in favor of the respondent-spouses is unwarranted because it cannot be said that
the latter won over the former since the CA even sustained her contention that the
imposition of 12% interest compounded annually is totally uncalled for.
Respondent-spouses Arguments

Respondent-spouses aver that it is only fair that interest be imposed on the amount they
paid considering that petitioner failed to return the amount upon demand and had been
using the P3.5 million for her benefit. Moreover, it is undisputed that petitioner failed to
perform her obligations to relocate the house outside the perimeter of the subject
property and to complete the necessary documents. As regards the attorneys fees, they
claim that they are entitled to the same because they were forced to litigate when
petitioner unjustly withheld the amount. Besides, the amount awarded by the CA is even
smaller compared to the filing fees they paid.

Our Ruling

The petition lacks merit.

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

We sustain the ruling of both the RTC and the CA that it is proper to impose interest
notwithstanding 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. 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. She has in fact
admitted that the conditions were not fulfilled and that she was willing to return the full
amount of P3.5 million but has not actually done so. Petitioner enjoyed the use of the
money from the time it was given to her[30] until now. Thus, she is already in default of
her obligation from the date of demand, i.e., on September 27, 2000.

The interest at the rate of 12% is applicable in the instant case.

Anent the interest rate, the general rule is that the applicable rate of interest shall be
computed in accordance with the stipulation of the parties.[31] Absent any stipulation,
the applicable rate of interest shall be 12% per annum when the obligation arises out of
a loan or a forbearance of money, goods or credits. In other cases, it shall be six
percent (6%).[32] In this case, the parties did not stipulate as to the applicable rate of
interest. The only question remaining therefore is whether the 6% as provided under
Article 2209 of the Civil Code, or 12% under Central Bank Circular No. 416, is due.

The contract involved in this case is admittedly not a loan but a Conditional Deed of
Sale. However, the contract provides that the seller (petitioner) must return the payment
made by the buyer (respondent-spouses) if the conditions are not fulfilled. There is no
question that they have in fact, not been fulfilled as the seller (petitioner) has admitted
this. Notwithstanding demand by the buyer (respondent-spouses), the seller (petitioner)
has failed to return the money and

should be considered in default from the time that demand was made on September 27,
2000.

Even if the transaction involved a Conditional Deed of Sale, can the stipulation
governing the return of the money be considered as a forbearance of money which
required payment of interest at the rate of 12%? We believe so.

In Crismina Garments, Inc. v. Court of Appeals,[33] forbearance was 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
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.[34] 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. 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.

Petitioners unwarranted withholding of the money which rightfully pertains to

respondent-spouses amounts to forbearance of money which can be considered as an
involuntary loan. Thus, the applicable rate of interest is 12% per annum. In Eastern
Shipping Lines, Inc. v. Court of Appeals,[35]cited in Crismina Garments, Inc. v. Court of
Appeals,[36] the Court suggested the following guidelines:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-

contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for
damages. The provisions under Title XVIII on Damages of the Civil Code govern in
determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is imposed,
as follows:

1. When the obligation is breached, and it consists in the payment of a sum of

money, i.e., a loan or forbearance of money, the interest due should be that which may
have been stipulated in writing. Furthermore, the interest due shall itself earn legal
interest from the time it is judicially demanded. In the absence of stipulation, the rate of
interest shall be 12% per annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.

2. When an obligation, not constituting a loan or forbearance of money, is

breached, an interest on the amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No interest, however, shall be
adjudged on unliquidated claims or damages except when or until the demand can be
established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shall begin to run
only from the date the judgment of the court is made (at which time the quantification of
damages may be deemed to have been reasonably ascertained). The actual base for
the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of credit.[37]

Eastern Shipping Lines, Inc. v. Court of Appeals[38]and its predecessor case,

Reformina v. Tongol[39] both involved torts cases and hence, there was no forbearance
of money, goods, or credits. Further, the amount claimed (i.e., damages) could not be
established with reasonable certainty at the time the claim was made. Hence, we
arrived at a different ruling in those cases.

Since the date of demand which is September 27, 2000 was satisfactorily established
during trial, then the interest rate of 12% should be reckoned from said date of demand
until the principal amount and the interest thereon is fully satisfied.

The award of attorneys fees is warranted.

Under Article 2208 of the Civil Code, attorneys fees may be recovered:
xxxx

(2) When the defendants act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest;

xxxx

(11) In any other case where the court deems it just and equitable that attorneys
fees and expenses of litigation should be recovered.

In all cases, the attorneys fees and expenses of litigation must be reasonable.
Considering the circumstances of the instant case, we find respondent-spouses entitled
to recover attorneys fees. There is no doubt that they were forced to litigate to protect
their interest, i.e., to recover their money. However, we find the amount of P50,000.00
more appropriate in line with the policy enunciated in Article 2208 of the Civil Code that
the award of attorneys fees must always be reasonable.

WHEREFORE, the Petition for Review is DENIED. The May 12, 2006 Decision of the
Court of Appeals in CA-G.R. CV No. 83123 is AFFIRMED with MODIFICATIONS that
the rate of interest shall be twelve percent (12%) per annum, computed from September
27, 2000 until fully satisfied. The award of attorneys fees is further reduced to
P50,000.00.

SO ORDERED.

ESTORES V. SPOUSES SUPANGAN, (2012)

(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 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. 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 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.

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.

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:
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.
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.
In a letter in 2000, Spouses demanded the return of the amount within 15 days from
receipt
In reply, Estores promised to return the same within 120 days
Spouses agreed but imposed an interest of 12% annually
Estores still failed despite demands
Spouses filed a complaint with the RTC against Estores and Roberto Arias (allegedly
acted as Estores agent)
In Answer, Estores said they were willing to pay the principal amount but without the
interest as it was not agreed upon
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
RTC ruled saying that the Spouses are entitled to the interest but only at 6% per annum
and also entitled to attys fees
On appeal, CA said that the issue to resolve is
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
CA affirmed RTC
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
That Arias not be solidarily liable as he acted as agent only and did not expressly bind
himself or exceeded his authority
Estores contends:
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
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
Spouses contend:
It is only fair that interest be imposed because Estores failed to return the amount upon
demand and used the money for her benefit
Estores failed to relocate the house outside the perimeter of the subject lot and
complete the necessary documents
As to the fees, they claim that they were forced to litigate when Estores unjustly held the
amount

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%

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.
She admitted that the conditions were not fulfilled and was willing to return the full
amount of P3.5M but hasnt done so
She is now in default
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
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.
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.
In such case, forbearance of money, goods or credits will have no distinct definition
from a loan.
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
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.

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Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-20085 August 8, 1975

PHILIPPINE TOBACCO FLUE CURING AND REDRYING CORPORATION, petitioner-
appellee,
vs.
RIZALINO PABLO, Director of the Bureau of Commerce, respondent-appellant.
Manuel O. Chan for petitioner-appellee.

Office of the Solicitor General Edilberto Barot and Solicitor Camilo D. Quiason for
respondent-appellant.

CONCEPCION JR., J.:

Appeal from a decision of the Court of First Instance of Manila, certified to this Court by
the Court of Appeals, pursuant to paragraph 3 (5) of Section 17 of the Judiciary Act, as
amended by Section 2 (5) of Republic Act No. 2313, the amount involved being
P24,905,579.63.
The record discloses that by Memorandum Agreement dated February 2, 1959,1 the
Philippine Tobacco Flue Curing and Redrying Corporation, hereinafter referred to as the
PTFCRC, a domestic corporation engaged in flue curing and redrying of tobacco
leaves, and the Agricultural Credit and Cooperative Financing Administration, ACCFA
for short, agreed that the PTFCRC "shall redry, pack and keep in storage all Virginia
leaf tobacco delivered by ACCFA to the CORPORATION'S redrying and repacking
plant, the same to be done according to standard procedure and usages of the trade,
including fumigation of stored tobacco to prevent damage by pests." ACCFA, in turn,
agreed to pay the PTFCRC eighteen (P0.18) Centavos per kilo for the redrying and
packing of the tobacco and a monthly warehousing fee of Two Pesos and Twenty
Centavos (P2.20) per hogshead. To guarantee the faithful performance of the
agreement, and to answer for any damage that may be suffered by the ACCFA while
the tobacco is in the plant or warehouse of the corporation, the PTFCRC agreed to file a
bond in the amount of P200,000.00, which amount "may be increased at the option of
the ACCFA as the amount and value of the tobacco delivered to the plant or warehouse
of the corporation increases. This agreement shall be in effect for a period of three (3)
years counting from March 1, 1959, and extendible from year to year thereafter, upon
mutual agreement of the parties."
On February 26, 1960, the Director of Commerce, through the Bureau's Chief
Commission Agent, required the PTFCRC to file an additional bond in the amount of
P11,033,334.00, later increased to P12,566,667.22, pursuant to the provisions of the
General Bonded Warehouse Act, since the PTFCRC, upon investigation, had allegedly
received for storage 50,000 hogsheads of Virginia leaf tobacco: valued at P40,000,000
and their records show that the said corporation is only authorized to receive for storage
at any one time not more than P2,300,000.00 worth of tobacco, equivalent to 4,000
hogsheads.2
In a letter dated March 12, 1960, the PTFCRC, through its legal counsel, informed the
Director of Commerce that the said corporation was not engaged in warehousing and
storage and, therefore, not subject to the provisions of the General Bonded Warehouse
Act.3 This contention was rejected by the Director of Commerce and the PTFCRC
appealed to the Secretary of Commerce and Industry.4 On May 12, 1960, the Secretary
of Commerce and Industry sent a letter to the PTFCRC rejecting its appeal and
enjoining it to file the bond required by the Director of Commerce.5
In the meantime, the PTFCRC and the ACCFA entered into a new Memorandum
Agreement,6 dated May 19, 1960, by virtue of which the ACCFA agreed to deliver 75%
of its tobacco to the premises of the PTFCRC, for the latter to render and perform all the
services required for the curing and treatment of said tobacco until they are ready for
the manufacture of cigarettes at the stipulated fee of P2.20 per hogshead. As security
for the faithful performance of the undertaking, the PTFCRC shall post and maintain a
surety bond in the amount of P700,000.00 in favor of the ACCFA. The Memorandum
Agreement entered into by and between the parties on February 2, 19597 was
expressly declared extinguished, terminated, voided, and superseded by this new
Memorandum Agreement.
On June 1, 1960, the PTFCRC received a letter from the Director of Commerce
requiring it to file an additional bond of P24,905,579.63 within two (2) days from receipt
thereof.8 Whereupon, the PTFCRC filed with the Court of First Instance of Manila, a
petition for prohibition with a writ of preliminary injunction, against the Director of
Commerce, claiming that in requiring it to file an additional bond, the Director of
Commerce acted with grave abuse of discretion and in disregard of the law and his
jurisdiction, which act would work injustice and cause irreparable injury to the said
corporation.
After trial, judgment was rendered (a) declaring that the petitioner PTFCRC "is not
engaged in the business of warehousing within the meaning of the General Bonded
Warehouse Law insofar as the ACCFA tobacco covered by the contract of May 19,
1960 is concerned, and should not be obliged to file the bond demanded by the
respondent; (b) declaring the order of the Director of Commerce requiring the petitioner
to file a bond of P24,905,579.63 null and void; and (c) making the writ of preliminary
injunction permanent." Hence, this appeal.
The focal issue is whether or not the petitioner-appellee should Post an additional bond,
as required by the Director of Commerce, pursuant to the provisions of sections 4 and 5
of Act No. 3893, as amended, otherwise known as the General Bonded Warehouse Act.
9
The petitioner-appellee claims that the contract entered into between the PTFCRC and
the ACCFA is one of services and, therefore, not within the purview of the General
Bonded Warehouse Act. The Director of Commerce, upon the other hand, maintains
that the petitioner-appellee is a warehouseman and should comply with the provisions
of the General Warehouse Act by putting up an additional bond.

As stated in Section 4 of the General Bonded Warehouse Act, the "bond shall be so
conditioned as to respond for the market value of the rice actually delivered and
received at any time the warehouseman is unable to return the rice 10 or to pay its
value." The main intention of the lawmaker, in requiring the millers to post the necessary
bond, "is to give protection to the owner of the commodity against possible abuses (and
we might add negligence) of the person to whom the physical control of his properties is
delivered." 11
In the case at bar, the ACCFA had insured its tobacco with the GSIS, 12 and the
PTFCRC had been required by the ACCFA to file a performance bond in the amount of
P700,000.00, which amount may be increased at the option of the ACCFA as the
amount and value of the tobacco delivered to the plant or warehouse of the petitioner-
appellee increases, conditioned upon the faithful performance of the agreement and to
answer for any damage that may be suffered by the ACCFA while the tobacco is in the
plant or warehouse of the petitioner-appellee. It is therefore evident that the ACCFA is
amply protected. It would be unreasonable and oppressive to compel the petitioner-
appellee to further put up a bond and subject it to the unnecessary burden of the
premium incident to such bond.
The ACCFA is now defunct and its functions have been taken over by the Agricultural
Credit Administration. This controversy involves the keeping of tobacco, harvested in
1959, for curing and ageing by the petitioner-appellee, which was contracted more than
fifteen (15) years ago. Witnesses for the litigants testified that the ageing process takes
from 18 to 24 months before the tobacco is sold to the cigarette manufacturers. For
sure, the commodity kept in the premises of the petitioner-appellee for curing and
ageing have already been withdrawn and disposed of by the ACCFA, in which case the
filing of an additional bond by the petitioner-appellee ceases to be controversial.
UPON THE FOREGOING, the appeal should be, as it is hereby, DISMISSED, without
costs.
SO ORDERED.