ESTORES v SPOUSES SUPANGAN
However, if the vendor fails to complete necessary documents
April 18, 2012 |Del Castillo, J.
SUMMARY: Petitioner Estores and Respondents Spouses Supangan entered into a
Contract of Conditional Sale , wherein Estores sold a parcel of land in Naic, Cavite to
Spouses Supangan for the sum of 4.7M. There were conditions imposed in
consideration of the sale. The Spouses were able to pay 3.5M however, Estores failed to
undertake all the conditions in the contract, thus, as per the contract, the spouses
demanded the return of their money. Estores acknowledged and promised to pay the
amount in 120 days. The spouses agreed but on the condition that 12% per annum
interest will be paid. Estores claimed that she should not pay interest since it was not
stipulated. The spouses then filed a complaint. The RTC ruled in favor of the spouses,
which was affirmed by the CA. The CA held that it should be reckoned from the time
demand was made. The SC upheld the decision of the CA.
DOCTRINE:
Article 2210 of the Civil Code expressly states that “interest may, in the discretion
of the court, be allowed upon damages awarded for breach of contract
General Rule: the applicable rate of interest shall be computed in accordance with with
the stipulation of the parties
If there is no stipulation on the applicable rate of interest, it shall be 12% per annum
when the obligation arises out of a loan or a forbearance of money, goods or credit. In
other cases, it shall be 6%
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 or payable. This 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.
FACTS:
 On October 3, 1993, Hermojina Estores (petitioner) and respondent-spouses
Arturo and Laura Supangan entered into a Conditional Deed of Sale. Estores
offered to sell a parcel of land located at Naic ,Cavite, for the sum of P4.7M.
among the stipulations were as follows:
o (1) Vendor will secure approved clearance from the DAR
o (4) the vendee shall be informed as to the status of the DAR
clearance within 10 days upon signing the document
o (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.
o (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.
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.
o (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.
o (10) The vendor assures the vendee of a peaceful transfer of ownership
 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 dated September 27, 2000, respondent-spouses demanded the return of
the amount of P3.5 million within 15 days from receipt of the letter. Estores
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.
 When petitioner still failed to return the amount despite demand, respondent-spouses
were constrained to file a Complaint for sum of money before the Regional Trial Court of
Malabon against Estores as well as Roberto U. Arias (Arias) who allegedly acted as the
agent of Estores.
 In the Pre-Trial Order, the RTC noted that the parties agreed that the principal
amount of 3.5M should be returned to the spouses Supangan. The only issue is
whether the spouses are entitled to legal interest thereon, damages and attorney’s
fees
o Estores and Arias claimed that the imposition of interest is not
proper as it was not provided for in the Conditional Deed of Sale
o On the other hand, Spouses Supangan aver that it is only fair that
interest shall be paid considering that the money was not retuened
upon demand and Estores has been using the money for her benfit
 The RTC ruled that Spouses Supangan were entitled to interest but only at the rate
of 6% per annum and not 12%. It also ruled that they were entitled to attorneys
fees because they were compelled to litigate to protect their interest.
 The CA affirmed the decision of the RTC. It found that:
o The imposition of 6% interest proper.
o However, it ruled that it shall only run from September 27, 2000,
when they formally demanded the return of their money, and not
from October 1993, when the contract was executed.
o It shall be computed from the time of demand until full payment
before finality of judgment and 12% per annum, in case the principal
and interest remains unpaid after finality of judgment until satisfied
o Arias cannot be held solidarily liable with Estores because he merely
acted as agent of the latter.
 Estores filed an MR but was denied
RULING: Petition lacks merit. Thus, was denied by the Court. . The ruling of the
Court of Appeals is AFFIRMED.
Whether or not the imposition of interest and attorneys fees is proper – YES.
Interest may be imposed even in the absence of stipulation in the contract
 Article 2210 of the Civil Code expressly states that “interest may, in the
discretion of the court, be allowed upon damages awarded for breach of
contract.
o There is no question that Estores is legally obligated to return the
P3.5M because of her failure to fulfill the obligation under the
Conditional Deed of Sale, despite demand.
o Estores enjoyed the use of the money from the time it was given to
her until the now, thus, she is already in default of her obligation
from the date of demand on September 27, 2000.
 The Court also ruled that the interest rate at the rate of 12% is applicable in
this case”.
o General Rule: the applicable rate of interest shall be computed in
accordance with with the stipulation of the parties
o If there is no stipulation on the applicable rate of interest, it shall be
12% per annum when the obligation arises out of a loan or a
forbearance of money, goods or credit. In other cases, it shall be 6%
o In the case at bar, the parties did not stipulate as to the applicable rate
of interest.
Whether or not a stipulation governing the return of the money be considered as
a forbearance of money which required the payment of interest rate of 12%,
even if the transaction involved a Conditional Deed of Sale – YES,
 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 or payable. This 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.
o In this case, the respondent-spouses parted with their money even before
the conditions were fulfilled.
o They have therefore allowed or granted forbearance to the seller (Estores) to
use their money pending fulfillment of the conditions.
o 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.
o 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
o The unwarranted withholding of the money which rightfully pertains to the
spouses amounts to forbearance of money which can be considered as an
involuntary loan. Thus, the applicable rate of interest is 12% per annum.
 GUIDELINES (Crismina Garments, Inc. v. Court of Appeals citing Eastern Shipping Lines,
Inc. v. Court of Appeals)
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. 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
 Since the date of demand (September 27, 2000) was satisfactorily established
during trial, then the interest rate of 12% should be reckoned from the said
date of demand until the principal amount and the interest thereon is fully
satisfied.


NOTES:
 For those details which are not important but seems important.