Supreme Court of the Philippines

538 Phil. 28

THIRD DIVISION
G.R. NO. 74269, November 27, 2006
SOLID HOMES, INC. AND V.V. SOLIVEN REALTY CORPORATION,
PETITIONERS, VS. HON. INTERMEDIATE APPELLATE COURT,
BENJAMIN V. ZABAT AND LUNINGNING ZABAT, RESPONDENTS.

[G.R. NO. 92137]

SOLID HOMES, INC., AND V.V. SOLIVEN REALTY CORPORATION,

PETITIONERS, VS. HON. COURT OF APPEALS, BENJAMIN V. ZABAT
AND LUNINGNING ZABAT, RESPONDENTS.

DECISION

TINGA, J.:

These consolidated cases stemmed from a Decision[1] of the then Court of First
Instance (CFI) of Rizal, Branch 15, awarding private respondents as plaintiffs in
an action seeking rescission of contract with damages in the amount of
P15,938.00, with interest, as well as actual, moral and exemplary damages plus
attorney's fees.[2] The petition in G.R. No. 74269 seeks the review of the interest
rate of 12% per annum imposed by the then Intermediate Appellate Court
(IAC) when it affirmed the CFI's decision; while the other petition, G.R. No.
92137, questions the propriety of an order allowing the partial execution
pending appeal of the CFI's decision.

The undisputed or admitted facts follow.

Solid Homes, Inc. is the owner and developer of a subdivision project known as
Greenheights Newton Subdivision (Greenheights) located in Antipolo, Rizal.[3]
V.V. Soliven Realty Corporation sold lots in this subdivision and Pedro B. de la
Peña was one of its brokers. In January 1976, De la Peña was introduced to
Colonel Benjamin V. Zabat (Zabat) and his wife Luningning (respondents) for
the purpose of making them interested in buying lots in Greenheights. De la
Peña offered Lot Nos. 1, 2 and 3 of Block 8 of Greenheights representing to
respondents Lot No. 1 as having 296 square meters, Lot No. 2 with 240 square
meters and Lot No. 3 with 296 square meters.[4] Respondents agreed to buy Lot
No. 1 of Block 8 while expressing their desire to purchase Lot Nos. 2 and 3 of
the same block, which were adjacent to Lot No. 1, for the purpose of turning
the three lots into a family compound.[5] The purchase price for Lot No. 1 was
P53,280.00 with down payment of 20% of the purchase price or P10,656.00.
The parties agreed to pay the down payment of P10,656.00 according to the
following arrangement—payment of P500.00 upon execution of the Reservation
Application and the remainder to be offset by the value of G.I. sheets which
respondents undertook to deliver to petitioners.[6]

On 29 January 1976, G.I. sheets worth P14,291.60 were delivered to Solid

Homes, Inc. On the same date, Zabat signed and delivered to De la Peña the
reservation agreements for Lot Nos. 1, 2 and 3.[7] Zabat retained a personal copy
of these reservation agreements.[8] As the value of the G.I. sheets was higher
than the agreed down payment for Lot No. 1, V.V. Soliven applied the excess of
the value of the G.I. sheets as down payment for Lot Nos. 2 and 3.[9]

However, Solid Homes, Inc. still sold Lot Nos. 2 and 3 to third parties on 2
March 1976, alleging failure of respondents to submit the reservation
application for Lot Nos. 2 and 3 on time.[10]

Respondents were only informed of the sale of Lot Nos. 2 and 3 in May 1976.
Thus, on 11 May 1976, Zabat sent a letter to petitioners stating his intention to
rescind the contract because of petitioners' failure to reserve Lot Nos. 2 and 3;
the purchase of these lots being the principal consideration for the purchase of
Lot No. 1.[11] Solid Homes, Inc. countered by saying that the reservation
applications for Lot Nos. 2 and 3 were submitted beyond the set deadline.[12]

Respondents then filed an action for specific performance or rescission of

contract with damages on 29 September 1976 before the CFI, praying that
petitioners comply with the agreement for petitioners to sell to respondents Lot
Nos. 1, 2 and 3 or, in the alternative, that petitioners be required to return to
respondents their payments, together with interest and damages.
Trial ensued. On 31 August 1979, the trial court rendered a Decision[13] in favor
of respondents, ordering petitioners to return to respondents the sum of
P15,938.00 with interest thereon at the legal rate computed from 11 February
1976 until full restoration. Petitioners were likewise declared liable to pay
respondents P1,000.00 for actual damages, P20,000.00 as moral damages,
P1,000.00 as exemplary damages plus P5,000.00 as attorney's fees.[14]

Upon appeal by petitioners,[15] the IAC affirmed[16] the decision of the trial court
with modification. Petitioners were ordered to return to respondents the sum of
P16,438.00[17] with interest thereon at 12% per annum from date of first
demand, 11 May 1976,[18] until full payment. The award for moral damages was
decreased to P10,000.00 while the award for actual damages was withdrawn. No
reference was made to the award of exemplary damages and attorney's fees,[19]
hence, it was deemed affirmed.

From the IAC's decision, petitioners filed the petition in G.R. No. 74269, raising
the correct rate of interest to be imposed on petitioner's obligation as declared
by the lower courts as the sole issue. As earlier noted, petitioners no longer
raised before this Court the matter of their liability to pay for the principal
obligation and moral damages.

After the filing of the instant petition in G.R. No. 74269, respondents filed a
Motion for Partial Execution of Judgment before the Regional Trial Court
(RTC) of Makati, Branch 132, to which the original case was transferred. On 28
January 1988, the lower court granted said motion on the ground that the sole
issue still pending before this Court was merely the determination of the
applicable rate of interest for the principal obligation, all other matters having
become final and executory.[20] Initially, the Court of Appeals reversed the
decision of the trial court.[21] However, upon motion for reconsideration, the
appellate court promulgated an amended decision granting the motion for
partial execution of judgment.[22] This amended decision is now challenged in
G.R. No. 92137.

Back to the lone issue in G.R. No. 74269 on the applicable rate of interest on a
money judgment. Strikingly, the IAC did not provide an explanation why it
imposed the interest rate of 12%.

This precise issue was subsequently addressed by this Court in Eastern Shipping
Lines, Inc. vs. Court of Appeals.[23] Although the filing of petition in G.R. No.
74269 preceded Eastern Shipping, the guidelines laid down therein are applicable
to this case as they implemented and clarified laws that were already in existence
even before this instant petition was filed.[24]

Respondents' cause of action in this case arose from petitioner's failure to

reserve lots intended to be purchased by respondents in accordance with their
contract. This prompted respondents to rescind the contract. The trial court
ordered petitioners to return the sum of P15,938.00 with interest and to pay
damages to respondents. The IAC affirmed the trial court's decision with
modification by ordering petitioners to return to respondents P16,438.00 with
interest at 12% per annum and to pay moral damages.[25]

Eastern Shipping teaches that, with respect to an award of interest in the concept
of actual and compensatory damages, interest on the amount of damages
awarded may be imposed at the discretion

of the Court at the rate of 6% per annum for a breach of an obligation not
constituting a loan or forbearance of money. No interest, however, shall be
adjudged on unliquidated claims or damages except when or until the demand
can be established with reasonable certainty. Where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim
is made judicially or extrajudicially. But when such certainty cannot be
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.[26]

The ruling of the appellate court imposing the interest rate of 12% is
incompatible with the consistently reiterated doctrine in Eastern Shipping.[27] In
this case, an interest of only 6% should be imposed on the obligation of
petitioners as such obligation did not constitute a loan or forbearance of credit.
The 6% interest imposed on the principal obligation of P16,438.00 shall
commence on the date of first demand as determined by the lower court which
is 11 May 1976.[28]

As aforestated, petitioners did not challenge their liability for the principal
obligation, damages and attorney's fees as found by the trial court. Thus,
petitioners' liability for the judgment amount, save for the interest, has become
final and executory.[29]
In Eastern Shipping, the Court went on to state that when the judgment of the
court awarding a sum of money becomes final and executory, the rate of legal
interest, whether the obligation was in the form of a loan or forbearance of
money or otherwise, 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.[30]

Accordingly, the principal obligation of P16,438.00 shall bear 6% interest from

the date of first demand or from 11 May 1976. From the date the liability for the
principal obligation, moral and exemplary damages and attorney's fees had
become final and executory, an annual interest of 12% shall be imposed on
these obligations until their final satisfaction, this interim period being deemed
to be by then an equivalent to a forbearance of credit.

Turning to the petition in G.R. No. 92137, what needs to be asked is whether it
is proper to issue a partial writ of execution of a decision ordering a return of a
sum of money while the determination of the applicable rate of interest on said
monetary obligation is still subject for final determination.

In resolving the motion for partial execution of judgment filed by respondents,

the appellate court referred to Section 9, Rule 41 of the 1964 Rules of Court, to
wit:
Sec. 9. When appeal deemed perfected; effect thereof. —If the notice of appeal, the
appeal bond and the record on appeal have been filed in due time, the appeal is
deemed perfected upon the approval of the record on appeal and of the appeal
bond other than a cash bond, and thereafter the trial court loses its jurisdiction
over the case, except to issue orders for the protection and preservation of
the rights of the parties which do not involve any matter litigated by the
appeal, to approve compromises offered by the parties prior to the transmittal
of the record on appeal to the appellate court, and to permit the prosecution of
pauper's appeals.[31]
The appellate court then granted the motion for partial execution on the ground
that the unappealed portion of the trial court's decision had become final and
executory. The appellate court also followed the ruling in Baldisimo v. CFI of
Capiz, et al.,[32] that it is within the power of the trial court to issue orders for the
protection and preservation of the rights of the parties which do not involve any
matter litigated in the appeal.[33]
On the other hand, petitioners contend that the case of Alcober, et al. v. Hon.
Garciano, et al., [34] should have been applied by the appellate court instead of
Baldisimo as Alcober was rendered on a later date. An examination of the two
cases would show, however, that it is Baldisimo and not Alcober that squarely
addresses the issue in this instant case.

Alcober involved an action to establish title to a parcel of land and the Court
therein applied the general rule set in Sec. 9, Rule 41 of the 1964 Rules that
when an appeal is perfected, the trial court loses jurisdiction over the case. Even
though Alcober applied the general rule, it nevertheless acknowledged that there
are exceptions to the same, namely: 1) when the issue orders for the protection
and preservation of the rights of the parties which do not involve any matter
litigated by the appeal; 2) to approve compromises offered by the parties prior
to the transmittal of the record on appeal to the appellate court; and 3) to permit
the prosecution of a pauper's appeal.[35]

The case of Baldisimo involved the application of the exception to the general
rule. Petitioner in Baldisimo sought to recover the ownership and possession of a
parcel of land. The lower court awarded ownership of the whole property to
petitioner and declared him entitled to the possession thereof while respondent
therein was declared entitled to the refund of expenses made for the
construction of improvements on the land. Respondent raised in his appeal the
reasonableness of the amount fixed for the value of the improvements but did
not appeal the ruling adjudicating the ownership of the land and the right of
possession thereto. Consequently, this Court held that under Sec. 9, Rule 41 of
the then Rules of Court,[36] it was within the power of the trial court to issue
orders for the protection and preservation of the rights of the parties which do
not involve any matter litigated in the appeal.[37]

The principle in Baldisimo applies to the instant case because save for the
determination of the applicable rate of interest, the decision of the appellate
court awarding to respondents P16,438.00 plus P10,000.00 as moral damages
had become final and executory. No similar complexity attended the appeal
raised in Alcober. These aspects of the decision are matters that are no longer
litigated in the appeal. Thus, the trial court can proceed with their execution.[38]

WHEREFORE, the petition in G.R. No. 74259 is GRANTED IN PART. The

decision of the Intermediate Appellate Court is MODIFIED in that petitioners
are ORDERED to pay interest at 6% per annum on the principal obligation in
the amount of P16,438.00 from 11 May 1976, the date of first demand by
respondent, until said decision on the principal obligation became final and
executory, and interest at 12% per annum on the principal obligation, moral and
exemplary damages, as well as attorney's fees, from the time said decision
became final and executory until full payment of said amounts.

The petition in G.R. No. 92137 is DENIED and the amended decision of the
Court of Appeals is AFFIRMED.

No pronouncement as to costs.

SO ORDERED

Quisumbing, (Chairperson), Carpio, Carpio Morales, and Velasco, Jr., JJ., concur.

[1] Rollo (G.R. No. 74269), pp. 52-68.

[2] Later amended by the IAC to P16,438.00 plus moral damages.

[3] Rollo, (G.R. No. 74269), pp. 92-93.

[4] Id. at 39.

[5] Id. at 93.

[6] Id. at 94.

[7] Id. at 55.

[8] Id.

[9] Id. at 94-95.

[10] Id. at 57.

[11] Id. at 56.

[12] Id. at 57.

[13] Id. at 165-181. Penned by Hon. Floreliana Castro-Bartolome.

[14] Rollo (G.R. No. 74269), p. 68.

[15] Docketed as AC - G.R. CV No. 70032.

Rollo (G.R. No. 74269), pp. 18-26, Decision promulgated March 12, 1986,
[16]

penned by Justice Serafin E. Camilon, with Justices Crisolito Pascual, Jose C.

Campos, Jr. (later, Supreme Court Justice) and Desiderio P. Jurado, concurring .

[17] Id.
at 25. The value of the G.I. sheets at P15,938.00 plus P500.00 cash
payment.

[18] Id.

[19] Id. at 26.

[20] Rollo, (G.R. 92137), p. 9.

[21] Id.
at 19-22; Decision dated September 18, 1989, penned by Associate Justice
Luis L. Victor, with Associate Justices Ricardo L. Pronove, Jr. and Felipe B.
Kalalo, concurring.

[22] Id.
at 16-17; Dated February 12, 1990, penned by Associate Justice Luis L.
Victor, with Associate Justices Ricardo L. Pronove, Jr. and Felipe B. Kalalo,
concurring.

[23] G.R. No. 97412, July 12, 1994, 234 SCRA 78.

[24] Thelaws and regulations relevant for the guidelines formulated in Eastern
Shipping were Central Bank Circular No. 416 [1974] and Article 2209 of the Civil
Code, both were already effective at the time the instant petition was filed.
[25] Rollo
(G.R. No. 74269), p. 26, to quote:
WHEREFORE, modified as follows:

1) ordering appellants, jointly and severally, to return to the appellees the sum of
P16,438.00 with interest thereon at 12% per annum from date of first demand,
May 11, 1976, until full payment;

2) ordering the appellants, jointly and severally, to pay the appellees the sum of
P10,000.00 as moral damages;

3) eliminating the award of actual damages.

the decision appealed from is affirmed.

Costs against appellants.

SO ORDERED.
[26] Eastern Shipping Lines, Inc. v. Court of Appeals, supra note 22 at 96, see also

Biesterbos v. Court of Appeals, G.R. No. 152529, 22 September 2003, 411 SCRA
396, 406-407; Heirs of Ignacia Aguilar-Reyes v. Spouses Mijares, 457 Phil. 120, 140
(2003).

[27] Id.

[28] Rollo (G.R. No. 74269), p. 34.

[29] RULES OF COURT (1964), Rule 45, Sec. 1 provides:

A party may appeal by certiorari, from a judgment of the Court of Appeals, by

filing with the Supreme Court a petition for certiorari, within fifteen (15) days
from notice of judgment or of the denial of his motion for reconsideration filed
in due time, and paying at the same time, to the clerk of said court the
corresponding docketing fee. xxx

In petitioner's Motion for Extension dated March 31, 1986, petitioners

acknowledged receiving the appellate court's decision on March 17, 1986. Rollo
(G.R. No. 74269), p. 2.
 Eastern Shipping Lines, Inc. v. Court of Appeals, supra note 22. Reiterated in
[30]

Almeda v. Cariño, 443 Phil. 182, 192 (2003), Biesterbos v. Court of Appeals, supra;
Vicente v. Planters Development Bank, 444 Phil. 309, 323-324 (2003).

[31] Emphasis supplied.

[32] 128 Phil. 368 (1967).

[33]Id. at 372.

[34] 132 Phil. 184 (1968).

Id. at 188. See also Commissioner of Internal Revenue v. Visayan Electric Co., et al.,
[35]

No. L-24921, March 31, 1967, 125 Phil. 1125, 1128 (1967) citing Zulueta v.
Paredes, 63 Phil. 1, 4-5; Arive v Ybañez, 92 Phil.1069, 1070; Facundo v. Pabalan, L-
17746, and Ulep v. Carbonel, L-17807, jointly decided on January 31, 1962.

[36] RULES OF COURT (1964).

Baldisimo v. Court of First Instance of Capiz, supra. Also see Facundo v. Pabalan
[37]

No. L-17746, 31 January 1962, 4 SCRA 375, 383.

The cases of Baldisimo and Alcober were decided applying the 1964 Rules of
[38]

Court. Revised Rules of Court of 1997, Rule 41, Sec. 9, now provides for a
different effect produced by perfected appeals, to wit:
SEC. 9. Perfection of Appeal; effect thereof. —A party's appeal by notice of appeal is
deemed perfected as to him upon the filing of the notice of appeal in due time.

A party's appeal by record on appeal is deemed perfected as to him with respect

to the subject matter thereof upon the approval of the record on appeal filed in
due time.

In appeals by notice of appeal, the court loses jurisdiction over the case upon
the perfection of the appeals filed in due time and the expiration of the time to
appeal of the other parties.

In appeals by record on appeal, the court loses jurisdiction only over the subject
matter thereof upon the approval of the records on appeal filed in due time and
the expiration of the time to appeal of the other parties.

In either case, prior to the transmittal of the original record or the record on
appeal, the court may issue orders for the protection and preservation of the
rights of the parties which do not involve any matter litigated by the appeal,
approve compromises, permit appeals of indigent litigants, order execution
pending appeal on accordance with section 2 of Rule 39, and allow withdrawal
of the appeal.

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