G.R. No. 96372 - Castelo vs. Court of Appeals

On 15 October 1982, petitioners Antonio Castelo, Bernabe Banson, Lourdes Banson, and Pompeyo Depante entered into a contract with private respondent Milagros Dela Rosa through a "Deed of Conditional Sale" covering a parcel of land measuring 84.19 square meters, located at 1524 Espana Street, Sampaloc, Manila.
The agreed price for the land was P269,408.00. Upon signing, Dela Rosa paid P106,000.00, leaving an unpaid balance of P163,408.00, which was to be paid on or before 31 December 1982 without interest or penalty, subject to certain conditions.

The Deed of Conditional Sale contained a provision that, in case the balance remained unpaid by the vendee, the parties would allow a grace period of six (6) months until 30 June 1983.
During the grace period, interest at the rate of 12% per annum and a 1% penalty charge per month on the remaining diminishing balance would be imposed.
Private respondent Dela Rosa failed to pay the remaining balance by the stipulated deadline.

On 29 July 1983, petitioners filed an action for specific performance with damages in the Regional Trial Court of Manila.
On 17 August 1984, RTC Judge Antonio Q. Malaya rendered a decision ordering the rescission of the Deed of Conditional Sale.
Petitioners subsequently sought certiorari before the Court of Appeals, contending that rescission was merely an alternative relief while they had asked for specific performance with damages.

In its decision dated 21 November 1986 (CA G.R. No. 07938-SP), the Court of Appeals annulled the RTC’s decision and ordered:

The amendment of the complaint to conform with existing evidence;
That the defendant pay the balance of P163,408.00 with interest (with rescission as an alternative should the defendant default.);

Petitioners later filed a motion for execution of the modified RTC judgment based on the CA decision.
The trial court issued a writ of execution on 2 September 1988, with a computation by the sheriff amounting to P197,723.68 (comprising the principal plus interest computed at 12% per annum from 21 November 1986 to 2 September 1988).

Petitioners objected to the sheriff’s computation, arguing that under the contractual terms, interest should be computed as follows:

From 1 January 1983 to 30 June 1983 at 12% per annum only; and
From 1 July 1983 until full payment at 12% per annum plus an additional 12% per annum (1% penalty per month), on the “remaining diminishing balance.”

Detailed computations were submitted by petitioners, arriving at an alternative total of P398,814.88.
The trial court, on 18 April 1990, denied both the motion for alias writ of execution and the motion for reconsideration, stating that it lacked authority to expand the scope of the dispositive portion of the Court of Appeals’ decision.

Petitioners then filed a second certiorari (CA-G.R. SP No. 22464), alleging grave abuse of discretion by the trial court in issuing its orders.
The Court of Appeals, through Luna, J., held that the “new” decision—the dispositive portion of the CA decision—should be executed as it stands, with interest beginning to run from its entry on 12 February 1987.
The key ambiguity arose over whether “to pay interest” referred to:

The Supreme Court reviewed the issue regarding the ambiguous phrase “to pay interest” in the dispositive portion of Castro-Bartolome, J.’s decision dated 21 November 1986.
Relying on established doctrine, the Court recognized that even final and executory judgments may be clarified where a clerical error or an inadvertent omission exists.
The petition argued that the correct interpretation must follow the contractual stipulations on interest agreed upon by the parties.
The Supreme Court held that the proper computation of interest should strictly adhere to the terms of the contract:

Interest at 12% per annum for payments made during the grace period (1 January 1983 to 30 June 1983);
Interest at a combined rate of 24% per annum (12% + 12% penalty) once the grace period expired (from 1 July 1983 onward).

The Court also noted that any deposit made by the respondent after the issuance of the writ of execution would, if proven, be applied as a deduction against the total amount due.

Whether the phrase “to pay interest” in the dispositive portion of Castro-Bartolome, J.’s decision was ambiguous or contained a clerical error that necessitated clarification.
Whether the appropriate interpretation of “to pay interest” should conform to the contractual stipulations in the Deed of Conditional Sale or the legal interest computation starting from the entry of judgment as held in Luna, J.’s decision.
Whether the computation provided by the sheriff (resulting in the sum of P197,723.68) was erroneous given the contractual terms stipulating different interest rates before and after the grace period.
Whether the Supreme Court has jurisdiction to clarify or correct an apparent ambiguity or clerical omission in the dispositive portion of a final and executory judgment.