Case Digest (G.R. No. 153004)
Facts:
Santos Ventura Hocorma Foundation, Inc. (Petitioner) entered into a Compromise Agreement with Ernesto V. Santos on October 26, 1990, whereby the Foundation agreed to pay Santos P14.5 million (P1.5 million immediately and P13 million within two years), with unpaid balance payable in land and a provision allowing writ of execution for noncompliance; the agreement was judicially approved on September 30, 1991. The Foundation paid P1.5 million, later sold properties formerly under lis pendens, and failed to pay the P13 million; after extrajudicial demand on October 28, 1992, levy, and auctions in 1994–1995 (where Riverland, Inc. became the highest bidder), Santos and Riverland sued for damages and interest; the trial court dismissed, the Court of Appeals awarded legal interest and attorneys' fees, and the petitioner sought review.
Issues:
- Whether the Court of Appeals erred in awarding legal interest to Ernesto V. Santos and Riverland, Inc. despite no provision for interest in the Compromise Agreement or the compromise judgment.
- Whether the Court of Appeals erred in awarding legal interest after the obligation was converted to payment in kind by delivery of real properties.
- Whether the respondents were barred from demanding interest by the waiver clause in the Compromise Agreement.
Ruling:
The petition was denied and the Decision and Resolution of the Court of Appeals were affirmed. The Court ordered Santos Ventura Hocorma Foundation, Inc. to pay legal interest at twelve percent per annum on the P13 million from October 28, 1992 until full payment, and awarded attorneys' fees and costs as previously ordered; costs were imposed on petitioner.
Ratio:
The Court held that a compromise is a binding contract upon execution and replaced the controverted claims, so the two-year period ran from October 26, 1990, making the obligation demandable by October 26, 1992. Under Article 1169 and Article 1170 of the Civil Code, the obligation was liquidated, the Foundation delayed performance after extrajudicial demand of October 28, 1992, and thus incurred liability for damages in the form of interest; absent agreement on interest, the legal rate applied, namely twelve percent per annum under Central Bank Circular No. 416, computed from default.
Doctrine:
- A compromise is a contract binding upon the parties from the time of its execution and, when approved, becomes the law between the parties.
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