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BOBIE ROSE V. FRIAS v. FLORA SAN DIEGO-SISON

FACTS:

Bobie Rose V. Frias, the petitioner, owns a property covered by TCT No. 168173. She entered into a Memorandum of Agreement with Dra. Flora San Diego-Sison, the respondent, regarding the purchase of the property. According to the agreement, the respondent had a six-month period to decide whether or not to purchase the property, and if she chose to buy it, she had another six months to pay the remaining balance. The petitioner was also allowed to offer the property to other buyers within the six-month period. The respondent paid the petitioner two million pesos in cash and gave her a post-dated check for one million pesos. However, the check became stale and the respondent decided not to purchase the property, informing the petitioner through a letter. The petitioner failed to repay the two million pesos to the respondent.

As a result, the respondent filed a complaint for sum of money with preliminary attachment against the petitioner. The case was raffled to Branch 30 of the RTC of Manila. The respondent alleged that the petitioner tried to deprive her of the security for the loan by falsely reporting the loss of her owner's copy of TCT No. 168173 and filing a petition for the issuance of a new owner's duplicate copy, although the petition was later set aside.

Upon the filing of a bond in the amount of two million pesos, the Executive Judge of the RTC of Manila issued a writ of preliminary attachment. The petitioner filed an amended answer, claiming that the Memorandum of Agreement was arranged by her lawyer without her being able to read it and that the title to the property and the Deed of Sale were never turned over to the respondent.

In another development, the petitioner received two million pesos in cash from the respondent and gave one million pesos to her lawyer, Atty. Lozada. The petitioner later executed an affidavit of loss and filed a petition for the issuance of an owner's duplicate title, claiming that the original title was lost. The petitioner alleged that she was manipulated by Atty. Lozada and the respondent as criminal charges were filed against her for perjury and false testimony. The RTC rendered a decision ordering the petitioner to pay the respondent the sum of two million pesos plus interest, premiums for the attachment bond, and damages. The petitioner appealed to the CA, which affirmed the RTC decision but reduced the interest rate.

ISSUES:

  1. Whether the compounded bank interest should be limited to six (6) months as contained in the Memorandum of Agreement.

  2. Whether the respondent is entitled to moral damages.

  3. Whether or not regular interest continues to accrue until the principal sum due is returned to the creditor.

  4. Whether the interest rate of 25% awarded by the Court of Appeals is fair and reasonable.

  5. Whether or not petitioner is entitled to moral damages.

  6. Whether or not petitioner is entitled to exemplary damages.

  7. Whether or not the Court of Appeals erred in awarding attorney's fees.

  8. The issue in this case is whether the award of attorney's fees is justified and in accordance with the law.

RULING:

  1. The Court held that the compounded bank interest should not be limited to six (6) months. The Memorandum of Agreement executed between the parties is the law between them. The phrase "for the last six months only" should be interpreted in the context of the entire agreement. It refers to the second six-month period after the respondent decided not to buy the property, in which interest will be charged. It does not mean that interest will no longer be charged after the second six-month period. Therefore, the CA's ruling awarding a 25% interest per annum on the two-million peso loan beyond the second six-month period was affirmed.

  2. The Court affirmed the CA's award of moral damages to the respondent. The petitioner's deceitful conduct in executing an affidavit of loss of a Certificate of Title when she knew that the title was in the respondent's possession caused the respondent serious anxiety and emotional distress.

  3. Yes, regular interest continues to accrue until the principal sum due is returned to the creditor.

  4. Yes, the interest rate of 25% awarded by the Court of Appeals is fair and reasonable based on previous jurisprudence.

  5. No, petitioner is not entitled to moral damages. The act of trying to deprive the respondent of the security for the loan through fraudulent means warrants the award of moral damages.

  6. Yes, respondent is entitled to exemplary damages. Exemplary damages may be imposed upon the petitioner as a way of example or correction for the public good.

  7. Yes, the Court of Appeals erred in awarding attorney's fees as the trial court's decision did not explain the findings of facts and law to justify the award.

  8. The Supreme Court affirmed the decision of the Court of Appeals with modification, deleting the award of attorney's fees. The Court held that the award of attorney's fees should be reasonable, just, and equitable, and it should not enrich the winning party at the expense of the losing litigant. The trial court must make findings of facts and law that would justify the grant of attorney's fees. The matter of attorney's fees should be clearly explained and justified in the body of the decision, not only mentioned in the dispositive portion. The Court held that the award of attorney's fees should be deleted in this case.

PRINCIPLES:

  • The terms of an agreement should be interpreted in its entirety, giving meaning to each provision and taking into account the intention of the parties.

  • The literal meaning of the stipulations in a contract shall prevail if the terms are clear and leave no doubt as to the parties' intention.

  • Interest may be charged on a loan even beyond the stipulated period if the contract allows for it or if the debtor fails to pay within the agreed date.

  • Regular interest continues to accrue until the principal sum due is returned to the creditor.

  • The interest rate awarded should be fair and reasonable, taking into account previous jurisprudence.

  • Moral damages may be awarded in breach of contract cases when the defendant acted fraudulently or in bad faith.

  • Exemplary damages may be imposed upon the defendant as a way of example or correction for the public good.

  • Attorney's fees may only be awarded in instances enumerated in Article 2208 of the New Civil Code.

  • Attorney's fees as part of damages should be reasonable, just, and equitable.

  • The award of attorney's fees is the exception rather than the general rule.

  • The trial court must make findings of facts and law that justify the grant of attorney's fees.

  • The award of attorney's fees should be clearly explained and justified in the body of the decision.

  • The Court of Appeals cannot supplement the bases for awarding attorney's fees if the trial court failed to discuss the reasons for the award in its decision.