G.R. No. 14304. March 23, 1960
ANTONIA A. CABARROGUIS AND MAMERTO CABARROGUIS, PLAINTIFFS AND APPELLEES, VS. TELESFORO B. VICENTE, DEFENDANT AND APPELLANT.
GUTIERREZ DAVID, J.:
nurse and midwife residing in Davao City, sustained physical injuries
as a result of an accident when the AC “jeepney” of which she was a
passenger hit another vehicle at a street comer in the said city. The
injury, among other things, caused permanent partial disability to her
right forearm. To avoid court litigation, defendant Telesforo B.
Vicente, owner and operator of the AC “jeepney” involved in the
accident, entered on July 13, 1955 into a compromise agreement with the
said victim Antonia A. Cabarroguis, obligating himself to pay to her
the sum of P2,500 “as actual and compensatory, exemplary and moral
damages suffered by (her) * * * from the said accident.” Of that
amount, defendant has paid a total of P1,500.00 leaving therefore, an
unpaid balance of P1,000. It was also stipulated in the agreement that
should defendant fail to complete payment within a period of sixty
days, he would pay an additional amount of P200.00 as liquidated
damages.”
As defendant failed and, notwithstanding repeated demands refused
“to comply with his obligation under the agreement after the same had
become, due and demandable, plaintiff Antonia A. Cabarroguis, assisted
by her husband, brought suit in the Municipal Court of Davao City. In
his defense, defendant alleged that the injury sustained by plaintiff
was not serious or consequential as to entitle her to the payment of
the amount stipulated in the compromise agreement; that the agreement
did not express the true intention of the parties thereto “by reason of
mistake, fraud, inequitable conduct or accident” so that a reformation
of the agreement was in order. Overruling defendant’s defense, the
inferior court, after hearing, rendered judgment in plaintiff’s favor.
From that judgment, defendant appealed to the Court of First Instance.
After trial, that court, holding that defendant’s pretension against
the due execution of the agreement was “a mere afterthought, prompted
by a desire to evade payment of an obligation, voluntarily assumed and
for valid consideration”, rendered its decision dated May 24, 1956, the
dispositive part of which reads:
“In view of all foregoing, the Court hereby renders
judgment, sentencing the defendant to pay to the plaintiff the amount
of P1,200.00 with interest at legal rate from the date of the filing of
the complaint until full payment, and to pay the costs.”
From the above decision, defendant again appealed to the Court of
Appeals, contending in his lone assignment of error that the lower
court erred in sentencing him to pay interest on the amount of the
judgment from the date of the filing of the complaint until full
payment. Citing Article 1226 of the new Civil Code, he argued that in
obligations with a penal clause, the penalty substitutes the indemnity
for damages and payment of interest. The question raided being one of
law, the appellate court certified the case to this Court.
As a rule, if the obligation consists in a sum of money, the only
damage a creditor Way recover, if the debtor incurs in delay, is the
payment of the interest agreed upon, or the legal interest, unless the
contrary is stipulated. (Article 2209, new Civil Code.) However, the
creditor may also claim other damages, such as moral or exemplary,
damages, in addition to interest (Articles 2196 and 2197, Id.), the
award of which is left to the discretion of the court. (See Reyes, et
al. vs. Yatco, etc., et al., 100 Phil., 964, 53 Off. Gaz., 2773.)
In obligations with a penal clause, however, as provided in Article
1226 of the new Civil Code, the penalty shall substitute the indemnity
for damages and the payment of interests. The exceptions to this rule,
according to the same article are: (1) when the contrary is stipulated;
(2) when the debtor refuses to pay the penalty imposed in the
obligation, in which case the creditor is entitled to interest on the
amount of the penalty, in accordance with Article 2209; and (3) when
the obligor is guilty of fraud in the fulfillment of the obligation.
Applying the law, it is evident that no interest can be awarded on
the principal obligation of defendant, the penalty of P200.00 agreed
upon having taken the place of the payment of such interest and the
indemnity for damages. No stipulation to the contrary was made, and
while defendant was sued for breach of the compromise agreement, the
breach was not occasioned by fraud.
The case, however, takes a different aspect with respect to the
penalty attached to the principal obligation. It has been held that in
obligations for the payment of a sum of money when a penalty is
stipulated for default, both the principal obligation and the penalty
can be demanded by the creditor. (Government vs. Lim, et al., 61 Phil., 737; Luneta Motor Co. vs.
Moral, 73 Phil., 80.) Defendant having refused to pay when demand was
made by plaintiff, the .latter clearly is entitled to interest on the
amount of the penalty. It is well to observe that Article 2210 of the
new Civil Code also provides that in the discretion of the court,
interest may be alleged upon damages awarded for breach of contract.
This interest is recoverable from the time of delay, that is to say,
from, the date of demand, either judicial or extrajudicial. There being
no showing as to when demand for payment was made, plaintiff must be
considered to nave made such demand only from the filing of the
complaint.
Wherefore, with the modification that the interest shall be allowed
only on the amount of the penalty, the decision appealed from is hereby
affirmed. Without costs.
Paras, C. J., Bengzon, Montemayor, Bautista Angelo, Labrador, Concepcion, Reyes, J. B. L., Endencia, and Barrera, JJ., concur.