Frias v. San Diego-Sison

BOBIE ROSE FRIAS v. FLORA SAN DIEGO-SISON 

2007 / Austria-Martinez

On 7 Dec 1990, Bobie Rose Frias and Dr. Flora San-Diego Sison entered into a MOA over Frias’ property

• MOA consideration is 3M
• Sison has 6 months from the date of contract’s execution to notify Frias of her intention to purchase the property with the improvements at 6.4M
• Prior to this 6 month period, Frias may still offer the property to other persons, provided that 3M shall be paid to Sison including interest based on prevailing compounded bank interest + amount of sale in excess of 7M [should the property be sold at a price greater than 7M]
• In case Frias has no other buyer within 6 months from the contract’s execution, no interest shall be charged by Sison on the 3M
• In the event that on the 6^th month, Sison would decide not to purchase the property, Frias has 6 months to pay 3M (amount shall earn compounded bank interest for the last 6 months only)
• 3M treated as a loan and the property considered as the security for the mortgage
• Upon notice of intention to purchase, Sison has 6 months to pay the balance of 3.4M (6.4M less 3M MOA consideration)

Frias received from Sison 3M (2M in cash; 1M post-dated check dated February 28, 1990, instead of 1991, which rendered the check stale). Frias gave Sison the TCT and the Deed of Absolute Sale over the property. Sison decided not to purchase the property, so she notified Frias through a letter dated March 20, 1991 [Frias received it only on June 11, 1991], and Sison reminded Frias of their agreement that the 2M Sison paid should be considered as a loan payable within 6 months. Frias failed to pay this amount.
Sison filed a complaint for sum of money with preliminary attachment. Sison averred that Frias tried to deprive her of the security for the loan by making a false report of the loss of her owner’s copy of TCT, executing an affidavit of loss and by filing a petition[1] for the issuance of a new owner’s duplicate copy. RTC issued a writ of preliminary attachment upon the filing of a 2M bond.

RTC found that Frias was under obligation to pay Sison 2M with compounded interest pursuant to their MOA. RTC ordered Frias to pay Sison: 

• 2M + 32% annual interest beginning December 7, 1991 until fully paid
• 70k representing premiums paid by Sison on the attachment bond with legal interest counted from the date of this decision until fully paid
• 100k moral, corrective, exemplary damages [liable for moral damages because of Frias’ fraudulent scheme]
• 100k attorney’s fees + cost of litigation

CA affirmed RTC with modification—32% reduced to 25%. CA said that there was no basis for Frias to say that the interest should be charged for 6 months only. It said that a loan always bears interest; otherwise, it is not a loan. The interest should commence on June 7, 1991 until fully paid, with compounded bank interest prevailing at the time [June 1991] the 2M was considered as a loan (as certified by the bank). 

ISSUES & HOLDING – Ratio only discusses topic of INTEREST (as per syllabus) 

• WON compounded bank interest should be limited to 6 months as contained in the MOA. NO 
• WON Sison is entitled to moral damages. YES 
• WON the grant of attorney’s fees is proper, even if not mentioned in the body of the decision. NO

CA committed no error in awarding an annual 25% interest on the 2M even beyond the 6-month stipulated period. In this case, the phrase "for the last six months only" should be taken in the context of the entire agreement.

SC notes that the agreement speaks of two (2) periods of 6 months each (see FACTS—words in bold & underline). No interest will be charged for the 1^st 6-month period [while Sison was making up her mind], but only for the 2^nd 6-month period after Sison decided not to buy the property. There is nothing in the MOA that suggests that interest will be charged for 6 months only even if it takes forever for Frias to pay the loan.

The payment of regular interest constitutes the price or cost of the use of money, and until the principal sum due is returned to the creditor, regular interest continues to accrue since the debtor continues to use such principal amount. For a debtor to continue in possession of the principal of the loan and to continue to use the same after maturity of the loan without payment of the monetary interest constitutes unjust enrichment on the part of the debtor at the expense of the creditor.

CA DECISION AND RESOLUTION AFFIRMED WITH MODIFICATION—Award of attorney’s fees deleted

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[1] At first, Frias’ petition was granted, but it was eventually set aside, since RTC granted Sison’s petition for relief from judgment (as Sison was in possession of the owner’s duplicate copy).