[G.R. NO.

158026 : April 23, 2008]

DORIE ABESA NICOLAS v. DEL-NACIA CORPORATION

PUNO, C.J.:

On February 20, 1988, the spouses Armando Nicolas and Dorie Abesa Nicolas
(Spouses Nicolas) and Del-Nacia entered into a Land Purchase Agreement
(Agreement) for the sale by the latter to the former of a parcel of land, situated at
Lot No. 3-B-4, Del Nacia Ville No. 5, San Jose del Monte, Bulacan.

Under the Agreement, the ownership of the land remains with Del-Nacia until full
payment of the stipulated purchase price under the following terms and conditions:

(3) Title to said parcel of land shall remain in the name of the OWNER until
complete payment by the PURCHASER

(4) Only the PURCHASER shall be deemed for all legal purposes to take
possession of the parcel of land

Upon signing of the Agreement, the Spouses Nicolas paid the down payment of
P40,000. Thereupon, the Spouses Nicolas took possession of the land, and for several
months thereafter, paid on or before the 20th of each month, the monthly
amortizations.

Unfortunately, however, Armando Nicolas died shortly after the signing of the
Agreement and Mrs. Nicolas began to falter in her payments.

Del-Nacia sent Mrs. Nicolas notice to pay her arrearages with a grace period of sixty
(60) days within which to make payment but to no avail. Del-Nacia then caused the
notarial cancellation of the Agreement on December 3, 1991.

Subsequently, Del-Nacia verbally informed Mrs. Nicolas to get the cash surrender
value of her payment at its office. However, Mrs. Nicolas did not claim the same. Del-
Nacia prepared a check in the amount of P270,651.88 representing the cash
surrender value of Mrs. Nicolas's payment and sent it to her by registered mail. On
February 23, 1993, Mrs. Nicolas filed a Complaint against Del-Nacia before the
HLURB. On December 15, 1994, the HLURB Arbiter rendered a Decision Declaring the
notarial cancellation of the contract on December 3, 1991 as null and void.
Mrs. Nicolas sought review of the Arbiter Decision by the HLURB.

The HLURB Board was partly receptive of the appeal and, on December 1, 1995, it
handed down a Decision to MODIFY the Decision Office a Quo, Nicolas to pay Del-
Nacia within sixty (60) days from receipt hereof the amount of (P173,957.29)
representing the remaining balance of the installment purchase price of the land
inclusive of legal interests at the rate of twelve percent (12%) per annum.

Del-Nacia filed a Motion for Reconsideration and a Supplement. Meanwhile, Mrs.

the HLURB Board resolved to deny Del-Nacia's motion for reconsideration and
ordered Mrs. Nicolas to deposit with it for safekeeping the amount indicated in its
Decision until Del-Nacia is willing to accept the same.

Mrs. Nicolas filed a Petition for Review with the CA reconsider and set aside the
dismissal of her petition and to admit her amended petition. the CA rendered its
Decision, affirming the O.P. Resolution, The Motion for Reconsideration filed by Mrs.
Nicolas was denied by the CA

Hence, this Petition for Review on Certiorari

Mrs. Nicolas contends that based on the payments she already made, she has
overpaid the purchase price due under the Agreement. She assails the application of
her payments made by Del-Nacia since the latter applied the bulk of her payments
to interest rather than the principal. According to her, therefore, the penalties,
interests and surcharges being collected by Del-Nacia have no basis in fact or in law.

According to Del-Nacia, however, Mrs. Nicolas disregarded paying the regular rate of
interest, overdue interest and penalty interest which were voluntarily agreed upon.
Del-Nacia contends that the records clearly establish that Mrs. Nicolas was in delay
in her payments of the monthly amortizations and she has not disputed the same.

The issue is whether Mrs. Nicolas is liable to pay interests, penalty interests and
other stipulated charges to Del-Nacia.

We rule in the affirmative.

As found by the HLURB Arbiter, the records of Del-Nacia shows that Mrs. Nicolas
incurred delay in the payment of her monthly amortizations. It is a well-settled rule
that factual findings of administrative agencies are conclusive and binding on the
Court when supported by substantial evidence. We agree with the O.P.
Resolution, which was adopted and affirmed by the CA, to wit:
Clearly, Mrs. Nicolas was bound to pay regular interest, and in case of delay, overdue
interest and penalty. It cannot be overemphasized that a contract is the law between
the parties, and courts have no choice but to enforce such contract so long as they
are not contrary to law, morals, good customs or public policy.

In this connection, a stipulation for the payment of interest and penalty apart from
interest in case of delay is not contrary to law, moral, good customs or public policy.
To be sure, the same is sanctioned by the following provisions of the Civil Code:

Article 1956. No interest shall be due unless it has been expressly

Article 1226. In obligations with a penal clause, the penalty shall substitute
the indemnity for damages and the payment of interests in case of non-
compliance, if there is no stipulation to the contrary.

Article 2209. If the obligation consists in the payment of a sum of money,

In Bachrach Motor Company v. Espiritu, the Court ruled that the Civil Code
permits the agreement upon a penalty apart from the interest. Should there be such
an agreement, the penalty does not include the interest, and as such the two are
different and distinct things which may be demanded separately.

The same principle was reiterated in Equitable Banking Corp. v. Liwanag et al.,
where this Court held that the stipulation about payment of such additional rate
partakes of the nature of a penalty clause, which is sanctioned by law.

On Mrs. Nicolas' contention that she should not pay interest and the other charges
based on the unilateral accounting or computation made by Del-Nacia, a perusal of
the formula for the computation of regular interest, overdue interest and penalty
interest used by Del-Nacia reveal that the same is in accord with the provisions of
the Agreement and cannot be said to have been unilaterally imposed by Del-Nacia.

Moreover, the case of Relucio v. Brillante-Garfin (Relucio), involves similar facts

Vendor and vendee are legally free to stipulate for the payment of
either the cash price of a subdivision lot or its installment price.
Should the vendee opt to purchase a subdivision lot via the
installment payment system, he is in effect paying interest on the
cash price, whether the fact and rate of such interest payment is
 disclosed in the contract or not. The contract for the purchase and
sale of a piece of land on the installment payment system in the
case at bar is not only quite lawful; it also reflects a very wide
spread usage or custom in our present day commercial life.

In Relucio, the Court also sustained the seller's theory of declining balance
whereby the seller credited a bigger sum of the monthly amortization to interest
rather than the principal, such that in "[During] the succeeding monthly payments,
however, as the outstanding balance on the principal gradually declined, the interest
component (in absolute terms) correspondingly fell while the component credited to
the principal increased proportionately, thus amortizing the balance of the principal
purchase price as that balance gradually declined."

Given the foregoing, it appears that the only dilemma which Mrs. Nicolas currently
finds herself in is that the obligations which she voluntary undertook under the
Agreement turned out to be more onerous than what she expected. Doctrinal is the
rule that courts may not extricate parties from the necessary consequences of their
acts. That the terms of a contract turn out to be financially disadvantageous to them
will not relieve them of their obligations therein.

IN VIEW WHEREOF, the petition is DISMISSED. The decision of the Court of

SO ORDERED.