[G.R. No. 84719. January 25, 1991.
] Petitioner Yong Chan Kim was employed as a Researcher at the
YONG CHAN KIM, Petitioner, v. PEOPLE OF THE PHILIPPINES,
HON. EDGAR D. GUSTILO, Presiding Judge, RTC, 6th Judicial
Region, Branch 28 Iloilo City and Court of Appeals (13th
Division), Respondents.
Remedios C . Balbin and Manuel C . Cases, Jr. for Petitioner.
Hector P. Teodosio for Private Respondent.
SYLLABUS
1. CRIMINAL LAW; ESTAFA WITH UNFAITHFULNESS OR ABUSE OF
CONFIDENCE; OBLIGATION TO RETURN THE SAME MONEY, GOODS OR
PERSONAL PROPERTY, INDISPENSABLE. — In order that a person can be
convicted under the provision of Article 315, 1(b) of the Revised Penal
Code it must be proven that he had the obligation to deliver or return the
same money, goods or personal property that he had received.
2. ID.; ID.; ID.; EMPLOYEE WITHOUT ANY OBLIGATION TO RETURN ANY
CASH ADVANCE RECEIVED NOT GUILTY THEREOF; CASE AT BAR. —
Liquidation simply means the settling of an indebtedness. An employee,
such as herein petitioner, who liquidates a cash advance is in fact paying
back his debt in the form of a loan of money advanced to him by his
employer, as per diems and allowances. Similarly, as stated in the
assailed decision of the lower court, "if the amount of the cash advance he
received is less than the amount he spent for actual travel . . . he has the
right to demand reimbursement from his employer the amount he spent
coming from his personal funds." In other words, the money advanced by
either party is actually a loan to the other. Hence, petitioner was under no
legal obligation to return the same cash or money, i.e., the bills or coins,
which he received from the private Respondent.
DECISION
PADILLA, J.:
This petition seeks the review on certiorari of the following:chanrob1es
virtual 1aw library
1. The decision dated 3 September 1986 of the 15th Municipal Circuit Trial
Court (Guimbal-Igbaras-Tigbauan-Tubungan) in Guimbal, Iloilo, in
Criminal Case No. 628, 1 and the affirming decision of the Regional Trial
Court, Branch XXVIII, Iloilo City, in Criminal Case No. 20958, promulgated
on 30 July 1987; 2
2. The decision of the Court of Appeals, dated 29 April 1988, 3 dismissing
petitioner’s appeal/petition for review for having been filed out of time,
and the resolution, dated 19 August 1988, denying petitioner’s motion for
reconsideration. 4
The antecedent facts are as follows:chanrob1es virtual 1aw library
Petitioner appealed from the decision of the Municipal Circuit Trial Court in
Aquaculture Department of the Southeast Asian Fisheries Development
Center (SEAFDEC) with head station at Tigbauan, Province of Iloilo. As
Head of the Economics Unit of the Research Division, he conducted prawn
surveys which required him to travel to various selected provinces in the
country where there are potentials for prawn culture.
On 15 June 1982, petitioner was issued Travel Order No. 2222 which
covered his travels to different places in Luzon from 16 June to 21 July
1982, a period of thirty five (35) days. Under this travel order, he
received P6,438.00 as cash advance to defray his travel expenses.
Within the same period, petitioner was issued another travel order, T.O.
2268, requiring him to travel from the Head Station at Tigbauan, Iloilo to
Roxas City from 30 June to 4 July 1982, a period of five (5) days. For this
travel order, petitioner received a cash advance of P495.00.
On 14 January 1983, petitioner presented both travel orders for
liquidation, submitting Travel Expense Reports to the Accounting Section.
When the Travel Expense Reports were audited, it was discovered that
there was an overlap of four (4) days (30 June to 3 July 1982) in the two
(2) travel orders for which petitioner collected per diems twice. In sum,
the total amount in the form of per diems and allowances charged and
collected by petitioner under Travel Order No. 2222, when he did not
actually and physically travel as represented by his liquidation papers, was
P1,230.00.chanrobles lawlibrary : rednad
Petitioner was required to comment on the internal auditor’s report
regarding the alleged anomalous claim for per diems. In his reply,
petitioner denied the alleged anomaly, claiming that he made make-up
trips to compensate for the trips he failed to undertake under T.O. 2222
because he was recalled to the head office and given another assignment.
In September 1983, two (2) complaints for Estafa were filed against the
petitioner before the Municipal Circuit Trial Court at Guimbal, Iloilo,
docketed as Criminal Case Nos. 628 and 631.
After trial in Criminal Case No. 628, the Municipal Circuit Trial Court
rendered a decision, the dispositive part of which reads as
follows:jgc:chanrobles.com.ph
"IN VIEW OF THE FOREGOING CONSIDERATIONS, the court finds the
accused, Yong Chan Kim, guilty beyond reasonable doubt for the crime of
Estafa penalized under paragraph 1(b) of Article 315, Revised Penal Code.
Records disclose there is no aggravating circumstance proven by the
prosecution. Neither there is any mitigating circumstance proven by the
accused. Considering the amount subject of the present complaint, the
imposable penalty should be in the medium period of arresto mayor in its
maximum period to prision correccional in its minimum period in
accordance with Article 315, No. 3, Revised Penal Code. Consonantly, the
Court hereby sentences the accused to suffer an imprisonment ranging
from four (4) months as the minimum to one (1) year and six (6) months
as the maximum in accordance with the Indeterminate Sentence Law and
to reimburse the amount of P1,230.00 to SEAFDEC.
"The surety bond of the accused shall remain valid until final judgment in
accordance herewith.
"Costs against the accused." 5
Criminal Case No. 631 was subsequently dismissed for failure to
prosecute.
Criminal Case No. 628. On 30 July 1987, the Regional Trial Court in Iloilo
City in Criminal Case No. 20958 affirmed in toto the trial court’s decision.
6
The decision of the Regional Trial Court was received by petitioner on 10
August 1987. On 11 August 1987, Petitioner, thru counsel, filed a notice
of appeal with the Regional Trial Court which ordered the elevation of the
records of the case to the then Intermediate Appellate Court on the
following day, 12 August 1987. The records of the case were received by
the Intermediate Appellate Court on 8 October 1987, and the appeal was
docketed as CA-G.R. No. 05035.
On 30 October 1987, petitioner filed with the appellate court a petition for
review. As earlier stated, on 29 April 1988, the Court of Appeals dismissed
the petition for having been filed out of time. Petitioner’s motion for
reconsideration was denied for lack of merit.
Hence, the present recourse.
On 19 October 1988, the Court resolved to require the respondents to
comment on the petition for review. The Solicitor General filed his
Comment on 20 January 1989, after several grants of extensions of time
to file the same.
In his Comment, the Solicitor General prayed for the dismissal of the
instant petition on the ground that, as provided for under Section 22,
Batas Pambansa 129, Section 22 of the Interim Rules and Guidelines, and
Section 3, Rule 123 of the 1985 Rules of Criminal Procedure, the
petitioner should have filed a petition for review with the then
Intermediate Appellate Court instead of a notice of appeal with the
Regional Trial Court, in perfecting his appeal from the RTC to the
Intermediate Appellate Court, since the RTC judge was rendered in the
exercise of its appellate jurisdiction over municipal trial courts. The failure
of petitioner to file the proper petition rendered the decision of the
Regional Trial Court final and executory, according to the Solicitor
General.chanrobles law library
Petitioner’s counsel submitted a Reply (erroneously termed Comment)7
wherein she contended that the peculiar circumstances of a case, such as
this, should be considered in order that the principle barring a petitioner’s
right of review can be made flexible in the interest of justice and equity.
In our Resolution of 29 May 1989, we resolved to deny the petition for
failure of petitioner to sufficiently show that the Court of Appeals had
committed any reversible error in its questioned judgment which had
dismissed petitioner’s petition for review for having been filed out of time.
8
Petitioner filed a motion for reconsideration maintaining that his petition
for review did not limit itself to the issue upon which the appellate court’s
decision of 29 April 1988 was based, but rather it delved into the
substance and merits of the case. 9
On 10 August 1990, we resolved to set aside our resolution dismissing
this case and gave due course to the petition. In the said resolution, we
stated:jgc:chanrobles.com.ph
"In several cases decided by this Court, it had set aside technicalities in
the Rules in order to give way to justice and equity. In the present case,
we note that the petitioner, in filing his Notice of Appeal the very next day
after receiving the decision of the court a quo, lost no time in showing his
intention to appeal, although the procedure taken was not correct. The
Court can overlook the wrong pleading filed, if strict compliance with the
rules would mean sacrificing justice to technicality. The imminence of a
person being deprived unjustly of his liberty due to procedural lapse of
counsel is a strong and compelling reason to warrant suspension of the
Rules. Hence, we shall consider the petition for review filed in the Court of
Appeals as a Supplement to the Notice of Appeal. As the Court declared in
a recent decision, ‘. . . there is nothing sacred about the procedure of
pleadings. This Court may go beyond the pleadings when the interest of
justice so warrants. It has the prerogative to suspend its rules for the
same purpose . . . Technicality, when it deserts its proper office as an aid
to justice and becomes its great hindrance and chief enemy, deserves
scant consideration from courts. [Alonzo v. Villamor, Et Al., 16 Phil. 315]’
Conscience cannot rest in allowing a man to go straight to jail, closing the
door to his every entreaty for a full opportunity to be heard, even as he
has made a prima facie showing of a meritorious cause, simply because
he had chosen an appeal route, to be sure, recognized by law but made
inapplicable to his case, under altered rules of procedure. While the Court
of Appeals can not be faulted and, in fact, it has to be landed for correctly
applying the rules of procedure in appeals to the Court of Appeals from
decisions of the RTC rendered in the exercise of its appellate jurisdiction,
yet, this Court, as the ultimate bulwark of human rights and individual
liberty, will not allow substantial justice to be sacrified at the altar of
procedural rigor." 10
In the same resolution, the parties were required to file their respective
memoranda, and in compliance with said resolution, petitioner filed his
memorandum on 25 October 1989, while private respondent SEAFDEC
filed its required memorandum on 10 April 1990. On the other hand, the
Solicitor General filed on 13 March 1990 a Recommendation for Acquittal
in lieu of the required memorandum.
Two (2) issues are raised by petitioner, to wit:chanrob1es virtual 1aw
library
I. WHETHER OR NOT THE DECISION (sic) OF THE MUNICIPAL CIRCUIT
TRIAL COURT (GUIMBAL, ILOILO) AND THE REGIONAL TRIAL COURT,
BRANCH 28 (ILOILO CITY) ARE SUPPORTED BY THE FACTS AND
EVIDENCE OR CONTRARY TO LAW AND THAT THE TWO COURTS A QUO
HAVE ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OF JURISDICTION OR HAVE ACTED WITHOUT OR IN EXCESS OF
JURISDICTION.
II. WHETHER OR NOT THE DECISION OF THE HONORABLE COURT OF
APPEALS IS CONTRARY TO LAW, ESTABLISHED JURISPRUDENCE, EQUITY
AND DUE PROCESS.chanrobles lawlibrary : rednad
The second issue has been resolved in our Resolution dated 10 August
1990, when we granted petitioner’s second motion for reconsideration. We
shall now proceed to the first issue.
We find merit in the petition.
It is undisputed that petitioner received a cash advance from private
respondent SEAFDEC to defray his travel expenses under T.O. 2222. It is
likewise admitted that within the period covered by T.O. 2222, petitioner
was recalled to the head station in Iloilo and given another assignment
which was covered by T.O. 2268. The dispute arose when petitioner
allegedly failed to return P1,230.00 out of the cash advance which he
received under T.O. 2222. For the alleged failure of petitioner to return
the amount of P1,230.00, he was charged with the crime of Estafa under
Article 315, par. 1(b) of the Revised Penal Code, which reads as
follows:jgc:chanrobles.com.ph
"Art. 315. Swindling (Estafa). Any person who shall defraud another by
any of the means mentioned herein below shall be punished
by:chanrob1es virtual 1aw library
x          x          x
"1. With unfaithfulness or abuse of confidence, namely:chanrob1es virtual
1aw library
(a) . . .
(b) By misappropriating or converting, to the prejudice of another, money,
goods, or any other personal property received by the offender in trust or
on commission, or for administration, or under any other obligation
involving the duty to make delivery of; or to return, the same, even
though such obligation be totally or partially guaranteed by a bond; or by
denying having received such money, goods, or other property."cralaw
virtua1aw library
In order that a person can be convicted under the abovequoted provision,
it must be proven that he had the obligation to deliver or return the same
money, goods or personal property that he had received. 11
Was petitioner under obligation to return the same money (cash advance)
which he had received? We believe not. Executive Order No. 10, dated 12
February 1980 provides as follows:jgc:chanrobles.com.ph
"B. Cash Advance for Travel.
x          x          x
"4. All cash advances must be liquidated within 30 days after date of
projected return of the person. Otherwise, corresponding salary deduction
shall be made immediately following the expiration day."cralaw virtua1aw
library
Liquidation simply means the settling of an indebtedness. An employee,
such as herein petitioner, who liquidates a cash advance is in fact paying
back his debt in the form of a loan of money advanced to him by his
employer, as per diems and allowances. Similarly, as stated in the
assailed decision of the lower court, "if the amount of the cash advance he
received is less than the amount he spent for actual travel . . . he has the
right to demand reimbursement from his employer the amount he spent
coming from his personal funds." 12 In other words, the money advanced
by either party is actually a loan to the other. Hence, petitioner was under
no legal obligation to return the same cash or money, i.e., the bills or
coins, which he received from the private Respondent.13
Article 1933 and Article 1953 of the Civil Code define the nature of a
simple loan.cralawnad
"Art. 1933. By the contract of loan, one of the parties delivers to another,
either something not consumable so that the latter may use the same for
a certain time and return it, in which case the contract is called a
commodatum; or money or other consumable thing, upon the condition
that the same amount of the same kind and quality shall be paid, in which
case the contract is simply called a loan or mutuum.
Commodatum is essentially gratuitous.
Simple loan may be gratuitous or with a stipulation to pay interest.
In commodatum the bailor retains the ownership of the thing loaned,
while in simple loan, ownership passes to the borrower."cralaw virtua1aw
library
"Art. 1953. — A person who receives a loan of money or any other
fungible thing acquires the ownership thereof, and is bound to pay to the
creditor an equal amount of the same kind and quality."cralaw virtua1aw
library
The ruling of the trial judge that ownership of the cash advanced to the
petitioner by private respondent was not transferred to the latter is
erroneous. Ownership of the money was transferred to the petitioner.
Even the prosecution witness, Virgilio Hierro, testified
thus:jgc:chanrobles.com.ph
"Q When you gave cash advance to the accused in this Travel Order No.
2222 subject to liquidation, who owns the funds, Accused or SEAFDEC?
How do you consider the funds in the possession of the accused at the
time when there is an actual transfer of cash? . . .
A The one drawing cash advance already owns the money but subject to
liquidation. If he will not liquidate, he is obliged to return the amount.
Q...
So why do you treat the itinerary of travel temporary when in fact as of
that time the accused owned already the cash advance. You said the cash
advance given to the accused is his own money. In other words, at the
time you departed with the money it belongs already to the accused?
A Yes, but subject for liquidation. He will be only entitled for that credence
if he liquidates.
Q If other words, it is a transfer of ownership subject to a suspensive
condition that he liquidates the amount of cash advance upon return to
station and completion of the travel?
A Yes, sir.
(pp. 26-28, tsn, May 8, 1985)." 14
Since ownership of the money (cash advance) was transferred to
petitioner, no fiduciary relationship was created. Absent this fiduciary
relationship between petitioner and private respondent, which is an
essential element of the crime of estafa by misappropriation or
conversion, petitioner could not have committed estafa. 15
Additionally, it has been the policy of private respondent that all cash
advances not liquidated are to be deducted correspondingly from the
salary of the employee concerned. The evidence shows that the
corresponding salary deduction was made in the case of petitioner vis-a-
vis the cash advance in question.
WHEREFORE, the decision dated 3 September 1986 of the 15th Municipal
Circuit Trial Court in Guimbal, Iloilo in Criminal Case No. 628, finding
petitioner guilty of estafa under Article 315, par. 1 (b) of the Revised
Penal Code and the affirming decision of the Regional Trial Court, Branch
XXVIII, Iloilo City, in Criminal Case No. 20958, promulgated on 30 July
1987 are both hereby SET ASIDE. Petitioner is ACQUITTED of the criminal
charges filed against him.chanrobles.com.ph : virtual law library

SO ORDERED.
G.R. No. 133632               February 15, 2002
BPI INVESTMENT CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS and ALS MANAGEMENT &
DEVELOPMENT CORPORATION, respondents.
DECISION
QUISUMBING, J.:
This petition for certiorari assails the decision dated February 28, 1997, of
the Court of Appeals and its resolution dated April 21, 1998, in CA-G.R.
CV No. 38887. The appellate court affirmed the judgment of the Regional
Trial Court of Pasig City, Branch 151, in (a) Civil Case No. 11831, for
foreclosure of mortgage by petitioner BPI Investment Corporation (BPIIC
for brevity) against private respondents ALS Management and
Development Corporation and Antonio K. Litonjua,1 consolidated with (b)
Civil Case No. 52093, for damages with prayer for the issuance of a writ of
preliminary injunction by the private respondents against said petitioner.
The trial court had held that private respondents were not in default in the
payment of their monthly amortization, hence, the extrajudicial foreclosure
conducted by BPIIC was premature and made in bad faith. It awarded
private respondents the amount of ₱300,000 for moral damages, ₱50,000
for exemplary damages, and ₱50,000 for attorney’s fees and expenses for
litigation. It likewise dismissed the foreclosure suit for being premature.
The facts are as follows:
Frank Roa obtained a loan at an interest rate of 16 1/4% per annum from
Ayala Investment and Development Corporation (AIDC), the predecessor
of petitioner BPIIC, for the construction of a house on his lot in New
Alabang Village, Muntinlupa. Said house and lot were mortgaged to AIDC
to secure the loan. Sometime in 1980, Roa sold the house and lot to
private respondents ALS and Antonio Litonjua for ₱850,000. They paid
₱350,000 in cash and assumed the ₱500,000 balance of Roa’s
indebtedness with AIDC. The latter, however, was not willing to extend the
old interest rate to private respondents and proposed to grant them a new
loan of ₱500,000 to be applied to Roa’s debt and secured by the same
property, at an interest rate of 20% per annum and service fee of 1% per
annum on the outstanding principal balance payable within ten years in
equal monthly amortization of ₱9,996.58 and penalty interest at the rate of
21% per annum per day from the date the amortization became due and
payable.
Consequently, in March 1981, private respondents executed a mortgage
deed containing the above stipulations with the provision that payment of
the monthly amortization shall commence on May 1, 1981.
On August 13, 1982, ALS and Litonjua updated Roa’s arrearages by Costs against BPI.
paying BPIIC the sum of ₱190,601.35. This reduced Roa’s principal
balance to ₱457,204.90 which, in turn, was liquidated when BPIIC applied
SO ORDERED.2
thereto the proceeds of private respondents’ loan of ₱500,000.
Both parties appealed to the Court of Appeals. However, private
On September 13, 1982, BPIIC released to private respondents
respondents’ appeal was dismissed for non-payment of docket fees.
₱7,146.87, purporting to be what was left of their loan after full payment of
Roa’s loan.
On February 28, 1997, the Court of Appeals promulgated its decision, the
dispositive portion reads:
In June 1984, BPIIC instituted foreclosure proceedings against private
respondents on the ground that they failed to pay the mortgage
indebtedness which from May 1, 1981 to June 30, 1984, amounted to Four WHEREFORE, finding no error in the appealed decision the same is
Hundred Seventy Five Thousand Five Hundred Eighty Five and 31/100 hereby AFFIRMED in toto.
Pesos (₱475,585.31). A notice of sheriff’s sale was published on August
13, 1984.
SO ORDERED.3
On February 28, 1985, ALS and Litonjua filed Civil Case No. 52093
In its decision, the Court of Appeals reasoned that a simple loan is
against BPIIC. They alleged, among others, that they were not in arrears
perfected only upon the delivery of the object of the contract. The contract
in their payment, but in fact made an overpayment as of June 30, 1984.
of loan between BPIIC and ALS & Litonjua was perfected only on
They maintained that they should not be made to pay amortization before
September 13, 1982, the date when BPIIC released the purported balance
the actual release of the ₱500,000 loan in August and September 1982.
of the ₱500,000 loan after deducting therefrom the value of Roa’s
Further, out of the ₱500,000 loan, only the total amount of ₱464,351.77
indebtedness. Thus, payment of the monthly amortization should
was released to private respondents. Hence, applying the effects of legal
commence only a month after the said date, as can be inferred from the
compensation, the balance of ₱35,648.23 should be applied to the initial
stipulations in the contract. This, despite the express agreement of the
monthly amortization for the loan.
parties that payment shall commence on May 1, 1981. From October 1982
to June 1984, the total amortization due was only ₱194,960.43. Evidence
On August 31, 1988, the trial court rendered its judgment in Civil Case showed that private respondents had an overpayment, because as of
Nos. 11831 and 52093, thus: June 1984, they already paid a total amount of ₱201,791.96. Therefore,
there was no basis for BPIIC to extrajudicially foreclose the mortgage and
cause the publication in newspapers concerning private respondents’
WHEREFORE, judgment is hereby rendered in favor of ALS Management
delinquency in the payment of their loan. This fact constituted sufficient
and Development Corporation and Antonio K. Litonjua and against BPI
ground for moral damages in favor of private respondents.
Investment Corporation, holding that the amount of loan granted by BPI to
ALS and Litonjua was only in the principal sum of P464,351.77, with
interest at 20% plus service charge of 1% per annum, payable on equal The motion for reconsideration filed by petitioner BPIIC was likewise
monthly and successive amortizations at P9,283.83 for ten (10) years or denied, hence this petition, where BPIIC submits for resolution the
one hundred twenty (120) months. The amortization schedule attached as following issues:
Annex "A" to the "Deed of Mortgage" is correspondingly reformed as
aforestated.
I. WHETHER OR NOT A CONTRACT OF LOAN IS A
CONSENSUAL CONTRACT IN THE LIGHT OF THE RULE
The Court further finds that ALS and Litonjua suffered compensable LAID DOWN IN BONNEVIE VS. COURT OF APPEALS, 125
damages when BPI caused their publication in a newspaper of general SCRA 122.
circulation as defaulting debtors, and therefore orders BPI to pay ALS and
Litonjua the following sums:
II. WHETHER OR NOT BPI SHOULD BE HELD LIABLE FOR
MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S
a) P300,000.00 for and as moral damages; FEES IN THE FACE OF IRREGULAR PAYMENTS MADE BY
ALS AND OPPOSED TO THE RULE LAID DOWN IN SOCIAL
SECURITY SYSTEM VS. COURT OF APPEALS, 120 SCRA
b) P50,000.00 as and for exemplary damages;
707.
c) P50,000.00 as and for attorney’s fees and expenses of
On the first issue, petitioner contends that the Court of Appeals erred in
litigation.
ruling that because a simple loan is perfected upon the delivery of the
object of the contract, the loan contract in this case was perfected only on
The foreclosure suit (Civil Case No. 11831) is hereby DISMISSED for September 13, 1982. Petitioner claims that a contract of loan is a
being premature. consensual contract, and a loan contract is perfected at the time the
contract of mortgage is executed conformably with our ruling in Bonnevie
v. Court of Appeals, 125 SCRA 122. In the present case, the loan contract
was perfected on March 31, 1981, the date when the mortgage deed was
executed, hence, the amortization and interests on the loan should be
computed from said date.
Petitioner also argues that while the documents showed that the loan was
released only on August 1982, the loan was actually released on March
31, 1981, when BPIIC issued a cancellation of mortgage of Frank Roa’s
loan. This finds support in the registration on March 31, 1981 of the Deed
of Absolute Sale executed by Roa in favor of ALS, transferring the title of
the property to ALS, and ALS executing the Mortgage Deed in favor of
BPIIC. Moreover, petitioner claims, the delay in the release of the loan
should be attributed to private respondents. As BPIIC only agreed to
extend a ₱500,000 loan, private respondents were required to reduce
Frank Roa’s loan below said amount. According to petitioner, private
respondents were only able to do so in August 1982.
In their comment, private respondents assert that based on Article 1934 of
the Civil Code,4 a simple loan is perfected upon the delivery of the object
of the contract, hence a real contract. In this case, even though the loan
contract was signed on March 31, 1981, it was perfected only on
September 13, 1982, when the full loan was released to private
respondents. They submit that petitioner misread Bonnevie. To give
meaning to Article 1934, according to private respondents, Bonnevie must
be construed to mean that the contract to extend the loan was perfected
on March 31, 1981 but the contract of loan itself was only perfected upon
the delivery of the full loan to private respondents on September 13, 1982.
Private respondents further maintain that even granting, arguendo, that
the loan contract was perfected on March 31, 1981, and their payment did
not start a month thereafter, still no default took place. According to private
respondents, a perfected loan agreement imposes reciprocal obligations,
where the obligation or promise of each party is the consideration of the
other party. In this case, the consideration for BPIIC in entering into the
loan contract is the promise of private respondents to pay the monthly
amortization. For the latter, it is the promise of BPIIC to deliver the money.
In reciprocal obligations, neither party incurs in delay if the other does not
comply or is not ready to comply in a proper manner with what is
incumbent upon him. Therefore, private respondents conclude, they did
not incur in delay when they did not commence paying the monthly
amortization on May 1, 1981, as it was only on September 13, 1982 when
petitioner fully complied with its obligation under the loan contract.
We agree with private respondents. A loan contract is not a consensual
contract but a real contract. It is perfected only upon the delivery of the
object of the contract.5 Petitioner misapplied Bonnevie. The contract
in Bonnevie declared by this Court as a perfected consensual contract
falls under the first clause of Article 1934, Civil Code. It is an accepted
promise to deliver something by way of simple loan.
In Saura Import and Export Co. Inc. vs. Development Bank of the
Philippines, 44 SCRA 445, petitioner applied for a loan of ₱500,000 with
respondent bank. The latter approved the application through a board
resolution. Thereafter, the corresponding mortgage was executed and
registered. However, because of acts attributable to petitioner, the loan
was not released. Later, petitioner instituted an action for damages. We so gross as to warrant moral and temperate damages," except that, said
recognized in this case, a perfected consensual contract which under Court reduced those damages by only P5,000.00 instead of eliminating
normal circumstances could have made the bank liable for not releasing them. Neither can we agree with the findings of both the Trial Court and
the loan. However, since the fault was attributable to petitioner therein, the respondent Court that the SSS had acted maliciously or in bad faith. The
court did not award it damages. SSS was of the belief that it was acting in the legitimate exercise of its
right under the mortgage contract in the face of irregular payments made
by private respondents and placed reliance on the automatic acceleration
A perfected consensual contract, as shown above, can give rise to an
clause in the contract. The filing alone of the foreclosure application
action for damages. However, said contract does not constitute the real
should not be a ground for an award of moral damages in the same way
contract of loan which requires the delivery of the object of the contract for
that a clearly unfounded civil action is not among the grounds for moral
its perfection and which gives rise to obligations only on the part of the
damages.
borrower.6
Private respondents counter that BPIIC was guilty of bad faith and should
In the present case, the loan contract between BPI, on the one hand, and
be liable for said damages because it insisted on the payment of
ALS and Litonjua, on the other, was perfected only on September 13,
amortization on the loan even before it was released. Further, it did not
1982, the date of the second release of the loan. Following the intentions
make the corresponding deduction in the monthly amortization to conform
of the parties on the commencement of the monthly amortization, as found
to the actual amount of loan released, and it immediately initiated
by the Court of Appeals, private respondents’ obligation to pay
foreclosure proceedings when private respondents failed to make timely
commenced only on October 13, 1982, a month after the perfection of the
payment.
contract.7
But as admitted by private respondents themselves, they were irregular in
We also agree with private respondents that a contract of loan involves a
their payment of monthly amortization. Conformably with our ruling
reciprocal obligation, wherein the obligation or promise of each party is the
in SSS, we can not properly declare BPIIC in bad faith. Consequently, we
consideration for that of the other.8 As averred by private respondents, the
should rule out the award of moral and exemplary damages.11
promise of BPIIC to extend and deliver the loan is upon the consideration
that ALS and Litonjua shall pay the monthly amortization commencing on
May 1, 1981, one month after the supposed release of the loan. It is a However, in our view, BPIIC was negligent in relying merely on the entries
basic principle in reciprocal obligations that neither party incurs in delay, if found in the deed of mortgage, without checking and correspondingly
the other does not comply or is not ready to comply in a proper manner adjusting its records on the amount actually released to private
with what is incumbent upon him.9 Only when a party has performed his respondents and the date when it was released. Such negligence resulted
part of the contract can he demand that the other party also fulfills his own in damage to private respondents, for which an award of nominal
obligation and if the latter fails, default sets in. Consequently, petitioner damages should be given in recognition of their rights which were violated
could only demand for the payment of the monthly amortization after by BPIIC.12 For this purpose, the amount of ₱25,000 is sufficient.
September 13, 1982 for it was only then when it complied with its
obligation under the loan contract. Therefore, in computing the amount
Lastly, as in SSS where we awarded attorney’s fees because private
due as of the date when BPIIC extrajudicially caused the foreclosure of the
respondents were compelled to litigate, we sustain the award of ₱50,000
mortgage, the starting date is October 13, 1982 and not May 1, 1981.
in favor of private respondents as attorney’s fees.
Other points raised by petitioner in connection with the first issue, such as
WHEREFORE, the decision dated February 28, 1997, of the Court of
the date of actual release of the loan and whether private respondents
Appeals and its resolution dated April 21, 1998, are AFFIRMED WITH
were the cause of the delay in the release of the loan, are factual. Since
MODIFICATION as to the award of damages. The award of moral and
petitioner has not shown that the instant case is one of the exceptions to
exemplary damages in favor of private respondents is DELETED, but the
the basic rule that only questions of law can be raised in a petition for
award to them of attorney’s fees in the amount of ₱50,000 is UPHELD.
review under Rule 45 of the Rules of Court,10 factual matters need not tarry
Additionally, petitioner is ORDERED to pay private respondents ₱25,000
us now. On these points we are bound by the findings of the appellate and
as nominal damages. Costs against petitioner.
trial courts.
SO ORDERED.
On the second issue, petitioner claims that it should not be held liable for
moral and exemplary damages for it did not act maliciously when it
initiated the foreclosure proceedings. It merely exercised its right under the
mortgage contract because private respondents were irregular in their
monthly amortization.1âwphi1 It invoked our ruling in Social Security
System vs. Court of Appeals, 120 SCRA 707, where we said:
Nor can the SSS be held liable for moral and temperate damages. As
concluded by the Court of Appeals "the negligence of the appellant is not
 [ G.R. No. 213582, September 12, 2018 ]
NYMPHA S. ODIAMAR,* PETITIONER, VS. LINDA ODIAMAR
VALENCIA, RESPONDENT.
RESOLUTION
PERLAS-BERNABE, J.:
Before the Court is a Motion for Reconsideration[1] filed by respondent
Linda Odiamar Valencia (respondent) assailing the Decision[2] dated June
28, 2016 of the Court which affirmed the Decision[3] dated March 16, 2012
and the Resolution[4] dated July 14, 2014 of the Court of Appeals (CA) in
C.A. G.R. CV No. 93624, with modification ordering petitioner Nympha S.
Odiamar (petitioner) to pay respondent the amount of P1,010,049.00
representing the remaining balance of petitioner's debt to the latter in the
original amount of P1,400,000.00.
In said motion, respondent prays for the imposition of legal interest on the
monetary award due her.[5] She likewise insists that petitioner's loan
obligation to her is not just P1,400,000.00 but P2,100,000.00 and, as
such, she should be made to pay the latter amount.[6]
Respondent's contentions are partly meritorious.
At the outset, the Court notes that there are two (2) types of interest,
namely, monetary interest and compensatory interest. Monetary interest is
the compensation fixed by the parties for the use or forbearance of money.
On the other hand, compensatory interest is that imposed by law or by the
courts as penalty or indemnity for damages. In other words, the right to
recover interest arises only either by virtue of a contract (monetary
interest) or as damages for the delay or failure to pay the principal loan on
which the interest is demanded (compensatory interest).[7]
Anent monetary interest, it is an elementary rule that no interest shall be
due unless it has been expressly stipulated in writing.[8]  In this case, no
monetary interest may be imposed on the loan obligation, considering that
there was no written agreement expressly providing for such.[9]
This notwithstanding, such loan obligation may still be subjected to
compensatory interest, following the guidelines laid down
in Nacar v. Gallery Frames,[10] as follows:
Thus, from the foregoing, in the absence of an express stipulation as to
the rate of interest that would govern the parties, the rate of legal interest
for loans or forbearance of any money, goods or credits and the rate
allowed in judgments shall no longer be twelve percent (12%) per annum
— as reflected in the case of [Eastern Shipping Lines, Inc. v. CA (Eastern
Shipping Lines)[11]] and Subsection X305.1 of the Manual of Regulations
for Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of
Regulations for Non-Bank Financial Institutions, before its amendment by
BSP-MB Circular No. 799 — but will now be six percent (6%) per annum
effective July 1, 2013. It should be noted, nonetheless, that the new rate
could only be applied prospectively and not retroactively. Consequently,
the twelve percent (12%) per annum legal interest shall apply only
until June 30, 2013. Come July 1, 2013 the new rate of six percent
(6%) per annum shall be the prevailing rate of interest  when
applicable.
xxxx
same are mere reiterations of the grounds already evaluated and passed
upon in the Assailed Decision. Therefore, there is no cogent reason to
To recapitulate and for future guidance, the guidelines laid down in the warrant a modification or reversal of the same.
case of Eastern Shipping Lines are accordingly modified to embody BSP-
MB Circular No. 799, as follows: WHEREFORE, the motion for reconsideration is PARTLY GRANTED.
The Decision dated June 28, 2016 of the Court is
hereby AFFIRMED with MODIFICATION, imposing on petitioner Nympha
I. When an obligation, regardless of its source, i.e., law, contracts, quasi
S. Odiamar's liability to respondent Linda Odiamar Valencia in the amount
contracts, delicts or quasi-delicts is breached, the contravenor can be held
of P1,010,049.00 legal interest at the rate of twelve percent (12%) per
liable for damages. The provisions under Title XVIII on "Damages" of the
annum from the date of judicial demand, i.e., August 20, 2003, until June
Civil Code govern in determining the measure of recoverable damages.
30, 2013, and thereafter at the legal rate of six percent (6%) per annum
from July 1, 2013 until finality of this ruling. Moreover, all monetary awards
II. With regard particularly to an award of interest in the concept of actual
due to respondent shall earn legal interest at the rate of six percent (6%)
and compensatory damages, the rate of interest, as well as the accrual
per annum from finality of this ruling until fully paid.
thereof, is imposed, as follows:
SO ORDERED.
1. When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of money,
the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest
from the time it is judicially demanded. In the absence of stipulation,
the rate of interest shall be 6% per annum to be computed from
default, i.e.,  from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of
money, is breached, an interest on the amount of damages awarded
may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated
claims or damages, except when or until the demand can be
established with reasonable certainty. Accordingly, where the demand
is established with reasonable certainty, the interest shall begin to run
from the time the claim is made judicially or extrajudicially (Art. 1169,
Civil Code), but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to
run only from the date the judgment of the court is made (at which
time the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of legal
interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest, whether
the case falls under paragraph 1 or paragraph 2, above, shall be
6% per annum from such finality until its satisfaction, this interim
period being deemed to be by then an equivalent to a
forbearance of credit.[12] (Emphases and underscoring supplied)
Applying the foregoing parameters to this case, petitioner's loan obligation
to respondent shall be subjected to compensatory interest at the legal rate
of twelve percent (12%) per annum from the date of judicial
demand, i.e., August 20, 2003,[13] until June 30, 2013, and thereafter at the
legal rate of six percent (6%) per annum from July 1, 2013 until finality of
this ruling. Moreover, all monetary awards[14] due to respondent shall earn
legal interest of six percent (6%) per annum from finality of this ruling until
fully paid.
However, as to respondent's other contentions, suffice it to say that the
G.R. No. 97412 July 12, 1994 On January 8 and 14, 1982, defendant Allied Brokerage
Corporation made deliveries of the shipment to the
consignee's warehouse. The latter excepted to one drum
EASTERN SHIPPING LINES, INC., petitioner, which contained spillages, while the rest of the contents
vs. was adulterated/fake (per "Bad Order Waybill" No. 10649,
HON. COURT OF APPEALS AND MERCANTILE INSURANCE COMPANY, Exh. E).
INC., respondents.
3. Whether or not defendant(s)
should be held liable for the
losses/damages (see plaintiff's pre-
Trial Brief, Records, p. 34; Allied's
pre-Trial Brief, adopting plaintiff's
Records, p. 38).

Alojada & Garcia and Jimenea, Dala & Zaragoza for petitoner.
Zapa Law Office for private respondent.
VITUG, J.:
The issues, albeit not completely novel, are: (a) whether or not a claim for
damage sustained on a shipment of goods can be a solidary, or joint and
several, liability of the common carrier, the arrastre operator and the customs
broker; (b) whether the payment of legal interest on an award for loss or
damage is to be computed from the time the complaint is filed or from the date
the decision appealed from is rendered; and (c) whether the applicable rate of
interest, referred to above, is twelve percent (12%) or six percent (6%).
The findings of the court a quo, adopted by the Court of Appeals, on the
antecedent and undisputed facts that have led to the controversy are
hereunder reproduced:
This is an action against defendants shipping company,
arrastre operator and broker-forwarder for damages
sustained by a shipment while in defendants' custody,
filed by the insurer-subrogee who paid the consignee the
value of such losses/damages.
On December 4, 1981, two fiber drums of riboflavin were
shipped from Yokohama, Japan for delivery vessel "SS
EASTERN COMET" owned by defendant Eastern
Shipping Lines under Bill of Lading
No. YMA-8 (Exh. B). The shipment was insured under
plaintiff's Marine Insurance Policy No. 81/01177 for
P36,382,466.38.
Upon arrival of the shipment in Manila on December 12,
1981, it was discharged unto the custody of defendant
Metro Port Service, Inc. The latter excepted to one drum,
said to be in bad order, which damage was unknown to
plaintiff.
On January 7, 1982 defendant Allied Brokerage
Corporation received the shipment from defendant Metro
Port Service, Inc., one drum opened and without seal (per
"Request for Bad Order Survey." Exh. D).
Plaintiff contended that due to the losses/damage As to the first issue, there can be no
sustained by said drum, the consignee suffered losses doubt that the shipment sustained
totaling P19,032.95, due to the fault and negligence of losses/damages. The two drums
defendants. Claims were presented against defendants were shipped in good order and
who failed and refused to pay the same (Exhs. H, I, J, K, condition, as clearly shown by the
L). Bill of Lading and Commercial
Invoice which do not indicate any
damages drum that was shipped
As a consequence of the losses sustained, plaintiff was (Exhs. B and C). But when on
compelled to pay the consignee P19,032.95 under the December 12, 1981 the shipment
aforestated marine insurance policy, so that it became was delivered to defendant Metro
subrogated to all the rights of action of said consignee Port Service, Inc., it excepted to
against defendants (per "Form of Subrogation", "Release" one drum in bad order.
and Philbanking check, Exhs. M, N, and O). (pp. 85-
86, Rollo.)
Correspondingly, as to the second
issue, it follows that the
There were, to be sure, other factual issues that confronted both courts. Here, losses/damages were sustained
the appellate court said: while in the respective and/or
successive custody and possession
Defendants filed their respective answers, traversing the of defendants carrier (Eastern),
material allegations of the complaint contending that: As arrastre operator (Metro Port) and
for defendant Eastern Shipping it alleged that the broker (Allied Brokerage). This
shipment was discharged in good order from the vessel becomes evident when the Marine
unto the custody of Metro Port Service so that any Cargo Survey Report (Exh. G), with
its "Additional Survey Notes", are
damage/losses incurred after the shipment was incurred
considered. In the latter notes, it is
after the shipment was turned over to the latter, is no
stated that when the shipment was
longer its liability (p. 17, Record); Metroport averred that
"landed on vessel" to dock of Pier #
although subject shipment was discharged unto its
15, South Harbor, Manila on
custody, portion of the same was already in bad order (p.
11, Record); Allied Brokerage alleged that plaintiff has no December 12, 1981, it was
cause of action against it, not having negligent or at fault observed that "one (1) fiber drum
for the shipment was already in damage and bad order (was) in damaged condition,
condition when received by it, but nonetheless, it still covered by the vessel's Agent's
exercised extra ordinary care and diligence in the Bad Order Tally Sheet No. 86427."
handling/delivery of the cargo to consignee in the same The report further states that when
condition shipment was received by it. defendant Allied Brokerage
withdrew the shipment from
defendant arrastre operator's
From the evidence the court found the following: custody on January 7, 1982, one
drum was found opened without
seal, cello bag partly torn but
The issues are:
contents intact. Net unrecovered
spillages was
1. Whether or not the shipment 15 kgs. The report went on to state
sustained losses/damages; that when the drums reached the
consignee, one drum was found
with adulterated/faked contents. It is
2. Whether or not these obvious, therefore, that these
losses/damages were sustained losses/damages occurred before
while in the custody of defendants the shipment reached the
(in whose respective custody, if consignee while under the
determinable); successive custodies of defendants.
 Under Art. 1737 of the New Civil
Code, the common carrier's duty to
observe extraordinary diligence in
the vigilance of goods remains in
full force and effect even if the
goods are temporarily unloaded and
stored in transit in the warehouse of
the carrier at the place of
destination, until the consignee has
been advised and has had
reasonable opportunity to remove
or dispose of the goods (Art. 1738,
NCC). Defendant Eastern
Shipping's own exhibit, the "Turn-
Over Survey of Bad Order Cargoes"
(Exhs. 3-Eastern) states that on
December 12, 1981 one drum was
found "open".
and thus held:
WHEREFORE, PREMISES
CONSIDERED, judgment is hereby
rendered:
A. Ordering defendants to pay plaintiff, jointly and
severally:
1. The amount of P19,032.95, with
the present legal interest of
12% per annum from October 1,
1982, the date of filing of this
complaints, until fully paid (the
liability of defendant Eastern
Shipping, Inc. shall not exceed
US$500 per case or the CIF value
of the loss, whichever is lesser,
while the liability of defendant Metro
Port Service, Inc. shall be to the
extent of the actual invoice value of
each package, crate box or
container in no case to exceed
P5,000.00 each, pursuant to
Section 6.01 of the Management
Contract);
2. P3,000.00 as attorney's fees, and
3. Costs.
B. Dismissing
the
counterclaims
and
crossclaim of
defendant/cro
ss-claimant
Allied
Brokerage course, exceptional cases when such presumption of fault is not observed but
Corporation. these cases, enumerated in Article 17341 of the Civil Code, are exclusive, not
one of which can be applied to this case.
SO ORDERED. (p. 207, Record).
The question of charging both the carrier and the arrastre operator with the
obligation of properly delivering the goods to the consignee has, too, been
Dissatisfied, defendant's recourse to US. passed upon by the Court. In Fireman's Fund Insurance vs. Metro Port
Services (182 SCRA 455), we have explained, in holding the carrier and the
The appeal is devoid of merit. arrastre operator liable in solidum, thus:
The legal relationship between the consignee and the
After a careful scrutiny of the evidence on record. We find
arrastre operator is akin to that of a depositor and
that the conclusion drawn therefrom is correct. As there is
warehouseman (Lua Kian v. Manila Railroad Co., 19
sufficient evidence that the shipment sustained damage
SCRA 5 [1967]. The relationship between the consignee
while in the successive possession of appellants, and
and the common carrier is similar to that of the consignee
therefore they are liable to the appellee, as subrogee for
and the arrastre operator (Northern Motors, Inc. v. Prince
the amount it paid to the consignee. (pp. 87-89, Rollo.)
Line, et al., 107 Phil. 253 [1960]). Since it is the duty of
the ARRASTRE to take good care of the goods that are in
The Court of Appeals thus affirmed in toto the judgment of the court its custody and to deliver them in good condition to the
a quo. consignee, such responsibility also devolves upon the
CARRIER. Both the ARRASTRE and the CARRIER are
therefore charged with the obligation to deliver the goods
In this petition, Eastern Shipping Lines, Inc., the common carrier, attributes
in good condition to the consignee.
error and grave abuse of discretion on the part of the appellate court when —
We do not, of course, imply by the above pronouncement that the arrastre
I. IT HELD PETITIONER CARRIER JOINTLY AND
operator and the customs broker are themselves always and necessarily liable
SEVERALLY LIABLE WITH THE ARRASTRE
solidarily with the carrier, or vice-versa, nor that attendant facts in a given case
OPERATOR AND CUSTOMS BROKER FOR THE
may not vary the rule. The instant petition has been brought solely by Eastern
CLAIM OF PRIVATE RESPONDENT AS GRANTED IN
Shipping Lines, which, being the carrier and not having been able to rebut the
THE QUESTIONED DECISION;
presumption of fault, is, in any event, to be held liable in this particular case. A
factual finding of both the court a quo and the appellate court, we take note, is
that "there is sufficient evidence that the shipment sustained damage while in
II. IT HELD THAT THE GRANT OF INTEREST ON THE
the successive possession of appellants" (the herein petitioner among them).
CLAIM OF PRIVATE RESPONDENT SHOULD
Accordingly, the liability imposed on Eastern Shipping Lines, Inc., the sole
COMMENCE FROM THE DATE OF THE FILING OF
petitioner in this case, is inevitable regardless of whether there are others
THE COMPLAINT AT THE RATE OF TWELVE
solidarily liable with it.
PERCENT PER ANNUM INSTEAD OF FROM THE
DATE OF THE DECISION OF THE TRIAL COURT AND
ONLY AT THE RATE OF SIX PERCENT PER ANNUM,
It is over the issue of legal interest adjudged by the appellate court that
PRIVATE RESPONDENT'S CLAIM BEING
deserves more than just a passing remark.
INDISPUTABLY UNLIQUIDATED.
Let us first see a chronological recitation of the major rulings of this Court:
The petition is, in part, granted.
The early case of Malayan Insurance Co., Inc., vs. Manila Port
In this decision, we have begun by saying that the questions raised by
Service,2 decided3 on 15 May 1969, involved a suit for recovery of money
petitioner carrier are not all that novel. Indeed, we do have a fairly good number
arising out of short deliveries and pilferage of goods. In this case, appellee
of previous decisions this Court can merely tack to.
Malayan Insurance (the plaintiff in the lower court) averred in its complaint that
the total amount of its claim for the value of the undelivered goods amounted to
The common carrier's duty to observe the requisite diligence in the shipment of P3,947.20. This demand, however, was neither established in its totality nor
goods lasts from the time the articles are surrendered to or unconditionally definitely ascertained. In the stipulation of facts later entered into by the parties,
placed in the possession of, and received by, the carrier for transportation until in lieu of proof, the amount of P1,447.51 was agreed upon. The trial court
delivered to, or until the lapse of a reasonable time for their acceptance by, the rendered judgment ordering the appellants (defendants) Manila Port Service
and Manila Railroad Company to pay appellee Malayan Insurance the sum of
person entitled to receive them (Arts. 1736-1738, Civil Code; Ganzon vs. Court
P1,447.51 with legal interest thereon from the date the complaint was filed on
of Appeals, 161 SCRA 646; Kui Bai vs. Dollar Steamship Lines, 52 Phil. 863).
28 December 1962 until full payment thereof. The appellants then
When the goods shipped either are lost or arrive in damaged condition, a
assailed, inter alia, the award of legal interest. In sustaining the appellants, this
presumption arises against the carrier of its failure to observe that diligence,
Court ruled:
and there need not be an express finding of negligence to hold it liable (Art.
1735, Civil Code; Philippine National Railways vs. Court of Appeals, 139 SCRA
87; Metro Port Service vs. Court of Appeals, 131 SCRA 365). There are, of
 Interest upon an obligation which calls for the payment of
money, absent a stipulation, is the legal rate. Such
interest normally is allowable from the date of demand,
judicial or extrajudicial. The trial court opted for judicial
demand as the starting point.
But then upon the provisions of Article 2213 of the Civil
Code, interest "cannot be recovered upon unliquidated
claims or damages, except when the demand can be
established with reasonable certainty." And as was held
by this Court in Rivera vs. Perez,4 L-6998, February 29,
1956, if the suit were for damages, "unliquidated and not
known until definitely ascertained, assessed and
determined by the courts after proof (Montilla
c. Corporacion de P.P. Agustinos, 25 Phil. 447; Lichauco
v. Guzman,
38 Phil. 302)," then, interest "should be from the date of
the decision." (Emphasis supplied)
The case of Reformina vs. Tomol,5 rendered on 11 October 1985, was for
"Recovery of Damages for Injury to Person and Loss of Property." After trial,
the lower court decreed:
WHEREFORE, judgment is hereby rendered in favor of
the plaintiffs and third party defendants and against the
defendants and third party plaintiffs as follows:
Ordering defendants and third party plaintiffs Shell and
Michael, Incorporated to pay jointly and severally the
following persons:
xxx xxx xxx
(g) Plaintiffs Pacita F. Reformina and Francisco
Reformina the sum of P131,084.00 which is the value of
the boat F B Pacita III together with its accessories,
fishing gear and equipment minus P80,000.00 which is
the value of the insurance recovered and the amount of
P10,000.00 a month as the estimated monthly loss
suffered by them as a result of the fire of May 6, 1969 up
to the time they are actually paid or already the total sum
of P370,000.00 as of June 4, 1972 with legal interest
from the filing of the complaint until paid and to pay
attorney's fees of P5,000.00 with costs against
defendants and third party plaintiffs. (Emphasis supplied.)
On appeal to the Court of Appeals, the latter modified the amount of
damages awarded but sustained the trial court in adjudging legal
interest from the filing of the complaint until fully paid. When the
appellate court's decision became final, the case was remanded to
the lower court for execution, and this was when the trial court
issued its assailed resolution which applied the 6% interest per
annum prescribed in Article 2209 of the Civil Code. In their petition
for review on certiorari, the petitioners contended that Central Bank
Circular
No. 416, providing thus —
By virtue of the authority granted to it under Section 1 of
Act 2655, as amended, Monetary Board in its Resolution
No. 1622 dated July 29, 1974, has prescribed that the
rate of interest for the loan, or forbearance of any money,
goods, or credits and the rate allowed in judgments, in the
absence of express contract as to such rate of interest,
shall be twelve (12%) percent per annum. This Circular
shall take effect immediately. (Emphasis found in the text)
— of FIVE MILLION (P5,000,000.00) Pesos to cover all
should have, instead, been applied. This Court6 ruled:
The judgments spoken of and referred to are judgments
in litigations involving loans or forbearance of any money,
goods or credits. Any other kind of monetary judgment
which has nothing to do with, nor involving loans or
forbearance of any money, goods or credits does not fall
within the coverage of the said law for it is not within the
ambit of the authority granted to the Central Bank.
xxx xxx xxx
Coming to the case at bar, the decision herein sought to
be executed is one rendered in an Action for Damages for
injury to persons and loss of property and does not
involve any loan, much less forbearances of any money,
goods or credits. As correctly argued by the private
respondents, the law applicable to the said case is Article
2209 of the New Civil Code which reads —
Art. 2209. — If the obligation
consists in the payment of a sum of
money, and the debtor incurs in
delay, the indemnity for damages,
there being no stipulation to the
contrary, shall be the payment of
interest agreed upon, and in the
absence of stipulation, the legal
interest which is six percent per
annum.
The above rule was reiterated in Philippine Rabbit Bus Lines, Inc.,
v. Cruz,7 promulgated on 28 July 1986. The case was for damages occasioned
by an injury to person and loss of property. The trial court awarded private
respondent Pedro Manabat actual and compensatory damages in the amount
of P72,500.00 with legal interest thereon from the filing of the complaint until
fully paid. Relying on the Reformina v. Tomol case, this Court8 modified the
interest award from 12% to 6% interest per annum but sustained the time
computation thereof, i.e., from the filing of the complaint until fully paid.
In Nakpil and Sons vs. Court of Appeals,9 the trial court, in an action for the
recovery of damages arising from the collapse of a building, ordered,
inter alia, the "defendant United Construction Co., Inc. (one of the petitioners)
. . . to pay the plaintiff, . . . , the sum of P989,335.68 with interest at the legal
rate from November 29, 1968, the date of the filing of the complaint until full
payment . . . ." Save from the modification of the amount granted by the lower
court, the Court of Appeals sustained the trial court's decision. When taken to
this Court for review, the case, on 03 October 1986, was decided, thus:
WHEREFORE, the decision appealed from is hereby
MODIFIED and considering the special and
environmental circumstances of this case, we deem it
reasonable to render a decision imposing, as We do
hereby impose, upon the defendant and the third-party
defendants (with the exception of Roman Ozaeta) a
solidary (Art. 1723, Civil Code, Supra.
p. 10) indemnity in favor of the Philippine Bar Association
damages (with the exception to attorney's fees)
occasioned by the loss of the building (including interest
charges and lost rentals) and an additional ONE
HUNDRED THOUSAND (P100,000.00) Pesos as and for
attorney's fees, the total sum being payable upon the
finality of this decision. Upon failure to pay on such
finality, twelve (12%) per cent interest per annum shall be
imposed upon aforementioned amounts from finality until
paid. Solidary costs against the defendant and third-party
defendants (Except Roman Ozaeta). (Emphasis supplied)
A motion for reconsideration was filed by United Construction,
contending that "the interest of twelve (12%) per cent per
annum imposed on the total amount of the monetary award was in
contravention of law." The Court10 ruled out the applicability of the
Reformina and Philippine Rabbit Bus Lines cases and, in its
resolution of 15 April 1988, it explained:
There should be no dispute that the imposition of 12%
interest pursuant to Central Bank Circular No. 416 . . . is
applicable only in the following: (1) loans; (2) forbearance
of any money, goods or credit; and
(3) rate allowed in judgments (judgments spoken of refer
to judgments involving loans or forbearance of any
money, goods or credits. (Philippine Rabbit Bus Lines Inc.
v. Cruz, 143 SCRA 160-161 [1986]; Reformina v. Tomol,
Jr., 139 SCRA 260 [1985]). It is true that in the instant
case, there is neither a loan or a forbearance, but then no
interest is actually imposed provided the sums referred to
in the judgment are paid upon the finality of the
judgment. It is delay in the payment of such final
judgment, that will cause the imposition of the interest.
It will be noted that in the cases already adverted to, the
rate of interest is imposed on the total sum, from the filing
of the complaint until paid; in other words, as part of the
judgment for damages. Clearly, they are not applicable to
the instant case. (Emphasis supplied.)
The subsequent case of American Express International, Inc., vs. Intermediate
Appellate Court11 was a petition for review on certiorari from the decision, dated
27 February 1985, of the then Intermediate Appellate Court reducing the
amount of moral and exemplary damages awarded by the trial court, to
P240,000.00 and P100,000.00, respectively, and its resolution, dated 29 April
1985, restoring the amount of damages awarded by the trial court, i.e.,
P2,000,000.00 as moral damages and P400,000.00 as exemplary damages
with interest thereon at 12% per annum from notice of judgment, plus costs of
suit. In a decision of 09 November 1988, this Court, while recognizing the right
of the private respondent to recover damages, held the award, however, for
moral damages by the trial court, later sustained by the IAC, to be
inconceivably large. The Court12 thus set aside the decision of the appellate
court and rendered a new one, "ordering the petitioner to pay private
respondent the sum of One Hundred Thousand (P100,000.00) Pesos as moral
damages, with
six (6%) percent interest thereon computed from the finality of this decision
until paid. (Emphasis supplied)
Reformina came into fore again in the 21 February 1989 case of Florendo
v. Ruiz13 which arose from a breach of employment contract. For having been
illegally dismissed, the petitioner was awarded by the trial court moral and
exemplary damages without, however, providing any legal interest thereon.
When the decision was appealed to the Court of Appeals, the latter held:
WHEREFORE, except as modified hereinabove the
decision of the CFI of Negros Oriental dated October 31,
1972 is affirmed in all respects, with the modification that
defendants-appellants, except defendant-appellant
Merton Munn, are ordered to pay, jointly and severally,
the amounts stated in the dispositive portion of the
decision, including the sum of P1,400.00 in concept of
compensatory damages, with interest at the legal rate
from the date of the filing of the complaint until fully
paid (Emphasis supplied.)
The petition for review to this Court was denied. The records were
thereupon transmitted to the trial court, and an entry of judgment
was made. The writ of execution issued by the trial court directed
that only compensatory damages should earn interest at 6% per
annum from the date of the filing of the complaint. Ascribing grave
abuse of discretion on the part of the trial judge, a petition
for certiorari assailed the said order. This Court said:
. . . , it is to be noted that the Court of Appeals ordered
the payment of interest "at the legal rate" from the time of
the filing of the complaint. . . Said circular [Central Bank
Circular No. 416] does not apply to actions based on a
breach of employment contract like the case at bar.
(Emphasis supplied)
The Court reiterated that the 6% interest per annum on the
damages should be computed from the time the complaint was filed
until the amount is fully paid.
Quite recently, the Court had another occasion to rule on the matter. National
Power Corporation vs. Angas,14 decided on 08 May 1992, involved the
expropriation of certain parcels of land. After conducting a hearing on the
complaints for eminent domain, the trial court ordered the petitioner to pay the
private respondents certain sums of money as just compensation for their lands
so expropriated "with legal interest thereon . . . until fully paid." Again, in
applying the 6% legal interest per annum under the Civil Code, the
Court15 declared:
. . . , (T)he transaction involved is clearly not a loan or
forbearance of money, goods or credits but expropriation
of certain parcels of land for a public purpose, the
payment of which is without stipulation regarding interest,
and the interest adjudged by the trial court is in the nature
of indemnity for damages. The legal interest required to
be paid on the amount of just compensation for the
properties expropriated is manifestly in the form of
indemnity for damages for the delay in the payment
thereof. Therefore, since the kind of interest involved in
the joint judgment of the lower court sought to be
enforced in this case is interest by way of damages, and
not by way of earnings from loans, etc. Art. 2209 of the
Civil Code shall apply.
Concededly, there have been seeming variances in the above holdings. The
cases can perhaps be classified into two groups according to the similarity of
the issues involved and the corresponding rulings rendered by the court. The
"first group" would consist of the cases of Reformina v. Tomol (1985),
Philippine Rabbit Bus Lines v. Cruz (1986), Florendo v. Ruiz (1989)
and National Power Corporation v. Angas (1992). In the "second group" would
be Malayan Insurance Company v. Manila Port Service (1969), Nakpil and
Sons v. Court of Appeals (1988), and American Express International
v. Intermediate Appellate Court (1988).
In the "first group", the basic issue focuses on the application of either the 6%
(under the Civil Code) or 12% (under the Central Bank Circular) interest per
annum. It is easily discernible in these cases that there has been a consistent
holding that the Central Bank Circular imposing the 12% interest per
annum applies only to loans or forbearance16 of money, goods or credits, as
well as to judgments involving such loan or forbearance of money, goods or
credits, and that the 6% interest under the Civil Code governs when the
transaction involves the payment of indemnities in the concept of damage
arising from the breach or a delay in the performance of obligations in general.
Observe, too, that in these cases, a common time frame in the computation of
the 6% interest per annum has been applied, i.e., from the time the complaint
is filed until the adjudged amount is fully paid.
The "second group", did not alter the pronounced rule on the application of the
6% or 12% interest per annum,17 depending on whether or not the amount
involved is a loan or forbearance, on the one hand, or one of indemnity for
damage, on the other hand. Unlike, however, the "first group" which remained
consistent in holding that the running of the legal interest should be from the
time of the filing of the complaint until fully paid, the "second group" varied on
the commencement of the running of the legal interest.
Malayan held that the amount awarded should bear legal interest from the date
of the decision of the court a quo, explaining that "if the suit were for damages,
'unliquidated and not known until definitely ascertained, assessed and
determined by the courts after proof,' then, interest 'should be from the date of
the decision.'" American Express International v. IAC, introduced a different
time frame for reckoning the 6% interest by ordering it to be "computed from
the finality of (the) decision until paid." The Nakpil and Sons case ruled that
12% interest per annum should be imposed from the finality of the decision
until the judgment amount is paid.
The ostensible discord is not difficult to explain. The factual circumstances may
have called for different applications, guided by the rule that the courts are
vested with discretion, depending on the equities of each case, on the award of
interest. Nonetheless, it may not be unwise, by way of clarification and
reconciliation, to suggest the following rules of thumb for future guidance.
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-
contracts, delicts or quasi-delicts18 is breached, the contravenor can be held
liable for damages.19 The provisions under Title XVIII on "Damages" of the Civil
Code govern in determining the measure of recoverable damages.20
II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is
imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that
which may have been stipulated in writing.21 Furthermore, the interest due shall
itself earn legal interest from the time it is judicially demanded.22 In the absence
of stipulation, the rate of interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 116923 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at
the discretion of the court24 at the rate of 6% per annum.25 No interest,
however, shall be adjudged on unliquidated claims or damages except when or
until the demand can be established with reasonable certainty.26 Accordingly,
where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Art.
1169, Civil Code) but when such certainty cannot be so reasonably established
at the time the demand is made, the interest shall begin to run only from the
date the judgment of the court is made (at which time the quantification of
damages may be deemed to have been reasonably ascertained). The actual
base for the computation of legal interest shall, in any case, be on the amount
finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1
or paragraph 2, above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.
WHEREFORE, the petition is partly GRANTED. The appealed decision is
AFFIRMED with the MODIFICATION that the legal interest to be paid is SIX
PERCENT (6%) on the amount due computed from the decision, dated
03 February 1988, of the court a quo. A TWELVE PERCENT (12%) interest, in
lieu of SIX PERCENT (6%), shall be imposed on such amount upon finality of
this decision until the payment thereof.
SO ORDERED.
 [G.R. No. 128721. March 9, 1999.]
CRISMINA GARMENTS, INC., Petitioner, v. COURT OF
APPEALS and NORMA SIAPNO, Respondents.
DECISION
PANGANIBAN, J.:
Interest shall be computed in accordance with the stipulation of
the parties. In the absence of such agreement, the rate shall be
twelve percent (12%) per annum when the obligation arises out
of a loan or a forbearance of money, goods or credits. In other
cases, it shall be six percent (6%).
The Case
On May 5, 1997, Crismina Garments, Inc. filed a Petition for
Review on Certiorari 1 assailing the December 28, 1995 Decision
2 and March 17, 1997 Resolution 3 of the Court of Appeals in
CA-GR CV No. 28973. On September 24, 1997, this Court issued
a minute Resolution 4 denying the petition "for its failure to show
any reversible error on the part of the Court of Appeals."cralaw
virtua1aw library
Petitioner then filed a Motion for Reconsideration, 5 arguing that
the interest rate should be computed at 6 percent per annum as
provided under Article 2209 of the Civil Code, not 12 percent per
annum as prescribed under Circular No. 416 of the Central Bank
of the Philippines. Acting on the Motion, the Court reinstated 6
the Petition, but only with respect to the issue of which interest
rate should be applied. 7chanrobles virtual lawlibrary
The Facts
As the facts of the case are no longer disputed, we are
reproducing hereunder the findings of the appellate
court:jgc:chanrobles.com.ph
"During the period from February 1979 to April 1979, the [herein
petitioner], which was engaged in the export of girls’ denim
pants, contracted the services of the [respondent], the sole
proprietress of the D’Wilmar Garments, for the sewing of 20,762
pieces of assorted girls[’] denims supplied by the [petitioner]
under Purchase Orders Nos. 1404, dated February 15, 1979,
0430 dated February 1, 1979, 1453 dated April 30, 1979. The
[petitioner] was obliged to pay the [respondent], for her
services, in the total amount of P76,410.00. The [respondent]
sew[ed] the materials and delivered the same to the [petitioner]
which acknowledged the same per Delivery Receipt Nos. 0030,
dated February 9, 1979; 0032, dated February 15, 1979; 0033
dated February 21, 1979; 0034, dated February 24, 1979; 0036,
dated February 20, 1979; 0038, dated March 11, 1979[;] 0039,
dated March 24, 1979; 0040 dated March 27, 1979; 0041, dated
March 29, 1979; 0044, dated Marc[h] 25, 1979; 0101 dated May
18, 1979[;] 0037, dated March 10, 1979 and 0042 dated March
10, 1979, in good order condition. At first, the [respondent] was
told that the sewing of some of the pants w[as] defective. She
offered to take delivery of the defective pants. However, she was
later told by [petitioner]’s representative that the goods were
already good. She was told to just return for her check of
P76,410.00. However, the [petitioner] failed to pay her the
aforesaid amount. This prompted her to hire the services of
counsel who, on November 12, 1979, wrote a letter to the
[petitioner] demanding payment of the aforesaid amount within
ten (10) days from receipt thereof. On February 7, 1990, the
[petitioner]’s [v]ice-[p]resident-[c]omptroller, wrote a letter to
[respondent]’s counsel, averring, inter alia, that the pairs of
jeans sewn by her, numbering 6,164 pairs, were defective and
that she was liable to the [petitioner] for the amount of
P49,925.51 which was the value of the damaged pairs of denim
pants and demanded refund of the aforesaid
amount.chanrobles.com : virtual law library
"On January 8, 1981, the [respondent] filed her complaint
against the [petitioner] with the [trial court] for the collection of
the principal amount of P76,410.00. . .
x       x       x
"After due proceedings, the [trial court] rendered judgment, on
February 28, 1989, in favor of the [respondent] against the
[petitioner], the dispositive portion of which reads as
follows:chanrob1es virtual 1aw library
‘WHEREFORE, judgment is hereby rendered in favor of the
plaintiff and against the defendant ordering the latter to pay the
former:chanrob1es virtual 1aw library
(1) The sum of P76,140.00 with interest thereon at 12% per
annum, to be counted from the filing of this complaint on
January 8, 1981, until fully paid;
(2) The sum of P5,000 as attorney[’]s fees; and
(3) The costs of this suit;
(4) Defendant’s counterclaim is hereby dismissed.’" 8
The Court of Appeals (CA) affirmed the trial court’s ruling, except
for the award of attorney’s fees which was deleted. 9
Subsequently, the CA denied the Motion for Reconsideration. 10
Hence, this recourse to this Court. 11
Sole Issue
In light of the Court’s Resolution dated April 27, 1998, petitioner
submits for our consideration this sole
issue:jgc:chanrobles.com.ph
"Whether or not it is proper to impose interest at the rate of
twelve percent (12%) per annum for an obligation that does not
involve a loan or forbearance of money in the absence of
stipulation of the parties." 12chanrobles.com:cralaw:red
This Court’s Ruling
We sustain petitioner’s contention that the interest rate should
be computed at six percent (6%) per annum.
Sole Issue: Interest Rate
The controversy revolves around petitioner’s payment of the
price beyond the period prescribed in a contract for a piece of
work. Article 1589 of the Civil Code provides that" [t]he vendee
[herein petitioner] shall owe interest for the period between the
delivery of the thing and the payment of the price . . . should he
be in default, from the time of judicial or extrajudicial demand
for the payment of the price." The only issue now is the
applicable rate of interest for the late payment.
Because the case before us is "an action for the enforcement of
an obligation for payment of money arising from a contract for a
piece of work," 13 petitioner submits that the interest rate
should be six percent (6%), pursuant to Article 2209 of the Civil
Code, which states:jgc:chanrobles.com.ph
"If the obligation consists in the payment of money and the
debtor incurs in delay, the indemnity for damages, there being
no stipulation to the contrary, shall be the payment of the
interest agreed upon, and in the absence of stipulation, the legal
interest, which is six per cent per annum." (Emphasis supplied.)
On the other hand, private respondent maintains that the
interest rate should be twelve percent (12%) per annum, in
accordance with Central Bank (CB) Circular No. 416, which
reads:chanrobles virtual lawlibrary
"By virtue of the authority granted to it under Section 1 of Act
No. 2655, as amended, otherwise known as the ‘Usury Law’, the
Monetary Board, in its Resolution No. 1622 dated July 29, 1974,
has prescribed that the rate of interest for the loan or
forbearance of any money, goods or credits and the rate allowed
in judgments, in the absence of express contract as to such rate
of interest, shall be twelve per cent (12%) per annum."
(Emphasis supplied.)
She argues that the circular applies, since "the money sought to
be recovered by her is in the form of forbearance." 14
We agree with the petitioner. In Reformina v. Tomol Jr., 15 this
Court stressed that the interest rate under CB Circular No. 416
applies to (1) loans; (2) forbearance of money, goods or credits;
or (3) a judgment involving a loan or forbearance of money,
goods or credits. Cases beyond the scope of the said circular are
governed by Article 2209 of the Civil Code, 16 which considers
interest a form of indemnity for the delay in the performance of
an obligation. 17
In Eastern Shipping Lines, Inc. v. Court of Appeals, 18 the Court
gave the following guidelines for the application of the proper
interest rates:jgc:chanrobles.com.ph
"I. When an obligation, regardless of its source, i.e., law,
contracts, quasi-contracts, delicts or quasi-delicts is breached,
the contravenor can be held liable for damages. The provisions
under Title XVIII on ‘Damages’ of the Civil Code govern in
determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept
of actual and compensatory damages, the rate of interest, as
well as the accrual thereof, is imposed, as follows:chanrob1es
virtual 1aw library
1. When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself
earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12% per
annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of
Article 1169 of the Civil Code.chanrobles virtuallawlibrary
"2. When an obligation, not constituting a loan or forbearance of
money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at the
rate of 6% per annum. No interest, however, shall be adjudged
on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim
is made judicially or extrajudicially (Art. 1169, Civil Code) but
when such certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to run only
from the date the judgment of the court is made (at which time
the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of
legal interest shall, in any case, be . . . the amount finally
adjudged.
"3. When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest, whether
the case falls under paragraph 1 or paragraph 2, above, shall be
12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a
forbearance of credit." 19
In Keng Hua Paper Products Co., Inc. v. CA, 20 we also ruled
that the monetary award shall earn interest at twelve percent
(12%) per annum from the date of the finality of the judgment
until its satisfaction, regardless of whether or not the case
involves a loan or forbearance of money. The interim period is
deemed to be equivalent to a forbearance of credit. 21
Because the amount due in this case arose from a contract for a
piece of work, not from a loan or forbearance of money, the legal
interest of six percent (6%) per annum should be applied.
Furthermore, since the amount of the demand could be
established with certainty when the Complaint was filed, the six
percent (6%) interest should be computed from the filing of the
said Complaint. But after the judgment becomes final and
executory until the obligation is satisfied, the interest should be
reckoned at twelve percent (12%) per
year.chanroblesvirtuallawlibrary:red
Private respondent maintains that the twelve percent (12%)
interest should be imposed, because the obligation arose from a
forbearance of money. 22 This is erroneous. In Eastern Shipping,
23 the Court observed that a "forbearance" in the context of the
usury law is a "contractual obligation of lender or creditor to
refrain, during a given period of time, from requiring the
borrower or debtor to repay a loan or debt then due and
payable." Using this standard, the obligation in this case was
obviously not a forbearance of money, goods or credit.
WHEREFORE, the appealed Decision is MODIFIED. The rate of
interest shall be six percent (6%) per annum, computed from
the time of the filing of the Complaint in the trial court until the
finality of the judgment. If the adjudged principal and the
interest (or any part thereof) remain unpaid thereafter, the
interest rate shall be twelve percent (12%) per annum computed
from the time the judgment becomes final and executory until it
is fully satisfied. No pronouncement as to costs.chanrobles law
library : red
SO ORDERED.
G.R. No. 123643 October 30, 1996
PHILIPPINE NATIONAL BANK, petitioner,
vs.
COURT OF APPEALS and DR. ERLINDA G. IBARROLA, respondents.
RESOLUTION
FRANCISCO, J.:p
As payments for the purchase of medicines, the Province of
Isabela issued several checks drawn against its account with
petitioner Philippine National Bank (PNB) in favor of the seller,
Lyndon Pharmaceuticals Laboratories, a business operated by
private respondent Ibarrola. The checks were delivered to the
seller's agents 1 who turned them over to Ibarrola, except 23
checks amounting to P98,691.90, which the agents appropriated
after negotiating them with PNB. For her failure to receive the
full payment for the medicines, Ibarrola filed on November 6,
1974 before the Regional Trial Court (RTC) an "action for a sum
of money and damages," docketed as Civil Case 4226-
p, 2 against the Province of Isabela, its Treasurer, the two
agents and PNB.
In its decision dated September 29, 1987, the trial court ordered
all the defendants in said civil case, except the treasurer who
died in the meantime, to "jointly and solidarily" pay Ibarrola
several amounts, among which is:
(1) P98,691.90 with interest thereon at the legal
rate from the date of the filing of the complaint until
the entire amount is fully paid; 3 (Emphasis supplied.)
4
PNB's appeal to the Court of Appeals (CA)   and later to the
Supreme Court 5 were denied and dismissed, respectively. All
the three courts, however, did not specify whether the legal rate
of interest referred to in the judgment is 6% or 12%. The
judgment in Civil Case 4226-P became final and executory on
November 26, 1993. At the execution stage, the sheriff
computed the interest mentioned in the judgment at the rate of
12% which PNB opposed insisting that the rate should only be
6%. Ibarrola sought clarification from the same RTC which
promulgated the decision. On August 4, 1994 said court issued
an order clarifying that the rate is 12%. PNB's direct appeal to
this court from that order was referred to the CA which affirmed
the RTC order. Hence, this petition for review under Rule 45
where two legal issues are raised: (1) whether in an action for
damages, the legal rate of interest is 6% as provided by Article
2209 6 of the New Civil Code or 12% as provided by CB Circular
416 series of 1974, 7 and (2) whether such rate shall be forbearance of money is breached then an interest on
computed from the filing of the complaint until fully paid? the amount of damages awarded may be imposed at
the discretion of the court at the rate of 6% per
annum in accordance with Art. 2209 of the Civil Code.
The issues are not new. In the case of Estern Shipping Lines,
Indeed, the monetary judgment in favor of private
Inc. v.
respondent does not involve a loan or forbearance of
CA, 8 this Court had provided a rule "of thumb for future
money, hence the proper imposable rate of interest is
guidance," 9 to wit:
six (6%) per cent. 13 (Emphasis ours.)
When an obligation, not constituting a loan or
Applying the aforequoted rule, therefore, the proper rate of
forbearance of money, is breached, an interest on the
interest referred to in the judgment under execution is only 6%.
amount of damages awarded may be imposed at
This interest according to Eastern Shipping shall be computed
the discretion of the court at the rate of 6% per
from the time of the filing of the complaint considering that the
annum. No interest, however, shall be adjudged on
amount adjudged (P98,691.90) can be established with
unliquidated claims or damages except when or until
reasonable certainty. Said amount being merely the uncollected
the demand can be established with reasonable
balance of the purchase price covered by the 23 checks
certainty. Accordingly, where the demand is
encashed and appropriated by Ibarrola's agents. However, once
established with reasonable certainty, the interest
the judgment becomes final and executory, the "interim period
shall begin to run from the time the claim is made
from the finality of judgment awarding a monetary claim and
judicially or extrajudicially (Art. 1169, Civil Code) but
until payment thereof, is deemed to be equivalent to a
when such certainty cannot be so reasonably
forbearance of credit." 14 Thus, in accordance with the
established at the time the demand is made, the
pronouncement in Eastern Shipping the rate of 12% p.a. should
interest shall begin to run only from the date the
be imposed, and to be computed from the time the judgment
judgment of the court is made (at which time the
became final and executory until fully satisfied. The actual base
quantification of damages may be deemed to have
for the computation of this 12% interest after the judgment in
been reasonably ascertained). The actual base for
this damage suit became final shall be the amount adjudged
the computation of legal interest shall, in any case, be
(P98,691.90).
on the amount finally adjudged. 10 (Emphasis ours.)
ACCORDINGLY, the appealed decision is REVERSED. The
The case at bench does not involve a loan, forbearance of
rate of interest shall be 6% p.a. computed from the time of the
money or judgment involving a loan or forbearance of money as
filing of the complaint until its full payment before finality of
it arose from a contract of sale whereby Ibarrola did not receive
judgment. Thereafter, if the amount adjudged remains unpaid,
full payment for her merchandise. When an obligation arises
the interest rate shall be 12% p.a. computed from the time the
"from a contract of purchase and sale and not from a contract of
judgment became final and executory on November 26, 1993
loan or mutuum," the applicable rate is "6% per annum as
until fully satisfied.
provided in Article 2209 of the NCC and not the rate of 12% per
annum as provided in (CB) Cir. No. 416." 11 Indeed, PNB's
liability is based only on the RTC's judgment where it was held SO ORDERED.
solidarily liable with the other defendants due to its negligence
when it "failed to assure itself" if the Provincial Treasurer was
"properly authorized" by Ibarrola to "make endorsements" of
said checks. 12
The rate of 12% interest referred to in Cir. 416 applies only to:
[L]oan or forbearance of money, or to cases where
money is transferred from one person to another and
the obligation to return the same or a portion thereof
is adjudged. Any other monetary judgment which
does not involve or which has nothing to do with loans
or forbearance of any money, goods or credit does
not fall within its coverage for such imposition is not
within the ambit of the authority granted to the Central
Bank. When an obligation not constituting a loan or