annum 

as provided in Article 2209 of the NCC and not

PNB V. CA, IBARROLA
G.R. 123643 (1996) the rate of 12%  per annum as provided in (CB) Cir. No.
416."  Indeed, PNB's liability is based only on the RTC's
judgment where it was held solidarily liable with the
Facts: As payments for the purchase of medicines, the
other defendants due to its negligence when it "failed
Province of Isabela issued checks drawn against its
to assure itself" if the Provincial Treasurer was
account with Philippine National Bank (PNB) in favor of
"properly authorized" by Ibarrola to "make
the seller, Lyndon Pharmaceuticals Laboratories, a
endorsements" of said checks. 
business operated by Dr. Erlinda Ibarrola. The checks
were delivered, but it lacked 23 checks amounting to
Applicability of 12% CB Cir. 416
P98,691.90.
The interest rate of 12% applies only to loans or
forbearances of money, or to cases where money is
For her failure to receive the full payment, Ibarrola filed
transferred from one person to another and the
an action for sum of money and damages against the
obligation to return the same or a portion thereof is
Province and the two agents of the PNB. The RTC
adjudged. 
ordered the Province and the two agents of PNB to
jointly and solidarily pay Ibarrola P98,691.90 “with
Any other monetary judgment which does not involve
interest thereon at the legal rate from the date of the
or which has nothing to do with loans or forbearance of
filing of the complaint until the entire amount is fully
any money, goods or credit does not fall within its
paid.” The decision reached finality, and at the
coverage for such imposition is not within the ambit
execution stage, the sheriff computed the interest at
of the authority granted to the Central Bank.
the rate of 12%. Upon clarification with the RTC that
made the order, it also said that the rate should be at
12%. However, PNB contends that it must be at only
Conclusion
6%. Thus, this case was filed with the SC.
The proper rate of interest referred to in the judgment
under execution is only 6%. This interest according to
Issue: What rate on the interest should be applied?
Eastern Shipping shall be computed from the time of
the filing of the complaint considering that the amount
Ruling: It should be 6% on the amount adjudged; and
adjudged (P98,691.90) can be established with
apply 12% once the judgment becomes final and
reasonable certainty. Said amount being merely the
executory.
uncollected balance of the purchase price covered by
the 23 checks encashed and appropriated by Ibarrola's
As ruled in Eastern Shipping Lines, Inc. v. CA:
agents. However, once the judgment becomes final and
executory, the "interim period from the finality of
When an obligation, not constituting a loan or
judgment awarding a monetary claim and until
forbearance of money, is breached, an interest
payment thereof, is deemed to be equivalent to a
on the amount of damages awarded may be
forbearance of credit."  Thus, in accordance with the
imposed at the discretion of the court at the rate
pronouncement in Eastern Shipping the rate of 12%
of 6%  per annum. Accordingly, where the
p.a. should be imposed, and to be computed from the
demand is established with reasonable certainty,
time the judgment became final and executory until
the interest shall begin to run from the time the
fully satisfied. The actual base for the computation of
claim is made judicially or extrajudicially  (Art.
this 12% interest after the judgment in this damage
1169, Civil Code) but when such certainty cannot
suit became final shall be the amount adjudged
be so reasonably established at the time the
(P98,691.90).
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 DISCUSSION: In this case, it was provided that as a
damages may be deemed to have been general rule: contract of Sale is not loan or
reasonably ascertained). The actual base for the forbearance of money. Hence, 6% was applied. But
computation of legal interest shall, in any case, from the time of finality of judgement up to
be on the amount finally adjudged.  satisfaction of the loan, rate used would be 12%.
Application to the Case Just don’t forget that aside from remembering what
The case at bench does not involve a loan, forbearance is or what is not loan or forbearance of money,
of money or judgment involving a loan or forbearance never forget that there would be a finality of
of money as it arose from a contract of sale whereby judgement. Especially for the exam.
Ibarrola did not receive full payment for her
merchandise. When an obligation arises "from a
contract of purchase and sale and not from a contract
of loan or mutuum," the applicable rate is "6%  per

ESTORES V. SPS. SUPANGAN
G.R. 175139 (2012)
Facts: On October 3, 1993, Hermojina Estores (vendor)
and Spouses Arturo and Laura Supangan (vendees)
entered into a conditional Deed of Sale over a parcel of
land subject to certain conditions, such as that the
vendor shall to relocate the house outside the
perimeter of the subject property and to complete the
necessary documents with the DAR; etc. The
agreement was that if Estores fails to comply with the
conditions within 30 days without sufficient reasons,
the spouses may demand full return of their
downpayment.
Seven years after the execution of the contract, and
despite the payment of the spouses of P3.5 million,
Estores still failed to comply with her obligations as the
vendor. Thus, the spouses sent a letter of demand
dated Sept 27, 2000 for the return of the P3.5 million.
The spouses later agreed with Estores that she return
the P3.5 million within 120 days, provided that an
interest of 12% compounded annually shall be imposed
on such amount.
However, Estores still failed to pay despite demands.
Thus, the spouses filed a complaint for sum of money
praying that they be paid the amount of P3.5 million,
plus 12% annual compounded interest. However, it is
the contention of Estores that it is willing to return the
P3.5 million, but without interest, arguing that since
the Conditional Deed of Sale provided only for the
return of the downpayment in case of breach (and no
stipulation as to any interest), they cannot be held
liable to pay legal interest as well.
Issue:
(1) May Estores be held liable for interest despite the
absence of a stipulation in the Conditional Deed of
Sale?
(2) If yes, what rate should apply? Can the stipulation
governing the return of the money be considered
as a forbearance of money which required payment
of interest at the rate of 12%?
Ruling:
(1) YES. Interest may be imposed even in the absence
of stipulation in the contract.
Article 2210 of the Civil Code expressly provides that
"Interest may, in the discretion of the court, be allowed
upon damages awarded for breach of contract." In this
case, there is no question that Estores is legally
obligated to return the ₱3.5 million because of her
failure to fulfill the obligation under the Conditional
Deed of Sale, despite demand. She has in fact admitted
that the conditions were not fulfilled and that she was
willing to return the full amount of ₱3.5 million but has
not actually done so. She enjoyed the use of the money
from the time it was given to her  until now. Thus, she is
already in default of her obligation from the date of
demand, i.e., on September 27, 2000.
(2) The interest at the rate of 12% is applicable. The
stipulation governing the return of the money be
considered as a forbearance of money which warrants
the use of the rate at 12%.
Anent the interest rate, the general rule is that the
applicable rate of interest "shall be computed in
accordance with the stipulation of the parties." Absent
any stipulation, the applicable rate of interest shall be
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%)." In this case,
the parties did not stipulate as to the applicable rate of
interest. Thus, we now determine whether the 6% as
provided under Article 2209 of the Civil Code, or 12%
under Central Bank Circular No. 416, is due.
The stipulation governing the return of the money is
considered as a forbearance of money. Thus, the
applicable rate is 12%.
Two Definitions of Forbearance
Cristina Garments v. Estores v. Sps. Supangan
CA (this case provided new
def)
Forbearance is a Forbearance of money,
"contractual goods or credit refer to
obligation of lender arrangements other than
or creditor to refrain loan agreements, where a
during a given period person acquiesces to the
of time, from temporary use of his
requiring the money, goods or credits
borrower or debtor to pending happening of
repay a loan or certain events or
debt  then due and fulfillment of certain
payable." conditions.
This definition We believe however, that
describes a loan the phrase "forbearance of
where a debtor is money, goods or credits" is
given a period within meant to have a separate
which to pay a loan or meaning from a loan,
debt. In such case, otherwise there would
"forbearance of have been no need to add
money, goods or that phrase as a loan is
credits" will have no already sufficiently defined
distinct definition in the Civil Code. (Hence
from a loan. the definition above).
Application to the Case
In this case, the Spouses Supangan parted with their
money even before the conditions were fulfilled. They
have therefore allowed or granted forbearance to the
seller (Estores) to use their money pending fulfillment
of the conditions. They were deprived of the use of
their money for the period pending fulfillment of the
conditions and when those conditions were breached,
they are entitled not only to the return of the principal
amount paid, but also to compensation for the use of
their money. And the compensation for the use of their
money, absent any stipulation, should be the same rate
of legal interest applicable to a loan since the use or
deprivation of funds is similar to a loan.
Estores’ unwarranted withholding of the money which
rightfully pertains to Spouses Supangan amounts to
forbearance of money which can be considered as an
involuntary loan. Thus, the applicable rate of interest
is 12% per annum.
(cited Eastern Shipping Lines guidelines, as cited in
Crismina v. CA)
Eastern Shipping Lines, Inc. v. Court of Appeals and its
predecessor case, Reformina v. Tongol both involved
torts cases and hence, there was no forbearance of
money, goods, or credits. Further, the amount claimed
(i.e., damages) could not be established with
reasonable certainty at the time the claim was made.
Hence, we arrived at a different ruling in those cases.
Reckoning Point of Interest
Since the date of demand which is September 27, 2000
was satisfactorily established during trial, then the
interest rate of 12% should be reckoned from said date
of demand until the principal amount and the interest
thereon is fully satisfied.
DISCUSSION: Always remember the definition of
loan or forbearance of money because without it,
you wouldn't be able to when the rate of 6% or 12%
is applicable. Compare this case with Cristina
Garments v. CA, since the two provided definitions
for forbearances of money. Please take note of
these two definitions.
PILIPINAS BANK V. CA, ECHAUS
G.R. 97873 (1993)
Facts: Echaus filed a complaint against Pilipinas Bank
and its president, Constantino Bautista, for collection of
a sum of money. The complaint alleged:
(1) that petitioner and Greatland Realty Corporation
executed a "Dacion en Pago," wherein Greatland
conveyed to Pilipinas Bank several parcels of land for
the sum of P7,776,335.69;
(2) that Greatland assigned P2,300,000.00 out of the
total consideration of the Dacion en Pago, in favor of
Echaus; and
(3) that notwithstanding her demand for payment,
Pilipinas Bank in bad faith, refused and failed to pay the
said amount assigned to her.
ASSIGNMENT
The trial court ordered Pilipinas Bank to pay Echaus as
follows:
1.) P2,300,000.00 the total amount assigned by
Greatland in her favor plus legal interest from the
dates of assignments until fully paid;
2) P3,217,707.00 representing the total actual damages
suffered by the plaintiff plus legal interest until fully
paid.
The CA modified the judgment of the trial court as
follows:
1) Pilipinas Bank is ordered to pay the Echaus the sum
of P2,300,000 representing the total amount assigned
by Greatland to her, with interest at the legal rate
starting July 24, 1981, date when demand was first
made.
According to Echaus, the legal interest on the principal
amount of P2,300,000.00 due her should be 12% per
annum pursuant to CB Circular No. 416 and not 6% per
annum as computed by Pilipinas Bank. However,
Pilipinas Bank argues that the applicable law is Article
2209 of the Civil Code, not CB 416.
OVERPAYMENT
Pilipinas Bank filed a motion in the trial court praying
that Echaus and Standard Insurance Co. should refund
the excess payment of P1,898,623.67 with interests at
6%. It must be recalled that while Echaus was able to
collect P5,517,707.00 from Pilipinas Bank pursuant to
the writ of advance execution, the final judgment in
the main case awarded to Echaus damages in the total
amount of only P2,655,000.00, together "with interest
on the amount of P2,300,000.00 at the legal rate
starting July 24, 1981, date when demand was first
made. (Murag naka advance payment sila, tapos later
pag rule less diay dapat ang bayaran so dapat i-refund
daw ni Echaus si Pilipinas Bank).
Issue:
(1) Is the P2,300,000 (payment by Pilipinas Bank to
Echaus) considered a loan, making the interest
applicable 12%?
(2) Is the P1,800,000 (overpayment to be paid by
Echaus to Pilipinas Bank) a forbearance of loan,
making the interest applicable 12%?
Ruling:
(1) NO. It arose from a contract of purchase of sale
and not of loan. Thus, the interest rate should be at
6%.
Note that Circular No. 416, fixing the rate of interest at
12% per annum, deals with (1) loans; (2) forbearance of
any money, goods or credit; and (3) judgments. The
judgments spoken of and referred to in Circular No.
416 are "judgments in litigation 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."
CB No. 416 does not apply to:
(1) Judgments involving damages (Reformina v. Tomol,
Jr.)
(2) Compensation in expropriation proceedings
(National Power Corporation v. Angas)
(3) Payment of unliquidated cash advances to an
employee by his employer (Villarica v. Court of
Appeals)
(4) Return of money paid by a buyer of a leasehold
right but which contract was voided due to the fault
of the seller (Buisier v. Court of Appeals)
The contract is from Purchase and Sale
The said amount was a portion of the P7,776,335.69
which petitioner was obligated to pay Greatland as
consideration for the sale of several parcels of land by
Greatland to petitioner. The amount of P2,300,000.00
was assigned by Greatland in favor of private
respondent. The said obligation therefore arose from a
contract of purchase and sale and not from a contract
of loan or mutuum. Hence, what is applicable is the
rate of 6% per annum as provided in Article 2209 of the
Civil Code of the Philippines and not the rate of 12%
per annum as provided in Circular No. 416.
rate for the return of the overpayment by Echaus to
Pilipinas Bank should be at 12%.
DISCUSSION: So in this case, it involves a Dacion en
Pago which is akin to a Contract of Purchase and
Sale. The judgement ordered petitioner to pay
₱2.3M arose from such a contract which is not a
loan or forbearance of money. Hence, the interest
that we will apply is 6%.
Okay, so what can you say about the fact that
previously in PNB vs. Ibarrola, we just talked about
that a contract of sale is not a loan or forbearance of
money, that's (inaudible), we're talking about a
conditional deed of sale being a loan or forbearance
of money.
The lower court applied the 6% annual interest. But
the SC overruled that and they applied the 12%
interest because they considered the return of
money, the inflation which returned the payment of
money as a forbearance of money because here, the
creditor allowed the temporary use of their money
despite the pending fulfillment of the obligation on
the part of the creditor (?) and thus they were
deprived of the use of their money for the period
pending fulfillment of such application because if
there was breach of such stipulation, then they are
not only entitled to the principal amount but also
the compensation for the temporary use of their
money.

(2) YES. It is a forbearance of loan, as there is still an

obligation to return the same. Thus, the interest rate
should be at 12%.

Echaus was paid in advance the amount of

P5,517,707.00 by Pilipinas Bank to the order for the
execution pending appeal of the judgment of the trial
court. On appeal, the Court of Appeals reduced the
total damages to P3,619,083.33, leaving a balance of
P1,898,623.67 to be refunded by private respondent to
petitioner. In an execution pending appeal, funds are
advanced by the losing party to the prevailing party
with the implied obligation of the latter to repay
former, in case the appellate court cancels or reduces
the monetary award.

In the case before us, the excess amount ordered to

refunded by private respondent falls within the ruling
in Viloria  and Buiser  that Circular No. 416 applies to
cases where money is transferred from one person to
another and the obligation to return the same or a
portion thereof is subsequently adjudged. Thus, it is in
the nature of a forbearance of loan, and the interest