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Pilipinas Bank vs. CA & Lilia R. Echaus, G.R. No.

97873, August 12, 1993 (225

SCRA 268)

Facts :The petitioner and Greatland Realty Corporation (Greatland) executed a "Dacion en Pago,"
wherein Greatland conveyed to petitioner several parcels of land in consideration of the sum of
P7,776,335.69. Greatland assigned P2,300,000.00 out of the total consideration of the Dacion en
Pago, in favor of private respondent. Notwithstanding her demand for payment, petitioner, in bad
faith, refused and failed to pay the said amount assigned to her. Private respondent sued.

Petitioner, while admitting the execution of the Dacion en Pago, claimed: (1) that its former president
had no authority to enter into such agreement; (2) that it never ratified the same; and (3) that assuming
arguendo that the agreement was binding, the conditions stipulated therein were never fulfilled.

Trial court ruled in favor of private respondent. The case was appealed. A motion for execution
pending appeal was filed and approved by the lower court. The CA modified the execution pending
appeal by deferring the execution of the award for moral, exemplary and nominal damages to await the
final judgment of the main case. The SC affirmed the CA.

The CA eventually ruled in favor of private respondent. The decision awarded interest at the legal rate
from the date when the demand was first made. The decision became final and executory.

The petitioner sought for payment of interest at the rate of 6% per annum only. The private respondent
sought for interest at the rate of 12% per annum pursuant to CB Circular No. 416. The court ruled that
the proper interest rate was 12%. A clarification was sought with the CA which ruled that the proper
interest rate was 12%.

Issue: Whether an obligation arising from a contract of sale is such a forbearance that would merit an
award for interest of 12% per annum.

Held: No. Reversed.

Ratio: The Court of Appeals was of the theory that the action in Civil Case No. 239-A filed by private
respondent against petitioner "involves forbearance of money, as the principal award to plaintiff-
appellee (private respondent) in the amount of P2,300,000.00 was the overdue debt of defendant-
appellant to her since July 1981. The case is, in effect, a simple collection of the money due to plaintiff-
appellee, as the unpaid creditor from the defendant bank, the debtor" (Resolution, p. 3; Rollo, p. 33).
Applying Central Bank Circular No. 416, the Court of Appeals Held that the applicable rate of interest is
12% per annum.

Petitioner argues that the applicable law is Article 2209 of the Civil Code, not the Central Bank Circular
No. 416. Said Article 2209 provides that 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 the interest

agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum.
In Reformina v. Tomol, Jr., 139 SCRA 260 [1985], the Court Held that 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."

Reformina was affirmed in Philippine Virginia Tobacco Administration v. Tensuan, 188 SCRA 628 [1990],
which emphasized that the "judgments" contemplated in Circular No. 417 "are judgments involving said
loans or forbearance only and not in judgments in litigation that have nothing to do with loans . . ."

We Held that Circular No. 416 does not apply to judgments involving damages (Reformina v. Tomol, Jr.,
supra; Philippine Virginia Tobacco Administration v. Tensuan, supra) and compensation in expropriation
proceedings (National Power Corporation v. Angas, 208 SCRA 542 [1992]). We also Held that Circular No.
416 applies to judgments involving the payment of unliquidated cash advances to an employee by his
employer (Villarica v. Court of Appeals, 123 SCRA 259 [1983]) and the 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, 154 SCRA 438 [1987]).

What then is the nature of the judgment ordering petitioner to pay private respondent the amount of
P2,300,000.00?

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.