Viloria v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioner Leoncio P. Viloria, former manager of Service Center of the Philippines, resigned on December 31, 1971. He subsequently filed a complaint to collect a portion of the company's net profits, alleging a profit-sharing agreement. The company denied the agreement and counterclaimed for unliquidated cash advances amounting to P7,252.00. Procedural History: The Court of First Instance of Davao dismissed Viloria's complaint for failure to prove the profit-sharing agreement but granted the counterclaim, ordering Viloria to pay P7,251.80 plus 12% interest from June 7, 1972. The Court of Appeals affirmed this decision in its entirety. The Petition: Viloria filed a petition for review with the Supreme Court, assailing (a) the finding that no profit-sharing agreement existed and (b) the imposition of a 12% interest rate, arguing that Central Bank Circular No. 416, which raised the legal interest rate, should not be applied retroactively.
Issue(s)
Whether the Court of Appeals erred in affirming the lower court's finding that no profit-sharing agreement existed. Whether Central Bank Circular No. 416, increasing the legal interest rate from 6% to 12%, should be given retroactive effect on the monetary award.
Ruling
The petition was granted partial due course. The award of P7,251.80 to the private respondent shall bear the legal rate of 6% interest until July 29, 1974, and 12% interest thereafter.
Ratio Decidendi
On the issue of the profit-sharing agreement: The Court held that the finding of the lower court, as affirmed by the Court of Appeals, that no profit-sharing agreement existed, is a factual determination. As a general rule, the Supreme Court does not disturb such findings of fact in a petition for review, especially when affirmed by the appellate court. Therefore, this aspect of the petition was not given due course. On the issue of the retroactive application of Central Bank Circular No. 416: The Court sustained the petitioner's contention. It noted that Central Bank Circular No. 416, which increased the legal rate of interest for loans, forbearances of money, goods, or credits, and in judgments from 6% to 12% per annum, took effect on July 29, 1974. The trial court rendered its decision on October 11, 1974. Since the legal rate of interest prior to July 29, 1974, was only 6%, and the obligation to repay the advances arose before the Circular's effectivity, the petitioner's contention that the Circular should not be given retrospective operation was meritorious. The obligation should be subject to the 6% interest rate until July 29, 1974, and the 12% rate only thereafter.
Main Doctrine
The Supreme Court held that Central Bank Circular No. 416, which increased the legal rate of interest from six percent (6%) to twelve percent (12%) per annum, should not be given retroactive effect. Therefore, obligations incurred before the effectivity of the Circular on July 29, 1974, should bear the legal rate of six percent (6%) interest until that date, and twelve percent (12%) thereafter. This ruling emphasizes the principle of prospective application of laws and circulars that alter established rates or obligations.