Philippine National Bank v. Court of Appeals
REITERATIONFacts
The Antecedents: The Province of Isabela issued checks to Lyndon Pharmaceuticals Laboratories (operated by Dr. Erlinda G. Ibarrola) as payment for medicines. Agents of the seller negotiated 23 checks amounting to P98,691.90 with Philippine National Bank (PNB) and appropriated the proceeds. Ibarrola filed an action for sum of money and damages against the Province, its Treasurer, the agents, and PNB for failure to receive full payment. Procedural History: The Regional Trial Court (RTC) ordered the defendants, including PNB, to jointly and solidarily pay Ibarrola P98,691.90 with legal interest. PNB's appeals to the Court of Appeals (CA) and the Supreme Court were denied. The judgment became final and executory on November 26, 1993. During execution, the sheriff computed interest at 12%, which PNB opposed, arguing for 6%. The RTC clarified the rate as 12%, and the CA affirmed this. PNB elevated the matter to the Supreme Court. The Petition: PNB seeks review of the CA's affirmation of the RTC's order, raising two issues: (1) whether the legal rate of interest in an action for damages is 6% (Art. 2209, Civil Code) or 12% (CB Circular 416); and (2) whether such rate should be computed from the filing of the complaint until fully paid.
Issue(s)
Whether the legal rate of interest in an action for damages arising from a contract of purchase and sale is 6% as provided by Article 2209 of the New Civil Code or 12% as provided by CB Circular 416 series of 1974. Whether the 6% interest rate shall be computed from the filing of the complaint until the judgment becomes final and executory, and whether a 12% interest rate applies from the time the judgment becomes final and executory until fully paid.
Ruling
The appealed decision is REVERSED. The rate of interest shall be 6% per annum computed from the time of the filing of the complaint until its full payment before finality of judgment. Thereafter, if the amount adjudged remains unpaid, the interest rate shall be 12% per annum computed from the time the judgment became final and executory on November 26, 1993 until fully satisfied.
Ratio Decidendi
On the applicable rate of interest: The Court reiterated the rule established in Eastern Shipping Lines, Inc. v. CA. When an obligation arises from a contract of purchase and sale and not from a contract of loan or mutuum, the applicable rate of interest is 6% per annum as provided in Article 2209 of the Civil Code. The Central Bank Circular No. 416, which prescribes a 12% interest rate, applies only to loans or forbearance of money, goods, or credit, or to cases where money is transferred and the obligation to return it is adjudged. The monetary judgment in this case, arising from uncollected balance of a purchase price due to appropriated checks, does not involve a loan or forbearance of money. Therefore, the initial rate of interest should be 6% per annum. On the computation period of interest: Applying the Eastern Shipping ruling, the 6% interest shall be computed from the time of the filing of the complaint because the amount adjudged (P98,691.90) was established with reasonable certainty, representing the uncollected balance of the purchase price. However, the Court clarified that once a judgment becomes final and executory, the "interim period from the finality of judgment awarding a monetary claim and until payment thereof, is deemed to be equivalent to a forbearance of credit." Consequently, in accordance with Eastern Shipping, the rate of 12% per annum should be imposed and computed from the time the judgment became final and executory until fully satisfied. The actual base for the computation of this 12% interest after finality shall be the amount adjudged.
Main Doctrine
The legal rate of interest on monetary judgments arising from contracts other than loans or forbearance of money is 6% per annum from the filing of the complaint until finality of judgment. Thereafter, the rate increases to 12% per annum from finality until full satisfaction.