SO ORDERED.

Regalado (Chairman), Romero, Puno and Torres,

Jr., JJ., concur.

Petition denied, decision affirmed.

Notes.—The Department of Agrarian Reform is

vested with quasi-judicial powers to determine and
adjudicate agrarian reform matters as well as exclusive
original jurisdiction over all matters involving
implementation of agrarian reform except those falling
under the exclusive original jurisdiction of the
Department of Agriculture and the Department of
Environment and Natural Resources. (Machete vs.
Court of Appeals, 250 SCRA 176 [1995])
Unless and until the transfer is consummated, or
expropriation proceedings instituted by the
government, the owner continues to retain ownership.
(Velarma vs. Court of Appeals, 252 SCRA 406 [1996])
——o0o——

G.R. No. 123643. October 30, 1996.*

PHILIPPINE NATIONAL BANK, petitioner, vs.

COURT OF APPEALS and DR. ERLINDA G.
IBARROLA, respondents.

Obligations; Interest Rates; Where 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 annum as
provided in Article 2209 of the NCC and not the rate of 12%
per annum as provided in (CB) Cir. No. 416.”—The case at
bench does not involve a loan, forbearance of money or
judgment involving a loan or forbearance of money as it arose
from a contract of sale whereby Ibarrola did not

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* THIRD DIVISION.

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Philippine National Bank vs. Court of Appeals

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
annum as provided in Article 2209 of the NCC and not 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 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.
Same; Same; Administrative Law; 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, and 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.”—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
forbearance of money is breached then an interest on 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. Indeed, the monetary judgment in
favor of private respondent does not involve a loan or
forbearance of money, hence the proper imposable rate of
interest is six (6%) per cent.” (Italics ours.)
Same; Same; Judgments; The interest rate on a judgment
for damages is only 6%, computed from the time of the filing of
the complaint but once the judgment becomes final and
executory, and until fully satisfied, the rate applicable is 12%.
—Applying the aforequoted rule, therefore, the proper rate of
interest referred to in the judgment under execution is only
6%. This interest according to Eastern Shipping shall be
computed from the time of the filing of the complaint
considering that the amount adjudged (P98,691.90) can be
established with reasonable certainty. Said amount being
merely

768

768 SUPREME COURT REPORTS ANNOTATED

Philippine National Bank vs. Court of Appeals

the uncollected balance of the purchase price covered by the

23 checks encashed and appropriated by Ibarrola’s agents.
However, once the 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.” Thus, in accordance
with the pronouncement in Eastern Shipping the rate of 12%
p.a. should be imposed, and to be computed from the time the
judgment became final and executory until fully satisfied. The
actual base for the computation of this 12% interest after the
judgment in this damage suit became final shall be the
amount adjudged (P98,691.90).
PETITION for review on certiorari of a decision of the
Court of Appeals.
   The facts are stated in the resolution of the Court.
  The Chief Legal Counsel and Odilon A. Diaz for
petitioner.
  Ananias C. Ona for private respondent.

RESOLUTION

FRANCISCO, J.:
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 agents1 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,”

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1 Manuel Flores and Demetrio Perez.

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VOL. 263, OCTOBER 30, 1996 769

Philippine National Bank vs. Court of Appeals

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 (Italics supplied.)

PNB’s appeal to the Court of Appeals (CA)4 and later

to the Supreme Court5 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 22096 of the New Civil Code or 12% as

_______________

2 Rollo, p. 13.
3 RTC Decision, p. 6; Rollo, p. 39.
4 CA Decision promulgated June 25, 1993, Annex “C.”
5 SC Resolution dated October 18, 1993, Annex “D.”
6 “If the obligation consist 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 percent per annum.”

770

770 SUPREME COURT REPORTS ANNOTATED

Philippine National Bank vs. Court of Appeals
 provided by CB Circular 416 series of 1974,7 and (2)
whether such rate shall be computed from the filing of
the complaint until fully paid?
The issues are not new. In the case of Eastern
Shipping Lines, Inc. v. CA,8 this Court had provided a
rule “of thumb for future guidance,”9 to wit:

“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.”10 (Italics ours.)

The case at bench does not involve a loan,

forbearance of money or judgment involving a loan or
forbearance of money as it arose from a contract of sale
whereby Ibarrola did not receive full payment for her
merchandise. When an obligation

_______________

7  “By virtue of the authority granted to it under Section 1 of Act

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 (12%) per
cent per annum. This Circular shall take effect immediately.”
8 234 SCRA 78.
9 Id., at p. 96.
10 Eastern Shipping Lines, Inc. v. Court of Appeals, 234 SCRA 88.
 771

VOL. 263, OCTOBER 30, 1996 771

Philippine National Bank vs. Court of Appeals

arises “from a contract of purchase and sale and not

from a contract of loan or mutuum,” the applicable rate
is 6% per annum as 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 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
forbearance of money is breached then an interest on 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. Indeed, the monetary judgment in
favor of private respondent does not involve a loan or
forbearance of money, hence the proper imposable rate of
interest is six (6%) per cent.”13 (Italics ours.)

Applying the aforequoted rule, therefore, the proper

rate of interest referred to in the judgment under
execution is only 6%. This interest according to Eastern
Shipping shall be computed from the time of the filing
of the complaint considering that the amount adjudged
(P98,691.90) can be established with reasonable
certainty. Said amount being merely the uncollected
balance of the purchase price covered by the 23 checks
encashed and appropriated by Ibarrola’s agents.

_______________

11 Pilipinas Bank v. CA, 225 SCRA 268.

12 Rollo, p. 38.
13  Food Terminal, Inc. v. CA and TAO Development, Inc., G.R.
120097, September 23, 1996.

772

772 SUPREME COURT REPORTS ANNOTATED

Philippine National Bank vs. Court of Appeals

However, once the 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.”14 Thus, in accordance with the
pronouncement in Eastern Shipping the rate of 12%
p.a. should be imposed, and to be computed from the
time the judgment became final and executory until
fully satisfied. The actual base for the computation of
this 12% interest after the judgment in this damage
suit became final shall be the amount adjudged
(P98,691.90).
ACCORDINGLY, the appealed decision is
REVERSED. The rate of interest shall be 6% p.a.
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% p.a. computed from the time
the judgment became final and executory on November
26, 1993 until fully satisfied.
SO ORDERED.

Narvasa (C.J., Chairman), Davide, Jr., Melo and

Panganiban, JJ., concur.

Judgment reversed.
 Notes.—Under the Civil Service Law, lending
money at usurious rates of interest is specifically listed
as ground for disciplinary action. (RTC Makati
Movement Against Graft and Corruption vs. Dumlao,
247 SCRA 108 [1995])
Galloping increases in interest rate unilaterally
imposed by a bank on a customer’s loan, over the
latter’s vehement protests, are arbitrary. (Almeda vs.
Court of Appeals, 256 SCRA 292 [1996])

——o0o——

_______________

14 Ibid.

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