SPOUSES LORETO CLARAVALL AND VICTORIA CLARAVALL, PETITIONERS, VS. HON. FLORENIO E. TIERRA, IN HIS CAPACITY AS PRESIDING JUDGE, REGIONAL TRIAL COURT, BRANCH 16, ILAGAN, ISABELA, …

Claiming that the respondent Judge acted without jurisdiction
and/or with grave abuse of discretion in issuing the 25 March 1992 Resolution
of the motion for execution in Civil Case No. 2143 and the 22 April 1992 Order
denying the motion for reconsideration of the said Resolution, petitioners come
before Us in this petition for certiorari
and mandamus under Rule 65 of the Revised Rules of Court seeking the
annulment of the Resolution and Order, and praying for the issuance of a writ
of mandamus directing the respondent Judge to execute the decision of this
Court in G.R. No. L-47120 promulgated on 15 October 1990.

The antecedent facts of this case are not disputed.

Petitioners obtained a loan in the amount of P75,000.00 from the
private respondent and her husband Francisco Ramirez. Subsequently, they executed on 29 December 1965 a deed of sale of
a real property situated in the Municipality of Ilagan, Isabela in favor of the
Ramirezes. On the same date, the Ramirezes
executed an instrument granting the petitioners, for and in consideration of
the sum of P10,000.00, an option to repurchase the property within two (2)
years therefrom. Petitioners failed to
repurchase the property within the stipulated period and their subsequent offer
to buy back the property was refused by the Ramirezes.

The petitioners then brought suit against the Ramirezes to compel
the latter to sell back the property to them. The case was filed with the Regional Trial Court (RTC) of Ilagan, Isabela. It was docketed as Civil Case No. 2143 and
raffled off to Branch 16 of the same court. On 25 August 1969, the
trial court rendered a judgment adverse to the petitioners which, on appeal,
was affirmed in toto by the Court of Appeals in a decision dated 22 April 1976. The petitioners filed a petition for review
with this Court which was docketed as G.R. No. L-47120. On
21 October 1990, this Court, per Mr. Justice Abdulwahid A. Bidin,
rendered therein
a decision^[1] reversing
the judgment of the Court of Appeals and holding that the transaction between
the parties, although denominated as a deed of sale with an option to
repurchase, was one of equitable mortgage. The dispositive portion of the decision reads:

“WHEREFORE, the decision of respondent Court promulgated on
April 22, 1976 and its resolution of June 22, 1977 are hereby Reversed and Set
Aside. The deed of absolute sale
between the parties with the option to repurchase is declared as an equitable
mortgage and, petitioners are declared entitled to redeem the mortgage property
which shall be effected upon payment of their mortgage debt to private
respondents in the total amount of P85,000.00
with legal rate of interest from December 31, 1967, the time the loan
matured until it is fully paid.”^[2]

After the decision had become final and executory, the
petitioners filed in Civil Case No. 2143 a motion for execution of judgment^[3]
and deposited with the Clerk of Court of the trial court a manager’s check in
the amount of P207,825.00 representing the redemption price which they had
computed in this wise:

“Principal Indebtedness . . . . . . . . . . . . .             P85,000.00

Interest of 6% p.a. on

the P85,000.00 from

December 31, 1967 to

December 31, 1991 . . . . . . . . . . . . . P122,400.00

Interest of 6% p.a. on

the P85,000.00 from

January 1, 1992 to

January 31, 1992         . . . . . . . . . . . . . . P 425.00

                                                                   —————–

T O T A L                                                   P207,825.00″

On 5 March 1992, the trial court ordered the issuance of the
corresponding writ of execution.^[4]

On 19 March 1992, the Ramirezes filed an opposition^[5] to
the petitioners’ Motion for Execution
and to Deposit Redemption Price on the grounds that (a) the redemption money
offered by the petitioners is insufficient because the legal interest was
computed at the rate of six percent
(6%) per annum instead of twelve percent (12%) per annum in accordance with
Central Bank (CB) Circular No. 416 and the ruling in Reformina
vs. Tomol,^[6] and (b) the redemption price should include the value of the
improvements on the property and the escalation of the dollar based on the
exchange rate of the dollar vis-a-vis the peso
at the time of actual repurchase.

The petitioners filed their reply^[7] to the
opposition contending that (a) CB Circular No. 416 cannot be applied to an
equitable mortgage; (b) CB Circular No. 416, which became effective
on 29 July 1974, cannot retroact to 31 December 1967, the date granted to the
petitioners for the repurchase of the property; and (c) the Ramirezes cannot
recover the value of the improvements on the property or any alleged dollar
escalation, both of which had not been provided for in the decision.

On 25 March 1992, the trial court issued the questioned
Resolution^[8]
which held that “the amount stated in
the said decision corresponds to the sum of money involved in the
execution of the ‘deed of absolute sale between the parties with the option
to repurchase.’” The trial court stated that the amount, therefore,
“cannot be characterized other than a loan,” and, hence, covered by
CB Circular No. 416. It accordingly
decreed that the principal amount of P85,000.00 to be paid by the petitioners
should bear interest at the rate of twelve percent (12%) per annum from 31 December
1967 until it is fully paid. The court a quo passed sub
silentio on the private respondents’ prayer for
payment of the value of the improvements on the property and did not touch the issue of the escalated dollar rate of
exchange vis-a-vis the peso because “the same is not an incident or arising
(sic) out of the decision” in G.R. No. L­-47120. The dispositive portion
of the resolution reads:

“IN VIEW OF THE FOREGOING, Circular No. 416 of the Central Bank,
dated July 29, 1974 should be applied in the decision of the instant case — ­that
is the amount of P85,000.00 to be paid by the plaintiffs-petitioners to the
respondents-defendants should be charged with interest rate of 12% per annum from December 31, 1967
until fully paid.”

The petitioners’ motion for reconsideration^[9] was denied by the trial court on 22
April 1992.

Hence, the instant petition. Only Carolina Ramirez is impleaded as
private respondent since Francisco Ramirez had earlier died.^[10]

Petitioners allege as grounds for the petition the following, to
wit:

“1. THE
RESPONDENT JUDGE ACTED WITHOUT OR IN EXCESS OF THE JURISDICTION AND/OR WITH
GRAVE ABUSE OF DISCRETION IN APPLYING CIRCULAR NO. 416 DATED JULY 29, 1974
RETROACTIVELY AS OF DECEMBER 31, 1967 WHEN SAID CIRCULAR NO. 416 WAS NOT YET
EXISTING AND THE LEGAL RATE OF INTEREST WAS 6% PER ANNUM; AND

2. THE RESPONDENT JUDGE ACTED WITHOUT OR IN
EXCESS OF HIS JURISDICTION AND/OR WITH GRAVE ABUSE OF DISCRETION IN APPLYING
CIRCULAR NO. 416 DATED JULY 29, 1974 IN A CONTRACT OF DEED OF SALE WITH RIGHT
TO REPURCHASE WHICH WAS DECLARED BY THIS HONORABLE (sic) COURT AS AN EQUITABLE
MORTGAGE NOT COVERED BY SAID CB CIRCULAR NO.
416.”^[11]

The second ground raises the primary issue of the applicability
of CB Circular No. 416 to the instant case. Petitioners advance the view that it does not because the transaction
between the parties in this case is a deed of sale with an option to
repurchase, although declared an equitable mortgage in G.R. No. L-47120, and an
equitable mortgage is not strictly a loan, or a forbearance of money, goods or
credits which is covered by the circular.

Indeed, it is settled that CB Circular No. 416, which took effect
on 29 July 1974, applies only to interest on (a) loans; (b) forbearance of any
money, goods or credits; and (c) judgments in cases involving loans or forbearances of any money, goods or credits.^[12]

In Reformina vs. Tomol,^[13] We held:

“Central Bank Circular No. 416 which took effect on July 29, 1974
was issued and promulgated by the Monetary Board pursuant to the authority
granted to the Central Bank by P.D. No. 116, which amended Act No. 2655,
otherwise known as the Usury
Law. The amendment from which said
authority emanated reads as follows —

‘Section 1-a. The Monetary
Board is hereby authorized to prescribe the maximum rate or rates of interest
for the loan or renewal thereof or the forbearance of any money, goods or
credits, and to change such rate or rates whenever warranted by prevailing economic
and social conditions: Provided, That
such changes shall not be made oftener than once every twelve months.

In the exercise of the authority herein granted, the Monetary Board
may prescribe higher maximum rates for consumer loans or renewals thereof as well as such loans made by pawnshops,
finance companies and other similar credit institutions although the rates
prescribed for these institutions need not necessarily be uniform.’ (Italics
supplied)

Acting pursuant to this grant of authority, the Monetary Board
creased the rate of legal interest from that of six (6%) percent per annum
originally allowed under Section 1 of Act 2655 to twelve (12%) percent per
annum.

It will be noted that Act No. 2655 deals with interest on (1)
loans; (2) forbearances of any money, goods or credits; and (3) rate allowed in
judgments.”

Petitioners had argued that the deed of absolute sale in relation
to the option to repurchase was in reality an equitable mortgage, and in G.R.
No. L-47120, this Court categorically stated this to be the main issue, thus:

“The main issue in this case is whether or not the Deed of
Absolute Sale and Option to Repurchase executed by the parties must be
considered as an equitable mortgage and not the absolute sale it purports to
be.”^[14]

The dispositive portion of Our decision therein, quoted earlier,
leaves no doubt that the real transaction
was, in fact, one of loan, for We declared the petitioners
“entitled to redeem the mortgaged property which shall be effected upon
payment of their mortgage debt to private respondents in the total amount of
P85,000.00 with legal rate of interest from December 31, 1967, the time the loan
matured until it is fully paid.”^[15] In
fine, We ruled therein that the principal transaction between the parties was
one of loan and the so-called deed of absolute sale was intended as a security
for the payment of the loan.

An equitable mortgage “arises from a transaction, regardless
of its
form, which resolves into a security, or an offer or attempt to pledge land as
security for a debt or liability.”^[16]
Otherwise stated, the “essential feature or essence of an equitable mortgage is the
intent of the parties to create a mortgage, lien, or charge on property
sufficiently described or identified to secure an obligation, which intent must
be clearly established in order that such a mortgage may exist.”^[17]

Petitioners cannot, now, execute a volte-face and argue
that CB Circular No. 416 is inapplicable to this case. The second ground for the petition must then be
resolved against the petitioners.

There is, however, merit in their first ground.

The trial court erred in charging the petitioners with interest
on the redemption amount of P85,000.00 at the rate of twelve percent (12%) per
annum as prescribed by CB Circular No. 416, from 31 December 1967 until full
payment of the said redemption amount. The legal rate of interest before 29 July 1974 was only six percent (6%)
per annum and it was only on that date when the said rate was increased to
twelve percent (12%) per annum by CB Circular No. 416. We held in Viloria vs. Court of Appeals^[18] that CB Circular No. 416 should not
be given retrospective effect. Respondent trial court, therefore, acted with grave abuse of discretion
when it imposed a twelve percent (12%) per annum interest on the redemption
amount before 29 July 1974.

WHEREFORE, the instant petition for certiorari is
PARTIALLY GRANTED. The 25 March 1992
Resolution of the trial court is affirmed insofar as it held that the
redemption amount in G.R. No. L-47120 is covered by CB Circular No. 416 and
partially set aside insofar as it orders the petitioners to pay the
private respondent interest thereon at the rate of twelve percent (12%) per annum
from 31 December 1967 until 28 July 1974. The interest should be six percent (6%) per annum from 31
December 1967, when the loan matured, until 28 July 1974, and at the
rate of twelve percent (12%) per annum from 29 July 1974, the date when
CB Circular No. 416 took effect, until full payment of the said redemption
amount. The writ of execution must then
be amended
in conformity
with this Decision.

Costs against the private respondent.

SO ORDERED.

Feliciano, (Chairman), Bidin, Romero, and Melo, JJ., concur.

^[1] Annex “A”
of Petition; Rollo, 19-33.

^[2]
Rollo, 32-33.

^[3]
Annex “B” of Petition; Id., 34-36.

^[4]
Annex “D”, Id.; Id., 40.

^[5]
Annex “E” of Petition; Rollo,
41-42.

^[6]
139 SCRA 260 [1985].

^[7]
Annex “F”, Petition, op.
cit.;
Rollo, op. cit., 43-52.

^[8]
Annex “G”, Id.; Id.,
53-55.

^[9]
Rollo, 65.

^[10]
Id., 3.

^[11]
Rollo, 8.

^[12]
Reformina vs. Tomol, supra.; Philippine Rabbit Bus
Lines, Inc. vs. Cruz, 143 SCRA 158 [1986]; Meridian Assurance
Corp. vs. Dayrit, 184 SCRA 20 [1990]; Philippine Virginia Tobacco Administration vs. Tensuan, 188 SCRA 628
[1990]; FNCB Finance vs. Estavillo, 192 SCRA 514 [1990]; GSIS vs.
Court of Appeals, G.R. 103590, 29 January 1993.

^[13]
Supra.

^[14]
Rollo, 26.

^[15]
Underscoring supplied for emphasis.

^[16]
59 C.J.S. 42.

^[17]
Id., 43.

^[18] 123 SCRA 259 [1983]. See also, Buiser vs. Court of
Appeals, 154 SCRA 438 [1987].