PHILIPPINE VIRGINIA TOBACCO ADMINISTRATION, PETITIONER, VS. HON. RICARDO P. TENSUAN, AS JUDGE OF THE COURT OF FIRST INSTANCE OF RIZAL, BRANCH IV, QUEZON CITY, AND EASTERN VIGAN …

The legal issue raised for our determination is whether or not
Central Bank Circular No. 416, dated July
29, 1974 and issued pursuant to the authority granted under Act No.
2655, as amended (The Usury Law), and prescribing that:

“xxx 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%) percent per annum,”

is applicable to
the decision of respondent court dated December
28, 1970 in Civil Case No. 11973 entitled “Eastern Vigan VTPA, Inc., et al. v. Phil. – Virginia Tobacco
Administration, et al.”

It appears that on various dates in 1963 the private respondents,
who are farmers’ cooperatives, delivered to the Central Cooperative Exchange,
Inc. (CCE, for brevity) in the latter’s redrying
plant at Agoo, La Union, certain
quantities of tobacco under particular guias.  At that time, CCE had a management contract
with petitioner under which it obligated itself to procure, redry
and service Virginia Tobacco for petitioner and to advance the payment of the
tobacco to the private respondents at the government support price.  On July
24, 1963, a fire destroyed the tobacco shipments of private
respondents in the redrying plant of the CCE, which shipments were already unloaded
therein though still awaiting inspection, grading and weighing.  Petitioner failed to pay the price of the
burned tobacco, prompting private respondents to institute Civil Case No. 11973 entitled “Eastern Vigan VTPA, Inc., et al. v. Phil. Virginia Tobacco Administration, et. al.”. After trial, on December 28, 1970, petitioner was ordered to pay private respondents the total amount of P1,036,717.09, plus legal interest from December 29, 1970
until fully paid, on the ground that petitioner already had the legal control
and custody of the tobacco shipments and should be deemed to have accepted
them.  Pursuant to a writ of execution
issued by the respondent Judge, the funds of the petitioner deposited at
the Philippine National Bank (Cubao Branch) were
garnished by the Sheriff of Quezon City to satisfy
the judgment in favor of the private respondents.

Petitioner did not
agree with the computation of the interest of 12% per annum based on Central Bank Circular No. 416 and
insisted on the application of the 6% legal rate of interest under Art. 2209 of
the Civil Code which reads:

“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 interest agreed upon, and
in the absence of stipulation, the legal interest which is six percent per
annum.”

Thus, on August 12, 1981, private
respondents filed an ex­–parte motion praying
for the issuance of an order fixing the legal rate of interest at 12% per
annum.  Petitioner filed an opposition thereto.

On November 4, 1981, the respondent judge issued the order prayed for the dispositive
portion of which reads as follows:

“xxx               xxx                   xxx

“(a) The
judgment obligation is determined as bearing interest thereon at 6% per annum
up to August 12, 1974, and thereafter at 12% per annum until fully paid; and

“b) The Ilocos Sur
Tobacco Industries Corporation is declared as entitled to a judgment obligation
in the sum of P27,640.78, with interest thereon at the rate set forth in paragraph
(a) immediately above.

“SO ORDERED. .”

Hence, the instant petition.

Private respondents
maintain that Article 2209 is “merely descriptive of the legal rate and
does not mean that the legal rate will be 6% per annum forever; it was added to
Art. 2209 because in 1950 when the Civil Code took effect the
prevailing rate was 6%.  Now,
however, the prevailing legal rate is 12% per annum x x x.  This must be so because the law is not
stagnant x x x.” They
further argue that the term “judgments” in CB Circular No. 416 is not
limited to judgments on loans or forbearance of money, or to “interest by
way of earnings” but should apply to all judgments for the payment of a
sum of money (as the law does not distinguish).

The foregoing conclusions
deserve scant consideration.  Applying
the case of Reformina v. Tomol,
139 SCRA 260, which bears essentially the same issues as in the case at hand,
We hold that Central Bank Circular No. 416 dated July 29, 1974, which fixes the
legal rate of interest at 12% per annum is not applicable here since the
circular applies only to loans or forbearance of money, goods or credits and
court judgment thereon.  As held in the Reformina case:

“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 increased the rate of legal interest
from that of the six (6%)
percent per annum originally allowed under Section 1 of Act No. 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.

“The issue now is–what kind of judgment is referred to under
the said law.  Petitioners maintain that
it covers all kinds of monetary judgments.

“The contention is devoid of merit.

“The judgments spoken of and referred to are judgments in
litigations 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 forbearances 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.  The Monetary Board may not tread on forbidden
grounds.  It cannot rewrite other
laws.  That function is vested solely
with the legislative authority.  It is
axiomatic in legal hermeneutics that statutes should be construed as a whole
and not as a series of disconnected articles and phrases.  In the absence of a clear contrary intention, words and
phrases in statutes should not be interpreted in isolation from one
another.  A word or phrase in a statute
is always used in association with other words or phrases and its meaning
may thus be modified or restricted by the latter.”

The Reformina case was an Action for
Damages for injury to persons and loss of property which was held not to
involve any loan, much less forbearance of any money,
goods or credits and therefore the law applicable is Art. 2209
of the Civil Code and not
Central Bank Circular No. 416.  To
make the latter law applicable to any case other than those specifically
provided for by the Usury Law would be to violate the principle of undue
delegation of legislative powers since the Monetary Board will be exercising legislative functions which was beyond the intendment of
P.D. 116.

We find no cogent reason to deviate from the Reformina
ruling in this case before Us.  The pertinent transaction here does not also
involve any loan or forbearance of any money, etc.  It was a contract of sale wherein there was
default in the payment of the price and interest was awarded therefor.  The interest here is therefore not within the
contemplation of the Usury Law.  Thus, Art. 2209 is the law applicable.

As regards the position of private respondents that the term
“judgments” in Central Bank Circular No. 416 is not limited to
judgments on loans or forbearance of money but should apply to all money
judgments, We strongly disagree and hold that the “judgments”
contemplated in the said Circular are judgments involving such loans or
forbearances only and not in judgments in litigations that have nothing to do
with loans as in the case at bar.

WHEREFORE, the Order of Judge Ricardo P. Tensuan dated November 4, 1981 is hereby MODIFIED in that
all the amounts specified in the dispositive portion
of the Decision of the Court of First Instance dated December 28, 1970 shall
earn interest of six percent (6%) per annum from the time the complaint was
filed until the same is fully paid.

SO ORDERED.

Melencio-Herrera, (Chairman),
Padilla, and Regalado,
JJ., concur.

Sarmiento, J., on leave.