PILIPINAS BANK, PETITIONER, VS. THE HON. COURT OF APPEALS, AND LILIA R. ECHAUS, RESPONDENTS.

This is a petition for certiorari
under Rule 45 of the Revised Rules of Court to review the Resolution of the
Court of Appeals in CA-G.R. CV No. 06017 promulgated on March 14, 1991. The Resolution was rendered in response to
private respondent’s motion for clarification of the decision of the Court of
Appeals in CA-G.R. No. 06017. The
matters sought to be clarified arose in the course of the execution of the
decision of the Regional Trial Court, Branch 71, Antipolo, Rizal in Civil Case
No. 239-A, as modified by the decision of the Court of Appeals in CA-G.R. CV
No. 06017.

In Civil Case No. 239-A, private
respondent filed a complaint against petitioner and its
president, Constantino Bautista, for collection of a sum
of money. The complaint alleged: (1) that petitioner and Greatland Realty
Corporation (Greatland) executed a “Dacion en Pago,” wherein
Greatland conveyed to petitioner several parcels of land in consideration of
the sum of P7,776,335.69; (2)
that Greatland assigned P2,300,000.00 out of the total consideration of the Dacion en Pago, in favor
of private respondent; and (3) that notwithstanding her demand for payment,
petitioner in bad faith, refused and failed to pay the said amount assigned to
her.

Petitioner, while
admitting the execution of the Dacion en Pago,
claimed: (1) that its former president had no authority to enter into such
agreement; (2) that it never
ratified the same; and (3) that assuming arguendo that the agreement was binding, the
conditions stipulated therein were never fulfilled.

Dismissing petitioner’s
defenses as unmeritorious, the trial court ruled in favor of private
respondent. The trial court ordered
petitioner and its co-defendant, jointly and severally, to pay private
respondent as follows:

“1) P2,300,000.00 the total amount assigned by
Greatland in her favor out of the P2,300,000.00 liability of defendant
Pilipinas to Greatland plus legal interest from the dates of assignments until
fully paid;

2) P3,217,707.00
representing the total actual damages suffered by the plaintiff plus legal
interest until fully paid;

3)   P1,000,000.00
in moral damages to partially assuage the extreme moral sufferings of plaintiff
inflicted upon her person considering the bad faith on the part of the
defendants and their failure to act with justice, and to give what is lawfully
due her and observe honesty and good faith;

4) P100,000.00 exemplary
and nominal damages to vindicate plaintiff’s violated rights;

5) Attorney’s fees
equivalent to 15% of the total award in favor of the plaintiff;

6) Costs of suit”
(Rollo, p. 78).

On March 22, 1985, petitioner appealed the decision of the trial
court to the Court of Appeals, which docketed the appeal as CA-G.R. No.
06017. On the same day, private
respondent filed a Motion for Immediate Execution Pending Appeal. The trial court granted the motion for
execution pending appeal in an Order dated April 3, 1985. Petitioner challenged the Order dated April
3, 1985 before the Court of Appeals in CA-G.R. No. SP No. 05909.

On October 30, 1986, the Court of Appeals modified the Order dated
April 3, 1985, by limiting the execution pending appeal against petitioner to
P5,517,707.00 and deferring the
execution of the award for moral, exemplary and nominal damages to await the
final judgment of the main case in CA-G.R. No. 06017. On June 17, 1987, the Supreme Court in G.R. No. L-76506 affirmed
the Order dated October 30, 1986 of the Court of Appeals.

On July 1, 1988, the trial court granted the new motion for
execution pending appeal filed by private respondent pursuant to the Resolution
of the Supreme Court dated June 17,
1987, upon the filing of the required bond. Petitioner complied with the writ of execution pending appeal by issuing
two manager’s checks in the total amount of P5,517,707.00 (one for P4,965,936.30
payable to private respondent and another for P551,770.70 payable to the Clerk
of Court, RTC, Antipolo, Rizal).

The check payable to private respondent was encashed on July 15,
1988.

On June 28, 1990, the Court of Appeals rendered a decision in
CA-G.R. No. CV-06017, which modified the judgment of the trial court as
follows:

“1. The
defendant-appellant Pilipinas Bank, formerly known as Filipinas Manufacturers
Bank is ordered to pay the plaintiff-appellee the following:

(a) The sum of Two
Million Three Hundred Thousand (2,300,000.00) Pesos, representing the total
amount assigned by Greatland to her, with interest at the legal rate starting
July 24, 1981, date when demand was first made (Exh. “F” and
“G”);

(b) The sum of One
Hundred Thousand (P100,000.00) Pesos in moral damages, to assuage moral
sufferings and embarrassment of plaintiff-appellee as a consequence of
appellant-bank’s unwarranted acts;

(c) The sum of Twenty Five Thousand (P25,000.00)
Pesos, as exemplary damages to serve as an example or correction for the public
good;

(d) The sum equivalent to ten (10) percent of
the principal claim awarded, representing attorney’s fees; and

2. Constantino Bautista is absolved of personal liability”. (Rollo, pp. 31-32).

Petitioner filed a motion for extension of time to file a Petition
for Review on Certiorari with the Supreme Court, which however was
withdrawn on July 23, 1990. Private
respondent, on her part, filed a motion for reconsideration of the decision of
the Court of Appeals in CA-G.R. No. 06017, which likewise was withdrawn on
August 13, 1990.

Hence, the decision of the Court of Appeals rendered in CA-G.R.
No. 06017 became final and executory.

On September 4, 1990, petitioner filed a motion in the trial
court praying that private respondent and Standard Insurance Co. (which
furnished the bond required in the advance execution of the decision of the
trial court) to refund to her the excess payment of P1,898,623.67 with
interests at 6% (Rollo, pp. 83-84).

It must be recalled that
while private respondent was able to collect P5,517,707.00 from petitioner pursuant to the writ of
advance execution allowed in CA­-G.R. No. SP No. 05909, the final judgment in
the main case (CA-G.R. No. 06017) awarded
to private respondent damages in the total amount of only P2,655,000.00
(P2,300,000.00 representing the amount
assigned by Greatland to private respondent, P100,000.00 as moral damages; P25,000.00
as exemplary damages and attorney’s
fees equivalent to 10% of the P2,300,000.00), together “with interest on
the amount of P2,300,000.00 at
the legal rate starting July 24, 1981, date when demand was first made (Exh.
“F” and “G”).”

Private respondent opposed the motion of petitioner with respect
to the rate of interest to be charged on the amount of P2,300,000.00. According to private respondent, the legal
interest on the principal amount of P2,300,000.00 due her should be 12% per
annum pursuant to CB Circular No. 416 and not 6% per annum as computed by petitioner.

On October 12, 1990, the trial court, while ordering the refund
to petitioner of the excess payment, fixed the interest rate due on the amount
of P2,300,000.00 at 12% per annum as proposed by private respondent, instead of
6% per annum as proposed by petitioner.

On October 16, 1990, petitioner moved to reconsider the Order
dated October 12, 1990 of the trial court, which however could not be acted
upon because on October 23, 1990, private respondent filed a Motion for Clarification with the Court of Appeals in
CA-G.R. CV No. 06017, regarding the following matters:

“a) The ‘legal
rate’ of interest on the principal award of P2,300,000.00 from July 24, 1981
(as per decision) up to July 14, 1988 (date of actual payment made by
defendant-appellant to plaintiff-appellee per execution pending appeal);

b) The
imposition of such ‘legal rate’ of interest on the ‘accrued interest’ from July
24, 1981 up to July 14, 1988;

c) The
amount of the costs of suit will include premium on surety bond;

d) The
discharge of the surety bond whether total or partial, depending on the
computation of the interest;

e) The award of attorney’s fees equivalent to
10% of the principal award, whether this should totally go to plaintiff-­appellee’s
former counsel or to be shared on the basis of quantum meruit
with the undersigned counsel; and

f) Aside from this final award of 10% attorney’s
fees chargeable against defendant-appellant, whether or not former counsel of
plaintiff-appellee can still collect from her the balance of 15% out of the 25%
attorney’s fees under Exh. ‘N'” (Rollo, p. 32).

In its Resolution promulgated
on March 14, 1991, the Court of
Appeals clarified that:

“a) The legal rate of interest on the principal
award of P2,300,000.00 should be 12% per annum in accordance with Circular No.
416 dated July 29, 1974 of the Central Bank.

b) The
computation of compounding interest annually has no basis, therefore, not
allowed in the instant case;

c) The
payment of premium on the bond in the sum of P259,813.50 as cost, being without
legal and factual basis, is denied;

d) The
surety bond posted by plaintiff-appellee may be released after satisfaction of
the decision; and

e) Payment/distribution
of attorney’s fees may/shall be litigated in a separate proceeding if the
parties cannot settle their differences amicably.

SO ORDERED” (Rollo, pp. 35-36).

In this appeal,
petitioner claims that the Court of Appeals erred:

(1)  In ruling that the legal rate of interest on
the amount of P2,300,000.00 adjudged to be paid by petitioner to private
respondent is 12% per annum.

(2) In
not holding that the refund to which petitioner is entitled should earn
interest at the rate of 12% per annum.

(3) In
not holding that the surety bond should only be released after actual refund
(Rollo, p. 18).

The Court of Appeals was of the theory that the action in Civil
Case No. 239-A filed by private respondent against petitioner “involves
forbearance of money, as the principal award to plaintiff-appellee (private
respondent) in the amount of P2,300,000.00 was the overdue debt of
defendant-appellant to her since July 1981. The case is, in effect, a simple collection of the money due to
plaintiff-appellee, as the unpaid creditor from the defendant bank, the debtor” (Resolution, p. 3; Rollo, p.
33). Applying Central Bank Circular No.
416, the Court of Appeals held that the applicable rate of interest is 12% per
annum.

Petitioner argues that the applicable law is Article 2209 of the
Civil Code, not the Central Bank Circular No. 416. Said Article 2209 provides:

“Art. 2209. 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 the interest agreed upon, and in the absence of
stipulation, the legal interest, which is six per cent per annum.”

Presidential Decree No. 116 authorized the Monetary Board 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 amended the Usury Law (Act No. 2655) for that purpose.

As amended, the Usury Law
now provides:

“SECTION 1. 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 six per centum per annum or
such rate as may be prescribed by the Monetary Board of the Central Bank of the
Philippines for that purpose in accordance with the authority hereby
granted.”

“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 charge 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.”

Acting on the authority
vested on it by the Usury Law, as amended by P.D. No. 116, the Monetary Board
of Central Bank issued Central Bank Circular No. 416, which provides:

“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.” (underscoring
supplied)

Note that Circular No. 416, fixing the rate of interest at 12%
per annum, deals with (1) loans; (2) forbearance of any money, goods or credit;
and (3) judgments.

In Reformina v. Tomol, Jr., 139
SCRA 260 [1985], the Court held that the judgments spoken of and referred to in
Circular No. 416 are “judgments in litigation 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 forbearance 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.”

Reformina was affirmed in Philippine Virginia Tobacco Administration v. Tensuan, 188 SCRA 628 [1990], which emphasized that the
“judgments” contemplated in Circular No. 417 “are judgments
involving said loans or forbearance only and not in judgments in litigation
that have nothing to do with loans x x x.”

We held that Circular No. 416 does not apply to judgments
involving damages (Reformina v. Tomol, Jr., supra; Philippine Virginia
Tobacco Administration v. Tensuan, supra) and compensation in
expropriation proceedings (National Power Corporation v. Angas, 208 SCRA 542
[1992]). We also held that Circular No.
416 applies to judgments involving the payment of unliquidated cash advances to
an employee by his employer (Villarica v. Court of Appeals, 123 SCRA 259 [1983]) and the return of money
paid by a buyer of a leasehold right but which contract was voided due to the
fault of the seller (Buisier v. Court of Appeals, 154 SCRA 438 [1987]).

What then is the nature of the judgment ordering petitioner to
pay private respondent the amount of P2,300,000.00?

The said amount was a portion of the P7,776,335.69 which petitioner
was obligated to pay Greatland as consideration for the sale of several parcels
of land by Greatland to petitioner. The
amount of P2,300,000.00 was assigned by Greatland in favor of private respondent. The said obligation therefore arose from a contract of purchase
and sale and not from a contract of loan or mutuum. Hence, what is applicable is the rate of 6% per annum as provided
in Article 2209 of the Civil
Code of the Philippines and not the rate of 12% per annum as provided in Circular No. 416.

Petitioner next contends that, consistent with its thesis that
Circular No. 416 applies only to judgments involving the payment of loans or
forbearance of money goods and credit, the Court of Appeals should have ordered
private respondent to pay interest at the rate of 12% on the overpayment collected by her pursuant to the advance
execution of the judgment.

Again, we sustain
petitioner’s contention as correct.

Private respondent was
paid in advance the amount of P5,517,707.00 by petitioner pursuant to the order
for the execution pending appeal of the judgment of the trial
court. On appeal, the Court of Appeals
reduced the total damages to P3,619,083.33, leaving a balance of P1,898,623.67
to be refunded by private respondent to petitioner. In an execution pending appeal, funds are advanced by the losing
party to the prevailing party with the implied obligation of the latter to
repay the former, in case the appellate court cancels or reduces the monetary
award.

Under Section 5 of Rule
39 of the Revised Rules of Court where “the judgment executed is reversed
totally or partially on appeal, the trial court, on motion, after the case is
remanded to it, may issue such orders of restitution, as equity and justice may
warrant under the circumstances.” It was to guarantee the restitution
contemplated by Section 5 of Rule 39 of the Revised Rules of Court that private
respondent was required by the trial court to post a bond before the writ of
advance execution was issued.

In the case before us,
the excess amount ordered to be refunded by private respondent falls within the ruling in Viloria and Buiser that
Circular No. 416 applies to cases where money is transferred from one person to
another and the obligation to return the same or a portion thereof is
subsequently adjudged.

Finally, petitioner
questions as vague the ruling of the Court of Appeals that the surety bond
given to secure the advance execution may be discharged “upon the
finality and satisfaction of the decision.” We believe that this ruling of
the Court of Appeals is clear enough in ordering that the surety bond shall be
released only after private respondent has fully refunded the overpayment to
petitioner.

WHEREFORE, the petition is GRANTED. The Resolution of the Court of Appeals
appealed from is MODIFIED in that (1) the amount of P2,300,000.00
adjudged to be paid by petitioner to private respondent shall earn interest of
6% per annum and (2) the amount of P1,898,623.67 to be refunded by private
respondent to petitioner shall earn interest of 12% per annum. Costs against private respondent.

SO ORDERED.

Cruz, (Chairman), Griño-Aquino, Davide, Jr., and Bellosillo, JJ., concur.