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G.R. No. 80294-95 September 21, 1988 CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE, petitioner, vs.

COURT OF APPEALS, HEIRS OF EGMIDIO OCTAVIANO AND JUAN VALDEZ, respondents. Valdez, Ereso, Polido & Associates for petitioner. Claustro, Claustro, Claustro Law Office collaborating counsel for petitioner. Jaime G. de Leon for the Heirs of Egmidio Octaviano. Cotabato Law Office for the Heirs of Juan Valdez.

GANCAYCO, J.: The principal issue in this case is whether or not a decision of the Court of Appeals promulgated a long time ago can properly be considered res judicata by respondent Court of Appeals in the present two cases between petitioner and two private respondents. Petitioner questions as allegedly erroneous the Decision dated August 31, 1987 of the Ninth Division of Respondent Court of Appeals 1 in CA-G.R. No. 05148 [Civil Case No. 3607 (419)] and CA-G.R. No. 05149 [Civil Case No. 3655 (429)], both for Recovery of Possession, which affirmed the Decision of the Honorable Nicodemo T. Ferrer, Judge of the Regional Trial Court of Baguio and Benguet in Civil Case No. 3607 (419) and Civil Case No. 3655 (429), with the dispositive portion as follows: WHEREFORE, Judgment is hereby rendered ordering the defendant, Catholic Vicar Apostolic of the Mountain Province to return and surrender Lot 2 of Plan Psu-194357 to the plaintiffs. Heirs of Juan Valdez, and Lot 3 of the same Plan to the other set of plaintiffs, the Heirs of Egmidio Octaviano (Leonardo Valdez, et al.). For lack or insufficiency of evidence, the plaintiffs' claim or damages is hereby denied. Said defendant is ordered to pay costs. (p. 36, Rollo) Respondent Court of Appeals, in affirming the trial court's decision, sustained the trial court's conclusions that the Decision of the Court of Appeals, dated May 4,1977 in CA-G.R. No. 38830-R, in the two cases affirmed by the Supreme Court, touched on the ownership of lots 2 and 3 in question; that the two lots were possessed by the predecessors-in-interest of private respondents under claim of ownership in good faith from 1906 to 1951; that petitioner had been in possession of the same lots as bailee in commodatum up to 1951, when petitioner repudiated the trust and when it applied for registration in 1962; that petitioner had just been in possession as owner for eleven years, hence there is no possibility of acquisitive prescription which requires 10 years possession with just title and 30 years of possession without; that the principle of res judicata on these findings by the Court of Appeals will bar a reopening of these questions of facts; and that those facts may no longer be altered. Petitioner's motion for reconsideation of the respondent appellate court's Decision in the two aforementioned cases (CA G.R. No. CV-05418 and 05419) was denied. The facts and background of these cases as narrated by the trail court are as follows ... The documents and records presented reveal that the whole controversy started when the defendant Catholic Vicar Apostolic of the Mountain Province (VICAR for brevity) filed with the Court of First Instance of Baguio Benguet on September 5, 1962 an application for registration of title over

Lots 1, 2, 3, and 4 in Psu-194357, situated at Poblacion Central, La Trinidad, Benguet, docketed as LRC N-91, said Lots being the sites of the Catholic Church building, convents, high school building, school gymnasium, school dormitories, social hall, stonewalls, etc. On March 22, 1963 the Heirs of Juan Valdez and the Heirs of Egmidio Octaviano filed their Answer/Opposition on Lots Nos. 2 and 3, respectively, asserting ownership and title thereto. After trial on the merits, the land registration court promulgated its Decision, dated November 17, 1965, confirming the registrable title of VICAR to Lots 1, 2, 3, and 4. The Heirs of Juan Valdez (plaintiffs in the herein Civil Case No. 3655) and the Heirs of Egmidio Octaviano (plaintiffs in the herein Civil Case No. 3607) appealed the decision of the land registration court to the then Court of Appeals, docketed as CA-G.R. No. 38830-R. The Court of Appeals rendered its decision, dated May 9, 1977, reversing the decision of the land registration court and dismissing the VICAR's application as to Lots 2 and 3, the lots claimed by the two sets of oppositors in the land registration case (and two sets of plaintiffs in the two cases now at bar), the first lot being presently occupied by the convent and the second by the women's dormitory and the sister's convent. On May 9, 1977, the Heirs of Octaviano filed a motion for reconsideration praying the Court of Appeals to order the registration of Lot 3 in the names of the Heirs of Egmidio Octaviano, and on May 17, 1977, the Heirs of Juan Valdez and Pacita Valdez filed their motion for reconsideration praying that both Lots 2 and 3 be ordered registered in the names of the Heirs of Juan Valdez and Pacita Valdez. On August 12,1977, the Court of Appeals denied the motion for reconsideration filed by the Heirs of Juan Valdez on the ground that there was "no sufficient merit to justify reconsideration one way or the other ...," and likewise denied that of the Heirs of Egmidio Octaviano. Thereupon, the VICAR filed with the Supreme Court a petition for review on certiorari of the decision of the Court of Appeals dismissing his (its) application for registration of Lots 2 and 3, docketed as G.R. No. L-46832, entitled 'Catholic Vicar Apostolic of the Mountain Province vs. Court of Appeals and Heirs of Egmidio Octaviano.' From the denial by the Court of Appeals of their motion for reconsideration the Heirs of Juan Valdez and Pacita Valdez, on September 8, 1977, filed with the Supreme Court a petition for review, docketed as G.R. No. L-46872, entitled, Heirs of Juan Valdez and Pacita Valdez vs. Court of Appeals, Vicar, Heirs of Egmidio Octaviano and Annable O. Valdez. On January 13, 1978, the Supreme Court denied in a minute resolution both petitions (of VICAR on the one hand and the Heirs of Juan Valdez and Pacita Valdez on the other) for lack of merit. Upon the finality of both Supreme Court resolutions in G.R. No. L-46832 and G.R. No. L- 46872, the Heirs of Octaviano filed with the then Court of First Instance of Baguio, Branch II, a Motion For Execution of Judgment praying that the Heirs of Octaviano be placed in possession of Lot 3. The Court, presided over by Hon. Salvador J. Valdez, on December 7, 1978, denied the motion on the ground that the Court of Appeals decision in CA-G.R. No. 38870 did not grant the Heirs of Octaviano any affirmative relief. On February 7, 1979, the Heirs of Octaviano filed with the Court of Appeals a petitioner for certiorari and mandamus, docketed as CA-G.R. No. 08890-R, entitled Heirs of Egmidio Octaviano vs. Hon. Salvador J. Valdez, Jr. and

Vicar. In its decision dated May 16, 1979, the Court of Appeals dismissed the petition. It was at that stage that the instant cases were filed. The Heirs of Egmidio Octaviano filed Civil Case No. 3607 (419) on July 24, 1979, for recovery of possession of Lot 3; and the Heirs of Juan Valdez filed Civil Case No. 3655 (429) on September 24, 1979, likewise for recovery of possession of Lot 2 (Decision, pp. 199-201, Orig. Rec.). In Civil Case No. 3607 (419) trial was held. The plaintiffs Heirs of Egmidio Octaviano presented one (1) witness, Fructuoso Valdez, who testified on the alleged ownership of the land in question (Lot 3) by their predecessor-in-interest, Egmidio Octaviano (Exh. C ); his written demand (Exh. BB-4 ) to defendant Vicar for the return of the land to them; and the reasonable rentals for the use of the land at P10,000.00 per month. On the other hand, defendant Vicar presented the Register of Deeds for the Province of Benguet, Atty. Nicanor Sison, who testified that the land in question is not covered by any title in the name of Egmidio Octaviano or any of the plaintiffs (Exh. 8). The defendant dispensed with the testimony of Mons.William Brasseur when the plaintiffs admitted that the witness if called to the witness stand, would testify that defendant Vicar has been in possession of Lot 3, for seventy-five (75) years continuously and peacefully and has constructed permanent structures thereon. In Civil Case No. 3655, the parties admitting that the material facts are not in dispute, submitted the case on the sole issue of whether or not the decisions of the Court of Appeals and the Supreme Court touching on the ownership of Lot 2, which in effect declared the plaintiffs the owners of the land constitute res judicata.

In these two cases , the plaintiffs arque that the defendant Vicar is barred from setting up the defense of ownership and/or long and continuous possession of the two lots in question since this is barred by prior judgment of the Court of Appeals in CA-G.R. No. 038830-R under the principle of res judicata. Plaintiffs contend that the question of possession and ownership have already been determined by the Court of Appeals (Exh. C, Decision, CA-G.R. No. 038830-R) and affirmed by the Supreme Court (Exh. 1, Minute Resolution of the Supreme Court). On his part, defendant Vicar maintains that the principle of res judicata would not prevent them from litigating the issues of long possession and ownership because the dispositive portion of the prior judgment in CAG.R. No. 038830-R merely dismissed their application for registration and titling of lots 2 and 3. Defendant Vicar contends that only the dispositive portion of the decision, and not its body, is the controlling pronouncement of the Court of Appeals. 2
The alleged errors committed by respondent Court of Appeals according to petitioner are as follows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

5. ERROR IN FINDING THAT VALDEZ AND OCTAVIANO HAD FREE PATENT APPLICATIONS AND THE PREDECESSORS OF PRIVATE RESPONDENTS ALREADY HAD FREE PATENT APPLICATIONS SINCE 1906; 6. ERROR IN FINDING THAT PETITIONER DECLARED LOTS 2 AND 3 ONLY IN 1951 AND JUST TITLE IS A PRIME NECESSITY UNDER ARTICLE 1134 IN RELATION TO ART. 1129 OF THE CIVIL CODE FOR ORDINARY ACQUISITIVE PRESCRIPTION OF 10 YEARS; 7. ERROR IN FINDING THAT THE DECISION OF THE COURT OF APPEALS IN CA G.R. NO. 038830 WAS AFFIRMED BY THE SUPREME COURT; 8. ERROR IN FINDING THAT THE DECISION IN CA G.R. NO. 038830 TOUCHED ON OWNERSHIP OF LOTS 2 AND 3 AND THAT PRIVATE RESPONDENTS AND THEIR PREDECESSORS WERE IN POSSESSION OF LOTS 2 AND 3 UNDER A CLAIM OF OWNERSHIP IN GOOD FAITH FROM 1906 TO 1951; 9. ERROR IN FINDING THAT PETITIONER HAD BEEN IN POSSESSION OF LOTS 2 AND 3 MERELY AS BAILEE BOR ROWER) IN COMMODATUM, A GRATUITOUS LOAN FOR USE; 10. ERROR IN FINDING THAT PETITIONER IS A POSSESSOR AND BUILDER IN GOOD FAITH WITHOUT RIGHTS OF RETENTION AND REIMBURSEMENT AND IS BARRED BY THE FINALITY AND CONCLUSIVENESS OF THE DECISION IN CA G.R. NO. 038830. 3 The petition is bereft of merit. Petitioner questions the ruling of respondent Court of Appeals in CA-G.R. Nos. 05148 and 05149, when it clearly held that it was in agreement with the findings of the trial court that the Decision of the Court of Appeals dated May 4,1977 in CA-G.R. No. 38830-R, on the question of ownership of Lots 2 and 3, declared that the said Court of Appeals Decision CA-G.R. No. 38830-R) did not positively declare private respondents as owners of the land, neither was it declared that they were not owners of the land, but it held that the predecessors of private respondents were possessors of Lots 2 and 3, with claim of ownership in good faith from 1906 to 1951. Petitioner was in possession as borrower in commodatum up to 1951, when it repudiated the trust by declaring the properties in its name for taxation purposes. When petitioner applied for registration of Lots 2 and 3 in 1962, it had been in possession in concept of owner only for eleven years. Ordinary acquisitive prescription requires possession for ten years, but always with just title. Extraordinary acquisitive prescription requires 30 years. 4 On the above findings of facts supported by evidence and evaluated by the Court of Appeals in CA-G.R. No. 38830-R, affirmed by this Court, We see no error in respondent appellate court's ruling that said findings are res judicata between the parties. They can no longer be altered by presentation of evidence because those issues were resolved with finality a long time ago. To ignore the principle of res judicata would be to open the door to endless litigations by continuous determination of issues without end. An examination of the Court of Appeals Decision dated May 4, 1977, First Division 5 in CA-G.R. No. 38830-R, shows that it reversed the trial court's Decision 6 finding petitioner to be entitled to register the lands in question under its ownership, on its evaluation of evidence and conclusion of facts. The Court of Appeals found that petitioner did not meet the requirement of 30 years possession for acquisitive prescription over Lots 2 and 3. Neither did it satisfy the requirement of 10 years possession for ordinary acquisitive prescription because of the absence of just title. The appellate court did not believe the findings of the trial court that Lot 2 was acquired from Juan Valdez by purchase and Lot 3 was acquired also by purchase from Egmidio Octaviano by petitioner Vicar because there was absolutely no documentary evidence to support the same and the alleged purchases were never mentioned in the application for registration.

By the very admission of petitioner Vicar, Lots 2 and 3 were owned by Valdez and Octaviano. Both Valdez and Octaviano had Free Patent Application for those lots since 1906. The predecessors of private respondents, not petitioner Vicar, were in possession of the questioned lots since 1906. There is evidence that petitioner Vicar occupied Lots 1 and 4, which are not in question, but not Lots 2 and 3, because the buildings standing thereon were only constructed after liberation in 1945. Petitioner Vicar only declared Lots 2 and 3 for taxation purposes in 1951. The improvements oil Lots 1, 2, 3, 4 were paid for by the Bishop but said Bishop was appointed only in 1947, the church was constructed only in 1951 and the new convent only 2 years before the trial in 1963. When petitioner Vicar was notified of the oppositor's claims, the parish priest offered to buy the lot from Fructuoso Valdez. Lots 2 and 3 were surveyed by request of petitioner Vicar only in 1962. Private respondents were able to prove that their predecessors' house was borrowed by petitioner Vicar after the church and the convent were destroyed. They never asked for the return of the house, but when they allowed its free use, they became bailors in commodatum and the petitioner the bailee. The bailees' failure to return the subject matter of commodatum to the bailor did not mean adverse possession on the part of the borrower. The bailee held in trust the property subject matter of commodatum. The adverse claim of petitioner came only in 1951 when it declared the lots for taxation purposes. The action of petitioner Vicar by such adverse claim could not ripen into title by way of ordinary acquisitive prescription because of the absence of just title. The Court of Appeals found that the predecessors-in-interest and private respondents were possessors under claim of ownership in good faith from 1906; that petitioner Vicar was only a bailee in commodatum; and that the adverse claim and repudiation of trust came only in 1951. We find no reason to disregard or reverse the ruling of the Court of Appeals in CA-G.R. No. 38830-R. Its findings of fact have become incontestible. This Court declined to review said decision, thereby in effect, affirming it. It has become final and executory a long time ago. Respondent appellate court did not commit any reversible error, much less grave abuse of discretion, when it held that the Decision of the Court of Appeals in CA-G.R. No. 38830-R is governing, under the principle of res judicata, hence the rule, in the present cases CA-G.R. No. 05148 and CA-G.R. No. 05149. The facts as supported by evidence established in that decision may no longer be altered. WHEREFORE AND BY REASON OF THE FOREGOING, this petition is DENIED for lack of merit, the Decision dated Aug. 31, 1987 in CA-G.R. Nos. 05148 and 05149, by respondent Court of Appeals is AFFIRMED, with costs against petitioner. SO ORDERED. G.R. No. L-20240 December 31, 1965

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee, vs. JOSE GRIJALDO, defendant-appellant. Office of the Solicitor General for plaintiff-appellee. Isabelo P. Samson for defendant-appellant. ZALDIVAR, J.: In the year 1943 appellant Jose Grijaldo obtained five loans from the branch office of the Bank of Taiwan, Ltd. in Bacolod City, in the total sum of P1,281.97 with interest at the rate of 6% per annum, compounded quarterly. These loans are evidenced by five promissory notes executed by the appellant in favor of the Bank of Taiwan,

Ltd., as follows: On June 1, 1943, P600.00; on June 3, 1943, P159.11; on June 18, 1943, P22.86; on August 9, 1943,P300.00; on August 13, 1943, P200.00, all notes without due dates, but because the loans were due one year after they were incurred. To secure the payment of the loans the appellant executed a chattel mortgage on the standing crops on his land, Lot No. 1494 known as Hacienda Campugas in Hinigiran, Negros Occidental. By virtue of Vesting Order No. P-4, dated January 21, 1946, and under the authority provided for in the Trading with the Enemy Act, as amended, the assets in the Philippines of the Bank of Taiwan, Ltd. were vested in the Government of the United States. Pursuant to the Philippine Property Act of 1946 of the United States, these assets, including the loans in question, were subsequently transferred to the Republic of the Philippines by the Government of the United States under Transfer Agreement dated July 20, 1954. These assets were among the properties that were placed under the administration of the Board of Liquidators created under Executive Order No. 372, dated November 24, 1950, and in accordance with Republic Acts Nos. 8 and 477 and other pertinent laws. On September 29, 1954 the appellee, Republic of the Philippines, represented by the Chairman of the Board of Liquidators, made a written extrajudicial demand upon the appellant for the payment of the account in question. The record shows that the appellant had actually received the written demand for payment, but he failed to pay. The aggregate amount due as principal of the five loans in question, computed under the Ballantyne scale of values as of the time that the loans were incurred in 1943, was P889.64; and the interest due thereon at the rate of 6% per annum compounded quarterly, computed as of December 31, 1959 was P2,377.23. On January 17, 1961 the appellee filed a complaint in the Justice of the Peace Court of Hinigaran, Negros Occidental, to collect from the appellant the unpaid account in question. The Justice of the Peace Of Hinigaran, after hearing, dismissed the case on the ground that the action had prescribed. The appellee appealed to the Court of First Instance of Negros Occidental and on March 26, 1962 the court a quo rendered a decision ordering the appellant to pay the appellee the sum of P2,377.23 as of December 31, 1959, plus interest at the rate of 6% per annum compounded quarterly from the date of the filing of the complaint until full payment was made. The appellant was also ordered to pay the sum equivalent to 10% of the amount due as attorney's fees and costs. The appellant appealed directly to this Court. During the pendency of this appeal the appellant Jose Grijaldo died. Upon motion by the Solicitor General this Court, in a resolution of May 13, 1963, required Manuel Lagtapon, Jacinto Lagtapon, Ruben Lagtapon and Anita L. Aguilar, who are the legal heirs of Jose Grijaldo to appear and be substituted as appellants in accordance with Section 17 of Rule 3 of the Rules of Court. In the present appeal the appellant contends: (1) that the appellee has no cause of action against the appellant; (2) that if the appellee has a cause of action at all, that action had prescribed; and (3) that the lower court erred in ordering the appellant to pay the amount of P2,377.23. In discussing the first point of contention, the appellant maintains that the appellee has no privity of contract with the appellant. It is claimed that the transaction between the Taiwan Bank, Ltd. and the appellant, so that the appellee, Republic of the Philippines, could not legally bring action against the appellant for the enforcement of the obligation involved in said transaction. This contention has no merit. It is true that the Bank of Taiwan, Ltd. was the original creditor and the transaction between the appellant and the Bank of Taiwan was a private contract of loan. However, pursuant to the Trading with the Enemy Act, as amended, and Executive Order No. 9095 of the United States; and under Vesting Order No. P-4, dated January 21, 1946, the properties of the Bank of Taiwan, Ltd., an entity which was declared to be under the jurisdiction of the enemy country (Japan), were vested in the United States Government and the Republic of the Philippines, the assets of the Bank of Taiwan, Ltd. were transferred to and vested in the Republic of the Philippines. The successive transfer of the rights over the loans in question from the Bank of Taiwan, Ltd. to the United States Government, and from the United States Government to the government of the Republic of the Philippines, made the Republic of the Philippines the successor of the rights, title and interest in said loans, thereby creating a privity of contract between the appellee and the appellant. In defining the word "privy" this Court, in a case, said: The word "privy" denotes the idea of succession ... hence an assignee of a credit, and one subrogated to it, etc. will be privies; in short, he who by succession is placed in the position of one of those who

contracted the judicial relation and executed the private document and appears to be substituting him in the personal rights and obligation is a privy (Alpurto vs. Perez, 38 Phil. 785, 790). The United States of America acting as a belligerent sovereign power seized the assets of the Bank of Taiwan, Ltd. which belonged to an enemy country. The confiscation of the assets of the Bank of Taiwan, Ltd. being an involuntary act of war, and sanctioned by international law, the United States succeeded to the rights and interests of said Bank of Taiwan, Ltd. over the assets of said bank. As successor in interest in, and transferee of, the property rights of the United States of America over the loans in question, the Republic of the Philippines had thereby become a privy to the original contracts of loan between the Bank of Taiwan, Ltd. and the appellant. It follows, therefore, that the Republic of the Philippines has a legal right to bring the present action against the appellant Jose Grijaldo. The appellant likewise maintains, in support of his contention that the appellee has no cause of action, that because the loans were secured by a chattel mortgage on the standing crops on a land owned by him and these crops were lost or destroyed through enemy action his obligation to pay the loans was thereby extinguished. This argument is untenable. The terms of the promissory notes and the chattel mortgage that the appellant executed in favor of the Bank of Taiwan, Ltd. do not support the claim of appellant. The obligation of the appellant under the five promissory notes was not to deliver a determinate thing namely, the crops to be harvested from his land, or the value of the crops that would be harvested from his land. Rather, his obligation was to pay a generic thing the amount of money representing the total sum of the five loans, with interest. The transaction between the appellant and the Bank of Taiwan, Ltd. was a series of five contracts of simple loan of sums of money. "By a contract of (simple) loan, one of the parties delivers to another ... money or other consumable thing upon the condition that the same amount of the same kind and quality shall be paid." (Article 1933, Civil Code) The obligation of the appellant under the five promissory notes evidencing the loans in questions is to pay the value thereof; that is, to deliver a sum of money a clear case of an obligation to deliver, a generic thing. Article 1263 of the Civil Code provides: In an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the obligation. The chattel mortgage on the crops growing on appellant's land simply stood as a security for the fulfillment of appellant's obligation covered by the five promissory notes, and the loss of the crops did not extinguish his obligation to pay, because the account could still be paid from other sources aside from the mortgaged crops. In his second point of contention, the appellant maintains that the action of the appellee had prescribed. The appellant points out that the loans became due on June 1, 1944; and when the complaint was filed on January 17,1961 a period of more than 16 years had already elapsed far beyond the period of ten years when an action based on a written contract should be brought to court. This contention of the appellant has no merit. Firstly, it should be considered that the complaint in the present case was brought by the Republic of the Philippines not as a nominal party but in the exercise of its sovereign functions, to protect the interests of the State over a public property. Under paragraph 4 of Article 1108 of the Civil Code prescription, both acquisitive and extinctive, does not run against the State. This Court has held that the statute of limitations does not run against the right of action of the Government of the Philippines (Government of the Philippine Islands vs. Monte de Piedad, etc., 35 Phil. 738-751).Secondly, the running of the period of prescription of the action to collect the loan from the appellant was interrupted by the moratorium laws (Executive Orders No. 25, dated November 18, 1944; Executive Order No. 32. dated March 10, 1945; and Republic Act No. 342, approved on July 26, 1948). The loan in question, as evidenced by the five promissory notes, were incurred in the year 1943, or during the period of Japanese occupation of the Philippines. This case is squarely covered by Executive Order No. 25, which became effective on November 18, 1944, providing for the suspension of payments of debts incurred after December 31, 1941. The period of prescription was, therefore, suspended beginning November 18, 1944. This Court, in the case of Rutter vs. Esteban (L-3708, May 18, 1953, 93 Phil. 68), declared on May 18, 1953 that the Moratorium Laws, R.A. No. 342 and Executive Orders Nos. 25 and 32, are unconstitutional; but in that case this Court ruled that the moratorium laws had suspended the prescriptive period until May 18, 1953. This ruling was categorically reiterated in the decision in the case of Manila Motors vs. Flores, L-9396, August 16, 1956. It follows, therefore, that the prescriptive period in the case now before US was suspended from November 18,1944, when Executive Orders Nos. 25 and 32

were declared unconstitutional by this Court. Computed accordingly, the prescriptive period was suspended for 8 years and 6 months. By the appellant's own admission, the cause of action on the five promissory notes in question arose on June 1, 1944. The complaint in the present case was filed on January 17, 1961, or after a period of 16 years, 6 months and 16 days when the cause of action arose. If the prescriptive period was not interrupted by the moratorium laws, the action would have prescribed already; but, as We have stated, the prescriptive period was suspended by the moratorium laws for a period of 8 years and 6 months. If we deduct the period of suspension (8 years and 6 months) from the period that elapsed from the time the cause of action arose to the time when the complaint was filed (16 years, 6 months and 16 days) there remains a period of 8 years and 16 days. In other words, the prescriptive period ran for only 8 years and 16 days. There still remained a period of one year, 11 months and 14 days of the prescriptive period when the complaint was filed. In his third point of contention the appellant maintains that the lower court erred in ordering him to pay the amount of P2,377.23. It is claimed by the appellant that it was error on the part of the lower court to apply the Ballantyne Scale of values in evaluating the Japanese war notes as of June 1943 when the loans were incurred, because what should be done is to evaluate the loans on the basis of the Ballantyne Scale as of the time the loans became due, and that was in June 1944. This contention of the appellant is also without merit. The decision of the court a quo ordered the appellant to pay the sum of P2,377.23 as of December 31, 1959, plus interest rate of 6% per annum compounded quarterly from the date of the filing of the complaint. The sum total of the five loans obtained by the appellant from the Bank of Taiwan, Ltd. was P1,281.97 in Japanese war notes. Computed under the Ballantyne Scale of values as of June 1943, this sum of P1,281.97 in Japanese war notes in June 1943 is equivalent to P889.64 in genuine Philippine currency which was considered the aggregate amount due as principal of the five loans, and the amount of P2,377.23 as of December 31, 1959 was arrived at after computing the interest on the principal sum of P889.64 compounded quarterly from the time the obligations were incurred in 1943. It is the stand of the appellee that the Ballantyne scale of values should be applied as of the time the obligation was incurred, and that was in June 1943. This stand of the appellee was upheld by the lower court; and the decision of the lower court is supported by the ruling of this Court in the case of Hilado vs. De la Costa (G.R. No. L-150, April 30, 1949; 46 O.G. 5472), which states: ... Contracts stipulating for payments presumably in Japanese war notes may be enforced in our Courts after the liberation to the extent of the just obligation of the contracting parties and, as said notes have become worthless, in order that justice may be done and the party entitled to be paid can recover their actual value in Philippine Currency, what the debtor or defendant bank should return or pay is the value of the Japanese military notes in relation to the peso in Philippine Currency obtaining on the date when and at the place where the obligation was incurred unless the parties had agreed otherwise. ... . (italics supplied) IN VIEW OF THE FOREGOING, the decision appealed from is affirmed, with costs against the appellant. Inasmuch as the appellant Jose Grijaldo died during the pendency of this appeal, his estate must answer in the execution of the judgment in the present case. G.R. No. L-38745 August 6, 1975 LUCIA TAN, plaintiff-appellee, vs. ARADOR VALDEHUEZA and REDICULO VALDEHUEZA, defendants-appellants. Alaric P. Acosta for plaintiff-appellee. Lorenzo P. de Guzman for defendants-appellants.

CASTRO, J.:

This appeal was certified to this Court by the Court of Appeals as involving questions purely of law. The decision a quo was rendered by the Court of First Instance of Misamis Occidental (Branch I) in an action instituted by the plaintiff-appellee Lucia Tan against the defendants-appellants Arador Valdehueza and Rediculo Valdehueza (docketed as civil case 2574) for (a) declaration of ownership and recovery of possession of the parcel of land described in the first cause of action of the complaint, and (b) consolidation of ownership of two portions of another parcel of (unregistered) land described in the second cause of action of the complaint, purportedly sold to the plaintiff in two separate deeds of pacto de retro. After the issues were joined, the parties submitted the following stipulation of facts: 1. That parties admit the legal capacity of plaintiff to sue; that defendants herein, Arador, Rediculo, Pacita, Concepcion and Rosario, all surnamed Valdehueza, are brothers and sisters; that the answer filed by Arador and Rediculo stand as the answer of Pacita, Concepcion and Rosario. 2. That the parties admit the identity of the land in the first cause of action. 3. That the parcel of land described in the first cause of action was the subject matter of the public auction sale held on May 6, 1955 at the Capitol Building in Oroquieta, Misamis Occidental, wherein the plaintiff was the highest bidder and as such a Certificate of Sale was executed by MR. VICENTE D. ROA who was then the Ex-Officio Provincial Sheriff in favor of LUCIA TAN the herein plaintiff. Due to the failure of defendant Arador Valdehueza to redeem the said land within the period of one year as being provided by law, MR. VICENTE D. ROA who was then the Ex-Officio Provincial Sheriff executed an ABSOLUTE DEED OF SALE in favor of the plaintiff LUCIA TAN. A copy of the NOTICE OF SHERIFFS SALE is hereby marked as 'Annex A', the CERTIFICATE OF SALE is marked as 'Annex B' and the ABSOLUTE DEED OF SALE is hereby marked as Annex C and all of which are made as integral parts of this stipulation of facts. 4. That the party-plaintiff is the same plaintiff in Civil Case No. 2002; that the parties defendants Arador, Rediculo and Pacita, all Valdehueza were the same parties-defendants in the same said Civil Case No. 2002; the complaint in Civil Case No. 2002 to be marked as Exhibit 1; the answer as Exhibit 2 and the order dated May 22, 1963 as Exhibit 3, and said exhibits are made integral part of this stipulation. 5. That defendants ARADOR VALDEHUEZA and REDICULO VALDEHUEZA have executed two documents of DEED OF PACTO DE RETRO SALE in favor of the plaintiff herein, LUCIA TAN of two portions of a parcel of land which is described in the second cause of action with the total amount of ONE THOUSAND FIVE HUNDRED PESOS (P1,500.00), Philippine Currency, copies of said documents are marked as 'Annex D' and Annex E', respectively and made as integral parts of this stipulation of facts. 6. That from the execution of the Deed of Sale with right to repurchase mentioned in the second cause of action, defendants Arador Valdehueza and Rediculo Valdehueza remained in the possession of the land; that land taxes to the said land were paid by the same said defendants.

Civil case 2002 referred to in stipulation of fact no. 4 was a complaint for injunction filed by Tan on July 24, 1957 against the Valdehuezas, to enjoin them "from entering the above-described parcel of land and gathering the nuts therein ...." This complaint and the counterclaim were subsequently dismissed for failure of the parties "to seek for the immediate trial thereof, thus evincing lack of interest on their part to proceed with the case. 1

The Deed of Pacto de Retro referred to in stipulation of fact no. 5 as "Annex D" (dated August 5, 1955) was not registered in the Registry of Deeds, while the Deed of Pacto de Retro referred to as "Annex E" (dated March 15, 1955) was registered. On the basis of the stipulation of facts and the annexes, the trial court rendered judgment, as follows: WHEREFORE, judgment is hereby rendered in favor of the plaintiff: 1. Declaring Lucia Tan the absolute owner of the property described in the first cause of action of the amended complaint; and ordering the herein defendants not to encroach and molest her in the exercise of her proprietary rights; and, from which property they must be dispossessed; 2. Ordering the defendants, Arador Valdehueza and Rediculo Valdehueza jointly and severally to pay to the plaintiff, Lucia Tan, on Annex 'E' the amount of P1,200, with legal interest of 6% as of August 15, 1966, within 90 days to be deposited with the Office of the Court within 90 days from the date of service of this decision, and that in default of such payment the property shall be sold in accordance with the Rules of Court for the release of the mortgage debt, plus costs; 3. And as regards the land covered by deed of pacto de retro annex 'D', the herein defendants Arador Valdehueza and Rediculo Valdehueza are hereby ordered to pay the plaintiff the amount of P300 with legal interest of 6% from August 15, 1966, the said land serving as guaranty of the said amount of payment; 4. Sentencing the defendants Arador Valdehueza and Rediculo Valdehueza to pay jointly and severally to the herein plaintiff Lucia Tan the amount of 1,000.00 as attorney's fees; and . 5. To pay the costs of the proceedings. The Valdehuezas appealed, assigning the following errors: That the lower court erred in failing to adjudge on the first cause of action that there exists res judicata; and That the lower court erred in making a finding on the second cause of action that the transactions between the parties were simple loan, instead, it should be declared as equitable mortgage. We affirm in part and modify in part. 1. Relying on Section 3 of Rule 17 of the Rules of Court which pertinently provides that a dismissal for failure to prosecute "shall have the effect of an adjudication upon the merits," the Valdehuezas submit that the dismissal of civil case 2002 operated, upon the principle of res judicata, as a bar to the first cause of action in civil case 2574. We rule that this contention is untenable as the causes of action in the two cases are not identical. Case 2002 was for injunction against the entry into and the gathering of nuts from the land, while case 2574 seeks to "remove any doubt or cloud of the plaintiff's ownership ..." (Amended complaint, Rec. on App., p. 27), with a prayer for declaration of ownership and recovery of possession. Applying the test of absence of inconsistency between prior and subsequent judgments, 2 we hold that the failure of Tan, in case 2002, to secure an injunction against the Valdehuezas to prevent them from entering the land and gathering nuts is not inconsistent with her being adjudged, in case 2574, as owner of the land with right to recover possession thereof. Case 2002 involved only the possession of the land and the fruits thereof, while case 2574 involves ownership of the land, with possession as a mere attribute of ownership. The judgment in the first case could not and did not encompass the judgment in the second, although the second

judgment would encompass the first. Moreover, the new Civil Code provides that suitors in actions to quiet title "need not be in possession of said property. 3 2. The trial court treated the registered deed of pacto de retro as an equitable mortgage but considered the unregistered deed of pacto de retro "as a mere case of simple loan, secured by the property thus sold underpacto de retro," on the ground that no suit lies to foreclose an unregistered mortgage. It would appear that the trial judge had not updated himself on law and jurisprudence; he cited, in support of his ruling, article 1875 of the old Civil Code and decisions of this Court circa 1910 and 1912. Under article 1875 of the Civil Code of 1889, registration was a necessary requisite for the validity of a mortgage even as between the parties, but under article 2125 of the new Civil Code (in effect since August 30,1950), this is no longer so. 4 If the instrument is not recorded, the mortgage is nonetheless binding between the parties. (Article 2125, 2nd sentence). The Valdehuezas having remained in possession of the land and the realty taxes having been paid by them, the contracts which purported to be pacto de retro transactions are presumed to be equitable mortgages, 5 whether registered or not, there being no third parties involved. 3. The Valdehuezas claim that their answer to the complaint of the plaintiff affirmed that they remained in possession of the land and gave the proceeds of the harvest to the plaintiff; it is thus argued that they would suffer double prejudice if they are to pay legal interest on the amounts stated in the pacto de retro contracts, as the lower court has directed, and that therefore the court should have ordered evidence to be adduced on the harvest. The record does not support this claim. Nowhere in the original and the amended complaints is an allegation of delivery to the plaintiff of the harvest from the land involved in the second cause of action. Hence, the defendants' answer had none to affirm. In submitting their stipulation of facts, the parties prayed "for its approval and maybe made the basis of the decision of this Honorable Court. " (emphasis supplied) This, the court did. It cannot therefore be faulted for not receiving evidence on who profited from the harvest. 4. The imposition of legal interest on the amounts subject of the equitable mortgages, P1,200 and P300, respectively, is without legal basis, for, "No interest shall be due unless it has been expressly stipulated in writing." (Article 1956, new Civil Code) Furthermore, the plaintiff did not pray for such interest; her thesis was a consolidation of ownership, which was properly rejected, the contracts being equitable mortgages. With the definitive resolution of the rights of the parties as discussed above, we find it needless to pass upon the plaintiffs petition for receivership. Should the circumstances so warrant, she may address the said petition to the court a quo. ACCORDINGLY, the judgment a quo is hereby modified, as follows: (a) the amounts of P1,200 and P300 mentioned in Annexes E and D shall bear interest at six percent per annum from the finality of this decision; and (b) the parcel of land covered by Annex D shall be treated in the same manner as that covered by Annex E, should the defendants fail to pay to the plaintiff the sum of P300 within 90 days from the finality of this decision. In all other respects the judgment is affirmed. No costs. G.R. No. L-59096 October 11, 1985 PACITA F. REFORMINA and HEIRS OF FRANCISCO REFORMINA, petitioners, vs. THE HONORABLE VALERIANO P. TOMOL, JR., as Judge of the Court of First Instance, Branch XI, CEBU CITY, SHELL REFINING COMPANY (PHILS.), INC., and MICHAEL, INCORPORATED, respondents.

Mateo Canonoy for petitioners. Reynaldo A. Pineda, Reyes, Santayana, Tayao and Picaso Law Office for respondent Shell. Marcelo Fernan & Associates for respondent Michael, Inc.

CUEVAS, J.: How much, by way of legal interest, should a judgment debtor pay the judgment creditor- is the issue raised by the REFORMINAS (herein petitioners) in this Petition for Review on certiorari of the Resolution of the Hon. respondent Judge Valeriano P. Tomol, Jr. of the then Court of First Instance of Cebu-Branch XI, issued in Civil Case No. R-11279, an action for Recovery of Damages for injury to Person and Loss of Property. The dispositive portion of the assailed Resolution reads as follows In light (sic) of the foregoing, the considered view here that by legal interest is meant six (6%) percent as provided for by Article 2209 of the Civil Code. Let a writ of execution be issued.

SO ORDERED. 1
Petitioners' motion for the reconsideration of the questioned Resolution having been denied, they now come before Us through the instant petition praying for the setting aside of the said Resolution and for a declaration that the judgment in their favor should bear legal interest at the rate of twelve (12%) percent per annum pursuant to Central Bank Circular No. 416 dated July 29, 1974. Hereunder are the pertinent antecedents: On June 7, 1972, judgment was rendered by the Court of First instance of Cebu in Civil Case No. R11279, 2 the dispositive portion of which reads WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and third party defendants and against the defendants and third party plaintiffs as follows: Ordering defendants and third party plaintiffs Shell and Michael, Incorporated to pay jointly and severally the following persons: (a) ... xxx xxx xxx (g) Plaintiffs Pacita F. Reformina and Francisco Reformina the sum of P131,084.00 which is the value of the boat F B Pacita Ill together with its accessories, fishing gear and equipment minus P80,000.00 which is the value of the insurance recovered and the amount of P10,000.00 a month as the estimated monthly loss suffered by them as a result of the fire of May 6, 1969 up to the time they are actually paid or already the total sum of P370,000.00 as of June 4, 1972 with legal interest from the filing of the complaint until paid and to pay attorney's fees of P5,000.00 with costs against defendants and third party plaintiffs. On appeal to the then Court of Appeals, the trial court's judgment was modified to reads as follows

WHEREFORE. the judgment appealed from is modified such that defendants-appellants Shell Refining Co. (Phils.), Inc. and Michael, Incorporated are hereby ordered to pay ... The two (2) defendants- appellants are also directed to pay P100,000.00 with legal interests from the filing of the complaint until paid as compensatory and moral damages and P41,000.00 compensation for the value of the lost boat with legal interest from the filing of the complaint until fully paid to Pacita F. Reformina and the heirs of Francisco Reformina. The liability of the two defendants for an the awards is solidary. xxx xxx xxx Except as modified above, the rest of the judgment appealed from is affirmed. The defendants-appellants shall pay costs in favor of the plaintiffs. Appellants Shell and Michael and third party defendant Anita L. Abellanosa shall shoulder their respective costs. SO ORDERED. 3 The said decision having become final on October 24, 1980, the case was remanded to the lower court for execution and this is where the controversy started. In the computation of the "legal interest" decreed in the judgment sought to be executed, petitioners claim that the "legal interest" should be at the rate of twelve (12%) percent per annum, invoking in support of their aforesaid submission, Central Bank of the Philippines Circular No. 416. Upon the other hand, private respondents insist that said legal interest should be at the rate of six (6%) percent per annum only, pursuant to and by authority of Article 2209 of the New Civil Code in relation to Articles 2210 and 2211 thereof. In support of their stand, petitioners contend that 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. (Italics supplied) includes the judgment sought to be executed in this case, because it is covered by the phrase 2nd the rate allowed in judgments in the absence of express contract as to such rate of interest ... " in the aforequoted circular. The petition is devoid of merit. Consequently, its dismissal is in order. 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 six (6%) percent per annum originally allowed under Section I 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 iswhat kind of judgment is referred to under the said law. Petitioners maintain that it covers all kinds of monetary judgment. 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 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. 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. 4 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. 5 Another formidable argument against the tenability of petitioners' stand are the whereases of PD No. 116 which brought about the grant of authority to the Central Bank and which reads thus WHEREAS, the interest rate, together with other monetary and credit policy instruments, performs a vital role in mobilizing domestic savings and attracting capital resources into preferred areas of investments; WHEREAS, the monetary authorities have recognized the need to amend the present Usury. Law to allow for more flexible interest rate ceilings that would be more responsive to the requirements of changing economic conditions; WHEREAS, the availability of adequate capital resources is, among other factors, a decisive element in the achievement of the declared objective of accelerating the growth of the national economy. Coming to the case at bar, the decision herein sought to be executed is one rendered in an Action for Damages for injury to persons and loss of property and does not involve any loan, much less forbearances of any money, goods or credits. As correctly argued by the private respondents, the law applicable to the said case is Article 2209 of the New Civil Code which reads 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 interest agreed upon, and in the absence of stipulation, the legal interest which is six percent per annum. The above provision remains untouched despite the grant of authority to the Central Bank by Act No. 2655, as amended. To make Central Bank Circular No. 416 applicable to any case other than those specifically provided for by the Usury Law will make the same of doubtful constitutionality since the Monetary Board will be exercising legislative functions which was beyond the intendment of P.D. No. 116. IN VIEW OF THE FOREGOING CONSIDERATIONS, and finding the instant petition to be without merit, the same is hereby DISMISSED with costs against petitioners. SO ORDERED.

G.R. No. 113926 October 23, 1996 SECURITY BANK AND TRUST COMPANY, petitioner, vs. REGIONAL TRIAL COURT OF MAKATI, BRANCH 61, MAGTANGGOL EUSEBIO and LEILA VENTURA,respondents.

HERMOSISIMA, JR. J.:p Questions of law which are of first impression are sought to be resolved in this case: Should the rate of interest on a loan or forbearance of money, goods or credits, as stipulated in a contract, far in excess of the ceiling prescribed under or pursuant to the Usury Law, prevail over Section 2 of Central Bank Circular No. 905 which prescribes that the rate of interest thereof shall continue to be 12% per annum? Do the Courts have the discretion to arbitrarily override stipulated interest rates of promissory notes and stipulated interest rates of promissory notes and thereby impose a 12% interest on the loans, in the absence of evidence justifying the imposition of a higher rate? This is a petition for review on certiorari for the purpose of assailing the decision of Honorable Judge Fernando V. Gorospe of the Regional Trial Court of Makati, Branch 61, dated March 30, 1993, which found private respondent Eusebio liable to petitioner for a sum of money. Interest was lowered by the court a quo from 23% per annum as agreed upon the parties to 12% per annum. The undisputed facts are as follows: On April 27, 1983, private respondent Magtanggol Eusebio executed Promissory Note No. TL/74/178/83 in favor of petitioner Security Bank and Trust Co. (SBTC) in the total amount of One Hundred Thousand Pesos (P100,000.00) payable in six monthly installments with a stipulated interest of 23% per annum up to the fifth installment. 1 On July 28, 1983, respondent Eusebio again executed Promissory Note No. TL/74/1296/83 in favor of petitioner SBTC. Respondent bound himself to pay the sum of One Hundred Thousand Pesos (P100,000.00) in six (6) monthly installments plus 23% interest per annum. 2 Finally, another Promissory Note No. TL74/1491/83 was executed on August 31, 1983 in the amount of Sixty Five Thousand Pesos (P65,000.00). Respondent agreed to pay this note in six (6) monthly installments plus interest at the rate of 23% per annum. 3 On all the abovementioned promissory notes, private respondent Leila Ventura had signed as co-maker. 4 Upon maturity which fell on the different dates below, the principal balance remaining on the notes stood at: 1) PN No. TL/74/748/83 P16,665.00 as of September 1983. 2) PN No. TL/74/1296/83 P83,333.00 as of August 1983. 3) PN No. TL/74/1991/83 P65,000.00 as of August 1983. Upon the failure and refusal of respondent Eusebio to pay the aforestated balance payable, a collection case was filed in court by petitioner SBTC. 5 On March 30, 1993, the court a quo rendered a judgment in favor of petitioner SBTC, the dispositive portion which reads: WHEREFORE, premises above-considered, and plaintiff's claim having been duly proven, judgment is hereby rendered in favor of plaintiff and as against defendant Eusebio who is hereby ordered to:

1. Pay the sum of P16,655.00, plus interest of 12% per annum starting 27 September 1983, until fully paid; 2. Pay the sum of P83,333.00, plus interest of 12% per annum starting 28 August 1983, until fully paid; 3. Pay the sum of P65,000.00, plus interest of 12% per annum starting 31 August 1983, until fully paid; 4. Pay the sum equivalent to 20% of the total amount due and payable to plaintiff as and by way of attorney's fees; and to 5. Pay the costs of this suit.

SO ORDERED. 6
On August 6, 1993, a motion for partial reconsideration was filed by petitioner SBTC contending that: (1) the interest rate agreed upon by the parties during the signing of the promissory notes was 23%per annum; (2) the interests awarded should be compounded quarterly from due date as provided in the three (3) promissory notes;

(3) defendants Leila Ventura should likewise be held liable to pay the balance on the promissory notes since she has signed as co-maker and as such, is liable jointly and severally with defendant Eusebio without a need for demand upon her. 7
Consequently, an Order was issued by the court a quo denying the motion to grant the rates of interest beyond 12% per annum; and holding defendant Leila Ventura jointly and severally liable with co-defendants Eusebio. Hence, this petition. The sole issue to be settled in this petition is whether or not the 23% rate of interest per annum agreed upon by petitioner bank and respondents is allowable and not against the Usury Law. We find merit in this petition. From the examination of the records, it appears that indeed the agreed rate of interest as stipulated on the three (3) promissory notes is 23% per annum. 8 The applicable provision of law is the Central Bank Circular No. 905 which took effect on December 22, 1982, particularly Sections 1 and 2 which state: 9 Sec. 1. The rate of interest, including commissions, premiums, fees and other charges, on a loan or forbearance of any money, goods or credits, regardless of maturity and whether secured or unsecured, that may be charged or collected by any person, whether natural or judicial, shall not be subject to any ceiling prescribed under or pursuant to the Usury Law, as amended. Sec. 2. 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 continue to be twelve per cent (12%) per annum. CB Circular 905 was issued by the Central Bank's Monetary Board pursuant to P.D. 1684 empowering them to prescribe the maximum rates of interest for loans and certain forbearances, to wit:

Sec. 1. Section 1-a of Act No. 2655, as amended, is hereby amended to read as follows: Sec. 1-a. The Monetary Board is hereby authorized to prescribe the maximum rate 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 changes in such rate or rates may be effected gradually on scheduled dates announced in advance.

In the exercise of the authority herein granted, the Monetary Board may prescribe higher maximum rates for loans of low priority, such as 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. The Monetary Board is also authorized to prescribed different maximum rate or rates for different types of borrowings, including deposits and deposit substitutes, or loans of financial intermediaries. 10
The court has ruled in the case of Philippine National Bank v. Court of Appeals 11 that: P.D. No. 1684 and C.B. Circular No. 905 no more than allow contracting parties to stipulate freely regarding any subsequent adjustment in the interest rate that shall accrue on a loan or forbearance of money, goods or credits. In fine, they can agree to adjust, upward or downward, the interest previously stipulated. All the promissory notes were signed in 1983 and, therefore, were already covered by CB Circular No. 905. Contrary to the claim of respondent court, this circular did not repeal nor in anyway amend the Usury Law but simply suspended the latter's effectivity. Basic is the rule of statutory construction that when the law is clear and unambiguous, the court is left with no alternative but to apply the same according to its clear language. As we have held in the case of Quijano v.Development Bank of the Philippines: 12 . . . We cannot see any room for interpretation or construction in the clear and unambiguous language of the above-quoted provision of law. This Court had steadfastly adhered to the doctrine that its first and fundamental duty is the application of the law according to its express terms, interpretation being called for only when such literal application is impossible. No process of interpretation or construction need be resorted to where a provision of law peremptorily calls for application. Where a requirement or condition is made in explicit and unambiguous terms, no discretion is left to the judiciary. It must see to it that is mandate is obeyed. The rate of interest was agreed upon by the parties freely. Significantly, respondent did not question that rate. It is not for respondent court a quo to change the stipulations in the contract where it is not illegal. Furthermore, Article 1306 of the New Civil Code provides that contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. We find no valid reason for the respondent court a quo to impose a 12% rate of interest on the principal balance owing to petitioner by respondent in the presence of a valid stipulation. In a loan or forbearance of money, the interest due should be that stipulated in writing, and in the absence thereof, the rate shall be 12% per annum. 13 Hence, only in the absence of a stipulation can the court impose the 12% rate of interest. The promissory notes were signed by both parties voluntarily. Therefore, stipulations therein are binding between them. Respondent Eusebio, likewise, did not question any of the stipulations therein. In fact, in the Comment filed by respondent Eusebio to this court, he chose not to question the decision and instead expressed his desire to negotiate with the petitioner bank for "terms within which to settle his obligation." 14

IN VIEW OF THE FOREGOING, the decision of the respondent court a quo, is hereby AFFIRMED with the MODIFICATION that the rate of interest that should be imposed be 23% per annum. SO ORDERED. G.R. No. 97995 January 21, 1993 PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS AND B.P. MATA AND CO., INC., respondents. Roland A. Niedo for petitioner. Benjamin C. Santos Law Office for respondent.

ROMERO, J.: Rarely is this Court confronted with a case calling for the delineation in broad strokes of the distinctions between such closely allied concepts as the quasi-contract called "solutio indebiti" under the venerable Spanish Civil Code and the species of implied trust denominated "constructive trusts," commonly regarded as of AngloAmerican origin. Such a case is the one presented to us now which has highlighted more of the affinity and less of the dissimilarity between the two concepts as to lead the legal scholar into the error of interchanging the two. Presented below are the factual circumstances that brought into juxtaposition the twin institutions of the Civil Law quasi-contract and the Anglo-American trust. Private Respondent B.P. Mata & Co. Inc. (Mata), is a private corporation engaged in providing goods and services to shipping companies. Since 1966, it has acted as a manning or crewing agent for several foreign firms, one of which is Star Kist Foods, Inc., USA (Star Kist). As part of their agreement, Mata makes advances for the crew's medical expenses, National Seaman's Board fees, Seaman's Welfare fund, and standby fees and for the crew's basic personal needs. Subsequently, Mata sends monthly billings to its foreign principal Star Kist, which in turn reimburses Mata by sending a telegraphic transfer through banks for credit to the latter's account. Against this background, on February 21, 1975, Security Pacific National Bank (SEPAC) of Los Angeles which had an agency arrangement with Philippine National Bank (PNB), transmitted a cable message to the International Department of PNB to pay the amount of US$14,000 to Mata by crediting the latter's account with the Insular Bank of Asia and America (IBAA), per order of Star Kist. Upon receipt of this cabled message on February 24, 1975, PNB's International Department noticed an error and sent a service message to SEPAC Bank. The latter replied with instructions that the amount of US$14,000 should only be for US$1,400. On the basis of the cable message dated February 24, 1975 Cashier's Check No. 269522 in the amount of US$1,400 (P9,772.95) representing reimbursement from Star Kist, was issued by the Star Kist for the account of Mata on February 25, 1975 through the Insular Bank of Asia and America (IBAA). However, fourteen days after or on March 11, 1975, PNB effected another payment through Cashier's Check No. 270271 in the amount of US$14,000 (P97,878.60) purporting to be another transmittal of reimbursement from Star Kist, private respondent's foreign principal. Six years later, or more specifically, on May 13, 1981, PNB requested Mata for refund of US$14,000 (P97,878.60) after it discovered its error in effecting the second payment.

On February 4, 1982, PNB filed a civil case for collection and refund of US$14,000 against Mata arguing that based on a constructive trust under Article 1456 of the Civil Code, it has a right to recover the said amount it erroneously credited to respondent Mata. 1 After trial, the Regional Trial Court of Manila rendered judgment dismissing the complaint ruling that the instant case falls squarely under Article 2154 on solutio indebiti and not under Article 1456 on constructive trust. The lower court ruled out constructive trust, applying strictly the technical definition of a trust as "a right of property, real or personal, held by one party for the benefit of another; that there is a fiduciary relation between a trustee and a cestui que trust as regards certain property, real, personal, money or choses in action." 2 In affirming the lower court, the appellate court added in its opinion that under Article 2154 on solutio indebiti, the person who makes the payment is the one who commits the mistake vis-a-vis the recipient who is unaware of such a mistake. 3 Consequently, recipient is duty bound to return the amount paid by mistake. But the appellate court concluded that petitioner's demand for the return of US$14,000 cannot prosper because its cause of action had already prescribed under Article 1145, paragraph 2 of the Civil Code which states: The following actions must be commenced within six years: xxx xxx xxx (2) Upon a quasi-contract. This is because petitioner's complaint was filed only on February 4, 1982, almost seven years after March 11, 1975 when petitioner mistakenly made payment to private respondent. Hence, the instant petition for certiorari proceeding seeking to annul the decision of the appellate court on the basis that Mata's obligation to return US$14,000 is governed, in the alternative, by either Article 1456 on constructive trust or Article 2154 of the Civil Code on quasi-contract. 4 Article 1456 of the Civil Code provides: If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. On the other hand, Article 2154 states: If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. Petitioner naturally opts for an interpretation under constructive trust as its action filed on February 4, 1982 can still prosper, as it is well within the prescriptive period of ten (10) years as provided by Article 1144, paragraph 2 of the Civil Code. 5 If it is to be construed as a case of payment by mistake or solutio indebiti, then the prescriptive period for quasicontracts of six years applies, as provided by Article 1145. As pointed out by the appellate court, petitioner's cause of action thereunder shall have prescribed, having been brought almost seven years after the cause of action accrued. However, even assuming that the instant case constitutes a constructive trust and prescription has not set in, the present action has already been barred by laches. To recall, trusts are either express or implied. While express trusts are created by the intention of the trustor or of the parties, implied trusts come into being by operation of law. 6 Implied trusts are those which, without being expressed, are deducible from the nature of the transaction as matters of intent or which are superinduced on the transaction by operation of law as matters of equity, independently of the particular intention of the parties. 7

In turn, implied trusts are subdivided into resulting and constructive trusts. 8 A resulting trust is a trust raised by implication of law and presumed always to have been contemplated by the parties, the intention of which is found in the nature of the transaction, but not expressed in the deed or instrument of conveyance. 9 Examples of resulting trusts are found in Articles 1448 to 1455 of the Civil Code. 10 On the other hand, a constructive trust is one not created by words either expressly or impliedly, but by construction of equity in order to satisfy the demands of justice. An example of a constructive trust is Article 1456 quoted above. 11 A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense 12 for in a typical trust, confidence is reposed in one person who is named a trustee for the benefit of another who is called the cestui que trust, respecting property which is held by the trustee for the benefit of the cestui que trust. 13 A constructive trust, unlike an express trust, does not emanate from, or generate a fiduciary relation. While in an express trust, a beneficiary and a trustee are linked by confidential or fiduciary relations, in a constructive trust, there is neither a promise nor any fiduciary relation to speak of and the so-called trustee neither accepts any trust nor intends holding the property for the beneficiary. 14 In the case at bar, Mata, in receiving the US$14,000 in its account through IBAA, had no intent of holding the same for a supposed beneficiary or cestui que trust, namely PNB. But under Article 1456, the law construes a trust, namely a constructive trust, for the benefit of the person from whom the property comes, in this case PNB, for reasons of justice and equity. At this juncture, a historical note on the codal provisions on trust and quasi-contracts is in order. Originally, under the Spanish Civil Code, there were only two kinds of quasi contracts: negotiorum gestio andsolutio indebiti. But the Code Commission, mindful of the position of the eminent Spanish jurist, Manresa, that "the number of quasi contracts may be indefinite," added Section 3 entitled "Other QuasiContracts." 15 Moreover, even as Article 2142 of the Civil Code defines a quasi-contract, the succeeding article provides that: "The provisions for quasi-contracts in this Chapter do not exclude other quasi-contracts which may come within the purview of the preceding article." 16 Indubitably, the Civil Code does not confine itself exclusively to the quasi-contracts enumerated from Articles 2144 to 2175 but is open to the possibility that, absent a pre-existing relationship, there being neither crime nor quasi-delict, a quasi-contractual relation may be forced upon the parties to avoid a case of unjust enrichment. 17 There being no express consent, in the sense of a meeting of minds between the parties, there is no contract to speak of. However, in view of the peculiar circumstances or factual environment, consent is presumed to the end that a recipient of benefits or favors resulting from lawful, voluntary and unilateral acts of another may not be unjustly enriched at the expense of another. Undoubtedly, the instant case fulfills the indispensable requisites of solutio indebiti as defined in Article 2154 that something (in this case money) has been received when there was no right to demand it and (2) the same was unduly delivered through mistake. There is a presumption that there was a mistake in the payment "if something which had never been due or had already been paid was delivered; but he from whom the return is claimed may prove that the delivery was made out of liberality or for any other just cause." 18 In the case at bar, a payment in the corrected amount of US$1,400 through Cashier's Check No. 269522 had already been made by PNB for the account of Mata on February 25, 1975. Strangely, however, fourteen days later, PNB effected another payment through Cashier's Check No. 270271 in the amount of US$14,000, this time purporting to be another transmittal of reimbursement from Star Kist, private respondent's foreign principal. While the principle of undue enrichment or solutio indebiti, is not new, having been incorporated in the subject on quasi-contracts in Title XVI of Book IV of the Spanish Civil Code entitled "Obligations incurred without contract," 19the chapter on Trusts is fairly recent, having been introduced by the Code Commission in 1949. Although the concept of trusts is nowhere to be found in the Spanish Civil Code, the framers of our present

Civil Code incorporated implied trusts, which includes constructive trusts, on top of quasi-contracts, both of which embody the principle of equity above strict legalism. 20 In analyzing the law on trusts, it would be instructive to refer to Anglo-American jurisprudence on the subject. Under American Law, a court of equity does not consider a constructive trustee for all purposes as though he were in reality a trustee; although it will force him to return the property, it will not impose upon him the numerous fiduciary obligations ordinarily demanded from a trustee of an express trust. 21 It must be borne in mind that in an express trust, the trustee has active duties of management while in a constructive trust, the duty is merely to surrender the property. Still applying American case law, quasi-contractual obligations give rise to a personal liability ordinarily enforceable by an action at law, while constructive trusts are enforceable by a proceeding in equity to compel the defendant to surrender specific property. To be sure, the distinction is more procedural than substantive. 22 Further reflection on these concepts reveals that a constructive "trust" is as much a misnomer as a "quasicontract," so far removed are they from trusts and contracts proper, respectively. In the case of a constructive trust, as in the case of quasi-contract, a relationship is "forced" by operation of law upon the parties, not because of any intention on their part but in order to prevent unjust enrichment, thus giving rise to certain obligations not within the contemplation of the parties. 23 Although we are not quite in accord with the opinion that "the trusts known to American and English equity jurisprudence are derived from the fidei commissa of the Roman Law," 24 it is safe to state that their roots are firmly grounded on such Civil Law principles are expressed in the Latin maxim, "Nemo cum alterius detrimento locupletari potest," 25 particularly the concept of constructive trust. Returning to the instant case, while petitioner may indeed opt to avail of an action to enforce a constructive trust or the quasi-contract of solutio indebiti, it has been deprived of a choice, for prescription has effectively blocked quasi-contract as an alternative, leaving only constructive trust as the feasible option. Petitioner argues that the lower and appellate courts cannot indulge in semantics by holding that in Article 1456 the recipient commits the mistake while in Article 2154, the recipient commits no mistake. 26 On the other hand, private respondent, invoking the appellate court's reasoning, would impress upon us that under Article 1456, there can be no mutual mistake. Consequently, private respondent contends that the case at bar is one of solutio indebiti and not a constructive trust. We agree with petitioner's stand that under Article 1456, the law does not make any distinction since mutual mistake is a possibility on either side on the side of either the grantor or the grantee. 27 Thus, it was error to conclude that in a constructive trust, only the person obtaining the property commits a mistake. This is because it is also possible that a grantor, like PNB in the case at hand, may commit the mistake. Proceeding now to the issue of whether or not petitioner may still claim the US$14,000 it erroneously paid private respondent under a constructive trust, we rule in the negative. Although we are aware that only seven (7) years lapsed after petitioner erroneously credited private respondent with the said amount and that under Article 1144, petitioner is well within the prescriptive period for the enforcement of a constructive or implied trust, we rule that petitioner's claim cannot prosper since it is already barred by laches. It is a well-settled rule now that an action to enforce an implied trust, whether resulting or constructive, may be barred not only by prescription but also by laches. 28 While prescription is concerned with the fact of delay, laches deals with the effect of unreasonable delay. 29 It is amazing that it took petitioner almost seven years before it discovered that it had erroneously paid private respondent. Petitioner would attribute its mistake to the heavy volume of international transactions handled by the Cable and Remittance Division of the International Department of PNB. Such specious reasoning is not persuasive. It is unbelievable for a bank, and a government bank at that, which regularly publishes its balanced financial statements annually or more frequently, by the quarter, to notice its error only seven years later. As a universal bank with worldwide operations, PNB cannot afford to commit such costly mistakes. Moreover, as

between parties where negligence is imputable to one and not to the other, the former must perforce bear the consequences of its neglect. Hence, petitioner should bear the cost of its own negligence. WHEREFORE, the decision of the Court of Appeals dismissing petitioner's claim against private respondent is AFFIRMED. Costs against petitioner. SO ORDERED. G.R. No. L-49101 October 24, 1983 RAOUL S.V. BONNEVIE and HONESTO V. BONNEVIE, petitioners, vs. THE HONORABLE COURT OF APPEALS and THE PHILIPPINE BANK OF COMMERCE, respondents. Edgardo I. De Leon for petitioners. Siguion Reyna, Montecillo & Associates for private respondent.

GUERRERO, J: Petition for review on certiorari seeking the reversal of the decision of the defunct Court of Appeals, now Intermediate Appellate Court, in CA-G.R. No. 61193-R, entitled "Honesto Bonnevie vs. Philippine Bank of Commerce, et al.," promulgated August 11, 1978 1 as well as the Resolution denying the motion for reconsideration. The complaint filed on January 26, 1971 by petitioner Honesto Bonnevie with the Court of First Instance of Rizal against respondent Philippine Bank of Commerce sought the annulment of the Deed of Mortgage dated December 6, 1966 executed in favor of the Philippine Bank of Commerce by the spouses Jose M. Lozano and Josefa P. Lozano as well as the extrajudicial foreclosure made on September 4, 1968. It alleged among others that (a) the Deed of Mortgage lacks consideration and (b) the mortgage was executed by one who was not the owner of the mortgaged property. It further alleged that the property in question was foreclosed pursuant to Act No. 3135 as amended, without, however, complying with the condition imposed for a valid foreclosure. Granting the validity of the mortgage and the extrajudicial foreclosure, it finally alleged that respondent Bank should have accepted petitioner's offer to redeem the property under the principle of equity said justice. On the other hand, the answer of defendant Bank, now private respondent herein, specifically denied most of the allegations in the complaint and raised the following affirmative defenses: (a) that the defendant has not given its consent, much less the requisite written consent, to the sale of the mortgaged property to plaintiff and the assumption by the latter of the loan secured thereby; (b) that the demand letters and notice of foreclosure were sent to Jose Lozano at his address; (c) that it was notified for the first time about the alleged sale after it had foreclosed the Lozano mortgage; (d) that the law on contracts requires defendant's consent before Jose Lozano can be released from his bilateral agreement with the former and doubly so, before plaintiff may be substituted for Jose Lozano and Alfonso Lim; (e) that the loan of P75,000.00 which was secured by mortgage, after two renewals remain unpaid despite countless reminders and demands; of that the property in question remained registered in the name of Jose M. Lozano in the land records of Rizal and there was no entry, notation or indication of the alleged sale to plaintiff; (g) that it is an established banking practice that payments against accounts need not be personally made by the debtor himself; and (h) that it is not true that the mortgage, at the time of its execution and registration, was without consideration as alleged because the execution and registration of the securing mortgage, the signing and delivery of the promissory note and the disbursement of the proceeds of the loan are mere implementation of the basic consensual contract of loan.

After petitioner Honesto V. Bonnevie had rested his case, petitioner Raoul SV Bonnevie filed a motion for intervention. The intervention was premised on the Deed of Assignment executed by petitioner Honesto Bonnevie in favor of petitioner Raoul SV Bonnevie covering the rights and interests of petitioner Honesto Bonnevie over the subject property. The intervention was ultimately granted in order that all issues be resolved in one proceeding to avoid multiplicity of suits. On March 29, 1976, the lower court rendered its decision, the dispositive portion of which reads as follows: WHEREFORE, all the foregoing premises considered, judgment is hereby rendered dismissing the complaint with costs against the plaintiff and the intervenor. After the motion for reconsideration of the lower court's decision was denied, petitioners appealed to respondent Court of Appeals assigning the following errors: 1. The lower court erred in not finding that the real estate mortgage executed by Jose Lozano was null and void; 2. The lower court erred in not finding that the auction sale decide on August 19, 1968 was null and void; 3. The lower court erred in not allowing the plaintiff and the intervenor to redeem the property; 4. The lower court erred in not finding that the defendant acted in bad faith; and 5. The lower court erred in dismissing the complaint. On August 11, 1978, the respondent court promulgated its decision affirming the decision of the lower court, and on October 3. 1978 denied the motion for reconsideration. Hence, the present petition for review. The factual findings of respondent Court of Appeals being conclusive upon this Court, We hereby adopt the facts found the trial court and found by the Court of Appeals to be consistent with the evidence adduced during trial, to wit: It is not disputed that spouses Jose M. Lozano and Josefa P. Lozano were the owners of the property which they mortgaged on December 6, 1966, to secure the payment of the loan in the principal amount of P75,000.00 they were about to obtain from defendant-appellee Philippine Bank of Commerce; that on December 8, 1966, executed in favor of plaintiffappellant the Deed of Sale with Mortgage ,, for and in consideration of the sum of P100,000.00, P25,000.00 of which amount being payable to the Lozano spouses upon the execution of the document, and the balance of P75,000.00 being payable to defendantappellee; that on December 6, 1966, when the mortgage was executed by the Lozano spouses in favor of defendant-appellee, the loan of P75,000.00 was not yet received them, as it was on December 12, 1966 when they and their co-maker Alfonso Lim signed the promissory note for that amount; that from April 28, 1967 to July 12, 1968, plaintiff-appellant made payments to defendant-appellee on the mortgage in the total amount of P18,944.22; that on May 4, 1968, plaintiff-appellant assigned all his rights under the Deed of Sale with Assumption of Mortgage to his brother, intervenor Raoul Bonnevie; that on June 10, 1968, defendant-appellee applied for the foreclosure of the mortgage, and notice of sale was published in the Luzon Weekly Courier on June 30, July 7, and July 14, 1968; that auction sale was conducted on August 19, 1968, and the property was sold to defendant-appellee for P84,387.00; and that offers from plaintiff-appellant to repurchase the property failed, and on October 9, 1969, he caused an adverse claim to be annotated on the title of the property. (Decision of the Court of Appeals, p. 5). Presented for resolution in this review are the following issues:

I Whether the real estate mortgage executed by the spouses Lozano in favor of respondent bank was validly and legally executed. II Whether the extrajudicial foreclosure of the said mortgage was validly and legally effected. III Whether petitioners had a right to redeem the foreclosed property. IV Granting that petitioners had such a right, whether respondent was justified in refusing their offers to repurchase the property. As clearly seen from the foregoing issues raised, petitioners' course of action is three-fold. They primarily attack the validity of the mortgage executed by the Lozano spouses in favor of respondent Bank. Next, they attack the validity of the extrajudicial foreclosure and finally, appeal to justice and equity. In attacking the validity of the deed of mortgage, they contended that when it was executed on December 6, 1966, there was yet no principal obligation to secure as the loan of P75,000.00 was not received by the Lozano spouses "So much so that in the absence of a principal obligation, there is want of consideration in the accessory contract, which consequently impairs its validity and fatally affects its very existence." (Petitioners' Brief, par. 1, p. 7). This contention is patently devoid of merit. From the recitals of the mortgage deed itself, it is clearly seen that the mortgage deed was executed for and on condition of the loan granted to the Lozano spouses. The fact that the latter did not collect from the respondent Bank the consideration of the mortgage on the date it was executed is immaterial. A contract of loan being a consensual contract, the herein contract of loan was perfected at the same time the contract of mortgage was executed. The promissory note executed on December 12, 1966 is only an evidence of indebtedness and does not indicate lack of consideration of the mortgage at the time of its execution. Petitioners also argued that granting the validity of the mortgage, the subsequent renewals of the original loan, using as security the same property which the Lozano spouses had already sold to petitioners, rendered the mortgage null and void, This argument failed to consider the provision 2 of the contract of mortgage which prohibits the sale, disposition of, mortgage and encumbrance of the mortgaged properties, without the written consent of the mortgagee, as well as the additional proviso that if in spite of said stipulation, the mortgaged property is sold, the vendee shall assume the mortgage in the terms and conditions under which it is constituted. These provisions are expressly made part and parcel of the Deed of Sale with Assumption of Mortgage. Petitioners admit that they did not secure the consent of respondent Bank to the sale with assumption of mortgage. Coupled with the fact that the sale/assignment was not registered so that the title remained in the name of the Lozano spouses, insofar as respondent Bank was concerned, the Lozano spouses could rightfully and validly mortgage the property. Respondent Bank had every right to rely on the certificate of title. It was not bound to go behind the same to look for flaws in the mortgagor's title, the doctrine of innocent purchaser for value being applicable to an innocent mortgagee for value. (Roxas vs. Dinglasan, 28 SCRA 430; Mallorca vs. De Ocampo, 32 SCRA 48). Another argument for the respondent Bank is that a mortgage follows the property whoever the possessor may be and subjects the fulfillment of the obligation for whose security it was constituted. Finally, it can also be said that petitioners voluntarily assumed the mortgage when they entered into the Deed of Sale with Assumption of Mortgage. They are, therefore, estopped from impugning its validity whether on the original loan or renewals thereof.

Petitioners next assail the validity and legality of the extrajudicial foreclosure on the following grounds: a) petitioners were never notified of the foreclosure sale. b) The notice of auction sale was not posted for the period required by law. c) publication of the notice of auction sale in the Luzon Weekly Courier was not in accordance with law. The lack of notice of the foreclosure sale on petitioners is a flimsy ground. Respondent Bank not being a party to the Deed of Sale with Assumption of Mortgage, it can validly claim that it was not aware of the same and hence, it may not be obliged to notify petitioners. Secondly, petitioner Honesto Bonnevie was not entitled to any notice because as of May 14, 1968, he had transferred and assigned all his rights and interests over the property in favor of intervenor Raoul Bonnevie and respondent Bank not likewise informed of the same. For the same reason, Raoul Bonnevie is not entitled to notice. Most importantly, Act No. 3135 does not require personal notice on the mortgagor. The requirement on notice is that: Section 3. Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city In the case at bar, the notice of sale was published in the Luzon Courier on June 30, July 7 and July 14, 1968 and notices of the sale were posted for not less than twenty days in at least three (3) public places in the Municipality where the property is located. Petitioners were thus placed on constructive notice. The case of Santiago vs. Dionisio, 92 Phil. 495, cited by petitioners is inapplicable because said case involved a judicial foreclosure and the sale to the vendee of the mortgaged property was duly registered making the mortgaged privy to the sale. As regards the claim that the period of publication of the notice of auction sale was not in accordance with law, namely: once a week for at least three consecutive weeks, the Court of Appeals ruled that the publication of notice on June 30, July 7 and July 14, 1968 satisfies the publication requirement under Act No. 3135 notwithstanding the fact that June 30 to July 14 is only 14 days. We agree. Act No. 3135 merely requires that such notice shall be published once a week for at least three consecutive weeks." Such phrase, as interpreted by this Court in Basa vs. Mercado, 61 Phil. 632, does not mean that notice should be published for three full weeks. The argument that the publication of the notice in the "Luzon Weekly Courier" was not in accordance with law as said newspaper is not of general circulation must likewise be disregarded. The affidavit of publication, executed by the Publisher, business/advertising manager of the Luzon Weekly Courier, stares that it is "a newspaper of general circulation in ... Rizal, and that the Notice of Sheriff's sale was published in said paper on June 30, July 7 and July 14, 1968. This constitutes prima facie evidence of compliance with the requisite publication. Sadang vs. GSIS, 18 SCRA 491). To be a newspaper of general circulation, it is enough that "it is published for the dissemination of local news and general information; that it has a bona fide subscription list of paying subscribers; that it is published at regular intervals." (Basa vs. Mercado, 61 Phil. 632). The newspaper need not have the largest circulation so long as it is of general circulation. Banta vs. Pacheco, 74 Phil. 67). The testimony of three witnesses that they do read the Luzon Weekly Courier is no proof that said newspaper is not a newspaper of general circulation in the province of Rizal. Whether or not the notice of auction sale was posted for the period required by law is a question of fact. It can no longer be entertained by this Court. (see Reyes, et al. vs. CA, et al., 107 SCRA 126). Nevertheless, the records show that copies of said notice were posted in three conspicuous places in the municipality of Pasig,

Rizal namely: the Hall of Justice, the Pasig Municipal Market and Pasig Municipal Hall. In the same manner, copies of said notice were also posted in the place where the property was located, namely: the Municipal Building of San Juan, Rizal; the Municipal Market and on Benitez Street. The following statement of Atty. Santiago Pastor, head of the legal department of respondent bank, namely: Q How many days were the notices posted in these two places, if you know? A We posted them only once in one day. (TSN, p. 45, July 25, 1973) is not a sufficient countervailing evidence to prove that there was no compliance with the posting requirement in the absence of proof or even of allegation that the notices were removed before the expiration of the twentyday period. A single act of posting (which may even extend beyond the period required by law) satisfies the requirement of law. The burden of proving that the posting requirement was not complied with is now shifted to the one who alleges non-compliance. On the question of whether or not the petitioners had a right to redeem the property, We hold that the Court of Appeals did not err in ruling that they had no right to redeem. No consent having been secured from respondent Bank to the sale with assumption of mortgage by petitioners, the latter were not validly substituted as debtors. In fact, their rights were never recorded and hence, respondent Bank is charged with the obligation to recognize the right of redemption only of the Lozano spouses. But even granting that as purchaser or assignee of the property, as the case may be, the petitioners had acquired a right to redeem the property, petitioners failed to exercise said right within the period granted by law. Thru certificate of sale in favor of appellee was registered on September 2, 1968 and the one year redemption period expired on September 3, 1969. It was not until September 29, 1969 that petitioner Honesto Bonnevie first wrote respondent and offered to redeem the property. Moreover, on September 29, 1969, Honesto had at that time already transferred his rights to intervenor Raoul Bonnevie. On the question of whether or not respondent Court of Appeals erred in holding that respondent Bank did not act in bad faith, petitioners rely on Exhibit "B" which is the letter of lose Lozano to respondent Bank dated December 8, 1966 advising the latter that Honesto Bonnevie was authorized to make payments for the amount secured by the mortgage on the subject property, to receive acknowledgment of payments, obtain the Release of the Mortgage after full payment of the obligation and to take delivery of the title of said property. On the assumption that the letter was received by respondent Bank, a careful reading of the same shows that the plaintiff was merely authorized to do acts mentioned therein and does not mention that petitioner is the new owner of the property nor request that all correspondence and notice should be sent to him. The claim of appellants that the collection of interests on the loan up to July 12, 1968 extends the maturity of said loan up to said date and accordingly on June 10, 1968 when defendant applied for the foreclosure of the mortgage, the loan was not yet due and demandable, is totally incorrect and misleading. The undeniable fact is that the loan matured on December 26, 1967. On June 10, 1968, when respondent Bank applied for foreclosure, the loan was already six months overdue. Petitioners' payment of interest on July 12, 1968 does not thereby make the earlier act of respondent Bank inequitous nor does it ipso facto result in the renewal of the loan. In order that a renewal of a loan may be effected, not only the payment of the accrued interest is necessary but also the payment of interest for the proposed period of renewal as well. Besides, whether or not a loan may be renewed does not solely depend on the debtor but more so on the discretion of the bank. Respondent Bank may not be, therefore, charged of bad faith. WHEREFORE, the appeal being devoid of merit, the decision of the Court of Appeals is hereby AFFIRMED. Costs against petitioners. SO ORDERED. G.R. No. 101163 January 11, 1993

STATE INVESTMENT HOUSE, INC., petitioner, vs. COURT OF APPEALS and NORA B. MOULIC, respondents. Escober, Alon & Associates for petitioner. Martin D. Pantaleon for private respondents.

BELLOSILLO, J.: The liability to a holder in due course of the drawer of checks issued to another merely as security, and the right of a real estate mortgagee after extrajudicial foreclosure to recover the balance of the obligation, are the issues in this Petition for Review of the Decision of respondent Court of Appeals. Private respondent Nora B. Moulic issued to Corazon Victoriano, as security for pieces of jewelry to be sold on commission, two (2) post-dated Equitable Banking Corporation checks in the amount of Fifty Thousand Pesos (P50,000.00) each, one dated 30 August 1979 and the other, 30 September 1979. Thereafter, the payee negotiated the checks to petitioner State Investment House. Inc. (STATE). MOULIC failed to sell the pieces of jewelry, so she returned them to the payee before maturity of the checks. The checks, however, could no longer be retrieved as they had already been negotiated. Consequently, before their maturity dates, MOULIC withdrew her funds from the drawee bank. Upon presentment for payment, the checks were dishonored for insufficiency of funds. On 20 December 1979, STATE allegedly notified MOULIC of the dishonor of the checks and requested that it be paid in cash instead, although MOULIC avers that no such notice was given her. On 6 October 1983, STATE sued to recover the value of the checks plus attorney's fees and expenses of litigation. In her Answer, MOULIC contends that she incurred no obligation on the checks because the jewelry was never sold and the checks were negotiated without her knowledge and consent. She also instituted a Third-Party Complaint against Corazon Victoriano, who later assumed full responsibility for the checks. On 26 May 1988, the trial court dismissed the Complaint as well as the Third-Party Complaint, and ordered STATE to pay MOULIC P3,000.00 for attorney's fees. STATE elevated the order of dismissal to the Court of Appeals, but the appellate court affirmed the trial court on the ground that the Notice of Dishonor to MOULIC was made beyond the period prescribed by the Negotiable Instruments Law and that even if STATE did serve such notice on MOULIC within the reglementary period it would be of no consequence as the checks should never have been presented for payment. The sale of the jewelry was never effected; the checks, therefore, ceased to serve their purpose as security for the jewelry. We are not persuaded. The negotiability of the checks is not in dispute. Indubitably, they were negotiable. After all, at the pre-trial, the parties agreed to limit the issue to whether or not STATE was a holder of the checks in due course. 1 In this regard, Sec. 52 of the Negotiable Instruments Law provides

Sec. 52. What constitutes a holder in due course. A holder in due course is a holder who has taken the instrument under the following conditions: (a) That it is complete and regular upon its face; (b) That he became the holder of it before it was overdue, and without notice that it was previously dishonored, if such was the fact; (c) That he took it in good faith and for value; (d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. Culled from the foregoing, a prima facie presumption exists that the holder of a negotiable instrument is a holder in due course. 2 Consequently, the burden of proving that STATE is not a holder in due course lies in the person who disputes the presumption. In this regard, MOULIC failed. The evidence clearly shows that: (a) on their faces the post-dated checks were complete and regular: (b) petitioner bought these checks from the payee, Corazon Victoriano, before their due dates; 3 (c) petitioner took these checks in good faith and for value, albeit at a discounted price; and, (d) petitioner was never informed nor made aware that these checks were merely issued to payee as security and not for value. Consequently, STATE is indeed a holder in due course. As such, it holds the instruments free from any defect of title of prior parties, and from defenses available to prior parties among themselves; STATE may, therefore, enforce full payment of the checks. 4 MOULIC cannot set up against STATE the defense that there was failure or absence of consideration. MOULIC can only invoke this defense against STATE if it was privy to the purpose for which they were issued and therefore is not a holder in due course. That the post-dated checks were merely issued as security is not a ground for the discharge of the instrument as against a holder in due course. For the only grounds are those outlined in Sec. 119 of the Negotiable Instruments Law: Sec. 119. Instrument; how discharged. A negotiable instrument is discharged: (a) By payment in due course by or on behalf of the principal debtor; (b) By payment in due course by the party accommodated, where the instrument is made or accepted for his accommodation; (c) By the intentional cancellation thereof by the holder; (d) By any other act which will discharge a simple contract for the payment of money; (e) When the principal debtor becomes the holder of the instrument at or after maturity in his own right. Obviously, MOULIC may only invoke paragraphs (c) and (d) as possible grounds for the discharge of the instrument. But, the intentional cancellation contemplated under paragraph (c) is that cancellation effected by destroying the instrument either by tearing it up, 5 burning it, 6 or writing the word "cancelled" on the instrument. The act of destroying the instrument must also be made by the holder of the instrument intentionally. Since MOULIC failed to get back possession of the post-dated checks, the intentional cancellation of the said checks is altogether impossible. On the other hand, the acts which will discharge a simple contract for the payment of money under paragraph (d) are determined by other existing legislations since Sec. 119 does not specify what these acts are, e.g., Art. 1231 of the Civil Code 7 which enumerates the modes of extinguishing obligations. Again, none of the modes outlined therein is applicable in the instant case as Sec. 119 contemplates of a situation where the holder of the instrument is the creditor while its drawer is the debtor. In the present action, the payee, Corazon Victoriano, was no longer MOULIC's creditor at the time the jewelry was returned. Correspondingly, MOULIC may not unilaterally discharge herself from her liability by the mere expediency of withdrawing her funds from the drawee bank. She is thus liable as she has no legal basis to excuse herself from liability on her checks to a holder in due course. Moreover, the fact that STATE failed to give Notice of Dishonor to MOULIC is of no moment. The need for such notice is not absolute; there are exceptions under Sec. 114 of the Negotiable Instruments Law:

Sec. 114. When notice need not be given to drawer. Notice of dishonor is not required to be given to the drawer in the following cases: (a) Where the drawer and the drawee are the same person; (b) When the drawee is a fictitious person or a person not having capacity to contract; (c) When the drawer is the person to whom the instrument is presented for payment: (d) Where the drawer has no right to expect or require that the drawee or acceptor will honor the instrument; (e) Where the drawer had countermanded payment. Indeed, MOULIC'S actuations leave much to be desired. She did not retrieve the checks when she returned the jewelry. She simply withdrew her funds from her drawee bank and transferred them to another to protect herself. After withdrawing her funds, she could not have expected her checks to be honored. In other words, she was responsible for the dishonor of her checks, hence, there was no need to serve her Notice of Dishonor, which is simply bringing to the knowledge of the drawer or indorser of the instrument, either verbally or by writing, the fact that a specified instrument, upon proper proceedings taken, has not been accepted or has not been paid, and that the party notified is expected to pay it. 8 In addition, the Negotiable Instruments Law was enacted for the purpose of facilitating, not hindering or hampering transactions in commercial paper. Thus, the said statute should not be tampered with haphazardly or lightly. Nor should it be brushed aside in order to meet the necessities in a single case. 9 The drawing and negotiation of a check have certain effects aside from the transfer of title or the incurring of liability in regard to the instrument by the transferor. The holder who takes the negotiated paper makes a contract with the parties on the face of the instrument. There is an implied representation that funds or credit are available for the payment of the instrument in the bank upon which it is drawn. 10 Consequently, the withdrawal of the money from the drawee bank to avoid liability on the checks cannot prejudice the rights of holders in due course. In the instant case, such withdrawal renders the drawer, Nora B. Moulic, liable to STATE, a holder in due course of the checks. Under the facts of this case, STATE could not expect payment as MOULIC left no funds with the drawee bank to meet her obligation on the checks, 11 so that Notice of Dishonor would be futile. The Court of Appeals also held that allowing recovery on the checks would constitute unjust enrichment on the part of STATE Investment House, Inc. This is error. The record shows that Mr. Romelito Caoili, an Account Assistant, testified that the obligation of Corazon Victoriano and her husband at the time their property mortgaged to STATE was extrajudicially foreclosed amounted to P1.9 million; the bid price at public auction was only P1 million. 12 Thus, the value of the property foreclosed was not even enough to pay the debt in full. Where the proceeds of the sale are insufficient to cover the debt in an extrajudicial foreclosure of mortgage, the mortgagee is entitled to claim the deficiency from the debtor. 13 The step thus taken by the mortgagee-bank in resorting to an extra-judicial foreclosure was merely to find a proceeding for the sale of the property and its action cannot be taken to mean a waiver of its right to demand payment for the whole debt. 14 For, while Act 3135, as amended, does not discuss the mortgagee's right to recover such deficiency, it does not contain any provision either, expressly or impliedly, prohibiting recovery. In this jurisdiction, when the legislature intends to foreclose the right of a creditor to sue for any deficiency resulting from foreclosure of a security given to guarantee an obligation, it so expressly provides. For instance, with respect to pledges, Art. 2115 of the Civil Code 15 does not allow the creditor to recover the deficiency from the sale of the thing pledged. Likewise, in the case of a chattel mortgage, or a thing sold on installment basis, in the event of foreclosure, the vendor "shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary will be void". 16 It is clear then that in the absence of a similar provision in Act No. 3135, as amended, it cannot be concluded that the creditor loses his right recognized by the Rules of Court to take action for the recovery of any unpaid balance on the principal obligation simply because he has chosen to extrajudicially foreclose the real estate mortgage pursuant to a Special Power of Attorney given him by the mortgagor in the contract of mortgage. 17

The filing of the Complaint and the Third-Party Complaint to enforce the checks against MOULIC and the VICTORIANO spouses, respectively, is just another means of recovering the unpaid balance of the debt of the VICTORIANOs. In fine, MOULIC, as drawer, is liable for the value of the checks she issued to the holder in due course, STATE, without prejudice to any action for recompense she may pursue against the VICTORIANOs as Third-Party Defendants who had already been declared as in default. WHEREFORE, the petition is GRANTED. The decision appealed from is REVERSED and a new one entered declaring private respondent NORA B. MOULIC liable to petitioner STATE INVESTMENT HOUSE, INC., for the value of EBC Checks Nos. 30089658 and 30089660 in the total amount of P100,000.00, P3,000.00 as attorney's fees, and the costs of suit, without prejudice to any action for recompense she may pursue against the VICTORIANOs as Third-Party Defendants. Costs against private respondent. SO ORDERED. G.R. No. 97412 July 12, 1994 EASTERN SHIPPING LINES, INC., petitioner, vs. HON. COURT OF APPEALS AND MERCANTILE INSURANCE COMPANY, INC., respondents. Alojada & Garcia and Jimenea, Dala & Zaragoza for petitoner. Zapa Law Office for private respondent.

VITUG, J.: The issues, albeit not completely novel, are: (a) whether or not a claim for damage sustained on a shipment of goods can be a solidary, or joint and several, liability of the common carrier, the arrastre operator and the customs broker; (b) whether the payment of legal interest on an award for loss or damage is to be computed from the time the complaint is filed or from the date the decision appealed from is rendered; and (c) whether the applicable rate of interest, referred to above, is twelve percent (12%) or six percent (6%). The findings of the court a quo, adopted by the Court of Appeals, on the antecedent and undisputed facts that have led to the controversy are hereunder reproduced: This is an action against defendants shipping company, arrastre operator and brokerforwarder for damages sustained by a shipment while in defendants' custody, filed by the insurer-subrogee who paid the consignee the value of such losses/damages. On December 4, 1981, two fiber drums of riboflavin were shipped from Yokohama, Japan for delivery vessel "SS EASTERN COMET" owned by defendant Eastern Shipping Lines under Bill of Lading No. YMA-8 (Exh. B). The shipment was insured under plaintiff's Marine Insurance Policy No. 81/01177 for P36,382,466.38. Upon arrival of the shipment in Manila on December 12, 1981, it was discharged unto the custody of defendant Metro Port Service, Inc. The latter excepted to one drum, said to be in bad order, which damage was unknown to plaintiff.

On January 7, 1982 defendant Allied Brokerage Corporation received the shipment from defendant Metro Port Service, Inc., one drum opened and without seal (per "Request for Bad Order Survey." Exh. D). On January 8 and 14, 1982, defendant Allied Brokerage Corporation made deliveries of the shipment to the consignee's warehouse. The latter excepted to one drum which contained spillages, while the rest of the contents was adulterated/fake (per "Bad Order Waybill" No. 10649, Exh. E). Plaintiff contended that due to the losses/damage sustained by said drum, the consignee suffered losses totaling P19,032.95, due to the fault and negligence of defendants. Claims were presented against defendants who failed and refused to pay the same (Exhs. H, I, J, K, L). As a consequence of the losses sustained, plaintiff was compelled to pay the consignee P19,032.95 under the aforestated marine insurance policy, so that it became subrogated to all the rights of action of said consignee against defendants (per "Form of Subrogation", "Release" and Philbanking check, Exhs. M, N, and O). (pp. 85-86, Rollo.) There were, to be sure, other factual issues that confronted both courts. Here, the appellate court said: Defendants filed their respective answers, traversing the material allegations of the complaint contending that: As for defendant Eastern Shipping it alleged that the shipment was discharged in good order from the vessel unto the custody of Metro Port Service so that any damage/losses incurred after the shipment was incurred after the shipment was turned over to the latter, is no longer its liability (p. 17, Record); Metroport averred that although subject shipment was discharged unto its custody, portion of the same was already in bad order (p. 11, Record); Allied Brokerage alleged that plaintiff has no cause of action against it, not having negligent or at fault for the shipment was already in damage and bad order condition when received by it, but nonetheless, it still exercised extra ordinary care and diligence in the handling/delivery of the cargo to consignee in the same condition shipment was received by it. From the evidence the court found the following: The issues are: 1. Whether or not the shipment sustained losses/damages; 2. Whether or not these losses/damages were sustained while in the custody of defendants (in whose respective custody, if determinable); 3. Whether or not defendant(s) should be held liable for the losses/damages (see plaintiff's pre-Trial Brief, Records, p. 34; Allied's pre-Trial Brief, adopting plaintiff's Records, p. 38). As to the first issue, there can be no doubt that the shipment sustained losses/damages. The two drums were shipped in good order and condition, as clearly shown by the Bill of Lading and Commercial Invoice which do not indicate any damages drum that was shipped (Exhs. B and C). But when on December 12, 1981 the shipment was delivered to defendant Metro Port Service, Inc., it excepted to one drum in bad order. Correspondingly, as to the second issue, it follows that the losses/damages were sustained while in the respective and/or successive custody and possession of defendants carrier (Eastern), arrastre operator (Metro Port)

and broker (Allied Brokerage). This becomes evident when the Marine Cargo Survey Report (Exh. G), with its "Additional Survey Notes", are considered. In the latter notes, it is stated that when the shipment was "landed on vessel" to dock of Pier # 15, South Harbor, Manila on December 12, 1981, it was observed that "one (1) fiber drum (was) in damaged condition, covered by the vessel's Agent's Bad Order Tally Sheet No. 86427." The report further states that when defendant Allied Brokerage withdrew the shipment from defendant arrastre operator's custody on January 7, 1982, one drum was found opened without seal, cello bag partly torn but contents intact. Net unrecovered spillages was 15 kgs. The report went on to state that when the drums reached the consignee, one drum was found with adulterated/faked contents. It is obvious, therefore, that these losses/damages occurred before the shipment reached the consignee while under the successive custodies of defendants. Under Art. 1737 of the New Civil Code, the common carrier's duty to observe extraordinary diligence in the vigilance of goods remains in full force and effect even if the goods are temporarily unloaded and stored in transit in the warehouse of the carrier at the place of destination, until the consignee has been advised and has had reasonable opportunity to remove or dispose of the goods (Art. 1738, NCC). Defendant Eastern Shipping's own exhibit, the "Turn-Over Survey of Bad Order Cargoes" (Exhs. 3-Eastern) states that on December 12, 1981 one drum was found "open". and thus held: WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered: A. Ordering defendants to pay plaintiff, jointly and severally: 1. The amount of P19,032.95, with the present legal interest of 12% per annum from October 1, 1982, the date of filing of this complaints, until fully paid (the liability of defendant Eastern Shipping, Inc. shall not exceed US$500 per case or the CIF value of the loss, whichever is lesser, while the liability of defendant Metro Port Service, Inc. shall be to the extent of the actual invoice value of each package, crate box or container in no case to exceed P5,000.00 each, pursuant to Section 6.01 of the Management Contract); 2. P3,000.00 as attorney's fees, and 3. Costs. B. Dismissing the counterclaims and crossclaim of defendant/cross-claimant Allied Brokerage Corporation. SO ORDERED. (p. 207, Record). Dissatisfied, defendant's recourse to US. The appeal is devoid of merit. After a careful scrutiny of the evidence on record. We find that the conclusion drawn therefrom is correct. As there is sufficient evidence that the shipment sustained damage while in the successive possession of appellants, and therefore they are liable to the appellee, as subrogee for the amount it paid to the consignee. (pp. 87-89, Rollo.)

The Court of Appeals thus affirmed in toto the judgment of the court a quo. In this petition, Eastern Shipping Lines, Inc., the common carrier, attributes error and grave abuse of discretion on the part of the appellate court when I. IT HELD PETITIONER CARRIER JOINTLY AND SEVERALLY LIABLE WITH THE ARRASTRE OPERATOR AND CUSTOMS BROKER FOR THE CLAIM OF PRIVATE RESPONDENT AS GRANTED IN THE QUESTIONED DECISION; II. IT HELD THAT THE GRANT OF INTEREST ON THE CLAIM OF PRIVATE RESPONDENT SHOULD COMMENCE FROM THE DATE OF THE FILING OF THE COMPLAINT AT THE RATE OF TWELVE PERCENT PER ANNUM INSTEAD OF FROM THE DATE OF THE DECISION OF THE TRIAL COURT AND ONLY AT THE RATE OF SIX PERCENT PER ANNUM, PRIVATE RESPONDENT'S CLAIM BEING INDISPUTABLY UNLIQUIDATED. The petition is, in part, granted. In this decision, we have begun by saying that the questions raised by petitioner carrier are not all that novel. Indeed, we do have a fairly good number of previous decisions this Court can merely tack to. The common carrier's duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to, or until the lapse of a reasonable time for their acceptance by, the person entitled to receive them (Arts. 1736-1738, Civil Code; Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai vs. Dollar Steamship Lines, 52 Phil. 863). When the goods shipped either are lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable (Art. 1735, Civil Code; Philippine National Railways vs. Court of Appeals, 139 SCRA 87; Metro Port Service vs. Court of Appeals, 131 SCRA 365). There are, of course, exceptional cases when such presumption of fault is not observed but these cases, enumerated in Article 1734 1 of the Civil Code, are exclusive, not one of which can be applied to this case. The question of charging both the carrier and the arrastre operator with the obligation of properly delivering the goods to the consignee has, too, been passed upon by the Court. In Fireman's Fund Insurance vs. Metro Port Services (182 SCRA 455), we have explained, in holding the carrier and the arrastre operator liable in solidum,thus: The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA 5 [1967]. The relationship between the consignee and the common carrier is similar to that of the consignee and the arrastre operator (Northern Motors, Inc. v. Prince Line, et al., 107 Phil. 253 [1960]). Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and to deliver them in good condition to the consignee, such responsibility also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore charged with the obligation to deliver the goods in good condition to the consignee. We do not, of course, imply by the above pronouncement that the arrastre operator and the customs broker are themselves always and necessarily liable solidarily with the carrier, or vice-versa, nor that attendant facts in a given case may not vary the rule. The instant petition has been brought solely by Eastern Shipping Lines, which, being the carrier and not having been able to rebut the presumption of fault, is, in any event, to be held liable in this particular case. A factual finding of both the court a quo and the appellate court, we take note, is that "there is sufficient evidence that the shipment sustained damage while in the successive possession of appellants" (the herein petitioner among them). Accordingly, the liability imposed on Eastern Shipping Lines, Inc., the sole petitioner in this case, is inevitable regardless of whether there are others solidarily liable with it.

It is over the issue of legal interest adjudged by the appellate court that deserves more than just a passing remark. Let us first see a chronological recitation of the major rulings of this Court: The early case of Malayan Insurance Co., Inc., vs. Manila Port Service, 2 decided 3 on 15 May 1969, involved a suit for recovery of money arising out of short deliveries and pilferage of goods. In this case, appellee Malayan Insurance (the plaintiff in the lower court) averred in its complaint that the total amount of its claim for the value of the undelivered goods amounted to P3,947.20. This demand, however, was neither established in its totality nor definitely ascertained. In the stipulation of facts later entered into by the parties, in lieu of proof, the amount of P1,447.51 was agreed upon. The trial court rendered judgment ordering the appellants (defendants) Manila Port Service and Manila Railroad Company to pay appellee Malayan Insurance the sum of P1,447.51 with legal interest thereon from the date the complaint was filed on 28 December 1962 until full payment thereof. The appellants then assailed, inter alia, the award of legal interest. In sustaining the appellants, this Court ruled: Interest upon an obligation which calls for the payment of money, absent a stipulation, is the legal rate. Such interest normally is allowable from the date of demand, judicial or extrajudicial. The trial court opted for judicial demand as the starting point.

But then upon the provisions of Article 2213 of the Civil Code, interest "cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonable certainty." And as was held by this Court in Rivera vs. Perez, 4 L-6998, February 29, 1956, if the suit were for damages, "unliquidated and not known until definitely ascertained, assessed and determined by the courts after proof (Montilla c.Corporacion de P.P. Agustinos, 25 Phil. 447; Lichauco v. Guzman, 38 Phil. 302)," then, interest "should be from the date of the decision." (Emphasis supplied)
The case of Reformina vs. Tomol, 5 rendered on 11 October 1985, was for "Recovery of Damages for Injury to Person and Loss of Property." After trial, the lower court decreed: WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and third party defendants and against the defendants and third party plaintiffs as follows: Ordering defendants and third party plaintiffs Shell and Michael, Incorporated to pay jointly and severally the following persons: xxx xxx xxx (g) Plaintiffs Pacita F. Reformina and Francisco Reformina the sum of P131,084.00 which is the value of the boat F B Pacita III together with its accessories, fishing gear and equipment minus P80,000.00 which is the value of the insurance recovered and the amount of P10,000.00 a month as the estimated monthly loss suffered by them as a result of the fire of May 6, 1969 up to the time they are actually paid or already the total sum of P370,000.00 as of June 4, 1972 with legal interest from the filing of the complaint until paid and to pay attorney's fees of P5,000.00 with costs against defendants and third party plaintiffs. (Emphasis supplied.) On appeal to the Court of Appeals, the latter modified the amount of damages awarded but sustained the trial court in adjudging legal interest from the filing of the complaint until fully paid. When the appellate court's decision became final, the case was remanded to the lower court for execution, and this was when the trial court issued its assailed resolution which applied the 6% interest per annum prescribed in Article 2209 of the Civil Code. In their petition for review on certiorari, the

petitioners contended that Central Bank Circular No. 416, providing thus By virtue of the authority granted to it under Section 1 of Act 2655, as amended, 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%) percent per annum. This Circular shall take effect immediately. (Emphasis found in the text) should have, instead, been applied. This Court 6 ruled: 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 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. xxx xxx xxx Coming to the case at bar, the decision herein sought to be executed is one rendered in an Action for Damages for injury to persons and loss of property and does not involve any loan, much less forbearances of any money, goods or credits. As correctly argued by the private respondents, the law applicable to the said case is Article 2209 of the New Civil Code which reads 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 interest agreed upon, and in the absence of stipulation, the legal interest which is six percent per annum. The above rule was reiterated in Philippine Rabbit Bus Lines, Inc., v. Cruz, 7 promulgated on 28 July 1986. The case was for damages occasioned by an injury to person and loss of property. The trial court awarded private respondent Pedro Manabat actual and compensatory damages in the amount of P72,500.00 with legal interest thereon from the filing of the complaint until fully paid. Relying on the Reformina v. Tomol case, this Court 8modified the interest award from 12% to 6% interest per annum but sustained the time computation thereof, i.e., from the filing of the complaint until fully paid. In Nakpil and Sons vs. Court of Appeals, 9 the trial court, in an action for the recovery of damages arising from the collapse of a building, ordered, inter alia, the "defendant United Construction Co., Inc. (one of the petitioners) . . . to pay the plaintiff, . . . , the sum of P989,335.68 with interest at the legal rate from November 29, 1968, the date of the filing of the complaint until full payment . . . ." Save from the modification of the amount granted by the lower court, the Court of Appeals sustained the trial court's decision. When taken to this Court for review, the case, on 03 October 1986, was decided, thus: WHEREFORE, the decision appealed from is hereby MODIFIED and considering the special and environmental circumstances of this case, we deem it reasonable to render a decision imposing, as We do hereby impose, upon the defendant and the third-party defendants (with the exception of Roman Ozaeta) a solidary (Art. 1723, Civil Code, Supra. p. 10) indemnity in favor of the Philippine Bar Association of FIVE MILLION (P5,000,000.00) Pesos to cover all damages (with the exception to attorney's fees) occasioned by the loss of the building (including interest charges and lost rentals) and an additional ONE HUNDRED THOUSAND (P100,000.00) Pesos as and for attorney's fees, the total sum being payable upon the finality of this decision. Upon failure to pay on such finality, twelve (12%) per cent

interest per annum shall be imposed upon aforementioned amounts from finality until paid. Solidary costs against the defendant and third-party defendants (Except Roman Ozaeta). (Emphasis supplied) A motion for reconsideration was filed by United Construction, contending that "the interest of twelve (12%) per cent per annum imposed on the total amount of the monetary award was in contravention of law." The Court 10 ruled out the applicability of the Reformina and Philippine Rabbit Bus Lines cases and, in its resolution of 15 April 1988, it explained: There should be no dispute that the imposition of 12% interest pursuant to Central Bank Circular No. 416 . . . is applicable only in the following: (1) loans; (2) forbearance of any money, goods or credit; and (3) rate allowed in judgments (judgments spoken of refer to judgments involving loans or forbearance of any money, goods or credits. (Philippine Rabbit Bus Lines Inc. v. Cruz, 143 SCRA 160-161 [1986]; Reformina v. Tomol, Jr., 139 SCRA 260 [1985]). It is true that in the instant case, there is neither a loan or a forbearance, but then no interest is actually imposed provided the sums referred to in the judgment are paid upon the finality of the judgment. It is delay in the payment of such final judgment, that will cause the imposition of the interest. It will be noted that in the cases already adverted to, the rate of interest is imposed on the total sum, from the filing of the complaint until paid; in other words, as part of the judgment for damages. Clearly, they are not applicable to the instant case. (Emphasis supplied.) The subsequent case of American Express International, Inc., vs. Intermediate Appellate Court 11 was a petition for review on certiorari from the decision, dated 27 February 1985, of the then Intermediate Appellate Court reducing the amount of moral and exemplary damages awarded by the trial court, to P240,000.00 and P100,000.00, respectively, and its resolution, dated 29 April 1985, restoring the amount of damages awarded by the trial court, i.e., P2,000,000.00 as moral damages and P400,000.00 as exemplary damages with interest thereon at 12% per annum from notice of judgment, plus costs of suit. In a decision of 09 November 1988, this Court, while recognizing the right of the private respondent to recover damages, held the award, however, for moral damages by the trial court, later sustained by the IAC, to be inconceivably large. The Court 12 thus set aside the decision of the appellate court and rendered a new one, "ordering the petitioner to pay private respondent the sum of One Hundred Thousand (P100,000.00) Pesos as moral damages, with six (6%) percent interest thereon computed from the finality of this decision until paid. (Emphasis supplied) Reformina came into fore again in the 21 February 1989 case of Florendo v. Ruiz 13 which arose from a breach of employment contract. For having been illegally dismissed, the petitioner was awarded by the trial court moral and exemplary damages without, however, providing any legal interest thereon. When the decision was appealed to the Court of Appeals, the latter held: WHEREFORE, except as modified hereinabove the decision of the CFI of Negros Oriental dated October 31, 1972 is affirmed in all respects, with the modification that defendantsappellants, except defendant-appellant Merton Munn, are ordered to pay, jointly and severally, the amounts stated in the dispositive portion of the decision, including the sum of P1,400.00 in concept of compensatory damages, with interest at the legal rate from the date of the filing of the complaint until fully paid(Emphasis supplied.) The petition for review to this Court was denied. The records were thereupon transmitted to the trial court, and an entry of judgment was made. The writ of execution issued by the trial court directed that only compensatory damages should earn interest at 6% per annum from the date of the filing of the complaint. Ascribing grave abuse of discretion on the part of the trial judge, a petition for certiorari assailed the said order. This Court said: . . . , it is to be noted that the Court of Appeals ordered the payment of interest "at the legal rate" from the time of the filing of the complaint. . . Said circular [Central Bank Circular No.

416] does not apply to actions based on a breach of employment contract like the case at bar. (Emphasis supplied) The Court reiterated that the 6% interest per annum on the damages should be computed from the time the complaint was filed until the amount is fully paid. Quite recently, the Court had another occasion to rule on the matter. National Power Corporation vs. Angas, 14decided on 08 May 1992, involved the expropriation of certain parcels of land. After conducting a hearing on the complaints for eminent domain, the trial court ordered the petitioner to pay the private respondents certain sums of money as just compensation for their lands so expropriated "with legal interest thereon . . . until fully paid." Again, in applying the 6% legal interest per annum under the Civil Code, the Court 15 declared: . . . , (T)he transaction involved is clearly not a loan or forbearance of money, goods or credits but expropriation of certain parcels of land for a public purpose, the payment of which is without stipulation regarding interest, and the interest adjudged by the trial court is in the nature of indemnity for damages. The legal interest required to be paid on the amount of just compensation for the properties expropriated is manifestly in the form of indemnity for damages for the delay in the payment thereof. Therefore, since the kind of interest involved in the joint judgment of the lower court sought to be enforced in this case is interest by way of damages, and not by way of earnings from loans, etc. Art. 2209 of the Civil Code shall apply. Concededly, there have been seeming variances in the above holdings. The cases can perhaps be classified into two groups according to the similarity of the issues involved and the corresponding rulings rendered by the court. The "first group" would consist of the cases of Reformina v. Tomol (1985), Philippine Rabbit Bus Lines v. Cruz(1986), Florendo v. Ruiz (1989) and National Power Corporation v. Angas (1992). In the "second group" would be Malayan Insurance Company v.Manila Port Service (1969), Nakpil and Sons v. Court of Appeals (1988), and American Express International v.Intermediate Appellate Court (1988). In the "first group", the basic issue focuses on the application of either the 6% (under the Civil Code) or 12% (under the Central Bank Circular) interest per annum. It is easily discernible in these cases that there has been a consistent holding that the Central Bank Circular imposing the 12% interest per annum applies only to loans or forbearance 16 of money, goods or credits, as well as to judgments involving such loan or forbearance of money, goods or credits, and that the 6% interest under the Civil Code governs when the transaction involves the payment of indemnities in the concept of damage arising from the breach or a delay in the performance of obligations in general. Observe, too, that in these cases, a common time frame in the computation of the 6% interest per annum has been applied, i.e., from the time the complaint is filed until the adjudged amount is fully paid. The "second group", did not alter the pronounced rule on the application of the 6% or 12% interest per annum, 17depending on whether or not the amount involved is a loan or forbearance, on the one hand, or one of indemnity for damage, on the other hand. Unlike, however, the "first group" which remained consistent in holding that the running of the legal interest should be from the time of the filing of the complaint until fully paid, the "second group" varied on the commencement of the running of the legal interest. Malayan held that the amount awarded should bear legal interest from the date of the decision of the court a quo,explaining that "if the suit were for damages, 'unliquidated and not known until definitely ascertained, assessed and determined by the courts after proof,' then, interest 'should be from the date of the decision.'" American Express International v. IAC, introduced a different time frame for reckoning the 6% interest by ordering it to be "computed from the finality of (the) decision until paid." The Nakpil and Sons case ruled that 12% interest per annum should be imposed from the finality of the decision until the judgment amount is paid. The ostensible discord is not difficult to explain. The factual circumstances may have called for different applications, guided by the rule that the courts are vested with discretion, depending on the equities of each

case, on the award of interest. Nonetheless, it may not be unwise, by way of clarification and reconciliation, to suggest the following rules of thumb for future guidance. I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts 18 is breached, the contravenor can be held liable for damages. 19 The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages. 20 II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. 21 Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. 22 In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 23 of the Civil Code. 2. 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 24 at the rate of 6% per annum. 25 No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. 26 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. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. WHEREFORE, the petition is partly GRANTED. The appealed decision is AFFIRMED with the MODIFICATION that the legal interest to be paid is SIX PERCENT (6%) on the amount due computed from the decision, dated 03 February 1988, of the court a quo. A TWELVE PERCENT (12%) interest, in lieu of SIX PERCENT (6%), shall be imposed on such amount upon finality of this decision until the payment thereof. SO ORDERED. G.R. No. 96372 May 22, 1995 ANTONIO L. CASTELO, BERNABE B. BANSON, LOURDES A. BANSON, and POMPEYO DEPANTE, petitioners, vs. THE COURT OF APPEALS, 12th Division, and MILAGROS DELA ROSA, respondents.

FELICIANO, J.: On 15 October 1982, petitioners Antonio Castelo, Bernabe Banson, Lourdes Banson and Pompeyo Depante entered into a contract denominated as a "Deed of Conditional Sale" with private respondent Milagros Dela Rosa involving a parcel of land located in 1524 Espaa Street, Sampaloc, Manila, 84.19 square meters in area. The agreed price of the land was Two Hundred Sixty Nine Thousand, Four Hundred and Eight Pesos (P269,408.00). Upon signing the contract, private respondent paid petitioners One Hundred Six Thousand

Pesos (P106,000.00) leaving a balance of One Hundred Sixty Thousand Four Hundred and Eight Pesos (P163,408.00). The Deed of Conditional Sale also stipulated that: xxx xxx xxx b.) The balance of P163,408.00 to be paid on or before December 31, 1982 without interest and penalty charges;

c.) Should the said balance [remain unpaid] by the VENDEE, the VENDORS hereby agree to give the VENDEE agrace period of SIX (6) months or up to June 30, 1983 to pay said balance provided that interest at the rate of 12% per annum shall be charged and 1% penalty charge a month shall be imposed on the remaining diminishing balance.1 (Emphasis supplied)
Private respondent Dela Rosa was unable to pay the remaining balance on or before 30 June 1983. On 29 July 1983, petitioners filed an action for specific performance with damages in the Regional Trial Court (RTC) of Manila against Dela Rosa. The RTC, in a decision dated 17 August 1984 rendered by Judge Antonio Q. Malaya, ordered the rescission of the Deed of Conditional Sale. Petitioners then went on Certiorari to the Court of Appeals questioning the trial court's decision rescinding the Deed of Conditional Sale. They claimed that rescission of the contract was only an alternative relief available under the Civil Code, while they, in their complaint before the RTC, had asked for specific performance with damages. In a decision written by Castro-Bartolome, J., dated 21 November 1986, the Court of Appeals, in CA G.R. No. 07938-SP, annulled and set aside the RTC's decision of 17 August 1984. In its dispositive portion, the Court of Appeals decision stated: WHEREFORE, the writ of certiorari is hereby granted annulling the decision of Judge Malaya dated August 17, 1984 and a new one entered: 1) allowing the amendment of the complaint to conform to the evidence already presented and defaulted defendant to answer the amendment within the reglementary period; and

2) ordering the defendant to comply with her obligation under the conditional sale to pay the balance of the conditional sale in the amount of P163,408.00, to pay interest and in default thereof the rescission thereof is the alternative. 2(Emphasis supplied)
Petitioners filed a motion for execution of the 17 August 1984 judgment of the trial court as modified by the 21 November 1986 judgment of the Court of Appeals. Private respondent opposed this motion. A writ of execution of the 21 November 1986 judgment of the Court of Appeals was issued by the trial court on 2 September 1988. Accordingly, a Sheriff's Notice to Pay Judgment was served on private respondent Dela Rosa requiring her to pay petitioners a total of One Hundred Ninety Seven Thousand Seven Hundred Twenty Three Pesos and Sixty Eight Centavos (P197,723.68), computed as follows:

Principal plus interest of 12% (per contract)

P163,408.00

from 21 Nov. 1986 to 2 Sept. 1988 Total amount of judgment (excluding sheriff's fees and expenses)

34,315.6800

P197,723.68 3

Petitioners filed a motion for reconsideration and a separate motion for alias writ of execution contending that the sum of P197,723.68, based on the Sheriff's own computation, was erroneous. They argued that the obligation of private respondent was to pay (a) interest at the rate of twelve percent (12%) per annum plus(b) one percent (1%) penalty charge per month, from default, i.e. from 1 January 1983: a. That the amount to be paid by the Defendant should be P398,814.88 instead and not P197,723.68 or a difference of P201,091.20; detailed computation of which are as follows:

Unpaid balance with interest of 12% P.A. and 1% penalty charge a month January to December 1983 January to December 1984 January to December 1985 January to December 1986 January to December 1987 January to August 1988 1% interest per month (P268.16) the interest for one (1) year @ 24%

P163,408.00 39,217.92 39,217.92 39,217.92 39,217.92 39,217.92 26,145.28

P 39,217.92 x 5 years P196,089.60

Interest from January to August 1988 Interest from January 1983 to August 1988 Principal

26,145.28 222,234,88 163,408.00 P385,642.88

Plus Real Estate Tax Paid Amount due to Plaintiffs

13,172.00 P398,814.88 4

They also claimed that the amount arrived at by the Sheriff was inconsistent not only with the Court of Appeal's decision of 21 November 1986, but also the stipulations in the "Deed of Conditional Sale." In an Order of 18 April 1990, the trial court denied the motion for alias writ of execution and the motion for reconsideration. In denying petitioners' motions, the trial court stated that it did not have authority to enlarge the scope of the dispositive portion of the Court of Appeals' decision which was the subject of

execution. Moreover, the trial court continued, the phrase "to pay interest" found in the dispositive portion of the Court of Appeals' 21 November 1986 decision did not refer to the stipulation in the "Deed of Conditional Sale" but rather to the legal rate of interest imposed by the Court of Appeals which started to run from 12 February 1987, the date of entry of judgment. Had it intended otherwise, the Court of Appeals would have declared so. Petitioners moved for reconsideration of the 18 April 1990 Order, without success. Petitioners then went on Certiorari for the second time to the Court of Appeals claiming that the trial court had acted with grave abuse of discretion in issuing its Orders dated 18 April 1990 and 18 June 1990. The petition, docketed as C.A.-G.R. SP No. 22464, was, however, dismissed for lack of merit. The Court of Appeals, speaking this time through Luna, J., pronounced that:

Indeed, what must be the subject of execution is the "new one" or new decision (referring to the Court of Appeals' decision in CA-G.R. No. 07938 SP dated 21 November 1986), wherein this Court decreed in paragraph "2" of the dispositive portion, ordering the "defendant . . . to pay the balance of the conditional sale in the amount of P163,408.00, to pay interest . . . . " Being a "new" judgment or decision, the computation of the "interest" on the balance of the conditional sale should commence from the date of its ENTRY on February 12, 1987, when the decision became FINAL and EXECUTORY. It is the DECISION of this Court WHICH DECREED PAYMENT and ACCRUAL OF INTEREST. 5
Hence this Petition for Review contending that, in the Luna, J. decision, the Court of Appeals had erred in ignoring the stipulation for payment of interest in case of default found in the "Deed of Conditional Sale." The instant petition does not seek a review of the decision of the Court of Appeals dated 21 November 1986, issued in CA G.R. No. 07938-SP, which long ago became final and executory. The Petition before us now presents the issue of what is the correct interpretation of the phrase "to pay interest" set out in the dispositive portion of the 21 November 1986 decision of Castro-Bartolome, J. The established doctrine is that when the dispositive portion of a judgment, which has become final and executory, contains a clerical error or an ambiguity arising from an inadvertent omission, such error or ambiguity may be clarified by reference to the body of the decision itself. In Reinsurance Company of the Orient, Inc. v. Court of Appeals, 6 the Court surveyed the applicable case law in the following manner: It is true that even a judgment which has become final and executory may be clarified under certain circumstances. The dispositive portion of the judgment may, for instance, contain an error clearly clerical in nature (perhaps best illustrated by an arithmetical computation) or an ambiguity arising from inadvertent omission, which error may be rectified or ambiguity clarified and the omission supplied by reference primarily to the body of the decision itself. Supplementary reference to the pleadings previously filed in the case may also be resorted to by way of corroboration of the existence of the error or of the ambiguity in the dispositive art of the judgment. In Locsin, et al. v. Paredes, et al. (63 Phil. 87 [1936]), this Court allowed a judgment which had become final and executory to be clarified by supplying a word which had been inadvertently omitted and which, when supplied, in effect changed the literal import of the original phraseology: . . . it clearly appears from the allegations of the complaint, the promissory note reproduced therein and made a part thereof, the prayer and the conclusions of fact and of law contained in the decision of the respondent judge, that the obligation contracted by the petitioners is joint and several and that the parties as well as the trial judge so understood it. Under the juridical rule that the judgment should be in accordance with the allegations, the evidence and the conclusions of fact and law, the dispositive part of the judgment under consideration should

have ordered that the debt be paid severally, and in omitting the word or adverb "severally" inadvertently, said judgment became ambiguous. This ambiguity may be clarified at any time after the decision is rendered and even after it had become final (34 Corpus Juris, 235, 326). The respondent judge did not, therefore, exceed his jurisdiction in clarifying the dispositive part of the judgment by supplying the omission. (63 Phil. at 91-91) In Filipino Legion Corporation v. Court of Appeals, et al. (56 SCRA 674 [1974]), the applicable principle was set out in the following terms: [W]here there is ambiguity caused by an omission or mistake in the dispositive portion of a decision, the court may clarify such ambiguity by an amendment even after the judgment had become final, and for this purpose it may resort to the pleadings filed by the parties, the court's findings of facts and conclusions of law as expressed in the body of the decision. (56 SCRA at 691; also Presbitero v. Court of Appeals, 129 SCRA 443 [1984]) In Republic Surety and Insurance Company, Inc. v. Intermediate Appellate Court (152 SCRA 309 [1987]), the Court applying the above doctrine said:

. . . We clarify, in other words, what we did affirm. What is involved here is not what is ordinarily regarded as a clerical error in the dispositive part of the decision of the Court of First Instance, which type of error is perhaps best typified by an error in arithmetical computation. At the same time, what is involved here is not a correction of an erroneous judgment or dispositive portion of a judgment. What we believe is involved here is in the nature of an inadvertent omission on the part of the Court of First Instance (which should have been noticed by private respondent's counsel who had prepared the complaint), of what might be described as a logical follow-through of something set forth both in the body of the decision and in the dispositive portion thereof: the inevitable follow-through, or translation into, operational or behavioral terms, of the annulment of the Deed of Sale with Assumption of Mortgage, form which petitioners' title or claim of title embodied in TCT 133153 flow. (152 SCRA at 315) 7 (Emphases in the original)
The question we must resolve is whether or not there is an ambiguity or clerical error and inadvertent omission in the dispositive portion of the decision of Castro-Bartolome, J. dated 21 November 1986, which may legitimately be clarified by referring to the body of the decision and perhaps even the pleadings filed before her. It will be recalled that the second paragraph of the dispositive portion of that decision of Castro-Bartolome, J. ordered private respondent dela Rosa to comply with her obligation under the conditional sale to pay the balance of the conditional sale in the amount of P163, 408.00, to pay interest and in default thereof the rescission thereof is the alternative. (Emphases supplied) The dispositive portion itself failed to specify expressly whether Castro-Bartolome, J. was referring to the payment of interest in accordance with the terms and conditions of the "Deed of Conditional Sale" or whether, as Luna, J. was to hold almost four (4) years later that the requirement of "to pay interest" related, not to the interest provisions of the Conditional Sale Deed between petitioners and private respondent, but rather to legal interest on the amount of the unpaid balance of the purchase price of the land which would begin to accrue from the date of the entry of the Castro-Bartolome judgment on 12 February 1987. Luna, J. said: It is settled that the only portion subject of execution is the dispositive portion of a judgment. The judgment of the Honorable Court of Appeals does not refer to the interest referred to in the Conditional Deed of Sale. Said judgment or dispositive portion cannot be stretched or enlarged to refer to the interest indicated in the Conditional Deed of Sale. If that were the intention of the Honorable Court of Appeals, as contended by plaintiffs, it would have said so in black and white. This Court is not authorized to re-write, alter, amend or change the above-mentioned dispositive portion of the judgment of the Honorable Court of Appeals.

By a fair interpretation, the interest therein referred to is the legal rate of interest imposed by the Honorable Court of Appeals which must commence from the entry of judgment on February 12, 1987. At this stage, it appearing that the Decision of the Honorable Court of Appeals had long become final and executory. This Court has no more jurisdiction to entertain reception of evidence in the matter of the execution of the dispositive portion of the judgment of the Honorable Court of Appeals. 8 (Emphasis supplied)
It thus appears that the Castro-Bartolome decision was ambiguous in the sense that it was too cryptic. Examination of the body of that decision, however, sheds no light on the reference intended by CastroBartolome, J. in directing private respondent "to pay interest." Luna, J. himself had to resort to "fair interpretation." We believe that, in these circumstances, we must assume that Mme. Justice CastroBartolome meant to decide in accordance with law; that we cannot fairly assume that she was unfamiliar with the applicable law or that she had intended to grant petitioners less than that they were entitled to under the law. Thus, the important question is: under the circumstances which were before Castro-Bartolome, J., what should private respondent dela Rosa have been held liable for in accordance with law? 9 We believe and so hold that the phrase "to pay interest," found in the dispositive portion of the CastroBartolome decision must, under applicable law, refer to the interest stipulated by the parties in the Deed of Conditional Sale which they had entered into on 15 October 1982. We note, in the first place, that the phrase "to pay interest" comes close upon the heels of the preceding phrase "to comply with her obligation under the conditional sale to pay the balance of P163,408.00." A strong inference thus arises that the "interest" required to be paid is the interest stipulated as part of the "obligation [of private respondent dela Rosa] under the conditional sale [agreement] to pay the balance of [the purchase price of the land]." There is, in the second place, no question that private respondent dela Rosa had failed to pay the balance of P163,408.00 on or before 31 December 1982. The applicable law is to be found in Article 2209 of the Civil Code which provides as follows: 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 percent (6%) per annum. (Emphasis supplied) Under Article 2209, the appropriate measure for damages in case of delay in discharging an obligation consisting of the payment of a sum of money is the payment of penalty interest at the rate agreed upon in the contract of the parties. In the absence of a stipulation of a particular rate of penalty interest, payment of additional interest at a rate equal to the regular or monetary interest, becomes due and payable. Finally, if no regular interest had been agreed upon by the contracting parties, then the damages payable will consist of payment of legal interest 10 which is six percent (6%) or, in the case of loans or forbearances of money, twelve percent (12%) per annum. 11 Applying Article 2209 to the instant case, we must refer to the "Deed of Conditional Sale" which, as already noted, had specifically provided for "interest at the rate of 12% per annum" and a "1% penalty charge a month [to] be imposed on their remaining diminishing balance." There was, it thus appears, no need for the subsequent Luna, J. decision to refer at all to the payment of legal interest from the time of entry of the Castro-Bartolome decision. The contention of private respondent that Article 2209 of the Civil Code is not applicable in this case because the interest referred to therein is given as compensation for the use of money, not for the incurring of delay as in the instant case, 12 need not detain us for long. Article 2209 governs transactions involving the payment of indemnity in the concept of damages arising from delay in the discharge of obligations consisting of the payment of a sum of money. 13 The "obligation consisting in the payment of a sum of money" referred to in Article 2209 is not confined to a loan or forbearance of money. The Court has, for instance, consistently applied Article 2209 in the determination of the interest properly payable where there was default in the payment of the price or consideration under a contract of sale 14 as in the case at bar. Article 2209 has also been applied by this Court in cases

involving an action for damages for injury to persons and loss of property; 15 to actions for damages arising from unpaid insurance claims; 16 and an action involving the appropriate rate of interest on just compensation that is payable for expropriated lands.17 The stipulation in the "Deed of Conditional Sale" requiring the payment of interest is not unlawful. The validity of the contract of conditional sale itself has not been put to question by private respondent dela Rosa and there is nothing in the record to suggest that the same may be contrary to law, morals, good custom, public order or public policy. Accordingly, the contractual stipulation must be regarded as binding and enforceable as the law between the parties. 18 We turn, therefore, to the examination of the contractual stipulation on interest which we quoted in full earlier. Under the terms of that stipulation, private respondent was bound, and entitled, to pay the balance of P163,408.00 on or before 31 December 1982 without incurring any liability for any interest and penalty charges. During the grace period of six (6) months, that is, from 1 January 1983 to 30 June 1983, private respondent vendee was given the right to pay the said balance or any portion that had remained unpaid provided that "interest at the rate of 12% per annum shall be charged and 1% penalty charge shall be imposed on the remaining diminishing balance." We observe that residual ambiguity infects this particular portion of the stipulation on payment of interest. The question is whether, during the period of 1 January 1983 up to 30 June 1983, 12% interest per annum plus 1% penalty charge a month was payable "on the remaining diminishing balance;" or whether during the period from 1 January 1983 to 30 June 1983, only12% per annum interest was payable while the 1% per month penalty charge would in addition begin to accrue on any balance remaining unpaid as of 1 July 1983. We believe that the contracting parties intended the latter view of their stipulation on interest; for if the parties had intended that during the grace period from 1 January 1983 to 30 June 1983, interest consisting of 12% per annum plus another 12% per annum (equivalent to 1% per month), or a total of 24% per annum, was payable, then they could have simply said so. Instead, the parties distinguished between interest at the rate of 12% per annum and the 1% a month penalty charge. The interpretation we adopt is also supported by the principle that in case of ambiguity in contract language, that interpretation which establishes a less onerous transmission of rights or imposition of lesser burdens which permits greater reciprocity between the parties, is to be adopted. 19 Summarizing the import of the contractual stipulation of the parties: (1) During the period from 1 January 1983 up to 30 June 1983, private respondent vendee dela Rosa was bound to pay interest at the rate of 12% per annum on the unpaid balance of P163,408.00. (2) Commencing on 1 July 1983, and until full payment, dela Rosa was bound to pay interest at the rate of 12% per annum plus another 12% per annum (or 1% penalty charge a month), or a total of 24% per annum to be computed on the "remaining diminishing [unpaid] balance." Private respondent finally contends that she had already complied with her obligation considering that after she had been served with a writ of execution dated 2 September 1988, she deposited with the trial court on 7 September 1988 the amount stated therein, that is, the amount of P197,723.68. 20 Obviously, this contention raises a question of fact; just as obvious, however, is the rule that questions of fact cannot be raised in a petition for review on certiorari before this Court. At all events, private respondent's factual contention is properly addressed not to this Court, but rather to the trial court during execution proceedings. In the interest of complete resolution of this drawn out litigation and of achieving substantial justice, we would add that if the trial court finds that, in point of fact, the amount of P197,723.68 had indeed been deposited with the trial court on 7 September 1988, then the total amount due from private respondent should be correspondingly reduced by the application of the amount of the deposit in accordance with the rules on application of payments. 21 Conversely, the interest yield or civil fruits of the deposit, commencing from date of application of the deposit as partial payment, would pertain to petitioners who have not thus far enjoyed the use of the monies deposited.

The conclusion we have reached renders it unnecessary to pass upon the other contentions made by private respondent. WHEREFORE, for all foregoing, the Petition for Review is hereby GRANTED. The Decision of the Court of Appeals dated 22 August 1990 in C.A.-G.R SP No. 22464 (the Luna, J. decision) is hereby REVERSED and SET ASIDE and the dispositive portion of the Decision by Castro-Bartolome, J., dated 21 November 1986, in C.A.-G.R No. 07938-SP is hereby CLARIFIED as follows: WHEREFORE, the writ of certiorari is hereby GRANTED annulling the Decision of Judge Malaya dated August 17, 1984 and a new one entered: (1) allowing the amendment of the complaint to conform to the evidence already presented and defaulted defendant to answer the amendment within the reglementary period; (2) ordering the defendant to comply with her obligation under the conditional sale to pay the balance of the conditional sale in the amount of P163,408.00, to pay interest on the amount of the balance remaining unpaid during the period from 1 January 1983 to 30 June 1983 at the rate of 12% per annum; and, from 1 July 1983 until full payment of the amount due, to pay interest at the rate of 12% per annum plus another 12% per annum (i.e., 1% penalty charge per month), or a total of 24% per annum, on the balance remaining unpaid; and (3) In default thereof, the rescission of the "Deed of Conditional Sale" is the alternative. No pronouncement as to costs. SO ORDERED. G.R. No. 97873 August 12, 1993 PILIPINAS BANK, petitioner, vs. THE HONORABLE COURT OF APPEALS, and LILIA R. ECHAUS, respondents. Gella, Reyes, Danguilan and Associates for the petitioner. Manuel L. Melotindos for the respondents.

QUIASON, J.: 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 defense 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 plaintiffappellee 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 (CAG.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 trail 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 discharged 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, p. 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: Sec. 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. Sec. 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 that 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. (italics 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 Philippines 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 . . . ." 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 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 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 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 refunded by private respondent falls within the ruling inViloria 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.