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.

FACTS

Petitioners Pacita F. Reformina and the heirs of Francisco Reformina were awarded damages in a civil case for injury to person and loss of property arising from a fire. The final and executory judgment ordered the respondents, Shell Refining Company (Phils.), Inc. and Michael, Incorporated, to pay compensatory and moral damages “with legal interest from the filing of the complaint until paid.” During execution, a dispute arose over the applicable rate of this legal interest. The trial court, through respondent Judge Valeriano P. Tomol, Jr., issued a resolution fixing the legal interest at six percent (6%) per annum pursuant to Article 2209 of the Civil Code. The petitioners moved for reconsideration, contending that the rate should be twelve percent (12%) per annum under Central Bank Circular No. 416. The motion was denied, prompting this petition.

ISSUE

Whether the “legal interest” on the monetary judgment for damages in this case, which did not arise from a loan or forbearance of money, goods, or credits, should be computed at the rate of twelve percent (12%) per annum under Central Bank Circular No. 416, or at six percent (6%) per annum under Article 2209 of the Civil Code.

RULING

The Supreme Court ruled that the legal interest on the judgment for damages should be computed at the rate of six percent (6%) per annum. The Court explained that Central Bank Circular No. 416, which prescribes a twelve percent (12%) per annum rate “for the loan or forbearance of any money, goods, or credits and the rate allowed in judgments,” must be read in context with the Usury Law (Act No. 2655) which it implements. The authority of the Monetary Board to prescribe interest rates under the Usury Law is limited to transactions involving loans or forbearances of money, goods, or credits. The phrase “rate allowed in judgments” in the Circular refers only to judgments that involve or are based on such loan or forbearance contracts. The judgment in this case is for damages arising from tort (quasi-delict), not from any loan or forbearance. Therefore, it falls outside the scope of Circular No. 416. For obligations not constituting a loan or forbearance, such as the payment of damages awarded in this case, the applicable legal interest is governed by Article 2209 of the Civil Code, which mandates an interest of six percent (6%) per annum. The trial court’s resolution was affirmed, and the petition was dismissed for lack of merit.