G.R. No. L-71017. July 28, 1986.
PHILIPPINE RABBIT BUS LINES, INC., petitioner, vs. HON. LEONARDO I. CRUZ, Presiding Judge, Branch LVI, RTC, Third Judicial Region & PEDRO MANABAT, respondents.

FACTS

Pedro Manabat obtained a final and executory judgment against Philippine Rabbit Bus Lines, Inc. for actual and compensatory damages amounting to P72,500.00, with legal interest from the filing of the complaint. To execute the judgment, the deputy sheriff garnished P155,150.00 from the petitioner’s bank account. This garnished sum included interest computed at twelve percent (12%) per annum on the principal award.
Philippine Rabbit moved to dissolve the garnishment, contesting the applicable interest rate. It argued that the interest should be computed at only six percent (6%) per annum, not twelve percent (12%). The respondent judge denied the motion, prompting the petitioner to seek relief from the Supreme Court.

ISSUE

Whether Central Bank Circular No. 416, prescribing a twelve percent (12%) per annum legal interest rate, applies to a monetary judgment arising from an action for damages for injury to persons and loss of property, which does not involve a loan or forbearance of money.

RULING

The Supreme Court granted the petition, ruling that the applicable legal interest rate is six percent (6%) per annum. The Court held that Central Bank Circular No. 416, issued pursuant to the authority granted under the Usury Law (Act No. 2655, as amended), is limited in scope. The Monetary Board’s authority to prescribe interest rates under Section 1-a of the Usury Law explicitly pertains only to “the loan or renewal thereof or the forbearance of any money, goods or credit.”
Following its precedent in Reformina v. Tomol, Jr., the Court elucidated that the phrase “rate allowed in judgments” mentioned in the Usury Law must be construed in association with the preceding terms. Therefore, it refers only to judgments involving loans or forbearances of money, goods, or credits. A judgment for damages arising from tort or quasi-delict, as in this case, does not constitute a loan or forbearance. Consequently, the general law on indemnity for damages governs, specifically Article 2209 of the Civil Code, which prescribes a six percent (6%) legal interest per annum in the absence of stipulation.
Applying this, the Court found that P41,325.00 of the garnished amount represented excess interest computed at the erroneous twelve percent rate. The respondent court’s order was vacated, and private respondent Manabat was ordered to refund said excess to the petitioner.