annum 

as provided in Article 2209 of the NCC and not

PNB V. CA, IBARROLA
G.R. 123643 (1996) the rate of 12%  per annum as provided in (CB) Cir. No.
416."  Indeed, PNB's liability is based only on the RTC's
judgment where it was held solidarily liable with the
Facts: As payments for the purchase of medicines, the
other defendants due to its negligence when it "failed
Province of Isabela issued checks drawn against its
to assure itself" if the Provincial Treasurer was
account with Philippine National Bank (PNB) in favor of
"properly authorized" by Ibarrola to "make
the seller, Lyndon Pharmaceuticals Laboratories, a
endorsements" of said checks. 
business operated by Dr. Erlinda Ibarrola. The checks
were delivered, but it lacked 23 checks amounting to
Applicability of 12% CB Cir. 416
P98,691.90.
The interest rate of 12% applies only to loans or
forbearances of money, or to cases where money is
For her failure to receive the full payment, Ibarrola filed
transferred from one person to another and the
an action for sum of money and damages against the
obligation to return the same or a portion thereof is
Province and the two agents of the PNB. The RTC
adjudged. 
ordered the Province and the two agents of PNB to
jointly and solidarily pay Ibarrola P98,691.90 “with
Any other monetary judgment which does not involve
interest thereon at the legal rate from the date of the
or which has nothing to do with loans or forbearance of
filing of the complaint until the entire amount is fully
any money, goods or credit does not fall within its
paid.” The decision reached finality, and at the
coverage for such imposition is not within the ambit
execution stage, the sheriff computed the interest at
of the authority granted to the Central Bank.
the rate of 12%. Upon clarification with the RTC that
made the order, it also said that the rate should be at
12%. However, PNB contends that it must be at only
Conclusion
6%. Thus, this case was filed with the SC.
The proper rate of interest referred to in the judgment
under execution is only 6%. This interest according to
Issue: What rate on the interest should be applied?
Eastern Shipping shall be computed from the time of
the filing of the complaint considering that the amount
Ruling: It should be 6% on the amount adjudged; and
adjudged (P98,691.90) can be established with
apply 12% once the judgment becomes final and
reasonable certainty. Said amount being merely the
executory.
uncollected balance of the purchase price covered by
the 23 checks encashed and appropriated by Ibarrola's
As ruled in Eastern Shipping Lines, Inc. v. CA:
agents. However, once the judgment becomes final and
executory, the "interim period from the finality of
When an obligation, not constituting a loan or
judgment awarding a monetary claim and until
forbearance of money, is breached, an interest
payment thereof, is deemed to be equivalent to a
on the amount of damages awarded may be
forbearance of credit."  Thus, in accordance with the
imposed at the discretion of the court at the rate
pronouncement in Eastern Shipping the rate of 12%
of 6%  per annum. Accordingly, where the
p.a. should be imposed, and to be computed from the
demand is established with reasonable certainty,
time the judgment became final and executory until
the interest shall begin to run from the time the
fully satisfied. The actual base for the computation of
claim is made judicially or extrajudicially  (Art.
this 12% interest after the judgment in this damage
1169, Civil Code) but when such certainty cannot
suit became final shall be the amount adjudged
be so reasonably established at the time the
(P98,691.90).
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 DISCUSSION: In this case, it was provided that as a
damages may be deemed to have been general rule: contract of Sale is not loan or
reasonably ascertained). The actual base for the forbearance of money. Hence, 6% was applied. But
computation of legal interest shall, in any case, from the time of finality of judgement up to
be on the amount finally adjudged.  satisfaction of the loan, rate used would be 12%.
Application to the Case Just don’t forget that aside from remembering what
The case at bench does not involve a loan, forbearance is or what is not loan or forbearance of money,
of money or judgment involving a loan or forbearance never forget that there would be a finality of
of money as it arose from a contract of sale whereby judgement. Especially for the exam.
Ibarrola did not receive full payment for her
merchandise. When an obligation arises "from a
contract of purchase and sale and not from a contract
of loan or mutuum," the applicable rate is "6%  per
 from the time it was given to her  until now. Thus, she is
ESTORES V. SPS. SUPANGAN
G.R. 175139 (2012) already in default of her obligation from the date of
demand, i.e., on September 27, 2000.
Facts: On October 3, 1993, Hermojina Estores (vendor) (2) The interest at the rate of 12% is applicable. The
and Spouses Arturo and Laura Supangan (vendees) stipulation governing the return of the money be
entered into a conditional Deed of Sale over a parcel of considered as a forbearance of money which warrants
land subject to certain conditions, such as that the the use of the rate at 12%.
vendor shall to relocate the house outside the
perimeter of the subject property and to complete the Anent the interest rate, the general rule is that the
necessary documents with the DAR; etc. The applicable rate of interest "shall be computed in
agreement was that if Estores fails to comply with the accordance with the stipulation of the parties." Absent
conditions within 30 days without sufficient reasons, any stipulation, the applicable rate of interest shall be
the spouses may demand full return of their 12% per annum "when the obligation arises out of a
downpayment. loan or a forbearance of money, goods or credits. In
other cases, it shall be six percent (6%)." In this case,
Seven years after the execution of the contract, and the parties did not stipulate as to the applicable rate of
despite the payment of the spouses of P3.5 million, interest. Thus, we now determine whether the 6% as
Estores still failed to comply with her obligations as the provided under Article 2209 of the Civil Code, or 12%
vendor. Thus, the spouses sent a letter of demand under Central Bank Circular No. 416, is due.
dated Sept 27, 2000 for the return of the P3.5 million.
The spouses later agreed with Estores that she return The stipulation governing the return of the money is
the P3.5 million within 120 days, provided that an considered as a forbearance of money. Thus, the
interest of 12% compounded annually shall be imposed applicable rate is 12%.
on such amount.
Two Definitions of Forbearance
However, Estores still failed to pay despite demands. Cristina Garments v. Estores v. Sps. Supangan
Thus, the spouses filed a complaint for sum of money CA (this case provided new
praying that they be paid the amount of P3.5 million, def)
plus 12% annual compounded interest. However, it is Forbearance is a Forbearance of money,
the contention of Estores that it is willing to return the "contractual goods or credit refer to
P3.5 million, but without interest, arguing that since obligation of lender arrangements other than
the Conditional Deed of Sale provided only for the or creditor to refrain loan agreements, where a
return of the downpayment in case of breach (and no during a given period person acquiesces to the
stipulation as to any interest), they cannot be held of time, from temporary use of his
liable to pay legal interest as well. requiring the money, goods or credits
borrower or debtor to pending happening of
Issue: repay a loan or certain events or
(1) May Estores be held liable for interest despite the debt  then due and fulfillment of certain
absence of a stipulation in the Conditional Deed of payable." conditions.
Sale? This definition We believe however, that
(2) If yes, what rate should apply? Can the stipulation describes a loan the phrase "forbearance of
governing the return of the money be considered where a debtor is money, goods or credits" is
as a forbearance of money which required payment given a period within meant to have a separate
of interest at the rate of 12%? which to pay a loan or meaning from a loan,
debt. In such case, otherwise there would
Ruling: "forbearance of have been no need to add
(1) YES. Interest may be imposed even in the absence money, goods or that phrase as a loan is
of stipulation in the contract. credits" will have no already sufficiently defined
distinct definition in the Civil Code. (Hence
Article 2210 of the Civil Code expressly provides that from a loan. the definition above).
"Interest may, in the discretion of the court, be allowed
upon damages awarded for breach of contract." In this
case, there is no question that Estores is legally Application to the Case
obligated to return the ₱3.5 million because of her In this case, the Spouses Supangan parted with their
failure to fulfill the obligation under the Conditional money even before the conditions were fulfilled. They
Deed of Sale, despite demand. She has in fact admitted have therefore allowed or granted forbearance to the
that the conditions were not fulfilled and that she was seller (Estores) to use their money pending fulfillment
willing to return the full amount of ₱3.5 million but has of the conditions. They were deprived of the use of
not actually done so. She enjoyed the use of the money
their money for the period pending fulfillment of the (3) that notwithstanding her demand for payment,
conditions and when those conditions were breached, Pilipinas Bank in bad faith, refused and failed to pay the
they are entitled not only to the return of the principal said amount assigned to her.
amount paid, but also to compensation for the use of
their money. And the compensation for the use of their ASSIGNMENT
money, absent any stipulation, should be the same rate The trial court ordered Pilipinas Bank to pay Echaus as
of legal interest applicable to a loan since the use or follows:
deprivation of funds is similar to a loan. 1.) P2,300,000.00 the total amount assigned by
Greatland in her favor plus legal interest from the
Estores’ unwarranted withholding of the money which dates of assignments until fully paid;
rightfully pertains to Spouses Supangan amounts to 2) P3,217,707.00 representing the total actual damages
forbearance of money which can be considered as an suffered by the plaintiff plus legal interest until fully
involuntary loan. Thus, the applicable rate of interest paid.
is 12% per annum.
The CA modified the judgment of the trial court as
(cited Eastern Shipping Lines guidelines, as cited in follows:
Crismina v. CA) 1) Pilipinas Bank is ordered to pay the Echaus the sum
of P2,300,000 representing the total amount assigned
Eastern Shipping Lines, Inc. v. Court of Appeals and its by Greatland to her, with interest at the legal rate
predecessor case, Reformina v. Tongol both involved starting July 24, 1981, date when demand was first
torts cases and hence, there was no forbearance of made.
money, goods, or credits. Further, the amount claimed
(i.e., damages) could not be established with According to Echaus, the legal interest on the principal
reasonable certainty at the time the claim was made. amount of P2,300,000.00 due her should be 12% per
Hence, we arrived at a different ruling in those cases. annum pursuant to CB Circular No. 416 and not 6% per
annum as computed by Pilipinas Bank. However,
Reckoning Point of Interest
Pilipinas Bank argues that the applicable law is Article
Since the date of demand which is September 27, 2000
2209 of the Civil Code, not CB 416.
was satisfactorily established during trial, then the
interest rate of 12% should be reckoned from said date
OVERPAYMENT
of demand until the principal amount and the interest
Pilipinas Bank filed a motion in the trial court praying
thereon is fully satisfied.
that Echaus and Standard Insurance Co. should refund
the excess payment of P1,898,623.67 with interests at
DISCUSSION: Always remember the definition of 6%. It must be recalled that while Echaus was able to
loan or forbearance of money because without it, collect P5,517,707.00 from Pilipinas Bank pursuant to
you wouldn't be able to when the rate of 6% or 12% the writ of advance execution, the final judgment in
is applicable. Compare this case with Cristina the main case awarded to Echaus damages in the total
Garments v. CA, since the two provided definitions amount of only P2,655,000.00, together "with interest
for forbearances of money. Please take note of on the amount of P2,300,000.00 at the legal rate
these two definitions. starting July 24, 1981, date when demand was first
made. (Murag naka advance payment sila, tapos later
pag rule less diay dapat ang bayaran so dapat i-refund
daw ni Echaus si Pilipinas Bank).
PILIPINAS BANK V. CA, ECHAUS
G.R. 97873 (1993) Issue:
(1) Is the P2,300,000 (payment by Pilipinas Bank to
Facts: Echaus filed a complaint against Pilipinas Bank Echaus) considered a loan, making the interest
and its president, Constantino Bautista, for collection of applicable 12%?
a sum of money. The complaint alleged: (2) Is the P1,800,000 (overpayment to be paid by
Echaus to Pilipinas Bank) a forbearance of loan,
(1) that petitioner and Greatland Realty Corporation making the interest applicable 12%?
executed a "Dacion en Pago," wherein Greatland
conveyed to Pilipinas Bank several parcels of land for Ruling:
the sum of P7,776,335.69; (1) NO. It arose from a contract of purchase of sale
(2) that Greatland assigned P2,300,000.00 out of the and not of loan. Thus, the interest rate should be at
total consideration of the Dacion en Pago, in favor of 6%.
Echaus; and
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. The rate for the return of the overpayment by Echaus to
judgments spoken of and referred to in Circular No. Pilipinas Bank should be at 12%.
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 DISCUSSION: So in this case, it involves a Dacion en
with nor involving loans or forbearance of any money, Pago which is akin to a Contract of Purchase and
goods or credits does not fall within the coverage of Sale. The judgement ordered petitioner to pay
the said law for it is not, within the ambit of the ₱2.3M arose from such a contract which is not a
authority granted to the Central Bank." loan or forbearance of money. Hence, the interest
that we will apply is 6%.
CB No. 416 does not apply to:
(1) Judgments involving damages (Reformina v. Tomol, Okay, so what can you say about the fact that
Jr.) previously in PNB vs. Ibarrola, we just talked about
(2) Compensation in expropriation proceedings that a contract of sale is not a loan or forbearance of
(National Power Corporation v. Angas) money, that's (inaudible), we're talking about a
(3) Payment of unliquidated cash advances to an conditional deed of sale being a loan or forbearance
employee by his employer (Villarica v. Court of of money.
Appeals)
(4) Return of money paid by a buyer of a leasehold The lower court applied the 6% annual interest. But
right but which contract was voided due to the fault the SC overruled that and they applied the 12%
of the seller (Buisier v. Court of Appeals) interest because they considered the return of
money, the inflation which returned the payment of
The contract is from Purchase and Sale money as a forbearance of money because here, the
The said amount was a portion of the P7,776,335.69 creditor allowed the temporary use of their money
which petitioner was obligated to pay Greatland as despite the pending fulfillment of the obligation on
consideration for the sale of several parcels of land by the part of the creditor (?) and thus they were
Greatland to petitioner. The amount of P2,300,000.00 deprived of the use of their money for the period
was assigned by Greatland in favor of private pending fulfillment of such application because if
respondent. The said obligation therefore arose from a there was breach of such stipulation, then they are
contract of purchase and sale and not from a contract not only entitled to the principal amount but also
of loan or mutuum. Hence, what is applicable is the the compensation for the temporary use of their
rate of 6% per annum as provided in Article 2209 of the money.
Civil Code of the Philippines and not the rate of 12%
per annum as provided in Circular No. 416.

(2) YES. It is a forbearance of loan, as there is still an

obligation to return the same. Thus, the interest rate
should be at 12%.

Echaus was paid in advance the amount of

P5,517,707.00 by Pilipinas Bank 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.

In the case before us, the excess amount ordered to

refunded by private respondent falls within the ruling
in Viloria  and Buiser  that Circular No. 416 applies to
cases where money is transferred from one person to
another and the obligation to return the same or a
portion thereof is subsequently adjudged. Thus, it is in
the nature of a forbearance of loan, and the interest