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    Issue: Whether The Legal Interest Rate For A Judgment Involving Damages To Property Is 12%

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    Vance Ceballos
    This case involved a dispute over the applicable interest rate on a judgment awarding damages for the loss of a boat and equipment in a fire. The Reforminas claimed the 12% interest rate under a Central Bank circular should apply, while Shell and Michael Inc. argued the 6% rate under the Civil Code applied. The Supreme Court ruled the 6% rate applied because the case did not involve a loan or forbearance of money, which were the types of judgments covered under the law authorizing the Central Bank to increase interest rates. A concurring opinion argued the delegation of authority to the Central Bank to set interest rates was unconstitutional as there were no guidelines limiting this authority.

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    Issue: Whether The Legal Interest Rate For A Judgment Involving Damages To Property Is 12%

    Uploaded by

    Vance Ceballos
    49 views2 pages
    This case involved a dispute over the applicable interest rate on a judgment awarding damages for the loss of a boat and equipment in a fire. The Reforminas claimed the 12% interest rate under a Central Bank circular should apply, while Shell and Michael Inc. argued the 6% rate under the Civil Code applied. The Supreme Court ruled the 6% rate applied because the case did not involve a loan or forbearance of money, which were the types of judgments covered under the law authorizing the Central Bank to increase interest rates. A concurring opinion argued the delegation of authority to the Central Bank to set interest rates was unconstitutional as there were no guidelines limiting this authority.

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    Pacita F

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    Pacita F

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    This case involved a dispute over the applicable interest rate on a judgment awarding damages for the loss of a boat and equipment in a fire. The Reforminas claimed the 12% interest rate under a Central Bank circular should apply, while Shell and Michael Inc. argued the 6% rate under the Civil Code applied. The Supreme Court ruled the 6% rate applied because the case did not involve a loan or forbearance of money, which were the types of judgments covered under the law authorizing the Central Bank to increase interest rates. A concurring opinion argued the delegation of authority to the Central Bank to set interest rates was unconstitutional as there were no guidelines limiting this authority.

    Copyright:

    © All Rights Reserved
    49 views2 pages

    Issue: Whether The Legal Interest Rate For A Judgment Involving Damages To Property Is 12%

    Uploaded by

    Vance Ceballos
    This case involved a dispute over the applicable interest rate on a judgment awarding damages for the loss of a boat and equipment in a fire. The Reforminas claimed the 12% interest rate under a Central Bank circular should apply, while Shell and Michael Inc. argued the 6% rate under the Civil Code applied. The Supreme Court ruled the 6% rate applied because the case did not involve a loan or forbearance of money, which were the types of judgments covered under the law authorizing the Central Bank to increase interest rates. A concurring opinion argued the delegation of authority to the Central Bank to set interest rates was unconstitutional as there were no guidelines limiting this authority.

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    of 2

    Pacita F. Reformina & Heirs of Francisco Reformina vs. Honorable Valeriano P. Tomol, Jr.

    , CFI Judge, Br
    XI, Cebu City, Shell Refining Company (Phils.), Inc. & Michael, Inc., G.R. No. L-59096, October 11, 1985
    (139 SCRA 260)

    Facts :The Reforminas lost a boat and its equipment as a result of a fire. They sued Shell and Michael,
    Inc. The CFI ruled in their favor and awarded legal interest from the filing of the complaint. The CA
    modified the decision, but still granted legal interest. The decision became final, and the case was
    remanded to the CFI for execution. The Reforminas claim that the legal interest should be 12% per
    annum pursuant to CB Circular No. 416. Shell and Michael, Inc. claim that that the interest should be
    6% as stated in Art. 2209 NCC in relation to Art. 2210 and 2211 NCC. The CFI ruled that the interest rate
    should be at 6%.

    Issue: Whether the legal interest rate for a judgment involving damages to property is 12%.

    Held: No. Affirmed.

    Ratio: 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 said law states that 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.

    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

    1 of Act No. 2655 to twelve (12%) percent per annum.

    Act No. 2655 deals with interest on (1) loans; (2) forbearances of any money, goods, or credits; and (3)
    rate allowed in judgments. 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. 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. 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.

    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 NCC.
    Plana, concurring& dissenting: The Usury Law does not empower the Central Bank to fix the specific
    rate of interest to be charged for loans. It merely grants the power to prescribe the maximum interest
    rate, leaving it to the contracting parties to determine within the allowable limit what precisely the
    interest rate will be. In other words, the provision presupposes that the parties to the loan agreement
    are free to fix the interest rate, the ceiling prescribed by the Central Bank operating merely to restrict
    the parties' freedom to stipulate. So viewed, Sec. 1-a cannot include a provision on interest to be
    allowed in judgments, which is not the subject of contractual stipulations and therefore cannot logically
    be made subject to interest ceiling, which is all that Sec. 1-a covers. Note that Central Bank Circular 416
    itself invokes as the basis for its issuance Sec. 1, rather than Sec. 1-a, of the Usury Law.

    By purpose and operative effect, Sec. 1 of the Usury Law is different from Sec. 1- a. This section
    envisages two situations: (a) a loan or forbearance of money, goods or

    credit, where the parties agreed on the payment of interest but failed to fix the rate thereof; and (b) a
    litigation that has ended in a final judgment for the payment of money. In either case, the role of Section
    1 is to fix the specific rate of interest or legal interest (6%) to be charged. It also impliedly delegates to
    the Central Bank the power to modify the said interest rate. Thus, the interest rate shall be 6% per
    annum or "such rate as may be prescribed by the Monetary Board of the Central Bank”.

    The authority to change the legal interest that has been delegated to the Central Bank under the quoted
    Section 1 is absolute and unqualified. It is true that Section 1 says that the rate of interest shall be 6%
    per annum or "such rate as may be prescribed by the Monetary Board of the Central Bank... in
    accordance with the authority hereby granted." But neither in the said section nor in any other section
    of the law is there a guideline or limitation imposed on the Central Bank. The determination of what the
    applicable interest rate shall be, as distinguished from interest rate ceiling, is completely left to the
    judgment of the Central Bank. In short, there is a total abdication of legislative power, which renders the
    delegation void.

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