GR 105756; (May, 1993) (Digest)
G.R. No. 105756 May 31, 1993
SPOUSES LORETO CLARAVALL and VICTORIA CLARAVALL, petitioners, vs. HON. FLORENIO E. TIERRA, in his capacity as Presiding Judge, Regional Trial Court, Branch 16, Ilagan, Isabela, CAROLINA P. RAMIREZ, respondents.
FACTS
Petitioners obtained a loan of P75,000.00 from private respondent Carolina Ramirez and her husband. On December 29, 1965, petitioners executed a deed of absolute sale over a property in favor of the Ramirezes, who on the same day granted petitioners an option to repurchase the property within two years for P10,000.00. Petitioners failed to repurchase within the stipulated period. They filed a suit to compel the Ramirezes to sell back the property, which was docketed as Civil Case No. 2143. The trial court ruled against petitioners, a decision affirmed by the Court of Appeals. On appeal, the Supreme Court, in G.R. No. L-47120 (promulgated October 15, 1990), reversed the lower courts, declared the transaction an equitable mortgage, and entitled petitioners to redeem the property upon payment of their “mortgage debt” of P85,000.00 with legal interest from December 31, 1967 until fully paid. After the decision became final, petitioners filed a motion for execution and deposited a manager’s check for P207,825.00, computing the redemption price with legal interest at 6% per annum from December 31, 1967. Private respondent opposed, arguing the legal interest should be 12% per annum per Central Bank (CB) Circular No. 416. The trial court, in a Resolution dated March 25, 1992, ruled that the amount in the decision was a loan covered by CB Circular No. 416 and ordered petitioners to pay interest at 12% per annum from December 31, 1967. Petitioners’ motion for reconsideration was denied on April 22, 1992.
ISSUE
1. Whether the respondent Judge acted with grave abuse of discretion in applying CB Circular No. 416 retroactively to December 31, 1967.
2. Whether the respondent Judge acted with grave abuse of discretion in applying CB Circular No. 416 to a contract declared as an equitable mortgage.
RULING
The petition is PARTIALLY GRANTED.
1. On the first issue, the Supreme Court ruled that the trial court acted with grave abuse of discretion in applying the 12% interest rate retroactively from December 31, 1967. CB Circular No. 416, which increased the legal rate of interest from 6% to 12% per annum, took effect only on July 29, 1974, and should not be given retrospective effect. Therefore, the applicable interest rate is 6% per annum from December 31, 1967 until July 28, 1974, and 12% per annum from July 29, 1974 until full payment.
2. On the second issue, the Supreme Court ruled that CB Circular No. 416 is applicable. The Court held that the transaction, although denominated as a deed of sale with an option to repurchase, was declared in G.R. No. L-47120 to be an equitable mortgage securing a loan. The dispositive portion of that decision referred to the payment of a “mortgage debt.” Since CB Circular No. 416 applies to loans and forbearances of money, it covers the redemption amount in this case. The writ of execution must be amended to conform with the correct computation of interest.