GR 128721; (March, 1999) (Digest)
G.R. No. 128721 . March 9, 1999. CRISMINA GARMENTS, INC., petitioner, vs. COURT OF APPEALS and NORMA SIAPNO, respondents.
FACTS
Petitioner Crismina Garments contracted respondent Norma Siapno, proprietress of D’Wilmar Garments, to sew denim pants from February to April 1979. Siapno delivered the finished goods, and petitioner acknowledged receipt. The contract price was P76,410.00, which petitioner failed to pay despite demand. Siapno filed a collection suit. The trial court ruled in her favor, ordering petitioner to pay the principal sum with 12% per annum interest from the filing of the complaint, plus attorney’s fees. The Court of Appeals affirmed but deleted the attorney’s fees.
Petitioner filed a Petition for Review, initially denied by the Supreme Court. Upon motion for reconsideration, the Court reinstated the petition solely on the issue of the applicable interest rate. Petitioner argues that the obligation arises from a contract for a piece of work, not a loan or forbearance of money, thus the legal interest should be 6% per annum under Article 2209 of the Civil Code. Respondent contends the 12% rate under Central Bank Circular No. 416 applies, characterizing the unpaid price as a forbearance of money.
ISSUE
Whether the legal interest on the unpaid contract price for a piece of work should be computed at 6% per annum or 12% per annum.
RULING
The Supreme Court ruled that the applicable interest rate is 6% per annum. The legal logic is anchored on the distinction between obligations arising from loans or forbearance of money and those arising from other sources. Central Bank Circular No. 416 prescribes a 12% per annum interest rate for loans or forbearance of money, goods, or credits. In contrast, Article 2209 of the Civil Code sets the legal interest at 6% per annum for monetary obligations not constituting a loan or forbearance.
The Court clarified that “forbearance” in the context of the usury law refers to a contractual obligation by a creditor to refrain, for a period, from demanding repayment of a loan or debt already due. The obligation here stemmed from a contract for a piece of work (sewing garments), not from a loan or any agreement involving forbearance of money. Therefore, the higher rate under Circular No. 416 is inapplicable. The award of interest is justified under Article 1589 of the Civil Code, as the buyer (petitioner) incurred delay in payment. Consequently, the interest is set at 6% per annum from judicial demand (filing of complaint) until the judgment’s finality. Any unpaid amount after finality shall earn 12% interest per annum until full satisfaction, consistent with the rule on judgments for monetary obligations.