G.R. No. 18289 - People vs. Tamayo

Meridian Assurance Corporation (petitioner) was a defendant in a civil case rendered by the then Court of First Instance of Manila involving First Western Bank & Trust Company as the judgment creditor.
The case, titled “First Western Bank and Trust Company vs. Atlas Timber Company, et al.,” resulted in a judgment in favor of First Western Bank for the sum of $21,933.38 (converted to pesos at the official rate), with interest at the legal rate from the filing of the complaint and costs of suit, subject to specific limitations regarding enforcement against individual partners.

The trial court rendered a verdict against the defendants, which was subsequently affirmed in toto by the Court of Appeals on October 9, 1980, thereby making the judgment final and executory.
Execution of the judgment was ordered by the trial court on September 8, 1981, leading to the commencement of execution proceedings.

On September 16, 1981, Meridian wrote to First Western offering to pay the full judgment amount computed with 6% per annum interest (the rate provided by Article 2209 of the Civil Code) along with approved costs of P237.00.
First Western rejected the offer in its letter dated September 21, 1981, insisting that the applicable interest rate should be 12% per annum, as prescribed by Central Bank Circular No. 416 dated July 29, 1974.
Subsequent correspondence between the parties affirmed their firm positions on the rate of interest to be applied.

Meridian filed a motion on September 30, 1981, accompanied by a deposit of P170,061.03, which comprised:

The peso equivalent of the principal debt.
Interest on the principal debt computed at 6% per annum from August 27, 1965, to September 30, 1981.
The approved costs of the suit.

The trial court denied the motion by an Order dated October 15, 1981, basing its ruling on the position that Central Bank Circular No. 416 had effectively changed the “legal rate” of interest from 6% to 12% per annum.
Meridian’s subsequent motion on October 26, 1981, asking the trial court to reconsider its order was similarly rejected.

Meridian elevated the issue to the Supreme Court through a petition for certiorari, requesting the annulment of the trial court’s orders denying its motion to deposit the full amount computed at 6% interest plus costs.
The Supreme Court granted the petition and issued a writ of certiorari, thereby setting aside the previous orders and declaring Meridian’s deposit as constituting full satisfaction of the judgment.

Whether the interest rate on a monetary judgment should be computed at the legal rate of 6% per annum under Article 2209 of the Civil Code, or at 12% per annum as mandated by Central Bank Circular No. 416.

Whether the Central Bank, through Circular No. 416, was authorized to prescribe a higher interest rate for all kinds of monetary judgments or solely those judgments involving loans or the forbearance of money, goods, or credits.