David vs. Court of Appeals

Article 2212 of the Civil Code contemplates the presence of stipulated or conventional interest which has accrued when demand was judicially made; in the absence of stipulated interest, no accrued conventional interest can further earn interest upon judicial demand. Furthermore, the rule that a court cannot amend a final and executory judgment admits of exceptions, such as when supervening facts or events transpire that render the execution of the original judgment unjust or inequitable, including changes in the legal rate of interest prescribed by monetary authorities.

Petitioner Jesus T. David obtained a judgment against private respondent Valentin Afable, Jr. for the sum of P66,500.00 plus the legal rate of interest from January 4, 1966, plus attorney's fees and costs. The parties had not stipulated on any interest in their underlying compromise agreement. After the judgment became final and executory, the case was remanded to the trial court for execution. During the execution phase, the sheriff computed the total judgment using simple legal interest, while petitioner insisted on compound interest, resulting in a dispute over the auction sale price and the issuance of the certificate of sale.

• The Judgment: The RTC of Manila, Branch 27, ordered private respondent Valentin Afable, Jr. to pay petitioner Jesus T. David P66,500.00 plus the legal rate of interest from January 4, 1966, plus P5,000.00 as attorney's fees and costs of suit. The parties had not stipulated on interest in their compromise agreement.
• The Execution Dispute: After the judgment became final and executory, an alias writ of execution was issued. Respondent Sheriff Melchor P. Peña conducted a public auction and computed the total judgment at P270,940.52 based on simple legal interest. Petitioner claimed the judgment should be P3,027,238.50 based on compounded interest.
• The Auction Sale: Petitioner won the auction but failed to pay the excess of his bid price over the sheriff’s computed judgment award (P2,941,524.47). Consequently, the sheriff did not issue a certificate of sale.
• The Trial Court's Ruling on Execution: Petitioner moved to direct the sheriff to issue the certificate of sale based on his bid price, invoking Article 2212 of the Civil Code. Respondent Judge Edgardo P. Cruz denied the motion, applying Central Bank Circular No. 416 and Reformina v. Tomol, which prescribed a 6% per annum interest rate for the period before July 29, 1974, and 12% per annum thereafter. The judge ordered petitioner to pay the excess bid amount before a certificate of sale could be issued.

• Petitioner argued that Article 2212 of the Civil Code applies even without stipulated interest, and that legal interest should be distinguished from consensual interest.
• Petitioner maintained that "interest on the legal interest" should be computed, effectively resulting in compound interest.
• Petitioner contended that respondent Judge Cruz gravely abused his discretion by modifying the final and executory judgment's dispositive portion, asserting that a court may no longer alter a judgment once it becomes final and executory.

• Respondent countered that no interest was stipulated by the parties in the compromise agreement.
• Respondent argued that Section 5 of the Usury Law and Article 2212 of the Civil Code are inapplicable because they contemplate the presence of stipulated or conventional interest that has accrued when judicial demand is made.
• Respondent asserted that because the judgment ordered simple legal interest only and made no mention of compound interest, execution must conform strictly to the dispositive portion.

• Procedural Issues: Whether the trial court judge committed grave abuse of discretion in modifying the computation of the final and executory judgment to reflect the rates prescribed by Central Bank Circular No. 416.
• Substantive Issues: Whether the Court of Appeals erred in affirming the order for the payment of simple legal interest rather than compound interest pursuant to Article 2212 of the Civil Code.

• Procedural: The Court ruled that the trial court judge did not commit grave abuse of discretion. The rule that a court cannot amend a final and executory judgment admits of exceptions, such as when supervening facts or events transpire that render the execution of the judgment unjust or inequitable. Because Central Bank Circular No. 416 took effect while the suit was still pending execution, it constituted a supervening event. The trial court correctly applied the circular pursuant to the ruling in Reformina v. Tomol to prevent an iniquitous result.
• Substantive: The Court held that the appellate court committed no error in affirming the payment of simple legal interest. Article 2212 of the Civil Code contemplates the presence of stipulated or conventional interest that has accrued when judicial demand is made. Where no interest was stipulated by the parties, there is no accrued conventional interest that could further earn interest upon judicial demand. Because the dispositive portion of the judgment ordered the payment of simple legal interest only and made no mention of compound interest, execution must conform to that ordainment.

• Article 2212 of the Civil Code (Accrued Interest) — Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point. The Court applied this doctrine by clarifying that Article 2212 applies only when there is stipulated or conventional interest that has already accrued at the time of judicial demand. In the absence of stipulated interest, no accrued conventional interest exists that can further earn legal interest upon judicial demand.
• Modification of Final and Executory Judgments — A court cannot amend a judgment that has become final and executory, except for clerical errors or omissions. However, this rule admits exceptions, such as when supervening facts or events transpire after the judgment becomes final that render its execution unjust and inequitable. The Court applied this exception by holding that the enactment of Central Bank Circular No. 416, which altered the legal rate of interest while execution was still pending, constituted a supervening event justifying the modification of the interest computation.

• "Both legal provisions are in applicable [sic] for they contemplate the presence of stipulated or conventional interest which has accrued when demand was judicially made. ... In other words, there was no accrued conventional interests which could further earn interest upon judicial demand." — This passage articulates the ratio decidendi that Article 2212 requires accrued conventional interest as a condition precedent.
• "The rule that once a judgment has become final and executory, it is ministerial duty of the courts to order its execution is not absolute It admits of certain exceptions. One exception is that where facts and/or events transpire after a decision has become executory, which facts and/or events present a supervening cause or reason which renders the final and executory decision of the court no longer enforceable." — This establishes the exception applied to justify the trial court's modification of the interest computation.

• Philippine American Accident Insurance Company, Inc. v. Flores, 97 SCRA 811 (1980) — Controlling precedent. Held that Article 2212 contemplates the presence of stipulated or conventional interest which has accrued when demand was judicially made; absent stipulated interest, no accrued conventional interest can further earn interest. Also held that execution must conform to the dispositive portion of the decision.
• Reformina v. Tomol, Jr., 139 SCRA 260 — Followed. Applied Central Bank Circular No. 416, which took effect on July 29, 1974, raising the legal rate of interest from 6% to 12% per annum. The trial court correctly relied on this case to compute the interest due.

• Article 2212, Civil Code — "Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point." Applied to clarify that it requires accrued conventional interest to trigger the imposition of interest on interest.
• Article 2209, Civil Code — Cited by petitioner regarding the payment of legal interest as indemnity for damages upon delay.
• Central Bank Circular No. 416 — Raised the legal rate of interest from 6% to 12% per annum effective July 29, 1974. Applied as a supervening event that justified the modification of the interest computation in the final judgment to prevent inequitable execution.
• Sections 22 and 23, Rule 39, Rules of Court — Govern the consequences of a purchaser at an execution sale failing to pay the excess of the bid price over the judgment amount. Applied to deny the issuance of the certificate of sale where petitioner failed to pay the excess.

Mendoza, Buena, and De Leon, Jr., JJ., concur.