1) Simex Intl (Mla) Inc.

v CA
A bank may be held liable for damages by reason of its unjustified dishonor of a check, which caused
damage to its clients credit standing. The bank must record every single transaction accurately, down
to the last centavo, and as promptly as possible. This has to be done if the account is to reflect at any
given time the amount of money the depositor can dispose of as he sees fit, confident that the bank will
deliver it as and to whomever he directs. The bank is a fiduciary of the depositors money.
Facts: Simex International is a private corporation engaged in the exportation of food products. It buys these
products from various local suppliers and then sells them abroad to the Middle East and the United States.
Most of its exports are purchased by the petitioner on credit. Simex was a depositor of the Far East Savings
Bank and maintained a checking account in its branch in Cubao, Quezon City which issued several checks
against its deposit but was surprised to learn later that they had been dishonored for insufficient funds. As a
consequence, several suppliers sent a letter of demand to the petitioner, threatening prosecution if the
dishonored check issued to it was not made good and also withheld delivery of the order made by the
petitioner. One supplier also cancelled the petitioners credit line and demanded that future payments be
made by it in cash or certified check. The petitioner complained to the respondent bank. Investigation
disclosed that the sum of P100,000.00 deposited by the petitioner on May 25, 1981, had not been credited to
it. The error was rectified only a month after, and the dishonored checks were paid after they were redeposited. The petitioner then filed a complaint in the then Court of First Instance of Rizal against the bank
for its gross and wanton negligence.
Issue:
check

Whether or not the bank can be held liable for negligence by reason of its unjustified dishonor of a

Held: The depositor expects the bank to treat his account with the utmost fidelity whether such account
consists only of a few hundred pesos or of millions. The bank must record every single transaction accurately,
down to the last centavo, and as promptly as possible. This has to be done if the account is to reflect at any
given time the amount of money the depositor can dispose of as he sees fit, confident that the bank will
deliver it as and to whomever he directs. A blunder on the part of the bank, such as the dishonour of a check
without good reason, can cause the depositor not a little embarrassment if not also financial loss and perhaps
even civil and criminal litigation.
Article 2205 of the Civil Code provides that actual or compensatory damages may be received (2) for injury
to the plaintiff s business standing or commercial credit. There is no question that the petitioner did sustain
actual injury as a result of the dishonored checks and that the existence of the loss having been established
absolute certainty as to its amount is not required. 7 Such injury should bolster all the more the demand of
the petitioner for moral damages and justifies the examination by this Court of the validity and
reasonableness of the said claim.
2) Reyes, et al v. CA
GR 118492, 8/15/2001
Facts: Petitioner Gregorio H. Reyes sent Godofredo Reyes to the respondent bank to apply for a demand draft
in the amount of AU$1,610.00 payable to the order of the 20 th Asian Racing Conference Secretariat of Sydney,
Australia. His application was denied for the reason that the respondent bank did not have an Austrian dollar
account in any bank in Sydney. The attendee informed him about an arrangement which has been
customarily resorted to since the 1960s: the respondent bank would draw a demand draft against Westpac
Bank in Sydney, Australia and have the latter reimburse itself from the U.S. dollar account of the respondent
in Westpac Bank in New York, U.S.A. Such arrangement was agreed upon. Respondent bank approved the
application and issued Foreign Exchange Demand draft, addressed to Westpac Sydney as the drawee bank.
Due to erroneous decoding of the cable message on the art of Westpac-Sydney, the demand draft was
dishonored. Wespac-Sydney had mistaken the cable message as a format letter of credit, and not for a
demand draft. Respondent bank sent more cable messages requesting to honor the reimbursement claim. But
for the same reason, the demand draft was again dishonored.

When the petitioners went to Australia and is about to register as a conference delegate at the registration
desk, in the presence of other delegate, he was told by a lady member of the conference secretariat that he
could not register because the demand draft had been dishonored. Petitioners were forced to pay in cash.
The petitioners filed a complaint for damages against the respondent bank, claiming that they were exposed
to unnecessary shock, social humiliation, and deep mental anguish in a foreign country, and in the presence of
an international audience. They contended that the bank have failed to exercise a higher degree of diligence
than that expected of an ordinary prudent person.
Issue: Whether or not the respondent bank have failed to exercise the appropriate degree of diligence
Ruling: No. Petitioners contention that that the respondent bank is required to exercise the highest degree of
diligence is untenable. It is only then; a bank has to exercise the highest degree of diligence when they act
under their fiduciary capacity, that is, as depositary of the deposits of their depositors. But the same higher
degree of diligence is not expected to be exerted by banks in commercial transactions that do not involve
their fiduciary relationship with their depositors.
The case at bar does not involve the handling of petitioners deposit. Instead, the relationship involved was
that of a buyer and seller, that is, between the respondent bank as the seller of the subject foreign exchange
demand draft, and petitioner as the buyer of the same, with the 20 th Asian Racing Conference Secretariat in
Sydney, Australia as the payee thereof.
The evidence shows that the respondent bank did everything within its power to prevent the dishonor of the
subject foreign exchange demand draft. The erroneous reading of its cable message to Westpac-Sydney by an
employee of the latter could not have been foreseen by the respondent bank. The petition is denied,
establishing the respondent bank acted in good faith and it did not cause the embarrassment of the
petitioners.
3. Republic of the Philippines vs. Security Credit and Acceptance Corporation
G.R. No. L-20583, January 23, 1967
An investment company which loans out the money of its customers, collects the interest and charges a
commission to both lender and borrower, is a bank. It is conceded that a total of 59,463 savings account
deposits have been made by the public with the corporation and its 74 branches, with an aggregate
deposit of P1,689,136.74, which has been lent out to such persons as the corporation deemed suitable
therefore. It is clear that these transactions partake of the nature of banking, as the term is used in
Section 2 of the General Banking Act.
Facts: The Solicitor General filed a petition for quo warranto to dissolve the Security and Acceptance
Corporation, alleging that the latter was engaging in banking operations without the authority required
therefor by the General Banking Act (Republic Act No. 337). Pursuant to a search warrant issued by MTC
Manila, members of Central Bank intelligence division and Manila police seized documents and records
relative to the business operations of the corporation. After examination of the same, the intelligence division
of the Central Bank submitted a memorandum to the then Acting Deputy Governor of Central Bank finding
that the corporation is engaged in banking operations. It was found that Security and Acceptance
Corporation established 74 branches in principal cities and towns throughout the Philippines; that through a
systematic and vigorous campaign undertaken by the corporation, the same had managed to induce the
public to open 59,463 savings deposit accounts with an aggregate deposit of P1,689,136.74; Accordingly, the
Solicitor General commenced this quo warranto proceedings for the dissolution of the corporation, with a
prayer that, meanwhile, a writ of preliminary injunction be issued ex parte, enjoining the corporation and its
branches, as well as its officers and agents, from performing the banking operations complained of, and that a
receiver be appointed pendente lite. Superintendent of Banks of the Central Bank was then appointed by the
Supreme Court as receiver pendente lite of defendant corporation.
In their defense, Security and Acceptance Corporation averred that the the corporation had filed with the
Superintendent of Banks an application for conversion into a Security Savings and Mortgage Bank, with
defendants Zapa, Balatbat, Tanjutco (Pablo and Vito, Jr.), Soriano, Beltran and Sebastian as proposed
directors.

Issue: Whether or not defendant corporation was engaged in banking operations.

Held. An investment company which loans out the money of its customers, collects the interest and charges
a commission to both lender and borrower, is a bank. It is conceded that a total of 59,463 savings account
deposits have been made by the public with the corporation and its 74 branches, with an aggregate deposit of
P1,689,136.74, which has been lent out to such persons as the corporation deemed suitable therefore. It is
clear that these transactions partake of the nature of banking, as the term is used in Section 2 of the General
Banking Act. Hence, defendant corporation has violated the law by engaging in banking without securing the
administrative authority required in Republic Act No. 337.
That the illegal transactions thus undertaken by defendant corporation warrant its dissolution is apparent
from the fact that the foregoing misuser of the corporate funds and franchise affects the essence of its
business, that it is willful and has been repeated 59,463 times, and that its continuance inflicts injury upon the
public, owing to the number of persons affected thereby.
4) Central Bank v Morfe
FACTS: First Mutual Savings and Loan Organization encourage savings among its members and extend
financial assistance thru loans. Central bank said that the Organization and others with similar nature are
banking institutions and that the Org have never been authorized. CB applied for SW because of the Orgs
illegal receipt of deposits of money for deposit, disbursementswithout compliance with RA 337. The SW
includes articles such as book of original entryand others. They said that the SW is general in its terms and
that the use of the word and others permits the unreasonable search and seizure of documents which have
no relation to any specific criminal act.
HELD: SW is upheld.

Depending on the circumstances, while in one instance the particular wording of the warrant may
make it assume the character of a general warrant, in another context it may be considered perfectly alright.

SW only for one offense, if issued for more than two, it is void. Scatter shot warrant.

In illegal possession of shabu, marijuana, paraphernalia- one SW ok!

SW may be partially void

Undetermined amount of marijuana ok!

Purpose of Particularity of Description:

Readily identify the items to be seized, thus prevent them from seizing the wrong items
Leave officers with no discretion regarding articles to be seized and thus prevent unreasonable searches and
seizure

Not required that technical precision of description be required

narcotics paraphernalia, any and all narcotics, and a quantity of loose heroin- ok!

and the like- not necessarily general warrant

Where should the requisite description appear- in the caption or body of the warrant? Body sufficient.

What if theres discrepancy between the address in the caption and in the body? Not sufficient to
invalidate. It is sufficient as long as you can identify the place intended and distinguish it from other places in
the community.
5) BPI Family v Franco
BPI FAMILY BANK VS. FRANCO G.R. No. 123498 J. Nachura November 23, 2007
FACTS: On August 15, 1989, Tevesteco opened a savings and current account with BPI-FB. Soon thereafter,
FMIC also opened a time deposit account with the same branch of BPI-FB On August 31, 1989, Franco opened
three accounts, namely, a current, savings, and time deposit, with BPI-FB. The total amount of P2,000,000.00
used to open these accounts is traceable to a check issued by Tevesteco allegedly in consideration of Francos
introduction of Eladio Teves, to Jaime Sebastian, who was then BPI-FB SFDMs Branch Manager. In turn, the
funding for the P2,000,000.00 check was part of the P80,000,000.00 debited by BPI-FB from FMICs time
deposit account and credited to Tevestecos current account pursuant to an Authority to Debit purportedly
signed by FMICs officers. It appears, however, that the signatures of FMICs officers on the Authority to Debit

were forged. BPI-FB, debited Francos savings and current accounts for the amounts remaining therein. In the
meantime, two checks drawn by Franco against his BPI-FB current account were dishonored and stamped
with a notation account under garnishment. Apparently, Francos current account was garnished by virtue
of an Order of Notably, the dishonored checks were issued by Franco and presented for payment at BPIFB
prior to Francos receipt of notice that his accounts were under garnishment. It was only on May 15, 1990,
that Franco was impleaded in the Makati case. Immediately, upon receipt of such copy, Franco filed a Motion
to Discharge Attachment. On May 17, 1990, Franco pre-terminated his time deposit account. BPI-FB deducted
the amount of P63,189.00 from the remaining balance of the time deposit account representing advance
interest paid to him. Consequently, in light of BPI-FBs refusal to heed Francos demands to unfreeze his
accounts and release his deposits therein, Franco filed on June 4, 1990 with the Manila RTC the subject suit.
ISSUE: WON Respondent had better right to the deposits in the subject accounts which are part of the
proceeds of a forged Authority to Debit
HELD:NO. There is no doubt that BPI-FB owns the deposited monies in the accounts of Franco, but not as a
legal consequence of its unauthorized transfer of FMICs deposits to Tevestecos account. BPI-FB conveniently
forgets that the deposit of money in banks is governed by the Civil Code provisions on simple loan or
mutuum. As there is a debtor-creditor relationship between a bank and its depositor, BPI-FB ultimately
acquired ownership of Francos deposits, but such ownership is coupled with a corresponding obligation to
pay him an equal amount on demand. Although BPI-FB owns the deposits in Francos accounts, it cannot
prevent him from demanding payment of BPI-FBs obligation by drawing checks against his current account,
or asking for the release of the funds in his savings account. Thus, when Franco issued checks drawn against
his current account, he had every right as creditor to expect that those checks would be honored by BPI-FB as
debtor. More importantly, BPI-FB does not have a unilateral right to freeze the accounts of Franco based on
its mere suspicion that the funds therein were proceeds of the multi-million peso scam Franco was allegedly
involved in. To grant BPI-FB, or any bank for that matter, the right to take whatever action it pleases on
deposits which it supposes are derived from shady transactions, would open the floodgates of public distrust
in the banking industry. Ineluctably, BPI-FB, as the trustee in the fiduciary relationship, is duty bound to
know the signatures of its customers. Having failed to detect the forgery in the Authority to Debit and in the
process inadvertently facilitate the FMIC-Tevesteco transfer, BPI-FB cannot now shift liability thereon to
Franco and the other payees of checks issued by Tevesteco, or prevent withdrawals from their respective
accounts without the appropriate court writ or a favorable final judgment.
6) BANK OF THE PHILIPPINE ISLANDS VS. COURT OF APPEALS
232 SCRA302
G.R. NO. 104612
MAY 10, 1994
FACTS:
Private respondents Eastern Plywood Corporation and Benigno Lim as officer of the corporation, had an
AND/OR joint account with Commercial Bank and Trust Co (CBTC), the predecessor-in-interest of petitioner
Bank of the Philippine Islands. Lim withdraw funds from such account and used it to open a joint checking
account (an AND account) with Mariano Velasco. When Velasco died in 1977, said joint checking account
had P662,522.87. By virtue of an Indemnity Undertaking executed by Lim and as President and General
Manager of Eastern withdrew one half of this amount and deposited it to one of the accounts of Eastern with
CBTC.
Eastern obtained a loan of P73,000.00 from CBTC which was not secured. However, Eastern and CBTC
executed a Holdout Agreement providing that the loan was secured by the Holdout of the C/A No. 2310-00142 referring to the joint checking account of Velasco and Lim.
Meanwhile, a judicial settlement of the estate of Velasco ordered the withdrawal of the balance of the account
of Velasco and Lim.
Asserting that the Holdout Agreement provides for the security of the loan obtained by Eastern and that it is
the duty of CBTC to debit the account of respondents to set off the amount of P73,000 covered by the
promissory note, BPI filed the instant petition for recovery. Private respondents Eastern and Lim, however,
assert that the amount deposited in the joint account of Velasco and Lim came from Eastern and therefore
rightfully belong to Eastern and/or Lim.

Since the Holdout Agreement covers the loan of P73,000, then petitioner can only hold that amount against
the joint checking account and must return the rest.
ISSUE: Whether BPI can demand the payment of the loan despite the existence of the Holdout Agreement and
whether BPI is still liable to the private respondents on the account subject of the withdrawal by the heirs of
Velasco.
RULING: Yes, for both issues. Regarding the first, the Holdout Agreement conferred on CBTC the power, not
the duty, to set off the loan from the account subject of the Agreement. When BPI demanded payment of the
loan from Eastern, it exercised its right to collect payment based on the promissory note, and disregarded its
option under the Holdout Agreement. Therefore, its demand was in the correct order.
Regarding the second issue, BPI was the debtor and Eastern was the creditor with respect to the joint
checking account. Therefore, BPI was obliged to return the amount of the said account only to the
creditor. When it allowed the withdrawal of the balance of the account by the heirs of Velasco, it made the
payment to the wrong party. The law provides that payment made by the debtor to the wrong party does not
extinguish its obligation to the creditor who is without fault or negligence. Therefore, BPI was still liable to
the true creditor, Eastern.
7) Vitug v CA
8) BPI v IAC
9) Go v IAC
10) Firestone Tire & rubber Co. vs. Court of Appeals
GR No. 113236
March 5, 2001
Quisumbing, J.:
Facts:

Forjas-Arca Enterprise Company is maintaining a special savings account with Luzon Development
Bank, the latter authorized and allowed withdrawals of funds through the medium of special withdrawal
slips. These are supplied by Fojas-Arca. Fojas-Arca purchased on credit with FirestoneTire & Rubber
Company, in payment Fojas-Arca delivered a 6 special withdrawal slips. In turn, these were deposited by the
Firsestone to its bank account in Citibank. With this, relying on such confidence and belief Firestone extended
to Fojas-Arca other purchase on credit of its products but several withdrawal slips were dishonored and not
paid. As a consequence, Citibank debited the plaintiffs account representing the aggregate amount of the two
dishonored special withdrawal slips. Fojas-Arca averred that the pecuniary losses it suffered are a caused by
and directly attributes to defendants gross negligence as a result Fojas-Arca filed a complaint.
Issue:
Whether or not the acceptance and payment of the special withdrawal slips without the presentation
of the depositors passbook thereby giving the impression that it is a negotiable instrument like a check.
Held:
No. Withdrawal slips in question were non negotiable instrument. Hence, the rules governing the
giving immediate notice of dishonor of negotiable instrument do not apply. The essence of negotiability which
characterizes a negotiable paper as a credit instrument lies in its freedom to circulate freely as a substitute
for money. The withdrawal slips in question lacked this character. The negligence of the citibank cannot be
shift to Luzon Development bank for considering.
11) PBCOM v CA
12) Salvacion et al v CA
GR No. 94723, August 21, 1997

FACTS: Greg Bartelli, an American tourist in the Philippines, was arrested and charged for commission of the
crime of four counts of rape and serious illegal detention against then 12 year old victim, Karen Salvacion. On
the scheduled day of hearing for Bartellis petition for bail, he escaped from jail, thereby causing all criminal
cases filed against him to be archived pending his arrest. A civil case for damages was also filed against him,
which led to the issuance of the writ of preliminary attachment in favor of the offended party, with damages
amounting to Php1,000,000.
However, China Banking Corporation did not honor the Notice of Granishment issued by the court. The bank
invoked Section 113 of Central Bank Circular No. 960, which was released pursuant to Section 8 of RA 6426
(amended by PD 1246), to the effect that the law exempts foreign currency deposits from attachment,
garnishment, or any other order or process of any court, legislative body, government agency or any
administrative body. Salvacion hence filed action for declaratory relief.
ISSUE: Whether or not Section 113 of Central Bank Circular No. 960 is a valid defense by Bartelli and China
Banking Corporation as to uphold secrecy of bank deposits.
HELD: NO. The Supreme Court ruled that the provisions of Section 113 of CB Circular No. 960 and PD No.
1246, insofar as it amends Section 8 of RA No. 6426 are INAPPLICABLE to this case because of its peculiar
circumstances. The Supreme Court mentions that the questioned law makes futile the favorable judgment
made by the lower court as regards to the damages awarded to the offended party and her family. The
application of the law depends on the extent of its justice. The SC mentions and uses as a ground Article 10 of
the Civil Code which provides that in case of doubt in the interpretation or application of laws, it is presumed
that the lawmaking body intended right and justice to prevail. If the questioned law would be allowed to be
used as a defense in this case, it would be inevitable that other foreign guests, who may be the likes of Greg
Bartelli, will use this as a device in committing similar crimes during their stay in the country, acquitting the
guilty at the expense of the innocent.
13) RCBC v De Castro
14) Ejercito v Sandiganbayan
FACTS: The Office of the Ombudsman requested the Sandiganbayan to issue subpoena duces tecum against
the Urban Bank relative to the case against President Joseph Estrada.
Ms. Dela Paz, receiver of the Urban Bank, furnished the Office of the Ombudsman certified copies of manager
checks detailed in thesubpoena duces tecum. The Sandiganbayan granted the same.
However, Ejercito claims that the subpoenas issued by the Sandiganbayan are invalid and may not be
enforced because the information found therein, given their extremely detailed character and could only
have been obtained by the Special Prosecution Panel through an illegal disclosure by the bank officials.
Ejercito thus contended that, following the fruit of the poisonous tree doctrine, the subpoenas must be
quashed. Moreover, the extremely-detailed information obtained by the Ombudsman from the bank officials
concerned during a previous investigation of the charges against him, such inquiry into his bank accounts
would itself be illegal.
ISSUE: Whether or not subpoena duces tecum/ad testificandum may be issued to order the production of
statement of bank accounts even before a case for plunder is filed in court
HELD: The Supreme Court held that plunder is analogous to bribery, and therefore, the exception to R.A. 1405
must also apply to cases of plunder. The court also reiterated the ruling in Marquez v. Desierto that before an
in camera inspection may be allowed there must be a pending case before a court of competent jurisdiction.
Further, the account must be clearly identified, the inspection limited to the subject matter of pending case
before the court of competent jurisdiction.

As no plunder case against then President Estrada had yet been filed before a court of competent jurisdiction
at the time the Ombudsman conducted an investigation, he concludes that the information about his bank
accounts were acquired illegally, hence, it may not be lawfully used to facilitate a subsequent inquiry into the
same bank accounts. Thus, his attempt to make the exclusionary rule applicable to the instant case fails.
The high Court, however, rejected the arguments of the petitioner Ejercito that the bank accounts which
where demanded from certain banks even before the case was filed before the proper court is inadmissible in
evidence being fruits of poisonous tree. This is because the Ombudsman issued the subpoenas bearing on the
bank accounts of Ejercito about four months before Marquez was promulgated on June 27, 2001. While
judicial interpretations of statutes, such as that made in Marquez with respect to R.A. No. 6770 or the
Ombudsman Act of 1989, are deemed part of the statute as of the date it was originally passed, the rule is not
absolute. Thus, the Court referred to the teaching of Columbia Pictures Inc., v. Court of Appeals, that: It is
consequently clear that a judicial interpretation becomes a part of the law as of the date that law was
originally passed, subject only to the qualification that when a doctrine of this Court is overruled and a
different view is adopted, and more so when there is a reversal thereof, the new doctrine should be applied
prospectively and should not apply to parties who relied on the old doctrine and acted in good faith
15) PDIC v Citibank, NA
16) PDIC vs Philippine Countryside Rural Bank
Facts:
On March 9, 2005, the Board of Directors of the PDIC adopted Resolution No. 2005-03-032 approving the
conduct of an investigation, on the basis of the Reports of Examination of the Bangko Sentral ng Pilipinas
(BSP) on ten (10) banks, four (4) of which are respondents in this petition for review. the PDIC Board adopted
another resolution, Resolution No. 2005-05-056, 4 approving the conduct of an investigation on PCRBI based
on a Complaint-Affidavit filed by a corporate depositor, the Philippine School of Entrepreneurship and
Management.
According to PDIC, in the course of its investigation, PCRBI was found to have granted loans to certain
individuals, which were settled by way of dacion of properties. These properties, however, had already been
previously foreclosed and consolidated under the names of PRBI, BEAI and RBCI
Subsequently, PRBI and BEAI refused entry to their bank premises and access to their records and documents
by the PDIC Investigation Team, upon advice of their respective counsels.
Atty. Victoria G. Noel sent letters to the PDIC informing it of her legal advice to PCRBI and BEAI not to submit
to PDIC investigation on the ground that its investigatory power pursuant to Section 9(b-1) of R.A. No. 3591,
cannot be differentiated from the examination powers accorded to PDIC under Section 8, paragraph 8 of the
same law, under which, prior approval from the Monetary Board is required. Thereafter, the Banks received a
letter, dated July 8, 2005, from the PDIC General Counsel reiterating its position that prior Monetary Board
approval was not a pre-requisite to PDICs exercise of its investigative power.
Issue:
Whether the Court of Appeals-Cebu erred in finding that prior approval of the Monetary Board of the
Bangko Sentral ng Pilipinas is necessary before the PDIC may conduct an investigation of respondent
banks.
Held:
NO. After an evaluation of the respective positions of the parties, the Court is of the view that the Monetary
Board approval is not required for PDIC to conduct an investigation on the Banks.
However, while "examination" connotes a mere generic perusal or inspection, "investigation" refers to a more
intensive scrutiny for a more specific fact-finding purpose. The latter term is also usually associated with
proceedings conducted prior to criminal prosecution.
the process of examination covers a wider scope than that of investigation.
Examination involves an evaluation of the current status of a bank and determines its compliance with the set
standards regarding solvency, liquidity, asset valuation, operations, systems, management, and compliance
with banking laws, rules and regulations.

Investigation, on the other hand, is conducted based on specific findings of certain acts or omissions which
are subject of a complaint or a Final Report of Examination. An examination entails a review of essentially all
the functions and facets of a bank and its operation. It necessitates poring through voluminous documents,
and requires a detailed evaluation thereof. Such a process then involves an intrusion into a bank's records.
In contrast, although it also involves a detailed evaluation, an investigation centers on specific acts or
omissions and, thus, requires a less invasive assessment.
To reiterate, an examination of banks requires the prior consent of the Monetary Board, whereas an
investigation based on an examination report, does not.
17. Dario Nacar vs Gallery Frames
FACTS: Dario Nacar filed a labor case against Gallery Frames and its owner Felipe Bordey, Jr. Nacar alleged
that he was dismissed without cause by Gallery Frames on January 24, 1997. On October 15, 1998, the Labor
Arbiter (LA) found Gallery Frames guilty of illegal dismissal hence the Arbiter awarded Nacar P158,919.92 in
damages consisting of backwages and separation pay.
Gallery Frames appealed all the way to the Supreme Court (SC). The Supreme Court affirmed the decision of
the Labor Arbiter and the decision became final on May 27, 2002.
After the finality of the SC decision, Nacar filed a motion before the LA for recomputation as he alleged that
his backwages should be computed from the time of his illegal dismissal (January 24, 1997) until the finality
of the SC decision (May 27, 2002) with interest. The LA denied the motion as he ruled that the reckoning
point of the computation should only be from the time Nacar was illegally dismissed (January 24, 1997) until
the decision of the LA (October 15, 1998). The LA reasoned that the said date should be the reckoning point
because Nacar did not appeal hence as to him, that decision became final and executory.
ISSUE: Whether or not the Labor Arbiter is correct.
HELD: No. There are two parts of a decision when it comes to illegal dismissal cases (referring to cases where
the dismissed employee wins, or loses but wins on appeal). The first part is the ruling that the employee was
illegally dismissed. This is immediately final even if the employer appeals but will be reversed if employer
wins on appeal. The second part is the ruling on the award of backwages and/or separation pay. For
backwages, it will be computed from the date of illegal dismissal until the date of the decision of the Labor
Arbiter. But if the employer appeals, then the end date shall be extended until the day when the appellate
courts decision shall become final. Hence, as a consequence, the liability of the employer, if he loses on
appeal, will increase this is just but a risk that the employer cannot avoid when it continued to seek
recourses against the Labor Arbiters decision. This is also in accordance with Article 279 of the Labor Code.
Anent the issue of award of interest in the form of actual or compensatory damages, the Supreme Court ruled
that the old case of Eastern Shipping Lines vs CA is already modified by the promulgation of the Bangko
Sentral ng Pilipinas Monetary Board Resolution No. 796 which lowered the legal rate of interest from 12% to
6%. Specifically, the rules on interest are now as follows:
1. Monetary Obligations ex. Loans:
a. If stipulated in writing:
a.1. shall run from date of judicial demand (filing of the case)
a.2. rate of interest shall be that amount stipulated
b. If not stipulated in writing
b.1. shall run from date of default (either failure to pay upon extra-judicial demand or upon judicial demand
whichever is appropriate and subject to the provisions of Article 1169 of the Civil Code)
b.2. rate of interest shall be 6% per annum
2. Non-Monetary Obligations (such as the case at bar)
a. If already liquidated, rate of interest shall be 6% per annum, demandable from date of judicial or extrajudicial demand (Art. 1169, Civil Code)
b. If unliquidated, no interest
Except: When later on established with certainty. Interest shall still be 6% per annum demandable from the
date of judgment because such on such date, it is already deemed that the amount of damages is already
ascertained.
3. Compounded Interest
This is applicable to both monetary and non-monetary obligations

 6% per annum computed against award of damages (interest) granted by the court. To be computed from
the date when the courts decision becomes final and executory until the award is fully satisfied by the losing
party.
4. The 6% per annum rate of legal interest shall be applied prospectively:
Final and executory judgments awarding damages prior to July 1, 2013 shall apply the 12% rate;
Final and executory judgments awarding damages on or after July 1, 2013 shall apply the 12% rate for
unpaid obligations until June 30, 2013; unpaid obligations with respect to said judgments on or after July 1,
2013 shall still incur the 6% rate.
NACAR V GALLERY FRAMES
FACTS: In the complaint filed by petitioner Dario Nacar before the Arbitration Branch of NLRC against
respondents Gallery Frames and Felipe Bordey, Nacar was found to be illegally dismissed from employment
without just cause, warranting him an award of back wages and separation pay amounting to P158,919.92 as
decided on October 45, 1998. Due to several appeals and non-appearance of respondents on the scheduled
pre-execution conference, petitioner filed for a re-computation of the amount due to him. it was granted and
resulted to another amount of P471,320.31 to which the respondents appealed.
ISSUE: Whether or not the re-computation was lawfully warranted?
HELD: The court held that the re-computation
However, during the pendency of the case, the BSP-Monetary Board, in its resolution no. 796 dated
May 16, 2013, which took effect on July 1, 2013 amended Circular No. 905 and issued Circular No. 799,
changing the rate of interest, in the absence of express stipulation on the contract, from 12% per annum to
6% per annum.
In relation to this, the court held that 12% per annum legal interest shall apply only until June 30,
2013 and the amending issuance shall be enforced, thus 6% per annum shall apply on July 1, 2013 onwards
for the re-computation. The court ordered the Labor Arbiter for re-computation based on the laid out
decision.