G.R. No.
90676 June 19, 1991 shares of stock — petitioner State contending that respondents should also pay interest and respondents
STATE INVESTMENT HOUSE, INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, HON. JUDGE PERLITA J. TRIA TIRONA, Presiding Judge
of the Regional Trial Court of Quezon City, Branch CII and SPS. RAFAEL and REFUGIO
AQUINO, respondents.
FELICIANO, J.:
On 5 April 1982, respondent spouses Rafael and Refugio Aquino pledged certain shares of stock to
petitioner State Investment House, Inc. ("State") in order to secure a loan of P120,000.00 designated as
Account No. IF-82-0631-AA. Prior to the execution of the pledge, respondent-spouses, as an
accommodation to and together with the spouses Jose and Marcelina Aquino, signed an agreement
(Account No. IF-82-1379-AA) with petitioner State for the latter's purchase of receivables amounting to
P375,000.00. When Account No. IF-82-0631-AA fell due, respondent spouses paid the same partly with
their own funds and partly from the proceeds of another loan which they obtained also from petitioner State
designated as Account No. IF-82-0904-AA. This new loan was secured by the same pledge agreement
executed in relation to Account No. IF-820631-AA. When the new loan matured, State demanded payment.
Respondents expressed willingness to pay, requesting that upon payment, the shares of stock pledged be
released. Petitioner State denied the request on the ground that the loan which it had extended to the
spouses Jose and Marcelina Aquino (Account No. IF-82-1379- AA) had remained unpaid.
On 29 June 1984, Atty. Rolando Salonga sent to respondent spouses a Notice of Notarial Sale stating that
upon request of State and by virtue of the pledge agreement, he would sell at public auction the shares of
stock pledged to State. This prompted respondents to file a case before the Regional Trial Court of Quezon
City alleging that the intended foreclosure sale was illegal because from the time the obligation under
Account No. IF-82-0904-AA became due, they had been able and willing to pay the same, but petitioner
had insisted that respondents pay even the loan account of Jose and Marcelina Aquino which had not been
secured by the pledge. It was further alleged that their failure to pay their loan (Account No. IF-82-0904-AA)
was excused because the petitioner State itself had prevented the satisfaction of the obligation.
The trial court, in a decision dated 14 December 1984 rendered by Judge Willelmo Fortun, initially dismissed
the complaint. Respondent spouses filed a motion for reconsideration praying for a new decision ordering
petitioner State to release the shares upon payment of respondents' loan "without interest," as the latter had
not been in delay in the performance of their obligation. State countered that the pledge executed by
respondent spouses also covered the loan extended to Jose and Marcelina Aquino, which too should be
paid before the shares may be released.
Acting on the motion for reconsideration, Judge Fortun set aside his original decision and rendered a new
judgment dated 29 January 1985, ordering State to immediately release the pledge and to deliver to
respondents the share of stock "upon payment of the loan under Code No. 82-0904-AA."
On appeal, the Court of Appeals affirmed in toto the new decision of the trial court, holding that the loan
extended to Jose and Marcelina Aquino, having been executed prior to the pledge was not covered by the
pledge which secured only loans executed subsequently. Thus, upon payment of the loan under Code No.
IF-0904-AA, the shares of stock should be released. The decisions of the Court of Appeals and of Judge
Fortun became final and executory.
Upon remand of the records of the case to the trial court for execution, there developed disagreement over
the amount which respondent spouses Rafael and Refugio Aquino should pay to secure the release of the
arguing they should not. Respondent spouses then filed a motion with the trial court to clarify the Fortun
decision praying that an order issue clarifying the phrase "upon payment of plaintiffs' loan" to mean upon
payment of plaintiff' loan in the principal amount of P110,000.00 alone, "without interest, penalties and other
charges."
On 17 February 1989, the trial court, speaking this time through Judge Perlita Tria Tirona, rendered a
decision purporting to clarify the decision of Judge Fortun and ruling that petitioner State shall release
respondents' shares of stock upon payment by respondents of the principal of the loan as set forth in PN No.
82-0904-AA in the amount of P110,000.00, without interest, penalties and other charges.
Petitioner State appealed Judge Tirona's decision to the Court of Appeals; the appeal was dismissed. The
Court of Appeals agreed with Judge Tirona that no interest need be paid and added that the clarificatory
(Tirona) decision of the trial court merely restated what had been provided for in the earlier (Fortun) decision;
that the Tirona decision did not go beyond what had been adjudged in the earlier decision. The motion for
reconsideration filed by petitioner was accordingly denied.
Hence, this Petition for Review contending that no manifest ambiguity existed in the decision penned by
Judge Fortun; that the trial court through Judge Tirona, erred in clarifying the decision of Judge Fortun; and
that the amendment sought to be introduced in the Fortun decision by respondents may not be made as
the same was substantial in nature and the Fortun decision had become final.
We begin by noting that the trial court has asserted authority to issue the clarificatory order in respect of the
decision of Judge Fortun, even though that judgment had become final and executory. In Reinsurance
Company of the Orient, Inc. v. Court of Appeals,1 this Court had occasion to deal with the applicable doctrine
to some extent:
- - - [E]ven a judgment which has become final and executory may be clarified under certain
circumstances. The dispositive portion of the judgment may, for instance, contain an error clearly
clerical in nature (perhaps best illustrated by an error in arithmetical computation) or an ambiguity
arising from inadvertent omission, which error may be rectified or ambiguity clarified and the
omission supplied by reference primarily to the body of the decision itself Supplementary
reference to the pleadings previously filed in the case may also be resorted to by way of
corroboration of the existence of the error or of the ambiguity in the dispositive part of the
judgment. In Locsin, et al. v. Parades, et al., this Court allowed a judgment which had become
final and executory to be clarified by supplying a word which had been inadvertently omitted and
which, when supplied, in effect changed the literal import of the original phraseology:
. . . it clearly appears from the allegations of the complaint, the promissory note reproduced
therein and made a part thereof, the prayer and the conclusions of fact and of law contained
in the decision of the respondent judge, that the obligation contracted by the petitioners is
joint and several and that the parties as well as the trial judge so understood it. Under the
juridical rule that the judgment should be in accordance with the allegations, the evidence
and the conclusions of fact and law, the dispositive part of the judgment under consideration
should have ordered that the debt be paid 'severally' and in omitting the word or adverb
'severally' inadvertently, said judgment became ambiguous. This ambiguity may be clarified
at any time after the decision is rendered and even after it had become final (34 Corpus
Juris, 235, 326). This respondent judge did not, therefore, exceed his jurisdiction in
clarifying the dispositive part of the judgment by supplying the omission. (Emphasis
supplied)
In Filipino Legion Corporation vs. Court of Appeals, et al., the applicable principle was set out in the following
terms:
[W]here there is ambiguity caused by an omission or mistake in the dispositive portion of a decision,
the court may clarify such ambiguity by an amendment even after the judgment had become final, and for
this purpose it may resort to the pleadings filed by the parties, the court's findings of facts and conclusions
of law as expressed in the body of the decision. (Emphasis supplied)
In Republic Surety and Insurance Company, Inc. v. Intermediate Appellate Court, the Court, in applying the
above doctrine, said:
. . . We clarify, in other words, what we did affirm. That is involved here is not what is ordinarily regarded as
a clerical error in the dispositive part of the decision of the Court of First Instance, . . . At the same time,
what is involved here is not a correction of an erroneous judgment or dispositive portion of a judgment. What
we believe is involved here is in the nature of an inadvertent omission on the part of the Court of First
Instance (which should have been noticed by private respondents' counsel who had prepared the
complaint), of what might be described as a logical follow-through of something set forth both in the body of
the decision and in the dispositive portion thereof; the inevitable follow-through, or translation into,
operational or behavioral terms, of the annulment of the Deed of Sale with Assumption of Mortgage, from
which petitioners' title or claim of title embodied in TCT 133153 flows. (Emphasis supplied) 2 (Underscoring
in the original; citations omitted)
The question we must resolve is thus whether or not there is an ambiguity or clerical error or inadvertent
omission in the dispositive portion of the decision of Judge Fortun which may be legitimately clarified by
referring to the body of the decision and perhaps even the pleadings filed before him. The decision of Judge
Fortun disposing of the motion for reconsideration filed by respondent spouses Rafael and Refugio Aquino
consisted basically of quoting practically the whole motion for reconsideration. In its dispositive portion,
Judge Fortun's decision stated:
WHEREFORE, plaintiffs "Motion for Reconsideration" dated January 3, 1985, is granted and the
decision of this Court dated December 14, 1984 is hereby revoked and set aside and another
judgment is hereby rendered in favor of plaintiffs as follows:
(1) Ordering defendants to immediately release the pledge on, and to deliver to plaintiffs, the
shares of stocks enumerated and described in paragraph 4 of plaintiffs' complaint dated July 17,
1984, upon payment of plaintiffs loan under Code No. 82-0904-AA to defendants;
(2) Ordering defendant State Investment House, Inc. to pay to plaintiffs P10,000.00 as moral
damages, P5,000.00 as exemplary damages, P6,000.00 as attorney's fees, plus costs;
(3) Dismissing defendants' counterclaim, for lack of merit and making the preliminary injunction
permanent.
SO ORDERED.3
Judge Fortun evidently meant to act favorably on the motion for reconsideration of the respondent Aquino
spouses and in effect accepted respondent spouses' argument that they had not incurred mora considering
that their failure to pay PN No. IF82-0904-AA on time had been due to petitioner State's unjustified refusal
to release the shares pledged to it. It is not, however, clear to what precise extent Judge Fortun meant to
grant the motion for reconsideration. The promissory note in Account No. IF-82-0904-AA had three (3)
components: (a) principal of the loan in the amount of P110,000.00; (b) regular interest in the amount of
seventeen percent (17%) per annum; and (c) additional or penalty interest in case of non-payment at
maturity, at the rate of two percent (2%) per month or twenty-four percent (24%) per annum. In the
dispositive part of his resolution, Judge Fortun did not specify which of these components of the loan he
was ordering respondent spouses to pay and which component or components he was in effect deleting.
We cannot assume that Judge Fortun meant to grant the relief prayed for by respondent spouses in all its
parts. For one thing, respondent spouses in their motion for reconsideration asked for "at least P50,000.00"
for moral damages and "at least P50,000.00" for exemplary damages, as well as P20,000.00 by way of
attorney's fees and litigation expenses. Judge Fortun granted respondent spouses only P10,000.00 as
moral damages and P5,000.00 as exemplary damages, plus P6,000.00 as attorney's fees and costs. For
another, respondent spouses asked Judge Fortun to order the release of the shares pledged "upon payment
of [respondent spouses'] loan under Code No. 82-0904-AA without interest, as plaintiffs were not in delay
in accordance with Article 69 of the New Civil Code –– " (Emphasis supplied). In other words, respondent
spouses did not themselves become very clear what they were asking Judge Fortun to grant them; they did
not apparently distinguish between regular interest or "monetary interest" in the amount of seventeen
percent (17%) per annum and penalty charges or "compensatory interest" in the amount of two percent
(2%) per month or twenty-four percent (24%) per annum.
It thus appears that the Fortun decision was ambiguous in the sense that it was cryptic. We believe that in
these circumstances, we must assume that Judge Fortun meant to decide in accordance with law, that we
cannot fairly assume that Judge Fortun was grossly ignorant of the law, or that he intended to grant the
respondent spouses relief to which they were not entitled under law. Thus, the ultimate question which
arises is: if respondent Aquino spouses were not in delay, what should they have been held liable for in
accordance with law?
We believe and so hold that since respondent Aquino spouses were held not to have been in delay, they
were properly liable only for: (a) the principal of the loan or P110,000.00; and (b) regular or monetary interest
in the amount of seventeen percent (17%) per annum. They were not liable for penalty or compensatory
interest, fixed by the promissory note in Account No. IF-82-0904-AA at two percent (2%) per month or
twenty-four (24%) per annum. It must be stressed in this connection that under Article 2209 of the Civil
Code which provides that
. . . [i]f the obligation consists in the payment of a sum of money, and the debtor incurs in delay. the
indemnity for damages, there being no stimulation to the contrary. shall be the payment of the interest
agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum.
the appropriate measure for damages in case of delay in discharging an obligation consisting of the payment
of a sum or money, is the payment of penalty interest at the rate agreed upon; and in the absence of a
stipulation of a particular rate of penalty interest, then the payment of additional interest at a rate equal to
the regular monetary interest; and if no regular interest had been agreed upon, then payment of legal interest
or six percent (6%) per annum.4
The fact that the respondent Aquino spouses were not in default did not mean that they, as a matter of law,
were relieved from the payment not only of penalty or compensatory interest at the rate of twenty-four
percent (24%) per annum but also of regular or monetary interest of seventeen percent (17%) per annum.
The regular or monetary interest continued to accrue under the terms of the relevant promissory note until
actual payment is effected. The payment of regular interest constitutes the price or cost of the use of money
and thus, until the principal sum due is returned to the creditor, regular interest continues to accrue since
the debtor continues to use such principal amount. The relevant rule is set out in Article 1256 of the Civil
Code which provides as follows:
Art. 1256. If the creditor to whom tender of payment has been made refuses without just cause
to accept it, the debtor shall be released from responsibility by the consignation of the thing or
sum due.
Consignation alone shall produce the same effect in the following cases:
 (1) When the creditor is absent or unknown, or does not appear at the place of payment;
(2) When he is incapacitated to receive the payment at the time it is due;
(3) When, without just cause, he refuses to give a receipt;
(4) When two or more persons claim the same right to collect;
(5) When the title of the obligation has been lost. (Emphasis supplied)
Where the creditor unjustly refuses to accept payment, the debtor desirous of being released from his
obligation must comply with two (2) conditions: (a) tender of payment; and (b) consignation of the sum due.
Tender of payment must be accompanied or followed by consignation in order that the effects of payment
may be produced. Thus, in Llamas v. Abaya,5 the Supreme Court stressed that a written tender of payment
alone, without consignation in court of the sum due, does not suspend the accruing of regular or monetary
interest.
In the instant case, respondent spouses Aquino, while they are properly regarded as having made a written
tender of payment to petitioner State, failed to consign in court the amount due at the time of the maturity
of Account No. IF-820904-AA. It follows that their obligation to pay principal-cum-regular or monetary
interest under the terms and conditions of Account No. IF-82-0904-AA was not extinguished by such tender
of payment alone.
For the respondent spouses to continue in possession of the principal of the loan amounting to P110,000.00
and to continue to use the same after maturity of the loan without payment of regular or monetary interest,
would constitute unjust enrichment on the part of the respondent spouses at the expense of petitioner State
even though the spouses had not been guilty of mora. It is precisely this unjust enrichment which Article
1256 of the Civil Code prevents by requiring, in addition to tender of payment, the consignation of the
amount due in court which amount would thereafter be deposited by the Clerk of Court in a bank and earn
interest to which the creditor would be entitled.
WHEREFORE, the Petition for Review is hereby GRANTED DUE COURSE. The Decision of the Court of
Appeals dated 30 August 1989 in C.A.-G.R. No. 17954 and the Decision of the Regional Trial Court dated
17 February 1989 in Civil Case No. Q-42188 are hereby REVERSED and SET ASIDE. The dispositive
portion of the decision of Judge Fortun is hereby clarified so as to read as follows:
(1) Ordering defendants to immediately release the pledge and to deliver to the plaintiff spouses Rafael and
Refugio Aquino the shares of stock enumerated and described in paragraph 4 of said spouses' complaint
dated 17 July 1984, upon full payment of the amount of P110,000.00 plus seventeen percent (17%) per
annum regular interest computed from the time of maturity of the plaintiffs' loan (Account No. IF-82-0904-
AA) and until full payment of such principal and interest to defendants;
(2) Ordering defendant State Investment House, Inc. to pay to the plaintiff spouses Rafael and Refugio
Aquino P10,000.00 as moral damages, P5,000.00 as exemplary damages, P6,000.00 as attorney's fees,
plus costs; and
(3) Dismissing defendants' counterclaim for lack of merit and making the preliminary injunction permanent."
No pronouncement as to costs.
SO ORDERED.
G.R. No. 97412 July 12, 1994
EASTERN SHIPPING LINES, INC., petitioner,
vs.
HON. COURT OF APPEALS AND MERCANTILE INSURANCE COMPANY, INC., respondents.
VITU, J.:
The issues, albeit not completely novel, are: (a) whether or not a claim for damage sustained on a shipment
of goods can be a solidary, or joint and several, liability of the common carrier, the arrastre operator and the
customs broker; (b) whether the payment of legal interest on an award for loss or damage is to be computed
from the time the complaint is filed or from the date the decision appealed from is rendered; and (c) whether
the applicable rate of interest, referred to above, is twelve percent (12%) or six percent (6%).
The findings of the court a quo, adopted by the Court of Appeals, on the antecedent and undisputed facts
that have led to the controversy are hereunder reproduced:
This is an action against defendants shipping company, arrastre operator and broker-
forwarder for damages sustained by a shipment while in defendants' custody, filed by
the insurer-subrogee who paid the consignee the value of such losses/damages.
On December 4, 1981, two fiber drums of riboflavin were shipped from Yokohama,
Japan for delivery vessel "SS EASTERN COMET" owned by defendant Eastern
Shipping Lines under Bill of Lading
No. YMA-8 (Exh. B). The shipment was insured under plaintiff's Marine Insurance
Policy No. 81/01177 for P36,382,466.38.
Upon arrival of the shipment in Manila on December 12, 1981, it was discharged unto
the custody of defendant Metro Port Service, Inc. The latter excepted to one drum, said
to be in bad order, which damage was unknown to plaintiff.
On January 7, 1982 defendant Allied Brokerage Corporation received the shipment
from defendant Metro Port Service, Inc., one drum opened and without seal (per
"Request for Bad Order Survey." Exh. D).
On January 8 and 14, 1982, defendant Allied Brokerage Corporation made deliveries
of the shipment to the consignee's warehouse. The latter excepted to one drum which
contained spillages, while the rest of the contents was adulterated/fake (per "Bad Order
Waybill" No. 10649, Exh. E).
Plaintiff contended that due to the losses/damage sustained by said drum, the
consignee suffered losses totaling P19,032.95, due to the fault and negligence of
defendants. Claims were presented against defendants who failed and refused to pay
the same (Exhs. H, I, J, K, L).
As a consequence of the losses sustained, plaintiff was compelled to pay the consignee
P19,032.95 under the aforestated marine insurance policy, so that it became
subrogated to all the rights of action of said consignee against defendants (per "Form
 of Subrogation", "Release" and Philbanking check, Exhs. M, N, and O). (pp. 85-
86, Rollo.)
There were, to be sure, other factual issues that confronted both courts. Here, the appellate court said:
Defendants filed their respective answers, traversing the material allegations of the
complaint contending that: As for defendant Eastern Shipping it alleged that the
shipment was discharged in good order from the vessel unto the custody of Metro Port
Service so that any damage/losses incurred after the shipment was incurred after the
shipment was turned over to the latter, is no longer its liability (p. 17, Record); Metroport
averred that although subject shipment was discharged unto its custody, portion of the
same was already in bad order (p. 11, Record); Allied Brokerage alleged that plaintiff
has no cause of action against it, not having negligent or at fault for the shipment was
already in damage and bad order condition when received by it, but nonetheless, it still
exercised extra ordinary care and diligence in the handling/delivery of the cargo to
consignee in the same condition shipment was received by it.
From the evidence the court found the following:
The issues are:
1. Whether or not the shipment sustained losses/damages;
2. Whether or not these losses/damages were sustained while in
the custody of defendants (in whose respective custody, if
determinable);
3. Whether or not defendant(s) should be held liable for the
losses/damages (see plaintiff's pre-Trial Brief, Records, p. 34;
Allied's pre-Trial Brief, adopting plaintiff's Records, p. 38).
As to the first issue, there can be no doubt that the shipment
sustained losses/damages. The two drums were shipped in good
order and condition, as clearly shown by the Bill of Lading and
Commercial Invoice which do not indicate any damages drum that
was shipped (Exhs. B and C). But when on December 12, 1981
the shipment was delivered to defendant Metro Port Service, Inc.,
it excepted to one drum in bad order.
Correspondingly, as to the second issue, it follows that the
losses/damages were sustained while in the respective and/or
successive custody and possession of defendants carrier
(Eastern), arrastre operator (Metro Port) and broker (Allied
Brokerage). This becomes evident when the Marine Cargo Survey
Report (Exh. G), with its "Additional Survey Notes", are
considered. In the latter notes, it is stated that when the shipment
was "landed on vessel" to dock of Pier # 15, South Harbor, Manila
on December 12, 1981, it was observed that "one (1) fiber drum
(was) in damaged condition, covered by the vessel's Agent's Bad
Order Tally Sheet No. 86427." The report further states that when
defendant Allied Brokerage withdrew the shipment from defendant
arrastre operator's custody on January 7, 1982, one drum was
found opened without seal, cello bag partly torn but contents intact.
Net unrecovered spillages was
15 kgs. The report went on to state that when the drums reached
the consignee, one drum was found with adulterated/faked
contents. It is obvious, therefore, that these losses/damages
occurred before the shipment reached the consignee while under
the successive custodies of defendants. Under Art. 1737 of the
New Civil Code, the common carrier's duty to observe
extraordinary diligence in the vigilance of goods remains in full
force and effect even if the goods are temporarily unloaded and
stored in transit in the warehouse of the carrier at the place of
destination, until the consignee has been advised and has had
reasonable opportunity to remove or dispose of the goods (Art.
1738, NCC). Defendant Eastern Shipping's own exhibit, the "Turn-
Over Survey of Bad Order Cargoes" (Exhs. 3-Eastern) states that
on December 12, 1981 one drum was found "open".
and thus held:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered:
A. Ordering defendants to pay plaintiff, jointly and severally:
1. The amount of P19,032.95, with the present legal interest of 12% per
annum from October 1, 1982, the date of filing of this complaints, until fully
paid (the liability of defendant Eastern Shipping, Inc. shall not exceed
US$500 per case or the CIF value of the loss, whichever is lesser, while
the liability of defendant Metro Port Service, Inc. shall be to the extent of
the actual invoice value of each package, crate box or container in no case
to exceed P5,000.00 each, pursuant to Section 6.01 of the Management
Contract);
2. P3,000.00 as attorney's fees, and
3. Costs.
B. Dismissing the counterclaims and
crossclaim of defendant/cross-claimant Allied
Brokerage Corporation.
SO ORDERED. (p. 207, Record).
Dissatisfied, defendant's recourse to US.
The appeal is devoid of merit.
After a careful scrutiny of the evidence on record. We find that the conclusion drawn
therefrom is correct. As there is sufficient evidence that the shipment sustained damage
while in the successive possession of appellants, and therefore they are liable to the
appellee, as subrogee for the amount it paid to the consignee. (pp. 87-89, Rollo.)
The Court of Appeals thus affirmed in toto the judgment of the
a quo.
In this petition, Eastern Shipping Lines, Inc., the common carrier, attributes error and grave abuse of
discretion on the part of the appellate court when —
I. IT HELD PETITIONER CARRIER JOINTLY AND SEVERALLY LIABLE WITH THE ARRASTRE
OPERATOR AND CUSTOMS BROKER FOR THE CLAIM OF PRIVATE RESPONDENT AS
GRANTED IN THE QUESTIONED DECISION;
II. IT HELD THAT THE GRANT OF INTEREST ON THE CLAIM OF PRIVATE RESPONDENT
SHOULD COMMENCE FROM THE DATE OF THE FILING OF THE COMPLAINT AT THE RATE
OF TWELVE PERCENT PER ANNUM INSTEAD OF FROM THE DATE OF THE DECISION OF
THE TRIAL COURT AND ONLY AT THE RATE OF SIX PERCENT PER ANNUM, PRIVATE
RESPONDENT'S CLAIM BEING INDISPUTABLY UNLIQUIDATED.
The petition is, in part, granted.
In this decision, we have begun by saying that the questions raised by petitioner carrier are not all that
novel. Indeed, we do have a fairly good number of previous decisions this Court can merely tack to.
The common carrier's duty to observe the requisite diligence in the shipment of goods lasts from the time
the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier
for transportation until delivered to, or until the lapse of a reasonable time for their acceptance by, the person
entitled to receive them (Arts. 1736-1738, Civil Code; Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai
vs. Dollar Steamship Lines, 52 Phil. 863). When the goods shipped either are lost or arrive in damaged
condition, a presumption arises against the carrier of its failure to observe that diligence, and there need
not be an express finding of negligence to hold it liable (Art. 1735, Civil Code; Philippine National Railways
vs. Court of Appeals, 139 SCRA 87; Metro Port Service vs. Court of Appeals, 131 SCRA 365). There are,
of course, exceptional cases when such presumption of fault is not observed but these cases, enumerated
in Article 17341 of the Civil Code, are exclusive, not one of which can be applied to this case.
court possession of appellants" (the herein petitioner among them). Accordingly, the liability imposed on Eastern
Shipping Lines, Inc., the sole petitioner in this case, is inevitable regardless of whether there are others
solidarily liable with it.
It is over the issue of legal interest adjudged by the appellate court that deserves more than just a passing
remark.
Let us first see a chronological recitation of the major rulings of this Court:
The early case of Malayan Insurance Co., Inc., vs. Manila Port
Service,2 decided3 on 15 May 1969, involved a suit for recovery of money arising out of short deliveries and
pilferage of goods. In this case, appellee Malayan Insurance (the plaintiff in the lower court) averred in its
complaint that the total amount of its claim for the value of the undelivered goods amounted to P3,947.20.
This demand, however, was neither established in its totality nor definitely ascertained. In the stipulation of
facts later entered into by the parties, in lieu of proof, the amount of P1,447.51 was agreed upon. The trial
court rendered judgment ordering the appellants (defendants) Manila Port Service and Manila Railroad
Company to pay appellee Malayan Insurance the sum of P1,447.51 with legal interest thereon from the date
the complaint was filed on 28 December 1962 until full payment thereof. The appellants then assailed, inter
alia, the award of legal interest. In sustaining the appellants, this Court ruled:
Interest upon an obligation which calls for the payment of money, absent a stipulation, is the
legal rate. Such interest normally is allowable from the date of demand, judicial or extrajudicial.
The trial court opted for judicial demand as the starting point.
But then upon the provisions of Article 2213 of the Civil Code, interest "cannot be recovered
upon unliquidated claims or damages, except when the demand can be established with
reasonable certainty." And as was held by this Court in Rivera vs. Perez,4 L-6998, February 29,
1956, if the suit were for damages, "unliquidated and not known until definitely ascertained,
assessed and determined by the courts after proof (Montilla c. Corporacion de P.P. Agustinos,
25 Phil. 447; Lichauco v. Guzman,
38 Phil. 302)," then, interest "should be from the date of the decision." (Emphasis supplied)

The case of Reformina vs. Tomol,5 rendered on 11 October 1985, was for "Recovery of Damages for Injury
The question of charging both the carrier and the arrastre operator with the obligation of properly delivering
to Person and Loss of Property." After trial, the lower court decreed:
the goods to the consignee has, too, been passed upon by the Court. In Fireman's Fund Insurance vs. Metro
Port Services (182 SCRA 455), we have explained, in holding the carrier and the arrastre operator liable
in solidum, thus: WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and third party defendants
and against the defendants and third party plaintiffs as follows:
The legal relationship between the consignee and the arrastre operator is akin to that of a
depositor and warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA 5 [1967]. The Ordering defendants and third party plaintiffs Shell and Michael, Incorporated to pay jointly and
relationship between the consignee and the common carrier is similar to that of the consignee severally the following persons:
and the arrastre operator (Northern Motors, Inc. v. Prince Line, et al., 107 Phil. 253 [1960]).
Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and
xxx xxx xxx
to deliver them in good condition to the consignee, such responsibility also devolves upon the
CARRIER. Both the ARRASTRE and the CARRIER are therefore charged with the obligation
to deliver the goods in good condition to the consignee. (g) Plaintiffs Pacita F. Reformina and Francisco Reformina the sum of P131,084.00
which is the value of the boat F B Pacita III together with its accessories, fishing gear
and equipment minus P80,000.00 which is the value of the insurance recovered and
We do not, of course, imply by the above pronouncement that the arrastre operator and the customs broker
the amount of P10,000.00 a month as the estimated monthly loss suffered by them as
are themselves always and necessarily liable solidarily with the carrier, or vice-versa, nor that attendant
a result of the fire of May 6, 1969 up to the time they are actually paid or already the
facts in a given case may not vary the rule. The instant petition has been brought solely by Eastern Shipping
total sum of P370,000.00 as of June 4, 1972 with legal interest from the filing of the
Lines, which, being the carrier and not having been able to rebut the presumption of fault, is, in any event,
complaint until paid and to pay attorney's fees of P5,000.00 with costs against
to be held liable in this particular case. A factual finding of both the court a quo and the appellate court, we
defendants and third party plaintiffs. (Emphasis supplied.)
take note, is that "there is sufficient evidence that the shipment sustained damage while in the successive
 On appeal to the Court of Appeals, the latter modified the amount of damages awarded but
sustained the trial court in adjudging legal interest from the filing of the complaint until fully paid.
When the appellate court's decision became final, the case was remanded to the lower court for
execution, and this was when the trial court issued its assailed resolution which applied the 6%
interest per annum prescribed in Article 2209 of the Civil Code. In their petition for review
on certiorari, the petitioners contended that Central Bank Circular
No. 416, providing thus —
By virtue of the authority granted to it under Section 1 of Act 2655, as amended,
Monetary Board in its Resolution No. 1622 dated July 29, 1974, has prescribed that the
rate of interest for the loan, or forbearance of any money, goods, or credits and the rate
allowed in judgments, in the absence of express contract as to such rate of interest,
shall be twelve (12%) percent per annum. This Circular shall take effect immediately.
(Emphasis found in the text) —
should have, instead, been applied. This Court6 ruled:
The judgments spoken of and referred to are judgments in litigations involving loans or
forbearance of any money, goods or credits. Any other kind of monetary judgment
which has nothing to do with, nor involving loans or forbearance of any money, goods
or credits does not fall within the coverage of the said law for it is not within the ambit
of the authority granted to the Central Bank.
xxx xxx xxx
Coming to the case at bar, the decision herein sought to be executed is one rendered
in an Action for Damages for injury to persons and loss of property and does not involve
any loan, much less forbearances of any money, goods or credits. As correctly argued
by the private respondents, the law applicable to the said case is Article 2209 of the
New Civil Code which reads —
Art. 2209. — If the obligation consists in the payment of a sum of
money, and the debtor incurs in delay, the indemnity for damages,
there being no stipulation to the contrary, shall be the payment of
interest agreed upon, and in the absence of stipulation, the legal
interest which is six percent per annum.
The above rule was reiterated in Philippine Rabbit Bus Lines, Inc., v. Cruz,7 promulgated on 28 July 1986.
The case was for damages occasioned by an injury to person and loss of property. The trial court awarded
private respondent Pedro Manabat actual and compensatory damages in the amount of P72,500.00
with legal interest thereon from the filing of the complaint until fully paid. Relying on the Reformina
v. Tomol case, this Court8 modified the interest award from 12% to 6% interest per annum but sustained
the time computation thereof, i.e., from the filing of the complaint until fully paid.
In Nakpil and Sons vs. Court of Appeals,9 the trial court, in an action for the recovery of damages arising
from the collapse of a building, ordered,
inter alia, the "defendant United Construction Co., Inc. (one of the petitioners)
. . . to pay the plaintiff, . . . , the sum of P989,335.68 with interest at the legal rate from November 29, 1968,
the date of the filing of the complaint until full payment . . . ." Save from the modification of the amount
granted by the lower court, the Court of Appeals sustained the trial court's decision. When taken to this
Court for review, the case, on 03 October 1986, was decided, thus:
WHEREFORE, the decision appealed from is hereby MODIFIED and considering the
special and environmental circumstances of this case, we deem it reasonable to render
a decision imposing, as We do hereby impose, upon the defendant and the third-party
defendants (with the exception of Roman Ozaeta) a solidary (Art. 1723, Civil
Code, Supra.
p. 10) indemnity in favor of the Philippine Bar Association of FIVE MILLION
(P5,000,000.00) Pesos to cover all damages (with the exception to attorney's fees)
occasioned by the loss of the building (including interest charges and lost rentals) and
an additional ONE HUNDRED THOUSAND (P100,000.00) Pesos as and for attorney's
fees, the total sum being payable upon the finality of this decision. Upon failure to pay
on such finality, twelve (12%) per cent interest per annum shall be imposed upon
aforementioned amounts from finality until paid. Solidary costs against the defendant
and third-party defendants (Except Roman Ozaeta). (Emphasis supplied)
A motion for reconsideration was filed by United Construction, contending that "the interest of
twelve (12%) per cent per annum imposed on the total amount of the monetary award was in
contravention of law." The Court10 ruled out the applicability of the Reformina and Philippine
Rabbit Bus Lines cases and, in its resolution of 15 April 1988, it explained:
There should be no dispute that the imposition of 12% interest pursuant to Central Bank
Circular No. 416 . . . is applicable only in the following: (1) loans; (2) forbearance of any
money, goods or credit; and
(3) rate allowed in judgments (judgments spoken of refer to judgments involving loans
or forbearance of any money, goods or credits. (Philippine Rabbit Bus Lines Inc. v.
Cruz, 143 SCRA 160-161 [1986]; Reformina v. Tomol, Jr., 139 SCRA 260 [1985]). It is
true that in the instant case, there is neither a loan or a forbearance, but then no interest
is actually imposed provided the sums referred to in the judgment are paid upon the
finality of the judgment. It is delay in the payment of such final judgment, that will cause
the imposition of the interest.
It will be noted that in the cases already adverted to, the rate of interest is imposed on
the total sum, from the filing of the complaint until paid; in other words, as part of the
judgment for damages. Clearly, they are not applicable to the instant case. (Emphasis
supplied.)
The subsequent case of American Express International, Inc., vs. Intermediate Appellate Court11 was a
petition for review on certiorari from the decision, dated 27 February 1985, of the then Intermediate
Appellate Court reducing the amount of moral and exemplary damages awarded by the trial court, to
P240,000.00 and P100,000.00, respectively, and its resolution, dated 29 April 1985, restoring the amount
of damages awarded by the trial court, i.e., P2,000,000.00 as moral damages and P400,000.00 as
exemplary damages with interest thereon at 12% per annum from notice of judgment, plus costs of suit. In
a decision of 09 November 1988, this Court, while recognizing the right of the private respondent to recover
damages, held the award, however, for moral damages by the trial court, later sustained by the IAC, to be
inconceivably large. The Court12 thus set aside the decision of the appellate court and rendered a new one,
"ordering the petitioner to pay private respondent the sum of One Hundred Thousand (P100,000.00) Pesos
as moral damages, with
six (6%) percent interest thereon computed from the finality of this decision until paid. (Emphasis supplied)
Reformina came into fore again in the 21 February 1989 case of Florendo v. Ruiz13 which arose from a
breach of employment contract. For having been illegally dismissed, the petitioner was awarded by the trial
court moral and exemplary damages without, however, providing any legal interest thereon. When the
decision was appealed to the Court of Appeals, the latter held:
 WHEREFORE, except as modified hereinabove the decision of the CFI of Negros in the performance of obligations in general. Observe, too, that in these cases, a common time frame in the
Oriental dated October 31, 1972 is affirmed in all respects, with the modification that computation of the 6% interest per annum has been applied, i.e., from the time the complaint is filed until
defendants-appellants, except defendant-appellant Merton Munn, are ordered to pay, the adjudged amount is fully paid.
jointly and severally, the amounts stated in the dispositive portion of the decision,
including the sum of P1,400.00 in concept of compensatory damages, with interest at
The "second group", did not alter the pronounced rule on the application of the 6% or 12% interest per
the legal rate from the date of the filing of the complaint until fully paid(Emphasis
annum,17depending on whether or not the amount involved is a loan or forbearance, on the one hand, or
supplied.)
one of indemnity for damage, on the other hand. Unlike, however, the "first group" which remained
consistent in holding that the running of the legal interest should be from the time of the filing of the complaint
The petition for review to this Court was denied. The records were thereupon transmitted to the until fully paid, the "second group" varied on the commencement of the running of the legal interest.
trial court, and an entry of judgment was made. The writ of execution issued by the trial court
directed that only compensatory damages should earn interest at 6% per annum from the date of
Malayan held that the amount awarded should bear legal interest from the date of the decision of the court
the filing of the complaint. Ascribing grave abuse of discretion on the part of the trial judge, a
a quo,explaining that "if the suit were for damages, 'unliquidated and not known until definitely ascertained,
petition for certiorari assailed the said order. This Court said:
assessed and determined by the courts after proof,' then, interest 'should be from the date of the
decision.'" American Express International v. IAC, introduced a different time frame for reckoning the 6%
. . . , it is to be noted that the Court of Appeals ordered the payment of interest "at the interest by ordering it to be "computed from the finality of (the) decision until paid." The Nakpil and Sons
legal rate" from the time of the filing of the complaint. . . Said circular [Central Bank case ruled that 12% interest per annum should be imposed from the finality of the decision until the judgment
Circular No. 416] does not apply to actions based on a breach of employment contract amount is paid.
like the case at bar. (Emphasis supplied)
The ostensible discord is not difficult to explain. The factual circumstances may have called for different
The Court reiterated that the 6% interest per annum on the damages should be computed from applications, guided by the rule that the courts are vested with discretion, depending on the equities of each
the time the complaint was filed until the amount is fully paid. case, on the award of interest. Nonetheless, it may not be unwise, by way of clarification and reconciliation,
to suggest the following rules of thumb for future guidance.
Quite recently, the Court had another occasion to rule on the matter. National Power Corporation
vs. Angas,14decided on 08 May 1992, involved the expropriation of certain parcels of land. After conducting I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-
a hearing on the complaints for eminent domain, the trial court ordered the petitioner to pay the private delicts18 is breached, the contravenor can be held liable for damages.19 The provisions under Title XVIII on
respondents certain sums of money as just compensation for their lands so expropriated "with legal interest "Damages" of the Civil Code govern in determining the measure of recoverable damages. 20
thereon . . . until fully paid." Again, in applying the 6% legal interest per annum under the Civil Code, the
Court15 declared:
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the
rate of interest, as well as the accrual thereof, is imposed, as follows:
. . . , (T)he transaction involved is clearly not a loan or forbearance of money, goods or
credits but expropriation of certain parcels of land for a public purpose, the payment of
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
which is without stipulation regarding interest, and the interest adjudged by the trial
forbearance of money, the interest due should be that which may have been stipulated in
court is in the nature of indemnity for damages. The legal interest required to be paid
writing.21 Furthermore, the interest due shall itself earn legal interest from the time it is judicially
on the amount of just compensation for the properties expropriated is manifestly in the
demanded.22 In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from
form of indemnity for damages for the delay in the payment thereof. Therefore, since
default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 116923 of the
the kind of interest involved in the joint judgment of the lower court sought to be
Civil Code.
enforced in this case is interest by way of damages, and not by way of earnings from
loans, etc. Art. 2209 of the Civil Code shall apply.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court24 at the rate of 6% per
Concededly, there have been seeming variances in the above holdings. The cases can perhaps be
annum.25 No interest, however, shall be adjudged on unliquidated claims or damages except when or until
classified into two groups according to the similarity of the issues involved and the corresponding rulings
the demand can be established with reasonable certainty. 26 Accordingly, where the demand is established
rendered by the court. The "first group" would consist of the cases of Reformina v. Tomol (1985), Philippine
with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or
Rabbit Bus Lines v. Cruz(1986), Florendo v. Ruiz (1989)
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the
and National Power Corporation v. Angas (1992). In the "second group" would be Malayan Insurance
time the demand is made, the interest shall begin to run only from the date the judgment of the court is
Company v.Manila Port Service (1969), Nakpil and Sons v. Court of Appeals (1988), and American Express
made (at which time the quantification of damages may be deemed to have been reasonably ascertained).
International v.Intermediate Appellate Court (1988).
The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

In the "first group", the basic issue focuses on the application of either the 6% (under the Civil Code) or 12%
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal
(under the Central Bank Circular) interest per annum. It is easily discernible in these cases that there has
interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from
been a consistent holding that the Central Bank Circular imposing the 12% interest per annum applies only
such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a
to loans or forbearance16 of money, goods or credits, as well as to judgments involving such loan or
forbearance of credit.
forbearance of money, goods or credits, and that the 6% interest under the Civil Code governs when the
transaction involves the payment of indemnities in the concept of damage arising from the breach or a delay
WHEREFORE, the petition is partly GRANTED. The appealed decision is AFFIRMED with the
₱198.00 x 26 days x 8 months = ₱41,184.00
MODIFICATION that the legal interest to be paid is SIX PERCENT (6%) on the amount due computed from
the decision, dated
BACKWAGES
03 February 1988, of the court a quo. A TWELVE PERCENT (12%) interest, in lieu of SIX PERCENT (6%),
shall be imposed on such amount upon finality of this decision until the payment thereof.
Date Dismissed = January 24, 1997

SO ORDERED. Rate per day = ₱196.00

Date of Decisions = Aug. 18, 1998

G.R. No. 189871 August 13, 2013
a) 1/24/97 to 2/5/98 = 12.36 mos.
DARIO NACAR, PETITIONER,
vs. ₱196.00/day x 12.36 mos. = ₱62,986.56
GALLERY FRAMES AND/OR FELIPE BORDEY, JR., RESPONDENTS.
b) 2/6/98 to 8/18/98 = 6.4 months

DECISION Prevailing Rate per day = ₱62,986.00

PERALTA, J.: ₱198.00 x 26 days x 6.4 mos. = ₱32,947.20

TOTAL = ₱95.933.76
This is a petition for review on certiorari assailing the Decision1 dated September 23, 2008 of the Court of
Appeals (CA) in CA-G.R. SP No. 98591, and the Resolution2 dated October 9, 2009 denying petitioner’s
motion for reconsideration. xxxx

The factual antecedents are undisputed.
Petitioner Dario Nacar filed a complaint for constructive dismissal before the Arbitration Branch of the
National Labor Relations Commission (NLRC) against respondents Gallery Frames (GF) and/or Felipe
Bordey, Jr., docketed as NLRC NCR Case No. 01-00519-97.
WHEREFORE, premises considered, judgment is hereby rendered finding respondents guilty of
constructive dismissal and are therefore, ordered:
To pay jointly and severally the complainant the amount of sixty-two thousand nine hundred eighty-six pesos
and 56/100 (₱62,986.56) Pesos representing his separation pay;

On October 15, 1998, the Labor Arbiter rendered a Decision3 in favor of petitioner and found that he was To pay jointly and severally the complainant the amount of nine (sic) five thousand nine hundred thirty-three
dismissed from employment without a valid or just cause. Thus, petitioner was awarded backwages and and 36/100 (₱95,933.36) representing his backwages; and
separation pay in lieu of reinstatement in the amount of ₱158,919.92. The dispositive portion of the decision,
reads:
All other claims are hereby dismissed for lack of merit.

With the foregoing, we find and so rule that respondents failed to discharge the burden of showing that
complainant was dismissed from employment for a just or valid cause. All the more, it is clear from the
records that complainant was never afforded due process before he was terminated. As such, we are
perforce constrained to grant complainant’s prayer for the payments of separation pay in lieu of
reinstatement to his former position, considering the strained relationship between the parties, and his
apparent reluctance to be reinstated, computed only up to promulgation of this decision as follows:
SO ORDERED.4
Respondents appealed to the NLRC, but it was dismissed for lack of merit in the Resolution5 dated February
29, 2000. Accordingly, the NLRC sustained the decision of the Labor Arbiter. Respondents filed a motion
for reconsideration, but it was denied.6

SEPARATION PAY Dissatisfied, respondents filed a Petition for Review on Certiorari before the CA. On August 24, 2000, the
CA issued a Resolution dismissing the petition. Respondents filed a Motion for Reconsideration, but it was
Date Hired = August 1990 likewise denied in a Resolution dated May 8, 2001.7

Rate = ₱198/day Respondents then sought relief before the Supreme Court, docketed as G.R. No. 151332. Finding no
reversible error on the part of the CA, this Court denied the petition in the Resolution dated April 17, 2002. 8
Date of Decision = Aug. 18, 1998

Length of Service = 8 yrs. & 1 month

An Entry of Judgment was later issued certifying that the resolution became final and executory on May 27,
2002.9The case was, thereafter, referred back to the Labor Arbiter. A pre-execution conference was
consequently scheduled, but respondents failed to appear.10
On November 5, 2002, petitioner filed a Motion for Correct Computation, praying that his backwages be
computed from the date of his dismissal on January 24, 1997 up to the finality of the Resolution of the
Supreme Court on May 27, 2002.11 Upon recomputation, the Computation and Examination Unit of the
NLRC arrived at an updated amount in the sum of ₱471,320.31. 12
On December 2, 2002, a Writ of Execution13 was issued by the Labor Arbiter ordering the Sheriff to collect
from respondents the total amount of ₱471,320.31. Respondents filed a Motion to Quash Writ of Execution,
arguing, among other things, that since the Labor Arbiter awarded separation pay of ₱62,986.56 and limited
backwages of ₱95,933.36, no more recomputation is required to be made of the said awards. They claimed
that after the decision becomes final and executory, the same cannot be altered or amended anymore. 14 On
January 13, 2003, the Labor Arbiter issued an Order15 denying the motion. Thus, an Alias Writ of
Execution16 was issued on January 14, 2003.
Respondents again appealed before the NLRC, which on June 30, 2003 issued a Resolution17 granting the
appeal in favor of the respondents and ordered the recomputation of the judgment award.
On August 20, 2003, an Entry of Judgment was issued declaring the Resolution of the NLRC to be final and
executory. Consequently, another pre-execution conference was held, but respondents failed to appear on
time. Meanwhile, petitioner moved that an Alias Writ of Execution be issued to enforce the earlier
recomputed judgment award in the sum of ₱471,320.31.18
The records of the case were again forwarded to the Computation and Examination Unit for recomputation,
where the judgment award of petitioner was reassessed to be in the total amount of only ₱147,560.19.
Petitioner then moved that a writ of execution be issued ordering respondents to pay him the original amount
as determined by the Labor Arbiter in his Decision dated October 15, 1998, pending the final computation
of his backwages and separation pay.
On January 14, 2003, the Labor Arbiter issued an Alias Writ of Execution to satisfy the judgment award that
was due to petitioner in the amount of ₱147,560.19, which petitioner eventually received.
Petitioner then filed a Manifestation and Motion praying for the re-computation of the monetary award to
include the appropriate interests.19
On May 10, 2005, the Labor Arbiter issued an Order20 granting the motion, but only up to the amount of
₱11,459.73. The Labor Arbiter reasoned that it is the October 15, 1998 Decision that should be enforced
considering that it was the one that became final and executory. However, the Labor Arbiter reasoned that
since the decision states that the separation pay and backwages are computed only up to the promulgation
of the said decision, it is the amount of ₱158,919.92 that should be executed. Thus, since petitioner already
received ₱147,560.19, he is only entitled to the balance of ₱11,459.73.
Petitioner then appealed before the NLRC,21 which appeal was denied by the NLRC in its Resolution22 dated
September 27, 2006. Petitioner filed a Motion for Reconsideration, but it was likewise denied in the
Resolution23dated January 31, 2007.
Aggrieved, petitioner then sought recourse before the CA, docketed as CA-G.R. SP No. 98591.
On September 23, 2008, the CA rendered a Decision24 denying the petition. The CA opined that since
petitioner no longer appealed the October 15, 1998 Decision of the Labor Arbiter, which already became
final and executory, a belated correction thereof is no longer allowed. The CA stated that there is nothing
left to be done except to enforce the said judgment. Consequently, it can no longer be modified in any
respect, except to correct clerical errors or mistakes.
Petitioner filed a Motion for Reconsideration, but it was denied in the Resolution25 dated October 9, 2009.
Hence, the petition assigning the lone error:
I
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED, COMMITTED
GRAVE ABUSE OF DISCRETION AND DECIDED CONTRARY TO LAW IN UPHOLDING THE
QUESTIONED RESOLUTIONS OF THE NLRC WHICH, IN TURN, SUSTAINED THE MAY 10, 2005
ORDER OF LABOR ARBITER MAGAT MAKING THE DISPOSITIVE PORTION OF THE OCTOBER 15,
1998 DECISION OF LABOR ARBITER LUSTRIA SUBSERVIENT TO AN OPINION EXPRESSED IN THE
BODY OF THE SAME DECISION.26
Petitioner argues that notwithstanding the fact that there was a computation of backwages in the Labor
Arbiter’s decision, the same is not final until reinstatement is made or until finality of the decision, in case of
an award of separation pay. Petitioner maintains that considering that the October 15, 1998 decision of the
Labor Arbiter did not become final and executory until the April 17, 2002 Resolution of the Supreme Court
in G.R. No. 151332 was entered in the Book of Entries on May 27, 2002, the reckoning point for the
computation of the backwages and separation pay should be on May 27, 2002 and not when the decision
of the Labor Arbiter was rendered on October 15, 1998. Further, petitioner posits that he is also entitled to
the payment of interest from the finality of the decision until full payment by the respondents.
On their part, respondents assert that since only separation pay and limited backwages were awarded to
petitioner by the October 15, 1998 decision of the Labor Arbiter, no more recomputation is required to be
made of said awards. Respondents insist that since the decision clearly stated that the separation pay and
backwages are "computed only up to [the] promulgation of this decision," and considering that petitioner no
longer appealed the decision, petitioner is only entitled to the award as computed by the Labor Arbiter in
the total amount of ₱158,919.92. Respondents added that it was only during the execution proceedings that
the petitioner questioned the award, long after the decision had become final and executory. Respondents
contend that to allow the further recomputation of the backwages to be awarded to petitioner at this point of
the proceedings would substantially vary the decision of the Labor Arbiter as it violates the rule on
immutability of judgments.
The petition is meritorious.
The instant case is similar to the case of Session Delights Ice Cream and Fast Foods v. Court of Appeals
(Sixth Division),27 wherein the issue submitted to the Court for resolution was the propriety of the
computation of the awards made, and whether this violated the principle of immutability of judgment. Like
in the present case, it was a distinct feature of the judgment of the Labor Arbiter in the above-cited case
that the decision already provided for the computation of the payable separation pay and backwages due
and did not further order the computation of the monetary awards up to the time of the finality of the
judgment. Also in Session Delights, the dismissed employee failed to appeal the decision of the labor arbiter.
The Court clarified, thus:
In concrete terms, the question is whether a re-computation in the course of execution of the labor arbiter's
original computation of the awards made, pegged as of the time the decision was rendered and confirmed
with modification by a final CA decision, is legally proper. The question is posed, given that the petitioner
did not immediately pay the awards stated in the original labor arbiter's decision; it delayed payment
because it continued with the litigation until final judgment at the CA level.
A source of misunderstanding in implementing the final decision in this case proceeds from the way the
original labor arbiter framed his decision. The decision consists essentially of two parts.
The first is that part of the decision that cannot now be disputed because it has been confirmed with finality.
This is the finding of the illegality of the dismissal and the awards of separation pay in lieu of reinstatement,
backwages, attorney's fees, and legal interests.
The second part is the computation of the awards made. On its face, the computation the labor arbiter made
shows that it was time-bound as can be seen from the figures used in the computation. This part, being
merely a computation of what the first part of the decision established and declared, can, by its nature, be
re-computed. This is the part, too, that the petitioner now posits should no longer be re-computed because
the computation is already in the labor arbiter's decision that the CA had affirmed. The public and private
respondents, on the other hand, posit that a re-computation is necessary because the relief in an illegal
dismissal decision goes all the way up to reinstatement if reinstatement is to be made, or up to the finality
of the decision, if separation pay is to be given in lieu reinstatement.
That the labor arbiter's decision, at the same time that it found that an illegal dismissal had taken place, also
made a computation of the award, is understandable in light of Section 3, Rule VIII of the then NLRC Rules
of Procedure which requires that a computation be made. This Section in part states:
[T]he Labor Arbiter of origin, in cases involving monetary awards and at all events, as far as practicable,
shall embody in any such decision or order the detailed and full amount awarded.
Clearly implied from this original computation is its currency up to the finality of the labor arbiter's decision.
As we noted above, this implication is apparent from the terms of the computation itself, and no question
would have arisen had the parties terminated the case and implemented the decision at that point.
However, the petitioner disagreed with the labor arbiter's findings on all counts - i.e., on the finding of
illegality as well as on all the consequent awards made. Hence, the petitioner appealed the case to the
NLRC which, in turn, affirmed the labor arbiter's decision. By law, the NLRC decision is final, reviewable
only by the CA on jurisdictional grounds.
The petitioner appropriately sought to nullify the NLRC decision on jurisdictional grounds through a timely
filed Rule 65 petition for certiorari. The CA decision, finding that NLRC exceeded its authority in affirming
the payment of 13th month pay and indemnity, lapsed to finality and was subsequently returned to the labor
arbiter of origin for execution.
It was at this point that the present case arose. Focusing on the core illegal dismissal portion of the original
labor arbiter's decision, the implementing labor arbiter ordered the award re-computed; he apparently read
the figures originally ordered to be paid to be the computation due had the case been terminated and
implemented at the labor arbiter's level. Thus, the labor arbiter re-computed the award to include the
separation pay and the backwages due up to the finality of the CA decision that fully terminated the case
on the merits. Unfortunately, the labor arbiter's approved computation went beyond the finality of the CA
decision (July 29, 2003) and included as well the payment for awards the final CA decision had deleted -
specifically, the proportionate 13th month pay and the indemnity awards. Hence, the CA issued the decision
now questioned in the present petition.
We see no error in the CA decision confirming that a re-computation is necessary as it essentially
considered the labor arbiter's original decision in accordance with its basic component parts as we
discussed above. To reiterate, the first part contains the finding of illegality and its monetary consequences;
the second part is the computation of the awards or monetary consequences of the illegal dismissal,
computed as of the time of the labor arbiter's original decision. 28
Consequently, from the above disquisitions, under the terms of the decision which is sought to be executed
by the petitioner, no essential change is made by a recomputation as this step is a necessary consequence
that flows from the nature of the illegality of dismissal declared by the Labor Arbiter in that decision. 29 A
recomputation (or an original computation, if no previous computation has been made) is a part of the law
– specifically, Article 279 of the Labor Code and the established jurisprudence on this provision – that is
read into the decision. By the nature of an illegal dismissal case, the reliefs continue to add up until full
satisfaction, as expressed under Article 279 of the Labor Code. The recomputation of the consequences of
illegal dismissal upon execution of the decision does not constitute an alteration or amendment of the final
decision being implemented. The illegal dismissal ruling stands; only the computation of monetary
consequences of this dismissal is affected, and this is not a violation of the principle of immutability of final
judgments.30
That the amount respondents shall now pay has greatly increased is a consequence that it cannot avoid as
it is the risk that it ran when it continued to seek recourses against the Labor Arbiter's decision. Article 279
provides for the consequences of illegal dismissal in no uncertain terms, qualified only by jurisprudence in
its interpretation of when separation pay in lieu of reinstatement is allowed. When that happens, the finality
of the illegal dismissal decision becomes the reckoning point instead of the reinstatement that the law
decrees. In allowing separation pay, the final decision effectively declares that the employment relationship
ended so that separation pay and backwages are to be computed up to that point. 31
Finally, anent the payment of legal interest. In the landmark case of Eastern Shipping Lines, Inc. v. Court of
Appeals,32 the Court laid down the guidelines regarding the manner of computing legal interest, to wit:
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the
rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum.
No interest, however, shall be adjudged on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at
the time the demand is made, the interest shall begin to run only from the date the judgment of the court
is made (at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount
finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum
 from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.33
Recently, however, the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its Resolution No. 796
dated May 16, 2013, approved the amendment of Section 234 of Circular No. 905, Series of 1982 and,
accordingly, issued Circular No. 799,35 Series of 2013, effective July 1, 2013, the pertinent portion of which
reads:
The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions
governing the rate of interest in the absence of stipulation in loan contracts, thereby amending Section 2 of
Circular No. 905, Series of 1982:
Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate
allowed in judgments, in the absence of an express contract as to such rate of interest, shall be six percent
(6%) per annum.
Section 2. In view of the above, Subsection X305.136 of the Manual of Regulations for Banks and Sections
4305Q.1,37 4305S.338 and 4303P.139 of the Manual of Regulations for Non-Bank Financial Institutions are
hereby amended accordingly.
This Circular shall take effect on 1 July 2013.
Thus, from the foregoing, in the absence of an express stipulation as to the rate of interest that would govern
the parties, the rate of legal interest for loans or forbearance of any money, goods or credits and the rate
allowed in judgments shall no longer be twelve percent (12%) per annum - as reflected in the case of Eastern
Shipping Lines40and Subsection X305.1 of the Manual of Regulations for Banks and Sections 4305Q.1,
4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions, before its
amendment by BSP-MB Circular No. 799 - but will now be six percent (6%) per annum effective July 1,
2013. It should be noted, nonetheless, that the new rate could only be applied prospectively and not
retroactively. Consequently, the twelve percent (12%) per annum legal interest shall apply only until June
30, 2013. Come July 1, 2013 the new rate of six percent (6%) per annum shall be the prevailing rate of
interest when applicable.
Corollarily, in the recent case of Advocates for Truth in Lending, Inc. and Eduardo B. Olaguer v. Bangko
Sentral Monetary Board,41 this Court affirmed the authority of the BSP-MB to set interest rates and to issue
and enforce Circulars when it ruled that "the BSP-MB may prescribe the maximum rate or rates of interest
for all loans or renewals thereof or the forbearance of any money, goods or credits, including those for loans
of low priority such as consumer loans, as well as such loans made by pawnshops, finance companies and
similar credit institutions. It even authorizes the BSP-MB to prescribe different maximum rate or rates for
different types of borrowings, including deposits and deposit substitutes, or loans of financial
intermediaries."
Nonetheless, with regard to those judgments that have become final and executory prior to July 1, 2013,
said judgments shall not be disturbed and shall continue to be implemented applying the rate of interest
fixed therein.1awp++i1
To recapitulate and for future guidance, the guidelines laid down in the case of Eastern Shipping Lines 42 are
accordingly modified to embody BSP-MB Circular No. 799, as follows:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-
delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on
"Damages" of the Civil Code govern in determining the measure of recoverable damages.1âwphi1
II. With regard particularly to an award of interest in the concept of actual and compensatory damages,
the rate of interest, as well as the accrual thereof, is imposed, as follows:
When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount
of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages, except when or until the demand can be
established with reasonable certainty. Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169,
Civil Code), but when such certainty cannot be so reasonably established at the time the demand is made,
the interest shall begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally adjudged.
When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from such
finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance
of credit.
And, in addition to the above, judgments that have become final and executory prior to July 1, 2013, shall
not be disturbed and shall continue to be implemented applying the rate of interest fixed therein.
WHEREFORE, premises considered, the Decision dated September 23, 2008 of the Court of Appeals in
CA-G.R. SP No. 98591, and the Resolution dated October 9, 2009 are REVERSED and SET ASIDE.
Respondents are Ordered to Pay petitioner:
(1) backwages computed from the time petitioner was illegally dismissed on January 24, 1997 up
to May 27, 2002, when the Resolution of this Court in G.R. No. 151332 became final and
executory;
(2) separation pay computed from August 1990 up to May 27, 2002 at the rate of one month pay
per year of service; and
(3) interest of twelve percent (12%) per annum of the total monetary awards, computed from May
27, 2002 to June 30, 2013 and six percent (6%) per annum from July 1, 2013 until their full
satisfaction.
The Labor Arbiter is hereby ORDERED to make another recomputation of the total monetary benefits
awarded and due to petitioner in accordance with this Decision.
SO ORDERED