G.R. No.

189871 August 13, 2013

DARIO NACAR, Petitioner,
vs.
GALLERY FRAMES AND/OR FELIPE BORDEY, JR., Respondents.

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 court’s 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 Arbiter’s 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 extra-judicial 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 court’s 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.