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INTEREST

G.R. No. 189871; 703 SCRA 439 – NACAR v. GALLERY FRAMES


PERALTA

Nacar won backwages and separation pay in an illegal dismissal case he filed against his employer. The LA decision had
a computation of awards. As Gallery Frames appealed up to the SC, the judgment reached finality much later than the
promulgation at the LA level, and so Nacar sought recomputation of the award to include the period up to finality. The
Court ruled in Nacar’s favor, reasoning that recomputing monetary awards did not amount to a violation of the principle of
the immutability of judgments, and that the inflated award was a consequence of Gallery Frames’s having chosen to
appeal the decision of the LA. On interest, the Court ruled that in the absence of an express contract as to rate of interest
for loans and forbearances of money, the applicable rate from 01 July 2013 onwards would be 6% (instead of the previous
12% demonstrated in the case of Eastern Shipping Lines) because of the amendment of Circular No. 905, s. 1982 by
Monetary Board Resolution No. 796.

DOCTRINE
Effective 01 July 2013, 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.
(Monetary Board Resolution No. 796, amending Sec. 2 of Circular No. 905, s. 1982)

IMPORTANT PEOPLE
Dario Nacar, petitioner
Gallery Frames and/or Felipe Bordey, Jr. (GF), respondent

FACTS
1. Nacar filed a complaint for constructive dismissal against Gallery Frames (GF). (No details were given about his
case.) The LA ruled in his favor, and he was awarded P158,919.92 in backwages and separation pay in lieu of
reinstatement. The award was computed, as stated in dispositive, “only up to the promulgation of the decision.”
2. Respondents unsuccessfully appealed to the NLRC, CA, and SC. An entry of judgment was issued certifying that the
resolution (of SC denying the petition for review of CA’s resolution) became final and executory on 27 May 2002.
3. 05 Nov. 2002: Nacar filed a Motion for Correct Computation, praying that his backwages be computed up to the
finality of the SC resolution (not the promulgation of the LA decision). It was recomputed to be P471,320.31.
4. LA issued a writ of execution. GF filed motion to quash the writ. GF’s theory: After finality, the decision (and the
amount computed by the LA) can no longer be altered or amended. LA denied the motion and issued an alias writ, so
GF appealed to the NLRC. NLRC granted the appeal and ordered another recomputation (yes, another #jsym).
5. The NLRC resolution became final and executory by entry of judgment. Nacar moved for an alias writ of execution to
enforce the earlier recomputed judgment of P471,320.31. When the records were further recomputed, the award was
assessed to be only P147,560.19. Nacar moved that the original amount (as computed by LA) be given to him
pending final computation. LA issued a writ for the latest (and lowest) computation (P147k), which Nacar receivd.
6. The LA then issued an order for P11,459, because Nacar was entitled to the original computation (P158), but he had
already received P147k. Nacar appealed before the NLRC (denied), and eth CA (denied also). Hence this petition.
7. Nacar’s position:
a. Computation of backwages is not final until finality of the decision, and so the basis of the computation should
be the finality of the resolution of the SC, and not the promulgation of the decision of the LA.
b. GF’s counter-argument: Recomputation would violate the rule on immutability of judgments.

ISSUE with HOLDING

1. W/N recomputation is proper – YES


Finality of the decision pertains to the finding of the illegality of the dismissal and the kinds of sums and benefits
awarded. This does not include the mere computation of what the decision established, and so the awards may
be recomputed. Recomputation is necessary because relief in an illegal dismissal case runs until reinstatement or, if
separation pay is to be given, up to the finality of the decision.
The increase in the amount payable is a consequence of the respondents’ having continued to seek recourse
against the LA decision.

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2. How shall legal interest be computed? (This is the issue in this case.)
Same as in Eastern Shipping, except that instead of 12% as the rate of interest for a loan or forbearance of money,
it shall be 6% per annum. This is in accordance with the BSP Monetary Board resolution (No. 796) approving the
amendment of Circular No. 905, effective 01 July 2013. 1
Thus, absent a stipulation as to interest, the rate for loans or forbearance of money, goods, or credits and the rate
allowed in judgments shall no longer be 12% as reflected in Eastern Shipping Lines, but 6% per annum. This is a
prospective rule, and so interest shall be applied at 12% until 30 June 2013. Starting 01 July 2013, 6% shall be applied
(when applicable).

DISPOSITIVE PORTION
WHEREFORE, premises considered, the Decision dated September 23, 2008 of the Court of Appeals in CA-G.R.
SPNo. 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.

NOTE (THE ONLY REALLY IMPORTANT PART OF THIS CASE WITH RESPECT TO CREDIT; SCRA 457)

To recapitulate and for future guidance, the guidelines laid down in the case of Eastern Shipping Lines 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.

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 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.

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 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.

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.
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DIGESTER: Gabi Timbancaya