45. Dario Nacar Vs. Gallery Frames G.R. No.

189871, August 13, 201

Topic: ​C. When the judgment of the court awarding a sum of money becomes final and
executory

Title: ​Dario Nacar Vs. Gallery Frames G.R. No. 189871,

Doctrine: ​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 X305.1 36 of the Manual of Regulations for Banks and
Sections 4305Q.1, 37 4305S.3 38 and 4303P.1 39 of the Manual of Regulations for Non-Bank
Financial Institutions are hereby amended accordingly.

This Circular shall take effect on 1 July 2013.

This rule does apply retroactively.

FACTS:

On October 15, 1998, the Labor Arbiter rendered a Decisionin favor of

petitioner and found that he was dismissed from employment without a valid
or just cause. Thus, petitioner was awarded backwages and separation pay in
lieu of reinstatement in the amount ofP158,919.92.

Respondents appealed to the NLRC, but it was dismissed for lack of merit.
Accordingly, the NLRC sustained the decision of the Labor Arbiter.
Respondents filed a motion for reconsideration, but it was denied.
Dissatisfied, respondents filed a Petition for Review on Certiorari before the
CA but it was likewise denied. Respondents then sought relief before the
Supreme Court. Finding no reversible error on the part of the CA, this Court
denied the petition in the Resolution dated April 17, 2002.

An Entry of Judgment was later issued certifying that the resolution became
final and executory on May 27, 2002. The case was, thereafter, referred back
to the Labor Arbiter for execution. 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. Upon recomputation, the Computation and
Examination Unit of the NLRC arrived at an updated amount in the sum
ofP471,320.31.

Respondents filed a Motion to Quash Writ of Execution, arguing, among other

things, that since the Labor Arbiter awarded separation pay ofP62,986.56 and
limited backwages ofP95,933.36, 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. LA denied
the motion but the decision was reversed by the NLRC on appeal.

Petitioner appealed to the CA but was denied, stating 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. Thus, petitioner filed this petition
for review on certiorari.

Alternative 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.

RULING:
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.

Fulltext

Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. 189871 August 13, 2013

DARIO NACAR,​ PETITIONER,

vs.

GALLERY FRAMES AND/OR FELIPE BORDEY, JR.,​ RESPONDENTS.

DECISION

PERALTA, ​J.:

This is a petition for review on certiorari assailing the Decision​1 dated September 23, 2008 of the
Court of Appeals (CA) in CA-G.R. SP No. 98591, and the Resolution​2 dated October 9, 2009
denying petitioner’s motion for reconsideration.

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.

On October 15, 1998, the Labor Arbiter rendered a Decision​3 in favor of petitioner and found that
he was dismissed from employment without a valid or just cause. Thus, petitioner was awarded
backwages and separation pay in lieu of reinstatement in the amount of ₱158,919.92. The
dispositive portion of the decision, reads:

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:

SEPARATION PAY

Date Hired = August 1990

Rate = ₱198/day

Date of Decision = Aug. 18, 1998

Length of Service = 8 yrs. & 1 month

₱198.00 x 26 days x 8 months = ₱41,184.00

BACKWAGES

Date Dismissed = January 24, 1997

Rate per day = ₱196.00

Date of Decisions = Aug. 18, 1998

a) 1/24/97 to 2/5/98 = 12.36 mos.

₱196.00/day x 12.36 mos. = ₱62,986.56

b) 2/6/98 to 8/18/98 = 6.4 months

Prevailing Rate per day = ₱62,986.00

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

TOTAL = ₱95.933.76

xxxx

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;

To pay jointly and severally the complainant the amount of nine (sic) five thousand nine hundred
thirty-three and 36/100 (₱95,933.36) representing his backwages; and

All other claims are hereby dismissed for lack of merit.

 4
SO ORDERED.​

5
Respondents appealed to the NLRC, but it was dismissed for lack of merit in the Resolution​
dated February 29, 2000. Accordingly, the NLRC sustained the decision of the Labor Arbiter.
6
Respondents filed a motion for reconsideration, but it was denied.​

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
7
Reconsideration, but it was likewise denied in a Resolution dated May 8, 2001.​

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
8
dated April 17, 2002.​

An Entry of Judgment was later issued certifying that the resolution became final and executory
on May 27, 2002.​9​The case was, thereafter, referred back to the Labor Arbiter. A pre-execution
10
conference was consequently scheduled, but respondents failed to appear.​

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
11
the Resolution of the Supreme Court on May 27, 2002.​ Upon recomputation, the Computation
12
and Examination Unit of the NLRC arrived at an updated amount in the sum of ₱471,320.31.​

On December 2, 2002, a Writ of Execution​13 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
14
executory, the same cannot be altered or amended anymore.​ On January 13, 2003, the Labor
15
Arbiter issued an Order​ denying the motion. Thus, an Alias Writ of Execution​16 was issued on
January 14, 2003.

17
Respondents again appealed before the NLRC, which on June 30, 2003 issued a Resolution​
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
18
₱471,320.31.​

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
19
award to include the appropriate interests.​

20
On May 10, 2005, the Labor Arbiter issued an Order​ 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.

21
Petitioner then appealed before the NLRC,​ which appeal was denied by the NLRC in its
22
Resolution​ dated September 27, 2006. Petitioner filed a Motion for Reconsideration, but it was
23​
likewise denied in the Resolution​ dated January 31, 2007.

Aggrieved, petitioner then sought recourse before the CA, docketed as CA-G.R. SP No. 98591.

24
On September 23, 2008, the CA rendered a Decision​ 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.

25
Petitioner filed a Motion for Reconsideration, but it was denied in the Resolution​ dated October
9, 2009.

Hence, the petition assigning the lone error:

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
27
Appeals (Sixth Division),​ 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
28
decision.​

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
29
Labor Arbiter in that decision.​ 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
30
immutability of final judgments.​

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.
32
v. Court of Appeals,​ 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
33
then an equivalent to a forbearance of credit.​

Recently, however, the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its Resolution
34
No. 796 dated May 16, 2013, approved the amendment of Section 2​ of Circular No. 905,
35
Series of 1982 and, accordingly, issued Circular No. 799,​ 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.

36
Section 2. In view of the above, Subsection X305.1​ of the Manual of Regulations
37 38 39
for Banks and Sections 4305Q.1,​ 4305S.3​ and 4303P.1​ 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 Lines​40​and 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.
41
Bangko Sentral Monetary Board,​ 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
42​
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.​ 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.

DIOSDADO M. PERALTA

Associate Justice

WE CONCUR:
 MARIA LOURDES P. A. SERENO

Chief Justice

ANTONIO T. CARPIO PRESBITERO J. VELASCO, JR.

Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO ARTURO D. BRION

Associate Justice Associate Justice

LUCAS P. BERSAMIN MARIANO C. DEL CASTILLO

Associate Justice Associate Justice

ROBERTO A. ABAD MARTIN S VILLARAMA, JR.

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA

Associate Justice Associate Justice

BIENVENIDO L. REYES ESTELA M. PERLAS-BERNABE

Associate Justice Associate Justice

MARVIC MARIO VICTOR F. LEONEN

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in
the above Decision had been reached in consultation before the case was assigned to the writer
of the opinion of the Court.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes

1
Penned by Associate Justice Vicente S. E. Veloso, with Associate Justices Rebecca De
Guia-Salvador and Ricardo R. Rosario, concurring; rollo, pp. 33-48.

2​
Id. at 32.

3​
Id. at 79-84.
4​
Id. at 82-84. (Emphasis supplied.)

5​
Id. at 85-93.

6​
Resolution dated July 24, 2000, id. at 94-96.

7​
Rollo, p. 35.

8​
Id. at 35-36.

9​
Id. at 36.

10​
Id. at 100.

11​
Id.

12​
Id. at 101.

13​
Id. at 97-102.

14​
Id. at 37.

15​
Id. at 103-108.

16​
Id. at 109-113.

17​
Id. at 114-117.

18​
Id. at 101.

19​
Id. at 40.

20​
Id. at 65-69.

21​
Id. at 70-74.

22​
Id. at 60-64.

23​
Id. at 58-59.

24​
Id. at 33-48.

25​
Id. at 32.

26​
Id. at 27.
27​
G.R. No. 172149, February 8, 2010, 612 SCRA 10.

28
Session Delights Ice Cream and Fast Foods v. Court of Appeals (Sixth Division), supra, at
21-23.

29​
Id. at 25.

30​
Id. at 25-26.

31​
Id. at 26.

32​
G.R. No. 97412, July 12, 1994, 234 SCRA 78.

33
Eastern Shipping Lines, Inc. v. Court of Appeals, supra, at 95-97. (Citations omitted; italics in
the original).

34
SECTION 2. 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 continue to be twelve percent (12%) per annum.

35​
Rate of interest in the absence of stipulation; Dated June 21, 2013.

36
§ X305.1 Rate of interest in the absence of stipulation. 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
expressed contract as to such rate of interest, shall be twelve percent (12%) per annum.

37​
The Section is under Q Regulations or Regulations Governing Non-Bank Financial Institutions

Performing Quasi-Banking Functions. It reads:

§ 4305Q.1 (2008 - 4307Q.6) Rate of interest in the absence of stipulation. The rate of interest for
the loan or forbearance of any money, goods or credit and the rate allowed in judgments, in the
absence of express contract as to such rate of interest, shall be twelve percent (12%) per
annum.

38
The Section is under S Regulations or Regulations Governing Non-Stock Savings and Loan
Associations. It reads:

§ 4305S.3 Interest in the absence of contract. In the absence of express contract, the rate of
interest for the loan or forbearance of any money, goods or credit and the rate allowed in
judgment shall be twelve percent (12%) per annum.

39​
The Section is under P Regulations or Regulations Governing Pawnshops. It reads:

§ 4303P.1 Rate of interest in the absence of stipulation. The rate of interest for a loan or
forbearance of money in the absence of an expressed contract as to such rate of interest, shall
be twelve percent (12%) per annum. (Circular No. 656 dated 02 June 2009)
40​
Supra note 32, at 95-97.

41​
G.R. No. 192986, January 15, 2013, 688 SCRA 530, 547.

42​
Supra note 32.