DARIO NACAR vs.

GALLERY FRAMES AND/OR FELIPE BORDEY

G.R. No. 189871

Note: I cannot find the nego issue in this case, so this one is focused on the interest part. :(

FACTS:

● 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.
● The Labor Arbiter rendered a Decision 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 P158,919.92.
○ Found and ruled 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.
○ 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;
● Respondents appealed to the NLRC, but it was dismissed for lack of merit in the Resolution
● 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 likewise denied in a Resolution dated May 8, 2001.
● Respondents then sought relief before the Supreme Court. Finding no reversible error on the part
of the CA, the Supreme Court denied the petition.
● 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. A pre-execution
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 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 of
₱471,320.31.
● A Writ of Execution 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.
● On January 13, 2003, the Labor Arbiter issued an Order denying the motion. Thus, an Alias Writ
of Execution was issued on January 14, 2003.

Petitioner’s contention
 ● 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.

Respondent’s contention

● 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.

ISSUE: Whether a recomputation is necessary in the determination of Nacar’s monetary benefits.

RULING: YES.

● 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.
● 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.
● Finally, anent the payment of legal interest. In the landmark case of Eastern Shipping Lines,
Inc. v. Court of Appeals, the Court laid down the guidelines regarding the manner of computing
legal interest, to wit:
● 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.

● 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 2 of Circular No. 905, 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.

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.

● 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 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.
● 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.