Republic of the Philippines be in bad order, which damage was unknown

SUPREME COURT to plaintiff.

Manila
On January 7, 1982 defendant Allied
EN BANC 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).
G.R. No. 97412 July 12, 1994
On January 8 and 14, 1982, defendant Allied
EASTERN SHIPPING LINES, INC., petitioner, Brokerage Corporation made deliveries of
vs. the shipment to the consignee's warehouse.
HON. COURT OF APPEALS AND MERCANTILE INSURANCE The latter excepted to one drum which
COMPANY, INC., respondents. contained spillages, while the rest of the
contents was adulterated/fake (per "Bad
Order Waybill" No. 10649, Exh. E).
Alojada & Garcia and Jimenea, Dala & Zaragoza for petitoner.
Plaintiff contended that due to the
Zapa Law Office for private respondent. 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
VITUG, J.: defendants who failed and refused to pay the
same (Exhs. H, I, J, K, L).
The issues, albeit not completely novel, are: (a) whether or
not a claim for damage sustained on a shipment of goods can As a consequence of the losses sustained,
be a solidary, or joint and several, liability of the common plaintiff was compelled to pay the consignee
carrier, the arrastre operator and the customs broker; (b) P19,032.95 under the aforestated marine
whether the payment of legal interest on an award for loss or insurance policy, so that it became
damage is to be computed from the time the complaint is filed subrogated to all the rights of action of said
or from the date the decision appealed from is rendered; and consignee against defendants (per "Form of
(c) whether the applicable rate of interest, referred to above, Subrogation", "Release" and Philbanking
is twelve percent (12%) or six percent (6%). check, Exhs. M, N, and O). (pp. 85-86, Rollo.)

The findings of the court a quo, adopted by the Court of There were, to be sure, other factual issues that confronted
Appeals, on the antecedent and undisputed facts that have led both courts. Here, the appellate court said:
to the controversy are hereunder reproduced:
Defendants filed their respective answers,
This is an action against defendants shipping traversing the material allegations of the
company, arrastre operator and broker- complaint contending that: As for defendant
forwarder for damages sustained by a Eastern Shipping it alleged that the shipment
shipment while in defendants' custody, filed was discharged in good order from the vessel
by the insurer-subrogee who paid the unto the custody of Metro Port Service so
consignee the value of such losses/damages. that any damage/losses incurred after the
shipment was incurred after the shipment
On December 4, 1981, two fiber drums of was turned over to the latter, is no longer its
riboflavin were shipped from Yokohama, liability (p. 17, Record); Metroport averred
Japan for delivery vessel "SS EASTERN that although subject shipment was
COMET" owned by defendant Eastern discharged unto its custody, portion of the
Shipping Lines under Bill of Lading same was already in bad order (p. 11,
No. YMA-8 (Exh. B). The shipment was Record); Allied Brokerage alleged that
insured under plaintiff's Marine Insurance plaintiff has no cause of action against it, not
Policy No. 81/01177 for P36,382,466.38. having negligent or at fault for the shipment
was already in damage and bad order
Upon arrival of the shipment in Manila on condition when received by it, but
December 12, 1981, it was discharged unto nonetheless, it still exercised extra ordinary
the custody of defendant Metro Port Service, care and diligence in the handling/delivery
Inc. The latter excepted to one drum, said to of the cargo to consignee in the same
condition shipment was received by it.
From the evidence the court found the on vessel" to dock of Pier #
following: 15, South Harbor, Manila on
December 12, 1981, it was
The issues are: observed that "one (1) fiber
drum (was) in damaged
1. Whether or not the condition, covered by the
shipment sustained vessel's Agent's Bad Order
losses/damages; Tally Sheet No. 86427." The
report further states that
when defendant Allied
2. Whether or not these Brokerage withdrew the
losses/damages were shipment from defendant
sustained while in the arrastre operator's custody
custody of defendants (in on January 7, 1982, one
whose respective custody, if drum was found opened
determinable); without seal, cello bag
partly torn but contents
3. Whether or not intact. Net unrecovered
defendant(s) should be held spillages was
liable for the 15 kgs. The report went on
losses/damages (see to state that when the
plaintiff's pre-Trial Brief, drums reached the
Records, p. 34; Allied's pre- consignee, one drum was
Trial Brief, adopting found with
plaintiff's Records, p. 38). adulterated/faked contents.
It is obvious, therefore, that
As to the first issue, there these losses/damages
can be no doubt that the occurred before the
shipment sustained shipment reached the
losses/damages. The two consignee while under the
drums were shipped in successive custodies of
good order and condition, defendants. Under Art. 1737
as clearly shown by the Bill of the New Civil Code, the
of Lading and Commercial common carrier's duty to
Invoice which do not observe extraordinary
indicate any damages drum diligence in the vigilance of
that was shipped (Exhs. B goods remains in full force
and C). But when on and effect even if the goods
December 12, 1981 the are temporarily unloaded
shipment was delivered to and stored in transit in the
defendant Metro Port warehouse of the carrier at
Service, Inc., it excepted to the place of destination,
one drum in bad order. until the consignee has been
advised and has had
Correspondingly, as to the reasonable opportunity to
second issue, it follows that remove or dispose of the
the losses/damages were goods (Art. 1738, NCC).
sustained while in the Defendant Eastern
respective and/or Shipping's own exhibit, the
successive custody and "Turn-Over Survey of Bad
possession of defendants Order Cargoes" (Exhs. 3-
carrier (Eastern), arrastre Eastern) states that on
operator (Metro Port) and December 12, 1981 one
broker (Allied Brokerage). drum was found "open".
This becomes evident when
the Marine Cargo Survey and thus held:
Report (Exh. G), with its
"Additional Survey Notes", WHEREFORE, PREMISES
are considered. In the latter CONSIDERED, judgment is
notes, it is stated that when hereby rendered:
the shipment was "landed
A. Ordering defendants to pay plaintiff, The Court of Appeals thus affirmed in toto the judgment of the
jointly and severally: court
a quo.
1. The amount of
P19,032.95, with the In this petition, Eastern Shipping Lines, Inc., the common
present legal interest of carrier, attributes error and grave abuse of discretion on the
12% per annum from part of the appellate court when —
October 1, 1982, the date of
filing of this complaints, I. IT HELD PETITIONER CARRIER JOINTLY
until fully paid (the liability AND SEVERALLY LIABLE WITH THE
of defendant Eastern ARRASTRE OPERATOR AND CUSTOMS
Shipping, Inc. shall not BROKER FOR THE CLAIM OF PRIVATE
exceed US$500 per case or RESPONDENT AS GRANTED IN THE
the CIF value of the loss, QUESTIONED DECISION;
whichever is lesser, while
the liability of defendant II. IT HELD THAT THE GRANT OF INTEREST
Metro Port Service, Inc. ON THE CLAIM OF PRIVATE RESPONDENT
shall be to the extent of the SHOULD COMMENCE FROM THE DATE OF
actual invoice value of each THE FILING OF THE COMPLAINT AT THE
package, crate box or RATE OF TWELVE PERCENT PER ANNUM
container in no case to INSTEAD OF FROM THE DATE OF THE
exceed P5,000.00 each, DECISION OF THE TRIAL COURT AND ONLY
pursuant to Section 6.01 of AT THE RATE OF SIX PERCENT PER ANNUM,
the Management Contract); PRIVATE RESPONDENT'S CLAIM BEING
INDISPUTABLY UNLIQUIDATED.
2. P3,000.00 as attorney's
fees, and The petition is, in part, granted.

3. Costs. In this decision, we have begun by saying that the questions

raised by petitioner carrier are not all that novel. Indeed, we
B. do have a fairly good number of previous decisions this Court
Dismissing can merely tack to.
the
counterclai The common carrier's duty to observe the requisite diligence
ms and in the shipment of goods lasts from the time the articles are
crossclaim surrendered to or unconditionally placed in the possession of,
of and received by, the carrier for transportation until delivered
defendant/ to, or until the lapse of a reasonable time for their acceptance
cross- by, the person entitled to receive them (Arts. 1736-1738, Civil
claimant Code; Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai vs.
Allied Dollar Steamship Lines, 52 Phil. 863). When the goods
Brokerage shipped either are lost or arrive in damaged condition, a
Corporatio presumption arises against the carrier of its failure to observe
n. that diligence, and there need not be an express finding of
negligence to hold it liable (Art. 1735, Civil Code; Philippine
SO ORDERED. (p. 207, Record). National Railways vs. Court of Appeals, 139 SCRA 87; Metro
Port Service vs. Court of Appeals, 131 SCRA 365). There are, of
Dissatisfied, defendant's recourse to US. course, exceptional cases when such presumption of fault is
not observed but these cases, enumerated in Article 1734 1 of
The appeal is devoid of merit. the Civil Code, are exclusive, not one of which can be applied
to this case.
After a careful scrutiny of the evidence on
record. We find that the conclusion drawn The question of charging both the carrier and the arrastre
therefrom is correct. As there is sufficient operator with the obligation of properly delivering the goods
evidence that the shipment sustained to the consignee has, too, been passed upon by the Court. In
damage while in the successive possession of Fireman's Fund Insurance vs. Metro Port Services (182 SCRA
appellants, and therefore they are liable to 455), we have explained, in holding the carrier and the
the appellee, as subrogee for the amount it arrastre operator liable in solidum, thus:
paid to the consignee. (pp. 87-89, Rollo.)
 The legal relationship between the consignee is the legal rate. Such interest normally is
and the arrastre operator is akin to that of a allowable from the date of demand, judicial
depositor and warehouseman (Lua Kian v. or extrajudicial. The trial court opted for
Manila Railroad Co., 19 SCRA 5 [1967]. The judicial demand as the starting point.
relationship between the consignee and the
common carrier is similar to that of the But then upon the provisions of Article 2213
consignee and the arrastre operator of the Civil Code, interest "cannot be
(Northern Motors, Inc. v. Prince Line, et al., recovered upon unliquidated claims or
107 Phil. 253 [1960]). Since it is the duty of damages, except when the demand can be
the ARRASTRE to take good care of the goods established with reasonable certainty." And
that are in its custody and to deliver them in as was held by this Court in Rivera vs. Perez, 4
good condition to the consignee, such L-6998, February 29, 1956, if the suit were
responsibility also devolves upon the for damages, "unliquidated and not known
CARRIER. Both the ARRASTRE and the until definitely ascertained, assessed and
CARRIER are therefore charged with the determined by the courts after proof (Montilla
obligation to deliver the goods in good c. Corporacion de P.P. Agustinos, 25 Phil. 447;
condition to the consignee. Lichauco v. Guzman,
38 Phil. 302)," then, interest "should be from
We do not, of course, imply by the above pronouncement that the date of the decision." (Emphasis supplied)
the arrastre operator and the customs broker are themselves
always and necessarily liable solidarily with the carrier, or The case of Reformina vs. Tomol, 5 rendered on 11 October
vice-versa, nor that attendant facts in a given case may not 1985, was for "Recovery of Damages for Injury to Person and
vary the rule. The instant petition has been brought solely by Loss of Property." After trial, the lower court decreed:
Eastern Shipping Lines, which, being the carrier and not
having been able to rebut the presumption of fault, is, in any WHEREFORE, judgment is hereby rendered
event, to be held liable in this particular case. A factual finding in favor of the plaintiffs and third party
of both the court a quo and the appellate court, we take note, defendants and against the defendants and
is that "there is sufficient evidence that the shipment third party plaintiffs as follows:
sustained damage while in the successive possession of
appellants" (the herein petitioner among them). Accordingly,
Ordering defendants and third party
the liability imposed on Eastern Shipping Lines, Inc., the sole
plaintiffs Shell and Michael, Incorporated to
petitioner in this case, is inevitable regardless of whether
pay jointly and severally the following
there are others solidarily liable with it.
persons:
It is over the issue of legal interest adjudged by the appellate
xxx xxx xxx
court that deserves more than just a passing remark.

(g) Plaintiffs Pacita F. Reformina and

Let us first see a chronological recitation of the major rulings
Francisco Reformina the sum of P131,084.00
of this Court:
which is the value of the boat F B Pacita III
together with its accessories, fishing gear
The early case of Malayan Insurance Co., Inc., vs. Manila Port and equipment minus P80,000.00 which is
Service, 2 decided 3 on 15 May 1969, involved a suit for the value of the insurance recovered and the
recovery of money arising out of short deliveries and pilferage amount of P10,000.00 a month as the
of goods. In this case, appellee Malayan Insurance (the estimated monthly loss suffered by them as a
plaintiff in the lower court) averred in its complaint that the result of the fire of May 6, 1969 up to the
total amount of its claim for the value of the undelivered time they are actually paid or already the
goods amounted to P3,947.20. This demand, however, was total sum of P370,000.00 as of June 4, 1972
neither established in its totality nor definitely ascertained. In with legal interest from the filing of the
the stipulation of facts later entered into by the parties, in lieu complaint until paid and to pay attorney's
of proof, the amount of P1,447.51 was agreed upon. The trial fees of P5,000.00 with costs against
court rendered judgment ordering the appellants defendants and third party plaintiffs.
(defendants) Manila Port Service and Manila Railroad (Emphasis supplied.)
Company to pay appellee Malayan Insurance the sum of
P1,447.51 with legal interest thereon from the date the
On appeal to the Court of Appeals, the latter modified
complaint was filed on 28 December 1962 until full payment
the amount of damages awarded but sustained the
thereof. The appellants then assailed, inter alia, the award of
trial court in adjudging legal interest from the filing of
legal interest. In sustaining the appellants, this Court ruled:
the complaint until fully paid. When the appellate
court's decision became final, the case was remanded
Interest upon an obligation which calls for to the lower court for execution, and this was when
the payment of money, absent a stipulation,
 the trial court issued its assailed resolution which property. The trial court awarded private respondent Pedro
applied the 6% interest per annum prescribed in Manabat actual and compensatory damages in the amount of
Article 2209 of the Civil Code. In their petition for P72,500.00 with legal interest thereon from the filing of the
review on certiorari, the petitioners contended that complaint until fully paid. Relying on the Reformina v. Tomol
Central Bank Circular case, this Court 8 modified the interest award from 12% to 6%
No. 416, providing thus — interest per annum but sustained the time computation thereof,
i.e., from the filing of the complaint until fully paid.
By virtue of the authority granted to it under
Section 1 of Act 2655, as amended, Monetary In Nakpil and Sons vs. Court of Appeals, 9 the trial court, in an
Board in its Resolution No. 1622 dated July action for the recovery of damages arising from the collapse
29, 1974, has prescribed that the rate of of a building, ordered,
interest for the loan, or forbearance of any inter alia, the "defendant United Construction Co., Inc. (one of
money, goods, or credits and the rate the petitioners)
allowed in judgments, in the absence of . . . to pay the plaintiff, . . . , the sum of P989,335.68 with
express contract as to such rate of interest, interest at the legal rate from November 29, 1968, the date of
shall be twelve (12%) percent per annum. the filing of the complaint until full payment . . . ." Save from the
This Circular shall take effect immediately. modification of the amount granted by the lower court, the
(Emphasis found in the text) — Court of Appeals sustained the trial court's decision. When
taken to this Court for review, the case, on 03 October 1986,
should have, instead, been applied. This Court 6 ruled: was decided, thus:

The judgments spoken of and referred to are WHEREFORE, the decision appealed from is
judgments in litigations involving loans or hereby MODIFIED and considering the
forbearance of any money, goods or credits. special and environmental circumstances of
Any other kind of monetary judgment which this case, we deem it reasonable to render a
has nothing to do with, nor involving loans or decision imposing, as We do hereby impose,
forbearance of any money, goods or credits upon the defendant and the third-party
does not fall within the coverage of the said defendants (with the exception of Roman
law for it is not within the ambit of the Ozaeta) a solidary (Art. 1723, Civil Code,
authority granted to the Central Bank. Supra.
p. 10) indemnity in favor of the Philippine
xxx xxx xxx Bar Association of FIVE MILLION
(P5,000,000.00) Pesos to cover all damages
(with the exception to attorney's fees)
Coming to the case at bar, the decision herein occasioned by the loss of the building
sought to be executed is one rendered in an (including interest charges and lost rentals)
Action for Damages for injury to persons and and an additional ONE HUNDRED
loss of property and does not involve any THOUSAND (P100,000.00) Pesos as and for
loan, much less forbearances of any money, attorney's fees, the total sum being payable
goods or credits. As correctly argued by the upon the finality of this decision. Upon
private respondents, the law applicable to failure to pay on such finality, twelve (12%)
the said case is Article 2209 of the New Civil per cent interest per annum shall be imposed
Code which reads — upon aforementioned amounts from finality
until paid. Solidary costs against the
Art. 2209. — If the defendant and third-party defendants
obligation consists in the (Except Roman Ozaeta). (Emphasis supplied)
payment of a sum of money,
and the debtor incurs in A motion for reconsideration was filed by United
delay, the indemnity for Construction, contending that "the interest of twelve
damages, there being no (12%) per cent per annum imposed on the total
stipulation to the contrary, amount of the monetary award was in contravention
shall be the payment of of law." The Court 10 ruled out the applicability of the
interest agreed upon, and in Reformina and Philippine Rabbit Bus Lines cases and,
the absence of stipulation, in its resolution of 15 April 1988, it explained:
the legal interest which is
six percent per annum.
There should be no dispute that the
imposition of 12% interest pursuant to
The above rule was reiterated in Philippine Rabbit Bus Lines, Central Bank Circular No. 416 . . . is
Inc., v. Cruz, 7 promulgated on 28 July 1986. The case was for applicable only in the following: (1) loans;
damages occasioned by an injury to person and loss of (2) forbearance of any money, goods or
 credit; and including the sum of P1,400.00 in concept of
(3) rate allowed in judgments (judgments compensatory damages, with interest at the
spoken of refer to judgments involving loans legal rate from the date of the filing of the
or forbearance of any money, goods or complaint until fully paid (Emphasis
credits. (Philippine Rabbit Bus Lines Inc. v. supplied.)
Cruz, 143 SCRA 160-161 [1986]; Reformina
v. Tomol, Jr., 139 SCRA 260 [1985]). It is true The petition for review to this Court was denied. The
that in the instant case, there is neither a loan records were thereupon transmitted to the trial
or a forbearance, but then no interest is court, and an entry of judgment was made. The writ
actually imposed provided the sums referred of execution issued by the trial court directed that
to in the judgment are paid upon the finality only compensatory damages should earn interest at
of the judgment. It is delay in the payment of 6% per annum from the date of the filing of the
such final judgment, that will cause the complaint. Ascribing grave abuse of discretion on the
imposition of the interest. part of the trial judge, a petition for certiorari assailed
the said order. This Court said:
It will be noted that in the cases already
adverted to, the rate of interest is imposed . . . , it is to be noted that the Court of Appeals
on the total sum, from the filing of the ordered the payment of interest "at the legal
complaint until paid; in other words, as part rate" from the time of the filing of the
of the judgment for damages. Clearly, they are complaint. . . Said circular [Central Bank
not applicable to the instant case. (Emphasis Circular No. 416] does not apply to actions
supplied.) based on a breach of employment contract
like the case at bar. (Emphasis supplied)
The subsequent case of American Express International, Inc.,
vs. Intermediate Appellate Court 11 was a petition for review on The Court reiterated that the 6% interest per annum
certiorari from the decision, dated 27 February 1985, of the on the damages should be computed from the time
then Intermediate Appellate Court reducing the amount of the complaint was filed until the amount is fully paid.
moral and exemplary damages awarded by the trial court, to
P240,000.00 and P100,000.00, respectively, and its Quite recently, the Court had another occasion to rule on the
resolution, dated 29 April 1985, restoring the amount of matter. National Power Corporation vs. Angas, 14 decided on 08
damages awarded by the trial court, i.e., P2,000,000.00 as May 1992, involved the expropriation of certain parcels of
moral damages and P400,000.00 as exemplary damages with land. After conducting a hearing on the complaints for
interest thereon at 12% per annum from notice of judgment, eminent domain, the trial court ordered the petitioner to pay
plus costs of suit. In a decision of 09 November 1988, this the private respondents certain sums of money as just
Court, while recognizing the right of the private respondent to compensation for their lands so expropriated "with legal
recover damages, held the award, however, for moral interest thereon . . . until fully paid." Again, in applying the 6%
damages by the trial court, later sustained by the IAC, to be legal interest per annum under the Civil Code, the Court 15
inconceivably large. The Court 12 thus set aside the decision of declared:
the appellate court and rendered a new one, "ordering the
petitioner to pay private respondent the sum of One Hundred
. . . , (T)he transaction involved is clearly not
Thousand (P100,000.00) Pesos as moral damages, with
a loan or forbearance of money, goods or
six (6%) percent interest thereon computed from the finality of
credits but expropriation of certain parcels
this decision until paid. (Emphasis supplied)
of land for a public purpose, the payment of
which is without stipulation regarding
Reformina came into fore again in the 21 February 1989 case interest, and the interest adjudged by the
of Florendo v. Ruiz 13 which arose from a breach of trial court is in the nature of indemnity for
employment contract. For having been illegally dismissed, the damages. The legal interest required to be
petitioner was awarded by the trial court moral and paid on the amount of just compensation for
exemplary damages without, however, providing any legal the properties expropriated is manifestly in
interest thereon. When the decision was appealed to the the form of indemnity for damages for the
Court of Appeals, the latter held: delay in the payment thereof. Therefore,
since the kind of interest involved in the joint
WHEREFORE, except as modified judgment of the lower court sought to be
hereinabove the decision of the CFI of Negros enforced in this case is interest by way of
Oriental dated October 31, 1972 is affirmed damages, and not by way of earnings from
in all respects, with the modification that loans, etc. Art. 2209 of the Civil Code shall
defendants-appellants, except defendant- apply.
appellant Merton Munn, are ordered to pay,
jointly and severally, the amounts stated in Concededly, there have been seeming variances in the above
the dispositive portion of the decision, holdings. The cases can perhaps be classified into two groups
according to the similarity of the issues involved and the The provisions under Title XVIII on "Damages" of the Civil
corresponding rulings rendered by the court. The "first Code govern in determining the measure of recoverable
group" would consist of the cases of Reformina v. Tomol damages. 20
(1985), Philippine Rabbit Bus Lines v. Cruz (1986), Florendo v.
Ruiz (1989) II. With regard particularly to an award of interest in the
and National Power Corporation v. Angas (1992). In the concept of actual and compensatory damages, the rate of
"second group" would be Malayan Insurance Company v. interest, as well as the accrual thereof, is imposed, as follows:
Manila Port Service (1969), Nakpil and Sons v. Court of Appeals
(1988), and American Express International v. Intermediate 1. When the obligation is breached, and it consists in the
Appellate Court (1988). payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been
In the "first group", the basic issue focuses on the application stipulated in writing. 21 Furthermore, the interest due shall
of either the 6% (under the Civil Code) or 12% (under the itself earn legal interest from the time it is judicially
Central Bank Circular) interest per annum. It is easily demanded. 22 In the absence of stipulation, the rate of interest
discernible in these cases that there has been a consistent shall be 12% per annum to be computed from default, i.e.,
holding that the Central Bank Circular imposing the 12% from judicial or extrajudicial demand under and subject to the
interest per annum applies only to loans or forbearance 16 of provisions of Article 1169 23 of the Civil Code.
money, goods or credits, as well as to judgments involving
such loan or forbearance of money, goods or credits, and that 2. When an obligation, not constituting a loan or forbearance
the 6% interest under the Civil Code governs when the of money, is breached, an interest on the amount of damages
transaction involves the payment of indemnities in the awarded may be imposed at the discretion of the court 24 at the
concept of damage arising from the breach or a delay in the rate of 6% per annum. 25 No interest, however, shall be
performance of obligations in general. Observe, too, that in adjudged on unliquidated claims or damages except when or
these cases, a common time frame in the computation of the until the demand can be established with reasonable
6% interest per annum has been applied, i.e., from the time certainty. 26 Accordingly, where the demand is established
the complaint is filed until the adjudged amount is fully paid. with reasonable certainty, the interest shall begin to run from
the time the claim is made judicially or extrajudicially (Art.
The "second group", did not alter the pronounced rule on the 1169, Civil Code) but when such certainty cannot be so
application of the 6% or 12% interest per annum, 17 reasonably established at the time the demand is made, the
depending on whether or not the amount involved is a loan or interest shall begin to run only from the date the judgment of
forbearance, on the one hand, or one of indemnity for damage, the court is made (at which time the quantification of
on the other hand. Unlike, however, the "first group" which damages may be deemed to have been reasonably
remained consistent in holding that the running of the legal ascertained). The actual base for the computation of legal
interest should be from the time of the filing of the complaint interest shall, in any case, be on the amount finally adjudged.
until fully paid, the "second group" varied on the
commencement of the running of the legal interest. 3. When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest,
Malayan held that the amount awarded should bear legal whether the case falls under paragraph 1 or paragraph 2,
interest from the date of the decision of the court a quo, above, shall be 12% per annum from such finality until its
explaining that "if the suit were for damages, 'unliquidated satisfaction, this interim period being deemed to be by then
and not known until definitely ascertained, assessed and an equivalent to a forbearance of credit.
determined by the courts after proof,' then, interest 'should be
from the date of the decision.'" American Express International WHEREFORE, the petition is partly GRANTED. The appealed
v. IAC, introduced a different time frame for reckoning the 6% decision is AFFIRMED with the MODIFICATION that the legal
interest by ordering it to be "computed from the finality of interest to be paid is SIX PERCENT (6%) on the amount due
(the) decision until paid." The Nakpil and Sons case ruled that computed from the decision, dated
12% interest per annum should be imposed from the finality 03 February 1988, of the court a quo. A TWELVE PERCENT
of the decision until the judgment amount is paid. (12%) interest, in lieu of SIX PERCENT (6%), shall be imposed
on such amount upon finality of this decision until the
The ostensible discord is not difficult to explain. The factual payment thereof.
circumstances may have called for different applications,
guided by the rule that the courts are vested with discretion, SO ORDERED.
depending on the equities of each case, on the award of
interest. Nonetheless, it may not be unwise, by way of
Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Regalado,
clarification and reconciliation, to suggest the following rules
Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno and
of thumb for future guidance.
Kapunan, JJ., concur.
I. When an obligation, regardless of its source, i.e., law,
Mendoza, J., took no part.
contracts, quasi-contracts, delicts or quasi-delicts 18 is
breached, the contravenor can be held liable for damages. 19
   8 Penned by then Justice, now Chief Justice,
Andres Narvasa, concurred in by Justices
#
Footnotes Pedro Yap, Ameurfina Melencio-Herrera,
Isagani A. Cruz and Edgardo Paras.
1 Art. 1734. Common carriers are
responsible for the loss, destruction, or 9 160 SCRA 334.
deterioration of the goods, unless the same is
due to any of the following causes only: 10 Penned by Justice Edgardo Paras, with the
concurrence of Justices Marcelo Fernan,
(1) Flood, storm, earthquake, Teodoro Padilla, Abdulwahid Bidin, and
lightning, or other natural disaster Irene Cortes. Justice Hugo Gutierrez, Jr., took
or calamity; no part because he was the ponente in the
Court of Appeals.
(2) Act of the public enemy in war,
whether international or civil; 11 167 SCRA 209.

(3) Act or omission of the shipper or 12 Rendered per curiam with the
owner of the goods; concurrence of then Chief Justice Marcelo
Fernan, Justices Andres Narvasa, Isagani A.
(4) The character of the goods or Cruz, Emilio Gancayco, Teodoro Padilla,
defects in the packing or in the Abdulwahid Bidin, Abraham Sarmiento,
containers; Irene Cortes, Carolina Griñ o-Aquino, Leo
Medialdea and Florenz Regalado. Justices
Ameurfina Melencio-Herrera and Hugo
(5) Order or act of competent public Gutierrez, Jr., took no part because they did
authority. not participate in the deliberations. Justices
Edgardo Paras and Florentino Feliciano also
2 28 SCRA 65. took no part.

3 Penned by Justice Conrado Sanchez, 13 170 SCRA 461.

concurred in by Justices Jose B.L. Reyes,
Arsenio Dizon, Querube Makalintal, Calixto 14 208 SCRA 542.
Zaldivar, Enrique Fernando, Francisco
Capistrano, Claudio Teehankee and Antonio
Barredo, Chief Justice Roberto Concepcion 15 Penned by Justice Edgardo Paras with the
and Justice Fred Ruiz Castro were on official concurrence of Justices Ameurfina Melencio-
leave. Herrera, Teodoro Padilla, Florenz Regalado
and Rodolfo Nocon.
4 The correct caption of the case is "Claro
Rivera vs. Amadeo Matute, L-6998, 16 Black's Law Dictionary (1990 ed., 644)
29 February 1956," 98 Phil. 516. citing the case of Hafer v. Spaeth,
22 Wash. 2d 378, 156 P.2d 408, 411 defines
the word forbearance, within the context of
5 139 SCRA 260, 265. usury law, as a contractual obligation of
lender or creditor to refrain, during given
6 Penned by Justice Serafin Cuevas, period of time, from requiring borrower or
concurred in by Justices Hermogenes debtor to repay loan or debt then due and
Concepcion, Jr., Vicente Abad Santos, payable.
Ameurfina Melencio-Herrera, Venicio
Escolin, Lorenzo Relova, Hugo Gutierrez, Jr., 17 In the case of Malayan Insurance, the
Buenaventura de la Fuente, Nestor Alampay application of the 6% and 12% interest per
and Lino Patajo. Justice Ramon Aquino annum has no bearing considering that this
concurred in the result. Justice Efren Plana case was decided upon before the issuance of
filed a concurring and dissenting opinion, Circular No. 416 by the Central Bank.
concurred in by Justice Claudio Teehankee
while Chief Justice Felix Makasiar concurred
with the separate opinion of Justice Plana. 18 Art. 1157. Obligations arise from.

7 143 SCRA 158. (1) Law;

 (2) Contracts; the moment one of the parties fulfills
his obligation, delay by the other
(3) Quasi-contracts; begins."

(4) Acts or omissions punished by 24 Art. 2210. Interest may, in the discretion
law; and of the court, be allowed upon damages
awarded for breach of contract.
(5) Qausi-delicts."
Art. 2211. In crimes and quasi-delicts,
19 Art. 1170. Those who in the performance interest as a part of the damages may, in a
of their obligations are guilty of fraud, proper case, be adjudicated in the discretion
negligence, or delay, and those who in any of the court.
manner contravene the tenor thereof, are
liable for damages. 25 Art. 2209. If the obligation consists in the
payment of a sum of money, and the debtor
20 Art. 2195. The provisions of this Title (on incurs in delay, the indemnity for damages,
Damages) shall be respectively applicable to there being no stipulation to the contrary,
all obligations mentioned in article 1157. shall be the payment of the interest agreed
upon, and in the absence of stipulation, the
legal interest, which is six per cent per
21 Art. 1956. No interest shall be due unless annum.
it has been expressly stipulated in writing.
26 Art. 2213. Interest cannot be recovered
22 Art. 2212. Interest due shall earn legal upon unliquidated claims or damages, except
interest from the time it is judicially when the demand can be established with
demanded, although the obligation may be reasonable certainty.
silent upon this point.

23 Art. 1169. Those obliged to deliver or to

do something incur in delay from the time
the obligee judicially or extrajudicially
demands from them the fulfillment of their
obligation.

"However, the demand by the

creditor shall not be necessary in
order that delay may exist:

(1) When the obligation or the law

expressly so declare; or

(2) When from the nature and the

circumstances of the obligation it
appears that the designation of the
time when the thing is to be
delivered or the service is to be
rendered was a controlling motive
for the establishment of the
contract; or

(3) When demand would be useless,

as when the obligor has rendered it
beyond his power to perform.

"In reciprocal obligations, neither

party incurs in delay if the other
does not comply or is not ready to
comply in a proper manner with
what is incumbent upon him. From