56.) NACAR VS. GALLERY FRAMES AND BORDEY, JR.

Petitioner: Dario Nacar

Respondent: Gallery Frames and/or Felipe Bordey, Jr.
Facts:
Pet. Nacar filed a complaint for constructive dismissal before NLRC against Resp. Gallery. NLRC rendered
decision in favor of pet. and found that he was dismissed from employment without a valid or just cause. Thus, he
was awarded backwages and separation pay amounting to P 158,919.92. An Entry of Judgment was later issued
certifying that the resolution became final and executory on May 27, 2002. Petitioner filed a Manifestation and
Motion praying for the re-computation of the monetary award to include the appropriate interests. On May 10,
2005, the Labor Arbiter issued an Order granting the motion, but only up to the amount of P11,459.73. 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 P158,919.92 that should be executed. Thus, since petitioner already receivedP147,560.19, he is only entitled
to the balance of P11,459.73. 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.
Issue:
Whether petitioner is entitled payment of legal interest
Held:
Yes.
In Eastern Shipping Lines vs. CA:
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.
However, under BSP-MB Circular No. 799 which modified Eastern Shipping Lines vs CA ruling, 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 - 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.
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.

Decision of SC as to legal interest awarded to petitioner:

XXX
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.
57.) DE LA PAZ VS. L&J DEVELOPMENT
Petitioner: Rolando C. De la Paz
Respondent: L&J Development Company
Facts:
On December 27, 2000, Petitioner Rolando lent P350,000.00 without any security to Respondent L&J Dev. Corp.
with Atty. Salonga as its President and General Manager. The loan, with no specified maturity date, carried a 6%
monthly interest, i.e., P21,000.00. From December 2000 to August 2003, L&J paid Rolando a total of
P576,000.007 representing interest charges.
As L&J failed to pay despite repeated demands, Rolando filed a Complaint for Collection of Sum of Money with
Damages against L&J and Atty. Salonga alleging that L&Js debt as of January 2005, inclusive of the monthly
interest, stood at P772,000.00; that the 6% monthly interest was upon Atty. Salongas suggestion; and, that the
latter tricked him into parting with his money without the loan transaction being reduced into writing.
In their Answer, L&J and Atty. Salonga denied Rolandos allegations arguing that Rolando cannot enforce the 6%
monthly interest for being unconscionable and shocking to the morals. Hence, the payments already made
should be applied to the P350,000.00 principal loan.
Issue:
Whether charging monetary interest in the absence of a written stipulation to pay interest on the loaned amount is
proper
Held:
No.
Under Article 1956 of the Civil Code, no interest shall be due unless it has been expressly stipulated in writing.
Jurisprudence on the matter also holds that for interest to be due and payable, two conditions must concur: a)
express stipulation for the payment of interest; and b) the agreement to pay interest is reduced in writing. Here, it
is undisputed that the parties did not put down in writing their agreement. Thus, no interest is due. The collection
of interest without any stipulation in writing is prohibited by law.
Even if the payment of interest has been reduced in writing, a 6% monthly interest rate on a loan is
unconscionable, regardless of who between the parties proposed the rate. Indeed at present, usury has been
legally non-existent in view of the suspension of the Usury Law by Central Bank Circular No. 905 s. 1982. Even
so, not all interest rates levied upon loans are permitted by the courts as they have the power to equitably reduce
unreasonable interest rates.
In the case at bench, there is no specified period as to the payment of the loan. Hence, levying 6% monthly or
72% interest per annum is "definitely outrageous and inordinate." The situation that it was the debtor who insisted
on the interest rate will not exempt Rolando from a ruling that the rate is void. As this Court cited in Asian Cathay
Finance and Leasing Corporation v. Gravador, "[t]he imposition of an unconscionable rate of interest on a
money debt, even if knowingly and voluntarily assumed, is immoral and unjust. It is tantamount to a repugnant
spoliation and an iniquitous deprivation of property, repulsive to the common sense of man." Indeed,
"voluntariness does not make the stipulation on [an unconscionable] interest valid."
Pursuant to Central Bank Circular No. 799 s. 2013 which took effect on July 1, 2013,36 the interest imposed by
the CA must be accordingly modified. The P226,000.00 which Rolando is ordered to pay L&J shall earn an

interest of 6% per annum from the finality of this Decision.