Two employees filed a complaint for “illegal suspension, non-payment of salaries, deprivation of medical benefits, life insurance and other benefits, damages and attorney’s fees” against their employer.
In a Decision dated 26 February 2008, the Office of the Labor Arbiter declared that the employees’ suspension was illegal and ordered the employer to pay the salaries and benefits withheld during the suspension, as well as 10% of the amount for attorney’s fees.
It appeared that the employer had sought recourse against the said decision by elevating the case to the National Labor Relations Commission, the Court of Appeals, and the Supreme Court. Worthy of note was the fact that the Court of Appeals rendered a Decision on 4 May 2010, which then became final and executory by way of a Decision rendered by the Supreme Court on 25 July 2011.
The employees filed a Motion for Issuance of Writ of Execution and a Motion for Re-computation of Monetary Award before the National Labor Relations Commission. The employer, in turn, filed a Manifestation stating that it had already computed the employees’ monetary award and tendered payment based on said computation on 17 April 2013.
Through an Order dated 29 November 2013, the Office of the Labor Arbiter ordered the employer to pay an amount pertaining to recomputed salaries, benefits, court order indemnification, legal interest [of 6% per annum counted from the date of their illegal suspension until the finality of the Decision of the Court of Appeals dated 4 May 2010], and attorney’s fees.
Both parties elevated the case to the National Labor Relations Commission, which found that there was basis to impose legal interest at the rate of 12% per annum on the monetary award counted from the date of finality of the Court of Appeals Decision dated 4 May 2010.
The employer filed a petition to assail the ruling of the National Labor Relations Commission. However, the Court of Appeals, in its Decision dated 13 January 2015, ruled that the employees were entitled to legal interest at the rate of 6% per annum from the time its Decision dated 4 May 2010 became final until full satisfaction thereof.
In its petition before the Supreme Court, the employer claimed that the employees were not entitled to legal interest, since it had already tendered payment and the employees contributed to the delay in the satisfaction of the Decision of the Court of Appeals dated 4 May 2010. According to the employer, to adjudge it liable for legal interest when the employees themselves partly caused the delay in the satisfaction of the said Court of Appeals Decision was unjust and unconscionable.
The employer added that assuming that it would be found liable for legal interest, it prayed that legal interest be collected only from the time of the finality of the Supreme Court’s Decision on 25 July 2011, which affirmed the Decision of the Court of Appeals dated 4 May 2010, until said employer’s tender of payment on 17 April 2013.
The Supreme Court did not accept the employer’s arguments.
The Court ruled that the legal interest imposed upon the employer was but a consequence of its participation in prolonging the proceedings in the present case.
According to the Court, that the amount respondents shall now pay had greatly increased was a consequence that it could not avoid, as it was the risk that it ran when it continued to seek recourses against the Office of the Labor Arbiter’s decision.
With regard to the proper rate of legal interest, the Court reiterated the guidelines it set forth in Nacar v. Gallery Frames.1G.R. No. 189871, August 13, 2013, 716 PHIL 267-283. Thus:
The Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its Resolution No. 796 dated 16 May 2013, approved the amendment of Section 2 of Circular No. 905, Series of 1982 and, accordingly, issued Circular No. 799, Series of 2013, effective 1 July 2013. x x x
[I]n 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 (G.R. No. 97412, July 12, 1994, 234 SCRA 78) 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 1 July 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 30 June 2013. Come 1 July 2013 the new rate of six percent (6%) per annum shall be the prevailing rate of interest when applicable.” x x x
To recapitulate and for future guidance, the guidelines laid down in the case of Eastern Shipping Lines are accordingly modified to embody BSP-MB Circular No. 799, as follows:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on “Damages” of the Civil Code govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.
And, in addition to the above, judgments that have become final and executory prior to 1 July 2013, shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein.
The Court added that prior to Nacar and Bangko Sentral ng Pilipinas Monetary Board Resolution No. 796 dated 16 May 2013, the rate of legal interest was pegged at 12% per annum from finality of judgment until its satisfaction, “this interim period being deemed to be by then an equivalent to a forbearance of credit.”
The Court in Nacar imposed the legal interest of
- 12% per annum of the total monetary awards, computed from finality of its own resolution therein until 30 June 2013; and
- 6% per annum from 1 July 2013 until their full satisfaction.
In the present case, the Court stated that on 25 July 2011, the Decision of the Court of Appeals dated 4 May 2010 became final and executory and was recorded in the Book of Entries of Judgments.
Consistent with Nacar, the Court accordingly ruled that the employees in the present case were entitled to legal interest at the following rates:
- 12% per annum computed from 25 July 2011, the date of the finality of the Decision of the Court of Appeals dated 4 May 2010 up to 30 June 2013; and
- 6% per annum from 1 July 2013 until full satisfaction of the award.
Further reading:
- Limlingan v. Asian Institute of Management, Inc., G.R. Nos. 220481 & 220503, February 17, 2016.
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