G.R. No.

71017 July 28, 1986

PHILIPPINE RABBIT BUS LINES, INC., petitioner, 

vs.
HON. LEONARDO I. CRUZ, Presiding Judge, Branch LVI, RTC, Third Judicial Region
& PEDRO MANABAT, respondents.

RESOLUTION

NARVASA, J.:

In Civil Case No. 2244 of the Court of First Instance (now Regional Trial Court, Branch LVI) of
Angeles City, Pedro Manabat, (the private respondent) obtained judgment against Philippine
Rabbit Bus Lines, Inc. (petitioner) the dispositive portion of which reads:

WHEREFORE, in view of the above findings, this Court renders judgment in

favor of the plaintiff Pedro Manabat, and against the defendant, the Philippine
Rabbit Bus Lines, Incorporated, sentencing the latter to pay the former, Pedro
Manabat as actual and compensatory damages the amount of P72,500 with legal
interest thereon from the filing of the complaint until fully paid, and the costs of
this suit. 1

The judgment having become final and executory following its affirmance by the Intermediate
Appellate Court, Manabat sought its execution and, at his instance, the deputy sheriff of Angeles
City garnished funds of Philippine Rabbit on deposit with Manila Bank in said City to the extent
of P155,150.00. This amount was released by the Bank's manager by means of a check drawn in
favor of the sheriff and was thereafter paid to the private respondent. 2 The amount of
P155,150.00 included interest at the rate of twelve (12%) percent per annum on the award of
P72,500.00 computed from the date of the filing of the complaint, as prescribed in the judgment.

Philippine Rabbit moved to dissolve the garnishment, asserting that while it was willing to pay
the award, the interest chargeable should be only six (6%) percent, not twelve (12%) percent, per
annum and upon being rebuffed, has come to this Court for relief.

The issue raised:

Whether or not Circular No. 416 of the Central Bank of the Philippines, issued
pursuant to authority granted under Act No. 2655, as amended (The Usury Law),
and prescribing that:

... 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 be twelve (12 %) percent per annum

is applicable to judgments that do not involve loans or forbearances of money,

etc.,
is not one of first impression.

In Reformina vs. Tomol, Jr. 3 decided October 11, 1985, essentially the same factual premises
obtained, the only difference being that in said case, which concerned also a judgment awarding
damages for loss or injury to person or property, the interest appeared to have been computed at
six (6%) percent, and it was the judgment creditors who came to this Court on their contention
that the rate should be twelve (12%) percent instead. The Court en banc unanimously rejected
that contention, the majority opinion holding, inter alia, that:

Central Bank Circular No. 416 which took effect on July 29, 1974 was issued and
promulgated by the Monetary Board pursuant to the authority granted to the
Central Bank by P.D. No. 116, which amended Act No. 2655, otherwise known as
the Usury Law. The amendment from said authority emanates reads as follows-

Section 1-a. The Monetary Board is hereby authorized to prescribe the maximum
rate or rates of interest for the loan or renewal thereof or the forbearance of any
money, goods or credit, and to change such rate or rates whenever warranted by
prevailing economic and social conditions. Provided, That such changes shall not
be made oftener than once every twelve months.

In the exercise of the authority herein granted, the Monetary Board may prescribe
higher maximum rates for consumer loans or renewals thereof as well as such
loans made by pawnshops, finance companies and other similar credit institutions
although the rates prescribed for these institutions need not necessarily be
uniform.' (Emphasis supplied)

Acting pursuant to this grant of authority, the Monetary Board increased the rate
of legal interest from that of the six (6%) percent per annum originally allowed
under Section 1 of Act No. 2655 to twelve (12%) percent per annum.

It will be noted that Act No. 2655 deals with interest on (1) loans: (2)
forbearances of any money, goods, or credits, and (3) rate allowed in judgments.
The issue now is what-kind of judgment is referred to under the said law.
Petitioners maintain that it covers all kinds of monetary judgment.

The contention is devoid of merit.

The judgments spoken of and referred to are judgments in litigations involving

loans or forbearance of any money, goods or credits. Any other kind of monetary
judgment which has nothing to do with, nor involving loans or forbearance of any
money, goods or credits does not fall within the coverage of the said law for it is
not within the ambit of the authority granted to the Central Bank. The Monetary
Board may not tread on forbidden grounds. It cannot rewrite other laws. That
function is vested solely with the legislative authority. It is axiomatic in legal
hermeneutics that statutes should be construed as a whole and not as a series of
disconnected articles and phrases. In the absence of a clear contrary intention,
 words and phrases in statutes should not be interpreted in isolation from one
another. A word or phrase in a statute is always used in association with other
words or phrases and its meaning may thus be modified or restricted by the latter.

xxx xxx xxx

Coming to the case at bar, the decision herein sought to be executed is one
rendered in an Action for Damages for injury to persons and loss of property and
does not involve any loan, much less forbearances of any money, goods or credits.
As correctly argued by private respondents, the law applicable to the said case is
Article 2209 of the New Civil Code which reads—

Art. 2209.— If the obligation consists in the payment of a sum of money, and the
debtor incurs in delay, the indemnify for damages, there being no stipulation to
the contrary, shall be the payment of interest agreed upon, and in the absence of
stipulation, the legal interest which is six percent per annum.

The above provisions remains untouched despite the grant of authority to the
Central Bank by Act No. 2655, as amended. To make Central Bank Circular No.
416 applicable to any case other than those specifically provided for by the Usury
Law well make the same of doubtful constitutionality since the Monetary Board
will be exercising legislative functions which was beyond the intendment of P.D.
No. 116.

There is no reason to depart or deviate from that ruling here. It seems quite clear that Section 1-a
of Act No. 2655, as amended-which, as distinguished from sec.1 of the same law, appears to be
the actual and operative grant of authority to the Monetary Board of the Central Bank to
prescribe maximum rates of interest where the parties have not stipulated thereon in excluding
mention of rates allowed in judgments, should, at the least, be construed as limiting the authority
thus granted only to loans or forbearances of money, etc., and to judgments involving such loans
or forbearances.

WHEREFORE, the petition is granted. It being obvious, as pointed out by the petitioner, 4 that of
the amount of P155,150.00 garnished and turned over to the private respondent, the sum of P
82,650.00 represents interest computed at the rate of twelve (12%) percent per annum, one-half
of the last-stated sum, or P41,325.00, represents interest in excess of the applicable rate of six
(6%) percent per annum, the order of the respondent Court complained of is vacated and set
aside, and the private respondent is ordered to refund to petitioner said excess of P41,325.00. No
pronouncement as to costs in this instance.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 97412 July 12, 1994

EASTERN SHIPPING LINES, INC., petitioner, 

vs.
HON. COURT OF APPEALS AND MERCANTILE INSURANCE COMPANY,
INC., respondents.

Alojada & Garcia and Jimenea, Dala & Zaragoza for petitoner.

Zapa Law Office for private respondent.

VITUG, J.:

The issues, albeit not completely novel, are: (a) whether or not a claim for damage sustained on
a shipment of goods can be a solidary, or joint and several, liability of the common carrier, the
arrastre operator and the customs broker; (b) whether the payment of legal interest on an award
for loss or damage is to be computed from the time the complaint is filed or from the date the
decision appealed from is rendered; and (c) whether the applicable rate of interest, referred to
above, is twelve percent (12%) or six percent (6%).

The findings of the court a quo, adopted by the Court of Appeals, on the antecedent and
undisputed facts that have led to the controversy are hereunder reproduced:

This is an action against defendants shipping company, arrastre operator and

broker-forwarder for damages sustained by a shipment while in defendants'
custody, filed by the insurer-subrogee who paid the consignee the value of such
losses/damages.

On December 4, 1981, two fiber drums of riboflavin were shipped from

Yokohama, Japan for delivery vessel "SS EASTERN COMET" owned by
defendant Eastern Shipping Lines under Bill of Lading 
No. YMA-8 (Exh. B). The shipment was insured under plaintiff's Marine
Insurance Policy No. 81/01177 for P36,382,466.38.
 Upon arrival of the shipment in Manila on December 12, 1981, it was discharged
unto the custody of defendant Metro Port Service, Inc. The latter excepted to one
drum, said to be in bad order, which damage was unknown to plaintiff.

On January 7, 1982 defendant Allied 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).

On January 8 and 14, 1982, defendant Allied Brokerage Corporation made

deliveries of the shipment to the consignee's warehouse. The latter excepted to
one drum which contained spillages, while the rest of the contents was
adulterated/fake (per "Bad Order Waybill" No. 10649, Exh. E).

Plaintiff contended that due to the 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 defendants who failed and refused to
pay the same (Exhs. H, I, J, K, L).

As a consequence of the losses sustained, plaintiff was compelled to pay the

consignee P19,032.95 under the aforestated marine insurance policy, so that it
became subrogated to all the rights of action of said consignee against defendants
(per "Form of Subrogation", "Release" and Philbanking check, Exhs. M, N, and
O). (pp. 85-86, Rollo.)

There were, to be sure, other factual issues that confronted both courts. Here, the appellate court
said:

Defendants filed their respective answers, traversing the material allegations of

the complaint contending that: As for defendant Eastern Shipping it alleged that
the shipment was discharged in good order from the vessel unto the custody of
Metro Port Service so that any damage/losses incurred after the shipment was
incurred after the shipment was turned over to the latter, is no longer its liability
(p. 17, Record); Metroport averred that although subject shipment was discharged
unto its custody, portion of the same was already in bad order (p. 11, Record);
Allied Brokerage alleged that plaintiff has no cause of action against it, not having
negligent or at fault for the shipment was already in damage and bad order
condition when received by it, but nonetheless, it still exercised extra ordinary
care and diligence in the handling/delivery of the cargo to consignee in the same
condition shipment was received by it.

From the evidence the court found the following:

The issues are:

1. Whether or not the shipment sustained losses/damages;

 2. Whether or not these losses/damages were sustained while in the
custody of defendants (in whose respective custody, if
determinable);

3. Whether or not defendant(s) should be held liable for the

losses/damages (see plaintiff's pre-Trial Brief, Records, p. 34;
Allied's pre-Trial Brief, adopting plaintiff's Records, p. 38).

As to the first issue, there can be no doubt that the shipment

sustained losses/damages. The two drums were shipped in good
order and condition, as clearly shown by the Bill of Lading and
Commercial Invoice which do not indicate any damages drum that
was shipped (Exhs. B and C). But when on December 12, 1981 the
shipment was delivered to defendant Metro Port Service, Inc., it
excepted to one drum in bad order.

Correspondingly, as to the second issue, it follows that the

losses/damages were sustained while in the respective and/or
successive custody and possession of defendants carrier (Eastern),
arrastre operator (Metro Port) and broker (Allied Brokerage). This
becomes evident when the Marine Cargo Survey Report (Exh. G),
with its "Additional Survey Notes", are considered. In the latter
notes, it is stated that when the shipment was "landed on vessel" to
dock of Pier # 15, South Harbor, Manila on December 12, 1981, it
was observed that "one (1) fiber drum (was) in damaged condition,
covered by the vessel's Agent's Bad Order Tally Sheet No. 86427."
The report further states that when defendant Allied Brokerage
withdrew the shipment from defendant arrastre operator's custody
on January 7, 1982, one drum was found opened without seal, cello
bag partly torn but contents intact. Net unrecovered spillages was 
15 kgs. The report went on to state that when the drums reached
the consignee, one drum was found with adulterated/faked
contents. It is obvious, therefore, that these losses/damages
occurred before the shipment reached the consignee while under
the successive custodies of defendants. Under Art. 1737 of the
New Civil Code, the common carrier's duty to observe
extraordinary diligence in the vigilance of goods remains in full
force and effect even if the goods are temporarily unloaded and
stored in transit in the warehouse of the carrier at the place of
destination, until the consignee has been advised and has had
reasonable opportunity to remove or dispose of the goods (Art.
1738, NCC). Defendant Eastern Shipping's own exhibit, the "Turn-
Over Survey of Bad Order Cargoes" (Exhs. 3-Eastern) states that
on December 12, 1981 one drum was found "open".

and thus held:

 WHEREFORE, PREMISES CONSIDERED, judgment is hereby
rendered:

A. Ordering defendants to pay plaintiff, jointly and severally:

1. The amount of P19,032.95, with the present legal interest of

12%  per annum from October 1, 1982, the date of filing of this
complaints, until fully paid (the liability of defendant Eastern
Shipping, Inc. shall not exceed US$500 per case or the CIF value
of the loss, whichever is lesser, while the liability of defendant
Metro Port Service, Inc. shall be to the extent of the actual invoice
value of each package, crate box or container in no case to exceed
P5,000.00 each, pursuant to Section 6.01 of the Management
Contract);

2. P3,000.00 as attorney's fees, and

3. Costs.

B. Dismissing the counterclaims and crossclaim of

defendant/cross-claimant Allied Brokerage
Corporation.

SO ORDERED. (p. 207, Record).

Dissatisfied, defendant's recourse to US.

The appeal is devoid of merit.

After a careful scrutiny of the evidence on record. We find that the conclusion
drawn therefrom is correct. As there is sufficient evidence that the shipment
sustained damage while in the successive possession of appellants, and therefore
they are liable to the appellee, as subrogee for the amount it paid to the consignee.
(pp. 87-89, Rollo.)

The Court of Appeals thus affirmed in toto the judgment of the court 

a quo.

In this petition, Eastern Shipping Lines, Inc., the common carrier, attributes error and grave
abuse of discretion on the part of the appellate court when —

I. IT HELD PETITIONER CARRIER JOINTLY AND SEVERALLY LIABLE

WITH THE ARRASTRE OPERATOR AND CUSTOMS BROKER FOR THE
CLAIM OF PRIVATE RESPONDENT AS GRANTED IN THE QUESTIONED
DECISION;
 II. IT HELD THAT THE GRANT OF INTEREST ON THE CLAIM OF
PRIVATE RESPONDENT SHOULD COMMENCE FROM THE DATE OF
THE FILING OF THE COMPLAINT AT THE RATE OF TWELVE
PERCENT PER ANNUM INSTEAD OF FROM THE DATE OF THE
DECISION OF THE TRIAL COURT AND ONLY AT THE RATE OF SIX
PERCENT PER ANNUM, PRIVATE RESPONDENT'S CLAIM BEING
INDISPUTABLY UNLIQUIDATED.

The petition is, in part, granted.

In this decision, we have begun by saying that the questions raised by petitioner carrier are not
all that novel. Indeed, we do have a fairly good number of previous decisions this Court can
merely tack to.

The common carrier's duty to observe the requisite diligence in the shipment of goods lasts from
the time the articles are surrendered to or unconditionally placed in the possession of, and
received by, the carrier for transportation until delivered to, or until the lapse of a reasonable
time for their acceptance by, the person entitled to receive them (Arts. 1736-1738, Civil Code;
Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai vs. Dollar Steamship Lines, 52 Phil. 863).
When the goods shipped either are lost or arrive in damaged condition, a presumption arises
against the carrier of its failure to observe that diligence, and there need not be an express finding
of negligence to hold it liable (Art. 1735, Civil Code; Philippine National Railways vs. Court of
Appeals, 139 SCRA 87; Metro Port Service vs. Court of Appeals, 131 SCRA 365). There are, of
course, exceptional cases when such presumption of fault is not observed but these cases,
enumerated in Article 1734 1 of the Civil Code, are exclusive, not one of which can be applied to
this case.

The question of charging both the carrier and the arrastre operator with the obligation of properly
delivering the goods to the consignee has, too, been passed upon by the Court. In Fireman's
Fund Insurance vs. Metro Port Services (182 SCRA 455), we have explained, in holding the
carrier and the arrastre operator liable in solidum, thus:

The legal relationship between the consignee and the arrastre operator is akin to
that of a depositor and warehouseman (Lua Kian v. Manila Railroad Co., 19
SCRA 5 [1967]. The relationship between the consignee and the common carrier
is similar to that of the consignee and the arrastre operator (Northern Motors, Inc.
v. Prince Line, et al., 107 Phil. 253 [1960]). Since it is the duty of the
ARRASTRE to take good care of the goods that are in its custody and to deliver
them in good condition to the consignee, such responsibility also devolves upon
the CARRIER. Both the ARRASTRE and the CARRIER are therefore charged
with the obligation to deliver the goods in good condition to the consignee.

We do not, of course, imply by the above pronouncement that the arrastre operator and the
customs broker are themselves always and necessarily liable solidarily with the carrier, or vice-
versa, nor that attendant facts in a given case may not vary the rule. The instant petition has been
brought solely by Eastern Shipping Lines, which, being the carrier and not having been able to
rebut the presumption of fault, is, in any event, to be held liable in this particular case. A factual
finding of both the court a quo and the appellate court, we take note, is that "there is sufficient
evidence that the shipment sustained damage while in the successive possession of appellants"
(the herein petitioner among them). Accordingly, the liability imposed on Eastern Shipping
Lines, Inc., the sole petitioner in this case, is inevitable regardless of whether there are others
solidarily liable with it.

It is over the issue of legal interest adjudged by the appellate court that deserves more than just a
passing remark.

Let us first see a chronological recitation of the major rulings of this Court:

The early case of Malayan Insurance Co., Inc., vs.  Manila Port 
Service, 2 decided 3 on 15 May 1969, involved a suit for recovery of money arising out of short
deliveries and pilferage of goods. In this case, appellee Malayan Insurance (the plaintiff in the
lower court) averred in its complaint that the total amount of its claim for the value of the
undelivered goods amounted to P3,947.20. This demand, however, was neither established in its
totality nor definitely ascertained. In the stipulation of facts later entered into by the parties, in
lieu of proof, the amount of P1,447.51 was agreed upon. The trial court rendered judgment
ordering the appellants (defendants) Manila Port Service and Manila Railroad Company to pay
appellee Malayan Insurance the sum of P1,447.51 with legal interest thereon from the date the
complaint was filed on 28 December 1962 until full payment thereof. The appellants then
assailed, inter alia, the award of legal interest. In sustaining the appellants, this Court ruled:

Interest upon an obligation which calls for the payment of money, absent a
stipulation, is the legal rate. Such interest normally is allowable from the date of
demand, judicial or extrajudicial. The trial court opted for judicial demand as the
starting point.

But then upon the provisions of Article 2213 of the Civil Code, interest "cannot
be recovered upon unliquidated claims or damages, except when the demand can
be established with reasonable certainty." And as was held by this Court in Rivera
vs.  Perez, 4 L-6998, February 29, 1956, if the suit were for
damages, "unliquidated and not known until definitely ascertained, assessed and
determined by the courts after proof (Montilla c. Corporacion de P.P. Agustinos,
25 Phil.  447; Lichauco v. Guzman, 
38 Phil.  302)," then, interest "should be from the date of the decision." (Emphasis
supplied)

The case of Reformina vs. Tomol, 5 rendered on 11 October 1985, was for "Recovery of Damages
for Injury to Person and Loss of Property." After trial, the lower court decreed:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and third

party defendants and against the defendants and third party plaintiffs as follows:
 Ordering defendants and third party plaintiffs Shell and Michael, Incorporated to
pay jointly and severally the following persons:

xxx xxx xxx

(g) Plaintiffs Pacita F. Reformina and Francisco Reformina the sum of

P131,084.00 which is the value of the boat F B Pacita III together with its
accessories, fishing gear and equipment minus P80,000.00 which is the value of
the insurance recovered and the amount of P10,000.00 a month as the estimated
monthly loss suffered by them as a result of the fire of May 6, 1969 up to the time
they are actually paid or already the total sum of P370,000.00 as of June 4, 1972
with legal interest from the filing of the complaint until paid and to pay attorney's
fees of P5,000.00 with costs against defendants and third party plaintiffs.
(Emphasis supplied.)

On appeal to the Court of Appeals, the latter modified the amount of damages awarded
but sustained the trial court in adjudging legal interest from the filing of the complaint
until fully paid. When the appellate court's decision became final, the case was remanded
to the lower court for execution, and this was when the trial court issued its assailed
resolution which applied the 6% interest per annum prescribed in Article 2209 of the
Civil Code. In their petition for review on certiorari, the petitioners contended that
Central Bank Circular 
No. 416, providing thus —

By virtue of the authority granted to it under Section 1 of Act 2655, as amended,

Monetary Board in its Resolution No. 1622 dated July 29, 1974, has prescribed
that 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 be twelve (12%) percent per annum. This Circular shall
take effect immediately. (Emphasis found in the text) —

should have, instead, been applied. This Court 6 ruled:

The judgments spoken of and referred to are judgments in litigations involving

loans or forbearance of any money, goods or credits. Any other kind of monetary
judgment which has nothing to do with, nor involving loans or forbearance of any
money, goods or credits does not fall within the coverage of the said law for it is
not within the ambit of the authority granted to the Central Bank.

xxx xxx xxx

Coming to the case at bar, the decision herein sought to be executed is one
rendered in an Action for Damages for injury to persons and loss of property and
does not involve any loan, much less forbearances of any money, goods or credits.
As correctly argued by the private respondents, the law applicable to the said case
is Article 2209 of the New Civil Code which reads —
 Art. 2209. — If the obligation consists in the payment of a sum of
money, and the debtor incurs in delay, the indemnity for damages,
there being no stipulation to the contrary, shall be the payment of
interest agreed upon, and in the absence of stipulation, the legal
interest which is six percent per annum.

The above rule was reiterated in Philippine Rabbit Bus Lines, Inc., v. Cruz, 7 promulgated on 28
July 1986. The case was for damages occasioned by an injury to person and loss of property. The
trial court awarded private respondent Pedro Manabat actual and compensatory damages in the
amount of P72,500.00 with legal interest thereon from the filing of the complaint until fully paid.
Relying on the Reformina v. Tomol case, this Court 8 modified the interest award from 12% to
6% interest per annum but sustained the time computation thereof, i.e., from the filing of the
complaint until fully paid.

In Nakpil and Sons vs. Court of Appeals, 9 the trial court, in an action for the recovery of
damages arising from the collapse of a building, ordered, 
inter alia, the "defendant United Construction Co., Inc. (one of the petitioners) 
. . . to pay the plaintiff, . . . , the sum of P989,335.68 with interest at the legal rate from
November 29, 1968, the date of the filing of the complaint until full payment . . . ." Save from the
modification of the amount granted by the lower court, the Court of Appeals sustained the trial
court's decision. When taken to this Court for review, the case, on 03 October 1986, was decided,
thus:

WHEREFORE, the decision appealed from is hereby MODIFIED and

considering the special and environmental circumstances of this case, we deem it
reasonable to render a decision imposing, as We do hereby impose, upon the
defendant and the third-party defendants (with the exception of Roman Ozaeta) a
solidary (Art. 1723, Civil Code, Supra. 
p. 10) indemnity in favor of the Philippine Bar Association of FIVE MILLION
(P5,000,000.00) Pesos to cover all damages (with the exception to attorney's fees)
occasioned by the loss of the building (including interest charges and lost rentals)
and an additional ONE HUNDRED THOUSAND (P100,000.00) Pesos as and for
attorney's fees, the total sum being payable upon the finality of this
decision. Upon failure to pay on such finality, twelve (12%) per cent interest per
annum shall be imposed upon aforementioned amounts from finality until paid.
Solidary costs against the defendant and third-party defendants (Except Roman
Ozaeta). (Emphasis supplied)

A motion for reconsideration was filed by United Construction, contending that "the
interest of twelve (12%) per cent per annum imposed on the total amount of the
monetary award was in contravention of law." The Court 10 ruled out the applicability of
the Reformina and Philippine Rabbit Bus Lines cases and, in its resolution of 15 April
1988, it explained:

There should be no dispute that the imposition of 12% interest pursuant to Central
Bank Circular No. 416 . . . is applicable only in the following: (1) loans; (2)
 forbearance of any money, goods or credit; and 
(3) rate allowed in judgments (judgments spoken of refer to judgments involving
loans or forbearance of any money, goods or credits. (Philippine Rabbit Bus Lines
Inc. v. Cruz, 143 SCRA 160-161 [1986]; Reformina v. Tomol, Jr., 139 SCRA 260
[1985]). It is true that in the instant case, there is neither a loan or a forbearance,
but then no interest is actually imposed provided the sums referred to in the
judgment are paid upon the finality of the judgment.  It is delay in the payment of
such final judgment, that will cause the imposition of the interest.

It will be noted that in the cases already adverted to, the rate of interest is imposed
on the total sum, from the filing of the complaint until paid; in other words,
as  part of the judgment for damages. Clearly, they are not applicable to the instant
case. (Emphasis supplied.)

The subsequent case of American Express International, Inc., vs. Intermediate Appellate

Court 11 was a petition for review on certiorari from the decision, dated 27 February 1985, of the
then Intermediate Appellate Court reducing the amount of moral and exemplary damages
awarded by the trial court, to P240,000.00 and P100,000.00, respectively, and its resolution,
dated 29 April 1985, restoring the amount of damages awarded by the trial court, i.e.,
P2,000,000.00 as moral damages and P400,000.00 as exemplary damages with interest thereon
at 12% per annum from notice of judgment, plus costs of suit. In a decision of 09 November
1988, this Court, while recognizing the right of the private respondent to recover damages, held
the award, however, for moral damages by the trial court, later sustained by the IAC, to be
inconceivably large. The Court 12 thus set aside the decision of the appellate court and rendered a
new one, "ordering the petitioner to pay private respondent the sum of One Hundred Thousand
(P100,000.00) Pesos as moral damages, with 
six (6%) percent interest thereon computed from the finality of this decision until paid.
(Emphasis supplied)

Reformina came into fore again in the 21 February 1989 case of Florendo v. Ruiz 13 which arose
from a breach of employment contract. For having been illegally dismissed, the petitioner was
awarded by the trial court moral and exemplary damages without, however, providing any legal
interest thereon. When the decision was appealed to the Court of Appeals, the latter held:

WHEREFORE, except as modified hereinabove the decision of the CFI of Negros

Oriental dated October 31, 1972 is affirmed in all respects, with the modification
that defendants-appellants, except defendant-appellant Merton Munn, are ordered
to pay, jointly and severally, the amounts stated in the dispositive portion of the
decision, including the sum of P1,400.00 in concept of compensatory damages,
with interest at the legal rate from the date of the filing of the complaint until
fully paid (Emphasis supplied.)

The petition for review to this Court was denied. The records were thereupon transmitted
to the trial court, and an entry of judgment was made. The writ of execution issued by the
trial court directed that only compensatory damages should earn interest at 6% per
annum from the date of the filing of the complaint. Ascribing grave abuse of discretion
 on the part of the trial judge, a petition for certiorari assailed the said order. This Court
said:

. . . , it is to be noted that the Court of Appeals ordered the payment of interest "at
the legal rate" from the time of the filing of the complaint. . . Said circular [Central
Bank Circular No. 416] does not apply to actions based on a breach of
employment contract like the case at bar. (Emphasis supplied)

The Court reiterated that the 6% interest per annum on the damages should be computed
from the time the complaint was filed until the amount is fully paid.

Quite recently, the Court had another occasion to rule on the matter. National Power
Corporation vs.  Angas, 14decided on 08 May 1992, involved the expropriation of certain parcels
of land. After conducting a hearing on the complaints for eminent domain, the trial court ordered
the petitioner to pay the private respondents certain sums of money as just compensation for their
lands so expropriated "with legal interest thereon . . . until fully paid." Again, in applying the 6%
legal interest per annum under the Civil Code, the Court 15 declared:

. . . , (T)he transaction involved is clearly not a loan or forbearance of money,

goods or credits but expropriation of certain parcels of land for a public purpose,
the payment of which is without stipulation regarding interest, and the interest
adjudged by the trial court is in the nature of indemnity for damages. The legal
interest required to be paid on the amount of just compensation for the properties
expropriated is manifestly in the form of indemnity for damages for the delay in
the payment thereof. Therefore, since the kind of interest involved in the joint
judgment of the lower court sought to be enforced in this case is interest by way
of damages, and not by way of earnings from loans, etc. Art. 2209 of the Civil
Code shall apply.

Concededly, there have been seeming variances in the above holdings. The cases can perhaps be
classified into two groups according to the similarity of the issues involved and the
corresponding rulings rendered by the court. The "first group" would consist of the cases
of Reformina v.  Tomol (1985), Philippine Rabbit Bus Lines v. Cruz (1986), Florendo
v. Ruiz (1989) 
and National Power Corporation v.  Angas (1992). In the "second group" would be Malayan
Insurance Company v. Manila Port Service (1969), Nakpil and Sons v. Court of
Appeals (1988), and American Express International v.  Intermediate Appellate Court (1988).

In the "first group", the basic issue focuses on the application of either the 6% (under the Civil
Code) or 12% (under the Central Bank Circular) interest per annum. It is easily discernible in
these cases that there has been a consistent holding that the Central Bank Circular imposing the
12% interest per annum applies only to loans or forbearance 16 of money, goods or credits, as
well as to judgments involving such loan or forbearance of money, goods or credits, and that the
6% interest under the Civil Code governs when the transaction involves the payment of
indemnities in the concept of damage arising from the breach or a delay in the performance of
obligations in general. Observe, too, that in these cases, a common time frame in the
computation of the 6% interest per annum has been applied, i.e., from the time the complaint is
filed until the adjudged amount is fully paid.

The "second group", did not alter the pronounced rule on the application of the 6% or 12%
interest per annum, 17depending on whether or not the amount involved is a loan or forbearance,
on the one hand, or one of indemnity for damage, on the other hand. Unlike, however, the "first
group" which remained consistent in holding that the running of the legal interest should be from
the time of the filing of the complaint until fully paid, the "second group" varied on the
commencement of the running of the legal interest.

Malayan held that the amount awarded should bear legal interest from the date of the decision of
the court a quo, explaining that "if the suit were for damages, 'unliquidated and not known until
definitely ascertained, assessed and determined by the courts after proof,' then, interest 'should be
from the date of the decision.'" American Express International v. IAC, introduced a different
time frame for reckoning the 6% interest by ordering it to be "computed from the finality of (the)
decision until paid." The Nakpil and Sons case ruled that 12% interest  per annum should be
imposed from the finality of the decision until the judgment amount is paid.

The ostensible discord is not difficult to explain. The factual circumstances may have called for
different applications, guided by the rule that the courts are vested with discretion, depending on
the equities of each case, on the award of interest. Nonetheless, it may not be unwise, by way of
clarification and reconciliation, to suggest the following rules of thumb for future guidance.

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or

quasi-delicts 18 is breached, the contravenor can be held liable for damages. 19 The provisions
under Title XVIII on "Damages" of the Civil Code govern in determining the measure of
recoverable damages. 20

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. 21 Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. 22 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 23 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 24 at the rate of
6%  per annum. 25 No interest, however, shall be adjudged on unliquidated claims or damages
except when or until the demand can be established with reasonable certainty. 26 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.

WHEREFORE, the petition is partly GRANTED. The appealed decision is AFFIRMED with the
MODIFICATION that the legal interest to be paid is SIX PERCENT (6%) on the amount due
computed from the decision, dated 
03 February 1988, of the court a quo. A TWELVE PERCENT (12%) interest, in lieu of SIX
PERCENT (6%), shall be imposed on such amount upon finality of this decision until the
payment thereof.

SO ORDERED.

Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero,
Bellosillo, Melo, Quiason, Puno and Kapunan, JJ., concur.

Mendoza, J., took no part.