Legal Rate of Interest

Cases: Reformina vs. Tomol Oct. 11, 1985

Eastern Shipping Lines vs. CA

July 12, 1994
Martinez, Kristine Joan

Outline
Background
Reformina vs. Tomol Eastern Shipping vs. CA

Learnings and Rules Cited from Cases Summary

Reformina vs. Tomol

Factual Background
1. Boat owned by Reforminas caught fire on May 6, 1969. 2. Brought action for Recovery of Damages for injury to Person and Loss of Property against Shell and Michael Incorporated who were ordered to pay: 1. P131,084.00 (value of boat, fishing gear and equipment) P80K (Insured amount) 2. P10k/month from date of fire until actually paid OR P370,000 as of June 4, 1972 with legal interest from the filing of the complaint until fully paid 3. Attys fees of P5,000

Reformina vs. Tomol

On Appeal
1. CA Modified and directed to pay 1. P100,000 with legal interest from the filing of the complaint until paid as compensatory and moral damages 2. P41,000 compensation for value of the lost boat with legal interest from the filing of the complaint until fully paid to Pacita F. Reformina and heirs of Francisco Reformina. 2. Upon finality on Oct. 24, 1980, case remanded back to lower court for execution where dispute on rate of legal interest started.

Reformina vs. Tomol

Issue

How much by way of legal interest, should a judgment debtor pay the judgment creditor?

Reformina vs. Tomol

Issue
Petitioners: Legal Interest should be at the rate of 12% per annum.
Cited: CB 416 xxx By virtue of authority granted it under S1 of Act 2655, as amended, xxx has prescribed that the rate of interest for 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 12% per annum. Xxx

Respondents: Legal Interest should be at the rate of 6% per annum.

Cited: New Civil Code 2209, 2210, 2211
Art. 2210. Interest may, in the discretion of the court, be allowed upon damages awarded for breach of contract.

Art. 2211. In crimes and quasi-delicts, interest as a part of the damages may, in a proper case, be adjudicated in the discretion of the court.
25 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 the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum.

Reformina vs. Tomol

Petitioners: CB 416
In support of their stand, petitioners contend that Central Bank Circular No. 416 which provides By virtue of the authority granted to it under Section 1 of Act 2655, as amended, otherwise known as the "Usury Law" the 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%) per cent per annum. This Circular shall take effect immediately. (Italics supplied) includes the judgment sought to be executed in this case, because it is covered by the phrase 2nd the rate allowed in judgments in the absence of express contract as to such rate of interest ... " in the aforequoted circular.

Act No. 2655

Amended by CB 416
Deals with INTEREST on: 1. Loans 2. Forebearances of any money, goods, or credits 3. Rate

allowed in Judgements

Issue: What kind of judgment is referred to? Court: 1. Judgments in litigations involving loans or forebearance in money goods or credits. 2. 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

Act No. 2655 (Amended by CB 416)

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 provision 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 will 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.

Eastern Shipping Lines vs. CA

Factual Background
1. Two fiber drums of Riboflavin were shipped out, insured under Mercantile Insurance Co. Inc. Amount was for P38 million ++ 2. The following people dealt with the shipment: 1. Shipper: Eastern Shipping Lines 2. Arrastre Operator: Metroport 3. Broker: Allied Brokerage 3. Facts were found that losses/damage sustained by 1 drum on the shipment, amounting to P19,032.95 are attributable to the three due to their fault and

Eastern Shipping Lines vs. CA

Factual Background
Defendants (3 above) ordered to pay 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.

Eastern Shipping Lines vs. CA

Factual The Court of Appeals thus affirmedBackground 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.

Eastern Shipping Lines vs. CA

Question
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.

12% per annum from date of filing of complaint Vs. 6% per annum from date of trial court decision

Eastern Shipping Lines vs. CA

(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;

Issues according to Justice Vitug

(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%).

Eastern Shipping Lines vs. CA

(a) Malayan Insurance Co. Inc. vs. Manila Port Service (a) May 1969 (b) Suit for recovery of money arising out of short deliveries and pilferage of goods (c) Judgment: Pay Insurer-Appelle sum of P1447.51 with legal interest thereon from the date the complaint was filed on Dec 28 1962 until full payment. 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),"

Cited Series of Cases

Eastern Shipping Lines vs. CA

b. Reformina vs. Tomol (a) Oct 1985 (b) Recovery of Damages for Injury to Loss of Person and Property (c) Judgment: Applied Art 2209 and used 6% per annum legal rate of interest

Cited Series of Cases

c. Philippine Rabbit Bus Lines, Inc. vs. Cruz a. Jul 28, 1986 b. Damages occasioned by an injury to person and loss of propery c. Compensatory damages with legal interest at 6% per annum from filing of the complaint until fully paid
d. Nakpil and Sons vs. CA a. Action for Recovery of damages arising from the collapse of a building b. Ordered to pay plaintiff amount of P989k ++ with interest at legal rate from date of filing of complaint until fully paid and Indemnity in favor of Phil Bar Assoc in amount of P5M c. 12% per annum shall be imposed upon amounts from finality until

Eastern Shipping Lines vs. CA

Cited Series of Cases
e. American Express International Inc. vs. IAC a. Feb. 27, 1985 b. Petition for review on certiorari from decision c. Court: Ordered P100k moral damages with 6% interest computed from finality of decision until paid f. Florendo vs. Ruiz a. Feb 21, 1989 b. Breach of Employment Contract for being illegally dismissed c. Court: Moral and Exemplary Damages plus P1,400 compenstary damages with interest at 6% per annum on damages from the time of filing of complaint until fully paid g. NAPOCOR vs. Angas (a) May 8, 1992 (b) Expropriation on certain parcels of Land (c) Judgment: 6% per annum on compensation for land clearly not a loan or forbearance of money for money, goods or credits but for expropriation for publi purpose. Payment is without stipulation of interest but in the nature of indemnity for damages. Art. 2209 shall apply.

Eastern Shipping Lines vs. CA

1st Group:

2 Groups of Cases

Reformina vs. Tomol (1885) Philippine Rabbit Bus Lines (1986) Florendo vs. Ruiz (1989) NAPOCOR vs. Angas (1992) Basic Issue: 6% under NCC or 12% under CB 416
1. 12% per annum 1. Loans 2. Forbearance on money, goods or credits 3. Judgment on loan or judgment on forbearance 2. 6% per annum 1. Payment of indemnities in the concept of damage arising from breach or delay in the performance of obligations in general 3. COMMON TIMEFRAME: 1. From the time complaint is filed until amount is fully paid

Eastern Shipping Lines vs. CA

2 Groups of Cases 2nd Group: Malayan Insurance Co. vs. Manila Port Service (1969) Nakpil and sons vs. CA (1988) American Express International vs. IAC
Basic Issue: 6% under NCC or 12% under CB 416

1. 12% per annum 1. Loans 2. Forbearance on money, goods or credits 3. Judgment on loan or judgment on forbearance 2. 6% per annum 1. Payment of indemnities in the concept of damage arising from breach or delay in the performance of obligations in general 3. VARY on the commencement of the running of legal interest

Eastern Shipping Lines vs. CA

2 GUIDANCE: Groups RULES OF THUMB FOR
I.

of Cases

When an obligation, regardless of its source, i.e., law, contracts, quasicontracts, 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.

Eastern Shipping Lines vs. CA

2 GUIDANCE: Groups RULES OF THUMB FOR of Cases
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 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.

Eastern Shipping Lines vs. CA

RULES OF THUMB FOR GUIDANCE:

2 Groups of Cases

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.

Thank you.
Report by Kristine Joan M. Martinez