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

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 Ordergranting 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 ofP158,919.92 that should be executed. Thus, since petitioner already receivedP147,560.19, he is only entitled to the balance ofP11,459.73. 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 lentP350,000.00 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 P576,000.007representing interest charges.

As L&J failed to pay despite repeated demands, Rolando filed a Complaintfor 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 atP772,000.00; 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 theP350,000.00 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 Lawby 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, 2013,36the interest imposed by the CA must be accordingly modified. TheP226,000.00 which Rolando is ordered to pay L&J shall earn an interest of 6% per annum from the finality of this Decision.