Republic of the PhilippinesSUPREME COURTManila

THIRD DIVISION

G.R. No. 90676 June 19, 1991

STATE INVESTMENT HOUSE, INC., petitioner, vs.THE HONORABLE COURT OF APPEALS, HON. JUDGE PERLITA J. TRIA TIRONA, Presiding Judge of the Regional Trial Court of Quezon City, Branch CII and SPS. RAFAEL and REFUGIO AQUINO, respondents.

Padilla Law Office for petitioner.

Rodolfo T. Galing and Chaves, Hechanova & Lim Law Offices for private respondents.

FELICIANO, J.:p

On 5 April 1982, respondent spouses Rafael and Refugio Aquino pledged certain shares of stock to petitioner State Investment House, Inc. ("State") in order to secure a loan of P120,000.00 designated as Account No. IF-82-0631-AA. Prior to the execution of the pledge, respondent-spouses, as an accommodation to and together with the spouses Jose and Marcelina Aquino, signed an agreement (Account No. IF-82-1379-AA) with petitioner State for the latter's purchase of receivables amounting to P375,000.00. When Account No. IF-82-0631-AA fell due, respondent spouses paid the same partly with their own funds and partly from the proceeds of another loan which they obtained also from petitioner State designated as Account No. IF-82-0904-AA. This new loan was secured by the same pledge agreement executed in relation to Account No. IF-820631-AA. When the new loan matured, State demanded payment. Respondents expressed willingness to pay, requesting that upon payment, the shares of stock pledged be released. Petitioner State denied the request on the ground that the loan which it had extended to the spouses Jose and Marcelina Aquino (Account No. IF-82-1379- AA) had remained unpaid.

On 29 June 1984, Atty. Rolando Salonga sent to respondent spouses a Notice of Notarial Sale stating that upon request of State and by virtue of the pledge agreement, he would sell at public auction the shares of stock pledged to State.

This prompted respondents to file a case before the Regional Trial Court of Quezon City alleging that the intended foreclosure sale was illegal because from the time the obligation under Account No. IF-82-0904-AA became due, they had been able and willing to pay the same, but petitioner had insisted that respondents pay even the loan account of Jose and Marcelina Aquino which had not been secured by the pledge. It was further alleged that their failure to pay their loan (Account No. IF-82-0904-AA) was excused because the petitioner State itself had prevented the satisfaction of the obligation.

The trial court, in a decision dated 14 December 1984 rendered by Judge Willelmo Fortun, initially dismissed the complaint. Respondent spouses filed a motion for reconsideration praying for a new decision ordering petitioner State to release the shares upon payment of respondents' loan "without interest," as the latter had not been in delay in the performance of their obligation. State countered that the pledge executed by respondent spouses also covered the loan extended to Jose and Marcelina Aquino, which too should be paid before the shares may be released.

Acting on the motion for reconsideration, Judge Fortun set aside his original decision and rendered a new judgment dated 29 January 1985, ordering State to immediately release the pledge and to deliver to respondents the share of stock "upon payment of the loan under Code No. 82-0904-AA."

On appeal, the Court of Appeals affirmed in toto the new decision of the trial court, holding that the loan extended to Jose and Marcelina Aquino, having been executed prior to the pledge was not covered by the pledge which secured only loans executed subsequently. Thus, upon payment of the loan under Code No. IF-0904-AA, the shares of stock should be released. The decisions of the Court of Appeals and of Judge Fortun became final and executory.

Upon remand of the records of the case to the trial court for execution, there developed disagreement over the amount which respondent spouses Rafael and Refugio Aquino should pay to secure the release of the shares of stock — petitioner State contending that respondents should also pay interest and respondents arguing they should not. Respondent spouses then filed a motion with the trial court to clarify the Fortun decision praying that an order issue clarifying the phrase "upon payment of plaintiffs' loan" to mean upon payment of plaintiff' loan in the principal amount of P110,000.00 alone, "without interest, penalties and other charges."

On 17 February 1989, the trial court, speaking this time through Judge Perlita Tria Tirona, rendered a decision purporting to clarify the decision of Judge Fortun and ruling that petitioner State shall release respondents' shares of stock upon payment by respondents of the principal of the loan as set forth in PN No. 82-0904-AA in the amount of P110,000.00, without interest, penalties and other charges.

Petitioner State appealed Judge Tirona's decision to the Court of Appeals; the appeal was dismissed. The Court of Appeals agreed with Judge Tirona that no interest need be paid and added that the clarificatory (Tirona) decision of the trial court merely restated what had been provided for in the earlier (Fortun) decision; that the Tirona decision did not go beyond what had been adjudged in the earlier decision. The motion for reconsideration filed by petitioner was accordingly denied.

Hence, this Petition for Review contending that no manifest ambiguity existed in the decision penned by Judge Fortun; that the trial court through Judge Tirona, erred in clarifying the decision of Judge Fortun; and that the amendment sought to be introduced in the Fortun decision by respondents may not be made as the same was substantial in nature and the Fortun decision had become final.

We begin by noting that the trial court has asserted authority to issue the clarificatory order in respect of the decision of Judge Fortun, even though that judgment had become final and executory. In Reinsurance Company of the Orient, Inc. v. Court of Appeals, 1 this Court had occasion to deal with the applicable doctrine to some extent:

- - - [E]ven a judgment which has become final and executory may be clarified under certain circumstances. The dispositive portion of the judgment may, for instance, contain an error clearly clerical in nature (perhaps best illustrated by an error in arithmetical computation) or an ambiguity arising from inadvertent omission, which error may be rectified or ambiguity clarified and the omission supplied by reference primarily to the body of the decision itself Supplementary reference to the pleadings previously filed in the case may also be resorted to by way of corroboration of the existence of the error or of the ambiguity in the dispositive part of the judgment. In Locsin, et al. v. Parades, et al., this Court allowed a judgment which had become final and executory to be clarified by supplying a word which had been inadvertently omitted and which, when supplied, in effect changed the literal import of the original phraseology:

. . . it clearly appears from the allegations of the complaint, the promissory note reproduced therein and made a part thereof, the prayer and the conclusions of fact and of law contained in the decision of the respondent judge, that the obligation contracted by the petitioners is joint and several and that the parties as well as the trial judge so understood it. Under the juridical rule that the judgment should be in accordance with the allegations, the

evidence and the conclusions of fact and law, the dispositive part of the judgment under consideration should have ordered that the debt be paid 'severally' and in omitting the word or adverb 'severally' inadvertently, said judgment became ambiguous. This ambiguity may be clarified at any time after the decision is rendered and even after it had become final (34 Corpus Juris, 235, 326). This respondent judge did not, therefore, exceed his jurisdiction in clarifying the dispositive part of the judgment by supplying the omission. (Emphasis supplied)

In Filipino Legion Corporation vs. Court of Appeals, et al., the applicable principle was set out in the following terms:

[W]here there is ambiguity caused by an omission or mistake in the dispositive portion of a decision, the court may clarify such ambiguity by an amendment even after the judgment had become final, and for this purpose it may resort to the pleadings filed by the parties, the court's findings of facts and conclusions of law as expressed in the body of the decision. (Emphasis supplied)

In Republic Surety and Insurance Company, Inc. v. Intermediate Appellate Court, the Court, in applying the above doctrine, said:

. . . We clarify, in other words, what we did affirm. That is involved here is not what is ordinarily regarded as a clerical error in the dispositive part of the decision of the Court of First Instance, . . . At the same time, what is involved here is not a correction of an erroneous judgment or dispositive portion of a judgment. What we believe is involved here is in the nature of an inadvertent omission on the part of the Court of First Instance (which should have been noticed by private respondents' counsel who had prepared the complaint), of what might be described as a logical follow-through of something set forth both in the body of the decision and in the dispositive portion thereof; the inevitable follow-through, or translation into, operational or behavioral terms, of the annulment of the Deed of Sale with Assumption of Mortgage, from which petitioners' title or claim of title embodied in TCT 133153 flows. (Emphasis supplied) 2 (Underscoring in the original; citations omitted)

The question we must resolve is thus whether or not there is an ambiguity or clerical error or inadvertent omission in the dispositive portion of the decision of Judge Fortun which may be legitimately clarified by referring to the body of the decision and perhaps even the pleadings filed before him. The decision of Judge Fortun disposing of the motion for reconsideration filed by respondent spouses Rafael and Refugio Aquino consisted basically of quoting practically the whole motion for reconsideration. In its dispositive portion, Judge Fortun's decision stated:

WHEREFORE, plaintiffs "Motion for Reconsideration" dated January 3, 1985, is granted and the decision of this Court dated December 14, 1984 is hereby revoked and set aside and another judgment is hereby rendered in favor of plaintiffs as follows:

(1) Ordering defendants to immediately release the pledge on, and to deliver to plaintiffs, the shares of stocks enumerated and described in paragraph 4 of plaintiffs' complaint dated July 17, 1984, upon payment of plaintiffs loan under Code No. 82-0904-AA to defendants;

(2) Ordering defendant State Investment House, Inc. to pay to plaintiffs P10,000.00 as moral damages, P5,000.00 as exemplary damages, P6,000.00 as attorney's fees, plus costs;

(3) Dismissing defendants' counterclaim, for lack of merit and making the preliminary injunction permanent.

SO ORDERED. 3

Judge Fortun evidently meant to act favorably on the motion for reconsideration of the respondent Aquino spouses and in effect accepted respondent spouses' argument that they had not incurred mora considering that their failure to pay PN No. IF82-0904-AA on time had been due to petitioner State's unjustified refusal to release the shares pledged to it. It is not, however, clear to what precise extent Judge Fortun meant to grant the motion for reconsideration. The promissory note in Account No. IF-82-0904-AA had three (3) components: (a) principal of the loan in the amount of P110,000.00; (b) regular interest in the amount of seventeen percent (17%) per annum; and (c) additional or penalty interest in case of non-payment at maturity, at the rate of two percent (2%) per month or twenty-four percent (24%) per annum. In the dispositive part of his resolution, Judge Fortun did not specify which of these components of the loan he was ordering respondent spouses to pay and which component or components he was in effect deleting. We cannot assume that Judge Fortun meant to grant the relief prayed for by respondent spouses in all its parts. For one thing, respondent spouses in their motion for reconsideration asked for "at least P50,000.00" for moral damages and "at least P50,000.00" for exemplary damages, as well as P20,000.00 by way of

attorney's fees and litigation expenses. Judge Fortun granted respondent spouses only P10,000.00 as moral damages and P5,000.00 as exemplary damages, plus P6,000.00 as attorney's fees and costs. For another, respondent spouses asked Judge Fortun to order the release of the shares pledged "upon payment of [respondent spouses'] loan under Code No. 82-0904-AA without interest, as plaintiffs were not in delay in accordance with Article 69 of the New Civil Code –– " (Emphasis supplied). In other words, respondent spouses did not themselves become very clear what they were asking Judge Fortun to grant them; they did not apparently distinguish between regular interest or "monetary interest" in the amount of seventeen percent (17%) per annumand penalty charges or "compensatory interest" in the amount of two percent (2%) per month or twenty-four percent (24%) per annum.

It thus appears that the Fortun decision was ambiguous in the sense that it was cryptic. We believe that in these circumstances, we must assume that Judge Fortun meant to decide in accordance with law, that we cannot fairly assume that Judge Fortun was grossly ignorant of the law, or that he intended to grant the respondent spouses relief to which they were not entitled under law. Thus, the ultimate question which arises is: if respondent Aquino spouses were not in delay, what should they have been held liable for in accordance with law?

We believe and so hold that since respondent Aquino spouses were held not to have been in delay, they were properly liable only for: (a) the principal of the loan or P110,000.00; and (b) regular or monetary interest in the amount of seventeen percent (17%) per annum. They were not liable for penalty or compensatory interest, fixed by the promissory note in Account No. IF-82-0904-AA at two percent (2%) per month or twenty-four (24%) per annum. It must be stressed in this connection that under Article 2209 of the Civil Code which provides that

. . . [i]f the obligation consists in the payment of a sum of money, and the debtor incurs in delay. the indemnity for damages, there being no stimulation 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.

the appropriate measure for damages in case of delay in discharging an obligation consisting of the payment of a sum or money, is the payment of penalty interest at the rate agreed upon; and in the absence of a stipulation of a particular rate of penalty interest, then the payment of additional interest at a rate equal to the regular monetary interest; and if no regular interest had been agreed upon, then payment of legal interest or six percent (6%) per annum. 4

The fact that the respondent Aquino spouses were not in default did not mean that they, as a matter of law, were relieved from the payment not only of penalty or compensatory interest at the rate of twenty-four percent (24%)per annum but also of regular or monetary interest of seventeen percent (17%) per annum. The regular or monetary interest continued to accrue under the terms of the relevant

promissory note until actual payment is effected. The payment of regular interest constitutes the price or cost of the use of money and thus, until the principal sum due is returned to the creditor, regular interest continues to accrue since the debtor continues to use such principal amount. The relevant rule is set out in Article 1256 of the Civil Code which provides as follows:

Art. 1256. If the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due.

Consignation alone shall produce the same effect in the following cases:

(1) When the creditor is absent or unknown, or does not appear at the place of payment;

(2) When he is incapacitated to receive the payment at the time it is due;

(3) When, without just cause, he refuses to give a receipt;

(4) When two or more persons claim the same right to collect;

(5) When the title of the obligation has been lost. (Emphasis supplied)

Where the creditor unjustly refuses to accept payment, the debtor desirous of being released from his obligation must comply with two (2) conditions: (a) tender of payment; and (b) consignation of the sum due. Tender of payment must be accompanied or followed by consignation in order that the effects of payment may be produced. Thus, in Llamas v. Abaya, 5 the Supreme Court stressed that a written tender of payment alone, without consignation in court of the sum due, does not suspend the accruing of regular or monetary interest.

In the instant case, respondent spouses Aquino, while they are properly regarded as having made a written tender of payment to petitioner State, failed to consign in court the amount due at the time of the maturity of Account No. IF-820904-AA. It follows that their obligation to pay principal-cum-regular or monetary interest under the terms and conditions of Account No. IF-82-0904-AA was not extinguished by such tender of payment alone.

For the respondent spouses to continue in possession of the principal of the loan amounting to P110,000.00 and to continue to use the same after maturity of the

loan without payment of regular or monetary interest, would constitute unjust enrichment on the part of the respondent spouses at the expense of petitioner State even though the spouses had not been guilty of mora. It is precisely this unjust enrichment which Article 1256 of the Civil Code prevents by requiring, in addition to tender of payment, the consignation of the amount due in court which amount would thereafter be deposited by the Clerk of Court in a bank and earn interest to which the creditor would be entitled.

WHEREFORE, the Petition for Review is hereby GRANTED DUE COURSE. The Decision of the Court of Appeals dated 30 August 1989 in C.A.-G.R. No. 17954 and the Decision of the Regional Trial Court dated 17 February 1989 in Civil Case No. Q-42188 are hereby REVERSED and SET ASIDE. The dispositive portion of the decision of Judge Fortun is hereby clarified so as to read as follows:

(1) Ordering defendants to immediately release the pledge and to deliver to the plaintiff spouses Rafael and Refugio Aquino the shares of stock enumerated and described in paragraph 4 of said spouses' complaint dated 17 July 1984, upon full payment of the amount of P110,000.00 plus seventeen percent (17%) per annum regular interest computed from the time of maturity of the plaintiffs' loan (Account No. IF-82-0904-AA) and until full payment of such principal and interest to defendants;

(2) Ordering defendant State Investment House, Inc. to pay to the plaintiff spouses Rafael and Refugio Aquino P10,000.00 as moral damages, P5,000.00 as exemplary damages, P6,000.00 as attorney's fees, plus costs; and

(3) Dismissing defendants' counterclaim for lack of merit and making the preliminary injunction permanent."

No pronouncement as to costs.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. 87597 August 3, 1990

CENTRAL AZUCARERA DE BAIS, petitioner, vs.THE HONORABLE COURT OF APPEALS, DAVID BAROT, ET AL.,* respondents.

Siguion Reyna, Montecillo & Ongsiako for petitioner. Tanada Vivo & Tan for private respondents.

REGALADO, J.:

Petitioner seeks the review and reversal of the decision of respondent Court of Appeals, dated March 20, 1989, 1which affirmed in toto the original decision of the Regional Trial Court of Manila, Branch XX, dated December 28,1984, in Civil Case No. 39650, entitled "David Barot, et al. vs. Central Azucarera de Bais," and set aside the partial modification thereof by the same trial court in its order of May 7, 1985.

The present litigation started thirty-one (31) years ago in the then Court of First Instance of Manila when private respondents filed a complaint for a sum of money against petitioner Central Azucarera de Bais on March 19, 1959. In their complaint, private respondents, consisting of David Barot and one hundred eighty (180) other sugar cane planters in Bais, Negros Oriental, relied on Section 1 of Republic Act No. 809, otherwise known as the Sugar Act of 1952, which in part provides that:

SECTION 1. In the absence of written milling agreements between the majority of planters and the millers of sugar-cane in any milling district in the Philippines, the unrefined sugar produced in that district from the milling by any sugar central of the sugar-cane of any Sugarcane planter or plantation owner, as well as all by- products and derivatives thereof, shall be divided between them as follows:

Sixty per centum for the planter, and forty per centum for the central in any milling district the maximum actual production of which is not more than four hundred thousand piculs: Provided, That the provisions of this section shall not apply to sugar

centrals with an actual production of less than one hundred fifty thousand piculs.

Sixty-two and one-half per centum for the planter, and thirty-seven and one-half per centum for the central in any milling district the maximum actual production of which exceeds four hundred thousands piculs but does not exceed six hundred thousand piculs;

Sixty-five per centum for the planter, and thirty-five per centum for the central in any milling district the maximum actual production of which exceeds six hundred thousand piculs but does not exceed nine hundred thousand piculs;

Sixty-seven and one-half per centum for the planter, and thirty-two and one-half per centum for the central in any milling district the maximum actual production of which exceeds nine hundred thousands piculs but does not exceed one million two hundred thousand piculs;

Seventy per centum for the planter, and thirty per centum for the central in any milling district the maximum actual production of which exceeds one million two hundred thousand piculs.

By actual production is meant the total production of the mill for the crop year immediately preceeding.

The facts as found by the respondent court are as follows:

As alleged in the complaint, the plaintiffs-appellants were all sugar cane planters in the milling district of Bais, Negros Oriental, who have been milling their sugarcane with appellant Central Azucarera de Bais since 1952, without any written milling contracts or agreements between plaintiffs-appellants and defendant-appellant. Further, plaintiffs-appellants averred that prior to the enactment of the Sugar Act of 1952 (RA 809) as planters, they only had a 60% share in the sugar produced and milled with appellant Central while the latter had 40%. With the enactment of R.A. 809, however, the percentage of the share of the planters was gradually increased depending upon the actual sugar production for each crop year and on whether or not the majority of the planters had executed milling agreementswith appellant Central. Hence, the plaintiffs-appellants who have been milling their sugarcane with the appellant Central from 1952-53 to

1958-59, without any written milling contracts sought to compel the latter to give to them the increased participation as provided for in R.A. 809 alleging that they constituted the majority of the sugarcane planters who milled with the appellant Central during these crop years.

The defendant-appellant denied in its Answer all the material allegations in the complaint and averred that the plaintiffs-appellants who milled with the Central did not constitute the majority of the sugarcane planters without written milling contracts arguing that it had written milling contracts with the majority of its, planters during the crop years in question, thus, Sec. 1 of R.A. 809 could not apply. Defendant-appellant likewise argued that R.A. 809 was unconstitutional on the ground that it not only deprived the appellant Central of its properties without due process of law but it also impaired the obligation of contracts.

As an affirmative defense, appellant Central averred, among others, that when the milling agreements executed in 1919 between the Central and its adherent planters expired in 1949, defendant-appellant and the majority of the planters in the milling district entered into a new milling contract to be effective for ten (10) years commencing from 1949. The new contract provided that the subscribing plantersreceive as their share 62% of the unrefined sugar and molasses resulting from the milling of their cane and they have certain obligations which are not assumed by the non-subscribing planters. The contract also provided that the appellant Central shall not grant to other planters, not signatories thereof, terms and conditions more advantageous than those provided for in the said contract. In compliance with the aforesaid restriction, appellant Central has laid down the policy of granting to the planters who did not sign the milling agreement, only 60% of the unrefined sugar produced from their cane. The plaintiffs-appellants therefore, who had been continuously delivering their sugarcane for milling with full knowledge of the aforesaid restrictions imposed in the contract and without protest, have thereby impliedly, if not expressly accepted the conditions under which their sugarcane had been milled by the appellant Central and have thus entered into a valid contract that they cannot now demand for a bigger participation than that provided for in the said contract.

(Emphasis in the original text) . 2

During the pendency of the case, upon motion of herein petitioner central, the trial court suspended the proceedings in an order dated August 25, 1970, on the ground that the issues in the present case are similar to the issues presented in the case before the Supreme Court entitled Associacion de Agricultores de Talisay-Silay, Inc., et al. vs. Talisay-Silay Milling Co., Inc., et al., docketed as G.R. No. L-19937. Eventually, this Court promulgated judgment in said case on February 19, 1979. 3

The court a quo resumed trial of the case and on December 28, 1984, it rendered a decision in favor of the private respondents finding that the majority of the planters did not have milling contracts with the petitioner. After determining the private respondents' increased participation in the sugar, molasses and bagasse and the money value thereof, the trial court decreed:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs David Barot and others whose names appear in the attached list marked Annex 'A' and against the defendant Central Azucarera de Bais, ordering the latter to pay the former the following:

1.The increased participation of the plaintiffs in sugar for the crop years 1952-53 to 1958-59, inclusive, consisting of 19,909.85 piculs, with a money value of P4,290,915.03 as of December 31, 1982 as hereinabove shown;

2.The increased participation of plaintiffs in molasses for the crop years 1952-53 to 1958-59, inclusive, consisting of 2,775.241 tons, with a money value of P995,938.01 as of December 31, 1982 as hereinabove shown;

3.The increased participation of the plaintiffs in bagasse for the crop years 1952-53 to 1958-59, inclusive, consisting of 386,114.79 bales, with a money value of P1,259,854.81 as of December 31, 1982 as hereinabove shown;

4.Interest at the current rate on the aggregate totality of plaintiffs claim worth P6,546,707.85, starting January 1, 1983, until such time as the same shall be fully paid;

5.25% of the total amount due the plaintiffs as for (sic) and attorney's fee; and

6.To pay the costs.

IT IS SO ORDERED. 4

Petitioner filed on January 20, 1985 a motion for reconsideration of the aforestated decision, which was granted in part in an order of May 7, 1985. The dispositive portion was modified to read as follows:

WHEREFORE, premises considered, the motion for reconsideration is granted in part and the dispositive portion of the decision dated December 28,1984 is hereby amended to read as follows:

1. WHEREFORE, judgment is hereby rendered in favor of the plaintiffs David Barot and others whose names appear in the attached list marked Annex A and against defendant Central Azucarera de Bais ordering the former to pay the following:

1. The increased participation of the plaintiffs in sugar for the crop years 1952-53 to 1958-59, inclusive, consisting of 19,909.85 piculs, with a value of P265,223.45;

2. The increased participation of the plaintiffs in molasses for the crop years 1952-53 to 1958-59, inclusive, consisting of 2,775.03 tons, with a value of P59,294.89;

3. The increased participation of the plaintiffs in bagasse for the crop years 1952-53 to 1958-59, inclusive, consisting of 986.114 bales with a value of P77,222.96;

4. 10% of the total amount due the plaintiffs as and for attorney's fees; and

5. To pay the costs, "All amounts herein ordered to be paid shall bear interest at 12% per annum, the legal rate from the finality of this decision until full payment.

SO ORDERED. 5

Petitioner appealed to respondent Court of Appeals the decision dated December 28,1984 and the order dated May 7,1985. Private respondents likewise appealed from the order of May 7, 1985 insofar as said order partially modified the trial court's decision of December 28, 1984, particularly on the question of interest and on the ground that said order is contrary to law and the evidence presented. Both appeals were docketed as and adjudicated in CA-G.R. CV No. 07759.

On March 20, 1989, respondent court promulgated its decision setting aside the May 7, 1985 order of the trial court and reinstated the decision dated December 28,1984. The appellate court approved the findings of the court below that the

majority of the planters who milled their sugar cane with petitioner in the crop years involved did not have written milling contracts. Likewise, it sustained the ruling that one hundred per cent (100%) of the computed increased participation of the planters should be paid to the latter, it being understood that under Section 9 of Republic Act No. 809 sixty per centum (60%) thereof belongs to the laborers. It adopted the rule that after paying the entire amount to the planters, they are in turn "directed to pay 60% of the increased participation to their laborers under the supervision of the Ministry (now Department) of Labor." Respondent court also ordered the payment of interest at the rate of twelve per cent (1 2%) per annum, on the basis of the rates charged by the Philippine National Bank on its regular loans.

Petitioner takes issue with the decision of the Court of Appeals, hence this petition wherein it contends that respondent court erred in:

A. Granting interest computed on the basis of the PNB lending rates, instead of the legal rate of six per cent;

B. Granting interest commencing from 1952 and not from the date plaintiffs' claim can be considered liquidated;

C. Granting an award of attorney's fees in favor of private respondents when even the courts were of divergent views on the issues involved;

D. Ruling that majority of the planters who milled with the petitioner had no written milling agreements, based on a manner of counting planters not sanctioned by the Talisay Silay case;

E. In not directing that sixty per cent of the award, if any, should be segregated for the benefit of the planters' laborers. 6

An initial discussion of the fourth assignment of error is necessary, it being a threshold issue. On this score, petitioner claims that the Court of Appeals erred in assuming that only those who actually affixed their signatures on the milling agreements shall be considered contract planters or planters with milling contracts; and, further, in declaring that the heirs of planters who signed milling agreements can be counted as planters with milling contracts only if they have already received their respective shares in their respective inheritance, otherwise, they shall be counted only as one.

Respondent Court of Appeals, in so holding, explicated as follows:

The lower court likewise was correct in observing and concluding that of the 79 milling contracts presented by the

defendant-appellant, fifteen (15) thereof should be considered only singly and not by the numbers of the planters which are named in the said contracts. The reason behind this is that the numerous signatories are but heirs, legatees or successors-in-interest of a deceased planter, and which could only be counted as one planter per contract, whose plantation remained whole as before his death, unsubdivided among his heirs, legatees or successors-in-interest and, which in fact, continues to be reflected in the books of the appellant Central as one plantation just as it appeared in its records before the death of the original owner-planter. In the case of Asociacion (sic) de Agricultores de Talisay-Silay Inc., et al. versus Talisay Milling Co., Inc., 88 SCRA 294, the heirs or successors-in-interest of a deceased planter-relative to the applicability of R.A. 809 (Sugar Act of 1952) was enunciated, along this line we quote:

... for the purpose of the application of R.A. 809 to the Talisay- Silay Milling District for the crop year 1952-53, the milling contracts, Exh. C-37, executed by the administrator of the estate of Esteban de la Rama, should be considered not as merely the contracts of two planters but as the separate 'contracts of the individual successors-in-interest of said estate who have already received their respective shares in the respective inheritance and who were actually holding separate and distinct plantation Audit Numbers respectively and who were actually dealing with the Central independently of each other, as they were deemed by the Central to be such. (As underscored in the original). 7

We find no compelling reason to deviate from said ruling of respondent court. From our examination of petitioner's allegations, it is easily discernible that this particular issue is factual. As petitioner itself avers, the determination of whether a majority of the planters had mulling agreements requires a review of the evidence presented to substantiate the respective positions of both parties. 8 Hence, we are constrained to submit to the well- known procedural rule that findings of fact of the Court of Appeals and the trial courts are final and conclusive if they are borne out by the records or supported by the requisite quantum of evidence. 9 Besides, petitioner failed to show by clear and convincing proof that the instant case falls under any of the exceptions to the aforesaid rule on conclusiveness of findings of fact. We are satisfied that the findings of the court below are amply supported by the evidence of record. The finding that the majority of the planters who

determined their sugar cane with petitioner did not have milling contracts was arrived at after scrupulously examining and evaluating the evidence presented, including the written agreements produced by the parties in court. This is in addition to the fact that petitioner failed to explain and substantiate its allegation that the majority of the planters had milling contracts.

Against this factual setting, the applicability of Section 1 of Republic Act No. 809 and the entitlement of the private respondents to the increased participation are unquestionable. Parenthetically, this increased participation should be given in their entirety to the planters. We cannot accept petitioner's insistence that the sixty per centum (60%) share of the laborers provided under Section 9 of Republic Act No. 809 should be paid directly to them. Said provision states:

SEC. 9. In addition to the benefits granted by the Minimum Wage Law, the proceeds of any increase in the participation granted the planters under this Act and above their present share shall be divided between the planter and his laborer in the plantation in the following proportion:

Sixty per centum of the increased participation for the laborers and forty per centum for planters. The distribution of the share corresponding to the laborers shall be made under the supervision of the Department of Labor.

xxx xxx xxx

Nothing in the quoted provision can be said to indicate that direct payment to the laborers is required. In fact, under Section 1 of the law, the increased participation clearly pertains to the planters. This construction of Republic Act No. 809 was applied in the case of Ernesto, et al. vs. The Court of appeals, et al., 10 where the planters, after receipt of the increased participation, were in turn ordered to pay their respective laborers sixty per centum (60%) of such difference as will be paid to them by the central, and the then Minister of Labor was directed to supervise the corresponding payments to the laborers. The correctness of this procedure is evident since the planters are in a better position to distribute the proportionate shares in the increased participation to their respective laborers. The planters are correctly assumed to know the amounts to be paid to each of their laborers by simply examining their company records.

We are, however, of the considered opinion that respondent court erred in awarding interest on the basis of the lending rates imposed by the Philippine National Bank. Such an award is bereft of statutory and jurisprudential basis. In the present case, the proper interest rate to be imposed should be the legal rate of six per cent (6%) per annum provided for in Article 2209 of the Civil Code. This express provision of the law cannot be disregarded, since it categorically declares that "(i)f 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 per cent per annum."

The rate of interest should not be twelve per cent (12%) as provided in the May 7, 1985 order of the trial court. It is well settled that the rate of interest of twelve per cent (12%) under Central Bank Circular No. 416 is applicable only to loans or renewals thereof or forbearance of money, goods, or credits or judgments in connection therewith. Any other judgment, as in the present case, is not covered - thereby. 11

Neither may equity be validly invoked nor aptly relied upon in this case. Equity is available only in the absence of law and not as its replacement. Equity is justice outside legality, which simply means that it cannot supplant, although it may, as it often happens, supplement the law. 12 Thus liberal interpretation in favor of private respondents is not in point because no such interpretation is, in fact, necessary. The law is clear that it is the legal interest that shall be paid and an unwarranted deviation therefrom would entail judicial legislation. Obviously, this objectionable result is anathema to our deeply rooted doctrine of separation of powers.

The rule is that interest is due from the moment there is delay on the part of the obligor to perform his obligation, that is, from the time it was judicially or extrajudicially demanded. 13 Nonetheless, under Article 2213 of the Civil Code, "(i)nterest cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonable certainty." Unliquidated damages or claims, it is said, are those which are not or cannot be known until defenitely ascertained, assessed and determined by the courts after presentation of proof.14

In the case at bar, however we hold that the claim of private respondents is for a definite sum of money. What they are claiming are specific percentages definitely provided under the law. It is merely a matter of mathematically computing the exact money value thereof, inasmuch as the annual sugar production and the amount of molasses and bagasse, derived from the production during the crop years involved, are undisputed and are in fact based on the records of petitioner. Irremissibly, therefore, the claim cannot be considered unliquidated. But even assumingex gratia arguntenti that it is unliquidated, the same will nevertheless fall under the exception in Article 2213 because the demand therefor can be established with reasonable certainty. Thus, in the absence of the law expressly declaring that demand is not necessary, the interest must be computed from the time of extrajudicial demand which, as held by respondent court in this case, was established to have been made in 1952 to comply with Republic Act No. 809 15 which was enacted in that year.

On the matter of attorney's fees, it is an accepted doctrine that the award thereof as an item of damages is the exception rather than the rule, and counsel's fees are not to be awarded every time a party wins a suit. The power of the court to award attorney's fees under Article 2208 of the Civil Code demands factual, legal and equitable justification, without which the award is a conclusion without a premise,

its basis being improperly left to speculation and conjecture. In all events, the court must explicitly state in the text of the decision, and not only in the decretal portion thereof, the legal reason for the award of attorney's fees. 16

It is undeniable and evident that both the respondent appellate court and the trial court completely violated the aforestated doctrinal rule. In awarding attorney's fees as damages, no justification therefor is advanced either in the decision of the trial court or of respondent appellate court which affirmed the former. Even for this reason alone, the award must be deleted and any advertence we would make herein to petitioner's alleged bad faith or good faith, as discussed in the exchanges of the parties but disregarded in the aforesaid decisions of both lower courts, would be unnecessary and pointless.

WHEREFORE, the judgment of respondent Court of Appeals is hereby AFFIRMED, subject to the MODIFICATION reducing the interest awarded to private respondents to six per cent (6%) per annum to commence in 1952, and deleting the award of attorney's fees.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

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 8modified 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.