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.

Civil Law; Damages; The appropriate measure for damages in case of delay in
discharging an obligation consisting of the payment of a sum of money is the payment
of penalty interest at the rate agreed upon.It must be stressed in this connection that
under Article 2209 of the Civil Code x x x the appropriate measure for damages in case
of delay in discharging an obligation consisting of the payment of a sum of 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.

Same; Same; Same; Fact that respondent Aquino spouses were not in default did not
mean that they were relieved from the payment not only of penalty or compensatory
interest of 24% per annum but also of regular or monetary interest of 17% per annum.
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.

Same; Payment; Consignation; Conditions to be complied with by debtor desirous of

being released from his obligation.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, 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.
Same; Same; Same; Same; Respondent spouses Aquino failed to consign in Court in
amount due at the time of the maturity of Account No. IF-82-0904-AA.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-82-0904-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.

PETITION for review of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

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

FELICIANO, J.:

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-82-1379AA) with petitioner State for the latters 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-82-0631-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. IF82-1379-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 stockpetitioner
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 Tironas 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, 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.
Paredes, 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:

x x x 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. (Italics 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 courts findings of facts and conclusions of law as expressed in the
body of the decision. (Italics supplied)
In Republic Surety and Insurance Company, Inc. v. Intermediate Appellate Court, the
Court, in applying the above doctrine, said:

x x x We clarify, in other words, what we did affirm. What 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, x x x. 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. (Italics supplied)
(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 Fortuns 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. 820904-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 attorneys fees, plus
costs;
(3) Dismissing defendants counterclaim, for lack of merit and making the preliminary
injunction permanent.
SO ORDERED.

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 States 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-82-0904AA 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 attorneys
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 attorneys 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 annum
and 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

x x x [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 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.

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-82-0904-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 attorneys 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.

EASTERN SHIPPING LINES, INC., petitioner, vs. HON. COURT OF APPEALS AND
MERCANTILE INSURANCE COMPANY, INC., respondents.

Common Carriers; Obligations; Presumption of Fault; When the goods shipped either
are lost or arrive in damaged condition, a presumption arises against the carrier of its
failure to observe that requisite diligence, and there need not be an express finding of
negligence to hold it liable.The common carriers 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 of the
Civil Code, are exclusive, not one of which can be applied to this case.

Same; Same; Arrastre Operator; Carrier and arrastre operator liable in solidum for the
proper delivery of the goods to the consignee.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 Firemans Fund Insurance
Co. vs. Metro Port Service, Inc. (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., et al., 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.

Same; Same; Same; The Supreme Court is not implying, however, 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.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.

Damages; Interest Rates; Rules of thumb for future guidance in the award of damages
and interest rates.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.
Same; Same; Same; When an obligation is breached, the contravenor can be held
liable for damages.When an obligation, regardless of its source, i.e., law, contracts,
quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable
for damages. The provisions under Title XVIII on Damages of the Civil Code govern in
determining the measure of recoverable damages.

Same; Same; Same; Interests in the Concept of Actual and Compensatory Damages; In
a loan or forbearance of money, the interest due should be that stipulated in writing, and
in the absence thereof, the rate shall be 12% per annum.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.

Same; Same; Same; Same; In case of other obligations, the interest on the amount of
damages may be imposed at the discretion of the court at the rate of 6% per annum.
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.

Same; Same; Same; Same; When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest 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.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.

PETITION for review of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Alojado & Garcia and Jimenea, Dala & Zaragoza for petitioner.
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 brokerforwarder 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, Inc. under Bill of Lading No. YMA-8 (Exh. B). The shipment
was insured under plaintiffs 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 consignees 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;

the custody of
determinable);

2.Whether or not these losses/damages were sustained while in

defendants (in whose respective custody, if

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

losses/damages (see
plaintiffs pre-Trial Brief, Records, p. 34;
Allieds pre-Trial Brief, adopting plaintiffs
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 vessels Agents Bad Order Tally Sheet No. 86427. The

report further states that when defendant Allied Brokerage withdrew the shipment from
defendant arrastre operators custody on January 7, 1982, one drum was found opened
without seal, cello bag partly torn but contents intact. Net unrecovered spillage was 15
kgs. The report went on to state that when the drums reached the consignee, one drum
was found with adul-terated/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 carriers 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 Shippings 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 attorneys fees, and
3. Costs.

B.Dismissing the counterclaims and crossclaim of defendant/cross-claimant

Allied Brokerage
Corporation.

SO ORDERED. (p. 207, Record).

Dissatisfied, defendants 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
RESPONDENTS 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 carriers 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, Inc. 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 17341 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 Firemans Fund Insurance, Co. vs. Metro Port Service, Inc. (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 decided3 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. (Italics 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:
Enrique Fernando, Francisco Capistrano, Claudio Teehankee and Antonio Barredo.
Chief Justice Roberto Concepcion and Justice Fred Ruiz Castro were on official leave.

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:

(a).....
x x x

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 alreadythe 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 attorneys fees of P5,000.00
with costs against defendants and third party plaintiffs. (Italics 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 courts 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. (Italics found in the text)
should have, instead, been applied. This Court 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.

x x x

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 forbear-ances 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 withlegal interest
thereon from the filing of the complaint until fully paid. Relying on the Reformina v.
Tomol case, this Court8 modified the interest award from 12% to 6% interest per annum
but sustained the time computation thereof, i.e., from the filing of the complaint until fully
paid.

In Nakpil and Sons vs. Court of Appeals,9 the trial court, in an action for the
recovery of damages arising from the collapse of a building, ordered, inter alia, the
defendant United Construction Co., Inc. (one of the petitioners) x x x to pay the plaintiff,
x x x, 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 x x x. Save from the modification
of the amount granted by the lower court, the Court of Appeals sustained the trial courts
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 of attorneys 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 attorneys 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 defen-dants (except Roman
Ozaeta). (Italics supplied)

A motion for reconsideration was filed by United Construction, contending that

the interest of twelve (12%) percent per annum imposed on the total amount of the
monetary award was in contravention of law. The Court10 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 x x x 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. (Italics
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
Court12 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. (Italics 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. (Italics 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 forcertiorari assailed the said order.
This Court said:

x x x, 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. x x x. Said circular [Central
Bank Circular No. 416] does not apply to actions based on a breach of employment
contract like the case at bar. (Italics 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,14 decided 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 x x x until fully paid. Again, in applying the 6% legal interest per annum under
the Civil Code, the
Court declared:

x x x, (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
forbearance16 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.

Thesecond group, did not alter the pronounced rule on the application of the
6% or 12% interest per annum,17 depending 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, 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.

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.

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.

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
courta quo. A TWELVE PERCENT (12%) interest, in lieu of SIX PERCENT (6%), shall
be imposed on such amount upon finality of this decision until the payment thereof.

SO ORDERED.

Narvasa (C.J.), Cruz, Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero,
Bellosillo, Melo, Quiason, Puno and Kapunan, JJ., concur.
Mendoza, J., Took no part in deliberations.
Petition partly granted.

Notes.Where the obligation arose from a contract or purchase and sale and not from
a contract of loan or mutuum, the applicable rate is 6% per annum as provided in Article
2209 of the Civil Code and not the rate of 12% per annum as provided in Circular No.
416 (Pilipinas Bank vs. Court of Appeals, 225 SCRA 268 [1993]).
While common carriers are required to observe extraordinary diligence and are
presumed at fault, no such presumption applies to private carriers (Planters Products,
Inc. vs. Court of Appeals, 226 SCRA 476 [1993]).
[Eastern Shipping Lines, Inc. vs. Court of Appeals, 234 SCRA 78(1994)]