DARIO NACAR, PETITIONER, VS.

GALLERY FRAMES AND/OR FELIPE BORDEY,

JR., RESPONDENTS.

FACTS:
Petitioner Dario Nacar filed a complaint for constructive dismissal before the Arbitration Branch
of the National Labor Relations Commission (NLRC) against respondents Gallery Frames (GF)
and/or Felipe Bordey, Jr..

On October 15, 1998, the Labor Arbiter rendered a Decision[3] in favor of petitioner and found
that he was dismissed from employment without a valid or just cause. Thus, petitioner was
awarded backwages and separation pay in lieu of reinstatement in the amount of P158,919.92.
The dispositive portion of the decision, reads:

As such, we are perforce constrained to grant complainants prayer for the payments of
separation pay in lieu of reinstatement to his former position which is computed only up to
promulgation of this decision.

Respondents were found guilty of constructive dismissal and are therefore, ordered to pay jointly
and severally the complainant the amount of P62,986.56 (separation pay), to pay jointly and
severally the complainant the amount of P95,933.36 (backwages) and all other claims are hereby
dismissed for lack of merit.

Upon appeal, NLRC sustained the decision of the Labor Arbiter. Respondents filed a Petition
for Review on Certiorari before the CA but was dismissed. Respondents then sought relief
before the Supreme Court which was also denied. An Entry of Judgment was later issued
certifying that the resolution became final and executory on May 27, 2002 and was then
referred back to the Labor Arbiter.

On November 5, 2002, petitioner filed a Motion for Correct Computation, praying that his
backwages be computed from the date of his dismissal on January 24, 1997 up to the finality of
the Resolution of the Supreme Court on May 27, 2002.[11] Upon recomputation, the Computation
and Examination Unit of the NLRC arrived at an updated amount in the sum of P471,320.31.[12]

On December 2, 2002, a Writ of Execution[13] was issued by the Labor Arbiter ordering the
Sheriff to collect from respondents the total amount of P471,320.31. Respondents filed a Motion
to Quash Writ of Execution, arguing, that since the Labor Arbiter awarded separation pay of
P62,986.56 and limited backwages of P95,933.36, no more recomputation is required to be made
of the said awards. The Labor Arbiter denied the motion. Thus, an Alias Writ of Execution[16]
was issued on January 14, 2003.

Respondents again appealed before the NLRC, and was granted. On August 20, 2003, an Entry
of Judgment was issued declaring the Resolution of the NLRC to be final and executory.
Meanwhile, petitioner moved that an Alias Writ of Execution be issued to enforce the earlier
recomputed judgment award in the sum of P471,320.31. The records of the case were again
forwarded to the Computation and Examination Unit for recomputation, where the judgment
award of petitioner was reassessed to be in the total amount of only P147,560.19.

Petitioner then moved that a writ of execution be issued ordering respondents to pay him the
original amount as determined by the Labor Arbiter in his Decision dated October 15, 1998,
pending the final computation of his backwages and separation pay.

On January 14, 2003, the Labor Arbiter issued an Alias Writ of Execution to satisfy the judgment
award that was due to petitioner in the amount of P147,560.19, which petitioner eventually
received.

Petitioner then filed a Manifestation and Motion praying for the re-computation of the monetary
award to include the appropriate interests but the Arbiter granted only up to the amount of
P11,459.73. The Labor Arbiter reasoned that since the decision states that the separation pay and
backwages are computed only up to the promulgation of the said decision, it is the amount of
P158,919.92 that should be executed. Thus, since petitioner already received P147,560.19, he is
only entitled to the balance of P11,459.73. Petitioner then appealed before the NLRC but was
denied. Upon recourse to the CA it was also denied.

ISSUE:
WON the Labor Arbiter is correct

WON the 6% per annum rate of legal interest shall be applied prospectively.

HELD:
No in both cases
There are two parts of a decision when it comes to illegal dismissal cases (referring to cases
where the dismissed employee wins, or loses but wins on appeal). The first part is the ruling that
the employee was illegally dismissed. This is immediately final even if the employer appeals
but will be reversed if employer wins on appeal. The second part is the ruling on the award of
backwages and/or separation pay. For backwages, it will be computed from the date of illegal
dismissal until the date of the decision of the Labor Arbiter. But if the employer appeals, then the
end date shall be extended until the day when the appellate courts decision shall become final.
Hence, as a consequence, the liability of the employer, if he loses on appeal, will increase this
is just but a risk that the employer cannot avoid when it continued to seek recourses against the
Labor Arbiters decision. This is also in accordance with Article 279 of the Labor Code.
Finally, anent the payment of legal interest. In the landmark case of Eastern Shipping Lines, Inc.
v. Court of Appeals,[32] the Court laid down the guidelines regarding the manner of computing
legal interest, to wit:
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.[33]
Recently, however, the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its
Resolution No. 796 dated May 16, 2013, approved the amendment of Section 2[34] of Circular
No. 905, Series of 1982 and, accordingly, issued Circular No. 799,[35] Series of 2013, effective
July 1, 2013, the pertinent portion of which reads:
The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following
revisions governing the rate of interest in the absence of stipulation in loan contracts, thereby
amending Section 2 of Circular No. 905, Series of 1982:
Section 1. 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 an express contract as to such rate of interest, shall
be six percent (6%) per annum.

Section 2. In view of the above, Subsection X305.1[36] of the Manual of Regulations for Banks
and Sections 4305Q.1,[37] 4305S.3[38] and 4303P.1[39] of the Manual of Regulations for Non-Bank
Financial Institutions are hereby amended accordingly.
This Circular shall take effect on 1 July 2013.
Thus, from the foregoing, in the absence of an express stipulation as to the rate of interest that
would govern the parties, the rate of legal interest for loans or forbearance of any money, goods
or credits and the rate allowed in judgments shall no longer be twelve percent (12%) per annum -
as reflected in the case of Eastern Shipping Lines[40] and Subsection X305.1 of the Manual of
Regulations for Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of
Regulations for Non-Bank Financial Institutions, before its amendment by BSP-MB Circular No.
799 - but will now be six percent (6%) per annum effective July 1, 2013. It should be noted,
nonetheless, that the new rate could only be applied prospectively and not retroactively.
Consequently, the twelve percent (12%) per annum legal interest shall apply only until
June 30, 2013. Come July 1, 2013 the new rate of six percent (6%) per annum shall be the
prevailing rate of interest when applicable.

Nonetheless, with regard to those judgments that have become final and executory prior to
July 1, 2013, said judgments shall not be disturbed and shall continue to be implemented
applying the rate of interest fixed therein.
And, in addition to the above, judgments that have become final and executory prior to July 1,
2013, shall not be disturbed and shall continue to be implemented applying the rate of interest
fixed therein.

WHEREFORE, premises considered, the Decision dated September 23, 2008 of the Court of
Appeals in CA-G.R. SP No. 98591, and the Resolution dated October 9, 2009 are REVERSED
and SET ASIDE. Respondents are Ordered to Pay petitioner:

(1) backwages computed from the time petitioner was illegally dismissed on January 24, 1997 up
to May 27, 2002, when the Resolution of this Court in G.R. No. 151332 became final and
executory; (2) separation pay computed from August 1990 up to May 27, 2002 at the rate of one
month pay per year of service; and (3) interest of twelve percent (12%) per annum of the total
monetary awards, computed from May 27, 2002 to June 30, 2013 and six percent (6%) per
annum from July 1, 2013 until their full satisfaction.