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 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 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 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."
(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 Court6 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
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) 
. . . 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 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 . . . 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 Court11 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.
(Emphasis supplied)
Reformina came into fore again in the 21 February 1989 case of Florendo
v. Ruiz13 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
Court15 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
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.

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-delicts18 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 116923 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
court24 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.