legal rate of interest

7/28/2019 Legal Rate of Interest

1/23

Legal Rate of Interest

Cases:

Reformina vs. TomolOct. 11, 1985

Eastern Shipping Lines vs. CA

July 12, 1994

Martinez, Kristine Joan


2/23

Outline

BackgroundReformina vs. Tomol

Eastern Shipping vs. CALearnings and Rules Cited from Cases

Summary


3/23

Reformina vs. TomolFactual Background

1. Boat owned by Reforminas caughtfire on May 6, 1969.

2. Brought action for Recovery of Damages for injury to Person

and Loss of Property againstShell and Michael Incorporatedwho were ordered to pay:

1. P131,084.00 (value of boat,fishing gear and equipment) P80K (Insured amount)

2. P10k/month from date of fireuntil actually paid ORP370,000 as of June 4, 1972with legal interest from thefiling of the complaint untilfully paid

3. Attys fees of P5,000


4/23

Reformina vs. TomolOn Appeal

1. CA Modified and directed to pay1. P100,000 with legal interest from the filing of

the complaint until paid as compensatory andmoral damages

2. P41,000 compensation for value of the lost boatwith legal interest from the filing of thecomplaint until fully paid to Pacita F. Reforminaand heirs of Francisco Reformina.

2. Upon finality on Oct. 24, 1980, case remanded backto lower court for execution where dispute on rateof legal interest started.


5/23

Reformina vs. TomolIssue

How much by way of legal

interest, should a judgmentdebtor pay the judgmentcreditor?


6/23

Reformina vs. TomolIssue

Petitioners:Legal Interest should be at therate of 12% per annum.

Cited: CB 416

xxx By virtue of authority granted itunder S1 of Act 2655, as amended,xxx has prescribed that the rate of interest for loan or forbearance of any money goods or credits andthe rate allowed in judgments, inthe absence of express contract asto such rate of interest shall be12% per annum.Xxx

Respondents:Legal Interest should be at therate of 6% per annum.

Cited: New Civil Code 2209, 2210,2211

Art. 2210. Interest may, in the discretion of thecourt, be allowed upon damages awarded for breach of contract.

Art. 2211. In crimes and quasi-delicts, interest

as a part of the damages may, in a proper case,be adjudicated in the discretion of the court.

25 Art. 2209. If the obligation consists in thepayment 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 legalinterest which is six er cent er annum .


7/23

Reformina vs. TomolPetitioners: CB 416

In support of their stand, petitioners contend that Central Bank Circular No. 416 which provides

By virtue of the authority granted to it under Section 1 of Act 2655, asamended, otherwise known as the "Usury Law" the Monetary Board in

its Resolution No. 1622 dated July 29, 1974, has prescribed that therate of interest for the loan or forbearance of a ny money, goods, or

credits and the rate allowed i n ju d g m en t s , in theabsence of express contract as to such rate of interest, shall be twelve(12%) per cent per annum. This Circular shall take effect immediately.

(Italics supplied)

includes the judgment sought to be executed in this case, because it iscovered by the phrase 2nd the rate allowed in judgments in theabsence of express contract as to such rate of interest ... " in theaforequoted circular.


8/23

Act No. 2655Amended by CB 416

Deals with INTEREST on:

1. Loans2. Forebearances of any money, goods, or credits

3. Rate allowed in JudgementsIssue: What kind of judgment is referred to?

Court:1. Judgments in litigations involving loans or forebearance in money

goods or credits.2. Any other kind of monetary judgment which has nothing to do with,

nor involving loans or forbearance of any money, goods or creditsdoes not fall within the coverage of the said law for it is not withinthe ambit of the authority granted to the Central Bank. TheMonetary Board may not tread on forbidden grounds. It cannotrewrite other laws. That function is vested solely with the legislative


9/23


10/23

Eastern Shipping Linesvs. CA

Factual Background1. Two fiber drums of Riboflavin were

shipped out, insured under MercantileInsurance Co. Inc. Amount was for P38million ++

2. The following people dealt with theshipment:1. Shipper: Eastern Shipping Lines

2. Arrastre Operator: Metroport3. Broker: Allied Brokerage3. Facts were found that losses/damage

sustained by 1 drum on the shipment,amounting to P19,032.95 are attributableto the three due to their fault and


11/23


Factual BackgroundDefendants (3 above) ordered to pay jointly and severally:

1. The amount of P19,032.95, with the present legal interest of 12% per annu m from October 1, 1982, the date of filing of thiscomplaints, until fully paid (the liability of defendant EasternShipping, Inc. shall not exceed US$500 per case or the CIFvalue of the loss, whichever is lesser, while the liability of defendant Metro Port Service, Inc. shall be to the extent of theactual invoice value of each package, crate box or container in no case to exceed P5,000.00 each, pursuant to Section 6.01of the Management Contract);

2. P3,000.00 as attorney's fees, and

3. Costs.


12/23


Factual BackgroundThe Court of Appeals thus affirmed in to to the judgment of the court a quo .In this petition, Eastern Shipping Lines, Inc., the common carrier, attributeserror and grave abuse of discretion on the part of the appellate court when

I. IT HELD PETITIONER CARRIER JOINTLY AND SEVERALLY LIABLE WITHTHE ARRASTRE OPERATOR AND CUSTOMS BROKER FOR THE CLAIMOF PRIVATE RESPONDENT AS GRANTED IN THE QUESTIONEDDECISION;

II. IT HELD THAT THE GRANT OF INTEREST ON THE CLAIM OF PRIVATE

RESPONDENT SHOULD COMMENCE FROM THE DATE OF THE FILING OF THECOMPLAINT AT THE RATE OF TWELVE PERCENT PER ANNUM INSTEAD OFFROM THE DATE OF THE DECISION OF THE TRIAL COURT AND ONLY AT THERATE OF SIX PERCENT PER ANNUM , PRIVATE RESPONDENT'S CLAIM BEINGINDISPUTABLY UNLIQUIDATED.


13/23

Eastern Shipping Linesvs. CAQuestion

II. IT HELD THAT THE GRANT OF INTEREST ON THE CLAIM OF PRIVATERESPONDENT SHOULD COMMENCE FROM THE DATE OF THE FILING OF THECOMPLAINT AT THE RATE OF TWELVE PERCENT PER ANNUM INSTEAD OFFROM THE DATE OF THE DECISION OF THE TRIAL COURT AND ONLY AT THE

RATE OF SIX PERCENT PER ANNUM , PRIVATE RESPONDENT'S CLAIM BEINGINDISPUTABLY UNLIQUIDATED.

12% per annum from date of filing of complaint

Vs.6% per annum from date of trial court decision


14/23


Issues according to Justice Vitug(a) whether or not a claim for damage sustained on ashipment of goods can be a solidary, or joint andseveral, liability of the common carrier, the arrastreoperator and the customs broker;

(b) whether the payment of legal interest on an awardfor loss or damage is to be computed from the timethe complaint is filed or from the date the decisionappealed from is rendered; and

(c) whether the applicable rate of interest, referred toabove, is twelve percent (12%) or six percent (6%).


15/23


Cited Series of Cases(a) Malayan Insurance Co. Inc. vs. Manila Port Service(a) May 1969(b) Suit for recovery of money arising out of short deliveries and pilferage of

goods(c) Judgment: Pay Insurer-Appelle sum of P1447.51 with legal interest

thereon from the date the complaint was filed on Dec 28 1962 until fullpayment.

Interest upon an obligation which calls for the payment of money, absent astipulation, 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 thestarting point.But then upon the provisions of Article 2213 of the Civil Code, interest "cannot berecovered upon unliquidated claims or damages, except when the demand can beestablished 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 . Cor oracion de P .P . A ustinos 25 Phil . 447 Lichauco v . Guzman 38 Phil . 302 "


16/23


Cited Series of Casesb. Reformina vs. Tomol(a) Oct 1985(b) Recovery of Damages for Injury to Loss of Person and Property(c) Judgment: Applied Art 2209 and used 6% per annum legal rate of

interest

c. Philippine Rabbit Bus Lines, Inc. vs. Cruza. Jul 28, 1986b. Damages occasioned by an injury to person and loss of properyc. Compensatory damages with legal interest at 6% per annum from

filing of the complaint until fully paid

d. Nakpil and Sons vs. CAa. Action for Recovery of damages arising from the collapse of a buildingb. Ordered to pay plaintiff amount of P989k ++ with interest at legal rate

from date of filing of complaint until fully paid and Indemnity in favor of Phil Bar Assoc in amount of P5M

c. 12% per annum shall be imposed upon amounts from finality untilaid


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Cited Series of Casese. American Express International Inc. vs. IACa. Feb. 27, 1985b. Petition for review on certiorari from decisionc. Court: Ordered P100k moral damages with 6% interest computed from finality

of decision until paid

f. Florendo vs. Ruiza. Feb 21, 1989b. Breach of Employment Contract for being illegally dismissedc. Court: Moral and Exemplary Damages plus P1,400 compenstary damages with

interest at 6% per annum on damages from the time of filing of complaint until fully paid

g. NAPOCOR vs. Angas(a) May 8, 1992(b) Expropriation on certain parcels of Land(c) Judgment: 6% per annum on compensation for land clearly not a loan or

forbearance of money for money, goods or credits but for expropriation for publipurpose. Payment is without stipulation of interest but in the nature of indemnityfor damages. Art. 2209 shall apply.


18/23


2 Groups of Cases1st Group:Reformina vs. Tomol (1885)Philippine Rabbit Bus Lines (1986)Florendo vs. Ruiz (1989)NAPOCOR vs. Angas (1992)

Basic Issue: 6% under NCC or 12% under CB 416

1. 12% per annum1. Loans

2. Forbearance on money, goods or credits3. Judgment on loan or judgment on forbearance2. 6% per annum

1. Payment of indemnities in the concept of damage arising frombreach or delay in the performance of obligations in general

3. COMMON TIMEFRAME:

1. From the time complaint is filed until amount is fully paid


19/23


2 Groups of Cases2nd Group:Malayan Insurance Co. vs. Manila Port Service (1969)Nakpil and sons vs. CA (1988)American Express International vs. IAC

Basic Issue: 6% under NCC or 12% under CB 416

1. 12% per annum1. Loans2. Forbearance on money, goods or credits3. Judgment on loan or judgment on forbearance

2. 6% per annum1. Payment of indemnities in the concept of damage arising frombreach or delay in the performance of obligations in general

3. VARY on the commencement of the running of legal interest


20/23


2 Groups of CasesRULES OF THUMB FOR GUIDANCE:I. When an obligation, regardless of its source, i .e ., law, contracts, quasi-

contracts, delicts or quasi-delicts is breached, the contravenor can be heldliable for damages. The provisions under Title XVIII on "Damages" of theCivil Code govern in determining the measure of recoverable damages.


21/23


2 Groups of CasesRULES OF THUMB FOR GUIDANCE:II. With regard particularly to an award of interest in the concept of actual andcompensatory damages, the rate of interest, as well as the accrual thereof, isimposed, 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 bethat which may have been stipulated in writing . Furthermore, theinterest due shall itself earn legal interest from the time it is judiciallydemanded. In the absence of stipulation, the rate of interest shall be 12%

per annum to be computed from default, i .e ., from judicial or extrajudicialdemand under and subject to the provisions of Article 1169 of the CivilCode.


22/23


2 Groups of CasesRULES OF THUMB FOR GUIDANCE:

2. When an obligation, not constituting a loan or forbearance of money, isbreached, an interest on the amount of damages awarded may be imposed at thediscre t ion of the cour t at the rate of 6% per annu m . No interest, however, shall be

adjudged on unliquidated claims or damages except when or until the demand canbe established with reasonable certainty. Accordingly, where the demand isestablished with reasonable certainty, the interest shall begin to run from the timethe claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when suchcertainty cannot be so reasonably established at the time the demand is made, theinterest shall begin to run only from the date the judgment of the court is made (atwhich time the quantification of damages may be deemed to have been reasonablyascertained). The actual base for the computation of legal interest shall, in anycase, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final andexecutory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annu m from such finality until its

satisfaction, this interim period being deemed to be by then an equivalent to aforbearance of credit.


23/23

Thank you.

Report by Kristine Joan M. Martinez

legal rate of interest

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