SECOND DIVISION
EASTERN ASSURANCE
AND SURETY CORPORATION (EASCO),
Petitioner,
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G.R.
No.
127135
January 18, 2000
-versus-
HON.
COURT OF
APPEALS,
HON. TEOFISTO L. CALUMPANG,IN HIS CAPACITY
AS PRESIDING JUDGE OF THE REGIONAL TRIALCOURT OF DUMAGUETE
CITY, BRANCH 40, AND VICENTE TAN,
Respondents.
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D E C I S I O N
MENDOZA,
J.:chanroblesvirtuallawlibrary
This is a petition for
review of the decision of the Court of Appeals,[1]
the dispositive portion of which reads:[2]
WHEREFORE,
the petition is hereby GIVEN DUE COURSE and is GRANTED. The legal
interest
rate to be paid by petitioner EASCO to the private respondent is 6% per
annum on the amount due corresponding to the period from June 26, 1981
to August 24, 1993; and 12% per annum beginning August 25, 1993 until
the
money judgment shall have been fully paid. No pronouncement as to costs.chanrobles virtuallaw libraryred
SO ORDERED.
The facts of the case
are
as follows:
On April 9, 1981, private
respondent Vicente Tan insured his building in Dumaguete City against
fire
with petitioner Eastern Assurance and Surety Corporation (EASCO) for
P250,000.00.
On June 26, 1981, the building was destroyed by fire. As his claim for
indemnity was refused, private respondent filed a complaint for breach
of contract with damages against petitioner. The Regional Trial Court,
Branch 40, Dumaguete City, to which the case was assigned rendered
judgment
as follows:[3]chanrobles virtuallaw libraryred
WHEREFORE, judgment
is rendered in favor of plaintiff [private respondent Vicente Tan] and
ordering defendant [petitioner EASCO]
1. To pay
plaintiff the sum of Two Hundred Fifty Thousand (P250,000.00) Pesos
representing
the fire insurance claim of plaintiff plus legal rate of interest from
June 26, 1981 until fully paid;chanrobles virtuallaw libraryred
2. To pay
plaintiff the sum of Twenty Thousand (P20,000.00) Pesos as attorney's
fees;
3. To pay
plaintiff all expenses incurred when he went to Manila with his lawyer
regarding his insurance claim;
4. To pay
plaintiff Twenty Thousand Pesos (P20,000.00) Pesos as moral damages and
Twenty Thousand (P20,000.00) Pesos as exemplary damages.cralaw:red
SO ORDERED.cralaw:red
Petitioner appealed
to the Court of Appeals, which, on July 30, 1993, affirmed the decision
of the trial court with modification by disallowing the award of moral
and exemplary damages, attorney's fees and litigation expenses. As no
further
appeal was taken from the decision of the Court of Appeals, the same
became
final and executory on August 25, 1993. Thereupon, petitioner tendered
payment of the money judgment in the amount of P250,000.00 plus
interest
of 6% per annum from June 26, 1981 to July 30, 1993. However, private
respondent
refused to accept payment on the ground that the applicable legal rate
of interest was 12% per annum. Subsequently, private respondent brought
the matter to the Insurance Commission. On February 27, 1995, the
parties
agreed before the hearing officer of the commission that the interest
should
be computed from June 26, 1981 to September 30, 1994. Petitioner would
file with the trial court a motion to fix the legal rate of interest
attaching
thereto a check in the amount of P250,000.00 with 6% interest per annum.cralaw:red
Accordingly, on March
17, 1995, petitioner filed the necessary motion in court, attaching
thereto
a manager's check for P448,750.00 representing the principal sum plus
6%
interest per annum for the period June 26, 1981 to September 30, 1994.
On May 10, 1995, the trial court issued the assailed resolution fixing
the rate of interest at 12% per annum, the dispositive portion of which
reads:[4]
WHEREFORE, premises
considered, this Court hereby resolve[s] that:
1. The legal rate of
interest imposable on the principal sum of P250,000.00 should be twelve
(12%) per annum from June 26, 1981 to September 30, 1994, which is the
cut-off date agreed upon by the parties;
2. That the manager's
check issued by the defendant in the amount of P448,750.00 in favor of
the plaintiff is considered as partial satisfaction of the writ of
execution;
and
3. Defendant to pay
immediately to plaintiff the unpaid balance of interest of the
principal
amount of P250,000.00 equivalent to 6% per annum from June 26, 1981 to
September 30, 1994.cralaw:red
Petitioner filed a motion
for reconsideration which was, however, denied by the trial court.
Thus,
on August 30, 1995, petitioner went to the Court of Appeals on
certiorari,
and on November 14, 1996, the appellate court rendered a decision.
Noting
that the case was for breach of contract for the payment of damages for
the loss or destruction of property and not for collection of a loan or
forbearance of money, the Court of Appeals ruled, on the authority of
Eastern
Shipping Lines, Inc. v. Court of Appeals,[5]
that the interest rate on the amount due should be 6% per annum from
June
26, 1981 to August 24, 1993, and 12% per annum beginning August 25,
1993
(the date the decision of the trial court became final and executory)
until
the money judgment is paid.cralaw:red
Hence, this petition.
Petitioner contends that[6]
I. The Appellate Court
glaringly committed an error of law in its assailed decision when it
wrongfully
applied the aforecited paragraph 3 of the suggested rules of thumb for
future guidance [as formulated in Eastern Shipping Lines, Inc. v. Court
of Appeals, 234 SCRA 78 (1994)] and unlawfully ignored or disregarded
the
agreed cut-off date for the payment of the legal rate of interest on
the
amount due, contrary to the manifestations/admissions of the parties as
well as the stand of the respondent Judge in resolving the issue of
applicable
legal rate of interest thereon.cralaw:red
II. The application
of the abovequoted paragraph 3 of the suggested rules of thumb in the
computation
of the applicable legal rate of interest embodied in the dispositive
part
of the assailed decision is tantamount to a "modification of a judgment
that is at its execution stage." It is also an "addition" amounting to
a material alteration of the same judgment which had been satisfied
only
at 6% percent interest per annum from June 26, 1981 up to September 30,
1994 (the agreed cut-off date). Hence, it cannot be allowed and is null
and void.cralaw:red
Petitioner's contentions
are without merit.cralaw:red
First. In Eastern Shipping
Lines, Inc. v. Court of Appeals,[7]
it was held:
I. 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.cralaw:red
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.cralaw:red
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.cralaw:red
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.cralaw:red
Unquestionably, this
case falls under the rule stated in paragraph 3. The question is
whether
this rule can be applied to this case. Petitioner contends that
paragraph
3 cannot be applied to this case considering that the decision of July
30, 1993 of the Court of Appeals, affirming the decision of the trial
court,
became final and executory on August 25, 1993, whereas the decision in
Eastern Shipping Lines, Inc. was rendered only on July 22, 1994.
Petitioner
argues that the rules stated in that case were in fact made for "future
guidance" of courts and, thus, to apply paragraph 3 to the case at bar
is to sanction the modification of a judgment which is already final
and
executory.cralaw:red
Contrary to petitioner's
contention, Eastern Shipping Lines, Inc. did not lay down any new
rules;
all that was made was to state a comprehensive summary of existing
rules
on the computation of legal interest. In fact, earlier in the case of
Nakpil
and Sons v. Court of Appeals,[8]
the Court allowed the imposition of 12% legal interest per annum on
money
judgment from the date of its finality until fully paid. Strictly
speaking,
therefore, there was no retroactive application of the rules in this
case.cralaw:red
Nor was there modification
of judgment in fixing the legal rate of interest at 12% precisely
because
the subject case arose when the trial court failed to specify in its
decision
the rate of the legal interest to be imposed on the money judgment.cralaw:red
Second. Petitioner argues
that the parties agreed on the "cut-off date" for the payment of legal
interest, and that is from June 26, 1981 to September 30, 1984, which
the
Court of Appeals should have respected. Private respondent disputes the
existence of the alleged agreement of the parties. He claims that he
merely
agreed to refer the issue of the applicable rate of legal interest to
the
trial court for resolution.[9]
We are inclined to believe
the claim of petitioner. The resolution of May 10, 1995 of the trial
court
referred to such an agreement, and private respondent never questioned
this resolution. The trial court's finding on this point is binding.
Hence,
the payment of 12% legal interest per annum should commence from August
25, 1993, the date the decision of the trial court became final, up to
September 30, 1994, the agreed "cut-off-date" for the payment of legal
interest.cralaw:red
WHEREFORE, the questioned
decision is AFFIRMED with the only MODIFICATION that petitioner is
ordered
to pay interest on the amount due at the rate of 12% legal interest per
annum from August 25, 1993 to September 30, 1994.cralaw:red
SO ORDERED.cralaw:red
Bellosillo, J., (Chairman),
Quisumbing, and De Leon, Jr., JJ.,
concur.
Buena, J., took no part,
having concurred in the decision below.
____________________________
Endnotes:cralaw:red
[1]
Per Justice Angelina Sandoval Gutierrez and concurred in by Justices
Arturo
B. Buena (now Associate Justice of the Supreme Court) and Conrado M.
Vasquez,
Jr.
[2]
Decision, p. 6; Rollo, p. 29.chanrobles virtuallaw libraryred
[3]
Rollo, pp. 15, 25.chanrobles virtuallaw libraryred
[4]
Petition, p. 4; Rollo, p. 17.
[5]
234 SCRA 78 (1994)chanrobles virtuallaw libraryred
[6]
Petition, pp. 5-6; Rollo, pp. 18-19.
[7]
234 SCRA 78, 95-97.chanrobles virtuallaw libraryred
[8]
160 SCRA 334 (1988)
[9]
Rollo, p. 51.chanrobles virtuallaw libraryred
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