DIGEST DRAFTS ₱300,000.00 as exemplary damages, ₱100,000.
00 as
Pantaleon v. American Express, May 2009
FACTS:
AMEX is a resident foreign corporation engaged in the
business of providing credit services through the operation of a
charge card system. Pantaleon has been an AMEX cardholder
since 1980.
In October 1991, Pantaleon, together with his wife (Julialinda),
daughter (Regina), and son (Adrian Roberto), went on a
Europe-tour. On October 25, 1991, the tour group arrived in
Amsterdam. Due to their late arrival, they postponed the tour of
the city for the following day.
The next day, the group began their sightseeing at around 8:50
a.m. with a trip to the Coster Diamond House. The tour group
planned to leave Coster by 9:30 a.m. at the latest.
While at Coster, Mrs. Pantaleon decided to purchase some
diamond pieces worth a total of US$13,826.00. Pantaleon
presented his American Express credit card to the sales clerk
to pay for this purchase at around 9:15 a.m. The sales clerk
swiped the credit card and asked Pantaleon to sign the charge
slip, which was then electronically referred to AMEX’s
Amsterdam office at 9:20 a.m.
45 minutes after Pantaleon presented his credit card, AMEX
still had not approved the purchase. Since the city tour could
not begin until the Pantaleons were onboard the tour bus,
Coster decided to release at around 10:05 a.m. the purchased
items to Pantaleon even without AMEX’s approval.
When the Pantaleons finally returned to the tour bus, they
found their travel companions visibly irritated. This irritation
intensified when the tour guide announced that they would
have to cancel the tour because of lack of time as they all had
to be in Calais, Belgium by 3 p.m. to catch the ferry to London.
From the records, it was not until 10:38 a.m. that AMEX’s
Manila office finally transmitted the Approval Code to AMEX’s
Amsterdam office. In all, it took AMEX a total of 78 minutes to
approve Pantaleon’s purchase and to transmit the approval to
the jewelry store.
After the trip to Europe, the Pantaleon family proceeded to the
United States. Again, Pantaleon experienced delay in securing
approval for purchases using his American Express credit card
on two separate occasions. He experienced the first delay
when he wanted to purchase golf equipment in the amount of
US$1,475.00 on October 30, 1991. Another delay occurred
when he wanted to purchase children’s shoes worth US$87.00
on November 3, 1991.
Upon return to Manila, Pantaleon sent AMEX a letter
demanding an apology for the humiliation and inconvenience
he and his family experienced due to the delays in obtaining
approval for his credit card purchases. AMEX responded by
explaining that the delay in Amsterdam was due to the amount
involved – the charged purchase of US$13,826.00 deviated
from Pantaleon’s established charge purchase pattern.
Dissatisfied with this explanation, Pantaleon filed an action for
damages against the credit card company with the Makati City
Regional Trial Court (RTC).
RTC DECISION:
On August 5, 1996, the RTC found AMEX guilty of delay, and
awarded Pantaleon ₱500,000.00 as moral damages,
attorney’s fees, and ₱85,233.01 as litigation expenses.
CA DECISION:
On appeal, the CA reversed the awards. It disagreed with the
RTC’s finding that AMEX had breached its contract, noting that
the delay was not attended by bad faith, malice or gross
negligence. The appellate court found that AMEX exercised
diligent efforts to effect the approval of Pantaleon’s purchases.
As there was no proof that AMEX breached its contract, or that
it acted in a wanton, fraudulent or malevolent manner, the
appellate court ruled that AMEX could not be held liable for any
form of damages.
Pantaleon questioned this decision via a petition for review on
certiorari with this Court.
SC FIRST DECISION:
In our May 8, 2009 decision, we reversed the appellate court’s
decision and held that AMEX was guilty of mora solvendi, or
debtor’s default. AMEX, as debtor, had an obligation as the
credit provider to act on Pantaleon’s purchase requests,
whether to approve or disapprove them, with "timely dispatch."
Based on the evidence on record, we found that AMEX failed
to timely act on Pantaleon’s purchases.
Based on the testimony of AMEX’s credit authorizer Edgardo
Jaurique, the approval time for credit card charges would be
three to four seconds under regular circumstances. In
Pantaleon’s case, it took AMEX 78 minutes to approve the
Amsterdam purchase. We attributed this delay to AMEX’s
Manila credit authorizer, Edgardo Jaurique, who had to go over
Pantaleon’s past credit history, his payment record and his
credit and bank references before he approved the purchase.
Finding this delay unwarranted, we reinstated the RTC
decision and awarded Pantaleon moral and exemplary
damages, as well as attorney’s fees and costs of litigation.
THE MOTION FOR RECONSIDERATION
In its motion for reconsideration, AMEX argues that this Court
erred when it found AMEX guilty of culpable delay in complying
with its obligation to act with timely dispatch on Pantaleon’s
purchases. While AMEX admits that it normally takes seconds
to approve charge purchases, it emphasizes that Pantaleon
experienced delay in Amsterdam because his transaction was
not a normal one. To recall, Pantaleon sought to charge in a
single transaction jewelry items purchased from Coster in the
total amount of US$13,826.00 or ₱383,746.16. While the total
amount of Pantaleon’s previous purchases using his AMEX
credit card did exceed US$13,826.00, AMEX points out that
these purchases were made in a span of more than 10 years,
not in a single transaction.
Because this was the biggest single transaction that Pantaleon
ever made using his AMEX credit card, AMEX argues that the
transaction necessarily required the credit authorizer to
carefully review Pantaleon’s credit history and bank references.
AMEX maintains that it did this not only to ensure Pantaleon’s
protection (to minimize the possibility that a third party was
fraudulently using his credit card), but also to protect itself from
the risk that Pantaleon might not be able to pay for his
purchases on credit. This careful review, according to AMEX, is
also in keeping with the extraordinary degree of diligence
required of banks in handling its transactions. AMEX
concluded that in these lights, the thorough review of
Pantaleon’s credit record was motivated by legitimate concerns
and could not be evidence of any ill will, fraud, or negligence
by AMEX.
AMEX further points out that the proximate cause of
Pantaleon’s humiliation and embarrassment was his own
decision to proceed with the purchase despite his awareness
that the tour group was waiting for him and his wife. Pantaleon
could have prevented the humiliation had he canceled the sale
when he noticed that the credit approval for the Coster
purchase was unusually delayed.
In his Comment dated February 24, 2010, Pantaleon maintains
that AMEX was guilty of mora solvendi, or delay on the part of
the debtor, in complying with its obligation to him. Based on
jurisprudence, a just cause for delay does not relieve the
debtor in delay from the consequences of delay; thus, even if
AMEX had a justifiable reason for the delay, this reason would
not relieve it from the liability arising from its failure to timely
act on Pantaleon’s purchase.
ISSUES:
(a) Whether AMEX has a contractual or a legal obligation
to act upon Pantaleon’s purchases within a specific
period of time (NO.)
(b) Whether AMEX has a right to review a cardholder’s
credit card history (YES.)
RULING:
On AMEX’s obligations to Pantaleon
First, Pantaleon presumes that since his credit card has no
pre-set spending limit, AMEX has the obligation to approve all
his charge requests. Conversely, even if AMEX has no such
obligation, at the very least it is obliged to act on his charge
requests within a specific period of time.
From the loan agreement perspective, the contractual
relationship begins to exist only upon the meeting of the offer
and acceptance of the parties involved. In more concrete
terms, when cardholders use their credit cards to pay for their
purchases, they merely offer to enter into loan agreements with
the credit card company. Only after the latter approves the
purchase requests that the parties enter into binding loan
contracts, in keeping with Article 1319 of the Civil Code, which
provides:
Article 1319. “Consent is manifested by the meeting
of the offer and the acceptance upon the thing and
the cause which are to constitute the contract. The
offer must be certain and the acceptance absolute. A
qualified acceptance constitutes a counter-offer.”
This view finds support in the reservation found in the card
membership agreement itself, particularly paragraph 10, which
clearly states that AMEX "reserve[s] the right to deny
authorization for any requested Charge." By so providing,
AMEX made its position clear that it has no obligation to
approve any and all charge requests made by its card holders.
AMEX not guilty of culpable delay
Since AMEX has no obligation to approve the purchase
requests of its credit cardholders, Pantaleon cannot claim that
AMEX defaulted in its obligation. Article 1169 of the Civil Code,
which provides the requisites to hold a debtor guilty of culpable
delay, states:
Article 1169. “Those obliged to deliver or to do something
incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of their
obligation.” x x x.
The three requisites for a finding of default are: (a) that the
obligation is demandable and liquidated; (b) the debtor delays
performance; and (c) the creditor judicially or extrajudicially
requires the debtor’s performance.
Based on the above, the first requisite is no longer met
because AMEX, by the express terms of the credit card
agreement, is not obligated to approve Pantaleon’s purchase
request. Without a demandable obligation, there can be no
finding of default.
Apart from the lack of any demandable obligation, we also find
that Pantaleon failed to make the demand required by Article
1169 of the Civil Code.
As previously established, the use of a credit card to pay for a
purchase is only an offer to the credit card company to enter a
loan agreement with the credit card holder. Before the credit
card issuer accepts this offer, no obligation relating to the loan
agreement exists between them. On the other hand, a demand
is defined as the "assertion of a legal right; xxx an asking with
authority, claiming or challenging as due." A demand
presupposes the existence of an obligation between the
parties.
Thus, every time that Pantaleon used his AMEX credit card to
pay for his purchases, what the stores transmitted to AMEX
were his offers to execute loan contracts. These obviously
could not be classified as the demand required by law to make
the debtor in default, given that no obligation could arise on the
part of AMEX until after AMEX transmitted its acceptance of
Pantaleon’s offers. Pantaleon’s act of "insisting on and waiting
for the charge purchases to be approved by AMEX" is not the
demand contemplated by Article 1169 of the Civil Code.
For failing to comply with the requisites of Article 1169,
Pantaleon’s charge that AMEX is guilty of culpable delay in
approving his purchase requests must fail.
On AMEX’s obligation to act on the offer within a specific
period of time
Pantaleon insists that AMEX had an obligation to act on his
purchase requests, either to approve or deny, in "a matter of
seconds" or "in timely dispatch."
Pantaleon’s assertions fail to convince us.
Every time Pantaleon charges a purchase on his credit card,
the credit card company still has to determine whether it will
allow this charge, based on his past credit history.
Pantaleon also cannot look to the law or government
issuances as the source of AMEX’s alleged obligation to act
upon his credit card purchases within a matter of seconds. As
the following survey of Philippine law on credit card
transactions demonstrates, the State does not require credit
card companies to act upon its cardholders’ purchase requests
within a specific period of time.
AMEX acted with good faith
Although found not guilty of culpable delay, AMEX doesn't
have an unlimited right to put off action on cardholders’
purchase requests for indefinite periods of time. In acting on
cardholders’ purchase requests, AMEX must take care not to
abuse its rights and cause injury to its clients and/or third
persons. We cite in this regard Article 19, in conjunction with
Article 21, of the Civil Code, which provide:
Article 19. “Every person must, in the exercise of his
rights and in the performance of his duties, act with
justice, give everyone his due and observe honesty
and good faith.”
Article 21. “Any person who willfully causes loss or
injury to another in a manner that is contrary to
morals, good customs or public policy shall
compensate the latter for the damage.”
A right, though by itself legal because recognized or granted by
law as such, may nevertheless become the source of some
illegality. When a right is exercised in a manner which does not
conform with the norms enshrined in Article 19 and results in
damage to another, a legal wrong is thereby committed for
which the wrongdoer must be held responsible.
In Edgardo Jaurigue’s own words:
Q 21: With reference to the transaction at the Coster Diamond
House covered by Exhibit H, also Exhibit 4 for the defendant,
the approval came at 2:19 a.m. after the request was relayed
at 1:33 a.m., can you explain why the approval came after
about 46 minutes, more or less?
A21: Because we have to make certain considerations and
evaluations of [Pantaleon’s] past spending pattern with [AMEX]
at that time before approving plaintiff’s request because
[Pantaleon] was at that time making his very first single charge
purchase of US$13,826 [this is below the US$16,112.58
actually billed and paid for by the plaintiff because the
difference was already automatically approved by [AMEX]
office in Netherland[s] and the record of [Pantaleon’s] past
spending with [AMEX] at that time does not favorably support
his ability to pay for such purchase. In fact, if the foregoing
internal policy of [AMEX] had been strictly followed, the
transaction would not have been approved at all considering
that the past spending pattern of the plaintiff with [AMEX] at
that time does not support his ability to pay for such purchase.
XXXXX
Q: Why did it take so long?
A: It took time to review the account on credit, so, if there is
any delinquencies [sic] of the cardmember. There are factors
on deciding the charge itself which are standard measures in
approving the authorization. Now in the case of Mr. Pantaleon
although his account is single charge purchase of US$13,826.
[sic] this is below the US$16,000. plus actually billed x x x we
would have already declined the charge outright and asked
him his bank account to support his charge. But due to the
length of his membership as cardholder we had to make a
decision on hand.
Pantaleon’s action was the proximate cause for his injury
Pantaleon mainly anchors his claim for moral and exemplary
damages on the embarrassment and humiliation that he felt
when the European tour group had to wait for him and his wife
for approximately 35 minutes, and eventually had to cancel the
Amsterdam city tour. After thoroughly reviewing the records of
this case, we have come to the conclusion that Pantaleon is
the proximate cause for this embarrassment and humiliation.
As borne by the records, Pantaleon knew even before entering
Coster that the tour group would have to leave the store by
9:30 a.m. to have enough time to take the city tour of
Amsterdam before they left the country. After 9:30 a.m.,
Pantaleon’s son, who had boarded the bus ahead of his family,
returned to the store to inform his family that they were the only
ones not on the bus and that the entire tour group was waiting
for them. Significantly, Pantaleon tried to cancel the sale at
9:40 a.m. because he did not want to cause any inconvenience
to the tour group. However, when Coster’s sale manager asked
him to wait a few more minutes for the credit card approval, he
agreed, despite the knowledge that he had already caused a
10-minute delay and that the city tour could not start without
him.
In Nikko Hotel Manila Garden v. Reyes, we ruled that a person
who knowingly and voluntarily exposes himself to danger
cannot claim damages for the resulting injury:
The doctrine of volenti non fit injuria ("to which a person
assents is not esteemed in law as injury") refers to self-inflicted
injury or to the consent to injury which precludes the recovery
of damages by one who has knowingly and voluntarily exposed
himself to danger, even if he is not negligent in doing so.
This doctrine, in our view, is wholly applicable to this case.
Pantaleon himself testified that the most basic rule when
traveling in a tour group is that you must never be a cause of
any delay because the schedule is very strict.46 When
Pantaleon made up his mind to push through with his
purchase, he must have known that the group would become
annoyed and irritated with him. This was the natural,
foreseeable consequence of his decision to make them all
wait.
Pantaleon is not entitled to damages
WHEREFORE, premises considered, we SET ASIDE our May
8, 2009 Decision and GRANT the present motion for
reconsideration. The Court of Appeals Decision dated August
18, 2006 is hereby AFFIRMED. No costs.
SO ORDERED.
Additional NOTES:
Nature of Credit Card Transactions
To better understand the dynamics involved in credit card
transactions, we turn to the United States case of Harris Trust
& Savings Bank v. McCray which explains:
The bank credit card system involves a tripartite relationship
between the issuer bank, the cardholder, and merchants
participating in the system. The issuer bank establishes an
account on behalf of the person to whom the card is issued,
and the two parties enter into an agreement which governs
their relationship. This agreement provides that the bank will
pay for cardholder’s account the amount of merchandise or
services purchased through the use of the credit card and will
also make cash loans available to the cardholder. It also states
that the cardholder shall be liable to the bank for advances and
payments made by the bank and that the cardholder’s
obligation to pay the bank shall not be affected or impaired by
any dispute, claim, or demand by the cardholder with respect
to any merchandise or service purchased.
The merchants participating in the system agree to honor the
bank’s credit cards. The bank irrevocably agrees to honor and
pay the sales slips presented by the merchant if the merchant
performs his undertakings such as checking the list of revoked
cards before accepting the card.

The issuance of a credit card is but an offer to extend a line of

open account credit. It is unilateral and supported by no
consideration. The offer may be withdrawn at any time, without
prior notice, for any reason or, indeed, for no reason at all, and
its withdrawal breaches no duty – for there is no duty to
continue it – and violates no rights.

Thus, under this view, each credit card transaction is

considered a separate offer and acceptance.
Eusebio-Calderon v. People October 2004
FACTS:
Within the months of May to November 1994, in the
municipality of Pulilan, Bulacan, petitioner ELIZABETH
EUSEBIO-CALDERON, by means of deceit, false pretenses
and fraudulent manifestations, and pretending to have
sufficient funds with Allied, Planters, and PCI Bank, willfully,
unlawfully and feloniously, prepared, issue and make out the
numerous checks amounting to
(1) P130,900.00 to one Amelia Casanova. (Criminal
Case No. 1190-M-95)
(2) P172,250.00 to one Teresite Eusebio. (Criminal Case
No. 1191-M-95)
(3) P60,000.00 to one Manolito G. Eusebio. (Criminal
Case No. 1192-M-95)
drawn against the said banks, and deliver the said checks to
the private complainants as exchange for cash received from
the said private complainants, knowing fully well that at the
time the checks were issued, her representations were false
for she had no sufficient funds in the said bank, so much so,
that upon presentation of the said checks with the said banks
for deposit or encashment, the same were dishonored and
refused payment for having been drawn against a "Closed
Account" and despite of repeated demands to deposit with the
said banks the amounts, the said accused failed and refused to
do so, to the damage and prejudice of the said private
complainants in the said amounts.
The private complainants, Teresita Eusebio, Amelia Casanova
and Manolito Eusebio, are petitioner’s aunt and cousins,
respectively.
According to private complainants, Elizabeth assured them that
the checks will be honored upon maturity. They gave her the
money because she showed them her pieces of jewelry which
convinced them that she has the ability to pay the loans.
In her defense, Elizabeth admits that she issued the checks
but alleges that it was not done to defraud her creditors. She
claims that her dealings with private complainants started in
1987 with her uncle Alberto, the husband of complainant
Teresita and the father of Amelia and Manolito. Although her
uncle died in 1989, she continued to make good the value of
the postdated checks she issued until 1990. Finally, she
asserts that she is an educated woman and she never had any
intention to deceive the private complainants.
LOWER COURT DECISION:
After trial, the lower court rendered a joint decision finding
Elizabeth guilty beyond reasonable doubt of three counts of
Estafa but ruled that her liability for the "interest checks" was
only civil.
The trial court denied Elizabeth's Motion for Reconsideration
for lack of merit. Hence, Elizabeth appealed the judgment of
the trial court to the Court of Appeals.
CA DECISION:
In its Decision dated April 30, 2001, the Court of Appeals
disposed of the appeal as follows:
Decision appealed from in so far as it bears on the criminal
liability of the accused is REVERSED and SET ASIDE and a
new judgment is issued ACQUITTING the accused of the
crimes charged on the ground that her guilt has not been
proven beyond reasonable doubt. However, she is held civilly
liable as follows:
- In Criminal Case No. 1190-M-95: To indemnify Amelia
Casanova the total amount of P130,900.00;
- In Criminal Case No. 1191-M-95: To indemnify
Teresita Eusebio the total amount of P172,250.00;
- In Criminal Case No. 1192-M-95: To indemnify
Manolito Eusebio the total amount of P60,000.00;
all with interest thereon at the rate of 12% per annum effective
December 20, 1994, the date of complainants’ demand thru
their counsel, until fully paid, and to pay costs.
In the instant petition for review, Elizabeth raises the following
errors:
ISSUES:
(1) Whether the Court of Appeals erred in finding
Elizabeth civilly liable to complainants with respect to
the interest in the principal loan despite the dismissal
of the interest checks by the Regional Trial Court?
(2) Whether the interest agreed upon by the parties is
usurious? * * * (NO. Since there can be no
stipulated interest in this case)
(3) Whether the private respondents should file a
separate civil complaint for the claim of Sum of
Money?
RULING:
Petitioner Elizabeth Calderon is clearly liable to the private
respondents for the amount borrowed. The Court of Appeals
found that Elizabeth did not employ trickery or deceit in
obtaining money from the private complainants, instead, it
concluded that the money obtained was undoubtedly loans for
which Elizabeth paid interest. The checks issued by Elizabeth
as payment for the principal loan constitute evidence of her
civil liability which was deemed instituted with the criminal
action.
The civil liability of Elizabeth includes only the principal amount
of the loan. With respect to the interest checks she issued, the
same are void. There was no written proof of the payable
interest except for the verbal agreement that the loan shall
earn 5% interest per month. Under Article 1956 of the Civil
Code, an agreement as to payment of interest must be in
writing, otherwise it cannot be valid. Consequently, no
interest is due and the interest checks she issued should
be eliminated from the computation of her civil liability.
However, while there can be no stipulated interest, there
can be legal interest pursuant to Article 2209 of the Civil
Code. It is elementary that in the absence of a stipulation as
to interest, the loan due will now earn interest at the legal rate
of 12% per annum. In the case of Eastern Shipping Lines, Inc.
v. Court of Appeals, we established the guidelines particularly
for the award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the
accrual thereof as follows:
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.
Hence, Elizabeth is liable for the payment of legal interest
per annum to be computed from December 20, 1994, the
date when she received the demand letter. After the
judgment becomes final and executory until the obligation is
satisfied, the amount due shall earn interest at 12% per year,
the interim period being deemed equivalent to a forbearance of
credit.

In view of our ruling that there can be no stipulated interest

in this case, there is no need to pass upon the second
issue of whether or not the interests were usurious.

WHEREFORE, in view of the foregoing, the Decision of the

Court of Appeals in CA-G.R. CR No. 23466 is AFFIRMED with
the MODIFICATION that

SC RULING:
Elizabeth is ordered to pay:
(1) Amelia Casanova the sum of P100,00.00;
(2) Teresita Eusebio the sum of P157,500.00; and
(3) Manolito Eusebio the sum of P50,000.00
as civil liability with legal interest of twelve percent (12%) per
annum from December 20, 1994 until its satisfaction.
Eastern Shipping Lines v. CA July 1994
FACTS:
On December 4, 1981, two fiber drums of riboflavin were
shipped from Yokohama, Japan to Manila via vessel "SS
EASTERN COMET" owned by defendant Eastern Shipping
Lines.
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.")
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.
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.
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.
The issues and evidence that were presented to the lower
court are:
1. Whether the shipment sustained losses/damages;
2. Whether these losses/damages were sustained while
in the custody of defendants (in whose respective
custody, if determinable);
3. Whether defendant(s) should be held liable for the
losses/damages.
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. 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 were 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".
LOWER COURT DECISION:
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.
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.)
CA DECISION:
The Court of Appeals thus affirmed in toto the judgment of the
court a quo.
In this instant 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.
SC grants, in part, the petition.
ISSUES:
(a) Whether 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; (YES.)
(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; (12% FROM
THE FINALITY OF THE DECISION - See
explanation below in NOTES.)
(c) Whether the applicable rate of interest, referred to
above, is twelve percent (12%) or six percent (6%).
RULING:
(1) 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 1734 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:
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.
(2) In the early case of Malayan Insurance Co., Inc., vs. Manila
Port Service, 15 May 1969, it was stated that "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."
However, 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, 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."
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.
SC DECISION:
WHEREFORE, the petition is partly GRANTED. The appealed
decision is AFFIRMED with the MODIFICATION that the legal
interest to be paid is TWELVE PERCENT (12%) interest, in lieu
of SIX PERCENT (6%) upon finality of this decision until the
payment thereof. ***
NOTES:
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-delicts 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. EXPLANATION AS TO WHY SC CHOSE 12% PER

ANNUM IN LIEU OF THE PRIOR CA DECISION OF 6% PER
ANNUM. 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.
Medel v. CA, November 1998
FACTS:
On November 7, 1985, Servando Franco and Leticia Medel
obtained a loan from Veronica Gonzales who was engaged in
the money lending business under the name "Gonzales Credit
Enterprises", in the amount of P50,000.00, payable in two
months.
Veronica gave only the amount of P47,000.00, to the
borrowers, as she retained P3,000.00, as advance interest for
one month at 6% per month. Servando and Leticia executed a
promissory note for P50,000.00, to evidence the loan, payable
on January 7, 1986.
On November 19, 1985, Servando and Leticia obtained from
Veronica another loan in the amount of P90,000.00, payable in
two months, at 6% interest per month. They executed a
promissory note to evidence the loan, maturing on January 19,
1986. They received only P84,000.00, out of the proceeds of
the loan.
On maturity of the two promissory notes, the borrowers failed
to pay the indebtedness.
On June 11, 1986, Servando and Leticia secured from
Veronica still another loan in the amount of P300,000.00,
maturing in one month, secured by a real estate mortgage over
a property belonging to Leticia Makalintal Yaptinchay, who
issued a special power of attorney in favor of Leticia Medel,
authorizing her to execute the mortgage. Servando and Leticia
executed a promissory note in favor of Veronica to pay the sum
of P300,000.00, after a month, or on July 11, 1986. However,
only the sum of P275.000.00, was given to them out of the
proceeds of the loan.
Like the previous loans, Servando and Medel failed to pay the
third loan on maturity.
On July 23, 1986, Servando and Leticia with the latter's
husband, Dr. Rafael Medel, consolidated all their previous
unpaid loans totaling P440,000.00, and sought from Veronica
another loan in the amount of P60,000.00, bringing their
indebtedness to a total of P500,000.00, payable on August 23,
1986. They executed yet another promissory note wherein they
said that:
- they will pay the P500,000.00 with interest at the rate
of 5.5 PERCENT per month
- plus 2% service charge per annum from date hereof
until fully paid according to the amortization schedule
contained herein.
Payment will be made in full at the maturity date.
Should they fail to pay any amortization or portion hereof when
due,
- all the other installments together with all interest
accrued shall immediately be due and payable and
- they agree to pay an additional amount equivalent to
one per cent (1%) per month of the amount due and
demandable as penalty charges in the form of
liquidated damages until fully paid;
- and the further sum of TWENTY FIVE PER CENT
(25%) thereof in full, without deductions as Attorney's
Fee whether actually incurred or not, of the total
amount due and demandable, exclusive of costs and
judicial or extrajudicial expenses.
On maturity of the loan, the borrowers failed to pay the
indebtedness of P500,000.00, plus interests and penalties,
evidenced by the above-quoted promissory note.
On February 20, 1990, Veronica R. Gonzales, joined by her
husband Danilo G. Gonzales, filed with the RTC of Bulacan a
complaint for collection of the full amount of the loan including
interests and other charges.
In his answer to the complaint filed with the trial court on April
5, 1990, defendant Servando alleged that he did not obtain any
loan from the plaintiffs; that it was defendants Leticia and Dr.
Rafael Medel who borrowed from the plaintiffs the sum of
P500,000.00, and actually received the amount and benefited
therefrom; that the loan was secured by a real estate mortgage
executed in favor of the plaintiffs, and that he (Servando
Franco) signed the promissory note only as a witness.
In Severando's answer, he alleges that
- he did not obtain any loan from the plaintiffs;
- that it was defendants Leticia and Dr. Rafael Medel
who borrowed from the plaintiffs and actually received
the amount and benefited therefrom.
- that the loan was secured by a real estate mortgage
executed in favor of the plaintiffs,
- and that Servando signed the promissory note only as
a witness.
In their separate answer filed on April 10, 1990, defendants
Leticia and Rafael Medel alleged that
- the loan was the transaction of Leticia Yaptinchay,
who executed a mortgage in favor of the plaintiffs over
a parcel of real estate situated in San Juan,
Batangas;
- that the interest rate is excessive at 5.5% per month
with additional service charge of 2% per annum, and
penalty charge of 1% per month;
- that the stipulation for attorney's fees of 25% of the
amount due is unconscionable, illegal and excessive,
- and that substantial payments made were applied to
interest, penalties and other charges.
RTC Ruling:
On December 9, 1991, the lower court ruled that the due
execution and genuineness of the four promissory notes had
been duly proved, and ruled that although the Usury Law had
been repealed, the interest charged by the plaintiffs on the
loans was unconscionable and "revolting to the conscience".
Hence, the trial court applied "the provision of the New [Civil]
Code" that the "legal rate of interest for loan or forbearance of
money, goods or credit is 12% per annum."
Both plaintiffs and defendants appealed to the Court of
Appeals.
In their appeal, the Gonzales' argued that the promissory note,
which consolidated all the unpaid loans of the defendants, is
the law that governs the parties. They further argued that
Circular No. 416 of the Central Bank prescribing the rate of
interest for loans or forbearance of money, goods or credit at
12% per annum, applies only in the absence of a stipulation on
interest rate, but not when the parties agreed thereon.
CA Ruling:
On March 21, 1997, CA reversed RTC's decision.
CA sustained the Gonzales' contention. It ruled that the lender
and borrower could agree on any interest that may be charged
on the loan (Central Bank in 1982 of Circular No. 905).
CA further held that "the imposition of 'an additional amount
equivalent to 1% per month of the amount due and
demandable as penalty charges in the form of liquidated
damages until fully paid' was allowed by
law".

On March 21, 1997, the Court of Appeals promulgated its

decision:

"Defendants are hereby ordered to pay the plaintiffs

- the sum of P500,000.00, plus 5.5% per month interest
and 2% service charge per annum effective July 23,
1986,
- plus 1% per month of the total amount due and
demandable as penalty charges effective August 24,
1986, until the entire amount is fully paid.
- The award to the plaintiffs of P50,000.00 as attorney's
fees is affirmed. And so is the imposition of costs
against the defendants."

Servando and Leticia(defendant-appellants) filed a motion for

reconsideration. CA denied.

Servando and Leticia interposed the present recourse via

petition for review on certiorari.

ISSUE:
Whether the stipulated rate of interest at 5.5% per month on
the loan in the sum of P500,000.00, that plaintiffs extended to
the defendants is usurious. (Has the Usury Law been repealed
by Central Bank Circular No. 905, adopted on December 22,
1982, pursuant to its powers under P.D. No. 116, as amended
by P.D. No. 1684?)

SC RULING:
We agree with petitioners that the stipulated rate of interest at
5.5% per month on the P500,000.00 loan is excessive,
iniquitous, unconscionable and exorbitant. However, we can
not consider the rate "usurious" because this Court has
consistently held that Circular No. 905 of the Central Bank,
adopted on December 22, 1982, has expressly removed the
interest ceilings prescribed by the Usury Law and that the
Usury Law is now "legally inexistent".

Nevertheless, we find the interest at 5.5% per month, or 66%

per annum, stipulated upon by the parties in the promissory
note iniquitous or unconscionable, and, hence, contrary to
morals ("contra bonos mores"), if not against the law. The
stipulation is void. The courts shall reduce equitably liquidated
damages, whether intended as an indemnity or a penalty if
they are iniquitous or unconscionable.

Consequently, the Court of Appeals erred in upholding the

stipulation of the parties. Rather, we agree with the trial court
that, under the circumstances, interest at 12% per annum, and
an additional 1% a month penalty charge as liquidated
damages may be more reasonable.

SC REVERSES and SETS ASIDE the decision of the CA.

AFFIRMING the decision of the RTC.
Nacar v Gallery Frames, August 2013
FACTS:
Dario Nacar filed a complaint for constructive dismissal before
the Arbitration Branch of the NLRC against Gallery Frames
(GF) and/or Felipe Bordey, Jr.
On October 15, 1998, the Labor Arbiter decided in favor of
Nacar since they found that he was dismissed from
employment without a valid or just cause. Thus, Nacar was
awarded backwages and separation pay in lieu of
reinstatement in the amount of ₱158,919.92.
Labor Arbiter Ruling:
"-- finding respondents guilty of constructive dismissal and are
therefore, ordered:
- to pay jointly and severally the complainant the
amount of ₱62,986.56 representing his separation
pay; and
- to pay jointly and severally the complainant the
amount of ₱95,933.36 representing his backwages"
GF and/or Bordey Jr. appealed to the NLRC, but it was
dismissed for lack of merit. GF and/or Bordey Jr filed a motion
for reconsideration, but it was denied.
CA dismissed certiorari:
GF and/or Bordey Jr. filed a Petition for Review on Certiorari
before the CA. On August 24, 2000; CA dismissed. Again, GF
and/or Bordey Jr filed a motion for reconsideration, but it was
denied.
SC denies relief:
GF and/or Bordey Jr. sought relief before the Supreme Court
but SC denied the petition finding no reversible error on the
part of the CA.
An Entry of Judgment was later issued certifying that the
resolution became final and executory on May 27, 2002.9 The
case was, thereafter, referred back to the Labor Arbiter. A
pre-execution conference was consequently scheduled, but
respondents failed to appear.
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.
Upon recomputation, the Computation and Examination Unit of
the NLRC arrived at an updated amount of ₱471,320.31.
On December 2, 2002, a Writ of Execution was issued by the
Labor Arbiter ordering the Sheriff to collect from respondents
the total amount of ₱471,320.31. GF and/or Bordey Jr. filed a
Motion to Quash Writ of Execution, arguing, among other
things, that since the Labor Arbiter awarded separation pay of
₱62,986.56 and limited backwages of ₱95,933.36, no more
recomputation is required to be made of the said awards. They
claimed that after the decision becomes final and executory,
the same cannot be altered or amended anymore. On January
13, 2003, the Labor Arbiter issued an Order denying the
motion. Thus, an Alias Writ of Execution was issued on
January 14, 2003.
GF and/or Bordey Jr. again appealed before the NLRC, which
on June 30, 2003. NLRC ruled in favor of GF and/or Bordey Jr.
and ordered the recomputation of the judgment award.
On August 20, 2003, an Entry of Judgment was issued
declaring the Resolution of the NLRC to be final and executory.
Consequently, another pre-execution conference was held, but
GF and/or Bordey Jr. failed to appear on time. Meanwhile,
Nacar moved that an Alias Writ of Execution be issued to
enforce the earlier recomputed judgment award in the sum of
₱471,320.31.
The records of the case were again forwarded to the
Computation and Examination Unit for recomputation, where
the judgment award of Nacar was reassessed to be in the total
amount of only ₱147,560.19.
Nacar 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 ₱147,560.19, 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.
On May 10, 2005, the Labor Arbiter issued an Order granting
the motion, but only up to the amount of ₱11,459.73. The
Labor Arbiter reasoned that it is the October 15, 1998 Decision
that should be enforced considering that it was the one that
became final and executory. However, 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 ₱158,919.92 that should
be executed. Thus, since Nacar already received ₱147,560.19,
he is only entitled to the balance of ₱11,459.73.
Nacar then appealed before the NLRC, but was denied.
Subsequently, he filed a Motion for Reconsideration, but it was
likewise denied.
Aggrieved, Nacar sought recourse before the CA.
On September 23, 2008, CA denied. CA opined that since CA Decision and Resolution are REVERSED and SET ASIDE.
petitioner no longer appealed the October 15, 1998 Decision of GF and/or Bordey Jr. are ordered to pay Nacar:
the Labor Arbiter, which already became final and executory, a (1) backwages computed from the time Nacar was
belated correction thereof is no longer allowed. The CA stated illegally dismissed on January 24, 1997 up to May 27,
that there is nothing left to be done except to enforce the said 2002, when the Resolution of this Court in G.R. No.
judgment. Consequently, it can no longer be modified in any 151332 became final and executory;
respect, except to correct clerical errors or mistakes. (2) separation pay computed from August 1990 up to
May 27, 2002 at the rate of one month pay per year of
Nacar filed a Motion for Reconsideration but was denied. service; and
(3) interest of twelve percent (12%) per annum of the
Hence, the petition upon the SC. total monetary awards, computed from May 27, 2002
to June 30, 2013 and six percent (6%) per annum
ISSUE: from July 1, 2013 until their full satisfaction.
WHETHER CA SERIOUSLY ERRED, COMMITTED GRAVE
ABUSE OF DISCRETION AND DECIDED CONTRARY TO The Labor Arbiter is hereby ORDERED to make another
LAW IN UPHOLDING THE QUESTIONED RESOLUTIONS OF recomputation of the total monetary benefits awarded and due
THE NLRC WHICH, IN TURN, SUSTAINED THE MAY 10, to Nacar in accordance with this Decision.
2005 ORDER OF LABOR ARBITER MAGAT MAKING THE
DISPOSITIVE PORTION OF THE OCTOBER 15, 1998 NOTE:
DECISION OF LABOR ARBITER LUSTRIA SUBSERVIENT Immutability of Judgments - It is a well-established rule that a
TO AN OPINION EXPRESSED IN THE BODY OF THE SAME judgment, once it has attained finality, can never be altered,
DECISION. amended, or modified, even if the alteration, amendment or
modification is to correct an erroneous of judgment.
THE PARTIES' ARGUMENTS:
Nacar argues that notwithstanding the fact that there was a
computation of backwages in the Labor Arbiter’s decision, the
same is not final until reinstatement is made or until finality of
the decision, in case of an award of separation pay. Petitioner
maintains that considering that the October 15, 1998 decision
of the Labor Arbiter did not become final and executory until
the April 17, 2002 Resolution of the Supreme Court in G.R. No.
151332 was entered in the Book of Entries on May 27, 2002,
the reckoning point for the computation of the backwages and
separation pay should be on May 27, 2002 and not when the
decision of the Labor Arbiter was rendered on October 15,
1998.

GF and/or Bordey Jr. assert that since only separation pay and
limited backwages were awarded to petitioner by the October
15, 1998 decision of the Labor Arbiter, no more recomputation
is required to be made of said awards. They insist that since
the decision clearly stated that the separation pay and
backwages are "computed only up to [the] promulgation of this
decision," and considering that petitioner no longer appealed
the decision, Nacar is only entitled to the award as computed
by the Labor Arbiter in the total amount of ₱158,919.92. GF
and/or Bordey Jr. added that it was only during the execution
proceedings that the Nacar questioned the award, long after
the decision had become final and executory. GF and/or
Bordey Jr. contend that to allow the further recomputation of
the backwages to be awarded to Nacar at this point of the
proceedings would substantially vary the decision of the Labor
Arbiter as it violates the rule on immutability of judgments.

SC Ruling:
The amount GF and/or Bordey Jr. shall now pay has greatly
increased is a consequence that it cannot avoid as it is the risk
that it ran when it continued to seek recourses against the
Labor Arbiter's decision. Article 279 provides for the
consequences of illegal dismissal in no uncertain terms,
qualified only by jurisprudence in its interpretation of when
separation pay in lieu of reinstatement is allowed. When that
happens, the finality of the illegal dismissal decision becomes
the reckoning point instead of the reinstatement that the law
decrees. In allowing separation pay, the final decision
effectively declares that the employment relationship ended so
that separation pay and backwages are to be computed up to
that point.