Case Name: Eastern Shipping Lines vs. CA By: GUANIO, Agustini Alfonso C.

GR No. 97412 - Vitug Topic: Damages; Interest

Date: July 12, 1994

FACTS
Sometime in December of 1981, 2 fiber drums of ribofalvin were shipped from Yokohama, Japan for delivery vessel SS
Eastern Comet owned by Eastern Shipping Lines, Inc..The shipment was insured under plaintiffs Marine Insurance Policy.
Days after, upon arrival of the shipment in Manila, it was discharged unto the custody of Metro Port Service, Inc. The latter
excepted to 1 drum, said to be in bad order, which damage was unknown to plaintiff.

On Jan. of 1982, Allied Brokerage Corp. received the shipment from Metro Port Service, Inc., 1 drum opened and without seal.
Allied Brokerage Corp. made deliveries of the shipment to the consignees warehouse. The latter excepted to 1 drum which
contained spillages, while the rest of the contents was adulterated/fake.

Mercantile Insurance Co. contended that due to the losses/damage sustained by said drum, the consignee suffered losses, due to
the fault and negligence of Eastern Shipping Lines, Metro Port Service, and Allied Brokerage Corp. Claims were presented
against the 3 corps. who failed and refused to pay the same.

As a consequence of the losses sustained, the insurance co. was compelled to pay the consignee its suffered losses under the
marine insurance policy, which makes the insurance co. subrogate to all the rights of action of said consignee.

The RTC ordered the defendants to pay the insurance co. with the present legal interest of 12% per annum from the date of
filing the complaints until fully paid. This decision was affirmed in toto by the appeallate court.

ISSUE:
(1) WON the payment of legal interest on an award for loss or damage is to be computed from the time the comlaint is
filed or from the date the decision appealed from is rendered; and
(2) WON the applicable rate of interest, referred to above, is 12% or 6%

HELD:
Factual finding of both the court a quo and the appeallate court is that there is sufficient evidence that the shipment sustained
damage while in the successive possession of appeallants. Accordingly, the libility imposed on Eatern Shipping Lines, Inc., the
sole petitioner in the case, is inevitable regardless of whether there are others solidarily liabile with it. The issued now is the
legal interest adjudged by the lower courts.

Rules applicable in determining the legal interest rate:

(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 Damage of the CC goven in determining the
measure of recoverable damages.
(II) With regard particularly to an award of interest in the concept of actual and compesatory damages, the rate of interest, as
well as the accrual thereof, is imposed, as follows:
1.) When the oblgiation is breached, and it consists in the payment of a sum of money (i.e., loan, forbearnce of money) the
interest due should be that which may been stipulaed 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
Art. 1169 of the CC.
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. Accordingly, where the
demand is established with reasonable certainty, the interest shall begin to rin from the time the claim is made
judicially or extrajudicially (Art. 1169, NCC) but when such certainty cannot be so reasonably established at the time
the demand is made, the interest shall beging to rin 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).
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 ot a forbearance of credit.

The SC ruled that the legal interest to be paid is 6% on the amount due computed from the decision of the court a quo. A 12%
interest, in lieu of 6%, shall be imposed on such amount upon finality of the present decision until payment thereof.

Doctrine: See the applicable rules in determining the legal interest above. Notes