1) Simex Int’l (Mla) Inc. v CA A bank may be held liable for damages by reason of its unjustified dishonor of a check, which caused damage to its client’s credit standing. The bank must record every single transaction accurately, down to the last centavo, and as promptly as possible. This has to be done if the account is to reflect at any given time the amount of money the depositor can dispose of as he sees fit, confident that the bank will deliver it as and to whomever he directs. The bank is a fiduciary of the depositor’s money.
Facts: Simex International is a private corporation engaged in the exportation of food products. It buys these products from various local suppliers and then sells them abroad to the Middle East and the United States. Most of its exports are purchased by the petitioner on credit. Simex was a depositor of the Far East Savings Bank and maintained a checking account in its branch in Cubao, Quezon City which issued several checks against its deposit but was surprised to learn later that they had been dishonored for insufficient funds. As a consequence, several suppliers sent a letter of demand to the petitioner, threatening prosecution if the dishonored check issued to it was not made good and also withheld delivery of the order made by the petitioner. One supplier also cancelled the petitioner’s credit line and demanded that future payments be made by it in cash or certified check. The petitioner complained to the respondent bank. Investigation disclosed that the sum of P100,000.00 deposited by the petitioner on May 25, 1981, had not been credited to it. The error was rectified only a month after, and the dishonored checks were paid after they were redeposited. The petitioner then filed a complaint in the then Court of First Instance of Rizal against the bank for its gross and wanton negligence. Issue: check
Whether or not the bank can be held liable for negligence by reason of its unjustified dishonor of a
Held: The depositor expects expects the bank to treat his account with the utmost fidelity whether such account consists only of a few hundred pesos or of millions. The bank must record every single transaction accurately, down to the last centavo, and as promptly as possible. This has to be done if the account is to reflect at any given time the amount of money the depositor can dispose of as he sees fit, confident that the bank will deliver it as and to whomever he directs. A blunder on the part of the bank, such as the dishonour of a check without good reason, can cause the depositor not a little embarrassment if not also financial loss and perhaps even civil and criminal litigation. Article 2205 of the Civil Code provides that actual or compensatory damages may be received “(2) for injury to the plaintiff s business standing or commercial credit.” There is no question that the petitioner did sustain actual injury as a result of the dishonored checks and that the existence of the loss having been established “absolute certainty as to its amount is not required.” 7 Such injury should bolster all the more the demand of the petitioner for moral damages and justifies the examination by this Court of the validity and reasonableness of the said claim. 2) Reyes, et al v. CA GR 118492, 8/15/2001 Facts: Petitioner Gregorio H. Reyes sent Godofredo Reyes to the respondent bank to apply for a demand draft in the amount of AU$1,610.00 payable to the order of the 20 th Asian Racing Conference Secretariat of Sydney, Australia. His application was denied for the reason that the respondent bank did not have an Austrian dollar account in any bank in Sydney. The attendee informed him about an arrangement which has been customarily resorted to since the 1960s: the respondent bank would draw a demand draft against Westpac Bank in Sydney, Australia and have the latter reimburse itself from the U.S. dollar account of the respondent in Westpac Bank in New York, U.S.A. Such arrangement was agreed upon. Respondent bank approved the application and issued Foreign Exchange Demand draft, addressed to Westpac Sydney as the drawee bank. Due to erroneous decoding of the cable message on the art of Westpac-Sydney, the demand draft was dishonored. Wespac-Sydney had mistaken the cable message as a format letter of credit, and not for a demand draft. Respondent bank sent more cable messages requesting to honor the reimbursement claim. But for the same reason, the demand draft was again dishonored.
When the petitioners went to Australia and is about to register as a conference delegate at the registration desk, in the presence of other delegate, he was told by a lady member of the conference secretariat that he could not register because the demand draft had been dishonored. Petitioners were forced to pay in cash. The petitioners filed a complaint for damages against the respondent bank, claiming that they were exposed to unnecessary shock, social humiliation, and deep mental anguish in a foreign country, and in the presence of an international audience. They contended that the bank have failed to exercise a higher degree of diligence than that expected of an ordinary prudent person. Issue: Whether or not the respondent bank have failed to exercise the appropriate degree of diligence Ruling: No. Petitioner’s contention that that the respondent bank is required to exercise the highest degree of diligence is untenable. It is only then; a bank has to exercise the highest degree of diligence when they act under their fiduciary capacity, that is, as depositary of the deposits of their depositors. But the same higher degree of diligence is not expected to be exerted by banks in commercial transactions that do not involve their fiduciary relationship with their depositors. The case at bar does not involve the handling of petitioners deposit. Instead, the relationship involved was that of a buyer and seller, that is, between the respondent bank as the seller of the subject foreign exchange demand draft, and petitioner as the buyer of the same, with the 20 th Asian Racing Conference Secretariat in Sydney, Australia as the payee thereof. The evidence shows that the respondent bank did everything within its power to prevent the dishonor of the subject foreign exchange demand draft. The erroneous reading of its cable message to Westpac-Sydney by an employee of the latter could not have been foreseen by the respondent bank. The petition is denied, establishing the respondent bank acted in good faith and it did not cause the embarrassment of the petitioners. 3. Republic of the Philippines vs. Security Credit and Acceptance Corporation G.R. No. L-20583, January 23, 1967 An investment company which loans out the money of its customers, collects the interest and charges a commission to both lender and borrower, is a bank. It is conceded that a total of 59,463 savings account deposits have been made by the public with the corporation and its 74 branches, with an aggregate deposit of P1,689,136.74, which has been lent out to such persons as the corporation deemed suitable therefore. It is clear that these transactions partake of the nature of banking, as the term is used in Section 2 of the General Banking Act. Facts: The Solicitor General filed a petition for quo warranto to dissolve the Security and Acceptance Corporation, alleging that the latter was engaging in banking operations without the authority required therefor by the General Banking Act (Republic Act No. 337). Pursuant to a search warrant issued by MTC Manila, members of Central Bank intelligence division and Manila police seized documents and records relative to the business operations of the corporation. After examination of the same, the intelligence division of the Central Bank submitted a memorandum to the then Acting Deputy Governor of Central Bank finding that the corporation is engaged in banking operations. It was found that Security and Acceptance Corporation established 74 branches in principal cities and towns throughout the Philippines; that through a systematic and vigorous campaign undertaken by the corporation, the same had managed to induce the public to open 59,463 savings deposit accounts with an aggregate deposit of P1,689,136.74; Accordingly, the Solicitor General commenced this quo warranto proceedings for the dissolution of the corporation, with a prayer that, meanwhile, a writ of preliminary injunction be issued ex parte, enjoining the corporation and its branches, as well as its officers and agents, from performing the banking operations complained of, and that a receiver be appointed pendente lite. Superintendent of Banks of the Central Bank was then appointed by the Supreme Court as receiver pendente lite of defendant corporation.
In their defense, Security and Acceptance Corporation averred that the the corporation had filed with the Superintendent of Banks an application for conversion into a Security Savings and Mortgage Bank, with defendants Zapa, Balatbat, Tanjutco (Pablo and Vito, Jr.), Soriano, Beltran and Sebastian as proposed directors.
Issue: Whether or not defendant corporation was engaged in banking operations. Held. An investment company which loans out the money of its customers, collects the interest and charges a commission to both lender and borrower, is a bank. It is conceded that a total of 59,463 savings account deposits have been made by the public with the corporation and its 74 branches, with an aggregate deposit of P1,689,136.74, which has been lent out to such persons as the corporation deemed suitable therefore. It is clear that these transactions partake of the nature of banking, as the term is used in Section 2 of the General Banking Act. Hence, defendant corporation has violated the law by engaging in banking without securing the administrative authority required in Republic Act No. 337.
That the illegal transactions thus undertaken by defendant corporation warrant its dissolution is apparent from the fact that the foregoing misuser of the corporate funds and franchise affects the essence of its business, that it is willful and has been repeated 59,463 times, and that its continuance inflicts injury upon the public, owing to the number of persons affected thereby. 4) Central Bank v Morfe FACTS: First Mutual Savings and Loan Organization encourage savings among its members and extend financial assistance thru loans. Central bank said that the Organization and others with similar nature are banking institutions and that the Org have never been authorized. CB applied for SW because of the Org’s illegal receipt of deposits of money for deposit, disbursements…without compliance with RA 337. The SW includes articles such as book of original entry…and others. They sai d that the SW is general in its terms and that the use of the word “and others” permits the unreasonable search and seizure of documents which have no relation to any specific criminal act.
HELD: SW is upheld. Depending on the circumstances, while in one instance the particular wording of the warrant may – make it assume the character of a general warrant, in another context it may be considered perfectly alright. SW only for one offense, if issued for more than two, it is void. Scatter shot warrant. – – In illegal possession of shabu, marijuana, paraphernalia- one SW ok! SW may be partially void – Undetermined amount of marijuana ok! – Purpose of Particularity of Description: – Readily identify the items to be seized, thus prevent them from seizing the wrong items Leave officers with no discretion regarding articles to be seized and thus prevent unreasonable searches and seizure Not required that technical precision of description be required – – “narcotics paraphernalia”, “any and all narcotics”, and “a quantity of loose heroin” - ok! – “and the like” - not necessarily general warrant – Where should the requisite description appear- in the caption or body of the warrant? Body sufficient. – What if there’s discrepancy between the address in the caption and in the body? Not sufficient to invalidate. It is sufficient as long as you can identify the place intended and distinguish it from other places in the community. 5) BPI Family v Franco BPI FAMILY BANK VS. FRANCO G.R. No. 123498 J. Nachura November 23, 2007 FACTS: On August 15, 1989, Tevesteco opened a savings and current account with BPI-FB. Soon thereafter, FMIC also opened a time deposit account with the same branch of BPI-FB On August 31, 1989, Franco opened three accounts, namely, a current, savings, and time deposit, with BPI-FB. The total amount of P2,000,000.00 used to open these accounts is traceable to a check issued by Tevesteco allegedly in consideration of Franco’s introduction of Eladio Teves, to Jaime Sebastian, who was then BPI- FB SFDM’s Branch Manager. In turn, the funding for the P2,000,000.00 check was part of the P80,000,000.00 debited by BPI- FB from FMIC’s time deposit account and credited to Teveste co’s current account pursuant to an Authority to Debit purportedly signed by FMIC’s officers. It appears, however, that the signatures of FMIC’s officers on the Authority to Debit
were forged. BPI-FB, debited Franco’s savings and current accounts for the a mounts remaining therein. In the meantime, two checks drawn by Franco against his BPI-FB current account were dishonored and stamped with a notation “account under garnishment.” Apparently, Franco’s current account was garnished by virtue of an Order of Notably, the dishonored checks were issued by Franco and presented for payment at BPIFB prior to Franco’s receipt of notice that his accounts were under garnishment. It was only on May 15, 1990, that Franco was impleaded in the Makati case. Immediately, upon receipt of such copy, Franco filed a Motion to Discharge Attachment. On May 17, 1990, Franco pre-terminated his time deposit account. BPI-FB deducted the amount of P63,189.00 from the remaining balance of the time deposit account representing advance interest paid to him. Consequently, in light of BPI- FB’s refusal to heed Franco’s demands to unfreeze his accounts and release his deposits therein, Franco filed on June 4, 1990 with the Manila RTC the subject suit. ISSUE: WON Respondent had better right to the deposits in the subject accounts which are part of the proceeds of a forged Authority to Debit HELD:NO. There is no doubt that BPI-FB owns the deposited monies in the accounts of Franco, but not as a legal consequence of its unauthorized transfer of FMIC ’s deposits to Tevesteco’s account. BPI -FB conveniently forgets that the deposit of money in banks is governed by the Civil Code provisions on simple loan or mutuum. As there is a debtor-creditor relationship between a bank and its depositor, BPI-FB ultimately acquired ownership of Franco’s deposits, but such ownership is coupled with a corresponding obligation to pay him an equal amount on demand. Although BPI- FB owns the deposits in Franco’s accounts, it cannot prevent him from demanding payment of BPI-FB ’s obligation by drawing checks against his current account, or asking for the release of the funds in his savings account. Thus, when Franco issued checks drawn against his current account, he had every right as creditor to expect that those checks would be honored by BPI-FB as debtor. More importantly, BPI-FB does not have a unilateral right to freeze the accounts of Franco based on its mere suspicion that the funds therein were proceeds of the multi-million peso scam Franco was allegedly involved in. To grant BPI-FB, or any bank for that matter, the right to take whatever action it pleases on deposits which it supposes are derived from shady transactions, would open the floodgates of public distrust in the banking industry. Ineluctably, BPI-FB, as the trustee in the fiduciary relationship, is duty bound to know the signatures of its customers. Having failed to detect the forgery in the Authority to Debit and in the process inadvertently facilitate the FMIC-Tevesteco transfer, BPI-FB cannot now shift liability thereon to Franco and the other payees of checks issued by Tevesteco, or prevent withdrawals from their respective accounts without the appropriate court writ or a favorable final judgment. 6) BANK OF THE PHILIPPINE ISLANDS VS. COURT OF APPEALS 232 SCRA302 G.R. NO. 104612 MAY 10, 1994 FACTS: Private respondents Eastern Plywood Corporation and Benigno Lim as officer of the corporation, had an “AND/OR” joint account with Commercial Bank and Trust Co (CBTC), the predecessor -in-interest of petitioner Bank of the Philippine Islands. Lim withdraw funds from such account and used it to open a joint checking account (an “AND” account) with Mariano Velasco. When Velasco died in 1977, said joint checking account had P662,522.87. By virtue of an Indemnity Undertaking executed by Lim and as President and General Manager of Eastern withdrew one half of this amount and deposited it to one of the accounts of Eastern with CBTC.
Eastern obtained a loan of P73,000.00 from CBTC which was not secured. However, Eastern and CBTC executed a Holdout Agreement providing that the loan was secured by the “Holdout of the C/A No. 2310 -00142” referring to the joint checking account of Velasco and Lim. Meanwhile, a judicial settlement of the estate of Velasco ordered the withdrawal of the balance of the account of Velasco and Lim. Asserting that the Holdout Agreement provides for the security of the loan obtained by Eastern and that it is the duty of CBTC to debit the account of respondents to set off the amount of P73,000 covered by the promissory note, BPI filed the instant petition for recovery. Private respondents Eastern and Lim, however, assert that the amount deposited in the joint account of Velasco and Lim came from Eastern and therefore rightfully belong to Eastern and/or Lim.
Since the Holdout Agreement covers the loan of P73,000, then petitioner can only hold that amount against the joint checking account and must return the rest. ISSUE: Whether BPI can demand the payment of the loan despite the existence of the Holdout Agreement and whether BPI is still liable to the private respondents on the account subject of the withdrawal by the heirs of Velasco. RULING: Yes, for both issues. Regarding the first, the Holdout Agreement conferred on CBTC the power, not the duty, to set off the loan from the account subject of the Agreement. When BPI demanded payment of the loan from Eastern, it exercised its right to collect payment based on the promissory note, and disregarded its option under the Holdout Agreement. Therefore, its demand was in the correct order. Regarding the second issue, BPI was the debtor and Eastern was the creditor with respect to the joint checking account. Therefore, BPI was obliged to return the amount of the said account only to the creditor. When it allowed the withdrawal of the balance of the account by the heirs of Velasco, it made the payment to the wrong party. The law provides that payment made by the debtor to the wrong party does not extinguish its obligation to the creditor who is without fault or negligence. Therefore, BPI was still liable to the true creditor, Eastern. 7) Vitug v CA 8) BPI v IAC 9) Go v IAC 10) Firestone Tire & rubber Co. vs. Cou rt of Appeals GR No. 113236 March 5, 2001 Quisumbing, J.:
Facts: Forjas-Arca Enterprise Company is maintaining a special savings account with Luzon Development Bank, the latter authorized and allowed withdrawals of funds through the medium of special withdrawal slips. These are supplied by Fojas-Arca. Fojas-Arca purchased on credit with FirestoneTire & Rubber Company, in payment Fojas-Arca delivered a 6 special withdrawal slips. In turn, these were deposited by the Firsestone to its bank account in Citibank. With this, relying on such confidence and belief Firestone extended to Fojas-Arca other purchase on credit of its products but several withdrawal slips were dishonored and not paid. As a consequence, Citibank debited the plaintiff’s account representing the aggregate amount of the two dishonored special withdrawal slips. Fojas-Arca averred that the pecuniary losses it suffered are a caused by and directly attributes to defendant’s gross negligence as a result Fojas -Arca filed a complaint. Issue: Whether or not the acceptance and payment of the special withdrawal slips without the presentation of the depositor’s passbook thereby giving the impression that it is a negotiable instrument like a check. Held: No. Withdrawal slips in question were non negotiable instrument. Hence, the rules governing the giving immediate notice of dishonor of negotiable instrument do not apply. The essence of negotiability which characterizes a negotiable paper as a credit instrument lies in its freedom to circulate freely as a substitute for money. The withdrawal slips in question lacked this character. The negligence of the citibank cannot be shift to Luzon Development bank for considering. 11) PBCOM v CA 12) Salvacion et al v CA GR No. 94723, August 21, 1997
FACTS: Greg Bartelli, an American tourist in the Philippines, was arrested and charged for commission of the crime of four counts of rape and serious illegal detention against then 12 year old victim, Karen Salvacion. On the scheduled day of hearing for Bartelli’s petition for bail, he escaped from jail, thereby causing all criminal cases filed against him to be archived pending his arrest. A civil case for damages was also filed against him, which led to the issuance of the writ of preliminary attachment in favor of the offended party, with damages amounting to Php1,000,000. However, China Banking Corporation did not honor the Notice of Granishment issued by the court. The bank invoked Section 113 of Central Bank Circular No. 960, which was released pursuant to Section 8 of RA 6426 (amended by PD 1246), to the effect that the law exempts foreign currency deposits from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body. Salvacion hence filed action for declaratory relief. ISSUE: Whether or not Section 113 of Central Bank Circular No. 960 is a valid defense by Bartelli and China Banking Corporation as to uphold secrecy of bank deposits. HELD: NO. The Supreme Court ruled that the provisions of Section 113 of CB Circular No. 960 and PD No. 1246, insofar as it amends Section 8 of RA No. 6426 are INAPPLICABLE to this case because of its peculiar circumstances. The Supreme Court mentions that the questioned law makes futile the favorable judgment made by the lower court as regards to the damages awarded to the offended party and her family. The application of the law depends on the extent of its justice. The SC mentions and uses as a ground Article 10 of the Civil Code which provides that “in case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail. ” If the questioned law would be allowed to be used as a defense in this case, it would be inevitable that other foreign guests, who may be the likes of Greg Bartelli, will use this as a device in committing similar crimes during their stay in the country, acquitting the guilty at the expense of the innocent. 13) RCBC v De Castro 14) Ejercito v Sandiganbayan
FACTS: The Office of the Ombudsman requested the Sandiganbayan to issue subpoena duces tecum against the Urban Bank relative to the case against President Joseph Estrada. Ms. Dela Paz, receiver of the Urban Bank, furnished the Office of the Ombudsman certified copies of manager checks detailed in thesubpoena duces tecum. The Sandiganbayan granted the same. However, Ejercito claims that the subpoenas issued by the Sandiganbayan are invalid and may not be enforced because the information found therein, given their ―extremely detailed‖ character and could only have been obtained by the Special Prosecution Panel through an illegal disclosure by the bank officials. Ejercito thus contended that, following the ―fruit of the poisonous tree‖ doctrine, the subpoenas must be quashed. Moreover, the ―extremely -detailed information obtained by the Ombudsman from the bank officials concerned during a previous investigation of the charges against him, such inquiry into his bank accounts would itself be illegal. ISSUE: Whether or not subpoena duces tecum/ad testificandum may be issued to order the production of statement of bank accounts even before a case for plunder is filed in court HELD: The Supreme Court held that plunder is analogous to bribery, and therefore, the exception to R.A. 1405 must also apply to cases of plunder. The court also reiterated the ruling in Marquez v. Desierto that before an in camera inspection may be allowed there must be a pending case before a court of competent jurisdiction. Further, the account must be clearly identified, the inspection limited to the subject matter of pending case before the court of competent jurisdiction.
As no plunder case against then President Estrada had yet been filed before a court of competent jurisdiction at the time the Ombudsman conducted an investigation, he concludes that the information about his bank accounts were acquired illegally, hence, it may not be lawfully used to facilitate a subsequent inquiry into the same bank accounts. Thus, his attempt to make the exclusionary rule applicable to the instant case fails. The high Court, however, rejected the arguments of the petitioner Ejercito that the bank accounts which where demanded from certain banks even before the case was filed before the proper court is inadmissible in evidence being fruits of poisonous tree. This is because the Ombudsman issued the subpoenas bearing on the bank accounts of Ejercito about four months before Marquez was promulgated on June 27, 2001. While judicial interpretations of statutes, such as that made in Marquez with respect to R.A. No. 6770 or the Ombudsman Act of 1989, are deemed part of the statute as of the date it was originally passed, the rule is not absolute. Thus, the Court referred to the teaching of Columbia Pictures Inc., v. Court of Appeals, that: It is consequently clear that a judicial interpretation becomes a part of the law as of the date that law was originally passed, subject only to the qualification that when a doctrine of this Court is overruled and a different view is adopted, and more so when there is a reversal thereof, the new doctrine should be applied prospectively and should not apply to parties who relied on the old doctrine and acted in good faith
15) PDIC v Citibank, NA 16) PDIC vs Philippine Countryside Rural Bank Facts: On March 9, 2005, the Board of Directors of the PDIC adopted Resolution No. 2005-03-032 approving the conduct of an investigation, on the basis of the Reports of Examination of the Bangko Sentral ng Pilipinas (BSP) on ten (10) banks, four (4) of which are respondents in this petition for review. the PDIC Board adopted another resolution, Resolution No. 2005-05-056, 4 approving the conduct of an investigation on PCRBI based on a Complaint-Affidavit filed by a corporate depositor, the Philippine School of Entrepreneurship and Management.
According to PDIC, in the course of its investigation, PCRBI was found to have granted loans to certain individuals, which were settled by way of dacion of properties. These properties, however, had already been previously foreclosed and consolidated under the names of PRBI, BEAI and RBCI Subsequently, PRBI and BEAI refused entry to their bank premises and access to their records and documents by the PDIC Investigation Team, upon advice of their respective counsels. Atty. Victoria G. Noel sent letters to the PDIC informing it of her legal advice to PCRBI and BEAI not to submit to PDIC investigation on the ground that its investigatory power pursuant to Section 9(b-1) of R.A. No. 3591, cannot be differentiated from the examination powers accorded to PDIC under Section 8, paragraph 8 of the same law, under which, prior approval from the Monetary Board is required. Thereafter, the Banks received a letter, dated July 8, 2005, from the PDIC General Counsel reiterating its position that prior Monetary Board approval was not a pre- requisite to PDIC’s exercise of its investigative power. Issue: Whether the Court of Appeals-Cebu erred in finding that prior approval of the Monetary Board of the Bangko Sentral ng Pilipinas is necessary before the PDIC may conduct an investigation of respondent banks. Held: NO. After an evaluation of the respective positions of the parties, the Court is of the view that the Monetary Board approval is not required for PDIC to conduct an investigation on the Banks. However, while "examination" connotes a mere generic perusal or inspection, "investigation" refers to a more intensive scrutiny for a more specific fact-finding purpose. The latter term is also usually associated with proceedings conducted prior to criminal prosecution. the process of examination covers a wider scope than that of investigation. Examination involves an evaluation of the current status of a bank and determines its compliance with the set standards regarding solvency, liquidity, asset valuation, operations, systems, management, and compliance with banking laws, rules and regulations.
Investigation, on the other hand, is conducted based on specific findings of certain acts or omissions which are subject of a complaint or a Final Report of Examination. An examination entails a review of essentially all the functions and facets of a bank and its operation. It necessitates poring through voluminous documents, and requires a detailed evaluation thereof. Such a process then involves an intrusion into a bank's records. In contrast, although it also involves a detailed evaluation, an investigation centers on specific acts or omissions and, thus, requires a less invasive assessment. To reiterate, an examination of banks requires the prior consent of the Monetary Board, whereas an investigation based on an examination report, does not. 17. Dario Nacar vs Gallery Frames FACTS: Dario Nacar filed a labor case against Gallery Frames and its owner Felipe Bordey, Jr. Nacar alleged that he was dismissed without cause by Gallery Frames on January 24, 1997. On October 15, 1998, the Labor Arbiter (LA) found Gallery Frames guilty of illegal dismissal hence the Arbiter awarded Nacar P158,919.92 in damages consisting of backwages and separation pay. Gallery Frames appealed all the way to the Supreme Court (SC). The Supreme Court affirmed the decision of the Labor Arbiter and the decision became final on May 27, 2002. After the finality of the SC decision, Nacar filed a motion before the LA for recomputation as he alleged that his backwages should be computed from the time of his illegal dismissal (January 24, 1997) until the finality of the SC decision (May 27, 2002) with interest. The LA denied the motion as he ruled that the reckoning point of the computation should only be from the time Nacar was illegally dismissed (January 24, 1997) until the decision of the LA (October 15, 1998). The LA reasoned that the said date should be the reckoning point because Nacar did not appeal hence as to him, that decision became final and executory. ISSUE: Whether or not the Labor Arbiter is correct. HELD: No. There are two parts of a decision when it comes to illegal dismissal cases (referring to cases where the dismissed employee wins, or loses but wins on appeal). The first part is the ruling that the employee was illegally dismissed. This is immediately final even if the employer appeals – but will be reversed if employer wins on appeal. The second part is the ruling on the award of backwages and/or separation pay. For backwages, it will be computed from the date of illegal dismissal until the date of the decision of the Labor Arbiter. But if the employer appeals, then the end date shall be extended until the day when the appellate court’s decision shall become final. Hence, as a consequence, the liability of the employer, if he loses on appeal, will increase – this is just but a risk that the employer cannot avoid when it continued to seek recourses against the Labor Arbiter’s decision. This is also in accordance with Article 279 of the Labor Code. Anent the issue of award of interest in the form of actual or compensatory damages, the Supreme Court ruled that the old case of Eastern Shipping Lines vs CA is already modified by the promulgation of the Bangko Sentral ng Pilipinas Monetary Board Resolution No. 796 which lowered the legal rate of interest from 12% to 6%. Specifically, the rules on interest are now as follows: 1. Monetary Obligations ex. Loans: a. If stipulated in writing: a.1. shall run from date of judicial demand (filing of the case) a.2. rate of interest shall be that amount stipulated b. If not stipulated in writing b.1. shall run from date of default (either failure to pay upon extra-judicial demand or upon judicial demand whichever is appropriate and subject to the provisions of Article 1169 of the Civil Code) b.2. rate of interest shall be 6% per annum 2. Non-Monetary Obligations (such as the case at bar) a. If already liquidated, rate of interest shall be 6% per annum, demandable from date of judicial or extrajudicial demand (Art. 1169, Civil Code) b. If unliquidated, no interest Except : When later on established with certainty. Interest shall still be 6% per annum demandable from the date of judgment because such on such date, it is already deemed that the amount of damages is already ascertained. 3. Compounded Interest – This is applicable to both monetary and non-monetary obligations
– 6% per annum computed against award of damages (interest) granted by the court. To be computed from the date when the court’s decision becomes final and executory until the award is fully satisfied by the losing party. 4. The 6% per annum rate of legal interest shall be applied prospectively: – Final and executory judgments awarding damages prior to July 1, 2013 shall apply the 12% rate; – Final and executory judgments awarding damages on or after July 1, 2013 shall apply the 12% rate for unpaid obligations until June 30, 2013; unpaid obligations with respect to said judgments on or after July 1, 2013 shall still incur the 6% rate. NACAR V GALLERY FRAMES FACTS: In the complaint filed by petitioner Dario Nacar before the Arbitration Branch of NLRC against respondents Gallery Frames and Felipe Bordey, Nacar was found to be illegally dismissed from employment without just cause, warranting him an award of back wages and separation pay amounting to P158,919.92 as decided on October 45, 1998. Due to several appeals and non-appearance of respondents on the scheduled pre-execution conference, petitioner filed for a re-computation of the amount due to him. it was granted and resulted to another amount of P471,320.31 to which the respondents appealed. ISSUE: Whether or not the re-computation was lawfully warranted? HELD: The court held that the re-computation However, during the pendency of the case, the BSP-Monetary Board, in its resolution no. 796 dated May 16, 2013, which took effect on July 1, 2013 amended Circular No. 905 and issued Circular No. 799, changing the rate of interest, in the absence of express stipulation on the contract, from 12% per annum to 6% per annum. In relation to this, the court held that 12% per annum legal interest shall apply only until June 30, 2013 and the amending issuance shall be enforced, thus 6% per annum shall apply on July 1, 2013 onwards for the re-computation. The court ordered the Labor Arbiter for re-computation based on the laid out decision.
