THIRD DIVISION
G.R. No. 206806, June 25, 2014
ARCO PULP AND PAPER CO., INC. AND CANDIDA A. SANTOS, Petitioners, v. DAN T. LIM, DOING BUSINESS UNDER THE NAME AND STYLE OF QUALITY PAPERS & PLASTIC PRODUCTS ENTERPRISES, Respondent.
D E C I S I O N
LEONEN, J.:
Per meeting held at ARCO, April 18, 2007, it has been mutually agreed between Mrs. Candida A. Santos and Mr. Eric Sy that ARCO will deliver 600 tons Test Liner 150/175 GSM, full width 76 inches at the price of P18.50 per kg. to Megapack Container for Mr. Eric Sy’s account. Schedule of deliveries are as follows:
. . . .
It has been agreed further that the Local OCC materials to be used for the production of the above Test Liners will be supplied by Quality Paper & Plastic Products Ent., total of 600 Metric Tons at P6.50 per kg. (price subject to change per advance notice). Quantity of Local OCC delivery will be based on the quantity of Test Liner delivered to Megapack Container Corp. based on the above production schedule.11
1. Whether the obligation between the parties was extinguished by novation
2. Whether Candida A. Santos was solidarily liable with Arco Pulp and Paper Co., Inc.
3. Whether moral damages, exemplary damages, and attorney’s fees can be awarded
Article 1199. A person alternatively bound by different prestations shall completely perform one of them.
The creditor cannot be compelled to receive part of one and part of the other undertaking.
The object of this notice is to give the creditor . . . opportunity to express his consent, or to impugn the election made by the debtor, and only after said notice shall the election take legal effect when consented by the creditor, or if impugned by the latter, when declared proper by a competent court.34
Article 1291. Obligations may be modified by:
(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor. (1203)
Article 1292. In order that an obligation may be extinguished by another which substitute the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with each other. (1204)
Article 1293. Novation which consists in substituting a new debtor in the place of the original one, may be made even without the knowledge or against the will of the latter, but not without the consent of the creditor. Payment by the new debtor gives him the rights mentioned in Articles 1236 and 1237. (1205a)
Novation is a mode of extinguishing an obligation by changing its objects or principal obligations, by substituting a new debtor in place of the old one, or by subrogating a third person to the rights of the creditor. Article 1293 of the Civil Code defines novation as follows:
“Art. 1293. Novation which consists in substituting a new debtor in the place of the original one, may be made even without the knowledge or against the will of the latter, but not without the consent of the creditor. Payment by the new debtor gives him rights mentioned in articles 1236 and 1237.”
In general, there are two modes of substituting the person of the debtor: (1) expromision and (2) delegacion. In expromision, the initiative for the change does not come from — and may even be made without the knowledge of — the debtor, since it consists of a third person’s assumption of the obligation. As such, it logically requires the consent of the third person and the creditor. In delegacion, the debtor offers, and the creditor accepts, a third person who consents to the substitution and assumes the obligation; thus, the consent of these three persons are necessary. Both modes of substitution by the debtor require the consent of the creditor.
Novation may also be extinctive or modificatory. It is extinctive when an old obligation is terminated by the creation of a new one that takes the place of the former. It is merely modificatory when the old obligation subsists to the extent that it remains compatible with the amendatory agreement. Whether extinctive or modificatory, novation is made either by changing the object or the principal conditions, referred to as objective or real novation; or by substituting the person of the debtor or subrogating a third person to the rights of the creditor, an act known as subjective or personal novation. For novation to take place, the following requisites must concur:
1) There must be a previous valid obligation.
2) The parties concerned must agree to a new contract.
3) The old contract must be extinguished.
4) There must be a valid new contract.
Novation may also be express or implied. It is express when the new obligation declares in unequivocal terms that the old obligation is extinguished. It is implied when the new obligation is incompatible with the old one on every point. The test of incompatibility is whether the two obligations can stand together, each one with its own independent existence.38 (Emphasis supplied)
In the civil law setting, novatio is literally construed as to make new. So it is deeply rooted in the Roman Law jurisprudence, the principle — novatio non praesumitur — that novation is never presumed. At bottom, for novation to be a jural reality, its animus must be ever present, debitum pro debito — basically extinguishing the old obligation for the new one.39 (Emphasis supplied)
Novation must be expressly consented to. Moreover, the conflicting intention and acts of the parties underscore the absence of any express disclosure or circumstances with which to deduce a clear and unequivocal intent by the parties to novate the old agreement.40 (Emphasis supplied)
Per meeting held at ARCO, April 18, 2007, it has been mutually agreed between Mrs. Candida A. Santos and Mr. Eric Sy. . . .41
Art. 2220. Willfull injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. (Emphasis supplied)
Moral damages are not recoverable simply because a contract has been breached. They are recoverable only if the party from whom it is claimed acted fraudulently or in bad faith or in wanton disregard of his contractual obligations. The breach must be wanton, reckless, malicious or in bad faith, and oppressive or abusive.42
An award of moral damages would require certain conditions to be met, to wit: (1) first, there must be an injury, whether physical, mental or psychological, clearly sustained by the claimant; (2) second, there must be culpable act or omission factually established; (3) third, the wrongful act or omission of the defendant is the proximate cause of the injury sustained by the claimant; and (4) fourth, the award of damages is predicated on any of the cases stated in Article 2219 of the Civil Code.43
Article 2219. Moral damages may be recovered in the following and analogous cases:ChanRoblesVirtualawlibraryBreaches of contract done in bad faith, however, are not specified within this enumeration. When a party breaches a contract, he or she goes against Article 19 of the Civil Code, which states:chanRoblesvirtualLawlibrary(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in Article 309;
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
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 19 is the general rule which governs the conduct of human relations. By itself, it is not the basis of an actionable tort. Article 19 describes the degree of care required so that an actionable tort may arise when it is alleged together with Article 20 or Article 21.44
Article 20. Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same.
Article 21. Any person who wilfully 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.
Article 20 concerns violations of existing law as basis for an injury. It allows recovery should the act have been willful or negligent. Willful may refer to the intention to do the act and the desire to achieve the outcome which is considered by the plaintiff in tort action as injurious. Negligence may refer to a situation where the act was consciously done but without intending the result which the plaintiff considers as injurious.
Article 21, on the other hand, concerns injuries that may be caused by acts which are not necessarily proscribed by law. This article requires that the act be willful, that is, that there was an intention to do the act and a desire to achieve the outcome. In cases under Article 21, the legal issues revolve around whether such outcome should be considered a legal injury on the part of the plaintiff or whether the commission of the act was done in violation of the standards of care required in Article 19.45
Article 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.
To recover moral damages in an action for breach of contract, the breach must be palpably wanton, reckless and malicious, in bad faith, oppressive, or abusive. Hence, the person claiming bad faith must prove its existence by clear and convincing evidence for the law always presumes good faith.
Bad faith does not simply connote bad judgment or negligence. It imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of known duty through some motive or interest or ill will that partakes of the nature of fraud. It is, therefore, a question of intention, which can be inferred from one’s conduct and/or contemporaneous statements.47 (Emphasis supplied)
Article 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.
Article 2233. Exemplary damages cannot be recovered as a matter of right; the court will decide whether or not they should be adjudicated.
Article 2234. While the amount of the exemplary damages need not be proven, the plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not exemplary damages should be awarded.
The purpose of exemplary damages is to serve as a deterrent to future and subsequent parties from the commission of a similar offense. The case of People v. Rante citing People v. Dalisay held that:ChanRoblesVirtualawlibraryAlso known as ‘punitive’ or ‘vindictive’ damages, exemplary or corrective damages are intended to serve as a deterrent to serious wrong doings, and as a vindication of undue sufferings and wanton invasion of the rights of an injured or a punishment for those guilty of outrageous conduct. These terms are generally, but not always, used interchangeably. In common law, there is preference in the use of exemplary damages when the award is to account for injury to feelings and for the sense of indignity and humiliation suffered by a person as a result of an injury that has been maliciously and wantonly inflicted, the theory being that there should be compensation for the hurt caused by the highly reprehensible conduct of the defendant—associated with such circumstances as willfulness, wantonness, malice, gross negligence or recklessness, oppression, insult or fraud or gross fraud—that intensifies the injury. The terms punitive or vindictive damages are often used to refer to those species of damages that may be awarded against a person to punish him for his outrageous conduct. In either case, these damages are intended in good measure to deter the wrongdoer and others like him from similar conduct in the future.50 (Emphasis supplied; citations omitted)
(1) they may be imposed by way of example in addition to compensatory damages, and only after the claimant's right to them has been established; (2) that they cannot be recovered as a matter of right, their determination depending upon the amount of compensatory damages that may be awarded to the claimant; and (3) the act must be accompanied by bad faith or done in a wanton, fraudulent, oppressive or malevolent manner.51
Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded[.]
Basic is the rule in corporation law that a corporation is a juridical entity which is vested with a legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising it. Following this principle, obligations incurred by the corporation, acting through its directors, officers and employees, are its sole liabilities. A director, officer or employee of a corporation is generally not held personally liable for obligations incurred by the corporation. Nevertheless, this legal fiction may be disregarded if it is used as a means to perpetrate fraud or an illegal act, or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, or to confuse legitimate issues.
. . . .
Before a director or officer of a corporation can be held personally liable for corporate obligations, however, the following requisites must concur: (1) the complainant must allege in the complaint that the director or officer assented to patently unlawful acts of the corporation, or that the officer was guilty of gross negligence or bad faith; and (2) the complainant must clearly and convincingly prove such unlawful acts, negligence or bad faith.
While it is true that the determination of the existence of any of the circumstances that would warrant the piercing of the veil of corporate fiction is a question of fact which cannot be the subject of a petition for review on certiorari under Rule 45, this Court can take cognizance of factual issues if the findings of the lower court are not supported by the evidence on record or are based on a misapprehension of facts.53 (Emphasis supplied)
Piercing the veil of corporate fiction is an equitable doctrine developed to address situations where the separate corporate personality of a corporation is abused or used for wrongful purposes. Under the doctrine, the corporate existence may be disregarded where the entity is formed or used for non-legitimate purposes, such as to evade a just and due obligation, or to justify a wrong, to shield or perpetrate fraud or to carry out similar or inequitable considerations, other unjustifiable aims or intentions, in which case, the fiction will be disregarded and the individuals composing it and the two corporations will be treated as identical.56 (Emphasis supplied)
In the present case, We find bad faith on the part of the [petitioners] when they unjustifiably refused to honor their undertaking in favor of the [respondent]. After the check in the amount of P1,487,766.68 issued by [petitioner] Santos was dishonored for being drawn against a closed account, [petitioner] corporation denied any privity with [respondent]. These acts prompted the [respondent] to avail of the remedies provided by law in order to protect his rights.57
To recapitulate and for future guidance, the guidelines laid down in the case of Eastern Shipping Lines are accordingly modified to embody BSP-MB Circular No. 799, as follows:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on “Damages” of the Civil Code govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 6% 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.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
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 6% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.
And, in addition to the above, judgments that have become final and executory prior to July 1, 2013, shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein.61 (Emphasis supplied; citations omitted.)
Endnotes:
* Associate Justice Diosdado M. Peralta was designated as Acting Chairperson of the Third Division per Special Order No. 1707 dated June 17, 2014, vice Associate Justice Presbitero J. Velasco, Jr., in view of the latter’s official trip to Nairobi, Kenya on June 22 to 25, 2014 and to South Africa on June 26 to 29, 2014.
** Associate Justice Martin S. Villarama, Jr. was designated as Acting Member per Special Order No. 1691 dated May 22, 2014, in view of the vacancy in the Third Division.
*** Associate Justice Bienvenido L. Reyes was designated as Acting Member of the Third Division per Special Order No. 1704 dated June 17, 2014, vice Associate Justice Presbitero J. Velasco, Jr., in view of the latter’s official trip to Nairobi, Kenya on June 22 to 25, 2014 and to South Africa on June 26 to 29, 2014.
1Rollo, pp. 8–20.
2 Id. at 101–110.
3 Id. at 22–29.
4 Id. at 23, complaint.
5 Id.
6 Id. at 101–102, CA decision.
7 Id. at 38.
8 Id. at 23.
9 Id. at 38.
10 Id. at 39.
11 Id.
12 Id. at 40.
13 Id. at 24.
14 Id. at 22–29.
15 Id. at 41–45.
16 Id. at 52, RTC decision.
17 Id. at 51–54.
18 Id. at 71–95.
19 Id. at 85.
20 Per Seventeenth Division, penned by J. Villon, and concurred in by J. Macalino and J. Inting.
21Rollo, pp. 101–110.
22 Id. at 110, CA decision.
23 Id. at 107, CA decision.
24 Id. at 109, CA decision.
25 Id. at 111–116.
26 Id. at 121–122.
27 Id. at 8–20.
28 Id. at 126–131.
29 Id. at 129, comment.
30 Id. at 133–136.
31 Entitled In Re: In Dispensing with Rejoinder, which states that:
“[U]pon the filing of a Reply (when required), no REJOINDER shall be required by the Court. Instead, the Court shall resolve either to (a) give due course to the petition and either consider the case submitted for decision based on the pleadings or require the parties to submit their respective memoranda; or (b) deny or dismiss the petition, as the case may be.”
32 Dissenting opinion of Justice Ynares-Santiago in Chavez v. PEA, 451 Phil. 1, 102–103 (2003) [Per J. Carpio, En Banc], citing A. M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES IV, 203 (1991).
33Borbon II v. Servicewide Specialists, 328 Phil. 150, 157–158 (1996) [Per J. Vitug, First Division].
34Ong Guan Can v. Century Insurance Co., Ltd., 46 Phil. 592, 594 (1924) [Per J. Villamor, En Banc]. See also CIVIL CODE art. 1201.
35 See rollo, p. 53, RTC decision, and rollo, p. 108, CA decision.
36 CIVIL CODE, art. 1292.
37 462 Phil. 779 (2003) [Per. J. Panganiban, First Division].
38 Id. at 788–790, citing Idolor v. CA, 404 Phil. 220, 228 (2001) [Per J. Gonzaga-Reyes, Third Division]; Agro Conglomerates, Inc. v. CA, 401 Phil. 644, 655 (2000) [Per J. Quisumbing, Second Division]; De Cortes v. Venturanza, 170 Phil. 55, 68 (1977) [Per J. Makasiar, First Division]; PNB v. Mallari and The First Nat'l. Surety & Assurance Co., Inc., 104 Phil. 437, 441 (1958) [Per J. Felix, En Banc]; A. M. TOLENTINO, CIVIL CODE OF THE PHILIPPINES, IV, 390 (1991); Garcia v. Khu Yek Chiong, 65 Phil. 466, 468 (1938) [Per C.J. Avanceña, En Banc]; Babst v. CA, 403 Phil. 244 (2001) [Per J. Ynares-Santiago, First Division]; Spouses Bautista v. Pilar Development Corporation, 371 Phil. 533 (1999) [Per J. Puno, First Division]; Security Bank and Trust Company, Inc. v. Cuenca, 396 Phil. 108, 122 (2000) [Per J. Panganiban, Third Division]; Reyes v. CA, 332 Phil. 40, 50 (1996) [Per J. Torres, Jr., Second Division]; Molino v. Security Diners International Corporation, 415 Phil. 587 (2001) [Per J. Gonzaga-Reyes, Third Division].
39 Reyes v. Court of Appeals, 332 Phil. 40, 56 (1996) [Per J. Torres, Jr., Second Division].
40 Land Bank of the Philippines v. Ong, G.R. No. 190755, November 24, 2010, 636 SCRA 266, 277 [Per J. Velasco, Jr., First Division], citing Philippine Savings Bank v. Spouses Mañalac, 496 Phil. 671, 687–688 (2005) [Per J. Ynares-Santiago, First Division].
41Rollo, p. 39.
42 Philippine Savings Bank v. Spouses Castillo, G.R. No. 193178, May 30, 2011, 649 SCRA 527, 538 [Per J. Nachura, Second Division], citing Philippine National Bank v. Rocamora, 616 Phil. 369, 385 (2009) [Per J. Brion, Second Division]; Pilipinas Shell Petroleum Corporation v. John Bordman Ltd. of Iloilo, Inc., 509 Phil. 728, 751 (2005) [Per J. Panganiban, Third Division].
43Francisco v. Ferrer, Jr., 405 Phil. 741, 749–750 (2001) [Per J. Pardo, First Division].
44Concurring opinion of J. Leonen, Alano v. Logmao, G.R. No. 175540, April 7, 2014 < http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2014/april2014/175540_leonen.pdf> [Per J. Peralta, Third Division].
45 Id.
46 G.R. No. 197842, October 9, 2013 < http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2013/october2013/197842.pdf> [Per J. Mendoza, Third Division].
47 Id., citing Erlinda Francisco v. Ferrer, Jr., 405 Phil. 741, 745 (2001) [Per J. Pardo, First Division]; Magat v. Court of Appeals, 392 Phil. 63, 76 (2000) [Per J. Pardo, First Division]; Far East Bank & Trust Company v. Court of Appeals, 311 Phil. 783, 787 (1995) [Per J. Vitug, En Banc]; Ace Haulers Corporation v. Court of Appeals, 393 Phil. 220, 230 (2000) [Per J. Pardo, First Division]; Tan v. Northwest Airlines, Inc., 383 Phil. 1026, 1032 (2000) [Per J. Pardo, First Division]; Ford Philippines, Inc. v. Court of Appeals, 335 Phil. 1, 9 (1997) [Per J. Francisco, Third Division]; and Llorente, Jr. v. Sandiganbayan, 350 Phil. 820, 843 (1998) [Per J. Panganiban, First Division].
48Adriano v. Lasala, G.R. No. 197842, October 9, 2013 < http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2013/october2013/197842.pdf> [Per J. Mendoza, Third Division].
49 G.R. No. 171428, November 11, 2013 < http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2013/november2013/171428.pdf> [Per J. Leonen, Third Division].
50 Id.
51 Francisco v. Ferrer, Jr., 405 Phil. 741, 750 (2001) [Per J. Pardo, First Division], citing National Steel Corporation v. Regional Trial Court of Lanao del Norte, Br. 2, Iligan City, 364 Phil. 240, 257–258 (1999) [Per J. Purisima, Third Division].
52 G.R. No. 166282–83, February 13, 2013, 690 SCRA 519 [Per J. Mendoza, Third Division].
53 Id. at 525–527, citing Garcia v. Social Security Commission Legal and Collection, 565 Phil. 193, 209–210 (2007) [Per Chico-Nazario, Third Division]; Aratea v. Suico, 547 Phil. 407, 414 (2007) [Per J. Garcia, First Division]; Prudential Bank v. Alviar, 502 Phil. 595 (2005) [Per J. Tinga, Second Division]; Francisco v. Mallen, Jr., G.R. No. 173169, September 22, 2010, 631 SCRA 118, 123 [Per J. Carpio, Second Division]; Sarona v. National Labor Relations Commission, G.R. No. 185280, January 18, 2012, 663 SCRA 394, 415 [Per J. Reyes, Second Division].
54Rollo, p. 38.
55 G.R. No. 177493, March 19, 2014 < http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2014/march2014/177493.pdf> [Per J. Brion, Second Division].
56 Id., citing J. C. Vitug (Retired Supreme Court Associate Justice), Commercial Law and Jurisprudence, II, 9 (2006); Lim v. Court of Appeals, 380 Phil. 60, 76 (2000) [Per J. Buena, Second Division]; Philippine National Bank v. Ritratto Group, Inc., 414 Phil. 494, 505 (2001) [Per J. Kapunan, First Division]; National Federation of Labor Union (NAFLU) v. Ople, 227 Phil. 113 (1986) [Per J. Gutierrez, Jr., Second Division]; Commissioner of Internal Revenue v. Norton & Harrison Company, 120 Phil. 684 (1964) [Per J. Paredes, En Banc].
57Rollo, p. 109.
58 G.R. No. 189871, August 13, 2013, 703 SCRA 439 [Per J. Peralta, En Banc].
59 Id.
60 G.R. No. 97412, July 12, 1994, 234 SCRA 78 [Per J. Vitug, En Banc]. The guidelines previously stated that:chanRoblesvirtualLawlibraryI. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.
61Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013, 703 SCRA 439, 457–458 [Per J. Peralta, En Banc].