FACTS:

This case involves a claim for damages sustained on a shipment of goods against the common carrier, arrastre operator, and customs broker. The shipment in question consisted of two fiber drums of riboflavin that were shipped from Yokohama, Japan for delivery to the vessel 'SS EASTERN COMET' owned by Eastern Shipping Lines. The shipment was insured under a Marine Insurance Policy. Upon arrival in Manila, the shipment was discharged to the custody of Metro Port Service, who noted that one drum was in bad order. Subsequently, Allied Brokerage Corporation received the shipment from Metro Port Service, and upon delivery to the consignee's warehouse, one drum was found to have spillages and adulterated/fake contents. The insurer, as subrogee, paid the consignee the value of these losses and filed an action for damages against the defendants who failed to pay the claims.

The trial court ruled in favor of the consignee and ordered the defendants to pay the amount of damages, along with attorney's fees and costs. The court held Eastern Shipping Lines, Inc. and the other defendants jointly and severally liable for the claim. The Court of Appeals affirmed the decision of the trial court.

Eastern Shipping Lines, Inc. filed a petition before the Supreme Court, alleging errors and grave abuse of discretion by the appellate court. The issues raised by Eastern Shipping Lines, Inc. were the joint and several liability of the carrier with the arrastre operator and customs broker, as well as the commencement and rate of interest on the claim of the consignee.

The Supreme Court mentioned previous decisions that discussed the common carrier's duty to observe diligence in the shipment of goods. The Court stated that when goods are lost or arrive in damaged condition, there is a presumption of the carrier's failure to observe diligence. The Court also cited a previous case where it held the carrier and the arrastre operator liable in solidum for the proper delivery of the goods to the consignee.

In this particular case, the Supreme Court found that Eastern Shipping Lines, Inc. failed to rebut the presumption of fault and should be held liable for the damages sustained by the shipment. The Court noted that there was sufficient evidence that the shipment sustained damage while in the possession of Eastern Shipping Lines, Inc.

On the issue of legal interest, the Supreme Court discussed the chronological rulings of previous cases. In the end, the Court found that the interest on the claim of the consignee should commence from the date of filing of the complaint at the rate of 12% per annum, instead of from the date of the decision of the trial court and at a lower rate.

The case of Co., Inc. vs. Manila Port Service, decided on 15 May 1969, is a suit for recovery of money arising from short deliveries and pilferage of goods. The plaintiff, Malayan Insurance, claimed that the value of the undelivered goods amounted to P3,947.20. However, this amount was not definitively established. In the stipulation of facts, the parties agreed upon the amount of P1,447.51. The trial court ordered the defendants, Manila Port Service and Manila Railroad Company, to pay the plaintiff this amount with legal interest from the date the complaint was filed.

In the case of Reformina vs. Tomol, rendered on 11 October 1985, the plaintiff sought to recover damages for injury to person and loss of property. After trial, the lower court ruled in favor of the plaintiff.

ISSUES:

1. Whether or not the award of legal interest is proper in cases involving unliquidated claims or damages.

2. Whether or not Central Bank Circular No. 416 prescribing a 12% interest rate should be applied to judgments in cases not involving loans or forbearance of any money, goods, or credits.

3. Whether or not interest should be imposed on the damages awarded in the judgment.

4. Whether or not the 12% interest imposed under Central Bank Circular No. 416 is applicable.

5. Whether the interest imposed should be governed by the Civil Code or the Central Bank Circular.

6. When should the running of the interest commence.

7. Whether the legal interest to be paid is six percent (6%) or twelve percent (12%) per annum.

8. When does the twelve percent (12%) interest begin to apply.

RULING:

1. In cases involving unliquidated claims or damages, interest cannot be recovered unless the demand can be established with reasonable certainty. Interest should be awarded from the date of the decision.

2. Central Bank Circular No. 416, prescribing a 12% interest rate, applies only to loans or forbearance of any money, goods, or credits. In cases not involving loans or forbearance, the legal interest is the rate agreed upon by the parties or, in the absence of stipulation, the legal interest is six percent (6%) per annum.

3. Interest should only be imposed if there is a delay in the payment of the final judgment.

4. The 12% interest imposed under Central Bank Circular No. 416 is not applicable because it is only applicable to loans, forbearance of money, goods, or credits, and judgments involving loans or forbearance of money, goods, or credits.

5. The interest imposed should be governed by the Civil Code. The interest adjudged by the trial court is in the nature of indemnity for damages, and not interest by way of earnings from loans. Therefore, Article 2209 of the Civil Code, which provides for interest as indemnity for damages, shall apply.

6. The running of the interest depends on the type of obligation breached:

7. • For obligations consisting of the payment of a sum of money (loan or forbearance of money), the interest due should be that which may have been stipulated in writing. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, from judicial or extrajudicial demand.
8. • For obligations not constituting a loan or forbearance of money, the interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. The interest shall begin to run from the time the claim is made judicially or extrajudicially, except when the demand cannot be established with reasonable certainty. In such cases, the interest shall begin to run only from the date the judgment of the court is made. The actual base for the computation of legal interest shall be on the amount finally adjudged.

9. The legal interest to be paid is six percent (6%) per annum.

10. The twelve percent (12%) interest shall be imposed on the amount due upon finality of the decision until its payment.

PRINCIPLES:

• Interest upon an obligation which calls for the payment of money, absent a stipulation, is the legal rate. It is generally allowable from the date of demand, judicial or extrajudicial.

• Interest cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonable certainty. In such cases, interest is awarded from the date of the decision.

• Central Bank Circular No. 416, prescribing a 12% interest rate, applies only to loans or forbearance of any money, goods, or credits. It does not cover other types of monetary judgments.

• In the absence of stipulation, the legal interest rate in cases not involving loans or forbearance is six percent (6%) per annum.

• Interest should be imposed only if there is a delay in the payment of the final judgment.

• The 12% interest imposed under Central Bank Circular No. 416 is not applicable to judgments that do not involve loans or forbearance of money, goods, or credits.

• The interest imposed depends on the nature of the obligation breached.

• For obligations consisting of the payment of a sum of money, the interest due should be that which may have been stipulated in writing.

• In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default.

• In obligations not constituting a loan or forbearance of money, the court may impose interest on the amount of damages awarded at the rate of 6% per annum.

• No interest shall be adjudged on unliquidated claims or damages unless the demand can be established with reasonable certainty.

• The running of the interest may commence from the time the claim is made judicially or extrajudicially, or from the date the judgment of the court is made, depending on the certainty of the demand.

• The legal interest rate is six percent (6%) per annum. This rate applies to the amount due from the decision of the court a quo.

• Upon finality of the decision, the interest rate shall increase to twelve percent (12%) per annum until its payment. This interim period is considered a forbearance of credit.