G.R. No. L-47851, L-47863, L-47896. April 15, 1988.
JUAN F. NAKPIL & SONS and JUAN F. NAKPIL, petitioners, vs. THE COURT OF APPEALS, UNITED CONSTRUCTION COMPANY, INC., JUAN J. CARLOS, and the PHILIPPINE BAR ASSOCIATION, respondents. (Consolidated Cases)

FACTS

The Philippine Bar Association (PBA) engaged the architectural services of Juan F. Nakpil & Sons (NAKPILS) for the design and the construction services of United Construction Co., Inc. (UNITED) for the erection of its office building in Intramuros, Manila. The building was completed in 1966. On August 2, 1968, a strong earthquake caused major structural damage, buckling the front columns. PBA sued UNITED for damages due to alleged construction defects. UNITED, in turn, filed a third-party complaint against NAKPILS, alleging the damage was due to design flaws. The case was referred to a commissioner, who found the damage was caused by the earthquake, defects in NAKPILS’ plans, UNITED’s deviations from the plans and poor workmanship, and PBA’s lack of supervision.
The trial court held UNITED and NAKPILS solidarily liable. The Court of Appeals modified the award. On appeal, the Supreme Court, in a 1986 Decision, modified the judgment by imposing solidary indemnity of P5,000,000.00 for damages (covering building loss, interest, and lost rentals) and P100,000.00 as attorney’s fees on UNITED and NAKPILS, payable upon finality of the decision, with a 12% per annum interest if payment is delayed. UNITED and NAKPILS filed motions for reconsideration.

ISSUE

The primary issue for reconsideration is whether the Supreme Court’s award of damages and imposition of interest were proper.

RULING

The Supreme Court denied the motions for reconsideration and affirmed its prior Decision. On the award of damages, the Court held the P5,000,000.00 indemnity was not excessive but a conservative estimate covering the building’s loss, interest charges, and unrealized rentals computed on a continuing basis until satisfaction of judgment. The Court rejected arguments that PBA failed to mitigate damages, noting a prior purchase offer for the damaged building was too low relative to the property’s combined value.
Regarding attorney’s fees, the Court affirmed its discretion to determine a reasonable amount, citing precedent where 10% of the recovery is deemed reasonable. The P100,000.00 award was upheld as just.
On the imposition of interest, the Court clarified that the 12% per annum interest under Central Bank Circular No. 416 applies only to loans, forbearance of money, or judgments involving such. Here, no interest was imposed on the principal indemnity if paid upon finality. The 12% interest was a penalty for delay in paying the judgment sum after it became final and executory, which is distinct from an interest imposed as part of compensatory damages from the filing of the complaint. Thus, the imposition was proper. All motions for reconsideration and related pleas were denied.