GR 213617; (April, 2018) (Digest)
G.R. No. 213617 APRIL 18, 2018
ARCH. EUSEBIO B. BERNAL, DOING BUSINESS UNDER THE NAME AND STYLE CONTEMPORARY BUILDERS, Petitioner vs DR. VIVENCIO VILLAFLOR and DRA. GREGORIA VILLAFLOR, Respondents
FACTS
Petitioner Arch. Eusebio Bernal filed an action for sum of money against respondents Dr. Vivencio and Dra. Gregoria Villaflor concerning unpaid construction costs for a Medical Arts Building. The Regional Trial Court (RTC) ruled in favor of Bernal, ordering the Villaflors to pay a principal amount plus legal interest from a specified date. On appeal, the Court of Appeals (CA) modified the RTC decision, reducing the principal award to Php 1,710,271.21. The CA also ruled that this amount shall earn legal interest at 6% per annum, but only from the date of finality of its judgment until full satisfaction.
Bernal filed a petition for review, limiting his challenge to the computation of interest. He argued that interest should be computed at 6% per annum from the time of either extrajudicial or judicial demand (1998), and that after judgment, the interest rate should be 12% per annum until full payment. He contended the CA erred in reckoning interest only from the finality of judgment.
ISSUE
Whether the Court of Appeals erred in its determination of the applicable interest rate and the reckoning period for the computation of interest on the monetary award.
RULING
The Supreme Court partially granted the petition, modifying the CA’s ruling on the reckoning date for interest. The Court applied the guidelines established in Eastern Shipping Lines, Inc. v. Court of Appeals. The obligation breached was a construction contract, not a loan or forbearance of money. Therefore, the applicable interest for the period prior to final judgment is 6% per annum. The Court clarified that for such obligations, interest shall begin to run not from the time of demand, but from the date when the quantification of damages is reasonably ascertained. In this case, the amount was only definitively quantified and no longer contested when the CA rendered its Decision on February 14, 2014. Thus, the 6% per annum interest should be computed from this date of quantification, not from the date of finality of judgment as ordered by the CA.
Regarding the post-judgment interest, the Court affirmed the 6% per annum rate. Citing Nacar v. Gallery Frames, the Court held that when the judgment became final after July 1, 2013 (the effectivity of BSP Circular No. 799), the legal rate of interest for loans or forbearance of money—which a final monetary judgment is deemed to be—is only 6% per annum, not 12%. Therefore, the award shall earn interest at 6% per annum from February 14, 2014, until full payment.