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Republic of the Philippines

G.R. No. 189871

August 13, 2013

DARIO NACAR, Petitioner,

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 courts 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 Arbiters 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

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

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 extra-judicial
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 courts 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%
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.