NACAR vs Gallery Frames

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 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 follows:
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
2. 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% rate;
- 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.