Eastern Shipping Lines v. CA (1994) G.R.
97412|Right to Office The Court suggested the following rules of thumb for future guidance:
PETITIONER: Eastern Shipping Lines
RESPONDENT: CA and Mercantile Insurance Inc.
SUMMARY: Eastern Shipping Lines shipped two fiber drums, but they were damaged.
Mercantile Insurance Inc. held them liable, for which they filed a complaint in Court. CA granted
them the damages, but held that defendants would be held liable at the legal interest of 12%
from the date of the filing of the complaint. Upon appeal to the SC, the Court realized that there
were different legal rates applied. Hence, they supplied the following rules (see doctrine). Given
such suggestion, the Court granted the petition as to this issue and gave the interest of 6% from
the date of the decision until it is fully paid.
DOCTRINE: see bold part on HELD. (Sorry, it’s really long)
FACTS:
 On Dec. 4, 1981, 2 fiber drums of riboflavin were shipped from Yokohama, Japan, for
delivery vessel ‘SS EASTERN COMET’, owned by Eastern Shipping Lines. The
shipment was insured under Mercantile Insurance Inc.’s Insurance Policy.
 Upon arrival, it was discharged under the custody of Metro Port Service, Inc. Everything
except 1 drum was said to be in bad order.
 Allied Brokerage Corporation received the shipment from Metro Port, where one drum
was opened and without seal. Allied Brokerage made deliveries of the shipment to the
consignee’s warehouse. Such shipment except one drum contained spillages, while the
rest of the contents was adulterated/fake.
 Mercantile Insurance contended that due to the losses/damage sustained by the drum,
the consignee lost Php19,032.95 due to the fault of defendants. Claims were presented
against them, which they failed and refused to pay.
 Eastern Shipping Lines contended that the shipment was discharged in good order from
the vessel. Metroport averred that although shipment was discharged, portion of it was
already in bad order. Allied Brokerage alleged that plaintiff has no cause of action against
it.
 CA ruled that defendants were to pay jointly and severally the amount of Php19,032.95
with the legal interest of 12% from Oct. 1, 1982.
ISSUE(S):
1. W/N CA erred when it held that the grant of interest should commence from the date
of the filing of the complaint at the rate of 12% instead of from the date of the decision
at 6%? YES.
HELD:
1. History of cases showed that there had been variances in the grant of legal interests.
a. The first group consists of cases that applied either 6% or 12% per annum. In
such group, there has been a consistent holding that the Central Bank Circular
imposing the 12% interest per annum applies only to loans or forbearance of
money, goods or credits, as well as to judgments involving such, and that the
6% interest under the Civil Code governs when the transaction involves the
payment of indemnities in the concept of damage arising from the breach or a
delay in the performance of obligations in general. A common frame time is
also observed – from the time the complaint is filed until it is fully paid.
b. The second group did not alter the pronounced rule on the application nof the
6% or 12%. Unlike, however, the “first group” which remained consistent in
holding that the running of the legal interest should be from the time of the
filing of the complaint until fully paid, the “second group” varied on the
commencement of the running of the legal interest.
a. When an obligation, regardless of its source, i.e., law, contracts, quasi-
contracts, delicts or quasi-delicts is breached, the contravenor can be held
liable for damages. The provisions under Title XVIII on “Damages” of the
Civil Code govern in determining the measure of recoverable damages.
b. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is
imposed, as follows:
a. When the obligation is breached, and it consists in the payment of
a sum of money, i.e., a loan or forbearance of money, the interest
due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the
rate of interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.
b. When an obligation, not constituting a loan or forbearance of
money, is breached, an interest on the amount of damages awarded
may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated
claims or damages except when or until the demand can be
established with reasonable certainty. Accordingly, where the
demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty
cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of
damages may be deemed to have been reasonably ascertained).
The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.
c. When the judgment of the court awarding a sum of money becomes
final and executory, the rate of legal interest, whether the case falls
under paragraph 1 or paragraph 2, above, shall be 12% per annum
from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit.