New rules re computation of legal interests

Date Published:
Modifying the rules in the Eastern Shipping Lines case, the High Court promulgated the Nacar guidelines.

In Nacar v. Gallery Frames,[1] the Supreme Court laid down the following guidelines for the imposition and computation of legal interests. The guidelines in the Eastern Shipping Lines case[2] were accordingly modified to embody BSP­ MB Circular No. 799, as follows:
  1. When an obligation, regardless of its source, i.e., law, contracts, quasi­contracts, delicts or quasi-delicts, is breached, the contravener 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.
  2. 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:
    1. 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 6% 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.
    2. 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.
    3. 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 6% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.
And, in addition to the above, judgments that have become final and executory prior to July 1, 2013, shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein.
[1] G.R. No. 189871, 13 August 2013.
[2] G.R. No. 97412, July 12, 1994

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