Eastern Shipping vs.

CA
Art. 1175 & 1176, Legal Interest

Issues
Whether the payment of legal interest on an award for loss or damage is to be
computed from the time of complaint is filed or from the date the decision appealed
from is rendered?
Whether the applicable rate of interest is 12% or 6%?
Facts

Petitioner Eastern Shipping made a shipment which was insured under

Insurance Policy with Defendant Mercantile Insurance
One drum of riboflavin was said to be in bad order upon receipt of the consignee
(person to whom the shipment is to be delivered)
Mercantile was compelled to pay the consignee
There is sufficient evidence that the shipment sustained damage while in the
possession of petitioner. Eastern was held liable for payment of damages

Held:
Established rule on interest in the concept of actual/compensatory damages
1. Payment of sum of money in the form of loan/forbearance
a. if stipulated in writing interest shall earn from the time it is judicially demanded
b. in the absence of stipulation 12% per annum to be computed fron time of default
(from time of judicial/extra-judicial demand was made under Art. 1169)
2. NOT in the form of loan/forbearance
- may be imposed at the discretion of the court at 6% per annum
NO INTEREST SHALL BE ADJUDGED ULESS THE DEMAND CAN BE
ESTABLISHED WITH REASONABLE CERTAINTY
a. When demand is established with reasonable certainty interest begin to run from
the time claim is made judicially/extra-judicially
b. When demand is not certain interest shall begin to run only from date of judgment
of court is made
Base for Computation amount finally adjudged
3.
When judgment awarding sum of money becomes final and executory legal
interest both 1 & 2 shall be 12% until its satisfaction (Reason: Interim period being
deemed to be by then an equivalent to a forbearance of credit)
*Eastern was ordered to pay 6% on the amount due computed from the decision dated
February 3, 1988, and 12% interest, in lieu of 6%, was imposed on such amount upon
finality of the SC decision until the payment thereof.