576 Phil. 502
VELASCO JR., J.:
The following is a summary of the parties' claims and counterclaims submitted before the CIAC:
- Is Claimant [Dynamic] entitled to the release of its retention amounting to P58,210,336.00 when DOTC released to the Respondent [Hanjin] the retained amount of P89,492,594.56?
- Is Claimant entitled to its claim for payment of escalation cost and/or price adjustment amounting to P60,000,000.00?
- Is Claimant entitled to its claim for payment of a foreign currency adjustment in the amount of P160,688,069.00?
- Is Claimant entitled to its claim for payment of its work accomplishments valued at P27,790,675.00?
- Whether or not Claimant is entitled to claim payment at 40% mark-up of the following variation orders: (1) Variation Order amounting to P219,171,878.00 x 40% = P87,668,722.00; (2) Variation Order amounting to P60,923,533.00 x 40% = P24,369,413.20?
- Is Claimant entitled to its claim for payment for the installation of three systems of arrival carousel in the amount of P34,297,691.91?
- x x x x
- Is Claimant entitled to its claim for payment for interest computed at the rate of 12% per annum in the amount of P51,288,786.36?
- Was respondent guilty of bad faith and deceit in its dealings with the Claimant when (a) it released the down payment in installments; x x x (c) it delayed payment of progress billings; (d) it refused to release to the Claimant 35% of the foreign currency portion of its contract with DOTC; x x x (f) it overpriced the materials it purchased for the Claimant under the Supplementary Agreement between the parties, and claimed reimbursement for materials for which it failed to produce supporting receipts and also claimed reimbursement for transporting materials from abroad using unreasonable and unacceptable method of transporting materials?
- Were there deductions from the work accomplishments of Claimant, which were unauthorized and undue? Did the Claimant abandon the works? If it did, is the Claimant liable to Respondent for additional expenses it incurred in completing the work in the aggregate amount of P107,459,925.51?
- Is Claimant liable for the claim x x x, for the cost of the supplies, materials and equipment, inclusive of taxes and customs duties, supplied by the Respondent x x x for the performance of the Subcontracted Works? If so, how much of this claim is Respondent entitled to x x x ?
- Was the Claimant (i) mismanaged, (ii) lacking in capacity to perform the Subcontracted Works, (iii) lacking in technical Know-how x x x (iv) lacking in expert engineers and qualified manpower x x x (v) financially incapable of accomplishing the Subcontracted Works x x x ?
- Did Claimant discover the deficiency in the structural design of the buildings to be constructed by it, namely: (i) the Passenger Terminal Building, (ii) the ATC-Administration Building, and (iii) the Central Plant Building? If so, did it call the attention of the Respondent to this deficiency? Did the Respondent instruct the Claimant to proceed with the construction of the shop drawings and the construction of the buildings? Did cracks occur in the concrete beams of the buildings causing the DOTC through its consultant to provide procedures for correction of the defects and determine their cause? x x x Who between Claimant and Respondent is liable for the cost of retrofitting the cracked slabs and beams?
- Is the Claimant liable for the claims of Respondent, described generally as "Contractual Negative Balance" x x x ?
- Is Claimant liable to Respondent for delay x x x ?
- Is the Claimant liable to the Respondent for x x x moral damages x x x and attorney's fees x x x ?
- Is Claimant entitled to its claim for payment of attorney's fees in the amount of P25,554,857.55?[19]
Thereafter, the CIAC issued a Final Award awarding the following amounts for the items as indicated:
[DYNAMIC'S CLAIMS:] Retention Money P 58,210,336.00Escalation Cost/Price Adjustment
60,000,000.00Foreign Currency Adjustment
60,688,069.00Work Accomplishments
27,790,675.00Variation Orders
53,119,284.73Interest for Late Payments
51,288,786.36Attorney's Fees
_____ ____25,554,857.55P 536,652,008.64
[HANJIN'S COUNTERCLAIMS:]
Contractual Negative Balance
P 121,273,314.00Increase Manpower
81,486,997.00Equipment
635,500.00Electrical Consumption
419,939.16Miscellaneous Materials
481,734.81Liquidated Damages
12,600,000.00Expenses for Preparation of Final Drawing
11,705,354.12Miscellaneous Expenses of Claimant's Subcontractors
130,500.00Moral Damages
1,000,000.00Exemplary Damages
1,000,000.00Attorney's Fees
_____ _____2,000,000.00P 232,733,339.51[20]
The total credits to Dynamic are: Adjusted Subcontract Price
P 1,028,932,282.36Share in Profit in VOs 9,295,667.94Materials Over-purchased
_____ _______54,847,739.30TOTAL
P 1,093,075,739.30The total deductions are:
Payment, Progress Billings Nos. 1-20 P 582,103,359.35Net Cost to Complete 368,578,828.92
Repayment Un-recouped Advance Payment ______ ________16,398,419.74TOTAL P_____ _______967,080,608.01x x x x BALANCE P 125,995,131.29[21]
WHEREFORE, the assailed CIAC Final Award dated September 7, 2004 is MODIFIED and/or RECTIFIED as follows: (a) to order the parties to equally share the costs of arbitration conformably with Article 24 of their Subcontract Agreement; (b) to delete the award of attorney's fees in favor of respondent [Dynamic]; and, (c) to reduce the rate of interest imposable after the finality of the award from 15% to 12% per annum. The rest is AFFIRMED in toto.[23]The CA would subsequently deny Hanjin's motion for reconsideration in its Resolution of October 14, 2005.
Upon motion for reconsideration filed by both parties, the CA recomputed and came up with a higher net award as set forth in its Resolution of August 31, 2005 in CA-G.R. SP No. 86641, disposing as follows:
Original Subcontract Price
PhP 714,868,129.00Foreign Currency Adjustment
131,338,674.80Price Escalation 48,171,585.32Variation Orders ______ _______156,786,932.62Adjusted Subcontract Price PhP 1,051,165,321.74x x x x Share in Profit in VOs 61,400,096.07Materials Over-Purchased ______ ________54,847,789.94Total PhP 1,167,413,207.75Less: Total Deductions Progress Billings Nos. 1-20 net of retention money 523,893,023.35Net Cost to Complete 368,578,828.92Repayment, Unrecouped
Advance Payment __16,398,419.74 908,870,252.01Net Award PhP 258,542,935.74
===== =================
The net award in favor of petitioner Dynamic x x x shall be [PhP 258,542,935.74] plus attorney's fees of [PhP 500,000]. Respondent Hanjin x x x is hereby ordered to pay petitioner corporation the amount of [PhP 259,042,935.74]; plus interest at 12% per annum from the promulgation of the assailed Final Award on September 7, 2004, until paid. The cost of arbitration, however, should be equally borne by the parties in accordance with Article 24 of the Subcontract Agreement.
SO ORDERED.[24]
Due to the complexity of the computations involved, We deem it wise to RESTATE Our Decision. The net award shall be recomputed as follows:From the CA Decision in CA-G.R. SP No. 86633, Hanjin has come to this Court on a Petition for Review on Certiorari, the same docketed as G.R. No. 170144. And from the more adverse CA Resolution in CA-G.R. SP No. 86641, Hanjin also filed a similar petition, docketed as G.R. No. 169408.
Original Subcontract Price
PhP 714,868,129.00Foreign Currency Adjustment
131,338,674.80Price Escalation 53,744,697.39Variation Orders (VOs ) 141,535,238.92______ ___________________ Adjusted Subcontract Price PhP 1,041,486,740.11Share in Profit in VOs
9,295,667.94Materials Over-Purchased
54,847,789.94 ______ ___________________Total PhP 1,105,630,197.99Less, Total Deductions Progress Billings Nos. 1-20 net of retention money 523,893,023.35Unadjusted Net Cost to Complete 470,183,498.41Plus: Mech. Works (EFQ) 7,776,735.77Less: Amount to be reimbursed
to [Dynamic] (3,338,736.57)Disallowed items (93,983,040.38)
Additional disallowed (8,381,856.00)Overcharging of Materials for VOs (104,208,856.26)Amended Cost to Complete 271,386,481.54Repayment, Un-recouped
Advance Payment
16,398,419.74 811,677,924.63 _______________ ______________Net Award
PhP 293,952,273.36 ===== =================
The net award in favor of petitioner [Dynamic] shall be [PhP 293,952,273.36] plus attorney's fees of [PhP 500,000]. Respondent [Hanjin] is hereby ordered to pay petitioner x x x the amount of [PhP 293,952,273.36] plus interest at 12% per annum from the promulgation of the assailed Final Award on September 7, 2004, until paid. Hanjin is likewise ordered to release to [Dynamic] the retention money in the amount of PhP 58,210,336.00, plus interest at 12% per annum from the time the Request for Arbitration was filed with the CIAC on February 20, 2004, until fully paid. The cost of arbitration, however, should be equally borne by the parties in accordance with Article 24 of the Subcontract Agreement.
SO ORDERED.[25]
I
WHETHER A REVIEW OF THE INSTANT CASE BY WAY OF THE INSTANT PETITION FOR REVIEW IS WARRANTEDII
WHETHER THE [CA] ERRONEOUSLY READ INTO THE SUBCONTRACT AGREEMENT EXTRANEOUS AND CONTRACTUALLY INEXISTENT TERMS AND CONDITIONS TO LAMELY JUSTIFY ITS AWARD TO RESPONDENT DYNAMIC OF PAYMENT IN FOREIGN CURRENCYIII
WHETHER THE [CA'S] AWARD OF PRICE ESCALATION IN FAVOR OF RESPONDENT DYNAMIC IS WITH LEGAL BASISIV
WHETHER THE [CA'S] IMPOSITION OF CERTAIN ITEMS, PERCENTAGES AND AMOUNTS IN RESPONDENT DYNAMIC'S CLAIM TO VARIATION ORDERS IS WITH LEGAL BASISV
WHETHER THE [CA] WAS LEGALLY JUSTIFIED IN ITS COMPUTATION WITH REGARD TO THE ITEMS ON COSTS TO COMPLETE IN FAVOR OF PETITIONER HANJINVI
WHETHER THE [CA] COMMITTED REVERSIBLE ERROR WHEN IT DISREGARDED THE EVIDENCE ESTABLISHED ON RECORD BY REWARDING RESPONDENT DYNAMIC PAYMENT OF RETENTION MONEY DESPITE ITS ABANDONMENT OF THE SUBCONTRACTED WORKSVII
WHETHER PETITIONER HANJIN IS LEGALLY ENTITLED TO REIMBURSEMENT OF THE COST OF ATTORNEY'S FEES, MORAL AND EXEMPLARY DAMAGESVIII
WHETHER THERE WAS LEGAL BASIS FOR THE [CA'S] RULING THAT RESPONDENT DYNAMIC IS ENTITLED TO INTEREST PAYMENT[27]
(1) when the factual findings of the [CA] and the trial court are contradictory;Significantly, jurisprudence teaches that mathematical computations as well as the propriety of the arbitral awards are factual determinations.[30] And just as significant is that the factual findings of the CIAC and CA--in each separate appealed decisions--practically dovetail with each other. The perceptible essential difference, at least insofar as the CIAC's Final Award and the CA Decision in CA-G.R. SP No. 86641 are concerned, rests merely on mathematical computations or adjustments of baseline amounts which the CIAC may have inadvertently utilized.
(2) when the findings are grounded entirely on speculation, surmises, or conjectures;
(3) when the inference made by the [CA] from its findings of fact is manifestly mistaken, absurd, or impossible;
(4) when there is grave abuse of discretion in the appreciation of facts;
(5) when the [CA], in making its findings, goes beyond the issues of the case, and such findings are contrary to the admissions of both appellant and appellee;
(6) when the judgment of the [CA] is premised on a misapprehension of facts;
(7) when the [CA] fails to notice certain relevant facts which, if properly considered, will justify a different conclusion;
(8) when the findings of fact are themselves conflicting;
(9) when the findings of fact are conclusions without citation of the specific evidence on which they are based; and
(10) when the findings of fact of the [CA] are premised on the absence of evidence but such findings are contradicted by the evidence on record.[29]
ARTICLE 1. SUBCONTRACT DOCUMENTSIt is abundantly clear from the emphasized portions of the aforequoted provision that the DOTC-Hanjin Main Contract forms as "an integral part of the Subcontract Agreement." It is settled that if the terms of a contract leave no doubt as to the parties' intention, the literal meaning of its stipulations should control.[34] The categorical finding of the CA, affirmatory of that of the CIAC, was that "the Subcontract is a back-to-back contract with Hanjin's contract with DOTC." Under the Main Contract, DOTC undertook to pay Hanjin 35% of the contract price in US dollars. Be that as it may, and on the postulate that the Main Contract is an integral part of the Subcontract Agreement, it behooves Hanjin to extend to Dynamic the same benefits otherwise accruing to Hanjin under the Main Contract. Apart from dollar payment, other benefits contemplated include the payment of price adjustment or escalation. An application of the "back-to-back" arrangement between Hanjin and Dynamic to the contrary would be tantamount to a construction against the terms of the Subcontract Agreement.
1.1) The following documents shall be deemed to form and be read and be construed as an integral part of the Subcontract Agreement in the same order of precedence as below:1.2) The Subcontractor is deemed to have examined and fully understood the aforesaid Subcontract Agreement Documents.[33] (Emphasis supplied.)
a) Subcontract Agreement No. DAV-2-Sub-A-OO 1
b) Special Conditions as the Annex 1
c) General Conditions of the Main Contract d) Technical Specifications of the Main Contract e) Tender Drawings f) Priced Bill of Quantities as the Annex 2.
Dynamic's Subcontract Price of P714,868,129.00 is 76% of what Hanjin will derive from DOTC for the Subcontract Works. 35% of this amount represents the foreign currency portion of the Subcontract Price. This amounts to P250,203,845.00. At the exchange rate of Hanjin which is P34.10: US$1, this amount of P250,203,845.00 is equivalent to US$7,337,356.15. Converted again into its value in pesos at the time when the Subcontract was performed which ranged from P50.00 to P54.00 to US$1, or an average rate of P52.00: US$1, its peso equivalent is P381,542,519.80. This is the rate used by Hanjin in charging Dynamic for the peso value of the importation of foreign materials. The difference between P381,542,519.80 and P250,203,845.00 is P131,338,674.80. We award to Dynamic as its share of the foreign currency portion of the Subcontract Price the amount of P131,338,674.80 which shall be added to the Subcontract Price.[37]
x x x. In Our assailed Decision [of July 6, 2005], We granted [Dynamic] additional escalation as to the "local portion" i.e., on 65% of [Dynamic] billings based on the formula: [Dynamic] Billing multiplied by 65% of the said billing, multiplied by the percentage of the escalation. However, We computed escalation of the total amount of PhP 545,162,305.61 because the CIAC computed escalation up to this extent only. It appears that a total of twenty (20) progress billings have been submitted by [Dynamic] to Hanjin because it was advised that no payments were forthcoming for subsequent progress billings.As it were, the records do not show that Hanjin presented any of the supposed 52 formulas and price indexes, the utilization of which would have resulted, so it claims, in a more exact price escalation figure. Hanjin did not adduce any evidence to provide legal support to its assertion that the price escalation portion to which Dynamic is entitled to is 35% of the price index only. The Court agrees with the CA that, in computing price escalation, the allowable escalation is to be pegged on the local portion, that is, on 65% of the Dynamic billing multiplied by 100% price index, because Dynamic is entitled to both price adjustment and price escalation under the Subcontract Agreement.x x x x
This being the case, We have no recourse but to limit the award of escalation only up to the period covered by Progress Billing No. 20 or up to April 2002 as the value of all subsequent accomplishments remained undetermined. It appears however, that the total amount billed up to the time was PhP 582,103,359.35. We have computed escalation only up to the PhP 545,162,035.61 or short as to PhP 36,941,052.74. Applying the formula mentioned above, an additional [PhP 5,573,112.07] is due [Dynamic] as escalation computed: PhP 36,941,053.74 x 65% x 0.2321, over and above PhP 22,233,039.38, so that a total of [PhP 27,806,151.45] is due [Dynamic] as additional escalation over and above that computed by the CIAC.[39]
Also pertinent is a list of VOs[43] approved by the DOTC with an aggregate amount of PhP 37,326,381.54,[44] corresponding to the same items previously deleted, as shown above, amounting to PhP 91,464,481.64.
Original Subcontract Price
PhP 924,670,819.00Deleted after re-measurement
PhP 118,338,206.31Deleted due change of specifications subject to VOs 91,464,481.64 209,802,687.95 PhP 714,868,129.05[42]==============
The Dynamic Summary is divided into two parts: The first part covered all purchases, payments to subcontractors and all expenses deducted from Dynamic's progress billings nos. 1 to 20. We reviewed the Dynamic Summary to ascertain the expenses that are questioned. We assume that those not questioned are admitted to be proper expenses and are deductible from the [adjusted subcontract price]. We agree with Dynamic that we should disallow certain items for the following reasons:We came across a substantial number of imported items where there was a material variance between the value of an imported item as reflected in a Customs declaration and the value reflected in private documents. The value reflected in the Bureau of Customs declaration is less, in some cases, substantially less than that reflected in other documents. We chose to rely on the value in the Bureau of Customs declaration. First, because it is a public document. Second, because if the case is one in which Hanjin undervalued the imported goods, which is a criminal act, we will not allow it to profit from its own wrong.[49]
- The expense is outside the scope of work of Dynamic;
- The expense relates to an item that is subject to a prior deduction; in other words, in the cases of double deduction.
- The expense is undocumented.
Even if it were true, as argued by Hanjin, that there were other aspects of the work that could have been aggressively pursued by Dynamic, it could have given the guarantee requested by Dynamic that it will be paid even if DOTC does not in turn pay Hanjin for the same work. Moreover, the admission by Hanjin that after the April 2002 progress billings, it did not pay Dynamic for work it had accomplished, in our view, provides sufficient legal justification for not continuing with the work. Article 1169 [of the] Civil Code, invoked by Dynamic provides:In its Resolution dated August 31, 2005, the CA sustained the CIAC's finding on non-abandonment, as follows:ART. 1169. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills the obligation, delay by the other begins.Under the Subcontract, Dynamic agreed to perform the Subcontract Works in consideration for which Hanjin agreed to pay Dynamic the stipulated Subcontract Price in accordance with the terms and conditions of the Subcontract. The payment for performing the Subcontract Works consisted of an advance payment exclusively to cover the costs of mobilization and monthly progress payments within seven (7) days after DOTC pays Hanjin. [Hanjin has not argued] that DOTC was remiss in the payment of Hanjin's progress billings. Clearly, therefore, there was failure on the part of Hanjin to comply with its obligation to pay Dynamic. Thus, we hold that x x x Dynamic did not abandon the Works. As will be shown later, Dynamic was squeezed out of the Subcontract and was rendered by Hanjin incapable of performing its obligations therein. Under Article 1186 of the Civil Code, "The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment."[50] (Emphasis supplied.)
[T]he CIAC found that [Dynamic] did not abandon the subcontract works, but that it was squeezed out of the Subcontract and was rendered by Hanjin incapable of performing the obligations therein. It found certain circumstances to justify the suspension of work by [Dynamic], to wit: that [Dynamic] was forced to de-mobilize because it was not being paid for work undertaken; that the issue of retrofitting had not been resolved; and that the manner of retrofitting still had to be decided upon. Despite the same, [Dynamic] continued with the work not affecting the retrofitting work, but Hanjin terminated the Subcontract. The CIAC thus held that Hanjin, the obligor, in voluntarily preventing the fulfillment by [Dynamic], the obligee, of its obligation, the condition was deemed fulfilled.[51]It cannot be overemphasized that conclusions arrived at on factual issues by the CIAC, when affirmed by the CA, are accorded great respect and even finality, if supported by substantial evidence.[52] In the instant case, both the CIAC and the CA found more than ample evidence to support Dynamic's disclaimer of having abandoned the Project.
6.2) Monthly progress billing calculated on the basis of actual works measured and sixty percent (60%) of the material costs of the delivered goods according to the Bill of quantities, x x x shall be paid with deductions of advance payment stipulated in Article 6.1 and ten percent (10%) of billing amount as the retention money stipulated in Article 7.1 for the period covered. Monthly progress billing[s] shall be paid by the Contractor and to the Subcontractor within seven (7) working days after the Client pays the Contractor.The retention money, as described above, is intended to ensure defect and deficiency-free work as evidenced by the contractor's issuance of a Take Over Certificate. Hanjin, as contractor, never issued this key document to Dynamic. Instead, it discharged Dynamic from the 94%-done Project rendering the issuance of such certificate a virtual impossibility. On June 1, 2003, the DOTC issued a Take Over Certificate to Hanjin and released the latter's retention money under the Main Contract. But even earlier, the DOTC released Hanjin's retention money covering the period February 2000 to December 2001, a development which would have obligated Hanjin to release the corresponding Dynamic's retention money for the same period. But instead of paying, Hanjin held onto Dynamic's retention money. Worse still, Hanjin willfully and in apparent bad faith took over the unfinished work of Dynamic. To us, and to CIAC and the CA earlier, Hanjin in effect waived any and all of its rights to hold Dynamic liable for any defects, deficiencies, or unfinished work. Consequently, there is no legal basis for Hanjin to further withhold payment of Dynamic's retention money.x x x x
ARTICLE 7. RETENTION
7.1) The retention money, ten percent (10%) of every progress billing with cumulative amount not exceeding ten percent (10%) of the Subcontract Price shall be deducted therefrom in order to secure the remedy of defects.
7.2) Fifty percent (50%) of the retention money shall be released to the Subcontractor immediately after the Contractor issues the "Taking Over Certificate" to the Subcontractor and against presentation of Warranty Bond x x x valid for the duration of the Defects Liability Period specified in Article 8.
The other fifty percent (50%) retention shall be released pro rata, if no defects have been found, after the Client releases retention money to the Contractor, after the Subcontractor issues a Clearance Certificate to the Contractor attesting that the Contractor is free from all liens and encumbrances in relation to the Subcontract Works and after the Subcontractor submits an acceptable Warranty Bond to the Contractor which is valid until the defects liability period of the Main Contract plus 2 months.x x x x
8.3) Defects Liability Period shall be three hundred sixty-five (365) days from the date of issuance of the Taking Over Certificate. Within this period, the Subcontractor shall repair and make good all defects in the Subcontract Works at his own cost x x x. The Subcontractor shall assume full and sole responsibility for the removal, repair and replacement of any defective or non- conforming works.[54] x x x
On the basis of the evidence before us, we do not find any basis to hold Dynamic liable to Hanjin for x x x damages and attorney's fees. On the other hand, on the basis of our finding that Hanjin acted in bad faith and had persistently acted in a manner that we interpret as attempts to squeeze out Dynamic from the Subcontract, and for attempting to pass on to Dynamic a part of the cost of retrofitting when, it is clear from the evidence, it was free from fault, and all the difficulties encountered by Dynamic in trying to enforce its rights under the Subcontract, we should find Hanjin liable to pay Dynamic exemplary damages but we cannot award exemplary damages as they are not part of the claim of Dynamic. x x x We, however, award attorney's fees of P500,000.00.[55]
ART. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered except:An award of attorney's fees being the exception,[56] some compelling legal reason must obtain to bring the case within the exception and justify such award. In the case at bench, there is a categorical finding by the CIAC and CA that Hanjin's refusal to satisfy Dynamic's just claims amounted to gross and evident bad faith. This to us presents the justifying ingredient for the award of attorney's fees. Accordingly, we affirm the award of attorney's fees in CA-G.R. SP No. 86641 to Dynamic in the amount of PhP 500,000.x x x x
2) When the defendant's acts or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect its interest;x x x x
5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim;x x x x
11) In any case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered.
[Hanjin] x x x is hereby ordered to pay [Dynamic] the amount of [PhP 293,952,273.36]; plus interest at 12% per annum from the promulgation of the assailed Final Award on September 7, 2004, until paid. Hanjin is likewise ordered to release to [Dynamic] the retention money in the amount of PhP 58,210,336.00, plus interest at 12% per annum from the time the Request for Arbitration was filed with the CIAC on February 20, 2004, until fully paid.[57] x x xIn the landmark case of Eastern Shipping Lines v. Court of Appeals, the Court summarized the rules on interest award, as follows:
II. 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:The contract under consideration does not partake of a loan or forbearance of money; it is a construction contract. Thus, the matter of interest award proceeding from the dispute would fall under the second paragraph of the above-quoted decision.
- 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.
- 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.
- 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.[58]