"x x x.
We agree with the Court of Appeals that the RTC erred in the interest rate and other monetary sums awarded to respondent as baseless. However, we must further modify the interest rate imposed by the Court of Appeals pursuant to the rule laid down in Eastern Shipping Lines, Inc. v. Court of Appeals:
I. 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.
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:
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 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.
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 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.
Since the obligation herein is for the payment of a sum of money, the legal interest rate to be imposed, under Article 2209 of the Civil Code is six percent (6%) per annum:
Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum.
Following the guidelines above, the legal interest of 6% per annum is to be imposed from November 16, 1997, the date of the last demand, and 12% in lieu of 6% from the date this decision becomes final until fully paid.
Petitioner’s allegations of sham dealings involving our own government agencies are potentially disturbing and alarming. If Cruz’s testimony were true, this should be a lesson to the PNP not to dabble in spurious transactions. Obviously, if it can afford to give a 2% commission to other contractors for the mere use of their business names, then the petitioner is disbursing more money than it normally would in a legitimate transaction. It is recommended that the proper agency investigate this matter and hold the involved personnel accountable to avoid any similar occurrence in the future.
x x x."