Republic of the Philippines vs.

Security Credit and Acceptance

Corporation
G.R. No. L-20583, January 23, 1967
An investment company which loans out the money of its customers, collects the
interest and charges a commission to both lender and borrower is a bank. It is
conceded that a total of 59,463 savings account deposits have been made by the
public with the corporation and its 74 branches, with an aggregate deposit of
P1,689,136.74, which has been lent out to such persons as the corporation deemed
suitable therefore. It is clear that these transactions partake of the nature of
banking, as the term is used in Section 2 of the General Banking Act.
Facts: The Solicitor General filed a petition for quo warranto to dissolve the
Security and Acceptance Corporation, alleging that the latter was engaging in
banking operations without the authority required therefor by the General Banking
Act (Republic Act No. 337). Pursuant to a search warrant issued by MTC Manila,
members of Central Bank intelligence division and Manila police seized documents
and records relative to the business operations of the corporation. After examination
of the same, the intelligence division of the Central Bank submitted a memorandum
to the then Acting Deputy Governor of Central Bank finding that the corporation is
engaged in banking operations. It was found that Security and Acceptance
Corporation established 74 branches in principal cities and towns throughout the
Philippines; that through a systematic and vigorous campaign undertaken by the
corporation, the same had managed to induce the public to open 59,463 savings
deposit accounts with an aggregate deposit of P1,689,136.74; Accordingly, the
Solicitor General commenced this quo warranto proceedings for the dissolution of
the corporation, with a prayer that, meanwhile, a writ of preliminary injunction be
issued ex parte, enjoining the corporation and its branches, as well as its officers
and agents, from performing the banking operations complained of, and that a
receiver be appointed pendente lite. Superintendent of Banks of the Central Bank
was then appointed by the Supreme Court as receiver pendente lite of Defendant
Corporation.
In their defense, Security and Acceptance Corporation averred that the the
corporation had filed with the Superintendent of Banks an application for conversion
into a Security Savings and Mortgage Bank, with defendants Zapa, Balatbat,
Tanjutco (Pablo and Vito, Jr.), Soriano, Beltran and Sebastian as proposed directors.
Issue:
operations.

Whether or not Defendant Corporation was engaged in banking

Held.
An investment company which loans out the money of its customers,
collects the interest and charges a commission to both lender and borrower, is a
bank. It is conceded that a total of 59,463 savings account deposits have been

made by the public with the corporation and its 74 branches, with an aggregate
deposit of P1,689,136.74, which has been lent out to such persons as the
corporation deemed suitable therefore. It is clear that these transactions partake of
the nature of banking, as the term is used in Section 2 of the General Banking Act.
Hence, defendant corporation has violated the law by engaging in banking without
securing the administrative authority required in Republic Act No. 337.
That the illegal transactions thus undertaken by defendant corporation warrant its
dissolution is apparent from the fact that the foregoing misuser of the corporate
funds and franchise affects the essence of its business, that it is willful and has been
repeated 59,463 times, and that its continuance inflicts injury upon the public,
owing to the number of persons affected thereby.

Dario Nacar vs Gallery Frames

FACTS: Dario Nacar filed a labor case against Gallery Frames and its owner Felipe
Bordey, Jr. Nacar alleged that he was dismissed without cause by Gallery Frames on
January 24, 1997. On October 15, 1998, the Labor Arbiter (LA) found Gallery Frames
guilty of illegal dismissal hence the Arbiter awarded Nacar P158,919.92 in damages
consisting of backwages and separation pay.
Gallery Frames appealed all the way to the Supreme Court (SC). The Supreme Court
affirmed the decision of the Labor Arbiter and the decision became final on May 27,
2002.
After the finality of the SC decision, Nacar filed a motion before the LA for
recomputation as he alleged that his backwages should be computed from the time
of his illegal dismissal (January 24, 1997) until the finality of the SC decision (May
27, 2002) with interest. The LA denied the motion as he ruled that the reckoning
point of the computation should only be from the time Nacar was illegally dismissed
(January 24, 1997) until the decision of the LA (October 15, 1998). The LA reasoned
that the said date should be the reckoning point because Nacar did not appeal
hence as to him, that decision became final and executory.
ISSUE: Whether or not the Labor Arbiter is correct.
HELD: No. There are two parts of a decision when it comes to illegal dismissal cases
(referring to cases where the dismissed employee wins, or loses but wins on
appeal). The first part is the ruling that the employee was illegally dismissed. This is
immediately final even if the employer appeals but will be reversed if employer
wins on appeal. The second part is the ruling on the award of backwages and/or
separation pay. For backwages, it will be computed from the date of illegal dismissal
until the date of the decision of the Labor Arbiter. But if the employer appeals, then
the end date shall be extended until the day when the appellate courts decision
shall become final. Hence, as a consequence, the liability of the employer, if he
loses on appeal, will increase this is just but a risk that the employer cannot avoid
when it continued to seek recourses against the Labor Arbiters decision. This is also
in accordance with Article 279 of the Labor Code.
Anent the issue of award of interest in the form of actual or compensatory damages,
the Supreme Court ruled that the old case of Eastern Shipping Lines vs CA is already

modified by the promulgation of the Bangko Sentral ng Pilipinas Monetary Board

Resolution No. 796 which lowered the legal rate of interest from 12% to 6%.
Specifically, the rules on interest are now as follows:
1. Monetary Obligations ex. Loans:
a. If stipulated in writing:
a.1. shall run from date of judicial demand (filing of the case)
a.2. rate of interest shall be that amount stipulated
b. If not stipulated in writing
b.1. shall run from date of default (either failure to pay upon extra-judicial
demand or upon judicial demand whichever is appropriate and subject to the
provisions of Article 1169 of the Civil Code)
b.2. rate of interest shall be 6% per annum
2.

Non-Monetary Obligations (such as the case at bar)

a. If already liquidated, rate of interest shall be 6% per annum, demandable

from date of judicial or extra-judicial
demand (Art. 1169, Civil Code)
b. If unliquidated, no interest
Except: When later on established with certainty. Interest shall still be 6% per
annum demandable from the date of judgment because such on such date, it is
already deemed that the amount of damages is already ascertained.
3. Compounded Interest
This is applicable to both monetary and non-monetary obligations
6% per annum computed against award of damages (interest) granted by the
court. To be computed from the date when the courts decision becomes final and
executory until the award is fully satisfied by the losing party.
4. The 6% per annum rate of legal interest shall be applied prospectively:
Final and executory judgments awarding damages prior to July 1, 2013 shall apply
the 12% rate;
Final and executory judgments awarding damages on or after July 1, 2013 shall
apply the 12% rate for unpaid obligations until June 30, 2013; unpaid obligations
with respect to said judgments on or after July 1, 2013 shall still incur the 6% rate.

Legal Interest Rates Modified by New Supreme Court Ruling

The Supreme Court has recently promulgated a decision modifying the rule on
interest rates awarded in the form of actual and compensatory damages.
In a decision penned by Justice Peralta, the Supreme Court in Nacar vs. Gallery
Frames, G.R. No. 189871 (13 August 2013), laid down a uniform rate of six percent
(6%) for the award of interest in the form of actual and compensatory damages. The
foregoing rate shall take effect on 01 July 2013.
The Supreme Courts pronouncement in Nacar vs. Gallery Frames modified the
previous guidelines laid down in Eastern Shipping Lines, Inc. vs. Court of Appeals,
G.R. No. 97412 (12 July 1994). Previously, in Eastern Shipping Lines, Inc. vs. Court of
Appeals, the Supreme Court held that for loans and forbearance of money, in the
absence of stipulation, the rate of interest shall be twelve percent (12%) while for
obligations not constituting a loan or forbearance of money, the rate of interest
shall be six percent (6%). When the judgment of the court becomes final and
executory, the rate of interest shall be twelve percent (12%) since it is akin to a
forbearance of money. Now, with Nacar vs. Gallery Frames, the interest rate,
regardless of the source of the obligation, is pegged at a uniform rate of six percent
(6%).
The Supreme Court further held in Nacar vs. Gallery Frames that for judgments
which became final and executory prior to 01 July 2013, they shall not be disturbed
and shall continue to apply the rates provided for therein.
The Supreme Court cited as basis BSP-MB Resolution No. 796 dated 16 May 2013
and BSP Circular No. 799, Series of 2013, which pegged the interest rates for loans
and forbearance of money, goods and credits, as well as judgments, at six percent
(6%). The Supreme Court held that the BSP is authorized to set interest rates and to
enforce its Circulars, citing its previous ruling in Advocates for Truth in Lending Act,
Inc. vs. Bangko Sentral Monetary Board, G.R. No. 192986 (15 January 2013).