Legal Interest on Philippine Judgment Awards: A Comprehensive Guide

This article surveys the entire doctrinal landscape on how Philippine courts compute legal (judicial) interest on money judgments. It synthesizes statutes, Bangko Sentral circulars, procedural rules, and leading Supreme Court decisions up to June 2025. It is intended as an academic resource and is not a substitute for independent legal advice.

1. Statutory Bedrock

Source	Key text
Civil Code Art. 2209	“If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is now six per cent per annum.”
Civil Code Arts. 2211–2212	Authorize courts to impose interest in the discretion of the court, even if not prayed for, when required by “equity” or “the nature of the case.”
Central Bank (now BSP) Charter (R.A. 7653, §109)	Empowers the Monetary Board to “prescribe the maximum rate of interest.”

2. Evolution of the “Legal Rate”

Period	Governing issuance	Legal rate (per annum)	Notes
16 July 1973 – 30 June 2013	CB Circular 416 (1973)	12 %	Applied to both monetary obligations & judgments.
1 July 2013 – present	BSP Circular 799 (MB Res. 738, 30 May 2013)	6 %	Reduced the legal and judgment rate to keep pace with market realities. BSP confirmed the 6 % rate in later Circular 902 (2016) and MB Res. 596 (2022).

Practical effect: Pre-2013 judgments attract 12 % only until 30 June 2013. Beginning 1 July 2013, any un-satisfied balance thereafter earns 6 %.

3. Two Core Doctrines on When Interest Runs

Doctrine	Leading case	Rules distilled
Eastern Shipping Lines (G.R. 97412, 12 July 1994)	• Loan or forbearance of money: 12 % from judicial or extrajudicial demand until full satisfaction. • Unliquidated damages: No interest until adjudged; thereafter 12 % from decision on liability until full payment. • Once judgment becomes final & executory (F&E), the same rate applies “as a rule” until satisfaction.
Nacar v. Gallery Frames (G.R. 189871, 13 Aug 2013)	Incorporated BSP Circular 799 • Re-affirmed Eastern sequencing but substituted 6 % for 12 % starting 1 July 2013. • For pre-2013 obligations already earning 12 %, the rate drops to 6 % on 1 July 2013. • After F&E, always 6 %, regardless of the nature of the obligation.

Other clarifying cases: Spouses Abalos v. PNB (G.R. 141790, 2005); Cua v. WSB Dev. (G.R. 202686, 2020); Sunga-Chua v. CA (G.R. 165028, 2010); PNB v. Court of Appeals (G.R. 121532, 1999).

4. Interest Categories the Courts Recognize

Monetary interest (loan/forbearance).
Compensatory interest (damages in lieu of earnings).
Judgment interest (interest on the judgment award after F&E).

Rule of thumb: Identify the nature of the principal claim first. The timing and rate flow from that characterization.

5. Step-by-Step Computation Framework

Identify the principal amount and nature of obligation.
Pinpoint triggering date:
- Loan/forbearance: date of demand (Art. 1169).
- Damages (unliquidated): date of decision fixing the amount.
Apply correct rate for the period:
- 12 % p.a. → until 30 June 2013.
- 6 % p.a. → from 1 July 2013 onward.
Change-over rule: Break the timeline into tranches if the period straddles 30 June 2013.
After finality (Entry of Judgment): 6 % p.a. simple interest until full satisfaction.
No compounding absent explicit stipulation or statutory mandate (Art. 1959).
If partial payments occur, compute interest on the diminishing balance.

Illustrative Example

Principal judgment award (unliquidated damages fixed only by the RTC): ₱1 000 000 RTC decision: 15 March 2012 CA & SC appeals end; judgment F&E: 10 October 2014 Writ of execution satisfied: 10 October 2016

Period	Days	Rate	Interest
15 Mar 2012 – 30 Jun 2013	473	12 %	₱1 000 000 × 0.12 × (473÷365) = ₱155 726.
1 Jul 2013 – 10 Oct 2014 (F&E)	466	6 %	₱1 000 000 × 0.06 × (466÷365) = ₱76 602.
Sub-Total before F&E			₱232 328
11 Oct 2014 – 10 Oct 2016	730	6 %	₱1 000 000 × 0.06 × (730÷365) = ₱120 000.
Total interest			₱352 328
Grand total to satisfy writ			₱1 352 328

(Assumes no partial payments; courts often accept 360-day banking year but Supreme Court default is 365.)

6. Special Issues & Nuances

Issue	Current doctrine
Contract stipulating a rate > 6 %	Enforced as written (freedom to contract) but usury laws repealed; court may reduce unconscionable rates as equity.
Interest on moral/exemplary damages	Allowed from date of decision fixing amount (unliquidated).
Arbitral awards (domestic/commercial)	Arbitration clause may set its own rate; otherwise apply BSP legal rate & Nacar sequencing.
Foreign currency judgments	Currency convert at payment date then apply 6 % on peso equivalent, absent contrary stipulation (Rule 45-B of the Rules of Court Amendment, 2022).
Tax awards vs. the State	Court of Tax Appeals applies 12 % or 6 % following Nippon Express (CTA EB 2049, 2023) depending on period; interest may be disallowed if the State is a passive debtor per Philippine Journalists, Inc. (G.R. 162532, 2008).
Labor cases (NLRC, CA-rule 65)	The Labor Code (Art. 294) imposes 6 % p.a. on monetary awards from finality; if forbearance exists, apply Nacar.
Family courts (child support arrears)	Treated as loan/forbearance ⇒ 6 % from demand or filing of petition; if arrears pre-2013, apply 12 % until 30 June 2013.
Government expropriation	“Just compensation” bears 6 % from taking (not from complaint) under Republic v. Court of Appeals (G.R. 146587, 2002) as refined by PEA-Tiamson line of cases; interest drops to 6 % in post-2013 periods.

7. Procedural Mechanics

Plead specifically. A claim for interest is not mandatory, but pleading it preserves entitlement under Art. 2209.
Courts may award motu proprio if justice demands.
Judgment Form: Decision should clearly (a) state the rate, (b) define the reckoning date, and (c) order 6 % interest on any unpaid balance after finality.
Execution stage: Clerk of court (Section 9, Rule 39) prepares a “computation sheet” following above rules; objections resolved by the trial court.

8. Compliance & Best-Practice Checklist for Litigants

Attach an interest table to motions for execution to forestall disputes.
If partial payments were made, present receipts chronologically and adjust the principal for each tranche before running interest.
Watch out for the 30 Jun 2013 cut-off—it frequently slashes accrued interest in older cases.
Where contract rate is silent but parties make a written demand before suit, reserve the right to claim monetary interest from demand.
For arbitral awards, ask the tribunal to specify interest terms to avoid recourse to judicial defaults.

9. Outstanding Debates (as of 2025)

Question	Status
Should the legal rate track the BSP overnight reverse-repurchase rate (now 6.50 %)?	Bills pending in the 19th Congress seek a floating “policy-rate-plus-x %” formulation; none have passed.
Applicability to crypto-denominated obligations	No SC ruling yet; trial courts tend to convert to pesos at BSP reference rate on payment date then apply Nacar.
Compound (interest-on-interest) post-judgment	Still disallowed absent express stipulation.

10. Key Take-Aways

Six per cent (6 % simple interest) is now the universal default.
Break the timeline at 30 Jun 2013 for legacy cases.
Identify whether the claim is a loan/forbearance or unliquidated damages—this dictates when interest starts.
After finality every peso of a judgment earns 6 % until paid, encouraging prompt compliance.
No compounding unless parties said so.

Conclusion

Philippine jurisprudence on judgment interest has coalesced around a clean, easily-applied formula: marry Eastern Shipping’s timing rules with Nacar’s 6 % rate. Litigants, counsel, and trial courts who follow the step-wise approach set out above can avoid the most common pitfalls—chiefly misapplying the 12 % rate or forgetting to switch to 6 % after July 2013—and ensure that judgment awards accurately compensate without over-penalizing. Pending legislative proposals to adopt a flexible market-based rate bear watching, but as of June 2025 the doctrine remains stable.