G.R. No. 36657 , March 28, 1934
TEAL MOTOR COMPANY, INC., plaintiff-appellee, vs. THE CONTINENTAL INSURANCE CO., defendant-appellant. MANILA BUILDING AND LOAN ASSOCIATION, defendant-appellee. (Consolidated with G.R. Nos. 36658, 36659, and 36660)

FACTS

Teal Motor Company, Inc., insured its building and merchandise with several insurance companies. A fire of unknown origin partially destroyed the building. The company filed claims, but the insurers refused to pay, alleging the claim for building damage was excessive and potentially fraudulent. The trial court held the insurers liable for the building damage amounting to P125,000 but denied recovery for the merchandise claims as filed out of time. The insurers appealed, contesting the valuation of the loss and the applicable interest rate.

ISSUE

1. Whether the trial court correctly determined the amount of loss for the building damage.
2. Whether the insurers were justified in contesting payment, affecting the applicable interest rate on the proceeds.

RULING

1. Yes. The Supreme Court affirmed the trial court’s finding that the building damage amounted to P125,000. The Court deferred to the trial court’s assessment of conflicting expert testimony, noting the building remained partially intact, allowing for a reasonable estimation of repair costs, unlike a situation involving totally destroyed property with an exaggerated claim.
2. On the interest rate, the insurers’ contest was justified. The Court modified the interest rate from 8% to the legal rate of 6% per annum. While Act No. 3802 provided for 8% interest if the insurer contested payment without justification, the Court found the insurers had sufficient information at the time to question the claim’s amount. Their defense was not captious or dilatory, so the higher rate did not apply.
Other defenses*, such as arson and overinsurance on the building, were rejected for lack of merit. The judgment of the trial court was affirmed with the modification on the interest rate.

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