GR 127135; (January, 2000) (Digest)
G.R. No. 127135. January 18, 1999
EASTERN ASSURANCE AND SURETY CORPORATION (EASCO), petitioner, vs. HON. COURT OF APPEALS, HON. TEOFISTO L. CALUMPANG, in his capacity as Presiding Judge of the Regional Trial Court of Dumaguete City, Branch 40, and VICENTE TAN, respondents.
FACTS
Vicente Tan insured his building with EASCO. After a fire destroyed it on June 26, 1981, EASCO refused his claim. Tan sued for breach of contract. The RTC ordered EASCO to pay P250,000.00 as indemnity “plus legal rate of interest from June 26, 1981 until fully paid.” The Court of Appeals affirmed this on July 30, 1993, but deleted other damages. This judgment became final on August 25, 1993. EASCO tendered payment with 6% annual interest, but Tan demanded 12%. The parties later agreed to refer the interest rate issue to the trial court and set a cut-off date for computation at September 30, 1994.
ISSUE
What is the applicable legal interest rate on the insurance indemnity from June 26, 1981, and was there a proper application of the rules from Eastern Shipping Lines?
RULING
The Supreme Court affirmed the Court of Appeals with modification. The legal interest is 6% per annum from June 26, 1981, until August 24, 1993. This is because the obligation arose from a breach of contract involving indemnity for property loss, not a loan or forbearance of money. Following the guidelines in Eastern Shipping Lines, Inc. v. Court of Appeals, the 6% rate under Article 2209 of the Civil Code applies to such monetary obligations from judicial or extrajudicial demand until the judgment becomes final.
From the date of finality of the judgment, August 25, 1993, the rate becomes 12% per annum until full satisfaction. This 12% rate is imposed as a monetary judgment earning interest pursuant to the Eastern Shipping Lines rules, which merely summarized existing jurisprudence, such as Nakpil and Sons v. Court of Appeals, and did not constitute a new, retroactive law. The Court found that the parties indeed agreed to a cut-off date of September 30, 1994, for interest computation. Therefore, the 12% rate is applied from August 25, 1993, only until September 30, 1994. EASCO’s payment tendered at the 6% rate for the entire period was thus insufficient.