G.R. No. 174838 . June 01, 2016
STRONGHOLD INSURANCE CO., INC., PETITIONER, VS. PAMANA ISLAND RESORT HOTEL AND MARINA CLUB, INC., RESPONDENT.

FACTS

This case originated from an action for sum of money filed by Pamana Island Resort Hotel and Marina Club, Inc. (Pamana) and Flowtech Construction Corporation against Stronghold Insurance Company, Inc. (Stronghold) based on a Contractor’s All Risk Bond. A fire destroyed cottages under construction, causing losses to Pamana. The Regional Trial Court (RTC) ruled in favor of Pamana, ordering Stronghold to pay insurance proceeds, exemplary damages, attorney’s fees, and interest at double the applicable rate pursuant to Section 243 of the Insurance Code, computed from the date of demand until fully paid. Stronghold’s appeals were denied, and the decision became final.
Subsequently, upon motion for execution, Stronghold filed an Urgent Motion to Suspend Execution, arguing the computed interest was unconscionable. The RTC granted the motion, substantially reducing the interest by ruling it should be computed only from the date of the judgment’s promulgation (October 14, 1999) until its finality (December 15, 2004), not from the date of demand. The Court of Appeals (CA) reversed the RTC order, annulling it on the ground of the immutability of final judgments, reinstating the original computation. Stronghold elevated the case to the Supreme Court.

ISSUE

Whether the Court of Appeals erred in annulling the RTC’s order which modified the computation of interest on the final and executory judgment.

RULING

The Supreme Court denied Stronghold’s petition and affirmed the CA decision with modification on the applicable interest rate. The Court upheld the doctrine of immutability of final judgments. A decision that has attained finality becomes immutable and unalterable. The RTC’s October 14, 1999 decision, which had long become final, explicitly ordered interest to be computed “from the date of demand until fully paid.” The RTC’s subsequent order in 2005, which changed the reckoning period for interest, constituted an unauthorized amendment of a final judgment. Execution must conform to the dispositive portion of the final decision, and courts cannot modify substantive terms during execution.
On the proper interest rate, the Court affirmed that Section 243 of the Insurance Code governs, imposing interest at twice the ceiling prescribed by the Monetary Board for loans or forbearance of money for an insurer’s unjustified delay in payment. However, applying Nacar v. Gallery Frames, the Court modified the rate prospectively. From the effectivity of BSP Circular No. 799 on July 1, 2013, the legal rate for loans was reduced to 6% per annum. Consequently, the double interest rate under Section 243 shall be computed at 12% per annum until June 30, 2013, and at 6% per annum thereafter until full payment. The Court also found no estoppel against Pamana, as Stronghold failed to prove Pamana accepted partial payments as full satisfaction.