GR 76101 02; (September, 1991) (Digest)
G.R. No. 76101 -02 September 30, 1991
TIO KHE CHIO, petitioner, vs. THE HONORABLE COURT OF APPEALS and EASTERN ASSURANCE AND SURETY CORPORATION, respondents.
FACTS
Petitioner Tio Khe Chio imported goods insured with respondent Eastern Assurance and Surety Corporation (EASCO). Upon arrival, the goods were damaged. Petitioner filed a claim which EASCO refused to pay, leading to a suit for damages. The trial court ruled in favor of petitioner, ordering EASCO to pay a sum less unpaid premiums, with interest at the legal rate from the filing of the complaint. The judgment became final against EASCO.
During execution, the sheriff computed interest at twelve percent (12%) per annum. EASCO moved to quash, arguing the legal interest should be six percent (6%) under Article 2209 of the Civil Code. The trial court denied EASCO’s motion. The Court of Appeals, however, granted EASCO’s petition, reducing the interest rate to 6% per annum. Petitioner now asserts that the 12% rate under Sections 243 and 244 of the Insurance Code should apply since the claim arises from an insurance contract.
ISSUE
What is the applicable legal rate of interest on the damages awarded for the unpaid insurance claim?
RULING
The Supreme Court ruled that the applicable legal rate of interest is six percent (6%) per annum, affirming the Court of Appeals. The Court clarified that the higher interest rate under Sections 243 and 244 of the Insurance Code applies only when the insurer’s refusal or failure to pay the claim is found to be unreasonable or unjustified. In this case, the Court of Appeals made no such finding; it noted EASCO’s refusal was based on a genuine interpretative issue regarding the policy terms, which negated a conclusion of unjustifiable delay.
Furthermore, the Court held that Central Bank Circular No. 416, which prescribes a 12% annual interest rate, applies only to loans or forbearances of money, goods, or credits, and to judgments arising therefrom. A judgment for damages due to loss of property, as in this case, does not involve a loan or forbearance. Therefore, the general rule on indemnity for damages under Article 2209 of the Civil Code governs. Since the insurance contract contained no stipulated interest rate for delayed payment, the legal interest of six percent per annum from the time of judicial demand (filing of the complaint) is correctly imposed. The petition was denied for lack of merit.