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STRONGHOLD INSURANCE CO. v. PAMANA ISLAND RESORT HOTEL

FACTS:

The case involves a Petition for Review filed by Stronghold Insurance Company, Inc. (Stronghold) against the Decision of the Court of Appeals (CA). The case arises from an action for sum of money filed by Pamana Island Resort Hotel and Marina Club, Inc. (Pamana) and Flowtech Construction Corporation (Flowtech) against Stronghold based on a Contractor's All Risk Bond. The bond was obtained by Flowtech for the construction of Pamana's project in Pamana Island, Subic Bay.

A fire occurred in the project, resulting in losses to Pamana. The RTC held Stronghold liable for the claim and ordered the payment of insurance proceeds, exemplary damages, attorney's fees, and interest at double the applicable rate under Section 243 of the Insurance Code. Stronghold's appeal was denied by the CA and SC.

Flowtech filed a motion for execution, which was granted. Stronghold then filed a motion to suspend execution, arguing that the interest penalty was unconscionable. Pamana opposed the motion, arguing that the RTC decision had become final and that the double interest rate was supported by the Insurance Code.

The RTC granted Stronghold's motion and reduced the interest, stating that its computation should be from the date of promulgation of judgment until its finality and not from the date of demand until full payment as stated in the Decision.

ISSUES:

  1. Whether the interest penalty imposed upon Stronghold was unconscionable and iniquitous.

  2. Whether the interest on the principal amount should be reckoned from the date of demand until full payment or from the date of promulgation of judgment until its finality.

RULING:

  1. Yes, the interest penalty imposed upon Stronghold was unconscionable and iniquitous. The RTC granted Stronghold's motion to suspend execution and rationalize the enforcement of the decision, reducing the interest penalty imposed.

  2. The interest on the principal amount should be reckoned from the date of promulgation of judgment until its finality. The RTC clarified that the interest should not be computed from the date of demand until full payment as stated in the Decision dated October 14, 1999.

PRINCIPLES:

  • Section 243 of the Insurance Code provides that if an insurer fails to pay the loss or damage within the prescribed time, the assured is entitled to collect interest on the proceeds of the policy for the duration of the delay at twice the ceiling prescribed by the Monetary Board, unless the failure to pay is based on the ground that the claim is fraudulent.