The Supreme Court in Stronghold Insurance Co., Inc. v. Pamana Island Resort Hotel and Marina Club, Inc., affirmed the principle that final judgments are immutable, meaning they cannot be altered, modified, or amended, except in specific circumstances like clerical errors or void judgments. The Court held that the Regional Trial Court (RTC) erred in modifying its original decision regarding the computation of interest, emphasizing that a writ of execution must strictly adhere to the terms of the final judgment. Furthermore, the Court clarified that Section 243 of the Insurance Code mandates a double interest rate on delayed insurance proceeds, aligning with the rates prescribed for loans or forbearance of money by the Bangko Sentral ng Pilipinas (BSP), adjusting the rate from 12% to 6% per annum effective July 1, 2013, in accordance with BSP Circular No. 799. This decision reinforces the stability and predictability of judicial outcomes while providing clear guidance on interest rate calculations in insurance claims.

Contractor’s Bond and the Immutable Decree

This case arose from a dispute over a Contractor’s All Risk Bond secured by Flowtech Construction Corporation for the construction of Pamana Island Resort Hotel and Marina Club, Inc.’s project. Following a fire that destroyed cottages being built, Pamana sought to recover losses under the bond from Stronghold Insurance Co., Inc. The RTC initially ruled in favor of Pamana, awarding insurance proceeds and imposing a double interest rate under Section 243 of the Insurance Code. However, Stronghold challenged the imposed interest penalty, arguing it was unconscionable. The central legal question revolves around whether the RTC could modify its final and executory judgment regarding the interest computation and rate, and the applicable interest rate under Section 243 of the Insurance Code.

The principle of immutability of final judgments is a cornerstone of the Philippine judicial system. This doctrine dictates that once a judgment becomes final, it can no longer be altered or amended, except for specific, limited exceptions. The Supreme Court has consistently upheld this principle to ensure stability and respect for judicial decisions. As the Court emphasized, “once a judgment becomes final and executory, all that remains is the execution of the decision which is a matter of right. The prevailing party is entitled to a writ of execution, the issuance of which is the trial court’s ministerial duty.” This means that the winning party has an inherent right to the enforcement of the judgment as originally rendered.

In this case, the RTC attempted to modify its original judgment by altering the computation and rate of interest. This was deemed a violation of the immutability principle. The Court of Appeals correctly pointed out that the RTC’s order introduced substantial changes to a judgment that had already become final and executory. These changes pertained to the date from which interest would be computed, the duration of the interest, and the applicable interest rate itself. The Supreme Court sided with the Court of Appeals, reiterating that a writ of execution must conform strictly to every essential detail of the original judgment.

The exceptions to the rule on immutability of final judgments are narrow and do not apply in this situation. These exceptions are typically limited to: (1) the correction of clerical errors; (2) nunc pro tunc entries that cause no prejudice to any party; and (3) void judgments. Since the RTC’s modifications did not fall under any of these exceptions, the Supreme Court found that the Court of Appeals was correct in annulling and setting aside the RTC’s orders that sought to alter the final judgment. The issue of whether Pamana was entitled to the insurance proceeds had long been settled when the RTC decision became final. Stronghold’s arguments appealing to the merits of the RTC’s main judgment were no longer relevant.

A crucial aspect of this case is the interpretation and application of Section 243 of the Insurance Code, which addresses the timing and interest penalties for delayed payments of insurance claims. This section states:

Sec. 243. The amount of any loss or damage for which an insurer may be liable, under any policy other than life insurance policy, shall be paid within thirty days after proof of loss is received by the insurer and ascertainment of the loss or damage is made either by agreement between the insured and the insurer or by arbitration; but if such ascertainment is not had or made within sixty days after such receipt by the insurer of the proof of loss, then the loss or damage shall be paid within ninety days after such receipt. Refusal or failure to pay the loss or damage within the time prescribed herein will entitle the assured to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary Board, unless such failure or refusal to pay is based on the ground that the claim is fraudulent.

The RTC had found that Stronghold violated Section 243 by taking over a year to reject Pamana’s claim after receiving the notice of loss. This violation triggered the imposition of double the applicable interest rate on the principal award. However, the specific interest rate to be applied remained a point of contention. The RTC, in its order dated November 22, 2005, pegged the interest rate at 6% per annum, reasoning that Stronghold’s obligation did not equate to a loan or forbearance of money. Conversely, the Court of Appeals asserted that the double rate should be based on 12% per annum, referencing the Insurance Code’s provision of “twice the ceiling prescribed by the Monetary Board,” which was understood to be the rate applicable to obligations involving a loan or forbearance of money.

The Supreme Court ultimately aligned with the Court of Appeals, holding that the provisions of the Insurance Code, as a special law, should govern the applicable interest rate, irrespective of the nature of Stronghold’s liability. The Court clarified that the interest rate should be that imposed on a loan or forbearance of money by the Bangko Sentral ng Pilipinas (BSP). Historically, this rate was 12% per annum. However, in light of Circular No. 799 issued by the BSP on June 21, 2013, which decreased the interest on loans or forbearance of money, the applicable rate was reduced to 6% per annum, effective July 1, 2013. The Court emphasized that this new rate could only be applied prospectively, not retroactively, citing the precedent set in Nacar v. Gallery Frames.

Moreover, Stronghold raised the issue of estoppel, arguing that Pamana’s acceptance of checks issued by Stronghold pursuant to the RTC’s order to implement should bar them from further claims. However, the Court rejected this argument, finding that Stronghold failed to sufficiently establish that Pamana accepted the sums in full satisfaction of their claims. The absence of clear evidence that Pamana intended to fully settle their claims by accepting the checks undermined Stronghold’s estoppel argument.

The implications of this decision are significant for both insurers and insured parties. It reinforces the importance of insurers promptly processing and settling claims to avoid the imposition of double interest penalties under Section 243 of the Insurance Code. Conversely, it provides insured parties with assurance that their claims will be handled fairly and expeditiously, with the appropriate interest applied in case of delay. By clarifying the applicable interest rate and reiterating the principle of immutability of final judgments, the Supreme Court has provided a clear framework for resolving disputes involving insurance claims.

FAQs

What was the key issue in this case?	The key issue was whether the RTC could modify its final judgment concerning the computation and rate of interest on insurance proceeds, and the applicable interest rate under Section 243 of the Insurance Code.
What is the principle of immutability of final judgments?	This principle dictates that once a judgment becomes final and executory, it can no longer be altered, amended, or modified, except in limited circumstances such as clerical errors or void judgments.
What does Section 243 of the Insurance Code say?	Section 243 mandates that insurers must pay claims within a specific timeframe and imposes a penalty of double the applicable interest rate for delays, unless the claim is fraudulent.
What interest rate applies under Section 243 of the Insurance Code?	The applicable interest rate is that imposed on loans or forbearance of money by the Bangko Sentral ng Pilipinas (BSP), which was 12% per annum but reduced to 6% per annum effective July 1, 2013, under BSP Circular No. 799.
Did the Supreme Court change the interest rate in this case?	The Supreme Court affirmed that the applicable interest rate should be double the rate prescribed by the BSP for loans or forbearance of money, adjusting it to 6% per annum from July 1, 2013, due to BSP Circular No. 799.
What was Stronghold’s argument regarding estoppel?	Stronghold argued that Pamana was estopped from claiming further amounts because they had accepted checks issued by Stronghold pursuant to the RTC’s implementation order.
Why did the Supreme Court reject Stronghold’s estoppel argument?	The Court rejected the argument because Stronghold failed to sufficiently prove that Pamana accepted the payments in full satisfaction of their claims, indicating a lack of intent to fully settle.
What is the effect of BSP Circular No. 799?	BSP Circular No. 799 reduced the interest rate on loans or forbearance of money from 12% to 6% per annum, effective July 1, 2013, which also affects the interest rate applicable under Section 243 of the Insurance Code.
When does the reduced interest rate apply?	The reduced interest rate of 6% per annum applies prospectively from July 1, 2013, and not retroactively to periods before this date.

In conclusion, this case underscores the significance of upholding final judgments and adhering to the specific provisions of the Insurance Code regarding interest on delayed insurance payments. The Supreme Court’s decision provides clarity on the applicable interest rates and reaffirms the principle that final judgments are immutable, ensuring stability and predictability in legal outcomes.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Stronghold Insurance Co., Inc. v. Pamana Island Resort Hotel and Marina Club, Inc., G.R. No. 174838, June 1, 2016