Tio Khe Chio vs. Court of Appeals (Insurance Law)

 

Tio Khe Chio vs. Court of Appeals

(Insurance Law)

202 SCRA 119 (G.R. No. 76101-02)

September 30, 1991

 

Petitioners:	Tio Khe Chio
Respondents:	Court of Appeals and Eastern Assurance and Surety Corporation

 

J. Fernan:

 

FACTS:

 

On December 18, 1978, Petitioner Tio Khe Chio imported one thousand (1,000) bags of fishmeal value at $36,000.30 from Agro Impex, USA, Dallas, Texas; USA. The goods were insured with EASCO and shipped on board the M/V Peskeow, a vessel owned by Far Eastern Shipping. Both refused to pay. Whereupon, petitioner sued them before the then CFI of Cebu, Branch II for damages. EASCO, as the insurer filed a counterclaim against Tio for the recovery of ₱18,387.86 representing the unpaid insurance premiums.

 

On June 30, 1982, the trial court rendered judgment ordering EASCO and Far Eastern Shipping to pay solidarily the sum of ₱105,986.68 less the amount of ₱18,387.86 for unpaid premiums with interest at the legal rate from the filing of the complaint, the sum of ₱ 15,000.00 as attorney’s fees and the costs.

 

The judgment became final as to EASCO but the shipping company appealed to the Court of Appeals and was absolved from liability by the said court.

 

The trial court, upon motion by petitioner issued a writ of execution against EASCO. The sheriff enforcing the writ reportedly fixed the legal rate of interest at twelve (12%) percent. EASCO moved to quashed the writ of alleging that the legal interest to be computed should be six (6%) percent per annum in accordance with. Article 2209 of the Civil Code and not twelve (12%) percent as insisted by Tio’s counsel. The trial court denied EASCO’s motion. EASCO then filed a petition for certiorari and prohibition before the Court of Appeals.

 

The appellate countered a decision that the interest that petitioner Tio is entitled to collect is 6% per annum only.

 

ISSUE:

 

Whether or not the correct legal rate of interest in the case at bar is six (6%) percent.

 

HELD:

 

Yes. The court rule for respondent EASCO. The legal rate of interest in the case at bar is six (6%) percent per annum as correctly held by appellate court.

 

Simply put, the Insurance Code Section 243 and 244 are not pertinent to the instant case. They apply only when the court finds an unreasonable delay or refusal in the payment of claims.

 

Neither does Circular No. 416 of the Central which took effect on July 29, 1974 pursuant to Presidential Decree 116 (Usury Law) which raised the legal rate of interest from 6% to 12% apply to the case at bar as contended by the petitioner. The adjusted rate mentioned in the circular refers only to loans or forbearances of money, goods, or credits and court judgments thereon but not to court judgment for damages arising from injury to persons and loss of property which does not involve a loan.

 

In the case of Philippine Rabbit Bus Lines, Inc. vs. Cruz, G.R. No. 71017, July 28, 1986, 143 SCRA 158, the Court declared that the legal rate of interest is six (6%) percent premium, and not twelve (12%) percent, where a judgment award is based on an action for damages for personal injury, not use or forbearance of money, goods or credit. In the same vein, the Court held in GSIS vs. Court of Appeals G.R. No. 52478, October 30, 1986; 145 SCRA 311, that the rates under the Usury Law (amended by PD 116) are applicable only to interest by way of compensation for the use or forbearance of money, interest by way of damages is governed by  Article 2209 of the Civil Code.