Stronghold Insurance Co., Inc. vs. Pamana Island Resort Hotel and Marina Club, Inc.

A final and executory judgment may not be modified during execution, even to correct the computation of interest, except only for clerical errors, nunc pro tunc entries causing no prejudice, or void judgments; and the penalty interest under Section 243 of the Insurance Code is computed at double the BSP-prescribed rate for loans or forbearance of money, applied prospectively from the effectivity of any BSP circular changing that rate.

Pamana Island Resort Hotel and Marina Club, Inc. engaged Flowtech Construction Corporation to construct a project on Pamana Island, Subic Bay. Flowtech obtained a Contractor's All Risk Bond in the amount of ₱9,047,960.14 from Stronghold Insurance Company, Inc. to secure the construction. Section 243 of the Insurance Code governs the timeliness of payment of insurance claims and prescribes a penalty of interest at double the ceiling prescribed by the Monetary Board for failure or refusal to pay within the periods stated therein.

Pamana Island Resort Hotel and Marina Club, Inc. engaged Flowtech Construction Corporation to construct a project on Pamana Island, Subic Bay. To secure the construction, Flowtech obtained a Contractor's All Risk Bond in the amount of ₱9,047,960.14 from Stronghold Insurance Company, Inc. On January 27, 1992, a fire broke out at the project site and burned down the cottages being built by Flowtech, causing losses to Pamana. Notice of loss was promptly served upon Stronghold, but it took more than a year for the insurer to reject the claim, in violation of Section 243 of the Insurance Code.

Pamana and Flowtech filed an action for sum of money against Stronghold. On October 14, 1999, the RTC of Makati City, Branch 135 rendered judgment declaring Stronghold liable, ordering payment of ₱4,728,297.82 as insurance proceeds with double the rate of interest from the date of demand until fully paid, ₱500,000 as exemplary damages, and ₱100,000 as attorney's fees. Stronghold's appeal was denied by the CA and thereafter by the Supreme Court, and the judgment became final and executory on December 15, 2004.

On March 4, 2005, Flowtech filed a motion for execution, which the RTC granted on May 10, 2005. A writ of execution issued on May 12, 2005. Flowtech's president, Engr. Edgardo C. Camering, computed the total judgment at ₱13,342,547.87, which included interest of ₱7,528,774.05 on the principal, interest of ₱419,976.00 on exemplary damages and attorney's fees, and execution-related expenses of ₱65,500.00. Stronghold filed an Urgent Motion to Suspend Execution on August 16, 2005, contending that the interest penalty being demanded was unconscionable and iniquitous. Pamana opposed, arguing that the RTC decision had become final and could no longer be modified, and that the double interest rate was supported by Section 243 of the Insurance Code.

On November 22, 2005, the RTC granted Stronghold's motion and substantially reduced the executable amount. The trial court ruled that exemplary damages and attorney's fees do not earn interest, that the principal obligation was not a loan or forbearance of money so the base rate should be 6% per annum (doubled to 12% under Section 243), and that interest should run only from the date of promulgation of judgment on October 14, 1999 until its finality on December 15, 2004 — a period of five years, two months, and one day — rather than from the date of demand until full payment. The RTC fixed the total executable amount at ₱8,261,418.46 and disallowed execution fees and related expenses for lack of basis. After the RTC denied Pamana's motion for reconsideration on February 22, 2006, Pamana appealed to the CA, which annulled the RTC orders on the ground of immutability of final judgments. Stronghold then elevated the case to the Supreme Court.

• Unconscionable Interest: Stronghold contended that the interest penalty being demanded through the Sheriff was unconscionable and iniquitous, warranting suspension or rationalization of the execution.
• Estoppel: Stronghold argued that Pamana was estopped from pursuing further claims because Pamana had received checks issued by Stronghold pursuant to the RTC's order to implement.

• Immutability of Final Judgment: Pamana countered that the RTC decision had become final and executory and thus could no longer be amended, altered, or modified.
• Statutory Basis for Double Interest: Pamana argued that the double interest rate being imposed was supported by Section 243 of the Insurance Code, which prescribes interest at twice the ceiling prescribed by the Monetary Board for refusal or failure to pay within the prescribed period.

• Immutability of Final Judgments: Whether the RTC may modify the interest computation — including the reckoning date, duration, and applicable rate — in a judgment that has become final and executory.
• Applicable Rate of Interest: Whether the base interest rate under Section 243 of the Insurance Code should be 6% or 12% per annum, given that the insurer's obligation is not a loan or forbearance of money.
• Estoppel: Whether Pamana was estopped from claiming the full judgment amount by virtue of having received checks from Stronghold.

• Immutability of Final Judgments: No. The RTC's execution orders contravened the doctrine of immutability by altering three essential particulars of a final judgment — the reckoning date, duration, and rate of interest — and none of the recognized exceptions applied.
• Applicable Rate of Interest: The applicable rate is double the BSP-prescribed rate for loans or forbearance of money, regardless of the nature of the insurer's obligation. This was 12% per annum until June 30, 2013, reduced to 6% per annum beginning July 1, 2013 pursuant to BSP Circular No. 799, applied prospectively.
• Estoppel: No. Pamana was not estopped because Stronghold failed to sufficiently establish that Pamana accepted the sums in full satisfaction of their claims.

• Immutability of Final Judgments: A writ of execution must conform substantially to every essential particular of the judgment promulgated; an execution not in harmony with the judgment is void. Once a judgment becomes final and executory, all that remains is execution as a matter of right, and the issuance of a writ is the trial court's ministerial duty. The RTC's orders varied the original judgment in three respects: the date from which the double rate of interest on the principal was to be computed, the period up to which such interest would run, and the applicable rate itself. Instead of "double the rate of interest from the date of demand until fully paid," the RTC limited interest to 12% per annum reckoned from the date of judgment until finality. The recognized exceptions to immutability — correction of clerical errors, nunc pro tunc entries causing no prejudice, and void judgments — were all absent. Although some of Stronghold's arguments appealed to the merits of the original judgment, those matters had long been settled through the RTC decision that had become final.

• Applicable Rate of Interest: The CA correctly held that Section 243 of the Insurance Code, being a special law, prescribes a penalty interest rate of "twice the ceiling prescribed by the Monetary Board," which could only refer to the rate applicable to obligations constituting a loan or forbearance of money. The Court agreed that the applicable rate of interest shall be that imposed on loans or forbearance of money by the BSP, irrespective of the nature of Stronghold's liability. In the past years, this rate was 12% per annum. However, BSP Circular No. 799, issued on June 21, 2013 and effective July 1, 2013, decreased the interest rate on loans or forbearance of money. Pursuant to Nacar vs. Gallery Frames, the new rate could only be applied prospectively and not retroactively. Accordingly, beginning July 1, 2013, the applicable interest under Section 243 was reduced to 6% per annum.

• Estoppel: Stronghold's estoppel argument was rejected because it failed to sufficiently establish that Pamana accepted the checks in full satisfaction of their claims. Mere receipt of partial payment pursuant to a court order does not constitute waiver or abandonment of the right to claim the full amount due under a final judgment.

• Immutability of Final Judgments — Once a judgment becomes final and executory, it may no longer be altered, amended, or modified, even if the modification is meant to correct erroneous conclusions of fact or law. A writ of execution must conform substantially to every essential particular of the judgment promulgated; an execution not in harmony with the judgment is void. The prevailing party is entitled to a writ of execution as a matter of right, and its issuance is the trial court's ministerial duty. The Court applied this doctrine to invalidate the RTC's execution orders, which altered the reckoning date, duration, and rate of interest fixed in the original final judgment.

• Exceptions to the Doctrine of Immutability — The recognized exceptions are: (1) correction of clerical errors; (2) nunc pro tunc entries which cause no prejudice to any party; and (3) void judgments. None of these exceptions was found to attend Stronghold's case, as the RTC's modifications were substantive, not clerical.

• Prospective Application of BSP Circular No. 799 — As explained in Nacar vs. Gallery Frames, the reduced interest rate prescribed by BSP Circular No. 799 may only be applied prospectively from its effectivity on July 1, 2013, and not retroactively to periods prior to that date. The Court applied this principle to reduce the penalty interest rate under Section 243 of the Insurance Code from 12% to 6% per annum beginning July 1, 2013, while maintaining the prior rate for the period before that date.

• "Clearly, the RTC's issuances contravened a settled principle affecting execution of judgments. Time and again, courts have emphasized that a writ of execution must conform substantially to every essential particular of the judgment promulgated. An execution that is not in harmony with the judgment is bereft of validity." — This passage articulates the ratio decidendi on the immutability of final judgments as applied to execution proceedings.

• "The Court agrees with the CA that given the provisions of the Insurance Code, which is a special law, the applicable rate of interest shall be that imposed in a loan or forbearance of money as imposed by the Bangko Sentral ng Pilipinas (BSP), even irrespective of the nature of Stronghold's liability." — This defines the controlling rule for computing penalty interest under Section 243 of the Insurance Code, establishing that the special-law character of the Insurance Code overrides the general distinction between loan/forbearance and other obligations.

• "the new rate imposed under the circular could only be applied prospectively, and not retroactively." — This restates the canonical rule from Nacar vs. Gallery Frames on the prospective application of BSP Circular No. 799, which the Court applied to reduce the penalty interest rate effective July 1, 2013.

• Nacar vs. Gallery Frames, G.R. No. 189871, August 13, 2013, 703 SCRA 439 — Controlling precedent on the prospective application of BSP Circular No. 799. The Court relied on this case to hold that the reduced interest rate could only be applied from July 1, 2013 forward, not retroactively.

• Spouses Golez vs. Spouses Navarro, 702 Phil. 618 (2013) — Cited for the principle that once a judgment becomes final and executory, execution is a matter of right and the issuance of a writ is the trial court's ministerial duty. Followed.

• One Shipping Corporation vs. Peñafiel, G.R. No. 192406, January 21, 2015, 746 SCRA 536 — Cited for the enumeration of exceptions to the doctrine of immutability of final judgments: clerical errors, nunc pro tunc entries, and void judgments. Followed.

• Section 243, Insurance Code — Provides that the amount of any loss or damage under any policy other than life insurance shall be paid within thirty days after proof of loss is received and ascertainment is made, or within ninety days if ascertainment is not had within sixty days. Refusal or failure to pay within the prescribed period entitles the assured to collect interest on the proceeds at double the ceiling prescribed by the Monetary Board, unless the failure is based on the ground that the claim is fraudulent. The Court applied this provision to impose penalty interest on Stronghold, which took more than a year to reject the claim after notice of loss was served.

• BSP Circular No. 799 (June 21, 2013, effective July 1, 2013) — Reduced the prescribed interest rate on loans or forbearance of money. The Court applied this circular prospectively to reduce the penalty interest rate under Section 243 of the Insurance Code from 12% to 6% per annum beginning July 1, 2013.

Velasco, Jr. (Chairperson), Peralta, Perez, and Reyes, JJ., concurred. Jardeleza, J., was on official leave.