Interest; in light of Circular No. 799 issued by the BSP on June 21, 2013 decreasing interest on loans or forbearance of money, the CA’s declared rate of 12% per annum shall be reduced to 6% per annum from the time of the circular’s effectivity on July 1, 2013.

STRONGHOLD INSURANCE CO., INC., PETITIONER, VS. PAMANA ISLAND RESORT HOTEL AND MARINA CLUB, INC., RESPONDENT. G.R. No. 174838, June 01, 2016. 

“x x x.

Applicable Rate of Interest

A disagreement, however, concerns the question of whether an interest rate of 6% or 12% per annum should apply in the computation, as this subject was not specifically defined in the RTC judgment in the main case. The RTC, in the Order dated November 22, 2005, pegged the interest rate at 6% per annum by explaining that Stronghold’s obligation did not equate to a loan or forbearance of money. On the other hand, the CA explained that the double rate should be based on 12% per annum, as the Insurance Code pertained to a rate “twice the ceiling prescribed by the Monetary Board”⁠7 and thus could only refer to the rate applicable to obligations constituting a loan or forbearance of money.⁠8 

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. In the past years, this rate was at 12% per annum. However, in light of Circular No. 799 issued by the BSP on June 21, 2013 decreasing interest on loans or forbearance of money, the CA’s declared rate of 12% per annum shall be reduced to 6% per annum from the time of the circular’s effectivity on July 1, 2013. The Court explained in Nacar v. Gallery Frames⁠9 that the new rate imposed under the circular could only be applied prospectively, and not retroactively.⁠10

X x x.”