See - G.R. No. 183272
"x x x .
There are two kinds of interest – monetary and compensatory.
"Monetary interest refers to the compensation set by the parties for the use or forbearance of money."25 No such interest shall be due unless it has been expressly stipulated in writing.26 "On the other hand, compensatory interest refers to the penalty or indemnity for damages imposed by law or by the courts."27 The interest mentioned in Articles 2209 and 221228of the Civil Code applies to compensatory interest.29
Clearly and contrary to respondents’ assertion, the interest imposed by the CA is not monetary interest because aside from the fact that there is no use or forbearance of money involved in this case, the subject interest was not one which was agreed upon by the parties in writing. This being the case and judging from the tenor of the CA, to wit:
Accordingly, [petitioner] is ordered to reimburse [respondents] the sum of P13,080.93 representing the [premium] paid by the insured with interest at the rate of 12% per annum from time of death of the insured until fully paid.30
there can be no other conclusion than that the interest imposed by the appellate court is in the nature of compensatory interest.
The CA incorrectly imposed compensatory interest on the premium refund reckoned from the time of death of the insured until fully paid
As a form of damages, compensatory interest is due only if the obligor is proven to have failed to comply with his obligation.31
In this case, it is undisputed that simultaneous to its giving of notice to respondents that it was rescinding the policy due to concealment, petitioner tendered the refund of premium by attaching to the said notice a check representing the amount of refund. However, respondents refused to accept the same since they were seeking for the release of the proceeds of the policy. Because of this discord, petitioner filed for judicial rescission of the contract. Petitioner, after receiving an adverse judgment from the RTC, appealed to the CA. And as may be recalled, the appellate court found Norberto guilty of concealment and thus upheld the rescission of the insurance contract and consequently decreed the obligation of petitioner to return to respondents the premium paid by Norberto. Moreover, we find that petitioner did not incur delay or unjustifiably deny the claim.
Based on the foregoing, we find that petitioner properly complied with its obligation under the law and contract. Hence, it should not be made liable to pay compensatory interest.
Considering the prevailing circumstances of the case, we hereby direct petitioner to reimburse the premium paid within 15 days from date of finality of this Decision. If petitioner fails to pay within the said period, then the amount shall be deemed equivalent to a forbearance of credit.32 In such a case, the rate of interest shall be 6% per annum.33.
x x x."
