TOPIC

CASE TITLE Sun Life of Canada (Philippines),Inc vs Sandra Tan Kit

CASE NO. 4
GR NO.​ ​183272 DATE:​ October 15, 2014
DOCTRINE:

As a form of damages, compensatory interest is due only if the obligor is proven to have failed to comply
with his obligation.

FACTS:

Sandra Tan Kit is the widow of Norberto. Norberto was granted a life insurance policy by the
petitioner on October 28, 1999. On February 19, 2001 or within the two-year contestability period,
Norberto died.

The insurer denied the claim on account of Norberto’s failure to fully disclose in his insurance
application certain material and relevant information about his smoking history. Specifically,
Norberto said “no” in the question whether he smoked cigarettes within 12 months prior to the filling
out of the insurance application. Believing that the policy is void, the petitioner refund the premiums
paid. However, Tan kit refused to accept the refund.

The Court of Appeals ruled that Norberto is in fact guilty of concealment and that the petitioner has
a right to rescind the contract. The CA ordered the petitioner to refund the premiums paid with
interest at the rate of 12% per annum

ISSUE:

WON the petitioner is liable to pay interest on the premium to be refunded.

HELD:

No. 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. On the other hand,
compensatory interest refers to the penalty or indemnity for damages imposed by law or by the
courts.

In this case, what is imposed by the CA is not monetary interest but compensatory interest.
Compensatory interest is due only when the obligor is proven to have failed to comply with his
obligation.

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. Also, there is no delay on the part of the
insurer to refund the premiums paid. Therefore, since it properly complied with its obligation under
the law, it should not be made liable to pay compensatory interest.
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