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PHILIPPINE SUPREME COURT DECISIONS

FIRST DIVISION

[G.R. No. 167942 : June 29, 2010]

ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION, PETITIONER, VS. CATHAY PACIFIC STEEL CORPORATION, (CAPASCO), RESPONDENT.

D E C I S I O N


DEL CASTILLO, J.:

Parties would do well to always be conscious of their freedom to accept or reject printed stipulations supplied by only one party that form part of the contract they enter into. Failure to object to such stipulations, which are not excessive or unconscionable, will bind them to its performance.

This Petition for Review assails the August 18, 2004 Decision1 of the Court of Appeals (CA) in CA-G.R. CV. No. 66741 which affirmed with modification the Decision2 of the Regional Trial Court (RTC) of Antipolo City, Branch 73 in Civil Case No. 98-5093. Also assailed is the May 3, 2005 Resolution3 denying the motion for reconsideration.

Factual Antecedents

On several occasions between June and July of 1997, petitioner Asian Construction and Development Corp. purchased from respondent Cathay Pacific Steel Corp. various reinforcing steel bars worth P2,650,916.40 covered by a total of 12 invoices. On November 21, 1997, petitioner made a partial payment of P2,159,211.49, and on March 2, 1998, another partial payment of P250,000, leaving a balance of P214,704.91. Respondent sent two demand letters dated May 12, 1998, and August 10, 1998, respectively, but no payment was made by petitioner. On November 24, 1998, respondent filed a complaint for a sum of money and damages with the RTC of Antipolo, docketed as Civil Case No. 98-5093.

In its answer, petitioner denied that it authorized the purchases/purchase orders from the respondent; it alleged that no demand for payment was made or received by petitioner, it had no knowledge as to the truth of the invoices, statement of accounts and letters as they were never received by petitioner, it had not received the reinforcing steel bars, the amount billed by respondent was bloated and no deduction was made for the corresponding payments made by petitioner and that it had not agreed to pay interest and attorney's fees.

Ruling of the Regional Trial Court

After the pre-trial conference was terminated, trial of the case on the merits was set. Hearing of the case was postponed several times. During the hearing on November 22, 1999, petitioner and its counsel were absent despite notice, and upon motion of the respondent, the trial court granted and set the ex-parte hearing of the case before a designated commissioner. On December 1, 1999, respondent presented its sole witness, David O. Chua (Chua), vice president of respondent company. Thereafter, respondent offered its evidence and rested its case.

On January 10, 2000, the trial court rendered a Decision in favor of the respondent, the fallo of which reads:

WHEREFORE, premises considered, defendant Asian [Construction] and Development Corporation is hereby ordered to pay to the plaintiff:
  1. P319,050.48 inclusive of interest as of 17 November 1998 plus 2% interest per month until the full amount is paid;

  2. P79,762.62 as attorney's fees and as appearance fees; and

  3. The costs of suit.
SO ORDERED.4

Ruling of the Court of Appeals

Petitioner then appealed the case to the CA which found that based on the invoices there is a specific amount of interest agreed upon, which is 24% per annum. It also found that the outstanding balance of petitioner is P241,704.91 which must earn interest from May 12, 1998, which is the date of extra-judicial demand. The dispositive portion of the CA Decision states:

WHEREFORE, premises considered, the assailed decision is AFFIRMED with MODIFICATION in this wise:

'WHEREFORE, premises considered, defendant Asian Construction and Development Corporation is hereby ordered to pay to the plaintiff:

1. P241,704.91 plus 24% interest per annum from May 12, 1998 until finality of this decision;

2. 10% of the total amount due as attorney's fees; and

3. The costs of suit.

SO ORDERED.'
SO ORDERED.5

After the denial by the CA of its motion for reconsideration, petitioner filed the present petition for review on certiorari.

Issues

Petitioner raises the following issues:

I- WHETHER X X X PETITIONER DID NOT QUESTION ITS LIABILITY IN ITS ANSWER.

II- WHETHER X X X THE TRIAL COURT AND COURT OF APPEALS ERRED IN ADMITTING THE PHOTOCOPIES OF THE DELIVERY RECEIPTS AND THE TESTIMONY OF MR. DAVID CHUA AS ADMISSIBLE IN EVIDENCE.

III- WHETHER X X X THE COURT OF APPEALS ERRED IN IMPOSING 24% PERCENT INTEREST FROM MAY 12, 1998 UNTIL FINALITY OF DECISION; AND

IV- WHETHER x x x RESPONDENT IS ENTITLED TO ATTORNEY'S FEES.6

Petitioner's Arguments

Petitioner contends that it disputed in its Answer the liability imputed to it by respondent. It also contends that respondent failed to prove the affirmative allegations in the complaint. It argues that the photocopies of the delivery receipts were not admissible in evidence and that the witness Chua was incompetent to establish the admissibility of secondary evidence.

Petitioner also contends that the CA did not adhere to the precedent set in the landmark case of Eastern Shipping Lines v. Court of Appeals7 in the computation of interest. It further argues that respondent is not entitled to an award of attorney's fees.

Respondent's Arguments

Respondent on the other hand contends that petitioner's affirmative defenses are not only inconsistent with each other but also reveals an admission of petitioner's obligation to respondent. Respondent also submits that it has duly proven its claim by a preponderance of evidence. The originals of the invoices were presented during the hearing and the loss of the delivery receipts was properly established by respondent, hence the admission of the secondary evidence was proper.

Respondent further submits that the interest rate of 24% per annum was expressly stipulated in the invoice and should thus be the rate used in the computation of the interest. It also contends that the award of attorney's fees is proper because it was constrained to engage the services of counsel and litigate in order to protect its interests.

Our Ruling

The petition is partly meritorious.

Obligation was duly established

As a rule, only questions of law may be appealed to the Court by petition for review. The Court is not a trier of facts, its jurisdiction is limited to errors of law. Moreover factual findings of the trial court, particularly when affirmed by the CA, are generally binding on this Court.

In the present case, the orders by, deliveries to, and pick-ups by, petitioner of reinforcing steel bars having a total value of P2,650,916.40 were evidenced by the testimony of Chua and the invoices. Notably the invoices contained a statement to the effect that the reinforcing steel bars were received in good order and condition.

The total payment in the amount of P2,409,211.49 made by petitioner was also supported by evidence. Some payments made were in fact admitted in the Answer of petitioner.8

With regard to the testimony of Chua, the fact that he is the head of Marketing and Finance proves that he is competent to testify on the sale of the reinforcing steel bars to petitioner and its unpaid balance. The notations addressed to him on the purchase orders and his signature on the demand letters further support the finding that he has personal knowledge of the transactions he testified on. Mere allegations of his incompetence to testify on such matters, are not proof and these cannot prevail over evidence to the contrary.

As for the delivery receipts, there is sufficient uncontroverted evidence showing loss of the originals despite the diligence exerted to find the same. Copies of the same are thus admissible.9

The factual findings of the trial court and the CA were based on a preponderance of evidence which were not refuted with contrary evidence by petitioner. We thus find no reason to disturb the factual findings of the trial court and the CA.

Applicable Interest Rate

Article 1306 of the Civil Code provides that the "contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy."

In the present case, the sales invoices expressly stipulated the payment of interest and attorney's fees in case of overdue accounts and collection suits, to wit: "Interest at 24% per annum is to be charged to all accounts overdue plus 25% additional on unpaid invoice for attorney's fees aside from court cost, the parties expressly submit themselves to the venue of the courts in Rizal, in case of legal proceeding." The sales invoices are in the nature of contracts of adhesion. "The court has repeatedly held that contracts of adhesion are as binding as ordinary contracts. Those who adhere to the contract are in reality free to reject it entirely and if they adhere, they give their consent. It is true that in some occasions the Court struck down such contracts as void when the weaker party is imposed upon in dealing with the dominant party and is reduced to the alternative of accepting the contract or leaving it, completely deprived of the opportunity to bargain on equal footing."10 Considering that petitioner is not a small time construction company, having such construction projects as the MRT III and the Mauban Power Plant, "petitioner is presumed to have full knowledge and to have acted with due care or, at the very least, to have been aware of the terms and conditions of the contract. Petitioner was free to contract the services of another supplier if respondent's terms were not acceptable".11 By contracting with respondent for the supply of the reinforcing steel bars and not interposing any objection to the stipulations in the sales invoice, petitioner did not only bind itself to pay the stated selling price, it also bound itself to pay (1) interest of 24% per annum on overdue accounts and (2) 25% of the unpaid invoice for attorney's fees. Thus, the lower courts did not err in using the invoices as basis for the award of interest.

Attorney's Fees

In Titan Construction Corporation v. Uni-Field Enterprises, Inc.,12 an apt discussion on attorney's fees was made by the Court, thus:

The law allows a party to recover attorney's fees under a written agreement. In Barons Marketing Corporation v. Court of Appeals, the Court ruled that:

[T]he attorney's fees here are in the nature of liquidated damages and the stipulation therefor is aptly called a penal clause. It has been said that so long as such stipulation does not contravene law, morals, or public order, it is strictly binding upon defendant. The attorney's fees so provided are awarded in favor of the litigant, not his counsel.

On the other hand, the law also allows parties to a contract to stipulate on liquidated damages to be paid in case of breach. A stipulation on liquidated damages is a penalty clause where the obligor assumes a greater liability in case of breach of an obligation. The obligor is bound to pay the stipulated amount without need for proof on the existence and on the measure of damages caused by the breach.13

In the present case, the invoices stipulate for 25% of the overdue accounts as attorney's fees. The overdue account in this case amounts to P241,704.91, 25% of which is P60,426.23. This amount is not excessive or unconscionable, hence, we sustain the amount of attorney's fees as stipulated by the parties.

WHEREFORE, the petition is DENIED. The August 18, 2004 Decision of the Court of Appeals in CA-G.R. CV No. 66741 is AFFIRMED with the MODIFICATION that the attorney's fees is fixed at P60,426.23.

SO ORDERED.

Corona, C.J., (Chairperson), Velasco, Jr., Leonardo-De Castro, and Perez, JJ., concur.

Endnotes:


1 Rollo, pp. 26-33; penned by Associate Justice Perlita J. Tria Tirona and concurred in by Associate Justices Ruben T. Reyes and Jose C. Reyes, Jr.

2 Id. at 60-21; penned by Judge Mauricio M. Rivera.

3 Id. at 35-36.

4 Id. at 62.

5 Id. at 32-33.

6 Id. at 151-152.

7 G.R. No. 97412, July 12, 1994, 234 SCRA 78.

8 No. 14 of the Answer states: "The amount billed by Plaintiff is bloated especially considering that Plaintiff did not deduct the corresponding payments made by Defendants. Records, p. 24.

9 Section 3 of Rule 130 of the Rules of Court states:

Section 3. Original document must be produced; exceptions. - When the subject of inquiry is the contents of a document, no evidence shall be admissible other than the original document itself, except in the following cases:

(a) When the original has been lost or destroyed, or cannot be produced in court, without bad faith on the part of the offeror;

(b) x x x x

10 Titan Construction Corporation v. Uni-Field Enterprises, Inc., G.R. No. 153874, March 1, 2007, 517 SCRA 180, 188.

11 Id.

12 Id.

13 Id. at 189.

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