G.R. No. 201001, November 10, 2014
MCMP CONSTRUCTION CORP., Petitioner, v. MONARK EQUIPMENT CORP., Respondent.
R E S O L U T I O N
VELASCO JR., J.:
"Credit sales are payable within 30 days from the date of invoice. Customer agrees to pay interest at 24% p.a. on all amounts. In addition, customer agrees to pay a collection fee of 1% compounded monthly and 2% per month penalty charge for late payment on amounts overdue. Customer agrees to pay a sum equal to 25% of any amount due as attorney's fees in case of suit, and expressly submit to the jurisdiction of the courts of Quezon City, Makati, Pasig or Manila, Metro Manila, for any legal action arising from, this transactions."
Principal Accumulated PhP 765,380.33 Interest (2%) 253,226.17 2% Monthly Penalty Charge 253,226.17 Collection Fee (1%) 10,649.16
"WHEREFORE, in view of the foregoing findings and legal premises, judgment is hereby rendered in favor of the plaintiff, and ordering the defendant to pay the former:SO ORDERED."
- PhP 1,282,481.83 as balance for the rental fees of the subject heavy equipments (sic) as of April 30, 2002, inclusive of the interests thereof;
- Twenty-Five percent (25%) of the total amount to be recovered as payment for the attorney's fees; and,
- The costs of suit.
"WHEREFORE, in light of the foregoing, the Court finds no reversible error in the assailed decision henceforth, the Motion for Reconsideration of defendant is hereby DENIED for lack of merit. On the other hand, the plaintiffs Motion for Clarification and/or Partial Reconsideration is hereby GRANTED for being meritorious. Therefore, in the dispositive portion of the assailed decision dated 20 November 2007, the following should be included:'The payment of interests, charges and fees due after April 30, 2002 and up to the time when all the obligations of the defendant to the plaintiff shall have been fully paid, computed in accordance with the stipulations entered into between the parties under Exhibits "A" to "G", and uniformly stated in the following wise:Credit sales are payable within 30 days from the date of invoice. Customer agrees to pay interest at 24% p.a. on all amounts. In addition, customer agrees to pay a collection fee of 1% compounded monthly and 2% per month penalty charge for late payment on amounts overdue. Customer agrees to pay a sum equal to 25% of any amount due as attorney's fees in case of suit, and expressly submit to the jurisdiction of the courts of Quezon City, Makati, Pasig or Manila, Metro Manila, for any legal action arising from, this transactions.'
"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) When the original is in the custody or under the control of the party against whom the evidence is offered, and the latter fails to produce it after reasonable notice;
(c) When the original consists of numerous accounts or other documents which cannot be examined in court without great loss of time and the fact sought to be established from them is only the general result of the whole; and
(d) When the original is a public record in the custody of a public officer or is recorded in a public office. (Emphasis supplied)"
"Section 5. When original document is unavailable. — When the original document has been lost or destroyed, or cannot be produced in court, the offeror, upon proof of its execution or existence and the cause of its unavailability without bad faith on his part, may prove its contents by a copy, or by a recital of its contents in some authentic document, or by the testimony of witnesses in the order stated. (4a)
Section 6. When original document is in adverse party's custody or control. — If the document is in the custody or under the control of adverse party, he must have reasonable notice to produce it. If after such notice and after satisfactory proof of its existence, he fails to produce the document, secondary evidence may be presented as in the case of its loss."
Before a party is allowed to adduce secondary evidence to prove the contents of the original, the offeror must prove the following: (1) the existence or due execution of the original; (2) the loss and destruction of the original or the reason for its non-production in court; and (3) on the part of the offeror, the absence of bad faith to which the unavailability of the original can be attributed. The correct order of proof is as follows: existence, execution, loss, and contents.
"x x x Nevertheless, it should be noted that this is not the first time that this Court has considered the interest rate of 36% per annum as excessive and unconscionable. We held in Chua vs. Timan:
The stipulated interest rates of 7% and 5% per month imposed on respondents' loans must be equitably reduced to 1% per month or 12% per annum. We need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates of 3% per month and higher are excessive, iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary to morals, if not against the law. While C.B. Circular No. 905-82, which took effect on January 1, 1983, effectively removed the ceiling on interest rates for both secured and unsecured loans, regardless of maturity, nothing in the said circular could possibly be read as granting carte blanche authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead to a hemorrhaging of their assets. (Emphasis supplied.)
Since the stipulation on the interest rate is void, it is as if there was no express contract thereon. Hence, courts may reduce the interest rate as reason and equity demand.
The same is true with respect to the penalty charge. Notably, under the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card, it was also stated therein that respondent BPI shall impose an additional penalty charge of 3% per month. Pertinently, Article 1229 of the Civil Code states:Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable.
In exercising this power to determine what is iniquitous and unconscionable, courts must consider the circumstances of each case since what may be iniquitous and unconscionable in one may be totally just and equitable in another."
"Aside from the payment of the principal obligation of PI,936,800.00, the parties agreed that respondent pay interest at the rate of 25% from February 17, 1997 until fully paid. Such rate, however, is excessive and thus, void. Since the stipulation on the interest rate is void, it is as if there was no express contract thereon. To be sure, courts may reduce the interest rate as reason and equity demand. In this case, 12% interest is reasonable.
The promissory notes likewise required the payment of a penalty charge of 3% per month or 36% per annum. We find such rates unconscionable. This Court has recognized a penalty clause as an accessory obligation which the parties attach to a principal obligation for the purpose of ensuring the performance thereof by imposing on the debtor a special prestation (generally consisting of the payment of a sum of money) in case the obligation is not fulfilled or is irregularly or inadequately fulfilled. However, a penalty charge of 3% per month is unconscionable; hence, we reduce it to 1% per month or 12% per annum, pursuant to Article 1229 of the Civil Code which states:Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable.Lastly, respondent promised to pay 25% of his outstanding obligations as attorney's fees in case of non-payment thereof. Attorney's fees here are in the nature of liquidated damages. As long as said stipulation does not contravene law, morals, or public order, it is strictly binding upon respondent. Nonetheless, courts are empowered to reduce such rate if the same is iniquitous or unconscionable pursuant to the above-quoted provision. This sentiment is echoed in Article 2227 of the Civil Code, to wit:Art. 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable.Hence, we reduce the stipulated attorney's fees from 25% to 10%."
WHEREFORE, in view of the foregoing findings and legal premises, judgment is hereby rendered in favor of the plaintiff, and ordering the defendant to pay the former:
- PhP 765,380.33 representing the unpaid rental fees;
- Interest of 12% per annum on the unpaid rental fees to be computed from March 1, 200117 until payment;
- Penalty and collection charge of 6% per annum on the unpaid rental fees to be computed from March 1, 2001;
- Attorney's Fees of five percent (5%) of the total amount to be recovered; and,
- The costs of suit.
* Acting Member per Special Order No. 1866 dated November 4, 2014.
1Rollo, pp. 8-25.
2 Penned by Associate Justice Jane Aurora C. Lantion, concurred in by Associate Justices Japar B. Dimaampao (Chairperson, 17lh Division) and Ramon A. Cruz; Id. at 50-63
3 Id. at 65-69.
4 Penned by Judge Afable E. Cajigal; Id. at 26-40.
5 Id. at 41-48.
6 Id. at 28-29.
7 Id. at 51.
8 Id. at 9.
9 Id. at 57-58.
10 Dated January 29, 2008; Id. at 55.
11 G.R. No. 165487, July 13, 2011, 653 SCRA 765, 777.
12 G.R. No. 179497, January 25, 2012.
13Rollo, pp. 57-58.
14 Id. at 15.
15 G.R. No. 175490, September 17, 2009, 600 SCRA 67, 76-78, citing Imperial v. Jaucian, G.R. 149004, April 14, 2004, 427 SCRA 517, Tongoy v. Court of Appeals, No. L-45645, June 28, 1983, 123 SCRA 99.
16 G.R. No. 171736, July 5, 2010, 623 SCRA 284, 305-306.