GR 153874; (March, 2007) (Digest)
G.R. No. 153874 ; March 1, 2007
TITAN CONSTRUCTION CORPORATION, Petitioner, vs. UNI-FIELD ENTERPRISES, INC., Respondent.
FACTS
Petitioner Titan Construction Corporation purchased construction materials on credit from respondent Uni-Field Enterprises, Inc. from 1990 to 1993. The total purchases amounted to ₱7,620,433.12. Petitioner made partial payments, leaving an unpaid balance of ₱1,404,637.42. After a demand letter went unheeded, respondent filed a collection suit. In its Answer, petitioner admitted the transactions but disputed the amount and interposed a counterclaim for various alleged damages and overpayments totaling ₱204,527.99.
The Regional Trial Court ruled in favor of respondent, ordering petitioner to pay the principal amount, 24% interest per annum compounded yearly, liquidated damages, attorney’s fees, and costs. The Court of Appeals affirmed the trial court’s decision. Petitioner elevated the case to the Supreme Court, arguing that the awards for interest, liquidated damages, and attorney’s fees had no legal basis and that the supporting documents were contracts of adhesion.
ISSUE
Whether the Court of Appeals erred in affirming the awards of interest, liquidated damages, and attorney’s fees based on the stipulations in the delivery receipts and sales invoices.
RULING
The Supreme Court denied the petition but modified the award of attorney’s fees. The Court held that factual findings of the trial court, affirmed by the Court of Appeals, are generally binding. Petitioner’s admission of the transactions in its Answer, coupled with its failure to specifically deny under oath the due execution and genuineness of the delivery receipts and invoices, meant the stipulations therein were deemed admitted. These documents clearly provided for a 24% annual interest on overdue accounts, compounded yearly, and specified amounts for liquidated damages and attorney’s fees. Contracts, even if in standard form, are binding as the law between the parties absent any vitiation of consent.
However, the Court found the combined awards for liquidated damages and attorney’s fees to be iniquitous. Applying Article 1229 of the Civil Code, the Court reduced the attorney’s fees from 25% of the total obligation to 10% of the principal sum due, amounting to ₱351,028.50. The award of liquidated damages was sustained as a valid penalty clause distinct from interest. The stipulated 24% interest, being a freely agreed-upon finance charge for delayed payment, was upheld.