Facts:

The case involves a petition for review filed by Arwood Industries, Inc. (petitioner) against D.M. Consunji, Inc. (respondent) concerning a construction contract dispute. The events leading to the case began with a Civil, Structural and Architectural Works Agreement dated February 6, 1989, wherein the respondent was contracted to construct the Westwood Condominium located at No. 23 Eisenhower St., Greenhills, San Juan, Metro Manila. The total contract price for the project was P20,800,000.00. Despite the completion of the condominium, the petitioner failed to pay the remaining balance of P962,434.78. The respondent made repeated demands for payment, which went unheeded. Consequently, on August 13, 1993, the respondent filed a complaint (Civil Case No. 63489) in the Regional Trial Court, Branch 153, Pasig City, seeking recovery of the unpaid balance along with damages. The respondent's complaint included a request for 2% monthly interest on the unpaid amount from November ...

Facts:

Background of the Case

• The parties involved are petitioner Arwood Industries, Inc. (owner) and respondent D.M. Consunji, Inc. (contractor).
• The dispute arises from a Civil, Structural and Architectural Works Agreement dated February 6, 1989, for the construction of Arwood's Westwood Condominium located at No. 23 Eisenhower St., Greenhills, San Juan, Metro Manila.
• The agreed contract price for the condominium project was P20,800,000.00.

The Dispute Over Payment

• Despite the completion of the condominium project, an amount of P962,434.78 remained unpaid by the petitioner.
• Repeated demands by the respondent to secure payment were unheeded, leading to the filing of Civil Case No. 63489 by the respondent on August 13, 1993.
• The relief sought by the respondent included:
• Payment of P962,434.78 with interest at 2% per month (or a fraction thereof) from November 1990 until full payment.
• Attorney's fees and litigation expenses of P250,000.00.
• Exemplary damages amounting to P150,000.00.
• Payment of the costs of the suit.

Trial Court and Court of Appeals Decisions

• At trial, the court ruled in favor of the respondent by awarding:
• The unpaid balance of P962,434.78 with interest at 2% per month from November 1990 until payment.
• Attorney’s fees and costs of suit, with the judgment later being modified by the Court of Appeals which deleted the attorney’s fees award.
• The Court of Appeals upheld the trial court’s decision, basing the imposition of 2% monthly interest on a specific contractual provision found in Article 6.03 of the Agreement.
• The contractual provision provided that in the event of a delay in payment beyond fifteen (15) calendar days, the petitioner would be liable to pay interest at a rate of two (2%) percent per month on the delayed sum or the fraction thereof.

Contentions Raised on Appeal

• The petitioner challenged the imposition of the 2% interest rule, arguing:
• The provision was not explicitly offered in evidence as it was not sub-marked in the Agreement nor was it raised timely during trial.
• The claimed amount was not “monthly progress billings” as defined in the Agreement and should therefore be immune from such penalty interest.
• The petitioner further contended that the pre-trial order dated February 4, 1994, did not include the issue of interest, emphasizing that the sole disputed issue was the balance of payment, not the interest computation.
• The petitioner argued that any imposition of the interest rate was an unwarranted extension or misapplication of a clause intended for monthly progress payments.

Evidence and Legal Basis Considered

• The respondent relied on the clear contractual language, including Articles 6.02 and 6.03, which referred to the balance to be paid in monthly progress payments and stipulated a penalty interest for delayed payments.
• Case law supporting the view that delay in performing an obligation—especially in the realm of monetary obligations—entails the award of interest, including references to Article 2209 of the Civil Code and previous Supreme Court decisions, was cited.
• The Court noted that by entering into the Agreement, the petitioner was bound by all its terms and by the consequences of non-performance, including the penalty interest clause.

Issue:

• Whether the imposition of two percent (2%) monthly interest on the outstanding balance of P962,434.78 is proper, given that the amount does not strictly represent “monthly progress billings” as per the petitioner’s contention.
• Whether the interest clause contained in Article 6.03 of the Agreement, although not formally sub-marked or explicitly presented in the body of the trial court’s decision, may be validly invoked to enforce the penalty interest.
• Whether the trial court erred in including, in its ruling, the imposition of interest despite a pre-trial order that did not list interest as an issue to be resolved.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)