Case Digest (G.R. No. 225433) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In Lara’s Gifts & Decors, Inc. v. Midtown Industrial Sales, Inc., G.R. No. 225433, decided September 20, 2022 under the 1987 Constitution, petitioner Lara’s Gifts bought industrial and construction materials from respondent Midtown on a 60-day credit term between January and December 2007, amounting to ₱1,263,104.22. Lara’s Gifts issued post-dated checks, which later bounced for “insufficient funds” or “account closed.” Midtown sent a demand letter dated January 21, 2008, but received no payment. On February 5, 2008, Midtown filed a Complaint for Sum of Money with Prayer for Attachment in the Regional Trial Court (RTC) of Caloocan City, Branch 128. Lara’s Gifts admitted the purchases but alleged most deliveries were substandard, causing rejection by U.S. buyers, compounded by a factory fire in February 2008. On January 27, 2014, the RTC rendered judgment for Midtown: principal of ₱1,263,104.22 plus 24% per annum interest from February 5, 2008, attorney’s fees of ₱50,000, and cos Case Digest (G.R. No. 225433) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Contract and transactions
- From January to December 2007, Lara’s Gifts & Decors, Inc. (petitioner) purchased industrial and construction materials from Midtown Industrial Sales, Inc. (respondent) totaling ₱1,263,104.22 on 60-day credit terms.
- The sales invoices provided for 24% per annum interest on overdue accounts; payment was by post-dated checks later dishonored for “insufficiency of funds” or “account closed.”
- Demand and litigation
- Midtown sent a demand letter dated January 21, 2008, but petitioner still failed to pay.
- Midtown filed a Complaint for Sum of Money with Prayer for Attachment on February 5, 2008.
- Petitioner’s defenses
- Petitioner admitted the purchases but alleged substandard materials causing rejection by U.S. buyers and order cancellations due to recession.
- Petitioner invoked a February 19, 2008 fire that destroyed its factory.
- Trial court and appellate rulings
- RTC, Branch 128, Caloocan City (January 27, 2014) found petitioner failed to prove substandard materials, rendered judgment for Midtown for:
- ₱1,263,104.22 plus 24% per annum interest from February 5, 2008 until full payment; and
- ₱50,000.00 as attorney’s fees, plus costs.
- CA (April 21, 2016) affirmed with no change in principal ruling.
- Supreme Court August 28, 2019 Decision
- Denied the petition for review, holding:
- General denial admitted genuineness and due execution of invoices.
- Petitioner failed to prove substandard deliveries.
- 24% stipulated interest was valid; computed from extrajudicial demand (January 22, 2008).
- Modified interest award by adding legal interest on the 24% interest at:
- 12% per annum from February 5, 2008 to June 30, 2013;
- 6% per annum from July 1, 2013 until full payment.
- Awarded ₱50,000.00 attorney’s fees plus 6% per annum from finality until paid.
- Motion for Reconsideration (MR) grounds
- Denial of due execution of invoices was specific in the answer.
- No valid extrajudicial demand was made.
- Petitioner proved substandard quality.
- 24% interest was unconscionable and unilaterally imposed.
- Legal interest on interest was excessive.
- En Banc Resolution (September 20, 2022)
- Partially granted MR: deleted legal interest on the 24% compensatory interest as ultra vires.
- Final award:
- ₱1,263,104.22 plus 24% per annum interest from January 22, 2008 until full payment;
- ₱50,000.00 attorney’s fees;
- Cost of suit;
- 6% per annum legal interest on attorney’s fees from finality until full payment.
Issues:
- Did petitioner’s general denial admit the genuineness and due execution of the sales invoices?
- Did petitioner prove that the delivered materials were substandard and of poor quality?
- Is the 24% per annum stipulated interest valid and enforceable?
- Was the award of legal interest on the 24% compensatory interest proper or ultra vires?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)