Case Digest (G.R. No. 225433)
Facts:
Lara’s Gifts & Decors, Inc. v. Midtown Industrial Sales, Inc., G.R. No. 225433, September 20, 2022, the Supreme Court En Banc, Leonen, J., acting C.J., writing for the Court.Petitioner Lara’s Gifts & Decors, Inc. purchased industrial and construction materials from respondent Midtown Industrial Sales, Inc. during 2007, amounting to P1,263,104.22. The sales were on 60‑day credit and the sales invoices expressly provided that overdue accounts would be charged interest at 24% per annum. Lara’s issued post‑dated checks which were later dishonored for "insufficiency of funds" or "account closed." Midtown sent a demand letter dated January 21, 2008 and, after nonpayment, filed a Complaint for Sum of Money with Prayer for Attachment on February 5, 2008.
Lara’s admitted the purchases but asserted affirmative defenses: many deliveries were substandard or defective causing rejection by its U.S. buyers, the global economic recession led to order cancellations, and a factory fire on February 19, 2008 destroyed its operations. At trial the Regional Trial Court (RTC), Branch 128, Caloocan City, rendered judgment on January 27, 2014 in favor of Midtown, finding the sales invoices genuine, the claimed amount supported, and the 24% interest not unconscionable; the RTC awarded P1,263,104.22 plus 24% per annum from judicial demand (Feb. 5, 2008) and P50,000 attorney’s fees. Midtown did not appeal the RTC judgment.
The Court of Appeals affirmed on April 21, 2016. Petitioner filed a Rule 45 petition for review on certiorari with the Supreme Court. In an August 28, 2019 Decision the Supreme Court denied the petition, affirmed the Court of Appeals with modification on damages by (i) fixing the 24% stipulated interest from extrajudicial demand (Jan. 22, 2008) and (ii) awarding legal interest "on the 24% per annum interest" at 12% p.a. from judicial demand (Feb. 5, 2008) to June 30, 2013 and 6% thereafter, plus attorney’s fees with interest. Lara’s filed a Motion for Reconsideration arguing, inter alia, that it specifically denied due execution of invoices, that it was not in default, that the materials were substandard, that the 24% rate was unconscionable and unilaterally imposed, and that legal interest on the 24% was excessive.
Respondent opposed the Motion. In the present Resolution the Court partially granted the Motion for Reconsideration: it upheld prior findings that (a) Lara’s general denial did not sufficiently disprove the invoices, (b) Lara’s failed to prove substandard deliveries, and (c) the 24% stipulated interest was binding; but it deleted the Supreme Court’s earlier award of legal interest on the 24% compensatory interest as ultra vires because the RTC judgment awarding principal + 24% (without legal interest on interest) had become final and executory as to Midtown which did not appeal. The Court ordered Lara’s to pay: (1) P1,263,104.22 plus stipulated 24% per annum from January 22, 2008 until full payment; (2) P50,000 attorney’s fees; and (3) costs. The t...(Subscriber-Only)
Issues:
- May the Court, on appeal by the debtor, lawfully impose legal interest on a creditor’s previously adjudged compensatory interest when the trial court’s judgment (which did not include such additional legal interest) has become final and executory as to the creditor?
- Is the subject contract a loan or forbearance (thus invoking the Usury Law/BSP‑prescribed legal rate) or a sale on credit (thus invoking Article 2209 and the 6% Civil Code legal rate)?
- Was the stipulated 24% per annum interest unco...(Subscriber-Only)
Ruling:
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Ratio:
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Doctrine:
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