Case Summary (G.R. No. 142277)

Case Overview

This case involves a petition for review concerning a contractual dispute between Arwood Industries, Inc. (Petitioner) and D.M. Consunji, Inc. (Respondent) regarding the imposition of interest on a balance of the contract price. The Court of Appeals affirmed the Regional Trial Court’s decision, which awarded the Respondent a monetary claim, including interest and damages.

Background of the Case

• Contract Parties: Arwood Industries, Inc. (Owner) and D.M. Consunji, Inc. (Contractor).
• Contract Date: February 6, 1989.
• Project: Construction of Westwood Condominium located in San Juan, Metro Manila.
• Contract Price: ₱20,800,000.00.
• Unpaid Amount: ₱962,434.78 remained unpaid after project completion.

Legal Issues Presented

• Core Issue: The propriety of the 2% monthly interest imposed on the unpaid balance of ₱962,434.78.

Trial Court Decision

• Judgment: The trial court ordered Petitioner to pay:
  • ₱962,434.78 (balance of contract price) with 2% interest per month from November 1990 until payment.
  • ₱150,000.00 as attorney's fees.
  • Costs of suit.

Court of Appeals Decision

• Affirmation with Modification: The Court of Appeals upheld the trial court's decision but removed the award of attorney's fees, citing lack of justification in the body of the decision.

Relevant Provisions from the Agreement

• Article 6.03: States that if the Owner delays payment beyond 15 calendar days, the Contractor can either suspend work or continue work with an interest charge of 2% per month on the due amount.

Key Legal Principles

• Interest on Unpaid Amount:
  • The court confirmed that the imposition of 2% monthly interest is valid due to the explicit provision in the Agreement.
  • Interest serves as compensation for damages incurred by the Contractor due to delayed payment.

Arguments by the Petitioner

• Claimed that the interest provision applied only to monthly progress billings and not to the final balance.
• Argued that the trial court's decision did not explicitly mention the interest in the dispositive portion, and hence, should not apply.
• Contended that the pre-trial order did not include interest as an issue for resolution.

Court Rulings and Justifications

• The court ruled that the Agreement’s provisions are binding, and the existence of the 2% interest clause cannot be disregarded.
• The Petitioner was deemed liable for damages due to their failure to pay on time, which justifies the interest.
• The court dismissed the notion that the interest provision was not applicable to the final balance, asserting that all payments are part of the contract price.

Key Takeaways

• The court upheld the validity of the 2% monthly interest based on the contractual Agreement.
• The absence of an objection to the contents of the Agreement during trial precluded the Petitioner from contesting the interest provision.
• The ruling reinforces the princip

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Case Syllabus (G.R. No. 142277)

Case Overview

• This case involves a petition for review regarding the decision of the Court of Appeals dated November 12, 1999, which modified the decision of the Regional Trial Court in favor of D.M. Consunji, Inc. against Arwood Industries, Inc.
• The primary issue at hand is the propriety of imposing a 2% monthly interest on the outstanding amount adjudged by the trial court, which was affirmed by the Court of Appeals.

Background Facts

• Arwood Industries, Inc. (petitioner) and D.M. Consunji, Inc. (respondent) entered into a construction agreement on February 6, 1989, for the Westwood Condominium project, with a total contract price of P20,800,000.00.
• Upon completion of the project, petitioner failed to pay P962,434.78, prompting respondent to file a complaint on August 13, 1993, seeking recovery of the unpaid balance along with additional claims for damages and attorney’s fees.

Court Proceedings

• The trial court ruled in favor of the respondent, granting the claims for the unpaid balance with 2% interest per month from November 1990, attorney’s fees of P150,000, and costs of the suit.
• Petitioner appealed, specifically contesting the inclusion of the 2% interest, arguing that this provision in the Agreement did not apply to the claim for the unpaid balance.

Court of Appeals Decision

• The Court of Appeals upheld the trial court's decision on the

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