Asia Construction and Development Corp vs. Cathay Pacific Steel Corp, G.R. No.

167942, Jun 29, 2010

FACTS:
1. On several occasions between June and July of 1997, petitioner Asian Construction
and Development Corp. purchased from respondent Cathay Pacific Steel Corp. various
reinforcing steel bars worth ₱2,650,916.40 covered by a total of 12 invoices. On
November 21, 1997, petitioner made a partial payment of ₱2,159,211.49, and on
March 2, 1998, another partial payment of ₱250,000, leaving a balance of
₱214,704.91.
2. Respondent sent two demand letters dated May 12, 1998, and August 10, 1998,
respectively, but no payment was made by petitioner.
3. On November 24, 1998, respondent filed a complaint for a sum of money and
damages with the RTC of Antipolo, docketed as Civil Case No. 98-5093.
4. In its answer, petitioner denied that it authorized the purchases/purchase orders from
the respondent; it alleged that no demand for payment was made or received by
petitioner, it had no knowledge as to the truth of the invoices, statement of accounts
and letters as they were never received by petitioner, it had not received the reinforcing
steel bars, the amount billed by respondent was bloated and no deduction was made
for the corresponding payments made by petitioner and that it had not agreed to pay
interest and attorney's fees.

RTC:
1. After the pre-trial conference was terminated, trial of the case on the merits was set.
Hearing of the case was postponed several times. During the hearing on November 22,
1999, petitioner and its counsel were absent despite notice, and upon motion of the
respondent, the trial court granted and set the ex-parte hearing of the case before a
designated commissioner. On December 1, 1999, respondent presented its sole
witness, David O. Chua (Chua), vice president of respondent company. Thereafter,
respondent offered its evidence and rested its case.
2. On January 10, 2000, the trial court rendered a Decision in favor of the respondent,
the fallo of which reads:
3.
WHEREFORE, premises considered, defendant Asian [Construction] and Development
Corporation is hereby ordered to pay to the plaintiff:
1. ₱319,050.48 inclusive of interest as of 17 November 1998 plus 2% interest per month
until the full amount is paid;
2. ₱79,762.62 as attorney's fees and as appearance fees; and
3. The costs of suit.

CA:
1. Petitioner then appealed the case to the CA which found that based on the invoices
there is a specific amount of interest agreed upon, which is 24% per annum.
 2. It also found that the outstanding balance of petitioner is ₱241,704.91 which must earn
interest from May 12, 1998, which is the date of extra-judicial demand. The dispositive
portion of the CA Decision states:

WHEREFORE, premises considered, the assailed decision is AFFIRMED with

MODIFICATION in this wise:
‘WHEREFORE, premises considered, defendant Asian Construction and Development
Corporation is hereby ordered to pay to the plaintiff:
1. ₱241,704.91 plus 24% interest per annum from May 12, 1998 until finality of this
decision;
2. 10% of the total amount due as attorney's fees; and
3. The costs of suit.

 Petitioner filed a review on certiorari on that decision

ISSUE/s:
1. WON petitioner did not question its liability in its answer. -Obligation was duly
established
2. WON the CA erred in imposing 24% percent Interest from May 12, 1998 until the
finality of decision – NO they did not

RULING:

1. Obligation was duly established

 As a rule, only questions of law may be appealed to the Court by petition for review.
The Court is not a trier of facts, its jurisdiction is limited to errors of law. Moreover,
factual findings of the trial court, particularly when affirmed by the CA, are generally
binding on this Court.

 In the present case, the orders by, deliveries to, and pick-ups by, petitioner of
reinforcing steel bars having a total value of ₱2,650,916.40 were evidenced by the
testimony of Chua and the invoices. Notably the invoices contained a statement to the
effect that the reinforcing steel bars were received in good order and condition.

 The total payment in the amount of ₱2,409,211.49 made by petitioner was also
supported by evidence. Some payments made were in fact admitted in the Answer of
petitioner.

 With regard to the testimony of Chua, the fact that he is the head of Marketing and
Finance proves that he is competent to testify on the sale of the reinforcing steel bars
to petitioner and its unpaid balance. The notations addressed to him on the purchase
orders and his signature on the demand letters further support the finding that he has
personal knowledge of the transactions he testified on. Mere allegations of his
incompetence to testify on such matters, are not proof and these cannot prevail over
evidence to the contrary.
  As for the delivery receipts, there is sufficient uncontroverted evidence showing loss of
the originals despite the diligence exerted to find the same. Copies of the same are
thus admissible.

 The factual findings of the trial court and the CA were based on a preponderance of
evidence which were not refuted with contrary evidence by petitioner. We thus find no
reason to disturb the factual findings of the trial court and the CA.

Applicable Interest Rate(Related to CREDIT TRANSACTIONS)

 Article 1306 of the Civil Code provides that the "contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem convenient, provided
they are not contrary to law, morals, good customs, public order, or public policy."

 In the present case, the sales invoices expressly stipulated the payment of interest and
attorney's fees in case of overdue accounts and collection suits, to wit:
o "Interest at 24% per annum is to be charged to all accounts overdue plus 25%
additional on unpaid invoice for attorney's fees aside from court cost, the parties
expressly submit themselves to the venue of the courts in Rizal, in case of legal
proceeding."
 The sales invoices are in the nature of contracts of adhesion. "The court has
repeatedly held that contracts of adhesion are as binding as ordinary contracts. Those
who adhere to the contract are in reality free to reject it entirely and if they adhere, they
give their consent. It is true that in some occasions the Court struck down such
contracts as void when the weaker party is imposed upon in dealing with the dominant
party and is reduced to the alternative of accepting the contract or leaving it,
completely deprived of the opportunity to bargain on equal footing."

 Considering that petitioner is not a small-time construction company, having such

construction projects as the MRT III and the Mauban Power Plant, "petitioner is
presumed to have full knowledge and to have acted with due care or, at the very least,
to have been aware of the terms and conditions of the contract. Petitioner was free to
contract the services of another supplier if respondent's terms were not acceptable". 

 By contracting with respondent for the supply of the reinforcing steel bars and
not interposing any objection to the stipulations in the sales invoice, petitioner
did not only bind itself to pay the stated selling price, it also bound itself to pay
(1) interest of 24% per annum on overdue accounts and (2) 25% of the unpaid
invoice for attorney's fees. Thus, the lower courts did not err in using the invoices as
basis for the award of interest.