Titan Construction v. Uni-Field Enterprises
REITERATIONFacts
The Antecedents: Petitioner Titan Construction Corporation (petitioner) purchased construction supplies on credit from respondent Uni-Field Enterprises, Inc. (respondent) from 1990 to 1993, amounting to ₱7,620,433.12. Petitioner paid ₱6,215,795.70, leaving an unpaid balance of ₱1,404,637.42. Respondent sent a demand letter on October 19, 1994, but the balance remained unpaid. Procedural History: On June 26, 1995, respondent filed a complaint for collection of sum of money with damages against petitioner. Petitioner admitted the purchases but disputed the amount and interposed a counterclaim for ₱204,527.99. The Regional Trial Court (RTC) of Quezon City ruled in favor of respondent, ordering petitioner to pay the principal amount, interest charges, liquidated damages, attorney's fees, and costs. The Court of Appeals (CA) affirmed the RTC decision. Petitioner's motion for reconsideration was denied, leading to the present petition. The Petition: Petitioner seeks review of the CA's decision, arguing that the award of liquidated damages, attorney's fees, and interest lacked legal basis and that the CA overlooked material facts.
Issue(s)
Whether the Court of Appeals erred in finding legal basis for awarding interests, liquidated damages, and attorney's fees in favor of respondent, and whether the stipulations in the delivery receipts and sales invoices were valid and enforceable. Whether the Court of Appeals erred by overlooking certain facts or circumstances of weight and influence regarding the nature of the contracts as contracts of adhesion and the exorbitant award of attorney's fees, which, if considered, would alter the results of the case.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals with modification regarding the award of attorney's fees. Petitioner Titan Construction Corporation was ordered to pay respondent Uni-Field Enterprises, Inc. attorney's fees of ₱351,028.50.
Ratio Decidendi
On the Legal Basis for Awarding Interests, Liquidated Damages, and Attorney's Fees: The Court held that the stipulations for interest, liquidated damages, and attorney's fees in the delivery receipts and sales invoices were legally binding. Although petitioner claimed these documents were not formally offered as evidence by the respondent, the records showed they were part of petitioner's formal offer of evidence. These documents expressly stipulated the payment of 24% annual interest on overdue accounts, compounded yearly; 25% liquidated damages based on the outstanding total obligation; and 25% attorney's fees based on the total claim including liquidated damages. The Court emphasized that since petitioner freely entered into the contract, these stipulations became the law between the parties and were enforceable. On the Nature of the Contracts as Contracts of Adhesion and the Exorbitant Award of Attorney's Fees: The Court addressed petitioner's allegation that the delivery receipts and sales invoices were contracts of adhesion, reiterating that such contracts are as binding as ordinary contracts, provided the adhering party had the freedom to reject the contract entirely and was not imposed upon. The Court found that petitioner, having engaged in business with respondent from 1990 to 1993 and not being a small-time company, was presumed to have full knowledge of the terms and conditions and was free to contract with another supplier if respondent's terms were unacceptable. While upholding the validity of the stipulations, the Court exercised its discretion under Articles 1229 and 2227 of the Civil Code to reduce the award of attorney's fees, finding the original award of 25% of the total amount due and payable to be exorbitant. The Court reduced the attorney's fees to 25% of the principal obligation only, amounting to ₱351,028.50.
Main Doctrine
The Supreme Court affirmed the Court of Appeals' decision, upholding the validity of stipulations for interest, liquidated damages, and attorney's fees in sales invoices and delivery receipts, even if considered contracts of adhesion, provided the party had the freedom to contract or reject and was not unduly prejudiced. However, the Court modified the award of attorney's fees, reducing it to 25% of the principal obligation due to its exorbitant nature when calculated on the total amount due including interest and liquidated damages.