G.R. No.

225433
August 28, 2019

Lara's Gifts vs. Midtown

Carpio, J.:

FACTS:
From January 2007 to December 2007, Lara’s Gifts & Decors, Inc. (petitioner)
engaged in transactions with Midtown Industrial Sales, Inc. (respondent), purchasing
various industrial and construction materials on a 60-day credit term, totaling
P1,263,104.22. The agreement stipulated a 24% annual interest on overdue accounts.
Payment was made through several post-dated checks, which were subsequently
dishonored due to insufficient funds. Despite repeated demands for payment following
the dishonor of both initial and replacement checks, the petitioner failed to fulfill its
monetary obligations, leading the respondent to file a Complaint for Sum of Money with
Prayer for Attachment. The petitioner, admitting the transactions, contested the quality
of goods delivered and cited a fire incident for its inability to meet obligations. The legal
journey from the Regional Trial Court (RTC) up to the Supreme Court revolved around
the enforceability of the sales invoices, the validity of the 24% interest stipulation, and the
application of relevant articles from the Civil Code in settling the dispute.

ISSUES:
1) Whether the sales invoices are admissible and have probative value despite
challenges to their genuineness, due execution, and authenticity.
2) Whether the petitioner is in default of its contractual obligations.
3) The applicability of Articles 1192 and 1283 of the Civil Code in the case.
4) The validity and imposition of the 24% interest rate per annum on overdue
accounts.
5) The procedural application and calculation of the interest rate upon final
judgment.

HELD:
1) The sales invoices were deemed admitted for not being specifically denied under
oath by the petitioner, making them admissible and imbued with probative value
to establish the transactions and the amount due.
2) The petitioner was in default for failing to substantiate its claims of receiving
substandard goods, thereby obligating them to fulfill its monetary obligations as
stipulated.
3) Articles 1192 and 1283 were deemed inapplicable since the petitioner could not
establish that the agreed obligations were not met by the respondent.
4) The stipulated 24% interest rate was held valid and binding upon both parties as
it was not proved to be unconscionable; thus, enforceable as part of the contractual
agreement.
5) The legal interest rates were clarified and applied per prevailing jurisprudence,
modifying the computation and imposition of interest rates from the RTC and the
Court of Appeals’ decisions.