MCMP Construction Corp. vs. Monark Equipment Corp.

IV.
Doctrine: In a suit for the collection of money, the judge may equitably reduce the
penalty when the debtor has partly or irregularly complied with the principal
obligation. Further, even if there has been no performance, the penalty may also be
reduced by the courts if it is iniquitous or unconscionable.
: Best Evidence Rule; Documentary Evidence;
The Best Evidence Rule, a basic postulate requiring the production of the
original document whenever its contents are the subject of inquiry, is contained in
Section 3 of Rule 130 of the Rules of Court which provides: “Section 3. Original
document must be produced; exceptions.- When the subject of inquiry is the
contents of a document, no evidence shall be admissible other than the original
document itself, except in the following cases: (a) When the original has been lost
or destroyed, or cannot be produced in court, without bad faith on the part of the
offeror; (b) When the original is in the custody or under the control of the party
against whom the evidence is offered, and the latter fails to produce it after
reasonable notice; (c) When the original consists of numerous accounts or other
documents which cannot be examined in court without great loss of time and the
fact sought to be established from them is only the general result of the whole; and
(d) When the original is a public record in the custody of a public officer or is
recorded in a public office.”
Case Title: MCMP CONSTRUCTION CORP., Petitioner, vs. MONARK

EQUIPMENT CORP., Respondent.
G.R. No. 201001, November 10, 2014, VELASCO, JR., J.:
FACTS:
MCMP Construction Corporation (MCMP) leased heavy equipment from Monark

Equipment Corporation (Monark) for various periods in 2000, the lease covered by
a Rental Equipment Contract (Contract). Thus, Monark delivered five (5) pieces of
heavy equipment to the project site of MCMP in Tanay, Rizal and Llavac, Quezon,
the delivery evidenced by invoices as well as Documents Acknowledgment Receipt
Nos. 04667 and 5706, received and signed by representatives of MCMP, namely,
Jorge Samonte on December 5, 2000 and Rose Takahashi on January 29, 2001,
respectively.
In the invoice, it states that the customer agrees to the following: a) that the credit
sales are payable within 30 days from the date of invoice, b) to pay interest at 24%
p.a. on all amounts, c) to the collection fee of 1% compounded monthly and 2%
per month penalty charge for late payment on amounts overdue d) to pay a sum
equal to 25% of any amount due as attorney’s fees in case of suit, and expressly
submit to the jurisdiction of the courts of Quezon City, Makati, Pasig or Manila,
Metro Manila, for any legal action arising from, this transactions.
MCMP however failed to pay all the rental fees. Upon demands by Monark, MCMP
was only able to pay P100,000.00 on April 15, 2001 and PhP100,000.00 on August
15, 2001. Further demands went unheeded. As of April 30, 2002, MCMP owed
Monark the amount of PhP1,282,481.83.
On June 18, 2002, Monark filed a suit for a Sum of Money, the RTC issued a
Decision in favor of the plaintiff, ordering MCMP to pay 1,282,481.83, as well as the
25% of the amount and the costs of suit.
The appellate court affirmed in toto the Decision and Order of the RTC. MCMP’s
motion for reconsideration was denied by the CA.
Hence, the instant petition.
ISSUE:
Can the Court reduce the penalty charges imposed?
HELD:
YES. The trial court imposed upon MCMP a 24% per annum interest on the rental
fees as well as a collection fee of 1% per month compounded monthly and a 2%
per month penalty charge. In all, the effective interest rate foisted upon MCMP is
60% per annum. On top of this, MCMP was assessed for attorney’s fees at the rate
of 25% of the total amount due. The Court finds these exorbitant and
unconscionable rates.
Article 1229 of the Civil Code states:

Art. 1229. The judge shall equitably reduce the penalty when the principal
obligation has been partly or irregularly complied with by the debtor. Even if there
has been no performance, the penalty may also be reduced by the courts if it is
iniquitous or unconscionable. In exercising this power to determine what is
iniquitous and unconscionable, courts must consider the circumstances of each case
since what may be iniquitous and unconscionable in one may be totally just and
equitable in another."
Also, respondent promised to pay 25% of his outstanding obligations as attorney’s

fees in case of non-payment thereof. Attorney’s fees here are in the nature of
liquidated damages. As long as said stipulation does not contravene law, morals, or
public order, it is strictly binding upon the respondent. Nonetheless, courts are
empowered to reduce such rate if the same is iniquitous or unconscionable
pursuant to the above-quoted provision. This sentiment is echoed in Article 2227 of
the Civil Code, to wit:
Art. 2227. Liquidated damages, whether intended as an indemnity or a penalty,

shall be equitably reduced if they are iniquitous or unconscionable.
Following the above principles previously laid down by the Court, the interest and
penalty charges imposed upon MCMP was considered as iniquitous, unconscionable
and, therefore, void. As such, the rates may validly be reduced. Thus, the interest
rate of 24% per annum is hereby reduced to 12% per annum. Moreover, the
interest shall start to accrue thirty (30) days after receipt of the second set of
invoices on January 21, 2001, or March 1, 2001 in accordance with the provisions in
the invoices themselves.
Additionally, the penalty and collection charge of 3% per month, or 36% per
annum, is also reduced to 6% per annum. And the amount of attorney's fees is
reduced from 25% of the total amount due to 5%.
WHEREFORE, premises considered, the instant petition is hereby DENIED for lack of
merit with the MODIFICATION that the dispositive portion of the RTC's Decision
dated November 20, 2007, as amended in an Order dated April 28, 2008, should
read:
WHEREFORE, in view of the foregoing findings and legal premises, judgment is

hereby rendered in favor of the plaintiff, and ordering the defendant to pay the
former:
1. PhP 765,380.33 representing the unpaid rental fees;
2. Interest of 12% per annum on the unpaid rental fees to be computed from March
1, 2001 until payment;
3. Penalty and collection charge of 6% per annum on the unpaid rental fees to be
computed from March 1, 2001;
4. Attorney's Fees of five percent (5%) of the total amount to be recovered; and,
5. The cost of suit.
SO ORDERED.

MCMP Construction Corp. vs. Monark Equipment Corp.

Uploaded by

Copyright:

Available Formats

MCMP Construction Corp. vs. Monark Equipment Corp.

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

MCMP Construction Corp. vs. Monark Equipment Corp.

Uploaded by

Copyright:

Available Formats

IV.

: Best Evidence Rule; Documentary Evidence;

Case Title: MCMP CONSTRUCTION CORP., Petitioner, vs. MONARK

G.R. No. 201001, November 10, 2014, VELASCO, JR., J.:

MCMP Construction Corporation (MCMP) leased heavy equipment from Monark

Hence, the instant petition.

Article 1229 of the Civil Code states:

Also, respondent promised to pay 25% of his outstanding obligations as attorney’s

Art. 2227. Liquidated damages, whether intended as an indemnity or a penalty,

WHEREFORE, in view of the foregoing findings and legal premises, judgment is

1. PhP 765,380.33 representing the unpaid rental fees;

5. The cost of suit.

You might also like