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    Lara'S Gifts & Decors, Inc. V. Midtown Industrial Sales, Inc., G.R. No. 225433, August 28, 2019, CARPIO, J. Doctrine

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    Michael Vincent Bautista
    The Supreme Court upheld the validity of a 24% interest rate on overdue accounts that was expressly stated in sales invoices between a manufacturer and supplier. While an unconscionably high interest rate would be nullified, the Court has previously ruled that 24% is not excessive and is valid when agreed upon by commercial parties. Here, the manufacturer was experienced in business and purchasing from the supplier for years, so it could not claim to be misled regarding the interest term in the invoices. Therefore, the 24% interest rate was binding on the manufacturer.

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    Lara'S Gifts & Decors, Inc. V. Midtown Industrial Sales, Inc., G.R. No. 225433, August 28, 2019, CARPIO, J. Doctrine

    Uploaded by

    Michael Vincent Bautista
    438 views3 pages
    The Supreme Court upheld the validity of a 24% interest rate on overdue accounts that was expressly stated in sales invoices between a manufacturer and supplier. While an unconscionably high interest rate would be nullified, the Court has previously ruled that 24% is not excessive and is valid when agreed upon by commercial parties. Here, the manufacturer was experienced in business and purchasing from the supplier for years, so it could not claim to be misled regarding the interest term in the invoices. Therefore, the 24% interest rate was binding on the manufacturer.

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    The Supreme Court upheld the validity of a 24% interest rate on overdue accounts that was expressly stated in sales invoices between a manufacturer and supplier. While an unconscionably high interest rate would be nullified, the Court has previously ruled that 24% is not excessive and is valid when agreed upon by commercial parties. Here, the manufacturer was experienced in business and purchasing from the supplier for years, so it could not claim to be misled regarding the interest term in the invoices. Therefore, the 24% interest rate was binding on the manufacturer.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    438 views3 pages

    Lara'S Gifts & Decors, Inc. V. Midtown Industrial Sales, Inc., G.R. No. 225433, August 28, 2019, CARPIO, J. Doctrine

    Uploaded by

    Michael Vincent Bautista
    The Supreme Court upheld the validity of a 24% interest rate on overdue accounts that was expressly stated in sales invoices between a manufacturer and supplier. While an unconscionably high interest rate would be nullified, the Court has previously ruled that 24% is not excessive and is valid when agreed upon by commercial parties. Here, the manufacturer was experienced in business and purchasing from the supplier for years, so it could not claim to be misled regarding the interest term in the invoices. Therefore, the 24% interest rate was binding on the manufacturer.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    LARA'S GIFTS & DECORS, INC. v. MIDTOWN INDUSTRIAL SALES, INC.

    ,
    G.R. No. 225433, August 28, 2019, CARPIO, J.
    DOCTRINE
    Only the unconscionable interest rate is nullified and deemed not written
    in the contract; whereas the parties' agreement on the payment of interest on
    the principal loan obligation subsists. It is as if the parties failed to specify the
    interest rate to be imposed on the principal amount, in which case the [BSP-
    prescribed] rate of interest prevailing at the time the agreement was entered
    into is applied by the Court.

    FACTS
    Petitioner Lara's Gifts & Decors, Inc. (petitioner) is engaged in the
    business of manufacturing, selling, and exporting handicraft products. On the
    other hand, respondent Midtown Industrial Sales, Inc. (respondent) is engaged
    in the business of selling industrial and construction materials, and petitioner
    is one of respondent's customers. From January 2007 up to December 2007,
    petitioner purchased from respondent various industrial and construction
    materials in the total amount of P1,263,104.22. The purchases were on a sixty
    (60)-day credit term, with the condition that 24% interest per annum would be
    charged on all accounts overdue, as stated in the sales invoices. Petitioner paid
    for its purchases by issuing several Chinabank postdated checks in favor of
    respondent. However, when respondent deposited the Chinabank checks on
    their maturity dates, the checks bounced. After repeated demands from
    respondent, petitioner replaced the bounced checks with new postdated Export
    and Industry Bank checks. However, when respondent deposited the checks
    were likewise dishonored for being "Drawn Against Insufficient Funds," and
    subsequently, for "Account Closed." Respondent sent a demand letter dated 21
    January 2008, which was received by petitioner on 22 January 2008,
    informing petitioner of the bounced checks and demanding that petitioner
    settle its accounts. Still petitioner failed to pay, prompting respondent to file on
    5 February 2008 a Complaint for Sum of Money.

    The trial court ruled in favor of the respondent and ordered the petitioner
    to pay to the former the Php1,263,104.22 plus interest fixed at 24% per annum
    to be computed from February 5, 2008, the date of judicial demand, until the
    judgment obligation is fully paid. Subsequently, the petitioner raised the issue
    that the 24% per annum interest is unconscionable, hence, void. The trial
    court and Court of appeals ruled for the validity of the interest rate stipulated
    by the parties.

    ISSUE
    Whether or not the interest rate fixed at 24% per annum is void

    RULING
    No. It is valid. In Asian Construction and Development Corporation v.
    Cathay Pacific Steel Corporation, the Court upheld the validity of interest rate
    fixed at 24% per annum that was expressly stipulated in the sales invoices. The
    Court held that petitioner construction company is presumed to have full
    knowledge of the terms and conditions of the contract and that by not objecting
    to the stipulations in the sales invoice, it also bound itself to pay not only the
    stated selling price but also the interest of 24% per annum on overdue
    accounts and the 25% of the unpaid invoice for attorney's fees.

    In the present case, petitioner, which has been doing business since
    1990 and has been purchasing various materials from respondent since 2004,
    cannot claim to have been misled into agreeing to the 24% interest rate which
    was expressly stated in the sales invoices. Besides, this Court has already
    ruled in several cases that an interest rate of 24% per annum agreed upon
    between the parties is valid and binding and not excessive and unconscionable.
    Thus, the stipulated 24% interest per annum is binding on petitioner.

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