Arwood vs. Consunji

MAGO, Floyd B. 11382643 Arwood Industries Inc. v DM Consunji, Inc. GR 142277, Dec 11, 2002 Facts: Petitioner Arwood Industries Inc. (Arwood) and respondent DM Consunji (Consunji) entered into a contract of Civil, Structural and Architectural Works Agreement (Agreement) for the construction of Arwood’s condominium project. The contract price aggregated for 20,800,000 php. Despite the completion of the condominium project, the amount of P962,434.78 remained unpaid by Arwood. Repeated demands by Consunji for Arwood to pay went unheeded. Thus, Consunji filed its complaint for the balance of the contract price and for damages against Arwood with interest of 2% per month or a fraction thereof, from November 1990 up to the time of payment. The lower court sided with Consunji. The Court of Appeals upheld the lower court’s decision but deleted the attorney’s fees saying that the same had no basis since it was not mentioned in the body of the decision. Issue: W/N the imposition of the 2% interest of the amount adjudged in favor of Consunji is proper Held: Yes. The Court in its decision cited as primary basis the agreement/contract of the parties. It must be noted that the agreement provided Consunji two options in case of delay in monthly payments, to wit: a) suspend work on the project until payment is remitted by the owner or b) continue the work but the owner shall be required to pay interest at a rate of two percent (2%) per month or a fraction thereof. Evidently, Consunji chose the latter option, as the condominium project was in fact already completed. Moreover, as to Arwood’s contention that the amount claimed does not refer to “monthly progress billings”. The Court pointed out that it (Arwood) did not provide an answer on what the amount represented. This left the Court with no choice but to agree with Consunji that the phrase "monthly progress billings" refers to a portion of the contract price payable by Arwood to Consunji based on the percentage of completion of the project or on work accomplished at a particular stage. It refers to that portion of the contract price still to be paid as work progresses, after the downpayment is made. As a final point, the Court also explained that even if there was a default of stipulation or agreement on interest, respondent may still recover on the basis of the general provision of law, which is Article 2209 of the Civil Code. The provision provides that the payment of penalty interest is in the rate agreed upon or if there was no agreement on the regular interest, then payment would consist of legal interest or six percent (6%) per annum.