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MCMP CONSTRUCTION CORP. v. MONARK EQUIPMENT CORP.

FACTS:

MCMP Construction Corporation (MCMP) leased heavy equipment from Monark Equipment Corporation (Monark) under a Rental Equipment Contract (Contract). MCMP failed to pay the rental fees despite demands. As of April 30, 2002, MCMP owed Monark a total of PhP1,282,481.83. Monark filed a suit for a Sum of Money against MCMP. During trial, Monark presented a photocopy of the Contract after the original copy was lost. MCMP objected to the presentation of secondary evidence, but did not present its copy of the Contract. The RTC rendered a Decision in favor of Monark, ordering MCMP to pay the amount due. MCMP appealed to the Court of Appeals (CA), but the CA affirmed the RTC's Decision. MCMP filed a petition for review with the Supreme Court, challenging the presentation of secondary evidence.

ISSUES:

  1. Whether the requirements for the presentation of secondary evidence to prove the contents of a lost document have been satisfied.

  2. Whether the pieces of equipment were actually delivered to MCMP by Monark.

  3. Whether the interest rate and penalty charge imposed on the defendant are iniquitous and unconscionable.

  4. Whether the attorney's fees are iniquitous and unconscionable.

RULING:

  1. The Court ruled that the requirements for the presentation of secondary evidence to prove the contents of a lost document have been satisfied. The offeror must prove: (1) the existence or due execution of the original; (2) the loss and destruction of the original or the reason for its non-production in court; and (3) the absence of bad faith on the part of the offeror to which the unavailability of the original can be attributed. In this case, the testimony citing the loss of the original contract and the diligent efforts to find it were uncontroverted. The court also noted that MCMP failed to present its own copy of the contract, giving rise to the disputable presumption of adverse evidence suppression.

  2. The Court found that the contention of MCMP that the pieces of equipment were not actually delivered to them by Monark was false based on the testimony of MCMP's own witnesses.

  3. The interest rate and penalty charge imposed on the defendant are iniquitous and unconscionable. The court has the power to reduce the interest rate and penalty charge under Article 1229 of the Civil Code. The interest rate is reduced from 24% per annum to 12% per annum, and the penalty and collection charge is reduced from 3% per month (36% per annum) to 6% per annum.

  4. The attorney's fees are iniquitous and unconscionable. The court is empowered to reduce the attorney's fees if they are iniquitous or unconscionable under Article 2227 of the Civil Code. The attorney's fees are reduced from 25% of the total amount due to 5%.

PRINCIPLES:

  • Before a party may present secondary evidence to prove the contents of a lost document, the offeror must prove the existence or due execution of the original, the loss or destruction of the original or the reason for its non-production in court, and the absence of bad faith on the part of the offeror.

  • When a party fails to produce a document in its custody or control after reasonable notice, secondary evidence may be presented.

  • Failure to present secondary evidence and explain the failure may give rise to a disputable presumption of adverse evidence suppression.

  • Exorbitant and unconscionable interest rates and penalty charges may be reduced by the court as reason and equity demand.

  • Courts have the power to reduce interest rates and penalties if they are iniquitous or unconscionable.

  • Stipulated attorney's fees are binding as long as they do not contravene law, morals, or public order.

  • Liquidated damages, whether intended as an indemnity or a penalty, can be equitably reduced if they are iniquitous or unconscionable.