FACTS:

Petitioner Lara's Gifts & Decors, Inc. is engaged in the business of manufacturing, selling, and exporting handicraft products, while respondent Midtown Industrial Sales, Inc. is engaged in the business of selling industrial and construction materials, with petitioner being one of respondent's customers. Respondent alleged that from January 2007 to December 2007, petitioner purchased various industrial and construction materials from respondent in the total amount of P1,263,104.22, with a sixty-day credit term and a 24% interest per annum on overdue accounts as stated in the sales invoices. However, when respondent deposited the postdated checks issued by petitioner, the checks bounced. Petitioner replaced the bounced checks with new postdated checks but these were also dishonored. After repeated demands, respondent filed a complaint for sum of money against petitioner. In its answer, petitioner admitted the purchases but claimed that the deliveries were substandard and resulted in the products not meeting the standards required by its US buyers, who subsequently canceled their orders. Petitioner also alleged that a fire destroyed its factory and equipment. The trial court ruled in favor of respondent, finding that petitioner failed to prove the substandard quality of the deliveries and ordered petitioner to pay the amount claimed by respondent plus interest and attorney's fees. The Court of Appeals affirmed the trial court's decision, ruling that petitioner failed to prove its claims and that the 24% interest rate per annum was not unconscionable.

ISSUES:

1. Whether the sales invoices on the alleged purchases have probative value.

2. Whether petitioner's admission of purchasing materials from respondent is equivalent to admitting the due execution of the sales invoices.

3. Whether petitioner substantiated its claim that the materials delivered by respondent were substandard or of poor quality.

4. Whether the issuance of postdated checks for payment is proof of valuable consideration.

5. Whether the interest rate of 24% per annum stipulated in the sales invoices is valid and binding on the petitioner.

6. Whether the legal interest of 6% per annum should be imposed in addition to the stipulated interest rate.

7. Whether Circular No. 799 applies only in the absence of stipulated interest.

8. Whether the stipulated interest should be applied until full payment of the obligation.

9. Whether there should be compounding of interest unless expressly agreed upon.

10. Whether the legal interest rate prescribed in Article 2209 of the Civil Code still applies to obligations other than loans or forbearance of money, goods or credits.

11. Can the stipulation governing the return of the money in a conditional deed of sale be considered as a forbearance of money?

12. If so, is the payment of interest at the rate of 12% required for the forbearance of money?

13. Whether interest should be imposed in the concept of actual and compensatory damages in cases of loans or forbearance of money, goods, credits or judgments.

14. What is the rate and accrual of interest when the obligation consists in the payment of a sum of money in cases of loans or forbearance of money, goods, credits or judgments.

15. What is the rate and accrual of interest when the obligation does not constitute a loan or forbearance of money, goods, credits or judgments.

16. Whether or not the Court of Appeals correctly applied the procedural rules in dismissing the petition for certiorari.

17. Whether or not the Court of Appeals correctly found that there was no grave abuse of discretion committed by the lower court in denying the motion for reconsideration.

RULING:

1. The sales invoices have probative value. The petitioner's admission of the existence of the sales invoices but not their due execution does not invalidate the sales invoices as evidence. Petitioner failed to specifically deny or contest under oath the genuineness or due execution of any of the sales invoices or any of the signatures of petitioner's representatives or employees appearing therein.

2. Petitioner's admission of purchasing materials from respondent is equivalent to admitting the due execution of the sales invoices. Petitioner's general denial of the due execution of the sales invoices amounts to an admission of their genuineness and due execution.

3. Petitioner failed to substantiate its claim that the materials delivered by respondent were substandard or of poor quality. Petitioner's bare allegation without proof or substantiation is insufficient.

4. The issuance of postdated checks for payment is proof of valuable consideration. Petitioner's claim that the checks were issued without valuable consideration is unsupported by evidence.

5. The stipulated interest rate of 24% per annum is valid and binding on the petitioner. The court held that the petitioner, being a business entity that has been purchasing materials from the respondent since 2004, cannot claim to have been misled into agreeing to the interest rate. Furthermore, the court cited Asian Construction and Development Corporation v. Cathay Pacific Steel Corporation, where it was ruled that an interest rate of 24% per annum agreed upon between the parties is valid and binding.

6. The legal interest of 6% per annum should not be imposed in addition to the stipulated interest rate. The court explained that the guidelines on the imposition of interests, as stated in Eastern Shipping Lines, Inc. v. Court of Appeals, have been modified by BSP-MB Circular No. 799. According to the modified guidelines, when an obligation consists of the payment of a sum of money, and there is a stipulation for interest, the stipulated interest shall apply. The legal interest of 6% per annum only applies in the absence of stipulated interest. Therefore, since the parties had agreed upon the interest rate of 24% per annum, the legal interest should not be imposed.

7. Yes, Circular No. 799 applies only in the absence of stipulated interest.

8. Yes, the stipulated interest should be applied until full payment of the obligation.

9. No, there should be no compounding of interest unless expressly agreed upon.

10. No, the legal interest rate prescribed in Article 2209 of the Civil Code does not apply to obligations other than loans or forbearance of money, goods or credits. The legal interest rate for these other obligations is governed by Articles 2210 and 2211 of the Civil Code, wherein the court has discretion to impose interest on damages awarded for breach of contract or in crimes and quasi-delicts. The interest imposed by the court will be the prevailing legal interest prescribed by the Bangko Sentral ng Pilipinas.

11. Yes, the stipulation governing the return of the money in a conditional deed of sale can be considered as a forbearance of money.

12. Yes, the payment of interest at the rate of 12% is required for the forbearance of money. The compensation for the use of money in a forbearance arrangement, absent any stipulation, should be the same rate of legal interest applicable to a loan since the use or deprivation of funds is similar to a loan.

13. Yes, interest should be imposed in the concept of actual and compensatory damages in cases of loans or forbearance of money, goods, credits or judgments.

14. The rate and accrual of interest when the obligation consists in the payment of a sum of money in cases of loans or forbearance of money, goods, credits or judgments shall be:

15. • The interest due shall be that which is stipulated by the parties in writing, provided it is not excessive and unconscionable.
16. • In the absence of stipulated interest, the rate of interest on the principal amount shall be the prevailing legal interest prescribed by the Bangko Sentral ng Pilipinas.
17. • Interest due on the principal amount accruing as of judicial demand shall separately earn legal interest at the prevailing rate prescribed by the Bangko Sentral ng Pilipinas, from the time of judicial demand until full payment.

18. The rate and accrual of interest when the obligation does not constitute a loan or forbearance of money, goods, credits or judgments shall be:

19. • An interest on the amount of damages awarded may be imposed in the discretion of the court at the prevailing legal interest prescribed by the Bangko Sentral ng Pilipinas.
20. • No interest shall be adjudged on unliquidated claims or damages until the demand can be established with reasonable certainty.
21. • The prevailing legal interest shall begin to run from the time the claim is made extrajudicially or judicially until full payment or from the date of the judgment of the trial court if the amount of the claim or damages cannot be reasonably ascertained at the time the demand is made.

22. The Court of Appeals correctly applied the procedural rules in dismissing the petition for certiorari. The petition was filed out of time and failed to comply with the requirements of Rule 65 of the Rules of Court.

23. The Court of Appeals correctly found that there was no grave abuse of discretion committed by the lower court in denying the motion for reconsideration. The lower court's decision was based on the proper application of the law and the facts presented.

PRINCIPLES:

• Admissibility of Sales Invoices. The genuineness and due execution of sales invoices are deemed admitted unless specifically denied under oath. (Sections 7, 8, and 10 of Rule 8)

• Substantiation of Fraud or Mistake Allegation. Whoever alleges fraud or mistake affecting a transaction must substantiate the allegation and bear the burden of proof.

• Sales Invoices as Best Evidence. The sales invoices and checks issued for payment are the best evidence of the transaction between the parties. Failure to present sufficient evidence to dispute the authenticity or quality of the materials delivered may result in a finding in favor of the party relying on the sales invoices.

• Applicability of Articles 1192 and 1283 of the Civil Code. Articles 1192 and 1283 govern situations where both parties have committed a breach of obligation, and they provide for the equitableness of the liabilities of the infractors.

• When an obligation consists of the payment of a sum of money, and there is a stipulation for interest, the stipulated interest shall apply. The legal interest of 6% per annum only applies in the absence of stipulated interest. (Eastern Shipping Lines, Inc. v. Court of Appeals)

• An interest rate of 24% per annum agreed upon between the parties is valid and binding. (Asian Construction and Development Corporation v. Cathay Pacific Steel Corporation)

• The stipulated interest is the law between the parties and should be applied until full payment of the obligation. (Article 1159, Civil Code)

• Unless the stipulated interest is excessive and unconscionable, there is no legal basis for the reduction of the stipulated interest at any time until full payment of the principal amount. (Article 2209, Civil Code)

• In the absence of stipulated interest, the prevailing legal interest prescribed by the Bangko Sentral ng Pilipinas shall apply. (Circular No. 799)

• There should be no compounding of interest, unless expressly agreed upon in writing by the parties or mandated by law or regulation. (Section 5 of the Usury Law, as amended)

• Article 2209 of the Civil Code applies only to loans or forbearance of money, goods or credit that arise out of obligations consisting in the payment of a sum of money, and when the debtor incurs in delay. On the other hand, Articles 2210 and 2211 refer to obligations that do not involve the payment of a sum of money.

• The payment of interest in Article 2209 is mandatory, while the payment of interest in Articles 2210 and 2211 is discretionary on the court.

• The legal interest rate prescribed in Article 2209 has been amended by Presidential Decree No. 116, which allows the Bangko Sentral ng Pilipinas to calibrate the legal interest rate to meet changing economic conditions and accelerate the growth of the national economy.

• "Forbearance of money, goods or credits" has a separate meaning from a loan, and it refers to arrangements other than loan agreements where a person acquiesces to the temporary use of their money, goods, or credits pending the happening of certain events or fulfillment of certain conditions.

• Forbearance refers to a contractual obligation of the lender or creditor to refrain from requiring the borrower or debtor to repay a loan or debt then due and payable during a given period of time.

• Forbearance of money, goods, or credits refers to arrangements where a person acquiesces to the temporary use of his money, goods, or credits pending the fulfillment of certain conditions or events.

• The term "judgments" in Act No. 2655 or the Usury Law refers to judgments in litigations involving loans or forbearance of any money, goods, or credits.

• The prevailing legal interest prescribed by the Bangko Sentral ng Pilipinas applies, in the absence of stipulated interest, to loans, forbearance of any money, goods or credits, and judgments in litigations involving loans or forbearance of money, goods or credits.

• In the absence of stipulated interest, the prevailing legal interest should be applied, provided it is not excessive and unconscionable.

The prevailing legal interest prescribed by the Bangko Sentral ng Pilipinas applies to loans or forbearance of money, goods or credits, as well as to judgments.

• Procedural rules must be followed in order to ensure the orderly administration of justice.

• Certiorari is a special civil action that can only be availed of if there is no available or plain, speedy, and adequate remedy in the ordinary course of law.

• The denial of a motion for reconsideration can only be reversed if there is a showing of grave abuse of discretion.

• Grave abuse of discretion refers to a capricious and whimsical exercise of judgment that is equivalent to lack of jurisdiction.