Asian Construction & Dev.
Corp v PCIB, 488 SCRA 192 (2006) law between the parties and should be complied
Facts:
There were two cause of action filed by PCIBANK
For the first cause of action, Asia Consturction
(ASIAKONSTRUCKT) obtained a US dollar denominated credit
accommodations from PCIBANK in the amount of
$4,487,000.00, exclusive of interests, charges and fees thereon
and the cost of collecting the same.
ASIAKONSTRUCKT was unable to pay its outstanding
obligations.
For the second cause of action, PCIBANK alleged that due to
fraudulent acts of ASIAKONSTRUKTY, the bank suffered the
following damages, all of which ASIAKONSTRUKT must be held
to pay PCIBANK.
The trial court rendered a decision that a writ of preliminary
attachment issue against all the property of defendant not
exempt from execution or so much thereof as may be
sufficient to satisfy plaintiff's principal claim of
US$4,553,446.06, representing the alleged unpaid obligation
of defendant, inclusive of interest and penalty charges, as of
December 31, 1998, which is equivalent to P174,260,380.72,
upon plaintiff's filing of a bond in an equal amount to answer
for all it may sustain by reason of the attachment if the Court
shall finally adjudge that plaintiff was not entitled thereto.
ASIAKONSTRUKT filed its answers saying that "severe financial
and currency crisis" which hit the Philippines in July 1997,
which adversely affected and ultimately put it out of business.
In reply, PCIBANK therein contending that the defenses
interposed by the defendant are sham and contrived, that the
alleged financial crisis pleaded in the Answer is not a fortuitous
event that would excuse debtors from their loan obligations,
nor is it an exempting circumstance under Article 1262 of the
New Civil Code where, as here, the same is attended by bad
faith.
Issue:
Whether or not the sever financial and currency crisis is a
valid justification to renege on its obligations to PCIBANK
Ruling:
No.
The CA was correct in ruling that the 1997 economic crisis does
not constitute a valid justification for ASIAKONSTRUKT to
renege on its obligations to PCIBANK.
The [petitioner] cannot even find solace in Articles 1266 and
1267 of the New Civil Code for, as declared by our Supreme
Court:
It is a fundamental rule that contracts, once
perfected, bind both contracting parties, and
obligations arising therefrom have the force of
with in good faith. But the law recognizes
exceptions to the principle of the obligatory force
of contracts. One exception is laid down in Article
1266 of the Civil Code, which reads: 'The debtor
in obligations to do shall also be released when
the prestation becomes legally or physically
impossible without the fault of the obligor.'
Petitioner cannot, however, successfully take refuge in the
said article, since it is applicable only to obligations "to do,"
and not obligations "to give." An obligation "to do" includes all
kinds of work or service; while an obligation "to give" is a
prestation which consists in the delivery of a movable or an
immovable thing in order to create a real right, or for the use
of the recipient, or for its simple possession, or in order to
return it to its owner.
Fil-Estate Properties, Inc. vs. Go
s Gonzalo and Consuelo Go, a condominium project . The
spouses paid a total of P3,439,000.07 of the full contract price
set at P3,620,000.00.
Because petitioner failed to develop the condominium project
in 1999, the spouses demanded the refund of the amount they
paid, plus interest. When petitioner did not refund the
spouses, the latter filed a complaint against petitioner for
reimbursement of P3,620,000 representing the lump sum
price of the condominium unit, plus interest, P100,000
attorneys fees, and expenses of litigation before the Housing
and Land Use Regulatory Board (HLURB).
Petitioner claimed that respondents had no cause of action
since the delay in the construction of the condominium was
caused by the financial crisis that hit the Asian region, a
fortuitous event over which petitioner had no control.
HLURB Regional Director approved the decision of the Housing
and Land Use Arbiter in favor of the spouses
The HLURB said that when petitioner discontinued the
development of its condominium project, it failed to fulfill its
contractual obligations to the spouses, which the spouses Go
may demand performance.
Under Article 1191 provides that in case fail to comply with the
obligation, the aggrieved party may choose between
fulfillment or rescission of the obligation, with damages. As Fil-
Estate could no longer fulfill its obligation, the spouses Go may
ask for rescission of the contract with damages.
The board ordered the Fil=Estate to refund the complainants
down payment plus 12% interest reckoned from the date the
respondent received the demand letter until fully paid and SHALL BE SUSPENDED during the said period.
Attorneys fees of 25k. Respondent Corporation had its first milling and performed
Motion for reconsideration was denied. millings every successive year, EXCEPT for the 6-YEAR PERIOD,
where 4 years were due to World War and 2 years of
On appeal, the CA affirmed HLURB and declared the Asian reconstruction of the respondents central. Petitioners then
financial crisis not a fortuitous event and during 1995 and considered that the 30-year period which was stipulated in the
1996, there was yet no crisis when the project should have contract expired and terminated already in 1948-1949.
been started and cannot blame 1997 crisis for the failure of the Petitioner presented new milling contracts with the
project. The project should have been completed by 1997. respondent corporation but were refused by the latter
contending that, the contract with the petitioners was 30
It was then elevated to the Supreme court. YEARS OF MILLING AND NOT 30 YEARS IN TIME, and there was
no milling for 6 years due to war (4 years) and reconstruction
ISSUE: of the respondents central (2 years), and with that,
1. WON financial crisis suffered by petitioner is termination of the contract would be in 1957.
considered a fortuitous event
2. WON respondents are entitled for damages ISSUE: WON, petitioner be compelled to deliver sugar cane for
6 more years after the expiration of the stipulated 30-year
period which was not delivered to the respondent corporation
HELD: by reason of force majeure (war)?

1. No. in a previous case, Asian Construction and Development HELD:

Corporation v. Philippine Commercial International Bank, the
Court had said that the 1997 financial crisis did not constitute
a valid justification to renege on obligations that the Asian
financial crisis in 1997 is not among the fortuitous events
contemplated under Article 1174 of the Civil Code.
A real estate enterprise engaged in the pre-selling of
condominium units is concededly a master in projections on
commodities and currency movements and business risks. The
fluctuating movement of the Philippine peso in the foreign
exchange market is an everyday occurrence, and fluctuations
in currency exchange rates happen everyday, thus, not an
instance of caso fortuito.
2.Yes. Clearly, it is evident that spouses had demanded for
reimbursement with interest. Failure in the fulfillment of the
obligation entitled the aggrieved for damages. However the
court only ordered the refund of the actual payment which
P3,439,000 and not the total cost of the condominium and
Attorneys fees from 25,000 to 100,000
VICTORIAS PLANTERS ASSOCIATION v VICTORIAS MILLING
CORPORATION
FACTS:
Petitioners are non-stock corporations along with respondents
also a corporation duly established and existing under the PH
laws.
Petitioners entered into a milling contract with the respondent
corporation, whereby, they have stipulated the following:
1) A 30-year period which was executed in the year 1918
and as such, the sugar cane produced by the petitioner will be
milled by the latter.
2) In the event of force majeure such as flood,
Earthquake, war, civil commotion and others, the contract
TRIAL COURT. The Court ruled in favor of the petitioner and
declared that the milling contract executed between the
parties was EXPIRED and TERMINATED upon the lapse of 30-
year period. Respondent cannot claim any extension or
addition to such period by virtue of 6 years composed of war
and reconstruction.
Upon appeal, respondent corporation contended that:
1) The contract is 30 YEARS OF MILLING AND NOT 30
CALENDAR YEARS.
2) Petitioner should fulfill their obligation which they
failed to perform during 6 milling years by reason of war, a
force majeure.
SUPREME COURT. Under 1174 of the Civil Code, fortuitous
event relieves the obligor from fulfilling the contracted
obligation. It was clearly stipulated in the contract that in the
event force majeure, the contract shall be deemed as
SUSPENDED during the said period. It only relieves the parties
from the fulfillment of their respective obligations and does
not mean that force majeure would stop the running of the 30-
yeqar period agreed upon.
In order for the petitioner to be compelled for the fulfillment
of their obligation, the latter must have been able to perform
the obligation but failed to do or refused to do it and not when
they were prevented by force majeure like war. It was
impossible for the petitioner to deliver the sugar cane during
the 6-year period. In accordance to NEMO TENETUR ED
IMPOSSIBILIA, obligee not being entitled to demand from the
obligors the performance of the latters part of the contracts
under those circumstances cannot later on demand its
fulfillment.
As such, the 30-year period stipulated in the contract expired
in the 30th agricultural year and the 6-year period cannot be
deducted from the stipulated period of 30 years.
ACE-AGRO DEV CORP v CA
FACTS:
Private respondent Cosmos Bottling Corp. is engaged in the
manufacture of soft drinks. Since 1979 petitioner Ace-Agro
Development Corp. had been cleaning soft drink bottles and
repairing woo
den shells for Cosmos, rendering its services within the
company premises in San Fernando, Pampanga. The parties
entered into service contracts which they renewed every year.
Private respondent had earlier contracted the services of Aren
Enterprises in view of the fact that petitioner could handle only
from 2,000 to 2,500 cases a day and could not cope with
private respondent's daily production of 8,000 cases.
Meanwhile, Fire broke out in private respondent's plant,
destroying, among other places, the area where petitioner did
its work. As a result, petitioner's work was stopped.
Petitioner asked private respondent to allow it to resume its
service, but petitioner was advised that on account of the fire,
which had practically burned all old soft drink bottles and
wooden shells, private respondent was terminating their
contract.
Petitioner expressed surprise at the termination of the
contract and requested private respondent to reconsider its
decision and allow petitioner to resume its work. As it received
no reply from private respondent, petitioner informed its
employees of the termination of their employment and
brought the case against private respondent for breach of
contract and damages in the Regional Trial Court (RTC) of
Malabon.
In its decision, the RTC found private respondent guilty of
breach of contract and ordered it to pay damages to
petitioner. Private respondent appealed to the Court of
Appeals, which reversed the trial court's decision and
dismissed petitioner's complaint. Hence, this petition.
ISSUE:
Whether or not the happening of a fortuitous event or force
majeure stops the running of the period stipulated in a
contract.
HELD:
No. The stipulation that in the event of a fortuitous event or
force majeure the contract shall be deemed suspended during
said period does not mean that the happening of any of those
events stops the running of the period the contract has been
agreed upon to run. It only relieves the parties from the
fulfillment of their respective obligations during that time.
Both parties admitted that the April 25, 1990 fire was a force
majeure or unforeseen event and that the same even burned
practically all the soft drink bottles and wooden shells which
are the objects of the agreement.
However, the court says that there was no cause for
terminating the contract but at most a temporary suspension
of work. Thus, as a result of the fire, the obligation has not
been extinguished. Petition denied and the decision appealed
from is affirmed.
CAUTON v COURT OF APPEALS
On January 5, 1993, respondent Rebecca Salud with her
husband instituted a suit for foreclosure of real estate
mortgage with damages against petitioner Mansueto Cuaton
and Conchita Cuaton, with the RTC. The court declared the
mortgage void because it was executed by Mansuelo acting
only as representative of Conchita cuaton (his mother) whose
name of mortgaged lot was titled in favor of Rebecca Salud.
The court ordered petitioner to pay Rebecca Salud, the loan
secured by the mortgage in the amount of One Million Pesos
plus a total P610,000.00 representing interests of 10% and 8%
per month. Court also issued permanent TRO against the
foreclosure.
The petitioner, appealed to CA, contending that the award for
interest (Php 610,000) is iniquitous and exorbitant, but
denied.
ISSUE:
Whether or not the 8% and 10% monthly interest on the one
million peso loan obligation valid.
HELD:
No. Stipulations that authorize iniquitous and unconscionable
interest rates are against morals, if not the law.
The Eastern Shipping Lines vs. CA laid down the following guide
for imposing interest
1. When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself
earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per
annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of
Article 1169 23 of the Civil Code.
When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest,
whether the case falls under paragraph 1 or paragraph 2,
above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.
In the present case, the 10% and 8% interest rates per month
on the one-million-peso loan of petitioner are even higher
than those previously invalidated by the Court in past
jurisprudence.
Therefore, the petition was granted. The decision of the CA
was affirmed with modified. The interest rates of 10% and 8%
per month imposed by the trial court is reduced to 12% per
annum. Which is to be computed from the date of the
execution of the loan until the finality of this decision.
LIAM LAW v OLYMPIC SAWMILL
FACTS:
On September 1957, plaintiff Liam Law loaned Php 10,000,
without interest, to defendant partnership and defendant
Elino Lee Chi.
The loan became ultimately due on January 31, 1960 but was
not paid by the debtor. They were asking for an extension of 3
months or up to April 30, 1960.
On March 17, 1960, the parties executed another loan
document. Payment of the Php 10,000 was extended to April
30, 1960 but the obligation was increased by Php 6,000 which
shall form part of the principal obligation to answer for
attorneys fees, legal interest, and other cost incident thereto.
Defendants failed to pay their obligation on April, 30, 1960.
Plaintiff instituted this collection case on September 23, 1960.
Defendants admitted the Php 10,000 Principal Obligation but
claimed that the additional Php 6,000 constituted usurious
interest.
On June 26, 1961, Trial Court rendered decision ordering
defendants to pay plaintiff the amount of Php 10,000 plus
further sum of Php 6,000 by way of liquidated damages with
legal interest on both amounts from April 30, 1960.
ISSUE: WON the additional Php 6,000 constituted usurious
interest.
HELD:
NO. For sometimes now, usury has been legally non-existent.
Interest can now be charged as lender and borrower may
agree upon. In regards to the agreement of the parties relative
to the Php 6,000 obligation, it is presumed that it exists and is
lawful, unless the debtor proves the contrary.
It has to be concluded that defendants had not proven that the
Php 6,000 obligation was illegal. The Supreme Court confirmed
the Trial Courts finding, that the Php 6,000 obligation as
liquidated damages suffered by the plaintiff, as of March 17,
1960, representing loss of interest income, attorneys fees and
incidentals.
(NOTE: The requirement in the Usury Law and the Rules of
court that an allegation of usury, if it is denied, must be denied
under oath, applies only if it is the plaintiff making the
allegation, not the defendant. The provision does not apply to
this case, where it is the defendant, not the plaintiff, who is
alleging usury. The rules of Court in regards to allegations of
usury, procedural in nature, should be considered repealed
with retroactive effect.)
MANILA TRADING & SUPPLY CO v MEDINA
FACTS:
Mariano Medina had an account prior to May 7, 1956 with
Manila Trading and Supply Co. with an amount of P60,000 for
which Medina executed a promissory note. The note provided
that upon failure to pay any of the installments, "the whole
sum remaining then unpaid will immediately become due and
payable, at the option of the holder of this note," fees and
expenses of collection, in addition to the costs of the suit.
Manila Trading & Co. filed a complaint against Medina for
failure to pay installments from September 1956 to January 7,
1957. Medina filed an answer admitting allegations including
the 12% interest on the principal, but contended that it was
unconscionable.
Trial was set, and because of non- appearance of defendant
and his counsel, the court commissioned the Clerk to receive
plaintiff's evidence, which showed that defendant had made
twenty-one payments totalling P24, 311.34 of which P4,413.76
corresponded to interest and the balance (P19,982.15) to the
principal
The court gave Medina opportunity to present his evidence.
Thereupon, he testified and asserted that in addition to the
twenty-one payments acknowledged by plaintiff company, he
had made ten other payments that, added to the former,
showed that he (Medina) had paid more than P4,000.00 a
month since the execution of the note up to the filing of the
complaint, and was, therefore, not in default.
To bolster his claims, Medina exhibited ten additional receipts
signed by the plaintiff's cashier, but without numbers or year
dates, because they were allegedly eaten by anay. Appellant
avers that the genuine receipts dated January, 1957 raise the
presumption that prior installments were paid. In rebuttal, the
assistant accountant of the Manila Trading denied that the ten
additional receipts exhibited by the defendant corresponded
to the period covered by the promissory note.
ISSUE:
Are the presented receipts genuine to raise the presumption
that prior installments were paid?
HELD:
No. Appellant avers that the genuine receipts dated January,
1957 raise the presumption that prior installments were paid.
This might be true if such receipts recited that they were issued
for the installments corresponding to the month of January,
1957; but nowhere does that fact appear. And even if such
recital had been made, the resulting presumption would only
be prima facie, and the evidence before us is clear that the
payments made do not correspond to the installments falling
due on the dates of the genuine receipts.
As pointed out by the trial court, it is highly suspicious that
these receipts should be mutilated precisely at the places
where the serial numbers and the year of issue must appear,
while the receipts for intervening payments recognized by the
plaintiff remained intact. In addition, the numbers that Medina
attributed to them are not in sequence. It is difficult to believe
that a trading company should issue receipts numbered at
random, since it would make auditing control impossible.
LEDESMA v REALUBIN
FACTS:
From June to September 1956 the petitioner purchased on
credit gas and motor oil, through her drivers, for amounts
summed up by the month, from the Baguio Caltex service
station owned by the respondent, Alberto Realubin.
Respondent follows the business practice of having each
invoice done in triplicate the original, in white paper; the
two others, in blue and pink paper, respectively.
For purchases in cash, the original or white invoice is issued.
For purchases on credit the pink copy is issued, with the station
proprietor retaining the original and blue copies; when
payment is made on credit purchases, the white or original
copy is then released to the customer.
At the time of the trial, the plaintiff (respondent herein) was in
possession of the original or white copies of the invoices for
purchases made in the months June to September, all of which
were signed by the petitioner's truck drivers.
Due to repeated verbal demands for her to pay, the petitioner
sent a handwritten letter apologizing and stating that
everything will be paid to Realubin.
Ledesma was first adjudged in default, but on petition for
relief, the default was set side. In her subsequent answer to
the complaint, she denied the purchases, and averred, as a
special defense, that her truck drivers did not have the
authority to purchase gasoline in her behalf.
The driver's authority to sign, however, was admitted during
the trial, but Ledesma testified that the amounts, which
Realubin was collecting from her, had been fully paid. She tried
to prove by her sole testimony and by presenting as exhibits
the pink copies of the invoices she had in her possession.
Ledesma also contended that the handwritten letter,
previously transcribed, is a forgery.
The trial court found for the plaintiff, and the Court of Appeals
sustained the decision.
ISSUE:
WON CA failed to apply the presumption of payment.
HELD:
No. Invoking Article 1171 of the Civil Code, petitioner claims
that inasmuch as she admittedly paid her October, 1956,
purchases, it is to be presumed that her prior purchases were
likewise paid, because her account with the respondent was a
running account. Realubin proved as a fact that the prior
purchases were not paid, and that the October purchases were
for cash. Therefore, the presumption of payment of prior
obligations (assuming its applicability for argument's sake)
cannot prevail. Between a proven fact and a presumption pro
tanto, the former stands, and the latter falls.
ADORABLE v COURT OF APPEALS
FACTS:
Private respondent Saturnino Bareng owned 2 parcels of land
identified as Lot No. 661-D-5-A (20,000 sqm) and Lot No. 661-
E(4.0628ha) in Isabela. Petitioners were lessees of a 200sqm
portion of Lot No. 661-D-5-A.
Respondent, with his son, obtained a loan worth P26,000 from
petitioners, wherein they promised to transfer the possession
and enjoyment of fruits of Lot 661-E.
Saturnino sold to his son 18,500sqm of Lot No 661-D-5-A. In
turn, his son Francisco sold 3,000sqm of the lot to respondent
Ramos. the deeds of sale evidencing such conveyances were
not registered in the register of deeds.
The Barengs were not able to pay their loan, thus petitioners
complained to the Integrated National Police of Echague. They
managed to come up with a Compromise agreement wherein
the Barengs acknowledged their indebtedness and promise to
pay such amount on or before July 15, 1987. However, when
the said date arrived, Bareng still failed to pay his debt. A
demand letter was then sent to Bareng but he still he refused
to pay.
Petitioners knew about the sale made by Francisco and Ramos.
Then, they filed a complaint with the RTC for the annulment or
rescission of the sale on the ground that the sale was
fraudulently prepared and executed.

The RTC dismissed the case for lack of cause of action,

declaring the contract of sale between Francisco Bareng and
Ramos valid and ordering Bareng to pay the amount he owed
to the petitioners.

The CA affirmed the decision of the RTC.

ISSUE:
WoN the petition at hand should be dismissed for lack of cause
of action.

HELD:
Yes. A real party in interest is one who would be benefited or
injured by the judgment, or who is entitled to the avails of the
suit. Petitioners contend that their interests over the property
were prejudiced by the sale that ensued between Bareng and
Ramos.

This holds no merit.

Petitioners do not have such material interest as to allow them

to sue for rescission of the contract of sale. at the outset,
petitioners only have a personal right to receive payment for
the loan, not a legal right over the subject of the deed of sale.

Petitioners claim that the sale was made in fraud of creditors.

The following successive measures must be taken by a creditor
before he can bring an action to rescind an alledgedly fradulent
sale:
(1) exhaust the properties of the debtor through levying by
attachment and execution upon all the property of the debtor,
except such as are exempt by law from execution; (2) exercise
all the rights and actions of the debtor, save those personal to
him (accion subrogatoria); and (3) seek rescission of the
contracts executed by the debtor in fraud of their rights
(accion pauliana).

Petitioner must first avail of the first 2 remedies before

undertaking the third measure. An action for rescission cannot
be instituted EXCEPT when a party suffering damage has no
other legal means to obtain reparation for the same.

Petitioners failed to show that they have no other means of

enforcing their credit.