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 1918 and as such, the sugar cane produced by the petitioner
respondent received the demand letter until fully paid and will be milled by the latter.
Attorneys fees of 25k. 2) In the event of force majeure such as flood,
Motion for reconsideration was denied. Earthquake, war, civil commotion and others, the contract
SHALL BE SUSPENDED during the said period.
On appeal, the CA affirmed HLURB and declared the Asian Respondent Corporation had its first milling and performed
financial crisis not a fortuitous event and during 1995 and millings every successive year, EXCEPT for the 6-YEAR
1996, there was yet no crisis when the project should have PERIOD, where 4 years were due to World War and 2 years of
been started and cannot blame 1997 crisis for the failure of reconstruction of the respondent’s central. Petitioners then
the project. The project should have been completed by considered that the 30-year period which was stipulated in
1997. the contract expired and terminated already in 1948-1949.
Petitioner presented new milling contracts with the
It was then elevated to the Supreme court. respondent corporation but were refused by the latter
contending that, the contract with the petitioners was 30
ISSUE: YEARS OF MILLING AND NOT 30 YEARS IN TIME, and there
1. WON financial crisis suffered by petitioner is was no milling for 6 years due to war (4 years) and
considered a fortuitous event reconstruction of the respondents’ central (2 years), and with
2. WON respondents are entitled for damages that, termination of the contract would be in 1957.

ISSUE: WON, petitioner be compelled to deliver sugar cane

HELD: for 6 more years after the expiration of the stipulated 30-year
period which was not delivered to the respondent
1. No. in a previous case, Asian Construction and corporation by reason of force majeure (war)?
Development Corporation v. Philippine Commercial
International Bank, the Court had said that the 1997 financial HELD:
crisis did not constitute a valid justification to renege on TRIAL COURT. The Court ruled in favor of the petitioner and
obligations that the Asian financial crisis in 1997 is not among declared that the milling contract executed between the
the fortuitous events contemplated under Article 1174 of the parties was EXPIRED and TERMINATED upon the lapse of 30-
Civil Code. year period. Respondent cannot claim any extension or
addition to such period by virtue of 6 years composed of war
A real estate enterprise engaged in the pre-selling of and reconstruction.
condominium units is concededly a master in projections on Upon appeal, respondent corporation contended that:
commodities and currency movements and business risks. 1) The contract is 30 YEARS OF MILLING AND NOT 30
The fluctuating movement of the Philippine peso in the CALENDAR YEARS.
foreign exchange market is an everyday occurrence, and 2) Petitioner should fulfill their obligation which they
fluctuations in currency exchange rates happen everyday, failed to perform during 6 milling years by reason of war, a
thus, not an instance of caso fortuito. force majeure.
SUPREME COURT. Under 1174 of the Civil Code, fortuitous
2.Yes. Clearly, it is evident that spouses had demanded for event relieves the obligor from fulfilling the contracted
reimbursement with interest. Failure in the fulfillment of the obligation. It was clearly stipulated in the contract that in the
obligation entitled the aggrieved for damages. However the event force majeure, the contract shall be deemed as
court only ordered the refund of the actual payment which SUSPENDED during the said period. It only relieves the parties
P3,439,000 and not the total cost of the condominium and from the fulfillment of their respective obligations and does
Attorneys fees from 25,000 to 100,000 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
VICTORIAS PLANTERS ASSOCIATION v VICTORIAS MILLING of their obligation, the latter must have been able to perform
CORPORATION 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
FACTS: the 6-year period. In accordance to NEMO TENETUR ED
Petitioners are non-stock corporations along with IMPOSSIBILIA, obligee not being entitled to demand from the
respondents also a corporation duly established and existing obligors the performance of the latter’s part of the contracts
under the PH laws. under those circumstances cannot later on demand its
Petitioners entered into a milling contract with the fulfillment.
respondent corporation, whereby, they have stipulated the As such, the 30-year period stipulated in the contract expired
following: in the 30th agricultural year and the 6-year period cannot be
1) A 30-year period which was executed in the year 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
attorney’s 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 Court’s finding, that the Php 6,000
obligation as liquidated damages suffered by the plaintiff, as
of March 17, 1960, representing loss of interest income,
attorney’s 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 Petitioners failed to show that they have no other means of
complained to the Integrated National Police of Echague. enforcing their credit.
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.