CASE DIGEST

BUSINESS LAW (OBLIGATION & CONTRACT)

Submitted by: Submitted to:

Castrillo , Leonard P. Ma’am Rhea Rejano.
 Development Bank of the Philippines V.S. Pundogar
GR No. 96921 . January 29 , 1993
Romero, J . :
Facts

Republic Act No. 1396 was enacted authorizing National Shipyards and Steel Corporation
(NASSCO) to establish a pig-iron smelting plant.When NASSCO started negotiations with the
United States Export-Import.

Bank (EXIMBANK) for a $62.3 million loan, the latter suggested that the management of the
project be placed in the hands of the private sector. After a public bidding, the Jacinto Steel, Inc.
(JSI) was entrusted with the implementation of the project.

IISMI and the Government entered into a collateral agreement whereby the Government
committed to extend equity and non-equity funds to IISMI during the construction period,
including an amount of no less than P34 million.

DBP issued additional loans to IISMI.

IISMI instituted an injunction suit against the Republic of the Philippines, Development Bank of
the Philippines (DBP), Central Bank of the Philippines (CB), Board of Investments (BOI) and the
Sheriff of Lanao del Norte and Iligan City.

Lower court rejected the claim of IISMI that its failure to meet its obligations was due to the floating
exchange rate, holding that IISMI could only claim a loss of P51.9 million owing to the floating rate
as importations before February 1970 were sold at pre-devaluation prices even after devaluation

Issues

Whether or not in the name of economic development, the Government can act in a manner
basically unfair and arbitrary and deny to a party with a legitimate grievance, a remedy in law.

Ruling

Private respondents, on the other hand, argue that the present action cannot be barred by res
judicata because the proceedings in Civil Case No. 1701 is not a judgment on the merits and
there is no identity of causes of action between the first and the second cases.

Res judicata is indeed present. Imbedded in Philippine jurisprudence are the elements
constituting res judicata as a ground for the dismissal of a complaint: a) the former judgment
must be final; b) the court which rendered it had jurisdiction over the subject... matter and the
parties; c) it must be a judgment on the merits and d) there must be, between the first and
second actions, identity of parties, subject matter and causes of action.

the court held that IISMI cannot pin the blame for the delay in payments of its obligations on the
alleged delay in the release of DBP, SSS and GSIS funds. The bulk of IISMI's obligations arose
from subsequent raw material importations guaranteed by DBP. These accounts were only
incurred by IISMI after DBP, SSS and GSIS had released their respective funds to IISMI.

Thus, the lower court concluded:

It is settled jurisprudence that an applicant for writ of preliminary injunction should

be able to establish a clear case, free from doubt and dispute. Since injunction is
an equitable remedy, an applicant must also come to court with clean hands. As
discussed above, the evidence show that IISMI has failed to satisfy both basic
requirements to entitle it to a writ of preliminary injunction

A comparison between the allegations of the complaints in Civil Case No. 1701 and that of Civil
Case No. 111-1549 reveals that there is indeed identity of causes of action. In both cases,
private respondents claim that DBP has no right to foreclose because it violated its... financial
commitments to IISMI and that it conspired with other agencies of the government to cause the
latter's financial ruin. It follows, therefore, that the evidence that private respondents used to
support Civil Case No. 1701 is the same evidence that they would utilize to... establish Civil
Case No. 111-1549... the lower court did not consider the attack on jurisdiction well-taken
because the annulment of the decision in Civil Case No. 1701 is not being sought by private
respondents

In the Resolution of May 28, 1992, we granted petitioners' urgent motion to set the case for
Oral Argument. At the hearing on June 4, 1992, the counsel for private respondents admitted
that they had actually no facts to support their assertion of ownership over the 51% shares of
NSC but were merely proceeding from inference.

After the hearing, the Court resolved to deny the petitioners' motion to lift the temporary
restraining order and to require private respondents to post a cash or surety bond in the amount
of P1.5 million.
 China Banking Corporation v. Court of Appeals
G.R No. 153267 . June 23 , 2005
Quisumbing , J . :

Facts
China Banking Corp. (CBC) is the registered owner of Home Notes (which are debt instruments)
issued in favor of Fund Centrum Finance, Inc. (FCI) and eventually sold, transferred and
assigned to Armed Forces and Police Savings & Loan Association, Inc. (AFPSLAI).
AFPSLAI demanded payment, CBC refused to pay.
AFPSLAI filed a complaint for a sum of money against CBC in the RTC of QC.
CBC filed an MTD alleging that the real party in interest was FCFI which was not joined in the
complaint, and that AFPSLAI was a mere trustee of FCFI.
TC denied MTD and MR. CA denied Petition for Certiorari and Prohibition. SC denied Petition
for Certiorari under R65 for being an improper remedy.
CBC filed another MTD, this time invoking prescription. Lower court denied MTD and ordered
CBC to present evidence. CBC filed MR instead, which was denied by lower court, stating that:
“This Court finds that there are conflicting claims on the issue of whether or not the action
has already prescribed. A full blown trial is in order to determine fully the rights of the
contending parties.”
CBC filed a petition under R65 with CA. CA dismissed, agreeing with the TC that more evidence
should be presented in order to properly determine WON action has prescribed.
CBC insists that prescription is apparent on the complaint.
o The maturity date of the Home Notes annexed to the pleading indicate the date
of accrual of the cause of action. [Dec. 2, 1983]
o AFSPLAI filed complaint for sum of money on Sep. 24, 1996, which is beyond
the prescriptive period of 10 years from when the creditor may file an action.

AFSPLAI argues that prescription is NOT apparent in the complaint.

o Maturity date stated in the Home Notes is NOT the time of accrual of action.

o Action accrued on time of demand to pay: July 20, 1995

Issues

Whether cause of action accrued on the maturity date of the instruments or on the date of
demand for payment? DATE of DEMAND for PAYMENT.
Ruling

Cause of action accrued on the date when demand for payment of the Home Notes was refused
by CBC [July 20, 1995].
Cause of action requires:
o Legal right of plaintiff (with duty of defendant to respect that right)
o Act/omission of defendant violating that right
Cause of action does not accrue until party obligated refuses (expressly or impliedly) to comply
with its duty
Three elements of cause of action
 Right in favor of plaintiff
 Obligation of defendant to respect/not violate such right
 Act/omission of defendant violating such right / constituting a
breach of obligation of defendant to plaintiff
It is only when the last element occurs that a cause of action arises
In a written contract, cause of action accrues only when an actual breach or violation occurs.
In this case, breach occurred when demand was made by AFSPLAI and CBC refused to pay.
Maturity date of notes [Dec. 2, 1983] NOT the accrual of cause of action because the 3rd
element (violation/breach) was not present at this date.
Date for computing when prescription begins is therefore from the time of actual demand (and
refusal to comply thereof) and not from maturity date.
Action was filed (Sep. 24, 1996) before the end of 10 yrs from cause of action (July 20, 1995).
Therefore, action is NOT barred by prescription.
 Pilipinas Shell Petroleum Corporations v. John Bordman ltd. of Ilo-Ilo
G.R No. 159831 . October 14,2005

Facts

Petitioner Pilipinas Shell Petroleum Corporation ("Pilipinas Shell") is a corporation engaged in

the business of refining and processing petroleum products.
Respondent John Bordman purchased bunker oil in drums from Arabay then later on Pilipinas
Shell took over to supply Bordman when Arabay stops its operation.
John Bordman filed against Pilipinas Shell for short deliveries since 1955. Pilipinas shell
delivered 200 liters only instead of 210 liters.
John Bordman requested from Pilipinas Shell that 640,000 liters of fuel oil, representing the
latter's alleged deficient deliveries, be credited to the former's account. The volume demanded
was adjusted to 780,000 liters, upon a realization that the billing rate of 210 liters per drum had
been effective since 1966.
Pilipinas Shell and Arabay were required to deliver to John Bordman 916,487.62 liters of bunker
fuel oil, to pay actual damages of P1,000,000; exemplary damages of P500,000; attorney's fees
of P500,000; and the costs of suit.
Pilipinas Shell appealed since John Bordman failed to prove the short deliveries.

Issue
whether or not the Pilipinas Shell breached the contract by delivering short deliveries of fuel.

Ruling of the Court of Appeals

Upholding the trial court, the CA overruled petitioner’s objections to the evidence of respondent
in relation to the testimonies of the latter’s witnesses and the results of the volumetric tests. The
CA noted that deliveries from 1955 to 1977 had been admitted by petitioner; and the fact of
deficiency, established by respondent. The appellate court also debunked petitioner’s claims of
estoppel and laches. It held that the stipulation in the product invoices stating that respondent
had received the products in good order was not controlling. On the issue of prescription, the
CA ruled that the action had been filed within the period required by law.
Held
Challenge to Volumetric Tests
Petitioner disputes the CA’s finding that it had failed to disprove the results of the volumetric
tests conducted by respondent. The former claims that it was able to controvert the latter’s
evidence. During the July 24, 1974 volumetric test, representatives of both petitioner and
respondent allegedly agreed to conduct two tests using drums independently chosen by each.
Respondent allegedly chose the worst-dented drum that could fill only up to 190 liters. The
second drum, which was chosen by
petitioner, was not tested in the presence of Macarubbo because of heavy rain.It supposedly
filled up to 210 liters.

Ruling
The Court agrees with the following observations of the CA:
"[Petitioner] posits that its fuel deliveries were properly measured and/or calibrated. To the mind
of this Court, regardless of what method or manner the deliveries were made, whether pre-
packed drums, by the dip stick method or through ex-jetty, the fact remains that [petitioner]
failed to overcome the burden of proving that indeed the drums used during the deliveries
contain 210 liters. The [petitioner], to support its claim, adduced no evidence. Moreover, it failed
to disprove the results of the volumetric tests."

Having sustained the finding of short deliveries, the Court finds it no longer necessary to
address the contention of petitioner that its subsequent reduction of billings constituted merely a
business accommodation.