Case Digest (G.R. No. 157757) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
On June 1, 1978, FASGI Enterprises, Inc. (“FASGI”), a California corporation, entered into a distributorship agreement with Philippine Aluminum Wheels, Inc. (“PAWI”), and Fratelli Pedrini Sarezzo S.p.A. (“FPS”) under which PAWI would manufacture and ship aluminum wheels to FASGI. PAWI shipped 8,594 wheels (FOB value US$216,444.30), which FASGI fully paid, but later discovered were defective and non-compliant with U.S. origin, load-limit, fitment and SEMA approval requirements. On September 21, 1979, FASGI sued PAWI and FPS in the U.S. District Court for the Central District of California for breach of contract and US$2,316,591 in damages. In January 1980, they executed a “Transaction” settlement providing for PAWI’s return of at least 8,100 wheels and four irrevocable letters of credit totaling US$268,750. PAWI soon defaulted and proposed revised LC schedules by telex, which FASGI rejected. On November 26, 1980, the parties signed a Supplemental Settlement Agreement entitling FA Case Digest (G.R. No. 157757) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Distributorship Agreement and Shipment
- On June 1, 1978, FASGI Enterprises, Inc. (“FASGI”), PAWI (Philippine Aluminum Wheels, Inc.) and FPS (Fratelli Pedrini Sarezzo S.P.A.) entered a contract: PAWI to manufacture and ship aluminum wheels to FASGI in the U.S.
- PAWI shipped 8,594 wheels (FOB value US$216,444.30); FASGI paid said FOB value.
- Defects, U.S. Litigation, and First Settlement (“Transaction”)
- FASGI discovered defects: lack of origin stamp, missing load-limit markings, incorrect vehicle-fit indications, non-compliance with SEMA approvals, among others.
- On September 21, 1979, FASGI sued PAWI and FPS in the U.S. District Court (Central District of California) for breach of contract and US$2,316,591 damages.
- In January 1980, parties executed a “Transaction”: FPS/PAWI to accept return of ≥8,100 wheels and repay US$268,750 via four irrevocable letters of credit (LCs) from January–April 1980.
- PAWI’s Delay and Revised LC Schedule
- March 2, 1980 telex from PAWI’s president cited Philippine currency restrictions, proposing LCs in April, June, August, November 1980, with FASGI to bear extra storage costs.
- PAWI again failed to open the first LC by April 30; FASGI threatened immediate legal action.
- Supplemental Settlement Agreement (November 26, 1980)
- Sellers to deliver four confirmed Crocker Bank LCs totaling US$268,750 plus interest/storage under a detailed timetable (LCs due June 30, Sept 1, Nov 1 1980, and Jan 1 1981).
- FASGI’s obligations to store wheels limited; after February 28, 1981, FASGI released from storing/delivering wheels if LCs delayed.
- Upon Sellers’ breach, FASGI could apply immediately for judgment per stipulation, enforceable in the U.S., Italy, or Philippines.
- Execution of Stipulation for Judgment and PAWI Defaults
- Stipulation filed in U.S. court: judgment against PAWI for US$283,480.01 plus costs and attorneys’ fees.
- PAWI opened first LC June 19, 1980 but paid only March 20, 1981; FASGI shipped first container.
- PAWI similarly delayed second LC and defaulted entirely on third and fourth LCs; FASGI shipped second container.
- U.S. Final Judgment and Philippine Enforcement Proceedings
- U.S. District Court issued certificate of finality on September 7, 1982.
- February 1983, FASGI filed in Makati RTC to enforce U.S. judgment; RTC dismissed (September 11, 1990) for collusion, fraud, clear mistake, and unjust enrichment.
- July 30, 1997, Court of Appeals reversed and ordered full enforcement. FASGI appealed to the Supreme Court.
Issues:
- Is the Supplemental Settlement Agreement and the Stipulation for Judgment binding on PAWI despite its claim that counsel lacked authority?
- Should the U.S. final judgment be recognized and enforced in the Philippines given allegations of collusion, fraud, clear mistake of law/fact, and unjust enrichment?
- Did PAWI’s alleged breach of mutual obligations render the foreign judgment inequitable or unenforceable?
- Does PAWI’s failure to promptly repudiate its counsel’s actions estop it from challenging the settlement and judgment?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)