Case Summary (G.R. No. 221147)
Petitioner
Asian Construction and Development Corporation (Asiakonstrukt)
Respondents
• MERO Structures, Inc. (substituted by Novum Structures LLC)
• First Centennial Clark Corporation (FCCC)
• National Development Corporation (NDC)
Key Dates
• March 16–17, 1998: FCCC and Asiakonstrukt execute Construction Agreement; Asiakonstrukt accepts MERO’s Materials Only Proposal for US$570,000.00.
• April 5, 1998: MERO ships spaceframe to Asiakonstrukt.
• June 16–18, 1998: Asiakonstrukt’s proposal for design, supply, and installation of the flag structure approved by FCCC; award confirmed to Asiakonstrukt.
• August 10, 1998: Asiakonstrukt demands full payment from FCCC.
• October 13 & November 8, 1999: MERO requests direct payment from FCCC; Asiakonstrukt raises no objection.
• February 21, 2002: MERO files Complaint for sum of money against Asiakonstrukt, FCCC, and NDC before the RTC.
• July 19, 2011: RTC issues Decision ordering Asiakonstrukt to pay ₱25.65 million (equivalent to US$570,000) plus statutory interest; dismisses NDC.
• February 18, 2015: CA affirms with modification (interest rate adjustment per Nacar v. Gallery Frames).
• September 29, 2021: Supreme Court decision under the 1987 Constitution.
Applicable Law
• 1987 Philippine Constitution (contractual freedom, due process)
• Civil Code of the Philippines – Articles 1231, 1291–1293 on extinguishment of obligations and novation
• Jurisprudence – Nacar v. Gallery Frames on equitable tempering of stipulated interest
Factual Background and Contractual Relations
Asiakonstrukt contracted with FCCC to finalize architectural concepts and undertake Expo Theme Park construction. Simultaneously, MERO submitted a “Materials Only Proposal” to supply a spaceframe for the Expo Filipino Philippine flag structure for US$570,000, accepted by Asiakonstrukt. MERO shipped the materials in April 1998. Asiakonstrukt then proposed and obtained FCCC approval to design, supply, and install the flag structure, subject to full payment for MERO’s spaceframe upon delivery. While Asiakonstrukt requested funding advances from NDC, FCCC never directly contracted MERO.
Post‐Delivery Demands and Attempts to Secure Payment
By August 1998, Asiakonstrukt demanded payment from FCCC. MERO repeatedly pressed Asiakonstrukt for payment and, in October 1999, sought direct payment from FCCC—Asiakonstrukt raised no objection but FCCC did not consent or pay. Subsequent appeals to DTI and DOF failed. MERO’s final demand offered US$570,000 plus 1.5% monthly interest; Asiakonstrukt did not pay.
RTC Proceedings and Decision
MERO sued Asiakonstrukt, FCCC, and NDC in 2002 for US$1,033,990 (inclusive of interest). NDC and FCCC challenged jurisdiction, privity, and validity of claims; Asiakonstrukt acknowledged the principal debt but contested the 18% annual rate. In July 2011, the RTC:
- Found Asiakonstrukt liable as principal debtor under its contract with MERO;
- Held FCCC benefited from MERO’s performance and was jointly liable;
- Dismissed NDC for lack of evidence;
- Ordered Asiakonstrukt to pay ₱25,650,000 (US$570,000 × P45.00) with 6% interest per annum from decision date and 12% per annum thereafter.
CA Ruling and Modification
On appeal, the CA in February 2015:
- Denied appeals of MERO and Asiakonstrukt;
- Modified interest application: 12% per annum from default (March 31, 1998) to June 30, 2013; 6% thereafter, per Nacar jurisprudence;
- Upheld that any stipulation of 18% may be tempered in equity;
- Affirmed dismissal of NDC and held no privity between MERO and FCCC, but sustained FCCC’s liability under unjust enrichment principles.
Issues on Certiorari
Asiakonstrukt’s Supreme Court petition raised:
- Whether letters of October 13 and November 8, 1999 constituted a new, binding contract novating Asiakonstrukt’s payment obligation and subrogating MERO’s ri
Case Syllabus (G.R. No. 221147)
Background and Parties
- First Centennial Clark Corporation (FCCC) was created in 1998 to design, construct, operate, and manage the National Centennial Exposition in Clark Special Economic Zone.
- Asian Construction and Development Corporation (Asiakonstrukt) entered into a Construction Agreement with FCCC on March 16, 1998.
- MERO Structures, Inc. (MERO), a Delaware corporation, submitted a Materials Only Proposal to Asiakonstrukt on March 16, 1998, later converted and renamed Novum Structures LLC in 2006.
- National Development Company (NDC) was tasked to finance the design, supply, and installation of the flag structure via advances sourced from government financial institutions.
- FCCC’s President and Board of Directors approved Asiakonstrukt’s proposal subject to Commission on Audit rules, sponsorship reimbursement, and a certificate from MERO.
Factual Background
- MERO agreed to manufacture and supply a KK System spaceframe for a special Philippine flag structure at US$570,000, with 20% downpayment and balance via letter of credit.
- Asiakonstrukt formally accepted MERO’s proposal on March 17, 1998.
- MERO shipped the spaceframe on April 5, 1998, to “Philippine Centennial Exposition c/o Asiakonstrukt.”
- Asiakonstrukt submitted to FCCC on June 16, 1998, a proposal for design, supply, and installation of the flag structure using the imported spaceframe, with payment terms and a completion date of June 28, 1998.
- FCCC approved the proposal on June 17, 1998, in accordance with MERO’s materials terms and Asiakonstrukt’s conditions.
Contracts and Agreements
- Construction Agreement (March 16, 1998) between FCCC and Asiakonstrukt for the National Centennial Exposition.
- MERO’s Materials Only Proposal (March 16, 1998) accepted by Asiakonstrukt on March 17, 1998.
- Asiakonstrukt’s subproposal (June 16, 1998) to FCCC for integration of MERO’s spaceframe into the flag structure.
- Memorandum by FCCC President requesting NDC advances to finance Asiakonstrukt’s scope of work.
- Letter from FCCC (June 17, 1998) approving Asiakonstrukt’s proposal under MERO’s and Asiakonstrukt’s original terms.
Payment Dispute and Correspondence
- Asiakonstrukt requested full payment for the delivered spaceframe and 50% installation downpayment on August 10, 1998.
- MERO repeatedly sought payment from Asiakonstrukt starting March 19, 1998.
- MERO’s letter (October 13, 1999) asked Asiakonstrukt to notify FCCC for direct payment; Asiakonstrukt’s response (November 8, 199