G.R. No. 170674 ; August 24, 2009
Foundation Specialists, Inc. vs. Betonval Ready Concrete, Inc. and Stronghold Insurance Co., Inc.

FACTS

Petitioner Foundation Specialists, Inc. (FSI) entered into contracts with respondent Betonval Ready Concrete, Inc. (Betonval) for the delivery of ready-mixed concrete. FSI failed to pay its outstanding balances starting January 1992. Despite a subsequent payment schedule proposed by FSI, which reduced the debt to ₱1,114,203.34 inclusive of 24% annual interest, FSI failed to fully settle. Betonval filed a complaint for sum of money and damages and applied for a writ of preliminary attachment, alleging FSI employed fraud in contracting and was disposing of assets to defraud creditors. The RTC issued the writ, which was later discharged upon FSI’s filing of counterbonds, except for specific equipment.
The RTC ruled for Betonval but awarded FSI ₱200,000 as compensatory damages for improper attachment. On motion, the RTC increased this award to ₱1.5 million. On appeal, the CA modified the decision, upholding the 24% interest on the principal obligation and reducing the damages awarded to FSI back to ₱200,000. FSI’s appeal was dismissed for non-payment of docket fees. FSI elevated the case to the Supreme Court via a petition for review.

ISSUE

The core issues were: (1) whether Betonval’s complaint was prematurely filed; (2) the proper rate of interest on the unpaid obligation; and (3) the propriety of the writ of preliminary attachment and the consequent award of damages to FSI.

RULING

The Supreme Court denied FSI’s petition. First, the complaint was not premature. FSI’s failure to allege discrepancies or object to Betonval’s invoices within a reasonable time constituted a judicial admission of their correctness under Section 1, Rule 9 of the Rules of Court. Its belated claim for reconciliation of accounts, particularly regarding unused cement, was an afterthought.
Second, the stipulated 24% per annum interest on overdue payments was valid and binding. The legal logic is that parties are free to stipulate on interest rates, provided they are not unconscionable. The 24% rate was expressly agreed upon in the contracts and was even adopted in FSI’s own proposed payment schedule. The Court affirmed the CA’s imposition of this contractual rate.
Third, the writ of preliminary attachment was improperly issued. For an attachment based on fraud under Section 1(d), Rule 57 of the Rules of Court, the fraud must be committed in the very execution of the obligation, not a subsequent failure to pay. Betonval failed to prove that FSI, at the time of contracting, had a preconceived plan or intention not to pay. Mere failure to pay a debt is not fraud justifying attachment. Consequently, FSI was entitled to damages for the wrongful attachment. However, the Court sustained the CA’s reduction of the award to ₱200,000, as FSI failed to substantiate its claim for higher actual damages with competent evidence. The surety, Stronghold Insurance, was held jointly and severally liable with Betonval for this award.