FILIPINO PIPE AND FOUNDRY CORP. vs.

NATIONAL WATERWORKS AND SEWERAGE AUTHORITY

FILIPINO PIPE AND FOUNDRY CORP. V. NAWASA
May 03, 1988 | Griño-Aquino, J.
Modes of Extinguishment of Obligations – Payment or Performance
PCD

DOCTRINE: Article 1250: “In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the
currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary.” 
not every inflation does not constitute extraordinary inflation
CASE SUMMARY: Plaintiff-appellant filed collection suit against defendant-appellee which was granted by the RTC. They later filed
another complaint seeking adjustment of the unpaid balance of the defendant-appellee, alleging a supervening extraordinary inflation of the
Philippine peso which has reduced the value of the bonds paid to plaintiff-appellant. Court dismissed the complaint, holding that the
inflation the plaintiff-appellant was referring to was a universal trend and does not constitute extraordinary inflation.

FACTS:
 June 1961: defendant NAWASA and plaintiff FPFC entered into a contract where FPFC was to supply NAWASA with cast iron
pressure pipes for construction of waterways in Masbate and Samar

 March 1967: FPFC filed a collection suit against NAWASA since they have completed delivery of all the pipes and yet NAWASA
failed to pay their remaining balance.
 RTC: ordered NAWASA to pay FPFC in NAWASA negotiable bonds.
 However, NAWASA failed to satisfy the decision and did not deliver the bonds.

 Feb 1971: FPFC filed another complaint seeking adjustment of the unpaid balance in accordance with value of the Philippine peso
when the decision was rendered. They allege a supervening extraordinary inflation of the Philippine peso which has reduced the value
of the bonds paid to them. They presented records and statistics showing that a spiraling inflation has marked the progress of the
country from 1962 to present.
 RTC: dismissed the complaint, saying that Article 1250 of the Civil Code does not apply because the inflation FPFC was referring to
was a worldwide occurrence, but hardly proof that the inflation was extraordinary in the sense that Article 1250 intended.
 FPFC elevated case with SC.

ISSUE: WON there exists an extraordinary inflation to justify an adjustment of NAWASA’s unpaid judgement obligation to FPFC? – NO

RULING:
Court ruled (with NAWASA, RTC):
 Extraordinary inflation exists when there is a decrease or increase in the purchasing power of the Philippine currency which is unusual
or beyond the common fluctuation in the value of said currency, and such decrease or increase could not have been reasonably
foreseen or was manifestly beyond the contemplation of the parties at the time of the establishment of the obligation.
 FPFC’s records and statistics proved that there has been a decline in the purchasing power of the Philippine peso, but this downward
fall of the currency cannot be considered extraordinary. It is simply a universal trend.

DISPOSITION:
WHEREFORE, finding no reversible error in the appealed decision of the trial court, We affirm in toto. No costs.

NOTES: