ATTY. REYNANTE B. ORCEO, G.R. No. 190779 Resolution No.

G.R. No. 190779 Resolution No. 8714 contains the implementing rules and regulations of Sec.
Petitioner,
Present: 32 (Who May Bear Firearms) and Section 33 (Security Personnel and Bodyguards) of
Republic Act (R.A.) No. 7166, entitled An Act Providing for Synchronized National and
PUNO, C.J.,*
Local Elections and for Electoral Reforms, Authorizing Appropriations Therefor, and for
CARPIO,**
CORONA, Other Purposes.
CARPIO MORALES,
VELASCO, JR.,
NACHURA, Section 1 of Resolution No. 8714 prohibits an unauthorized person from
- versus - LEONARDO-DE CASTRO, bearing, carrying or transporting firearms or other deadly weapons in public places,
BRION, including all public buildings, streets, parks, and private vehicles or public
PERALTA,
BERSAMIN, conveyances, even if licensed to possess or carry the same, during the election period.
DEL CASTILLO,
ABAD, Under Section 2 (b) of Resolution No. 8714, the term firearm includes airgun,
VILLARAMA, JR.,
PEREZ, and airsoft guns, and their replica/imitation in whatever form that can cause an ordinary
MENDOZA, JJ. person to believe that they are real. Hence, airsoft guns and their replicas/imitations
are included in the gun ban during the election period from January 10, 2010 to June 9,
COMMISSION ON ELECTIONS, Promulgated:
Respondent. March 26, 2010 2010.
x---- ------------------------------------------------------------------------------------x Petitioner claims that he is a real party-in-interest, because he has been
playing airsoft since the year 2000. The continuing implementation of Resolution No.
DECISION 8714 will put him in danger of sustaining direct injury or make him liable for an election
offense[2] if caught in possession of an airsoft gun and its replica/imitation in going to
PERALTA, J.: and from the game site and playing the sport during the election period.

This is a petition for certiorari[1] questioning the validity of Resolution No. Petitioner contends that the COMELEC gravely abused its discretion
8714 insofar as it provides that the term firearm includes airsoft guns and their amounting to lack or excess of jurisdiction in including airsoft guns and their
replicas/imitations, which results in their coverage by the gun ban during the election replicas/imitations in the definition of firearm in Resolution No. 8714, since there is
period this year. nothing in R.A. No. 7166 that mentions airsoft guns and their replicas/imitations. He
Resolution No. 8714 is entitled Rules and Regulations on the: (1) Bearing, asserts that the intendment of R.A. No. 7166 is that the term firearm refers to real
Carrying or Transporting of Firearms or other Deadly Weapons; and (2) Employment, firearm in its common and ordinary usage. In support of this assertion, he cites the
Availment or Engagement of the Services of Security Personnel or Bodyguards, Senate deliberation on the bill,[3] which later became R.A. No. 7166, where it was
During the Election Period for the May 10, 2010 National and Local Elections. The clarified that an unauthorized person caught carrying a firearm during the election
Resolution was promulgated by the Commission on Elections (COMELEC) period is guilty of an election offense under Section 261 (q) of the Omnibus Election
on December 16, 2009, and took effect on December 25, 2009. Code.
 Further, petitioner alleges that there is no law that covers airsoft guns. By possession of firearms, the deputized law enforcement officer must be:
including airsoft guns in the definition of firearm, Resolution No. 8714, in effect, (a) in full uniform showing clearly and legibly his name, rank and serial
criminalizes the sport, since the possession of an airsoft gun or its replica/imitation is number, which shall remain visible at all times; and (b) in the actual
performance of his election duty in the specific area designated by the
now an election offense, although there is still no law that governs the use thereof.
Commission.

Petitioner prays that the Court render a decision as follows: (1) Annulling
xxxx
Resolution No. 8714 insofar as it includes airsoft guns and their replicas/imitations
within the meaning of firearm, and declaring the Resolution as invalid; (2) ordering the SEC. 35. Rules and Regulations. The Commission shall
COMELEC to desist from further implementing Resolution No. 8714 insofar as airsoft issue rules and regulations to implement this Act. Said rules shall be
published in at least two (2) national newspapers of general
guns and their replicas/imitations are concerned; (3) ordering the COMELEC to amend circulation.
Resolution No. 8714 by removing airsoft guns and their replicas/imitations within the
meaning of firearm; and (4) ordering the COMELEC to issue a Resolution directing the
Armed Forces of the Philippines, Philippine National Police and other law enforcement Pursuant to Section 35 of R.A. No. 7166, the COMELEC
agencies deputized by the COMELEC to desist from further enforcing Resolution No. promulgated Resolution No. 8714, which contains the implementing rules and
8714 insofar as airsoft guns and their replicas/imitations are concerned. regulations of Sections 32 and 33 of R.A. No. 7166. The pertinent portion of the
The main issue is whether or not the COMELEC gravely abused its discretion Resolution states:
in including airsoft guns and their replicas/imitations in the term firearm in Section 2 (b)
of R.A. No. 8714.
NOW, THEREFORE, pursuant to the powers vested in it by
the Constitution of the Republic of the Philippines, the Omnibus
The Court finds that the COMELEC did not commit grave abuse of discretion Election Code (B.P. Blg. 881), Republic Acts Nos. 6646, 7166, 8189,
in this case. 8436, 9189, 9369 and other elections laws, the Commission
R.A. No. 7166 (An Act Providing for Synchronized National and Local RESOLVED, as it hereby RESOLVES, to promulgate the following
Elections and for Electoral Reforms, Authorizing Appropriations Therefor, and for Other rules and regulations to implement Sections 32 and 33 of Republic
Purposes)[4] provides: Act No. 7166 in connection with the conduct of the May 10, 2010
SEC. 32. Who May Bear Firearms. During the election period, national and local elections:
no person shall bear, carry or transport firearms or other deadly
weapons in public places, including any building, street, park, private SECTION 1. General Guiding Principles. During the
vehicle or public conveyance, even if licensed to possess or carry the election period: (a) no person shall bear, carry or
same, unless authorized in writing by the Commission. The issuance of transport firearms or other deadly weapons in public places,
firearms licenses shall be suspended during the election period. including all public buildings, streets, parks, and private vehicles
or public conveyances, even if licensed to possess or carry the
Only regular members or officers of the Philippine National same; and (b) no candidate for public office, including incumbent
Police, the Armed Forces of the Philippines and other law enforcement public officers seeking election to any public office, shall employ, avail
agencies of the Government who are duly deputized in writing by the himself of or engage the services of security personnel or
Commission for election duty may be authorized to carry and possess bodyguards, whether or not such bodyguards are regular members or
firearms during the election period: Provided, That, when in the officers of the Philippine National Police (PNP), the Armed Forces of
the Philippines (AFP) or other law enforcement agency of the outside of residence by means of a valid mission order or
letter order; and (4) in the actual performance of official
Government.
law enforcement duty, or in going to or returning from his
residence/barracks or official station.
The transport of firearms of those who are engaged in the xxxx
manufacture, importation, exportation, purchase, sale of firearms,
(b) Member of privately owned or operated security,
explosives and their spare parts or those involving the transportation
investigative, protective or intelligence agencies duly
of firearms, explosives and their spare parts, may, with prior notice to authorized by the PNP, provided that when in the
the Commission, be authorized by the Director General of the PNP possession of firearm, he is: (1) in the agency-prescribed
provided that the firearms, explosives and their spare parts are uniform with his agency-issued identification card
prominently displayed and visible at all times, showing
immediately transported to the Firearms and Explosives Division,
clearly his name and position; and (2) in the actual
CSG, PNP. performance of duty at his specified place/area of duty.

SEC. 2. Definition of Terms. As used in this Resolution: xxxx

SEC. 8. Enforcement. Any person who, not wearing the

(a) Election Period refers to the election period
authorized uniform mentioned herein, bears, carries or transports
prescribed in Comelec Resolution No. 8646 dated 14 July 2009 which
firearm or other deadly weapon, shall be presumed unauthorized to
is from 10 January 2010 to 09 June 2010;
carry firearms and subject to arrest.[5]
(b) Firearm shall refer to the "firearm" as defined
in existing laws, rules and regulations. The term also includes
airgun, airsoft guns, and their replica/imitation in whatever form Petitioner contends that under R.A. No. 7166, the term firearm connotes real
that can cause an ordinary person to believe that they are real;
firearm. Moreover, R.A. No. 7166 does not mention airsoft guns and their
(c) Deadly weapon includes bladed instrument, replicas/imitations. Hence, its implementing rules and regulations contained in
handgrenades or other explosives, except pyrotechnics. Resolution No. 8714 should not include airsoft guns and their replicas/imitations in the
xxxx
definition of the term firearm.
SEC. 4. Who May Bear Firearms. Only the following
persons who are in the regular plantilla of the PNP or AFP or other
The Court is not persuaded.
law enforcement agencies are authorized to bear, carry or transport
firearms or other deadly weapons during the election period: Holy Spirit Homeowners Association, Inc. v. Defensor[6] held:

(a) Regular member or officer of the PNP, the AFP and Where a rule or regulation has a provision not expressly
other law enforcement agencies of the Government, stated or contained in the statute being implemented, that provision
provided that when in the possession of firearm, he is: does not necessarily contradict the statute. A legislative rule is in the
(1) in the regular plantilla of the said agencies and is nature of subordinate legislation, designed to implement a primary
receiving regular compensation for the services rendered legislation by providing the details thereof. All that is required is that
in said agencies; and (2) in the agency-prescribed the regulation should be germane to the objects and purposes of
uniform showing clearly and legibly his name, rank and the law; that the regulation be not in contradiction to, but in
serial number or, in case rank and serial number are conformity with, the standards prescribed by the law.[7]
inapplicable, his agency-issued identification card
showing clearly his name and position, which
identification card shall remain visible at all times; (3)
duly licensed to possess firearm and to carry the same
 Evidently, the COMELEC had the authority to promulgate Resolution No. 8714 Operating Procedure No. 13, which prescribes the procedure to be followed in the
pursuant to Section 35 of R.A. No. 7166. It was granted the power to issue the licensing of firearms.[10] The minimum age limit of the applicant is 18 years old.[11] The
implementing rules and regulations of Sections 32 and 33 of R.A. No. 7166. Under this Circular also requires a Permit to Transport an airsoft rifle/pistol from the place of
broad power, the COMELEC was mandated to provide the details of who may bear, residence to any game or exhibition site.[12]
carry or transport firearms or other deadly weapons, as well as the definition of
firearms, among others. These details are left to the discretion of the COMELEC, which A license to possess an airsoft gun, just like ordinary licenses in other
is a constitutional body that possesses special knowledge and expertise on election regulated fields, does not confer an absolute right, but only a personal privilege to be
matters, with the objective of ensuring the holding of free, orderly, honest, peaceful and exercised under existing restrictions, and such as may thereafter be reasonably
credible elections. imposed.[13]

In its Comment,[8] the COMELEC, represented by the Office of the Solicitor The inclusion of airsoft guns and airguns in the term firearm in Resolution No.
General, states that the COMELECs intent in the inclusion of airsoft guns in the term 8714 for purposes of the gun ban during the election period is a reasonable restriction,
firearm and their resultant coverage by the election gun ban is to avoid the possible the objective of which is to ensure the holding of free, orderly, honest, peaceful and
use of recreational guns in sowing fear, intimidation or terror during the election credible elections.
period. An ordinary citizen may not be able to distinguish between a real gun and an
airsoft gun. It is fear subverting the will of a voter, whether brought about by the use of However, the Court excludes the replicas and imitations of airsoft guns
a real gun or a recreational gun, which is sought to be averted. Ultimately, the objective and airguns from the term firearm under Resolution No. 8714, because they are not
is to ensure the holding of free, orderly, honest, peaceful and credible elections this subject to any regulation, unlike airsoft guns.
year.
Contrary to petitioners allegation, there is a regulation that governs the Petitioner further contends that Resolution No. 8714 is not in accordance with
possession and carriage of airsoft rifles/pistols, namely, Philippine National Police the State policies in these constitutional provisions:
(PNP) Circular No. 11 dated December 4, 2007, entitled Revised Rules and
Regulations Governing the Manufacture, Importation, Exportation, Sale, Possession, Art. II, Sec. 12. The State recognizes the sanctity of family life
and shall protect and strengthen the family as a basic autonomous
Carrying of Airsoft Rifles/Pistols and Operation of Airsoft Game Sites and Airsoft social institution. x x x
Teams. The Circular defines an airsoft gun as follows:
Art. XV, Sec. 1. The State recognizes the Filipino family as
Airsoft Rifle/Pistol x x x includes battery operated, spring and the foundation of the nation. Accordingly, it shall strengthen its
gas type powered rifles/pistols which discharge plastic or rubber solidarity and actively promote its total development.
pellets only as bullets or ammunition. This differs from replica as the
latter does not fire plastic or rubber pellet. Art. II, Sec. 17. The State shall give priority to x x x sports to
foster patriotism and nationalism, accelerate social progress, and
promote total human liberation and development.

PNP Circular No. 11 classifies the airsoft rifle/pistol as a special type of air
gun, which is restricted in its use only to sporting activities, such as war game Petitioner asserts that playing airsoft provides bonding moments among family
[9]
simulation. Any person who desires to possess an airsoft rifle/pistol needs a license members. Families are entitled to protection by the society and the State under the
from the PNP, and he shall file his application in accordance with PNP Standard Universal Declaration of Human Rights. They are free to choose and enjoy their
recreational activities. These liberties, petitioner contends, cannot be abridged by the No costs.
COMELEC. SO ORDERED.

G.R. No. 187226 January 28, 2015

In its Comment, the COMELEC, through the Solicitor General, states that it
adheres to the aforementioned state policies, but even constitutional freedoms are not CHERYLL SANTOS LEUS, Petitioner,
absolute, and they may be abridged to some extent to serve appropriate and important vs.
ST. SCHOLASTICA'S COLLEGE WESTGROVE and/or SR. EDNA QUIAMBAO,
interests. OSB, Respondents.
As a long-time player of the airsoft sport, it is presumed that petitioner has a
license to possess an airsoft gun. As a lawyer, petitioner is aware that DECISION
a licensee of an airsoft gun is subject to the restrictions imposed upon him by PNP
REYES, J.:
Circular No. 11 and other valid restrictions, such as Resolution No. 8714. These
restrictions exist in spite of the aforementioned State policies, which do not directly Cheryll Santos Leus (petitioner) was hired by St. Scholastica's College Westgrove
uphold a licensees absolute right to possess or carry an airsoft gun under any (SSCW), a Catholic educational institution, as a non-teaching personnel, engaged in
circumstance. pre-marital sexual relations, got pregnant out of wedlock, married the father of her
child, and was dismissed by SSCW, in that order. The question that has to be resolved
is whether the petitioner's conduct constitutes a ground for her dismissal.
Petitioners allegation of grave abuse of discretion by respondent COMELEC
implies such capricious and whimsical exercise of judgment as is equivalent to lack of Before this Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to annul and set aside the Decision1 dated September 24, 2008 and
jurisdiction or, in other words, the exercise of power in an arbitrary manner by reason Resolution2 dated March 2, 2009 issued by the Court of Appeals (CA) in CA-G.R. SP
of passion, prejudice or personal hostility, and it must be so patent or gross as to No. 100188, which affirmed the Resolutions dated February 28, 20073 and May 21,
amount to an evasion of a positive duty or to a virtual refusal to perform the duty 20074 of the National Labor Relations Commission (NLRC)in NLRC CA No. 049222-
06.
enjoined or to act at all in contemplation of law.[14]
The Facts
The Court holds that the COMELEC did not gravely abuse its discretion in
including airsoft guns and airguns in the term firearm in Resolution No. 8714 for SSCW is a catholic and sectarian educational institution in Silang, Cavite. In May 2001,
SSCW hired the petitioner as an Assistant to SSCWs Director of the Lay Apostolate
purposes of the gun ban during the election period, with the apparent objective of and Community Outreach Directorate.
ensuring free, honest, peaceful and credible elections this year. However, the replicas
and imitations of airsoft guns and airguns are excluded from the term firearm in Sometime in 2003, the petitioner and her boyfriend conceived a child out of wedlock.
Resolution No. 8714. When SSCW learned of the petitioners pregnancy, Sr. Edna Quiambao (Sr.
Quiambao), SSCWs Directress, advised her to file a resignation letter effective June 1,
WHEREFORE, the petition is PARTLY GRANTED insofar as the exclusion of 2003. In response, the petitioner informed Sr. Quiambao that she would not resign
replicas and imitations of airsoft guns from the term firearm is concerned. Replicas and from her employment just because she got pregnant without the benefit of marriage.5
imitations of airsoft guns and airguns are hereby declared excluded from the term
On May 28, 2003, Sr. Quiambao formally directed the petitioner to explain in writing
firearm in Resolution No. 8714. The petition is DISMISSED in regard to the exclusion why she should not be dismissed for engaging in pre-marital sexual relations and
of airsoft guns from the term firearm in Resolution No. 8714. Airsoft guns getting pregnant as a result thereof, which amounts to serious misconduct and conduct
and airguns are covered by the gun ban during the election period. unbecoming of an employee of a Catholic school.6
In a letter7 dated May 31, 2003, the petitioner explained that her pregnancy out of Consequently, in her letter13 dated June 11, 2003, Sr. Quiambao informed the
wedlock does not amount to serious misconduct or conduct unbecoming of an petitioner that her employment with SSCW is terminated on the ground of serious
employee. She averred that she is unaware of any school policy stating that being misconduct. She stressed that pre-marital sexual relations between two consenting
pregnant out of wedlock is considered as a serious misconduct and, thus, a ground for adults with no impediment to marry, even if they subsequently married, amounts to
dismissal. Further, the petitioner requested a copy of SSCWs policy and guidelines so immoral conduct. She further pointed out that SSCW finds unacceptable the scandal
that she may better respond to the charge against her. On June 2, 2003, Sr. Quiambao brought about by the petitioners pregnancy out of wedlock as it ran counter to the
informed the petitioner that, pending the promulgation of a "Support Staff Handbook," moral principles that SSCW stands for and teaches its students.
SSCW follows the 1992 Manual of Regulations for Private Schools (1992 MRPS) on
the causes for termination of employments; that Section 94(e) of the 1992 MRPS cites Thereupon, the petitioner filed a complaint for illegal dismissal with the Regional
"disgraceful or immoral conduct" as a ground for dismissal in addition to the just causes Arbitration Branch of the NLRC in Quezon City against SSCW and Sr. Quiambao
for termination of employment provided under Article 282 of the Labor Code.8 (respondents). In her position paper,14 the petitioner claimed that SSCW gravely
abused its management prerogative as there was no just cause for her dismissal. She
On June 4, 2003, the petitioner, through counsel, sent Sr. Quiambao a letter,9 which, in maintained that her pregnancy out of wedlock cannot be considered as serious
part, reads: misconduct since the same is a purely private affair and not connected in any way with
her duties as an employee of SSCW. Further, the petitioner averred that she and her
To us, pre-marital sex between two consenting adults without legal impediment to boyfriend eventually got married even prior to her dismissal.
marry each other who later on married each other does not fall within the
contemplation of "disgraceful or immoral conduct" and "serious misconduct" of the For their part, SSCW claimed that there was just cause to terminate the petitioners
Manual of Regulations for Private Schools and the Labor Code of the Philippines. employment with SSCW and that the same is a valid exercise of SSCWs management
prerogative. They maintained that engaging in pre-marital sex, and getting pregnant as
Your argument that what happened to our client would set a bad example to the a result thereof, amounts to a disgraceful or immoral conduct, which is a ground for the
students and other employees of your school is speculative and is more imaginary than dismissal of an employee under the 1992 MRPS.
real. To dismiss her on that sole ground constitutes grave abuse of management
prerogatives. They pointed out that SSCW is a Catholic educational institution, which caters
exclusively to young girls; that SSCW would lose its credibility if it would maintain
Considering her untarnished service for two years, dismissing her with her present employees who do not live up to the values and teachings it inculcates to its students.
condition would also mean depriving her to be more secure in terms of financial SSCW further asserted that the petitioner, being an employee of a Catholic educational
capacity to sustain maternal needs.10 institution, should have strived to maintain the honor, dignity and reputation of SSCW
as a Catholic school.15
In a letter11 dated June 6, 2003, SSCW, through counsel, maintained that pre-marital
sexual relations, evenif between two consenting adults without legal impediment to The Ruling of the Labor Arbiter
marry, is considered a disgraceful and immoral conduct or a serious misconduct, which
are grounds for the termination of employment under the 1992 MRPS and the Labor On February 28, 2006, the Labor Arbiter (LA) rendered a Decision,16 in NLRC Case
Code. That SSCW, as a Catholic institution of learning, has the right to uphold the No. 6-17657-03-C which dismissed the complaint filed by the petitioner. The LA found
teaching of the Catholic Church and expect its employees to abide by the same. They that there was a valid ground for the petitioners dismissal; that her pregnancy out of
further asserted that the petitioners indiscretion is further aggravated by the fact that wedlock is considered as a "disgraceful and immoral conduct." The LA pointed out that,
she is the Assistant to the Director of the Lay Apostolate and Community Outreach as an employee of a Catholic educational institution, the petitioner is expected to live
Directorate, a position of responsibility that the students look up to as rolemodel. The up to the Catholic values taught by SSCW to its students. Likewise, the LA opined that:
petitioner was again directed to submit a written explanation on why she should not be
dismissed. Further, a deep analysis of the facts would lead us to disagree with the complainant
that she was dismissed simply because she violate[d] a Catholic [teaching]. It should
On June 9, 2003, the petitioner informed Sr. Quiambao that she adopts her counsels not be taken in isolation but rather it should be analyzed in the lightof the surrounding
letter dated June 4, 2003 as her written explanation.12 circumstances as a whole. We must also take into [consideration] the nature of her
work and the nature of her employer-school. For us, it is not just an ordinary violation. It
was committed by the complainant in an environment where her strict adherence to the
same is called for and where the reputation of the school is at stake. x x x.17
The LA further held that teachers and school employees, both in their official and Implementing Rules and Regulations of Batas Pambansa Blg. 232 or the Education Act
personal conduct, must display exemplary behavior and act in a manner that is beyond of 1982. x x x.24
reproach.
The CA further held that the petitioners dismissal was a valid exercise of SSCWs
The petitioner appealed to the NLRC, insisting that there was no valid ground for the management prerogative to discipline and impose penalties on erring employees
termination of her employment. She maintained that her pregnancy out of wedlock pursuant toits policies, rules and regulations. The CA upheld the NLRCs conclusion
cannot be considered as "serious misconduct" under Article 282 of the Labor Code that the petitioners pregnancy out of wedlock is considered as a "disgraceful and
since the same was not of such a grave and aggravated character. She asserted that immoral conduct" and, thus, a ground for dismissal under Section 94(e) of the 1992
SSCW did not present any evidence to establish that her pregnancy out of wedlock MRPS. The CA likewise opined that the petitioners pregnancy out of wedlock is
indeed eroded the moral principles that it teaches its students.18 scandalous per segiven the work environment and social milieu that she was in, viz:

The Ruling of the NLRC Under Section 94 (e) of the [MRPS], and even under Article 282 (serious misconduct)
of the Labor Code, "disgraceful and immoral conduct" is a basis for termination of
On February 28, 2007, the NLRC issued a Resolution,19 which affirmed the LA employment.
Decision dated February 28, 2006. The NLRC pointed out that the termination of the
employment of the personnel of private schools is governed by the 1992 MRPS; that xxxx
Section 94(e) thereof cites "disgraceful or immoral conduct" as a just cause for
dismissal, in addition to the grounds for termination of employment provided for under Petitioner contends that her pre-marital sexual relations with her boyfriend and her
Article 282 of the Labor Code. The NLRC held that the petitioners pregnancy out of pregnancy prior to marriage was not disgraceful or immoral conduct sufficient for her
wedlock is a "disgraceful or immoral conduct" within the contemplation of Section 94(e) dismissal because she was not a member of the schools faculty and there is no
of the 1992 MRPS and, thus, SSCW had a valid reason to terminate her employment. evidence that her pregnancy scandalized the school community.

The petitioner sought reconsideration20 of the Resolution dated February 28, 2007 but We are not persuaded. Petitioners pregnancy prior to marriage is scandalous in itself
it was denied by the NLRC in its Resolution21 dated May 21, 2007. given the work environment and social milieu she was in. Respondent school for young
ladies precisely seeks to prevent its students from situations like this, inculcating in
Unperturbed, the petitioner filed a petition22 for certiorari with the CA, alleging that the them strict moral values and standards. Being part of the institution, petitionersprivate
NLRC gravely abused its discretion in ruling that there was a valid ground for her and public life could not be separated. Her admitted pre-marital sexual relations was a
dismissal. She maintained that pregnancy out of wedlock cannot be considered as a violation of private respondents prescribed standards of conduct that views pre-marital
disgraceful or immoral conduct; that SSCW failed to prove that its students were sex as immoral because sex between a man and a woman must only take place within
indeed gravely scandalized by her pregnancy out of wedlock. She likewise asserted the bounds of marriage.
that the NLRC erred in applying Section 94(e) of the 1992 MRPS.
Finally, petitioners dismissal is a valid exercise of the employer-schools management
The Ruling of the CA prerogative to discipline and impose penalties on erring employees pursuant to its
policies, rules and regulations. x x x.25 (Citations omitted)
On September 24, 2008, the CA rendered the herein assailed Decision,23 which denied
the petition for certiorari filed by the petitioner. The CA held that it is the provisions of The petitioner moved for reconsideration26 but it was denied by the CA in its
the 1992 MRPS and not the Labor Code which governs the termination of employment Resolution27 dated March 2, 2009.
of teaching and non-teaching personnel of private schools, explaining that:
Hence, the instant petition.
It is a principle of statutory construction that where there are two statutes that apply to
a particular case, that which was specially intended for the said case must prevail. Issues
Petitioner was employed by respondent private Catholic institution which undeniably
follows the precepts or norms of conduct set forth by the Catholic Church. Accordingly,
Essentially, the issues set forth by the petitioner for this Courts decision are the
the Manual of Regulations for Private Schools followed by it must prevail over the
following: first, whether the CA committed reversible error in ruling that it is the 1992
Labor Code, a general statute. The Manual constitutes the private schools
MRPS and not the Labor Code that governs the termination of employment of teaching
and non-teaching personnel of private schools; and second, whether the The qualifications of teaching and non-teaching personnel of private schools, as well
petitionerspregnancy out of wedlock constitutes a valid ground to terminate her as the causes for the termination of their employment, are an integral aspect of the
employment. educational system of private schools. Indubitably, ensuring that the teaching and non-
teaching personnel of private schools are not only qualified, but competent and efficient
The Ruling of the Court as well goes hand in hand with the declared objective of BP 232 establishing and
maintaining relevant quality education.31 It is thus within the authority of the Secretary
of Education to issue a rule, which provides for the dismissal of teaching and non-
The Court grants the petition.
teaching personnel of private schools based on their incompetence, inefficiency, or
some other disqualification.
First Issue: Applicability of the 1992 MRPS
Moreover, Section 69 of BP 232 specifically authorizes the Secretary of Education to
The petitioner contends that the CA, in ruling that there was a valid ground to dismiss "prescribe and impose such administrative sanction as he may deem reasonable and
her, erred in applying Section 94 of the 1992 MRPS. Essentially, she claims that the appropriate in the implementing rules and regulations" for the "[g]ross inefficiency of
1992 MRPS was issued by the Secretary of Education as the revised implementing the teaching or non-teaching personnel" of private schools.32 Accordingly, contrary to
rules and regulations of Batas Pambansa Bilang 232 (BP 232) or the "Education Act of the petitioners claim, the Court sees no reason to invalidate the provisions of the 1992
1982." That there is no provision in BP 232, which provides for the grounds for the MRPS, specifically Section 94 thereof. Second Issue: Validity of the Petitioners
termination of employment of teaching and non-teaching personnel of private schools. Dismissal
Thus, Section 94 of the 1992 MRPS, which provides for the causes of terminating an
employment, isinvalid as it "widened the scope and coverage" of BP 232.
The validity of the petitioners dismissal hinges on the determination of whether
pregnancy out of wedlock by an employee of a catholic educational institution is a
The Court does not agree. cause for the termination of her employment.

The Court notes that the argument against the validity of the 1992 MRPS, specifically In resolving the foregoing question,the Court will assess the matter from a strictly
Section 94 thereof, is raised by the petitioner for the first time in the instant petition for neutral and secular point of view the relationship between SSCW as employer and
review. Nowhere in the proceedings before the LA, the NLRC or the CA did the the petitioner as an employee, the causes provided for by law in the termination of
petitioner assail the validity of the provisions of the 1992 MRPS. suchrelationship, and the evidence on record. The ground cited for the petitioners
dismissal, i.e., pre-marital sexual relations and, consequently, pregnancy outof
"It is well established that issues raised for the first time on appeal and not raised in the wedlock, will be assessed as to whether the same constitutes a valid ground for
proceedings in the lower court are barred by estoppel. Points of law, theories, issues, dismissal pursuant to Section 94(e) of the 1992 MRPS.
and arguments not brought to the attention of the trial court ought not to be considered
by a reviewing court, as these cannot be raised for the first time on appeal. To consider The standard of review in a Rule 45
the alleged facts and arguments belatedly raised would amount to trampling on the petition from the CA decision in
basic principles of fair play, justice, and due process."28 labor cases.

In any case, even if the Court were to disregard the petitioners belated claim of the In a petition for review under Rule 45 of the Rules of Court, such as the instant petition,
invalidity of the 1992 MRPS, the Court still finds the same untenable. where the CAs disposition in a labor case is sought to be calibrated, the Courts review
isquite limited. In ruling for legal correctness, the Court has to view the CA decision in
The 1992 MRPS, the regulation in force at the time of the instant controversy, was the same context that the petition for certiorari it ruled upon was presented to it; the
issued by the Secretary of Education pursuant to BP 232. Section 70 29 of BP 232 vests Court has to examine the CA decision from the prism of whether it correctly determined
the Secretary of Education with the authority to issue rules and regulations to the presence or absence of grave abuse of discretion in the NLRC decision before it,
implement the provisions of BP 232. Concomitantly, Section 5730 specifically empowers not on the basis of whether the NLRC decision on the merits of the case was correct.33
the Department of Education to promulgate rules and regulations necessary for the
administration, supervision and regulation of the educational system in accordance The phrase "grave abuse of discretion" is well-defined in the Courts jurisprudence. It
with the declared policy of BP 232. exists where an act of a court or tribunal is performed with a capricious or whimsical
exercise ofjudgment equivalent to lack of jurisdiction.34 The determination of the
presence or absence of grave abuse of discretion does not include an inquiry into the
correctness of the evaluation of evidence, which was the basis of the labor agency in The totality of the circumstances
reaching its conclusion.35 surrounding the conduct alleged to
be disgraceful or immoral must be
Nevertheless, while a certiorari proceeding does not strictly include an inquiry as to the assessed against the prevailing
correctness of the evaluation of evidence (that was the basis of the labor tribunals in norms of conduct.
determining their conclusion), the incorrectness of its evidentiary evaluation should not
result in negating the requirement of substantial evidence. Indeed, when there is a In Chua-Qua v. Clave,37 the Court stressed that to constitute immorality, the
showing that the findings or conclusions, drawn from the same pieces of evidence, circumstances of each particular case must be holistically considered and evaluated in
were arrived at arbitrarily or in disregard of the evidence on record, they may be light of the prevailing norms of conductand applicable laws.38Otherwise stated, it is not
reviewed by the courts. In particular, the CA can grant the petition for certiorariif it finds the totality of the circumstances surrounding the conduct per se that determines
that the NLRC, in its assailed decision or resolution, made a factual finding not whether the same is disgraceful or immoral, but the conduct that is generally accepted
supported by substantial evidence. A decision that is not supported by substantial by society as respectable or moral. If the conduct does not conform to what society
evidence is definitely a decision tainted with grave abuse of discretion. 36 generally views as respectable or moral, then the conduct is considered as disgraceful
or immoral. Tersely put, substantial evidence must be presented, which would
The labor tribunals respective establish that a particular conduct, viewed in light of the prevailing norms of conduct, is
conclusions that the petitioners considered disgraceful or immoral.
pregnancy is a "disgraceful or
immoral conduct" were arrived at Thus, the determination of whether a conduct is disgraceful or immoral involves a two-
arbitrarily. step process: first, a consideration of the totality of the circumstances surrounding the
conduct; and second, an assessment of the said circumstances vis--visthe prevailing
The CA and the labor tribunals affirmed the validity of the petitioners dismissal norms of conduct, i.e., what the society generally considers moral and respectable.
pursuant to Section 94(e) of the 1992 MRPS, which provides that:
That the petitioner was employed by a Catholic educational institution per se does not
Sec. 94. Causes of Terminating Employment In addition to the just causes absolutely determine whether her pregnancy out of wedlock is disgraceful or immoral.
enumerated in the Labor Code, the employment of school personnel, including faculty, There is still a necessity to determine whether the petitioners pregnancy out of
may be terminated for any of the following causes: wedlock is considered disgraceful or immoral in accordance with the prevailing norms
of conduct.
xxxx
Public and secular morality should
determine the prevailing norms of
e. Disgraceful or immoral conduct;
conduct, not religious morality.

xxxx
However, determining what the prevailing norms of conduct are considered disgraceful
or immoral is not an easy task. An individuals perception of what is moral or
The labor tribunals concluded that the petitioners pregnancy out of wedlock, per se, is respectable is a confluence of a myriad of influences, such as religion, family, social
"disgraceful and immoral"considering that she is employed in a Catholic educational status, and a cacophony of others. In this regard, the Courts ratiocination in Estrada v.
institution. In arriving at such conclusion, the labor tribunals merely assessed the fact Escritor39 is instructive.
of the petitioners pregnancy vis--visthe totality of the circumstances surrounding the
same.
In Estrada, an administrative case against a court interpreter charged with disgraceful
and immoral conduct, the Court stressed that in determining whether a particular
However, the Court finds no substantial evidence to support the aforementioned conduct can be considered as disgraceful and immoral, the distinction between public
conclusion arrived at by the labor tribunals. The fact of the petitioners pregnancy out of and secular morality on the one hand, and religious morality, on the other, should be
wedlock, without more, is not enough to characterize the petitioners conduct as kept in mind.40 That the distinction between public and secular morality and religious
disgraceful or immoral. There must be substantial evidence to establish that pre-marital morality is important because the jurisdiction of the Court extends only to public and
sexual relations and, consequently, pregnancy outof wedlock, are indeed considered secular morality.41 The Court further explained that:
disgraceful or immoral.
The morality referred to in the law is public and necessarily secular, not religiousx x x. Under these tests, two things may be concluded from the fact that an unmarried
"Religious teachings as expressed in public debate may influence the civil public order woman gives birth out of wedlock:
but public moral disputes may be resolved only on grounds articulable in secular
terms." Otherwise, if government relies upon religious beliefs in formulating public (1) if the father of the child is himself unmarried, the woman is not ordinarily
policies and morals, the resulting policies and morals would require conformity to what administratively liable for disgraceful and immoral conduct.It may be a not-so-
some might regard as religious programs or agenda.The non-believers would therefore ideal situation and may cause complications for both mother and child but it
be compelled to conform to a standard of conduct buttressed by a religious belief, i.e., does not give cause for administrative sanction. There is no law which
to a "compelled religion," anathema to religious freedom. Likewise, if government penalizes an unmarried mother under those circumstances by reason of her
based its actions upon religious beliefs, it would tacitly approve or endorse that belief sexual conduct or proscribes the consensual sexual activity between two
and thereby also tacitly disapprove contrary religious or non-religious views that would unmarried persons. Neither does the situation contravene any fundamental
not support the policy. As a result, government will not provide full religious freedom for state policy as expressed in the Constitution, a document that accommodates
all its citizens, or even make it appear that those whose beliefs are disapproved are various belief systems irrespective of dogmatic origins.
second-class citizens. Expansive religious freedom therefore requires that government
be neutral in matters of religion; governmental reliance upon religious justification is
inconsistent with this policy of neutrality. (2) if the father of the child born out of wedlock is himself married to a woman
other thanthe mother, then there is a cause for administrative sanction against
either the father or the mother. In sucha case, the "disgraceful and immoral
In other words, government action, including its proscription of immorality as expressed conduct" consists of having extramarital relations with a married person. The
in criminal law like concubinage, must have a secular purpose. That is, the government sanctity of marriage is constitutionally recognized and likewise affirmed by our
proscribes this conduct because it is "detrimental (or dangerous) to those conditions statutes as a special contract of permanent union. Accordingly, judicial
upon which depend the existence and progress of human society" and not because the employees have been sanctioned for their dalliances with married persons or
conduct is proscribed by the beliefs of one religion or the other. Although admittedly, for their own betrayals of the marital vow of fidelity.
moral judgments based on religion might have a compelling influence on those
engaged in public deliberations over what actions would be considered a moral
disapprobation punishable by law. After all, they might also be adherents of a religion In this case, it was not disputed that, like respondent, the father of her child was
and thus have religious opinions and moral codes with a compelling influence on them; unmarried. Therefore, respondent cannot be held liable for disgraceful and immoral
the human mind endeavors to regulate the temporal and spiritual institutions of society conduct simply because she gave birth to the child Christian Jeon out of
wedlock.44 (Citations omitted and emphases ours)
in a uniform manner, harmonizing earth with heaven. Succinctly put, a law could be
religious or Kantian or Aquinian or utilitarian in its deepest roots, but it must have an
articulable and discernible secular purpose and justification to pass scrutiny of the Both Estrada and Radamare administrative cases against employees in the civil
religion clauses.x x x.42(Citations omitted and emphases ours) service. The Court, however, sees no reason not to apply the doctrines enunciated in
Estrada and Radamin the instant case. Estrada and Radamalso required the Court to
Accordingly, when the law speaks of immoral or, necessarily, disgraceful conduct, it delineate what conducts are considered disgraceful and/or immoral as would constitute
pertains to public and secular morality; it refers to those conducts which are proscribed a ground for dismissal. More importantly, as in the said administrative cases, the
because they are detrimental to conditions upon which depend the existence and instant case involves an employees security of tenure; this case likewise concerns
progress of human society. Thus, in Anonymous v. Radam,43 an administrative case employment, which is not merely a specie of property right, but also the means by
which the employee and those who depend on him live.45
involving a court utility worker likewise charged with disgraceful and immoral conduct,
applying the doctrines laid down in Estrada, the Court held that:
It bears stressing that the right of an employee to security of tenure is protected by the
Constitution. Perfunctorily, a regular employee may not be dismissed unless for cause
For a particular conduct to constitute "disgraceful and immoral" behavior under civil
provided under the Labor Code and other relevant laws, in this case, the 1992 MRPS.
service laws, it must be regulated on account of the concerns of public and secular
As stated above, when the law refers to morality, it necessarily pertains to public and
morality. It cannot be judged based on personal bias, specifically those colored by
particular mores. Nor should it be grounded on "cultural" values not convincingly secular morality and not religious morality. Thus, the proscription against "disgraceful
demonstrated to have been recognized in the realm of public policy expressed in the or immoral conduct" under Section 94(e) of the 1992 MRPS, which is made as a cause
Constitution and the laws. At the same time, the constitutionally guaranteed rights for dismissal, must necessarily refer to public and secular morality. Accordingly, in
(such as the right to privacy) should be observed to the extent that they protect order for a conduct tobe considered as disgraceful or immoral, it must be "detrimental
behavior that may be frowned upon by the majority. (or dangerous) to those conditions upon which depend the existence and progress of
human society and not because the conduct is proscribed by the beliefs of one religion Accordingly, the labor tribunals erred in upholding the validity of the petitioners
or the other." dismissal. The labor tribunals arbitrarily relied solely on the circumstances surrounding
the petitioners pregnancy and its supposed effect on SSCW and its students without
Thus, in Santos v. NLRC,46 the Court upheld the dismissal of a teacher who had an evaluating whether the petitioners conduct is indeed considered disgraceful or immoral
extra-marital affair with his co-teacher, who is likewise married, on the ground of in view of the prevailing norms of conduct. In this regard, the labor tribunals respective
disgraceful and immoral conduct under Section 94(e) of the 1992 MRPS. The Court haphazard evaluation of the evidence amounts to grave abuse of discretion, which the
pointed out that extra-marital affair is considered as a disgraceful and immoral conduct Court will rectify.
is an afront to the sanctity of marriage, which is a basic institution of society, viz:
The labor tribunals finding that the petitioners pregnancy out of wedlock despite the
We cannot overemphasize that having an extra-marital affair is an afront to the sanctity absence of substantial evidence is not only arbitrary, but a grave abuse of discretion,
of marriage, which is a basic institution of society. Even our Family Code provides that which should have been set right by the CA.
husband and wife must live together, observe mutual love, respect and fidelity. This is
rooted in the fact that both our Constitution and our laws cherish the validity of There is no substantial evidence to
marriage and unity of the family. Our laws, in implementing this constitutional edict on prove that the petitioners pregnancy
marriage and the family underscore their permanence, inviolability and solidarity.47 out of wedlock caused grave scandal
to SSCW and its students.
The petitioners pregnancy out of
wedlock is not a disgraceful or SSCW claimed that the petitioner was primarily dismissed because her pregnancy out
immoral conduct since she and the of wedlock caused grave scandal to SSCW and its students. That the scandal brought
father of her child have no about by the petitioners indiscretion prompted them to dismiss her. The LA upheld the
impediment to marry each other. respondents claim, stating that:

In stark contrast to Santos, the Court does not find any circumstance in this case which In this particular case, an "objective" and "rational evaluation" of the facts and
would lead the Court to conclude that the petitioner committed a disgraceful or immoral circumstances obtaining in this case would lead us to focus our attention x x x on the
conduct. It bears stressing that the petitioner and her boyfriend, at the time they impact of the act committed by the complainant. The act of the complainant x x x
conceived a child, had no legal impediment to marry. Indeed, even prior to her eroded the moral principles being taught and project[ed] by the respondent [C]atholic
dismissal, the petitioner married her boyfriend, the father of her child. As the Court held school to their young lady students.48 (Emphasis in the original)
in Radam, there is no law which penalizes an unmarried mother by reason of her
sexual conduct or proscribes the consensual sexual activity between two unmarried On the other hand, the NLRC opined that:
persons; that neither does such situation contravene any fundamental state policy
enshrined in the Constitution.
In the instant case, when the complainant-appellant was already conceiving a child
even before she got married, such is considered a shameful and scandalous behavior,
Admittedly, the petitioner is employed in an educational institution where the teachings inimical to public welfare and policy. It eroded the moral doctrines which the
and doctrines of the Catholic Church, including that on pre-marital sexual relations, is respondent Catholic school, an exclusive school for girls, is teaching the young girls.
strictly upheld and taught to the students. That her indiscretion, which resulted in her Thus, when the respondent-appellee school terminated complainant-appellants
pregnancy out of wedlock, is anathema to the doctrines of the Catholic Church. services, it was a valid exercise of its management prerogative. Whether or not she
However, viewed against the prevailing norms of conduct, the petitioners conduct was a teacher is of no moment. There is no separate set of rules for non-teaching
cannot be considered as disgraceful or immoral; such conduct is not denounced by personnel. Respondents-appellees uphold the teachings of the Catholic Church on pre-
public and secular morality. It may be an unusual arrangement, but it certainly is not marital sex and that the complainant-appellant as an employee of the school was
disgraceful or immoral within the contemplation of the law. expected to abide by this basic principle and to live up with the standards of their
purely Catholic values. Her subsequent marriage did not take away the fact that she
To stress, pre-marital sexual relations between two consenting adults who have no had engaged in pre-marital sex which the respondent-appellee school denounces as
impediment to marry each other, and, consequently, conceiving a child out of wedlock, the same is opposed to the teachings and doctrines it espouses.49 (Emphasis ours)
gauged from a purely public and secular view of morality, does not amount to a
disgraceful or immoral conduct under Section 94(e) of the 1992 MRPS.
Contrary to the labor tribunals declarations, the Court finds that SSCW failed to SSCW, as employer, undeniably has the right to discipline its employees and, if need
adduce substantial evidence to prove that the petitioners indiscretion indeed caused be, dismiss themif there is a valid cause to do so. However, as already explained, there
grave scandal to SSCW and its students. Other than the SSCWs bare allegation, the is no cause to dismiss the petitioner. Her conduct is not considered by law as
records are bereft of any evidence that would convincingly prove that the petitioners disgraceful or immoral. Further, the respondents themselves have admitted that
conduct indeed adversely affected SSCWs integrity in teaching the moral doctrines, SSCW, at the time of the controversy, does not have any policy or rule against an
which it stands for. The petitioner is only a non-teaching personnel; her interaction with employee who engages in pre-marital sexual relations and conceives a child as a
SSCWs students is very limited. Itis thus quite impossible that her pregnancy out of result thereof. There being no valid basis in law or even in SSCWs policy and rules,
wedlock caused such a grave scandal, as claimed by SSCW, as to warranther SSCWs dismissal of the petitioner is despotic and arbitrary and, thus, not a valid
dismissal. exercise of management prerogative.

Settled is the rule that in termination cases, the burden of proving that the dismissal of In sum, the Court finds that the petitioner was illegally dismissed as there was no just
the employees was for a valid and authorized cause rests on the employer. It is cause for the termination of her employment. SSCW failed to adduce substantial
incumbent upon the employer to show by substantial evidence that the termination of evidence to establish that the petitioners conduct, i.e., engaging in pre-marital sexual
the employment of the employees was validly made and failure to discharge that duty relations and conceiving a child out of wedlock, assessed in light of the prevailing
would mean that the dismissal is not justified and therefore illegal.50 "Substantial norms of conduct, is considered disgraceful or immoral. The labor tribunals gravely
evidence is more than a mere scintilla of evidence. It means such relevant evidence as abused their discretion in upholding the validity of the petitioners dismissal as the
a reasonable mind might accept as adequateto support a conclusion, even if other charge against the petitioner lay not on substantial evidence, but on the bare
minds equally reasonable mightconceivably opine otherwise."51 allegations of SSCW. In turn, the CA committed reversible error in upholding the
validity of the petitioners dismissal, failing torecognize that the labor tribunals gravely
Indubitably, bare allegations do not amount to substantial evidence. Considering that abused their discretion in ruling for the respondents.
the respondents failed to adduce substantial evidence to prove their asserted cause for
the petitioners dismissal, the labor tribunals should not have upheld their allegations The petitioner is entitled to
hook, line and sinker. The labor tribunals respective findings, which were arrived at separation pay, in lieu of actual
sans any substantial evidence, amounts to a grave abuse of discretion, which the CA reinstatement, full backwages and
should have rectified. "Security of tenure is a right which may not be denied on mere attorneys fees, but not to moral and
speculation of any unclearand nebulous basis."52 exemplary damages.

The petitioners dismissal is not a Having established that the petitioner was illegally dismissed, the Court now
valid exercise of SSCWs determines the reliefs thatshe is entitled to and their extent. Under the law and
management prerogative. prevailing jurisprudence, "an illegally dismissed employee is entitled to reinstatement
as a matter of right."54 Aside from the instances provided under Articles 28355 and
The CA be labored the management prerogative of SSCW to discipline its employees. 28456 of the Labor Code, separation pay is, however, granted when reinstatement is no
The CA opined that the petitioners dismissal is a valid exercise of management longer feasible because of strained relations between the employer and the employee.
prerogative to impose penalties on erring employees pursuant to its policies, rules and In cases of illegal dismissal, the accepted doctrine is that separation pay is available in
regulations. lieu of reinstatement when the latter recourse is no longer practical or in the best
interest of the parties.57
The Court does not agree.
In Divine Word High School v. NLRC,58 the Court ordered the employer Catholic school
to pay the illegally dismissed high school teacher separation pay in lieu of actual
The Court has held that "management is free to regulate, according to its own
reinstatement since her continued presence as a teacher in the school "may well
discretion and judgment, all aspects of employment, including hiring, work bemet with antipathy and antagonism by some sectors in the school community."59
assignments, working methods, time, place and manner of work, processes to be
followed, supervision of workers, working regulations, transfer of employees, work
supervision, lay off of workers and discipline, dismissal and recall of workers. The In view of the particular circumstances of this case, it would be more prudent to direct
exercise of management prerogative, however, is not absolute as it must beexercised SSCW to pay the petitioner separation pay inlieu of actual reinstatement. The
in good faith and with due regard to the rights of labor." Management cannot exercise continued employment of the petitioner with SSCW would only serve to intensify the
its prerogative in a cruel, repressive, or despotic manner.53 atmosphere of antipathy and antagonism between the parties. Consequently, the Court
awards separation pay to the petitioner equivalent to one (1) month pay for every year WHEREFORE, in consideration of the foregoing disquisitions, the petition is
of service, with a fraction of at least six (6) months considered as one (1) whole year, GRANTED. The Decision dated September 24, 2008 and Resolution dated March 2,
from the time of her illegal dismissal up to the finality of this judgment, as an alternative 2009 of the Court of Appeals in CA-G.R. SP No. 100188 are hereby REVERSED and
to reinstatement. SET ASIDE.

Also, "employees who are illegally dismissed are entitled to full backwages, inclusive of The respondent, St. Scholasticas College Westgrove, is hereby declared guilty of
allowances and other benefits or their monetary equivalent, computed from the time illegal dismissal and is hereby ORDERED to pay the petitioner, Cheryll Santos Leus,
their actual compensation was withheld from them up to the time of their actual the following: (a) separation pay in lieu of actual reinstatement equivalent to one (1)
reinstatement but if reinstatement is no longer possible, the backwages shall be month pay for every year of service, with a fraction of at least six (6) months
computed from the time of their illegal termination up to the finality of the considered as one (1) whole year from the time of her dismissal up to the finality of this
decision."60 Accordingly, the petitioner is entitled to an award of full backwages from Decision; (b) full backwages from the time of her illegal dismissal up to the finality of
the time she was illegally dismissed up to the finality of this decision. this Decision; and (c) attorneys fees equivalent to ten percent (10%) of the total
monetary award. The monetary awards herein granted shall earn legal interest at the
Nevertheless, the petitioner is not entitled to moral and exemplary damages. "A rate of six percent (6%) per annumfrom the date of the finality of this Decision untilfully
dismissed employee isentitled to moral damages when the dismissal is attended by paid. The case is REMANDED to the Labor Arbiter for the computation of petitioners
bad faith or fraud or constitutes an act oppressive to labor, or is done in a manner monetary awards.
contrary to good morals, good customs or public policy. Exemplary damages may be
awarded if the dismissal is effected in a wanton, oppressive or malevolent manner."61 SO ORDERED.

"Bad faith, under the law, does not simply connote bad judgment or
negligence.1wphi1 It imports a dishonest purpose or some moral obliquity and
conscious doing of a wrong, or a breach of a known duty through some motive or
interest or ill will that partakes of the nature of fraud."62

"It must be noted that the burden of proving bad faith rests on the one alleging
it"63 since basic is the principle that good faith is presumed and he who alleges bad
faith has the duty to prove the same.64 "Allegations of bad faith and fraud must be
proved by clear and convincing evidence."65

The records of this case are bereft of any clear and convincing evidence showing that
the respondents acted in bad faith or in a wanton or fraudulent manner in dismissing
the petitioner. That the petitioner was illegally dismissed is insufficient to prove bad
faith. A dismissal may be contrary to law but by itself alone, it does not establish bad
faith to entitle the dismissed employee to moral damages. The award of moral and
exemplary damages cannot be justified solely upon the premise that the employer
dismissed his employee without cause.66

However, the petitioner is entitled to attorneys fees in the amount of 10% of the total
monetary award pursuant to Article 11167 of the Labor Code. "It is settled that where an
employee was forced to litigate and, thus, incur expenses to protect his rights and
interest, the award of attorneys fees is legally and morally justifiable."68

Finally, legal interest shall be imposed on the monetary awards herein granted at the
rate of six percent (6%) per annumfrom the finality of this judgment until fully paid.69
PHILIPPINE REALTY AND HOLDINGS G. R. No. 165548 construction manager of PRHC, while Joselito Santos (Santos) was its general
CORPORATION, manager and vice-president for operations.
Petitioner,
Sometime between April 1988 and October 1989, the two corporations entered into
four major construction projects, as evidenced by four duly notarized construction
- versus - agreements. LCDC committed itself to the construction of the buildings needed by
PRHC, which in turn committed itself to pay the contract price agreed upon. These
were the four construction projects the parties entered into involving a Project 1,
LEY CONSTRUCTION AND Project 2, Project 3 (all of which involve the Alexandra buildings) and a Tektite Building:
DEVELOPMENT CORPORATION,
Respondent. 1. Construction Agreement dated 25 April 1988 Alexandra-
x-----------------------x Cluster C involving the construction of two units of seven-
LEY CONSTRUCTION AND storey buildings with basement at a contract price
DEVELOPMENT CORPORATION, G. R. No. 167879 of P 68,000,000 (Project 1);
Petitioner,
Present: 2. Construction Agreement dated 25 July 1988 Alexandra-
Cluster B involving the construction of an eleven-storey twin-
- versus - CARPIO MORALES, J., tower building with a common basement at a contract price
Chairperson, of P140,500,000 (Project 2);
BRION,
BERSAMIN, 3. Construction Agreement dated 23 November 1988
PHILIPPINE REALTY AND HOLDINGS VILLARAMA, JR., and Alexandra-Cluster E involving the construction of an eleven-
CORPORATION, SERENO, JJ. storey twin-tower building with common basement at a
Respondent. contract price of P 140,500,000 (Project 3); and
Promulgated:
4. Construction Agreement dated 10 October 1989 Tektite
June 13, 2011 Towers Phase I involving the construction of Tektite Tower
Building I at Tektite Road at a contract price
of P 729,138,964 (Tektite Building).
x--------------------------------------------------x
DECISION
The agreement covering the construction of the Tektite Building was signed by a Mr.
Campos under the words Phil. Realty & Holdings Corp. and by Santos as a
SERENO, J.: witness. Manuel Ley, the president of LCDC, signed under the words Ley Const. &
Dev. Corp.
These are consolidated petitions for review under Rule 45 of the New Rules of Civil
Procedure filed by both parties from a Court of Appeals (CA) Decision in CA-GR No. The terms embodied in the afore-listed construction agreements were almost identical.
71293 dated 30 September 2004. This Decision reversed a Decision of the Regional Each agreement provided for a fixed price to be paid by PRHC for every project.
Trial Court (RTC), National Capital Judicial Region (NCJR), Branch 135 in Makati City
dated 31 January 2001 in Civil Case No. 96-160.
All the aforementioned agreements contain the following provisions:
The foregoing are the facts culled from the record, and from the findings of the CA and
the RTC. ARTICLE IV CONTRACT PRICE

Ley Construction and Development Corporation (LCDC) was the project contractor for The Contract Price shall not be subject to escalation except due to
the construction of several buildings for Philippine Realty & Holdings Corporation work addition, (approved by the OWNER and the ARCHITECT) and
(PRHC), the project owner. Engineer Dennis Abcede (Abcede) was the project to official increase in minimum wage as covered by the Labor
 Adjustment Clause below. All costs and expenses over and above the It claimed that, without a corresponding increase in the fixed prices found in the
Contract Price except as provided in Article V hereof shall be for the agreements, it would be impossible for it to finish the construction of the Tektite
account of the CONTRACTOR. It is understood that there shall be no Building. In their analysis of the project plans for the building and of all the external
escalation on the price of materials. However, should there be any factors affecting the completion of the project, the parties discovered that even if LCDC
increase in minimum daily wage level, the adjustment on labor cost were able to collect the entire balance from the contract, the collected amount would
only shall be considered based on conditions as stipulated below. still be insufficient to purchase all the materials needed to complete the construction of
the building.
ARTICLE VII TIME OF COMPLETION
Both parties agreed that their foremost objective should be to ensure that the Tektite
Building project would be completed. To achieve this goal, they entered into another
Should the work be delayed by any act or omission of the OWNER or agreement. Abcede asked LCDC to advance the amount necessary to complete
any other person employed by or contracted by the OWNER in the construction. Its president acceded, on the absolute condition that it be allowed to
project, including days in the delivery or (sic) materials furnished by escalate the contract price. It wanted PRHC to allow the escalation and to disregard
the OWNER or others, or by any appreciable additions or alterations the prohibition contained in Article VII of the agreements. Abcede replied that he would
in the work ordered by the OWNER or the ARCHITECT, under Article take this matter up with the board of directors of PRHC.
V or by force majeure, war, rebellion, strikes, epidemics, fires, riots, or
acts of the civil or military authorities, the CONTRACTOR shall be The board of directors turned down the request for an escalation agreement.[3] Neither
granted time extension. PRHC nor Abcede gave notice to LCDC of the alleged denial of the proposal.
However, on 9 August 1991 Abcede sent a formal letter to LCDC, asking for its
Sometime after the execution of these agreements, two more were entered into by the conformity, to the effect that should it infuse P36 million into the project, a contract
parties: price escalation for the same amount would be granted in its favor by PRHC.[4]

1. Letter-agreement dated 24 August 1989 Project 3 for the This letter was signed by Abcede above the title Construction Manager, as well as by
construction of the drivers quarters in Project 3; and LCDC.[5] A plain reading of the letter-agreement will reveal that the blank above the
words PHIL. REALTY & HOLDINGS CORP. was never signed,[6] viz:
2. Agreement dated 7 January 1993 Tektite Towers for the
concreting works on GL, 5, 9, & A (ground floor to the Very truly yours,
5th floor) of the Tektite Towers.
(Signed)
Santos signed the letter-agreement on the construction of the drivers quarters in DENNIS A. ABCEDE
Project 3,[1] while both he and Abcede signed the letter-agreement on the concreting Construction Manager
works on GL, 5, 9, and A, and also of Project 3.[2]

In order to jump-start the construction operations, LCDC was required to submit a CONFORME:
performance bond as provided for in the construction agreements. As stated in these
agreements, as soon as PRHC received the performance bond, it would deliver its (Signed) .
initial payment to LCDC. The remaining balance was to be paid in monthly progress LEY CONST. & DEV. CORP.
payments based on actual work completed. In practice, these monthly progress
payments were used by LCDC to purchase the materials needed to continue the
construction of the remaining parts of the building. APPROVED & ACCEPTED :

In the course of the construction of the Tektite Building, it became evident to both .
parties that LCDC would not be able to finish the project within the agreed PHIL. REALTY & HOLDINGS CORP.
period. Thus, through its president, LCDC met with Abcede to discuss the cause of the
delay. LCDC explained that the unanticipated delay in construction was due mainly to
the sudden, unexpected hike in the prices of cement and other construction materials.
Notwithstanding the absence of a signature above PRHCs name, LCDC proceeded On 20 January 1992, LCDC wrote a letter addressed to Santos stating that it had
with the construction of the Tektite Building, expending the entire amount necessary to already complied with its commitment as of 31 December 1991 and was requesting the
complete the project. From August to December 1991, it infused amounts release of P 2,248,463.92. It attached a 16 January 1992 letter written by D.A. Abcede
totaling P 38,248,463.92. These amounts were not deposited into the joint account of & Associates, informing PRHC of the total cash infusion made by LCDC to the project,
LCDC and PRHC, but paid directly to the suppliers upon the instruction of Santos.[7] to wit:

LCDC religiously submitted to PRHC monthly reports[8] that contained the amounts of in compliance with the commitment of Ley Construction and
infusion it made from the period August 1991 to December 1991. These monthly Devt Corp. to infuse P36.00M for the above subject project x
reports all had the following heading: xx

MR. JOSELITO L. SANTOS x x x we would like to present the total cash infusion by
VICE PRESIDENT OPERATION LCDC for the period covering the month of August, 1991 to
PHIL. REALTY & HOLDINGS CORP. December 1991 broken down as follows:
4TH Floor Quad Alpha Centrum Bldg.
125 Pioneer St., Mandaluyong, M.M. T O T A
L: P 38,248,463.92
T H R U : D.A. ABCEDE & ASSOCIATES
Construction Managers
PRHC never replied to this letter.
SUBJECT : P 36.0M INFUSION-TEKTITE TOWERS PROJECT
In another letter dated 7 September 1992, there was a reconciliation of accounts
between the two corporations with respect to the balances due for Projects 1, 2, and 3.
The reconciliation of accounts resulted in PRHC owing LCDC the sum
From these monthly reports, it can be gleaned that the following were the cash of P 20,862,546.41, broken down as follows:
infusions made by LCDC:
Project 1 P 1,783,046.72

Month Amount Date of monthly Project 2 P 13,550,003.93

report
August 1991 PhP 6,724,632.26 15 October 1991[9] Project 3 P 5,529,495.76

September 1991 PhP 7,326,230.69 7 October 1991[10] P 20,862,546.41

October 1991 PhP 7,756,846.88 7 November 1991[11]

November 1991 PhP 8,553,313.50 7 December 1991[12] In a letter dated 8 September 1992,[14] when 96.43% of Tektite Building had been
completed, LCDC requested the release of the P 36 million escalation price. PRHC did
December 1991 PhP 7,887,440.50 9 January 1992[13] not reply, but after the construction of the building was completed, it conveyed its
decision in a letter on 7 December 1992.[15] That decision was to set off, in the form of
PhP 38,248,463.92 liquidated damages, its claim to the supposed liability of LCDC, to wit:

.........

PRHC never replied to any of these monthly reports.

 In this regard, please be advised that per owners decision; your claim In addition to the agreed-upon outstanding balance in favor of LCDC, the latter claimed
of P 36,000,00.00 adjustment will be applied to the liquidated another outstanding balance of P 232,367.96 in its favor for the construction of the
damages for concreting works computed in the amount of Thirty Nine drivers quarters in Project 3.
Million Three Hundred Twenty Six Thousand Eight Hundred
Seventeen & 15/100 (P39,326,817.15) as shown in the attached It also further claimed the amount of P 7,112,738.82, representing the balance for the
sheet. concreting works from the ground floor to the fifth floor of the Tektite Building.

Further, the net difference P 3,326,817.15 will also be considered Seeking to recover all the above-mentioned amounts, LCDC filed a Complaint
waived as additional consideration.
with Application for the Issuance of a Writ of Preliminary Attachment on 2 February
......... 1996 before the RTC in Makati City docketed as Civil Case No. 96-160:

In a letter dated 18 January 1993, LCDC, through counsel, demanded payment of the WHEREFORE, it is respectfully prayed that:
agreed escalation price of P 36 million. In its reply on 16 February 1993, PRHC
suddenly denied any liability for the escalation price. In the same letter, it claimed that 1. Immediately upon the filing of this Complaint, an order of
LCDC had incurred 111 days of delay in the construction of the Tektite Building and preliminary attachment be issued over defendant Philrealtys
demanded that the latter pay P 39,326,817.15 as liquidated damages. This claim was properties as security for any judgment which plaintiff may
set forth in PRHCs earlier 7 December 1992 letter. recover against said defendant; and

2. After trial, judgment be rendered as follows:

LCDC countered that there were many times when its requests for time extension
although due to reasonable causes sanctioned by the construction agreement such as
power failures, water supply interruption, and scarcity of construction materials were 2.1. On the first, second and third alternative causes
unreasonably reduced to shorter periods by PRHC. In its letter dated 9 December of action,
1992, LCDC claimed that in a period of over two years, out of the 618 days of
extension it requested, only 256 days or not even half the number of days originally (a) Ordering defendant Philrealty to pay
requested were considered. It further claimed that its president inquired from Abcede plaintiff actual damages in the amount
and Santos why its requests for extension of time were not granted in full. The two, of P36,000,00.00 with legal interest thereon
however, assured him that LCDC would not be penalized with damages for even a from the filing of this Complaint until fully
single day of delay, because the fact that it was working hard on the Tektite Building paid;
project was known to PRHC.[16]
(b) In the alternative, ordering defendants
Abcede and Santos to jointly and severally,
Thereafter, in a letter dated 18 January 1993, LCDC demanded payment of the agreed
in the event that they acted without
total balance for Projects 1, 2, and 3. Through a reply letter dated 16 February 1993,
necessary authority, to pay plaintiff actual
PRHC denied any liability. During the course of the proceedings, both parties
damagesin the amount of P36,000,00.00
conducted another reconciliation of their respective records. The reconciliation showed
the following balances in favor of LCDC: with legal interest thereon from the filing of
this Complaint until fully paid; and

Project 1 P 1,703,955.07 (c) Ordering defendant Philrealty or

Project 2 P 13,251,152.61
defendants Abcede and Santos to pay
plaintiff exemplary damages in the amount
Project 3 P 5,529,495.76 to be determined by the Honorable Court
Total: P 20,484,603.44 but not less than P5,000,000.00

2.2. On the fourth cause of action, ordering defendant

Philrealty to pay plaintiff
 (a) Actual damages in the amount Due to LCDC Overpaid to LCDC
of P7,112,738.82 with legal interest thereon
from the filing of this Complaint until fully Tektite Building P4,646,947.35
paid; and
Project 1 P1,703,955.07
(b) Exemplary damages in the amount to be
determined by the Honorable Court but not
less than P1,000,000.00 Project 2 P3,251,152.61

2.3. On the fifth cause of action, ordering defendant P14,955,107.68 P4,646,947.35

Philrealty to pay plaintiff

(a) Actual damages in the amount Both parties agreed that the only remaining issues to be resolved by the court, with
of P20,862,546.41 with legal interest respect to the Tektite Building project and Projects 1 to 3, were as follows:
thereon from the filing of this Complaint until
fully paid; and
a) The validity of Ley Constructions claim that Philrealty had
granted the former a contract price escalation for Tektite
(b) Exemplary damages in an amount to be
Tower I in the amount of P36,000,000.00
determined by the Honorable Court but not
less than P5,000,000.00.
b) The validity of the claim of Philrealty that the following
amounts should be charged to Ley Construction:
2.4. On the sixth cause of action, ordering defendant
Philrealty to pay plaintiff
Payments/Advances without LCDCs conformity and
(a) Actual damages in the amount recommendation of the Construction Manager, D.A. Abcede
of P232,367.96 with legal interest thereon & Associates that subject items are LCDCs account:
from the filing of this Complaint until fully
paid; and a. Esicor, Inc. waterproofing works Cluster B P1,121,000.00
b. Ideal Marketing, Inc. waterproofing works at Cluster B,
(b) Exemplary damages in the amount to be Quadrant 2 P885,000.00 P2,006,000.00
determined by the Honorable Court but not
less than P100,000.00
c) The claim of Philrealty for liquidated damages for delay in
completion of the construction as follows:
2.5. On the seventh cause of action, ordering
defendant Philrealty and/or defendants Abcede and
Santos to pay plaintiff attorneys fees in the amount d) Tektite Tower I - P39,326,817.15
of P750,000.00 and expenses of litigation in the Alexandra Cluster B - 12,785,000.00
amount of P50,000.00, plus costs. Alexandra Cluster C - 1,100,000.00

Plaintiff prays for such other just and equitable reliefs and
as may be warranted by the circumstances.
e) The claim of Ley Construction for additional sum
On 23 July 1999, a joint Stipulation of Facts[17] was filed by the parties. In the said of P2,248,463.92 which it allegedly infused for the Tektite
stipulation, they reconciled their respective claims on the payments made and the Tower I project over and above the original P36,000,000.00 it
balances due for the construction of the Tektite Building project, Project 1, and Project had allegedly bound itself to infuse.[18]
2. The reconciliation shows that the following amounts are due and/or overpaid:
On 31 January 2001, the RTC promulgated its Decision. LCDC filed a Motion for 7. P750,000.00 for attorneys fees and expenses of
Partial Reconsideration, which was granted. litigation; and

It must be noted that in the Stipulation of Facts, the parties had jointly agreed that 8. Costs.
the P7,112,738.82 unpaid account in the concreting of Tektite Building would no longer
be included in the list of claims submitted to the RTC for decision. Nonetheless, this SO ORDERED.[19]
amount was still included as an award in the trial courts 7 May 2001 amended
Decision, the dispositive portion of which provides:
PRHC filed a Notice of Appeal on 14 June 2001. The Court of Appeals, in CA-G.R. CV
No. 71293,[20] reversed the lower courts amended Decision on 30 September 2004 and
WHEREFORE, premises considered, judgment is hereby rendered: ruled thus:
A. Dismissing the counter-claim of defendant DENNIS
ABCEDE and the cross-claim of defendant JOSELITO WHEREFORE, premises considered, the assailed January 31, 2001 decision
SANTOS; and and the May 7, 2001 amended decision are hereby REVERSED and SET
ASIDE and a new one is entered:
B. Ordering defendant PHILIPPINE REALTY AND
HOLDING CORPORATION to pay plaintiff LEY I. FINDING plaintiff-appellee LCDC LIABLE to defendant-appellant
CONSTRUCTION AND DEVELOPMENT PRHC in the amount of Sixty million Four Hundred Sixty Four (Thousand)
CORPORATION: Seven Hundred Sixty Four 90/100 (P60,464,764.90) PESOS detailed as
follows:
1. P33,601,316.17, for the Tektite Tower I Project
with legal interest thereon from date of the filing [1] P39,326,817.15 liquidated damages pursuant to contract for delay
of the complaint until fully paid; incurred by plaintiff-appellee LCDC in the construction of Tektite
Tower Phase I, the length of delay having been signed and confirmed
2. P13,251,152.61 for Alexandra Cluster B with by LCDC;
legal interest thereon from date of the filing of
the complaint until fully paid;
[2] P12,785,000.00 liquidated damages pursuant to contract for delay
3. P1,703,955.07 for Alexandra Cluster C with incurred by plaintiff-appellee LCDC in the construction of Alexandra
legal interest thereon from date of the filing of Cluster B, the length of delay having been signed and confirmed by
the complaint until fully paid; LCDC;

4. P7,112,738.82 in actual damages for the [3] P1,700,000.00 liquidated damages pursuant to contract for delay
concreting works of Tektite Tower I, with legal incurred by plaintiff appellee LCDC in the construction of Alexandra
interest thereon from the date of the filing of the Cluster C, the length of delay having been confirmed by LCDC;
complaint until fully paid;
[4] P4,646,947.75 overpayment by defendant-appellant PRHC to
5. P5,529,495.76 in actual damages for the plaintiff-appellee LCDC for the Tektite Tower Phase I Project;
construction of Alexandra Cluster E, with legal
interest thereon from the date of the filing of the
complaint until fully paid; [5] P1,121,000.00 expenses incurred by defendant-appellant PRHC
for corrective works to redo/repair allegedly defective Waterproofing
6. P232,367.96 in actual damages for the construction work or plaintiff-appellee LCDC in the Alexander Cluster
construction of the drivers quarters of Alexandra B Project which was paid by defendant-appellant PRHC to contractor
Cluster E, with legal interest thereon from the Escritor, Inc.;
date of the filing of the complaint until fully paid;
 [6] P885,000.00 expenses incurred by defendant-appellant PRHC for The respective liabilities of the parties as set forth above are hereby SET
corrective works to redo/repair allegedly defective Waterproofing OFF against each other and plaintiff-appellee LCDC is hereby DIRECTED to
construction work of plaintiff-appellee LCDC at the Alexandra Cluster pay defendant-appellant PRHC the net amount due of Three million Seven
B Quadrant in the Alexander Cluster B Project which was paid by Hundred Forty Seven Thousand Seven Hundred Ninety Three 50/100
defendant-appellant PRHC to contractor Ideal Marketing Inc., and (P3,747,793.50) PESOS with legal interest from date of filing of complaint.

II. FINDING defendant-appellant PRHC LIABLE to plaintiff-appellee SO ORDERED.

LCDC in the amount of Fifty Six million Seven Hundred Sixteen Thousand
Nine Hundred Seventy One 40/100 (P56,716,971.40) detailed as follows: PRHC came directly to this Court and filed a petition for review on certiorari docketed
as SC-G.R. No. 165548 to assail in part the appellate courts Decision. LCDC, on the
[1] P36,000,000.00 as acknowledged and agreed to by PHRC as a other hand, filed on 25 October 2004 a Motion for Reconsideration with the Court of
loan by LCDC, reimbursable when the Tektite Tower I project was Appeals. In its Resolution dated 12 April 2005, the appellate court denied the motion.
95% completed, but this was not classified by this Court as an LCDC then filed its own Petition for Review on certiorari, which was docketed as SC-
escalation for increase in price of materials because an escalation for G.R. No. 167879.
price increase of cost of materials is expressly prohibited by 10
October 1989 original contract; In a Resolution dated 6 August 2008, this Court consolidated G.R. Nos. 165548 and
16789.
[2] All expenditures for the projects are at the risk of the contractor
LCDC who is to be paid, according to the contract, a fixed contract
PRHC, in its Petition for Review[21] in G.R. No. 165548, submits the following issues for
price so that there is no such thing as overinfusion of expenses by
resolution:
plaintiff-appellee LCDC guaranteed under the contract that it would
pay all costs of materials irregardless (sic) of any increase in costs;
1. Whether the finding and ruling of the Court of Appeals that the
letter dated 07 December 1992 was a counter-offer on the part of
[3] P13,251,152.61 balance yet unpaid by defendant-appellant in the LCDC and a confirmation to treat the P36,000,000.00 as a loan
Alexandra Cluster B Project; deductible from liquidated damages is contrary to the allegations in
the pleadings and the evidence on record.
[4] P1,703,955.07 balance yet unpaid by defendant-appellant in the
Alexander Cluster C Project; 2. Whether the finding and ruling of the Court of Appeals that LCDC
is liable to PRHC in the amount of P5,529,495.76 representing the
[5] Defendant-appellant PRHC is hereby held not liable for balance of the contract price for the construction of Alexandra Cluster
P750,000.00 attorneys fees; E Project is contrary to the Stipulation of Facts jointly submitted by the
parties to the Trial Court.
[6] Plaintiff-appellee LCDC is not entitled to claim P7,112,738.82 for
concreting works for Tektite Towers Phase I which cause of action 3. Whether the finding and ruling of the Court of Appeals that
had already been dismissed by the parties in the 23 July 1999 Joint LCDC is liable to PRHC in the amount of P232,367.96 representing
Stipulation of Facts that the contract price for the October 10, 1989 the cost of the construction of the drivers quarters at Alexandra
Construction Agreement had been fully paid; Cluster E Project is contrary to the Stipulation of Facts jointly
submitted by the parties to the trial court. [22]

[7] P5,529,495.76 balance yet unpaid in the Alexandra Cluster E

For its part, LCDC submits the following grounds in support of its Petition for
Project;
Review[23] docketed as G.R. No. 167879:

[8] P232,367.96 balance yet unpaid for construction of the drivers

I. The Court of Appeals seriously erred in ruling that there is no
quarters at the Alexandra Cluster E. P36 million escalation agreement between LCDC and PRHC.
......... Whether or not LCDC was delayed in the performance of its obligation
to construct the buildings for PRHC and, corollary thereto, whether or
II. The Court of Appeals seriously erred in ruling that PHRC is not not the latter is entitled to liquidated damages for this supposed delay
obliged to pay LCDC the sum of P2,248,463.92 representing the cash in the construction of the Tektite Building and Projects 1 and 2;
infused by LCDC over and above the P36 million escalation price.
III
III. The Court of Appeals seriously erred in ruling that PRHC is not
Whether or not the CA can make an award or should have made an
obliged to pay LCDC the P7,112,738.82 balance for the concreting
award for the following causes of action not alleged in the pleadings
works of the ground floor to the fifth floor of the PSE.
or omitted in the stipulation of facts:
IV. The Court of Appeals seriously erred in awarding liquidated a. The supposed remaining balance
damages to PHRC under the TTI Project Agreement and the of P5,529,495.76 for Project 3, which was
Alexandra-Clusters B and C agreements. awarded by the appellate court;

V. The Court of Appeals seriously erred in ruling that LCDC is liable b. The supposed remaining balance
for the corrective works in Alexandra-Cluster B. of P232,367.96, which the appellate court
also awarded, representing the cost of the
VI. The Court of Appeals seriously erred in deleting the lower courts construction of the drivers quarters in Project
award of P750,000.00 attorneys fees and expenses of litigation to 3; and
LCDC and holding the latter liable to pay costs.[24]
c. The supposed remaining balance
At the outset, it must be noted that PRHC does not question the following amounts of P7,112,738.82, the cost of the concreting
granted by the Court of Appeals: works from the ground floor to the fifth floor
of the Tektite Building, which was not
(a) P13,251,152.61 awarded to LCDC as balance yet unpaid by PRHC awarded by the CA but was awarded by the
for Project 2; lower court;

(b) P1,703,955.07 awarded to LCDC as balance yet unpaid by PRHC for IV

Project 1; and
Whether or not LCDC should be held liable for the amount
(c) P4,646,947.75 awarded to PRHC for its overpayment to LCDC for of P2,006,000 for the corrective works to redo or repair the defective
the Tektite Building. waterproofing in Project 2; and

No appeal having been filed from the immediately preceding rulings, they attained V
finality.
Whether or not LCDC is entitled to the appellate courts award
We reduce the issues to the following: of P750,000 for attorneys fees and expenses of litigation and costs.

I We shall review the findings of fact of the Court of Appeals in view of some
inconsistencies with those of the trial court and the evidence on record, and as a result
Whether or not a valid escalation agreement was entered into by the of our analysis of the threshold legal issues.
parties and, if so, to what amount;

II
A subsequent escalation agreement was validly entered into by the parties, but PESOS (P36,000,000.00) ONLY in accordance with the following
only to the extent of P 36 million. schedule:
.........
The construction agreements, including the Tektite Building agreement, expressly
prohibit any increase in the contracted price. It can be inferred from this prohibition that 2.0 If Ley Construction & Dev. Corp. faithfully complies with above
the parties agreed to place all expenses over and above the contracted price for the commitment then Philippine Realty & Holdings Corporation shall grant
account of the contractor.[25] PRHC claims that since its board of directors never a contract price escalation to Ley Const. & Dev. Corp. in the amount
acceded to the proposed escalation agreement, the provision in the main agreement of THIRTY SIX MILLION PESOS (P36,000,000.00) ONLY in view of
prohibiting any increase in the contract price stands. the increase in cost of materials during the construction period which
amount shall be payable to Ley Const. & Dev. Corp. when the LCDC
LCDC, on the other hand, claims that the fact that any increase in the contract price is contract work is at least 95% complete.
prohibited under the Tektite Building agreement does not invalidate the parties
subsequent decision to supersede or disregard this prohibition. It argues that all the (over)
documentary and testimonial evidence it presented clearly established the existence of
a P 36 million escalation agreement.[26] Very truly yours,

LCDC now comes to this Court, asking that the escalation agreement with PRHC, as (Signed)
represented by Abcede and Santos, be declared to have effectively novated the DENNIS A. ABCEDE
prohibition in the Tektite Building agreement. Construction Manager

After examining the extensive evidence presented by both parties, we resolve to rule in
favor of LCDC. CONFORME:

LCDC relies in part on PRHCs 19 August 1991 letter-agreement,[27] which provides as (Signed) .
follows: LEY CONST. & DEV. CORP.

August 09, 1991

APPROVED & ACCEPTED :
LEY CONSTRUCTION DEV. CORP.
.
10th Flr., Pacific Star Bldg.
PHIL. REALTY & HOLDINGS CORP.
Makati Avenue, Makati
Metro Manila
It is apparent from its face that the letter was not signed by PRHC. This fact allegedly
Attention: Mr. Manuel Ley proves, according to PRHC, that it never expressed its consent to the letter and,
hence, cannot and should not be bound by the contents thereof. It further claims that
Subject: TEKTITE TOWERS
its internal rules require the signatures of at least two of its officers to bind the
corporation.
Gentlemen:

Relative to your contract for subject project this will confirm LCDC, for its part, submits that the fact that the letter is unsigned by PRHC is
agreement between your goodselves and Philippine Realty & insignificant, considering that other pieces of documentary and testimonial evidence
were presented to prove the existence of the escalation agreement.[28]
Holdings Corporation as follows:

1.0 Ley Construction & Development Corporation shall put in funds The appellate court found for PRHC and ruled that an unsigned letter does not bind the
for Tektite project with a total amount of THIRTY SIX MILLION party left out,[29] viz:
 But it is patent on the face of that letter that PRHC did not sign the In fact, correspondences to the construction manager that were addressed to or that
document. It is patent on its face that between the words: had to be noted by PRHC were most of the time coursed through and noted by Santos.
APPROVED: and the name Philippine Realty & Holdings Corporation, Likewise, its correspondences to LCDC were signed by him alone.[34]
there is no signature. Apparent therefore on its face, there was no
meeting of the minds between the parties LCDC and PRHC in the Santos testified that, as the vice president and general manager of PRHC, he was
P36,000,000.00 escalation for materials.[30] responsible for the implementation of the policies of the board,[35] to wit:

The Court of Appeals further held that a simple letter cannot novate a notarized Q: Why do you know the defendant Philippine Realty and Holding
agreement.[31] Corporation?

The appellate court is incorrect. The 9 August 1991 letter is not a simple letter, but A: I used to serve that company as Vice President and Director, sir.
rather a letter-agreementa contractwhich because of the existence of the consent of
both parties become valid and binding. It is true that no representative of PRHC signed Q: During what year did you serve as Vice President and Director of
under its typewritten name, where a signature should traditionally appear, to show the Philippine Realty.
companys acceptance and approval of the contents of the letter-agreement. This
Court, however, finds that the signature of Abcede is sufficient to bind PRHC. As its A: I started serving that company as General Manager in 1987 and I
construction manager, his very act of signing a letter embodying the P 36 million resigned in 1993, sir.
escalation agreement produced legal effect, even if there was a blank space for a
higher officer of PHRC to indicate approval thereof. At the very least, he indicated
Q: Will you state your duties and functions as General Manager and
authority to make such representation on behalf of PRHC.
Director of the company?

On direct examination, Abcede admitted that, as the construction manager, he A: I was responsible for the implementation of the policies approved
represented PRHC in running its affairs with regard to the execution of the aforesaid
by the board and the day to day general management of the
projects. He testified as follows:[32]
company from operation to administration to finance and
marketing, sir.[36]
Q. What is your profession by the way?
In addition, LCDC was able to establish that Abcede and Santos had signed, on behalf
A. Im a Civil Engineer by profession and presently, I am engaged in of PRHC, other documents that were almost identical to the questioned letter-
the construction management. agreement.[37] Santos was actually the one who signed for PRHC in the letter-
agreement for the construction of the drivers quarters in Project 3.[38] He signed under
Q. And what is your company engaged in the construction the words Approved: Phil. Realty & Holdings Corp.[39] While both he and Abcede
management? signed the letter-agreement for concreting works on GL, 5, 9, and A,[40] Santos again
signed under the word Approved.[41] PRHC does not question the validity of these
A. We actually, as construction managers, we represent the owners, agreements; it thereby effectively admits that these two individuals had actual authority
of the construction.[33] to sign on its behalf with respect to these construction projects.

All throughout the existence and execution of the construction agreements, it was the We cannot fault LCDC for relying on the representation of PRHC that the authority to
established practice of LCDC, each time it had concerns about the projects or contract with the former, in matters relating to the construction agreements, resided in
something to discuss with PRHC, to approach Abcede and Santos as representatives Abcede and Santos.
of the latter corporation. As far as LCDC was concerned, these two individuals were
the fully authorized representatives of PRHC. Thus, when they entered into the P 36 Furthermore, PRHC does not question the validity of its 7 December 1992 letter to
million escalation agreement with LCDC, PRHC effectively agreed thereto. LCDC wherein it seeks to apply LCDCs claim for the P 36 million escalation price to its
counterclaim for liquidated damages, which was signed by Santos under the words
Approved: Phil. Realty & Holdings Corp.:
 07 December 1992 authority to sign on behalf of the corporation; yet, it is not questioning the validity of the
LEY CONST. & DEV. CORP. above-quoted letter.
23rd Floor Pacific Star Bldg.
Sen. Gil Puyat Ave. corner We consider this letter as additional evidence that PRHC had given Abcede and
Makati Avenue, Makati, Metro Manila. Santos the authority to act on its behalf in making such a decision or entering into such
agreements with LCDC.
Attention : MR. MANUEL T. LEY
LCDC additionally argues that a subsequent escalation agreement was validly entered
Subject : TEKTITE TOWERS into, even on the following assumptions: (a) that Abcede and Santos had no authority
to agree to the escalation of the contract price without the approval of the board of
directors; and (b) that the 7 December 1992 letter cannot be construed as an
Gentlemen : acknowledgment by PRHC that it owed LCDC P36 million. It posits that the actions of
Abcede and Santos, assuming they were beyond the authority given to them by PRHC
This is in connection with your previous request for materials cost which they were representing, still bound PRHC under the doctrine of apparent
adjustment in the amount of Thirty Six Million & 0/100 authority. [42] Thus, the lack of authority on their part should not be used to prejudice it,
(P36,000,000.00). considering that the two were clothed with apparent authority to execute such
agreements. In addition, PRHC is allegedly barred by promissory estoppel from
In this regard, please be advised that per owners decision; your claim denying the claims of the other corporation.
of P36,000,00.00 adjustment will be applied to the liquidated
damages for concreting works computed in the amount of Thirty Nine We agree with LCDC.
Million Three Hundred Twenty Six Thousand Eight Hundred
Seventeen & 15/100 (P39,326,817.15) as shown in the attached In Yao Ka Sin Trading v. Court of Appeals, et al,.[43] this Court discussed the applicable
sheet. rules on the doctrine of apparent authority, to wit:

Further, the net difference P3,326,817.15 will also be considered The rule is of course settled that [a]lthough an officer or agent acts
waived as additional consideration. without, or in excess of, his actual authority if he acts within the scope
of an apparent authority with which the corporation has clothed him by
We trust you will find the above fair and equitable. holding him out or permitting him to appear as having such authority,
the corporation is bound thereby in favor of a person who deals with
Very truly yours, him in good faith in reliance on such apparent authority, as where an
officer is allowed to exercise a particular authority with respect to the
(Signed) business, or a particular branch of it, continuously and publicly, for a
DENNIS A. ABCEDE considerable time. Also, if a private corporation intentionally or
Construction Manager negligently clothes its officers or agents with apparent power to
perform acts for it, the corporation will be estopped to deny that such
Approved: apparent authority is real, as to innocent third persons dealing in good
faith with such officers or agents. [44]
(Signed by Santos)
PHIL. REALTY & HOLDINGS CORP. In Peoples Aircargo and Warehousing Co. Inc. v. Court of Appeals, et al.,[45] we held
that apparent authority is derived not merely from practice:

Its existence may be ascertained through (1) the general manner in

This letter was signed by Abcede, again as the construction manager, while Santos
signed above PHIL. REALTY & HOLDINGS CORP., which was notably the unsigned which the corporation holds out an officer or agent as having the
part in the 9 August 1991 letter. PRHC claims that neither one of them had the power to act or, in other words, the apparent authority to act in
general, with which it clothes him; or (2) the acquiescence in his acts
 of a particular nature, with actual or constructive knowledge thereof, Through estoppel an admission or representation is rendered
whether within or beyond the scope of his ordinary powers. conclusive upon the person making it, and cannot be denied or
disproved as against the person relying thereon.
We rule that Santos and Abcede held themselves out as possessing the authority to
act, negotiate and sign documents on behalf of PRHC; and that PRHC sanctioned Article 1431 is reflected in Rule 131, Section 2 (a) of the Rules of Court, viz.:
these acts. It would be the height of incongruity to now allow PRHC to deny the extent
of the authority with which it had clothed both individuals. We find that Abcedes role as
Sec. 2. Conclusive presumptions. The following are instances of
construction manager, with regard to the construction projects, was akin to that of a
general manager with regard to the general operations of the corporation he or she is conclusive presumptions:
representing.
(a) Whenever a party has by his own declaration, act or omission,
intentionally and deliberately led another to believe a particular thing
Consequently, the escalation agreement entered into by LCDC and Abcede is a valid
agreement that PRHC is obligated to comply with. This escalation agreement whether true, and to act upon such belief, he cannot, in any litigation arising
written or verbal has lifted, through novation, the prohibition contained in the Tektite out of such declaration, act or omission be permitted to falsify it.
Building Agreement.

In order for novation to take place, the concurrence of the following requisites is This Court has identified the elements of estoppel as:
indispensable:
[F]irst, the actor who usually must have knowledge, notice or
suspicion of the true facts, communicates something to another in a
1. There must be a previous valid obligation.
misleading way, either by words, conduct or silence; second, the
2. The parties concerned must agree to a new contract.
other in fact relies, and relies reasonably or justifiably, upon that
3. The old contract must be extinguished.
communication; third, the other would be harmed materially if the
4. There must be a valid new contract.[46]
actor is later permitted to assert any claim inconsistent with his earlier
conduct; and fourth, the actor knows, expects or foresees that the
All the aforementioned requisites are present in this case. The obligation of both other would act upon the information given or that a reasonable
parties not to increase the contract price in the Tektite Building Agreement was person in the actor's position would expect or foresee such action.[48]
extinguished, and a new obligation increasing the old contract price by P 36 million was
created by the parties to take its place.
This liability of PRHC, however, has a ceiling. The escalation agreement
What makes this Court believe that it is incorrect to allow PRHC to escape liability for entered into was for P 36 millionthe maximum amount that LCDC contracted itself to
the escalation price is the fact that LCDC was never informed of the board of directors
infuse and that PRHC agreed to reimburse. Thus, the Court of Appeals was correct in
supposed non-approval of the escalation agreement until it was too late. Instead,
PRHC, for its own benefit, waited for the former to finish infusing the entire amount into ruling that the P 2,248,463.92 infused by LCDC over and above the P 36 million should
the construction of the building before informing it that the said agreement had never be for its account, since PRHC never agreed to pay anything beyond the latter amount.
been approved by the board of directors. LCDC diligently informed PRHC each month
of the partial amounts the former infused into the project. PRHC must be deemed While PRHC benefited from this excess infusion, this did not result in its unjust
estopped from denying the existence of the escalation agreement for having allowed enrichment, as defined by law.
LCDC to continue infusing additional money spending for its own project, when it could
have promptly notified LCDC of the alleged disapproval of the proposed escalation Unjust enrichment exists when a person unjustly retains a benefit to the loss of
price by its board of directors. another, or when a person retains money or property of another against the
fundamental principles of justice, equity and good conscience.[49] Under Art. 22 of the
Estoppel is an equitable principle rooted in natural justice; it is meant to prevent Civil Code, there is unjust enrichment when (1) a person is unjustly benefited, and (2)
persons from going back on their own acts and representations, to the prejudice of such benefit is derived at the expense of or with damages to another.[50] The term is
others who have relied on them.[47] Article 1431 of the Civil Code provides: further defined thus:
 Unjust enrichment is a term used to depict result or effect of failure to damages, because its rightful and reasonable requests for time extension were denied
make remuneration of or for property or benefits received under
circumstances that give rise to legal or equitable obligation to account by PRHC.[56]
for them; to be entitled to remuneration, one must confer benefit by
mistake, fraud, coercion, or request.[51] It is important to note that PRHC does not question the veracity of the factual
representations of LCDC to justify the latters requests for extension of time. It insists,
however, that in any event LCDC agreed to the limits of the time extensions it
In order for an unjust enrichment claim to prosper, one must not only prove that the
granted.[57]
other party benefited from ones efforts or the obligations of others; it must also be
shown that the other party was unjustly enriched in the sense that the term unjustly
could mean illegally or unlawfully.[52] LCDC was aware that the escalation agreement The practice of the parties is that each time LCDC requests for more time, an
was limited to P36 million. It is not entitled to remuneration of the excess, since it did extension agreement is executed and signed by both parties to indicate their joint
not confer this benefit by mistake, fraud, coercion, or request. Rather, it voluntarily approval of the number of days of extension agreed upon.
infused the excess amount with full knowledge that PRHC had no obligation to
reimburse it. The applicable provision in the parties agreements is as follows:

Parenthetically, we note that the CA had ruled that the 7 December 1992 letter ARTICLE VII TIME OF COMPLETION
demonstrates that PRHC treated the P 36 million as a loan deductible from the .........
liquidated damages for which LCDC is supposedly liable.[53] It ruled that when PRHC
informed LCDC that it would apply the P 36 million to the liquidated damages, PRHC,
Should the work be delayed by any act or omission of the OWNER or
in effect, acknowledged that it was in debt to LCDC in the amount of P36 million, and
any other person employed by or contracted by the OWNER in the
that forms the basis for PRHCs liability to LCDC for the said amount.
project, including days in the delivery or (sic) materials furnished by
the OWNER or others, or by any appreciable additions or alterations
We disagree with this analysis. in the work ordered by the OWNER or the ARCHITECT, under Article
V or by force majeure, war, rebellion, strikes, epidemics, fires, riots, or
In a contract of loan, ownership of the money is transferred from the lender to the acts of the civil or military authorities, the CONTRACTOR shall be
borrower.[54] In this case, ownership of the P 36 million was never transferred to PRHC. granted time extension.
As previously mentioned, such amount was paid directly to the suppliers.[55] We find
that arrangement between PRHC and LCDC cannot be construed as a loan agreement
but rather, it was an agreement to advance the costs of construction. In Liwanag v. In case the CONTRACTOR encounters any justifiable cause or
Court of Appeals et al., we state: reason for delay, the CONTRACTOR shall within ten (10) days, after
encountering such cause of delay submit to the OWNER in writing a
Neither can the transaction be considered a loan, since in a contract written request for time extension indicating therein the requested
of loan once the money is received by the debtor, ownership over the contract time extension. Failure by the CONTRACTOR to comply with
same is transferred. Being the owner, the borrower can dispose of it this requirements (sic) will be adequate reason for the OWNER not to
for whatever purpose he may deem proper. In the instant petition, grant the time extension.
however, it is evident that Liwanag could not dispose of the money as
she pleased because it was only delivered to her for a single purpose,
The following table shows the dates of LCDCs letter-requests, the supposed
namely, for the purchase of cigarettes, and if this was not possible
then to return the money to Rosales. causes justifying them, the number of days requested, and the number of days granted
by PRHC and supposedly conformed to by LCDC:
LCDC is not liable for liquidated damages for delay in the construction of the
buildings for PRHC.

There is no question that LCDC was not able to fully construct the Tektite Building and
Projects 1, 2, and 3 on time. It reasons that it should not be made liable for liquidated
 Plaintiff-appellees allegation that determination by PHRC of
Cause # of days # of days extensions of time were unreasonable or arbitrary is untenable in the
requested granted light of express provisions of the Construction Agreements which
1 Mar 1990 Due to additional works and shortage of 30 11 prescribed precise procedures for extensions of time. In fact the
supplies and cement procedure is fool-proof because both OWNER and CONTRACTOR
14 Apr 1990 Shortage of cement supply 18 6 sign to indicate approval of the number of days of extension.
10 May Frequent power failures 10 2 Computation of the penalty becomes mechanical after that. Each
1990 extension as signed by the parties is a contract by itself and has the
force of law between them.
9 Jul 1990 Bad weather which endangered the lives 10 2
of the construction workers (heavy winds)
In fact, the parties followed that prescribed procedure strictly the
4 Sep 1990 Inclement weather that endangered the 10 3 CONTRACTOR first requested the OWNER to approve the number of
lives of the construction workers days applied for as extension of time to finish the particular project
28 Feb 1991 Architectural and structural revisions of 20 8 and the OWNER will counter-offer by approving only a lower number
R.C. beams at the 8th floor level of days extension of time for CONTRACTOR to finish the contract as
28 Aug 1991 For change order work and revisions in the 271 136 recommended by the CONSTRUCTION MANAGER ABCEDE, and in
plans initiated by the architect and the end, both CONTRACTOR and OWNER sign jointly the approved
Abcedes delay in giving the revised plans number of days agreed upon. That signed extension of time is taken
to contractor to be the contract between the parties.[59]
2 Sep 1991 Inclement weather and scarcity of cement 25 17
13 Oct 1991 Water supply interruption and power 15 6
failures preventing the mixing of cement The appellate court further ruled that each signed extension is a separate contract that
5 Dec 1991 Typhoon Uring and water supply 15 2
interruption (typhoon Uring alone caused a
becomes the law between the parties:[60]
delay for more than 10 days due to strong
and continuous rains) there is nothing arbitrary or unreasonable about the number of days
extension of time because each extension is a meeting of the minds
2 Apr 1992 Inadequate supply of Portland cement and 15 12
between the parties, each under joint signature OWNERand
frequent power failures
CONTRACTOR witnessed by the CONSTRUCTION MANAGER.[61]
5 May 1992 Inadequate supply of cement and frequent 17 12
power failures
456 217
Inasmuch as LCDCs claimed exemption from liability are beyond the approved time
additions and alterations in the work 108 20
ordered by the owner and architect extensions, LCDC, according to the majority of the CA, is liable therefor.
564 237
Justice Juan Q. Enriquez, in his Dissenting Opinion, held that the reasons submitted by
As previously mentioned, LCDC sent a 9 December 1992 letter to PRHC claiming that, LCDC fell under the definition of force majeure.[62] This specific point was not refuted by
in a period of over two years, only 256 out of the 618 days of extension requested were
the majority.
considered. We disregard these numbers presented by LCDC because of its failure to
present evidence to prove its allegation. The tally that we will acceptas reflected by the
evidence submitted to the lower courtis as follows: out of the 564 days requested, only We agree with Justice Enriquez on this point and thereby disagree with the majority
237 were considered. ruling of the CA.

Essentially the same aforementioned reasons or causes are presented by LCDC as Article 1174 of the Civil Code provides: Except in cases expressly specified by the law,
defense against liability for both Projects 1 and 2.[58] In this regard, the CA ruled:
or when it is otherwise declared by stipulation or when the nature of the obligation
requires the assumption of risk, no person shall be responsible for those events which A: I will tell them why did you not grant the extension for us, Maam.
could not be foreseen, or which though foreseen, were inevitable. A perusal of the Q: What was the response of Mr. Abcede and Mr. Santos?
construction agreements shows that the parties never agreed to make LCDC liable
A: Mr. Abcede and Mr. Santos told me, Mr. Ley dont worry, you will
even in cases of force majeure. Neither was the assumption of risk required. Thus, in
not be liquidated of any single day for this because we can see that
the occurrence of events that could not be foreseen, or though foreseen were you worked so hard for this project, Maam.
inevitable, neither party should be held responsible.
Q: And what did you do after you were given that response of Mr.
Abcede and Mr. Santos?
Under Article 1174 of the Civil Code, to exempt the obligor from liability for a breach of
an obligation due to an act of God or force majeure, the following must concur: A: They told me you just relax and finish the project, and we will pay
you up to the last centavos, Maam.
(a) the cause of the breach of the obligation must be independent of
Q: What did you do after taking that statement or assurance?
the will of the debtor; (b) the event must be either unforseeable or
unavoidable; (c) the event must be such as to render it impossible for A: As gentlemans agreement I just continued working without
the debtor to fulfill his obligation in a normal manner; and (d) the complaining anymore, Maam.[66]
debtor must be free from any participation in, or aggravation of the
injury to the creditor.[63]
The above testimony is uncontradicted. Even assuming that all the reasons LCDC
presented do not qualify as fortuitous events, as contemplated by law, this Court finds
that PRHC is estopped from denying that it had granted a waiver of the liquidated
The shortage in supplies and cement may be characterized as force majeure.[64] In the
damages the latter corporation may collect from the former due to a delay in the
present case, hardware stores did not have enough cement available in their supplies construction of any of the buildings.
or stocks at the time of the construction in the 1990s. Likewise, typhoons, power
failures and interruptions of water supply all clearly fall under force majeure. Since Courts may rule on causes of action not included in the Complaint, as long as
these have been proven during trial without the objection of the opposing party.
LCDC could not possibly continue constructing the building under the circumstances
prevailing, it cannot be held liable for any delay that resulted from the causes
aforementioned. PRHC argues that since the parties had already limited the issues to those reflected in
their joint stipulation of facts, neither the trial court nor the appellate court has the
Further, PRHC is barred by the doctrine of promissory estoppel from denying that it authority to rule upon issues not included therein. Thus it was wrong for the trial court
agreed, and even promised, to hold LCDC free and clear of any liquidated damages.
and the CA to have awarded the amounts of P 5,529,495.76 representing the
Abcede and Santos also promised that the latter corporation would not be held liable
for liquidated damages even for a single day of delay despite the non-approval of the remaining balance for Project 3 as well as for the P 232,367.96 representing the
requests for extension.[65] Mr. Ley testified to this fact as follows: balance for the construction of the drivers quarters in Project 3. PRHC claims that in
the Stipulation of Facts, all the issues regarding Project 3 were already made part of
Q: So, Mr. Witness in all those requests for extension and whenever
the computation of the balances for the other projects. It thus argues that the
the D.A. Abcede & Associates did not grant you the actual number of
days stated in your requests for extension, what did Ley construction computation for the Tektite Building showed that the overpayment for Project 3 in the
and Development do, if any? amount of P 9,531,181.80 was credited as payment for the Tektite Tower Project.[67] It

A: We talked to Dennis Abcede and Mr. Santos, Maam. reasons that, considering that it actually made an overpayment for Project 3, it should
not be made liable for the remaining balances for Project 3 and the drivers quarters in
Q: And what did you tell them? Project 3.[68] It is LCDCs position, however, that the Stipulation of Facts covers the
balances due only for the Tektite Tower Project, Project 1, and Project 2.[69] Since Considering the absence of timely and appropriate objections, the trial court did not err
Project 3 was not included in the reconciliation contained in the said stipulation, it in admitting evidence of the unpaid balances for Project 3, its drivers quarters, and the
[70]
maintains that the balance for Project 3 remains at P 5,529,495.76, and that the concreting works in the Tektite Building. Furthermore, both the lower and the appellate
balance for the construction of the drivers quarters in Project 3 remains courts found that the supporting evidence presented by LCDC were sufficient to prove
at P232,367.96. that the claimed amounts were due, but that they remained unpaid.

On its part, LCDC disputes the deletion by the CA of the lower courts grant of the LCDC should be held liable for the corrective works to redo or repair the
alleged P 7,112,738.82 unpaid balance for the concreting works in the Tektite defective waterproofing in Project 2.
Building. The CA had ruled that this cause of action was withdrawn by the parties when
they did not include it in their Joint Stipulation of Facts. LCDC argues that to the
The waterproofing of Project 2 was not undertaken by LCDC. Instead, Vulchem
contrary, the silence of the Stipulation of Facts on this matter proves that the claim still
stands.[71] Corporation (Vulchem), which was recommended by Santos and Abcede, was hired for
that task. Vulchems waterproofing turned out to be defective. In order to correct or
Considering that the unpaid balances for Project 3, its drivers quarters, and the repair the defective waterproofing, PRHC had to contract the services of another
concreting works in the Tektite Building were not covered by the Stipulation of Facts
entered into by the parties, we rule that no judicial admission could have been made by corporation, which charged it P2,006,000.
LCDC regarding any issue involving the unpaid balances for those pieces of work.
Denying liability by alleging that PRHC forced it into hiring Vulchem Corporation for the
We affirm in this case the doctrine that courts may rule or decide on matters that, waterproofing works in Project 2, LCDC argues that under Article 1892, an agent is
although not submitted as issues, were proven during trial. The admission of evidence, responsible for the acts of the substitute if he was given the power to appoint a
presented to support an allegation not submitted as an issue, should be objected to at substitute. Conversely, if it is the principal and not the agent who appointed the
the time of its presentation by the party to be affected thereby; otherwise, the court substitute, the agent bears no responsibility for the acts of the sub-agent.[73]The
may admit the evidence, and the fact that such evidence seeks to prove a matter not provision reads:
included or presented as an issue in the pleadings submitted becomes irrelevant,
because of the failure of the appropriate party to object to the presentation. Art. 1892. The agent may appoint a substitute if the principal has not
prohibited him from doing so; but he shall be responsible for the acts
No objection was raised when LCDC presented evidence to prove the outstanding of the substitute:
balances for Project 3, its drivers quarters, and the concreting works in the Tektite
Building. (1) When he was not given the power to appoint one;

(2) When he was given such power, but without designating the
In Phil. Export and Foreign Loan Guarantee Corp. v. Phil. Infrastructures, et al.,[72] this
Court held: person, and the person appointed was notoriously incompetent or
insolvent.

It is settled that even if the complaint be defective, but the parties go

to trial thereon, and the plaintiff, without objection, introduces LCDC argues that because PRHC, as the principal, had designated Vulchem as sub-
sufficient evidence to constitute the particular cause of action which it agent, LCDC, as the agent, should not be made responsible for the acts of the
intended to allege in the original complaint, and the defendant
voluntarily produces witnesses to meet the cause of action thus substitute, even in the instance where the latter were notoriously incompetent.[74]
established, an issue is joined as fully and as effectively as if it had
been previously joined by the most perfect pleadings. Likewise, when LCDCs reliance on Art. 1892 is misplaced. The principles of agency are not to be
issues not raised by the pleadings are tried by express or implied applied to this case, since the legal relationship between PRHC and LCDC was not
consent of the parties, they shall be treated in all respects as if they one of agency, but was rather that between the owner of the project and an
had been raised in the pleadings. independent contractor under a contract of service. Thus, it is the agreement between
the parties and not the Civil Code provisions on agency that should be applied to ART. 2208. In the absence of stipulation, attorneys fees and
resolve this issue. expenses of litigation, other than judicial costs, cannot be recovered,
except:
Art. XIV of the Project 2 Agreement clearly states that if the contractor sublets any part .........
of the agreement to a third party, who in effect becomes a sub-contractor, the losses or
expenses that result from the acts/inactions of the sub-contractor should be for the (5) Where the defendant acted in gross and evident bad faith in
contractors account, to wit: refusing to satisfy the plaintiffs plainly valid, just and demandable
claim;
ARTICLE XIV ASSIGNMENT
.........
This Agreement, and/or any of the payments to be due hereunder
shall not be assigned in whole or in part by the CONTRACTOR nor Attorney's fees may be awarded when the act or omission of the defendant compelled
shall any part of the works be sublet by CONTRACTOR without the the plaintiff to incur expenses to protect the latters interest.[79] In ABS-CBN
prior written consent of OWNER, and such consent shall not relieve Broadcasting Corp. v. CA,[80] we held thus:
the CONTRACTOR from full responsibility and liability for the works
hereunder shall not be granted in any event until CONTRACTOR has The general rule is that attorney's fees cannot be recovered as part of
furnished OWNER with satisfactory evidence that the Sub-Contractor damages because of the policy that no premium should be placed on
is carrying ample insurance to the same extent and in the same the right to litigate. They are not to be awarded every time a party
manner as herein provided to be furnished by CONTRACTOR. If the wins a suit. The power of the court to award attorney's fees under
agreement is assigned or any part thereof is sublet, CONTRACTOR Article 2208 demands factual, legal, and equitable justification. Even
shall exonerate, indemnify and save harmless the OWNER from and when a claimant is compelled to litigate with third persons or to incur
against any and all losses or expenses caused thereby.[75] expenses to protect his rights, still attorney's fees may not be
awarded where no sufficient showing of bad faith could be reflected in
LCDC had every right to reject Vulchem as sub-contractor for the waterproofing work of a party's persistence in a case other than an erroneous conviction of
Project 2 but it did not do so and proceeded to hire the latter. It is not unusual for the righteousness of his cause.
project owners to recommend sub-contractors, and such recommendations do not
diminish the liability of contractors in the presence of an Article XIV-type clause in the
construction agreement. The failure of LCDC to ensure that the work of its sub-
contractor is satisfactory makes it liable for the expenses PRHC incurred in order to LCDC has failed to establish bad faith on the part of PRHC so as to sustain its position
correct the defective works of the sub-contractor. The CA did not err in ruling that the that it is entitled to attorneys fees. Nevertheless, the CA erred in reversing the lower
contract itself gave PRHC the authority to recover the expenses for the re-do works
courts Decision granting LCDCs claim for attorneys fees considering that the
arising from the defective work of Vulchem.[76]
construction agreements contain a penal clause that deals with the award of attorneys
LCDC is entitled to attorneys fees and the expenses of litigation and costs. fees, as follows:

According to the CA, LCDC was not entitled to attorneys fees, because it was not the In the event the OWNER/CONTRACTOR institutes a judicial
proceeding in order to enforce any terms or conditions of this
aggrieved party, but was the one that violated the terms of the construction Agreement, the CONTRACTOR/OWNER should it be adjudged liable
agreements and should thus be made to pay costs.[77] LCDC claims, on the other hand, in whole or in part, shall pay the OWNER/CONTRACTOR reasonable
that the CA seriously erred in deleting the lower courts award of P750,000 attorneys attorneys fees in the amount equivalent to Twenty Percent (20%) of
the total amount claimed in addition to all expenses of litigation and
fees and the expenses of litigation in its favor, since this award is justified under the
costs of the suit.
law.[78] To support its claim, LCDC cites Article 2208(5), which provides: Equivalent to at least Twenty Percent (20%) of the total amount
claimed in addition to all expenses of litigation and costs of the suit.
As long as a stipulation does not contravene the law, morals, and public order, it is II. Further, we find LCDC LIABLE to PRHC in the amount of P 6,652,947.75
binding upon the obligor.[81] Thus, LCDC is entitled to recover attorneys fees. detailed as follows:
Nevertheless, this Court deems it proper to equitably reduce the stipulated amount. 1. P 4,646,947.75 for the overpayment made by PRHC for the Tektite
Building;
Courts have the power to reduce the amount of attorneys fees when found to be
excessive,[82] viz: 2. P 2,006,000.00 for the expenses incurred by PRHC for corrective works
to redo/repair the allegedly defective waterproofing construction work
done by LCDC in Project 2.
We affirm the equitable reduction in attorneys fees. These are not an
integral part of the cost of borrowing, but arise only when collecting
The respective liabilities of the parties as enumerated above are hereby SET
upon the Notes becomes necessary. The purpose of these fees is
OFF against each other, and PRHC is hereby DIRECTED to pay LCDC the net amount
not to give respondent a larger compensation for the loan than the law
due, which is P 57,376,762.47, with legal interest from the date of the filing of
already allows, but to protect it against any future loss or damage by
Complaint.
being compelled to retain counsel in-house or notto institute judicial
proceedings for the collection of its credit. Courts have has the
power to determine their reasonableness based on quantum SO ORDERED.
meruit and to reduce the amount thereof if excessive.[83]
G.R. NO. 192105 December 9, 2013
We reverse the appellate courts Decision and reinstate the lower courts award of
attorneys fees, but reduce the amount from P750,000 to P200,000. ANTONIO LOCSIN, II, Petitioner,
vs.
MEKENI FOOD CORPORATION, Respondent.
WHEREFORE, we SET ASIDE the Decision of the Court of Appeals and RULE as
follows:
DECISION

I. We find Philippine Realty and Holdings Corporation (PRHC) LIABLE to Ley DEL CASTILLO, J.:
Construction Development Corporation (LCDC) in the amount
of P 64,029,710.22, detailed as follows: In the absence of specific terms and conditions governing a car plan agreement
1. P 13,251,152.61 as balance yet unpaid by PRHC for Project 2; between the employer and employe former may not retain the installment payments
made by the latter on the car plan and treat them as rents for the use of the service
2. P 1,703,955.07 as balance yet unpaid by PRHC for Project 1; vehicle, in the event that the employee ceases his employment and is unable to
complete the installment payments on the vehicle. The underlying reason is that the
3. P 5,529,495.76 as balance yet unpaid by PRHC for Project 3; service vehicle was precisely used in the former' s business; any personal benefit
obtained by the employee from its use is merely incidental. This Petition for Review
4. P 232,367.96 as balance yet unpaid by PRHC for the drivers quarters for on Certiorari1 assails the January 27, 2010 Decision2 of the Court of Appeals (CA) in
Project 3; CA-G.R. SP No. 109550, as well as its April 23, 2010 Resolution3 denying petitioners
Motion for Partial Reconsideration.4
5. P 36,000,000.00 as agreed upon in the escalation agreement entered
into by PRHCs representatives and LCDC for the Tektite Building; Factual Antecedents

6. P 7,112,738.82 as balance yet unpaid by PRHC for the concreting works In February 2004, respondent Mekeni Food Corporation(Mekeni)a Philippine
from the ground floor to the fifth floor of the Tektite Building; company engaged in food manufacturing and meat processing offered petitioner
Antonio Locsin II the position of Regional Sales Manager to over see Mekenis National
7. P 200,000.00 as LCDCs reduced attorneys fees. Capital Region Supermarket/Food Service and South Luzon operations. In addition to
a compensation and benefit package, Mekeni offered petitioner a car plan, under which
one-half of the cost of the vehicle is to be paid by the company and the other half to be 3.Unpaid commission in the amount of 9,780.00; and
deducted from petitioners salary. Mekenis offer was contained in an Offer
Sheet5 which was presented to petitioner. 4.Reimbursement of complainants payment under the car plan agreement in
the amount of 112,500.00; and
Petitioner began his stint as Mekeni Regional Sales Manager on March 17, 2004. To
be able to effectively cover his appointed sales territory, Mekeni furnished petitioner 5.The equivalent share of the company as part of the complainants benefit
with a used Honda Civic car valued at 280,000.00, which used to be the service under the car plan 50/50 sharing amounting to 112,500.00.
vehicle of petitioners immediate supervisor. Petitioner paid for his 50% share through
salary deductions of 5,000.00 each month.
Respondent-Appellee Mekeni Food Corporation is hereby authorized to deduct the
sum of 4,736.50 representing complainant-appellants cash advance from his total
Subsequently, Locsin resigned effective February 25, 2006. By then, a total of monetary award.
112,500.00 had been deducted from his monthly salary and applied as part of the
employees share in the car plan. Mekeni supposedly put in an equivalent amount as
All other claims are dismissed for lack of merit.
its share under the car plan. In his resignation letter, petitioner made an offer to
purchase his service vehicle by paying the outstanding balance thereon. The parties
negotiated, but could not agree on the terms of the proposed purchase. Petitioner thus SO ORDERED.11 The NLRC held that petitioners amortization payments on his
returned the vehicle to Mekeni on May 2, 2006. service vehicle amounting to 112,500.00 should be reimbursed; if not, unjust
enrichment would result, as the vehicle remained in the possession and ownership of
Mekeni.
Petitioner made personal and written follow-ups regarding his unpaid salaries,
commissions, benefits, and offer to purchase his service vehicle. Mekeni replied that
the company car plan benefit applied only to employees who have been with the On October 30, 2007, Labor Arbiter Cresencio G. Ramos rendered a
company for five years; for this reason, the balance that petitioner should pay on his Decision,7 decreeing as follows:
service vehicle stood at 116,380.00 if he opts to purchase the same.
WHEREFORE, in the light of the foregoing premises, judgment is hereby rendered
On May 3, 2007, petitioner filed against Mekeni and/or its President, Prudencio S. directing respondents to turn-over to complainant x x xthe subject vehicle upon the said
Garcia, a Complaint6for the recovery of monetary claims consisting of unpaid salaries, complainants payment to them of the sum of 100,435.84.
commissions, sick/vacation leave benefits, and recovery of monthly salary deductions
which were earmarked for his cost-sharing in the car plan. The case was docketed in SO ORDERED.8
the National Labor Relations Commission(NLRC), National Capital Region(NCR),
Quezon City as NLRC NCR CASE NO. 00-05-04139-07. Ruling of the National Labor Relations Commission

On October 30, 2007, Labor Arbiter Cresencio G. Ramos rendered a On appeal,9 the Labor Arbiters Decision was reversedin a February 27, 2009
Decision,7 decreeing as follows: WHEREFORE, in the light of the foregoing premises, Decision10of the NLRC, thus:
judgment is hereby rendered directing respondents to turn-over to complainant x x x
the subject vehicle upon the said complainants payment to them of the sum of
100,435.84.SO ORDERED.8 Ruling of the National Labor Relations Commission On WHEREFORE, premises considered, the appeal is hereby Granted. The assailed
appeal,9 the Labor Arbiters Decision was reversed in a February 27, 2009 Decision dated October 30, 2007 is hereby REVERSED and SET ASIDE and a new
Decision10 of the NLRC, thus: WHEREFORE, premises considered, the appeal is one entered ordering respondent-appellee Mekeni Food Corporation to pay
hereby Granted. The assailed Decision dated October 30, 2007 is hereby REVERSED complainant-appellee the following:
and SET ASIDE and a new one entered ordering respondent-appellee Mekeni Food
Corporation to pay complainant-appellee the following: 1.Unpaid Salary in the amount of 12,511.45;

1.Unpaid Salary in the amount of 12,511.45; 2.Unpaid sick leave/vacation leave pay in the amount of 14,789.15;

2.Unpaid sick leave/vacation leave pay in the amount of 14,789.15; 3.Unpaid commission in the amount of 9,780.00; and
 4.Reimbursement of complainants payment under the car plan agreement in In arriving at the above conclusion, the CA held that the NLRC possessed jurisdiction
the amount of 112,500.00; and over petitioners claims, including the amounts he paid under the car plan, since his
Complaint against Mekeni is one for the payment of salaries and employee benefits.
5.The equivalent share of the company as part of the complainants benefit With regard to the car plan arrangement, the CA applied the ruling in Elisco Tool
under the car plan 50/50 sharing amounting to 112,500.00. Manufacturing Corporation v. Court of Appeals,15 where it was held that

Respondent-Appellee Mekeni Food Corporation is hereby authorized to deduct the First. Petitioner does not deny that private respondent Rolando Lantan acquired the
sum of 4,736.50 representing complainant-appellants cash advance from his total vehicle in question under a car plan for executives of the Elizalde group of companies.
monetary award. Under a typical car plan, the company advances the purchase price of a car to be paid
back by the employee through monthly deductions from his salary. The company
retains ownership of the motor vehicle until it shall have been fully paid for. However,
All other claims are dismissed for lack of merit.
retention of registration of the car in the companys name is only a form of a lien on the
vehicle in the event that the employee would abscond before he has fully paid for it.
SO ORDERED.11 There are also stipulations in car plan agreements to the effect that should the
employment of the employee concerned be terminated before all installments are fully
The NLRC held that petitioners amortization payments on his service vehicle paid, the vehicle will be taken by the employer and all installments paid shall be
amounting to 112,500.00 should be reimbursed; if not, unjust enrichment would considered rentals per agreement.16
result, as the vehicle remained in the possession and ownership of Mekeni.
In the absence of evidence as to the stipulations of the car plan arrangement between
In addition, the employers share in the monthly car plan payments should likewise be Mekeni and petitioner, the CA treated petitioners monthly contributions in the total
awarded to petitioner because it forms part of the latters benefits under the car plan. It amount of 112,500.00 as rentals for the use of his service vehicle for the duration of
held further that Mekenis claim that the company car plan benefit applied only to his employment with Mekeni. The appellate court applied Articles 1484-1486 of the
employees who have been with the company for five years has not been substantiated Civil Code,17 and added that the installments paid by petitioner should not be returned
by its evidence, in which case the car plan agreement should be construed in to him inasmuch as the amounts are not unconscionable. It made the following
petitioners favor. Mekeni moved to reconsider, but in an April 30, 2009 pronouncement:
Resolution,12 the NLRC sustained its original findings.
Having used the car in question for the duration of his employment, it is but fair that all
Ruling of the Court of Appeals of Locsins payments be considered as rentals therefor which may be forfeited by
Mekeni. Therefore, Mekeni has no obligation to return these payments to Locsin.
Mekeni filed a Petition for Certiorari13 with the CA assailing the NLRCs February 27, Conversely, Mekeni has no right to demand the payment of the balance of the
2009 Decision, saying that the NLRC committed grave abuse of discretion in holding it purchase price from Locsin since the latter has already surrendered possession of the
liable to petitioner as it had no jurisdiction to resolve petitioners claims, which are civil vehicle.18
in nature.
Moreover, the CA held that petitioner cannot recover Mekenis corresponding share in
On January 27, 2010, the CA issued the assailed Decision, decreeing as follows: the purchase price of the service vehicle, as this would constitute unjust enrichment on
the part of petitioner at Mekenis expense.
WHEREFORE, the petition for certiorari is GRANTED. The Decision of the National
Labor Relations Commission dated 27 February 2009, in NLRC NCR Case No. 00-05- The CA affirmed the NLRC judgment in all other respects. Petitioner filed his Motion for
04139-07, and its Resolution dated 30 April 2009 denying reconsideration thereof, are Partial Reconsideration,19but the CA denied the same in its April 23, 2010 Resolution.
MODIFIED in that the reimbursement of Locsins payment under the car plan in the
amount of 112,500.00, and the payment to him of Mekenis 50% share in the amount Thus, petitioner filed the instant Petition; Mekeni, on the other hand, took no further
of 112,500.00 are DELETED. The rest of the decision is AFFIRMED. action.

SO ORDERED.14 Issue
Petitioner raises the following solitary issue: Mekeni asserts further that the service vehicle was merely a loan which had to be paid
through the monthly salary deductions.If it is not allowed to recover on the loan, this
WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS ERRED IN would constitute unjust enrichment on the part of petitioner.
NOT CONSIDERING THE CAR PLAN PRIVILEGE AS PART OF THE
COMPENSATION PACKAGE OFFERED TO PETITIONER AT THE INCEPTION OF Our Ruling
HIS EMPLOYMENT AND INSTEAD LIKENED IT TO A CAR LOAN ON
INSTALLMENT, IN SPITE OF THE ABSENCE OF EVIDENCE ONRECORD.20 The Petition is partially granted.

Petitioners Arguments To begin with, the Court notes that Mekeni did not file a similar petition questioning the
CA Decision; thus, it is deemed to have accepted what was decreed. The only issue
In his Petition and Reply,21 petitioner mainly argues that the CA erred in treating his that must be resolved in this Petition, then, is whether petitioner is entitled to a refund
monthly contributions to the car plan, totaling 112,500.00, as rentals for the use of his of all the amounts applied to the cost of the service vehicle under the car plan.
service vehicle during his employment; the car plan which he availed ofwasa benefit
and it formed part of the package of economic benefits granted to him when he was When the conclusions of the CA are grounded entirely on speculation, surmises and
hired as Regional Sales Manager. Petitioner submits that this is shown by the Offer conjectures, or when the inferences made by it are manifestly mistaken or absurd, its
Sheet which was shown to him and which became the basis for his decision to accept findings are subject to review by this Court.24
the offer and work for Mekeni.
From the evidence on record, it is seen that the Mekeni car plan offered to petitioner
Petitioner adds that the absence of documentary or other evidence showing the terms was subject to no other term or condition than that Mekeni shall cover one-half of its
and conditions of the Mekeni company car plan cannot justify a reliance on Mekenis value, and petitioner shall in turn pay the other half through deductions from his
self-serving claimsthat the full terms thereof applied only to employees who have been monthly salary.Mekeni has not shown, by documentary evidence or otherwise, that
with the company for at least five years; in the absence of evidence, doubts should be there are other terms and conditions governing its car plan agreement with petitioner.
resolved in his favor pursuant to the policy of the law that affords protection to labor, as There is no evidence to suggest that if petitioner failed to completely cover one-half of
well asthe principle that all doubts shouldbe construed to its benefit. the cost of the vehicle, then all the deductions from his salary going to the cost of the
vehicle will be treated as rentals for his use thereof while working with Mekeni, and
Finally, petitioner submits that the ruling in the Elisco Tool casecannot apply to his shall not be refunded. Indeed, there is no such stipulation or arrangement between
case because the car plan subject of the said case involved a car loan, which his car them. Thus, the CAs reliance on Elisco Toolis without basis, and its conclusions
plan benefit was not; it was part of his compensation package, and the vehicle was an arrived at in the questioned decision are manifestly mistaken. To repeat what was said
important component of his work which required constant and uninterrupted mobility. in Elisco Tool
Petitioner claims that the car plan was in fact more beneficial to Mekeni than to him;
besides, he did not choose to avail of it, as it was simply imposed upon him. He First. Petitioner does not deny that private respondent Rolando Lantan acquired the
concludes that it is only just that his payments should be refunded and returned to him. vehicle in question under a car plan for executives of the Elizalde group of companies.
Under a typical car plan, the company advances the purchase price of a car to be paid
Petitioner thus prays for the reversal of the assailed CA Decision and Resolution, and back by the employee through monthly deductions from his salary. The company
that the Court reinstate the NLRCs February 27, 2009 Decision. retains ownership of the motor vehicle until it shall have been fully paid for. However,
retention of registration of the car in the companys name is only a form of a lien on the
Respondents Arguments vehicle in the event that the employee would abscond before he has fully paid for it.
There are also stipulations in car plan agreements to the effect that should the
employment of the employee concerned be terminated before all installments are fully
In its Comment,22 Mekeni argues that the Petition does not raise questions of law, but
paid, the vehicle will be taken by the employer and all installments paid shall be
merely of fact, which thus requires the Court to review anew issues already passed considered rentals per agreement.25 (Emphasis supplied)
upon by the CA an unauthorized exercise given that the Supreme Court is not a trier
of facts, nor is it its function to analyze or weigh the evidence of the parties all over
again.23 It adds that the issue regarding the car plan and the conclusions of the CA It was made clear in the above pronouncement that installments made on the car plan
drawn from the evidence on record are questions of fact. may be treated as rentals only when there is an express stipulation in the car plan
agreement to such effect. It was therefore patent error for the appellate court to
assume that, even in the absence of express stipulation, petitioners payments on the created between them. Consequently, Mekeni may not enrich itself by charging
car plan may be considered as rentals which need not be returned. petitioner for the use of its vehicle which is otherwise absolutely necessaryto the full
and effective promotion of its business. It may not, under the claim that petitioners
Indeed, the Court cannot allow that payments made on the car plan should be forfeited payments constitute rents for the use of the company vehicle, refuse to refund what
by Mekeni and treated simply as rentals for petitioners use of the company service petitioner had paid, for the reasons that the car plan did not carry such a condition; the
vehicle. Nor may they be retained by it as purported loan payments, as it would have subject vehicle is an old car that is substantially, if not fully, depreciated; the car plan
this Court believe. In the first place, there is precisely no stipulation to such effect in arrangement benefited Mekeni for the most part; and any personal benefit obtained by
their agreement. Secondly, it may not be said that the car plan arrangement between petitioner from using the vehicle was merely incidental.
the parties was a benefit that the petitioner enjoyed; on the contrary, it wasan absolute
necessity in Mekenis business operations, which benefit edit to the fullest extent: Conversely, petitioner cannot recover the monetary value of Mekenis counterpart
without the service vehicle, petitioner would have been unable to rapidly cover the vast contribution to the cost of the vehicle; that is not property or money that belongs to him,
sales territory assigned to him, and sales or marketing of Mekenis products could not nor was it intended to be given to him in lieu of the car plan. In other words, Mekenis
have been booked or made fast enough to move Mekenis inventory. Poor sales, share of the vehicles cost was not part of petitioners compensation package. To start
inability to market Mekenis products, a high rate of product spoil age resulting from with, the vehicle is an asset that belonged to Mekeni. Just as Mekeni is unjustly
stagnant inventory, and poor monitoring of the sales territory are the necessary enriched by failing to refund petitioners payments, so should petitioner not be awarded
consequences of lack of mobility. Without a service vehicle, petitioner would have been the value of Mekenis counter part contribution to the car plan, as this would unjustly
placed at the mercy of inefficient and unreliable public transportation; his official enrich him at Mekenis expense.
schedule would have been dependent on the arrival and departure times of buses or
jeeps, not to mention the availability of seats in them. Clearly, without a service vehicle, There is unjust enrichment ''when a person unjustly retains a benefit to the loss of
Mekenis business could only prosper at a snails pace, if not completely paralyzed. Its another, or when a person retains money or property of another against the
cost of doing business would be higher as well. The Court expressed just such a view fundamental principles of justice, equity and good conscience." The principle of unjust
in the past. Thus enrichment requires two conditions: (1) that a person is benefited without a valid basis
or justification, and (2) that such benefit is derived at the expense of another. The main
In the case at bar, the disallowance of the subject car plan benefits would hamper the objective of the principle against unjust enrichment is to prevent one from enriching
officials in the performance of their functions to promote and develop trade which himself at the expense of another without just cause or consideration. x x x 28
requires mobility in the performance of official business. Indeed, the car plan benefits
are supportive of the implementation of the objectives and mission of the agency WHEREFORE, the Petition is GRANTED IN PART. The assailed January 27, 2010
relative to the nature of its operation and responsive to the exigencies of the Decision and April 23, 2010 Resolution of the Court of Appeals in CA-G.R. SP No.
service.26 (Emphasis supplied) Any benefit or privilege enjoyed by petitioner from using 109550 are MODIFIED, in that respondent Mekeni Food Corporation is hereby ordered
the service vehicle was merely incidental and insignificant, because for the most part to REFUND petitioner Antonio Locsin II's payments under the car plan agreement in
the vehicle was under Mekenis control and supervision. Free and complete disposal is the total amount of112,500.00.
given to the petitioner only after the vehicles cost is covered or paid in full. Until then,
the vehicle remains at the beck and call of Mekeni. Given the vast territory petitioner
had to cover to be able to perform his work effectively and generate business for his Thus, except for the counterpart or equivalent share of Mekeni Food Corporation in the
employer, the service vehicle was an absolute necessity, or else Mekenis business car plan agreement amounting to 112,500.00, which is DELETED, the February 27,
2009 Decision of the National Labor Relations Commission is affirmed in all respects.
would suffer adversely. Thus, it is clear that while petitioner was paying for half of the
vehicles value, Mekeni was reaping the full benefits from the use thereof.
SO ORDERED.
In light of the foregoing, it is unfair to deny petitioner a refund of all his contributions to
the car plan.1wphi1 Under Article 22 of the Civil Code, "[e]very person who through
an act of performance by another, or any other means, acquires or comes into
possession of something at the expense of the latter without just or legal ground, shall
return the same to him." Article 214227of the same Code likewise clarifies that there
are certain lawful, voluntary and unilateral acts which give rise to the juridical relation of
quasi-contract, to the end that no one shall be unjustly enriched or benefited at the
expense of another. In the absence of specific terms and conditions governing the car
plan arrangement between the petitioner and Mekeni, a quasi-contractual relation was