L A LEY DE C ONTRATACIÓN A DMINISTRATIVA

 Iloilo Jar Corporation vs. Comglasco Corporation/Aguila Glass G.R. No. 219509

● Rutcher T. Dagasdas vs. Grand Placement and General Services Corporation G.R. No. 205727

January 25, 2016

 Kabisig Real Wealth Dev., Inc. and Fernando C. Tio vs. Young Builders Corporation G.R. No. 212375

January 31, 2016

 Madag Buisan, et al. vs. Commission of Audit and Department of Public Works and Highways

Iloilo Jar Corporation vs. Comglasco Corporation/Aguila Glass G.R. No. 219509

January 18, 2017

Topic: Rebus Sic Stantibus; Kinds of Prestation

Facts: In August 2000, Iloilo Jar (lessor), and Comglasco (lessee) entered into a lease contract

over a portion of a warehouse building. The term of the lease was for a period of 3 years or until August 2003.

On December 2001, Comglasco requested for the pre-termination of the lease effective on the same date. Iloilo Jar rejected the request on the ground that the pre-termination of the lease contract was not stipulated. Despite the denial of the request for pre-termination, Comglasco still removed all its stock, merchandise and equipment from the leased premises on January 15, 2002. From the time of the withdrawal of the equipment, and despite several demand letters, Comglasco no longer paid all rentals accruing from the said date.

Iloilo Jar sent a final demand letter to Comglasco, but it was again ignored. Consequently, Iloilo Jar filed a civil action for breach of contract and damages before the RTC

Comglasco argued that by virtue of Article 1267 of the Civil Code, it was released from its obligation from the lease contract. It explained that the consideration had become so difficult due to the global and regional economic crisis that had plagued the economy. It admitted that it had removed its stocks and merchandise but it did not refuse to pay the rentals because the lease contract was already deemed terminated.

RTC rendered a decision for Iloilo Jar. Comglasco moved for reconsideration to the CA, who reversed the order of the RTC. Iloilo Jar filed a MR but was denied.

Issue: Whether or not there was a valid termination of contract? Held: No, there was no valid termination.

To evade responsibility, Comglasco explained that by virtue of Article 1267, it was released from the lease contract. It cited the existing global and regional economic crisis for its inability to comply with its obligation.

Comglasco's position fails to impress because Article 1267 applies only to obligations to do and not to obligations to give.

An obligation "to do" includes all kinds of work or service; while an obligation "to give" is a prestation which consists in the delivery of a movable or an immovable thing in order to create a real right, or for the use of the recipient, or for its simple possession, or in order to return it to its owner. The obligation to pay rentals or deliver the thing in a contract of lease falls within the

The principle of rebus sic stantibus neither fits in with the facts of the case. Under this theory, the parties stipulate in the light of certain prevailing conditions, and once these conditions cease to exist, the contract also ceases to exist.

This article, which enunciates the doctrine of unforeseen events, is not, however, an absolute application of the principle of rebus sic stantibus, which would endanger the security of contractual relations. The parties to the contract must be presumed to have assumed the risks of unfavorable developments. It is therefore only in absolutely exceptional changes of circumstances that equity demands assistance for the debtor.

Considering that Comglasco's obligation of paying rent is not an obligation to do, it could not rightfully invoke Article 1267 of the Civil Code. Even so, its position is still without merit as financial struggles due to an economic crisis is not enough reason for the courts to grant reprieve from contractual obligations.

In COMGLASCO Corporation/Aguila Glass v. Santos Car Check Center Corporation, the Court ruled that the economic crisis which may have caused therein petitioner's financial problems is not an absolute exceptional change of circumstances that equity demands assistance for the debtor. It is noteworthy that Comglasco was also the petitioner in the above-mentioned case, where it also involved Article 1267 to pre-terminate the lease contract.

Thus, the RTC was correct in ordering Comglasco to pay the unpaid rentals because the affirmative defense raised by it was insufficient to free it from its obligations under the lease contract.

Rutcher T. Dagasdas vs. Grand Placement and General Services Corporation G.R. No. 205727

January 18, 2017

Topic: Parties may stipulate terms and agreements in their contract

Facts: Grand Placement and General Services Corp (GPGS) is a licensed recruitment or

placement agency in the Philippines while Saudi Aramco (Aramco) is its counterpart in Saudi Arabia. On the other hand, Industrial & Management Technology Methods Co. Ltd. (ITM) is the principal of GPGS, a company existing in Saudi Arabia.

In November 2007, GPGS, on behalf of ITM, employed Dagasdas as Network Technician. He was to be deployed in Saudi Arabia under a one-year contract. Before leaving the Philippines, Dagasdas underwent skill training and pre-departure orientation as Network Technician. Nonetheless, his Job Offer indicated that he was accepted by Aramco and ITM for the position of “Supt.”

Dagasdas contended that although his position under his contract was as a Network Technician, he actually applied for and was engaged as a Civil Engineer. Purportedly, the position of Network Technician was only for the purpose of securing a visa for Saudi Arabia because ITM could not support visa application for Civil Engineers. Dagasdas arrived in Saudi and signed a new contract with ITM who contracted him as Superintendent. Under this contract, Dagasdas shall be placed under a three-month probationary period; and, this new contract shall cancel all contracts prior to its date from any source.

He was allegedly given tasks suited for a Mechanical Engineer. Seeing that he would not be able to perform well in his work, Dagasdas raised his concern to his Supervisor. Consequently, he was transferred to the Civil Engineering Department. However, before Dagasdas’ case was investigated, Siddiqui, Site Coordinator Manager,had severed his employment with ITM.

Later on, ITM gave him a termination notice indicating that his last day of work was on April 30, 2008, and he was dismissed pursuant to clause 17.4.3 of his contract, which provided that ITM reserved the right to terminate any employee within the three-month probationary period without need of any notice to the employee.

Dagasdas signed a Statement of Quitclaimwith Final Settlement23 stating that ITM paid him all the salaries and benefits for his services from February 11, 2008 to April 30, 2008 and ITM was relieved from all financial obligations due to Dagasdas.

Upon returning to the PH, he filed an illegal dismissal case against GPGS, ITM and Amarco. The Labor Arbiter dismissed the case for lack of merit. It was pointed out that Dagasdas signed a new contract which was more advantageous for him, making the contract not prohibited by law. Dagasdas appealed to the NLRC which found that his dismissal was illegal. They stated that

GPGS filed a Petitioner for Certiorari. CA reversed the NLRC decision and reinstated the LA decision

Issue: Whether or not the new contract is valid?

Held: NO, the new contract signed in Saudi is not valid.

It is well-settled that employers have the prerogative to impose standards on the work quantity and quality of their employees and provide measures to ensure compliance. Non-compliance with work standards may thus be a valid cause for dismissing an employee. Nonetheless, to ensure that employers will not abuse their prerogatives, the same is tempered by security of tenure whereby the employees are guaranteed substantive and procedural due process before they are dismissed from work.

Since the employment contracts of OFWs are perfected in the Philippines, and following the principle of lex loci contractus (the law of the place where the contract is made), these contracts are governed by our laws, primarily the Labor Code. Our laws generally apply even to employment contracts of OFWs as our Constitution explicitly provides that the State shall afford full protection to labor, whether local or overseas. Even if a Filipino is employed abroad, he or she is entitled to security of tenure, among other constitutional rights.

In this case, prior to his deployment and while still in the Philippines, Dagasdas was made to sign a POEA-approved contract with GPGS, on behalf of ITM, and, upon arrival in Saudi Arabia, ITM made him sign a new employment contract. Nonetheless, this new contract, which was used as basis for dismissing Dagasdas, is void

ITM terminated him for violating clause 17.4.3 of his new contract

17.4 The Company reserves the right to terminate this agreement without serving any notice to the Consultant in the following cases:

17.4.3 If the Consultant is terminated by company or its client within the probation period of 3 months

Dagasdas’ new contract is in clear violation of his right to security of tenure. There is no clear justification for the dismissal of Dagasdas other than the exercise of ITM's right to terminate him within the probationary period While our Civil Code recognizes that parties may stipulate in their contracts such terms and conditions as they may deem convenient, these terms and conditions must not be contrary to law, morals, good customs, public order or policy. The contract is contrary to law because as discussed, our Constitution guarantees that employees, local or overseas, are entitled to security of tenure. To allow employers to reserve a right to terminate employees without cause is violative of this guarantee of security of tenure.

Kabisig Real Wealth Dev. Inc & Fernando Tito vs. Young Corporation Builders G.R. No. 212375

January 25, 2017

Topic: Requisites of a Valid Contract

Facts: In April 2001, Kabisig Real, through Ferdinand Tito, contracted the services of Young

Builders Corporation (Young Builders) to supply labor, tools, equipment, and materials for the renovation of its building in Cebu City. Young Builders then finished the work in September 2001 and billed Kabisig for P4,123,320.95. However, despite numerous demands, Kabisig failed to pay. The parties did not enter into a written contract, and there was no estimate as to the cost of the renovation.

Young Builders filed a collection of sum of money suit against kabisig. RTC-Cebu rendered a decision ordering Kabisig to pay Young Builders. Kabisig elevated the case to the CA, who affirmed the decision of the RTC.

Young Builders and Kabisig moved for reconsideration but were denied. Kabisig filed the current petition.

Issue: Whether or not Kabisig is liable to Young Builders for the damages claimed? Held: Yes, Kabisig is liable to Young Builders.

Under the Civil Code, a contract is a meeting of minds, with respect to the other, to give something or to render some service. Article 1318 reads:

Art. 1318. There is no contract unless the following requisites concur:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract; and (3) Cause of the obligation which is established.

Accordingly, for a contract to be valid, it must have the following essential elements: (1) consent of the contracting parties; (2) object certain, which is the subject matter of the contract; and (3) cause of the obligation which is established.

Consent must exist, otherwise, the contract is non-existent. Consent is manifested by the meeting of the offer and the acceptance of the thing and the cause, which are to constitute the contract. By law, a contract of sale, is perfected at the moment there is a meeting of the minds upon the thing that is the object of the contract and upon the price. Indeed, it is a consensual contract which is perfected by mere consent.

Kabisig's claim as to the absence of a written contract between it and Young Builders simply does not hold water. It is settled that once perfected, a contract is generally binding in whatever form, whether written or oral, it may have been entered into, provided the aforementioned essential requisites for its validity are present.Article 1356 of the Civil Code provides:

Art. 1356. Contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present.

There is nothing in the law that requires a written contract for the agreement in question to be valid and enforceable. Also, the Court notes that neither Kabisig nor Tio had objected to the renovation work, until it was already time to settle the bill.

To determine the compensation due and to avoid unjust enrichment from resulting out of a fulfilled contract, the principle of quantum meruit may be used. Under this principle, a contractor is allowed to recover the reasonable value of the services rendered despite the lack of a written contract. The measure of recovery under the principle should relate to the reasonable value of the services performed. The principle prevents undue enrichment based on the equitable postulate that it is unjust for a person to retain any benefit without paying for it. Being predicated on equity, said principle should only be applied if no express contract was entered into, and no specific statutory provision was applicable.11

The principle of quantum meruit justifies the payment of the reasonable value of the services rendered and should apply in the absence of an express agreement on the fees. Considering the absence of an agreement, and in view of the completion of the renovation, the Court has to apply the principle of quantum meruit in determining how much is due to Young Builders.

Under the established circumstances, the total amount of P2,400,000.00 which the CA awarded is deemed to be a reasonable compensation under the principle of quantum meruit since the renovation of Kabisig's building had already been completed in 2001.

Madag Buisan, et al vs. Commission on Audit and Department of Public Works and Highways

G.R. No. 212376 January 31, 2017 Topic: Laches

Facts: In 1989, the DPWH undertook the construction of the Liguasan Cut-off Channel (Project)

in Tunggol, Pagalungan, Maguindanao, to minimize the perennial problem of flooding in the area. In 2001, the DPWH received various claims from land owners for damages allegedly caused to their properties, crops and improvements by the premature opening of the Project. In 2004, DPWH Regional Office recommended to pay just compensation to the claimants. However since the event occurred in 1989, it could not account physically the actual quantity of damaged crops and property. DPWH did not have a final resolution and the claims was forwarded to COA.

The Petitioners, represented by Mayor Bai Anne Montawal, filed a petitioner with COA, praying that DPWH pay compensation for the damaged crops, and properties. Later on, Buisan filed a Motion to Dismiss the Petition alleging that Montawal was not authorized to represent them. In fact, Buisan and the other claimants filed a separate petition with the COA based on that same money claim

COA denied the money claims of the petitioners. It held that they are barred by laches for failure to file the money claims within reasonable time.

Issue: Whether or not COA gravely abused its discretion in finding that the petitioners’ claim

was barred by laches and prescription?

Held: Yes, petitioner’s cause of action has been barred by laches.

COA denied the petition primarily on the ground that the petitioners filed their money claims only on 2014, or 15 years after their cause of action arose in 1989. The petitioners’ statement that there were already heavy rains since 1989 that caused flooding in the area negates their previous claim that the cause of action arose in 1992. If in fact there were already heavy rains since 1989, then it can also be argued that prior to 1992, their properties were already damaged by the floods and that would be the reckoning point of their cause of action. This further establishes that their cause of action has already prescribed.

While it may be argued that the petitioners have a cause of action against the DPWH, the same has already prescribed in view of Article 1146 of the Civil Code; viz.:

ART. 1146. The following actions must be instituted within four years: (1) Upon an injury to the rights of the plaintiff;

General, “it will be the height of injustice for respondent DPWH to be confronted with stale claims, where verification on the plausibility of the allegations remains difficult, either because the condition of the alleged inundation of crops has changed, or the physical impossibility of accounting for the lost and damaged crops due to the considerable lapse of time”

On the other hand, “laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence could or should have been done earlier”

In the case at bar, laches has set in as the elements are present. Firstly, the premature opening by the DPWH of the Project allegedly causing flash floods, and damaging the petitioners’ properties took place in 1989 or even in 1992. Secondly, the petitioners took 15 years to assert their rights when they formally filed a complaint in 2004 against the DPWH. Thirdly, as the petitioners failed to file a formal suit for their claims before the COA, there is an apparent lack of notice that would give the DPWH the opportunity to defend itself.

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