ALVAREZ VS PEOPLE OF THE PHILIPPINES

FACTS: Efren L. Alvarez was then Mayor in a Municipality in Nueva Ecija. In 1995, the
Sagguniang Bayan of the Municipality upon a Resolution invited Mr. Jesus Garcia,
President of Australian - Professional Inc. (API), in connection with the municipal
government plan to construct a four storey shopping mall (a project included in its
Multi-Development Plan).
Approved the project under the Build-Operate-Transfer Law arrangement in
the amount of 240 million pesos, and to be constructed on a 4000 sq. meters
properly of the municipal government which is located at the back of the Municipal
Hall.
API proposal was submitted November 7, 1995
On February 9, 1996 on Invitation for proposal to be submitted within 30 days
and published
In April 12, 1996, upon pre qualification recommended by PBAC the
proposal was approved with the lone bidder, API
In April 15, 1996, Sagguniang Bayna passed a resolution authorizing
petitioner to enter into a Memorandum of Agreement with API for the project
In September 12, 1996, Petitioner signed the MOA with API by Mr. Jess Garcia
for the construction of shopping mall building under the BOT scheme whereby API
undertook to finish the construction within 730 days
In April 14, 1997, the groundbreaking ceremony took place. However, no mall
was constructed as API stopped work within just a few months
In August 10, 2006, petitioner was filed a complaint of bad faith, manifest
partiality and gross negligence in performance as a public high ranking official.
Respondent contends that API was not duly licensed construction company as per
records at Philippine Construction Accreditation Board
(PCAB) and has no
construction license. API has no experience and financial qualifications about the
project and it is a damage and prejudice of the public serviced.
Petitioner contends that bad faith, manifest partiality and gross negligence were
not proven by the respondent. He stresses that there was substantial compliance
with the requirements of R.A. No. 7718, and while it is true that petitioner may have
deviated from some of the procedures outlined in the said law, the essential
purpose of the law that a project proposal be properly evaluated and that parties
other than the opponent be given opportunity to present their proposal was
accomplished. The Sandiganbayan therefore seriously erred when it immediately
concluded that all actions of petitioner were illegal and irregular. Petitioner
maintains such actions are presumed to be regular and the burden of proving

otherwise rests on the respondent. Because all the transactions were done by him
with the authority of the Sangguniang Bayan, petitioner argues that there can be no
dispute that he endeavored in good faith to comply with the requirements of R.A No.
7718. Moreover, petitioner asserts that the non-inclusion of all the other members
of the Sangguniang Bayan denied him the equal protection of the laws.
In compliance with the directive of this Court, the Solicitor General filed his
Comment asserting that petitioner was correctly convicted of Violation of Section
3(e) of R.A. No. 3019. The Solicitor General stressed that the findings of the
Sandiganbayan and this Court that the requirements of the Build-Operate-Transfer
(BOT) law and its implementing rules have not been followed in the bidding and
award of the contract to Australian-Professional, Inc. (API) were based on the
documents of the project which have not been questioned by petitioner. Thus,
despite petitioners claim of substantial compliance and APIs proposal being
"complete," it is undisputed that it did not include the required company profile of
the contractor and that the publication of the invitation for comparative proposals,
as found by this Court, was defective. These findings supported by the evidence on
record were shown to have resulted in the failure to assess the actual experience
and financial capacity of API to of rival proposals. Finally, the fact that the
Sangguniang Bayan members were not included in the charge does not negate the
guilt of petitioner who had the power and discretion over the implementation of the
Wag-wag Shopping Mall project and not simply to execute the resolutions passed by
the Sangguniang Bayan approving the contract award to API. The facts established
in the decision of the Sandiganbayan bear great significance on petitioners role in
the bidding and contract award to API, which also clearly showed that petitioner as
local chief executive was totally remiss in his duties and functions.
We find no cogent reason for reversal or modification of our decision which
exhaustively discussed the afore-cited issues being raised anew by the petitioner
ACCORDINGLY, accused Efren L. Alvarez is found guilty beyond reasonable doubt
for[sic] violation of Section 3 (e) of Republic Act No. 3019 and is sentenced to suffer
in prison the penalty of 6 years and 1 month to 10 years. He also has to suffer
perpetual disqualification from holding any public office and to indemnify the City
Government of Muoz (now Science), Nueva Ecija the amount of Four Million Eight
Hundred Thousand Pesos (Php 4,800,000.00) less the Five Hundred Thousand Pesos
(Php
500,000.00)
API
earlier
paid
the
municipality
as
damages.
The Sandiganbayan likewise denied petitioner's motion for reconsideration. It ruled
that upon examination of Section 4-A of R.A. No. 6957 as amended by R.A. No.
7718, it was clear that petitioner, with manifest partiality and gross inexcusable
negligence, failed to comply with the requirements and procedures for competitive
bidding in unsolicited proposals.

ISSUES: Whether or not the Honorable Sandiganbayan failed to observe the

requirement of proof beyond reasonable doubt in convicting the Accused-Petitioner;
failed to appreciate the legal intent of the BOT project; failed to appreciate that the
BOT was a lawful project of the Sangguniang Bayan and not the project of the Mayor
Accused-Petitioner herein; and failed to appreciate that there was no damage on the
then Municipality as contemplated by law, to warrant the conviction of the
Accused-Petitioner.
RULING: We sustain and affirm the Sandiganbayan in holding that petitioner violated
Section 3(e) of R.A. No. 3019, and that he cannot shield himself from criminal
liability simply because the SB passed the necessary resolutions adopting the BOT
project and authorizing him to enter into the MOA. We find no error or grave abuse
in its ruling, which we herein quote:
It is apparent that the unwarranted benefit in this case lies in the very fact that API
was allowed to present its proposal without compliance of [sic] the requirements
provided under the relevant laws and rules. To begin with, the municipal
government never conducted a public bidding prior to the execution of the contract.
The project was immediately awarded to the API without delay and without any rival
proponents, when it was not qualified to participate in the first place. The legality
and propriety of the agreement executed with the contractor is totally absent based
on the testimonies of both the prosecution and the defense.
The term undue injury in the context of Section 3(e) of the Anti-Graft and
Corrupt Practices Act punishing the act of causing undue injury to any party,
has a meaning akin to that civil law concept of actual damage. Actual damage,
in the context of these definitions, is akin to that in civil law. Article 2199 of the
Civil Code provides that except as provided by law or bystipulation, one is
entitled to an adequate compensation only for such pecuniary loss suffered by a
party as he has duly proved.
For approved BOT contracts, it is mandatory that a performance security be posted
by the contractor/proponent in favor of the LGU in the form of cash, manager's
check, cashier's check, irrevocable letter of credit or bank draft in the minimum
amount of 2% of the total project cost.[44] In case the default occurred during the
project construction stage, the LGU shall likewise forfeit the performance security of
the erring project proponent/contractor.[45] The IRR thus provides:
SEC. 12.13. Liquidated Damages. - Where the project proponent of a project fails to
satisfactorily complete the work within the construction period prescribed in the
contract, including any extension or grace period duly granted, and is thereby in
default under the contract, the project proponent shall pay the Agency/LGU
concerned liquidated damages, as may be agreed upon under the contract by the
parties. The parties shall agree on the amount and schedule of payment of the
liquidated damages. The performance security may be forfeited to answer for any
liquidated damages due to the Agency/LGU. The amount of liquidated damages due
for every calendar day of delay will be determined by the Agency/LGU. In no case
however shall the delay exceed twenty percent (20%) of the approved construction
time stipulated in the contract plus any time extension duly granted. In such an
event the Agency/LGU concerned shall rescind the contract, forfeit the proponent's

performance security and proceed with the procedures prescribed under Section
12.19. b.
Had the requirement of performance security been complied with, there is no
dispute that the Municipality would have been entitled to the forfeiture of
performance security when API defaulted on its obligation to execute the
construction contract, at the very least in an amount equivalent to 2% of the total
project cost. Hence, said LGU is entitled to such damages which the law mandates
to be incorporated in the BOT contract, the parties being at liberty only to stipulate
the extent and amount thereof. To rule otherwise would mean a condonation of
blatant disregard and violation of the provisions of the BOT law and its
implementing rules and regulations which are designed to protect the public
interest in transactions between government and private business entities. While
petitioner claims to have entered into a compromise agreement as authorized by
the SB and approved by the trial court, no evidence of such judicial compromise was
submitted
before
the
Sandiganbayan.
WHEREFORE, the petition is DENIED. The Decision dated November 16, 2009 and
Resolution dated June 9, 2010 of the Sandiganbayan in Criminal Case No. SB-06CRM-0389 are AFFIRMED.
INTERNATIONAL HOTEL CORPORATION VS FRANCISCO JOAQUIN AND ET. AL.
RATIO: To avoid unjust enrichment to a party from resulting out of a substantially
performed contract, the principle of quantum meruit may be used to determine his
compensation in the absence of a written agreement for that purpose. The principle
of quantum meruit justifies the payment of the reasonable value of the services
rendered by him.
FACTS: On February 1, 1969, respondent Francisco B. Joaquin, Jr. submitted a
proposal to the Board of Directors of the International Hotel Corporation (IHC) for
him to render technical assistance in securing a foreign loan for the construction of
a hotel, to be guaranteed by the Development Bank of the Philippines (DBP). The
proposal encompassed nine phases, namely: (1) the preparation of a new project
study; (2) the settlement of the unregistered mortgage prior to the submission of
the application for guaranty for processing by DBP; (3) the preparation of papers
necessary to the application for guaranty; (4) the securing of a foreign financier for
the project; (5) the securing of the approval of the DBP Board of Governors; (6) the
actual follow up of the application with DBP; (7) the overall coordination in
implementing the projections of the project study; (8) the preparation of the staff for
actual hotel operations; and (9) the actual hotel operations.
The IHC Board of Directors approved phase one to phase six of the proposal during
the special board meeting on February 11, 1969, and earmarked P2,000,000.00 for
the project. Anent the financing, IHC applied with DBP for a foreign loan guaranty.
DBP processed the application, and approved it on October 24, 1969 subject to
several conditions.

On July 11, 1969, shortly after submitting the application to DBP, Joaquin wrote to
IHC to request the payment of his fees in the amount of P500,000.00 for the
services that he had provided and would be providing to IHC in relation to the hotel
project that were outside the scope of the technical proposal. Joaquin intimated his
amenability to receive shares of stock instead of cash in view of IHCs financial
situation.
On July 11, 1969, the stockholders of IHC met and granted Joaquins request,
allowing the payment for both Joaquin and Rafael Suarez for their services in
implementing the proposal.
On June 20, 1970, Joaquin presented to the IHC Board of Directors the results of his
negotiations with potential foreign financiers. He narrowed the financiers to Roger
Dunn & Company and Materials Handling Corporation. He recommended that the
Board of Directors consider Materials Handling Corporation based on the more
beneficial terms it had offered. His recommendation was accepted.
Negotiations with Materials Handling Corporation and, later on, with its principal,
Barnes International (Barnes), ensued. While the negotiations with Barnes were
ongoing, Joaquin and Jose Valero, the Executive Director of IHC, met with another
financier, the Weston International Corporation (Weston), to explore possible
financing. When Barnes failed to deliver the needed loan, IHC informed DBP that it
would submit Weston for DBPs consideration. As a result, DBP cancelled its
previous guaranty through a letter dated December 6, 1971.
On December 13, 1971, IHC entered into an agreement with Weston, and
communicated this development to DBP on June 26, 1972. However, DBP denied the
application for guaranty for failure to comply with the conditions contained in its
November 12, 1971 letter.
Due to Joaquins failure to secure the needed loan, IHC, through its President
Bautista, canceled the 17,000 shares of stock previously issued to Joaquin and
Suarez as payment for their services. The latter requested a reconsideration of the
cancellation, but their request was rejected.
Consequently, Joaquin and Suarez commenced this action for specific performance,
annulment, damages and injunction by a complaint dated December 6, 1973 in the
Regional Trial Court in Manila (RTC).
The complaint alleged that the cancellation of the shares had been illegal, and had
deprived them of their right to participate in the meetings and elections held by
IHC; that Barnes had been recommended by IHC President Bautista, not by Joaquin;
that they had failed to meet their obligation because President Bautista and his son
had intervened and negotiated with Barnes instead of Weston; that DBP had
canceled the guaranty because Barnes had failed to release the loan; and that IHC

had agreed to compensate their services with 17,000 shares of the common stock
plus cash of P1,000,000.00.
Petitioners filed an answer claiming that the shares issued to Joaquin and Suarez as
compensation for their "past and future services" had been issued in violation of
Section 16 of the Corporation Code; that Joaquin and Suarez had not provided a
foreign financier acceptable to DBP; and that they had already received P96,350.00
as payment for their services.
On their part, Lirag and Lacerna denied any knowledge of or participation in the
cancellation of the shares. Similarly, Gochangco and Reyes denied any knowledge
of or participation in the cancellation of the shares, and clarified that they were not
directors of IHC. In the course of the proceedings, Reyes died and was substituted
by Consorcia P. Reyes, the administratrix of his estate.
RTC RULING: WHEREFORE, in the light of the above facts, law and jurisprudence, the
Court hereby orders the defendant International Hotel Corporation to pay plaintiff
Francisco B. Joaquin, the amount of Two Hundred Thousand Pesos (P200,000.00)
and to pay plaintiff Rafael Suarez the amount of Fifty Thousand Pesos (P50,000.00);
that the said defendant IHC likewise pay the co-plaintiffs, attorneys fees
of P20,000.00, and costs of suit.
The RTC found that Joaquin and Suarez had failed to meet their obligations when
IHC had chosen to negotiate with Barnes rather than with Weston, the financier that
Joaquin had recommended; and that the cancellation of the shares of stock had
been proper under Section 68 of the Corporation Code, which allowed such transfer
of shares to compensate only past services, not future ones.
CA RULING: Both parties appealed. The CA concurred with the RTC, upholding IHCs
liability under Article 1186 of the Civil Code. It ruled that in the context of Article
1234 of the Civil Code, Joaquin had substantially performed his obligations and had
become entitled to be paid for his services; and that the issuance of the shares of
stock was ultra vires for having been issued as consideration for future services.
(ART 1234: If the obligation has been substantially performed in good faith, the
obligor may recover as though there has been strict and complete fulfillment, less
damages suffered by the oblige.)
ISSUE: WHETHER OR NOT THE COURT OF APPEALS IS CORRECT IN AWARDING
COMPENSATION AND EVEN MODIFYING THE PAYMENT TO HEREIN RESPONDENTS
DESPITE NON-FULFILLMENT OF THEIR OBLIGATION TO HEREIN PETITIONER AND
WHETHER OR NOT THE COURT OF APPEALS IS CORRECT IN AWARDING ATTORNEYS
FEES TO RESPONDENTS
Ruling
We deny the petition for review on certiorari subject to the ensuing disquisitions.

1. IHC raises questions of law

We first consider and resolve whether IHCs petition improperly raised questions of
fact.
A question of law exists when there is doubt as to what the law is on a certain state
of facts, but, in contrast, a question of fact exists when the doubt arises as to the
truth or falsity of the facts alleged. A question of law does not involve an
examination of the probative value of the evidence presented by the litigants or by
any of them; the resolution of the issue must rest solely on what the law provides on
the given set of circumstances. When there is no dispute as to the facts, the
question of whether or not the conclusion drawn from the facts is correct is a
question of law.
Considering that what IHC seeks to review is the CAs application of the law on the
facts presented therein, there is no doubt that IHC raises questions of law. The basic
issue posed here is whether the conclusions drawn by the CA were correct under
the pertinent laws.
2. Article 1186 and Article 1234 of the Civil Code cannot be the source of IHCs
obligation to pay respondents IHC argues that it should not be held liable because:
(a) it was Joaquin who had recommended Barnes; and (b) IHCs negotiation with
Barnes had been neither intentional nor willfully intended to prevent Joaquin from
complying with his obligations.
IHCs argument is meritorious.
Article 1186 of the Civil Code reads:
Article 1186. The condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment.
This provision refers to the constructive fulfillment of a suspensive condition, whose
application calls for two requisites, namely: (a) the intent of the obligor to prevent
the fulfillment of the condition, and (b) the actual prevention of the fulfillment. Mere
intention of the debtor to prevent the happening of the condition, or to place
ineffective obstacles to its compliance, without actually preventing the fulfillment, is
insufficient.
Evidently, IHC only relied on the opinion of its consultant in deciding to transact with
Materials Handling and, later on, with Barnes. In negotiating with Barnes, IHC had
no intention, willful or otherwise, to prevent Joaquin and Suarez from meeting their
undertaking. Such absence of any intention negated the basis for the CAs reliance
on Article 1186 of the Civil Code.

Nor do we agree with the CAs upholding of IHCs liability by virtue of Joaquin and
Suarezs substantial performance. In so ruling, the CA applied Article 1234 of the
Civil Code, which states:
Article 1234. If the obligation has been substantially performed in good
faith, the obligor may recover as though there had been a strict and
complete fulfillment, less damages suffered by the obligee.
It is well to note that Article 1234 applies only when an obligor admits
breaching the contract after honestly and faithfully performing all the
material elements thereof except for some technical aspects that cause no
serious harm to the obligee. IHC correctly submits that the provision
refers to an omission or deviation that is slight, or technical and
unimportant, and does not affect the real purpose of the contract.
In order that there may be substantial performance of an obligation, there must
have been an attempt in good faith to perform, without any willful or intentional
departure therefrom. The deviation from the obligation must be slight, and the
omission or defect must be technical and unimportant, and must not pervade the
whole or be so material that the object which the parties intended to accomplish in
a particular manner is not attained. The non-performance of a material part of a
contract will prevent the performance from amounting to a substantial compliance.
The party claiming substantial performance must show that he has attempted in
good faith to perform his contract, but has through oversight, misunderstanding or
any excusable neglect failed to completely perform in certain negligible respects,
for which the other party may be adequately indemnified by an allowance and
deduction from the contract price or by an award of damages. But a party who
knowingly and wilfully fails to perform his contract in any respect, or omits to
perform a material part of it, cannot be permitted, under the protection of this rule,
to compel the other party, and the trend of the more recent decisions is to hold that
the percentage of omitted or irregular performance may in and of itself be sufficient
to show that there had not been a substantial performance.
By reason of the inconsequential nature of the breach or omission, the law deems
the performance as substantial, making it the obligees duty to pay. The compulsion
of payment is predicated on the substantial benefit derived by the obligee from the
partial performance. Although compelled to pay, the obligee is nonetheless entitled
to an allowance for the sum required to remedy omissions or defects and to
complete the work agreed upon.
Conversely, the principle of substantial performance is inappropriate when the
incomplete performance constitutes a material breach of the contract. A contractual
breach is material if it will adversely affect the nature of the obligation that the
obligor promised to deliver, the benefits that the obligee expects to receive after full
compliance, and the extent that the non-performance defeated the purposes of the

contract. Accordingly, for the principle embodied in Article 1234 to apply, the failure
of Joaquin and Suarez to comply with their commitment should not defeat the
ultimate purpose of the contract.
3. IHC is nonetheless liable to pay under the rule on constructive fulfillment of a
mixed conditional obligation
Notwithstanding the inapplicability of Article 1186 and Article 1234 of the Civil
Code, IHC was liable based on the nature of the obligation.
Considering that the agreement between the parties was not circumscribed by a
definite period, its termination was subject to a condition the happening of a
future and uncertain event. The prevailing rule in conditional obligations is that the
acquisition of rights, as well as the extinguishment or loss of those already acquired,
shall depend upon the happening of the event that constitutes the condition.
To recall, both the RTC and the CA held that Joaquin and Suarezs obligation was
subject to the suspensive condition of successfully securing a foreign loan
guaranteed by DBP. IHC agrees with both lower courts, and even argues that the
obligation with a suspensive condition did not arise when the event or occurrence
did not happen. In that instance, partial performance of the contract subject to the
suspensive condition was tantamount to no performance at all. As such, the
respondents were not entitled to any compensation.
Quantum meruit should apply in the absence of an express agreement on the fees
The next issue to resolve is the amount of the fees that IHC should pay to Joaquin
and Suarez.
Joaquin claimed that aside from the approved P2,000,000.00 fee to implement
phase 1 to phase 6, the IHC Board of Directors had approved an
additional P500,000.00 as payment for his services. The RTC declared that he and
Suarez were entitled to P200,000.00 each, but the CA revised the amounts
to P700,000.00 for Joaquin and P200,000.00 for Suarez.
Anent the P2,000,000.00, the CA rightly concluded that the full amount
of P2,000,000.00 could not be awarded to respondents because such amount was
not allocated exclusively to compensate respondents, but was intended to be the
estimated maximum to fund the expenses in undertaking phase 6 of the scope of
services. Its conclusion was unquestionably borne out by the minutes of the
February 11, 1969 meeting, viz:
Lastly, the amount purportedly included services still to be rendered that
supposedly extended until the completion of the construction of the hotel. It is
basic, however, that in obligations to do, there can be no payment unless the
obligation has been completely rendered.

It is notable that the confusion on the amounts of compensation arose from the
parties inability to agree on the fees that respondents should receive. Considering
the absence of an agreement, and in view of respondents constructive fulfillment of
their obligation, the Court has to apply the principle of quantum meruit in
determining how much was still due and owing to respondents. Under the
principle of quantum meruit, 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, the
principle should only be applied if no express contract was entered into, and no
specific statutory provision was applicable.
Under the established circumstances, we deem the total amount of P200,000.00 to
be reasonable compensation for respondents services under the principle of
quantum meruit.
Finally, we sustain IHCs position that the grant of attorneys fees lacked factual or
legal basis. Attorneys fees are not awarded every time a party prevails in a suit
because of the policy that no premium should be placed on the right to litigate.
There should be factual or legal support in the records before the award of such fees
is sustained. It is not enough justification for the award simply because respondents
were compelled to protect their rights.
ACCORDINGLY, the Court DENIES the petition for review on certiorari; and AFFIRMS
the decision of the Court of Appeals promulgated on November 8, 2002 in C.A.-G.R.
No. 47094 subject to the MODIFICATIONS that: (a) International Hotel Corporation is
ordered to. pay Francisco G. Joaquin, Jr. and Rafael Suarez P100,000.00 each as
compensation for their services, and (b) the award of P20,000.00 as attorney's fees
is deleted.
MANILA INTERNATIONAL
INTERNATIONAL INC.

AIRPORT

AUTHORITY

VS

AVIA

FILIPINAS

FACTS: In September 1990, herein petitioner Manila International Airport Authority

(MIAA) entered into a contract of lease with herein respondent Avia Filipinas
International Corporation (AFIC), wherein MIAA allowed AFIC to use specific portions
of land as well as facilities within the Ninoy Aquino International Airport exclusively
for the latter's aircraft repair station and chartering operations. The contract was for
one (1) year, beginning September 1, 1990 until August 31, 1991, with a monthly
rental of P6,580.00.
In December 1990, MIAA issued Administrative Order No. 1, Series of 1990, which
revised the rates of dues, charges, fees or assessments for the use of its properties,
facilities and services within the airport complex. The Administrative Order was

made effective on December 1, 1990. As a consequence, the monthly rentals due

from AFIC was increased toP15,996.50. Nonetheless, MIAA did not require AFIC to
pay the new rental fee. Thus, it continued to pay the original fee of P6,580.00.
After the expiration of the contract, AFIC continued to use and occupy the leased
premises giving rise to an implied lease contract on a monthly basis. AFIC kept on
paying the original rental fee without protest on the part of MIAA.
Three years after the expiration of the original contract of lease, MIAA informed
AFIC, through a billing statement dated October 6, 1994, that the monthly rental
over the subject premises was increased to P15,966.50 beginning September 1,
1991, which is the date immediately following the expiration of the original contract
of lease. MIAA sought recovery of the difference between the increased rental rate
and the original rental fee amounting to a total of P347,300.50 covering thirty-seven
(37) months between September 1, 1991 and September 31, 1994. Beginning
October 1994, AFIC paid the increased rental fee. However, it refused to pay the
lump sum of P347,300.50 sought to be recovered by MIAA. For the continued refusal
of AFIC to pay the said lump sum, its employees were denied access to the leased
premises from July 1, 1997 until March 11, 1998. This, notwithstanding, AFIC
continued paying its rentals. Subsequently, AFIC was granted temporary access to
the leased premises.
AFIC then filed with the RTC of Quezon City a Complaint for damages with
injunction against MIAA and its General Manager seeking uninterrupted access to
the leased premises, recovery of actual and exemplary damages, refund of its
monthly rentals with interest at the time that it was denied access to the area being
rented as well as attorney's fees.
In its Answer with Counterclaim, MIAA contended that under its lease contract with
AFIC, MIAA is allowed to either increase or decrease the monthly rental; AFIC has
rental arrears in the amount of P347,300.50; AFIC was wrong in claiming that MIAA
took the law into its own hands in denying AFIC and its employees access to the
leased premises, because under the lease contract, in case of failure on the part of
AFIC to pay rentals for at least two (2) months, the contract shall become
automatically terminated and canceled without need of judicial action or process
and it shall be lawful for MIAA or any person or persons duly authorized on its behalf
to take possession of the property either by padlocking the premises or posting its
guards to prevent the entry of any person. MIAA prayed for the award of exemplary
damages as well as attorney's fees and litigation expenses.
On March 21, 2003, the RTC rendered its Decision, the dispositive portion of which
reads as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the
plaintiff [AFIC] and as against the defendants [MIAA] ordering the latter to pay
plaintiff the following:

a) the amount of P2,000,000.00 as actual damages;

b) the amount of P200,000.00 as exemplary damages;
c) to refund the monthly rental payments beginning July 1, 1997 up [to] March 11,
1998 with interest at twelve (12%) percent;
d) the amount of P100,000.00 as attorney's fees;
e) cost of suit.
MIAA filed an appeal with the CA contending that the RTC erred in: (1) finding that
MIAA is not entitled to apply the increase in rentals as against AFIC; (2) finding that
MIAA is not entitled to padlock the leased premises or post guards to prevent entry
of AFIC therein; and (3) awarding actual and exemplary damages and attorney's
fees.
On June 19, 2007, the CA rendered its assailed Decision, the dispositive portion of
which reads, thus:
WHEREFORE, premises considered, the decision of the Regional Trial Court of
Quezon City in Civil Case No. Q-98-34395 is hereby AFFIRMED with
MODIFICATION. The awards of actual/compensatory damages and exemplary
damages are deleted. The refund of monthly rental payments from July 1, 1997 to
March 11, 1998 shall earn interest of six percent (6%) per annum from the date of
the filing of the complaint until the finality of this decision. An interest of twelve
percent (12%) per annum shall be imposed upon any unpaid balance from such
finality until the judgment amount is fully satisfied.
The award of attorney's fees stands.
MIAA filed a Motion for Reconsideration, but the CA denied it via its Resolution
dated October 11, 2007.
ISSUES: Hence, the present petition for review on certiorari raising the following
issues:
WHETHER THE HONORABLE COURT OF APPEALS CORRECTLY INTERPRETED THE
PROVISIONS OF THE LEASE CONTRACT IN LINE WITH THE PROVISIONS OF THE CIVIL
CODE AND EXISTING JURISPRUDENCE ON CONTRACTS.
WHETHER THE PRINCIPLE OF UNJUST ENRICHMENT IS APPLICABLE TO THE INSTANT
CASE.
WHETHER RESPONDENT IS ENTITLED TO ATTORNEY'S FEES.
RULING: The petition lacks merit.

Article 1306 of the Civil Code provides that [t]he contracting parties may establish
such stipulations, clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs, public order, or public
policy.
Moreover, Article 1374 of the Civil Code clearly provides that [t]he various
stipulations of a contract shall be interpreted together, attributing to the doubtful
ones that sense which may result from all of them taken jointly. Indeed, in
construing a contract, the provisions thereof should not be read in isolation, but in
relation to each other and in their entirety so as to render them effective, having in
mind the intention of the parties and the purpose to be achieved. In other words,
the stipulations in a contract and other contract documents should be interpreted
together with the end in view of giving effect to all.
In the present case, the Court finds nothing repugnant to law with respect to the
questioned provisions of the contract of lease between petitioner and respondent. It
is true that Article II, Paragraph 2.04 of the Contract of Lease states that
[a]ny subsequent amendment to Administrative Order No. 4, Series of 1982, which
will effect a decrease or escalation of the monthly rental or impose new and
additional fees and charges, including but not limited to government/MIAA circulars,
rules and regulation to this effect, shall be deemed incorporated herein and shall
automatically amend this Contract insofar as the monthly rental is
concerned. However, the Court agrees with the CA that the abovequoted provision
of the lease contract should not be read in isolation. Rather, it should be read
together with the provisions of Article VIII, Paragraph 8.13, which provide that
[a]ny amendment, alteration or modification of th[e] Contract shall not be valid and
binding, unless and until made in writing and signed by the parties thereto. It is
clear from the foregoing that the intention of the parties is to subject such
amendment to the conformity of both petitioner and respondent. In the instant
case, there is no showing that respondent gave his acquiescence to the said
amendment or modification of the contract.
The situation is different with respect to the payments of the increased rental fee
made by respondent beginning October 1994 because by then the amendment to
the contract was made in writing through a bill sent by petitioner to respondent.
It may not be amiss to point out that during the abovementioned period,
respondent continued to pay and petitioner kept on receiving the original rental fee
of P6,580.00 without any reservations or protests from the latter. Neither did
petitioner indicate in the official receipts it issued that the payments made by
respondent constitute only partial fulfillment of the latter's obligations. Article
1235 of the Civil Code clearly states that [w]hen the obligee accepts the
performance knowing its incompleteness or irregularity, and without
expressing any protest or objection, the obligation is deemed fully

complied with. For failing to make any protest or objection, petitioner is

already estopped from seeking recovery of the amount claimed.
Anent the second issue, since it has been established that petitioner has no legal
basis in requiring respondent to pay additional rental fees from September 1, 1991
to September 30, 1994, it, thus, follows that petitioner's act of denying respondent
and its employees access to the leased premises from July 1, 1997 until March 11,
1998, by reason of respondent's non-payment of the said additional fees, is likewise
unjustified.
Under Paragraph 3, Article 1654 of the Civil Code, the lessor is obliged [t]o maintain
the lessee in the peaceful and adequate enjoyment of the lease for the entire
duration of the contract.
Moreover, Article 1658 of the same Code provides that [t]he lessee may suspend
the payment of the rent in case the lessor fails to make the necessary repairs or to
maintain the lessee in peaceful and adequate enjoyment of the property leased.
Furthermore, as correctly cited by the RTC, Article 19 of the Civil Code provides that
[e]very person must, in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe honesty and good faith.
Article 22 of the same Code also states that [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. In accordance with jurisprudence, there is unjust enrichment when a
person unjustly retains a benefit to the loss of another, or when a person retains
money or property of another against the fundamental principles of justice, equity
and good conscience. The principle of unjust enrichment essentially contemplates
payment when there is no duty to pay, and the person who receives the payment
has no right to receive it.
In the instant case, it is clear that petitioner failed to maintain respondent in the
peaceful and adequate enjoyment of the leased premises by unjustifiably
preventing the latter access thereto. Consequently, in accordance with Article 1658
of the Civil Code, respondent had no duty to make rent payments. Despite that,
respondent still continued to pay the rental fees agreed upon in the original
contract. Thus, it would be the height of inequity and injustice as well as unjust
enrichment on the part of petitioner if the rental fees paid by respondent during the
time that it was denied access to and prevented from using the leased premises be
not returned to it.
With respect to attorney's fees, the Court finds no error on the part of the CA in
sustaining such award on the ground that petitioner's act of denying respondent
and its employees access to the leased premises has compelled respondent to
litigate and incur expenses to protect its interest. The Court likewise agrees with the

CA that, under the circumstances prevailing in the present case, attorney's fees
may be granted on grounds of justice and equity.
WHEREFORE, the petition is DENIED. The June 19, 2007 Decision and October 11,
2007 Resolution of the Court of Appeals in CA-G.R. CV No. 79325 are AFFIRMED. The
Regional Trial Court of Quezon City, Branch 224 is ORDERED to comply with the
directives of Supreme Court Administrative Circular No. 10-2000.
RATIO: Petitioner MIAA contends that, as an administrative agency possessed of
quasi-legislative and quasi-judicial powers as provided for in its charter, it is
empowered to make rules and regulations and to levy fees and charges; that its
issuance of Administrative Order No. 1, Series of 1990 is pursuant to the exercise of
the abovementioned powers; that by signing the lease contract, respondent AFIC
already agreed and gave its consent to any further increase in rental rates; as such,
the provisions of the lease contract being cited by the CA which provides that any
amendment, alteration or modification [of the lease contract] shall not be valid and
binding, unless and until made in writing and signed by the parties thereto is
deemed complied with because respondent already consented to having any
subsequent amendments to Administrative Order No. 1 automatically incorporated
in the lease contract; that the above-quoted provisions should not also be
interpreted as having the effect of limiting the authority of MIAA to impose new
rental rates in accordance with its authority under its charter.
Petitioner also argues that it is not guilty of unjust enrichment when it denied
respondent access to the leased premises, because there is nothing unlawful in its
act of imposing sanctions against respondent for the latter's failure to pay the
increased rental.
Lastly, petitioner avers that respondent is not entitled to attorney's fees,
considering that it was not compelled to litigate and incur expenses to protect its
interest by reason of any unjustified act on the part of petitioner. Petitioner
reiterates that it was merely exercising its right as the owner and administrator of
the leased property and, as such, its acts may not be deemed unwarranted.