PNCC v. NLRC G.R. No.

78603 January 28, 1991 FACTS: On 22 May 1979, private respondent, Romeo Buan, was hired by petitioner, ("PNCC") to work as Civil Engineer III in Saudi Arabia for a period of two (2) years with a monthly salary of US$1,024.00. While in Saudi Arabia, respondent was assigned to work in the Saudi Government's Mecca Stormwater Drainage Project where petitioner was a subcontractor of ("REDEC"), the main contractor. After expiration, Buan renewed with petitioner as Senior Engineer. This new contract of employment provided, among other things, that: All expenses for entry visas to Saudi Arabia or residence permits thereof of the EMPLOYEE shall be borne by the COMPANY. The COMPANY shall assist the employee in the renewal of his Residence permit during the term of this contract. Should the renewal of the said permit be denied by the concerned authorities for any reason, this contract shall be cancelled as of the end of the residence period without prejudice to the rights of the employee, benefits or privileges accrued at the time of the cancellation of this Agreement. However, private respondents residence & work permit expired. REDEC refused to renew him and repatriated him back to the Philippines. Private respondent then filed a complaint against petitioner PNCC before public respondent Philippine Overseas Employment Administration ("POEA") for breach of contract or illegal dismissal. In a decision dated 15 April 1986, POEA ordered petitioner to pay private respondent his salary corresponding to the unexpired term of the second contract of employment in the total amount of US$28,080.00, or its equivalent in Philippine currency at the time of actual payment, plus attorney's fees. ISSUE/S: WON petitioner breached its contract RATIO: NO. Appraising the second employment contract between petitioner and private respondent in terms of Philippine law, there are three (3) reasons why petitioner cannot be held liable under that contract for breach thereof under the circumstances of this case. The first reason relates to paragraph 13 of the second contract, quoted earlier. It will be seen that the renewal of private respondent's Residence and Work permit constituted a condition to his continued employment in Saudi Arabia. That condition was resolutory in nature, that is, the non-renewal of private respondent's permit had the effect of resolving, or rendering cancellable, that contract. 6 The second reason is found in the rule that an obligor shall be released from his obligation when the prestation has become legally or physically impossible without fault on his part (Article 1266). 7 The supervening impossibility of performance, based upon some factor independent of the will of the obligor, releases the obligor from his obligation after restitution of what he may have received, if any, in advance from the other contracting party; 8 the obligor incurs no liability for damages for his inability to perform. In the case at bar, the failure of refusal of REDEC to sponsor the renewal of private respondent's Residence and Work permit had rendered it legally impossible for petitioner to continue to implement its contract of employment in Saudi Arabia of private respondent. There is no dispute that REDEC was not subject to the control of petitioner; indeed, it was petitioner which was wholly subject to the control and even the whims of REDEC. To require petitioner to retain the services of private respondent in Saudi Arabia would be to require petitioner to violate the labor laws of its host country. So to require, would be to impose an intolerable burden upon petitioner.

There is a third and final reason why private respondent cannot hold petitioner liable for breach of the second contract of employment. Paragraph 13 of the second contract expressly envisaged the possibility that renewal of the Residence and Work permit of private respondent could "be denied by the concerned authorities for any reason," in which case, the contract would be "cancelled." Private respondent was, of course, aware that his original permit was about to expire when he left for Saudi Arabia the second time. He must or should have been also alerted by the second contract of employment to the possibility of non-renewal of his Residence and Work permit and the ensuing cancellability of the contract. Petitioner did not, in other words, conceal the legal and practical situation from private respondent. We find no bad faith on the part of petitioner. DISPOSITIVE PORTION: ACCORDINGLY, the Court Resolved to GRANT due course to the Petition for Certiorari and to REVERSE and SET ASIDE the Decision dated 21 April 1987 of the NLRC in POEA Case No. (L)84-11-1047. The Temporary Restraining Order earlier issued by this Court is hereby made PERMANENT. No pronouncement as to costs. PNCC VS. CA 272 SCRA 183 May 5, 1997 FACTS: On 18 November 1985, private respondents and petitioner entered into a contract of lease of a parcel of land owned by the former. The terms and conditions of said contract of lease are as follows: a) the lease shall be for a period of five (5) years which begins upon the issuance of permit by the Ministry of Human Settlement and renewable at the option of the lessee under the terms and conditions, b) the monthly rent is P20, 000.00 which shall be increased yearly by 5% based on the monthly rate, c) the rent shall be paid yearly in advance, and d) the property shall be used as premises of a rock crushing plan. On January 7, 1986, petitioner obtained permit from the Ministry which was to be valid for two (2) years unless revoked by the Ministry. Later, respondent requested the payment of the first annual rental. But petitioner alleged that the payment of rental should commence on the date of the issuance of the industrial clearance not on the date of signing of the contract. It then expressed its intention to terminate the contract and decided to cancel the project due to financial and technical difficulties. However, petitioner refused to accede to respondents request and reiterated their demand for the payment of the first annual rental. But the petitioner argued that it was only obligated to pay P20, 000.00 as rental for one month prompting private respondent to file an action against the petitioner for specific performance with damages before the RTC of Pasig. The trial court rendered decision in favor of private respondent. Petitioner then appealed the decision of the trial court to the Court of Appeals but the later affirmed the decision of the trial court and denied the motion for reconsideration. ISSUE: WON petitioner can avail of the benefit of Article 1266 of the New Civil Code. HELD/RATIO: NO. First, PNCC is estopped from claiming that Lease Contract commences on the date of issuance of clearance by Ministry, because in its letter to respondents, PNCC recognized its obligation to pay rentals counted from the date the temporary permit was issued. Second, invoking Article 1266 and the principle of rebus sic stantibus, petitioner asserts that it should be released from the obligatory force of the contract of lease because the purpose of the contract did not materialize due to unforeseen events and causes

beyond its control, i.e., due to the abrupt change in political climate after the EDSA Revolution and financial difficulties. It is a fundamental rule that contracts, once perfected, bind both contracting parties, and obligations arising therefrom have the force of law between the parties and should be complied with in good faith. 13 But the law recognizes exceptions to the principle of the obligatory force of contracts. One exception is laid down in Article 1266 of the Civil Code, which reads: "The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor." Petitioner cannot, however, successfully take refuge in the said article, since it is applicable only to obligations "to do," and not to obligations "to give." 14 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.15 The obligation to pay rentals 16 or deliver the thing in a contract of lease 17 falls within the prestation "to give"; hence, it is not covered within the scope of Article 1266. At any rate, the unforeseen event and causes mentioned by petitioner are not the legal or physical impossibilities contemplated in the said article. Besides, petitioner failed to state specifically the circumstances brought about by "the abrupt change in the political climate in the country" except the alleged prevailing uncertainties in government policies on infrastructure projects. Third, PNCC asserts that it was not able to use and enjoy the land and is not entitled to pay damages cited by the court. However, respondents suffered damages because of its inability to use the premises. Respondents are entitled to indemnification under Art. 1659 of the Civil Code. Lastly, PNCC was not deprived of due process because trial court granted several postponements to petitioner before it waived the presentation of evidence in petitioners behalf. DISPOSITIVE PORTION: WHEREFORE, the instant petition is DENIED and the challenge decision of the Court of Appeals is AFFIRMED in toto.