ST Mary's Academy

T. MARYS ACADEMY, petitioner, vs. WILLIAM CARPITANOS and LUCIA S.
CARPITANOS, GUADA DANIEL, JAMES DANIEL II, JAMES

DANIEL, SR., and VIVENCIO VILLANUEVA, respondents.
The Case
The case is an appeal via certiorari from the decision[1] of the Court of Appeals as well as the resolution denying
reconsideration, holding petitioner liable for damages arising from an accident that resulted in the death of a student who
had joined a campaign to visit the public schools in Dipolog Cityto solicit enrollment.
The Facts
The facts, as found by the Court of Appeals, are as follows:
Claiming damages for the death of their only son, Sherwin Carpitanos, spouses William Carpitanos and Lucia Carpitanos
filed onJune 9, 1995 a case against James Daniel II and his parents, James Daniel Sr. and Guada Daniel, the vehicle owner,
Vivencio Villanueva and St. Marys Academy before the Regional Trial Court of Dipolog City.
On 20 February 1997, Branch 6 of the Regional Trial Court of Dipolog City rendered its decision the dispositive portion of
which reads as follows:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in the following manner:
1. Defendant St. Marys Academy of Dipolog City, is hereby ordered to pay plaintiffs William Carpitanos and Luisa Carpitanos,
the following sums of money:
a. FIFTY THOUSAND PESOS (P50,000.00) indemnity for the loss of life of Sherwin S. Carpitanos;
b. FORTY THOUSAND PESOS (P40,000.00) actual damages incurred by plaintiffs for burial and related expenses;
c. TEN THOUSAND PESOS (P10,000.00) for attorneys fees;
d. FIVE HUNDRED THOUSAND PESOS (P500,000.00) for moral damages; and to pay costs.
2. Their liability being only subsidiary, defendants James Daniel, Sr. and Guada Daniel are hereby ordered to pay herein
plaintiffs the amount of damages above-stated in the event of insolvency of principal obligor St. Marys Academy of Dipolog
City;
3. Defendant James Daniel II, being a minor at the time of the commission of the tort and who was under special parental
authority of defendant St. Marys Academy, is ABSOLVED from paying the above-stated damages, same being adjudged
against defendants St. Marys Academy, and subsidiarily, against his parents;
4. Defendant Vivencio Villanueva is hereby ABSOLVED of any liability. His counterclaim not being in order as earlier
discussed in this decision, is hereby DISMISSED.
IT IS SO ORDERED. (Decision, pp. 32-33; Records, pp. 205-206).
From the records it appears that from 13 to 20 February 1995, defendant-appellant St. Marys Academy of Dipolog City
conducted an enrollment drive for the school year 1995-1996. A facet of the enrollment campaign was the visitation of
schools from where prospective enrollees were studying. As a student of St. Marys Academy, Sherwin Carpitanos was part
of the campaigning group.Accordingly, on the fateful day, Sherwin, along with other high school students were riding in a
Mitsubishi jeep owned by defendant Vivencio Villanueva on their way to Larayan Elementary School,
Larayan, Dapitan City. The jeep was driven by James Daniel II then 15 years old and a student of the same school. Allegedly,
the latter drove the jeep in a reckless manner and as a result the jeep turned turtle.
1
Sherwin Carpitanos died as a result of the injuries he sustained from the accident. [2]
In due time, petitioner St. Marys academy appealed the decision to the Court of Appeals.[3]
On February 29, 2000, the Court of Appeals promulgated a decision reducing the actual damages to P25,000.00 but
otherwise affirming the decision a quo, in toto.[4]
On February 29, 2000, petitioner St. Marys Academy filed a motion for reconsideration of the decision. However, on May
22, 2000, the Court of Appeals denied the motion.[5]
Hence, this appeal.[6]
The Issues
1) Whether the Court of Appeals erred in holding the petitioner liable for damages for the death of Sherwin Carpitanos.
2) Whether the Court of Appeals erred in affirming the award of moral damages against the petitioner.
The Courts Ruling
We reverse the decision of the Court of Appeals.
The Court of Appeals held petitioner St. Marys Academy liable for the death of Sherwin Carpitanos under Articles 218 [7] and
219[8] of the Family Code, pointing out that petitioner was negligent in allowing a minor to drive and in not having a teacher
accompany the minor students in the jeep.
Under Article 218 of the Family Code, the following shall have special parental authority over a minor child while under
their supervision, instruction or custody: (1) the school, its administrators and teachers; or (2) the individual, entity or
institution engaged in child care. This special parental authority and responsibility applies to all authorized activities,
whether inside or outside the premises of the school, entity or institution. Thus, such authority and responsibility applies to
field trips, excursions and other affairs of the pupils and students outside the school premises whenever authorized by the
school or its teachers.[9]
Under Article 219 of the Family Code, if the person under custody is a minor, those exercising special parental authority are
principally and solidarily liable for damages caused by the acts or omissions of the unemancipated minor while under their
supervision, instruction, or custody.[10]
However, for petitioner to be liable, there must be a finding that the act or omission considered as negligent was the
proximate cause of the injury caused because the negligence must have a causal connection to the accident. [11]
In order that there may be a recovery for an injury, however, it must be shown that the injury for which recovery is sought
must be the legitimate consequence of the wrong done; the connection between the negligence and the injury must be a
direct and natural sequence of events, unbroken by intervening efficient causes. In other words, the negligence must be
the proximate cause of the injury. For, negligence, no matter in what it consists, cannot create a right of action unless it is
the proximate cause of the injury complained of. And the proximate cause of an injury is that cause, which, in natural and
continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would
not have occurred.[12]
In this case, the respondents failed to show that the negligence of petitioner was the proximate cause of the death of the
victim.
Respondents Daniel spouses and Villanueva admitted that the immediate cause of the accident was not the negligence of
petitioner or the reckless driving of James Daniel II, but the detachment of the steering wheel guide of the jeep.
In their comment to the petition, respondents Daniel spouses and Villanueva admitted the documentary exhibits
establishing that the cause of the accident was the detachment of the steering wheel guide of the jeep. Hence, the cause
of the accident was not the recklessness of James Daniel II but the mechanical defect in the jeep of Vivencio
Villanueva. Respondents, including the spouses Carpitanos, parents of the deceased Sherwin Carpitanos, did not dispute
the report and testimony of the traffic investigator who stated that the cause of the accident was the detachment of the
steering wheel guide that caused the jeep to turn turtle.
Significantly, respondents did not present any evidence to show that the proximate cause of the accident was the negligence
of the school authorities, or the reckless driving of James Daniel II. Hence, the respondents reliance on Article 219 of the
Family Code that those given the authority and responsibility under the preceding Article shall be principally and solidarily
liable for damages caused by acts or omissions of the unemancipated minor was unfounded.
Further, there was no evidence that petitioner school allowed the minor James Daniel II to drive the jeep of respondent
Vivencio Villanueva. It was Ched Villanueva, grandson of respondent Vivencio Villanueva, who had possession and control
of the jeep. He was driving the vehicle and he allowed James Daniel II, a minor, to drive the jeep at the time of the accident.
Hence, liability for the accident, whether caused by the negligence of the minor driver or mechanical detachment of the
steering wheel guide of the jeep, must be pinned on the minors parents primarily. The negligence of petitioner St. Marys
Academy was only a remote cause of the accident. Between the remote cause and the injury, there intervened the
negligence of the minors parents or the detachment of the steering wheel guide of the jeep.
The proximate cause of an injury is that cause, which, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury, and without which the result would not have occurred. [13]
Considering that the negligence of the minor driver or the detachment of the steering wheel guide of the jeep owned by
respondent Villanueva was an event over which petitioner St. Marys Academy had no control, and which was the proximate
cause of the accident, petitioner may not be held liable for the death resulting from such accident.
Consequently, we find that petitioner likewise cannot be held liable for moral damages in the amount of P500,000.00
awarded by the trial court and affirmed by the Court of Appeals.
Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the
defendants wrongful act or omission.[14] In this case, the proximate cause of the accident was not attributable to petitioner.
For the reason that petitioner was not directly liable for the accident, the decision of the Court of Appeals ordering
petitioner to pay death indemnity to respondent Carpitanos must be deleted. Moreover, the grant of attorneys fees as part
of damages is the exception rather than the rule.[15] The power of the court to award attorneys fees under Article 2208 of
the Civil Code demands factual, legal and equitable justification.[16] Thus, the grant of attorneys fees against the petitioner
is likewise deleted.
Incidentally, there was no question that the registered owner of the vehicle was respondent Villanueva. He never denied
and in fact admitted this fact. We have held that the registered owner of any vehicle, even if not used for public service,
would primarily be responsible to the public or to third persons for injuries caused the latter while the vehicle was being
driven on the highways or streets.[17] Hence, with the overwhelming evidence presented by petitioner and the respondent
Daniel spouses that the accident occurred because of the detachment of the steering wheel guide of the jeep, it is not the
school, but the registered owner of the vehicle who shall be held responsible for damages for the death of Sherwin
Carpitanos.
The Fallo
WHEREFORE, the Court REVERSES and SETS ASIDE the decision of the Court of Appeals [18] and that of the trial court.[19] The
Court remands the case to the trial court for determination of the liability of defendants, excluding petitioner St. Marys
Academy, Dipolog City.
SPOUSES LUIGI M. GUANIO and ANNA HERNANDEZ-GUANIO

- versus MAKATI SHANGRI-LA HOTEL and RESORT, INC., also doing business under the name of SHANGRI-LA HOTEL MANILA,
For their wedding reception on July 28, 2001, spouses Luigi M. Guanio and Anna Hernandez-Guanio (petitioners) booked at
the Shangri-la Hotel Makati (the hotel).
Prior to the event, Makati Shangri-La Hotel & Resort, Inc. (respondent) scheduled an initial food tasting. Petitioners claim
that they requested the hotel to prepare for seven persons the two of them, their respective parents, and the wedding
coordinator. At the scheduled food tasting, however, respondent prepared for only six.
Petitioners initially chose a set menu which included black cod, king prawns and angel hair pasta with wild mushroom sauce
for the main course which cost P1,000.00 per person. They were, however, given an option in which salmon, instead of king
prawns, would be in the menu at P950.00 per person. They in fact partook of the salmon.
Three days before the event, a final food tasting took place. Petitioners aver that the salmon served was half the size of
what they were served during the initial food tasting; and when queried about it, the hotel quoted a much higher price
(P1,200.00) for the size that was initially served to them. The parties eventually agreed on a final price P1,150 per person.
A day before the event or on July 27, 2001, the parties finalized and forged their contract.[1]
Petitioners claim that during the reception, respondents representatives, Catering Director Bea Marquez and Sales Manager
Tessa Alvarez, did not show up despite their assurance that they would; their guests complained of the delay in the service
of the dinner; certain items listed in the published menu were unavailable; the hotels waiters were rude and unapologetic
when confronted about the delay; and despite Alvarezs promise that there would be no charge for the extension of the
reception beyond 12:00 midnight, they were billed and paidP8,000 per hour for the three-hour extension of the event up
to 4:00 A.M. the next day.
Petitioners further claim that they brought wine and liquor in accordance with their open bar arrangement, but these were
not served to the guests who were forced to pay for their drinks.
Petitioners thus sent a letter-complaint to the Makati Shangri-la Hotel and Resort, Inc. (respondent) and received an
apologetic reply from Krister Svensson, the hotels Executive Assistant Manager in charge of Food and Beverage. They
nevertheless filed a complaint for breach of contract and damages before the Regional Trial Court (RTC) of Makati City.
In its Answer, respondent claimed that petitioners requested a combination of king prawns and salmon, hence, the price
was increased toP1,200.00 per person, but discounted at P1,150.00; that contrary to petitioners claim, Marquez and Alvarez
were present during the event, albeit they were not permanently stationed thereat as there were three other hotel
functions; that while there was a delay in the service of the meals, the same was occasioned by the sudden increase of
guests to 470 from the guaranteed expected minimum number of guests of 350 to a maximum of 380, as stated in the
Banquet Event Order (BEO);[2] and that Isaac Albacea, Banquet Service Director, in fact relayed the delay in the service of
the meals to petitioner Luigis father, Gil Guanio.
Respecting the belated service of meals to some guests, respondent attributed it to the insistence of petitioners wedding
coordinator that certain guests be served first.
On Svenssons letter, respondent, denying it as an admission of liability, claimed that it was meant to maintain goodwill to
its customers.
By Decision of August 17, 2006, Branch 148 of the Makati RTC rendered judgment in favor of petitioners, disposing as
follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendant
ordering the defendants to pay the plaintiff the following:
1)
The amount of P350,000.00 by way of actual damages;
2)
The amount of P250,000.00 for and as moral damages;
3)
The amount of P100,000.00 as exemplary damages;
4)
The amount of P100,000.00 for and as attorneys fees.
With costs against the defendant.

SO ORDERED.[3]
In finding for petitioners, the trial court relied heavily on the letter of Svensson which is partly quoted below:
Upon receiving your comments on our service rendered during your reception here with us, we are in fact, very distressed.
Right from minor issues pappadums served in the soup instead of the creutons, lack of valet parkers, hard rolls being too
hard till a major one slow service, rude and arrogant waiters, we have disappointed you in all means.
Indeed, we feel as strongly as you do that the services you received were unacceptable and definitely not up to our
standards. We understand that it is our job to provide excellent service and in this instance, we have fallen short of your
expectations. We ask you please to accept our profound apologies for causing such discomfort and
annoyance. [4] (underscoring supplied)
The trial court observed that from the tenor of the letter . . . the defendant[-herein respondent] admits that the services
the plaintiff[-herein petitioners] received were unacceptable and definitely not up to their standards. [5]
On appeal, the Court of Appeals, by Decision of July 27, 2009,[6] reversed the trial courts decision, it holding that the
proximate cause of petitioners injury was an unexpected increase in their guests:
x x x Hence, the alleged damage or injury brought about by the confusion, inconvenience and disarray during the wedding
reception may not be attributed to defendant-appellant Shangri-la.
We find that the said proximate cause, which is entirely attributable to plaintiffs-appellants, set the chain of events which
resulted in the alleged inconveniences, to the plaintiffs-appellants. Given the circumstances that obtained, only the Sps.
Guanio may bear whatever consequential damages that they may have allegedly suffered. [7] (underscoring supplied)
Petitioners motion for reconsideration having been denied by Resolution of November 18, 2009, the present petition for
review was filed.
The Court finds that since petitioners complaint arose from a contract, the doctrine of proximate cause finds no application
to it:
The doctrine of proximate cause is applicable only in actions for quasi-delicts, not in actions involving breach of contract. x
x x The doctrine is a device for imputing liability to a person where there is no relation between him and another party. In
such a case, the obligation is created by law itself. But, where there is a pre-existing contractual relation between the parties,
it is the parties themselves who create the obligation, and the function of the law is merely to regulate the relation thus
created.[8] (emphasis and underscoring supplied)
What applies in the present case is Article 1170 of the Civil Code which reads:
Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence or delay, and those who in any
manner contravene the tenor thereof, are liable for damages.
RCPI v. Verchez, et al. [9] enlightens:

In culpa contractual x x x the mere proof of the existence of the contract and the failure of its compliance justify, prima
facie, a corresponding right of relief. The law, recognizing the obligatory force of contracts, will not permit a party to be set
free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor
thereof. A breach upon the contract confers upon the injured party a valid cause for recovering that which may have been
lost or suffered. The remedy serves to preserve the interests of the promissee that may include hisexpectation
interest, which is his interest in having the benefit of his bargain by being put in as good a position as he would have been
in had the contract been performed, or his reliance interest, which is his interest in being reimbursed for loss caused by
reliance on the contract by being put in as good a position as he would have been in had the contract not been made; or
his restitution interest, which is his interest in having restored to him any benefit that he has conferred on the other
party. Indeed, agreements can accomplish little, either for their makers or for society, unless they are made the basis for
action. The effect of every infraction is to create a new duty, that is, to make RECOMPENSE to the one who has been injured
by the failure of another to observe his contractual obligation unless he can show extenuating circumstances, like proof of
his exercise of due diligence x x x or of the attendance of fortuitous event, to excuse him from his ensuing liability. (emphasis
and underscoring in the original; capitalization supplied)
The pertinent provisions of the Banquet and Meeting Services Contract between the parties read:
4.3 The ENGAGER shall be billed in accordance with the prescribed rate for the minimum guaranteed number of persons
contracted for, regardless of under attendance or non-appearance of the expected number of guests, except where the
ENGAGER cancels the Function in accordance with its Letter of Confirmation with the HOTEL. Should the attendance exceed
the minimum guaranteed attendance, the ENGAGER shall also be billed at the actual rate per cover in excess of the
minimum guaranteed attendance.
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xxxx
4.5. The ENGAGER must inform the HOTEL at least forty eight (48) hours before the scheduled date and time of the Function
of any change in the minimum guaranteed covers. In the absence of such notice, paragraph 4.3 shall apply in the event of
under attendance. In case the actual number of attendees exceed the minimum guaranteed number by ten percent (10%),
the HOTEL shall not in any way be held liable for any damage or inconvenience which may be caused thereby. The ENGAGER
shall also undertake to advise the guests of the situation and take positive steps to remedy the same.[10] (emphasis, italics and
underscoring supplied)
Breach of contract is defined as the failure without legal reason to comply with the terms of a contract. It is also defined as
the [f]ailure, without legal excuse, to perform any promise which forms the whole or part of the contract.[11]
The appellate court, and even the trial court, observed that petitioners were remiss in their obligation to inform respondent
of the change in the expected number of guests. The observation is reflected in the records of the case. Petitioners failure
to discharge such obligation thus excused, as the above-quoted paragraph 4.5 of the parties contract provide, respondent
from liability for any damage or inconvenience occasioned thereby.
As for petitioners claim that respondent departed from its verbal agreement with petitioners, the same fails, given that the
written contract which the parties entered into the day before the event, being the law between them.
Respecting the letter of Svensson on which the trial court heavily relied as admission of respondents liability but which the
appellate court brushed aside, the Court finds the appellate courts stance in order. It is not uncommon in the hotel industry
to receive comments, criticisms or feedback on the service it delivers. It is also customary for hotel management to try to
smooth ruffled feathers to preserve goodwill among its clientele.
Kalalo v. Luz holds:[12]
Statements which are not estoppels nor judicial admissions have no quality of conclusiveness, and an opponent whose
admissions have been offered against him may offer any evidence which serves as an explanation for his former assertion
of what he now denies as a fact.
Respondents Catering Director, Bea Marquez, explained the hotels procedure on receiving and processing complaints, viz:
ATTY. CALMA:
Q You mentioned that the letter indicates an acknowledgement of the concern and that there was-the first letter there was
an acknowledgment of the concern and an apology, not necessarily indicating that such or admitting fault?
A Yes.
Q Is this the letter that you are referring to?
If I may, Your Honor, that was the letter dated August 4, 2001, previously marked as plaintiffs exhibits, Your Honor. What is
the procedure of the hotel with respect to customer concern?
A Upon receipt of the concern from the guest or client, we acknowledge receipt of such concern, and as part of procedure
in service industry particularly Makati Shangri-la we apologize for whatever inconvenience but at the same time saying, that
of course, we would go through certain investigation and get back to them for the feedback with whatever concern they
may have.
7
Q Your Honor, I just like at this point mark the exhibits, Your Honor, the letter dated August 4, 2001 identified by the witness,
Your Honor, to be marked as Exhibit 14 and the signature of Mr. Krister Svensson be marked as Exhibit 14-A.[13]
xxxx
Q In your opinion, you just mentioned that there is a procedure that the hotel follows with respect to the complaint, in your
opinion was this procedure followed in this particular concern?
A Yes, maam.
Q What makes you say that this procedure was followed?
A As I mentioned earlier, we proved that we did acknowledge the concern of the client in this case and we did emphatize
from the client and apologized, and at the same time got back to them in whatever investigation we have.
Q You said that you apologized, what did you apologize for?
A Well, first of all it is a standard that we apologize, right? Being in the service industry, it is a practice that we apologize if
there is any inconvenience,so the purpose for apologizing is mainly to show empathy and to ensure the client that we are
hearing them out and that we will do a better investigation and it is not in any way that we are admitting any
fault.[14] (underscoring supplied)
To the Court, the foregoing explanation of the hotels Banquet Director overcomes any presumption of admission of breach
which Svenssons letter might have conveyed.
The exculpatory clause notwithstanding, the Court notes that respondent could have managed the situation better, it being
held in high esteem in the hotel and service industry. Given respondents vast experience, it is safe to presume that this is
not its first encounter with booked events exceeding the guaranteed cover. It is not audacious to expect that certain
measures have been placed in case this predicament crops up. That regardless of these measures, respondent still received
complaints as in the present case, does not amuse.
Respondent admitted that three hotel functions coincided with petitioners reception. To the Court, the delay in service
might have been avoided or minimized if respondent exercised prescience in scheduling events. No less than quality service
should be delivered especially in events which possibility of repetition is close to nil. Petitioners are not expected to get
married twice in their lifetimes.
In the present petition, under considerations of equity, the Court deems it just to award the amount of P50,000.00 by way
of nominal damages to petitioners, for the discomfiture that they were subjected to during to the event. [15] The Court
recognizes that every person is entitled to respect of his dignity, personality, privacy and peace of mind. [16] Respondents
lack of prudence is an affront to this right.
WHEREFORE, the Court of Appeals Decision dated July 27, 2009 is PARTIALLY REVERSED. Respondent is, in light of the
foregoing discussion, ORDERED to pay the amount of P50,000.00 to petitioners by way of nominal damages.
TSPIC CORPORATION vs TSPIC EMPLOYEES UNION (FFW) ,

G.R. No. 163419
The path towards industrial peace is a two-way street. Fundamental fairness and protection to labor should always govern
dealings between labor and management. Seemingly conflicting provisions should be harmonized to arrive at an
interpretation that is within the parameters of the law, compassionate to labor, yet, fair to management.
In this Petition for Review on Certiorari under Rule 45, petitioner TSPIC Corporation (TSPIC) seeks to annul and set aside the
October 22, 2003 Decision[5] and April 23, 2004 Resolution[6] of the Court of Appeals (CA) in CA-G.R. SP No. 68616, which
affirmed the September 13, 2001 Decision[7] of Accredited Voluntary Arbitrator Josephus B. Jimenez in National Conciliation
and Mediation Board Case No. JBJ-AVA-2001-07-57.
TSPIC is engaged in the business of designing, manufacturing, and marketing integrated circuits to serve the
communication, automotive, data processing, and aerospace industries. Respondent TSPIC Employees Union (FFW) (Union),
on the other hand, is the registered bargaining agent of the rank-and-file employees of TSPIC. The respondents, Maria Fe
Flores, Fe Capistrano, Amy Durias, Claire Evelyn Velez, Janice Olaguir, Jerico Alipit, Glen Batula, Ser John Hernandez, Rachel
Novillas, Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez,
Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos
Santos, Juanita Yana, and Suzette Dulay, are all members of the Union.
In 1999, TSPIC and the Union entered into a Collective Bargaining Agreement (CBA) [8] for the years 2000 to 2004. The CBA
included a provision on yearly salary increases starting January 2000 until January 2002. Section 1, Article X of the CBA
provides, as follows:
Section 1. Salary/ Wage Increases.Employees covered by this Agreement shall be granted salary/wage increases as follows:
a) Effective January 1, 2000, all employees on regular status and within the bargaining unit on or before said date shall
be granted a salary increase equivalent to ten percent (10%) of their basicmonthly salary as of December 31, 1999.
b) Effective January 1, 2001, all employees on regular status and within the bargaining unit on or before said date shall
be granted a salary increase equivalent to twelve (12%) of their basic monthly salary as of December 31, 2000.
c) Effective January 1, 2002, all employees on regular status and within the bargaining unit on or before said date shall
be granted a salary increase equivalent to eleven percent (11%) of their basic monthly salary as of December 31, 2001.
The wage salary increase of the first year of this Agreement shall be over and above the wage/salary increase, including the
wage distortion adjustment, granted by the COMPANY on November 1, 1999 as per Wage Order No. NCR-07.
The wage/salary increases for the years 2001 and 2002 shall be deemed inclusive of the mandated minimum wage increases
under future Wage Orders, that may be issued after Wage Order No. NCR-07, and shall be considered as correction of any
9
wage distortion that may have been brought about by the said future Wage Orders. Thus the wage/salary increases in 2001
and 2002 shall be deemed as compliance to future wage orders after Wage Order No. NCR-07.
Consequently, on January 1, 2000, all the regular rank-and-file employees of TSPIC received a 10% increase in their salary.
Accordingly, the following nine (9) respondents (first group) who were already regular employees received the said increase
in their salary: Maria Fe Flores, Fe Capistrano, Amy Durias, Claire Evelyn Velez, Janice Olaguir, Jerico Alipit,Glen Batula, Ser
John Hernandez, and Rachel Novillas.[9]
The CBA also provided that employees who acquire regular employment status within the year but after the effectivity of a
particular salary increase shall receive a proportionate part of the increase upon attainment of their regular status. Sec. 2
of the CBA provides:
SECTION 2. Regularization Increase.A covered daily paid employee who acquires regular status within the year subsequent
to the effectivity of a particular salary/wage increase mentioned in Section 1 above shall be granted a salary/wage increase
in proportionate basis as follows:
Regularization Period Equivalent Increase
- 1st Quarter 100%
- 2nd Quarter 75%
- 3rd Quarter 50%
- 4th Quarter 25%
Thus, a daily paid employee who becomes a regular employee covered by this Agreement only on May 1, 2000, i.e., during
the second quarter and subsequent to the January 1, 2000 wage increase under this Agreement, will be entitled to a wage
increase equivalent to seventy-five percent (75%) of ten percent (10%) of his basic pay. In the same manner, an employee
who acquires regular status on December 1, 2000 will be entitled to a salary increase equivalent to twenty-five percent
(25%) of ten percent (10%) of his last basic pay.
On the other hand, any monthly-paid employee who acquires regular status within the term of the Agreement shall be
granted regularization increase equivalent to 10% of his regular basic salary.
Then on October 6, 2000, the Regional Tripartite Wage and Productivity Board, National Capital Region, issued Wage Order
No. NCR-08[10] (WO No. 8) which raised the daily minimum wage from PhP 223.50 to PhP 250 effectiveNovember 1, 2000.
Conformably, the wages of 17 probationary employees, namely: Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia
Edroso,Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba,
Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay (second group),
were increased to PhP 250.00 effective November 1, 2000.
On various dates during the last quarter of 2000, the above named 17 employees attained regular employment [11] and
received 25% of 10% of their salaries as granted under the provision on regularization increase under Article X, Sec. 2 of the
CBA.
In January 2001, TSPIC implemented the new wage rates as mandated by the CBA. As a result, the nine employees (first
group), who were senior to the above-listed recently regularized employees, received less wages.
10
On January 19, 2001, a few weeks after the salary increase for the year 2001 became effective, TSPICs Human Resources
Department notified 24 employees,[12] namely: Maria Fe Flores, Janice Olaguir, Rachel Novillas, Fe Capistrano, Jerico Alipit,
Amy Durias, Glen Batula, Claire Evelyn Velez, Ser John Hernandez, Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia
Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba,
Diomedisa Erni, Mario Salmorin, Loida Comullo, and Marie Ann Delos Santos, that due to an error in the automated payroll
system, they were overpaid and the overpayment would be deducted from their salaries in a staggered basis, starting
February 2001. TSPIC explained that the correction of the erroneous computation was based on the crediting provision of
Sec. 1, Art. X of the CBA.
The Union, on the other hand, asserted that there was no error and the deduction of the alleged overpayment from
employees constituted diminution of pay. The issue was brought to the grievance machinery, but TSPIC and theUnion failed
to reach an agreement.
Consequently, TSPIC and the Union agreed to undergo voluntary arbitration on the solitary issue of whether or not the acts
of the management in making deductions from the salaries of the affected employees constituted diminution of pay.
On September 13, 2001, Arbitrator Jimenez rendered a Decision, holding that the unilateral deduction made by TSPIC
violated Art. 100[13] of the Labor Code. The fallo reads:
WHEREFORE, in the light of the law on the matter and on the facts adduced in evidence, judgment is hereby rendered in
favor of the Union and the named individual employees and against the company, thereby ordering the [TSPIC] to pay as
follows:
1) to the sixteen (16) newly regularized employees named above, the amount of P12,642.24 a month or a total of
P113,780.16 for nine (9) months or P7,111.26 for each of them as well as an additional P12,642.24 (for all), or P790.14 (for
each), for every month after 30 September 2001, until full payment, with legal interests for every month of delay;
2) to the nine (9) who were hired earlier than the sixteen (16); also named above, their respective amount of
entitlements, according to the Unions correct computation, ranging from P110.22 per month (or P991.98 for nine months)
to P450.58 a month (or P4,055.22 for nine months), as well as corresponding monthly entitlements after 30 September
2001, plus legal interests until full payment,
3) to Suzette Dulay, the amount of P608.14 a month (or P5,473.26), as well as corresponding monthly entitlements
after 30 September 2001, plus legal interest until full payment,
4)
Attorneys fees equal to 10% of all the above monetary awards.
The claim for exemplary damages is denied for want of factual basis.
The parties are hereby directed to comply with their joint voluntary commitment to abide by this Award and thus, submit
to this Office jointly, a written proof of voluntary compliance with this DECISION within ten (10) days after the finality
hereof.
SO ORDERED.[14]
TSPIC filed a Motion for Reconsideration which was denied in a Resolution dated November 21, 2001.
Aggrieved, TSPIC filed before the CA a petition for review under Rule 43 docketed as CA-G.R. SP No. 68616. The appellate
court, through its October 22, 2003 Decision, dismissed the petition and affirmed in toto the decision of the voluntary
arbitrator. The CA declared TSPICs computation allowing PhP 287 as daily wages to the newly regularized employees to be
correct, noting that the computation conformed to WO No. 8 and the provisions of the CBA. According to the CA, TSPIC
11
failed to convince the appellate court that the deduction was a result of a system error in the automated payroll system.
The CA explained that when WO No. 8 took effect on November 1, 2000, the concerned employees were still probationary
employees who were receiving the minimum wage of PhP 223.50. The CA said that effective November 1, 2000, said
employees should have received the minimum wage of PhP 250. The CA held that when respondents became regular
employees on November 29, 2000, they should be allowed the salary increase granted them under the CBA at the rate of
25% of 10% of their basic salary for the year 2000; thereafter, the 12% increase for the year 2001 and the 10% increase for
the year 2002 should also be made applicable to them.
TSPIC filed a Motion for Reconsideration which was denied by the CA in itsApril 23, 2004 Resolution.
TSPIC filed the instant petition which raises this sole issue for our resolution: Does the TSPICs decision to deduct the alleged
overpayment from the salaries of the affected members of the Union constitute diminution of benefits in violation of the
Labor Code?
TSPIC maintains that the formula proposed by the Union, adopted by the arbitrator and affirmed by the CA, was flawed,
inasmuch as it completely disregarded the crediting provision contained in the last paragraph of Sec. 1, Art. X of the CBA.
We find TSPICs contention meritorious.
A Collective Bargaining Agreement is the law between the parties
It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they are obliged to
comply with its provisions.[16]We said so in Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda:
A collective bargaining agreement or CBA refers to the negotiated contract between a legitimate labor organization and the
employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit. As in all
contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient
provided these are not contrary to law, morals, good customs, public order or public policy. Thus, where the CBA is clear
and unambiguous, it becomes the law between the parties and compliance therewith is mandated by the express policy of
the law. [17]
Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the contracting parties,
the literal meaning of their stipulations shall control.[18] However, sometimes, as in this case, though the provisions of the
CBA seem clear and unambiguous, the parties sometimes arrive at conflicting interpretations. Here, TSPIC wants to credit
the increase granted by WO No. 8 to the increase granted under the CBA. According to TSPIC, it is specifically provided in
the CBA that the salary/wage increase for the year 2001 shall be deemed inclusive of the mandated minimum wage
increases under future wage orders that may be issued after Wage Order No. 7. The Union, on the other hand, insists that
the crediting provision of the CBA finds no application in the present case, since at the time WO No. 8 was issued, the
probationary employees (second group) were not yet covered by the CBA, particularly by its crediting provision.
As a general rule, in the interpretation of a contract, the intention of the parties is to be pursued.[19] Littera necat spiritus
vivificat. An instrument must be interpreted according to the intention of the parties. It is the duty of the courts to place a
practical and realistic construction upon it, giving due consideration to the context in which it is negotiated and the purpose
which it is intended to serve.[20] Absurd and illogical interpretations should also be avoided. Considering that the parties
have unequivocally agreed to substitute the benefits granted under the CBA with those granted under wage orders, the
agreement must prevail and be given full effect.
12
Paragraph (b) of Sec. 1 of Art. X of the CBA provides for the general agreement that, effective January 1, 2001, all employees
on regular status and within the bargaining unit on or before said date shall be granted a salary increase equivalent to
twelve (12%) of their basic monthly salary as of December 31, 2000. The 12% salary increase is granted to all employees
who (1) are regular employees and (2) are within the bargaining unit.
Second paragraph of (c) provides that the salary increase for the year 2000 shall not include the increase in salary granted
under WO No. 7 and the correction of the wage distortion for November 1999.
The last paragraph, on the other hand, states the specific condition that the wage/salary increases for the years 2001 and
2002 shall be deemed inclusive of the mandated minimum wage increases under future wage orders, that may be issued
after WO No. 7, and shall be considered as correction of the wage distortions that may be brought about by the said future
wage orders. Thus, the wage/salary increases in 2001 and 2002 shall be deemed as compliance to future wage orders after
WO No. 7.
Paragraph (b) is a general provision which allows a salary increase to all those who are qualified. It, however, clashes with
the last paragraph which specifically states that the salary increases for the years 2001 and 2002 shall be deemed inclusive
of wage increases subsequent to those granted under WO No. 7. It is a familiar rule in interpretation of contracts that
conflicting provisions should be harmonized to give effect to all. [21] Likewise, when general and specific provisions are
inconsistent, the specific provision shall be paramount to and govern the general provision. [22] Thus, it may be reasonably
concluded that TSPIC granted the salary increases under the condition that any wage order that may be subsequently issued
shall be credited against the previously granted increase. The intention of the parties is clear: As long as an employee is
qualified to receive the 12% increase in salary, the employee shall be granted the increase; and as long as an employee is
granted the 12% increase, the amount shall be credited against any wage order issued after WO No. 7.
Respondents should not be allowed to receive benefits from the CBA while avoiding the counterpart crediting provision.
They have received their regularization increases under Art. X, Sec. 2 of the CBA and the yearly increase for the year 2001.
They should not then be allowed to avoid the crediting provision which is an accompanying condition.
Respondents attained regular employment status before January 1, 2001. WO No. 8, increasing the minimum wage, was
issued after WO No. 7. Thus, respondents rightfully received the 12% salary increase for the year 2001 granted in the CBA;
and consequently, TSPIC rightfully credited that 12% increase against the increase granted by WO No. 8.
Proper formula for computing the salaries for the year 2001
Thus, the proper computation of the salaries of individual respondents is as follows:
(1) With regard to the first group of respondents who attained regular employment status before the effectivity of WO No.
8, the computation is as follows:
For respondents Jerico Alipit and Glen Batula:[23]
Wage rate before WO No. 8... PhP 234.67

Increase due to WO No. 8
setting the minimum wage at PhP 250. 15.33
Total Salary upon effectivity of WO No. 8. PhP 250.00
13
Increase for 2001 (12% of 2000 salary)........... PhP 30.00

Less the wage increase under WO No. 8. 15.33
Total difference between the wage increase
for 2001 and the increase granted under WO No. 8.. PhP 14.67
Wage rate by December 2000..... PhP 250.00
Plus total difference between the wage increase for 2001
and the increase granted under WO No. 8.. 14.67
Total (Wage rate range beginning January 1, 2001) PhP 264.67
For respondents Ser John Hernandez and Rachel Novillas:[24]
Wage rate range before WO No. 8.PhP 234.68

setting the minimum wage at PhP 250.. 15.32
Total Salary upon effectivity of WO No. 8... PhP 250.00
Increase for 2001 (12% of 2000 salary) PhP 30.00

Less the wage increase under WO No. 8.. 15.32
Total difference between the wage increase
for 2001 and the increase granted under WO No. 8. PhP 14.68
Wage rate by December 2000......... PhP 250.00

Total (Wage rate range beginning January 1, 2001) .. PhP 264.68
For respondents Amy Durias, Claire Evelyn Velez, and Janice Olaguir:[25]
Wage rate range before WO No. 8.. PhP 240.26

14
setting the minimum wage at PhP 250 9.74

Total Salary upon effectivity of WO No. 8. PhP 250.00
Increase for 2001 (12% of 2000 salary). PhP 30.00

Less the wage increase under WO No. 8 9.74
Total difference between the wage increase for 2001
and the increase granted under WO No. 8.. PhP 20.26
Wage rate by December 2000. PhP 250.00

Total (Wage rate range beginning January 1, 2001).. PhP 270.26
For respondents Ma. Fe Flores and Fe Capistrano:[26]
Wage rate range before WO No. 8 PhP 245.85

setting the minimum wage at PhP 250.. 4.15
Total Salary upon effectivity of WO No. 8... PhP 250.00
Increase for 2001 (12% of 2000 salary). PhP 30.00
Less the wage increase under WO No. 8........... 4.15
Total difference between the wage increase for 2001
and the increase granted under WO No. 8. PhP 25.85
Wage rate by December 2000. PhP 250.00

15
Total (Wage rate range beginning January 1, 2001).. PhP 275.85
(2) With regard to the second group of employees, who attained regular employment status after the implementation of
WO No. 8, namely: Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie
Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie
Ann Delos Santos, Juanita Yana, and Suzette Dulay, the proper computation of the salaries for the year 2001, in accordance
with the CBA, is as follows:
Compute the increase in salary after the implementation of WO No. 8 by subtracting the minimum wage before WO No. 8
from the minimum wage per the wage order to arrive at the wage increase, thus:
Minimum Wage per Wage Order.. PhP 250.00
Wage rate before Wage Order.. 223.50
Wage Increase. PhP 26.50
Upon attainment of regular employment status, the employees salaries were increased by 25% of 10% of their basic salaries,
as provided for in Sec. 2, Art. X of the CBA, thus resulting in a further increase of PhP 6.25, for a total of PhP 256.25,
computed as follows:
Wage rate after WO No. 8. PhP 250.00
Regularization increase (25 % of 10% of basic salary). 6.25
Total (Salary for the end of year 2000).. PhP 256.25
To compute for the increase in wage rates for the year 2001, get the increase of 12% of the employees salaries as of
December 31, 2000; then subtract from that amount, the amount increased in salaries as granted under WO No. 8 in
accordance with the crediting provision of the CBA, to arrive at the increase in salaries for the year 2001 of the recently
regularized employees. Add the result to their salaries as of December 31, 2000 to get the proper salary beginning January
1, 2001, thus:
Increase for 2001 (12% of 2000 salary)... PhP 30.75
Less the wage increase under WO No. 8. 26.50
Difference between the wage increase
for 2001 and the increase granted under WO No. 8.... PhP 4.25
Wage rate after regularization increase... PhP 256.25
Plus total difference between the wage increase and
the increase granted under WO No. 8. 4.25
Total (Wage rate beginning January 1, 2001). PhP 260.50
With these computations, the crediting provision of the CBA is put in effect, and the wage distortion between the first and
second group of employees is cured. The first group of employees who attained regular employment status before the
implementation of WO No. 8 is entitled to receive, starting January 1, 2001, a daily wage rate within the range of PhP 264.67
16
to PhP 275.85, depending on their wage rate before the implementation of WO No. 8. The second group that attained
regular employment status after the implementation of WO No. 8 is entitled to receive a daily wage rate of PhP 260.50
startingJanuary 1, 2001.
Diminution of benefits
TSPIC also maintains that charging the overpayments made to the 16 respondents through staggered deductions from their
salaries does not constitute diminution of benefits.
We agree with TSPIC.
Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed by the employees. There is
diminution of benefits when it is shown that: (1) the grant or benefit is founded on a policy or has ripened into a practice
over a long period; (2) the practice is consistent and deliberate; (3) the practice is not due to error in the construction or
application of a doubtful or difficult question of law; and (4) the diminution or discontinuance is done unilaterally by the
employer.[27]
As correctly pointed out by TSPIC, the overpayment of its employees was a result of an error. This error was immediately
rectified by TSPIC upon its discovery. We have ruled before that an erroneously granted benefit may be withdrawn without
violating the prohibition against non-diminution of benefits. We ruled in Globe-Mackay Cable and Radio Corp. v. NLRC:
Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of the law.
Payment may be said to have been made by reason of a mistake in the construction or application of a doubtful or difficult
question of law. (Article 2155, in relation to Article 2154 of the Civil Code). Since it is a past error that is being corrected, no
vested right may be said to have arisen nor any diminution of benefit under Article 100 of the Labor Code may be said to
have resulted by virtue of the correction.[28]
Here, no vested right accrued to individual respondents when TSPIC corrected its error by crediting the salary increase for
the year 2001 against the salary increase granted under WO No. 8, all in accordance with the CBA.
Hence, any amount given to the employees in excess of what they were entitled to, as computed above, may be legally
deducted by TSPIC from the employees salaries. It was also compassionate and fair that TSPIC deducted the overpayment
in installments over a period of 12 months starting from the date of the initial deduction to lessen the burden on the
overpaid employees. TSPIC, in turn, must refund to individual respondents any amount deducted from their salaries which
was in excess of what TSPIC is legally allowed to deduct from the salaries based on the computations discussed in this
Decision.
As a last word, it should be reiterated that though it is the states responsibility to afford protection to labor, this policy
should not be used as an instrument to oppress management and capital.[29] In resolving disputes between labor and capital,
fairness and justice should always prevail. We ruled in Norkis Union v. Norkis Trading that in the resolution of labor cases,
we have always been guided by the State policy enshrined in the Constitution: social justice and protection of the working
class. Social justice does not, however, mandate that every dispute should be automatically decided in favor of labor. In
any case, justice is to be granted to the deserving and dispensed in the light of the established facts and the applicable law
and doctrine.[30]
17
WHEREFORE, premises considered, the September 13, 2001 Decision of the Labor Arbitrator in National Conciliation and
Mediation Board Case No. JBJ-AVA-2001-07-57 and the October 22, 2003 CA Decision in CA-G.R. SP No. 68616 are
hereby AFFIRMED with MODIFICATION. TSPIC is herebyORDERED to pay respondents their salary increases in accordance
with this Decision, as follows:
No. of Working No.

of
Days in a Month Months in a
Wage
Total Salary for
Year
2001
Name of Employee
Daily
Rate
Nimfa Anilao
260.5
26
12
81,276.00
Rose Subardiaga
260.5
26
12
81,276.00
Valerie Carbon
260.5
26
12
81,276.00
Olivia Edroso
260.5
26
12
81,276.00
Maricris Donaire
260.5
26
12
81,276.00
Analyn Azarcon
260.5
26
12
81,276.00
Rosalie Ramirez
260.5
26
12
81,276.00
Julieta Rosete
260.5
26
12
81,276.00
Janice Nebre
260.5
26
12
81,276.00
Nia Andrade
260.5
26
12
81,276.00
Catherine Yaba
260.5
26
12
81,276.00
Diomedisa Erni
260.5
26
12
81,276.00
Mario Salmorin
260.5
26
12
81,276.00
Loida Camullo
260.5
26
12
81,276.00
Marie Ann DelosSantos
260.5
26
12
81,276.00
Juanita Yana
260.5
26
12
81,276.00
Suzette Dulay
260.5
26
12
81,276.00
Jerico Alipit
264.67
26
12
82,577.04
Glen Batula
264.67
26
12
82,577.04
Ser John Hernandez
264.68
26
12
82,580.16
18
Rachel Novillas
264.68
26
12
82,580.16
Amy Durias
270.26
26
12
84,321.12
Claire Evelyn Velez
270.26
26
12
84,321.12
Janice Olaguir
270.26
26
12
84,321.12
Maria Fe Flores
275.85
26
12
86,065.20
Fe Capistrano
275.85
26
12
86,065.20
The award for attorneys fees of ten percent (10%) of the total award isMAINTAINED.
SO ORDERED.
KHRISTINE REA M. REGINO, Assisted and Represented by ARMANDO REGINO, petitioner, vs. PANGASINAN COLLEGES OF
SCIENCE AND TECHNOLOGY, RACHELLE A. GAMUROT and ELISSA BALADAD, respondents.
Upon enrolment, students and their school enter upon a reciprocal contract. The students agree to abide by the standards
of academic performance and codes of conduct, issued usually in the form of manuals that are distributed to the enrollees
at the start of the school term. Further, the school informs them of the itemized fees they are expected to pay.
Consequently, it cannot, after the enrolment of a student, vary the terms of the contract. It cannot require fees other than
those it specified upon enrolment.
The Case
Before the Court is a Petition for Review under Rule 45, [1] seeking to nullify the July 12, 2002[2] and the November 22,
2002[3] Orders of the Regional Trial Court (RTC) of Urdaneta City, Pangasinan (Branch 48) in Civil Case No. U-7541. The
decretal portion of the first assailed Order reads:
WHEREFORE, the Court GRANTS the instant motion to dismiss for lack of cause of action. [4]
The second challenged Order denied petitioners Motion for Reconsideration.
The Facts
Petitioner Khristine Rea M. Regino was a first year computer science student at Respondent Pangasinan Colleges of Science
and Technology (PCST). Reared in a poor family, Regino went to college mainly through the financial support of her relatives.
During the second semester of school year 2001-2002, she enrolled in logic and statistics subjects under Respondents
Rachelle A. Gamurot and Elissa Baladad, respectively, as teachers.
In February 2002, PCST held a fund raising campaign dubbed the Rave Party and Dance Revolution, the proceeds of which
were to go to the construction of the schools tennis and volleyball courts. Each student was required to pay for two tickets
19
at the price of P100 each. The project was allegedly implemented by recompensing students who purchased tickets with
additional points in their test scores; those who refused to pay were denied the opportunity to take the final examinations.
Financially strapped and prohibited by her religion from attending dance parties and celebrations, Regino refused to pay
for the tickets. On March 14 and March 15, 2002, the scheduled dates of the final examinations in logic and statistics, her
teachers -- Respondents Rachelle A. Gamurot and Elissa Baladad -- allegedly disallowed her from taking the tests. According
to petitioner, Gamurot made her sit out her logic class while her classmates were taking their examinations. The next day,
Baladad, after announcing to the entire class that she was not permitting petitioner and another student to take their
statistics examinations for failing to pay for their tickets, allegedly ejected them from the classroom. Petitioners pleas
ostensibly went unheeded by Gamurot and Baladad, who unrelentingly defended their positions as compliance with PCSTs
policy.
On April 25, 2002, petitioner filed, as a pauper litigant, a Complaint [5] for damages against PCST, Gamurot and Baladad. In
her Complaint, she prayed forP500,000 as nominal damages; P500,000 as moral damages; at least P1,000,000 as exemplary
damages; P250,000 as actual damages; plus the costs of litigation and attorneys fees.
On May 30, 2002, respondents filed a Motion to Dismiss[6] on the ground of petitioners failure to exhaust administrative
remedies. According to respondents, the question raised involved the determination of the wisdom of an administrative
policy of the PCST; hence, the case should have been initiated before the proper administrative body, the Commission of
Higher Education (CHED).
In her Comment to respondents Motion, petitioner argued that prior exhaustion of administrative remedies was
unnecessary, because her action was not administrative in nature, but one purely for damages arising from respondents
breach of the laws on human relations. As such, jurisdiction lay with the courts.
On July 12, 2002, the RTC dismissed the Complaint for lack of cause of action.
Ruling of the Regional Trial Court
In granting respondents Motion to Dismiss, the trial court noted that the instant controversy involved a higher institution
of learning, two of its faculty members and one of its students. It added that Section 54 of the Education Act of 1982 vested
in the Commission on Higher Education (CHED) the supervision and regulation of tertiary schools. Thus, it ruled that the
CHED, not the courts, had jurisdiction over the controversy.[7]
In its dispositive portion, the assailed Order dismissed the Complaint for lack of cause of action without, however, explaining
this ground.
Aggrieved, petitioner filed the present Petition on pure questions of law.[8]
Issues
In her Memorandum, petitioner raises the following issues for our consideration:
Whether or not the principle of exhaustion of administrative remedies applies in a civil action exclusively for damages based
on violation of the human relation provisions of the Civil Code, filed by a student against her former school.
Whether or not there is a need for prior declaration of invalidity of a certain school administrative policy by the Commission
on Higher Education (CHED) before a former student can successfully maintain an action exclusively for damages in regular
courts.
20
Whether or not the Commission on Higher Education (CHED) has exclusive original jurisdiction over actions for damages
based upon violation of the Civil Code provisions on human relations filed by a student against the school. [9]
All of the foregoing point to one issue -- whether the doctrine of exhaustion of administrative remedies is applicable. The
Court, however, sees a second issue which, though not expressly raised by petitioner, was impliedly contained in her
Petition: whether the Complaint stated sufficient cause(s) of action.
The Courts Ruling
The Petition is meritorious.
First Issue:
Exhaustion of Administrative Remedies
Respondents anchored their Motion to Dismiss on petitioners alleged failure to exhaust administrative remedies before
resorting to the RTC. According to them, the determination of the controversy hinge on the validity, the wisdom and the
propriety of PCSTs academic policy. Thus, the Complaint should have been lodged in the CHED, the administrative body
tasked under Republic Act No. 7722 to implement the state policy to protect, foster and promote the right of all citizens to
affordable quality education at all levels and to take appropriate steps to ensure that education is accessible to all.[10]
Petitioner counters that the doctrine finds no relevance to the present case since she is praying for damages, a remedy
beyond the domain of the CHED and well within the jurisdiction of the courts. [11]
Petitioner is correct. First, the doctrine of exhaustion of administrative remedies has no bearing on the present case.
In Factoran Jr. v. CA,[12] the Court had occasion to elucidate on the rationale behind this doctrine:
The doctrine of exhaustion of administrative remedies is basic. Courts, for reasons of law, comity, and convenience, should
not entertain suits unless the available administrative remedies have first been resorted to and the proper authorities have
been given the appropriate opportunity to act and correct their alleged errors, if any, committed in the administrative
forum. x x x.[13]
Petitioner is not asking for the reversal of the policies of PCST. Neither is she demanding it to allow her to take her final
examinations; she was already enrolled in another educational institution. A reversal of the acts complained of would not
adequately redress her grievances; under the circumstances, the consequences of respondents acts could no longer be
undone or rectified.
Second, exhaustion of administrative remedies is applicable when there is competence on the part of the administrative
body to act upon the matter complained of.[14] Administrative agencies are not courts; they are neither part of the judicial
system, nor are they deemed judicial tribunals.[15] Specifically, the CHED does not have the power to award
damages.[16] Hence, petitioner could not have commenced her case before the Commission.
Third, the exhaustion doctrine admits of exceptions, one of which arises when the issue is purely legal and well within the
jurisdiction of the trial court. [17]Petitioners action for damages inevitably calls for the application and the interpretation of
the Civil Code, a function that falls within the jurisdiction of the courts. [18]
Second Issue:
Cause of Action
Sufficient Causes of Action Stated
21
in the Allegations in the Complaint

As a rule, every complaint must sufficiently allege a cause of action; failure to do so warrants its dismissal. [19] A complaint is
said to assert a sufficient cause of action if, admitting what appears solely on its face to be correct, the plaintiff would be
entitled to the relief prayed for. Assuming the facts that are alleged to be true, the court should be able to render a valid
judgment in accordance with the prayer in the complaint.[20]
A motion to dismiss based on lack of cause of action hypothetically admits the truth of the alleged facts. In their Motion to
Dismiss, respondents did not dispute any of petitioners allegations, and they admitted that x x x the crux of plaintiffs cause
of action is the determination of whether or not the assessment of P100 per ticket is excessive or oppressive. [21] They
thereby premised their prayer for dismissal on the Complaints alleged failure to state a cause of action. Thus, a
reexamination of the Complaint is in order.
The Complaint contains the following factual allegations:
10. In the second week of February 2002, defendant Rachelle A. Gamurot, in connivance with PCST, forced plaintiff and her
classmates to buy or take two tickets each, x x x;
11. Plaintiff and many of her classmates objected to the forced distribution and selling of tickets to them but the said
defendant warned them that if they refused [to] take or pay the price of the two tickets they would not be allowed at all to
take the final examinations;
12. As if to add insult to injury, defendant Rachelle A. Gamurot bribed students with additional fifty points or so in their test
score in her subject just to unjustly influence and compel them into taking the tickets;
13. Despite the students refusal, they were forced to take the tickets because [of] defendant Rachelle A. Gamurots coercion
and act of intimidation, but still many of them including the plaintiff did not attend the dance party imposed upon them by
defendants PCST and Rachelle A. Gamurot;
14. Plaintiff was not able to pay the price of her own two tickets because aside form the fact that she could not afford to
pay them it is also against her religious practice as a member of a certain religious congregation to be attending dance
parties and celebrations;
15. On March 14, 2002, before defendant Rachelle A. Gamurot gave her class its final examination in the subject Logic she
warned that students who had not paid the tickets would not be allowed to participate in the examination, for which threat
and intimidation many students were eventually forced to make payments:
16. Because plaintiff could not afford to pay, defendant Rachelle A. Gamurot inhumanly made plaintiff sit out the class but
the defendant did not allow her to take her final examination in Logic;
17. On March 15, 2002 just before the giving of the final examination in the subject Statistics, defendant Elissa Baladad, in
connivance with defendants Rachelle A. Gamurot and PCST, announced in the classroom that she was not allowing plaintiff
and another student to take the examination for their failure and refusal to pay the price of the tickets, and thenceforth
she ejected plaintiff and the other student from the classroom;
18. Plaintiff pleaded for a chance to take the examination but all defendants could say was that the prohibition to give the
examinations to non-paying students was an administrative decision;
19. Plaintiff has already paid her tuition fees and other obligations in the school;
22
20. That the above-cited incident was not a first since PCST also did another forced distribution of tickets to its students in
the first semester of school year 2001-2002; x x x [22]
The foregoing allegations show two causes of action; first, breach of contract; and second, liability for tort.
Reciprocity of the
School-Student Contract
In Alcuaz v. PSBA,[23] the Court characterized the relationship between the school and the student as a contract, in which a
student, once admitted by the school is considered enrolled for one semester.[24] Two years later, in Non v. Dames II,[25] the
Court modified the termination of contract theory in Alcuaz by holding that the contractual relationship between the school
and the student is not only semestral in duration, but for the entire period the latter are expected to complete it.[26] Except
for the variance in the period during which the contractual relationship is considered to subsist, both Alcuaz and Non were
unanimous in characterizing the school-student relationship as contractual in nature.
The school-student relationship is also reciprocal. Thus, it has consequences appurtenant to and inherent in all contracts of
such kind -- it gives rise to bilateral or reciprocal rights and obligations. The school undertakes to provide students with
education sufficient to enable them to pursue higher education or a profession. On the other hand, the students agree to
abide by the academic requirements of the school and to observe its rules and regulations. [27]
The terms of the school-student contract are defined at the moment of its inception -- upon enrolment of the student.
Standards of academic performance and the code of behavior and discipline are usually set forth in manuals distributed to
new students at the start of every school year. Further, schools inform prospective enrollees the amount of fees and the
terms of payment.
In practice, students are normally required to make a down payment upon enrollment, with the balance to be paid before
every preliminary, midterm and final examination. Their failure to pay their financial obligation is regarded as a valid ground
for the school to deny them the opportunity to take these examinations.
The foregoing practice does not merely ensure compliance with financial obligations; it also underlines the importance of
major examinations. Failure to take a major examination is usually fatal to the students promotion to the next grade or to
graduation. Examination results form a significant basis for their final grades. These tests are usually a primary and an
indispensable requisite to their elevation to the next educational level and, ultimately, to their completion of a course.
Education is not a measurable commodity. It is not possible to determine who is better educated than another.
Nevertheless, a students grades are an accepted approximation of what would otherwise be an intangible product of
countless hours of study. The importance of grades cannot be discounted in a setting where education is generally the gate
pass to employment opportunities and better life; such grades are often the means by which a prospective employer
measures whether a job applicant has acquired the necessary tools or skills for a particular profession or trade.
Thus, students expect that upon their payment of tuition fees, satisfaction of the set academic standards, completion of
academic requirements and observance of school rules and regulations, the school would reward them by recognizing their
completion of the course enrolled in.
The obligation on the part of the school has been established in Magtibay v. Garcia,[28] Licup v. University of San
Carlos[29] and Ateneo de Manila University v. Garcia,[30] in which the Court held that, barring any violation of the rules on the
part of the students, an institution of higher learning has a contractual obligation to afford its students a fair opportunity to
complete the course they seek to pursue.
23
We recognize the need of a school to fund its facilities and to meet astronomical operating costs; this is a reality in running
it. Crystal v. Cebu International School[31]upheld the imposition by respondent school of a land purchase deposit in the
amount of P50,000 per student to be used for the purchase of a piece of land and for the construction of new buildings and
other facilities x x x which the school would transfer [to] and occupy after the expiration of its lease contract over its present
site.
The amount was refundable after the student graduated or left the school. After noting that the imposition of the fee was
made only after prior consultation and approval by the parents of the students, the Court held that the school committed
no actionable wrong in refusing to admit the children of the petitioners therein for their failure to pay the land purchase
deposit and the 2.5 percent monthly surcharge thereon.
In the present case, PCST imposed the assailed revenue-raising measure belatedly, in the middle of the semester. It exacted
the dance party fee as a condition for the students taking the final examinations, and ultimately for its recognition of their
ability to finish a course. The fee, however, was not part of the school-student contract entered into at the start of the
school year. Hence, it could not be unilaterally imposed to the prejudice of the enrollees.
Such contract is by no means an ordinary one. In Non, we stressed that the school-student contract is imbued with public
interest, considering the high priority given by the Constitution to education and the grant to the State of supervisory and
regulatory powers over all educational institutions.[32] Sections 5 (1) and (3) of Article XIV of the 1987 Constitution provide:
The State shall protect and promote the right of all citizens to quality education at all levels and shall take appropriate steps
to make such declaration accessible to all.
Every student has a right to select a profession or course of study, subject to fair, reasonable and equitable admission and
academic requirements.
The same state policy resonates in Section 9(2) of BP 232, otherwise known as the Education Act of 1982:
Section 9. Rights of Students in School. In addition to other rights, and subject to the limitations prescribed by law and
regulations, students and pupils in all schools shall enjoy the following rights:
xxxxxxxxx
(2) The right to freely choose their field of study subject to existing curricula and to continue their course therein up to
graduation, except in cases of academic deficiency, or violation of disciplinary regulations.
Liability for Tort
In her Complaint, petitioner also charged that private respondents inhumanly punish students x x x by reason only of their
poverty, religious practice or lowly station in life, which inculcated upon [petitioner] the feelings of guilt, disgrace and
unworthiness;[33] as a result of such punishment, she was allegedly unable to finish any of her subjects for the second
semester of that school year and had to lag behind in her studies by a full year. The acts of respondents supposedly caused
her extreme humiliation, mental agony and demoralization of unimaginable proportions in violation of Articles 19, 21 and
26 of the Civil Code. These provisions of the law state thus:
Article 19. Every 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 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or
public policy shall compensate the latter for the damage.
24
Article 26. Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons.
The following and similar acts, though they may not constitute a criminal offense, shall produce a cause of action for
damages, prevention and other relief:
(1) Prying into the privacy of anothers residence;
(2) Meddling with or disturbing the private life or family relations of another;
(3) Intriguing to cause another to be alienated from his friends;
(4) Vexing or humiliating another on account of his beliefs, lowly station in life, place of birth, physical defect, or other
personal condition.
Generally, liability for tort arises only between parties not otherwise bound by a contract. An academic institution, however,
may be held liable for tort even if it has an existing contract with its students, since the act that violated the contract may
also be a tort. We ruled thus in PSBA vs. CA,[34] from which we quote:
x x x A perusal of Article 2176 [of the Civil Code] shows that obligations arising from quasi-delicts or tort, also known as
extra-contractual obligations, arise only between parties not otherwise bound by contract, whether express or implied.
However, this impression has not prevented this Court from determining the existence of a tort even when there obtains a
contract. In Air France v. Carrascoso (124 Phil. 722), the private respondent was awarded damages for his unwarranted
expulsion from a first-class seat aboard the petitioner airline. It is noted, however, that the Court referred to the petitionerairlines liability as one arising from tort, not one arising form a contract of carriage. In effect, Air France is authority for the
view that liability from tort may exist even if there is a contract, for the act that breaks the contract may be also a tort. x x
x This view was not all that revolutionary, for even as early as 1918, this Court was already of a similar mind. In Cangco v.
Manila Railroad (38 Phil. 780), Mr. Justice Fisher elucidated thus: x x x. When such a contractual relation exists the obligor
may break the contract under such conditions that the same act which constitutes a breach of the contract would have
constituted the source of an extra-contractual obligation had no contract existed between the parties.
Immediately what comes to mind is the chapter of the Civil Code on Human Relations, particularly Article 21 x x x.[35]
Academic Freedom
In their Memorandum, respondents harp on their right to academic freedom. We are not impressed. According to present
jurisprudence, academic freedom encompasses the independence of an academic institution to determine for itself (1) who
may teach, (2) what may be taught, (3) how it shall teach, and (4) who may be admitted to study. [36] In Garcia v. the Faculty
Admission Committee, Loyola School of Theology,[37] the Court upheld the respondent therein when it denied a female
students admission to theological studies in a seminary for prospective priests. The Court defined the freedom of an
academic institution thus: to decide for itself aims and objectives and how best to attain them x x x free from outside
coercion or interference save possibly when overriding public welfare calls for some restraint. [38]
In Tangonan v. Pao,[39] the Court upheld, in the name of academic freedom, the right of the school to refuse readmission of
a nursing student who had been enrolled on probation, and who had failed her nursing subjects. These instances
notwithstanding, the Court has emphasized that once a school has, in the name of academic freedom, set its standards,
these should be meticulously observed and should not be used to discriminate against certain students.[40] After accepting
them upon enrollment, the school cannot renege on its contractual obligation on grounds other than those made known
to, and accepted by, students at the start of the school year.
25
In sum, the Court holds that the Complaint alleges sufficient causes of action against respondents, and that it should not
have been summarily dismissed. Needless to say, the Court is not holding respondents liable for the acts complained of.
That will have to be ruled upon in due course by the court a quo.
WHEREFORE, the Petition is hereby GRANTED, and the assailed Orders REVERSED. The trial court is DIRECTED to reinstate
the Complaint and, with all deliberate speed, to continue the proceedings in Civil Case No. U-7541. No costs.
SO ORDERED.
G.R. No. 112182 December 12, 1994

BRICKTOWN DEVELOPMENT CORP and MARIANO Z. VERALDE, petitioners, vs. AMOR TIERRA DEVELOPMENT CORPORATION
and the HON. COURT OF APPEALS,
A contract, once perfected, has the force of law between the parties with which they are bound to comply in good faith and
from which neither one may renege without the consent of the other. The autonomy of contracts allows the parties to
establish such stipulations, clauses, terms and conditions as they may deem appropriate provided only that they are not
contrary to law, morals, good customs, public order or public policy. The standard norm in the performance of their
respective covenants in the contract, as well as in the exercise of their rights thereunder, is expressed in the cardinal
principle that the parties in that juridical relation must act with justice, honesty and good faith.
These basic tenets, once again, take the lead in the instant controversy.
Private respondent reminds us that the factual findings of the trial court, sustained by the Court of Appeals, should be
considered binding on this Court in this petition. We concede to this reminder since, indeed, there appears to be no valid
justification in the case at bench for us to take an exception from the rule. We shall, therefore, momentarily paraphrase
these findings.
On 31 March 1981, Bricktown Development Corporation (herein petitioner corporation), represented by its President and
co-petitioner Mariano Z. Velarde, executed two Contracts to Sell (Exhs. "A" and "B") in favor of Amor Tierra Development
Corporation (herein private respondent), represented in these acts by its Vice-President, Moises G. Petilla, covering a total
of 96 residential lots, situated at the Multinational Village Subdivision, La Huerta, Paraaque, Metro Manila, with an
aggregate area of 82,888 square meters. The total price of P21,639,875.00 was stipulated to be paid by private respondent
in such amounts and maturity dates, as follows: P2,200,000.00 on 31 March 1981; P3,209,968.75 on 30 June 1981;
P4,729,906.25 on 31 December 1981; and the balance of P11,500,000.00 to be paid by means of an assumption by private
respondent of petitioner corporation's mortgage liability to the Philippine Savings Bank or, alternatively, to be made payable
in cash. On even date, 31 March 1981, the parties executed a Supplemental Agreement (Exh. "C"), providing that private
respondent would additionally pay to petitioner corporation the amounts of P55,364.68, or 21% interest on the balance of
down payment for the period from 31 March to 30 June 1981, and of P390,369.37 representing interest paid by petitioner
corporation to the Philippine Savings Bank in updating the bank loan for the period from 01 February to 31 March 1981.
Private respondent was only able to pay petitioner corporation the sum of P1,334,443.21 (Exhs. "A" to "K"). In the
meanwhile, however, the parties continued to negotiate for a possible modification of their agreement, although nothing
conclusive would appear to have ultimately been arrived at.
26
Finally, on 12 October 1981, petitioner corporation, through its legal counsel, sent private respondent a "Notice of
Cancellation of Contract" (Exh. "D") on account of the latter's continued failure to pay the installment due 30 June 1981 and
the interest on the unpaid balance of the stipulated initial payment. Petitioner corporation advised private respondent,
however, that it (private respondent) still had the right to pay its arrearages within 30 days from receipt of the notice
"otherwise the actual cancellation of the contract (would) take place."
Several months later, or on 26 September 1983, private respondent, through counsel, demanded (Exh. "E") the refund of
private respondent's various payments to petitioner corporation, allegedly "amounting to P2,455,497.71," with interest
within fifteen days from receipt of said letter, or, in lieu of a cash payment, to assign to private respondent an equivalent
number of unencumbered lots at the same price fixed in the contracts. The demand, not having been heeded, private
respondent commenced, on 18 November 1983, its action with the court a quo. 1
Following the reception of evidence, the trial court rendered its decision, the dispositive portion of which read:
In view of all the foregoing, judgment is hereby rendered as follows:
1. Declaring the Contracts to Sell and the Supplemental Agreement (Exhibits "A", "B" and "C") rescinded;
2. Ordering the [petitioner] corporation, Bricktown Development Corporation, also known as Multinational Realty
Development Corporation, to return to the [private respondent] the amount of One Million Three Hundred Thirty Four
Thousand Four Hundred Forty-Three Pesos and Twenty-One Centavos (P1,334,443.21) with interest at the rate of Twelve
(12%) percent per annum, starting November 18, 1983, the date when the complaint was filed, until the amount is fully
paid;
3. Ordering the [petitioner] corporation to pay the [private respondent] the amount of Twenty-five Thousand (P25,000.00)
Pesos, representing attorney's fees;
4. Dismissing [petitioner's] counterclaim for lack of merit; and
5. With costs against the [petitioner] corporation.
SO ORDERED. 2
On appeal, the appellate court affirmed in toto the trial court's findings and judgment.
In their instant petition, petitioners contend that the Court of Appeals has erred in ruling that
(1) By petitioners' acts, conduct and representation, they themselves delayed or prevented the performance of the
contracts to sell and the supplemental agreement and were thus estopped from cancelling the same.
(2) Petitioners were no justified in resolving the contracts to sell and the supplemental agreement.
(3) The cancellation of the contract required a positive act on the part of petitioners giving private respondent the sixty (60)
day grace period provided in the contracts to sell; and
(4) In not holding that the forfeiture of the P1,378,197.48 was warranted under the liquidated damages provisions of the
contracts to sell and the supplemental agreement and was not iniquitous nor unconscionable.
The core issues would really come down to (a) whether or not the contracts to sell were validly rescinded or cancelled by
petitioner corporation and, in the affirmative, (b) whether or not the amounts already remitted by private respondent under
said contracts were rightly forfeited by petitioner corporation.
27
Admittedly, the terms of payment agreed upon by the parties were not met by private respondent. Of a total selling price
of P21,639,875.00, private respondent was only able to remit the sum of P1,334,443.21 which was even short of the
stipulated initial payment of P2,200,000.00. No additional payments, it would seem, were made. A notice of cancellation
was ultimately made months after the lapse of the contracted grace period. Paragraph 15 of the Contracts to Sell provided
thusly:
15. Should the PURCHASER fail to pay when due any of the installments mentioned in stipulation No. 1 above, the OWNER
shall grant the purchaser a sixty (60)-day grace period within which to pay the amount/s due, and should the PURCHASER
still fail to pay the due amount/s within the 60-day grace period, the PURCHASER shall have the right to ex-parte cancel or
rescind this contract, provided, however, that the actual cancellation or rescission shall take effect only after the lapse of
thirty (30) days from the date of receipt by the PURCHASER of the notice of cancellation of this contract or the demand for
its rescission by a notarial act, and thereafter, the OWNER shall have the right to resell the lot/s subject hereof to another
buyer and all payments made, together with all improvements introduced on the aforementioned lot/s shall be forfeited in
favor of the OWNER as liquidated damages, and in this connection, the PURCHASER obligates itself to peacefully vacate the
aforesaid lot/s without necessity of notice or demand by the OWNER. 3
A grace period is a right, not an obligation, of the debtor. When unconditionally conferred, such as in this case, the grace
period is effective without further need of demand either calling for the payment of the obligation or for honoring the right.
The grace period must not be likened to an obligation, the non-payment of which, under Article 1169 of the Civil Code,
would generally still require judicial or extrajudicial demand before "default" can be said to arise. 4
Verily, in the case at bench, the sixty-day grace period under the terms of the contracts to sell became ipso facto operative
from the moment the due payments were not met at their stated maturities. On this score, the provisions of Article 1169
of the Civil Code would find no relevance whatsoever.
The cancellation of the contracts to sell by petitioner corporation accords with the contractual covenants of the parties,
and such cancellation must be respected. It may be noteworthy to add that in a contract to sell, the
non-payment of the purchase price (which is normally the condition for the final sale) can prevent the obligation to convey
title from acquiring any obligatory force (Roque vs. Lapuz, 96 SCRA 741; Agustin vs. Court of Appeals, 186 SCRA 375).
The forfeiture of the payments thus far remitted under the cancelled contracts in question, given the factual findings of
both the trial court and the appellate court, must be viewed differently. While clearly insufficient to justify a foreclosure of
the right of petitioner corporation to rescind or cancel its contracts with private respondent, the series of events and
circumstances described by said courts to have prevailed in the interim between the parties, however, warrant some
favorable consideration by this Court.
Petitioners do not deny the fact that there has indeed been a constant dialogue between the parties during the period of
their juridical relation. Concededly, the negotiations that they have pursued strictly did not result in the novation, either
extinctive or modificatory, of the contracts to sell; nevertheless, this Court is unable to completely disregard the following
findings of both the trial court and the appellate court. Said the trial court:
It has been duly established through the testimony of plaintiff's witnesses Marcosa Sanchez and Vicente Casas that there
were negotiations to enter into another agreement between the parties, after March 31, 1981. The first negotiation took
place before June 30, 1981, when Moises Petilla and Renato Dragon, Vice-President and president, respectively, of the
plaintiff corporation, together with Marcosa Sanchez, went to the office of the defendant corporation and made some
proposals to the latter, thru its president, the defendant Mariano Velarde. They told the defendant Velarde of the plaintiff's
request for the division of the lots to be purchased into smaller lots and the building of town houses or smaller houses
therein as these kinds of houses can be sold easily than big ones. Velarde replied that subdivision owners would not consent
28
to the building of small houses. He, however, made two counter-proposals, to wit: that the defendant corporation would
assign to the plaintiff a number of lots corresponding to the amounts the latter had already paid, or that the defendant
corporation may sell the corporation itself, together with the Multinational Village Subdivision, and its other properties, to
the plaintiff and the latter's sister companies engaged in the real estate business. The negotiations between the parties
went on for sometime but nothing definite was accomplished. 5
For its part, the Court of Appeals observed:
We agree with the court a quo that there is, therefore, reasonable ground to believe that because of the negotiations
between the parties, coupled with the fact that the plaintiff never took actual possession of the properties and the
defendants did not also dispose of the same during the pendency of said negotiations, the plaintiff was led to believe that
the parties may ultimately enter into another agreement in place of the "contracts to sell." There was, evidently, no malice
or bad faith on the part of the plaintiff in suspending payments. On the contrary, the defendants not only contributed, but
had consented to the delay or suspension of payments. They did not give the plaintiff a categorical answer that their
counter-proposals will not materialize. 6
In fine, while we must conclude that petitioner corporation still acted within its legal right to declare the contracts to sell
rescinded or cancelled, considering, nevertheless, the peculiar circumstances found to be extant by the trial court,
confirmed by the Court of Appeals, it would be unconscionable, in our view, to likewise sanction the forfeiture by petitioner
corporation of payments made to it by private respondent. Indeed, in the opening statement of thisponencia, we have
intimated that the relationship between parties in any contract must always be characterized and punctuated by good faith
and fair dealing. Judging from what the courts below have said, petitioners did fall well behind that standard. We do not
find it equitable, however, to adjudge any interest payment by petitioners on the amount to be thus refunded, computed
from judicial demand, for, indeed, private respondent should not be allowed to totally free itself from its own breach.
WHEREFORE, the appealed decision is AFFIRMED insofar as it declares valid the cancellation of the contracts in question
but MODIFIED by ordering the refund by petitioner corporation of P1,334,443.21 with 12% interest per annum to
commence only, however, from the date of finality of this decision until such refund is effected. No costs.
SO ORDERED.
29

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T. MARYS ACADEMY, petitioner, vs. WILLIAM CARPITANOS and LUCIA S.

CARPITANOS, GUADA DANIEL, JAMES DANIEL II, JAMES

SPOUSES LUIGI M. GUANIO and ANNA HERNANDEZ-GUANIO

The amount of P350,000.00 by way of actual damages;

The amount of P250,000.00 for and as moral damages;

The amount of P100,000.00 as exemplary damages;

The amount of P100,000.00 for and as attorneys fees.

With costs against the defendant.

RCPI v. Verchez, et al. [9] enlightens:

TSPIC CORPORATION vs TSPIC EMPLOYEES UNION (FFW) ,

Attorneys fees equal to 10% of all the above monetary awards.

Wage rate before WO No. 8... PhP 234.67

Increase for 2001 (12% of 2000 salary)........... PhP 30.00

Wage rate range before WO No. 8.PhP 234.68

Increase for 2001 (12% of 2000 salary) PhP 30.00

Wage rate by December 2000......... PhP 250.00

Wage rate range before WO No. 8.. PhP 240.26

setting the minimum wage at PhP 250 9.74

Increase for 2001 (12% of 2000 salary). PhP 30.00

Wage rate by December 2000. PhP 250.00

For respondents Ma. Fe Flores and Fe Capistrano:[26]

Wage rate range before WO No. 8 PhP 245.85

Wage rate by December 2000. PhP 250.00

Total (Wage rate range beginning January 1, 2001).. PhP 275.85

No. of Working No.

Marie Ann DelosSantos

Ser John Hernandez

Claire Evelyn Velez

in the Allegations in the Complaint

G.R. No. 112182 December 12, 1994

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