MARSANGCA, EDRES, and MACADINDANG Law Firm

Mahayahay, Iligan City

August 12, 2011 Mr. ANTONIO ANTON Campus Director Philippine Trade and Commerce College Dear Sir: Thank you for trusting our firm with your dilemma. We hope that this opinion you requested from us could shed light on you. Before going any further, let us first recount the facts. A two years contract of food services was perfected on July 2, 2007 between your College, Philippine Trade and Commerce College (PTCC), and Mr. Pepito Manoloto. Your College was represented by then Director Richard Rick. By virtue thereof, Mr. Manoloto undertakes the building of a canteen inside the college premises and at the scholars temporary dormitory located at TESDA at his own expense. He shall provide the students with nutritious and healthy food and well-balanced meals during all school days of the year, and weekends for weekenders. In turn, your College has agreed to restrict, forbid, ban, prevent outside vendors or ambulant vendors to sell or market their products or produce within the college premises at anytime. In case of non-renewal of the contract after two years, Mr. Manoloto shall be reimbursed by the next contracting party upon assumption which shall be 50% less of the construction cost of the two canteens constructed by him. After one year of operation, the canteen at TESDA was stopped since the TESDA Dormitory Site was closed. Prior to its stop, scholars already were complaining because of their discontentment on the kind of food and services being provided to them. Despite these complaints and the fact that his contract ended in July 2009, he still continued its operations. So, on February 14, 2010, a new canteen was built inside the premises of your college. This prompted Mr. Manaloto to ask the 50% reimbursement from your College because there exists a non-renewal of contract. Furthermore, he argued that his continued operation beyond July 2009 was intended to off-set the loss incurred due to the sudden closed-out of the canteen at TESDA. Subsequently, you wrote Mr. Manaloto a letter stating that you are not paying him the 50% reimbursement. Since nobody is using his canteen, he is not entitled to reimbursement. You informed him that he can only claim such, if others are using the canteen he had built. Also, nothing in the contract prevents the next concessionaire to use a different space for his canteen operations. You even realized that the real party to the Contract are the scholars through the Federated Parents Teachers Association (FPTA) because they are the ones actually paying the canteen services and not the College. The scholars were not properly represented and involved in the contract. Your queries and our corresponding answers thereto are given below. Query 1: Whether or not Mr. Manoloto violated the terms of the contract.
Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfilment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law.

MARSANGCA, EDRES, and MACADINDANG Law Firm

Mahayahay, Iligan City

Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Art. 1157. Obligations arise from: (1) Law; (2) Contracts; (3) Quasi-contracts; (4) Acts or omissions punished by law; and (5) Quasi-delicts.

When your College and Mr. Manoloto entered into a contract, both of you are obliged to comply with what you have agreed upon as fixed in the contract. Accordingly, Mr. Manoloto makes himself liable if he does not provide the students with nutritious and healthy food and well-balanced meals. In the same coin, your College is also liable if you do not give a weekly menu for him to be followed. This is the essence of Article 1315 of the New Civil Code. A review of the facts clearly shows that Mr. Manoloto violated the terms of the contract as he failed to comply with what is required of him by the contract. This is evidenced by the several complaints of the scholars and the Federated Parents Teachers Association (FPTA) since its operation in June 2007. The scholars expressed their discontentment on the kind of food and services being provided to them. On this ground, you have a right of action against Mr. Manaloto. However, Mr. Manaloto can counter this argument on the same ground. He may argue that you also failed in complying with what is incumbent upon you. Your College is supposed to provide him a weekly menu which shall be followed in his preparation of the food for the students. But, it can be gleaned from the narration of your facts that you were not able to do so. As such, you are also liable. Taking this into consideration, both of you are guilty of violating the terms of the contract. Consequently, none of you have a course of action against each other. He who seeks equity must come with clean hands. Query 2: Whether or not Mr. Manoloto is in the position to invoke the provision of the contract regarding the reimbursement of 50% of his expenses.

Regarding this second query, Mr. Manoloto cannot invoke the provision of the contract on the reimbursement of fifty percent of his expenses. There is sheer violation of the terms of the contract on his part and he was also in bad faith. His bad faith is seen in his failure to anticipate the possible closure of the dormitory called by its temporary nature. This in turn can result to the untimely stop of his canteen operations. It was held in Torres v. CA, 320 SCRA 430 that parties are free to enter into any contractual stipulations so long as it is not illegal or contrary to public morals. When such agreement, freely and voluntarily entered into, turns out to be disadvantageous to a party, courts cannot rescue it without crossing the constitutional right to a contract. In addition, Article 449 of the Civil Code further supports our arguments. Article 449 states that, he who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity. Following this, we can conclude that Mr. Manaloto has no right to ask reimbursement from your College. His building of a canteen in TESDA amounts to bad faith; and, as such, he has no right to indemnity.

MARSANGCA, EDRES, and MACADINDANG Law Firm

Mahayahay, Iligan City

Be that as it may, Mr. Manoloto may assert that he was in good faith and continue with his claim for reimbursement. He can argue that the mere fact of his building a canteen in TESDA albeit its temporary nature is not sufficient evidence to establish his bad faith. He can challenge you to present competent evidence to prove your claim of bad faith against him. Besides, the law states that the burden of proof lies on the person asserting bad faith. Failure on your part to do so, would entitle Mr. Manoloto to the reimbursement. Query 3: Whether or not the campus director, on behalf of the students, can legally forge a contract of canteen concession with the service providers.

The campus director can legally forge a contract on behalf of the students. This is based on the implied authority given to him by the students as shown by their acquiescence to the contract. The students did not express any objection to the signing of the contract. Had the students objected to the contract, the campus director lost his authority to contract on behalf of the students. As such, he cannot legally represent the students in a contract. The contract thereby becomes unenforceable unless subsequently, ratified by the students. This is the principle enunciated in Article 1317 of the Civil Code, quoted below:
Art. 1317. No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent him. A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party.

Query 4: Whether or not the new contract made by the FPTA with the new concessionaire valid. Article 1318 of the Civil Code provides that there is no contract unless the following requisites concur, viz: (1) CONSENT of the contracting parties; (2) OBJECT certain which is the subject matter of the contract; (3) CAUSE of the obligation which is established. All these requisites are present in the new contract between the FPTA and the concessionaire. Hence, the new contract is valid. There is consent when both the FPTA and Mr. Bruno Marz agreed on the building of another canteen inside the premises of your College. The object of the contract on your part is the building of a canteen inside the premises of your College. It is worth noting that the said object is not contrary to law, morals, good customs, public order or public policy. Finally, the cause of the contract on your part is the delivery of canteen services in the form of nutritious and healthy food as well as well-balanced meals to your students. On the part of Mr. Marz, the cause is the income that will be generated by him out of the canteen operations. Query 5: Whether or not the second contract forged by the FPTA violated the former contract of Mr. Manoloto.

MARSANGCA, EDRES, and MACADINDANG Law Firm

Mahayahay, Iligan City

The contract forged by FPTA did not violate the former contract of Mr. Manoloto. Article 1370 of the Civil Code states that If the terms of contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control The terms of the second contract are clear. There is no provision in the contract that the next concessionaire shall not be permitted to use different space for his canteen. Consequently, Mr. Marz can legally put up his canteen inside your College without committing any violation respecting the original contract entered between your College and Mr. Manoloto It is time-honored rule that a contract constitutes the law between parties. Therefore, they are bound by its stipulations. Since the second contract is valid for all its intents and legal purposes, the parties are bound to comply with its stipulations. Besides, obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Query 6: Whether or not there is a connection between the former and subsequent contract which entitles Mr. Manoloto to demand that certain provisions in the former contract be implemented against the new concessionaire. There is no connection between the former and subsequent contract which entitles Mr. Manoloto to demand that certain provisions in the former contract be implemented against the new concessionaire. It is important to note that the parties involved in the former and subsequent contract are not the same parties. In the first contract, the contracting parties were PTCC and Mr. Manoloto; while in the second contract, the contracting parties were FPTA and Mr. Marz. At all events, regarding the option that Mr. Manoloto that he wants to operate the canteen again and to remove the canteen of Mr. Marz cannot be granted. He cannot exercise the option because he violated the contract and removing Mr. Marz would impair the subsequent one.