NATIONAL POWER CORPORATION, PETITIONER V.HON. ROSE MARIE ALONZO-LEGASTO AS PRESIDING JUDGE, RTC QC BR 99 ET AL1

GR no.148318 November 22, 2004Tinga, J. SV: NPC and FUCC Entered into a project for excavation. FUCC needed to do blasting works to continue with the project. NPC agreed that it will issue an extra work order for the blasting works and subsequently pay FUCC but this did not happen. The two entered into a compromise agreement and agreed that NPC will pay the undisputed unpaid claims and that they will submit the agreement to an arbitration board to settle the amount to be paid. After the arbitration issued its ruling, NPC questioned the award which included the blasting works (no extra work order issued for it) allegedly due to promissory estoppel.SC: no basis for applying promissory estoppel. The payment was conditional on the issuance of the extra work order. The acts of the officials of NPC exceeded their authority and should not bind NPC unless the latter ratifies these acts. Unfortunately, NPC did when it signed the compromise agreement. Hence, FUCC was entitled for payment for the blasting works.

1. NPC and First United Constructors Corporation (FUCC) entered into a construction of power facilities, one in Cawayan area and the other in Bacon, Sorsogon. The price for grading excavation was P76.00 per cubic meter.

2. After commencement of the excavation, FUCC requested that it be allowed to blast to the design grade of 495 meters above sea level as its dozers and rippers could no longer excavate. It also requested that it be paid P1346 per cubic meter

3. NPC, after creating a task force to review the blasting works, offered to pay P458.07 per cubic meter, which FUCC accepted in a letter.

4. FUCC eventually abandoned the project. NPC decided to take over the project to stave-off huge pecuniary and non-monetary losses. FUCC, in order to prevent this filed an action for specific performance and damages with preliminary injunction and TRO against NPC.

5. RTC qc issued a TRO and later a writ of preliminary injunction. a. NPC filed a petition for certiorari before the CA. CA granted petition and set aside the lower

court’s order 6. FUCC filed before the SC a petition for review assailing the decision of the CA but pending the

resolution of the SC, NPC and FUCC entered into a compromise agreement. a. In the compromise agreement, NPC shall pay the undisputed unpaid billings of FUCC in

connection with the project; that NPC shall have the right to preceed with the works by re-bidding it; upon final resolution of the arbitration, the parties shall mutually terminate the contract among others

b. That the claims will be settled through 2 stagesi. One is the signing of the compromise agreement which they whill submit for

approval by this court ii. It shall submit by arbitration to settle the price of the blasting, damages and all

other unresolved claims by the parties. The 3-man commission was headed by Mr. Carmelo Sison

7. The compromise agreement was approved by the court and the case was then referred to arbitration where it was held that an award of P118,681,328.28 as just compensation plus 10% thereof for attorney’s fees and expenses of litigation was due. (NPC already paid 36,550,000 so they only owe FUCC P82,131,328.28)

8. FUCC filed a motion for execution while NPC filed a motion to vacate award by the arbitration board. Judge Alonzo-LEgasto approved the motion for execution.

9. NPC went to the CA alleging GAD. a. CA: no GAD. The arbitration board acted pursuant to its powers under the compromise

agreement. That NPC failed to prove by evidence that Mr. Sison was biased. That although

1 NATIONAL POWER CORPORATION, petitioner, vs. HON. ROSE MARIE ALONZO-LEGASTO, as Presiding Judge, RTC of Quezon City, Branch 99, JOSE MARTINEZ, Deputy Sheriff, RTC of Quezon City, CARMELO V. SISON, Chairman, Arbitration Board, and FIRST UNITED CONSTRUCTORS CORPORATION, respondents.

the blasting was not part of the unit price for the project and that there was no perfected contract for it, FUCC relied on the representation of NPC’s officials that the extra work order should be submitted to its board of directors for approval and that the blasting works would be paid. CA ruled that FUCC is entitled to just compensation on grounds of equity and promissory estoppel

10. NPC went up to the SC with basically the same arguments before the CA. one of these arguments is that the claim for blasting works was not approved by authorized officials, that the approval of extra work by authorized officials is required for an extra work order is issued.

ISSUE: Is FUCC entitled to the payment for the extra work done on the project?

there was a discussion on arbitration and vacating an award. In the end SC held that NPC’s only ground was the alleged bias of Mr. Sison, which it failed to prove by evidence at the lower court. Hence they cannot depart from the ruling upholding the award

the court looked at Sec. 9 of PD 1594 (Prescribing Policies, Guidelines, Rules and Regulations for Government Infrastructure Contracts,) which provides that a change order or extra work order may be issued only for works necessary for the completion of the project and, therefore, shall be within the general scope of the contract as bid[ded] and awarded. All change orders and extra work orders shall be subject to the approval of the Minister of Public Works, Transportation and Communications, the Minister of Public Highways, or the Minister of Energy, as the case may be.

The SC also considered the facts which were used as bases for promissory estoppel and held that although it appeared that NPC made promises that an extra work order will be issued in connection with the blasting projects, none came to existence.

o Promissory estoppel “may arise from the making of a promise, even though without consideration, if it was intended that the promise should be relied upon and in fact it was relied upon, and if a refusal to enforce it would be virtually to sanction the perpetration of fraud or would result in other injustice.” Promissory estoppel presupposes the existence of a promise on the part of one against whom estoppel is claimed. The promise must be plain and unambiguous and sufficiently specific so that the court can understand the obligation assumed and enforce the promise according to its terms.

o There was no basis for promissory estoppel since both parties knew that the payment for the blasting works was dependent on the issuance of an extra work order. The promise of NPC to pay was conditional (upon the issuance of the work order) and FUCC knew of this fact.

o Mendoza v. CA: a cause of action for promissory estoppel does not lie where an alleged oral promise was conditional, so that reliance upon it was not reasonable. It does not operate to create liability where it does not otherwise exist.

NPC’s argument that it is not bound by the acts of its officials is correct. It is a corporate entity performing proprietary functions and not a mere agency of the government.

The officials exceeded the scope of their authority when they authorized FUCC to commence blasting without an extra work order. Their acts cannot bind NPC unless it has ratified such acts or it is estopped from disclaiming them

NPC RATIFIED THOSE ACTS! The compromise agreement is a confirmatory act signifying NPC’s ratification of all the prior acts of its officers (the president who signed it was acting pursuant to a board resolution)

SC in the end upheld the award of the arbitration except for the rate of interest which was decreased from 12% to 6%.

Justin Benedict A. Moreto