J.A.B. Bulao & Associates

CASE 2011-0232: MA. JOY TERESA BILBAO VS. SAUDI ARABIAN AIRLINES (G.R. NO. 183915, 14 DECEMBER 2011, LEONARDO-DE CASTRO, J ) SUBJECT: RESIGNATION (BRIEF TITLE: BILBAO VS. SAUDI ARABIAN AIRLINE)

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DISPOSITIVE

WHEREFORE, the petition is DENIED.  The Decision dated May 30, 2008 and the Resolution dated July 22, 2008 of the Court of Appeals in CA-G.R. No. 102319 are AFFIRMED.

SO ORDERED.

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Republic of the Philippines

Supreme Court

Manila

FIRST DIVISION

x- – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x

D E C I S I O N

LEONARDO-DE CASTRO, J.:

Before the Court is a petition for review on certiorari seeking the reversal of the May 30, 2008 Decision^[1][1] of the Court of Appeals in CA-G.R. No. 102319 and its July 22, 2008 Resolution^[2][2] denying petitioner Ma. Joy Teresa O. Bilbao’s (Bilbao) motion for reconsideration.  The assailed decision affirmed the ruling of the National Labor Relations Commission (NLRC) which held thatBilbao was not illegally dismissed and had voluntarily resigned.  The NLRC reversed and set aside the decision of the Labor Arbiter which ruled that Bilbao, together with two other complainants, was illegally dismissed by respondent Saudi Arabian Airlines (Saudia) and ordered the payment of full backwages, separation pay, and attorney’s fees. 

          The facts are as follows:

         Bilbaowas a former employee of respondent Saudia, having been hired as a Flight Attendant on May 13, 1986 until her separation from Saudia in September 2004.  During the course of her employment,Bilbaowas assigned to work at the Manila Office, although the nature of her work as a flight attendant entailed regular flights fromManilatoJeddah,Saudi Arabia, and back.

          On August 25, 2004, the In-Flight Service Senior Manager of Saudia assigned in Manilareceived an inter-office Memorandum dated August 17, 2004 from its Jeddah Office regarding the transfer of 10 flight attendants from Manilato Jeddah effective September 1, 2004.  The said memorandum explained that such transfer was made “due to operational requirements.”^[3][3] Bilbao was among the 10 flight attendants to be transferred.

         Bilbaoinitially complied with the transfer order and proceeded to Jeddah for her new assignment.  However, on September 7, 2004, she opted to resign and relinquish her post by tendering a resignation letter, which reads:

Jeddah IFS Base Manager (F)

F/A  Maria Joy Teresa O. Bilbao

PRN:  3006078

22  /  07  /  1425 H     7  /  09  /  2004

RESIGNATION

I am tendering my resignation with one (1) month notice effective 18 October 2004.  Thank you for the support you have given me during my 18 years of service.

                                                            (signed)

                                                            ________________

                                                            F/A’s SIGNATURE

                                                            3006078         

(signed)                                                September 7, 2004

_________________

AMIN GHABRA

SNR. MGR. IFS JED (F)

(signed)

ABDULLAH BALKHOYOUR

GM IFS CABIN CREW

8/8/1425

21/9/04                                                ADMIN ACKNOWLEDGEMENT / DATE^[4][4]

           On October 28, 2004, Bilbao executed and signed an Undertaking^[5][5] similar to that of a Receipt, Release and Quitclaim wherein she acknowledged receipt of a sum of money as “full and complete end-of-service award with final settlement and have no further claims whatsoever against Saudi Arabian Airlines.”^[6][6] 

          In spite of this signed Undertaking, however, on July 20, 2005,Bilbaofiled with the NLRC a complaint for reinstatement and payment of full backwages; moral, exemplary and actual damages; and attorney’s fees.  Two of the other flight attendants who were included in the list for transfer to Jeddah, Shalimar Centi-Mandanas and Maria Lourdes Castells, also filed their respective complaints against Saudia.  These complaints were eventually consolidated into NLRC-NCR Case Nos. 00-07-06315-05 and 00-08-06745-05, and assigned to Labor Arbiter Ramon Valentin C. Reyes.

          For her part,Bilbaomaintained that her resignation from Saudia was not voluntary.  She narrated that she was made to sign a pre-typed resignation letter and was even reminded that the same was a better option than termination which would tarnish her record of service with Saudia. Bilbaoand her co-complainants shared a common theory that their transfer to Jeddah was a prelude to their termination since they were all allegedly between 39 and 40 years of age.

          Upon the other hand, Saudia averred that the resignation letters fromBilbaoand her co-complainants were voluntarily made since they were actually hand-written and duly signed.  Saudia asserted thatBilbaoand her co-complainants were not subjected to any force, intimidation, or coercion when they wrote said resignation letters and even their undertakings, after receiving without protest a generous separation package despite the fact that employees who voluntarily resign are not entitled to any separation pay.  Saudia also added that the transfer of flight attendants from their Manila Office to the Jeddah Office was a valid exercise of its management prerogative. 

          On August 31, 2006, Labor Arbiter Reyes rendered a Decision^[7][7] declaring that Bilbao, together with co-complainants Centi-Mandanas and Castells, was illegally dismissed, and ordering Saudia to pay each of the complainants full backwages from the time of the illegal dismissal until the finality of the decision, separation pay of one month for every year of service less the amount already received, plus ten percent (10%) attorney’s fees on the amounts actually determined to be due the complainants. 

           Saudia filed an appeal before the NLRC alleging thatBilbaoand her co-complainants voluntarily executed their resignation letters and undertakings; thus, they were not illegally dismissed.  Moreover, Saudia opined thatBilbaoand her co-complainants’ claim of illegal dismissal was a mere afterthought as they waited for almost one year from the date of their alleged dismissal to file their respective complaints. 

         Bilbaofollowed suit and also appealed before the NLRC, arguing that she was entitled to the payment of moral and exemplary damages since her termination was allegedly attended by bad faith, fraud and deceit. 

          On June 25, 2007, the NLRC granted Saudia’s appeal, and reversed and set aside the decision of the Labor Arbiter.  The decretal portion of the NLRC decision reads:

WHEREFORE, the foregoing premises considered, the respondents’ appeal is hereby GRANTED.  The decision appealed from is REVERSED and SET ASIDE and a new one is issued finding the respondent not guilty of illegal dismissal.

For lack of merit, the complainant Bilbao’s appeal is DISMISSED.

Accordingly, the complaint is DISMISSED.^[8][8]

          In a Resolution^[9][9] dated October 26, 2007, the NLRC amended its earlier Resolution dated June 25, 2007, to state that Castells and Centi-Mandanas were also not entitled to moral and exemplary damages.  Moreover, the NLRC failed to find any compelling justification or valid reason to modify, alter or reverse its earlier resolution, thus:

WHEREFORE, the foregoing premises considered, the Appeals and Motions for Reconsideration of complainants Maria Lourdes Castells and Shalimar Centi-Mandanas are hereby DISMISSED for lack of merit.

Likewise, the Motion for Reconsideration of Maria Joy Teresa Bilbao is DENIED.

No further motion of similar nature shall be entertained.^[10][10]

          Bilbaowent to the Court of Appeals via a petition for certiorari alleging grave abuse of discretion on the part of the NLRC in ruling that she was not illegally dismissed and not entitled to the payment of moral and exemplary damages. 

          On May 30, 2008, the Court of Appeals affirmed the Resolutions of the NLRC dated June 25, 2007 and October 26, 2007, and held that the resignation of Bilbaowas “of her own free will and intelligent act.”^[11][11] 

          Dissatisfied,Bilbaofiled a motion for reconsideration which was denied by the Court of Appeals in the Resolution dated July 22, 2008. 

          Hence, the instant petition for review filed byBilbaoon the following grounds:

6.  GROUND FOR THIS PETITION/ISSUES

6.1.  The Court of Appeals committed reversible error in upholding the erroneous Decision of the NLRC, Third Division which Decision reversed the Labor Arbiter’s findings.  The Court of Appeals decided the case in a way probably not in accord with law or with applicable decisions of the Supreme Court.

6.2.  The Court of Appeals committed palpable error in ruling that petitioner was not forced to resign; the Court of Appeals decided the case in a way probably not in accord with law and contrary to applicable decisions of the Supreme Court.

6.3.  The Court of Appeals committed patent mistake in ruling that the petitioners’ (sic) termination was valid because respondent had the right to terminate the petitioner even without just cause; this is an outright violation of the Labor Code and applicable laws and jurisprudence; The Court of Appeals likewise erred in validating the resignation because it was accompanied with words of gratitude and payment of separation benefits.^[12][12]

In her Petition^[13][13] dated September 15, 2008, Bilbao asserts that the initial step of Saudia in transferring her to Jeddah was, by itself, constructive dismissal since the transfer order was unreasonable, discriminatory, attended by bad faith, and would result to demotion in rank or diminution in pay.  Moreover,Bilbao maintains that her resignation letter was not voluntarily made as it was in a pre-typed form supplied by Saudia, and was accomplished when she was under pressure and had no choice but to resign.  Lastly,Bilbao insists that the undertaking or waiver and quitclaim that she signed in favor of Saudia was invalid as she particularly puts in issue the voluntariness of its execution.

In its Comment^[14][14] dated November 14, 2008, Saudia preliminarily asserts that the petition raises the factual issue of whether or not Bilbao voluntarily resigned from her employment with Saudia, which is not proper for a petition for review under Rule 45 of the Rules of Court, thus warranting its outright dismissal.  Nonetheless, Saudia presents its arguments and contends that it validly exercised its management prerogative in transferringBilbao to another work station.  Saudia then enumerates the following factual circumstances which allegedly reveal the voluntariness ofBilbao’s resignation, to wit:

a)      [Bilbao’s] resignation letter was penned in her own handwriting and duly signed by her;

b)      [Bilbao] tendered her letter of resignation in Jeddah, KSA on 07 September 2004;

c)      [Bilbao] is of sufficient age and discretion, could read, write, and understand English and a college graduate;

d)     There is no proof that any material or physical force was applied on her person or her family;

e)      [Bilbao] then voluntarily executed an Undertaking acknowledging receipt of various sums of money and irrevocably and unconditionally releasing Saudia, its directors, stockholders, officers and employees from any claim or demand whatsoever in law or equity which they may have in connection with her employment with respondent;

f)       [Bilbao] received generous financial benefits without protest;

g)      It took [Bilbao] at least one (1) year from the date of the alleged dismissal to file her Complaint against [Saudia]; and 

h)      The intimidation, force or coercion allegedly employed by [Saudia] surfaced, for the first time, when the Complaint were (sic) filed on 20 July 2005, which was then amended on 01 September 2005.^[15][15]

Lastly, Saudia claims thatBilbaois not entitled to any award of moral and exemplary damages since there is no dismissal, much less illegal dismissal committed by Saudia, asBilbaovoluntarily resigned from her employment.

This Court finds no merit in the petition.

At the outset, it bears stressing that the jurisdiction of this Court in a petition for review under Rule 45 of the Rules of Court, as amended, is generally confined only to errors of law.  It does not extend to questions of fact.  This rule, however, admits of exceptions, such as in the instant case, where the findings of fact and the conclusions of the Labor Arbiter are inconsistent with those of the NLRC and the Court of Appeals.^[16][16]  To recall, the Labor Arbiter found that Saudia illegally dismissedBilbao, while the NLRC and the Court of Appeals are in agreement thatBilbao voluntarily tendered her resignation. 

          After a review of the case, we uphold the findings of the Court of Appeals thatBilbaovoluntarily resigned from her employment with Saudia.  Her resignation letter and undertaking that evidenced her receipt of separation pay, when taken together with her educational attainment and the circumstances surrounding the filing of the complaint for illegal dismissal, comprise substantial proof ofBilbao’s voluntary resignation. 

          Resignation is the voluntary act of an employee who is in a situation where one believes that personal reasons cannot be sacrificed in favor of the exigency of the service, and one has no other choice but to dissociate oneself from employment.  It is a formal pronouncement or relinquishment of an office, with the intention of relinquishing the office accompanied by the act of relinquishment.  As the intent to relinquish must concur with the overt act of relinquishment, the acts of the employee before and after the alleged resignation must be considered in determining whether he or she, in fact, intended to sever his or her employment.^[17][17]

          In the instant case,Bilbaotendered her resignation letter a week after her transfer to the Jeddah office.  In the said letter,Bilbaoexpressed her gratitude for the support which Saudia had given her for her eighteen years of service.  Clearly, her use of words of appreciation and gratitude negates the notion that she was forced and coerced to resign.  Besides, the resignation letter was hand-written byBilbaoon a Saudia form and was in English, a language she is conversant in. 

Additionally, instead of immediately filing a complaint for illegal dismissal after she was allegedly forced to resign,Bilbaoexecuted an Undertaking in favor of Saudia, wherein she declared that she received her full and complete end-of-service award with final settlement, to wit:

I, the undersigned employee

Name/ MARIA JOY TERESA O. BILBAO

PRN/ 3006078

hereby declare that I have received my full and complete end-of-service award with final settlement and have no further claims whatsoever against Saudi Arabian Airlines.

By signing this undertaking, I also fully Understand that any other future claims filed by me shall not be considered, accepted, or entertained.

Name: MARIA JOY TERESA O. BILBAO

PRN: 3006078

Signature: (SGD.)

Date: October 25, 2004^[18][18]

What is more,Bilbaowaited for more than 10 months after her separation from Saudia to file a complaint for illegal dismissal. 

Despite the foregoing circumstances,Bilbaomaintains that she was forced and coerced into writing the said resignation letter in the form prepared by Saudia, and that she was left with no other option but to resign.  Saudia, on the other hand, claims thatBilbao’s resignation was voluntary, thus, there could be no illegal dismissal.

Even assuming that Saudia prepared the form in whichBilbaowrote her resignation letter as claimed, this Court is not convinced that she was coerced and intimidated into signing it. Bilbaois no ordinary employee who may not be able to completely comprehend and realize the consequences of her acts.  She is an educated individual.  It is highly improbable that with her long years in the profession and her educational attainment, she could be tricked and forced into doing something she does not intend to do.  Under these circumstances, it can hardly be said thatBilbaowas coerced into resigning from Saudia.

Besides, Bilbaodid not adduce any competent evidence to prove that she was forced or threatened by Saudia.  It must be remembered that for intimidation to vitiate consent, the following requisites must be present: (1) that the intimidation caused the consent to be given; (2) that the threatened act be unjust or unlawful; (3) that the threat be real or serious, there being evident disproportion between the evil and the resistance which all men can offer, leading to the choice of doing the act which is forced on the person to do as the lesser evil; and (4) that it produces a well-grounded fear from the fact that the person from whom it comes has the necessary means or ability to inflict the threatened injury to his person or property.^[19][19]  In the instant case,Bilbao did not prove the existence of any one of these essential elements.  Bare and self-serving allegations of coercion or intimidation, unsubstantiated by evidence, do not constitute proof to sufficiently support a finding of forced resignation.  It would be utterly unfair and unjust to hold that Saudia illegally dismissedBilbao and to impose upon it the burden of accepting backBilbao who unequivocally and voluntarily manifested her intent and willingness to sever her employment ties.

Anent the Undertaking signed by Bilbao, this Court is of the opinion that the same was validly and voluntarily executed.  Indeed, not all waivers and quitclaims are invalid as against public policy.  There are legitimate waivers and quitclaims that represent a voluntary and reasonable settlement of workers’ claims which should be respected by the courts as the law between the parties.^[20][20]  And if such agreement was voluntarily entered into and represented a reasonable settlement, it is binding on the parties and should not later be disowned. 

Periquet v. National Labor Relations Commission,^[21][21] held that:

Not all waivers and quitclaims are invalid as against public policy.  If the agreement was voluntarily entered into and represents a reasonable settlement, it is binding on the parties and may not later be disowned simply because of a change of mind.  It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable on its face, that the law will step in to annul the questionable transaction.  But where it is shown that the person making the waiver did so voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding undertaking. x x x.^[22][22]

This Court quotes with approval the finding of the NLRC, to wit:

Having signed the waiver, it is hard to conclude that [Bilbaowas] merely forced by the necessity to execute the “undertaking.” [Bilbaois] not [a] gullible nor unsuspecting [person] who can easily be tricked or inveigled and, thus, need the extra protection of law.  [She is a] well-educated and highly experienced flight [attendant].  The “undertaking” executed by [Bilbaois] therefore considered valid and binding on [her] and [Saudia].

Due to [her] voluntary resignation, [Bilbaois] actually not entitled to any separation pay benefits.  Thus, the financial package given to [her] is more than sufficient consideration for [her] execution of the “undertaking.”^[23][23]

          Clearly then,Bilbao’s claim that she was illegally dismissed cannot be sustained.  There is no showing that the Undertaking and resignation letter were executed byBilbaounder force or intimidation. Bilbao’s claims for reinstatement, payment of backwages without loss of seniority rights and with interest, moral and exemplary damages, and attorney’s fees must inevitably fail. 

          This Court has always reminded that:

Although the Supreme Court has, more often than not, been inclined towards the workers and has upheld their cause in their conflicts with the employers, such inclination has not blinded it to the rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and applicable law and doctrine.  An employee who resigns and executes a quitclaim in favor of the employer is generally stopped from filing any further money claims against the employer arising from the employment.^[24][24]

          WHEREFORE, the petition is DENIED.  The Decision dated May 30, 2008 and the Resolution dated July 22, 2008 of the Court of Appeals in CA-G.R. No. 102319 are AFFIRMED.

SO ORDERED.

                                                 TERESITA J. LEONARDO-DE CASTRO

                                       Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA

                                                                                Chief Justice

CASE 2011-0231: EVILINA C. BANAAG VS. OLIVIA C. ESPELETA, INTERPRETER III, BRANCH 82, REGIONAL TRIAL COURT, QUEZON CITY (A.M. NO. P-11-3011, 16 DECEMBER 2011, PERLAS-BERNABE, J.) SUBJECT: DISGRACEFUL AND IMMORAL CONDUCT; SUBSTANTIAL EVIDENCE; (BRIEF TITLE: BANAAN VS. ESPELITA)

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DISPOSITIVE:

WHEREFORE, respondent OLIVIA C. ESPELETA is found GUILTY of Disgraceful and Immoral Conduct. In view of her resignation, a FINE in the amount of P50,000.00 is imposed on respondent, to be deducted from her accrued leave credits, if sufficient; otherwise, she is ORDERED to pay the amount of the fine directly to this Court.

The Employees Leave Division, Office of Administrative Services of the Office of the Court Administrator, is DIRECTED to compute respondent’s accrued leave credits, if any, and deduct therefrom the amount representing the payment of the fine.

Let a copy of this Decision be filed in the personal record of respondent.

SO ORDERED.

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SUBJECT/DOCTRINE/DIGEST

ESPELITA, A COURT INTERPRETER  MAINTAINED AN ILLICIT RELATIONSHIP WITH A CERTAIN MR. BANAAG EVIDENCED BY BANK DEPOSIT SLIPS MADE BY THE LATTER IN FAVOR OF ESPELITA. WHAT OFFENSE DID ESPELITA COMMIT?

DISGRACEFUL AND IMMORAL CONDUCT.

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WHAT IS THE OFFENSE OF DISGRACEFUL AND IMMORAL CONDUCT?

IT IS  “AN ACT WHICH VIOLATES THE BASIC NORM OF DECENCY, MORALITY AND DECORUM ABHORRED AND CONDEMNED BY THE SOCIETY” AND “CONDUCT WHICH IS WILLFUL, FLAGRANT OR SHAMELESS, AND WHICH SHOWS A MORAL INDIFFERENCE TO THE OPINIONS OF THE GOOD AND RESPECTABLE MEMBERS OF THE COMMUNITY.”

After a careful evaluation of the records of the instant case, the Court finds respondent Olivia C. Espeleta guilty of Disgraceful and Immoral Conduct under Section 46(b)(5), Chapter 7, Subtitle A, Title I, Book V of the Administrative Code of 1987 which, as defined in Section 1 of CSC Resolution No. 100912 dated May 17, 2010 (Revised Rules on the Administrative Offense of Disgraceful and Immoral Conduct), is “an act which violates the basic norm of decency, morality and decorum abhorred and condemned by the society” and “conduct which is willful, flagrant or shameless, and which shows a moral indifference to the opinions of the good and respectable members of the community.”

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WHAT IS THE DEGREE OF SUCH OFFENSE?

GRAVE.

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WHAT IS THE PENALTY?

SUSPENSION FROM THE SERVICE FOR SIX (6) MONTHS AND ONE (1) DAY TO ONE (1) YEAR FOR THE FIRST OFFENSE, AND DISMISSAL FOR THE SECOND OFFENSE.²⁷

Respondent’s act of maintaining an illicit relationship with a married man comes within the purview of disgraceful and immoral conduct,²⁶ which is classified as a grave offense punishable with suspension from the service for six (6) months and one (1) day to one (1) year for the first offense, and dismissal for the second offense.²⁷

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ARE THERE PRECEDENTS?

YES. SOME PRECEDENTS ARE AS FOLLOWS:

In Sealana-Abbu vs. Laurenciana-Huraño²⁸ (2007), where two court stenographers engaged in an illicit affair were suspended for one (1) year, the Court emphasized that “(i)t is morally reprehensible for a married man or woman to maintain intimate relations with another person of the opposite sex other than his or her spouse.” In Elape vs. Elape²⁹ (2008), a process server of the RTC was suspended for six (6) months and one (1) day for cohabiting with his mistress, abandoning his family and depriving them of financial support. Another process server was suspended for the same period in Regir vs. Regir³⁰ (2009) for carrying on an illicit relationship with a woman not his wife, with whom he begot a child. Recently, in Babante-Caples vs. Caples³¹ (2010), a utility worker in the MTC, who had resigned, was nonetheless ordered to pay a fine for maintaining an illicit relationship with a woman not his wife.

As in Babante-Caples, respondent herein was given the opportunity to be heard and refute the charges against her; yet, she chose not to file any comment. Instead, as aptly pointed out by the OCA, respondent rather hastily tendered her resignation on June 11, 2009, just a few days after receipt on June 2, 2009³² of the 1^st Indorsement specifically requiring her to answer the letter-complaint. That respondent fully intended to run away from accountability for her indiscretions is betrayed by her perfectly-timed departure for theUnited States of America shortly after her resignation. Respondent’s actuations when confronted with the charges against her are, thus, strongly indicative of guilt on her part.

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HOW DID THE COURT EVALUATE THE EVIDENCE AGAINST ESPELITA?

IN THIS WISE:

The deposit slips indicating various amounts credited both directly and indirectly to respondent’s account indubitably prove the allegation that she had been receiving substantial amounts of money from complainant’s husband, in callous disregard of the heartache and financial dislocation of the latter’s family. There could thus not be any serious doubt that respondent was indeed in an intimate relationship with Avelino, a married man.

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WHAT IS THE DEGREE OF EVIDENCE APPLIED BY THE COURT?

SUBSTANTIAL EVIDENCE.

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WHAT IS SUBSTANTIAL EVIDENCE?

THAT AMOUNT OF RELEVANT EVIDENCE THAT A REASONABLE MIND MIGHT ACCEPT AS ADEQUATE TO SUPPORT A CONCLUSION, IS REQUIRED.³³

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WHEN IS THE STANDARD OF SUBSTANTIAL EVIDENCE SATISFIED?

WHEN THERE IS REASONABLE GROUND TO BELIEVE THAT RESPONDENT IS RESPONSIBLE FOR THE MISCONDUCT COMPLAINED OF, EVEN IF SUCH EVIDENCE MIGHT NOT BE OVERWHELMING OR EVEN PREPONDERANT.³⁴

In administrative proceedings, only substantial evidence, i.e., that amount of relevant evidence that a reasonable mind might accept as adequate to support a conclusion, is required.³³ The standard of substantial evidence is satisfied when there is reasonable ground to believe that respondent is responsible for the misconduct complained of, even if such evidence might not be overwhelming or even preponderant.³⁴

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WHY SHOULD IMMORAL CONDUCT BE PENALIZED STRICTLY?

BECAUSE THE IMAGE OF A COURT OF JUSTICE IS MIRRORED IN THE CONDUCT, OFFICIAL AND OTHERWISE, OF THE PERSONNEL WHO WORK THEREAT, FROM THE JUDGE TO THE LOWEST OF ITS PERSONNEL. COURT EMPLOYEES HAVE BEEN ENJOINED TO ADHERE TO THE EXACTING STANDARDS OF MORALITY AND DECENCY IN THEIR PROFESSIONAL AND PRIVATE CONDUCT IN ORDER TO PRESERVE THE GOOD NAME AND INTEGRITY OF COURTS OF JUSTICE.”³⁵

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BUT ESPELITA HAS ALREADY RESIGNED. WILL SHE STILL BE SANCTIONED?

YES, BY PAYING FINE  OF P50,000.00.. RESIGNATION SHOULD NOT BE USED EITHER AS AN ESCAPE OR AS AN EASY WAY OUT TO EVADE AN ADMINISTRATIVE SANCTION.

“It cannot be overstressed that the image of a court of justice is mirrored in the conduct, official and otherwise, of the personnel who work thereat, from the judge to the lowest of its personnel. Court employees have been enjoined to adhere to the exacting standards of morality and decency in their professional and private conduct in order to preserve the good name and integrity of courts of justice.”³⁵ This Court has thus consistently penalized court personnel who had been found wanting of such standards, even if they have precipitately resigned from their positions. Resignation should not be used either as an escape or as an easy way out to evade an administrative liability or an administrative sanction.³⁶

Had respondent not resigned from the service, she would have been suspended for six months and one day in accordance with the prescribed penalty in the Uniform Rules on Administrative Cases in the Civil Service³⁷, this being her first offense involving immorality. Instead, the Court adopts the OCA’s recommended fine in the amount of P50,000.00 not exceeding respondent’s six months’ salary, which may be deducted from her accrued leave credits, if sufficient.

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EN BANC

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DECISION

PERLAS-BERNABE, J.:

“Can a man scoop fire into his lap without his clothes being burned? Can a man walk on hot coals without his feet being scorched?” So goes an early admonition against immorality from the Holy Book that is as valuable today as it was thousands of years ago. In the judiciary, “moral integrity is more than a virtue; it is a necessity”.¹ A court employee who has fallen short of the exacting standards of morality and decency has to face the consequences, even after the embers have died and the scars have faded.

The Facts

The present administrative case originated from a letter-complaint² dated May 3, 2009 filed by complainant Evelina C. Banaag before the Office of the Court Administrator (OCA) charging respondent Olivia C. Espeleta with Gross Immorality and Conduct Prejudicial to the Best Interest of the Service for engaging in an illicit and immoral relationship with her husband, Avelino C. Banaag.

Evelina met Olivia for the first time in October 2005 when the latter accompanied Gloria Tubtub to her house at JB Crystal Building, Quirino Highway, Lagro, Quezon City, to request for encashment of a check in the amount of P11,000.00. It turned out that the check, which Evelina encashed out of pity for Gloria who was her “sister” in a Marriage Encounter group and who told her that she needed money for her grandchild who was supposedly hospitalized, actually belonged to Olivia. According to Gloria, she did not intend to deceive her friend but only wanted to help Olivia, who gave her a “small token” for the transaction.³

At the same meeting, Olivia introduced herself as a court interpreter in the Regional Trial Court (RTC) ofQuezon City, Branch 82. Believing that Olivia could assist her and her husband in their pending cases before the court, Evelina introduced Olivia to her husband who, after learning that they both hail from Batangas, asked for Olivia’s cellphone number. Little did Evelina know that said casual meeting would eventually blossom into an amorous relationship between Olivia and her husband.

Evelina claimed that she learned about the affair the following year, 2006, when her husband asked to withdraw P180,000.00 from their joint bank account to lend to his brother, Reynaldo, who was then confined in the hospital. She later found out from the latter’s wife, Ana Fe, that Avelino gave him (Reynaldo) only P80,000.00. Ana Fe cautioned Evelina against releasing more money to her husband who has a mistress working at the City Hall.

Upon investigation, Evelina learned that on two separate occasions in 2006, her husband had gone to Olivia’s house in San Jose Del Monte, Bulacan, accompanied by his friend, Engr. Pacifico “Jun” R. Sabigan. On both occasions, according to Sabigan, they had some drinks, and Olivia danced. Avelino, already tipsy, danced with her. Although Sabigan did not witness any compromising exchanges between the two, nonetheless, Avelino had confided to him that he and Olivia were seeing each other, and that he had been giving Olivia P5,000.00 for her groceries.⁴

Evelina confronted her husband right away. He was tight-lipped at first, but he eventually admitted his romantic involvement with Olivia. Worse, Evelina discovered that her husband, using their conjugal funds, had been depositing substantial amounts of money to Olivia’s Landbank account⁵ for three years spanning 2006 to 2009, as well as to the Metrobank account⁶ of the latter’s daughter, Ana Kharmela E. Rules. He also made deposits to the Landbank accounts of Olivia’s co-employees, Pacencia Rodriguez⁷ and Olga Abesamis⁸. When confronted, Olga allegedly confirmed that the deposits to her account were for the benefit of Olivia who, at that time, had no ATM card.

Evelina claimed that more than P3 Million had been deposited to Olivia’s account but she was able to retain in her possession deposit slips amounting only to P1.429 Million, having lost the others in a scuffle with her husband, who tore them to pieces and flushed them in the toilet. For a long time, Avelino was the administrator of the family-owned JB Crystal Building, which earned rentals that he himself collected in cash. This, Evelina surmised, enabled her husband to support Olivia financially.

To bolster her claims, Evelina attached to her letter-complaint (1) photocopies⁹ of cash deposit slips evidencing Avelino’s deposits to Olivia’s account wherein he indicated his relationship to the latter as a “cousin”, as well as to the accounts of Olivia’s daughter and co-employees; and (2) summaries¹⁰ of unremitted rentals from their commercial building and unauthorized withdrawals made by Avelino from their bank account. She likewise submitted in evidence the affidavits executed by Gloria Tubtub¹¹ and Engr. Sabigan¹² confirming the illicit relationship.

The Action and Recommendation of the OCA

The OCA directed respondent Olivia to comment on the letter-complaint within ten (10) days from receipt of its 1^st Indorsement¹³ dated May 18, 2009. However, Olivia failed to comply therewith. A similar notice¹⁴ was subsequently issued by the OCA on August 19, 2009, to no avail. On January 21, 2010, the OCA reported¹⁵ the matter to this Court recommending that Olivia be directed for the last time to submit her comment otherwise the case against her shall be resolved on the basis of the record on file. Accordingly, the First Division issued the pertinent Resolution¹⁶ dated April 28, 2010, which was, however, returned unserved with the notation “No occupant at given address”. It was served anew per Resolution¹⁷ dated August 16, 2010, but was likewise returned unserved for the reason “RTS-Moved”.¹⁸ The Court thereafter sent the case back to the OCA for evaluation, report and recommendation.¹⁹

Upon verification with the Office of Administrative Services (OAS), it was found that Olivia had filed a letter²⁰ of resignation dated June 11, 2009, which was favorably endorsed²¹ both by the Presiding Judge of Branch 82 and the Executive Judge of the RTC. In a subsequent letter²² dated August 12, 2009, Presiding Judge Severino B. De Castro, Jr. informed the OCA that Olivia had gone to the United States, and that it was not known whether she intended to return to the country. Hence, upon the recommendation²³ of the OCA, the resignation was accepted by this Court on February 26, 2010 without prejudice to the outcome of the instant administrative case.

On August 11, 2011, the OCA reported its findings²⁴ on the case and recommended that:

1. The instant administrative matter be RE-DOCKETED as a regular administrative complaint against Olivia C. Espeleta, former Interpreter III. Regional Trial Court, Branch 82,Quezon City; and

2. Respondent Olivia C. Espeleta be found GUILTY of Gross Immoral Conduct, and be ORDERED to pay a FINE in the amount of P50,000.00, which may be deducted from whatever sums that are due her, as accrued leave credits, if sufficient.²⁵

The Issue

The only issue to be resolved is whether respondent Olivia C. Espeleta is guilty of immoral conduct.

The Ruling of the Court

After a careful evaluation of the records of the instant case, the Court finds respondent Olivia C. Espeleta guilty of Disgraceful and Immoral Conduct under Section 46(b)(5), Chapter 7, Subtitle A, Title I, Book V of the Administrative Code of 1987 which, as defined in Section 1 of CSC Resolution No. 100912 dated May 17, 2010 (Revised Rules on the Administrative Offense of Disgraceful and Immoral Conduct), is “an act which violates the basic norm of decency, morality and decorum abhorred and condemned by the society” and “conduct which is willful, flagrant or shameless, and which shows a moral indifference to the opinions of the good and respectable members of the community.”

Respondent’s act of maintaining an illicit relationship with a married man comes within the purview of disgraceful and immoral conduct,²⁶ which is classified as a grave offense punishable with suspension from the service for six (6) months and one (1) day to one (1) year for the first offense, and dismissal for the second offense.²⁷

In Sealana-Abbu vs. Laurenciana-Huraño²⁸ (2007), where two court stenographers engaged in an illicit affair were suspended for one (1) year, the Court emphasized that “(i)t is morally reprehensible for a married man or woman to maintain intimate relations with another person of the opposite sex other than his or her spouse.” In Elape vs. Elape²⁹ (2008), a process server of the RTC was suspended for six (6) months and one (1) day for cohabiting with his mistress, abandoning his family and depriving them of financial support. Another process server was suspended for the same period in Regir vs. Regir³⁰ (2009) for carrying on an illicit relationship with a woman not his wife, with whom he begot a child. Recently, in Babante-Caples vs. Caples³¹ (2010), a utility worker in the MTC, who had resigned, was nonetheless ordered to pay a fine for maintaining an illicit relationship with a woman not his wife.

As in Babante-Caples, respondent herein was given the opportunity to be heard and refute the charges against her; yet, she chose not to file any comment. Instead, as aptly pointed out by the OCA, respondent rather hastily tendered her resignation on June 11, 2009, just a few days after receipt on June 2, 2009³² of the 1^st Indorsement specifically requiring her to answer the letter-complaint. That respondent fully intended to run away from accountability for her indiscretions is betrayed by her perfectly-timed departure for theUnited States of America shortly after her resignation. Respondent’s actuations when confronted with the charges against her are, thus, strongly indicative of guilt on her part.

The deposit slips indicating various amounts credited both directly and indirectly to respondent’s account indubitably prove the allegation that she had been receiving substantial amounts of money from complainant’s husband, in callous disregard of the heartache and financial dislocation of the latter’s family. There could thus not be any serious doubt that respondent was indeed in an intimate relationship with Avelino, a married man.

In administrative proceedings, only substantial evidence, i.e., that amount of relevant evidence that a reasonable mind might accept as adequate to support a conclusion, is required.³³ The standard of substantial evidence is satisfied when there is reasonable ground to believe that respondent is responsible for the misconduct complained of, even if such evidence might not be overwhelming or even preponderant.³⁴

“It cannot be overstressed that the image of a court of justice is mirrored in the conduct, official and otherwise, of the personnel who work thereat, from the judge to the lowest of its personnel. Court employees have been enjoined to adhere to the exacting standards of morality and decency in their professional and private conduct in order to preserve the good name and integrity of courts of justice.”³⁵ This Court has thus consistently penalized court personnel who had been found wanting of such standards, even if they have precipitately resigned from their positions. Resignation should not be used either as an escape or as an easy way out to evade an administrative liability or an administrative sanction.³⁶

Had respondent not resigned from the service, she would have been suspended for six months and one day in accordance with the prescribed penalty in the Uniform Rules on Administrative Cases in the Civil Service³⁷, this being her first offense involving immorality. Instead, the Court adopts the OCA’s recommended fine in the amount of P50,000.00 not exceeding respondent’s six months’ salary, which may be deducted from her accrued leave credits, if sufficient.

WHEREFORE, respondent OLIVIA C. ESPELETA is found GUILTY of Disgraceful and Immoral Conduct. In view of her resignation, a FINE in the amount of P50,000.00 is imposed on respondent, to be deducted from her accrued leave credits, if sufficient; otherwise, she is ORDERED to pay the amount of the fine directly to this Court.

The Employees Leave Division, Office of Administrative Services of the Office of the Court Administrator, is DIRECTED to compute respondent’s accrued leave credits, if any, and deduct therefrom the amount representing the payment of the fine.

Let a copy of this Decision be filed in the personal record of respondent.

SO ORDERED.

ESTELA M. PERLAS-BERNABE

Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

ANTONIO T. CARPIO PRESBITERO J. VELASCO JR.

Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO ARTURO D. BRION

Associate Justice Associate Justice

DIOSDADO M. PERALTA LUCAS P. BERSAMIN

Associate Justice Associate Justice

MARIANO C. DEL CASTILLO ROBERTO A. ABAD

Associate Justice Associate Justice

MARTIN S. VILLARAMA, JR. JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

JOSE CATRAL MENDOZA MARIA LOURDES P. A. SERENO

Associate Justice Associate Justice

BIENVENIDO L. REYES

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA

Chief Justice

1 Lledo vs. Lledo, A.M. No. P-95-1167, December 21, 1998, 300 SCRA 310.

2 Rollo, pp. 1-5.

3 See Affidavit of Gloria Tubtub dated June 10, 2009, id. , p. 102.

4 See Affidavit of Engr. Pacifico R. Sabigan dated June 10, 2009, id., p. 104.

5 As evidenced by deposit slips, id., pp. 27-76.

6 Id., pp. 83-86.

7 Id., p. 81.

8 Id., pp. 78-80.

9 Id., pp. 27-86.

10 Id., pp. 90-101.

11 Id., p.102.

12 Id., p. 104.

13 Id., p. 107.

14 1st Tracer dated August 19, 2009, id., p. 109.

15 Id., pp. 316-317.

16 Id., pp. 319-320.

17 Id., p. 327.

18 Per Resolution dated March 23, 2011, id., p. 328.

19 Per Resolution dated June 1, 2011, id., p. 329.

20 Id., p. 330.

21 Id., pp. 332 and 333.

22 Id., p. 336.

23 See Memorandum dated February 17, 2010, id., pp. 340-341.

24 Id., pp. 343-350.

25 Id., p. 350.

26 Babante-Caples vs. Caples, A.M. No. HOJ-10-03 (Formerly A.M. OCA IPI No. 09-04-HOJ), November 15, 2010, 634 SCRA 498.

27 Section 52(A)(15), Rule IV of CSC Resolution No. 99-1936 dated August 31, 1999 (Revised Uniform Rules on Administrative Cases in the Civil Service).

28 A.M. No. P-05-2091, August 28, 2007, 531 SCRA 289.

29 A.M. No. P-08-2431, (formerly OCA IPI No. 03-1682-P), April 16, 2008, 551 SCRA 403.

30 A.M. No. P-06-2282, August 7, 2009, 595 SCRA 455.

31 Supra, note 26.

32 See Registry Return Receipt, 1^st Indorsement dated May 18, 2009, Rollo, p. 107 (dorsal portion).

33 Supra, note 26.

34 Re: Complaint of Mrs. Corazon S. Salvador against Spouses Noel and Amelia Serafico, A.M. No. 2008-20-SC, March 15, 2010.

35 Gibas, Jr. vs. Gibas, A.M. No. P-09-2651, March 23, 2011, citing Bucatcat vs. Bucatcat, 380 Phil. 555, 567 (2000).

36 Cajot vs. Cledera, A.M. No. O-98-1262, February 12, 1998, 286 SCRA 238.

37 Supra, note 27.

CASE 2011-0230: MANILA INTERNATIONAL AIRPORT AUTHORITY VS. DING VELAYO SPORTS CENTER INC. (G.R. NO. 161718, 14 DECEMBER 2011) LEONARDO – DE CASTRO, J.) (BRIEF TITLE: MIAA VS. DING VELAYO)

===============

DISPOSITIVE:

WHEREFORE, the instant Petition is hereby DENIED for lack of merit.  The Decision dated January 8, 2004 of the Court Appeals in CA-G.R. CV No. 68787, which affirmed the Decision dated October 29, 1999 of Branch 111 of the RTC of Pasay City in Civil Case No. 8847, is hereby AFFIRMED. 

SO ORDERED.

===============

Republic of the Philippines

Supreme Court

Manila

FIRST DIVISION

x- – – – – – – – – – – – – – – – – – – – – – – – – – – – –  – – – – – – – – – – – – – – – – – – – – – -x

D E C I S I O N

LEONARDO-DE CASTRO, J.:

Before Us is a Petition for Review under Rule 45 of the Rules of Court of the Decision^[1][1] dated January 8, 2004 of the Court Appeals in CA-G.R. CV No. 68787, affirming the Decision^[2][2] dated October 29, 1999 of Branch 111 of the Regional Trial Court (RTC) of Pasay City in Civil Case No. 8847, which granted the Complaint for Injunction, Consignation, and Damages with prayer for a Temporary Restraining Order filed by respondent Ding Velayo Sports Center, Inc. against petitioner Manila International Airport Authority (MIAA), and essentially compelled petitioner to renew the lease of respondent over a parcel of land within the airport premises.

Below are the facts as culled from the records of the case:

On February 15, 1967, petitioner (then still called the Civil Aeronautics Administration or CAA) and Salem Investment Corporation (Salem) entered into a Contract of Lease whereby petitioner leased in favor of Salem a parcel of land known as Lot 2-A, with an area of 76,328 square meters, located in front of the Manila International Airport (MIA) in Pasay City, and registered under Transfer Certificate of Title (TCT) No. 6735 in the name of the Republic (Lot 2-A).  Petitioner andSalementered into said Contract of Lease for the following reasons:

WHEREAS, this particular portion of land is presently an eyesore to the airport premises due to the fact that a major portion of it consists of swampy and talahib infested silt and abandoned fishponds and occupied by squatters and some [petitioner’s] employees with ungainly makeshift dwellings;

WHEREAS, the LESSOR, in accordance with its general plan to improve and beautify the airport premises, is interested in developing this particular area by providing such facilities and conveniences as may be necessary for the  comfort, convenience and relaxation of transients, tourists and the general public;

WHEREAS, the LESSEE, a corporation engaged in hostelry and other allied business, is ready, willing and able to cooperate with the LESSOR in the implementation of this general development plan for the airport premises;

x  x x x

WHEREAS, the LESSEE’s  main interest is to have a sufficient land area within which to construct a modern hotel with such facilities as would ordinarily go with modern hostelry, including recreation halls, facilities for banks, tourist agencies, travel bureaus, laundry shops, postal stations, curio and native shops and other allied business calculated to make the hotel and its facilities comfortable, convenient and attractive, and for this purpose, an initial land area of some Thirty[-]Five Thousand Ten (35,010) square meters would be first utilized.^[3][3]

The term of the lease and renewal thereof as stipulated upon by petitioner andSalemare as follows:

            3.         That the term of the lease shall be for a period of Twenty-Five (25) years, commencing from the date of receipt of approval of this Contract by the Secretary of Public Works and Communications, and at the option of the LESSEE, renewable for another Twenty-Five (25) years.  It is understood, that after the first 25 years lease, the ownership of, and full title to, all the buildings and permanent improvements introduced by the LESSEE on the leased premises including those introduced on theGolfDrivingRangeshall automatically vest in the LESSOR, without cost.

            Upon the termination of the lease or should the LESSEE not exercise this option for renewal, the LESSEE shall deliver the peaceful possession of all the building and other permanent improvements herein above referred to, with the understanding that the LESSEE shall have the right to remove from the premises such equipment, furnitures, accessories and other articles as would ordinarily be classified as movable property under pertinent provisions of law.

            4.         That the renewal of this lease contract shall be for another period of Twenty-Five (25) years, under the same terms and conditions herein stipulated; provided, however that, since the ownership of the hotel building and permanent improvement have passed on the LESSOR, the LESSEE shall pay as rental, in addition to the rentals herein agreed upon, an amount equivalent to One percent (1%) of the appraised value of the hotel building and permanent improvements at the time of expiration of Twenty-Five (25) years lease period, payable annually.^[4][4]

Subsequently, in a Transfer of Lease Rights and Existing Improvements dated September 30, 1974, Salem conveyed in favor of Ding Velayo Export Corporation (Velayo Export), for the consideration of P1,050,000.00, its leasehold rights over a portion of Lot 2-A, measuring about 15,534 square meters, with the improvements thereon, consisting of an unfinished cinema-theater.  Accordingly, petitioner and Velayo Export executed a Contract of Lease datedNovember 26, 1974 pertaining to the aforementioned leased portion ofLot 2-A. 

In turn, Velayo Export executed a Transfer of Lease Rights dated April 27, 1976 by which it conveyed to respondent, for the consideration of P500,000.00, its leasehold rights over an 8,481-square meter area (subject property) out of the 15,534-square meter portion it was leasing from petitioner.  As a result, petitioner and respondent executed another Contract of Lease^[5][5] datedMay 14, 1976 covering the subject property. 

The Contract of Lease datedMay 14, 1976between petitioner (as lessor) and respondent (as lessee) specified how respondent shall develop and use the subject property:

2.         That the LESSEE shall utilize the premises as the site for the construction of a Sports Complex facilities and shopping centers in line with the Presidential Decree for Sports Development and Physical Fitness, including the beautification of the premises and providing cemented parking areas.

3.         That the LESSEE shall construct at its expense on the leased premises a parking area parallel to and fronting the Domestic Airport Terminal to be open to the traveling public free of charge to ease the problem of parking congestion at the Domestic Airport.^[6][6]

Pursuant to the aforequoted objectives, respondent agreed to the following:

9.         Physical improvements on building spaces and areas subject of this agreement may be undertaken by and at the expenses of the LESSEE.  However, no improvements may be commenced without prior approval of the plans by the LESSOR and, whenever deemed necessary a cash deposit shall be made in favor of the LESSOR which shall be equivalent to the cost of restoration of any portion affected by such alteration or improvements;

10.       The LESSEE agrees and binds himself to complete the physical improvements or contemplated structures within the leased premises for a period of one (1) year.  Failure on the part of the LESSEE to do so within said period shall automatically revoke the Contract of Lease without necessity of judicial process.^[7][7]

The lease rental shall be computed as follows:

5.         That the LESSEE shall pay to the LESSOR as monthly rentals for the leased premises the rate of P0.45 per square meter for the first 300 square meters, P0.30 per square meter for the next 500 square meters, and P0.25 per square meter for the remaining area pursuant to Part VIII, Section 4 of Administrative Order No. 4, Series of 1970, which in the case of the 8,481 square meters herein leased shall amount to P2,205.25 per month, or a  royalty equivalent to one percent (1%) of the monthly gross income of the LESSEE, whichever is higher.

6.         That for the purpose of accurately determining the monthly gross income, the LESSEE hereby gives its consent for the examination of the books by authorized representatives of the LESSOR or the Commission on Audit;

            x x x x

            13.       If, during the lifetime of this agreement and upon approval by the LESSOR, the leased area is increased or diminished, or the LESSEE is relocated to another area, rentals, fees, and charges imposed shall be amended accordingly.  Subsequent amendments to the Administrative Order which will affect an increase of the rates of fees, charges and rentals agreed upon in this contract shall automatically amend this contract to the extent that the rates of fees, rentals, and charges are increased.

            In the event of relocation of the LESSEE to other areas, the cost of relocation shall be shouldered by the LESSEE.^[8][8]

Nonpayment of lease rentals shall have the following consequence:

          8.         Failure on the part of the LESSEE TO PAY ANY fees, charges, rentals or the royalty of one percent (1%) within thirty (30) days after receipt of written demand, the LESSOR shall deny the LESSEE of the further use of the leased premises and /or any of its facilities, utilities and services.  x x x.^[9][9]

The Contract of Lease prohibits respondent from transferring its leasehold rights, engaging in any other business outside those mentioned in said Contract, and subletting the premises whether in whole or in part, thus:

            16.       The LESSEE agrees not to assign, sell, transfer or mortgage his rights under this agreement or sublet the whole or part of premises covered by it to a third party or parties nor engage in any other business outside of those mentioned in this contract.  Violation of this provision shall also be a ground for revocation of the lease contract without need of judicial process.^[10][10]

Period of the lease and renewal thereof are governed by paragraphs 4 and 17 of the Contract of Lease that read:

          4.         That the period of this lease shall take effect fromJune 1, 1976up toFebruary 15, 1992which is equivalent to the unexpired portion of the lease contract executed between [petitioner] and Ding Velayo Export Corporation.

x x x x

            17.       The LESSEE, if desirous of continuing his lease, should notify the LESSOR sixty (60) days prior to expiration of the period agreed upon for the renewal of the Contract of Lease.^[11][11]

The lease may be revoked/terminated under the following conditions:

            15.       This contract of lease may be terminated by other party upon thirty (30) days notice in writing.  Failure on the part of the LESSEE to comply with any of the provisions of this lease contract or any violation of any rule or regulations of the Airport shall give the LESSOR the right to revoke this contract effective thirty (30) days after notice of revocation without need of judicial demand.  However, the LESSEE shall remain liable and obligated to pay rentals and other fees and charges due and in arrears with interest at the rate of twelve percent (12%) per annum;

            x x x x

            18.       Upon termination or revocation of this contract of lease as herein provided, the LESSEE shall deliver possession of the premises to the LESSOR in the same condition that they were received giving allowance to normal wear and tear and to damage or destruction caused by act of God.  All permanent improvements, however, which the LESSEE might have constructed in the premises by virtue hereof shall upon the termination of this lease automatically become the absolute property of the LESSOR without cost;

            19.       In the event that the LESSOR shall need the leased premises in its airport development program, the LESSEE agrees to vacate the premises within thirty (30) days from receipt of notice.  All improvements not removed by the LESSEE within the thirty (30) day period shall become the property of the LESSOR without cost.^[12][12]

Respondent began occupying the subject property and paying petitioner the amount of P2,205.25 per month as rental fee.  Respondent then constructed a multi-million plaza with a three-storey building on said property.  Respondent leased spaces in the building to various business proprietors. 

In a Letter^[13][13] dated April 11, 1979, petitioner requested respondent for a copy of the latter’s Gross Income Statement from December 1977 to December 1978, duly certified by a certified public accountant, for the purpose of computing the royalty equivalent to 1% of the monthly gross income of respondent.  Acceding to this request, respondent sent petitioner a Letter^[14][14] dated May 31, 1979 and appended therewith the requested income statements which disclosed that the total gross income of respondent for the period in question amounted to P1,972,968.11.  Respondent also submitted to petitioner and the Commission on Audit (COA) its duly audited financial statements^[15][15] for the years 1984 to 1988.  Meanwhile, petitioner had continued billing respondent the amount of P2,205.25 as monthly rental fee, which the latter obediently paid.

Petitioner eventually issued Administrative Order (AO) No. 4, series of 1982,^[16][16] and AO No. 1, series of 1984, fixing various rates for the lease rentals of its properties.  AO No. 4, series of 1982, and AO No. 1, series of 1984, allegedly effected an increase in the lease rental of respondent for the subject property, as provided for in paragraph 13 of the Contract of Lease dated May 14, 1976 between petitioner and respondent.  However, said issuances were subjected to review for revision purposes and their implementation was suspended.  Still, petitioner, through a letter dated September 23, 1986, required respondent to pay a moratorium rental at the rate of P5.00 per square meter rate per month or a total of P42,405.00 every month.    

In a Letter^[17][17] datedOctober 18, 1986, respondent opposed the implementation of any increase in its lease rental for the subject property.  Respondent wrote:

We believe that an increase in rental of a property which does not form part of the Airport or its immediate premises, like the premises leased to DVSC, although owned by MIAA is not covered by Batas Pambansa Blg. 325 or Finance Ministry Order No. 6-83.  Furthermore, the language of B.P. No. 325 and Ministry Order No. 6-83 authorizes the fixing or revision of fees and charges only for “services and functions.”

x x x x

Assuming that the increase in rental of MIAA property is authorized by B.P. No. 325 and Ministry Order No. 6-83, such increase as ordered in your moratorium rental rate insofar as it is made applicable to DVSC is not valid.

The increase which is around 2,000 percent or 20 times above present rental rate is unreasonably high.  Both B.P. No. 325 and Ministry Order No. 6-83 prescribed only “just and reasonable rates sufficient to cover administrative costs.”

Such increase in rental is uncalled for considering that:

Upon termination of the lease, all the improvements on the property shall belong to MIAA without costs.  The original cost of the buildings and other improvements on the land we have leased is P10,600,000.00.  Said improvements would now cost over P30,000,000.00.  In effect the Government would be collecting another P2.0 million a year.

We, therefore, request that the moratorium rate be not applied to us.

Following the foregoing exchange, petitioner had kept on charging respondent the original monthly rental of P2,205.25.

More than 60 days prior to the expiration of the lease between petitioner and respondent, the latter, through its President, Conrado M. Velayo (Velayo), sent the former a Letter^[18][18] dated December 2, 1991 stating that respondent was interested in renewing the lease for another 25 years. 

Petitioner, through its General Manager, Eduardo O. Carrascoso, in a Letter^[19][19] dated February 24, 1992, declined to renew the lease, ordered respondent to vacate the subject property within five days, and demanded respondent to pay arrears in lease rentals as of January 1992 in the sum of P15,671,173.75.

Velayo, on behalf of respondent, replied to petitioner through a Letter^[20][20] dated March 3, 1992 that reads:

This refers to your letters which we received on26 February 1992and27 February 1992, respectively, the first as a response to our letter of2 December 1991where we informed you of our intention to renew our lease contract, and the second wherein you asked us to vacate within five (5) days the leased premises.

Your second letter surprised us inasmuch as we have been negotiating with you for the renewal of our lease.  In addition, your sudden decision gave us no time to discuss your terms and conditions with our Board considering that the issues involved major decision.

For a smoother transition and for the mutual interest of the government, the tenants and ourselves, may we request for a reconsideration of your decision, and we be given up to the end of March 1992 to peacefully turn-over to you the leased premises.  This will enable you to create a committee that will take-over the leased property and its operations.

Likewise, consistent with our previous stand as communicated to you by our legal counsel, copy of which is hereto attached, we deny any liability on rental increases.

In Letters^[21][21] all dated March 10, 1992, Velayo informed petitioner that he already sent individual letters to Manila Electric Company, Philippine Long Distance Telephone Company, and Manila Waterworks and Sewerage System, instructing the said utility companies that succeeding billings for electric, telephone, and water consumptions should already be transferred to the account of petitioner in light of the expected turn-over of the subject property and improvements thereon from respondent to petitioner.

However, around the same time, Samuel Alomesen (Alomesen) became the new President and General Manager of respondent, replacing Velayo.  Alomesen, acting on behalf of respondent, sent petitioner a Letter^[22][22] dated March 25, 1992, revoking the aforementioned Letters dated March 3 and 10, 1992 since these were purportedly sent by Velayo without authority from respondent’s Board of Directors.  Respondent expressed its interest in continuing the lease of the subject property for another 25 years and tendered to petitioner a manager’s check in the amount of P8,821.00 as payment for the lease rentals for the subject property from December 1991 until March 1992.

Petitioner entirely disregarded the claims of respondent and threatened to take-over the subject property.

On March 30, 1992, respondent filed against petitioner before the RTC a Complaint for Injunction, Consignation, and Damages with a Prayer for a Temporary Restraining Order.^[23][23]  Respondent essentially prayed for the RTC to order the renewal of the Contract of Lease between the parties for another 25-year term counted from February 15, 1992.  On even date, the RTC issued a Temporary Restraining Order^[24][24] preventing petitioner and all persons acting on its behalf from taking possession of the entire or any portion of the subject property, from administering the said property, from collecting rental payments from sub-lessees, and from taking any action against respondent for the collection of alleged arrears in rental payments until further orders from the trial court.

In its Answer,^[25][25] petitioner contended that its Contract of Lease with respondent was already terminated onFebruary 15, 1992, the expiration date explicitly stated under paragraph 4 of the same Contract.  Petitioner was not bound to renew the Contract of Lease with respondent.  The renewal provision under paragraph 17 of the Contract was not automatic but merely directory and procedural and that, in any event, Velayo, the former President of respondent, already conceded to the non-renewal of the Contract.

Petitioner likewise invoked paragraph 15 of the Contract of Lease, i.e., its right to revoke the said Contract in case of violation of any of the provisions thereof by respondent.  Petitioner averred that respondent committed the following violations: (1) respondent failed to fulfill the conditions set forth under paragraphs 2 and 3 of the Contract as it did not establish a shopping center on the subject property and did not help ease the problems of parking congestion at the Domestic Airport; (2) respondent “sub-leased” the subject property in defiance of the prohibition under paragraph 16 of the Contract; and (3) respondent did not pay the lease rentals in accordance with paragraphs 5 and 13 of the Contract, thus, incurring a total outstanding balance of P15,671,173.75 as of February 1992.

By way of counter-claim, petitioner demanded that respondent pay the total outstanding balance of its lease rentals for the subject property and turn-over lease rentals it had collected from sub-lessees beginning February 15, 1992.   

After the preliminary hearing, the RTC issued a Writ of Preliminary Injunction^[26][26] against petitioner on April 30, 1992 upon the posting by respondent of a bond in the amount of P100,000.00. 

In an Order^[27][27] datedJune 11, 1996, the RTC denied the Omnibus Motion of petitioner for the dissolution of the writ of injunction and appointment of a receiver for the fruits of the subject property; and at the same time, granted the motion of respondent for the consignment of their monthly lease rentals for the subject property with the RTC.

The RTC terminated the pre-trial proceedings in an Order^[28][28] datedOctober 23, 1997 for failure of the parties to amicably settle the dispute.  Thereafter, trial on the merits ensued.

Respondent presented the testimonies of Mariano Nocom, Jr.,^[29][29] Gladioluz Segundo,^[30][30] Mariano Nocom, Sr.,^[31][31] and Rosila Mabanag.^[32][32]  The RTC admitted all the documentary evidence of respondent in an Order^[33][33] datedDecember 14, 1998.

Petitioner, on the other hand, presented the lone testimony of their accounting manager, Arlene Britanico.^[34][34]  Among the numerous documents submitted by petitioner as evidence were its own issuances imposing various rates for the lease of its properties, which allegedly effected an increase in the lease rentals of respondent for the subject property, specifically, AO No. 4, series of 1982;^[35][35] AO No. 1, series of 1984;^[36][36] AO No. 1, series of 1990;^[37][37] AO No. 1, series of 1993;^[38][38] Resolution No. 94-74,^[39][39] Resolution No. 96-32,^[40][40] and Resolution No. 97-51,^[41][41] all amending AO No. 1, series of 1993; and AO No. 1, series of 1998.^[42][42]  All of the documentary evidence of petitioner were admitted by the RTC in an Order^[43][43] datedMay 28, 1999.

In its Decision dated October 29, 1999, the RTC ruled in favor of respondent, disposing thus:

WHEREFORE, judgment is hereby rendered in favor of [respondent] and against [petitioner].

Accordingly, [petitioner] is hereby ordered to:

1. Grant renewal of the lease contract for the same term as stipulated in the old contract and the rental to be based on the applicable rate of the time or renewal;

1. To respect and maintain [respondent’s] peaceful possession of the premises;

1. To accept the rental payment consigned by the [respondent] to the court beginning December 1991 onward until and after a renewal has been duly executed by both parties;
2. To pay [respondent] as and by way of attorney’s fees the sum of P500,000.00; and

1. To pay the cost of suit.^[44][44]

Petitioner appealed the RTC judgment before the Court of Appeals and assigned these errors:

1. The trial court gravely erred in declaring that [respondent] is entitled to a renewal of the contract of lease.

1. The trial court gravely erred in ordering the renewal of the contract of lease despite of the fact that it has no legal authority to do so.

1. The trial court gravely erred in declaring that [respondent] did not violate the terms and conditions of the contract.

1. The trial court gravely erred in declaring that [petitioner’s] act of effecting the increase in the rental during the stipulated lifetime of the contract has no valid basis.

1. The trial court gravely erred in not finding that [petitioner] is entitled to its counterclaim.^[45][45]

The Court of Appeals promulgated its Decision onJanuary 8, 2004, finding no reversible error in the appealed judgment of the RTC and decreeing as follows:

WHEREFORE, finding no reversible error committed by the trial court, the instant appeal is hereby DISMISSED, and the assailed decision is hereby AFFIRMED.^[46][46]

Hence, the instant Petition for Review, wherein petitioner basically attributed to the Court of Appeals the very same errors it assigned to the RTC. 

Petitioner argues that the renewal of the Contract of Lease cannot be made to depend on the sole will of respondent for the same would then be void for being a potestative condition. 

We do not agree.  As we have already explained in Allied Banking Corporation v. Court of Appeals ^[47][47]:

Article 1308 of the Civil Code expresses what is known in law as the principle of mutuality of contracts.  It provides that “the contract must bind both the contracting parties; its validity or compliance cannot be left to the will of one of them.”  This binding effect of a contract on both parties is based on the principle that the obligations arising from contracts have the force of law between the contracting parties, and there must be mutuality between them based essentially on their equality under which it is repugnant to have one party bound by the contract while leaving the other free therefrom.  The ultimate purpose is to render void a contract containing a condition which makes its fulfillment dependent solely upon the uncontrolled will of one of the contracting parties.

An express agreement which gives the lessee the sole option to renew the lease is frequent and subject to statutory restrictions, valid and binding on the parties.  This option, which is provided in the same lease agreement, is fundamentally part of the consideration in the contract and is no different from any other provision of the lease carrying an undertaking on the part of the lessor to act conditioned on the performance by the lessee.  It is a purely executory contract and at most confers a right to obtain a renewal if there is compliance with the conditions on which the right is made to depend.  The right of renewal constitutes a part of the lessee’s interest in the land and forms a substantial and integral part of the agreement.

The fact that such option is binding only on the lessor and can be exercised only by the lessee does not render it void for lack of mutuality.  After all, the lessor is free to give or not to give the option to the lessee.  And while the lessee has a right to elect whether to continue with the lease or not, once he exercises his option to continue and the lessor accepts, both parties are thereafter bound by the new lease agreement.  Their rights and obligations become mutually fixed, and the lessee is entitled to retain possession of the property for the duration of the new lease, and the lessor may hold him liable for the rent therefor. The lessee cannot thereafter escape liability even if he should subsequently decide to abandon the premises.  Mutuality obtains in such a contract and equality exists between the lessor and the lessee since they remain with the same faculties in respect to fulfillment.^[48][48]

Paragraph 17 of the Contract of Lease dated May 14, 1976 between petitioner and respondent solely granted to respondent the option of renewing the lease of the subject property, the only express requirement was for respondent to notify petitioner of its decision to renew the lease within 60 days prior to the expiration of the original lease term.  It has not been disputed that said Contract of Lease was willingly and knowingly entered into by petitioner and respondent.  Thus, petitioner freely consented to giving respondent the exclusive right to choose whether or not to renew the lease.  As we stated in Allied Banking, the right of renewal constitutes a part of the interest of respondent, as lessee, in the subject property, and forms a substantial and integral part of the lease agreement with petitioner.  Records show that respondent had duly complied with the only condition for renewal under Section 17 of the Contract of Lease by notifying petitioner 60 days prior to the expiration of said Contract that it chooses to renew the lease.  We cannot now allow petitioner to arbitrarily deny respondent of said right after having previously agreed to the grant of the same.    

Equally unmeritorious is the assertion of petitioner that paragraph 17 of the Contract of Lease dated May 14, 1976merely provides a procedural basis for a negotiation for renewal of the lease and the terms thereof.  The exercise by respondent of its option to renew the lease need no longer be subject to negotiations.  We reiterate the point we made in Allied Banking that:

[I]f we were to adopt the contrary theory that the terms and conditions to be embodied in the renewed contract were still subject to mutual agreement by and between the parties, then the option – which is an integral part of the consideration for the contract – would be rendered worthless.  For then, the lessor could easily defeat the lessee’s right of renewal by simply imposing unreasonable and onerous conditions to prevent the parties from reaching an agreement, as in the case at bar.  As in a statute, no word, clause, sentence, provision or part of a contract shall be considered surplusage or superfluous, meaningless, void, insignificant or nugatory, if that can be reasonably avoided. To this end, a construction which will render every word operative is to be preferred over that which would make some words idle and nugatory.^[49][49]

In case the lessee chooses to renew the lease but there are no specified terms and conditions for the new contract of lease, the same terms and conditions as the original contract of lease shall continue to govern, as the following survey of cases in Allied Banking would show:

In Ledesma v. Javellana this Court was confronted with a similar problem.  In that case the lessee was given the sole option to renew the lease, but the contract failed to specify the terms and conditions that would govern the new contract.  When the lease expired, the lessee demanded an extension under the same terms and conditions.  The lessor expressed conformity to the renewal of the contract but refused to accede to the claim of the lessee that the renewal should be under the same terms and conditions as the original contract.  In sustaining the lessee, this Court made the following pronouncement:

x x x [i]n the case of Hicks v. Manila Hotel Company, a similar issue was resolved by this Court.  It was held that ‘such a clause relates to the very contract in which it is placed, and does not permit the defendant upon the renewal of the contract in which the clause is found, to insist upon different terms than those embraced in the contract to be renewed’; and that ‘a stipulation to renew always relates to the contract in which it is found and the rights granted thereunder, unless it expressly provides for variations in the terms of the contract to be renewed.’

The same principle is upheld in American Law regarding the renewal of lease contracts.  In 50 Am. Jur. 2d, Sec. 1159, at p. 45,  we find the following citations:  ‘The  rule is well-established that a general covenant to renew or extend a  lease which makes no provision as to the terms of a renewal  or  extension implies a  renewal  or extension upon the same terms as provided  in the original lease.’

In the lease contract under consideration, there is no provision to indicate that the renewal will be subject to new terms and conditions that the parties may yet agree upon.  It is to renewal provisions of lease contracts of the kind presently considered that the principles stated above squarely apply.  We do not agree with the contention of the appellants that if it was intended by the parties to renew the contract under the  same terms  and conditions stipulated in the  contract of lease, such should have expressly so stated  in  the  contract  itself.  The same argument could easily be interposed by the appellee who could likewise contend that if the intention was to renew the contract of lease under such new terms and conditions that the parties may agree upon, the contract should have so specified.  Between the two assertions, there is more logic in the latter.

The settled rule is that in case of uncertainty as to the meaning of a provision granting extension to a contract of lease, the tenant is the one favored and not the landlord.  ‘As a general rule, in construing  provisions  relating  to renewals or extensions, where there is any uncertainty, the tenant is favored, and not the landlord, because the latter, having the power of stipulating  in his  own favor, has neglected to do  so;  and also  upon  the principle  that  every  man’s grant  is to be taken most  strongly  against himself  (50 Am Jur. 2d, Sec. 1162, p. 48; see also 51 C.J.S. 599).’^[50][50] (Emphases supplied.)

Being consistent with the foregoing principles, we sustain the interpretation of the RTC of paragraph 17 of the Contract of Lease dated May 14, 1976 between petitioner and respondent, to wit:

[Paragraph 17 of the Contract of Lease dated May 14, 1976] admits several meanings.  In simpler terms, the phrase, i.e., “if desirous of continuing his lease, may be simply restated, i.e., if he wants to go on with his lease, considering the word `CONTINUE’ in its verb form ordinarily means – to go on in present state, or even restated in another way – if desirous of extending his lease, because the word `continue’ in its verb form also means – extend uniformly.”  Thus, if we are to adopt the interpretation of [petitioner] that the stipulation merely established the procedural basis for a negotiation for renewal then the aforequoted phrase would be rendered a mere surplusage, meaningless and insignificant.  But if we are to prod deeper to the very context of the entire stipulations setforth in the contract and from what is obvious with respect to the intentions of the contracting parties based on their contemporaneous and subsequent acts including but not limited to the historical antecedents of the agreement then an interpretation invariably different from that of [petitioner] becomes inevitable.

Specifically, the extraneous source of the lease contract in question could be the original and renewed contract of lease by and between Salem Investment Corporation and CAA – the predecessor-in-interest of [petitioner] – executed on February 10, 1967 (Exh. “M”).  Under the said lease contract between CAA and Salem, the term is for a period of twenty-five (25) years renewable for another 25 years at the option of the lessee – Salem (Exh. “Y-1”).  Later, with the approval of CAA, Salem transferred its leasehold rights over a portion of the land leased to Ding Velayo Export Corporation on September 30, 1974 (Exh. “N”) and in turn Velayo Export transferred its leasehold rights over a portion of the leased land transferred to it by Salem to Velayo Sports Complex, Inc. – [respondent] herein – on April 29, 1976 (Exh. “O”).  Thus, on May 14, 1976, [respondent] and CAA, predecessor-in-interest of [petitioner], concluded the lease agreement in question with a term equivalent to the unexpired portion of the lease between Velayo Export and CAA.

As culled from the transfers effected prior to the May 14, 1976 agreement of [respondent] and [petitioner]’s predecessor-in-interest, the renewal of the contract was clearly at the option of the lessee.  Considering that there was no evidence positively showing that [respondent] and CAA expressly intended the removal of the option for the renewal of the lease contract from the lessee, it is but logical to conclude, although the stipulation setforth in paragraph 17 appears to have been worded or couched in somewhat uncertain terms, that the parties agreed that the option should remain with the lessee.  This must be so because based on the context of their agreements and bolstered by the testimony of Mr. Mariano Nocom of Salem Investment and particularly Rosila Mabanag, one of the signatory witness to the contract and a retired employee of CAA’s Legal Division the parties really intended a renewal for the same term as it was then the usual practice of CAA to have the term of leases on lands where substantial amount will be involved in the construction of the improvements to be undertaken by the lessee to give a renewal.  In fact, it clearly appears that the right of renewal constitutes a part of the lessee’s interest in the land considering the multimillion investments it made relative to the construction of the building and facilities thereon and forms a substantial and integral part of the agreement.^[51][51] (Emphases supplied.)

In sum, the renewed contract of lease of the subject property between petitioner and respondent shall be based on the same terms and conditions as the original contract of lease.  The “original contract of lease” does not pertain to the Contract of Lease dated May 14, 1976 between petitioner and respondent alone, but also to the Contract of Lease dated February 15, 1967 between petitioner (then still called CAA) and Salem, as well as the Contract of Lease dated November 26, 1974 between petitioner and Velayo Export –   all three contracts being inextricably connected.  Since the Contract of Lease between petitioner andSalemwas for a term of 25 years, then the renewed contract of lease of between petitioner and respondent shall be for another term of 25 years.  This construction of the renewal clause under paragraph 17 of the Contract of Lease datedMay 14, 1976between petitioner and respondent is most consistent with the intent of the parties at the time of the execution of said Contract and most effectual in implementing the same.  

In addition to challenging the exclusive right of respondent to renew the Contract of Lease over the subject property, petitioner insists on its right to refuse the renewal because of purported violations of the said Contract by respondent, particularly: (1) subleasing of the premises; (2) failure to ease the problems of parking congestion at the Domestic Airport and to provide a shopping center and sports facilities, such as an oval track and a swimming pool; and (3) failure to pay monthly lease rentals in the form of royalties equivalent to 1% of the gross income of respondent or in  accordance with the rates fixed in the administrative orders of petitioner. 

We find no violations by the respondent of the Contract of Lease datedMay 14, 1976as to justify the revocation or refusal to renew of said Contract by petitioner.

The RTC is once again correct in its construal that paragraph 16 of the Contract of Lease, prohibiting the subleasing of the “premises,” refers only to the subject property.  We stress that when the said Contract was executed on May 14, 1976, the “premises” leased by petitioner to respondent, and which respondent was not allowed to sublease, is the subject property, i.e., an idle piece of land with an area of 8,481 square meters.  More importantly, being the builder of the improvements on the subject property, said improvements are owned by respondent until their turn-over to petitioner at the end of the 25-year lease in 1992.  As respondent is not leasing the improvements from petitioner, then it is not subleasing the same to third parties.   

While the Contract of Lease expressly obligated respondent to build certain improvements, such as parking, shopping mall, and sports facilities, the belated insistence by petitioner on compliance with the same appears to be a mere afterthought.   

Article 1235 of the Civil Code states that “[w]hen the obligee accepts the performance, knowing its incompleteness or irregularity, and without expressing any protest or objection, the obligation is deemed fully complied with.” 

As aptly observed by the RTC, paragraphs 9 and 10 of the Contract of Lease likewise expressly require respondent to submit, for prior approval by petitioner, all construction plans on the subject property; and to complete the contemplated improvements thereon within a year.  The Contract of Lease was executed on May 14, 1976, and the one-year period expired on May 14, 1977.  Yet, petitioner did not register any protest or objection to the alleged incompleteness of or irregularity in the performance by respondent of its obligation to build and develop improvements on the subject property.  In fact, upon the expiration of the original 25-year lease period in February 1992, petitioner was already ready and willing to accept and appropriate as its own the improvements built on the subject property in 1992.  Petitioner only raised the issue of the purported incompleteness/irregularity of the said improvements when it was brought to court by respondent for refusing to renew the lease. 

Just as the RTC adjudged, no fault could be attributed to respondent for deficient payment of lease rentals.  Lease rentals were based on either the rates fixed by AO No. 4, series of 1970, or 1% of the monthly gross income of respondent, whichever is higher.  At the very beginning of the lease, respondent had been paying monthly lease rentals based on the rates fixed by AO No. 4, series of 1970, which amounted to P2,205.25 per month.  When requested, respondent submitted to petitioner its gross income statements, so petitioner could very well compute the 1% royalty.  However, petitioner continued to charge respondent only P2,205.25 monthly lease rental, which the latter faithfully paid. 

Petitioner later demanded an increase in lease rentals based on subsequent administrative issuances raising the rates for the rental of its properties.  But the RTC found that the adverted administrative orders were not published in full, thus, the same were legally invalid within the context of Article 2 of the Civil Code which provides that “[l]aws shall take effect after fifteen days following the completion of their publication in the Official Gazette, unless it is otherwise provided. x x x”  In Tañada v. Tuvera,^[52][52] we enunciated that publication is indispensable in order that all statutes, including administrative rules that are intended to enforce or implement existing laws, attain binding force and effect, to wit:

          We hold therefore that all statutes, including those of local application and private laws, shall be published as a condition for their effectivity, which shall begin fifteen days after publication unless a different effectivity date is fixed by the legislature.

Covered by this rule are presidential decrees and executive orders promulgated by the President in the exercise of legislative powers whenever the same are validly delegated by the legislature or, at present, directly conferred by the Constitution.  Administrative rules and regulations must also be published if their purpose is to enforce or implement existing law pursuant also to a valid delegation.^[53][53]

There is no basis for the argument of petitioner that the validity of its administrative orders cannot be collaterally attacked.  To the contrary, we have previously declared that a party may raise the unconstitutionality or invalidity of an administrative regulation on every occasion that said regulation is being enforced.^[54][54]  Since it is petitioner which first invoked its administrative orders to justify the increase in lease rentals of respondent, then respondent may raise before the court the invalidity of said administrative orders on the ground of non-publication thereof. 

Finally, petitioner cannot oppose the renewal of the lease because of estoppel.  Our following disquisition in Kalalo v. Luz^[55][55] is relevant herein:

Under Article 1431 of the Civil Code, in order that estoppel may apply the person, to whom representations have been made and who claims the estoppel in his favor must have relied or acted on such representations. Said article provides:

“Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.”

An essential element of estoppel is that the person invoking it has been influenced and has relied on the representations or conduct of the person sought to be estopped, and this element is wanting in the instant case. In Cristobal vs. Gomez,this Court held that no estoppel based on a document can be invoked by one who has not been misled by the false statements contained therein. And in Republic of the Philippines vs. Garcia, et al.,this Court ruled that there is no estoppel when the statement or action invoked as its basis did not mislead the adverse party.  Estoppel has been characterized as harsh or odious, and not favored in law.  When misapplied, estoppel becomes a most effective weapon to accomplish an injustice, inasmuch as it shuts a man’s mouth from speaking the truth and debars the truth in a particular case.  Estoppel cannot be sustained by mere argument or doubtful inference; it must be clearly proved in all its essential elements by clear, convincing and satisfactory evidence.  No party should be precluded from making out his case according to its truth unless by force of some positive principle of law, and, consequently, estoppel in pais must be applied strictly and should not be enforced unless substantiated in every particular.

The essential elements of estoppel in pais may be considered in relation to the party sought to be estopped, and in relation to the party invoking the estoppel in his favor.  As related to the party to be estopped, the essential elements are: (1) conduct amounting to false representation or concealment of material facts; or at least calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (2) intent, or at least expectation that his conduct shall be acted upon by, or at least influence, the other party; and (3) knowledge, actual or constructive, of the real facts. As related to the party claiming the estoppel, the essential elements are (1) lack of knowledge and of the means of knowledge of the truth as the facts in questions; (2) reliance, in good faith, upon the conduct or statements of the party to be estopped; (3) action or inaction based thereon of such character as to change the position or status of the party claiming the estoppel, to his injury, detriment or prejudice.^[56][56] (Emphases ours.)

Indeed, Velayo’s Letters dated March 3 and 10, 1992 to petitioner may have already expressed acquiescence to the non-renewal of the lease and turn-over of the improvements on the subject property to petitioner.  But not long thereafter, Alomesen, the new President of respondent, already wrote another Letter dated March 25, 1992, which revoked Velayo’s earlier Letters for having been sent without authority of the Board of Directors of respondent, insisted on the renewal of the lease, and tendered payment of past due lease rentals.  Respondent, through Alomesen, timely acted to correct Velayo’s mistakes.  In the 15-day interval between Velayo’s Letter dated March 10, 1992 and Alomesen’s Letter dated March 25, 1992, there is no showing that petitioner, relying in good faith on Velayo’s Letters, acted or did not act as to have caused it injury, detriment, or prejudice.  There is an utter lack of clear, convincing, and satisfactory evidence on the part of petitioner, as the party claiming estoppel, of the second and third elements for the application of said principle against respondent.

WHEREFORE, the instant Petition is hereby DENIED for lack of merit.  The Decision dated January 8, 2004 of the Court Appeals in CA-G.R. CV No. 68787, which affirmed the Decision dated October 29, 1999 of Branch 111 of the RTC of Pasay City in Civil Case No. 8847, is hereby AFFIRMED. 

SO ORDERED.

                                                 TERESITA J. LEONARDO-DE CASTRO

                                       Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA

Chief Justice