GR 78603; (January, 1991) (Digest)
G.R. No. 78603 ; January 28, 1991
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, petitioner vs. NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION); PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION and RUBEN S. BUAN, respondents.
FACTS
Private respondent Ruben Buan was hired by petitioner PNCC for overseas work in Saudi Arabia under a two-year contract. After completing this term, he entered a second two-year contract as a Senior Engineer. This new contract stipulated that PNCC would assist in renewing his Residence and Work Permit (Iqama) and that the contract would be cancelled if renewal was denied by the concerned authorities. Buan returned to Saudi Arabia on a re-entry visa sponsored by REDEC, the main contractor. However, upon the Iqama’s expiration, REDEC refused to sponsor its renewal, citing dissatisfaction with Buan’s performance, leading to his repatriation.
Buan filed a complaint for illegal dismissal. The POEA ruled in his favor, ordering PNCC to pay salaries for the unexpired contract term. The NLRC affirmed but reduced the award to fifteen months’ salary. PNCC filed this Petition for Certiorari, arguing that REDEC’s refusal constituted a fortuitous event absolving it of liability under Article 1174 of the Civil Code and that enforcing the contract would require violating Saudi labor law.
ISSUE
Whether the NLRC committed grave abuse of discretion in holding PNCC liable for breach of contract despite the refusal of the main contractor, REDEC, to sponsor the renewal of Buan’s Iqama.
RULING
The Supreme Court granted the petition and reversed the NLRC. The legal logic is threefold. First, the impossibility of performance under Article 1266 of the Civil Code was present. REDEC’s refusal to sponsor the Iqama renewal, an act wholly outside PNCC’s control, rendered the contract’s continuation legally impossible under Saudi law, which designates only the main contractor as the permissible sponsor. PNCC could not be compelled to perform an impossible act or to violate host country laws.
Second, the contract itself, in Paragraph 13, expressly contemplated the possibility of denial of permit renewal “by the concerned authorities for any reason” as a ground for cancellation. Buan, having worked there previously, was or should have been aware of this condition. The Court found no concealment or bad faith on PNCC’s part.
Third, the principle against unjust enrichment applies. Requiring PNCC to pay unearned salaries for a contract rendered impossible by a superior third party’s action, without any fault attributable to PNCC, would unjustly enrich Buan at PNCC’s expense. Therefore, the termination was justified, and no liability for damages for breach of contract attaches.