NATIONAL POWER CORPORATION, PETITIONER

V.

HON. ROSE MARIE ALONZO-LEGASTO AS PRESIDING JUDGE, RTC QC BR 99 ET AL1

GR no.148318 November 22, 2004
Tinga, J.
SV: NPC and FUCC Entered into a project for excavation. FUCC needed to do blasting works to continue with the
project. NPC agreed that it will issue an extra work order for the blasting works and subsequently pay FUCC but this
did not happen. The two entered into a compromise agreement and agreed that NPC will pay the undisputed unpaid
claims and that they will submit the agreement to an arbitration board to settle the amount to be paid. After the
arbitration issued its ruling, NPC questioned the award which included the blasting works (no extra work order
issued for it) allegedly due to promissory estoppel.
SC: no basis for applying promissory estoppel. The payment was conditional on the issuance of the extra work
order. The acts of the officials of NPC exceeded their authority and should not bind NPC unless the latter ratifies
these acts. Unfortunately, NPC did when it signed the compromise agreement. Hence, FUCC was entitled for
payment for the blasting works.
1.

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

2.

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

3.

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

4.

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

5.

RTC qc issued a TRO and later a writ of preliminary injunction.

a.

6.

NPC filed a petition for certiorari before the CA. CA granted petition and set aside the lower
courts order

FUCC filed before the SC a petition for review assailing the decision of the CA but pending the resolution
of the SC, NPC and FUCC entered into a compromise agreement.
a.

In the compromise agreement, NPC shall pay the undisputed unpaid billings of FUCC in
connection with the project; that NPC shall have the right to preceed with the works by re-bidding
it; upon final resolution of the arbitration, the parties shall mutually terminate the contract among
others

b.

That the claims will be settled through 2 stages

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

i. One is the signing of the compromise agreement which they whill submit for approval by
this court
ii. It shall submit by arbitration to settle the price of the blasting, damages and all other
unresolved claims by the parties. The 3-man commission was headed by Mr. Carmelo
Sison
7.

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

8.

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

9.

NPC went to the CA alleging GAD.

a.

CA: no GAD. The arbitration board acted pursuant to its powers under the compromise
agreement. That NPC failed to prove by evidence that Mr. Sison was biased. That although the
blasting was not part of the unit price for the project and that there was no perfected contract for it,
FUCC relied on the representation of NPCs officials that the extra work order should be
submitted to its board of directors for approval and that the blasting works would be paid. CA
ruled that
FUCC is entitled to just compensation on grounds of equity and promissory estoppel

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

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

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

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

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

Promissory estoppel may arise from the making of a promise, even though without
consideration, if it was intended that the promise should be relied upon and in fact it was
relied upon, and if a refusal to enforce it would be virtually to sanction the perpetration of
fraud or would result in other injustice. Promissory estoppel presupposes the existence of a
promise on the part of one against whom estoppel is claimed. The promise must be plain and

unambiguous and sufficiently specific so that the court can understand the obligation assumed
and enforce the promise according to its terms.
o

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

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

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

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

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

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

Justin Benedict A. Moreto