Philippine National Construction Corporation v. National Labor Relations Commission
REITERATIONFacts
The Antecedents: Private respondent Ruben S. Buan was hired by petitioner Philippine National Construction Corporation (PNCC) as a Civil Engineer III in Saudi Arabia for two years. After completing the first contract, he entered into a second two-year contract as Senior Engineer with PNCC. The second contract stipulated that PNCC would bear expenses for entry visas and assist in renewing the Residence and Work Permit (Iqama), and that the contract would be cancelled without prejudice to accrued benefits if renewal was denied by concerned authorities. Procedural History: Private respondent's Iqama expired on September 1, 1981. PNCC requested its renewal from REDEC, the main contractor, but the request was denied with a notation that REDEC was dissatisfied with Buan's performance and refused to renew the Iqama. Consequently, Buan was repatriated on November 26, 1981. Buan filed a complaint for breach of contract or illegal dismissal with the Philippine Overseas Employment Administration (POEA). POEA ordered PNCC to pay Buan his salary for the unexpired term of the second contract. The National Labor Relations Commission (NLRC) affirmed the POEA decision with modifications, reducing the award to fifteen months' pay. The Petition: PNCC filed a Petition for Certiorari, alleging that the NLRC abused its discretion by holding PNCC liable despite the termination being due to force majeure, contravening Article 1174 of the Civil Code. PNCC also argued that the NLRC decision contravened Saudi Arabian labor law and sanctioned Buan's illegal sojourn, and that the award of attorney's fees was an abuse of discretion.
Issue(s)
Whether the NLRC gravely abused its discretion in holding petitioner PNCC liable for breach of contract, considering the applicability of Saudi Arabian law and the refusal of REDEC to sponsor the renewal of the work permit (Iqama). Whether the termination of private respondent's employment was due to force majeure or impossibility of performance under Saudi Arabian law and Philippine law, specifically considering REDEC's refusal to sponsor the renewal of the work permit (Iqama). Whether the NLRC gravely abused its discretion in awarding attorney's fees.
Ruling
The Supreme Court resolved to GRANT due course to the Petition for Certiorari and to REVERSE and SET ASIDE the Decision dated 21 April 1987 of the NLRC. The Temporary Restraining Order earlier issued by this Court was made PERMANENT.
Ratio Decidendi
On the issue of breach of contract and force majeure: The Court found that the NLRC erred in holding PNCC liable for breach of contract. While PNCC was the direct employer under Philippine law, the employment in Saudi Arabia was governed by Saudi Arabian law, which required a Saudi Arabian company like REDEC to sponsor the renewal of the work permit (Iqama). PNCC, as a subcontractor, had no official standing to directly secure the Iqama. The refusal of REDEC to sponsor the renewal, which rendered continued employment legally impossible, constituted a valid ground for cancellation under paragraph 13 of the contract and was akin to force majeure or impossibility of performance under Article 1266 of the Civil Code. PNCC could not be faulted for REDEC's refusal, especially since REDEC had sponsored Buan's re-entry visa and promoted him, which suggested no serious dissatisfaction. The Court emphasized that insisting on PNCC's liability would impose an intolerable burden and sanction unjust enrichment. The Court also agreed with PNCC that the NLRC's interpretation of Saudi Arabian law was flawed. Under Saudi Arabian law, a foreigner requires sponsorship by a Saudi employer to obtain a work permit. REDEC's sponsorship was crucial, and its refusal made it legally impossible for PNCC to continue Buan's employment in Saudi Arabia. The NLRC's view that only the Saudi Arabian government's denial, not REDEC's refusal to sponsor, constituted a valid ground for termination overlooked this essential requirement of Saudi law. On the issue of force majeure/impossibility of performance: The refusal of REDEC to sponsor the renewal of the work permit (Iqama) constituted a valid ground for cancellation under paragraph 13 of the contract and was akin to force majeure or impossibility of performance under Article 1266 of the Civil Code. On the issue of attorney's fees: Although the NLRC decision was reversed on the merits, the issue of attorney's fees was rendered moot by the reversal of the main ruling.
Main Doctrine
An employer is not liable for breach of an overseas employment contract when the termination of employment is rendered legally impossible by the refusal of a third-party principal contractor to sponsor the renewal of the employee's work permit, provided the employer acted without fault and in good faith, and the contract itself contemplated such a possibility.