Manzano v. Lazaro
REITERATIONFacts
The Antecedents: On February 16, 1998, petitioner Eduardo B. Manzano, running for Vice-Mayor of Makati City, entered into a Professional Services Contract with respondent Antonio B. Lazaro as his campaign manager, effective until May 15, 1998. Under Section II, respondent was tasked with heading the organizational machinery, hiring/firing personnel, authorizing expenditures, mobilizing resources, setting up administrative safeguards, taking responsibility for furniture/fixtures, and developing programs for winnability. Petitioner agreed to provide financial/logistical support and compensate respondent with P70,000 monthly (in two P35,000 tranches on the 15th and 30th, for three months totaling P210,000) plus a P200,000 bonus if petitioner won. Petitioner won the election on May 11, 1998. On June 16, 1998, a transmittal letter for the last payroll indicated respondent would receive P15,000 with P20,000 balance upon final inventory of campaign materials. Respondent, via July 3, 1998 letter, confirmed turnover of equipment on July 2 and demanded P20,000 balance plus P200,000 bonus. Petitioner replied on July 17 acknowledging receipt but conditioning payment on liquidation of campaign expenses, claiming it was requested post-elections via Mrs. Rufino from Soliman Cruz who allegedly volunteered respondent. Respondent countered on July 30 that financial reporting was not his duty (assigned to Robert Gomez, Cruz as Finance Director, and Angie Manzano as auditor), reiterated demand. Cruz's July 30 letter clarified no request for full liquidation from respondent, who had no accounting role, and accused petitioner of shifting conditions. Petitioner had paid prior tranches, indicating initial recognition of performance. Petitioner later claimed respondent misrepresented expertise, was absent from sorties/meetings, provided dual-loyalty personnel, failed on resources/poll watchers, contributing nothing to victory due to petitioner's popularity/family support. Procedural History: Respondent filed Civil Case No. Q-98-35924 for sum of money with RTC Branch 97, Quezon City. RTC, on June 7, 2004, ruled for respondent, ordering P220,000 (P20,000 balance + P200,000 bonus) plus legal interest from July 3, 1998, and P30,000 attorney's fees, holding contract enforceable absent annulment, rescission requires judicial invocation, partial payroll belied breach claims, and post-compliance demands were excuses. Petitioner appealed to CA (CA-G.R. CV No. 82753). CA, on February 28, 2006, affirmed RTC, emphasizing voidable contracts bind until annulled, implied ratification via silence/continued tasks/partial payments. Petitioner's MR denied June 21, 2006. The Petition: Petitioner sought certiorari, alleging CA erred in limiting to voidable/ratification issues ignoring material breach (absence, poor personnel, no resources/poll watchers), misrepresentation vitiating consent (fraud/mistake on expertise), and equity against unjust enrichment/payment for non-performance.
Issue(s)
Whether the CA erred in not finding respondent's substantial breach disqualifying bonus entitlement. Whether respondent's misrepresentation vitiated consent, rendering contract unenforceable without annulment. Whether equity bars payment despite contract terms.
Ruling
The petition is DENIED. The CA Decision (Feb. 28, 2006) and Resolution (June 21, 2006) affirming RTC are AFFIRMED with MODIFICATION: P220,000 earns 6% interest per annum from July 3, 1998 until finality of this decision; thereafter, 12% per annum until full payment. P30,000 attorney's fees upheld.
Ratio Decidendi
On substantial breach and bonus entitlement: Petitioner's breach claims (absence, poor personnel, no poll watchers/resources) raised factual issues not reviewable in certiorari, as SC is not trier of facts; RTC/CA findings that respondent proved performance via evidence (payroll, letters) bind SC absent grave error. Contract is law between parties (Art. 1159); stipulations bind absent illegality (Art. 1306). Partial salary payments (all but P20,000 conditioned on inventory, which respondent complied with and petitioner acknowledged July 17 letter) estop total breach claims, as non-performance would preclude such payments. Post-election conditions shifted from inventory (complied) to unproven liquidation duty (denied by respondent/Cruz letters; petitioner offered no contrary evidence), betraying pretext. Breach never raised during demands, only post-payment refusal, evidencing ratification and performance sufficient for victory bonus, as win triggered unconditional entitlement. RTC/CA correctly held unilateral rescission invalid in reciprocal obligations; judicial action required, uninvoked here. (Liga v. Allegro; Titan Construction cited for factual finality). On vitiated consent/misrepresentation: Unsupported by evidence beyond self-serving testimony; even if fraud (Art. 1390[2]), contract voidable, not void, binding until annulled judicially—no annulment action filed. Remedy was annulment with mutual restitution, not unilateral non-payment. Implied ratification via silence (no confrontation), retention of services/benefits, post-contract demands (inventory/liquidation), and assigning further tasks (Art. 1393), cleansing defects. Raising defense only upon bonus demand confirms agreement except for unmet expectations. CA aptly noted one cannot demand performance while denying enforceability. On equity/unjust enrichment: Rejected; equity enforces, not overrides, valid contracts. Attorney's fees proper (Art. 2208[2]) for unjust refusal compelling litigation. Interest per Eastern Shipping: 6% from extrajudicial demand (July 3, 1998) on non-loan breach until finality; 12% thereafter as forbearance equivalent.
Main Doctrine
Contracts, including professional services agreements, constitute the law between the parties and must be complied with in good faith, binding unless contrary to law, morals, good customs, public order, or public policy. Voidable contracts due to vitiated consent (e.g., fraud or mistake) remain enforceable and produce legal effects until annulled by a proper judicial action; mere allegations of defect do not justify unilateral refusal to perform. Such contracts may be ratified expressly or impliedly, with implied ratification occurring through silence, acceptance and retention of benefits, or continued demands for performance under the contract, extinguishing the right to annul. In reciprocal obligations like service contracts, the power to rescind for breach is implied but must be invoked judicially, not unilaterally based on one party's judgment of non-performance. Partial performance and payments, coupled with post-contract correspondence acknowledging obligations (e.g., conditioning balance on inventory submission), negate claims of substantial breach and evidence ratification, entitling the service provider to full remuneration including success-based bonuses upon fulfillment of conditions like electoral victory.