Case Digest (G.R. No. 160600)
Facts:
Domingo Gonzalo v. John Tarnate, Jr., G.R. No. 160600, January 15, 2014, First Division, Bersamin, J., writing for the Court.The respondent, John Tarnate, Jr. (Tarnate), operated JNT Aggregates. The petitioner, Domingo Gonzalo, through Gonzalo Construction, was the primary contractor awarded by the Department of Public Works and Highways (DPWH) on July 22, 1997 for the improvement of the Sadsadan‑Maba‑ay section of the Mountain Province‑Benguet Road. On October 15, 1997, Gonzalo subcontracted the supply of materials and labor to Tarnate; the subcontract provided for percentage payments to Tarnate upon billings. On April 6, 1999 Gonzalo executed a deed of assignment assigning to Tarnate 10% of the DPWH collections (P233,526.13) as rental for Tarnate’s equipment and authorized Tarnate to use Gonzalo Construction’s official receipt for collection processing; the deed was submitted to the DPWH on April 15, 1999.
While the retention fee was being processed, Gonzalo filed an affidavit canceling the deed of assignment (dated April 19, filed April 22), and the DPWH disbursed the 10% retention in Gonzalo’s name. Tarnate demanded payment but was refused, and on September 13, 1999 he sued Gonzalo in the Regional Trial Court (RTC), Mountain Province, to recover the retention fee, moral and exemplary damages, and attorneys’ fees. In his answer Gonzalo admitted executing the deed but maintained the subcontract (and the deed) were illegal because subcontracting without DPWH approval violated law and therefore the assignment was ineffectual; he also alleged revocation.
On January 26, 2001 the RTC found the deed of assignment valid and rendered judgment in favor of Tarnate for P233,526.13, attorneys’ fees (reduced to P30,000), litigation expenses (P15,000), moral damages (P20,000), and costs; exemplary damages were denied. Gonzalo appealed to the Court of Appeals (CA). On February 18, 2003 the CA affirmed the RTC’s judgment but held the subcontract (and deed of assignment) were illegal under Section 6 of Presidential Decree No. 1594; the CA refused to apply th...(Pro-only)
Issues:
- Does the doctrine of in pari delicto bar Tarnate from recovering the 10% retention fee in light of the illegality of the subcontract and deed of assignment?
- Is the deed of assignment void as a product of the illegal subcontract, and if void can Tarnate still recover?
- (Procedural) Must the parties comply with the subcontract’s arbitration clause be...(Pro-only)
Ruling:
- (Pro-only)
Ratio:
- (Pro-only)
Doctrine:
- (Pro-only)