Sangguniang Panlungsod ng Baguio City v.

Jadewell Parking Systems Corporation

G.R. No. 160025, April 23, 2014
First Division, Sereno, CJ.

DOCTRINE: Article 1191 of the Civil Code provides that the power to rescind is implied in
reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with
the payment of damages in either case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible. The court shall decree the rescission claimed,
unless there be just cause authorizing the fixing of a period. The court shall decree the rescission
claimed, unless there be just cause authorizing the fixing of a period.

FACTS:
Jadewell proposed the privatization of the administration of on-street parking in Baguio
City using Schlumberger’s DG4S Pay and Display Parking Meter (hereinafter "DG4S P&D"),
which it touted as "technologically advanced, up to the level of more progressive countries and
which would make the city as the first and only city in the Philippines, if not in Asia, to have
metered parking as an important part of its traffic and parking system. Respondent Sanggunian
acted favorably on the proposal. It passed Resolution No. 159, Series of 1999, authorizing the
City Mayor of Baguio to negotiate and enter into a Memorandum of Agreement with Jadewell
for the installation of its proposed DG4S parking technology.

Respondent Sanggunian enacted City Ordinance No. 003, Series of 2000 (Ordinance No.
003-2000) amending Ordinance No. 13, Series of 1983, outlining the rules and policy on the
privatization of the administration of on-street parking in the city streets of Baguio. For this
purpose, the City of Baguio authorized the intervention of a private operator for the regulation,
charging and collection of parking fees and the installation of modern parking meters, among
others. The MOA was finally executed between Jadewell and the City of Baguio for the
installation, management and operation of the DG4S P&D parking meters. The Sanggunian
confirmed the MOA through its Resolution No. 205-2000. The parties executed a supplemental
MOA to include the Ganza/Burnham parking space, owned by the Philippine Tourism Authority
and managed by the City of Baguio, in the project. This supplemental agreement was neither
confirmed nor ratified by the Sanggunian.

Jadewell began to mobilize and take over the parking facilities at the Ganza/Burnham
Park area. Around this time, questions arose regarding the compliance by Jadewell with the
provisions of the MOA, notably on matters such as obtaining the recommendation from the
Department of Public Works and Highways (DPWH) for the installation of the parking meters
and the legality of the collection of parking fees being done by its parking attendants prior to the
installation of the parking meters at Burnham Park.

For the alleged violations of Jadewell regarding the provisions of MOA, the Sanggunian
passed Resolution 37, expressing its intent to rescind the MOA with Jadewell. Then Mayor
Alfredo Vergara vetoed the Resolution. The Sanggunian Panlungsod overrode the veto through
an unnumbered Resolution. Jadewell denied the breach and commenced an action before the
Regional Trial Court (RTC) of Baguio, questioning the validity of the MOA’s revocation and the
Sanggunian’s capacity to pass a resolution revoking the MOA.

ISSUE:
Can the Sangguniang Panlungsod of City of Baguio unilaterally rescind the MOA?

RULING:
No. The Sangguniang Panlungsod of City of Baguio cannot unilaterally rescind the
MOA.

Article 1191 of the Civil Code provides that the power to rescind is implied in reciprocal
ones, in case one of the obligors should not comply with what is incumbent upon him. The
injured party may choose between the fulfillment and the rescission of the obligation, with the
payment of damages in either case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible. The court shall decree the rescission claimed,
unless there be just cause authorizing the fixing of a period.

In this case, the Baguio City government has repeatedly mentioned that Jadewell had so
far installed only 14 parking meters, with only 12 functioning. While finding of the COA-CAR
Report state that Jadewell collected parking fees, Jadewell failed to properly remit the same.
Moreover, COA-CAR Report states that Jadewell failed to have its parking attendants
deputized, a condition under the MOA that is also important to the overall objective of the
endeavor. Despite the enumeration of the above-mentioned faults of Jadewell, the Supreme
Court does not make a categorical finding that there was substantial breach committed by
Jadewell to justify a unilateral rescission of the MOA. Had these violations by Jadewell been
proven in a proper hearing, the finding of a substantial breach of the MOA would have been a
distinct probability. Unfortunately, neither the RTC nor the CA provided a clear basis for their
rulings on the extent of the breach of the MOA by Jadewell. Save from reiterating the
Sanggunian’s litany of violations said to be committed by Jadewell, there was no testimony on
record to prove such facts. The City of Baguio was still duty-bound to establish the alleged
breach.

Therefore, the Sangguniang Panlungsod of City of Baguio cannot unilaterally rescind the
MOA.