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ADR Cases (Edited) PDF
DECISION
PUNO , J : p
Assailed in this petition for review is the Decision dated April 2, 2003 1 of the Court
of Appeals in CA-G.R. CV No. 59023 2 which modi ed the Decision dated December 15,
1997 of the Regional Trial Court (RTC) of Valenzuela City, Branch 172, in Civil Case No.
5139-V-97, as well as its Resolution dated August 8, 2003 3 which denied petitioner's
motion for reconsideration.
The antecedent facts are as follows:
In October 1994, petitioner Teodoro Chavez and respondent Jacinto Trillana entered
into a contract of lease 4 whereby the former leased to the latter his shpond at Sitio
Pariahan, Taliptip, Bulacan, Bulacan, for a term of six (6) years commencing from October
23, 1994 to October 23, 2000. The rental for the whole term was two million two hundred
forty thousand (P2,240,000.00) pesos, of which one million (P1,000,000.00) pesos was to
be paid upon signing of the contract. The balance was payable as follows:
b. That, after six (6) months and/or, on or before one (1) year from the
date of signing this contract, the amount of THREE HUNDRED FORTY-FOUR
THOUSAND (P344,000.00) pesos shall be paid on April 23, 1995 and/or, on or
before October 23, 1995 shall be paid by the LESSEE to the LESSOR. SHacCD
c. That, the LESSEE, shall pay the amount of FOUR HUNDRED FORTY-
EIGHT THOUSAND (P448,000.00) pesos . . . to the LESSOR on April 23, 1997
and/or, on or before October 23, 1997, and on April 23, 1998 and/or, on or before
October 23, 1998 the amount of FOUR HUNDRED FORTY-EIGHT THOUSAND
(P448,000.00) pesos . . .
Paragraph 5 of the contract further provided that respondent shall undertake all
construction and preservation of improvements in the shpond that may be destroyed
during the period of the lease, at his expense, without reimbursement from petitioner.
In August 1996, a powerful typhoon hit the country which damaged the subject
shpond. Respondent did not immediately undertake the necessary repairs as the water
level was still high. Three (3) weeks later, respondent was informed by a barangay
councilor that major repairs were being undertaken in the shpond with the use of a crane.
Respondent found out that the repairs were at the instance of petitioner who had grown
impatient with his delay in commencing the work. 2005cdtai
Alleging non-compliance by petitioner with their lease contract and the foregoing
"Kasunduan," respondent led a complaint on February 7, 1997 against petitioner before
the RTC of Valenzuela City, docketed as Civil Case No. 5139-V-97. Respondent prayed that
the following amounts be awarded him, viz.: (a) P300,000.00 as reimbursement for rentals
of the leased premises corresponding to the unexpired portion of the lease contract; (b)
P500,000.00 as unrealized pro ts; (c) P200,000.00 as moral damages; (d) P200,000.00
as exemplary damages; and, (e) P100,000.00 as attorney's fees plus P1,000.00 for each
court appearance of respondent's counsel. cSDIHT
Petitioner led his answer but failed to submit the required pretrial brief and to
attend the pretrial conference. On October 21, 1997, respondent was allowed to present
his evidence ex-parte before the Acting Branch Clerk of Court. 5 On the basis thereof, a
decision was rendered on December 15, 1997 6 in favor of respondent, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered as follows:
Petitioner appealed to the Court of Appeals which modi ed the decision of the trial
court by deleting the award of P500,000.00 for unrealized pro ts for lack of basis, and by
reducing the award for attorney's fees to P50,000.00. 7 Petitioner's motion for
reconsideration was denied. Hence, this petition for review.
Petitioner contends that the Court of Appeals erred in ruling that the RTC of
Valenzuela City had jurisdiction over the action led by respondent considering that the
subject matter thereof, his alleged violation of the lease contract with respondent, was
already amicably settled before the O ce of the Barangay Captain of Taliptip, Bulacan,
Bulacan. Petitioner argued that respondent should have followed the procedure for
enforcement of the amicable settlement as provided for in the Revised Katarungang
Pambarangay Law. Assuming arguendo that the RTC had jurisdiction, it cannot award
more than the amount stipulated in the "Kasunduan" which is P150,000.00. In any event, no
factual or legal basis existed for the reimbursement of alleged advance rentals for the
unexpired portion of the lease contract as well as for moral and exemplary damages, and
attorney's fees.
Indeed, the Revised Katarungang Pambarangay Law 8 provides that an amicable
settlement reached after barangay conciliation proceedings has the force and effect of a
nal judgment of a court if not repudiated or a petition to nullify the same is led before
the proper city or municipal court within ten (10) days from its date. 9 It further provides
that the settlement may be enforced by execution by the lupong tagapamayapa within six
(6) months from its date, or by action in the appropriate city or municipal court, if beyond
the six-month period. 1 0 This special provision follows the general precept enunciated in
Article 2037 of the Civil Code, viz.:
A compromise has upon the parties the effect and authority of res judicata;
but there shall be no execution except in compliance with a judicial compromise.
Thus, we have held that a compromise agreement which is not contrary to law,
public order, public policy, morals or good customs is a valid contract which is the law
between the parties themselves. 1 1 It has upon them the effect and authority of res
judicata even if not judicially approved, 1 2 and cannot be lightly set aside or disturbed
except for vices of consent and forgery. 1 3
However, in Heirs of Zari, et al. v. Santos, 1 4 we clari ed that the broad precept
enunciated in Art. 2037 is qualified by Art. 2041 of the same Code, which provides:
If one of the parties fails or refuses to abide by the compromise, the other
party may either enforce the compromise or regard it as rescinded and insist upon
his original demand.
We explained, viz:
[B]efore the onset of the new Civil Code, there was no right to rescind
compromise agreements. Where a party violated the terms of a compromise
agreement, the only recourse open to the other party was to enforce the terms
thereof.
When the new Civil Code came into being, its Article 2041 . . . created for
the rst time the right of rescission. That provision gives to the aggrieved party
the right to "either enforce the compromise or regard it as rescinded and insist
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upon his original demand." Article 2041 should obviously be deemed to qualify
the broad precept enunciated in Article 2037 that "[a] compromise has upon the
parties the effect and authority of res judicata. (underscoring ours)
In exercising the second option under Art. 2041, the aggrieved party may, if he chooses,
bring the suit contemplated or involved in his original demand, as if there had never
been any compromise agreement, without bringing an action for rescission. 1 5 This is
because he may regard the compromise as already rescinded 1 6 by the breach thereof
of the other party.
Thus, in Morales v. National Labor Relations Commission 1 7 we upheld the National
Labor Relations Commission when it heeded the original demand of four (4) workers for
reinstatement upon their employer's failure to comply with its obligation to pay their
monetary bene ts within the period prescribed under the amicable settlement. We
reiterated the rule that the aggrieved party may either (1) enforce the compromise by a
writ of execution, or (2) regard it as rescinded and so insist upon his original demand upon
the other party's failure or refusal to abide by the compromise. We also recognized the
options in Mabale v. Apalisok, 1 8 Canonizado v. Benitez, 1 9 and Ramnani v. Court of
Appeals, 2 0 to name a few cases.
In the case at bar, the Revised Katarungang Pambarangay Law provides for a two-
tiered mode of enforcement of an amicable settlement, to wit: (a) by execution by the
Punong Barangay which is quasi-judicial and summary in nature on mere motion of the
party entitled thereto; and (b) an action in regular form, which remedy is judicial. 2 1
However, the mode of enforcement does not rule out the right of rescission under Art.
2041 of the Civil Code. The availability of the right of rescission is apparent from the
wording of Sec. 417 2 2 itself which provides that the amicable settlement "may" be
enforced by execution by the lupon within six (6) months from its date or by action in the
appropriate city or municipal court, if beyond that period. The use of the word "may" clearly
makes the procedure provided in the Revised Katarungang Pambarangay Law directory 2 3
or merely optional in nature.
Thus, although the "Kasunduan" executed by petitioner and respondent before the
O ce of the Barangay Captain had the force and effect of a nal judgment of a court,
petitioner's non-compliance paved the way for the application of Art. 2041 under which
respondent may either enforce the compromise, following the procedure laid out in the
Revised Katarungang Pambarangay Law, or regard it as rescinded and insist upon his
original demand. Respondent chose the latter option when he instituted Civil Case No.
5139-V-97 for recovery of unrealized pro ts and reimbursement of advance rentals, moral
and exemplary damages, and attorney's fees. Respondent was not limited to claiming
P150,000.00 because although he agreed to the amount in the "Kasunduan," it is axiomatic
that a compromise settlement is not an admission of liability but merely a recognition that
there is a dispute and an impending litigation 2 4 which the parties hope to prevent by
making reciprocal concessions, adjusting their respective positions in the hope of gaining
balanced by the danger of losing. 2 5 Under the "Kasunduan," respondent was only required
to execute a waiver of all possible claims arising from the lease contract if petitioner fully
complies with his obligations thereunder. 2 6 It is undisputed that herein petitioner did not.
Having a rmed the RTC's jurisdiction over the action led by respondent, we now
resolve petitioner's remaining contention. Petitioner contends that no factual or legal basis
exists for the reimbursement of alleged advance rentals, moral and exemplary damages,
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and attorney's fees awarded by the court a quo and the Court of Appeals.
The rule is that actual damages cannot be presumed, but must be proved with a
reasonable degree of certainty. 2 7 In the case at bar, we agree with petitioner that no
competent proof was presented to prove that respondent had paid P300,000.00 as
advance rentals for the unexpired period of the lease contract. On the contrary, the lease
contract itself provided that the remaining rentals of P448,000.00 shall be paid "on April
23, 1997 and/or, on or before October 23, 1997, and on April 23, 1998 and/or, on or before
October 23, 1998 the amount P448,000.00." Respondent led his complaint on February 7,
1997. No receipt or other competent proof, aside from respondent's self-serving
assertion, was presented to prove that respondent paid the rentals which were not yet due.
No proof was even presented by respondent to show that he had already paid
P1,000,000.00 upon signing of the lease contract, as stipulated therein. Petitioner, in
paragraphs 2 and 7 of his answer, 2 8 speci cally denied that respondent did so. Courts
must base actual damages suffered upon competent proof and on the best obtainable
evidence of the actual amount thereof. 2 9
As to moral damages, Art. 2220 of the Civil Code provides that same may be
awarded in breaches of contract where the defendant acted fraudulently or in bad faith. In
the case at bar, respondent alleged that petitioner made unauthorized repairs in the leased
premises and ousted his personnel therefrom despite their valid and subsisting lease
agreement. Petitioner alleged, by way of defense, that he undertook the repairs because
respondent abandoned the leased premises and left it in a state of disrepair. However,
petitioner presented no evidence to prove his allegation, as he did not attend the pretrial
conference and was consequently declared in default. What remains undisputed therefore
is that petitioner had a valid and subsisting lease contract with respondent which he
refused to honor by giving back possession of the leased premises to respondent. We
therefore sustain the conclusion of both the trial court and the Court of Appeals that an
award of moral damages is justi ed under the circumstances. We likewise sustain the
award for exemplary damages considering petitioner's propensity not to honor his
contractual obligations, rst under the lease contract and second, under the amicable
settlement executed before the O ce of the Barangay Captain. Since respondent was
compelled to litigate and incur expenses to protect his interest on account of petitioner's
refusal to comply with his contractual obligations, 3 0 the award of attorney's fees has to
be sustained.
IN VIEW WHEREOF, the petition is PARTIALLY GRANTED. The assailed Decision
dated April 2, 2003 of the Court of Appeals in CA-G.R. CV No. 59023 is modi ed by
deleting the award of P300,000.00 as reimbursement of advance rentals. The assailed
Decision is AFFIRMED in all other respects.
SO ORDERED.
Austria-Martinez, Callejo, Sr., Tinga and Chico-Nazario, JJ., concur.
Footnotes
DECISION
LEONEN J :
LEONEN, p
Respondent Salamanca led a complaint for partition against her siblings, Antonio,
Elena (deceased, now represented by her husband, Jose Lopez), and Adoracion (deceased,
now represented by heirs, petitioner Nestor and Francisco Gadrinab) before the Regional
Trial Court of Manila. 7
All parties claimed their respective shares in the property. 8 They also claimed
shares in the rentals collected from one of the units of a duplex apartment on the property.
9 The total amount of rental collection in the possession of Jose Lopez was
PhP528,623.00. 10 The amount, according to Jose's counsel, was ready for distribution. 11
Upon being referred to mediation, the parties entered into a compromise agreement
and stipulated the following:
1) That the subject property (land with all the improvements) situated
at 2370 Nacar Street, San Andres, Sta. Ana, Manila will be subject for sale and the
amount will be divided among the four (plaintiff and defendants);
3) That Cuervo Appraiser will be the one who appraised [sic] the
property on or before March 21, 2003 and any appraised value shall binding [sic]
on all parties;
7) That the parties agreed to waive all their claims and counter-claims
arising from this case; and
On April 10, 2003, the Regional Trial Court approved the compromise agreement. 13
Based on the entry of judgment, the case became nal and executory on April 10, 2003. 14
CcAHEI
Petitioner alleged that the judgment on the compromise agreement had already
been partially complied with, as respondent Salamanca had already been paid her share in
the accrued rentals. 39 On the other hand, petitioner still had not been paid his share, 40
prompting him to file the motion for execution. 41
Petitioner pointed out that there was no agreement that he must vacate the property
before it could be sold. 42
Moreover, petitioner argued that the Court of Appeals' decision violated his right to
due process. 43 According to him, had there been a full-blown trial on the action for
partition, he would have been able to present evidence of exclusive possession of half of
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the property. 44
In their separate comments, respondents Salamanca and Talao argued that this
case fell under the exception of the rule on immutability of judgments. 45 The non-
compliance of some of the parties with the compromise agreement constituted an event
that "[makes] it difficult if not totally impossible to enforce the compromise agreement." 46
Respondents Salamanca and Talao also argued that the physical partition of the
property would not prejudice the parties. 47 The order granting the motion for physical
partition was a mere enforcement of the compromise agreement, which entitled the
parties to their shares in the proceeds of the sale. 48 Respondent Salamanca pointed out
that the grant of the motion for physical partition would still be consistent with the intent
of the compromise agreement since it would result in the proceeds being divided equally
among the parties. 49 "The Order granting the physical partition was within the inherent
power and authority of the court having jurisdiction to render a particular judgment to
enforce it and to exercise equitable control over such enforcement." 50
Moreover, petitioner's refusal to vacate the property prevented it from being sold so
that the proceeds could already be distributed among the parties. 51
On the violation of due process, respondents Salamanca and Talao argued that it
was only before this court that this issue was raised.
The issue in this case is whether the Court of Appeals erred in a rming the Regional
Trial Court's decision allowing the physical partition of the property despite nality of a
previous judgment on compromise agreement involving the division of the same property.
The petition is meritorious.
The Court of Appeals erred in
affirming the Regional Trial
Court's decision allowing the
physical partition of the property
Respondent Salamanca led two actions for physical partition. The two parties
settled the rst action through a judicial compromise agreement. The same respondent
led the second action after she had determined that her co-heirs were not being
cooperative in complying with the compromise agreement. ATcEDS
In a compromise agreement, the parties freely enter into stipulations. "[A] judgment
based on a compromise agreement is a judgment on the merits" 52 of the case. It has the
effect of res judicata. These principles are impressed both in our law and jurisprudence.
Thus, Article 2037 of the Civil Code provides:
Article 2037.A compromise has upon the parties the effect and authority of res
judicata; but there shall be no execution except in compliance with a judicial
compromise.
(b) In other cases, the judgment or nal order is, with respect to the matter
directly adjudged or as to any other matter that could have been raised in
relation thereto, conclusive between the parties and their successors in interest
by title subsequent to the commencement of the action or special proceeding,
litigating for the same thing and under the same title and in the same capacity[.]
The second rule refers to "conclusiveness of judgment." 58 This means that facts
already tried and determined in another action involving a different claim or cause of action
cannot anymore be relitigated. 59 This rule is embodied in Rule 39, Section 47, paragraph
(c) of the Rules of Court, which provides:
Section 47. Effect of judgments or nal orders. — The effect of a judgment
or nal order rendered by a court of the Philippines, having jurisdiction to
pronounce the judgment or final order, may be as follows:
This case involves "bar by prior judgment." Respondents cannot le another action
for partition after nal judgment on compromise had already been rendered in a previous
action for partition involving the same parties and property.
This court explained in FGU Insurance Corporation v. Regional Trial Court 60 the
doctrine of finality of judgment:
Under the doctrine of nality of judgment or immutability of judgment, a
decision that has acquired nality becomes immutable and unalterable, and may
no longer be modi ed in any respect, even if the modi cation is meant to correct
erroneous conclusions of fact and law, and whether it be made by the court that
rendered it or by the Highest Court of the land. Any act which violates this
principle must immediately be struck down. 61
This doctrine admits a few exceptions, usually applied to serve substantial justice:
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1. "The correction of clerical errors;
2. the so-called nunc pro tunc entries which cause no prejudice to any
party;
Therefore, courts cannot entertain actions involving the same cause of action,
parties, and subject matter without violating the doctrines on bar by prior judgment and
immutability of judgments, unless there is evidence that the agreement was void, obtained
through fraud, mistake or any vice of consent, or would disrupt substantial justice.
In this case, there was no issue as to the fact that the parties freely entered into the
compromise agreement. There was also no dispute about the clarity of its terms. Some of
the parties simply do not wish to abide by the compromise agreement's terms.
This court does not see how substantial justice will be served by disturbing a
previous nal judgment on compromise when failure of its execution was caused by the
parties themselves.
Likewise, respondents' argument that a supervening event, i.e., disagreement among
the parties, was present to justify disturbance of the nal judgment on compromise fails
to persuade. A supervening event may justify the disturbance of a nal judgment on
compromise if it "brought about a material change in [the] situation" 64 between the
parties. The material change contemplated must render the execution of the nal
judgment unjust and inequitable. Otherwise, a party to the compromise agreement has a
"right to have the compromise agreement executed, according to its terms." 65
The subsequent disagreement among the parties did not cause any material change
in the situation or in the relations among the parties. The situation and relations among the
parties remained the same as the situation and their relations prior to the compromise
agreement. They remained co-owners of the property, which they desired to partition.
Moreover, the parties voluntarily agreed to the compromise agreement, which was
already stamped with judicial approval. The agreement's execution would bring about the
effects desired by all parties and the most just and equitable situation for all. On the other
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hand, the judgment granting the second action for partition led by respondent Salamanca
was obtained with opposition. IaHCAD
Judges "have the ministerial and mandatory duty to implement and enforce [a
compromise agreement]." 66 Absent appeal or motion to set aside the judgment, courts
cannot modify, impose terms different from the terms of a compromise agreement, or set
aside the compromises and reciprocal concessions made in good faith by the parties
without gravely abusing their discretion. 67
"[They cannot] relieve parties from [their] obligations . . . simply because [the
agreements are] . . . unwise." 68 Further, "[t]he mere fact that the Compromise Agreement
favors one party does not render it invalid." 69 Courts do not have power to "alter contracts
in order to save [one party] from [the effects of] adverse stipulations. . . ." 70
Respondents have remedies if
parties to the compromise
agreement refuse to abide by its
terms
The issue in this case involves the non-compliance of some of the parties with the
terms of the compromise agreement. The law affords complying parties with remedies in
case one of the parties to an agreement fails to abide by its terms.
A party may file a motion for execution of judgment. Execution is a matter of right on
final judgments. Section 1, Rule 39 of the Rules of Court provides:
Section 1. Execution upon judgments or nal orders. — Execution shall
issue as a matter of right, on motion, upon a judgment or order that disposes of
the action or proceeding upon the expiration of the period to appeal therefrom if
no appeal has been duly perfected. (1a)
If the appeal has been duly perfected and nally resolved, the execution may
forthwith be applied for in the court of origin, on motion of the judgment obligee,
submitting therewith certi ed true copies of the judgment or judgments or nal
order or orders sought to be enforced and of the entry thereof, with notice to the
adverse party.
The appellate court may, on motion in the same case, when the interest of
justice so requires, direct the court of origin to issue the writ of execution. (n)
If a party refuses to comply with the terms of the judgment or resists the
enforcement of a lawful writ issued, an action for indirect contempt may be led in
accordance with Rule 71 of the Rules of Court:
Section 3. Indirect contempt to be punished lifter charge and hearing. —
After a charge in writing has been led, and an opportunity given to the
respondent to comment thereon within such period as may be xed by the court
and to be heard by himself or counsel, a person guilty of any of the following
acts may be punished for indirect contempt;
Footnotes
*Villarama, Jr., J., designated as Acting Member per Special Order No. 1691 dated May 22,
2014 in view of the vacancy in the Third Division.
1.Rollo, pp. 31-42. This decision was penned by Associate Justice Noel G. Tijam, with Associate
Justices Marlene Gonzales-Sison and Danton Q. Bueser concurring.
2.Id. at 43-45. This resolution was penned by Associate Justice Noel G. Tijam, with Associate
Justices Marlene Gonzales-Sison and Danton Q. Bueser concurring.
3.Id. at 32.
4.Id.
5.Id.
6.Id.
7.Id.
8.Id.
9.Id. at 33.
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SECOND DIVISION
RESOLUTION
CARPIO , J : p
This is a petition 1 for certiorari under Rule 65 of the Rules of Court. The petition
challenges the 5 April 2 and 10 June 3 2005 Resolutions of the Court of Appeals in CA-
G.R. SP No. 89023. The Court of Appeals dismissed the petition 4 for certiorari, with
prayer for issuance of a temporary restraining order, led by Marcelino Domingo
(Marcelino) for failure to serve the pleadings personally and for failure to provide a
written explanation why the service was not done personally.
Before he died, Julio Domingo (Julio) allegedly executed a Deed of Absolute Sale
over a 4.1358-hectare parcel of land in favor of Marcelino's wife, Carmelita Mananghaya
(Mananghaya). The property was situated in Burgos, Sto. Domingo, Nueva Ecija, and
was covered by Transfer Certificate of Title No. NT-87365.
Agapita and Ana Domingo, and the heirs of Gaudencio, Julian, Edilberta, Modesta,
Felipe, and Geronimo Domingo (the Domingos) led before the Regional Trial Court
(RTC), Judicial Region 3, Branch 37, Baloc, Sto. Domingo, Nueva Ecija, a complaint
against Marcelino and Mananghaya for the annulment of the Deed of Absolute Sale. The
Domingos alleged that Julio's signature in the deed was forged.
In its 3 November 1993 Decision, 5 the RTC held that Julio's signature in the Deed
of Absolute Sale was forged; thus, the deed was void. The RTC ordered Marcelino and
Mananghaya to deliver possession of the property to the Domingos.
Marcelino and Mananghaya appealed the 3 November 1993 Decision to the
Court of Appeals. In its 14 July 2000 Decision, the Court of Appeals dismissed the
appeal. The 14 July 2000 Decision became nal and executory. Thus, on 4 August 2003,
the RTC issued a writ of execution. On 25 August 2003, the Domingos gained
possession of the property. CSAcTa
Marcelino led with the Department of Agrarian Reform (DAR) a petition 6 dated
25 August 2003 praying that he be declared the tenant-beneficiary of the property.
Around April 2004, Marcelino reentered and retook possession of the property.
The Domingos led before the RTC a motion to cite Marcelino in contempt. Marcelino
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and Mananghaya led before the Court of Appeals a petition, 7 dated 28 April 2004, for
certiorari, prohibition and mandamus. They prayed that:
1. Pending hearing a preliminary injunction be issued against the [RTC]
enjoining and prohibiting to implement the writ of executed [sic] (Exh. M);
3. Annulling the last portion of the decision in Civil Case No. 1218
which states: ["]to deliver the possession of the land in question to the plaintiffs.
(par. 5 Decision dated November 3, 1993)."
In its 26 May 2004 Order, the RTC found Marcelino in contempt, ned him
P25,000 and ordered his arrest and imprisonment. However, the sheriff of the RTC no
longer served the 26 May 2004 Order because Marcelino declared in writing that he
would deliver possession of the property to the Domingos. In its 8 June 2004,
Resolution, 9 the Court of Appeals dismissed outright Marcelino and Mananghaya's 28
April 2004 petition.
Later, however, Marcelino employed six men to reenter the property. On 14 June
2004, the RTC issued warrants of arrest against Marcelino and the six men. Marcelino
and a certain Genero Salazar (Salazar) were arrested and were detained at the
Philippine National Police station in Sto. Domingo, Nueva Ecija. On 17 and 23 June
2004, Genero and Marcelino, respectively, were released after declaring in writing that
they would no longer interfere with the Domingos' possession of the property. The RTC
warned Marcelino that a warrant for his arrest shall be deemed automatically issued if
he reenters the property.
In its 4 October 2004 Order, 1 0 the DAR granted Marcelino's 25 August 2003
petition, placed 10.0108 hectares of land — including the property — under the
coverage of Republic Act (RA) No. 6657, and named Marcelino as one of the tenant-
bene ciaries. Agapita Domingo (Agapita) led a motion for reconsideration of the 4
October 2004 Order. Marcelino reentered and retook possession of the property.
The Domingos led before the RTC another motion to cite Marcelino in
contempt, and for the issuance of a warrant for his arrest. In its 23 December 2004
Order, 1 1 the RTC stated that:
In the partial return, dated December 9, 2004, of Sheriff Crispino Magbitang
acting per order, dated December 1, 2004 of this Court, he con rmed that when he
went to the subject property on December 7, 2004, about 3:00 p.m., he saw six (6)
men "tilling and plowing the land-in-question" but who, upon seeing him, stopped
working, gathered their agricultural implements and left. . . . Dorenzo Domingo,
brother of defendant Marcelino Domingo, con rmed to the sheriff the re-entry on
the land in question by his brother, the barangay captain of the place where said
land is situated, who bragged of an alleged decision of the DARAB regional o ce
in San Fernando City, Pampanga, making him the legal owner of the subject land.
cDTSHE
This Court, notwithstanding its already nal order of May 26, 2004, nding
and declaring defendant Marcelino Domingo in contempt of court as well as the
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order of June 23, 2004 wherein it warned of the automatic re-issuance of a
warrant of arrest against him and any other acting in his behalf in the event of
reentry and retaking possession of the subject property, set the present motion for
hearing on December 15, 2004 to afford defendant Marcelino Domingo the
opportunity to explain his side even only for the purpose of mitigating the legal
consequences of his very stubborn arrogance that amounted to open de ance of
the power of contempt of this Court.
Again, to give the defendant another chance, the hearing set on December
15, 2004 was reset to December 20, 2004, as requested by defendant's counsel
Atty. Restituto M. David . . . but again, none of them appeared on said date nor file
[sic] any comment on the same.
With defendant Marcelino Domingo's cavalier attitude towards it, this Court
now feels its authority ignored and belittled and its power of contempt challenged
and tested of its worth by said defendant who, ironically, as barangay head and,
as such, a person in authority himself, should rst be the paragon in upholding
the rule of law. SDAaTC
5. Ordering the issuance of a [sic] continuing warrants for the arrest of all
other persons working, cultivating, tilling and planting on the subject
landholding in behalf of defendant Marcelino Domingo, and under his
control, direction and supervision. 1 2
In its 17 February 2005 Order, 1 3 the DAR granted Agapita's motion for
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reconsideration and set aside the 4 October 2004 Order. The DAR held that the
property was not covered by RA No. 6657 because it was less than ve hectares. The
DAR stated that:
From the documents submitted by the movant, it appears that the subject
property of 4.1358 hectares covered by TCT No. 87365 is the only landholdings
owned by Julio Domingo. He was only an administrator of the 5.8831 hectares,
therefore, the 4.1358 hectares cannot be covered by land reform law either under
PD 27/RA 6657 since the same is way below the ceiling mandated by agrarian
reform law. 1 4 HSIaAT
In its 4 March 2005 Order, 1 5 the RTC denied Marcelino's motion for
reconsideration. The RTC held that:
In his Sinumpaang Salaysay of June 22, 2004 on the basis of which this
Court ordered his release from jail, defendant Marcelino never mentioned
anything about the distinction of his possession of the subject property between
that in the concept of owner and in the concept of a tenant-lessee. Even if he did,
that would not have mattered because the concept of possession in the instance
[sic] case was never in issue. Besides, his undertaking in the said sworn statement
was clearly worded that he would never again re-enter or retake possession of the
subject land either by himself of [sic] by his agents and he would bar others from
entering the same.
It will now appear that he had foisted a contumacious lie to this Court with
his declaration in the said sworn statement to obtain his release from jail. This
warrant his being cited for another contempt of this Court.
But the fact is, the Order of the DARAB relied upon by the defendant
Marcelino did not grant him any speci c portion of the land declared to be within
the coverage of PD 27/RA 6657 because the same was yet, by its terms, to be
distributed to the quali ed bene ciaries thereof and defendant Marcelino being
only one of such beneficiaries.
It is now very clear to this Court that defendant Marcelino's re-entry and
retaking possession and cultivation of the subject land was sheer display of
stubborn arrogance and an open, deliberate and contemptuous de ance of its
order and processes.
Marcelino led before the Court of Appeals a petition for certiorari under Rule 65
of the Rules of Court, dated 21 March 2005, with prayer for the issuance of a temporary
restraining order. Marcelino alleged that the RTC had no jurisdiction to order him to
deliver possession of the property to the Domingos and that the RTC gravely abused its
discretion in finding him in contempt.
In its 5 April 2005 Resolution, the Court of Appeals dismissed outright
Marcelino's petition. The Court of Appeals held that:
This petition for certiorari faces outright dismissal for three (3)
fundamental reasons, namely:
(2) The following copies of pertinent pleadings and orders that would
support the allegations in the petition have not been attached thereto as annexes,
to wit:
(a) The complaint for annulment of sale with damages led with the
Regional Trial Court, Branch 37, Baloc, Sto. Domingo, Nueva Ecija;
EScAHT
(c) The petition for coverage under PD 27 led with DAR, Regional
Office, San Fernando, Pampanga;
(e) The motion for reconsideration led with DAR, Reg. III, San
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Fernando, Pampanga;
The petition is unmeritorious. Section 11, Rule 13 of the Rules of Court states:
SEC. 11. Priorities in modes of service and ling. — Whenever
practicable, the service and ling of pleadings and other papers shall be done
personally. Except with respect to papers emanating from the court, a resort to
other modes must be accompanied by a written explanation why the service or
ling was not done personally. A violation of this Rule may be cause to consider
the paper as not filed. ACHEaI
Personal service and ling are preferred for obvious reasons. Plainly, such
should expedite action or resolution on a pleading, motion or other paper; and
conversely, minimize, if not eliminate, delays likely to be incurred if service or
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ling is done by mail, considering the ine ciency of postal service. Likewise,
personal service will do away with the practice of some lawyers who, wanting to
appear clever, resort to the following less than ethical practices: (1) serving or
ling pleadings by mail to catch opposing counsel off-guard, thus leaving the
latter with little or no time to prepare, for instance, responsive pleadings or an
opposition; or (2) upon receiving notice from the post o ce that the registered
parcel containing the pleading of or other paper from the adverse party may be
claimed, unduly procrastinating before claiming the parcel, or, worse, not claiming
it at all, thereby causing undue delay in the disposition of such pleading or other
papers.
We thus take this opportunity to clarify that under Section 11, Rule 13 of
the 1997 Rules of Civil Procedure, personal service and ling is the general
rule, and resort to other modes of service and ling, the exception.
Henceforth, whenever personal service or ling is practicable, in light of
the circumstances of time, place and person, personal service or ling
is mandatory. Only when personal service or ling is not practicable
may resort to other modes be had, which must then be accompanied by
a written explanation as to why personal service or ling was not
practicable to begin with . In adjudging the plausibility of an explanation, a
court shall likewise consider the importance of the subject matter of the case or
the issues involved therein, and the prima facie merit of the pleading sought to be
expunged for violation of Section 11. This Court cannot rule otherwise, lest we
allow circumvention of the innovation introduced by the 1997 Rules in order to
obviate delay in the administration of justice. AHcCDI
Liberal application of procedural rules is allowed only when two requisites are
present: (1) there is a plausible explanation for the non-compliance, and (2) the outright
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dismissal would defeat the administration of justice. In Tible & Tible Company, Inc. v.
Royal Savings and Loan Association, 2 7 the Court held that "the two pre-requisites for
the relaxation of the rules are: (1) justi able cause or plausible reason for non-
compliance; and (2) compelling reason to convince the court that outright dismissal of
the petition would seriously impair the orderly administration of justice." 2 8 Both
requisites are lacking in the present case.
WHEREFORE , we DISMISS the petition. We AFFIRM the 5 April and 10 June
2005 Resolutions of the Court of Appeals in CA-G.R. SP No. 89023.
SO ORDERED.
ORDERED
Corona, * Brion, Del Castillo and Perez, JJ., concur.
Footnotes
3. Id. at 64-65.
4. Id. at 44-55.
5. Id. at 72-76. Penned by Judge Senen R. Saguyod.
6. Id. at 77-82.
7. Id. at 140-147.
8. Id. at 144-145.
9. Id. at 149-150. Penned by Associate Justice Jose Catral Mendoza, with Associate
Justices Eugenio S. Labitoria and Jose L. Sabio, Jr. concurring.
SYNOPSIS
SYLLABUS
QUISUMBING , J : p
This petition 1 seeks to annul the decision of the Court of Appeals dated August 29,
1996, which set aside the decision of the Regional Trial Court of Batac, Ilocos Norte,
Branch 17, in Civil Case No. 582-17 for reivindicacion consolidated with Cadastral Case
No. 1. 2 The petition likewise seeks to annul the resolution dated December 11, 1996,
denying petitioners' motion for reconsideration.
The facts of this case, culled from the records, are as follows:
Paulina Rigonan owned three (3) parcels of land, located at Batac and Espiritu,
Ilocos Norte, including the house and warehouse on one parcel. She allegedly sold them to
private respondents, the spouses Felipe and Concepcion Rigonan, who claim to be her
relatives. In 1966, herein petitioners Eugenio Domingo, Crispin Mangabat and Samuel
Capalungan, who claim to be her closest surviving relatives, allegedly took possession of
the properties by means of stealth, force and intimidation, and refused to vacate the same.
Consequently, on February 2, 1976, herein respondent Felipe Rigonan led a complaint for
reivindicacion against petitioners in the Regional Trial Court of Batac, Ilocos Norte. On July
3, 1977, he amended the complaint and included his wife as co-plaintiff. They alleged that
they were the owners of the three parcels of land through the deed of sale executed by
Paulina Rigonan on January 28, 1965; that since then, they had been in continuous
possession of the subject properties and had introduced permanent improvements
thereon; and that defendants (now petitioners) entered the properties illegally, and they
refused to leave them when asked to do so.
Herein petitioners, as defendants below, contested plaintiffs' claims. According to
defendants, the alleged deed of absolute sale was void for being spurious as well as
lacking consideration. They said that Paulina Rigonan did not sell her properties to anyone.
As her nearest surviving kin within the fifth degree of consanguinity, they inherited the three
lots and the permanent improvements thereon when Paulina died in 1966. They said they
had been in possession of the contested properties for more than 10 years. Defendants
asked for damages against plaintiffs. HAICTD
During trial, Juan Franco, Notary Public Evaristo P. Tagatag 3 and plaintiff Felipe
Rigonan testified for plaintiffs (private respondents now).
Franco testi ed that he was a witness to the execution of the questioned deed of
absolute sale. However, when cross-examined and shown the deed he stated that the deed
was not the document he signed as a witness, but rather it was the will and testament
made by Paulina Rigonan.
Atty. Tagatag testi ed that he personally prepared the deed, he saw Paulina Rigonan
a x her thumbprint on it and he signed it both as witness and notary public. He further
testi ed that he also notarized Paulina's last will and testament dated February 19, 1965.
The will mentioned the same lots sold to private respondents. When asked why the subject
lots were still included in the last will and testament, he could not explain. Atty. Tagatag
also mentioned that he registered the original deed of absolute sale with the Register of
Deeds.
Plaintiff Felipe Rigonan claimed that he was Paulina's close relative. Their fathers
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were rst cousins. However, he could not recall the name of Paulina's grandfather. His
claim was disputed by defendants, who lived with Paulina as their close kin. He admitted
the discrepancies between the Register of Deeds' copy of the deed and the copy in his
possession. But he attributed them to the representative from the O ce of the Register of
Deeds who went to plaintiffs' house after that O ce received a subpoena duces tecum.
According to him, the representative showed him blanks in the deed and then the
representative filled in the blanks by copying from his (plaintiffs) copy.
Counsel for defendants (petitioners herein) presented as witnesses Jose Flores, the
owner of the adjacent lot; Ruben Blanco, then acting Registrar of Deeds in Ilocos Norte;
and Zosima Domingo, wife of defendant Eugenio Domingo.
Jose Flores testi ed that he knew defendants, herein petitioners, who had lived on
the land with Paulina Rigonan since he could remember and continued to live there even
after Paulina's death. He said he did not receive any notice nor any offer to sell the lots
from Paulina, contrary to what was indicated in the deed of sale that the vendor had
noti ed all the adjacent owners of the sale. He averred he had no knowledge of any sale
between Paulina and private respondents.
Ruben Blanco, the acting Registrar of Deeds, testi ed that only the carbon copy, also
called a duplicate original, of the deed of sale was led in his o ce, but he could not
explain why this was so.
Zosima Domingo testi ed that her husband, Eugenio Domingo, was Paulina's
nephew. Paulina was a rst cousin of Eugenio's father. She also said that they lived with
Paulina and her husband, Jose Guerson, since 1956. They took care of her, spent for her
daily needs and medical expenses, especially when she was hospitalized prior to her death.
She stated that Paulina was never badly in need of money during her lifetime. aSEDHC
On March 23, 1994, the trial court rendered judgment in favor of defendants (now
the petitioners). It disposed:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
defendants and against the plaintiffs, and as prayed for, the Amended Complaint
is hereby DISMISSED .
The alleged deed of sale (Exhs. "A", "A-1", "1" and "1-a") is hereby declared
null and void and fake and the prayer for the issuance of a writ of preliminary
injunction is hereby denied.
No pronouncement as to costs. 4
II
III
IV
THAT THE RESPONDENT COURT OF APPEALS MANIFESTLY OVERLOOKED CERTAIN
RELEVANT FACTS NOT DISPUTED BY THE PARTIES AND WHICH, IF PROPERLY CONSIDERED,
WOULD JUSTIFY A DIFFERENT CONCLUSION.
The basic issue for our consideration is, did private respondents su ciently
establish the existence and due execution of the Deed of Absolute and Irrevocable Sale of
Real Property? Marked as Exhibits "A", "A-1", "1" and "1-a", this deed purportedly involved
nine (9) parcels of land, inclusive of the three (3) parcels in dispute, sold at the price of
P850 by Paulina Rigonan to private respondents on January 28, 1965, at Batac, Ilocos
Norte. 7 The trial court found the deed "fake," being a carbon copy with no typewritten
original presented; and the court concluded that the document's execution "was tainted
with alterations, defects, tamperings, and irregularities which render it null and void ab
initio." 8
Petitioners argue that the Court of Appeals erred in not applying the doctrine that
factual ndings of trial courts are entitled to great weight and respect on appeal,
especially when said ndings are established by unrebutted testimonial and documentary
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evidence. They add that the Court of Appeals, in reaching a different conclusion, had
decided the case contrary to the evidence presented and the law applicable to the case.
Petitioners maintain that the due execution of the deed of sale was not su ciently
established by private respondents, who as plaintiffs had the burden of proving it. First, the
testimonies of the two alleged instrumental witnesses of the sale, namely, Juan Franco
and Efren Sibucao, were dispensed with and discarded when Franco retracted his oral and
written testimony that he was a witness to the execution of the subject deed. As a
consequence, the appellate court merely relied on Atty. Tagatag's (the notary public)
testimony, which was incredible because aside from taking the double role of a witness
and notary public, he was a paid witness. Further his testimony, that the subject deed was
executed in the house of Paulina Rigonan, was rebutted by Zosima Domingo, Paulina's
housekeeper, who said that she did not see Atty. Tagatag, Juan Franco and Efren Sibucao
in Paulina's house on the alleged date of the deed's execution.
Secondly, petitioners said that private respondents failed to account for the
typewritten original of the deed of sale and that the carbon copy led with the Register of
Deeds was only a duplicate which contained insertions and erasures. Further, the carbon
copy was without an a davit of explanation, in violation of the Administrative Code as
amended, which requires that if the original deed of sale is not presented or available upon
registration of the deed, the carbon copy or so-called "duplicate original" must be
accompanied by an affidavit of explanation, otherwise, registration must be denied. 9
Thirdly, petitioners aver that the consideration of only P850 for the parcels of land
sold, together with a house and a warehouse, was another indication that the sale was
ctitious because no person who was nancially stable would sell said property at such a
grossly inadequate consideration.
Lastly, petitioners assert that there was abundant evidence that at the time of the
execution of the deed of sale, Paulina Rigonan was already senile. She could not have
consented to the sale by merely imprinting her thumbmark on the deed.
In their comment, private respondents counter that at the outset the petition must
be dismissed for it lacks a certi cation against forum-shopping. Nonetheless, even
disregarding this requirement, the petition must still be denied in due course for it does
not present any substantial legal issue, but factual or evidentiary ones which were already
rmly resolved by the Court of Appeals based on records and the evidence presented by
the parties. Private respondents' claim that the factual determination by the trial court
lacks credibility for it was made by the trial judge who presided only in one hearing of the
case. The trial judge could not validly say that the deed of absolute sale was "fake"
because no signature was forged, according to private respondents; and indeed a
thumbmark, said to be the seller's own, appears thereon. ECcDAH
In their reply, petitioners said that the copy of the petition led with this Court was
accompanied with a certi cation against forum-shopping. If private respondents' copy did
not contain same certi cation, this was only due to inadvertence. Petitioners ask for the
Court's indulgence for anyway there was substantial compliance with Revised Circular No.
28-91.
On the contention that here only factual issues had been raised, hence not the
proper subject for review by this Court, petitioners reply that this general rule admits of
exceptions, as when the factual ndings of the Court of Appeals and the trial court are
contradictory; when the ndings are grounded entirely on speculations, surmises or
conjectures; and when the Court of Appeals overlooked certain relevant facts not disputed
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by the parties which if properly considered would justify a different conclusion. All these,
according to petitioners, are present in this case.
Before proceeding to the main issue, we shall first settle procedural issues raised by
private respondents.
While the trial judge deciding the case presided over the hearings of the case only
once, this circumstance could not have an adverse effect on his decision. The continuity of
a court and the e cacy of its proceedings are not affected by the death, resignation or
cessation from the service of the presiding judge. A judge may validly render a decision
although he has only partly heard the testimony of the witnesses. 1 0 After all, he could
utilize and rely on the records of the case, including the transcripts of testimonies heard by
the former presiding judge.
On the matter of the certi cation against forum-shopping, petitioners aver that they
attached one in the copy intended for this Court. This is substantial compliance. A
deviation from a rigid enforcement of the rules may be allowed to attain their prime
objective for, after all, the dispensation of justice is the core reason for the court's
existence. 1 1
While the issues raised in this petition might appear to be mainly factual, this
petition is properly given due course because of the contradictory ndings of the trial
court and the Court of Appeals. Further, the latter court apparently overlooked certain
relevant facts which justify a different conclusion. 1 2 Moreover, a compelling sense to
make sure that justice is done, and done rightly in the light of the issues raised herein,
constrains us from relying on technicalities alone to resolve this petition.
Now, on the main issue. Did private respondents establish the existence and due
execution of the deed of sale? Our nding is in the negative. First, note that private
respondents as plaintiffs below presented only a carbon copy of this deed. When the
Register of Deeds was subpoenaed to produce the deed, no original typewritten deed but
only a carbon copy was presented to the trial court. Although the Court of Appeals calls it
a "duplicate original," the deed contained lled in blanks and alterations. None of the
witnesses directly testi ed to prove positively and convincingly Paulina's execution of the
original deed of sale. The carbon copy did not bear her signature, but only her alleged
thumbprint. Juan Franco testi ed during the direct examination that he was an
instrumental witness to the deed. However, when cross-examined and shown a copy of the
subject deed, he retracted and said that said deed of sale was not the document he signed
as witness. 1 3 He declared categorically he knew nothing about it. 1 4
We note that another witness, Efren Sibucao, whose testimony should have
corroborated Atty. Tagatag's, was not presented and his a davit was withdrawn from the
court, 1 5 leaving only Atty. Tagatag's testimony, which aside from being uncorroborated,
was self-serving.
Secondly, we agree with the trial court that irregularities abound regarding the
execution and registration of the alleged deed of sale. On record, Atty. Tagatag testi ed
that he himself registered the original deed with the Register of Deeds. 1 6 Yet, the original
was nowhere to be found and none could be presented at the trial. Also, the carbon copy
on le, which is allegedly a duplicate original, shows intercalations and discrepancies when
compared to purported copies in existence. The intercalations were allegedly due to
blanks left un lled by Atty. Tagatag at the time of the deed's registration. The blanks were
allegedly lled in much later by a representative of the Register of Deeds. In addition, the
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alleged other copies of the document bore different dates of entry: May 16, 1966, 10:20
A.M. 1 7 and June 10, 1966, 3:16 P.M., 1 8 and different entry numbers: 66246, 74389 1 9 and
64369. 2 0 The deed was apparently registered long after its alleged date of execution and
after Paulina's death on March 20, 1966. 2 1 Admittedly, the alleged vendor Paulina Rigonan
was not given a copy. 2 2
Furthermore, it appears that the alleged vendor was never asked to vacate the
premises she had purportedly sold. Felipe testi ed that he had agreed to let Paulina stay in
the house until her death. 2 3 In Alcos v. IAC, 162 SCRA 823 (1988), the buyer's immediate
possession and occupation of the property was deemed corroborative of the truthfulness
and authenticity of the deed of sale. The alleged vendor's continued possession of the
property in this case throws an inverse implication, a serious doubt on the due execution of
the deed of sale. Noteworthy, the same parcels of land involved in the alleged sale were
still included in the will subsequently executed by Paulina and notarized by the same notary
public, Atty. Tagatag. 2 4 These circumstances, taken together, militate against unguarded
acceptance of the due execution and genuineness of the alleged deed of sale. CTIEac
Thirdly, we have to take into account the element of consideration for the sale. The
price allegedly paid by private respondents for nine (9) parcels, including the three parcels
in dispute, a house and a warehouse, raises further questions. Consideration is the why of
a contract, the essential reason which moves the contracting parties to enter into the
contract. 2 5 On record, there is unrebutted testimony that Paulina as landowner was
nancially well off. She loaned money to several people. 2 6 We see no apparent and
compelling reason for her to sell the subject parcels of land with a house and warehouse
at a meager price of P850 only.
I n Rongavilla vs. CA, 294 SCRA 289 (1998), private respondents were in their
advanced years, and were not in dire need of money, except for a small amount of P2,000
which they said were loaned by petitioners for the repair of their house's roof. We ruled
against petitioners, and declared that there was no valid sale because of lack of
consideration.
In the present case, at the time of the execution of the alleged contract, Paulina
Rigonan was already of advanced age and senile. She died an octogenarian on March 20,
1966, barely over a year when the deed was allegedly executed on January 28, 1965, but
before copies of the deed were entered in the registry allegedly on May 16 and June 10,
1966. The general rule is that a person is not incompetent to contract merely because of
advanced years or by reason of physical in rmities. 2 7 However, when such age or
in rmities have impaired the mental faculties so as to prevent the person from properly,
intelligently, and rmly protecting her property rights then she is undeniably incapacitated.
The unrebutted testimony of Zosima Domingo shows that at the time of the alleged
execution of the deed, Paulina was already incapacitated physically and mentally. She
narrated that Paulina played with her waste and urinated in bed. Given these
circumstances, there is in our view su cient reason to seriously doubt that she consented
to the sale of and the price for her parcels of land. Moreover, there is no receipt to show
that said price was paid to and received by her. Thus, we are in agreement with the trial
court's finding and conclusion on the matter:
The whole evidence on record does not show clearly that the ctitious
P850.00 consideration was ever delivered to the vendor. Undisputably, the
P850.00 consideration for the nine (9) parcels of land including the house and
bodega is grossly and shockingly inadequate, and the sale is null and void ab
initio. 2 8
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WHEREFORE, the petition is GRANTED. The decision and resolution of the Court of
Appeals dated August 29, 1996 and December 11, 1996, respectively, are REVERSED and
SET ASIDE. The decision of the Regional Trial Court of Batac, Ilocos Norte, Branch 17,
dated March 23, 1994, is REINSTATED.
Costs against private respondents.
SO ORDERED.
Bellosillo, Mendoza, Buena and De Leon Jr., JJ., concur.
Footnotes
4. Rollo, p. 72.
5. Id. at 43-44.
6. Id. at 6-7.
7. Records, Civil Case No. 582-17, pp. 108-109.
9. Rollo, p. 22.
10. Ayco vs. Fernandez, 195 SCRA 328, 333 (1991).
11. Philippine Coconut Authority vs. Corona International, Inc., G.R. No. 139910, September
29, 2000, p. 8.
SYLLABUS
DECISION
PARAS J :
PARAS, p
On January 21, 1976, this Court declared as submitted for decision a case where
the principal issue was the validity of a compromise agreement (which subsequently
was embodied in a judgment by compromise) where the agreement was signed (on
behalf of one of the parties thereto) by a lawyer who did so without authorization of
said party or client. We hold that such a compromise agreement is merely
unenforceable 1 (not void) and may therefore be rati ed by said party expressly or
implicitly. 2
In the instant case (which has been brought to Us by certiorari assailing an Order
of the Court of First Instance of Tarlac in Civil Case No. 4912 entitled "Bumanlag et al. v.
Bumanlag, et al.") herein petitioners sued herein private respondents for partition of the
lots inherited by both parties from their deceased father; respondents however moved
to dismiss on the ground that some years before a nal and executory judgment
(based on a compromise agreement) involving the same parties, same subject matter,
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and same causes of action had already been rendered by a court of competent
jurisdiction and that therefore the doctrine of res judicata clearly bars the present case;
petitioners contend that said judgment is void because the compromise agreement
had been signed in their behalf by their lawyer who had not been authorized by them to
enter into such agreement, consequently there can be no res judicata.
As already intimated hereinabove, the compromise agreement is not void but
merely unenforceable. The petitioners by their silence for sixteen (16) years and by their
overt acts of exchanging or bartering some of the lots awarded to them with some of
the lots of the private respondents have doubtless rati ed the act of their attorney;
ergo, the requisites of res judicata being all present, the principle applies to the instant
case. prcd
One nal point. The argument that the partition in the rst case was not one with
metes and bounds is bankrupt. There was such a physical and actual partition, not
merely a metaphysical one.
WHEREFORE, this petition is DISMISSED, and the assailed Order is hereby
AFFIRMED, with costs against petitioners.
SO ORDERED.
Feria (Chairman), Fernan, Alampay and Gutierrez, Jr., JJ., concur.
Footnotes
SYLLABUS
DECISION
QUIASON J :
QUIASON, p
This is a petition for review on certiorari under Rule 45 of the Revised Rules of
Court of the Decision dated December 27, 1991 and the Resolution dated February 11,
1992 of the Court of Appeals in CA-G.R. SP No. 24683.
I
On October 10, 1987, petitioners executed a Deed of Sale with Right to
Repurchase in favor of private respondents, involving a residential house located at No.
346 Algeciras St., Sampaloc, Manila. Due to serious nancial and business reverses,
petitioners were not able to redeem the property within four months as agreed upon. LexLib
On October 24, 1989, private respondents led a complaint for ejectment in the
Metropolitan Trial Court of the City of Manila, docketed as Civil Case No. 130352-CV
against petitioners.
On December 27, 1989, the parties, assisted by their counsels, executed a
compromise agreement. In an order dated March 15, 1990, the Metropolitan Trial Court
approved the compromise agreement. The order reproduced the agreement as follows:
"1. That defendants [petitioners herein] agree to pay plaintiffs [private
respondents herein] in the amounts and on the dates speci cally indicated herein
below:
a. P50,000.00 on Jan. 31, 1990;
"2. That failure on the part of the defendants to pay three (3)
consecutive payments, plaintiffs will be entitled to a writ of execution, unless the
parties agree to extend the period of entitlement to a writ of execution in writing to
be submitted and/or approved by this Honorable Court; . . ." (Rollo, p. 53).
On April 15, 1990, private respondents led a motion for execution on the ground
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that petitioner's failed to pay the rst three installments stipulated in the compromise
agreement, to wit: P50,000.00 on January 31, 1990; P10,000.00 on February 28, 1990;
and P10,000.00 on March 31, 1990.
On April 6, 1990, petitioners led an "Urgent Ex-Parte Motion for Reconsideration
and/or Correct Order of this Court" calling attention to a typographical error in the
Order dated March 15, 1990, and asking that the amount of P10,000.00 payable on
September 30, 1990 be corrected and changed to the agreed amount of P5,000.00. Cdpr
On April 25, 1990, the Metropolitan Trial Court issued an order granting the
motion for correction of the typographical error in the decision.
On August, 17, 1990, petitioners led an ex-parte motion asking that the check
payment previously deposited by them with the court, be accepted and be given to
respondents in compliance with their compromise agreement.
On August 23, 1990, respondents opposed petitioners' ex-parte motion and
stated that they would not renew the compromise agreement with petitioners.
The Metropolitan Trial Court denied private respondents' motion for execution
dated April 15, 1990 and another similar motion dated June 26, 1990.
On October 12, 1990, respondents led a petition for mandamus with us (G.R.
No. 95470). In a resolution dated November 5, 1990, we referred the case to the
Executive Judge of the Regional Trial Court, Manila. Petitioners moved to dismiss the
petition for mandamus.
On March 14, 1991, the Regional Trial Court denied the motion to dismiss and
issued the assailed resolution commanding the Metropolitan Trial Court to issue a writ
of execution of the decision approving the compromise agreement in Civil Case No.
130352-CV.
In compliance with the said resolution, the Metropolitan Trial Court issued an
order dated March 27, 1991 directing the issuance of a writ of execution to enforce the
compromise agreement entered into by the parties.
On April 11, 1991, a "Sheriffs' Notice to Voluntarily Vacate the Premises" was
served on petitioner.
Petitioners then led a petition for certiorari with a prayer for the issuance of a
temporary restraining order and a writ of injunction with the Court of Appeals (CA-G.R.
SP No. 24683). llcd
On December 27, 1991, the Court of Appeals dismissed the petition. Likewise,
the said court denied the motion for reconsideration filed by petitioner.
II
Petitioners contend that both the Regional Trial Court and Metropolitan Trial
Court acted with grave abuse of discretion, the former in issuing a resolution directing
the Metropolitan Trial Court to issue a writ of execution against petitioners herein, and
the latter, in issuing said writ of execution.
III
A compromise agreement is a contract between the parties, which if not contrary
to law, morals or public policy, is valid and enforceable between them ( Municipal Board
of Cabanatuan City v. Samahang Magsasaka, Inc., 62 SCRA 435 [1975]). There are two
kinds of compromise agreements, the judicial, which puts an end to a pending litigation,
and the extrajudicial, which is to avoid a litigation (Civil Code of the Philippines, Art.
2028; Caguioa, VI Commentaries and Cases on Civil Law 292 [1970]).
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As a contract, a compromise agreement is perfected by mutual consent (Rovero
v. Amparo, 91 Phil. 228 [1952]). A judicial compromise, however, while binding between
the parties upon its execution, is not executory until it is approved by the court and
reduced to a judgment.
Article 2037 of the Civil Code of the Philippines provides:
"A compromise has upon the parties the effect and authority of res
judicata but there shall be no execution except in compliance with a judicial
compromise."
Real property, stocks, shares, debts, credits, and other personal property, or
any interest in either real or personal property, may be levied on in like manner
and with like effect as under a writ of attachment."
SO ORDERED.
Padilla, Davide, Jr ., Bellosillo and Kapunan, JJ., concur.
SYLLABUS
DECISION
BAUTISTA ANGELO , J : p
In 1941, shortly before the outbreak of the war, the Red Star Stores, Inc. was
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indebted to the National City Bank of New York, Manila Branch, hereinafter called the
Bank, in the amount of $19,956.75 representing certain import bills purchased by said
Bank. This obligation was guaranteed by Ernest Berg, hereinafter referred to as plaintiff,
and by his brother, Alfred Berg. During the Japanese occupation, the Bank of Taiwan
required the Red Star Stores, Inc. to liquidate its obligation and, accordingly, plaintiff
paid the same in full.
After liberation, the Bank reopened and established a department to revise all
prewar accounts and take such steps as may be necessary to recover them. This
department sent a letter to the Red Star Stores, Inc. requesting it to indicate the steps it
wanted to take to liquidate its prewar obligation. On November 1, 1945, plaintiff
contacted the o cials of the Bank telling them that he had already settled the account
with the Bank of Taiwan during the Japanese occupation, but said o cials intimated
that they could not regard such payment as discharging the obligation and requested
that it be paid. Plaintiff acknowledged his indebtedness and agreed to pay the same
but stated that he desired to consult rst his lawyers as to the possible effect of the
cases then pending on the validity of wartime payments in Japanese military notes.
Subsequently, on February 1, 1946, plaintiff informed the Bank that he was willing to
compromise his case by paying the indebtedness provided the Bank forego its claim as
to interest. This offer was approved and on February 15, 1946, plaintiff signed an
acknowledgment of the debt and an agreement relative to its liquidation (Exhibit I). On
March 23, 1946, plaintiff informed the Bank that, as the sale of his real property had
been delayed, he would not be able to make payment as agreed upon, but that, in the
meantime, he would execute a note and a pledge placing as security the 3,300 shares
of Filipinas Compañia de Seguros registered in his name. This was done and the
agreement was subsequently executed.
On March 12, 1946, the Court of First Instance of Manila decided the case of
Haw Pia vs. China Banking Corporation holding that payments made in Japanese
military currency to the Bank of Taiwan did not operate to discharge the obligations,
but on April 9, 1948, the decision was reversed by the Supreme Court holding said
payments to be valid (G. R. No. L-554) * . On June 22, 1946, having been advised that his
note was falling due, plaintiff made a partial payment of P4,913.50 and was given an
extension of 30 days to pay the balance. On July 21, 1946, a second notice was given
plaintiff for the payment of the balance, and on July 31, plaintiff sent a letter authorizing
the Bank to sell the shares he had pledged to secure his debt and to deposit the
balance, if any, in his personal account. This was done thereby liquidating the account
of plaintiff.
On September 27, 1948, plaintiff demanded from the Bank the repayment of the
money paid by him relying on the decision of the Supreme Court in the Haw Pia case.
The Bank replied that the case of the plaintiff had been compromised and can no longer
be reopened. Whereupon on April 13, 1949, plaintiff commenced the present action to
recover the amount paid, plus the sum of P33,000 as damages.
In his complaint, plaintiff alleged that notwithstanding the fact that he had
already paid his debt to the Bank of Taiwan, defendant, by the use of deceit, fraud,
threat and intimidation still forced him to compromise his case as a result of which
defendant sold his 3,300 shares of the Filipinas Compañia de Seguros and retained the
sum of P35,172.62 to pay the debt he had already paid to the Bank of Taiwan.
Defendant, in turn, denied the charge and alleged that plaintiff paid the sum of
P35,172.62 as a result of a compromise entered into for good and valuable
consideration. And on May 29, 1950, the court rendered judgment ordering defendant
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to pay to plaintiff said amount of P35,172.62, with legal interest from August 6, 1946,
plus the costs of action. No action was taken on the claim for damages. In due time,
both parties appealed from the decision, plaintiff insofar as the court ignored his claim
for damages, and defendant because of the adversed ruling rendered against it.
In holding that the second payment made by plaintiff to defendant of the old
indebtedness was improperly made and as a consequence the money paid should be
returned in view of the decision of the Supreme Court in the Haw Pia case, the trial court
made the following comments:
"There is not much to be discussed in this case. Was the payment made by
the plaintiff during the Japanese Administration valid? If it was valid, as the Court
believes it to be, then the obligation of the Red Store Co., Inc., was no longer
existing at the time the plaintiff made the second payment. If there was no more
obligation to pay, then the demand made by the plaintiff for the payment of the
obligation of the 'Red Stores Co., Inc.,' was illegal. Either from the standpoint of
the plaintiff or from the standpoint of the defendant, the second payment was
most unjustified. If payment was made because of duress, threats, or
intimidation, plaintiff is entitled to the recovery of the amount he paid. If payment
was made willingly and voluntarily in the belief that there was still an obligation
to be paid, equity and justice demand the return of the second payment for the
reason that there was no more obligation to be paid."
Under ordinary circumstances, the above ruling of the court would be correct for
indeed under Article 1895 of the old Civil Code, "If a thing is received where there was
no right to claim it, and which through an error has been unduly delivered, an obligation
to restore the same arises", and apparently here we have a duplication of payment. But
in the present case the situation is different, for here we nd that plaintiff and
defendant had entered into a compromise whereby the formed agreed to pay his
indebtedness provided the latter forego the payment of the interest, and this
compromise was arrived at when there was still uncertainty as to the validity of the
payments made to the Bank of Taiwan of prewar obligations. Thus, on February 15,
1946, as a result of the negotiations had between plaintiff and defendant, the latter sent
to the former a letter of the following tenor:
Manila
It is true that plaintiff claims that the agreement was forced upon him through
deceit, fraud, threat or intimidation, but the trial court did not predicate its decision on
any of said grounds. Apparently, the trial court was of the belief that a compromise can
only be effected if the claim to be settled was enforceable, which is not correct, for, as
a rule, a compromise is entered into not because it settles a valid claim but because it
settles a controversy between the parties. And here there was a real compromise when
defendant waived the payment of interest amounting to over $4,000.
"'The compromise of any matter is valid and binding, not because it is the
settlement of a valid claim, but because it is the settlement of a controversy.'
(Page 877.)
'In order to effect a compromise there must be a definite proposition and
an acceptance. As a question of law it does not matter from whom the
proposition of settlement comes; if one is made and accepted, it constitutes a
contract, and in the absence of fraud it is binding on both parties.' (Page 879.)
'Hence it is a general rule in this country, that compromises are to be
favored, without regard to the nature of the controversy compromised, and that
they cannot be set aside because the event shows all the gain to have been on
one side, and all the sacrifice on the other, if the parties have acted in good faith,
and with a belief of the actual existence of the rights which they have respectively
waived or abandoned; and if a settlement be made in regard to such subject, free
from fraud or mistake, whereby there is a surrender or satisfaction, in whole or in
part, of a claim upon one side in exchange for or in consideration of a surrender
or satisfaction of a claim in whole or in part, or of something of value, upon the
other, however baseless may be the claim upon either side or harsh the terms as
to either of the parties, the other cannot successfully impeach the agreement in a
court of justice . . .. Where the compromise is instituted and carried through in
good faith, the fact that there was a mistake as to the law or as to the facts,
except in certain cases where the mistake was mutual and correctable as such in
equity, cannot afford a basis for setting a compromise aside or defending against
a suit brought thereon . . .. Furthermore, and as following the rule stated, a
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compromise of conflicting claims asserted in good faith will not be disturbed
because by a subsequent judicial decision in an analogous case it appears that
one party had no rights to forego.' (Pages 883, 884.)" (McCarthy vs. Barber
Steamship Lines, 45 Phil., 488, 498-499)
But plaintiff insists that the compromise is null and void as the same has been
extorted from him by the o cials of the Bank through deceit, fraud and intimidation. In
this respect, counsel for defendant says: "Mr. Berg claims that the compromise
agreement was secured from him by deceit, fraud and unlawful action by the bank. The
bank is referred to as an extortionist, and as a blackmailer, as being guilty of making
illegal demands, of coercing Mr. Berg, of resorting to misrepresentation, illegal
distortion, deceit and insidious machinations. Its acts are likened to those of a tra c
policeman soliciting a bribe, on one hand, and to a highwayman extracting money from
a wayfarer at the point of a gun, on the other. Mr. Berg's counsel states that Mr. Berg
was compelled to settle because of fear for his life, of life imprisonment or a heavy ne,
and fear of nancial ruin, the implication being that the bank would cause these dire
contingencies should Mr. Berg not pay the sums demanded" (p. 4, Defendant's
Memorandum).
But these imputations only nd support in the testimony of plaintiff which were
denied by the o cials of the Bank. In fact, they have not been substantiated. What
plaintiff in effect wanted to convey is that the o cials of the Bank intimidated to him
that unless the account is settled, the Bank would bring an action against him or
against his brother, Alfred Berg; that it would not extend any further credit facilities to
him or his business enterprises; and that it would make use of its in uence to prevent
him from engaging in business in the Philippines. The question then that arises is: Do
these threats constitute duress under the law?
With regard to the rst charge, we see nothing improper. It is a practice followed
not only by banks but even by individuals to demand payment of their accounts with the
threat that upon failure to do so an action would be instituted in court. Such a threat is
proper within the realm of the law as a means to enforce collection. Such a threat
cannot constitute duress even if the claim proves to be unfounded so long as the
creditor believes that it was his right to do so. This charge has no legal basis.
"One element of the early law of duress continues to exist, however its
boundaries may be otherwise extended. The pressure must be wrongful, and not
all pressure is wrongful. The law provides certain means for the enforcement of
their claims by creditors. It is not duress to threaten to take these means.
Therefore, a threat to bring a civil action or to resort to remedies given by the
contract is not such duress as to justify recission of a transaction induced
thereby, even though there is no legal right to enforce the claim, provided the
threat is made in good faith; that is, in the belief that a possible cause of action
exists. But, if the threat is made with the consciousness that there is no real right
of action and the purpose is coercion, a payment or contract induced thereby is
voidable. In the former case, it may be said that the threatened action was
rightful; in the letter case, it was not." (Section 1606, Williston on Contracts, Vol. V,
pp. 4500-4502.)
Plaintiff also contends that the Bank had intimated that it would not extend to
him or his enterprise further credit facilities unless he settles the former debt of the
Red Star Stores, Inc. Even if this were true, the same cannot constitute duress that
might invalidate the settlement, for there is nothing improper for a bank to decline
further credit to any person or entity as a means to enforce the collection of its
accounts if such is necessary to protect its investment. In fact, such is the practice
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followed by most banking institutions for it goes a long way in the determination of the
paying capacity of those who deal with them. Moreover, the banking business in the
Philippines is extremely competitive. There are other banks that are opened for
business whose facilities plaintiff may avail of in case the threat is carried out and if
plaintiff is a good business risk he could certainly nd accommodation in any one of
them if he so desires. The fact that plaintiff was then under indictment for treason does
not change the situation. This is rather a further reason for defendant to adopt a more
stringent measure against plaintiff because of the belief, grounded or otherwise, that
the collection of the account might be frustrated. Such circumstance should not be
considered as a desire on the part of defendant to harrass or aggravate the alleged
political or financial difficulties of plaintiff.
Plaintiff likewise contends that the o cials of the Bank have threatened him with
reprisals in the sense that unless he settles his account they would make use of their
in uence to prevent him from engaging in business in the Philippines. Not only is this
claim inherently untenable but it was atly denied by the o cials of the Bank. Certainly,
plaintiff has not been able to indicate in what manner does defendant or its o cials
expect to carry out the threat imputed to them.
All things considered, we find the charges of plaintiff unfounded. And considering
that, under our law, intimidation can only exist "when one of the contracting parties is
inspired with a reasonable and well-grounded fear of suffering an imminent and serious
injury to his person or property" (Article 1267, old Civil Code), we are persuaded to
conclude that the compromise in question has been entered into voluntarily and, as
such, is valid and binding.
Having reached this conclusion, we nd it unnecessary to discuss the appeal
taken by plaintiff-appellant.
Wherefore, the decision appealed from is reversed, with out pronouncement as
to costs.
Paras, C. J., Bengzon, Padilla, Montemayor, Reyes, A., Labrador, Concepcion,
Reyes, J. B. L., Endencia and Felix, JJ., concur.
Footnotes
DECISION
DEL CASTILLO , J : p
This Petition for Review on Certiorari 1 assails the Court of Appeals' August 28,
2012 Decision 2 and January 25, 2013 Resolution 3 denying herein petitioner Conchita
A. Sonley's Urgent Motion for Reconsideration 4 in CA-G.R. SP No. 122409.
Factual Antecedents
The facts, as succinctly narrated by the Court of Appeals (CA), are as follows:
The instant case arose when, on March 13, 2009, the petitioner 5 led a
Complaint 6 for declaration of nullity of rescission of contract and damages in
the trial court 7 against . . . Anchor Savings Bank ("Anchor"), a thrift banking
institution organized and existing under the laws of the Philippines [whose]
business name . . . was [later] changed to Equicom Savings Bank . . .
In the said complaint, petitioner alleged that, on January 28, 2005, she
agreed to purchase a real property from [Anchor] for the sum of . . .
Php2,200,000.00 . . . . The said real property pertained to a parcel of land that
had been foreclosed by [Anchor] with an area of . . . 126.50 square meters . . .
located at Fairview, Quezon City ("subject property"). Pursuant to the said
agreement, the parties entered into a Contract to Sell 8 whereby the petitioner
agreed to pay the amount of . . . Php200,000.00 . . . as downpayment . . . with
the balance of . . . Php2,000,000.00 . . . payable in sixty (60) monthly
installments amounting to . . . Php47,580.00 . . . .
Petitioner, however, defaulted in paying her monthly obligations . . .
which prompted [Anchor] to rescind the contract to sell . . . . In ling the
complaint . . . petitioner averred that the rescission of the contract to sell was
null and void because she had already substantially paid her obligation to the
bank.
In its Answer[,] 9 [Anchor] denied the allegations that were made by the
petitioner in her complaint. On the contrary, it contended that the post-dated
checks which were issued by the petitioner in its favor covering the monthly
installments for the purchase of the subject property were all dishonored by the
drawee bank when they were presented for payment. Thus, [Anchor] averred that
petitioner should not be allowed to bene t from her own fault and prevent
[Anchor] from exercising its right to rescind their contract to sell.
EATCcI
Subsequently, after the issuance of a Pre-Trial Order by the trial court, the
parties agreed to an amicable settlement and entered into a Compromise
Agreement. 10 On the basis thereof, the trial court rendered a Judgment 11 . . .
on August 16, 2010 whereby the petitioner agreed to repurchase the subject
property from [Anchor] for the amount of . . . Php1,469,460.66 . . . plus . . . 12% .
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. . interest per annum.
However, [Anchor] later on filed a Manifestation and Motion for Execution
12 in the trial court claiming that petitioner had not been paying the agreed
monthly installments in accordance with the compromise agreement. Moreover,
it averred that all the checks which the petitioner issued to pay her obligations
were again dishonored. Thus, [Anchor] prayed that a writ of execution be issued
by the trial court in its favor ordering. (1) that the contract to sell that was
entered into between the parties be rescinded; (2) that [Anchor] be allowed to
apply all the payments that were made to it by the petitioner as rentals; and (3)
that petitioner immediately vacate the subject property.
Consequently, on September 8, 2011, the trial court issued the assailed
order 13 the dispositive portion of which states:
'WHEREFORE, premises considered, the 'Manifestation and
Motion for Execution' is hereby GRANTED.
Consequently, the Judgment dated August 16, 2010 should
be entered in the Book of Entries of Judgment as nal and
executory. Accordingly, let a writ of execution be issued and the
Deputy Sheriff of this Court is hereby ordered to implement the
same.
SO ORDERED.'
In arriving at the said ruling, the trial court ratiocinated as follows:
'In view of the foregoing and for failure of the plaintiff to
comply with the terms and conditions of the Compromise
Agreement and since said Judgment itself provides that the same
shall be immediately nal and executory, the Decision dated
August 16, 2010 is hereby reiterated as nal and executory and
should now be entered in the Book of Entries and Judgment.
Accordingly, a writ of execution should now be issued to
implement the aforesaid Judgment in consonance with the
Compromise Agreement and in line with Rule 39 Section 1 of the
Rules of Court, to wit:
'Section 1. Execution upon judgments or nal orders.
— Execution shall issue as a matter of right, on motion,
upon a judgment or order that disposes of the action or
proceeding upon the expiration of the period to appeal
therefrom if no appeal has been duly perfected.' 14
Ruling of the Court of Appeals
Petitioner led a Petition for Certiorari before the CA, docketed as CA-G.R. SP
No. 122409, claiming that the trial court committed grave abuse of discretion in issuing
a writ of execution, since there is nothing in the trial court's August 16, 2010 judgment
which authorizes the issuance of such a writ in case the parties fail to perform the
obligations stated under the Compromise Agreement. DHITCc
In its assailed August 28, 2012 Decision, however, the CA ruled against the
petitioner, pronouncing thus:
In sum, the sole issue to be resolved by us in this case is whether or not
the trial court may issue a writ of execution against the petitioner despite the
fact that the issuance thereof was not speci cally provided for in the judgment
which it rendered based on compromise agreement. After a careful and
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judicious scrutiny of the whole matter, together with the applicable laws and
jurisprudence in the premises, we find the instant petition to be bereft of merit.
A compromise is a contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one already commenced. Like
any other contract, a compromise agreement must comply with the requisites in
Article 1318 of the Civil Code, to wit: (a) consent of the contracting parties; (b)
object certain that is the subject matter of the contract; and (c) cause of the
obligation that is established. Like any other contract, the terms and conditions
of a compromise agreement must not be contrary to law, morals, good customs,
public policy and public order. . . .
Corollary thereto, once submitted to the court and stamped with judicial
approval, a compromise agreement becomes more than a mere private contract
binding upon the parties. Having the sanction of the court and entered as its
determination of the controversy, it has the force and effect of any judgment.
In the case at bench, the petitioner pointed out that the issuance of a writ
of execution was not warranted and had no legal basis under the judgment
based on compromise agreement that was rendered by the trial court. In support
of her argument, petitioner relied on paragraph (c) of the said agreement which
provides as follows:
'(c) Penalty. In case of failure of the plaintiff to pay, for any
reason whatsoever, the amount provided in the Schedule of
Payment, the plaintiff hereby agrees to pay, in addition to, and
separate from, the interest rate agreed upon, a penalty charge of
FIVE PERCENT (5%) per month or a fraction thereof, based on
unpaid installments computed from due date until fully paid. This
shall be without prejudice to the right of the defendant to rescind
this Compromise Agreement as provided under the 'Contract to
Sell' dated 21 December 2007 upon compliance with the
requirements provided for under the law.'
Petitioner insisted that, pursuant to the foregoing stipulation, [Anchor]
was only entitled to an additional penalty charge of ve percent (5%) per month
in case she failed to pay her monthly obligations. Thus, she posited that the trial
court committed grave abuse of discretion when it issued a writ of execution
against her when she defaulted in her payment because the terms of their
compromise agreement did not provide for the said remedy. cEaSHC
Petitioner's Arguments
Praying that the assailed CA dispositions be voided, reversed, and set aside,
petitioner argues that respondent is not entitled to execution as the Compromise
Agreement does not speci cally provide that in case of default, a writ of execution may
issue; that the only remedies available to respondent are to charge penalties and/or
rescind the agreement as provided for under the Contract to Sell; and that before a writ
of execution may issue, respondent must rst institute an action for rescission and
secure a judicial declaration that the Contract to Sell is rescinded, which was not done
in this case.
Respondent's Arguments
In its Comment, 17 respondent counters that since petitioner admits that she is in
default and thus violated the terms of the Compromise Agreement, rescission should
follow as a matter of course as authorized and provided for in said agreement and the
Contract to Sell; that the trial court's approval of the Compromise Agreement is a nal
act that forms part and parcel of the judgment which may be enforced by a writ of
execution; 18 that since the Compromise Agreement itself provides the power to
rescind, it follows that any rescission done pursuant thereto is enforceable by
execution without need of a separate action; and that since petitioner failed to prove
the presence of grave abuse of discretion, the CA is correct in dismissing her Petition
for Certiorari.
Our Ruling
The Petition must be denied.
Under Article 2041 of the Civil Code, "(i)f one of the parties fails or refuses to
abide by the compromise, the other party may either enforce the compromise or regard
it as rescinded and insist upon his original demand." "The language of this Article 2041 .
. . denotes that no action for rescission is required . . ., and that the party aggrieved by
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the breach of a compromise agreement may, if he chooses, bring the suit contemplated
or involved in his original demand, as if there had never been any compromise
agreement, without bringing an action for rescission thereof. He need not seek a
judicial declaration of rescission, for he may 'regard' the compromise agreement
already 'rescinded.'" 19 This principle was reiterated in a subsequent case, thus:
In the case of Leonor v. Sycip , the Supreme Court (SC) had the occasion
to explain this provision of law. It ruled that Article 2041 does not require an
action for rescission, and the aggrieved party, by the breach of compromise
agreement, may just consider it already rescinded, to wit: cHECAS
* On leave.
DECISION
REYES J :
REYES, p
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court. Petitioner Crisanta Alcaraz Miguel (Miguel) seeks the reversal and setting aside of
the September 17, 2009 Decision 1 and February 11, 2010 Resolution 2 of the Court of
Appeals (CA) in CA-G.R. SP No. 100544, entitled "Jerry D. Montanez v. Crisanta Alcaraz
Miguel."
Antecedent Facts
On February 1, 2001, respondent Jerry Montanez (Montanez) secured a loan of One
Hundred Forty-Three Thousand Eight Hundred Sixty-Four Pesos (P143,864.00), payable in
one (1) year, or until February 1, 2002, from the petitioner. The respondent gave as
collateral therefor his house and lot located at Block 39 Lot 39 Phase 3, Palmera Spring,
Bagumbong, Caloocan City.
Due to the respondent's failure to pay the loan, the petitioner led a complaint
against the respondent before the Lupong Tagapamayapa o f Barangay San Jose,
Rodriguez, Rizal. The parties entered into a Kasunduang Pag-aayos wherein the respondent
agreed to pay his loan in installments in the amount of Two Thousand Pesos (P2,000.00)
per month, and in the event the house and lot given as collateral is sold, the respondent
would settle the balance of the loan in full. However, the respondent still failed to pay, and
on December 13, 2004, the Lupong Tagapamayapa issued a certi cation to le action in
court in favor of the petitioner.
On April 7, 2005, the petitioner led before the Metropolitan Trial Court (MeTC) of
Makati City, Branch 66, a complaint for Collection of Sum of Money. In his Answer with
Counterclaim, 3 the respondent raised the defense of improper venue considering that the
petitioner was a resident of Bagumbong, Caloocan City while he lived in San Mateo, Rizal.
After trial, on August 16, 2006, the MeTC rendered a Decision, 4 which disposes as
follows:
WHEREFORE,
WHEREFORE premises considered[,] judgment is hereby rendered
ordering defendant Jerry D. Montanez to pay plaintiff the following:
On appeal to the Regional Trial Court (RTC) of Makati City, Branch 146, the
respondent raised the same issues cited in his Answer. In its March 14, 2007 Decision, 6
the RTC affirmed the MeTC Decision, disposing as follows:
WHEREFORE, nding no cogent reason to disturb the ndings of the court
a quo, the appeal is hereby DISMISSED, and the DECISION appealed from is
hereby AFFIRMED in its entirety for being in accordance with law and evidence.
SO ORDERED. 7
Dissatis ed, the respondent appealed to the CA raising two issues, namely, (1)
whether or not venue was improperly laid, and (2) whether or not the Kasunduang Pag-
aayos effectively novated the loan agreement. On September 17, 2009, the CA rendered
the assailed Decision, disposing as follows:
WHEREFORE,
WHEREFORE premises considered, the petition is hereby GRANTED . The
appealed Decision dated March 14, 2007 of the Regional Trial Court (RTC) of
Makati City, Branch 146, is REVERSED and SET ASIDE.
ASIDE A new judgment is
entered dismissing respondent's complaint for collection of sum of money,
without prejudice to her right to le the necessary action to enforce the
Kasunduang Pag-aayos.
SO ORDERED . 8
Anent the issue of whether or not there is novation of the loan contract, the CA ruled
in the negative. It ratiocinated as follows:
Judging from the terms of the Kasunduang Pag-aayos, it is clear that no
novation of the old obligation has taken place. Contrary to petitioner's assertion,
there was no reduction of the term or period originally stipulated. The original
period in the rst agreement is one (1) year to be counted from February 1, 2001,
or until January 31, 2002. When the complaint was led before the barangay on
February 2003, the period of the original agreement had long expired without
compliance on the part of petitioner. Hence, there was nothing to reduce or
extend. There was only a change in the terms of payment which is not
incompatible with the old agreement. In other words, the Kasunduang Pag-aayos
merely supplemented the old agreement. 9
The CA went on saying that since the parties entered into a Kasunduang Pag-aayos
before the Lupon ng Barangay, such settlement has the force and effect of a court
judgment, which may be enforced by execution within six (6) months from the date of
settlement by the Lupon ng Barangay, or by court action after the lapse of such time. 1 0
Considering that more than six (6) months had elapsed from the date of settlement, the
CA ruled that the remedy of the petitioner was to le an action for the execution of the
Kasunduang Pag-aayos in court and not for collection of sum of money. 1 1 Consequently,
the CA deemed it unnecessary to resolve the issue on venue. 1 2
The petitioner now comes to this Court.
Issues
(1) Whether or not a complaint for sum of money is the proper remedy for the
petitioner, notwithstanding the Kasunduang Pag-aayos; 1 3 and
Being a by-product of mutual concessions and good faith of the parties, an amicable
settlement has the force and effect of res judicata even if not judicially approved. 1 7 It
transcends being a mere contract binding only upon the parties thereto, and is akin to a
judgment that is subject to execution in accordance with the Rules. 1 8 Thus, under Section
417 of the Local Government Code, 1 9 such amicable settlement or arbitration award may
be enforced by execution by the Barangay Lupon within six (6) months from the date of
settlement, or by ling an action to enforce such settlement in the appropriate city or
municipal court, if beyond the six-month period.
Under the rst remedy, the proceedings are covered by the Local Government Code
and the Katarungang Pambarangay Implementing Rules and Regulations. The Punong
Barangay is called upon during the hearing to determine solely the fact of non-compliance
of the terms of the settlement and to give the defaulting party another chance at
voluntarily complying with his obligation under the settlement. Under the second remedy,
the proceedings are governed by the Rules of Court, as amended. The cause of action is
the amicable settlement itself, which, by operation of law, has the force and effect of a final
judgment. 2 0
It must be emphasized, however, that enforcement by execution of the amicable
settlement, either under the rst or the second remedy, is only applicable if the contracting
parties have not repudiated such settlement within ten (10) days from the date thereof in
accordance with Section 416 of the Local Government Code. If the amicable settlement is
repudiated by one party, either expressly or impliedly, the other party has two options,
namely, to enforce the compromise in accordance with the Local Government Code or
Rules of Court as the case may be, or to consider it rescinded and insist upon his original
demand. This is in accord with Article 2041 of the Civil Code, which quali es the broad
application of Article 2037, viz.:
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If one of the parties fails or refuses to abide by the compromise, the other
party may either enforce the compromise or regard it as rescinded and insist upon
his original demand.
In the case of Leonor v. Sycip, 2 1 the Supreme Court (SC) had the occasion to explain
this provision of law. It ruled that Article 2041 does not require an action for rescission,
and the aggrieved party, by the breach of compromise agreement, may just consider it
already rescinded, to wit:
It is worthy of notice, in this connection, that, unlike Article 2039 of the
same Code, which speaks of "a cause of annulment or rescission of the
compromise" and provides that "the compromise may be annulled or rescinded"
for the cause therein speci ed, thus suggesting an action for annulment or
rescission, said Article 2041 confers upon the party concerned, not a "cause" for
rescission, or the right to "demand" the rescission of a compromise, but the
authority, not only to "regard it as rescinded", but, also, to "insist upon his original
demand". The language of this Article 2041, particularly when contrasted
with that of Article 2039, denotes that no action for rescission is
required in said Article 2041, and that the party aggrieved by the breach
of a compromise agreement may, if he chooses, bring the suit
contemplated or involved in his original demand, as if there had never
been any compromise agreement, without bringing an action for
rescission thereof. He need not seek a judicial declaration of rescission,
for he may "regard" the compromise agreement already "rescinded". "rescinded". 2 2
(emphasis supplied)
In the instant case, the respondent did not comply with the terms and conditions of
the Kasunduang Pag-aayos. Such non-compliance may be construed as repudiation
because it denotes that the respondent did not intend to be bound by the terms thereof,
thereby negating the very purpose for which it was executed. Perforce, the petitioner has
the option either to enforce the Kasunduang Pag-aayos, or to regard it as rescinded and
insist upon his original demand, in accordance with the provision of Article 2041 of the
Civil Code. Having instituted an action for collection of sum of money, the petitioner
obviously chose to rescind the Kasunduang Pag-aayos. As such, it is error on the part of
the CA to rule that enforcement by execution of said agreement is the appropriate remedy
under the circumstances.
Considering that the Kasunduang Pag-aayos is deemed rescinded by the non-
compliance of the respondent of the terms thereof, remanding the case to
the trial court for the enforcement of said agreement is clearly unwarranted.
The petitioner avers that the CA erred in remanding the case to the trial court for the
enforcement of the Kasunduang Pag-aayos as it prolonged the process, "thereby putting
off the case in an inde nite pendency." 2 5 Thus, the petitioner insists that she should be
allowed to ventilate her rights before this Court and not to repeat the same proceedings
just to comply with the enforcement of the Kasunduang Pag-aayos, in order to nally
enforce her right to payment. 2 6
The CA took off on the wrong premise that enforcement of the Kasunduang Pag-
aayos is the proper remedy, and therefore erred in its conclusion that the case should be
remanded to the trial court. The fact that the petitioner opted to rescind the Kasunduang
Pag-aayos means that she is insisting upon the undertaking of the respondent under the
original loan contract. Thus, the CA should have decided the case on the merits, as an
appeal before it, and not prolong the determination of the issues by remanding it to the
trial court. Pertinently, evidence abounds that the respondent has failed to comply with his
loan obligation. In fact, the Kasunduang Pag-aayos is the well nigh incontrovertible proof
of the respondent's indebtedness with the petitioner as it was executed precisely to give
the respondent a second chance to make good on his undertaking. And since the
respondent still reneged in paying his indebtedness, justice demands that he must be held
answerable therefor.
WHEREFORE , the petition is GRANTED.
GRANTED The assailed decision of the Court of
Appeals is SET ASIDE and the Decision of the Regional Trial Court, Branch 146, Makati
City, dated March 14, 2007 is REINSTATED.
REINSTATED
SO ORDERED.
Carpio, Perez, Sereno and Perlas-Bernabe, * JJ., concur.
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THIRD DIVISION
DECISION
AUSTRIA-MARTINEZ J :
AUSTRIA-MARTINEZ, p
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court assailing the Decision 1 dated August 30, 2002 promulgated by the Court of Appeals
(CA) in CA-G.R. SP No. 69689, which a rmed the Judgment on Compromise Agreement
dated January 2, 2002 of the Regional Trial Court (RTC), Branch 3, Nabunturan, Compostela
Valley, and the RTC Orders dated January 21, 2002 and February 7, 2002 (ORDERS) in Civil
Case No. 656.
The facts of the case, as found by the CA, are as follows:
Herein petitioner and herein private respondent are spouses who once had
a blissful married life and out of which were blessed to have a son. However, their
once sugar coated romance turned bitter when petitioner discovered that private
respondent was having illicit sexual affair with her paramour, which thus,
prompted the petitioner to le a case of adultery against private respondent and
the latter's paramour. Consequently, both the private respondent and her
paramour were convicted of the crime charged and were sentenced to suffer an
imprisonment ranging from one (1) year, eight (8) months, minimum of prision
correccional as minimum penalty, to three (3) years, six (6) months and twenty
one (21) days, medium of prision correccional as maximum penalty.
Thereafter, private respondent, through counsel, led a Petition for
Declaration of Nullity of Marriage, Dissolution and Liquidation of Conjugal
Partnership of Gains and Damages on June 15, 2001 with the Regional Trial
Court, Branch 3 of Nabunturan, Compostela Valley, docketed as Civil Case No.
656, imputing psychological incapacity on the part of the petitioner. TCDHaE
During the pre-trial of the said case, petitioner and private respondent
entered into a COMPROMISE AGREEMENT in the following terms, to wit:
d. The passenger jeep shall be for the plaintiff who shall pay
the defendant the sum of P75,000.00 as his share thereon
and in full settlement thereof;
The respondent Judge in the assailed Order dated January 21, 2002,
2002
denied the aforementioned Omnibus Motion.
The petitioner filed a Petition for Certiorari and Prohibition with the CA under Rule 65
of the Rules of Court claiming that the RTC committed grave error and abuse of discretion
amounting to lack or excess of jurisdiction (1) in upholding the validity of the Compromise
Agreement dated January 11, 2002; (2) when it held in its Order dated February 7, 2002
that the Compromise Agreement was made within the cooling-off period; (3) when it
denied petitioner's Motion to Repudiate Compromise Agreement and to Reconsider Its
Judgment on Compromise Agreement; and (4) when it conducted the proceedings without
the appearance and participation of the O ce of the Solicitor General and/or the
Provincial Prosecutor. 4
On August 30, 2002, the CA dismissed the Petition for lack of merit. The CA held
that the conviction of the respondent of the crime of adultery does not ipso facto
disqualify her from sharing in the conjugal property, especially considering that she had
only been sentenced with the penalty of prision correccional, a penalty that does not carry
the accessory penalty of civil interdiction which deprives the person of the rights to
manage her property and to dispose of such property inter vivos; that Articles 43 and 63
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of the Family Code, which pertain to the effects of a nulli ed marriage and the effects of
legal separation, respectively, do not apply, considering, too, that the Petition for the
Declaration of the Nullity of Marriage led by the respondent invoking Article 36 of the
Family Code has yet to be decided, and, hence, it is premature to apply Articles 43 and 63
of the Family Code; that, although adultery is a ground for legal separation, nonetheless,
Article 63 nds no application in the instant case since no petition to that effect was led
by the petitioner against the respondent; that the spouses voluntarily separated their
property through their Compromise Agreement with court approval under Article 134 of
the Family Code; that the Compromise Agreement, which embodies the voluntary
separation of property, is valid and binding in all respects because it had been voluntarily
entered into by the parties; that, furthermore, even if it were true that the petitioner was not
duly informed by his previous counsel about the legal effects of the Compromise
Agreement, this point is untenable since the mistake or negligence of the lawyer binds his
client, unless such mistake or negligence amounts to gross negligence or deprivation of
due process on the part of his client; that these exceptions are not present in the instant
case; that the Compromise Agreement was plainly worded and written in simple language,
which a person of ordinary intelligence can discern the consequences thereof, hence,
petitioner's claim that his consent was vitiated is highly incredible; that the Compromise
Agreement was made during the existence of the marriage of the parties since it was
submitted during the pendency of the petition for declaration of nullity of marriage; that
the application of Article 2035 of the Civil Code is misplaced; that the cooling-off period
under Article 58 of the Family Code has no bearing on the validity of the Compromise
Agreement; that the Compromise Agreement is not contrary to law, morals, good
customs, public order, and public policy; that this agreement may not be later disowned
simply because of a change of mind; that the presence of the Solicitor General or his
deputy is not indispensable to the execution and validity of the Compromise Agreement,
since the purpose of his presence is to curtail any collusion between the parties and to see
to it that evidence is not fabricated, and, with this in mind, nothing in the Compromise
Agreement touches on the very merits of the case of declaration of nullity of marriage for
the court to be wary of any possible collusion; and, nally, that the Compromise
Agreement is merely an agreement between the parties to separate their conjugal
properties partially without prejudice to the outcome of the pending case of declaration of
nullity of marriage. cHCIDE
Hence, herein Petition, purely on questions of law, raising the following issues:
I.
II.
WHETHER OR NOT A COMPROMISE AGREEMENT ENTERED INTO BY SPOUSES,
ONE OF WHOM WAS CONVICTED OF ADULTERY, GIVING THE CONVICTED
SPOUSE A SHARE IN THE CONJUGAL PROPERTY, VALID AND LEGAL;
III.
The petitioner argues that the Compromise Agreement should not have been given
judicial imprimatur since it is against law and public policy; that the proceedings where it
was approved is null and void, there being no appearance and participation of the Solicitor
General or the Provincial Prosecutor; that it was timely repudiated; and that the
respondent, having been convicted of adultery, is therefore disquali ed from sharing in the
conjugal property.
The Petition must fail.
The essential question is whether the partial voluntary separation of property made
by the spouses pending the petition for declaration of nullity of marriage is valid.
First. The petitioner contends that the Compromise Agreement is void because it
circumvents the law that prohibits the guilty spouse, who was convicted of either adultery
or concubinage, from sharing in the conjugal property. Since the respondent was convicted
of adultery, the petitioner argues that her share should be forfeited in favor of the common
child under Articles 43 (2) 6 and 63 7 of the Family Code.
To the petitioner, it is the clear intention of the law to disqualify the spouse
convicted of adultery from sharing in the conjugal property; and because the Compromise
Agreement is void, it never became final and executory.
Moreover, the petitioner cites Article 2035 8 of the Civil Code and argues that since
adultery is a ground for legal separation, the Compromise Agreement is therefore void.
These arguments are specious. The foregoing provisions of the law are inapplicable
to the instant case.
Article 43 of the Family Code refers to Article 42, to wit:
Article 42. The subsequent marriage referred to in the preceding Article
9 shall be automatically terminated by the recording of the a davit of
reappearance of the absent spouse, unless there is a judgment annulling the
previous marriage or declaring it void ab initio.
Truly, the purpose of the active participation of the Public Prosecutor or the Solicitor
General is to ensure that the interest of the State is represented and protected in
proceedings for annulment and declaration of nullity of marriages by preventing collusion
between the parties, or the fabrication or suppression of evidence. 1 0 While the
appearances of the Solicitor General and/or the Public Prosecutor are mandatory, the
failure of the RTC to require their appearance does not per se nullify the Compromise
Agreement. This Court fully concurs with the findings of the CA:
. . . . It bears emphasizing that the intendment of the law in requiring the
presence of the Solicitor General and/or State prosecutor in all proceedings of
legal separation and annulment or declaration of nullity of marriage is to curtail
or prevent any possibility of collusion between the parties and to see to it that
their evidence respecting the case is not fabricated. In the instant case, there is no
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exigency for the presence of the Solicitor General and/or the State prosecutor
because as already stated, nothing in the subject compromise agreement touched
into the very merits of the case of declaration of nullity of marriage for the court
to be wary of any possible collusion between the parties. At the risk of being
repetiti[ve], the compromise agreement pertains merely to an agreement between
the petitioner and the private respondent to separate their conjugal properties
partially without prejudice to the outcome of the pending case of declaration of
nullity of marriage. 1 1
SaHcAC
Third. The conviction of adultery does not carry the accessory of civil interdiction.
Article 34 of the Revised Penal Code provides for the consequences of civil interdiction:
Art. 34. Civil Interdiction. — Civil interdiction shall deprive the offender
during the time of his sentence of the rights of parental authority, or guardianship,
either as to the person or property of any ward, of marital authority, of the right to
manage his property and of the right to dispose of such property by any act or
any conveyance inter vivos.
Under Article 333 of the same Code, the penalty for adultery is prision correccional in
its medium and maximum periods. Article 333 should be read with Article 43 of the
same Code. The latter provides:
Art. 43. Prision correccional — Its accessory penalties. — The penalty
o f prision correccional shall carry with it that of suspension from public o ce,
from the right to follow a profession or calling, and that of perpetual special
disquali cation from the right of suffrage, if the duration of said imprisonment
shall exceed eighteen months. The offender shall suffer the disquali cation
provided in this article although pardoned as to the principal penalty, unless the
same shall have been expressly remitted in the pardon.
It is clear, therefore, and as correctly held by the CA, that the crime of adultery does
not carry the accessory penalty of civil interdiction which deprives the person of the rights
to manage her property and to dispose of such property inter vivos.
Fourth. Neither could it be said that the petitioner was not intelligently and
judiciously informed of the consequential effects of the compromise agreement, and that,
on this basis, he may repudiate the Compromise Agreement. The argument of the
petitioner that he was not duly informed by his previous counsel about the legal effects of
the voluntary settlement is not convincing. Mistake or vitiation of consent, as now claimed
by the petitioner as his basis for repudiating the settlement, could hardly be said to be
evident. In Salonga v. Court of Appeals, 1 2 this Court held:
[I]t is well-settled that the negligence of counsel binds the client. This is
based on the rule that any act performed by a lawyer within the scope of his
general or implied authority is regarded as an act of his client. Consequently, the
mistake or negligence of petitioners' counsel may result in the rendition of an
unfavorable judgment against them.
None of these exceptions has been sufficiently shown in the present case.
WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals is
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AFFIRMED with MODIFICATION that the subject Compromise Agreement is VALID without
prejudice to the rights of all creditors and other persons with pecuniary interest in the
properties of the conjugal partnership of gains.
SO ORDERED.
Ynares-Santiago, Chico-Nazario and Nachura, JJ., concur.
Footnotes
Art. 43. The termination of the subsequent marriage referred to in the preceding Article
shall produce the following effects:
xxx xxx xxx
(2) The absolute community of property or the conjugal partnership, as the case may
be, shall be dissolved and liquidated, but if either spouse contracted said
marriage in bad faith, his or her share of the net profits of the community
property or conjugal partnership property shall be forfeited in favor of the
common children or, if there are none, the children of the guilty spouse by a
previous marriage or in default of children, the innocent spouse;
7. Article 63 reads:
Art. 63. The decree of legal separation shall have the following effects:
(2) The absolute community or the conjugal partnership shall be dissolved and
liquidated but the offending spouse shall have no right to any share of the
net profits earned by the absolute community or the conjugal partnership,
which shall be forfeited in accordance with the provisions of Article 43 (2);
SYLLABUS
DECISION
AZCUNA J :
AZCUNA, p
For consideration in this petition for review are the resolutions of the Court of
Appeals in CA-G.R. CV No. 45821 dated April 5, 2000 and August 30, 2000,
respectively.
Both parties have accepted the factual account narrated by the Court of Appeals
1 and have identically quoted the portion of the assailed decision pertaining thereto in
their memoranda. Accordingly, the Court adopts said ndings, which are reproduced as
follows:
On November 11, 1980, plaintiff Security Bank & Trust Company led a
complaint for a Sum of Money with the Regional Trial Court of Pasig, Branch 158
entitled "Security Bank & Trust Company, plaintiff, — versus — Miguel F. Uy,
Brigitte E. Uy and Rolando Limpo, defendants[.]" Plaintiff Bank sought to recover
the outstanding balance of a promissory note executed by the defendants.
When defendants failed to comply with the terms and conditions of the
compromise agreement, plaintiff bank, on November 27, 1984, led an Ex-Parte
Motion for the Issuance of Writ of Execution. The motion not having been acted
upon, plaintiff bank, on July 22, 1992, filed a complaint for Revival of Judgment.
The defendant-spouses, in their Answer, alleged as their defense laches, for
failure of plaintiff bank to enforce its rights for more than eight (8) years.
Defendant Limpo, on the other hand, alleged that "he is not obligated to pay any
amount to plaintiff under the said compromise agreement which was entered into
only by and between plaintiff and defendant spouses Miguel F. Uy and Brigitte E.
Uy without his knowledge and consent." (Records, p. 31)
On February 5, 1993, plaintiff bank led a Motion for Judgment on the
Pleadings alleging that defendants spouses' Answer failed to tender genuine
issues. On April 20, 1993, the trial court issued an order against defendants
spouses ordering them to pay plaintiff bank the amount of P38,833.44 with
interest at the rate of 20% per annum computed from January 12, 1983 until the
amount is fully paid. Defendant-spouses appealed this decision to the Court of
Appeals, but said appeal was ordered dismissed by this Court's Special Fifth
Division for defendants spouses' abuse of the extensions of time granted them,
pursuant to Section 1 (f) of Rule 50 of the Rules of Court (Rollo, p. 84).
Not satis ed with the Order of the trial court, plaintiff bank led the appeal
at bench.
Plaintiff-appellant Security Bank & Trust Company assails the Order of the
trial court on the basis of the sole assigned error, to wit:
At rst, the Court of Appeals dismissed the appeal holding that the Compromise
Agreement had superseded the promissory note executed between the payee Security
Bank & Trust Company (the Bank) and the makers spouses Miguel F. Uy and Brigitte E.
Uy (spouses Uy) and Rolando Limpo (Limpo). Limpo, inasmuch as he was never a party
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to the new agreement, was held to be not bound by its terms and, therefore, was no
longer obligated to the Bank. Upon the Bank's motion for reconsideration, however, the
Court of Appeals reversed itself and ordered the continuation of proceedings in Civil
Case No. 62226 against Limpo.
In this petition, Limpo presents the following issues to be resolved: 2
1. Whether Rolando Limpo is bound under the Compromise Agreement
entered into by Security Bank Corporation and defendants Miguel Uy and Brigitte
Uy.
Anent the rst two issues, Limpo takes for the negative. He maintains that the
Compromise Agreement was executed without his participation and so the trial court's
judgment based on compromise, by obvious consequence, did not and could not have
included him as a judgment debtor. Under this circumstance, there would be no basis
to include him as a defendant in a complaint for revival of judgment.
With respect to the second issue, Limpo answers in the a rmative. He avers that
an action based on the promissory note, being a written contract, prescribes in ten
years. Continuing from this premise, he computes that the right of action under the
promissory note accrued when it became due and demandable on September 19, 1979
and was suspended upon institution of the action to collect on the note on November
11, 1980. By then, one year, one month and twenty-three days had elapsed. The period
began to run again on March 22, 1983, when the judgment approving the Compromise
Agreement was issued, and was tolled upon the ling of the complaint for revival of
judgment on July 22, 1992. This next interval adds up to approximately nine years and
four months. Add this to the rst interval, the total period that had run would already be
ten years and ve months, making any suit on the promissory note barred by
prescription.
The Court finds the petition meritorious.
It is settled that a compromise agreement cannot bind persons who are not
parties to it. 3 This rule is based on Article 1311(1) of the Civil Code which provides that
"contracts take effect only between the parties, their assigns and heirs . . . ." The sound
reason for the exclusion of non-parties to an agreement is the absence of a vinculum or
juridical tie which is the e cient cause for the establishment of an obligation. In the
Compromise Agreement that was presented to the trial court, there is no question that
only the spouses Uy and the Bank were parties. Limpo did not participate in its
execution and there was no reference to him in any of its provisions. He cannot be
bound by the Compromise Agreement.
What happens then if the court approves a compromise agreement that fails to
include all of the defendants? In approving a compromise agreement, no court can
impose upon the parties a judgment different from their real agreement or against the
very terms and conditions of the amicable settlement entered into. 4 The principle of
autonomy of contracts must be respected. 5 These being said, considering that the
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Compromise Agreement imposed no obligation upon Limpo, it follows that the
judgment rendered by the Regional Trial Court (RTC) of Pasig, based on the
Compromise Agreement, could likewise not impose any obligation upon him. The duty
of the court is con ned to the interpretation of the agreement that the contracting
parties have made for themselves without regard to its wisdom or folly as the court
cannot supply material stipulations or read into the contract words which it does not
contain. 6 Consequently, the contention of Limpo is correct. The terms and conditions
set forth in the Compromise Agreement, as approved by the court, are controlling 7 and,
therefore, there is no basis to include him in reviving the judgment.
However, there remains the question of whether the Bank may still continue the
proceedings against Limpo in Civil Case No. 62226, as concluded by the Court of
Appeals.
The Court of Appeals gives the following reason:
. . . If the spouses Uy would become insolvent and could not pay their
obligation under the Compromise Agreement, the SBTC [the Bank] could collect
the whole amount of the obligation from defendant Rolando Limpo. A judgment,
therefore, against Rolando Limpo would not be incompatible with the existence of
the Compromise Agreement for in such a situation SBTC could exercise its option
to secure execution of judgment against either or both the Uys and Limpo. The
only limitation is that SBTC could not collect more than the total amount of
indebtedness.
The Court, in that case, ostensibly concluded that a decision that fails to
expressly mention the liability of one of the defendants will be taken to mean that he
has been absolved in that case. From this pronouncement, the failure to mention Limpo
in the judgment of the RTC of Pasig will correspondingly mean his absence of liability to
the Bank. As this implied declaration became nal with the approval of the
Compromise Agreement, the Court of Appeals' instructions to continue the
proceedings against Limpo in Civil Case No. 62226 amount to an alteration of a matter
that is already res judicata.
Since Limpo is no longer liable to the Bank, the issue of prescription is not
necessary to resolve.
WHEREFORE, the resolutions of the Court of Appeals dated April 5, 2000 and
August 30, 2000 in CA-G.R. CV No. 45821 are hereby REVERSED and SET ASIDE.
Rolando Limpo is ordered DROPPED as a defendant in Civil Case No. 62226. No
pronouncement as to costs.
SO ORDERED.
Puno and Garcia, JJ., concur.
Sandoval-Gutierrez, J., is on sick leave.
Corona, J., is on leave.
Footnotes
3.Banzagales v. Galman, G.R. No. 46717, May 21, 1993, 222 SCRA 350.
4.Phil. Bank of Communications v. Echiverri, No. L-41795, August 29, 1980, 99 SCRA 508.
5.Manila International Airport Authority v. ALA Industries Corporation , G.R. No. 147349,
February 13, 2004, 442 SCRA 603.
6.Cuizon v. Court of Appeals, G.R. No. 102096, August 22, 1996, 260 SCRA 645.
7.University of the East v. Secretary of Labor and Employment , G.R. Nos. 93310-12, November
21, 1991, 204 SCRA 254.
8.Esguerra v. Court of Appeals, G.R. No. 119310, February 3, 1997, 267 SCRA 380.
9.Abarintos v. Court of Appeals, G.R. No. 113070, September 30, 1999, 315 SCRA 550.
n Note from the Publisher: Copied verbatim from the o cial copy. “Bobis” should read as
“Bobis”.
DECISION
SR J :
CALLEJO, SR., p
This is a Petition for Certiorari under Rule 65 1 of the Rules of Court of the Decision 2
of the Court of Appeals (CA) in CA-G.R. SP No. 81544, as well as the Resolution 3 dated
November 23, 2004 denying the motion for reconsideration thereof.
The Antecedents
The Philippine Journalists, Inc. (PJI) is a domestic corporation engaged in the
publication and sale of newspapers and magazines. The exclusive bargaining agent of all
the rank-and- le employees in the company is the Journal Employees Union (Union for
brevity).
Sometime in April 2005, the Union led a notice of strike before the National
Conciliation and Mediation Board (NCMB), claiming that PJI was guilty of unfair labor
practice. PJI was then going to implement a retrenchment program due to "over-sta ng
or bloated work force and continuing actual losses sustained by the company for the past
three years resulting in negative stockholders equity of P127.0 million." The Secretary of
the Department of Labor and Employment (DOLE) certi ed 4 the labor dispute to the
National Labor Relations Commission (NLRC) for compulsory arbitration pursuant to
Article 263 (g) of the Labor Code. The case was docketed as NCMB-NCR-NS-03-087-00.
The parties were required to submit their respective position papers. PJI led a
motion to dismiss, contending that the Secretary of Labor had no jurisdiction to assume
over the case and thus erred in certifying it to the Commission. The NLRC denied the
motion. PJI, thereafter, led a Motion to Defer Further Proceedings, alleging, among
others, that the ling of its position paper might jeopardize attempts to settle the matter
extrajudicially, which the NLRC also denied. The case was, thereafter, submitted for
decision. 5
In its Resolution 6 dated May 31, 2001, the NLRC declared that the 31 complainants
were illegally dismissed and that there was no basis for the implementation of petitioner’s
retrenchment program. The NLRC noted that the following circumstances belied PJI's
claim that it had incurred losses: (1) o ce renovations were made as evidenced by
numerous purchase orders; (2) certain employees were granted merit increases; and (3) a
Christmas party for employees was held at a plush hotel. It also observed that PJI's
executives refused to forego their quarterly bonuses if the Union members refused to
forego theirs. AIECSD
In its Resolution 1 6 dated July 31, 2003, the NLRC ruled that the complainants were
not illegally dismissed. The May 31, 2001 Resolution declaring the retrenchment program
illegal did not attain nality as "it had been academically mooted by the compromise
agreement entered into between both parties on July 9, 2001." According to the
Commission, it was on the basis of this agreement that the July 25, 2002 Resolution which
declared the case closed and terminated was issued. Pursuant to Article 223 of the Labor
Code, this later resolution attained nality upon the expiration of ten days from both
parties' receipt thereof. Thus, the May 31, 2001 Resolution could not be made the basis to
justify the alleged continued employment regularity of the 29 complainants subsequent to
their retrenchment. The NLRC further declared that the two cases involved different sets of
facts, hence, the inapplicability of the doctrine of stare decisis. In the rst action, the issue
was whether the complainants as regular employees were illegally retrenched; in this case,
whether the 29 complainants, contractual employees, were illegally dismissed on separate
dates long after their retrenchment.
The NLRC also declared that by their separate acts of entering into xed-term
employment contracts with petitioner after their separation from employment by virtue of
retrenchment, they are deemed to have admitted the validity of their separation from
employment and are thus estopped from questioning it. Moreover, there was no showing
that the complainants were forced or pressured into signing the xed-term employment
contracts which they entered into. Consequently, their claims for CBA bene ts and
increases from January to November 2002 should be dismissed. The NLRC pointed out
that since they were mere contractual employees, the complainants were necessarily
excluded from the collective bargaining unit. The NLRC stressed that the complainants had
refused to be regularized and ceased to be employees of petitioner upon the expiration of
their last xed-term employment contracts. Thus, the NLRC dismissed the case for lack of
merit, but directed the company to "give preference to the separated 29 complainants
should they apply for re-employment."
On the other issues raised by the complainants, the NLRC held:
We, furthermore nd that JEU has no personality to represent the 29
Complainants for, as prudently discussed above, they were contractual
employees, not regular employees, from the time they entered into xed-term
employment contracts after being retrenched up to the time they ceased being
employees of PJI due to the non-renewal of their last xed-term employment
contracts. As contractual employees, they were excluded from the Collective
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Bargaining Unit (Section 2, CBA) and hence, not union members.
Firstly, although PJI deducted union dues from the monthly wages of the
29 employees, it erroneously did so due to the distracting misrepresentation of
JEU that they were union members. Thus, if there is any legal effect of these acts
of misrepresentation and erroneous deduction, it is certainly the liability of JEU
for restitution of the erroneously deducted amounts to PJI.
We nally rule that JEU is not guilty of unfair labor practice. Although it
admitted the 29 contractual employees as its members and represented them in
the instant case and circulated derogatory letters and made accusations against
Respondents, it is, nevertheless, deemed to have acted in good faith, there being
no substantial evidence on record showing that they did so in bad faith and with
malice.
The Union assailed the ruling of the NLRC before the CA via petition for certiorari
under Rule 65.
In its Decision dated August 17, 2004, the appellate court held that the NLRC gravely
abused its discretion in ruling for PJI. The compromise agreement referred only to the
award given by the NLRC to the complainants in the said case, that is, the obligation of the
employer to the complainants. The CA pointed out that the NLRC Resolution nevertheless
declared that respondent failed to prove the validity of its retrenchment program, which
according to it, stands even after the compromise agreement was executed; it was the
reason why the agreement was reached in the first place.
The CA further held that the act of respondent in hiring the retrenched employees as
contractual workers was a ploy to circumvent the latter's security of tenure. This is
evidenced by the admission of PJI, that it hired contractual employees (majority of whom
were those retrenched) because of increased, albeit uncertain, demand for its publications.
The CA pointed out that this was done almost immediately after implementing the
retrenchment program. Another "telling feature" is the fact that the said employees were
re-hired for ve-month contracts only, and were later offered regular employment with
salaries lower than what they were previously receiving. The CA also ruled that the
dismissed employees were not barred from pursuing their monetary claims despite the
fact that they had accepted their separation pay and signed their quitclaims. The
dispositive portion of the decision reads:
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WHEREFORE,
WHEREFORE the petition is GRANTED . Respondent is ordered to
reinstate the 29 dismissed employees to their previous positions without loss of
seniority rights and payment of their full backwages from the time of their
dismissal up to their actual reinstatement. Respondent is likewise ordered to pay
the 29 and 50 employees, respectively, their rightful bene ts under the CBA, less
whatever amount they have already received. The records of this case are
remanded to the NLRC for the computation of the monetary awards.
SO ORDERED . 1 8
III
At the outset, we note that this case was brought before us via petition for certiorari
under Rule 65 of the Revised Rules of Civil Procedure. The proper remedy, however, was to
le a petition under Rule 45. It must be stressed that certiorari under Rule 65 is "a remedy
narrow in scope and in exible in character. It is not a general utility tool in the legal
workshop." 2 0 Moreover, the special civil action for certiorari will lie only when a court has
acted without or in excess of jurisdiction or with grave abuse of discretion. 2 1
Be that as it may, a petition for certiorari may be treated as a petition for review
under Rule 45. Such move is in accordance with the liberal spirit pervading the Rules of
Court and in the interest of substantial justice. 2 2 As the instant petition was led within
the prescribed fteen-day period, and in view of the substantial issues raised, the Court
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resolves to give due course to the petition and treat the same as a petition for review on
certiorari. 2 3
The primary issue before the Court is whether an NLRC Resolution, which includes a
pronouncement that the members of a union had been illegally dismissed, is abandoned or
rendered "moot and academic" by a compromise agreement subsequently entered into
between the dismissed employees and the employer; this, in turn, raises the question of
whether such a compromise agreement constitutes res judicata to a new complaint later
led by other union members-employees, not parties to the agreement, who likewise claim
to have been illegally dismissed.
Petitioners point out that a compromise agreement is the product of free will and
consent of the parties and that such agreement can be entered into during any stage of the
case. They insist that its terms are not dictated or dependent on the court's ndings of
facts; it is valid as long as not contrary to law, public order, public policy, morals or good
customs. According to petitioners, the execution of the compromise agreement embodied
and approved by the NLRC Resolution dated July 25, 2001 effectively closed and
terminated Certi ed Case No. 000181-00. Citing Golden Donuts, Inc., v. National Labor
Relations Commission. 2 4 Thus, a judgment on a compromise agreement has the force
and effect of any other judgment.
Petitioners also point out that as correctly observed by the NLRC, the resolution
declaring respondents' retrenchment was promulgated on May 31, 2001. Petitioners' side
was never presented in Certi ed Case No. 000181-00, and if it were not for the ling of the
compromise agreement, they would have moved to reconsider or at least led the
appropriate pleadings to rectify the ndings adverse to them. They insist that the
compromise agreement effectively abandoned all ndings of facts and its necessary
consequences in favor of the amicable settlement. The compromise agreement was
thereafter approved on July 25, 2001 by the NLRC. As clearly stated in Article 223 of the
Labor Code, it is the Resolution dated July 25, 2001 that attained nality after the
expiration of the ten-day period, and not the abandoned and mooted Resolution dated May
31, 2001.
Petitioners claim that the letter of Atty. Adolfo Romero dated March 20, 2000 was
never presented as evidence. Moreover, since the CA is not a trier of facts, it was error on
its part to "admit material evidence that was never presented in the instant case (or to lift
ndings of facts from the abandoned and mooted resolution dated 31 May 2001)." Thus,
the NLRC did not act with grave abuse of discretion when it found that the retrenchment
was legal as stated in the appealed decision dated July 31, 2003. Such use of the
admissions contained in the said letter dated March 20, 2000 denied them due process as
they were not given the opportunity to contest or deny its validity or existence.
Petitioners further point out that while the instant petition was led only by 29
complainants, the dispositive portion of the assailed decision was extended to cover 50
other persons. They insist that the said letter, as well as the ndings of a "mooted
decision," were used as evidence to support the erroneous decision of the CA; in so doing,
the appellate court acted with grave abuse of discretion amounting to lack or excess of
jurisdiction.
For their part, private respondents claim that the appellate court did not commit any
reversible error, and that the assailed decision is borne out by the evidence on record.
Since the dismissal of the retrenched employees has been declared illegal, the 29
dismissed employees enjoy the status of regular and permanent employees who cannot
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be dismissed except for cause; hence, the CA correctly ordered their reinstatement. CHEIcS
They further point out that the xing of ve-month contracts of employment entered
into by the individual union members was intentionally employed by petitioners to
circumvent the provisions of the Labor Code on security of tenure, hence, illegal. They also
allege that petitioners did not comply with the 30-day notice rule required by law to render
any dismissal from employment valid. The letter of dismissal was dated June 27, 2002,
and took effect a week after, or on July 3, 2002, a violation of the 30-day notice rule. The
Union members' salaries and bene ts were obtained through CBA negotiations and were
included in the existing CBA. Thus, petitioners' act of unilaterally removing such bene ts
and wage increases constitutes gross violations of its economic provisions, and unfair
labor practice as de ned by the Labor Code. Private respondents cite Philippine Carpet
Employees Association v. Philippine Carpet Manufacturing Corporation 2 5 to support their
arguments. They insist that the illegally retrenched employees were made to believe that
their retrenchment was valid, and thus, through mistake or fraud accepted their separation
pay, which, however, does not militate against their claims.
In any event, the compromise agreement cannot bind a party who did not voluntarily
take part in the settlement itself and gave speci c individual consent . 3 4 It must be
remembered that a compromise agreement is also a contract; it requires the consent of
the parties, and it is only then that the agreement may be considered as voluntarily entered
into.
The case of Golden Donuts, Inc. v. National Labor Relations Commission , 3 5 which
petitioners erroneously rely upon, is instructive on this point. The Court therein was
confronted with the following questions:
. . . (1) whether or not a union may compromise or waive the rights to
security of tenure and money claims of its minority members, without the latter's
consent, and (2) whether or not the compromise agreement entered into by the
union with petitioner company, which has not been consented to nor rati ed by
respondents minority members has the effect of res judicata upon them." 3 6
Speaking through Justice Reynato C. Puno, the Court held that pursuant to Section
23, Rule 138 3 7 of the then 1964 Revised Rules of Court, a special authority is required
before a lawyer may compromise his client's litigation; thus, the union has no authority to
compromise the individual claims of members who did not consent to the settlement. 3 8
The Court also stated that "the authority to compromise cannot lightly be presumed and
should be duly established by evidence," 3 9 and that "a compromise agreement is not valid
when a party in the case has not signed the same or when someone signs for and in behalf
of such party without authority to do so;" consequently, the affected employees may still
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pursue their individual claims against their employer. 4 0 The Court went on to state that a
judgment approving a compromise agreement cannot have the effect of res judicata upon
non-signatories since the requirement of identity of parties is not satis ed. A judgment
upon a compromise agreement has all the force and effect of any other judgment, and,
conclusive only upon parties thereto and their privies, hence, not binding on third persons
who are not parties to it. 4 1
A careful perusal of the wordings of the compromise agreement will show that the
parties agreed that the only issue to be resolved was the question of the monetary claim
of several employees. The prayer of the parties in the compromise agreement which was
submitted to the NLRC reads:
WHEREFORE, premises considered, it is respectfully prayed that the
Compromise Settlement be noted and considered; that the instant case [be]
deemed close[d] and terminated and that the Decision dated May 31, 2001
rendered herein by this Honorable Commission be deemed to be fully
implemented insofar as concerns the thirty-one (31) employees mentioned in
paragraphs 2c and 2d hereof; and, that the only issue remaining to be resolved be
limited to the question of the monetary claim raised in the motion for clari cation
by the seven employees mentioned in paragraph 2e hereof. 4 2
The agreement was later approved by the NLRC. The case was considered closed
and terminated and the Resolution dated May 31, 2001 fully implemented insofar as the
employees "mentioned in paragraphs 2c and 2d of the compromise agreement" were
concerned. Hence, the CA was correct in holding that the compromise agreement
pertained only to the "monetary obligation" of the employer to the dismissed employees,
and in no way affected the Resolution in NCMB-NCR-NS-03-087-00 dated May 31, 2001
where the NLRC made the pronouncement that there was no basis for the implementation
of petitioners' retrenchment program.
To reiterate, the rule is that when judgment is rendered based on a compromise
agreement, the judgment becomes immediately executory, there being an implied waiver
of the parties' right to appeal from the decision. 4 3 The judgment having become nal, the
Court can no longer reverse, much less modify it. DaTISc
Petitioners' argument that the CA is not a trier of facts is likewise erroneous. In the
exercise of its power to review decisions by the NLRC, the CA can review the factual
ndings or legal conclusions of the labor tribunal. 4 4 Thus, the CA is not proscribed from
"examining evidence anew to determine whether the factual ndings of the NLRC are
supported by the evidence presented and the conclusions derived therefrom accurately
ascertained." 4 5
The ndings of the appellate court are in accord with the evidence on record, and we
note with approval the following pronouncement:
Respondents alleged that it hired contractual employees majority of whom
were those retrenched because of the increased but uncertain demand for its
publications. Respondent did this almost immediately after its alleged
retrenchment program. Another telling feature in the scheme of respondent is the
fact that these contractual employees were given contracts of ve (5) month
durations and thereafter, were offered regular employment with salaries lower
than their previous salaries. The Labor Code explicitly prohibits the diminution of
employee's bene ts. Clearly, the situation in the case at bar is one of the things
the provision on security of tenure seeks to prevent.
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Lastly, it could not be said that the employees in this case are barred from
pursuing their claims because of their acceptance of separation pay and their
signing of quitclaims. It is settled that "quitclaims, waivers and/or complete
releases executed by employees do not stop them from pursuing their claims — if
there is a showing of undue pressure or duress. The basic reason for this is that
such quitclaims, waivers and/or complete releases being guratively exacted
through the barrel of a gun, are against public policy and therefore null and void
ab initio (ACD Investigation Security Agency, Inc. v. Pablo D. Daquera , G.R. No.
147473, March 30, 2004)." In the case at bar, the employees were faced with
impending termination. As such, it was but natural for them to accept whatever
monetary benefits that they could get. 4 6
CONSIDERING THE FOREGOING, the petition is DENIED and the assailed Decision
and Resolution AFFIRMED. Costs against the petitioners.
SO ORDERED.
Panganiban, C.J., Ynares-Santiago, Austria-Martinez and Chico-Nazario, JJ., concur.
Footnotes
1. Petitioners erroneously labeled their recourse as one for "certiorari" under "Rule 65." Since
they are questioning a decision of the Court of Appeals, the proper remedy is a petition
for review under Rule 45. Inasmuch as the instant petition was filed within the 15-day
reglementary period, the Court hereby treats it as one filed under Rule 45.
2. Penned by Associate Justice Juan Q. Enriquez, Jr., with Associate Justices Salvador R.
Valdez, Jr. (Retired) and Vicente Q. Roxas, concurring; rollo, pp. 23-31.
5. CA rollo, p. 372.
6. Id. at 371-405.
7. Id. at 400-405.
8. Id. at 482-489.
9. Id. at 490-491.
10. Rollo, pp. 69-91.
11. The dispositive portion of the Resolution reads:
SYNOPSIS
SYLLABUS
DECISION
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VITUG , J : p
Presented for resolution in the instant petition before the Court is the issue, in main,
of whether or not an order of the Regional Trial Court denying a motion to set aside a
partial judgment based on a compromise agreement may be appealed to the Court of
Appeals on a petition for review on certiorari by a party to the court proceedings although
he did not take part in the compromise agreement. LLpr
B.E. Ritz Mansion International Corporation ("B.E. Ritz"), a corporation involved in real
estate projects, contracted to sell to private respondent EBR Realty, Inc. ("EBRRI"), an
o ce building, also identi ed as Building E, still then under construction along E.
Rodriguez Avenue, Bagong Bayan, Quezon City, for P22,050,000.00. EBRRI paid B.E. Ritz
the aggregate sum of P17,640,000.00 leaving a balance of P4,410,000.00 payable upon
the completion and turnover of the building to EBRRI. The two rms additionally executed
contracts to sell covering ten condominium units, still then under construction, at the
Phoenix Subdivision in Pasig City for which purchase EBRRI paid to B.E. Ritz the sum of
P20,415,682.75. In July 1991, B.E. Ritz demanded from EBRRI the payment of the
P4,410,000.00 balance in its purchase of Building E. Instead of paying the amount, EBRRI
led a complaint, docketed HLRB Case No. REM-120992-5304, before the Housing and
Land Use Regulatory Board ("HLURB") for speci c performance and/or rescission plus
damages against B.E. Ritz premised on the latter's failure to nish the construction of
Building E on the date agreed upon for its completion. EBRRI also sought to rescind the
contracts to sell over the ten condominium units in the Phoenix Subdivision for a similar
failure on the part of B.E. Ritz to timely complete the construction thereof. EBRRI prayed
for the refund of the amounts paid by it to B.E. Ritz plus damages and interests.
Meanwhile, on 10 August 1991, EBRRI and Eurotrust Capital Corporation
("Eurotrust"), allegedly with the prior consent of B.E. Ritz, executed a deed of assignment
whereby EBRRI assigned and conveyed to petitioner Armed Forces of the Philippines
Mutual Bene t Association, Inc. ("AFPMBAI"), by way of security, all rights, interests and
participation 1 in Building E and the condominium units at the Phoenix Subdivision. prLL
"1.1. B.E. RITZ admits and acknowledges that it borrowed funds from
EUROTRUST CAPITAL CORPORATION and/or ELSA B. REYES.
"1.2. B.E. RITZ admits and acknowledges that a portion of the funds it
borrowed from EUROTRUST CAPITAL CORPORATION came from AFP-MBAI. B.E.
Ritz represents that Twenty Four Million Pesos (P24,000,000.00) more or less, of
the funds it borrowed from EUROTRUST CAPITAL CORPORATION came from
AFP-MBAI.
"1.3. B.E. RITZ has agreed to return to AFP-MBAI the amounts received
from EUROTRUST CAPITAL CORPORATION, which actually belong to AFP-MBAI.
"1.4. B.E. RITZ shall be absolved from any and all claims, obligations
and indebtedness in relation to or in connection with the funds borrowed from
EUROTRUST CAPITAL CORPORATION and which came from AFP-MBAI. cdphil
"1.5. AFP-MBAI reserves and retains its rights to hold ELSA B. REYES,
EUROTRUST CAPITAL CORPORATION and other defendants in the above-entitled
case, liable to the full extent of their obligation.
Relative to the mode of settlement, petitioner AFPMBAI and B.E. RITZ agreed that —
"2.1. B.E. RITZ and its nanciers (named below) shall jointly and
severally pay AFP-MBAI the amount of Twenty Million Pesos (P20,000,000.00),
payable within the period stated in the promissory note to be executed as
provided in paragraphs 2.2 and 2.2.1. In addition, B.E. RITZ shall sell
Building 'E' standing on a parcel of land covered by Transfer Certi cate
of Title No. 23247, Registry of Deeds for Quezon City, located on E.
Rodriguez, Jr. Avenue, Bagong Bayan, Quezon City, Metro Manila and
shall pay AFP-MBAI the amount of Ten Million Pesos (P10,000,000.00)
from the proceeds of the sale thereof . cda
"2.2. Within forty- ve (45) days from the execution, and as a condition
precedent to the effectivity, of this Agreement.
"It is hereby understood and agreed that failure to issue and deliver the
said Promissory Note and postdated check shall render this Agreement ineffective
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and without effect from the beginning.
"2.3. Within one (1) year from the execution of this Agreement, B.E.
RITZ shall sell Building 'E' , and shall pay AFP-MBAI the aforesaid sum of
P10,000,000.00 from the proceeds thereof, provided that the period of one-year
may be extended by agreement of the parties. B.E. RITZ shall be solely
responsible for complying with all requirements in connection with the
sale of Building 'E' and shall take sole responsibility for the sale,
holding as it hereby holds AFP-MBAI free and harmless from any
liability or obligation that may arise from the said sale of Building 'E' .
AFPMBAI waived, consistently with the compromise agreement, all its rights and
interests in ten (10) condominium units, two units in a condominium project and Building
'E' in favor of B.E. Ritz. 4
AFPMBAI and B.E. Ritz led on 14 March 1995 a joint omnibus motion, dated 16
February 1995, praying for the approval of the compromise agreement and the rendition of
a partial judgment based thereon. The motion also included a prayer for the partial lifting
of the writ of preliminary attachment over the levied property with the exception of
Building 'E'. 5 The following day, 15 March 1995, the trial court 6 rendered a "partial
decision" approving the compromise agreement and lifting the writ of attachment and
notice of garnishment upon all property and assets of B.E. Ritz except Building 'E'. LexLib
EBRRI was not furnished with a copy of the compromise agreement nor noti ed of
the partial decision. When EBRRI ultimately learned of these incidents, EBRRI promptly filed
a motion to partially set aside the judgment predicated on the compromise agreement
insofar as it had referred to Building E, pointing out that Building E was the subject matter
of litigation before the HLURB which, in its decision of 19 November 1993, had directed
B.E. Ritz to execute a deed of absolute sale over the building and to deliver to EBRRI the
corresponding transfer certi cate of title. EBRRI contended that the projected disposition
of Building E was in violation of paragraph 4 of Article 1381 of the Civil Code that would
consider rescissible, "contracts which referred to things under litigation if entered into by
the defendant without the knowledge and approval of the litigants or of competent judicial
authority." EBRRI added that the proposed sale of Building E would be in fraud of creditors
under Article 1387(2) of the Civil Code there being, in fact, a previous judgment in the
HLURB case. 7
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B.E. Ritz, in turn, averred that in executing the compromise agreement, petitioner
AFPBMAI was simply implementing the deed of assignment executed between private
respondent EBRRI and Eurotrust. In its case, AFMBAI stated that it was only interested, at
all events, in the expeditious recovery of the amount covered by the compromise
agreement. EBRRI responded by stressing that B.E. Ritz should not be allowed to dispose
of the property owned by EBRRI to pay an obligation due from B.E. Ritz to AFPMBAI.
The trial court refused to set aside its judgment on the compromise agreement; in
its order, dated 07 September 1995, it held:
"'A judgment rendered in accordance with a compromise agreement is
immediately executory unless a motion is led to set aside the agreement on the
ground of fraud, mistake or duress . . .' ( Arkoncel, Jr. vs. Lagamon , 204 SCRA
560). None of the above-mentioned grounds is present in the contract in question.
LLphil
"Be it noted that Building 'E' is not the subject of the main case. These
properties were levied on attachment as properties registered in the name of
defendant B.E. Ritz against whom a writ of attachment was issued. There is no
reason why the parties concerned cannot come up with a compromise agreement
involving the same. While it may be true that Building 'E' is the subject of litigation
between EBR Realty and B.E. Ritz before HLURB, absence is a showing that EBR
Realty was declared with finality to be the absolute owner of the said building.
From the foregoing order, EBRRI led with this Court a petition for review on
certiorari, docketed G.R. No. 121988, which immediately drew a motion to dismiss from
AFPMBAI. On 27 November 1995, the Court referred the petition to the Court of Appeals
for appropriate action. 9
In the Court of Appeals, the petition was docketed C.A. G.R. SP No. 39496. On 29
May 1996, the appellate court promulgated the herein questioned decision 1 0 granting the
petition of EBRRI, setting aside the Order of 07 September 1995 of the Regional Trial
Court, and partially setting aside the compromise agreement insofar as it covered Building
E. The appellate court held that the assailed Order, dated 07 September 1995, of the trial
court was a nal order since it had practically adjudicated substantial rights of the parties,
leaving nothing much to be done by the trial court except to implement the judgment, and
that, therefore, a petition for review could be a proper remedy. As regards the assailed
order of the trial court, the Court of Appeals ruled that a non-party to a compromise
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agreement could ask for its rescission by reason of injury or prejudice that said person
might suffer as a result of an execution of the judgment based on that compromise
agreement. The Court of Appeals held: LexLib
"It must be stressed that the compromise agreement was executed after an
adverse decision had been rendered against the respondent B.E. Ritz. While the
HLURB decision awarding building 'E' to the petitioner may not yet be nal, the
fact that a decision has been rendered against respondent B.E. Ritz gives rise to
the presumption that the compromise agreement, insofar as it includes building
'E' therein, is fraudulent and thus rescissible under paragraph 3 of Article 1381."
11
A motion for the reconsideration of the decision led by AFPMBAI was denied for
lack of merit by the appellate court in its resolution of 10 October 1996. 12 llcd
Once again, the case is before this Court via, this time, the instant petition for review
on certiorari that seeks to impugn the decision of the Court of Appeals.
Firstly, petitioner AFPMBAI contends, the petition for review on certiorari under Rule
45 of the Rules of Court is not the proper remedy from the interlocutory order of the trial
court that has denied the motion to set aside the partial judgment but a petition for
certiorari under Rule 65. Granting that trial court's Order of 07 September 1995 can be
considered to be a nal order, AFPMBAI argues, the petition, nonetheless, should have
been "dismissed" for violating Circular No. 2-90 on the proper mode of appeal. Secondly,
AFPMBAI asserts, it has been denied its constitutional right to due process of law for not
having been given the opportunity to le a comment on the petition for review on certiorari.
Thirdly, petitioner insists, assuming that the compromise agreement is rescissible insofar
as the inclusion of Building E is concerned, still, private respondent should have led an
action for rescission and not just attack collaterally the compromise agreement.
The Court of Appeals did not commit a reversible error.
The first and third issues, being somehow interrelated, shall priorly be taken up. cdll
Adjective law governing judicial compromises annunciate that once approved by the
court, a judicial compromise is not appealable and it thereby becomes immediately
executory 1 9 but this rule must be understood to refer and apply only to those who are
bound by the compromise and, on the assumption that they are the only parties to the
case, the litigation comes to an end except only as regards to its compliance and the
ful llment by the parties of their respective obligations thereunder. The reason for the rule,
said the Court in Domingo vs. Court of Appeals, 2 0 is that when both parties so enter into
the agreement to put to a close a pending litigation between them and ask that a decision
be rendered in conformity therewith, it would only be "natural to presume that such action
constitutes an implicit waiver of the right to appeal" 2 1 against that decision. The order
approving a compromise agreement thus becomes a nal act, and it forms part and parcel
of the judgment that can be enforced by a writ of execution 2 2 unless otherwise enjoined
by a restraining order.
Where there are, along with the parties to the compromise, other persons involved in
the litigation who have not taken part in concluding the compromise agreement but are
adversely affected or feel prejudiced thereby, should not be precluded from invoking in the
same proceedings an adequate relief therefor. A motion to set aside the judgment to the
extent he might feel aggrieved, or might justi ably fear to be at risk by acquiescence 2 3
unless timely invoked, is such a remedy. A denial of the motion to set aside the judgment
on the compromise agreement opens the door for its possible elevation to a higher court.
If the motion is denied, he may, considering the special nality feature of the compromise
judgment, albeit partial, and its susceptibility to execution, take an appeal from the order of
denial under Rule 45 or even, when circumstances particularly warrant, the extraordinary
remedy prescribed in Rule 65, of the Rules of Court. 2 4 That appeal notwithstanding, the
main case still subsists 2 5 allowing him to have continued locus standi. LLphil
Supreme Court Circular No. 2-90, dated March 9, 1990, states that an appeal from a
judgment rendered in a civil or criminal action by the Regional Trial Court in the exercise of
its original jurisdiction shall be by a writ of error or ordinary appeal 2 6 in which questions of
law and of facts may be raised. Where a party desires to only bring up issues of law,
appellant may avail himself of Section 1, Rule 45, of the Rules of Court. That rule provides
that a party desiring to appeal by certiorari from the judgment or nal order or resolution
of the Court of Appeals, the Sandiganbayan, the Regional Trial Courts or other courts
whenever authorized by law, may le with this Court a veri ed petition for review on
certiorari. The petition shall raise only questions of law that must be distinctly set forth
therein. The Circular provides, however, that although submission of issues of fact in an
appeal by certiorari taken to this Court from the Regional Trial Court is ordinarily
proscribed, this Court nonetheless retains the option in the exercise of its sound
discretion, taking into account the attendant circumstances, either to take cognizance of
and decide such issues or to refer the case to the Court of Appeals for determination. 2 7
The Court opted accordingly by referring G.R. No. 121988 to the Court of Appeals.
About the insistence of petitioner AFPMBAI that EBRRI may not attack the
compromise agreement collaterally but should have led a separate action for rescission,
it must be pointed out that the compromise is directly related to the case still then
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pending before the trial court, certainly a proper venue for the assailed incident. The
general aim of adjective law is to facilitate the application of justice to the rival claims of
contending parties, bearing always in mind that procedural rules are created not to hinder
or delay but to facilitate and promote the administration of justice. 28 It is far better to
dispose of the case on the merits which is a primordial end rather than on a technicality, 29
if it be the case, that may result in injustice. The principles against multiplicity of suits may
also be rightly invoked by EBRRI. In the considered view of the Court, the compromise
agreement must not be held to thwart, by its very rationale for being, the full resolution of
the case among EBRRI, AFPMBAI and B.E. Ritz or to unduly disturb the nal disposition of
the case among them. cdtai
No trenchant reason could possibly sustain the claim of AFPMBAI that its right to
due process had been violated. When the petition in G.R. No. 121988 was instituted, a
motion to dismiss the case was forthwith led by AFPMBAI. The motion, along with the
petition, was referred to the Court of Appeals pursuant to the Resolution of 27 November
1995 of the Court. AFPMBAI likewise led a motion for reconsideration of the decision of
the appellate court and, after private respondent EBRRI had submitted an opposition to
that motion for reconsideration, AFPMBAI led its reply thereto. 3 0 It would be improper to
claim a deprivation of due process "where a party [had been] given the chance to be heard
[on its] motion for reconsideration." 3 1 The motion for reconsideration undoubtedly gave
AFPMBAI full opportunity to submit to the Court of Appeals its side of the controversy.
The opportunity to be heard was given, and AFPMBAI indeed had made use of that
opportunity. 3 2
WHEREFORE, the instant petition for review on certiorari is DENIED, and the assailed
Decision of the Court of Appeals, dated 29 May 1996, is AFFIRMED. No costs. cdasia
SO ORDERED.
Romero (Acting C.J.), Panganiban and Purisima, JJ., concur.
Gonzaga-Reyes, J., took no part; relationship with counsel.
Footnotes
VALDEZ petitioners, vs .
SPOUSES SEGUNDO RAMOS and FELISA VALDEZ,
HON. COURT OF APPEALS, LEILA VALDEZ-PASCUAL, ARACELI
VALDEZ, GLICERIA VALDEZ, JUANA VALDEZ, SIMEON VALDEZ,
CONRADA VALDEZ, SEVERINO VALDEZ, MARIO VALDEZ,
ADORACION VALDEZ, JOSE VALDEZ, DIONISIA VALDEZ, DANILO
VALDEZ, SERAPIO VALDEZ, HELEN VALDEZ, PERLA VALDEZ, and
VALDEZ respondents.
DELIA VALDEZ,
DECISION
CHICO-NAZARIO , J : p
This case presents a tangled tale involving the con icting accounts of petitioners
and private respondents over a piece of land sold by Gregorio Valdez (private
respondents' father) to petitioners in 1948 and which ostensibly became the subject of a
compromise agreement in 1977.
Through the instant Petition for Review on certiorari, spouses Segundo Ramos and
Felisa Valdez seek the reversal of the Decision 1 of the Court of Appeals dated 31 July
1997 which reversed the Decision 2 of the Regional Trial Court (RTC), Branch 48, Urdaneta,
Pangasinan. The RTC decision dismissed the case led by private respondents for
Quieting of Title, Ownership, Possession plus Damages with prayer for Writ of Preliminary
Injunction and adjudged petitioners as the lawful owners of a piece of land, with an area of
3,036 square meters, and which forms part of a bigger tract of land covered by Original
Certi cate of Title (OCT) No. 48824 of the Registry of Deeds of the Province of
Pangasinan in the name of Gregorio Valdez. Under review as well is the Court of Appeals
Resolution 3 dated 08 December 1997 denying petitioners' motion for reconsideration.
Private respondents are the children 4 of Gregorio Valdez. In 1948, Gregorio Valdez
sold the subject land to petitioners. The absolute deed of sale was subsequently
annotated at the back of OCT No. 48824 as Entry No. 377847. It is the contention of
private respondents that as early as 1977, petitioners no longer owned subject land as
they had renounced their rights thereto as evidenced by a compromise agreement dated
02 June 1977.
Sometime in 1991, Gregorio Valdez died. Private respondents allege that
immediately after the death of their father, petitioners disturbed their possession of
subject land by cultivating the same and by enclosing it with a fence. As petitioners did not
heed their demands to vacate, they were constrained to le a case for Quieting of Title,
Ownership, Possession plus Damages with prayer for Writ of Preliminary Injunction.
Petitioners, in their Answer with Counterclaim, maintain that they remain owners of
the subject land as the compromise agreement being relied upon by private respondents
refers to another piece of land. Thus, they argue that the compromise agreement
constitutes a cloud on their title. They prayed, among other things, for the quieting of their
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title and that they be adjudged lawful owners of the subject land.
The trial court believed petitioners. It sided with petitioners by declaring them
owners of the subject land by virtue of the absolute deed of sale dated 06 January 1948.
The dispositive portion of its decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
the defendants and against the plaintiffs and declaring the defendants to be the
lawful owners of the land in question. 5
The Court of Appeals reversed the trial court's ruling. It held that the land renounced
by petitioners was the subject land and that it was made in favor of Gregorio Valdez, thus:
WHEREFORE, premises considered the decision appealed from is hereby
REVERSED and SET ASIDE and another one entered declaring plaintiffs as owner
of the land in question, and ordering defendants-appellees to vacate the same.
With costs against defendants-appellees. CDESIA
Aggrieved by the aforecited ruling, and their motion for reconsideration having been
denied by the Court of Appeals, petitioners assert before us that —
I.
THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE TRIAL
COURT'S FINDINGS WHICH TOOK INTO ACCOUNT THE INTENTIONS OF THE
PARTIES IN THE COMPROMISE AGREEMENT IN QUESTION BY CONSIDERING
CIRCUMSTANCES PREVIOUS AND SIMULTANEOUS TO THE EXECUTION OF THE
AGREEMENT.
II.
III.
In order to get to the bottom of this land dispute, the primary and most basic
question that has to be asked is this: Is the absolute deed of sale dated 06 January 1948
between petitioners and private respondents' predecessor-in-interest, Gregorio Valdez,
annotated at the back of OCT No. 48824, a cloud on such title that has to be removed
under the grounds stated in the Civil Code?
Articles 476 and 478 of the Civil Code provide:
Art. 476.
476 Whenever there is a cloud on title to real property or any
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interest therein, by reason of any instrument, record, claim, encumbrance or
proceeding which is apparently valid or effective but is in truth and in fact invalid,
ineffective, voidable, or unenforceable, and may be prejudicial to said title, an
action may be brought to remove such cloud or to quiet the title.
An action may also be brought to prevent a cloud from being cast upon
title to real property or any interest therein.
Art. 478.
478 There may also be an action to quiet title or remove a cloud
therefrom when the contract, instrument or other obligation has been
extinguished or has terminated, or has been barred by extinctive prescription.
In herein case, private respondents, as plaintiffs in the case for quieting of title,
allege that their father's obligation under the deed of absolute sale has been extinguished
or has been terminated by virtue of the compromise agreement dated 02 June 1977
whereby petitioners ostensibly renounced their rights over the subject property.
Petitioners, on the other hand, claim that the same compromise agreement constitutes a
cloud on their title.
The Compromise Agreement 7 states:
REPUBLIC OF THE PHILIPPINES
COURT OF FIRST INSTANCE OF PANGASINAN
THIRD JUDICIAL DISTRICT
9th Branch, Urdaneta
- versus -
COMPROMISE AGREEMENT
COME NOW, the parties in the above-entitled case duly assisted by their
respective counsels and to this Honorable Court submit this compromise
agreement, to wit:
2. That the applicants Segundo Ramos and Felisa Valdez hereby also
quitclaim and renounce whatever rights in the document registered under entry
No. 377847 annotated at the back of O.C.T. No. 48824 of Gregorio Valdez;
3. That the parties hereby waive any claim for and against the other.
FELIPE CABERO
Oppositor
ASSISTED BY:
It is not disputed that the property in question with an area of 3,036 square
metes on the northern portion of a parcel of land was owned by the plaintiffs' late
father Gregorio Valdez covered by TCT No. 48824 (Exh. A). Sometime in the year
1948, the late Gregorio Valdez sold the said property to defendant-spouses
Segundo Ramos and Felisa Valdez. That sale was annotated at the back of said
title as Entry No. 377847 (Exh. A-1).
The Court noted that the portion of land referred to in the said compromise
agreement and to have been renounced allegedly is the northern portion. This is
clear in the Entry No. 377847 (Exh. A-1). In contrast, what has been relinquished
and renounced by Segundo Ramos was the southern portion of the same land
being occupied, at that time, by Felipe Cabero. It appears therefore, that there is a
different portion of land that was the real subject of renunciation other than that
indicated in the compromise agreement. Hence, such agreement expresses wrong
intentions of the parties. The mistake in the compromise agreement was
recognized and admitted by plaintiff Lilia Valdez when she testi ed as rebuttal
witness, to wit:
A. That is not true sir actually the compromise agreement was made to
correct a mistake which was committed because the deed of sale was
executed covering the portion which was titled property when it should
pertain to the untitled property of Gregorio Valdez."
As can be seen from the decision dated 19 March 1979 of the Court of
First Instance of Pangasinan in Land Registration Case No. U-843 Record No. N-
48998 entitled Segundo Ramos, et al. vs. The Director of Lands, et al. (Exh. "3",
Folder of Exhibits, pp. 15-17) only Felipe Cabero and the Director of Lands
opposed defendants-appellees' application for original registration. The subject of
this land registration case was that parcel of land previously owned by Alejandro
Alcantara, situated at Barrio Maambal, Municipality of Pozorrubio, Province of
Pangasinan containing an area of 7,073 square meters, more or less, and more
particularly described in Plan Psu-1-002310. As indicated in the aforesaid
decision Felipe Cabero withdrew his opposition. The Decision however does not
make any reference to the Compromise Agreement executed in the same case two
(2) years before, on June 2, 1977 marked as Exhibit "B" (Folder of Exhibits, p. 2).
It is manifest from the foregoing that while the land registration case
covered that parcel of land purchased by appellees from Alejandro Alcantara,
which was ultimately decreed in favor of appellees in the Decision of the LRC
marked Exhibit "3"; the Compromise Agreement wherein appellees declared their
renunciation/quitclaim of their rights referred to another parcel of land consisting
of 3,036 sq. m. that was the subject of a Deed of Absolute Sale executed by
Gregorio Valdez that was a part of, hence annotated on OCT No. 48824 registered
in Valdez name, which property had been earlier sold to the Spouses Ramos by
Gregorio Valdez. The Spouses Ramos renounced their rights over the latter
property in the Compromise Agreement marked as Exhibit "B"/"1" to effect the
withdrawal of the opposition of Felipe Cabero to their application for registration
in the aforesaid LRC No. U-843 (TSN, February 17, 1992, pp. 9-11). Cabero's
opposition was predicated on his perceived ownership of the southern portion of
the land which was formerly owned by Alejandro Alcantara that was the subject
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of the land registration proceedings. This southern portion adjoins another
(untitled) property of Gregorio Valdez (Exhibit "E", Folder of Exhibits p. 13). This
had been mistakenly sold by Valdez to Cabero in the belief that it belonged to him
(Valdez). When Valdez recognized his error, and by way of disentangling a
con ict that he had caused, Valdez persuaded Ramos to renounce his rights over
the 3,036 sq. m. portion of his titled property, and at the same time for Cabero to
withdraw his opposition to the application by Spouses Ramos for the registration
in their name of the entire lot formerly belonging to Alejandro Alcantara.
Conceivably, Cabero's withdrawal of his opposition along with his occupied
southern portion of Alejandro Alcantara's property, was to be exchanged with the
3,036 sq. m. portion renounced by Spouses Ramos. In his testimony Segundo
Ramos spoke of accommodating the entreaties of Gregorio Valdez whom he
called his "father-in-law" (TSN, February 17, 1992, p. 11).
As already stated, the LRC Decision dated 19 March 1979 (Exhibit "3") did
not take cognizance of the Compromise Agreement dated 2 June 1977 although
it noted that oppositor Felipe Cabero had withdrawn his opposition to the
application of Spouses Ramos in the LRC case (Exhibits 3-a-1, Folder of Exhibits,
p. 16). The simple explanation is that the Compromise Agreement referred to
another parcel of land that was not the subject of the land registration case. In
withdrawing his opposition, Felipe Cabero paved the way for Spouses Segundo
Ramos to have the entire property of Alejandro Alcantara registered in their
names, and not just the 3,000 sq. m. that was the subject of the deed of sale
signed by Alcantara in their favor, marked Exhibit "6". Thus, Gregorio Valdez was
able to effect the solution to the imbroglio he had caused by selling to Felipe
Cabero land that did not belong to him but to the adjoining owner Alejandro
Alcantara. This is shown by the testimony of Lilia Valdez.
On the part of appellees, the loss of the 3,036 sq. m. portion was amply
compensated by approximately 4,000 sq. m. of the southern portion that had
been occupied by Felipe Cabero but which had been included in their land
registration application. The evidence of the defendants-appellees shows that "
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(b)ecause of his mistake, vendor Gregorio Valdez intervened and pleaded to
appellees to just relinquish the area he mistakenly sold to Cabero who in
exchange was to withdraw his opposition, hence the compromise agreement in
question was drawn" (TSN, February 17, 1999, p. 11; January 29 1992, pp. 8-10;
Appellees' Brief, p. 7). It is to be noted that Gregorio Valdez and Felipe Cabero
were closely associated and even shared the same counsel Atty. Nicanor Caldito
who notarized the Deed of Sale executed by Gregorio Valdez in favor of Segundo
Ramos (Exhibits "B"/"1" and "2"; Folder of Exhibits, pp. 2 and 14) and who later
appeared as counsel for oppositor Felipe Cabero in the land registration case.
Although the withdrawal of opposition of Felipe Cabero along with his occupation
of the southern portion was successfully effected by the Compromise Agreement,
later events showed that Cabero was eventually removed from the picture of both
parcels of land. Evidence shows that Gregorio Valdez continued to occupy the
renounced portion until his death in 1991 (TSN, January 6, 1991, pp. 3-4; Pre-Trial
Order, Record, p. 58). His occupation evidences his continued dominion and
exercise of ownership over the entire land covered by OCT No. 48824. 1 0
To state the obvious, much ado has been made over the compromise agreement.
After having reviewed the records of the case, however, it has become even more obvious
that private respondents cannot assert any rights under said compromise agreement,
thus, it cannot be used by them to defeat petitioners' claim over the subject land.
The compromise agreement, like any other contract, takes effect only between the
parties, their assigns and heirs. 1 1 In herein case, the parties to the compromise agreement
were petitioners and Felipe Cabero only as the same was executed by them in connection
with LRC Case No. U-843 wherein petitioners were the applicants and Cabero the
oppositor. 1 2 Gregorio Valdez, although he was very much interested in the compromise
agreement as the same would solve the problem he created of selling to Cabero a piece of
land not belonging to him, was not a party thereto. As correctly pointed out by petitioners,
his signature might have appeared in the compromise agreement but it does not appear in
what capacity he was signing. In juxtaposition, the compromise agreement expressly
states in what capacity the other signatories were signing. Thus, typewritten in the
agreement are the following entries:
SEGUNDO RAMOS FELISA RAMOS
Applicant Applicant
FELIPE CABERO
Oppositor
ASSISTED BY:
The persons whose names were typewritten on the compromise agreement signed
above their names. Gregorio Valdez's name, on the other hand, as well as the role he played
in the execution of the document, was not typewritten on the document. His signature,
however, appears on the same line as the phrase "assisted by" just above the signature of
Atty. Caldito. Petitioner Segundo Ramos swears that he did not see Gregorio Valdez sign
the document at the time of the execution of the same. 1 3 Witness for petitioners,
Leonardo Quesora, who was present at the time of the execution of the compromise
agreement, likewise testi ed that he did not see Gregorio Valdez sign. 1 4 Moreover, none
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of the private respondents or their witnesses testi ed as to having witnessed Gregorio
Valdez sign the compromise agreement.
It is axiomatic that a contract cannot be binding upon and cannot be enforced
against one who is not a party to it, even if he is aware of such contract and has acted with
knowledge thereof. 1 5 A person who is not a party to a compromise agreement cannot be
affected by it. 1 6 This is already well-settled. Thus, in Young v. Court of Appeals 1 7 we
stressed:
The main issue in this case is whether or not petitioner can enforce a
compromise agreement to which she was not a party.
This issue has already been squarely settled by this Court in the negative in
J.M. Tuason & Co., Inc. v. Cadampog (7 SCRA 808 [1963]) where it was ruled that
appellant is not entitled to enforce a compromise agreement to which he was not
a party and that as to its effect and scope, it has been determined in the sense
that its effectivity if at all, is limited to the parties thereto and those mentioned in
the exhibits (J.M. Tuason & Co., Inc. v. Aguirre , 7 SCRA 112 [1963]). It was
reiterated later that a compromise agreement cannot bind persons who are not
parties thereto (Guerrero v. C.A., 29 SCRA 791 [1969]).
Consequently, Gregorio Valdez not being a party to the compromise agreement, his
heirs (private respondents) cannot sue for its performance.
Be that as it may, private respondents additionally harp on the reference to their
father made in the body of the compromise agreement itself which they claim is proof of
renunciation of subject land by petitioners in favor of their father, to wit:
2. That the applicants Segundo Ramos and Felisa Valdez hereby also
quitclaim and renounce whatever rights in the document registered under entry
No. 377847 annotated at the back of O.C.T. No. 48824 of Gregorio Valdez;
Contrary to the position taken by private respondents, the reference to their father,
Gregorio Valdez, seems to us to be a mere description of the land being renounced.
Nothing in the compromise agreement would suggest that the renunciation of the subject
land was to be made in Gregorio Valdez's favor. Verily, for this Court to interpret the
stipulation as conferring some right to a third person (i.e., stipulation pour autrui), the
following requisites must concur:
1. There must be a stipulation in favor of a third person;
2. The stipulation in favor of a third person should be a part, not the
whole, of the contract;
3. The contracting parties must have clearly and deliberately conferred a
favor upon a third person, not a mere incidental benefit or interest;
4. The third person must have communicated his acceptance to the
obligor before its revocation; and
5. Neither of the contracting parties bears the legal representation or
authorization of the third party. 1 8
To constitute a valid stipulation pour autrie, it must be the purpose and intent of the
stipulating parties to bene t the third person, and it is not su cient that the third person
may be incidentally bene ted by the stipulation. 1 9 In herein case, from the testimony of
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petitioner Segundo Ramos who is undoubtedly a party to the compromise agreement, and
from the rest of the evidence on hand, any bene t which accrued to private respondents'
father was merely incidental.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated 31
July 1997 is REVERSED and SET ASIDE. The Decision of the Regional Trial Court of
Urdaneta, Pangasinan, Branch 48, insofar as it dismissed the complaint led by herein
private respondents, is hereby AFFIRMED. No costs.
SO ORDERED.
Puno, Austria-Martinez, Callejo, Sr. and Tinga, JJ., concur.
Footnotes
3. Rollo, p. 47.
4. Except for Conrada Valdez who is Gregorio Valdez's daughter-in-law and Danilo and
Mario Valdez who are his grandchildren (RTC Records, p. 48).
5. Rollo, p. 24.
6. Rollo, p. 10.
7. Exh. "B," Folder of Exhibits, p. 2.
See also Banzagales v. Galman, G.R. No. 46717, 21 May 1993, 222 SCRA 350, 356.
12. Exh. "B."
15. University of the Philippines v. Philab Industries, Inc., G.R. No. 152411, 29 September
2004, 439 SCRA 467, 480.
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SECOND DIVISION
DECISION
DEL CASTILLO , J : p
A judicially approved compromise agreement has the effect and authority of res
judicata. 1 It is nal, binding on the parties, and enforceable through a writ of execution.
Article 2041 of the Civil Code, however, allows the aggrieved party to rescind the
compromise agreement and insist upon his original demand upon failure and refusal of
the other party to abide by the compromise agreement. CcSTHI
This Petition for Review on Certiorari 2 assails the August 27, 2010 Decision 3 of
the Court of Appeals (CA) in CA-G.R. SP No. 106724, which dismissed the Petition for
Certiorari led by Reynaldo Inutan (Inutan), Helen Carte (Carte), Noel Ayson (Ayson), Ivy
Cabarle (Cabarle), Noel Jamili (Jamili), Maritess Hular (Hular), Rolito Azucena (Azucena),
Raymundo Tunog (Tunog), Jenelyn Sancho, Wilmar Bolonias, Roger Bernal (Bernal),
Agustin Estre (Estre), Marilou Sagun (Sagun), and Enrique Ledesma, Jr. (Ledesma),
against respondents Napar Contracting & Allied Services (Napar), Norman Lacsamana
(Lacsamana), Jonas International, Inc. (Jonas), and Philip Young (Young), and a rmed
the June 26, 2008 Decision 4 and October 14, 2008 Resolution 5 of the National Labor
Relations Commission (NLRC) in NLRC CA No. 041474-04 dismissing the consolidated
complaints against respondents for illegal dismissal with money claims on the ground
o f res judicata. Likewise assailed is the CA's February 10, 2011 Resolution 6 which
denied the Motion for Reconsideration.
Factual Antecedents
Petitioners Inutan, Carte, Ayson, Cabarle, Jamili, Hular, Azucena, Tunog, Bernal,
Estre, Sagun, and Ledesma were employees of respondent Napar, a recruitment agency
owned and managed by respondent Lacsamana. Napar assigned petitioners at
respondent Jonas, a corporation engaged in the manufacture of various food products
with respondent Young as its President, to work as factory workers, machine operator,
quality control inspector, selector, mixer, and warehouseman. SDTIaE
Respondents, in their Position Paper, 13 claimed that they have ful lled their
obligation under the agreement when Napar required complainants to report for work,
to submit documentary requirements, to undergo seminars and training, and to pass
qualifying exams. They contended that complainants were the ones who violated the
agreement when they refused to comply with the foregoing requirements in order to
assess their working capabilities and skills for their next posting. As such, they were
deemed to have waived their right to be reassigned. They argued that complainants
should not have led new complaints but should have instead moved for the execution
of the Joint Compromise Agreement. They then argued that the Labor Arbiter who
approved the said Joint Compromise Agreement or LA Reyno has exclusive jurisdiction
to act on the complaints.
In a Decision 14 dated July 29, 2004, Labor Arbiter Pablo C. Espiritu, Jr. (LA
Espiritu) held that the conditions of the Joint Compromise Agreement particularly
regarding reinstatement/reassignment of complainants were violated thereby justifying
rescission of the Joint Compromise Agreement. LA Espiritu noted that complainants
were correct in re- ling the complaints as this was an available remedy under the NLRC
Rules of Procedure when their previous complaints were dismissed without prejudice.
He struck down respondents' contention that a motion for execution of the
compromise agreement was the proper remedy, ratiocinating that the dismissal of the
cases was approved without prejudice and therefore cannot be the subject of an
execution.
LA Espiritu then ruled that complainants were constructively dismissed as they
were placed on temporary off-detail without any work for more than six months despite
being regular employees of Napar. Doubting respondents' intention of reinstating
complainants, LA Espiritu observed that the submission of requirements and
compliance with the procedures for rehiring should not be imposed on complainants
who are not newly-hired employees. Thus, Napar and Lacsamana were held jointly and
severally liable to pay complainants their separation pay in lieu of reinstatement due to
the already strained relations of the parties. EDATSI
In a Decision 17 dated June 26, 2008, the NLRC granted respondents' appeal. It
ruled that the approval of the Joint Compromise Agreement by LA Reyno operates as
res judicata between the parties and renders it unappealable and immediately
executory. It held that complainants had no cause of action when they re- led their
complaints for being barred by res judicata. The NLRC, in disposing of the case,
ordered the issuance of a writ of execution to enforce the Joint Compromise
Agreement, thus:
WHEREFORE, premises considered, the appeal of respondents is
GRANTED, while that of the complainants is DISMISSED for lack of merit. The
Decision of Labor Arbiter Pablo C. Espiritu, Jr., dated July 29, 2004 is REVERSED
and SET ASIDE, and a new one is rendered DISMISSING the above-entitled
complaints for having been barred by res judicata. The Order of Labor Arbiter
Jaime Reyno dated January 16, 2003 nding the Compromise Agreement
entered into by the parties on January 13, 2003 to be in order and not contrary
to law and approving the same, stands valid, effective and should be enforced.
Let the records of this case be forwarded to the Labor Arbiter for the issuance of
a writ of execution to enforce the said Compromise Agreement.
SO ORDERED. 18
Complainants led a Motion for Reconsideration, 19 averring that the NLRC
gravely erred in ordering the issuance of a writ of execution despite the absence of a
nal judgment or a judgment on the merits. They stand on their right to rescind the
Joint Compromise Agreement and to insist on their original demands when
respondents violated the compromise agreement and on their right to re- le their
cases as sanctioned by the rules in cases of provisional dismissal of cases.
Napar and Lacsamana, on the other hand, led a Motion for Partial
Reconsideration 20 praying for the modi cation of the NLRC Decision in that
complainants be declared to have waived their right to their claims under the Joint
Compromise Agreement for likewise violating the agreement. EADSIa
Both motions were denied in the NLRC Resolution 21 dated October 14, 2008.
Napar and Lacsamana on the other hand, aver that petitioners' sole remedy was
to move for the execution of the Joint Compromise Agreement. They aver that
petitioners cannot be allowed to rescind the agreement after having violated the same
and having already enjoyed its bene ts. After all, the Joint Compromise Agreement is
final, binding and constitutes as res judicata between them.
Our Ruling
The Petition has merit. Petitioners' right to rescind the Joint Compromise
Agreement and right to re-file their complaints must prevail.
Petitioners validly exercised the option
of rescinding the Joint Compromise
Agreement under Article 2041 of the
Civil Code acADIT
In exercising the second option under Art. 2041, the aggrieved party may,
if he chooses, bring the suit contemplated or involved in his original demand, as
if there had never been any compromise agreement, without bringing an action
for rescission. This is because he may regard the compromise as already
rescinded by the breach thereof of the other party.
To reiterate, Article 2041 confers upon the party concerned the authority, not
only to regard the compromise agreement as rescinded but also, to insist upon his
original demand. We nd that petitioners validly exercised this option as there was
breach and non-compliance of the Joint Compromise Agreement by respondents.
"We have held that management is free to regulate, according to its own
discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner of work, processes to be
followed, supervision of workers, working regulations, transfer of employees, work
supervision, lay off of workers and discipline, dismissal and recall of workers. The
exercise of management prerogative, however, is not absolute as it must be exercised
in good faith and with due regard to the rights of labor." 40 Such "cannot be used as a
subterfuge by the employer to rid himself of an undesirable worker." 41
Respondents' non-compliance with the strict terms of the Joint Compromise
Agreement of reassigning petitioners and ensuring that they will be given work within
the required time constitutes repudiation of the agreement. As such, the agreement is
considered rescinded in accordance with Article 2041 of the Civil Code. Petitioners
properly chose to rescind the compromise agreement and exercised the option of ling
anew their complaints, pursuant to Art. 2041. It was error on the part of the CA to deny
petitioners the right of rescission.
Still, respondents insist that petitioners cannot seek rescission for they have
already enjoyed the bene ts of the Joint Compromise Agreement. According to
respondents, petitioners' acceptance of the amount of P7,000.00 each bars them from
repudiating and rescinding the agreement.
The contention lacks merit for the following reasons. First, petitioners never
accepted the meager amount of P7,000.00 as full satisfaction of their claims as they
also expected to be reassigned and reinstated in their jobs. In other words, their
acceptance of the amount of P7,000.00 each should not be interpreted as full
satisfaction of all their claims, which included reinstatement in their jobs. The amount
of P7,000.00 is measly compared to the amount of monetary award granted by LA
Espiritu and therefore makes the agreement unconscionable and against public policy.
42 At this point, it is worth noting that even quitclaims are ineffective in barring recovery
for the full measure of the worker's rights and that acceptance of bene ts therefrom
does not amount to estoppel. 43 Lastly, it must be emphasized that the Joint
Compromise Agreement expressly provided that each of the complainants shall receive
P7,000.00 as payment for their monetary claims and "which amount shall be
considered in any future litigation." 44 By virtue of this stipulation, the parties in entering
into the agreement did not rule out the possibility of any future claims in the event of
non-compliance. As correctly ruled by LA Espiritu, this proviso showed that petitioners
were not barred from raising their money claims in the future. IAcDET
In view of the foregoing, we nd that both the NLRC and CA gravely erred in
dismissing petitioners' Complaints on the ground of res judicata. LA Espiritu correctly
assumed jurisdiction and properly took cognizance of petitioners' consolidated
complaints for illegal dismissal and other monetary claims.
Petitioners are entitled to separation pay
and full backwages as well as to the
other monetary awards granted by the
Labor Arbiter
We, likewise, subscribe to LA Espiritu's ruling that petitioners, as regular
employees, are deemed to have been constructively and illegally dismissed by
respondents. Being on oating status and off-detailed for more than six months, not
having been reinstated and reassigned by respondents, petitioners are considered to
have been constructively dismissed. 48 Settled is the rule that an employee who is
unjustly dismissed from work shall be entitled to reinstatement, or separation pay if
reinstatement is no longer viable, and to his full backwages. 49
LA Espiritu awarded petitioners separation pay in lieu of reinstatement. The
Court agrees that the award of separation pay is warranted due to the already strained
relations between the parties. 50 However, aside from separation pay, petitioners, for
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having been illegally dismissed, should also be awarded full backwages, inclusive of
allowances and their other bene ts or their monetary equivalent computed from
November 9, 2002 (the date of their last work assignment or from the time
compensation was withheld from them) up to the date of finality of this Decision. aSIHcT
3. C A rollo, pp. 299-313; penned by Associate Justice Mari or P. Punzalan Castillo and
concurred in by Associate Justices Jose na Guevara-Salonga and Franchito N.
Diamante.
5. Id. at 172-174.
6. Id. at 324-325.
7. Id. at 48-50.
SYLLABUS
DECISION
KAPUNAN J :
KAPUNAN, p
The instant case illustrates a long drawn-out litigation between parties who already
entered into a compromise agreement some thirty- ve (35) years ago and which
agreement was given judicial imprimatur. One of them, up to now, still refuses to be bound
by the said judicial compromise.
Petitioner Rosita Domingo was one of the bona fide tenants-occupants of an eighty-
seven (87) hectare land located at Barrio Baesa, Caloocan City then known as the Gonzales
Estate.
Upon petition of the tenants sometime in 1947, the Republic of the Philippines
through the Rural Progress Administration (RPA) instituted an action which was docketed
as Civil Case No. 131 with the then Court of First Instance of Rizal for the expropriation of
the Gonzales Estate and its subsequent resale to the tenants thereof. The court ruled in
favor of the Republic and on appeal to this Court, the said decision was affirmed. 1
The Republic of the Philippines thereafter acquired title over the estate.
Administration of the estate was later transferred to the People's Homesite and Housing
Corporation (PHHC) by the RPA. With the change in administration came a change of
policy with regard to the resale of the subdivided lots. On March 16, 1960, the President
ordered PHHC to sell a bigger portion of the estate to persons other than the bona de
tenants-occupants of the estate.
On October 29, 1960, fty-two (52) tenants-occupants of the estate, petitioner
included, led an action to compel the Republic of the Philippines through the PHHC to sell
the entire estate to them pursuant to Commonwealth Act No. 539 and the decision of the
Supreme Court in Civil Case No. 131. Said case was docketed as Civil Case No. 6376 (later
redocketed as Civil Case No. C-760).
On May 3, 1961, private respondent Araneta Institute of Agriculture (AIA) led a
complaint in intervention on the basis of a document entitled 'KASUNDUAN NA MAY
PAGBIBIGAY KAPANGYARIHAN HINGGIL SA ASYENDA GONZALES SA BAESA,
CALOOCAN RIZAL." The said KASUNDUAN was actually a document of sale or transfer
whereby the 52 tenants conveyed unto AIA their respective landholdings in the estate. AIA
was allowed to intervene.
On November 28, 1961, AIA submitted to the lower court a Compromise Agreement
it entered into with 13 tenants-occupants of the estate. The said agreement reads in full:
COMPROMISE AGREEMENT
Quezon City and Malabon, Rizal, for Pasig, Rizal, November 28, 1961.
Sgd. Sgd
FAUSTO BAJAMONDE GREGORIO BAJAMONDE
Plaintiff Plaintiff
Sgd. Sgd.
JUAN BAJAMONDE DAMASO BAJAMONDE
Plaintiff Plaintiff
Sgd. Sgd.
ANDRES BAJAMONDE SIXTA CLEOFAS
Plaintiff Plaintiff
Sgd. Sgd.
PERFECTO BAJAMONDE ROSITA DOMINGO
Plaintiff Plaintiff
Sgd. Sgd
CATALINA PASCUAL MACARIA SANTOS
Plaintiff Plaintiff
Sgd
LAZARO PINEDA
Plaintiff
Sgd.
CRISPIN D. BAIZAS
Counsel for Plaintiffs
Shurdut Bldg., Manila
ARANETA INSTITUTE OF
AGRICULTURE
(Now ARANETA UNIVERSITY)
Intervenor
By:
Sgd.
SALVADOR ARANETA
By:
Sgd.
PORFIRIO C. DAVID
On December 23, 1961, the trial court approved the above Compromise Agreement
in a partial decision embodying the said agreement. 3
On February 6, 1962, counsel for the tenants led a motion for immediate execution
of the partial decision. The same was granted by the court on February 23, 1962.
Thereafter, PHHC led a petition for certiorari and prohibition with this Court seeking to
annul the order of execution. On November 5, 1965, said petition was dismissed.
Meanwhile, some of the 13 tenants who entered into the Compromise Agreement
with AIA led separate proceedings against the latter before the trial courts of Caloocan
City to annul the partial decision approving their agreement. All the cases were dismissed.
On her part, petitioner led Civil Case No. 473 but the same was dismissed for failure to
prosecute.
Subsequently, counsel for AIA led a Motion for Issuance of a Writ of Execution of
the Partial Decision dated December 23, 1961.
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On May 23, 1986, the lower court issued an order enforcing the said decision, the
decretal portion of which reads:
WHEREFORE, the PHHC (now National Housing Authority) is ordered to
comply with the Partial Decision dated December 23, 1961 by executing a Deed of
Conveyance and/or transfer and delivering the titles of the lots originally awarded
to plaintiffs Rosita Domingo respecting Lot 48 free from all liens and
encumbrances in favor of Intervenor Araneta Institute of Agriculture upon proof of
payment by the intervenor of the purchase price.
So ordered. 4
Petitioner filed a motion for reconsideration of the above-quoted order but the same
was denied on January 22, 1988. 5
In the meantime, even before the court could resolve the motion for reconsideration,
intervenor-private respondent led another motion for execution of the decision of
December 23, 1961.
On July 7, 1988, the trial court issued an order which dispositively reads as follows:
WHEREFORE, the Motion for Reconsideration of the Order dated January
22, 1988 [filed by intervenor-private respondent] is hereby GRANTED.
As prayed for, let a writ of execution be issued for the enforcement of the
Compromise Agreement dated November 28, 1961 and the partial Decision dated
December 23, 1961, ordering plaintiff Rosita Domingo:
SO ORDERED. 6
From the said order, petitioner appealed to the Court of Appeals raising as issues
the following, to wit: (a) the validity of the Compromise Agreement and the propriety of its
approval in the decision of December 23, 1961; (b) the applicability of the nulli cation of
the Compromise Agreement and Partial Decision by the same court on December 20,
1985; and (c) assuming that the Compromise Agreement is valid, the correctness of the
nding that intervenor-private respondent complied with the terms and obligations of the
agreement.
However, petitioner fared no better in the said appellate court. In dismissing her
petition, the Court of Appeals declared:
We shall address the first and second issues.
It will be observed that whatever the court a quo said about the Partial
Decision dated December 23, 1961, rendered by Judge Andres Reyes, approving
and embodying the Compromise Agreement dated November 23, 1961 were obiter
dicta. Being a compromise judgment, it was nal and immediately executory
(Pamintuan vs. Muñoz, 22 SCRA 1109, 1111; Pasay City Government vs. CFI
Manila, 132 SCRA 156, 157), unless a motion is led to set aside the compromise
on the ground of fraud, mistake, duress, in which event, an appeal may be taken
from the order denying the motion (De los Reyes v. Ugarte , 75 Phil. 505 [1945];
Piano vs. Cayanong, et al., 7 SCRA 397 [1963]; Cadano, et al. vs. Cadano, 49 SCRA
33 [1973]; Zagala vs. Jimenez, 152 SCRA 147, 157 [1987]). In the case at bar, no
such motion was led. Moreover, said partial decision of Judge Reyes was not an
issue submitted to the trial court in the Motion to Execute Partial Decision dated
December 23, 1961 on the basis of the Compromise Agreement dated December
11, 1961. As a matter of fact, the dispositive portion of the Order of December 20,
1985 did not declare the aforesaid partial decision (compromise judgment) dated
March 23, 1961 null and void.
To the motion for reconsideration of the Order dated January 22, 1988,
led by Intervenor-appellee on February 19, 1988, has been attached Annexes "A"
to "E", including O cial Receipts dated December 6, 1961 and December 22, 1961
showing payments made by Intervenor in compliance with the compromise
judgment. We agree with the trial court in nding them to be su cient proof of
compliance by the Intervenor with the terms and conditions of the compromise
judgment in question. In the Order of July 7, 1988, the trial court ruled:
The petitioner is now before this Court raising the same issues brought to
respondent court for consideration, viz: (a) the validity of the Compromise Agreement and
the partial decision approving the same; and (b) the admission in evidence of the receipts
of payment made by private respondent to petitioner. 8
The petition is not impressed with merit and we nd no reason to discuss the
foregoing issues, the same having been raised before, and resolved at length, by the trial
court and respondent court in their respective decisions. However, we shall reiterate the
applicability of the following pertinent principles to the instant case for clarity and
emphasis.
A compromise is a contract whereby the parties, by making reciprocal concessions,
avoid a litigation or put an end to one already commenced. 9 Essentially, it is a contract
perfected by mere consent, the latter being manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract. 1 0 Once an
agreement is stamped with judicial approval, it becomes more than a mere contract
binding upon the parties; having the sanction of the court and entered as its determination
of the controversy, it has the force and effect of any other judgment. 1 1
Consequently, a judgment rendered in accordance with a compromise agreement is
immediately executory as there is no appeal from such judgment. The reason for this rule
being that when both parties enter into an agreement to end a pending litigation and
request that a decision be rendered approving said agreement, it is only natural to
presume that such action constitutes an implicit waiver of the right to appeal against said
decision. 1 2
A compromise may however be disturbed and set aside for vices of consent or
forgery. 1 3 Hence, where an aggrieved party alleges mistake, fraud, violence, intimidation,
undue in uence, or falsity in the execution of the compromise embodied in a judgment, an
action to annul it should be brought before the Court of Appeals, in accordance with
Section 9(2) of Batas Pambansa Bilang 129, which gives that court exclusive original
jurisdiction over actions for annulment of judgments of regional trial courts.
Here, petitioner led an action 1 4 to annul the compromise judgment with the
Regional Trial Court of Caloocan City, Branch 120 on the ground of forgery. Said case was
however dismissed for failure to prosecute. Clearly then petitioner has forfeited her right
to challenge the compromise judgment not only because she did not appeal from the
order of dismissal but more so because she ventilated her remedy to the wrong court
which had undoubtedly no jurisdiction to annul the judgment of a concurrent court.
Footnotes
5. Id., at 44.
6. Id., at 93.
7. Court of Appeals Decision, pp. 8-11; Rollo, pp. 244-247.
11. Asirot v. Vda. de Rodriguez, 28 SCRA 258 [1969] citing Marquez v. Marquez, 73 Phil. 74
[1941]; See also Soler v. Reyes, 8 SCRA 691 [1963] and Araneta v. Perez, 7 SCRA 933
[1963].
12. World Machine Enterprises v. Intermediate Appellate Court, 192 SCRA 459 [1990] citing
Serrano v. Reyes, 110 Phil 536 [1960].
13. Periquet, Jr. v. Intermediate Appellate Court, 238 SCRA 697, 713 [1994] citing Master
Tours and Travel Corporation v. Court of Appeals, 219 SCRA 321, 325 [1993]; United
Housing Corp. v. Dayrit, 181 SCRA 285 [1990]; Binamira v. Ogan-Occena, 148 SCRA 677
[1987]; Go v. Trocino, 114 SCRA 443 [1982]; Sabino v. Cuba, 18 SCRA 981 [1966]; and
Araneta v. Perez, supra.
14. See page 6.
SYLLABUS
DECISION
PANGANIBAN J :
PANGANIBAN, p
May a co-owner contest as unenforceable a sale of a real property listed in and sold
pursuant to the terms of a judicially-approved compromise agreement but without the
knowledge of such co-owner? Is the corporate secretary's certi cation of the
shareholders' and directors' resolution authorizing such sale su cient, or does the buyer
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need to go behind such certification and investigate further the truth and veracity thereof?
These questions are answered by this Court as it resolves the instant petition
challenging the Decision 1 in CA-G.R. SP No. 33307 promulgated May 31, 1994 by the
respondent Court, 2 reversing the judgment of the trial court.
The Antecedent Facts
The facts as found by the respondent Court of Appeals are as follows:
"On 29 June 1984, (now herein Petitioner) Julieta Esguerra led a
complaint for administration of conjugal partnership or separation of property
against her husband Vicente Esguerra, Jr. before (the trial) court. The said
complaint was later amended on 31 October 1985 impleading V. Esguerra
Construction Co., Inc. (VECCI for brevity) and other family corporations as
defendants (Annex 'C', p. 23, Rollo).
The parties entered into a compromise agreement which was submitted to
the court. On the basis of the said agreement, the court on 11 January 1990
rendered two partial judgments: one between Vicente and (herein petitioner) and
the other as between the latter and VECCI (Annex 'F' and 'G', pp. 26-27, Rollo). The
compromise agreement between (herein petitioner) and VECCI provides in part:
Not being a party to the civil case, (private respondent Sureste) on 23 June
1993 led a Manifestation concerning (herein petitioner's) motion to declare the
s a l e void ab initio. In its Manifestation (Sureste) points out that in the
compromise agreement executed by VECCI and (Julieta V. Esguerra), she gave her
express consent to the sale of the said building (p. 38, Rollo).
On 05 August 1993, respondent judge (who took over the case from Judge
Buenaventura Guerrero, now Associate Justice of this court) issued an Omnibus
Order denying among others, (Sureste's) motion, to which a motion for
reconsideration was filed. 3
After trial on the merits, the Regional Trial Court of Makati, Branch 133, 4 rendered
its order, the dispositive portion of which reads:
"WHEREFORE, the Court resolves as it is resolved that:
SO ORDERED." 5
From the foregoing order, herein private respondent Sureste Properties, Inc.
interposed an appeal with the Court of Appeals which ruled in its favor, viz.:
"From the foregoing, it is clear that respondent judge abused his discretion
when he rendered the sale of the property unenforceable with respect to one-half.
SO ORDERED." 6
Julieta Esguerra's Motion for Reconsideration 7 dated June 15, 1994 was denied by
the respondent Court in the second assailed Resolution 8 promulgated on February 23,
1995.
Hence this petition.
The Issues
Petitioner submits the following assignment of errors:
". . . (I)n issuing the Decision (Annex 'A' of the petition) and the Resolution
(Annex 'B' of the petition), the Court of Appeals decided questions of substance
contrary to law and applicable jurisprudence and acted without jurisdiction
and/or with grave abuse of discretion when:
It validated the sale by VECCI to Sureste of the subject property without the
knowledge and consent of the acknowledged co-owner thereof and in
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contravention of the terms of the compromise agreement as well as the
Resolution of this Honorable Court in G.R. No. 100441 wherein this Honorable
Court recognized herein petitioner's 'acknowledged ownership of — one-half of the
subject property; and,
It held that the trial court acted without jurisdiction and/or abused its
discretion when it held that the questioned sale of the property is ineffectual and
unenforceable as to herein petitioner's one-half (1/2) ownership/interest in the
property since the sale was made without her knowledge and consent.
B E C A U S E:
B. The sale of the subject property was made in violation of the terms
of the compromise agreement in that it was not made with the approval/consent
of the acknowledged owner of 1/2 of the said asset;
Simply put, petitioner (1) assails VECCI's sale of Esguerra Building II to private
respondent as unenforceable to the extent of her one-half share, and (2) accuses the
appellate court of "acting without jurisdiction or with grave abuse of discretion" in
reversing the trial court's finding to that effect.
The Court's Ruling
The petition has no merit.
First Issue: Is the Contract of Sale Unenforceable?
The Civil Code provides that a contract is unenforceable when it is ". . . entered into
in the name of another person by one who has been given no authority or legal
representation, or who has acted beyond his powers." 1 0 And that "(a) contract entered
into in the name of another by one who has no authority or legal representation, or who has
acted beyond his powers, shall be unenforceable, . . ." 1 1 After a thorough review of the
case at bench, the Court nds the sale of Esguerra Building II by VECCI to private
respondent Sureste Properties, Inc. valid. The sale was expressly and clearly authorized
under the judicially-approved compromise agreement freely consented to and voluntarily
signed by petitioner Julieta Esguerra. Thus, petitioner's contention that the sale is
unenforceable as to her share for being unauthorized is plainly incongruous with the
express authority granted by the compromise agreement to VECCI, which speci ed no
condition that the latter shall rst consult with the former prior to selling any of the
properties listed there. As astutely and correctly found by the appellate Court:
Moreover, petitioner's contention runs counter to Article 1900 of the Civil Code
which provides that:
"So far as third persons are concerned, an act is deemed to have been
performed within the scope of the agent's authority, if such act is within the terms
of the power of attorney, as written, even if the agent has in fact exceeded the
limits of his authority according to an understanding between the principal and
the agent."
Thus, as far as private respondent Sureste Properties, Inc. is concerned, the sale to
it by VECCI was completely valid and legal because it was executed in accordance with the
compromise agreement, authorized not only by the parties thereto, who became co-
principals in a contract of agency created thereby, but by the approving court as well.
Consequently, the sale to Sureste Properties, Inc. of Esguerra Building II cannot in any
manner or guise be deemed unenforceable, as contended by petitioner.
Consultation in the Sale of Esguerra Building I
Not a Binding Precedent
The petitioner further argues that VECCI's consulting her on the terms and
conditions of its sale of Esguerra Building I set a binding precedent to be followed by the
latter on subsequent sales. She adds that in failing to consult her on the sale of Esguerra
Building II, VECCI "acted unfairly and unjustly" as evidenced by (a) the sale of said building
for only P160,000,000.00 instead of P200,000,000.00, which is "the best price obtainable
in the market," (b) payment of real estate broker's commission of 5% instead of just 2% as
in the sale of Esguerra 1 building, and (c) the denial of petitioner's right of rst refusal
when her offer to purchase her one-half share for P80,000,000.00 as ordered by the trial
court was totally ignored. 13
The Court is not persuaded. Petitioner's argument is debunked by the very nature of
a compromise agreement. The mere fact that petitioner Julieta Esguerra was consulted by
VECCI in the sale of Esguerra Building I did not affect nor vary the terms of the authority to
sell granted the former as expressly spelled out in the judicially-approved compromise
agreement because "a compromise once approved by nal orders of the court has the
force of res judicata between the parties and should not be disturbed except for vices of
consent or forgery." 1 4 Hence, "a decision on a compromise agreement is nal and
executory, . . ." 1 5
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Petitioner insists that had she been consulted in the sale of Esguerra Building II,
better terms could have been obtained. This is plainly without legal basis since she already
consented to the compromise agreement which authorized VECCI to sell the properties
without the requirement of prior consultation with her. "It is a long established doctrine
that the law does not relieve a party from the effects of an unwise, foolish, or disastrous
contract, entered into with all the required formalities and with full awareness of what he
was doing. Courts have no power to relieve parties from obligations voluntarily assumed,
simply because their contracts turned out to be disastrous deals or unwise investments."
16 It is a truism that "a compromise agreement entered into by party-litigants, when not
contrary to law, public order, public policy, morals, or good custom is a valid contract
which is the law between the parties themselves. It follows, therefore, that a compromise
agreement, not tainted with in rmity, irregularity, fraud or illegality is the law between the
parties who are duty bound to abide by it and observe strictly its terms and conditions" 17
as in this case. Incidentally, private respondent Sureste Properties, Inc. submits that the
petitioner offered to buy her one-half share for only P75,000,000.00, not P80,000,000.00.
18 She therefore valued the whole building only at P150,000,000.00 which amount is
P10,000,000.00 less than the price of P160,000,000.00 paid by private respondent, the
highest offer the market has produced in two and a half years the building was offered for
sale. Even the 5% real estate broker's commission was not disparate with the standard
practice in the real estate industry. Thus, the respondent Court aptly stated that: cdasia
Contrary to petitioner's asseverations, the Court nds that the respondent Court of
Appeals judiciously, correctly and certainly acted within its jurisdiction in reversing the trial
court's decision. As discussed, its decision is consistent with law and existing
jurisprudence.
Let it be emphasized that Rule 45 of the Rules of Court, under which the present
petition was led, authorizes only reversible errors of the appellate court as grounds for
review, and not "grave abuse of discretion" which is provided for by Rule 65. It is basic that
where Rule 45 is available, and in fact availed of as a remedy — as in this case — recourse
under Rule 65 cannot be allowed either as an add-on or as a substitute for appeal.
Finally, "(c)ourts as a rule may not impose upon the parties a judgment different
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from their compromise agreement. It would be an abuse of discretion." 33 Hence, in this
case, it is the trial court's decision which is tainted with grave abuse of discretion for
having injudiciously added "prior consultation" to VECCI's authority to sell the properties, a
condition not contained in the judicially-approved compromise agreement.
WHEREFORE, the petition is hereby DENIED for lack of merit, no reversible error
having been committed by respondent Court. The assailed Decision is AFFIRMED in toto.
Costs against petitioner.
SO ORDERED.
Narvasa, C .J ., Davide, Jr., Melo and Francisco, concur.
Footnotes
5. Rollo, p. 117.
6. Ibid., p. 51.
7. Ibid., pp. 178-195
8. Ibid., pp. 53-55.
9. Memorandum for the Petitioner, pp. 11-12; Rollo, pp. 292-293.
10. Article 1403, paragraph 1, Civil Code.
DECISION
PANGANIBAN J :
PANGANIBAN, p
"On June 3, 1997, [petitioners] led an Urgent Motion for Issuance of Writ
of Execution wherein they con rmed that each of them received P40,000 from
[respondent] on May 2, 1997.
"On June 9, 1997, [respondent] opposed the motion on the ground that the
judgment award had been fully satis ed. In their Reply, [petitioners] claimed that
they received only partial payments of the judgment award.
"On October 20, 1997, six (6) of the eight (8) [petitioners] led a
Manifestation requesting that the cases be considered closed and terminated as
they are already satis ed of what they have received (a total of P320,000) from
[respondent]. Together with said Manifestation is a Joint A davit in the local
dialect, dated October 20, 1997, of the six (6) [petitioners] attesting that they have
no more collectible amount from [respondent] and if there is any, they are
abandoning and waiving the same. EASCDH
"On February 27, 1998, the Labor Arbiter issued an order denying the
motion for issuance of writ of execution and [considered] the cases closed and
terminated . . .
"2. Whether or not the petitioners' a davit waiving their awards in [the]
labor case executed without the assistance of their counsel and labor arbiter is
valid;
The rst paragraph of Article 2040 refers to a scenario in which either or both of the
parties are unaware of a court's nal judgment at the time they agree on a compromise. In
this case, the law allows either of them to rescind the compromise agreement. It is evident
from the quoted paragraph that such an agreement is not prohibited or void or voidable.
Instead, a remedy to impugn the contract, which is an action for rescission, is declared
available. 2 2 The law allows a party to rescind a compromise agreement, because it could
have been entered into in ignorance of the fact that there was already a nal judgment.
Knowledge of a decision's nality may affect the resolve to enter into a compromise
agreement.
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The second paragraph, though irrelevant to the present case, refers to the instance
when the court's decision is still appealable or otherwise subject to modi cation. Under
this paragraph, ignorance of the decision is not a ground to rescind a compromise
agreement, because the parties are still unsure of the nal outcome of the case at this
time.
Petitioners' argument, therefore, fails to convince. Article 2040 of the Civil Code
does not refer to the validity of a compromise agreement entered into after nal judgment.
Moreover, an important requisite, which is lack of knowledge of the nal judgment, is
wanting in the present case.
Supported by Case Law
The issue involving the validity of a compromise agreement notwithstanding a nal
judgment is not novel. Jesalva v. Bautista 2 3 upheld a compromise agreement that covered
cases pending trial, on appeal, and with nal judgment. 2 4 The Court noted that Article
2040 impliedly allowed such agreements; there was no limitation as to when these should
be entered into. 2 5 Palanca v. Court of Industrial Relations 2 6 sustained a compromise
agreement, notwithstanding a nal judgment in which only the amount of back wages was
left to be determined. The Court found no evidence of fraud or of any showing that the
agreement was contrary to law, morals, good customs, public order, or public policy. 2 7
Gatchalian v. Arlegui 2 8 upheld the right to compromise prior to the execution of a
nal judgment. The Court ruled that the nal judgment had been novated and superseded
by a compromise agreement. 2 9 Also, Northern Lines, Inc. v. Court of Tax Appeals 3 0
recognized the right to compromise nal and executory judgments, as long as such right
was exercised by the proper party litigants. 3 1
Rovero v. Amparo , 3 2 which petitioners cited, did not set any precedent that all
compromise agreements after nal judgment were invalid. In that case, the customs
commissioner imposed a ne on an importer, based on the appraised value of the goods
illegally brought to the country. The latter's appeal, which eventually reached this Court,
was denied. Despite a nal judgment, the customs commissioner still reappraised the
value of the goods and effectively reduced the amount of ne. Holding that he had no
authority to compromise a final judgment, the Court explained:
"It is argued that the parties to a case may enter into a compromise about
even a nal judgment rendered by a court, and it is contended . . . that the
reappraisal ordered by the Commissioner of Customs and sanctioned by the
Department of Finance was authorized by Section 1369 of the [Revised
Administrative Code]. The contention may be correct as regards private
parties who are the owners of the property subject-matter of the
litigation, and who are therefore free to do with what they own or what
is awarded to them, as they please, even to the extent of renouncing the
award, or condoning the obligation imposed by the judgment on the
adverse party . Not so, however, in the present case. Here, the Commissioner of
Customs is not a private party and is not the owner of the money involved in the
ne based on the original appraisal. He is a mere agent of the Government and
acts as a trustee of the money or property in his hands or coming thereto by virtue
of a favorable judgment. Unless expressly authorized by his principal or by law,
he is not authorized to accept anything different from or anything less than what
is adjudicated in favor of the Government." 3 3 (Bold types supplied)
SHDAEC
"The settlement shall be approved by the Labor Arbiter after being satis ed
that it was voluntarily entered into by the parties and after having explained to
them the terms and consequences thereof. EAHcCT
"A compromise agreement entered into by the parties not in the presence of
the Labor Arbiter before whom the case is pending shall be approved by him, if
after confronting the parties, particularly the complainants, he is satis ed that
they understand the terms and conditions of the settlement and that it was
entered into freely and voluntarily by them and the agreement is not contrary to
law, morals, and public policy." 5 1
Footnotes
3. Id., p. 71.
4. Id., p. 27.
5. Assailed Decision, pp. 2-6; rollo, pp. 17-21.
9. The case was deemed submitted for decision on October 5, 2004, upon this Court's
receipt of petitioners' Memorandum, signed by Atty. Mariano R. Pefianco. Respondent's
Memorandum, signed by Attys. Nicolas P. Lapeña Jr. and Gilbert F. Ordoña, was
received by this Court on September 8, 2004.
11. Art. 2028, Civil Code; Manila International Airport Authority v. ALA Industries
Corporation, 422 SCRA 603, 609, February 13, 2004; Ramnani v. Court of Appeals, 413
Phil. 194, 207, July 10, 2001; Abarintos v. Court of Appeals, 374 Phil. 157, 168,
September 30, 1999; Del Rosario v. Madayag, 317 Phil. 883, 887, August 28, 1995.
12. Armed Forces of the Philippines Mutual Benefit Association, Inc. v. Court of Appeals,
311 SCRA 143, 154, July 26, 1999.