Pasco v. Heirs of Filomena | G.R. No. 165554 | July 26, 2010 | Del Castillo, J.

Petitioners: Lazaro Pasco & Lauro Pasco

Respondents: Heirs of Filomena De Guzman, represented by Cresencia De Guzman-Principe

SUMMARY: Petitioners owed Filomena 140k which was secured by a chattel mortgage over petitioner’s isuzu jeep. Upon
Filomena’s death, the heirs demanded and eventually filed a collection suit against the petitioners. The
parties settled the case and the MTC approved the compromise agreement. Thereafter, the petitioners
assailed the validity of the compromise agreement alleging procedural defects, fraud and assailed the SPA in
favor of the respondent who filed the case on behalf of her coheirs. The SC ultimately ruled that the
compromise agreement and SPA was valid since the claim of fraud was unsubstantiated and that the power
to institute the case was necessarily included. However, the SC noted that the money collected from the
petitioners should not immediately go to the heirs as the status of the estate settlement had not been shown.
To release the money to the heirs would be tantamount to distribution which should only occur after the
liabilities of the estate have been shown to be settled.

FACTS:

 Dec, 2000: Respondents filed a complaint for Sum of Money and Damages against petitioners in the MTC of Bocaue,
Bulacan
o Respondents alleged that in 1997, petitioners got a loan of PHP 140k from Filomena. The loan was secured
by a chattel mortgage over Lauro’s Isuzu Jeep in favor of Filomena
o Upon Filomena’s death, her heirs repeatedly demanded from the petitioners, to no avail. They refused to
pay the loan and refused to surrender the jeep.
o The respondents then filed this collection suit for the 140k + damages + interest + fees
 Filomena’s 5 heirs authorized Cresencia to act as attorney-in-fact through an SPA executed in 1999 to do the
following on behalf of her co-heirs
o To represent us on all matters concerning the intestate estate of our deceased sister, Filomena de
Guzman;
o To file cases for collection of all accounts due said Filomena de Guzman or her estate, including the power
to file petition for foreclosure of mortgaged properties;
o To do and perform all other acts necessary to carry out the powers hereinabove conferred
 During pretrial, the parties verbally agreed to settle.
 In Feb 21, 2002, the parties jointly filed a compromise agreement, signed by both parties and their counsel. The
Agreement contained the following.
o That petitioners admit their principal loan and obligation to the [respondents] in the sum of P140,000.00;
in addition to the incidental and other miscellaneous expenses that they have incurred in the pursuit of
this case, in the further sum of P18,700.00;
o That, petitioners undertake to pay to the [respondents] their aforementioned obligations, together with
attorneys fees equivalent to ten percentum (10%) of the total sum thereof, directly at the BULACAN
OFFICE of the [respondents] counsel, located at No. 24 Hornbill Street, St. Francis Subdivision, Bo.
Pandayan, Meycauayan, Bulacan, WITHOUT NEED OF FURTHER DEMAND in the following specific manner,
to wit: P60,000.00 to be paid on or before May 15, 2002 P10,000.00 monthly payments thereafter, starting
June 15, 2002 up to and until the aforementioned obligations shall have been fully paid
o That, provided that [petitioners] shall truly comply with the foregoing specifically agreed manner of
payments, [respondents] shall forego and waive all the interests charges of 5% monthly from February 7,
1998 and the 25% attorneys fees provided for in Annex AA of the Complaint
o In the event of failure on the part of the [petitioners] to comply with any of the specific provisions of this
Compromise Agreement, the [respondents] shall be entitled to the issuance of a Writ of Execution to
enforce the satisfaction of [petitioners] obligations, as mentioned in paragraph 1, together with the 5%
monthly interests charges and attorneys fees mentioned in paragraph 3 thereof
 The MTC approved the compromised agreement.
 However, petitioners filed a MOTION TO SET ASIDE DECISION alleging that
 o it was written in a language that they didn’t understand
o the terms and conditions weren’t fully explained
o they then questioned the MTC’s jurisdiction because the amount they owed was at P585,500
 MTC denied said motion and granted Cresencia’s prayer for the issuance of a writ of execution
 Petitioners then filed a Petition for Certiorari and Prohibition before the RTC and argued that
o The MTC gravely abused its discretion because
 the amount was beyond the jurisdictional limit
 Cresencia had no authority because Filomena’s estate had a personality of its own
 Compromise Agreement was void for failure to explain the terms and conditions
o Respondents argued that the principal amount of 140k was within the MTC jurisdiction
 Records reveal that petitioners themselves, assisted by counsel, proposed the terms.
 RTC dismissed the petition, CA agrees
o MTC had jurisdiction, Cresencia was authorized, and MTC’s approval wasn’t tainted with GAD
o MR denied
 Hence this petition

ISSUES + RULING:

1. Whether or not the MTC had jurisdiction? YES

o BP 129 fixes the MTC’s jurisdiction to cases where the demand does not exceed 200k exclusive of interest,
damages of whatever kind, atty’s fees, litigation expenses, and costs.
o Hence, 140k principal amount falls within said range.
2. Whether or not the petitioners properly resorted to the special civil action of certiorari? Yes
o Petitioners properly resorted to the special civil action of certiorari.
o The CA held that the proper remedy from the MTCs Order approving the Compromise Agreement was a
Petition for Relief from Judgment under Rule 38 and not a Petition for Certiorari under Rule 65.
o SC recalls that petitioners filed a Motion to Set Aside Decision which was denied by the MTC.
 This order of denial was properly the subject of a petition for certiorari, pursuant to Rule 41,
Section 1, of the Rules of Court.
o MTCs denial of petitioners Motion to Set Aside Decision could not have been appealed.
 A decision based on a compromise agreement is immediately final and executory and cannot be
the subject of appeal. It is a presumed waiver of the right to appeal
o Thus Rule 65 was proper
3. Whether or not Cresencia was authorized to enter into the compromise agreement? Yes
o It is undisputed that her coheirs executed a SPA designating her as their attorney-in-fact
 They empowered her to file cases for collection of all the accounts due to Filomena or her estate.
 Consequently, she entered into the compromise agreement to collect the loan due.
 She merely performed her duty
o Trinidad v CA: It was held that the SPA necessarily included the power of the attorney-in-fact to
compromise the case.
o Also, the petitioners never assailed the validity of the SPA during pre-trial, said matter wasn’t even raised
in the motion to set aside the compromise agreement or in the petition before the RTC. It was only
assailed months after in December, 2002.
4. Whether or not the interest should be reduced? Yes
o The stated interest rate should be reduced.
o SC finds the 5% monthly interest rate stipulated in the Compromise Agreement to be iniquitous and
unconscionable.
o The legal interest of 12% per annum must be imposed in lieu of the excessive interest stipulated in the
agreement.
o The 5% monthly interest rate, or 60% per annum, compounded monthly, stipulated in the Kasulatan is
even higher than in previous cases.
o Thus, SC holds the 5% monthly interest to be excessive, iniquitous, unconscionable and exorbitant,
contrary to morals, and the law.
 5. Whether or not the proceeds of the loan should be released to Filomenas heirs only upon settlement of her
estate? Yes
o Filomenas estate has a different juridical personality than that of the heirs.
o Nonetheless, her heirs have an interest in the preservation of the estate and the recovery of its properties,
 At the moment of Filomenas death, the heirs start to own the property, subject to the decedent's
liabilities.
 Article 777 of the Civil Code states that the rights to the succession are transmitted from the
moment of the death of the decedent.
o However, the records do not show the status of the proceedings for the settlement of the estate of
Filomena, if any.
 To allow the release of the funds directly to the heirs would amount to a distribution of the estate
 distribution and delivery should be made only after, not before, the payment of all debts, charges,
expenses, and taxes of the estate have been paid.
o SC thus orders that Cresencia should deposit the amounts received the MTC of Bocaue, Bulacan
 The MTC should hold in abeyance the release of the amounts to Filomenas heirs until after a
showing that the proper procedure for the settlement of Filomenas estate has been followed.

Disposition: WHEREFORE, the petition is DENIED.

The May 13, 2004 Decision of the Court of Appeals and its October 5, 2004 Resolution are AFFIRMED with MODIFICATIONS
that the interest rate of 5% per month (60% per annum) is ordered reduced to 12 % per annum. Respondent Cresencia De
Guzman-Principe is DIRECTED to deposit with the Municipal Trial Court of Bocaue, Bulacan the amounts received from the
petitioners. The Municipal Trial Court of Bocaue, Bulacan is likewise DIRECTED to hold in abeyance the release of any
amounts recovered from the petitioners until after a showing that the procedure for settlement of estates of Filomena de
Guzmans estate has been followed, and after all charges on the estate have been fully satisfied. SO ORDERED