Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 194560 June 11, 2014

NESTOR T. GADRINAB, Petitioner,

vs.
NORAT. SALAMANCA, ANTONIO TALAO AND ELENA LOPEZ, Respondents.

DECISION

LEONEN, J.:

A judgment on compromise agreement is a judgment on the merits. It has the effect of res judicata,
and is immediately final and executory unless set aside because of falsity or vices of consent. The
doctrine of immutability of judgments bars courts from modifying decisions that have already attained
finality, even if the purpose of the modification is to correct errors of fact or law.

This Rule 45 petlt10n seeks the review of the Court of Appeals' Decision dated July 22, 2010 and its
1

resolution dated November 19, 2010.

2

The Court of Appeals dismissed petitioner’s appeal and affirmed the Regional Trial Court’s decision
granting respondent Salamanca’s motion for physical partition pending the execution of a judgment
on compromise agreement between the parties.

Respondents, together with Adoracion Gadrinab and Arsenia Talao, are siblings and heirs of the late
Spouses Talao, Nicolas and Aurelia. The Spouses Talao died intestate, leaving a parcel of land in
3

Sta. Ana, Manila. 4

The five Talao children divided the property among themselves through an extrajudicial
settlement. Subsequently, Arsenia Talao waived her share over the property in favor of her siblings.
5 6

Respondent Salamanca filed 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. They also claimed shares in the rentals
8

collected from one of the units of a duplex apartment on the property. The total amount of rental
9

collection in the possession of Jose Lopez was 528,623.00. The amount, according to Jose’s
10

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);
 2) That the subject property will be appraised by independent appraiser and the appraised
value will be divided into four. Mr. Antonio Talao will pay in advance the share of Francisco
Gadrinab immediately after the report of the said appraisal;

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;

4) That the rental collection in its total amount of Five Hundred Twenty Eight Thousand and
Six Hundred Twenty Three Pesos (528,623.00) and the uncollected amount up to February
2003 once collected will be divided among the parties;

5) That the amount of 528,623.00 divided by four be distributed among the parties will be
given to all parties on or before March 12, 2003 by Mr. Antonio Talao;

6) That upon payment of the appraised value to Francisco Gadrinab, Mr. Nestor Gadrinab is
given forty-five (45) days within which to leave the premises in question;

7) That the parties agreed to waive all their claims and counter-claims arising from this case;
and

8) That the parties agreed to request this Honorable Court that a decision be issued base
[sic] on this Compromise Agreement or this Compromise Agreement be submitted before this
Honorable Court for approval. 12

On April 10, 2003, the Regional Trial Court approved the compromise agreement. Based on the
13

entry of judgment, the case became final and executory on April 10, 2003. 14

Nestor Gadrinab filed a motion for execution of the compromise agreement. He demanded his one-
15

fourth share in the accumulated rentals. During the hearing on the motion for execution, the parties
16

agreed that the rentals shall be divided only into three since Nestor had already been occupying one
of the duplex units. The parties also agreed that Antonio Talao would shoulder Nestor’s share,
17

equivalent to one-fourth of the rental amount. 18

Pursuant to the compromise agreement, Cuervo Appraiser appraised the property. Unsatisfied with
19

the appraisal, Antonio Talao moved for the property’s reappraisal. This was denied by the Regional
20

Trial Court. 21

The portion of the duplex that Nestor refused to vacate, remained unsold.
22 23

Because of the attitude of her co-heirs, respondent Salamanca moved for the physical partition of
the property before the Regional Trial Court of Manila. She prayed for the physical partition of the
24

property instead of having it sold.

25

Nestor and Francisco Gadrinab opposed the motion. They contended that the judgment on the
26

compromise agreement had already become final and executory and had the effect of res
judicata. Antonio Talao and Jose Lopez did not object to the motion for physical partition.
27 28

On December 29, 2005, the Regional Trial Court of Manila granted the motion for physical partition. 29
Nestor and Francisco Gadrinab appealed to the Court of Appeals. They assailed the grant of
Salamanca’s motion for physical partition after the issuance of the judgment on compromise
agreement. 30

In a decision promulgated on July 22, 2010, the Court of Appeals dismissed the appeal. The Court
31

of Appeals ruled that the exception to the immutability of judgments, that is, "whenever
circumstances transpire after the finality of the decision rendering its execution unjust and
inequitable," applies in this case. The Court of Appeals specifically noted that the "parties’
32

seemingly endless disagreements on matters involving the disposition of the subject property" were 33

such circumstances that rendered the compromise agreement’s execution unjust and inequitable.
The Court of Appeals agreed with the Regional Trial Court’s ruling that "the proposed physical
partition of the subject lot . . . is just another way of enforcing the [c]ourt’s decision and will not in
anyway vary the parties’ agreement nor affect their right over the property." 34

On November 19, 2010, the Court of Appeals denied petitioner’s motion for reconsideration. 35

Hence, this petition was filed.

Petitioner argued that the Court of Appeals erred in affirming the Regional Trial Court’s order
granting respondent Salamanca’s motion for physical partition. A judgment on the compromise
36

agreement had already been rendered and had attained finality. Petitioner also argued that the
37

Court of Appeals failed to consider the following terms of the compromise agreement:

2. That the subject property will be appraised by independent appraiser and the appraised
value will be divided into four (4). Mr. Antonio Talao will pay in advance the share of
Francisco Gadrinab immediately after the report of the said appraisal;

....

4. That the rental collection in its total amount of FIVE HUNDRED TWENTY EIGHT
THOUSAND SIX HUNDRED TWENTY THREE PESOS (Php528,623.00) and the
uncollected amount up to February 2003 once collected [sic] will be divided among the
parties;

5. That the amount of FIVEHUNDRED TWENTY EIGHT THOUSAND SIX HUNDRED

TWENTY THREE PESOS Php528,623.00 divided by four (4) among the parties will be given
to all parties on or [sic] March 12, 2003 by Mr. Antonio Talao at Greenbelt, Mc Donald at 9:00
o’clock in the morning;

6. That upon payment of the appraised value to Mr. Francisco Gadrinab, Mr. Nestor
Gadrinab is given forty five (45) days within which to leave the premises in
question[.] (Emphasis in the original)
38

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. On the other hand, petitioner still had not been paid his share, prompting him to file the
39 40

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. According to him, had there been a full-blown trial on the action for partition, he would
43

have been able to present evidence of exclusive possession of half of 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. The non-compliance of some of the parties with
45

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. The order granting the motion for physical partition was a mere enforcement
47

of the compromise agreement, which entitled the parties to their shares in the proceeds of the
sale. Respondent Salamanca pointed out that the grant of the motion for physical partition would
48

still be consistent with the intent of the compromise agreement since it would result in the proceeds
being divided equally among the parties. "The Order granting the physical partition was within the
49

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 affirming the Regional Trial Court’s
decision allowing the physical partition of the property despite finality 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 filed two actions for physical partition. The two parties settled the first action
through a judicial compromise agreement. The same respondent filed the second action after she
had determined that her co-heirs were not being cooperative in complying with the compromise
agreement.

In a compromise agreement, the parties freely enter into stipulations. "[A] judgment based on a
compromise agreement is a judgment on the merits" of the case. It has the effect of res judicata.
52

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.

In Spouses Romero v. Tan, this court said:

53
It is well settled that a judicial compromise has the effect of res judicata and is immediately executory
and not appealable unless set aside [by mistake, fraud, violence, intimidation, undue influence, or
falsity of documents that vitiated the compromise agreement]. 54

There is res judicata when the following concur:

1. Previous final judgment;

2. By a court having jurisdiction over the parties and the subject matter;

3. On the merits of the case;

4. Between identical parties, on the same subject matter, and cause of action 55

There are two rules that embody the principle of res judicata. The first rule refers to "bar by prior
judgment," which means that actions on the same claim or cause of action cannot be
56

relitigated. This rule is embodied in Rule 39, Section 47, paragraph (b) of the Rules of Court, which
57

provides:

Section 47. Effect of judgments or final orders. — The effect of a judgment or final order rendered by
a court of the Philippines, having jurisdiction to pronounce the judgment or final order, may be as
follows:

(b) In other cases, the judgment or final 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." This means that facts already tried and
58

determined in another action involving a different claim or cause of action cannot anymore be
relitigated. This rule is embodied in Rule 39, Section 47, paragraph (c) of the Rules of Court, which
59

provides:

Section 47. Effect of judgments or final orders. — The effect of a judgment or final order rendered by
a court of the Philippines, having jurisdiction to pronounce the judgment or final order, may be as
follows:

....

(c) In any other litigation between the same parties or their successors in interest, that only is
deemed to have been adjudged in a former judgment or final order which appears upon its face to
have been so adjudged, or which was actually and necessarily included therein or necessary
thereto. (49a)

This case involves "bar by prior judgment." Respondents cannot file another action for partition after
final 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 the doctrine of finality of
60

judgment:
Under the doctrine of finality of judgment or immutability of judgment, a decision that has acquired
finality becomes immutable and unalterable, and may no longer be modified in any respect, even if
the modification 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:

1. "The correction of clerical errors;

2. the so-called nunc pro tunc entries which cause no prejudice to any party;

3. void judgments; and

4. whenever circumstances transpire after the finality of the decision rendering its execution
unjust and inequitable." 62

Doctrines on bar by prior judgment and immutability of judgment apply whether judgment is rendered
after a full-blown trial or after the parties voluntarily execute a compromise agreement duly approved
by the court.

Because a judicial compromise agreement is in the nature of both an agreement between the parties
and a judgment on the merits, it is covered by the Civil Code provisions on contracts. It can be
avoided on grounds that may avoid an ordinary contract, e.g., it is not in accord with the law; lack of
63

consent by a party; and existence of fraud or duress. Further, the pertinent Civil Code provisions on
compromise agreements provide:

Article 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence,
or falsity of documents is subject to the provisions of Article 1330 of this Code.

Article 1330. A contract where consent is given through mistake, violence, intimidation, undue
influence, or fraud is voidable.

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 final 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 final judgment on compromise fails to persuade. A
supervening event may justify the disturbance of a final judgment on compromise if it "brought about
a material change in [the] situation" between the parties. The material change contemplated must
64

render the execution of the final 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 hand, the judgment granting the
second action for partition filed by respondent Salamanca was obtained with opposition.

Judges "have the ministerial and mandatory duty to implement and enforce [a compromise
agreement]." Absent appeal or motion to set aside the judgment, courts cannot modify, impose
66

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." Further, "[t]he mere fact that the Compromise Agreement favors one party does not render
68

it invalid." Courts do not have power to "alter contracts in order to save [one party]
69

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
1âwphi1

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 final 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 finally resolved, the execution may forthwith be applied for
in the court of origin, on motion of the judgment obligee, submitting therewith certified true copies of
the judgment or judgments or final 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 filed in accordance with Rule 71 of the Rules of Court:
Section 3. Indirect contempt to be punished after charge and hearing. — After a charge in writing
has been filed, and an opportunity given to the respondent to comment thereon within such period
as may be fixed 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;

....

(b) Disobedience of or resistance to a lawful writ, process, order, or judgment of a court, including
the act of a person who, after being dispossessed or ejected from any real property by the judgment
or process of any court of competent jurisdiction, enters or attempts or induces another to enter into
or upon such real property, for the purpose of executing acts of ownership or possession, or in any
manner disturbs the possession given to the person adjudged to be entitled thereto[.]

Since a judgment on compromise agreement is effectively a judgment on the case, proper remedies
against ordinary judgments may be used against judgments on a compromise agreement. Provided
these are availed on time and the appropriate grounds exist, remedies may include the following: a)
motion for reconsideration; b) motion for new trial; c) appeal; d) petition for relief from judgment; e)
petition for certiorari; and f) petition for annulment of judgment.
71

Respondent Salamanca knew that the only reason for the failed compromise agreement was the
non-compliance with the agreement’s terms of some of her co-heirs. Particularly, it was stipulated
that petitioner’s removal from the property was conditioned upon payment of an amount equivalent
to his share. Respondent Talao refused to abide by his own undertaking to shoulder respondent
Salamanca’s share. He also refused to acknowledge the appraisal of the appraiser appointed in the
compromise agreement. This refusal caused the failure of the compromise agreement.

Instead of availing herself of the proper remedies so the compromise could be enforced and the
partition could be effected, respondent Salamanca chose to move again for the partition of the
property and set aside a valid and final judgment on compromise. This court cannot allow such
motion to prosper without going against law and established jurisprudence on judgments.

WHEREFORE, the Court of Appeals’ decision is REVERSED and SET ASIDE. The judgment on the
compromise agreement is REINSTATED.

SO ORDERED.

MARVIC MARIO VICTOR F. LEONEN

Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

DIOSDADO M. PERALTA MARTIN S. VILLARAMA, JR.*

Associate Justice Associate Justice

JOSE CATRAL MENDOZA

Associate Justice
 ATT E STATI O N

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson, Third Division

C E RTI F I CATI O N

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 104133 April 18, 1995

SPOUSES EMILIO ABINUJAR and MILAGROS M. LANA, petitioners,

vs.
THE COURT OF APPEALS and SPOUSES SANTIAGO RAMIRO and FLORENTINA RAMIRO, respondents.

QUIASON, J.:

This is a petition for review on ceitiorari 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.

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 financial and business
reverses, petitioners were not able to redeem the property within four months as agreed upon.

On October 24, 1989, private respondents filed 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 specifically indicated herein below:

a. P50,000.00 on Jan. 31, 1990;

b. 10,000.00 on Feb. 28, 1990;

c. 10,000.00 on March 31, 1990;

d. 10,000.00 on April 30, 1990;

e. 10,000.00 on May 31, 1990;

f. 10,000.00 on June 30, 1990;

g. 10,000.00 on July 31,1990;

h. 10,000.00 on August 31, 1990;

i. 10,000.00 on September 30, 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 filed a motion for execution on the ground that petitioners failed to pay the first
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 filed 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 P50,000.

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 filed a motion asking that the check payments 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 filed 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 filed 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).

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]).

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.

The non-fulfillment of the terms and conditions of a compromise agreement approved by the court justifies execution
thereof and the issuance of the writ for said purpose is the court's ministerial duty enforceable by mandamus (Maceda,
Jr. v. Moreman Builders Co., Inc., 203 SCRA 293 [1991]).

In the compromise agreement, petitioners obligated themselves to pay private respondents the amount of P50,000.00
on January 31, 1990, P10,000.00 on February 28, 1990, and P10,000.00 on March 31, 1990.

Petitioners received a copy of the decision of the Metropolitan Trial Court approving the compromise agreement on
March 26, 1990. Clearly, there was a breach, for it was only on August 17, 1990 that petitioners attempted to pay by
means of nine postdated checks the amounts agreed upon. In effect, the first installment payment of P50,000.00 due on
January 31, 1990 was moved to August 31, 1990, the second installment of P10,000.00 due on February 28, 1990 was
moved to September 30, 1990 and so forth, thereby making the last installment of P5,000.00 due on September 30, 1990
moved to April 30, 1991. This is tantamount to novating the original agreement entered into by the parties without the
consent of private respondents.

Inasmuch as a judicial compromise becomes binding between the parties upon its execution, petitioners should have
paid the installments falling due even before the approval thereof by the trial court. But assuming that a judicial
compromise is not perfected until it is approved by the court, still petitioner should have paid the compromise
agreement installments due on March 31, 1990, together with the installments due on January 31 and February 28, 1990
on or before March 31, 1990.

Petitioners also assail the validity of the issuance by the Deputy Sheriff of the notice to voluntarily vacate the premises
by way of enforcing the decision approving the compromise agreement. They maintain that their obligation is monetary
in nature and the applicable rule should have been Section 15, Rule 39 and not Section 13, Rule 39 of the Revised Rules
of Court.

Petitioners contention has merit.

When the parties entered into a compromise agreement, the original action for ejectment was set aside and the action
was changed to a monetary obligation.

A perusal of the compromise agreement signed by the parties and approved by the inferior court merely provided that
in case the defendants (petitioners herein) failed to pay three monthly installments, the plaintiffs (private respondents
herein) would be entitled to a writ of execution, without specifying what the subject of execution would be. Said
agreement did not state that petitioners would be evicted from the premises subject of the suit in case of any default in
complying with their obligation thereunder. This was the result of the careless drafting thereof for which only private
respondents were to be blamed.

A judgment is the foundation of a writ of execution which draws its vitality therefrom (Monaghon v. Monaghon, 25 Ohio
St. 325). An officer issuing a writ of execution is required to look to the judgment for his immediate authority (Sydnor v.
Roberts, 12 Tex. 598).

An execution must conform to and be warranted by the judgment on which it was issued (Francisco, The Revised Rules
of Court 641 [1966]; Kramer v. Montgomery, 206 Okla.190, 242 p. 2d 414 [1952]). There should not be a substantial
variance between the judgment and the writ of execution (Avery v. Lewis, 10 Vt. 332). Thus, an execution is fatally
defective if the judgment was for a sum of money and the writ of execution was for the sale of mortgaged property
(Bank of Philippine Islands v. Green, 48 Phil. 284 [1925]).

As petitioners' obligation under the compromise agreement as approved by the court was monetary in nature, private
respondents can avail only of the writ of execution provided in Section 15, Rule 39 of the Revised Rules of Court, and
not that provided in Section 13.

Section 15, Rule 39 provides:

Execution of money judgments. — The officer must enforce an execution of a money judgment by
levying on all the property, real and personal of every name and nature whatsoever, and which
may be disposed of for value, of the judgment debtor not exempt from execution, or on a
sufficient amount of such property, if there be sufficient, and selling the same, and paying to the
judgment creditor, or his attorney, so much of the proceeds as will satisfy the judgment. Any
excess in the proceeds over the judgment and accruing costs must be delivered to the judgment
debtor, unless otherwise directed by the judgment or order of the court. When there is more
property of the judgment debtor than is sufficient to satisfy the judgment and accruing costs,
within the view of the officer, he must levy only on such part of the property as is amply sufficient
to satisfy the judgment and costs.

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.

On the other hand, Section 13, Rule 39 provides:

How execution for the delivery or restitution of property enforced. — The officer must enforce an
execution for the delivery or restitution of property by ousting therefrom the person against whom
the judgment is rendered and placing the judgment creditor in possession of such property, and
by levying as hereinafter provided upon so much of the property of the judgment debtor as will
satisfy the amount of the judgment and costs included in the writ of execution.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the Sheriff is directed to
enforce the execution only of the money judgment in accordance with Section 15, Rule 39 of the Revised Rules of
Court.

SO ORDERED.

Padilla, Davide, Jr., Bellosillo and Kapunan, JJ., concur.

The Lawphil Project - Arellano Law Foundation

 FIRST DIVISION

PHILIPPINE JOURNALISTS, G.R. No. 166421

INC., BOBBY DELA CRUZ,
ARNOLD BANARES and
ATTY. RUBY RUIZ BRUNO,
Petitioners, Present:
PANGANIBAN, C.J., Chairperson,
- versus - YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.
NATIONAL LABOR RELATIONS
COMMISSION, HON. COMMS.
LOURDES JAVIER, TITO
GENILO and ERNESTO Promulgated:
VERCELES, JOURNAL
EMPLOYEES UNION, and September 5, 2006
THE COURT OF APPEALS,
Respondents.
x--------------------------------------------------x

DECISION

CALLEJO, SR., J.:

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-file employees in the company is the Journal Employees
Union (Union for brevity).
 Sometime in April 2005, the Union filed 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-staffing 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) certified[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 filed 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, filed a Motion to Defer Further Proceedings,
alleging, among others, that the filing 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 petitioners retrenchment program. The NLRC noted that the
following circumstances belied PJIs claim that it had incurred losses: (1) office
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 PJIs executives refused to forego
their quarterly bonuses if the Union members refused to forego theirs.

Thus, the NLRC declared that the retrenchment of 31 employees was illegal
and ordered their reinstatement to their former position without loss of seniority
rights and other benefits, with payment of unpaid salaries, bonuses and backwages
from the date of dismissal up to the actual date of reinstatement plus 10% of the
total monetary award as attorneys fees. PJI was adjudged liable in the total amount
of P6,447,008.57.[7]

Thereafter, the parties executed a Compromise Agreement [8] dated July 9,

2001, where PJI undertook to reinstate the 31 complainant-employees effective
July 1, 2001 without loss of seniority rights and benefits; 17 of them who were
previously retrenched were agreed to be given full and complete payment of their
respective monetary claims, while 14 others would be paid their monetary claims
minus what they received by way of separation pay. The agreement stated that the
parties entered the agreement [i]n a sincere effort at peace and reconciliation as
well as to jointly establish a new era in labor management relations marked by
mutual trust, cooperation and assistance, enhanced by open, constant and sincere
communication with a view of advancing the interest of both the company and its
employees. The compromise agreement was submitted to the NLRC for approval.
All the employees mentioned in the agreement and in the NLRC Resolution affixed
their signatures thereon. They likewise signed the Joint Manifesto and Declaration
of Mutual Support and Cooperation[9] which had also been submitted for the
consideration of the labor tribunal.

The NLRC forthwith issued another Resolution[10] on July 25, 2002,

declaring that the Clarificatory Motion of complainants Floro Andrin, Jr. and Jazen
M. Jilhani had been mooted by the compromise agreement as they appeared to be
included in paragraph 2.c and paragraph 2.d, respectively thereof. As to the seven
others who had filed a motion for clarification, the NLRC held that they should
have filed individual affidavits to establish their claims or moved to consolidate
their cases with the certified case. Thus, the NLRC granted the computation of
their benefits as shown in the individual affidavits of the complainants. However,
as to the prayer to declare the Union guilty of unfair labor practice, to continue
with the CBA negotiation and to pay moral and exemplary damages, the NLRC
ruled that there was no sufficient factual and legal basis to modify its
resolution. Thus, the compromise agreement was approved and NCMB-NCR-NS-
03-087-00 was deemed closed and terminated.[11]

In the meantime, however, the Union filed another Notice of Strike on July
1, 2002, premised on the following claims:

1. OUTRIGHT DISMISSAL OF 29 EMPLOYEES

2. VIOLATION OF CBA BENEFITS
3. NON-PAYMENT OF ALLOWANCES, MEAL, RICE,
TRANSPORTATION, QUARTERLY BONUS, X-MAS BONUS,
 ANNIVERSARY BONUS, HEALTH INSURANCE, DENTAL TO 29
EMPLOYEES
4. NON-PAYMENT OF BACKWAGES OF 38 REINSTATED
EMPLOYEES [JUNE 2001 SALARY AND ALLOWANCES,
DIFFERENCE (sic) OF ALLOWANCES AND BONUSES AWARDED
BY NLRC]
5. TRANSPORTATION ALLOWANCE OF 5 UNION
MEMBERS

6. NON-PAYMENT OF P1000 INCREASE PER CBA

7. DIMINUTION OF SALARY OF 200 EMPLOYEES TO
50%[12]

In an Order[13] dated September 16, 2002, the DOLE Secretary certified the
case to the Commission for compulsory arbitration. The case was docketed as
NCMB-NCR-NS-07-251-02.

The Union claimed that 29 employees were illegally dismissed from

employment, and that the salaries and benefits [14] of 50 others had been illegally
reduced.[15] After the retrenchment program was implemented, 200 Union
members-employees who continued working for petitioner had been made to sign
five-month contracts. The Union also alleged that the company, through its legal
officer, threatened to dismiss some 200 union members from employment if they
refused to conform to a 40% to 50% salary reduction; indeed, the 29 employees
who refused to accede to these demands were dismissed on June 28, 2002. The
Union prayed that the dismissed employees be reinstated with payment of full
backwages and all other benefits or their monetary equivalent from the date of their
dismissal on July 3, 2002 up to the actual date of reinstatement; and that the CBA
benefits (as of November 2002) of the 29 employees and 50 others be restored.

In its Resolution[16] 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 finality 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
finality 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 first
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 fixed-
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 fixed-term employment contracts which they entered into. Consequently, their
claims for CBA benefits 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 fixed-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 find 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 fixed-
term employment contracts after being retrenched up to the time they
ceased being employees of PJI due to the non-renewal of their last fixed-
term employment contracts. As contractual employees, they were
excluded from the Collective Bargaining Unit (Section 2, CBA) and
hence, not union members.
 Complainants contend that PJI admitted that the 29 Complainants were
union members because PJI deducted union dues from their monthly
wages.

We, however, do not subscribe to this view.

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.

Secondly, the union membership admission due to erroneous union dues

deduction is incompatible with the fixed-term employment contracts
Complainants entered into with PJI.

We finally 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.

Much as we empathize with Complainants in their period of depressing

economic plight and hence, sincerely yearn to extricate them from them
such a situation, [w]e cannot do anything, for our hands are shackled by
the hard but true merits of the instant case. As an exception to this
incapacity, however, [w]e can request Respondents to give preference to
the 29 Complainants should they apply for re-employment. [17]

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 latters 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 five-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:

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 benefits 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.[18]

The Present Petition

PJI, its President Bobby Dela Cruz, its Executive Vice-President Arnold
Banares, and its Chief Legal Officer Ruby Ruiz Bruno, the petitioners, now come
before this Court and submit that the CA erred as follows:
I

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE

ABUSE OF DISCRETION WHEN IT ADOPTED THE RESOLUTION
DATED 31 MAY 2001 IN CERT. CASE NO. 000181-
 00 AND APPLIED THE SAME TO THE INSTANT CASE
DOCKETED AS CERT. CASE NO. 000229-02, DESPITE THE SAID
RESOLUTION BEING ABANDONED ANDACADEMICALLY
MOOTED BY THE
RESOLUTION DATED 25 JULY 2001, WHICH APPROVED THE

COMPROMISE AGREEMENT BETWEEN THE PARTIES IN CERT.

CASE NO. 000181-00. IN FINE; THE HONORABLE COURT OF
APPEALS APPLIED TO THE INSTANT CASE THE
LOGIC AND LAW OF AN ABANDONED RESOLUTION WHICH
NEVER ATTAINED FINALITY.

II

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE

ABUSE OF DISCRETION WHEN IT TRIED
FACTS AND EVIDENCES WHICH WERE NOT
PRESENTED ANDCONSIDERED BY THE COURT A QUO. IN
FINE, THE HONORABLE COURT OF APPEALS WENT
BEYOND ITS MANDATE AND AUTHORITY WHEN IT
BECAME A TRIER OF FACTS.

III

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE

ABUSE OF DISCRETION WHEN IT GRANTED TO AWARD 50
OTHER PERSONS WHO ARE NOT PARTIES OR PRIVIES TO THE
INSTANT CASE. IN FINE, THE HONORABLE COURT OF
APPEALS GRANTED AWARDS TO THOSE WITH WHOM IT
NEVER HAD JURISDICTION.[19]

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 file a petition under Rule 45. It must be stressed
that certiorari under Rule 65 is a remedy narrow in scope and inflexible in
character. It is not a general utility tool in the legal workshop. [20] 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.[21]
 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. [22] As the instant
petition was filed within the prescribed fifteen-day period, and in view of the
substantial issues raised, the Court resolves to give due course to the petition and
treat the same as a petition for review on certiorari.[23]

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 filed 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
courts findings 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 Certified Case No. 000181-
00. Citing Golden Donuts, Inc., v. National Labor Relations Commission.[24] 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 Certified Case No. 000181-00, and if it
were not for the filing of the compromise agreement, they would have moved to
reconsider or at least filed the appropriate pleadings to rectify the findings adverse
to them. They insist that the compromise agreement effectively abandoned all
findings 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 finality 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 findings 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 filed 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 findings 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 be dismissed except for cause; hence, the CA
correctly ordered their reinstatement.

They further point out that the fixing of five-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
benefits were obtained through CBA negotiations and were included in the
existing CBA. Thus, petitioners act of unilaterally removing such benefits and
wage increases constitutes gross violations of its economic provisions, and unfair
labor practice as defined by the Labor Code. Private respondents cite Philippine
Carpet Employees Association v. Philippine Carpet Manufacturing
Corporation[25] 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.

The Ruling of the Court

The petition is denied.

The nature of a compromise is spelled out in Article 2028 of the New Civil
Code: it is a contract whereby the parties, by making reciprocal concessions, avoid
litigation or put an end to one already commenced. Parties to a compromise are
motivated by the hope of gaining, balanced by the dangers of losing. [26] It
contemplates mutual concessions and mutual gains to avoid the expenses of
litigation, or, when litigation has already begun, to end it because of the uncertainty
of the result.[27] Article 227 of the Labor Code of the Philippines authorizes
compromise agreements voluntarily agreed upon by the parties, in conformity with
the basic policy of the State to promote and emphasize the primacy of free
collective bargaining and negotiations, including voluntary arbitration, mediation
and conciliation, as modes of settling labor or industrial disputes.[28] As the Court

held in Reformist Union of R.B. Liner, Inc. v. NLRC,[29] the provision bestows
finality to unvitiated compromise agreements, particularly if there is no allegation
that either party did not comply with what was incumbent upon them under the
agreement. The provision reads:

ART. 227 Compromise Agreements. Any compromise settlement,

including those involving labor standard laws, voluntarily agreed upon by
the parties with the assistance of the Bureau or the regional office of the
Department of Labor, shall be final and binding upon the parties. The
 National Labor Relations Commission or any court shall not assume
jurisdiction over issues involved therein except in case of noncompliance
thereof or if there is prima facie evidence that the settlement was obtained
through fraud, misrepresentation, or coercion.

Thus, a judgment rendered in accordance with a compromise agreement is

not appealable, and is immediately executory unless a motion is filed to set aside
the agreement on the ground of fraud, mistake, or duress, in which case an appeal
may be taken against the order denying the motion.[30] Under Article 2037 of the
Civil Code, a compromise has upon the parties the effect and authority of res
judicata, even when effected without judicial approval; and under the principle
of res judicata, an issue which had already been laid to rest by the parties
themselves can no longer be relitigated.[31]

In AFP Mutual Benefit Association, Inc. v. Court of Appeals,[32] the Court

spelled out the distinguishing features of a compromise agreement that is basically
intended to resolve a matter already in litigation, or what is normally termed as a
judicial compromise. The Court held that once approved, the agreement becomes
more than a mere contract binding upon the parties, considering that it has been
entered as the courts determination of the controversy and has the force and effect
of any other judgment. The Court went on to state:

Adjective law governing judicial compromises annunciate that

once approved by the court, a judicial compromise is not appealable and
it thereby becomes immediately executory 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 fulfillment by the parties of their respective
obligations thereunder. The reason for the rule, said the Court
in Domingo v. Court of Appeals [325 Phil. 469], is that when both
parties so enter into the agreement to put a close to 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 against that
decision. The order approving the compromise agreement thus
 becomes a final act, and it forms part and parcel of the judgment that
can be enforced by a writ of execution unless otherwise enjoined by a
restraining order.[33]

Thus, contrary to the allegation of petitioners, the execution and subsequent

approval by the NLRC of the agreement forged between it and the
respondent Union did not render the NLRC resolution ineffectual, nor rendered it
moot and academic. The agreement becomes part of the judgment of the court or
tribunal, and as a logical consequence, there is an implicit waiver of the right to
appeal.

In any event, the compromise agreement cannot bind a party who did not
voluntarily take part in the settlement itself and gave specific individual consent.
[34]
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,

[35]
which petitioners erroneously rely upon, is instructive on this point. The Court
therein was confronted with the following questions:

x x x (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 latters consent, and (2) whether or not the compromise
agreement entered into by the union with petitioner company, which has
not been consented to nor ratified by respondents minority members has
the effect of res judicata upon them.[36]

Speaking through Justice Reynato C. Puno, the Court held that pursuant to
Section 23, Rule 138[37] of the then 1964 Revised Rules of Court, a special
authority is required before a lawyer may compromise his clients litigation; thus,
the union has no authority to compromise the individual claims of members who
did not consent to the settlement.[38] The Court also stated that the authority to
compromise cannot lightly be presumed and should be duly established by
evidence,[39] 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 pursue
their individual claims against their employer.[40] 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
satisfied. 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.[41]

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 clarification by the seven employees
mentioned in paragraph 2e hereof.[42]

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.[43] The judgment
having become final, the Court can no longer reverse, much less modify it.
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 findings or legal conclusions of the labor tribunal.[44] Thus, the CA is not
proscribed from examining evidence anew to determine whether the factual
findings of the NLRC are supported by the evidence presented and the conclusions
derived therefrom accurately ascertained.[45]

The findings 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 five (5) month durations and thereafter, were offered
regular employment with salaries lower than their previous salaries. The
Labor Code explicitly prohibits the diminution of employees benefits.
Clearly, the situation in the case at bar is one of the things the provision
on security of tenure seeks to prevent.

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 figuratively 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. [46]

CONSIDERING THE FOREGOING, the petition is DENIED and the assailed

Decision and Resolution AFFIRMED. Costs against the petitioners.

SO ORDERED.
 ROMEO J. CALLEJO, SR.
Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson

CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

C E R T I FI CAT I O N

Pursuant to Section 13, Article VIII of the Constitution, I certify that the
conclusions in the above decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN
Chief Justice

Republic of the Philippines

Supreme Court
Manila
 SECOND DIVISION

CRISANTA ALCARAZ MIGUEL, G.R. No. 191336

Petitioner,
Present:

CARPIO, J.,
- versus - Chairperson,
PEREZ,
SERENO,
REYES, and
PERLAS-BERNABE, JJ. *

JERRY D. MONTANEZ, Promulgated:

Respondent.
January 25, 2012

x------------------------------------------------------------------------------------x

DECISION

REYES, J.:

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 respondents failure to pay the loan, the petitioner filed a
complaint against the respondent before the Lupong
Tagapamayapa of 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 certification to file action
in court in favor of the petitioner.

On April 7, 2005, the petitioner filed 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, premises considered[,] judgment is hereby rendered ordering

defendant Jerry D. Montanez to pay plaintiff the following:

1. The amount of [Php147,893.00] representing the obligation with

legal rate of interest from February 1, 2002 which was the
date of the loan maturity until the account is fully paid;

2. The amount of Php10,000.00 as and by way of attorneys fees;

and the costs.

SO ORDERED. [5]

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, finding no cogent reason to disturb the findings 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]

Dissatisfied, 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, 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. A new judgment
is entered dismissing respondents complaint for collection of sum of money,
without prejudice to her right to file 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 petitioners assertion,
there was no reduction of the term or period originally stipulated. The original
period in the first agreement is one (1) year to be counted from February 1, 2001,
or until January 31, 2002. When the complaint was filed 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.[10]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 file an
action for the execution of the Kasunduang Pag-aayos in court and not for
collection of sum of money.[11] Consequently, the CA deemed it unnecessary to
resolve the issue on venue.[12]

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;[13] and

(2) Whether or not the CA should have decided the case on the merits
rather than remand the case for the enforcement of the Kasunduang Pag-aayos.[14]

Our Ruling

Because the respondent failed to comply

with the terms of the Kasunduang Pag-
aayos, said agreement is deemed
rescinded pursuant to Article 2041 of the
New Civil Code and the petitioner can
insist on his original demand. Perforce,
the complaint for collection of sum of
money is the proper remedy.

The petitioner contends that the CA erred in ruling that she should have
followed the procedure for enforcement of the amicable settlement as provided in
the Revised Katarungang Pambarangay Law, instead of filing a collection case.
The petitioner points out that the cause of action did not arise from
the Kasunduang Pag-aayos but on the respondents breach of the original loan
agreement.[15]

This Court agrees with the petitioner.

It is true that an amicable settlement reached at the barangay conciliation
proceedings, like the Kasunduang Pag-aayos in this case, is binding between the
contracting parties and, upon its perfection, is immediately executory insofar as it
is not contrary to law, good morals, good
[16]
customs, public order and public policy. This is in accord with the broad precept
of 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.

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.[17] 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.[18] Thus, under Section 417 of the Local Government Code,[19] 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 filing an action to
enforce such settlement in the appropriate city or municipal court, if beyond the
six-month period.

Under the first 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.[20]

It must be emphasized, however, that enforcement by execution of the

amicable settlement, either under the first 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 qualifies the broad application of Article
2037, viz:

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,[21] 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 specified, 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".[22] (emphasis
supplied)

As so well stated in the case of Chavez v. Court of Appeals,[23] a party's non-

compliance with the amicable settlement paved the way for the application of
Article 2041 under which the other party may either enforce the compromise,
following the procedure laid out in the Revised Katarungang Pambarangay Law,
or consider it as rescinded and insist upon his original demand. To quote:
 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. 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 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 or merely
optional in nature.

Thus, although the "Kasunduan" executed by petitioner and

respondent before the Office of the Barangay Captain had the force and effect
of a final 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 profits 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 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. 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. It is undisputed that herein petitioner did
not.[24] (emphasis supplied and citations omitted)

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 indefinite pendency. [25] 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 finally enforce her right to payment.[26]

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 respondents 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. 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.

SO ORDERED.
 BIENVENIDO L. REYES
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice

JOSE PORTUGAL PEREZ MARIA LOURDES P. A. SERENO

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

ATT E S TATI O N

I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division
 C E RT I FI CAT I O N

Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairperson's Attestation, I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

*
Additional Member in lieu of Associate Justice Arturo D. Brion per Special Order No. 1174 dated January 9, 2012.
[1]
Penned by Associate Justice Rosalinda Asuncion-Vicente, with Associate Justices Normandie B. Pizarro and
Ricardo R. Rosario, concurring; rollo, pp. 37-45.
[2]
Id. at 34-35.
[3]
Id. at 63-69.
[4]
Id. at 70-74.
[5]
Id. at 73.
[6]
Id. at 75-77.
[7]
Id. at 77.
[8]
Id. at 45.
[9]
Id. at 41.
[10]
Id. at 42.
[11]
Id. at 43.
[12]
Id. at 44.
[13]
Id. at 13.
[14]
Id. at 14.
[15]
Id. at 20.
[16]
New Civil Code, Article 1306.
[17]
Republic v. Sandiganbayan, G.R. No.108292, September 10, 1993,, 226 SCRA 314; 468 Phil 1000 (2004).
[18]
Manila International Airport Authority (MIAA) v. ALA Industries Corporation, G.R. No. 147349, February 13,
2004, 422 SCRA 603, 611.
[19]
R.A. No. 7160, Book III, Title One, Chapter VII, Section, 417. Execution. The amicable settlement or arbitration
award may be enforced by execution by the [L]upon within six (6) months from the date of the settlement. After the
lapse of such time, the settlement may be enforced by action in the proper city or municipal court.
[20]
Vidal v. Escueta, 463 Phil 314 (2003).
[21]
111 Phil 859 (1961).
[22]
Id. at 865.
[23]
493 Phil 945 (2005).
[24]
Id. at 954-955.
[25]
Rollo, p. 26.
[26]
Id. at 27.

G.R. No. 195654, November 25, 2015 - REYNALDO INUTAN, HELEN CARTE, NOEL AYSON, IVY
CABARLE, NOELJAMILI, MARITES HULAR, ROLITOAZUCENA, RAYMUNDO TUNOG, ROGER
BERNAL, AGUSTEV ESTRE, MARILOU SAGUN, AND ENRIQUE LEDESMA, JR., Petitioners, v.
NAPAR CONTRACTING & ALLIED SERVICES, NORMAN LACSAMANA, JONAS INTERNATIONAL,
INC., AND PHILIP YOUNG, Respondent.

SECOND DIVISION

G.R. No. 195654, November 25, 2015

REYNALDO INUTAN, HELEN CARTE, NOEL AYSON, IVY CABARLE, NOELJAMILI,

MARITES HULAR, ROLITOAZUCENA, RAYMUNDO TUNOG, ROGER BERNAL, AGUSTEV
ESTRE, MARILOU SAGUN, AND ENRIQUE LEDESMA, JR., Petitioners, v. NAPAR
CONTRACTING & ALLIED SERVICES, NORMAN LACSAMANA, *** JONAS
INTERNATIONAL, INC., AND PHILIP YOUNG, Respondent.

DECISION

DEL CASTILLO, J.:

A judicially approved compromise agreement has the effect and authority of res judicata.2 It is
final, 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.

This Petition for Review on Certiorari2 assails the August 27, 2010 Decision3 of the Court of
Appeals (CA) in CA-G.R. SP No. 106724, which dismissed the Petition for Certiorari filed 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 affirmed the June 26, 2008 Decision 4and October
14, 2008 Resolution5 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 of res judicata. Likewise assailed is the CA's February 10,
2011 Resolution6 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.

Sometime in September of 2002, petitioners and other co-workers (complainants) filed before
the Arbitration Branch of the NLRC three separate complaints for wage differentials, 13 th month
pay, overtime pay, holiday pay, premium pay for holiday and rest day, service incentive leave
pay, and unpaid emergency cost of living allowance (ECOLA) against respondents, docketed as
NLRC NCR Case Nos. 09-76698-2002, 09-08152-2002, and 09-08046-2002, which complaints
were consolidated before Labor Arbiter Jaime M. Reyno (LA Reyno).

On January 13, 2003, complainants and respondents entered into a Joint Compromise
Agreement7 which reads: chanRoblesvirt ualLawlibrary

JOINT COMPROMISE AGREEMENT

COMPLAINANTS and the RESPONDENTS, through their' respective counsel, respectfully submit
the following Compromise Agreement.

WHEREAS, the parties (except Susana Larga) deciding to finally write "finis" to the instant
case, have agreed to settle the instant case and to enter into a Compromise Agreement.

NOW THEREFORE, for and in consideration of the terms and conditions herein below stipulated,
the parties do hereby agree:

1. That the complainants should be considered regular employees of Napar

Contracting and Allied Services reckoned from their date of hire and are
entitled to all the benefits under the law due to regular employees;

2. That the complainants shall be re-assigned by Napar Contracting and Allied

Services and shall ensure that they will be given work within forty five days
(45) or until February 26,2002;

3. That in case Napar Contracting and Allied Services failed to re assign or

provide them work, complainants shall be reinstated in their payroll or be
given their salary equivalent to the existing minimum wage x x x;

4. That the complainants shall each receive the amount of SEVEN THOUSAND
PESOS as payment for their monetary claims and which amount shall be
considered in any future litigation;

5. That upon signing of this agreement and compliance with the stipulations
herein provided, the cases shall be deemed and considered fully and
completely satisfied and the complainants hereby release, remiss and forever
discharge the herein respondents, from any and all claims arising from the
above cases;

6. The parties herein respectfully pray unto this Honorable Commission to

approve this Compromise Agreement and thereafter an Order be issued
declaring the judgment in the above-entitled cases fully and completely
satisfied.

IN WITNESS WHEREFORE, the parties have hereunto set their hands this 13 th day of January
2003.8
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In an Order9 dated January 16, 2003, LA Reyno approved the Joint Compromise Agreement,
enjoined the parties to fully comply with its terms and dismissed the case without prejudice.

In accordance with the Joint Compromise Agreement, complainants, on several instances,

reported to Napar. They were paid P7,000.00 each as part of the agreement but were required
by Napar; (1) to submit their respective bio-data/resume and several documents such as
Police Clearance, NBI Clearance, Barangay Clearance, Mayor's Permit, Health Certificate, drug
test results, community tax certificate, eye test results and medical/physical examination
results; (2) to attend orientation seminars; (3) to undergo series of interviews; and (4) to take
and pass qualifying examinations, before they could be posted to their new assignments.
These requirements, according to Napar, are needed to properly assess complainants' skills for
new placement with the agency's other clients.

Complainants failed to fully comply, hence they were not given new assignments.

Proceedings before the Labor Arbiter

Sensing Napar's insincerity in discharging its obligation in reassigning them, complainants filed
anew before the Arbitration Branch of the NLRC four separate Complaints 10 for illegal dismissal,
non-payment of 13th month pay, wage differentials, overtime pay, service incentive leave pay,
holiday pay, premium pay for holiday and rest day, and moral and exemplary damages against
respondents, docketed as NLRC NCR Case Nos. 00-0505557-2003, 00-05-06187-2003, 00-05-
06605-2003,11 and 00-07-07792-2003. These complaints were consolidated.

In their Position Paper,12 complainants averred that Napar's failure to reinstate or provide them
work without any condition, in consonance with the terms of the Joint Compromise Agreement,
constitutes illegal constructive dismissal. They prayed for backwages plus separation pay in
lieu of reinstatement.

Respondents, in their Position Paper,13 claimed that they have fulfilled 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 filed 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 Decision14 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-filing 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 strainedrelations of the parties.

Respondents Jonas/Young, as indirect employers of complainants, were held jointly and

severally liable with Napar/Lacsamana for wage differentials, 13 month pay differentials,
service incentive leave pay, unpaid ECOLA, and holiday pay to some complainants, less the
P7,000.00 already received from respondents. The claims for premium pay for holiday, rest
day, overtime pay, and moral and exemplary damages were denied for lack of merit.

Proceedings before the National Labor Relations Commission

All parties appealed to the NLRC.

Complainants filed a partial appeal, arguing that LA Espiritu erred in not awarding backwages
as well as wage and 13th month pay differentials to nine of them.
Respondents, for their part, argued that LA Espiritu erred in failing to recognize the final and
binding effect of the Joint Compromise Agreement, contending that complainants are barred
from rescinding the agreement for having received P7,000.00 each as partial compliance and
refusing to comply with the requirements for their reassignment. Respondents Napar and
Lacsamana, in their Memorandum on Appeal,15 vehemently denied having illegally dismissed
complainants and averred that they have the prerogative to impose certain requirements in
order to determine their working skills vis-a-vis their new postings. And since they refused to
comply, they have waived their right to be reassigned. Respondents Jonas/Young, meanwhile,
in its Notice of Appeal Memorandum of Appeal, 16 asserted that they cannot be held solidarity
liable with respondents Napar and Lacsamana since only Napar is obligated to reassign
complainants under the Joint Compromise Agreement.

In a Decision17 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-filed 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: chanRoblesvirt ualLawlibrary

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 finding 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
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Complainants filed 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 final 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-file their cases as sanctioned by the rules in cases of provisional
dismissal of cases,

Napar and Lacsamana, on the other hand, filed a Motion for Partial Reconsideration 20 praying
for the modification 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.

Both motions were denied in the NLRC Resolution21 dated October 14, 2008.

Proceedings before the Court of Appeals

In their Petition for Certiorari22 filed before the CA, complainants insisted on their right to
rescind the Joint Compromise Agreement under Article 2041 23 of the Civil Code and on their
right to re-file their complaints under Section 16, Rule V of the NLRC Rules of Procedure. 24

Napar and Lacsamana filed a Comment25 on the Petition. Jonas and Young, however, failed to
file a comment. As the CA did not acquire jurisdiction over Jonas and Young and on the basis
of complainants' manifestation that Jonas and Young had already ceased operation, Jonas and
Young were dropped as party respondents by the CA in its Resolution 26 of December 16, 2009.

On August 27, 2010, the CA rendered a Decision27 affirming the NLRC. The CA considered the
January 16, 2003 Order of LA Reyno, which approved the Joint Compromise Agreement, as a
judgment on the merits, and held that the second set of complaints was barred by res
judicata. According to the C A, the complainants, in re-filing their complaints due to
respondents' unwarranted refusal to provide them work, were essentially seeking to enforce
the compromise agreement and were not insisting on their original demands that do not even
include a claim for illegal dismissal. Thus, the CA ruled that complainants should have moved
for the execution of the Joint Compromise Agreement instead of filing a separate and
independent action for illegal dismissal. The CA dismissed the Petition, viz.: chanRoblesvirt ualLawlibrary

WHEREFORE, premises considered, the instant petition for certiorari is DISMISSED for lack of
merit. Accordingly, the June 26, 2008 Decision and October 14, 2008 Resolution of public
respondent National Labor Relations Commission are AFFIRMED.

SO ORDERED.28 cralawlawlibrary

Complainants filed a Motion for Reconsideration29 but it was likewise denied by the CA in its
Resolution30dated February 10, 2011.

Twelve of the complainants, herein petitioners, instituted the present Petition for Review
on Certiorari.

Issues

Petitioners presented the following issues: chanRoblesvirt ualLawlibrary

WHETHER THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT PETITIONERS'

COMPLAINT IS ALREADY BARRED BY RES JUDICATA.

II

WHETHER THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT, IN FILING THE SECOND
COMPLAINT, THE PETITIONERS ARE ENFORCING THE JOINT COMPROMISE AGREEMENT AND
NOT RESCINDING IT. THUS, THE PETITIONERS SHOULD HAVE MOVED FOR THE ISSUANCE OF
A WRIT OF EXECUTION BEFORE THE LABOR ARBITER INSTEAD OF FILING A SECOND
COMPLAINT.

III

WHETHER THE PETITIONERS ARE ENTITLED TO SEPARATION PAY IN LIEU OF REINSTATEMENT

AND FULL BACKWAGES.31 cralawlawlibrary

Petitioners argue that the CA, in ordering the execution of the Joint Compromise Agreement,
has deprived them of their right of rescission under Article 2041 of the Civil Code. They posit
that due to the blatant violation by the respondents of the provisions of the Joint Compromise
Agreement, they only exercised the option accorded to them by law of rescinding the
agreement and of insisting upon their original demands by filing anew their Complaints. The
inclusion of illegal dismissal in their causes of action is, for petitioners, a necessary
consequence of their subsequent dismissal and the blatant omission of respondents'
commitment to reinstate them. Petitioners thus pray for the payment of separation pay in lieu
of reinstatement and full backwages as a consequence of their illegal dismissal.

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 benefits. 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
CompromiseAgreement under
Article 2041 of the Civil Code

Article 2028 of the Civil Code defines a compromise agreement as a contract whereby the
parties make reciprocal concessions in order to avoid litigation or put an end to one already
commenced. If judicially approved, it becomes more than a binding contract; it is a
determination of a controversy and has the force and effect of a judgment. 32 Article 227 of the
Labor Code provides that any compromise settlement voluntarily agreed upon by the parties
with the assistance of the Bureau of Labor Relations or the regional office of the Department of
Labor and Employment shall be final and binding upon the parties. Compromise agreements
between employers and workers have often been upheld as valid and accepted as a desirable
means of settling disputes.33

Thus, a compromise agreement, once approved, has the effect of res judicata between the
parties and should not be disturbed except for vices of consent, forgery, fraud,
misrepresentation, and coercion.34 A judgment upon compromise is therefore not appealable,
immediately executory, and can be enforced by a writ of execution. 35 However, this broad
precept enunciated under Article 203736 of the Civil Code has been qualified by Article 2041 of
the same Code which recognizes the right of an aggrieved party to either (1) enforce the
compromise by a writ of execution, or (2) regard it as rescinded and insist upon his original
demand, upon the other party's failure or refusal to abide by the compromise. In a plethora of
cases,37 the Court has recognized the option of rescinding a compromise agreement due to
non-compliance with its terms. We explained in Chavez v. Court of Appeals:38 chanroblesvirtuallawlibrary

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. cralawlawlibrary

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. It has upon them the effect and authority of res judicata even if not judicially
approved, and cannot be lightly set aside or disturbed except for vices of consent and forgery.
However, in Heirs of Zari, et al v. Santos, we clarified 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 xxx created for the first 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 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.
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. cralawlawlibrary

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 find
that petitioners validly exercised this option as there was breach and non-compliance of the
Joint Compromise Agreement by respondents.

It is undisputed that Napar failed to reassign and provide work to petitioners. Napar, however,
puts the blame on petitioners for their alleged deliberate refusal to comply with the
requirements for reassignment to other clients. Napar claims that the imposition of these so-
called "reassessment procedures" will efficiently guide them on where to assign petitioners; it
likewise posits that it is a valid exercise of its management prerogative to assign workers to
their principal employer.

At the outset, it must be emphasized that there was no indication that petitioners deliberately
refused to comply with the procedures prior to their purported reassignment. Petitioners
alleged that they reported to Napar several times waiting for tlieir assignment and that Napar
was giving them a run-around even as they tried to comply with the requirements. These
matters were not disputed by respondents. Thus, we cannot agree with respondents were the
ones who violated the compromise agreement. Moreover, we are not persuaded by Napar's
assertion that petitioners' reassignment cannot be effected without compliance with the
requirements set by it. Petitioners are regular employees of Napar; thus, their reassignment
should not involve any reduction in rank, status or salary.39 As aptly noted by LA Espiritu,
petitioners are not newly-hired employees. Considering further that they are ordinary factory
workers, they do not need special training or any skills assessment procedures for proper
placement. While we consider Napar's decision to require petitioners to submit documents and
employment clearances, to attend seminars and interviews and take examinations, which
according to Napar is imperative in order for it to effectively carry out its business objective, as
falling within the ambit of management prerogative, this undertaking should not, however,
deny petitioners their constitutional right of tenure. Besides, there is no evidence nor any
allegation proffered that Napar has no available clients where petitioners can be assigned to
work in the same position they previously occupied. Plainly, Napar's scheme of requiring
petitioners to comply with reassessment procedures only seeks to prevent petitioners'
immediate reassignment.

"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 filing 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 benefits 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 benefits
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."44By 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.

Section 16 of Rule V of the NLRC Rules

of Procedure allows petitioners to re-file their
complaints which were previously dismissed
without prejudice

The Court also takes into account the circumstance that petitioners' previous complaints were
dismissed without prejudice. "A dismissal without prejudice does not operate as a judgment on
the merits."45 As contrasted from a dismissal with prejudice which disallows and bars the filing
of. a complaint, a dismissal without prejudice "does not bar another action involving the same
parties, on the same subject matter and theory."46 The NLRC Rules of Procedure, specifically
Section 16 of Rule V thereof, provides the remedy of filing for a revival or re-opening of a case
which was dismissed without prejudice within 10 days from receipt of notice of the order of
dismissal and of re-filing the case after the lapse of the 10-day period. Petitioners are thus not
barred from re-filing their Complaints.

In choosing to rescind the Joint Compromise Agreement and re-file their complaints,
petitioners can rightfully include their claim of illegal dismissal. The CA took off from the wrong
premise that petitioners, in re-filing their case, cannot be said to have opted to rescind the
compromise agreement since they were not insisting on their original claim. It must be noted
that when petitioners initially filed their first set of complaints for wage differentials,
13th month pay, overtime pay, holiday pay, premium pay for holiday and rest day, service
incentive leave pay, and unpaid ECOLA (that does not include the claim of illegal dismissal),
subsequent events transpired which brought about their unceremonious suspension and
dismissal from work. This then led to the parties entering into the Joint Compromise
Agreement whereby respondents undertook to reinstate petitioners and pay them the sum of
P7,000.00 in partial satisfaction of their claims. The compromise agreement evinces and shows
that petitioners' reinstatement was part of their original demands. Besides, respondents
acknowledged that the first and second sets of Complaints filed by petitioners are similar in
nature. Respondents even admitted that the issues raised in the first set of Complaints were
similar to the issues raised by petitioners when they filed anew their Complaints. Nevertheless,
the filing of a separate action for illegal dismissal shall only go against the rule on multiplicity
of suits. It is settled that a plaintiff may join several distinct demands, controversies or rights
of action in one declaration, complaint or petition.47 This is to avert duplicity and multiplicity of
suits that would farther delay the disposition of the case.

In view of the foregoing, we find 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 floating
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 having been illegally dismissed,
should also be awarded full backwages, inclusive of allowances and their other benefits 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.
 While petitioners failed to raise the matter of entitlement to backwages before the CA, this
does not prevent the Court from considering their entitlement to the same. The Court has
discretionary authority to take up new issues on appeal if it finds that their consideration is
necessary in arriving at a just decision.

Anent the other monetary claims in petitioners' complaints, the awards granted to them by LA
Espiritu stand undisturbed for petitioners' failure to question the same on appeal before the CA
and even before this Court. Hence, we sustain the award of wage differentials, 13th month pay
differentials, service incentive leave pay, unpaid ECOLA, and holiday pay less the P7;000.00
already received by them.

WHEREFORE, the Petition is GRANTED. The August 27, 2010 Decision and February 10,
2011 Resolution of the Court of Appeals in CA-G.R. SP No. 106724 are REVERSED and SET
ASIDE. The July 29, 2004 Decision of the Labor Arbiter Pablo C. Espiritu, Jr. in NLRC NCR
Case Nos. 00-05-05557-2003, 00-05-06187-2003, 00-05-06605-2003 and 00-07-07792-2003
is REINSTATED. In addition, respondents Napar Contracting & Allied Services and Norman
Lacsamana are held jointly and severally liable to pay petitioners Reynaldo Inutan, Helen
Carte, Noel Ayson, Ivy Cabarle, Noel Jamili, Maritess Hular, Rolito Azucena, Raymundo Tunog,
Roger Bernal, Agustin Estre, Marilou Sagun, and Enrique Ledesma, Jr. full backwages, inclusive
of allowances and their other benefits or their monetary equivalent computed from November
9, 2002 up to the date of finality of this Decision.

SO ORDERED. chanroblesvirtuallawlibrary

Velasco, Jr.,* Brion, (Acting Chairperson), Mendoza, and Leonen, JJ., concur. chanrobleslaw

Endnotes:

Philippine Supreme Court Jurisprudence > Year 1957 > October 1957 Decisions > G.R. No. L-9312 October 31,
1957 - ERNEST BERG v. NATIONAL CITY BANK OF NEW YORK

102 Phil 309:

EN BANC

[G.R. No. L-9312. October 31, 1957.]

ERNEST BERG, Plaintiff-Appellant, v. NATIONAL CITY BANK OF NEW

YORK, Defendant-Appellant.

Alva J. Hill, for Plaintiff-Appellant.

Ross, Selph, Carrascoso & Janda, for Defendant-Appellant.

SYLLABUS
1. obligation AND CONTRACT; COMPROMISE AGREEMENT; BEFORE PAYMENT TO BANK
DURING OCCUPATION WAS VALIDATED. — Where the plaintiff and defendant had previously
entered into a compromise agreement, whereby the former agreed to pay his indebtedness
provided the latter forego the payment of the interest which compromise was arrived at when
there was still uncertainty as to the validity of payments made to the Bank of Taiwan of prewar
obligations and the compromise was entered into avoid "the provocation of a suit" " which
defendant was then contemplating to take against the plaintiff and his brother in the belief that
the payment made to the Bank of Taiwan was not valid (Article 1809, Old Civil Code), Held:
that it being a compromise, it is binding upon the parties (Article 1809, Old Civil Code) and as
such it has "the same authority as re judicata" (Article 1809, Old Civil Code) and as such it has
"the same authority as res judicata" (Article 1816 Idem.)

2. ID.; ID.; TO SETTLE A CONTROVERSY. — As a rule, a compromise is entered into not

because it settles a valid claim but because it settles a controversy between the parties.

3. ID.; ID.; THREAT TO BRING ACTION TO ENFORCE COLLECTION IS NOT DURESS. — It is a

practice followed not only by banks but even by individual, to demand payment of their
accounts with the threat that upon failure to do so, an action would be instituted in court. Held:
That such a threat is proper within the realm of the law as a means to enforce collection, and it
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.

4. ID.; ID.; ABSENCE OF INTIMIDATION; CASE AT BAR. — As warranted by the facts and
circumstances established in the case at bar, the compromise agreement has been entered into
voluntarily and, as such, is valid and binding, since under law intimidation can only exist "when
one of the contracting parties is inspired with a reasonable and well grounded fear of suffering
and imminent and serious injury to his person or property" (Article 1267 , Old Civil Code).

DECISION

BAUTISTA ANGELO, J.:

In 1941, shortly before the outbreak of the war, the Red Star Stores, Inc. was 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 officials of the Bank telling them that
he had already settled the account with the Bank of Taiwan during the Japanese occupation,
but said officials 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 first 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 v. 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
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: jgc:chanrobles.com.ph

"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." cralaw virtua1aw library

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 find 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:

"Mr. Ernest Berg

1340 Oregon St.

Manila

Red Star Stores, Inc.

Dear Mr. Berg: chanrob1es virtual 1aw library

This will confirm our conversation of this afternoon when you agreed to reimburse us in full for
our Advance Bills local amounting to US$19,956.75 against which we are prepared to waive
interest up to date.

It is our understanding that you have disposed of some property and when the deal is
consummated, which is expected next week, you will liquidate the subject’s pre-war
indebtedness to us.

We take this opportunity to convey our thanks for the splendid cooperation you have displayed
in discharging this obligation.

Very truly yours.

(Sgd.) FRED W. HENDER

Sub-Manager

I hereby acknowledge the above indebtedness and confirm that it will be fully liquidated.

(Sgd.) ERNEST BERG

Note that the letter says that it was a confirmation of a conversation had between plaintiff and
defendant regarding the settlement of the account previously had by the former the term of
which was that plaintiff would pay his account in full and defendant would waive the payment
of interest. Note also that at the foot of the letter there appears the following under the
signature of plaintiff: "I hereby acknowledge the above indebtedness and confirm that it will be
fully liquidated." That this agreement has the nature of a compromise cannot be denied for it
was entered into to avoid "the provocation of a suit" which defendant was then contemplating
to take against plaintiff and his brother in the belief that the payment made to the Bank of
Taiwan was not valid (Article 1809, old Civil Code). Note that at that time the decision of the
Supreme Court in the Haw Pia case has not as yet been rendered. It being a compromise, it is
binding upon the parties (Article 1809, old Civil Code), and as such it has "the same authority
as res judicata" (Article 1816, Idem.) .

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 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 v. 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 officials 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 traffic 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 fine,
and fear of financial 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 find support in the testimony of plaintiff which were denied by the
officials of the Bank. In fact, they have not been substantiated. What plaintiff in effect wanted
to convey is that the officials 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 influence 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 first 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 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 find 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 officials of the Bank have threatened him with reprisals in
the sense that unless he settles his account they would make use of their influence to prevent
him from engaging in business in the Philippines. Not only is this claim inherently untenable but
it was flatly denied by the officials of the Bank. Certainly, plaintiff has not been able to indicate
in what manner does defendant or its officials 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 find 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.

Endnotes:

SECOND DIVISION

[G.R. No. 159411. March 18, 2005]

TEODORO I. CHAVEZ, petitioner, vs. HON. COURT OF APPEALS and

JACINTO S. TRILLANA, respondents.

DECISION
PUNO, J.:

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 modified 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
petitioners 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 fishpond 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.

c. That, the LESSEE, shall pay the amount of FOUR HUNDRED FORTY-EIGHT
THOUSAND (P448,000.00) pesos x x x 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 x x x.

Paragraph 5 of the contract further provided that respondent shall undertake all
construction and preservation of improvements in the fishpond 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
fishpond. 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 fishpond 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.
In September 1996, respondent filed a complaint before the Office of
the Barangay Captain of Taliptip, Bulacan, Bulacan. He complained about the
unauthorized repairs undertaken by petitioner, the ouster of his personnel from the
leased premises and its unlawful taking by petitioner despite their valid and subsisting
lease contract. After conciliation proceedings, an agreement was reached, viz.:

KASUNDUAN

Napagkasunduan ngayong araw na to ika-17 ng Setyembre ng nagpabuwis Teodoro

Chavez at bumubuwis na si G. Jay Trillana na ibabalik ni G. Chavez ang
halagang P150,000.00 kay G. Trillana bilang sukli sa natitirang panahon ng
buwisan.
Ngunit kung maibibigay ni G. Chavez ang halagang P100,000.00 bago sumapit o
pagsapit ng ika-23 ng Setyembre, taong kasalukuyan, to ay nangangahulugan ng
buong kabayaran at hindi P150,000.00.

Kung sakali at hindi maibigay ang P100,000.00 ang magiging kabayaran ay

mananatiling P150,000.00 na may paraan ng pagbabayad ng sumusunod:

Ang P50,000.00 ay ibibigay bago sumapit o pagsapit ng ika-31 ng Oktubre 1996 at

ang balanseng P100,000.00 ay ibibigay sa loob ng isang taon subalit magbibigay ng
promissory note si G. Chavez at kung mabubuwisang ang kanyang palaisdaan ay
ibibigay lahat ni G. Chavez ang buong P150,000.00 sa lalong madaling panahon.

Kung magkakaroon ng sapat at total na kabayaran si G. Chavez kay G. Trillana ang

huli ay lalagda sa kasulatan bilang waiver o walang anumang paghahabol sa
nabanggit na buwisan.

Alleging non-compliance by petitioner with their lease contract and the

foregoing Kasunduan, respondent filed 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 profits; (c) P200,000.00 as
moral damages; (d) P200,000.00 as exemplary damages; and, (e) P100,000.00 as
attorneys fees plus P1,000.00 for each court appearance of respondents counsel.
Petitioner filed 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:

(1) Ordering the defendant to reimburse to the plaintiff the sum of P300,000.00
representing rental payment of the leased premises for the unused period of lease;

(2) Ordering the defendant to pay plaintiff the sum of P500,000.00 representing
unrealized profit as a result of the unlawful deprivation by the defendant of the
possession of the subject premises;

(3) Ordering the defendant to pay plaintiff the sum of P200,000.00 as moral damages;

(4) Ordering the defendant to pay plaintiff the sum of P200,000.00 as exemplary
damages; and
(5) Ordering the defendant to pay plaintiff the sum of P100,000.00 as and for
attorneys fees, plus costs of suit.

Petitioner appealed to the Court of Appeals which modified the decision of the trial
court by deleting the award of P500,000.00 for unrealized profits for lack of basis, and
by reducing the award for attorneys fees to P50,000.00.[7] Petitioners 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 filed by respondent considering that the
subject matter thereof, his alleged violation of the lease contract with respondent, was
already amicably settled before the Office 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 attorneys 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
final judgment of a court if not repudiated or a petition to nullify the same is filed 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. [10] 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.[11] It has upon them the effect and authority of res
judicata even if not judicially approved, [12] and cannot be lightly set aside or disturbed
except for vices of consent and forgery.[13]
However, in Heirs of Zari, et al. v. Santos,[14] we clarified 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 x x x created for the first
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 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. [15] This is
because he may regard the compromise as already rescinded [16] by the breach thereof
of the other party.
Thus, in Morales v. National Labor Relations Commission [17] we upheld the
National Labor Relations Commission when it heeded the original demand of four (4)
workers for reinstatement upon their employers failure to comply with its obligation to
pay their monetary benefits 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 partys failure or refusal to abide by the compromise. We also
recognized the options in Mabale v. Apalisok,[18] Canonizado v. Benitez,
[19]
and Ramnani v. Court of Appeals,[20] 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.
[21]
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[22] 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[23] or merely optional in nature.
Thus, although the Kasunduan executed by petitioner and respondent before the
Office of the Barangay Captain had the force and effect of a final judgment of a court,
petitioners 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 profits and reimbursement of advance rentals,
moral and exemplary damages, and attorneys 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 [24] 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. [25] 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. [26] It is undisputed that
herein petitioner did not.
Having affirmed the RTCs jurisdiction over the action filed by respondent, we now
resolve petitioners remaining contention. Petitioner contends that no factual or legal
basis exists for the reimbursement of alleged advance rentals, moral and exemplary
damages, and attorneys 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. [27] 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 filed his complaint on
February 7, 1997. No receipt or other competent proof, aside from respondents 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, [28] specifically 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. [29]
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 justified under the
circumstances. We likewise sustain the award for exemplary damages considering
petitioners propensity not to honor his contractual obligations, first under the lease
contract and second, under the amicable settlement executed before the Office of the
Barangay Captain. Since respondent was compelled to litigate and incur expenses to
protect his interest on account of petitioners refusal to comply with his contractual
obligations,[30] the award of attorneys 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 modified 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.

[1]
Rollo, pp. 28-35.
[2]
Entitled Jacinto S. Trillana, plaintiff-appellee v. Teodoro Chavez, defendant-appellant.
[3]
Rollo, pp. 37-38.
[4]
Entitled Contract of Lease of Fishpond, Id., pp. 46-50; Original Records, pp. 8-12.
[5]
Order dated October 21, 1997 issued by Judge Floro P. Alejo, RTC of Valenzuela City, Branch 172;
Original Records, p. 46.
[6]
Rollo, pp. 58-59; Original Records, pp. 50-51.
[7]
Supra at Note 1.
[8]
Codified in Sections 399-422, Chapter VII, Title One, Book III, and Sec. 515, Title One, Book IV of
Republic Act No. 7160, otherwise known as the Local Government Code of 1991.
[9]
Section 416, Chapter VII, Title One, Book III of R.A. No. 7160.
[10]
Section 417, Chapter VII, Title One, Book III of R.A. No. 7160. See Vidal v. Escueta, 417 SCRA 617
(2003).
[11]
Pasay City Government v. CFI of Manila, Br. X, 132 SCRA 156 (1984), citing Municipal Board of
Cabanatuan City v. Samahang Magsasaka, Inc., 62 SCRA 435 (1975).
[12]
Vda. de Guilas v. David, 23 SCRA 762 (1968).
[13]
Binamira v. Ogan-Occena, 148 SCRA 677 (1987).
[14]
137 Phil. 79 (1969).
[15]
Leonor v. Sycip, 1 SCRA 1215 (1961). See also Iloilo Traders Finance, Inc. v. Heirs of Oscar Soriano,
Jr., 404 SCRA 67 (2003), citing Diongzon v. Court of Appeals, 321 SCRA 477 (1999).
[16]
Leonor v. Sycip, supra.
[17]
241 SCRA 103 (1995).
[18]
88 SCRA 234 (1979).
[19]
127 SCRA 610 (1984).
[20]
360 SCRA 645 (2001).
[21]
See Vidal v. Escueta, supra.
[22]
The amicable settlement or arbitration award may be enforced by execution by the lupon within six (6)
months from the date of the settlement. After the lapse of such time, the settlement may be
enforced by action in the appropriate city or municipal court.
[23]
Maceda, Jr. v. Moreman Builders Co., Inc., 203 SCRA 293 (1991).
[24]
Servicewide Specialists, Inc. v. Court of Appeals, 257 SCRA 643 (1996).
[25]
Genova v. De Castro, 407 SCRA 165 (2003).
[26]
The last paragraph of the Kasunduan specifically reads: Kung magkakaroon ng sapat at total na
kabayaran si G. Chavez kay G. Trillana ang huli ay lalagda sa kasulatan bilang waiver o walang
anumang paghahabol sa nabanggit na buwisan.
[27]
Chan v. Maceda, Jr., 402 SCRA 352 (2003).
[28]
Original Records, pp. 22-23.
[29]
Id.
[30]
See Tugade, Sr. v. Court of Appeals, 407 SCRA 497 (2003).

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-14220 April 29, 1961

DOMINGO E. LEONOR, plaintiff-appellee,

vs.
FRANCISCO SYCIP, defendant-appellant.

Patricio D. Senador and Ricardo D. Galano for plaintiff-appellee.

Vicente Salvadora for defendant-appellant.

CONCEPCION, J.:

Appeal from a decision of the Court of First Instance of Rizal, the dispositive part of which reads:

IN VIEW OF THE FOREGOING, the Court hereby renders judgment ordering the defendant,
Francisco Sycip, to vacate the leased premises, to pay plaintiff Domingo E. Leonor the back
rentals from July 13, 1956 at the rate of THREE HUNDRED FIFTY (P350.00) PESOS a
month until he shall have vacated the leased premises and to pay the costs.

The case is before us, the pertinent facts having been agreed upon and only questions of law being
raised in the appeal.

On July 11, 1955, plaintiff Domingo E. Leonor and defendant Francisco Sycip entered into a
contract, whereby the former leased to the latter a two-story building located at No. 1728-D Taft
Avenue, interior, Pasay City, for a period of two years, beginning from August 1, 1955, at a monthly
rental of P350.00. From July to October, 1956, Sycip failed to pay the corresponding rentals in view
of which, on October 12, 1956, Leonor instituted against him, in the municipal court of Pasay City,
Civil Case No. 1972 thereof, for unlawful detainer. Inasmuch as, on October 19, 1956, one Napoleon
A. Coronado agreed to guarantee the payment of the rentals due from Sycip by assigning to Leonor
his (Coronado's) rights under a deed of chattel mortgage executed, prior thereto, by Sycip in his
(Coronado's) favor, on November 10, 1956, Leonor moved for the dismissal of said case No. 1972,
which was granted on November 12, 1956.

As Sycip kept on defaulting in the payment of rentals, Leonor requested the Sheriff of Pasay City, on
February 11, 1957, to cause the personal property subject to said chattel mortgage to be foreclosed
extrajudicially, as stipulated in the contract, but this provision thereof could not be enforced because
Sycip refused to surrender' said property to the sheriff. Hence, on March 7, 1957, Leonor again sued
Sycip in the municipal court of Pasay City for unlawful detainer (Civil Case No. 2067), to eject him
from the leased premises and collect the rentals from July, 1956 to March, 1957. On the date set for
the hearing of the case, Leonor introduced his evidence, after which Sycip waived his right to
introduce evidence and submitted the case for decision, which was rendered on May 24, 1957. It
sentenced Sycip to vacate said premises and to pay Leonor P3,800 as rentals due up to said date,
with interest thereon at the legal rate from the institution of the case, as well as the rentals that may
fall due thereafter, at the rate of P350 a month, until the premises shall have been vacated, in
addition to P150 as attorney's fees, and the costs of the proceedings.

On May 27, 1957, Sycip filed notice of appeal from this decision. Pending perfection of the appeal,
or on May 28, 1957, plaintiff moved for the immediate execution of said decision, which was granted
on June 1, 1957. Pursuant to the writ of execution accordingly issued, the Sheriff of Pasay City sold
at public auction, on July 8, 1957, certain properties of Sycip for the sum of P3,500. Deducting this
sum from the amount then due from Sycip under the appealed decision, or P4,495.60, plus the
expenses of execution, amounting P327.00, there remained a balance of P1,322.60 still due from
him. Moreover, Sycip's ejectment took place on July 13, 1957. When the appealed case was heard
in the Court of First Instance of Rizal (Civil Case No. 1756-P), Sycip maintained that it should be
dismiss upon the ground:

I. That the claim set forth in the complaint has be released;

II. That the Assignment of Chattel Mortgage which dismissed the first action (Civil Case No.
1792) a compromise agreement that had upon the parties the effect and authority of Res-
Judicata;

III. That the second action, the case at bar, (Civil Case No. 2067) cannot be taken to mean
as a rescission of the compromise agreement.

Said court, however, overruled defendant's pretense an rendered the decision appealed from. A
reconsideration thereof having been denied, the case has been brought us on appeal taken by
Sycip.

Appellant says that the lower court erred in holding the claim set forth in the complaint herein has not
been "released by novation", which he maintains, took place, because the deed of assignment by
Coronado to Leonor the chattel mortgage executed by Sycip in favor of Coronado stated that the
sum of P2,450 then due from Sycip was payable on December 31, 1956, whereas the contract of
lease between Leonor and Sycip stipulated that the agree rentals were "payable on or before the 5th
of every month'. Said assignment was made, however, on October 6, 1956 and, hence, the period
therein given for the payment of the aforementioned sum of P2,450.00, due up to that date, did not
novate or otherwise affect the obligation to pay the rentals accruing subsequently thereto, in
conformity with the provisions of the aforementioned contract of leas or "on or before the 5th of every
month", although payment of these rentals was also guaranteed by the chattel mortgage thus
assigned to Leonor. Inasmuch as Sycip continued defaulting in the payment of such rentals, an
failed to pay the same as well as to vacate the leased premises despite repeated demands, it follows
that Leonor was entitled to seek the proper remedy against the resulting unlawful detainer by Sycip.
Obviously, the security given to guarantee the payment of rentals falling due after October 6, 1956,
did not extinguish or novate the obligation to satisfy the same, or impair the right of the lessor to the
aforementioned remedy (Bank of the P.I. v. Herridge, 47 Phil. 57; Asia Banking Manresa 429). There
Corporation v. Lacson, 48 Phil. 482; 8 Manresa 429). There is no incompatibility between, either this
remedy or said obligation, on the one hand, and the aforementioned security, on the other. On the
contrary, the chattel mortgage bolstered up said remedy and strengthened the effectivity of the
obligation, by insuring the collection of the money judgment that may be rendered in the action for
unlawful detainer.

It is next urged by the defendant that plaintiff should have sought a judicial foreclosure of the chattel
mortgage or sued the guarantor Napoleon A. Coronado. This contention is premised upon the
assumption that by plaintiff's acceptance of the assignment of chattel mortgage, there had been a
novation of the lease contract between him and Sycip, for the period subsequent to October 6, 1956,
which is not a fact. Plaintiff had, of course, the option to seek a judicial foreclosure of said chattel
mortgage, but he was not bound to do so, for the assignment in his favor of the chattel mortgage
merely gave him additional rights. It did not deprive him of any of his existing rights, either
substantive or procedural, except insofar as the sum of P2,450 due as rentals up to October 6, 1956,
which was made payable on or before December 31, 1956. With respect to the rentals
accruing after October 6, 1956, he retained all such rights, plus the corresponding lien on the
personal property subject to the chattel mortgage.

Contrary to defendant's pretense, plaintiff could not have sued Coronado for, by virtue of his
aforementioned assignment, the latter merely yielded his preferred lien in favor of plaintiff herein,
and did not assume any responsibility for defendant's obligation in favor of plaintiff herein. Besides,
having violated the chattel mortgage contract, by refusing to deliver the mortgaged property to the
sheriff, for purposes of the extra-judicial foreclosure, to which the defendant had explicitly agreed in
the deed of chattel mortgage, he may not require the plaintiff to adhere thereto (Art. 1191,, Civil
Code of the Phil.). Again, owing to the breach of the compromise agreement between the parties,
resulting, not only from defendant's refusal to deliver the mortgaged property to the sheriff, but, also,
from his failure to pay, on or before December 31, 1956, the sum P2,450, due on October 6, 1956,
plaintiff has, under Article 2041 of the Civil Code of the Philippines, the right eigth to "enforce the
compromise or regard it as rescinded a insist upon his original demand".

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 specified, thus suggesting an action for annulment or
rescission, said Article 2041 confers up the party concerned, not a "cause" for rescission, or t 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 this Article 2041, particularly when
contrasted with that of Article 2039, denotes that no action for rescission required in said Article
2041, and that the party aggrieved by the breach of a compromise agreement may, if he choose
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, he may "regard" the compromise agreement already rescinded".

Any other view would lead, insofar as the parties here are concerned, to a splitting of plaintiff's cause
of action Indeed, to seek a rescission of the compromise, an action would have to be brought in the
court of first instance, such action is incapable of pecuniary estimation, where the unlawful detainer
case would have to be filed with municipal court. Moreover, if the right of action for unlawful detainer
would be subordinated to the action for rescission of the compromise agreement, then the latter
would be a prejudicial question and the proceedings the former would have to be suspended until
the final disposition of the action for rescission. The summary naturalization of the remedy of
unlawful detainer would thus be completely defeated or destroyed. Surely, the framers of Article
2041 of the Civil Code of the Philippines could not have intended such result. The case of Bas Vda.
de Concepcion v. Santos, L-3585 (July 9, 1951), cited in appellant's brief, involved a compromise
made on January 24, 1943, years before the approval of said Code, and, hence, it is not in point.

In the light of the foregoing, defendant's theory to the effect that plaintiff's complaint in the present
case contains no allegations to warrant rescission of their compromise agreement is pointless, an
action for rescission being unnecessary.

Defendant brands the decision of the Court of First Instance of Rizal as vague and erroneous
because it sentences him to pay the plaintiff back rentals, at the rate of P350.00 a month, from July
13, 1956 until such time as he (defendant) shall have vacated the leased premises, whereas the
record on appeal shows that he had been ejected from said premises on July 13, 1957, or prior to
the rendition of said decision on March 29, 1958. This fact does 'not retract, however, from the
precision and accuracy of said decision, for, pursuant thereto, he shall pay rentals, at the
aforementioned rate, from July 13, 1956 to July 13, 1957.

WHEREFORE, the decision appealed from is hereby affirmed, with costs against defendant-
appellant, Francisco Sycip.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Paredes and Dizon,
JJ., concur.

The Lawphil Project - Arellano Law Foundation

Philippine Supreme Court Jurisprudence > Year 2016 > August 2016 Decisions > G.R. No. 205623, August 10,
2016 - CONCHITA A. SONLEY, Petitioner, v. ANCHOR SAVINGS BANK/ EQUICOM SAVINGS BANK, Respondent.:

G.R. No. 205623, August 10, 2016 - CONCHITA A. SONLEY, Petitioner, v. ANCHOR SAVINGS
BANK/ EQUICOM SAVINGS BANK, Respondent.

SECOND DIVISION

G.R. No. 205623, August 10, 2016

CONCHITA A. SONLEY, Petitioner, v. ANCHOR SAVINGS BANK/ EQUICOM SAVINGS

BANK, Respondent.

DECISION
 DEL CASTILLO, J.:

This Petition for Review on Certiorari1 assails the Court of Appeals' August 28, 2012
Decision2 and January 25, 2013 Resolution3 denying herein petitioner Conchita A. Sonley's
Urgent Motion for Reconsideration4 in CA-G.R. SP No. 122409.

Factual Antecedents

The facts, as succinctly narrated by the Court of Appeals (CA), are as follows: ChanRoblesVirtualawlibrary

The instant case arose when, on March 13, 2009, the petitioner5 filed a Complaint6 for
declaration of nullity of rescission of contract and damages in the trial court 7 against x x x
Anchor Savings Bank ("Anchor"), a thrift banking institution organized and existing under the
laws of the Philippines [whose] business name xxx was [later] changed to Equicom Savings
Bank x x x

In the said complaint, petitioner alleged that, on January 28, 2005, she agreed to purchase a
real property from [Anchor] for the sum of x x x Php2,200,000.00 xxx. The said real property
pertained to a parcel of land that had been foreclosed by [Anchor] with an area of x x x 126.50
square meters xxx located at Fairview, Quezon City ("subject property" Pursuant to the said
agreement, the parties entered into a Contract to Sell8 whereby the petitioner agreed to pay
the amount of x x x Php200,000.00 x x x as downpayment xxx with the balance of x x x
Php2,000,000.00 xxx payable in sixty (60) monthly installments amounting to
xxxPhp47,580.00 xxx.

Petitioner, however, defaulted in paying her monthly obligations xxx which prompted [Anchor]
to rescind the contract to sell xxx. In filing the complaint xxx 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 Answer9 [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 benefit from her own fault and
prevent [Anchor] from exercising its right to rescind their contact to sell.

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 Judgment11 xxxon August 16,2010 whereby the petitioner agreed to
repurchase the subject property from [Anchor] for the amount of x x x Phpl ,469,460.66 xxx
plus xxx 12% x x x 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:ChanRoblesVirtualawlibrary

'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 final 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
chanRoblesvirtualLawlibrary

conditions of the Compromise Agreement and since said Judgment itself provides that the
same shall t>e immediately final and executory, the Decision dated August 16, 2010 is hereby
reiterated as final 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: ChanRoblesVirtualawlibrary

'Section 1. Execution upon judgments or final 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
Riding of the Court of Appeals

Petitioner filed 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.

In its assailed August 28,2012 Decision, however, the CA ruled against the petitioner,
pronouncing thus: ChanRoblesVirtualawlibrary

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 specifically provided for in the judgment which it rendered based on compromise
agreement. After a careful and 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 contact; 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, x x x

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: ChanRoblesVirtualawlibrary

'(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 'Contact 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 five 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 Hie said remedy.
The foregoing contentions adduced by the petitioner are untenable and devoid of merit. True,
the compromise agreement between the parties stated that, in case of the petitioner's failure
to pay her obligation, she agreed to pay interests and penalties [sic] charges. However,
paragraph (c) of the compromise agreement likewise provided that petitioner's payment of the
additional interests and charges 'shall be without prejudice to the right of the defendant to
rescind this Compromise Agreement as provided under the 'Contact to Sell' dated 21 December
2007.' On this note, it bears stressing mat the pertinent portions of the contact to sell read as
follows:

'RESCISSION OF CONTRACT
chanRoblesvirtualLawlibrary

'The failure of the BUYER to pay on due date any monthly installmentin accordance with
the Schedule of Payment provided in Paragraph 2 - Manner of Payment, or if, at any time, the
SELLER is of the opinion that the BUYER would be unable to pay or meet his obligations under
this Contract or in case the BUYER was declared in default by any other creditor, then the
SELLER shall be entitled, as a matter of right, to rescind the Contract.'

'FORFEITURE OF PAYMENTS

'As a consequence of the rescission of this Contract pursuant to Paragraph 5 above,

any and/or all payments made by the BUYER under this Contract shall be deemed
forfeited in favour of the SELLER and shall be applied as rentals for the use and
occupancy of the PROPERTY and/or as and by way of liquidated damages and
indemnification for opportunity loss and/or other losses, the BUYER hereby acknowledging and
confirming that the SELLER was deprived of the opportunity to offer the PROPERTY for sale to
other interested parties or dispose thereof in such manner as it deems necessary or
appropriate during the existence of this Contract.'
Considering the aforequoted stipulations in the compromise agreement and the contract to sell,
this Court does not find any merit in the claim of the petitioner that [Anchor] could not avail of
the remedy of rescission in case of default in payment by the petitioner. On the contrary, the
intent of the contracting parties was clearly embodied in the compromise agreement when the
said agreement stated that the petitioner should pay additional charges should she default in
the payment of her obligations x x x. The payment of said additional amounts, however, shall
be without prejudice to [Anchor's] right to rescind the contract to sell and consider the
payments that were already made by the petitioner as rentals for her use and occupation of the
subject property.

Verily, it is a settled rule that a compromise agreement, once approved by final order of the
court, has the force of res judicata between the parties and should not be disturbed except for
vices of consent or forgery. Hence, a decision on a compromise agreement is final and
executory and it has the force of law and is conclusive between the parties. It transcends its
identity as a mere contract binding only upon the parties thereto as it becomes a judgment
that is subject to execution in accordance with the Rules of Court. In this regard, Article 2041
of the Civil Code explicitly provides that, if one of the parties fails or refuses to abide by the
compromise agreement, the other party may either enforce the compromise or regard it as
rescinded and insist upon his or her original demand.

At this point, it bears stressing that a petition for certiorari against a court which has
jurisdiction over a case will prosper only if grave abuse of discretion is manifested. The burden
is on the part of the petitioner to prove not merely reversible error but grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the [court] issuing the
impugned order. Mere abuse of discretion is not enough; it must be grave,

Here, there is a paucity of circumstance which would persuade us to grant the instant petition.
There was no hint of whimsicality nor gross and patent abuse of discretion as would amount to
an evasion of a positive duty or a virtual refusal to perform a duty enjoined By law when the
trial court issued the assailed order and issued a writ of execution against herein petitioner who
voluntarily and freely signed the compromise agreement and thereafter became bound by the
terms and conditions that were embodied therein.

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us DENYING

the petition filed in this case for lack of merit. The Order dated September 8,2011 issued by
Branch 148 of the Regional Trial Court of the National Capital Judicial Region in Makati City
dated September 8, 2011 [sic] in Civil Case No. 09-217 is AFFIRMED.

SO ORDERED.15
In short, the CA held that petitioner's failure to abide by the terms and conditions of the
Compromise Agreement, which had the force and effect of a final and executory judgment
when it was approved by the trial court in its August 16,2010 Judgment, authorized the
enforcement thereof by execution, and thus the trial court may not be faulted for granting
respondent's motion for execution and directing the issuance of the corresponding writ.

Petitioner moved to reconsider, but in its assailed January 25, 2013 Resolution, the CA
remained unconvinced. Hence, the present Petition.

In an August 20, 2014 Resolution,16 this Court resolved to give due course to the Petition.

Issue

In essence, petitioner reiterates her contention before the CA that the trial court had no power
to issue a writ of execution in Civil Case No. 09-217 as the issuance thereof was not authorized
and specifically provided for in its August 16, 2010 Judgment.

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 specifically
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 first 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 final 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 C A 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 x x x denotes that no
action for rescission is required x x x, 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'."19 This principle was reiterated in a
subsequent case, thus: ChanRoblesVirtualawlibrary

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:
ChanRoblesVirtualawlibrary

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 therein specified, 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".20
The parties' Compromise Agreement states that -
(c) Perialty. 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. (Emphasis supplied)
The Contract to Sell provides, on the other hand, that -
The failure of the BUYER to pay on due date any monthly installment in'accordance with
the Schedule of Payment provided in Paragraph 2 - Manner of payment, or if, at any time, the
SELLER is of the opinion that the BUYER would be unable to pay or meet his obligations under
this Contract or in case the BUYER was declared in default by any other creditor, then the
SELLER shall be entitled, as a matter of right, to rescind this Contract. (Emphasis
supplied)
While the assailed dispositions of the trial court and the CA do not specify the remedies that
respondent is entitled to, it is clear that rescission and eviction were specifically sought and
prayed for in respondent's Manifestation and Motion for Execution, and petitioner was given the
opportunity to oppose the same. In her Opposition to the Motion for Execution, 21 she in fact
acknowledged and admitted that she was in default and that she violated the Compromise
Agreement by her failure to make regular payments as required therein. Indeed, it may be said
that respondent's motion for execution, with a prayer for rescission, for the of petitioner's
payments as rental, and for her eviction, constituted sufficient written notice to petitioner, and
it was duly heard; petitioner opposed the motion and even filed a rejoinder 22 to respondent's
reply,23 but she could not proffer any defense; quite the opposite, she openly admitted liability.
The facts, evidence, and pleadings are clear and within the cognizance of the trial court;
petitioner's failure to abide by the agreement should result in execution, cancellation and
rescission of the Compromise Agreement and Contract to Sell, and her eviction from the
property.
Certainly, a compromise agreement becomes the law between the parties and will not He set
aside other than [sic] the grounds mentioned above. In Ramnani v. Cburt of Appeals,we held
that the main purpose of a compromise agreement is to put an end to litigation because of the
uncertainty that may arise from it. Once the compromise is perfected, the parties are bound to
abide by it in good faith. $hould a party fail or refuse to comply with the terms of a
compromise of amicable settlement, the other party could either enforce the compromise by a
writ of execution or regard it as rescinded and so insist upon his/her original, demand. 24
Petitioner may be right in arguing that respondent has the option to proceed with the sale and
charge corresponding penalties instead, pursuant to the stipulations in the Contract to Sell;
however, respondent chose to rescind the same, an option which it is equally entitled to by
contract and under the law,25 and thus evict petitioner frotn the premises. Respondent must
cralawred

have thought that if past actions were a gatige, petitioner was no longer in a position to honor
her obligations under trje Contract to Sell.

Respondent claim is straightforward: it seeks rescission and eviction, with whatever amount
fiaid by petitioner to be applied as rental for the use and occupation of the subject property as
agreed upon. Going by what is on record, it would appear that petitioner paid the total amount
of P497,412.76,26 while she has been occupying tjie property, a 126.5-square meter parcel of
land with improvements thereon located at Timex Street, West Fairview, Quezon City, as her
 residence since 2007.27 In effect, petitioner would have paid a measly sum as aggregate rent
for her stay therein, which is more than just for her.

WHEREFORE, the Petition is DENIED. The August 28, 2012 Decision and January 25, 2013
Resolution of the Court of Appeals in CA-G.R. SP No. 122409 are AFFIRMED. The parties'
Compromise Agreement and Contract to Sell dated December 21, 2007
are RESCINDED. Petitioner Conchita A. Sonley is ordered to immediately VACATE the subject
property and premises and SURRENDER the same to respondent Anchor Savings
Bank/Equicom Savings Bank.

SO ORDERED. chanRoblesvirtualLawlibrary

Carpio, (Chairperson), and Leonen, JJ., concur.

Brion,* J., On leave.
Mendoza,** J., On official leave.

Endnotes:

Republic of the Philippines

Supreme Court
Manila

THIRD DIVISION

VIRGILIO MAQUILAN, G.R. NO. 155409

Petitioner,
Present:

YNARES-SANTIAGO, J.,
Chairperson,
- versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO, and
NACHURA, JJ.
DITA MAQUILAN, Promulgated:
Respondent. June 8, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
 DECISION

AUSTRIA-MARTINEZ, J.:

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 affirmed 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 file a case of adultery against private respondent and
the latters 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 prisioncorreccional 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, filed 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.

During the pre-trial of the said case, petitioner and private

respondent entered into a COMPROMISE AGREEMENT in the
following terms, to wit:

1. In partial settlement of the conjugal partnership of gains,

the parties agree to the following:
 a. P 500,000.00 of the m oney deposi t ed in t he bank
j oi ntl y i n t he nam e of the spouses shal l be
wi t hdra wn and deposi t ed in f avor and i n t rust of
t hei r comm on chi l d, N ei l Maqui l an, wi t h t he
deposi t i n t he j oi nt a ccount of the part i es.

The bal anc e of such deposi t , whi ch pres ent l y

st ands at P 1,318,043.36, shal l be wi t hdrawn and
di vi ded equ al l y by the part i es;

b. The st or e t hat i s now bei ng oc cupi ed by t he

pl ai nt i ff shal l be al l ot t ed to her whi l e t he bodeg a
shal l be for t he de fendant . The de fendant shall be
pai d t he sum of P 50,000.00 as hi s share i n the
st ocks of the st or e i n ful l set tl em ent the reof.

The pl ai nt i ff shal l be al l owed t o occupy t he

bodeg a unt il t he ti m e t he own er of the l ot on
whi ch it st ands shal l const ruct a bui l di ng t her eon;

c. The m ot or cycl es shal l be di vi ded bet ween t hem

such t hat the Ka wasaki shal l be owned by the
pl ai nt i ff whi l e the Hond a Dream shal l be fo r the
de fendant ;

d. The passeng er j eep shal l be for the pl ai nt i ff who

shal l pay the def endant t he sum of P 75,000.00 as
hi s shar e t hereon and i n ful l set t l em ent t hereo f;

e. The house and l ot shal l be t o the com m on chi l d.

2. This settlement is only partial, i.e., without prejudice to

the litigation of other conjugal properties that have
not been mentioned;

x x x x

The said Compromise Agreement was given judicial imprimatur by

the respondent judge in the assailed Judgment On Compromise
Agreement, which was erroneously dated January 2, 2002. [ 2 ]

However, petitioner filed an Omnibus Motion dated January 15,

2002, praying for the repudiation of the Compromise Agreement and
the reconsideration of the Judgment on Compromise Agreement by
the respondent judge on the grounds that his previous lawyer did not
intelligently and judiciously apprise him of the consequential
effects of the Compromise Agreement.

The respondent Judge in the assailed Order dated January 21,

2002, denied the aforementioned Omnibus Motion.
 Displeased, petitioner filed a Motion for Reconsideration of the
aforesaid Order, but the same was denied in the assailed Order
dated February 7, 2002. [ 3 ] (Emphasis supplied)

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 petitioners 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 Office 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 prisioncorreccional, 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 of the Family Code, which
pertain to the effects of a nullified marriage and the effects of legal
separation, respectively, do not apply, considering, too, that the
Petition for the Declaration of the Nullity of Marriage filed 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 finds no application in the instant case since no
petition to that effect was filed 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,
petitioners 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, finally, 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.
Hence, herein Petition, purely on questions of law, raising the
following issues:

I.
 WHETHER OF NOT A SPOUSE CONVICTED OF EITHER
CONCUBINAGE OR ADULTERY, CAN STILL SHARE IN THE
CONJUGAL PARTNERSHIP;

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

WHETHER OR NOT A JUDGMENT FOR ANNULMENT AND

LEGAL SEPARATION IS A PRE-REQUISITE BEFORE A SPOUSE
CONVICTED OF EITHER CONCUBINAGE OR ADULTERY, BE
DISQUALIFIED AND PROHIBITED FROM SHARING IN THE
CONJUGAL PROPERTY;

IV

WHETHER OR NOT THE DISQUALIFICATION OF A

CONVICTED SPOUSE OF ADULTERY FROM SHARING IN A
CONJUGAL PROPERTY, CONSTITUTES CIVIL INTERDICTION.
[5]

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 disqualified 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
affidavit of reappearance of the absent spouse, unless there is a
judgment annulling the previous marriage or declaring it
void ab initio.

A sworn statement of the fact and circumstances of reappearance

shall be recorded in the civil registry of the residence of the parties
to the subsequent marriage at the instance of any interested person,
with due notice to the spouses of the subsequent marriage and
without prejudice to the fact of reappearance being judicially
determined in case such fact is disputed.

where a subsequent marriage is terminated because of the

reappearance of an absent spouse; while Article 63 applies to the
effects of a decree of legal separation. The present case involves a
proceeding where the nullity of the marriage is sought to be declared
under the ground of psychological capacity.
Article 2035 of the Civil Code is also clearly inapplicable. The
Compromise Agreement partially divided the properties of the
conjugal partnership of gains between the parties and does not deal
with the validity of a marriage or legal separation. It is not among
those that are expressly prohibited by Article 2035.
Moreover, the contention that the Compromise Agreement is
tantamount to a circumvention of the law prohibiting the guilty spouse
from sharing in the conjugal properties is misplaced. Existing law and
jurisprudence do not impose such disqualification.

Under Article 143 of the Family Code, separation of property may be

effected voluntarily or for sufficient cause, subject to judicial
approval. The questioned Compromise Agreement which was judicially
approved is exactly such a separation of property allowed under the
law. This conclusion holds true even if the proceedings for the
declaration of nullity of marriage was still pending. However, the
Court must stress that this voluntary separation of property is
subject to the rights of all creditors of the conjugal partnership of
gains and other persons with pecuniary interest pursuant to Article
136 of the Family Code.
Second. Petitioners claim that since the proceedings before the RTC
were void in the absence of the participation of the provincial
prosecutor or solicitor, the voluntary separation made during
the pendency of the case is also void. The proceedings pertaining to
the Compromise Agreement involved the conjugal properties of the
spouses. The settlement had no relation to the questions surrounding
the validity of their marriage. Nor did the settlement amount to a
collusion between the parties.

Article 48 of the Family Code states:

Art. 48. In all cases of annulment or declaration of absolute nullity

of marriage, the Court shall order the prosecuting attorney or fiscal
assigned to it to appear on behalf of the State to take steps to
prevent collusion between the parties and to take care that the
evidence is not fabricated or suppressed. (Emphasis supplied)
Section 3(e) of Rule 9 of the 1997 Rules of Court provides:
 SEC. 3. Default; declaration of.- x x x x
x x x x

(e) Where no defaults allowed. If the defending party in

action for annulment or declaration of nullity of marriage or for
legal separation fails to answer, the court shall order the
prosecuting attorney to investigate whether or not a collusion
between the parties exists if there is no collusion, to intervene
for the State in order to see to it that the evidence submitted is
not fabricated. (Emphasis supplied

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:

x x x. 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 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. [ 11 ]

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

of prision correccional shall carry with it that of suspension from
public office, from the right to follow a profession or calling, and
that of perpetual special disqualification from the right of suffrage,
if the duration of said imprisonment shall exceed eighteen
months. The offender shall suffer the disqualification 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.

Exceptions to the foregoing have been recognized by the Court in

cases where reckless or gross negligence of counsel deprives the
client of due process of law, or when its application "results in the
outright deprivation of one's property through a technicality."
x x x x[13]

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 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.

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

MINITA V. CHICO-NAZARIO ANTONIO EDUARDO B. NACHURA

Associate Justice Associate Justice
 ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
C E R T I FI CAT I O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons attestation, it is hereby certified that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.

LEONARDO A. QUISUMBING
Acting Chief Justice

[1]
P enned by Associ at e Just i ce Bi env eni do L. R eyes, wi t h Associ at e Just i ces R obert o A.
B ar ri os (now de ceas ed) and Edga rdo F. Sundi am , con curri ng.
[2]
The C om prom ise Agr eem ent is dat ed January 11, 2002.
[3]
Roll o , pp. 29- 31.
[4]
Roll o, p. 32.
[5]
Roll o , pp. 19- 20.
[6]
Art i cl e 43 r eads:
Art . 43. The t erm i nat i on of the subsequent m arri age re fer red t o i n the pr ecedi ng
Art i cl e shal l produce t he fol l owi ng effe ct s:
x x x x
(2) The absol ut e comm uni t y of prop ert y or t he conj ugal part ne rshi p, as t he
c ase m ay be, shal l be di ssol ved and l i qui dat ed, b u t i f ei th er sp ou se
con t ract ed sai d mar ri age in bad fai th , hi s or h er sh are of th e n et p rofi ts of
th e com mun i ty p rop erty or con ju gal partn e rsh ip p rop e rty sh al l b e for fei t ed
i n favo r of th e com mon ch i ld ren or, i f t here ar e none, t he chi l dr en of t he
gui l t y spouse by a previ ous m arri ag e or i n defaul t of chi l dren, t he innoc ent
spouse;
x x x x (emphasis supplied)
[7]
Art i cl e 63 r eads:
Art . 63. The de cre e of l egal sepa rat i on shal l have the fol l owi ng eff ect s:
 x x x x
(2) The absol ut e comm uni t y or t he conj ug al part ne rshi p shal l b e d issol ved and
l iq u id at ed bu t th e of fen di n g sp ou se sh all h ave n o ri gh t to an y sh are of th e
n et p rofi ts ea rn ed by th e ab solu t e com mun i ty or th e con ju gal p artn e rshi p ,
wh i ch s hal l be for fei t ed i n a ccord anc e wi t h t he provi si ons of Art i cl e 43(2);
x x x x ( em phasi s suppl i ed)
[8]
Art i cl e 2035 r eads:
Art . 2035. No com prom i se upon t he foll owi ng quest i ons shal l be val i d:
(1) The ci vi l st at us of persons;
(2) Th e val i di ty of a mar ri age or a l egal sep arati on ;
(3) An y groun d for l egal sep arati on ;
(4) Fut ure support ;
(5) The j uri sdi ct i on of court s;
(6) Fut ure l egit i m e. (1814 a)
( em phasi s suppl i ed)
[9]
Art i cl e 41 r eads:
Art . 41. A m ar ri age cont r act ed by any person duri ng t he subsist en ce of a
pr evi ous m ar ri age shal l be nul l and voi d, unl ess befo re t he cel eb rat i on of t he
subsequent m arri ag e, t he pri or spouse had be en absent for fou r conse cut i ve
ye ars and t he spouse pres ent had a wel l -found ed bel i ef t hat the absent spouse
was al re ady de ad. In case of di sappe aran ce wher e t here i s danger of deat h
unde r t he ci r cum st ances set fort h i n t he provi si ons of Art i cl es 391 of t he Ci vi l
C ode, an absenc e of onl y t wo ye ars shal l be suffi ci ent .
F or t he purpos e of cont r act i ng t he subsequ ent m arri ag e under t he pre cedi ng
pa ragr aph, the spouse pres ent m ust i nst it ut e a summ a ry proce edi ng as provi ded
i n t his C ode for t he de cl ar at i on of presum pt i ve de at h of t he abs ent ee, wit hout
pr ej udi ce t o t he e ffe ct of r eapp ear anc e of t he absent spouse.
[10]
S ee Republ i c v. Cui son-M el gar , G.R . No. 139676, March 31, 2006, 486 SC R A 177, 187.
[ 11 ]
Roll o , p. 39.
[12]
336 Phi l . 514 (1997).
[13]
Id. at 526- 527.

SECOND DIVISION

G.R. No. 144732 February 13, 2006

ROLANDO LIMPO, Petitioner,

vs.
COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY, Respondents.

DECISION

AZCUNA, J.:
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 findings, which are reproduced as follows:

On November 11, 1980, plaintiff Security Bank & Trust Company filed 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.

On February 1, 1983, defendants-spouses Miguel F. Uy and Brigitte Uy entered into a Compromise

Agreement with plaintiff bank. On March 22, 1983, the trial court rendered decision, reproducing
therein the pertinent provisions of the Compromise Agreement as follows:

"1. Defendant spouses admit liability to the plaintiff the said amount of ₱38,833.44 as of
January 12, 1983;

2. Defendant spouses agree to pay the plaintiff the said amount of ₱38,833.44 with interest
at the rate of 20% per annum with aforesaid interest rate computed based on declining
balance, from January 12, 1983 in the following manner:

a) ₱4,644.00 on or before March 14, 1983 of which ₱500.00 shall be applied as

attorney’s fee; ₱144.00 the cost of suit, and the remaining balance to the outstanding
loan obligation;

b) ₱4,000.00 each on or before the 15th day of each month commencing April 1983
until June 1, 1983;

c) ₱1,500.00 on or before the 15th day of each month commencing July 1983 until
the balance and accruing interest thereon is fully paid.

3. In case of failure to pay any installment when due, the whole balance shall become due
and payable, without necessity of demand and defendant spouses shall be assessed a
default penalty of 3% per month until the obligation is fully paid. Moreover, plaintiff shall be
entitled to a writ of execution upon ex-parte motion." (RTC Decision, p. 1)

When defendants failed to comply with the terms and conditions of the compromise agreement,
plaintiff bank, on November 27, 1984, filed 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 filed 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 ₱38,833.44
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).

Meanwhile, on June 30, 1993, defendant Limpo filed a Manifestation and Motion praying for the
dismissal of the complaint on the ground that the judgment sought to be revived did not include
defendant Limpo. After responsive pleadings were filed by the parties, the trial court issued an Order
dated November 3, 1993 dismissing the complaint against defendant Limpo. This Order was
reiterated by the trial court in the Order dated April 19, 1994 which likewise dismissed defendant
Limpo’s compulsory counterclaim.

Not satisfied with the Order of the trial court, plaintiff bank filed 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:

"THE LOWER COURT ERRED IN DISMISSING THE INSTANT COMPLAINT AGAINST

DEFENDANT-APPELLANT ROLANDO LIMPO." (Appellant’s Brief, p. 3)

At first, 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 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.

2. Whether Rolando Limpo is liable to Security Bank Corporation under the trial court’s
judgment dated March 22, 1983 which was based on the Compromise Agreement entered
into by Security Bank and the defendants Miguel Uy and Brigitte Uy.

3. Whether the action by Security Bank against Rolando Limpo, as co-maker of defendants
Miguel Uy and Brigitte Uy, [was] already barred by prescription when the action for revival of
judgment was filed on July 22, 1992.

Anent the first 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 affirmative. 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 filing 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
first interval, the total period that had run would already be ten years and five months, making any
suit on the promissory note barred by prescription.

The Court finds the petition meritorious. 1avvphil.net

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 x x x." The sound reason for the exclusion of non-parties to an
agreement is the absence of a vinculum or juridical tie which is the efficient 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 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
confined 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 controlling7 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:

x x x 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 sound reasoning of the Court of Appeals as to the liabilities of a solidary debtor is correct.
However, it failed to consider two important incidents that make this case distinct: 1) a judgment had
been rendered excluding Limpo; and 2) such judgment had become final.

A compromise agreement once approved by order of the court becomes immediately final and
executory with the force of res judicata.8 The court’s sanction imbues it with the same effect as any
other judgment.9 No doubt that as to the spouses Uy, there was a clear declaration of liability. Debate
arises with respect to Limpo who was never mentioned in both the agreement and the judgment
despite that fact that he was impleaded as a defendant. How should this omission affect him?

Judicial precedent as to the implication of a judgment approving a compromise agreement that fails
to expressly mention or include all the defendants is found in Bopis v. Provincial Sheriff of
Camarines Norte,10 the facts of which are akin to those of this case. There, four defendants, Camino,
Eco, Guadalupe and Bopis, were sued by the plaintiff for recovery of possession of real property.
Later, a compromise agreement was executed among Camino, Eco and the plaintiff, whereby
Camino and Eco agreed to pay the plaintiff a sum of money. The compromise agreement was later
approved by the trial court. Camino and Eco, however, failed to pay the entire amount and, as a
result, a writ of execution was issued against all four defendants. Guadalupe and Bopis questioned
their inclusion in the writ of execution since the judgment approving the agreement did not include
them. This Court found their contention meritorious and declared the writ of execution null and void
with respect to Guadalupe and Bopis. Quoting from the Decision:

As will be seen, only Rufina Camino and Pasto Eco were adjudged to pay Alfonso Ortega the
amount of ₱140.00 on February 28, 1951. Although they were included as party defendants, the
spouses Fermin Bopis and Emilia Guadalupe were not ordered to pay Alfonso Ortega. Obviously,
they were absolved from liability. Accordingly, as to them, there was nothing to execute since they
have been absolved from liability.

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 final
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.

ADOLFO S. AZCUNA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Associate Justice
Chairperson

(On Sick Leave) (On Leave)

ANGELINA SANDOVAL-GUTIERREZ* RENATO C. CORONA**
Associate Justice Asscociate Justice
 CANCIO C. GARCIA
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-39119 September 26, 1986

FELICIANA BUMANLAG and FLAVIANO BUMANLAG, petitioners,

vs.
HON. ANACLETO B. ALZATE, as Presiding Judge, Branch II, Court of first Instance of Tarlac,
TOMASA BUMANLAG, and SILVINO ESPUGADO, respondents.

Emilio D. Castellanes for petitioners.

Lauro O. Samson for respondents.

PARAS, J.:

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 if said party or client. We hold that a such compromise agreement is
merely unenforceable (not void)and may therefore be ratified by said party expressly or implicity.
1 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
final and executory judgment (based on a compromise agreement) involving the same parties, same
subject matter, 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 ratified the act of their attorney; ergo, the requisites of res judicata being all present, the
principle applies to the instant case.

One final point. The argument that the partition in the first 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

1 Art. 1403 (no. 1) Civil Code.

2 Art. 1403 (1st sentence), Civil Code.