ADR Cases (Edited)

SECOND DIVISION
[G.R. No. 159411. March 18, 2005.]
CHAVEZ petitioner, vs . HON. COURT OF APPEALS and

TEODORO I. CHAVEZ,
TRILLANA respondents.
JACINTO S. TRILLANA,
DECISION
PUNO , J : p
Assailed in this petition for review is the Decision dated April 2, 2003 1 of the Court
of Appeals in CA-G.R. CV No. 59023 2 which modi ed the Decision dated December 15,
1997 of the Regional Trial Court (RTC) of Valenzuela City, Branch 172, in Civil Case No.
5139-V-97, as well as its Resolution dated August 8, 2003 3 which denied petitioner's
motion for reconsideration.
The antecedent facts are as follows:
In October 1994, petitioner Teodoro Chavez and respondent Jacinto Trillana entered
into a contract of lease 4 whereby the former leased to the latter his shpond at Sitio
Pariahan, Taliptip, Bulacan, Bulacan, for a term of six (6) years commencing from October
23, 1994 to October 23, 2000. The rental for the whole term was two million two hundred
forty thousand (P2,240,000.00) pesos, of which one million (P1,000,000.00) pesos was to
be paid upon signing of the contract. The balance was payable as follows:
b. That, after six (6) months and/or, on or before one (1) year from the
date of signing this contract, the amount of THREE HUNDRED FORTY-FOUR
THOUSAND (P344,000.00) pesos shall be paid on April 23, 1995 and/or, on or
before October 23, 1995 shall be paid by the LESSEE to the LESSOR. SHacCD
c. That, the LESSEE, shall pay the amount of FOUR HUNDRED FORTY-
EIGHT THOUSAND (P448,000.00) pesos . . . to the LESSOR on April 23, 1997
and/or, on or before October 23, 1997, and on April 23, 1998 and/or, on or before
October 23, 1998 the amount of FOUR HUNDRED FORTY-EIGHT THOUSAND
(P448,000.00) pesos . . .
Paragraph 5 of the contract further provided that respondent shall undertake all
construction and preservation of improvements in the shpond that may be destroyed
during the period of the lease, at his expense, without reimbursement from petitioner.
In August 1996, a powerful typhoon hit the country which damaged the subject
shpond. Respondent did not immediately undertake the necessary repairs as the water
level was still high. Three (3) weeks later, respondent was informed by a barangay
councilor that major repairs were being undertaken in the shpond with the use of a crane.
Respondent found out that the repairs were at the instance of petitioner who had grown
impatient with his delay in commencing the work. 2005cdtai
In September 1996, respondent led a complaint before the O ce 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
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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 led a complaint on February 7, 1997 against petitioner before
the RTC of Valenzuela City, docketed as Civil Case No. 5139-V-97. Respondent prayed that
the following amounts be awarded him, viz.: (a) P300,000.00 as reimbursement for rentals
of the leased premises corresponding to the unexpired portion of the lease contract; (b)
P500,000.00 as unrealized pro ts; (c) P200,000.00 as moral damages; (d) P200,000.00
as exemplary damages; and, (e) P100,000.00 as attorney's fees plus P1,000.00 for each
court appearance of respondent's counsel. cSDIHT
Petitioner led his answer but failed to submit the required pretrial brief and to
attend the pretrial conference. On October 21, 1997, respondent was allowed to present
his evidence ex-parte before the Acting Branch Clerk of Court. 5 On the basis thereof, a
decision was rendered on December 15, 1997 6 in favor of respondent, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered as follows:
(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 pro t 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;

exemplary damages; and
and for attorney's fees, plus costs of suit.
Petitioner appealed to the Court of Appeals which modi ed the decision of the trial
court by deleting the award of P500,000.00 for unrealized pro ts for lack of basis, and by
reducing the award for attorney's fees to P50,000.00. 7 Petitioner's motion for
reconsideration was denied. Hence, this petition for review.
Petitioner contends that the Court of Appeals erred in ruling that the RTC of
Valenzuela City had jurisdiction over the action led by respondent considering that the
subject matter thereof, his alleged violation of the lease contract with respondent, was
already amicably settled before the O ce of the Barangay Captain of Taliptip, Bulacan,
Bulacan. Petitioner argued that respondent should have followed the procedure for
enforcement of the amicable settlement as provided for in the Revised Katarungang
Pambarangay Law. Assuming arguendo that the RTC had jurisdiction, it cannot award
more than the amount stipulated in the "Kasunduan" which is P150,000.00. In any event, no
factual or legal basis existed for the reimbursement of alleged advance rentals for the
unexpired portion of the lease contract as well as for moral and exemplary damages, and
attorney's fees.
Indeed, the Revised Katarungang Pambarangay Law 8 provides that an amicable
settlement reached after barangay conciliation proceedings has the force and effect of a
nal judgment of a court if not repudiated or a petition to nullify the same is led before
the proper city or municipal court within ten (10) days from its date. 9 It further provides
that the settlement may be enforced by execution by the lupong tagapamayapa within six
(6) months from its date, or by action in the appropriate city or municipal court, if beyond
the six-month period. 1 0 This special provision follows the general precept enunciated in
Article 2037 of the Civil Code, viz.:
A compromise has upon the parties the effect and authority of res judicata;
but there shall be no execution except in compliance with a judicial compromise.
Thus, we have held that a compromise agreement which is not contrary to law,
public order, public policy, morals or good customs is a valid contract which is the law
between the parties themselves. 1 1 It has upon them the effect and authority of res
judicata even if not judicially approved, 1 2 and cannot be lightly set aside or disturbed
except for vices of consent and forgery. 1 3
However, in Heirs of Zari, et al. v. Santos, 1 4 we clari ed that the broad precept
enunciated in Art. 2037 is qualified by Art. 2041 of the same Code, which provides:
If one of the parties fails or refuses to abide by the compromise, the other
party may either enforce the compromise or regard it as rescinded and insist upon
his original demand.
We explained, viz:
[B]efore the onset of the new Civil Code, there was no right to rescind
compromise agreements. Where a party violated the terms of a compromise
agreement, the only recourse open to the other party was to enforce the terms
thereof.
When the new Civil Code came into being, its Article 2041 . . . created for
the rst time the right of rescission. That provision gives to the aggrieved party
the right to "either enforce the compromise or regard it as rescinded and insist
upon his original demand." Article 2041 should obviously be deemed to qualify
the broad precept enunciated in Article 2037 that "[a] compromise has upon the
parties the effect and authority of res judicata. (underscoring ours)
In exercising the second option under Art. 2041, the aggrieved party may, if he chooses,
bring the suit contemplated or involved in his original demand, as if there had never
been any compromise agreement, without bringing an action for rescission. 1 5 This is
because he may regard the compromise as already rescinded 1 6 by the breach thereof
of the other party.
Thus, in Morales v. National Labor Relations Commission 1 7 we upheld the National
Labor Relations Commission when it heeded the original demand of four (4) workers for
reinstatement upon their employer's failure to comply with its obligation to pay their
monetary bene ts within the period prescribed under the amicable settlement. We
reiterated the rule that the aggrieved party may either (1) enforce the compromise by a
writ of execution, or (2) regard it as rescinded and so insist upon his original demand upon
the other party's failure or refusal to abide by the compromise. We also recognized the
options in Mabale v. Apalisok, 1 8 Canonizado v. Benitez, 1 9 and Ramnani v. Court of
Appeals, 2 0 to name a few cases.
In the case at bar, the Revised Katarungang Pambarangay Law provides for a two-
tiered mode of enforcement of an amicable settlement, to wit: (a) by execution by the
Punong Barangay which is quasi-judicial and summary in nature on mere motion of the
party entitled thereto; and (b) an action in regular form, which remedy is judicial. 2 1
However, the mode of enforcement does not rule out the right of rescission under Art.
2041 of the Civil Code. The availability of the right of rescission is apparent from the
wording of Sec. 417 2 2 itself which provides that the amicable settlement "may" be
enforced by execution by the lupon within six (6) months from its date or by action in the
appropriate city or municipal court, if beyond that period. The use of the word "may" clearly
makes the procedure provided in the Revised Katarungang Pambarangay Law directory 2 3
or merely optional in nature.
Thus, although the "Kasunduan" executed by petitioner and respondent before the
O ce of the Barangay Captain had the force and effect of a nal judgment of a court,
petitioner's non-compliance paved the way for the application of Art. 2041 under which
respondent may either enforce the compromise, following the procedure laid out in the
Revised Katarungang Pambarangay Law, or regard it as rescinded and insist upon his
original demand. Respondent chose the latter option when he instituted Civil Case No.
5139-V-97 for recovery of unrealized pro ts and reimbursement of advance rentals, moral
and exemplary damages, and attorney's fees. Respondent was not limited to claiming
P150,000.00 because although he agreed to the amount in the "Kasunduan," it is axiomatic
that a compromise settlement is not an admission of liability but merely a recognition that
there is a dispute and an impending litigation 2 4 which the parties hope to prevent by
making reciprocal concessions, adjusting their respective positions in the hope of gaining
balanced by the danger of losing. 2 5 Under the "Kasunduan," respondent was only required
to execute a waiver of all possible claims arising from the lease contract if petitioner fully
complies with his obligations thereunder. 2 6 It is undisputed that herein petitioner did not.
Having a rmed the RTC's jurisdiction over the action led by respondent, we now
resolve petitioner's remaining contention. Petitioner contends that no factual or legal basis
exists for the reimbursement of alleged advance rentals, moral and exemplary damages,
and attorney's fees awarded by the court a quo and the Court of Appeals.
The rule is that actual damages cannot be presumed, but must be proved with a
reasonable degree of certainty. 2 7 In the case at bar, we agree with petitioner that no
competent proof was presented to prove that respondent had paid P300,000.00 as
advance rentals for the unexpired period of the lease contract. On the contrary, the lease
contract itself provided that the remaining rentals of P448,000.00 shall be paid "on April
23, 1997 and/or, on or before October 23, 1997, and on April 23, 1998 and/or, on or before
October 23, 1998 the amount P448,000.00." Respondent led his complaint on February 7,
1997. No receipt or other competent proof, aside from respondent's self-serving
assertion, was presented to prove that respondent paid the rentals which were not yet due.
No proof was even presented by respondent to show that he had already paid
P1,000,000.00 upon signing of the lease contract, as stipulated therein. Petitioner, in
paragraphs 2 and 7 of his answer, 2 8 speci cally denied that respondent did so. Courts
must base actual damages suffered upon competent proof and on the best obtainable
evidence of the actual amount thereof. 2 9
As to moral damages, Art. 2220 of the Civil Code provides that same may be
awarded in breaches of contract where the defendant acted fraudulently or in bad faith. In
the case at bar, respondent alleged that petitioner made unauthorized repairs in the leased
premises and ousted his personnel therefrom despite their valid and subsisting lease
agreement. Petitioner alleged, by way of defense, that he undertook the repairs because
respondent abandoned the leased premises and left it in a state of disrepair. However,
petitioner presented no evidence to prove his allegation, as he did not attend the pretrial
conference and was consequently declared in default. What remains undisputed therefore
is that petitioner had a valid and subsisting lease contract with respondent which he
refused to honor by giving back possession of the leased premises to respondent. We
therefore sustain the conclusion of both the trial court and the Court of Appeals that an
award of moral damages is justi ed under the circumstances. We likewise sustain the
award for exemplary damages considering petitioner's propensity not to honor his
contractual obligations, rst under the lease contract and second, under the amicable
settlement executed before the O ce of the Barangay Captain. Since respondent was
compelled to litigate and incur expenses to protect his interest on account of petitioner's
refusal to comply with his contractual obligations, 3 0 the award of attorney's fees has to
be sustained.
IN VIEW WHEREOF, the petition is PARTIALLY GRANTED. The assailed Decision
dated April 2, 2003 of the Court of Appeals in CA-G.R. CV No. 59023 is modi ed by
deleting the award of P300,000.00 as reimbursement of advance rentals. The assailed
Decision is AFFIRMED in all other respects.
SO ORDERED.
Austria-Martinez, Callejo, Sr., Tinga and Chico-Nazario, JJ., concur.
Footnotes
1. Rollo, pp. 28-35.

2. Entitled "Jacinto S. Trillana, plaintiff-appellee v. Teodoro Chavez, defendant-appellant.''
3. Rollo, pp. 37-38.

THIRD DIVISION
[G.R. No. 194560. June 11, 2014.]
NESTOR T. GADRINAB , petitioner, vs . NORA T. SALAMANCA,

LOPEZ respondents.
ANTONIO TALAO, AND ELENA LOPEZ,
DECISION
LEONEN J :
LEONEN, p
A judgment on compromise agreement is a judgment on the merits. It has the effect

of res judicata, and is immediately nal 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 nality, even if the purpose of the modi cation is to
correct errors of fact or law.
This Rule 45 petition seeks the review of the Court of Appeals' decision 1 dated July
22, 2010 and its resolution 2 dated November 19, 2010. The Court of Appeals dismissed
petitioner's appeal and a rmed 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. 3 The Spouses Talao died intestate,
leaving a parcel of land in Sta. Ana, Manila. 4
The ve Talao children divided the property among themselves through an
extrajudicial settlement. 5 Subsequently, Arsenia Talao waived her share over the property
in favor of her siblings. 6 IcEACH
Respondent Salamanca led a complaint for partition against her siblings, Antonio,
Elena (deceased, now represented by her husband, Jose Lopez), and Adoracion (deceased,
now represented by heirs, petitioner Nestor and Francisco Gadrinab) before the Regional
Trial Court of Manila. 7
All parties claimed their respective shares in the property. 8 They also claimed
shares in the rentals collected from one of the units of a duplex apartment on the property.
9 The total amount of rental collection in the possession of Jose Lopez was
PhP528,623.00. 10 The amount, according to Jose's counsel, was ready for distribution. 11
Upon being referred to mediation, the parties entered into a compromise agreement
and stipulated the following:
1) That the subject property (land with all the improvements) situated
at 2370 Nacar Street, San Andres, Sta. Ana, Manila will be subject for sale and the
amount will be divided among the four (plaintiff and defendants);
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
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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 (PhP528,623.00)
and the uncollected amount up to February 2003 once collected will be divided
among the parties;
5) That the amount of PhP528,623.00 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- ve (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. 13
Based on the entry of judgment, the case became nal and executory on April 10, 2003. 14
CcAHEI
Nestor Gadrinab led a motion for execution of the compromise agreement. 15 He

demanded his one-fourth share in the accumulated rentals. 16 During the hearing on the
motion for execution, the parties agreed that the rentals shall be divided only into three
since Nestor had already been occupying one of the duplex units. 17 The parties also
agreed that Antonio Talao would shoulder Nestor's share, equivalent to one-fourth of the
rental amount. 18
Pursuant to the compromise agreement, Cuervo Appraiser appraised the property.
19 Unsatis ed with the appraisal, Antonio Talao moved for the property's reappraisal. 20
This was denied by the Regional Trial Court. 21
The portion of the duplex that Nestor refused to vacate, 22 remained unsold. 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. 24 She prayed
for the physical partition of the property instead of having it sold. 25
Nestor and Francisco Gadrinab opposed the motion. 26 They contended that the
judgment on the compromise agreement had already become nal and executory and had
the effect of res judicata. 27 Antonio Talao and Jose Lopez did not object to the motion for
physical partition. 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, 31 the Court of Appeals dismissed the
appeal. The Court of Appeals ruled that the exception to the immutability of judgments,
that is, "whenever circumstances transpire after the nality of the decision rendering its
execution unjust and inequitable," 32 applies in this case. The Court of Appeals speci cally
noted that the "parties' seemingly endless disagreements on matters involving the
disposition of the subject property" 33 were 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 a rming the Regional Trial
Court's order granting respondent Salamanca's motion for physical partition. 36 A
judgment on the compromise agreement had already been rendered and had attained
finality. 37 Petitioner also argued that the 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;
xxx xxx xxx

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;
TCDcSE
5. That the amount of FIVE HUNDRED 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 ve (45) days within which
to leave the premises in question [.] 38 (Emphasis in the original)
Petitioner alleged that the judgment on the compromise agreement had already
been partially complied with, as respondent Salamanca had already been paid her share in
the accrued rentals. 39 On the other hand, petitioner still had not been paid his share, 40
prompting him to file the motion for execution. 41
Petitioner pointed out that there was no agreement that he must vacate the property
before it could be sold. 42
Moreover, petitioner argued that the Court of Appeals' decision violated his right to
due process. 43 According to him, had there been a full-blown trial on the action for
partition, he would have been able to present evidence of exclusive possession of half of
the property. 44
In their separate comments, respondents Salamanca and Talao argued that this
case fell under the exception of the rule on immutability of judgments. 45 The non-
compliance of some of the parties with the compromise agreement constituted an event
that "[makes] it difficult if not totally impossible to enforce the compromise agreement." 46
Respondents Salamanca and Talao also argued that the physical partition of the
property would not prejudice the parties. 47 The order granting the motion for physical
partition was a mere enforcement of the compromise agreement, which entitled the
parties to their shares in the proceeds of the sale. 48 Respondent Salamanca pointed out
that the grant of the motion for physical partition would still be consistent with the intent
of the compromise agreement since it would result in the proceeds being divided equally
among the parties. 49 "The Order granting the physical partition was within the inherent
power and authority of the court having jurisdiction to render a particular judgment to
enforce it and to exercise equitable control over such enforcement." 50
Moreover, petitioner's refusal to vacate the property prevented it from being sold so
that the proceeds could already be distributed among the parties. 51
On the violation of due process, respondents Salamanca and Talao argued that it
was only before this court that this issue was raised.
The issue in this case is whether the Court of Appeals erred in a rming the Regional
Trial Court's decision allowing the physical partition of the property despite nality of a
previous judgment on compromise agreement involving the division of the same property.
The petition is meritorious.
The Court of Appeals erred in
affirming the Regional Trial
Court's decision allowing the
physical partition of the property
Respondent Salamanca led two actions for physical partition. The two parties
settled the rst action through a judicial compromise agreement. The same respondent
led the second action after she had determined that her co-heirs were not being
cooperative in complying with the compromise agreement. ATcEDS
In a compromise agreement, the parties freely enter into stipulations. "[A] judgment
based on a compromise agreement is a judgment on the merits" 52 of the case. It has the
effect of res judicata. These principles are impressed both in our law and jurisprudence.
Thus, Article 2037 of the Civil Code provides:
Article 2037.A compromise has upon the parties the effect and authority of res
judicata; but there shall be no execution except in compliance with a judicial
compromise.
In Spouses Romero v. Tan, 53 this court said:

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 in uence, 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 rst rule refers to
"bar by prior judgment," 56 which means that actions on the same claim or cause of action
cannot be relitigated. 57 This rule is embodied in Rule 39, Section 47, paragraph (b) of the
Rules of Court, which provides:
Section 47. Effect of judgments or nal orders. — The effect of a judgment
or nal order rendered by a court of the Philippines, having jurisdiction to
pronounce the judgment or final order, may be as follows:
(b) In other cases, the judgment or nal order is, with respect to the matter
directly adjudged or as to any other matter that could have been raised in
relation thereto, conclusive between the parties and their successors in interest
by title subsequent to the commencement of the action or special proceeding,
litigating for the same thing and under the same title and in the same capacity[.]
The second rule refers to "conclusiveness of judgment." 58 This means that facts
already tried and determined in another action involving a different claim or cause of action
cannot anymore be relitigated. 59 This rule is embodied in Rule 39, Section 47, paragraph
(c) of the Rules of Court, which provides:
Section 47. Effect of judgments or nal orders. — The effect of a judgment
or nal order rendered by a court of the Philippines, having jurisdiction to
pronounce the judgment or final order, may be as follows:
xxx xxx xxx

(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
nal order which appears upon its face to have been so adjudged, or which was
actually and necessarily included therein or necessary thereto. (49a) IcAaEH
This case involves "bar by prior judgment." Respondents cannot le another action
for partition after nal judgment on compromise had already been rendered in a previous
action for partition involving the same parties and property.
This court explained in FGU Insurance Corporation v. Regional Trial Court 60 the
doctrine of finality of judgment:
Under the doctrine of nality of judgment or immutability of judgment, a
decision that has acquired nality becomes immutable and unalterable, and may
no longer be modi ed in any respect, even if the modi cation is meant to correct
erroneous conclusions of fact and law, and whether it be made by the court that
rendered it or by the Highest Court of the land. Any act which violates this
principle must immediately be struck down. 61
This doctrine admits a few exceptions, usually applied to serve substantial justice:
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; 63 lack of 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 in uence, 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 nal judgment on compromise when failure of its execution was caused by the
parties themselves.
Likewise, respondents' argument that a supervening event, i.e., disagreement among
the parties, was present to justify disturbance of the nal judgment on compromise fails
to persuade. A supervening event may justify the disturbance of a nal judgment on
compromise if it "brought about a material change in [the] situation" 64 between the
parties. The material change contemplated must render the execution of the nal
judgment unjust and inequitable. Otherwise, a party to the compromise agreement has a
"right to have the compromise agreement executed, according to its terms." 65
The subsequent disagreement among the parties did not cause any material change
in the situation or in the relations among the parties. The situation and relations among the
parties remained the same as the situation and their relations prior to the compromise
agreement. They remained co-owners of the property, which they desired to partition.
Moreover, the parties voluntarily agreed to the compromise agreement, which was
already stamped with judicial approval. The agreement's execution would bring about the
effects desired by all parties and the most just and equitable situation for all. On the other
hand, the judgment granting the second action for partition led by respondent Salamanca
was obtained with opposition. IaHCAD
Judges "have the ministerial and mandatory duty to implement and enforce [a
compromise agreement]." 66 Absent appeal or motion to set aside the judgment, courts
cannot modify, impose terms different from the terms of a compromise agreement, or set
aside the compromises and reciprocal concessions made in good faith by the parties
without gravely abusing their discretion. 67
"[They cannot] relieve parties from [their] obligations . . . simply because [the
agreements are] . . . unwise." 68 Further, "[t]he mere fact that the Compromise Agreement
favors one party does not render it invalid." 69 Courts do not have power to "alter contracts
in order to save [one party] from [the effects of] adverse stipulations. . . ." 70
Respondents have remedies if
parties to the compromise
agreement refuse to abide by its
terms
The issue in this case involves the non-compliance of some of the parties with the
terms of the compromise agreement. The law affords complying parties with remedies in
case one of the parties to an agreement fails to abide by its terms.
A party may file a motion for execution of judgment. Execution is a matter of right on
final judgments. Section 1, Rule 39 of the Rules of Court provides:
Section 1. Execution upon judgments or nal orders. — Execution shall
issue as a matter of right, on motion, upon a judgment or order that disposes of
the action or proceeding upon the expiration of the period to appeal therefrom if
no appeal has been duly perfected. (1a)
If the appeal has been duly perfected and nally resolved, the execution may
forthwith be applied for in the court of origin, on motion of the judgment obligee,
submitting therewith certi ed true copies of the judgment or judgments or nal
order or orders sought to be enforced and of the entry thereof, with notice to the
adverse party.
The appellate court may, on motion in the same case, when the interest of
justice so requires, direct the court of origin to issue the writ of execution. (n)
If a party refuses to comply with the terms of the judgment or resists the
enforcement of a lawful writ issued, an action for indirect contempt may be led in
accordance with Rule 71 of the Rules of Court:
Section 3. Indirect contempt to be punished lifter charge and hearing. —
After a charge in writing has been led, and an opportunity given to the
respondent to comment thereon within such period as may be xed by the court
and to be heard by himself or counsel, a person guilty of any of the following
acts may be punished for indirect contempt;
xxx xxx xxx

(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[.]
EaHcDS
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 nal 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.
REINSTATED
SO ORDERED.
ORDERED
Velasco, Jr., Peralta, Villarama, Jr. * and Mendoza, JJ., concur.
Footnotes
*Villarama, Jr., J., designated as Acting Member per Special Order No. 1691 dated May 22,
2014 in view of the vacancy in the Third Division.
1.Rollo, pp. 31-42. This decision was penned by Associate Justice Noel G. Tijam, with Associate
Justices Marlene Gonzales-Sison and Danton Q. Bueser concurring.
2.Id. at 43-45. This resolution was penned by Associate Justice Noel G. Tijam, with Associate
Justices Marlene Gonzales-Sison and Danton Q. Bueser concurring.
3.Id. at 32.
4.Id.
5.Id.
6.Id.
7.Id.
8.Id.
9.Id. at 33.
SECOND DIVISION
[G.R. No. 169122. February 2, 2010.]
MARCELINO DOMINGO , petitioner, vs . COURT OF APPEALS, AGAPITA

DOMINGO, ANA DOMINGO, HEIRS OF GAUDENCIO DOMINGO,
namely: DOROTEO DOMINGO, JULITA DOMINGO, AMANDO
DOMINGO, and ARCEL DOMINGO; HEIRS OF JULIAN DOMINGO,
namely: JULIAN DOMINGO, JR. and PONCIANO DOMINGO; HEIRS OF
EDILBERTA DOMINGO, namely: ANITA DOMINGO and ROSIE
DOMINGO; HEIR OF FELIPE DOMINGO, namely: LORNA DOMINGO;
and HEIRS OF GERONIMO DOMINGO, namely: EMILY DOMINGO and
ARISTON DOMINGO represented by ROLANDO DOMINGO ,
respondents.
RESOLUTION
CARPIO , J : p
This is a petition 1 for certiorari under Rule 65 of the Rules of Court. The petition
challenges the 5 April 2 and 10 June 3 2005 Resolutions of the Court of Appeals in CA-
G.R. SP No. 89023. The Court of Appeals dismissed the petition 4 for certiorari, with
prayer for issuance of a temporary restraining order, led by Marcelino Domingo
(Marcelino) for failure to serve the pleadings personally and for failure to provide a
written explanation why the service was not done personally.
Before he died, Julio Domingo (Julio) allegedly executed a Deed of Absolute Sale
over a 4.1358-hectare parcel of land in favor of Marcelino's wife, Carmelita Mananghaya
(Mananghaya). The property was situated in Burgos, Sto. Domingo, Nueva Ecija, and
was covered by Transfer Certificate of Title No. NT-87365.
Agapita and Ana Domingo, and the heirs of Gaudencio, Julian, Edilberta, Modesta,
Felipe, and Geronimo Domingo (the Domingos) led before the Regional Trial Court
(RTC), Judicial Region 3, Branch 37, Baloc, Sto. Domingo, Nueva Ecija, a complaint
against Marcelino and Mananghaya for the annulment of the Deed of Absolute Sale. The
Domingos alleged that Julio's signature in the deed was forged.
In its 3 November 1993 Decision, 5 the RTC held that Julio's signature in the Deed
of Absolute Sale was forged; thus, the deed was void. The RTC ordered Marcelino and
Mananghaya to deliver possession of the property to the Domingos.
Marcelino and Mananghaya appealed the 3 November 1993 Decision to the
Court of Appeals. In its 14 July 2000 Decision, the Court of Appeals dismissed the
appeal. The 14 July 2000 Decision became nal and executory. Thus, on 4 August 2003,
the RTC issued a writ of execution. On 25 August 2003, the Domingos gained
possession of the property. CSAcTa
Marcelino led with the Department of Agrarian Reform (DAR) a petition 6 dated
25 August 2003 praying that he be declared the tenant-beneficiary of the property.
Around April 2004, Marcelino reentered and retook possession of the property.
The Domingos led before the RTC a motion to cite Marcelino in contempt. Marcelino
and Mananghaya led before the Court of Appeals a petition, 7 dated 28 April 2004, for
certiorari, prohibition and mandamus. They prayed that:
1. Pending hearing a preliminary injunction be issued against the [RTC]
enjoining and prohibiting to implement the writ of executed [sic] (Exh. M);
2. Annulling the writ of execution dated August 23, 2003;
3. Annulling the last portion of the decision in Civil Case No. 1218
which states: ["]to deliver the possession of the land in question to the plaintiffs.
(par. 5 Decision dated November 3, 1993)."
4. Ordering the denial and or dismissal of the motion for contempt

filed by the private respondent against the petitioners. 8
In its 26 May 2004 Order, the RTC found Marcelino in contempt, ned him
P25,000 and ordered his arrest and imprisonment. However, the sheriff of the RTC no
longer served the 26 May 2004 Order because Marcelino declared in writing that he
would deliver possession of the property to the Domingos. In its 8 June 2004,
Resolution, 9 the Court of Appeals dismissed outright Marcelino and Mananghaya's 28
April 2004 petition.
Later, however, Marcelino employed six men to reenter the property. On 14 June
2004, the RTC issued warrants of arrest against Marcelino and the six men. Marcelino
and a certain Genero Salazar (Salazar) were arrested and were detained at the
Philippine National Police station in Sto. Domingo, Nueva Ecija. On 17 and 23 June
2004, Genero and Marcelino, respectively, were released after declaring in writing that
they would no longer interfere with the Domingos' possession of the property. The RTC
warned Marcelino that a warrant for his arrest shall be deemed automatically issued if
he reenters the property.
In its 4 October 2004 Order, 1 0 the DAR granted Marcelino's 25 August 2003
petition, placed 10.0108 hectares of land — including the property — under the
coverage of Republic Act (RA) No. 6657, and named Marcelino as one of the tenant-
bene ciaries. Agapita Domingo (Agapita) led a motion for reconsideration of the 4
October 2004 Order. Marcelino reentered and retook possession of the property.
The Domingos led before the RTC another motion to cite Marcelino in
contempt, and for the issuance of a warrant for his arrest. In its 23 December 2004
Order, 1 1 the RTC stated that:
In the partial return, dated December 9, 2004, of Sheriff Crispino Magbitang
acting per order, dated December 1, 2004 of this Court, he con rmed that when he
went to the subject property on December 7, 2004, about 3:00 p.m., he saw six (6)
men "tilling and plowing the land-in-question" but who, upon seeing him, stopped
working, gathered their agricultural implements and left. . . . Dorenzo Domingo,
brother of defendant Marcelino Domingo, con rmed to the sheriff the re-entry on
the land in question by his brother, the barangay captain of the place where said
land is situated, who bragged of an alleged decision of the DARAB regional o ce
in San Fernando City, Pampanga, making him the legal owner of the subject land.
cDTSHE
The evidence of the plaintiffs also showed that defendant Marcelino

Domingo had actually fenced the subject property.
This Court, notwithstanding its already nal order of May 26, 2004, nding
and declaring defendant Marcelino Domingo in contempt of court as well as the
order of June 23, 2004 wherein it warned of the automatic re-issuance of a
warrant of arrest against him and any other acting in his behalf in the event of
reentry and retaking possession of the subject property, set the present motion for
hearing on December 15, 2004 to afford defendant Marcelino Domingo the
opportunity to explain his side even only for the purpose of mitigating the legal
consequences of his very stubborn arrogance that amounted to open de ance of
the power of contempt of this Court.
Unfortunately, not only did defendant Marcelino Domingo refuse to receive

the notice of the hearing set on December 15, 2004, but he actually disregarded it
by failing to appear on said date.
Again, to give the defendant another chance, the hearing set on December
15, 2004 was reset to December 20, 2004, as requested by defendant's counsel
Atty. Restituto M. David . . . but again, none of them appeared on said date nor file
[sic] any comment on the same.
With defendant Marcelino Domingo's cavalier attitude towards it, this Court
now feels its authority ignored and belittled and its power of contempt challenged
and tested of its worth by said defendant who, ironically, as barangay head and,
as such, a person in authority himself, should rst be the paragon in upholding
the rule of law. SDAaTC
Even if granted that defendant Marcelino Domingo had awarded [sic]

ownership of the subject land by the DARAB, still he could not have taken the law
in his own hands by simply taking over thereof without any judicial order and
thereby ousting therefrom the plaintiffs who [sic], this Court, had given legal
possession thereof pursuant to a decision of the Court of Appeals which had
already long become final and executory.
WHEREFORE, premises considered, the present motion is granted:
1. Ordering the issuance of a continuing warrant of arrest and detention of

defendant Marcelino Domingo at the Nueva Ecija Provincial Jail,
Caalibangbangan, Cabanatuan City for a period of Thirty (30) days until
further order from this Court;
2. Ordering defendant Marcelino Domingo's further detention at the said jail

until he shall have effectively surrendered and redelivered possession of
the subject property to the plaintiffs;
3. Ordering the forfeiture in favor of the plaintiffs of all the movable

improvements put or introduced on the subject property by defendant
Marcelino Domingo;
4. Ordering the issuance of a writ of execution for the satisfaction of the ne

of P25,000.00 per the Order, dated May 26, 2004[;]
5. Ordering the issuance of a [sic] continuing warrants for the arrest of all
other persons working, cultivating, tilling and planting on the subject
landholding in behalf of defendant Marcelino Domingo, and under his
control, direction and supervision. 1 2
Marcelino led a motion for reconsideration of the 23 December 2004

Order.
In its 17 February 2005 Order, 1 3 the DAR granted Agapita's motion for
reconsideration and set aside the 4 October 2004 Order. The DAR held that the
property was not covered by RA No. 6657 because it was less than ve hectares. The
DAR stated that:
From the documents submitted by the movant, it appears that the subject
property of 4.1358 hectares covered by TCT No. 87365 is the only landholdings
owned by Julio Domingo. He was only an administrator of the 5.8831 hectares,
therefore, the 4.1358 hectares cannot be covered by land reform law either under
PD 27/RA 6657 since the same is way below the ceiling mandated by agrarian
reform law. 1 4 HSIaAT
In its 4 March 2005 Order, 1 5 the RTC denied Marcelino's motion for
reconsideration. The RTC held that:
In his Sinumpaang Salaysay of June 22, 2004 on the basis of which this
Court ordered his release from jail, defendant Marcelino never mentioned
anything about the distinction of his possession of the subject property between
that in the concept of owner and in the concept of a tenant-lessee. Even if he did,
that would not have mattered because the concept of possession in the instance
[sic] case was never in issue. Besides, his undertaking in the said sworn statement
was clearly worded that he would never again re-enter or retake possession of the
subject land either by himself of [sic] by his agents and he would bar others from
entering the same.
It will now appear that he had foisted a contumacious lie to this Court with
his declaration in the said sworn statement to obtain his release from jail. This
warrant his being cited for another contempt of this Court.
Actually even if defendant Marcelino had been awarded ownership of the

subject land by the DARAB, still he could not have taken the law in his own hands
by simply taking over thereof without any judicial order and thereby ousting
therefrom the plaintiffs who [sic], this Court, had given legal possession thereof
pursuant to a decision of the Court of Appeals which had already long become
final and executory.
But the fact is, the Order of the DARAB relied upon by the defendant
Marcelino did not grant him any speci c portion of the land declared to be within
the coverage of PD 27/RA 6657 because the same was yet, by its terms, to be
distributed to the quali ed bene ciaries thereof and defendant Marcelino being
only one of such beneficiaries.
What accentuates defendant Marcelino contemnary [sic] act of reentering

and retaking possession of the subject land was the fact that he did so without
even waiting for the nality of the order relied upon by him. As it has turned out
the DAR — Region III had reversed its order of October 4, 2004 in another order,
dated February 17, 2005, copy of which was presented by the plaintiff to this
Court by way of manifestation led on February 23, 2005, "SETTING ASIDE the
Order, dated October 4, 2004, and a new one is hereby issued DENYING the
petition for coverage filed by Marcelino Domingo for utter lack of merit".
It is now very clear to this Court that defendant Marcelino's re-entry and
retaking possession and cultivation of the subject land was sheer display of
stubborn arrogance and an open, deliberate and contemptuous de ance of its
order and processes.
WHEREFORE, premises considered, the Motion for Reconsideration of

defendant Marcelino Domingo is hereby denied and further ordering that: CScTED
1. The order granting the issuance of a warrant of arrest against

defendant Marcelino Domingo is hereby maintained;
2. Defendant Marcelino Domingo is again found and declared in

contempt of Court and penalized with imprisonment of Twenty (20)
days;
3. Defendant Marcelino Domingo's further detention at the Nueva Ecija

Provincial Jail until he shall have effectively surrendered and
redelivered possession of the subject land to plaintiffs;
4. Ordering the forfeiture in favor of the plaintiffs of all the movable

improvements put or introduced on the subject property by
defendant Marcelino Domingo[;]
5. Ordering the issuance of a writ of execution for the satisfaction of

The fine of P25,000.00 per the Order, dated May 26, 2004[;]
6. Ordering the issuance of a continuing warrants [sic] for the arrest of

all other persons working, cultivating, tilling and planting on the
subject landholding in behalf of defendant Marcelino Domingo, and
under his control, direction and supervision. 1 6
Marcelino led before the Court of Appeals a petition for certiorari under Rule 65
of the Rules of Court, dated 21 March 2005, with prayer for the issuance of a temporary
restraining order. Marcelino alleged that the RTC had no jurisdiction to order him to
deliver possession of the property to the Domingos and that the RTC gravely abused its
discretion in finding him in contempt.
In its 5 April 2005 Resolution, the Court of Appeals dismissed outright
Marcelino's petition. The Court of Appeals held that:
This petition for certiorari faces outright dismissal for three (3)
fundamental reasons, namely:
(1) There is no written explanation to justify service by mail in lieu of

the preferred mode of personal service, this in violation of Section 11, Rule 13, of
the [Rules of Court] . . . .
Net result: The petition is deemed NOT filed.
(2) The following copies of pertinent pleadings and orders that would
support the allegations in the petition have not been attached thereto as annexes,
to wit:
(a) The complaint for annulment of sale with damages led with the
Regional Trial Court, Branch 37, Baloc, Sto. Domingo, Nueva Ecija;
EScAHT
(b) The RTC decision of November 3, 1993;
(c) The petition for coverage under PD 27 led with DAR, Regional
Office, San Fernando, Pampanga;
(d) The October 4, 2004 DAR order;
(e) The motion for reconsideration led with DAR, Reg. III, San
Fernando, Pampanga;
(f) DAR order of February 17, 2005; and,
(g) The notice of appeal filed on March 8, 2005.
this in violation of Section 3, Rule 46 of the 1997 Rules . . . .
(3) The prayer for temporary restraining order failed to manifest

willingness to post the necessary injunctive bond, in violation of Section 4, Rule
58. 1 7
Marcelino led a motion 1 8 for reconsideration of the 5 April 2005 Resolution. In

its 10 June 2005 Resolution, the Court of Appeals denied the motion. The Court of
Appeals held that Marcelino's "failure to le a written explanation to justify service by
mail in lieu of the preferred mode of personal service is an absolutely insurmountable
obstacle to the success of this motion for reconsideration." 1 9 Marcelino led another
motion 2 0 for reconsideration. In its 19 July 2005 Resolution, the Court of Appeals
noted the motion. The Court of Appeals held that, "We cannot accept the motion for
reconsideration for the reason that a second motion for reconsideration of a nal order
is a prohibited pleading." 2 1
Hence, the present petition. Marcelino alleges that the Court of Appeals gravely
abused its discretion in dismissing the 21 March 2005 petition. He states that:
While it is true that petitioner failed to incorporate a written explanation to
justify service by mail in lieu of the preferred mode of personal service in his
Petition, it was grave abuse of discretion for public respondent Court of Appeals
to dismiss his Petition on this ground. . . . [L]itigations should be decided as much
as possible on their merits rather than technicalities . . . .
. . . Section 11, Rule 13 of the 1997 Rules of Civil Procedure is "merely

directory" and it is incumbent upon the court to use its discretion in determining
whether substantial justice will be served (or rights unjusti ably prejudiced) if it
resolves to dismiss a petition because of non-compliance with a mere directory
rule. 2 2
The petition is unmeritorious. Section 11, Rule 13 of the Rules of Court states:
SEC. 11. Priorities in modes of service and ling. — Whenever
practicable, the service and ling of pleadings and other papers shall be done
personally. Except with respect to papers emanating from the court, a resort to
other modes must be accompanied by a written explanation why the service or
ling was not done personally. A violation of this Rule may be cause to consider
the paper as not filed. ACHEaI
Section 11 is mandatory. In Solar Team Entertainment, Inc. v. Judge Ricafort, 23

the Court held that:
Pursuant . . . to Section 11 of Rule 13, service and ling of pleadings
and other papers must, whenever practicable, be done personally; and if
made through other modes, the party concerned must provide a written
explanation as to why the service or filing was not done personally . . . .
Personal service and ling are preferred for obvious reasons. Plainly, such
should expedite action or resolution on a pleading, motion or other paper; and
conversely, minimize, if not eliminate, delays likely to be incurred if service or
ling is done by mail, considering the ine ciency of postal service. Likewise,
personal service will do away with the practice of some lawyers who, wanting to
appear clever, resort to the following less than ethical practices: (1) serving or
ling pleadings by mail to catch opposing counsel off-guard, thus leaving the
latter with little or no time to prepare, for instance, responsive pleadings or an
opposition; or (2) upon receiving notice from the post o ce that the registered
parcel containing the pleading of or other paper from the adverse party may be
claimed, unduly procrastinating before claiming the parcel, or, worse, not claiming
it at all, thereby causing undue delay in the disposition of such pleading or other
papers.
If only to underscore the mandatory nature of this innovation to

our set of adjective rules requiring personal service whenever
practicable, Section 11 of Rule 13 then gives the court the discretion to
consider a pleading or paper as not led if the other modes of service
or ling were resorted to and no written explanation was made as to
why personal service was not done in the rst place . The exercise of
discretion must, necessarily, consider the practicability of personal service, for
Section 11 itself begins with the clause "whenever practicable."
We thus take this opportunity to clarify that under Section 11, Rule 13 of
the 1997 Rules of Civil Procedure, personal service and ling is the general
rule, and resort to other modes of service and ling, the exception.
Henceforth, whenever personal service or ling is practicable, in light of
the circumstances of time, place and person, personal service or ling
is mandatory. Only when personal service or ling is not practicable
may resort to other modes be had, which must then be accompanied by
a written explanation as to why personal service or ling was not
practicable to begin with . In adjudging the plausibility of an explanation, a
court shall likewise consider the importance of the subject matter of the case or
the issues involved therein, and the prima facie merit of the pleading sought to be
expunged for violation of Section 11. This Court cannot rule otherwise, lest we
allow circumvention of the innovation introduced by the 1997 Rules in order to
obviate delay in the administration of justice. AHcCDI
xxx xxx xxx
. . . [F]or the guidance of the Bench and Bar, strictest compliance

with Section 11 of Rule 13 is mandated.
mandated 2 4 (Emphasis supplied)
In petitions for certiorari, procedural rules must be strictly observed. In Athena

Computers, Inc. v. Reyes, 2 5 the Court held that:
Certiorari, being an extraordinary remedy, the party who seeks to avail of
the same must strictly observe the rules laid down by law.
xxx xxx xxx
The acceptance of a petition for certiorari as well as the grant of due

course thereto is, in general, addressed to the sound discretion of the court.
Although the court has absolute discretion to reject and dismiss a petition for
certiorari, it does so only . . . when there are procedural errors, like violations of the
Rules of Court. 2 6
Liberal application of procedural rules is allowed only when two requisites are
present: (1) there is a plausible explanation for the non-compliance, and (2) the outright
dismissal would defeat the administration of justice. In Tible & Tible Company, Inc. v.
Royal Savings and Loan Association, 2 7 the Court held that "the two pre-requisites for
the relaxation of the rules are: (1) justi able cause or plausible reason for non-
compliance; and (2) compelling reason to convince the court that outright dismissal of
the petition would seriously impair the orderly administration of justice." 2 8 Both
requisites are lacking in the present case.
WHEREFORE , we DISMISS the petition. We AFFIRM the 5 April and 10 June
2005 Resolutions of the Court of Appeals in CA-G.R. SP No. 89023.
SO ORDERED.
ORDERED
Corona, * Brion, Del Castillo and Perez, JJ., concur.
Footnotes
* Designated additional member per Special Order No. 812.
1. Rollo, pp. 3-30.

2. Id. at 57-59. Penned by Associate Justice Renato C. Dacudao, with Associate Justices
Edgardo F. Sundiam and Japar B. Dimaampao concurring.
3. Id. at 64-65.
4. Id. at 44-55.
5. Id. at 72-76. Penned by Judge Senen R. Saguyod.
6. Id. at 77-82.
7. Id. at 140-147.
8. Id. at 144-145.
9. Id. at 149-150. Penned by Associate Justice Jose Catral Mendoza, with Associate
Justices Eugenio S. Labitoria and Jose L. Sabio, Jr. concurring.
10. Id. at 83-85.

11. Id. at 36-38. Penned by Judge Santiago M. Arenas.
12. Id. at 37-38.
13. Id. at 86-88.
14. Id. at 87.
15. Id. at 39-43.
16. Id. at 41-43.
17. Id. at 57-59.
18. Id. at 60-63.
19. Id. at 64.
20. Id. at 66-69.

SECOND DIVISION
[G.R. No. 127540. October 17, 2001.]
EUGENIO DOMINGO, CRISPIN MANGABAT and SAMUEL

CAPALUNGAN petitioners, vs . HON. COURT OF APPEALS, FELIPE C.
CAPALUNGAN,
RIGONAN respondents.
RIGONAN and CONCEPCION R. RIGONAN,
EUGENIO DOMINGO, CRISPIN MANGABAT and SAMUEL

CAPALUNGAN , petitioners, vs. HON. COURT OF APPEALS, THE
DIRECTOR OF LANDS, and FELIPE C. RIGONAN and CONCEPCION R.
RIGONAN, respondents.
Herman D. Coloma for petitioners.

Eddie Tamondong for private respondents.
SYNOPSIS
Subject parcels of land were previously owned by Paulina Rigonan. Private

respondents claimed that Paulina sold them the lots in 1965. Petitioners, however,
alleged that they are the closest surviving relatives of Paulina and they inherited the lots
from her when she died in 1966. Here in issue is the existence and due execution of the
alleged deed of sale.
The Court ruled in the negative on the issue posed. First, no original deed of sale
was ever presented, only a carbon copy thereof. No witness directly testi ed on the
execution of the deed of sale and the carbon copy bore only the alleged thumbprint of
Paulina. Second, the carbon copy contained lled-in blanks and alterations; it showed
intercalations and discrepancies when compared to supposed copies in existence.
Third, Paulina was never asked to vacate the purportedly sold premises; in fact, they
were still included in her will which was notarized by the same notary public who
allegedly notarized the supposed deed of sale. Fourth, at the purported execution of the
deed, the Court noted that Paulina was already incapacitated by impaired mental
faculties due to advanced years. Lastly, the consideration here is only P850 for 9 lots, a
house and a bodega. The Court agreed that said amount was grossly inadequate for a
valid sale.
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT; THAT DECIDING JUDGE

PRESIDED ONLY ONCE OVER THE HEARINGS HAS NO ADVERSE EFFECT ON THE
DECISION. — While the trial judge deciding the case presided over the hearings of the case
only once, this circumstance could not have an adverse effect on his decision. The
continuity of a court and the e cacy of its proceedings are not affected by the death,
resignation or cessation from the service of the presiding judge. A judge may validly render
a decision although he has only partly heard the testimony of the witnesses. After all, he
could utilize and rely on the records of the case, including the transcripts of testimonies
heard by the former presiding judge.
2. ID.; ID.; CERTIFICATION AGAINST FORUM-SHOPPING; COMPLIANCE;
PRESENT WHEN ONE WAS ATTACHED IN THE COPY INTENDED FOR THE COURT. — On
the matter of the certi cation against forum-shopping, petitioners aver that they attached
one in the copy intended for this Court. This is substantial compliance. A deviation from a
rigid enforcement of the rules may be allowed to attain their prime objective for, after all,
the dispensation of justice is the core reason for the court's existence.
3. ID.; ID.; APPEAL; REVIEW OF THE CONTRADICTORY FINDINGS OF THE TRIAL
COURT AND COURT OF APPEALS. — While the issues raised in this petition might appear
to be mainly factual, this petition is properly given due course because of the contradictory
ndings of the trial court and the Court of Appeals. Further, the latter court apparently
overlooked certain relevant facts which justify a different conclusion. Moreover, a
compelling sense to make sure that justice is done, and done rightly in the light of the
issues raised herein, constrains us from relying on technicalities alone to resolve this
petition.
4. CIVIL LAW; CONTRACTS; DEED OF SALE; DOUBTFUL IN THE PRESENCE OF
VARIOUS IRREGULARITIES. — Irregularities abound regarding the execution and
registration of the alleged deed of sale. The original was nowhere to be found and none
could be presented at the trial. The carbon copy on le, which is allegedly a duplicate
original, shows intercalations and discrepancies when compared to purported copies in
existence. Furthermore, it appears that the alleged vendor was never asked to vacate the
premises she had purportedly sold. The alleged vendor's continued possession of the
property in this case throws an inverse implication, a serious doubt on the due execution of
the deed of sale. Noteworthy, the same parcels of land involved in the alleged sale were
still included in the will subsequently executed by Paulina and notarized by the same notary
public, Atty. Tagatag. These circumstances, taken together, militate against unguarded
acceptance of the due execution and genuineness of the alleged deed of sale.
5. ID.; ID.; CONSIDERATION; NOT APPRECIATED WHEN AMOUNT THEREOF
DUBIOUS. — We have to take into account the element of consideration for the sale. The
price allegedly paid by private respondents for nine (9) parcels, including the three parcels
in dispute, a house and a warehouse, raises further questions. Consideration is the why of
a contract, the essential reason which moves the contracting parties to enter into the
contract. On record, there is unrebutted testimony that Paulina as landowner was
nancially well off. She loaned money to several people. We see no apparent and
compelling reason for her to sell the subject parcels of land with a house and warehouse
at a meager price of P850 only.
6. ID.; ID.; CONSENT; NOT APPRECIATED WHEN THERE IS INCAPACITY DUE TO
ADVANCED YEARS IMPAIRING THE MENTAL FACULTY OF A PARTY. — The general rule is
that a person is not incompetent to contract merely because of advanced years or by
reason of physical in rmities. However, when such age or in rmities have impaired the
mental faculties so as to prevent the person from properly, intelligently, and rmly
protecting her property rights then she is undeniably incapacitated. The unrebutted
testimony of Zosima Domingo shows that at the time of the alleged execution of the deed,
Paulina was already incapacitated physically and mentally. She narrated that Paulina
played with her waste and urinated in bed. Given these circumstances, there is in our view
su cient reason to seriously doubt that she consented to the sale of and the price for her
parcels of land. Moreover, there is no receipt to show that said price was paid to and
received by her.

DECISION
QUISUMBING , J : p
This petition 1 seeks to annul the decision of the Court of Appeals dated August 29,
1996, which set aside the decision of the Regional Trial Court of Batac, Ilocos Norte,
Branch 17, in Civil Case No. 582-17 for reivindicacion consolidated with Cadastral Case
No. 1. 2 The petition likewise seeks to annul the resolution dated December 11, 1996,
denying petitioners' motion for reconsideration.
The facts of this case, culled from the records, are as follows:
Paulina Rigonan owned three (3) parcels of land, located at Batac and Espiritu,
Ilocos Norte, including the house and warehouse on one parcel. She allegedly sold them to
private respondents, the spouses Felipe and Concepcion Rigonan, who claim to be her
relatives. In 1966, herein petitioners Eugenio Domingo, Crispin Mangabat and Samuel
Capalungan, who claim to be her closest surviving relatives, allegedly took possession of
the properties by means of stealth, force and intimidation, and refused to vacate the same.
Consequently, on February 2, 1976, herein respondent Felipe Rigonan led a complaint for
reivindicacion against petitioners in the Regional Trial Court of Batac, Ilocos Norte. On July
3, 1977, he amended the complaint and included his wife as co-plaintiff. They alleged that
they were the owners of the three parcels of land through the deed of sale executed by
Paulina Rigonan on January 28, 1965; that since then, they had been in continuous
possession of the subject properties and had introduced permanent improvements
thereon; and that defendants (now petitioners) entered the properties illegally, and they
refused to leave them when asked to do so.
Herein petitioners, as defendants below, contested plaintiffs' claims. According to
defendants, the alleged deed of absolute sale was void for being spurious as well as
lacking consideration. They said that Paulina Rigonan did not sell her properties to anyone.
As her nearest surviving kin within the fifth degree of consanguinity, they inherited the three
lots and the permanent improvements thereon when Paulina died in 1966. They said they
had been in possession of the contested properties for more than 10 years. Defendants
asked for damages against plaintiffs. HAICTD
During trial, Juan Franco, Notary Public Evaristo P. Tagatag 3 and plaintiff Felipe
Rigonan testified for plaintiffs (private respondents now).
Franco testi ed that he was a witness to the execution of the questioned deed of
absolute sale. However, when cross-examined and shown the deed he stated that the deed
was not the document he signed as a witness, but rather it was the will and testament
made by Paulina Rigonan.
Atty. Tagatag testi ed that he personally prepared the deed, he saw Paulina Rigonan
a x her thumbprint on it and he signed it both as witness and notary public. He further
testi ed that he also notarized Paulina's last will and testament dated February 19, 1965.
The will mentioned the same lots sold to private respondents. When asked why the subject
lots were still included in the last will and testament, he could not explain. Atty. Tagatag
also mentioned that he registered the original deed of absolute sale with the Register of
Deeds.
Plaintiff Felipe Rigonan claimed that he was Paulina's close relative. Their fathers
were rst cousins. However, he could not recall the name of Paulina's grandfather. His
claim was disputed by defendants, who lived with Paulina as their close kin. He admitted
the discrepancies between the Register of Deeds' copy of the deed and the copy in his
possession. But he attributed them to the representative from the O ce of the Register of
Deeds who went to plaintiffs' house after that O ce received a subpoena duces tecum.
According to him, the representative showed him blanks in the deed and then the
representative filled in the blanks by copying from his (plaintiffs) copy.
Counsel for defendants (petitioners herein) presented as witnesses Jose Flores, the
owner of the adjacent lot; Ruben Blanco, then acting Registrar of Deeds in Ilocos Norte;
and Zosima Domingo, wife of defendant Eugenio Domingo.
Jose Flores testi ed that he knew defendants, herein petitioners, who had lived on
the land with Paulina Rigonan since he could remember and continued to live there even
after Paulina's death. He said he did not receive any notice nor any offer to sell the lots
from Paulina, contrary to what was indicated in the deed of sale that the vendor had
noti ed all the adjacent owners of the sale. He averred he had no knowledge of any sale
between Paulina and private respondents.
Ruben Blanco, the acting Registrar of Deeds, testi ed that only the carbon copy, also
called a duplicate original, of the deed of sale was led in his o ce, but he could not
explain why this was so.
Zosima Domingo testi ed that her husband, Eugenio Domingo, was Paulina's
nephew. Paulina was a rst cousin of Eugenio's father. She also said that they lived with
Paulina and her husband, Jose Guerson, since 1956. They took care of her, spent for her
daily needs and medical expenses, especially when she was hospitalized prior to her death.
She stated that Paulina was never badly in need of money during her lifetime. aSEDHC
On March 23, 1994, the trial court rendered judgment in favor of defendants (now
the petitioners). It disposed:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
defendants and against the plaintiffs, and as prayed for, the Amended Complaint
is hereby DISMISSED .
Defendants are hereby declared, by virtue of intestate succession, the

lawful owners and possessors of the house including the bodega and the three
(3) parcels of land in suit and a Decree of Registration adjudicating the ownership
of the said properties to defendants is hereby issued.
The alleged deed of sale (Exhs. "A", "A-1", "1" and "1-a") is hereby declared
null and void and fake and the prayer for the issuance of a writ of preliminary
injunction is hereby denied.
Plaintiffs are hereby ordered to pay defendants:
a) P20,000.00 as moral damages;
b) P10,000.00 as exemplary damages;
c) P10,000.00 attorney's fees and other litigation expenses.
No pronouncement as to costs. 4
Private respondents herein appealed to the Court of Appeals.

On August 29, 1996, the CA reversed the trial court's decision, thus:
WHEREFORE, the decision dated March 23, 1994 is hereby SET ASIDE. The
plaintiffs-appellants Felipe Rigonan and Concepcion Rigonan are declared the
owners of the properties under litigation and the defendants-appellees are hereby
ordered to VACATE the subject properties and SURRENDER the possession
thereof to the heirs of the plaintiffs-appellants.
Costs against the defendants-appellees. 5
Hence, this petition assigning the following as errors:

I
THE RESPONDENT COURT OF APPEALS HAS DECIDED QUESTIONS OF LEGAL SUBSTANCE

AND SIGNIFICANCE NOT IN ACCORDANCE WITH THE EVIDENCE, LAW AND WITH THE
APPLICABLE DECISIONS OF THIS HONORABLE COURT.
II
THAT THE FINDINGS OF RESPONDENT COURT OF APPEALS ARE CONTRARY TO THOSE OF

THE TRIAL COURT AND CLEARLY VIOLATES THE RULE THAT THE FACTUAL FINDINGS OF
TRIAL COURTS ARE ENTITLED TO GREAT WEIGHT AND RESPECT ON APPEAL, ESPECIALLY
WHEN SAID FINDINGS ARE ESTABLISHED BY UNREBUTTED TESTIMONIAL AND
DOCUMENTARY EVIDENCE.
III
THAT THE FINDINGS AND CONCLUSIONS OF RESPONDENT COURT OF APPEALS ARE

GROUNDED ENTIRELY ON SPECULATIONS, SURMISES, CONJECTURES, OR ON INFERENCES
MANIFESTLY MISTAKEN.
IV
THAT THE RESPONDENT COURT OF APPEALS MANIFESTLY OVERLOOKED CERTAIN
RELEVANT FACTS NOT DISPUTED BY THE PARTIES AND WHICH, IF PROPERLY CONSIDERED,
WOULD JUSTIFY A DIFFERENT CONCLUSION.
THAT THE FINDINGS OF FACT OF RESPONDENT COURT OF APPEALS ARE PREMISED ON

SUPPOSED ABSENCE OF EVIDENCE BUT IS CONTRADICTED BY THE EVIDENCE ON RECORD
THUS CONSTITUTES GRAVE ABUSE OF DISCRETION. 6
The basic issue for our consideration is, did private respondents su ciently
establish the existence and due execution of the Deed of Absolute and Irrevocable Sale of
Real Property? Marked as Exhibits "A", "A-1", "1" and "1-a", this deed purportedly involved
nine (9) parcels of land, inclusive of the three (3) parcels in dispute, sold at the price of
P850 by Paulina Rigonan to private respondents on January 28, 1965, at Batac, Ilocos
Norte. 7 The trial court found the deed "fake," being a carbon copy with no typewritten
original presented; and the court concluded that the document's execution "was tainted
with alterations, defects, tamperings, and irregularities which render it null and void ab
initio." 8
Petitioners argue that the Court of Appeals erred in not applying the doctrine that
factual ndings of trial courts are entitled to great weight and respect on appeal,
especially when said ndings are established by unrebutted testimonial and documentary
evidence. They add that the Court of Appeals, in reaching a different conclusion, had
decided the case contrary to the evidence presented and the law applicable to the case.
Petitioners maintain that the due execution of the deed of sale was not su ciently
established by private respondents, who as plaintiffs had the burden of proving it. First, the
testimonies of the two alleged instrumental witnesses of the sale, namely, Juan Franco
and Efren Sibucao, were dispensed with and discarded when Franco retracted his oral and
written testimony that he was a witness to the execution of the subject deed. As a
consequence, the appellate court merely relied on Atty. Tagatag's (the notary public)
testimony, which was incredible because aside from taking the double role of a witness
and notary public, he was a paid witness. Further his testimony, that the subject deed was
executed in the house of Paulina Rigonan, was rebutted by Zosima Domingo, Paulina's
housekeeper, who said that she did not see Atty. Tagatag, Juan Franco and Efren Sibucao
in Paulina's house on the alleged date of the deed's execution.
Secondly, petitioners said that private respondents failed to account for the
typewritten original of the deed of sale and that the carbon copy led with the Register of
Deeds was only a duplicate which contained insertions and erasures. Further, the carbon
copy was without an a davit of explanation, in violation of the Administrative Code as
amended, which requires that if the original deed of sale is not presented or available upon
registration of the deed, the carbon copy or so-called "duplicate original" must be
accompanied by an affidavit of explanation, otherwise, registration must be denied. 9
Thirdly, petitioners aver that the consideration of only P850 for the parcels of land
sold, together with a house and a warehouse, was another indication that the sale was
ctitious because no person who was nancially stable would sell said property at such a
grossly inadequate consideration.
Lastly, petitioners assert that there was abundant evidence that at the time of the
execution of the deed of sale, Paulina Rigonan was already senile. She could not have
consented to the sale by merely imprinting her thumbmark on the deed.
In their comment, private respondents counter that at the outset the petition must
be dismissed for it lacks a certi cation against forum-shopping. Nonetheless, even
disregarding this requirement, the petition must still be denied in due course for it does
not present any substantial legal issue, but factual or evidentiary ones which were already
rmly resolved by the Court of Appeals based on records and the evidence presented by
the parties. Private respondents' claim that the factual determination by the trial court
lacks credibility for it was made by the trial judge who presided only in one hearing of the
case. The trial judge could not validly say that the deed of absolute sale was "fake"
because no signature was forged, according to private respondents; and indeed a
thumbmark, said to be the seller's own, appears thereon. ECcDAH
In their reply, petitioners said that the copy of the petition led with this Court was
accompanied with a certi cation against forum-shopping. If private respondents' copy did
not contain same certi cation, this was only due to inadvertence. Petitioners ask for the
Court's indulgence for anyway there was substantial compliance with Revised Circular No.
28-91.
On the contention that here only factual issues had been raised, hence not the
proper subject for review by this Court, petitioners reply that this general rule admits of
exceptions, as when the factual ndings of the Court of Appeals and the trial court are
contradictory; when the ndings are grounded entirely on speculations, surmises or
conjectures; and when the Court of Appeals overlooked certain relevant facts not disputed
by the parties which if properly considered would justify a different conclusion. All these,
according to petitioners, are present in this case.
Before proceeding to the main issue, we shall first settle procedural issues raised by
private respondents.
While the trial judge deciding the case presided over the hearings of the case only
once, this circumstance could not have an adverse effect on his decision. The continuity of
a court and the e cacy of its proceedings are not affected by the death, resignation or
cessation from the service of the presiding judge. A judge may validly render a decision
although he has only partly heard the testimony of the witnesses. 1 0 After all, he could
utilize and rely on the records of the case, including the transcripts of testimonies heard by
the former presiding judge.
On the matter of the certi cation against forum-shopping, petitioners aver that they
attached one in the copy intended for this Court. This is substantial compliance. A
deviation from a rigid enforcement of the rules may be allowed to attain their prime
objective for, after all, the dispensation of justice is the core reason for the court's
existence. 1 1
While the issues raised in this petition might appear to be mainly factual, this
petition is properly given due course because of the contradictory ndings of the trial
court and the Court of Appeals. Further, the latter court apparently overlooked certain
relevant facts which justify a different conclusion. 1 2 Moreover, a compelling sense to
make sure that justice is done, and done rightly in the light of the issues raised herein,
constrains us from relying on technicalities alone to resolve this petition.
Now, on the main issue. Did private respondents establish the existence and due
execution of the deed of sale? Our nding is in the negative. First, note that private
respondents as plaintiffs below presented only a carbon copy of this deed. When the
Register of Deeds was subpoenaed to produce the deed, no original typewritten deed but
only a carbon copy was presented to the trial court. Although the Court of Appeals calls it
a "duplicate original," the deed contained lled in blanks and alterations. None of the
witnesses directly testi ed to prove positively and convincingly Paulina's execution of the
original deed of sale. The carbon copy did not bear her signature, but only her alleged
thumbprint. Juan Franco testi ed during the direct examination that he was an
instrumental witness to the deed. However, when cross-examined and shown a copy of the
subject deed, he retracted and said that said deed of sale was not the document he signed
as witness. 1 3 He declared categorically he knew nothing about it. 1 4
We note that another witness, Efren Sibucao, whose testimony should have
corroborated Atty. Tagatag's, was not presented and his a davit was withdrawn from the
court, 1 5 leaving only Atty. Tagatag's testimony, which aside from being uncorroborated,
was self-serving.
Secondly, we agree with the trial court that irregularities abound regarding the
execution and registration of the alleged deed of sale. On record, Atty. Tagatag testi ed
that he himself registered the original deed with the Register of Deeds. 1 6 Yet, the original
was nowhere to be found and none could be presented at the trial. Also, the carbon copy
on le, which is allegedly a duplicate original, shows intercalations and discrepancies when
compared to purported copies in existence. The intercalations were allegedly due to
blanks left un lled by Atty. Tagatag at the time of the deed's registration. The blanks were
allegedly lled in much later by a representative of the Register of Deeds. In addition, the
alleged other copies of the document bore different dates of entry: May 16, 1966, 10:20
A.M. 1 7 and June 10, 1966, 3:16 P.M., 1 8 and different entry numbers: 66246, 74389 1 9 and
64369. 2 0 The deed was apparently registered long after its alleged date of execution and
after Paulina's death on March 20, 1966. 2 1 Admittedly, the alleged vendor Paulina Rigonan
was not given a copy. 2 2
Furthermore, it appears that the alleged vendor was never asked to vacate the
premises she had purportedly sold. Felipe testi ed that he had agreed to let Paulina stay in
the house until her death. 2 3 In Alcos v. IAC, 162 SCRA 823 (1988), the buyer's immediate
possession and occupation of the property was deemed corroborative of the truthfulness
and authenticity of the deed of sale. The alleged vendor's continued possession of the
property in this case throws an inverse implication, a serious doubt on the due execution of
the deed of sale. Noteworthy, the same parcels of land involved in the alleged sale were
still included in the will subsequently executed by Paulina and notarized by the same notary
public, Atty. Tagatag. 2 4 These circumstances, taken together, militate against unguarded
acceptance of the due execution and genuineness of the alleged deed of sale. CTIEac
Thirdly, we have to take into account the element of consideration for the sale. The
price allegedly paid by private respondents for nine (9) parcels, including the three parcels
in dispute, a house and a warehouse, raises further questions. Consideration is the why of
a contract, the essential reason which moves the contracting parties to enter into the
contract. 2 5 On record, there is unrebutted testimony that Paulina as landowner was
nancially well off. She loaned money to several people. 2 6 We see no apparent and
compelling reason for her to sell the subject parcels of land with a house and warehouse
at a meager price of P850 only.
I n Rongavilla vs. CA, 294 SCRA 289 (1998), private respondents were in their
advanced years, and were not in dire need of money, except for a small amount of P2,000
which they said were loaned by petitioners for the repair of their house's roof. We ruled
against petitioners, and declared that there was no valid sale because of lack of
consideration.
In the present case, at the time of the execution of the alleged contract, Paulina
Rigonan was already of advanced age and senile. She died an octogenarian on March 20,
1966, barely over a year when the deed was allegedly executed on January 28, 1965, but
before copies of the deed were entered in the registry allegedly on May 16 and June 10,
1966. The general rule is that a person is not incompetent to contract merely because of
advanced years or by reason of physical in rmities. 2 7 However, when such age or
in rmities have impaired the mental faculties so as to prevent the person from properly,
intelligently, and rmly protecting her property rights then she is undeniably incapacitated.
The unrebutted testimony of Zosima Domingo shows that at the time of the alleged
execution of the deed, Paulina was already incapacitated physically and mentally. She
narrated that Paulina played with her waste and urinated in bed. Given these
circumstances, there is in our view su cient reason to seriously doubt that she consented
to the sale of and the price for her parcels of land. Moreover, there is no receipt to show
that said price was paid to and received by her. Thus, we are in agreement with the trial
court's finding and conclusion on the matter:
The whole evidence on record does not show clearly that the ctitious
P850.00 consideration was ever delivered to the vendor. Undisputably, the
P850.00 consideration for the nine (9) parcels of land including the house and
bodega is grossly and shockingly inadequate, and the sale is null and void ab
initio. 2 8
WHEREFORE, the petition is GRANTED. The decision and resolution of the Court of
Appeals dated August 29, 1996 and December 11, 1996, respectively, are REVERSED and
SET ASIDE. The decision of the Regional Trial Court of Batac, Ilocos Norte, Branch 17,
dated March 23, 1994, is REINSTATED.
Costs against private respondents.
SO ORDERED.
Bellosillo, Mendoza, Buena and De Leon Jr., JJ., concur.
Footnotes
1. Rollo, pp. 4-30.

2. Id. at 34-44.
3. Also spelled as "Tagatac."
4. Rollo, p. 72.
5. Id. at 43-44.
6. Id. at 6-7.
7. Records, Civil Case No. 582-17, pp. 108-109.
8. Decision penned by Judge Ariston Rubio, Rollo, p. 67.
9. Rollo, p. 22.
10. Ayco vs. Fernandez, 195 SCRA 328, 333 (1991).
11. Philippine Coconut Authority vs. Corona International, Inc., G.R. No. 139910, September
29, 2000, p. 8.
12. Medel vs. People, G.R. No. 137143, December 8, 2000, p. 7.

13. Records, p. 101.
14. TSN, July 6, 1978, pp. 5-26.
15. TSN, January 15, 1981, p. 26.
16. TSN, August 22, 1979, p. 19.
17. Records, pp. 19 and 112.
18. Id. at 19.

19. Id. at 108, 109 and 112.
20. Id. at 112.
21. Records for Cadastral Case for Lot No. 949, p. 138.
22. TSN, August 22, 1979, p. 23.
23. Records, pp. 94 and 100.

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
rst Instance of Tarlac, TOMASA BUMANLAG, and SILVINO
ESPUGADO , respondents.
Emilio D. Castellanes for petitioners.

Lauro O. Samson for respondents.
SYLLABUS
1. CIVIL LAW; CONTRACTS; COMPROMISE AGREEMENT ENTERED BY

LAWYER WITHOUT AUTHORITY OF THE CLIENT; UNENFORCEABLE. — 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) were the agreement was signed (on behalf of one of the
parties there to) by a lawyer who did so without authorization of said party or client. We
hold that such a compromise agreement is merely unenforceable (not void) and may
therefore be ratified by said party expressly or implicitly.
2. ID.; ID.; ID.; ID.; MAY BE RATIFIED BY OVERT ACTS OF THE PARTIES. — 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 their attorney.
DECISION
PARAS J :
PARAS, p
On January 21, 1976, this Court declared as submitted for decision a case where
the principal issue was the validity of a compromise agreement (which subsequently
was embodied in a judgment by compromise) where the agreement was signed (on
behalf of one of the parties thereto) by a lawyer who did so without authorization of
said party or client. We hold that such a compromise agreement is merely
unenforceable 1 (not void) and may therefore be rati ed by said party expressly or
implicitly. 2
In the instant case (which has been brought to Us by certiorari assailing an Order
of the Court of First Instance of Tarlac in Civil Case No. 4912 entitled "Bumanlag et al. v.
Bumanlag, et al.") herein petitioners sued herein private respondents for partition of the
lots inherited by both parties from their deceased father; respondents however moved
to dismiss on the ground that some years before a nal and executory judgment
(based on a compromise agreement) involving the same parties, same subject matter,
and same causes of action had already been rendered by a court of competent
jurisdiction and that therefore the doctrine of res judicata clearly bars the present case;
petitioners contend that said judgment is void because the compromise agreement
had been signed in their behalf by their lawyer who had not been authorized by them to
enter into such agreement, consequently there can be no res judicata.
As already intimated hereinabove, the compromise agreement is not void but
merely unenforceable. The petitioners by their silence for sixteen (16) years and by their
overt acts of exchanging or bartering some of the lots awarded to them with some of
the lots of the private respondents have doubtless rati ed the act of their attorney;
ergo, the requisites of res judicata being all present, the principle applies to the instant
case. prcd
One nal point. The argument that the partition in the rst case was not one with
metes and bounds is bankrupt. There was such a physical and actual partition, not
merely a metaphysical one.
WHEREFORE, this petition is DISMISSED, and the assailed Order is hereby
AFFIRMED, with costs against petitioners.
SO ORDERED.
Feria (Chairman), Fernan, Alampay and Gutierrez, Jr., JJ., concur.
Footnotes
1. Art. 1403 (no. 1) Civil Code.
2. Art. 1403 (1st sentence), Civil Code.

FIRST DIVISION
[G.R. No. 104133. April 18, 1995.]
LANA petitioners, vs.

SPOUSES EMILIO ABINUJAR and MILAGROS M. LANA,
THE COURT OF APPEALS and SPOUSES SANTIAGO RAMIRO and
FLORENTINA RAMIRO , respondents.
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT; COMPROMISE

AGREEMENT; NOT SUBJECT TO NOVATION WITHOUT CONSENT OF OTHER PARTY. — In
the compromise agreement, petitioners obligated themselves to pay private respondents
the amount of 50,000.00 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 rst
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.
2. ID.; ID.; ID.; ID.; CONVERTS ORIGINAL ACTION FOR EJECTMENT TO A
MONETARY OBLIGATION. — 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. prLL
3. ID.; ID.; ID.; FOUNDATION OF A WRIT OF EXECUTION. — A judgment is the

foundation of a writ of execution which draws its vitality therefrom (Monaghon v.
Monaghon, 25 Ohio St. 325). An o cer issuing a writ of execution is required to look to the
judgment for his immediate authority (Sydnor v. Roberts, 12 Tex. 598).
4. ID.; ID.; ID.; EXECUTION; MUST CONFORM TO AND BE WARRANTED BY THE
JUDGMENT ON WHICH IT WAS ISSUED. — 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,]).
5. ID.; ID.; ID.; ID; REMEDY AVAILABLE TO AGGRIEVED PARTY WHERE THERE IS
BREACH OF COMPROMISE AGREEMENT. — 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.
DECISION
QUIASON J :
QUIASON, p
This is a petition for review on certiorari under Rule 45 of the Revised Rules of
Court of the Decision dated December 27, 1991 and the Resolution dated February 11,
1992 of the Court of Appeals in CA-G.R. SP No. 24683.
I
On October 10, 1987, petitioners executed a Deed of Sale with Right to
Repurchase in favor of private respondents, involving a residential house located at No.
346 Algeciras St., Sampaloc, Manila. Due to serious nancial and business reverses,
petitioners were not able to redeem the property within four months as agreed upon. LexLib
On October 24, 1989, private respondents led a complaint for ejectment in the
Metropolitan Trial Court of the City of Manila, docketed as Civil Case No. 130352-CV
against petitioners.
On December 27, 1989, the parties, assisted by their counsels, executed a
compromise agreement. In an order dated March 15, 1990, the Metropolitan Trial Court
approved the compromise agreement. The order reproduced the agreement as follows:
"1. That defendants [petitioners herein] agree to pay plaintiffs [private
respondents herein] in the amounts and on the dates speci cally indicated herein
below:
a. P50,000.00 on Jan. 31, 1990;
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 led a motion for execution on the ground
that petitioner's failed to pay the rst three installments stipulated in the compromise
agreement, to wit: P50,000.00 on January 31, 1990; P10,000.00 on February 28, 1990;
and P10,000.00 on March 31, 1990.
On April 6, 1990, petitioners led an "Urgent Ex-Parte Motion for Reconsideration
and/or Correct Order of this Court" calling attention to a typographical error in the
Order dated March 15, 1990, and asking that the amount of P10,000.00 payable on
September 30, 1990 be corrected and changed to the agreed amount of P5,000.00. Cdpr
On April 25, 1990, the Metropolitan Trial Court issued an order granting the
motion for correction of the typographical error in the decision.
On August, 17, 1990, petitioners led an ex-parte motion asking that the check
payment previously deposited by them with the court, be accepted and be given to
respondents in compliance with their compromise agreement.
On August 23, 1990, respondents opposed petitioners' ex-parte motion and
stated that they would not renew the compromise agreement with petitioners.
The Metropolitan Trial Court denied private respondents' motion for execution
dated April 15, 1990 and another similar motion dated June 26, 1990.
On October 12, 1990, respondents led a petition for mandamus with us (G.R.
No. 95470). In a resolution dated November 5, 1990, we referred the case to the
Executive Judge of the Regional Trial Court, Manila. Petitioners moved to dismiss the
petition for mandamus.
On March 14, 1991, the Regional Trial Court denied the motion to dismiss and
issued the assailed resolution commanding the Metropolitan Trial Court to issue a writ
of execution of the decision approving the compromise agreement in Civil Case No.
130352-CV.
In compliance with the said resolution, the Metropolitan Trial Court issued an
order dated March 27, 1991 directing the issuance of a writ of execution to enforce the
compromise agreement entered into by the parties.
On April 11, 1991, a "Sheriffs' Notice to Voluntarily Vacate the Premises" was
served on petitioner.
Petitioners then led a petition for certiorari with a prayer for the issuance of a
temporary restraining order and a writ of injunction with the Court of Appeals (CA-G.R.
SP No. 24683). llcd
On December 27, 1991, the Court of Appeals dismissed the petition. Likewise,
the said court denied the motion for reconsideration filed by petitioner.
II
Petitioners contend that both the Regional Trial Court and Metropolitan Trial
Court acted with grave abuse of discretion, the former in issuing a resolution directing
the Metropolitan Trial Court to issue a writ of execution against petitioners herein, and
the latter, in issuing said writ of execution.
III
A compromise agreement is a contract between the parties, which if not contrary
to law, morals or public policy, is valid and enforceable between them ( Municipal Board
of Cabanatuan City v. Samahang Magsasaka, Inc., 62 SCRA 435 [1975]). There are two
kinds of compromise agreements, the judicial, which puts an end to a pending litigation,
and the extrajudicial, which is to avoid a litigation (Civil Code of the Philippines, Art.
2028; Caguioa, VI Commentaries and Cases on Civil Law 292 [1970]).
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-ful llment of the terms and conditions of a compromise agreement

approved by the court justi es 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 50,000.00 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 rst 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. LLpr
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
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. prLL
A judgment is the foundation of a writ of execution which draws its vitality

therefrom (Monaghon v. Monaghon , 25 Ohio St. 325). An o cer 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 o cer 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 su cient amount of such
property, if there be su cient, 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 su cient to
satisfy the judgment and accruing costs, within the view of the o cer, he must
levy only on such part of the property as is amply su cient 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
o cer 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. prLL
SO ORDERED.
Padilla, Davide, Jr ., Bellosillo and Kapunan, JJ., concur.

EN BANC
[G.R. No. L-9312. October 31, 1957.]
ERNEST BERG , plaintiff-appellant, vs . 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 : p
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 o cials of the Bank telling them that he had already settled the account
with the Bank of Taiwan during the Japanese occupation, but said o cials intimated
that they could not regard such payment as discharging the obligation and requested
that it be paid. Plaintiff acknowledged his indebtedness and agreed to pay the same
but stated that he desired to consult rst his lawyers as to the possible effect of the
cases then pending on the validity of wartime payments in Japanese military notes.
Subsequently, on February 1, 1946, plaintiff informed the Bank that he was willing to
compromise his case by paying the indebtedness provided the Bank forego its claim as
to interest. This offer was approved and on February 15, 1946, plaintiff signed an
acknowledgment of the debt and an agreement relative to its liquidation (Exhibit I). On
March 23, 1946, plaintiff informed the Bank that, as the sale of his real property had
been delayed, he would not be able to make payment as agreed upon, but that, in the
meantime, he would execute a note and a pledge placing as security the 3,300 shares
of Filipinas Compañia de Seguros registered in his name. This was done and the
agreement was subsequently executed.
On March 12, 1946, the Court of First Instance of Manila decided the case of
Haw Pia vs. China Banking Corporation holding that payments made in Japanese
military currency to the Bank of Taiwan did not operate to discharge the obligations,
but on April 9, 1948, the decision was reversed by the Supreme Court holding said
payments to be valid (G. R. No. L-554) * . On June 22, 1946, having been advised that his
note was falling due, plaintiff made a partial payment of P4,913.50 and was given an
extension of 30 days to pay the balance. On July 21, 1946, a second notice was given
plaintiff for the payment of the balance, and on July 31, plaintiff sent a letter authorizing
the Bank to sell the shares he had pledged to secure his debt and to deposit the
balance, if any, in his personal account. This was done thereby liquidating the account
of plaintiff.
On September 27, 1948, plaintiff demanded from the Bank the repayment of the
money paid by him relying on the decision of the Supreme Court in the Haw Pia case.
The Bank replied that the case of the plaintiff had been compromised and can no longer
be reopened. Whereupon on April 13, 1949, plaintiff commenced the present action to
recover the amount paid, plus the sum of P33,000 as damages.
In his complaint, plaintiff alleged that notwithstanding the fact that he had
already paid his debt to the Bank of Taiwan, defendant, by the use of deceit, fraud,
threat and intimidation still forced him to compromise his case as a result of which
defendant sold his 3,300 shares of the Filipinas Compañia de Seguros and retained the
sum of P35,172.62 to pay the debt he had already paid to the Bank of Taiwan.
Defendant, in turn, denied the charge and alleged that plaintiff paid the sum of
P35,172.62 as a result of a compromise entered into for good and valuable
consideration. And on May 29, 1950, the court rendered judgment ordering defendant
to pay to plaintiff said amount of P35,172.62, with legal interest from August 6, 1946,
plus the costs of action. No action was taken on the claim for damages. In due time,
both parties appealed from the decision, plaintiff insofar as the court ignored his claim
for damages, and defendant because of the adversed ruling rendered against it.
In holding that the second payment made by plaintiff to defendant of the old
indebtedness was improperly made and as a consequence the money paid should be
returned in view of the decision of the Supreme Court in the Haw Pia case, the trial court
made the following comments:
"There is not much to be discussed in this case. Was the payment made by
the plaintiff during the Japanese Administration valid? If it was valid, as the Court
believes it to be, then the obligation of the Red Store Co., Inc., was no longer
existing at the time the plaintiff made the second payment. If there was no more
obligation to pay, then the demand made by the plaintiff for the payment of the
obligation of the 'Red Stores Co., Inc.,' was illegal. Either from the standpoint of
the plaintiff or from the standpoint of the defendant, the second payment was
most unjustified. If payment was made because of duress, threats, or
intimidation, plaintiff is entitled to the recovery of the amount he paid. If payment
was made willingly and voluntarily in the belief that there was still an obligation
to be paid, equity and justice demand the return of the second payment for the
reason that there was no more obligation to be paid."
Under ordinary circumstances, the above ruling of the court would be correct for
indeed under Article 1895 of the old Civil Code, "If a thing is received where there was
no right to claim it, and which through an error has been unduly delivered, an obligation
to restore the same arises", and apparently here we have a duplication of payment. But
in the present case the situation is different, for here we nd that plaintiff and
defendant had entered into a compromise whereby the formed agreed to pay his
indebtedness provided the latter forego the payment of the interest, and this
compromise was arrived at when there was still uncertainty as to the validity of the
payments made to the Bank of Taiwan of prewar obligations. Thus, on February 15,
1946, as a result of the negotiations had between plaintiff and defendant, the latter sent
to the former a letter of the following tenor:
"Mr. Ernest Berg
1340 Oregon St.
Manila
Red Star Stores, Inc.

Dear Mr. Berg:
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 con rmation 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 con rm 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 vs. Barber
Steamship Lines, 45 Phil., 488, 498-499)
But plaintiff insists that the compromise is null and void as the same has been
extorted from him by the o cials of the Bank through deceit, fraud and intimidation. In
this respect, counsel for defendant says: "Mr. Berg claims that the compromise
agreement was secured from him by deceit, fraud and unlawful action by the bank. The
bank is referred to as an extortionist, and as a blackmailer, as being guilty of making
illegal demands, of coercing Mr. Berg, of resorting to misrepresentation, illegal
distortion, deceit and insidious machinations. Its acts are likened to those of a tra c
policeman soliciting a bribe, on one hand, and to a highwayman extracting money from
a wayfarer at the point of a gun, on the other. Mr. Berg's counsel states that Mr. Berg
was compelled to settle because of fear for his life, of life imprisonment or a heavy ne,
and fear of nancial ruin, the implication being that the bank would cause these dire
contingencies should Mr. Berg not pay the sums demanded" (p. 4, Defendant's
Memorandum).
But these imputations only nd support in the testimony of plaintiff which were
denied by the o cials of the Bank. In fact, they have not been substantiated. What
plaintiff in effect wanted to convey is that the o cials of the Bank intimidated to him
that unless the account is settled, the Bank would bring an action against him or
against his brother, Alfred Berg; that it would not extend any further credit facilities to
him or his business enterprises; and that it would make use of its in uence to prevent
him from engaging in business in the Philippines. The question then that arises is: Do
these threats constitute duress under the law?
With regard to the rst charge, we see nothing improper. It is a practice followed
not only by banks but even by individuals to demand payment of their accounts with the
threat that upon failure to do so an action would be instituted in court. Such a threat is
proper within the realm of the law as a means to enforce collection. Such a threat
cannot constitute duress even if the claim proves to be unfounded so long as the
creditor believes that it was his right to do so. This charge has no legal basis.
"One element of the early law of duress continues to exist, however its
boundaries may be otherwise extended. The pressure must be wrongful, and not
all pressure is wrongful. The law provides certain means for the enforcement of
their claims by creditors. It is not duress to threaten to take these means.
Therefore, a threat to bring a civil action or to resort to remedies given by the
contract is not such duress as to justify recission of a transaction induced
thereby, even though there is no legal right to enforce the claim, provided the
threat is made in good faith; that is, in the belief that a possible cause of action
exists. But, if the threat is made with the consciousness that there is no real right
of action and the purpose is coercion, a payment or contract induced thereby is
voidable. In the former case, it may be said that the threatened action was
rightful; in the letter case, it was not." (Section 1606, Williston on Contracts, Vol. V,
pp. 4500-4502.)
Plaintiff also contends that the Bank had intimated that it would not extend to
him or his enterprise further credit facilities unless he settles the former debt of the
Red Star Stores, Inc. Even if this were true, the same cannot constitute duress that
might invalidate the settlement, for there is nothing improper for a bank to decline
further credit to any person or entity as a means to enforce the collection of its
accounts if such is necessary to protect its investment. In fact, such is the practice
followed by most banking institutions for it goes a long way in the determination of the
paying capacity of those who deal with them. Moreover, the banking business in the
Philippines is extremely competitive. There are other banks that are opened for
business whose facilities plaintiff may avail of in case the threat is carried out and if
plaintiff is a good business risk he could certainly nd accommodation in any one of
them if he so desires. The fact that plaintiff was then under indictment for treason does
not change the situation. This is rather a further reason for defendant to adopt a more
stringent measure against plaintiff because of the belief, grounded or otherwise, that
the collection of the account might be frustrated. Such circumstance should not be
considered as a desire on the part of defendant to harrass or aggravate the alleged
political or financial difficulties of plaintiff.
Plaintiff likewise contends that the o cials of the Bank have threatened him with
reprisals in the sense that unless he settles his account they would make use of their
in uence to prevent him from engaging in business in the Philippines. Not only is this
claim inherently untenable but it was atly denied by the o cials of the Bank. Certainly,
plaintiff has not been able to indicate in what manner does defendant or its o cials
expect to carry out the threat imputed to them.
All things considered, we find the charges of plaintiff unfounded. And considering
that, under our law, intimidation can only exist "when one of the contracting parties is
inspired with a reasonable and well-grounded fear of suffering an imminent and serious
injury to his person or property" (Article 1267, old Civil Code), we are persuaded to
conclude that the compromise in question has been entered into voluntarily and, as
such, is valid and binding.
Having reached this conclusion, we nd it unnecessary to discuss the appeal
taken by plaintiff-appellant.
Wherefore, the decision appealed from is reversed, with out pronouncement as
to costs.
Paras, C. J., Bengzon, Padilla, Montemayor, Reyes, A., Labrador, Concepcion,
Reyes, J. B. L., Endencia and Felix, JJ., concur.
Footnotes
* 80 Phil., 604; 45 Off. Gaz., [Supp. No. 9] 229.

SECOND DIVISION
[G.R. No. 205623. August 10, 2016.]
CONCHITA A. SONLEY , petitioner, vs. ANCHOR SAVINGS

BANK/EQUICOM SAVINGS BANK , respondent.
DECISION
DEL CASTILLO , J : p
This Petition for Review on Certiorari 1 assails the Court of Appeals' August 28,
2012 Decision 2 and January 25, 2013 Resolution 3 denying herein petitioner Conchita
A. Sonley's Urgent Motion for Reconsideration 4 in CA-G.R. SP No. 122409.
Factual Antecedents
The facts, as succinctly narrated by the Court of Appeals (CA), are as follows:
The instant case arose when, on March 13, 2009, the petitioner 5 led a
Complaint 6 for declaration of nullity of rescission of contract and damages in
the trial court 7 against . . . Anchor Savings Bank ("Anchor"), a thrift banking
institution organized and existing under the laws of the Philippines [whose]
business name . . . was [later] changed to Equicom Savings Bank . . .
In the said complaint, petitioner alleged that, on January 28, 2005, she
agreed to purchase a real property from [Anchor] for the sum of . . .
Php2,200,000.00 . . . . The said real property pertained to a parcel of land that
had been foreclosed by [Anchor] with an area of . . . 126.50 square meters . . .
located at Fairview, Quezon City ("subject property"). Pursuant to the said
agreement, the parties entered into a Contract to Sell 8 whereby the petitioner
agreed to pay the amount of . . . Php200,000.00 . . . as downpayment . . . with
the balance of . . . Php2,000,000.00 . . . payable in sixty (60) monthly
installments amounting to . . . Php47,580.00 . . . .
Petitioner, however, defaulted in paying her monthly obligations . . .
which prompted [Anchor] to rescind the contract to sell . . . . In ling the
complaint . . . petitioner averred that the rescission of the contract to sell was
null and void because she had already substantially paid her obligation to the
bank.
In its Answer[,] 9 [Anchor] denied the allegations that were made by the
petitioner in her complaint. On the contrary, it contended that the post-dated
checks which were issued by the petitioner in its favor covering the monthly
installments for the purchase of the subject property were all dishonored by the
drawee bank when they were presented for payment. Thus, [Anchor] averred that
petitioner should not be allowed to bene t from her own fault and prevent
[Anchor] from exercising its right to rescind their contract to sell.
EATCcI
Subsequently, after the issuance of a Pre-Trial Order by the trial court, the
parties agreed to an amicable settlement and entered into a Compromise
Agreement. 10 On the basis thereof, the trial court rendered a Judgment 11 . . .
on August 16, 2010 whereby the petitioner agreed to repurchase the subject
property from [Anchor] for the amount of . . . Php1,469,460.66 . . . plus . . . 12% .
. . interest per annum.
However, [Anchor] later on filed a Manifestation and Motion for Execution
12 in the trial court claiming that petitioner had not been paying the agreed
monthly installments in accordance with the compromise agreement. Moreover,
it averred that all the checks which the petitioner issued to pay her obligations
were again dishonored. Thus, [Anchor] prayed that a writ of execution be issued
by the trial court in its favor ordering. (1) that the contract to sell that was
entered into between the parties be rescinded; (2) that [Anchor] be allowed to
apply all the payments that were made to it by the petitioner as rentals; and (3)
that petitioner immediately vacate the subject property.
Consequently, on September 8, 2011, the trial court issued the assailed
order 13 the dispositive portion of which states:
'WHEREFORE, premises considered, the 'Manifestation and
Motion for Execution' is hereby GRANTED.
Consequently, the Judgment dated August 16, 2010 should
be entered in the Book of Entries of Judgment as nal and
executory. Accordingly, let a writ of execution be issued and the
Deputy Sheriff of this Court is hereby ordered to implement the
same.
SO ORDERED.'
In arriving at the said ruling, the trial court ratiocinated as follows:
'In view of the foregoing and for failure of the plaintiff to
comply with the terms and conditions of the Compromise
Agreement and since said Judgment itself provides that the same
shall be immediately nal and executory, the Decision dated
August 16, 2010 is hereby reiterated as nal and executory and
should now be entered in the Book of Entries and Judgment.
Accordingly, a writ of execution should now be issued to
implement the aforesaid Judgment in consonance with the
Compromise Agreement and in line with Rule 39 Section 1 of the
Rules of Court, to wit:
'Section 1. Execution upon judgments or nal orders.
— Execution shall issue as a matter of right, on motion,
upon a judgment or order that disposes of the action or
proceeding upon the expiration of the period to appeal
therefrom if no appeal has been duly perfected.' 14
Ruling of the Court of Appeals
Petitioner led a Petition for Certiorari before the CA, docketed as CA-G.R. SP
No. 122409, claiming that the trial court committed grave abuse of discretion in issuing
a writ of execution, since there is nothing in the trial court's August 16, 2010 judgment
which authorizes the issuance of such a writ in case the parties fail to perform the
obligations stated under the Compromise Agreement. DHITCc
In its assailed August 28, 2012 Decision, however, the CA ruled against the
petitioner, pronouncing thus:
In sum, the sole issue to be resolved by us in this case is whether or not
the trial court may issue a writ of execution against the petitioner despite the
fact that the issuance thereof was not speci cally provided for in the judgment
which it rendered based on compromise agreement. After a careful and
judicious scrutiny of the whole matter, together with the applicable laws and
jurisprudence in the premises, we find the instant petition to be bereft of merit.
A compromise is a contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one already commenced. Like
any other contract, a compromise agreement must comply with the requisites in
Article 1318 of the Civil Code, to wit: (a) consent of the contracting parties; (b)
object certain that is the subject matter of the contract; and (c) cause of the
obligation that is established. Like any other contract, the terms and conditions
of a compromise agreement must not be contrary to law, morals, good customs,
public policy and public order. . . .
Corollary thereto, once submitted to the court and stamped with judicial
approval, a compromise agreement becomes more than a mere private contract
binding upon the parties. Having the sanction of the court and entered as its
determination of the controversy, it has the force and effect of any judgment.
In the case at bench, the petitioner pointed out that the issuance of a writ
of execution was not warranted and had no legal basis under the judgment
based on compromise agreement that was rendered by the trial court. In support
of her argument, petitioner relied on paragraph (c) of the said agreement which
provides as follows:
'(c) Penalty. In case of failure of the plaintiff to pay, for any
reason whatsoever, the amount provided in the Schedule of
Payment, the plaintiff hereby agrees to pay, in addition to, and
separate from, the interest rate agreed upon, a penalty charge of
FIVE PERCENT (5%) per month or a fraction thereof, based on
unpaid installments computed from due date until fully paid. This
shall be without prejudice to the right of the defendant to rescind
this Compromise Agreement as provided under the 'Contract to
Sell' dated 21 December 2007 upon compliance with the
requirements provided for under the law.'
Petitioner insisted that, pursuant to the foregoing stipulation, [Anchor]
was only entitled to an additional penalty charge of ve percent (5%) per month
in case she failed to pay her monthly obligations. Thus, she posited that the trial
court committed grave abuse of discretion when it issued a writ of execution
against her when she defaulted in her payment because the terms of their
compromise agreement did not provide for the said remedy. cEaSHC
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 'Contract to Sell' dated 21
December 2007.' On this note, it bears stressing that the pertinent portions of
the contract to sell read as follows:
'RESCISSION OF CONTRACT
'The
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 the Contract.'
Contract
'FORFEITURE OF PAYMENTS
'As
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 indemni cation
for opportunity loss and/or other losses, the BUYER hereby
acknowledging and con rming 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 nd 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 . . . . 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.
CTIEac
Verily, it is a settled rule that a compromise agreement, once approved by

nal 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 nal 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,
WHEREFORE in view of the foregoing premises, judgment is hereby
rendered by us DENYING the petition led 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 nal 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 speci cally provided for in its August 16, 2010
Judgment. SaCIDT
Petitioner's Arguments
Praying that the assailed CA dispositions be voided, reversed, and set aside,
petitioner argues that respondent is not entitled to execution as the Compromise
Agreement does not speci cally provide that in case of default, a writ of execution may
issue; that the only remedies available to respondent are to charge penalties and/or
rescind the agreement as provided for under the Contract to Sell; and that before a writ
of execution may issue, respondent must rst institute an action for rescission and
secure a judicial declaration that the Contract to Sell is rescinded, which was not done
in this case.
Respondent's Arguments
In its Comment, 17 respondent counters that since petitioner admits that she is in
default and thus violated the terms of the Compromise Agreement, rescission should
follow as a matter of course as authorized and provided for in said agreement and the
Contract to Sell; that the trial court's approval of the Compromise Agreement is a nal
act that forms part and parcel of the judgment which may be enforced by a writ of
execution; 18 that since the Compromise Agreement itself provides the power to
rescind, it follows that any rescission done pursuant thereto is enforceable by
execution without need of a separate action; and that since petitioner failed to prove
the presence of grave abuse of discretion, the CA is correct in dismissing her Petition
for Certiorari.
Our Ruling
The Petition must be denied.
Under Article 2041 of the Civil Code, "(i)f one of the parties fails or refuses to
abide by the compromise, the other party may either enforce the compromise or regard
it as rescinded and insist upon his original demand." "The language of this Article 2041 .
. . denotes that no action for rescission is required . . ., and that the party aggrieved by
the breach of a compromise agreement may, if he chooses, bring the suit contemplated
or involved in his original demand, as if there had never been any compromise
agreement, without bringing an action for rescission thereof. He need not seek a
judicial declaration of rescission, for he may 'regard' the compromise agreement
already 'rescinded.'" 19 This principle was reiterated in a subsequent case, thus:
In the case of Leonor v. Sycip , the Supreme Court (SC) had the occasion
to explain this provision of law. It ruled that Article 2041 does not require an
action for rescission, and the aggrieved party, by the breach of compromise
agreement, may just consider it already rescinded, to wit: cHECAS
It is worthy of notice, in this connection, that, unlike Article

2039 of the same Code, which speaks of "a cause of annulment or
rescission of the compromise" and provides that "the compromise
may be annulled or rescinded" for the cause therein speci ed, thus
suggesting an action for annulment or rescission, said Article
2041 confers upon the party concerned, not a "cause" for
rescission, or the right to "demand" the rescission of a
compromise, but the authority, not only to "regard it as rescinded",
but, also, to "insist upon his original demand." The language of
this Article 2041, particularly when contrasted with that of
Article 2039, denotes that no action for rescission is
required in said Article 2041, and that the party aggrieved
by the breach of a compromise agreement may, if he
chooses, bring the suit contemplated or involved in his
original demand, as if there had never been any
compromise agreement, without bringing an action for
rescission thereof. He need not seek a judicial declaration
of rescission, for he may "regard" the compromise
agreement already "rescinded." 20
The parties' Compromise Agreement states that —
(c) Penalty. In case of failure of the plaintiff to pay, for any reason
whatsoever, the amount provided in the Schedule of Payment, the plaintiff
hereby agrees to pay, in addition to, and separate from, the interest rate agreed
upon, a penalty charge of FIVE PERCENT (5%) per month or a fraction thereof,
based on unpaid installments computed from due date until fully paid. This
shall be without prejudice to the right of the defendant to rescind this
Compromise Agreement as provided under the "Contract to Sell" dated
21 December 2007 upon compliance with the requirements provided for under
the law. (Emphasis supplied)
The Contract to Sell provides, on the other hand, that —
The failure of the BUYER to pay on due date any monthly
i n sta l l m en t 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.
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
speci cally 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 application of petitioner's
payments as rental, and for her eviction, constituted suf cient written notice to
petitioner, and it was duly heard; petitioner opposed the motion and even led 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. AHDacC
Certainly, a compromise agreement becomes the law between the parties

and will not be set aside other than [sic] the grounds mentioned above. In
Ramnani v. Court 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. Should a party fail or refuse to comply with the terms of a
compromise or 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 from the
premises. Respondent must have thought that if past actions were a gauge, petitioner
was no longer in a position to honor her obligations under the Contract to Sell.
Respondent's claim is straightforward: it seeks rescission and eviction, with
whatever amount paid 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
the 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.
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.
AFFIRMED The parties' Compromise Agreement and Contract to Sell dated December
21, 2007 are RESCINDED.
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. IDSEAH
Carpio and Leonen, JJ., concur.

Brion, * J., is on leave.
Mendoza, ** J., is on official leave.
Footnotes
* On leave.

SECOND DIVISION
[G.R. No. 191336. January 25, 2012.]
CRISANTA ALCARAZ MIGUEL , petitioner, vs . JERRY D. MONTANEZ ,

respondent.
DECISION
REYES J :
REYES, p
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court. Petitioner Crisanta Alcaraz Miguel (Miguel) seeks the reversal and setting aside of
the September 17, 2009 Decision 1 and February 11, 2010 Resolution 2 of the Court of
Appeals (CA) in CA-G.R. SP No. 100544, entitled "Jerry D. Montanez v. Crisanta Alcaraz
Miguel."
Antecedent Facts
On February 1, 2001, respondent Jerry Montanez (Montanez) secured a loan of One
Hundred Forty-Three Thousand Eight Hundred Sixty-Four Pesos (P143,864.00), payable in
one (1) year, or until February 1, 2002, from the petitioner. The respondent gave as
collateral therefor his house and lot located at Block 39 Lot 39 Phase 3, Palmera Spring,
Bagumbong, Caloocan City.
Due to the respondent's failure to pay the loan, the petitioner led a complaint
against the respondent before the Lupong Tagapamayapa o f Barangay San Jose,
Rodriguez, Rizal. The parties entered into a Kasunduang Pag-aayos wherein the respondent
agreed to pay his loan in installments in the amount of Two Thousand Pesos (P2,000.00)
per month, and in the event the house and lot given as collateral is sold, the respondent
would settle the balance of the loan in full. However, the respondent still failed to pay, and
on December 13, 2004, the Lupong Tagapamayapa issued a certi cation to le action in
court in favor of the petitioner.
On April 7, 2005, the petitioner led before the Metropolitan Trial Court (MeTC) of
Makati City, Branch 66, a complaint for Collection of Sum of Money. In his Answer with
Counterclaim, 3 the respondent raised the defense of improper venue considering that the
petitioner was a resident of Bagumbong, Caloocan City while he lived in San Mateo, Rizal.
After trial, on August 16, 2006, the MeTC rendered a Decision, 4 which disposes as
follows:
WHEREFORE,
WHEREFORE premises considered[,] judgment is hereby rendered
ordering defendant Jerry D. Montanez to pay plaintiff the following:
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 attorney's 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, nding no cogent reason to disturb the ndings of the court
a quo, the appeal is hereby DISMISSED, and the DECISION appealed from is
hereby AFFIRMED in its entirety for being in accordance with law and evidence.
SO ORDERED. 7
Dissatis ed, the respondent appealed to the CA raising two issues, namely, (1)
whether or not venue was improperly laid, and (2) whether or not the Kasunduang Pag-
aayos effectively novated the loan agreement. On September 17, 2009, the CA rendered
the assailed Decision, disposing as follows:
WHEREFORE,
WHEREFORE premises considered, the petition is hereby GRANTED . The
appealed Decision dated March 14, 2007 of the Regional Trial Court (RTC) of
Makati City, Branch 146, is REVERSED and SET ASIDE.
ASIDE A new judgment is
entered dismissing respondent's complaint for collection of sum of money,
without prejudice to her right to le the necessary action to enforce the
Kasunduang Pag-aayos.
SO ORDERED . 8
Anent the issue of whether or not there is novation of the loan contract, the CA ruled
in the negative. It ratiocinated as follows:
Judging from the terms of the Kasunduang Pag-aayos, it is clear that no
novation of the old obligation has taken place. Contrary to petitioner's assertion,
there was no reduction of the term or period originally stipulated. The original
period in the rst agreement is one (1) year to be counted from February 1, 2001,
or until January 31, 2002. When the complaint was led before the barangay on
February 2003, the period of the original agreement had long expired without
compliance on the part of petitioner. Hence, there was nothing to reduce or
extend. There was only a change in the terms of payment which is not
incompatible with the old agreement. In other words, the Kasunduang Pag-aayos
merely supplemented the old agreement. 9
The CA went on saying that since the parties entered into a Kasunduang Pag-aayos
before the Lupon ng Barangay, such settlement has the force and effect of a court
judgment, which may be enforced by execution within six (6) months from the date of
settlement by the Lupon ng Barangay, or by court action after the lapse of such time. 1 0
Considering that more than six (6) months had elapsed from the date of settlement, the
CA ruled that the remedy of the petitioner was to le an action for the execution of the
Kasunduang Pag-aayos in court and not for collection of sum of money. 1 1 Consequently,
the CA deemed it unnecessary to resolve the issue on venue. 1 2
The petitioner now comes to this Court.
Issues
(1) Whether or not a complaint for sum of money is the proper remedy for the
petitioner, notwithstanding the Kasunduang Pag-aayos; 1 3 and

(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. 1 4
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 ling a collection case. The petitioner points
out that the cause of action did not arise from the Kasunduang Pag-aayos but on the
respondent's breach of the original loan agreement. 1 5
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 customs, public order and public policy. 1 6 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. 1 7 It
transcends being a mere contract binding only upon the parties thereto, and is akin to a
judgment that is subject to execution in accordance with the Rules. 1 8 Thus, under Section
417 of the Local Government Code, 1 9 such amicable settlement or arbitration award may
be enforced by execution by the Barangay Lupon within six (6) months from the date of
settlement, or by ling an action to enforce such settlement in the appropriate city or
municipal court, if beyond the six-month period.
Under the rst remedy, the proceedings are covered by the Local Government Code
and the Katarungang Pambarangay Implementing Rules and Regulations. The Punong
Barangay is called upon during the hearing to determine solely the fact of non-compliance
of the terms of the settlement and to give the defaulting party another chance at
voluntarily complying with his obligation under the settlement. Under the second remedy,
the proceedings are governed by the Rules of Court, as amended. The cause of action is
the amicable settlement itself, which, by operation of law, has the force and effect of a final
judgment. 2 0
It must be emphasized, however, that enforcement by execution of the amicable
settlement, either under the rst or the second remedy, is only applicable if the contracting
parties have not repudiated such settlement within ten (10) days from the date thereof in
accordance with Section 416 of the Local Government Code. If the amicable settlement is
repudiated by one party, either expressly or impliedly, the other party has two options,
namely, to enforce the compromise in accordance with the Local Government Code or
Rules of Court as the case may be, or to consider it rescinded and insist upon his original
demand. This is in accord with Article 2041 of the Civil Code, which quali es the broad
application of Article 2037, viz.:
If one of the parties fails or refuses to abide by the compromise, the other
party may either enforce the compromise or regard it as rescinded and insist upon
his original demand.
In the case of Leonor v. Sycip, 2 1 the Supreme Court (SC) had the occasion to explain
this provision of law. It ruled that Article 2041 does not require an action for rescission,
and the aggrieved party, by the breach of compromise agreement, may just consider it
already rescinded, to wit:
It is worthy of notice, in this connection, that, unlike Article 2039 of the
same Code, which speaks of "a cause of annulment or rescission of the
compromise" and provides that "the compromise may be annulled or rescinded"
for the cause therein speci ed, thus suggesting an action for annulment or
rescission, said Article 2041 confers upon the party concerned, not a "cause" for
rescission, or the right to "demand" the rescission of a compromise, but the
authority, not only to "regard it as rescinded", but, also, to "insist upon his original
demand". The language of this Article 2041, particularly when contrasted
with that of Article 2039, denotes that no action for rescission is
required in said Article 2041, and that the party aggrieved by the breach
of a compromise agreement may, if he chooses, bring the suit
contemplated or involved in his original demand, as if there had never
been any compromise agreement, without bringing an action for
rescission thereof. He need not seek a judicial declaration of rescission,
for he may "regard" the compromise agreement already "rescinded". "rescinded". 2 2
(emphasis supplied)
As so well stated in the case of Chavez v. Court of Appeals, 2 3 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 " K a su n d u a n" executed by petitioner and

respondent before the Office of the Barangay Captain had the force and
effect of a nal judgment of a court, petitioner's non-compliance paved
the way for the application of Art. 2041 under which respondent may
either enforce the compromise, following the procedure laid out in the
Revised Katarungang Pambarangay Law, or regard it as rescinded and
insist upon his original demand. Respondent chose the latter option
when he instituted Civil Case No. 5139-V-97 for recovery of unrealized
pro ts and reimbursement of advance rentals, moral and exemplary
damages, and attorney's fees. Respondent was not limited to claiming
P150,000.00 because although he agreed to the amount in the "Kasunduan," it is
axiomatic that a compromise settlement is not an admission of liability but
merely a recognition that there is a dispute and an impending litigation 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. 2 4
(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 inde nite pendency." 2 5 Thus, the petitioner insists that she should be
allowed to ventilate her rights before this Court and not to repeat the same proceedings
just to comply with the enforcement of the Kasunduang Pag-aayos, in order to nally
enforce her right to payment. 2 6
The CA took off on the wrong premise that enforcement of the Kasunduang Pag-
aayos is the proper remedy, and therefore erred in its conclusion that the case should be
remanded to the trial court. The fact that the petitioner opted to rescind the Kasunduang
Pag-aayos means that she is insisting upon the undertaking of the respondent under the
original loan contract. Thus, the CA should have decided the case on the merits, as an
appeal before it, and not prolong the determination of the issues by remanding it to the
trial court. Pertinently, evidence abounds that the respondent has failed to comply with his
loan obligation. In fact, the Kasunduang Pag-aayos is the well nigh incontrovertible proof
of the respondent's indebtedness with the petitioner as it was executed precisely to give
the respondent a second chance to make good on his undertaking. And since the
respondent still reneged in paying his indebtedness, justice demands that he must be held
answerable therefor.
WHEREFORE , the petition is GRANTED.
GRANTED The assailed decision of the Court of
Appeals is SET ASIDE and the Decision of the Regional Trial Court, Branch 146, Makati
City, dated March 14, 2007 is REINSTATED.
REINSTATED
SO ORDERED.
Carpio, Perez, Sereno and Perlas-Bernabe, * JJ., concur.
THIRD DIVISION
[G.R. No. 155409. June 8, 2007.]
MAQUILAN petitioner, vs . DITA MAQUILAN,

VIRGILIO MAQUILAN, MAQUILAN respondent.
DECISION
AUSTRIA-MARTINEZ J :
AUSTRIA-MARTINEZ, p
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court assailing the Decision 1 dated August 30, 2002 promulgated by the Court of Appeals
(CA) in CA-G.R. SP No. 69689, which a rmed the Judgment on Compromise Agreement
dated January 2, 2002 of the Regional Trial Court (RTC), Branch 3, Nabunturan, Compostela
Valley, and the RTC Orders dated January 21, 2002 and February 7, 2002 (ORDERS) in Civil
Case No. 656.
The facts of the case, as found by the CA, are as follows:
Herein petitioner and herein private respondent are spouses who once had
a blissful married life and out of which were blessed to have a son. However, their
once sugar coated romance turned bitter when petitioner discovered that private
respondent was having illicit sexual affair with her paramour, which thus,
prompted the petitioner to le a case of adultery against private respondent and
the latter's paramour. Consequently, both the private respondent and her
paramour were convicted of the crime charged and were sentenced to suffer an
imprisonment ranging from one (1) year, eight (8) months, minimum of prision
correccional as minimum penalty, to three (3) years, six (6) months and twenty
one (21) days, medium of prision correccional as maximum penalty.
Thereafter, private respondent, through counsel, led a Petition for
Declaration of Nullity of Marriage, Dissolution and Liquidation of Conjugal
Partnership of Gains and Damages on June 15, 2001 with the Regional Trial
Court, Branch 3 of Nabunturan, Compostela Valley, docketed as Civil Case No.
656, imputing psychological incapacity on the part of the petitioner. TCDHaE
During the pre-trial of the said case, petitioner and private respondent
entered into a COMPROMISE AGREEMENT in the following terms, to wit:
1. In partial settlement of the conjugal partnership of gains, the parties

agree to the following:
a. P500,000.00 of the money deposited in the bank jointly in the

name of the spouses shall be withdrawn and deposited in
favor and in trust of their common child, Neil Maquilan, with
the deposit in the joint account of the parties.
The balance of such deposit, which presently stands at

P1,318,043.36, shall be withdrawn and divided equally by the
parties;
b. The store that is now being occupied by the plaintiff shall be

allotted to her while the bodega shall be for the defendant.
The defendant shall be paid the sum of P50,000.00 as his
share in the stocks of the store in full settlement thereof.
The plaintiff shall be allowed to occupy the bodega until the

time the owner of the lot on which it stands shall construct a
building thereon;
c. The motorcycles shall be divided between them such that the

Kawasaki shall be owned by the plaintiff while the Honda
Dream shall be for the defendant;
d. The passenger jeep shall be for the plaintiff who shall pay
the defendant the sum of P75,000.00 as his share thereon
and in full settlement thereof;
e. The house and lot shall be to the common child.
2. This settlement is only partial, i.e., without prejudice to the litigation

of other conjugal properties that have not been mentioned;
xxx xxx xxx
The said Compromise Agreement was given judicial imprimatur by the

respondent judge in the assailed Judgment On Compromise Agreement,
Agreement
which was erroneously dated January 2, 2002. 2 EaIcAS
However, petitioner led 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,
2002
denied the aforementioned Omnibus Motion.
Displeased, petitioner led a Motion for Reconsideration of the aforesaid

Order, but the same was denied in the assailed Order dated February 7, 2002.
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 petitioner's Motion to Repudiate Compromise Agreement and to Reconsider Its
Judgment on Compromise Agreement; and (4) when it conducted the proceedings without
the appearance and participation of the O ce of the Solicitor General and/or the
Provincial Prosecutor. 4
On August 30, 2002, the CA dismissed the Petition for lack of merit. The CA held
that the conviction of the respondent of the crime of adultery does not ipso facto
disqualify her from sharing in the conjugal property, especially considering that she had
only been sentenced with the penalty of prision correccional, a penalty that does not carry
the accessory penalty of civil interdiction which deprives the person of the rights to
manage her property and to dispose of such property inter vivos; that Articles 43 and 63
of the Family Code, which pertain to the effects of a nulli ed marriage and the effects of
legal separation, respectively, do not apply, considering, too, that the Petition for the
Declaration of the Nullity of Marriage led by the respondent invoking Article 36 of the
Family Code has yet to be decided, and, hence, it is premature to apply Articles 43 and 63
of the Family Code; that, although adultery is a ground for legal separation, nonetheless,
Article 63 nds no application in the instant case since no petition to that effect was led
by the petitioner against the respondent; that the spouses voluntarily separated their
property through their Compromise Agreement with court approval under Article 134 of
the Family Code; that the Compromise Agreement, which embodies the voluntary
separation of property, is valid and binding in all respects because it had been voluntarily
entered into by the parties; that, furthermore, even if it were true that the petitioner was not
duly informed by his previous counsel about the legal effects of the Compromise
Agreement, this point is untenable since the mistake or negligence of the lawyer binds his
client, unless such mistake or negligence amounts to gross negligence or deprivation of
due process on the part of his client; that these exceptions are not present in the instant
case; that the Compromise Agreement was plainly worded and written in simple language,
which a person of ordinary intelligence can discern the consequences thereof, hence,
petitioner's claim that his consent was vitiated is highly incredible; that the Compromise
Agreement was made during the existence of the marriage of the parties since it was
submitted during the pendency of the petition for declaration of nullity of marriage; that
the application of Article 2035 of the Civil Code is misplaced; that the cooling-off period
under Article 58 of the Family Code has no bearing on the validity of the Compromise
Agreement; that the Compromise Agreement is not contrary to law, morals, good
customs, public order, and public policy; that this agreement may not be later disowned
simply because of a change of mind; that the presence of the Solicitor General or his
deputy is not indispensable to the execution and validity of the Compromise Agreement,
since the purpose of his presence is to curtail any collusion between the parties and to see
to it that evidence is not fabricated, and, with this in mind, nothing in the Compromise
Agreement touches on the very merits of the case of declaration of nullity of marriage for
the court to be wary of any possible collusion; and, nally, that the Compromise
Agreement is merely an agreement between the parties to separate their conjugal
properties partially without prejudice to the outcome of the pending case of declaration of
nullity of marriage. cHCIDE
Hence, herein Petition, purely on questions of law, raising the following issues:
I.
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 DTEAHI
The petitioner argues that the Compromise Agreement should not have been given
judicial imprimatur since it is against law and public policy; that the proceedings where it
was approved is null and void, there being no appearance and participation of the Solicitor
General or the Provincial Prosecutor; that it was timely repudiated; and that the
respondent, having been convicted of adultery, is therefore disquali ed from sharing in the
conjugal property.
The Petition must fail.
The essential question is whether the partial voluntary separation of property made
by the spouses pending the petition for declaration of nullity of marriage is valid.
First. The petitioner contends that the Compromise Agreement is void because it
circumvents the law that prohibits the guilty spouse, who was convicted of either adultery
or concubinage, from sharing in the conjugal property. Since the respondent was convicted
of adultery, the petitioner argues that her share should be forfeited in favor of the common
child under Articles 43 (2) 6 and 63 7 of the Family Code.
To the petitioner, it is the clear intention of the law to disqualify the spouse
convicted of adultery from sharing in the conjugal property; and because the Compromise
Agreement is void, it never became final and executory.
Moreover, the petitioner cites Article 2035 8 of the Civil Code and argues that since
adultery is a ground for legal separation, the Compromise Agreement is therefore void.
These arguments are specious. The foregoing provisions of the law are inapplicable
to the instant case.
Article 43 of the Family Code refers to Article 42, to wit:
Article 42. The subsequent marriage referred to in the preceding Article
9 shall be automatically terminated by the recording of the a davit of
reappearance of the absent spouse, unless there is a judgment annulling the
previous marriage or declaring it void ab initio.
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 su cient 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. Petitioner's 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 scal 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. — . . .
xxx xxx xxx
(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:
. . . . 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. 1 1
SaHcAC
Third. The conviction of adultery does not carry the accessory of civil interdiction.
Article 34 of the Revised Penal Code provides for the consequences of civil interdiction:
Art. 34. Civil Interdiction. — Civil interdiction shall deprive the offender
during the time of his sentence of the rights of parental authority, or guardianship,
either as to the person or property of any ward, of marital authority, of the right to
manage his property and of the right to dispose of such property by any act or
any conveyance inter vivos.
Under Article 333 of the same Code, the penalty for adultery is prision correccional in
its medium and maximum periods. Article 333 should be read with Article 43 of the
same Code. The latter provides:
Art. 43. Prision correccional — Its accessory penalties. — The penalty
o f prision correccional shall carry with it that of suspension from public o ce,
from the right to follow a profession or calling, and that of perpetual special
disquali cation from the right of suffrage, if the duration of said imprisonment
shall exceed eighteen months. The offender shall suffer the disquali cation
provided in this article although pardoned as to the principal penalty, unless the
same shall have been expressly remitted in the pardon.
It is clear, therefore, and as correctly held by the CA, that the crime of adultery does
not carry the accessory penalty of civil interdiction which deprives the person of the rights
to manage her property and to dispose of such property inter vivos.
Fourth. Neither could it be said that the petitioner was not intelligently and
judiciously informed of the consequential effects of the compromise agreement, and that,
on this basis, he may repudiate the Compromise Agreement. The argument of the
petitioner that he was not duly informed by his previous counsel about the legal effects of
the voluntary settlement is not convincing. Mistake or vitiation of consent, as now claimed
by the petitioner as his basis for repudiating the settlement, could hardly be said to be
evident. In Salonga v. Court of Appeals, 1 2 this Court held:
[I]t is well-settled that the negligence of counsel binds the client. This is
based on the rule that any act performed by a lawyer within the scope of his
general or implied authority is regarded as an act of his client. Consequently, the
mistake or negligence of petitioners' counsel may result in the rendition of an
unfavorable judgment against them.
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." . . . 1 3
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.
Ynares-Santiago, Chico-Nazario and Nachura, JJ., concur.
Footnotes
1. Penned by Associate Justice Bienvenido L. Reyes, with Associate Justices Roberto A.

Barrios (now deceased) and Edgardo F. Sundiam, concurring.
2. The Compromise Agreement is dated January 11, 2002.
3. Rollo, pp. 29-31.

4. Rollo, p. 32.
5. Rollo, pp. 19-20.
6. Article 43 reads:
Art. 43. The termination of the subsequent marriage referred to in the preceding Article
shall produce the following effects:
xxx xxx xxx
(2) The absolute community of property or the conjugal partnership, as the case may
be, shall be dissolved and liquidated, but if either spouse contracted said
marriage in bad faith, his or her share of the net profits of the community
property or conjugal partnership property shall be forfeited in favor of the
common children or, if there are none, the children of the guilty spouse by a
previous marriage or in default of children, the innocent spouse;
xxx xxx xxx (emphasis supplied) ITSCED
Art. 63. The decree of legal separation shall have the following effects:
xxx xxx xxx
(2) The absolute community or the conjugal partnership shall be dissolved and
liquidated but the offending spouse shall have no right to any share of the
net profits earned by the absolute community or the conjugal partnership,
which shall be forfeited in accordance with the provisions of Article 43 (2);
xxx xxx xxx (emphasis supplied)

Art. 2035. No compromise upon the following questions shall be valid:
(1) The civil status of persons;
(2) The validity of a marriage or a legal separation;
(3) Any ground for legal separation;

SECOND DIVISION
[G.R. No. 144732. February 13, 2006.]
ROLANDO LIMPO , petitioner, vs . COURT OF APPEALS and SECURITY

COMPANY respondents.
BANK AND TRUST COMPANY,
Alvaro M. Simbulan for petitioner.

Castro Yan Mangrobang & Miralles for Security Bank and Trust Co.
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT APPROVING A

COMPROMISE AGREEMENT; PERSONS WHO ARE NOT PARTIES TO THE
COMPROMISE AGREEMENT CANNOT BE BOUND THEREBY; CASE AT BAR. — It is
settled that a compromise agreement cannot bind persons who are not parties to it.
This rule is based on Article 1311 (1) of the Civil Code which provides that "contracts
take effect only between the parties, their assigns and heirs . . . ." The sound reason for
the exclusion of non-parties to an agreement is the absence of a vinculum or juridical tie
which is the e cient cause for the establishment of an obligation. In the Compromise
Agreement that was presented to the trial court, there is no question that only the
spouses Uy and the Bank were parties. Limpo did not participate in its execution and
there was no reference to him in any of its provisions. He cannot be bound by the
Compromise Agreement.
2. ID.; ID.; ID.; APPLICABILITY OF THE PRINCIPLE OF AUTONOMY OF
CONTRACTS; COURT CANNOT IMPOSE UPON PARTIES A JUDGMENT DIFFERENT
FROM THEIR REAL AGREEMENT; CASE AT BAR. — 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. The principle of autonomy of contracts must be
respected. 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 con ned to the interpretation of the
agreement that the contracting parties have made for themselves without regard to its
wisdom or folly as the court cannot supply material stipulations or read into the
contract words which it does not contain. Consequently, the contention of Limpo is
correct. The terms and conditions set forth in the Compromise Agreement, as
approved by the court, are controlling and, therefore, there is no basis to include him in
reviving the judgment.
3. ID.; ID.; ID.; BECOMES IMMEDIATELY FINAL AND EXECUTORY WITH THE
FORCE OF RES JUDICATA. — A compromise agreement once approved by order of the
court becomes immediately nal and executory with the force of res judicata. The
court's sanction imbues it with the same effect as any other judgment. No doubt that
as to the spouses Uy, there was a clear declaration of liability.
4. ID.; ID.; ID.; ID.; DECISION WHICH FAILS TO EXPRESSLY MENTION
LIABILITY OF ONE OF THE DEFENDANTS IMPLIES THAT HE HAS BEEN ABSOLVED IN
THAT CASE; CASE AT BAR. — 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 Bobis v. Provincial Sheriff of Camarines Norte , the facts of which
are akin to those of this case. . . . The Court, in that case, ostensibly concluded that a
decision that fails to expressly mention the liability of one of the defendants will be
taken to mean that he has been absolved in that case. From this pronouncement, the
failure to mention Limpo in the judgment of the RTC of Pasig will correspondingly mean
his absence of liability to the Bank. As this implied declaration became nal with the
approval of the Compromise Agreement, the Court of Appeals' instructions to continue
the proceedings against Limpo in Civil Case No. 62226 amount to an alteration of a
matter that is already res judicata.
DECISION
AZCUNA J :
AZCUNA, p
For consideration in this petition for review are the resolutions of the Court of
Appeals in CA-G.R. CV No. 45821 dated April 5, 2000 and August 30, 2000,
respectively.
Both parties have accepted the factual account narrated by the Court of Appeals
1 and have identically quoted the portion of the assailed decision pertaining thereto in
their memoranda. Accordingly, the Court adopts said ndings, which are reproduced as
follows:
On November 11, 1980, plaintiff Security Bank & Trust Company led a
complaint for a Sum of Money with the Regional Trial Court of Pasig, Branch 158
entitled "Security Bank & Trust Company, plaintiff, — versus — Miguel F. Uy,
Brigitte E. Uy and Rolando Limpo, defendants[.]" Plaintiff Bank sought to recover
the outstanding balance of a promissory note executed by the defendants.
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 P38,833.44 as of January 12, 1983;
2. Defendant spouses agree to pay the plaintiff the said amount

of P38,833.44 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) P4,644.00 on or before March 14, 1983 of which P500.00

shall be applied as attorney's fee; P144.00 the cost of suit,
and the remaining balance to the outstanding loan
obligation;
b) P4,000.00 each on or before the 15th day of each month

commencing April 1983 until June 1, 1983;
c) P1,500.00 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, led an Ex-Parte
Motion for the Issuance of Writ of Execution. The motion not having been acted
upon, plaintiff bank, on July 22, 1992, filed a complaint for Revival of Judgment.
The defendant-spouses, in their Answer, alleged as their defense laches, for
failure of plaintiff bank to enforce its rights for more than eight (8) years.
Defendant Limpo, on the other hand, alleged that "he is not obligated to pay any
amount to plaintiff under the said compromise agreement which was entered into
only by and between plaintiff and defendant spouses Miguel F. Uy and Brigitte E.
Uy without his knowledge and consent." (Records, p. 31)
On February 5, 1993, plaintiff bank led a Motion for Judgment on the
Pleadings alleging that defendants spouses' Answer failed to tender genuine
issues. On April 20, 1993, the trial court issued an order against defendants
spouses ordering them to pay plaintiff bank the amount of P38,833.44 with
interest at the rate of 20% per annum computed from January 12, 1983 until the
amount is fully paid. Defendant-spouses appealed this decision to the Court of
Appeals, but said appeal was ordered dismissed by this Court's Special Fifth
Division for defendants spouses' abuse of the extensions of time granted them,
pursuant to Section 1 (f) of Rule 50 of the Rules of Court (Rollo, p. 84).
Meanwhile, on June 30, 1993, defendant Limpo led 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 led 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 satis ed with the Order of the trial court, plaintiff bank led the appeal
at bench.
Plaintiff-appellant Security Bank & Trust Company assails the Order of the
trial court on the basis of the sole assigned error, to wit:
"THE LOWER COURT ERRED IN DISMISSING THE INSTANT

COMPLAINT AGAINST DEFENDANT-APPELLANT ROLANDO LIMPO."
(Appellant's Brief, p. 3)
At rst, the Court of Appeals dismissed the appeal holding that the Compromise
Agreement had superseded the promissory note executed between the payee Security
Bank & Trust Company (the Bank) and the makers spouses Miguel F. Uy and Brigitte E.
Uy (spouses Uy) and Rolando Limpo (Limpo). Limpo, inasmuch as he was never a party
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 rst two issues, Limpo takes for the negative. He maintains that the
Compromise Agreement was executed without his participation and so the trial court's
judgment based on compromise, by obvious consequence, did not and could not have
included him as a judgment debtor. Under this circumstance, there would be no basis
to include him as a defendant in a complaint for revival of judgment.
With respect to the second issue, Limpo answers in the a rmative. He avers that
an action based on the promissory note, being a written contract, prescribes in ten
years. Continuing from this premise, he computes that the right of action under the
promissory note accrued when it became due and demandable on September 19, 1979
and was suspended upon institution of the action to collect on the note on November
11, 1980. By then, one year, one month and twenty-three days had elapsed. The period
began to run again on March 22, 1983, when the judgment approving the Compromise
Agreement was issued, and was tolled upon the ling of the complaint for revival of
judgment on July 22, 1992. This next interval adds up to approximately nine years and
four months. Add this to the rst interval, the total period that had run would already be
ten years and ve months, making any suit on the promissory note barred by
prescription.
The Court finds the petition meritorious.
It is settled that a compromise agreement cannot bind persons who are not
parties to it. 3 This rule is based on Article 1311(1) of the Civil Code which provides that
"contracts take effect only between the parties, their assigns and heirs . . . ." The sound
reason for the exclusion of non-parties to an agreement is the absence of a vinculum or
juridical tie which is the e cient cause for the establishment of an obligation. In the
Compromise Agreement that was presented to the trial court, there is no question that
only the spouses Uy and the Bank were parties. Limpo did not participate in its
execution and there was no reference to him in any of its provisions. He cannot be
bound by the Compromise Agreement.
What happens then if the court approves a compromise agreement that fails to
include all of the defendants? In approving a compromise agreement, no court can
impose upon the parties a judgment different from their real agreement or against the
very terms and conditions of the amicable settlement entered into. 4 The principle of
autonomy of contracts must be respected. 5 These being said, considering that the
Compromise Agreement imposed no obligation upon Limpo, it follows that the
judgment rendered by the Regional Trial Court (RTC) of Pasig, based on the
Compromise Agreement, could likewise not impose any obligation upon him. The duty
of the court is con ned to the interpretation of the agreement that the contracting
parties have made for themselves without regard to its wisdom or folly as the court
cannot supply material stipulations or read into the contract words which it does not
contain. 6 Consequently, the contention of Limpo is correct. The terms and conditions
set forth in the Compromise Agreement, as approved by the court, are controlling 7 and,
therefore, there is no basis to include him in reviving the judgment.
However, there remains the question of whether the Bank may still continue the
proceedings against Limpo in Civil Case No. 62226, as concluded by the Court of
Appeals.
The Court of Appeals gives the following reason:
. . . If the spouses Uy would become insolvent and could not pay their
obligation under the Compromise Agreement, the SBTC [the Bank] could collect
the whole amount of the obligation from defendant Rolando Limpo. A judgment,
therefore, against Rolando Limpo would not be incompatible with the existence of
the Compromise Agreement for in such a situation SBTC could exercise its option
to secure execution of judgment against either or both the Uys and Limpo. The
only limitation is that SBTC could not collect more than the total amount of
indebtedness.
The 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 nal 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
Bobis v. Provincial Sheriff of Camarines Norte ,n 1 0 the facts of which are akin to those
of this case. There, four defendants, Camino, Eco, Guadalupe and Bobis, 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 Bobis 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 Bobis. Quoting from the Decision:
As will be seen, only Ru na Camino and Pasto Eco were adjudged to pay
Alfonso Ortega the amount of P140.00 on February 28, 1951. Although they were
included as party defendants, the spouses Fermin Bobis 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 nal with the approval of the
Compromise Agreement, the Court of Appeals' instructions to continue the
proceedings against Limpo in Civil Case No. 62226 amount to an alteration of a matter
that is already res judicata.
Since Limpo is no longer liable to the Bank, the issue of prescription is not
necessary to resolve.
WHEREFORE, the resolutions of the Court of Appeals dated April 5, 2000 and
August 30, 2000 in CA-G.R. CV No. 45821 are hereby REVERSED and SET ASIDE.
Rolando Limpo is ordered DROPPED as a defendant in Civil Case No. 62226. No
pronouncement as to costs.
SO ORDERED.
Puno and Garcia, JJ., concur.
Sandoval-Gutierrez, J., is on sick leave.
Corona, J., is on leave.
Footnotes
1.Court of Appeals decision, dated August 14, 1996, Rollo, p. 26.
2.Petitioner's Memorandum, Rollo, p. 131.
3.Banzagales v. Galman, G.R. No. 46717, May 21, 1993, 222 SCRA 350.
4.Phil. Bank of Communications v. Echiverri, No. L-41795, August 29, 1980, 99 SCRA 508.
5.Manila International Airport Authority v. ALA Industries Corporation , G.R. No. 147349,
February 13, 2004, 442 SCRA 603.
6.Cuizon v. Court of Appeals, G.R. No. 102096, August 22, 1996, 260 SCRA 645.
7.University of the East v. Secretary of Labor and Employment , G.R. Nos. 93310-12, November
21, 1991, 204 SCRA 254.
8.Esguerra v. Court of Appeals, G.R. No. 119310, February 3, 1997, 267 SCRA 380.
9.Abarintos v. Court of Appeals, G.R. No. 113070, September 30, 1999, 315 SCRA 550.
10.No. L-29838, March 18, 1983, 121 SCRA 28.
n Note from the Publisher: Copied verbatim from the o cial copy. “Bobis” should read as
“Bobis”.

FIRST DIVISION
[G.R. No. 166421. September 5, 2006.]
PHILIPPINE JOURNALISTS, INC., BOBBY DELA CRUZ, ARNOLD

BANARES and ATTY. RUBY RUIZ BRUNO , petitioners, vs . NATIONAL
LABOR RELATIONS COMMISSION, HON. COMMS. LOURDES JAVIER,
TITO GENILO and ERNESTO VERCELES, JOURNAL EMPLOYEES
APPEALS respondents.
UNION, and THE COURT OF APPEALS,
DECISION
SR J :
CALLEJO, SR., p
This is a Petition for Certiorari under Rule 65 1 of the Rules of Court of the Decision 2
of the Court of Appeals (CA) in CA-G.R. SP No. 81544, as well as the Resolution 3 dated
November 23, 2004 denying the motion for reconsideration thereof.
The Antecedents
The Philippine Journalists, Inc. (PJI) is a domestic corporation engaged in the
publication and sale of newspapers and magazines. The exclusive bargaining agent of all
the rank-and- le employees in the company is the Journal Employees Union (Union for
brevity).
Sometime in April 2005, the Union led a notice of strike before the National
Conciliation and Mediation Board (NCMB), claiming that PJI was guilty of unfair labor
practice. PJI was then going to implement a retrenchment program due to "over-sta ng
or bloated work force and continuing actual losses sustained by the company for the past
three years resulting in negative stockholders equity of P127.0 million." The Secretary of
the Department of Labor and Employment (DOLE) certi ed 4 the labor dispute to the
National Labor Relations Commission (NLRC) for compulsory arbitration pursuant to
Article 263 (g) of the Labor Code. The case was docketed as NCMB-NCR-NS-03-087-00.
The parties were required to submit their respective position papers. PJI led a
motion to dismiss, contending that the Secretary of Labor had no jurisdiction to assume
over the case and thus erred in certifying it to the Commission. The NLRC denied the
motion. PJI, thereafter, led a Motion to Defer Further Proceedings, alleging, among
others, that the ling of its position paper might jeopardize attempts to settle the matter
extrajudicially, which the NLRC also denied. The case was, thereafter, submitted for
decision. 5
In its Resolution 6 dated May 31, 2001, the NLRC declared that the 31 complainants
were illegally dismissed and that there was no basis for the implementation of petitioner’s
retrenchment program. The NLRC noted that the following circumstances belied PJI's
claim that it had incurred losses: (1) o ce renovations were made as evidenced by
numerous purchase orders; (2) certain employees were granted merit increases; and (3) a
Christmas party for employees was held at a plush hotel. It also observed that PJI's
executives refused to forego their quarterly bonuses if the Union members refused to
forego theirs. AIECSD

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 bene ts, 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
attorney's 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 bene ts; 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
a xed 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 1 0 on July 25, 2002, declaring that the
Clari catory 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 led 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 certi ed case. Thus, the NLRC granted
the computation of their bene ts as shown in the individual a davits 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 su cient 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. 1 1
In the meantime, however, the Union led 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% 1 2

In an Order 1 3 dated September 16, 2002, the DOLE Secretary certi ed 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 bene ts 1 4 of 50 others had been illegally reduced. 1 5 After the
retrenchment program was implemented, 200 Union members-employees who continued
working for petitioner had been made to sign ve-month contracts. The Union also alleged
that the company, through its legal o cer, 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 bene ts 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. HAEDIS
In its Resolution 1 6 dated July 31, 2003, the NLRC ruled that the complainants were
not illegally dismissed. The May 31, 2001 Resolution declaring the retrenchment program
illegal did not attain nality as "it had been academically mooted by the compromise
agreement entered into between both parties on July 9, 2001." According to the
Commission, it was on the basis of this agreement that the July 25, 2002 Resolution which
declared the case closed and terminated was issued. Pursuant to Article 223 of the Labor
Code, this later resolution attained nality upon the expiration of ten days from both
parties' receipt thereof. Thus, the May 31, 2001 Resolution could not be made the basis to
justify the alleged continued employment regularity of the 29 complainants subsequent to
their retrenchment. The NLRC further declared that the two cases involved different sets of
facts, hence, the inapplicability of the doctrine of stare decisis. In the rst action, the issue
was whether the complainants as regular employees were illegally retrenched; in this case,
whether the 29 complainants, contractual employees, were illegally dismissed on separate
dates long after their retrenchment.
The NLRC also declared that by their separate acts of entering into xed-term
employment contracts with petitioner after their separation from employment by virtue of
retrenchment, they are deemed to have admitted the validity of their separation from
employment and are thus estopped from questioning it. Moreover, there was no showing
that the complainants were forced or pressured into signing the xed-term employment
contracts which they entered into. Consequently, their claims for CBA bene ts and
increases from January to November 2002 should be dismissed. The NLRC pointed out
that since they were mere contractual employees, the complainants were necessarily
excluded from the collective bargaining unit. The NLRC stressed that the complainants had
refused to be regularized and ceased to be employees of petitioner upon the expiration of
their last xed-term employment contracts. Thus, the NLRC dismissed the case for lack of
merit, but directed the company to "give preference to the separated 29 complainants
should they apply for re-employment."
On the other issues raised by the complainants, the NLRC held:
We, furthermore nd that JEU has no personality to represent the 29
Complainants for, as prudently discussed above, they were contractual
employees, not regular employees, from the time they entered into xed-term
employment contracts after being retrenched up to the time they ceased being
employees of PJI due to the non-renewal of their last xed-term employment
contracts. As contractual employees, they were excluded from the Collective
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 xed-term employment contracts
Complainants entered into with PJI.
We nally rule that JEU is not guilty of unfair labor practice. Although it
admitted the 29 contractual employees as its members and represented them in
the instant case and circulated derogatory letters and made accusations against
Respondents, it is, nevertheless, deemed to have acted in good faith, there being
no substantial evidence on record showing that they did so in bad faith and with
malice.
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. 1 7
The Union assailed the ruling of the NLRC before the CA via petition for certiorari
under Rule 65.
In its Decision dated August 17, 2004, the appellate court held that the NLRC gravely
abused its discretion in ruling for PJI. The compromise agreement referred only to the
award given by the NLRC to the complainants in the said case, that is, the obligation of the
employer to the complainants. The CA pointed out that the NLRC Resolution nevertheless
declared that respondent failed to prove the validity of its retrenchment program, which
according to it, stands even after the compromise agreement was executed; it was the
reason why the agreement was reached in the first place.
The CA further held that the act of respondent in hiring the retrenched employees as
contractual workers was a ploy to circumvent the latter's security of tenure. This is
evidenced by the admission of PJI, that it hired contractual employees (majority of whom
were those retrenched) because of increased, albeit uncertain, demand for its publications.
The CA pointed out that this was done almost immediately after implementing the
retrenchment program. Another "telling feature" is the fact that the said employees were
re-hired for ve-month contracts only, and were later offered regular employment with
salaries lower than what they were previously receiving. The CA also ruled that the
dismissed employees were not barred from pursuing their monetary claims despite the
fact that they had accepted their separation pay and signed their quitclaims. The
dispositive portion of the decision reads:
WHEREFORE,
WHEREFORE the petition is GRANTED . Respondent is ordered to
reinstate the 29 dismissed employees to their previous positions without loss of
seniority rights and payment of their full backwages from the time of their
dismissal up to their actual reinstatement. Respondent is likewise ordered to pay
the 29 and 50 employees, respectively, their rightful bene ts under the CBA, less
whatever amount they have already received. The records of this case are
remanded to the NLRC for the computation of the monetary awards.
SO ORDERED . 1 8
The Present Petition

PJI, its President Bobby Dela Cruz, its Executive Vice-President Arnold Banares, and
its Chief Legal O cer 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 AND ACADEMICALLY 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

DISCRETION WHEN IT TRIED FACTS AND EVIDENCES WHICH WERE NOT
PRESENTED AND CONSIDERED 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

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.
JURISDICTION 1 9
At the outset, we note that this case was brought before us via petition for certiorari
under Rule 65 of the Revised Rules of Civil Procedure. The proper remedy, however, was to
le a petition under Rule 45. It must be stressed that certiorari under Rule 65 is "a remedy
narrow in scope and in exible in character. It is not a general utility tool in the legal
workshop." 2 0 Moreover, the special civil action for certiorari will lie only when a court has
acted without or in excess of jurisdiction or with grave abuse of discretion. 2 1
Be that as it may, a petition for certiorari may be treated as a petition for review
under Rule 45. Such move is in accordance with the liberal spirit pervading the Rules of
Court and in the interest of substantial justice. 2 2 As the instant petition was led within
the prescribed fteen-day period, and in view of the substantial issues raised, the Court
resolves to give due course to the petition and treat the same as a petition for review on
certiorari. 2 3
The primary issue before the Court is whether an NLRC Resolution, which includes a
pronouncement that the members of a union had been illegally dismissed, is abandoned or
rendered "moot and academic" by a compromise agreement subsequently entered into
between the dismissed employees and the employer; this, in turn, raises the question of
whether such a compromise agreement constitutes res judicata to a new complaint later
led by other union members-employees, not parties to the agreement, who likewise claim
to have been illegally dismissed.
Petitioners point out that a compromise agreement is the product of free will and
consent of the parties and that such agreement can be entered into during any stage of the
case. They insist that its terms are not dictated or dependent on the court's ndings of
facts; it is valid as long as not contrary to law, public order, public policy, morals or good
customs. According to petitioners, the execution of the compromise agreement embodied
and approved by the NLRC Resolution dated July 25, 2001 effectively closed and
terminated Certi ed Case No. 000181-00. Citing Golden Donuts, Inc., v. National Labor
Relations Commission. 2 4 Thus, a judgment on a compromise agreement has the force
and effect of any other judgment.
Petitioners also point out that as correctly observed by the NLRC, the resolution
declaring respondents' retrenchment was promulgated on May 31, 2001. Petitioners' side
was never presented in Certi ed Case No. 000181-00, and if it were not for the ling of the
compromise agreement, they would have moved to reconsider or at least led the
appropriate pleadings to rectify the ndings adverse to them. They insist that the
compromise agreement effectively abandoned all ndings of facts and its necessary
consequences in favor of the amicable settlement. The compromise agreement was
thereafter approved on July 25, 2001 by the NLRC. As clearly stated in Article 223 of the
Labor Code, it is the Resolution dated July 25, 2001 that attained nality after the
expiration of the ten-day period, and not the abandoned and mooted Resolution dated May
31, 2001.
Petitioners claim that the letter of Atty. Adolfo Romero dated March 20, 2000 was
never presented as evidence. Moreover, since the CA is not a trier of facts, it was error on
its part to "admit material evidence that was never presented in the instant case (or to lift
ndings of facts from the abandoned and mooted resolution dated 31 May 2001)." Thus,
the NLRC did not act with grave abuse of discretion when it found that the retrenchment
was legal as stated in the appealed decision dated July 31, 2003. Such use of the
admissions contained in the said letter dated March 20, 2000 denied them due process as
they were not given the opportunity to contest or deny its validity or existence.
Petitioners further point out that while the instant petition was led only by 29
complainants, the dispositive portion of the assailed decision was extended to cover 50
other persons. They insist that the said letter, as well as the ndings of a "mooted
decision," were used as evidence to support the erroneous decision of the CA; in so doing,
the appellate court acted with grave abuse of discretion amounting to lack or excess of
jurisdiction.
For their part, private respondents claim that the appellate court did not commit any
reversible error, and that the assailed decision is borne out by the evidence on record.
Since the dismissal of the retrenched employees has been declared illegal, the 29
dismissed employees enjoy the status of regular and permanent employees who cannot
be dismissed except for cause; hence, the CA correctly ordered their reinstatement. CHEIcS
They further point out that the xing of ve-month contracts of employment entered
into by the individual union members was intentionally employed by petitioners to
circumvent the provisions of the Labor Code on security of tenure, hence, illegal. They also
allege that petitioners did not comply with the 30-day notice rule required by law to render
any dismissal from employment valid. The letter of dismissal was dated June 27, 2002,
and took effect a week after, or on July 3, 2002, a violation of the 30-day notice rule. The
Union members' salaries and bene ts were obtained through CBA negotiations and were
included in the existing CBA. Thus, petitioners' act of unilaterally removing such bene ts
and wage increases constitutes gross violations of its economic provisions, and unfair
labor practice as de ned by the Labor Code. Private respondents cite Philippine Carpet
Employees Association v. Philippine Carpet Manufacturing Corporation 2 5 to support their
arguments. They insist that the illegally retrenched employees were made to believe that
their retrenchment was valid, and thus, through mistake or fraud accepted their separation
pay, which, however, does not militate against their claims.
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." 2 6 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. 2 7 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." 2 8 As the Court held in
Reformist Union of R.B. Liner, Inc. v. NLRC , 2 9 the provision "bestows nality 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 o ce of the Department
of Labor, shall be nal 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 led 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. 3 0 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. 3 1
In AFP Mutual Bene t Association, Inc. v. Court of Appeals , 3 2 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 court's 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 ful llment 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 nal 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 . 3 3
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. ACETID
In any event, the compromise agreement cannot bind a party who did not voluntarily
take part in the settlement itself and gave speci c individual consent . 3 4 It must be
remembered that a compromise agreement is also a contract; it requires the consent of
the parties, and it is only then that the agreement may be considered as voluntarily entered
into.
The case of Golden Donuts, Inc. v. National Labor Relations Commission , 3 5 which
petitioners erroneously rely upon, is instructive on this point. The Court therein was
confronted with the following questions:
. . . (1) whether or not a union may compromise or waive the rights to
security of tenure and money claims of its minority members, without the latter's
consent, and (2) whether or not the compromise agreement entered into by the
union with petitioner company, which has not been consented to nor rati ed by
respondents minority members has the effect of res judicata upon them." 3 6
Speaking through Justice Reynato C. Puno, the Court held that pursuant to Section
23, Rule 138 3 7 of the then 1964 Revised Rules of Court, a special authority is required
before a lawyer may compromise his client's litigation; thus, the union has no authority to
compromise the individual claims of members who did not consent to the settlement. 3 8
The Court also stated that "the authority to compromise cannot lightly be presumed and
should be duly established by evidence," 3 9 and that "a compromise agreement is not valid
when a party in the case has not signed the same or when someone signs for and in behalf
of such party without authority to do so;" consequently, the affected employees may still
pursue their individual claims against their employer. 4 0 The Court went on to state that a
judgment approving a compromise agreement cannot have the effect of res judicata upon
non-signatories since the requirement of identity of parties is not satis ed. A judgment
upon a compromise agreement has all the force and effect of any other judgment, and,
conclusive only upon parties thereto and their privies, hence, not binding on third persons
who are not parties to it. 4 1
A careful perusal of the wordings of the compromise agreement will show that the
parties agreed that the only issue to be resolved was the question of the monetary claim
of several employees. The prayer of the parties in the compromise agreement which was
submitted to the NLRC reads:
WHEREFORE, premises considered, it is respectfully prayed that the
Compromise Settlement be noted and considered; that the instant case [be]
deemed close[d] and terminated and that the Decision dated May 31, 2001
rendered herein by this Honorable Commission be deemed to be fully
implemented insofar as concerns the thirty-one (31) employees mentioned in
paragraphs 2c and 2d hereof; and, that the only issue remaining to be resolved be
limited to the question of the monetary claim raised in the motion for clari cation
by the seven employees mentioned in paragraph 2e hereof. 4 2
The agreement was later approved by the NLRC. The case was considered closed
and terminated and the Resolution dated May 31, 2001 fully implemented insofar as the
employees "mentioned in paragraphs 2c and 2d of the compromise agreement" were
concerned. Hence, the CA was correct in holding that the compromise agreement
pertained only to the "monetary obligation" of the employer to the dismissed employees,
and in no way affected the Resolution in NCMB-NCR-NS-03-087-00 dated May 31, 2001
where the NLRC made the pronouncement that there was no basis for the implementation
of petitioners' retrenchment program.
To reiterate, the rule is that when judgment is rendered based on a compromise
agreement, the judgment becomes immediately executory, there being an implied waiver
of the parties' right to appeal from the decision. 4 3 The judgment having become nal, the
Court can no longer reverse, much less modify it. DaTISc
Petitioners' argument that the CA is not a trier of facts is likewise erroneous. In the
exercise of its power to review decisions by the NLRC, the CA can review the factual
ndings or legal conclusions of the labor tribunal. 4 4 Thus, the CA is not proscribed from
"examining evidence anew to determine whether the factual ndings of the NLRC are
supported by the evidence presented and the conclusions derived therefrom accurately
ascertained." 4 5
The ndings of the appellate court are in accord with the evidence on record, and we
note with approval the following pronouncement:
Respondents alleged that it hired contractual employees majority of whom
were those retrenched because of the increased but uncertain demand for its
publications. Respondent did this almost immediately after its alleged
retrenchment program. Another telling feature in the scheme of respondent is the
fact that these contractual employees were given contracts of ve (5) month
durations and thereafter, were offered regular employment with salaries lower
than their previous salaries. The Labor Code explicitly prohibits the diminution of
employee's bene ts. Clearly, the situation in the case at bar is one of the things
the provision on security of tenure seeks to prevent.
Lastly, it could not be said that the employees in this case are barred from
pursuing their claims because of their acceptance of separation pay and their
signing of quitclaims. It is settled that "quitclaims, waivers and/or complete
releases executed by employees do not stop them from pursuing their claims — if
there is a showing of undue pressure or duress. The basic reason for this is that
such quitclaims, waivers and/or complete releases being guratively exacted
through the barrel of a gun, are against public policy and therefore null and void
ab initio (ACD Investigation Security Agency, Inc. v. Pablo D. Daquera , G.R. No.
147473, March 30, 2004)." In the case at bar, the employees were faced with
impending termination. As such, it was but natural for them to accept whatever
monetary benefits that they could get. 4 6
CONSIDERING THE FOREGOING, the petition is DENIED and the assailed Decision
and Resolution AFFIRMED. Costs against the petitioners.
SO ORDERED.
Panganiban, C.J., Ynares-Santiago, Austria-Martinez and Chico-Nazario, JJ., concur.
Footnotes
1. Petitioners erroneously labeled their recourse as one for "certiorari" under "Rule 65." Since
they are questioning a decision of the Court of Appeals, the proper remedy is a petition
for review under Rule 45. Inasmuch as the instant petition was filed within the 15-day
reglementary period, the Court hereby treats it as one filed under Rule 45.
2. Penned by Associate Justice Juan Q. Enriquez, Jr., with Associate Justices Salvador R.
Valdez, Jr. (Retired) and Vicente Q. Roxas, concurring; rollo, pp. 23-31.
3. Rollo, pp. 32-33.

4. Order dated September 16, 2002, CA rollo, pp. 409-410.
5. CA rollo, p. 372.
6. Id. at 371-405.
7. Id. at 400-405.
8. Id. at 482-489.
9. Id. at 490-491.
10. Rollo, pp. 69-91.
11. The dispositive portion of the Resolution reads:
WHEREFORE, premises considered, [w]e hereby order respondent Philippine

Journalists Inc. to:
1. Reinstate Maria Rosario T. Flores, Eddie H. Serrano and Milagros B. Billones to

their former position without loss of seniority rights and other benefits;
2. To pay the monetary claims of Antonio M. Ayo, Arnold S. Santos, Judith A.

Pulido, Maria Rosario T. Flores, Emmeline D. Nicolas, Emmanuel M. Munar, Jr., Eddie H.
Serrano, Razil B. Taleon and Milagros B. Billones as shown in their computations quoted
THIRD DIVISION
[G.R. No. 126745. July 26, 1999.]
ARMED FORCES OF THE PHILIPPINES MUTUAL BENEFIT

INC. petitioner, vs . THE HONORABLE COURT OF
ASSOCIATION, INC.,
INC. respondents.
APPEALS and EBR REALTY, INC.,
Carpio Villaraza & Cruz for petitioner.

Sycip Salazar Hernandez & Gatmaitan for private respondent.
SYNOPSIS
Building E is the subject of a contract to sell executed by B.E. Ritz Mansion

International Corp. in favor of EBR Realty, Inc. (EBRRI). In July 1991, the sale became a
subject of litigation before the Housing and Land Use Regulatory Board between B.E. Ritz
and EBRRI. However, on August 10, 1991, EBRRI and Eurotrust Capital Corp., with prior
consent of B.E. Ritz, executed a Deed of Assignment whereby EBRRI assigned and
conveyed to the Armed Forces of the Philippines Mutual Bene t Association, Inc. (AFP-
MBAI) by way of security, among others, all rights, interests and participation in Building E.
On January 27, 1992, AFP-MBAI instituted Civil Case No. Q-92-1198 against Eurotrust,
EBRRI, B.E. Ritz and others, seeking to recover treasury notes worth P73,000,000.00 and
the payment of P35,157,637.72 plus interest. On the other hand, on November 19, 1993,
the Housing and Land Use Arbiter ordered B.E. Ritz to execute a Deed of Absolute Sale of
Building E in favor of EBRRI. On July 11, 1994, in Civil Case No. Q-92-1198, the trial court
issued a writ of attachment, levying the assets of B.E. Ritz including Building E. On
December 13, 1994, petitioner AFP-MBAI and B.E. Ritz entered into a compromise
agreement which provided, among others, that within one year from execution of the
Agreement, B.E. Ritz shall sell Building E and shall pay AFP-MBAI the sum of
P10,000,000.00 from the proceeds thereof. On March 15, 1995, the trial court rendered a
partial decision approving the said compromise agreement. It also lifted the writ of
attachment and notice of garnishment upon all property and assets of B.E. Ritz except
Building E. When EBRRI learned of these incidents, EBRRI led a motion to partially set
aside judgment predicated on the compromise agreement insofar as it referred to Building
E. The trial court denied the motion. However, the Court of Appeals set aside the Order of
the trial court and the compromise agreement insofar as it covered Building E. cAHDES
Hence, this petition.

The Court ruled that where there are, along with the parties to the compromise,
other persons involved in the litigation who have not taken part in concluding the
compromise agreement but are adversely affected or feel prejudiced thereby, should not
be precluded from invoking in the same proceedings an adequate relief therefor. A motion
to set aside the judgment to the extent he might feel aggrieved, or might justi ably fear to
be at risk by acquiescence unless timely invoked, is such a remedy. A denial of the motion
to set aside the judgment on the compromise agreement opens the door for its possible
elevation to a higher court. If the motion is denied, he may, considering the special nality
feature of the compromise judgment, albeit partial, and its susceptibility to execution, take
an appeal from the order of denial under Rule 45 or even, when circumstances particularly
warrant, the extraordinary remedy prescribed in Rule 65, of the Rules of Court. That appeal
notwithstanding, the main case still subsists allowing him to have continued locus standi.
The instant petition was DENIED.
SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; COMPROMISE AGREEMENT;

DEFINED. — A compromise agreement is a contract whereby the parties make reciprocal
concessions in order to resolve their differences and thus avoid a litigation or to put an
end to one already commenced. Aptly, it is also described as an agreement between two
or more persons, who, for the purpose of preventing or putting an end to a lawsuit, adjust
their di culties by mutual consent in the manner which they agree on, and which each
party prefers over the hope of gaining but balanced by the danger of losing. The
compromise may thus be either extrajudicial (to avoid a litigation) or judicial (to put to an
end a litigation).
2. ID.; ID.; EXTRAJUDICIAL COMPROMISE AGREEMENT; ELUCIDATED. — Like
any other contract, an extrajudicial compromise agreement is not excepted from rules and
principles of a contract. It is a consensual contract, perfected by mere consent, the latter
being manifested by the meeting of the offer and the acceptance upon the thing and the
cause which are to constitute the contract. It may be either perfectly valid or defective if it
suffers from any impediment that, depending on the nature of its aw, could render it void,
unenforceable, voidable or rescissible.
3. REMEDIAL LAW; JUDGMENT; JUDICIAL COMPROMISE; HAS THE EFFECT
AND AUTHORITY OF RES JUDICATA . — A compromise agreement that is basically
intended to resolve a matter already under litigation is what would normally be termed a
judicial compromise. Once stamped with judicial imprimatur, it becomes more than a mere
contract binding upon the parties; having the sanction of the court and entered as its
determination of the controversy, it has the force and effect of any other judgment. It has
the effect and authority of res judicata, although no execution may issue until it would have
received the corresponding approval of the court where the litigation pends and its
compliance with the terms of the agreement is thereupon decreed. A judicial compromise
is likewise circumscribed by the rules of procedure.
4. ID.; ID.; ID.; NOT APPEALABLE AND IMMEDIATELY EXECUTORY BETWEEN
THE PARTIES. — 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.
5. ID.; ID.; ID.; RATIONALE. — The reason for the rule, said the Court in Domingo
vs. Court of Appeals, is that when both parties so enter into the agreement to put to a
close a pending litigation between them and ask that a decision be rendered in conformity
therewith, it would only be "natural to presume that such action constitutes an implicit
waiver of the right to appeal" against that decision. The order approving a compromise
agreement thus becomes a nal act, and it forms part and parcel of the judgment that can
be enforced by a writ of execution unless otherwise enjoined by a restraining order.

6. ID.; ID.; ID.; RIGHTS OF PERSONS ADVERSELY AFFECTED WHO ARE NOT
PARTIES THERETO. — Where there are, along with the parties to the compromise, other
persons involved in the litigation who have not taken part in concluding the compromise
agreement but are adversely affected or feel prejudiced thereby, they should not be
precluded from invoking in the same proceedings an adequate relief therefor. A motion to
set aside the judgment to the extent he might feel aggrieved, or might justi ably fear to be
at risk by acquiescence unless timely invoked, is such a remedy. A denial of the motion to
set aside the judgment on the compromise agreement opens the door for its possible
elevation to a higher court. If the motion is denied, he may, considering the special nality
feature of the compromise judgment, albeit partial, and its susceptibility to execution, take
an appeal from the order of denial under Rule 45 or even, when circumstances particularly
warrant, the extraordinary remedy prescribed in Rule 65, of the Rules of Court. That appeal
notwithstanding, the main case still subsists allowing him to have continued locus standi,
7. ID.; SUPREME COURT CIRCULAR NO. 2-90; ELUCIDATED. — Supreme Court
Circular No. 2-90, dated March 9, 1990, states that an appeal from a judgment rendered in
a civil or criminal action by the Regional Trial Court in the exercise of its original jurisdiction
shall be by a writ of error or ordinary appeal in which questions of law and of facts may be
raised. Where a party desires to only bring up issues of law, appellant may avail himself of
Section 1, Rule 45, of the Rules of Court. That rule provides that a party desiring to appeal
b y certiorari from the judgment or nal order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Courts or other courts whenever authorized by law, may
le with this Court a veri ed petition for review on certiorari. The petition shall raise only
questions of law that must be distinctly set forth therein. The Circular provides, however,
that although submission of issues of fact in an appeal by certiorari taken to this Court
from the Regional Trial Court is ordinarily proscribed, this Court nonetheless retains the
option in the exercise of its sound discretion, taking into account the attendant
circumstances, either to take cognizance of and decide such issues or to refer the case to
the Court of Appeals for determination.
8. ID.; JUDGMENT; JUDICIAL COMPROMISE; PROPER VENUE TO ASSAIL THE
VALIDITY THEREOF IS THE TRIAL COURT WHERE THE CASE IS PENDING. — About the
insistence of petitioner AFPMBAI that EBRRI may not attack the compromise agreement
collaterally but should have led a separate action for rescission, it must be pointed out
that the compromise is directly related to the case still then pending before the trial court,
certainly a proper venue for the assailed incident. The general aim of adjective law is to
facilitate the application of justice to the rival claims as of contending parties, bearing
always in mind that procedural rules are created not to hinder or delay but to facilitate and
promote the administration of justice. It is far better to dispose of the case on the merits
which is a primordial end rather than on a technicality, if it be the case, that may result in
injustice. The principles against multiplicity of suits may also be rightly invoked by EBRRI.
9. POLITICAL LAW; CONSTITUTIONAL LAW; BILL OF RIGHTS; DUE PROCESS; A
PARTY WAS NOT DEPRIVED THEREOF WHEN HE WAS GIVEN A CHANCE TO BE HEARD
THROUGH MOTION FOR RECONSIDERATION. — It would be improper to claim a
deprivation of due process "where a party [had been] given the chance to be heard [on its]
motion for reconsideration." The motion for reconsideration undoubtedly gave AFPMBAI
full opportunity to submit to the Court of Appeals its side of the controversy. The
opportunity to be heard was given, and AFPMBAI indeed had made use of that opportunity.
DECISION
VITUG , J : p
Presented for resolution in the instant petition before the Court is the issue, in main,
of whether or not an order of the Regional Trial Court denying a motion to set aside a
partial judgment based on a compromise agreement may be appealed to the Court of
Appeals on a petition for review on certiorari by a party to the court proceedings although
he did not take part in the compromise agreement. LLpr
B.E. Ritz Mansion International Corporation ("B.E. Ritz"), a corporation involved in real
estate projects, contracted to sell to private respondent EBR Realty, Inc. ("EBRRI"), an
o ce building, also identi ed as Building E, still then under construction along E.
Rodriguez Avenue, Bagong Bayan, Quezon City, for P22,050,000.00. EBRRI paid B.E. Ritz
the aggregate sum of P17,640,000.00 leaving a balance of P4,410,000.00 payable upon
the completion and turnover of the building to EBRRI. The two rms additionally executed
contracts to sell covering ten condominium units, still then under construction, at the
Phoenix Subdivision in Pasig City for which purchase EBRRI paid to B.E. Ritz the sum of
P20,415,682.75. In July 1991, B.E. Ritz demanded from EBRRI the payment of the
P4,410,000.00 balance in its purchase of Building E. Instead of paying the amount, EBRRI
led a complaint, docketed HLRB Case No. REM-120992-5304, before the Housing and
Land Use Regulatory Board ("HLURB") for speci c performance and/or rescission plus
damages against B.E. Ritz premised on the latter's failure to nish the construction of
Building E on the date agreed upon for its completion. EBRRI also sought to rescind the
contracts to sell over the ten condominium units in the Phoenix Subdivision for a similar
failure on the part of B.E. Ritz to timely complete the construction thereof. EBRRI prayed
for the refund of the amounts paid by it to B.E. Ritz plus damages and interests.
Meanwhile, on 10 August 1991, EBRRI and Eurotrust Capital Corporation
("Eurotrust"), allegedly with the prior consent of B.E. Ritz, executed a deed of assignment
whereby EBRRI assigned and conveyed to petitioner Armed Forces of the Philippines
Mutual Bene t Association, Inc. ("AFPMBAI"), by way of security, all rights, interests and
participation 1 in Building E and the condominium units at the Phoenix Subdivision. prLL
On 27 January 1992, AFPMBAI instituted Civil Case No. Q-92-11198 against

Eurotrust, Elsa B. Reyes, Digna Blanca, Fernando C. Francisco and Maria Cristina C.
Cornista with the Regional Trial Court of Quezon City, seeking to recover from the
defendants treasury notes worth P73,000,000.00 and the payment of P35,157,637.72 plus
interest, attorney's fees and litigation expenses. Later, the complaint was amended to
include EBRRI and B.E. Ritz party defendants and to pray for the issuance of a writ of
preliminary attachment.
In a decision, dated 19 November 1993, in HLRB Case No. REM-120992-5304,
Housing and Land Use Arbiter Teresita R. Alferez declared rescinded the contracts to sell
covering the ten condominium units and ordered B.E. Ritz to execute a deed of absolute
sale of Building E in favor of EBRRI. Arbiter Alferez held that EBRRI's obligation to B.E. Ritz
in the amount of P4,410,000.00, the balance of the purchase price of Building E, should
simply be deducted from the obligation of B.E. Ritz to refund the P20,415,682.75 sum
remitted to it by EBRRI under the rescinded contracts to sell (covering the ten
condominium units) or, in ne, a net amount of P16,005,682.72 still to be paid by B.E. Ritz
to EBRRI.
In Civil Case No. Q-92-11198, the trial court issued on 11 July 1994 a writ of
attachment levying the assets of B.E. Ritz that included Building E and the ten
condominium units. On 13 December 1994, petitioner AFPMBAI and B.E. Ritz entered into
a compromise agreement that, among other things, provided: llcd
"1.1. B.E. RITZ admits and acknowledges that it borrowed funds from
EUROTRUST CAPITAL CORPORATION and/or ELSA B. REYES.
"1.2. B.E. RITZ admits and acknowledges that a portion of the funds it
borrowed from EUROTRUST CAPITAL CORPORATION came from AFP-MBAI. B.E.
Ritz represents that Twenty Four Million Pesos (P24,000,000.00) more or less, of
the funds it borrowed from EUROTRUST CAPITAL CORPORATION came from
AFP-MBAI.
"1.3. B.E. RITZ has agreed to return to AFP-MBAI the amounts received
from EUROTRUST CAPITAL CORPORATION, which actually belong to AFP-MBAI.
"1.4. B.E. RITZ shall be absolved from any and all claims, obligations
and indebtedness in relation to or in connection with the funds borrowed from
EUROTRUST CAPITAL CORPORATION and which came from AFP-MBAI. cdphil
"1.5. AFP-MBAI reserves and retains its rights to hold ELSA B. REYES,
EUROTRUST CAPITAL CORPORATION and other defendants in the above-entitled
case, liable to the full extent of their obligation.
"1.6. Any consideration to be paid to AFP-MBAI under this Agreement

shall be considered as settlement of the amount belonging to AFP-MBAI, which
B.E. RITZ represents to have received from EUROTRUST CAPITAL
CORPORATION." 2
Relative to the mode of settlement, petitioner AFPMBAI and B.E. RITZ agreed that —
"2.1. B.E. RITZ and its nanciers (named below) shall jointly and
severally pay AFP-MBAI the amount of Twenty Million Pesos (P20,000,000.00),
payable within the period stated in the promissory note to be executed as
provided in paragraphs 2.2 and 2.2.1. In addition, B.E. RITZ shall sell
Building 'E' standing on a parcel of land covered by Transfer Certi cate
of Title No. 23247, Registry of Deeds for Quezon City, located on E.
Rodriguez, Jr. Avenue, Bagong Bayan, Quezon City, Metro Manila and
shall pay AFP-MBAI the amount of Ten Million Pesos (P10,000,000.00)
from the proceeds of the sale thereof . cda
"2.2. Within forty- ve (45) days from the execution, and as a condition
precedent to the effectivity, of this Agreement.
"2.2.1 B.E. RITZ and its nanciers composed of TERRA

PHILIPPINES CORPORATION, RICHVILLE RESOURCES & DEV. CORP., and
STANFORD RESOURCES & DEV. CORP. acting through a duly authorized
representative, shall issue and deliver a Promissory Note in the aforesaid
amount of P20,000,000.00 in favor of AFP-MBAI committing to pay the
said amount to the latter or its order, within one (1) year from date of said
Promissory Note. The liability of B.E. RITZ and its nanciers shall be joint
and several.
"2.2.2 In payment of said Promissory Note, B.E. RITZ shall, in

addition, issue and deliver a check for the same amount with the same
maturity date as the said Promissory Note. prLL
"It is hereby understood and agreed that failure to issue and deliver the
said Promissory Note and postdated check shall render this Agreement ineffective
and without effect from the beginning.
"2.3. Within one (1) year from the execution of this Agreement, B.E.
RITZ shall sell Building 'E' , and shall pay AFP-MBAI the aforesaid sum of
P10,000,000.00 from the proceeds thereof, provided that the period of one-year
may be extended by agreement of the parties. B.E. RITZ shall be solely
responsible for complying with all requirements in connection with the
sale of Building 'E' and shall take sole responsibility for the sale,
holding as it hereby holds AFP-MBAI free and harmless from any
liability or obligation that may arise from the said sale of Building 'E' .
"2.4. Immediately upon the execution of this Agreement, AFP-MBAI

shall cause the lifting of the writ of preliminary attachment on the condominium
project located at cor. Javier St. and Canley Road, Phoenix Subdivision, Pasig,
M.M.
"2.5. In exchange for the Promissory Note and postdated check as

provided in the preceding paragraphs, AFP-MBAI shall deliver to B.E. RITZ a
MOTION FOR PARTIAL JUDGMENT BASED ON COMPROMISE AGREEMENT with
MOTION TO LIFT WRIT OF ATTACHMENT duly signed by AFP-MBAI to be led in
Court praying for the approval of this Agreement and the lifting of the writ of
attachment on all the remaining properties pertaining to B.E. RITZ and/or its
assigns or successors-in-interest, except the attachment over Building 'E'
located at E. Rodriguez, Jr. Avenue, Bagong Bayan, Quezon City, Metro
Manila, which shall be maintained and remain in full force and effect
until the same is disposed by B.E. RITZ and the Ten Million Pesos
(P10,000,000.00) from the proceeds thereof paid to AFP-MBAI. AFP-MBAI " 3
(Underscoring ours.)cdasia
AFPMBAI waived, consistently with the compromise agreement, all its rights and
interests in ten (10) condominium units, two units in a condominium project and Building
'E' in favor of B.E. Ritz. 4
AFPMBAI and B.E. Ritz led on 14 March 1995 a joint omnibus motion, dated 16
February 1995, praying for the approval of the compromise agreement and the rendition of
a partial judgment based thereon. The motion also included a prayer for the partial lifting
of the writ of preliminary attachment over the levied property with the exception of
Building 'E'. 5 The following day, 15 March 1995, the trial court 6 rendered a "partial
decision" approving the compromise agreement and lifting the writ of attachment and
notice of garnishment upon all property and assets of B.E. Ritz except Building 'E'. LexLib
EBRRI was not furnished with a copy of the compromise agreement nor noti ed of
the partial decision. When EBRRI ultimately learned of these incidents, EBRRI promptly filed
a motion to partially set aside the judgment predicated on the compromise agreement
insofar as it had referred to Building E, pointing out that Building E was the subject matter
of litigation before the HLURB which, in its decision of 19 November 1993, had directed
B.E. Ritz to execute a deed of absolute sale over the building and to deliver to EBRRI the
corresponding transfer certi cate of title. EBRRI contended that the projected disposition
of Building E was in violation of paragraph 4 of Article 1381 of the Civil Code that would
consider rescissible, "contracts which referred to things under litigation if entered into by
the defendant without the knowledge and approval of the litigants or of competent judicial
authority." EBRRI added that the proposed sale of Building E would be in fraud of creditors
under Article 1387(2) of the Civil Code there being, in fact, a previous judgment in the
HLURB case. 7
B.E. Ritz, in turn, averred that in executing the compromise agreement, petitioner
AFPBMAI was simply implementing the deed of assignment executed between private
respondent EBRRI and Eurotrust. In its case, AFMBAI stated that it was only interested, at
all events, in the expeditious recovery of the amount covered by the compromise
agreement. EBRRI responded by stressing that B.E. Ritz should not be allowed to dispose
of the property owned by EBRRI to pay an obligation due from B.E. Ritz to AFPMBAI.
The trial court refused to set aside its judgment on the compromise agreement; in
its order, dated 07 September 1995, it held:
"'A judgment rendered in accordance with a compromise agreement is
immediately executory unless a motion is led to set aside the agreement on the
ground of fraud, mistake or duress . . .' ( Arkoncel, Jr. vs. Lagamon , 204 SCRA
560). None of the above-mentioned grounds is present in the contract in question.
LLphil
"Be it noted that Building 'E' is not the subject of the main case. These
properties were levied on attachment as properties registered in the name of
defendant B.E. Ritz against whom a writ of attachment was issued. There is no
reason why the parties concerned cannot come up with a compromise agreement
involving the same. While it may be true that Building 'E' is the subject of litigation
between EBR Realty and B.E. Ritz before HLURB, absence is a showing that EBR
Realty was declared with finality to be the absolute owner of the said building.
"Moreover, a compromise agreement is a contract and, therefore, cannot

affect third persons who are not parties to it (University of the East vs. Secretary
of Labor and Employment, 204 SCRA 254), defendant EBR Realty in this case.
"Well-settled is the rule that a compromise agreement, once approved by
the Court, cannot and should not be disturbed except for vices of consent or
forgery, it being the obvious purpose of such compromise agreement to settle,
once and for all, the claims of the parties, and bar all future disputes and
controversies thereon. A compromise agreement cannot bind persons who are not
parties thereto. Neither would a person not party to a compromise agreement be
entitled to enforce the same. Similarly, a person who is not a party to an
agreement cannot seek the amendment or modi cation of the same. Neither can
a Court of law rule that the compromise agreement be amended and modi ed
pursuant only to the wishes of a person not party to said agreement (cited in
Periquet, Jr. vs. Intermediate Appellate Court , G.R. No. 69996, December 5, 1994)."
8 LLpr
From the foregoing order, EBRRI led with this Court a petition for review on
certiorari, docketed G.R. No. 121988, which immediately drew a motion to dismiss from
AFPMBAI. On 27 November 1995, the Court referred the petition to the Court of Appeals
for appropriate action. 9
In the Court of Appeals, the petition was docketed C.A. G.R. SP No. 39496. On 29
May 1996, the appellate court promulgated the herein questioned decision 1 0 granting the
petition of EBRRI, setting aside the Order of 07 September 1995 of the Regional Trial
Court, and partially setting aside the compromise agreement insofar as it covered Building
E. The appellate court held that the assailed Order, dated 07 September 1995, of the trial
court was a nal order since it had practically adjudicated substantial rights of the parties,
leaving nothing much to be done by the trial court except to implement the judgment, and
that, therefore, a petition for review could be a proper remedy. As regards the assailed
order of the trial court, the Court of Appeals ruled that a non-party to a compromise
agreement could ask for its rescission by reason of injury or prejudice that said person
might suffer as a result of an execution of the judgment based on that compromise
agreement. The Court of Appeals held: LexLib
"It must be stressed that the compromise agreement was executed after an
adverse decision had been rendered against the respondent B.E. Ritz. While the
HLURB decision awarding building 'E' to the petitioner may not yet be nal, the
fact that a decision has been rendered against respondent B.E. Ritz gives rise to
the presumption that the compromise agreement, insofar as it includes building
'E' therein, is fraudulent and thus rescissible under paragraph 3 of Article 1381."
11
A motion for the reconsideration of the decision led by AFPMBAI was denied for
lack of merit by the appellate court in its resolution of 10 October 1996. 12 llcd
Once again, the case is before this Court via, this time, the instant petition for review
on certiorari that seeks to impugn the decision of the Court of Appeals.
Firstly, petitioner AFPMBAI contends, the petition for review on certiorari under Rule
45 of the Rules of Court is not the proper remedy from the interlocutory order of the trial
court that has denied the motion to set aside the partial judgment but a petition for
certiorari under Rule 65. Granting that trial court's Order of 07 September 1995 can be
considered to be a nal order, AFPMBAI argues, the petition, nonetheless, should have
been "dismissed" for violating Circular No. 2-90 on the proper mode of appeal. Secondly,
AFPMBAI asserts, it has been denied its constitutional right to due process of law for not
having been given the opportunity to le a comment on the petition for review on certiorari.
Thirdly, petitioner insists, assuming that the compromise agreement is rescissible insofar
as the inclusion of Building E is concerned, still, private respondent should have led an
action for rescission and not just attack collaterally the compromise agreement.
The Court of Appeals did not commit a reversible error.
The first and third issues, being somehow interrelated, shall priorly be taken up. cdll
A compromise agreement is a contract whereby the parties make reciprocal

concessions in order to resolve their differences and thus avoid a litigation or to put an
end to one already commenced. 1 3 Aptly, it is also described as an agreement between
two or more persons, who, for the purpose of preventing or putting an end to a lawsuit,
adjust their di culties by mutual consent in the manner which they agree on, and which
each party prefers over the hope of gaining but balanced by the danger of losing. 1 4 The
compromise may thus be either extrajudicial (to avoid a litigation) or judicial (to put to an
end a litigation).
Like any other contract, an extrajudicial compromise agreement is not excepted
from rules and principles of a contract. It is a consensual contract, perfected by mere
consent, the latter being manifested by the meeting of the offer and the acceptance upon
the thing and the cause which are to constitute the contract. 15 It may be either perfectly
valid or defective if it suffers from any impediment that, depending on the nature of its
flaw, could render it void, unenforceable, voidable or rescissible.
A compromise agreement that is basically intended to resolve a matter already
under litigation is what would normally be termed a judicial compromise. Once stamped
with judicial imprimatur, it becomes more than a mere contract binding upon the parties;
having the sanction of the court and entered as its determination of the controversy, it has
the force and effect of any other judgment. 1 6 It has the effect and authority of res judicata,
1 7 although no execution may issue until it would have received the corresponding
approval of the court where the litigation pends and its compliance with the terms of the
agreement is thereupon decreed. 1 8 A judicial compromise is likewise circumscribed by
the rules of procedure. cdphil
Adjective law governing judicial compromises annunciate that once approved by the
court, a judicial compromise is not appealable and it thereby becomes immediately
executory 1 9 but this rule must be understood to refer and apply only to those who are
bound by the compromise and, on the assumption that they are the only parties to the
case, the litigation comes to an end except only as regards to its compliance and the
ful llment by the parties of their respective obligations thereunder. The reason for the rule,
said the Court in Domingo vs. Court of Appeals, 2 0 is that when both parties so enter into
the agreement to put to a close a pending litigation between them and ask that a decision
be rendered in conformity therewith, it would only be "natural to presume that such action
constitutes an implicit waiver of the right to appeal" 2 1 against that decision. The order
approving a compromise agreement thus becomes a nal act, and it forms part and parcel
of the judgment that can be enforced by a writ of execution 2 2 unless otherwise enjoined
by a restraining order.
Where there are, along with the parties to the compromise, other persons involved in
the litigation who have not taken part in concluding the compromise agreement but are
adversely affected or feel prejudiced thereby, should not be precluded from invoking in the
same proceedings an adequate relief therefor. A motion to set aside the judgment to the
extent he might feel aggrieved, or might justi ably fear to be at risk by acquiescence 2 3
unless timely invoked, is such a remedy. A denial of the motion to set aside the judgment
on the compromise agreement opens the door for its possible elevation to a higher court.
If the motion is denied, he may, considering the special nality feature of the compromise
judgment, albeit partial, and its susceptibility to execution, take an appeal from the order of
denial under Rule 45 or even, when circumstances particularly warrant, the extraordinary
remedy prescribed in Rule 65, of the Rules of Court. 2 4 That appeal notwithstanding, the
main case still subsists 2 5 allowing him to have continued locus standi. LLphil
Supreme Court Circular No. 2-90, dated March 9, 1990, states that an appeal from a
judgment rendered in a civil or criminal action by the Regional Trial Court in the exercise of
its original jurisdiction shall be by a writ of error or ordinary appeal 2 6 in which questions of
law and of facts may be raised. Where a party desires to only bring up issues of law,
appellant may avail himself of Section 1, Rule 45, of the Rules of Court. That rule provides
that a party desiring to appeal by certiorari from the judgment or nal order or resolution
of the Court of Appeals, the Sandiganbayan, the Regional Trial Courts or other courts
whenever authorized by law, may le with this Court a veri ed petition for review on
certiorari. The petition shall raise only questions of law that must be distinctly set forth
therein. The Circular provides, however, that although submission of issues of fact in an
appeal by certiorari taken to this Court from the Regional Trial Court is ordinarily
proscribed, this Court nonetheless retains the option in the exercise of its sound
discretion, taking into account the attendant circumstances, either to take cognizance of
and decide such issues or to refer the case to the Court of Appeals for determination. 2 7
The Court opted accordingly by referring G.R. No. 121988 to the Court of Appeals.
About the insistence of petitioner AFPMBAI that EBRRI may not attack the
compromise agreement collaterally but should have led a separate action for rescission,
it must be pointed out that the compromise is directly related to the case still then
pending before the trial court, certainly a proper venue for the assailed incident. The
general aim of adjective law is to facilitate the application of justice to the rival claims of
contending parties, bearing always in mind that procedural rules are created not to hinder
or delay but to facilitate and promote the administration of justice. 28 It is far better to
dispose of the case on the merits which is a primordial end rather than on a technicality, 29
if it be the case, that may result in injustice. The principles against multiplicity of suits may
also be rightly invoked by EBRRI. In the considered view of the Court, the compromise
agreement must not be held to thwart, by its very rationale for being, the full resolution of
the case among EBRRI, AFPMBAI and B.E. Ritz or to unduly disturb the nal disposition of
the case among them. cdtai
No trenchant reason could possibly sustain the claim of AFPMBAI that its right to
due process had been violated. When the petition in G.R. No. 121988 was instituted, a
motion to dismiss the case was forthwith led by AFPMBAI. The motion, along with the
petition, was referred to the Court of Appeals pursuant to the Resolution of 27 November
1995 of the Court. AFPMBAI likewise led a motion for reconsideration of the decision of
the appellate court and, after private respondent EBRRI had submitted an opposition to
that motion for reconsideration, AFPMBAI led its reply thereto. 3 0 It would be improper to
claim a deprivation of due process "where a party [had been] given the chance to be heard
[on its] motion for reconsideration." 3 1 The motion for reconsideration undoubtedly gave
AFPMBAI full opportunity to submit to the Court of Appeals its side of the controversy.
The opportunity to be heard was given, and AFPMBAI indeed had made use of that
opportunity. 3 2
WHEREFORE, the instant petition for review on certiorari is DENIED, and the assailed
Decision of the Court of Appeals, dated 29 May 1996, is AFFIRMED. No costs. cdasia
SO ORDERED.
Romero (Acting C.J.), Panganiban and Purisima, JJ., concur.
Gonzaga-Reyes, J., took no part; relationship with counsel.
Footnotes
1. Rollo, pp. 123-124.

2. Rollo, p. 102.
3. Rollo, pp. 103-105.
4. Ibid., pp. 101-108.
5. Ibid., pp. 98-99.
6. Presided by Judge Marciano I. Bacalla.
7. Rollo, pp. 209, 211.

8. Ibid., pp. 88-89.
9. Ibid., p. 156.
10. Penned by Associate Justice Antonio M. Martinez and concurred in by Associate
Justices Ricardo P. Galvez and Portia Aliño Hormachuelos.
SECOND DIVISION
[G.R. No. 132196. December 9, 2005.]
VALDEZ petitioners, vs .
SPOUSES SEGUNDO RAMOS and FELISA VALDEZ,
HON. COURT OF APPEALS, LEILA VALDEZ-PASCUAL, ARACELI
VALDEZ, GLICERIA VALDEZ, JUANA VALDEZ, SIMEON VALDEZ,
CONRADA VALDEZ, SEVERINO VALDEZ, MARIO VALDEZ,
ADORACION VALDEZ, JOSE VALDEZ, DIONISIA VALDEZ, DANILO
VALDEZ, SERAPIO VALDEZ, HELEN VALDEZ, PERLA VALDEZ, and
VALDEZ respondents.
DELIA VALDEZ,
DECISION
CHICO-NAZARIO , J : p
This case presents a tangled tale involving the con icting accounts of petitioners
and private respondents over a piece of land sold by Gregorio Valdez (private
respondents' father) to petitioners in 1948 and which ostensibly became the subject of a
compromise agreement in 1977.
Through the instant Petition for Review on certiorari, spouses Segundo Ramos and
Felisa Valdez seek the reversal of the Decision 1 of the Court of Appeals dated 31 July
1997 which reversed the Decision 2 of the Regional Trial Court (RTC), Branch 48, Urdaneta,
Pangasinan. The RTC decision dismissed the case led by private respondents for
Quieting of Title, Ownership, Possession plus Damages with prayer for Writ of Preliminary
Injunction and adjudged petitioners as the lawful owners of a piece of land, with an area of
3,036 square meters, and which forms part of a bigger tract of land covered by Original
Certi cate of Title (OCT) No. 48824 of the Registry of Deeds of the Province of
Pangasinan in the name of Gregorio Valdez. Under review as well is the Court of Appeals
Resolution 3 dated 08 December 1997 denying petitioners' motion for reconsideration.
Private respondents are the children 4 of Gregorio Valdez. In 1948, Gregorio Valdez
sold the subject land to petitioners. The absolute deed of sale was subsequently
annotated at the back of OCT No. 48824 as Entry No. 377847. It is the contention of
private respondents that as early as 1977, petitioners no longer owned subject land as
they had renounced their rights thereto as evidenced by a compromise agreement dated
02 June 1977.
Sometime in 1991, Gregorio Valdez died. Private respondents allege that
immediately after the death of their father, petitioners disturbed their possession of
subject land by cultivating the same and by enclosing it with a fence. As petitioners did not
heed their demands to vacate, they were constrained to le a case for Quieting of Title,
Ownership, Possession plus Damages with prayer for Writ of Preliminary Injunction.
Petitioners, in their Answer with Counterclaim, maintain that they remain owners of
the subject land as the compromise agreement being relied upon by private respondents
refers to another piece of land. Thus, they argue that the compromise agreement
constitutes a cloud on their title. They prayed, among other things, for the quieting of their
title and that they be adjudged lawful owners of the subject land.
The trial court believed petitioners. It sided with petitioners by declaring them
owners of the subject land by virtue of the absolute deed of sale dated 06 January 1948.
The dispositive portion of its decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
the defendants and against the plaintiffs and declaring the defendants to be the
lawful owners of the land in question. 5
The Court of Appeals reversed the trial court's ruling. It held that the land renounced
by petitioners was the subject land and that it was made in favor of Gregorio Valdez, thus:
WHEREFORE, premises considered the decision appealed from is hereby
REVERSED and SET ASIDE and another one entered declaring plaintiffs as owner
of the land in question, and ordering defendants-appellees to vacate the same.
With costs against defendants-appellees. CDESIA
Aggrieved by the aforecited ruling, and their motion for reconsideration having been
denied by the Court of Appeals, petitioners assert before us that —
I.
THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE TRIAL
COURT'S FINDINGS WHICH TOOK INTO ACCOUNT THE INTENTIONS OF THE
PARTIES IN THE COMPROMISE AGREEMENT IN QUESTION BY CONSIDERING
CIRCUMSTANCES PREVIOUS AND SIMULTANEOUS TO THE EXECUTION OF THE
AGREEMENT.
II.
WHILE THE HONORABLE COURT OF APPEALS CORRECTLY STATED THE

UNDERLYING REASONS BEHIND THE EXECUTION OF THE COMPROMISE
AGREEMENT IN QUESTION, IT SERIOUSLY ERRED IN UPHOLDING THE VALIDITY
OF THE COMPROMISE AGREEMENT WITH RESPECT TO A THIRD PERSON WHO
WAS A STRANGER THERETO AND INVOLVING A PARCEL OF LAND WHICH IS
FOREIGN TO THE DISPUTE IN THE LAND REGISTRATION CASE THAT GAVE LIFE
TO THE COMPROMISE AGREEMENT.
III.
THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE TRIAL

COURT'S DECISION FINDING NO LEGAL AND FACTUAL BASES TO UPHOLD THE
VALIDITY OF THE ALLEGED RENUNCIATION OF PETITIONERS' RIGHTS OVER
THE NORTHERN PORTION OF THE TITLED LAND IN QUESTION INSTEAD OF THE
INTENDED SOUTHERN PORTION OF AN UNTITILED LAND SUBJECT OF THE LRC.
6
In order to get to the bottom of this land dispute, the primary and most basic
question that has to be asked is this: Is the absolute deed of sale dated 06 January 1948
between petitioners and private respondents' predecessor-in-interest, Gregorio Valdez,
annotated at the back of OCT No. 48824, a cloud on such title that has to be removed
under the grounds stated in the Civil Code?
Articles 476 and 478 of the Civil Code provide:
Art. 476.
476 Whenever there is a cloud on title to real property or any
interest therein, by reason of any instrument, record, claim, encumbrance or
proceeding which is apparently valid or effective but is in truth and in fact invalid,
ineffective, voidable, or unenforceable, and may be prejudicial to said title, an
action may be brought to remove such cloud or to quiet the title.
An action may also be brought to prevent a cloud from being cast upon
title to real property or any interest therein.
Art. 478.
478 There may also be an action to quiet title or remove a cloud
therefrom when the contract, instrument or other obligation has been
extinguished or has terminated, or has been barred by extinctive prescription.
In herein case, private respondents, as plaintiffs in the case for quieting of title,
allege that their father's obligation under the deed of absolute sale has been extinguished
or has been terminated by virtue of the compromise agreement dated 02 June 1977
whereby petitioners ostensibly renounced their rights over the subject property.
Petitioners, on the other hand, claim that the same compromise agreement constitutes a
cloud on their title.
The Compromise Agreement 7 states:
REPUBLIC OF THE PHILIPPINES
COURT OF FIRST INSTANCE OF PANGASINAN
THIRD JUDICIAL DISTRICT
9th Branch, Urdaneta
SEGUNDO RAMOS, ET AL.,

Applicants. LAND REG. CASE No. U-843
LRC Rec. No. N-48993
- versus -
THE DIRECTOR OF LANDS,

ET AL.,
Oppositors.
COMPROMISE AGREEMENT
COME NOW, the parties in the above-entitled case duly assisted by their
respective counsels and to this Honorable Court submit this compromise
agreement, to wit:
1. That the oppositor Felipe Cabero hereby withdraw (sic) his

opposition in the above-entitled case;
2. That the applicants Segundo Ramos and Felisa Valdez hereby also
quitclaim and renounce whatever rights in the document registered under entry
No. 377847 annotated at the back of O.C.T. No. 48824 of Gregorio Valdez;
3. That the parties hereby waive any claim for and against the other.
WHEREFORE, the parties should abide the foregoing compromise

agreement and that each of them shall respect the right of the other.
IN WITNESS WHEREOF, the parties duly assisted by their respective

counsels set their hands this 2nd day of June, 1977, at Urdaneta, Pangasinan.

SEGUNDO RAMOS FELISA VALDEZ
Applicant Applicant
FELIPE CABERO
Oppositor
ASSISTED BY:
ATTY. ELISEO E. VERSOZA ATTY. NICANOR CALDITO

Counsel for the Applicants Counsel for Oppositor
Soconi, Bugallon, Pang. Pozorrubio, Pang.
To get a proper grip of the controversial compromise agreement, a narration of the

circumstances surrounding its execution is in order.
The compromise agreement was entered into between petitioners and a certain
Felipe Cabero in connection with petitioners' application for registration of a piece of
untitled land adjacent to the subject land led with the Court of First Instance of
Pangasinan in LRC Case No. U-843. This untitled land was purchased by petitioners from a
certain Alejandro Alcantara. 8 Apparently, Cabero was the actual occupant of the southern
portion of this land, thus, he opposed petitioners' application for registration. Petitioners
explained that the southern portion occupied by Cabero was purchased by Cabero from
Gregorio Valdez who sold it by mistake as he (Valdez) thought that the land he was selling
was part of his titled land.
Petitioners' version
To save himself from the quagmire he created, Gregorio Valdez entreated upon
petitioners to give up the southern portion of their untitled land in exchange for Cabero's
withdrawal of his opposition to petitioners' application for registration. Petitioners agreed.
Thus, during the pendency of the land registration proceedings, petitioners and Cabero
entered into a compromise agreement. The agreement was written in English. Its contents
were not translated into Ilocano for petitioners but they did not mind as they were
represented by their counsel. The signatories to the said agreement were petitioners,
Cabero and their respective counsels. Petitioners, being unlettered, were not aware that
the property they were renouncing under the compromise agreement was the subject
property as, de nitely, this was not their intention. Thus, they argued that the compromise
agreement contained a false cause and that they gave their consent thereto by mistake.
Private Respondents' version
The compromise agreement categorically states that the property being renounced
is the subject property and that the same is made in favor of private respondents' late
father, Gregorio Valdez. Gregorio Valdez was a party to said compromise agreement as
his signature is also affixed thereto.
The decision of the trial court

As articulated earlier, the trial court ruled in favor of herein petitioners. It held:
After carefully perusing the records and the evidence adduced, this Court is
left to resolve the issues agreed upon by the parties as indicated in the pre-trial
order.

However, before this Court could arrive at a proper solution of the issues, it
is imperative to determine the true intentions of the parties in the controversial
compromise agreement (Exh. B) by considering all the surrounding circumstances
previous and simultaneous to the execution of the same.
It is not disputed that the property in question with an area of 3,036 square
metes on the northern portion of a parcel of land was owned by the plaintiffs' late
father Gregorio Valdez covered by TCT No. 48824 (Exh. A). Sometime in the year
1948, the late Gregorio Valdez sold the said property to defendant-spouses
Segundo Ramos and Felisa Valdez. That sale was annotated at the back of said
title as Entry No. 377847 (Exh. A-1).
Defendant Segundo Ramos also bought an untitled land from Alejandro

Alcantara in 1945 evidenced by a deed of absolute sale marked as Exhibit 6.
When Segundo Ramos applied for registration of title of the said land, Felipe
Cabero opposed the same. During the pendency of the land registration case, a
compromise agreement (Exh. B) was concluded by the herein defendants as
applicants and oppositor Felipe Cabero.
The Court noted that the portion of land referred to in the said compromise
agreement and to have been renounced allegedly is the northern portion. This is
clear in the Entry No. 377847 (Exh. A-1). In contrast, what has been relinquished
and renounced by Segundo Ramos was the southern portion of the same land
being occupied, at that time, by Felipe Cabero. It appears therefore, that there is a
different portion of land that was the real subject of renunciation other than that
indicated in the compromise agreement. Hence, such agreement expresses wrong
intentions of the parties. The mistake in the compromise agreement was
recognized and admitted by plaintiff Lilia Valdez when she testi ed as rebuttal
witness, to wit:
"Q. According to Segundo Ramos there was no consideration whatsoever in

favor of your father Gregorio Valdez that the compromise agreement was
executed, what can you say about that?
A. That is not true sir.
Q. What is the truth?
A. That is not true sir actually the compromise agreement was made to
correct a mistake which was committed because the deed of sale was
executed covering the portion which was titled property when it should
pertain to the untitled property of Gregorio Valdez."
(TSN-Felix, 3-11-92, pp. 8-9)
The renunciation of the southern portion by Segundo Ramos, as he

claimed, is inter-related to the con ict of encroachment of ownership of the land
between him and Felipe Cabero. It is unthinkable and unusual for defendant-
spouses to renounce the very portion of land they bought from late Gregorio
Valdez to the latter without any consideration at all.
Morever, a scrutiny of the compromise agreement reveals that the alleged

renunciation was not expressly made in favor of Gregorio Valdez and worst of all,
the latter was never a party in the registration case although his signature was
a xed therein (Exh. B-1 and 1-a) without any designation, nor reference to the
land registration case. If ever there was a renunciation, it should be in favor of
Felipe Cabero because he was the oppositor, but he did not anymore pursue his
opposition.
In view of the foregoing ndings, it could not be said that defendant-

spouses did renounce the property in question which is the northern portion to
late Gregorio Valdez from whom they bought it. 9
The Ruling of the Court of Appeals

The reversal by the Court of Appeals of the afore-quoted decision was based on the
following ratiocination, to wit:
We agree with appellants' contention that the identity of the land subject of
the compromise agreement vis-à-vis that covered by the Deed of Sale executed
between Gregorio Valdez and defendants-appellees is no longer open to question
having been made the subject of pre-trial stipulation (Pre-Trial Order dated
November 19, 1991, supra). Moreover, the evidence presented supports this
contention.
As can be seen from the decision dated 19 March 1979 of the Court of
First Instance of Pangasinan in Land Registration Case No. U-843 Record No. N-
48998 entitled Segundo Ramos, et al. vs. The Director of Lands, et al. (Exh. "3",
Folder of Exhibits, pp. 15-17) only Felipe Cabero and the Director of Lands
opposed defendants-appellees' application for original registration. The subject of
this land registration case was that parcel of land previously owned by Alejandro
Alcantara, situated at Barrio Maambal, Municipality of Pozorrubio, Province of
Pangasinan containing an area of 7,073 square meters, more or less, and more
particularly described in Plan Psu-1-002310. As indicated in the aforesaid
decision Felipe Cabero withdrew his opposition. The Decision however does not
make any reference to the Compromise Agreement executed in the same case two
(2) years before, on June 2, 1977 marked as Exhibit "B" (Folder of Exhibits, p. 2).
In the Compromise Agreement (supra), the applicants in the land

registration case, Segundo Ramos and Felisa Valdez had expressed their
renunciation of their rights "in the document registered under Entry No. 377847
annotated at the back of O.C.T. No. 48824 of Gregorio Valdez". This entry is a
Deed of Absolute Sale (Exhibit "7") executed by Gregorio Valdez married to Maria
Soriano in favor of Segundo Ramos married to Felisa Valdez, the subject of which
is a parcel of land consisting of 3,036 square meters of the northern portion of the
land covered by OCT No. 48824 (Exhibit "A").
It is manifest from the foregoing that while the land registration case
covered that parcel of land purchased by appellees from Alejandro Alcantara,
which was ultimately decreed in favor of appellees in the Decision of the LRC
marked Exhibit "3"; the Compromise Agreement wherein appellees declared their
renunciation/quitclaim of their rights referred to another parcel of land consisting
of 3,036 sq. m. that was the subject of a Deed of Absolute Sale executed by
Gregorio Valdez that was a part of, hence annotated on OCT No. 48824 registered
in Valdez name, which property had been earlier sold to the Spouses Ramos by
Gregorio Valdez. The Spouses Ramos renounced their rights over the latter
property in the Compromise Agreement marked as Exhibit "B"/"1" to effect the
withdrawal of the opposition of Felipe Cabero to their application for registration
in the aforesaid LRC No. U-843 (TSN, February 17, 1992, pp. 9-11). Cabero's
opposition was predicated on his perceived ownership of the southern portion of
the land which was formerly owned by Alejandro Alcantara that was the subject
of the land registration proceedings. This southern portion adjoins another
(untitled) property of Gregorio Valdez (Exhibit "E", Folder of Exhibits p. 13). This
had been mistakenly sold by Valdez to Cabero in the belief that it belonged to him
(Valdez). When Valdez recognized his error, and by way of disentangling a
con ict that he had caused, Valdez persuaded Ramos to renounce his rights over
the 3,036 sq. m. portion of his titled property, and at the same time for Cabero to
withdraw his opposition to the application by Spouses Ramos for the registration
in their name of the entire lot formerly belonging to Alejandro Alcantara.
Conceivably, Cabero's withdrawal of his opposition along with his occupied
southern portion of Alejandro Alcantara's property, was to be exchanged with the
3,036 sq. m. portion renounced by Spouses Ramos. In his testimony Segundo
Ramos spoke of accommodating the entreaties of Gregorio Valdez whom he
called his "father-in-law" (TSN, February 17, 1992, p. 11).
As a consequence, applicants Spouses Segundo and Felisa Ramos in the

LRC case, executed a Compromise Agreement with Felipe Cabero witnessed by
Gregorio Valdez that was meant to renounce their (Ramos') claim or rights over
that portion of the land which they had purchased from Gregorio Valdez in
exchange for the southern portion of the land that was being occupied by Felipe
Cabero. To repeat, Felipe Cabero had occupied the southern portion by virtue of a
deed of sale from Gregorio Valdez but Valdez actually had no right to sell this
portion, it being owned by the adjoining owner Alejandro Alcantara. This is shown
by the fact that although the "Absolute Deed of Sale" executed by Alejandro
Alcantara in favor of Spouses Segundo Valdez conveyed only an area of 3,000
sq. m. (Exhibit "6", Folder of Exhibits, p. 37) the total area applied for and decreed
by the Land Registration Court in LRC No. U-843 in favor of applicant Spouses
Segundo Ramos (Exhibit "3", Folder of Exhibits, p. 15) had a total area of 7,073
sq. m. which fact was admitted by appellee Segundo Ramos on re-cross (TSN,
March 11, 1992, p. 3). On this point, Natalia Alcantara dela Cruz, daughter of
Alejandro Alcantara testified on rebuttal.TIHDAa
xxx xxx xxx
As already stated, the LRC Decision dated 19 March 1979 (Exhibit "3") did
not take cognizance of the Compromise Agreement dated 2 June 1977 although
it noted that oppositor Felipe Cabero had withdrawn his opposition to the
application of Spouses Ramos in the LRC case (Exhibits 3-a-1, Folder of Exhibits,
p. 16). The simple explanation is that the Compromise Agreement referred to
another parcel of land that was not the subject of the land registration case. In
withdrawing his opposition, Felipe Cabero paved the way for Spouses Segundo
Ramos to have the entire property of Alejandro Alcantara registered in their
names, and not just the 3,000 sq. m. that was the subject of the deed of sale
signed by Alcantara in their favor, marked Exhibit "6". Thus, Gregorio Valdez was
able to effect the solution to the imbroglio he had caused by selling to Felipe
Cabero land that did not belong to him but to the adjoining owner Alejandro
Alcantara. This is shown by the testimony of Lilia Valdez.
xxx xxx xxx
On the part of appellees, the loss of the 3,036 sq. m. portion was amply
compensated by approximately 4,000 sq. m. of the southern portion that had
been occupied by Felipe Cabero but which had been included in their land
registration application. The evidence of the defendants-appellees shows that "
(b)ecause of his mistake, vendor Gregorio Valdez intervened and pleaded to
appellees to just relinquish the area he mistakenly sold to Cabero who in
exchange was to withdraw his opposition, hence the compromise agreement in
question was drawn" (TSN, February 17, 1999, p. 11; January 29 1992, pp. 8-10;
Appellees' Brief, p. 7). It is to be noted that Gregorio Valdez and Felipe Cabero
were closely associated and even shared the same counsel Atty. Nicanor Caldito
who notarized the Deed of Sale executed by Gregorio Valdez in favor of Segundo
Ramos (Exhibits "B"/"1" and "2"; Folder of Exhibits, pp. 2 and 14) and who later
appeared as counsel for oppositor Felipe Cabero in the land registration case.
Although the withdrawal of opposition of Felipe Cabero along with his occupation
of the southern portion was successfully effected by the Compromise Agreement,
later events showed that Cabero was eventually removed from the picture of both
parcels of land. Evidence shows that Gregorio Valdez continued to occupy the
renounced portion until his death in 1991 (TSN, January 6, 1991, pp. 3-4; Pre-Trial
Order, Record, p. 58). His occupation evidences his continued dominion and
exercise of ownership over the entire land covered by OCT No. 48824. 1 0
To state the obvious, much ado has been made over the compromise agreement.
After having reviewed the records of the case, however, it has become even more obvious
that private respondents cannot assert any rights under said compromise agreement,
thus, it cannot be used by them to defeat petitioners' claim over the subject land.
The compromise agreement, like any other contract, takes effect only between the
parties, their assigns and heirs. 1 1 In herein case, the parties to the compromise agreement
were petitioners and Felipe Cabero only as the same was executed by them in connection
with LRC Case No. U-843 wherein petitioners were the applicants and Cabero the
oppositor. 1 2 Gregorio Valdez, although he was very much interested in the compromise
agreement as the same would solve the problem he created of selling to Cabero a piece of
land not belonging to him, was not a party thereto. As correctly pointed out by petitioners,
his signature might have appeared in the compromise agreement but it does not appear in
what capacity he was signing. In juxtaposition, the compromise agreement expressly
states in what capacity the other signatories were signing. Thus, typewritten in the
agreement are the following entries:
SEGUNDO RAMOS FELISA RAMOS
Applicant Applicant
FELIPE CABERO
Oppositor
ASSISTED BY:
ATTY. ELISEO E. VERSOZA ATTY. NICANOR CALDITO

Counsel for the Applicants Counsel for Oppositor
Soconi, Bugallon, Pang. Pozorrubio, Pang.
The persons whose names were typewritten on the compromise agreement signed
above their names. Gregorio Valdez's name, on the other hand, as well as the role he played
in the execution of the document, was not typewritten on the document. His signature,
however, appears on the same line as the phrase "assisted by" just above the signature of
Atty. Caldito. Petitioner Segundo Ramos swears that he did not see Gregorio Valdez sign
the document at the time of the execution of the same. 1 3 Witness for petitioners,
Leonardo Quesora, who was present at the time of the execution of the compromise
agreement, likewise testi ed that he did not see Gregorio Valdez sign. 1 4 Moreover, none
of the private respondents or their witnesses testi ed as to having witnessed Gregorio
Valdez sign the compromise agreement.
It is axiomatic that a contract cannot be binding upon and cannot be enforced
against one who is not a party to it, even if he is aware of such contract and has acted with
knowledge thereof. 1 5 A person who is not a party to a compromise agreement cannot be
affected by it. 1 6 This is already well-settled. Thus, in Young v. Court of Appeals 1 7 we
stressed:
The main issue in this case is whether or not petitioner can enforce a
compromise agreement to which she was not a party.
This issue has already been squarely settled by this Court in the negative in
J.M. Tuason & Co., Inc. v. Cadampog (7 SCRA 808 [1963]) where it was ruled that
appellant is not entitled to enforce a compromise agreement to which he was not
a party and that as to its effect and scope, it has been determined in the sense
that its effectivity if at all, is limited to the parties thereto and those mentioned in
the exhibits (J.M. Tuason & Co., Inc. v. Aguirre , 7 SCRA 112 [1963]). It was
reiterated later that a compromise agreement cannot bind persons who are not
parties thereto (Guerrero v. C.A., 29 SCRA 791 [1969]).
Consequently, Gregorio Valdez not being a party to the compromise agreement, his
heirs (private respondents) cannot sue for its performance.
Be that as it may, private respondents additionally harp on the reference to their
father made in the body of the compromise agreement itself which they claim is proof of
renunciation of subject land by petitioners in favor of their father, to wit:
2. That the applicants Segundo Ramos and Felisa Valdez hereby also
quitclaim and renounce whatever rights in the document registered under entry
No. 377847 annotated at the back of O.C.T. No. 48824 of Gregorio Valdez;
Contrary to the position taken by private respondents, the reference to their father,
Gregorio Valdez, seems to us to be a mere description of the land being renounced.
Nothing in the compromise agreement would suggest that the renunciation of the subject
land was to be made in Gregorio Valdez's favor. Verily, for this Court to interpret the
stipulation as conferring some right to a third person (i.e., stipulation pour autrui), the
following requisites must concur:
1. There must be a stipulation in favor of a third person;
2. The stipulation in favor of a third person should be a part, not the
whole, of the contract;
3. The contracting parties must have clearly and deliberately conferred a
favor upon a third person, not a mere incidental benefit or interest;
4. The third person must have communicated his acceptance to the
obligor before its revocation; and
5. Neither of the contracting parties bears the legal representation or
authorization of the third party. 1 8
To constitute a valid stipulation pour autrie, it must be the purpose and intent of the
stipulating parties to bene t the third person, and it is not su cient that the third person
may be incidentally bene ted by the stipulation. 1 9 In herein case, from the testimony of
petitioner Segundo Ramos who is undoubtedly a party to the compromise agreement, and
from the rest of the evidence on hand, any bene t which accrued to private respondents'
father was merely incidental.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated 31
July 1997 is REVERSED and SET ASIDE. The Decision of the Regional Trial Court of
Urdaneta, Pangasinan, Branch 48, insofar as it dismissed the complaint led by herein
private respondents, is hereby AFFIRMED. No costs.
SO ORDERED.
Puno, Austria-Martinez, Callejo, Sr. and Tinga, JJ., concur.
Footnotes
1. Penned by Associate Justice Portia Aliño-Hormachuelos with Associate Justices Jorge

S. Imperial and Ramon U. Mabutas, Jr. concurring (Rollo, pp. 28-45).
2. Decided by Presiding Judge Alicia Gonzalez-Decano.
3. Rollo, p. 47.
4. Except for Conrada Valdez who is Gregorio Valdez's daughter-in-law and Danilo and
Mario Valdez who are his grandchildren (RTC Records, p. 48).
5. Rollo, p. 24.
6. Rollo, p. 10.
7. Exh. "B," Folder of Exhibits, p. 2.
8. Exh. 6, Folder of Exhibits, p. 37.
9. Rollo, pp. 22-24.

10. Rollo, pp. 38-44.
11. Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except
in case where the rights and obligations arising from the contract are not transmissible
by their nature, or by stipulation or by provision of law. The heir is not liable beyond the
value of the property he received from the decedent.
If a contract should contain some stipulation in favor of a third person, he may

demand its fulfillment provided he communicated his acceptance to the obligor before
its revocation. A mere incidental benefit or interest of a person is not sufficient. The
contracting parties must have clearly and deliberately conferred a favor upon a third
person.
See also Banzagales v. Galman, G.R. No. 46717, 21 May 1993, 222 SCRA 350, 356.
12. Exh. "B."
13. TSN, 17 February 1992, p. 12; TSN, 18 February 1992, p. 6.
14. TSN, 29 January 1992, p. 11.
15. University of the Philippines v. Philab Industries, Inc., G.R. No. 152411, 29 September
2004, 439 SCRA 467, 480.
SECOND DIVISION
[G.R. No. 195654. November 25, 2015.]
REYNALDO INUTAN, HELEN CARTE, NOEL AYSON, IYY CABARLE,

NOEL JAMILI, MARITES HULAR, ROLITO AZUCENA, RAYMUNDO
TUNOG, ROGER BERNAL, AGUSTIN ESTRE, MARILOU SAGUN, and
JR. petitioners, vs. NAPAR CONTRACTING &
ENRIQUE LEDESMA, JR.,
ALLIED SERVICES, NORMAN LACSAMANA, *** JONAS
INTERNATIONAL, INC., and PHILIP YOUNG , respondents.
DECISION
DEL CASTILLO , J : p
A judicially approved compromise agreement has the effect and authority of res
judicata. 1 It is nal, binding on the parties, and enforceable through a writ of execution.
Article 2041 of the Civil Code, however, allows the aggrieved party to rescind the
compromise agreement and insist upon his original demand upon failure and refusal of
the other party to abide by the compromise agreement. CcSTHI
This Petition for Review on Certiorari 2 assails the August 27, 2010 Decision 3 of
the Court of Appeals (CA) in CA-G.R. SP No. 106724, which dismissed the Petition for
Certiorari led by Reynaldo Inutan (Inutan), Helen Carte (Carte), Noel Ayson (Ayson), Ivy
Cabarle (Cabarle), Noel Jamili (Jamili), Maritess Hular (Hular), Rolito Azucena (Azucena),
Raymundo Tunog (Tunog), Jenelyn Sancho, Wilmar Bolonias, Roger Bernal (Bernal),
Agustin Estre (Estre), Marilou Sagun (Sagun), and Enrique Ledesma, Jr. (Ledesma),
against respondents Napar Contracting & Allied Services (Napar), Norman Lacsamana
(Lacsamana), Jonas International, Inc. (Jonas), and Philip Young (Young), and a rmed
the June 26, 2008 Decision 4 and October 14, 2008 Resolution 5 of the National Labor
Relations Commission (NLRC) in NLRC CA No. 041474-04 dismissing the consolidated
complaints against respondents for illegal dismissal with money claims on the ground
o f res judicata. Likewise assailed is the CA's February 10, 2011 Resolution 6 which
denied the Motion for Reconsideration.
Factual Antecedents
Petitioners Inutan, Carte, Ayson, Cabarle, Jamili, Hular, Azucena, Tunog, Bernal,
Estre, Sagun, and Ledesma were employees of respondent Napar, a recruitment agency
owned and managed by respondent Lacsamana. Napar assigned petitioners at
respondent Jonas, a corporation engaged in the manufacture of various food products
with respondent Young as its President, to work as factory workers, machine operator,
quality control inspector, selector, mixer, and warehouseman. SDTIaE
Sometime in September of 2002, petitioners and other co-workers

(complainants) led before the Arbitration Branch of the NLRC three separate
complaints for wage differentials, 13th 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 Agreement 7 which reads:
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 nally write
" nis" 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 bene ts 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; AacCIT
3. That in case Napar Contracting and Allied Services failed to reassign or

provide them work, complainants shall be reinstated in their payroll
or be given their salary equivalent to the existing minimum wage . . .;
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 satis ed and the complainants
hereby release, remiss and forever discharge the herein respondents,
from any and all claims arising from the above cases; TIEHSA
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
13th day of January 2003. 8
In an Order 9 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 Certi cate, drug test results, community tax certi cate, 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 led 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. TDAcCa
Respondents, in their Position Paper, 13 claimed that they have ful lled their
obligation under the agreement when Napar required complainants to report for work,
to submit documentary requirements, to undergo seminars and training, and to pass
qualifying exams. They contended that complainants were the ones who violated the
agreement when they refused to comply with the foregoing requirements in order to
assess their working capabilities and skills for their next posting. As such, they were
deemed to have waived their right to be reassigned. They argued that complainants
should not have led new complaints but should have instead moved for the execution
of the Joint Compromise Agreement. They then argued that the Labor Arbiter who
approved the said Joint Compromise Agreement or LA Reyno has exclusive jurisdiction
to act on the complaints.
In a Decision 14 dated July 29, 2004, Labor Arbiter Pablo C. Espiritu, Jr. (LA
Espiritu) held that the conditions of the Joint Compromise Agreement particularly
regarding reinstatement/reassignment of complainants were violated thereby justifying
rescission of the Joint Compromise Agreement. LA Espiritu noted that complainants
were correct in re- ling the complaints as this was an available remedy under the NLRC
Rules of Procedure when their previous complaints were dismissed without prejudice.
He struck down respondents' contention that a motion for execution of the
compromise agreement was the proper remedy, ratiocinating that the dismissal of the
cases was approved without prejudice and therefore cannot be the subject of an
execution.
LA Espiritu then ruled that complainants were constructively dismissed as they
were placed on temporary off-detail without any work for more than six months despite
being regular employees of Napar. Doubting respondents' intention of reinstating
complainants, LA Espiritu observed that the submission of requirements and
compliance with the procedures for rehiring should not be imposed on complainants
who are not newly-hired employees. Thus, Napar and Lacsamana were held jointly and
severally liable to pay complainants their separation pay in lieu of reinstatement due to
the already strained relations of the parties. EDATSI
Respondents Jonas/Young, as indirect employers of complainants, were held

jointly and severally liable with Napar/Lacsamana for wage differentials, 13th 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 led 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 nal 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-à-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 with Memorandum of Appeal, 16 asserted that they cannot be held solidarily
liable with respondents Napar and Lacsamana since only Napar is obligated to reassign
complainants under the Joint Compromise Agreement. TaDSCA
In a Decision 17 dated June 26, 2008, the NLRC granted respondents' appeal. It
ruled that the approval of the Joint Compromise Agreement by LA Reyno operates as
res judicata between the parties and renders it unappealable and immediately
executory. It held that complainants had no cause of action when they re- led their
complaints for being barred by res judicata. The NLRC, in disposing of the case,
ordered the issuance of a writ of execution to enforce the Joint Compromise
Agreement, thus:
WHEREFORE, premises considered, the appeal of respondents is
GRANTED, while that of the complainants is DISMISSED for lack of merit. The
Decision of Labor Arbiter Pablo C. Espiritu, Jr., dated July 29, 2004 is REVERSED
and SET ASIDE, and a new one is rendered DISMISSING the above-entitled
complaints for having been barred by res judicata. The Order of Labor Arbiter
Jaime Reyno dated January 16, 2003 nding the Compromise Agreement
entered into by the parties on January 13, 2003 to be in order and not contrary
to law and approving the same, stands valid, effective and should be enforced.
Let the records of this case be forwarded to the Labor Arbiter for the issuance of
a writ of execution to enforce the said Compromise Agreement.
SO ORDERED. 18
Complainants led a Motion for Reconsideration, 19 averring that the NLRC
gravely erred in ordering the issuance of a writ of execution despite the absence of a
nal judgment or a judgment on the merits. They stand on their right to rescind the
Joint Compromise Agreement and to insist on their original demands when
respondents violated the compromise agreement and on their right to re- le their
cases as sanctioned by the rules in cases of provisional dismissal of cases.
Napar and Lacsamana, on the other hand, led a Motion for Partial
Reconsideration 20 praying for the modi cation of the NLRC Decision in that
complainants be declared to have waived their right to their claims under the Joint
Compromise Agreement for likewise violating the agreement. EADSIa
Both motions were denied in the NLRC Resolution 21 dated October 14, 2008.

Proceedings before the Court of Appeals
In their Petition for Certiorari 22 led 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- le their complaints under Section 16, Rule V of the
NLRC Rules of Procedure. 24
Napar and Lacsamana led a Comment 25 on the Petition. Jonas and Young,
however, failed to le 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 Decision 27 a rming 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 CA, the complainants, in re-
ling 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 ling a separate and independent action for illegal
dismissal. The CA dismissed the Petition, viz.:
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
Complainants led a Motion for Reconsideration 29 but it was likewise denied by
the CA in its Resolution 30 dated February 10, 2011.
Twelve of the complainants, herein petitioners, instituted the present Petition for
Review on Certiorari.
Issues
Petitioners presented the following issues:
I
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
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
ling 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. ADTEaI
Napar and Lacsamana on the other hand, aver that petitioners' sole remedy was
to move for the execution of the Joint Compromise Agreement. They aver that
petitioners cannot be allowed to rescind the agreement after having violated the same
and having already enjoyed its bene ts. After all, the Joint Compromise Agreement is
final, binding and constitutes as res judicata between them.
Our Ruling
The Petition has merit. Petitioners' right to rescind the Joint Compromise
Agreement and right to re-file their complaints must prevail.
Petitioners validly exercised the option
of rescinding the Joint Compromise
Agreement under Article 2041 of the
Civil Code acADIT
Article 2028 of the Civil Code de nes 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 o ce of the Department of Labor and Employment shall be
nal 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 2037 36 of the Civil Code has
been quali ed 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
A compromise has upon the parties the effect and authority
o f 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. 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 clari ed that the broad
precept enunciated in Art. 2037 is quali ed by Art. 2041 of the same Code,
which provides: DaCTcA
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.:
[Before 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 other
party was to enforce the terms thereof.
When the new Civil Code came into being, its Article 2041 . .
. created for the rst time the right of rescission. That provision
gives to the aggrieved party the right to "either enforce the
compromise or regard it as rescinded and insist 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.
ACIEaH
In exercising the second option under Art. 2041, the aggrieved party may,
if he chooses, bring the suit contemplated or involved in his original demand, as
if there had never been any compromise agreement, without bringing an action
for rescission. This is because he may regard the compromise as already
rescinded by the breach thereof of the other party.
To reiterate, Article 2041 confers upon the party concerned the authority, not
only to regard the compromise agreement as rescinded but also, to insist upon his
original demand. We nd that petitioners validly exercised this option as there was
breach and non-compliance of the Joint Compromise Agreement by respondents.
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 e ciently 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
their 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 that petitioners 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. cDCSET
"We have held that management is free to regulate, according to its own
discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner of work, processes to be
followed, supervision of workers, working regulations, transfer of employees, work
supervision, lay off of workers and discipline, dismissal and recall of workers. The
exercise of management prerogative, however, is not absolute as it must be exercised
in good faith and with due regard to the rights of labor." 40 Such "cannot be used as a
subterfuge by the employer to rid himself of an undesirable worker." 41
Respondents' non-compliance with the strict terms of the Joint Compromise
Agreement of reassigning petitioners and ensuring that they will be given work within
the required time constitutes repudiation of the agreement. As such, the agreement is
considered rescinded in accordance with Article 2041 of the Civil Code. Petitioners
properly chose to rescind the compromise agreement and exercised the option of ling
anew their complaints, pursuant to Art. 2041. It was error on the part of the CA to deny
petitioners the right of rescission.
Still, respondents insist that petitioners cannot seek rescission for they have
already enjoyed the bene ts of the Joint Compromise Agreement. According to
respondents, petitioners' acceptance of the amount of P7,000.00 each bars them from
repudiating and rescinding the agreement.
The contention lacks merit for the following reasons. First, petitioners never
accepted the meager amount of P7,000.00 as full satisfaction of their claims as they
also expected to be reassigned and reinstated in their jobs. In other words, their
acceptance of the amount of P7,000.00 each should not be interpreted as full
satisfaction of all their claims, which included reinstatement in their jobs. The amount
of P7,000.00 is measly compared to the amount of monetary award granted by LA
Espiritu and therefore makes the agreement unconscionable and against public policy.
42 At this point, it is worth noting that even quitclaims are ineffective in barring recovery
for the full measure of the worker's rights and that acceptance of bene ts therefrom
does not amount to estoppel. 43 Lastly, it must be emphasized that the Joint
Compromise Agreement expressly provided that each of the complainants shall receive
P7,000.00 as payment for their monetary claims and "which amount shall be
considered in any future litigation." 44 By virtue of this stipulation, the parties in entering
into the agreement did not rule out the possibility of any future claims in the event of
non-compliance. As correctly ruled by LA Espiritu, this proviso showed that petitioners
were not barred from raising their money claims in the future. IAcDET
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 ling 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, speci cally Section 16 of Rule V thereof,
provides the remedy of ling 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- ling 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- le their
complaints, petitioners can rightfully include their claim of illegal dismissal. The CA
took off from the wrong premise that petitioners, in re- ling 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 led their rst 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 rst and second sets of Complaints led by petitioners are
similar in nature. Respondents even admitted that the issues raised in the rst set of
Complaints were similar to the issues raised by petitioners when they led anew their
Complaints. Nevertheless, the ling 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 further delay the
disposition of the case. TSHEIc
In view of the foregoing, we nd that both the NLRC and CA gravely erred in
dismissing petitioners' Complaints on the ground of res judicata. LA Espiritu correctly
assumed jurisdiction and properly took cognizance of petitioners' consolidated
complaints for illegal dismissal and other monetary claims.
Petitioners are entitled to separation pay
and full backwages as well as to the
other monetary awards granted by the
Labor Arbiter
We, likewise, subscribe to LA Espiritu's ruling that petitioners, as regular
employees, are deemed to have been constructively and illegally dismissed by
respondents. Being on oating status and off-detailed for more than six months, not
having been reinstated and reassigned by respondents, petitioners are considered to
have been constructively dismissed. 48 Settled is the rule that an employee who is
unjustly dismissed from work shall be entitled to reinstatement, or separation pay if
reinstatement is no longer viable, and to his full backwages. 49
LA Espiritu awarded petitioners separation pay in lieu of reinstatement. The
Court agrees that the award of separation pay is warranted due to the already strained
relations between the parties. 50 However, aside from separation pay, petitioners, for
having been illegally dismissed, should also be awarded full backwages, inclusive of
allowances and their other bene ts or their monetary equivalent computed from
November 9, 2002 (the date of their last work assignment or from the time
compensation was withheld from them) up to the date of finality of this Decision. aSIHcT
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 nds that
their consideration is necessary in arriving at a just decision. 51
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.

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.
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 bene ts or their monetary equivalent computed from November 9, 2002 up
to the date of finality of this Decision.
SO ORDERED. CSEHcT
Velasco, Jr., * Brion, ** Mendoza and Leonen, JJ., concur.

Footnotes
* Per Special Order No. 2282 dated November 13, 2015.
** Per Special Order No. 2281 dated November 13, 2015.
*** Spelled as Laxamana in some parts of the records.
1. CIVIL CODE, Article 2037.
2. Rollo, pp. 12-40.
3. C A rollo, pp. 299-313; penned by Associate Justice Mari or P. Punzalan Castillo and
concurred in by Associate Justices Jose na Guevara-Salonga and Franchito N.
Diamante.
4. Id. at 130-138; penned by Presiding Commissioner Gerardo C. Nograles and concurred in by

Commissioners Perlita B. Velasco and Romeo L. Go.
5. Id. at 172-174.
6. Id. at 324-325.
7. Id. at 48-50.

FIRST DIVISION
[G.R. No. 102360. March 20, 1996.]
ROSITA DOMINGO , petitioner, vs . COURT OF APPEALS and ARANETA

INSTITUTE OF AGRICULTURE , respondents.
Rolando S. Javier for petitioner.

Macario O. Directo for private respondent.
SYLLABUS
1. REMEDIAL LAW; EVIDENCE; CREDIBILITY; FINDINGS OF FACTS OF THE TRIAL

AND APPELLATE COURTS, GENERALLY UPHELD ON APPEAL. — The petitioner is now
before this Court raising the same issues brought to respondent court for consideration,
viz: (a) the validity of the Compromise Agreement and the partial decision approving the
same; and (b) the admission in evidence of the receipts of payment made by private
respondent to petitioner. The petition is not impressed with merit and we nd no reason to
discuss the foregoing issues, the same having been raised before, and resolved at length,
by the trial court and respondent court in their respective decisions. We nd no reason to
reverse the assailed decision of respondent court. Perforce, the partial decision dated
December 23, 1961 must accordingly be enforced and executed with deliberate dispatch
and without further delay.
2. CIVIL LAW; OBLIGATIONS AND CONTRACTS; COMPROMISE, DEFINED. — A
compromise is a contract whereby the parties, by making reciprocal concessions, avoid a
litigation or put an end to one already commenced. Essentially, it is a contract perfected by
mere consent, the latter being manifested by the meeting of the offer and the acceptance
upon the thing and the cause which are to constitute the contract.
3. REMEDIAL LAW; ACTIONS; JUDICIAL COMPROMISE; EFFECT. — Once an
agreement is stamped with judicial approval, it becomes more than a mere contract
binding upon the parties; having the sanction of the court and entered as its determination
of the controversy, it has the force and effect of any other judgment. Consequently, a
judgment rendered in accordance with a compromise agreement is immediately executory
as there is no appeal from such judgment. The reason for this rule being that when both
parties enter into an agreement to end a pending litigation and request that a decision be
rendered approving said agreement, it is only natural to presume that such action
constitutes an implicit waiver of the right to appeal against said decision.
4. ID.; ID.; ID.; GROUNDS FOR ANNULMENT THEREOF. — A compromise may
however be disturbed and set aside for vices of consent or forgery. Hence, where an
aggrieved party alleges mistake, fraud, violence, intimidation, undue in uence, or falsity in
the execution of the compromise embodied in a judgment, an action to annul it should be
brought before the Court of Appeals, in accordance with Section 9(2) of Batas Pambansa
Bilang 129, which gives that court exclusive original jurisdiction over actions for annulment
of judgments of regional trial courts.
5. ID.; ID.; ID.; ID.; CASE AT BAR. — Petitioner led an action to annul the
compromise judgment with the Regional Trial Court of Caloocan City, Branch 120 on the
ground of forgery. Said case was however dismissed for failure to prosecute. Clearly then
petitioner has forfeited her right to challenge the compromise judgment not only because
she did not appeal from the order of dismissal but more so because she ventilated her
remedy to the wrong court which had undoubtedly no jurisdiction to annul the judgment of
a concurrent court.
DECISION
KAPUNAN J :
KAPUNAN, p
The instant case illustrates a long drawn-out litigation between parties who already
entered into a compromise agreement some thirty- ve (35) years ago and which
agreement was given judicial imprimatur. One of them, up to now, still refuses to be bound
by the said judicial compromise.
Petitioner Rosita Domingo was one of the bona fide tenants-occupants of an eighty-
seven (87) hectare land located at Barrio Baesa, Caloocan City then known as the Gonzales
Estate.
Upon petition of the tenants sometime in 1947, the Republic of the Philippines
through the Rural Progress Administration (RPA) instituted an action which was docketed
as Civil Case No. 131 with the then Court of First Instance of Rizal for the expropriation of
the Gonzales Estate and its subsequent resale to the tenants thereof. The court ruled in
favor of the Republic and on appeal to this Court, the said decision was affirmed. 1
The Republic of the Philippines thereafter acquired title over the estate.
Administration of the estate was later transferred to the People's Homesite and Housing
Corporation (PHHC) by the RPA. With the change in administration came a change of
policy with regard to the resale of the subdivided lots. On March 16, 1960, the President
ordered PHHC to sell a bigger portion of the estate to persons other than the bona de
tenants-occupants of the estate.
On October 29, 1960, fty-two (52) tenants-occupants of the estate, petitioner
included, led an action to compel the Republic of the Philippines through the PHHC to sell
the entire estate to them pursuant to Commonwealth Act No. 539 and the decision of the
Supreme Court in Civil Case No. 131. Said case was docketed as Civil Case No. 6376 (later
redocketed as Civil Case No. C-760).
On May 3, 1961, private respondent Araneta Institute of Agriculture (AIA) led a
complaint in intervention on the basis of a document entitled 'KASUNDUAN NA MAY
PAGBIBIGAY KAPANGYARIHAN HINGGIL SA ASYENDA GONZALES SA BAESA,
CALOOCAN RIZAL." The said KASUNDUAN was actually a document of sale or transfer
whereby the 52 tenants conveyed unto AIA their respective landholdings in the estate. AIA
was allowed to intervene.
On November 28, 1961, AIA submitted to the lower court a Compromise Agreement
it entered into with 13 tenants-occupants of the estate. The said agreement reads in full:
COMPROMISE AGREEMENT
Intervenor and plaintiffs Fausto Bajamonde, Gregorio Bajamonde, Juan

Bajamonde, Damaso Bajamonde, Andres Bajamonde, Perfecto Bajamonde, Sixta
Cleofas, Rosita Domingo, Catalina Pascual, Macaria Santos, Evaristo Aquino,
Narciso Aquino and Lazaro Pineda, assisted by their respective counsel,
respectfully manifest that they have arrived at an amicable settlement of their
case, as follows:
1. That plaintiffs herein admit all the allegations and prayer of

intervenor's complaint in intervention;
2. That immediately upon acquisition of title to their respective

lots, plaintiffs herein shall convey the same to intervenor by way of
absolute sale, free from all liens and encumbrances, except any prior lien in
favor of defendants, for the purchase price of P5.55 per square meter, to be
paid by intervenor, in the following manner:
P11,600.00 — previously paid to and acknowledged by

plaintiffs herein.
110,634.62 — upon execution of this agreement, as
follows:
P60,000.00 — directly to plaintiffs herein.
50,634.62 — to defendant PHHC, for plaintiffs' account,

as 10% initial downpayment on the
purchase price of the lots, due to said
defendants from plaintiffs.
101,269.24 — upon court approval of this agreement —

to be paid to defendant PHHC, for the
account of plaintiffs herein, to complete the
required 30% downpayment on said lots.
53,335.75 — upon transfer of title in the name of

intervenor.
462,692.34 — balance of purchase price, to be liquidated in

five years, in ten equal semestral installments.
in accordance with the schedule, marked Annex 'A', which is attached

hereto and made an integral part thereof;
3. That the purchase price to be paid by intervenor for the

individual lots of plaintiffs herein shall be subject to adjustment, in
accordance with the actual survey of said lots to be made by defendant
PHHC, duly approved by the proper government office;
4. That plaintiffs shall, immediately upon demand of intervenor,

execute any and all other documents which may be necessary to carry out
the provisions of this agreement;
5. That plaintiffs shall deliver possession of said lots to

intervenor, immediately upon payment of the aforesaid sum of
P101,269.24, free from all other occupants;
6. That intervenor is hereby authorized to advance, for the

account of plaintiffs herein, any and all amounts necessary to expedite the
latter's acquisition of title, which amounts shall be deducted from the
purchase price of their respective lots, due to them from intervenor.
7. That for the sake of expediency, payments of the amounts
mentioned herein above, except those to defendants, shall be made by
intervenor thru plaintiff Marciano Baylon, who is hereby authorized by
plaintiffs herein to receive the same for and in their behalf, and to issue the
corresponding receipts therefor;
8. That documentation, notarization and other incidental

expenses to be incurred in the transfer of title plaintiffs to intervenor shall
be for the account of the latter;
9. That if, for any reason whatsoever, conveyance of title to

intervenor could not be affected, plaintiffs herein shall, upon demand from
intervenor, reimburse the latter of any and all amounts paid by intervenor
under this agreement; provided, however, that intervenor's right to
reimbursement under this agreement shall be without prejudice to other
legal remedies which intervenor may elect in the alternative, including the
right to ask for and receive the refund of whatever amounts it has
advanced or paid for plaintiffs' account;
10. That, as security for the performance of plaintiffs'

obligation under this agreement, plaintiffs herein hereby assigns, transfers
and conveys to intervenor, all their rights, interests and participation over
their lots aforementioned;
11. That in the event of default by either of the parties hereto,

the defaulting party shall pay liquidated damages and attorney's fees
equivalent to 25% of the amount involved.
WHEREFORE, the parties hereto respectfully pray that judgment be

rendered in accordance with the foregoing compromise agreement, without
pronouncement as to costs.
Quezon City and Malabon, Rizal, for Pasig, Rizal, November 28, 1961.
Sgd. Sgd
FAUSTO BAJAMONDE GREGORIO BAJAMONDE
Plaintiff Plaintiff
Sgd. Sgd.
JUAN BAJAMONDE DAMASO BAJAMONDE
Plaintiff Plaintiff
Sgd. Sgd.
ANDRES BAJAMONDE SIXTA CLEOFAS
Plaintiff Plaintiff
Sgd. Sgd.
PERFECTO BAJAMONDE ROSITA DOMINGO
Plaintiff Plaintiff
Sgd. Sgd
CATALINA PASCUAL MACARIA SANTOS
Plaintiff Plaintiff

Sgd. Sgd.
EVARISTO AQUINO NARCISO AQUINO
Plaintiff Plaintiff
Sgd
LAZARO PINEDA
Plaintiff
Sgd.
CRISPIN D. BAIZAS
Counsel for Plaintiffs
Shurdut Bldg., Manila
ARANETA INSTITUTE OF
AGRICULTURE
(Now ARANETA UNIVERSITY)
Intervenor
By:
Sgd.
SALVADOR ARANETA
ROQUE & DAVID
By:
Sgd.
PORFIRIO C. DAVID
Counsel for Intervenor
R-410 Phil. Bank of Commerce Bldg.
Plaza Sta. Cruz, Manila 2
On December 23, 1961, the trial court approved the above Compromise Agreement
in a partial decision embodying the said agreement. 3
On February 6, 1962, counsel for the tenants led a motion for immediate execution
of the partial decision. The same was granted by the court on February 23, 1962.
Thereafter, PHHC led a petition for certiorari and prohibition with this Court seeking to
annul the order of execution. On November 5, 1965, said petition was dismissed.
Meanwhile, some of the 13 tenants who entered into the Compromise Agreement
with AIA led separate proceedings against the latter before the trial courts of Caloocan
City to annul the partial decision approving their agreement. All the cases were dismissed.
On her part, petitioner led Civil Case No. 473 but the same was dismissed for failure to
prosecute.
Subsequently, counsel for AIA led a Motion for Issuance of a Writ of Execution of
the Partial Decision dated December 23, 1961.
On May 23, 1986, the lower court issued an order enforcing the said decision, the
decretal portion of which reads:
WHEREFORE, the PHHC (now National Housing Authority) is ordered to
comply with the Partial Decision dated December 23, 1961 by executing a Deed of
Conveyance and/or transfer and delivering the titles of the lots originally awarded
to plaintiffs Rosita Domingo respecting Lot 48 free from all liens and
encumbrances in favor of Intervenor Araneta Institute of Agriculture upon proof of
payment by the intervenor of the purchase price.
So ordered. 4
Petitioner filed a motion for reconsideration of the above-quoted order but the same
was denied on January 22, 1988. 5
In the meantime, even before the court could resolve the motion for reconsideration,
intervenor-private respondent led another motion for execution of the decision of
December 23, 1961.
On July 7, 1988, the trial court issued an order which dispositively reads as follows:
WHEREFORE, the Motion for Reconsideration of the Order dated January
22, 1988 [filed by intervenor-private respondent] is hereby GRANTED.
As prayed for, let a writ of execution be issued for the enforcement of the
Compromise Agreement dated November 28, 1961 and the partial Decision dated
December 23, 1961, ordering plaintiff Rosita Domingo:
1. To execute a deed of absolute sale of Lot 48 in favor of Intervenor

Araneta Institute of Agriculture; and
2. To deliver immediately the possession of said lot to said Intervenor

Araneta Institute of Agriculture.
SO ORDERED. 6
From the said order, petitioner appealed to the Court of Appeals raising as issues
the following, to wit: (a) the validity of the Compromise Agreement and the propriety of its
approval in the decision of December 23, 1961; (b) the applicability of the nulli cation of
the Compromise Agreement and Partial Decision by the same court on December 20,
1985; and (c) assuming that the Compromise Agreement is valid, the correctness of the
nding that intervenor-private respondent complied with the terms and obligations of the
agreement.
However, petitioner fared no better in the said appellate court. In dismissing her
petition, the Court of Appeals declared:
We shall address the first and second issues.
Plaintiff-appellant maintains that the so-called compromise agreement

dated November 28, 1961 and the partial decision dated December 23, 1961
approving said agreement are null and void, as discussed and decided in the
Order of December 20, 1985 . . . .
We find appellant's contention unmeritorious.
Plaintiff-appellant led Civil Case No. 473 against Araneta Institute of

Agriculture, et al., before the Regional Trial Court of Caloocan City, Branch 120, to
annul the partial decision of December 23, 1961, involving the thirteen (13)
tenants of whom she was one of them. That case was dismissed for failure to
prosecute. The order of dismissal was not appealed.
xxx xxx xxx
It will be observed that whatever the court a quo said about the Partial
Decision dated December 23, 1961, rendered by Judge Andres Reyes, approving
and embodying the Compromise Agreement dated November 23, 1961 were obiter
dicta. Being a compromise judgment, it was nal and immediately executory
(Pamintuan vs. Muñoz, 22 SCRA 1109, 1111; Pasay City Government vs. CFI
Manila, 132 SCRA 156, 157), unless a motion is led to set aside the compromise
on the ground of fraud, mistake, duress, in which event, an appeal may be taken
from the order denying the motion (De los Reyes v. Ugarte , 75 Phil. 505 [1945];
Piano vs. Cayanong, et al., 7 SCRA 397 [1963]; Cadano, et al. vs. Cadano, 49 SCRA
33 [1973]; Zagala vs. Jimenez, 152 SCRA 147, 157 [1987]). In the case at bar, no
such motion was led. Moreover, said partial decision of Judge Reyes was not an
issue submitted to the trial court in the Motion to Execute Partial Decision dated
December 23, 1961 on the basis of the Compromise Agreement dated December
11, 1961. As a matter of fact, the dispositive portion of the Order of December 20,
1985 did not declare the aforesaid partial decision (compromise judgment) dated
March 23, 1961 null and void.
xxx xxx xxx
On the third issue, appellant contends that the alleged intervenor's

compliance with its contractual obligation has not been proven; that the trial court
has ruled on the tenants' right of recission vis-a-vis the alleged agreement; and
that the illegible photocopies of alleged payment receipts were not duly presented
and offered in evidence.
Appellant's contention cannot be sustained.
To the motion for reconsideration of the Order dated January 22, 1988,
led by Intervenor-appellee on February 19, 1988, has been attached Annexes "A"
to "E", including O cial Receipts dated December 6, 1961 and December 22, 1961
showing payments made by Intervenor in compliance with the compromise
judgment. We agree with the trial court in nding them to be su cient proof of
compliance by the Intervenor with the terms and conditions of the compromise
judgment in question. In the Order of July 7, 1988, the trial court ruled:
Now in the intervenor's Motion for Reconsideration, it has averred

that the sum of P110,634.62 and the sum of P101,269.24 have been paid
in compliance with the provisions of said Compromise Agreement and
which are evidence by documents and receipts marked as Annexes "A" to
"E" and Exhibits "1", "1-A" to "1-K"; Exhibits "4", "4-A" to "4-K".
Worthwhile noting is the O cial Receipt No. 6094757, marked as

Annex "1-D", dated December 6, 1961, evidencing payment of P4,883.00 to
plaintiff Rosita Domingo for the ten (10%) percent down payment of the
purchase price of the lot awarded to her by the PHHC consisting of 12,800
square meters. Likewise, in another O cial Receipt No. 6096479, marked
as Annex "4-D", dated December 29, 1961, for the payment of P9,766,00 to
plaintiff Rosita Domingo, as part payment of the price of the lot equivalent
to twenty (20%) percent of the Gonzales Estate, Baesa, Caloocan City.
It bears emphasis that the aforementioned payments of P4,683.00
(Annex "1-D") and P9,766.00 (Annex "4-D") to Rosita Domingo are NOT
DENIED either in the Opposition to the Motion for Execution or in the
Memorandum for Rosita Domingo.
Parenthetically, the photo copies of the receipts submitted by the

intervenor are legible enough for credible accounting purposes, contrary to
plaintiff's claim.
Viewed from the foregoing, the ineluctably follows, that the

Intervenor, indeed, has ful lled its obligation under the aforementioned
compromise agreement of November 28, 1961, as approved by the partial
decision dated December 23, 1961. 7
The petitioner is now before this Court raising the same issues brought to
respondent court for consideration, viz: (a) the validity of the Compromise Agreement and
the partial decision approving the same; and (b) the admission in evidence of the receipts
of payment made by private respondent to petitioner. 8
The petition is not impressed with merit and we nd no reason to discuss the
foregoing issues, the same having been raised before, and resolved at length, by the trial
court and respondent court in their respective decisions. However, we shall reiterate the
applicability of the following pertinent principles to the instant case for clarity and
emphasis.
A compromise is a contract whereby the parties, by making reciprocal concessions,
avoid a litigation or put an end to one already commenced. 9 Essentially, it is a contract
perfected by mere consent, the latter being manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract. 1 0 Once an
agreement is stamped with judicial approval, it becomes more than a mere contract
binding upon the parties; having the sanction of the court and entered as its determination
of the controversy, it has the force and effect of any other judgment. 1 1
Consequently, a judgment rendered in accordance with a compromise agreement is
immediately executory as there is no appeal from such judgment. The reason for this rule
being that when both parties enter into an agreement to end a pending litigation and
request that a decision be rendered approving said agreement, it is only natural to
presume that such action constitutes an implicit waiver of the right to appeal against said
decision. 1 2
A compromise may however be disturbed and set aside for vices of consent or
forgery. 1 3 Hence, where an aggrieved party alleges mistake, fraud, violence, intimidation,
undue in uence, or falsity in the execution of the compromise embodied in a judgment, an
action to annul it should be brought before the Court of Appeals, in accordance with
Section 9(2) of Batas Pambansa Bilang 129, which gives that court exclusive original
jurisdiction over actions for annulment of judgments of regional trial courts.
Here, petitioner led an action 1 4 to annul the compromise judgment with the
Regional Trial Court of Caloocan City, Branch 120 on the ground of forgery. Said case was
however dismissed for failure to prosecute. Clearly then petitioner has forfeited her right
to challenge the compromise judgment not only because she did not appeal from the
order of dismissal but more so because she ventilated her remedy to the wrong court
which had undoubtedly no jurisdiction to annul the judgment of a concurrent court.

All told, we nd no reason to reverse the assailed decision of respondent court.
Perforce, the partial decision dated December 23, 1961 must accordingly be enforced and
executed with deliberate dispatch and without further delay.
WHEREFORE, the instant petition is hereby DENIED.
SO ORDERED.
Padilla, Bellosillo, Vitug, and Hermosisima, Jr., JJ., concur.
Footnotes
1. G.R. No. L-4918, May 14, 1954, 94 Phil. 956.
2. Rollo, pp. 249-253.

3. Id., at 255-258, Original Records, pp. 8-10.
4. Original Records, p. 87.
5. Id., at 44.
6. Id., at 93.
7. Court of Appeals Decision, pp. 8-11; Rollo, pp. 244-247.
8. Petition, p. 13; Rollo, p. 13-a.
9. Article 2028, New Civil Code.

10. Juliana del Rosario vs. Hon. Job Madayag, et al., G.R. No. 118531, August 28, 1995
citing Go v. Intermediate Appellate Court, 183 SCRA 82, 86 [1990].
11. Asirot v. Vda. de Rodriguez, 28 SCRA 258 [1969] citing Marquez v. Marquez, 73 Phil. 74
[1941]; See also Soler v. Reyes, 8 SCRA 691 [1963] and Araneta v. Perez, 7 SCRA 933
[1963].
12. World Machine Enterprises v. Intermediate Appellate Court, 192 SCRA 459 [1990] citing
Serrano v. Reyes, 110 Phil 536 [1960].
13. Periquet, Jr. v. Intermediate Appellate Court, 238 SCRA 697, 713 [1994] citing Master
Tours and Travel Corporation v. Court of Appeals, 219 SCRA 321, 325 [1993]; United
Housing Corp. v. Dayrit, 181 SCRA 285 [1990]; Binamira v. Ogan-Occena, 148 SCRA 677
[1987]; Go v. Trocino, 114 SCRA 443 [1982]; Sabino v. Cuba, 18 SCRA 981 [1966]; and
Araneta v. Perez, supra.
14. See page 6.

THIRD DIVISION
[G.R. No. 119310. February 3, 1997.]
JULIETA V. ESGUERRA , petitioner, vs . COURT OF APPEALS and

INC. respondents.
SURESTE PROPERTIES, INC.,
SYLLABUS
1. CIVIL LAW; UNENFORCEABLE CONTRACT; DEFINED. — The Civil Code

provides that a contract is unenforceable when it is ". . . entered into in the name of another
person by one who has been given no authority or legal representation, or who has acted
beyond his powers." (Article 1403, paragraph 1, Civil Code.) And that "(a) contract entered
into in the name of another by one who has no authority or legal representation, or who has
acted beyond his powers, shall be unenforceable." (Article 1317, paragraph 2, Civil Code.)
2. REMEDIAL LAW; CIVIL PROCEDURE; COMPROMISE AGREEMENT; EFFECT
THEREOF; CASE AT BAR. — As far as private respondent Sureste Properties, Inc. is
concerned, the sale to it by VECCI was completely valid and legal because it was executed
in accordance with the compromise agreement authorized not only by the parties thereto,
who became co-principals in a contract of agency created thereby, but by the approving
court, as well. Consequently, the sale of Sureste Properties, Inc. of Esguerra Building II
cannot in any manner or guise be deemed unenforceable, as contended by petitioner. The
mere fact that petitioner Julieta Esguerra was consulted by VECCI in a sale of Esguerra
Building I did not affect nor vary the terms of the authority to sell granted the former as
expressly spelled out in the judicially-approved compromise agreement because "a
compromise once approved by nal orders of the court has the force of res judicata
between the parties and should not be disturbed except for vices of consent or forgery."
(Republic vs. Sandiganbayan, 226 SCRA 314, 328, September 10, 1993). Hence, "a decision
on a compromise agreement is nal and executory, . . . ." ( Casal vs. Concepcion, Jr., 243
SCRA 369, 372, April 6, 1995) "It is a long established doctrine that the law does not relieve
a party from the effects of an unwise, foolish, or disastrous contract, entered into with all
the required formalities and will full awareness of what he was doing. Courts have no
power to relieve parties from obligations voluntarily assumed, simply because their
contracts turned out to be disastrous deals or unwise investments." It is a truism that "a
compromise agreement entered into by party-litigants, when not contrary to law, public
order, public policy, morals, or good custom is a valid contract which is the law, between
the parties themselves. It follows, therefore, that a compromise agreement, not tainted
with in rmity, irregularity, fraud, or illegality is the law between the parties who are duty
bound to abide by it and observe strictly its terms and conditions" as in this case.
3. CIVIL LAW; PROPERTY; RIGHT OF FIRST REFUSAL; WHEN DEEMED WAIVED.
— The right of rst refusal like other rights, may be waived as petitioner did waive it upon
entering into the compromise agreement. Corollarily, the execution of the spouses' judicial
compromise agreement necessitated the sale of the spouses' co-owned properties and
its proceeds distributed fty percent to each of them which, therefore, resulted in its
partition. (Article 496 of the Civil Code provides that: "Partition may be made by agreement
between the parties or by judicial proceedings. . . ." Article 498 of the Civil Code reads:
"Whenever the thing is essentially indivisible and the co-owners cannot agree that it be
allotted to one of them who shall indemnify the others, it shall be sold and its proceeds
distributed.") If petitioner wanted to keep such right of rst refusal, she should have
expressly reserved it in the compromise agreement. For her failure to do so, she must live
with its consequences.
4. COMMERCIAL LAW; CORPORATION CODE; SALE OR OTHER DISPOSITION OF
ASSETS (Sec. 40); REQUIREMENTS; COMPLIED WITH IN CASE AT BAR. — VECCI's sale of
all the properties mentioned in the judicially-approved compromise agreement was done
on the basis of its Corporate Secretary's Certi cation of these two resolutions. The partial
decision did not require any further board or stockholder resolutions to make VECCI's sale
of these properties valid. Being regular on its face, the Secretary's Certi cation was
su cient for private respondent Sureste Properties, Inc., to rely on. It did not have to
investigate the truth of the facts contained in such certi cation. Otherwise, business
transactions of corporations would become tortuously slow and unnecessarily hampered.
Ineluctably, VECCI's sale of Esguerra Building II to private respondent was not ultra vires
but a valid execution of the trial court's partial decision. Based on the foregoing, the sale is
also deemed to have satisfied the requirements of Section 40 of the Corporation Code.
5. REMEDIAL LAW; CIVIL PROCEDURE; NOTICE OF LIS PENDENS; EFFECT
THEREOF. — "Once a notice of lis pendens has been duly registered, any cancellation or
issuance of the title of the land involved as well as any subsequent transaction affecting
the same, would have to be subject to the outcome" of the suit. In other words, "a
purchaser who buys registered land with full notice of the fact that it is in litigation
between the vendor and a third party . . . stands in the shoes of his vendor and his title is
subject to the incidents and results of the pending litigation . . ."
6. ID.; ID.; WITHOUT JURISDICTION AND GRAVE ABUSE OF DISCRETION;
CONSTRUED. — In the case of Alafriz vs. Nable, 72 Phil. 278, p. 280 (1941), this Court
de ned the phrases "without jurisdiction" and "grave abuse of discretion" as follows:
'without jurisdiction' means that the court acted with absolute want of jurisdiction. . . .
'Grave abuse of discretion' implies such capricious and a whimsical exercise of judgment
as is equivalent to lack of jurisdiction, or, in other words where the power is exercised in an
arbitrary or despotic manner by reason of passion or personal hostility, and it must be so
patent and gross as to amount to an evasion of positive duty or to a virtual refusal to
perform the duty enjoined or to act at all in contemplation of law."
7. ID.; ID.; APPEAL; WHEN RULE 45 AVAILABLE; CASE AT BAR. — Let it be
emphasized that Rule 45 of the Rules of Court, under which the present petition was led,
authorizes only reversible errors of the appellate court as grounds for review, and not
"grave abuse of discretion" which is provided for by Rule 65. It is basic that where Rule 45
is available and in fact availed of as a remedy — as in this case — recourse under Rule 65
cannot be allowed either as an add-on or as a substitute for appeal.
DECISION
PANGANIBAN J :
PANGANIBAN, p
May a co-owner contest as unenforceable a sale of a real property listed in and sold
pursuant to the terms of a judicially-approved compromise agreement but without the
knowledge of such co-owner? Is the corporate secretary's certi cation of the
shareholders' and directors' resolution authorizing such sale su cient, or does the buyer
need to go behind such certification and investigate further the truth and veracity thereof?
These questions are answered by this Court as it resolves the instant petition
challenging the Decision 1 in CA-G.R. SP No. 33307 promulgated May 31, 1994 by the
respondent Court, 2 reversing the judgment of the trial court.
The Antecedent Facts
The facts as found by the respondent Court of Appeals are as follows:
"On 29 June 1984, (now herein Petitioner) Julieta Esguerra led a
complaint for administration of conjugal partnership or separation of property
against her husband Vicente Esguerra, Jr. before (the trial) court. The said
complaint was later amended on 31 October 1985 impleading V. Esguerra
Construction Co., Inc. (VECCI for brevity) and other family corporations as
defendants (Annex 'C', p. 23, Rollo).
The parties entered into a compromise agreement which was submitted to
the court. On the basis of the said agreement, the court on 11 January 1990
rendered two partial judgments: one between Vicente and (herein petitioner) and
the other as between the latter and VECCI (Annex 'F' and 'G', pp. 26-27, Rollo). The
compromise agreement between (herein petitioner) and VECCI provides in part:
'Plaintiff Julieta V. Esguerra and defendant V. Esguerra

Construction Co., Inc., as assisted by their respective counsels, submitted
to this Court on January 11, 1990 a 'Joint Motion for Partial Judgment
Based on Compromise Agreement", pertinent provisions of which reads as
follows:
'1. Defendant V. Esguerra Construction Co., Inc., (VECCI) shall

sell/alienate/transfer or dispose of in any lawful and convenient manner,
and under the terms and conditions recited in the enabling resolutions of
its Board of Directors and stockholders, all the following properties:
* real estate and building located at 140 Amorsolo Street,

Legaspi Village, Makati, Metro Manila;
* real estate and building located at 104 Amorsolo Street,

Legaspi Village, Makati, Metro Manila:
* real estate and improvements located at Barangay San Jose,

Antipolo, Rizal;
* real estate and improvements located at Barangay San Jose,

Antipolo, Rizal;
* real estate and improvements located at Kamagong Street, St.

Anthony Subdivision, Cainta, Rizal; and
* real estate and improvements located at Barangay Malaatis,

San Mateo, Rizal.
2. After the above-mentioned properties shall have been

sold/alienated/transferred or disposed of and funds are realized therefrom,
and after all the nancial obligations of defendant VECCI (those speci ed
in the enabling resolutions and such other obligations determined to be
due and will become due) are completely paid and/or settled, defendant
VECCI shall cause to be paid and/or remitted to the plaintiff such
amount/sum equivalent to fty percent (50%) of the (net) resulting
balance of such funds.'
By virtue of said agreement, Esguerra Bldg. I located at 140

Amorsolo St., Legaspi Village was sold and the net proceeds distributed
according to the agreement. The controversy arose with respect to
Esguerra Building II located at 104 Amorsolo St., Legaspi Village, Makati.
(Herein petitioner) started claiming one-half of the rentals of the said
building which VECCI refused. Thus, on 7 August 1990, (herein petitioner)
led a motion with respondent court praying that VECCI be ordered to remit
one-half of the rentals to her effective January 1990 until the same be sold
(p. 28, Id.). VECCI opposed said motion (p. 31, Rollo).
On October 30, 1990 respondent (trial) court ruled in favor of (herein
petitioner) (p. 34, Rollo) which was a rmed by this court in a decision dated 17
May 1991 in CA-G.R. SP. No. 2380. VECCI resorted to the Supreme Court which on
4 May 1992 in G.R. No. 100441 a rmed this court's decision the fallo of which
reads:
'The petition is without merit. As correctly found by the respondent

Court of Appeals, it can be deduced from the terms of the Compromise
Agreement and from the nature of the action in the court a quo that the
basis of the equal division of the proceeds of any sale or disposition of
any of the subject properties is the acknowledged ownership of private
respondent over one-half of the said assets. Considering that the other
building has yet to be sold, it is but logical that pending its disposition and
conformably with her one-half interest therein, private respondent should
be entitled to half of its rentals which forms part of her share in the fruits
of the assets. To accord a different interpretation of the Compromise
Agreement would be prejudicial to the established rights of private
respondent.' (p. 36, Rollo).
Meanwhile, Esguerra Bldg. II was sold to (herein private respondent Sureste

Properties, Inc.) for P150,000,000.00 (sic). On 17 June 1993, (Julieta V. Esguerra)
led a motion seeking the nulli cation of the sale before respondent (trial) court
on the ground that VECCI is not the lawful and absolute owner thereof and that
she has not been noti ed nor consulted as to the terms and conditions of the sale
(p. 37, Rollo).
Not being a party to the civil case, (private respondent Sureste) on 23 June
1993 led a Manifestation concerning (herein petitioner's) motion to declare the
s a l e void ab initio. In its Manifestation (Sureste) points out that in the
compromise agreement executed by VECCI and (Julieta V. Esguerra), she gave her
express consent to the sale of the said building (p. 38, Rollo).
On 05 August 1993, respondent judge (who took over the case from Judge
Buenaventura Guerrero, now Associate Justice of this court) issued an Omnibus
Order denying among others, (Sureste's) motion, to which a motion for
reconsideration was filed. 3
After trial on the merits, the Regional Trial Court of Makati, Branch 133, 4 rendered
its order, the dispositive portion of which reads:
"WHEREFORE, the Court resolves as it is resolved that:

1. The Omnibus Order of the Court issued on August 5, 1993 is hereby
reconsidered and modified to the effect that:
a. The Notice of Lis Pendens is annotated at the back of the

Certi cate of Title of Esguerra Bldg. II located at Amorsolo St., Legaspi
Village, Makati, Metro Manila is delivered to be valid and subsisting, the
cancellation of the same is hereby set aside; and,
b. The sale of Esguerra Bldg. II to Sureste Properties, Inc. is

declared valid with respect to one-half of the value thereof but ineffectual
and unenforceable with respect to the other half as the acknowledged
owner of said portion was not consulted as to the terms and conditions of
the sale
The other provisions of said Omnibus Order remain undisturbed and

are now deemed final and executory.
2. Sureste Properties, Inc. is hereby enjoined from pursuing further

whatever Court action it has led against plaintiff as well as plaintiff's tenants at
Esguerra Bldg. II;
3. Plaintiff's Urgent Ex-parte Motion dated December 14, 1993 is

hereby DENIED for being moot and academic.
4. Plaintiff is hereby directed to bring to Court, personally or through

counsel, the subject shares of stocks on February 15, 1994 at 10:30 in the
morning for the physical examination of defendant or counsel.
SO ORDERED." 5
From the foregoing order, herein private respondent Sureste Properties, Inc.
interposed an appeal with the Court of Appeals which ruled in its favor, viz.:
"From the foregoing, it is clear that respondent judge abused his discretion
when he rendered the sale of the property unenforceable with respect to one-half.
WHEREFORE, the petition is hereby GRANTED. The assailed order dated 1

February 1994 is hereby SET ASIDE. No pronouncement as to cost.
SO ORDERED." 6
Julieta Esguerra's Motion for Reconsideration 7 dated June 15, 1994 was denied by
the respondent Court in the second assailed Resolution 8 promulgated on February 23,
1995.
Hence this petition.
The Issues
Petitioner submits the following assignment of errors:
". . . (I)n issuing the Decision (Annex 'A' of the petition) and the Resolution
(Annex 'B' of the petition), the Court of Appeals decided questions of substance
contrary to law and applicable jurisprudence and acted without jurisdiction
and/or with grave abuse of discretion when:
It validated the sale by VECCI to Sureste of the subject property without the
knowledge and consent of the acknowledged co-owner thereof and in
contravention of the terms of the compromise agreement as well as the
Resolution of this Honorable Court in G.R. No. 100441 wherein this Honorable
Court recognized herein petitioner's 'acknowledged ownership of — one-half of the
subject property; and,
It held that the trial court acted without jurisdiction and/or abused its
discretion when it held that the questioned sale of the property is ineffectual and
unenforceable as to herein petitioner's one-half (1/2) ownership/interest in the
property since the sale was made without her knowledge and consent.
B E C A U S E:
A. No proper corporate action of VECCI was made to effect such sale

as required under the compromise agreement;
B. The sale of the subject property was made in violation of the terms
of the compromise agreement in that it was not made with the approval/consent
of the acknowledged owner of 1/2 of the said asset;
C. The prior sale of another property (the Esguerra Building I as

distinguished from the subject property which is the Esguerra Building II) included
in the said compromise agreement was made only after the prior
approval/consent of petitioner and this procedure established a precedent that
applied in the subsequent sale of the Esguerra Building II; and
D. Respondent Sureste as purchaser pendente lite of the subject

property covered by a notice of lis pendens was in law-deemed to have been duly
noti ed of the aforesaid conditions required for a valid sale of the subject
property as well as of petitioner's 'acknowledged ownership — over one-half' of
the Esguerra Building II." 9
Simply put, petitioner (1) assails VECCI's sale of Esguerra Building II to private
respondent as unenforceable to the extent of her one-half share, and (2) accuses the
appellate court of "acting without jurisdiction or with grave abuse of discretion" in
reversing the trial court's finding to that effect.
The Court's Ruling
The petition has no merit.
First Issue: Is the Contract of Sale Unenforceable?
The Civil Code provides that a contract is unenforceable when it is ". . . entered into
in the name of another person by one who has been given no authority or legal
representation, or who has acted beyond his powers." 1 0 And that "(a) contract entered
into in the name of another by one who has no authority or legal representation, or who has
acted beyond his powers, shall be unenforceable, . . ." 1 1 After a thorough review of the
case at bench, the Court nds the sale of Esguerra Building II by VECCI to private
respondent Sureste Properties, Inc. valid. The sale was expressly and clearly authorized
under the judicially-approved compromise agreement freely consented to and voluntarily
signed by petitioner Julieta Esguerra. Thus, petitioner's contention that the sale is
unenforceable as to her share for being unauthorized is plainly incongruous with the
express authority granted by the compromise agreement to VECCI, which speci ed no
condition that the latter shall rst consult with the former prior to selling any of the
properties listed there. As astutely and correctly found by the appellate Court:

"The compromise agreement entered between private respondent (Julieta
Esguerra) and VECCI, which was approved by the court, expressly provides,
among others, that the latter shall sell or otherwise dispose of certain properties,
among them, Esguerra Bldgs. I and II, and fty (50%) percent of the net proceeds
thereof to be given to the former. Pursuant to said agreement, VECCI sold the
buildings. . . .
xxx xxx xxx
The compromise agreement expressly authorizes VECCI to sell the subject

properties, with the only condition that the sale be in a lawful and convenient
manner and under the terms and conditions recited in the enabling resolutions of
its Board of Directors and stockholders. There is nothing in the said agreement
requiring VECCI to consult the private respondent (Julieta Esguerra) before any
sale (can be concluded). Thus, when VECCI sold the property to (Sureste
Properties, Inc.) as agreed upon, it need not consult the private respondent." 12
Moreover, petitioner's contention runs counter to Article 1900 of the Civil Code
which provides that:
"So far as third persons are concerned, an act is deemed to have been
performed within the scope of the agent's authority, if such act is within the terms
of the power of attorney, as written, even if the agent has in fact exceeded the
limits of his authority according to an understanding between the principal and
the agent."
Thus, as far as private respondent Sureste Properties, Inc. is concerned, the sale to
it by VECCI was completely valid and legal because it was executed in accordance with the
compromise agreement, authorized not only by the parties thereto, who became co-
principals in a contract of agency created thereby, but by the approving court as well.
Consequently, the sale to Sureste Properties, Inc. of Esguerra Building II cannot in any
manner or guise be deemed unenforceable, as contended by petitioner.
Consultation in the Sale of Esguerra Building I
Not a Binding Precedent
The petitioner further argues that VECCI's consulting her on the terms and
conditions of its sale of Esguerra Building I set a binding precedent to be followed by the
latter on subsequent sales. She adds that in failing to consult her on the sale of Esguerra
Building II, VECCI "acted unfairly and unjustly" as evidenced by (a) the sale of said building
for only P160,000,000.00 instead of P200,000,000.00, which is "the best price obtainable
in the market," (b) payment of real estate broker's commission of 5% instead of just 2% as
in the sale of Esguerra 1 building, and (c) the denial of petitioner's right of rst refusal
when her offer to purchase her one-half share for P80,000,000.00 as ordered by the trial
court was totally ignored. 13
The Court is not persuaded. Petitioner's argument is debunked by the very nature of
a compromise agreement. The mere fact that petitioner Julieta Esguerra was consulted by
VECCI in the sale of Esguerra Building I did not affect nor vary the terms of the authority to
sell granted the former as expressly spelled out in the judicially-approved compromise
agreement because "a compromise once approved by nal orders of the court has the
force of res judicata between the parties and should not be disturbed except for vices of
consent or forgery." 1 4 Hence, "a decision on a compromise agreement is nal and
executory, . . ." 1 5
Petitioner insists that had she been consulted in the sale of Esguerra Building II,
better terms could have been obtained. This is plainly without legal basis since she already
consented to the compromise agreement which authorized VECCI to sell the properties
without the requirement of prior consultation with her. "It is a long established doctrine
that the law does not relieve a party from the effects of an unwise, foolish, or disastrous
contract, entered into with all the required formalities and with full awareness of what he
was doing. Courts have no power to relieve parties from obligations voluntarily assumed,
simply because their contracts turned out to be disastrous deals or unwise investments."
16 It is a truism that "a compromise agreement entered into by party-litigants, when not
contrary to law, public order, public policy, morals, or good custom is a valid contract
which is the law between the parties themselves. It follows, therefore, that a compromise
agreement, not tainted with in rmity, irregularity, fraud or illegality is the law between the
parties who are duty bound to abide by it and observe strictly its terms and conditions" 17
as in this case. Incidentally, private respondent Sureste Properties, Inc. submits that the
petitioner offered to buy her one-half share for only P75,000,000.00, not P80,000,000.00.
18 She therefore valued the whole building only at P150,000,000.00 which amount is
P10,000,000.00 less than the price of P160,000,000.00 paid by private respondent, the
highest offer the market has produced in two and a half years the building was offered for
sale. Even the 5% real estate broker's commission was not disparate with the standard
practice in the real estate industry. Thus, the respondent Court aptly stated that: cdasia
". . . In a xing her signature on the compromise agreement, private

respondent (Julieta Esguerra) has demonstrated her agreement to all the terms
and conditions therein and have (sic) given expressly her consent to all acts that
may be performed pursuant thereto. She can not later on repudiate the effects of
her voluntary acts simply because it does not t her. Her contention that she was
not consulted as to the terms of the sale has no leg to stand on." 1 9
Parenthetically, the previous consultation can be deemed as no more than a mere

courtesy extended voluntarily by VECCI. Besides, such previous consultation — even
assuming arguendo that it was a binding precedent — cannot bind private respondent
Sureste which was not a party thereto. To declare the sale as in rm or unenforceable is to
heap unfairness upon Sureste Properties, Inc. and to undermine public faith in court
decisions approving compromise agreements.
Right of First Refusal Waived
The argument of petitioner that she was denied her right of rst refusal is puerile.
This alleged right, like other rights, may be waived 2 0 as petitioner did waive it upon
entering into the compromise agreement. Corollarily, the execution of the spouses' judicial
compromise agreement necessitated the sale of the spouses' co-owned properties and
its proceeds distributed fty percent to each of them which, therefor, resulted in its
partition. 2 1 If petitioner wanted to keep such right of rst refusal, she should have
expressly reserved it in the compromise agreement. For her failure to do so, she must live
with its consequences.
VECCI'S Sale of Esguerra
Building II A Valid Exercise of Corporate Power
Petitioner contends that VECCI violated the condition in the compromise agreement
requiring that the sale be made "under the terms and conditions recited in the enabling
resolutions of its Board of Directors and stockholders." 2 2 She rues that no shareholders'
or directors' meeting, wherein these resolutions were passed, was actually held. She thus
bewails this sale as improper for not having complied with the requirements mandated by
Section 40 of the Corporation Code. 2 3
Petitioner's contention is plainly unmeritorious. The trial court's partial decision
dated January 11, 1990 approving the compromise agreement clearly showed that the
"enabling resolutions of its (VECCI's) board of directors and stockholders" referred to
were those then already existing; to wit: (1) "the resolution of the stockholders of VECCI
dated November 9, 1989, (where) the stockholders authorized VECCI to sell and/or
disposed all or substantially all its property and assets upon such terms and conditions
and for such consideration as the board of directors may deem expedient." 2 4 (2) the
"resolution dated 9 November 1989, (where) the board of directors of VECCI authorized
VECCI to sell and/or dispose all or substantially all the property and assets of the
corporation, at the highest available price/s they could be sold or disposed of in cash, and
in such manner as may be held convenient under the circumstances, and authorized the
President Vicente B. Esguerra, Jr. to negotiate, contract, execute and sign such sale for
and in behalf of the corporation." 2 5 VECCI's sale of all the properties mentioned in the
judicially-approved compromise agreement was done on the basis of its Corporate
Secretary's Certification of these two resolutions. The partial decision did not require any
further board or stockholder resolutions to make VECCI's sale of these properties valid.
Being regular on its face, the Secretary's Certi cation was su cient for private respondent
Sureste Properties, Inc. to rely on. It did not have to investigate the truth of the facts
contained in such certi cation. Otherwise, business transactions of corporations would
become tortuously slow and unnecessarily hampered. Ineluctably, VECCI's sale of
Esguerra Building II to private respondent was not ultra vires but a valid execution of the
trial court's partial decision. Based on the foregoing, the sale is also deemed to have
satisfied the requirements of Section 40 of the Corporation Code.
Furthermore, petitioner Julieta Esguerra is estopped from contesting the validity of
VECCI's corporate action in selling Esguerra Building II on the basis of said resolutions and
certi cation because she never raised this issue in VECCI's prior sales of the other
properties sold including the Esguerra Building I. 2 6 The same identical resolutions and
certification were used in such prior sales.
Notice of Lis Pendens
"Once a notice of lis pendens has been duly registered, any cancellation or issuance
of the title of the land involved as well as any subsequent transaction affecting the same,
would have to be subject to the outcome" 27 of the suit. In other words, "a purchaser who
buys registered land with full notice of the fact that it is in litigation between the vendor
and a third party . . . stands in the shoes of his vendor and his title is subject to the
incidents and result of the pending litigation . . ." 28 In the present case, the purchase made
by private respondent Sureste Properties, Inc. of the property in controversy is subject to
the notice of lis pendens annotated on its title. Thus, the private respondent's purchase
remains subject to our decision in the instant case. The former is likewise deemed noti ed
of all the incidents of this case including the terms and conditions for the sale contained in
the compromise agreement. However, petitioner's inference that the private respondent is
also deemed to have been noti ed that the manner of the sale of the properties contained
in the compromise agreement should be "made only upon prior consent/conformity of the
herein petitioner" is non sequitur. Nowhere in the compromise agreement was this
inference expressly or impliedly stated. In the nal analysis, the determination of this issue
ultimately depends on this Court's disposition of this case.
Appealed Decision Consistent with Previous
Court of Appeals and Supreme Court Decisions
Petitioner maintains that the trial court's ruling that "the sale of Esguerra Building II
to Sureste is unenforceable to the extent of one-half share of petitioner in the property" is
based on the Court of Appeals' decision in G.R. SP No. 23780 dated May 17, 1991, and the
Supreme Court's decision in G.R. No. 100441 dated May 4, 1992 which both
acknowledged petitioner's one-half ownership of said building. 2 9 She reasons that "(a)s
co-owner her consent or conformity to the sale was necessary for the validity or effectivity
thereof insofar as her 1/2 share/ownership was concerned." 3 0 The Court disagrees. As
discussed previously, this repetitive contention is negated by her consent to the
compromise agreement that authorized VECCI to sell the building without need of further
consultation with her. Her co-ownership in the building was not inconsistent with her
authorizing another, speci cally VECCI, to sell her share in this property via an agency
arrangement. As correctly stated by the respondent Court of Appeals, the only import of
this Court's ruling in G.R. No. 100441 was as follows:
"the only issue involved is whether or not private respondent is entitled to
one-half of the rentals of the subject property pending its sale. The rulings of the
courts is (sic) therefore limited only to the issue of rental, there being no provision
in the compromise agreement approved by the court for the rentals earned from
the building pending its sale. Nowhere in the said rulings did it question nor assail
the authority granted to VECCI to sell the said building. In fact, the decisions
a rmed the authority granted to VECCI to sell the said building which invoked the
compromise agreement of the parties as a basis of the decision (Manifestation, p.
38,. Rollo)." 3 1
Second Issue: Did the Appellate Court Act Without Jurisdiction

or With Grave Abuse of Discretion?
In the case of Alafriz vs. Nable, 32 this Court de ned the phrases "without
jurisdiction" and "grave abuse of discretion" as follows:
"'Without jurisdiction' means that the court acted with absolute want of
jurisdiction. . . . 'Grave abuse of discretion' implies such capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction, or, in other words
where the power is exercised in an arbitrary or despotic manner by reason of
passion or personal hostility, and it must be so patent and gross as to amount to
an evasion of positive duty or to a virtual refusal to perform the duty enjoined or
to act at all in contemplation of law."
Contrary to petitioner's asseverations, the Court nds that the respondent Court of
Appeals judiciously, correctly and certainly acted within its jurisdiction in reversing the trial
court's decision. As discussed, its decision is consistent with law and existing
jurisprudence.
Let it be emphasized that Rule 45 of the Rules of Court, under which the present
petition was led, authorizes only reversible errors of the appellate court as grounds for
review, and not "grave abuse of discretion" which is provided for by Rule 65. It is basic that
where Rule 45 is available, and in fact availed of as a remedy — as in this case — recourse
under Rule 65 cannot be allowed either as an add-on or as a substitute for appeal.
Finally, "(c)ourts as a rule may not impose upon the parties a judgment different
from their compromise agreement. It would be an abuse of discretion." 33 Hence, in this
case, it is the trial court's decision which is tainted with grave abuse of discretion for
having injudiciously added "prior consultation" to VECCI's authority to sell the properties, a
condition not contained in the judicially-approved compromise agreement.
WHEREFORE, the petition is hereby DENIED for lack of merit, no reversible error
having been committed by respondent Court. The assailed Decision is AFFIRMED in toto.
Costs against petitioner.
SO ORDERED.
Narvasa, C .J ., Davide, Jr., Melo and Francisco, concur.
Footnotes
1. Rollo, pp. 44-51.

2. Second Division, composed of J. Antonio M. Martinez, ponente, and JJ. Quirino D. Abad
Santos, Jr. and Godardo A. Jacinto.
3. Rollo, pp. 45-48.

4. Presided by Judge Ruben A. Mendiola.
5. Rollo, p. 117.
6. Ibid., p. 51.
7. Ibid., pp. 178-195
8. Ibid., pp. 53-55.
9. Memorandum for the Petitioner, pp. 11-12; Rollo, pp. 292-293.
10. Article 1403, paragraph 1, Civil Code.
11. Article 1317, paragraph 2, Supra.

12. Rollo, pp. 49-50.
13. Memorandum for the Petitioner, p. 25; Rollo, p. 306.
14. Republic vs. Sandiganbayan, 226 SCRA 314, 328, September 10, 1993; citing Araneta
vs. Perez, 7 SCRA 923, April 30, 1963.
15. Casal vs. Concepcion, Jr., 243 SCRA 369, 372, April 6, 1995; Citing Master Tours and
Travel Corporation vs. Court of Appeals , 219 SCRA 321, March 1, 1993, and Mobil Oil
Philippines, Inc. vs. Court of First Instance of Rizal, Branch VI, 208 SCRA 523, May 8,
1992.
16. Republic vs. Sandiganbayan, supra.; citing Tanda vs. Aldaya , 89 Phil. 497, (1951), and
Villacorte vs. Mariano, 89 Phil. 341, (1951).
17. Municipal Board of Cabanatuan City vs. Samahang Magsasaka, Inc., 62 SCRA 435,
438, February 25, 1975; citing Juan-Marcelo vs. Go Kim Pah, 22 SCRA 309, January 29,
1968.
18. Rollo, pp. 212 and 274; Comment, p. 8; Memorandum for Private Respondent, p. 13.
THIRD DIVISION
[G.R. No. 161003. May 6, 2005.]
FELIPE O. MAGBANUA, CARLOS DE LA CRUZ, REMY ARNAIZ, BILLY

ARNAIZ, ROLLY ARNAIZ, DOMINGO SALARDA, JULIO CAHILIG and
LABUEN petitioners, vs . RIZALINO UY,
NICANOR LABUEN, UY respondent.
DECISION
PANGANIBAN J :
PANGANIBAN, p
Rights may be waived through a compromise agreement, notwithstanding a nal

judgment that has already settled the rights of the contracting parties. To be binding, the
compromise must be shown to have been voluntarily, freely and intelligently executed by
the parties, who had full knowledge of the judgment. Furthermore, it must not be contrary
to law, morals, good customs and public policy.
The Case
Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, assailing the
May 31, 2000 Decision 2 and the October 30, 2003 Resolution 3 of the Court of Appeals
(CA) in CA-GR SP No. 53581. The challenged Decision disposed as follows:
"WHEREFORE, having found that public respondent NLRC committed grave
abuse of discretion, the Court hereby SETS ASIDE the two assailed Resolutions
and REINSTATES the order of the Labor Arbiter dated February 27, 1998." 4
The assailed Resolution denied reconsideration.

The Facts
The CA relates the facts in this wise:
"As a final consequence of the final and executory decision of the Supreme
Court in Rizalino P. Uy v. National Labor Relations Commission, et al . (GR No.
117983, September 6, 1996) which a rmed with modi cation the decision of the
NLRC in NLRC Case No. V-0427-93, hearings were conducted [in the National
Labor Relations Commission Sub-Regional Arbitration Branch in Iloilo City] to
determine the amount of wage differentials due the eight (8) complainants
therein, now [petitioners]. As computed, the award amounted to P1,487,312.69 . . .
"On February 3, 1997, [petitioners] led a Motion for Issuance of Writ of

Execution.
"On May 19, 1997, [respondent] Rizalino Uy led a Manifestation

requesting that the cases be terminated and closed, stating that the judgment
award as computed had been complied with to the satisfaction of [petitioners].
Said Manifestation was also signed by the eight (8) [petitioners]. Together with
the Manifestation is a Joint A davit dated May 5, 1997 of [petitioners], attesting
to the receipt of payment from [respondent] and waiving all other bene ts due
them in connection with their complaint.
xxx xxx xxx
"On June 3, 1997, [petitioners] led an Urgent Motion for Issuance of Writ
of Execution wherein they con rmed that each of them received P40,000 from
[respondent] on May 2, 1997.
"On June 9, 1997, [respondent] opposed the motion on the ground that the
judgment award had been fully satis ed. In their Reply, [petitioners] claimed that
they received only partial payments of the judgment award.
xxx xxx xxx
"On October 20, 1997, six (6) of the eight (8) [petitioners] led a
Manifestation requesting that the cases be considered closed and terminated as
they are already satis ed of what they have received (a total of P320,000) from
[respondent]. Together with said Manifestation is a Joint A davit in the local
dialect, dated October 20, 1997, of the six (6) [petitioners] attesting that they have
no more collectible amount from [respondent] and if there is any, they are
abandoning and waiving the same. EASCDH
"On February 27, 1998, the Labor Arbiter issued an order denying the
motion for issuance of writ of execution and [considered] the cases closed and
terminated . . .
"On appeal, the [National Labor Relations Commission (hereinafter 'NLRC')]

reversed the Labor Arbiter and directed the immediate issuance of a writ of
execution, holding that a nal and executory judgment can no longer be altered
and that quitclaims and releases are normally frowned upon as contrary to public
policy." 5
Ruling of the Court of Appeals

The CA held that compromise agreements may be entered into even after a nal
judgment. 6 Thus, petitioners validly released respondent from any claims, upon the
voluntary execution of a waiver pursuant to the compromise agreement. 7
The appellate court denied petitioners' motion for reconsideration for having been
filed out of time. 8
Hence, this Petition. 9
The Issues
Petitioners raise the following issues for our consideration:
"1. Whether or not the nal and executory judgment of the Supreme
Court could be subject to compromise settlement;
"2. Whether or not the petitioners' a davit waiving their awards in [the]
labor case executed without the assistance of their counsel and labor arbiter is
valid;
"3. Whether or not the ignorance of the jurisprudence by the Court of

Appeals and its erroneous counting of the period to le [a] motion for
reconsideration constitute a denial of the petitioners' right to due process." 1 0
The Court's Ruling

The Petition has no merit.
First Issue:
Validity of the Compromise Agreement
A compromise agreement is a contract whereby the parties make reciprocal
concessions in order to resolve their differences and thus avoid or put an end to a lawsuit.
1 1 They adjust their di culties in the manner they have agreed upon, disregarding the
possible gain in litigation and keeping in mind that such gain is balanced by the danger of
losing. 1 2 Verily, the compromise may be either extrajudicial (to prevent litigation) or
judicial (to end a litigation). 1 3
A compromise must not be contrary to law, morals, good customs and public
policy; and must have been freely and intelligently executed by and between the parties. 1 4
To have the force of law between the parties, 1 5 it must comply with the requisites and
principles of contracts. 1 6 Upon the parties, it has the effect and the authority of res
judicata, once entered into. 1 7
When a compromise agreement is given judicial approval, it becomes more than a
contract binding upon the parties. Having been sanctioned by the court, it is entered as a
determination of a controversy and has the force and effect of a judgment. 1 8 It is
immediately executory and not appealable, except for vices of consent or forgery. 1 9 The
nonful llment of its terms and conditions justi es the issuance of a writ of execution; in
such an instance, execution becomes a ministerial duty of the court. 2 0
Following these basic principles, apparently unnecessary is a compromise
agreement after nal judgment has been entered. Indeed, once the case is terminated by
nal judgment, the rights of the parties are settled. There are no more disputes that can be
compromised.
Compromise Agreements
after Final Judgment
The Court is tasked, however, to determine the legality of a compromise agreement
after nal judgment, not the prudence of entering into one. Petitioners vehemently argue
that a compromise of a nal judgment is invalid under Article 2040 of the Civil Code, which
we quote: 2 1
"Art. 2040. If after a litigation has been decided by a nal judgment, a
compromise should be agreed upon, either or both parties being unaware of the
existence of the final judgment, the compromise may be rescinded.
rescinded
"Ignorance of a judgment which may be revoked or set aside is not a valid
ground for attacking a compromise." (Bold types supplied)
The rst paragraph of Article 2040 refers to a scenario in which either or both of the
parties are unaware of a court's nal judgment at the time they agree on a compromise. In
this case, the law allows either of them to rescind the compromise agreement. It is evident
from the quoted paragraph that such an agreement is not prohibited or void or voidable.
Instead, a remedy to impugn the contract, which is an action for rescission, is declared
available. 2 2 The law allows a party to rescind a compromise agreement, because it could
have been entered into in ignorance of the fact that there was already a nal judgment.
Knowledge of a decision's nality may affect the resolve to enter into a compromise
agreement.
The second paragraph, though irrelevant to the present case, refers to the instance
when the court's decision is still appealable or otherwise subject to modi cation. Under
this paragraph, ignorance of the decision is not a ground to rescind a compromise
agreement, because the parties are still unsure of the nal outcome of the case at this
time.
Petitioners' argument, therefore, fails to convince. Article 2040 of the Civil Code
does not refer to the validity of a compromise agreement entered into after nal judgment.
Moreover, an important requisite, which is lack of knowledge of the nal judgment, is
wanting in the present case.
Supported by Case Law
The issue involving the validity of a compromise agreement notwithstanding a nal
judgment is not novel. Jesalva v. Bautista 2 3 upheld a compromise agreement that covered
cases pending trial, on appeal, and with nal judgment. 2 4 The Court noted that Article
2040 impliedly allowed such agreements; there was no limitation as to when these should
be entered into. 2 5 Palanca v. Court of Industrial Relations 2 6 sustained a compromise
agreement, notwithstanding a nal judgment in which only the amount of back wages was
left to be determined. The Court found no evidence of fraud or of any showing that the
agreement was contrary to law, morals, good customs, public order, or public policy. 2 7
Gatchalian v. Arlegui 2 8 upheld the right to compromise prior to the execution of a
nal judgment. The Court ruled that the nal judgment had been novated and superseded
by a compromise agreement. 2 9 Also, Northern Lines, Inc. v. Court of Tax Appeals 3 0
recognized the right to compromise nal and executory judgments, as long as such right
was exercised by the proper party litigants. 3 1
Rovero v. Amparo , 3 2 which petitioners cited, did not set any precedent that all
compromise agreements after nal judgment were invalid. In that case, the customs
commissioner imposed a ne on an importer, based on the appraised value of the goods
illegally brought to the country. The latter's appeal, which eventually reached this Court,
was denied. Despite a nal judgment, the customs commissioner still reappraised the
value of the goods and effectively reduced the amount of ne. Holding that he had no
authority to compromise a final judgment, the Court explained:
"It is argued that the parties to a case may enter into a compromise about
even a nal judgment rendered by a court, and it is contended . . . that the
reappraisal ordered by the Commissioner of Customs and sanctioned by the
Department of Finance was authorized by Section 1369 of the [Revised
Administrative Code]. The contention may be correct as regards private
parties who are the owners of the property subject-matter of the
litigation, and who are therefore free to do with what they own or what
is awarded to them, as they please, even to the extent of renouncing the
award, or condoning the obligation imposed by the judgment on the
adverse party . Not so, however, in the present case. Here, the Commissioner of
Customs is not a private party and is not the owner of the money involved in the
ne based on the original appraisal. He is a mere agent of the Government and
acts as a trustee of the money or property in his hands or coming thereto by virtue
of a favorable judgment. Unless expressly authorized by his principal or by law,
he is not authorized to accept anything different from or anything less than what
is adjudicated in favor of the Government." 3 3 (Bold types supplied)
SHDAEC

Compliance with the
Rule on Contracts
There is no justi cation to disallow a compromise agreement, solely because it was
entered into after nal judgment. The validity of the agreement is determined by
compliance with the requisites and principles of contracts, not by when it was entered into.
As provided by the law on contracts, a valid compromise must have the following
elements: (1) the consent of the parties to the compromise, (2) an object certain that is
the subject matter of the compromise, and (3) the cause of the obligation that is
established. 3 4
In the present factual milieu, compliance with the elements of a valid contract is not
in issue. Petitioners do not challenge the factual nding that they entered into a
compromise agreement with respondent. There are no allegations of vitiated consent.
Neither was there any proof that the agreement was defective or could be characterized as
rescissible, 3 5 voidable, 3 6 unenforceable, 3 7 or void. 3 8 Instead, petitioners base their
argument on the sole fact that the agreement was executed despite a nal judgment,
which the Court had previously ruled to be allowed by law.
Petitioners voluntarily entered into the compromise agreement, as shown by the
following facts: (1) they signed respondent's Manifestation ( led with the labor arbiter)
that the judgment award had been satis ed; 3 9 (2) they executed a Joint A davit dated
May 5, 1997, attesting to the receipt of payment and the waiver of all other bene ts due
them; 4 0 and (3) 6 of the 8 petitioners led a Manifestation with the labor arbiter on
October 20, 1997, requesting that the cases be terminated because of their receipt of
payment in full satisfaction of their claims. 4 1 These circumstances also reveal that
respondent has already complied with its obligation pursuant to the compromise
agreement. Having already bene ted from the agreement, estoppel bars petitioners from
challenging it.
Advantages of Compromise
A reciprocal concession inherent in a compromise agreement assures bene ts for
the contracting parties. For the defeated litigant, obvious is the advantage of a
compromise after nal judgment. Liability arising from the judgment may be reduced. As
to the prevailing party, a compromise agreement assures receipt of payment. Litigants are
sometimes deprived of their winnings because of unscrupulous mechanisms meant to
delay or evade the execution of a final judgment.
The advantages of a compromise agreement appear to be recognized by the NLRC
in its Rules of Procedure. As part of the proceedings in executing a nal judgment, litigants
are required to attend a pre-execution conference to thresh out matters relevant to the
execution. 4 2 In the conference, any agreement that would settle the nal judgment in a
particular manner is necessarily a compromise.
Novation of an Obligation
The principle of novation supports the validity of a compromise after nal judgment.
Novation, a mode of extinguishing an obligation, 4 3 is done by changing the object or
principal condition of an obligation, substituting the person of the debtor, or surrogating a
third person in the exercise of the rights of the creditor. 4 4
For an obligation to be extinguished by another, the law requires either of these two
conditions: (1) the substitution is unequivocally declared, or (2) the old and the new
obligations are incompatible on every point. 4 5 A compromise of a nal judgment operates
as a novation of the judgment obligation, upon compliance with either requisite. 4 6 In the
present case, the incompatibility of the nal judgment with the compromise agreement is
evident, because the latter was precisely entered into to supersede the former.
Second Issue:
Validity of the Waiver
Having ruled on the validity of the compromise agreement in the present suit, the
Court now turns its attention to the waiver of claims or quitclaim executed by petitioners.
The subject waiver was their concession when they entered into the agreement. They
allege, however, that the absence of their counsel and the labor arbiter when they executed
the waiver invalidates the document.
Not Determinative
of the Waiver's Validity
The presence or the absence of counsel when a waiver is executed does not
determine its validity. There is no law requiring the presence of a counsel to validate a
waiver. The test is whether it was executed voluntarily, freely and intelligently; and whether
the consideration for it was credible and reasonable. 4 7 Where there is clear proof that a
waiver was wangled from an unsuspecting or a gullible person, the law must step in to
annul such transaction. 4 8 In the present case, petitioners failed to present any evidence to
show that their consent had been vitiated.
The law is silent with regard to the procedure for approving a waiver after a case has
been terminated. 4 9 Relevant, however, is this reference to the NLRC's New Rules of
Procedure:
"Should the parties arrive at any agreement as to the whole or any part of
the dispute, the same shall be reduced to writing and signed by the parties and
their respective counsel, or authorized representative, if any, 5 0 before the Labor
Arbiter.
"The settlement shall be approved by the Labor Arbiter after being satis ed
that it was voluntarily entered into by the parties and after having explained to
them the terms and consequences thereof. EAHcCT
"A compromise agreement entered into by the parties not in the presence of
the Labor Arbiter before whom the case is pending shall be approved by him, if
after confronting the parties, particularly the complainants, he is satis ed that
they understand the terms and conditions of the settlement and that it was
entered into freely and voluntarily by them and the agreement is not contrary to
law, morals, and public policy." 5 1
This provision refers to proceedings in a mandatory/conciliation conference during

the initial stage of the litigation. Such provision should be made applicable to the
proceedings in the pre-execution conference, for which the procedure for approving a
waiver after nal judgment is not stated. There is no reason to make a distinction between
the proceedings in mandatory/conciliation and those in pre-execution conferences.
The labor arbiter's absence when the waivers were executed was remedied upon
compliance with the above procedure. The Court observes that the arbiter made searching
questions during the pre-execution conference to ascertain whether petitioners had
voluntarily and freely executed the waivers. 5 2 Likewise, there was evidence that they made
an intelligent choice, considering that the contents of the written waivers had been
explained to them. 5 3 The labor arbiter's absence when those waivers were executed does
not, therefore, invalidate them.
The Court declines to rule on the allegation that respondent's counsels encroached
upon the professional employment of petitioners' lawyer when they facilitated the waivers.
5 4 The present action is not the proper forum in which to raise any charge of professional
misconduct. More important, petitioners failed to present any supporting evidence.
The third issue, which refers to the timely ling of petitioners' Motion for
Reconsideration led with the CA, will no longer be discussed because this Court's
decision has resolved the case on the merits.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs
against petitioners.
SO ORDERED.
Sandoval-Gutierrez, Corona, Carpio Morales and Garcia, JJ., concur.
Footnotes
1. Rollo, pp. 3-14.

2. Id., pp. 16-28. Special Fifteenth Division. Penned by Justice Ruben T. Reyes (Division
chair), with the concurrence of Justices Andres B. Reyes Jr. and Jose L. Sabio Jr.
(members).
3. Id., p. 71.
4. Id., p. 27.
5. Assailed Decision, pp. 2-6; rollo, pp. 17-21.
6. Id., pp. 8 & 23.

7. Id., pp. 9 & 24.
8. Assailed Resolution; rollo, p. 71.
9. The case was deemed submitted for decision on October 5, 2004, upon this Court's
receipt of petitioners' Memorandum, signed by Atty. Mariano R. Pefianco. Respondent's
Memorandum, signed by Attys. Nicolas P. Lapeña Jr. and Gilbert F. Ordoña, was
received by this Court on September 8, 2004.
10. Petitioners' Memorandum, p. 4; rollo, p. 121.
11. Art. 2028, Civil Code; Manila International Airport Authority v. ALA Industries
Corporation, 422 SCRA 603, 609, February 13, 2004; Ramnani v. Court of Appeals, 413
Phil. 194, 207, July 10, 2001; Abarintos v. Court of Appeals, 374 Phil. 157, 168,
September 30, 1999; Del Rosario v. Madayag, 317 Phil. 883, 887, August 28, 1995.
12. Armed Forces of the Philippines Mutual Benefit Association, Inc. v. Court of Appeals,
311 SCRA 143, 154, July 26, 1999.

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SECOND DIVISION

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

CHAVEZ petitioner, vs . HON. COURT OF APPEALS and

In September 1996, respondent led a complaint before the O ce of the Barangay

Napagkasunduan ngayong araw na 'to ika-17 ng Setyembre ng

Ngunit kung maibibigay ni G. Chavez ang halagang P100,000.00 bago

(1) Ordering the defendant to reimburse to the plaintiff the sum of

(2) Ordering the defendant to pay plaintiff the sum of P500,000.00

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

(4) Ordering the defendant to pay plaintiff the sum of P200,000.00 as

1. Rollo, pp. 28-35.

3. Rollo, pp. 37-38.

CD Technologies Asia, Inc. © 2018 cdasiaonline.com

[G.R. No. 194560. June 11, 2014.]

NESTOR T. GADRINAB , petitioner, vs . NORA T. SALAMANCA,

A judgment on compromise agreement is a judgment on the merits. It has the effect

2) That the subject property will be appraised by independent

4) That the rental collection in its total amount of Five Hundred

5) That the amount of PhP528,623.00 divided by four be distributed

6) That upon payment of the appraised value to Francisco Gadrinab,

8) That the parties agreed to request this Honorable Court that a

Nestor Gadrinab led a motion for execution of the compromise agreement. 15 He

xxx xxx xxx

5. That the amount of FIVE HUNDRED TWENTY EIGHT THOUSAND

6. That upon payment of the appraised value to Mr. Francisco

In Spouses Romero v. Tan, 53 this court said:

xxx xxx xxx

3. void judgments; and

4. whenever circumstances transpire after the finality of the decision

Doctrines on bar by prior judgment and immutability of judgment apply whether

Article 1330. A contract where consent is given through mistake, violence,

xxx xxx xxx

Since a judgment on compromise agreement is effectively a judgment on the case,

[G.R. No. 169122. February 2, 2010.]

MARCELINO DOMINGO , petitioner, vs . COURT OF APPEALS, AGAPITA

2. Annulling the writ of execution dated August 23, 2003;

4. Ordering the denial and or dismissal of the motion for contempt

The evidence of the plaintiffs also showed that defendant Marcelino

Unfortunately, not only did defendant Marcelino Domingo refuse to receive

Even if granted that defendant Marcelino Domingo had awarded [sic]

WHEREFORE, premises considered, the present motion is granted:

1. Ordering the issuance of a continuing warrant of arrest and detention of

2. Ordering defendant Marcelino Domingo's further detention at the said jail

3. Ordering the forfeiture in favor of the plaintiffs of all the movable

4. Ordering the issuance of a writ of execution for the satisfaction of the ne

Marcelino led a motion for reconsideration of the 23 December 2004

Actually even if defendant Marcelino had been awarded ownership of the

What accentuates defendant Marcelino contemnary [sic] act of reentering

WHEREFORE, premises considered, the Motion for Reconsideration of

1. The order granting the issuance of a warrant of arrest against

2. Defendant Marcelino Domingo is again found and declared in

3. Defendant Marcelino Domingo's further detention at the Nueva Ecija

4. Ordering the forfeiture in favor of the plaintiffs of all the movable

5. Ordering the issuance of a writ of execution for the satisfaction of

6. Ordering the issuance of a continuing warrants [sic] for the arrest of

(1) There is no written explanation to justify service by mail in lieu of

Net result: The petition is deemed NOT filed.

(b) The RTC decision of November 3, 1993;

(d) The October 4, 2004 DAR order;

(f) DAR order of February 17, 2005; and,

(g) The notice of appeal filed on March 8, 2005.

this in violation of Section 3, Rule 46 of the 1997 Rules . . . .

(3) The prayer for temporary restraining order failed to manifest