[31] G.R. No.
211302, August 12, 2015 between Norwegian Crew Management A/S and Associated Marine Officers'
PHILIPPINE TRANSMARINE CARRIERS, INC., CARLOS C. SALINAS,
AND NORWEGIAN CREW MANAGEMENT A/S, Petitioners, v. CESAR C.
PELAGIO, Respondent.
Civil Law; Contracts; Compromise Agreements; To be considered valid and
binding between the contracting parties, a compromise agreement must be: (a) not
contrary to law, morals, good customs, public order, and public policy; (b) freely
and intelligently executed by and between the parties; and (c) compliant with the
requisites and principles of contracts.—A compromise agreement is a contract
whereby the parties, by making reciprocal concessions, avoid a litigation or put an
end to one already commenced. To be considered valid and binding between the
contracting parties, a compromise agreement must be: (a) not contrary to law,
morals, good customs, public order, and public policy; (b) freely and intelligently
executed by and between the parties; and (c) compliant with the requisites and
principles of contracts. Once entered into, it has the effect and the authority of res
judicata upon the parties. In other words, a valid compromise agreement may render
a pending case moot and academic. However, the parties may opt to put therein
clauses, conditions, and the like that would prevent a pending case from becoming
moot and academic — such as when the execution of such agreement is without
prejudice to the final disposition of the said case. After all, a compromise agreement
is still a contract by nature, and as such, the parties are free to insert clauses to
modify its legal effects, so long as such modifications are not contrary to law,
morals, good customs, public order, or public policy.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated
December 21, 2012 and the Resolution3 dated February 17, 2014 of the
Court of Appeals (CA) in CA-G.R. SP No. 122771, which dismissed the
certiorari petition of petitioners Philippine Transmarine Carriers, Inc. (PTCI),
Carlos C. Salinas, and Norwegian Crew Management A/S (petitioners)
before the CA on the ground that the issues raised therein had become moot
and academic on account of the compromise agreement between petitioners
and respondent Cesar C. Pelagio (Pelagio).
The Facts
PTCI, for and on behalf of his foreign principal, Norwegian Crew
Management A/S, hired Pelagio as a Motorman on board the vessel MN
Drive Mahone for a period of six (6) months, under a Philippine Overseas
Employment Administration (POEA)-approved employment contract4 dated
September 29, 2009, as well as the collective bargaining agreement5
₯Compromise Agreement- Set V
and Seamen's Union of the Philippines (CBA). After being declared fit for
employment, Pelagio boarded M/V Drive Mahone on November 3, 2009.
Sometime in February 2010, Pelagio experienced difficulty in breathing and
pains on the nape, lower back, and joints while at work. Pelagio was then
referred to a port doctor in Said, Egypt, where he was diagnosed with
"Myositis"7 and declared unfit to work.8 On March 2, 2010, Pelagio was
repatriated back to the Philippines for further medical treatment, and
thereafter, promptly sought the medical attention of the company-designated
physician, Dr. Robert D. Lim (Dr. Lim), at the Metropolitan Medical Center.
After a series of medical and laboratory examinations, including chest x-ray,
pulmonary function tests, electroencephalogram, and other related physical
examinations, Pelagio was finally diagnosed to have Carpal Tunnel
Syndrome, Bilateral L5-S1 Radiculopathy, Mild Degenerative Changes, and
Lumbosacral Spine10 with an assessment of disability rating of Grade 11 -
"slight loss of lifting power of the trunk."
On August 18, 2010, Pelagio sought a second opinion from a private
orthopedic surgeon physician, Dr. Manuel Fidel M. Magtira (Dr. Magtira), who
assessed him with a Grade 8 disability - moderate rigidity or two-thirds loss of
motion or lifting power of the trunk- and declared him "permanently UNFIT
TO WORK in any capacity at his previous occupation."
Pelagio sought payment of permanent total disability benefits from
petitioners, but to no avail. Hence, he filed a complaint13 for disability
benefits, reimbursement of medical expenses, illness allowance, damages,
and attorney's fees against petitioners before the Arbitration Branch of the
National Labor Relations Commission (NLRC), docketed as NLRC-NCR No.
(M) 09-13299-10.14 Essentially, Pelagio contended that his inability to work
for more than 120 days from repatriation entitles him to permanent total
disability benefits.
For their part,16 petitioners countered that Pelagio is not entitled to
permanent total disability benefits, considering that the independent
physician, Dr. Magtira, assessed him with a Grade 8 impediment. In this
relation, petitioners likewise claimed that on August 5, 2010, the company-
designated physician, Dr. Lim, assessed Pelagio with a Grade 11 disability
"slight loss of lifting power of the trunk."17 In view of the conflicting findings of
the company-designated and independent physicians, petitioners suggested
that they seek a third mutually-appointed doctor to comply with the provisions
of the POEA-Standard Employment Contract, but Pelagio refused.18 Finally,
petitioners averred that they offered the amount of US$13,437.00, the
amount of benefit corresponding to a Grade 11 impediment, pursuant to the
CBA, but Pelagio rejected such offer.
Page 1 of 82
The LA Ruling
In a Decision20 dated April 29, 2011, the LA found that Pelagio was suffering
from a permanent partial disability, and accordingly, ordered petitioners to
jointly and severally pay him the amount of US$13,437.00.21 The LA ruled
that Pelagio's mere inability to work for 120 days from his repatriation did not
ipso facto mean that he is suffering from a permanent total disability,
especially in view of the disability assessments given by both the company-
designated and the independent physicians.22 On this note, the LA gave
weight to the findings of the company-designated physician that Pelagio was
suffering from a Grade 11 impediment, and thus, must only be awarded
disability benefits corresponding thereto.
Dissatisfied, Pelagio appealed to the NLRC.
The NLRC Ruling
In a Decision25cralawred dated August 24, 2011, the NLRC reversed and set
aside the LA ruling, and accordingly, awarded Pelagio the amount of
US$77,000.00 at its peso equivalent at the time of actual payment
representing permanent total disability benefits and attorney's fees.
The NLRC found that the records are bereft of anything that would support
petitioners' claim that the company-designated physician indeed gave Grade
11 disability rating, and thus, deemed that there was no assessment made
on him.27 In view thereof, the NLRC ruled that Pelagio's disability went
beyond 240 days without a declaration that he is fit to resume work or an
assessment of disability rating, and as such, he is already entitled to
permanent total disability benefits as stated under the CBA.
Petitioners moved for reconsideration,29 which was, however, dismissed in a
Resolution30 dated October 4, 2011. Aggrieved, petitioners filed a petition for
certiorari31 before the CA, docketed as CA G.R. SP No. 122771.
During the pendency of the certiorari proceedings before the CA, the parties
executed a Satisfaction of Judgment 32 dated December 21, 2011 stating
that petitioners had already given Pelagio the amount of P3,313,772.00 as
full and complete satisfaction of the NLRC ruling. However, it is likewise
stated therein that such satisfaction of judgment "is without prejudice to
[petitioners'] petition for certiorari pending with the [CA] x x x," and that the
same was "being made only to prevent imminent execution being undertaken
by the NLRC and [Pelagio]."33 On even date, Pelagio likewise executed a
Receipt of Paymene34 acknowledging receipt of the aforesaid amount, but
recognizing that such payment is "understood to be without prejudice to the
pending petition for certiorari filed by [petitioners] before the [CA]."35 Pelagio
further executed an Affidavit of Claimant36 stating that he "understand[s] that
₯Compromise Agreement- Set V
payment is hereby being made by the shipowners/manning agents to [him]
only to prevent further execution proceedings that [he has] initiated with the
NLRC;" and that he "recognize[s] the NLRC's jurisdiction on Restitution
proceedings, in case of a reversal of judgment by the Higher Courts x x x."37
On February 10, 2012, the NLRC issued an Order38 approving the
settlement and considered the case closed and terminated.
The CA Ruling
In a Decision39 dated December 21, 2012, the CA dismissed the certiorari
petition, ruling that the Satisfaction of Judgment executed by the parties is in
the nature of a compromise agreement, which was properly approved by the
NLRC, as it did not contravene any law, morals, public policy, or public
order.40 In this regard, the CA held that the issues raised in the petition had
already been rendered moot and academic, and as such, the petition must
be dismissed without going into the merits of the case.
Petitioners moved for reconsideration42 but was denied in a Resolution43
dated February 17, 2014; hence, this petition.
The Issue Before the Court
The primordial issue for the Court's resolution is whether or not the CA
correctly dismissed the certiorari petition on the basis of the compromise
agreement between the parties. Otherwise stated, the issue is whether or not
the execution of the Satisfaction of Judgment between the parties rendered
the certiorari proceedings before the CA moot and academic.
The Court's Ruling
The petition is meritorious.
A compromise agreement is a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end to one already
commenced.44 To be considered valid and binding between the contracting
parties, a compromise agreement must be: (a) not contrary to law, morals,
good customs, public order, and public policy; (b) freely and intelligently
executed by and between the parties; and (c) compliant with the requisites
and principles of contracts.45 Once entered into, it has the effect and the
authority of res judicata upon the parties.46 In other words, a valid
compromise agreement may render a pending case moot and academic.
However, the parties may opt to put therein clauses, conditions, and the like
that would prevent a pending case from becoming moot and academic - such
as when the execution of such agreement is without prejudice to the final
disposition of the said case. After all, a compromise agreement is still a
contract by nature, and as such, the parties are free to insert clauses to
Page 2 of 82
modify its legal effects, so long as such modifications are not contrary to law,
morals, good customs, public order, or public policy.
In the instant case, it is undisputed that the parties had entered into a
Satisfaction of Judgment signifying that petitioners had already given Pelagio
the amount of P3,313,772.00 as full and complete satisfaction of the NLRC
ruling. While this document may be properly deemed as a compromise
agreement, it is conditional in nature, considering that it is without prejudice
to the certiorari proceedings pending before the CA, i.e., it obliges Pelagio to
return the aforesaid proceeds to petitioners should the CA ultimately rule in
the latter's favor. In Leonis Navigation Co., Inc. v. Villamater48 (Leonis
Navigation), the Court held that such an agreement will not render a pending
case moot and academic as it does not preclude the employer from
recovering from the employee should the courts ultimately decide in favor of
the former, to wit:
Simply put, the execution of the final and executory decision or resolution of
the NLRC shall proceed despite the pendency of a petition for certiorari,
unless it is restrained by the proper court. In the present case, petitioners
already paid Villamater's widow, Sonia, the amount of P3,649,800.00,
representing the total and permanent disability award plus attorney's fees,
pursuant to the Writ of Execution issued by the Labor Arbiter. Thereafter, an
Order was issued declaring the case as "closed and terminated." However,
although there was no motion for reconsideration of this last Order, Sonia
was, nonetheless, estopped from claiming that the controversy had already
reached its end with the issuance of the Order closing and terminating the
case. This is because the Acknowledgment Receipt she signed when she
received petitioners' payment was without prejudice to the final outcome of
the petition for certiorari pending before the CA.49 (Emphasis and
underscoring supplied)
However, in Career Philippines Ship Management, Inc. v. Madjus50 (Career
Philippines), the Court made a seemingly contrary ruling from that in Leonis
Navigation, holding that such an agreement is tantamount to an absolute
amicable settlement, thus, rendering the certiorari petition before the CA
dismissible for being moot and academic, viz.:
In effect, while petitioner had the luxury of having other remedies available to
it such as its petition for certiorari pending before the appellate court, and an
eventual appeal to this Court, respondent, on the other hand, could no longer
pursue other claims, including for interests that may accrue during the
pendency of the case.
Contrary to petitioner's assertion, it could not, at the time respondent moved
for the execution of the Labor Arbiter's monetary awards, have been
compelled to immediately pay the judgment award, for it had filed with the
₯Compromise Agreement- Set V
NLRC an appeal bond, intended to assure respondent that if he prevailed in
the case, he would receive the money judgment in his favor upon the
dismissal of the employer's appeal. The Labor Arbiter and the appellate court
may not thus be faulted for interpreting petitioner's "conditional settlement" to
be tantamount to an amicable settlement of the case resulting in the
mootness of the petition for certiorari.
Fortunately, the Court had the opportunity to reconcile the ostensibly
opposing pronouncements in the Leonis Navigation and Career Philippines
cases in Philippine Transmarine Carriers, Inc. v. Legaspi,52 (Philippine
Transmarine) in this wise:
In Career Philippines, believing that the execution of the LA Decision was
imminent after its petition for injunctive relief was denied, the employer filed
before the LA a pleading embodying a conditional satisfaction of judgment
before the CA and, accordingly, paid the employee the monetary award in
the LA decision. In the said pleading, the employer stated that the conditional
satisfaction of the judgment award was without prejudice to its pending
appeal before the CA and that it was being made only to prevent the
imminent execution.
The CA later dismissed the employer's petition for being moot and academic,
noting that the decision of the LA had attained finality with the satisfaction of
the judgment award. This Court affirmed the ruling of the CA, interpreting the
"conditional settlement" to be tantamount to an amicable settlement of the
case resulting in the mootness of the petition for certiorari, considering (i) that
the employee could no longer pursue other claims, and (ii) that the employer
could not have been compelled to immediately pay because it had filed an
appeal bond to ensure payment to the employee.
Stated differently, the Court ruled against the emvlover because the
conditional satisfaction of judgment signed by the parties was highly
prejudicial to the employee. The agreement stated that the payment of the
monetary award was without prejudice to the right of the employer to file a
petition for certiorari and appeal, while the employee agreed that she would
no longer file any complaint or prosecute any suit of action against the
employer after receiving the payment.
In contrast, in Leonis Navigation, after the NLRC resolution awarding
disability benefits became final and executory, the employer paid the
monetary award to the employee. The CA dismissed the employer's petition
for certiorari, ruling that the final and executory decisions or resolutions of the
NLRC rendered appeals to superior courts moot and academic. This Court
disagreed with the CA and held that final and executed decisions of the
Page 3 of 82
NLRC did not prevent the CA from reviewing the same under Rule 65 of the
Rules of Court. It was further ruled that the employee was estopped from
claiming that the case was closed and terminated, considering that the
employee's Acknowledgment Receipt stated that such was without prejudice
to the final outcome of the petition for certiorari pending before the CA.53
Ultimately, in Philippine Transmarine, the Court ruled that since the
agreement in that case was fair to the parties in that it provided available
remedies to both parties, the certiorari petition was not rendered moot
despite the employer's satisfaction of the judgment award, as the respondent
had obliged himself to return the payment if the petition would be granted.
In the instant case, the body of the Satisfaction of Judgment entered into by
petitioners and Pelagio reads:
1. That complainant Cesar C. Pelagio received the sum of Three Million
Three Hundred Thirteen Thousand Seven Hundred [Seventy-Two] Pesos
(PHP3,313,772.00), as full and complete satisfaction of the Decision and
Resolution of this Honorable Commission (Fourth Division) dated 24 August
2011 and 4 October 2011. That payment is hereby made to complainant only
to prevent imminent execution that the NLRC and the complainant are
undertaking.
2. That said payment was made by means of Citibank Check No.
1000006094 dated 21 December 2011 in the sum of Three Million Three
Hundred Thirteen Thousand Seven Hundred (Seventy-Two] Pesos
(PHP3,313,772.00) payable to complainant Cesar C. Pelagio.
3. That by virtue of said payment, which is in full and complete satisfaction of
the judgment award as indicated in the Decision and Resolution of this
Honorable Commission (Fourth Division) dated 24 August 2011 and 4
October 2011 respectively, herein complainant has no further claims against
respondents Philippine Transmarine Carriers, Inc./Mr. Carlos C. Salinas
and/or Norwegian Crew Mangament A/S and will no longer pursue the
execution proceedings he initiated by virtue of the judgment award of the
NLRC.
4. That this Satisfaction of Judgment is without prejudice to herein
respondents' Petition for Certiorari pending with the Court of Appeals
docketed as case entitled "Philippine Transmarine Carriers, Inc./Mr. Carlos
C. Salinas and/or Norwegian Crew Mangament A/S vs. NLRC and Cesar C.
Pelagio" and this Satisfaction of Judgment is being made only to prevent
imminent execution being undertaken by the NLRC and complainant.55
On the other hand, the Receipt for Payment executed by Pelagio provides:
₯Compromise Agreement- Set V
Received from DEL ROSARIO & DEL ROSARlO Citibank Check No.
1000006094 dated 20 December 2011 in the sum of Three Million Three
Hundred Thirteen Thousand Seven Hundred [Seventy-Two] Pesos
(PHP3,313,772.00) payable to Cesar C. Pelagio, in full and complete
payment of the judgment award. That payment is hereby made to the
complainant only to prevent imminent execution of the Decision and the
Resolution of the NLRC (Fourth Division) dated 24 August 2011 and 4
October 2011 docketed as NLRC LAC Case No. M-05-000458-11-M/NLRC
NCR Case No. 09-13299-10-M case entitled "Cesar C. Pelagio vs.
Transmarine Carriers, Inc. et al." This payment is also understood to be
without prejudice to the pending Petition for Certiorari filed by the
respondents before the Court of Appeals, case entitled "Philippine
Transmarine Carriers, Inc. and/or Mr. Carlos C. Salinas and Norwegian Crew
Management A/S versus National Labor Relations Commission and Cesar C.
Pelagio.
I hereby certify and warrant that if any other person will claim from the vessel,
her Owners, manager, charterers, agents or P & I Club his
compensation/damages in connection with my illness, I shall hold said
vessel/persons free and harmless from any and all claims and liabilities
whatsoever.
Finally, pertinent parts of the Affidavit of Claimant executed by Pelagio
states:
3. That in connection with my claim, I have discussed this matter with my
lawyer (Valmores and Valmores Law Offices-Atty. Romulo P. Valmores/Atty.
Christopher Rey P. Valmores) and Del Rosario & Del Rosario and the
manning agents and after discussion, to my full and complete satisfaction, I
have freely and voluntarily agreed to a full and final payment of all my past,
present and future claims against the vessel MV Drive Mahone her Owners,
agents and operators in an amount not exceeding US$77,000.00 or its
equivalent in Philippine currency. That I understand that payment is hereby
being made by the shipowners/manning agents to me only to prevent further
execution proceedings that I have initiated with the NLRC.
4. That I understand that the payment of the judgment awards in the amount
of US$77,000.00 or its equivalent in Philippine currency is without prejudice
to the shipowners'/manning agents' Petition for Certiorari pending with the
Court of Appeals case entitled "Philippine Transmarine Carriers, Inc. and/or
Mr. Carlos C. Salinas and Norwegian Crew Management A/S versus National
Labor Relations Commission and Cesar C. Pelagio";
5. That I understand that in case of reversal and/or modification of the
Decision and the Resolution dated 24 August 2011 and 4 October 2011 of
the NLRC by the Court of Appeals and/or the Supreme Court, I shall return
Page 4 of 82
whatever is due and owing to shipowners/manning agents without need of
further demand;

6. That I recognize the NLRC's jurisdiction on Restitution proceedings, in

case of a reversal of judgment by the Higher Courts by virtue of the NLRC
2011 Rules of Procedure, Rule XI, Section 14 thereof, to wit:cralawlawlibrary

"SECTION 14. EFFECT OF REVERSAL OF EXECUTED JUDGMENT. -

Where the executed judgment is totally or partially reversed or annulled by
the Court of Appeals or the Supreme Court, the Labor Arbiter shall, on
motion, issue such orders of restitution of the executed awards, except
wages paid during reinstatement pending appeal."57

A reading of the foregoing documents reveals that: (a) petitioners paid

Pelagio P3,313,772.00 as full and complete satisfaction of the NLRC rulings;
(b) such payment is made in order to prevent imminent execution of such
rulings being undertaken by the NLRC and Pelagio; (c) such payment is
without prejudice to the outcome of the certiorari proceedings before the CA;
and (d) in case of partial or complete reversal of the NLRC judgment by the
CA, Pelagio is obliged to reimburse petitioners accordingly. More importantly,
the foregoing documents do not have any clause prohibiting either of the
parties from seeking further redress against each other. Thus, both
petitioners and Pelagio may pursue any of the available legal remedies
should any eventuality arise in their dispute, i.e., when the CA renders a
ruling adverse to their respective interests. It can, therefore, be said that
similar to the Philippine Transmarine case above-cited, the agreement
entered into by the petitioners and Pelagio is fair and is not prejudicial to
either party, and thus, such agreement did not render the certiorari
proceedings before the CA moot and academic.

In sum, the CA erred in dismissing the certiorari petition before it on the basis
of the compromise agreement between petitioners and Pelagio. In view of the
fact that such dismissal was not based on the merits, the Court deems it
appropriate to remand the case to the CA for further proceedings.

WHEREFORE, the petition is GRANTED. Accordingly the Decision dated

December 21, 2012 and the Resolution dated February 17, 2014 of the Court
of Appeals (CA) in CA-G.R. SP No. 122771 are hereby REVERSED and SET
ASIDE. CA-G.R. SP No. 122771 is REINSTATED and REMANDED to the
CA, which is hereby directed to resolve the case on the merits.

SO ORDERED.

₯Compromise Agreement- Set V

Page 5 of 82
[32] G.R. No. 192943, August 12, 2015
UNITED DUMANGAS PORT DEVELOPMENT CORPORATION, Petitioner,
v. PHILIPPINE PORTS AUTHORITY, ATTY. OSMAR M. SEVILLA,
GENERAL MANAGER, ATTY. FERNANDO B. CLAVERINA, PORT
MANAGER, PORT MANAGEMENT OFFICER-ILOILO; AND RAUL T.
SANTOS, PORT DISTRICT MANAGER, PORT DISTRICT OFFICE-
VISAYAS, Respondents.
Local Government Code; Mayors; Under Section 444(b)(1)(vi) of the Local
Government Code (LGC), the municipal mayor may represent the municipality in all
its business transactions and sign, on its behalf, contracts and obligations made
pursuant to law or ordinance.—Even granting that the subject resolutions need not
be submitted to the Sangguniang Panlalawigan for review, these resolutions
purportedly authorizing Municipal Mayor Golez to enter into the Compromise
Agreement still cannot be given credence. Under Section 444(b)(1)(vi) of the LGC,
the municipal mayor may represent the municipality in all its business transactions
and sign, on its behalf, contracts and obligations made pursuant to law or ordinance.
However, a mere resolution, such as those issued by the Sangguniang Bayan herein,
does not suffice to approve PPA’s claim of Php111,930,282.28 against MOD for no
rights can be conferred by and be inferred from a resolution, which is nothing but an
embodiment of what the law-making body has to say in the light of attendant
circumstances. Contrary to the appellate court’s stance, that Mayor Golez was
elected by the people of MOD does not excuse him from acting within the
parameters set by law. Thus, while it is true that compromise agreements between
the parties in civil cases are not only allowed but even encouraged, in order for them
to be binding on the parties, however, they must be executed in accordance with
applicable law and jurisprudence.
Ports; Administrative Jurisdiction; While the Philippine Ports Authority (PPA)
was indeed, authorized by Executive Order (EO) No. 171 to exercise its
administrative jurisdiction over the Dumangas Port, Department of Transportation
and Communications (DOTC) Department Order No. 2002-18, issued after EO No.
171, effectively rescinded the latter for as correctly ruled by the trial court, acts of
the secretaries of such departments, performed and promulgated in the regular
course of business are, unless disapproved or reprobated by the Chief Executive,
presumptively the acts of the Chief Executive.—It bears stressing that apart from the
unsustainable Compromise Agreement, PPA failed to provide the Court with
sufficient basis, legal or otherwise, in support of its alleged authority to take over the
operation of the Dumangas Port. While the PPA was indeed, authorized by EO No.
171 to exercise its administrative jurisdiction over the Dumangas Port, DOTC
Department Order No. 2002-18, issued after EO No. 171, effectively rescinded the
latter for as correctly ruled by the trial court, acts of the secretaries of such
departments, performed and promulgated in the regular course of business are, unless
disapproved or reprobated by the Chief Executive, presumptively the acts of the
Chief Executive. Consequently, PPA’s authority to administer the Port of Dumangas
₯Compromise Agreement- Set V
was effectively superseded by the directive mandated by the DOTC Department
Order to transfer the operation of the same to the MOD.
Same; Same; In view of the expiration of United Dumangas Port Development
Corporation’s (UDPDC’s) permit to operate the port, and in the absence of any
contract renewing the same, UDPDC cannot claim to have any right to the
administration thereof.—The series of holdover authorities as well as the final
holdover permit granting UDPDC a three (3)-month extension was clearly temporary
in nature. As aptly found by the trial court, UDPDC’s continued operation of the port
was merely by PPA’s tolerance, having no valid and existing permit, and that
UDPDC’s status was merely on the basis of a holdover authority, temporary in
nature, which may be recalled by PPA at any time. As such, the holdover permits
should have served as adequate notice to UDPDC that, at any time, its authority to
remain within the premises of the port of Dumangas may be terminated. That PPA
arbitrarily revoked UDPDC’s permit upon the dictates of a powerful politician in the
fourth congressional district of Iloilo is a mere speculation, unsupported in evidence.
Thus, in view of the expiration of UDPDC’s permit to operate the port, and in the
absence of any contract renewing the same, UDPDC cannot claim to have any right
to the administration thereof. 
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the
Rules of Court seeking to reverse and set aside the Decision1 and
Resolution,2 dated December 4, 2009 and July 1, 2010, respectively, of the
Court Appeals (CA) in CA-G.R. SP No. 03293.
The antecedent facts are as follows:
On December 1, 2000, respondent Philippine Ports Authority (PPA) granted
petitioner United Dumangas Port Development Corporation (UDPDC) a
permit to operate the cargo handling services at the Port of valid for one (1)
year.3 Thereafter, PPA issued UDPDC several holders authorities to
continue its services thereon. On May 28, 2003, PPA granted UDPDC a
three (3)-month extension from June 1, 2003 to August 31, 2003. UDPDC,
however, continued its operations even after the extension.4 Meanwhile, on
July 14, 2005, PPA conducted a public bidding for the cargo handling
services at the port wherein UDPDC did not participate despite notice.5
When the winning bidder was selected, the losing bidder filed an action,
docketed as CA-G.R. SP No. 92950, to set aside the result of the public
bidding.
On October 27, 2005, PPA served a notice upon UDPDC through PPA
Memorandum Order No. 43-2005 stating that it will be taking over the cargo
Page 6 of 82
handling services at the port beginning on November 15, 2005. A day before
the take-over, however, UDPDC sent PPA a letter-protest assailing the
termination of their services.
On November 18, 2005, UDPDC filed before the Regional Trial Court (RTC)
of Dumangas, Iloilo, Branch 68, an Amended Petition7 for Certiorari and
Prohibition with Prayer for the Issuance of Temporary Restraining Order and
Writ of Preliminary Injunction challenging the PPA Memorandum Order No.
43-2005 and seeking an injunction against its implementation, docketed as
Special Civil Action Case No. 05-024.
After granting the prayer for the issuance of a temporary restraining order,
the RTC, in its Order8 dated December 5, 2005, issued a writ of preliminary
injunction restraining the PPA from taking over the cargo handling operations
until further orders. In a Resolution9 dated March 17, 2005, however, the trial
court lifted the writ of preliminary injunction and dismissed the petition filed by
UDPDC, agreeing with PPA's stance that as far as it was concerned,
UDPDC's continued operation of the port was merely by its tolerance, having
no valid and existing permit, and that UDPDC's status was merely on the
basis of a holdover authority, temporary in nature, which may he recalled by
PPA at any time.
On March 27, 2006, UDPDC moved for the reconsideration of the dismissal
of its petition.11 Thereafter, on March 29, 2006, the Municipality of
Dumangas (MOD) filed a Petition-in-Intervention12 pursuant to a
Memorandum of Agreement13 (MOA) entered into by respondent PPA,
Project Management Office-Ports (PMO), Department of Transportation and
Communications (DOTC), and Department of Interior and Local Government
(DILG) on June 30, 1999 wherein the parties signified their commitment to
strengthen the capability of Local Government Units (LGUs) to a planned and
desirable sustainable feeder ports operation as well as PPA Administrative
Order No, 02-9814 dated August 31, 1998 which provided for the devolution
of port management functions from the PPA to the LGUs concerned.15
According to MOD, they already underwent training courses on feeder port
operation and management at the PPA Training Center in preparation for the
eventual transfer of the operation and management of the Dumangas Port
thereto and as mandated by the Social Reform Related Feeders Port
Development Project under the MOA. However, PPA, in taking over the
Dumangas Port and conducting a public bidding for the management of the
same, abandoned its duties arising from the MOA to support the port
development project and to tum-over the operation of feeder or municipal
ports to their respective LGUs.16 Respondent PPA countered that pursuant
to Executive Order (EO) No. 171,17 promulgated on October 25, 1999, it
rightfully had administrative jurisdiction over the expanded Dumangas Port
Zone for the proper zoning, planning, development and utilization of the port.
₯Compromise Agreement- Set V
On March 16, 2007, the RTC issued an Order19 agreeing with UDPDC's
assertion that instead of dismissing its petition, the trial court should have
conducted a hearing to determine the issue of whether UDPDC could
effectively be deprived of the equipment, facilities, properties and
improvements it introduced on the Dumangas Port as a result of PPA's take
over without due process of law and payment of just compensation. As to
MOD's intervention, the RTC found that since the MOD had a valid legal
interest in the matter in litigation which may be adversely affected, its
intervention is proper. Thus, the trial court ordered the parties to file their
respective memoranda.
On May 18, 2007, the RTC rendered a Decision20 finding that UDPDC has
no more right to continue its operations at the port after the expiration of the
series of extensions granted to it for it was allowed to do so by mere
tolerance of PPA. However, it recognized that in the process of its
operations, UDPDC had purchased heavy equipment and facilities and had
introduced considerable improvements necessary for the efficient and
effective operations therein. Thus, as law and equity demands, UDPDC
should be reimbursed therefor because to allow the take-over of operations
in the port without reimbursement would result in unjust enrichment at the
expense of UDPDC.21 The trial court also noted the need for a hearing to
determine the amount of equipment and improvements to be reimbursed and
to give the parties a chance to present evidence in support of their respective
claims.
As to the claims of intervenor MOD, the RTC ruled that while President
Joseph Ejercito Estrada had issued EO No. 171 on October 25, 1999
declaring the Dumangas Port Zone to be under the administration of the
PPA, this was effectively rescinded by DOTC Department Order No. 2002-18
issued on April 15, 2002 entitled "Effecting the Direct Tum-Over of
Completed Port Projects Implemented Under the Foreign-Assisted
Nationwide Feeder Ports Development Program (NFPDP) to the Local
Government Units" under the new administration of President Gloria
Macapagal Arroyo. This is because according to the RTC, the official act of
the DOTC Secretary in issuing said Department Order was deemed as an act
of the President pursuant to the principle of qualified political agency.23 It is
presumed that the action of the Secretary bears the implied sanction of the
President absent any act subsequently made setting aside, disapproving or
reprobating such department order of then DOTC Secretary.24 Thus, the
mandate of DOTC Department Order No. 2002-18 to tum-over the
Dumangas Port to MOD is controlling, having effectively rescinded EO No.
171. The RTC added that under the law, MOD enjoys a privileged position in
terms of enhancing the principles of decentralization which provides
adequate resources to LGUs to effectively carry out their functions and
discharge their power to create and broaden their own sources of revenue
and right to a just share in the proceeds of the national wealth within their
Page 7 of 82
respective areas. Moreover, under the Rules of Interpretation under Republic
Act (RA) No. 7160 of the Local Government Code (LGC) of 1991, any
provision on a power of an LGU shall be liberally interpreted in its favor.
There is therefore no basis for the PPA to take over the operation of the
cargo handling services at the Dumangas Port.
In view of the foregoing, the trial court ruled as follows:
WHEREFORE, finding the Amended Petition dated November 17, 2005 of
the United Dumangas Port Development Corporation (UDPDC) without merit,
the same is hereby dismissed. On the other hand, finding the Complaint-in-
Intervention and Supplemental Complaint-in Intervention of the Intervenor
Municipality with merit, the same is granted. Thus, UDPDC is hereby ordered
to deliver to the Intervenor Municipality of Dumangas, Iloilo the operation of
the cargo handling services of the Port of Dumangas, after the Intervenor has
reimbursed the UDPDC of the value of its development and improvements
introduced in the Port and the value of its infrastructures and equipment used
in the operation of the Port. SO ORDERED.
PPA appealed from the aforequoted Decision via Notice of Appeal26 dated
June 15, 2007. Consequently, PPA, UDPDC and MOD were required to
submit their respective memoranda in support of their positions.
On March 4, 2009, PPA and MOD submitted a Compromise Agreement27
they executed on December 3, 2008, which pertinently provides:
WHEREAS, all costs of development and improvements introduced in the
port of Dumangas were made by the national government and PPA;
WHEREAS, the LGU, in a letter to the PPA's General Manager dated 09
August 2007, inquired on the estimated value of the development and
improvements introduced in the port of Dumangas and its estimated value of
the infrastructure introduced and equipment used in its operation as outlined
in the foregoing Decision;
WHEREAS, the PPA gave the total amount for the development and
improvement introduced in the port of Dumangas as well as the
infrastructures and equipment used in its operation at more or less PHP
111,930,282.28. (Annexes "B" & "C");
WHEREAS, in Sangguniang Bayan Resolution No. 2008-14, the LGU: (a)
acknowledged that it has no financial capacity to reimburse the PPA the
amount aforestated; (b) recognized that the PPA has the expertise and
capacity to operate on its own, by contract or otherwise administer the port of
Dumangas in line with the latter's specific mandate; and (c) authorized the
₯Compromise Agreement- Set V
Hon. Mayor Ronaldo B. Golez to enter into a compromise agreement with the
PPA for the purpose of furthering the interests of the LGU and its
constituents;
NOW, THEREFORE, in consideration of all the foregoing premises and of
the stipulations, covenants and agreements, hereinafter set forth, the parties
hereby mutually agree, as follows:
1. The PPA shall continue to administer the port of Dumangas in Iloilo under
Presidential Decree No. 857, as amended, Executive Order No. 171, Series
of 1999, its policies, rules and regulations;
2. The LGU shall respect and honor any existing award, permit, contract or
authority issued or to be issued by the PPA involving the operation and
management of any services in the port of Dumangas;
3. The LGU, under such terms and conditions as may be mutually agreed
upon by the parties, may manage and operate the port of Dumangas or
jointly undertake projects and/or activities for the mutual benefit of both
parties, the port users and the general public, subject to PPA's existing and
applicable policies, rules and regulations;
4. The parties hereby waive their respective claims/ counterclaims against
each other and shall jointly undertake the approval of this Compromise
Agreement by the proper court;
5. This Compromise Agreement fully settles the claims of the parties against
each other to their mutual satisfaction. Said agreement may be pleaded as
an absolute and final bar to suit or suits or legal proceedings that may
hereafter be initiated by either party, their assigns or subrogees, or anyone
claiming by, through, or under them, against each other arising or relating to
the transaction subject matter of the abovementioned case;
UDPDC objected to the admission of the Compromise Agreement for its
failure to provide for the reimbursement of its improvements as ordered by
the trial court in its May 18, 2007 Decision.29 It also alleged that the same
was ultra vires for it was not approved by the Provincial Government of Iloilo
and the Provincial Legal Office. The Provincial Legal Officer of Iloilo as
MOD's counsel of record similarly objected to the Compromise Agreement on
the ground that he was not informed nor was his permission sought before
the execution of the same.30 He alleged that Provincial Prosecutor Bernabe
D. Dusaban was unauthorized to act as counsel and represent MOD in the
Urgent Joint Motion for Approval of the Compromise Agreement. He further
alleged that the purported Sangguniang Bayan Resolution No. 2008-14 of
the MOD did not comply with the requirements of the LGC, particularly,
Sections 5531 and 5632 thereof.
Page 8 of 82
In its Decision dated December 4, 2009, the CA upheld the validity of the
Compromise Agreement in the following wise:
The issues before this Court anPPA's arguments on appeal as contained in
its memorandum. This must be so because neither MOD not UDPDC
appealed the court a quo's Decision. Hence, as to them, they can no longer
assail the Decision.
PPA's memorandum argued: (a) MOD's intervention was filed late; (b) PPA
was denied due process when it was not afforded an opportunity to file an
answer to the MOD's petition-in-intervention; and (c) the MOD had no right to
take over and manage the Port of Dumangas. PPA asked that it be declared
the "appropriate agency to take over the operation of the cargo handling
services of the Port of Dumangas" and the dismissal of UDPDC's petition be
reinstated in toto. However, these arguments against MOD became moot
when the latter and PPA executed a "Compromise Agreement" between
them.
This Court sees nothing essentially wrong with the "Compromise Agreement"
because it settles only the claims as between PPA and MOD. The matter of
reimbursement remains outstanding in UDPDC's favor. But as agreed
between PPA and MOD, the same must be settled by PPA - this must be so
because MOD's principal motivation in seeking the "Compromise Agreement"
was that it could not afford to pay for the facilities introduced in the Port of
Dumangas, as unambiguously stated in the "Whereas" clause thereof.
Clearly, the issue of reimbursement, as it is still alive, was shifted to PPA to
resolve. While on this issue, there being allegations that the facilities at the
Port of Dumangas were spent for by the national government and PPA itself,
and there being a prayer by PPA that this Court dismiss outright UDPDC's
petition, it behooves this Court to remand the instant case to the court a quo
for a categorical declaration on two (2) essential points: (a) as to whose
provenance the improvements at the Port of Dumangas should be rightfully
credited: and (b) as to how much these facilities are worth for purposes of
reimbursement, if at all.
The idea of settling cases on appeal is not at all unheard of, much less,
irregular. After all, the stress on mediation and judicial dispute resolution on
appeal has been one of the Supreme Court's programs on judicial reform.
With a "Compromise Agreement" on the line that settles this case with two
(2) of the principal protagonists emerging winners, and the third one not
prejudiced as regards its rights and should also be therefore happy, this
Court can do no less but approve it and cut-short the instant litigation.
As to the objections of the Provincial Legal Officer of Iloilo, the appellate
court found the same to be without merit for the provisions of the LGC,
₯Compromise Agreement- Set V
specifically, Sections 31,34 5535 56,36 and 481,37 cited by said officer fails
to support his claim. We quote the CA's ratiocination:
The representation by the Provincial Legal Office is couched in the
permissive "may" as stated in Sec. 31 quoted above. The review of
ordinances or resolutions is limited to those "approving the local development
plans and public investment programs formulated by the local development
councils." The "Compromise Agreement" is neither of these because it is
obviously not a "local development plan" or a "public investment program."
What do these two concepts mean? As explained by the Asian Development
Bank, they are a "wish list" of projects for funding that are integrated into
macro-economic plans, not the individual project concepts themselves:
This Court cannot give credence to the Provincial Legal Office's arguments
for to do so would run contrary to the autonomy of MOD as a local
government unit. Its leaders who were represented in the "Compromise
Agreement" were elected by the people of MOD, hence, their voice as to the
direction of where the Port of Dumangas should be, is entitled to great weight
and should not be lightly set aside - especially so if the opinion that is
supposed to replace it is one coming from a non-tenured public officer and
unelected at that. The distinction between MOD's duly elected leaders and
the Provincial Legal Office should be clear enough to those who rightfully
discern.
Indeed, the test as to when the Provincial Legal Office should continue
representing the municipality concerned ought to be circumscribed by the
tenets of a lawyer-client relationship, that is, the client's advantage. The
Provincial Legal Office's assistance must be summoned, and summoned
quickly, only when the client runs the risk of suffering from a case without due
representation. Verily, it is a test of actual advantages or lack of them. Here,
this Court sees nothing apparently prejudicial to MOD that would arise from
the "Compromise Agreement." It actually relieves MOD of the burden of
paying for the facilities at the Port of Dumangas by way of reimbursement
because PPA would have to take care of it, if at all, but at the same time
allows MOD the opportunity to manage and operate the port. Hence, there is
no need for the Provincial Legal Office to insist on its representation of MOD.
All in all, the "Compromise Agreement" should be a welcome development
for the parties concerned.
WHEREFORE:
(a) The "Motion to Recuse" is DENIED for lack of merit.
(b) The "Compromise Agreement" is APPROVED by this Court as it is not
contrary to law, public policy and morals. It is the final and executory
Page 9 of 82
judgment in this civil case as between the Philippine Ports Authority and the
Municipality of Dumangas.
(c) The matter of reimbursement of the value of the facilities at the Port of
Dumangas is REMANDED to the court a quo for determination (a) as to
whose provenance the improvements at the Port of Dumangas should be
rightfully credited; and (b) as to how much these facilities are worth for
purposes of reimbursement if at all.
UDPDC filed a Motion for Reconsideration39 dated December 29, 2009
invoking that the appellate court erred in: (1) approving the Compromise
Agreement between PPA and MOD which does not define which of the
parties shall be liable to UDPDC for the values of the equipment and
improvements it introduced in the Dumangas Port; (2) ruling that MOD need
not be represented by the Provincial Legal Officer and need not observe the
procedure prescribed by the LGC in executing the Compromise Agreement;
and (3) remanding the case to the trial court to determine as to whose
provenance the improvements should rightfully be credited when it had
already ruled in favor of its right to be reimbursed.
MOD, represented by the Provincial Legal Officer, likewise filed a Motion for
Reconsideration40 invoking the following grounds: (1) the appellate court
does not have authority to recognize, worse, approve the spurious and illegal
Compromise Agreement. From the standpoint of the law, there is no
Compromise Agreement, hence, the appeal should have been decided on
the issues raised therein; (2) MOD has no obligation to pay PPA the sum of
P111,930,282.28 to effect the turnover of the Dumangas Port to MOD; and
(3) there is no legal basis to remand the case to the trial court for re-trial.
However, in a Resolution41 dated July 1, 2010, the CA denied the Motions
for Reconsideration filed by UDPDC and MOD finding no compelling reason
to disturb its Decision as it had already categorically declared that UDPDC is
entitled to reimbursement of the value of improvements which must be
settled by PPA.
On September 7, 2010, UDPDC filed the instant Petition for Review on
Certiorari invoking the following grounds:
I. THE COURT OF APPEALS SERIOUSLY AND GRAVELY ERRED IN
APPROVING THE COMPROMISE AGREEMENT BETWEEN PPA AND
PURPORTEDLY MOD DESPITE THE CLEAR FACT THAT IT: (1) IS
CONTRARY TO LAW; (2) IS CONTRARY TO PUBLIC POLICY; (3) IS
WITHOUT THE PROVENANCE AND APPROVAL OF THE PROPER AND
LEGITIMATE AUTHORITY; (4) IS BASED ON A FINDING NOT
SUPPORTED BY ANY EVIDENCE; AND (5) REVERSED, IF NOT
MODIFIED, THE RTC DECISION JUDGMENT IN FAVOR OF PETITIONER
₯Compromise Agreement- Set V
UDPDC, A PARTY TO THE CASE BUT NOT TO THE COMPROMISE
AGREEMENT.
II. THE COURT OF APPEALS SERIOUSLY AND GRAVELY ERRED IN
TOTALLY IGNORING AND NOT RULING UPON THE ISSUE RAISED BY
UDPDC, I.E. WHETHER OR NOT PPA HAS THE RIGHT TO ARBITRARILY
AND WHIMSICALLY REVOKE AND CANCEL THE UDPDC'S HOLD-OVER
PERMIT WITHOUT ANY CAUSE OR REASON, BUT UPON DICTATES OF
A POWERFUL POLITICIAN IN THE FOURTH CONGRESSIONAL
DISTRICT OF ILOILO.
UDPDC assails the validity of the Compromise Agreement executed between
PPA and purportedly the MOD. First, it maintains that the Compromise
Agreement is contrary to law and public policy, particularly DOTC
Department Order No. 2002-18 and the MOA executed by the PPA, PMO
and the DILG, both of which direct the transfer of the operation, management
and maintenance of feeder ports to their respective LGUs in furtherance of
the commitment to insure their economic autonomy and strengthen their
institutional capability under the Social Reform Related Feeders Ports
Development Project.42 In furtherance thereof, UDPDC stated that PPA itself
even issued PPA Administrative Order No. 02-98 setting the guidelines on
the transfer of the administration of ports to the LGUs.
Second, UDPDC avers that the Compromise Agreement is without the
provenance and approval of the legitimate and proper authorities.
Particularly, it questions the Resolution No. 2008-33 and Resolution No.
2008-14 issued by the Sangguniang Bayan purportedly authorizing the
execution of the Compromise Agreement for they were not submitted to the
Sangguniang Panlalawigan and the Provincial Legal Officer for review as
required by Section 5644 of the LGC. According to UDPDC, the subject
resolutions waiving the rights of MOD over the Port of Dumangas is definitely
one involving a "local development plan," and hence, subject to review by the
Sangguniang Panlalawigan.
Moreover, under Sections 3146 and 48147 of the LGC, only the municipal
legal officer, or if there is none, as in this case, the provincial legal officer,
has sole authority to represent MOD. This is mandatory.
Thus, neither the provincial prosecutor nor the incumbent Mayor Ronaldo
Golez who signed and filed the Motion to Approve Compromise Agreement
and the Compromise Agreement itself has legal authority to represent and
act as counsel for the municipality. The authority of the provincial prosecutor
is restricted only to giving legal opinions, and only if there is no municipal or
provincial legal officer.49 UDPDC notes that Provincial Prosecutor Dusaban
was aware of this, which is why he later on withdrew his appearance as
counsel for MOD.
Page 10 of 82
Third, PPA's claim in the Compromise Agreement that it had spent
P111,930,282.28 has no mooring in evidence. According to UDPDC, the
feeder ports project all over the country is under the Social Reform Related
Feeder Ports Development Projects funded from the financial assistance
extended by Japan Bank for International Cooperation (JBIC) under soft loan
agreements Nos. PH-P80 and PH-P173. Moreover, there is nothing in the
loan agreements, DOTC Order No. 2002-18, PPA Administrative Order No.
02-98, and the MOA which states that MOD shall reimburse the national
government or PPA the costs of the Dumangas Port before it would devolve
upon the former. Furthermore, the finding that MOD has no expertise to
manage the port runs contrary to the fact that the PPA had conducted
months-long seminars for local government officials, including then Mayor
Distura, of MOD, specifically to enable them to run the local ports.
Fourth, the Compromise Agreement reversed, if not modified, the RTC
judgment in favour of UDPDC, a party to the case but not to the same.
Nowhere in the Compromise Agreement does it identify which between the
PPA and the MOD shall assume the reimbursement to UDPDC. The RTC
had already ruled in favour of UDPDC's right to reimbursement, which was
not objected to by PPA nor the MOD. However, the appellate court merely
approved the Compromise Agreement, disposed that PPA, not MOD, is the
party who should reimburse UDPDC, and even remanded the case to the
trial court for a re-determination as to whose provenance the improvements
of the Port of Dumangas should be rightfully credited.
Aside from assailing the validity of the Compromise Agreement, UDPDC
further maintains that PPA has no legal right or authority to revoke its hold-
over permit without just and valid cause and only upon the dictates of a
powerful politician in the 4th Congressional District of Iloilo. According to
UDPDC, PPA's take-over is violative of the requirement in PPA
Administrative Order No. 02-98 that it shall be for cause in order to protect
and promote public interest. In addition, UDPDC claims that its continued
operation of the port despite the expiration of its permit constitutes an implied
renewal of the same. As such, it asks the Court to fix a period within which it
shall operate the port.
In its Comment, PPA counters that UDPDC's non-inclusion in the
Compromise Agreement does not render it illegal nor contrary to law. Citing
the ruling in Valdez v. Financiera Manila, Inc.,51 PPA states that the only
legal effect of the non-inclusion of a party in a compromise agreement is that
said party cannot be bound by the terms of the same. It shall, however, be
binding on the parties who signed thereon.52 PPA also maintains that the
assistance of the Provincial Prosecutor instead of the Provincial Legal Officer
in the execution of the Compromise Agreement is not an impediment for the
approval of the same. This is because the Provincial Prosecutor was duly
₯Compromise Agreement- Set V
authorized to represent MOD by virtue of Resolution No. 2008-33 issued by
the Sangguniang Bayan on March 19, 2009. While at the onset, counsel for
MOD was the Provincial Legal Officer, MOD has a right to discharge its
attorney. On this score, PPA cites the ruling of the appellate court stating that
the Mayor, who signed the Compromise Agreement, was elected by the
people of MOD, and his decisions must be accorded great weight especially
when the opinion he is replacing is one from a non tenured, unelected officer,
such as the Provincial Legal Officer. Such officer's assistance must only be
summoned when the client, the MOD in this case, runs the risk of suffering
from a case without due representation. Here, however, there is nothing in
the Compromise Agreement that is prejudicial to MOD. In fact, the same
actually relieves it from the burden of reimbursing UDPDC for the obligation
is transferred to PPA.
On UDPDC's alleged right to continue its operations in the port, PPA asserts
UDPDC's failure to appeal the May 18, 2007 Decision of the trial court
wherein it states that UDPDC does not have any more right to the port since
its continued operation was by mere tolerance of the PPA.54 Consequently,
such issue is no longer open for review.
As to the validity of the Compromise Agreement, PPA counters that the same
cannot be invalidated for UDPDC suffered no prejudice therefrom. In fact, it
noted that compromise agreements, such as the one it executed with MOD,
are not only allowed, but are also encouraged in civil cases.55 Moreover,
contrary to UDPDC's contention, the agreement did not reverse nor modify
the trial court's decision with respect to its right to reimbursement. The
appellate court, in approving of the same, merely recognized the
improvements introduced by the national government and PPA on the port.
PPA substantiated this by attaching to its Comment documents56 entitled
"Project Brief' purportedly evidencing the expenses it incurred in the
construction of improvements on the port.
The petition is partly meritorious. A perusal of the provisions of the
Compromise Agreement, as well as the circumstances surrounding its
execution, negates its validity.
Section 56 of the Local Government Code provides:
Section 56. Review of Component City and Municipal Ordinances or
Resolutions by the Sangguniang Panlalawigan.
(a) Within three (3) days after approval, the secretary to the sanggunian
panlungsod or sangguniang bayan shall forward to the sangguniang
panlalawigan for review, copies of approved ordinances and the resolutions
approving the local development plans and public investment programs
formulated by the local development councils.
Page 11 of 82
(b) Within thirty (30) days after the receipt of copies of such ordinances and
resolutions, the sangguniang panlalawigan shall examine the documents or
transmit them to the provincial attorney, or if there be none, to the provincial
prosecutor for prompt examination. The provincial attorney or provincial
prosecutor shall, within a period of ten (10) days from receipt of the
documents, inform the sangguniang panlalawigan in writing of his comments
or recommendations, which may be considered by the sangguniang
panlalawigan in making its decision.
(c) If the sangguniang panlalawigan finds that such an ordinance or
resolution is beyond the power conferred upon the sangguniang panlungsod
or sangguniang bayan concerned, it shall declare such ordinance or
resolution invalid in whole or in part. The sangguniang panlalawigan shall
enter its action in the minutes and shall advise the corresponding city or
municipal authorities of the action it has taken.
(d) If no action has been taken by the sangguniang panlalawigan within thirty
(30) days after submission of such an ordinance or resolution, the same shall
be presumed consistent with law and therefore valid.
In upholding the validity of the Compromise Agreement, the appellate court
held that "the review of ordinances or resolutions is limited to those
approving the local development plans and public investment programs
formulated by the local development councils." It stated that the subject
Compromise Agreement is neither a "local development plan" nor a "public
investment program," pursuant to the explanation provided by the Asian
Development Bank (ADB), to wit:
Consequently, in the 1980s many developing countries moved to rolling
public investment plans, generally with the encouragement and along the
recommendations of the World Bank. These rolling investment plans are
usually named Public Investment Programs (PIP). They are widely used in
aid-dependent countries, since one of their aims is to improve aid
coordination, and are less common in middle-income countries. Recently,
with the assistance of the World Bank and the European Union, PIPs have
been newly introduced in a number of transition countries.
In some developing countries, a PIP became a simple wish list, used to
attract aid from donors and international financial institutions, or even just to
fulfill a formalistic requirement of Consultative Groups and other donor
meetings.. Often such wish list is prepared hastily for the meetings with the
assistance of external consultants and little genuine involvement of local
officials. The role of these wish lists of project in the formulation of the budget
is generally weal or nil. Worse, because these PIPs are shopping lists rather
than programming tools, they invariably include a variety of weak, unsound,
or undocumented project proposals. Even the marginal usefulness of these
₯Compromise Agreement- Set V
PIPs as documentation for a donor meeting is swamped by the risk of
financing bad projects; by the implicit transfer of control over the
development agenda from the government to the external donors; and by the
generalized loss of credibility of the programming process. It would be better
if they were not prepared at all (or externally requested).
One does not, however, dismiss an economic programming tool because it is
often misused or abused in practice. The following discussion examines the
utility of PIPs when they are genuine medium-term programs for public
investment. If it is concluded that this tool is appropriate to a particular
country, then it becomes necessary to assure that it is designed and used
properly. In any case, the relatively large donor funding will either be
appropriately programmed, in relation to the policy priorities of the recipient
country, or still be distributed, but without any central scrutiny of project
quality, consistency with policy, or coordination with the budgeting of
domestic resources. A good PIP is aimed at ensuring five different (although
interrelated) functions:
improving economic management, to ensure that macroeconomic sector
strategies are translated into programs and projects;
improving aid coordination and channeling external resources to priority
areas;
strengthening the hand of the government in negotiating with external
donors;
assisting public financial management, by balancing (partial) commitments
and resources over a multi-year framework; and strengthening the project
cycle by providing a framework within which project preparation,
implementation, and monitoring can occur.
Perhaps the most significant benefit that aid-dependent developing countries
receive from good PIPs is that the process of PIP preparation itself gives an
opportunity to review, and then integrate into the budget, aid-financed
expenditures that were previously nonbudgeted. (As chapter 2 stressed, the
budget should be comprehensive and should include all government
expenditures, however financed.) PIP exercises contribute also to extending
the horizon of financial programming and planning beyond the annual
budget, and the perspective of policymakers in a more realistic way than
previous five-year plans.
Finally, if conducted rigorously and with full local participation, the process
can be an invaluable capacity-building tool, and a way to introduce financial
discipline and the awareness of opportunity cost into the informal rules of the
local bureaucracy. Finally, a good PIP process can set the stage for the
Page 12 of 82
eventual medium-term programming of all expenditure which is the optional
way of incorporating the needed multi-year perspective in to the budget
process.
On the basis of the aforequoted text, the appellate court simply concluded
that local development plans and public investment programs are a "wish list
of projects for funding that are integrated into macro-economic plans, and not
the individual project concepts themselves."59 Without expounding on said
conclusion, however, nor citing any provision of law or jurisprudence that
would justify the same, the CA immediately dispensed with the requirement
of forwarding to the sangguniang panlalawigan for review, copies of
approved ordinances and the resolutions approving the local development
plans and public investment programs. No other basis, legal or otherwise,
was offered to explain how the operation of a commercial port for the
generation of income cannot fall within the definition of "local development
plan" nor a public investment program. In fact, as observed by MOD, through
the Provincial Legal Officer, nowhere in the ADB write-up does it state that
feeder ports, like the Port of Dumangas, are not "local development plans'' or
"public investment projects" for purposes of the LGC.
Even granting that the subject resolutions need not be submitted to the
Sangguniang Panlalawigan for review, these resolutions purportedly
authorizing Municipal Mayor Golez to enter into the Compromise Agreement
still cannot be given credence. Under Section 444(b)(l)(vi)60 of the LGC, the
municipal mayor may represent the municipality in all its business
transactions and sign, on its behalf, contracts and obligations made pursuant
to law or ordinance. However, a mere resolution, such as those issued by the
Sangguniang Bayan herein, does not suffice to approve PPA's claim of Php
111,930,282.28 against MOD for no rights can be conferred by and be
inferred from a resolution, which is nothing but an embodiment of what the
law-making body has to say in the light of attendant circumstances.61
Contrary to the appellate court's stance, that Mayor Golez was elected by the
people of MOD does not excuse him from acting within the parameters set by
law. Thus, while it is true that compromise agreements between the parties in
civil cases are not only allowed but even encouraged, in order for them to be
binding on the parties, however, they must be executed in accordance with
applicable law and jurisprudence.
On this score, alone, the Compromise Agreement must be nullified for being
entered into without complying with the provisions of law. Yet, a substantial
reading of the same further demands its nullification as its terms are highly
irregular and manifestly disadvantageous to the MOD. It bears stressing that
under the Compromise Agreement, MOD suddenly became indebted to PPA
for the costs of improvements it allegedly introduced on the port in the
amount of Php 111,930,282.28. This obligation to reimburse PPA, however,
was never asserted throughout the proceedings, not even on PPA's appeal
₯Compromise Agreement- Set V
to the CA. Neither was there any evidence submitted to substantiate the
claim. Note that only in its Comment filed before this Court did the PPA
attempt to provide some sort of basis in support of its alleged expenses. But
two pages containing a mere enumeration of certain works purportedly
constructed on the port with the total amount at the bottom of each page can
hardly be considered sufficient to entitle PPA reimbursement of Php
111,930,282.28.62 As noted by UDPDC, not only are the documents
unsigned, of an unknown source and authorship, but their authenticity and
due execution were not even shown.
The foregoing, notwithstanding, it was on this unsubstantiated claim that
MOD's right to operate the Port of Dumangas was waived in favor of PPA,
contrary to the letter and spirit of prevailing law and contractual agreements.
Under the DOTC Department Order No. 2002-18,64 the PPA was expressly
directed to revert the Port of Dumangas, among other ports enumerated
therein, to the DOTC which shall, in tum, cause the turnover of the same to
their respective LGUs pursuant to the loan agreements between the
Government and the JBIC under the Social Reform Related Feeders Ports
Development Project. It is for the same project that the PPA entered into the
MOA with the PMO and DILG to provide its assistance in the implementation
of the training program to strengthen the capability ofLGUs on feeder ports
operation and management through the facilities of PPA Training Center.65
In line with this, PPA itself issued Administrative Order No. 02-9866 which
similarly provided for the devolution of port management functions from the
PPA to the LGUs concerned setting the guidelines thereon. According to
MOD, moreover, its local government officials, including then Mayor Distura,
even underwent training courses on feeder port operation and management
at the PPA Training Center specifically to enable them to run the local ports.
It bears stressing that apart from the unsustainable Compromise Agreement,
PPA failed to provide the Court with sufficient basis, legal or otherwise, in
support of its alleged authority to take-over the operation of the Dumangas
Port. While the PPA was indeed, authorized by EO No. 171 to exercise its
administrative jurisdiction over the Dumangas Port, DOTC Department Order
No. 2002-18, issued after EO No. 171, effectively rescinded the latter for as
correctly ruled by the trial court, acts of the secretaries of such departments,
performed and promulgated in the regular course of business are, unless
disapproved or reprobated by the Chief Executive, presumptively the acts of
the Chief Executive.67 Consequently, PPA's authority to administer the Port
of Dumangas was effectively superseded by the directive mandated by the
DOTC Department Order to transfer the operation of the same to the MOD.
Thus, in view of the Compromise Agreement's procedural and substantive
infirmities, the Court cannot allow the same to govern the rights of the parties
herein. The appellate court's central consideration in approving of the same
on the ground that it effectively disposes of the case with the parties
Page 13 of 82
"emerging as winners" cannot be sustained. On the one hand, its contention
that there is nothing in the Compromise Agreement that is prejudicial to MOD
for it actually relieves it from the burden of reimbursing UDPDC is misleading.
Not· only is there nothing in the agreement which states that PPA undertakes
to assume MOD's obligation to reimburse UDPDC, MOD suddenly became
indebted to PPA in the amount of Php111,930,282.28. Yet, as previously
discussed, PPA's claim to said amount was unsubstantiated by convincing
evidence. Moreover, as UDPDC noted, nowhere in the DOTC Order No.
2002-18, PPA Administrative Order No. 02-98, nor the MOA is it stated,
expressly or impliedly, that MOD is obliged to reimburse PPA costs of the
Dumangas Port before it would devolve upon the former. Clearly, PPA's
claim to reimbursement has neither legal nor evidentiary basis. Yet, in spite
of this, the MOD, pursuant to the Compromise Agreement, waived its right to
operate the Dumangas Port granted to it by prevailing law and binding
agreements.
On the other hand, the Court also cannot sustain the appellate court's ruling
that UDPDC must "be happy" that its rights are not prejudiced for the matter
of reimbursement remains outstanding in its favor, only that the same must
be settled by the PPA. While it is conceded that the non-inclusion of UDPDC
in the Compromise Agreement does not perforce nullify it, the wording of the
same taken in conjunction with the ruling of the appellate court renders
UDPDC's right to reimbursement uncertain. Again, there is nothing in the
agreement which states that PPA undertakes to assume MOD's obligation to
reimburse UDPDC. Moreover, while the CA claims to recognize UDPDC's
right to reimbursement, it remands such matter to the court a quo for
determination (a) as to whose provenance the improvements at the Port of
Dumangas should be rightfully credited; and (b) as to how much these
facilities are worth for purposes of reimbursement if at all. Thus, the CA's
contention that it had already categorically declared that UDPDC is entitled to
reimbursement of the value of improvements is belied by the fact that it
remanded the case to the trial court to determine as to whose provenance
the improvements at the Port of Dumangas should be rightfully credited. Its
approval of the Compromise Agreement cannot, therefore, be justified on the
simple reasoning that all parties in the instant case are not prejudiced
thereby for as previously discussed, the provisions of the agreement are
actually disadvantageous to the rights ofUDPDC and MOD.
Anent UDPDC's contention, however, that the PPA did not have authority to
revoke its hold-over permit, the following ruling in Philippine Ports Authority v.
Cipres Stevedoring & Arrastre, Inc. is instructive:
In connection with the foregoing, we likewise find no arbitrariness nor
irregularity on the part of petitioner as far as PPA AO No. 03-2000 is
concerned. It is worthwhile to remind respondent that petitioner was created
for the purpose of, among other things, promoting the growth of regional port
₯Compromise Agreement- Set V
bodies. In furtherance of this objective, petitioner is empowered, after
consultation with relevant government agencies, to make port regulations
particularly to make rules or regulation for the planning, development,
construction, maintenance, control, supervision and management of any port
or port district in the country. With this mandate, the decision to bid out the
cargo holding services in the ports around the country is properly within the
province and discretion of petitioner which we cannot simply set aside absent
grave abuse of discretion on its part. The discretion to carry out this policy
necessarily required prior study and evaluation and this task is best left to the
judgment of petitioner. While there have been occasions when we have
brushed aside actions on the part of administrative agencies for being
beyond the scope of their authority, the situation at the case at bar does not
fall within this exception.
In the case at bar, respondent sought the issuance of a writ for preliminary
injunction in order to prevent the "cessation of cargo handling services in the
port of Dumaguete City to the detriment and prejudice of the public, shipper,
consignees and port workers." However, the factual backdrop of this case
establishes that respondent's eight-year contract for cargo handling was
already terminated and its continued operation in the port of Dumaguete City
was merely by virtue of a second hold-over permit granted by petitioner
through a letter dated 27 December 1999, the pertinent portion of which
reads:
This HOP extension shall be valid from January 18, 2000 up to April 18,
2000, unless sooner withdrawn or cancelled or upon the award of the cargo
handling contract thru public bidding.
By its nature, the hold-over permit was merely temporary in nature and may
be revoked by petitioner at anytime. As we declared in the case of Anglo-Fil
Trading Corporation, hold-over permits are merely temporary and subject to
the policy and guidelines as may be implemented by petitioner. The
temporary nature of the hold-over permit should have served as adequate
notice to respondent that, at any time, its authority to remain within the
premises of the port of Dumaguete City may be terminated. Unlike the
contract for cargo handling services previously entered into by petitioner and
respondent, whose terms and conditions were agreed upon by the parties
herein and which clearly provided for a specific period of effectivity as well as
a stipulation regarding the notice of violation, the hold-over permit was
unilaterally granted by petitioner pursuant to its authority under the law.
Based on the foregoing, it is clear that at the time of the institution of this suit,
respondent no longer possessed any contract for its continued operation in
Dumaguete City and its stay in the port of said city was by virtue of a mere
permit extended by petitioner revocable at anytime by the latter. Obviously,
the writ of preliminary injunction issued by the Court of Appeals granted
Page 14 of 82
respondent the authority to maintain its cargo handling services despite the
absence of a valid cargo handling agreement between respondent and
petitioner. For this reason, we hold that the Court of Appeals erred in
ordering the court a quo to issue the writ of preliminary injunction in favor of
respondent.

Similarly in this case, the series of hold-over authorities as well as the final
holdover permit granting UDPDC a three (3)-month extension was clearly
temporary in nature. As aptly found by the trial court, UDPDC's continued
operation of the port was merely by PPA's tolerance, having no valid and
existing permit, and that UDPDC's status was merely on the basis of a
holdover authority, temporary in nature, which may be recalled by PPA at any
time. As such, the holdover permits should have served as adequate notice
to UDPDC that, at any time, its authority to remain within the premises of the
port of Dumangas may be terminated. That PPA arbitrarily revoked UDPDC's
permit upon the dictates of a powerful politician in the fourth congressional
district of Iloilo is a mere speculation, unsupported in evidence. Thus, in view
ofthe expiration ofUDPDC's permit to operate the port, and in the absence of
any contract renewing the same, UDPDC cannot claim to have any right to
the administration thereof.

WHEREFORE, premises considered, the instant petition is PARTLY

GRANTED. The Decision and Resolution, dated December 4, 2009 and July
1, 2010, respectively, of the Court Appeals in CA-G.R. SP No. 03293 are
SET ASIDE insofar as it: (1) approved the Compromise Agreement; and (2)
remanded to the trial court the determination as to whose provenance the
improvements at the Port of Dumangas should be rightfully credited and as to
how much these facilities are worth for purposes of reimbursement, if at all.
The Compromise Agreement executed by respondent Philippine Ports
Authority and Municipality of Dumangas on December 3, 2008 is hereby
declared INVALID and WITH NO EFFECT. The Decision dated May 18, 2007
ordering the delivery to the Municipality of Dumangas the operation of the
cargo handling services of the Port of Dumangas, after the Municipality has
reimbursed petitioner United Dumangas Port Development Corporation of the
value of its development and improvements introduced on the Port and the
value of its infrastructures and equipment used in the operation thereof, is
REINSTATED. For this purpose, the records of this case are hereby
REMANDED to the Regional Trial Court of P.D. Monfort North, Dumangas,
Iloilo, Branch 68, for the proper determination of the value of equipment and
improvements introduced by petitioner on the Port of Dumangas. SO
ORDERED.

₯Compromise Agreement- Set V

Page 15 of 82
[33] G.R. No. 170679, March 09, 2016
TUNG HUI CHUNG AND TONG HONG CHUNG, Petitioners, v. SHIH CHIU
HUANG A.K.A. JAMES SHIH, Respondent.
Civil Law; Compromise Agreements; Words and Phrases; A compromise
agreement is a contract whereby the parties make reciprocal concessions to avoid
litigation or to put an end to one already commenced.—To start with, a compromise
agreement is a contract whereby the parties make reciprocal concessions to avoid
litigation or to put an end to one already commenced. It is an accepted, nay, even
highly encouraged practice in the courts of law of this jurisdiction. It attains the
authority and effect of res judicata upon the parties upon its execution, and becomes
immediately final and executory, unless rescinded by grounds which vitiate consent.
Once stamped with judicial imprimatur, it ceases to be a mere contract between the
parties, and becomes a judgment of the court, to be enforced through writ of
execution.
Remedial Law; Special Civil Actions; Certiorari; Section 4, Rule 65 of the
Rules of Court, allowed the petition for certiorari to be filed not later than sixty (60)
days from notice of the judgment being assailed.—The CA did not recognize that
what it was asked to annul and set aside in C.A.-G.R. S.P. No. 88804 was no longer
the compromise agreement of the parties but already the judgment based on the
compromise agreement. The failure to recognize led the CA into granting the
unprecedented relief of annulling the compromise agreement on the ground of fraud
and lack of consent. In so doing, the CA acted without jurisdiction. First of all, the
action before the CA was a special civil action for certiorari that had been brought
on March 7, 2005, which was way beyond the period of 60 days from the rendition
of the judgment based on the compromise agreement on October 20, 2003. The long
delay grossly violated Section 4, Rule 65 of the Rules of Court, which allowed the
petition for certiorari to be filed not later than 60 days from notice of the judgment
being assailed. Moreover, the grounds relied upon by the respondent in his petition
for certiorari in C.A.-G.R. S.P. No. 88804 — that the RTC had committed grave
abuse of discretion tantamount to excess or lack of jurisdiction for issuing the writ of
execution that was patently unjust, one-side, unfair, fraudulent and unconscionable
compromise agreement; and for issuing the writ of execution of the compromise
agreement that lacked consideration — were not proper grounds for assailing the
judgment based on the compromise agreement. Even assuming that such grounds for
the petition for certiorari were true, which they were not, the judgment based on the
compromise agreement could not be assailed on that basis. As the foregoing excerpt
of the assailed decision bears out, the annulment of the judgment based on the
compromise agreement was premised on fraud and lack of consent on the part of the
respondent as a contracting party, which were far from the jurisdictional error on
which the petition for certiorari should have rested.
Civil Law; Compromise Agreements; The judicially approved agreement was
thereby turned into a final judgment, immutable and unalterable, regardless of
₯Compromise Agreement- Set V
whether or not it rested on erroneous conclusions of fact and law, and regardless of
whether the change would be by the court that rendered it or the highest court of the
land.—The RTC, after finding the August 19, 2003 compromise agreement to be in
order and not contrary to law, morals, good customs and public policy, issued the
October 20, 2003 order approving the compromise agreement. With this stamp of
judicial approval, the compromise agreement became more than a mere contract of
the parties. The judicially approved agreement was thereby turned into a final
judgment, immutable and unalterable, regardless of whether or not it rested on
erroneous conclusions of fact and law, and regardless of whether the change would
be by the court that rendered it or the highest court of the land. This doctrine of
immutability is grounded on fundamental considerations of public policy and sound
practice, for, at the risk of occasional errors, judgments of the courts must become
final at some definite date set by law. The doctrine exists for the reason that every
litigation must come to an end at some time, for it is necessary for the proper
enforcement of the rule of law and the administration of justice that once a judgment
attains finality, the winning party should not be denied the favorable result. Clearly,
the element of public policy and public interest has diluted the purely private interest
of the parties before the compromise agreement was approved by the trial court.
Remedial Law; Civil Procedure; Annulment of Judgments; Under Section 2 of
Rule 47, the original action for annulment may be based only on extrinsic fraud or
lack of jurisdiction, but extrinsic fraud, to be valid ground, should not have been
availed of, or could not have been availed of in a motion for new trial or petition for
relief.—If the ground of the respondent to assail the judgment based on the
compromise agreement was extrinsic fraud, his action should be brought under Rule
47 of the Rules of Court. Under Section 2 of Rule 47, the original action for
annulment may be based only on extrinsic fraud or lack of jurisdiction, but extrinsic
fraud, to be valid ground, should not have been availed of, or could not have been
availed of in a motion for new trial or petition for relief. If the ground relied up is
extrinsic fraud, the action must be filed within four years from the discovery of the
extrinsic fraud; if the ground is lack of jurisdiction, the action must be brought before
it is barred by laches or estoppels. Regardless of the ground for the action, the
remedy under Rule 47 is to be availed of only if the ordinary remedies of new trial,
appeal, petition for relief or other appropriate remedies are no longer available
through no fault of the petitioner. Ostensibly, the respondent could have availed
himself of the petition for relief from judgment under Rule 38 of the Rules of Court.
Hence, his failure to resort to such remedy precluded him from availing himself of
the remedy to annul the judgment based on the compromise agreement.
DECISION
BERSAMIN, J.:
A compromise agreement has the effect and authority of res judicata
between the parties, and is immediately final and executory, unless
rescinded upon grounds that vitiate consent. Once stamped with judicial
Page 16 of 82
imprimatur, it is more than a mere contract between the parties. Any effort to
annul the judgment based on compromise on the ground of extrinsic fraud
must proceed in accordance with Rule 47 of the Rules of Court.
The Case
This appeal by petition for review on certiorari seeks the review and reversal
of the decision promulgated on September 30, 2005,1 whereby the Court of
Appeals (CA) annulled and set aside the judicially-approved compromise
agreement of August 19, 2003,2 and the resolution dated December 1,
2005,3 whereby the CA denied the motion for reconsideration, as well as the
orders of January 13, 20054 and February 28, 20055 of the trial court
denying the motion to quash the writ of execution to enforce the compromise
judgment.
Antecedents
On September 6, 2001, the petitioners, both Australian citizens, filed in the
Regional Trial Court (RTC), Branch 49, in Manila an amended complaint6 to
recover from the respondent a sum of money and damages (with prayer for a
writ of attachment). The suit, docketed as Civil Case No. 01-101260, involved
the contract to sell dated October 30, 2000,7 whereby the respondent, as the
vendor, undertook to deliver to the petitioners, as the vendees, shares of
stock worth P10,606,266.00 in Island Information and Technology, Inc. (the
corporation), a publicly listed corporation. The contract to sell pertinently
stipulated:
WHEREAS, sometime in the month of March, 2000 VENDEE remitted to
VENDOR the total amount of Ten Million Six Hundred Six Thousand Two
Hundred Sixty Six Philippine currency (Php10,606,266.00) which VENDOR
hereby acknowledges receipt of the same;
WHEREAS, the above amount was given by VENDEE to VENDOR in
consideration for equivalent number of shares ("subject shares") of stock in
the corporation, at the price specified below, which shares VENDOR will
deliver to VENDEE at the time agreed upon in this Contract;
NOW, THEREFORE, for and in consideration of the foregoing premises,
VENDOR and VENDEE hereby agree as follows:
1. VENDOR shall deliver to VENDEE the subject shares on cither of the
following dates, whichever comes sooner:
a. Upon approval by the Securities and Exchange Commission (SEC) of the
application for increase of the number of shares of stocks of the Corporation;
or
₯Compromise Agreement- Set V
b. Four (4) months after the signing of this Contract.
3. VENDOR and VENDEE hereby agree that the subject shares shall be
priced at the average value thereof five (5) days prior to end of the fourth
month as specified in Section 1 (b). In the event that VENDOR is able to
deliver the subject shares to VENDEE prior to any of the periods given in
Section 1, the subject shares shall be valued at the price mutually agreed
upon in writing by both VENDOR and VENDEE at the time of actual delivery;
4. It is hereby understood that the exact number of shares to be delivered by
VENDOR to VENDEE shall be that equivalent to Ten Million Six Hundred Six
Thousand Two Hundred Sixty Six Philippine Currency (Php10,606,266,00),
consideration of this Contract, at the value or price thereof provided in
Section 3;
5. VENDEE hereby acknowledges that VENDOR has advanced to him
certain certificates of stocks of the Corporation equivalent to Thirty Four
Million Two Hundred Thousand (34,200,000) shares, which are not yet
transferred to his name, which number of shares shall be deducted from the
subject shares to be delivered by VENDOR to VENDEE at the value provided
in Section 3;8 (emphasis supplied)
The petitioners alleged that under the provisions of the contract to sell, the
equivalent shares of stock in the corporation should be their value as of
February 22, 2001, the date corresponding to the five-day period prior to the
end of the fourth month after October 30, 2000, the date of the signing of the
contract to sell; that according to the Philippine Stock Exchange, Inc. (PSEI),
the shares of the corporation, which stood at P0.05 for the open, high, low
and closing prices on February 22, 2001, had the equivalent of 177,925,320
shares of stock; and that the respondent failed to deliver the shares of stock
corresponding to the agreed amount on the date fixed by the contract.
On October 10, 2001, the RTC issued an amended order granting the
petitioners' application for the writ of preliminary attachment.9 On December
27, 2001, the respondent submitted his answer with counterclaim.
Later on, the parties filed their Joint Motion for Approval of a Compromise
Agreement dated August 19, 2003.11 The compromise agreement, which
was signed by the respondent and by Eduard Alcordo, as the attorney-in-fact
of the petitioners, with the assistance of their respective counsels, stipulated
that the parties agreed to settle their respective claims and counterclaims,
and the respondent acknowledged therein his obligation to the petitioners in
the amount of $250,000.00, which he promised to pay in US$ currency, as
follows:
Page 17 of 82
The amount of Twenty Thousand Dollars (US$20,000.00) on or before
November 15, 2003;
The amount of Sixty Five Thousand Dollars (US$65,000.00) on or before
November 15, 2004;
The amount of Sixty Five Thousand Dollars (US$65,000.00) on or before
November 15, 2005;
The amount of Fifty Thousand Dollars (US$50,000.00) on or before
November 15, 2006; and
The amount of Fifty Thousand Dollars (US$50,000.00) on or before
November 15, 2007.12
The parties further agreed that upon payment of the first installment of
US$20,000.00, both of them would jointly move for the partial lifting of the
writ of attachment issued by the RTC against the properties of the
respondent.
The RTC approved the compromise agreement on October 20, 2003.13
Upon the respondent's payment of the initial amount of US$20,000.00, the
parties filed their Joint Motion to Partially Lift the Preliminary Attachment
dated December 16, 2003 in accordance with the compromise agreement.14
The RTC granted the joint motion.
But the respondent did not pay the November 15, 2004 second installment
despite demand. Instead, he filed in the CA a petition for annulment of
judgment dated November 25, 2004 (C.A.-G.R. SP No. 87768),15 thereby
seeking to nullify the amended order dated October 10, 2001 granting the
application for the writ of attachment, and the order dated October 20, 2003
approving the compromise agreement.
Meanwhile, the petitioners sought the execution of the judgment upon the
compromise agreement through their motion for execution dated December
2, 2004 on the ground of the respondent's failure to pay the second
installment.16 The RTC granted their motion for execution on December 14,
2004,17 and issued the writ of execution,18 commanding the sheriff to
demand from the respondent the immediate payment of the full amount of
$230,000.00 as indicated in the compromise agreement.
Through its resolution promulgated on December 29, 2004,19 the CA
dismissed C.A.-G.R. SP No. 87768 for having no substantial merit. Although
the respondent filed a Motion for Reconsideration with Leave of Court,20 he
₯Compromise Agreement- Set V
later withdrew the motion. The CA granted his motion to withdraw on March
7, 2005.21
During the pendency of C.A.-G.R. SP No. 87768, the respondent filed a
Motion to Quash Writ of Execution dated December 20, 2004,22 which the
RTC denied on January 13, 2005.23 The RTC later denied the motion for
reconsideration with finality.
The RTC's denial of the motion for reconsideration with finality impelled the
respondent to go to the CA on certiorari (C.A.-G.R. SP No. 88804) on March
7, 2005,25 alleging that the RTC committed grave abuse of discretion
amounting to lack of jurisdiction in issuing: (1) the writ of execution in Civil
Case No. 01-101260; (2) the order dated January 13, 2005 denying the
Motion to Quash Writ of Execution; and (3) the order dated February 28,
2005 denying the motion for reconsideration. He claimed that the
compromise agreement was patently unjust, one-sided, unfair, fraudulent and
unconscionable; hence, the RTC should not have issued the writ of
execution.
On September 30, 2005, the CA promulgated the assailed decision,26
whereby it disposed as follows:
WHEREFORE, the petition, having merit in fact and in law is hereby GIVEN
DUE COURSE. Resultantly, the assailed February 28, 2005 and January 18,
2005 orders of the trial court are hereby ANNULLED and SET ASIDE for
having been issued without jurisdiction. The judicially approved compromise
agreement of August 19, 2003 is likewise annulled and set aside due to fraud
and lack of valid consent on the part of petitioner. The trial court is directed to
bring the parties together, if so desired by them, for a possible valid
compromise agreement reflective of the true and real intent of the parties and
in the alternative to proceed with the hearing and trial of Civil Case No. 01-
101260 with dispatch. No costs.
SO ORDERED.
The CA opined that based on the huge difference between the obligation of
$250,000.00 as stated in the compromise agreement and the relief prayed for
in the amended complaint worth P10,606,266.00, there could be no other
conclusion than that the respondent had been deceived into entering into the
compromise agreement; and that, in addition, the writ of execution was void
for varying the terms of the judgment by directing the payment of the entire
$230,000.00 obligation, thereby including sums that were not yet due and
demandable.
The petitioners moved for reconsideration,28 but the CA denied their
motion.29
Page 18 of 82
Hence, this appeal.
Issues
On the procedural aspect, the petitioners contend that the judicial
compromise agreement could no longer be assailed through certiorari; that
the lapse of time between the approval of the compromise agreement on
October 20, 2003 and the filing of the petition for certiorari in C.A.-G.R. SP
No. 88804 on March 7, 2005 had rendered the compromise agreement
conclusive and immutable.
On the substantive aspect, the petitioners insist that there was no fraud in the
execution of the compromise agreement; that contrary to the findings of the
CA, there was nothing appalling in the amount agreed upon in the
compromise agreement that amounted to fraud considering that their
amended complaint had prayed for P10,606,266.00, an amount that could be
equal to $212,125.00, exclusive of amount of damages, interest and cost of
suit, due to the exchange rate at the time of the discussion of the terms and
conditions of the compromise agreement being P50.00 to $1.00; and that the
amount of $250,000.00 stated in the compromise agreement was fair and
reasonable under the circumstances.
In addition, the petitioners assert that based on the resolution promulgated in
C.A.-G.R. SP No. 87768, the controlling legal rule between the parties was
that there had been no extrinsic fraud as the ground to annul the order dated
October 20, 2003 approving the compromise agreement; that the
respondent's payment of the initial US$20,000.00 in accordance with the
compromise agreement had rendered him in estoppel; and that the fact that
both parties had been assisted by their respective counsels during the
execution and submission of the compromise agreement for judicial approval
negated the existence of fraud.
In his comment dated April 12, 2006,30 the respondent counters that the
petitioners had taken advantage of his unfamiliarity with the English language
and the trust and confidence he had reposed in them as his friends when
they made him sign a document containing stipulations contrary to what they
had agreed upon; that the document turned out to be the contract to sell; that
the petitioners then used such fraudulent contract in having his properties
attached; that as a businessman, he was forced to enter into the compromise
agreement to recover his properties; and that the RTC erred in approving the
compromise agreement despite its being one-sided, unfair, fraudulent and
unconscionable.
The respondent contends that the payment of $20,000.00 did not constitute
his ratification of the compromise agreement as to estop him because the
void contracts could not be ratified; and that it would be unjust to have the
₯Compromise Agreement- Set V
errors of his previous counsel bind him, most especially if the errors were
blatant and gross, causing grave and irreparable injury to him.
In other words, the Court shall determine and resolve whether or not the CA
was correct in nullifying and setting aside the judgment based on the
compromise agreement dated August 19, 2003.
Ruling of the Court
The appeal is meritorious.
The CA annulled the August 19, 2003 final and executory compromise
agreement on the ground of fraud and vitiated consent, observing:
Indeed we are persuaded by the arguments of petitioner that the compromise
agreement was tainted with fraud and that the consent of petitioner therein
was not freely given. We carefully compared the amended complaint filed by
plaintiff-private respondent and the answer with counterclaim filed by
petitioner defendant with the approved compromise agreement and we are
all the more convinced of the presence of fraud, deceit or lack of
consideration therein.
It is simply incredible and beyond any reason how all of a sudden, in the
compromise agreement, petitioner becomes liable in the amount of Two
Hundred Fifty Thousand ($250,000.00) Dollars while in the prayer contained
in the amended complaint, plaintiff-private respondent only prayed for Ten
Million Six Hundred Six Thousand and Two Hundred Sixty Six
(P10,606,266.00) Pesos plus damages of Eight Hundred Thousand
(P800,000.00) Pesos plus costs of the suit. How did petitioner become liable
for such an amount without any other transaction having been entered into.
The only explanation for such mind-boggling discrepancy is that petitioner
was defrauded into agreeing to the proposed compromise agreement.
A judicial compromise may be annulled or modified on the ground of vitiated
consent or forgery. We find petitioners' argument on the matter very
compelling, hence we adopt it as our own.31 (citations and underscoring
omitted)
The annulment by the CA was legally and factually unwarranted.
To start with, a compromise agreement is a contract whereby the parties
make reciprocal concessions to avoid litigation or to put an end to one
already commenced.32 It is an accepted, nay, even highly encouraged
practice in the courts of law of this jurisdiction.33 It attains the authority and
effect of res judicata upon the parties upon its execution,34 and becomes
immediately final and executory, unless rescinded by grounds which vitiate
Page 19 of 82
consent.35 Once stamped with judicial imprimatur, it ceases to be a mere
contract between the parties, and becomes a judgment of the court, to be
enforced through writ of execution.36
The CA did not recognize that what it was asked to annul and set aside in
C.A.-G.R. SP No. 88804 was no longer the compromise agreement of the
parties but already the judgment based on the compromise agreement. The
failure to recognize led the CA into granting the unprecedented relief of
annulling the compromise agreement on the ground of fraud and lack of
consent. In so doing, the CA acted without jurisdiction. First of all, the action
before the CA was a special civil action for certiorari that had been brought
on March 7, 2005, which was way beyond the period of 60 days from the
rendition of the judgment based on the compromise agreement on October
20, 2003. The long delay grossly violated Section 4, Rule 65 of the Rules of
Court, which allowed the petition for certiorari to be filed not later than 60
days from notice of the judgment being assailed. Moreover, the grounds
relied upon by the respondent in his petition for certiorari in C.A.-G.R. SP No.
88804 - that the RTC had committed grave abuse of discretion tantamount to
excess or lack of jurisdiction for issuing the writ of execution that was patently
unjust, one-side, unfair, fraudulent and unconscionable compromise
agreement; and for issuing the writ of execution of the compromise
agreement that lacked consideration - were not proper grounds for assailing
the judgment based on the compromise agreement. Even assuming that
such grounds for the petition for certiorari were true, which they were not, the
judgment based on the compromise agreement could not be assailed on that
basis. As the foregoing excerpt of the assailed decision bears out, the
annulment of the judgment based on the compromise agreement was
premised on fraud and lack of consent on the part of the respondent as a
contracting party, which were far from the jurisdictional error on which the
petition for certiorari should have rested.
The impropriety of the petition for certiorari in CA-G.R. SP No. 87768 to
demand the annulment of the compromise agreement was blatant and
unquestionable. The RTC, after finding the August 19, 2003 compromise
agreement to be in order and not contrary to law, morals, good customs and
public policy, issued the October 20, 2003 order approving the compromise
agreement. With this stamp of judicial approval, the compromise agreement
became more than a mere contract of the parties. The judicially approved
agreement was thereby turned into a final judgment, immutable and
unalterable, regardless of whether or not it rested on erroneous conclusions
of fact and law, and regardless of whether the change would be by the court
that rendered it or the highest court of the land.37 This doctrine of
immutability is grounded on fundamental considerations of public policy and
sound practice, for, at the risk of occasional errors, judgments of the courts
must become final at some definite date set by law.38 The doctrine exists for
the reason that every litigation must come to an end at some time, for it is
₯Compromise Agreement- Set V
necessary for the proper enforcement of the rule of law and the
administration of justice that once a judgment attains finality, the winning
party should not be denied the favorable result. Clearly, the element of public
policy and public interest has diluted the purely private interest of the parties
before the compromise agreement was approved by the trial court.
And, secondly, if the ground of the respondent to assail the judgment based
on the compromise agreement was extrinsic fraud, his action should be
brought under Rule 47 of the Rules of Court. Under Section 2 of Rule 47, the
original action for annulment may be based only on extrinsic fraud or lack of
jurisdiction, but extrinsic fraud, to be valid ground, should not have been
availed of, or could not have been availed of in a motion for new trial or
petition for relief. If the ground relied up is extrinsic fraud, the action must be
filed within four years from the discovery of the extrinsic fraud; if the ground is
lack of jurisdiction, the action must be brought before it is barred by laches or
estoppels.39 Regardless of the ground for the action, the remedy under Rule
47 is to be availed of only if the ordinary remedies of new trial, appeal,
petition for relief or other appropriate remedies are no longer available
through no fault of the petitioner.40 Ostensibly, the respondent could have
availed himself of the petition for relief from judgment under Rule 38 of the
Rules of Court. Hence, his failure to resort to such remedy precluded him
from availing himself of the remedy to annul the judgment based on the
compromise agreement.
In Dare Adventure Farm Corporation v. Court of Appeals,41 the Court has
discoursed on the nature of the remedy of annulment of judgment under Rule
47 in the following manner:
A petition for annulment of judgment is a remedy in equity so exceptional in
nature that it may be availed of only when other remedies are wanting, and
only if the judgment, final order or final resolution sought to be annulled was
rendered by a court lacking jurisdiction or through extrinsic fraud. Yet, the
remedy, being exceptional in character, is not allowed to be so easily and
readily abused by parties aggrieved by the final judgments, orders or
resolutions. The Court has thus instituted safeguards by limiting the grounds
for the annulment to lack of jurisdiction and extrinsic fraud, and by prescribing
in Section 1 of Rule 47 of the Rules of Court that the petitioner should show
that the ordinary remedies of new trial, appeal, petition for relief or other
appropriate remedies are no longer available through no fault of the
petitioner. A petition for annulment that ignores or disregards any of the
safeguards cannot prosper.
The attitude of judicial reluctance towards the annulment of a judgment, final
order or final resolution is understandable, for the remedy disregards the
time-honored doctrine of immutability and unalterability of final judgments, a
solid corner stone in the dispensation of justice by the courts. The doctrine of
Page 20 of 82
immutability and unalterability serves a two-fold purpose, namely: (a) to avoid
delay in the administration of justice and thus, procedurally, to make orderly
the discharge of judicial business; and (b) to put an end to judicial
controversies, at the risk of occasional errors, which is precisely why the
courts exist. As to the first, a judgment that has acquired finality becomes
immutable and unalterable and is no longer to be modified in any respect
even if the modification is meant to correct an erroneous conclusion of fact or
of law, and whether the modification is made by the court that rendered the
decision or by the highest court of the land. As to the latter, controversies
cannot drag on indefinitely because fundamental considerations of public
policy and sound practice demand that the rights and obligations of every
litigant must not hang in suspense for an indefinite period of time.

WHEREFORE, the Court GRANTS the petition for review on certiorari

ANNULS and SETS aside the assailed decision promulgated on September
30, 2005; REINSTATES the judgment issued by the Regional Trial Court,
Branch 49, of Manila based on the compromise agreement of August 19,
2003 in Civil Case No. 01-101260; and ORDERS the respondent to pay the
costs of suit.

SO ORDERED.

₯Compromise Agreement- Set V

Page 21 of 82
[34] G.R. No. 179597, December 03, 2014
IGLESIA FILIPINA INDEPENDIENTE, Petitioner, v. HEIRS OF
BERNARDINO TAEZA, Respondents.
Remedial Law; Civil Procedure; Parties; Compromise Agreements; The
Supreme Court (SC) stated in its Decision dated February 3, 2014, that “any sale of
real property requires not just the consent of the Supreme Bishop but also the
concurrence of the laymen’s committee, the parish priest, and the Diocesan Bishop,
as sanctioned by the Supreme Council.”—Note, however, that the only signatory to
the Compromise Agreement is Right Rev. Ernesto M. Tamayo, Bishop of the
Diocesan Church of Tuguegarao, purportedly authorized by the Supreme Bishop,
Most Reverend Ephraim S. Fajutagana, via a Special Power of Attorney dated as far
back as September 27, 2011. This would give rise to the same question of whether
the Supreme Bishop is indeed authorized to enter into a contract of sale in behalf of
petitioner. The Court stated in its Decision dated February 3, 2014, that “any sale of
real property requires not just the consent of the Supreme Bishop but also the
concurrence of the laymen’s committee, the parish priest, and the Diocesan Bishop,
as sanctioned by the Supreme Council.” The Compromise Agreement, which
stipulates that the subject property would be sold to a third party and the proceeds
therefrom divided between herein parties, again raises the issue of the authority of
the person acting in behalf of petitioner.
RESOLUTION
PERALTA, J.:
The Court promulgated a Decision1 in the above-captioned case on February
3, 2014. The dispositive portion thereof reads as follows:
WHEREFORE, the petition is GRANTED. The Decision of the Court of
Appeals, dated June 30, 2006, and its Resolution dated August 23, 2007, are
REVERSED and SET ASIDE. A new judgment is hereby entered:
(1) DECLARING petitioner Iglesia Filipina Independiente as the RIGHTFUL
OWNER of the lots covered by Transfer Certificate of Title Nos. T-77994 and
T-77995;
(2) ORDERING respondents to execute a deed conveying the
aforementioned lots to petitioner;
(3) ORDERING respondents and successors-in-interest to vacate the subject
premises and surrender the same to petitioner; and
(4) Respondents to PAY costs of suit.
₯Compromise Agreement- Set V
SO ORDERED.
Respondents' Motion for Reconsideration of the aforementioned Decision
was denied with finality in a Resolution3 dated July 9, 2014. Nevertheless,
herein parties filed a Joint Manifestation4 dated July 14, 2014, wherein they
prayed that the attached Compromise Agreement dated June 27, 2014 be
approved by the Court for the speedy resolution of the dispute between the
parties.
Note, however, that the only signatory to the Compromise Agreement is
Right Rev. Ernesto M. Tamayo, Bishop of the Diocesan Church of
Tuguegarao, purportedly authorized by the Supreme Bishop, Most Reverend
Ephraim S. Fajutagana, via a Special Power of Attorney dated as far back as
September 27, 2011. This would give rise to the same question of whether
the Supreme Bishop is indeed authorized to enter into a contract of sale in
behalf of petitioner. The Court stated in its Decision dated February 3, 2014,
that “any sale of real property requires not just the consent of the Supreme
Bishop but also the concurrence of the laymen's committee, the parish priest,
and the Diocesan Bishop, as sanctioned by the Supreme Council.” The
Compromise Agreement, which stipulates that the subject property would be
sold to a third party and the proceeds therefrom divided between herein
parties, again raises the issue of the authority of the person acting in behalf
of petitioner.
WHEREFORE, the Joint Manifestation dated July 14, 2014 is DENIED, and
the Compromise Agreement dated June 27, 2014 is hereby DISAPPROVED.
SO ORDERED.
Page 22 of 82
[35] G.R. Nos. 177857-58, October 05, 2016
PHILIPPINE COCONUT PRODUCERS FEDERATION, INC. (COCOFED),
MANUEL V. DEL ROSARIO, DOMINGO P. ESPINA, SALVADOR P.
BALLARES, JOSELITO A. MORALEDA, PAZ M. YASON, VICENTE A.
CADIZ, CESARIA DE LUNA TITULAR, AND RAYMUNDO C. DE
VILLA, Petitioners, v. REPUBLIC OF THE PHILIPPINES, Respondent.
Constitutional Law; Due Process; It is elementary that every person must be
heard and given his day in court before a judgment involving his life, liberty or
property issues against him.—It is elementary that every person must be heard and
given his day in court before a judgment involving his life, liberty or property issues
against him. This rule is enshrined no less in the very first section of the Bill of
Rights of our Constitution: SECTION 1. No person shall be deprived of life,
liberty or property without due process of law, nor shall any person be denied the
equal protection of the laws.
Same; Same; Corporations; Corporate persons, needless to stress, are entitled
to the due process protection.—Corporate persons, needless to stress, are entitled to
the due process protection. Thus, in Palm Avenue Holding Co., Inc. v.
Sandiganbayan, 732 SCRA 156 (2014), the Court echoed our ruling in PCGG v.
Sandiganbayan, 290 SCRA 639 (1998), that the failure to implead a corporation in a
suit for the recovery of ill-gotten wealth against its stockholders cannot bind the
corporation itself; otherwise, its fundamental right to due process will be
violated, viz.: The Court’s ruling in Presidential Commission on Good Government
v. Sandiganbayan, which remains good law, reiterates the necessity of the
Republic to actually implead corporations as defendants in the complaint, out of
recognition for their distinct and separate personalities, failure to do so would
necessarily be denying such entities their right to due process. Here, the writ of
sequestration issued against the assets of the Palm Companies is not valid
because the suit in Civil Case No. 0035 against Benjamin Romualdez as
shareholder in the Palm Companies is not a suit against the latter. The Court has
held, contrary to the assailed Sandiganbayan Resolution in G.R. No. 173082,
that failure to implead these corporations as defendants and merely annexing a
list of such corporations to the complaints is a violation of their right to due
process for it would be, in effect, disregarding their distinct and separate
personality without a hearing. Here, the Palm Companies were merely mentioned
as Item Nos. 47 and 48, Annex A of the Complaint, as among the corporations where
defendant Romualdez owns shares of stocks. Furthermore, while the writ of
sequestration was issued on October 27, 1986, the Palm Companies were
impleaded in the case only in 1997, or already a decade from the ratification of
the Constitution in 1987, way beyond the prescribed period.
Remedial Law; Civil Procedure; Execution of Judgments; The Supreme Court
(SC) has held that execution may issue only upon a person who is a party to the
₯Compromise Agreement- Set V
action or proceeding, and not against one who did not have or was denied his day in
court.—As a corollary rule, this Court has held that execution may issue only upon a
person who is a party to the action or proceeding, and not against one who did not
have or was denied his day in court. We said as much in Atilano II v. Asaali, 680
SCRA 345 (2012): It is well-settled that no man shall be affected by any
proceeding to which he is a stranger, and strangers to a case are not bound by a
judgment rendered by the court. Execution of a judgment can only be issued
against one who is a party to the action, and not against one who, not being a party
thereto, did not have his day in court. Due process dictates that a court decision can
only bind a party to the litigation and not against innocent third parties.
Same; Same; Judgments; In a plethora of cases, the Supreme Court (SC) has
emphasized the well-entrenched principle that a judgment rendered without
jurisdiction cannot be the source of any right nor the creator of any obligation.—In
a plethora of cases, the Court has emphasized the well-entrenched principle that a
judgment rendered without jurisdiction cannot be the source of any right nor
the creator of any obligation. We said as much in Florete v. Florete, 781 SCRA
255 (2016) and Arcelona v. Court of Appeals, 280 SCRA 20 (1997): A void
judgment for want of jurisdiction is no judgment at all. It cannot be the source
of any right nor the creator of any obligation. All acts performed pursuant to it
and all claims emanating from it have no legal effect. Hence, it can never become
final and any writ of execution based on it is void: “. . . it may be said to be a lawless
thing which can be treated as an outlaw and slain at sight, or ignored wherever and
whenever it exhibits its head.” The acknowledgment that the Court has no
jurisdiction over SMC in the present case is not “allow[ing] San Miguel Corporation
to keep these treasury shares under the guise of technicalities.” The question of
jurisdiction, the Court has repeatedly explained, is not a mere question of
technicality or a simple matter of procedure but an element of due process.
Indeed, it is unsporting, nay the height of injustice and a clear violation of the due
process guarantee, to order SMC to comply with any decision rendered in CC 0033-F
when it was never given the opportunity to present, explain, and prove its claim over
the presently contested shares.
Constitutional Law; Due Process; The Supreme Court (SC) cannot set the
benchmark of due process at the lowest level by considering each pleading submitted
by a party as enough to satisfy the requirements of this Constitutional protection.—
The Court cannot set the benchmark of due process at the lowest level by considering
each pleading submitted by a party as enough to satisfy the requirements of this
Constitutional protection. If this Court is to animate the spirit of the Constitution and
maintain in full strength the substance of the due process protection, it must afford
each party the full legal opportunity to be heard and present evidence in support of
his or her contentions. SMC must, therefore, be given full opportunity to proffer
evidence on its claim of ownership over the treasury shares in a proper case before
the right court.
Page 23 of 82
 Estoppel; While the general rule is that the State cannot be put in estoppel by
the mistakes or errors of its officials or agents, it is established that “[t]he rule on
non-estoppel of the government is not designed to perpetrate an injustice.”—While
the general rule is that the State cannot be put in estoppel by the mistakes or errors of
its officials or agents, it is established that “[t]he rule on non-estoppel of the
government is not designed to perpetrate an injustice.” Thus, several exceptions to
the Republic’s non-estoppel have been recognized. In Republic of the Philippines v.
Court of Appeals, 301 SCRA 366 (1999), the Court held: The general rule is that the
State cannot be put in estoppel by the mistakes or errors of its officials or agents.
However, like all general rules, this is also subject to exceptions, viz.: “Estoppel
against the public are little favored. They should not be invoked except in rare and
unusual circumstances and may not be invoked where they would operate to defeat
the effective operation of a polity adopted to protect the public. They must be applied
with circumspection and should be applied only in those special cases where the
interests of justice clearly require it. Nevertheless, the government must not be
allowed to deal dishonorably or capriciously  with its citizens, and must not play
an ignoble part or do a shabby thing; and subject to limitations .  . . the doctrine
of equitable estoppel may be invoked against public authorities as well as against
private individuals.”
RESOLUTION
VELASCO JR., J.:
For consideration is the Manifestation and Omnibus Motion (Omnibus
Motion) dated October 12, 2012 interposed by respondent Republic of the
Philippines (Republic). In it, respondent claims that the Court, in its
September 4, 2012 Resolution, has not included as part of its assets to be
reconveyed to it the 25.45 million San Miguel Corporation (SMC) shares
subject of the Compromise Agreement dated March 20 and 22, 1990 entered
into by and between the SMC Group and the United Coconut Planters Bank
(UCPB) Group that SMC subsequently converted to treasury shares.
Antecedents
On March 26, 1986, the Coconut Industry Investment Fund Holding
Companies ("CIIF") sold 33,133,266 SMC common shares to Andres Soriano
III of the SMC Group for P3,313,326,600.00, payable in four (4) installments.
On April 1, 1986, the SMC Group paid the initial purchase price of P500
million to the UCPB as administrator of the CIIF (the "UCPB Group"). The
sale was transacted through the stock exchange and the shares were then
registered in the name of Anscor-Hagedom Securities, Inc.
(AHSI). 1chanrobleslaw
On April 7, 1986, the Presidential Commission on Good Government (PCGG)
₯Compromise Agreement- Set V
sequestered the shares of stock. Due to the sequestration, the SMC Group
suspended payment of the balance of the purchase price of the subject
stocks. In retaliation, the UCPB Group attempted to rescind the sale by filing
a complaint with the Regional Trial Court of Makati. The complaint, however,
was eventually ordered dismissed for lack of jurisdiction. 2chanrobleslaw
Early 1989 developments saw the SMC and UCPB groups successfully
threshing out their dispute over the aborted sale of the over 33.1 million SMC
shares which have meanwhile ballooned to 175,274,960 as a consequence
of dividends and stock splits. But because any settlement required PCGG's
intervention, Andres Soriano III, for SMC, and Ramon Y. Sy, for UCPB, in a
joint letter of October 31, 1989, informed the PCGG about a proposal which
would have the two groups give PCGG an "arbitration fee" in the form of
5,500,000 SMC shares to support the Comprehensive Agrarian Reform
Program (CARP).3chanrobleslaw
PCGG approved the proposal. Thus, on March 20 and 22, 1990, SMC and
UCPB representing the CIIF signed a Compromise Agreement and Amicable
Settlement  ("Compromise Agreement"). Its pertinent provisions state:
3.1. The sale of the shares covered by and corresponding to the first
installment of the 1986 Stock Purchase Agreement consisting of Five Million
SMC Shares is hereby recognized by the parties as valid and effective as of
1 April 1986. Accordingly, said shares and all stock and cash dividend
declared thereon after 1 April 1986 shall pertain, and are hereby assigned, to
SMC. x x x
3.2. The First Installment Shares shall revert to the SMC treasury for
dispersal pursuant to the SMC Stock Dispersal Plan attached as Annex "A-1"
hereof. The parties are aware that these First Installment Shares shall be
sold to raise funds at the soonest possible time for the expansion program of
SMC. x x x
3.3. The sale of the shares covered by and corresponding to the second,
third and fourth installments of the 1986 Stock Purchase Agreement is
hereby rescinded effective 1 April 1986 and deemed null and void, and of no
force and effect. Accordingly, all stock and cash dividends declared after 1
April 1986 corresponding to the second, third and fourth installments shall
pertain to CIIF Holding Corporations. x x x
On March 23, 1990, the SMC and the UCPB Groups filed with the
Sandiganbayan a Joint Petition for Approval of the Compromise Agreement
and Amicable Settlement ('Joint Petition"), docketed as CC No. 0102.4
On June 18, 1990, the PCGG joined the OSG in praying that the SMC and
UCPB Groups' Joint Petition be treated as an incident of Civil Case (CC) No.
0033, a case for the recovery of ill-gotten wealth instituted by the PCGG with
Page 24 of 82
the Sandiganbayan against former President Ferdinand Marcos, Eduardo
Cojuangco, Jr. ("Cojuangco"), et al. on July 31, 1987. PCGG, however,
interposed no objection to the implementation of the Compromise
Agreement  subject to some conditions.
On July 4, 1991, the SMC and UCPB Groups filed a Joint Manifestation of
Implementation of Compromise Agreement and of Withdrawal of
Petition therein stating that they have implemented the Compromise
Agreement with the conditions set by the PCGG and, accordingly,
withdrawing their Joint Petition. They informed the Sandiganbayan of the
execution of the following corporate acts:
a. On instructions of the SMCGroup, the certificates of stock registered in the
name of Anscor-Hagedom Securities, Inc. (AHSI) representing 175,274,960
SMC shares were surrendered to the SMC corporate secretary.
b. The said SMC shares were reissued and registered in the record books of
SMC in the following manner: i) Certificates for 25,450,000 SMC shares were
registered in the name of SMC, as treasury; ii) Certificates for 144,324,960
SMC shares were registered in the name of the CIIF Holding Companies; iii)
Certificates for 5,500,000 SMC shares were registered in the name of the
PCGG.
c. The UCPB Group has delivered to the SMC Group the amount of
P500,000,000.00 in full payment of the UCPB preferred shares.
d. The SMC Group delivered to the UCPB Group the amount of
481,628,055.99 representing accumufated dividends (from Apri 11, 1986) on
the shares reverted to the CIIF Holding Companies.
The PCGG, for its part, manifested that it has no objection to the action
thus taken by the SMC and UCPB Groups.7 COCOFED, et al. and
Cojuangco filed their respective motions, both dated July 4, 1991, to nullify
the implementation of the Compromise Agreement. Acting on the Joint
Manifestation of Implementation of Compromise Agreement and of
Withdrawal of Petition, the Sandiganbayan on July 5, 1991 noted the
same.8chanrobleslaw
On July 16, 1991, SMC filed its Manifestation where it declared that Stock
Certificate Nos. A 0004129 and A 0015556 representing 25,450,000 shares
were issued in the name of SMC as treasury stocks.
On October 25, 1991, the Sandiganbayan issued a Resolution requiring SMC
to deliver the 25.45 million SMC treasury shares to the PCGG. 9 On March 18,
1992, the Sandiganbayan denied the SMC Group's Motion for
Reconsideration.
₯Compromise Agreement- Set V
Later, the Sandiganbayan ordered on December 8, 1994 that the causes of
action in CC No. 0033 be divided and litigated separately. In Compliance, the
Republic subdivided CC No. 0033 into eight complaints, two of which
became:
CC No. 0033-A, entitled Third Amended Complaint (Subdivided)[Re:
Anomalous Purchase and Use of First United Bank (now "United Coconut
Planters Bank')], the subject matter of which is the sequestered shares of
stock of UCPB registered in the names of the coconut farmers (the UCPB
shares) and of Cojuangco; and 
a. CC No. 0033-F, entitled Third Amended Complaint (Subdivided) [Re:
Acquisition of San Miguel Corporation], the subject matter of which is
the shares of stock of SMC registered in the names of the CIIF
Holding Companies (the SMC shares).
In a Resolution, the Sandiganbayan admitted the eight subdivided complaints
on March 24, 1999. 
Meanwhile, respondent Republic filed in CC No. 0033-A a  Motion for Partial
Summary Judgment, which the Sandiganbayan granted on 1 July 11, 2003
via a Partial Summary Judgment (PSJ) holding that the coco levy fund is
public in nature.
On February 2, 2004, SMC filed in CC No. 0033-F a Complaint in-
Intervention praying that any judgment forfeiting the CIIF block of
shares should exclude the "treasury shares." Herein respondent
opposed the SMC's motion to intervene in said case. By Resolution of
May 6, 2004, the graft court denied the desired intervention.
The next day, the Sandiganbayan granted the Republic's Motion for
Judgment on the Pleadings and/or Partial Summary Judgment in CC No.
0033-F in its May 7, 2004 PSJ, holding that "[t]he CIIF Companies having
been acquired with public funds, the 14 CIIF-Holding Companies and all their
assets, including the CIIF Block of SMC Shares, being public in character,
belong. to the government."12 In so ruling, the Sandiganbayan declared the
33,133,266 sequestered SMC shares subject of the stock purchase
agreement by the CIIF Holding Companies and Andres Soriano III as owned
by the Republic in trust for the coconut farmers.
In its Resolution of May 11, 2007 in CC No. 0033-F, the Sandiganbayan held
that there is no need for further trial on the issue regarding the actual
percentage of the sequestered CIIF Block of SMC shares vis-a-vis the
outstanding capital stock of SMC, effectively deleting the last paragraph of
the dispositive portion of its May 7, 2004 PSJ.
Page 25 of 82
It is upon the foregoing factual backdrop and proceedings that herein
petitioners have filed the captioned consolidated Petitions for Review on
Certiorari in May 2007.
Awaiting the decision thereon, COCOFED filed on July 24, 2009 an Urgent
Motion to Approve the Conversion of the SMC Common Shares into SMC
Series 1 Preferred Shares15 praying for the approval of the conversion of the
Class "A" and Class."B" common shares registered in the name of the 14
CIIF Holding Companies (listed in Annex "D" of the motion) 16 into SMC
Series 1 Preferred Shares.
By then, the 14 CIIF Holding Companies' registered shareholdings in SMC
already totaled 753,848,312 shares after dividend yields and availment by
the CIIF of stock rights offering on April 11, 2005 of additional 28,645,672
shares.
On September I7, 2009, this Court issued a Resolution 18 approving with
qualification the conversion, viz:
WHEREFORE, the Court APPROVES the conversion of the 753,848,312,
·sMC Common Shares registered in the CIIF companies to SMC SERIES 1
PREFERRED SHARES of 753,848,312, the converted shares to be
registered in the names of the CIIF companies in accordance with the terms
and conditions specified in the conversion offer set forth in SMC's Information
Statement and appended as Annex "A" of COCOFED's Urgent Motion to
Approve the Conversion of the CIIF SMC Common Shares into Series 1
Preferred Shares. The preferred shares shall remain in custodia legis and
their ownership shall be subject to the final ownership determination of the
Court. Until the ownership issue has been resolved, the preferred shares in
the name of the CIIF Companies shall be placed under sequestration and
PCGG management.
Once the conversion is accomplished, the SMC Common Shares
previously registered in the names of the CIIF companies shall be released
from sequestration.
Notably, the Court's September I7, 2009 Resolution was limited only to the
753,848,312 common shares that were registered in the name of the CIIF
Companies. To stress, a part of these shares evolved from the 144,324,960
shares registered in the name of the CIIF Holding Companies following the
implementation of the Compromise Agreement and augmented by the
28,645,672 shares availed during the stock rights offering in Apri12005. The
September 17, 2009 Resolution did not include the 25.45 million shares in
the name of SMC as treasury shares. Neither did the same Resolution
encompass the "arbitration fee" shares which already amounted to
27,571,409 Class "A" and Class "B" shares as of July 30, 2009.
On June 28, 2011, respondent Republic filed with the Court an Urgent
₯Compromise Agreement- Set V
Motion to Direct the San Miguel Corporation (SMC) to Comply with the Final
and Executory Resolutions dated October 24, 1991 and March 18, 1992 of
the Sandiganbayan21 praying that this Court direct SMC to comply with the
Sandiganbayan's October 25, 1991 and March 18, 1992
Resolutions. In a Resolution dated July 5, 2011, this Court required SMC to
file a Comment on the Republic's Urgent Motion.
On January 24, 2012, this Court finally rendered judgment on the captioned
consolidated petitions and affirmed with modification the PSJs of the
Sandiganbayan holding that the CIIF Companies and the CIIF block of SMC
shares are public funds/assets.
Petitioners COCOFED, et al. interposed  their Motion for Reconsideration
dated February 14, 2012 of this Court's January 24, 2012 Decision.
Pending the resolution of the petitioners' motion for reconsideration, SMC
filed its Comment on the Urgent Motion to Direct the San Miguel Corporation
(SMC) to Comply with the Final and Executory Resolutions Dated October
24, 1991 and March 18, 1992 of the Sandiganbayan on March 30, 2012
opposing the Republic's motion on procedural and substantive grounds. In
the main, SMC argued that the Compromise Agreement whence it derives its
right on the treasury shares is effective and the Republic has no ground to
assail it.
In its September 4, 2012 Resolution denying COCOFED's motion for
reconsideration, the Court sought to reflect the current number of the shares
registered in the name of the CIIF companies and so held:
As of 1983, the Class A and B San Miguel Corporation (SMC) common
shares in the names of the 14 CIIF Holding Companies are 33,133,266
shares. From 1983 to November 19, 2009 when the Republic of the
Philippines representing the Presidential Commission on Good Government
(PCGG) filed the "Motion To Approve Sale of CIIF SMC Series I Preferred
Shares," the common shares of the CIIF Holding companies increased
to 753,848,312 Class A and B SMC common shares.
Owing, however, to a certain development that altered the factual situation
then obtaining in G.R. Nos. 177857-58, there is, therefore, a compelling need
to clarify the fallo of the January 24, 2012 Decision to reconcile it, vis-a-vis
the sh&res of stocks in SMC which were declared owned by the Government,
with this development. We refer to the Resolution issued by the Court on
September 17, 2009 in the then consolidated cases docketed as G.R.
Nos. 177857-58, G.R. No. 178193 and G.R. No. 180705. In that Resolution
which has long become final and executory, the Court, upon motion of
COCOFED and with the approval of the Presidential Commission on
Page 26 of 82
Good Government, granted the conversion of 753,848,312 Class "A" of stock.
and Class "B" SMC common shares registered in the name of the CIIF
companies to SMC Series 1 Preferred Shares of 753,848,312, subject to The Partial Summary Judgment rendered on May 7, 2004 is modified by
certain terms and conditions. The dispositive portion of the aforementioned deleting the last paragraph of the dispositive portion, which will now read, as
Resolution states: follows:

The CIIF block of SMC shares, as converted, is the same shares of stocks
that are subject matter of, and declared as owned by the Government in, the
January 24, 2012 Decision. Hence, the need to clarify.
WHEREFORE, the Court resolves to DENY with FINALITY the instant
Motion for Reconsideration dated February 14, 2012 for lack of merit.
WHEREFORE, in view of the foregoing, we hold that:
The Motion for Partial  Summary Judgment (Re: Defendants CIIF
Companies, 14 Holding Companies - and Cocofed, et al.) filed by Plaintiff is
hereby GRANTED.
ACCORDINGLY, THE CIIF COMPANIES, NAMELY:

The Court further resolves to CLARIFY that the 753,848,312 SMC Series 1 1. Southern Luzon Coconut Oil Mills (SOLCOM);
preferred shares of the CIIF companies converted from the CIIF block of 2. Cagayan de Oro Oil Co., Inc. (CAGOIL);
SMC shares, with all the dividend earnings as well as all increments arising 3. Iligan Coconut Industries, Inc. (ILICOCO);
from, but not limited to, the exercise of preemptive rights subject of the 4. San Pablo Manufacturing Corp. (SPMC);
September 17, 2009 Resolution, shall now be the subject matter of the 5. Graneexport Manufacturing Corp. (GRANEX); and
January 24, 2012 Decision and shall be declared owned by the Government 6. Legaspi Oil Co., Inc. (LEGOIL),
and be used only for the benefit of all coconut farmers and for the
development of the coconut industry. AS WELL AS THE 14 HOLDING COMPANIES, NAMELY:
As modified, the fallo of the January 24, 2012 Decision shall read, as follows:
1. Soria Shares, Inc.;
2. ACS Investors, Inc.;
WHEREFORE, the petitions in G.R. Nos. 177857-58 and 178793 are
3. Roxas Shares, Inc.;
hereby DENIED. The Partial Summary Judgment dated July 11, 2003 in Civil
4. Arc Investors, Inc.;
Case No. 0033-A as reiterated with modification in Resolution dated June 5,
5. Toda Holdings, Inc.;
2007, as well as the Partial Summary Judgment dated May 7, 2004 in Civil
6. AP Holdings, Inc.;
Case No. 0033-F, which was effectively amended in Resolution dated May
7. Fernandez Holdings, Inc.;
11, 2007, are AFFIRMED with MODIFICATION, only with respect to those
8. SMC Officers Corps, Inc.;
issues subject of the petitions in G.R. Nos. 177857-58 and 178193. However,
9. Te Deum Resources, Inc.;
the issues raised in G.R. No. 180705 in relation to Partial Summary
10. Anglo Ventures, Inc.;
Judgment dated July 11, 2003 and Resolution dated June 5, 2007 in Civil
11. Randy Allied Ventures, Inc.;
Case No. 0033-A, shall be decided by this Court in a separate decision.
12. Rock Steel Resources, Inc.;
The Partial Summary Judgment in Civil Case No. 0033-A dated July 11,
13. Valhalla Properties Ltd., Inc.; and
2003, is hereby MODIFIED, and shall read as follows: SO ORDERED.
14. First Meridian Development, Inc.

The Partial Summary Judgment in Civil Case No. 0033-F dated May 7, 2004,
is hereby MODIFIED, and shall read as follows:
WHEREFORE, the MOTION FOR EXECUTION OF PARTIAL SUMMARY
JUDGMENT (RE: CIIF BLOCK OF SMC SHARES OF STOCK) dated
August 8, 2005 of the plaintiff is hereby denied for lack of merit. However,
this Court orders the severance of this particular claim of Plaintiff. The Partial
Summary Judgment dated May 7, 2004 is now considered a separate final
and appealable judgment with respect to the said CIIF Block of SMC shares
₯Compromise Agreement- Set V
AND THE CONVERTED SMC SERIES 1 PREFERRED SHARES
TOTALING 753,848,312 SHARES SUBJE'CT OF THE RESOLUTION OF
THE COURT DATED SEPTEMBER 17, 2009 TOGETHER WITH ALL
DIVIDENDS DECLARED, PAID OR ISSUED THEREON AFTER THAT
DATE, AS WELL AS ANY INCREMENTS THERETO ARISING FROM, BUT
NOT LIMITED TO, EXERCISE OF PRE-EMPTIVE RIGHTS ARE
DECLARED OWNED BY THE GOVERNMENT TO BE USED ONIy FOR
THE BENEFIT OF ALL COCONUT FARMERS AND FOR THE
Page 27 of 82
DEVELOPMENOF THE COCONUT INDUSTRY, AND ORDERED
RECONVEYED TO THE GOVERNMENT.
THE COURT AFFIRMS THE RESOLUTIONS ISSUED BY THE
SANDIGANBAYAN ON JUNE 5, 2007 IN CIVIL CASEi NO. 0033-A AND
ON MAY 11, 2007 IN CIVIL CASE NO. 0033-F, THAT THERE IS NO MORE
NECESSITY OF FURTHER TRIAL WITH RESPECT TO THE ISSUE OF
OWNERSHIP OF (1) THE SEQUESTERED UCPB SHARES, (2) THE CIIF
BLOCK OF SMC SHARES, AND (3) THE CIIF COMPANIES, AS THEY
HAVE FINALLY BEEN ADJUDICATED IN THE AFOREMENTIONED
PARTIAL SUMMARY JUDGMENTS DATED JULY 11, 2003 AND MAY 7,
2004.
SO ORDERED.
On October 15, 2012, respondent Republic filed the present Manifestation
and Omnibus Motion dated October 12, 2012 particularly asserting that the
753,848,312 SMC Series 1 Preferred. Shares mentioned in this Court's
September 4, 2012 Resolution does not equate to the 33,133,266 SMC
common shares specified in its January 24, 2012 Decision. The Republic
posits that the 25.45 million SMC treasury shares form part of the CIIF block
of SMC shares totaling 33,133,266 shares as of 1983, which the Court has
declared to be owned by the Government. Hence, the Republic prays that a
new resolution be issued:
1. AMENDING the Resolution dated September 4, 2012 to include the
"treasury shares" which are part and parcel of the 33,133,266 CIIF Block of
Shares as of 1983 decreed as owned by the Government;
2. DIRECTING the San Miguel Corporation to comply with the
Sandiganbayan's Resolution promulgated on October 24, 1991 and March
18, 1992 in Civil Case No. 0102 (integrated in Civil Case No. 0033 [Civil
Case No. 0033-F]) as affirmed by the Honorable Court in the consolidated
cases in G.R. Nos. 104037-38 and 109797 which directed the delivery to the
[PCGG] of the treasury shares, including all the accrued cash and stock
dividends from 1986 up to the present;
3. AWARDING actual damages in favor of the Republic of the Philippines in
the form of legal interest on the cash and cash value of the stock dividends
and cash dividends which ought to have accrued and delivered to the
Republic and the PCGG by the SMC in compliance with the aforesaid
resolutions and decision of. the Sandiganbayan and the Honorable Court. 23
In its Comment24 dated December 2, 2013 on the above Manifestation and
Omnibus Motion, SMC maintains that the adverted SMC treasury shares
belong to SMC pursuant to the March 20 and 22, 1990 Compromise
₯Compromise Agreement- Set V
Agreement and that this Court is without jurisdiction to order it to deliver the
25.45 million treasury shares to the Government since SMC's intervention in
CC No. 0033-F was denied and so it is a non-party in said case.
Our Ruling
No Jurisdiction over SMC since it is not a party to the case
It is elementary that every person must be heard and given his day in court
before a judgment involving his life, liberty or property issues against him.
This rule is enshrined no less in the very first section of the Bill of Rights of
our Constitution:
SECTION 1. No person shall be deprived of life, liberty or property
without due process of law, nor shall any person be denied the equal
protection of the laws. (Emphasis supplied)
Corporate persons, needless to stress, are entitled to the due process
protection. Thus, in Palm Avenue Holding Co., Inc. v.
Sandiganbayan,25cralawred the Court echoed our ruling in PCGG v.
Sandiganbayan26 that the failure to implead a corporation in a suit for the
recovery of ill-gotten wealth against its stockholders cannot bind the
corporation itself; otherwise, its fundamental right to due process will be
violated, viz:
The Court's ruling in Presidential Commission on Good Government v.
Sandiganbavan, which remains good law, reiterates the necessity of the
Republic to actually implead corporations as defendants in the
complaint, out of recognition for their distinct and separate
personalities, failure to do so would necessarily be denying such
entities their right to due process. Here, the writ of sequestration issued
against the assets of the Palm Companies is not valid because the suit
in Civil Case No. 0035 against Benjamin Romualdez as shareholder in
the Palm Companies is not a suit against the latter. The Court has held,
contrary to the assailed Sandiganbayan Resolution in G.R. No. 173082,
that failure to implead these corporations as defendants and merely
annexing a list of such corporations to the complaints is a violation of their
right to due process for it would be, in effect, disregarding their distinct
and separate personality without a hearing. Here, the Palm Companies
were merely mentioned as Item Nos. 47 and 48, Annex A of the Complaint,
as among the corporations where defendant Romualdez owns shares of
stocks. Furthermore, while the writ of sequestration was issued on
October 27, 1986, the Palm Companies were impleaded in the case only
in 1997, or already a decade from the ratification of the Constitution in
1987, way beyond the prescribed period.
Page 28 of 82

As a corollary rule, this Court has held that execution may issue only upon a
person who is a party to the action or proceeding, and not against one
who did not have or was denied his day in court. We said as much in Atilano
v. Asaali:  void: "... it may be said to be a lawless thing which can be treated as an
It is well-settled that no man shall be affected by any proceeding to which
he is a stranger, and strangers to a case are not bound by a judgment
rendered by the court. Execution of a judgment can only be issued against
one who is a party to the action, and not against one who, not being a party
thereto, did not have his day in court. Due process dictates that a court
decision can only bind a party to the litigation and not against innocent third
parties.
Even the Rules of Court provides that judgments can, in appropriate cases,
only be exe?uted against a judgment obligor. As it were, SMC
was never made a party to CC No. 0033-F filed by respondent Republic to
recover the SMC shares of stock registered in the name of the CIIF Holding
Companies. It was not given a chance to justify, let alone ventilate, its claim
ever the 25.45 million shares it has in its possession even when it had
volunteered to participate and moved to intervene in the said case, as will be
expounded below.
Certainly, SMC cannot, under the premises, be considered as such judgment
obligor in CC 0033-F as it was not impleaded by respondent Republic as a
party despite the clear mandate of the Rules of Court that "parties in interest
without whom no final determination can be had of an action shall be joined
as plaintiffs or defendants."
It has been advanced, however, that "[SMC] need not be [a party] because
its interests have already been clearly and finally addressed by this Court."
This view, however, fails to consider that SMC's interests over these 25.45
million shares have not yet been addressed 31 precisely because SMC was
not impleaded in the case when its legal presence is an absolute pre-
requisite before a prejudicial and confiscatory decision can be issued
against it.32 In other words, the non-joinder of SMC as a party in CC 0033-F
did not confer upon this Court jurisdiction over the juridical person of SMC
and so the Court is without power to order SMC to comply with any
pronouncement made in the case involving, adversely at that, its
property.
In a plethora of cases,33 the Court has emphasized the well-entrenched
principle that a judgment rendered without jurisdiction cannot be the
source of any right nor the creator of any obligation. We said as much
in Florete v. Florete34 and Arcelona v. Court of Appeals:
₯Compromise Agreement- Set V
A void judgment for want of jurisdiction is no judgment at all. It cannot
be the source of any right nor the creator of any obligation. All acts
performed pursuant to it and all claims emanating from it have no legal effect.
Hence, it can never become final and any writ of execution based on it is
outlaw and slain at sight, or ignored wherever and whenever it exhibits its
head."36
The acknowledgment that the Court has no jurisdiction over SMC in the
present case is not "allow[ing] San Miguel Corporation to keep these treasury
shares under the guise of technicalities."37The question of jurisdiction, the
Court has repeatedly explained, is not a mere question of technicality
or a simple matter of procedure but an element of due
process.38 Indeed, it is unsporting, nay the height of injustice and a clear
violation of the due process guarantee, to order SMC to comply with any
decision rendered in CC 0033-F when it was never given the opportunity to
present, explain, and prove its claim over the presently contested shares.
It may be that in Republic v. Sandiganbayan, Maria Clara Lobregat, et al.
(Lobregat),39 one of the cases that sprung forth from the sequestration made
by PCGG of properties suspected ill-gotten by former President Marcos and
his cronies, including the CIIF Companies and its SMC shares, the Court
mentioned that there is no need to implead SMC in cases seeking to recover
sequestered SMC shares.
Our pronouncements in Lobregat, however, are not applicable herein. Unlike
in the foregoing cases, SMC presently has a legitimate claim over the
25.45 million shares in its treasury by a commercial transaction not
otherwise alleged to be conducted under any "illicit or anomalous
conditions." SMC and the CIIF Companies (through UCPB) entered into
the contract of sale in March 1986 and SMC paid P500 million on April 1,
1986 or several days prior to the actual sequestration. The consequent
transfer of the 5 million shares (now 26.45 million shares) to SMC vests in
SMC the proprietary right over these shares. Put differently, as the manner of
SMC's acquisition of these shares was arms-length and not made through
public funds, the present issue does not fall within the ambit of our
pronouncements in Republic v. Sandiganbayan, which refer to corporations
as repositories of shares acquired by misappropriated public funds or "ill-
gotten wealth."
More significantly, this Court, in PCGG v. Interco,41 Republic v.
Sandiganbayan, Sipalay Trading Corp. and Allied Banking
Corp,42 and PCGG v. Sandiganbayan and Aerocom Investors and Managers,
Inc.,43 effectively abrogated its ruling in Lobregat when it hewed to the lone
dissent of Justice Teodoro R. Padilla in the very same Lobregat, to wit:
Page 29 of 82
... failure to implead these corporations as defendants and merely annexing a
list of such corporations to the complaints is a violation of their right to due
process for it would in effect be disregarding their distinct and separate
personality without a hearing.
In cases where stocks of a corporation were allegedly the fruits of ill-gotten
wealth, it should be remembered that in most of these cases the stocks
involved constitute a substantial if not controlling interest in the
corporations. . The basic tenets of fair play demand that these
corporations be impleaded as defendants since a judgment in favor of
the government will undoubtedly substantially and decisively affect the
corporations as distinct entities. The judgment could strip them of
everything without being previously heard as they are not parties to the
action in which the judgment is rendered.
Holding that the 'corresponding judicial action or proceeding' contemplated
by the Constitution is any action concerning or involving the corporation
under sequestration is oversimplifying the solution, the result of which is
antagonistic to the principles of justice and fair play. the actions contemplated
by the Constitution should be those which include the corporation not as a
mere annex to the complaint but as defendant. This is the minimum
requirement of the due process guarantee. Short of being impleaded, the
corporation has no standing in the judicial action. It cannot adequately
defend itself. It may not even be heard.
On the opinion that alternatively the corporations can be impleaded as
defendants by amendment of the complaint, Section 26, Article XVIII of the
Constitution would appear to preclude this procedure, for allowing
amendment of the complaint to implead theretofore unimpleaded
corporations would in effect allow complaints against the corporation to be
filed beyond the periods fixed by said Section 26.
While government efforts to recover illegally amassed wealth should have
support from all its branches, eagerness and zeal should not be allowed
to run berserk, overriding in the process the very principles that it is
sworn to uphold. In our legal system, the ends do not always justify the
means. Wrongs are never corrected by committing other wrongs, and
as above-discussed the recovery of ill gotten wealth does not and
should never justify unreasonable intrusions into constitutionally
forbidden grounds....
Indeed, it is but in keeping with fair play that parties are allowed to
present their respective claims in a full-blown trial regarding the "sale"
of the 25.45 million SMC shares for P500 million. This is not, at the first
instance,. the appropriate case to make a final judgment over the ownership
of the 25.45 million shares.
₯Compromise Agreement- Set V
Nonetheless, it is advanced that SMC had already been afforded an
opportunity to air its side in San Miguel Corporation v. Sandiganbayan44 and
in this very case where it filed its Comment on the Republic's Omnibus
Motion. With all due respect, the posture fails to consider that the issue of
ownership was never tackled in San Miguel and, certainly, the Comment filed
by SMC in this case, over its repeated manifestation that it is not party to the
instant case45 and continuing objection on this Court's jurisdiction, is hardly
enough to satisfy the requirements of due process.
The Court cannot set the benchmark of due process at the lowest level by
considering each pleading submitted by a party as enough to satisfy the
requirements of this Constitutional protection. If this Court is to animate the
spirit of the Constitution and maintain in full strength the substance of the due
process protection, it must afford each party the full legal opportunity to be
heard and present evidence in support of his or her contentions. SMC must,
therefore, be given full opportunity to proffer evidence on its claim of
ownership over the treasury shares in a proper case before the right court.
In fact, SMC should have been al1owed to participate and present its
evidence in CC 0033-F. To recall, SMC filed a "Motion to Intervene" with
attached "Complaint-Intervention" dated February 2, 2004 with the
Sandiganbayan.46 It alleged, among other things, that it had an interest in the
matter in dispute being the owner by purchase of a portion of the so-called
"CIIF block of SMC shares of stock" sought to be recovered by the Republic
as al1eged ill-gotten wealth.47 SMC prayed, thus:
WHEREFORE, it is respectfully prayed that the SMC shares comprising the
"compromise shares" between SMC and defendant CIIF Companies, and
covered by Certificate Nos. A0004129 and B0015556, be adjudged excluded
(a) from the "CIIF Block of SMC shares" subject of plaintiffs forfeiture action,
and (b) from an1 judgment that may be rendered in this suit as to such
forfeiture claim.48
The Republic, however, opposed the intervention and found the same
improper.49 COCOFED and Ursua likewise posed their Opposition. 50 On May
6, 2004, the Sandiganbayan promulgated a Resolution finding SMC's motion
to intervene devoid of merit.51 SMC moved for reconsideration but to no
avail.52 Soon thereafter, or on May 7, 2004, the Sandiganbayan issued the
Partial Summary Judgment in CC 0033-F 53 that was assailed in these
consolidated petitions.
Undeniably, SMC was not given the proper chance to be heard and furnish
proof on its claim of ownership over the treasury shares. That was a denial of
its right to due process. It should be corrected.
Page 30 of 82
The Clarification in the September 4, 2012 Resolution Total Number 33,133,26
A review of the past underlying transactions that led to the acquisition of the
so-called "treasury shares" would indicate that SMC had acquired colorable
title to retain possession of the 25.45 million shares of what were once CIIF In sum, the 753,848,312 SMC shares now reflected in the fallo of the
shares prior to the sequestration of these CIIF shares on April 7, 1986 September 4, 2012 Resolution in these captioned cases, are the only
and the institution of CC Nos. 0033 and 0033-F on July 31, 1987. remaining SMC shares in the name of the CIIF companies that can be,
and were in fact, declared as owned by the Government. Hence, the
It is worthy to consider that the original contract of sale between the SMC need to clarify the Court's January 2012 Decision.
and UCPB Groups over a block of SMC shares, which was later the subject
of the Compromise Agreement, was executed on March 26, 1986 and, as On this note, there was no mistake in the dispositive portitm of the
mentioned, SMC paid P500 million as first installment on April 1, 1986 or September 4, 2012 Resolution. The fallo was clarified precisely to reflect the
several days before the government sequestered the 33,133,266 shares, present number of shares registered in the name of the CIIF companies .
on April 7, 1986. Thus, the 5.5 million shares with the PCGG, and the 25.45 million shares
with SMC, were no longer included therein.
Because of differences regarding the implementation of the purchase
agreement after the shares were sequestered, SMC and UCPB (acting on There was never an equivalence made or implied between the 33,133,266
behalf of the CIIF companies) entered into a Compromise Agreement and common shares and the 753,848,312 SMC Series 1 Preferred Shares. As
Amicable Settlement in March 1990 wherein the P500-million first installment observed, the current number of 753,848,312 SMC Series 1 Preferred
paid by SMC was considered as full payment for 5 million SMC shares, which Shares was taken from this -Court's September 17, 2009 Resolution, where
by then had increased to 26,450,000 shares. there was no mention of the original 33,133,266 common shares. The
September 17, 2009 Resolution limited itself to the conversion of the shares
As a consequence of the implementation of this Compromise Agreement in remaining in the name of the CIIF companies from common to Series 1
July 1991, the CIIF-SMC shares which then numbered 175,274,960 were, Preferred shares., i.e., those arising from the 144,324,960 shares registered
thus, distributed among the CIIF Holding Companies, SMC-Treasury and the in the name of CIIF companies following the implementation of the
PCGG, which helped bring to reality the Compromise Agreement and agreed compromise agreement and the additional 28,645,672 subscribed by them in
to hold the "arbitration fees" in trust for the CARP. The following illustrates April 1995 following SMC's stock rights offering. This is so considering that
the evolution of the CIIF shares before their sequestration until this Court's COCOFED's "Urgent Motion: To Approve the Conversion of the SMC
September 4, 2012 Resolution: Common Shares Into SMC Series 1 Preferred Shares" dated July 24, 2009
specifically asked for the exchange of "ALL THE SHARES OF STOCK OF
SMC THAT ARE PRESENTLY SEQUESTERED AND REGISTERED IN
1986 1990 1990 2009 THE RESPECTIVE NAMES OF THE 14 CIIF HOLDING COMPANIES IN
(Per the (Per the (Manifestation (Per PCGG THE TOTAL NUMBER OF 753,848,312."56 COCOFED did not ask for the
March 1986 Compromise of Resolution No. conversion of all the shares that arose from the original 33,133,266 SMC
Agreement) Agreement) Implementation 2009-037-756) Common Shares given the claim and possession of the remaining portion by
of Compromise the PCGG and the SMC over the remainder.
Agreement and
of Withdrawal In other words, COCOFED did not ask for the conversion of the 5.5 million
of Petition) arbitration shares already in the name of PCGG because the shares were
CIIF 28,133,266 148,824,960 144,324,960 753,848,31254 already transferred and registered in the name of PCGG as of July
Companies/ 1991.57 Likewise, COCOFED did not ask for the conversion of the SMC
UCPB Group treasury shares because it had no claim on them anymore, as the same were
already transferred and registered in the name of SMC. 58 As a matter of fact,
SMC Group 5,000,000 26,450,000 25,450,000 25,450,000 certificates of stocks were issued to SMC and PCGG, specifically: (1)
Certificate Nos. 004127, 004128, and 015555 for PCGG; and (2) Certificate
PCGG-ITF- - - 5,500,00055 27,571,409 Nos. 004129 and 015556 for SMC. Thus, the PCGG shares and the SMC
CARP treasury shares were no longer included in the September 17, 2009 and
₯Compromise Agreement- Set V
Page 31 of 82
September 4, 2012 Resolutions, which were limited to the 753,848,312 It is not lost on this Court that the PCGG, the government's primary
shares still registered in the name of COCOFED. representative in sequestration proceedings, virtually gave its consent to
SMC's continuous possession of the 25.45 million shares by approving the
There is no gainsaying that the treasury shares were originally derived from Compromise Agreement on which SMC predicates its claim over the shares
the more than 33.13 million shares acquired by the CIIF shares in 1983. and continuing its possession of the so-called "arbitration fee" shares that
However, SMC is persistent in its claim of ownership over the 25.45 million came out of the same Compromise Agreement.
shares following the events that transpired after the purchase by the CIIF of
the shares in 1983. Thus, it is not incompatible, much less "illogical," to hold Put differently, the PCGG, the government agency empowered to exercise
that the original 33,133,266 SMC common shares were bought with public sequestration powers over the 25.45 SMC treasury shares, gave its consent
funds in 1983 and yet the treasury shares may not now belong to the to SMC's claim of ownership and possession of the treasury shares by
government given the foregoing events that supervened after the purchase of approving the Compromise Agreement on which SMC predicates its claim
these shares, which, as will be discussed, bore the imprimatur of the and also asserting and exercising ownership and possession of the so called
government agency appointed to administer them. "arbitration· fees of 5.5 SMC shares that came out of the Compromise
Agreement." This may be the real reason why PCGG did not implement the
The Republic participated in the Compromise Agreement SB orders dated October 25, 1991 and March 18, 1992 which ordered SMC
to surrender the treasury shares.
To sway this Court, the Republic relies on the fact that the Compromise
Agreement between SMC and the CIIF Companies ratifYing the sale of the What is more, at the time the Compromise Agreement was signed, SMC's
first installment shares had been submitted but has not been approved by the board was dominated by PCGG nominees and other government
Sandiganbayan. But note, neither has the Compromise Agreement been representatives.
disapproved by that or this Court. Nowhere in San Miguel Corporation v.
Sandiganbayan59 did the Court rule on the validity of the Compromise The facts recited in Cojuangco, Jr. v. Roxas64 reveal that on April 18, 1989,
Agreement, much less "indirectly [deny] approval of the Compromise the annual meeting ofSMC shareholders was held. Among the matters taken
Agreement,"60 since it was not the issue presented for the Court's up was the election of fifteen (15) members of the board of directors for the
resolution.61 ensuing year. On such date, there were 140,849,970 shares outstanding, of
which 133,224,130 shares, or 94.58%, were present at the meeting, either in
The absence of an explicit approval of the Compromise Agreement by the person or by proxy. Because of PCGG's ciaim that the shares of stock were
Sandiganbayan, however, did not and does not preclude the PCGG from under sequestration, PCGG was allowed to represent and vote 85,756,279
recognizing the agreement. In fact, the PCGG exercised ownership over the shares of stocks, or almost 2/3 of the actual votes cast. With PCGG voting
arbitration shares by asking, through the OSG, for the conversion of the the 85,756,279 shares or 1,286,744,185 votes, the following were elected
PCGG shares into preferred shares per a Motion dated September 30, members of the SMC Board:
2009.62 More importantly, it retained ownership of the said arbitration fee
shares from 1991 up to the present. Undoubtedly, the Republic, through the 1. Mr. Eduardo De Los Angeles
PCGG, implicitly recognized the validity of the Compromise Agreement. 2. Mr. Feliciano Belmonte, Jr.
3. Mr. Teodoro L. Locsin
The graft court's disinclination to explicitly approve the Compromise 4. Mr. Domingo Lee
Agreement was, as admitted in the Dissent, only intended to prevent any 5. Mr. Philip Ella Juico
"prejudice [of] their eventual delivery to their lawful owner or owners who will 6. Mr. Patrick Pineda
be determined at the close of the judicial proceeding." 63 In effect, the 7. Mr. Adolfo Azcuna
Sandiganbayan intended to conserve the SMC shares for the party who 8. Mr. Edison Coseteng
will eventually be declared the beneficial owner thereof. 9. Mr. Andres Soriano III
10. Mr. Eduardo Soriano
Per this Court's January 2012 Decision, beneficial ownership of the shares 11. Mr. Francisco C. Eizmendi, Jr.
pertains to the Republic. But as things stood, the Republic was actually 12. Mr. Benigno P. Toda, Jr.
involved in the Compromise Agreement and its implementation. 13. Mr. Antonio J. Roxas
14. Mr. Jose L. Cuisia, Jr.

₯Compromise Agreement- Set V

Page 32 of 82
 15. Mr. Oscar Hilado
Out of the 15 men elected to the board, eight (8) were PCGG
nominees,65 one (1) was nominated by SSS, 66 one by GSIS, and only five (5)
were nominated by non-government institutions and/or individuals. 67 Similar
facts attended the election of the directors of the SMC Board on April 17,
1990. Hence, 10 out of the 15 members of the SMC Board were government-
nominated and elected.
It would, therefore, be fair to state that the 10 men nominated and elected by
the government to the SMC Board for the years 1989-1990 and 1990-1991
have actually acted to advance the interest ofthe Republic at the time that the
Compromise Agreement was signed and implemented.
Without a doubt, the Republic had a hand in the transactions that eventually
led to the designation of the more than 25.45 million shares as SMC treasury
shares. Indeed, it is not disputed that the PCGG and, ergo, the Republic had
an "influence" in the execution and eventual implementation of the
Compromise Agreement through their representatives in the SMC Board.
Furthermore, neither has the PCGG ever moved for the actual execution of
the Sandiganbayan's October 25, 1991 and March 18, 1992 Orders now
relied upon by the Republic in claiming its renewed interest on the treasury
shares. Twenty-four (24) years had elapsed and the Republic, either through
the OSG or the PCGG, has not lifted even a finger to execute and enforce
the said Sandiganbayan Orders. It should have filed a motion or instituted an
action therefor within five·(5) or ten (10) years, as the case may be, as
prescribed under the Rules of Court.69 At the very least, the' Republic should
have asked for a citation of contempt. Regrettably, the Republic did nothing.
Certainly, the PCGG and, ergo, the Republic had no interest to do so given
the 5.5 million, now more than 27.5 million, shares it had accepted as
"arbitration fees." Evidently, whatever will be the outcome of CC 0033-F, i.e.,
whether the courts grant the shares to the Republic, COCOFED, or the
coconut farmers, the Republic through the PCGG was already assured of a
piece of the pie.
Indeed, for all intents and purposes, it is safe to state that SMC is an
innocent bystander caught betweethe conflict between the government,
certain individuals, and COCOFED over the shares. There is, therefore, no
reason for the Court to now resolve the incident at bar to benefit the Republic
at the expense of SMC.
Unjust Enrichment and Estoppel bar the Republic's Motion
There is nothing on record that says that the government offered to return the
P500 million to the SMC Group. That is to say, while the· respondent
₯Compromise Agreement- Set V
Republic is asking for the delivery and reconveyance of the 25.45 million
shares, it has not intimated its intention to return the P500 million it received
(through the CIIF Companies now declared as government-owned) for the
same shares. The inevitable conclusion that can be made is the Republic
plans to keep the P500 million along with the 25.45 million shares. Such
retention and acquisition of the P500 million would, in context, amount to a
flagrant and arbitrary deprivation of SMC's property in violation of the
company's due process right. This act definitely trenches on the sacred
Constitutional guarantee of due process.
Elementary rules against unjust enrichment, 70 if not the sporting idea of fair
play, forbid the Republic to retain the P500 million with the over 25.45 millibn
shares it now claims. At the very least, everyone has a reasonable
expectation that the Republic follow its own laws, foremost of which is the
Constitution.
In sum, by keeping the P500-million first installment, approving through tht;
PCGG the Compromise Agreement, and even taking and keeping an
"arbitration fee," the government descended to the level of an ordinary
citlizen and stripped itself of the vestiges of immunity that is otherwise
available to it in the perfonnance of governmental acts. 71 Clearly, it is now
vulnerable to the application of the principle of estoppel which militates
against the grant of respondent's motion.
While the general rule is that the State cannot be put in estoppel by the
mistakes or errors of its officials or agents, it is established that "[t]he rule on
non-estoppel of the government is not designed to perpetrate an
injustice."72 :Thus, several exceptions to the Republic's non-estoppel have
been recogriized. In Republic of the Philippines v. Court of Appeals,73 the
Court held:
The general rule is that the State cannot be put in estoppel by the mistaks or
errors of its officials or agents. However, like all general rules, this is also
subject to exceptions, viz.:
"Estoppel against the public are little favored. They should not be invoked
except in rare and unusual circumstances and may not be invqked where
they would operate to defeat the effective operation of a polity adopted to
protect the public. They must be applied with circlimspection and should be
applied only in those special cases where the interests of justice clearly
require it. Nevertheless, the government must not be allowed to deal
dishonorably or capriciously with its citizens, and must not play an
ignoble part or do a shabby thing; andi subject to limitations ..., the
doctrine of equitable estoppel mall be invoked against public
authorities as well as against private individuals."
In Republic v. Sandiganbayan, the government, in its effort to recoveill-gotten
Page 33 of 82
wealth, tried to skirt the application of estoppel against it by invoking a
specific constitutional provision. The Court countered:

"We agree with the statement that the State is immune from estoppel, but
this concept is understood to refer to acts and mistakes of its officials
especially those which are irregular (Sharp International Marketing vs. Court
of Appeals, 201 SCRA 299; 306 [1991]; Republic v. Aquino), which peculiar
circumstances are absent in the case at bar. Although the State's right of
action to recover ill-gotten wealth is not vulnerable to estoppel[;] it is non
sequitur to suggest that a contract, freely and in good faith executed
between the parties thereto is susceptible to disturbance ad infinitum.
A different interpretation will lead to the absurd scenario of permitting a
party to unilaterally jettison a compromise agreement which is
supposed to have the authority of res judicata (Article 2037, New Civil
Code), and like any other contract, has the force of law between parties
thereto (Article 1159, New Civil Code; Hernaez vs. Kao, Padilla, Civil Code
Annotated, Aquino, Civil Code, 1990)

The Court further declared that "(t)he real office of the equitable norm of
estoppel is limited to supfly[ing] deficiency in the law, but it should not
supplant positive law."

The exception established in the foregoing cases is appropriate in the

present case since the Compromise Agreement partook of the nature of a
bonafide proprietary business transaction of the government and was not
undertaken as an incident to any of its governmental functions.

Clearly, issues regarding SMC's right over the 25.45 millioo treasury shares
or the entitlement to the alleged dividends on said shares or to the interests
and increase in value of the PSOO million remain unresolved. These issues
are better ventilated and threshed out in a proper proceeding before the right
forum where SMC will be accorded due process.

With respect to the Republic's "Urgent Motion to Direct the San Miguel
Corporation (SMC) to Comply with the Final and Executory Resolutions
Dated October 24, 1991 and March 18, 1992 of the Sandiganbayan," the
same is noted without action in view of the ruling of the Court that jurisdiction
has not been acquired over SMC.

WHEREFORE, the Republic of the Philippines' Manifestation and Omnibus

Motion dated October 12, 2012 is DENIED without prejudice to the right of
respondent Republic to institute the appropriate action or proceeding where
SMC's alleged right over the 25.45 million SMC treasury shares will be
determined and finally resolved.

SO ORDERED.

₯Compromise Agreement- Set V

Page 34 of 82
[36] G.R. No. 183645 July 20, 2016
HEIRS OF GAMALIEL ALBANO, represented by ALEXANDER ALBANO
and all other person living with them in the subject
premises, Petitioners, vs. SPS. MENA C. RAVANES and ROBERTO
RAVANES, Respondents.
Remedial Law; Civil Procedure; Motion for Reconsideration; The filing of a
second motion for reconsideration is prohibited under Rule 52, Section 2 of the 1997
Rules of Civil Procedure, as amended and the prevailing 1999 Internal Rules of the
Procedure of the Court of Appeals (IRCA).—The filing of a second motion for
reconsideration is prohibited under Rule 52, Section 2 of the 1997 Rules of Civil
Procedure, as amended and the prevailing 1999 Internal Rules of the Procedure of
the CA (IRCA). Being a prohibited pleading, a second motion for reconsideration
does not have any legal effect and does not toll the running of the period to appeal.
Same; Same; Appeals; An appeal is not a matter of right, but is one of sound
judicial discretion.—An appeal is not a matter of right, but is one of sound judicial
discretion. It may only be availed of in the manner provided by the law and the rules.
A party who fails to question an adverse decision by not filing the proper remedy
within the period prescribed by law loses the right to do so as the decision, as to him,
becomes final and binding.
Supervening Events; Words and Phrases; A supervening event refers to facts
which transpire after judgment has become final and executory or to new
circumstances which developed after the judgment has acquired finality, including
matters which the parties were not aware of prior to or during the trial as they were
not yet in existence at that time.—Petitioners allege that the execution of the lease
contract lent legitimacy to their occupation of the property, such that the CA
Decision is now mooted and should no longer be enforced because to do so would be
inequitable. Petitioners insist that the lease contract constitutes a supervening event
justifying the stay of the CA Decision. Petitioners’ contentions are untenable. A
supervening event refers to facts which transpire after judgment has become final
and executory or to new circumstances which developed after the judgment has
acquired finality, including matters which the parties were not aware of prior to or
during the trial as they were not yet in existence at that time. Here, the lease contract
was executed after the CA Decision was promulgated but before it attained finality.
In fact, petitioners executed the lease contract just six days after they received the
adverse ruling of the CA.
Compromise Agreements; Words and Phrases; A compromise is a contract
whereby the parties, by making reciprocal concessions, avoid litigation or put an
end to one already commenced.—To our mind, instead of a supervening event, the
execution of the lease contract partakes of the nature of a compromise. A
compromise is a contract whereby the parties, by making reciprocal concessions,
₯Compromise Agreement- Set V
avoid litigation or put an end to one already commenced. It is an agreement between
two or more persons, who, for the purpose of preventing or putting an end to a
lawsuit, adjust their difficulties 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. In the case before us, petitioners claim that they executed the lease contract
before notice of the CA Decision as an “amicable settlement of the issues with
reference to occupancy of the subject property.” Thus, petitioners’ intention to end
the litigation by virtue of a compromise is evident.
Same; A compromise may be entered into at any stage of the case — pending
trial, on appeal and even after finality of judgment.—A compromise may be entered
into at any stage of the case — pending trial, on appeal and even after finality of
judgment. Hence, petitioners may enter into a compromise with the respondent-
spouses, even after the CA Decision was rendered. However, the validity of the
agreement is determined by compliance with the requisites and the principles of
contracts, not by when it was entered into. Unfortunately for petitioners, the
compromise that they effected is wanting of one of the essential requisites of a valid
and binding compromise — consent of all the parties in the case. We have
consistently ruled that a compromise agreement cannot bind a party who did not
voluntarily take part in the settlement itself and gave specific individual consent.
Remedial Law; Special Civil Actions; Ejectment; Grounds for Judicial
Ejectment.—The controversy revolves on whether respondent-spouses’ satisfied the
requisites of Section 5(c) of BP 877 as a ground for judicial ejectment. To
recapitulate, the requisites are: (1) the owner’s/lessor’s legitimate need to repossess
the leased property for his own personal use or for the use of any of his immediate
family; (2) the owner/lessor does not own any other available residential unit
within the same city or municipality; (3) the lease for a definite period has
expired; (4) there was formal notice at least three (3) months prior to the
intended date to repossess the property; and (5) the owner must not lease or allow
the use of the property to a third party for at least one year.
Same; Same; Same; The right of respondent-spouses to eject petitioners
cannot be negated by the fact alone that the former have other residential units in
Pasig City. The said properties must be “available.”—While it is admitted by
respondent-spouses that they have other residential units in Pasig City, they were not
available because they were occupied by tenants who pay their rentals promptly. The
keyword in the second requisite of Section 5(c) is the word “available.” The right of
respondent-spouses to eject petitioners cannot be negated by the fact alone that the
former have other residential units in Pasig City. The said properties must be
“available.” Our ruling in Roxas v. Intermediate Appellate Court, 157 SCRA 166
(1988), is enlightening, thus: It is important to stress that even assuming any of
petitioners own other residential units, what the law requires is that the same is
an available residential unit, for the use of such owner/lessor or the immediate
member of his family. Thus even if an owner/lessor owns another residential
Page 35 of 82
unit, if the same is not available as for example the same is occupied or it is not
suitable for dwelling purposes, it is no obstacle to the ejectment of a tenant on
the ground that the premises is needed for use of the owner or immediate
member of his family.
Civil Law; Lease; The lease between respondent-spouses and petitioners,
although merely verbal, is deemed to be one with a definite period which expires at
the end of each month. The lease is on a month-to-month basis because the rentals
are paid monthly.—The lease between respondent-spouses and petitioners, although
merely verbal, is deemed to be one with a definite period which expires at the end of
each month. The lease is on a month-to-month basis because the rentals are paid
monthly. In this regard, we cite our ruling in Arquelada v. Philippine Veterans Bank,
329 SCRA 536 (2000), to wit: The question now is, has the verbal contract of lease
between petitioners and the Bank expired in order to call for the ejectment of the
latter from the premises in question? The Court rules in the affirmative. It is admitted
that no specific period for the duration of the lease was agreed upon between the
parties. Nonetheless, payment of the stipulated rents were made on a monthly
basis and, as such, the period of lease is considered to be from month to month
in accordance with Article 1687 of the Civil Code. Moreover, a lease from
month-to-month is considered to be one with a definite period which expires at
the end of each month upon a demand to vacate by the lessor.
Remedial Law; Special Civil Actions; Ejectment; Notice to Vacate; The
“formal notice” requirement under Batas Pambansa (BP) Blg. 877 does not refer to
a written notice only.—The “formal notice” requirement under BP 877 does not refer
to a written notice only. In the case of Garcia v. Court of Appeals, 220 SCRA 264
(1993), we reckoned compliance with the 3-month notice requirement from his
verbal demand to vacate, viz.: x x x [E]ven assuming arguendo that the appellate
court’s premise is correct, petitioner did give notice on his own behalf. The trial
court found that soon after the sale of the properly to petitioner, or on October 10,
1979, the latter wrote to private respondent that he vacate the premises. After this
and other subsequent demands were ignored, he again made a demand on
August 7, 1982 informing private respondent that he wished to build his house
on the property. After this last demand was again ignored, he brought the matter
before the Barangay Chairman who, on September 19, 1982, sent a summons to
private respondent, who, not only ignored it but in addition, refused to accept it when
served upon him. Petitioner finally filed an ejectment suit before the MTC on
December 7, 1982, or four months after his verbal demand on August 7, 1982.
Thus, even disregarding the previous demands soon after the sale, petitioner
had complied with the requirement of three-month notice.
DECISION
JARDELEZA, .J.:
₯Compromise Agreement- Set V
Before us is a Petition for Review on Certiorari1under Rule 45 of the Rules of
Corni seeking to annul the August 29, 2007 Decision 2 (CA Decision) and July
7, 2008 Resolution3 of the Court of Appeals (CA) in CA G.R. SP No. 96111.
The CA Decision reversed the May 29, 2006 Decision 4 of Branch 68,
Regional Trial Court (RTC) of Pasig City and reinstated the January 19, 2004
Decision5 of Branch 69, Metropolitan Trial Court (MeTC) of Pasig City. The
MeTC ordered petitioners to: (a) vacate the lot owned by respondent-
spouses; and (b) pay the monthly back rentals from the month of default until
the leased premises are vacated.6
The Facts
Respondent Mena Ravanes (Mena), married to Roberto Ravanes (Roberto)
(collectively, the respondent-spouses), is the registered owner of a parcel of
land covered by Transfer Certificate of Title No. 57 414 located in Caniogan,
Pasig City.7 On about thirty-five (35) square meters of the property stands the
two-storey residential house of petitioners. 8 Petitioners' father, Gamaliel
Albano, purchased the house in 1986 from a certain Mary Ong
Dee.9 Petitioners leased the property from Mena with the agreement that they
will vacate it, regardless of their rental payments, when the latter and her
family would need to use it.10
In March 2000, respondent-spouses informed petitioners that their daughter,
Rowena, is getting married and would need the property to build her
house.11 However, petitioners refused to vacate the property. Thus,
respondent-spouses filed a complaint in the Office of the Barangay  Captain
of Caniogan against petitioners. 12 Having failed to reach an amicable
settlement, however, the Barangay  issued a certificate to file action on June
22, 2000.13
On September 14, 2000, respondent-spouses filed a Complaint for
Ejectment14 against petitioners in the MeTC of Pasig City.
Respondentspouses cited Section 5 (c) of Batas Pambansa Big. 877 (BP
877)15 as a ground for ejectment:
Section 5. Grounds for Judicial Ejectment. – Ejectment shall be allowed on
the following grounds:
(c) Legitimate need of owner/lessor to repossess his properly for his own use
or for the use of any immediate member of his family as a residential unit,
such owner or immediate member not being the owner of any other available
residential unit within the same city or municipality: Provided, however, That
the lease for a definite period has expired: Provided, further, Thal the lessor
has given the lessee formal notice three (3) months in advance of the
lessor's intention lo repossess the property: and Provided, finally, That the
Page 36 of 82
owner/lessor is prohibited from leasing the residential unit or allowing its use
by a third party for at least one year.
Respondent-spouses stated that their daughter needs the property to build
her conjugal home.16 They pleaded that they do not own any other available
residential units within Pasig City or anywhere else. They also stated that the
lease between them and petitioners had already lapsed as of December 31,
1999. Respondent-spouses claimed they notified petitioners of their intent to
repossess the property at least three (3) months in advance. They prayed for
the MeTC to order petitioners to vacate the property and remove the
improvements in it. They also sought payment of petitioners' rent for July
2000 and attorney’s fees.17
In their Answer dated October 4, 2000, 18 retitioncrs countered that
respondent-spouses and their predecessors-in-interest assured them that
they can stay in the property for as long as they are paying the agreed
monthly rentals.19 Petitioners claimed that their harmonious relationship with
respondent-spouses changed in February 2000 when the latter suddenly
refused to accept the rental payments for January to June 2000. 20 They
belied the claim that respondent-spouses do not own other lots in Pasig City,
asserting that respondent-spouses have other suitable residential houses
and apartment units in Pasig City as evidenced by photocopies of land titles
attached to their Answer.21 Consequently, petitioners argued that the
Complaint should be dismissed because respondent-spouses do not need
the property for their personal use.22
Further, petitioners alleged respondent-spouses handed them the notice to
vacate only on June 15, 2000. The notice demanded petitioners to vacate the
premises on or before July 13, 2000. Thus, they were given only a 28-day
notice, which was short of the 3-month notice requirement under BP 877. 23
By way of counterclaim, petitioners prayed that respondent-spouses be
ordered to pay moral and exemplary damages and attorney's
fees.24 Petitioners also asked that, in the event the MeTC ruled in favor of
respondent-spouses, they be ordered to reimburse petitioners the amount
the latter incurred for the repair of their house. 25
In their Position Paper dated December 26, 2000, 26 respondent-spouses
admitted ownership of several properties in Pasig City, but insisted that these
properties were not available for their daughter because they were on
lease.27 Respondent-spouses explained that they chose to eject petitioners
rather than their other lessees because petitioners are delinquent in their
rental payrnents.28 Respondent-spouses also alleged that they complied with
the 3-month notice requirement because they waited for 91 days-from June
₯Compromise Agreement- Set V
15, the date when petitioners received the notice to vacate, until September
14, 2000-to file the case for ejectment.29
In their Position Paper dated .January 2, 2001, 30 petitioners reiterated that
respondent-spouses have no legal ground to eject them on the basis of an
alleged legitimate need for personal use of the property because respondent-
spouses own other available lots in Pasig City, and because the 3-month
notice requirement was not complied with.
Both parties raised the issue of whether petitioners can be legally ejected
from the property under Section 5 (c) of BP 877.
The Ruling of the MeTC
In its Decision dated January 19, 2004;31 the MeTC found for respondent-
spouses. The dispositivc portion of its Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
plaintiffs and against defendant[s] who are hereby ordered to vacate
immediately the leased premises located at No. 19-A, A. Flores St.,
Caniogan, Pasig City, and to pay plaintiffs the monthly [back rentals] of
PHP2, 131.00 from the month of default until the premises arc vacated.
Attorney's fees are additionally awarded in favor of plaintiffs in the amount of
PHP10,000.00 the same being deemed just and equitable under the
circumstances. No pronouncement as to costs.
SO ORDERED.32
The MeTC held that the lease between respondent-spouses and petitioners
is one in which no period of lease has actually been fixed. Thus, under Article
1687 of the New Civil Code, the lease is deemed to be on a month to month
basis since rentals were paid monthly. Accordingly, the lease expires every
end of the month which gives respondent-spouses a ground for judicial
ejectment.33 The MeTC declared as void and against public policy the
interpretation of petitioners of their contract that they were assured of a
lifetime lease for as long as they are paying monthly rent. It also explained
that respondent-spouses' ownership of other properties is immaterial
because as owners of the property, respondent-spouses have the right to
repossess it aJter the monthly expiration of the lease between the parties. 34
The MeTC also denied petitioners' counterclaim on the ground that they do
not have the right to be paid the value of their house's improvements since
they built it at their own risk. Petitioners, however, may remove the
improvements if respondent-spouses refuse to reimburse one-half of its total
value.35
Page 37 of 82
The Ruling of the RTC
On appeal before the RTC of Pasig City, petitioners took issue with the
MeTC's judgment that respondent-spouses can eject petitioners on the
ground of expiration of the lease contract. They contended that the issue
about the expiration of the lease was neither invoked by the respondent-
spouses in their Complaint nor raised as an issue in the pleadings. Thus, the
MeTC should not have departed from the sole issue defined by the parties
during the preliminary conference in the MeTC. Petitioners claimed they were
denied due process because they were not given the opportunity to meet the
issue regarding the alleged expiration of lease.36
The RTC agreed with petitioner. In its Decision dated May 29, 2006, 37 the
RTC vacated the decision of the Me TC and ordered the dismissal of the
complaint for insufficiency of evidence. The RTC opined that the issue in the
case is whether respondent-spouses had satisfied the requisites for
ejectment under Section 5 (c) of BP 877. It then answered the question in the
negative, thus:
Accordingly, the assailed decision is hereby RECONSIDERED  and SET
ASIDE on the ground of denial of clue process, and this Court is now tasked
to look into the issue of whether or not the plaintiffs have met the following
requirements of Section 5, par (c) of the Rental Law as amended:
a). A legitimate need of owner/lessor to repossess his property for his own
use or for the use of any immediate member of his family;
b). The need to repossess is for residential [purpose];
c). Such owner or immediate family member does not own any other
available residential unit within the city or municipality;
d). The lease agreement should be for a definite period;
e). The period of lease has expired;
f). The lessor has given the lessee a formal notice three (3) months in
advance of the lessor's intention to repossess the property.
The assailed decision is unequivocal. It stated that "Clearly, this is a lease
for which no period of lease has actually been fixed x x x." On this score
alone, this case necessarily has to fail for the lease covered under this
provision of the Rental Law should be one with a definite period, and the
lease at bar as held by the lower court is not one with a definite period. But
₯Compromise Agreement- Set V
aside from this the defendants also were able to show that the plaintiffs own
other available residential units in Pasig City, although the lower court
alleged that it is or no moment. Similarly, the defendants were also able to
show that the three (3) months requirement notice was not complied with.
The assailed decision kept silent on this requirement but the very letter of
demand dated June 9, 2000 of the plaintiffs required the defendants to
vacate the premises on or before July 13, 2000 or just about a month and
three (3) days from the elate of the letter.38 (Emphasis in the original.)
The Ruling of the CA
Respondent-spouses appealed to the CA, reiterating that they have complied
with Section 5 (c) of BP 877.39
In its Decision dated August 29, 2007, the CA set aside the Decision of the
RTC and reinstated the Decision of the MeTC. 40 The CA ruled that, contrary
to the findings of the RTC, the lease between respondent-spouses and
petitioners is one with a period. Citing Dula v. Maravilla41and Rivera v.
Florendo,42 the CA explained that a lease agreement without a fixed period is
deemed to be from month to month if the rentals are paid monthly. Thus,
there is a definite period to speak of and as such, respondent-spouses can
eject petitioners from the property on the ground of expiration of their lease
under Section 5 (1) of BP 877. The CA thus stated:
In the instant case, it is undisputed that the rental on the lot was paid
monthly. And based on the previous rulings of the Court, it is clearly one with
a definite period, which expires every month, upon proper notice to the
respondents [herein petitioners]. Thus, when petitioners [herein
respondent-spouses] sent a letter of demand dated June 9, 2000 for
respondents to vacate the leased premises on July 13, 2000, the lease
contract is deemed to have expired as of the end of that month. Upon
the expiration of said period, the contract of lease would expire, giving
rise to the lessor's right to file an action for ejectment against
respondent.
Based on the foregoing, a legal ground for ejectment would still exist against
respondents which is the expiration of the lease, under paragraph (I) or
Section 5.43 (Emphasis supplied.)
The CA also held that petitioners failed to present concrete evidence that
respondent-spouses have other available properties in Pasig City. Further,
the CA found that the respondent-spouses substantially met the 3- month
notice requirement since as early as March 2000, respondent-spouses
notified petitioners to vacate the property because their daughter needs it.
Page 38 of 82
The CA stressed that petitioners participated in a barangay  hearing
regarding the matter.44
On September 19, 2007, petitioners filed a Manifestation and Motion to Stay
the Execution of Judgment dated August 29, 2007. 45 They manifested that
respondent Roberto entered into a lease contract with petitioner Alexander
Albano (Alexander) on September 10, 2007, 46 which meant that petitioners
are now in lawful occupation of the property. The execution of the CA's
Decision is no longer necessary because the judgment was mooted by a
supervening event. Petitioners averred that with the renewal of the expired
lease contract, the ground for judicial ejectment relied upon by the CA no
longer exists.47
Further, petitioners claimed that the Contract of Lease operates as a
novation of the previous month-to-month lease between petitioners and
respondent-spouses, and which renders inutile the allegations that were
passed upon in the trial courts below.48
Mena filed a C omment49 to petitioners’ manifestation and motion. Mena
assailed the validity of the lease contract between her husband, Roberto, and
Alexander. She claimed that Roberto has no personality to unilaterally enter
into a lease contract with Alexander because the property is her paraphernal
property.50 She further questioned the wisdom of the lease because the
monthly rental price of P2, 131.00 is the same rent existing in 1986. 51
In its Resolution dated February 20, 2008, 52 the CA denied petitioners'
manifestation and motion. The CA held that its Decision dated August 29,
2007 attained finality on September 19, 2007. 53 It found that the lease
contract did not operate as a novation of its Decision because it was entered
into without the express consent of Mena.54
On March 7, 2008, petitioners filed a Motion for Reconsideration of the
Resolution dated February 20, 2008.55 They contended that the Contract of
Lease between Roberto and Alexander is valid and binding upon Mena
considering the conjugal nature of the property. 56 The CA denied the Motion
for Reconsideration in its Resolution 57 dated July 7, 2008. Hence, this petition
for review.
Petitioners allege that the CA erred in reversing the RTC's Decision. They
aver that under BP 877, the lessor should prove that he or his immediate ta
mi ly member is not the owner of any other available residential unit within
the same city or municipality.58 They also reiterate that the execution or the
lease contract between Roberto nnd Alexander on September 10, 2007 is a
supervening event that justifies the stay of execution of the CA
₯Compromise Agreement- Set V
Decision,59 and that Mena cannot assert the paraphernal nature of the
property for the first time in her Comment before the CA. 60
In their Comment,61 respondent-spouses argue that the CA Decision became
final and executory on September 20, 2007 because petitioners neither filed
a motion for reconsideration nor filed an appeal before us. 62 Accordingly,
respondent-spouses plead that petitioners' right to file this petition before us
had already lapsed.
The Issues
The issues before us are:
1. Whether the CA Decision is already final and executory;
2. Whether the execution of the lease contract is a supervening event that
will justily the stay of execution of the CA Decision; and
3. Whether the respondent-spouses complied with Section 5 (c) of BP 877.
Our Ruling
We deny the petition.
The CA Decision is already Final and Executory
The facts and material dates are undisputed. On September 4, 2007,
petitioners received notice of the CA Decision. On September 19, 2007, they
filed a Manifestation and Motion to Stay the Execution of Judgment, which
the CA denied in its February 20, 2008 Resolution. The petitioners received a
copy of this Resolution on February 22, 2008.
Thereafter, on March 7, 2008, petitioners filed a Motion for Reconsideration
of the February 20, 2008 Resolution of the CA. The CA also denied this
motion in its July 7, 2008 Resolution, a copy of which was received by the
petitioners on July 14, 2008.
Subsequently, petitioners filed before us a Motion for Additional Period to File
Petition for Review,63 which we granted. They prayed that they be given
additional 30 days within which to file their petition or from July 29, 2008 to
August 28, 2008. Petitioners filed the petition for review on August 28, 2008.
The above narration of material dates gives a semblance that the present
petition was seasonably filed. However, the records show that petitioners
Page 39 of 82
should have reckoned the 15-day period to appeal from the receipt of the
denial of the Manifestation and Motion to Stay Execution of Judgment, and
not from their receipt of the denial of the Motion for Reconsideration. Having
failed to do so, petitioners' right to appeal by certiorari lapsed as early as
March 9, 2008 when the assailed CA Decision became final and executory.
Petitioners' Manifestation and Motion to Stay Execution of Judgment is, in
actuality, a motion for reconsideration of the CA Decision. The said
manifestation and motion so alleged:
10. In light of the foregoing, respondents are constrained to bring the
matter of supervening event to the attention of this Honorable Court
and likewise in the manner of a motion for reconsideration, by way of
modification of the DECISION, if the same maybe deemed proper and
allowed and favorably considered, for the Honorable Court to so hold that the
execution of the judgment dated August 29, 2007 no longer necessary, as
there appears NO MORE VALID GROUND TO EJECT respondents from the
leased premises or otherwise so hold that respondents arc at the present
time in lawful occupation of leased premises;64 (Emphasis supplied.)
Hence, contrary to the allegation of respondent-spouses and the finding of
the CA, petitioners filed a motion for reconsideration of the CA Decision,
albeit in the guise of a "Manifestation and Motion to Stay Execution of
Judgment." In fact, the relief prayed for by petitioners in this manifestation
and motion is the same relief obtained once a motion for reconsideration is
filed on time. Rule 52, Section 4 of the Rules of Court provides that generally,
a motion for reconsideration filed on time stays the execution of the judgment
sought to be reconsidered. It thus baffles us why petitioners captioned their
motion as a "Manifestation and Motion to Suspend Execution of Judgment"
when the effect sought is one and the same -to stay the execution of
judgment. This carelessness only brought confusion to respondent-spouses
and the CA.
Since the Manifestation and Motion to Stay Execution of Judgment is a
motion for reconsideration of the CA Decision, petitioners' receipt of the
resolution denying it triggers the running of the 15-day period within which to
file an appeal.65 Petitioners received a copy of the February 20, 2008
Resolution on February 22, 2008. Thus, counting 15 days from receipt,
petitioners had only until March 8, 200866 to file a petition for review.
On March 7, 2008, however, petitioners filed a Motion for Reconsideration of
the February 20, 2008 Resolution instead. This motion for reconsideration
partakes of the nature of a second motion for reconsideration. In Tagaytay
City v. Sps. De Los Reyes,67 we ruled that a motion for reconsideration, even
if it was not designated as a second motion for reconsideration, is a
₯Compromise Agreement- Set V
disguised second motion for reconsideration if it is merely a reiteration of the
movant’s earlier arguments.68 Here, petitioners’ Motion for Reconsideration is
just that-a mere rehash of the arguments raised in their earlier Manifestation
and Motion to Stay Execution of Judgment, which we found previously to be
their (first) motion for reconsideration.
The filing of a second motion for reconsideration is prohibited under Rule 52,
Section 2 of the 1997 Rules of Civil Procedure, as amended 69 and the
prevailing 1999 Internal Rules of the Procedure of the CA (IRCA). 70 Being a
prohibited pleading, a second motion for reconsideration does not have any
legal effect and does not toll the running of the period to appeal. 71
In Securities and Exchange Commission v. PJCOP Resources, Inc., 72 we
explained why the period to appeal should not be reckoned from the denial of
a second motion for reconsideration:
To rule that finality of judgment shall be reckoned from the receipt of the
resolution or order denying the second motion for reconsideration would
result to an absurd situation whereby courts will be obliged to issue orders or
resolutions denying what is a prohibited motion in the first place, in order that
the period for the finality of judgments shall run, thereby, prolonging the
disposition of cases. Moreover, such a ruling would allow a party to forestall
the running of the period of finality or judgments by virtue or filing a prohibited
pleading; such a situation is not only illogical but also unjust to the winning
party.
The same principle is likewise applicable by analogy in the
determination of the correct period to appeal. Reckoning the period
from the denial of the second motion for reconsideration will result in
the same absurd situation where the courts will be obliged to issue
orders or resolutions denying a prohibited pleading in the first place.
An appeal is not a matter of right, but is one of sound judicial discretion. It
may only be availed of in the manner provided by the law and the rules. 74 A
party who fails to question an adverse decision by not filing the proper
remedy within the period prescribed by law loses the right to do so as the
decision, as to him, becomes final and binding.75
Considering that petitioners reckoned the period to appeal on the date
of notice of the denial of the second motion for reconsideration on July
7, 2008, instead of the date of notice of the denial of the first motion for
reconsideration on February 22, 2008, the present petition filed only on
August 28, 2008 is evidently filed out of time. The petition, being 173
clays late, renders the CA Decision final and executory. Thus, we do not
have jurisdiction to pass upon the petition.
Page 40 of 82
Our ruling in Tagle v. Equitable PCI Bank76is illustrative:
In the case at bar, the Court of Appeals dismissed the petition of petitioner
Alfredo in CA-G.R. SP No. 90461 by virtue of a Resolution  dated 6
September 2005. Petitioner Alfredo's Motion for Reconsideration of the
dismissal of his petition was denied by the appellate court in
its Resolution dated 16 February 2006. Petitioner Alfredo thus had 15 days
from receipt of the 16 February 2006 Resolution  of the Court of Appeals
within which to file a petition for review. The reckoning date from which the
15- day period to appeal shall be computed is the elate or receipt by
petitioner Alfredo of the 16 February 2006 Resolution  of the Court or
Appeals, and not of its 11 April 2006 Resolution  denying petitioner Alfredo's
second motion for reconsideration, since the second paragraph of Sec. 5,
Rule 37 of the Revised Rules of Court is explicit that a second motion for
reconsideration shall not be allowed. And since a second motion for
reconsideration is not allowed, then unvoidably, its filing did not toll the
running of the period to file an appeal by certiorari.  Petitioner Alfredo
made a critical mistake in waiting for the Court of Appeals to resolve
his second motion for reconsideration before pursuing an appeal.
Another elementary rule of procedure is that perfection of an appeal
within the reglementary period is not only mandatory hut also
jurisdictional. For this reason, petitioner Alfredo's failure to file this
petition within 15 days from receipt of the 16 February 2006 Resolution
of the Court of Appeals denying his first Motion for Reconsideration,
rendered the same final and exccutory, and deprived us of jurisdiction
to entertain an appeal thereof.77 (Emphasis supplied.)
While there are instances when we relax the application of procedural rules,
the present petition is not one of them. Liberal application of the rules is an
exception rather than the rule. In this case, petitioners failed to address the
issue of finality of the CA Decision when it was raised in respondent Mena's
Comment to the Manifestation and Motion to Stay Execution in the CA. Upon
the denial of the manifestation and motion clue to finality of the CA Decision,
petitioners again ignored the issue of finality in their Motion for
Reconsideration. Up until respondent-spouses' Comment before us, which
again alleged the finality of the CA Decision, petitioners continued to be mum
on the issue. Petitioners' silence as to the timeliness of their appeal is
suspect. Thus, in the absence of exceptional circumstances and effort on the
part of petitioners to justify the liberal application of the rules, we are
constrained to deny the petition.
Nevertheless, even discounting the above procedural defect, we still
find the present petition unmeritorious.
₯Compromise Agreement- Set V
The Execution of the Lease Contract is not a Supervening Event
The assailed CA Decision was promulgated on August 29, 2007, and
petitioners received notice of it on September 4, 2007. 78 The CA Decision
ordered petitioners to vacate the property on the ground of respondent-
spouses' legitimate need of the premises and expiration of the lease. On
September 10, 2007, petitioners entered into a 10-year lease contract with
Roberto involving the property.79
Consequently, petitioners allege that the execution of the lease contract lent
legitimacy to their occupation of the property, such that the CA Decision is
now mooted and should no longer be enforced because to do so would be
inequitable. Petitioners insist that the lease contract constitutes a
supervening event justifying the stay of the CA Decision. 80
Petitioners' contentions are untenable. A supervening event refers to facts
which transpire after judgment has become final and executory or to new
circumstances which developed after the judgment has acquired finality,
including matters which the parties were not aware of prior to or during the
trial as they were not yet in existence at that time. 81 Here, the lease contract
was executed after the CA Decision was promulgated but before it attained
finality. In fact, petitioners executed the lease contract just six days after they
received the adverse ruling of the CA.
To our mind, instead of a supervening event, the execution of the lease
contract partakes of the nature of a compromise. A compromise is a contract
whereby the parties, by making reciprocal concessions, avoid litigation or put
an end to one already commenced.82 It is an agreement between two or more
persons, who, for the purpose of preventing or putting an end to a lawsuit,
adjust their difiiculties 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.83 In the case before us, petitioners claim that they executed
the lease contract before notice of the CA Decision as an "amicable
settlement of the issues with reference to occupancy of the subject
property."84 Thus, petitioners' intention to end the litigation by virtue of a
compromise is evident.
A compromise may be entered into at any stage of the case-pending trial, on
appeal and even after finality of judgment. 85 Hence, petitioners may enter into
a compromise with the respondent-spouses, even after the CA Decision was
rendered. However, the validity of the agreement is determined by
compliance with the requisites and the principles of contracts, not by when it
was entered into.86 Unfortunately for petitioners, the compromise that they
effected is wanting of one of the essential requisites 87 of a valid and binding
compromise--consent of all the parties in the case. We have consistently
Page 41 of 82
ruled that a compromise agreement cannot bind a party who did not
voluntarily take part in the settlement itself and gave specific individual
consent.88
It is undisputed that only Roberto entered into a lease contract with
petitioners. Mena did not sign it, but on the contrary, denounces its execution
as being done in evident bad faith and without authority from her as the sole
owner of the property. Considering that Mena did not participate in the
execution of the lease contract, the compromise is not binding on her.
In addition, the compromise is also not valid even between petitioners and
Roberto because the records show that the land in question is indeed a
paraphernal prope1iy of Mena. Petitioners themselves admitted in their
Answer89 and Position Paper90 before the MeTC that only Mena is the
registered owner of the property. Estoppel therefore lies against them.
Petitioners cannot now argue before us that the prope1iy is a conjugal
property of the respondent-spouses, such that only Roberto's consent is
necessary for the effoctivity of the lease. Without an authorization showing
that Roberto is acting on behalf of Mena, he has no right and power to enter
into a lease contract involving Mena's exclusive property.
Besides, even assuming that the property is conjugally owned by
respondent-spouses, this does not bestow upon Roberto the power to enter
into a lease contract without the consent of his wife. We have explained
in Roxas v. Court of Appeals,91 that consent of the wife is required for lease
of a conjugal realty for a period of more than one year, such lease being
considered a conveyance and encumbrance under the provisions of the Civil
Code.92
Respondent-Spouses Complied with Section 5 (c) of BP 877
The controversy revolves on whether respondent-spouses' satisfied the
requisites of Section 5 (c) of BP 877 as a ground for judicial ejectment. To
recapitulate, the requisites are:
(1) the owner's/lessor's legitimate need to repossess the leased property for
his own personal use or for the use of any of his immediate family;
(2) the owner/lessor docs not own any other available residential unit
within the same city or municipality;
(3) the lease for a definite period has expired;
(4) there was formal notice at least three (3) months prior to the
intended date to repossess the property; and
₯Compromise Agreement- Set V
(5) the owner must not lease or allow the use of the property to a third party
for at least one year.
The second, third and fourth requisites are the ones contested in this case.
The RTC found that respondent-spouses have other residential units within
Pasig City. It also adjudged that the verbal lease between the parties does
not have a period and the 3-month notice requirement was not complied with.
We disagree with the RTC and affirm the CA.
First,  while it is admitted by respondent-spouses that they have other
residential units in Pasig City, they were not available because they were
occupied by tenants who pay their rentals promptly. 94 The keyword in the
second requisite of Section 5 (c) is the word "available." The right of
respondent-spouses to eject petitioners cannot be negated by the fact alone
that the former have other residential units in Pasig City. The said properties
must be "available." Our ruling in Roxas v. Intermediate Appellate Court 95is
enlightening, thus:
It is important to stress lhat even assuming any of petitioners own other
residential units, whal the law requires is that the same is an available
residential unit,  for the use of such owner/lessor or the immediate member of
his family. Thus even if an owner/lessor owns another residential unit, if
the same is not available as for example the same is occupied or it is
not suitable for dwelling purposes, it is no obstacle to the ejectment of
a tenant on the ground that the premises is needed for use of the owner
or immediate member of his family.
Respondent-spouses did not choose to eject petitioners arbitrarily and
unreasonably. They asserted that among their tenants, petitioners are
delinquent in their rental payments. We cannot fault respondent-spouses in
choosing their other tenants, who are in good standing, over petitioners.
Second,  the lease between respondent-spouses and petitioners, although
merely verbal, is deemed to be one with a definite period which expires at the
end of each month. The lease is on a month-to-month basis because the
rentals are paid monthly. In this regard, we cite our ruling in Arquelada v.
Philippine Veterans Bank,97to wit:
The question now is, has the verbal contract of lease between petitioners and
the Bank expired in order to call for the ejectment of the latter from the
premises in question? The Court rules in the affirmative.
It is admitted that no specific period for the duration of the lease was agreed
upon between the parties. Nonetheless, payment of the stipulated rents
Page 42 of 82
were made on a monthly basis and, as such, the period of lease is SO ORDERED.
considered to be from month to month in accordance with Article 1687
of the Civil Code. Moreover, a lease from month-to-month is considered
to be one with a definite period which expires at the end of each month
upon a demand to vacate by the lessor. 98 (Citations omitted, emphasis
supplied.)

Third, respondent-spouses complied with the requirement of 3-month prior

notice. Petitioners do not dispute that they were verbally informed of
respondent-spouses' need of the property as early as March 2000. In
fact, barangay  conciliation meetings were held regarding the matter.
Petitioners, however, insist that the reckoning period for the 3-month notice
should be counted from their receipt on June 15, 2000 of the letter to vacate.
Consequently, they argue that they were given only 28 days from June 15 to
July 13, 2000 to vacate the property.

We reject petitioners' contention.

The "formal notice" requirement under BP 877 does not refer to a written
notice only. In the case of Garcia v. Court of Appeals,99 we reckoned
compliance with the 3-month notice requirement from his verbal demand to
vacate, viz:

x x x [E]ven assuming arguendo  that the appellate court's premise is correct,

petitioner did give notice on his own behalf.1âwphi1 The trial court found that
soon after the sale of the property to petitioner, or on October 10, 1979, the
latter wrote to private respondent thal he vacate the premises. After this and
other subsequent demands were ignored, he again made a demand on
August 7, 1982 informing private respondent that he wished to build his
house on the property. After this last demand was again ignored, he
brought the matter before the Barangay Chairman who, on September 19,
1982, sent a summons to private respondent, who, not only ignored it but in
addition, refused to accept it when served upon him. Petitioner finally filed
an ejectment suit before the MTC on December 7, 1982, or four months
after his verbal demand on August 7, 1982. Thus, even disregarding the
previous demands soon after the sale, petitioner had complied with the
requirement of three-month notice.100 (Emphasis supplied.)

All told, the present petition is without merit both on technical and substantive
grounds.

WHEREFORE, the Petition is DENIED. The Decision and Resolution of the

Court of Appeals elated August 29, 2007 and July 7, 2008, respectively, are
hereby AFFIRMED.

₯Compromise Agreement- Set V

Page 43 of 82
[37] G.R. No. 205623 August 10, 2016
CONCHITA A SONLEY, Petitioner vs. ANCHOR SAVINGS
BANK/EQUICOM SAVINGS BANK, Respondent
Civil Law; Compromise Agreements; Under Article 2041 of the Civil Code,
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.—Under Article 2041 of the Civil Code, “(i)f one of the parties fails or
refuses to abide by the compromise, the other party may either enforce the
compromise or regard it as rescinded and insist upon his original demand.” “The
language of this Article 2041 x x x denotes that no action for rescission is required
x x x, and that the party aggrieved by the breach of a compromise agreement may, if
he chooses, bring the suit contemplated or involved in his original demand, as if
there had never been any compromise agreement, without bringing an action for
rescission thereof. He need not seek a judicial declaration of rescission, for he may
‘regard’ the compromise agreement already ‘rescinded.’”
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 assails the Court of Appeals' August
28, 2012 Decision2 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 filed a
Complaint6 for declaration of nullity of rescission of contract and damages in
the trial court7 against x x x Anchor Savings Bank ("Anchor"), a thrift banking
institution organized and existing under the laws of the Philippines [whose]
business name x x x was [later] changed to Equicom Savings Bank x x x
In the said complaint, petitioner alleged that, on January 28, 2005, she
agreed to purchase a real property from [Anchor] for the sum of x x x
Php2,200,000.00 x x x. The said real property pertained to a parcel of land
that had been foreclosed by [Anchor] with an area of x x x 126.50 square
meters x x x located at Fairview, Quezon City ("subject property"). Pursuant
₯Compromise Agreement- Set V
to the said agreement, the parties entered into a Contract to Sell 8 whereby
the petitioner agreed to pay the amount of x x x Php200,000.00 x x x as
downpayment x x x with the balance of x x x Php2,000,000.00 x x x payable
in sixty (60) monthly installments amounting to x x x Php47,580.00 x x x.
Petitioner, however, defaulted in paying her monthly obligations x x x which
prompted [Anchor] to rescind the contract to sell x x x. In filing the complaint
x x x 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 benefit from her own fault
and prevent [Anchor] from exercising its right to rescind their contract to sell.
Subsequently, after the issuance of a Pre-Trial Order by the trial court, the
parties agreed to an amicable settlement and entered into a Compromise
Agreement.10 On the basis thereof, the trial court rendered a Judgment 11 x x x
on August 16, 2010 whereby the petitioner agreed to repurchase the subject
property from [Anchor] for the amount of x x x Php1,469,460.66 x x x plus x x
x 12% x x x interest per annum.
However, [Anchor] later on filed a Manifestation and Motion for Execution 12 in
the trial court claiming that petitioner had not been paying the agreed monthly
installments in accordance with the compromise agreement. Moreover, it
averred that all the checks which the petitioner issued to pay her obligations
were again dishonored. Thus, [Anchor] prayed that a writ of execution be
issued by the trial court in its favor ordering: (1) that the contract to sell that
was entered into between the parties be rescinded; (2) that [Anchor] be
allowed to apply all the payments that were made to it by the petitioner as
rentals; and (3) that petitioner immediately vacate the subject property.
Consequently, on September 8, 2011, the trial court issued the assailed
order13 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 final and executory. Accordingly, let a writ of
Page 44 of 82
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 final and executory, the Decision
dated August 16, 2010 is hereby reiterated as final and executory and should
now be entered in the Book of Entries and Judgment. Accordingly, a writ of
execution should now be issued to implement the aforesaid Judgment in
consonance with the Compromise Agreement and in line with Rule 39
Section 1 of the Rules of Court, to wit:
‘Section 1. Execution upon judgments or final orders. – Execution shall issue
as a matter of right, on motion, upon a judgment or order that disposes of the
action or proceeding upon the expiration of the period to appeal therefrom if
no appeal has been duly perfected.’14
Ruling of the Court of Appeals
Petitioner filed a Petition for Certiorari before the CA, docketed as CAG.R.
SP No. 122409, claiming that the trial court committed grave abuse of
discretion in issuing a writ of execution, since there is nothing in the trial
court’s August 16, 2010 judgment which authorizes the issuance of such a
writ in case the parties fail to perform the obligations stated under the
Compromise Agreement.
In its assailed August 28, 2012 Decision, however, the CA ruled against the
petitioner, pronouncing thus:
In sum, the sole issue to be resolved by us in this case is whether or not the
trial court may issue a writ of execution against the petitioner despite the fact
that the issuance thereof was not specifically provided for in the judgment
which it rendered based on compromise agreement. After a careful and
judicious scrutiny of the whole matter, together with the applicable laws and
jurisprudence in the premises, we find the instant petition to be bereft of
merit.
A compromise is a contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one already commenced. Like
any other contract, a compromise agreement must comply with the requisites
in Article 1318 of the Civil Code, to wit: (a) consent of the contracting parties;
₯Compromise Agreement- Set V
(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. x x x
Corollary thereto, once submitted to the court and stamped with judicial
approval, a compromise agreement becomes more than a mere private
contract binding upon the parties. Having the sanction of the court and
entered as its determination of the controversy, it has the force and effect of
any judgment.
In the case at bench, the petitioner pointed out that the issuance of a writ of
execution was not warranted and had no legal basis under the judgment
based on compromise agreement that was rendered by the trial court. In
support of her argument, petitioner relied on paragraph (c) of the said
agreement which provides as follows:
‘(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 five percent (5%) per month in
case she failed to pay her monthly obligations. Thus, she posited that the trial
court committed grave abuse of discretion when it issued a writ of execution
against her when she defaulted in her payment because the terms of their
compromise agreement did not provide for the said remedy.
The foregoing contentions adduced by the petitioner are untenable and
devoid of merit. True, the compromise agreement between the parties stated
that, in case of the petitioner’s failure to pay her obligation, she agreed to pay
interests and penalties [sic] charges. However, paragraph (c) of the
compromise agreement likewise provided that petitioner’s payment of the
additional interests and charges ‘shall be without prejudice to the right of the
defendant to rescind this Compromise Agreement as provided under the
‘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
Page 45 of 82
‘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.’
‘FORFEITURE OF PAYMENTS
‘As a consequence of the rescission of this Contract pursuant to
Paragraph 5 above, any and/or all payments made by the BUYER under
this Contract shall be deemed forfeited in favour of the SELLER and
shall be applied as rentals for the use and occupancy of the
PROPERTY and/or as and by way of liquidated damages and
indemnification for opportunity loss and/or other losses, the BUYER hereby
acknowledging and confirming that the SELLER was deprived of the
opportunity to offer the PROPERTY for sale to other interested parties or
dispose thereof in such manner as it deems necessary or appropriate during
the existence of this Contract.’
Considering the aforequoted stipulations in the compromise agreement and
the contract to sell, this Court does not find any merit in the claim of the
petitioner that [Anchor] could not avail of the remedy of rescission in case of
default in payment by the petitioner. On the contrary, the intent of the
contracting parties was clearly embodied in the compromise agreement when
the said agreement stated that the petitioner should pay additional charges
should she default in the payment of her obligations x x x. The payment of
said additional amounts, however, shall be without prejudice to [Anchor’s]
right to rescind the contract to sell and consider the payments that were
already made by the petitioner as rentals for her use and occupation of the
subject property.
Verily, it is a settled rule that a compromise agreement, once approved by
final order of the court, has the force of res judicata between the parties and
should not be disturbed except for vices of consent or forgery. Hence, a
decision on a compromise agreement is final and executory and it has the
force of law and is conclusive between the parties. It transcends its identity
as a mere contract binding only upon the parties thereto as it becomes a
judgment that is subject to execution in accordance with the Rules of Court.
In this regard, Article 2041 of the Civil Code explicitly provides that, if one of
the parties fails or refuses to abide by the compromise agreement, the other
party may either enforce the compromise or regard it as rescinded and insist
upon his or her original demand.
₯Compromise Agreement- Set V
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. x x x
Here, there is a paucity of circumstance which would persuade us to grant
the instant petition. There was no hint of whimsicality nor gross and patent
abuse of discretion as would amount to an evasion of a positive duty or a
virtual refusal to perform a duty enjoined by law when the trial court issued
the assailed order and issued a writ of execution against herein petitioner
who voluntarily and freely signed the compromise agreement and thereafter
became bound by the terms and conditions that were embodied therein.
WHEREFORE, in view of the foregoing premises, judgment is hereby
rendered by us DENYING the petition filed in this case for lack of merit. The
Order dated September 8, 2011 issued by Branch 148 of the Regional Trial
Court of the National Capital Judicial Region in Makati City dated September
8, 2011 [sic] in Civil Case No. 09-217 is AFFIRMED.
SO ORDERED. 15
In short, the CA held that petitioner’s failure to abide by the terms and
conditions of the Compromise Agreement, which had the force and effect of a
final and executory judgment when it was approved by the trial court in its
August 16, 2010 Judgment, authorized the enforcement thereof by execution,
and thus the trial court may not be faulted for granting respondent’s motion
for execution and directing the issuance of the corresponding writ.
Petitioner moved to reconsider, but in its assailed January 25, 2013
Resolution, the CA remained unconvinced. Hence, the present Petition.
In an August 20, 2014 Resolution,16 this Court resolved to give due course to
the Petition.
Issue
In essence, petitioner reiterates her contention before the CA that the trial
court had no power to issue a writ of execution in Civil Case No. 09-217 as
the issuance thereof was not authorized and specifically provided for in its
August 16, 2010 Judgment.
Petitioner’s Arguments
Page 46 of 82
Praying that the assailed CA dispositions be voided, reversed, and set aside,
petitioner argues that respondent is not entitled to execution as the
Compromise Agreement does not specifically provide that in case of default,
a writ of execution may issue; that the only remedies available to respondent
are to charge penalties and/or rescind the agreement as provided for under
the Contract to Sell; and that before a writ of execution may issue,
respondent must first institute an action for rescission and secure a judicial
declaration that the Contract to Sell is rescinded, which was not done in this
case.
Respondent’s Arguments
In its Comment,17 respondent counters that since petitioner admits that she is
in default and thus violated the terms of the Compromise Agreement,
rescission should follow as a matter of course as authorized and provided for
in said agreement and the Contract to Sell; that the trial court’s approval of
the Compromise Agreement is a final act that forms part and parcel of the
judgment which may be enforced by a writ of execution; 18 that since the
Compromise Agreement itself provides the power to rescind, it follows that
any rescission done pursuant thereto is enforceable by execution without
need of a separate action; and that since petitioner failed to prove the
presence of grave abuse of discretion, the 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 x x x denotes that no action for rescission is required x x
x, and that the party aggrieved by the breach of a compromise agreement
may, if he chooses, bring the suit contemplated or involved in his original
demand, as if there had never been any compromise agreement, without
bringing an action for rescission thereof. He need not seek a judicial
declaration of rescission, for he may ‘regard’ the compromise agreement
already ‘rescinded’."19 This principle was reiterated in a subsequent case,
thus:
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:
₯Compromise Agreement- Set V
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 r
rescinded" for the cause therein specified, thus suggesting an action for
annulment or rescission, said Article 2041 confers upon the party concerned,
not a "cause" for rescission, or the right to "demand" the rescission of a
compromise, but the authority, not only to "regard it as rescinded", but, also,
to "insist upon his original demand". The language of this Article 2041,
particularly when contrasted with that of Article 2039, denotes that no
action for rescission is required in said Article 2041, and that the party
aggrieved by the breach of a compromise agreement may, if he
chooses, bring the suit contemplated or involved in his original
demand, as if there had never been any compromise agreement,
without bringing an action for rescission thereof. He need not seek a
judicial declaration of rescission, for he may "regard" the compromise
agreement already "rescinded". 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 installment in
accordance with the Schedule of Payment provided in Paragraph 2 – Manner
of Payment, or if, at any time, the SELLER is of the opinion that the BUYER
would be unable to pay or meet his obligations under this Contract or in case
the BUYER was declared in default by any other creditor, then the SELLER
shall be entitled, as a matter of right, to rescind this Contract. (Emphasis
supplied)
While the assailed dispositions of the trial court and the CA do not specify the
remedies that respondent is entitled to, it is clear that rescission and eviction
were specifically sought and prayed for in respondent’s Manifestation and
Motion for Execution, and petitioner was given the opportunity to oppose the
same. In her Opposition to the Motion for Execution, 21 she in fact
acknowledged and admitted that she was in default and that she violated the
Page 47 of 82
Compromise Agreement by her failure to make regular payments as required SO ORDERED.
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 sufficient written notice to petitioner, and it
was duly heard; petitioner opposed the motion and even filed a rejoinder 22 to
respondent’s reply,23 but she could not proffer any defense; quite the
opposite, she openly admitted liability. The facts, evidence, and pleadings
are clear and within the cognizance of the trial court; petitioner’s failure to
abide by the agreement should result in execution, cancellation and
rescission of the Compromise Agreement and Contract to Sell, and her
eviction from the property.

Certainly, a compromise agreement becomes the law between the parties

and will not 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 ₱497,412.76, 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. The August 28, 2012 Decision and
January 25, 2013 Resolution of the Court of Appeals in CA-G.R. SP No.
122409 are AFFIRMED. The parties’ Compromise Agreement and Contract
to Sell dated December 21, 2007 are RESCINDED. Petitioner Conchita A.
Sonley is ordered to immediately VACATE the subject property and
premises and SURRENDER the 'same to respondent Anchor Savings
Bank/Equicom Savings Bank.

₯Compromise Agreement- Set V

Page 48 of 82
[38] G.R. No. 191652, September 13, 2017
TEAM IMAGE ENTERTAINMENT, INC., AND FELIX S. CO., Petitioners, v.
SOLAR TEAM ENTERTAINMENT, INC., Respondent.
Criminal Law; Extinction of Criminal Liability; Compromise Agreements; A
compromise is not one of the grounds prescribed by the Revised Penal Code (RPC)
for the extinction of criminal liability.—Despite paragraphs 21 and 22 of the
Compromise Agreement, Solar Team cannot be deemed to have violated it for failing
to cause the dismissal of the criminal cases for estafa Tieng filed against Co. It is
settled that criminal liability cannot be the subject of a compromise. “[A] criminal
case is committed against the People, and the offended party may not waive or
extinguish the criminal liability that the law imposes for its commission.” This
explains why “a compromise is not one of the grounds prescribed by the Revised
Penal Code for the extinction of criminal liability.”
Same; Same; Same; Chavez v. Presidential Commission on Good Government,
299 SCRA 744 (1998), and Benedicto v. Board of Administrators, 207 SCRA 659
(1992), ironically cited by Team Image, are both clear that compromise is
encouraged only in civil cases.—Chavez v. Presidential Commission on Good
Government, 299 SCRA 744 (1998), and Benedicto v. Board of Administrators, 207
SCRA 659 (1992), ironically cited by Team Image, are both clear that compromise is
encouraged only in civil cases. Chavez explicitly stated that “[w]hile a compromise
in civil suits is expressly authorized by law, there is no similar general sanction as
regards criminal liability.” Team Image confused the Presidential Commission on
Good Government’s power to grant criminal immunity with the act of compromising
criminal liability. Granting criminal immunity is allowed because no criminal case
has yet been filed in court, and therefore, there is no criminal liability to
compromise. On the other hand, compromising criminal liability presupposes that a
criminal case has already been filed in court, the dismissal of which is already based
on the sound discretion of the trial court. In other words, the dismissal cannot be
automatic, regardless of the agreement between the private complainant and the
accused to dismiss the case. As discussed, the real offended party in a criminal case
is the State and the outcome of the criminal case cannot be based on the will of the
private complainant who is a mere witness for the prosecution.
Remedial Law; Civil Procedure; Judgments; Compromise Agreements; Upon
approval, a judgment upon a compromise is immediately executory, not even subject
to appeal.—As held by the Court of Appeals, it was grave abuse of discretion for
Judge Dumayas to keep the P2,000,000.00 in custodia legis. Upon approval, a
judgment upon a compromise is immediately executory, not even subject to appeal.
Ordering the deposit of the P2,000,000.00 with the Office of the Clerk of Court
effectively stayed the execution of an immediately executory judgment. It is highly
irregular. Nowhere in the law or the Rules of Court is such deposit allowed.
DECISION
₯Compromise Agreement- Set V
LEONEN, J.:
A judgment upon a compromise is rendered based on the parties' reciprocal
concessions. With all the more reason should a judgment upon a
compromise be complied with in good faith considering that the parties
themselves crafted its terms.
These are consolidated Petitions for Review on Certiorari assailing the
December 10, 2009 Decision1 and March 17, 2010 Resolution2 of the Court
of Appeals in CA-G.R. SP No. 104961. The Court of Appeals held that both
parties—Team Image Entertainment, Inc. (Team Image) and Solar Team
Entertainment, Inc. (Solar Team)—violated the Compromise Agreement they
had entered into in connection with a civil case for accounting3 filed before
Branch 59, Regional Trial Court, Makati City. Team Image was specifically
ordered to pay Solar Team P2,000,000.00 in liquidated damages for failing to
settle its monetary obligation to Solar Team within the period provided in the
Compromise Agreement.4 Further, the Court of Appeals allowed Team
Image to suspend payments under the Compromise Agreement because
Solar Team failed to withdraw the complaint-in-intervention it had earlier filed
against Team Image's President, Felix S. Co (Co), contrary to their
agreement to dismiss all actions they had filed against each other.
Solar Team owned movies, films, telenovelas, television series, programs,
and coverage specials that it aired over block times in several television
stations.6 It derived profits by selling advertising spots to interested business
enterprises.
On April 24, 1996, Solar Team entered into a Marketing Agreement with
Team Image,8 which agreed to act as Solar Team's exclusive marketing
agent by selling advertising spots to business enterprises on behalf of Solar
Team.
According to Solar Team, Team Image breached their Marketing Agreement
by failing to disclose the names of the entities to which Team Image sold
advertising spots. Further, Team Image allegedly represented itself as the
owner of Solar Team's television programs, series, and telenovelas, hence
collecting the proceeds of the sale without remitting them to Solar Team. For
these reasons, Solar Team demanded that Team Image render an
accounting of all the transactions the latter had entered into pursuant to the
Marketing Agreement and that it remit all the proceeds it had received in
selling Solar Team's television programs, series, and telenovelas.
When Team Image refused to render an accounting, Solar Team filed against
Team Image and its President, Co, a Complaint for Accounting and Damages
Page 49 of 82
before the Regional Trial Court of Makati.11 The case was raffled to Branch
59, presided by Judge Winlove M. Dumayas (Judge Dumayas).
On January 17, 2002, the trial court rendered a Decision,13 finding that
Team Image breached the Marketing Agreement. According to the trial court,
Team Image only had the authority to sell advertisement spots on behalf of
Solar Team, not to collect any sales proceeds. Thus, it ordered Team Image
to render an accounting of all its transactions and collections under the
Marketing Agreement. The dispositive portion of this Decision read:
WHEREFORE, judgment is hereby rendered in favor of [Solar Team] and
against [Team Image and Felix S. Co]. as follows:
Ordering [Team Image and Felix S. Co] jointly and severally to immediately
render an accounting within fifteen (15) days from receipt of this decision, on
all its sales and collections on the television properties of [Solar Team]
mentioned in Annex "A" of the complaint, from date of the agency agreement
(Exhibit "A") on April 24, 1996 until the filing of the complaint;
Directing [Team Image and Felix S. Co] jointly and severally to make
available to [Solar Team] or its authorized representatives) accountant[s] or
auditors, within fifteen (15) days from receipt hereof, all their books of
accounts and records on all their sales and collections on [Solar Team's]
aforesaid television properties[; and]
Ordering [Team Image and Felix S. Co] jointly and severally to pay [Solar
Team] the sum of Php50,000.00 for attorney's fee; and Php200,000.00 for
moral, exemplary[,] nominal and temperate damages; and cost[s] of suit. SO
ORDERED.
More than a year after or on April 28, 2003, Solar Team and Team Image
entered into a Compromise Agreement,15 submitting it to the trial court for
approval. In essence, the parties agreed on the payment terms and their
division of receivables from the media company VTV Corporation, which had
purchased advertising spots from Team Image as Solar Team's marketing
agent. For purposes of accounting and auditing these receivables, the parties
hired SyCip Gorres Velayo and Company (SGV and Co.) as auditor.
With respect to other business ventures that the parties may have jointly
undertaken, paragraph 18 of the Compromise Agreement stated that the
parties must submit a certification of the existence of these receivables:
18. To further assure each one of them, both parties shall within ten (10)
days from the date of execution of this agreement, submit to one another,
certification and/or reasonable and available proof of the existence of said
receivables.
₯Compromise Agreement- Set V
The parties likewise agreed to waive all their claims against each other and
to cause the provisional dismissal of all the criminal and civil actions that they
had filed against each other. Paragraphs 21 and 22 of the Compromise
Agreement provided:
21. This agreement constitutes the final repository of all the prior
understanding agreements and contracts of the parties and shall operate as
total waiver and discharge of any or all claims, counterclaims, causes of
action, claims and demands of whatever kind and nature which each may
have against the other, including their respective heirs[,] assigns[,] and
successors-in-interest arising out of any of all matters, cause or thing,
whether directly or indirectly, related with the Marketing Agency Agreement
dated 24 April 1996.
22. By virtue hereof, the parties have agreed, as they hereby agree to
immediately provisionally dismiss all actions, whether civil or criminal, they
may have filed against the other, and after SGV shall have finally completed
the audit and accounting tasked upon it, the results of which is final and
binding upon the parties, all said civil and/or criminal actions shall be
permanently dismissed by the parties.
Further, the parties agreed to the immediate issuance of a writ of execution
and payment of liquidated damages in case of breach of the Compromise
Agreement. Paragraph 24 of the Compromise Agreement stated:
24. In the event SGV shall have made a final determination of the respective
accountability of the parties and any of the parties fail to comply with the
same, or in the event any of the parties is remiss or reneges from [its]
commitment/s as specified in this Agreement or breaches the warranties
and/or representation as contained herein, then the aggrieved party shall be
entitled to an immediate issuance of a writ of execution to enforce
compliance thereof and the guilty party shall pay the innocent party the sum
of P2 Million Pesos by way of liquidated damages and/or penalty and shall,
likewise, shoulder all the expenses in enforcing this compromise agreement
by a writ of execution. Moreover, the innocent party shall have the right to
invoke the principle of reciprocity of obligations in contracts as provided for
by law.
Finding the provisions of the Compromise Agreement not contrary to law,
morals, or public policy, the trial court approved and rendered judgment
based on the Compromise Agreement in its Decision19 dated April 30, 2003.
The parties subsequently filed motions for issuance of a writ of execution on
account of the other's alleged violation of the Compromise Agreement.
Page 50 of 82
The first motion for issuance of a writ of execution was filed by Team Image
on April 26, 2004.20 Team Image prayed that the trial court allow it to
suspend payments to Solar Team under the Compromise Agreement due to
the alleged failure of Solar Team's Chief Executive Officer, William Tieng
(Tieng), to collect receivables from VTV Corporation. In addition, Solar Team
allegedly failed to submit to Team Image a certification on the existence of
the receivables from VTV Corporation, in violation of paragraph 18 of the
Compromise Agreement.
In its Order21 dated April 29, 2004, the trial court allowed Team Image to
suspend payments to Solar Team '"until after [the trial court] shall have
resolved [the April 26, 2004 motion for issuance of a writ of execution]."22
The trial court subsequently issued a Writ of Execution on May 28, 2004.23
However, in its Order24 dated November 23, 2004, the trial court granted
Solar Team's Motion for Reconsideration; thus, it set aside its previous order
allowing suspension of payment and quashed the writ of execution. The
dispositive portion of the November 23, 2004 Order read:
ORDER
Finding the Motion for Reconsideration filed by [Solar Team] to be impressed
with merit, the same is hereby GRANTED.
Accordingly, the Order of the Court dated April 30, 2004 is hereby
RECONSIDERED and set aside and the Writ of Execution dated May 28,
2004 is hereby QUASHED.25
Team Image moved to reconsider the November 23, 2004 Order.26
In the meantime, on October 6, 2005, Team Image filed a second motion27
for issuance of a writ of execution and suspension of payments (October 6,
2005 Motion) due to Solar rerun's alleged violation of paragraphs 21 and 22
of the Compromise Agreement. According to Team Image, Solar Team failed
to cause the dismissal of its complaint-in-intervention in a collection case filed
against Team Image,28 with Solar Team actively participating in the civil
case after the execution of the Compromise Agreement.
In its Order29 dated November 3, 2005, the trial court granted the October 6,
2005 Motion, issuing a writ of execution to enforce payment by Solar Team of
P2,000,000.00 in liquidated damages and allowing Team Image to suspend
payments to Solar Team. The dispositive portion of the November 3, 2005
Order read:
WHEREFORE, premises considered, the Court hereby . . . GRANTS [Team
Image's] motion for the issuance of a writ of execution along with their prayer
for an order allowing suspension of payment and Orders [Solar Team] to
₯Compromise Agreement- Set V
comply with paragraphs 21 and 22 of the compromise agreement executed
by the parties herein.
Accordingly, let a writ of execution be issued against [Solar Team] to enforce
payment of the sum of P2 Million Pesos as liquidated damages pursuant to
paragraph 24 of the compromise agreement. SO ORDERED.
Solar Team moved for a partial reconsideration of the November 3, 2005
Order.31
On December 6, 2005, Solar Team filed its own motion32 for issuance of a
writ of execution due to Team Image's alleged violation of paragraph 20 of
the Compromise Agreement.33 Solar Team claimed that Team Image failed
to submit documents necessary for the auditing and accounting of
receivables to SGV and Co., the appointed auditor under the Compromise
Agreement.
Meanwhile, in its Order34 dated April 7, 2006, the trial court denied both
Team Image's Motion for Reconsideration of the November 23, 2004 Order
and Solar Team's Motion for Partial Reconsideration of the November 3,
2005 Order. The trial court found that Team Image filed the Motion for
Reconsideration beyond the reglementary period. As for Solar Team, the trial
court found that it had failed to comply with its obligation to cause the
dismissal of all pending cases that it had filed against Team Image. Hence,
Solar Team was ordered to pay Team Image P2,000,000.00 in liquidated
damages per paragraph 24 of the Compromise Agreement. The dispositive
portion of the April 7, 2006 Order read:
WHEREFORE, premises considered, this Court resolves to DENY [Team
Image's] Motion for Reconsideration dated August 22, 2005 from the Order of
this Court dated November 23, 2004. [Solar Team's] Motion for Partial
Reconsideration dated November 19, 2005 from the Order of this Court
dated November 3, 2005 is, likewise, DENIED for lack of merit. SO
ORDERED.
On December 5, 2007, Team Image filed before the trial court its third
motion36 for issuance of writ of execution with prayer for suspension of
payments (December 5, 2007 Motion). Team Image argued that Solar
Team's Tieng violated anew paragraphs 21 and 22 of the Compromise
Agreement by failing to cause the dismissal of the criminal cases he had
earlier filed against Team Image's Co. On December 18, 2007, Team Image
filed an Omnibus Motion37 with prayer for issuance of a writ of execution and
suspension of payments (December 18, 2007 Omnibus Motion), this time, for
Solar Team's Tieng to return to Team Image a total of P25,862,750.00. This
amount allegedly included the collections in excess of the P26,000,000.00
fixed in the Compromise Agreement; the P2,891,226.97 supposedly collected
Page 51 of 82
by a certain Ma. Fe Barreiro (Barreiro)38 without Solar Team's authority but
actually redounded to Tieng's benefit; and a total of P8,500,000.00 in post-
dated checks still in possession of Tieng. Thus, Team Image reiterated its
prayer for the trial court to implement the November 3, 2005 Order directing
Solar Team to pay Team Image liquidated damages.
In its Order40 dated January 9, 2008, the trial court ordered the
implementation of the November 3, 2005 Order to enforce payment of
liquidated damages by Solar Team for failure to cause the dismissal of its
complaint-in-intervention in the collection case filed against Team Image. A
Writ of Execution41 was subsequently issued on January 16, 2008, directing
the sheriff to implement the November 3, 2005 Order.
Two (2) days after or on January 18, 2008, Solar Team filed a motion to defer
the implementation of the January 16, 2008 Writ of Execution.42 Solar Team
likewise filed a motion to hold in abeyance the implementation of the Letters
of Garnishment issued pursuant to the January 16, 2008 Writ of Execution.
Acting on Team Image's December 5, 2007 Motion and December 18, 2007
Omnibus Motion in the Order44 dated January 21, 2008, the trial court
directed Solar Team, through Tieng, to cause the dismissal of the criminal
cases filed against Co pursuant to paragraphs 21 and 22 of the Compromise
Agreement.
Further, the trial court found that Tieng indeed had excess collections from
VTV Corporation. In his complaint for sum of money filed against VTV
Corporation, Tieng allegedly admitted that he had collected P22,971,572.03
from VTV Corporation, an amount which exceeded the P10,275,547.48
disclosed in paragraph 4 of the Compromise Agreement.45
The trial court likewise found that contrary to Solar Team's representation in
paragraph 5 of the Compromise Agreement,46 the P2,891,226.97
supposedly collected by Barreiro without Solar Team's authority actually
redounded to Tieng's benefit.47
Based on these findings, the trial court ordered Solar Team to return the
excess amounts and incorrect charges and to pay Team Image a total of
P8,000,000.00 in liquidated damages for breaching four (4) warranties made
in the Compromise Agreement. The dispositive portion of the January 21,
2008 Order read:
WHEREFORE, PREMISES CONSIDERED, this Court hereby grants [Team
Image and Felix S. Co's] 1) Motion for the issuance of writ of execution for
violation of paragraphs 21 and 22 of the compromise agreement with prayer
for an order allowing continuance of suspension of payment of obligation/s, if
any, as per paragraph 24 thereof dated December 5, 2007; and 2) Omnibus
₯Compromise Agreement- Set V
motion for the issuance of an order directing William Tieng to return to [Team
Image and Felix S. Co]; (a) overpayment under the compromise agreement
(b) marketing commission falsely charged against the share of [Team Image
and Felix S. Co] in the VTV operations and (c) for writ of execution and
suspension of payment, if any dated December 18, 2007.
Accordingly, [Team Image and Felix S. Co] are hereby authorized to suspend
payment of their obligation, if any, pursuant to paragraph 24 of the
compromise agreement and that:
ON THE FIRST MOTION
a) William Tieng is hereby ordered to dismiss and/or cause the dismissal of
Criminal Case Nos. 07-1235 and 07-1236 now pending before the Regional
Trial Court of Parañaque City, Metro Manila; and
b) Let a writ of execution issue to enforce the payment to [Team Image and
Felix S. Co] the sum of TWO MILLION (PhP2,000,000.00) PESOS as
liquidated damages on account of William Tieng's breach of warranties and
representations under paragraphs 21 and 22 of the compromise agreement.
ON THE SECOND MOTION
a) William Tieng is hereby ordered to pay/return to [Team Image and Felix S.
Co] the sum of TWENTY[-]FIVE MILLION EIGHT HUNDRED SIXTY[-]TWO
THOUSAND SEVEN HUNDRED FIFTY and 00/100 (PhP25,862,750.00)
PESOS broken down as: PhP17,362,750.00 cash amount received by
William Tieng and PhP8,500,000.00, total amount of checks still in the
possession of William Tieng;
b) William Tieng is hereby ordered to turn over to [Solar Team] the amount of
TWO MILLION EIGHT HUNDRED NINETY[-] ONE THOUSAND TWO
HUNDRED TWENTY[-]SIX and 97/100 (Php2,891,226.97) PESOS and for
SGV to pay [Team Image and Felix S. Co's] share thereon;
c) Let a writ of execution issue to enforce payment of the sum of FOUR
MILLION (Php4,000,000.00) PESOS by way of liquidated damages on
account of TIENG's aforesaid two (2) breaches of warranty and
representation under the first ground hereof and; and another FOUR
MILLION (PhP4,000,000.00) PESOS by way of liquidated damages on
account of TIENG's aforesaid two (2) breaches of warranty and
representation under the second ground her of or a total of EIGHT MILLION
(PhP8,000,000.00) PESOS, all pursuant to paragraph 24 of the Compromise
Agreement. SO ORDERED.
Page 52 of 82
A Motion for Reconsideration of the January 21, 2008 Order was filed by
Solar Team.49 When the trial court ordered the deputy sheriff to deliver the
garnished amount to Team Image through a certified bank check, Solar
Team likewise filed a Motion for Reconsideration.
In its Omnibus Order51 dated May 19, 2008, the trial court acted on Team
Image's December 18, 2007 Omnibus Motion. According to the trial court, the
only remedy allowed under the Compromise Agreement is the filing of a
motion for issuance of a writ of execution and that the orders allowing Team
Image to suspend payments were merely temporary and did not exonerate or
release Team Image and Co from their obligation.52 It then found that Team
Image and Co were "clearly in default in the payment of their obligation"53
under the Compromise Agreement. Therefore, the trial court set aside all its
previous orders that allowed Team Image to suspend payments, i.e., the
November 3, 2005 and January 21, 2008 Orders.
Furthermore, acting on Solar Team's Motion for Reconsideration, the trial
court reversed and set aside its January 21, 2008 Order where it declared
that Solar Team made excess collections from VTV Corporation. The trial
court reversed itself, and said that it was "premature to declare that there
was overpayment made to [Solar Team] or William Tieng"54 because the
appointed auditor, SGV and Co., had not yet finalized the required audit.
Nevertheless, the trial court reiterated that Solar Team violated the
Compromise Agreement when it failed to cause the dismissal of the
complaint in intervention it had filed against Team Image. The trial court
ordered Solar Team to pay Team Image P2,000,000.00 in liquidated
damages and to deposit the amount before the Office of the Clerk of Court of
the Regional Trial Court of Makati.
The dispositive portion of the May 19, 2008 Omnibus Order read:
WHEREFORE, PREMISES CONSIDERED, this Court hereby resolves the
parties' motions, as follows:
[Solar Team's] Urgent Omnibus Motion dated January 18, 2008 praying that:
1) the implementation of the Writ of Execution dated January 10, 2008 be
held in abeyance is hereby DENIED for being moot and academic;
2) a Writ of Execution be issued against [Team Image] to enforce payment of
the sum of TWO MILLION (Php2,000,000.00) PESOS and the unpaid
obligation of [Team Image] pursuant to paragraph 24 of the compromise
agreement is GRANTED, The previous Orders of this Court allowing
suspension of payment are hereby RECONSIDERED AND SET ASIDE;
₯Compromise Agreement- Set V
[Solar Team's] Urgent Motion dated January 21, 2008 praying that the
Letters of Garnishment be recalled and/or their implementation be held in
abeyance is hereby DENIED for being moot and academic;
[Solar Team's] Motion for Reconsideration dated January 28, 2008 is hereby
GRANTED. The Order dated January 21, 2008 is hereby RECONSIDERED
and SET ASIDE;
[Solar Team's] Omnibus Motion dated March 27, 2008 seeking that [Solar
Team] be allowed to deposit the amount of P2 Million Pesos to the Office of
the Clerk of Court - Regional Trial Court of Makati City is GRANTED.
Finally, [Team Image and Felix S. Co's] prayer to cite [Solar Team's William
Tieng] and his counsels for direct contempt is hereby DENIED for lack of
merit.
Accordingly, [Solar Team] is hereby ordered to deposit the amount of P2
Million Pesos to the Office of the Clerk of Court - Regional Trial Court of
Makati City within ten (10) days from receipt of this Order, the same will be
released only after final determination of the obligations of [Team Image and
Felix S. Co] pursuant to the compromise agreement and after the issue on
the violation of the same agreement by [Solar Team] for its failure to cause
the dismissal of Civil Case No. 97-024 has been resolved with finality.
On the other hand, [Team Image and Felix S. Co] are hereby ordered to pay
[Solar Team] as follows:
1) the sum of TWO MILLION (Php2,000,000.00) PESOS as liquidated
damages for their failure to pay [Solar Team] the value of the dishonored
checks despite its demand after the April 30, 2004 Order allowing the
suspension of payment to [Solar Team] was set aside by the November 23,
2004 Order of this Court.
2) the sum of EIGHT MILLION FIVE HUNDRED THOUSAND
(P8,500,000.00) PESOS representing the value of the seventeen (17)
dishonored checks which has remained unpaid as provided under paragraph
7 of the compromise agreement.
Let a writ of execution issue against [Team Image and Felix S. Co] to enforce
the payment of the sum of TWO MILLION (Php2,000,000.00) PESOS as
liquidated damages and EIGHT MILLION FIVE HUNDRED THOUSAND
(P8,500,000.00) PESOS representing the value of the said seventeen (17)
dishonored checks or a total of TEN MILLION FIVE HUNDRED THOUSAND
(P10,500,000.00), pursuant to paragraphs 7 and 24 of the compromise
agreement. SO ORDERED.
Page 53 of 82
Team Image filed a Motion for Reconsideration of the May 19, 2008 Omnibus
Order, which the trial court denied in its August 8, 2008 Order,56 the
dispositive portion of which read:
WHEREFORE, premises considered, this Court resolves to DENY [Solar
Team's] Motion to Consider [Team Image and Felix S. Co's] Motion for
Reconsideration as Not Filed dated July 2, 2008. [Team Image and Felix S.
Co's] Motion for Reconsider[a]tion dated June 17, 2008 is likewise DENIED
for utter lack of merit.
Accordingly, let the Writ as ordered by this Court to be issued per its Order
dated May 19, 2008 be now issued and implemented in the manner provided
for under Rule 39, Section 8 of the Rules of Court and according to its
aforesaid terms.
SO ORDERED.
Team Image filed a Petition for Certiorari before the Court of Appeals to
assail the May 19, 2008 and August 8, 2008 Orders of the trial court.
The issue for the Court of Appeals' resolution was whether or not the trial
court gravely abused its discretion:
First, in ordering the Clerk of Court to keep in the trial court's custody the
deposited P2,000,000.00 in liquidated damages instead of ordering Solar
Team Entertainment, Inc. to pay the amount directly to Team Image
Entertainment, Inc.;
Second, in disallowing Team Image Entertainment, Inc. from suspending
payments because the Compromise Agreement allegedly did not allow
suspension of payments;
Third, in ruling that a criminal case cannot be the subject of a compromise;
Fourth, in refusing to rule on whether or not Solar Team Entertainment, Inc.'s
William Tieng made excess collections from VTV Corporation; and
Finally, in holding that only a maximum of P2,000,000.00 in liquidated
damages may be claimed under the Compromise Agreement regardless of
the number of violations.59
On the first action, the Court of Appeals held that the trial court gravely
abused its discretion in ordering the Clerk of Court to keep in custodia legis
the P2,000,000.00 liquidated damages deposited by Solar Team for its failure
₯Compromise Agreement- Set V
to dismiss the complaint-in-intervention it had filed against Team Image. By
keeping this amount in court custody instead of ordering the Clerk of Court to
deliver it to Team Image, the trial court allegedly stayed the execution of a
final and executory judgment.
On the second action, the Court of Appeals ruled that the Compromise
Agreement allowed for suspension of payments, paragraph 2461 of which
stated that the "principle of reciprocity" under the Civil Code applied to the
parties. The Court of Appeals stated that Team Image was not obliged to pay
its monetary obligations under the Compromise Agreement since Solar Team
violated several of its provisions such as submitting the required certification
of receivables and dismissing the cases earlier filed against Team Image.
Nevertheless, the Court of Appeals found 'that the trial court November 23,
2004 Order which allowed the suspension of Team Image's payments was
merely temporary. When the trial court set aside this Order, Team Image
should have resumed paying its obligations to Solar Team until November 3,
2005, when the trial court granted Team Image's second motion to suspend
payments. By failing to resume its payment in the interim, Team Image and
Co were in default from November 23, 2004 to November 3, 2005.
On the third action, the Court of Appeals said that criminal liability cannot be
the subject of a compromise; hence, Solar Team cannot be deemed to have
violated the Compromise Agreement when it failed to cause the dismissal of
the criminal cases against Co.
On the fourth action, the Court of Appeals refused to resolve the issue of
grave abuse of discretion because doing so would allegedly preempt the
proceedings before Branch 57, Regional Trial Court, Makati City where Solar
Team sued VTV Corporation for P18,617,915.81 in advertising spot fees.
On the last action, the Court of Appeals held that only a maximum of
P2,000,000.00 in liquidated damages may be paid under the Compromise
Agreement, paragraph 2466 of which still maintained that liquidated
damages are payable in case of failure to comply with "commitments" and in
case of "breaches [of] warranties." The use of plural "commitments" and
"breaches," observed the Court of Appeals, meant that P2,000,000.00 is
payable for collective breaches of the Compromise Agreement. In the words
of the Court of Appeals, "the totality of infractions or the number of violations
would not be relevant and liquidated damages would be pegged at Two
Million (P2,000,000.00) Pesos for the total violations."
In its December 10, 2009 Decision,68 the Court of Appeals partly granted
Team Image's Petition for Certiorari, disposing the case in this wise:
Page 54 of 82
WHEREFORE, premises considered, the petition is PARTLY GRANTED and
resolved as follows:
The implementation of the Writ of Execution dated January 10, 2008 is
AFFIRMED.
The payment by [Team Image] of TWO MILLION (Php2,000,000.00) PESOS
pursuant to paragraph 24 of the Compromise Agreement for its failure to
settle its obligation within the period from November 23, 2004 to November 3,
2005 is AFFIRMED.
The suspension of payment granted in the Order dated November 3, 2005
STAYS until respondent Solar Team Entertainment, Inc. withdraws the
complaint-in-intervention in Civil Case No. 97-024 before Branch 137,
Regional Trial Court of Makati City.
The denial of the recall of the issued Letters of Garnishment is AFFIRMED.
The order to deposit the amount of P2 Million Pesos to the Office of the Clerk
of Court Regional Trial Court of Makati City is REVERSED and SET ASIDE.
The garnished amount of Two (P2M) Million pesos representing liquidated
damages is ordered released from the custody of the Clerk of Court of the
Regional Trial Court of Makati City and delivered to [Team Image].
The reversal of the order which requires [Solar Team's] William Tieng to
cause the dismissal of Criminal Case Nos. 07-1235 and 07-1236 is
AFFIRMED.
The reversal of the order requiring [Solar Team's] William Tieng to pay the
sum of TWO MILLION (Php2,000,000.00) PESOS as liquidated damages on
account of its failure to dismiss Crim. Case Nos. 07-1235 and 07-1236 is
AFFIRMED.
The reversal of the order requiring [Solar Team's] William Tieng to return the
sum of TWENTY[-]FIVE MILLION EIGHT HUNDRED SIXTY[-]TWO
THOUSAND SEVEN HUNDRED FIFTY and 00/100 PESOS
(PhP25,862,750.00) on account of [Solar Team's] alleged admission in its
pleading in Civil Case No. 05-603 despite the pendency of the SGV audit is
AFFIRMED.
The reversal of the order requiring [Solar Team's] William Tieng to turn over
the amount of TWO MILLION EIGHT HUNDRED NINETY[-]ONE
THOUSAND TWO HUNDRED TWENTY[-]SIX and 97/100
(Php2,891,226.97) PESOS to [Solar Team] is AFFIRMED.
₯Compromise Agreement- Set V
The reversal of the order requiring [Solar Team's] William Tieng to pay a total
of EIGHT MILLION PESOS (PhP8,000,000.00) PESOS, pursuant to
paragraph 24 of the Compromise Agreement for alleged breaches of
warranty and representation is AFFIRMED. SO ORDERED.
Team Image and Solar Team filed their separate Motions for
Reconsideration,70 both of which were denied in the Resolution71 dated
March 17, 2010.
Separate Petitions for Review on Certiorari were filed by Team Image and
Co72 and Solar Team.73 The Petitions were thereafter consolidated.74
Comments75 and Replies76 had likewise been tiled by the parties.
The issues for this Court's resolution are the following:
First, whether or not the Court of Appeals erred in finding no grave abuse of
discretion on the part of the trial court when the latter declared Team Image
Entertainment, Inc. in default for failing to resume payments from November
23, 2004 to November 3, 2005;
Second, whether or not the Court of Appeals erred in finding no grave abuse
of discretion on the part of the trial court when the latter declared Solar Team
Entertainment, Inc. to have violated the Compromise Agreement for failing to
withdraw the complaint-in-intervention it had earlier filed in a collection case
against Team Image Entertainment, Inc.;
Third, whether or not the Court of Appeals erred in finding no grave abuse of
discretion on the part of the trial court when the latter declared that Solar
Team Entertainment, Inc. did not violate the Compromise Agreement for
failing to cause the dismissal of the criminal cases for estafa filed by Solar
Team Entertainment, Inc.'s William Tieng against Team Image
Entertainment, Inc.'s Felix S. Co;
Fourth, whether or not the Court of Appeals erred in finding no grave abuse
of discretion in the trial court's reversal of its earlier order that required Solar
Team Entertainment, Inc.'s William Tieng to turn over P25,862,750.00. to
Team Image Entertainment, Inc. as overpayments and P2,891,226.97 to
Solar Team Entertainment, Inc. as amounts collected by William Tieng from
VTV Corporation; and,
Finally, whether or not only a maximum of P2,000,000.00 in liquidated
damages may be awarded under the Compromise Agreement.
On the first issue, Team Image argues that the Court of Appeals erred in
affirming the trial court's May 19, 2008 Order declaring Team Image to have
defaulted in paying its obligation under the Compromise Agreement. Team
Page 55 of 82
Image maintains that the trial court, in its own November 3, 2005 Order,
stated that Team Image was entitled to suspend payments under the
Compromise Agreement because Solar Team did not withdraw the
complaint-in-intervention it had earlier filed against Team Image. Team
Image's liability under the Compromise Agreement, if any, only became due
and demandable on April 7, 2006 when the trial court set aside the
November 3, 2005 Order, not on February 19, 2005 as erroneously found by
the trial court in its subsequent May 19, 2008 Order.
On the second issue, Team Image maintained that Solar Team violated the
Compromise Agreement because the latter failed to withdraw the complaint-
in-intervention it had filed in ABC v. Team Image, a collection case against
Team Image. The trial court's November 3, 2005 and April 7, 2006 Orders
that ordered Solar Team to withdraw its complaint-in-intervention were
affirmed on certiorari by the Court of Appeals in CA-G.R. SP No. 94102 and
on appeal by this Court in G.R. No. 183848. While Solar Team filed a Motion
for Reconsideration in G.R. No. 183848, the Motion was already denied with
finality. Thus, Solar Team's argument that it cannot withdraw its complaint-in-
intervention pending the resolution of its Motion for Reconsideration "rest[s]
on a shaky and slim foundation[.]"
On the third issue, Team Image argues that the Court of Appeals erred in
declaring that criminal liability cannot be the subject of a compromise. Team
Image maintains that there was nothing in the Compromise Agreement which
was contrary to law, morals, or public policy. Further, courts encourage
judgments based on compromise, the only exceptions being matters relating
to: (a) civil status of persons; (b) the validity of a marriage or a legal
separation; (c) any ground for legal separation; (d) future support; (e) the
jurisdiction of courts; and, (f) future legitime.79 Paragraph 24 of the
Compromise Agreement that required Solar Team to dismiss all cases it had
filed against Team Image and Co does not fall within these exceptions.
Consequently, Solar Team must cause the dismissal of the criminal cases it
filed against Team Image and Co per paragraph 24 of the Compromise
Agreement.80
On the fourth issue, Team Image maintains that the Court of Appeals erred in
affirming the reversal of trial court's earlier Orders requiring Solar Team's
Tieng to turn over a total of P25,862,750.00 in excess collections from VTV
Corporation to Team Image for equal division among the parties. Team
Image argues that contrary to Solar Team and Tieng's representation in
paragraph 4 of the Compromise Agreement, Tieng collected more than
P10,275,547.48 from VTV Corporation. Specifically, Tieng received
P22,971,527.03 from VTV Corporation as he alleged in his Complaint in Civil
Case No. 05-603 pending before Branch 57 of the trial court. In addition, the
P2,891,226.97 supposedly collected by Barreiro without Solar Team's
authority actually redounded to the benefit of Tieng; hence, the amount
₯Compromise Agreement- Set V
should likewise be returned for equal distribution between Solar Team and
Team Image.81
On the fifth issue, Team Image argues that the Court of Appeals erred in
affirming the reversal by the trial court of its earlier Order for Solar Team to
pay a total of P8,000,000.00 in liquidated damages: According to Team
Image, it is clear from paragraph 24 of the Compromise Agreement that a
writ of execution may issue for every violation of the Compromise
Agreement. Hence, for every writ of execution, a corresponding award of
liquidated damages to the aggrieved party must be paid. Team Image
contends that the maximum amount of P2,000,000.00 in liquidated damages
allowed to be awarded would "result in a serious crisis whereby one party will
contravene and/or breach with impunity any of [its] representations and
warranties, and worst, even all of them, with only a relatively small amount of
penalty compared [to] the actual amount which is the subject matter of the
entire compromise agreement."
Arguing on the first issue, Solar Team counters that Team Image defaulted in
its payments under the Compromise Agreement as was earlier found by the
trial court. Between November 23, 2004, when the trial court set aside its
initial order allowing suspension of payments, and November 3, 2005, when
the trial court again allowed suspension of payments, there was an almost
one (1)-year period when Team Image should have resumed its payments to
Solar Team. Team Image, thus, defaulted in its payments during this almost
one (1)-year period and the Court of Appeals correctly affirmed the
November 3, 2005 and April 7, 2006 Orders directing Team Image to pay
Solar Team P2,000,000.00 in liquidated damages for violation of the
Compromise Agreement.
On the second issue, Solar Team maintains that it did not violate the
Compromise Agreement when it failed to withdraw the complaint-in
intervention it had filed in ABC v. Team Image. Solar Team alleges that the
issue of whether or not it indeed violated the Compromise Agreement is
currently pending before this Court in a Petition for Review docketed as Solar
Team v. Hon. Dumayas, G.R. No. 183848. Consequently, the Court of
Appeals should not have resolved this issue in deference to this Court's
''supreme authority."
On the third issue, Solar Team echoes the Court of Appeals' pronouncement
that criminal liability cannot be the subject of a compromise. A crime being a
violation of public law, the aggrieved party is the public in general, not a
private individual. Consequently, neither Team Image nor Solar Team, both
being private entities, may agree to cause the dismissal of the criminal cases
they filed against each other because they are both mere witnesses, not
parties, in the criminal cases.
Page 56 of 82
On the fourth issue, Solar Team maintains that Team Image's claim of
overpayments is premature considering that the appointed auditing firm, SGV
and Co., has not yet finalized its accounting report as required under
paragraph 24 of the Compromise Agreement. Further, Tieng's supposed
admission that he received P22,971,572.03 from VTV Corporation was, at
best, an extrajudicial admission not made in the present case. This
admission cannot be used against him and the Court of Appeals correctly
affirmed the trial court orders that set aside the earlier directives for Solar
Team to return Team Image's alleged overpayments.
On the fifth issue, Solar Team reiterates the Court of Appeals'
pronouncement that only a maximum of P2,000,000.00 in liquidated
damages may be awarded based on the Compromise Agreement. Solar
Team argues that nothing in the Compromise Agreement provided that each
breach would correspond to an award of liquidated damages. Furthermore,
paragraph 24 used "breaches of warranties" and "commitments,'' meaning,
"there can be as many orders of compliance as there are proven
breaches,"87 but only a maximum of P2,000,000.00 in liquidated damages,
regardless of the number of supposed breaches, may be awarded.
This Court partially grants the respective Petitions for Review on Certiorari
filed by Team Image and Solar Team.
I. Under the Compromise Agreement, Team Image acknowledged and
agreed to pay a total of P26,000,000,00 representing marketing commissions
collectible from VTV Corporation. Team Image also agreed to pay half of the
professional fees of SGV and Co., the auditing firm hired to determine the
final amounts payable by the parties under the Compromise Agreement. The
specific payment terms were provided in paragraphs 6 to 9 of the
Compromise Agreement:
6. After crediting for the moment the amount of P7,384,320.51 mentioned in
paragraph 4 hereof, as having been collected by William Tieng from VTV, the
parties agree that there remains, for the moment, a balance of EIGHTEEN
MILLION SIX HUNDRED FIFTEEN THOUSAND SIX HUNDRED
SEVENTY[-]NINE AND 49/100 PESOS (P18,615,679.49) which Felix Co
[and/or Team Image] agree to jointly and severally pay William Tieng in the
following manner and schedule:
P3,267,000.00 - by a 50[-]day postdated check from date of signing, which
amount Felix Co [and/or Team Image] represent to be his own collectibles
from Duty Free Philippines, Inc. The encashment of said check shall not be
dependent upon Felix Co's/[Team Image's] ability to collect from Duty Free
Philippines, Inc.
₯Compromise Agreement- Set V
P349,428.37 - to be withdrawn from the joint account of William Tieng and
Felix S. Co with Philippine Bank of Communications; Provided, That, Felix S.
Co shall jointly sign a withdrawal slip or document to effect or authorize the
withdrawal thereof.
P983,826.06 to be taken from the earlier collections of SGV deposited with
International Exchange Bank; Provided, That Felix S. Co and William Tieng
shall jointly sign a withdrawal slip or document for the withdrawal of the
same,
The total of the above sums is FOUR MILLION SIX HUNDRED THOUSAND
TWO HUNDRED FIFTY[-]FOUR AND 43/100 (P4,600,254.43).
7. Felix Co/[Team Image] shall jointly and severally pay and liquidate the
remaining balance of FOURTEEN MILLION FIFTEEN THOUSAND FOUR
HUNDRED TWENTY[-]FIVE AND 06/100 PESOS (P14,015,425.06) in the
following manner:
P1,015,425.06 - on or before 60 days from date of signing this agreement;
Provided, That, Felix Co/[Team Image] shall issue the corresponding
postdated check therefor; and
P13,000,000.00 - to be paid in twenty[-]six (26) equal monthly installments of
P500,000.00 each beginning 30 July 2003 and every 30th of the month
thereafter until fully liquidated, Provided, That, Felix Co/[Team Image] shall
issue the corresponding postdated checks therefor.
8. Felix Co/[Team Image] likewise agree, to jointly and severally immediately
reimburse William Tieng, upon the execution of this agreement, fifty percent
(50%) of the amount of TWO HUNDRED SEVENTY[-]EIGHT THOUSAND
SIX HUNDRED SEVENTY PESOS (P278,670.00) which the latter had paid
to Sycip Gorres & Velayo (SGV), by way of the latter's professional fee or the
sum of One Hundred Thirty[]Nine Thousand Three Hundred Thirty[-]Five
(P139,335) Pesos.
9. Felix Co further agrees to recompense William Tieng the amount of
P600,000.00, subject matters of I.S. No. 99-F-3526 and P2,225,244.59,
subject matter of I.S. No. 99-F-3525, both of the Office of the City Prosecutor,
Parañaque City, Metro Manila, or the total amount of P2,825,244.59 by way
of postdated checks in five (5) equal monthly installments of P565,048.92
each installments, the same to commence on 15 July 2003 and every 15th
day of the month thereafter, Provided, That, the parties agree to submit these
accounts to SGV for the final determination of the nature of the consideration
of these checks, i.e., whether or not the same represent over-payment on the
capital contribution of Felix S. Co into Solar Team Entertainment, Inc. (STEI)
to purchase TV programs/materials owned by Solar Entertainment
Page 57 of 82
Corporation and/or from other suppliers and/or personal indebtedness of
Felix S. Co to William Tieng, Provided, That, SGV shall finish said accounting
or on before 01 July 2003, and, Provided, Finally, that, in the event SGV shall
determine before the due date of any of the five (5) postdated checks herein
mentioned, that said amounts of the two (2) aforementioned checks are over
payment on the capital contribution of Felix Co, then Felix S. Co shall have
the right to stop the payment of the checks which have not been presented
for payment and William Tieng shall immediately return to Felix S. Co the
amount/s of the check/s so far encashed.
The table below summarizes Team Image's monetary obligations and the
periods or conditions required for their performance:
Obligation
Period or condition required for performance of obligation
Basis under the Compromise Agreement
Payment of P3,267,000.00 through a postdated check
Fifty (50) days from date of signing the Compromise Agreement
Paragraph 6
Withdrawal of P349,428.37 from the joint account of William Tieng and Felix
S. Co
No period or condition provided, i.e., a pure obligation demandable at once90
Paragraph 6
Withdrawal of P983,826.06 from earlier collections of SGV and Co.
Upon the joint signing of a withdrawal slip by William Tieng and Felix
S. Co or any document authorizing the withdrawal
Paragraph 6
Payment of P1,015,425.06
On or before 60 days from date of signing the Compromise Agreement
Paragraph 7
Payment of P13,000,000.00
₯Compromise Agreement- Set V
To be paid in twenty-six (26) equal monthly installments of P500,000.00 each
beginning 30 July 2003 and every 30th of the month thereafter until fully
liquidated
Paragraph 7
Reimburse William Tieng P139,335.00 representing 50% of SGV and Co.'s
professional fees Immediately, i.e., upon the execution of the
Compromise Agreement on April 28, 2003
Paragraph 8
A total of P2,825,244.59 representing the amounts subject matters of I.S. No.
99-F-3526 and I.S. No. 99-F-3525, both of the Office of the City Prosecutor,
Parañaque City, Metro Manila By way of postdated checks in five (5) equal
monthly installments of P565,048.92 each installments, the same to
commence on 15 July 2003 and every 15th day of the month thereafter
Paragraph 9
Based on the periods and conditions provided in paragraphs 6 to 9, except
for the payment of P13,000,000.00, Team Image should have already
performed its monetary obligations under the Compromise Agreement by
April 26, 2004, when it filed its first motion for issuance of writ of execution
and suspension of payment. For instance, 50 days from the signing of the
Compromise Agreement on April 28, 2003 would fall on June 17, 2003.
Hence, by June 17, 2003, Team Image should have already paid Solar Team
P3,267,000.00 in post-dated checks. Another obligation would be for Team
Image to pay Solar Team P1,015,425.06 within 60 days from the signing of
the Compromise Agreement, the 60th day being June 27, 2003.91 There is
no proof, however, that Team Image complied with these obligations within
the required periods. That Team Image filed a motion for suspension of
payments further demonstrates that it had not fully paid its obligations under
the Compromise Agreement.
While it is true that the trial court granted the Motion for Suspension of
Payments in its April 29, 2004 Order, this Order was subsequently set aside
on November 23, 2004. Until the trial court granted Team Image's second
motion for suspension of payments on November 3, 2005, Team Image had
almost a year to resume payments. However, Team Image did not do so.
The Court of Appeals, therefore, correctly held that Team Image was in
default for failure to resume payments under the Compromise Agreement.
Team Image violated paragraphs 6 to 9 of the Compromise Agreement.
II. Paragraphs 21 and 22 of the Compromise Agreement are again provided
below:
Page 58 of 82
21. This agreement constitutes the final repository of all the prior
understanding agreements and contracts of the parties and shall operate as
total waiver and discharge of any or all claim, counterclaims, causes of
action, claims and demands of whatever kind and nature which each may
have against the other, including their respective heirs[,] assigns[,] and
successors-in-interest arising out of any of all matters, cause or thing,
whether directly or indirectly, related with the Marketing Agency Agreement
dated 24 April 1996.
22. By virtue hereof, the parties have agreed, as they hereby agree to
immediately provisionally dismiss all actions, whether civil or criminal, they
may have filed against the other, and after SGV shall have finally completed
the audit and accounting tasked upon it, the results of which is final and
binding upon the parties, all said civil and/or criminal actions shall be
permanently dismissed by the parties.
Paragraph 22 requires both Team Image and Solar Team to "immediately
provisionally dismiss all actions, whether civil or criminal, they may have filed
against each other." They shall cause the permanent dismissal of the actions
"after [SGV and Co.] shall have finally completed the audit and accounting
tasked upon it."
When the Compromise Agreement was executed on April 28, 2003, there
was a pending collection case filed by ABC Television against Team Image
when Solar Team filed a complaint-in-intervention. It does not appear that
Solar Team filed a motion to dismiss the complaint-in-intervention it had filed
against Team Image; hence, Solar Team violated paragraph 22 of the
Compromise Agreement.
That the term "provisional dismissal," in its technical sense, only applies to
criminal cases92 is not an argument for Solar Team to refuse to withdraw the
complaint-in-intervention. It does not appear that Team Image and Solar
Team meant to use the term in its technical sense. Considering that the
parties agreed in paragraph 21 that the Compromise Agreement "shall
operate as total waiver and discharge of any or all claims, counterclaims,
causes of action, claims and demands of whatever kind and nature which
each may have against the other," the parties intended to terminate all the
cases they filed against each other.
The pendency of the Motion for Reconsideration filed by Solar Team in Solar
Team v. Hon. Dumayas, G.R. No. 183848, may no longer be invoked
because it had already been denied with finality. Even if G.R. No. 183848
remained active, it originated from a Petition for Certiorari questioning the
interlocutory Order of November 3, 2005, a suit that can proceed separately
from the main case.93 It merely continued the certiorari proceedings before
the Court of Appeals; hence, this Court need not await the resolution of G.R.
₯Compromise Agreement- Set V
No. 183848 before resolving whether or not Solar Team violated the
Compromise Agreement for failing to withdraw its complaint-in-intervention
against Team Image.
III. However, despite paragraphs 21 and 22 of the Compromise Agreement,
Solar Team cannot be deemed to have violated it for failing to cause the
dismissal of the criminal cases for estafa Tieng filed against Co. It is settled
that criminal liability cannot be the subject of a compromise.94 "[A] criminal
case is committed against the People, and the offended party may not waive
or extinguish the criminal liability that the law imposes for its commission."95
This explains why "a compromise is not one of the grounds prescribed by the
Revised Penal Code for the extinction of criminal liability."
None of the cases cited by Team Image supports its argument that criminal
liability may be subject of a compromise. Chavez v. Presidential Commission
on Good Government97 and Benedicto v. Board of Administrators,98
ironically cited by Team Image, are both clear that compromise is
encouraged only in civil cases. Chavez explicitly stated that "[w]hile a
compromise in civil suits is expressly authorized by law, there is no similar
general sanction as regards criminal liability.
Team Image confused the Presidential Commission on Good Government's
power to grant criminal immunity100 with the act of compromising criminal
liability. Granting criminal immunity is allowed because no criminal case has
yet been filed in court, and therefore, there is no criminal liability to
compromise. On the other hand, compromising criminal liability presupposes
that a criminal case has already been filed in court, the dismissal of which is
already based on the sound discretion of the trial court.101 In other words,
the dismissal cannot be automatic, regardless of the agreement between the
private complainant and the accused to dismiss the case. As discussed, the
real offended party in a criminal case is the State and the outcome of the
criminal case cannot be based on the will of the private complainant who is a
mere witness for the prosecution.
The cases involved here are cases not under the jurisdiction of the
Presidential Commission on Good Government. Chavez and Benedicto,
therefore, do not apply.
All told, the Court of Appeals correctly found no grave abuse of discretion on
the part of the trial court when it held that Team Image and Solar Team
cannot agree on the dismissal of the criminal cases. Solar Team did not
violate the Compromise Agreement when Tieng failed to cause the dismissal
of the criminal cases for estafa he had filed against Co.
IV. Furthermore, it was premature for Team Image to claim that it made
overpayments to Solar Team when Tieng allegedly admitted to receiving
Page 59 of 82
from VTV Corporation the amount of P22,971,572.03, significantly more than
the P10,275,547.48 provided in paragraph 4 of the Compromise Agreement.
Paragraphs 3, 4, and 5 of the Compromise Agreement provide:
3. The parties agree that William Tieng is entitled to initially receive the
amount of TWENTY[-]SIX MILLION PESOS (P26,000,000.00), Philippine
Currency, as stipulated and embodied in their handwritten memorandum of
agreement executed on 05 May 1998, out of the sales and collections made
by [Team Image]/Felix S. Co as marketing agent of [Solar Team]. This is so
because, [Team Image]/Felix S. Co have admitted having earlier collected at
least the sum of at least P26M, hence, to equalize the sharing of Felix S. Co
and William Tieng on the proceeds of the sales. William Tieng should also
receive the sum of at least P26M.
4. William Tieng acknowledges that VTV had made payments in the total
sum of TEN MILLION TWO HUNDRED SEVENTY[-]FIVE THOUSAND FIVE
HUNDRED FORTY[-]SEVEN AND 48/100 PESOS (10,275,547[.]48)
Philippine Currency, from the contracts with VTV for the airing over IBC-13 of
the TV programs/materials belonging to either Solar Entertainment
Corporation, or Solar Films, Inc., or Solar Team Entertainment, Inc., out of
which, TWO MILLION EIGHT HUNDRED NINETY[-]ONE THOUSAND TWO
HUNDRED TWENTY[-]SIX AND 97/100 (P2,891,226.97) was collected and
paid to Ma. Fe Barriero as what she represented to be marketing
commissions, thus leaving a balance of SEVEN MILLION THREE
HUNDRED EIGHTY[-]FOUR THOUSAND THREE HUNDRED TWENTY
AND 51/100 (P7,384,320.51). An accounting shall he made by VTV to
determine how much of this amount of P7,384,320.51, pertain to
programs/materials owned by [Solar Team]. Upon such determination, the
amount pertaining to the programs/materials owned by [Solar Team] (which
company is owned 50/50 by Felix Co and William Tieng) shall be credited to
it and shall be credited to William Tieng as part of the amount he is entitled to
receive stated and referred to in paragraph 3 hereof:
5. William Tieng represents and warrants that the aforesaid sum of
P2,891,226.97 which is charged as marketing commissions are unauthorized
collections which, did not redound to the benefit of the parties from their joint
operation as stated in the paragraph immediately preceding, but to the
personal gain and advantage of their marketing agent, Maria Fe Barriero,
hence, earnest efforts shall be exerted by said William Tieng to collect the
same from the offending party. After said collection or in the event that said
amount shall be proved to have redounded to the benefit of said William
Tieng, then William Tieng shall turn-over the said amount to [Solar Team]
and thereafter SGV shall determine the share of Felix S. Co thereon which
shall be paid immediately to the latter.102
₯Compromise Agreement- Set V
Under paragraphs 4 and 5 of the Compromise Agreement, there must first be
an audit and accounting by SGV and Co. before there can be a final
determination of the share of Team Image from the collectibles from VTV
Corporation. There is no showing that SGV and Co. had already completed
its audit and accounting when Team Image filed a motion for the issuance of
a writ of execution.
The supposed admission of Tieng in Civil Case No. 05-603 that he received
P22,971,572.03 is not a judicial admission contemplated under Rule 129,
Section 4 of the Rules of Court.103 Rule 129, Section 4 requires that the
admission be made in the same case. The admission of Tieng was made in a
different case. Therefore, the admission in Civil Case No. 05-603 cannot be
made basis to contend that Tieng misrepresented the amounts he stated in
paragraph 4 of the Compromise Agreement. The Court of Appeals correctly
held that it was premature for Team Image to claim overpayments.
V. Paragraph 24 of the Compromise Agreement is reiterated below:
24. In the event SGV shall have made a final determination of the respective
accountability of the parties and any of the parties fail to comply with the
same, or in the event any of the parties is remiss or reneges from [its]
commitment/s as specified in this Agreement or breaches the warranties
and/or representation as contained herein, then the aggrieved party shall be
entitled to an immediate issuance of a writ of execution to enforce
compliance thereof and the guilty party shall pay the innocent party the sum
of P2 Million Pesos by way of liquidated damages and/or penalty and shall,
likewise, shoulder all the expenses in enforcing this compromise agreement
by a writ of execution. Moreover, the innocent party shall have the right to
invoke the principle of reciprocity of obligations in contracts as provided for
by law.
Paragraph 24 of the Compromise Agreement gives two (2) classifications of
the possible violations of the Compromise Agreement. The first is "in the
event" where the appointed auditing firm, SGV and Co., would have made a
final determination of the accountabilities of the parties and any of the parties
fails to pay its respective accountabilities based on the audit. The second is
''in the event" where "any of the parties is remiss or reneges from [its]
commitment/s as specified in this Agreement or breaches the warranties
and/or representation as contained herein." That these are the only two (2)
classifications of violations is inferable from the use of the phrase "in the
event," a comma, and the word "or" to separate these two (2) instances. In
other words, all obligations that require SGV and Co.'s final accounting fall
under the first classification. All other obligations fall under the second
classification.
Page 60 of 82
Given the foregoing, the payment of liquidated damages is based on these
two (2) "events" or classifications of violation. Since there are only two (2)
classifications of violations immediately preceding the provision on the
payment of P2,000,000.00 liquidated damages, only a maximum of
P4,000,000.00 may be paid under paragraph 24.
The obligations under the Compromise Agreement that require SGV and
Co.'s final determination are found in paragraphs 9, 105 13,106 15,107
16,108 17,109 19,110 22,111 and 24.112 Violations of these paragraphs fall
under the first "event” or classification. Violations of all other paragraphs fall
under the second "event” or classification.
As previously discussed, Team Image violated paragraphs 6 and 7 of the
Compromise Agreement by failing to pay its monetary obligations under
these paragraphs. For these violations, Team Image must pay Solar Team
P2,000,000.00 in liquidated damages. As for Solar Team, it violated
paragraph 22 the Compromise Agreement for failure to withdraw the
complaint-in-intervention it had earlier filed against Team Image. Hence,
Solar Team must pay Team Image P2,000,000.00 in liquidated damages.
VI. Articles 1279 and 1281 of the Civil Code provide:
Article 1279. In order that compensation may be proper, it is necessary:
(1) That each one of the obligors be bound principally, and that he be at the
same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the
latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy,
commenced by third persons and communicated in due time to the debtor.
Article 1281. Compensation may be total or partial. When the two debts are
of the same amount, there is a total compensation.
Considering that the parties are equally liable to each other in the amount of
P2,000,000.00, this Court confirms that the amounts are set off by operation
of law.
₯Compromise Agreement- Set V
VII. However, this Court recalls that in the May 19, 2008 Omnibus Order,
Judge Dumayas directed Solar Team to deposit with Office of the Clerk of
Court Regional Trial Court of Makati City the amount of P2,000,000.00
representing liquidated damages for Solar Team's failure to withdraw the
complaint-in-intervention it had filed against Team Image. Judge Dumayas
added that the amount “will be released only after final determination of the
obligations of [Team Image and Co] pursuant to the compromise agreement
and after the issue on the violation of the same agreement by [Solar Team]
for its failure to [withdraw the complaint-in-intervention] has been resolved
with finality.”
As held by the Court of Appeals, it was grave abuse of discretion for Judge
Dumayas to keep the P2,000,000.00 in custodia legis. Upon approval, a
judgment upon a compromise is immediately executory, not even subject to
appeal.115 Ordering the deposit of the P2,000,000.00 with the Office of the
Clerk of Court effectively stayed the execution of an immediately executory
judgment. It is highly irregular. Nowhere in the law or the Rules of Court is
such deposit allowed.
Additionally, the complexity of resolving the present petitions could have
been avoided had Judge Dumayas properly managed the case for
accounting. For this reason, adding the highly irregular order of deposit, this
matter is referred to the Office of the Court Administrator to be docketed as a
separate administrative matter against Judge Dumayas. Judge Dumayas is
to show cause why he should not be disciplinarily dealt with for: first, in
issuing the May 19, 2008 Omnibus Order which directed the deposit of
P2,000,000.00 before the Office of the Clerk of Court-Regional Trial Court,
Makati City; and, second, for reversing himself, on several occasions, on the
issues of whether or not Team Image was entitled to suspend payments to
Solar Team and whether or not the criminal cases may be dismissed based
on the Compromise Agreement.
WHEREFORE, the Petitions for Review on Certiorari filed by Team Image
Entertainment, Inc. and Solar Team Entertainment, Inc. are PARTIALLY
GRANTED and the Court of Appeals December 10, 2009 Decision in CA-
G.R. SP No, 104961 is MODIFIED as follows:
The implementation of the Writ of Execution dated January 10, 2008 is
AFFIRMED;
Team Image Entertainment, Inc. is LIABLE to Solar Team Entertainment, Inc.
in the amount of P2,000,000.00 pursuant to paragraph 24 of the Compromise
Agreement for its failure to settle its obligation within the period from
November 23, 2004 to November 3, 2005;
Page 61 of 82
Solar Team Entertainment, Inc. is LIABLE to Team Image Entertainment, Inc.
in the amount of P2,000,000.00 pursuant to paragraph 24 of the Compromise
Agreement for its failure to withdraw earlier the complaint in intervention it
filed in Civil Case No. 97-024 pending before Branch 137, Regional Trial
Court of Makati City;

Considering that Team Image Entertainment, Inc. and Solar Team

Entertainment, Inc. are concurrently liable to each other in equal amounts,
the compensation of their liabilities takes effect by operation of law. The order
for Solar Team Entertainment, Inc. to deposit the amount of P2,000,000.00 to
the Office of the Clerk of Court - Regional Trial Court of Makati City is
REVERSED and SET ASIDE. The garnished amount of P2,000,000.00
representing liquidated damages is ordered released from the custody of the
Clerk of Court of the Regional Trial Court of Makati City and must be returned
to Solar Team Entertainment, Inc.;

The reversal of the order which requires William Tieng to cause the dismissal
of Criminal Case Nos. 07-1235 and 07-1236 is AFFIRMED;

The reversal of the order requiring William Tieng to pay the sum of
P2,000,000.00 as liquidated damages on account of his failure to dismiss
Criminal Case Nos. 07-1235 and 07-1236 is AFFIRMED;

The reversal of the order requiring William Tieng to return the sum of
P25,862,750.00 on account of Solar Team Entertainment, Inc.'s alleged
admission in its pleading in Civil Case No. 05-603 despite the pendency of
the SyCip Gorres Velayo and Co. audit is AFFIRMED;

The reversal of the order requiring William Tieng to turn over the amount of
P2,891,226.97 to Solar Team Entertainment, Inc. is AFFIRMED;

The reversal of the order requiring William Tieng to pay a total of

P8,000,000.00 as liquidated damages for alleged breaches of warranty and
representation is AFFIRMED; and

Finally, the issuance of the May 19, 2008 Omnibus Order is REFERRED to
the Office of the Court Administrator to be docketed as a regular
administrative matter against Presiding Judge Winlove M. Dumayas of
Branch 59, Regional Trial Court, Makati City.

SO ORDERED.

₯Compromise Agreement- Set V

Page 62 of 82
[39] G.R. No. 189102
CHIQUITA BRANDS, INC. and CHIQUITA BRANDS INTERNATIONAL,
INC., Petitioners
vs. HON. GEORGE E. OMELIO, REGIONAL TRIAL COURT, DAVAO CITY,
BRANCH 14, SHERIFF ROBERTO C. ESGUERRA, CECILIO G. ABENION,
and 1,842 OTHER PLAINTIFFS IN CIVIL CASE NO. 95-45, Respondents
Remedial Law; Civil Procedure; Courts; Hierarchy of Courts; The doctrine on
hierarchy of courts prohibits “parties from directly resorting to this Court when
relief may be obtained before the lower courts.”—The doctrine on hierarchy of
courts prohibits “parties from directly resorting to this Court when relief may be
obtained before the lower courts.” This rule is founded upon judicial economy and
practical considerations. On the one hand, it allows this Court to devote its time and
attention to those matters falling within its exclusive jurisdiction. It also “prevent[s]
the congestion of th[is] Court’s dockets.” On the other hand, it “ensure[s] that every
level of the judiciary performs its designated roles in an effective and efficient
manner.” The doctrine on hierarchy of courts was designed to promote order and
efficiency.
Same; Same; Same; Same; The doctrine on hierarchy of courts determines the
proper venue or choice of forum where petitions for certiorari, prohibition, and
mandamus should be filed.—Although this Court has the power to issue
extraordinary writs of certiorari, prohibition, and mandamus, it is by no means an
exclusive power. “[I]t is shared [concurrently] with the Court of Appeals and the
Regional Trial Courts.” However, “[p]arties cannot randomly select the . . . forum to
which their [petitions] will be directed.” The doctrine on hierarchy of courts
determines the proper venue or choice of forum where petitions for certiorari,
prohibition, and mandamus should be filed.
Same; Same; Same; Same; Immediate resort to the Supreme Court (SC) may
be warranted: (1) when genuine issues of constitutionality are raised that must be
addressed immediately; (2) when the case involves transcendental importance; (3)
when the case is novel; (4) when the constitutional issues raised are better decided
by the SC; (5) when time is of the essence; (6) when the subject of review involves
acts of a constitutional organ; (7) when there is no other plain, speedy, adequate
remedy in the ordinary course of law; (8) when the petition includes questions that
may affect public welfare, public policy, or demanded by the broader interest of
justice; (9) when the order complained of was a patent nullity; and (10) when the
appeal was considered as an inappropriate remedy.—Generally, this Court will
dismiss petitions that are directly filed before it if relief can be obtained from the
lower courts. Trial courts and the Court of Appeals are “in the best position to deal
with causes in the first instance.” They not only resolve questions of law but also
determine facts based on the evidence presented before them. Nevertheless, a direct
invocation of this Court’s original jurisdiction may be justified “when there are
compelling reasons clearly set forth in the petition.” Immediate resort to this Court
₯Compromise Agreement- Set V
may be warranted: (1) when genuine issues of constitutionality are raised that must
be addressed immediately; (2) when the case involves transcendental importance; (3)
when the case is novel; (4) when the constitutional issues raised are better decided by
this Court; (5) when time is of the essence; (6) when the subject of review involves
acts of a constitutional organ; (7) when there is no other plain, speedy, adequate
remedy in the ordinary course of law; (8) when the petition includes questions that
may affect public welfare, public policy, or demanded by the broader interest of
justice; (9) when the order complained of was a patent nullity; and (10) when the
appeal was considered as an inappropriate remedy.
Civil Law; Compromise Agreements; Words and Phrases; A compromise is
defined under the Civil Code as “a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end to one already
commenced.”—A compromise is defined under the Civil Code as “a contract
whereby the parties, by making reciprocal concessions, avoid a litigation or put an
end to one already commenced.” It may either be judicial or extrajudicial depending
on its object or the purpose of the parties. A compromise is judicial if the parties’
purpose is to terminate a suit already commenced. On the other hand, a compromise
is extrajudicial if its object is to avoid litigation. In any case, a compromise validly
entered into has the authority and effect of res judicata as between the parties. To
this extent, a judicial compromise and an extrajudicial compromise are no different
from each other.
Remedial Law; Civil Procedure; Judicial Compromise; A judicial compromise
is regarded as a “determination of the controversy” between the parties and “has
the force and effect of [a final] judgment.”—Unlike an extrajudicial compromise, a
compromise that has received judicial imprimatur “becomes more than a mere
contract.” A judicial compromise is regarded as a “determination of the controversy”
between the parties and “has the force and effect of [a final] judgment.” In other
words, it is both a contract and “a judgment on the merits.” It may neither be
disturbed nor set aside except in cases where there is forgery or when either of the
parties’ consent has been vitiated.
Same; Same; Same; Doctrine of Immutability of Final Judgments; The
doctrine on immutability of judgments applies to compromise agreements approved
by the courts in the same manner that it applies to judgments that have been
rendered on the basis of a full-blown trial.—The doctrine on immutability of
judgments applies to compromise agreements approved by the courts in the same
manner that it applies to judgments that have been rendered on the basis of a full-
blown trial. Thus, a judgment on compromise that has attained finality cannot be
“modified in any respect, even if the modification is meant to correct erroneous
conclusions of fact and law, and whether it be made by the court that rendered it or
by the Highest Court of the land.” A judgment on compromise may be executed just
like any other final judgment in the manner provided in the Rules of Court. The writ
of execution derives its validity from the judgment it seeks to enforce and must
essentially conform to the judgment’s terms. It can neither be wider in scope nor
exceed the judgment that gives it life. Otherwise, it has no validity. Thus, in issuing
Page 63 of 82
writs of execution, courts must look at the terms of the judgment sought to be
enforced.
Writ of Execution; Motion to Quash; A writ of execution may be stayed or
quashed when “facts and circumstances transpire” after judgment has been
rendered that would make “execution impossible or unjust.”—Ordinarily, courts
have the ministerial duty to grant the execution of a final judgment. The prevailing
party may immediately move for execution of the judgment, and the issuance of the
writ follows as a matter of course. Execution, being “the final stage of litigation . . .
[cannot] be frustrated.” Nevertheless, the execution of a final judgment may be
stayed or set aside in certain cases. “Courts have jurisdiction to entertain motions to
quash previously issued writs of execution[.]” They “have the inherent power, for the
advancement of justice, to correct the errors of their ministerial officers and to
control their own processes.” A writ of execution may be stayed or quashed when
“facts and circumstances transpire” after judgment has been rendered that would
make “execution impossible or unjust.”
Same; A writ of execution derives its validity from the judgment it seeks to
enforce. Hence, it should not “vary terms of the judgment or go beyond its terms.”—
A writ of execution derives its validity from the judgment it seeks to enforce. Hence,
it should not “vary terms of the judgment . . . [or] go beyond its terms.”  Otherwise,
the writ of execution is void. Courts can neither modify nor “impose terms different
from the terms of a compromise agreement” that parties have entered in good faith.
To do so would amount to grave abuse of discretion.
Same; Motion to Quash; Payment or satisfaction of the judgment debt also
constitutes as a ground for the quashal of a writ of execution.—Payment or
satisfaction of the judgment debt also constitutes as a ground for the quashal of a writ
of execution. In Sandico, Sr. v. Piguing, 42 SCRA 322 (1971), although the sum
given by the debtors was less than the amount of the judgment debt, the creditors
accepted the reduced amount as “full satisfaction of the money judgment.” This
justified the issuance of an order recalling the writ of execution.
Same; Same; A writ of execution may also be set aside or quashed when it
appears from the circumstances of the case that the writ “is defective in substance,”
“has been improvidently issued,” issued without authority, or was “issued against
the wrong party.”—A writ of execution may also be set aside or quashed when it
appears from the circumstances of the case that the writ “is defective in
substance,” “has been improvidently issued,” issued without authority, or was
“issued against the wrong party.” The party assailing the propriety of the issuance of
the writ of execution must adduce sufficient evidence to support his or her
motion. This may consist of affidavits and other documents.
Civil Law; Conflict of Laws; Doctrine of Processual Presumption; The laws of
a foreign country must “be properly pleaded and proved” as facts. Otherwise, under
the doctrine of processual presumption, foreign law shall be presumed to be the
₯Compromise Agreement- Set V
same as domestic law.—Under the Compromise Agreement, the law that shall
govern its interpretation is the law of Texas, United States. In this jurisdiction, courts
are not authorized to “take judicial notice of foreign laws.” The laws of a foreign
country must “be properly pleaded and proved” as facts. Otherwise, under the
doctrine of processual presumption, foreign law shall be presumed to be the same as
domestic law. Unfortunately, there is no evidence that Texan law has been proven as
a fact. Hence, this Court is constrained to apply Philippine law.
Same; Solidary Obligations; Under Article 1207 of the Civil Code, there is
solidary liability when “the obligation expressly so states, or when the law or the
nature of the obligation requires solidarity.”—Solidary liability under Philippine
law is not to be inferred lightly but must be clearly expressed. Under Article 1207 of
the Civil Code, there is solidary liability when “the obligation expressly so states, or
when the law or the nature of the obligation requires solidarity.” The Compromise
Agreement provided: 25. Affiliates and Successors. This Agreement and the rights,
obligations, and covenants contained herein shall inure to the benefit of and be
binding upon The Plaintiffs and Settling Defendants and their respective subsidiaries,
affiliates, controlled and related entities, successors, and assigns. Clearly, the
Compromise Agreement did not impose solidary liability on the parties’ subsidiaries,
affiliates, controlled, and related entities, successors, and assigns but merely allowed
them to benefit from its effects. Thus, respondent Judge Omelio gravely abused his
discretion in holding that the petitioners’ subsidiaries and affiliates were solidarily
liable under the Compromise Agreement.
DECISION
LEONEN, J.:
Courts can neither amend nor modify the terms and conditions of a
compromise validly entered into by the parties. A writ of execution that varies
the respective obligations of the parties under a judicially approved
compromise agreement is void.
Through this Petition for Certiorari 1 under Rule 65 of the Rules of Court,
petitioners seek to prevent the execution of a judicially approved compromise
agreement.
In particular, petitioners assail the validity of the following writs and orders:
(1) Writ of Execution dated April 23, 2003 (Writ of Execution); (2) Omnibus
Order dated December 14, 2006, which were both issued by the Regional
Trial Court of Panabo City;2 (3) Order dated July 10, 2009; (4) Amended
Order dated August 11, 2009; (5) Amended Writ of Execution dated July 31,
2009 (Amended Writ of Execution); and (6) Alias Writ of Execution dated
August 12, 2009 (Alias Writ of Execution), which were rendered by the
Regional Trial Court, Davao City, in Civil Case No. 95-45. 3
Page 64 of 82
On August 31, 1993, 4 thousands of banana plantation workers from over 14
countries5 instituted class suits6 for damages in the United States against 11
foreign corporations, namely: (1) Shell Oil Company; (2) Dow Chemical
Company; (3) Occidental Chemical Corporation; (4) Standard Fruit Company;
(5) Standard Fruit and Steamship Co.; (6) Dole Food Company, Inc.; (7) Dole
Fresh Fruit Company; (8) Chiquita Brands, Inc.; (9) Chiquita Brands
International, Inc.; (10) Del Monte Fresh Produce, N.A.; and (11) Del Monte
Tropical Fruit Co.7
The banana plantation workers claimed to have been exposed to
dibromochloropropane (DBCP) in the 1970s up to the 1990s while working in
plantations that utilized it. 8 As a result, these workers suffered serious and
permanent injuries to their reproductive systems. 9
DBCP is a pesticide used against roundworms and threadworms that thrive
on and damage tropical fruits such as bananas and pineapples. 10 It was first
introduced in 1955 as a soil fumigant. 11 Early studies have shown that
prolonged exposure to DBCP causes sterility. 12 DBCP was also found to
have mutagenic properties. 13
The United States courts dismissed the actions on the ground of forum non
conveniens14 and directed the claimants to file actions in their respective
home countries. 15
On May 3, 1996, 1,843 16 Filipino claimants filed a complaint for damages
against the same foreign corporations before the Regional Trial Court in
Panabo City, Davao del Norte, Philippines. 17 The case was raffled to Branch
4, presided by Judge Jesus L. Grageda (Judge Grageda), and was docketed
as Civil Case No. 95-45.18
Before pre-trial, 19 Chiquita Brands, Inc., Chiquita Brands International, Inc.
(collectively, Chiquita),20 Dow Chemical Company (Dow), Occidental
Chemical Corporation (Occidental), Shell Oil Company (Shell), Del Monte
Fresh Produce, N.A., and Del Monte Tropical Fruit Co. (collectively, Del
Monte) entered into a worldwide settlement in the United States with all the
banana plantation workers.21 The parties executed a document denominated
as the "Compromise Settlement, Indemnity, and Hold Harmless Agreement"
(Compromise Agreement).22 The Filipino claimants were represented by their
counsel, Atty. Renato Ma. Callanta (Atty. Callanta). 23
The Compromise Agreement provided, among others, that the settlement
amount should be deposited in an escrow account, which should be
administered by a mediator. After the claimants execute individual releases,
the mediator shall give the checks representing the settlement amounts to
the claimants' counsel, who shall then distribute the checks to each claimant:
₯Compromise Agreement- Set V
COMPROMISE SETTLEMENT, INDEMNITY, AND HOLD HARMLESS
AGREEMENT
7. Escrow
The Settling Defendants will pay the "Settlement Sum", which shall be the
sum recited in a letter from counsel for the settling defendants to counsel for
plaintiffs of even date herewith, and which shall remain confidential unless
required to be disclosed for the reasons set forth in the same by Dow
Chemical Company as part of its settlement with Plaintiffs. The Settling
Defendants reserve the right to move the escrow account and funds
contained therein to a different financial institution in Texas. This payment
shall be made within ten (10) business days after The Plaintiffs deliver to
Counsel for Settling Defendants an executed original (or counterpart original)
of this Compromise Settlement, Indemnity, and Hold Harmless Agreement
signed individually by each of the Counsel for The Plaintiffs, or signed by one
or more Counsel for The Plaintiffs on their behalf. Administration of this
escrow account and all payments from it shall be made by the Mediator, MA.
"Mickey" Mills ("the Mediator"). If Mr. Mills resigns as Mediator, becomes
incapacitated, or dies, the Settling Defendants and Counsel for The Plaintiffs
must agree upon his successor as Mediator. The parties agree to cooperate
with Mr. Mills and, if agreed upon by the parties and if necessary to complete
the settlement, to seek his appointment by an appropriate court as Special
Master. The interest earned on this escrow account shall first be used to pay
the Mediator's fees, costs and expenses (which expenses shall include
reasonable expenses associated with travel, lodging and meals), and the
costs of implementing this settlement including distribution expenses, bank
charges and fees, and the like. Any interest remaining thereafter shall be
owned by the party owning the principal. The Settling Defendants reserve the
right to audit any and all payments from the escrow account at anytime. One
year after the sum stated herein has been paid into the escrow account, any
portion remaining, plus interest, shall be refunded to Settling Defendants.
13. Releases
The individual releases are to be signed by The Plaintiffs and shall be
enforceable in the courts of Plaintiffs' country of residence, in the United
States, and in any other country in which their cause of action allegedly
occurred. The form of this individual release shall be that of Exhibit G to the
Dow agreement or such other form as is acceptable to the Settling
Defendants. The check provided to each Plaintiff will contain release
language and will incorporate the language on the full release to be signed
separately by the Plaintiff. This release shall be notarized (or, if approved by
the Mediator, be authorized in such a manner that the signed release shall be
enforceable in the courts of Plaintiffs' country of residence, as well as in the
United States) and signed by one of the Counsel for The Plaintiffs or an
Page 65 of 82
authorized representative thereof acceptable to Settling Defendants. The
notary, or authorizing person, shall attest to the identity of the Plaintiff
receiving the settlement payment. In countries which have a picture
identification, the notary, or authorizing person, will examine the picture
identification at the time the notarization or authorization is accomplished. In
countries which do not have a picture identification, the notary, or authorizing
person, will examine other appropriate documentary evidence of the identity
of the person signing the release; provided, however, that the Mediator shall
have authority in all instances to determine identification of The Plaintiffs.
17. Payment From Escrow Funds
The amount placed in escrow shall be divided into a clients' account and an
attorneys' account according to the terms of powers of attorney held by
Counsel for The Plaintiffs. The check for the amount payable to each Plaintiff
(the "net client allocation") will be provided by the Mediator to Counsel for
The Plaintiffs for their delivery to the Plaintiffs at the time the released [sic} is
signed. The amount owed to Counsel for The Plaintiffs from the attorneys'
account, as a result of execution of releases by Plaintiffs, shall be paid by the
Mediator to Counsel for The Plaintiffs on a sliding scale of the percentage of
releases obtained and after receipt and determination by the Mediator that
the executed releases received comply with the requirements of this
Agreement. Counsel for Plaintiffs will use their best efforts to obtain releases
from each of the Plaintiffs listed on Exhibits A and C. When the Mediator
receives releases from at least fifty (50) percent of those Plaintiffs listed on
Exhibit A, the Mediator may release to Counsel for Plaintiffs from the escrow
account attorneys' fees and expenses proportionate to twenty-five (25)
percent of the Plaintiffs having signed and returned valid releases. When the
Mediator has received releases from at least eighty (80) percent of those
Plaintiffs listed on Exhibit A, an additional twenty-five (25) percent of the fees
and expenses allocated to Plaintiffs who have signed releases can be
disbursed to Plaintiffs' Counsel. Upon receipt of releases from ninety-five (95)
percent of the Plaintiffs/Claimants listed on Exhibit A, the Mediator may
release all of the allocated fees and expenses proportionate to that
percentage of Plaintiffs who have signed releases (e.g., ninety-five (95)
percent signed releases results in ninety-five (95) percent of fees and
expenses being disbursed to Plaintiffs' Counsel). All questions concerning
the propriety and validity of each release and of the payment of the client's
share to each individual client will be determined by the Mediator. At the
request of the Settling Defendants, the Mediator will provide to Settling
Defendants a breakdown of the amounts paid to the Plaintiffs by
category. 24 (Emphasis supplied)
The Compromise Agreement also provided that the laws of Texas, United
States should govern its interpretation. 25
₯Compromise Agreement- Set V
Consequently, Chiquita, Dow, Occidental, Shell, and Del Monte moved to
dismiss Civil Case No. 95-45.26 In support of its Motion for Partial
Dismissal,27 Chiquita alleged that all claimants, except James Bagas and
Dante Bautista, executed quitclaims denominated as "Release in
Full."28 Chiquita attached five (5) quitclaims in its motion. 29
The Regional Trial Court, Panabo City approved the Compromise Agreement
by way of judgment on compromise. Accordingly, it dismissed Civil Case No.
95-45 in the Omnibus Order dated December 20, 2002: 30
WHEREFORE, the court, hereby, resolves:
Under No. 3, supra, the joint motion to dismiss and motion for partial
judgment between the plaintiffs and defendants Dow and Occidental under
the provisions of "[C]ompromise [S]ettlement, [I]ndemnity and [H]old
[H]armless [A]greement(s)", embodied in annexes "A" and "B", which
documents by reference are, hereby, incorporated, adopted, and made
integral parts hereof, not being contrary to law, good morals, public order or
policy are, hereby, approved  by way of judgment on compromise and the
causes of action of the plaintiffs in their joint amended complaint as well as
the counter-claims of defendants Dow and Occidental are dismissed;
The motion to dismiss of the Del Monte defendant except as against sixteen
(16) plaintiffs mentioned in par. 4 of motion as shown in Annex "A" of motion
hereby incorporated, adopted and made integral part hereof, not being
contrary to law, good morals, public order or policy is,
hereby, granted and/or approved by way of judgment on compromise and
plaintiffs' joint amended complaint, except as against the sixteen (16)
plaintiffs mentioned above, as well as the Del Monte defendant's
counterclaims against the plaintiffs in the premises are, dismissed[;]
The motion for partial dismissal of the Chiquita defendants of the above-
entitled case against all the plaintiffs except plaintiffs James Bagas and
Dante Bautista under a quit claim styled as "release in full", embodied in
Annexes "l" to "5" of the motion hereby incorporated, adopted and made
integral parts hereof, not being contrary to law, good morals, public order or
policy is, hereby, granted  and/or approved  by way of judgment on
compromise and plaintiffs['] joint amended complaint except as to plaintiffs
James Bagas and Dante Bautista as well as the Chiquita defendants
counterclaims against the plaintiffs in the premises are
accordingly dismissed.
The foregoing parties are, hereby, enjoined to strictly abide by the terms and
conditions of their respective settlements or compromise agreements.
Page 66 of 82
The cross-claims of all the co-defendants in the above-entitled case between
and among themselves. in effect leaving all the said codefendants cross-
claimants ("r-> 1intiffs") and cross-defendants ("defendants") against each
other shall continue to be taken cognizance of by the court.
As between and/or among the remaining parties, let the above entitled case
be set for pre-trial on February 21, 2003 from 9:00 a.m. to 5:00 p.m.
All other motions filed by the parties in relation to or in connection to the
issues hereinabove resolved but which have been wittingly or unwittingly left
unresolved are hereby considered moot and academic; likewise, all previous
orders contrary to or not in accordance with the foregoing resolutions are
hereby reconsidered, set aside and vacated.
SO ORDERED.31 (Emphasis in the original)
Shortly after the dismissal of Civil Case No. 95-45, several claimants moved
for the execution of the judgment on compromise. 32 They were represented
by Atty. Oswaldo A. Macadangdang (Atty. Macadangdang). 33
Chiquita, Dow, Occidental, Shell, and Del Monte opposed the execution on
the ground of mootness. They argued that they had already complied with
their obligation under the Compromise Agreement by depositing the
settlement amounts into an escrow account, which was administered by the
designated mediator, Mr. M.A. "Mickey" Mills (Mr. Mills). 34 Hence, there was
nothing left for the court to execute.35
In its Opposition to the Motion for Execution dated December 26,
2002,36 Chiquita pointed out that the claimants' execution of individual
quitclaims, denominated as "Release in Full," was an acknowledgement that
they had received their respective share in the settlement amount. 37 The
quitclaims proved that the claimants entered into a compromise agreement
and that petitioners complied with its terms. 38
The Regional Trial Court, Panabo City granted the Motion for Execution in
the Order dated April 15, 200339 because there was no proof that the
settlement amounts had been withdrawn and delivered to each individual
claimant.40 Although the parties admitted that the funds were already
deposited in an escrow account, the Regional Trial Court held that this was
insufficient to establish that Chiquita, Dow, Occidental, Shell, and Del Monte
had fulfilled their obligation under the Compromise Agreement. 41 Accordingly,
a Writ of Execution 42 was issued on April 23, 2003:
NOW THEREFORE, you are hereby commanded to cause the execution of
the Omnibus Order of this court dated December 20, 2002 specifically to
₯Compromise Agreement- Set V
collect or demand from each of the herein defendants the following amounts
to wit:
1. Defendants Dow Chemical Company ("Dow") and Occidental
Chemical Corporation ("Occidental") the amount of:
a. [US]$22 million or such amount equivalent to the plaintiffs'
claim in this case in accordance with their Compromise
Settlement, Indemnity, and Hold Harmless Agreement (Annex
"A"); and
b. The amount of [US]$20 million or such amount equivalent to
the plaintiffs' claim in this case in accordance with their
Compromise Settlement, Indemnity, and Hold Harmless
Agreement (Annex "B")
2. Defendants Del Monte Fresh Produce, N .A. and Del Monte Fresh
Produce Company (formerly Del Monte Tropical Fruit, Co.) (collectively, the
"Del Monte defendants") the amount of One Thousand Eight and No/100
Dollars ([US]$1,008.00) for each plaintiff in accordance with their Release
in Full Agreement; [and]
3. Defendants Chiquita Brands, Inc. and Chiquita Brands, International,
Inc. (collectively the "Chiquita Defendants") the amount of Two Thousand
One Hundred Fifty-Seven and No/100 Dollars ([US]$2,157.00) for each
plaintiff in accordance with their Release in Full Agreement.
The claimants moved to amend the Writ of Execution to include the
subsidiaries of Chiquita, Dow, Occidental, Shell, and Del Monte. 44
On May 9, 2003, Chiquita filed a motion, praying to suspend the execution of
judgment and to recall the Writ of Execution. 45 On the other hand, Shell, Dow,
and Occidental moved that they be allowed to photocopy, certify, and
authenticate the release documents in the United States before a court-
appointed commissioner or before Judge Grageda. 46 The release documents,
which allegedly proved that the claims had been settled in full, were stored in
the Law Offices of Baker Botts L.L.P. in Houston, Texas, United States. 47 The
other defendant corporations, except Chiquita, "joined the motions of Shell,
Dow, and Occidental."48
In the Omnibus Order49 dated June 30, 2003, the Regional Trial Court,
Panabo City granted the motions of Shell, Dow, and Occidental. Judge
Grageda, pursuant to Rule 135, Section 6 of the Rules of Court, 50 ordered the
reception of evidence at the Philippine Consulate in San Francisco,
Page 67 of 82
California, United States51 and undertook to preside over the
proceedings.52 The Regional Trial Court, Panabo City suspended the
implementation of the Writ of Execution and deferred action on the pending
motions until the termination of the proceedings abroad. 53
The claimants, through Atty. Macadangdang, objected to the reception of
evidence in the United States. 54 They argued that Judge Grageda was not
authorized to receive evidence and hold hearings outside his territorial
jurisdiction55 without this Court's express permission.56
On August 27, 2003,57 Judge Grageda received evidence at the Philippine
Consulate Office in San Francisco, California, United States. 58 Despite due
notice, the claimants did not participate. 59 The proceedings were held until
September 29, 2003.60
In the Order dated September 29, 2003, Judge Grageda declared the
photocopies of the release documents as "authentic and true copies of the
original[s]."61 The claimants moved for reconsideration arguing that the
evidence was inadmissible because Judge Grageda was not authorized "to
conduct the proceedings abroad."62
Subsequently, the claimants moved to inhibit Judge Grageda. 63 However, the
motion was denied. 64
In the Order dated February 4, 2004, the Regional Trial Court, Panabo City
considered the documents obtained from the proceedings abroad "as part of
the case record."65 The claimants moved for reconsideration, but their motion
was denied. 66
Meanwhile, Dow and Occidental submitted copies of Special Powers of
Attorney that the claimants executed in favor of their original counsel, Atty.
Callanta, before the Regional Trial Court, Panabo City. 67 The Special Powers
of Attorney were presented to prove Atty. Callanta's authority to enter into the
Compromise Agreement on behalf of his clients and to establish that Dow
and Occidental had complied with their obligations under the Compromise
Agreement. 68
The claimants opposed the presentation of the Special Powers of Attorney.
They asked the Regional Trial Court of Panabo City to subpoena Atty.
Callanta and the notary public, Atty. Zacarias Magnanao (Atty.
Magnanao ). 69 The claimants argued that the Special Powers of Attorney
"were not properly notarized" 70 and were neither identified nor authenticated
by Atty. Callanta. 71
₯Compromise Agreement- Set V
Subsequently, Dow and Occidental moved to set the dates of hearing for the
presentation of the claimants' evidence. 72 The claimants asserted that Dow
and Occidental had the burden of proving compliance with the Compromise
Agreement because they raised the affirmative defense of payment. 73
On July 1, 2004, Dow and Occidental filed their formal offer of the evidence
adduced during the proceedings in San Francisco, California, United
States. 74
On January 27, 2005 and January 28, 2005, Atty. Magnanao and Atty.
Giselle Talion (Atty. Talion), the executive clerk of court of Panabo City and
the custodian of Atty. Magnanao's notarial register, 75 were subpoenaed. Only
Atty. Talion testified. After her direct examination, she failed to appear for
cross-examination.
Insisting that the proceedings in San Francisco, California, United States
were void, the claimants moved to expunge the documents that were
adduced by the defendant corporations. The claimants also moved for the
implementation of the Writ of Execution.77
On December 14, 2006, the Regional Trial Court, Panabo City rendered an
Omnibus Order 78 directing the implementation of the Writ of Execution
against Chiquita and Del Monte. It reasoned that only Dow and Occidental
used the evidence produced at the proceedings in San Francisco, California,
United States. 79 In the same Order, the Regional Trial Court, Panabo City
denied the motion to include the defendant corporations' subsidiaries,
considering that they were not impleaded in the case: 80
WHEREFORE, the notice of appearance as well as the motion for inhibition
against the undersigned filed by Atty. Bartolome C. Amoguis are, hereby
DENIED. The motion for reconsideration, and its supplements, of the order
dated April 15, 2003 as well as the motions to quash or recall the writ of
execution are GRANTED in favor of defendant Dow and Occidental. The
motion to amend the said writ to include subsidiaries of the defendant
corporations is, hereby, DENIED, considering that said subsidiaries have not
been impleaded in the JointAmended Complaint in the above-entitled case.
The suspension of the writ of execution is, hereby, LIFTED as against
defendants Del Monte and Chiquita. SO ORDERED.
Chiquita moved for reconsideration of the Omnibus Order dated December
14, 2006. 82 It manifested its intention to file its formal offer of evidence once
the court declared that the claimants "had waived their right to present
evidence ... [for] their failure to present Atty. Talion for cross-examination[.]" 83
Page 68 of 82
On March 26, 2007 and March 27, 2007, 84 Chiquita took the deposition of its
counsel in the United States, Mr. Samuel E. Stubbs, (Mr. Stubbs) at the
Makati Shangri-la Hotel, Philippines.85 The deposition was undertaken with
the trial court's approval.86 During the deposition, Mr. Stubbs identified and
authenticated the documents which proved that Chiquita complied with the
terms of the Compromise Agreement. 87 He also answered the claimants'
written interrogatories. 88
During the hearing of Civil Case No. 95-45, the claimants picketed outside
the courtroom.89 They were led by a certain Edgardo 0. Maquiran. 90 The
claimants accused Judge Grageda as a corrupt official who delayed the
execution of the judicially approved Compromise Agreement. 91 The claimants
allegedly harassed and intimidated Judge Grageda "by shouting insults and
invectives at him when he went to and left the courtroom. " 92 Judge Grageda
was forced to inhibit from hearing Civil Case No. 95-45. 93
Chiquita requested for a change of venue from Panabo City to Davao City
due to security issues.94 This Court granted the request and ordered the
transfer from Panabo City to Davao City 95 of Civil Case No. 95-45. The case
was raffled to Branch 14, Regional Trial Court, Davao City, presided by
Judge George E. Omelio (Judge Omelio ).96
The claimants, through Atty. Macadangdang, filed a Manifestation dated
November 8, 2008 containing a list of the pending incidents in Civil Case No.
95-45.97 The Regional Trial Court, Davao City submitted the pending
incidents for resolution.98
In December 2008, Shell moved to relocate the case records after its counsel
discovered that the sealed boxes containing the case records were merely
stacked "on the corridors of the [j]ustice [h]all, exposed and
unsecured."99 During the hearing on Shell's motion, presiding Judge Omelio
permitted Atty. Macadangdang "to argue the merits of the pending incidents"
of the case.100 In the course of the proceedings, presiding Judge Omelio
allegedly stated that: (1) the proceedings for the reception of evidence held in
the Philippine Consulate in San Francisco, California, United States, were
void for which Judge Grageda was disciplined;101 (2) the settlement amount
should be given directly to the claimants instead of depositing it in a
fund; 102 and (3) the defendant corporations should pay the claimants
anew. 103
Suspecting that presiding Judge Omelio had prejudged the case, Shell
moved for his inhibition. 104 However, before Shell's motion could be heard,
the Regional Trial Court, Davao City issued a Joint Order 105 dated January 7,
2009 denying it.106 Shell moved for reconsideration. Chiquita also moved to
inhibit Judge Omelio. Both motions were denied. 107
₯Compromise Agreement- Set V
In the Order108 dated July 10, 2009, the Regional Trial Court, Davao City
denied Chiquita's Motion for Partial Reconsideration of the Omnibus
Order109 dated December 14, 2006, which directed the implementation of the
Writ of Execution.110 In the same Order, the trial court included Chiquita's
subsidiaries and affiliates in the Writ of Execution:
WHEREFORE, and in view of all the foregoing, this Court hereby resolves as
follows:
a) As to Chiquita defendants' Motion for Partial Reconsideration of the 14
December 2006 Omnibus Order is DENIED; and
b) As to the Writ of Execution dated April 23, 2003, the same is hereby
amended to include all subsidiaries, affiliates, controlled and related
entities, successors, [and] assigns pursuant to the common provision,
Clause 25 of the 1997 Compromise Agreement[,] which are doing
business in the Philippines and/or registered with the Securities and
Exchange Commission.
SO ORDERED.111
The Regional Trial Court, Davao City reasoned that Chiquita never filed its
formal offer of evidence. 112 Hence, the trial court had no other choice but to
issue another writ of execution. 113 The Amended Writ ofExecution was
issued on July 31, 2009. 114
Acting on an ex-parte motion of the claimants, the Regional Trial Court,
Davao City issued an Amended Order115 dated August 11, 2009. The
Amended Order modified the Writ of Execution under the 25th Clause 116 of
the Compromise Agreement 117 to include all the "subsidiaries, affiliates,
controlled and related entities, successors, [and] assigns" of
Dow, 118 Shell, 119 Occidental, 120 Chiquita, 121 and Del Monte, 122 which are
doing business in the Philippines.123
In the same Order, the Regional Trial Court, Davao City imposed solidary
liability on all the subsidiaries, affiliates, controlled and related entities,
successors, and assigns of Dow, Shell, Occidental, Chiquita, and Del
Monte.124 Accordingly, the Regional Trial Court, Davao City issued the Alias
Writ ofExecution125 on August 12, 2009.
On August 26, 2009, Chiquita instituted before this Court a Petition
for Certiorari and Prohibition 126 with an application for the issuance of a
temporary restraining order and writ of preliminary prohibitory or mandatory
injunction. 127
Page 69 of 82
Petitioners assail the validity of the following orders and writs on the ground
that they were issued with grave abuse of discretion: (1) Writ of Execution;
(2) Omnibus Order dated December 14, 2006, which directed the
implementation of the Writ of Execution as against petitioners; (3) Order
dated July 10, 2009, which denied petitioners' Motion for Partial
Reconsideration of the Omnibus Order dated December 14, 2006; (4)
Amended Order dated August 11, 2009, which modified the terms of the Writ
of Execution to include petitioners' subsidiaries, affiliates, controlled and
related entities, successors, and assigns doing business in the Philippines;
(5) Amended Writ of Execution; and (6) Alias Writ of Execution. 128
The first two (2) assailed orders were issued by Judge Grageda of Branch 4,
Regional Trial Court, Panabo City. 129 The rest were issued by presiding
Judge Omelio of Branch 14, Regional Trial Court, Davao City. 130
In the Resolution dated September 23, 2009, this Court directed the
respondents to file a comment on the petition for certiorari. 131
Meanwhile, on October 8, 2009, petitioners filed an Urgent Motion to Resolve
the Application for Temporary Restraining Order. 132 They filed a
Supplemental Petition133 on October 19, 2009. Petitioners alleged that
respondents-claimants "attempt[ed] to trifle with court processes" 134 by filing
an Ex-Parte Motion before the Regional Trial Court, Davao City. The Ex-
Parte Motion prayed that Deputy Sheriff Amos Camporedondo of Branch 14,
Regional Trial Court, Panabo City be deputized to assist respondent Sheriff
Roberto C. Esguerra (Sheriff Esguerra) in implementing the assailed orders
and writs. 135 Despite the absence of notice and hearing, the Regional Trial
Court, Davao City granted the Ex-Parte Motion in an Order 136 dated August
19, 2009.
In support of their prayer for the issuance of a temporary restraining order
and/or writ of preliminary injunction, petitioners argued that the Petition
for Certiorari pending before this Court would be rendered moot and
academic by the implementation of the assailed orders and writs. 137
On December 3, 2009, respondents filed a Comment 138 on the petition
for certiorari.
On December 16, 2009,139 this Court issued a Temporary Restraining
Order140 against respondent Judge Omelio, respondent Sheriff Esguerra, and
all other persons acting on their behalf enjoining them from implementing and
enforcing the assailed orders and writs. 141 Petitioners were ordered to post a
₱2 million bond.142
₯Compromise Agreement- Set V
On January 5, 2010, petitioners filed a Motion for Leave to Admit
Reply. 143 They posted the P2 million bond on January 11, 2010. 144
In a Resolution dated February 17, 2010, this Court granted petitioners'
motion for leave to admit reply to the comment on the petition
for certiorari and noted the Reply dated January 5, 2010.145
On June 7, 2011, petitioners manifested 146 that the Court of Appeals
rendered a Decision dated March 15, 2011 147 in the consolidated petitions
for certiorari148 filed against respondents regarding the assailed orders and
writs. 149
Subsequently, respondents sought for leave before this Court to file a
rejoinder to petitioners' reply to the comment on the petition 150 to which
petitioners filed an Opposition. 151
In the present case, petitioners argue that the Writ of Execution should never
have been issued because the dismissal of Civil Case No. 95-45 in the
Omnibus Order dated December 20, 2002 was based on the trial court's
approval of the quitclaims executed by the claimants. 152 Hence, "there was
nothing left" for the trial court to execute. 153 Consequently, the Omnibus
Order dated December 14, 2006, which directed the implementation of the
Writ of Execution, is likewise a patent nullity. 154
Petitioners further assert that respondent Judge Omelio issued the assailed
orders and writs "in an arbitrary and despotic manner by reason of passion
and hostility" against them and their co-defendants in Civil Case No. 95-
45.155 They claim that he "consistently displayed bias and partiality in favor of
[the claimants]."156 For instance, he allegedly stated in open court that the
proceedings at the Philippine Consulate in San Francisco, California, United
States were void157 despite the absence of any order or decision nullifying the
proceedings.158 The evidence adduced during the proceedings in San
Francisco, California, United States should have convinced respondent
Judge Omelio to quash the Writ of Execution. Instead, he concluded, without
reviewing the case records, 159 that there was no evidence to prove that
petitioners complied with the Compromise Agreement.160
According to petitioners, respondent Judge Omelio committed grave abuse of
discretion161 and evaded his duties162 by ignoring the records of Civil Case
No. 95-45.163
Had Judge Omelio reviewed the case records, he would have discovered
that petitioners' evidence was not limited to the documents produced at the
Philippine Consulate in San Francisco, California, United States but included
the deposition of Mr. Stubbs.164 Hence, assuming that the proceedings
Page 70 of 82
conducted abroad were invalid, 165 there was still evidence on record to
support petitioners' claim that they fully complied with the terms of the
Compromise Agreement166 by depositing the settlement amount in an escrow
account administered by Mr. Mills.167
Judge Omelio would have also discovered that petitioners' delay in filing their
formal offer of evidence was justified.168 According to petitioners,
respondents-claimants were "still in the process of presenting evidence in
support of their motion for execution." 169 Respondentsclaimants had just
completed the direct examination of their witness, Atty. Talion. However, Atty.
Talion failed to appear for cross-examination. 170 Petitioners deemed it best to
make a formal offer of evidence once the trial court declared that the
claimants waived their right to present evidence to ensure an orderly
proceeding. 171
Petitioners further argue that the trial courts gravely abused their discretion in
ordering them to directly pay each of the claimants anew 172 and in imposing
solidary liability on their "subsidiaries, affiliates, controlled and related
entities, successors, [and] assigns." 173 Petitioners' obligation under the
Compromise Agreement consisted of depositing the settlement amount in an
escrow fund. 174 They were not required to release and to directly give the
settlement amount to each claimant since this duty was delegated to the
mediator, Mr. Mills.175 Therefore, it is unnecessary to prove that each
claimant has received his or her respective share in the settlement amount to
determine whether the Compromise Agreement has been satisfied. 176
In addition, petitioners' subsidiaries and affiliates cannot be held liable under
Clause 25 of the Compromise Agreement. 177 Their subsidiaries and affiliates
were not privy to the Compromise Agreement.178
Lastly, and for these reasons, petitioners assert that respondent Judge
Omelio should inhibit himself from hearing Civil Case No. 95-45. 179
On the other hand, respondents argue that petitioners failed to observe the
doctrine on hierarchy of courts by directly filing the petition
for certiorari before this Court. 180 While there may be exceptions to the rule
on hierarchy of courts, as when the assailed orders are patently null or when
there are special and important reasons, none of these is present in this
case. 181
Respondents point out that the evidence relied upon by petitioners originated
from the proceeding conducted in San Francisco, California, United States.
However, they insist that the proceedings were void. Hence, petitioners have
no evidence to prove that they complied with the Compromise Agreement. 182
₯Compromise Agreement- Set V
Assuming that the proceedings conducted abroad were valid, petitioners
failed to make a formal offer of evidence. 183 Respondent Judge Omelio had
no other choice but "to disregard petitioners' evidence" although it already
formed part of the case records. 184 Respondents find it peculiar that
petitioners had to wait for the trial court to declare that respondents-claimants
waived their right in presenting evidence before making their formal offer of
evidence.185
Respondents further assert that the Regional Trial Court, Davao City did not
err in holding petitioners' subsidiaries and affiliates solidarily liable because
they were bound by Clause 25 of the Compromise
Agreement.186 Furthermore, petitioners used the corporate fiction as a vehicle
to evade an existing obligation.187
Finally, "there is no valid reason for [respondent] Judge Omelio to inhibit
himself from further hearing Civil Case No. 95-45." 188 Mere suspicion of bias
is insufficient to prove personal bias or prejudice on the part of a judge. 189
This case presents the following issues for this Court's resolution:
First, whether this case falls under the exceptions to the doctrine on
hierarchy of courts;
Second, whether respondent court committed "grave abuse of discretion
amounting to lack or excess of its jurisdiction in issuing the assailed [o]rders
and [w]rits"; 190 and
Finally, whether Judge George E. Omelio of Branch 14, Regional Trial Court,
Davao City should inhibit himself from hearing Civil Case No. 95-45. 191
I. The doctrine on hierarchy of courts prohibits "parties from directly resorting
to this Court when relief may be obtained before the lower courts." 192 This
rule is founded upon judicial economy and practical considerations. On the
one hand, it allows this Court to devote its time and attention to those matters
falling within its exclusive jurisdiction.193 It also "prevent[s] the congestion of
th[is] Court's dockets."194 On the other hand, it "ensure[s] that every level of
the judiciary performs its designated roles in an effective and efficient
manner."195 The doctrine on hierarchy of courts was designed to promote
order and efficiency.
Although this Court has the power to issue extraordinary writs of certiorari,
prohibition, and mandamus, it is by no means an exclusive power. 196 "[I]t is
shared [concurrently] with the Court of Appeals and the Regional Trial
Courts."197 However, "[p]arties cannot randomly select the .. . forum to which
their [petitions] will be directed." 198 The doctrine on hierarchy of courts
Page 71 of 82
determines the proper venue or choice of forum where petitions for certiorari,
prohibition, and mandamus should be filed. 199
Generally, this Court will dismiss petitions that are directly filed before it if
relief can be obtained from the lower courts. Trial courts and the Court of
Appeals are "in the best position to deal with causes in the first
instance."200 They not only resolve questions of law but also determine facts
based on the evidence presented before them. 201
Nevertheless, a direct invocation of this Court's original jurisdiction may be
justified "when there are compelling reasons clearly set forth in the petition.
"202 Immediate resort to this Court may be warranted:
(1) when genuine issues of constitutionality are raised that must be
addressed immediately; (2) when the case involves transcendental
importance; (3) when the case is novel; (4) when the constitutional issues
raised are better decided by this Court; (5) when time is of the essence; (6)
when the subject of review involves acts of a constitutional organ; (7) when
there is no other plain, speedy, adequate remedy in the ordinary course of
law; (8) when the petition includes questions that may affect public welfare,
public policy, or demanded by the broader interest of justice; (9) when the
order complained of was a patent nullity; and (10) when the appeal was
considered as an inappropriate remedy. 203
We may take cognizance of this case "in the interest of judicial economy and
efficiency."204 The records of this case are sufficient for this Court to decide
on the issues raised by the parties. 205 Any further delay would unduly
prejudice the parties.
II. A compromise is defined under the Civil Code as "a contract whereby the
parties, by making reciprocal concessions, avoid a litigation or put an end to
one already commenced."206 It may either be judicial or extrajudicial
depending on its object or the purpose of the parties. 207 A compromise is
judicial if the parties' purpose is to terminate a suit already commenced. 208 On
the other hand, a compromise is extrajudicial if its object is to avoid
litigation. 209
In any case, a compromise validly entered into has the authority and effect
of res judicata  as between the parties.210 To this extent, a judicial
compromise and an extrajudicial compromise are no different from each
other.
However, unlike an extrajudicial compromise, a compromise that has
received judicial imprimatur "becomes more than a mere contract." 211 A
judicial compromise is regarded as a "determination of the controversy"
₯Compromise Agreement- Set V
between the parties and "has the force and effect of [a final] judgment." 212 In
other words, it is both a contract and "a judgment on the merits." 213 It may
neither be disturbed nor set aside except in cases where there is forgery or
when either of the parties' consent has been vitiated. 214
The doctrine on immutability of judgments applies to compromise
agreements approved by the courts in the same manner that it applies to
judgments that have been rendered on the basis of a full-blown trial. 215 Thus,
a judgment on compromise that has attained finality cannot be "modified in
any respect, even if the modification is meant to correct erroneous
conclusions of fact and law, and whether it be made by the court that
rendered it or by the Highest Court of the land." 216
A judgment on compromise may be executed just like any other final
judgment217 in the manner provided in the Rules of Court. 218 The writ of
execution derives its validity from the judgment it seeks to enforce and must
essentially conform to the judgment's terms. 219 It can neither be wider in
scope nor exceed the judgment that gives it life. 220 Otherwise, it has no
validity. Thus, in issuing writs of execution, courts must look at the terms of
the judgment sought to be enforced.
In Bank of the Philippine Islands v. Green,  221 the writ of execution ordering
the sale of the judgment debtor's mortgaged property 222 was declared void
because the judgment sought to be executed was for a sum of
money.223 In Philippine American Accident Insurance Co., Inc. v.
Flores,224 this Court set aside the writ of execution issued by the trial court
which ordered the payment of compounded interest because the judgment
sought to be enforced ordered the payment of simple interest only. 225
The Writ of Execution ordering the collection of the settlement amount
directly from petitioners and its co-defendants in Civil Case No. 95- 45 is
void.
Under the judicially approved Compromise Agreement, petitioners are
obliged to deposit the settlement amount in escrow within 10 business days
after they receive a signed Compromise Agreement from the counsel of the
claimants. 226
There was nothing in the Compromise Agreement that required petitioners to
ensure the distribution of the settlement amount to each claimant. Petitioners'
obligation under the Compromise Agreement was limited to depositing the
settlement amount in escrow.227 On the other hand, the actual distribution of
the settlement amounts was delegated to the chosen mediator, Mr.
Mills.228 To require proof that the settlement amounts have been withdrawn
Page 72 of 82
and delivered to each claimant229 would enlarge the obligation of petitioners
under the Compromise Agreement.
Consequently, the Omnibus Order dated December 14, 2006, which directed
the implementation of the Writ of Execution, is likewise void.
Ordinarily, courts have the ministerial duty to grant the execution of a final
judgment.230 The prevailing party may immediately move for execution of the
judgment, and the issuance of the writ follows as a matter of
course. 231 Execution, being "the final stage of litigation . . . [cannot] be
frustrated. "232
Nevertheless, the execution of a final judgment may be stayed or set aside in
certain cases. "Courts have jurisdiction to entertain motions to quash
previously issued writs of execution[. ]"233 They "have the inherent power, for
the advancement of justice, to correct the errors of their ministerial officers
and to control their own processes. "234
A writ of execution may be stayed or quashed when "facts and
circumstances transpire" after judgment has been rendered that would make
"execution impossible or unjust."235
In Lee v. De Guzman,236  the trial court issued a writ of execution directing a
car manufacturer to deliver a 1983 Toyota Corolla Liftback to a buyer. 237 The
manufacturer moved to quash the writ.238 Instead of ordering the
manufacturer to deliver the car, this Court ordered the manufacturer to pay
damages.239 The cessation of the manufacturer's business operations
rendered compliance with the writ of execution impossible. 240
Another exception is when the writ of execution alters or varies the
judgment.241 A writ of execution derives its validity from the judgment it seeks
to enforce. Hence, it should not "vary terms of the judgment ... [or] go beyond
its terms."242 Otherwise, the writ of execution is void. 243 Courts can neither
modify nor "impose terms different from the terms of a compromise
agreement" that parties have entered in good faith. To do so would amount
to grave abuse of discretion.244
Payment or satisfaction of the judgment debt also constitutes as a ground for
the quashal of a writ of execution.245 In Sandico, Sr. v. Piguing,  246 although
the sum given by the debtors was less than the amount of the judgment debt,
the creditors accepted the reduced amount as "full satisfaction of the money
judgment."247 This justified the issuance of an order recalling the writ of
execution. 248
₯Compromise Agreement- Set V
A writ of execution may also be set aside or quashed when it appears from
the circumstances of the case that the writ "is defective in substance," 249 "has
been improvidently issued,"250 issued without authority,251 or was "issued
against the wrong party."252
The party assailing the propriety of the issuance of the writ of execution must
adduce sufficient evidence to support his or her motion. 253 This may consist
of affidavits and other documents.254
On the other hand, in resolving whether execution should be suspended or
whether a writ of execution should be quashed, courts should be guided by
the same principle in the execution of final judgments. Certainly, they may
require parties to present evidence.
In this case, petitioners cannot rely on the five (5) quitclaims255 for the trial
court to quash or recall the writ of execution. The quitclaims are insufficient to
establish that petitioners complied with their obligation under the
Compromise Agreement. They only prove that five (5) claimants received
their respective share in the settlement amount but do not establish that
petitioners deposited the entire settlement amount in escrow. At the very
least, petitioners should have attached proof of actual deposit in their
Opposition to the Motion for Execution.
Neither can petitioners rely on the evidence presented during the
proceedings conducted at the Philippine Consulate in San Francisco,
California, United States.1âwphi1 This Court takes judicial notice of the
administrative case filed against Judge Grageda for his act of receiving
evidence abroad without proper authority.
In Maquiran v. Grageda,  256 Judge Grageda was held administratively liable
for conducting proceedings in the United States in relation to Civil Case No.
95-45 without this Court's approval. 257 Although he was granted authority to
travel to the United States from August 26, 2003 to September 15, 2003, it
was for the sole purpose of visiting his daughter: 258
[N]o matter how noble [Judge Grageda's] intention was, he is not at liberty to
commit acts of judicial indiscretion. The proceedings conducted by [Judge
Grageda] abroad are outside the territorial jurisdiction of the Philippine
Courts. He is the Presiding Judge of Branch 4 of the Regional Trial Court for
the Eleventh Judicial Region, the territorial jurisdiction of which is limited only
to Panabo, Davao de! Norte.  This Court had not granted him any authority to
conduct the proceedings abroad.
It is not [Judge Grageda's] duty to secure these documents for the
defendants, as he is the judge in the pending case and not the counsel of the
Page 73 of 82
defendants. Judges in their zeal to search for the truth should not lose the
proper judicial perspective, and should see to it that in the execution of their
duties, they do not overstep the limitations of their power as laid by the rules
of procedure.259 (Emphasis supplied, citations omitted)
Judge Grageda was meted a penalty of suspension from service for a period
of six (6) months.260
Although Branch 4, Regional Trial Court, Panabo City directed the
implementation of the Writ of Execution against petitioners in the Omnibus
Order dated December 14, 2006, it nevertheless allowed petitioners to take
the deposition of their United States counsel, Mr. Stubbs, to prove
compliance with the Compromise Agreement. 261 At the same time, and to
ensure the orderly flow of proceedings, petitioners waited for the adverse
party to rest its case before making a formal offer of evidence.
However, presiding Judge Grageda inhibited himself from further hearing the
case before the Regional Trial Court, Panabo City could act on the pending
incidents. The case was then transferred to Davao City due to the hostile
environment in Panabo City. Succeeding events further delayed the
proceedings.
Given the circumstances of this case, petitioners cannot be faulted for failing
to make a formal offer of evidence because they were denied the opportunity
to do so. Respondent court should have given petitioners the chance to offer
the deposition of Mr. Stubbs in evidence before acting on the pending
incidents of the case. Thus, respondent court gravely abused its discretion in
issuing the Order dated July 10, 2009, which affirmed execution against
petitioners.
Respondent court also erred in issuing the Order dated July 10, 2009.
Petitioners' subsidiaries and affiliates cannot be adjudged solidarily liable.
Under the Compromise Agreement, the law that shall govern its interpretation
is the law of Texas, United States. 262 In this jurisdiction, courts are not
authorized to "take judicial notice of foreign laws." 263 The laws of a foreign
country must "be properly pleaded and proved" as facts. 264 Otherwise, under
the doctrine of processual presumption, foreign law shall be presumed to be
the same as domestic law.265 Unfortunately, there is no evidence that Texan
law has been proven as a fact. Hence, this Court is constrained to apply
Philippine law.
III. Solidary liability under Philippine law is not to be inferred lightly but must
be clearly expressed.266 Under Article 1207 of the Civil Code, there is solidary
₯Compromise Agreement- Set V
liability when "the obligation expressly so states, or when the law or the
nature of the obligation requires solidarity." 267
The Compromise Agreement provided:
25. Affiliates and Successors
This Agreement and the rights, obligations, and covenants contained herein
shall inure to the benefit of and be binding upon The Plaintiffs and Settling
Defendants and their respective subsidiaries, affiliates, controlled and related
entities, successors, and assigns.268
Clearly, the Compromise Agreement did not impose solidary liability on the
parties' subsidiaries, affiliates, controlled, and related entities, successors,
and assigns but merely allowed them to benefit from its effects. Thus,
respondent Judge Omelio gravely abused his discretion in holding that the
petitioners' subsidiaries and affiliates were solidarily liable under the
Compromise Agreement.
Furthermore, there is no reason for respondent court to pierce the veil of
corporate fiction. There is hardly any evidence to soow that petitioners
abused their separate juridical identity to evade their obligation under the
Compromise Agreement.
Consequently, the Amended Order dated August 11, 2009, the Amended
Writ of Execution, and the Alias Writ of Execution are void for having been
issued by respondent court with grave abuse of discretion.
Respondent court's fervor in ordering the execution of the compromise
agreement appears to be fueled by its compassion towards the workers who
have allegedly been exposed to DBCP. However, prudence and judicial
restraint dictate that a court's sympathy towards litigants should yield to
established legal rules. Moreover, this jurisdiction should not alter the
mechanism established for claims here and abroad as it can undo the entire
process for all the farmers involved. The remedy of any unpaid claimant
would be to establish their claims with the mediator named in the
Compromise Agreement. Counsels for the farmers and their families should
have followed this clear, legal course mandated in the Compromise
Agreement. This would have abbreviated the further suffering of the
respondents.
Considering that respondent Judge Omelio has been dismissed from service
in 2013,269 the last issue raised by petitioners has been rendered moot and
academic. It need not be tackled by this Court.
Page 74 of 82
WHEREFORE, the Petition for Certiorari is GRANTED. The assailed orders
and writs are ANNULLED and SET ASIDE for having been issued with grave
abuse of discretion.

SO ORDERED.

₯Compromise Agreement- Set V

Page 75 of 82
[40] G.R. No. 178591 March 29, 2017
SM SYSTEMS CORPORATION (formerly SPRINGSUN MANAGEMENT
SYSTEMS CORPORATION), Petitioner vs OSCAR CAMERINO, EFREN
CAMERINO, CORNELIO MANTILE, DOMINGO ENRIQUEZ AND HEIRS
OF NOLASCO DEL ROSARIO, Respondents
Civil Law; Contracts; It is settled that the provisions of existing laws are read
into contracts and deemed a part thereof.—It is settled that the provisions of existing
laws are read into contracts and deemed a part thereof. Section 62 of Republic Act
(R.A.) No. 3844 clearly provides: Sec. 62. Limitation on Land Rights.—Except in
case of hereditary succession by one heir, landholdings acquired under this Code
may not be resold, mortgaged, encumbered, or transferred until after the lapse of ten
years from the date of full payment and acquisition and after such ten-year period,
any transfer, sale or disposition may be made only in favor of persons qualified to
acquire economic family-size farm units in accordance with the provisions of this
Code.
Agrarian Reform; Section 62 of Republic Act (RA) No. 3844 explicitly states
that a transfer of the rights over agricultural leasehold acquired by a farmer can
only be done after the lapse of ten (10) years reckoned from full payment or
acquisition thereof, and only in favor of a person, who is qualified to be a
beneficiary under agrarian laws.—Section 62 of R.A. No. 3844 explicitly states that
a transfer of the rights over agricultural leasehold acquired by a farmer can only be
done after the lapse of 10 years reckoned from full payment or acquisition thereof,
and only in favor of a person, who is qualified to be a beneficiary under agrarian
laws. Both requisites are absent in the instant case. When the IPA was executed on
December 18, 2003, ownership over the landholdings had not even been conferred
upon the farmers and there is nothing on the records showing that Nocom is qualified
to be a beneficiary under agrarian laws. Perforce, Nocom cannot step into the shoes
of the farmers as a party to the case.
Civil Law; Compromise Agreements; Rights may be waived through a
compromise agreement, notwithstanding a final judgment that has already settled
the rights of the contracting parties.—“A compromise is a contract whereby the
parties, by making reciprocal concessions, avoid a litigation or put an end to one
already commenced.” Compromise is a form of amicable settlement that is not only
allowed, but also encouraged in civil cases. Contracting parties may establish such
stipulations, clauses, terms, and conditions as they deem convenient, provided that
these are not contrary to law, morals, good customs, public order, or public policy.
Rights may be waived through a compromise agreement, notwithstanding a final
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.
₯Compromise Agreement- Set V
Same; Same; There is no justification to disallow a compromise agreement,
solely because it was entered into after final judgment.—There is no justification to
disallow a compromise agreement, solely because it was entered into after final
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.
Agrarian Reform; Right of Redemption; It is logical to conclude that the right
of redemption can be exercised separately by each of the farmers in proportion to
the area of the agricultural land they cultivated.—It is logical to conclude that the
right of redemption can be exercised separately by each of the farmers in proportion
to the area of the agricultural land they cultivated. Thus, the nonparticipation of
Oscar will not affect the validity of the compromise agreements executed by SMS
with four of the farmers. Lastly, it is indispensable to inquire if the law or public
policy disallows the four farmers from executing waivers of their redemption rights.
In Planters Development Bank v. Garcia, 477 SCRA 185 (2005), the Court
discussed as follows the rights of the landowners vis-à-vis those of tenants or
agricultural lessees in cases of sale of the landholdings: As an owner, Carolina has
the right to dispose of the property without other limitations than those established
by law. This attribute of ownership is impliedly recognized in Sections 10, 11 and 12
of [R.A.] No. 3844, where the law allows the agricultural lessor to sell the
landholding, with or without the knowledge of the agricultural lessee and at the same
time recognizes the right of preemption and redemption of the agricultural
lessee. Thus, the existence of tenancy rights of agricultural lessee cannot affect nor
derogate from the right of the agricultural lessor as owner to dispose of the property.
The only right of the agricultural lessee or his successor-in-interest is the right of
preemption and/or redemption. (Italics in the original) While the right of redemption
is available to the farmers, it need not be exercised and can be waived. There is no
law disallowing such waiver and it is not within the contemplation of transfers
prohibited by Section 62 of R.A. No. 3844.
DECISION
REYES, J.:
For review in the instant petition 1 is the Decision2 rendered on October 23,
2006 and Resolution3 issued on June 29, 2007 by the Court of Appeals (CA)
in CA-G.R. SP No. 92994. The CA dismissed the Petition for Certiorarz4 filed
by the herein petitioner, SM Systems Corporation (SMS), formerly Springsun
Management Systems Corporation, seeking to set aside the Orders issued
by the Regional Trial Court (RTC) of Muntinlupa City, Branch 256 5 on
September 7, 20056 and December 16, 20057 in Civil Case No. 95-020, a
complaint for redemption involving three parcels of agricultural land located
Page 76 of 82
in Muntinlupa City. Through the two orders, the R TC invalidated the
compromise agreement entered into by and between SMS and four of the
herein respondents, Efren Camerino (Efren), Cornelio Mantile (Cornelio),
Domingo Enriquez (Domingo) and the Heirs of Nolasco del Rosario
(Nolasco).8 The RTC also denied SMS' motions (a) to hold in abeyance the
execution of the decision allowing redemption; (b) to quash the writ of
execution; and (c) for Honorable Judge Alberto L. Lerma (Judge Lerma) to
inhibit himself from further issuing orders.
Facts and Issues
In the Resolution9 dated July 26, 2010, the Court summarized the facts and
issues of the case as follows:
Victoria Homes, Inc. (Victoria Homes) was the registered owner of three (3)
lots (subject lots), covered by Transfer Certificate of Title (TCT) Nos.
(289237) S-6135, S-72244, and (289236) S-35855, with an area of 109, 451
square meters, 73,849 sq m, and 109,452 sq m, respectively. 10 These lots
are situated in Barrio Bagbagan, Muntinlupa, Rizal (now Barangay Tunasan,
Muntinlupa City, Metro Manila).
Since 1967, respondents [Oscar], [Efren], [Cornelio], [Domingo] and
(Nolasco] (herein represented by his heirs) were farmers-tenants of Victoria
Homes, cultivating and planting rice and com on the lots.
On February 9, 1983 and July 12, 1983, Victoria Homes, without notifying
[the farmers], sold the subject lots to Springsun Management Systems
Corporation (Springsun), the predecessor-in-interest of [SMS]. The Deeds of
Sale were registered with the Registry of Deeds of Rizal. Accordingly, TCT
Nos. (289237) S-6135, (289236) S-35855, and S-72244 in the name of
Victoria Homes were cancelled and, in lieu thereof, TCT Nos. 120541,
120542, and 123872 were issued in the name of Springsun. Springsun
subsequently mortgaged the subject lots to Banco Filipino Savings and
Mortgage Bank (Banco Filipino) as security for its various loans amounting to
₱ll,545,000.00. When Springsun failed to pay its loans, the mortgage was
foreclosed extra-judicially. At the public auction sale, the lots were sold to
Banco Filipino, being the highest bidder, but they were eventually redeemed
by Springsun.
On March 7, 1995, [the farmers] filed with the [RTC], Branch 256, Muntinlupa
City, a complaint against Springsun and Banco Filipino
for Prohibition/Certiorari, Reconveyance/Redemption, Damages, Injunction
with Preliminary Injunction and Temporary Restraining Order or, simply, an
action for Redemption. On January 25, 2002, the RTC rendered a decision in
favor of [the farmers], authorizing them to redeem the subject lots from
₯Compromise Agreement- Set V
Springsun for the total price of ₱9,790,612.00. On appeal to the CA, the
appellate court affirmed the RTC decision with a modification on the award of
attorney's fees.
Aggrieved, Springsun elevated the matter to this Court via  a petition for
review on certiorari.  The case was docketed as G.R. No. 161029. On
January 19, 2005, we affirmed the CA Decision. With the denial of
Springsun's motion for reconsideration, the same became final and
executory; accordingly, an entry of judgment was made. [The farmers] thus
moved for the execution of the Decision.
[SMS] instituted an action for Annulment of Judgment with prayer for the
issuance of a Temporary Restraining Order before the CA, docketed as CA-
G.R. SP No. 90931. [SMS] sought the annulment of the RTC decision
allowing [the farmers] to redeem the subject property. [SMS] argued that it
was deprived of the opportunity to present its case on 'the ground of fraud,
manipulations and machinations of [the farmers]. It further claimed that the
Department of Agrarian Reform, not the R TC, had jurisdiction over the
redemption case. The CA, however, dismissed the petition on October 20,
2005. Its motion for reconsideration was also denied for lack of merit. The
matter was elevated to this Court via  a petition for review on certiorari in
G.R. No. 171754, but the same was denied on June 28, 2006. After the
denial of its motion for reconsideration, the Decision became final and
executory; and an entry of judgment was subsequently made.
Meanwhile, on December 18, 2003; [the farmers] executed an Irrevocable
Power of Attorney in favor of Mariano Nocom (Nocom), authorizing him,
among other things, to comply with our January 19, 2005 Decision by paying
the redemption price to Springsun and/or to the court. [The farmers],
however, challenged the power of attorney in an action for revocation with
the RTC. In a summary judgment, the RTC annulled the Irrevocable Power of
Attorney for being contrary to law and public policy. The R TC explained that
the power of attorney was a disguised conveyance of the statutory right of
redemption that is prohibited under Republic Act No. 3844. The CA affirmed
the RTC decision. However, this Court, in G.R. No. 182984, set aside the CA
Decision and concluded that the RTC erred in rendering the summary
judgment. The Court thus remanded the case to the RTC for proper
proceedings and proper disposition, according to the rudiments of a regular
trial on the merits and not through an abbreviated termination of the case by
summary judgment.
On August 4, 2005, as [SMS] refused to accept the redemption amount of
₱9,790,612.00, plus ₱147,059.18 as commission, [the farmers] deposited the
said amounts, duly evidenced by official receipts, 11 with the RTC. The RTC
further granted [the farmers·'] motion for execution and, consequently, TCT
Nos. 120542, 120541, and 123872 in the name of [SMS] were cancelled and
Page 77 of 82
TCT Nos. 15895, 15896, and 15897 were issued in the names of [the
farmers]. It also ordered that the "Irrevocable Power of Attorney," executed
on December 18, 2003 by [the farmers] in favor of Nocom, be annotated in
the memorandum of encumbrances of TCT Nos. 15895, 15896, and 15897.
On August 20, 2005, [SMS] and [the farmers] (except [Oscar]) executed a
document, denominated as Kasunduan,12 wherein the latter agreed to
receive ₱300,000.00 each from the former, as compromise settlement. [SMS]
then filed a Motion to Hold Execution in Abeyance on the Ground of
Supervening Event.
On September 7, 2005, the RTC denied [SMS'] motion, thus:
WHEREFORE, in view of the foregoing, [SMS'] Motion to Hold in Abeyance
Execution on Ground of Supervening Event is denied and the Kasunduan
separately entered into by [Efren, Cornelio, Domingo and the Heirs of
Nolasco] are hereby disapproved. SO ORDERED.
Aggrieved by the aforesaid Order and the denial of its motion for
reconsideration, [SMS] elevated the matter to the CA. On May 8, 2006,
counsel for [the farmers] moved that they be excused from filing the required
comment, considering that only [Oscar] was impleaded as private respondent
in the amended petition; and also because [the farmers] already
transferred pendente lite their contingent rights over the case in favor of
Nocoin. Nocom, in turn, filed a Motion for Leave of Court to Admit Attached
Comment to the Petition.
On October 23, 2006, the appellate court rendered the assailed Decision,
finding [SMS] guilty of forum shopping. The CA concluded that the present
case was substantially similar to G.R. No. 171754. It further held that the
compromise agreement could not novate the Court's earlier Decision. in G.R.
No. 161029 because only four out of five parties executed the agreement.
Undaunted, [SMS] comes before us in this petition for review
on certiorari,  raising the following issues:
1. Whether or not the Kasunduan  effectively novated the judgment
obligation.
2. Whether or not the [CA should have ruled] on the Motion to Expunge the
Comment of Mariano Nocom filed by [SMS].
3. Whether or not Mariano Nocom should be allowed to participate in the
instant case on the basis of the null and void Irrevocable Power of Attorney.
₯Compromise Agreement- Set V
4. Whether or not the (sic) there is grave abuse of discretion when Judge
Lerma denied the Motion to [I]nhibit filed by [SMS] despite Judge Lenna's
clear showing of partiality for the other party.
5. Whether or not there is forum-shopping.13 (Citations omitted)
In the same Resolution dated July 26, 2010, contrary to the CA's conclusion,
the Court had resolved that SMS is not guilty of forum shopping for reasons
stated below:
It is true that after the finality of this Court's Decision in G.R. No. 161029
dated January 19, 2005, [SMS] instituted and filed various petitions and
motions which essentially prevented the execution of the aforesaid Decision.
Yet, we do not agree with the CA that the instant case is dismissible because
it earlier filed an action for annulment of judgment that involved substantially
the same set of facts, issues, and reliefs sought. While [SMS'] goal in filing
the instant case is the same as that in G.R. No. 171754 (which stemmed
from the petition for annulment of judgment), that is to prevent the ·execution
of the January 19, 2005 Decision, still, there is no forum shopping.
In the action for annulment of judgment, [SMS] sought the nullification of the
January 19, 2005 Decision on the ground that it was deprived of its
opportunity to present its case and that the RTC had no jurisdiction to decide
the case. While in the instant case, [SMS] prays that the execution of the
January 19, 2005 Decision be held in abeyance in view of the compromise
agreement entered into by [SMS] and four [of the farmers, namely, Efren,
Cornelio, Domingo and the Heirs of Nolasco]. In short, the issue threshed out
in the annulment case was the validity of the 2005 Decision, while in this
case, the issue is focused on the effect of the compromise agreement
entered into after the finality of the· Decision sought to be executed. Clearly,
therefore, there is no identity of issues in the two cases. 14
In the light of the foregoing, the Court declared that a. further review of the
herein assailed decision and resolution is in order. However, the Court were
unable to fully dispose of all the issues raised considering the pendency then
of Civil Case No. 05-172, the petition filed by the farmers before the RTC of
Muntinlupa City, Branch 203, to challenge the Irrevocable Power of Attorney
(IPA)15 issued to Mariano Nocom (Nocom). This Circumstance acquires
greater significance as Nocom, in his own behalf, to the exclusion of the
farmers, and on the basis of the IPA, has filed before this Court a
Comment16 and a Memorandum17 to the instant petition. Hence, in the same
Resolution dated July. 26, 2010, the Court held in abeyance the proceedings
herein until Civil Case No. 05-172 shall have been terminated. 18
Page 78 of 82
Civil Case No. 05-172 was thereafter re-raffled to RTC of Muntinlupa City,
Branch 256, following the voluntary inhibition from further hearing the case of
the then Presiding Judge of Branch 203, Myra B. Quiambao. 19
On September 20, 2011, the then Acting Presiding Judge of Branch 256,
Leandro C. Catalo, issued an Order20 dismissing the case on account of the
farmers' withdrawal of their petition against Nocom. Necessarily, SMS' .
complaint-in-intervention was also dismissed and its motion for
reconsideration was denied through the Order 21 issued by the RTC on April
3, 2012.
With Civil Case No. 05-172 now terminated, the Court can proceed to
dispose of the four unresolved issues for consideration.
The Parties' Arguments
In support of the petition, SMS claims that the IPA issued in 2003 by the
farmers in Nocom's favor effected a transfer of lands acquired under the
agrarian reform program breaching both laws and public policy. Thus,
notwithstanding the execution of the IP A, Nocom has no interest over the
three parcels of land. Consequently, Nocom cannot step into the shoes of the
farmers as a party to the case, hence, the pleadings he filed should be
expunged from the records.22
SMS likewise alleges that the Kasunduan it executed with each of the four
farmers complied with the requisites and principles of contracts, therefore,
valid despite having been entered into after the finality of the judgment in the
redemption case. Further, the amount of ₱300,000.00 paid to each of the
four farmers was not unconscionable for being way above the sum of
₱25,000.00 originally demanded from SMS. Besides, there was an eventual
admission of the lack of legitimate tenancy or agricultural leasehold
relationship between the parties.23
The farmers did not file a comment to the petition. In their stead, Nocom,
representing himself as transferee pendente lite  of the farmers' claimed
rights of redemption, argues that the petition is fatally defective for failure to
implead him as an indispensable party. As early as 2003, he had paid the
farmers a total sum of ₱2,500,000.00. Thus, when SMS executed
the Kasunduan  with four of the farmers in 2005, the latter had nothing more
to waive, and the judgment in the redemption case had also become final. 24
Ruling of the Court
There is merit in the instant petition.
₯Compromise Agreement- Set V
It bears noting that on October 12, 2010, albeit in a case unrelated to the
instant petition, the Court had found Judge Lerma guilty of gross misconduct
and he was meted a penalty of dismissal from service. 25 Hence, one of the
issues 'for the court's consideration, to wit, the alleged partiality of Judge
Lerma and his refusal to inhibit himself from further issuing orders relative to
Civil Case No. 95-020 is rendered moot.
Nocom cannot rightfully substitute the farmers as a party to the case.
While Civil Case No. 05-172 had already been dismissed due to the
withdrawal by the farmers themselves of their petition to revoke the IPA
before the RTC, the Court still finds Nocom to be without the legal personality
to substitute the former as a party in the redemption case.
It is settled that the provisions of existing laws are read into contracts and
deemed a part thereof.26
Section 62 .of Republic Act (R.A.) No. 384427 clearly provides:
Sec. 62. Limitation on Land Rights .-Except in case of hereditary succession
by one heir, landholdings acquired under this Code may not be resold,
mortgaged, encumbered, or transferred until after the lapse of ten years from
the date of full payment and acquisition and after such ten-year period, any
transfer, sale or disposition may be made only in favor of persons qualified to
acquire economic family-size farm units m accordance with the provisions of
this Code x x x.
Tayag v. Lacson28  unequivocally emphasizes the prohibition on the transfer
of the right of redemption acquired pursuant to agrarian laws, viz.:
Under Section 22 of [R.A. No. 6657], 29 beneficiaries under P.D. No. 2730 who
have culpably sold, disposed of, or abandoned their land, are disqualified
from becoming beneficiaries.
Under Section 12 of the law, if the property was sold to a third person without
the knowledge of the tenants thereon, the latter shall have the right to
redeem the same at a reasonable price and consideration. By assigning their
rights and· interests on the landholding under the deeds of assignment in
favor of the petitioner, the defendants-tenants thereby waived, in favor of the
petitioner, who is not a beneficiary under Section 22 of [R.A.] No. 6657, their
rights of preemption or redemption under [R.A.] No. 3844. The defendants-
tenants would then have to vacate the property in favor of the petitioner upon
full payment of the purchase price. Instead of acquiring ownership of the
portions of the landholding respectively [tilled] by them, the defendants-
tenants would again become landless for a measly sum of ₱50.00 per square
Page 79 of 82
meter. The petitioner's scheme is subversive, not only of public policy, but
also of the letter and spirit of the agrarian laws. That the scheme of the
petitioner had yet to take effect in the future or ten years hence is not a
justification. The respondents may well argue that the agrarian laws had
been violated by the defendants-tenants and the petitioner by the mere
execution of the deeds of assignment. In fact, the petitioner has implemented
the deeds by paying the defendants-tenants amounts of money and even
sought their immediate implementation by setting a meeting with the
defendants-tenants.x x x.31
In the case before this Court, the IPA issued by the farmers conferred upon
Nocom the rights to "sell, assign, transfer, dispose of, mortgage and
alienate" the subject three parcels of land and ''procure the necessary
transfer certificate of titles in his name as the absolute owner of said
properties:"32 The said IP A is nothing less but a conveyance of the rights of
the farmers to Nocom, hence, invalid for being an affront against agrarian
laws. Section 62 of R.A. No. 3844 explicitly states that a transfer of the rights
over agricultural leasehold acquired by a farmer can only be done after the
lapse of 10 years reckoned from full payment or acquisition thereof, and only
in favor of a person, who is qualified to be a beneficiary under agrarian laws.
Both requisites are absent in the instant case. When the IP A was executed
on December 18, 2003, ownership over the landholdings had not even been
conferred upon the farmers and there is nothing on the records showing that
Nocom is qualified to be a beneficiary under agrarian laws. Perforce, Nocom
cannot step into the shoes of the farmers as a party to the case.
Be that as it may, in the interest of justice and to be able to write finis to the
instant case, the Court will not expunge Nocom's pleadings but consider
them as having been filed by an intervenor .
Section 1 of Rule 19 of the 1997 Rules of Civil Procedure states:
Section 1. Who may intervene. - A person who has a legal interest in the
matter in litigation, or in the success of either of the parties, or an interest
against. both, or is so situated as to be adversely affected by a distribution or
other disposition of property in the custody of the court or of an officer thereof
may, with leave of court, be allowed to intervene in the action. The court shall
consider whether or not the intervention will unduly delay or prejudice the
adjudication of the rights of the original parties, and whether or not the
intervenor's rights may be fully protected in a separate proceeding.
Although Nocom cannot properly substitute as a party to the case, it is not
disputed that he supplied the amount of ₱9,790,612.00, plus ₱147,059.18
commission deposited by the farmers to the RTC to redeem the three parcels
of land from SMS. That is where his interest lies. Nocom is entitled to be
₯Compromise Agreement- Set V
reimbursed for those amounts, and this is the only reason why the Court is
allowing his intervention.
In sum, the Court finds the conveyance of the farmers' rights made in
Nocom's favor to be unlawful. Notwithstanding the dismissal of the petition to
nullify the IPA upon the instance of the farmers themselves, Nocom cannot
rightfully substitute them as a party to this case.
The compromise agreements executed by and between SMS and
four of the farmers are valid, thus, a novation of the judgment in the
redemption case.
In invalidating the compromise agreements, the R TC explained that at the
time of their execution, the judgment in the redemption case was already
final, thus, there were no more proceedings to suspend. Further, the amount
of ₱300,000.00 paid by SMS to each of the four farmers was
unconscionable.33
On the other hand, the CA, in ruling that the Kasunduan executed by SMS
with each of the four farmers did not novate the judgment obligation,
ratiocinated that:
[T]he right of redemption in favor of [the farmers] is one which must be
exercised in full, if it is to be exercised at all. [The farmers] must be able to
subrogate themselves in the place of and to the exclusion of [SMS]. Since
such right is one which cannot be exercised partially, it follows that [SMS']
obligation to allow them to exercise the said right cannot also be performed
severally. Because the right granted is incapable of dissection into
component parts, the obligation imposed by the said judgment upon [SMS] is
also indivisible. In obligations to do, as in that prescribed in the final judgment
in Civil Case No. 95-020, indivisibility is also presumed. 34
A compromise is a contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one already commenced." 35
Compromise is a form of amicable settlement that is not only allowed, but
also encouraged in civil cases. Contracting parties may establish such
stipulations, clauses, terms, and conditions as they deem convenient,
provided that these are not contrary to law, morals, good customs, public
order, or public policy.36
Rights may be waived through a compromise agreement, notwithstanding a
final judgment that has already settled the rights of the contracting parties. To
be binding, the compromise must be shown to have been voluntarily, freely
Page 80 of 82
and intelligently executed by the parties, who had full knowledge of the
judgment.37
The Court, in its Resolution dated July 26, 2010, stated that:
Once a case is terminated by final judgment, the rights of the parties are
settled; hence, a compromise agreement is no longer necessary. Though it
may not be prudent to do so, we have seen in a number of cases that parties
still considered and had, in fact, executed such agreement. To be sure, the
parties may execute a compromise agreement even after the finality of the
decision. A reciprocal concession inherent in a compromise agreement
assures benefits for the contracting parties. For the defeated litigant, obvious
is the advantage of a compromise after final judgment as the liability decreed
by the judgment may be reduced. As to the prevailing party, it assures receipt
of payment because litigants are sometimes deprived of their winnings
because of unscrupulous mechanisms meant to delay or evade the execution
of a final judgment.38 (Citations omitted and emphasis ours)
There is no justification to disallow a compromise agreement, solely because
it was entered into after final 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. 39
In the course of the proceedings of the instant case, the farmers themselves
raised no challenge relative to the existence of the elements of a valid
contract. The execution of the compromise agreements between SMS and
four of the farmers is an undisputed fact. There are likewise no claims of
vitiated consent and no proof that the agreements
were "rescissible,  voidable, unenforceable, or void."40  Moreover, the Court
does not find the amount of ₱300,000.00 paid to each of the four farmers as
unconscionable especially in the fight of Efren's subsequent declaration that
they tilled the land on their own initiative, without procuring anybody's
permission, and sans a harvest sharing agreement.41
Anent the CA's ruling on the indivisibility of the exercise of the right of
redemption, the Court finds the same to be without legal mooring.
Section 12 of R.A. No. 3844 originally provided:
Sec. 12. Lessee's Right of Redemption.  - In case the landholding is sold to a
third person without the knowledge of the agricultural lessee, the latter. shall
have the right to redeem the same at a reasonable price and consideration.
₯Compromise Agreement- Set V
Provided, That the entire landholding sold must be redeemed: Provided,
further, That where there are two or more agricultural lessees, each shall be
entitled to said right of redemption only to the extent of the area actually
cultivated by him. The right of redemption under this Section may be
exercised within two (2) years from the registration of the sale and shall have
priority over any other right of legal redemption. (Emphasis ours and italics in
the original)
However, in view of its amendment by Section 12 of R.A. No. 6389, 42 it now
reads as follows:
Sec. 12. Lessee's Right of Redemption.  - In case the landholding is sold to a
third person without the knowledge of the agricultural lessee, the latter shall
have the right to redeem the same at a reasonable price and consideration:
Provided, that where there are two or more agricultural lessees, each shall
be entitled to said right of redemption only to the extent of the area actually
cultivated by him. The right of redemption under this Section may be
exercised within one hundred and eighty days from notice in writing which
shall be served by the vendee on all lessees affected and the Department of
Agrarian Reform upon the registration of the sale, and shall have priority over
any other right of redemption. The redemption price shall be the reasonable
price of the land at the time of the sale.
Upon the filing of the corresponding petition or request (to redeem) with the
department or corresponding case in court by the agricultural lessee or
lessees, the said period of one hundred and eighty days shall cease to run.
Any petition or request for redemption shall be resolved within sixty days
from filing thereof; otherwise the said period shall start to run again.
x x x x (Emphasis and underlining ours)
Considering the foregoing, it is logical to conclude that the right of redemption
can be exercised separately by each of the farmers in proportion to the area
of the agricultural land they cultivated. Thus, the non-participation of Oscar
will not affect the validity of the compromise agreements executed by SMS
with four of the farmers.
Lastly, it is indispensable to inquire if the law or public policy disallows the
four farmers from executing waivers of their redemption
rights.1âwphi1 In Planters Development Bank v. Garcia, 43 the Court
discussed as follows the rights of the landowners vis-a-vis those of tenants
or agricultural lessees in cases of sale of the landholdings:
Page 81 of 82
As an owner, Carolina has the right to dispose of the property without other
limitations than those established by law. This attribute of ownership is
impliedly recognized in Sections 10, 11 and 12 of [R.A.] No. 3844, where the
law allows the agricultural lessor to sell the landholding, with or without the
knowledge of the agricultural lessee and at the same time recognizes the
right of preemption and redemption of the agricultural lessee. Thus, the
existence of tenancy rights of agricultural  lessee cannot affect nor derogate
from the right of the agricultural lessor as owner to dispose of the property.
The only right of the agricultural lessee or his successor in interest is the right
of preemption and/or redemption.44 (Italics in the original)
While the right of redemption is available to the farmers, it need not be
exercised and can be waived. There is no law disallowing such waiver and it
is not within the contemplation of transfers prohibited by Section 62 of R.A.
No. 3844.
The Court, thus, finds no compelling grounds to invalidate the compromise
agreements.
In Heirs of Servando Franco v. Spouses Gonzales, 45 the Court discussed
novation in this wise:
A novation arises when there is a substitution of an obligation by a
subsequent one that extinguishes the first, either by changing the object or
the principal conditions, or by substituting the person of the debtor, or by
subrogating a third person in the rights of the creditor: For a valid novation to
take place, there must be, therefore: (a) a previous valid obligation; (b) an
agreement of the parties to make .a new contract; (c) an extinguishment of
the old contract; and (d) a valid new contract. In short, the new obligation
extinguishes the prior agreement only when the substitution is unequivocally
declared, or the old and the new obligations are incompatible on every point.
A compromise of a final judgment operates as a novation of the judgment
obligation upon compliance with either of these two conditions. 46 (Citations
omitted)
is in no financial position, to exercise the right of redemption" 48  granted to
him.
Considering that the judgment obligation had been novated due to the
execution of valid compromise agreements, and in the light of Oscar's
manifestation of his disinterest in exercising his right of redemption, the writ
of execution issued by the RTC on August 22, 2005 in Civil Case No. 95-020,
should thus be quashed.
IN VIEW OF THE FOREGOING, the Decision and Resolution of the Court
Appeals, dated October 23, 2006 and June 29, 2007, respectively, in CA.-
G.R. SP No. 92994, are SET ASIDE. The writ of execution issued on August
22, 2005 by the Regional Trial Court of Muntinlupa City, Branch 256, in Civil
Case No. 95-020 is hereby QUASHED. Transfer Certificate of Title Nos.
15895, 15896, and 15897 in the names of Oscar Camerino, Efren Camerino,
Comelio Mantile, Domingo Enriquez and Nolasco del Rosario are
hereby CANCELLED, and TCT Nos. 120541, 120542, and 123872 in the
name of Springsun Management Systems Corporation, the predecessor of
the petitioner herein, SM Systems Corporation, are REINSTATED. The trial
court is further directed to RETURN to the intervenor, Mariano Nocom, the
amounts of ₱9,790,612.00 and ₱l47,059.18 consigned by him as redemption
price and commission, respectively.
SO ORDERED.

In the case at bar, SMS' obligation to allow redemption of the three parcels of
land was superseded by the terms of the compromise agreements executed
with the four farmers. SMS' new obligation consisted of the payment of
₱300,000.00 each to the four farmers, who, in turn, waived their redemption
rights. Novation, thus, arose as the old obligation became incompatible with
the new.

The Court also notes that Oscar, the farmer who did not execute a
compromise agreement with SMS, filed before the RTC a Manifestation and
Motion,47 dated September 15, 2006, indicating that "he has no plans, as he

₯Compromise Agreement- Set V

Page 82 of 82