DIGEST:

Viesca vs Gilinsky
FACTS:
Petitioner and respondent, a Canadian citizen, met at the Makati Shangri-La Hotel where the
former worked as a hotel manager. After a few months, a relationship blossomed between the
two. On 22 October 2001, their son Louis Maxwell was born. Respondent executed an
Affidavit of Acknowledgment/Admission of Paternity3 of the child. Subsequently, the Civil
Registrar of Makati City issued a Certification granting the change of Louis Maxwell’s
surname from “Viesca” to “Gilinsky. Unfortunately, the relationship between petitioner and
respondent soured and they parted ways during the early part of 2003.
Respondent filed a Petition praying that he be entitled to the company of Louis Maxwell at
any time of any given day; he be entitled to enjoy the company of Louis Maxwell during
weekends and on such occasions the child shall be allowed to spend the night with his father;
and he be entitled to enjoy a yearly three-week vacation in any destination with his child.

During the pendency of respondent’s petition, the parties arrived at a compromise agreement.
Respondent filed an “Urgent Motion for Issuance of Writ of Execution.” It was alleged in
said motion that petitioner had repeatedly refused to abide by the terms of the compromise
judgment, particularly the provision allowing Louis Maxwell to spend a night with him at any
day of the week.

Petitioner filed a Motion to Quash Writ of Execution insisting that said writ was issued with
“indecent haste” violative of her right to due process, and that the writ varied the terms of the
Compromise Agreement since it failed to take into consideration the parties’ understanding
that in the enjoyment of respondent’s visitorial rights, petitioner “shall have the right to
designate any person of suitable age to accompany the child.”

The court ruled to deny the motion to quash the writ of execution filed by [herein petitioner]
thru counsel for lack of merit and grant the prayer of the respondent that he be allowed to
exercise his visitorial rights over the minor LUIS MAXWELL VIESCA today under the
conditions imposed by the petitioner, some of which are contained in the compromise
agreement.

petitioner filed an “Ex-Parte Reiterative Motion to Inhibit” claiming that Judge Mariano
could no longer handle the case “with the cold neutrality of an impartial judge”23 because of
her statement pertaining to petitioner’s failure to abide by the Compromise Judgment.
Respondent filed his opposition thereto. Respondent once more filed a Motion for the
Issuance of a Writ of Execution,
Judge Mariano issued an Order, directing the parties to attend an in-chamber conference on
20 May 2005 relative to respondent’s Motion to Withdraw Support and petitioner’s Ex-Parte
Reiterative Motion to Inhibit. Respondent requested that his Very Urgent Motion to Enforce
and Enjoy Visitorial Rights be heard notwithstanding the three-day notice rule required under
the Revised Rules of Civil Procedure, as he was about to go on a two-week business trip. The
RTC granted the urgent motion. CA affirmed.
ISSUE: WON the RTC erred in amending or altering the terms of the Compromise judgment
without the concurrence of both parties.
RULING: YES.
it is settled that neither the courts nor quasi-judicial bodies can impose upon the parties a
judgment different from their compromise agreement or against the very terms and conditions
of their agreement51 without contravening the universally established principle that a contract
is the law between the parties.52 The courts can only approve the agreement of parties. They
can not make a contract for them.53
A compromise agreement that has been made and duly approved by the court attains the
effect and authority of res judicata, although no execution may be issued unless the
agreement receives the approval of the court where the litigation is pending and compliance
with the terms of the agreement is decreed.47
In this case, the compromise agreement entered into between the parties fell way short of its
objective of finally putting an end to their dispute. The sheer number of incidents which
cropped up shortly after the trial court’s approval of the compromise agreement reveals that
the compromise judgment failed to bring peace to the parties. Interestingly enough, the only
points of disagreement are Clause II(b) of the Compromise Judgment which pertains to the
overnight visits of Louis Maxwell with respondent and the last paragraph of the same clause
regarding the appointment of the child’s accompanying guardian.

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 171698 July 4, 2007

MARIA SHEILA ALMIRA T. VIESCA, Petitioner,

vs.
DAVID GILINSKY,* Respondent.

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals
promulgated on 19 October 2005 in CA-G.R. SP No. 90285 which affirmed, with
modification, the Order dated 16 June 2005 rendered by the Regional Trial Court, Branch
136, Makati City, in Civil Case SP Proc. Case No. M-5785.

The facts of the case are as follows:

Petitioner and respondent, a Canadian citizen, met sometime in January 1999 at the Makati
Shangri-La Hotel where the former worked as a hotel manager. After a few months, a
relationship blossomed between the two. On 22 October 2001, their son Louis Maxwell was
born.2 On 30 October 2001, respondent executed an Affidavit of
Acknowledgment/Admission of Paternity3 of the child. Subsequently, the Civil Registrar of
Makati City issued a Certification granting the change of Louis Maxwell’s surname from
"Viesca" to "Gilinsky."4

Unfortunately, the relationship between petitioner and respondent soured and they parted
ways during the early part of 2003.

On 6 February 2004, respondent filed a Petition praying that he be entitled to the company of
Louis Maxwell at any time of any given day; he be entitled to enjoy the company of Louis
Maxwell during weekends and on such occasions the child shall be allowed to spend the
night with his father; and he be entitled to enjoy a yearly three-week vacation in any
destination with his child.5 The case was raffled off to public respondent’s sala and was
docketed as SP Proc. Case No. No 5785.

During the pendency of respondent’s petition, the parties arrived at a compromise agreement.
This compromise agreement was submitted before the trial court and became the basis of the
Compromise Judgment issued on 12 May 2004.6 We reproduce the Compromise Judgment
below–

COMPROMISE JUDGMENT

Acting on the joint motion to render judgment based on Compromise Agreement and finding
the allegations therein to be of merit, same is hereby given due course.

Judgment is therefore rendered based on the compromise agreement which is quoted

hereunder.

"COMPROMISE AGREEMENT

KNOW ALL MEN BY THESE PRESENTS:

This Agreement entered this 22nd day of April 2004 by and between:

DAVID GILINSKY, of legal age, single and residing at Suite 2828, Makati Shang-rila Hotel,
Ayala Avenue corner Makati Avenue, Makati City, hereinafter referred to as the "FATHER"

-and-

SHEILA T. VIESCA, of legal age, single and a resident of Lot 2, Block 39, Phase 5, Fort
Bonifacio, Taguig, Metro Manila, hereinafter referred to as the "MOTHER".

WITNESSETH:

WHEREAS, the parties are the biological parents of minor LOUIS MAXWELL (the
"CHILD") born on 22 October 2001;

WHEREAS, as a result of disputes and differences, the parties are now living separately and
apart;
WHEREAS, the parties desire to provide for a complete settlement of the issues pertaining to
the custody, visitorial rights, support and maintenance of the child;

WHEREAS, each party acknowledges his or her personal obligations as parent of the child
and, by these presents, each hereby undertakes to render the performance of these obligations
to the child and comply with his or her duties as a parent;

NOW, THEREFORE, for and in consideration of the promises and dispositions made in this
agreement, the parties hereto have agreed as follows:

I. CUSTODY OF THE CHILD

The mother shall continue to have custody over LOUIS MAXWELL while the father shall
exercise visitorial rights as hereunder stated.

Both parties, by these presents, undertake to take every measure necessary, desirable and
proper, to consider the best interest of the child at all times, whether with them or away from
them. Any act, word or manipulative scheme that may cause the alienation of feelings or loss
of respect or that either one or both of them, from either one of the parties, shall never be
tolerated.

II. VISITATION RIGHTS

As the child will continue to be in the custody of the mother, the father, as the non-custodial
parent shall be entitled to the following supervised visitation rights, to wit:

a. He shall be entitled to the company of the child every Saturday and/or

Sunday afternoon;

b. The child shall be allowed to spend the night with the father once a week;

c. Nothing herein shall prevent the father from visiting the child during
reasonable hour in the afternoon of any day of the week at the mother’s
residence in the presence of the mother or her duly designated representative,
and with prior notice to the mother.

One year after the signing of this agreement, the parties shall meet to discuss and resolve the
matter pertaining to the entitlement of the father to enjoy a yearly, three-week vacation in any
destination with the child.

In the exercise and/or enjoyment of the above rights, the mother shall have the right to
designate any person of suitable age to accompany the child.

III. SUPPORT

a. The father shall give monthly financial support of US Dollars Five Hundred
(US$500.00) or its Peso equivalent within the first five days of the month
effective upon the signing of this agreement. The amount shall be subject to
such yearly adjustment of such rate equal to the inflation rate determined by
the appropriate government agency.
 b. On top of the said monthly financial support, the Father shall provide:

i. full medical and dental expenses and/or insurance coverage for the
child;

ii. full education for the child at Colegio San Agustin, Makati or any
other suitable school;

iii. college Education Insurance for the child;

iv. monthly car amortization of Ten Thousand Pesos (₱10,000.00) or

One Fourth (1/4) of the current amortization whichever is lower;

v. Monthly amortization due as of the date of this Agreement for the

Rockwell-Manansala Condominium unit until its full payment and
transfer of title, including its association dues and charges. The mother
here affirms/confirms she is holding title to the condominium in trust
for the child.

The mother shall ensure that all arrears and/or outstanding obligations prior to the execution
of this agreement shall have been settled and paid. As soon as the above have been fully
complied with, the father shall pay the ensuing monthly amortization.

IV. COURT APPROVAL OF AGREEMENT

This agreement shall be governed by and construed in accordance with the laws of the
Republic of the Philippines. The parties hereto shall, in good faith, strictly abide by the terms
hereof.

The parties agree to submit this written agreement for the court’s approval.

V. JUDICIAL RELIEF

Should either one of the parties fail to comply with the terms and conditions of this
Agreement, the aggrieved party may seek judicial relief against the erring party and apply
with the proper court for a writ of execution against said erring party to enforce his or her
obligations imposed in this Agreement. The offending party shall pay for the cost of
litigation, attorney’s fees, other expenses, and interest incurred in such application for a writ
of execution.

IN WITNESS WHEREOF, we have hereunto affixed our respective signatures on the date
and place hereinabove mentioned.

(SGD) DAVID GILINSKY (SGD) SHEILA T. VIESCA7

Father Mother

On 5 April 2005, respondent filed an "Urgent Motion for Issuance of Writ of Execution." It
was alleged in said motion that petitioner had repeatedly refused to abide by the terms of the
compromise judgment, particularly the provision allowing Louis Maxwell to spend a night
with him at any day of the week. Respondent likewise stated in his motion that he had already
filed a Petition to cite petitioner in contempt which was raffled off to the Regional Trial
Court, Branch 59 of Makati City.8

Respondent’s Urgent Motion for Issuance of Writ of Execution was scheduled to be heard on
8 April 2005. Notice thereof was received by petitioner’s counsel on 5 April 2005.9 On 7
April 2005, petitioner’s counsel filed a Manifestation10 requesting that the hearing on said
motion be reset, as he had to be in Balanga, Bataan on the date and time of the scheduled
hearing. He also prayed that he be given a period of seven days within which to file his
Comment/Opposition to respondent’s Urgent Motion for Issuance of Writ of Execution.

Despite petitioner’s Manifestation, the trial court still proceeded to hear respondent’s urgent
motion on 8 April 2005 and issued the Writ of Execution prayed for by respondent.11

On 9 April 2005, the court sheriff together with respondent tried to serve the Writ of
Execution upon petitioner at her residence in Taguig City. Petitioner’s mother informed the
sheriff and respondent that petitioner was then at her office. The sheriff then asked
petitioner’s mother to inform petitioner about the service of the Writ of Execution. After
about half an hour, petitioner, her father, and her lawyer Atty. Jorge Manuel arrived. Atty.
Manuel received the copy of the Writ of Execution but informed the court sheriff that they
would not comply with the court’s order and would challenge the writ.12

As expected, petitioner filed a Motion to Quash Writ of Execution13 insisting that said writ
was issued with "indecent haste" violative of her right to due process, and that the writ varied
the terms of the Compromise Agreement since it failed to take into consideration the parties’
understanding that in the enjoyment of respondent’s visitorial rights, petitioner "shall have
the right to designate any person of suitable age to accompany the child."14

On 15 April 2005, petitioner’s Motion to Quash Writ of Execution was heard. What
transpired during the hearing was summarized by the trial court in its Order given in open
court as follows:

The Court heard the arguments raised by the counsel for the [herein petitioner] and the
reply/comment thereto made by the counsel for the [herein respondent]. The [herein
petitioner] thru counsel imposed certain conditions if ever the visitorial rights of the [herein
respondent] would be granted. Though [herein petitioners] wished that those conditions be
contained in an affidavit, which to the mind of the court would only delay the resolution of
the motion, the court thereupon ordered that the statement of the petitioner be made orally but
under oath, thus, [herein respondent] was placed in the witness stand.

Thereafter, the court ruled to deny the motion to quash the writ of execution filed by [herein
petitioner] thru counsel for lack of merit and grant the prayer of the [herein respondent] that
he be allowed to exercise his visitorial rights over the minor LUIS MAXWELL VIESCA
today under the conditions imposed by the [herein petitioner], some of which are contained in
the compromise agreement to which [herein respondent] promised under oath to obey the
same (sic).

WHEREFORE, let the [herein respondent] DAVID GILINSKY exercise his visitorial rights
over the minor LUIS MAXWELL VIESCA on the following conditions, to wit:
 1. [Herein respondent] shall surrender to the court his passport everytime he is with
his child; and

2. [Herein respondent] shall not secure/apply another passport (sic) for his son LUIS
MAXWELL; and

3. [Herein petitioner] shall exercise her right to designate any person of suitable age to
accompany the child whenever [herein respondent] would exercise his visitorial right.

[Herein Petitioner] is commanded to bring the minor child LUIS MAXWELL VIESCA to
court not later than 3:00 o’clock this afternoon, to be pick-up (sic) by the [herein private
respondent], upon the service of his order to the [herein petitioner] by the sheriff of this court.

Failure of the [herein petitioner] to comply with this order shall be a ground for contempt of
this court AND SHALL BE DEALTH WITH SEVERELY.15

In addition, petitioner alleges that in the course of argument between the parties during this
hearing, Judge Rebecca Mariano was not able to contain her bias against petitioner when she
reproved the latter’s "stubborn refusal"16 to comply with the Compromise Judgment.
Believing that Judge Mariano had shown her partiality in favor of respondent, petitioner’s
counsel moved in open court for her inhibition.17 To this, Judge Mariano remarked:

COURT

ALRIGHT, before I inhibit myself, the MOTION TO QUASH is DENIED and my position
granting visitorial rights of the child is GRANTED.18

Subsequently, respondent filed a Manifestation with Motion to Withdraw Motion for

Temporary Relief of Support dated 25 April 200519 to which petitioner filed her
Comment20 as ordered by the trial court. In their pleadings, the parties presented disparate
accounts of what transpired after the hearing on 15 April 2005.

According to respondent –

3. At 3:00 o’clock p.m. of said afternoon, [herein respondent], together with undersigned
counsel, promptly went to the court to await the arrival of his son, Louis Maxwell.

4. At or about 4:00 o’clock, This Court’s sheriff informed undersigned counsel that he had
just served a copy of the order upon the adverse counsel.

5. Undersigned counsel immediately conferred with Atty. E. Perez, [herein petitioner’s]

counsel, to arrange the implementation of the above-quoted Order. Atty. Perez informed
undersigned of his client’s inability to comply with the 3:00 o’clock mandate given that the
Order was served to her only at 3:25 p.m., to which the undersigned counsel responded by
saying that [herein petitioner] could still have Louis Maxwell brought to court even after the
designated time.

6. Despite the clear and unequivocal tenor of This Court’s Order, Atty. Perez informed the
undersigned counsel that since [herein petitioner] was still at work, his client could only bring
the child at the lobby of Shangri-la hotel, Makati, at around 8:00 o’clock p.m. of that day.
Undersigned counsel immediately rejected the proposed arrangement for the same does not
only run counter to the express mandate of This Court’s Order but more importantly would
deprive [respondent] of spending quality time with his son – the raisaon d’etre of the
stipulation in the Compromise Agreement providing an overnight stay. Undersigned counsel,
moreover, explained that 8:00 o’clock p.m. is unreasonable and oppressive, not for [herein
respondent] but more for the child, as the proposed time is the expected bedtime of three-year
olds.

The adverse counsel, however, remained insistent that the child could only be brought by the
[herein petitioner] at 8:00 o’clock p.m. and intimated that since the court order came as a
"surprise" and was served at past 3:00 p.m., [herein respondent] should not expect [herein
petitioner] to alter her schedule at such short notice.

The undersigned counsel finally relented to the 8:00 o’clock arrangement as it was clear that
the adverse counsel and [herein petitioner]

was (sic) unaffected by [herein respondent’s] earnest desire to spend quality time with his
son.

7. Albeit the representation [herein petitioner’s] counsel that his client committed to bring the
child at 8:00 o’clock at Shangri-la, Makati, [herein petitioner] arrived at past 9:00 o’clock
p.m. [Herein petitioner] not only brought the child but likewise brought with her the child’s
grandmother (herein petitioner’s mother) and several of her friends. And instead of allowing
only one person to act as guardian over Louis Maxwell, [herein petitioner] insisted on having
both herself and her mother accompany Louis during his overnight stay with [herein
respondent]. [Herein respondent] had no choice but to accede to such demand lest he be
deprived once more of the enjoyment of his right.

xxxx

10. Furthermore, [herein petitioner] arrived at past 9 o’clock p.m. despite her undertaking that
she will bring the child to [herein respondent] at 8 o’clock p.m.; [herein petitioner] also
imposed on two guardians: herself and her mother, instead of only one guardian, as provided
in the Compromise Judgment; The child was not allowed by [herein petitioner] to sleep in
[herein respondent’s] room and was made to sleep in her separate room with her mother;
finally, on the argument that overnight stay simply means sleeping over, [herein petitioner]
left with Louis and her mother at 6 o’clock in the morning of 16 April 2005.21

On the other hand, petitioner countered –

"4. It is clear therefore that there was nothing in the oral argument nor in the Order given in
open court that the child was supposed to be brought to Court at 3:00 p.m. that same day to
accommodate [herein respondent’s] request for visitorial rights. Neither is there mention of
the specific time in the Compromise Judgment. It appears that it was [herein respondent] who
had prior notice or advanced information as to the contents of the Order from his
Manifestation that –

"3. At 3:00 o’clock p.m. of said afternoon, [herein respondent], together with undersigned
counsel, promptly went to the court to await the arrival of his son, Louis Maxwell."
"5. Undersigned counsel received a copy of the Order dated 15 April 2005 only at 4:15 p.m.
of that same day, hence, it was impossible for [herein petitioner] to comply with Order
commanding her to bring the child "to court not later than 3:00 o’clock this afternoon." Be
that as it may, counsel immediately got in touch with [herein petitioner] to advise her to
comply with the Order but [herein petitioner] stated she could not leave her office
immediately because of prior commitment and instead suggested that she would bring the
child to [herein respondent] Shangrila Hotel resident in the evening. Hereon counsel relayed
the information/suggestion to [herein respondent’s] counsel and after a series of calls, an
arrangement was made for the evening. What actually happened that evening, the parties had
different accounts.

6. [Herein petitioner] maintains that –

a. She arrived late at little past 9:00 o’clock because of heavy traffic. It was a Friday,
pay day and last day for income tax payment.

b. [Herein respondent] conveniently failed to mention that when [herein petitioner]

arrived with the child Louis Maxwell at the hotel lobby, they were met by [herein
respondent] together with three (3) Manulife insurance agents and a physician.
[Herein respondent] and the insurance men tried almost to coercion to convince
[herein petitioner] to agree that the child be subjected to medical examination that
night so that [herein respondent] could secure a multimillion insurance policy for the
child with David Gilinsky as the sole beneficiary. [Herein petitioner] naturally did not
agree. [Herein petitioner] does not want to speculate but the circumstances, time and
manner of taking the policy appears to be dubious. The fact remains that whatever
desire of [herein respondent] to spend quality time with the child was clouded when
he allowed these insurance men to get in the way when they should not be there in the
first place.22

On 26 April 2005, petitioner filed an "Ex-Parte Reiterative Motion to Inhibit" claiming that
Judge Mariano could no longer handle the case "with the cold neutrality of an impartial
judge"23 because of her statement pertaining to petitioner’s failure to abide by the
Compromise Judgment. Respondent filed his opposition thereto, arguing that Judge
Mariano’s remark was merely based on her observation of petitioner’s behavior and attitude
during the proceedings of this case.24

On 17 May 2005, respondent once more filed a Motion for the Issuance of a Writ of
Execution, contending that petitioner had repeatedly failed to comply with their agreement as
regards his visitorial rights over Louis Maxwell. Respondent claimed that petitioner relied on
the fact that as the Compromise Judgment did not state the time when Louis Maxwell should
be in his company, she had insisted on an 8:00 o’clock p.m. to 6:00 o’clock a.m. schedule.
Respondent also lamented petitioner’s habit of reneging, at the last minute, on their
agreements over Louis Maxwell’s weekend visits with him and petitioner’s insistence that
two guardians accompany Louis Maxwell during his overnight stays.25 Thus, respondent
prayed for the following:

a. To command [herein petitioner] to bring the child to either This Court or to the
[herein respondent’s] residence not later than 3:00 p.m. of 20 May 2005 and for the
child to be allowed to leave the company of the [herein respondent] at 4:00 p.m. of 21
May 2005; and
 b. To direct the [herein petitioner] pay (sic) the amount of ₱295,000.00, as and by
way of attorney’s fees.

Other relief just and equitable under the circumstances are likewise prayed for.26

In her Comment,27 petitioner asserted that Judge Mariano should no longer rule on
respondent’s motion, since there was a pending motion for her to inhibit. She likewise took
the opportunity to refute respondent’s allegations with regard to her purported failure to
observe the terms of the Compromise Judgment. Petitioner claimed that on 14 May 2005,
Louis Maxwell fell sick and so she was unable to bring him to private respondent. In fact,
petitioner’s counsel even sent a letter dated 16 May 2005 to respondent’s lawyer explaining
her "version of the story."28 She also posed objection to respondent’s plea that Louis Maxwell
be brought either to the trial court or to him since the child was still sick, and taking him out
of the house would only worsen his condition. Moreover, petitioner argued that to grant
respondent’s prayer would contravene the provisions of the Compromise Judgment under
which his entitlement to the company of his son every weekend is a separate and distinct term
from his right to spend a night with the child. She also claimed that as agreed upon,
respondent should be the one to pick up the child and to return him to her. Finally, petitioner
assailed respondent’s prayer for attorney’s fees for lack of basis.

Meanwhile, Judge Mariano issued an Order dated 16 May 2005, directing the parties to
attend an in-chamber conference on 20 May 2005 relative to respondent’s Motion to
Withdraw Support and petitioner’s Ex-Parte Reiterative Motion to Inhibit.29

In respondent’s Comment to the present Petition, it is claimed that the following terms were
agreed upon by the parties during the in-chamber conference held on 20 May 2005:

a. The respective counsels of each party will meet on 26 May 2005 to agree on the
time frame for the sleepover provision;

b. Pending the conclusion of the agreement, the child will be fetched from the
Petitioner’s residence at 6 o’clock p.m. and will be brought back at 9 o’clock a.m. the
following day, effective May 20-21 and May 27-28.

c. Private Respondent is to surrender his passport during these visits.

d. Petitioner’s mother will act as the designated guardian; and

e. The withdrawal of the parties’ respective motions, i.e., Petitioner’s Reiterative

Motion to Inhibit and Motion to Withdraw Support.30

The 20-21 May 2005 sleepover proceeded as scheduled.31 However, discord between the
parties resurfaced when respondent was unable to spend time with Louis Maxwell on 27-28
May 2005. It appears that petitioner’s mother, who was the designated accompanying
guardian, got sick and because of this, respondent did not enjoy the company of his son. Once
more, respondent sought the trial court’s intervention through his Very Urgent Motion to
Enforce and Enjoy Visitorial Rights dated 30 May 2005.32 Respondent averred therein that on
27 May 2005, he sent his driver to fetch Louis Maxwell and his maternal grandmother
pursuant to the agreement forged on 20 May 2005. When his driver reached petitioner’s
residence, he was informed that Louis Maxwell and his grandmother could not go with him,
as the grandmother was allegedly sick. Respondent claimed that Louis Maxwell’s
grandmother was merely feigning sickness since she refused his offer to get medical help.
Besides, had petitioner really intended to abide by their agreement, respondent argued that
she could have appointed one of her brothers or her sister to accompany Louis Maxwell
during his sleepover. Thus, respondent concluded that the totality of petitioner's conduct
unmasked her lack of interest in observing the Compromise Judgment, particularly Clause II
thereof. He therefore prayed for the following reliefs:

a) To allow (him) to have the company of his son on Wednesday, June 1, 2005,
beginning 6:00 p.m. up to 9:00 a.m. of the following day. For this purpose, for this
Court to further allow (him) to fetch his son at [herein petitioner’s] residence and
bring him back at [herein petitioner’s] abode not later than 9:00 a.m. of the following
day.

b) To designate the hours of 6:00 p.m. of any given Friday to 9:00 a.m. of the
following day, as the regular day and hours at which the [herein respondent] can
enjoy the company of his son pursuant to Clause II of the Compromise Judgment
dated May 12, 2004.

c) To designate the Court Sheriff and/or any other court officer to act as the
accompanying guardian of Louis Maxwell Viesca Gilinsky during the implementation
of the prayed for relief under paragraph (a) hereof and of the sleep-over provision
mentioned in Clause II of the Compromise Judgment.

d) To command [herein petitioner] to pay the amount of Thirty Thousand Pesos

(₱30,000.00), as and by way of cost of litigation, attorney’s fees and other expenses
pursuant to Clause V of the Compromise Judgment.

Just and equitable reliefs prayed for under the circumstances.33

Respondent requested that his Very Urgent Motion to Enforce and Enjoy Visitorial Rights be
heard on 1 June 2005 notwithstanding the three-day notice rule required under the Revised
Rules of Civil Procedure, as he was about to go on a two-week business trip on 3 June 2005.

Petitioner posed her objection to respondent’s motion, as it violated the three-day notice rule.
She also denied that the 27 May 2005 incident was her fault as her mother was really not
feeling well that day. She denounced respondent’s fixation over the cancellation of Louis
Maxwell’s sleepover that night, in total disregard of the fact that the 20 May 2005 scheduled
sleepover pushed through as agreed upon. She claimed that she did not have any reason to
deprive respondent of his rights under the Compromise Judgment, and so there was no need
for respondent to file his Very Urgent Motion to Enforce and Enjoy Visitorial Rights.34

On 1 June 2005, Judge Mariano rendered the following Order:

ORDER

Set for today’s hearing is the Very Urgent Motion to Enforce and Enjoy Visitorial Rights
filed by the [herein respondent] and the Comment thereto filed by the [herein petitioner]. The
Court heard the arguments between the parties accusing each other of violation of the
compromise agreement.
The [herein respondent] wanted to present testimonial evidence to prove his allegation in the
motion but which was denied by the Court for lack of material time.

The Court likewise reminded the parties the fact that the [herein respondent] surrenders his
passport everytime he exercises his visitorial right was voluntary on his part and not as part of
the compromise agreement.

WHEREFORE, the court ruled that the [herein respondent] can exercise his visitorial right
today at 6:00 o’clock in the evening to be accompanied by the sheriff of this court. If the
[herein petitioner] is not available nor the grandmother to accompany the minor child, the
court instructed the [herein petitioner] to appoint another person who can accompany the
child so as not to avoid any delay in fetching the minor child. Likewise the motion was reset
to July 1, 2005, at 10:30 o’clock in the morning.

Considering that the very urgent motion filed by the [herein respondent] was commented or
objected to by the [herein petitioner’s] counsel, let the [herein respondent], thru counsel file a
reply within five (5) days from receipt of this Order and the [herein petitioner] is given the
same period of time from receipt of the reply within which to file a rejoinder, if she so
desires.

SO ORDERED.

n 16 June 2005, Judge Mariano proceeded to resolve respondent’s very urgent motion in the
following manner:

ORDER

Before the Court is the Very Urgent Motion to Enforce and Enjoy Visitorial Rights filed by
the [herein respondent] thru counsel, alleging among others, that [herein petitioner] had once
again proven herself to be unfaithful to her promises and representations, citing the incident
which happened on 27 May 2005, the scheduled meeting of the [herein respondent] and his
son. On the said date, [herein petitioner’s] grandmother (sic) became sick, however, the latter
refused the offer of the petitioner to get medical help. Said alleged illness became more
doubtful when the grandmother insisted on being well enough to push through with the
visitation but at 9:00 o’clock in the evening instead of 6:00 o’clock in the evening, as
previously agreed upon by the parties.

On the Comment filed by the [herein petitioner], she stated that the present motion should be
denied because it violates the three-day notice rule and there is no good cause to set the
hearing on shorter notice.

We shall now rule on the motion.

Under Section 4, Rule 15 of the Revised Rules of Court and following the pronouncements
by the High Court in the cases of Cledera, et al. vs. Sarmiento, et al 39 SCRA 552; Estipora
vs. Navarro, 69 SCRA 285, the motion under consideration should have been dismissed
ourtright, however, the above-cited provision or the so-called three-day notice rule is not
absolute. Like any other rule, it admits of exception, i.e. urgent motions (Remedial Law
Compendium, Vol. 1, Regalado). Moreover, in the interest of substantial justice, this Court
finds it imperative and necessary to brush-aside any technicality since the issue involved
herein is basically the natural right of a father to enjoy the company and presence of his
beloved son. To the mind of the Court, the best and most applicable law in cases of this
nature is the conscience of untroubled and unprejudiced majesty. Finally, the right of custody
accorded to parents’ springs from the exercise of parental authority (Santos Sr. vs. Court of
Appeals, 242 SCRA 407). Hence, the motion under consideration is hereby given due course.

Accordingly, [herein petitioner] is ordered to perform the following, to wit:

1. Allow [herein respondent] to enjoy the company of Louis Maxwell on 24 June

2005 and on every Friday of each week starting from 6:00 pm to 9:00 am of the
following day, pursuant to Clause II of the compromise Judgment dated 12 May 2004;

2. The Deputy Sheriff of this court is hereby designated to act as the accompanying
guardian of Louis Maxwell Viesca Gilinsky during the implementation of the prayed
for relief under paragraph 1 hereof;

3. Pay the [herein respondent] the amount of Thirty-Thousand Pesos (Php 30,000.00),
as and by way of cost of litigation, attorney’s fees and other expenses pursuant to
Clause V of the Compromise Agreement.

As regards the prayer under paragraph (a) of the motion, the same is denied for being moot
and academic.

SO ORDERED.

Given in Chambers this 16th June 2005, Makati City.

REBECCA R. MARIANO Judge36

During the hearing on 1 July 2005, it was clarified that the Deputy Sheriff would act as
accompanying guardian of Louis Maxwell only in case of the unavailability of petitioner or
her failure to designate the child’s overnight companion.37

Aggrieved, petitioner elevated the case via Petition for Certiorari and Prohibition before the
Court of Appeals seeking the reversal and setting aside of the 16 June 2005 Order of the trial
court as well as its Orders dated 1 June 2005 and 8 April 2005.38

In her petition with the Court of Appeals, petitioner contended that the assailed Order dated
16 June 2005 altered or amended the Compromise Judgment. She asserted that by approving
respondent’s prayer that he be given the right to enjoy Louis Maxwell’s company "every
Friday of each week starting from 6:00 p.m. to 9:00 a.m. of the following day," Judge
Mariano altered Clause II(b) of the Compromise Judgment which states that "(t)he child shall
be allowed to spend the night with the father once a week." As the Compromise Judgment did
not specifically provide for the day and time of the week when Louis Maxwell should be in
the company of respondent, the trial court exceeded its jurisdiction when it rendered its 16
June 2005 Order. In addition, she contends that by designating the Deputy Sheriff of the court
to act as the accompanying guardian of the child during the latter’s sleepovers, the trial court
again disregarded the terms of the Compromise Judgment with respect to the appointment of
Louis Maxwell’s guardian whenever he visits with respondent. These alterations, petitioner
argues, should not be permitted since a compromise agreement, once it was approved by the
court, has the force of res judicata between the parties and should not be disturbed except for
vices of consent or forgery.39 The court is not allowed to impose a judgment different from
the terms of the agreement.40

Petitioner also insisted that Judge Mariano should desist from further hearing the case below.

On 19 October 2005, the Court of Appeals partially granted the petition by deleting the award
of ₱30,000.00 that the trial court awarded to private respondent in its Order of 16 June 2005.
The dispositive portion of the Decision of the Court of Appeals states:

WHEREFORE, the petition is PARTIALLY GRANTED in that the Order dated June 16,
2005 is MODIFIED. The award of Thirty Thousand Pesos (Php30,000.00), as and by way of
litigation cost, attorney’s fees and other expenses pursuant to clause V of the Compromise
Judgment in favor of private respondent is DELETED.41

Petitioner’s Motion for Reconsideration was denied in the Resolution promulgated on 24

February 2006.42

Hence, the present recourse raising the following issues for our consideration:

WITH ALL DUE RESPECT, THE COURT OF APPEALS ERRED IN DECIDING A

QUESTION OF LAW, NOT THERETOFORE DETERMINED BY THIS HONORABLE
COURT, AND/OR DECIDING IT IN A WAY NOT IN ACCORD WITH LAW OR WITH
APPLICABLE DECISIONS OF THIS HONORABLE COURT CONSIDERING THAT-

A. THE TRIAL COURT AMENDED OR ALTERED THE TERMS OF THE

COMPROMISE JUDGMENT WITHOUT THE CONCURRENCE OF BOTH
PARTIES THERETO.

B. RESPONDENT JUDGE ISSUED THE ASSAILED ORDER AMENDING THE

COMPROMISE JUDGMENT IN HASTE AND WITHOUT EVIDENTIARY
SUPPORT AS IT WAS ISSUED WITHOUT WAITING FOR THE SCHEDULED
HEARING OF THE MOTION FILED BY PRIVATE RESPONDENT AND
DESPITE THE PENDING MOTION TO INHIBIT.43

The petition is partly meritorious.

A compromise agreement has been described as a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end to one already commenced.44 A
compromise agreement that is intended to resolve a matter already under litigation is
normally called a judicial compromise. Once it is stamped with judicial imprimatur, it
becomes more than a mere contract binding upon the parties. Having the sanction of the court
and entered as its determination of the controversy, it has the force and effect of any other
judgment.45 Such agreement 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, for it becomes
a judgment that is subject to execution in accordance with the Rules.46 Thus, a compromise
agreement that has been made and duly approved by the court attains the effect and authority
of res judicata, although no execution may be issued unless the agreement receives the
approval of the court where the litigation is pending and compliance with the terms of the
agreement is decreed.47
The settlement of disputes brought before the courts is encouraged. In fact, in the Civil Code
and in the Revised Rules of Court, courts are directed to persuade the litigants in civil cases
to agree upon some fair compromise.48

Unfortunately in the case before us, the compromise agreement entered into between the
parties fell way short of its objective of finally putting an end to their dispute. The sheer
number of incidents which cropped up shortly after the trial court’s approval of the
compromise agreement reveals that the compromise judgment failed to bring peace to the
parties. Interestingly enough, the only points of disagreement are Clause II(b) of the
Compromise Judgment which pertains to the overnight visits of Louis Maxwell with
respondent and the last paragraph of the same clause regarding the appointment of the child’s
accompanying guardian.

Clause II(b) states that "(t)he child shall be allowed to spend the night with the father once a
week." The sentence seems simple enough to be understood by a layman. Petitioner claims
that the parties did not specify the day and time of the week when private respondent could
enjoy the overnight company of Louis Maxwell in order to give the parties "some flexibility"
and to give them the opportunity to arrange the schedule themselves.49 But the parties have
overstretched the indeterminate language of said provision. Indeed, the parties have been at
odds over the interpretation and implementation of this plain provision of the Compromise
Judgment and this could have caused much confusion in the mind of the young Louis
Maxwell who had to be brought from one place to another at such unholy hours of the night
only to be awakened from deep slumber in the early hours of the morning to be taken to
another place. And yet, all of these could have been avoided had the parties opted to be more
specific in their agreement. The question thus becomes: can the trial court modify, by motion
of one of the parties, a Compromise Judgment? We hold in the negative.

To reiterate, a compromise judgment has the force of res judicata between the parties and
should not be disturbed except for vices of consent or forgery50 which private respondent
does not allege in this case.

More importantly and as correctly pointed out by petitioner, it is settled that neither the courts
nor quasi-judicial bodies can impose upon the parties a judgment different from their
compromise agreement or against the very terms and conditions of their agreement51 without
contravening the universally established principle that a contract is the law between the
parties.52 The courts can only approve the agreement of parties. They can not make a contract
for them.53

Nevertheless, we cannot totally blame the trial court for having granted respondent’s Very
Urgent Motion to Enforce and Enjoy Visitorial Rights. Perhaps, in its desire to finally put to
rest the bothersome issue concerning Clause II(b) of the Compromise Judgment and to
prevent future disagreements between the parties, the trial court saw the wisdom, as this
Court does, in providing the specifics in the said indefinite portion of the Compromise
Judgment. As we previously held in the case of Hernandez v. Colayco54 –

This is not the first unfortunate instance that a compromise judgment of a trial court has given
rise to subsequent prolonged controversy, only because the trial judge failed to exercise the
required degree of care in seeing to it that neither ambiguity nor incompleteness of details
should characterize the agreement, much less the judgment rendered on the basis thereof. The
expressed desire of the parties to end their judicial travails by submitting to a compromise
deserves the utmost attention from the court, and no effort should be spared in helping them
arrive at a definite and unequivocal termination of their problems and differences. It is high
time that the matter-of-fact treatment usually accorded by trial courts to motions to approve
compromises were abandoned in favor of the more positive activist attitude the situation
demands. In acting in such a situation, the judge should bear in mind that the objective is to
end the disagreement between the parties, not to begin a new one. Thus, if the parties and
their counsel are unable to do it, the judge is expected to assist them in attaining
precision and accuracy of language that would more or less make it certain that any
disputes as to the matters being settled would not recur, much less give rise to a new
controversy. (Emphasis supplied.)

Resultantly, a remand of this case is necessary to allow the parties themselves to resolve the
matter regarding the implementation of Clause II(b) of the Compromise Judgment. In this
regard, the rule on immutability for purposes of execution does not attach to a judgment that
is materially equivocal or which suffers from either patent or latent ambiguity.55 To obviate
further discord between them and to preclude their recourse to the trial court every time one
of them perceives a violation committed by the other of Clause II(b) of the Compromise
Judgment, we direct the trial court to be on guard and ensure that the parties would lay out in
concrete, specific details the terms of their agreement as to this specific matter as well of the
appointment of Louis Maxwell’s accompanying guardian.

Turning now to the question of whether Judge Mariano should inhibit herself from the case,
we rule in favor of respondent.

The pertinent provision of Rule 137, Section 1, of the Revised Rules of Court states:

SECTION 1. Disqualification of judges. – No judge or judicial officer shall sit in any case in
which he, or his wife or child, is pecuniarily interested as heir, legatee, creditor or otherwise,
or in which he is related to either party within the sixth degree of consanguinity or affinity, or
to counsel within the fourth degree, computed according to the rules of the civil law, or in
which he has been executor, administrator, guardian, trustee or counsel, or in which he has
presided in any inferior court when his ruling or decision is the subject of review, without the
written consent of all parties in interest, signed by them and entered upon the record.

A judge may, in the exercise of his sound discretion disqualify himself from sitting in a case,
for just or valid reasons other than those mentioned above. (Emphasis supplied).

This Court has ruled that to disqualify or not to disqualify is a matter of conscience and is
addressed primarily to the sense of fairness and justice of the judge concerned.56 Said
discretion is granted to judges, since they are in the better position to determine the issue of
voluntary inhibition, as they are the ones who directly deal with the parties in their
courtrooms.57 The test that must be applied in questions involving the propriety of the denial
of a motion to inhibit is whether the movant was deprived of a fair and impartial trial.58 In
this case, we hold that petitioner was not deprived of her day in court, for she was able to file
her comments on and/or objections to the motions filed by private respondent. She, therefore,
was able to ventilate her positions on the issues brought before the trial court.

As regards Judge Mariano’s remark regarding petitioner’s obstinacy, we agree with private
respondent that the same is not a sufficient ground for public respondent to inhibit herself.
Indeed, "(o)pinions formed in the course of judicial proceedings, as long as they are based on
the evidence presented and conduct observed by the judge, even if found later on to be
erroneous, do not prove personal bias or prejudice on the part of the judge."59 Moreover, a
single comment uttered by the public respondent in the course of the proceedings should not
be taken to be generally illustrative of her conduct in hearing and determining the outcome of
the entire case. Such isolated remark should not be taken to mean that public respondent has
crossed the line separating cold impartiality from unbridled bias.

WHEREFORE, premises considered, the present Petition is PARTIALLY GRANTED.

The Decision of the Court of Appeals in CA-G.R. SP No. 90285 dated 19 October 2005, is
hereby REVERSED and SET ASIDE insofar as it affirmed the Order dated 16 June 2005 of
the RTC, Branch 136, Makati City in SP Proc. Case No. M-5785, amending Clause II(b) of
the Compromise Judgment and the last paragraph of Clause II. Petitioner’s prayer, however,
that Judge Rebecca Mariano of the RTC, Branch 136, Makati City, be directed to inhibit
herself from hearing said case is DENIED.

Judge Mariano is ordered to hold further proceedings to allow the parties to agree
SPECIFICALLY and DEFINITIVELY on how the overnight visits of Louis Maxwell with
respondent and the appointment of said child’s accompanying guardian would be
implemented within ten (10) days from receipt hereof. No costs.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

FIRST DIVISION

[G.R. No. 74461. May 12, 1989.]

JUAN ASONG, Petitioner, v. THE HONORABLE INTERMEDIATE APPELLATE

COURT, ALBARO ALBANO, JR. and SEVERINO BANASIG, Respondents.

Citizens Legal Assistance Office for Petitioner.

Gellada, Dullano & Gellada for Private Respondents.

SYLLABUS
1. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT BY THE TRIAL COURT,
GENERALLY ENTITLED TO GREAT WEIGHT ON APPEAL. — Conclusions and
findings of fact by the trial court are entitled to great weight on appeal and should not be
disturbed unless for strong and cogent reasons because the trial court is in a better position to
examine real evidence, as well as to observe the demeanor of the witnesses while testifying in
the case (Chase v. Buencamino, Sr., L-20395, May 13, 1985; 136 SCRA 365).

2. ID.; ID.; ID.; PRINCIPLE APPLIED TO CASE AT BAR. — We find no convincing

reasons in the instant case to depart from this rule. The evidence on record shows that Asong
was fully apprised of the legal consequences arising from the amicable settlement. Aside
from his lawyer, Atty. Joelito Barrera who represented him in the Municipal Court, a friend
of Atty. Barrera, Atty. Rex Salas who accidentally interrupted Barrera’s meeting with Asong
and Banasig regarding the amicable settlement at the former’s law office and Municipal
Judge Albaro Albano before whom the amicable settlement was submitted, explained the
terms thereof to Asong in the Hiligaynon dialect. We fail to find any tinge of bias or improper
motive on their part to testify against Asong. On the other hand, Asong’s vehement denial
unsupported by any contrary evidence cannot rebut the positive testimonies of the aforesaid
witnesses.

3. ID.; CIVIL ACTIONS; COMPROMISE AGREEMENT; NOT VOIDED BY MERE

FACT THAT ONLY ONE PARTY WAS BENEFITED THEREBY. — It is a general rule in
this country that compromise are to be favored, without regard to the nature of the
controversy compromised, and that they cannot be set aside because the event shows all the
gain to have been on one side, and all the sacrifice on the other, if the parties have acted in
good faith, and with a belief of the actual existence of the rights which they have respectively
waived or abandoned (Berg v. National City Bank of New York, supra.)

4. ID.; ID.; ID.; DEFINITION. — A compromise is a contract whereby the parties by making
reciprocal concessions avoid the litigation or put an end to one already commenced (Art.
2028, Civil Code; Republic v. Caray, L-21416, December 31, 1965)

DECISION

MEDIALDEA, J.:

This is a petition for review under Rule 45 of the Rules of Court of the decision of the
Intermediate Appellate Court (now Court of Appeals), dated March 31, 1986 in AC G.R. CV.
No. 63215 entitled "Juan Asong, Plaintiff-Appellant, v. Albaro Albano, Jr., and Severino
Banasig, defendants-appellees" which affirmed the judgment of the Court of First Instance
(now Regional Trial Court) of Iloilo.

The antecedent facts are as follows:chanrob1es virtual 1aw library

On October 8, 1973, Severino Banasig (Banasig, for short) filed a case for forcible entry and
damages against Juan Asong (Asong, for short) with the Municipal Court (now Municipal
Circuit Trial Court) of Barotac Viejo, Iloilo, presided over by respondent Judge Albaro
Albano, Jr., (p. 23, Records). Banasig alleged, inter alia, that he is the owner and the
possessor of a parcel of land (Lot No. 14) covered by Tax Declaration No. 13635 which is
situated at Barotac Viejo, Iloilo; that on September 27, 1973, Asong, by means of force and
intimidation, took possession of one and a half hectares on the eastern portion thereof.

On December 4, 1973, the parties submitted to the Municipal Court an amicable settlement,
as follows:jgc:chanrobles.com.ph

"1. That the defendant recognizes the ownership and possession of the plaintiff over Lot Nos.
2925 and 2654 of the Barotac Viejo Cadastre, Case 3;

2. The plaintiff recognizes that the boundary of the two (2) aforementioned lots which are his,
in relation to the adjoining land of the defendant starts from a point on the ‘Iniam’ tree on the
northern side going across another ‘Iniam’ tree on the other end;

3. Parties agree for dismissal of their claim and counterclaim on damages." (Exhibit "C", p. 5,
Records)

On December 5, 1973, the Municipal Court approved the amicable settlement and rendered
judgment based thereon (Exhibit "D", p. 6, Records).

On March 6, 1975, Asong filed a complaint before the Court of First Instance (now Regional
Trial Court), Branch 4, at Iloilo City, against Judge Albaro Albano, Jr. and Banasig for
recovery of ownership and annulment of amicable settlement and judgment. He averred, inter
alia, that he is illiterate; that as such, he did not understand the contents of the amicable
settlement; that he had no intention of giving up his right over Lot Nos. 2925 and 2654 but
only with respect to Lot 2653; and that he discovered the defective agreement only on
November 26, 1974 when he was cited for contempt by Judge Albano, Jr. for his refusal to
vacate Lot Nos. 2925 and 2654.

On August 6, 1977, the Court of First Instance rendered a decision, the dispositive portion of
which reads:jgc:chanrobles.com.ph

"Wherefore, judgment is rendered in favor of the defendant Severino Banasig and against the
plaintiff Juan Asong, hereby dismissing plaintiff’s complaint, and declaring the amicable
settlement (Exh.’C’ or ‘3’) to have been freely and voluntarily entered by both parties fully
cognizant of its contents and implications and that the decision rendered thereunder (Exh.’D’
or ‘4’) is valid and irrevocable and constitute a bar to the above-entitled case in so far as
possession is concerned.

"The counterclaim is dismissed.

"Costs against the plaintiff.

"SO ORDERED." (p. 70, Rollo)

After his motion for reconsideration was denied, Asong appealed to the Intermediate
Appellate Court, which, as earlier stated, subsequently affirmed the said decision. He now
comes to Us and submits only one issue to be resolved, to wit:jgc:chanrobles.com.ph
"Whether or not the amicable settlement was voluntarily and freely entered into and fully
explained to petitioner." (p. 77, Rollo)

Petitioner Asong contends that the amicable settlement should be annulled on the ground of
mistake. He asserts that he is illiterate; that he was persuaded by his lawyer to enter into an
amicable settlement with Banasig without fully informing him of the legal implications
thereof; that "the effect of the amicable settlement (was) worse than a confession of judgment
for under (it) he not only relinquishes possession but also recognizes the ownership of private
respondent over the two lots subject of the forcible entry case thus the same would constitute
a bar to a case for recovery of ownership as well." (pp. 79-80, Rollo)

In the resolution of May 14, 1986, We granted the motion of Asong to litigate as pauper. (p.
4, Rollo)

The instant petition is devoid of merit.

It is a fundamental and settled rule that conclusions and findings of fact by the trial court are
entitled to great weight on appeal and should not be disturbed unless for strong and cogent
reasons because the trial court is in a better position to examine real evidence, as well as to
observe the demeanor of the witnesses while testifying in the case (Chase v. Buencamino, Sr.,
L-20395, May 13, 1985; 136 SCRA 365). We find no convincing reasons in the instant case
to depart from this rule. The evidence on record shows that Asong was fully apprised of the
legal consequences arising from the amicable settlement. Aside from his lawyer, Atty. Joelito
Barrera who represented him in the Municipal Court, a friend of Atty. Barrera, Atty. Rex
Salas who accidentally interrupted Barrera’s meeting with Asong and Banasig regarding the
amicable settlement at the former’s law office and Municipal Judge Albaro Albano before
whom the amicable settlement was submitted, explained the terms thereof to Asong in the
Hiligaynon dialect (see pp. 29-30, TSN, November 18, 1976; pp. 21-22, TSN, September 29,
1976 and pp. 41-42, TSN, January 10, 1977, respectively). We fail to find any tinge of bias or
improper motive on their part to testify against Asong. On the other hand, Asong’s vehement
denial unsupported by any contrary evidence cannot rebut the positive testimonies of the
aforesaid witnesses.

Moreover, We are not persuaded by Asong’s argument that the amicable settlement should be
voided because he did not gain anything from it and that such agreement was worse than a
confession of judgment. The appellate court correctly ruled against Asong’s supposition, as
follows:chanrobles law library

"Plaintiff-appellant argues that the defendant-appellee ‘had the concession’ while he ‘never
gained anything but on the contrary lost the case without even a fight,’ citing Art. 2028 of the
Civil Code which provides:chanrob1es virtual 1aw library

‘A compromise is a contract whereby the parties by making reciprocal concessions avoid the
litigation or put an end to one already commenced.’

In Berg v. National City Bank of New York, supra, the Supreme Court, speaking through Mr.
Justice Felix Bautista Angelo opined:chanrob1es virtual 1aw library

‘hence, it is a general rule in this country that compromise are to be favored, without regard
to the nature of the controversy compromised, and that they cannot be set aside because the
event shows all the gain to have been on one side, and all the sacrifice on the other, if the
parties have acted in good faith, and with a belief of the actual existence of the rights which
they have respectively waived or abandoned; and if a settlement be made in regard to such
subject, free from fraud or mistake, whereby there is a surrender or satisfaction, in whole or
in part, of a claim upon one side in exchange for or in consideration of a surrender or
satisfaction of a claim in whole or in part, or of something of value upon the other, however
baseless may be the claim upon either side or harsh the terms as to either of the parties, the
other cannot successfully impeach the agreement in a court of justice . . . . (Emphasis
supplied). Where the compromise is instituted and carried through in good faith, the fact that
there was a mistake as to the law or as to the facts, except in certain cases where the mistake
was mutual and correctable as such in equity, cannot afford a basis for setting a compromise
aside or defending against a suit brought thereon . . . .’ (citing McCarthy v. Barber Steamship
Lines, 45 Phil. 488, 498-499).

Appellant further maintains that the amicable settlement was more of a confession of
judgment which was far from his mind. But, even conceding that it was a confession of
judgment, it nevertheless partook of the nature of a compromise. As held in the case of
Republic v. Caray, 21416, December 31, 1965:chanrob1es virtual 1aw library

‘A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a

litigation or put an end to one already commenced (Art. 2028, Civil Code). It is obvious that
the pleading entitled ‘Confession of Judgment’, . . . partook of the nature of a compromise,
for, in consideration of defendant’s recognition of his obligation and the Commissioner’s
willingness to allow its payment on installments, both had agreed to put an end to the
litigation, through the rendition of a judgment incorporating said stipulations.’" (pp. 20-22,
Rollo)

It is significant to note that Asong did not raise any objections to the terms of the amicable
settlement until one year and three months later. His claim that he came to know of the
defective agreement only when he was cited in contempt for his refusal to vacate the
questioned lots is dubious. It appears from the uncontradicted testimony of Banasig that he
took possession of the lots in controversy immediately after the promulgation of judgment
based on the amicable settlement; and that, thereafter, he caused the plowing of the land and
planted sugar cane thereon (p. 46, TSN, March 31, 1977). With such flurry of activities,
Asong inevitably could have learned of Banasig’s possession in no time at all-if not on his
own, then, from his neighbors in the surrounding area.

ACCORDINGLY, the decision of the Intermediate Appellate Court dated March 31, 1987 is
hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.
 THIRD DIVISION

[G.R. No. L-46953. February 29, 1988.]

JOSE N. MAYUGA, substituted by SIMONA L. MAYUGA, SYLVIA MAYUGA-

YUSON, JOSE L. MAYUGA, JR., ABELARDO MAYUGA, RAMON MAYUGA,
JOSEFINA MAYUGA-FINK, CRISTINA MAYUGA and ROBERTO MAYUGA,
MANUEL N. MAYUGA, CARMEN MAYUGA, LOURDES MAYUGA,
CONSOLACION MAYUGA, HILARIO FUSILERO, LILIA FUSILERO, and MARIA
MAYUGA VDA. DE CAILLES, AGRIPINO MAYUGA, MANUEL MAYUGA,
AURORA MAYUGA, MILAGROS M. HIPOLITO, and PURIFICACION MAYUGA,
substituted by SERAFIN CAILLES, NARCISO CAILLES, LEON CAILLES and
CARMEN C. MAYUGA, Petitioners-Appellants, v. THE COURT OF APPEALS,
MACONDRAY FARMS, INC., REALTY SALES ENTERPRISE, INC., as assignee of
MACONDRAY FARMS, INC., DOMINADOR MAYUGA, DONATO CIRIACO,
RAFAEL GREY JR., CLARO Y. SULIT, EMILIO ESTEBAN, THE LAND
REGISTRATION COMMISSIONER and THE TREASURER OF THE
PHILIPPINES, Respondents-Appellees.

SYLLABUS

1. REMEDIAL LAW; SUPREME COURT, NOT A TRIER OF FACTS; AWARD OF

DAMAGES MUST BE BASED ON A FINDING OF MALICE AND BAD FAITH. —
Realty has a mistaken concept of the nature of the interest being claimed. It is not based on
contract nor on law. More properly the interest being claimed is in the concept of damages
arising from Realty’s maliciously evading its contractual obligation. The claimed interest is
just one of three suggested bases for computing the award of damages being prayed for by
petitioners. This Court cannot award the damages prayed for. The award of damages would
have to be based on a finding of malice and bad faith which this Court cannot make as it is
not a trier of facts.

2. ID.; MOTION FOR RECONSIDERATION; DENIAL THEREOF WARRANTED;

GROUNDS. — Realty’s motion for reconsideration must likewise be denied. Firstly, the
period fixed by the Court is subsequent to the promulgation of the decision which fixes the
period. It is clearly prospective. Secondly, the facts cited by Realty as grounds for the fixing
of another period are not valid reasons for allowing Realty to further delay fulfillment of its
obligation. To grant Realty’s motion for reconsideration would run counter to the clear intent
of the parties in entering into a compromise agreement.

RESOLUTION

CORTES, J.:

Before the Court are two motions for reconsideration, one filed by petitioners Mayuga, Et.
Al. and the other by respondent Realty Sales Enterprise, Inc.
1. The Motion for Reconsideration of

Petitioners Mayuga, Et. Al.

Petitioners seek a reconsideration of the decision insofar as the same does not award damages
in their favor. It is argued that Realty had acted in bad faith and with malice in trying to
renege on the agreement. Since the purchasing power of the peso has steadily declined while
the value of the disputed property has quadrupled, it is claimed that justice and equity
demand that Realty should not be allowed to profit, but should instead be made to pay
petitioners the losses they had sustained, and the profits they failed to realize. They pray for
damages based on either: (1) the increase in the value of the property from its value in 1977,
when the compromise agreement was entered into, to its present market value; (2) the
difference in the purchasing power of the peso; or (3) legal interest (12%) computed from
1977 to the end of October 1987.

In its comment to Petitioners’ Motion, respondent Realty contends that since the compromise
has the effect and authority of res judicata, it has become conclusive between the parties and
no one can add anything to it, such as the Mayugas’ claim for interest (citing Urtula v.
Republic, L-22061, January 31, 1968, 22 SCRA 477.)

Realty has a mistaken concept of the nature of the interest being claimed. It is not based on
contract nor on law. (See Urtula v. Republic, supra.) More properly the interest being claimed
is in the concept of damages arising from Realty’s maliciously evading its contractual
obligation. The claimed interest is just one of three suggested bases for computing the award
of damages being prayed for by petitioners.

However, this Court cannot award the damages prayed for. The award of damages would
have to be based on a finding of malice and bad faith which this Court cannot make as it is
not a trier of facts.

2. The Motion for Reconsideration of Realty.

Realty contends that this Court erred in ordering it to pay petitioners P4.25M upon finality of
judgment, thereby defeating the purpose and intent of Art. 1197 of the Civil Code in allowing
the Court to fix a period which must be prospective and not retroactive, in view of the
peculiar circumstances attendant to the case at bar. It is asserted that the period fixed by the
Court was not the one contemplated by the parties when they entered into the compromise
agreement.

It must be emphasized that Realty concedes that it is liable to petitioners. What is being
sought to be considered is the period fixed by the Court. The size of the corporation, its
financial resources and the suit commenced by Carpo (See G.R. No. 67451) are the "peculiar
circumstances attendant to the case at bar" invoked as grounds for the motion for
reconsideration praying that Realty be given six (6) months from finality of the decision in
G.R. 67451 within which to pay the amount.

Realty’s motion for reconsideration must likewise be denied. Firstly, the period fixed by the
Court is subsequent to the promulgation of the decision which fixes the period. It is clearly
prospective. Secondly, the facts cited by Realty as grounds for the fixing of another period
are not valid reasons for allowing Realty to further delay fulfillment of its obligation. As
stated in the decision now subject of reconsideration:chanrob1es virtual 1aw library

It has been more than ten years since the compromise agreement was entered into. By
entering into a compromise agreement, the party-litigants could have only intended to put an
end a litigation commenced in 1959 as soon as possible and not to prolong it much longer, at
least, not for another ten years.

To grant Realty’s motion for reconsideration would run counter to the clear intent of the
parties in entering into a compromise agreement.

WHEREFORE, the Motion for Reconsideration filed by petitioners on November 5, 1987

and the Motion for Reconsideration filed by respondent Realty Sales Enterprise, Inc. on
November 10, 1987 are both DENIED. This denial is FINAL.

SO ORDERED.

Fernan (Chairman), Gutierrez, Jr., Feliciano and Bidin, JJ., concu

THIRD DIVISION

G.R. No. 119310 February 3, 1997

JULIETA V. ESGUERRA, Petitioner, v. COURT OF APPEALS and SURESTE

PROPERTIES, INC., respondents

PANGANIBAN, J.:

May a co-owner contest as unenforceable a sale of a real property listed in and sold pursuant
to the terms of a judicially-approved compromise agreement but without the knowledge of
such co-owner? Is the corporate secretary's certification of the shareholders' and directors
resolution authorizing such sale sufficient, or does the buyer need to go behind such
certification and investigate further the truth and veracity thereof?

These questions are answered by this Court as it resolves the instant petition challenging the
Decision 1 in CA-G.R. SP No. 33307 promulgated May 31, 1994 by the respondent
Court, 2 reversing the judgment of the trial court.

The Antecedent Facts

The facts as found by the respondent Court of Appeals are as follows:

On 29 June 1984, (now herein Petitioner) Julieta Esguerra filed a complaint for
administration of conjugal partnership or separation of property against her husband Vicente
Esguerra, Jr. before (the trial) court. The said complaint was later amended on 31 October
1985 impleading V. Esguerra Construction Co., Inc. (VECCI for brevity) and other family
corporations as defendants (Annex "C", p. 23, Rollo).
The parties entered into a compromise agreement which was submitted to the court.' On the
basis of the said agreement, the court on 11 January 1990 rendered two partial judgments:
one between Vicente and (herein petitioner) and the other as between the latter and VECCI
(Annex "F" and "G", pp. 26-27, Rollo). The compromise agreement between (herein
petitioner) and VECCI provides in part:

"Plaintiff Julieta V. Esguerra and defendant V. Esguerra Construction Co., Inc., as assisted by
their respective counsels, submitted to this Court on January 11, 1990 a "Joint Motion for
Partial Judgment Based on Compromise Agreement", pertinent provisions of which reads as
follows:

"1. Defendant V. Esguerra Construction Co., Inc., (VECCI) shall sell/alienate/transfer or

dispose of in any lawful and convenient manner, and under the terms and conditions recited
in the enabling resolutions of its Board of Directors and stockholders, all the following
properties:

* real estate and building located at 140 Amorsolo Street, Legaspi Village, Makati, Metro
Manila;

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

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

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

* real estate and improvements located at Kamagong Street, St. Anthony Subdivision, Cainta,
Rizal; and

* real estate and improvements located at Barangay Malaatis, San Mateo, Rizal.

2. After the above-mentioned properties shall have been sold/alienated/transferred or

disposed of and funds are realized therefrom, and after all the financial obligations of
defendant VECCI (those specified in the enabling resolutions and such other obligations
determined to be due and will become due) are completely paid and/or settled, defendant
VECCI shall cause to be paid and/or remitted to the plaintiff such amount/sum equivalent to
fifty percent (50%) of the (net) resulting balance of such funds.

By virtue of said agreement, Esguerra Bldg. I located at 140 Amorsolo St., Legaspi Village
was sold and the net proceeds distributed according to the agreement. The controversy arose
with respect to Esguerra Building II located at 104 Amorsolo St., Legaspi Village, Makati.
(Herein petitioner) started claiming one-half of the rentals of the said building which VECCI
refused. Thus, on 7 August 1990, (herein petitioner) filed a motion with respondent court
praying that VECCI be ordered to remit one-half of the rentals to her effective January 1990
until the same be sold (p. 28, id.). VECCI opposed said motion (p. 31, Rollo).

On October 30, 1990 respondent (trial) court ruled in favor of (herein petitioner) (p.
34, Rollo) which was affirmed by this court in a decision dated 17 May 1991 in CA-G.R. SP.
No. 2380. VECCI resorted to the Supreme Court which on 4 May 1992 in G.R. No. 100441
affirmed this court's decision the fallo of which reads:
"The petition is without merit. As correctly found by the respondent Court of Appeals, it can,
be deduced from the terms of the Compromise Agreement and from the nature of the action
in the court a quo that the basis of the equal division of the proceeds of any sale or disposition
of any of the subject properties is the acknowledged ownership of private respondent over
one-half of the said assets. Considering that the other building has yet to be sold, it is but
logical that pending its disposition and conformably with her one-half interest therein, private
respondent should be entitled to half of its rentals which forms part of her share in the fruits
of the assets. To accord a different interpretation of the Compromise Agreement would be
prejudicial to the established rights of private respondent." (p. 36, Rollo).

Meanwhile, Esguerra Bldg. II was sold to (herein private respondent Sureste Properties. Inc.)
for P150,000,000.00 (sic). On 17 June 1993, (Julieta V. Esguerra) filed a motion seeking the
nullification of the sale before respondent (trial) court on the ground that VECCI is not the
lawful and absolute owner thereof and that she has not been notified nor consulted as to the
terms and conditions of the sale (p. 37, Rollo).

Not being a party to the civil case, (private respondent Sureste) on 23 June 1993 filed a
Manifestation concerning (herein petitioner's) motion to declare the sale void ab initio. In its
Manifestation (Sureste) points out that in the compromise agreement executed by VECCI and
(Julieta V. Esguerra), she gave her express consent to the sale of the said building (p.
38, Rollo).

On 05 August 1993, respondent judge (who took over the case from Judge Buenaventura
Guerrero, now Associate Justice of this court) issued an Omnibus Order denying among
others, (Sureste's) motion, to which a motion for reconsideration was filed. 3

After trial on the merits, the Regional Trial Court of Makati, Branch 133, 4 rendered its order,
the dispositive portion of which reads:

WHEREFORE, the Court resolves as it is resolved that:

1. The Omnibus Order of the Court issued on August 5, 1993 is hereby reconsidered and
modified to the effect that:

a. The Notice of Lis Pendens is annotated at the back of the Certificate of Title of Esguerra
Bldg. II located at Amorsolo St., Legaspi Village, Makati, Metro Manila is delivered to be
valid and subsisting, the cancellation of the same is hereby set aside; and,

b. The sale of Esguerra Bldg. II to Sureste Properties, Inc. is declared valid with respect to
one-half of the value thereof but ineffectual and unenforceable with respect to the other half
as the acknowledged owner of said portion was not consulted as to the terms and conditions
of the sale.

The other provisions of said Omnibus Order remain undisturbed and are now deemed final
and executory.

2. Sureste Properties, Inc. is hereby enjoined from pursuing further whatever Court action it
has filed against plaintiff as well as plaintiffs tenants at Esguerra Bldg. II;
3. Plaintiffs Urgent Ex-parte Motion dated December 14, 1993 is hereby DENIED for being
moot and academic.

4. Plaintiff is hereby directed to bring to Court, personally or through counsel, the subject
shares of stocks on February 15, 1994 at 10:30 in the morning for the physical examination of
defendant or counsel.

SO ORDERED. 5

From the foregoing order, herein private respondent Sureste Properties, Inc. interposed an
appeal with the Court of Appeals which ruled in its favor, viz.:

From the foregoing, it is clear that respondent judge abused his discretion when he rendered
the sale of the property unenforceable with respect to one-half.

WHEREFORE, the petition is hereby GRANTED. The assailed order dated 1 February 1994
is hereby SET ASIDE. No pronouncement as to cost.

SO ORDERED. 6

Julieta Esguerra's Motion for Reconsideration 7 dated June 15, 1994 was denied by the
respondent Court in the second assailed Resolutions 8 promulgated on February 23, 1995.

Hence this petition.

The Issues

Petitioner submits the following assignment of errors:

. . . (I)n issuing the Decision (Annex "A" of the petition) and the Resolution (Annex "B" of
the petition), the Court of Appeals decided questions of substance contrary to law and
applicable jurisprudence and acted without jurisdiction and/or with grave abuse of discretion
when:

It validated the sale by VECCI to Sureste of the subject property without the knowledge and
consent of the acknowledged co-owner thereof and in contravention of the terms of the
compromise agreement as well as the Resolution of this Honorable Court in G.R. No. 100441
wherein this Honorable Court recognized herein petitioner's 'acknowledged ownership of -
one-half of the subject property; and,

It held that the trial court acted without jurisdiction and!or abused its discretion when it held
that the questioned sale of the property is ineffectual and unenforceable as to herein
petitioner's one-half (1/2) ownership/interest in the property since the sale was made without
her knowledge and consent.

BECAUSE:

A. No proper corporate action of VECCI was made to effect such sale as required under the
compromise agreement;
B. The sale of the subject property was made in violation of the terms of the compromise
agreement in that it was not made with the approval/consent of the acknowledged owner of
1/2 of the said asset;

C. The prior sale of another property (the Esguerra Building I as distinguished from the
subject property which is the Esguerra Building II) included in the said compromise
agreement was made only after the prior approval/consent of petitioner and this procedure
established a precedent that applied in the subsequent sale of the Esguerra Building II; and

D. Respondent Sureste as purchaser pendente lite of the subject property covered by a notice
of lis pendens was in law deemed to have been duly notified of the aforesaid conditions
required for a valid sale of the subject property as well as of petitioner's "acknowledged
ownership - over one-half" of the Esguerra Building II. 9

Simply put, petitioner (1) assails VECCI's sale of Esguerra Building II to private respondent
as unenforceable to the extent of her one-half share, and (2) accuses the appellate court of
"acting without jurisdiction or with grave abuse of discretion" in reversing the trial court's
finding to that effect.

The Court's Ruling

The petition has no merit.

First Issue: Is the Contract of Sale Unenforceable?

The Civil Code provides that a contract is unenforceable when it is ". . . entered into in the
name of another person by one who has been given no authority or legal representation, or
who has acted beyond his powers." 10 And that "(a) contract entered into in the name of
another by one who has no authority or legal representation, or who has acted beyond his
powers, shall be unenforceable, . . ." 11 After a thorough review of the case at bench, the
Court finds the sale of Esguerra Building II by VECCI to private respondent Sureste
Properties, Inc. valid. The sale was expressly and clearly authorized under the judicially-
approved compromise agreement freely consented to and voluntarily signed by petitioner
Julieta Esguerra. Thus, petitioner's contention that the sale is unenforceable as to her share for
being unauthorized is plainly incongruous with the express authority granted by the
compromise agreement to VECCI, which specified no condition that the latter shall first
consult with the former prior to selling any of the properties listed there. As astutely and
correctly found by the appellate Court:

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

xxx xxx xxx

. . . The compromise agreement expressly authorizes VECCI to sell the subject properties,
with the only condition that the sale be in a lawful and convenient manner and under the
terms and conditions recited in the enabling resolutions of its Board of Directors and
stockholders. There is nothing in the said agreement requiring VECCI to consult the private
respondent (Julieta Esguerra) before any sale (can be concluded). Thus, when VECCI sold
the property to (Sureste Properties, Inc.) as agreed upon, it need not consult the private
respondent. 2

Moreover, petitioner's contention runs counter to Article 1900 of the Civil Code which
provides that:

So far as third persons are concerned, an act is deemed to have been performed within the
scope of the agent's authority, if such act is within the terms of the power of attorney, as
written, even if the agent has in fact exceeded the limits of his authority according to an
understanding between the principal and the agent.

Thus, as far as private respondent Sureste Properties, Inc. is concerned, the sale to it by
VECCI was completely valid and legal because it was executed in accordance with the
compromise agreement, authorized not only by the parties thereto, who became co-principals
in a contract of agency created thereby, but by the approving court as well. Consequently, the
sale to Sureste Properties, Inc. of Esguerra Building II cannot in any manner or guise be
deemed unenforceable, as contended by petitioner.

Consultation in the Sale of Esguerra Building I

Not a Binding Precedent

The petitioner further argues that VECCI's consulting her on the terms and conditions of its
sale of Esguerra Building I set a binding precedent to be followed by the latter on subsequent
sales. She adds that in failing to consult her on the sale of Esguerra Building II, VECCI
"acted unfairly and unjustly" as evidenced by (a) the sale of said building for only
P160,000,000.00 instead of P200,000,000.00, which is "the best price obtainable in the
market," (b) payment of real estate broker's commission of 5% instead of just 2% as in the
sale of Esguerra 1 building, and (c) the denial of petitioner's right of first refusal when her
offer to purchase her one-half share for P80,000,000.00 as ordered by the trial court was
totally ignored. 13

The Court is not persuaded. Petitioner's argument is debunked by the very nature of a
compromise agreement. The mere fact that petitioner Julieta Esguerra was consulted by
VECCI in the sale of Esguerra Building I did not affect nor vary the terms of the authority to
sell granted the former as expressly spelled out in the judicially-approved compromise
agreement because "a compromise once approved by final orders of the court has the force
of res judicata between the parties and should not be disturbed except for vices of consent or
forgery." 14 Hence, "a decision on a compromise agreement is final and executory, . . . 15

Petitioner insists that had she been consulted in the sale of Esguerra Building II, better terms
could have been obtained. This is plainly without legal basis since she already consented to
the compromise agreement which authorized VECCI to sell the properties without the
requirement of prior consultation with her. "It is a long established doctrine that the law does
not relieve a party from the effects of an unwise, foolish, or disastrous contract, entered into
with all the required formalities and with full awareness of what he was doing. Courts have
no power to relieve parties from obligations voluntarily assumed, simply because their
contracts turned out to be disastrous deals or unwise investments." 16 It is a truism that "a
compromise agreement entered into by party-litigants, when not contrary to law, public order,
public policy, morals, or good custom is a valid contract which is the law between the parties
themselves. It follows, therefore, that a compromise agreement, not tainted with infirmity,
irregularity, fraud or illegality is the law between the parties who are duty bound to abide by
it and observe strictly its terms and conditions 17 as in this case. Incidentally, private
respondent Sureste Properties, Inc. submits that the petitioner offered to buy her one-half
share for only P75,000,000.00, not P80,000,000.00. 18 She therefore valued the whole
building only at P150,000,000.00 which amount is P10,000,000.00 less than the price of
P160,000,000.00 paid by private respondent, the highest offer the market has produced in two
and a half years the building was offered for sale. Even the 5% real estate broker's
commission was not disparate with the standard practice in the real estate industry. Thus, the
respondent Court aptly stated that:

. . . In affixing her signature on the compromise agreement, private respondent (Julieta

Esguerra) has demonstrated her agreement to all the terms and conditions therein and have
(sic) given expressly her consent to all acts that may be performed pursuant thereto. She can
not later on repudiate the effects of her voluntary acts simply because it does not fit her. Her
contention that she was not consulted as to the terms of the sale has no leg to stand on. 19

Parenthetically, the previous consultation can be deemed as no more than a mere courtesy
extended voluntarily by VECCI. Besides, such previous consultation - even assuming
arguendo that it was a binding precedent - cannot bind private respondent Sureste which was
not a party thereto. To declare the sale as infirm or unenforceable is to heap unfairness upon
Sureste Properties, Inc. and to undermine public faith in court decisions approving
compromise agreements.

Right of First Refusal Waived

The argument of petitioner that she was denied her right of first refusal is puerile. This
alleged right, like other rights, may be waived 20 as petitioner did waive it upon entering into
the compromise agreement. Corollarily, the execution of the spouses' judicial compromise
agreement necessitated the sale of the spouses' co-owned properties and its proceeds
distributed fifty percent to each of them which, therefor, resulted in its partition.21 If
petitioner wanted to keep such right of first refusal, she should have expressly reserved it in
the compromise agreement. For her failure to do so, she must live with its consequences.

VECCI'S Sale of Esguerra

Building II A Valid Exercise of Corporate Power

Petitioner contends that VECCI violated the condition in the compromise agreement
requiring that the sale be made "under the terms and conditions recited in the enabling
resolutions of its Board of Directors and stockholders. 22 She rues that no shareholders' or
directors' meeting, wherein these resolutions were passed, was actually held. She thus bewails
this sale as improper for not having complied with the requirements mandated by Section 40
of the Corporation Code. 23

Petitioner's contention is plainly unmeritorious. The trial court's partial decision dated
January 11, 1990 approving the compromise agreement clearly showed that the "enabling
resolutions of its (VECCI's) board of directors and stockholders" referred to were those then
already existing; to wit: (1) "the resolution of the stockholders of VECCI dated November 9,
1989, (where) the stockholders authorized VECCI to sell and/or disposed all or substantially
all its property and assets upon such terms and conditions and for such consideration as the
board of directors may deem expedient." 24 (2) the "resolution dated 9 November 1989,
(where) the board of directors of VECCI authorized VECCI to sell and/or dispose all or
substantially all the property and assets of the corporation, at the highest available
price/s they could be sold or disposed of in cash, and in such manner as may be held
convenient under the circumstances, and authorized the President Vicente B. Esguerra. Jr. to
negotiate. contract, execute and sign such sale for and in behalf of the
corporation." 25 VECCI's sale of all the properties mentioned in the judicially-approved
compromise agreement was done on the basis of its Corporate Secretary's Certification of
these two resolutions. The partial decision did not require any further board or stockholder
resolutions to make VECCI's sale of these properties valid. Being regular on its face, the
Secretary's Certification was sufficient for private respondent Sureste Properties, Inc. to rely
on. It did not have to investigate the truth of the facts contained in such certification.
Otherwise, business transactions of corporations would become tortuously slow and
unnecessarily hampered. Ineluctably, VECCI's sale of Esguerra Building II to private
respondent was not ultra vires but a valid execution of the trial court's partial decision. Based
on the foregoing, the sale is also deemed to have satisfied the requirements of Section 40 of
the Corporation Code.

Furthermore, petitioner Julieta Esguerra is estopped from contesting the validity of VECCI's
corporate action in selling Esguerra Building II on the basis of said resolutions and
certification because she never raised this issue in VECCI's prior sales of the other properties
sold including the Esguerra Building I. 26 The same identical resolutions and certification
were used in such prior sales.

Notice of Lis Pendens

"Once a notice of lis pendens has been duly registered, any cancellation or issuance of the
title of the land involved as well as any subsequent transaction affecting the same, would
have to be subject to the outcome" 27 of the suit. In other words, "a purchaser who buys
registered land with full notice of the fact that it is in litigation between the vendor and a third
party . . . stands in the shoes of his vendor and his title is subject to the incidents and result of
the pending litigation . . . 28 In the present case, the purchase made by private respondent
Sureste Properties, Inc. of the property in controversy is subject to the notice of lis
pendens annotated on its title. Thus, the private respondent's purchase remains subject to our
decision in the instant case. The former is likewise deemed notified of all the incidents of this
case including the terms and conditions for the sale contained in the compromise agreement.
However, petitioner's inference that the private respondent is also deemed to have been
notified that the manner of the sale of the properties contained in the compromise agreement
should be "made only upon prior consent/conformity of the herein petitioner" is non sequitur.
Nowhere in the compromise agreement was this inference expressly or impliedly stated. In
the final analysis, the determination of this issue ultimately depends on this Court's
disposition of this case.

Appealed Decision Consistent with Previous

Court of Appeals and Supreme Court Decisions

Petitioner maintains that the trial court's ruling that "the sale of Esguerra Building II to
Sureste is unenforceable to the extent of one-half share of petitioner in the property" is based
on the Court of Appeals' decision in G.R. SP No. 23780 dated May 17, 1991, and the
Supreme Court's decision in G.R. No. 100441 dated May 4, 1992 which both acknowledged
petitioner's one-half ownership of said building. 29 She reasons that "(a)s co-owner her
consent or conformity to the sale was necessary for the validity or effectivity thereof insofar
as her 1/2 share/ownership was concerned." 30 The Court disagrees. As discussed previously,
this repetitive contention is negated by her consent to the compromise agreement that
authorized VECCI to sell the building without need of further consultation with her. Her co-
ownership in the building was not inconsistent with her authorizing another, specifically
VECCI, to sell her share in this property via an agency arrangement. As correctly stated by
the respondent Court of Appeals, the only import of this Court's ruling in G.R. No. 100441
was as follows:

the only issue involved is whether or not private respondent is entitled to one-half of the
rentals of the subject property pending its sale. The rulings of the courts is (sic) therefore
limited only to the issue of rental, there being no provision in the compromise agreement
approved by the court for the rentals earned from the building pending its sale. Nowhere in
the said rulings did it question nor assail the authority granted to VECCI to sell the said
building. In fact, the decisions affirmed the authority granted to VECCI to sell the said
building which invoked the compromise agreement of the parties as a basis of the decision
(Manifestation, p. 38,. Rollo). 31

Second Issue: Did the Appellate Court Act Without Jurisdiction

or With Grave Abuse of Discretion?

In the case of Alafriz vs. Nable, 32 this Court defined the phrases "without jurisdiction" and
"grave abuse of discretion" as follows:

"Without jurisdiction" means that the court acted with absolute want of jurisdiction. . . .
"Grave abuse of discretion" implies such capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction, or, in other words where the power is exercised in an
arbitrary or despotic manner by reason of passion or personal hostility, and it must be so
patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform
the duty enjoined or to act at all in contemplation of law.

Contrary to petitioner's asseverations, the Court finds that the respondent Court of Appeals
judiciously, correctly and certainly acted within its jurisdiction in reversing the trial court's
decision. As discussed, its decision is consistent with law and existing jurisprudence.

Let it be emphasized that Rule 45 of the Rules of Court, under which the present petition was
filed, authorizes only reversible errors of the appellate court as grounds for review, and not
"grave abuse of discretion" which is provided for by Rule 65. It is basic that where Rule 45 is
available, and in fact availed of as a remedy -- as in this case - recourse under Rule 65 cannot
be allowed either as an add-on or as a substitute for appeal.

Finally, "(c)ourts as a rule may not impose upon the parties a judgment different from their
compromise agreement. It would be an abuse of
discretion." 33 Hence, in this case, it is the trial court's decision which is tainted with grave
abuse of discretion for having injudiciously added "prior consultation" to VECCI's authority
to sell the properties, a condition not contained in the judicially-approved compromise
agreement.
WHEREFORE, the petition is hereby DENIED for lack of merit, no reversible error having
been committed by respondent Court. The assailed Decision is AFFIRMED in toto. Costs
against petitioner.

SO ORDERED.

Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.

G.R. No. 194560 June 11, 2014

NESTOR T. GADRINAB, Petitioner,
vs.
NORAT. SALAMANCA, ANTONIO TALAO AND ELENA LOPEZ, Respondents.
DECISION

LEONEN, J.:

The issue in this case is whether the Court of Appeals erred in affirming the Regional Trial
Court’s decision allowing the physical partition of the property despite finality of a previous
judgment on compromise agreement involving the division of the same property.

The petition is meritorious.

The Court of Appeals erred in affirming the Regional Trial Court’s decision allowing the
physical partition of the property

Respondent Salamanca filed two actions for physical partition. The two parties settled the
first action through a judicial compromise agreement. The same respondent filed the second
action after she had determined that her co-heirs were not being cooperative in complying
with the compromise agreement.
In a compromise agreement, the parties freely enter into stipulations. "[A] judgment based on
a compromise agreement is a judgment on the merits"52 of the case. It has the effect of res
judicata. These principles are impressed both in our law and jurisprudence.
Thus, Article 2037 of the Civil Code provides:
Article 2037. A compromise has upon the parties the effect and authority of res judicata; but
there shall be no execution except in compliance with a judicial compromise.
In Spouses Romero v. Tan,53 this court said:
It is well settled that a judicial compromise has the effect of res judicata and is immediately
executory and not appealable unless set aside [by mistake, fraud, violence, intimidation,
undue influence, or falsity of documents that vitiated the compromise agreement].54
There is res judicata when the following concur:
1. Previous final judgment;
2. By a court having jurisdiction over the parties and the subject matter;
3. On the merits of the case;
4. Between identical parties, on the same subject matter, and cause of action55

There are two rules that embody the principle of res judicata. The first rule refers to "bar by
prior judgment,"56 which means that actions on the same claim or cause of action cannot be
relitigated.57 This rule is embodied in Rule 39, Section 47, paragraph (b) of the Rules of
Court, which provides:
Section 47. Effect of judgments or final orders. — The effect of a judgment or final order
rendered by a court of the Philippines, having jurisdiction to pronounce the judgment or final
order, may be as follows:
(b) In other cases, the judgment or final order is, with respect to the matter directly adjudged
or as to any other matter that could have been raised in relation thereto, conclusive between
the parties and their successors in interest by title subsequent to the commencement of the
action or special proceeding, litigating for the same thing and under the same title and in the
same capacity[.]
The second rule refers to "conclusiveness of judgment."58 This means that facts already tried
and determined in another action involving a different claim or cause of action cannot
anymore be relitigated.59 This rule is embodied in Rule 39, Section 47, paragraph (c) of the
Rules of Court, which provides:
Section 47. Effect of judgments or final orders. — The effect of a judgment or final order
rendered by a court of the Philippines, having jurisdiction to pronounce the judgment or final
order, may be as follows:
....
(c) In any other litigation between the same parties or their successors in interest, that only is
deemed to have been adjudged in a former judgment or final order which appears upon its
face to have been so adjudged, or which was actually and necessarily included therein or
necessary thereto. (49a)
This case involves "bar by prior judgment." Respondents cannot file another action for
partition after final judgment on compromise had already been rendered in a previous action
for partition involving the same parties and property.
This court explained in FGU Insurance Corporation v. Regional Trial Court60 the doctrine of
finality of judgment:
Under the doctrine of finality of judgment or immutability of judgment, a decision that has
acquired finality becomes immutable and unalterable, and may no longer be modified in any
respect, even if the modification is meant to correct erroneous conclusions of fact and law,
and whether it be made by the court that rendered it or by the Highest Court of the land. Any
act which violates this principle must immediately be struck down.61
This doctrine admits a few exceptions, usually applied to serve substantial justice:
1. "The correction of clerical errors;
2. the so-called nunc pro tunc entries which cause no prejudice to any party;
3. void judgments; and
4. whenever circumstances transpire after the finality of the decision rendering its execution
unjust and inequitable."

[ G.R. No. 104133, April 18, 1995 ]

SPOUSES EMILIO ABINUJAR AND MILAGROS M. LANA, PETITIONERS, VS. THE

COURT OF APPEALS AND SPOUSES SANTIAGO RAMIRO AND FLORENTINA
RAMIRO, RESPONDENTS.

DECISION

QUIASON, J.:
On October 10, 1987, petitioners executed a Deed of Sale with Right to Repurchase in favor
of private respondents, involving a residential house located at No. 346 Algeciras St.,
Sampaloc, Manila. Due to serious financial and business reverses, petitioners were not able
to redeem the property within four months as agreed upon.

On October 24, 1989, private respondents filed a complaint for ejectment in the Metropolitan
Trial Court of the City of Manila, docketed as Civil Case No. 130352-CV against petitioners.

On December 27, 1989, the parties, assisted by their counsels, executed a compromise
agreement. In an order dated March 15, 1990, the Metropolitan Trial Court approved the
compromise agreement. The order reproduced the agreement as follows:

"1. That defendants [petitioners herein] agree to pay plaintiffs [private respondents herein] in
the amounts and on the dates specifically indicated herein below:

"2. That failure on the part of the defendants to pay three (3) consecutive payments, plaintiffs
will be entitled to a writ of execution, unless the parties agree to extend the period of
entitlement to a writ of execution in writing to be submitted and/or approved by this
Honorable Court; xxx" (Rollo, p. 53).
On April 15, 1990, private respondents filed a motion for execution on the ground that
petitioners failed to pay the first three installments stipulated in the compromise agreement,
to wit: P50,000.00 on January 31, 1990; P10,000.00 on February 28, 1990; and P10,000.00
on March 31, 1990.

On April 6, 1990, petitioners filed an "Urgent Ex-Parte Motion for Reconsideration and/or
Correct Order of this Court" calling attention to a typographical error in the Order dated
March 15, 1990, and asking that the amount of P10,000.00 payable on September 30, 1990 be
corrected and changed to the agreed amount of P5,000.00.

On April 25, 1990, the Metropolitan Trial Court issued an order granting the motion for
correction of the typographical error in the decision.

On August 17, 1990, petitioners filed an ex-parte motion asking that the check payments
previously deposited by them with the court, be accepted and be given to respondents in
compliance with their compromise agreement.

On August 23, 1990, respondents opposed petitioners' ex-parte motion and stated that they
would not renew the compromise agreement with petitioners.

The Metropolitan Trial Court denied private respondents' motion for execution dated April
15, 1990 and another similar motion dated June 26, 1990.

On October 12, 1990, respondents filed a petition for mandamus with us (G.R. No. 95470).
In a resolution dated November 5, 1990, we referred the case to the Executive Judge of the
Regional Trial Court, Manila. Petitioners moved to dismiss the petition for mandamus.
On March 14, 1991, the Regional Trial Court denied the motion to dismiss and issued the
assailed resolution commanding the Metropolitan Trial Court to issue a writ of execution of
the decision approving the compromise agreement in Civil Case No. 130352-CV.

In compliance with the said resolution, the Metropolitan Trial Court issued an order dated
March 27, 1991 directing the issuance of a writ of execution to enforce the compromise
agreement entered into by the parties.

On April 11, 1991, a "Sheriffs' Notice to Voluntarily Vacate the Premises" was served on
petitioner.

Petitioners then filed a petition for certiorari with a prayer for the issuance of a temporary
restraining order and a writ of injunction with the Court of Appeals (CA-G.R. SP No. 24683).

On December 27, 1991, the Court of Appeals dismissed the petition. Likewise, the said court
denied the motion for reconsideration filed by petitioner.

II

Petitioners contend that both the Regional Trial Court and Metropolitan Trial Court acted
with grave abuse of discretion, the former in issuing a resolution directing the Metropolitan
Trial Court to issue a writ of execution against petitioners herein, and the latter, in issuing
said writ of execution.

III

A compromise agreement is a contract between the parties, which if not contrary to law,
morals or public policy, is valid and enforceable between them (Municipal Board of
Cabanatuan City v. Samahang Magsasaka, Inc., 62 SCRA 435 [1975]). There are two kinds
of compromise agreements, the judicial, which puts an end to a pending litigation, and the
extrajudicial, which is to avoid a litigation (Civil Code of the Philippines, Art. 2028; Caguioa,
VI Commentaries and Cases on Civil Law 292 [1970]).

As a contract, a compromise agreement is perfected by mutual consent (Rovero v. Amparo,

91 Phil. 228 [1952]). A judicial compromise, however, while binding between the parties
upon its execution, is not executory until it is approved by the court and reduced to a
judgment.

Article 2037 of the Civil Code of the Philippines provides:

"A compromise has upon the parties the effect and authority of res judicata; but there shall be
no execution except in compliance with a judicial compromise."

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

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

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

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

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

Petitioners' contention has merit.

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

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

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

An execution must conform to and be warranted by the judgment on which it was issued
(Francisco, The Revised Rules of Court 641 [1966]; Kramer v. Montgomery, 206 Okla. 190,
242 P. 2d 414 [1952]). There should not be a substantial variance between the judgment and
the writ of execution (Avery v. Lewis, 10 Vt. 332). Thus, an execution is fatally defective if
the judgment was for a sum of money and the writ of execution was for the sale of mortgaged
property (Bank of Philippine Islands v. Green, 48 Phil. 284 [1925]).
As petitioners' obligation under the compromise agreement as approved by the court was
monetary in nature, private respondents can avail only of the writ of execution provided in
Section 15, Rule 39 of the Revised Rules of Court, and not that provided in Section 13.

Section 15, Rule 39 provides:

"Execution of money judgments. - The officer must enforce an execution of a money

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

Real property, stocks, shares, debts, credits, and other personal property, or any interest in
either real or personal property, may be levied on in like manner and with like effect as under
a writ of attachment."

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

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

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with

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

SO ORDERED.

Padilla, (Chairman), Davide, Jr., Bellosillo, and Kapunan, JJ., concur.

PHIL. JOURNALISTS INC. VS. NLRC (2006) GR 166421

Facts:
Journal Employees Union (JEU) filed a notice of strike before the NCMB claiming that petitioner
Philippine Journalists Inc (PJI) was guilty of unfair labor practice and that its planned retrenchment
program was illegal. The DOLE Secretary then certified the labor dispute to the NLRC for compulsory
arbitration. NLRC declared that the complainants were illegally dismissed and that there was no
basis for petitioner’s implementation of the retrenchment program as the circumstances belied that
PJI incurred losses. Thereafter, the parties executed a Compromise Agreement where PJI undertook
to reinstate the illegally dismissed employees. NLRC then issued a resolution deeming the labor
dispute already closed and terminated.
In the meantime however, the Union filed another notice of strike claiming that 29 employees were
illegally dismissed and that the salaries and benefits of 50 others had been illegally reduced. The
NLRC ruled that the complainants were not illegally dismissed because the resolution declaring the
retrenchment program illegal did not attain finality as it had been mooted by the compromise
agreement entered into by the parties. The appellate court however, held that the compromise
agreement referred only to the award given by the NLRC to the complainants in the case.
Issue:
Whether the compromise agreement entered into by the parties mooted the NLRC resolution
finding that the union members had been illegally dismissed.
Ruling: NO.
Contrary to the allegation of petitioners, the execution and subsequent approval by the NLRC of the
agreement forged between it and the respondent Union did not render the NLRC resolution
ineffectual, nor rendered it “moot and academic.” The agreement becomes part of the judgment of
the court or tribunal, and as a logical consequence, there is an implicit waiver of the right to appeal.
In any event, the compromise agreement cannot bind a party who did not voluntarily take part in
the settlement itself and gave specific individual consent. It must be remembered that a
compromise agreement is also a contract; it requires the consent of the parties, and it is only then
that the agreement may be considered as voluntarily entered into.
A careful perusal of the wordings of the compromise agreement will show that the parties agreed
that the only issue to be resolved was the question of the monetary claim of several employees. The
agreement was later approved by the NLRC. The case was considered closed and terminated and the
Resolution fully implemented insofar as the employees “mentioned in paragraphs 2c and 2d of the
compromise agreement” were concerned. Hence, the CA was correct in holding that the
compromise agreement pertained only to the “monetary obligation” of the employer to the
dismissed employees, and in no way affected the Resolution where the NLRC made the
pronouncement that there was no basis for the implementation of petitioners’ retrenchment
program.

[ G.R. No. 191336, January 25, 2012 ]

CRISANTA ALCARAZ MIGUEL, PETITIONER, VS. JERRY D. MONTANEZ,

RESPONDENT.

DECISION

REYES, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court.
Petitioner Crisanta Alcaraz Miguel (Miguel) seeks the reversal and setting aside of the
September 17, 2009 Decision[1] and February 11, 2010 Resolution[2] of the Court of Appeals
(CA) in CA-G.R. SP No. 100544, entitled "Jerry D. Montanez v. Crisanta Alcaraz Miguel."

Antecedent Facts
On February 1, 2001, respondent Jerry Montanez (Montanez) secured a loan of One Hundred
Forty-Three Thousand Eight Hundred Sixty-Four Pesos (P143,864.00), payable in one (1)
year, or until February 1, 2002, from the petitioner. The respondent gave as collateral therefor
his house and lot located at Block 39 Lot 39 Phase 3, Palmera Spring, Bagumbong, Caloocan
City.

Due to the respondent's failure to pay the loan, the petitioner filed a complaint against the
respondent before the Lupong Tagapamayapa of Barangay San Jose, Rodriguez, Rizal. The
parties entered into a Kasunduang Pag-aayos wherein the respondent agreed to pay his loan
in installments in the amount of Two Thousand Pesos (P2,000.00) per month, and in the
event the house and lot given as collateral is sold, the respondent would settle the balance of
the loan in full. However, the respondent still failed to pay, and on December 13, 2004,
the Lupong Tagapamayapa issued a certification to file action in court in favor of the
petitioner.

On April 7, 2005, the petitioner filed before the Metropolitan Trial Court (MeTC) of Makati
City, Branch 66, a complaint for Collection of Sum of Money. In his Answer with
Counterclaim,[3] the respondent raised the defense of improper venue considering that the
petitioner was a resident of Bagumbong, Caloocan City while he lived in San Mateo, Rizal.

After trial, on August 16, 2006, the MeTC rendered a Decision,[4] which disposes as follows:

WHEREFORE, premises considered[,] judgment is hereby rendered ordering

defendant Jerry D. Montanez to pay plaintiff the following:

1. The amount of [Php147,893.00] representing the obligation with legal rate of interest
from February 1, 2002 which was the date of the loan maturity until the account is
fully paid;
2. The amount of Php10,000.00 as and by way of attorney's fees; and the costs.

SO ORDERED. [5]

On appeal to the Regional Trial Court (RTC) of Makati City, Branch 146, the respondent
raised the same issues cited in his Answer. In its March 14, 2007 Decision,[6] the RTC
affirmed the MeTC Decision, disposing as follows:

WHEREFORE, finding no cogent reason to disturb the findings of the court a quo, the appeal
is hereby DISMISSED, and the DECISION appealed from is hereby AFFIRMED in its
entirety for being in accordance with law and evidence.

SO ORDERED.[7]

Dissatisfied, the respondent appealed to the CA raising two issues, namely, (1) whether or not
venue was improperly laid, and (2) whether or not the Kasunduang Pag-aayos effectively
novated the loan agreement. On September 17, 2009, the CA rendered the assailed Decision,
disposing as follows:

WHEREFORE, premises considered, the petition is hereby GRANTED. The appealed

Decision dated March 14, 2007 of the Regional Trial Court (RTC) of Makati City, Branch
146, is REVERSED and SET ASIDE. A new judgment is entered dismissing respondent's
complaint for collection of sum of money, without prejudice to her right to file the necessary
action to enforce the Kasunduang Pag-aayos.

SO ORDERED.[8]

Anent the issue of whether or not there is novation of the loan contract, the CA ruled in the
negative. It ratiocinated as follows:

Judging from the terms of the Kasunduang Pag-aayos, it is clear that no novation of the old
obligation has taken place. Contrary to petitioner's assertion, there was no reduction of the
term or period originally stipulated. The original period in the first agreement is one (1) year
to be counted from February 1, 2001, or until January 31, 2002. When the complaint was
filed before the barangay on February 2003, the period of the original agreement had long
expired without compliance on the part of petitioner. Hence, there was nothing to reduce or
extend. There was only a change in the terms of payment which is not incompatible with the
old agreement. In other words, the Kasunduang Pag-aayos merely supplemented the old
agreement.[9]

The CA went on saying that since the parties entered into a Kasunduang Pag-aayos before
the Lupon ng Barangay, such settlement has the force and effect of a court judgment, which
may be enforced by execution within six (6) months from the date of settlement by the Lupon
ng Barangay, or by court action after the lapse of such time.[10] Considering that more than
six (6) months had elapsed from the date of settlement, the CA ruled that the remedy of the
petitioner was to file an action for the execution of the Kasunduang Pag-aayos in court and
not for collection of sum of money.[11] Consequently, the CA deemed it unnecessary to
resolve the issue on venue.[12]

The petitioner now comes to this Court.

Issues

(1) Whether or not a complaint for sum of money is the proper remedy for the petitioner,
notwithstanding the Kasunduang Pag-aayos;[13] and

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

Our Ruling

Because the respondent failed to comply

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

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

This Court agrees with the petitioner.

It is true that an amicable settlement reached at the barangay conciliation proceedings, like
the Kasunduang Pag-aayos in this case, is binding between the contracting parties and, upon
its perfection, is immediately executory insofar as it is not contrary to law, good morals,
good customs, public order and public policy.[16] This is in accord with the broad precept of
Article 2037 of the Civil Code, viz:

A compromise has upon the parties the effect and authority of res judicata; but there shall be
no execution except in compliance with a judicial compromise.

Being a by-product of mutual concessions and good faith of the parties, an amicable
settlement has the force and effect of res judicata even if not judicially approved.[17] It
transcends being a mere contract binding only upon the parties thereto, and is akin to a
judgment that is subject to execution in accordance with the Rules.[18] Thus, under Section
417 of the Local Government Code,[19] such amicable settlement or arbitration award may be
enforced by execution by the Barangay Lupon within six (6) months from the date of
settlement, or by filing an action to enforce such settlement in the appropriate city or
municipal court, if beyond the six-month period.

Under the first remedy, the proceedings are covered by the Local Government Code and
the Katarungang Pambarangay Implementing Rules and Regulations. The Punong
Barangay is called upon during the hearing to determine solely the fact of non-compliance of
the terms of the settlement and to give the defaulting party another chance at voluntarily
complying with his obligation under the settlement. Under the second remedy, the
proceedings are governed by the Rules of Court, as amended. The cause of action is the
amicable settlement itself, which, by operation of law, has the force and effect of a final
judgment.[20]

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

either under the first or the second remedy, is only applicable if the contracting parties have
not repudiated such settlement within ten (10) days from the date thereof in accordance with
Section 416 of the Local Government Code. If the amicable settlement is repudiated by one
party, either expressly or impliedly, the other party has two options, namely, to enforce the
compromise in accordance with the Local Government Code or Rules of Court as the case
may be, or to consider it rescinded and insist upon his original demand. This is in accord with
Article 2041 of the Civil Code, which qualifies the broad application of Article 2037, viz:

If one of the parties fails or refuses to abide by the compromise, the other party may either
enforce the compromise or regard it as rescinded and insist upon his original demand.

In the case of Leonor v. Sycip,[21] the Supreme Court (SC) had the occasion to explain this
provision of law. It ruled that Article 2041 does not require an action for rescission, and the
aggrieved party, by the breach of compromise agreement, may just consider it already
rescinded, to wit:

It is worthy of notice, in this connection, that, unlike Article 2039 of the same Code, which
speaks of "a cause of annulment or rescission of the compromise" and provides that "the
compromise may be annulled or rescinded" for the cause therein specified, thus suggesting
an action for annulment or rescission, said Article 2041 confers upon the party concerned, not
a "cause" for rescission, or the right to "demand" the rescission of a compromise, but the
authority, not only to "regard it as rescinded", but, also, to "insist upon his original
demand". The language of this Article 2041, particularly when contrasted with that of
Article 2039, denotes that no action for rescission is required in said Article 2041, and
that the party aggrieved by the breach of a compromise agreement may, if he chooses,
bring the suit contemplated or involved in his original demand, as if there had never
been any compromise agreement, without bringing an action for rescission thereof. He
need not seek a judicial declaration of rescission, for he may "regard" the compromise
agreement already "rescinded".[22] (emphasis supplied)

As so well stated in the case of Chavez v. Court of Appeals,[23] a party's non-compliance with
the amicable settlement paved the way for the application of Article 2041 under which the
other party may either enforce the compromise, following the procedure laid out in
the Revised Katarungang Pambarangay Law, or consider it as rescinded and insist upon his
original demand. To quote:

In the case at bar, the Revised Katarungang Pambarangay Law provides for a two-tiered
mode of enforcement of an amicable settlement, to wit: (a) by execution by the Punong
Barangay which is quasi-judicial and summary in nature on mere motion of the party entitled
thereto; and (b) an action in regular form, which remedy is judicial. However, the mode of
enforcement does not rule out the right of rescission under Art. 2041 of the Civil Code. The
availability of the right of rescission is apparent from the wording of Sec. 417 itself which
provides that the amicable settlement "may" be enforced by execution by the lupon within six
(6) months from its date or by action in the appropriate city or municipal court, if beyond that
period. The use of the word "may" clearly makes the procedure provided in the Revised
Katarungang Pambarangay Law directory or merely optional in nature.

Thus, although the "Kasunduan" executed by petitioner and respondent before the
Office of the Barangay Captain had the force and effect of a final judgment of a court,
petitioner's non-compliance paved the way for the application of Art. 2041 under which
respondent may either enforce the compromise, following the procedure laid out in
the Revised Katarungang Pambarangay Law, or regard it as rescinded and insist upon
his original demand. Respondent chose the latter option when he instituted Civil Case
No. 5139-V-97 for recovery of unrealized profits and reimbursement of advance rentals,
moral and exemplary damages, and attorney's fees. Respondent was not limited to
claiming P150,000.00 because although he agreed to the amount in the "Kasunduan," it is
axiomatic that a compromise settlement is not an admission of liability but merely a
recognition that there is a dispute and an impending litigation which the parties hope to
prevent by making reciprocal concessions, adjusting their respective positions in the hope of
gaining balanced by the danger of losing. Under the "Kasunduan," respondent was only
required to execute a waiver of all possible claims arising from the lease contract if petitioner
fully complies with his obligations thereunder. It is undisputed that herein petitioner did
not.[24] (emphasis supplied and citations omitted)

In the instant case, the respondent did not comply with the terms and conditions of
the Kasunduang Pag-aayos. Such non-compliance may be construed as repudiation because
it denotes that the respondent did not intend to be bound by the terms thereof, thereby
negating the very purpose for which it was executed. Perforce, the petitioner has the option
either to enforce the Kasunduang Pag-aayos, or to regard it as rescinded and insist upon his
original demand, in accordance with the provision of Article 2041 of the Civil Code. Having
instituted an action for collection of sum of money, the petitioner obviously chose to rescind
the Kasunduang Pag-aayos. As such, it is error on the part of the CA to rule that
enforcement by execution of said agreement is the appropriate remedy under the
circumstances.

Considering that the Kasunduang Pag-

aayos is deemed rescinded by the non-
compliance of the respondent of the terms
thereof, remanding the case to the trial
court for the enforcement of said
agreement is clearly unwarranted.

The petitioner avers that the CA erred in remanding the case to the trial court for the
enforcement of the Kasunduang Pag-aayos as it prolonged the process, "thereby putting off
the case in an indefinite pendency."[25] Thus, the petitioner insists that she should be allowed
to ventilate her rights before this Court and not to repeat the same proceedings just to comply
with the enforcement of the Kasunduang Pag-aayos, in order to finally enforce her right to
payment.[26]

The CA took off on the wrong premise that enforcement of the Kasunduang Pag-aayos is the
proper remedy, and therefore erred in its conclusion that the case should be remanded to the
trial court. The fact that the petitioner opted to rescind the Kasunduang Pag-aayos means that
she is insisting upon the undertaking of the respondent under the original loan contract. Thus,
the CA should have decided the case on the merits, as an appeal before it, and not prolong the
determination of the issues by remanding it to the trial court. Pertinently, evidence abounds
that the respondent has failed to comply with his loan obligation. In fact, the Kasunduang
Pag-aayos is the well nigh incontrovertible proof of the respondent's indebtedness with the
petitioner as it was executed precisely to give the respondent a second chance to make good
on his undertaking. And since the respondent still reneged in paying his indebtedness, justice
demands that he must be held answerable therefor.
WHEREFORE, the petition is GRANTED. The assailed decision of the Court of Appeals
is SET ASIDE and the Decision of the Regional Trial Court, Branch 146, Makati City, dated
March 14, 2007 is REINSTATED.

SO ORDERED.

Carpio, (Chairperson), Perez, Sereno, and Perlas-Bernabe, JJ.* concur.

INUTAN VS. NAPAR CONTRACTING (2015) GR 195654

DEL CASTILLO, J.:

A judicially approved compromise agreement has the effect and authority of res judicata.[2] It
is final, binding on the parties, and enforceable through a writ of execution. Article 2041 of
the Civil Code, however, allows the aggrieved party to rescind the compromise agreement
and insist upon his original demand upon failure and refusal of the other party to abide by the
compromise agreement.

This Petition for Review on Certiorari[2] assails the August 27, 2010 Decision[3] of the Court
of Appeals (CA) in CA-G.R. SP No. 106724, which dismissed the Petition
for Certiorari filed by Reynaldo Inutan (Inutan), Helen Carte (Carte), Noel Ayson (Ayson),
Ivy Cabarle (Cabarle), Noel Jamili (Jamili), Maritess Hular (Hular), Rolito Azucena
(Azucena), Raymundo Tunog (Tunog), Jenelyn Sancho, Wilmar Bolonias, Roger Bernal
(Bernal), Agustin Estre (Estre), Marilou Sagun (Sagun), and Enrique Ledesma, Jr.
(Ledesma), against respondents Napar Contracting & Allied Services (Napar), Norman
Lacsamana (Lacsamana), Jonas International, Inc. (Jonas), and Philip Young (Young), and
affirmed the June 26, 2008 Decision[4] and October 14, 2008 Resolution[5] of the National
Labor Relations Commission (NLRC) in NLRC CA No. 041474-04 dismissing the
consolidated complaints against respondents for illegal dismissal with money claims on the
ground of res judicata. Likewise assailed is the CA's February 10, 2011 Resolution[6] which
denied the Motion for Reconsideration.

Factual Antecedents

Petitioners Inutan, Carte, Ayson, Cabarle, Jamili, Hular, Azucena, Tunog, Bernal, Estre,
Sagun, and Ledesma were employees of respondent Napar, a recruitment agency owned and
managed by respondent Lacsamana. Napar assigned petitioners at respondent Jonas, a
corporation engaged in the manufacture of various food products with respondent Young as
its President, to work as factory workers, machine operator, quality control inspector,
selector, mixer, and warehouseman.

Sometime in September of 2002, petitioners and other co-workers (complainants) filed before
the Arbitration Branch of the NLRC three separate complaints for wage differentials,
13th month pay, overtime pay, holiday pay, premium pay for holiday and rest day, service
incentive leave pay, and unpaid emergency cost of living allowance (ECOLA) against
respondents, docketed as NLRC NCR Case Nos. 09-76698-2002, 09-08152-2002, and 09-
08046-2002, which complaints were consolidated before Labor Arbiter Jaime M. Reyno (LA
Reyno).
On January 13, 2003, complainants and respondents entered into a Joint Compromise
Agreement[7] which reads:

JOINT COMPROMISE AGREEMENT

COMPLAINANTS and the RESPONDENTS, through their' respective counsel, respectfully

submit the following Compromise Agreement.

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

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

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

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

2. That the complainants shall be re-assigned by Napar Contracting and Allied Services
and shall ensure that they will be given work within forty five days (45) or until
February 26,2002;

3. That in case Napar Contracting and Allied Services failed to re assign or provide them
work, complainants shall be reinstated in their payroll or be given their salary
equivalent to the existing minimum wage x x x;

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

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

6. The parties herein respectfully pray unto this Honorable Commission to approve this
Compromise Agreement and thereafter an Order be issued declaring the judgment in
the above-entitled cases fully and completely satisfied.

IN WITNESS WHEREFORE, the parties have hereunto set their hands this 13 th day of
January 2003.[8]

In an Order[9] dated January 16, 2003, LA Reyno approved the Joint Compromise Agreement,
enjoined the parties to fully comply with its terms and dismissed the case without prejudice.

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

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

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

Proceedings before the Labor Arbiter

Sensing Napar's insincerity in discharging its obligation in reassigning them, complainants

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

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

Respondents, in their Position Paper,[13] claimed that they have fulfilled their obligation under
the agreement when Napar required complainants to report for work, to submit documentary
requirements, to undergo seminars and training, and to pass qualifying exams. They
contended that complainants were the ones who violated the agreement when they refused to
comply with the foregoing requirements in order to assess their working capabilities and
skills for their next posting. As such, they were deemed to have waived their right to be
reassigned. They argued that complainants should not have filed new complaints but should
have instead moved for the execution of the Joint Compromise Agreement. They then argued
that the Labor Arbiter who approved the said Joint Compromise Agreement or LA Reyno has
exclusive jurisdiction to act on the complaints.

In a Decision[14] dated July 29, 2004, Labor Arbiter Pablo C. Espiritu, Jr. (LA Espiritu) held
that the conditions of the Joint Compromise Agreement particularly regarding
reinstatement/reassignment of complainants were violated thereby justifying rescission of the
Joint Compromise Agreement. LA Espiritu noted that complainants were correct in re-filing
the complaints as this was an available remedy under the NLRC Rules of Procedure when
their previous complaints were dismissed without prejudice. He struck down respondents'
contention that a motion for execution of the compromise agreement was the proper remedy,
ratiocinating that the dismissal of the cases was approved without prejudice and therefore
cannot be the subject of an execution.

LA Espiritu then ruled that complainants were constructively dismissed as they were placed
on temporary off-detail without any work for more than six months despite being regular
employees of Napar. Doubting respondents' intention of reinstating complainants, LA
Espiritu observed that the submission of requirements and compliance with the procedures
for rehiring should not be imposed on complainants who are not newly-hired employees.
Thus, Napar and Lacsamana were held jointly and severally liable to pay complainants their
separation pay in lieu of reinstatement due to the already strainedrelations of the parties.

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

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

Proceedings before the National Labor Relations Commission

All parties appealed to the NLRC.

Complainants filed a partial appeal, arguing that LA Espiritu erred in not awarding
backwages as well as wage and 13th month pay differentials to nine of them.

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

In a Decision[17] dated June 26, 2008, the NLRC granted respondents' appeal. It ruled that the
approval of the Joint Compromise Agreement by LA Reyno operates as res judicata between
the parties and renders it unappealable and immediately executory. It held that complainants
had no cause of action when they re-filed their complaints for being barred by res judicata.
The NLRC, in disposing of the case, ordered the issuance of a writ of execution to enforce
the Joint Compromise Agreement, thus:

WHEREFORE, premises considered, the appeal of respondents is GRANTED, while that of

the complainants is DISMISSED for lack of merit. The Decision of Labor Arbiter Pablo C.
Espiritu, Jr. dated July 29, 2004 is REVERSED and SET ASIDE, and a new one is rendered
DISMISSING the above-entitled complaints for having been barred by res judicata. The
Order of Labor Arbiter Jaime Reyno dated January 16, 2003 finding the Compromise
Agreement entered into by the parties on January 13, 2003 to be in order and not contrary to
law and approving the same, stands valid, effective and should be enforced. Let the records of
this case be forwarded to the Labor Arbiter for the issuance of a writ of execution to enforce
the said Compromise Agreement.

SO ORDERED.[18]

Complainants filed a Motion for Reconsideration,[19] averring that the NLRC gravely erred in
ordering the issuance of a writ of execution despite the absence of a final judgment or a
judgment on the merits. They stand on their right to rescind the Joint Compromise Agreement
and to insist on their original demands when respondents violated the compromise agreement
and on their right to re-file their cases as sanctioned by the rules in cases of provisional
dismissal of cases,

Napar and Lacsamana, on the other hand, filed a Motion for Partial
Reconsideration[20] praying for the modification of the NLRC Decision in that complainants
be declared to have waived their right to their claims under the Joint Compromise Agreement
for likewise violating the agreement.

Both motions were denied in the NLRC Resolution[21] dated October 14, 2008.

Proceedings before the Court of Appeals

In their Petition for Certiorari[22] filed before the CA, complainants insisted on their right to
rescind the Joint Compromise Agreement under Article 2041[23] of the Civil Code and on
their right to re-file their complaints under Section 16, Rule V of the NLRC Rules of
Procedure.[24]

Napar and Lacsamana filed a Comment[25] on the Petition. Jonas and Young, however, failed
to file a comment. As the CA did not acquire jurisdiction over Jonas and Young and on the
basis of complainants' manifestation that Jonas and Young had already ceased operation,
Jonas and Young were dropped as party respondents by the CA in its Resolution[26] of
December 16, 2009.

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

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

SO ORDERED.[28]

Complainants filed a Motion for Reconsideration[29] but it was likewise denied by the CA in
its Resolution[30] dated February 10, 2011.

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

Issues
Petitioners presented the following issues:

WHETHER THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT

PETITIONERS' COMPLAINT IS ALREADY BARRED BY RES JUDICATA.

II

WHETHER THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT, IN

FILING THE SECOND COMPLAINT, THE PETITIONERS ARE ENFORCING THE
JOINT COMPROMISE AGREEMENT AND NOT RESCINDING IT. THUS, THE
PETITIONERS SHOULD HAVE MOVED FOR THE ISSUANCE OF A WRIT OF
EXECUTION BEFORE THE LABOR ARBITER INSTEAD OF FILING A SECOND
COMPLAINT.

III

WHETHER THE PETITIONERS ARE ENTITLED TO SEPARATION PAY IN LIEU OF

REINSTATEMENT AND FULL BACKWAGES.[31]

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

Napar and Lacsamana on the other hand, aver that petitioners' sole remedy was to move for
the execution of the Joint Compromise Agreement. They aver that petitioners cannot be
allowed to rescind the agreement after having violated the same and having already enjoyed
its benefits. After all, the Joint Compromise Agreement is final, binding and constitutes as res
judicata between them.

Our Ruling

The Petition has merit. Petitioners' right to rescind the Joint Compromise Agreement and
right to re-file their complaints must prevail.

Petitioners validly exercised the

option of rescinding the Joint
CompromiseAgreement under
Article 2041 of the Civil Code

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

Thus, a compromise agreement, once approved, has the effect of res judicata between the
parties and should not be disturbed except for vices of consent, forgery, fraud,
misrepresentation, and coercion.[34] A judgment upon compromise is therefore not
appealable, immediately executory, and can be enforced by a writ of execution. [35] However,
this broad precept enunciated under Article 2037[36] of the Civil Code has been qualified by
Article 2041 of the same Code which recognizes the right of an aggrieved party to either (1)
enforce the compromise by a writ of execution, or (2) regard it as rescinded and insist upon
his original demand, upon the other party's failure or refusal to abide by the compromise. In a
plethora of cases,[37] the Court has recognized the option of rescinding a compromise
agreement due to non-compliance with its terms. We explained in Chavez v. Court of
Appeals:[38]

A compromise has upon the parties the effect and authority of res judicata; but there shall be
no execution except in compliance with a judicial compromise.

Thus, we have held that a compromise agreement which is not contrary to law, public order,
public policy, morals or good customs is a valid contract which is the law between the parties
themselves. It has upon them the effect and authority of res judicata even if not judicially
approved, and cannot be lightly set aside or disturbed except for vices of consent and forgery.
However, in Heirs of Zari, et al v. Santos, we clarified that the broad precept enunciated in
Art, 2037 is qualified by Art. 2041 of the same Code, which provides:

If one of the parties fails or refuses to abide by the compromise, the other party may either
enforce the compromise or regard it as rescinded and insist upon his original demand.
We explained, viz.:

[B]efore the onset of the new Civil Code, there was no right to rescind compromise
agreements. Where a party violated the terms of a compromise agreement, the only recourse
open to the other party was to enforce the terms thereof.

When the new Civil Code came into being, its Article 2041 xxx created for the first time the
right of rescission. That provision gives to the aggrieved party the right to "either enforce the
compromise or regard it as rescinded and insist upon his original demand." Article 2041
should obviously be deemed to qualify the broad precept enunciated in Article 2037 that "[a]
compromise has upon the parties the effect and authority of res judicata.
In exercising the second option under Art. 2041, the aggrieved party may, if he chooses,
bring the suit contemplated or involved in his original demand, as if there had never been any
compromise agreement, without bringing an action for rescission. This is because he may
regard the compromise as already rescinded by the breach thereof of the other party.

To reiterate, Article 2041 confers upon the party concerned the authority, not only to regard
the compromise agreement as rescinded but also, to insist upon his original demand. We find
that petitioners validly exercised this option as there was breach and non-compliance of the
Joint Compromise Agreement by respondents.

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

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

"We have held that management is free to regulate, according to its own discretion and
judgment, all aspects of employment, including hiring, work assignments, working methods,
time, place and manner of work, processes to be followed, supervision of workers, working
regulations, transfer of employees, work supervision, lay off of workers and discipline,
dismissal and recall of workers. The exercise of management prerogative, however, is not
absolute as it must be exercised in good faith and with due regard to the rights of
labor."[40] Such "cannot be used as a subterfuge by the employer to rid himself of an
undesirable worker."[41]

Respondents' non-compliance with the strict terms of the Joint Compromise Agreement of
reassigning petitioners and ensuring that they will be given work within the required time
constitutes repudiation of the agreement. As such, the agreement is considered rescinded in
accordance with Article 2041 of the Civil Code. Petitioners properly chose to rescind the
compromise agreement and exercised the option of filing anew their complaints, pursuant to
Art. 2041. It was error on the part of the CA to deny petitioners the right of rescission.

Still, respondents insist that petitioners cannot seek rescission for they have already enjoyed
the benefits of the Joint Compromise Agreement. According to respondents, petitioners'
acceptance of the amount of P7,000.00 each bars them from repudiating and rescinding the
agreement.

The contention lacks merit for the following reasons. First, petitioners never accepted the
meager amount of P7,000.00 as full satisfaction of their claims as they also expected to be
reassigned and reinstated in their jobs. In other words, their acceptance of the amount of
P7,000.00 each should not be interpreted as full satisfaction of all their claims, which
included reinstatement in their jobs. The amount of P7,000.00 is measly compared to the
amount of monetary award granted by LA Espiritu and therefore makes the agreement
unconscionable and against public policy,[42] At this point, it is worth noting that even
quitclaims are ineffective in barring recovery for the full measure of the worker's rights and
that acceptance of benefits therefrom does not amount to estoppel.[43] Lastly, it must be
emphasized that the Joint Compromise Agreement expressly provided that each of the
complainants shall receive P7,000.00 as payment for their monetary claims and "which
amount shall be considered in any future litigation."[44] By virtue of this stipulation, the
parties in entering into the agreement did not rule out the possibility of any future claims in
the event of non-compliance. As correctly ruled by LA Espiritu, this proviso showed that
petitioners were not barred from raising their money claims in the future.

Section 16 of Rule V of the NLRC Rules

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

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

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

In view of the foregoing, we find that both the NLRC and CA gravely erred in dismissing
petitioners' Complaints on the ground of res judicata. LA Espiritu correctly assumed
jurisdiction and properly took cognizance of petitioners' consolidated complaints for illegal
dismissal and other monetary claims.

Petitioners are entitled to separation pay

and full backwages as well as to the other
monetary awards granted by the
Labor Arbiter

We, likewise, subscribe to LA Espiritu's ruling that petitioners, as regular employees, are
deemed to have been constructively and illegally dismissed by respondents. Being on floating
status and off-detailed for more than six months, not having been reinstated and reassigned
by respondents, petitioners are considered to have been constructively dismissed.[48] Settled is
the rule that an employee who is unjustly dismissed from work shall be entitled to
reinstatement, or separation pay if reinstatement is no longer viable, and to his full
backwages.[49]

LA Espiritu awarded petitioners separation pay in lieu of reinstatement. The Court agrees that
the award of separation pay is warranted due to the already strained relations between the
parties.50 However, aside from separation pay, petitioners, for having been illegally
dismissed, should also be awarded full backwages, inclusive of allowances and their other
benefits or their monetary equivalent computed from November 9, 2002 (the date of their last
work assignment or from the time compensation was withheld from them) up to the date of
finality of this Decision.

While petitioners failed to raise the matter of entitlement to backwages before the CA, this
does not prevent the Court from considering their entitlement to the same. The Court has
discretionary authority to take up new issues on appeal if it finds that their consideration is
necessary in arriving at a just decision.

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

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

SO ORDERED.

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

concur.

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

ERNEST BERG, PLAINTIFF AND APPELLANT VS. NATIONAL CITY BANK OF NEW
YORK, DEFENDANT AND APPELLANT.

DECISION

PAREDES, J.:
In 1941, shortly before the outbreak of the war, the Red Star Stores, Inc. was indebted to the
National City Bank of New York, Manila Branch, hereinafter called the Bank, in the amount
of $19,956.75 representing certain import bills purchased by said Bank. This obligation was
guaranteed by Ernest Berg, hereinafter referred to as plaintiff, and by his brother, Alfred
Berg. During the Japanese occupation, the Bank of Taiwan required the Red Star Stores, Inc.
to liquidate its obligation and, accordingly, plaintiff paid the same in full.

After liberation, the Bank reopened and established a department to revise all prewar
accounts and take such stops as may be necessary to recover them. This department sent a
letter to the Red Star Stores, Inc. requesting it to indicate the steps it wanted to take to
liquidate its prewar obligation. On November 1, 1945, plaintiff contacted the officials of the
Bank telling them that he had already settled the account with the Bank of Taiwan during the
Japanese occupation, but said officials intimated that they could not regard such payment as
discharging the obligation and requested that it be paid. Plaintiff acknowledged his
indebtedness and agreed to pay the same but stated that he desired to consult first his lawyers
as to the possible effect of the cases then pending on the validity of wartime payments in
Japanese military notes. Subsequently, on February 1, 1946, plaintiff informed the Bank that
he was willing to compromise his ease by paying, the indebtedness provided the Bank forego
its claim as to interest. This offer was approved and on February 15, 1948, plaintiff signed an
acknowledgment of the debt and an agreement relative to its liquidation (Exhibit I). On
March 23, 1946, plaintiff informed the Bank that, as. the sale of his real property had been
delayed, he would not be able to make payment as agreed upon, but that, in the meantime, he
would execute a note and a pledge-placing as security the 8,300 shares of Filipinas Compaña
de Seguros registered in his name. This Was done and the agreement was subsequently
executed.

On March 12, 1946, the Court of First Instance of Manila decided the case of Haw Pia vs.
China Banking Corporation holding that payments made in Japanese-military currency to the
Bank of Taiwan did not operate to discharge the obligations, but on April 9, 1948, the
decision was reversed by the Supreme Court holding said payments to be valid (G. R. No. L-
554)*. On June 22,, 1946, having been advised that his note was falling due, plaintiff made a
partial payment of P4,913.50 and was given an extension of 30 days to pay the balance. On
July 21, 1946, a second notice was given plaintiff for the payment of the balance, and on July
31, plaintiff sent a letter authorizing the Bank to sell the shares he had pledged to secure his
debt and to deposit the balance, if any, in his personal account. This was done thereby
liquidating the account of plaintiff.

On September 27, 1848, plaintiff demanded from the Bank the repayment of the money paid
by him relying on the decision of the Supreme Court in the Haw Pia ease. The Bank replied
that the case of the plaintiff had been compromised and can no longer be reopened.
Whereupon on April 13, 1949, plaintiff commenced the present action to recover the amount
paid, plus the sum of P33,000 as, damages.

In his complaint, plaintiff alleged that notwithstanding the fact that he had already paid his
debt to the Bank of Taiwan, defendant, by the use of deceit, fraud, threat and intimidation still
forced him to compromise his case as a result of which defendant sold his 3,300 shares of the
Filipinas Compaña de Seguros and retained the sum of P35,172.62 to pay the debt he had
already paid to the Bank of Taiwan. Defendant, in turn, denied the charge and alleged that
plaintiff paid the sum of P35,172.62 as a result of a compromise entered into for good and
valuable consideration. And on May 29, 1950, the court rendered judgment ordering
defendant to pay to plaintiff said amount of P35,172.62, with legal interest from August 6,
1946, plus the costs of action. No action was taken on the claim for damages. In due time,
both parties appealed from the decision, plaintiff insofar as the court ignored his claim for
damages, and defendant because of the adversed ruling rendered against it.

In holding that the second payment made by plaintiff to defendant of the old indebtedness
was improperly made and as a consequence the money paid should be returned in view of the
decision of the Supreme Court in the Haw Pia case, the trial court made the following
comments:

"There is not much to be discussed in this case. Was the payment made by the plaintiff during
the Japanese Administration valid? If it was valid, as the Court believes it to be, then the
obligation of the Red Store Co., Inc., was no longer existing' at the time the plaintiff made the
second payment. If there was no more obligation to pay, then the demand made by the
plaintiff for the payment of the obligation of the 'Red Stores Co., Inc.,' was illegal. Either
from the standpoint of the plaintiff? or from the standpoint of the defendant, the second
payment was most unjustified. If payment was made because of duress, threats, or
intimidation, plaintiff is entitled to the recovery cf the amount he paid. If payment was made
willingly and voluntarily in the belief that there was still an obligation to be paid, equity and
justice demand the return of the second payment for the reason that there was no more
obligation to be paid."
Under ordinary circumstances, the above ruling of the court would be correct for indeed
under Article 1895 of the old Civil Code, "If a thing is received where there was no right to
claim it, and which through an error has been unduly delivered, an obligation to restore the
same arises", and apparently here we have a duplication of payment. But in the present case
the situation is different, for here we find that plaintiff and defendant had entered into a
compromise whereby the formed agreed to pay his indebtedness provided the latter forego
the payment of the interest, and this compromise was arrived at when there was still
uncertainty as to the validity of the payments made to the Bank of Taiwan of prewar
obligations. Thus, on February 15, 1946, as a result of the negotiations had between plaintiff
and defendant, the latter sent to the former a letter of the following tenor:

"Mr. Ernest Berg

1340 Oregon St.

Manila

Red Star Stores, Inc.

Dear Mr. Berg':

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

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

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

Very truly yours.

(Sgd.) Fhed W. Hendbk

Sub-Manager

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

(Sgd.) Eknest Berg

Note that the letter says that it was a confirmation of a conversation had between plaintiff and
defendant regarding the settlement of the account previously had by the former the term of
which was that plaintiff would pay his account in full and defendant would waive the
payment of interest. Note also that at the foot of the letter there appears the following under
the signature of plaintiff: "1 hereby acknowledge the above indebtedness and confirm that it
will be fully liquidated." That this agreement has the nature of a compromise cannot be
denied for it was entered into to avoid "the provocation of a suit" which defendant was then
contemplating to take against plaintiff and his brother in the belief that the payment made to
the Bank of Taiwan was not valid (Article 1809, old Civil Code). Note that at that time the
decision of the Supreme Court in the Haw Pia case has not as yet been rendered. It being a
compromise, it is binding upon the parties (Article 1809, old Civil Code), and as such it has
"the same authority as res judicata" (Article 1816, Idem.).

It is true that plaintiff claims that the agreement Was forced upon him through deceit, fraud,
threat or intimidation, but the trial court did not predicate its decision on any of said grounds.
Apparently, the trial court was of the belief that a compromise can only be effected if the
claim to be settled was enforceable, which is not correct, for, as a rule, a compromise is
entered into not because it settles a valid claim but because it settles a controversy between
the parties. And here there was a real compromise when defendant waived the payment of
interest amounting to over $4,000.

" 'The compromise of any matter is valid and binding, not because it is the settlement of a
valid claim, but because it is the settlement of a controversy.
'In order to effect a compromise there must be a definite proposition and an acceptance. As a
question of law it does not matter from whom the proposition oil settlement comes; if one is
made and accepted, it constitutes a contract, and in the absence of fraud it is binding on both
parties.' (Page 870.)
'Hence it is a general rule in this country, that compromises are to be favored, without regard
to the nature of the controversy compromised, and that they cannot be set aside because the
event shows all the gain to have been on one side, and all the sacrifice on the other, if the
parties have acted in good faith, and with a belief of the actual existence of the rights which
they have respectively waived or abandoned; and if a settlement be made in regard to such
subject, free from fraud or mistake, whereby there is a surrender or satisfaction, in whole or
in part, of a claim upon one side in exchange for or in consideration of a surrender or
satisfaction of a claim in whole or in part, or of something of value, upon the other, however
baseless may be the claim upon either side or harsh the terms as to either of the parties, the
other cannot successfully impeach the agreement in a court of justice * * *. Where the
compromise is instituted and carried through in good faith, the fact that there was a mistake
as to the law or as to the facts, except in certain cases where the mistake was mutual and
correctable as such in equity, cannot afford a basis for setting a compromise aside or
defending against a suit brought thereon * * *. Furthermore, and as following the rule stated,
a compromise of conflicting claims asserted in good faith will not be disturbed because by a
subsequent judicial decision in an analogous case it appears that one party had no rights to
forego.(Pages 883, 884.)" (McCarthy vs. Barber Steamship Lines, 45 Phil., 488, 498-499)
But plaintiff insists that the compromise is null and void as the same has been extorted from
him by the officials of the Bank through deceit, fraud and intimidation. In this respect,
counsel for defendant says: "Mr. Berg claims that the compromise agreement was secured
from him by deceit, fraud and unlawful action by the bank. The bank is referred to as an
extortionist, and as a blackmailer, as being guilty of making illegal demands, of coercing Mr.
Berg, of resorting to misrepresentation, illegal distortion, deceit and insidous machinations.
Its acts are likened to those of a traffic policeman soliciting a bribe, on one hand, and to a
highwayman extracting money from a wayfarer at the point of a gun, on the other. Mr. Berg's
counsel states that Mr. Berg was compelled to settle because of fear for his life, of Jife
imprisonment or a heavy fine, and fear of financial ruin, the implication being that the bank
would cause these dire contingencies should Mr. Berg not pay the sums demanded" (p. 4,
Defendant's Memorandum).

But these imputations only find support in the testimony of plaintiff which were denied by
the officials of the Bank-In fact, they have not been substantiated. What plaintiff in effect
wanted to convey is that the officials of the Bank intimidated to him that unless the account is
settled, the Bank would bring an action against him or against Ms brother, Alfred Berg; that it
would not extend any further credit facilities to him or his business enterprises; and that it
would make use of its influence to prevent him from engaging in business in the Philippines.
The question then that arises is: Do these threats constitute duress under the law?

With regard to the first charge, we see nothing improper. It is a practice followed not only by
banks hut even by individuals to demand payment of their accounts with the threat that upon
failure to do so an action would be instituted in court. Such a threat is proper within the realm
of the law as a means to enforce collection. Such a threat cannot constitute duress even if the
claim proves to be unfounded so long as the creditor believes that it was his right to do so.
This, charge has no legal basis.

"One element of the early law of duress continues to exept, however its boundaries may be
otherwise extended. The present-be-must be wrongful, and not all pressure is wrongful. The
law provides certain means for the enforcement of their claims by creditors. It is not duress to
threaten to take these means. Therefore, a threat to bringing action or to resort to remedies
given by the contract is not such duties as to justify recission of a transaction induced
thereby, even though there is no legal right to enforce the claim, provided the threat is made
in good faith; that is, in the belief that a possible cause of action exists. But, if the threat is
made with the consciousness that there is no real right of action and the purpose is coercion, a
payment or contract induced thereby is voidable. In the former case, it may be said that the
threatened action was rightful; in the latter case, it was not." (Section 1606, Williston on
Contracts, Vol. V, pp. 4500-4W2.)

Plaintiff also contends that the Bank had intimated that it would not extend to him or his.
enterprise further credit facilities unless he settles the former debt of the* Red Star Stores,
Inc. Even if this were true, the same' cannot constitute duress that might invalidate the
settle. Blent, for there is nothing improper for a bank to decline further credit to any person
or entity as a means to enforce the collection of its. accounts if such is necessary to protect its
investment. In fact, such is the practice followed by most banking institutions for it goes
along way in the determination of the paying capacity of those who deal with. them.
Moreover, the banking business in the Philippines is extremely competitive. There are other
banks that are opened for business whose facilities plaintiff may avail of in case the threat is
carried out and if plaintiff is a good business risk he could certainly find accommodation in
any one of them if he so desires. The fact that plaintiff was then under indictment for treason
does not change the situation. This is rather a further reason for defendant to adopt a more
stringent measure against plaintiff because of the belief, grounded or otherwise, that the
collection of the account might be frustrated. Such circumstance should not be considered as
a desire on the part of defendant to harrass or aggravate the alleged political or financial
difficulties of plaintiff.

Plaintiff likewise contends that the officials of the Bank have threatened him with reprisals in
the sense that unless he settles his account they would make use of their influence to prevent
him from engaging in business in the Philippines. Not only is this claim inherently untenable
but it was flatly denied by the officials of the Bank. Certainly, plaintiff has not been able to
indicate in what manner does defendant or its officials expect to carry out the threat imputed
to them.

All things considered, we find the charges of plaintiff unfounded. And considering that, under
our law, intimidation can only exist "when one of the contracting parties is inspired with a
and well-grounded fear of suffering an imminent and serious injury to his person or property"
(Article 1267, old Civil Code), we are persuaded to conclude that the compromise in question
has been entered into voluntarily and, as such, is valid and binding.

Having reached this conclusion, we find it unnecessary to discuss the appeal taken by
plaintiff-appellant.

Wherefore, the decision appealed from is reversed, without pronouncement as to costs.

Paras, G. J., Bengzon, Padilla, Montemayor, Reyes, A., Labrador, Concepcion, Reyes, J. B.
L., Endencia and Felix, JJ., concur.