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Transcript of Cases on Special Contracts
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III. SUBJECT MATTER
A. REQUISITES OF A VALID SUBJECTMATTER: Articles 1459 1465
a.
G.R. No. L-4402 July 28, 1952
CANUTO MARTIN, petitioner,
vs.
MARIA REYES and PEDRO REVILLA, respondents.
Delgado and Flores for petitioner.
Ramon Diokono and Jose W. Diokno for respondents.
BENGSON,J.:
Coming from the Court of Appeals for revision, this
litigation presents two principal question: the price
at which the respondents were entitled to
repurchase the property, and the exercise of such
right within the period of redemption. Apparently
issues of fact, they really depend upon legal points,
as will presently be seen.
According to the Court of Appeals, the respondents
Pedro Revilla and Maria Reyes obtained from the La
Previsora Filipina sometime before November 18,1939 a loan of P6,500; and with the money, they the
price of a lot, with improvements, which they paid
had previously purchased from the Archibishop of
Manila. And they mortgaged the property to La
Previsora for the purpose of guaranteeing
repayment of the debt in installments with interest
at 12 per cent per annum.
It turned out later that Monte de Piedad y Caja de
Ahorros had obtained a judgment against Pedro
Revilla for the sum of P45,000 and had levied
execution therefor upon the property and its
rentals. Apprised of this development, the La
Previsora started foreclosure proceedings, alleging
non-payment of its credit by the mortgagors. The
conflicting interests were later the object of
amicable settlement among the parties, as a result
of which the herein respondents notarized the deed
Exhibit E whereby in satisfaction of their obligations
to La Previsora (then amounting to P8,204.60) they
ceded the property to the said institutions,reserving the right to repurchase for P8,204.60
within sixty days. The deed was acknowledged on
November 3, 1941.
It seems that La Previsora at the same time, or
immediately thereafter conveyed the property by
Exhibit C to petitioner Canuto Martin, who then
executed the document Exhibit D undertaking to
allow respondents to repurchase the property
within sixty days from October 31, 1941, but at the
price of P14,000. This document Exhibit D was
signed by Maria Reyes signifying her assent. At the
trial she pleaded that the document, without
embodying their true agreement, had been
obtained thru deceit and abuse of confidence.
However, her assertions were not credited by the
Court of Appeals. Nevertheless, that court declared
the document void (Exhibit D) for the only reasons
that it had been signed by Canuto Martin before
acquiring ownership of the property by the cession
of Maria Reyes and Pedro Revilla to the La
Previsora, and from the latter to them. The Court
noted that whereas Exhibit E was acknowledged
before the notary on November 3, 1941, Exhibit
Dbore the date October 30, 1941, a few days
before.
Wherefore the Court of Appeals held that the
respondent's right to repurchase was to be found in
Exhibit E, and that they had seasonably exercised
such right.
The validity of Exhibit D is the subject-matter of
Martin's principal attack on the appellate court's
judgment.
The documents Exhibits C, D and E were
undoubtedly part of the same amicable settlement.
Acknowledgment of the document Exhibit E was
delayed on account of the necessity of securing the
approval of the Monte de Piedad y Caja de Ahorros.
For that reason it bears the date November 3. The
arrangements were obviously: (a) transfer to La
Previsora with right to repurchase at P8,204.60; (b)
transfer by La Previsora to Canuto Martin and (c)
option to repurchase from Martin at P14,000.
Why at P14,00, when it is admitted that Martin got
the property at P7,000 from La Previsora the claims
of Monte de Piedad arising from the attachment
heretofore described.
The Court of Appeals pronounced Exhibit D invalidbecause at the time of its execution, Martin had no
title over the property. This is rather too technical a
viewpoint. Remembering that Exhibit D constituted
a part of the whole friendly settlement and could
be considered as simultaneous with the other
documents, specially the documents of transfer
from Maria Reyes and La Previsora, the disparity of
dates should imply no annulling consequences. At
any rate, Exhibit D may be placed in the same
category as a promise to convey land not yetowned by the vendor, obligation which may be
enforced, according to the authorities:
Property or goods which, at the time of the
sale, are not owned by the seller, but which
are thereafter to be acquired by him, cannot
be the subject of an executed sale, but may
be the subject of a contract for the future sale
and delivery thereof, and it has been held
that even though the contract is in the form
of the present sale it will not pass the title,after the goods have been acquired, until
the seller has done some act appropriating
them to the contract. Such a contract of the
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future sale and delivery of goods, which the
seller has not in possession but which he
intends to acquire by producing,
manufacturing, or purchasing before the
day of delivery, is valid as an executory
contract to be fulfilled by acquiring and
delivering the goods specified in the
contract, even though the acquisition of the
goods by the seller depends upon a
contingency which may or may not happen.
(55 Corpus Juris, 65). (Emphasis ours)
It is not unusual for persons to agree to
convey by a certain time, notwithstanding
they have no title to the land at the time of
the contract, and the validity of such
agreement is upheld. In such cases, the
vendor assume the risk of acquiring the title
and making the conveyance, or respondingin damages for the vendee's loss of his
bargain, One having an option to purchase
real estate has a legal right to enter into an
executory contract to sell the property.
Afortiori, it is not necessary that the vendor
be the absolute owner of the propertyat the
time he enters into agreement of sale
because the owner of the land, is as much
the subject of sale as is the land itself, and
whenever one is so suited with reference toa tract of land that he can acquire the title
thereto, either by the voluntary act of the
parties holding the title, or by proceeding at
law or in equity, he is in a position to make
a valid agreement for the sale thereof,
without disclosing the nature of his title. (55
American Jurisprudence, 480). (Emphasis
ours)
The above principles express the same the ideas in
articles 1462 and 1459 of the New Civil Code.
Therefore erroneous is the ruling that, because
executed before Canuto Martin became the owner,
Exhibit D, was null and void. Consequently, as Reyes
voluntarily agreed under Exhibit D, to repurchase at
P14,000, she should not repurchase at any other
price.
Now, have the respondents properly exercised their
right to repurchase?
The Court of Appeals stated that in December 1941,
Maria Reyes accompanied by Marcela Mota de
Malonso went to the office of La Previsora, not for
the purpose of repurchasing the property, but to ask
for extension of the period. Nevertheless, that Court
opined that inasmuch as the complaint to compel
repurchase had been filed on January 2, 1952 within
the sixty-day period mentioned in Exhibit E, the
vendors had preserved their redemption option.
Upon a move to reconsider, the Court of Appealsamplified its decision saying,
In view of the refusal of Atty. Pete A. Revilla
who was acting in behalf of appellee Canuto
Martin, to receive any amount less than
P14,000, nor to accept in behalf of the La
Previsora Filipina, claiming that the latter's
right were already ceded to appellee Canuto
Martin, we hold that the question to the
efficiency of the amount offered at the time
is not as vital to the issue as the necessity of
making one. . . . We find that the plaintiff
Maria Reyes, accompanied to one Marcela
Mota de Malonso did make an offer to
redeem the property in the property days of
December, 1941. Whether or not the
amount they had on that occasion was
sufficient to redeem the property at
P8,204.60 or P10,204.60 is not vital to the
preservation of the rights of the plaintiff's in
view of the refusal to accept any amountless than P14,000.
Having declared that Exhibit E was valid and that
the repurchase had to be made at P14,000, we must
necessarily conclude that under the above findings
of the Court of Appeals the right to repurchase had
not been preserved.
Nevertheless, let us suppose for the moment that
the rights of Revilla and Reyes are governed byExhibit E only-not by Exhibit D.
From the findings of the Court of Appeals it is to be
deduced that in December Maria Reyes offered to
redeem for less thanP8,204.60. The decision of the
court of first instance says "all the money she had
at that time was P7,000."
Now then: the repurchase price was P8,204.60 (on
the supposition that Exhibit E governs the parties'
rights); Maria Reyes offered to repay in DecemberP7,000 only. The fact that she was told Canuto
Martin wanted P14,000, does not excuse her
obligation to offer, within the time stipulated, the
full price for the repurchase: P8,204.60. If it was her
theory and position that she had a right to redeem
from La Previsora in accordance with Exhibit E, she
would have acted in accordance therewith by
offering P8,204.60 to La Previsora entirely
disregarding the demands of any other individual.
Undoubtedly, she failed to offer that amount.
Furthermore, there is no evidenceand the Court
of Appeals did not findthat Pedro Revilla was
actually authorized by La Previsora to refuse to
repurchase at P8,204.60.
Needless to add, the date of filing of the complaint
is immaterial, so long as it is filed within the period
of limitations, its purpose being to enforce a right
which must be established within the time to
repurchase.
Wherefore with the declaration that option to
repurchase, whether under Exhibit E or under
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Exhibit D, had not been asserted to the proper time,
we hereby absolve the petitioner Canuto Martin
from the complaint. Costs against respondents.
XXXXXXXXXXXXXXXXX
b.
G.R. No. 74470 March 8, 1989
NATIONAL GRAINS AUTHORITY and WILLLAM
CABAL, petitioners
vs.
THE INTERMEDIATE APPELLATE COURT and
LEON SORIANO, respondents.
Cordoba, Zapanta, Rola & Garcia for petitioner
National Grains Authority.
Plaridel Mar Israel for respondent Leon Soriano.
MEDIALDEA, J.:
This is a petition for review of the decision (pp. 9-
21, Rollo) of the Intermediate Appellate Court (now
Court of Appeals) dated December 23, 1985 in A.C.
G.R. CV No. 03812 entitled, "Leon Soriano, Plaintiff-
Appellee versus National Grains Authority and
William Cabal, Defendants Appellants", which
affirmed the decision of the Court of First Instance
of Cagayan, in Civil Case No. 2754 and its resolution
(p. 28, Rollo) dated April 17, 1986 which denied the
Motion for Reconsideration filed therein.
The antecedent facts of the instant case are as
follows:
Petitioner National Grains Authority (now National
Food Authority, NFA for short) is a government
agency created under Presidential Decree No. 4.
One of its incidental functions is the buying of
palay grains from qualified farmers.
On August 23, 1979, private respondent LeonSoriano offered to sell palay grains to the NFA,
through William Cabal, the Provincial Manager of
NFA stationed at Tuguegarao, Cagayan. He
submitted the documents required by the NFA for
pre-qualifying as a seller, namely: (1) Farmer's
Information Sheet accomplished by Soriano and
certified by a Bureau of Agricultural Extension
(BAEX) technician, Napoleon Callangan, (2) Xerox
copies of four (4) tax declarations of the riceland
leased to him and copies of the lease contract
between him and Judge Concepcion Salud, and (3)
his Residence Tax Certificate. Private respondent
Soriano's documents were processed and
accordingly, he was given a quota of 2,640 cavans
of palay. The quota noted in the Farmer's
Information Sheet represented the maximum
number of cavans of palay that Soriano may sell to
the NFA.
In the afternoon of August 23, 1979 and on the
following day, August 24, 1979, Soriano delivered630 cavans of palay. The palay delivered during
these two days were not rebagged, classified and
weighed. when Soriano demanded payment of the
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630 cavans of palay, he was informed that its
payment will be held in abeyance since Mr. Cabal
was still investigating on an information he received
that Soriano was not a bona tide farmer and the
palay delivered by him was not produced from his
farmland but was taken from the warehouse of a
rice trader, Ben de Guzman. On August 28, 1979,
Cabal wrote Soriano advising him to withdraw from
the NFA warehouse the 630 cavans Soriano
delivered stating that NFA cannot legally accept the
said delivery on the basis of the subsequent
certification of the BAEX technician, Napoleon
Callangan that Soriano is not a bona fide farmer.
Instead of withdrawing the 630 cavans of palay,
private respondent Soriano insisted that the palay
grains delivered be paid. He then filed a complaint
for specific performance and/or collection of
money with damages on November 2, 1979,against the National Food Authority and Mr.
William Cabal, Provincial Manager of NFA with the
Court of First Instance of Tuguegarao, and
docketed as Civil Case No. 2754.
Meanwhile, by agreement of the parties and upon
order of the trial court, the 630 cavans of palay in
question were withdrawn from the warehouse of
NFA. An inventory was made by the sheriff as
representative of the Court, a representative ofSoriano and a representative of NFA (p. 13, Rollo).
On September 30, 1982, the trial court rendered
judgment ordering petitioner National Food
Authority, its officers and agents to pay respondent
Soriano (as plaintiff in Civil Case No. 2754) the
amount of P 47,250.00 representing the unpaid
price of the 630 cavans of palay plus legal interest
thereof (p. 1-2, CA Decision). The dispositive
portion reads as follows:
WHEREFORE, the Court renders
judgment in favor of the plaintiff and
against the defendants National
Grains Authority, and William Cabal
and hereby orders:
1. The National Grains Authority,
now the National Food Authority, its
officers and agents, and Mr. William
Cabal, the Provincial Manager of the
National Grains Authority at the time
of the filing of this case, assigned at
Tuguegarao, Cagayan, whomsoever
is his successors, to pay to the
plaintiff Leon T. Soriano, the amount
of P47,250.00, representing the
unpaid price of the palay deliveries
made by the plaintiff to the
defendants consisting of 630 cavans
at the rate Pl.50 per kilo of 50 kilos
per cavan of palay;
2. That the defendants National
Grains Authority, now National Food
Authority, its officer and/or agents,
and Mr. William Cabal, the Provincial
Manager of the National Grains
Authority, at the time of the filing of
this case assigned at Tuguegarao,
Cagayan or whomsoever is his
successors, are likewise ordered to
pay the plaintiff Leon T. Soriano, the
legal interest at the rate of TWELVE
(12%) percent per annum, of the
amount of P 47,250.00 from the
filing of the complaint on November
20, 1979, up to the final payment of
the price of P 47,250.00;
3. That the defendants National
Grains Authority, now National Food
Authority, or their agents and duly
authorized representatives can nowwithdraw the total number of bags
(630 bags with an excess of 13 bags)
now on deposit in the bonded
warehouse of Eng. Ben de Guzman
at Tuguegarao, Cagayan pursuant to
the order of this court, and as
appearing in the written inventory
dated October 10, 1980, (Exhibit F
for the plaintiff and Exhibit 20 for the
defendants) upon payment of theprice of P 47,250.00 and TWELVE
PERCENT (12%) legal interest to the
plaintiff,
4. That the counterclaim of the
defendants is hereby dismissed;
5. That there is no pronouncement
as to the award of moral and
exemplary damages and attorney's
fees; and
6. That there is no pronouncement
as to costs.
SO ORDERED (pp. 9-10, Rollo)
Petitioners' motion for reconsideration of the
decision was denied on December 6, 1982.
Petitioners' appealed the trial court's decision to
the Intermediate Appellate Court. In a decision
promulgated on December 23, 1986 (pp. 9-21,
Rollo) the then Intermediate Appellate Court
upheld the findings of the trial court and affirmed
the decision ordering NFA and its officers to pay
Soriano the price of the 630 cavans of rice plus
interest. Petitioners' motion for reconsideration of
the appellate court's decision was denied in a
resolution dated April 17, 1986 (p. 28, Rollo).
Hence, this petition for review filed by the NationalFood Authority and Mr. William Cabal on May 15,
1986 assailing the decision of the Intermediate
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Appellate Court on the sole issue of whether or not
there was a contract of sale in the case at bar.
Petitioners contend that the 630 cavans of palay
delivered by Soriano on August 23, 1979 was made
only for purposes of having it offered for sale.
Further, petitioners stated that the procedure then
prevailing in matters of palay procurement from
qualified farmers were: firstly, there is a rebagging
wherein the palay is transferred from a private sack
of a farmer to the NFA sack; secondly, after the
rebagging has been undertaken, classification of
the palay is made to determine its variety; thirdly,
after the determination of its variety and convinced
that it passed the quality standard, the same will be
weighed to determine the number of kilos; and
finally, it will be piled inside the warehouse after the
preparation of the Warehouse Stock Receipt (WSP)
indicating therein the number of kilos, the varietyand the number of bags. Under this procedure,
rebagging is the initial operative act signifying
acceptance, and acceptance will be considered
complete only after the preparation of the
Warehouse Stock Receipt (WSR). When the 630
cavans of palay were brought by Soriano to the
Carig warehouse of NFA they were only offered for
sale. Since the same were not rebagged, classified
and weighed in accordance with the palay
procurement program of NFA, there was noacceptance of the offer which, to petitioners' mind
is a clear case of solicitation or an unaccepted offer
to sell.
The petition is not impressed with merit.
Article 1458 of the Civil Code of the Philippines
defines sale as a contract whereby one of the
contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing,
and the other party to pay therefore a price certainin money or its equivalent. A contract, on the other
hand, is a meeting of minds between two (2)
persons whereby one binds himself, with respect to
the other, to give something or to render some
service (Art. 1305, Civil Code of the Philippines). The
essential requisites of contracts are: (1) consent of
the contracting parties, (2) object certain which is
the subject matter of the contract, and (3) cause of
the obligation which is established (Art. 1318, Civil
Code of the Philippines.
In the case at bar, Soriano initially offered to sell
palay grains produced in his farmland to NFA.
When the latter accepted the offer by noting in
Soriano's Farmer's Information Sheet a quota of
2,640 cavans, there was already a meeting of the
minds between the parties. The object of the
contract, being the palay grains produced in
Soriano's farmland and the NFA was to pay the
same depending upon its quality. The fact that the
exact number of cavans of palay to be delivered hasnot been determined does not affect the perfection
of the contract. Article 1349 of the New Civil Code
provides: ". . .. The fact that the quantity is not
determinate shall not be an obstacle to the
existence of the contract, provided it is possible to
determine the same, without the need of a new
contract between the parties." In this case, there
was no need for NFA and Soriano to enter into a
new contract to determine the exact number of
cavans of palay to be sold. Soriano can deliver so
much of his produce as long as it does not exceed
2,640 cavans.
In its memorandum (pp. 66-71, Rollo) dated
December 4, 1986, petitioners further contend that
there was no contract of sale because of the
absence of an essential requisite in contracts,
namely, consent. It cited Section 1319 of the Civil
Code which states: "Consent is manifested by the
meeting of the offer and the acceptance of the
thing and the cause which are to constitute the
contract. ... " Following this line, petitioners contendthat there was no consent because there was no
acceptance of the 630 cavans of palay in question.
The above contention of petitioner is not correct
Sale is a consensual contract, " ... , there is
perfection when there is consent upon the subject
matter and price, even if neither is delivered."
(Obana vs. C.A., L-36249, March 29, 1985, 135 SCRA
557, 560) This is provided by Article 1475 of the
Civil Code which states:
Art. 1475. The contract of sale is
perfected at the moment there is a
meeting of minds upon the thing
which is the object of the contract
and upon the price.
x x x
The acceptance referred to which determines
consent is the acceptance of the offer of one partyby the other and not of the goods delivered as
contended by petitioners.
From the moment the contract of sale is perfected,
it is incumbent upon the parties to comply with
their mutual obligations or "the parties may
reciprocally demand performance" thereof. (Article
1475, Civil Code, 2nd par.).
The reason why NFA initially refused acceptance of
the 630 cavans of palay delivered by Soriano is that
it (NFA) cannot legally accept the said delivery
because Soriano is allegedly not a bona fide farmer.
The trial court and the appellate court found that
Soriano was a bona fide farmer and therefore, he
was qualified to sell palay grains to NFA.
Both courts likewise agree that NFA's refusal to
accept was without just cause. The above factual
findings which are supported by the record should
not be disturbed on appeal.
ACCORDINGLY, the instant petition for review is
DISMISSED. The assailed decision of the then
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Intermediate Appellate Court (now Court of
Appeals) is affirmed. No costs.
XXXXXXXXXXXXXXXXXXXXXXXXX
c.
G.R. No. 126236 January 26, 2007
DOMINGO REALTY, INC. and AYALA STEEL
MANUFACTURING CO., INC., Petitioners,
vs.
COURT OF APPEALS and ANTONIO M.
ACERO, Respondents.
D E C I S I O N
VELASCO, JR.,J.:
Good judgment comes from experience, and often
experience comes from bad judgment.
Rita Mae Brown
The Case
This Petition for Review on Certiorari, under Rule 45
of the Revised Rules of Court, seeks the reversal of
the October 31, 1995 Decision1of the Court of
Appeals (CA) in CA-G.R. SP No. 33407, entitled
Antonio M. Acero v. Hon. Sofronio G. Sayo, et al.,
which annulled the December 7, 1987 Decision
based on a Compromise Agreement among
petitioner Domingo Realty, Inc. (Domingo Realty),
respondent Antonio M. Acero, and defendant Luis
Recato Dy in Civil Case No. 9581-P before the Pasay
City Regional Trial Court (RTC), Branch CXI; and the
August 28, 1996 Resolution2of the CA which
denied petitioners Motion for Reconsideration of
its October 31, 1995 Decision.
The Facts
On November 19, 1981, petitioner Domingo Realty
filed its November 15, 1981 Complaint3
with thePasay City RTC against Antonio M. Acero, who
conducted business under the firm name A.M.
Acero Trading,4David Victorio, John Doe, and Peter
Doe, for recovery of possession of three (3) parcels
of land located in Cupang, Muntinlupa, Metro
Manila, covered by (1) Transfer Certificate of Title
(TCT) No. (75600) S-107639-Land Records of Rizal;
(2) TCT No. (67006) S-107640-Land Records of
Rizal; and (3) TCT No. (67007) S-107643-Land
Records of Rizal (the "subject properties"). The said
lots have an aggregate area of 26,705 square
meters, more or less, on a portion of which Acero
had constructed a factory building for the
manufacture of hollow blocks, as alleged by
Domingo Realty.
On January 4, 1982, defendants Acero and Victorio
filed their December 21, 1981 Answer5to the
Complaint in Civil Case No. 9581-P. Acero alleged
that he merely leased the land from his co-
defendant David Victorio, who, in turn, claimed toown the property on which the hollow blocks
factory of Acero stood. In the Answer, Victorio
assailed the validity of the TCTs of Domingo Realty,
http://www.lawphil.net/judjuris/juri2007/jan2007/gr_126236_2007.html#fnt1http://www.lawphil.net/judjuris/juri2007/jan2007/gr_126236_2007.html#fnt1http://www.lawphil.net/judjuris/juri2007/jan2007/gr_126236_2007.html#fnt2http://www.lawphil.net/judjuris/juri2007/jan2007/gr_126236_2007.html#fnt2http://www.lawphil.net/judjuris/juri2007/jan2007/gr_126236_2007.html#fnt3http://www.lawphil.net/judjuris/juri2007/jan2007/gr_126236_2007.html#fnt3http://www.lawphil.net/judjuris/juri2007/jan2007/gr_126236_2007.html#fnt3http://www.lawphil.net/judjuris/juri2007/jan2007/gr_126236_2007.html#fnt4http://www.lawphil.net/judjuris/juri2007/jan2007/gr_126236_2007.html#fnt4http://www.lawphil.net/judjuris/juri2007/jan2007/gr_126236_2007.html#fnt4http://www.lawphil.net/judjuris/juri2007/jan2007/gr_126236_2007.html#fnt5http://www.lawphil.net/judjuris/juri2007/jan2007/gr_126236_2007.html#fnt5http://www.lawphil.net/judjuris/juri2007/jan2007/gr_126236_2007.html#fnt5http://www.lawphil.net/judjuris/juri2007/jan2007/gr_126236_2007.html#fnt5http://www.lawphil.net/judjuris/juri2007/jan2007/gr_126236_2007.html#fnt4http://www.lawphil.net/judjuris/juri2007/jan2007/gr_126236_2007.html#fnt3http://www.lawphil.net/judjuris/juri2007/jan2007/gr_126236_2007.html#fnt2http://www.lawphil.net/judjuris/juri2007/jan2007/gr_126236_2007.html#fnt1 -
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alleging that the said TCTs emanated from spurious
deeds of sale, and claimed that he and his
predecessors-in-interest had been in possession of
the property for more than 70 years.
On December 3, 1987, Mariano Yu representing
Domingo Realty, Luis Recato Dy6, and Antonio M.
Acero, all assisted by counsels, executed a
Compromise Agreement, which contained the
following stipulations, to wit:
1. That defendants admit and recognize the
ownership of the plaintiff over the property
subject of this case, covered by TCT No. S-
107639 (75600), S-107643 (67007), and S-
107640 (67006) with a total area of 26,705
square meters;
2. That defendant Luis Recato Dy admitsand recognizes that his title covered by TCT
No. 108027 has been proven not to be
genuine and that the area indicated therein
is inside the property of the plaintiff;
3. That defendant Acero admits that the
property he is presently occupying by way
of lease is encroaching on a portion of the
property of the plaintiff and assume[s] and
undertakes to vacate, remove and clear any
and all structures erected inside the
property of the plaintiff by himself and
other third parties, duly authorized and/or
who have an existing agreement with
defendant Acero, and shall deliver said
portion of the property of the plaintiff free
and clear of any unauthorized structures,
shanties, occupants, squatters or lessees
within a period of sixty (60) days from date
of signing of this compromise agreement.
Should defendant Acero fail in hisobligation to vacate, remove and clear the
structures erected inside the property of the
plaintiff within the period of 60 days afore-
mentioned, plaintiff shall be entitled to a
writ of execution for the immediate
demolition or removal of said structure to
fully implement this agreement; and
ejectment of all squatters and occupants
and lessees, including the dependents to
fully implement this agreement;
4. That plaintiff admits and recognizes that
defendant Luis Recato Dy bought and
occupied the property in good faith and for
value whereas defendant Acero leased the
portion of said property likewise in good
faith and for value hereby waives absolutely
and unconditionally all claims including
attorneys fees against both defendants in
all cases pending in any court whether by
virtue of any judgment or under the presentcomplaint and undertake to withdraw
and/or move to dismiss the same under the
spirit of this agreement;
5. That defendants likewise waive all claims
for damages including attorneys fees
against the plaintiff;
6. That plaintiff acknowledges the benefit
done by defendant Luis Recato Dy on the
property by incurring expenses in protecting
and preserving the property by way of
construction of perimeter fence and
maintaining a caretaker therein and plaintiff
has agreed to pay Luis Recato Dy the
amount of P100,000.00 upon approval of
this agreement by this Honorable Court.7
Acting on the Compromise Agreement, the Pasay
City RTC rendered the December 7, 1987 Decision
which adopted the aforequoted six (6) stipulations
and approved the Compromise Agreement.
To implement the said Decision, Domingo Realty
filed its January 21, 1988 Motion8asking the trial
court for permission to conduct a re-survey of the
subject properties, which was granted in the
January 22, 1988 Order.9
On February 2, 1988, respondent Acero filed his
January 29, 1988 Motion to Nullify the Compromise
Agreement,10claiming that the January 22, 1988
Order authorizing the survey plan of petitioner
Domingo Realty as the basis of a resurvey would
violate the Compromise Agreement since the whole
area he occupied would be adjudged as owned by
the realty firm.
On March 18, 1988, Acero filed a Motion to
Resurvey,11whereby it was alleged that the parties
agreed to have the disputed lots re-surveyed by the
Bureau of Lands. Thus, the trial court issued the
March 21, 1988 Order12directing the Director of
Lands to conduct a re-survey of the subjectproperties.
In his June 9, 1989 Report, Elpidio T. De Lara, Chief
of the Technical Services Division of the Lands
Management Section of the National Capital
Region - Department of Environment and Natural
Resources, submitted to the trial court Verification
Survey Plan No. Vs-13-000135. In the said
Verification Survey Plan, petitioners TCTs covered
the entire land occupied by the respondents
hollow block factory.13
On April 10, 1990, petitioner Ayala Steel
Manufacturing Co., Inc. (Ayala Steel) filed its March
30, 1990 Motion for Substitution alleging that it
had purchased the subject lots, attaching to the
motion TCT Nos. 152528, 152529, and 152530 all in
its name, as proof of purchase.14
The said motion was opposed by Acero claiming
that "this case has already been terminated inaccordance with the compromise agreement of the
parties, hence, substitution will no longer be
necessary and justified under the
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circumstances."15The motion was not resolved
which explains why both transferor Domingo Realty
and transferee Ayala Steel are co-petitioners in the
instant petition.
In its December 28, 1990 Order,16the trial court
directed Acero to conduct his own re-survey of the
lots based on the technical description appearing in
the TCTs of Domingo Realty and to have the re-
survey plans approved by the Bureau of Lands. The
Order resulted from Aceros contention that he
occupied only 2,000 square meters of petitioners
property.
Acero employed the services of Engr. Eligio L. Cruz
who came up with Verification Survey Plan No. Vs-
13-000185. However, when the said Verification
Survey Plan was presented to the Bureau of Lands
for approval, it was rejected because Engr. Cruzfailed to comply with the requirements of the
Bureau.17
On April 8, 1991, petitioners filed a Manifestation
with Motion praying for the denial of respondents
Motion to Nullify the Compromise Agreement and
for the approval of Verification Survey Plan No. Vs-
13-000135 prepared by Engr. Lara of the Bureau of
Lands. The Pasay City RTC issued the December 6,
1991 Order18denying respondent Aceros Motion
to Nullify the Compromise Agreement. As a
consequence, petitioners filed a Motion for
Execution on December 10, 1991.19
On January 6, 1992, respondent filed an undated
Manifestation20claiming, among others, that it was
on record that the Compromise Agreement was
only as to a portion of the land being occupied by
respondent, which is about 2,000 square meters,
more or less. He reiterated the same contentions in
his December 21, 1991 Manifestation.21
On January 13, 1992, respondent filed a Motion to
Modify Order Dated 6 December 91,22claiming
that the said Order modified the Compromise
Agreement considering that it allegedly involved
only 1,357 square meters and not the entire
lot;23and if not amended, the Order would deviate
from the principle that "no man shall enrich himself
at the expense of the other."
In its January 15, 1992 Order,24the trial court
approved the issuance of a Writ of Execution to
enforce the December 7, 1987 Decision. On
February 3, 1992, respondent Acero subsequently
filed a Motion for Reconsideration25of the January
15, 1992 Order arguing that the Order was
premature and that Verification Survey Plan No. Vs-
13-000135 violated the Compromise Agreement.
On January 18, 1992, the Pasay City Hall was gutted
by fire, destroying the records of the lower court,including those of this case. Thus, after
reconstituting the records, the trial court issued the
October 6, 1992 Order,26reiterating its January 15,
1992 Order and ordering the issuance of a Writ of
Execution.
On October 23, 1992, respondent filed a
Manifestation and Compliance,27alleging that
Verification Survey Plan No. Vs-13-000185 had
been approved by the Regional Director of the
DENR; thus, he moved for the annulment of the
October 6, 1992 Order granting the Writ of
Execution in favor of petitioners.
Given the conflicting Verification Survey Plans of
the parties, the trial court issued the October 11,
1993 Order28requiring the Bureau of Lands Director
to determine which of the two survey plans was
correct.
Subsequently, Regional Technical Director Eriberto
V. Almazan of the Land Registration Authorityissued the November 24, 1993 Order29cancelling
Verification Survey Plan No. Vs-13-000185,
submitted by Engineer Eligio Cruz, who was hired
by respondent Acero, and declared Verification
Survey Plan No. Vs-13-000135, submitted by
Engineer Lara of the Bureau of Lands, as the correct
Plan.
Thereafter, petitioners filed their January 12, 1994
Ex-parte Manifestation with Motion,30praying for
the implementation of the Writ of Execution against
the disputed lands, which was granted in the
January 12, 1994 Order.31
Respondents Motion for Reconsideration32of the
January 12, 1994 Order was denied in the February
1, 1994 Order33of the Pasay City RTC.
Aggrieved, respondent Acero filed before the CA
his February 23, 1994 Petition for Certiorari and
Mandamus with Urgent Prayer for Issuance of aTemporary Restraining Order,34under Rule 65 of
the Rules of Court, against petitioners and Judge
Sofronio G. Sayo as presiding judge of the lower
court. In the petition, respondent sought to nullify
and set aside the RTC Orders dated December 6,
1991, January 15, 1992, October 6, 1992, January
12, 1994, and February 1, 1994, all of which pertain
to the execution of the December 7, 1987 Decision
on the Compromise Agreement. Significantly,
respondent did not seek the annulment of said
judgment but merely reiterated the issue that under
the Compromise Agreement, he would only be
vacating a portion of the property he was
occupying.
The Ruling of the Court of Appeals
On October 31, 1995, the CA promulgated the
assailed Decision, the fallo of which reads:
IN VIEW OF THE FOREGOING, the petition forcertiorari is GRANTED and the Orders of
respondent court dated December 6, 1991, January
15, 1992, October 6, 1992, and January 12, 1994,
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and February 1, 1994 are SET ASIDE. In the interest
of justice, and consistent with the views expressed
by this Court, the Compromise Judgment dated
December 7, 1987 of respondent court is likewise
SET ASIDE. Respondent Court is likewise directed to
proceed with the hearing of Civil Case No. 9581-P
on the merits and determine, once and for all, the
respective proprietary rights of the litigants thereto.
SO ORDERED.35
In discarding the December 7, 1987 Decision based
on the Compromise Agreement, the appellate court
ratiocinated that David Victorio, the alleged lessor
of Acero, was not a party to the Compromise
Agreement; thus, there would always remain the
probability that he might eventually resurface and
assail the Compromise Agreement, giving rise to
another suit. Moreover, the CA found theCompromise Agreement vague, not having
stipulated a mutually agreed upon surveyor, "who
would survey the properties using as a basis, survey
plans acceptable to both, and to thereafter submit
a report to the court."36
Likewise, the CA sustained Aceros belief that he
would only have to vacate a portion of the property
he was presently occupying, which was tantamount
to a mistake that served as basis for the nullification
of the Compromise Agreement entered into.
On January 17, 1996, petitioners filed a Motion for
Reconsideration37of the adverse Decision, which
was consequently rejected in the CAs August 28,
1996 Resolution.
Thus, the instant petition is in our hands.
The Issues
The issues as stated in the petition are as follows:
1. The respondent Court of Appeals erred in
nullifying and setting aside judgment on
Compromise Agreement and the
Compromise Agreement itself as well as the
subsequent orders of the court a quo
though there is no motion to set aside the
judgment on the Compromise Agreement
before the court a quo on the ground of
fraud, mistake or duress;
2. The respondent Court of Appeals erred in
nullifying and setting aside the judgment on
Compromise Agreement and the
Compromise Agreement itself as well as the
subsequent Orders of the Court of quo [sic]
though in the Petition for Certiorari and
Mandamus before respondent Court of
Appeals, private respondent argued that
judgment on Compromise Agreement isfinal, executory, immutable and unalterable;
3. The respondent Court of Appeals erred in
nullifying and setting aside Judgment on
Compromise Agreement and the
Compromise Agreement itself as well as the
subsequent Orders of the Court a quo
based on fraud or mistake though said
issues were not raised before the Court a
quo, and no evidence was introduced to
substantiate fraud or mistake before the
court a quo;
4. The respondent Court of Appeals erred
when it ruled that the non-inclusion of one
of the parties in this case, and the
vagueness of the Compromise Agreement
are grounds to nullify and set aside the
Compromise Agreement; and
5. The respondent Court of Appeals erredwhen it entertained the Petition for
Certiorari and Mandamus though it was
filed beyond reasonable time if not barred
by laches.38
Restated, the issues are:
I.
WHETHER THE PETITION BEFORE THE COURT OF
APPEALS WAS FILED OUT OF TIME OR BARRED BY
LACHES;
II.
WHETHER THE NON-INCLUSION OF DAVID
VICTORIO WOULD NULLIFY THE COMPROMISE
AGREEMENT;
III.
WHETHER THE JUDGMENT ON COMPROMISE
AGREEMENT SHOULD BE SET ASIDE ON THE
GROUND OF VAGUENESS; AND
IV.
WHETHER THE JUDGMENT ON COMPROMISE
AGREEMENT SHOULD BE SET ASIDE ON THE
GROUND OF MISTAKE.
The Courts Ruling
The petition is meritorious.
The preliminary issue involves the query of what
proper remedy is available to a party who believes
that his consent in a compromise agreement was
vitiated by mistake upon which a judgment was
rendered by a court of law.
There is no question that a contract where theconsent is given through mistake, violence,
intimidation, undue influence, or fraud is voidable
under Article 1330 of the Civil Code. If the contract
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assumes the form of a Compromise Agreement
between the parties in a civil case, then a judgment
rendered on the basis of such covenant is final,
unappealable, and immediately executory. If one of
the parties claims that his consent was obtained
through fraud, mistake, or duress, he must file a
motion with the trial court that approved the
compromise agreement to reconsider the judgment
and nullify or set aside said contract on any of the
said grounds for annulment of contract within 15
days from notice of judgment. Under Rule 37, said
party can either file a motion for new trial or
reconsideration. A party can file a motion for new
trial based on fraud, accident or mistake, excusable
negligence, or newly discovered evidence.
On the other hand, a party may decide to seek the
recall or modification of the judgment by means of
a motion for reconsideration on the ground that"the decision or final order is contrary to law" if the
consent was procured through fraud, mistake, or
duress. Thus, the motion for a new trial or motion
for reconsideration is the readily available remedy
for a party to challenge a judgment if the 15-day
period from receipt of judgment for taking an
appeal has not yet expired. This motion is the most
plain, speedy, and adequate remedy in law to assail
a judgment based on a compromise agreement
which, even if it is immediately executory, can stillbe annulled for vices of consent or forgery.39
Prior to the effectivity of the 1997 Rules of Civil
Procedure on July 1, 1997, an order denying a
motion for new trial or reconsideration was not
appealable since the judgment in the case is not yet
final. The remedy is to appeal from the challenged
decision and the denial of the motion for
reconsideration or new trial is assigned as an error
in the appeal.40Under the present [1997] Rules of
Civil Procedure, the same rule was maintained thatthe order denying said motion is still unappealable
and the rule is still to appeal from the judgment
and not from the order rejecting the motion for
reconsideration/new trial.
If the 15-day period for taking an appeal has
lapsed, then the aggrieved party can avail of Rule
38 by filing a petition for relief from judgment
which should be done within 60 days after the
petitioner learns of the judgment, but not morethan six (6) months after such judgment or final
order was entered. Prior to the effectivity of the
1997 Rules of Civil Procedure in 1997, if the court
denies the petition under Rule 38, the remedy is to
appeal from the order of denial and not from the
judgment since said decision has already become
final and already unappealable.41However, in the
appeal from said order, the appellant may likewise
assail the judgment. Under the 1997 Rules of Civil
Procedure, the aggrieved party can no longer
appeal from the order denying the petition sincethis is proscribed under Section 1 of Rule 41. The
remedy of the party is to file a special civil action
for certiorari under Rule 65 from the order rejecting
the petition for relief from judgment.
The records of the case reveal the following:
1. December 3, 1987 the parties signed
the Compromise Agreement;
2. December 7, 1987 a decision/judgment
was rendered based on the December 3,
1987 Compromise Agreement;
3. February 2, 1988 Acero filed a Motion to
Nullify the Compromise Agreement;
4. December 6, 1991 the trial court denied
Aceros Motion to Nullify the Compromise
Agreement;
5. December 11, 1991 defendant Acero
received the December 6, 1991 Order which
denied said motion;42
6. December 26, 1991 the 15-day period
to appeal to the CA expired by the failure of
defendant Acero to file an appeal with said
appellate court;
7. January 15, 1992 the trial court issued
the Order which granted petitioners motion
for the issuance of a Writ of Execution;
8. October 6, 1992 the trial court
reiterated its January 15, 1992 Order
directing the issuance of a Writ of Execution
after the records of the case were lost in a
fire that gutted the Pasay City Hall;
9. January 12, 1994 the trial court issued
the Order which directed theimplementation of the Writ of Execution
prayed for by petitioners;
10. February 1, 1994 the trial court issued
the Order which denied respondents
Motion for Reconsideration of its January
12, 1994 Order; and
11. April 4, 1994 Acero filed with the CA a
petition for certiorari in CA-G.R. SP No.
33407 entitled Antonio M. Acero v.
Domingo Realty, Inc., et al.
In his undated Manifestation, respondent Acero
admitted having received a copy of the December
7, 1987 Decision on December 11, 1987. However, it
was only on February 2, 1988 when he filed a
Motion to Nullify the Compromise Agreement
which was discarded for lack of merit by the trial
court on December 6, 1991. If the Motion to Nullify
the Compromise Agreement is treated as a motionfor reconsideration and/or for new trial, then Acero
should have filed an appeal from the December 7,
1987 Decision and assigned as error the December
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6, 1991 Order denying said motion pursuant to the
rules existing prior to the 1997 Rules of Civil
Procedure. He failed to file such appeal but instead
filed a petition for certiorari under Rule 65 with the
CA on April 4, 1994. This is prejudicial to
respondent Acero as the special civil action of
certiorari is not the proper remedy. If the aggrieved
party does not interpose a timely appeal from the
adverse decision, a special civil action for certiorari
is not available as a substitute for a lost appeal.43
What respondent Acero should have done was to
file a petition for relief from judgment when he
became aware that he lost his right of appeal on
December 26, 1991. Even with this approach,
defendant Acero was also remiss.
In sum, the petition for certiorari instituted by
respondent Acero with the CA is a wrong remedy; asimple appeal to the CA would have sufficed. Since
the certiorari action is an improper legal action, the
petition should have been rejected outright by the
CA.
Assuming arguendo that a petition for certiorari
with the CA is the appropriate remedy, still, said
petition was filed out of time.
The petition before the CA was filed prior to the
effectivity of the 1997 Rules of Court when there
was still no prescribed period within which to file
said petition, unlike in the present Section 4 of Rule
65 wherein a Petition for Certiorari and Mandamus
must be filed within 60 days from notice of the
judgment, final order, or resolution appealed from,
or of the denial of the petitioners motion for new
trial or reconsideration after notice of judgment.
Section 4, Rule 65 previously read:
Section 4. Where petition filed.The petition may
be filed in the Supreme Court, or, if it relates to the
acts or omissions of an inferior court, or of a
corporation, board or officer or person, in a Court
of First Instance having jurisdiction thereof. It may
also be filed in the Court of Appeals if it is in aid of
its appellate jurisdiction.
Petitions for certiorari under Rules 43, 44 and 45
shall be filed with the Supreme Court.
Before the 1997 Rules of Civil Procedure became
effective on July 1, 1997, the yardstick to determine
the timeliness of a petition for certiorari under Rule
65 was the reasonableness of the time that had
elapsed from receipt of notice of the assailed
order/s of the trial court up to the filing of the
appeal with the CA.44In a number of cases, the
Court ruled that reasonable time can be pegged at
three (3) months.45
In the present case, the Order denying the Motion
to Nullify the Compromise Agreement was issued
on December 6, 1991. The petition for certiorari was
filed on April 4, 1994. The period of two (2) years
and four (4) months cannot be considered fair and
reasonable. With respect to the January 15, 1992
Order granting the writ of execution and the
October 6, 1992 Order directing the issuance of the
writ, it is evident that the petition before the CA
was filed more than three (3) months after the
receipt by respondent Acero of said orders and the
filing of the petition is likewise unreasonably
delayed.
On the second issue, petitioners assail the ruling of
the appellate court that David Victorio who is
claimed to be the lessor of Acero, and who is
impleaded as a defendant in Civil Case No. 9581-P,
was not made a party to the Compromise
Agreement and hence, he may later "assail the
compromise agreement as not binding upon him,
thereby giving rise to another suit."46
We find merit in petitioners position.
The CA was unable to cite a law or jurisprudence
that supports the annulment of a compromise
agreement if one of the parties in a case is not
included in the settlement. The only legal effect of
the non-inclusion of a party in a compromise
agreement is that said party cannot be bound by
the terms of the agreement. The Compromise
Agreement shall however be "valid and binding as
to the parties who signed thereto."47
The issue of ownership between petitioners and
David Victorio can be threshed out by the trial court
in Civil Case No. 9581-P. The proper thing to do is
to remand the case for continuation of the
proceedings between petitioners and defendant
David Victorio but not to annul the partial
judgment between petitioners and respondent
Acero which has been pending execution for 20years.
With regard to the third issue, petitioners assail the
ruling of the CA that the Compromise Agreement is
vague as there is still a need to determine the exact
metes and bounds of the encroachment on the
petitioners lot.
The object of a contract, in order to be considered
as "certain," need not specify such object with
absolute certainty. It is enough that the object is
determinable in order for it to be considered as
"certain." Article 1349 of the Civil Code provides:
Article 1349. The object of every contract must be
determinate as to its kind. The fact that the quantity
is not determinate shall not be an obstacle to the
existence of the contract, provided it is possible to
determine the same, without the need of a new
contract between the parties.
In the instant case, the title over the subject
property contains a technical description that
provides the metes and bounds of the property of
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petitioners. Such technical description is the final
determinant of the extent of the property of
petitioners. Thus, the area of petitioners property is
determinable based on the technical descriptions
contained in the TCTs.
Notably, the determination made by the Bureau of
Landsthat Verification Survey Plan No. Vs-13-
000135 is the correct Planis controlling and shall
prevail over Verification Survey Plan No. Vs-13-
000185 submitted by Acero. Findings of fact by
administrative agencies, having acquired expertise
in their field of specialization, must be given great
weight by this Court.48Even if the exact area of
encroachment is not specified in the agreement, it
can still be determined from the technical
description of the title of plaintiff which defendant
Acero admitted to be correct. Thus, the object of
the Compromise Agreement is considereddeterminate and specific.
Moreover, "vagueness" is defined in Blacks Law
Dictionary as: "indefinite, uncertain; not susceptible
of being understood."
A perusal of the entire Compromise Agreement will
negate any contention that there is vagueness in its
provisions. It must be remembered that in the
interpretation of contracts, an instrument must be
construed so as to give effect to all the provisions
of these contracts.49Thus, the Compromise
Agreement must be considered as a whole.
The alleged vagueness revolves around the term
"portion" in paragraph three (3) of the Compromise
Agreement,50taken together with paragraph one
(1) which we quote:
1. That defendants admit and recognize the
ownership of the plaintiff over the property subjectof this case, covered by TCT No. S-107639 (75600),
S-107643 (67007), and S-107640 (67006) with a
total area of 26,705 square meters;
x x x x
3. That defendant Acero admits that the property
he is presently occupying by way of lease is
encroaching on a portion of the property of the
plaintiff and assume and undertakes to vacate,
remove and clear any and all structures erected
inside the property of the plaintiff by himself and
other third parties, duly authorized and/or who
have an existing agreement with defendant Acero,
and shall deliver said portion of the property of the
plaintiff free and clear of any unauthorized
structures, shanties, occupants, squatters or lessees
within a period of sixty (60) days from date of
signing of this compromise agreement. Should
defendant Acero fail in his obligation to vacate,
remove and clear the structures erected inside theproperty of the plaintiff within the period of 60
days afore-mentioned, plaintiff shall be entitled to a
writ of execution for the immediate demolition or
removal of said structure to fully implement this
agreement; and ejectment of all squatters and
occupants and lessees, including the dependents to
fully implement this agreement. (Emphasis
supplied.)
Respondent harps on their contention that the term
"portion" in paragraph 3 of the Compromise
Agreement refers to the property which they are
occupying. Respondents interpretation of
paragraph 3 of the Compromise Agreement is
mistaken as it is anchored on his belief that the
encroachment on the property of petitioners is only
a portion and not the entire lot he is occupying.
This is apparent from his Supplement to his Petition
for Certiorari and Mandamus where he explained:
Petitioner [Acero] entered into this agreement
because of his well-founded belief and convictionthat a portion of the property he is occupying
encroaches only a portion of the property of private
respondent. In fine, only a portion of the property
petitioner is occupying (not all of it) encroaches on
a portion of the property of private respondent.51
This contention is incorrect. The agreement is clear
that respondent Acero admitted that "the property
he is presently occupying by way of lease is
encroaching on a portion of the property of the
plaintiff." Thus, whether it is only a portion or the
entire lot Acero is leasing that will be affected by
the agreement is of no importance. What controls
is the encroachment on the lot of petitioner
Domingo Realty regardless of whether the entire lot
or only a portion occupied by Acero will be covered
by the encroachment.
While it may be the honest belief of respondent
Acero that only a portion of the lot he is occupying
encroaches on the 26,705-square meter lot ofpetitioner Domingo Realty and later, Ayala Steel,
the Court finds that the true and real agreement
between the parties is that any encroachment by
respondent Acero on the lot of petitioners will be
surrendered to the latter. This is apparent from the
undertaking in paragraph 3 that defendant Acero
"undertakes to vacate, remove and clear any and all
structures erected inside the property of the
plaintiff." This prestation results from the admission
against the interest of respondent Acero that he"admits and recognizes the ownership of the
plaintiff (Domingo Realty)" over the subject lot. The
controlling word therefore is "encroachment"
whether it involves a portion of or the entire lot
claimed by defendant David Victorio. To reiterate,
the word "portion" refers to petitioners lot and not
that of Aceros. Contrary to the disposition of the
CA, we rule that the terms of the Compromise
Agreement are clear and leave no doubt upon the
intent of the parties that respondent Acero will
vacate, remove, and clear any and all structureserected inside petitioners property, the ownership
of which is not denied by him. The literal meaning
of the stipulations in the Compromise Agreement
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will control under Article 1370 of the Civil Code.
Thus, the alleged vagueness in the object of the
agreement cannot be made an excuse for its
nullification.
Finally, with regard to the fourth issue, petitioners
question the finding of the CA that the compromise
judgment can be set aside on the ground of
mistake under Article 2038 of the Civil Code,
because respondent Acero gave his consent to the
Compromise Agreement in good faith that he
would only vacate a portion of his lot in favor of
petitioner Domingo Realty.
We rule otherwise.
Articles 2038 and 1330 of the Civil Code allow a
party to a contract, on the ground of mistake, to
nullify a compromise agreement, viz:
Article 2038. A compromise in which there is
mistake, fraud, violence, intimidation, undue
influence, or falsity of documents, is subject to the
provisions of Article 1330 of this Code.
Article 1330. A contract where the consent is given
through mistake, violence, intimidation, undue
influence, or fraud is voidable (emphasis supplied).
"Mistake" has been defined as a "misunderstanding
of the meaning or implication of something" or "a
wrong action or statement proceeding from a faulty
judgment x x x."52
Article 1333 of the Civil Code of the Philippines
however states that "there is no mistake if the party
alleging it knew the doubt, contingency or risk
affecting the object of the contract."
Under this provision of law, it is presumed that theparties to a contract know and understand the
import of their agreement. Thus, civil law expert
Arturo M. Tolentino opined that:
To invalidate consent, the error must be excusable.
It must be real error, and not one that could have
been avoided by the party alleging it. The error
must arise from facts unknown to him. He cannot
allege an error which refers to a fact known to him,
or which he should have known by ordinary diligent
examination of the facts. An error so patent and
obvious that nobody could have made it, or one
which could have been avoided by ordinary
prudence, cannot be invoked by the one who made
it in order to annul his contract. A mistake that is
caused by manifest negligence cannot invalidate a
juridical act.53(Emphasis supplied.)
Prior to the execution of the Compromise
Agreement, respondent Acero was already aware of
the technical description of the titled lots ofpetitioner Domingo Realty and more so, of the
boundaries and area of the lot he leased from
David Victorio. Before consenting to the agreement,
he could have simply hired a geodetic engineer to
conduct a verification survey and determine the
actual encroachment of the area he was leasing on
the titled lot of petitioner Domingo Realty. Had he
undertaken such a precautionary measure, he
would have known that the entire area he was
occupying intruded into the titled lot of petitioners
and possibly, he would not have signed the
agreement.
In this factual milieu, respondent Acero could have
easily averted the alleged mistake in the contract;
but through palpable neglect, he failed to
undertake the measures expected of a person of
ordinary prudence. Without doubt, this kind of
mistake cannot be resorted to by respondent Acero
as a ground to nullify an otherwise clear, legal, and
valid agreement, even though the document may
become adverse and even ruinous to his business.
Moreover, respondent failed to state in the
Compromise Agreement that he intended to vacate
only a portion of the property he was leasing. Such
provision being beneficial to respondent, he, in the
exercise of the proper diligence required, should
have made sure that such matter was specified in
the Compromise Agreement. Respondent Aceros
failure to have the said stipulation incorporated in
the Compromise Agreement is negligence on hispart and insufficient to abrogate said agreement.
In Torres v. Court of Appeals,54which was also cited
in LL and Company Development and Agro-
Industrial Corporation v. Huang Chao Chun,55it was
held that:
Under Article 1315 of the Civil Code, contracts bind
the parties not only to what has been expressly
stipulated, but also to all necessary consequences
thereof, as follows:
ART. 1315. Contracts are perfected by mere
consent, and from that moment the parties are
bound not only to the fulfillment of what has been
expressly stipulated but also to all the
consequences which, according to their nature, may
be in keeping with good faith, usage and law.
It is undisputed that petitioners are educated and
are thus presumed to have understood the terms of
the contract they voluntarily signed. If it was not in
consonance with their expectations, they should
have objected to it and insisted on the provisions
they wanted.
Courts are not authorized to extricate parties from
the necessary consequences of their acts, and the
fact that the contractual stipulations may turn out
to be financially disadvantageous will not relieve
parties thereto of their obligations. They cannot
now disavow the relationship formed from suchagreement due to their supposed
misunderstanding of its terms.
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The mere fact that the Compromise Agreement
favors one party does not render it invalid. We
ruled in Amarante v. Court of Appeals that:
Compromises are generally to be favored and
cannot be set aside if the parties acted in good
faith and made reciprocal concessions to each
other in order to terminate a case. This holds true
even if all the gains appear to be on one side and
all the sacrifices on the other (emphasis supplied).56
One final note. While the Court can commiserate
with respondent Acero in his sad plight,
nonetheless we have no power to make or alter
contracts in order to save him from the adverse
stipulations in the Compromise Agreement.
Hopefully this case will serve as a precaution to
prospective parties to a contract involving titled
lands for them to exercise the diligence of areasonably prudent person by undertaking
measures to ensure the legality of the title and the
accurate metes and bounds of the lot embraced in
the title. It is advisable that such parties (1) verify
the origin, history, authenticity, and validity of the
title with the Office of the Register of Deeds and
the Land Registration Authority; (2) engage the
services of a competent and reliable geodetic
engineer to verify the boundary, metes, and bounds
of the lot subject of said title based on the technicaldescription in the said title and the approved
survey plan in the Land Management Bureau; (3)
conduct an actual ocular inspection of the lot; (4)
inquire from the owners and possessors of
adjoining lots with respect to the true and legal
ownership of the lot in question; (5) put up signs
that said lot is being purchased, leased, or
encumbered; and (6) undertake such other
measures to make the general public aware that
said lot will be subject to alienation, lease, or
encumbrance by the parties. Respondent Acero, forall his woes, may have a legal recourse against
lessor David Victorio who inveigled him to lease the
lot which turned out to be owned by another.
WHEREFORE, the petition is hereby GRANTED and
the assailed Decision and Resolution of the CA are
REVERSED. The questioned Orders of the Pasay City
RTC dated December 6, 1991, January 15, 1992,
October 6, 1992, January 12, 1994, and February 1,
1994, including the Decision dated December 7,1987, are AFFIRMED. The case is remanded to the
Pasay RTC, Branch III for further proceedings with
respect to petitioner Domingo Realtys November
15, 1981 Complaint57against one of the
defendants, David Victorio. No costs.
XXXXXXXXXXXXXXXXXXXXXXX
B. PARTICULAR KINDSa.
G.R. No. L-24732 April 30, 1968
PIO SIAN MELLIZA, petitioner,
vs.CITY OF ILOILO, UNIVERSITY OF THE
PHILIPPINES and THE COURT
APPEALS, respondents.
Cornelio P. Ravena for petitioner.
Office of the Solicitor General for respondents.
BENGZON, J.P.,J.:
Juliana Melliza during her lifetime owned, among
other properties, three parcels of residential land in
Iloilo City registered in her name under Original
Certificate of Title No. 3462. Said parcels of land
were known as Lots Nos. 2, 5 and 1214. The total
area of Lot No. 1214 was 29,073 square meters.
On November 27, 1931 she donated to the then
Municipality of Iloilo, 9,000 square meters of Lot
1214, to serve as site for the municipal hall. 1 The
donation was however revoked by the parties for
the reason that the area donated was foundinadequate to meet the requirements of the
development plan of the municipality, the so-called
"Arellano Plan". 2
Subsequently, Lot No. 1214 was divided by Certeza
Surveying Co., Inc. into Lots 1214-A and 1214-B.
And still later, Lot 1214-B was further divided into
Lots 1214-B-1, Lot 1214-B-2 and Lot 1214-B-3. As
approved by the Bureau of Lands, Lot 1214-B-1
with 4,562 square meters, became known as Lot
1214-B; Lot 1214-B-2, with 6,653 square meters,
was designated as Lot 1214-C; and Lot 1214-B-13,
with 4,135 square meters, became Lot 1214-D.
On November 15, 1932 Juliana Melliza executed an
instrument without any caption containing the
following:
Que en consideracion a la suma total de
SEIS MIL CUATRO CIENTOS VEINTIDOS
PESOS (P6,422.00), moneda filipina que porla presente declaro haber recibido a mi
entera satisfaccion del Gobierno Municipal
de Iloilo, cedo y traspaso en venta real y
difinitiva a dicho Gobierno Municipal de
Iloilo los lotes y porciones de los mismos
que a continuacion se especifican a saber: el
lote No. 5 en toda su extension; una porcion
de 7669 metros cuadrados del lote No. 2,
cuya porcion esta designada como sub-
lotes Nos. 2-B y 2-C del piano de
subdivision de dichos lotes preparado por la
Certeza Surveying Co., Inc., y una porcion de
10,788 metros cuadrados del lote No. 1214
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cuya porcion esta designada como sub-
lotes Nos. 1214-B-2 y 1214-B-3 del mismo
plano de subdivision.
Asimismo nago constar que la cesion y
traspaso que ariba se mencionan es de
venta difinitiva, y que para la mejor
identificacion de los lotes y porciones de los
mismos que son objeto de la presente, hago
constar que dichos lotes y porciones son los
que necesita el Gobierno Municipal de Iloilo
para la construccion de avenidas, parques y
City Hall site del Municipal Government
Center de iloilo, segun el plano Arellano.
On January 14, 1938 Juliana Melliza sold her
remaining interest in Lot 1214 to Remedios Sian
Villanueva who thereafter obtained her own
registered title thereto, under Transfer Certificate ofTitle No. 18178. Remedios in turn on November 4,
1946 transferred her rights to said portion