WBench1

FIRST DIVISION

[G.R. No. 140942. October 18, 2000]

BENIGNO M. SALVADOR, petitioner, vs. JORGE Z. ORTOLL, respondent.

D E C I S I O N

PARDO, J.:

What is before us is an appeal via certiorari to set aside the decision[1] of the Court of Appeals annulling the order of the Regional Trial Court, Branch 163, Pasig City which granted the issuance of a writ of execution in Civil Case No. 64798.[2]

The antecedent facts are as follows:

Respondent Jorge Z. Ortoll was the owner of a three-bedroom condominium unit at Alexandra Apartments in Pasig, Metro Manila. In December 1992, respondent Ortoll and petitioner Benigno M. Salvador entered into an option to purchase agreement which, for and in consideration of two hundred thousand (P200,000.00) pesos, granted petitioner Salvador the option to purchase the condominium unit within a period of six (6) months from December 1, 1992, for the total sum of six million four hundred thousand (P6,400,000.00) pesos, payable in cash.

Upon petitioner Salvador’s request, respondent Ortoll allowed him to occupy the condominium unit, subject to the condition that if petitioner Salvador failed to exercise the option within the agreed period, he would voluntarily vacate the premises without necessity of demand or judicial intervention. Moreover, petitioner Salvador would pay liquidated damages in the amount of five hundred thousand (P500,000.00) pesos should it become necessary to go to court to evict him from the property. The option to buy is not assignable, nor is there an intention to put the unit up for lease.

On May 28, 1993, petitioner Salvador informed respondent Ortoll that his bank approved his loan application in the amount of three million five hundred thousand (P3,500,000.00) pesos and asked that he be granted a few more weeks to complete the purchase price. However, on June 1, 1993, Atty. Domingo Gonzales, respondent Ortoll’s lawyer, sent petitioner Salvador a letter demanding that he vacate the property on June 30, 1993 and pay the amount of thirty five thousand (P35,000.00) pesos as usage fee of the condominium unit for the month of June 1993.

On June 7, 1993, petitioner Salvador informed respondent Ortoll that his bank, Monte de Piedad Savings and Loan Bank, increased his approved loan to ten million (P10,000,000.00) pesos and repeated his appeal to extend the period to exercise his option to purchase the condominium unit.

In a letter faxed on July 7, 1993, respondent Ortoll told petitioner Salvador that these proposals were not acceptable. The thirty five thousand (P35,000.00) pesos that he was asking Salvador to pay corresponded to the usage fee of the condominium unit for the duration covered by the option agreement, and not payment for the extension of the lease. If he were to grant the request for extension until August 31, 1993, Salvador must pay the option money to extend the option to purchase agreement of one hundred five thousand (P105,000.00) pesos.

Petitioner Salvador did not inform respondent Ortoll whether he was accepting the counter-proposal. Neither did he vacate the condominium unit nor pay the purchase price of six million four hundred (P6,400,000.00) pesos.

On September 15, 1993, respondent Ortoll filed with the Metropolitan Trial Court, Branch 68, Pasig City an action for ejectment.

On December 29, 1993, the Metropolitan Trial Court decided the case in favor of respondent Ortoll.[3] However, on appeal, the Regional Trial Court, Pasig City, on September 23, 1994, reversed the decision.[4]

On October 17, 1994, respondent Ortoll moved for reconsideration of the decision but the Regional Trial Court denied the motion.[5] Upon appeal via petition for review to the Court of Appeals, the appellate court reversed the decision of the Regional Trial Court and reinstated the decision of the Metropolitan Trial Court, with modification. The dispositive portion reads:

“WHEREFORE, premises considered, the decision of the court a quo is REVERSED and the MTC decision is REINSTITUTED with MODIFICATION that the private respondent shall pay to the petitioner, as plaintiff in the case the amount of P500,000.00 liquidated damages pursuant to the agreement between them.”[6]

Petitioner Salvador appealed to the Supreme Court.[7]

During the pendency of the appeal, petitioner Salvador initiated a new complaint with the Regional Trial Court, Branch 163, Pasig City[8] for specific performance and damages and prayed for the enforcement of the option to purchase agreement then pending with the Supreme Court.

To put an end to the case pending before the trial court, petitioner Salvador and respondent Ortoll entered into a compromise agreement, which the Regional Trial Court approved on June 28, 1996.[9] The pertinent provisions of the agreement provided that:

“1. Both parties have agreed to settle the case amicably with the plaintiff buying the Alexandra Unit E-251 of defendant for ELEVEN MILLION THREE HUNDRED THOUSAND PESOS (P11,300,000.00), under the following terms and conditions:

“A. TERMS OF PAYMENT

“A. 1. 50% or P5,650,000.00 payable on or before the 90^th day from execution of this compromise agreement; and, the balance of:

“A. 2. 50% or P5,650,000.00 payable on or before the 30^th day from due date of the first payment;

“A. 3. The total consideration of P11.3 Million shall be covered by two (2) separate post dated checks.

“A. 4. Jorge Z. Ortoll, to deliver CCT No. PT-7461 to Plaintiff upon encashment of second check covering the full payment together with the real estate taxes payment for 1996.

“B. OTHER TERMS AND CONDITIONS:

“B.1. The above consideration of P11.3 million shall be net CASH to defendant. Plaintiff have agreed to pay the EVAT, withholding tax, documentary stamps to be affixed to the Deed of Sale, transfer tax, registration expenses and all other incidental expenses to transfer title of subject property in the name of the buyer.

“B.2. As a further consideration of the compromise agreement, both parties have agreed to file a Joint Motion to Withdraw the Petition for Review docketed as G. R. No. 122164 (CA-G. R. SP No. 36531) now pending before the Supreme Court (Second Division) covering the same property subject matter of the above captioned complaint.

“B.3. Finally, both parties have agreed to waive any and all causes or rights of action each one may have against the other involving the said property.”[10]

Under the terms of the compromise agreement, petitioner Salvador would pay one half of the purchase price on or before September 26, 1996, and the other half thirty (30) days after, or on or before October 26, 1996. Petitioner Salvador failed to comply with these obligations, since payment was tendered only on October 28, 1996, two days late from the deadline.

On October 14, 1996, petitioner Salvador informed respondent Ortoll that his application for a loan of P11,300,000.00 had been approved by the United Coconut Planters Life Assurance Corporation (UCPLAC). However, the approved loan was for the account of Jasper Phils. Corporation, and subject to the condition that the deed of sale be issued in the name of Jasper Phils.

On October 16, 1996, respondent Ortoll informed petitioner Salvador that he would deliver the title upon full payment of the purchase price, including payment of taxes due thereon pursuant to the terms of the judgment by compromise. The following additional conditions were set:

(a) Salvador would pay an interest equivalent to 1.5% on the amount of P5,650,000.00 due and unpaid as of September 26, 1996;

(b) Salvador would pay rent for his possession and occupation of the condominium unit until the sale has been finalized;

(d) The seller would be Tamaraw Investors Management Enterprises, Inc. (TIME), who had purchased Ortoll’s interests on the condominium unit on August 25, 1997.

Petitioner Salvador agreed to pay the rent, but refused payment of interest on delayed payment and the value-added tax on the transaction.

On November 8, 1996, petitioner Salvador applied with the trial court for the issuance of writ of execution to implement the judgment by compromise. The Court granted the motion in an order dated January 28, 1997.[11] The trial court said that:

“Since both parties in this case claim rights which are not expressly embodied in their compromise agreement which were the bases of the decision of this Court in this case, and since plaintiff already has the amount ready for payment of the subject of their controversies, the Alexandra Unit E-251, this Court believes that it would be for the interest of both parties that defendant Jorge Z. Ortoll accepts the check for P11,300,000.00 and execute the deed of sale of Condominium Unit, Alexandra E-251, in favor of plaintiff, Benigno Salvador.

“WHEREFORE, premises considered, let a writ of execution be issued to enforce the decision of the Court in this case.”

On January 29, 1997, the trial court issued the writ of execution.

On February 7, 1997, respondent Ortoll moved to quash the writ of execution.[12] On March 11, 1997, the trial court denied the motion.[13] On March 17, 1997, the trial court gave due course to the appeal filed by respondent Ortoll and ordered the elevation of the records of the case to the Court of Appeals.[14]

In the appeal, respondent Ortoll alleged that the appealed order must be annulled on two grounds: (1) it substantially varied the terms of the judgment by compromise; and (2) he has unilaterally rescinded the compromise judgment due to petitioner Salvador’s failure to strictly comply with its terms.

On April 30, 1999, the Court of Appeals promulgated its decision ruling that the appealed order substantially deviated from and varied the terms of the compromise judgment. The appealed order extended the time of payment granted to the buyer and fixed “a new period for its fulfillment excusing him from the effects of his default and compelling defendant to accept a bilateral lump-sum payment of plaintiff’s obligations without any compensation for such delay.”[15]

The Court of Appeals sustained respondent Ortoll’s contention that by virtue of petitioner Salvador’s failure to comply with the terms of the compromise judgment, respondent Ortoll could exercise his right to unilaterally rescind the compromise judgment pursuant to the provisions of Article 2041 of the Civil Code. The seller of the condominium unit had no obligation to accept the tender of payment made by the buyer because the party making it was not the buyer and the tender was conditional and deficient. Hence, by virtue of the unilateral rescission, the compromise judgment has been rendered functus officio.

The dispositive portion of the decision provides that:

“WHEREFORE, finding the appeal meritorious, the appealed Order dated January 28, 1997 is hereby declared NULL AND VOID and it is hereby SET ASIDE.”[16]

On July 9, 1999, petitioner filed a motion for reconsideration.[17]

On November 4, 1999, the Court of Appeals denied petitioner’s motion for reconsideration.[18]

Hence, this petition.[19]

Petitioner Salvador contends that the appellate court erred in ruling that: (1) the writ of execution varied the terms of the compromise judgment; (2) he breached the compromise judgment, as a result of which, respondent Ortoll was entitled to unilaterally rescind the compromise agreement pursuant to Article 2041 of the Civil Code; and (3) respondent Ortoll was not estopped from exercising the right to rescind the compromise judgment.

We grant the petition.

The issues raised by the petitioner are as follows:

1. Whether the Court of Appeals erred in holding that the writ of execution issued by the lower court to execute the compromise agreement had the effect of substantially altering the compromise agreement and extending the time of plaintiff Salvador to pay the purchase price;

2. Whether the Court of Appeals erred in holding that the breach was substantial and thus entitled respondent Ortoll to unilaterally rescind the compromise judgment.

As to the first assigned error, we do not agree with the Court of Appeals that the writ of execution varied the terms of the compromise agreement. The main purpose of the compromise is to settle between the two parties the amount to be paid by petitioner as purchase price for the condominium unit. The writ of execution is simple. Petitioner is ordered to pay P11,300,000.00 and respondent to issue the corresponding deed of absolute sale. There was no substantial part that was changed by the writ of execution. The purchase price is the same and the other terms of the compromise were still incorporated therein.

This Court has time and again reiterated the ruling that if the parties could end their legal battles in an amicable way it would be to the best interest of the parties and the courts as well. “The law encourages the amicable settlement not only of pending cases but also disputes which might otherwise be filed in court,”[20] as what the trial court wished to avert when it issued the writ of execution dated January 28, 1997.

As to the second assigned error, it is very obvious that petitioner Ortoll as early as September 26, 1996, was aware of the non-payment of respondent Salvador since that was the date that Salvador was supposed to pay fifty per cent of the P11,300,000.00 purchase price for the condominium unit.

However, on October 16, 1996 respondent Ortoll still had communication with Salvador and the lending agency UCPLAC that the loan of Salvador was already approved for P11,300,000.00 but the same was in the name of JASPER Phils. On the same day, Ortoll did not register any objection to said arrangement and even wrote Salvador that he would accept full payment; Ortoll did not state in his letter that he was not agreeable with the arrangement that the purchase would be done in the name of Jasper Phils. Inc. What he stipulated in his letter were additional conditions, which would jack-up the purchase price to thirteen million pesos (P13,000,000.00). Such actions simply mean that he was still willing to push through with the compromise agreement, he was not rescinding the agreement but was adding new conditions to the compromise.

Petitioner Salvador contends that respondent Ortoll is estopped from rescinding the compromise judgment because of his representation that he would continue with the enforcement of the compromise judgment despite the breach. “Estoppel in pais arises when one, by his acts, representations or admissions, or by his own silence when he ought to speak out, intentionally or through culpable negligence, induces another to believe certain facts to exist and such other rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted to deny the existence of such facts.”[21]

With respondent Ortoll’s constant communication through his representatives on the status of the loan of petitioner Salvador and his letter of October 16, 1996, agreeing to the purchase after full payment, it is clear that he was not rescinding the compromise agreement and was pushing through with the sale. The only issue that caused the institution of this case was the demand by Ortoll of additional interest that was not in the original compromise agreement. It is respondent Ortoll who wished to change the stipulations in the compromise agreement.

The greater interest at stake in this case is the end to litigation and the settling of the dispute as to the purchase of the condominium unit, for which the parties entered into a compromise agreement which has the force and effect of a judgment and is considered final and executory. “It is well-settled that a judicial compromise has the effect of res judicata and is immediately executory and not appealable unless a motion to set aside the same is filed on the ground of fraud, mistake or duress, in which event an appeal may be filed from an order denying the same. A court can not set aside a judgment based on compromise without having declared in an incidental hearing that such a compromise is vitiated by any of the grounds for nullity enumerated in Article 2038 of the Civil Code.”[22]

WHEREFORE, the Court grants the petition, and annuls and sets aside the decision of the Court of Appeals in CA-G. R. CV No. 54740.

IN LIEU THEREOF, the Court reinstates the order dated January 28, 1997, of the Regional Trial Court, Branch 163, Pasig City in Civil Case No. 64798, for the issuance of a writ of execution to enforce the compromise decision of the court in the case.

No costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-Santiago, JJ., concur.