1. [G.R. No. 128066. June 19, 2000] law. The tenor of the letter, i.e.
law. The tenor of the letter, i.e., "This will confirm that Pure Foods has
JARDINE DAVIES INC., petitioner, vs. COURT OF APPEALS and
FAR EAST MILLS SUPPLY CORPORATION, respondents.
[G.R. No. 128069 June 19, 2000]
PURE FOODS CORPORATION, petitioner, vs. COURT OF
APPEALS and FAR EAST MILLS SUPPLY CORPORATION,
respondents.
FACTS:
This is rather a simple case for specific performance with damages which
could have been resolved through mediation and conciliation during its
infancy stage had the parties been earnest in expediting the disposal of
this case. They opted however to resort to full court proceedings and
denied themselves the benefits of alternative dispute resolution, thus
making the process more arduous and long-drawn.
1. petitioner PURE FOODS CORPORATION decided to install two
(2) 1500 KW generators in its food processing plant in San
Roque, Marikina City.
2. a bidding for the supply and installation of the generators was
held. Out of the eight (8) prospective bidders, respondent
FEMSCO was awarded.
3. PUREFOODS wrote a letter to FEMSCO confirming the award
of bid where basic terms and conditions are also enumerated.
4. FEMSCO responded the letter and initially complied with the
terms.
5. PUREFOODS, however, wrote another letter to FEMSCO to
unilaterally cancel the award and before FEMSCO’s protest could
be resolved, awarded the bid to another party JARDINE DAVIES
INC.
6. FEMSCO filed for specific performance with damages.
7. PUREFOODS counter it by alleging that letter to FEMSCO was
not an acceptance of the latter's bid proposal and award of the
project but more of a qualified acceptance constituting a counter-
offer which required FEMSCO's express conforme. Since
PUREFOODS never received FEMSCOs conforme,
PUREFOODS was very well within reason to revoke its qualified
acceptance or counter-offer. Hence, no contract was perfected
between them.
ISSUE: won there is a perfected contract.
HELD: Yes. Contracts are perfected by mere consent, upon the acceptance
by the offeree of the offer made by the offeror. 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. To produce a contract,
the acceptance must not qualify the terms of the offer. However, the
acceptance may be express or implied. For a contract to arise, the
acceptance must be made known to the offeror. Accordingly, the
acceptance can be withdrawn or revoked before it is made known to the
offeror.
In the instant case, there is no issue as regards the subject matter of the
contract and the cause of the obligation. The controversy lies in the consent
- whether there was an acceptance of the offer, and if so, if it was
communicated, thereby perfecting the contract.
To resolve the dispute, there is a need to determine what constituted the
offer and the acceptance. Since petitioner PUREFOODS started the process
of entering into the contract by conducting a bidding, Art. 1326 of the Civil
Code, which provides that "[a]dvertisements for bidders are simply
invitations to make proposals," applies.
Accordingly, the Terms and Conditions of the Bidding disseminated by
petitioner PUREFOODS constitutes the "advertisement" to bid on the
project. The bid proposals or quotations submitted by the prospective
suppliers including respondent FEMSCO, are the offers. And, the reply of
petitioner PUREFOODS, the acceptance or rejection of the respective
offers.
Quite obviously, the letter of petitioner PUREFOODS to FEMSCO
constituted acceptance of respondent FEMSCOs offer as contemplated by
awarded to your firm (FEMSCO) the project," could not be more
categorical. While the same letter enumerated certain "basic terms and
conditions," these conditions were imposed on the performance of the
obligation rather than on the perfection of the contract.
2. G.R. No. 161003 May 6, 2005
FELIPE O. MAGBANUA, CARLOS DE LA CRUZ, REMY ARNAIZ,
BILLY ARNAIZ, ROLLY ARNAIZ, DOMINGO SALARDA, JULIO
CAHILIG and NICANOR LABUEN,petitioners, vs. RIZALINO UY,
respondent.
“Rights may be waived through a compromise agreement,
notwithstanding a final judgment that has already settled the rights of
the contracting parties. To be binding, the compromise must be shown
to have been voluntarily, freely and intelligently executed by the parties,
who had full knowledge of the judgment. Furthermore, it must not be
contrary to law, morals, good customs and public policy.”
Facts: As a final consequence of the final and executory decision of the
Supreme Court in Rizalino P. Uy v. National Labor Relations Commission,
et. al. which affirmed with modification the decision of the NLRC to
determine the amount of wage differentials due the eight (8) complainants
therein, now [petitioners]. As computed, the award amounted to
P1,487,312.69.
Petitioners filed a Motion for Issuance of Writ of Execution.
Respondent Rizalino Uy filed a Manifestation (May 19, 1997) requesting
that the cases be terminated and closed, stating that the judgment award as
computed had been complied with to the satisfaction of [petitioners]. Said
Manifestation was also signed by the eight (8) [petitioners]. Together with
the Manifestation is a Joint Affidavit (dated May 5, 1997) of [petitioners],
attesting to the receipt of payment from [respondent] and waiving all other
benefits due them in connection with their complaint.
Petitioners filed an Urgent Motion for Issuance of Writ of Execution (June
3, 1997) wherein they confirmed that each of them received P40,000 from
[respondent] on May 2, 1997.
Respondent opposed the motion on the ground that the judgment award
had been fully satisfied. In their Reply, [petitioners] claimed that they
received only partial payments of the judgment award.
Six (6) of the eight (8) [petitioners] filed a Manifestation (October 20, 1997)
requesting that the cases be considered closed and terminated as they are
already satisfied of what they have received (a total ofP320,000) from
[respondent]. Together with said Manifestation is a Joint Affidavit of the six
(6) [petitioners] attesting that they have no more collectible amount from
[respondent] and if there is any, they are abandoning and waiving the same.
The Labor Arbiter issued an order denying the motion for issuance of writ of
execution and [considered] the cases closed and terminated.
On appeal, the [National Labor Relations Commission (NLRC) reversed the
Labor Arbiter and directed the immediate issuance of a writ of execution,
holding that a final and executory judgment can no longer be altered and that
quitclaims and releases are normally frowned upon as contrary to public
policy.
The CA held that compromise agreements may be entered into even after a
final judgment. Thus, petitioners validly released respondent from any
claims, upon the voluntary execution of a waiver pursuant to the
compromise agreement.
Hence, this Petition.
Issue: Whether or not the final and executory judgment of the Supreme
Court could be subject to compromise settlement;
Held: Yes.
The Petition has no merit.
Validity of the Compromise Agreement
“A compromise agreement is a contract whereby the parties make reciprocal
concessions in order to resolve their differences and thus avoid or put an end
to a lawsuit. They adjust their difficulties in the manner they have agreed
upon, disregarding the possible gain in litigation and keeping in mind that
such gain is balanced by the danger of losing. Verily, the compromise may
be either extrajudicial (to prevent litigation) or judicial (to end a litigation).
A compromise must not be contrary to law, morals, good customs and
public policy; and must have been freely and intelligently executed by and
between the parties. To have the force of law between the parties, it must
comply with the requisites and principles of contracts. Upon the parties, it
has the effect and the authority of res judicata, once entered into.
When a compromise agreement is given judicial approval, it becomes more
than a contract binding upon the parties. Having been sanctioned by the
court, it is entered as a determination of a controversy and has the force and
effect of a judgment. It is immediately executory and not appealable, except
for vices of consent or forgery. The nonfulfillment of its terms and
conditions justifies the issuance of a writ of execution; in such an instance,
execution becomes a ministerial duty of the court.”
their winnings because of unscrupulous mechanisms meant to delay or
evade the execution of a final judgment.
3. [G.R. No. 141833. March 26, 2003]
LM POWER ENGINEERING CORPORATION, petitioner, vs.
CAPITOL INDUSTRIAL CONSTRUCTION GROUPS, INC.,
respondent.
FACTS: On February 22, 1983, Petitioner LM Power Engineering
Corporation and Respondent Capitol Industrial Construction Groups Inc.
entered into a Subcontract Agreement involving electrical work at the Third
Port of Zamboanga. [5]
On April 25, 1985, respondent took over some of the work contracted to
petitioner. [6] Allegedly, the latter had failed to finish it because of its
inability to procure materials. [7]
Upon completing its task under the Contract, petitioner billed respondent.
Contesting the accuracy of the amount, the latter refused to pay. Respondent
also took refuge in the termination clause of the Agreement. That clause
allowed it to set off the cost of the work that petitioner had failed to
undertake -- due to termination or take-over -- against the amount it owed
the latter.
Petitioner then filed a complaint for collection of the amount but respondent
filed a motion to dismiss on the ground that there was no prior recourse to
arbitration as stipulated in their contract.

The RTC ruled in favor of petitioner ordering that respondents pay the
Following these basic principles, apparently unnecessary is a compromise petitioner. However on appeal, the CA reversed the said decision. Hence this
agreement after final judgment has been entered. Indeed, once the case is present petition.
terminated by final judgment, the rights of the parties are settled. There are
no more disputes that can be compromised. ISSUE: Whether or not there exists a controversy/dispute between petitioner
and respondent regarding the interpretation and implementation of the Sub-
Compromise Agreements after Final Judgment Contract Agreement dated February 22, 1983 that requires prior recourse to
voluntary arbitration?
The Court is tasked, however, to determine the legality of a compromise
In the affirmative, whether or not the requirements provided in Article III [1]
agreement after final judgment, not the prudence of entering into one.
of CIAC Arbitration Rules regarding request for arbitration ha[ve] been
Petitioners vehemently argue that a compromise of a final judgment is
complied with?
invalid under Article 2040 of the Civil Code, which we quote:
HELD: Petitioner claims that there is no conflict regarding the
"Art. 2040. If after a litigation has been decided by a final judgment, a interpretation or the implementation of the Agreement. Thus, without having
compromise should be agreed upon, either or both parties being to resort to prior arbitration, it is entitled to collect the value of the services
unaware of the existence of the final judgment, the compromise may it rendered through an ordinary action for the collection of a sum of money
be rescinded. from respondent.

"Ignorance of a judgment which may be revoked or set aside is not a On the other hand, the respondent contends that there is a need for prior
valid ground for attacking a compromise." -irrelevant to the present arbitration as provided in the Agreement. This is because there are some
case disparities between the parties’ positions regarding the extent of the work
done, the amount of advances and billable accomplishments, and the set off
of expenses incurred by respondent in its take-over of petitioners work.
The first paragraph of Article 2040 refers to a scenario in which either or
both of the parties are unaware of a court’s final judgment at the time they
We side with respondent. Essentially, the dispute arose from the parties
agree on a compromise. In this case, the law allows either of them to rescind
incongruent positions on whether certain provisions of their Agreement
the compromise agreement. It is evident from the quoted paragraph that
could be applied to the facts. The instant case involves technical
such an agreement is not prohibited or void or voidable. Instead, a
discrepancies that are better left to an arbitral body that has expertise in
remedy to impugn the contract, which is an action for rescission, is declared
those areas. In any event, the inclusion of an arbitration clause in a
available. The law allows a party to rescind a compromise agreement,
contract does not ipso facto divest the courts of jurisdiction to pass upon
because it could have been entered into in ignorance of the fact that there
the findings of arbitral bodies, because the awards are still judicially
was already a final judgment. Knowledge of a decisions finality may affect
reviewable under certain conditions.
the resolve to enter into a compromise agreement.
Being an inexpensive, speedy and amicable method of settling disputes, [24]
Petitioners’ argument, therefore, fails to convince. Article 2040 of the Civil arbitration -- along with mediation, conciliation and negotiation -- is
Code does not refer to the validity of a compromise agreement entered into encouraged by the Supreme Court. Aside from unclogging judicial dockets,
after final judgment. Moreover, an important requisite, which is lack of arbitration also hastens the resolution of disputes, especially of the
knowledge of the final judgment, is wanting in the present case. commercial kind. [25] It is thus regarded as the wave of the future in
international civil and commercial disputes. [26] Brushing aside a
Advantages of Compromise contractual agreement calling for arbitration between the parties would be a
step backward.
A reciprocal concession inherent in a compromise agreement assures In the case before us, the Subcontract has the following arbitral clause:
benefits for the contracting parties. For the defeated litigant, obvious is the
advantage of a compromise after final judgment. Liability arising from the 6. The Parties hereto agree that any dispute or conflict as regards to
judgment may be reduced. As to the prevailing party, a compromise interpretation and implementation of this Agreement which cannot be settled
agreement assures receipt of payment. Litigants are sometimes deprived of
between [respondent] and [petitioner] amicably shall be settled by means of FACTS: On 11 November 1961, the Land Tenure Administration,
arbitration x x x. [19] representing the Republic, initiated and prosecuted expropriation
proceedings in the Court of First Instance of Leyte for the acquisition of
Clearly, the resolution of the dispute between the parties herein requires a private agricultural lands situated in San Isidro, Leyte, and owned by
referral to the provisions of their Agreement. respondents Espeletas, Martinezes and Pachecos, for resale to tenants.

As to the second issue, according to petitioner, assuming arguendo that the On 14 June 1962, the lower court rendered a decision condemning the said
dispute is arbitrable, the failure to file a formal request for arbitration withland for P411,995.78. 1 The Republic, having already paid the partial sum of
the Construction Industry Arbitration Commission (CIAC) precluded the P206,850.00, was, accordingly, ordered to pay the balance of P205,145.78,
latter from acquiring jurisdiction over the question. plus the further sum of P20,000.00 or a total of P225,145.78.
Dissenting, the Republic commenced an appeal, only to withdraw the same
Under the present Rules of Procedure, for a particular construction contract upon reaching a compromise agreement with respondents-landowners
to fall within the jurisdiction of CIAC, it is merely required that the parties reducing the price of the land to P350,000.00. Minus the sum of
agree to submit the same to voluntary arbitration Unlike in the original P206,850.00 which had already been paid, as previously mentioned, the
version of Section 1, as applied in the Tesco case, the law as it now stands Republic undertook to pay the balance of P143,150.00 "as soon as
does not provide that the parties should agree to submit disputes arising practically possible" without any interest. Said compromise agreement was
from their agreement specifically to the CIAC for the latter to acquire approved and adopted by the lower court as its amended decision of 24
jurisdiction over the same. August 1962.
Rather, it is plain and clear that as long as the parties agree to submit to
voluntary arbitration, regardless of what forum they may choose, their Came 12 April 1963 and the balance of P143,150.00 still remained unpaid
agreement will fall within the jurisdiction of the CIAC, such that, even if despite an order directing payment thereof. Respondents-landowners then
they specifically choose another forum, the parties will not be precluded filed a motion in the lower court imploring the latter to (1) annul its
from electing to submit their dispute before the CIAC because this right has amended decision of 24 August 1962 on the ground that its basis — the
been vested upon each party by law. Clearly, there is no more need to file a compromise agreement — was secured through fraud; 2 and (2) resuscitate
request with the CIAC in order to vest it with jurisdiction to decide a its original decision of 14 June 1962.
construction dispute.
On 26 April 1963, despite protestations of the Republic's good faith as well
4. JULIA DE LA MERCED, ET AL. as of the finality of the amended decision, the lower court issued an order
vs. nullifying the said amended decision for the reason that "the compromise
THE ROMAN CATHOLIC ARCHBISHOP OF MANILA ET AL. agreement was entered into by the . . . (Republic) . . . to defraud the . . .
landowners and to unduly delay . . . payment of the amount due," and at the
FACTS same time declaring as "valid, effective and binding upon the parties" its
De la Merced, et al, claiming to be representing numerous lessees of a parcel original decision of 14 June 1962. Writ of execution was issued the
of land belonging to the Archbishop, filed a case alleging that they had following day.
occupied the leased premises for many years, under oral agreements for
indefinite terms, and had introduced improvements therein; that without The Republic forthwith went to the Supreme Court on a petition
their knowledge, the defendants served notices terminating their occupancy for certiorari and prohibition with preliminary mandatory
and requiring them to vacate. After defendants had filed answers, traversing injunction. 3 Before the Supreme Court could rule on the petition, however,
the allegations of the complaint, the parties executed and submitted to the the parties entered anew into another compromise agreement. The Republic,
trial Court a compromise agreement. now represented by the Land Authority (that succeeded to the former Land
Tenure Administration by Republic Act No. 3844), covenanted to satisfy on
The CFI rendered judgment in accordance with the compromise agreement. or before 31 August 1964 the balance of P143,150.00 plus 6% per annum
6 months after, defendants claiming that the compromise had not been interest from 24 August 1962. Respondents-landowners, for their part,
authorized by them and that they would not have agreed to it had they been agreed to renounce "any and all further claims against the former (petitioner)
informed of its terms, prayed that the judgment be set aside. which had been recognized and ordered paid" by the lower court in its order
ISSUE: WON the compromise agreement is valid? of 26 April 1963 "in the event (of) full payment of said compromise price . .
. on or before said date," i.e., 31 August 1964. The Supreme Court, on 5
HELD: The "compromise agreement" submitted to the Court and August 1964, approved the amicable settlement submitted by the parties
incorporated in its decision, contained nothing more than a recognition of and, as prayed for, dismissed the petition.
the obligations of appellants lessees under the facts disclosed in their The Republic failed again to pay its obligation in full, as per agreement.
pleadings, in conformity with existing law.

The agreement, therefore, was not a true compromise, the essence of which
resides in reciprocal concessions (Civil Code of the Philippines, art. 2028),
since it has been shown that any concessions here were solely on the part of
the defendant lessor. Consequently, the rules invoked by the appellants as to
the necessity of special authority for an attorney to effectuate a compromise
are not apposite and are totally inapplicable. That the stipulation was labeled
"compromise" does not make it one in fact.
5. G.R. No. L-24656 September 25, 1968
REPUBLIC OF THE PHILIPPINES (Represented by the Land
Authority), petitioner,
vs.
HON. NUMERIANO G. ESTENZO, Judge of the Court of First
Instance of Leyte; SPOUSES CARLOTA M. DE ESPELETA and
JOAQUIN ESPELETA, CLOTILDE MARTINEZ, CELESTINO
MARTINEZ, SPOUSES CARMEN M. PACHECO and FRANCISCO
PACHECO, PRIMITIVO MARTINEZ, JOSE MARTINEZ, JR. and
SHERIFFS OF THE CITY OF MANILA and QUEZON
CITY, respondents.
On 16 December 1964, the lower court ordered the issuance of a writ of
execution 8 for payment of P154,894.22 — P152,218.159 on the principal
and P2,676.07 on the interest — with interest on the principal at the rate of
P24.55 daily from 30 November 1964. And, accordingly, the Sheriff of the
City of Manila garnished the sum of P156,793.63 out of the funds of the
Land Authority deposited in the Philippine National Bank.
ISSUE: WON the compromise agreement approved by the Supreme Court
is the one binding with the parties.
RULING: Yes. It is to be noted that the compromise actually binding upon
the parties was the second one, approved by this Court on 5 August 1964.
This compromise superseded all agreements and proceedings that had
previously taken place and was the final and definitive settlement of the
controversies by and between the parties. From the time it was entered into
it became the source of their rights and obligations, the purpose of a
compromise being precisely to replace and terminate the controverted
claims. As entered into, that settlement had the force of res judicata as to
them, and was enforcible by execution upon approval by the court.
Assuming ad arguendo that the non-payment in full of the expropriation
price on the promised date operated as a resolutory condition that annulled
the 1964 compromise; still that would not validate the lower court's
contested order to issue execution on the basis of its resolution of 25 April
1963, reinstating the original decision of 14 June 1962.
6. LAND OIL VS. JUSTICES of CA and OUTHWAITE
FACTS: Petitioner Landoil, through insurance brokers, obtained from
herein PR Outhwaite Company insurance coverage in the amount of US
$50,000,000.00 for its operation and those of its affiliates and subsidiaries
against certain political risks outside the Philippines. Upon full payment of
the corresponding premium, Outhwaite issued policy No. MAB255049 to
Landoil.
In 1981, insurance claim for its construction project in the Middle East was
made by Landoil, but the claim was denied by Outhwaite on the alleged
grounds of non-disclosure and misrepresentation. Hence, petitioners filed
Civil Case to enforce its insurance claim and for compensatory and
exemplary damages.
On 1986, summons was served upon Outhwaite through Smith, Bell & Co.,
who filed a manifestation stating, among others, that it is not authorized to
receive summons in behalf of Outhwaite.
Outhwaite filed a Special Appearance Motion to Quash Service of
Summons, questioning the jurisdiction of the Philippine Court over the
persons of the defendants (private respondents herein).
defendants therein, now herein petitioners, filed their Comment to the
Petition. Having acquired jurisdiction, the same cannot be lost on the basis
of an intervening event, such as the amicable settlement of the parties.
Jurisdiction once acquired by a court over a case remains with it until the
full termination of the case, unless a law provides the contrary (Bueno
Industrial & Development Corp. v. Enage, 104 SCRA 600 [1981]). To
require that the Motion to Approve Amicable Settlement be filed with the
trial court, as argued by petitioners, would only unduly delay the case, since,
as above-stated, proceedings in the trial court would necessarily be held in
abeyance.
In fact, jurisprudence in a lone line of decisions has established without
question that compromise agreements reached by the parties in a case and
filed before either the Court of Appeals or the Supreme Court, have been
approved and/or sustained by this Court.
Thus, it has been held that a compromise may supersede all agreements
and proceedings that had previously taken place and may constitute a
final and definite settlement of the controversies by and between the
parties. From the time a compromise is validly entered into, it becomes the
source of the rights and obligations of the parties thereto, the purpose of a
compromise being precisely to replace and terminate controverted claims
(Article 2028, Civil Code). A compromise has upon the parties the effect
and authority of res judicata, and is enforceable by execution upon approval
by the court (Article 2037, Civil Code; Republic v. Estenzo, 25 SCRA 122
[1968]).
7. REFORMIST UNION VS. NLRC

On January 27, 1986, Outhwaite commenced arbitration proceedings against FACTS: Petitioner union (Reformist) affiliated as Lakas filed a notice of
petitioners in the London Court of Arbitration pursuant to the arbitration strike because of alleged acts of ULP (unfair labor practice) committed by
clause contained in the policy, and the court heerein ordered, among others the private respondents RB Liner. Despite conciliation, the parties failed to
— reach an agreement. Later, another act of ULP allegedly committed by the
private respondents impelled Reformist, with the authorization of Lakas, to
That the intended defendants be restrained by go on another strike on 13 December 1989 even as conciliation proceedings
themselves, their servants or agents or otherwise continued.
howsoever from causing or permitting any further steps
to be taken in Civil Case in the Regional Trial Court of Upon the petition of RB Liner to Sec. Drilon of the DOLE, he certified the
the National Capital Region of the Philippines; dispute to the NLRC for compulsory arbitration and issued a return-to-work
otherwise, than by way of defending the application of order. Fortunately, the certified case was dismissed after the union and the
the intended plaintiff herein to quash service of company reached an agreement providing, among other matters, for the
Summons by which the said civil case was commenced. holding of a certification election.

The trial court finding Smith, Bell & Co. as settling agent of Outhwaite, A Certification Election was held in which the Lakas won as the exclusive
denied Outhwaite's Special Appearance, Motion to Quash Service of bargaining agent of respondent’s rank-and-file employees. Lakas presented
Summons. proposals for CBA to which the respondents refused to bargain. The
petitioner union then filed to the NLRC a complaint of ULP against
Outhwaite file a Petition for Certiorari/Prohibition with the Court of Appeals respondent to which the latter countered another complaint that sought to
questioning the validity of the service of summons to Outhwaite through declare as illegal the union's 13 December 1989 strike.
Smith, Bell & Co. and consequently, the jurisdiction of the Makati Regional
Trial Court over their persons. ISSUE: Whether or not the compulsory arbitration conducted is binding.

On 1987, petitioners received a copy of a Motion to Approve Amicable
Settlement filed by their counsel, private respondent Manuel Camacho, with
the Court of Appeals.
The Court of Appeals, in a resolution approved the amicable settlement.
Hence, the instant petition.
Hence, petitioners argue that since the Motion to Approve Amicable
Settlement is not within either the original or appellate jurisdiction of the
Court of Appeals, such court has no authority to resolve the factual
questions raised in the said motion, much less receive evidence thereon.
Accordingly, petitioners maintain that such functions pertain not to the
Court of Appeals, but to the regional trial court.
ISSUE: WHETHER OR NOT THE MOTION TO APPROVE AMICABLE
SETTLEMENT IS WITHIN THE ORIGINAL OR APPELLATE
JURISDICTION OF THE COURT OF APPEALS.
RULING: It must be stated that the Court of Appeals acquired jurisdiction
over the case when the Petition for Certiorari/Prohibition was filed and the
RULING: Yes, it is binding.
The very nature of compulsory arbitration makes the settlement binding
upon the private respondents, for compulsory arbitration has been defined
both as "the process of settlement of labor disputes by a government agency
which has the authority to investigate and to make an award which is
binding on all the parties," and as mode of arbitration where the parties are
"compelled to accept the resolution of their dispute through arbitration by
the a third party." Clearly then, the legality of the strike could no longer be
reviewed by the Labor Arbiter, much less by the NLRC, as this had already
been resolved.
The agreement entered into by the company and the union, moreover, was in
the nature of a compromise agreement, i.e. "an agreement between two or
more persons, who, for preventing or putting an end to a lawsuit, adjust their
difficulties by mutual consent in the manner which they agree on, and which
everyone of them prefers to the hope of gaining, balanced by the danger of
losing." Thus in the agreement, each party made concessions in favor of the
other to avoid a protracted litigation. While we do not abandon the rule that
"unfair labor practice acts are beyond and outside the sphere of
compromises." the agreement herein was voluntarily entered into and Facts: The complaint sought to recover damages sustained for the death of
represents a reasonable settlement, thus it binds the parties. Dasalla's son who died when the passenger jeepney driven and owned by
Sumangil figured in an accident. The complaint prayed for payment of
8. G.R. No. L-21416 December 31, 1965 P30,000.00 moral damages; exemplary damages in an amount left to the
REPUBLIC OF THE PHILIPPINES vs. MARCELO B. GARAY discretion of the court, attorney's fees of P5,000.00 and costs.

FACTS: In his answer, Sumangil prayed for the dismissal of the complaint. He
denied the allegations of the complaint and alleged that this civil obligations
to Dasalla was already settled; and that the latter executed an affidavit
1. This is an ordinary action for the recovery by the Government of (Sinumpaang Salaysay) condoning, waiving and forgiving all others
several sums of money allegedly due from defendant Marcelo B. damages he may be entitled to after receipt of P6,000.00 from the former.
Garay by way of deficiency income tax of the aggregate amount of
P14,843.22 including 1/2% monthly interest;
2. defendant agreed to pay said sum of P14,843.22, but requested To rebut this the plaintiff alleged that the "Sinumpaang Salaysay" was
that he be allowed to settle his obligation in twelve (12) equal signed by him based on information that he was being given the amount for
monthly installments; the awe purpose of the accused not going to jail. Upon cross-examination,
3. the Commissioner had acquiesced to this request, provided that however, by this Court, said witness reluctantly admired that he knew that
defendant paid P2,843.22 upon receipt of said letter and the the amount given to him has a direct connection with the death of his son.
balance of P12,000 in twelve equal monthly installments of
P1,000 each, and that defendant's conformity thereto be expressed Thereby the Court dismisses this complaint on the ground that the obligation
in a proper pleading in order that judgment could be rendered in has been fully paid.
accordance therewith;
4. defendant, accordingly, confessed judgment in line with this Issue: Whether or not the "Sinumpaang Salaysay" which was made the basis
undertaking. Thereupon, the lower court rendered a decision. of the dismissal of the complaint by the trial court, is contrary to law, public
5. Soon thereafter, plaintiff filed a motion stating that, "due to an order, public policy, morals or good customs, or prejudicial to a third person
oversight," the lower court had "failed to provide for the with a right recognized by law.
surcharges and interests which defendant became liable under his
admission, as ... the taxes involved were to be paid on
instalments," and praying that said decision be amended to Held:
sentence the defendant to pay, also, (a) 5% surcharges and (b) 1%
monthly interest (GRAND TOTAL P3,669.80). There is no law which prohibits a person who has incurred damages by
6. By an order dated March 15, 1963, the lower court denied the reason of the act of another from waiving whatever' rights he may have
relief prayed for by the plaintiff, upon the ground that the against the latter. If the act causing damage to another also constitutes a
aforementioned judgment was "based upon a compromise crime, the civil liability arising from the criminal act may also be validly
agreement of the parties" and that the "suppose surcharges and waived.
other penalties now being claimed by the plaintiff must have been
taken into consideration" when said agreement was entered into What is not allowed in this jurisdiction is to compromise or to waive the
and filed with the court. criminal aspect of a case. The reason or principle underlying the difference
7. Hence, this appeal by the plaintiff, who maintains that the decision between rights which may be waived and rights which may not be waived is
appealed from is not based upon a compromise agreement, that those rights which may be waived are personal, while those rights which
because the parties therein had merely agreed to a delay in the may not be waived involve public interest which may be affected.
payment of the tax and no advantage to the government would
come from such agreement, and that the same was not signed by
the Commissioner. In a compromise or a waiver of the civil aspect of the case, the restriction
imposed by law is that it must be entered into before or during litigation,
never after final judgment (Romero v. Amparo, 91 Phil., 228). A
ISSUE: WON the decision appealed from is not based upon a compromise compromise on the civil aspect of a case is valid even if it turns out to be
agreement unsatisfactory to either or both of the parties (Castro v. Castro, 97 Phil.,
705). The case of Balite v. People, (L-21475) enumerated the reasons to
HELD: We find no merit in this pretense. Article 2028 of the Civil Code of support the conclusion that civil liability may be waived or condoned:
the Philippines provides:
. . ., express condonation by the offended party has the effect of
A compromise is a contract whereby the parties, by making reciprocal waiving civil liability with regard to the interest of the injured party
concessions, avoid a litigation or put an end to one already commenced. (Article 23, Revised Penal Code). For, civil liability arising from an
offense is extinguished in the same manner as other obligations, in
It is obvious that the entitled "Confession of Judgment," filed by the accordance with the provisions of the civil law (Art. 112, Revised
defendant on January 15, 1963, and bearing, not only the signature of his Penal Code. See also Article 2034, Civil Code which reads: "There
counsel, but, also, that of counsel for the Commissioner, partook of the may be a compromise upon the civil liability arising from an offense;
nature of a compromise, for, in consideration of defendant's recognition of but such compromise shall not extinguish the public action for the
his obligation to pay the aforementioned sum of P14,843.22, and the imposition of the legal penalty").
Commissioner's willingness to allow its payment on installments, both had
agreed to put an end to the present litigation, thru the rendition of a specific It is true, as alleged by petitioner, that the minimum amount of
request for "a sort of compromise agreement," which was expressly compensatory damages for death that may be awarded to petitioner at
"granted," in the letter of the Commissioner dated January 3, 1963. Then, the time of the death of his son is P12,000.00. However, for reasons
also, plaintiff derived from said agreement the advantage of collecting stated in the "Sinumpaang Salaysay," petitioner voluntarily released
P2,843.22, upon receipt of said letter by the defendant, aside from putting an the private respondent from his civil obligations. ("Affidavit of
end to the litigation and the assurance of monthly collections of P1,000 for Desistance")
one year. Again, although the motion captioned "Confession of Judgment"
was not signed by the Commissioner, his letter of January 3, 1963, annexed
to said motion, and, accordingly, forming part thereof, bears his signature. It is Our opinion that the above affidavit executed by the petitioner,
releasing the respondent from additional civil liability arising from the death
9. G.R. No. L-51461 April 26, 1991 of the former's son, is legal. It is not contrary to law, morals, good customs,
CRISPIN DASALLA, SR., vs. COURT OF FIRST INSTANCE OF public policy or public order. Consequently, he can no longer institute a
NUEVA ECIJA, Branch IV and ROGELIO SUMANGIL, complaint to recover damages arising from the same incident subject of the
affidavit.
A party to the settlement cannot be allowed to renege on his it does not appear that the plaintiff has induced them into this belief, this
undertaking therein after receiving the benefits thereof. As long as the fact, at most, constitutes an error of fact which the defendants can not set up
parties entered into the settlement voluntarily and intelligently, the in this action, it having been the object and result of the compromise to
courts are bound to respect the agreement. withdraw the parties from a suit already commenced. (Art. 1817, Civ.
Code.)
We can readily say that the literal wording of the contract itself rejects this
interpretation, as the contract shows that the defendants are the ones who
bound themselves to make the redemption and that the plaintiff only
10. G.R. No. L-11943 December 21, 1918 promised to cooperate with the defendants towards this purpose. It is
sufficient for the plaintiff that she use all the means within her power, and it
MARIA FERRER, in her own behalf and as administratrix of the is not required that this cooperation on her part will result precisely in the
intestate estate of Mariano Trias, Plaintiff-Appellant, vs. MARIA redemption of the said lands. And, if the wording of the contract is clear in
IGNACIO, ET AL., this sense, the intention of the contracting parties which can be deduced
from the other clauses is no less clear.
FACTS: On December 21, 1908 or 1910, the Court of First Instance of It is to be inferred from the foregoing that the redemption of which the
Cavite rendered two judgments in favor of the spouses Mariano Trias and contract speaks should not be, in the contemplation of the parties, the legal
Maria Ferrer, and against the brothers Buenaventura Dimaguila and Perfecto redemption but a redemption purely voluntary on the part of the purchasers.
Dimaguila.
And if this interpretation is the one that should be given to the contract, as
we believe it is, it seems clear that the plaintiff in binding herself to
To satisfy these judgments, the sheriff attached the five parcels of land cooperate with the defendants did not understand that she was obliged to
which were later sold at a public auction to different persons. effect in fact the redemption, inasmuch as she could not reasonably oblige
Subsequently, Maria Ignacio, the mother of Perfecto Dimaguila and herself to do so, as the redemption did not depend upon her own will but
Buenaventura Dimaguila, claiming to be the owner of the lands sold by the upon of the purchasers.
sheriff at public auction, as lands belonging to Perfecto Dimaguila and
Buenaventura Dimaguila, brought an action to recover said lands against the Aside from the fact that the word "cooperate," in itself, does not have this
spouses Mariano Trias and Maria Ferrer, and the sheriff who sold the lands. scope, the circumstances which we have explained show, moreover, that the
Pending this litigations, the spouses Mariano Trias and Maria Ferrer, parties contracting parties should not have given to this word such a scope.
of the first part, and Maria Ignacio, Perfecto Dimaguila, and Buenaventura
Dimaguila, as principal obligors, and Pedro Guevara as surety, parties of the 11. INTERNATIONAL HOTEL CORPORATION, FELIX ANGELO
second part, executed a compromise agreement on February 6, 1912, BAUTISTA, MARIO B. JULIAN, HERMILO T. RODIS, and
whereby said litigation was terminated. TESTATE ESTATE OF JOSE M. VALERO
vs.
In this compromise agreement, Maria Ignacio, Perfecto Dimaguila, and HON. ELIAS B. ASUNCION, HON. JORGE R. COQUIA, PACIFIC
Buenaventura Dimaguila bound themselves to pay jointly and severally to HOTEL CORPORATION, BASILIO L. LIRAG, MANUEL M. SISON
Mariano Trias and to redeem the said parcels of land. Mariano Trias and and DANILO R. LACERNA
Maria Ferrer, after recognizing Maria Ignacio's title to the parcels of land
referred to in the agreement, bound themselves, in turn, to cooperate, with FACTS: Petitioners had started the construction of a hotel on their own
all the means in their power, in redeeming the said lands. land, which, however, was mortgaged to two banks, PCIB and the
Commercial & Trust Company. In that construction, they utilized materials
However up to this day the lands were never redeemed and the buyers purchased from the Reparations Commission on terms.
refused to alow their redemption.
It appears that the Reparations Commission sued the petitioners and the two
The plaintiff, for herself and as administratrix of the estate of Mariano Trias, banks alleging that although the purchase price of its materials bought from
now brings this action against the defendants, Maria Ignacio, Buenaventura it by petitioners had not yet been paid, the two banks were already taking
Dimaguila, Perfecto Dimaguila, and Pedro Guevara to recover from the said over the land of petitioners, with the improvements thereon, by virtue of the
defendants. The defendants, in their cross complaint, claim from the plaintiff mortgages. It turned out, however, that the banks had already sold the
the payment of the amount of P13,250 as damages, for the reason that the properties, to Pacific Hotel Corporation.
plaintiff failed to redeem the lands.
After issues were joined but before trial could start, a compromise appears to
ISSUE: whether or not the spouses Mariano Trias and Maria Ferrer have have been arrived at between herein petitioners and private respondents,
complied with their obligation with regard to the redemption of the lands albeit without the participation of the banks and without the said banks
referred to in the compromise agreement? being parties thereto, hence the rendering by the respondent Judge Coquia of
the controversial decision in accordance with the terms and conditions of
HELD: Yes. said Compromise Agreement. The decision was later on modified. In the
The defendants claim, and the lower court agrees with them, that this clause modified decision, petitioners contend that the interpolation made by Judge
imposes upon the plaintiff (by plaintiff we refer to the spouses Mariano Coquia is arbitrary. The disputed interpolation reads:
Trias and Maria Ferrer) the obligation to effect in fact the redemption of the
lands, and unless this redemption is effected and the lands are delivered to
Maria Ignacio, it can not be said that the plaintiff has complied with her ... According to the parties, although the defendant banks, namely the
obligation. And, as the redemption of these lands is now legally impossible, Philippine Commercial & Industrial Bank and the Commercial Bank &
because some parcels were sold in an absolute sale, and as regards the other Trust Company, have not signed this agreement, the issues affecting them
parcels the right to redeem them had already been extinguished, the have become moot and academic. (P. 51, Rec.)
defendants allege that it should be considered that the plaintiff has already
violated her obligation. ISSUE
WON the compromise agreement is valid?
We have reached this conclusion, taking into account the fact that the case
treats of a compromise agreement whereby the plaintiff and the defendants HELD: The respondent court arbitrarily altered the tenor and substance of
have put an end to a litigation, and that this class of contracts is to be strictly the compromise agreement to their prejudice, since the said portion served
interpreted, and must be understood as including only matters specifically to dilute the bargain they had struck with herein respondents.
determined therein or which by necessary inference from its wording must
be deemed included. (Art. 1815, Civil Code.)al law library The questioned interpolation in the decision of a virtual dismissal of
petitioners' cross-claims against the banks has no basis and is entirely
unwarranted. No one among them, not even the banks who were the
At all events, supposing that the defendants executed the contract under the beneficiaries thereof opposed petitioners' motion for the elimination of such
impression that the right to redeem the parcels of land was still subsisting, as interpolation.

Besides, the respondent court knew all the time ought to have known that
the motion for approval of the compromise agreement was signed only by
petitioners, as third-party plaintiffs and respondents, as third-party
defendants. In other words, the banks were parties neither to the agreement
nor to the motion to approve the same.
12. G.R. No. L-14132 January 22, 1920
As already stated, the plaintiff Dimatulac did not surrender all of the
property of Dolores Coronel as he had agreed to do in the compromise of
1915. This circumstance can not affect the solution of this case, and it is
immaterial whether he remained in possession of part in defiance of Dolores
Coronel or retained it with her consent. Of course he might be required to
account for the value of the use and occupation of the property so retained,
prior to the offer to redeem, but his right to redeem within the period limited
by the contract cannot be made to depend upon his performance in good
faith of the compromise agreement.

LUCIANO VITUG DIMATULAC vs. DOLORES CORONEL 14. MARQUEZ VS MARQUEZ 73 PHIL 74

FACTS: The plaintiff in this action, Luciano Vitug Dimatulac, resident of
the municipality of Lubao, in the Province of Pampanga, seeks to redeem
several parcels of land, with a dwelling-house and other improvements
thereon, from a contract of sale with pacto de retro, whereby said property
was transferred by the plaintiff on June 30, 1911, to the defendant, Dolores
Coronel.
It appears in evidence that, upon June 30, 1911, the plaintiff sold the
property in question to Dolores Coronel for the sum of P9,000, reserving the
privilege to repurchase within the period of five years.
Under this contract the payment of rent should have begun in the year 1912.
The vendor, however, entirely failed in the performance of this obligation
and continued in arrears upon account of rent for at least three years. In view
of this default Dolores Coronel, the vendee, decided to take advantage of the
clause in the contract by which the consolidation of the property was
accelerated; and to this end she impleaded Dimatulac in a civil action to
compel him to surrender the property in question and to pay the past-due
rent.
This action was settled by a compromise, which was reduced to writing,
approved by the Judge of the Court of First Instance, and entered of record
in that action on April 9, 1915. By the terms of this compromise Dimatulac
agreed to place at the disposition of Dolores Coronel all the property to
which the action related, including the crops already harvested thereon but
not yet converted into money; and inasmuch as Dimatulac had already made
an agreement with a third person for the sale of the growing cane, Dolores
Coronel was authorized to arrange with the buyer as to the price, to receive
the proceeds, and to apply the same to the satisfaction of the past-due rent.
In conformity with this agreement Dimatulac surrendered to Dolores
Coronel the possession of most, but not all, of the parcels in question,
including the crops harvested and to be harvested thereon.
FACTS: There are three contiguous parcels of land, the first, belonging to
defendant Gregorio Marquez; the second situated on the south, belonging to
plaintiff Daniel Marquez; and the third also on the south and adjoining the
second, belonging to defendant Gregorio Marquez. A dispute having arisen
between the two brothers, Daniel and Gregorio, as to the distribution and use
of the waters flowing through these parcels from the north to the south, a
Civil Case was instituted in the CFI of Tayabas by Daniel Marquez against
Gregorio Marquez in which they entered into a compromise agreement.
They agreed, among others, that plaintiff is entitled to the use of the waters,
without prejudice to closing it during the days in which the use of the waters
should appertain to the defendant. It also directed defendant not to close the
right of way existing on the northern and southern strips of the land ceded to
him in their compromise, so that plaintiff may have access to the other side
of his land.
This compromise was approved by the court and a judgment rendered in
accordance therewith. Thereafter, in the same civil case, a motion was filed
by the plaintiff, alleging the defendant violated the compromise, by
constructing a dam by which the waters coming from his property on the
north were intercepted and prevented from flowing freely towards the land
of Daniel Marquez on the south. The trial court thereafter rendered an order
directing defendant to open the dam.
Defendant now challenges the validity of this order, contending that the
lower court had no jurisdiction to entertain the motion, on the ground that,
although it had power to enforce its judgment founded on the compromise, it
can so enforce it only in the very terms of such compromise without in the
least altering or modifying them, otherwise the proper procedure would be
an independent action.
ISSUE: Whether or not the court has no jurisdiction to order the defendant
to open the dam.

When Dimatulac, through his wife, offered to redeem the entire property RULING: The court has jurisdiction, hence, the order of opening the dam is
under the original contract of sale with pacto de retro, the five years named valid.
therein as the period during which repurchase might be effected not having
as yet expired. This redemption Dolores Coronel refused to concede, on the These stipulations have become orders of the court contained in the
ground that the title to the property had become absolute in herself. judgment rendered in accordance with the compromise, and such judgment
Thereupon the present action was instituted, as already stated, to compel her being one requiring the performance of an act other than the payment of
to permit redemption. money, or the sale or delivery of real or personal property, is considered as a
special judgment enforcible by proceedings as for contempt. If, therefore,
ISSUE: WON the compromise agreement extinguished the exercise of right after service of a copy of the judgment upon the defendant then he violates
to repurchase by the vendor-a-retro. the order or orders contained in the judgment, he may be dealt with as for
contempt.
RULING: No. Any right which Dolores Coronel may have derived from
In the judgment sought to be enforced, defendant is bound to close some
that contract is entirely consistent with the title which she had acquired
canals from Monday to Thursday of every week to permit plaintiff the
under the original contract; and there is nothing in the compromise
exclusive enjoyment of the waters during said days, and if defendant does
agreement which has the necessary effect of extinguishing the right of
something by which the waters are prevented from flowing to plaintiff's
redemption.
property, he is liable for contempt. It has been found by the trial court that
the construction of the dam impairs greatly the flowing of the waters from
Her possession under this agreement must therefore be considered to be of the north to the property of plaintiff Daniel Marquez on the south,
the same character, and her rights of the same extent, as if she had taken constituting thus a violation of the judgment rendered upon the compromise.
possession at once when the original contract was executed. (Art. 1815, Civ. We find in the record or in the evidence no ground whatsoever for disturbing
Code.) It must be admitted that the provision for the lease, under which this finding.
the plaintiff was permitted to retain possession of the property, was
abrogated as a result of the compromise agreement, but it would be an However, the order of the trial court directing defendant not to close the
unnecessary and unjust inference to say that the right of redemption right of way existing on the north and south of the portion ceded to him in
created by the original contract had also been destroyed. Every the compromise, is null and void, it having been issued in excess of the
intendment both of law and equity favors the preservation of that right. court's jurisdiction. This right of way is not a matter covered by the
judgment sought to be enforced. It is completely a new matter and cannot be
acted upon in a mere petition for execution of judgment.
15. G.R. No. L-13994 April 29, 1961
VALERIO P. TRIA, in substitution of MARIANO B. DELGADO,
vs. WENCESLAO A. LIRAG
FACTS:
1. Mariano B. Delgado and defendant Wenceslao A. Lirag executed
a deed whereby Delgado sold to Lirag a parcel of land for a
specified price, payable in the manner therein stipulated.
2. Alleging that Lirag had violated the terms of the agreement,
Delgado instituted this action for the recovery of P8,000, plus
attorney's fees and costs.
3. After the filing of Lirag's answer, the parties submitted to the court
a compromise agreement.
4. The agreement stipulated:
 that the parties hereby agree to rescind the deed of sale;
 that the plaintiff will pay to the defendant the sum in full
payment and satisfaction of all sums of money received
by the plaintiff from the defendant as well as expenses
incurred by the latter;
 that upon full payment of this amount, the defendant
will deliver to the plaintiff the land which is the subject-
matter of the said deed of sale;
 That the parties mutually relinquish their claims for
damages and attorney's fees against one another;
 That the plaintiff may sell, mortgage, or otherwise
dispose of the land subject-matter of the sale or any part
thereof in order to raise such sum as may be necessary to
pay the afore-mentioned amount of P13,500.00 to the
defendant, provided however, that no sale, mortgage or
disposition made by the plaintiff shall be valid unless
made with the consent of the defendant;
 and that in case of disagreement the matter shall be
settled by the Court.
5. Delgado conveyed all his rights in and to the aforementioned
property to one Valerie P. Tria who, with Lirag's conformity,
subsequently, substitute Delgado as plaintiff in this case.
6. Lirag filed a "motion for execution", upon the ground that Tria had
not paid the sum, in violation of the compromise agreement and
the decision.
7. Over Tria's objection, the motion was granted. No appeal having
been taken therefrom, the corresponding writ of execution was
issued. For reasons not stated in the record, said writ was not
enforced. Hence, on motion of Lirag, an alias writ of execution
was issued. Soon thereafter, Tria filed a "motion to lift alias writ
of execution", which was denied by an order.
8. Tria insists that the compromise agreement was merely a contract,
which may be enforced by ordinary action specific performance,
not by writ of execution.
ISSUE: WON that the compromise agreement was merely a contract, which
may be enforced by ordinary action specific performance, not by writ of
execution.
HELD: No. Said compromise agreement is more than a contract. It had
been submitted to the court for approval with request that judgment be
rendered in accordance therewith, and was accordingly approved by the
court and incorporation into its decision, which was "rendered in conformity
there with." In other words, it was part and parcel of the judgment and may,
therefore, be enforced, as such, by writ execution. (Art. 2037, Civil Code of
the Philippines.)
Notice of Lirag's motion for execution of the decision was duly served upon
Tria, who filed a written opposition thereto. Yet, when the lower court
issued its order of June 5, 1956, overruling this opposition and granting said
motion, Tria did not appeal from said order and thus allowed it to become
final executory. He did not question its propriety until a the issuance of an
alias writ of execution on January 1958, or more than a year and a half later.
It is now too late, therefore, to invoke the alleged breach of the compromise
agreement by Lirag as a ground to bar the execution of the decision in this
case. He could have, and shall have, taken it up on appeal from the order of
June 1956.
16. G.R. No. 105409. March 1, 1993.
MASTER TOURS and TRAVEL CORPORATION, petitioner,
vs. HON. COURT OF APPEALS, (Twelfth Division), HON.
LEONARDO I. CRUZ, Presiding Judge of the Regional Trial Court of
Manila, Branch 25, FRANCISCO SALVADOR, Deputy Sheriff, RTC of
Manila, Branch 25, and CATHAY PACIFIC AIRWAYS, LTD.,
respondents.
Facts:
On 28 February 1991, summons together with a copy of the complaint for
sum of money filed by the private respondent Cathay Pacific Airways Ltd.
(Cathay) and an Order of Attachment were served upon and received by the
petitioner. Pursuant to the Order of Attachment, the sheriff immediately
levied upon properties of the petitioner, with value equivalent to Cathay's
claim.
The defendant (herein petitioner) moved to set aside the order of attachment
on the grounds that there had been no prior notice or hearing before the
issuance of the writ and that the averments of the complaint failed to
satisfactorily allege the basis for attachment. The trial court issued an order
denying the petitioner's motion, petitioner thereupon moved for
reconsideration.
However, pending resolution of the incident, the respondent sheriff and
Cathay's counsel, allegedly thru coercion and harassment, compelled the
petitioner, thru its counsel and vice-president, to enter into a compromise
agreement. Petitioner subsequently moved to withdraw the said compromise
agreement before the trial court could approve the same.
Petitioner's aforesaid motion for reconsideration and motion to withdraw
compromise agreement were jointly heard and later submitted for resolution.
Pending said resolution, respondent sheriff and Cathay's counsel allegedly
continued to harass the petitioner and were able to effect garnishment of
certain bank deposits of petitioner.
The trial court issued an order denying petitioner's twin motions. Then the
appellate court also ruled to dismiss the petition. Hence, this petition for
review.
Petitioner raises the issue of the permissibility of withdrawing a compromise
agreement which has not been approved by the court.
Issue: W/N the compromise agreement signed by Executive Vice President
and counsel of petitioner is not binding to him.
Held: No.
The rule is that a judgment rendered in accordance with a compromise
agreement is immediately executory unless a motion is filed to set aside the
agreement on the ground of fraud, mistake or duress in which case an appeal
may be taken against the order denying the motion. (Arkoncel, Jr. v.
Lagamon).
In its order, the Regional Trial Court said:
"The Court does not believe, so to speak, that the Executive Vice President,
who signed the compromise agreement cannot bind the defendant for if it
were otherwise, the defendant corporation's board as portrayed above, would
have been on guard.
The compromise agreement, to say the least, in the contemplation of the law,
is a valid document binding not only on the Executive Vice President, but
also on the defendant corporation itself. It is not vitiated by what the
Executive Vice President of the defendant corporation and the lawyer
representing both call — lack of authority and threat and intimidation —
that compelled them (Executive Vice President and counsel) to sign it. This special authority is mandatory under the law (Section 23, Rule 138, Revised
protestation, is amply refuted in the plaintiff's opposition . . . ." Rules of Court).

The propriety or improriety of withdrawing the compromise agreement is SEC. 23. Authority of attorneys to bind clients. — Attorneys have
more a question of fact than of law in this particular case. authority to bind their clients in any case by any agreement in
relation thereto made in writing, and in taking appeals, and in all
17. G.R. No. L-23098 February 28, 1967 matters of ordinary judicial procedure. But they cannot, without
special authority, compromise their client's litigation, or receive
anything in discharge of a client's claim but the full amount in
DOMINGO T. JACINTO, vs. HON. AGUSTIN P. MONTESA, in his cash.
capacity as Judge of the Court of First Instance of Manila, THE
SHERIFF OF MANILA, ALPHA INVESTMENTS AND FINANCE
CORPORATION and PASTOR D. AGO It is not disputed that Jacinto was declared in default in the lower court and
that plaintiff did not adduce evidence to prove his cause of action against
him. Under the circumstances prevailing in the case at bar, it is clear that no
FACTS: On 23 April, 1959, Alpha Investments filed a suit in the Court of valid judgment was rendered against Jacinto that may be enforced by
First Instance of Manila to recover P26,000.00 plus 10% attorney's fees and execution. As this Court ruled in a case with facts practically identical to the
court costs from Pastor D. Ago and from Domingo T. Jacinto, who had case at bar, a judgment based upon a compromise entered by an attorney
guaranteed Ago's solvency in a separate document. Only Pastor D. Ago without specific authority from the client is null and void, and such
answered the complaint, but Domingo T. Jacinto failed to do so, though duly judgment may be impugned, and its execution restrained, in any proceeding
served with summons. Consequently, upon motion of plaintiff, Jacinto was by the party against whom it is sought to be enforced.
declared in default.
While it has already been held that "as a rule, a judgment upon compromise
Subsequently, on 15 November 1960, a pleading entitled "Stipulation of is not appealable and is immediately executory, unless a motion is filed to
Facts and Compromise Agreement" was executed wherein Pastor Ago set aside the compromise on the ground of fraud, mistake, or duress, in
admitted joint and several liability with Domingo Jacinto. which event an appeal may be taken from the order denying the motion, and
that is the remedy in this case and not certiorari in this Court" (De los Reyes
For failure of the defendants to comply with their obligations as enjoined in vs. De Ugarte, 75 Phil. 505; cited in Enriquez vs. Padilla, 77 Phil. 373),
the above agreement, plaintiff moved, on 28 February 1963, for the issuance Jacinto was not in a position to urge such vices of consent, since he was not
of a writ of execution. The trial court granted, on 3 March 1963, said writ a party to the compromise, and never agreed to the same.
which expired, however, without being served on, and enforced against, the
defendants. Hence, plaintiff, upon application, later secured, on 1 April While as a rule, certiorari does not lie when there is an appeal, the rule may
1964, an alias writ of execution. be relaxed where, as in the instant case, a writ of execution is in the process
of being carried out. Needless to say, the underlying reason for this doctrine
Upon being served with said alias writ, defendant Jacinto presented, on 4 is to give a party litigant his day in court and an opportunity to be heard.
April 1964, a motion to quash the same, alleging as grounds therefor that the
judgment based on the compromise is not binding or enforceable against
him since he was not a party nor has he unauthorized his codefendant Ago 18. FERMIN BOBIS and EMILIA GUADALUPE, plaintiffs-appellants
or his counsel to represent him in said compromise agreement; and that vs.
having been previously declared in default plaintiff, nevertheless, failed to THE PROVINCIAL SHERIFF OF CAMARINES NORTE and
adduce evidence against him; hence, no judgment could have been validly ZOSIMO RIVERA
rendered against him; and that he was not notified of the above-stated
compromise agreement nor of the judgment and plaintiff's motion for FACTS: Camino and Eco were the registered owners of a parcel of land.
execution. The said parcel of land was cultivated by the spouses Bobis and Guadalupe,
during the pendency of an action filed by certain Ortega as the alleged
cultivator of the ½ portion thereof, Camino and Eco sold the property to
Upon the other hand, respondent Alpha Investments and Finance Bobis and Guadalupe.
Corporation in its answer disputes Jacinto's claim that he was not a party to
the compromise agreement. Thus, it points out that, although Jacinto was The parties entered into a compromise agreement to the court ajudging
declared in default, this fact did not prelude him from authorizing his co- Camino and Eco to pay Ortega the amount of P140,000; and the court
defendant Ago and his counsel to represent in said agreement as shown and promulgated a decision, approving the said compromise agreement. The
express therein that "they have been authorized by their respective parties defendants Camino and Eco did not comply with their obligation to Ortega.
with full authority to enter freely an voluntarily into a stipulation of facts As a result, a writ of execution was issued and consequently, the Sheriff
and conclude a compromise agreement in this case"; and that there were levied upon the land which Camino and Eco had sold to Bobis and
only two (2) defendants in the court below, one of them being Ago who Guadalupe.
signed said agreement for "defendants," and Atty. Jose M. Luison, who
likewise signed it as "counsel for defendants"; that Jacinto having been duly The Provincial Sheriff sold the parcel of land in question at an execution
represented in said compromise agreement which was approved by the sale to Rivera, the highest bidder. Bobis and Guadalupe filed the instant
lower court, there is no necessity of presenting evidence against the action against the Provincial Sheriff of Camarines Norte and Rivera with the
defendants (including Jacinto); that the lower court having admittedly CFI of Camarines, for the annulment of the sheriff's deed of sale and for
acquired jurisdiction, the judgment rendered thereon is valid; that said valid damages, upon the ground that the writ of execution issued was not in
judgment having become final and executory, respondent Judge did not err conformity with the judgment rendered therein and therefore, void and of no
or commit any grave abuse of discretion in issuing the questioned alias writ legal effect.
of execution.
ISSUE: WON the judge is correct when it ordered the writ of execution?
ISSUE: Whether or not Jacinto was a party or was duly represented in the
Compromise Agreement? HELD: A judge or court, which sets aside a judgment rendered upon
consent of the parties and based on a compromise entered into by them,
HELD: No. We are inclined to believe herein petitioner Jacinto's claim that which is converted into such judgment, cannot amend or set it aside without
he has not authorized Ago and his counsel, Atty. Jose M. Luison, or even the consent of said parties, or without first having declared in an incidental
engaged the services of the latter, to represent him in said compromise preliminary hearing that such compromise is vitiated by any of the grounds
agreement. Ago and Luison corroborated this claim. It appears from the for nullity enumerated in Article 1817 (now Art. 2038) of the Civil Code."
record of this case that Jacinto is not a signatory party to said agreement, and Since the modification and amendment of the judgment was made
nothing therein shows that Ago and Luison had any special authority to unilaterally in the writ of execution, without any preliminary hearing, it was
compromise the case in behalf of herein petitioner, which requirement of unjustified.
As will be seen, only Camino and Eco were adjudged to pay Ortega. It is an admitted fact that petitioner gave his consent to the compromise
Although they were included as party defendants, the spouses Bobis and because of the first report of the commissioner that the disputed land
Guadalupe were not ordered to pay Ortega. Obviously, they were absolved contained an area of more than 7 hectares. His consent to the agreement was,
from liability. therefore, vitiated by error induced by the commissioner's act.

Accordingly, as to them, there was nothing to execute since they have been
absolved from liability. When, therefore, the lower court, in issuing the writ
of execution of the judgment, commanded the Provincial Sheriff that the
goods and chattels of the defendants Camino and Eco, Emilia Guadalupe
and Bobis be caused to be made the sum of P140.00 whereby making the
spouses Bobis and Guadalupe equally liable for the judgment debt of the
spouses Camino and Eco, adding to the judgment sought to be executed a
new relief, it acted in excess of jurisdiction, if not abuse of authority.
19. G.R. No. L-4358 January 2, 1953
JOSE SAMINIADA vs. EPIFANIO MATA
SYLLABUS
ISSUE: WON the agreement entered into by fraud or mistake binds the
injured party.
RULING: No. From a broader perspective, the attempt of the parties in
court to settle their litigation in a definite manner in the case at bar should be
considered as a single proceeding. The signing of the agreement and its
submission to the court for its approval was the first act to carry out their
intent. The designation of the surveyor is another act leading to the same
final purpose. His report is still another step towards that same end, and so
would have been the parties', as well as the court's, approval thereof.
The different steps should not be taken separately, independently one from
the other. They are the necessary, inseparable, and integral parts of one
proceeding — the definite settlement of the controversy — and while they
had not all been finished and carried out, the compromise agreement was not
complete.

1. JUDGMENTS; CONSENT JUDGMENTS; COMPROMISE
AGREEMENTS. — Under the old Civil Code, an agreement entered into by
the parties, which is embodied in the court’s decision, is considered as a
judicial compromise for the reason that its purpose is to terminate a suit
already instituted. In American Law, such agreement is known as a
judgment by consent and is generally considered as a contract. A decision
must "state clearly and distinctly the facts and the law upon which it is
based. Where the so-called "decision" embodying a compromise agreement
lacks these essentials of a judgment it is not a decision. When a litigation is
adjusted between the parties and said adjustment is sanctioned by a decree
of the court, the agreement or settlement does not have the effect of a final
judgment or the character of res judicata, the court’s approval being
considered mainly as an administrative recording of what has been agreed to
between the parties.
3. ID.; ID.; ID. — Consent judgments may be set aside on the ground of
fraud or mistake. Where one of the parties gave in good faith his consent to
the compromise because of an erroneous Commissioner’s report as to the
area of the land in dispute, there is such error as may be a ground for setting
the compromise aside, the approval of the court thereof notwithstanding.
20. VELAYO VS. VELAYO
FACTS: The case originated in the Court of First Instance of Manila,
which, after trial, found grounds for granting the petition for partition and
pursuant to the manifestation of the parties, granted them a period of ten
days within which to submit to it for approval an agreement under which
separation of property would be adjudged.

2. ID.; ID.; ID. — When a compromise agreement approved by the court The parties having submitted the required agreement, the court promulgated
contains a provision for the designation of a commissioner to make a its decision approving the agreement and ordering the parties to comply with
partition of the land subject of the compromise and to submit a report the terms thereof. Upon motion of petitioner, a writ of execution was issued
thereof to the court, the agreement is not complete until the commissioner against respondent for the sums due from him as support for petitioner and
submits a definite partition of the land by metes and bounds based upon the their children and as her share of the conjugal properties.
compromise agreement, and this is approved by the parties and the court.
The court’s order of approval is interlocutory merely; it cannot acquire Because execution could not be satisfied, petitioner moved that respondent
finality until the report containing the partition is approved by the court. be ordered to appear in court so he could be examined respecting his
properties and income, but this order could not be served on respondent
FACTS: This case involves the ownership and possession of a riceland because his counsel had withdrawn his appearance and respondent had failed
situated in Libon, Albay, which Epifanio Mata claims to have purchased to inform the court of his address.
from Julian Ponce. Jose Saminiada, the defendant in the action, alleged that
he occupied it by virtue of free patent application. Petitioner filed a petition to cite the defendant for contempt of court",
praying that defendant be required to appear in court to show cause why he
should not be punished for contempt and placed under confinement until he
After the issues had been joined, and with a view to simplifying the has paid in full the amounts due to petitioner and their children.
proceedings, the court, upon petition of the parties, designated one Ramon
Rempillo, Junior Public Land Inspector, as commissioner to determine The Juvenile and Domestic Relations Court, to which this petition had been
whether or not the land described in the complaint forms part of the land transferred, issued an order requiring respondent to pay petitioner all sums
covered by free patent application of Saminiada. On June 13, 1949, due her and their children, otherwise he would be held in contempt of court.
Rempillo submitted his report, stating that the land subject of the action was On February 7, 1958, respondent filed a notice of appeal and posted a
the same land covered by free patent application He submitted a sketch of P25,000.00 bond to stay execution of the order.
the property, indicating that the land contains an approximate area of 7
hectares. In the Court of Appeals, respondent filed a motion to dismiss the case on the
ground that it had been terminated by an amicable settlement he entered into
On January 18, 1950, the parties submitted an agreement. Upon the with petitioner. Acting upon the motion, the appellate court passed on a
submission of the agreement, the court rendered judgment in accordance resolution dismissing the case. This is the resolution now under review.
therewith and enjoined the parties to comply with the terms and conditions
therein provided. Petitioner submits that the compromise agreement was void ab initio
because it contains terms which are contrary to laws, morals and public
On February 13, 1950, counsel for defendant Jose Saminiada presented a policy; and, hence, it cannot be the ground for dismissal of the case.
"motion for reconsideration of decision," stating that when the commissioner
submitted his report to the effect that the land contained an area of more than Respondent admits and we find that certain parts of the compromise
7 hectares, he entertained grave doubts regarding such supposed area, as his agreement are indeed violative of legal precepts and highly repugnant to
client, defendant Jose Saminiada, was of the belief that the area of the land morals. Sanction cannot be given to petitioner’s pardon and condonation of
was a little more 5 hectares only. "all acts of concubinage committed and being committed by "respondent nor
to her waiver of any claim against respondent for support now or in the
future. The right to receive support cannot be renounced (Article 301, New
Civil Code); and no compromise upon future support shall be valid (Article they own or what is awarded to them, as they please, even to the extent of
2035, New Civil Code). renouncing the award, or condoning the obligation imposed by the judgment
on the adverse party. Not so, however in the present case. Here, the
ISSUE: Whether the invalid provisions render void the whole agreement? Commissioner of Customs is not a private party and is not the owner of the
money involved in the fine based on the original appraisal. He is a mere
RULING: NO. We think not. The invalid stipulations are independent of agent of the Government and acts as a trustee of the money or property in
the rest of the terms of the agreement and can easily be separated therefrom his hands or coming thereto by virtue of a favorable judgment. Unless
without doing violence to the manifest intention of the parties. This being expressly authorized by his principal or by law, he is not authorized to
so, the legal terms of the contract can be enforced (Article 1420, New Civil accept anything different from or anything less than what is adjudicated in
Code). favor of the Government.

Outright dismissal of the whole case was not proper. The order of the
Juvenile and Domestic Relations Court from which respondent had
appealed, ordered respondent to pay petitioner all sums due her by virtue of
the decision. The decision referred to ordered the parties to observe the
terms of their agreement which had been approved by the Court.
This agreement stipulated that respondent would pay petitioner as her share
of the conjugal properties, P5,000.00 upon approval of the agreement and
P15,000.00 within a period of two years therefrom; and while said balance
of P15,000.00 has not been paid, he would pay her P200.00 monthly for her
support and P300.00 monthly for the support of their three children; and that
after said balance has been paid in full, he would give her P150.00 monthly
as his one-half share toward the support of their children. Therefore, under
the order of the Juvenile and Domestic Relations Court, respondent was
obliged to pay petitioner not only support in arrears but also her share of the
conjugal properties.
Compromise is resorted to, to avoid a litigation or to end a suit already
instituted. It contemplates mutual concessions and mutual gains to avoid
expense and trouble of litigation or, when litigation has already been begun,
to end it because of the uncertainty of the result thereof.
Here, as far as the Republic is concerned, the period for compromise has
definitely ended. The original controversy about the legality of the seizure of
the jewelry, the imposition of the fine treble the appraised value of P23,736
has not only been taken to court, but it has been finally decided by the
highest Tribunal. Whatever expense caused to the Government as a result of
the suit in court, including the appeal will be reimbursed to it, because of the
adjudication of costs in its favor. There is no longer any uncertainty as to the
result of the litigation because the Government has definitely and finally
won it. In other words, there is nothing more to compromise.
22. G.R. No. 86760 April 30, 1991

The compromise agreement constitutes a waiver of petitioner’s claim for
support under this case, but it did not express or even intimate of a waiver of
her share of the conjugal properties. Under these circumstances, it is the
appeal that should have been dismissed, so that petitioner can still have the
order of the Juvenile and Domestic Relations Court executed, in so far as her
right to share in the conjugal properties is concerned.
21. ROVERO VS. AMPARO
FACTS: The petitioner Rovero arrived from Bangkok, Siam, with him was
a Chinese vase that he declared and valued at P15. But it was found that the
vase had a false bottom which upon being broken open was seen to hold a
tin can containing 259 pieces of jewelry, which the Customs officials
appraised at P23,736. Rovero was, then, found guilty of violating the
Revised Administrative Code and sentenced to pay a fine with subsidiary
imprisonment in case of insolvency. The Commissioner of Customs
declared that the seizure of said 259 pieces of jewelry. Not satisfied with
that decision Rovero appealed the case to the CFI of Manila then the SC
which both courts affirmed the decision of the Commissioner of Customs.
After the promulgation of the decision of the SC, Rovero wrote to the
Commissioner of Customs a letter petitioning for a reappraisal of said
jewelry. Acting upon said petition the Collector of Customs created a
Committee on Reappraisement which rendered a report that the said 259
pieces of jewelry were reappraised at P9,880. The report was forwarded to
the Secretary of Finance requesting that the original appraisement of
P23,736 may be set aside and the reappraisement made by the Committee be
considered. The Secretary of Finance granted the request and set aside the
original appraisement of P23,736.
The Solicitor-General moved for execution of the decision of CFI that had
been affirmed by the SC to which Rovero opposed stating that the judgment
had already been satisfied, claiming that under Official Receipt No. B-
2361606, the fine in lieu of forfeiture plus surcharge and other legal charges
had already been paid. According to the RECEIPT, Rovero received from
the Collector of Customs the 259 pieces of jewelry after he had paid the
corresponding duty and all charges and the fine of treble the reappraised
value of P9,880 (not the original appraisal of P23,736). By order, Judge
Amparo of the CFI of Manila declared that the full amount of the judgment
had not been paid and he ordered the Sheriff to carry out the order of
execution.
ISSUE: Whether or not the parties may enter into a compromise even a final
judgment had been rendered by the court.
RULING: No. Compromise may be entered even a final judgment had been
rendered as regards to private parties who are the owners of the property
subject-matter of the litigation, and who are therefore free to do with what
CITY OF ZAMBOANGA, VITALIANO D. AGAN, EFREN S. MARIA
NO and PEDRO A. PACIO vs. HON. PELAGIO S. MANDI Presiding J
udge of Regional Trial Court, Branch 12, AURELIO JULIAN and BEN
ITA LEDESMA JULIAN
The focal point of inquiry in this controversy is the validity and
enforceability of the Compromise Agreement entered into between the
parties, which petitioners assail as without binding force and effect by
reason of lack of this Court's approval.
FACTS:
1. a Complaint for Eminent Domain was lodged before the RTC by p
etitioner City of Zamboanga against private respondent spouses Ju
lian over the latter's lot. The expropriation was intended for the ex
pansion of the Pasonanca Park and for other public purposes.
2. RTC gave the City the authority to enter, take and retain possessio
n of the property sought to be expropriated upon payment of just c
ompensation fixed at P0.18 per sq.m., or a total of P10,428.00 whi
ch was affirmed in toto by the CA.
3. Spouses Julian filed a "Notice of Appeal" to the Supreme Court.
4. The Julians wrote a letter to the Mayor, stating, inter alia, that pen
ding appeal, "we are accepting the offer of the City of Zamboanga
to buy our lot at the uniform price of P3.00 per square meter, and s
hould this decision of ours to sell to the City at the price stated is a
cceptable to the City we will move for the dismissal of the appeal
on the ground of amicable settlement."
5. The SP of the city adopted a resolution authorizing the mayor “to s
ign for and in behalf of the City Government of Zamboanga the C
ompromise Agreement for the acquisition of the properties of Mr.
Aurelio G. Julian XXX at the price of P3.00 per square meter, XX
X, subject, however, to the approval of the Supreme Court, and if
approved, to authorize him to sign for and in behalf of the city the
corresponding deed of sale . . .
6. Compromise Agreement was signed and on the same date, the part
ies filed with this Court a Motion to Approve Compromise Agree
ment.
7. notwithstanding non-approval of the Compromise Agreement by t
his Court, the SP of the City gave authority to Mayor to sign for an
d on behalf of the City the Deed of Absolute Sale covering the acq
uisition by the City of the subject lot at the price of P3.00 per sq.
m. Said Resolution did not impose any condition of prior approval
by the Supreme Court. And so it was that pursuant to the authoriz
ation granted, the Deed was duly signed by the parties on 11 Janua
ry 1988 for and in consideration of the total sum of P170,595.00 at
P3.00 per sq.m.
 8. subsequently, the City received copy of the Entry of Judgment of t
he Appellate Court Decision, showing that it had become final and
executory on 21 February 1987. Significantly, however, the Entry
of Judgment was made only on 26 January 1988.
9. on the ground that the City was reneging on the Compromise Agre
ement, the Julians instituted before the RTC, presided over by resp
ondent Judge, a Petition for mandamus praying that the City be ma
de to comply with said Agreement, "particularly to pay the Julians
the amount of P170,595.00 for the purchase of Lot.
10. In its Answer, the City traversed the Petition by contending that th
e Julians had no cause of action against it since this Court's approv
al of the Compromise Agreement was never obtained because of t
he abandonment of the appeal, consequently, said Agreement neve
r became operative and enforceable. Moreover, according to the Ci
ty, citing Article 2040 of the Civil Code, a final judgment may not
be the subject of a compromise agreement, which must be entered
into before or during litigation and not after final judgment, the rea
son being that there being no more controversy, a compromise is u
seless.
11. Deciding the Mandamus, respondent Judge issued the Writ, appro
ved the Deed of Absolute Sale entered into between the parties as
a result of the Compromise Agreement, and ordered the City to pa
y the total sum of P170,595.00 for the expropriated property at the
price of P3.00 per sq.m. That disposition relied; among others, on
the ruling in Dormitorio, et al. vs. Fernandez, et al. (L-25895, 21
August 1976, 72 SCRA 388), that a final and executory judgment
of a trial court may be novated by the subsequent agreement of the
parties.
ISSUE: WON the compromise agreement is valid and enforceable even wit
hout the SC’s approval.
RULING: Yes. It is true that in its resolution, the City had authorized the ex
ecution of the Compromise Agreement and the Deed of Sale "subject to the
approval of the Supreme Court." However, the subsequent acts of the parties
clearly show that the City was no longer insisting on that suspensive conditi
on.
To all intents and purposes, therefore, new rights and obligations as between
the parties had been created of their own volition. There was clear proof of
an animus novandi and an obvious intent to supersede the previous judgment
in the Eminent Domain Case. With this patent manifestation of will, that De
cision must be deemed to have been novated by the parties themselves (cf. D
ormitorio vs. Hon. Jose Fernandez, L-25897, 21 August 1976, 72 SCRA 388
), with the result that said original Decision had lost force and effect.
The finality of the Appellate Court Decision, therefore, which was unknown
to the parties at the time of settlement, neither produced any legal effect sinc
e the appeal had effectively been withdrawn. There was no longer any lower
Court Decision that could be the subject of an appeal.
It may be conceded that the City was unaware that the judgment in the Emin
ent Domain Case had attained finality. Ignorance of a judgment, however, is
not a valid ground for attacking a compromise. The course of action should
have been an action for rescission which, in this case, has not been availed o
f.
Article 2040 of the Civil Code explicitly provides:
If after a litigation has been decided by a final judgment, a compromise shou
ld be agree upon, either or both parties being unaware of the existence of the
final judgment, the compromise may be rescinded.
Ignorance of a judgment which maybe revoked or set aside is not a valid gro
und for attacking a compromise.
The Julians were well within their rights in seeking the enforcement of the c
ompromise through a Petition for Mandamus on the strength of Article 2041 It appears that the petitioners accepted the refund of their two months
of the Civil Code, providing that: deposit from the previous owner of the two premises in question. Further,
the petitioners remain undisturbed in the leased premises pursuant to the
compromise agreements. They likewise paid to the private respondents the
If one of the parties fails or refuses to abide by the compromise, the other pa
rty may either enforce the compromise or regard it as rescinded and insist up
on his original demand.
23. G.R. No. L-44715-16 January 26, 1989
ERLINDA BARRERAS with her husband and DOLORES MILLAN,
vs. HON. GREGORIO N. GARCIA, Presiding Judge, City Court of
Manila, Branch I, FORTUNATO G. TIMAN, and SHERIFF OF
MANILA,
Facts: Private respondent Fortunato G. Timan and his spouse, Lydia Timan,
filed two complaints for illegal detainer separately against the petitioners
Erlinda Barreras together with her unknown husband and Dolores Millan
before the Court.
The complaints allege that the private respondent and his spouse are the
lawful owners of a two-storey house at 1953-A 1953-B Oroquieta Street,
Sta. Cruz, Manila, leased by petitioner Erlinda Barreras with her unknown
husband and Dolores Millan, respectively. Both petitioners were informed
that their lease would expire on June 30, 1975. The petitioners raised no
objection but requested for an extension until July 31, 1975, free of charge.
However, for failure of the petitioners to comply with the verbal agreement
to vacate the leased premises as promised, the private respondent and his
wife, through counsel, sent the petitioners two demand letters to vacate.
Again, the petitioners failed to comply.
At the hearing of these cases, two identical Compromise Agreements were
submitted by the parties, assisted by their respective counsels, and approved
by the respondent judge. The Compromise Agreements read:
1. That the plaintiffs hereby allow the defendants to continue to
occupy the premises described in the complaint until May 31,
1976;
2. That in consideration of this Compromise Agreement
defendant will pay the plaintiffs the amount of P250.00 a month
beginning the month of September, 1975 as monthly rent for the
reasonable use of the same, payable on or before the 10th day of
each month;
3. That defendants will vacate the premises described in the
complaint on May 31, 1976 and restore possession thereof to the
plaintiffs;
4. That any violation of this agreement will entitle the plaintiffs
to ask the Court for a writ of execution.
Accordingly, the respondent judge rendered decisions approving the
Compromise Agreements and enjoining the parties to comply strictly and
faithfully with all the terms and conditions therein set forth.
After almost a year from the decisions approving the Compromise
Agreements and the parties complying with their respective obligations,
both petitioners filed their identical Amended Motions for Reconsideration
each alleging that "such agreement and the resulting Decision thereof, is
(sic) null and void, for it violates Section 4 of P.D. No. 20 which suspends
the right of the lessor to judicially eject the lessee or tenant, under Art. 1673,
N.C.C." They further contended that "the Compromise Agreement is false
because it was consummated under duress and undue influence on the
defendant herein just to ease out and railroad the termination of her case of
ejectment." Finally, the petitioners alleged that "the Court, in issuing the
Writ of Execution based on a Decision that is null and void, acted without or
in excess of its jurisdiction or with grave abuse of discretion, as the question
of jurisdiction cannot be conferred by the parties to the Court and/or be
compromised
sum of P250.00 a month from September, 1975 to May, 1986 in accordance Admittedly, the Amended motion for Reconsideration of the Order
with the agreements. approving the Compromise Agreement was filed only eleven (11) months
after receipt of the judgment of the compromise. On this score alone, the
Issue: W/N the compromise agreement entered by the parties are null and Amended Motion would be denied for being filed out of time.
void.
This Court frowns upon the crude grounds of the petition before us. We
Held: No. perceive petitioners' ploy to unduly delay the execution of the final judgment
of the trial court. After enjoying the benefits of the compromise agreement
specifically the flat rate of P250.00 monthly rental, and exemption from
We dismiss the petition. payment of the same for certain months, the petitioners would want this
Court to declare the said compromise agreements as null and void. No better
A compromise agreement is a valid contract between the parties thereto. illustration of bad faith could be gleaned than the herein petition.
Under Article 2028 of the Civil Code, it is a contract in which the parties in
interest, by making reciprocal concessions, avoid a litigation or terminate For twelve years therefore, petitioners have been staying in their respective
one already commenced. When it is not contrary to law, morals, or public leased premises on their old monthly rental of P250.00. As such, petitioners
policy, the same may be approved by the court and a judgment be rendered should pay their respective rentals of P250.00 each. from June, 1976 to date,
in accordance therewith. The parties are thereby enjoined to comply on the principle of unjust enrichment, the last monthly payment being on
faithfully with its terms and conditions. The approval of the compromise May, 1976.
agreement by the court dismisses the case, or considers it closed.
24. G.R. No. L-14220 April 29, 1961
The law, however, anticipates situations wherein the parties refuse to
comply with the terms of a compromise agreement like in the herein cases.
Clearly therefore, when a party fails or refuses to abide by the compromise, DOMINGO E. LEONOR vs. FRANCISCO SYCIP
the other party may either enforce the compromise by a writ of execution, or
regard it as rescinded and insist upon his original demand. Non-fulfillment FACTS: On July 11, 1955, plaintiff Domingo E. Leonor and defendant
of the terms of the compromise justifies execution. Francisco Sycip entered into a contract, whereby the former leased to the
latter a two-story building for a period of two years, beginning from August
Considering these established doctrines, the petitioners failed to comply 1, 1955, at a monthly rental of P350.00. From July to October, 1956, Sycip
with the term of the compromise, leaving the private respondent with no failed to pay the corresponding rentals in view of which, on October 12,
other recourse except to apply for the writ of execution. 1956, Leonor instituted against him, for unlawful detainer. Inasmuch as, on
October 19, 1956, one Napoleon A. Coronado agreed to guarantee the
payment of the rentals due from Sycip by assigning to Leonor his
Invoking Section 4 of Presidential Decree No. 20, the petitioners would (Coronado's) rights under a deed of chattel mortgage executed, prior thereto,
want this Court to declare the Compromise Agreements they entered into by Sycip in his (Coronado's) favor, on November 10, 1956, Leonor moved
with the private respondents null and void as being contrary to law. for the dismissal of said case.
As Sycip kept on defaulting in the payment of rentals, Leonor requested the
The ground posited has no legal basis. In Sinclair vs. Court of Appeals we Sheriff of Pasay City, on February 11, 1957, to cause the personal property
stated: subject to said chattel mortgage to be foreclosed extrajudicially, as stipulated
in the contract, but this provision thereof could not be enforced because
The provisions of P.D. 20 govern apartment-dwellers who are Sycip refused to surrender' said property to the sheriff. Hence, on March 7,
paying rentals not exceeding P 300.00 a month. the decree 1957, Leonor again sued Sycip in the municipal court of Pasay City for
mandates "the freezing of rentals for the lower income group at unlawful detainer which was decided in favor of Leonor.
their present levels" in order that the rentals for the houses be
stabilized. It is true that said decree was issued to alleviate the Pursuant thereto, certain properties of Sycip was sold at public auction.
living conditions of those in need, owing to prevailing hard Upon appeal of the case, he then maintained that it should be dismiss upon
economic conditions. It should, however, not be applied the grounds:
indiscriminately even to the extent of depriving the owner of his
property rights protected by the Constitution. I. That the claim set forth in the complaint has be released;

It should also be stressed that P.D. 20 respects obligations of contract in II. That the Assignment of Chattel Mortgage which dismissed the
obedience to the constitutional mandate that no law shall be enacted which first action (Civil Case No. 1792) a compromise agreement that
would impair such obligations. It therefore places no legal obstacle to the had upon the parties the effect and authority of Res-Judicata;
enforcement of an existing agreement validly entered into by the parties
herein as the decision appealed from seeks to do, which in no way runs
counter to the socialistic intent and humanitarian spirit of the decree. III. That the second action, the case at bar, (Civil Case No. 2067)
cannot be taken to mean as a rescission of the compromise
agreement.
While it is true that a party to a compromise agreement may move to set it
aside on the ground of fraud, mistake, or duress in which case an appeal may
be taken from the order denying the motion, the motion to suspend the ISSUE: Whether or not Sycip’s contention is correct?
compromise agreement should meet the essential requirements of Section 3
of Rule 38. It reads: RULING: No. Appellant says that the lower court erred in holding the
claim set forth in the complaint herein has not been "released by novation",
A petition provided for in either of the preceding sections of this which he maintains, took place, because the deed of assignment by
rule must be verified, filed within sixty (60) days after the Coronado to Leonor the chattel mortgage executed by Sycip in favor of
petitioner learns of the judgment, order, or other proceeding to Coronado stated that the sum of P2,450 then due from Sycip was payable on
be set aside, and not more than six (6) months after such December 31, 1956, whereas the contract of lease between Leonor and
judgment or order was entered, or such proceeding was taken, Sycip stipulated that the agree rentals were "payable on or before the 5th of
and must be accompanied with affidavits showing the fraud, every month'.
accident, mistake, or excusable negligence relied upon, and the
facts constituting the petitioners good and substantial cause of Said assignment was made, however, on October 6, 1956 and, hence, the
action or defense, as the case may be. period therein given for the payment of the aforementioned sum of
P2,450.00, due up to that date, did not novate or otherwise affect the
obligation to pay the rentals accruing subsequently thereto, in conformity
with the provisions of the aforementioned contract of leas or "on or before
the 5th of every month", although payment of these rentals was also
guaranteed by the chattel mortgage thus assigned to Leonor. Inasmuch as
Sycip continued defaulting in the payment of such rentals, an failed to pay
the same as well as to vacate the leased premises despite repeated demands,
it follows that Leonor was entitled to seek the proper remedy against the
resulting unlawful detainer by Sycip.
It is next urged by the defendant that plaintiff should have sought a judicial
foreclosure of the chattel mortgage or sued the guarantor Napoleon A.
Coronado. This contention is premised upon the assumption that by
plaintiff's acceptance of the assignment of chattel mortgage, there had been a
novation of the lease contract between him and Sycip, for the period
subsequent to October 6, 1956, which is not a fact. Plaintiff had, of course,
the option to seek a judicial foreclosure of said chattel mortgage, but he was
not bound to do so, for the assignment in his favor of the chattel mortgage
merely gave him additional rights. It did not deprive him of any of his
existing rights, either substantive or procedural, except insofar as the sum of
P2,450 due as rentals up to October 6, 1956, which was made payable on or
before December 31, 1956. With respect to the rentals accruing after
October 6, 1956, he retained all such rights, plus the corresponding lien on
the personal property subject to the chattel mortgage.
Contrary to defendant's pretense, plaintiff could not have sued Coronado for,
by virtue of his aforementioned assignment, the latter merely yielded his
preferred lien in favor of plaintiff herein, and did not assume any
responsibility for defendant's obligation in favor of plaintiff herein. Besides,
having violated the chattel mortgage contract, by refusing to deliver the
mortgaged property to the sheriff, for purposes of the extra-judicial
foreclosure, to which the defendant had explicitly agreed in the deed of
chattel mortgage, he may not require the plaintiff to adhere thereto (Art.
1191,, Civil Code of the Phil.). Again, owing to the breach of the
compromise agreement between the parties, resulting, not only from
defendant's refusal to deliver the mortgaged property to the sheriff, but, also,
from his failure to pay, on or before December 31, 1956, the sum P2,450,
due on October 6, 1956, plaintiff has, under Article 2041 of the Civil Code
of the Philippines, the right eight to "enforce the compromise or regard it as
rescinded a insist upon his original demand".
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 up the party concerned,
not a "cause" for rescission, or t 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 this Article 2041,
particularly when contrasted with that of Article 2039, denotes that no action
for rescission required in said Article 2041, and that the party aggrieved by
the breach of a compromise agreement may, if he choose 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, he may
"regard" the compromise agreement already rescinded".
25. REPUBLIC OF THE PHILIPPINES [PCGG]
vs.
SANDIGANBAYAN, JOSE L. AFRICA, MANUEL H. NIETO, JR.,
FERDINAND E. MARCOS, IMELDA R. MARCOS, FERDINAND R.
MARCOS, JR., ROBERTO S. BENEDICTO, JUAN PONCE ENRILE,
and POTENCIANO ILUSORIO
FACTS: The cases arose from complaints for reconveyance, reversion,
accounting, restitution, and damages against former President Marcos,
members of his family, and alleged cronies, one of whom is said to be
respondent Benedicto. The compromise agreement involved in these
petitions is effected between the PCGG and respondent Benedicto. Alterations in the plans and specifications were subsequently made during
the progress of the construction. Due to this and to other causes deemed
Under the compromise agreement, Benedicto and his group-controlled sufficient by Turnbull, Inc., extensions of time for the termination of the
corporations operating media business, ceded to the government certain project, initially agreed to be finished on December 17, 1961, were granted. 2
pieces of property and assigned or transferred whatever rights he may have,
if any, to the government over all corporate assets listed in the agreement.
The PCGG in turn, lifted the sequestrations over the property listed in the
agreement and extended absolute immunity to Benedicto, members of his
family, and officers and employees of the listed corporations. Later on,
PCGG sought to rescind thye agreement contending that retaining a portion
of the assets is anathema to, and incongruous with, the zero-retention policy
of the government in the pursuit for recovery of all ill-gotten wealth.
ISSUE: WON the PCGG is allowed to withdraw from the previous
compromise agreement which it entered into with Benedicto?
HELD: No. The argument that the compromise is too one-sided in favor of
Benedicto and that undue injury has been caused to the Government while
unwarranted benefits and advantages have been given to Mr. Benedicto, his
family, and employees contrary to Republic Act No. 3019, have no merit.
The compromise agreement was the result of a long drawn out process of
negotiations with each party trying to come out as best as it could. There can
be no question of its being freely and voluntarily entered into by the then
PCGG Chairman with full authority from the Commission itself.
A party that availed himself of and complied with the provisions of a
judicial compromise is under estoppel to question its validity. In the regime
of law and order, repudiation of an agreement validly entered into cannot be
made without any ground or reason in law or in fact for such repudiation.
A compromise upon its perfection became binding upon the parties and
has the effect and authority of res judicata even if not judicially approved.
In this connection, therefore, plaintiff is in estoppel to question the validity
of the herein Compromise Agreement since it had already received benefits
thereunder.
26. G.R. No. L-23390 April 24, 1967
MINDANAO PORTLAND CEMENT CORPORATION vs.
McDONOUGH CONSTRUCTION COMPANY OF FLORIDA
SYLLABUS
1. SUMMARY PROCEEDING; ENFORCEMENT OF AGREEMENT TO
ARBITRATE; CASE AT BAR. — Where as in this case, there obtains a
written provision for arbitration as well as failure on respondent’s part to
comply therewith, the court a quo rightly ordered the parties to proceed to
arbitration in accordance with the terms of their agreement (Sec. 6, Republic
Act 876). Respondent’s arguments touching upon the merits of the dispute
are improperly raised herein. They should be addressed to the arbitrators.
This proceeding is merely a summary remedy to enforce the agreement to
arbitrate.
2. ID.; ID.; ID.; EXISTENCE OF DEFENSE AGAINST A CLAIM; ITS
EFFECT. — Although it has been ruled that a frivolous or patently baseless
claim should not be ordered to arbitration, it is also recognized that the mere
fact that a defense exists against a claim does not make it frivolous or
baseless.
FACTS: On February 13, 1961, petitioner Mindanao Portland Cement
Corporation and respondent McDonough Construction Company of Florida,
U.S.A., executed a contract1 for the construction by the respondent for the
petitioner of a dry portland, cement plant at Iligan City. In a separate
contract, Turnbull, Inc. — the "engineer" referred to in the construction
contract — was engaged to design and manage the construction of the plant,
supervise the construction, schedule deliveries and the construction work as
well as check and certify ill contractors' progress and fiscal requests for
payment.
Respondent finally completed the project on October 22, 1962, except as to contractor, the sum of P352,000 for the materials, labor and construction
delivery of certain spare parts for replacements and installations of expenses.
floodlamps, etc.
Differences later arose. Petitioner claimed from respondent damages in the
amount of more than P2,000,000 allegedly occasioned by the delay in the
project's completion. Respondent in turn asked for more than P450,000 from
petitioner for alleged losses due to cost of extra work and overhead as of
April 1962.
Petitioner sent respondent, on August 8, 1962, and again on September
24,1962, written invitations to arbitrate, invoking a provision in their
contract regarding arbitration of disputes.
Petitioner, on January 29, 1963, filed the present action in the Court of First among others, that Mariano M. Chan violated the contract by not
Instance of Manila to compel respondent to arbitrate with it concerning constructing the first and second stories within the stipulated five- month
alleged disputes arising from their contract.
Respondent filed, on February 23, 1963, its answer. It denied the alleged
existence of disagreement between the parties.
After stipulation of facts and submission of documentary evidence, the
court, on May 13, 1964, rendered its decision finding that dispute or
disagreement obtained between the parties with respect to their rights and
obligations under their contract and that the same should be submitted to
arbitration pursuant to par. 39 of said contract — the arbitration clause —
and to Republic Act 876 — the Arbitration Law. And thus it ordered
petitioner and respondent to proceed to arbitration in accordance with the
terms of their contract.
Not satisfied with the ruling, respondent appealed therefrom to Us to raise
the purely legal question of whether under these facts respondent is duty-
bound to submit to arbitration.
Respondent, herein appellant, contends first, that there is no showing of
disagreement; and second, that if there is, the same falls under the exception,
to be resolved by the engineer.
ISSUE: WON arbitration must proceed as culled from the agreement of the
parties.
RULING: Yes. Since there obtains herein a written provision for arbitration
as well as failure on respondent's part to comply therewith, the court a
quo rightly ordered the parties to proceed to arbitration in accordance with
the terms of their agreement (Sec. 6, Republic Act 876).
The fact of disagreement has been determined by the court below upon the
stipulation of facts and documentary evidence submitted. In this appeal
involving pure questions of law, the above finding should not be disturbed.
Furthermore, the existence of disagreement is plainly shown in the record.
Respondent admits the existence of petitioner's claim but denies its merit. It
likewise admits that petitioner has refused to pay its claim for the unpaid
balance of the price of the contract.5 Paragraph 8 of the stipulation of facts
shows the dispute of the parties regarding their mutual claims and that said
dispute remained unsettled
Respondent's arguments touching upon the merits of the dispute are
improperly raised herein. They should be addressed to the arbitrators. This
proceeding is merely a summary remedy to enforce the agreement to
arbitrate. The duty of the court in this case is not to resolve the merits of the
parties' claims but only to determine if they should proceed to arbitration or
not. And although it has been ruled that a frivolous or patently baseless
claim should not be ordered to arbitration, it is also recognized that the mere
fact that a defense exists against a claim does not make it frivolous or
baseless.
27. BENGSON VS. CHAN
FACTS: This is a case involving arbitration. Soledad F. Bengson and
Mariano M. Chan entered into a contract for the construction of a six-story On 1981, the payee, MESZELLEN, sued the drawee, ALLIED BANK, for
building on Bengson's lot. In that contract Bengson must pay Chan, the damages which it allegedly suffered when the value of the checks were paid
not to it but to some other person.
The contract contains the following arbitration clause:
15. Any and all questions, disputes or differences arising between
the parties hereto relative to the construction of the BUILDING
shall be determined by arbitration of two persons, each chosen by
the parties themselves. The determination of said arbitration shall
be final, conclusive and binding upon both parties hereto, unless
they choose to go to court, in which case the determination by
arbitration is a condition precedent for taking any court action.
The expenses of arbitration shall be borne by both parties equally.
On May 24, 1966 Soledad F. Bengson filed an action for damages against
Mariano M. Chan and the sureties on his performance bond. She alleged,
period and that she suffered damages amounting to P85,000 as a
consequence of Chan's failure to construct the commercial building.
The Defendants filed an answer wherein they alleged as an additional
affirmative defense that the complaint states no cause of action because
Soledad F. Bengson did not submit the controversy for arbitration as
required in the aforequoted paragraph 15 of the construction contract.
After holding a hearing, the trial court in its order of November 24, 1966
sustained that new defense and dismissed the complaint. Bengson appealed.
Hence, this petition.
Bengson argued that her cause of action does not involve disputes relative to
the construction of the building and, consequently, should not be submitted
for arbitration.
ISSUE: Whether or not the case should be dismissed on the ground of
failure of Bengson to resort the dispute before arbitration.
RULING: No. There is no question that the terms of paragraph 15 clearly
express the intention of the parties that all disputes between them should
first be arbitrated before court action can be taken by the aggrieved party.
However, although the causes of action in Bengson's complaint are covered
by paragraph 15, her failure to resort to arbitration does not warrant the
dismissal of her complaint.
Within the meaning of section 6 of the Arbitration Law, the failure of
Soledad F. Bengson to resort to arbitration may be regarded as a refusal to
comply with the stipulation for arbitration. And defendants p interposition of
the defense that arbitration is a condition precedent to the institution of a
court action may be interpreted as a petition for an order that arbitration
should proceed as contemplated in section 15.
Therefore, instead of dismissing the case, the proceedings therein should be
suspended and the parties should be directed to go through the motions of
arbitration at least within a sixty-day period. With the consent of the parties,
the trial court may appoint a third arbitrator to prevent a deadlock between
the two arbitrators. In the event that the disputes between the parties could
not be settled definitively by arbitration, then the hearing of the instant case
should be resumed.
28. ALLIED BANK VS. CA AND BPI
FACTS: Hyatt Terraces Baguio issued two crossed checks drawn against
Allied Bank in favor of appellee Meszellen Commodities Services, Inc.
(hereinafter, MESZELLEN). Said checks were deposited with the now
defunct Commercial Bank and Trust Company (hereinafter, COMTRUST).
Upon receipt of the above checks, COMTRUST stamped at the back thereof
the warranty "All prior endorsements and/or lack of endorsements
guaranteed." After the checks were cleared through the Philippine Clearing
House Corporation (hereinafter, PCHC), ALLIED BANK paid the proceeds
of said checks to COMTRUST as the collecting bank.
Almost ten years later, before defendant ALLIED BANK could finish 29. REPUBLIC OF THE PHILIPPINES, Represented by the POLLUTION
presenting its evidence, it filed a third party complaint against Bank of the ADJUDICATIONBOARD (DENR) vs. MARCOPPER MINING
Philippine Islands as successor-in-interest of COMTRUST, for CORPORATION
reimbursement in the event that it would be adjudged liable in the main case
to pay plaintiff, MESZELLEN. BPI filed a motion to dismiss said third party July 10, 2000
complaint grounded on the following: 1) that the court ha[d] no jurisdiction
over the nature of the action; and 2) that the cause of action of the third party
FACTS: Respondent MMC was issued a temporary permit to operate a
plaintiff ha[d] already prescribed. tailings sea disposal system for the period from October 31, 1985 to October
21, 1986. Before it expired, MMC filed an application for the renewal
The trial court issued an order dismissing the third party complaint. thereof with the National Pollution Control Commission (NPCC). On
Defendant-third party plaintiff's motion for reconsideration of this order was September 20, 1986, MMC received a telegraphic order from the NPCC
subsequently denied. directing the former to "(i)mmediately cease and desist from discharging
mine tailings into Calancan Bay." The directive was brought about through
the efforts of certain religious groups which had been protesting MMC’s
To buttress its claim, private respondent contends that petitioner's remedy tailings sea disposal system. MMC requested the NPCC to refrain from
rests with the PCHC, of which both Allied and BPI are members, in implementing the aforesaid directive until its adoption of an alternative
consonance with the Clearing House Rules and Regulations which, in part, tailings disposal system.
states:
The NPCC granted MMC’s request and called a conference to discuss
Sec. 38 — Arbitration possible alternative disposal systems. In the meantime, the National
Pollution Control Commission (NPCC) was abolished by EO No.
Any dispute or controversy between two or more 192dated June 10, 1987, and its powers and functions were integrated into
clearing participants involving any check/item cleared the Pollution Adjudication Board. On April 11, 1988, the DENR Secretary,
thru PCHC shall be submitted to the Arbitration in his capacity as Chairman of the PAB, issued another order directing
Committee, upon written complaint of any involved MMC to "cease and desist from discharging mine tailings into Calancan
participant by filing the same with the PCHC serving the Bay." This was appealed by the MMC with the Office of the President (OP),
same upon the other party or parties, who shall within requesting for the issuance of a restraining order enjoining PAB from
fifteen (15) days after receipt thereof file with the enforcing its order.
Arbitration Committee its written answer to such written
complaint and also within the same period serve the The Office of the President granted MMC’s appeal; thus, Pollution
same upon the complaining participant, . . . . Adjudication Board, are hereby enjoined from enforcing its cease and desist
order of April 15, 1988 pending resolution by this Office of respondent-
appellant’s appeal from said orders. It is further directed that the status
Furthermore, private respondent argues that the trial court had no authority quo obtaining prior to the issuance of said cease and desist order be
to admit a third-party claim that was filed by one bank against another and maintained until further orders from this Office.
involved a check cleared through the Philippine Clearing House Corporation
(PCHC). To the mind of the Court, this is the critical issue. It is understood, however that during the restraining order’s efficacy the
Calancan Bay Rehabilitation Project (CBRP) was created, and MMC is
ISSUE: Can Allied Bank invoke the jurisdiction of the trial courts without required to remit the undertaking of the amount of P30,000.00 a day, starting
prior recourse to the PCHC Arbitration Committee? from May 13, 1988 to the ETF thereof. MMC started paying until on June
30, 1991, it stopped from making further deposits in the ETF alleging by
reason of its stop in discharging its tailings in the Calancan Bay. On
RULING: NO. Recognizing the role of the PCHC in the arbitration of
February 5, 1993, the Office of the President rendered a decision in O.P.
disputes between participating banks, the Court in Associated Bank further
Case actually dismissing the appeal; affirming the cease and desist Order
held: "Pursuant to its function involving the clearing of checks and other
issued by the PAB; and lifting the TRO.
clearing items, the PCHC has adopted rules and regulations designed to
provide member banks with a procedure whereby disputes involving the
clearance of checks and other negotiable instruments undergo a process of In a letter dated January 22, 199712 , Municipal Mayor Wilfredo A. Red of
arbitration prior to submission to the courts below. Sta. Cruz, Marinduque informed the PAB that MMC stopped remitting the
amount of 30,000.00 per day as of July 1, 1991 to the ETF of the CBRP.
April 23, 1997, the PAB ruled that the obligation of MMC to deposit
This procedure not only ensures a uniformity of rulings relating to factual
P30,000.00 per day to the ETF of the CBRP subsists, as provided for in the
disputes involving checks and other negotiable instruments but also provides
Order of the Office of the President dated May 13, 1988, during the
a mechanism for settling minor disputes among participating and member
"efficacy of said order restraining the PAB from enforcing its cease and
banks which would otherwise go directly to the trial courts."
desist order against MMC".

We defer to the primary authority of PCHC over the present dispute,

Since the Order was lifted only on February 5, 1993, the obligation of MMC
because its technical expertise in this field enables it to better resolve
to remit was likewise extinguished only on said date and not earlier as
questions of this nature. This is not prejudicial to the interest of any party,
contended by MMC from the time it ceased dumping tailings into the Bay
since primary recourse to the PCHC does not preclude an appeal to the
on July 1, 1991. MMC is hereby ordered to pay the CBRP the amount of
regional trial courts on questions of law.
P30,000.00 per day, computed from the date Marcopper Mining Corporation
stopped paying on 01 July 1991, up to the formal lifting of the subject Order
By participating in the clearing operations of the PCHC, petitioner agreed to from the Office of the President on 05 February 1993.
submit disputes of this nature to arbitration. Accordingly, it cannot invoke
the jurisdiction of the trial courts without a prior recourse to the PCHC
MMC assailed the aforequoted Order dated April 23, 1997 of the PAB as
Arbitration Committee. Having given its free and voluntary consent to the
null and void for having been issued without jurisdiction or with grave abuse
arbitration clause, petitioner cannot unilaterally take it back according to its
of discretion in a petition for Certiorari and Prohibition (with prayer for
whim. In the world of commerce, especially in the field of banking, the
temporary restraining order and preliminary injunction) before the Court of
promised word is crucial. Once given, it may no longer be broken.
Appeals which was docketed as CA-G.R. No. SP-44656. The Court of
Appeals ruled in favor of MMC ratiocinating that PAB’s jurisdiction to try
Upon the other hand, arbitration as an alternative method of dispute pollution cases is transferred to the mines regional director by virtue of RA
resolution is encouraged by this Court. Aside from unclogging judicial 7942 otherwise known as the Philippine Mining Act of 1995 amending the
dockets, it also hastens solutions especially of commercial disputes. PAB’s jurisdiction given under PD 984.
ISSUE: WON the Pollution Adjudication Board has retained its jurisdiction
over the issuance, renewal or denial of permits for the discharge of mine
tailings.
RULING: Yes.
PAB was created and granted under the same EO 192 broad powers to
adjudicate pollution cases in general. Thus,
SEC. 19. Pollution Adjudication Board. – There is hereby created a
Pollution Adjudication Board under the Office of the Secretary. The Board
shall be composed of the Secretary as Chairman, two (2) Undersecretaries as
may be designated by the Secretary, the Director of Environmental
management, and three (3) others to be designated by the Secretary as
members. The Board shall assume the powers and functions of the
Commission/Commissioners of the National Pollution Control Commission
with respect to the adjudication of pollution cases under Republic Act 3931
and Presidential Decree 984, particularly with respect to Section 6 letters e,
f, g, j, k, and p of P.D. 984. The Environmental Management Bureau shall
serve as the Secretariat of the Board. These powers and functions may be
delegated to the regional offices of the Department in accordance with rules
and regulations to be promulgated by the Board.20
SEC. 6. Powers and Functions.
(f) Make, alter or modify orders requiring the discontinuance of pollution
specifying the conditions and the time within which such discontinuance
must be accomplished.
(g) Issue, renew, or deny permits, under such conditions as it may determine
to be reasonable, for the prevention and abatement of pollution, for the
discharge of sewage, industrial waste, or for the installation or operation of
sewage works and industrial disposal system or parts thereof: Provided,
however, That the Commission, by rules and regulations, may require
subdivisions, condominium, hospitals, public buildings and other similar
human settlements to put up appropriate central sewerage system and
sewage treatment works, except that no permits shall be required to any
sewage works or changes to or extensions of existing works that discharge
only domestic or sanitary wastes from a singles residential building provided
with septic tanks or their equivalent. The Commission may impose
reasonable fees and charges for the issuance or renewal of all permits
required herein.
Section 7(a) of P.D. No. 984 further provides in part:
"Sec. 7(a) Public Hearing. – Public hearing shall be conducted by the
Commissioner, Deputy Commissioner or any senior official duly designated
by the Commissioner prior to issuance or promulgation of any order or
decision by the Commissioner requiring the discontinuance of discharge of
sewage, industrial wastes and other wastes into the water, air or land
resources of the Philippines as provided in the Decree: provided, that
whenever the Commission finds a prima facie evidence that the discharged
sewage or wastes are of immediate threat to life, public health, safety or
Welfare, or to animal or plant life, or exceeds the allowable standards set by
the Commission, the Commissioner may issue and ex-parte order directing
the discontinuance of the same or the temporary suspension or cessation of
operation of the establishment or person generating such sewage or
wasteswithout the necessity of a prior public hearing. x x x . (underscoring
supplied).
RA 7942 (Philippine Mining Act of 1995):
SEC. 67. Power to Issue Orders. – The mines regional director shall, in
consultation with the Environmental Management Bureau, forthwith or
within such time as specified in his order, require the contractor to remedy
any practice connected with mining or quarrying operations, which is not in
accordance with safety and anti-pollution laws and regulations. In case of
imminent danger to life or property, the mines regional director may
summarily suspend the mining or quarrying operations until the danger is
removed, or appropriate measures are taken by the contractor or permittee.
There is no irreconcilable conflict between the two laws. Section 19 of EO
192 vested the PAB with the specific power to adjudicate pollution cases in
general. Sec. 2, par. (a) of PD 984 defines the term "pollution" as referring
to any alteration of the physical, chemical and biological properties of any
water, air and/or land resources of the Philippines , or any discharge thereto
of any liquid, gaseous or solid wastes as will or is likely to create or to
render such water, air and land resources harmful, detrimental or injurious to
public health, safety or welfare or which will adversely affect their
utilization for domestic, commercial, industrial, agricultural, recreational or
other legitimate purposes.
On the other hand, the authority of the mines regional director is
complementary to that of the PAB. Section 66 of RA 7942 gives the mines
regional director exclusive jurisdiction over the safety inspection of all
installations, surface or underground in mining operations. Section 67
thereof vests upon the regional director power to issue orders requiring a
contractor to remedy any practice connected with mining or quarrying
operations which is not in accordance with safety and anti-pollution laws
and regulations; and to summarily suspend mining or quarrying operations
in case of imminent danger to life or property.
In addition, an environmental clearance certificate is required based on an
environment impact assessment. The law also requires contractors and
permittees to rehabilitate the mined-out areas, and set up a mine
rehabilitation fund. Significantly, the law allows and encourages people’s
organizations and non-governmental organizations to participate in ensuring
that contractors/permittees shall observe all the requirements of
environmental protection.
From the foregoing, it readily appears that the power of the mines regional
director does not foreclose PAB’s authority to determine and act on
complaints filed before it. The power granted to the mines regional director
to issue orders requiring the contractor to remedy any practice connected
with mining or quarrying operations or to summarily suspend the same in
cases of violation of pollution laws is for purposes of effectively regulating
and monitoring activities within mining operations and installations pursuant
to the environmental protection and enhancement program undertaken by
contractors and permittees in procuring their mining permit. While the mines
regional director has express administrative and regulatory powers over
mining operations and installations, it has no adjudicative powers over
complaints for violation of pollution control statutes and regulations. There
is no genuine conflict between RA 7942 and RA 3931 as amended by PD
984 that precludes their co-existence.
in Laguna Lake Development Authority vs. Court of Appeals,23 this Court
held that adjudication of pollution cases generally pertains to the Pollution
Adjudication Board (PAB) except where the special law provides for
another forum. However, contrary to the ruling of the Court of Appeals, RA
7942 does not provide for another forum inasmuch as RA 7942 does not vest
quasi-judicial powers in the Mines Regional Director. The authority is
vested and remains with the PAB.
Ruling that PAB has jurisdiction however, the records reveal that witness for
PAB, Mr. Edel Genato, who is the Technical Resource person of the PAB
for the project admitted that the funds in the ETF amounting to about
Fourteen Million Pesos are more than sufficient to cover the costs of
rehabilitation. Hence, MMC must be declared not to have arrears in deposits
as admittedly, the ETF already has more than sufficient funds to undertake
the rehabilitation of Calancan Bay.
30. BENGUET CORPORATION vs. DEPARTMENT OF
ENVIRONMENT AND NATURAL RESOURCES -MINES
ADJUDICATION BOARD and J.G. REALTY AND MINING
CORPORATION
FACTS: On June 1, 1987, Benguet and J.G. Realty entered into a RAWOP,
wherein J.G. Realty was acknowledged as the owner of four mining claims
respectively named as Bonito-I, Bonito-II, Bonito-III, and Bonito-IV, with a
total area of 288.8656 hectares, situated in Barangay Luklukam, Sitio
Bagong Bayan, Municipality of Jose Panganiban, Camarines Norte. The
parties also executed a Supplemental Agreement5 dated June 1, 1987. The
mining claims were covered by MPSA Application No. APSA-V-0009
jointly filed by J.G. Realty as claimowner and Benguet as operator.
In the RAWOP, Benguet obligated itself to perfect the rights to the mining
claims and/or otherwise acquire the mining rights to the mineral claims.
Within 24 months from the execution of the RAWOP, Benguet should also
cause the examination of the mining claims for the purpose of determining
whether or not they are worth developing with reasonable probability of
profitable production. On August 9, 1989, the Executive Vice-President of
Benguet, Antonio N. Tachuling, issued a letter informing J.G. Realty of its
intention to develop the mining claims. However, on February 9, 1999, J.G.
Realty, through its President, Johnny L. Tan, then sent a letter to the
President of Benguet informing the latter that it was terminating the
RAWOP.
Benguet’s Manager for Legal Services, Reynaldo P. Mendoza, wrote J.G.
Realty a letter dated March 8, 1999,8 therein alleging that there was no valid
ground for the termination of the RAWOP. It also reminded J.G. Realty that
it should submit the disagreement to arbitration rather than unilaterally
terminating the RAWOP. On June 7, 2000, J.G. Realty filed a Petition for
Declaration of Nullity/Cancellation of the RAWOP 9 with the Legaspi City
POA, Region V, docketed as DENR Case No. 2000-01 and entitled J.G.
Realty v. Benguet.POA issued a decision in favour of JG Realty. Therefrom,
Benguet filed a Notice of Appeal11 with the MAB on April 23, 2001,
docketed as Mines Administrative Case No. R-M-2000-01. Thereafter, the
MAB issued the assailed December 2, 2002 Decision. Benguet then filed a
Motion for Reconsideration of the assailed Decision which was denied in the
March 17, 2004 Resolution of the MAB. Hence, Benguet filed the instant
petition.
ISSUE:
WON the disagreement should be submitted for arbitration before POA
could take cognizance of the case.
RULING: Yes. The disagreement must be submitted first to arbitration. The
Court ruled for Benguet.
Secs. 11.01 and 11.02 of the RAWOP pertinently provide:
11.01 Arbitration
Any disputes, differences or disagreements between BENGUET
and the OWNER with reference to anything whatsoever pertaining
to this Agreement that cannot be amicably settled by them shall
not be cause of any action of any kind whatsoever in any court or
administrative agency but shall, upon notice of one party to the
other, be referred to a Board of Arbitrators consisting of three (3)
members, one to be selected by BENGUET, another to be selected
by the OWNER and the third to be selected by the aforementioned
two arbitrators so appointed.
xxxx
11.02 Court Action
No action shall be instituted in court as to any matter in dispute as
hereinabove stated, except to enforce the decision of the majority
of the Arbitrators.16
On this issue the Court ruled:
Sec. 2 of RA 876 elucidates the scope of arbitration:
Section 2. Persons and matters subject to arbitration.––Two or
more persons or parties may submit to the arbitration of one
or more arbitrators any controversy existing between them at
the time of the submission and which may be the subject of an
action, or the parties to any contract may in such contract
agree to settle by arbitration a controversy thereafter arising
between them. Such submission or contract shall be valid,
enforceable and irrevocable, save upon such grounds as exist
at law for the revocation of any contract.
Recently in RA 9285 or the "Alternative Dispute Resolution Act of 2004,"
the Congress reiterated the efficacy of arbitration as an alternative mode of
dispute resolution by stating in Sec. 32 thereof that domestic arbitration shall
still be governed by RA 876. Clearly, a contractual stipulation that requires
prior resort to voluntary arbitration before the parties can go directly to court
is not illegal and is in fact promoted by the State.
Moreover, the contention that RA 7942 prevails over RA 876 presupposes a
conflict between the two laws. Such is not the case here. To reiterate,
availment of voluntary arbitration before resort is made to the courts or
quasi-judicial agencies of the government is a valid contractual stipulation
that must be adhered to by the parties. As stated in Secs. 6 and 7 of RA 876:
Section 6. Hearing by court.––A party aggrieved by the failure,
neglect or refusal of another to perform under an agreement
in writing providing for arbitration may petition the court for
an order directing that such arbitration proceed in the manner
provided for in such agreement. X X X X The court shall hear
the parties, and upon being satisfied that the making of the
agreement or such failure to comply therewith is not in issue,
shall make an order directing the parties to proceed to
arbitration in accordance with the terms of the agreement. If
the making of the agreement or default be in issue the court
shall proceed to summarily hear such issue. If the finding be
that no agreement in writing providing for arbitration was
made, or that there is no default in the proceeding thereunder,
the proceeding shall be dismissed. If the finding be that a
written provision for arbitration was made and there is a
default in proceeding thereunder, an order shall be made
summarily directing the parties to proceed with the
arbitration in accordance with the terms thereof.
Section 7. Stay of civil action.––If any suit or proceeding be
brought upon an issue arising out of an agreement providing for
the arbitration thereof, the court in which such suit or proceeding
is pending, upon being satisfied that the issue involved in such suit
or proceeding is referable to arbitration, shall stay the action or
proceeding until an arbitration has been had in accordance with
the terms of the agreement
In short, in the event a case that should properly be the subject of voluntary
arbitration is erroneously filed with the courts or quasi-judicial agencies, on
motion of the defendant, the court or quasi-judicial agency shall determine
whether such contractual provision for arbitration is sufficient and effective.
If in affirmative, the court or quasi-judicial agency shall then order the
enforcement of said provision.
In BF Corporation v. Court of Appeals, we already ruled:
In this connection, it bears stressing that the lower court has not
lost its jurisdiction over the case. Section 7 of Republic Act No.
876 provides that proceedings therein have only been stayed. After
the special proceeding of arbitration has been pursued and
completed, then the lower court may confirm the award made by
the arbitrator.22
J.G. Realty’s contention, that prior resort to arbitration is unavailing in the
instant case because the POA’s mandate is to arbitrate disputes involving
mineral agreements, is misplaced. A distinction must be made between
voluntary and compulsory arbitration. In Ludo and Luym Corporation v.
Saordino, the Court had the occasion to distinguish between the two types of
arbitrations:
Comparatively, in Reformist Union of R.B. Liner, Inc. vs. NLRC,
compulsory arbitration has been defined both as "the process of
settlement of labor disputes by a government agency which has
the authority to investigate and to make an award which is
binding on all the parties, and as a mode of arbitration where the
parties are compelled to accept the resolution of their dispute
through arbitration by a third party." While a voluntary arbitrator
 is not part of the governmental unit or labor department’s arbitration. On 23 August 2000, Climax-Arimco filed a motion for
personnel, said arbitrator renders arbitration services provided for reconsideration of the 24 July 2000 Order. The RTC granted the motion and
under labor laws.23 (Emphasis supplied.) directed the parties to arbitration. On 13 February 2001, Judge Pimentel
issued the first assailed order requiring Gonzales to proceed with arbitration
There is a clear distinction between compulsory and voluntary arbitration. proceedings and appointing retired CA Justice as a sole arbitrator.20
The arbitration provided by the POA is compulsory, while the nature of the Gonzales thus filed the Rule 65 petition assailing the Orders dated 13
arbitration provision in the RAWOP is voluntary, not involving any February 2001 and 7 March 2005 of Judge Pimentel. Gonzales contends that
government agency. Thus, J.G. Realty’s argument on this matter must fail. public respondent Judge Pimentel acted with grave abuse of discretion in
immediately ordering the parties to proceed with arbitration despite his
proper, valid, and timely raised argument in latter’s Answer with
As to J.G. Realty’s contention that the provisions of RA 876 cannot apply to Counterclaim that the Addendum Contract, containing the arbitration clause,
the instant case which involves an administrative agency, it must be pointed is null and void. Gonzales sought a temporary restraining order to prevent
out that Section 11.01 of the RAWOP states that: the enforcement of the assailed orders directing the parties to arbitrate, and
to direct Judge Pimentel to hold a pre-trial conference and the necessary
[Any controversy with regard to the contract] shall not be cause of any hearings on the determination of the nullity of the Addendum Contract.
action of any kind whatsoever in any court or administrative agency but
shall, be referred to a Board of Arbitrators. ISSUE: WON whether it was proper for the RTC, in the proceeding to
compel arbitration under R.A. No. 876, to order the parties to arbitrate even
There can be no quibbling that POA is a quasi-judicial body which forms though the defendant therein has raised the twin issues of validity and nullity
part of the DENR, an administrative agency. Hence, the provision on of the Addendum Contract and, consequently, of the arbitration clause
mandatory resort to arbitration, freely entered into by the parties, must be therein.
held binding against them.25
RULING: Yes. Arbitration, as an alternative mode of settling disputes, has
In sum, on the issue of whether POA should have referred the case to long been recognized and accepted in our jurisdiction. The Civil Code is
voluntary arbitration, explicit on the matter.33 R.A. No. 876 expressly authorizes such. The
enactment of R.A. No. 9285 on 2 April 2004 further institutionalized the use
However, we find that Benguet is already estopped from questioning the of alternative dispute resolution systems, including arbitration, in the
POA’s jurisdiction. As it were, when J.G. Realty filed DENR Case No. settlement of disputes. Necessarily, a contract is required for arbitration to
2000-01, Benguet filed its answer and participated in the proceedings before take place and to be binding. R.A. No. 876 recognizes the contractual nature
the POA, Region V. Secondly, when the adverse March 19, 2001 POA of the arbitration agreement.
Decision was rendered, it filed an appeal with the MAB and again
participated in the proceedings. Sec. 2. Persons and matters subject to arbitration.—Two or more persons or
parties may submit to the arbitration of one or more arbitrators any
31. G.R. No. 167994 January 22, 2007 controversy existing, between them at the time of the submission and which
may be the subject of an action, or the parties to any contract may in such
contract agree to settle by arbitration a controversy thereafter arising
JORGE GONZALES and PANEL OF ARBITRATORS, Petitioners, between them. Such submission or contract shall be valid, enforceable and
vs. irrevocable, save upon such grounds as exist at law for the revocation of any
CLIMAX MINING LTD., CLIMAX-ARIMCO MINING CORP., and contract.
AUSTRALASIAN PHILIPPINES MINING INC.,Respondents.
Thus, we held in Manila Electric Co. v. Pasay Transportation Co. 35 that a
Vs. HON. OSCAR B. PIMENTEL, in his capacity as PRESIDING submission to arbitration is a contract. A clause in a contract providing that
JUDGE of BR. 148 of the REGIONAL TRIAL COURT of MAKATI all matters in dispute between the parties shall be referred to arbitration is a
CITY, and CLIMAX-ARIMCO MINING contract,36 and in Del Monte Corporation-USA v. Court of Appeals37 that
CORPORATION, Respondents. "[t]he provision to submit to arbitration any dispute arising therefrom and
the relationship of the parties is part of that contract and is itself a contract.
FACTS: This is a consolidation of two petitions rooted in the same disputed As a rule, contracts are respected as the law between the contracting parties
Addendum Contract entered into by the parties. and produce effect as between them, their assigns and heirs."38
G.R. No. 167994. It stemmed from the petition to compel arbitration filed by
respondent Climax-Arimco before the RTC of Makati City on 31 March Sec. 6 of R.A. No. 876 recognizes the contractual nature of arbitration
2000 while the complaint of the GR 161957 for the nullification of the clauses or agreements. It provides:
Addendum Contract was pending before the DENR Panel of Arbitrators. On
March 23, 2000 Climax-Arimco had sent Gonzales a Demand for
Arbitration pursuant to Clause 19.111 of the Addendum Contract and also in Sec. 6. Hearing by court.—A party aggrieved by the failure, neglect or
accordance with Sec. 5 of R.A. No. 876. The petition for arbitration was refusal of another to perform under an agreement in writing providing for
subsequently filed before the RTC of Makaki City and Climax-Arimco arbitration may petition the court for an order directing that such arbitration
sought an order to compel the parties to arbitrate pursuant to the said proceed in the manner provided for in such agreement. Five days notice in
arbitration clause. writing of the hearing of such application shall be served either personally or
by registered mail upon the party in default. The court shall hear the parties,
and upon being satisfied that the making of the agreement or such failure to
April 14, 2000, Gonzales filed a motion to dismiss which he however failed comply therewith is not in issue, shall make an order directing the parties to
to set for hearing. On 15 May 2000, he filed an Answer with proceed to arbitration in accordance with the terms of the agreement. If the
Counterclaim,12 questioning the validity of the Addendum Contract making of the agreement or default be in issue the court shall proceed to
containing the arbitration clause. Gonzales alleged that the Addendum summarily hear such issue. If the finding be that no agreement in writing
Contract containing the arbitration clause is void in view of Climax- providing for arbitration was made, or that there is no default in the
Arimco’s acts of fraud, oppression and violation of the Constitution. Thus, proceeding thereunder, the proceeding shall be dismissed. If the finding be
the arbitration clause, Clause 19.1, contained in the Addendum Contract is that a written provision for arbitration was made and there is a default in
also null and void ab initio and legally inexistent. Gonzales RTC issued an proceeding thereunder, an order shall be made summarily directing the
order declaring Gonzales’s motion to dismiss moot and academic in view of parties to proceed with the arbitration in accordance with the terms thereof.
the filing of his Answer with Counterclaim.13
This special proceeding is the procedural mechanism for the enforcement of
On 31 May 2000, Gonzales asked the RTC to set the case for pre-trial. on 7 the contract to arbitrate. The jurisdiction of the courts in relation to Sec. 6 of
July 2000, the RTC granted Gonzales’s motion and set the case for pre-trial. R.A. No. 876 as well as the nature of the proceedings therein was
Climax-Arimco then filed a motion to resolve its pending motion to compel expounded upon in La Naval Drug Corporation v. Court of Appeals. 39 There
it was held that R.A. No. 876 explicitly confines the court's authority only to
the determination of whether or not there is an agreement in writing
providing for arbitration. In the affirmative, the statute ordains that the court
shall issue an order "summarily directing the parties to proceed with the
arbitration in accordance with the terms thereof." If the court, upon the other
hand, finds that no such agreement exists, "the proceeding shall be
dismissed."40 The cited case also stressed that the proceedings are summary
in nature.41
Implicit in the summary nature of the judicial proceedings is the separable or
independent character of the arbitration clause or agreement. This was
highlighted in the cases of Manila Electric Co. v. Pasay Trans. Co. 44and Del
Monte Corporation-USA v. Court of Appeals.45
The separability of the arbitration agreement is especially significant to the
determination of whether the invalidity of the main contract also nullifies the
arbitration clause. Indeed, the doctrine denotes that the invalidity of the main
contract, also referred to as the "container" contract, does not affect the
validity of the arbitration agreement. Irrespective of the fact that the main While the provision on arbitration in the Charter Party reads:
contract is invalid, the arbitration clause/agreement still remains valid and
enforceable.47
H. Special Provisions.
There is reason, therefore, to rule against Gonzales when he alleges that
Judge Pimentel acted with grave abuse of discretion in ordering the parties
to proceed with arbitration. Gonzales’s argument that the Addendum
Contract is null and void and, therefore the arbitration clause therein is void
as well, is not tenable. First, the proceeding in a petition for arbitration under
R.A. No. 876 is limited only to the resolution of the question of whether the
arbitration agreement exists. Second, the separability of the arbitration
clause from the Addendum Contract means that validity or invalidity of the
Addendum Contract will not affect the enforceability of the agreement to
arbitrate. The validity of the contract containing the agreement to submit to
arbitration does not affect the applicability of the arbitration clause itself. A
contrary ruling would suggest that a party’s mere repudiation of the main
contract is sufficient to avoid arbitration. That is exactly the situation that
the separability doctrine, as well as jurisprudence applying it, seeks to avoid.
Hence, Gonzales’s petition for certiorari should be dismissed.
32. NATIONAL UNION FIRE INSURANCE COMPANY OF
PITTSBURG, PA/AMERICAN INTERNATIONAL UNDERWRITER
(PHIL.) INC., petitioners,
vs.
STOLT-NIELSEN PHILIPPINES, INC. and COURT OF
APPEALS, respondents.
FACTS:
The United Coconut Chemicals, Inc. (hereinafter referred to as SHIPPER)
shipped 404.774 metric tons of distilled C6-C18 fatty acid on board MT
"Stolt Sceptre," a tanker owned by Stolt-Nielsen Philippines Inc. (hereinafter
referred to as CARRIER), from Bauan, Batangas, Philippines, consigned to
"Nieuwe Matex" at Rotterdam, Netherlands, covered by Tanker Bill of
Lading BL No. BAT-1. The shipment was insured under a marine cargo
policy with Petitioner National Union Fire Insurance Company of Pittsburg
(hereinafter referred to as INSURER), a non-life American insurance
corporation. Upon receipt of the cargo by the CONSIGNEE in the
Netherlands, it was found to be discolored and totally contaminated. The
claim filed by the SHIPPER-ASSURED with the CARRIER having been
denied, the INSURER indemnified the SHIPPER pursuant to the stipulation
in the marine cargo policy covering said shipment.
On April 21, 1986 as subrogee of the SHIPPER-ASSURED, the INSURER
filed suit against the CARRIER, before the Regional Trial Court of Makati,
Branch 58 (RTC), for recovery of the sum of P1,619,469.21, with interest,
representing the amount the INSURER had paid the SHIPPER-ASSURED.
The CARRIER moved to dismiss/suspend the proceedings on the ground
that the RTC had no jurisdiction over the claim the same being an arbitrable
one. As subrogee of the SHIPPER-ASSURED, the INSURER is subject to
the provisions of the Bill of Lading, which includes a provision that the
shipment is carried under and pursuant to the terms of the Charter Party
between the SHIPPER-ASSURED and the CARRIER providing for
arbitration. The INSURER opposed the dismissal/suspension of the
proceedings on the ground that it was not legally bound to submit the claim
for arbitration inasmuch as the arbitration clause provided in the Charter
Party was not incorporated into the Bill of Lading, and that the arbitration
clause is void for being unreasonable and unjust.
ISSUE:
WON the claim of the petitioner-insurer in this case against respondent-
carrier is arbitrable.
RULING
Yes. The claim of petitioner against respondent is arbitrable.
The pertinent portion of the Bill of Lading in issue provides in part:
This shipment is carried under and pursuant to the terms of the
Charter dated December 21st 1984 at Greenwich, Connecticut,
U.S.A. between Parcel Tankers. Inc. and United Coconut
Chemicals, Ind. as Charterer and all the terms whatsoever of the
said Charter except the rate and payment of freight specified
therein apply to and govern the rights of the parties concerned in
this shipment. Copy of the Charter may be obtained from the
Shipper or Charterer. (Emphasis supplied)
xxx xxx xxx
4. Arbitration. Any dispute arising from the making, performance
or termination of this Charter Party shall be settled in New York,
Owner and Charterer each appointing an arbitrator, who shall be a
merchant, broker or individual experienced in the shipping
business; the two thus chosen, if they cannot agree, shall nominate
a third arbitrator who shall be an admiralty lawyer. Such
arbitration shall be conducted in conformity with the provisions
and procedure of the United States arbitration act, and a judgment
of the court shall be entered upon any award made by said
arbitrator. Nothing in this clause shall be deemed to waive
Owner's right to lien on the cargo for freight, deed of freight, or
demurrage.
Clearly, the Bill of Lading incorporates by reference the terms of the Charter
Party. As the respondent Appellate Court found, the INSURER "cannot
feign ignorance of the arbitration clause since it was already charged with
notice of the existence of the charter party due to an appropriate reference
thereof in the bill of lading. The insurer’s postulate that it cannot be bound
by the Charter Party because, as insurer, it is subrogee only with respect to
the Bill of Lading; that only the Bill of Lading should regulate the relation
among the INSURER, the holder of the Bill of Lading, and the CARRIER
and that in order to bind it, the arbitral clause in the Charter Party should
have been incorporated into the Bill of Lading does not carry a meritorious
consideration because the charter may be made part of the contract under
which the goods are carried by an appropriate reference in the Bill of
Lading. The entire contract must be read together and its clauses interpreted
in relation to one another and not by parts. By subrogation, it became privy
to the Charter Party as fully as the SHIPPER before the latter was
indemnified, because as subrogee it stepped into the shoes of the SHIPPER-
ASSURED and is subrogated merely to the latter's rights. It can recover only
the amount that is recoverable by the assured. And since the right of action
of the SHIPPER-ASSURED is governed by the provisions of the Bill of
Lading, which includes by reference the terms of the Charter Party,
necessarily, a suit by the INSURER is subject to the same agreements.
These include the provision on arbitration hence; the INSURER cannot
avoid the binding effect of the arbitration clause.
Arbitration, as an alternative mode of settling disputes, has long been
recognized and accepted in our jurisdiction (Chapter 2, Title XIV, Book IV,
Civil Code). Republic Act No. 876 (The Arbitration Law) also expressly
authorizes arbitration of domestic disputes. Foreign arbitration as a system
of settling commercial disputes of an international character was likewise
recognized when the Philippines adhered to the United Nations "Convention
on the Recognition and the Enforcement of Foreign Arbitral Awards of
1958," under the 10 May 1965 Resolution No. 71 of the Philippine Senate,
giving reciprocal recognition and allowing enforcement of international
arbitration agreements between parties of different nationalities within a
contracting state. Thus, it pertinently provides:
1. Each Contracting State shall recognize an agreement in writing
under which the parties undertake to submit to arbitration all or
any differences which have arisen or which may arise between
them in respect of a defined legal relationship, whether contractual
or not, concerning a subject matter capable of settlement by
arbitration.
2. The term "agreement in writing" shall include an arbitral clause
in a contract or an arbitration agreement, signed by the parties or
contained in an exchange of letters or telegrams.
3. The court of a Contracting State, when seized of an action in a
matter in respect of which the parties have made an agreement
within the meaning of this article, shall, at the request of one of the
parties, refer the parties to arbitration, unless it finds that the said
agreement is null and void, inoperative or incapable of being
performed.
It has not been shown that the arbitral clause in question is null and void,
inoperative, or incapable of being performed. Nor has any conflict been
pointed out between the Charter Party and the Bill of Lading.
In fine, referral to arbitration in New York pursuant to the arbitration clause,
and suspension of the proceedings in Civil Case No. 13498 below, pending
the return of the arbitral award, is, indeed called for.
33. PUROMINES, INC., petitioner, vs. COURT OF APPEAL and
PHILIPP BROTHERS OCEANIC, INC., respondents.
FACTS:
Puromines, Inc. (Puromines for brevity) and Makati Agro Trading, Inc. (not
a party in this case) entered into a contract with private respondents Philipp
Brothers Oceanic, Inc. for the sale of prilled Urea in bulk. The Sales
Contract No. S151.8.01018 provided, among others an arbitration clause Whether the liability of respondent should be based on the same contract or
which states, thus:
"Any disputes arising under this contract shall be settled by
arbitration in London in accordance with the Arbitration Act 1950 and any
statutory amendment or modification thereof. Each party is to appoint an
Arbitrator, and should they be unable to agree, the decision of an Umpire
appointed by them to be final. The Arbitrators and Umpire are all to be
commercial men and resident in London. This submission may be made a
rule of the High Court of Justice in England by either party." 2
On or about May 22, 1988, the vessel M/V "Liliana Dimitrova" loaded on
board at Yuzhny, USSR a shipment of 15,500 metric tons prilled Urea in
bulk complete and in good order and condition for transport to Iloilo and
Manila, to be delivered to petitioner. Three bills of lading were issued by the
ship-agent in the Philippines, Maritime Factors Inc.
Shipments covered by Bill of Lading Nos. 1 and 3 were discharged in
Manila in bad order and condition, caked, hardened and lumpy, discolored
and contaminated with rust and dirt. Damages were valued and assessed at
some amount.
ISSUE:
WON Puromines action for breach of contract of carriage against Maritime
Factors and Puromines is subject to the arbitration provided in the sales
contract.
RULING:
Yes. The sales contract is comprehensive enough to include claims for
damages arising from carriage and delivery of the goods. Provision on
arbitrations provided in the sales contract is applicable in action for damages
arising from the breach of the contract of carriage.
As a general rule the seller has the obligation to transmit the goods to the
buyer, and concomitant thereto, the contracting of a carrier to deliver the
same. Art. 1523 of the Civil Code provides:
"Art. 1523. Where in pursuance of a contract of sale, the seller in authorized
or required to send the goods to the buyer, delivery of the goods to a carrier,
whether named by the buyer or not, for the purpose of transmission to the
buyer is deemed to be a delivery of the goods to the buyer, except in the
cases provided for in article 1503, first, second and third paragraphs, or
unless a contrary intent appear.
"Unless otherwise authorized by the buyer, the seller must take such contract
with the carrier on behalf of the buyer as may be reasonable, having regard
to the nature of the goods and the other circumstances of the case. X X X “
The disputed sales contact provides for conditions relative to the delivery of
goods, such as date of shipment, demurrage, weight as determined by the
bill of lading at load port and more particularly other provisions.
Hence as argued by respondent on its motion to dismiss, "the (petitioner)
derives his right to the cargo from the bill of lading which is the contract of
affreightment together with the sales contract. Puromines is therefore bound
by the provisions and terms of said bill of lading and of the arbitration
clause incorporated in the sales contract."
that of the bill of lading, the parties are nevertheless obligated to respect the
arbitration provisions on the sales contract and/or the bill of lading.
Petitioner being a signatory and party to the sales contract cannot escape
from his obligation under the arbitration clause as stated therein.
Arbitration has been held valid and constitutional. Unless the agreement is
such as absolutely to close the doors of the courts against the parties, which
agreement would be void, the courts will look with favor upon such
amicable arrangements and will only interfere with great reluctance to
anticipate or nullify the action of the arbitrator. 17 "Since there obtains
herein a written provision for arbitration as well as failure on respondent's
part to comply therewith, the court a quo should order the parties to proceed
to their arbitration in accordance with the terms of their agreement (Sec. 6
Republic Act 876). The reason for this case is that Puromines’ arguments
touching upon the merits of the dispute are improperly raised herein. They
should be addressed to the arbitrators first. Hence Puromines’ action is
premature.

Petitioner filed a complaint 3 with the trial court 4 for breach of contract of
carriage against Maritime Factors Inc. (which was not included as
respondent in this petition) as ship-agent in the Philippines for the owners of
the vessel MV "Liliana Dimitrova," while private respondent, Philipp
Brothers Oceanic Inc., was impleaded as charterer of the said vessel and
proper party to accord petitioner complete relief. Philip Brothers Oceanic
private respondent herein filed a motion to dismiss dated on the ground that
the petitioner, Puromines should comply with the arbitration clause in the
sales contract. The motion to dismiss was opposed by petitioner contending
the inapplicability of the arbitration clause inasmuch as the cause of action
did not arise from a violation of the terms of the sales contract but rather for
claims of cargo damages where there is no arbitration agreement.