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Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 156200. March 31, 2004

MEGAWORLD PROPERTIES AND HOLDINGS, INC.,, Petitioner, vs. HON. JUDGE BENEDICTO G. COBARDE, in his capacity as the Presiding Judge of the Regional Trial Court, Branch 53, Lapu-Lapu City; JUAN GATO, in his capacity as the Sheriff of the Regional Trial Court, Branch 53, Lapu-Lapu City; SERECIO MATTHEW B. JO AND IDA HENARES, Respondents.

D E C I S I O N

CORONA, J.:

This is a case involving the failure to pay the balance of a real estate brokers commission.

The antecedents show that sometime in July 1995, Mar y Cielo Leisure Resort, Inc. (MYC) secured the services of private respondents, Matthew Jo and Ida Henares, to broker a joint venture between MYC and petitioner Megaworld Properties and Holdings, Inc. for the latter to develop MYCs prime parcels of land with vast beach fronts located in Lapu-Lapu City, Cebu[1 into a world-class residential/commercial condominium complex. It was agreed that private respondents would be paid a 3% brokers fee based on the total consideration to be received by MYC from petitioner in the joint venture. A development agreement was then drawn up by petitioner Megaworld, AEV Properties, Inc. and Acoland, Inc. as developers, and MYC, through its owners Manuel, Virginia, Mariano and Richard all surnamed Zamora (Zamora family). Petitioner Megaworld was designated the exclusive marketing agent for the project.

However, before the development agreement could be implemented, or in March 1996, private respondents filed a civil complaint against petitioner Megaworld, MYC, the Zamora family, among others, for allegedly resorting to deceitful conduct to avoid payment of their 3% brokers/consultants fee. Private respondents alleged that MYC entered into simulated deeds of conveyance with certain individual members of the Zamora family to make it appear that MYC was not the owner of the properties subject of the development agreement.

To avert a full-blown trial and to save the joint venture project, the parties entered into a compromise agreement. Under the said agreement, MYC and the Zamora family committed themselves to pay private respondents a settlement amount of P29 million.[2 As agreed, P3.9 million of the total amount was paid by MYC and the Zamora family to private respondents upon the signing of the compromise agreement, with the balance of P25.1 million to be paid out of the share of MYC and/or the Zamora family from the proceeds of the joint venture project under the development agreement. The pertinent portions of the compromise agreement stated that:

x x x

4. MYC and the ZAMORA FAMILY agree to pay the FIRST PARTY a settlement amount of TWENTY NINE MILLION PESOS (29,000,000.00) Philippine Currency. Thus, upon signing of this Compromise Agreement, MYC and the ZAMORA FAMILY shall pay the FIRST PARTY P3.9 Million, plus interests earned therefrom from January 1996 up to the signing hereof. The balance of P25.1 Million shall be paid as follows:

a.Thirty Percent (30%) of whatever amount or consideration MYC and/or the ZAMORA FAMILY will receive from the Joint Venture Agreement shall be applied against the P25.1 Million liability through payment by the DEVELOPERS directly to the FIRST PARTY. x x x.

x x x

6. The DEVELOPERS undertake to withhold, pay and immediately deliver directly to the FIRST PARTY the latters 30% share until the P25.1 Million Pesos is fully paid in accordance with the conditions set forth (sic) in paragraph 4 but in no case shall the full payment be more than three (3) years from the execution of this Agreement. However, in the event the Thirty Percent (30%) of the amount or consideration MYC and/or the ZAMORA FAMILY will receive from the Joint Venture Agreement within the three-year period fails to reach P25.1 Million or the development has been delayed and MYC and the ZAMORA FAMILY have not received any proceeds from the Joint Venture Agreement, the DEVELOPERS shall advance the balance thereof due to the FIRST PARTY, which amount shall be deducted, without interest, from the share of MYC and/or the ZAMORA FAMILY under the Joint Venture Agreement.3 (underscoring ours)

On January 24, 1997, judgment[4 was rendered based on the above compromise agreement. However, more than three years passed and petitioner Megaworld, MYC and the Zamora family still had not paid private respondents the balance of P25.1million brokers fee. Consequently, private respondents filed a motion for execution of the judgment by compromise agreement which the court a quo granted. It likewise issued a notice of garnishment against petitioners deposits in Manila Banking Corporation,[5among other banks. Aggrieved, petitioner appealed to the Court of Appeals which, however, denied its petition and ordered the implementation of the writ of execution of the judgment on the compromise agreement.[6The appellate court further held that:

x x x

x x x. The July 27, 1997 Judgment based on a Compromise Agreement had already been partially fulfilled when the private respondents were paid P3.9 Million under paragraph (4) of the compromise agreement. Petitioner cannot now question the legality of a partially-performed compromise judgment after more than three (3) years from its promulgation without violating the principles of res judicata.7

Petitioner moved for a reconsideration of the CAs decision but the same was denied.[8Hence, this appeal.

Petitioner contends that its obligation under the compromise agreement to advance the balance of respondents commission of P25.1 million was premised on its being reimbursed from the share of MYC and the Zamora family in the proceeds of the joint venture project.[9However, the joint venture project was totally aborted due to causes beyond its control,[10among them the unilateral cancellation by MYC and the Zamora family of the development agreement which effectively revoked petitioners obligation under the compromise agreement to pay the balance of private respondents brokers commission.

In their comment, private respondents counter that the judgment based on the compromise agreement has long become final and executory, and was in fact partially executed when MYC and the Zamora family paid private respondents P3.9 million as initial payment of the P29 million settlement amount. They accuse petitioner of bad faith for allegedly delaying the start of the joint venture project and reneging on its obligation under the compromise agreement to advance the balance of private respondents commission.

The only issue to be resolved is whether petitioner is liable for the balance of private respondents brokers commission amounting to P25.1 million as held by the court a quo and the appellate court.

We hold that petitioner is not liable.

As a rule, the findings of fact of the trial court, when affirmed by the Court of Appeals, are binding and conclusive upon the Supreme Court.[11However, when the judgment of the Court of Appeals is premised on a misapprehension of facts or a failure to consider certain relevant facts that would lead to a completely different conclusion, a review of its factual findings may be made.[12In the case at bar, the Court of Appeals failed to take into account that on February 1, 2000, more than two years after the judgment on the compromise agreement was rendered and partially executed, MYC and the Zamora family unilaterally cancelled the development agreement. Thru counsel, they notified petitioner of said termination in their letter which stated that:

x x x

Pursuant to Section 12 1(b) of the Agreement, we hereby put you on notice that our clients are terminating the agreement, effective sixty (60) days from receipt of this letter.

On our clients behalf, we also demand that you pay them the amount of P8,000.00 everyday starting June 15, 1996 as liquidated damages in accordance with Section 11.4 Article XI of the agreement, plus the amount conservatively fixed at P128,000,000.00 (P258,000,000.00 less P130,000,000.00 as guaranty deposit) and P20,000,000.00 as loss of goodwill, representing the damages they sustained as a result of your failure to commence with the project or comply with your obligation under the agreement and destruction of an on-going resort business.13 (underscoring ours)

We hold that the unilateral rescission of the joint venture agreement by MYC and the Zamora family, pursuant to Section 12.1(b)[14of the development agreement, effectively discharged petitioner from its obligation under the compromise agreement to advance the balance of respondents brokers fee in the amount of P25.1 million. The terms of the compromise agreement were clear that petitioners undertaking to advance said amount was subject to reimbursement from the share of MYC and the Zamora family in the proceeds of the joint venture project. Thus, Section 6 of the compromise agreement stated:

6.x x x the DEVELOPERS shall advance the balance thereof due to the FIRST PARTY, which amount shall be deducted, without interest, from the share of MYC and/or ZAMORA FAMILY at the rate of Thirty Percent (30%) of whatever proceeds payable to MYC and/or the ZAMORA FAMILY under the Joint Venture Agreement.15 (underscoring ours)

If the terms of a contract are clear and leave no doubt as to the intention of the contracting parties, the literal meaning of its stipulation shall control.[16It is evident from Section 6 of the compromise agreement, supra, that petitioners obligation to advance the balance of respondents commission was dependent on the success meaning, the earnings of the joint venture project. This is clear from the stipulation of the parties under the said agreement that whatever amount petitioner advanced to respondents was to be deducted from the share of MYC and/or the Zamora family in the proceeds of the joint venture agreement. Consequently, when MYC and the Zamora family unilaterally cancelled the development agreement, petitioner was effectively deprived of its source of payment to respondents since it was left without recourse to reimbursement. To hold petitioner liable under the circumstances will result in the unjust enrichment of MYC, the Zamora family and the respondents. This we cannot countenance.

We likewise note that it was MYC and the Zamora family that gave respondents the authority[17to broker a joint venture agreement between them and petitioner for the development of MYCs prime parcels of land into a world-class residential/ commercial condominium complex, in consideration of three percent (3%) brokers/consultants fee based on the total consideration the Corporation may receive from Megaworld Properties and Holdings, Inc. In short, respondents were the agents or brokers of MYC and the Zamora family, not the petitioner, and the obligation to pay the brokers fee therefore rested on MYC and the Zamora family.

We find it totally unreasonable, oppressive even, for respondents to exact its brokers fee from a party which is not even its principal or the entity that engaged its services. Even on the premise that petitioner obligated itself under the compromise agreement to pay respondents the P25.1 million commission, that assumption of liability if needed it was was conditioned on the presence of earnings due MYC and the Zamora family. But how could there have accrued any earnings for MYC and the Zamora family when the latter unilaterally cancelled the project from which petitioner could draw the payment? To insist on holding petitioner liable for the P25.1 million, under the circumstances, is like Shylocks insistence on his pound of flesh.

Indeed it appears to be respondents theory that the compromise agreement in effect made the petitioner-developer a surety or solidary co-obligor of MYC and the Zamora family, absolutely and unconditionally liable for the P25.1 million brokers commission due the respondents with or without any possibility of reimbursement from the landowners MYC and Zamora family, and regardless of whether the joint venture project materializes or not. This is absurd and reads too much into the compromise agreement.

We agree that the judgment on the compromise agreement where petitioner obligated itself to pay the balance of respondents commission of P25.1 million has become final and executory. The same was in fact partially performed when MYC and the Zamora family gave respondents P3.9 million as partial payment of their brokers fee. However, under the law, the Court may modify or alter a judgment even after the same has become executory whenever circumstances make its execution unjust and inequitable, as where certain facts and circumstances justifying or requiring such modification or alteration transpire after the judgment becomes final and executory.[18 We have likewise held in a long line of cases[19 that the Court has the authority to suspend the execution of a final judgment or to cause a modification thereof as and when it becomes imperative in the higher interest of justice or when supervening events warrant it. In the case at bar, the critical factor was the unilateral cancellation by MYC and the Zamora family of the development agreement after the compromise agreement became final and partially executed. This fact was overlooked by the Court of Appeals. This was extremely important because, without the development agreement, the joint venture project could not push through. And without the joint venture project, there could have been no earnings from which the P25.1 million could be advanced. Thus, on account of the cancellation of the development agreement and the consequent abrogation of the entire joint venture project petitioners obligation to advance the balance of respondents commission ceased. To rule otherwise would be contrary to law and the principles of justice and fair play.

WHEREFORE, premises considered, the instant petition is hereby GRANTED. The decision of the Court of Appeals dated August 28, 2002 and its resolution of November 20, 2002 are hereby set ASIDE. The order of public respondent judge dated June 29, 2001 executing the compromise agreement as well as the writ of execution and notices of garnishment are hereby declared NULL AND VOID.

No costs.

SO ORDERED.

Sandoval-Gutierrez, (Acting Chairman), and Carpio-Morales, JJ., concur.

Vitug, J., (Chairman), on official business leave.


Endnotes:

1 These prime lands are located beside the Shangrila Mactan Resort Hotel, Lapu-Lapu City, Cebu and consist of 11,502 square meters.

2 Private respondents agreed to reduce their 3% commission of P60 million to P29 million provided they would be paid the entire amount within 3 years from the execution of the compromise agreement.

3 Compromise Agreement, Annex F, pp. 3-5.

4 Penned by Benedicto G. Cobarde, Presiding Judge, Civil Case No. 4411-L, RTC Branch 53, Lapu-Lapu City, Cebu.

5 Notice of Garnishment, Civil Case No. 4411-L, RTC, 7th Judicial Region, Lapu-Lapu City, Branch 53, December 2, 2002.

6 Penned by Associate Justice Eubolo G. Verzola and concurred in by Associate Justices Bernardo P. Abesamis and Josefina Guevara-Salonga of the Third Division; Rollo, pp. 45-55.

7 Ibid. p. 54.

8 Resolution, CA-G.R. SP No. 65489, November 20, 2002; Rollo, pp. 56-57

9 Petition, Rollo, p. 21.

10 In its reply to private respondents comment, petitioner Megaworld avers that the joint venture project was totally aborted due to causes beyond its control, to wit:

(a)It was only sometime in 1998 that MYC and/or the Zamora family were able to resolve the case involving the ownership of one of the lots located in Phase I of the proposed Master Plan. Even then, it was not yet clear to the petitioner if the Notice of Lis Pendens which was annotated on the title of the subject property had already been lifted.

(b)As developer, herein petitioner had submitted to MYC and/or the Zamora family for approval the Master Plan and the Development Timetable as early as 1996. Yet, despite repeated follow-ups, MYC and/or the Zamora family did not act on it. In the meantime, the (Asian) economic crisis took place.

(c)Since no Master Plan and Development Timetable had yet been agreed upon, and due to the onslaught of the economic crisis, petitioner was constrained to propose changes on Phase I of the submitted Master Plan in order to meet the changes in the property market demand. Again, however, despite repeated follow-ups, MYC and/or the Zamora family did not act on the proposed changes.

(d)Worse, the Joint Venture Agreement between MYC and/or the Zamora family and the developers was unilaterally terminated by MYC and/or the Zamora family themselves. In fact, they filed a case for a specific performance entitled Manuel Zamora, et al. v. Megaworld Properties and Holdings, Inc., AEB Properties, Inc. and Acoland Inc. before the Regional Trial Court of Makati City.

(c)MYC and/or the Zamora family have taken possession and regained full physical control of the development site as in fact they already replaced with their own security men the security guards those who herein petitioner had detailed at the vicinity.

Rollo, p. 203.

12 Santos v. Reyes, 368 SCRA 261 [2002].

13 Annex H, Rollo, p.122.

14 Section 12.1. Default / Remedies in Case of Default

xxx xxxxxx

(a) xxx xxxxxx

(b) If the Defaulting Party fails to remedy or cure said default or breach within the stipulated or extended period, as the case may be, the Non-Defaulting Party shall have the right to terminate this Agreement by giving sixty (60) days written notice to the Defaulting Party. The consequences of such default are set forth in Section 12.2.

Development Agreement, Rollo, p. 79.

15 op cit. at note 2.

16 Article 130, New Civil Code.

17 Authority, Annex C, Rollo, p.58.

18 David vs. Court of Appeals, 316 SCRA 710 [1999].

19 People v. Gallo, 315 SCRA 461 [1999] citing Echegaray v. Secretary of Justice, 301 SCRA 96 [1999]; Bachrach Corporation v. Court of Appeals, 296 SCRA 487 [1998]; Lee v. de Guzman, 187 SCRA 276 [1990]; Philippine Veterans Bank v. Intermediate Appellate Court, 178 SCRA 645 [1989]; Lipana v. Development Bank of Rizal, 154 SCRA 257 [1987], Candelaria v. Canizares, 4 SCRA 738 [1962].



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