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FIRST DIVISION

G.R. No. 132076. July 22, 2003

ROBERTO U. GENOVA, petitioner, v. LEVITA DE CASTRO, respondent.

[G.R. No. 140989. July 22, 2003]

ROBERTO U. GENOVA, petitioner, v. LEVITA DE CASTRO and THE HONORABLE COURT OF APPEALS, respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

These are consolidated petitions for review of the decisions of Court of Appeals in CA-G.R. SP Nos. 41521 and 48422.1cräläwvirtualibräry

Petitioner was the owner of a parcel of land located in Sta. Ana, Manila, containing an area of 399.6 square meters and registered in his name under Transfer Certificate of Title No. 172539 of the Register of Deeds of Manila. Sometime in 1989, petitioner ventured into the business of movie production. In order to finance his film project, he obtained a loan from respondent Levita de Castro for P1,000,000.00 with interest thereon at the rate of 5% per annum. By way of security for the loan, and as required by respondent, petitioner turned over his owners duplicate certificate of title and signed blank sheets of paper with the understanding that their Deed of Mortgage will be printed thereon. Meanwhile, petitioner remained in possession of the property.

It appears that previously, petitioner had obtained a loan from the United Coconut Planters Bank secured by a real estate mortgage over the subject property. He defaulted in the payment of his obligations, whereupon the bank caused the extrajudicial foreclosure of the mortgage and purchased the property as the highest bidder at the sale at public auction.

Subsequently, respondent redeemed the property from UCPB and caused the cancellation of TCT No. 172539 on the strength of a purported deed of sale from petitioner. It turned out that instead of printing a Deed of Mortgage on the blank sheets of paper which petitioner had earlier signed, respondent caused to be printed thereon an Absolute Deed of Sale of a Registered Land in her favor. Thus, respondent obtained TCT No. 194123 in her name.2

G.R. No. 140989

Petitioner filed against respondent an action for Reformation of Contract, Reconveyance and Damages with the Regional Trial Court of Manila, Branch 25, which was docketed as Civil Case No. 90-54611. In the course of the proceedings, the parties entered into a Compromise Agreement whereby they stipulated as follows:

1. Plaintiff [petitioner herein] acknowledges defendants [respondent herein] having redeemed the property in question on November 12, 1991, subject of the Certificate of Sale dated September 29, 1990, and inscribed on the title thereof (TCT No. 194123 ind.) on November 12, 1990 under Entry No. 2422 in favor of UCPB Savings Bank.

2. Defendant has hereby acceded to the request of plaintiff to re-sell to him the property in question within a period of four (4) months from date of approval hereof at the agreed repurchase price corresponding to the total original purchase price of One Million and Sixty Thousand (P1,060,000.00) pesos, plus five (5%) percent agreed monthly interest to the tune of Fifty Three Thousand (P53,000.00) pesos, commencing from December 23, 1989, up to the time when plaintiff has finally exercised his right to buy back the property within the period stipulated above.

3. Plaintiff likewise has agreed to reimburse the defendants redemption payment of Three Hundred Ninety Two Thousand and Eight Hundred (P392,800.00) pesos, to UCPB Savings Bank plus legal bank rate of interest accrued thereon and payments made corresponding to insurance premium in the total sum of EIGHTY ONE THOUSAND THREE HUNDRED NINETY SIX AND FIFTY NINE CENTAVOS (P81,396.59) PESOS; subject however, to presentation of supporting pertinent receipt.

4. As regards realty tax and transfer tax payments made by the defendant necessary for the transfer of TCT No. 172539 in her name, plaintiff has further agreed to reimburse defendant the fixed amount of One Hundred Fifty Five Thousand (P155,000.00) pesos, to be added to the repurchase price of the subject property.

5. Finally, defendant hereby recognized payment made by plaintiff on May 11, 1990 in the amount of One Million Two Hundred Thousand (Y1,200,000.00) yen, subject, however, to the prevailing conversion in Philippine Pesos;

6. In the event plaintiff fails to repurchase back the subject property within the period stipulated herein, he shall be deemed therefor to have irrevocably waived any further right, claim, or interest to the subject property in question and, thereafter, defendant shall be entitled to a Writ of Execution issued ex-parte to oust or eject plaintiff and all persons claiming right under him from the house built on the said property as well as from its premises.

7. By virtue of the agreement, the parties hereto authorized the Register of Deeds for the City of Manila to cancel or delete any and/or all annotations or liens and encumbrances on TCT No. 194123 ind., including, but not limited to the lis pendens caused to be inscribed by the plaintiff which affect and/or involve the parties hereto.3cräläwvirtualibräry

The Compromise Agreement was approved by the trial court in a decision dated June 8, 1992.4cräläwvirtualibräry

Under the Compromise Agreement, petitioner was obligated to pay respondent the total amount of P3,332,196.59. He was able to pay only the sum of P2,287,000.00 within the four-month stipulated period. Thereafter, he tendered payment of the remaining balance of P1,045,196.59, but respondent refused to accept the same. On March 13, 1996, petitioner consigned with the trial court a check for the amount of the said remaining balance.

Respondent filed a motion for the issuance of a writ of execution of the compromise judgment dated June 8, 1992 on the ground that petitioner failed to pay the stipulated amount in full within the period agreed upon in the compromise agreement.5 In an Order dated March 4, 1998, the trial court denied the motion, upon a finding that the principal obligation had already been paid by petitioner and the unpaid balance represented the interest on the loan.6 Respondent filed a motion for reconsideration, which was denied in an Order dated May 15, 1998.7cräläwvirtualibräry

Hence, respondent filed a petition for certiorari with the Court of Appeals, which was docketed as CA-G.R. SP No. 48422. The petition was granted by the appellate court. The trial court was directed to issue the writ of execution prayed for by respondent.8cräläwvirtualibräry

Petitioner thus filed the instant petition for review, which was docketed as G.R. No. 140989, based on the following assignment of errors:

I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONER FAILED TO REPURCHASE THE SUBJECT PROPERTY FROM RESPONDENT DE CASTRO IN ACCORDANCE WITH THE COMPROMISE AGREEMENT BETWEEN THE PARTIES.

II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE CONSIGNATION MADE BY PETITIONER WITH THE REGIONAL TRIAL COURT OF THE REMAINING BALANCE OF THE AGREED REPURCHASE PRICE WAS INVALID.

III. EVEN ASSUMING FOR THE SAKE OF ARGUMENT THAT THE JUDICIALLY SANCTIONED COMPROMISE AGREEMENT BETWEEN PETITIONER AND RESPONDENT DE CASTRO WAS NOT COMPLIED WITH TO THE LETTER, THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THERE WAS NO SUBSTANTIAL COMPLIANCE THEREOF BY SAID PETITIONER OF HIS OBLIGATION UNDER THE SAME.

IV. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE COURT A QUOS ORDER DENYING RESPONDENT DE CASTROS MOTION FOR ISSUANCE OF WRIT OF EXECUTION AS WELL AS THE ORDER DENYING SAID RESPONDENTS SUBSEQUENT MOTION FOR RECONSIDERATION OF THE ABOVE-MENTIONED COURT A QUOS ORDER.9cräläwvirtualibräry

More specifically, petitioner contends that the compromise agreement approved by the lower court partook of the nature of a pacto de retro sale. He argues that he may still pay even after the lapse of the four-month period agreed upon as long as no demand for rescission of the contract has been made upon him either judicially or by notarial act, citing Article 1592 of the Civil Code which states:

In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long asno demand for rescission of the contract has been made upon him either judicially or by notarial act. After the demand, the court may grant him a new term.

Petitioner also claims that the tender and consignation of the remaining balance of the purchase price before any demand for rescission was made constituted valid payment. He points out that the amount he was not able to pay within the stipulated period represented unconscionable interests on the loan, the imposition of which is contrary to public policy. Should reconveyance of the property be no longer feasible, petitioner prayed that the amount which he had paid to the respondent be returned to him based on the principle of solutio indebiti.

G.R. No. 132076

On October 2, 1995, respondent filed a complaint for unlawful detainer against petitioner before the Metropolitan Trial Court of Manila, Branch 15, which was docketed as Civil Case No. 149540-CV. On March 21, 1996, a judgment was rendered in favor of respondent as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff [respondent herein] as against defendant [petitioner herein] ordering the latter and all persons claiming right under him to vacate and turn over the possession of the premises to the plaintiff; ordering the defendant to pay the amount of P40,000.00 as reasonable compensation of the premises from he time of demand to vacate until such time that defendant shall have finally vacated the premises; ordering defendant to pay plaintiff the sum of P10,000.00 as and for attorneys fees, plus costs of suit.

SO ORDERED.10cräläwvirtualibräry

Petitioner appealed the decision to the Regional Trial Court of Manila, Branch 31, where it was docketed as Civil Case No. 96-78041. On July 12, 1996, the Regional Trial Court rendered judgment reversing the decision of the Metropolitan Trial Court and dismissed the ejectment case pending the outcome of Civil Case No. 90-54611 (the reformation case).11cräläwvirtualibräry

Respondent filed a petition for review of the above decision before the Court of Appeals, which reversed the decision of the Regional Trial Court12 on the ground that inferior courts are not divested of jurisdiction over the unlawful detainer case when the defendant sets up a claim of ownership over the litigated property.13cräläwvirtualibräry

Hence, the instant petition for review, raising the following assignment of errors:

1. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT OVERLOOKED THE FACT THAT CIVIL CASE NO. 90-54611 FOR REFORMATION, RECONVEYANCE AND DAMAGES FILED BY PETITIONER HEREIN WAS ALREADY FINAL AND EXECUTORY, THUS, BARRING THE INSTANT ACTION OF PRIVATE RESPONDENT ON THE GROUND OF RES JUDICATA AND FORUM SHOPPING;

2. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT FAILED TO APPRECIATE THAT PETITIONER IS THE REAL AND TRUE OWNER OF THE PROPERTY SUBJECT MATTER.14cräläwvirtualibräry

Petitioner argues that the judgment by compromise in the reconveyance case was a final judgment which barred the ejectment case filed by the respondent on the ground of res judicata and forum shopping.

Both petitions lack merit.

A compromise is an agreement between two or more persons who, for preventing or putting an end to a lawsuit, adjust their respective positions by mutual consent in the way they feel they can live with. Reciprocal concessions are the very heart and life of every compromise agreement, where each party approximates and concedes in the hope of gaining balance by the danger of losing. It is, in essence, a contract.15cräläwvirtualibräry

A compromise is binding and has the force of law between the parties, unless the consent of a party is vitiated such as by mistake, fraud, violence, intimidation or undue influence or when there is forgery, or if the terms of the settlement are so palpably unconscionable.16cräläwvirtualibräry

Under the compromise agreement executed between the parties, petitioner bound himself to pay respondent the aggregate amount of P3,332,196.59 as consideration for the reconveyance to him of the property.17 However, he failed to pay the said amount in full within the four-month period stipulated in the compromise agreement, counted from the date of approval thereof by the trial court. Thus, the provision contained in paragraph 6 of the compromise agreement came into play, to wit:

6. In the event plaintiff fails to repurchase back the subject property within the period stipulated herein, he shall be deemed therefor to have irrevocably waived any further right, claim, or interest to the subject property in question and, thereafter, defendant shall be entitled to a Writ of Execution issued ex-parte to oust or eject plaintiff and all persons claiming right under him from the house built on the said property as well as from its premises.18cräläwvirtualibräry

Petitioner argues that he should be allowed to pay the remaining balance even after the lapse of the four-month stipulated period considering that pursuant to Article 1592 of the Civil Code, a judicial or notarial act was necessary before the respondent may unilaterally rescind the contract of sale.

The argument is misplaced.

In the case at bar, the judicial compromise specifically provided for the relief that the parties may resort to in case of breach. More particularly, it states that respondent shall have the right to file a motion for the issuance of a writ of execution to eject petitioner from the property in case he fails to pay his obligations in full within the stipulated period. On the other hand, petitioner agreed to waive any further right, claim or interest to the subject property.

Indeed, it has been held in a number of cases that in the event of breach or default by one party to a judicial compromise in the performance of his obligations, the remedy of the aggrieved party is to move for the execution of the compromise judgment.19 Thus:

Even more than a contract which may be enforced by ordinary action for specific performance, the compromise agreement is part and parcel of the judgment, and may therefore be enforced as such by a writ of execution.

Finally, when the terms of an amicable settlement are violated, as in the case at bar, the remedy of the aggrieved party is to move for its execution. 20cräläwvirtualibräry

Therefore, respondent availed of the proper remedy when she filed with the court that rendered the compromise judgment a motion for the execution of the same. Conversely, petitioner has no choice but to abide by the consequences of his failure to perform his obligation under the agreement.

Petitioner likewise contends that respondent was guilty of forum shopping. The test to determine whether a party violated the rule against forum shopping is whether the elements of litis pendentia are present, or whether a final judgment in one case will amount to res judicata in another.21 Accordingly, there is res judicata where the following four essential conditions concur, viz: (1) there must be a final judgment or order; (2) the court rendering it must have jurisdiction over the subject matter and the parties; (3) it must be a judgment or order on the merits; and (4) there must be, between the two cases, identity of parties, subject matter and causes of action.22cräläwvirtualibräry

Here, while the first three conditions are present and there was identity of parties, there is no identity of causes of action in the reformation case, on the one hand, and the ejectment case, on the other hand. In determining the question of the identity of causes of action, the following test is as a rule sufficient: Would the same evidence support and establish both the present and the former cause of action?23 It is clear that the evidence petitioner needed to sustain his complaint for reformation is different from the proofs he must present in support of his defense in the action for unlawful detainer. In the action for reformation, the issue to be resolved is whether the agreement was attended by fraud. Thus, he should present evidence to prove the true intent of the parties in entering into the mortgage agreement. He should also prove that there was fraud in the transfer of title to the property to respondent. On the other hand, the ejectment suit involved the issue of possession only.

Moreover, petitioners violation of the terms of the compromise judgment gave rise to a new cause of action on the part of respondent, i.e., the right to enforce the terms thereof. When she failed to obtain this by mere motion filed with the trial court, she was constrained to institute the proper suit for ejectment. The filing of a separate case based on a cause of action that arises from the application or violation of a compromise agreement is not barred by res judicata in the first action.24cräläwvirtualibräry

Petitioner also argues that the payments he has made to respondent must be returned based on the principle of solutio indebiti under Article 2154 of the Civil Code. There is solutio indebiti where: (1) payment is made when there exists no binding relation between the payor, who has no duty to pay, and the person who received the payment; and (2) the payment is made through mistake, and not through liberality or some other cause.25 The quasi-contract of solutio indebiti is based on the ancient principle that no one shall enrich himself unjustly at the expense of another.26cräläwvirtualibräry

Article 2154 of the Civil Code provides:

If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.

The first element of solutio indebiti is lacking. There can be no mistaken payment in this case because petitioner made payments to respondent pursuant to an agreement to repurchase the property. Hence, the principle of solutio indebiti finds no application in this case.

This notwithstanding, petitioner is entitled to a refund of what he had paid based on equitable grounds. We find it iniquitous for the respondent to forfeit both petitioners land and hard-earned money. In Trinidad v. Intermediate Appellate Court,27 this Court, in the exercise of equity jurisdiction, refused to strictly enforce the stipulation of the parties, thus:

xxx Given such circumstances, the Court feels and so holds that the above-quoted stipulation should not be strictly enforced, to justify the rescission of the contract. To make her forfeit the payments already made by her and at the same time return the property to the private respondents for standing up to what she considered her right would, in our view, be unfair and unconscionable. Justice demands that we moderate the harsh effects of the stipulation. Accordingly, in the exercise of our equity jurisdiction, we hereby rule that the Contract of Conditional Sale shall be maintained between the parties except that the petitioner shall not return the house to the private respondents. However, she will have to pay them the balance of the purchase price in the sum of P52,500.00, with 12% annual interest from July 1, 1972, until full payment.

Also, in Ramos, et al. v. Court of Appeals, et al.,28 it was held that although the contract of sale between Herminio Ramos and Lydia Celestino should be voided for being contrary to public policy, we deemed it equitable to allow private respondent therein to recover what she had paid for the land with legal interest thereon commencing from the date of the filing of the complaint.

In one case,29 we even ordered the Government to refund the overpayment of franchise taxes to a taxpayer despite its non-compliance with the requisites before suit could be maintained for the recovery thereof, based on moral and equitable grounds. From a moral standpoint, it was ruled that the Government would be enriching itself at the expense of the taxpayer, viz:

xxx Legally speaking, the decision of the Tax Court is therefore correct, being in accordance with law. However, ones conscience does not and cannot rest easy on this strict application of the law, considering the special circumstances that surround this case. xxx

Hence, in the exercise of equity jurisdiction, the compromise agreement between the parties should be maintained but respondent should be made to return the amount of P2,287,000.00 to petitioner. The Regional Trial Court of Manila, Branch 25 is ordered to return the check in the amount of P1,045,196.59 which was consigned by the petitioner.

WHEREFORE, the consolidated petitions are PARTLY GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 41521, which reversed the decision of the Regional Trial Court of Manila, Branch 31 in Civil Case No. 96-78041 dismissing the action for unlawful detainer pending the outcome of the reformation case, is AFFIRMED. The decision of the Court of Appeals in CA-G.R. SP No. 48422, which directed the Regional Trial Court of Manila, Branch 25, in Civil Case No. 90-54611, to order the execution of the compromise judgment, is AFFIRMED with the MODIFICATION that respondent is ordered to REFUND to petitioner the sum of P2,287,000.00. The Regional Trial Court of Manila, Branch 25, is also ordered to RETURN the check which was consigned by the petitioner in the amount of P1,045,196.59.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Vitug, Carpio, and Azcuna, JJ., concur.



Endnotes:

1 Resolution dated September 9, 2002.

2 CA Rollo, CA-G.R. SP No. 48422, p. 36.

3 Id., pp. 17-18.

4 Id., p. 18.

5 Id., p. 20.

6 Id., pp. 13-15.

7 Id., p. 16.

8 Rollo, G.R. No. 140989, pp. 44-51; penned by Associate Justice Fermin A. Martin, concurred in by Associate Justices B.A. Adefuin-De la Cruz and Presbitero J. Velasco, Jr.

9 Id., p. 26.

10 Id., pp. 31-34, at 33-34; penned by Judge Virgilio N. Jiro.

11 Id., pp. 26-29; penned by Judge Regino T. Veridiano II.

12 Rollo, pp. 46-50; penned by Associate Justice Oswaldo D. Agcaoili, concurred in by Associate Justices Jaime M. Lantin and Buenaventura J. Guerrero.

13 Id., p. 50.

14 Id., p. 33.

[16 Chavez v. Presidential Commission on Good Government, 360 Phil. 133 (1998).

17 Rollo G.R. No. 140989, p. 37.

18 Op. cit., note 3.

19 Paredes v. Court of Appeals, 217 Phil. 471 (1984); citing Zapanta v. De Rotaeche, 21 Phil. 154 (1912), World Machine Enterprises v. Intermediate Appellate Court, G.R. No. 72019, 20 December 1990 and Chemphil Export and Import Corporation v. Court of Appeals, 321 Phil. 619 (1995).

22 Gallardo-Corro v. Gallardo, et al., G.R. No. 136228, 30 January 2001; Republic v. CA, et al., 381 Phil. 558 (2000); Ayala Land, Inc. v. Valisno, 381 Phil. 518 (2000); Bachrach Corporation v. CA, et al., 357 Phil. 483 (1998); Alejandrino v. CA, et al., 356 Phil. 851 (1998).

23 Pealosa v. Tuason, 22 Phil. 303 (1912).

25 National Commercial Bank of Saudi Arabia v. Court of Appeals, et al., G.R. No. 124267, 31 January 2003; Philippine National Bank v. Court of Appeals, et al., G.R. No. 97995, 21 January 1993.

26 Andres v. Manufacturers Hanover & Trust Corporation, et al., G.R. No. 82670, 15 September 1989, see also Ramie Textiles, Inc. v. Mathay, Sr., G.R. No. L-32364, 30 April 1979.

27 G. R. No. 659222, 3 December 1991, 204 SCRA 524.

28 G.R. No. 108121, 10 May 1994.

29 Panay Electric Co., Inc. v. The Collector of Internal Revenue and the Court of Tax Appeals, 103 Phil. 819 (1958).




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