Whether the defendant-appellant is bound under the Compromise Agreement entered into by Security Bank Corporation and defendants.

Anent the first two issues, Limpo takes for the negative. He maintains that the Compromise Agreement was executed without his participation and so the trial court’s judgment based on compromise, by obvious consequence, did not and could not have included him as a judgment debtor. Under this circumstance, there would be no basis to include him as a defendant in a complaint for revival of judgment.
With respect to the second issue, Limpo answers in the affirmative. He avers that an action based on the promissory note, being a written contract, prescribes in ten years. Continuing from this premise, he computes that the right of action under the promissory note accrued when it became due and demandable on September 19, 1979 and was suspended upon institution of the action to collect on the note on November 11, 1980. By then, one year, one month and twenty-three days had elapsed. The period began to run again on March 22, 1983, when the judgment approving the Compromise Agreement was issued, and was tolled upon the filing of the complaint for revival of judgment on July 22, 1992. This next interval adds up to approximately nine years and four months. Add this to the first interval, the total period that had run would already be ten years and five months, making any suit on the promissory note barred by prescription. 

The Court finds the petition meritorious. 

It is settled that a compromise agreement cannot bind persons who are not parties to it This rule is based on Article 1311(1) of the Civil Code which provides that “contracts take effect only between the parties, their assigns and heirs x x x.”  The sound reason for the exclusion of non-parties to an agreement is the absence of a vinculum or juridical tie which is the efficient cause for the establishment of an obligation. In the Compromise Agreement that was presented to the trial court, there is no question that only the spouses Uy and the Bank were parties. Limpo did not participate in its execution and there was no reference to him in any of its provisions. He cannot be bound by the Compromise Agreement.
What happens then if the court approves a compromise agreement that fails to include all of the defendants? In approving a compromise agreement, no court can impose upon the parties a judgment different from their real agreement or against the very terms and conditions of the amicable settlement entered into. The principle of autonomy of contracts must be respected. These being said, considering that the Compromise Agreement imposed no obligation upon Limpo, it follows that the judgment rendered by the Regional Trial Court (RTC) of Pasig, based on the Compromise Agreement, could likewise not impose any obligation upon him. The duty of the court is confined to the interpretation of the agreement that the contracting parties have made for themselves without regard to its wisdom or folly as the court cannot supply material stipulations or read into the contract words which it does not contain. Consequently, the contention of Limpo is correct. The terms and conditions set forth in the Compromise Agreement, as approved by the court, are controlling and, therefore, there is no basis to include him in reviving the judgment. 

However, there remains the question of whether the Bank may still continue the proceedings against Limpo in Civil Case No. 62226, as concluded by the Court of Appeals.  

The Court of Appeals gives the following reason:  

x x x If the spouses Uy would become insolvent and could not pay their obligation under the Compromise Agreement, the SBTC [the Bank] could collect the whole amount of the obligation from defendant Rolando Limpo. A judgment, therefore, against Rolando Limpo would not be incompatible with the existence of the Compromise Agreement for in such a situation SBTC could exercise its option to secure execution of judgment against either or both the Uys and Limpo. The only limitation is that SBTC could not collect more than the total amount of indebtedness.

The sound reasoning of the Court of Appeals as to the liabilities of a solidary debtor is correct. However, it failed to consider two important incidents that make this case distinct: 1) a judgment had been rendered excluding Limpo; and 2) such judgment had become final.

A compromise agreement once approved by order of the court becomes immediately final and executory with the force of res judicata.  The court’s sanction imbues it with the same effect as any other judgment.  No doubt that as to the spouses Uy, there was a clear declaration of liability. Debate arises with respect to Limpo who was never mentioned in both the agreement and the judgment despite that fact that he was impleaded as a defendant. How should this omission affect him?

Judicial precedent as to the implication of a judgment approving a compromise agreement that fails to expressly mention or include all the defendants is found in Bopis v. Provincial Sheriff of Camarines Norte, the facts of which are akin to those of this case.  There, four defendants, Camino, Eco, Guadalupe and Bopis, were sued by the plaintiff for recovery of possession of real property. Later, a compromise agreement was executed among Camino, Eco and the plaintiff, whereby Camino and Eco agreed to pay the plaintiff a sum of money. The compromise agreement was later approved by the trial court. Camino and Eco, however, failed to pay the entire amount and, as a result, a writ of execution was issued against all four defendants. Guadalupe and Bopis questioned their inclusion in the writ of execution since the judgment approving the agreement did not include them. This Court found their contention meritorious and declared the writ of execution null and void with respect to Guadalupe and Bopis.  Quoting from the Decision:

As will be seen, only Rufina Camino and Pasto Eco were adjudged to pay Alfonso Ortega the amount of P140.00 on February 28, 1951. Although they were included as party defendants, the spouses Fermin Bopis and Emilia Guadalupe were not ordered to pay Alfonso Ortega. Obviously, they were absolved from liability. Accordingly, as to them, there was nothing to execute since they have been absolved from liability.

The Court, in that case, ostensibly concluded that a decision that fails to expressly mention the liability of one of the defendants will be taken to mean that he has been absolved in that case. From this pronouncement, the failure to mention Limpo in the judgment of the RTC of Pasig will correspondingly mean his absence of liability to the Bank. As this implied declaration became final with the approval of the Compromise Agreement, the Court of Appeals’ instructions to continue the proceedings against Limpo in Civil Case No. 62226 amount to an alteration of a matter that is already res judicata.  

Since Limpo is no longer liable to the Bank, the issue of prescription is not necessary to resolve. 

, the resolutions of the Court of Appeals dated April 5, 2000 and August 30, 2000 in CA-G.R. CV No. 45821 are hereby REVERSED and SET ASIDE. Rolando Limpo is ordered DROPPED as a defendant in Civil Case No. 62226. No pronouncement as to costs. 

SO ORDERED.       

SOURCE: [ G.R. NO. 144732, February 13, 2006 ]ROLANDO LIMPO, PETITIONER, VS. COURT OF APPEALS AND SECURITY BANK AND TRUST COMPANY, RESPONDENTS. Tags: conversion hearing trial illegal drugs trial lawyer business corporate lawyer labor lawyer immigration law bureau of immigration cebu 9g visa search warrant warrant of arrest motion to quash information complaint police officers buy bust physical suffering shocked horrified mental anguish fright serious anxiety besmirched reputation sleepless nights wounded feelings moral shock social humiliation similar injuries Real Estate Broker nominal damages Sales Agent Properties for Sale Looking for Buyers Design Build House and Lot for Sale for Rent Talisay City Mandaue City Lapu Lapu Lapu-Lapu City Yncierto Sesante Villanueva Ruz Jan Edmond Marc Tim Timothy temperate damages Luz liquidated damages Kristin tct transfer certificate of title tax declaration birth certificate relocation survey surveying judicial titling administrative titling patent title denr cenro foreshore lease ecc environmental compliance certificate design build architect cebu engineer interior design designer residential commercial cebu property warehouse for rent for lease marc Christian yncierto ruz jan Edmond yncierto ruz Kristin Villanueva ruz Edmond mabalot ruz marriage certificate timber land forest land watershed agricultural lot land use Alcantara Alcoy moral damages Alegria actual damages Aloguinsan Argao Asturias Badian Balamban Bantayan Barili Boljoon Borbon Carmen Catmon Compostela Consolacion Cordova Daanbantayan Dumaguete Bais Sibulan Tampi Bacong Negros Bacolod Separation pay Resign Resignation Back wages Backwages Length of service pay benefit employee employer relationship Silay Kabankalan Daan Bantayan Dalaguete Dumanjug Ginatilan Liloan compensatory damages Madridejos Malabuyoc Medellin Minglanilla Moalboal Oslob Pilar Pinamungajan Poro Ronda Samboan San Fernando San Francisco San Remigio Sante Fe Santander Sibonga Sogod Tabogon Tabuelan Tuburan attorney’s fees Tudela exemplary damages Camotes General Luna Siargao Cagayan Davao Kidapawan Attorney Abogado Lawyer Architect

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