SPOUSES ROLLY YU & BELLAFLOR RIVERA-YU AND MARILYN YU-TUTAAN, PLAINTIFFS-APPELLANTS, VS. LILIAN P. YU, SPOUSES CHARLEY P. YU AND AURORA C. YU AND SPOUSES HOWARD CO AND MARIA EVI…

Yu versus Yu

The Case

This is the case of Yu versus Yu, a dispute among siblings over a commercial parcel of land in San Mateo, Isabela. The plaintiffs, Rolly Yu and Bellaflor Rivera-Yu together with Marilyn Yu-Tutaan, sued their sister Lilian Yu and her husband Charley Yu, as well as the spouses Howard Co and Maria Evita Co, asking the Regional Trial Court to enforce an alleged oral agreement of co-ownership, to annul the sale of the property to the Co spouses, and to partition the land, with damages. The case matters to a reviewee for two reasons: it shows how the Supreme Court treats a compromise agreement that ends a pending appeal, and it illustrates when the absence of some co-parties' signatures will not defeat such an agreement.

Procedural History

The plaintiffs filed their complaint for specific performance, annulment of sale, partition, and damages with a prayer for injunctive relief before the Regional Trial Court of Cauayan City, Isabela, Branch 19. The defendants filed their respective answers, and Lilian and Charley Yu then moved for summary judgment. The trial court granted the motion, dismissing the complaint for lack of cause of action, declaring Lilian Yu the exclusive owner of the property, declaring the sale to the Co spouses valid, ordering the plaintiffs to pay attorney's fees, and ordering the cancellation of the adverse claim annotated on the title. The plaintiffs appealed to the Court of Appeals. While the appeal was pending, the Court was informed that Lilian Yu had been fatally shot, and the appellees filed their brief. The Court required the appellants to show cause why the case should not be deemed submitted for decision without a reply brief, and when they did not comply, the appeal was deemed submitted. The appellants then filed a Manifestation and Urgent Motion informing the Court of a Compromise Agreement with the Co spouses, and it is this motion that the Supreme Court resolved.

Facts

The plaintiffs alleged that Lilian Yu acquired the land from the Bank of the Philippine Islands in 2005 for 3,000,000 pesos, payable over five years, and that the title was placed in her name only for convenience. According to them, the siblings agreed that all of them would co-own the property, each contributing twenty five percent of the monthly amortization, with Rolly Yu serving as administrator of the commercial building erected on the land. They claimed that once the price was fully paid and the mortgage discharged in 2010, the co-owners would execute a Memorandum of Agreement acknowledging the co-ownership, but that Lilian refused to sign it after a misunderstanding with Marilyn.

Lilian then sold the property to the Co spouses without the consent of the plaintiffs, who annotated an adverse claim on the title. In September 2011, Rolly Yu learned that Howard Co had instructed the tenants to pay rentals to him instead, and Marilyn alleged that Howard Co, with armed men, tried to eject her from her stall and that a shot was fired and one of her stalls padlocked.

In their answers, Lilian and Charley Yu denied any co-ownership, insisting that Lilian paid for the property herself and that Rolly's help came from brotherly generosity. Lilian invoked the Statute of Frauds, laches, and estoppel. The Co spouses maintained that their purchase was lawful. The trial court rendered summary judgment for the defendants. On appeal, the plaintiffs instead entered into a Compromise Agreement with the Co spouses, under which the plaintiffs waived their claims to the property for a total of 4,000,000 pesos, agreed to vacate the premises, and agreed that the Co spouses would receive the rentals.

Issues

• Whether or not the Compromise Agreement between the plaintiffs and the Co spouses may be approved despite the absence of the signatures of Charley Yu and Aurora Yu.
• Whether or not the Compromise Agreement is valid and not among those matters prohibited by law from being the subject of a compromise.
• Whether or not the approval of the Compromise Agreement warrants the dismissal of the appeal.

Applicable Provisions

Article 2305 of the Civil Code, cited by the Court, provides:

Article 2305. No compromise upon the following questions shall be valid: (1) The civil status of persons; (2) The validity of a marriage or a legal separation; (3) Any ground for legal separation; (4) Future support; (5) The jurisdiction of courts; (6) Future legitime.

The Court checked the Compromise Agreement against this list and found that it touches none of these prohibited matters, which is why it could be validly approved.

Ruling

On the first issue, the Court held that the lack of signatures of Charley Yu and Aurora Yu did not invalidate the Compromise Agreement. The Court observed that the plaintiffs' causes of action were directed particularly at the deceased Lilian Yu and the Co spouses, and that no cause of action had been alleged against Charley and Aurora. Their absence from the agreement simply made them third parties to it, while the agreement remained binding on those who signed it.

On the second issue, the Court held that the signatories appeared to have signed voluntarily and were assisted by counsel, and that the agreement did not involve any of the matters prohibited by Article 2305 of the Civil Code. The Court recalled the nature of the instrument:

A compromise agreement is a contract whereby the parties make reciprocal concessions, avoid litigation, or put an end to one already commenced.

On the third issue, the Court held that since Lilian Yu had passed away, the compromise between the plaintiffs and the Co spouses sufficed to terminate the case, and that in the interest of putting an end to the litigation, the agreement should be approved and the appeal dismissed.

Doctrine

A compromise agreement is a contract by which the parties make reciprocal concessions to avoid litigation or to end one already commenced, and it is a practice courts accept, indeed encourage. Once shown to be voluntarily entered into, with the assistance of counsel, and not covering any of the matters prohibited by Article 2305 of the Civil Code, it may be approved and will bind the signatories. The absence of the signatures of co-parties against whom no cause of action is alleged does not invalidate the compromise; it merely makes them third parties to it. Approval of the compromise carries with it the dismissal of the appeal, for that is the very object the parties sought.

Disposition

The Court granted the Manifestation and Urgent Motion, approved the Compromise Agreement, and dismissed the appeal.

Remember This

Memorize the rule that a compromise agreement voluntarily signed, with counsel's assistance, and outside the prohibited matters of Article 2305 binds only its signatories and does not need the signature of co-parties against whom no cause of action lies. Examiners use this case to test the requisites and effects of a compromise agreement, and the effect of its approval on a pending appeal.