BENITO ORIT, PLAINTIFF AND APPELLEE, VS. BALRODGAN COMPANY, LTD., DEFENDANT AND APPELLANT.

Orit versus Balrodgan Company

The Case

This is a simple collection case that became a lesson on the binding force of a stipulation of facts. Benito Orit sued Balrodgan Company, Limited to collect the unpaid balance of the price of export logs the company had bought from him, plus interest, attorney's fees, moral damages, exemplary damages, and costs. The company admitted the debt but resisted the period of payment fixed by the trial court, invoking the Civil Code provision on obligations with a period. The case matters because it shows that when parties freely enter into a compromise agreement and expressly authorize the court to fix a reasonable time for payment, the debtor cannot later complain that the period is unreasonable, and the appeal itself may be treated as a dilatory device and penalized with treble costs.

Procedural History

Benito Orit brought the action in the Court of First Instance of Camarines Norte on 22 November 1955. The defendant filed its answer on 7 January 1956. On 25 September 1956 the parties, assisted by their respective counsel, entered into a stipulation of facts and submitted it to the court. Because the parties failed to submit the agreed date of payment by 6 November 1956, the plaintiff filed an ex parte motion praying that judgment be rendered on the stipulation and that the court fix the time for payment. On 28 November 1956 the trial court rendered judgment as prayed for, ordering the defendant to pay within thirty days from receipt of notice of judgment. The defendant's motion for reconsideration was denied on 21 January 1957. The defendant then appealed to the Supreme Court, which decided the case on 29 December 1959.

Facts

Benito Orit sold export logs to Balrodgan Company, Limited. A balance of five thousand pesos remained unpaid, and on 22 November 1955 Orit sued to collect it, together with interest, attorney's fees, moral damages, exemplary damages, and costs.

On 25 September 1956 the parties, assisted by their counsel, entered into a stipulation of facts. The defendant admitted in open court its obligation to pay the plaintiff five thousand pesos, plus interest from 8 December 1955 and costs. The parties agreed to submit to the court a fixed date for payment, not later than 6 November 1956. They further agreed that if they failed to submit that date on 6 November 1956, the court would have full power to fix a reasonable time for payment, and judgment would issue based on the stipulation.

The parties failed to submit the date. On 6 November 1956 the plaintiff moved ex parte for judgment on the stipulation and for the court to fix the time of payment. The trial court granted the motion, ordering payment within thirty days from receipt of notice of judgment, with legal interest from 8 December 1955 until fully paid, plus costs. The defendant's motion for reconsideration was denied, and the defendant appealed, admitting the debt but asking for at least one year within which to pay.

Issues

• Whether or not the period of thirty days fixed by the trial court may be assailed as unreasonable by the debtor who freely entered into the stipulation of facts authorizing the court to fix that period.
• Whether or not Article 1196 of the new Civil Code, on the presumption that a period is established for the benefit of both creditor and debtor, applies to a period fixed by the court under a compromise agreement.
• Whether or not the appellee may recover attorney's fees, moral damages, and exemplary damages claimed in its motion filed in the Supreme Court.

Applicable Provisions

Article 1196 of the new Civil Code provides:

Whenever in an obligation a period is designated, it is presumed to have been established for the benefit of both the creditor and the debtor, unless from the tenor of the same or other circumstances it should appear that the period has been established in favor of one or of the other.

The appellant invoked this article to argue that the thirty-day period fixed by the court benefited only the creditor, but the Court held that the article applies only where the parties themselves have fixed a period in a contract, not where a court fixes the period under a compromise agreement.

Ruling

On the first issue, the Court held that the judgment was rendered in pursuance of the compromise agreement embodied in the stipulation of facts, which the parties entered into freely and voluntarily with the assistance of their counsel. Having agreed that the court would fix a reasonable time if they failed to agree on a date, the appellant cannot now claim that the period fixed is unreasonable.

On the second issue, the Court held that Article 1196 cannot be applied to the case at bar. The Court explained that the article applies where the parties to a contract themselves have fixed a period, whereas here the parties entered into a compromise agreement ending a controversy and authorized the court to fix a reasonable time for payment. The Court also noted that the appeal was manifestly interposed to delay, not to evade, payment of the debt.

On the third issue, the Court held that since nothing had been agreed upon in the stipulation regarding attorney's fees, moral damages, and exemplary damages, the collection of those sums sought in the appellee's motion filed in the Supreme Court could not be granted.

Doctrine

A compromise agreement freely and voluntarily entered into by the parties, with the assistance of counsel, is binding and has the force of law between them. Where the parties expressly authorize the court to fix a reasonable time for payment upon their failure to agree on a date, the debtor cannot later complain that the period fixed by the court is unreasonable.

Article 1196 of the new Civil Code, which presumes that a period is established for the benefit of both creditor and debtor, applies only where the parties themselves have fixed the period in a contract. It does not apply where the period is fixed by the court pursuant to a compromise agreement.

An appeal interposed manifestly to delay rather than to evade payment of a debt may be penalized with treble costs. Claims not covered by the stipulation of facts, such as attorney's fees and damages, cannot be granted.

Disposition

The Supreme Court affirmed the judgment appealed from, with treble costs against the appellant.

Remember This

The single line worth memorizing is that a party who freely agrees to let the court fix the period of payment cannot later call that period unreasonable, and Article 1196 applies only to periods fixed by the parties themselves. Examiners use this case to test the binding effect of stipulations of facts and compromise agreements, and the rule that dilatory appeals may be penalized with treble costs.