MARITESS P. ELBINIAS, PETITIONER, VS. THE BOARD OF DIRECTORS OF DONA JUANA TOWNHOMES ASSOCIATION, JERRY LUCAS, ROBERT CRESPO, ODETTE PERLADA, JOHN JOHN TORRES, EVELYN DUMDUM, RU…

Elbinia versus Board of Directors of Dona Juana Townhomes Association

The Case

This is the case of Maritess Elbinia against the Board of Directors of Dona Juana Townhomes Association and its individual officers. The action began as a complaint before the Housing and Land Use Regulatory Board concerning a townhome unit in Pasig City, and it reached the Supreme Court on the question of whether a compromise agreement submitted by the parties should be approved. The case matters to a reviewee because it shows, in the cleanest possible form, how a compromise agreement operates as the law between the parties, how it can extinguish not only the judgment below but every related cause of action between the parties and their successors, and how the courts treat such an agreement when its terms are lawful and voluntarily entered into.

Procedural History

The dispute began in the Housing and Land Use Regulatory Board, which rendered a decision in November 2011 in favor of the complainant. The Board of Commissioners of the same agency affirmed that decision in July 2012. The respondents then appealed to the Court of Appeals. While the appeals were pending, the parties, through the mediation process, arrived at a settlement. They filed a Joint Motion to Approve Compromise Agreement dated November 2014, attaching the agreement itself and a Board Resolution authorizing the President of the Association to sign it. The Court of Appeals, finding the terms in accord with law, approved the compromise and rendered judgment in accordance therewith. The matter thereafter came before the Supreme Court, which resolved it by the resolution reproduced in the decision text.

Facts

The complainant, Maritess Elbinia, was a member of the Dona Juana Townhomes Association and the owner of Unit 46 of the townhomes in Pasig City. She filed a complaint before the Housing and Land Use Regulatory Board against the Association and its officers. The Housing and Land Use Regulatory Board decided in her favor in November 2011, and its Board of Commissioners affirmed that decision in July 2012.

The respondents elevated the matter to the Court of Appeals. While the appeals were pending, the parties were referred to mediation, and they produced a Mediator's Report together with a Joint Motion to Approve Compromise Agreement. Under the agreement, the respondents bound themselves not to pose any obstacle to the transfer of the property in the name of a new owner. Pending that transfer, neither side would enforce or execute the Housing and Land Use Regulatory Board decisions against the other.

The agreement went further. Once the transfer was made and the parties had faithfully complied with all its terms, the parties would forever be barred from enforcing or executing the Housing and Land Use Regulatory Board decisions, and all their causes of action, monetary claims, claims and counterclaims against each other and against their privies, agents, transferees, and connected persons would be deemed to have ceased and terminated. The parties would release each other from any obligation arising from the original complaint or from membership in the Association. The Board bound the Association and all subsequent and future Boards, and the incumbent Board authorized its President to sign. Any violation of the agreement, whether committed during the existence of subsequent and future Boards, would render the agreement invalid and ineffectual from the beginning, reverting the parties to the situation at the time of its execution.

Issues

• Whether or not the Joint Motion to Approve Compromise Agreement should be granted.
• Whether or not the terms of the compromise agreement are in accord with law.
• Whether or not the agreement binds the Association and its subsequent and future Boards of Directors.

Applicable Provisions

The decision does not quote any statutory provision in its text. Its ruling rests on the parties' own covenant as set out in the Joint Motion to Approve Compromise Agreement, which the Court adopts as the basis of its judgment. The operative terms, quoted verbatim from the agreement, are these:

Respondents shall not pose any obstacle to the transfer under the name of the new owner of the Property located at Unit 46, Dona Juana Townhomes, Pasig City.

This term fixes the respondents' principal obligation and is the condition upon which the rest of the settlement depends.

Pending the transfer of the Property in the name of the new owner, the Parties hereby agree that neither of them shall take any action to enforce or execute against each other the HLURB Decision dated 23 November 2011 in HLURB Case No. NCRHOA-030811-1465 and the Decision of the HLURB Board of Commissioners dated 10 July 2012 in HOA-A-120125-0427.

This term preserves the status quo during the interim period and prevents either side from using the appealed decisions as a weapon while the transfer is being completed.

After the transfer in the name of the new owner of the Property and upon faithful compliance by the Parties of all the terms of this Agreement, the Parties shall forever be barred from taking any action to enforce or execute the HLURB Decisions.

This is the extinguishment clause: it terminates the parties' rights, obligations, and relations with each other, including all causes of action, monetary claims, claims and counterclaims against their privies, agents, transferees, and connected persons.

Since respondent Board acts on behalf of the Dona Juana Townhomes Association, the terms of this Agreement are thus binding on the Association and upon any subsequent and future Board of Directors.

This term answers the question of persons bound: the settlement reaches the Association itself and every Board that succeeds the incumbent one.

Pending the transfer of the title over the Property under the name of the new owner, any violation of this Agreement whether or not committed during the existence of subsequent and future Boards shall render this Agreement invalid and ineffectual ab initio.

This is the self-destruct clause: a violation voids the agreement from the beginning and restores the parties to their positions at the time of execution.

Ruling

On the first issue, the Court granted the Joint Motion to Approve Compromise Agreement. It found the subject motion proper for approval and rendered judgment in accordance therewith, enjoining the parties to comply with their covenant with utmost fidelity.

On the second issue, the Court held that the terms of the agreement are in accord with law. That finding is the premise of the approval, for the Court stated that inasmuch as the foregoing terms are in accord with law, the Joint Motion to Approve Compromise Agreement is hereby approved.

On the third issue, the Court held that the agreement binds the Association and its subsequent and future Boards. It accepted the premise that the respondent Board acts on behalf of the Association, and it noted that the incumbent Board executed the agreement through a Board Resolution that satisfactorily reflects the will and consent of the incumbent Board and its successors-in-interest, and that the Board authorized the President of the Association to sign on its behalf. The faithful compliance with the terms and the proper authority of the President to sign were among the premises of the validity of the agreement.

Doctrine

First, a compromise agreement whose terms are in accord with law will be approved by the court, and judgment will be rendered in accordance therewith. The test the Court applied is simply whether the terms are lawful; once that is satisfied, approval follows.

Second, a compromise agreement is the law between the parties. It may extinguish not only the judgment under appeal but all related causes of action, monetary claims, claims and counterclaims, including those against privies, agents, transferees, and persons connected with the case, and it may operate as a mutual release from obligations arising from the original complaint or from membership in the association.

Third, a compromise executed by a Board of Directors on behalf of an association, supported by a Board Resolution reflecting the will of the incumbent Board and its successors and authorizing the President to sign, binds the association and all subsequent and future Boards.

Fourth, the parties may validly stipulate that any violation of the agreement shall render it invalid and ineffectual from the beginning, in which case the situation reverts to what it was at the time of execution. Such a clause is itself part of the law between the parties and will be respected.

Disposition

The Court approved the Joint Motion to Approve Compromise Agreement, rendered judgment in accordance therewith, and enjoined the parties to comply with their covenant with utmost fidelity.

Remember This

Memorize this line: a compromise agreement whose terms are in accord with law is approved and becomes the judgment of the court, binding the parties, their privies, and the association's subsequent and future Boards. Examiners use this case to test the requisites and effects of a compromise agreement, the binding effect of a Board Resolution authorizing the President to sign, and the validity of extinguishment and self-destruct clauses in a settlement.