PRUDENCE REALTY AND DEVELOPMENT CORPORATION, PETITIONER, VS. THE COURT OF APPEALS, HON. NORBERTO Y. GERALDEZ, IN HIS CAPACITY AS PRESIDING JUDGE RTC, BRANCH 36, CALAMBA, LAGUNA,…

On July 29, 1979, Paulina Gonzales Habana sold three parcels of
land covering an area of 10.36 has. to Prudence Realty and Development
Corporation for P2,279,398.00.

On September 2, 1980, the Corporation filed an action for the
rescission of the contract. On
September 21, 1982, the then Court of First Instance of Manila rendered
judgment in accordance with a compromise agreement reached by the parties and
approved by the court.^[1] The
agreement was embodied in the judgment.

On February 19, 1990, Habana instituted an action with the
Regional Trial Court of Calamba for the declaration of nullity of the
compromise agreement. She alleged that
the agreement was void because it contained in its paragraph 8 (c) a
potestative suspensive condition dependent on the will of the debtor
Corporation.

On April 11, 1990, the defendant moved to dismiss for lack of
jurisdiction, arguing that the complaint was actually an action for the
annulment of a judgment of a regional trial court and therefore cognizable only
by the Court of Appeals.

On June 7, 1990, Habana amended her complaint to allege three
alternative causes of action, to wit, invalidity of the compromise agreement,
as in the original complaint; failure of the defendant to pay the balance of
the purchase price; and the need for the court to fix the period for the
payment of the balance of the purchase price.^[2]

The amended complaint was opposed by the defendant on the ground
that the court should first resolve the first cause of action before it could
proceed to consider the second and third alternative causes of action. Citing Versoza v. Versoza,^[3]
it contended that if the cause of action set forth in the original complaint
was not within the jurisdiction of the court where it was filed, the
jurisdictional defect could not be corrected by the amendment of the complaint
so as to include therein causes of action within the jurisdiction of the court.

The Corporation also argued that since the trial court had no
jurisdiction to hear and determine the first cause of action, it was not
possible to decide the second or the third alternative causes of actions, which
should therefore be dismissed for prematurity. Besides, joinder of causes of action is permitted only subject to the
rules regarding jurisdiction, venue and joinder of parties, which have not been
observed in this case.

It was further pointed out that since the compromise agreement
did not provide for a period for compliance, the five-year period within which
a judgment may be executed on motion had not yet even begun to run.

A subsequent motion to dismiss reiterated the same grounds and
was denied in an order dated February 28, 1991,^[4]
reading in part as follows:

This Court does not agree with defendant’s argument in its Motion
to Dismiss that being mere alternatives to the first cause of action the second
and third causes of action suffer from the same congenital infirmity and are
necessarily dependent upon the resolution of the first alternative cause of
action. The Rules of Court, Rule 8,
Section 2, expressly provides:

Sec. 2. Alternative causes of action or defense – A party
may set forth two or more statements of a claim or defense alternatively or
hypothetically, either in one cause of action or defense or in separate causes
of action or defenses. When two or more
statements are made in the alternative and one of them if made independently
would be sufficient, the pleading is not made insufficient by the insufficiency
of one or more of the alternative statements.

In fact, the decisions of the Supreme Court have even authorized
the pleading of inconsistent alternative cause of action or defense provided
that each is consistent in itself. (Castle
Bros. Wolf and Sons v. Go-Juno, 7 Phil. 144, Nelayan, et al., G.R. No.
L-14518, Aug. 29, 1960, La Mallorca v. Court of Appeals, et al., No.
L-20671, July 27, 1966).

Similarly, this Court is not persuaded by defendant’s contention
that plaintiff’s second and third alternative cause of action fail to state a
sufficient cause of action and therefore should be dismissed. It is a well-settled rule that lack of a
cause of action as a ground for dismissal must appear on the face of the
complaint, and to determine the sufficiency of the cause of action, only the
facts alleged in the complaint, and no other, should be considered (Dimayuga
v. Dimayuga, 51 O.G. 2397, Reivares v. Arrastia, G.R. No. L-17083,
July 31, 1962, Cervets, Inc. v. National Development Co., et al., 54 O.G. 5322,
Uy Chao v. De la Roma Steamship Co., No. L-14495, Sept. 29, 1962). The validity of defendant’s argument that
the decision upon compromise has not yet become dormant so as to justify
enforcement by an independent action may be determined only after evidence has
been presented during the trial on the merits.

Finally, applying the rule on joinder of causes of action set forth
in the Rules of Court, Rule 2, Section 5, which expressly provides that said
rule shall be subject to rules regarding jurisdiction, this court finds that
there can be no proper joinder of the first alternative cause of action with
the second and third alternative causes of action.

The reaction of the defendant was to file a special civil action
for certiorari and mandamus with
the Court of Appeals. It claimed that
the trial court committed grave abuse of discretion in proceeding with the case
instead of dismissing the second and third alternative causes of action for
lack of jurisdiction.

The Corporation fared no better in the appellate court. In dismissing its petition, the Court of
Appeals declared:

Petitioner’s contention that the alternative cause of action do not
state a cause of action is predicated on the supposition that the judgment has
not become dormant after the lapse of seven years from the date of its
finality. The question of whether it
has become dormant or not rests on whether or not a period or a condition was
set by the parties. Such issue, as
earlier discussed, boils down to a question of fact which is not proper in certiorari proceedings.

Petitioner finally contends that the third cause of action for
fixing of a period is a mere incident in execution proceedings. It may well be that such fixing of a period
may just be an incident in the execution proceedings but petitioner failed to
explain why it cannot be a separate cause of action. There is nothing in Article 1197 of the New Civil Code which may
be taken to limit the power to set such period to the court which approved the
compromise agreement. The said article
vests general power on courts to set such period when one is intended by the
parties.^[5]

The petitioner is now before this Court and raises the following
issues;

First – WHETHER OR NOT THE ISSUE OF WHETHER
THE PARTIES INTENDED A CONDITION OR A PERIOD WHICH IS NOT EVEN RAISED BEFORE
THE RESPONDENT COURT REQUIRES PREFERENTIAL RESOLUTION AND IS DECISIVE OF THE
ISSUE OF JURISDICTION;

Second – WHETHER OR NOT THE ISSUE OF
JURISDICTION RAISED IS DETERMINABLE FROM THE ALLEGATIONS IN THE PLEADINGS BELOW
AND HENCE REQUIRES NO FURTHER EVIDENTIARY BASIS FOR ITS RESOLUTION;

Third – WHETHER THE PROPER REMEDY UNDER THE
FACTS ALLEGED IN THE SECOND ALTERNATIVE CAUSE OF ACTION IS AN INDEPENDENT
ACTION OR A MOTION FOR EXECUTION; and

Fourth – WHETHER OR NOT THE SECOND AND THIRD
ALTERNATIVE CAUSES OF ACTION ARE SUFFICIENT TO STATE A CAUSE OF ACTION FOR
RESCISSION AND FOR FIXING A PERIOD.

We rule first on the admission of the amended complaint.

In the early case of Alvarez v. Commonwealth,^[6] the
Court held:

When it is evident that the court has no jurisdiction over the person
and the subject matter, that the pleading is so fatally defective as not to be
susceptible of amendment, or that to permit such amendment would radically
alter the theory and nature of the action, then the court may refuse the
amendment of the defective pleading and order the dismissal of the case. (Emphasis supplied).

In that case, a demurrer to the complaint for failure to state a
cause of action and a motion to dismiss the same for lack of jurisdiction were
filed. Notwithstanding the subsequent motion
for amendment, the complaint was dismissed. This Court, in rejecting the amendment, held that under Section 101 of
the Code of Civil Procedure, the amendment of a pleading after a demurrer was
sustained was not an absolute right of the pleader but rested rather on the
sound discretion of the court.

In the later case of Rosario v. Carangdang,^[7] the
trial court likewise denied the amendment filed subsequent to a motion to
dismiss for lack of jurisdiction. The
Court observed:

The case might be different had the amendment been made before an
answer or a motion to dismiss had been filed, since the original complaint was
then amenable, and the amendment could supersede the original pleading, as
of right, without leave of court being required, and without the court
taking cognizance at all of the original complaint.

The ruling was based on Rule 17, Sec. 1, of the 1940 Rules of
Court (now Rule 10, Sec. 2) reading as follows:

Sec. 1. Amendment; how made. – A party may amend his
pleading once as a matter of course at any time before a responsive pleading
is served or, if the pleading is one to which no responsive pleading is
permitted and the action has not been placed upon the trial calendar, he may so
amend it at any time within ten (10) days after it is served (Emphasis
supplied).

It has since been held,
however, that a motion to dismiss is not a responsive pleading that will
prevent the amendment of a complaint as a matter of right. Thus, in Soledad v. Mamañgun,^[8]
Justice Bautista Angelo said for the Court:

It is contended that the court a quo erred in not dismissing
the complaint on the ground of want of jurisdiction for the reason that the
original complaint filed before the municipal court failed to aver that it was
an action for unlawful detainer and the amount being recovered was beyond the
jurisdiction of that court. In other
words, plaintiff insinuates that the court a quo erred in not
considering the original complaint filed by the plaintiff before the municipal
court as one simply for recovery of a sum of money which was beyond its
jurisdiction even if later it was amended over the opposition of defendant.

In overruling this argument the court a quo acted on the
theory that appellee had the right to amend his complaint as a matter of
course considering that at the time he did it appellant has not yet
interposed any responsive pleading. Thus, the court said: “The
amended complaint admitted by the Municipal Judge was filed before the
defendant has entered his answer. The
defendant contends that since said amended complaint was filed after he has
filed his motion to dismiss, the first sentence of Section 1, Rule 17, (Supra)
is not applicable. But this Court is of
the opinion that a motion to dismiss is not a responsive pleading, so
that its filing would not deprive the plaintiff of his right to amend his
complaint at his pleasure.”

We agree to the above ruling for under the provision already
above-referred to a party may amend his pleading once as a matter of course
at any time before a responsive pleading is served upon him. And it is a matter which cannot be disputed
that a motion to dismiss is not a responsive pleading.

Hence, the original complaint filed by Habana could still be
amended as a matter of right despite the filing of a motion to dismiss by the
Corporation. The trial court was
correct when it admitted the amended complaint with two additional causes of
action.

Now to the other issues raised in the petition.

Habana seeks the rescission of the compromise agreement under
Art. 1191 of the Civil Code.* However,
this provision applies only to reciprocal obligations in general and not to
obligations arising from a judicial compromise, as we have consistently held in
a long line of decisions. Thus:

Judgment upon agreement of the parties is more than a mere contract
binding upon them; having the sanction of the court and entered as its
determination of the controversy it has the force and effect of any other
judgment (Asirot vs. Vda. de Rodriquez 28 SCRA 258 citing Marquez vs. Marquez
73 Phil. 74; also Araneta vs. Perez 7 SCRA 933; Soler vs. Reyes 8 SCRA 691).

Moreover, the rule is that a judgment rendered in accordance with
a compromise agreement is immediately executory as there is no appeal from such
judgment.

A judgment based on a compromise is generally not appealable. The reason for the rule is that when both
parties enter into an agreement to end a pending litigation and request that a
decision be rendered approving said agreement, it is only natural to presume
that such action constitutes an implicit, as undeniable as an express, waiver
of the right to appeal against said decision (World Machine Enterprises vs. IAC
192 SCRA 459 citing Serrano vs. Reyes 110 Phil. 536).

The nullification of a compromise judgment is governed by the
following provisions of the Civil Code:

Art. 2038 A compromise in which there is mistake, fraud, violence,
intimidation, due influence, or falsity of documents is subject to the
provisions of Art. 1330 of this code.

x  x      x

Art. 1330 A contract where consent is given through mistakes,
violence, intimidation, undue influence or fraud is violable.

Art. 1390 The following contracts are violable or annulable, even
though there may have been no damage to the contracting parties;

1) those where one of the parties is incapable
of giving consent to a contract.

2) those where the consent is vitiated by
mistake, violence, intimidation, undue influence or fraud.

These contracts are binding, unless they are annulled by a proper action in court. They
are susceptible of ratification.

Where the aggrieved party alleges mistake, fraud, violence,
intimidation, undue influence, or falsity in the execution of the compromise
embodied in a judgment, an action to annul it should be brought before the Court
of Appeals, in accordance with Sec. 9 (2) of BP 129, which gives that court
exclusive original jurisdiction over inter alia actions for annulment of
judgments of regional trial courts.

The other available remedy is a motion for relief from judgment, which
may be sought under Rule 38, Secs. 2 to 3, of the Rules of Court, on the ground
that the judgment was obtained through fraud, mistake or excusable
negligence. This must be filed with the
court that rendered the judgment, within 60 days after the petitioner is
notified of the judgment and not more than six months after its entry.

Habana admitted that what she really wanted was the recovery of
the subject land,^[9] and
she sought to achieve this by having the judgment rescinded on the ground of default
of the Corporation. This, however, is
not one of the grounds recognized in the above quoted Art. 2038. The very nature of a compromise judgment
bars default as a ground for rescission.

When the terms of a compromise judgment are violated, the remedy of the aggrieved party is to
move for its execution, not its invalidation. In fact, the court has inherent powers to prevent its decision from
becoming a dead letter and may hold the judgment debtor in contempt if it finds
the refusal to be malicious and systematic. It may even place the property under receivership under Rule 39, Sec.
43, of the Rules of Court.^[10]

On the assumption that Habanas’ action was really for the
execution of the compromise judgment, the trial court still would not have had
the jurisdiction to act upon it. Execution of a judgment through an independent action is possible only
when it is established that the judgment has become dormant, and not before, as
clearly provided in Rule 39, Sec. 6, of the Rules of Court, reading as follows:

Sec. 6. Execution by motion or by independent action. – A
judgment may be executed on motion within five (5) years from the date of its
entry or from the date it became final and executory. After the lapse of such time, and before it is barred by the
statute of limitations, a judgment may be enforced by action.

As the Court observed in Tan Ching Ji v. Mapalo,^[11]
this section clearly and logically contemplates the usual situation where the
judgment is susceptible of execution or enforcement the moment it acquires the
character of finality.

Irrespective of the date of entry, the determinative issue is not
when the judgment became final in the sense that no appeal therefrom could be
taken but when it became executory in the sense that it could already be enforced.^[12]
The reason is that it will be idle to speak of execution or an attempt to
obtain a writ for that purpose if the judgment is not yet enforceable.^[13]

The question we should therefore address is: At the time the judgment of September 21,
1982, became final, was it also already enforceable?

There are certain provisions in the agreement that could already
be enforced then, such as:

7. Within five (5)
days from receipt of the Honorable Court’s decision approving this Compromise
Agreement, plaintiff will pay to defendants the sum of Five Hundred Thousand
(P500,000.00) Pesos in lump sum to be credited as partial payments for the
unpaid balance mentioned in par. 6 above, and deliver to defendants a check for
the sum of P100,000 post dated to February 23, 1983, also as partial payment
for the unpaid balance mentioned in par. 6 above.

8. After subtracting the sum of P600,000 stated
in par. 7 above, the remaining unpaid balance due from plaintiff to the
defendants is One Million Three Hundred Thirty Thousand Nine Hundred Fourteen
Pesos and 94/100 (P1,330,914.94), payable in the following manner, to wit.

(a) Said unpaid balance
of P1,330,914.94 shall be annotated at
the back of the plaintiff’s corresponding certificates of title over the
properties x x x.

However, Section 8 (c) could not be carried out even after entry
of the judgment because its enforcement is made subject to certain future
events, to wit:

8. x x x

c) The subject
properties will be offered for sale, either in whole or in part, by plaintiff
to public under such terms and conditions that plaintiff shall, in its sole
discretion, determine to be proper, with no time limit for selling, unless a certain price is reached, estimated
at a minimum of thirty-four (P34.00) pesos per square meter, and
further subject to future contingent expenses, such as taxes, commissions,
right of way expenses, expenses for developmemt and improvement of the
properties that plaintiff may undertake, and other related items.

This provision clearly states that the petitioner can start
selling the subdivision lots only when the price reaches P34.00 per square
meter; and under Section 9 of the agreement** it is
from the proceeds of the sales that the balance of the purchase price is to be
paid. There is thus a necessity first
for the parties to agree that the price has been reached, unless the parties
decide instead to bring the matter to the court for determination. As neither of these has been done, the
five-year period providing for the execution of the decision upon motion has
not yet commenced to run. Hence, the
judgment has not yet become dormant so as to justify the institution of an
independent action for its enforcement.

The non-dormancy of the decision was determinable from the
compromise agreement embodied therein and also appended to the complaint filed
by Habana. Evidence was not necessary
to establish that the decision could not yet be enforced pending fulfillment of
the conditions specified in Section 8 (c) of the agreement. We do not agree with the respondent court
that in order to ascertain the dormancy of the decision, it is indispensable to
first determine whether it was a condition or a term envisioned by the parties
in Article 8 (c) of the agreement. Whatever might have been intended, there is no showing that, as a
condition, it had already been fulfilled or that, as a term, it had already
expired.

Inasmuch as the action taken by Habana was premature, the
Regional Trial Court of Laguna should have dismissed her complaint for lack of
a cause of action. There was no special
reason to continue the proceeding before it, especially since the defendant
Corporation had not even filed its answer to the complaint.

Regarding the third cause of action, we hold that it is before
the Regional Trial Court of Manila, which approved the compromise agreement and
embodied it in its judgment, that a motion may be filed for the fixing of a
period within which the Corporation may comply with its obligation under the
judgment. This function pertains to
that court under Rule 39, Sec. 6, of the Rules of Court.

WHEREFORE, the petition is GRANTED on the ground that the
second and third causes of action
alleged by the private respondent are premature. Civil Case No. 1454-90-C in the Regional Trial Court of Laguna is
hereby DISMISSED, without prejudice to the filing of the proper motion with the
Regional Trial Court of Manila for the fixing of the period for compliance by
the petitioner with its obligation under the decision of the court dated
September 21, 1982. No pronouncement as
to costs.

SO ORDERED.

Davide, Jr.,
Bellosillo, Quiason, and Kapunan, JJ., concur.

^[1] Annex C, Rollo pp. 88-95.

^[2]
Annex E, Rollo pp. 64-75.

^[3]
26 SCRA 78.

^[4]
Annex J, Rollo pp. 115-117.

^[5]
Guingona, J., ponente, Javellana and Imperial, JJ., concurring.

^[6]
65 Phil. 302.

^[7]
96 Phil. 845.

^[8]
8 SCRA 110.

* Art. 1191. The
power to rescind is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him.

The injured party may choose
between the fulfillment and the rescission of the obligation, with the payment
of damages in either case. He may also
seek rescission, even after he has chosen fulfillment, if the latter should
become impossible.

The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.

x x x

^[9]
Annex H, Rollo p. 107

^[10]
Asirot v. Vda. de Rodriquez 28
SCRA 258.

^[11]
37 SCRA 510.

^[12]
Ibid.

^[13]
Id.

** Section 9. Out of the proceeds
of the sale of subject properties as mentioned in par. 8 above, plaintiff will pay
to the defendants their unpaid balance of P1,330,914.94.