BENIGNO M. SALVADOR, PETITIONER, VS. JORGE Z. ORTOLL, RESPONDENT.

What is before us is an appeal via certiorari to set aside the
decision^[1] of the Court of Appeals
annulling the order of the Regional Trial Court, Branch 163, Pasig City which
granted the issuance of a writ of execution in Civil Case No. 64798.^[2]

The antecedent facts are as follows:

Respondent Jorge Z. Ortoll was the owner of a three-bedroom condominium unit
at Alexandra Apartments in Pasig, Metro Manila. In December 1992, respondent
Ortoll and petitioner Benigno M. Salvador entered into an option to purchase
agreement which, for and in consideration of two hundred thousand (P200,000.00)
pesos, granted petitioner Salvador the option to purchase the condominium unit
within a period of six (6) months from December 1, 1992, for the total sum of
six million four hundred thousand (P6,400,000.00) pesos, payable in cash.

Upon petitioner Salvador’s request, respondent Ortoll allowed him to occupy
the condominium unit, subject to the condition that if petitioner Salvador
failed to exercise the option within the agreed period, he would voluntarily
vacate the premises without necessity of demand or judicial intervention.
Moreover, petitioner Salvador would pay liquidated damages in the amount of five
hundred thousand (P500,000.00) pesos should it become necessary to go to court
to evict him from the property. The option to buy is not assignable, nor is
there an intention to put the unit up for lease.

On May 28, 1993, petitioner Salvador informed respondent Ortoll that his bank
approved his loan application in the amount of three million five hundred
thousand (P3,500,000.00) pesos and asked that he be granted a few more weeks to
complete the purchase price. However, on June 1, 1993, Atty. Domingo Gonzales,
respondent Ortoll’s lawyer, sent petitioner Salvador a letter demanding that he
vacate the property on June 30, 1993 and pay the amount of thirty five thousand
(P35,000.00) pesos as usage fee of the condominium unit for the month of June
1993.

On June 7, 1993, petitioner Salvador informed respondent Ortoll that his
bank, Monte de Piedad Savings and Loan Bank, increased his approved loan to ten
million (P10,000,000.00) pesos and repeated his appeal to extend the period to
exercise his option to purchase the condominium unit.

In a letter faxed on July 7, 1993, respondent Ortoll told petitioner Salvador
that these proposals were not acceptable. The thirty five thousand (P35,000.00)
pesos that he was asking Salvador to pay corresponded to the usage fee of the
condominium unit for the duration covered by the option agreement, and not
payment for the extension of the lease. If he were to grant the request for
extension until August 31, 1993, Salvador must pay the option money to extend
the option to purchase agreement of one hundred five thousand (P105,000.00)
pesos.

Petitioner Salvador did not inform respondent Ortoll whether he was accepting
the counter-proposal. Neither did he vacate the condominium unit nor pay the
purchase price of six million four hundred (P6,400,000.00) pesos.

On September 15, 1993, respondent Ortoll filed with the Metropolitan Trial
Court, Branch 68, Pasig City an action for ejectment.

On December 29, 1993, the Metropolitan Trial Court decided the case in favor
of respondent Ortoll.^[3] However, on
appeal, the Regional Trial Court, Pasig City, on September 23, 1994, reversed
the decision.^[4]

On October 17, 1994, respondent Ortoll moved for reconsideration of the
decision but the Regional Trial Court denied the motion.^[5] Upon appeal via petition for review
to the Court of Appeals, the appellate court reversed the decision of the
Regional Trial Court and reinstated the decision of the Metropolitan Trial
Court, with modification. The dispositive portion reads:

“WHEREFORE, premises considered, the decision of the court a quo is REVERSED
and the MTC decision is REINSTITUTED with MODIFICATION that the private
respondent shall pay to the petitioner, as plaintiff in the case the amount of
P500,000.00 liquidated damages pursuant to the agreement between them.”^[6]

Petitioner Salvador appealed to the Supreme Court.^[7]

During the pendency of the appeal, petitioner Salvador initiated a new
complaint with the Regional Trial Court, Branch 163, Pasig City^[8] for specific performance and damages and
prayed for the enforcement of the option to purchase agreement then pending with
the Supreme Court.

To put an end to the case pending before the trial court, petitioner Salvador
and respondent Ortoll entered into a compromise agreement, which the Regional
Trial Court approved on June 28, 1996.^[9]
The pertinent provisions of the agreement provided that:

“1. Both parties have agreed to settle the case amicably with the plaintiff
buying the Alexandra Unit E-251 of defendant for ELEVEN MILLION THREE HUNDRED
THOUSAND PESOS (P11,300,000.00), under the following terms and conditions:

“A. TERMS OF PAYMENT

“A. 1. 50% or P5,650,000.00 payable on or before the 90^th day from
execution of this compromise agreement; and, the balance of:

“A. 2. 50% or P5,650,000.00 payable on or before the 30^th day from
due date of the first payment;

“A. 3. The total consideration of P11.3 Million shall be covered by two (2)
separate post dated checks.

“A. 4. Jorge Z. Ortoll, to deliver CCT No. PT-7461 to Plaintiff upon
encashment of second check covering the full payment together with the real
estate taxes payment for 1996.

“B. OTHER TERMS AND CONDITIONS:

“B.1. The above consideration of P11.3 million shall be net CASH to
defendant. Plaintiff have agreed to pay the EVAT, withholding tax, documentary
stamps to be affixed to the Deed of Sale, transfer tax, registration expenses
and all other incidental expenses to transfer title of subject property in the
name of the buyer.

“B.2. As a further consideration of the compromise agreement, both parties
have agreed to file a Joint Motion to Withdraw the Petition for Review docketed
as G. R. No. 122164 (CA-G. R. SP No. 36531) now pending before the Supreme Court
(Second Division) covering the same property subject matter of the above
captioned complaint.

“B.3. Finally, both parties have agreed to waive any and all causes or rights
of action each one may have against the other involving the said property.”^[10]

Under the terms of the compromise agreement, petitioner Salvador would pay
one half of the purchase price on or before September 26, 1996, and the other
half thirty (30) days after, or on or before October 26, 1996. Petitioner
Salvador failed to comply with these obligations, since payment was tendered
only on October 28, 1996, two days late from the deadline.

On October 14, 1996, petitioner Salvador informed respondent Ortoll that his
application for a loan of P11,300,000.00 had been approved by the United Coconut
Planters Life Assurance Corporation (UCPLAC). However, the approved loan was for
the account of Jasper Phils. Corporation, and subject to the condition that the
deed of sale be issued in the name of Jasper Phils.

On October 16, 1996, respondent Ortoll informed petitioner Salvador that he
would deliver the title upon full payment of the purchase price, including
payment of taxes due thereon pursuant to the terms of the judgment by
compromise. The following additional conditions were set:

(a) Salvador would pay an interest equivalent to 1.5% on the amount of
P5,650,000.00 due and unpaid as of September 26, 1996;

(b) Salvador would pay rent for his possession and occupation of the
condominium unit until the sale has been finalized;

(c) Salvador would pay the E-VAT and other taxes due on the property; and

(d) The seller would be Tamaraw Investors Management Enterprises, Inc.
(TIME), who had purchased Ortoll’s interests on the condominium unit on August
25, 1997.

Petitioner Salvador agreed to pay the rent, but refused payment of interest
on delayed payment and the value-added tax on the transaction.

On November 8, 1996, petitioner Salvador applied with the trial court for the
issuance of writ of execution to implement the judgment by compromise. The Court
granted the motion in an order dated January 28, 1997.^[11] The trial court said that:

“Since both parties in this case claim rights which are not expressly
embodied in their compromise agreement which were the bases of the decision of
this Court in this case, and since plaintiff already has the amount ready for
payment of the subject of their controversies, the Alexandra Unit E-251, this
Court believes that it would be for the interest of both parties that defendant
Jorge Z. Ortoll accepts the check for P11,300,000.00 and execute the deed of
sale of Condominium Unit, Alexandra E-251, in favor of plaintiff, Benigno
Salvador.

“WHEREFORE, premises considered, let a writ of execution be issued to enforce
the decision of the Court in this case.”

On January 29, 1997, the trial court issued the writ of execution.

On February 7, 1997, respondent Ortoll moved to quash the writ of
execution.^[12] On March 11, 1997, the
trial court denied the motion.^[13] On
March 17, 1997, the trial court gave due course to the appeal filed by
respondent Ortoll and ordered the elevation of the records of the case to the
Court of Appeals.^[14]

In the appeal, respondent Ortoll alleged that the appealed order must be
annulled on two grounds: (1) it substantially varied the terms of the judgment
by compromise; and (2) he has unilaterally rescinded the compromise judgment due
to petitioner Salvador’s failure to strictly comply with its terms.

On April 30, 1999, the Court of Appeals promulgated its decision ruling that
the appealed order substantially deviated from and varied the terms of the
compromise judgment. The appealed order extended the time of payment granted to
the buyer and fixed “a new period for its fulfillment excusing him from the
effects of his default and compelling defendant to accept a bilateral lump-sum
payment of plaintiff’s obligations without any compensation for such delay.”^[15]

The Court of Appeals sustained respondent Ortoll’s contention that by virtue
of petitioner Salvador’s failure to comply with the terms of the compromise
judgment, respondent Ortoll could exercise his right to unilaterally rescind the
compromise judgment pursuant to the provisions of Article 2041 of the Civil
Code. The seller of the condominium unit had no obligation to accept the tender
of payment made by the buyer because the party making it was not the buyer and
the tender was conditional and deficient. Hence, by virtue of the unilateral
rescission, the compromise judgment has been rendered functus officio.

The dispositive portion of the decision provides that:

“WHEREFORE, finding the appeal meritorious, the appealed Order dated
January 28, 1997 is hereby declared NULL AND VOID and it is hereby SET
ASIDE.“^[16]

On July 9, 1999, petitioner filed a motion for reconsideration.^[17]

On November 4, 1999, the Court of Appeals denied petitioner’s motion for
reconsideration.^[18]

Hence, this petition.^[19]

Petitioner Salvador contends that the appellate court erred in ruling that:
(1) the writ of execution varied the terms of the compromise judgment; (2) he
breached the compromise judgment, as a result of which, respondent Ortoll was
entitled to unilaterally rescind the compromise agreement pursuant to Article
2041 of the Civil Code; and (3) respondent Ortoll was not estopped from
exercising the right to rescind the compromise judgment.

We grant the petition.

The issues raised by the petitioner are as follows:

1. Whether the Court of Appeals erred in holding that the writ of execution
   issued by the lower court to execute the compromise agreement had the effect of
   substantially altering the compromise agreement and extending the time of
   plaintiff Salvador to pay the purchase price;
2. Whether the Court of Appeals erred in holding that the breach was
   substantial and thus entitled respondent Ortoll to unilaterally rescind the
   compromise judgment.

As to the first assigned error, we do not agree with the Court of Appeals
that the writ of execution varied the terms of the compromise agreement. The
main purpose of the compromise is to settle between the two parties the amount
to be paid by petitioner as purchase price for the condominium unit. The writ of
execution is simple. Petitioner is ordered to pay P11,300,000.00 and respondent
to issue the corresponding deed of absolute sale. There was no substantial part
that was changed by the writ of execution. The purchase price is the same and
the other terms of the compromise were still incorporated therein.

This Court has time and again reiterated the ruling that if the parties could
end their legal battles in an amicable way it would be to the best interest of
the parties and the courts as well. “The law encourages the amicable settlement
not only of pending cases but also disputes which might otherwise be filed in
court,”^[20] as what the trial court
wished to avert when it issued the writ of execution dated January 28, 1997.

As to the second assigned error, it is very obvious that petitioner Ortoll as
early as September 26, 1996, was aware of the non-payment of respondent Salvador
since that was the date that Salvador was supposed to pay fifty per cent of the
P11,300,000.00 purchase price for the condominium unit.

However, on October 16, 1996 respondent Ortoll still had communication with
Salvador and the lending agency UCPLAC that the loan of Salvador was already
approved for P11,300,000.00 but the same was in the name of JASPER Phils. On the
same day, Ortoll did not register any objection to said arrangement and even
wrote Salvador that he would accept full payment; Ortoll did not state in his
letter that he was not agreeable with the arrangement that the purchase would be
done in the name of Jasper Phils. Inc. What he stipulated in his letter were
additional conditions, which would jack-up the purchase price to thirteen
million pesos (P13,000,000.00). Such actions simply mean that he was still
willing to push through with the compromise agreement, he was not rescinding the
agreement but was adding new conditions to the compromise.

Petitioner Salvador contends that respondent Ortoll is estopped from
rescinding the compromise judgment because of his representation that he would
continue with the enforcement of the compromise judgment despite the breach.
“Estoppel in pais arises when one, by his acts, representations or
admissions, or by his own silence when he ought to speak out, intentionally or
through culpable negligence, induces another to believe certain facts to exist
and such other rightfully relies and acts on such belief, so that he will be
prejudiced if the former is permitted to deny the existence of such facts.”^[21]

With respondent Ortoll’s constant communication through his representatives
on the status of the loan of petitioner Salvador and his letter of October 16,
1996, agreeing to the purchase after full payment, it is clear that he was not
rescinding the compromise agreement and was pushing through with the sale. The
only issue that caused the institution of this case was the demand by Ortoll of
additional interest that was not in the original compromise agreement. It is
respondent Ortoll who wished to change the stipulations in the compromise
agreement.

The greater interest at stake in this case is the end to litigation and the
settling of the dispute as to the purchase of the condominium unit, for which
the parties entered into a compromise agreement which has the force and effect
of a judgment and is considered final and executory. “It is well-settled that a
judicial compromise has the effect of res judicata and is immediately
executory and not appealable unless a motion to set aside the same is filed on
the ground of fraud, mistake or duress, in which event an appeal may be filed
from an order denying the same. A court can not set aside a judgment based on
compromise without having declared in an incidental hearing that such a
compromise is vitiated by any of the grounds for nullity enumerated in Article
2038 of the Civil Code.”^[22]

WHEREFORE, the Court grants the petition, and annuls and sets aside
the decision of the Court of Appeals in CA-G. R. CV No. 54740.

IN LIEU THEREOF, the Court reinstates the order dated January 28,
1997, of the Regional Trial Court, Branch 163, Pasig City in Civil Case No.
64798, for the issuance of a writ of execution to enforce the compromise
decision of the court in the case.

No costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Kapunan, and
Ynares-Santiago, JJ., concur.