WORLD MACHINE ENTERPRISES, PETITIONER, VS. INTERMEDIATE APPELLATE COURT AND J.R. LITHOPLATES, RESPONDENTS.

Can the issuance of a writ of execution of a compromise judgment be
appealed and consequently recalled, notwithstanding that said writ had already
been enforced and satisfied during the pendency of a
Motion to Recall the Issuance of said Writ?

This is the sole issue for resolution in this case, the
antecedent facts of which are as follows:

Private respondent J.R. Lithoplates
(hereinafter referred to as private respondent) purchased a printing press
machine from petitioner World Machine Enterprises (hereinafter referred to as
petitioner) payable in monthly installments. 
The sale was evidenced by a promissory note.  To secure the note, private respondent executed a chattel mortgage over a
piece of personal property belonging to it, described as follows:

“One (1) unit
SOLNA COLOUR

OFFSET PRESS MODEL
8000

SERIES SINGLE,
SIZE 18″

x 24 3/4″
Complete with

standard
accessories and

electrics”^[1]

It was stipulated in both the promissory note and the chattel
mortgage contract that in the event of failure to pay one (1) or two (2)
consecutive monthly installments, the entire balance shall become due and
payable and petitioner shall have the right to repossess the subject property
or to foreclose the chattel
mortgage, at its election.

Private respondent defaulted in its payments to petitioner.  Consequently, petitioner demanded payment, or
the surrender of the above-described property for the purpose of foreclosure,
but despite repeated demands, private respondent was unable to comply
therewith.

Thus, on February 22,
1983, petitioner filed a complaint for replevin
and/or a sum of money against
private respondent before the Regional Trial Court of Quezon
City, Branch 99.  The complaint was docketed as Civil Case No.
Q-37443.^[2]

During the hearing of the case on the merits, the parties submitted a Compromise
Agreement dated April 30, 1983,
the complete text of which reads as follows:

“COME NOW the parties in the above-entitled case, and unto
this Honorable Court respectfully submit this compromise agreement:

1.       – Defendant (J.R. Lithoplates) admits that its obligation to the plaintiff in
the amount of Sixty Six Thousand (P66,000.00) Pesos including interest,
arrearages, litigation expenses and other charges is due and demandable;

2.       – Defendant agrees to
settle the foregoing amount under the following schedule of payments, to wit:

a)      Ten Thousand
(P10,000.00) Pesos upon signing of the contract;

b)      Twenty Three Thousand
(P23,000.00) Pesos on or before May
30, 1983; and

c)      Thirty Three Thousand
(P33,000.00) Pesos on or before July
30, 1983;

3.       – Plaintiff agrees to
return the machine subject matter of the instant complaint to the defendant
upon payment by the latter of the Twenty Three Thousand (P23,000.00) Pesos
stipulated in paragraph 2 (b) hereof;

4.       – Defendant further
agrees to insure the said machine and the proceeds of which is payable to the
plaintiff;

5.       – The other terms and
conditions the promissory note and chattel mortgage contract relative to the
machine subject matter of the instant complaint in so far as applicable and not
in conflict with the terms and conditions of the compromise agreement shall
remain valid and binding to which defendant agrees to strictly comply with;

6.       – The parties hereby agreed that if
defendant violates any and/or all the foregoing terms and conditions set forth
in this compromise agreement, a writ of execution to seize the printing press
machine subject matter of
the instant complaint shall immediately be issued upon motion of the plaintiff
and defendant waives his right to a notice and hearing thereof and all
payments made by virtue of this compromise agreement shall be forfeited in
favor of the plaintiff as rentals of the machine and as liquidated damages.

WHEREFORE, PREMISES
CONSIDERED, it is respectfully
prayed of this Honorable Court that a decision be rendered based on the
foregoing compromise agreement.”^[3]
(underscoring supplied)

Presiding Judge Bienvenido C. Vera-Cruz approved the aforequoted
compromise agreement in toto in a decision
promulgated on May 27, 1983.^[4]

It is uncontroverted that on May 30, 1983, private respondent failed to pay the second
installment of P23,000.00, in violation
of paragraph 2 of the compromise agreement. 
Private respondent, through its representative, Jaime Ragiles, requested petitioner for an extension of time to
pay as it was awaiting the release of its loan from the Integral Management and
Development Consultancy for thirty thousand pesos (P30,000.00),^[5] with which sum it intended to pay
petitioner.  As proof thereof, private
respondent showed petitioner a copy of
the certification of approval of the loan from said company dated May 30, 1983.^[6]
Petitioner admits that it granted private respondent, through counsel, only up
to June 1, 1983 to pay the
second installment.  Petitioner likewise admits that it made
inquiries into the said loan, but after learning that it would be approved only
upon submission of the necessary documents, and that there is no specific date
for its release, petitioner proceeded to file a motion for writ of execution
with the trial court on June 2, 1983.^[7]

On the other hand, private respondent claims that when it
approached petitioner for an extension, it sought to get the same in writing,
but the counsel of petitioner assured the private respondent that the request
for extension can easily be accommodated. 
Hence, private respondent continues,
it did not persist in procuring the written extension and relied on the word of
counsel for petitioner.  Private
respondent insists that petitioner was guilty of bad faith in filing the motion
for writ of execution despite the extension granted through counsel.

At any rate, the motion for execution was granted and a writ of
execution dated June 7, 1983 was accordingly issued. 
The very next day, private respondent filed an Urgent Ex-Parte Motion to Recall the Writ of Execution, containing
all of the above allegations.  Petitioner
filed an opposition thereto, setting forth its own version as aforementioned.  Meanwhile, the writ of execution was implemented
by Deputy Sheriff Florencio Pangilinan
on June 10, 1983,
and was duly satisfied as evidenced by the Sheriff’s Return dated June 17,
1983.^[8]

Private respondent then filed a Manifestation alleging that the
writ of execution should be recalled on the ground that it had not yet been
enforced.  Petitioner countered by manifesting
that the writ of execution had already been served and that the machine subject
matter of the writ had already been sold in accordance therewith.

After due hearing, the trial court issued an Order dated June 30,
1983, denying the Motion to Recall the Writ of Execution filed by private respondent.^[9]

On July 2, 1983,
private respondent filed a Notice of Appeal of the aforementioned Order of the
trial court, which was given due course, despite the opposition of
petitioner.  The case was docketed in the
then Intermediate Appellate Court (now
Court of Appeals) as CA-G.R. CV No. 02146.^[10]

After the parties had filed their respective briefs, the
respondent court rendered a decision dated February 28, 1985, recalling the
Writ of Execution issued by the trial court, ordering the petitioner to return
the printing press machine to private respondent, and ordering the latter to
pay its entire obligation of FIFTY-SIX
THOUSAND PESOS (P56,000.00) to petitioner within one month from the finality of
the decision.^[11]

The respondent court found that a verbal extension of time to pay
was indeed granted by petitioner to private respondents on account of the fact
that petitioner made inquiries into the loan sought to be obtained by private respondent.

Petitioner filed a Motion for Reconsideration of the decision of
the respondent court, which was denied.

Hence, the instant petition for certiorari.

Petitioner raises four assignments of error, namely that:

“I.  THE RESPONDENT
COURT ERRED IN NOT DISMISSING THE APPEAL OF
RESPONDENT J.R. LITHOPLATES, SUCH REMEDY NOT BEING LEGALLY PROPER OR
APPROPRIATE;

“II.  THE RESPONDENT
COURT ERRED IN NOT CONSIDERING THE APPEAL MOOT AND
ACADEMIC;

“III. THE RESPONDENT COURT
ERRED IN CONCLUDING THAT PETI­TIONER WORLD MACHINE ENTERPRISES EXTENDED THE
PERIOD OF PAYMENT OF THE OBLIGATION CONTRARY TO THE UNDISPUTED FACTS AND THE
FILING OF THE MOTION FOR EXECUTION;

“IV. THE RESPONDENT COURT
HAS ERRONEOUSLY EFFECTED A SUBSTANTIAL ALTERATION OR CHANGE IN THE TERMS AND
CONDITIONS OF A COMPROMISE JUDGMENT ALREADY SATISFIED.”^[12]

The petition is impressed with merit.

The respondent Court of Appeals gravely erred when it reversed
the Order appealed from and recalled the Writ of Execution issued by the trial
court, for the following reasons:

First, as correctly
contended by petitioner, there is no longer anything to recall, as the writ of
execution had already been duly served and satisfied.  Its recall has therefore, been rendered moot
and academic.

Second, the compromise agreement executed by the parties and approved
by the trial court is controlling.  It is
clear therefrom that a violation of any of its terms
and conditions shall entitle petitioner to the issuance of a writ of execution, with private respondent
waiving its right to notice and hearing of the same.

Well-settled is the rule that a judicial compromise has the force
of law and is conclusive between the parties.^[13]
A compromise has upon them the effect and authority of res judicata.^[14] Therefore, private respondent is bound
by the compromise agreement it entered into with petitioner.  Since it defaulted on the payment of the
second installment, execution was properly sought by petitioner, and
accordingly issued by the trial court.

Third, a judgment based on a compromise is generally not appealable, as enunciated
in the case of Serrano et al. vs Reyes et al.^[15]
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”.^[16]
Granting that what was appealed in the instant case is the issuance of the writ
of execution and not the compromise agreement itself, the distinction is but
superficial because the questioned writ of execution was issued pursuant to the
compromise agreement and may be considered as part thereof.  The
net result is that the compromise agreement is what is actually being appealed, specifically the provision on execution.  The Court of Appeals clearly violated the
above-mentioned rule on the non-appealability of
judgments on compromise when it entertained the appeal of petitioner.

Fourth, what private respondent is actually trying to achieve by
seeking the recall of the writ of execution is to obtain judicial recognition of what would amount to a
modification of the compromise judgment. 
This modification refers to the alleged verbal grant of extension of time to pay the second
installment.

The alleged modification of the compromise judgment is a question
of fact, which the trial court presumably passed upon with adequacy during the hearing and proceedings to resolve the
Motion to Recall the Writ of
Execution.  The appellate court should
therefore not have disturbed the finding of the trial court that there was no
such extension as implied
in its appealed Order.  The court a
quo is in the best position to determine said question, especially considering
that the judgment sought to be modified is based entirely on a compromise
agreement between the parties.  Time and again We have ruled that the determination by the trial court is
entitled to the highest respect, and that as a general rule, appellate courts
will not disturb the factual findings of the trial court.^[17]

Furthermore, the rule on modification of compromise judgments
clearly provides that if a court renders a judgment on compromise, it generally
cannot modify the compromise unless the parties consent (underscoring
supplied) or unless there is a hearing to determine the presence or absence of
vitiated consent.^[18]
Following this rule, the court a quo could not have recognized the alleged extension which is the modification sought,
without the consent of the petitioner. 
The record of the case clearly shows that petitioner did not give its
consent to the requested extension.  On
the contrary, petitioner in fact opposed the same, as evidenced by its Opposition to the Motion to Recall the Writ of
Execution.  Moreover, the fact that
petitioner filed for the issuance of a writ of execution indicates a clear
intent to abide by the terms of the compromise agreement.

Fifth, there was no
reversible error on the part of the trial court when it held that the writ of
execution should not be recalled based on the mere allegation of a verbal
extension of time of payment
purportedly granted by petitioner,
since such allegation is unsubstantiated by concrete evidence.

The only admissions made by petitioner are:  (1) that upon the request of private
respondent, it granted the latter a period of two days from May 30, 1983, or
until June 1, 1983, to pay the second
installment, and (2) that it made injuries into the loan being applied for by
private respondent, which the latter declared it would use to pay petitioner.

These admissions are not sufficient to hold that petitioner did
allow private respondent to pay only upon the release of the loan, thereby
modifying the approved compromise agreement, and removing the right of
petitioner to move for execution upon any default of payment.

The contention of private respondent is that the verbal assurance
of accommodation given by the counsel of petitioner regarding its request for extension is already equivalent to a grant of said request.  The claim is self-serving and entirely
uncorroborated.  By no stretch of the
imagination can such assurance from the counsel of petitioner quality as
a clear grant of extension.

Sixth, the pronouncement of the appellate court that the fact
that petitioner made inquiries is conduct indicative of the fact that it really
granted an extension of time to pay is
erroneous.  The inquiries made amounts to
an express grant of extension no more than the verbal assurances of accommodation made by the counsel of
petitioner.  Inquiries into the release
of a loan of one’s debtor is only to be expected
of a concerned creditor, especially so if said loan is declared by the debtor
to be the sum from which the payment of the debt shall be taken.

This latter finding was based on Article 1371 of the New Civil Code,
which declares that the contemporaneous and subsequent acts of the parties may be principally considered to judge
the intention of the contracting parties. 
The application of said article is improper because said
provision presupposes that the terms of a particular contract are not clear; hence, there is a need to look at the intention
of the parties by other means.  In the
instant case, there is no ambiguity in the terms of the approved compromise
agreement.  The intention of the parties
is clear therefrom.

Lastly, petitioner is correct
in its assertion that the best proof that it granted no extension is the fact
that the very day after the lapse of the two-day “grace period” which
it granted to private respondent, petitioner immediately filed for the issuance
of a Writ of Execution pursuant to the terms of the compromise judgment.  The latter prevails over any unproven
subsequent modification.

The claim of extension of private respondent is nothing but a
lame excuse for its failure to pay, and is not entitled to any
consideration.  If the loan application
was really meant be a part of the compromise agreement, meaning that the second
installment should be paid on the agreed date on the condition that the loan
would be released by then, private respondent should have ensured that it be incorporated therein, or it
should not have signed the compromise agreement at all if it could not comply therewith.

In sum, between a judgment based on a compromise agreement
voluntarily signed by the parties to a case, with the blessings of the trial
court, and an unsupported allegation of
modification of said judgment by only one of the parties, the former must
prevail.

At this juncture, it is worthy to note several points which
further weaken private respondent’s position. 
Petitioner has averred that notwithstanding the favorable decision of
the Court of Appeals to private respondent, the latter has not complied with
said decision, which was rendered almost six years ago.  In short, the balance of the debt due, or
FIFTY-SIX THOUSAND PESOS (P56,000.00), remains unpaid to this day.  Moreover, private respondent failed to file
its comment to the instant petition, as well as its Memorandum, contrary to the
orders of this Court.  It has not
participated at all in the hearing of this petition.  All these reveal evident bad faith on the part of private respondent, further
justifying a judgment against it.

WHEREFORE, in view of the foregoing, the instant petition
is hereby GRANTED.  The decision of the
respondent Court of Appeals dated February
28, 1985 is hereby REVERSED AND SET ASIDE, and the order of the
trial court dated June 30, 1983 denying the Motion to Recall the Writ of
Execution is REINSTATED.  Double costs
against private respondent.

SO ORDERED.

Narvasa, (Chairman), Cruz, Grino-Aquino, and Medialdea, JJ., concur.

^[1]
Page 52, Rollo.

^[2]
Page 33, Ibid.

^[3]
Pages 65-66, Ibid.

^[4]
Pages 67-68, Ibid.

^[5]
Page 71, Ibid.

^[6]
Page 70, Original Records.

^[7]
Page 65, Ibid.

^[8]
Pages 19-20, Rollo.

^[9]
Page 86, Ibid.

^[10]
Page 21, Ibid.

^[11]
Pages 36-37, Ibid.

^[12]
Pages 22-23, Ibid.

^[13]
United Housing Corporation v. Dayrit, G.R. No.
76442, January 22, 1990.

^[14]
Article 2037, New Civil Code.

^[15]
110 Phil 536 (1960).

^[16]
Ibid.

^[17]
People vs. Ibal, 143 SCRA 317 (1986).

^[18]
Yboleon vs. Sison,
59 Phil 281 (1933).