ROLANDO R. LIGON, PETITIONER-APPELLANT, VS. HONORABLE COURT OF APPEALS AND DAMASO S. FLORES, RESPONDENTS-APPELLEES.

In September 1983, petitioner Rolando R. Ligon
extended various loan accommodations to private respondent Damaso
S. Flores, amounting to P1,130,000.00.  As private respondent failed to pay his
obligation, petitioner filed a complaint
for sum of money with the RTC of Quezon City,
docketed as Civil Case No. Q-45825.  Thereafter, the parties came up with a
compromise agreement, which was approved by the trial court on 26 September 1985, under which
private respondent acknowledged his principal obligation to petitioner in the
amount of P1,869,700.00.

The compromise agreement also provided, among others, that in
case of failure of private respondent to comply with its terms and conditions,
the entire obligation then remaining outstanding and unpaid would become immediately
due and demandable and private respondent would then vacate and turn over the
possession, use, administration and operation of his cockpit arena, known as Paranaque Cockpit Stadium, to petitioner and allow the
latter to use, possess, manage and operate the same as his own, provided that
the amount of the obligation that was outstanding
and unpaid totalled at least P500,000.00.

However, a conflict arose between the parties as to the
computation of the interests due under the compromise agreement.  Hence, on 10 April 1986, the trial court ruled
on the divergent interpretations of the parties on the computation of the
interest, and then it issued a writ of execution against private respondent, on
the ground that the latter’s payment of P300,000.00 under the first installment
due was short of what was required in said compromise agreement.  From said order of 10 April 1986, private respondent appealed to the
Court of Appeals where the appeal was docketed as CA-G.R. No. 10259.

On 9 May 1986,
petitioner Ligon filed in Civil Case No. Q-45825 a
motion for execution pending appeal, to which motion,
private respondent Flores filed an opposition alleging that the trial court had
lost jurisdiction to grant the motion, as the same was filed long after private
respondent had perfected his appeal and after the period for appeal had
expired.  The trial court, nevertheless,
granted the motion for execution
pending appeal on 22 May 1986,
and accordingly, possession of the cockpit was wrested from private respondent
in favor of petitioner on 23 May 1986.

On the same day, 23 May 1986, private respondent filed before the
Court of Appeals a petition for certiorari with prayer for the issuance
of a temporary restraining order, docketed as CA-G.R. No. 09061.  The Court of Appeals temporarily restrained
petitioner Ligon from enforcing the 22 May 1986 order granting execution
pending appeal, and upon refusal of petitioner to comply, a resolution was
issued ordering the latter to
immediately surrender possession of the cockpit to private respondent Flores.

However, on 16 July 1986,
the Court of Appeals, through its First Special Cases Division, dismissed the
petition of private respondent in said CA-G.R. No. 09061.  But upon motion for reconsideration filed by
private respondent, the appellate court’s Seventh Division rendered an Amended
Decision dated 19 September 1986 giving due course to the petition, initially
dismissed, and nullifying the trial court’s
order of 22 May 1986, holding that it (trial court) had lost
jurisdiction to order execution pending appeal after the period to appeal had
expired.

From the above Court of Appeals decision in CA-G.R. No. 09061,
petitioner Ligon filed before this Court a petition
for review on certiorari, docketed as G.R. No. 76039, assigned to
the First Division.  The Court affirmed
the decision of the Court of Appeals and dismissed the petition for review of
petitioner Ligon in a resolution of 10 March 1988.

After this Court’s resolution in G.R. No. 76039 became final and executory by reason of the entry of judgment there­in,
private respondent Flores moved for a writ of execution with the trial court in
Civil Case No. Q-45825, which was granted in an order dated 20 April 1988.  This would have restored possession of the
cockpit to private respondent.

The above writ of execution could not, just the same, be enforced
because, on 17 May 1988,
the Court of Appeals in CA-G.R. No. 10259
issued a temporary restraining order,
upon motion of petitioner Ligon.  However, in a decision dated 9 August 1988, the
Court of Appeals in the same CA-G.R. No. 10259 reversed and set aside the order
of 10 April 1986 of the trial court interpreting the computation of interest
and ordered private respondent to pay petitioner Ligon
the sum of P1,619,700.00 plus accrued interest at 4% per month from 1 October
1985 until full payment, and remanded the case to the lower court for further
proceedings to determine the income derived by petitioner Ligon
from the operation of the cockpit from 22 May 1986 until its possession is returned
to private respondent.  Whereupon, petitioner Ligon filed this
petition for review, now docketed as G.R. No. 84644, assigned
to the Second Division.

It is petitioner’s submission that the compromise agreement in
Civil Case No. Q-45825 provides that the 4% interest should be based on the
principal obligation of P1,869,700.00.  The holding of respondent appellate court
that the computation of private respondent is reflective of the intention of
the parties to allow private respondent to accumulate his funds, is, according
to petitioner, without basis because the same cannot be inferred from the terms
of the compromise agreement.

Petitioner Ligon further claims that,
in finding for private respondent, respondent Court of Appeals ignored accepted
legal and financial principles in computing interest on a debt, among which
principles are:

1.  Article 1253.  If the debt produces interest, payment of the
principal shall not be deemed to have been made until the interests have been
covered.  (Civil Code of the Philip­pines)

2.  Interest is computed on
the principal from the first day until the date of the first partial
payment.  The next time a payment is
made, interest is calculated on the adjusted principal from the date of the
previous payment up to the present (Roueche, Business
Mathe­matics, 1973, Prentice Hall, Inc.)

The present petition further prayed for the issuance of a
temporary restraining order to enjoin and prohibit the RTC of Quezon City, in Civil
Case No. 45825, from acting on the application of respondent Flores
to place him in possession of the Paranaque Cockpit
Stadium.  In a resolution dated 5
December 1988, this Court issued a temporary restraining order enjoining said
trial court from acting on the application of respondent Flores for a writ of
execu­tion.

On 9 December 1988, private respondent filed an Urgent Motion To
Lift Temporary Restraining Order and to Cite Peti­tioner and Counsels in
Contempt of Court, for misleading the
Court into believing that what the private respondent is seeking to enforce in the trial court through
the filing of a motion for a writ of execution, is the decision of 9 August
1988 of respondent Court of Appeals in CA-G.R. No. 10259, which is the subject
of this petition, when in fact, what private
respondent is seeking to enforce, by applying with the trial court for a writ of execution, is the
decision of the Court of Appeals dated 19
September 1986 in CA-G.R. No. 09061 which was affirmed by this
Court (First Division) in G.R. No. 76039, and which became final and executory on 25
March 1988.

Petitioner Ligon, in his Comment on the
Motion to Lift Restraining Order and to Cite Him and Counsels in Contempt of
Court, denies the allegation of private respondent that the Court was misled in
issuing the TRO and argues against its lifting, because such lifting will
allegedly render ineffectual any judgment that may be rendered in his favor.

On 30 January 1989, private respondent filed with this Court a
Motion for Issuance of a Clarificatory Order, praying
that a clarification be made to the effect that the temporary restraining order
of 5 December 1988 pertains only to the enforcement and execution of the
decision of the Court of Appeals dated 9 August 1988 in CA-G.R. No. 10259 and
does not include or affect the enforcement of the Amended Decision of the Court
of Appeals of 19 September 1986 in CA-G.R. No. 09061.

Petitioner, in his Comment on the above motion for clarification,
states that he did not distort the facts of the case to mislead the Court into
issuing the TRO.  What has been stressed
from the beginning, according to petitioner, is that private respondent should
not be allowed to execute the Amended Decision dated 19 September 1986 rendered in CA-G.R. No. 09061,
pending resolution of the instant petition inasmuch as the issue of who should
possess the cockpit is part and parcel of the instant case.

Petitioner is correct in his position as regards the need for the
TRO issued by the Court in this
case dated 5 December 1988,
it appearing that the Amended Decision in said CA-G.R. No. 09061, which was
affirmed by this Court (First Division) in G.R. No. 76039
was not a decision on the merits of the controversy.

We now proceed to the merits of the controversy.  As earlier stated, petitioner contends that
the 4% monthly interest should not be
applied only to the first installment of the principal obligation but to the
entire principal obligation of P1,869,700.00.  Following this computation, petitioner states
that the amount due under the first installment is P556,630.00
and not P300,000.00 as claimed and paid by private respondent.

The trial court, in its order of 10 April 1986, sustained the computation of petitioner
insofar as the amount due on the first installment is concerned, which is P556,630.00.  It declared
that the compromise agreement is clear in its provisions that the accrued 4%
monthly interest should be imposed on the principal obligation of P1,869,700.00, as supported by par. 3 of the compromise
agreement where the principal obligation is defined to be the amount of
P1,869,700.00.  The contention of the
private respondent that the compromise agreement intended to allow him to
slowly accumulate his funds, does not appear in nor
can it be inferred from the provisions of the compromise agreement, according
to the petitioner.

Private respondent, upon the other hand, claims that the
computation of the accrued interest of 4% per month should be based on the
amount of P250,000.00 which is the first installment
due on the principal obligation and not on the total indebtedness.  Hence, the first payment he made in the sum
of P300,000.00 complied with the provisions of the
compromise agreement.  Private respondent
further submits that his interpretation should prevail not only because it
reflects the true intent of the parties but also because any doubt as to the
meaning of the compromise agreement should be resolved in his favor, considering that the
agreement is more onerous to him.

Well-settled is the rule that where the literal interpretation of
a contract is contrary to the evident intention of the parties, the latter
prevails.^[1]
After a thorough examination of the records, we find merit in the contention of
private respondent that the true intent of the parties is to give him time to slowly
accumulate his resources by the gradual increase of the payable interest.  Said intention is shown by the following
circumstances, which respondent appellate court aptly enumerates:

“1) The principal obligation was broken down or parcelarized into five principal install­ments which
gradually increases, from a low P250,000.00 principal for the first installment
to a high of P469,700.00 for the last installment.

It would have been easier and most natural to divide the total
obligation into five (5) equal principals of P373,940.00
each, but this was not done by plaintiff-appellee (Ligon).

2)  In the September 26,
1985 ‘Joint Manifestation/Motion to Amend compromise Agreement’
(Annex ‘D’, Appellant’s Brief), the parties realized that the principal
obligation mentioned in the September
25, 1985 Compromise Agreement was mathematically short by P69,700.  The parties, in
correcting said defect, added the P69,700.00 deficit
to the last installment, evidencing an intention of the parties to allow
defendant-appellant the opportunity to slowly accumulate his funds.

3)  The compromise agreement,
consistent with the intention of the parties to allow defendant-appellant to
slowly accumulate his funds, counted the periods for the five (5) installments
uniformly from October 1, 1985.  Consequently, the interests gradually
increase because the duration of the periods for the five (5) principal
installments gradually became longer, not because the interest rate increases.

It is important to remember that the amount of P1,869,700.00
was the result of a compilation of several sets of previous obligations that
bore different maturity dates.  This
being so, then the applicable interest to each particular set of obligations
was to be computed only for that particular set of obligations and only for the
duration for which it was utilized.

Thus, the breaking down of the figure P1,869,700 into paragraphs
5A.1 for P250,000, 5A.2 for P350,000, 5A.3 for P400,000, 5A.4 for P400,000 and
5A.5 for P469,700 shows the resurrected previous sets of obligations which are
now presented in a streamlined manner and with definite terms that includes the
specific duration for accrual and computation of interest – all being from October
1, 1985, as it is very clear from paragraphs 5A.1 to 5A.5 of the Compromise
Agreement, whereas before, all sets of obligations had open-ended terms.

The essence of the Compromise Agreement is clearly evident
here.  Both the conceptualization of the
streamlined different set of obligations, which are now with definite due
dates, and the gradual increase in the amount of principal obligation and
corresponding interest due are glaring representation of the intention of the
parties.

The Supreme Court, in the case of Nielson & Co., Inc. vs. Lepanto Consolidated Mining Co., 18 SCRA 1040 held:

‘At the outset, it should
be stated that, as a rule, in the construction and interpretation of a document
the intention of the parties must be sought (Rule 130, Section 10, Rules of
Court).  This is the basic rule in the
interpretation of contracts because all other rules are but ancillary to the
ascertainment of the meaning intended by the parties.  And once this intention has been
ascertained it becomes an integral part of the contract as though it has been
originally expressed therein in unequivocal terms.  (Shoreline Oil Corp. vs.
Guy, App. 189. So., 348, cited in 17A C.J.S., P. 47) (emphasis supplied).’” ^[2]

Thus, inasmuch as the true
intention of the parties when they
executed the compromise agreement has been ascertained and determined, the same
binds them without the need of extraneous evidence such as accepted banking and
financial practices.

ACCORDINGLY, finding no reversible error in the respon­dent appellate court’s decision, dated 9 August 1988, in CA-GR No. 10259, the
petition is DENIED and said decision is AFFIRMED.  The temporary restraining order of this
Court, dated 5 December 1988,
is LIFTED.  Costs
against petitioner.

SO ORDERED.

Sarmiento and Regalado, JJ.,
concur.

Melencio-Herrera, (Chairman), No part.  Son’s law office is counsel for petitioner.

Paras, J., No part. My wife concurred in CA decision.

^[1]
Labasan vs.
Lacuesta, G. R. No. L-25931, October 30, 1978, 86 SCRA 16

^[2]
Rollo, pp. 55-57