uly 29, 2019

G.R. No. 242852

CONSOLACION P. CHAVEZ, CONNIE P. CHAVEZ, CARLA HORTENSIA C. ADELANTAR,

vs.
MAYBANK PHILIPPINES, INC., Respondent

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition   for review on certiorari are the Decision  dated February 20, 2018 and the
1 2

Resolution  dated October 10, 2018 of the Court of Appeals (CA) in CA-G.R. CEB-SP No. 10333,
3

which: (a) set aside the Order  dated May 26, 2016 of the Regional Trial Court of Jordan, Guimaras,
4

Branch 65 (RTC) and (b) directed it to issue a Writ of Possession in favor of respondent Maybank
Philippines, Inc. (respondent).

The Facts

In December 1999, petitioner Consolacion Chavez (Consolacion) and her late husband, Cresente
Chavez, Sr.   (Crescente, Sr.; collectively, Spouses Chavez) obtained a loan from respondent for the
5

construction of a commercial building.   As collateral therefor, they mortgaged the land on which the
6

building was to be erected, particularly described as Lot No. 1583-C-2-E-l covered by Transfer
Certificate of Title (TCT) No. T-177235  (subject property) of the Registry of Deeds for the Province
7

of Iloilo (RD-Iloilo). 
8

Unfortunately, Spouses Chavez defaulted in the payment of their loan, prompting respondent to
extrajudicially foreclose the mortgage on the subject property.  Respondent emerged as the highest
9

bidder at the public auction and was thereafter issued a Certificate of Sale at Public Auction  dated
10

December 18, 2002, which was registered with the RD-Iloilo subject to Spouses Chavez's right of
redemption.  11

Meanwhile, Spouses Chavez filed an action for the nullification of the extrajudicial foreclosure
proceedings before the RTC, docketed as Civil Case No. 0236.  During its pendency, Cresente, Sr.
12

died and was substituted by his children Connie P. Chavez, Carla Hortensia C. Adelantar, Carmela
P. Chavez, Cresente P. Chavez, Jr., and Cecilia P. Gibe, represented by her attorney-in-fact, Carla
P. Chavez.  Thus, they were joined as plaintiffs together with their mother, Consolacion (collectively,
13

petitioners). 14

During the pre-trial stage of Civil Case No. 0236, the parties entered into a Compromise
Agreement   dated December 13, 2012 by virtue of which respondent allowed petitioners to buy
15

back the subject property for the consideration of forty million pesos (₱40,000,000.00) payable in
installments, notwithstanding the expiration of the redemption period.   Pertinent portions of the
16

Compromise Agreement state:

(1) Notwithstanding the expiration of the redemption period allowed by law, Maybank, nevertheless
allows the CHAVEZ FAMILY to buy back the property covered by Transfer Certificate of Title No.
177235 subject to the terms and conditions herein set forth;
(2) The consideration of the buyback (the buyback price) shall be as it is hereby agreed upon to be
FORTY MILLION PESOS (P40,000,000.00), payable in the following manner;

xxxx

(3) Upon execution of this Compromise Agreement, provided that the corresponding corporate
approvals and authorization on the part of Maybank have been obtained, the plaintiff [herein
petitioners] agrees and undertakes to jointly submit the same to the Court for approval, praying for
the dismissal with prejudice of Civil Case No. 0236, for Nullification of the Foreclosure Proceedings
and Documents, entitled Sps. Cresente & Consolacion Chavez –versus-MPI, Guimaras, Register of
Deeds, Iloilo Province, RTC Branch 65, San Miguel, Jordan, Guimaras Province, together with all
the parties' claims and counterclaims against each other;

The former owner and children/plaintiffs shall assume the cancellation of the annotation of Notice of
Lis Pendens on the TCT under Entry No. 17030 and its attendant costs.

The Compromise Agreement shall be final and executory and that no other case of the same nature
shall be filed or any petition or injunction filed, arising from the same issues and by the same parties;

(4) This buy back transaction shall on an "as-is, where-is" basis. As such, the CHAVEZ FAMILY
shall be responsible, among others, as follows:

xxxx

(5) It is hereby agreed and understood that failure of the CHAVEZ FAMILY to pay any one (1) of the
quarterly amortization referred to in paragraph 2 when due and to otherwise perform strictly with any
of their obligations herein provided, shall mean a breach of this agreement and shall constitute
default and the same shall render the whole obligation due and demandable; Provided that all
unpaid and defaulted obligation shall be subject to a penalty at the rate of 24% per annum from the
date the defaulted became due and demandable until fully paid. Said breach shall also entitle
Maybank at its sole and singular option to right away secure an order for the immediate possession
of the subject property from RTC San Miguel, Jordan, Branch 65, in Civil Case No. 0236 of the
above entitled case and that the CHAVEZ FAMILY shall agree that the court may issue a JUDICIAL
CONFIRMATION of the said action of Maybank.

(6) Anything in this Agreement to the contrary notwithstanding, Maybank reserves the right to cancel
this Agreement in the event of default by the Chavez Family in the performance of any of their
obligations herein stipulated. In such case, all payments made by them shall be considered as
rentals for the occupancy of and/or used of the subject property and as liquidated and ascertained
damages. 17

In view of the execution of the Compromise Agreement, the RTC dismissed Civil Case No. 0236 in
an Order  dated May 30, 2016. Unfortunately, petitioners defaulted in the payment of their obligation
18

under the Compromise Agreement.   This prompted respondent to enter into a Deed of Promise to
19

Sell  with J.E. TICO Realty Corporation (J.E. TICO Realty) and to file a Petition  for Issuance of a
20 21

Writ of Possession before the RTC, docketed as Cadastral Case No. 15-0608. Respondent prayed
that it be placed in possession of the subject property, being the highest bidder in the foreclosure
sale and as owner thereof. 22

Petitioners opposed   the petition, arguing that the Compromise Agreement was a contract of sale
23

which transferred to them the ownership of the subject property.   Therefore, possession thereof
24
cannot be summarily awarded to respondent, considering that their interest is adverse to that of a
mortgagor-debtor.  Additionally, they filed an action to annul respondent's Deed of Promise to Sell
25

executed with J.E. TICO Realty, docketed as Civil Case No. 15-0527. 26

The RTC Ruling

In an Order  dated May 26, 2016, the RTC declined to issue a Writ of Possession in respondent's
27

favor, finding that it was first necessary to determine the nature of the interest of petitioners over the
subject property, i.e., whether it is adverse to that of a mortgagor-debtor.  Likewise, the RTC
28

deemed it necessary to first look into the nature of the Compromise Agreement, i.e., whether it was
a deed of sale or some other contract.  The resolution of these issues therefore requires the
29

reception of evidence. Additionally, the RTC ordered the consolidation of Cadastral Case No. 15-
0608 and Civil Case No. 15-0527, opining that the core issues and the parties involved in both
cases are the same. 30

Respondent moved for reconsideration,   which was denied in an Order  dated July 12, 2016.
31 32

Aggrieved, respondent filed a petition for certiorari  before the CA. 33

The CA Ruling

In a Decision  dated February 20, 2018, the CA set aside the assailed issuances of the RTC and
34

accordingly, directed it to issue a Writ of Possession in favor of respondent in Cadastral Case No.
15-0608.  The CA held that the R TC gravely abused its discretion in not issuing an ex-parte Writ of
35

Possession, the same being the court's ministerial function pursuant to Sections 6  and 7  of Act No.
36 37

3135,  as amended by Act No. 4118.  It further held that while the rules admit of an exception which
38 39

bars the issuance of a writ of possession, such as when the subject land is held by a third party
adversely to the mortgagor-debtor,   such a situation does not obtain in this case. Consolacion, one
40

of the original mortgagors, cannot claim to have possessed the subject property adverse to herself,
while the children of the other mortgagor, Cresente, Sr., merely substituted him in these
proceedings. Further, the CA held that the parties did not intend to extinguish their mortgagor-
mortgagee relationship, as extant in paragraph 5  of the Compromise Agreement where respondent
41

reserved its right to immediately possess the subject property should petitioners default in any of
their payments.

Moreover, the CA held that the consolidation of Cadastral Case No. 15-0608 and Civil Case No.
15-0527 was improper, considering that the former is a non-litigious proceeding which involves the
ministerial function of issuing an ex-parte writ of possession in favor of respondent,  while the latter
42

involves the annulment of respondent's Deed of Promise to Sell in favor of J.E. TICO Realty which is
litigious in nature.

Petitioners moved for reconsideration,   which was denied m a Resolution  dated October 10, 2018;
43 44

hence, this petition.

The Issue Before the Court

The issue for the Court's resolution is whether or not the CA erred in directing the issuance of an ex-
parte Writ of Possesion in favor of respondent. 1âшphi1

The Court's Ruling

immediate possession of the subject property through an ex-parte motion for the issuance of a writ
of possession, in light of the execution of the Compromise Agreement which, they aver, constitutes a
"new contract" and a "new legal relationship" between the parties on the thesis that the nature of the
transaction embraced therein involves a sale of the subject property. Respondent
refutes  petitioners' stance, insisting that the Compromise Agreement was simply what it is - a
46

compromise entered between the parties designed to put an end to litigation, non-compliance
therewith being a ground to rescind the compromise. Moreover, the mortgagor-mortgagee regime
between the parties was never extinguished, as respondent never transferred ownership of the
subject property to petitioners upon the execution of the Compromise Agreement.  47

The petition lacks merit.

The nature of the Compromise Agreement

Article 2028  of the Civil Code defines a "compromise agreement" as a contract whereby the parties
48

make reciprocal concessions in order to avoid litigation or put an end to one already commenced. If
judicially approved, it becomes more than a binding contract; it is a determination of a controversy
and has the force and effect of a judgment.   To have the force of law between the parties, a
49

compromise agreement must comply with the requisites and principles of contracts. Thus, it must
have the following elements: (1) the consent of the parties to the compromise; (2) an object certain
that is the subject matter of the compromise; and (3) the cause of the obligation that is established.
While compromise agreements are generally favored and encouraged by the courts, it must be
proved that they were voluntarily, freely, and intelligently entered into by the parties, who had full
knowledge of the judgment.   Hence, a compromise agreement, once approved, has the effect
50

of res judicata between the parties and should not be disturbed except for vices of consent, forgery,
fraud, misrepresentation, and coercion. 51

In this case, it is undisputed that after the extrajudicial foreclosure of the subject property and the
consolidation of title in the name of respondent, and during the pendency of Civil Case No. 0236  for
52

nullification of the extrajudicial foreclosure proceedings filed by petitioners against respondent, the
parties entered into a Compromise Agreement whereby petitioners were given the opportunity to
"buy back" the subject property despite the lapse of the one-year period for redemption.
Unfortunately, petitioners defaulted in their obligations under the Compromise Agreement - an
allegation that, the Court notes, petitioners never denied. Further, as the CA correctly pointed
out,   the terms and conditions of the Compromise Agreement are legally binding upon the parties
53

having been executed without any vice of consent, forgery, fraud, misrepresentation, or coercion.

The stipulations of the Compromise Agreement, particularly paragraphs (5) and (6) thereof, clearly
show the right of respondent to rescind the same and to immediately secure a writ of possession
over the subject property. This course of action/option on the part of respondent finds support under
Article 2041   of the Civil Code, which recognizes the right of an aggrieved party to either (1) enforce
54

the compromise by a writ of execution or (2) regard it as rescinded and insist upon his original
demand, upon the other party's failure or refusal to abide by the compromise.  55

Indeed, the Court has acknowledged the option to rescind a compromise agreement due to non-
compliance with its terms,  as explained in Chavez v. Court of Appeals:
56 57

However, in Heirs of Zari, et al. v. Santos, we clarified that the broad precept enunciated in Art. 2037
is qualified by Art. 2041 of the same Code, which provides:
If one of the parties fails or refuses to abide by the compromise, the other party may either enforce
the compromise or regard it as rescinded and insist upon his original demand.

We explained, viz. :

[B]efore the onset of the new Civil Code, there was no right to rescind compromise agreements.
Where a party violated the terms of a compromise agreement, the only recourse open to the other
party was to enforce the terms thereof.

When the new Civil Code came into being, its Article 2041 x x x created for the first time the right of
rescission.  That provision gives to the aggrieved party the right to "either enforce the compromise or
1âшphi1

regard it as rescinded and insist upon his original demand." Article 2041 should obviously be
deemed to qualify the broad precept enunciated in Article 2037 that "[a] compromise has upon the
parties the effect and authority of resjudicata.

In exercising the second option under Art. 2041, the aggrieved party may, if he chooses, bring the
suit contemplated or involved in his original demand, as if there had never been any compromise
agreement, without bringing an action for rescission. This is because he may regard the
compromise as already rescinded by the breach thereof of the other party.  58

In this regard, the Court must reject petitioners' stapce that the "buy back" transaction embraced in
the Compromise Agreement was in the nature of a sale and that upon the execution thereof, the
parties were deemed to have entered into a new legal relation, citing the doctrine enunciated in the
case of Philippine National Bank v. Spouses Pimentel  (PNB case) to bolster their argument. It bears
59

pointing out, however, that in the PNB case, the parties clearly and unequivocally executed a Deed
of Conditional Sale whereby respondents repurchased the subject property from PNB for Seven
Million Five Hundred Thousand Pesos (₱7,500,000.00). Thus, the Court ruled therein that "when
PNB executed the deed of conditional sale in favor of herein respondents, the transaction is no
longer a sale under the provisions of Act No. 3135." 60

The writ of possession must issue as

The law  and jurisprudence are clear that in extrajudicial foreclosure proceedings, an order for a writ
61

of possession issues as a matter of course, upon proper motion, after the expiration of the
redemption period without the mortgagor exercising the right of redemption, or even during the
redemption period, provided a bond is posted to indemnify the debtor in case the foreclosure sale is
shown to have been conducted without complying with the requirements of the law or without the
debtor violating the mortgage contract. The rationale for the ministerial issuance of a writ of
possession is to put the foreclosure buyer in possession of the property sold without delay, since the
right to possession is founded on ownership of the property.  62

Once the title to the property has been consolidated in the buyer's name upon failure of the
mortgagor to redeem the property within the one-year redemption period, the writ of possession
becomes a matter of right belonging to the buyer. Consequently, the buyer can demand possession
of the property at any time. Its right to possession has then ripened into the right of a confirmed
absolute owner and the issuance of the writ becomes a ministerial function that does not admit of the
exercise of the court's discretion.  The basis of the right to possession is the purchaser's ownership
63

of the property. 64

Jurisprudence recognizes certain exceptions to the court's ministerial function to issue a writ of
possession. In Nagtalon v. UCPB,  the Court enumerated the following jurisprudential exceptions:
65
(a) gross inadequacy of the purchase price;   (b) third party claiming right adverse to the
66

mortgagor/debtor, and; (c) failure to pay the surplus proceeds of the sale to the mortgagor.  None of
67 68

the foregoing instances obtain in the present case; as the CA aptly observed,   petitioners cannot be
69

said to be holding the subject property adverse to themselves, being one of the original mortgagors
in the case of Consolacion and the heirs and/or substitute parties in the case of petitioners.
Accordingly, the writ of possession must issue as a matter of course in respondent's favor.

WHEREFORE, the petition is DENIED. The Decision dated February 20, 2018 and the Resolution
dated October 10, 2018 of the Court of Appeals in CA-G.R. CEB-SP No. 10333 are
hereby AFFIRMED.

SO ORDERED.