G.R. No. 156228               December 10, 2003 a.

by execution of the Punong Barangay which is quasi-judicial and summary in

CALLEJO, SR., J.: Under the first remedy {execution of the Punong Barangay}, the proceedings are covered by the LGC
and the Katarungang Pambarangay Implementing Rules and Regulations. The Punong Barangay is
BACKDROP: This is a petition for review of the Decision dated July 23, 2002 of the Court of Appeals in CA-G.R. SP NO. 68895 called upon during the hearing to determine solely the fact of non-compliance of the terms of the
which affirmed the decision of the Regional Trial Court (RTC) of Mandaluyong City, Branch 208, which reversed and set aside the settlement and to give the defaulting party another chance at voluntarily complying with his obligation
decision of the Metropolitan Trial Court of Mandaluyong City (MTC), Branch 60; and granted the motion for execution filed by private
respondent Ma. Teresa O. Escueta in Civil Case No. 17520. under the settlement.

SUMMARY: Abelardo Escueta died intestate he was survived by his widow Remedios Escueta and Under the second remedy {action in regular form}, the proceedings are governed by the Rules of
their six children, including Ma. Teresa O. Escueta and her brother Herman O. Escueta. Part of his Court, as amended. The cause of action is the amicable settlement itself, which, by operation of law,
estate was a parcel of land located at No. 14 Sierra Madre corner Kanlaon Streets, Barangay has the force and effect of a final judgment.
Highway Hills, Mandaluyong City, covered by Transfer Certificate of Title (TCT) No. (77083) - 27568,
and the house thereon {subject property of the case}. The property was leased to Rainier Llanera, Section 417 of the LGC grants a party a period of six months to enforce the amicable settlement by
who sublet the same to 25 persons. the Lupon through the Punong Barangay before such party may resort to filing an action with the
MTC to enforce the settlement. The raison d etre of the law is to afford the parties during the six-
Ma. Teresa Escueta, as a co-owner of the property, filed an ejectment case against Llanera and the month time line, a simple, speedy and less expensive enforcement of their settlement before the
sub-lessees before the Lupon of Barangay Highway Hills. • In the meantime, on April 15, 1999, the Lupon.
heirs of Abelardo Escueta executed a deed of conditional sale over the property including the house
thereon, to Mary Liza Santos for P13,300,000 Going by the plain words of Section 417 of the LGC, the time line of six months should be computed
from the date of settlement. However, if applied to a particular case because of its peculiar
On May 5, 1999, Escueta and Llanera, and the sub-lessees, executed an Amicable Settlement,…with circumstance, the computation of the time line from the date of the settlement may be arbitrary and
the concomitant obligation of the respondents (petitioners) to vacate the property on or before unjust and contrary to the intent of the law. To illustrate:
December 1999. The Settlement provided that if the lessee and sub-lessees fail or refuse to vacate
the property on or before December 1999, the barangay chairman was authorized without any court Under an amicable settlement made by the parties before the Lupon dated January 15, 2003, the
order to cause the eviction and removal of all the respondents on the property. respondents were obliged to vacate the subject property on or before September 15, 2003. If the time
line of six months under Section 417 were to be strictly and literally followed, the complainant may
By January 2000, five sub-lessees, namely, Ma. Teresa Vidal, Lulu Marquez, Marcelo Trinidad, enforce the settlement through the Lupon only up to July 15, 2003. But under the settlement, the
Carlos Sobremonte,[12] and Jingkee Ang remained in the property, and requested Escueta for respondent was not obliged to vacate the property on or before July 15, 2003; hence, the settlement
extensions to vacate the property. Escueta agreed, but despite the lapse of the extensions granted cannot as yet be enforced. The settlement could be enforced only after September 15, 2003, when
them, the five sub-lessees refused to vacate the property. the respondent was obliged to vacate the property. By then, the six months under Section 417 shall
have already elapsed. The complainant can no longer enforce the settlement through the Lupon, but
Escueta opted not to have the sub-lessees evicted through the Punong Barangay as provided for in had to enforce the same through an action in the MTC, in derogation of the objective of Section 417
the amicable settlement. Neither did she file a motion with the Punong Barangay for the enforcement of the LGC. The law should be construed and applied in such a way as to reflect the will of the
of the settlement. Instead, she filed on May 12, 2000, a verified Motion for Execution against the legislature and attain its objective, and not to cause an injustice.
recalcitrant sub-lessees with the MTC for the enforcement of the amicable settlement and the
issuance of a writ of execution. In light of the foregoing considerations, the time line in Section 417 should be construed to mean that
if the obligation in the settlement to be enforced is due and demandable on the date of the settlement,
ISSUE: Whether or not the respondents’ verified Motion for Execution against the recalcitrant sub- the six-month period should be counted from the date of the settlement; otherwise, if the obligation to
lessees with the MTC for the enforcement of the amicable settlement and the issuance of a writ of be enforced is due and demandable on a date other than the date of the settlement, the six-month
execution was correct period should be counted from the date the obligation becomes due and demandable.

Held: The respondent adopted the wrong remedy. Parenthetically, the Katarungang Pambarangay Implementing Rules and Regulations, Rule VII,
Section 2 provides:
Ratio: We agree that the Secretary of the Lupon is mandated to transmit the settlement to the
appropriate city or municipal court within the time frame under Section 418 of the LGC and to furnish SECTION 2. Modes of Execution. - The amicable settlement or arbitration award may be
the parties and the Lupon Chairman with copies thereof.The amicable settlement which is not enforced by execution by the Lupon within six [6] months from date of the settlement or
repudiated within the period therefor may be enforced by execution by the Lupon through the Punong date of receipt of the award or from the date the obligation stipulated in the settlement or
Barangay within a time line of six months, and if the settlement is not so enforced by the Lupon after adjudged in the arbitration award becomes due and demandable. After the lapse of such
the lapse of the said period, it may be enforced only by an action in the proper city or municipal court time, the settlement or award may be enforced by the appropriate local trial court pursuant
as provided for in Section 417 of the LGC of 1991, as amended, which reads: to the applicable provisions of the Rules of Court . An amicable settlement reached in a
case referred by the Court having jurisdiction over the case to the Lupon shall be enforced
SEC. 417. Execution. The amicable settlement or arbitration award may be enforced by execution by by execution by the said court. (Underlining supplied).
the Lupon within six (6) months from the date of the settlement. After the lapse of such time, the
settlement may be enforced by action in the proper city or municipal court. (Underlining supplied). By express provision of Section 417 of the LGC, an action for the enforcement of the settlement
should be instituted in the proper municipal or city court. This is regardless of the nature of the
Section 417 of the Local Government Code provides a mechanism for the enforcement of a complaint before the Lupon, and the relief prayed for therein. The venue for such actions is governed
settlement of the parties before the Lupon. It provides for a two-tiered mode of enforcement by Rule 4, Section 1 of the 1997 Rules of Civil Procedure, as amended. An action for the enforcement
of an amicable settlement executed by the parties before the Lupon, namely, of a settlement is not one of those covered by the Rules on Summary Procedure in civil cases;hence,
the rules on regular procedure shall apply, as provided for in Section 1, Rule 5 of the Rules of Civil publication for the Extra-Judicial Settlement of the estate of the late ABELARDO ESCUETA
Procedure, as amended. while the registration and transfer fees shall be shouldered by the BUYER."

In this case, the parties executed their Amicable Settlement on May 5, 1999. However, the petitioners On May 5, 1999, Escueta and Llanera, and the sub-lessees, executed an "Amicable
were obliged to vacate the property only in January 2000, or seven months after the date of the Settlement," where they agreed that (a) the owners of the property would no longer collect the
settlement; hence, the respondent may enforce the settlement through the Punong Barangay within rentals due from the respondents therein (lessee and sub-lessees) starting May 1999, with the
six months from January 2000 or until June 2000, when the obligation of the petitioners to vacate the concomitant obligation of the respondents to vacate the property on or before December 1999;
property became due. The respondent was precluded from enforcing the settlement via an action with (b) time was the essence of the agreement, and that consequently, if the lessee and sub-lessees
the MTC before June 2000. However, the respondent filed on May 12, 2000 a motion for execution fail or refuse to vacate the property on or before December 1999, the barangay chairman was
with the MTC and not with the Punong Barangay. Clearly, the respondent adopted the wrong remedy. authorized without any court order to cause the eviction and removal of all the respondents on
Although the MTC denied the respondents motion for a writ of execution, it was for a reason other the property. The amicable settlement was attested by Pangkat Chairman Jose Acong. The parties
than the impropriety of the remedy resorted to by the respondent. The RTC erred in granting the did not repudiate the amicable settlement within ten days from the execution thereof. Neither
respondents motion for a writ of execution, and the CA erred in denying the petitioners petition for did any of the parties file any petition to repudiate the settlement.
review.
The vendees having paid the down payment and second installment of the price of the property, the
In this case, there is no question that the petitioners were obliged under the settlement to vacate the vendors caused the cancellation on December 17, 1999, of TCT No. 27568 and the issuance of TCT
premises in January 2000. They refused, despite the extensions granted by the respondent, to allow No. 15324 to and under the names of the vendees Mary Liza Santos, Susana Lim and Johnny Lim.
their stay in the property. For the court to remand the case to the Lupon and require the respondent However, Escueta and the other vendors had yet to receive the balance of the purchase price of
to refile her motion for execution with the Lupon would be an idle ceremony. It would only unduly P1,000,000.00 because the respondents were still in the property.
prolong the petitioners unlawful retention of the premises.
Llanera vacated the leased premises. Later, twenty of the sub-lessees also vacated the
property. By January 2000, five sub-lessees, namely, Ma. Teresa Vidal, Lulu Marquez, Marcelo
Trinidad, Carlos Sobremonte, and Jingkee Ang remained in the property, and requested Escueta
for extensions to vacate the property. Escueta agreed, but despite the lapse of the extensions
FACTS: When Abelardo Escueta died intestate on December 3, 1994, he was survived by his
granted them, the five sub-lessees refused to vacate the property.
widow Remedios Escueta and their six children, including Ma. Teresa O. Escueta and her
brother Herman O. Escueta.
Escueta opted not to have the sub-lessees evicted through the Punong Barangay as provided
for in the amicable settlement. Neither did she file a motion with the Punong Barangay for the
Part of his estate was a parcel of land located at No. 14 Sierra Madre corner Kanlaon Streets,
enforcement of the settlement.
Barangay Highway Hills, Mandaluyong City, covered by Transfer Certificate of Title (TCT) No.
(77083) - 27568, and the house thereon. The property was leased to Rainier Llanera, who sublet
Instead, she filed on May 12, 2000, a verified "Motion for Execution" against the recalcitrant
the same to 25 persons. The heirs executed an extra-judicial settlement of estate over the
sub-lessees with the MTC for the enforcement of the amicable settlement and the issuance of a
property. They also executed a special power of attorney authorizing Ma. Teresa Escueta to sell
writ of execution. The pleading was docketed as Civil Case No. 17520, with Teresa Escueta as
the said property.
plaintiff, and the sub-lessees as defendants.
Sometime in 1999, Ma. Teresa Escueta, as a co-owner of the property, filed an ejectment case
The defendants opposed the motion alleging that they were inveigled into executing the amicable
against Llanera and the sub-lessees before the Lupon of Barangay Highway Hills, docketed as
settlement despite the fact that they had not violated any of the terms and conditions of the verbal
Barangay Case No. 99-09.
lease of the property; they were coerced and forced to enter into such amicable settlement as it was
the only way of prolonging their stay in the leased premises; and that they had been paying faithfully
In the meantime, on April 15, 1999, the heirs of Abelardo Escueta executed a deed of conditional
and religiously the monthly rentals in advance.
sale over the property including the house thereon, to Mary Liza Santos for ₱13,300,000.00
payable as follows:
They also contended that the plaintiff came to court with unclean hands, as the property had been
"Down payment – ONE MILLION FIVE HUNDRED THOUSAND (₱1,500,000.00) which the HEIRS-
sold by the co-owners thereof on June 8, 1999, without notifying them. The real parties-in-interest as
SELLERS acknowledged receipt thereof with complete and full satisfaction; plaintiffs, would be the new owners of the property, and not the Escuetas. The defendants further
asserted that the amicable settlement was not elevated to or approved by the MTC as required
Second payment - TEN MILLION EIGHT HUNDRED THOUSAND (₱10,800,000.00) after publication of by Section 419 of the Local Government Code (LGC), nor approved by a competent court;
the Extra-Judicial Settlement of the Estate of the late Abelardo Escueta and payment of the taxes with hence, there was no judgment to enforce by a new motion for a writ of execution. As such, the
the Bureau of Internal Revenue by the Attorney-in-Fact; and plaintiff’s motion was premature and procedurally improper. The defendants asserted that the
plaintiff must first secure a certification to file action from the barangay and thereafter, file an
The balance of ONE MILLION (₱1,000,000.00) upon vacation of all the occupants of the subject
property within SIX (6) months from date hereof."
action for ejectment against them as required by Section 417 of the LGC. The amicable settlement
of the parties before the Lupon cannot be a substitute for an action for ejectment . Finally, they
The parties further agreed that: averred that they had been sub-lessees for more than ten years already; hence, had the right of first
refusal under Section 6 of the Urban Land Reform Law (P.D. No. 1517).
"Ms. Maria Teresa Escueta shall deliver unto the BUYER the Owner’s Duplicate Copy
of the title upon receipt of the down payment while the original copies of the Special For her part, the plaintiff asserted that there having been no execution of the amicable
Power of Attorney shall be delivered upon payment of the Second Payment stated above. settlement on or before November 6, 1999 by the Lupon, the settlement may now be enforced by
action in the proper city or municipal court.
The ATTORNEY-IN-FACT-SELLER shall be responsible for the ejectment of all the
tenants in the said subject property. On February 22, 2001, the court issued an Order denying the "Motion for Execution." The court
held that the plaintiff was not the real party-in-interest as the subject property had already been
The ATTORNEY-IN-FACT-SELLER shall pay the estate tax, capital gains tax and sold and titled to Susana Lim, Johnny Lim and Mary Liza Santos. Only the vendees had the right to
documentary stamp tax including the telephone, water and Meralco bills and the demand the ejectment of the defendants from the said property. The court further ruled that the
defendants had the right of first refusal to purchase the property under Presidential Decree No. the Amicable Settlement was obtained through deceit and fraud; and (5) in ruling that the petitioners
1517. The MTC, however, did not rule on the issue of whether or not the plaintiff’s motion for had no right of first refusal in the purchase and sale of the subject property under Presidential Decree
execution was premature. No. 1517.

Aggrieved, the plaintiff, now the appellant, appealed the order to the RTC where she contended that: ISSUE: WON the motion for execution of Escueta was prematurely filed (YES, but instead of
remanding the case to the Lupon, the SC decided on the merits)
THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE ERROR IN FINDING AND IN CONCLUDING THAT PLAINTIFF IS NO LONGER THE
REAL PARTY-IN-INTEREST.
RULING: IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The petitioners and all those acting for
THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE ERROR IN FINDING AND IN CONCLUDING THAT DEFENDANTS CANNOT BE and in their behalf are directed to vacate, at their own expense, the property covered by Transfer Certificate of Title
EJECTED AND CAN EXERCISE THE RIGHT OF FIRST REFUSAL.
No. 15324 of the Register of Deeds of Muntinlupa City and deliver possession of the property to the vendees Mary
THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE ERROR IN NOT FINDING AND IN NOT MAKING THE CONCLUSION THAT Liza Santos, Susana Lim and Johnny Lim. This is without prejudice to the right of the vendees to recover from the
DEFENDANTS HAVE VIOLATED THE FINAL AND EXECUTORY THE WRITTEN AMICABLE SETTLEMENT BETWEEN PARTIES EXECUTED IN THEIR
BARANGAY CONFRONTATION.
petitioners reasonable compensation for their possession of the property from January 2000 until such time that they
vacate the property. Costs against the petitioners. SO ORDERED.
THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE ERROR IN NOT ORDERING THE EJECTMENT OF THE DEFENDANTS AND IN NOT
ORDERING SAID DEFENDANTS TO PAY THEIR ARREARAGES IN RENTAL PAYMENTS FROM MAY 1999 UP TO THE DAY THEY ACTUALLY LEAVE THE
PREMISES AS WELL AS ATTORNEY’S FEES AND DAMAGES. RATIO:

RTC ISSUES: ON THE FAILURE TO STATE THE DATES (IRRELEVANT)

(1) WON Escueta was the real-party-in-interest (Yes) On the procedural issue, the CA dismissed the petition before it for the petitioners’ failure to
(2) WON the sub-lessees had the right of first refusal under PD No. 1517 (No) comply with Section 2, par. 1, Rule 42 of the 1997 Rules of Civil Procedure. The CA ratiocinated
(3) WON the sub-lessees violated the amicable settlement (N/A) that there was no justification for a relaxation of the Rules, thus:
(4) WON the sub-lessees should be ejected (N/A)
Petitioners cited decisions of the Supreme Court where a relaxation of procedural rules was allowed. However, a reading
of those cases shows that they are not exactly similar with the present case. In the case of Mactan Cebu International
RTC RULING: Airport Authority vs. Francisco Cuizon Mangubat, the Supreme Court allowed the late payment of docket fee by the
Solicitor General on the ground that the 1997 Rules of Civil Procedure regarding payment of docket fees was still new at
On August 31, 2001, the RTC rendered a decision holding that the plaintiff-appellant was still the that time. The same cannot be said in the present case. The petition was filed on February 28, 2002, almost five years
owner of the property when the ejectment case was filed in the office of the barangay captain, and, from the issuance of the 1997 Rules of Civil Procedure. The circumstances of typhoon and holiday for failure to obtain a
as such, was the real party-in-interest as the plaintiff in the MTC. Moreover, under the deed of certified true copy of the DOJ’s Decision, in the case of Hagonoy Market Vendor Association vs. Municipality of Hagonoy,
Bulacan, were present in the instant petition. The case of Salazar vs. Court of Appeals is also not similar with the present
conditional sale between her and the buyers, it was stipulated therein that the purchase price of
case.
₱1,000,000.00 would be delivered to the vendors only "upon the vacation of all the occupants of the
subject property within six (6) months from date hereof." She was duty-bound to cause the eviction of
the defendant from the property; hence, the appellant, as a co-owner, had a substantial interest in the The petitioners aver in this case that the failure of their counsel to include the material dates in
property. The MTC further held that the sale, having been executed while the appellant’s complaint was their petition with the CA was, as stated in their Amended Manifestation, because the said
pending with the Lupon, the action in the MTC may be continued by the plaintiff-appellant. counsel was suffering from a slight heart attack. The Court finds the petitioners’ pretext
flimsy. If the petitioners’ counsel was able to prepare their petition despite her condition, there
As to the right of first refusal being asserted by the appellees, the court ruled that there was no was no valid reason why she failed to include the material dates required under the Rules of
showing that the land leased had been proclaimed to be within a specific Urban Land Reform Court. Besides, the petitioners stated in their petition that they had appended a copy of their
Zone. In fact, the Housing and Land Use Regulatory Board had certified that the subject property was
outside the area for priority development; thus, the appellees may not claim that they had been deprived
Amended Manifestation, but failed to do so. If the rules were to be applied strictly, the CA could not
of their preemptive right when no such right existed in the first place. The court did not rule on the be faulted for dismissing the petition.
third and fourth issues on the ground that the said issues were never raised by the parties. The
decretal portion of the RTC decision reads as follows: However, in order to promote their objective of securing a just, speedy and inexpensive
dispensation of every action and proceedings, the Rules are to be liberally construed. Rules of
PREMISES CONSIDERED, the appeal is GRANTED. The Order dated February 2, 2001 issued by the procedure are intended to promote, not to defeat substantial justice and, therefore, should not
Metropolitan Trial Court of Mandaluyong City, Branch 60, in Civil Case No. 17520 is hereby REVERSED and
SET ASIDE, and a new one is entered granting the Motion for Execution. Let the Record of this case be be applied in a very rigid and technical sense. This Court ruled in Buenaflor vs. Court of Appeals,
remanded to the court a quo for proper disposition. SO ORDERED. et al. that appeal is an essential part of our judicial system and trial courts and the Court of
Appeals are advised to proceed with caution so as not to deprive a party of the right to appeal
A petition for review under Rule 42 was filed with the Court of Appeals by three of the appellees, and that every party litigant should be afforded the amplest opportunity for the proper and just
now petitioners Ma. Teresa Vidal, Lulu Marquez and Carlos Sobremonte. The court, however, disposition of his cause, free from the constraints of technicalities. The Court has given due
dismissed the petition on (1) procedural grounds, and (2) for lack of merit.  course to petitions where to do so would serve the demands of substantial justice and in the exercise
of its equity jurisdiction. In this case, the Court opts to apply the rules liberally to enable it to delve into
On procedural grounds, the CA ruled that the petitioners failed to indicate the specific material and resolve the cogent substantial issues posed by the petitioners.
dates, showing that their petition was filed on time as required by the rules, and in declaring that
they failed to justify their failure to do so. LUPON ARBITRATION AWARD

On the merits of the petition, the appellate court upheld the ruling of the RTC. The decretal portion of We agree with the contention of the petitioners that under Section 416 of the LGC, the
the decision of the CA reads: amicable settlement executed by the parties before the Lupon on the arbitration award has the
force and effect of a final judgment of a court upon the expiration of ten (10) days from the
WHEREFORE, the instant petition is hereby DISMISSED. The assailed Decision of the Regional Trial Court of date thereof, unless the settlement is repudiated within the period therefor, where the consent
Mandaluyong City, Branch 208, rendered in Civil Case No. MC01-333-A, dated August 31, 2001 is hereby AFFIRMED.
SO ORDERED. is vitiated by force, violence or intimidation, or a petition to nullify the award is filed before the
proper city or municipal court. The repudiation of the settlement shall be sufficient basis for
In their petition at bar, the petitioners assert that the CA erred as follows: (1) in not applying the rules the issuance of a certification to file a complaint.
of procedure liberally; (2) in declaring that there was no need for the respondents to file an ejectment
case for the eviction of the petitioners; (3) that the real parties-in-interest as plaintiffs in the MTC were We also agree that the Secretary of the Lupon is mandated to transmit the settlement to the
the new owners of the property, Susana Lim, Johnny Lim and Mary Liza Santos; (4) in not finding that appropriate city or municipal court within the time frame under Section 418 of the LGC and to
furnish the parties and the Lupon Chairman with copies thereof. The amicable settlement SECTION 2. Modes of Execution. - The amicable settlement or arbitration award may be
which is not repudiated within the period therefor may be enforced by execution by the Lupon enforced by execution by the Lupon within six [6] months from date of the settlement or
through the Punong Barangay within a time line of six months, and if the settlement is not so date of receipt of the award or from the date the obligation stipulated in the settlement or
enforced by the Lupon after the lapse of the said period, it may be enforced only by an action in the adjudged in the arbitration award becomes due and demandable. After the lapse of such
proper city or municipal court as provided for in Section 417 of the LGC of 1991, as amended, which time, the settlement or award may be enforced by the appropriate local trial court pursuant
reads: to the applicable provisions of the Rules of Court . An amicable settlement reached in a
case referred by the Court having jurisdiction over the case to the Lupon shall be enforced
SEC. 417. Execution. – The amicable settlement or arbitration award may be enforced by by execution by the said court. (Underlining supplied).
execution by the Lupon within six (6) months from the date of the settlement. After the
lapse of such time, the settlement may be enforced by action in the proper city or municipal By express provision of Section 417 of the LGC, an action for the enforcement of the settlement
court. (Underlining supplied). should be instituted in the proper municipal or city court. This is regardless of the nature of the
complaint before the Lupon, and the relief prayed for therein. The venue for such actions is governed
Section 417 of the Local Government Code provides a mechanism for the enforcement of a by Rule 4, Section 1 of the 1997 Rules of Civil Procedure, as amended. An action for the enforcement
settlement of the parties before the Lupon. It provides for a two-tiered mode of enforcement of an of a settlement is not one of those covered by the Rules on Summary Procedure in civil cases; hence,
amicable settlement executed by the parties before the Lupon, namely, (a) by execution of the the rules on regular procedure shall apply, as provided for in Section 1, Rule 5 of the Rules of Civil
Punong Barangay which is quasi-judicial and summary in nature on mere motion of the party/parties Procedure, as amended.
entitled thereto; and (b) by an action in regular form, which remedy is judicial. Under the first remedy,
the proceedings are covered by the LGC and the Katarungang Pambarangay Implementing Rules As to the requisite legal fees for the filing of an action in the first level court under Section 417 of the Local Government Code,
indigents-litigants (a) whose gross income and that of their immediate family do not exceed ten thousand (P10,000.00) pesos a month if
and Regulations. The Punong Barangay is called upon during the hearing to determine solely the fact residing in Metro Manila, and five thousand (P5,000.00) pesos a month if residing outside Metro Manila, and (b) who do not own real
of non-compliance of the terms of the settlement and to give the defaulting party another chance at property with an assessed value of more than fifty thousand (P50,000.00) pesos shall be exempt from the payment of legal fees.
voluntarily complying with his obligation under the settlement. Under the second remedy, the Section 18, Rule 141 of the Revised Rules of Court, as amended by A.M. No. 00-2-01-SC, is hereby further amended accordingly.
proceedings are governed by the Rules of Court, as amended. The cause of action is the amicable
settlement itself, which, by operation of law, has the force and effect of a final judgment. In this case, the parties executed their Amicable Settlement on May 5, 1999. However, the
petitioners were obliged to vacate the property only in January 2000, or seven months after
ESCUETA’S MOTION WAS PREMATURE the date of the settlement; hence, the respondent may enforce the settlement through the Punong
Barangay within six months from January 2000 or until June 2000, when the obligation of the
Section 417 of the LGC grants a party a period of six months to enforce the amicable petitioners to vacate the property became due. The respondent was precluded from enforcing the
settlement by the Lupon through the Punong Barangay before such party may resort to filing settlement via an action with the MTC before June 2000. However, the respondent filed on May
an action with the MTC to enforce the settlement. The raison d’ etre of the law is to afford the 12, 2000 a motion for execution with the MTC and not with the Punong Barangay.
parties during the six-month time line, a simple, speedy and less expensive enforcement of
their settlement before the Lupon. Clearly, the respondent adopted the wrong remedy. Although the MTC denied the respondent’s
motion for a writ of execution, it was for a reason other than the impropriety of the remedy resorted to
The time line of six months is for the benefit not only of the complainant, but also of the by the respondent. The RTC erred in granting the respondent’s motion for a writ of execution,
respondent. Going by the plain words of Section 417 of the LGC, the time line of six months and the CA erred in denying the petitioners’ petition for review.
should be computed from the date of settlement. However, if applied to a particular case
because of its peculiar circumstance, the computation of the time line from the date of the Normally, the Court would remand the case to the Punong Barangay for further proceedings.
settlement may be arbitrary and unjust and contrary to the intent of the law. To illustrate: Under However, the Court may resolve the issues posed by the petitioners, based on the pleadings of
an amicable settlement made by the parties before the Lupon dated January 15, 2003, the the parties to serve the ends of justice. It is an accepted rule of procedure for the Court to strive to
respondents were obliged to vacate the subject property on or before September 15, 2003. If the time settle the existing controversy in a single proceeding, leaving no root or branch to bear the seeds of
line of six months under Section 417 were to be strictly and literally followed, the complainant may future litigation.
enforce the settlement through the Lupon only up to July 15, 2003. But under the settlement, the
respondent was not obliged to vacate the property on or before July 15, 2003; hence, the settlement In this case, there is no question that the petitioners were obliged under the settlement to
cannot as yet be enforced. The settlement could be enforced only after September 15, 2003, vacate the premises in January 2000. They refused, despite the extensions granted by the
when the respondent was obliged to vacate the property. By then, the six months under Section respondent, to allow their stay in the property. For the court to remand the case to the Lupon and
417 shall have already elapsed. The complainant can no longer enforce the settlement through the require the respondent to refile her motion for execution with the Lupon would be an idle ceremony. It
Lupon, but had to enforce the same through an action in the MTC, in derogation of the objective of would only unduly prolong the petitioners’ unlawful retention of the premises.
Section 417 of the LGC. The law should be construed and applied in such a way as to reflect the will
of the legislature and attain its objective, and not to cause an injustice. As Justice Oliver Wendell ESCUETA WAS THE REAL-PARTY-IN-INTEREST
Holmes aptly said, "courts are apt to err by sticking too closely to the words of the law where these
words support a policy that goes beyond them. The Court should not defer to the latter that killeth but The RTC and the CA correctly ruled that the respondent is the real party-in-interest to enforce
to the spirit that vivifieth." amicable settlement. Rule 3, Section 2 of the Rules of Court, as amended, reads:

In light of the foregoing considerations, the time line in Section 417 should be construed to mean SEC. 2. Parties in interest. - A real party in interest is the party who stands to be benefited or injured
by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise
that if the obligation in the settlement to be enforced is due and demandable on the date of the authorized by law or these Rules, every action must be prosecuted or defended in the name of the real
settlement, the six-month period should be counted from the date of the settlement; party in interest.
otherwise, if the obligation to be enforced is due and demandable on a date other than the
date of the settlement, the six-month period should be counted from the date the obligation The party-in-interest applies not only to the plaintiff but also to the defendant. "Interest" within the
becomes due and demandable. meaning of the rules means material interest, an interest in issue and to be affected by the
decree as distinguished from mere interest in the question involved, or a mere incidental
Parenthetically, the Katarungang Pambarangay Implementing Rules and Regulations, Rule VII, interest. A real party in interest is one who has a legal right. Since a contract may be violated only
Section 2 provides: by the parties thereto as against each other, in an action upon that contract, the real parties-in-
interest, either as plaintiff or as defendant, must be parties to the said contract. The action
must be brought by the person who, by substantive law, possesses the right sought to be
enforced. In this case, Escueta was the party in the amicable settlement. She is the real party-
in-interest to enforce the terms of the settlement because unless the petitioners vacate the
property, the respondent and the other vendors should not be paid the balance of P1,000,000.00 of
the purchase price of the property under the Deed of Conditional Sale.

THE AMICABLE SETTLEMENT WAS VALID

The petitioners are estopped from assailing the amicable settlement on the ground of deceit
and fraud. First. The petitioners failed to repudiate the settlement within the period therefor.
Second. The petitioners were benefited by the amicable settlement. They were allowed to
remain in the property without any rentals therefor until December 1998. They were even
granted extensions to continue in possession of the property. It was only when the respondent
filed the motion for execution that the petitioners alleged for the first time that the respondents
deceived them into executing the amicable settlement.

ON THE RIGHT OF FIRST REFUSAL

On the petitioners’ claim that they were entitled to the right of first refusal under P.D. No. 1517, we
agree with the disquisition of the trial court, as quoted by the Court of Appeals:

We likewise find no reversible error on the part of [the] RTC in rejecting that the
petitioners have a right of first refusal in the purchase and sale of the subject property.
As ratiocinated by the court:

"xxx. Presidential Decree No. 1517 (The Urban Land Reform Law) does not
apply where there is no showing that the land leased has been proclaimed
to be within a specific Urban Land Reform Zone. In the instant case, the
annex attached to the Proclamation 1967 creating the areas declared as priority
development and urban land reform zone ... does not indicate that the
barangay where the subject property is located is included therein. This is
bolstered by the certification issued by the Housing and Land Regulatory
Board to the effect that the location of the property is outside the area of
Priority Development. It is therefore a reversible error for the lower court to
conclude that defendants-appellees were deprived of their preemptive right when
no right exists in the first place."

Indeed, before a preemptive right under PD 1517 can be exercised, the disputed land should be
situated in an area declared to be both an APD (Areas for Priority Development) and a ULRZ (Urban
Land Reform Zones).1âwphi1 Records show, and as not disputed by the petitioners, the disputed
property is not covered by the aforementioned areas and zones.