Supreme Court Decision: Compromise Agreement (Sps. Segundo Ramos and Felisa Valdez vs. Hon. Court of Appeals)

Supreme Court Decision:

Compromise Agreement (Sps. Segundo Ramos and Felisa Valdez vs. Hon. Court of Appeals, et al., December 9, 2005)


SECOND DIVISION

G.R. No. 132196

SPOUSES SEGUNDO RAMOS and FELISA VALDEZ,
Petitioners,

- versus -

HON. COURT OF AP-PEALS, LEILA VALDEZ-PASCUAL, ARACELI VALDEZ, GLICERIA VALDEZ, JUANA VALDEZ, SIMEON VALDEZ, CONRADA VALDEZ, SEVERINO VALDEZ, MARIO VALDEZ, ADORACION VALDEZ, JOSE VALDEZ, DIONISIA VALDEZ, DANILO VALDEZ, SERAPIO VALDEZ, HELEN VALDEZ, PERLA VALDEZ, and DELIA VALDEZ,
Respondents.

Promulgated:
December 9, 2005DECISION

CHICO-NAZARIO, J.:

This case presents a tangled tale involving the conflicting accounts of petitioners and private respondents over a piece of land sold by Gregorio Valdez (private respondents’ father) to petitioners in 1948 and which ostensibly became the subject of a com-promise agreement in 1977.

Through the instant Petition for Review on certiorari, spouses Segundo Ramos and Felisa Valdez seek the reversal of the Decision1 of the Court of Appeals dated 31 July 1997 which reversed the Decision2 of the Regional Trial Court (RTC), Branch 48, Urdaneta, Pangasinan.

The RTC decision dismissed the case filed by private respondents for Quieting of Title, Ownership, Possession plus Damages with prayer for Writ of Preliminary Injunction and adjudged petitioners as the lawful owners of a piece of land, with an area of 3,036 square meters, and which forms part of a bigger tract of land covered by Original Certificate of Title (OCT) No. 48824 of the Registry of Deeds of the Province of Pangasinan in the name of Gregorio Valdez. Under review as well is the Court of Appeals Resolution3 dated 08 December 1997 denying petitioners’ motion for reconsideration.

4 Private respondents are the children of Gregorio Valdez. In 1948, Gregorio Valdez sold the subject land to petitioners.

The absolute deed of sale was subsequently annotated at the back of OCT No. 48824 as Entry No. 377847. It is the contention of private respondents that as early as 1977, petitioners no longer owned subject land as they had renounced their rights thereto as evidenced by a compromise agreement dated 02 June 1977.

Sometime in 1991, Gregorio Valdez died. Private respondents allege that immediately after the death of their father, petitioners disturbed their possession of subject land by cultivating the same and by enclosing it with a fence.

As petitioners did not heed their demands to vacate, they were constrained to file a case for Quieting of Title, Ownership, Possession plus Damages with prayer for Writ of Preliminary Injunction.

Petitioners, in their Answer with Counterclaim, maintain that they remain owners of the subject land as the compromise agree-ment being relied upon by private respondents refers to another piece of land.

Thus, they argue that the compromise agreement constitutes a cloud on their title. They prayed, among other things, for the quieting of their title and that they be adjudged lawful owners of the subject land.

The trial court believed petitioners. It sided with petitioners by declaring them owners of the subject land by virtue of the absolute deed of sale dated 06 January 1948. The dispositive portion of its decision reads:

WHEREFORE, premi-ses considered, judgment is hereby rendered in favor of the defendants and against the plaintiffs and declaring the defendants to be the lawful owners of the land in question.

5 The Court of Appeals reversed the trial court’s ruling. It held that the land renounced by petitioners was the subject land and that it was made in favor of Gregorio Valdez, thus:
WHEREFORE, premi-ses considered the decision appealed from is hereby REVERSED and SET ASIDE and another one entered declaring plaintiffs as owner of the land in question, and ordering defendants-appellees to vacate the same.

With costs against defendants-appellees. Aggrieved by the aforecited ruling, and their motion for reconsideration having been denied by the Court of Appeals, petitioners assert before us that signatories were signing. Thus, typewritten in the agreement are the following entries:

SEGUNDO RAMOS FELISA RAMOS
Applicant Applicant

FELIPE CABERO
Oppositor

ASSISTED BY:

ATTY. ELISEO E. ATTY. NICANOR
VERSOZA CALDITO
Counsel for the Applicants Counsel for Oppositor
Soconi, Bugallon, Pang. Pozorrubio, Pang.

The persons whose names were typewritten on the compromise agreement signed above their names. Gregorio Valdez’s name, on the other hand, as well as the role he played in the execution of the document, was not typewritten on the document.

His signature, however, appears on the same line as the phrase “assisted by” just above the signature of Atty. Caldito. Petitioner Segundo Ramos swears that he did not see Gregorio Valdez sign the document at the time of the execution of the same.

13 Witness for petitioners, Leonardo Quesora, who was present at the time of the execution of the compromise agreement, likewise testified that he did not see Gregorio Valdez sign.

14 Moreover, none of the private respondents or their witnesses testified as to having witnessed Gregorio Valdez sign the compromise agreement.

It is axiomatic that a contract cannot be binding upon and cannot be enforced against one who is not a party to it, even if he is aware of such contract and has acted with knowledge thereof.

15 A person who is not a party to a compromise agreement cannot be affected by it.

16 This is already well-settled. Thus, in Young v. Court of Appeals

17 we stressed: The main issue in this case is whether or not petitioner can enforce a compromise agreement to which she was not a party.

This issue has already been squarely settled by this Court in the negative in J.M. Tuason & Co., Inc. v. Cadampog (7 SCRA 808 [1963]) where it was ruled that appellant is not entitled to enforce a compromise agreement to which he was not a party and that as to its effect and scope, it has been determined in the sense that its effectivity if at all, is limited to the parties thereto and those mentioned in the exhibits (J.M. Tuason & Co., Inc. v. Aguirre, 7 SCRA 112 [1963]).

It was reiterated later that a compromise agreement cannot bind persons who are not parties thereto (Guerrero v. C.A., 29 SCRA 791 [1969]).

Consequently, Gregorio Valdez not being a party to the compromise agreement, his heirs (private respondents) cannot sue for its performance.

Be that as it may, private respondents additionally harp on the reference to their father made in the body of the compromise agreement itself which they claim is proof of renunciation of subject land by petitioners in favor of their father, to wit:

2. That the applicants Segundo Ramos and Felisa Valdez hereby also quitclaim and renounce whatever rights in the document registered under entry No. 377847 annotated at the back of O.C.T. No. 48824 of Gregorio Valdez; Contrary to the position taken by private respondents, the reference to their father, Gregorio Valdez, seems to us to be a mere description of the land being renounced.

Nothing in the compromise agreement would suggest that the renunciation of the subject land was to be made in Gregorio Valdez’s favor. Verily, for this Court to interpret the stipulation as conferring some right to a third person (i.e., stipulation pour autrui), the following requisites must concur:

1. There must be a stipulation in favor of a third person;
2. The stipulation in favor of a third person should be a part, not the whole, of the contract;
3. The contracting parties must have clearly and deliberately conferred a favor upon a third person, not a mere incidental benefit or interest;
4. The third person must have communicated his acceptance to the obligor before its revocation; and
5. Neither of the contracting parties bears the legal representation or authorization of the third party.

18 To constitute a valid stipulation pour autrie, it must be the purpose and intent of the stipulating parties to benefit the third person, and it is not sufficient that the third person may be incidentally benefited by the stipulation.

19 In herein case, from the testimony of petitioner Segundo Ramos who is undoubtedly a party to the compromise agreement, and from the rest of the evidence on hand, any benefit which accrued to private respondents’ father was merely incidental.

WHEREFORE, premises considered, the Decision of the Court of Appeals dated 31 July 1997 is REVERSED and SET ASIDE.

The Decision of the Regional Trial Court of Urdaneta, Pangasinan, Branch 48, insofar as it dismissed the complaint filed by herein private respondents, is hereby AFFIRMED. No costs.

SO ORDERED

Puno, Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.


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1 Penned by Associate Justice Portia Aliño-Hormachuelos with Associate Justices Jorge S. Imperial and Ramon U. Mabutas, Jr. concurring (Rollo, pp. 28-45).

2 Decided by Presiding Judge Alicia Gonzalez-Decano.

3 Rollo, p. 47.

4 Except for Conrada Valdez who is Gregorio Valdez’s daughter-in-law and Danilo and Mario Valdez who are his grandchildren (RTC Records, p. 48).

5 Rollo, p. 24.

13 TSN, 17 February 1992, p. 12; TSN, 18 February 1992, p. 6.

14 TSN, 29 January 1992, p. 11.

15 University of the Philippines v. Philab Industries, Inc., G.R. No. 152411, 29 September 2004, 439 SCRA 467, 480.

16 Banzagales v. Galman, G.R. No. 46717, 21 May 1993, 222 SCRA 350, 356.

17 G.R. No. 79518, 13 January 1989, 169 SCRA 213, 218.

18 Id., p. 219.

19 Tolentino, Civil Code of the Philippines, Vol. IV, p. 433.