G.R. No. L-68477 - Balila vs. Intermediate Appellate Court

The case originated from an amicable settlement between the petitioners and private respondents in Civil Case No. U-3501.

The settlement, approved by the trial court on December 11, 1980, involved a pacto de retro sale whereby defendants (petitioners) bought three parcels of land (Lot No. 965, Lot No. 16, and Lot No. 52) for the total amount of P84,000.00.

Under the terms of the settlement, the defendants were required to pay the entire amount within four months, with the deadline set on May 15, 1981.

On December 30, 1981—more than seven months after the payment deadline—the defendants redeemed Lot No. 52 by paying P20,000.00, thereby partially satisfying their obligation.

In response to the non-payment regarding the remaining parcels (Lot No. 965 and Lot No. 16), the plaintiff (Guadalupe C. Vda. de del Castillo) filed a motion on August 4, 1982, seeking a hearing for the consolidation of title over these lots.

Defendants countered that they had made several partial payments through intermediary channels, notably payments to Waldo del Castillo, who acted as an attorney-in-fact purportedly on behalf of Guadalupe.

The trial court, on April 26, 1983, issued an order consolidating ownership of Lot No. 965 and Lot No. 16 in favor of Guadalupe, based on the terms of the amicable settlement.

On June 8, 1983, additional payments amounting to P28,800.00 were made by the defendants—even though the consolidation order had yet to be enforced—leaving an outstanding balance of P35,200.00.

A Certification, also dated June 8, 1983 and signed by Waldo del Castillo, granted defendants a 45-day period to settle the remaining balance, which later served as support for their motions for reconsideration and supplemental reconsideration.

These motions were denied by the lower court, prompting the petitioners to elevate the matter through a petition for certiorari, prohibition, and mandamus with a preliminary injunction before the Intermediate Appellate Court.

After the appellate court affirmed the lower court’s decision, petitioners presented evidence of multiple subsequent extensions and payments, arguing that:

Private respondents (Guadalupe and her son Waldo) accepted several installments post the original payment deadline.

These installments, which included payments on July 8, September 9, October 30, November 13, and November 23, 1984, were coupled with promises to reconvey the title documents (TCT Nos. 146360 and 146361) pertaining to Lot No. 965 and Lot No. 16.

Petitioners contended that these multiple transactions and extensions effectively amounted to a novation of the original judgment by compromise, thereby discharging the full payment obligation.

The dispute also centered on whether Waldo del Castillo was duly authorized by his mother, Guadalupe, to accept payments and act on her behalf, given that some private respondents questioned his authority and the admissibility of corresponding receipts.

The entire record revolves around whether the partial and subsequent payments, along with the extensions granted by private respondents, constituted an effective novation of the original payment obligation.

Equally pivotal was the determination of Waldo del Castillo’s authority as attorney-in-fact, which impacted the acceptance of these payments on Guadalupe’s behalf.

Whether the contract entered into by the parties is to be treated as an equitable mortgage or a pacto de retro sale, particularly in light of the subsequent modifications made by mutual agreement.
Whether the extension and acceptance of installment payments by private respondents, including those by Waldo del Castillo, effectively novated and amended the original judgment by compromise.
Whether Waldo del Castillo was a duly authorized attorney-in-fact, empowered to receive payments and act for Guadalupe in transactions concerning the disputed properties.
Whether the consolidation order executed by the lower court, based on the original settlement, should be set aside given that petitioners eventually fully satisfied their financial obligations through staggered payments and agreed extensions.