G.R. No. 106837 - Macion vs. Guiani

On April 26, 1991, petitioners (Henry Macion and Angeles Macion) and private respondent (in his capacity as president of De La Vida Institute) entered into a contract to sell two adjoining parcels of lots.
Petitioners, as sellers, surrendered physical possession of the lots to private respondent, who then proceeded to build an edifice valued at P800,000.00.
The lots were intended as an extension site for De La Vida Institute, an educational institution located in Cotabato City.
Despite the agreement, the sale never materialized on July 31, 1991, as private respondent failed to complete the purchase for the agreed price of P1,750,000.00.

Following the non-performance of the sale on the specified date, petitioners filed a complaint for unlawful detainer against private respondent (MTCC Civil Case No. 2739).
In retaliation, private respondent initiated a complaint for the reformation of the contract to sell (Civil Case 592), alleging that petitioners had caused the preparation of a faulty contract.

The parties negotiated and entered into a compromise agreement on February 6, 1992.
Key provisions of the agreement included:

Petitioners giving private respondent five (5) months (up to July 6, 1992) to secure funds totaling P2,060,000.00.
The obligation of petitioners to execute, sign, and deliver a Deed of Sale for the two lots, along with turning over the owner’s duplicate copies of TCT Nos. T-22004 and T-22005, upon full payment.
Petitioners’ duty to furnish private respondent with a xerox copy of the land title to aid in securing a bank loan.

The compromise agreement received the full support of the Board of Trustees of De La Vida College.

On March 10, 1992, private respondent circulated a letter which effectively acted as a counterproposal, indicating a revision of the price down to P2,000,000.00.
In the letter, private respondent also:

Confirmed the commencement of operations (accepting students and holding classes until July 6, 1992).
Provided that if the necessary funds were not raised, they would vacate the premises.
Stipulated the submission of other documents if required by banking institutions to expedite loan processing.

Subsequent communications included three letters dated May 19, 20, and 26, 1992, wherein private respondent requested that petitioners execute a contract to sell in accordance with the compromise agreement.

On March 25, 1992, the trial court approved the February 6 compromise agreement.
On May 28, 1992, private respondent filed an urgent motion requesting the trial court to direct petitioners to execute a contract to sell.
On July 8, 1992, petitioners filed a motion for the execution of judgment, arguing that the five-month period stipulated in the agreement had lapsed without private respondent fulfilling their obligations.
The respondent judge, in his order dated August 6, 1992, denied the motion for execution and ordered petitioners to execute the contract to sell, basing his decision on:

The view that the proximate cause for the failure to comply with the compromise agreement was petitioners’ refusal to execute a contract to sell.
The belief that a contract to sell did not involve an immediate transfer of ownership and thus did not prejudice petitioners.

On October 7, 1992, petitioners filed an Omnibus Urgent Motion requesting that private respondent be ordered to consign P135,000.00, representing rentals from May 1991 to January 1992, with the court.
The court granted this prayer on November 18, 1992.
Private respondent subsequently consigned the amount and, after petitioners’ motion to withdraw said consignment, the trial court released the funds on April 5, 1993.

Whether the respondent judge committed grave abuse of discretion by ordering the petitioners to execute a contract to sell in favor of private respondent.

Examination of whether such an order was justified under the terms of the compromise agreement.
Analysis of the consequent rights and obligations of the parties arising from the compromise agreement.

Whether the compromise agreement, particularly paragraph 7, endowed the private respondent with the right to demand the execution of a contract to sell.

Determination of whether the agreement compelled the sellers (petitioners) to execute a contract to sell or merely to deliver a Deed of Sale upon the full payment of the purchase price.
Consideration of the parties’ intent as reflected in the language of the compromise agreement and subsequent acts.

Whether the subsequent actions and communications between the parties (such as the letters and requests by private respondent) substantiate the interpretation that the agreement constituted a bilateral promise to buy and sell.

Evaluation of whether these actions effectively confirmed the parties’ mutual understanding and intent.