G.R. No. 231452 - Spouses Hofer vs. Yu

On February 28, 1995, respondent Nelson Yu filed a Complaint for Sum of Money and Damages with an application for the issuance of a preliminary attachment against petitioners Spouses Atty. Tomas Hofer and Dr. Bernardita R. Hofer.
The complaint was docketed as Civil Case No. 5550.
On March 6, 1995, the RTC issued a Writ of Preliminary Attachment, resulting in the levying of several conjugal properties, which included:

Parcel of land, Lot 3 Block 4 (a portion of Lot 25, Pis 209-D) in Barrio Lagao, General Santos City (approx. 185 square meters, T-48484).
Parcel of land, Lot 8 Block 1 (a portion of Lot 25, Pis 209-D) in Barrio Lagao (approx. 200 square meters, T-48447).
Parcel of land, Lot 1 Block 10 (a portion of Lot 25, Pis 209-D) in Barrio Lagao (298 square meters, T-48402).
Parcel of land, Lot 1 Block 6 (a portion of Lot 25, Pis 209-D) in Barrio Lagao (approx. 248 square meters, T-48386).
Parcel of land known as Lot 30, GSS-11-030-D in Tambler, General Santos City (approx. 4076 square meters, T-60285).
Parcel of land, Lot 24-B Psd-11-009020 (a portion of Lot 24, GSS-11-030-D) in Barrio Tambler (approx. 5,000 square meters, T-19829).

On April 17, 1995, the petitioners filed their Answer, denying any valid cause of action against them, asserting that the subject check was issued without authority.
On August 18, 1995, before the trial on merits, the parties, represented by counsel, executed a Compromise Agreement containing the following key stipulations:

Both parties acknowledged the total obligation of P1,500,000.00 due from the petitioners to respondent Yu.
The subject conjugal property was valued at P1,600,000.00 and was agreed to be conveyed to Yu in full satisfaction of the obligation.
Petitioners were to receive an additional P100,000.00 for the excess value over the debt.
All expenses for the transfer and registration of the property were to be borne by the petitioners.
Both parties mutually withdrew any further claims or counterclaims arising from the dispute.

On August 22, 1995, the RTC approved the Compromise Agreement and rendered a Decision adopting its stipulations, which then became final and executory.

On May 29, 2003, after nearly eight years, respondent Yu and Bernardita executed an Amended Compromise Agreement without Tomas’s knowledge or participation.
Key changes in the Amended Compromise Agreement included:

Petitioners were relieved from accepting the Talamban Cebu City property.
In exchange, they were to hold in trust an amount of P1,500,000.00 derived from the sale proceeds of the levied properties, subject to sale conditions and time extensions.
Specific properties identified by various Transfer Certificates of Title were designated for sale.

Requested the respective counsels to manifest whether the parties were duly assisted during its execution.
Noted on October 8, 2003, that petitioners’ counsel did not have full information regarding the execution, thereby questioning if due assistance was rendered.

On February 23, 2004, the RTC rendered an Amended Decision approving the Amended Compromise Agreement, thereby modifying the earlier August 22, 1995 Decision.
Execution Procedures:

On August 25, 2005, respondent Yu filed a Motion for Issuance of Writ of Execution.
On September 12, 2005, the RTC issued an Order for the issuance of a writ, which led to a public auction sale on October 20, 2005.
The Sheriffs Certificate of Sale was issued on December 28, 2006 and subsequently registered on January 4, 2007.

On March 10, 2008, respondent Yu filed several motions directing the Register of Deeds to annotate, cancel, and issue new certificates of title, and to execute further orders regarding possession and demolition.

On March 16, 2009, petitioners filed a Comment with Motion to Set Aside the Amended Decision, Writ of Execution, Public Auction Sale, and to declare void the certificate of sale, asserting that:

Tomas’s right to participate was violated as he had not consented to the Amended Compromise Agreement.
The amendment was executed through deceitful means and without proper due process.

On September 17, 2009, the RTC issued an Order partly granting respondent Yu’s motions, directing annotations and issuance of final certificates of sale for certain properties.
On November 11, 2009, petitioners filed a Petition for Annulment of Judgment and Final Order with a request for Temporary Restraining Order and/or Writ of Preliminary Injunction before the Court of Appeals (CA).

Petitioners argued that the Amended Decision and corresponding orders were null and void because the trial court lacked jurisdiction to amend the final, judicially approved Compromise Agreement.
They further contended that the Amended Compromise Agreement was executed without Tomas’s consent and therefore could not bind the conjugal properties.

The CA, on November 17, 2009, initially granted a temporary restraining order but later, in its Decision dated October 27, 2016, dismissed the petition on the ground that the annulment action was barred by laches.
During the pendency of the case, petitioner Bernardita died on March 27, 2016, adding further complexity to the dispute.

Whether the Court of Appeals erred in ruling that petitioners’ action for annulment of judgment was barred by laches.

Specifically, whether Tomas’s delayed response constituted abandonment of rights or whether the doctrine of laches was inappropriately applied given the circumstances surrounding his lack of knowledge.

Whether there exists any ground to annul the Amended Decision rendered by the RTC.

In particular, whether the Amended Compromise Agreement, executed without Tomas’s knowledge and consent, violates principles of due process and contractual propriety.