G.R. No. 126236 - Domingo Realty, Inc. vs. Court of Appeals

Case Summary (G.R. No. 126236)

Factual Background

Petitioner Domingo Realty, Inc. sued respondent Antonio M. Acero and others for recovery of possession of three titled parcels in Cupang, Muntinlupa, aggregating 26,705 square meters, upon which Acero operated a hollow block factory. Acero answered that he merely leased from co-defendant David Victorio, who claimed long possession and attacked the plaintiffs titles. Other occupants included one who later identified as Luis Recato Dy.

The Compromise Agreement and Trial Court Adoption

On December 3, 1987, the parties, through counsel, executed a Compromise Agreement in which the defendants admitted the plaintiff’s ownership over the titled parcels, Dy acknowledged his questionable title, and Acero admitted that the land he occupied encroached on plaintiff’s property and undertook to vacate and remove structures within sixty days, with plaintiff agreeing to pay Dy PHP 100,000. The Pasay RTC rendered its December 7, 1987 Decision approving and adopting the Compromise Agreement.

Post-judgment Proceedings and Conflicting Survey Plans

To implement the judgment, the RTC authorized a resurvey. The Bureau of Lands produced Verification Survey Plan No. Vs-13-000135 showing petitioners’ titles covered the area occupied by Acero. Acero commissioned Engr. Eligio L. Cruz who produced Verification Survey Plan No. Vs-13-000185, later rejected by the Bureau. The Land Registration Authority cancelled Acero’s plan and confirmed the Bureau’s plan as correct. Petitioner Ayala Steel later alleged purchase of the subject lots and sought substitution, and the trial court ordered issuance of a writ of execution to enforce the Compromise Agreement.

Proceedings in the Court of Appeals

Respondent Acero filed a petition for certiorari and mandamus in the Court of Appeals seeking nullification of various RTC orders related to execution of the December 7, 1987 Decision. The CA granted the petition on October 31, 1995, set aside the RTC orders, and, in the interest of justice, also set aside the December 7, 1987 Compromise Judgment, directing the RTC to hear the case on the merits to determine proprietary rights. The CA grounded its ruling on perceived vagueness of the compromise, the non-inclusion of alleged lessor David Victorio in the compromise, and Acero’s claimed belief that he had agreed only to vacate a portion of his leased lot.

Issues Presented to the Supreme Court

Petitioners raised several issues challenging the CA: whether the certiorari petition was filed out of time or barred by laches; whether non-inclusion of David Victorio in the compromise justified annulment; whether the compromise judgment was void for vagueness; and whether the CA properly set aside the compromise for mistake without the trial court having been afforded the opportunity to act on motion to set aside within the post-judgment remedies prescribed by law.

Supreme Court's Disposition

The Supreme Court granted the petition for review under Rule 45 and reversed the Court of Appeals Decision and Resolution. The Court affirmed the December 7, 1987 Decision of the Pasay RTC and its subsequent orders of December 6, 1991; January 15, 1992; October 6, 1992; January 12, 1994; and February 1, 1994. The Court remanded the case to the Pasay RTC for further proceedings only as to the claims involving defendant David Victorio.

Legal Reasoning on the Proper Remedy

The Court emphasized that where a party alleges its consent to a compromise was vitiated by mistake, fraud, or duress, the proper and plain, speedy, and adequate remedy is to move before the trial court that approved the compromise for new trial or reconsideration under Rule 37, or, when the right of appeal has been lost, to invoke Rule 38 for relief from judgment within the prescribed period. The Court held that a petition for certiorari under Rule 65 is not a substitute for a lost appeal and is an improper remedy when an adequate remedy exists. Because Acero failed to appeal from the December 7, 1987 Decision within the fifteen-day appeal period and then delayed filing certiorari in the CA, the CA should have dismissed his petition as the wrong remedy and untimely.

Timeliness and Laches

Applying the pre-1997 standard for Rule 65 petitions, the Court found unreasonable delay. The RTC denied Acero’s motion to nullify on December 6, 1991; Acero received notice on December 11, 1991; he failed to appeal by December 26, 1991. The certiorari petition reached the CA on April 4, 1994, more than two years later. The Court held that a delay of two years and four months exceeded the reasonable three-month yardstick and constituted laches. Even assuming certiorari were appropriate, the Court concluded the petition was filed after an unreasonable lapse of time.

Effect of Non‑inclusion of a Party in a Compromise Agreement

The Court rejected the CA’s view that non-inclusion of David Victorio rendered the compromise void. It recognized that a party not signing a compromise cannot be bound thereby, but that the compromise remains valid and binding as to the signatories. The Court reasoned that the proper remedy was to proceed against Victorio in the trial court to resolve ownership disputes, not to annul the partial judgment already in execution between the signatory parties.

Vagueness and Determinacy of the Compromise Object

The Court held that the object of the Compromise Agreement was determinable and not void for vagueness. Citing Article 1349, the Court explained that a contract’s object need only be determinable. The TCTs contained technical descriptions that made petitioners’ lot ascertainable. The Bureau of Lands’ confirmation of Verification Survey Plan No. Vs-13-000135 was controlling. The Court construed the term “portion” in the compromise as referring to the portion of petitioners’ lot affected by encroachment, not to any limitation that Acero would surrender only part of his leased area; thus the stipulations requiring Acero to vacate structures inside petitioners’ property were clear and enforceable under Article 1370.

Mistake as a Ground to Annul the Compromise

The Court addressed the CA’s conclusion that Acero’s alleged mistake justified setting aside the compromise under Article 2038 and Article 1330. The Court reiterated that to invalidate consent for mistake the error must be excusable and not one that could

Case Syllabus (G.R. No. 126236)

Parties and Procedural Posture

Domingo Realty, Inc. and Ayala Steel Manufacturing Co., Inc. were the petitioners before the Supreme Court seeking reversal of the Court of Appeals decision that set aside a judgment based on a Compromise Agreement and related orders of the trial court.
Antonio M. Acero was the respondent in the Supreme Court and the principal opposing party in the underlying ejectment and possession litigation.
Luis Recato Dy and David Victorio were defendants in the original civil action and were implicated in the Compromise Agreement or the factual matrix of ownership and possession.
The subject litigation arose from Civil Case No. 9581-P filed in the Pasay City Regional Trial Court (RTC) and was the target of a petition for certiorari under Rule 65 filed in the Court of Appeals (CA) by Acero.
The Supreme Court reviewed the CA decision under a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court.

Key Factual Allegations

Petitioners filed a complaint for recovery of possession over three titled parcels totaling 26,705 square meters located in Cupang, Muntinlupa, on which Acero operated a hollow block factory.
The disputed lots were covered by Transfer Certificate of Title Nos. S-107639 (75600), S-107640 (67006), and S-107643 (67007), which petitioners alleged were owned by Domingo Realty.
Acero claimed to be a lessee from David Victorio, who in turn asserted possession and challenged petitioners' titles as spurious.
On December 3, 1987, representatives of Domingo Realty, Acero, and Recato Dy executed a Compromise Agreement that admitted petitioners' ownership, required Acero to vacate and remove structures encroaching on petitioners' property within 60 days, and provided for payment of PHP 100,000 to Recato Dy.
Two competing verification survey plans were later produced: Verification Survey Plan No. Vs-13-000135 by Engr. Elpidio T. De Lara of the Bureau of Lands and Verification Survey Plan No. Vs-13-000185 by Engr. Eligio L. Cruz hired by Acero.

Procedural History

Petitioners filed the complaint on November 15, 1981, and the parties executed the Compromise Agreement on December 3, 1987, which the RTC approved in its December 7, 1987 Decision.
Acero filed a Motion to Nullify the Compromise Agreement on February 2, 1988, and the RTC denied that motion in its December 6, 1991 Order.
The RTC issued orders directing resurveys, approved the Bureau of Lands Verification Survey Plan No. Vs-13-000135, and issued writs of execution on January 15, 1992, October 6, 1992, and January 12, 1994 to implement the Compromise Agreement.
Acero filed a petition for certiorari and mandamus in the Court of Appeals on April 4, 1994 challenging the trial court orders enforcing the compromise-based judgment.
The Court of Appeals granted the petition and set aside the trial court orders and the December 7, 1987 Compromise Judgment in its October 31, 1995 Decision, and denied reconsideration in its August 28, 1996 Resolution.
Petitioners invoked review before the Supreme Court by a Rule 45 petition, which resulted in the present decision.

Issues Presented

Whether Acero’s petition for certiorari before the Court of Appeals was filed out of time or was barred by laches.
Whether the omission of David Victorio from the Compromise Agreement rendered the agreement void or subject to nullification.
Whether the Compromise Agreement was void for vagueness because it failed to specify the exact metes and bounds of the encroachment.
Whether the Compromise Agreement could be set aside for mistake under Article 2038 and Article 1330 of the Civil Code.

Ruling and Disposition

The Supreme Court granted the petition, reversed the Court of Appeals Decision and Resolution, and reaffirmed the December 7, 1987 Decision based on the Compromise Agreement and the