FACTS:

The case involves a car accident that occurred on July 9, 1984, where a car owned by Leticia Fideldia and driven by Enrique Pimentel collided with another car owned by Teresita Gerales and driven by Cesar Dela Fuente, with Marcela Golding, Maria Vergara, and Perlito Trigero as passengers. Pimentel was later charged with the crime of Damage to Property with Multiple Physical Injuries thru Reckless Imprudence.

During the pendency of the criminal case, the offended parties (now petitioners) filed a civil case for damages against Pimentel and Fideldia in the Regional Trial Court of Bataan. However, before the service of summons upon the defendants, the offended parties settled their claims with Pimentel and Fideldia, receiving amounts varying for each individual as a full and final settlement of their claims.

A motion to dismiss the criminal case was then filed, based on the affidavits of desistance executed by the offended parties. The Municipal Trial Court subsequently dismissed the criminal case.

After the dismissal of the criminal case, Pimentel and Fideldia were served with summons and a copy of the complaint in the civil case. Pimentel then wrote a letter to the Clerk of Court, requesting that the settlement in the criminal case be considered. The presiding judge of the Regional Trial Court issued an order directing the plaintiffs to file a necessary motion within five days, or else their interest in the prosecution of the civil case would be considered to have ceased.

The plaintiffs, petitioners in this case, filed a civil case for damages against defendants Enrique E. Pimentel and Leticia T. Fideldia. The trial court issued an order declaring the defendants in default after they failed to file their responsive pleading and set the case for presentation of petitioners' evidence ex-parte. Judgment was subsequently rendered in favor of the petitioners, ordering the defendants to pay various amounts for actual damages, compensatory damages, and attorney's fees. The defendants received a copy of the judgment and filed a Petition for Relief from Judgment, which was denied by the trial judge. A writ of execution was then issued. The defendants filed a Petition for Certiorari, Mandamus, and Prohibition with the Court of Appeals, seeking to set aside the judgment and orders of the trial court. The Court of Appeals reversed the decision of the trial court and dismissed the complaint against the defendants. The petitioners filed a petition with the Supreme Court, questioning the decision of the Court of Appeals and asserting that the trial court had jurisdiction over the case and the defendants were properly served with summons. The defendants argued that the trial court committed grave abuse of discretion in various instances. The Supreme Court held that the trial court should have considered the defendants' letter as a responsive pleading, even if it lacked formalities, and that the letter contained an averment of an affirmative defense which should have been given due consideration.

The petitioners in this case filed a claim against the respondents. However, the trial court declared the respondents in default and subsequently issued a judgment by default. The respondents filed a petition for relief from judgment, asserting that the claim had already been paid or extinguished. The trial court denied the petition. The respondents contended that the trial court's denial of their petition was improper and that they should be allowed to prove their defense of full settlement and/or payment. They argued that technicalities should not be resorted to in derogation of the intent and purpose of the rules, which is the proper determination of the litigation. The respondents further argued that default judgments should be frowned upon and that both parties should be given a fair chance to present their case without resorting to technicalities. The respondents sought to have the judgment by default set aside and filed a petition for certiorari, contending that the trial court had acted with grave abuse of discretion.

ISSUES:

1. Whether or not the trial court committed grave abuse of discretion in declaring private respondents in default, and in denying their petition for relief from judgment.

2. Whether or not the dismissal of the complaint against private respondents solely based on the releases of claims violated the petitioners' right to procedural due process.

3. Whether or not the releases of claims executed by the petitioners are valid and binding.

4. Whether or not the execution of the releases of claims by the petitioners effectively compromised and settled their claims in Civil Case No. 5210.

5. Whether or not there was fraud or mistake in the execution of the releases of claims.

6. Whether or not the case should be remanded to the trial court for the presentation of evidence on the alleged misappreciation and misrepresentation with respect to the Releases of Claim.

7. Whether or not the Releases of Claim are valid and enforceable contracts.

8. Whether the party who merely signed the contract of adhesion alleging vitiation of consent should be given a thorough examination of such allegation.

9. Whether the Releases of Claims are valid and binding.

10. Whether the case should be remanded to the trial court for further proceedings.

RULING:

1. The trial court committed grave abuse of discretion in declaring private respondents in default and denying their petition for relief from judgment. The order of default and all subsequent proceedings cannot be sustained.

2. The dismissal of the complaint against private respondents based solely on the releases of claims did not violate the petitioners' right to procedural due process.

3. The releases of claims executed by the petitioners are valid and binding.

4. The Court held that the execution of the releases of claims by the petitioners effectively compromised and settled their claims in Civil Case No. 5210. The existence of the releases of claims is undisputed and sufficient basis for the dismissal of the petitioners' complaint on the ground that their claims had been paid or released. Moreover, there was no evidence of fraud or mistake in the execution of the releases of claims.

5. The case should be remanded to the trial court to allow the petitioners the opportunity to present evidence on their allegations of misappreciation and misrepresentation regarding the Releases of Claim.

6. The Releases of Claim, as contracts of adhesion, are subject to greater strictness and vigilance by the court. In case of ambiguity, any doubt is to be resolved against the party that prepared the contract and in favor of the one that merely adhered to it.

7. The duty to exercise vigilance on cases involving parties at a disadvantage is imposed by the Civil Code. The court must be vigilant for the protection of a party who is at a disadvantage on account of moral dependence, ignorance, indigence, mental weakness, tender age, or other handicap.

8. While there is no public policy against waiving actions arising from quasi-delict, the terms of the waiver must be reasonable and the consent of the parties untainted. Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and represents a reasonable settlement, it is binding on the parties. However, if there is clear proof that the waiver was obtained from an unsuspecting or gullible person or the terms of settlement are unconscionable on its face, the law will annul the questionable transaction.

9. The case should be remanded to the trial court to give the respondents the opportunity to present evidence regarding their allegations of misappreciation and misrepresentation as regards the Releases of Claim. Additionally, the trial court must determine the reasonableness of the terms of the waivers, considering the injuries, damages suffered by the petitioners, the amount paid, and other relevant circumstances.

PRINCIPLES:

• Reopening a case and setting aside orders of default for default judgment is frowned upon, and trial courts should give both parties every chance to fight their case fairly and without resorting to technicality.

• Certiorari is a more speedy and efficacious remedy to challenge a judgment by default that was illegally declared.

• A notarized instrument is admissible in evidence without further proof of its due execution and is conclusive as to the truthfulness of its contents.

• The Parol Evidence Rule prohibits proof of verbal agreements offered to vary the terms of written agreements, unless there has been fraud or mistake.

• The execution of releases of claims, when undisputed, can effectively compromise and settle the claims of the parties.

• Fraud or mistake must be proven in order to challenge the validity of a release of claims.

• The Court may decide a case on the basis of the records before it without remanding it to the trial court for further proceedings if the only defense of the respondents is the existence of releases of claims.

• Contracts of adhesion are characterized by the imposition of one party's terms on another who has no bargaining power, and courts have an obligation to protect the weaker party from abuses and imposition. (Qua Chee Gan v. La Union and Rock Insurance Co. Ltd.)

• In contracts of adhesion, any ambiguity in the agreement should be resolved against the party that prepared the contract.

• Courts have a duty to exercise vigilance in cases involving parties at a disadvantage to protect their rights.

• Not all waivers and quitclaims are invalid as against public policy, but the terms must be reasonable and the consent untainted.

• When there is clear proof of the waiver being obtained from an unsuspecting or gullible person or the terms of settlement being unconscionable, the law will annul the transaction.

• The case may be remanded to the trial court to allow for further proceedings and examination of evidence.