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CRISANTA ALCARAZ MIGUEL v. JERRY D. MONTANEZ

FACTS:

On February 1, 2001, respondent Jerry Montanez secured a loan from petitioner Crisanta Miguel. The loan was in the amount of P143,864.00 and was payable within one year. The loan was secured by the respondent's house and lot located in Caloocan City. Due to the respondent's failure to pay the loan, petitioner filed a complaint before the Lupong Tagapamayapa, who issued a certification to file an action in court in favor of the petitioner. Petitioner then filed a complaint for Collection of Sum of Money before the Metropolitan Trial Court (MeTC) of Makati City. After trial, the MeTC rendered a decision in favor of petitioner, ordering respondent to pay the loan amount with interest and attorney's fees. Respondent appealed the decision to the Regional Trial Court (RTC), which affirmed the MeTC decision. Dissatisfied, respondent appealed to the Court of Appeals (CA) and raised issues on improper venue and novation of the loan agreement. The CA reversed and set aside the RTC decision and dismissed petitioner's complaint for collection of sum of money. The CA held that the proper remedy was to file an action for the execution of the settlement agreement entered into before the Lupon ng Barangay. The petitioner now seeks a review of the CA decision.

ISSUES:

  1. Whether the complaint for collection of sum of money is the proper remedy due to the respondent's failure to comply with the terms of the Kasunduang Pag-aayos.

  2. Whether the petitioner should have followed the procedure for enforcement of the amicable settlement as provided in the Revised Katarungang Pambarangay Law, instead of filing a collection case.

  3. Whether the Kasunduan executed by the petitioner and respondent before the Office of the Barangay Captain had the force and effect of a final judgment of a court.

  4. Whether the respondent may enforce the compromise under Article 2041 of the Civil Code or insist upon his original demand.

  5. Whether the petitioner is limited to claiming only the amount agreed upon in the Kasunduan.

  6. Whether the Kasunduang Pag-aayos is deemed rescinded due to the respondent's non-compliance.

  7. Whether the case should be remanded to the trial court for enforcement of the Kasunduang Pag-aayos.

RULING:

  1. The complaint for collection of sum of money is the proper remedy because the respondent failed to comply with the terms of the Kasunduang Pag-aayos, which resulted in its rescission pursuant to Article 2041 of the New Civil Code.

  2. The petitioner was not required to follow the procedure for enforcement of the amicable settlement under the Revised Katarungang Pambarangay Law, as the cause of action did not arise from the settlement itself but from the respondent's breach of the original loan agreement.

  3. Yes. The Kasunduan executed by the petitioner and respondent before the Office of the Barangay Captain had the force and effect of a final judgment of a court.

  4. The respondent may either enforce the compromise following the procedure in the Revised Katarungang Pambarangay Law or regard it as rescinded and insist upon his original demand, as provided in Article 2041 of the Civil Code.

  5. No. The petitioner is not limited to claiming only the amount agreed upon in the Kasunduan. A compromise settlement does not admit liability but is a recognition of a dispute, and the parties aim to prevent litigation by making reciprocal concessions.

  6. Yes. The Kasunduang Pag-aayos is deemed rescinded due to the respondent's non-compliance with its terms and conditions, which signifies repudiation and negates the purpose for its execution.

  7. No. Remanding the case to the trial court for enforcement of the Kasunduang Pag-aayos is unwarranted. The petitioner has the option to rescind the agreement and insist upon the original demand, as chosen in this case. The Court of Appeals erred in remanding the case instead of deciding it on the merits.

PRINCIPLES:

  • An amicable settlement reached at the barangay conciliation proceedings, like the Kasunduang Pag-aayos in this case, is binding between the contracting parties and has the force and effect of res judicata, even if not judicially approved.

  • Enforcement of an amicable settlement may be done through execution by the Barangay Lupon or by filing an action in the appropriate court within six months from the date of settlement.

  • If one party repudiates the amicable settlement, the other party has the option to either enforce the compromise or consider it rescinded and insist upon their original demand, pursuant to Article 2041 of the Civil Code. No action for rescission is required.

  • A compromise settlement is not an admission of liability but a recognition of a dispute, aiming to prevent litigation by making reciprocal concessions.

  • Non-compliance with the terms of a compromise may be construed as repudiation, allowing the aggrieved party to rescind the agreement and insist upon the original demand.

  • The Kasunduang Pag-aayos executed before the Barangay has the force and effect of a final judgment of a court.

  • Remanding a case for enforcement of a compromise settlement is not necessary if the aggrieved party chooses to rescind the agreement and insist upon the original demand.