View full case

JULIETA V. ESGUERRA v. CA

FACTS:

The case involves a dispute over a sale of a real property listed in and sold pursuant to a judicially-approved compromise agreement. Julieta Esguerra filed a complaint against her husband Vicente Esguerra, Jr. seeking administration of conjugal partnership or separation of property. V. Esguerra Construction Co., Inc. (VECCI) and other family corporations were also impleaded as defendants. The parties entered into a compromise agreement which provided for the sale of several properties, including Esguerra Building II located at 104 Amorsolo Street, Legaspi Village, Makati. The agreement stated that after the properties were sold and all obligations of VECCI were settled, half of the resulting balance would be paid to Julieta. Esguerra Building I was sold and the net proceeds were distributed accordingly. However, a dispute arose with respect to Esguerra Building II, as Julieta claimed one-half of the rentals but VECCI refused. Eventually, Esguerra Building II was sold to Sureste Properties, Inc. Julieta, who was not a party to the civil case, filed a motion seeking the nullification of the sale, arguing that she was not notified or consulted about the terms and conditions. Sureste, in turn, filed a manifestation pointing out that Julieta gave her express consent to the sale in the compromise agreement. The trial court issued an omnibus order denying Sureste's motion, among others.

This case involves a dispute over the sale of a property known as Esguerra Building II. The Regional Trial Court of Makati issued an omnibus order denying the motion filed by Sureste Properties, Inc. (Sureste) and other parties. Sureste filed a motion for reconsideration, which was also denied.

After a trial on the merits, the trial court rendered an order modifying the earlier omnibus order. The trial court ruled that the notice of lis pendens, which was annotated at the back of the Certificate of Title of Esguerra Building II, is valid and subsisting. The court also declared that the sale of Esguerra Building II to Sureste is valid with respect to half of its value but ineffectual and unenforceable with respect to the other half, as the acknowledged owner of that portion was not consulted about the sale. The trial court further enjoined Sureste from pursuing any further court action against the plaintiff and plaintiff's tenants at Esguerra Building II.

Sureste appealed the trial court's order to the Court of Appeals, which ruled in its favor. The Court of Appeals held that the trial court abused its discretion by rendering the sale of the property unenforceable with respect to half of it. Julieta Esguerra, the acknowledged co-owner of the property, filed a motion for reconsideration, but it was denied by the Court of Appeals.

Julieta Esguerra then filed a petition with the Supreme Court, raising several issues. She argued that the Court of Appeals erred in validating the sale of the property to Sureste without her knowledge and consent, and in holding that the trial court acted without jurisdiction or abused its discretion in declaring the sale unenforceable with respect to her one-half share.

In summary, the main issues in this case are the enforceability of the sale of Esguerra Building II to Sureste and the alleged errors committed by the Court of Appeals in its ruling.

ISSUES:

  1. Is the sale by V. Esguerra Construction Co., Inc. (VECCI) to Sureste Properties, Inc. unenforceable to the extent of Julieta Esguerra's one-half share?

  2. Did the Court of Appeals act without jurisdiction or with grave abuse of discretion in reversing the trial court's ruling?

RULING:

  1. First Issue: Is the Contract of Sale Unenforceable?

    • The sale by VECCI to Sureste Properties, Inc. is valid and enforceable. The Supreme Court found that the sale was expressly and clearly authorized under a judicially-approved compromise agreement, which was freely consented to and voluntarily signed by Julieta Esguerra. The compromise agreement specified no condition that VECCI must first consult Esguerra before selling the properties.

  2. Second Issue: Did the Appellate Court Act Without Jurisdiction or With Grave Abuse of Discretion?

    • The appellate court did not act without jurisdiction or with grave abuse of discretion. The Supreme Court found that the respondent Court of Appeals acted within its jurisdiction and its decision was consistent with law and existing jurisprudence.

PRINCIPLES:

  1. Unenforceable Contracts As per the Civil Code, a contract is unenforceable when entered into by one who has no authority or has acted beyond his powers.

  2. Compromise Agreements A judicially-approved compromise agreement has the force of res judicata and should not be disturbed except for vices of consent or forgery.

  3. Final and Executory Decision Once a compromise agreement is judicially approved, it becomes final and executory.

  4. Estoppel A party cannot later repudiate the effects of a contract they voluntarily entered into.

  5. Waiver of Rights Rights can be waived, and failure to reserve a right in a compromise agreement results in waiving that right.

  6. Corporate Actions Regularity of corporate actions (e.g., sale of assets) is presumed based on valid board resolutions and certifications from corporate officers.

  7. Lis Pendens A purchaser of a property subject to lis pendens stands in the shoes of the vendor and is subject to the outcome of the pending litigation.

  8. Authority to Sell The express authority granted in a compromise agreement is binding and does not require additional consultations unless specifically stipulated.