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ANACLETO v. VAN TWEST AND/OR EUROCEANIC RAINBOW ENTERPRISES

FACTS:

On February 6, 1995, a complaint for reconveyance of title was filed by Alexander Van Twest and Euroceanic Rainbow Enterprises Philippines, Inc. (Euroceanic) against Gloria A. Anacleto and Isaias M. Bongar. Atty. Ernesto V. Perez, as counsel for Van Twest, stated in the complaint that Van Twest has been reported missing and he is representing Van Twest as his agent and/or general counsel.

On March 31, 1995, Atty. Perez, representing Van Twest, entered into a compromise agreement with Anacleto and Bongar, represented by Atty. Diosdado M. Allado. The agreement stated that the parties desire to avoid protracted litigation and wish to buy peace. The agreement provided for the payment of a sum of money by the defendants to Van Twest in installments, with an initial payment to be delivered to a third party acting as an escrow-trustee.

On April 6, 1995, the trial court rendered judgment based on the compromise agreement. Later on, petitioner Anacleto filed a manifestation, submitting a copy of a special power of attorney (SPA). She then filed a motion to order Atty. Perez to submit an SPA and to defer her compliance with the compromise agreement. Atty. Perez admitted that he had no SPA from Van Twest to enter into the compromise agreement, but claimed that petitioner's former counsel was informed of this fact. The trial court denied petitioner's motion on the ground of estoppel. Petitioner filed a motion to vacate the judgment, but it was denied. She then filed a notice of appeal, which was later denied as it was filed late. Consequently, petitioner filed a petition for certiorari in the Court of Appeals, which was dismissed. Petitioner now filed a petition for review on certiorari with the Supreme Court arguing that she should not be estopped from questioning the validity of the compromise agreement.

ISSUES:

  1. Whether a party, who enters into a compromise agreement with another allegedly represented by a lawyer who has no authority, is estopped from questioning the validity of such agreement.

RULING:

  1. No, the party is not estopped from questioning the validity of such agreement. The Supreme Court found that the compromise agreement was void because Atty. Ernesto V. Perez did not have the special authority required to enter into such an agreement on behalf of his client, Alexander Van Twest and Euroceanic Rainbow Enterprises Philippines, Inc. As such, the judgment based on the compromise agreement was also null and void.

PRINCIPLES:

  1. Compromise Agreement: A compromise is a contract that must comply with the requisites of consent, object certain, and cause of the obligation (Art. 1318 of the Civil Code).

  2. Authority of Attorneys: Attorneys need special authority to compromise a client's litigation (Rule 138, §23).

  3. Special Power of Attorney: A special power of attorney is necessary for acts not considered as usual acts of administration, including the ability to compromise (Art. 1878 of the Civil Code).

  4. Judicial Nullity: A judgment based on a compromise agreement entered into by an attorney without special authority is null and void.

  5. Estoppel: A party is not estopped from questioning the validity of a compromise agreement if they were led to believe by the opposing attorney that they had the required authority.

  6. Procedural Liberalism: Courts may relax stringent procedural rules to prevent manifest injustice, especially when one party clearly lacks proper representation.