FACTS:

loan to be obtained by the plaintiffs within three (3) months from the approval of this Compromise Agreement, and the balance to be paid within the period agreed upon by the parties;

1.2. Upon full payment of the total agreed amount, the defendants shall execute the necessary Deed of Reconveyance in favor of the plaintiffs, at the expense of the latter, which shall be presented to the Register of Deeds for the City of Manila, for proper annotation on the Transfer Certificate of Title covering the said property in the Registry of Deeds of said City;

2.3. The defendants hereby bind themselves to execute all documents necessary for the attainment of said re-conveyance, at their expense, including the payment of all fees, charges and taxes due thereon, including the capital gains tax, documentary stamp tax and transfer tax;

3.4. The plaintiffs hereby acknowledge and recognize the rights and interests of defendant Francisco E. Munoz, Sr., for himself and on behalf of Ma. Consuelo E. Munoz and Consuelo C. Estrada, and even in derogation to the terms and conditions set forth in the Deed of Real Estate Mortgage aforequoted;

4.5. The plaintiffs further bind themselves, not to make any derogatory statement, in any form and manner whatsoever, whether verbal or written, tending to besmirch the reputation of the defendants and/or their spouses, ancestors, descendants, relatives or assigns;

5.6. The defendants likewise hereby waive, release and forever discharge plaintiffs, their successors-in-interest, representatives, heirs, administrators or executors, from whatever cause or causes of action, arising from the execution of the herein AMENDED COMPROMISE AGREEMENT, and the transactions and incidents relating thereto; and

6.7. The plaintiffs, for themselves, likewise, hereby waive, release and forever discharge the defendants and/or their assigns, agents, employees, or representatives, from whatever cause or causes of action, arising from the execution and/or non-execution of the Deed of Real Estate Mortgage, as well as for the institution of the present case, and the transactions and incidents thereto.

The Joint Motion for Approval of Amended Compromise Agreement contained certificates of acknowledgment and conformity as to the genuineness and due execution of the Amended Compromise Agreement executed by the parties. The RTC approved the Amended Compromise Agreement and rendered a Decision approving the compromise agreement as well as the reconveyance of the property to the spouses Ibañez upon full payment of the total agreed amount.

The case involves a dispute between the spouses Ibañez and Francisco Munoz, Sr. over a real estate loan secured from the Government Service Insurance System (GSIS). On February 19, 1999, the parties entered into a Compromise Agreement, wherein the spouses Ibañez agreed to pay a portion of the loan through the proceeds of the real estate loan and the remaining balance from other sources. The amount to be released by GSIS would be assigned to the defendants, and the remaining balance would be payable within one year with interest and secured by a real estate mortgage. The agreement also stated that if the GSIS loan application did not materialize, the plaintiffs would cause the lifting of the Status Quo Order and the defendants would immediately be issued a Certificate of Sale over the subject property. The parties also agreed to waive any other claims against each other. On June 17, 2002, the RTC approved the Amended Compromise Agreement. On September 24, 2002, the spouses Ibañez manifested a slight delay in their compliance due to new loan requirements from GSIS, and they executed a Real Estate Mortgage in favor of Ma. Consuelo and Consuelo. On February 28, 2006, Atty. Bermejo filed a motion for execution and lifting of the Status Quo Order and for the issuance of a writ of possession, claiming that the spouses Ibañez failed to comply with their obligations. On March 24, 2006, the RTC granted the motion and lifted the status quo order, ordered the issuance of a writ of possession, and directed the sheriff to issue a certificate of sale to the defendants. The spouses Ibañez moved for reconsideration, claiming that there was no valid substitution of parties as Francisco had already died and Atty. Anave failed to inform the court. The RTC granted the motion, declaring the proceedings null and void due to the lack of substitution. The spouses Ibañez then filed a motion for the implementation of the Amended Compromise Agreement, arguing that the proper parties to substitute Francisco are Ma. Consuelo and Consuelo. They also claimed partial compliance with the agreement.

The case involves a dispute over a Compromise Agreement entered into by the parties. The spouses Ibañez filed a Motion to Adopt/Consider the Judicial Compromise Agreement as the Final and Executory Decision. They argued that the terms of the Compromise Agreement have been partially complied with, specifically the execution of a Deed of Assignment and a Real Estate Mortgage. They requested that the Compromise Agreement be considered initially implemented and that the assignees be ordered to surrender the owner's copy of the title or consider it lost if not surrendered.

The spouses Ibañez's counsel, Atty. Anave, filed a Notice of Withdrawal of Appearance. Atty. Bermejo then filed a Notice of Death of one of the parties and an Entry of Appearance as counsel for the legal representative of the deceased party.

The spouses Ibañez then filed a Motion to Adopt/Consider the Compromise Agreement as the Final Decision. The motion was granted by the RTC, considering the Compromise Agreement as the final decision on the merits.

Atty. Anave's withdrawal and Atty. Bermejo's entry of appearance were noted by the RTC. Ma. Consuela and Consuela filed a manifestation disclaiming Atty. Bermejo as their counsel and naming Atty. Barcelona as their new counsel.

James, as the legal representative of the deceased party, sought reconsideration of the RTC's order, arguing that not all stipulations in the Compromise Agreement have been complied with.

ISSUES:

1. Whether Francisco was a real party in interest

2. Whether there was valid substitution of parties

3. Whether all the provisions of the Amended Compromise Agreement have been complied with

RULING:

1. Francisco was a real party in interest

   • The Supreme Court ruled that Francisco had a material interest in the case since he was one of the lenders to the spouses Ibañez. Any judgment made would benefit or injure Francisco; thus, he is a real party in interest.

2. There was valid substitution of parties

   • Despite the lack of strict compliance with procedural rules, the heirs of Francisco, represented by James Harper, actively participated in the case. Their voluntary appearance and participation rendered a formal substitution unnecessary, in line with jurisprudence such as Vda. de Salazar v. Court of Appeals and Berot v. Siapno.

3. Non-compliance with the Amended Compromise Agreement

   • The Supreme Court held that the obligations under the Amended Compromise Agreement were joint, not solidary. Since the spouses Ibañez only assigned the GSIS loan proceeds and executed a real estate mortgage in favor of Ma. Consuelo and Consuelo, their obligation towards Francisco remained unsettled. Therefore, the conditions of the Hatol were not fully complied with.

PRINCIPLES:

• Real Party in Interest Defined under Rule 3, Section 2 of the Revised Rules of Court, as a party who stands to be benefited or injured by the judgment in the suit.

• Substitution of Parties Rule 3, Section 16 of the Revised Rules of Court requires heirs to be substituted for a deceased party unless formal substitution can be dispensed with upon active participation of the heirs in the case.

• Joint vs. Solidary Obligation In the absence of a clear agreement to hold joint obligors solidarily liable, the obligation is presumed joint, meaning each debtor is liable only for their proportionate part.

• Res Judicata in Compromise Agreements Once a compromise agreement is approved by the court, it has the effect of res judicata and is enforceable as a final judgment.