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CATHAY LAND v. AYALA LAND

FACTS:

The petitioners, Cathay Land, Inc. and Cathay Metal Corporation, filed a complaint for easement of right of way against respondents Ayala Land, Inc., Avida Land Corporation, and Laguna Technopark, Inc. In a compromise agreement, the respondents granted an easement of right of way to the petitioners, subject to certain undertakings. The agreement provided that the respondents have the right to withdraw or suspend the grant of easement in case of breach. The compromise agreement was approved by the court. However, the respondents later discovered plans by the petitioners to construct a cyber park and high-rise buildings, which violated the terms of the compromise agreement. The respondents filed a motion for execution to enforce the terms of the agreement.

The Ayala Group filed a motion seeking the enforcement of the Compromise Agreement, claiming that the Cathay Group violated the terms of the agreement by proceeding with the development of their South Forbes Golf City project and constructing buildings higher than three storeys. They requested the court to issue a temporary restraining order (TRO) and a writ of execution to permanently enjoin the Cathay Group from constructing buildings taller than three storeys.

The Cathay Group opposed the motion, arguing that they did not violate the terms of the agreement and that the agreement did not have a specific provision limiting building height to three storeys. They argued that the prohibition on high-rise buildings only pertained to buildings without any qualifications.

The Regional Trial Court (RTC) denied the Ayala Group's Motion for Execution, interpreting the term "high-rise building" according to the Revised Implementing Rules and Regulations (IRR) of the National Building Code. The court noted that the agreement did not mention the Fire Code as its governing law.

The Ayala Group filed a Motion for Reconsideration, which was granted by the RTC. The court ordered the issuance of a writ of execution to enforce the terms of the Compromise Agreement and a writ of injunction to stop the Cathay Group from constructing high-rise structures on the land.

The Cathay Group filed a Petition for Certiorari before the Court of Appeals (CA), challenging the RTC's order. The CA dismissed the petition, ruling that the term "high-rise building" should be interpreted based on the laws and ordinances applicable at the time of the agreement and that the IRR of the National Building Code could not be applied retroactively. The CA also noted that the restriction on building height was clearly defined in the Cathay Group's undertaking to ensure consistency with the residential character of the adjacent developments.

ISSUES:

  1. Whether the April 1, 2009 Order should be nullified for not stating the facts and law on which it is based.

  2. Whether the term "high-rise building" in the Compromise Agreement implies a height limit of three storeys.

  3. Whether the Writ of Execution dated December 2, 2009 is void for giving the Sheriff unbridled authority to halt any construction projects that he personally deems a "high-rise" structure.

  4. Whether the Ayala Group has the right to prohibit the Cathay Group from constructing high-rise buildings.

  5. Whether the Ayala Group prematurely moved for the execution of the Compromise Agreement.

  6. Whether there was a violation of the terms of the Compromise Agreement.

  7. Whether the definition of "high-rise buildings" in the Municipal Zoning Ordinance is consistent with the definition used in the Compromise Agreement.

  8. Whether the Cathay Group violated the terms of the Compromise Agreement.

RULING:

  1. The Petition is meritorious. A judgment based on a compromise agreement is executed based strictly on the terms agreed upon by the parties. The issuance of a writ of execution implementing a judicial compromise is ministerial in nature and does not violate the constitutional requirement that judgments must state the facts and law on which they are based.

  2. The term "high-rise building" in the Compromise Agreement should not be interpreted to imply a height limit of three storeys. The definition of a high-rise building in the IRR of the NBC cannot be applied retroactively as it was promulgated after the parties entered into the agreement. The proper interpretation should be based on the laws and ordinances enforced at the time of executing the Compromise Agreement, which limited building height to only three storeys.

  3. The Writ of Execution dated December 2, 2009 is not void as it merely enforces the terms of the Compromise Agreement, which allows for the withdrawal or suspension of grant of easement of right-of-way if the Cathay Group fails to rectify a breach within 30 days from notice. The Ayala Group does not have the right to seek injunctive relief in case of the Cathay Group's breach.

  4. The Ayala Group only has the right to suspend or withdraw the grant of easement of right of way, and does not have the right to prohibit the Cathay Group from constructing high-rise buildings.

  5. Yes, the Ayala Group prematurely moved for the execution of the Compromise Agreement.

  6. There is no sufficient proof that the Cathay Group violated the terms of the Compromise Agreement.

  7. The Court ruled that the definition of "high-rise buildings" in the Municipal Zoning Ordinance does not equate to the definition used in the Compromise Agreement. The building height limitation in the Ordinance does not expressly state that buildings over three storeys high are considered "high-rise buildings." Therefore, the Court held that the CA erred in considering the building height limit as the definition of "high-rise buildings" in the Compromise Agreement.

  8. The Court held that the Cathay Group did not violate the terms of the Compromise Agreement. The Agreement did not contain an express prohibition on constructing buildings over three storeys high in the area. Furthermore, the Cathay Group had already obtained a variance and necessary permits from the local government, exempting them from the coverage of the Municipal Zoning Ordinance. Thus, the CA erred in finding that the Cathay Group violated the Agreement.

PRINCIPLES:

  • A compromise agreement has the effect and authority of res judicata and is subject to execution in accordance with the rules of court.

  • Judges have a ministerial and mandatory duty to implement and enforce a compromise agreement.

  • Courts cannot modify, impose different terms, or set aside a compromise agreement and the concessions made by the parties in good faith, without gravely abusing their discretion.

  • The terms of a contract are presumed to have been used in their primary and general acceptation, and evidence is admissible to show any local, technical, or peculiar signification of the terms (Sec. 14, Rule 130, Rules of Court).

  • Clear and explicit terms of an agreement should be understood literally as they appear on the face of the contract.

  • In the absence of clear language to the contrary, a term in a contract relating to construction of buildings should follow prevailing industry standards and practices.

  • The definition and interpretation of terms in a contract depend on the intention of the parties as shown by the language used, subject matter, and circumstances surrounding the contract.

  • A municipal zoning ordinance may not have the same definition of terms used in a private contractual agreement.

  • Parties to a contract are bound by its terms and provisions, and any violation must be based on the specific provisions agreed upon by the parties.