Commercial Credit Corp. of Cagayan de Oro vs Court of Appeals and Cagayan de Oro Coliseum, Inc. GR No. 78315, January 2, 1989
Subject: Obligations and Contracts
FACTS
In 1978, private respondent, Cagayan De Oro Coliseum,
Inc. (CDOCI) executed a promissory note in the amount of 329, 852.54 in favor
of petitioner Commercial Credit Corporation of Cagayan De Oro (CCCCDO), payable
in 36 monthly installments. The note is secured by a real estate mortgage duly
executed by private respondent in favor of petitioner. Respondent then
defaulted in the real payment and the petitioner proceeded with the
extrajudicial foreclosure of the real estate mortgage in September 1979.
On March 11, 1980, a Compromise Agreement was entered
into by the parties wherein the minority stockholders ratified and approved the
loan and real estate mortgage, and as such, CDOCI hereby admits its total outstanding
obligation to Commercial Credit Corporation of Cagayan de Oro and agreed to pay
the obligation plus interest on diminishing balance computed yearly at sixteen
(16) per cent per annum. Furthermore, it agreed to pay the aforegoing
obligation in equal monthly installments of P11,000.00 the first installment
shall be payable in February 1980 and every month thereafter until the whole
account payable as aforementioned is fully paid, and that, failure on the part
of Respondent Cagayan de Oro Coliseum, Inc. to pay any of the installments as
they shall become due, the whole amount then outstanding and unpaid shall
immediately become due and payable in its entirety and shall render the
judgment herein to be immediately final, unappealable and executory; and the
overdue and unpaid installments shall earn a three (3%) per cent monthly
penalty charge until fully paid, plus five percent (5%) of the outstanding
balance as additional attorney’s fee.
CCCCDO on its part agreed to withdraw its application for the extra-judicial
foreclosure of the real estate mortgage subject of this complaint.
However, CDOCI failed to comply with the terms of the
judgment for failure to pay several installments which matured on July 13,
1982, petitioner CCCCDO filed an ex-parte motion for the issuance of a writ of
execution on March 4, 1983. On March 10, 1983 the Court of First Instance
granted the motion, and a notice of auction sale was issued on March 11, 1983.
After reviewing the respondent’s motion for reconsideration and the petitioner’s
reply, the trail court accordingly denied the motion and issued the writ on
December 4, 1986.
Private respondent then filed a special civil action
in the Court of Appeals to annul said compromise-judgment, alleging that the
trail court acted in serious violation of law and/or in grave abuse of
discretion. In due course, a decision was rendered by said appellate court
denying the petition.
A motion for reconsideration of the decision was filed
by the petitioner but was denied.
ISSUE
Whether or not Article 1229 of the
Civil Code is applicable in this case.
RULING
No, Article 1229 of the Civil Code is
not applicable in this case.
Under the law (Art 1229), the judge
shall equitably reduce the penalty when the principal obligation has been
partly or irregularly complied with by the debtor. Even if there has been no
performance, the penalty may also be reduced by the courts if it is iniquitous
or unconscionable.
In this case, a compromise judgement
is final and immediately executor. Once a judgment becomes final and executor,
it cannot be modified and amended. When the parties entered into the compromise
agreement and submitted the same for approval of the trail court, its terms and
conditions must be the primordial consideration why the parties voluntarily
entered into the same. The trail court approved it because it is lawful, and is
not against public policy or morals. Even the respondent Court of Appeals
unheld the validity of the said compromise agreement. Hence, the respondent
court has no authority to reduce the penaly and attorney’s fees therein
stipulated which is the law between the parties and is res judicata. Article
1229 applies only to an obligation or contractm subject of a litigation, the
condition being that the same has been partly or irregularly complied with by
the debtor. Said provision also applies even if there has been no performance,
as long as the penalty is uniquitous or unconscionable. It cannot apply to a
final and executory judgment.
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