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TITLE XIV COMPROMISES AND ARBITRATIONS CHAPTER 1. COMPROMISES ARTICLE 2028.

. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. A. Characteristics of Compromise (BRONCAS) 1. Consensual 2. Reciprocal 3. Nominate 4. Onerous 5. Accessory, in the sense that a prior conflict is presupposed 6. Binding, once accepted, unless there is no vitiated consent 7. Principally a settlement of controversy, and incidentally of a claim. B. Kinds of Compromise 1. Judicial to end a pending litigation 2. Extra-judicial to prevent a litigation from arising ARTICLE 2034. There may be a compromise upon the civil liability arising from an offense; but such compromise shall not extinguish the public action of the legal penalty.

ARTICLE 2035. No compromise upon the following questions shall be valid: (1) The civil status of persons; (2) The validity of a marriage or a legal separation; (3) Any ground for legal separation; (4) Future support; (5) The jurisdiction of the courts; (6) Future legitime. Any compromise upon any of the above-listed subjects shall be VOID. PROBLEM: X and Y entered into a compromise agreement whereby X respected the ownership of Y over a part of the creek (now a fishpond). Is the agreement valid? A: No, because that is contrary to public policy and the law. (Maneclang v IAC, infra) ADRIANO MANECLANG, ET. AL., v INTERMEDIATE APPELLATE COURT, ET. AL. GR No. L-66575, 30 September 1986 (Second Division, J. Fernan) FACTS: Maneclang, et. al. filed before then CFI Branch XI of Pangasinan a complaint for quieting of title over a certain fishpond located within their owned 4 parcels of land in Barrio Salomague, Bugallon, Pangasinan, and annulment of two resolutions of the Municipal Council of Bugallon, Pangasinan. Complaint was dismissed upon the court learning that the subject body of water is part of a creek, public in nature and not subject to private appropriation. The two resolutions for ocular inspection and authorization of public bidding for the lease of all ferries and fisheries are likewise declared valid. IAC affirmed the lower courts decision. Maneclang, et. al. filed this petition for review on certiorari. However, pending the same, an amicable settlement (between Maneclang, et. al. and the winning bidder) was submitted to the Court praying that judgment be rendered recognizing the ownership of petitioners over the fishpond. ISSUE: Whether the compromise agreement is valid. RULING: No, the compromise agreement is not valid. The stipulations contained in the Compromise Agreement partake of the nature of an adjudication of ownership in favor of herein petitioners of the fishpond in dispute, which x x x was originally a creek forming a tributary of the Agno River. Considering that as held in the case of Mercado vs. Municipal President of Macabebe, 59 Phil. 592 [1934], a creek x x x is a property belonging to the public domain which is not susceptible to private appropriation and acquisitive prescription, x x x [Diego v. Court of Appeals, 102 Phil. 494; Mangaldan v. Manaoag, 38 Phil. 4551; and considering further that neither the mere construction of irrigation dikes by the National Irrigation Administration which prevented the water

ARTICLE 2029. The court shall endeavor to persuade the litigants in a civil case to agree upon some fair compromise.

ARTICLE 2030. Every civil action or proceeding shall be suspended: (1) (2) If willingness to discuss a possible compromise is expressed by one or both parties; or If it appears that one of the parties, before the commencement of the action or proceeding, offered to discuss a possible compromise but the other party refused the offer.

The duration and terms of the suspension of the civil action or proceeding and similar matters shall be governed by such provisions of the rules of court as the Supreme Court shall promulgate. Sais rules of court shall likewise provide for the appointment and duties of amicable compounders.

ARTICLE 2031. The courts may mitigate the damages to be paid by the losing party who has shown a sincere desire for a compromise. PROBLEM: X is indebted to Y in the amount of P50,000.00 with the stipulation that the same shall earn interest at 40% per annum, when X failed to pay, Y sued him. In an effort to settle the case, X offered to pay the principal but begged for the reduction of the interest. Y refused so trial was conducted. Can the judge reduce the rate of interest? A: Yes. The case falls squarely in that situation contemplated under Article 2031 of the New Civil Code. Xs offer to pay the principal and plea to reduce the interest showed his sincere desire for a compromise.

from flowing in and out of the subject fishpond, nor its conversion into a fishpond, alter or change the nature of the creek as a property of the public domain, the Court finds the Compromise Agreement null and void and of no legal effect, the same being contrary to law and public policy.

ARTICLE 2036. A compromise comprises only those objects which are definitely stated therein, or which by necessary implication from its terms should be deemed to have been included in the same. A general renunciation of rights is understood to refer only to those that are connected with the dispute which was the subject of the compromise.

ARTICLE 2037. A compromise has upon the parties the effect and authority of res judicata; but there shall be no execution except in compliance with a judicial compromise.

ARTICLE 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence, or falsity of documents, is subject to the provisions of Article 1330 of this Code. However, one of the parties cannot set up a mistake of fact as against the other if the latter, by virtue of the compromise, has withdrawn from a litigation already commenced. REMEMBER: ARTICLE 1330 states that a contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is VOIDABLE. PROBLEM: A and B entered into a compromise agreement. A week thereafter, B filed an action in court seeking to annul the compromise agreement, contending that it is one-sided. Is the action proper? A: No. Where the compromise is instituted and carried through in good faith, the fact that there was mistake as to law or fact, save in cases where such mistake is mutual and correctible in equity, cannot afford a basis for setting aside a compromise. Compromises are favored without regard to the nature of the controversy compromise, and they cannot be set aside merely because the event shows all the gains have been on one side. (Asong v IAC, infra) Juan Asong v Intermediate Appellate Court, Judge Albaro Albano, Jr., and Severino Banasig GR No. 74461, 12 May 1989 (First Division, J. Medialdea) FACTS: Severino Banasig (Banasig) filed a case for forcible entry and damages against Juan Asong (Asong) with MTC of Barotac Viejo, Iloilo. Pending said action, the parties submitted to the court an amicable settlement containing, among others, an agreement for the dismissal of their claim and counterclaim for damages. MTC Judge Albaro Albano, Jr. approved and rendered judgment based on the settlement. Upon execution, Asong refused to vacate one lot for which he was cited in contempt. Later, he filed an action for recovery of ownership and annulment of amicable settlement

and judgment before CFI Branch 4 of Iloilo City. CFI dismissed said action declaring that the amicable settlement has been voluntarily and freely entered into and is valid and constitutes a bar to the subsequent case for annulment. After denial of his motion for reconsideration, Asong appealed to IAC which affirmed the questioned decision. Hence, this petition where Asong contends that the settlement should be annulled on the ground of mistake. ISSUE: Whether the amicable settlement was voluntarily and freely entered into and fully explained to petitioner. RULING: The instant petition is devoid of merit. x x x The evidence on record shows that Asong was fully apprised of the legal consequences arising from the amicable settlement. Aside from his lawyer, Atty. Joelito Barrera who represented him in the Municipal Court, a friend of Atty. Barrera, Atty. Rex Salas who accidentally interrupted Barrera's meeting with Asong and Banasig regarding the amicable settlement at the former's law office and Municipal Judge Albaro Albano before whom the amicable settlement was submitted, explained the terms thereof to Asong in the Hiligaynon dialect. We fail to find any tinge of bias or improper motive on their part to testify against Asong. x x x On the other hand, Asong's vehement denial unsupported by any contrary evidence cannot rebut the positive testimonies of the aforesaid witnesses. (citations omitted) Moreover, We are not persuaded by Asong's argument that the amicable settlement should be voided because he did not gain anything from it x x x. The appellate court correctly ruled against Asong's supposition, as follows: xxxx In Berg vs. National City Bank of New York, supra, the Supreme Court, speaking through Mr. Justice Felix Bautista Angelo opined: x x x x [I]t is a general rule in this country that compromise are to be favored, without regard to the nature of the controversy compromised, and that they cannot be set aside because the event shows all the gain to have been on one side, and all the sacrifice on the other, if the parties have acted in good faith, and with a belief of the actual existence of the rights which they have respectively waived or abandoned; and if a settlement be made in regard to such subject, free from fraud or mistake, whereby there is a surrender or satisfaction, in whole or in part, of a claim upon one side in exchange for or in consideration of a surrender or satisfaction of a claim in whole or in part, or of something of value upon the other, however baseless may be the claim upon either side or harsh the terms as to either of the parties, the other cannot successfully impeach the agreement in a court of justice .... (Emphasis supplied). x x x

ARTICLE 2039. When the parties compromise generally on all differences which they might have with each other, the discovery of documents

referring to one or more but not to all of the questions settled shall not itself be a cause for annulment or rescission of the compromise, unless said documents have been concealed by one of the parties. But the compromise may be annulled or rescinded if it refers only to one thing to which one of the parties has no right, as shown by the newlydiscovered documents.

ARTICLE 2040. If after a litigation has been decided by a final judgment, a compromise should e agreed upon, either or both parties being unaware of the existence of the final judgment, the compromise may be rescinded. Ignorance of a judgment which may be revoked or set aside is not a valid greound for attacking a compromise.

ARTICLE 2041. If one of the parties fails or refuses to abide by the compromise, the other party may either enforce the compromise or regard it as rescinded and insist upon his original demand.

CHAPTER 2. ARBITRATIONS ARTICLE 2042. The same persons who may enter into a compromise may submit their controversies to one or more arbitrators for decision. ARTICLE 2043. The provisions of the preceding Chapter upon compromises shall also e applicable to arbitrations. ARTICLE 2044. Any stipulation that the arbitrators award or decision shall be final, is valid, without prejudice to Articles 2038, 2039, and 2040. ARTICLE 2045. Any clause giving one of the parties power to choose more arbitrators than the other is void and of no effect. ARTICLE 2046. The appointment of arbitrators and the procedure for arbitration shall be governed by the provisions of such rules of court as the Supreme Court shall promulgate. RA No. 876 is The Arbitration Law, which provides for the appointment of arbitrators and the procedure for arbitration in civil controversies, and for other purposes.