102.) MIAA VS. ALA Industries Corp.

,
Petitioner: Manila International Airport Authority (MIAA)
Respondent: ALA Industries Corporation
Facts:
Petitioner MIAA conducted a public bidding for a contract involving the structural repair and waterproofing
of the International Passenger Terminal (IPT) and International Container Terminal (ICT). The bid was
awarded to Respondent ALA in the amount of P32,000,000.00. Under Article IV of their CONTRACT
PRICE/MANNER OF PAYMENT, MIAA agreed to pay ALA P32M in consideration of the full performance.
The contract contains escalation clauses and price adjustments. ALA made the necessary repairs and
waterproofing wherein the latter received partial payments. But, a certain progress billing no. 6 remained
unpaid despite repeated demands by ALA.
The parties executed a compromise agreement approved by the trial court which provides that MIAA will pay
P5,946,294.31 to ALA within a period of 30 days (Item No.3). Failure of MIAA to pay said amount within
the period stipulated shall entitle ALA to writ of execution from the Court to enforce all its claims pleaded in
the Complaint. However, MIAA failed to pay within the said period prompting ALA to file a motion for
execution. RTC denied the motion for execution which the CA reversed.
Issue:
Whether or not the slight delay of petitioner in complying with its obligation under the Compromise
Agreement is a valid ground for the enforcement of private respondents claim for writ of execution
Held:
Yes.
"The principle of autonomy of contracts must be respected." The Compromise Agreement was a contract
perfected by mere consent; hence, it should have been respected. Item 3 thereof provided that failure of
petitioner to pay within the stipulated period would entitle respondent to a writ of execution to enforce all the
claims that had been pleaded by the latter in the Complaint. This provision must be upheld, because the
Agreement supplanted the Complaint itself. Although judicial approval was not required for the perfection of
that Agreement once it was granted, it could not and must not be disturbed except for vices of consent or
forgery.
Basic is the rule that if a party fails or refuses to abide by a compromise agreement, the other may either
enforce it or regard it as rescinded and insist upon the original demand. For failure of petitioner to abide by
the judicial compromise, respondent chose to enforce it. The latters course of action was in accordance with
the very stipulations in the Agreement that the lower court could not change. Respondent is thus entitled to a
writ of execution for the total amount contained in the Compromise Agreement. The Court cannot reduce it.
The partial payment made by petitioner does not at all contravene Article 1229 of the Civil Code, which is
applicable only to contracts that are the subjects of litigation, not to final and executory judgments. Petition
denied.

103.) Restituta M. Imperial vs. Alex A. Jaucian

Facts:
The present controversy arose from a case for collection of money, filed by Alex A. Jaucian(plaintiff) against
Restituta Imperial(defendant), on October 26, 1989.
Defendant claims that she was extended loans by the plaintiff on several occasions, i.e., from November 13,
1987 to January 13, 1988, in the total sum of P320,000.00 at the rate of sixteen percent (16%) per month.
Defendant executed 6 separate promisorry in favor of plaintiff. The notes matured every four (4) months with
unearned interest compounding every four (4) months if the loan was not fully paid. The loan releases [were]
as follows:
(a)
(b)
(c)
(d)
(e)
(f)

November 13, 1987

December 28, 1987
January 6, 1988
January 11, 1988
January 12, 1988
January 13, 1988
Total

P 50,000.00
40,000.00
30,000.00
50,000.00
50,000.00
100,000.00
P320,000.00

Defendant alleges that the above amounts are the real amount released to the defendant but the plaintiff by
masterful machinations made it appear that the total amount released was P462,600.00. Because in his
computation he made it appear that the true amounts released was not the original amount, since it included
the unconscionable interest for four months.
Further, defendant contends that as of January 25, 1989, the total payments she made was P441,780.00 and
that she had an excess payment of P121,780.00 which she alleged to be more than the interest that could be
legally charged, and in fact as of January 25, 1989, the total releases have been fully paid.
RTC ruling on August 31, 1993:
Ordering defendant (Imperial) to pay plaintiff (Jaucian) the amount of P478,194.54 with regular and
compensatory interests thereon at the rate of twenty-eight (28%) per per annum computed from August 31,
1993 until full payment of the said amount, and in addition, an amount equivalent to ten (10%) per centum of
the total amount due and payable, for attorneys fees, without pronouncement as to costs.
CA affirmed. Hence, this petition.
Issue:
Whether the charging of attorneys fees and penalties per month by the RTC is proper

Held:
Yes.
Penalties and Attorneys Fees
Article 1229 of the Civil Code states thus:
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 the present case, iniquitous and unconscionable was the parties stipulated penalty charge of 5 percent per
month or 60 percent per annum, in addition to regular interests and attorneys fees. Also, there was partial
performance by petitioner when she remitted P116,540 as partial payment of her principal obligation of
P320,000. Under the circumstances, the trial court was justified in reducing the stipulated penalty charge to
the more equitable rate of 14 percent per annum.
The Promissory Note carried a stipulation for attorneys fees of 25 percent of the principal amount and
accrued interests. Strictly speaking, this covenant on attorneys fees is different from that mentioned in and
regulated by the Rules of Court Rather, the attorneys fees here are in the nature of liquidated damages and the
stipulation therefor is aptly called a penal clause. So long as the stipulation does not contravene the law,
morals, public order or public policy, it is binding upon the obligor. It is the litigant, not the counsel, who is
the judgment creditor entitled to enforce the judgment by execution.
Nevertheless, it appears that petitioners failure to comply fully with her obligation was not motivated by ill
will or malice. The twenty-nine partial payments she made were a manifestation of her good faith. Again,
Article 1229 of the Civil Code specifically empowers the judge to reduce the civil penalty equitably, when
the principal obligation has been partly or irregularly complied with. Upon this premise, we hold that the
RTCs reduction of attorneys fees -- from 25 percent to 10 percent of the total amount due and payable -- is
reasonable. Petition denied.