295 SCRA 470 (1998)

G.R. No. 129742, September 16, 1998

TERESITA FABIAN
vs.

DESIERTO

FACTS:
Petitioner Teresita Fabian was the major stockholder and President of
PROMAT Construction Development Corporation which was engaged in the
construction business. Private respondent Nestor Agustin was the District
Engineer of the First Metro Manila Engineering District. PROMAT
participated in the bidding for government construction projects, and private
respondent, reportedly taking advantage of his official position, inveigled
petitioner into an amorous relationship. Their affair lasted for some time, in
the course of which, private respondent gifted PROMAT with public works
contracts and interceded for it in problems concerning the same in his office.
When petitioner tried to terminate their relationship, private respondent
refused and resisted her attempts to do so to the extent of employing acts of
harassment, intimidation and threats. Petitioner filed an administrative
complaint against private respondent.

Ombudsman found private respondent guilty of misconduct and meted out

the penalty of suspension without pay for 1 year. After private respondent
moved for reconsideration, the Ombudsman discovered that the private
respondents new counsel had been his classmate and close associate, hence,
he inhibited himself. The case was transferred to respondent Deputy
Ombudsman who exonerated private respondent from the administrative
charges. Petitioner appealed to the SC by certiorari under Rule 45 of the
Rules of Court.

ISSUE:
Whether or not Section 27 of RA 6770 which provides for appeals in
administrative disciplinary cases from the Office of the Ombudsman to the
SC in accordance with Rule 45 of the Rules of Court is valid
DECISION:
The revised Rules of Civil Procedure preclude appeals from quasi-judicial
agencies to the SC via a petition for review on certiorari under Rule 45.
Under the present Rule 45, appeals may be brought through a petition for
review on certiorari but only from judgments and final orders of the courts
enumerated in Sec. 1 thereof. Appeals from judgments and final orders of
quasi-judicial agencies are now required to be brought to the CA on a
verified petition for review, under the requirements and conditions in Rule
43 which was precisely formulated and adopted to provide for a uniform rule
of appellate procedure for quasi-judicial agencies.

Section 27 of RA 6770 cannot validly authorize an appeal to the SC from

decisions of the Office of the Ombudsman in administrative disciplinary
cases. It consequently violates the proscription in Sec. 30, Art. VI of the
Constitution against a law which increases the appellate jurisdiction of the
SC.

321 SCRA 659 (1999)

GR 133876 December 29, 1999

BANK OF AMERICA

vs

AMERICAN REALTY CORPORATION

FACTS:
Petitioner granted loans to 3 foreign corporations. As security, the latter
mortgaged a property located in the Philippines owned by herein respondent
ARC. ARC is a third party mortgagor who pledged its own property in favor
of the 3 debtor-foreign corporations. The debtors failed to pay. Thus,
petitioner filed collection suits in foreign courts to enforce the loan.
Subsequently, it filed a petition in the Sheriff to extra-judicially foreclose the
said mortgage, which was granted. On 12 February 1993, private respondent
filed before the Pasig RTC, Branch 159, an action for damages against the
petitioner, for the latters act of foreclosing extra-judicially the real estate
mortgages despite the pendency of civil suits before foreign courts for the
collection of the principal loan.

ISSUE:
WON petitioners act of filing a collection suit against the principal debtors
for the recovery of the loan before foreign courts constituted a waiver of the
remedy of foreclosure.

DECISION:
Yes.
1. Loan; Mortgage; remedies:
In the absence of express statutory provisions, a mortgage creditor may
institute against the mortgage debtor either a personal action or debt or a real
action to foreclose the mortgage. In other words, he may pursue either of the
two remedies, but not both. By such election, his cause of action can by no
means be impaired, for each of the two remedies is complete in itself.
In our jurisdiction, the remedies available to the mortgage creditor are
deemed alternative and not cumulative. Notably, an election of one remedy
operates as a waiver of the other. For this purpose, a remedy is deemed
chosen upon the filing of the suit for collection or upon the filing of the
complaint in an action for foreclosure of mortgage. As to extrajudicial
foreclosure, such remedy is deemed elected by the mortgage creditor upon
filing of the petition not with any court of justice but with the Office of the
Sheriff of the province where the sale is to be made.
In the case at bar, petitioner only has one cause of action which is non-
payment of the debt. Nevertheless, alternative remedies are available for its
enjoyment and exercise. Petitioner then may opt to exercise only one of two
remedies so as not to violate the rule against splitting a cause of action.
Accordingly, applying the foregoing rules, we hold that petitioner, by the
expediency of filing four civil suits before foreign courts, necessarily
abandoned the remedy to foreclose the real estate mortgages constituted over
the properties of third-party mortgagor and herein private respondent ARC.
Moreover, by filing the four civil actions and by eventually foreclosing
extra-judicially the mortgages, petitioner in effect transgressed the rules
against splitting a cause of action well-enshrined in jurisprudence and our
statute books.
2. Conflicts of Law
Incidentally, petitioner alleges that under English Law, which according to
petitioner is the governing law with regard to the principal agreements, the
mortgagee does not lose its security interest by simply filing civil actions for
sums of money.
We rule in the negative.
In a long line of decisions, this Court adopted the well-imbedded principle in
our jurisdiction that there is no judicial notice of any foreign law. A foreign
law must be properly pleaded and proved as a fact. Thus, if the foreign law
involved is not properly pleaded and proved, our courts will presume that the
foreign law is the same as our local or domestic or internallaw. This is what
we refer to as the doctrine of processual presumption.
In the instant case, assuming arguendo that the English Law on the matter
were properly pleaded and proved in said foreign law would still not find
applicability.
Thus, when the foreign law, judgment or contract is contrary to a sound and
established public policy of the forum, the said foreign law, judgment or
order shall not be applied.
Additionally, prohibitive laws concerning persons, their acts or property, and
those which have for their object public order, public policy and good
customs shall not be rendered ineffective by laws or judgments promulgated,
or by determinations or conventions agreed upon in a foreign country.
The public policy sought to be protected in the instant case is the principle
imbedded in our jurisdiction proscribing the splitting up of a single cause of
action.
Moreover, foreign law should not be applied when its application would
work undeniable injustice to the citizens or residents of the forum. To give
justice is the most important function of law; hence, a law, or judgment or
contract that is obviously unjust negates the fundamental principles of
Conflict of Laws.
Clearly then, English Law is not applicable.
190 SCRA 190 (1990)

PAKISTAN INTERNATIONAL AIRLINES CORPORATION

vs

HON. BLAS OPLE

FACTS:
1. Pakistan International Airline (PIA) is a foreign corporation licensed
to do business in the PH. 2 separate contracts of employment with
Farrales and Mamasig were entered into by PIA in Manila. The
contracts became effective in 1979. The contracts contained
provisions
a. Providing for the term of 3 years extendible upon mutual
consent of the parties
b. That PIA reserves the right to terminate the employee either by
giving notice 1 month before the date of termination or one
months salary
c. This agreement shall be construed and governed under
and by the laws of Pakistan, and only the Courts of
Karachi, Pakistan shall have the jurisdiction to consider
any matter arising out of or under this agreement.
2. After their training period, Farrales and Mamasig commenced their
services as flight attendants with base station in Manila.
3. 1 year and 4 months before the lapse of the 3-year period, counsel for
the local branch of PIA sent Farrales and Mamasig notices expressing
that their services will be terminated a month thereafter.
4. Farrales and Mamasig filed a joint complaint for illegal termination
and non-payment of company benefits before the then Ministry of
Labor and Employment (MOLE)
5. PIA submitted a position paper claiming that Farrales and Mamasig
were habitual absentees; that both were in the habit of bringing in
from abroad sizeable quantities of "personal effects"; and that PIA
personnel at the Manila International Airport had been discreetly
warned by customs officials to advise private respondents to
discontinue that practice.
6. Regional Director ordered reinstatement and payment of full back
wages or in the alternative payment of their salaries for the remainder
of the 3-year period.
 a. They have attained status of regular employees
b. The provision stipulating a three-year period of employment is
null and void for violating LAbor Code provisions on regular
employment
c. Dismissal without clearance from MOLE entitles employees to
reinstatement
7. Deputy Minister affirmed the RDs order.
8. PIA filed a petition for certiorari before the SC.
a. PIAs relationship with Farrles and Mamasig was governed by
the provisions of its contract rather than by the general
provisions of the Labor Code

ISSUES:
What law governs the relationship of the parties to the contract?

DECISION: PHILIPPINE LAW

1. Art 1306 of the Civil Code provides: The contracting parties may
establish such stipulations, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy.
2. The governing principle is that parties may not contract away
applicable provisions of law especially peremptory provisions dealing
with matters heavily impressed with public interest. The law relating
to labor and employment is clearly such an area and parties are not at
liberty to insulate themselves and their relationships from the impact
of labor laws and regulations by simply contracting with each other. It
is thus necessary to appraise the contractual provisions invoked by
petitioner PIA in terms of their consistency with applicable Philippine
law and regulations.
3. The employment contracts were inconsistent with Arts. 280-281 of the
Labor Code
4. In the case of Brent School vs Zamora, the Court ruled that contracts
of employment providing for a fied period are not necessarily
unlawful. The presence or absence of a substantial indication that the
period specified in an employment agreement was designed to
circumvent the security of tenure of regular employees which is
provided for in Articles 280 and 281 of the Labor Code is crucial.
5. The provision in the contracts with PIA allowing for termination of
services upon notice or payment of one months salary was intended
to prevent any security of tenure from accruing in favor of private
 respondents even during the limited period of three (3) years, and thus
to escape completely the thrust of Articles 280 and 281 of the Labor
Code by rendering their employment at the pleasure of PIA.
6. PIA cannot take refuge in paragraph 10 of its employment agreement
which specifies, firstly, the law of Pakistan as the applicable law of
the agreement and, secondly, lays the venue for settlement of any
dispute arising out of or in connection with the agreement "only in
courts of Karachi Pakistan".
a. The relationship is much affected with public interest and that
the otherwise applicable Philippine laws and regulations cannot
be rendered illusory by the parties agreeing upon some other
law to govern their relationship.
b. A cursory scrutiny of the relevant circumstances of this case
will show the multiple and substantive contacts between
Philippine law and Philippine courts, on the one hand, and the
relationship between the parties, upon the other:
i. the contract was not only executed in the Philippines, it
was also performed here, at least partially;
ii. private respondents are Philippine citizens and
respondents, while petitioner, although a foreign
corporation, is licensed to do business (and actually
doing business) and hence resident in the Philippines;
iii. private respondents were based in the Philippines in
between their assigned flights to the Middle East and
Europe.
All the above contacts point to the Philippine courts and
administrative agencies as a proper forum for the resolution of
contractual disputes between the parties. Under these
circumstances, paragraph 10 of the employment agreement
cannot be given effect so as to oust Philippine agencies and
courts of the jurisdiction vested upon them by Philippine law.
c. Finally, and in any event, the petitioner PIA did not undertake
to plead and prove the contents of Pakistan law on the matter; it
must therefore be presumed that the applicable provisions of the
law of Pakistan are the same as the applicable provisions of
Philippine law
G.R. No. L-19671 November 29, 1965

PASTOR TENCHAVEZ

Vs

VICENTA ESCAO

FACTS:
Vicenta Escao, 27, exchanged marriage vows with Pastor Tenchavez, 32,
on February 24, 1948, before a Catholic chaplain. The marriage was duly
registered with the local civil registrar. However, the two were unable to live
together after the marriage and as of June 1948, they were already
estranged. Vicenta left for the United Stated in 1950. On the same year she
filed a verified complaint for divorce against Tenchavez in the State of
Nevada on the ground of Extreme cruelty, entirely mental in character.
A decree of divorce, final and absolute was issued in open court by the
said tribunal. She married an American, lived with him in California, had
several children with him and, on 1958, acquired American Citizenship.
On 30 July 1955, Tenchavez filed a complaint in the Court of First Instance
of Cebu, and amended on 31 May 1956, against Vicenta F. Escao, her
parents, Mamerto and Mena Escao whom he charged with having
dissuaded and discouraged Vicenta from joining her husband, and alienating
her affections, and against the Roman Catholic Church, for having, through
its Diocesan Tribunal, decreed the annulment of the marriage, and asked for
legal separation and one million pesos in damages. Vicentas parents denied
that they had in any way influenced their daughters acts, and
counterclaimed for moral damages.

ISSUE:
1. Whether or not the divorce sought by Vicenta Escao is valid and
binding upon courts of the Philippines.
2. Whether or not the charges against Vicenta Escaos parents were
sufficient in form.

DECISION:
1. No. Vicenta Escao and Pastor Tenchavez marriage remain existent
and undissolved under the Philippine Law. Escaos divorce and second
marriage cannot be deemed valid under the Philippine Law to which Escao
was bound since in the time the divorce decree was issued, Escao, like her
husband, was still a Filipino citizen. The acts of the wife in not complying
with her wifely duties, deserting her husband without any justifiable cause,
leaving for the United States in order to secure a decree of absolute divorce,
and finally getting married again are acts which constitute a willful infliction
of injury upon the husbands feelings in a manner contrary to morals, good
customs or public policy, thus entitling Tenchavez to a decree of legal
separation under our law on the basis of adultery.

2. No. Tenchavez charge against Vicentas parents are not supported by

credible evidence. The testimony of Tenchavez about the Escaos animosity
toward him strikes the court to be merely conjecture and exaggeration, and
were belied by Tenchavez own letters written before the suit had begun. An
action for alienation of affections against the parents of one consort does not
lie in the absence of proof of malice or unworthy motives on their
part.Plaintiff Tenchavez, in falsely charging Vicenta's aged parents with
racial or social discrimination and with having exerted efforts and pressured
her to seek annulment and divorce, unquestionably caused them unrest and
anxiety, entitling them to recover damages.

81 PHIL 506
G.R. No. L-2363 September 23, 1948

GREGORIO ARANETA INC.

VS

SOTERO RODAS

FACTS:
This is a motion for reconsideration of the resolution of this Court
dismissing the special civil action of certiorari and mandamus filed by the
petitioners against the respondents, which asked that order of the respondent
judge denying the petitioner's motion to compel the other respondents to
answer certain interrogatories submitted by the former to the latter be set
aside, and that the respondent be ordered to issue an order compelling the
respondent corporation to answer said interrogatories.

ISSUE:
Whether or not there is a rule of law which controls or guides the respondent
judge in deciding whether an interrogatory should be allowed or not.

DECISION:
Since the scope of depositions and written interrogatories is limited to
matters which are not privileged and relevant to the subject matter involved
in a pending action, and the determination of whether or not an interrogatory
is privileged or material is not left to the discretion of the court or judge, for
there is a law applicable which serves as norm or guide for the court or judge
to follow, the respondent judge could not commit a grave abuse of discretion
which it did not have in deciding whether or not the interrogatories in
question are immaterial to the subject matter involved in the pending action,
and therefore they can not be allowed. If the respondent judge has acted
contrary to law in deciding that the written interrogatories propounded by
the petitioners to the other respondents are immaterial, he would have
committed an error of law which this court can not correct in the present
case; but not a grave abuse of discretion.
What the resolution means to say, and we now expressly so hold is
that certiorari does not lie at all for the reasons above stated, and the proper
remedy is to rise the question of admissibility of such interrogatories on
appeal from the final judgment of the respondent court or judge. It is
obvious that the question whether certiorari or appeal is the proper and
adequate remedy may only come up when the court has acted without or in
excess of jurisdiction and the act complained of is appealable.
Principle:
When the law does not provide a rule or norm for the court to follow in
deciding a question submitted to it, but leaves it to the court to determine it
in one way or another at his discretion, the judge is not absolutely free to act
at his pleasure or will or arbitrarily. He must decide the question, not in
accordance with law for there is none, but in conformity with justice, reason
and equity, in view of the circumstances of the case. Otherwise the court or
judge would abuse his discretion.
G.R. NO. L-41795 AUGUST 29, 1980

PHILLIPINE BANK OF COMMUNICATIONS

VS

HON. JUAN ECHIVERRI

FACTS:
On May 29, 1974, the Philippine Bank of Communications (PBCOM for
short), a banking corporation duly organized and existing under the laws of
the Philippines that has been engaged in normal commercial banking
transactions since 1939, filed a complaint for the recovery, jointly and
severally from therein defendants, of over P25 million allegedly embezzled
from it over a period of 16 years by its said employees defendants, Yu Chiao
Chin, alias Nelson Yu, assistant manager, in-charge of the Auditing
Department; Paulino How, manager of the Business Development
Department; Faustino Carlos, Ildefonso Carino, Conrado Galvez, Arsenic
Lorenzo, Enrique Lorenzo, Ricardo Carlos, Victoriano Salvador and
Felizardo Albaira, bookkeepers. PBCOM prayed for full restitution of the
amount embezzled, and payment of attorney's fees and exemplary damages.
Upon its application, the trial court issued writs of attachment and, through
the City Sheriff of Manila, attached various real and personal properties of
the. defendants.

Separately, each of the defendants, except Victoriano Salvador who died in

the meantime, filed responsive pleadings, either an answer or a motion to
dismiss, the last of which was filed on August 15, 1974.

The Agreement was signed by the PBCOM represented by its president,

Edward S. Go, as PARTY OF THE FIRST PART and each of the defendants
in his own behalf as PARTIES OF THE SECOND PART.

On March 17, 1975, the counsel for the PBCOM on one hand, and the
counsels for each of the defendants on the other, jointly filed a "Motion for
Judgment on the Basis of Attached Compromise Agreement."

On April 17, 1975, respondent judge issued an order resetting the hearing or
the motion for judgment on the basis of the compromise agreement and at
the same time making the observation motu proprio that "there are certain
objectionable features concerning the compromise agreement, as submitted,
such as matters pertaining to a proposed compromise involving the criminal
aspect of the case, 'Which is contrary to law. Therefore, the parties who have
already signed the said compromise agreement are hereby instructed to go
over the same and see how it could be properly approved by the Court,
taking into consideration the provisions of law as well as public morals and
policy."

On April 26, 1975, tile parties the PBCOM, thru its president, and the
defendants in their own behalf and each assisted by counsel submitted a
manifestation and motion in order to have the phrase "and criminal charge
hereinabove mentioned" (contained in paragraph 7 of the Compromise
Agreement) and "and criminal charge" (contained in paragraph 10 of the
Compromise Agreement), supra, deleted and praying that judgment be
rendered on the basis of the Compromise Agreement as thus modified.

On May 12, 1975, the defendant Conrado Galvez thru his counsel filed a
Manifestation pointing out two alleged objectionable features in the
compromise agreement signed by him, which he claimed to be "contrary to
law, public policy and decency," namely, the provision thereof to the effect
that said agreement even after its approval by the court shall be without
prejudice to charging anew the same defendants on the basis of other
anomalies which might be discovered in the bank thereafter, contrary to his
expectation that the dismissal of the present criminal and civil cases would
terminate with finality any and all litigations between the parties; and the
provision regarding quitclaim where said defendant would be considered as
having voluntarily resigned, waiving his right to reinstatement in the service,
his right to retirement with the corresponding gratuity or compensation and
his right to receive the benefits under the Staff Provident Fund. But said
defendant made no claim that he did not voluntarily sign the compromise or
that Ws consent had been obtained through mistake, violence or fraud. 4 In
fact, he based his objection on his claim that "it was the plaintiff, from the
outset, who persuaded Galvez to turn state witness and promised him
reciprocal benefits should he agree to become such, and to which Galvez
agreed and had done his part, but plaintiff had reneged on its promise and
commitment.

Countering the manifestation of Conrado Galvez, PBCOM thru counsel

maintained the legality and validity of' the quitclaim duly signed by said
Galvez. As to the terms of the, Agreement, viz. that it "shall not in any
manner bar or preclude the Bank from asserting the rights against the
PARTIES OF THE SECOND PART in the event that the Bank subsequently
discovers such other transactions on, dealings ill which any or all the
PARTIES OF THE SECOND PART are directly or indirectly involved and
which are prejudicial to the Bank's interest," said counsel explained that the
agreement was intended by the bank to cover only such matters of
transactions which were known or disclosed to it by the defendants and not
those of which it had no knowledge at the time of execution thereof.

On July 3, 1975, respondent judge issued an order setting the case for
hearing "at which all the parties will be afforded the opportunity to
individually show whether or not there is sufficient basis for the quitclaims
in question viewed from the standpoint of law, public policy and morals vis-
a-vis employer-employee relations.

ISSUE:

WON The compromise agreement entered is valid and binding among the
parties?

DECISION:

the present petition find to be meritorious.

1. Contrary to the bare conclusion of respondent judge ordering the deletion

of the names of herein respondents-defendants from the above-quoted
Paragraph 7 of the compromise agreement, whereby he would free them
from their agreement of voluntarily resigning from petitioner bank and
waiving whatever rights they may have against petitioner arising from their
employment or the case, including all benefits and rights under petitioner's
Staff Provident Fund and retirement plan in consideration of petitioner's
agreement to dismiss the P25 million case against them and discharging
them from all obligations and liabilities thereunder, there is nothing in said
resignation and waiver undertakings of respondents that "transgresses the
law" or is "contrary to law, morals, good customs, public policy and public
order and, therefore is considered inexistent and void from the beginning"
and no such law or authority was cited by respondent judge or respondents
to justify or support his erroneous assertion.

Respondent judge's "finding" that herein respondents-bookkeepers "all

occupied an inferior position in the negotiations on the Compromise
Agreement in question, with respect to the plaintiff-bank and/or together
with principal defendants Yu Chiao Chin alias Nelson Yu and Paulino L.
How. Be it remembered that these principal defendants as early- as the year
1970, long before the Complaint herein was filed, had admitted in writing
and 'assumed full responsibility for whatever consequences may arise and
that we declare the bookkeepers free from all responsibility,or even his pre-
judged subjective perception in his earlier Order of July 3, 1975 hereinabove
quoted that "there was obviously an imbalance in [their] treatment" in the
"unfair" and "one-sided compromise agreement" do not at all warrant his
rash deletion of the respondents' reciprocal undertaking in exchange of
petitioner's dismissal of the case and waiver of its claims as "contrary to law,
morals, good customs, public policy and public order." This is so,
particularly considering that respondent judge approved the very same
compromise agreement in toto without any deletion of the provisions in
question as to defendants How and Yu, who were charged in the complaint
below together with herein respondents-defendants as having connived and
acted in concert with each other to defraud petitioner of some P25 million
and respondent judge in his above-quoted "findings" found that "the
admissions of the several defendants-bookkeepers I herein respondents]
approximated this finding [of P25 million defrauded loss found by Sycip,
Gorres, Velayo & Co., the independent auditors]; i.e. P21 million alone by
Nelson Yu." All of them being similarly situated and having been charged
with connivance and conspiracy .n carrying out through the years the huge
defraudation of petitioner, respondent judge could not arbitrarily declare the
provisions in question void as to the herein seven respondents-conspirators
and valid as t6 the two others above named.

2. Far from being "one-sided" and "unfair", it thus appears that in exchange
of herein respondents' voluntary resignation (which employment they could
not have clung to anyway considering the huge defraudation of over P25
million carried out with their connivance and covered by their admissions, as
per respondent judge's own "findings" in his decision, supra,which certainly
would warrant their dismissal even on the mere ground of total loss of trust
and confidence) and waiver of any dubious rights arising from their
employment and the case below, including all benefits and rights under
petitioner's Staff Provident Fund and retirement plan (which they would
nevertheless have lost and forfeited upon separation from the service all of
which involved petty amounts compared to the over P25 million sought to
be recovered by petitioner, herein respondents got a pretty good deal.
Petitioner in consideration thereof and probably realizing the futility of
collecting any amount from them, agreed to dismiss the case against them
and discharge them from all liability and required no assumption of
monetary liability from them contenting itself with the much lesser amounts
of P600,000.00 and P6,610,000.00 undertaken to be paid it by the
defendants Paulino How and Yu Chiao Chin alias Nelson Yu, respectively.
This is the whole essence of a compromise as provided in Article 2028 of the
Civil Code whereby the parties, by making reciprocal concessions, whether
of greater benefit or not to one or the other party, avoid a litigation or put an
end to one already commenced.

3. The parties therefore have every freedom to enter into a compromise

agreement, as in any other contract, the only exceptions being certain
prohibited subjects of compromise such as the civil status of persons as
provided in Article 2035 of the Civil Code (none of which is applicable here)
and the general restriction in Article 1306 of the Civil Code that 'The
contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to
law, morals, good customs, public order, or public policy.

The law and the precepts of morals or good customs need no definition.
They need only to be cited and none has or can be cited as being
transgressed by the cited provisions in question. As to the remaining fields
of public order and public policy, the Court has since the early case of
Ferrazzini vs. Gsell 15 pointed out that the two terms are practically
equivalent, citing Manresa that "Public policy (order publico) which does
not here signify the material keeping of public order represents in the law
of persons the public, social and legal interest, that which is permanent and
essential of the institutions, that which. even in favoring an individual in
whom the right lies, cannot be left to his own will." The Code Commission
however in drafting our present Code included the two terms, stating ill its
report that "Public order, which is found in the Spanish Civil Code, is not as
broad as public policy, as the latter may refer not only to public safety but
also, to considerations which are moved by the common good.
In Gabriel vs. Monte de Piedad, the Court enjoined that "courts should not
rashly extend the rule which holds that a contract is void as against public
policy" and laid down the following criteria: "The term 'public policy' is
vague and uncertain in meaning, floating and changeable in connotation. It
may be said, however, that, in general, a contract which is neither prohibited
by law nor condemned by judicial decision, nor contrary to public morals,
contravenes no public policy. In the absence of express legislation or
constitutional prohibition, a court, in order to declare a contract void as
against public policy, must find that the contract as to the consideration or
thing to be done, has a tendency to injure the public, is against the public
good, or contravenes some established interests of society, or is inconsistent
with sound policy and good morals, or tends clearly to undermine the
security of individual rights, whether of personal liability or of private
property. Examining the contract at bar, we are of the opinion that it does not
in any way militate against the public good. Neither does it contravene the
policy of the law nor the established interests of society.

Thus, the provisions in question which are neither prohibited by law nor
condemned by judicial decision nor contrary to morals and good customs
cannot be said to contravene any public policy or to militate against the
public good.

4. The Civil Code in fact contains salutary provisions that encourage and
favor compromises and does not even require judicial approval. As the Court
held in Cochingyan vs. Cloribel "Pursuant to Article 2037 of the Civil Code,
'A compromise has upon the parties the effect and authority of res
judicata ...' and this is true even if the compromise is not judicially
approved." Article 2032 of the Civil Code provides only that "the court's
approval is necessary in compromises entered into by guardians, parents,
absentee's representatives, and administrators or executors of decedents'
estates," and in no other case. Thus, parties-litigants who have arrived at a
compromise have many times simply asked for and obtained the courts'
dismissal of their suit without submitting their compromise agreement for
judicial approval. Procedurally, it is preferable that such approval be
obtained, since as was held in Piano vs. Cayanong,"The agreement ha(s)
upon the parties the effect and authority of res judicata (Art. 2037, New
Civil Code; Yboleon v. Sison, 59 Phil. 281, 290; Hernandez vs. Barcelon, 23
Phil. 599, 607; De Jesus v. Go Quiolay, 65 Phil. 476, 482; Meneses v. De la
Rosa, 77 Phil. 34, 38; Salazar v. Jarabe, 48 O.G. 2708, 2712; Morales v.
Fontanos, 64 Phil. 19, 21), and the judgment rendered thereon ha(s) the
authority of res judicata from the moment it (is) rendered ... and such
judgment is more than a mere contract binding the parties because having
the sanction of the court, and entered as its determination of the controversy,
it has all the force and effect of any other judgment, it being conclusive upon
the parties and their privies (Marquez vs. Marquez, 73 Phil. 74)" and as
provided by Article 2037, execution lies to exact compliance only with a
judicial compromise. Article 2029 of the Civil Code provides further that
"The court shall endeavor to persuade the litigants in a civil case to agree
upon some fair compromise," and Articles 2039 and 2031 thereof provide
for the suspension of pending actions and mitigation of damages to the
losing party who has shown a sincere desire for a Compromise, in line with
the Code's policy of encouraging amicable settlements.

5. It is settled jurisprudence that neither the courts nor quasi-judicial bodies

can impose upon the parties a judgment different from their compromise
agreement (which as a valid contract is the law between the parties
themselves) or against the very terms and conditions of their agreement.

We thus held in Municipal Board of Cabanatuan City vs. Samahang

Magsasaka, Inc. that "a judicial or quasi-judicial body cannot impose upon
the parties a judgment different from their real agreement or against the very
terms and conditions of the amicable settlement entered into by them,
without running the risk of contravening the universally established
principle that a contract is the law between the parties."

We stressed therein that "(T)his Court, time and again, has ruled that a
compromise agreement entered into by party-litigants, when not contrary to
law, public order, public policy, morals, or good custom is a valid contract
which is the law between the parties themselves. (Juan-Marcelo, et al. vs.
Go Kim Pah, et al., 22 SCRA 309). It follows, therefore, that a compromise
agreement, not tainted with infirmity, irregularity, fraud or illegality, is the
law between the parties who are duty bound to abide by it and observe
strictly its terms and conditions. It is incumbent upon the courts of justice to
help develop and inculcate in the minds of the parties- litigants proper
respect for, and obedience to, the terms and conditions of this kind of mutual
agreement whenever it does not exhibit any feature or taint of illegality or
fraud. Thus we would be enhancing the salutary provisions of Section 1,
Rule 20, of the Revised Rules of Court and Article 2029, New Civil Code,
which entrust to the courts the function of enabling party-litigants in a civil
suit to reach an amicable settlement of their disputes," and cited our previous
ruling in Castro vs Castro that

... Es principio universalmente establecido que el convenio es ley entre las

partes. No debe imponerse un criterio por mas acertado que fuese sobre el
verdadero contrato de las Partes. Que utilidad puede proporcionar la
disposicion del articulo 2029 del nuevo codigo civil que encomienda al
Juzgado la funcion de persuader a los litigantes en un asunto civil a que
procuren illegar a un arreglo si, despues de todo, el criterio del tribunal se ha
de imponer sobre su convenio?

The only case where the court may validly intervene is "ff the parties and
their counsel are to do it ... to assist them in attaining precision and accuracy
of language that would more or less make it certain that any dispute as to the
matters being settled would not recur, much less give rise to a new
controversy

6. As held in the case of Gonzales vs Gonzales, the court cannot deny their
approval to a compromise agreement, voluntarily entered into by the parties,
where there is no valid serious objection, since "(T)he agreement, therefore,
partaking of the nature of a contract, is subject to the same legal provision
providing for the validity, enforcement, rescission or annulment of ordinary
contracts. In entering in said compromise, the parties were free to make any
stipulation not contrary to law, public interest, or principles of morality, as
much as in any other contract."

As stated above, only two of herein respondent's, namely, Conrado Galvez

and Ricardo Carlos, had presented manifestations as to the "objectionable
features" of the compromise agreement signed by them both following
respondent judge's telegraphed but baseless observations in his Orders of
April 17, 1975 and July 3, 1975 as to the waiver and quitclaim provisions
being "contrary to law, morals and public policy," with Galvez complaining
about petitioner having reneged on its alleged promise to give him reciprocal
benefits in exchange of his agreement to turn state witness.

Aside from the totally untenable position in which respondent judge placed
himself by declaring the provisions of paragraph 7 of the compromise
agreement void as to herein respondents but valid in toto as to the
defendants Paulino How and Yu Chiao Chin alias Nelson Yu, his decision
would arbitrarily substitute his own terms for that agreed upon by the parties
to the compromise agreement and baselessly free herein respondents from
their undertaking thereunder. With their names ordered deleted from
paragraph 7 of the compromise, they would be bound to no concession nor
obligation (notwithstanding that pursuant thereto they had in fact executed
the corresponding waiver and quitclaim therein provided), while petitioner
had complied with its part and discharged them from all obligations and
liabilities, despite their admission of complicity, pursuant to paragraph 8 of
the same agreement (subject only to the express exception that petitioner
was not waiving its rights as to any other anomalies which might
subsequently be discovered, notwithstanding respondents' warranty that they
had not participated in any such prejudicial transactions other than those
related to or included in the civil case and criminal charge).

7. There can be no question that the parties voluntarily executed and entered
into the compromise agreement. The record shows that all of the parties
personally signed the agreement. Respondents' voluntary consent to said
agreement and its due execution with assistance of counsel was confirmed
when a week thereafter, their respective-counsels all signed the "Motion for
Judgment on the Basis of the Attached Compromise Agreement. The
signatures of the parties, petitioner and respondents, and those of their
respective counsels, were again affixed on the Manifestation and Motion
dated April 26, 1975, reiterating their prayer for approval of the compromise
agreement as modified pursuant to respondent judge's Order of April 17,
1978. Thus, not one of herein respondents had ever assailed the compromise
agreement as not having been freely or voluntarily entered into.

When respondent judge issued his Order for hearing of April 26, 1975
advancing his own observation as to "certain objectionable features" and
mentioning that the compromise referred to compounding a felony, which is
contrary to law and directing the parties to go over the same again so that he
could approve the same "taking into consideration the provisions of law, as
well as public morals and policy," supra, the parties deferred thereto by
filing their said Manifestation and Motion of April 26, 1975, wherein they
prayed that "The phrase 'and criminal charge herein above mentioned' found
in paragraph 7, page 5 and the phrase land criminal charge' found in
paragraph 10, page 6 of the Compromise Agreement be deleted from the said
Compromise Agreement dated March 10, 1975," and reiterated the prayer
for judgment on the basis of the compromise agreement, as thus modified.
They made of record, though, that respondent judge's view was in error,
thus:
5. The parties wish to state that the reference to a criminal charge in the said
paragraphs is pure oversight on inadvertence inasmuch as there is no
criminal charge mentioned in the paragraphs preceding paragraphs 7 and 10
of the Compromise Agreement and consequently the phrase 'criminal charge
hereinabove mentioned' is meaningless. Besides, it has not been the intention
of the parties to compromise 'the criminal aspect of the case', not only
because it would be contrary to law to do so but principally because the
defendants are fully aware that such a compromise may be taken as an
admission of guilt and the defendants entered into the 'Compromise
Agreement' dated March 10, 1975 with the clear understanding that by so
entering into such agreement, they are not admitting nor are they deemed to
admit the commission of any criminal act.

Notwithstanding respondent judge's said Order and subsequent Order of July

3, 1975 setting the case anew for hearing and directing the parties once more
"to reconsider ... and reform" the waiver and quitclaim provisions of
paragraph 7 of the compromise agreement and flatly announcing that the
modification deleting all reference to the criminal charge was
"unsatisfactory" and that "dropping the complaint is not enough" concession
for herein respondents, the stark fact remains that not one of respondents
ever repudiated the compromise agreement nor moved to set aside or annul
the same because of alleged fraud, violence or vitiated consent - which is the
remedy available in such cases under Article 2038 of the Civil Code.

All that respondents ever asserted, following respondent judge's line, was
that the waiver and quitclaim provisions constituting their reciprocal
concession was "contrary to law, morals, good customs, public policy and
public order" which we have held to be totally untenable.

ACCORDINGLY, the modification of and deletions from the compromise

agreement ordered in respondent judge's decision are hereby set aside as null
and void, and in lieu thereof, judgment is hereby rendered approving the
compromise agreement in toto. Without pronouncement as to costs.

SO ORDERED.