Hapitan vs. Lagradilla

A creditor's waiver of her claim cannot validate a sale of conjugal property that the courts declared void for fraud, and a compromise agreement affecting conjugal property is void without the other spouse's written consent; however, amounts actually paid under an invalid compromise are credited against the judgment debt.

Ilona Hapitan is the sister of Nolan Hapitan, and Spouses Jimmy and Warlily Lagradilla were creditors of Nolan's wife Esmeralda Blacer Hapitan. The property at the center is a house and lot in Iloilo City covered by TCT No. T-103227 in the names of Nolan and Esmeralda. The Family Code governs conjugal partnership property, requiring the other spouse's written consent for any disposition or encumbrance and prohibiting waiver of conjugal rights during the marriage except in case of judicial separation of property.

Esmeralda Blacer Hapitan, the wife of Nolan Hapitan, issued thirty-one UCPB checks in various amounts totaling P510,463.98 payable to Warlily Lagradilla between September and December 1994. When Warlily presented the checks for payment, UCPB dishonored them because the account was closed. On January 6, 1995, Warlily and her husband Jimmy filed a civil case for sum of money against Nolan and Esmeralda Hapitan, Ilona Hapitan, and Spouses Jessie and Ruth Terosa, praying for preliminary attachment over a house and lot registered in Nolan and Esmeralda's names as security for any judgment.

In their complaint, Jimmy and Warlily alleged that they made several demands on Nolan and Esmeralda to settle their outstanding obligations; the latter promised to convey and transfer to Jimmy and Warlily the title of their house and lot in Barangay M.V. Hechanova, Jaro, Iloilo City, covered by TCT No. T-103227 in the names of Nolan and Esmeralda. Jimmy and Warlily later found that Nolan and Esmeralda separately executed a Special Power of Attorney designating Ilona, Nolan's sister, as attorney-in-fact for the sale of the same property. They alleged that the property was fraudulently sold to Spouses Terosa and that Nolan and Esmeralda were about to depart from the Philippines with intent to defraud creditors, hence the prayer for preliminary attachment.

Esmeralda filed an Answer with Cross-Claim admitting her indebtedness to Warlily. She alleged that due to Nolan's failure, while a seaman, to send her substantial amounts and because of losses in her jewelry business, she failed to fund the checks she issued. She also alleged that although she executed an SPA in favor of Ilona authorizing the latter to sell the house and lot owned by her and Nolan, she subsequently revoked the SPA. Nolan and Ilona denied the allegations; they argued that the debts were incurred solely by Esmeralda and were not intended to benefit the conjugal partnership. They further stated that Esmeralda had abandoned her only son with Nolan and that Nolan had filed a petition for declaration of nullity of his marriage with Esmeralda. On March 31, 1995, the RTC declared Spouses Terosa in default for failure to file their Answer within the reglementary period.

On February 13, 1996, the RTC rendered its Decision. It found that the house and lot was part of Nolan and Esmeralda's conjugal property, having been built from amounts Nolan sent to Esmeralda and income from her business. It found that the property was sold through Ilona as attorney-in-fact under an SPA providing that proceeds of Esmeralda's share shall be applied specifically to her obligations, a limited authority acknowledged by Nolan in his SPA to Ilona. The RTC found the sale price of P450,000 unreasonably low because the lot's market value was P290,150 and the bill of materials for the house was P511,341.94, so the minimum consideration should have been at least P800,000. It also found that the SPA was revoked after Esmeralda learned the consideration was unconscionably low and Nolan and his relatives became antagonistic to her; that Ilona turned over the payment to Nolan, but neither Ilona nor Nolan paid Esmeralda's obligations; and that Spouses Terosa connived and cooperated with Nolan and Ilona to defraud Esmeralda and Jimmy and Warlily, with Spouses Terosa remaining silent and having been informed of the SPA revocation before the sale was consummated.

The parties filed separate Notices of Appeal. In its Decision dated October 14, 2003, the CA rendered judgment in CA G.R. CV No. 53301. On November 6, 2003, Nolan and Ilona filed a Motion for Reconsideration/Modification based mainly on Warlily's Affidavit of Waiver, Quitclaim and Satisfaction of Claim dated October 22, 2003, in which Warlily stated that she had fully received from Nolan, for himself and the rest of the defendants, the balance of her total claim in the sum of P125,000 representing full and complete satisfaction of her claim, and that she made remission, release, and quitclaim of all claims and causes of action against the defendants, including attorney's fees. In the same motion, Nolan and Ilona asked the CA to reconsider its findings that the sale to Spouses Terosa was fraudulent and that Esmeralda was entitled to damages. On November 20, 2003, Jimmy and Warlily and Nolan and Ilona filed a Motion for Approval of Amicable Settlement.

The Amicable Settlement stated that Jimmy and Warlily and Nolan and Ilona agreed to the full, final, and complete settlement of the liability of Nolan and Ilona and Spouses Terosa under the RTC Decision affirmed by the CA, with payment of P425,000: P300,000 in cash acknowledged in the settlement and P125,000 received by Warlily as stated in the waiver, acknowledged as part payment of the P425,000, and understood to include the share of Esmeralda and Spouses Terosa. It further agreed to modify the judgment by declaring the Deed of Sale to Spouses Terosa valid and recalling the order cancelling TCT No. T-107509. Jimmy and Warlily later filed a Manifestation and Motion dated December 19, 2003 alleging that on October 28, 2003 Warlily was approached by Nolan, who offered money to settle; that she was not assisted by counsel, who had died earlier that year, and was in difficult financial constraints, so she accepted P125,000 for a quitclaim; and that she was not aware of the CA Decision dated October 14, 2003 until October 30, 2003. They said Nolan willfully failed to disclose that the case was already decided and took advantage of her counsel's absence, and that Nolan gave her P300,000 on November 19, 2003. Nolan and Ilona answered that Warlily's claim of deception rested on dubious grounds and that any defects in the waiver were cured or rendered moot by the Amicable Settlement. Jimmy and Warlily replied that the waiver was executed on October 28, not October 22; that the CA Decision was received by Nolan and Ilona's counsel on October 24 and by Jimmy and Warlily on October 30, showing Warlily was deceived; and that the Amicable Settlement did not change her situation because she was never apprised of the import of the CA Decision and believed Atty. Edgar Praile was only a witness to the receipt of P300,000. Nolan and Ilona replied that Warlily's counsel's office received a copy on October 23 and that Atty. Praile signed as counsel for Jimmy and Warlily in the Amicable Settlement and Motion to Approve. Esmeralda opposed the motion, stating she was not a party to the waiver and had no knowledge of its veracity; she argued it was incredulous for Nolan to insist the CA reverse a decision favorable to him, that only Spouses Terosa would suffer from the cancellation, and that Nolan and Ilona's act bolstered the claim that the deed of sale to Spouses Terosa was fictitious and simulated to deprive Esmeralda and creditors of claims against conjugal assets. The CA denied the Motion for Reconsideration/Modification in its Resolution dated October 7, 2005, and Ilona filed the present petition.

• Waiver: Petitioner argued that by virtue of Warlily's Waiver, the CA should have at least reconsidered or modified its Decision dated October 14, 2003 because Warlily received P125,000 representing full and complete satisfaction of her claim in the civil case.
• Amicable Settlement: Petitioner argued that the Amicable Settlement, in addition to the Waiver, modified the CA Decision because the parties agreed that the P425,000 payment received by Jimmy and Warlily was the full, final, and complete settlement of their claims, and prayed that the terms of the Amicable Settlement be considered to have modified the RTC Decision.
• Validity of Sale and TCT: Petitioner prayed that the deed of sale in favor of Spouses Terosa conveying the house and lot be declared valid and that the order for cancellation of TCT No. 107509 in the name of Spouses Terosa be recalled.

• Consent and Deception: Jimmy and Warlily countered that they were deceived into executing the Waiver and Amicable Settlement and were not properly assisted by counsel; Warlily accepted P125,000 without counsel, who had died earlier that year, and under financial constraints, unaware of the CA Decision until October 30, 2003; they argued Nolan and Ilona proposed and forged the settlement in bad faith with advance knowledge of the CA Decision.
• Waiver Date and Amicable Settlement: Jimmy and Warlily argued that the Waiver was executed on October 28, not October 22, and that the receipt dates of the CA Decision by Nolan and Ilona's counsel on October 24 and by Jimmy and Warlily on October 30 showed Warlily was deceived; the Amicable Settlement did not change her situation because she was never apprised of the import of the CA Decision and believed Atty. Edgar Praile was only a witness to the receipt of P300,000.
• Conjugal Property and Simulated Sale: Esmeralda countered that she was not a party to the Waiver and had no knowledge of its veracity; she argued that it was incredulous for Nolan to insist that the CA reverse a decision favorable to him, that only Spouses Terosa would suffer from the cancellation of their title, and that Nolan and Ilona's act bolstered the claim that the deed of sale to Spouses Terosa was fictitious and simulated to deprive Esmeralda and creditors of claims against conjugal assets.

• Waiver: Whether Warlily's Affidavit of Waiver, Quitclaim and Satisfaction of Claim can render moot or modify the CA Decision declaring the sale to Spouses Terosa void.
• Amicable Settlement — Consent: Whether the Amicable Settlement validly modified the CA Decision considering Jimmy and Warlily's claim that they did not give consent.
• Amicable Settlement — Conjugal Property: Whether Nolan could waive or dispose of his and Esmeralda's rights over the conjugal house and lot through the Amicable Settlement without Esmeralda's written consent.
• Payment: Whether the P425,000 received by Jimmy and Warlily should be deducted from the total amount due notwithstanding the invalidity of the Amicable Settlement.

• Waiver: No. Warlily's waiver could not affect the nullity of the deed of sale because the property was neither a right nor a benefit she was entitled to, and the fraud finding was a finding of fact and law that the parties cannot undo by agreement.
• Amicable Settlement — Consent: No. The compromise lacked valid consent because Jimmy and Warlily's allegations cast doubt on whether they fully understood its terms and the CA Decision.
• Amicable Settlement — Conjugal Property: No. Nolan could not waive or dispose of conjugal property without Esmeralda's written consent under Family Code Articles 124, 89, and 107, and Esmeralda objected to the settlement.
• Payment: Yes. Although the Amicable Settlement was invalid, it was evidence of payment of P425,000, which should be deducted from the total amount due.

• Waiver: The SC applied the definition of waiver as a voluntary and intentional relinquishment or abandonment of a known existing legal right, advantage, benefit, claim, or privilege, which except for such waiver the party would have enjoyed. It noted the general rule that a person may waive any matter affecting property and alienable rights or privileges if they rest in the individual, are for his sole benefit, do not infringe the rights of others, and are not forbidden by law or public policy. Warlily's waiver could not cover the issue of the validity of the sale of the property to Spouses Terosa because the property is neither a right nor a benefit she is entitled to. The declaration of nullity due to fraud was both a finding of fact and of law by the lower courts, and the parties cannot agree amongst themselves and decide otherwise. Thus, the waiver did not render the issue moot or modify the CA Decision.
• Amicable Settlement — Consent: The SC treated the Amicable Settlement as a compromise agreement, defined as a contract whereby the parties make reciprocal concessions in order to resolve their differences and thus avoid or put an end to a lawsuit. To have the force of law, a compromise must comply with the requisites and principles of contracts: consent of the parties, an object certain that is the subject matter, and the cause of the obligation. While compromise agreements are generally favored and encouraged by the courts, it must be proved that they were voluntarily, freely, and intelligently entered into by the parties, who had full knowledge of the judgment. Jimmy and Warlily consistently maintained that they were deceived into executing the Waiver and Amicable Settlement and were not properly assisted by counsel; they insisted the settlement was proposed and forged by Nolan and Ilona in bad faith with advance knowledge of the CA Decision. Their allegations cast doubt on whether they fully understood the terms of the Amicable Settlement when they signed it, and they argued they did not fully comprehend the CA Decision in their favor. Thus, it may be reasonably inferred that Jimmy and Warlily did not give consent to the Amicable Settlement.
• Amicable Settlement — Conjugal Property: The Amicable Settlement, which Nolan signed, aimed to recall the lower courts' finding of nullity of the sale of the house and lot to Spouses Terosa. By agreeing to the validity of the sale, Nolan disposed of or waived his and Esmeralda's rights over the house and lot, which the lower courts found to be part of their conjugal property. Article 124 of the Family Code requires that any disposition or encumbrance of conjugal property must have the written consent of the other spouse; otherwise, such disposition is void. Under Article 89, no waiver of rights, interests, shares, and effects of the conjugal partnership during the marriage can be made except in case of judicial separation of property, and Article 107 applies Articles 88 and 89 to the conjugal partnership of gains. Esmeralda did not consent to Nolan disposing or waiving their rights over the house and lot through the Amicable Settlement; she objected to the settlement and expressed disbelief that Nolan would want the CA to reverse a decision favorable to him. Thus, Nolan could not waive or dispose of the conjugal property through the Amicable Settlement.
• Payment: The SC found that notwithstanding the invalidity of the Amicable Settlement, it was still evidence of payment by Nolan and Ilona of P425,000. Jimmy and Warlily did not deny receiving the amount; in their Opposition filed with the CA, they admitted receipt and attached a copy of the receipt. The amount of P425,000 should therefore be deducted from the total amount due to Jimmy and Warlily.

• Waiver — A voluntary and intentional relinquishment or abandonment of a known existing legal right, advantage, benefit, claim, or privilege, which except for such waiver the party would have enjoyed. A person may waive any matter affecting property and alienable rights or privileges if they rest in the individual, are for his sole benefit, do not infringe the rights of others, and are not forbidden by law or public policy. In this case, Warlily's waiver could not affect the nullity of the sale to Spouses Terosa because the property was not her right or benefit, and the fraud finding was a finding of fact and law that the parties cannot undo by agreement.
• Compromise Agreement — A contract whereby the parties make reciprocal concessions in order to resolve their differences and thus avoid or put an end to a lawsuit. To have the force of law, it must comply with contract requisites: (1) consent of the parties; (2) an object certain that is the subject matter; and (3) the cause of the obligation. It must be voluntarily, freely, and intelligently entered into with full knowledge of the judgment. The SC found no valid consent because Jimmy and Warlily's allegations cast doubt on whether they understood the terms and the CA Decision.
• Conjugal Property Disposition — Under Family Code Article 124, any disposition or encumbrance of conjugal property requires the written consent of the other spouse; otherwise, it is void. Under Articles 89 and 107, no waiver of rights, interests, shares, and effects of the conjugal partnership can be made during the marriage except in case of judicial separation of property. Nolan's agreement to validate the sale and recall cancellation of TCT No. T-107509 was a disposition or waiver of conjugal property without Esmeralda's written consent, so it was void.
• Payment Under Invalid Compromise — An invalid compromise agreement may still be evidence of payment of amounts actually received. The SC deducted P425,000 from the total amount due to Jimmy and Warlily because they admitted receiving it.

• "Warlily's Waiver cannot cover the issue of the validity of the sale of the property to the Spouses Terosa since the property is neither a right nor a benefit she is entitled to." — The SC used this to reject the waiver as a basis for modifying the CA Decision.
• "A compromise agreement is defined as a contract whereby the parties make reciprocal concessions in order to resolve their differences and thus avoid or put an end to a lawsuit." — The SC characterized the Amicable Settlement as a compromise and tested it against contract requisites.
• "Such disposal or waiver by Nolan is not allowed by law. Article 124 of the Family Code requires that any disposition or encumbrance of conjugal property must have the written consent of the other spouse; otherwise, such disposition is void." — The SC invalidated Nolan's agreement to validate the sale without Esmeralda's written consent.
• "The invalidity of the Amicable Settlement notwithstanding, we find that it still is evidence of payment by Nolan and Ilona of P425,000.00." — The SC credited the amount paid despite the settlement's invalidity.

• F.F. Cruz and Co., Inc. vs. HR Construction Corp., G.R. No. 187521, March 14, 2012, 668 SCRA 302 — Cited for the definition and nature of waiver.
• Magbanua vs. Uy, G.R. No. 161003, May 6, 2005, 458 SCRA 184 — Cited for the definition of compromise agreement and its contract requisites.
• Aguslin vs. Cruz-Herrera, G.R. No. 174564, February 12, 2014, 716 SCRA 42 — Cited for the rule that a compromise must be voluntarily, freely, and intelligently entered into with full knowledge of the judgment.
• Titan Construction Corporation vs. David, Sr., G.R. No. 169548, March 15, 2010, 615 SCRA 362 — Cited for the rule that disposition or encumbrance of conjugal property without the other spouse's written consent is void under Article 124.
• Aggabao vs. Parulan, Jr., G.R. No. 165803, September 1, 2010, 629 SCRA 562 — Cited in support of the same Article 124 rule.

• Family Code, Article 124 — Requires the written consent of the other spouse for any disposition or encumbrance of conjugal property; otherwise, the disposition is void. Applied to hold that Nolan's agreement in the Amicable Settlement to validate the sale and recall cancellation of TCT No. T-107509 was void without Esmeralda's written consent.
• Family Code, Article 89 — Prohibits waiver of rights, interests, shares, and effects of the absolute community during marriage except in case of judicial separation of property. Applied through Article 107 to the conjugal partnership of gains, so Nolan could not waive conjugal rights during the marriage.
• Family Code, Article 107 — Makes Articles 88 and 89 applicable to the conjugal partnership of gains. Applied to treat the Hapitans' property as conjugal and to bar Nolan's waiver without judicial separation of property.
• Civil Code, Article 2028 — Defines a compromise as a contract whereby parties make reciprocal concessions to resolve differences and avoid or end a lawsuit. Applied to characterize the Amicable Settlement and test its validity.
• Civil Code, Article 1318 — Sets the requisites of contracts: consent of the parties, object certain, and cause of the obligation. Applied to require valid consent for the compromise; the SC found consent doubtful because Jimmy and Warlily did not fully understand the terms and the CA Decision.