Borja, Sr. v. Sulyap, Inc.
REITERATIONFacts
The Antecedents: Petitioner Basilio Borja, Sr. (lessor) and private respondent Sulyap Inc. (lessee) entered into a lease contract for an office building. Upon expiration, Sulyap Inc. demanded the return of advance rentals, association dues, and a deposit for electrical and telephone expenses, which Borja, Sr. refused. Sulyap Inc. filed a complaint for sum of money. Procedural History: The parties submitted a Compromise Agreement to the Regional Trial Court (RTC) of Quezon City, Branch 80, which was approved by the RTC on October 24, 1995. The agreement stipulated various amounts to be returned by the lessor to the lessee, including a P55,000.00 deposit to be turned over within 5 days from arrival of billings for utilities, and P30,575.00 for withholding taxes and association dues to be reimbursed prior to or on November 7, 1995. It also contained a penalty clause stating that any amount not paid within the period stated would earn 2% interest per month until fully paid, plus 25% attorney's fees. Petitioner failed to pay the stipulated amounts. Sulyap Inc. filed a motion for writ of execution for P102,733.12, inclusive of interest and attorney's fees. Petitioner opposed, arguing the penalty should not be imposed due to respondent's fault. Petitioner later filed a motion to quash the writ and modify the decision, alleging fraud in the execution of the compromise agreement, claiming his signature was attached to a version containing the penalty clause without his consent. The RTC denied the motion, giving credence to the testimony of petitioner's former counsel, Atty. Leonardo Cruz, who stated petitioner consented to the penalty clause, and noting petitioner's delay in raising the fraud issue. The Court of Appeals affirmed the RTC's denial. The Petition: Petitioner assails the Court of Appeals' decision affirming the RTC's denial of his motion to quash the writ of execution and modify the compromise judgment.
Issue(s)
Whether the petitioner is bound by the penalty clause in the compromise agreement. Whether the petitioner's failure to question the penalty clause for an extended period constitutes ratification and estops him from assailing its validity. Whether the assistance of Atty. Leonardo Cruz, an employee of the Quezon City government, in entering into the compromise agreement constitutes a prohibited practice of law.
Ruling
The petition is denied. The Decision of the Court of Appeals is affirmed, sustaining the trial court's denial of petitioner's motion to quash the writ of execution and to modify the compromise judgment.
Ratio Decidendi
On the binding effect of the penalty clause: The Court reiterated the settled rule that findings of trial courts on the credibility of witnesses are given great weight. The petitioner's claim of fraud in the execution of the compromise agreement was not sufficiently established. The testimony of Atty. Leonardo Cruz, who stated that the petitioner consented to the inclusion of the penalty clause, was found credible. The Court noted that the penalty clause in the approved agreement was less burdensome than another proposed clause, suggesting a deliberate choice by the petitioner. The absence of evidence, other than petitioner's bare allegation, further weakened his claim of fraud. The Court found no irregularity in the compromise agreement as approved by the trial court. On ratification and estoppel: The Court highlighted the petitioner's conduct after receiving the judgment based on the compromise agreement. From October 25, 1995, when he received the judgment, until February 19, 1997, he never raised the issue of the fraudulent inclusion of the penalty clause. This prolonged silence, despite receiving the judgment and filing other motions (including one without counsel regarding repairs), militated against his claim of fraud. Even when represented by new counsel, the issue of fraud was not immediately brought to the trial court's attention. The Court concluded that petitioner's failure to question the penalty clause despite several opportunities constituted ratification, making him estopped from assailing its validity. His earlier motion to quash the writ of execution, based on a different ground (respondent's fault), implicitly acknowledged the validity of the penalty clause. On the alleged prohibited practice of law: The Court found no merit in the petitioner's contention that Atty. Leonardo Cruz's assistance constituted a prohibited private practice of law. The Court clarified that "private practice" contemplates a succession of acts of the same nature habitually or customarily holding oneself out to the public as a lawyer, not an isolated court appearance or assistance in a single transaction like entering into a compromise agreement. Such habitual practice was not established in this case.
Main Doctrine
A party who fails to question the inclusion of a penalty clause in a compromise agreement despite several opportunities to do so is deemed to have ratified the same and is estopped from assailing its validity.