G.R. No. 107888 January 4, 1994
CIUDAD REALTY & DEV’T. CORPORATION, ELVIRA C. PATEL AND JOSE M. DRAGON, petitioners, vs. THE HON. COURT OF APPEALS, MAGDIWANG REALTY CORPORATION, DOÑA JUANA DEV’T. CORPORATION, respondents.

FACTS

In June 1982, Doña Juana Development, Inc., Jose Dragon, and Bayani Dragon filed a complaint for rescission of contract with damages against Elvira C. Patel and Ciudad Real Development, Inc. before the RTC of Quezon City (Civil Case No. Q-35393). The complaint alleged that on March 31, 1981, Doña Juana, through its Secretary-Treasurer Bayani M. Dragon, sold a parcel of land to defendant Patel via a “Memorandum-Agreement.” Patel made partial payments but failed to complete the 40% down payment. Patel later introduced Ciudad Real, claiming it would shoulder the unpaid balance using the property as collateral for a loan from the DBP. Plaintiffs, acting in good faith, acceded to a simulated sale transferring titles to Ciudad Real, with the purchase price drastically reduced. Defendants allegedly novated the payment terms, making them dependent on the DBP loan approval, contrary to the original agreement. Defendants failed to pay the balance despite demands.
On July 18, 1989, Magdiwang Realty Corporation filed a Motion for Intervention, invoking a Memorandum of Agreement dated July 15, 1982, with Doña Juana, whereby Doña Juana agreed to sell the same property to Magdiwang. The motion was denied, and the denial was not appealed. On August 27, 1991, Magdiwang filed a Motion to Substitute and/or Join as Party/Plaintiff, which was also denied by the trial court in an Order dated February 19, 1991. This Order was not further contested by Magdiwang.
Subsequently, a misunderstanding developed between plaintiff Jose Dragon and Atty. Renato Callanta, counsel for Doña Juana. Atty. Callanta manifested that Jose Dragon was no longer an officer or stockholder of Doña Juana. Jose Dragon, in turn, filed a Notice of Termination of Service of Counsel, terminating Atty. Callanta.
The parties (Doña Juana, represented by Jose Dragon, and Ciudad Real, represented by Elvira Patel) then submitted a Compromise Agreement on March 4, 1992, wherein defendants admitted a remaining balance of P3,658,519.00 and agreed to pay it in installments. In return, plaintiffs agreed to dismiss the case and deliver the titles. The trial court set the agreement for hearing. Magdiwang filed an Opposition, arguing Jose Dragon had no authority to represent Doña Juana and that the compromise was contrary to its rights under the 1982 Memorandum with Doña Juana. The trial court approved the Compromise Agreement in its Decision dated April 30, 1992.
Magdiwang filed a petition for certiorari with the Court of Appeals. The appellate court granted the petition, annulled the trial court’s Decision approving the compromise, and ordered the case remanded for further proceedings. The Court of Appeals held that the trial court committed grave abuse of discretion in approving the compromise because: (1) Jose Dragon lacked authority to represent Doña Juana, as shown by a Deed of Assignment where he transferred his rights to another; (2) the compromise violated Magdiwang’s rights under its 1982 Memorandum with Doña Juana; and (3) the trial court failed to consider a letter from a certain Marissa Gonzales claiming to be the corporate secretary of Doña Juana, which stated that Jose Dragon was not authorized.
Petitioners Ciudad Real, Patel, and Jose Dragon filed the instant petition for certiorari.

ISSUE

Whether the Court of Appeals acted with grave abuse of discretion in annulling the trial court’s Decision which approved the Compromise Agreement between the original parties.

RULING

Yes, the Court of Appeals acted with grave abuse of discretion. The Supreme Court granted the petition, reversed the Decision of the Court of Appeals, and reinstated the trial court’s Decision approving the Compromise Agreement.
The Supreme Court held that the Court of Appeals erred in ruling that the trial court committed grave abuse of discretion. First, the trial court correctly found that Jose Dragon had the authority to represent Doña Juana. He appeared at the hearing, identified the corporation’s Secretary’s Certificate authorizing him to enter into the compromise, and testified to his positions as Chairman, President, and General Manager. The appellate court’s reliance on an unproven Deed of Assignment and a hearsay letter (from Marissa Gonzales) not presented as evidence during the hearings was procedurally erroneous and a denial of due process. Findings of fact of the trial court, when supported by evidence, command respect.
Second, Magdiwang had no legal interest in the subject matter of the litigation that would entitle it to block the compromise between the original parties. Its Motion for Intervention and Motion to Substitute were both denied by the trial court, and these denials became final as Magdiwang did not appeal them. Consequently, Magdiwang was not a party to the case. Its alleged rights under the 1982 Memorandum with Doña Juana were not presented as evidence during the hearings for the compromise approval. A trial court’s decision cannot be reversed for failing to consider evidence not presented by the parties.
The Compromise Agreement was validly executed by the real parties-in-interest and complied with legal requirements. The trial court did not abuse its discretion in approving it.