G.R. No. 132076 & G.R. No. 140989; July 22, 2003
ROBERTO U. GENOVA, Petitioner, vs. LEVITA DE CASTRO and THE HONORABLE COURT OF APPEALS, Respondents.

FACTS

Petitioner Roberto Genova obtained a loan from respondent Levita de Castro, securing it by surrendering his owner’s duplicate certificate of title and signing blank papers for a mortgage document. Instead, de Castro used the signed papers to fabricate an “Absolute Deed of Sale,” transferring the property to her name. The property was later foreclosed by a prior mortgagee, UCPB, from whom de Castro redeemed it, consolidating title in her name using the fraudulent deed. Genova filed an action for reformation and reconveyance. The parties entered into a Compromise Agreement approved by the trial court, whereby Genova could repurchase the property within four months by paying de Castro a total sum of P3,332,196.59, representing the redemption price, taxes, and interest.
Genova paid P2,287,000.00 within the stipulated period but failed to pay the P1,045,196.59 balance on time. He later tendered payment, which was refused, leading him to consign the amount with the trial court. De Castro moved for a writ of execution, arguing Genova failed to comply fully with the compromise agreement. The trial court denied the motion, finding the principal obligation paid and the balance constituting only interest. The Court of Appeals reversed, ordering execution.

ISSUE

Whether the Court of Appeals erred in ruling that petitioner failed to repurchase the property per the Compromise Agreement and that his consignation of the unpaid balance was invalid.

RULING

The Supreme Court reversed the Court of Appeals and upheld the trial court’s denial of the writ of execution. The legal logic centers on the nature of the Compromise Agreement as a novation of the original loan and fraudulent sale, converting the transaction into a contract of repurchase with a clear principal sum. The Court meticulously examined the stipulated payments, distinguishing between the principal repurchase price and additional components for reimbursement and interest. It found that Genova had paid the core repurchase price of P1,060,000.00 and the redemption payment to UCPB, fulfilling the essential obligations. The unpaid balance pertained solely to accrued interest and other reimbursements.
The Court ruled that consignation was valid. De Castro’s unjustified refusal to accept the tendered payment for the interest balance extinguished Genova’s obligation upon valid consignation. The Compromise Agreement’s clause on failure to repurchase was interpreted to mean failure to pay the principal repurchase price, not the ancillary interest. Since the principal was paid, Genova substantially complied, and equity favored preventing de Castro from using a technical default on interest to forfeit the property, especially given the agreement’s origin in her fraud. The decision prevents the unjust enrichment of a party who initiated the controversy through deceit.