G.R. No. L-46717 May 21, 1993
ANTONIO BANZAGALES and GREGORIO ABAD, petitioners, vs. Spouses HERMINIA AND PATROCINIO GALMAN; Spouses REMEDIOS AND BENJAMIN MENDOZA; PASCUAL ALCARAZ; AGUSTINA MANALOTO, deceased, represented by ANTONIO MANALOTO; and the Honorable COURT OF APPEALS, respondents.

FACTS

Private respondents (the Galman group) filed a complaint against petitioners and Agustina Manaloto for annulment of documents, recovery of possession, and damages. They sought to enforce their right to occupy store spaces in a building on a government lot in Quiapo, Manila, based on a 1961 sublease contract with Manaloto, the lessee of the lot. Petitioners claim they constructed the building at their expense under a 1972 Memorandum of Agreement with Manaloto. Pending litigation, the trial court issued orders establishing a “temporary arrangement” for occupancy, setting rental and goodwill payments. Subsequent orders by different judges amended these amounts. The Galman group filed a petition for certiorari with the Court of Appeals seeking to annul the amendatory orders. The Court of Appeals initially dismissed the petition but, on motion for reconsideration, reversed itself and enforced a “Compromise Agreement” entered into solely between the Galman group and Manaloto. This agreement declared Manaloto the owner of the building and fixed rental terms, purporting to be a final settlement. Petitioners were not parties to this compromise.

ISSUE

Whether the Court of Appeals acted with grave abuse of discretion or in excess of jurisdiction by: 1) adjudicating the case on the merits through a compromise agreement to which the petitioners were not parties, before the trial court could hold a trial; and 2) granting certiorari relief against interlocutory orders of the trial court.

RULING

The Supreme Court ruled in favor of the petitioners. The resolution of the Court of Appeals dated July 29, 1977, was set aside, and its earlier decision dated March 30, 1976, was reinstated. The case was remanded to the trial court for trial on the merits.
The Court held that the Court of Appeals exceeded its jurisdiction. The compromise agreement, which decided substantive issues like ownership and rental terms, effectively resolved the case on the merits without a trial and without the participation of the petitioners, who were claiming title to the building. Under Article 1311 of the Civil Code and the rule on res inter alios acta, a contract cannot bind or prejudice a non-party. The Court of Appeals usurped the trial court’s function to determine the legal relationships of the parties after a full hearing.
Furthermore, the petition for certiorari filed by the Galman group was improper. The challenged orders were interlocutory, issued to govern relations pending litigation, and could only be reviewed on appeal after a final judgment. Certiorari does not lie against interlocutory orders unless issued with grave abuse of discretion, which was not shown. The trial court had jurisdiction to amend the temporary arrangement as conditions warranted. The Supreme Court directed the trial court to hear and decide the case with dispatch.