G.R. No. L-14678 March 31, 1965
JUAN SERRANO, plaintiff-appellee, vs. FEDERICO MIAVE, EUGENIA HIDALGO MIAVE and CRESENTE VICTORINO, defendants-appellants.

FACTS

On July 11, 1956, Juan Serrano filed a complaint (Civil Case No. Q-1948) against spouses Federico and Eugenia Miave for specific performance and damages, demanding they execute a formal deed of sale for a truck and assign its certificate of public convenience. The spouses defended that Serrano failed to deliver a reconditioned jeepney as part of the purchase price. The parties submitted a compromise agreement dated February 15, 1957, which was approved by the court in a judgment dated February 24, 1957. The agreement stipulated: (1) a purchase price of P5,200; (2) an acknowledgment of P600 received; (3) Serrano’s obligation to deliver a jeepney within 45 days; (4) the spouses’ promise to deliver the truck’s papers and execute the deed of sale; (5) payment of the P1,600 balance in installments; and (6) the inclusion and transfer of the certificate of public convenience (PSC Case No. 81523). The spouses executed the deed of sale and assignment, and Serrano executed a chattel mortgage to secure the balance. Serrano failed to deliver the jeepney, prompting the spouses to move for execution of the judgment. After notice and hearing, execution was ordered. At the sheriff’s sale on May 27, 1957, the spouses purchased Serrano’s own certificate of public convenience (PSC Case No. 79700) for P1,000. They later sold it to Cresente Victorino for P4,000. Serrano then filed the present case (Civil Case No. Q-2487) to annul the compromise agreement, the judgment, the execution, and the sheriff’s sale, alleging fraud. He claimed that at the time of the compromise agreement (February 15, 1957), the spouses’ certificate (PSC Case No. 81523) had already been cancelled by the Public Service Commission on October 19, 1956, a fact concealed from him. The trial court annulled all the proceedings.

ISSUE

Whether the compromise agreement, the judgment approving it, the order and writ of execution, and the sheriff’s sale should be annulled on the grounds of fraud and/or lack of consideration due to the alleged concealment of the cancellation of the certificate of public convenience.

RULING

No. The Supreme Court reversed the trial court’s decision and declared all the proceedings valid. The Court held that: (1) There was no fraud attributable to the Miave spouses. Serrano had possession of the truck and the certificate since February 10, 1956, and had the opportunity and duty to verify the certificate’s status with the Public Service Commission, especially since he was himself an operator. The compromise agreement even placed on him the obligation to secure the transfer of the certificate. There was no proof the spouses knew of the cancellation. Serrano’s failure to exercise ordinary care negated a finding of concealment or fraud. (2) The compromise agreement was not void for lack of consideration. The consideration is determined at the time of the contract’s perfection. The original contract to sell was perfected on February 6, 1956, when the certificate was still existing. The compromise agreement was a reaffirmance and ratification of that original contract, not a novation. Furthermore, inadequacy or insufficiency of the vendor’s title does not equate to a lack of consideration that voids a contract. (3) The order and writ of execution were valid as Serrano received notice of the motion for execution and the notice of sale, and a hearing was conducted. Consequently, the sheriff’s sale was valid, and the subsequent sale to Victorino was likewise valid.