G.R. No. L-21347 July 28, 1972
DAMASO P. PEREZ, petitioner, vs. COURT OF APPEALS and PACMAC MACHINERY & MERCHANDIZING CO., INC., respondents.

FACTS

Republic Shoe Manufacturing Co. filed a complaint against PACMAC for reformation of contracts involving the purchase of machineries. PACMAC counterclaimed for the unpaid balance. The parties subsequently entered into a Compromise Agreement, which was approved by the trial court in a judgment dated November 12, 1960. The agreement stipulated that Republic Shoe admitted a liability of P336,248.30. It was to settle this by returning specified machineries within 60 days, with an option to sell some items and pay a fixed sum. Crucially, paragraph 7 of the agreement stated: “Mr. Damaso Perez binds himself to pay all said sum of P35,000.00 plus interest… in recognition of said indebtedness, Mr. Perez has executed and delivered in favor of PACMAC… a pledge of his Republic Savings Bank shares.”
PACMAC later filed a motion for execution, alleging Republic Shoe failed to comply with the terms. The trial court granted the motion and issued a writ of execution not only against Republic Shoe but also against Damaso P. Perez personally. Perez moved to quash the writ, arguing he was not a party to the case and the judgment based on the compromise did not order him to pay anything. The trial court denied his motion, and the Court of Appeals sustained this denial.

ISSUE

The primary issue is whether Damaso P. Perez, who was not formally named as a party-defendant in the original case, can be held liable under the writ of execution issued to enforce the compromise judgment.

RULING

The Supreme Court ruled that Perez can be held liable. The legal logic rests on two key points. First, the judgment subject to execution is based solely on the Compromise Agreement. Paragraph 7 of that agreement explicitly states, “Mr. Damaso Perez binds himself to pay…” and details his execution of a pledge on his personal bank shares. By signing the agreement in his personal capacity and undertaking a personal obligation therein, Perez voluntarily submitted himself to the court’s jurisdiction for the enforcement of that specific stipulation. The compromise, once approved by the court, had the force of res judicata and was immediately executory.
Second, the Court found no denial of due process. While Perez was not formally impleaded as a defendant, the protective mantle of due process was accorded to him as the real party in interest. Republic Shoe Manufacturing Co. was a sole proprietorship owned entirely by Perez, not a separate corporate entity. Therefore, Perez and the company were legally one and the same. As the sole proprietor, he was the real plaintiff from the start, and any judgment for or against the proprietorship necessarily affected him. The Court cited precedent that when the real litigant has in fact been accorded due process, he may be held liable as a party. Here, Perez actively participated by causing the complaint to be filed and, most importantly, by personally signing the compromise agreement that created his direct obligation. Consequently, amending the writ to enforce the judgment against him personally was legally justified. The Court modified the appellate decision by remanding the case for a hearing on the motion for execution with proper notice.