G.R. No. L-4659 July 11, 1952
Dominga Salazar, et al., plaintiffs-appellees, vs. Fausto Jarabe, defendant-appellant.

FACTS

The plaintiffs, heirs of Gregorio Salazar, filed an action to recover a parcel of land in Pinamalayan, Mindoro. This land was part of a larger tract originally owned by Margarito Afan and was purchased by Gregorio Salazar from Afan’s widow. The defendant, Fausto Jarabe, claimed to have bought the same portion from Salazar and took possession. Previously, on August 10, 1946, the plaintiffs, through Atty. Lourdes Paredes-San Diego, filed a forcible entry and detainer case against Jarabe. Before trial, the plaintiffs’ lawyer moved to dismiss the case, attaching a written compromise agreement stating that the plaintiffs recognized a 1932 deed of sale from their father to Jarabe and agreed to settle for an additional P75 from the defendant. The agreement was signed only by Jarabe and Atty. Paredes-San Diego, not by the plaintiffs themselves. The justice of the peace court confirmed the settlement and dismissed the case. On February 13, 1948, the plaintiffs, through a different attorney, filed the present action for recovery of ownership. The defendant pleaded the compromise agreement as a bar. The trial court invalidated the compromise, sustaining the plaintiffs’ impugnment.

ISSUE

Whether the compromise agreement entered into by the plaintiffs’ former attorney without their special authority is valid and constitutes a bar to the present action for recovery of ownership.

RULING

Yes. The Supreme Court reversed the trial court’s decision and dismissed the action. While Section 21 of Rule 127 (now Rule 138) provides that an attorney cannot compromise a client’s litigation without special authority, laches may operate to validate such an agreement if the client, upon becoming aware, fails to promptly repudiate it. Here, the plaintiffs failed to repudiate the compromise for nearly two years, raising a presumption of ratification which they did not rebut. Furthermore, the compromise agreement has the authority of res judicata between the parties under Article 1809 (now Article 2028) of the Civil Code, as a contract to terminate a suit already instituted. The Court held that the compromise was not foreign to the issues in the forcible entry case, as ownership was the heart of the controversy upon which the right of possession depended. Therefore, the present action is barred by the compromise.