G.R. No. L-52197 January 30, 1982
RAFAEL M. SUMADCHAT, doing business under the name and style “R. SUMADCHAT CUSTOMS BONDED WAREHOUSE, General Order No. 238”, petitioner, vs. HONORABLE COURT OF APPEALS and ST. LOUIS REALTY CORPORATION, respondents.

FACTS

Petitioner Rafael Sumadchat obtained a money judgment against private respondent St. Louis Realty Corporation. Following execution pending appeal, the parties entered into a compromise agreement to settle the case. The agreement, incorporated in a Motion to Withdraw Appeal, stipulated that St. Louis Realty would pay Sumadchat a total of P915,000.00 in specified installments. In consideration, Sumadchat agreed to release levied properties and lift garnishments upon payment of the first installment of P600,000.00, and to execute documents of reconveyance for properties already sold at execution sale, treating them as redeemed.
St. Louis Realty paid the first P600,000.00 and the attorney’s fees. However, it failed to pay the final balance of P300,000.00 when it became due. Sumadchat moved for an alias writ of execution in the trial court to collect this balance. The trial court granted the motion. St. Louis Realty then filed a petition for certiorari with the Court of Appeals, arguing that Sumadchat had not first complied with his obligation to execute the deeds of reconveyance, which was a condition precedent to its own duty to pay the balance. The Court of Appeals annulled the trial court’s orders granting execution, holding that Sumadchat’s performance was a condition that must be fulfilled first.

ISSUE

Whether the Court of Appeals erred in ruling that the petitioner’s execution of deeds of reconveyance was a condition precedent to the private respondent’s obligation to pay the balance of the compromise amount.

RULING

Yes, the Supreme Court reversed the Court of Appeals. The legal logic centers on the interpretation of the compromise agreement and the doctrine of constructive fulfillment. The Court held that St. Louis Realty’s obligation to pay the P300,000.00 balance was not contingent upon Sumadchat first physically executing and delivering formal deeds of reconveyance. The compromise agreement required Sumadchat to treat the properties as “redeemed in accordance with law.” The record showed that Sumadchat had already executed a Certificate of Redemption, a public document filed with the Register of Deeds affecting the subject properties. This act constituted substantial compliance with his contractual duty. Since a Certificate of Redemption is a public record, St. Louis Realty was deemed to have knowledge of it. Therefore, the condition was constructively fulfilled, and no legal obstacle remained to prevent St. Louis Realty’s payment obligation from becoming absolute. The Court found that St. Louis Realty’s refusal to pay, and its failure to consign the amount, indicated a desire to use the funds for its own advantage unjustly. A compromise agreement, once approved, is binding and terminates the original controversy. Consequently, the alias writ of execution for the balance of P300,000.00 plus legal interest from its due date was properly issued by the trial court.