Respondents executed two promissory notes secured by real property mortgages in favor of petitioner. The respondents defaulted and petitioner moved for extra-judicial foreclosure of the mortgages. Respondent filed a complaint against petitioner. The parties later entered into “amicable settlement” and submitted it to the trial court for approval. The trial court required the parties to give some clarifications on several issues that were not complied. The amicable settlement was disapproved and the court proceeded. Respondents withdrew the case and filed a (new) case for novation and specific performance which was decided favorably for the respondents. The Court of Appeals affirmed the judgment.
Whether or not the amicable settlement entered into between parties has novated the original obligation.
NO. The parties entered into the agreement basically to put an end to Civil Case No. 14007 then pending before the Regional Trial Court.Concededly, the provisions of the settlement were beneficial to the respondent couple. The compromise extended the terms of payment and implicitly deferred the extrajudicial foreclosure of the mortgaged property. It was well to the interest of respondent spouses to ensure its judicial approval; instead, they went to ignore the order of the trial court and virtually failed to make any further appearance in court. This conduct on the part of respondent spouses gave petitioner the correct impression that the Sorianos did not intend to be bound by the compromise settlement, and its non-materialization negated the very purpose for which it was executed.
The decision of the court of the Court of Appeals affirming that of the trial court was reversed and set aside.