Remedy if an amicable settlement is repudiated by one party

Facts: Jerry obtained a loan from Crisanta. Due to the Jerry's failure to pay the loan, Crisanta filed a complaint before the barangay. The parties entered into a Kasunduang Pag-aayos wherein the respondent agreed to pay his loan in installments. However, Jerry still failed to pay. The Lupong Tagapamayapa issued a certification to file action in court in favor of Crisanta who then filed a collection suit against Jerry before the Metropolitan Trial Court. MTC ruled in favor of Crisanta. RTC affirmed the decision. The CA, however, ruled that the remedy of Crisanta was to file an action for the execution of the Kasunduang Pag-aayos in court and not for collection of sum of money considering that more than six (6) months had elapsed from the date of settlement. 

Issue: Whether or not a complaint for sum of money is the proper remedy 

Held: Under Section 417 of the Local Government Code, an amicable settlement or arbitration award may be enforced by execution by the Barangay Lupon within six (6) months from the date of settlement, or by filing an action to enforce such settlement in the appropriate city or municipal court, if beyond the six-month period.

It must be emphasized, however, that enforcement by execution of the amicable settlement, either under the first or the second remedy, is only applicable if the contracting parties have not repudiated such settlement within ten (10) days from the date thereof in accordance with Section 416 of the Local Government Code. If the amicable settlement is repudiated by one party, either expressly or impliedly, the other party has two options, namely, to enforce the compromise in accordance with the Local Government Code or Rules of Court as the case may be, or to consider it rescinded and insist upon his original demand. This is in accord with Article 2041 of the Civil Code, which qualifies the broad application of Article 2037, viz:

If one of the parties fails or refuses to abide by the compromise, the other party may either enforce the compromise or regard it as rescinded and insist upon his original demand.

In the instant case, the respondent did not comply with the terms and conditions of the Kasunduang Pag-aayos. Such non-compliance may be construed as repudiation because it denotes that the respondent did not intend to be bound by the terms thereof, thereby negating the very purpose for which it was executed. Perforce, the petitioner has the option either to enforce the Kasunduang Pag-aayos, or to regard it as rescinded and insist upon his original demand, in accordance with the provision of Article 2041 of the Civil Code. Having instituted an action for collection of sum of money, the petitioner obviously chose to rescind the Kasunduang Pag-aayos. As such, it is error on the part of the CA to rule that enforcement by execution of said agreement is the appropriate remedy under the circumstances. (Miguel vs Montanez, G.R. No. 191336, January 25, 2012)

A motion for execution that contains the material requirements of an initiatory action could be treated as an original action and not merely as a motion

Facts: Michael and Annabel entered into an amicable settlement, evidenced by a document denominated as "kasunduan'' wherein Michael agreed to pay Annabel the amount of P250,000.00 on specific dates. The kasunduan was not repudiated. When Michael failed to honor the kasunduan, the Barangay Captain failed to enforce the kasunduan, and instead, issued a Certification to File Action. After about one and a half years from the date of the execution of the kasunduan, Angelita filed with the Municipal Circuit Trial Court a motion for execution. Michael argues that an amicable settlement or arbitration award can be enforced by ordinary civil action in the appropriate City or Municipal Trial Court and not by a mere Motion for execution.

Issue: Whether the motion for execution was a proper remedy

Held: 

A perusal of the body of the motion for

execution shows that it is actually in the 

nature of an action for execution; hence, 

it was a proper remedy;

It is undisputed that what Angelita filed before the MCTC was captioned "motion for execution," rather than a petition/complaint for execution.

A perusal of the motion for execution, however, shows that it contains the material requirements of an initiatory action.

First, the motion is sufficient in form and substance. It is complete with allegations of the ultimate facts constituting the cause of action; the names and residences of the plaintiff and the defendant; it contains the prayer for the MCTC to order the execution of the kasunduan; and there was also a verification and certification against forum shopping.

Furthermore, attached to the motion are: 1) the authenticated special power of attorney of Annabel, authorizing Angelita to file the present action on her behalf; and 2) the copy of the kasunduan whose contents were quoted in the body of the motion for execution.

It is well-settled that what are controlling in determining the nature of the pleading are the allegations in the body and not the caption.

Thus, the motion for execution that Angelita filed was intended to be an initiatory pleading or an original action that is compliant with the requirement under Section 3, Rule 6 of the Rules of Court that the complaint should allege the plaintiffs cause of action and the names and residences of the plaintiff and the defendant.

Angelita's motion could therefore be treated as an original action, and not merely as a motion/special proceeding. For this reason, Annabel has filed the proper remedy prescribed under Section 417 of the Local Government Code. (Sebastian vs. Ng, G.R. No. 164594, April 22, 2015)

The MCTC has the authority and jurisdiction to enforce the kasunduan regardless of the amount or the nature of the issue involved

Facts: Michael and Annabel entered into an amicable settlement, evidenced by a document denominated as "kasunduan'' wherein Michael agreed to pay Annabel the amount of P250,000.00 on specific dates. The kasunduan was not repudiated. When Michael failed to honor the kasunduan, the Barangay Captain failed to enforce the kasunduan, and instead, issued a Certification to File Action. After about one and a half years from the date of the execution of the kasunduan, Angelita filed with the Municipal Circuit Trial Court an action to enforce the same. Michael contends that since the amount of P250,000.00 - the subject matter of the kasunduan - is in excess of MCTC's jurisdictional amount of P200,000.00, the kasunduan is beyond the MCTC's jurisdiction to hear and to resolve.

Issue: Whether or not the MCTC has the authority and jurisdiction to execute the kasunduan regardless of the amount involved

Held: We again draw attention to the provision of Section 417 of the Local Government Code that after the lapse of the six (6) month period from the date of the settlement, the agreement may be enforced by action in the appropriate city or municipal court.

The law, as written, unequivocally speaks of the "appropriate city or municipal court" as the forum for the execution of the settlement or arbitration award issued by the Lupon. Notably, in expressly conferring authority over these courts, Section 417 made no distinction with respect to the amount involved or the nature of the issue involved. Thus, there can be no question that the law's intendment was to grant jurisdiction over the enforcement of settlement/arbitration awards to the city or municipal courts regardless of the amount. A basic principle of interpretation is that words must be given their literal meaning and applied without attempted interpretation where the words of a statute are clear,' plain and free from ambiguity. (Sebastian vs. Ng, G.R. No. 164594, April 22, 2015)

An action for the enforcement of a settlement is governed by the regular procedure and not by summary procedure

By express provision of Section 417 of the LGC, an action for the enforcement of the settlement should be instituted in the proper municipal or city court. This is regardless of the nature of the complaint before the Lupon, and the relief prayed for therein. The venue for such actions is governed by Rule 4, Section 1 of the 1997 Rules of Civil Procedure, as amended. An action for the enforcement of a settlement is not one of those covered by the Rules on Summary Procedure in civil cases; hence, the rules on regular procedure shall apply, as provided for in Section 1, Rule 5 of the Rules of Civil Procedure, as amended. (Vidal vs Escueta, G.R. No. 156228, December 10, 2003)

When to reckon the six-month period to enforce an amicable settlement by the Lupon

If the obligation in the settlement to be enforced is due and demandable on the date of the settlement, the six-month period should be counted from the date of the settlement; otherwise, if the obligation to be enforced is due and demandable on a date other than the date of the settlement, the six-month period should be counted from the date the obligation becomes due and demandable.

Held: Section 417 of the LGC grants a party a period of six months to enforce the amicable settlement by the Lupon through the Punong Barangay before such party may resort to filing an action with the MTC to enforce the settlement. The raison d etre of the law is to afford the parties during the six-month time line, a simple, speedy and less expensive enforcement of their settlement before the Lupon.

The time line of six months should be computed from the date of settlement. However, if applied to a particular case because of its peculiar circumstance, the computation of the time line from the date of the settlement may be arbitrary and unjust and contrary to the intent of the law. To illustrate: Under an amicable settlement made by the parties before the Lupon dated January 15, 2003, the respondents were obliged to vacate the subject property on or before September 15, 2003. If the time line of six months under Section 417 were to be strictly and literally followed, the complainant may enforce the settlement through the Lupon only up to July 15, 2003. But under the settlement, the respondent was not obliged to vacate the property on or before July 15, 2003; hence, the settlement cannot as yet be enforced. The settlement could be enforced only after September 15, 2003, when the respondent was obliged to vacate the property. By then, the six months under Section 417 shall have already elapsed. The complainant can no longer enforce the settlement through the Lupon, but had to enforce the same through an action in the MTC, in derogation of the objective of Section 417 of the LGC. The law should be construed and applied in such a way as to reflect the will of the legislature and attain its objective, and not to cause an injustice. As Justice Oliver Wendell Holmes aptly said, courts are apt to err by sticking too closely to the words of the law where these words support a policy that goes beyond them. The Court should not defer to the latter that killeth but to the spirit that vivifieth.

In light of the foregoing considerations, the time line in Section 417 should be construed to mean that if the obligation in the settlement to be enforced is due and demandable on the date of the settlement, the six-month period should be counted from the date of the settlement; otherwise, if the obligation to be enforced is due and demandable on a date other than the date of the settlement, the six-month period should be counted from the date the obligation becomes due and demandable.

Parenthetically, the Katarungang Pambarangay Implementing Rules and Regulations, Rule VII, Section 2 provides:

SECTION 2. Modes of Execution. - The amicable settlement or arbitration award may be enforced by execution by the Lupon within six [6] months from date of the settlement or date of receipt of the award or from the date the obligation stipulated in the settlement or adjudged in the arbitration award becomes due and demandable. After the lapse of such time, the settlement or award may be enforced by the appropriate local trial court pursuant to the applicable provisions of the Rules of Court. An amicable settlement reached in a case referred by the Court having jurisdiction over the case to the Lupon shall be enforced by execution by the said court. (Underlining supplied).

(Vidal vs Escueta, G.R. No. 156228, December 10, 2003)

Two-tiered mode of enforcement of an amicable settlement

● Section 417 of the Local Government Code readily discloses the two-tiered mode of enforcement of an amicable settlement. The provision reads:

Section 417. Execution. - The amicable settlement or arbitration award may be enforced by execution by the lupon within six (6) months from the date of the settlement. After the lapse of such time, the settlement may be enforced by action in the appropriate city or municipal court. 

Under this provision, an amicable settlement or arbitration award that is not repudiated within a period often (10) days from the settlement may be enforced by: first, execution by the Lupon within six (6) months from the date of the settlement; or second, by an action in the appropriate city or municipal trial court if more than six (6) months from the date of settlement has already elapsed.

Under the first mode of enforcement, the execution of an amicable settlement could be done on mere motion of the party entitled thereto before the Punong Barangay. The proceedings in this case are summary in nature and are governed by the Local Government Code and the Katarungang Pambarangay Implementing Rules and Regulations.

The second mode of enforcement, on the other hand, is judicial in nature and could only be resorted to through the institution of an action in a regular form before the proper City/Municipal Trial Court. The proceedings shall be governed by the provisions of the Rules of Court. (Sebastian vs. Ng, G.R. No. 164594, April 22, 2015)


● The amicable settlement which is not repudiated within the period therefor may be enforced by execution by the Lupon through the Punong Barangay within a time line of six months, and if the settlement is not so enforced by the Lupon after the lapse of the said period, it may be enforced only by an action in the proper city or municipal court as provided for in Section 417 of the LGC of 1991, as amended, which reads:

SEC. 417. Execution. The amicable settlement or arbitration award may be enforced by execution by the Lupon within six (6) months from the date of the settlement. After the lapse of such time, the settlement may be enforced by action in the proper city or municipal court.

Section 417 of the Local Government Code provides a mechanism for the enforcement of a settlement of the parties before the Lupon. It provides for a two-tiered mode of enforcement of an amicable settlement executed by the parties before the Lupon, namely, (a) by execution of the Punong Barangay which is quasi-judicial and summary in nature on mere motion of the party/parties entitled thereto; and (b) by an action in regular form, which remedy is judicial. Under the first remedy, the proceedings are covered by the LGC and the Katarungang Pambarangay Implementing Rules and Regulations. The Punong Barangay is called upon during the hearing to determine solely the fact of non-compliance of the terms of the settlement and to give the defaulting party another chance at voluntarily complying with his obligation under the settlement. Under the second remedy, the proceedings are governed by the Rules of Court, as amended. The cause of action is the amicable settlement itself, which, by operation of law, has the force and effect of a final judgment. (Vidal vs Escueta, G.R. No. 156228, December 10, 2003)