G.R. No.

78315 January 2, 1989

COMMERCIAL CREDIT CORPORATION CAGAYAN DE ORO, petitioner, vs.
THE COURT OF APPEALS and THE CAGAYAN DE ORO COLISEUM,
INC., respondents
Respondent Cagayan de Oro Coliseum executed a promissory note in favor of
petitioner Commercial Credit Corp., payable in 36 monthly installments, which was
secured by a real estate mortgage. Upon failure of the respondent to pay the
monthly installments due, petitioner proceeded with the extra judicial foreclosure of
the real estate mortgage.
Meanwhile, five of the minority stockholders of the respondent instituted a special
civil action questioning the power of the respondent to execute a real estate
mortgage without the consent of its stockholders. In due course, a compromise
agreement was entered into by the parties, on the basis of which, a compromise
judgment was rendered by the trial court. One of the provisions in the stipulations in
the compromise judgment is that upon failure of the respondent to pay any of the
installments as they shall become due, the total outstanding balance shall
immediately become due, and the overdue and unpaid installments shall earn a 3%
interest per month as penalty charge, plus 5% interest of the outstanding balance
as additional attorneys fee.
When respondent failed to comply with the terms of the judgment, petitioner filed a
motion for the issuance of a writ of execution, which was granted by the trial court.
Thus, a writ of execution was issued, however, the provincial sheriff failed to push
through with the scheduled auction sale due to some internal problems in the office
of the sheriff.
Respondent filed a special civil action in the CA to annul said compromise judgment.
The CA denied the petition, but modified the compromise judgment pursuant to Art.
1229 of the Civil Code. It reduced the penalty charge from 3% to 1.5%, and the
additional attorneys fee from 5% to 2%. A motion for reconsideration was filed by
both parties, but to no avail. Hence, the present petition filed by Commercial Credit
Corporation
Issue:
Whether or not Art. 1229 is applicable in the instant case
Ruling:
NO. A compromise judgment is final and immediately executor. Once a judgment
becomes final and executor, it cannot be modified or amended.
The modification of said compromise judgment by the respondent appellate court is
predicated on the provision of Article 1229 of the Civil Code which provides as
follows:
ART. 1229. The Judge shall equitably reduce the penalty when the principal
obligation has been partly or irregularly complied with by the debtor. Even if
there has been no performance, the penalty may also be reduced by the courts if
it is iniquitous or unconscionable.

The foregoing provision of the law applies only to obligations or contract, subject of
a litigation, the condition being that the same has been partly or irregularly
complied with by the debtor. The provision also applies even if there has been no
performance, as long as the penalty is iniquituous or unconscionable. It cannot
apply to a final and executory judgment.