Ynson v. Court of Appeals

G.R. No. 117018-19, 117327 (June 17, 1996)

Facts:

Petitioner Benjamin D. Ynson is the controlling stockholder and President of PHESCO, Incorporated, a construction company in the Philippines. Private respondent Felipe Yulienco, who is the elder brother of Ynson's wife, was a registered stockholder and served as Vice-President and Treasurer of the corporation. In 1986, Ynson issued a memorandum to reduce overhead costs, which led to tensions between him and Yulienco, who opposed the management decisions.

On June 16, 1987, Yulienco and his lawyer, Emerito Salva, filed a petition with the Securities and Exchange Commission (SEC) alleging mismanagement by Ynson and seeking damages, unaccounted profits, and attorney's fees. Before Ynson could respond, Yulienco and Salva proposed a compromise, which included payment for profit-sharing and the sale of their shares in PHESCO at a price determined by a mutually designated appraiser, AEA Development Corporation. This proposal was accepted by Ynson.

On October 15, 1987, both parties submitted a Joint Motion for Judgment by Compromise to the SEC, which was approved on October 20, 1987. The agreement stipulated that PHESCO would pay Yulienco P4,045,782.42 and that Yulienco and Salva would sell their shares at a fair market value determined by the appraiser. The agreement included a clause stating that the appraiser's determination would be final and non-appealable.

After the appraisal was completed on February 5, 1988, the fair market value was set at P311.32 per share. Ynson filed a Motion for Execution of the Compromise Judgment, but Yulienco and Salva opposed it, alleging fraud in the financial statements that undervalued their shares. The SEC granted Ynson's motion for execution on August 29, 1988, but Yulienco and Salva appealed.

The SEC En Banc dismissed their appeal on December 1, 1992, affirming the execution order but included an obiter that legal interest should be paid on the appraised value. Ynson contested this, leading to further motions and appeals. The Court of Appeals consolidated the petitions from both parties and ultimately ruled that the Compromise Judgment had not attained finality and remanded the case to the SEC for a new appraisal.

Legal Issues:

1. Whether the Compromise Judgment dated October 20, 1987, had attained finality and could be set aside on the grounds of fraud.
2. Whether the remaining balance of the purchase price should be paid with interest.

Arguments:

• Petitioner Ynson's Arguments:

  • The Compromise Judgment was final and executory upon the submission of the appraisal report.
  • The determination of the fair market value by the mutually appointed appraiser was binding and not subject to further approval or challenge.
  • The SEC's inclusion of legal interest in its resolution was erroneous as the agreement explicitly stated that the balance would be paid without interest.

• Private Respondents Yulienco and Salva's Arguments:

  • The Compromise Judgment had not attained finality due to alleged fraud in the financial statements, which affected the valuation of their shares.
  • They were entitled to legal interest on the amount due, as the delay in payment was due to Ynson's actions.

Court's Decision and Legal Reasoning:

The Supreme Court ruled in favor of Ynson, stating that the Compromise Judgment had indeed attained finality. The Court emphasized that the clause in the Compromise Agreement stating that the appraiser's determination of fair market value was final, irrevocable, and binding was clear and unambiguous. The Court found that the private respondents' claims of fraud were not substantiated by sufficient evidence, and the SEC's findings were supported by substantial evidence.

Regarding the issue of interest, the Court held that the agreement explicitly stated that the remaining balance would be paid without interest. The SEC's resolution awarding legal interest was annulled, as it contradicted the terms of the Compromise Agreement.

Significant Legal Principles Established:

1. A judicial compromise has the force of law and is conclusive between the parties once executed, barring any claims of fraud that are substantiated by evidence.
2. The determination of fair market value by a mutually appointed appraiser, as stipulated in a compromise agreement, is binding and not subject to further challenge or approval.
3. The terms of a compromise agreement, including payment conditions, must be adhered to as they are final and binding on the parties.