I want to seek advice for my aunt. She borrowed money from her co-worker last January 5, 2017, and payable after four months or on May 5, 2017. Unfortunately, she was unable to pay because of financial constraints. Her co-worker wanted to settle the matter, so she brought the matter to barangay (village) authorities. They reached an amicable settlement on May 20, 2017 to the effect that my aunt conceded to pay her in five equal monthly instalLments, the last installment to be made on October 20, 2017.
I can honestly say that my aunt tried her best to pay her debt but, unfortunately, she was still unable to do so. Now, she told me that her co-worker threatened to sue her in court for the full amount with damages. Is this really possible? I mean, can she really bring a case to court given that they have already reached an amicable settlement? Shouldn’t she just be allowed to enforce or execute their settlement before the barangay? My aunt is really worried because she does not want to have a case filed against her in court. Please advise us.
Republic Act (RA) 7610 or the Local Government Code of 1991 provides a channel for parties to settle their disputes without having to go to court. It is clearly provided under Section 408 of the Local Government Code (LGC) that the lupon (council) of each barangay (village) has authority to bring together parties actually residing in the same city or municipality for amicable settlement of all disputes, save those exceptions mentioned therein. An amicable settlement appropriately reached before the barangay has a binding effect and it may thereafter be enforced. As stated under the LGC:
“SECTION 416. The amicable settlement and arbitration award shall have the force and effect of a final judgment of a court upon the expiration of ten (10) days from the date thereof, unless repudiation of the settlement has been made or a petition to nullify the award has been filed before the proper city or municipal court.
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SECTION 417. The amicable settlement and arbitration award may be enforced by execution by the lupon within six (6) months from the date of settlement. After the lapse of such time, the settlement may be enforced by action in the appropriate city or municipal court.”
Accordingly, your aunt’s co-worker has the option of enforcing the subject settlement they reached before the barangay, but only within six (6) months from reaching such settlement or enforce it by filing an appropriate action before the proper court.
We wish to further emphasize that the remedies mentioned under Section 417 of the same code do not rule out the possible availment of another remedy mentioned under our civil laws, which is to regard the amicable settlement as rescinded and insist upon his original demand by court action. As stated under Article 2041 of the New Civil Code:
“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.”
Our Supreme Court explained in the case of Miguel vs. Montanez (G.R. No. 191336; January 25, 2012; ponente, Associate Justice Bienvenido Reyes):
“Thus, under Section 417 of the Local Government Code,19 such 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.
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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 [implicitly], 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.
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In the case at bar, the Revised Katarungang Pambarangay Law provides for a two-tiered mode of enforcement of an amicable settlement, to wit: (a) by execution by the Punong Barangay that is quasi-judicial and summary in nature on mere motion of the party entitled thereto; and (b) an action in regular form, which remedy is judicial. However, the mode of enforcement does not rule out the right of rescission under Art. 2041 of the Civil Code. The availability of the right of rescission is apparent from the wording of Sec. 417 itself which provides that the amicable settlement “may” be enforced by execution by the lupon within six (6) months from its date or by action in the appropriate city or municipal court, if beyond that period. The use of the word “may” clearly makes the procedure provided in the Revised Katarungang Pambarangay Law directory or merely optional in nature.
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We hope that we were able to answer your queries. Please be reminded that this advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.
Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to email@example.com