Case Digest on Obligations and Contracts: Waiver of a Compromise Agreement - Doña Adela Export International v. Trade and Investment Development Corporation (TIDCORP), and the Bank of the Philippine Islands (BPI) G.R. No. 201931

Doña Adela Export International, Inc. v. Trade and Investment Development Corporation (TIDCORP), and the Bank of the Philippine Islands (BPI)

G.R. No. 201931, February 11, 2015

Facts:

Sometime in 2006, Doña Adela Export International, Inc., (DAEI) filed a Petition for Voluntary Insolvency. RTC issued an order declaring it insolvent and staying all civil proceedings against it. Sometime in August 2011 TIDCORP and BPI as creditors of DAEI filed a Joint Motion to Approve Agreement which contained among others a waiver of confidentiality clause wherein DAEI and the members of its Board of Directors shall waive all rights to confidentiality provided under the Law on Secrecy of Bank Deposits and The General Banking Law of 2000. The RTC approved the compromise agreement between BPI and TIDCORP.

DAEI filed a motion for partial reconsideration and claimed that TIDCORP and BPI‘s agreement imposes on it several obligations such as payment of expenses and taxes and waiver of confidentiality of its bank deposits but it is not a party and signatory to the said agreement. The RTC denied the motion and ruled that DAEI‘s silence to the joint motion when it was set for hearing filed by BPI and TIDCORP is tantamount to its acquiescence thereto.

DAEI asserts that express and written waiver from the depositor concerned is required by law before any third person or entity is allowed to examine bank deposits or bank records and that its silence is not tantamount to an admission that binds it to the compromise agreement of its creditors. BPI counters that DAEI is estopped from questioning the BPI-TIDCORP compromise agreement because it participated in all the proceedings involving the subject compromise agreement and did not object when the compromise agreement was considered by the RTC.

Issue: Whether the waiver of confidentiality provision in the Agreement between TIDCORP and BPI is valid and binding upon DAEI even if it was not a party thereto.

The Supreme Court ruled no. The Joint Motion to Approve Agreement was executed by BPI and TIDCORP only. There was no written consent given by DAEI or by its representative that it is waiving the confidentiality of its bank deposits. The provision on the waiver of the confidentiality of DAEI‘s bank deposits was merely inserted in the agreement and DAEI is not bound thereby since it was not a signatory to the compromise agreement. Neither can DAEI be deemed to have given its permission by failure to interpose its objection during the proceedings.

It is an elementary rule that the existence of a waiver must be positively demonstrated since a waiver by implication is not normally countenanced. The norm is that a waiver must not only be voluntary, but must have been made knowingly, intelligently, and with sufficient awareness of the relevant circumstances and likely consequences. It is basic in law that a compromise agreement, as a contract, is binding only upon the parties to the compromise, and not upon non-parties. This is the doctrine of relativity of contracts. The rule is based on Article 1311 (1) of the Civil Code which provides that ―contracts take effect only between the parties, their assigns and heirs x x x. ‖ The sound reason for the exclusion of non-parties to an agreement is the absence of a vinculum or juridical tie which is the efficient cause for the establishment of an obligation. Consistent with this principle, a judgment based entirely on a compromise agreement is binding only on the parties to the compromise the court approved, and not upon the parties who did not take part in the compromise agreement and in the proceedings leading to its submission and approval by the court.