Dear PAO,
Out of pity, I extended a loan to my neighbor amounting to one hundred thousand pesos (P100,000.00). She promised to pay me back after six (6) months. However, a year has passed, and she never paid a cent. Thus, I brought a complaint before our barangay, and we executed a compromise agreement wherein she agreed to pay the full amount of the loan in five (5) monthly installments, plus 10 percent annual interest computed from the time she received the money in January 2025.
However, since we signed the agreement before the barangay in March 2026, my neighbor has not made a single payment. I would like to know what actions I may have to exact payment from her.
-Ariel
Dear Ariel,
Our laws and jurisprudence have laid down specific legal remedies for an aggrieved party in case a party-in-default fails to comply with the terms of a compromise agreement duly executed before the barangay.
An aggrieved party may either demand the enforcement of the compromise agreement as sanctioned by the Local Government Code, or exercise his/her right of rescission under the New Civil Code and insist upon the fulfillment of the original contract.
In this regard, Section 417 of the Local Government Code states:
“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.”
Hence, the aggrieved party may demand the implementation of the amicable settlement to the Barangay Lupon within six (6) months from the date the agreement was signed. But, if he/she failed to execute the same within the prescribed period; then, an action before the city or municipal court for the enforcement of the compromise agreement may be instituted.
On the other hand, an aggrieved party may also avail of his/her right under Article 2041 of the New Civil Code which provides that [i]f 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parties fails or refuses to abide by the compromise, the other party may either enforce the compromise or regard it as rescinded and insist upon his original demand.
The aforesaid remedies were elaborated by the Supreme Court, through Associate Justice Bienvenido Reyes, in Crisanta Miguel vs. Jerry Montanez (GR 191336, Jan. 25, 2012), which reads:
“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 which 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.” (Citing Chavez v. Court of Appeals, GR 159411, March 18, 2005, penned by Senior Associate Justice Reynato Puno).
Hence, applying the foregoing to your case, you may seek the enforcement of the compromise agreement under the Katarungang Pambarangay Law, or treat the same agreement as canceled and insist upon the original demand.
We hope that we were able to answer your queries. This advice is solely based on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.
Thank you for your continued trust and support.
Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to dearpao@manilatimes.net.
