G.R. No. 137796 July 15, 1999
MONDRAGON LEISURE AND RESORTS CORPORATION, MONDRAGON INTERNATIONAL PHILIPPINES, INC. AND MONDRAGON SECURITIES, INC., petitioners, vs. COURT OF APPEALS and CLARK DEVELOPMENT CORPORATION, respondents.

FACTS

Petitioner Mondragon Leisure and Resorts Corporation (MLRC) is the lessee of a 152.25-hectare area within the former Clark Air Base from respondent Clark Development Corporation (CDC) under a fifty-year lease. CDC sought to eject MLRC for alleged violations of the lease agreement, primarily non-payment of proper rent. During the dispute, Philippine National Police personnel barricaded the Mimosa Regency Casino, an establishment operated by MLRC within the leased area. To prevent ejectment, MLRC filed a complaint (Civil Case No. 9242) before the Regional Trial Court (RTC) of Angeles City, which granted a temporary restraining order (TRO). Separately, the Philippine Amusement and Gaming Corporation (PAGCOR) threatened to revoke MLRC’s casino license, prompting another complaint (Civil Case No. 8970) before a different RTC branch, which also issued a TRO against both PAGCOR and CDC. The Court of Appeals set aside these restraining orders, leading MLRC to file this petition for review.

ISSUE

Whether the Supreme Court should approve the Compromise Agreement submitted by the parties to settle their dispute.

RULING

Yes. The Supreme Court approved and noted the Compromise Agreement, dismissing the petition. The legal logic is anchored on the policy favoring amicable settlements and the binding nature of compromise agreements under the Civil Code. The Court observed that during the pendency of the petition, the parties, prompted by a Court resolution, engaged in arbitration and successfully negotiated a Compromise Agreement dated June 28, 1999. This agreement comprehensively addressed the core disputes, including the payment schedule for MLRC’s rental arrears amounting to Php 325,000,000.00, the revision of future minimum guaranteed lease rentals, the settlement of MLRC’s liabilities to PAGCOR and the BIR, and the mutual withdrawal of all pending cases.
The Court’s role in such a scenario is not to re-adjudicate the merits but to examine whether the compromise is consonant with law, public order, public policy, morals, and good customs. Finding no contravention, the Court granted judicial imprimatur to the agreement. Pursuant to Article 2037 of the Civil Code, a compromise agreement has the effect and authority of res judicata upon the parties. Consequently, the Court dismissed the petition, rendering the appellate court’s decision on the TROs moot and academic, as the parties’ private agreement superseded the litigated issues. The dismissal based on the compromise constitutes a definitive resolution of the controversy.