G.R. No. 140486 February 6, 2001
Public Estates Authority vs. Jesus S. Yujuico and Augusto Y. Carpio

FACTS

Private respondents Yujuico and Carpio, registered owners of adjacent lots in Parañaque, filed a complaint for removal of cloud and annulment of title against petitioner Public Estates Authority (PEA). They alleged that the Manila-Cavite Coastal Road project directly overlapped their properties and that portions of land PEA sold to Manila Bay Development Corporation were also owned by them. PEA, in its defense, asserted that the road area was granted to it by the government via a Special Patent and challenged the validity of the respondents’ titles, claiming the land was still part of the public domain underwater when their predecessor-in-interest acquired it in 1974.
During litigation, PEA’s own legal counsel, the Office of the Government Corporate Counsel (OGCC), and the Office of the Solicitor General (OSG) separately opined that the respondents’ titles were valid and that a survey error by PEA caused the overlap. Following these opinions, PEA’s board created a committee which recommended settlement. Subsequently, PEA, through its then-General Manager, entered into a Compromise Agreement with the respondents, which was approved by the trial court. The agreement involved an exchange of properties and granted respondents an option to purchase additional land. However, a new PEA management later repudiated the agreement and sought to nullify it.

ISSUE

Whether the Compromise Agreement, judicially approved, is valid and binding upon the PEA.

RULING

Yes, the Compromise Agreement is valid and binding. The Court affirmed the Court of Appeals’ decision upholding the agreement. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid litigation or put an end to one already commenced. Upon judicial approval, it becomes a final judgment that has the force of res judicata and is immediately executory.
PEA’s argument that its former General Manager lacked authority is untenable. He acted with the assistance of the OGCC and upon the specific recommendation and approval of the PEA Board of Directors. The Board’s approval vested the General Manager with clear authority to conclude the settlement. The change in PEA’s management does not justify repudiating a contract perfected and approved by the court. The OSG’s subsequent contrary opinion does not invalidate the earlier, board-authorized act. The agreement was not shown to be contrary to law, morals, good customs, public order, or public policy. Therefore, PEA is legally and bound to comply with its terms under the principle of pacta sunt servanda.