GR 166866; (March, 2008) (Digest)
G.R. No. 166866 ; March 27, 2008
REPUBLIC OF THE PHILIPPINES, represented by the PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA) vs. ANTONIO and LILI FLORENDO
FACTS
The Philippine Economic Zone Authority (PEZA) filed an expropriation case for seven parcels of land owned by spouses Antonio and Lili Florendo. The Regional Trial Court ordered expropriation and set just compensation at ₱1,500 per square meter. PEZA appealed the valuation to the Court of Appeals. Pending appeal, the parties entered into a compromise agreement, embodied in a Deed of Absolute Sale dated June 25, 2001, which adopted the ₱1,500/sqm valuation but waived the 12% interest awarded by the RTC. The agreement required respondents to present clean titles before payment. Petitioner paid for and acquired four lots where clean titles were delivered. However, respondents could not clear the titles of the remaining three lots due to third-party claims.
While the parties were discussing how to formalize their settlement, the CA, unaware of the compromise, rendered a decision modifying the RTC ruling by reducing the just compensation to ₱1,000/sqm. This decision became final. Respondents then moved for execution of this final CA judgment for the three unpaid lots at the lower rate. The RTC granted execution and issued garnishment orders against PEZA.
ISSUE
Whether the final and executory judgment of the Court of Appeals, rendered without knowledge of the parties’ compromise agreement, bars the execution of that agreement and compels enforcement of the court’s decision.
RULING
The Supreme Court ruled that the compromise agreement governs the rights of the parties over the three remaining lots, not the final CA decision. A compromise agreement is a contract that has the force of law between the parties. The Court emphasized that the compromise was entered into while PEZA’s appeal on valuation was pending. By agreeing to a price of ₱1,500/sqm and waiving interest, the parties effectively superseded the very issue—the correct valuation—that was on appeal. The failure to inform the CA of this supervening compromise agreement was a fatal omission. Consequently, the CA’s subsequent decision, which was based on the original disputed valuation, was rendered moot and ineffectual as to the parties’ actual agreement. The finality of a judgment does not preclude its execution from being refused on equitable grounds when a supervening event, like a valid compromise, renders its execution unjust. The Court set aside the challenged orders and writs of execution, and remanded the case to the RTC to enforce the terms of the compromise agreement regarding the three disputed lots.