G.R. No. 183387; September 29, 2009
SIMEON M. VALDEZ, Petitioner, vs. FINANCIERA MANILA, INC., Respondent.

FACTS

Petitioner Simeon Valdez and others filed a complaint for sum of money with preliminary attachment against respondent Financiera Manila, Inc. for unpaid money market investments. The RTC issued a writ of preliminary attachment, leading to the levy on Financiera’s real properties and investment accounts. The RTC later held Financiera liable for damages. On appeal, the CA affirmed the award of actual damages and remanded the case for determination of other damages.
Subsequently, the parties entered into a Compromise Agreement, which was approved by the RTC. The agreement stipulated that the plaintiffs would drop their complaint and acknowledge having no further claims. In exchange, Financiera would assign specific levied investment accounts to the plaintiffs, and all attachments on Financiera’s properties would be lifted. The agreement was declared a full and final settlement of all claims. Despite this, petitioner later filed a motion for execution to enforce the original CA judgment for actual damages, arguing the compromise only covered moral and exemplary damages.

ISSUE

Whether the Compromise Agreement constituted a novation that extinguished Financiera’s obligation to pay the actual damages awarded by the Court of Appeals.

RULING

Yes. The Supreme Court ruled that the Compromise Agreement novated and extinguished the original obligation, including the CA-awarded actual damages. A compromise agreement 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 between the parties.
The legal logic is clear from the agreement’s explicit terms. It stated the plaintiffs had “no more claims” and that it was a “full and final settlement of all the claims.” This comprehensive language encompassed all aspects of the judgment, not merely the unresolved moral and exemplary damages. The assignment of specific investment accounts was the agreed-upon valuable consideration for this full settlement. Petitioner’s interpretation, that only the remanded issues were settled, is untenable as it renders the “full and final settlement” clause meaningless. The agreement created new obligations (the assignment of accounts) in lieu of the old ones (the monetary judgment), effecting a novation by substitution of obligations. Consequently, petitioner could no longer seek execution of the superseded monetary award.