G.R. No. L-27905 December 28, 1970
REPUBLIC OF THE PHILIPPINES, and/or NATIONAL MARKETING CORPORATION, petitioners, vs. HON. GAUDENCIO CLORIBEL, as Judge of the Court of First Instance of Manila, Branch VI, JOSE SAN AGUSTIN, as ex-officio Sheriff of the City of Manila, and BIENVENIDO Y. AGUILAR, respondents.

FACTS

On October 24, 1958, the Republic of the Philippines and/or the Central Bank of the Philippines filed a petition (amended on January 5, 1959) for prohibition and injunction with damages against several government officials and Bienvenido Y. Aguilar in Civil Case No. 38224. The petition sought to enjoin the release of goods imported by Aguilar under a license, alleging the importations were achieved through fraudulent, illegal, and criminal means, causing the petitioners damages and losses of approximately Six Million Pesos, and that the imported goods should be confiscated. The petitioners later agreed to the release of the goods upon the posting of surety bonds totaling P1,351,000.00. After trial, the court rendered a decision on July 1, 1965, dismissing the petition and ordering the Central Bank to pay Aguilar various sums totaling P3,556,624.11 for storage charges, demurrage, damages due to pilferage, unrealized profits, bond premiums, attorney’s fees, and exemplary damages, while dismissing the counterclaim against the Republic. The petitioners filed a notice of appeal. Prior to the transmittal of the record to the Supreme Court, the parties entered into a Compromise Agreement dated November 24, 1966. This agreement was based on a Monetary Board resolution wherein Aguilar agreed to release the Central Bank from the judgment award of P3,556,624.11 and to reimburse the Bank for investigation and prosecution expenses (P4,925.33, which he paid), in exchange for a joint motion to dismiss the case. The agreement also mentioned a separate “Trade Assistance Agreement” entered into between Aguilar and the National Marketing Corporation (NAMARCO) on November 17, 1966, wherein NAMARCO would authorize Aguilar to finance imports not exceeding $15,000,000. The Compromise Agreement stipulated the termination of related seizure cases and a mutual waiver of claims. On December 2, 1966, the trial court approved the Compromise Agreement, dismissed the petition and counterclaim, and ordered the cancellation of the surety bonds. Subsequently, on February 22, 1967, Aguilar filed a petition in the lower court to set aside the December 2, 1966 decision, declare the Trade Assistance Agreement without effect, reinstate the July 1, 1965 decision, and order the Central Bank to reimburse his P4,925.33 payment. He alleged the Trade Assistance Agreement was being assailed as immoral and illegal. The Republic and Central Bank opposed, arguing the Trade Assistance Agreement was not a cause or consideration for the amicable settlement and that NAMARCO was not a party to the case. On July 5, 1967, respondent Judge Gaudencio Cloribel issued an order granting Aguilar’s petition, setting aside the compromise judgment, reinstating the original decision, and ordering the Central Bank to reimburse Aguilar. The Republic and NAMARCO then filed the present original action for certiorari to annul this order.

ISSUE

Whether the respondent Judge acted with grave abuse of discretion in setting aside the final and executory judgment based on the approved Compromise Agreement, upon the motion of one of the parties (Aguilar) who sought its rescission based on the alleged failure of a separate consideration (the Trade Assistance Agreement) which was not an integral part of the compromise.

RULING

Yes. The Supreme Court annulled and set aside the order of respondent Judge dated July 5, 1967. The Court held that a compromise, once approved by final order of the court, has the force of res judicata between the parties and cannot be disturbed except on grounds of vitiation of consent, such as fraud, mistake, or duress. Aguilar’s motion did not allege any such vice of consent. The grounds he raised pertained to the supposed failure of consideration, arguing that the Trade Assistance Agreement was the cause or consideration for the compromise. The Court ruled that the Trade Assistance Agreement was not the cause of the Compromise Agreement. The cause of a contract is the essential reason which moves the parties to enter into it, distinct from the motives of a party. An examination of the Compromise Agreement showed that the only matters compromised were the dismissal of the case and mutual waiver of claims in consideration of Aguilar releasing the Central Bank from the monetary judgment and reimbursing its expenses. The Trade Assistance Agreement was merely mentioned as an existing fact, and the Central Bank had expressly dissociated itself from it due to lack of jurisdiction. The NAMARCO General Manager’s conformity to the Compromise Agreement pertained only to the fact of its existence. There was no meeting of the minds between the parties to the compromise (Republic/Central Bank and Aguilar) regarding the Trade Assistance Agreement as part of their settlement. Therefore, the Compromise Agreement was valid and independent, and its approval resulted in a final and executory judgment. The respondent Judge gravely abused his discretion in reopening and setting aside that final judgment.