G.R. No. 51143 and G.R. No. 51150 , March 22, 1990
DOROTEO M. DE GUIA, ET AL., petitioners, vs. THE HON. MANUEL V. ROMILLO, JR., ET AL., respondents.

LORENZO BACALLA, ET AL., petitioners, vs. HON. MANUEL V. ROMILLO, JR., ET AL., respondents.

FACTS

The petitioners were defendants in an ejectment case filed on May 17, 1973, by the registered owners of a parcel of land in Parañaque. The parties initially stipulated that the defendants were lessees occupying the land since 1952 on a month-to-month basis, paying rentals, and had constructed their residences with the owners’ consent. The plaintiffs demanded vacation for commercial development, and the defendants refused despite notices. Subsequently, the parties submitted a Second Stipulation of Facts, admitting that they had entered into separate written contracts executed on October 31, 1972, for a fixed period of three years starting January 1, 1973, and ending December 31, 1975. Both stipulations were submitted for decision in lieu of trial.
The Municipal Trial Court rendered a decision fixing a new lease period of three and a half years from the filing of the complaint. On appeal, the Court of First Instance affirmed this decision. The petitioners then elevated the case to the Supreme Court, arguing that under Presidential Decree No. 20, they could not be judicially ejected from their indefinite leases as they had religiously paid rentals, and that the court could not fix a period under the Civil Code.

ISSUE

Whether the Court of First Instance committed reversible error in ordering the petitioners to vacate the leased property.

RULING

The Supreme Court denied the petition, ruling that the Court of First Instance did not err. The legal logic centers on the effect of the Second Stipulation of Facts. The petitioners’ original indefinite verbal leases were judicially transformed into written leases for a definite three-year term (January 1, 1973, to December 31, 1975) through that stipulation. This constituted a judicial compromise agreement between the parties. Under Article 2037 of the Civil Code, a judicial compromise is immediately executory and has the force and effect of res judicata; it is a final judgment that cannot be altered except for vices of consent or forgery. The trial court’s role was merely to approve the parties’ agreement, not to create a new contract for them by fixing a different period.
Consequently, the petitioners’ right to occupy the premises under the compromise expired on December 31, 1975. The respondents’ right to enforce that term and seek ejectment was therefore long overdue. The argument based on P.D. No. 20 became inapplicable as the lease was no longer indefinite but for a fixed term that had ended. Non-fulfillment of a compromise agreement justifies execution. Thus, the order for the petitioners to vacate was correct.