G.R. No. L-22481, June 30, 1969
Republic of the Philippines, plaintiff-appellee, vs. Philippine Air Lines, Inc., defendant-appellant.

FACTS

The Republic of the Philippines filed a complaint against Philippine Air Lines, Inc. (PAL) for the recovery of P1,357,686.14, representing unpaid balances of take-off, terminal, landing, parking fees, and rents for the use of government air navigation facilities from September 2, 1947, to June 30, 1950. PAL, in its answer, contended that: (a) the claim had been fully released by a compromise agreement dated September 13, 1950, with the National Airports Corporation, for which PAL paid P587,641.36; (b) PAL was exempt from payment of landing charges under its franchise; and (c) the rates charged were unreasonable, confiscatory, and arbitrarily fixed. PAL also asserted a counterclaim, alleging that the Republic failed to provide and maintain necessary radio communication systems, airport buildings, and navigation facilities, forcing PAL to acquire, operate, and maintain them at its own expense, for which it sought reimbursement. The Court of First Instance of Manila decided the case against PAL on December 23, 1963, ordering it to pay the principal amount with legal interest. PAL appealed the decision to the Supreme Court. During the pendency of the appeal, the parties submitted a Joint Petition for Judgment in Accordance with Agreement, attaching a Compromise Agreement dated June 9, 1969.

ISSUE

Whether the Compromise Agreement submitted by the parties should be approved by the Supreme Court.

RULING

The Supreme Court approved the Compromise Agreement. The agreement stipulated that PAL would pay the Republic the total sum of P1,357,686.14 in specific installments: P257,686.14 upon the Court’s approval of the agreement, and the balance of P1,100,000.00 in eleven monthly installments of P100,000.00 each, commencing thirty days after approval. The parties agreed that this Compromise Agreement would novate and supersede the judgment of the Court of First Instance of Manila dated December 23, 1963. Upon complete payment, all disputes and claims between the parties in the case would be fully settled. The agreement also provided that failure to pay any installment would make the judgment approving the compromise immediately executory. The Court found the agreement fair, not contrary to law, morals, public order, or public policy. Consequently, the Court enjoined the parties to comply strictly with the terms of the Compromise Agreement and declared the decision of the Court of First Instance superseded and of no further force and effect. No costs were awarded.