G.R. No. L-39669. March 10, 1975.
INTERNATIONAL HOTEL CORPORATION, ET AL., petitioners, vs. HON. ELIAS B. ASUNCION, ET AL., respondents.

FACTS

Petitioners, led by International Hotel Corporation, owned land on which they began constructing a hotel. They financed this project using materials purchased on credit from the Reparations Commission and by mortgaging the land to two banks. The Reparations Commission filed Civil Case No. 83690 against petitioners and the banks, asserting its ownership over the materials until full payment and seeking recognition as a preferential creditor. During the pendency of this suit, the banks foreclosed on the mortgages, consolidated ownership of the land and improvements, and sold them to respondent Pacific Hotel Corporation. Notably, some individuals were stockholders in both the petitioner and respondent corporations. Petitioners then filed a third-party complaint against these private respondents and the banks, alleging bad faith and conspiracy in the sale.
Before trial, petitioners and private respondents (but not the banks) entered into a compromise agreement. This agreement, submitted for court approval, essentially allowed petitioners to repurchase the properties from Pacific Hotel Corporation by a specified date upon payment of the latter’s total investment and other sums. The respondent judge rendered a decision on May 7, 1974, approving this compromise.

ISSUE

Whether the respondent court acted with grave abuse of discretion in issuing a writ of possession to enforce the compromise judgment while a motion for its modification was pending and the judgment contained provisions not agreed upon by all parties.

RULING

Yes, the respondent court committed grave abuse of discretion. The Supreme Court nullified the writ of possession and the subsequent resolutions denying the motion for modification. The legal logic is anchored on the finality and integrity of compromise judgments. A compromise is a contract between parties, and a judgment rendered upon it must conform strictly to their agreement. The Court found that the May 7, 1974 decision contained an extraneous and substantial declaration—that the cross-claims against the defendant banks had become “moot and academic”—which was not part of the submitted compromise agreement signed by the parties. This insertion created an ambiguity as to the true terms of the enforceable judgment.
Consequently, the compromise judgment could not be considered final and executory at the time the writ of possession was issued. The petitioners had timely filed a motion to delete this unauthorized portion, which remained unresolved. The respondent court’s failure to act on this motion and its premature issuance of the writ of possession, while the very terms of the judgment were under legitimate challenge, constituted an arbitrary exercise of power. The writ was therefore illegally issued. The Supreme Court modified the decision by deleting the offending clause and set aside the writ of possession, ordering the return of the property to petitioners upon their payment of the compromise amounts within a new 60-day period, thereby upholding the sanctity of the parties’ agreement as the sole basis for the judgment.