G.R. No. L-43179, June 27, 1985
Republic of the Philippines, represented by the Director of Buildings and Real Property Management and City Sheriff of Manila, petitioners, vs. The Court of Appeals, Mercy de Vera and Juan A. de Vera, respondents.

FACTS

The Republic of the Philippines, owner of a parcel of land in the San Lazaro Estate, leased the property to spouses Mercy and Juan de Vera under a 25-year contract commencing in 1952, renewable for another term at the lessor’s option. Due to unpaid rentals, the Republic filed an action for collection and termination of the lease. The trial court rendered judgment ordering the spouses to pay back rentals and, in default of payment within three months, declaring the lease terminated. The Court of Appeals affirmed this decision, which became final in 1968. Upon motion, the trial court issued a writ of execution.
The private respondents engaged in protracted efforts to resist execution. They initially challenged the validity of the service of the appellate decision, a petition dismissed by the Supreme Court. Subsequently, they filed a separate petition for certiorari and prohibition with the Court of Appeals, alleging new supervening events—specifically, a fire that destroyed improvements on the property and their purported willingness to pay all arrears—and invoking equity to suspend execution and compel the Republic to renew the lease.

ISSUE

Whether the Court of Appeals gravely abused its discretion in annulling the writ of execution and ordering the trial court to admit evidence on new facts to grant relief to the private respondents, including a directive for lease renewal.

RULING

Yes, the Supreme Court granted the petition and reversed the Court of Appeals. The legal logic is anchored on the finality of judgments and the proper scope of equity. The judgment ordering payment and, in case of default, termination of the lease, had long become final and executory. A final judgment is immutable and unalterable. The alleged supervening events, such as the fire and an offer to pay, did not constitute a compelling legal reason to nullify the execution or to reopen the case. Equity cannot be invoked to defeat the settled rights of a party arising from a final judgment, nor can it be used to reward bad faith. The Court found that the private respondents’ conduct, characterized by continuous non-payment of rentals accruing to a substantial amount and their dilatory tactics, demonstrated a lack of good faith. Consequently, the equitable relief granted by the Court of Appeals was a grave abuse of discretion. The Supreme Court reinstated the trial court’s orders for execution and imposed treble costs on the private respondents for their dilatory strategies.