Filipro v. Permanent Savings Bank
REITERATIONFacts
1. The Antecedents: Filipro, Inc. filed a complaint for damages against Philippine Banking Corporation (Philbank) for allegedly clearing a patently altered Philbank check issued by Mr. So Peng Tiam to Filipro, Inc. The check was stolen by an employee, Jessie Fuentes, who materially altered the payee's name by crossing out "INC" and deposited it into an account he opened under the name "FILIPRO" with Permanent Savings and Loan Bank (Permanent). Permanent deposited the check with Allied Banking Corporation (Allied), which presented it to Philbank for clearing. After clearing, Fuentes withdrew the funds for his personal benefit. Philbank filed a third-party complaint against Allied, and Allied filed a fourth-party complaint against Permanent for reimbursement. The trial court declared Permanent in default for failure to appear during pre-trial. Despite the order of default being set aside for the limited purpose of cross-examination, Permanent repeatedly failed to appear, leading the trial court to reiterate the default order and consider its previous judgment against Permanent as final and executory. On October 16, 1989, Filipro, Philbank, and Allied entered into a compromise agreement where Philbank admitted liability to Filipro for P547,000.00, and Allied admitted liability to Philbank for the same amount plus P10,000.00 for attorney's fees. The agreement acknowledged the trial court's partial decision against Permanent in favor of Allied, which was already final and executory. The compromise stipulated that Allied would directly remit P547,000.00 to Filipro and P10,000.00 to Philbank from Permanent's funds held by Allied. The trial court approved the compromise agreement on November 7, 1989. 2. Procedural History: Permanent Savings and Loan Bank filed a petition for certiorari and prohibition with the Court of Appeals on November 27, 1992, more than three years after the trial court's approval of the compromise agreement. The Court of Appeals dismissed the petition but ordered Filipro and Philbank to remit the sums of P547,000.00 and P10,000.00, respectively, to the duly appointed receiver of Permanent. 3. The Petition: Filipro, Inc. filed a petition for review with the Supreme Court, assailing the Court of Appeals' order to remit the sums to the receiver, arguing that the Court of Appeals erred in modifying a final and executory judgment.
Issue(s)
Whether the Court of Appeals erred in ordering Filipro, Inc. and Philbank to remit the respective sums of P547,000.00 and P10,000.00 to the receiver of Permanent Savings and Loan Bank. Whether a judgment based on a compromise agreement, once final and executory, can be modified by an appellate court.
Ruling
The petition is meritorious. The dispositive portion of the Decision of the Court of Appeals in CA-G.R. SP No. 29566 dated February 23, 2000 is MODIFIED. The portion ordering petitioner Filipro, Inc. and Philippine Banking Corporation to remit the sums of P547,000.00 and P10,000.00 to the duly appointed receiver of Permanent Savings and Loan Bank in SP-No. 85-3371 is DELETED.
Ratio Decidendi
On the issue of whether the Court of Appeals erred in ordering the remittance of sums to the receiver: The Supreme Court held that the Court of Appeals committed reversible error. The appellate court, while acknowledging the finality of the trial court's decisions and the tardiness of Permanent's petition, paradoxically modified the lower court's judgment by ordering the remittance of funds to the receiver. This disposition directly contradicted its own pronouncements regarding the immutability of final and executory judgments. The Court emphasized that the orderly administration of justice requires that judgments reach a point of finality, and any act violating this principle must be struck down. The Court of Appeals' order to remit the sums to the receiver, despite finding the petition late and the judgment final, was an act that could not be countenanced. The Court reiterated that litigation must end, and once a judgment becomes final, the issues should be laid to rest. On the issue of whether a judgment based on a compromise agreement, once final and executory, can be modified by an appellate court: The Supreme Court affirmed the principle of immutability and unalterability of final and inappealable judgments. It stated that once a judgment attains finality, it can no longer be modified in any respect, even to correct perceived errors of fact or law. This principle is grounded on public policy and sound practice, ensuring an end to litigation. The Court noted that the trial court's November 7, 1989 order approving the compromise agreement had the force and effect of a judgment. Since a judgment based on a compromise agreement is no different from any other judgment, it becomes immutable upon reaching finality. The Court further pointed out that Permanent Savings and Loan Bank was declared in default by the trial court on June 6, 1986, and this default status persisted when the compromise agreement was approved. A party declared in default loses its standing in court and cannot appear, adduce evidence, be heard, or be entitled to notice, thus precluding it from seeking modifications to a judgment it failed to contest properly.
Main Doctrine
A judgment based on a compromise agreement, once it attains finality, becomes immutable and unalterable, and cannot be modified even by the appellate court, especially when the party seeking modification was declared in default and failed to appeal the judgment.