Republic v. Florendo
REITERATIONFacts
The Antecedents: The Philippine Economic Zone Authority (PEZA), as predecessor to the Export Processing Zone Authority, initiated an expropriation case against respondents Antonio and Lili Florendo for seven parcels of land in Lapu-Lapu City, Cebu. The purpose was to develop these properties into an export processing zone. The Regional Trial Court (RTC) ordered the expropriation and set the just compensation at P1,500 per square meter, with 12% annual interest from the date of possession. Procedural History: PEZA appealed the RTC's valuation to the Court of Appeals (CA). While the appeal was pending, PEZA and the Florendos reached a settlement, agreeing on the P1,500 per square meter valuation, a waiver of interest by the respondents, and the presentation of clean titles before payment. A deed of absolute sale was executed, and PEZA paid for four of the seven lots. However, disputes arose over the remaining three lots due to encumbrances and third-party claims, preventing the respondents from delivering clean titles. The CA, unaware of the settlement, subsequently issued a decision modifying the RTC's ruling by reducing the just compensation to P1,000 per square meter. This decision became final. The RTC later granted the respondents' motion for execution of the final CA judgment for the unpaid lots, leading to garnishment orders. PEZA's motions to quash the writ and lift the garnishment were denied by the RTC. PEZA then filed a petition for certiorari and prohibition with the CA, which dismissed the petition, holding that the settlement did not bind the court and that there was no supervening event to prevent execution. The Petition: The Republic of the Philippines, represented by PEZA, filed a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the CA's decision. PEZA argued that the compromise agreement between the parties constituted res judicata and superseded the CA's final judgment. It also contended that there was a supervening event that rendered the execution of the final judgment inequitable. The core of PEZA's argument is that the settlement agreement, which was perfected by the meeting of the minds and had the force of law between the parties, should be upheld, even though it was not judicially approved before the CA rendered its decision.
Issue(s)
Whether the compromise agreement of the parties constituted res judicata and therefore the June 25, 2002 decision of the CA could not have superseded it. Whether there was a supervening event that rendered the execution of the final judgment inequitable.
Ruling
The Supreme Court granted the petition, set aside the Court of Appeals' decision, and declared the RTC orders, writ of execution, and notices of garnishment null and void. The status quo order issued by the Supreme Court was lifted.
Ratio Decidendi
On the issue of whether the compromise agreement constituted res judicata and superseded the CA decision: The Court held that the compromise agreement executed by the parties, even though not judicially approved, was a valid contract with the force of law between them and had the effect of res judicata. The elements of a valid contract of sale were present: consent, determinate subject matter, and price certain. The Court clarified that the respondents' obligation to present clean titles was a condition for the performance of PEZA's obligation to pay for the remaining lots, not a condition for the perfection of the contract of sale itself. Citing Jardine Davies Inc. v. CA, the Court distinguished between conditions affecting perfection and those affecting performance. Furthermore, the Court reiterated that a compromise agreement is valid even if there is already a final and executory judgment, as it can supersede such judgment, citing Magbanua v. Uy, Jesalva v. Bautista, Palanca v. Court of Industrial Relations, and Gatchalian v. Arlegui. Therefore, the CA decision, which was rendered without knowledge of the parties' settlement, had been unknowingly adjudicated a case already terminated by their agreement and was thus superseded. The Court emphasized that compromises are favored and parties are bound to abide by them in good faith. On the issue of whether there was a supervening event rendering execution inequitable: Since the Court found that the compromise agreement superseded the CA decision, the execution of the CA decision was rendered invalid. Consequently, the various orders of the RTC directing the execution of the CA decision were also invalid. The Court found that the inability of the respondents to deliver clean titles to the remaining three lots, due to pending cases by third-party claimants, was a matter covered by the compromise agreement's terms regarding the settlement of encumbrances before payment, and did not constitute a supervening event that would render the execution of the CA decision inequitable. Instead, it highlighted the continued binding effect of the compromise agreement.
Main Doctrine
A compromise agreement, even if not judicially approved, has the force of law between the parties and can supersede a final judgment. The condition of delivering clean titles pertains to the performance of the obligation to pay, not to the perfection of the contract of sale.