Monday, July 25, 2016

Compromise; execution of judgment; finality of judgment; res judicata; bar by prior judgment

 - See – The Lawyer’s Post.

“x x x.

In a compromise agreement, the parties freely enter into stipulations. “[A] judgment based on a compromise agreement is a judgment on the merits”[1] of the case. It has the effect of res judicata. These principles are impressed both in our law and jurisprudence.

Thus, Article 2037 of the Civil Code provides:

Article 2037. A compromise has upon the parties the effect and authority of res judicata; but there shall be no execution except in compliance with a judicial compromise.

In Spouses Romero v. Tan[2], this court said:

It is well settled that a judicial compromise has the effect of res judicata and is immediately executory and not appealable unless set aside [by mistake, fraud, violence, intimidation, undue influence, or falsity of documents that vitiated the compromise agreement][3].

There is res judicata when the following concur:

1. Previous final judgment;

2. By a court having jurisdiction over the parties and the subject matter;

3. On the merits of the case;

4. Between identical parties, on the same subject matter, and cause of action[4]

There are two rules that embody the principle of res judicata. The first rule refers to “bar by prior judgment[5],” which means that actions on the same claim or cause of action cannot be relitigated.[6] This rule is embodied in Rule 39, Section 47, paragraph (b) of the Rules of Court, which provides:

Section 47. Effect of judgments or final orders. — The effect of a judgment or final order rendered by a court of the Philippines, having jurisdiction to pronounce the judgment or final order, may be as follows:

(b) In other cases, the judgment or final order is, with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto, conclusive between the parties and their successors in interest by title subsequent to the commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity[.]

The second rule refers to “conclusiveness of judgment.”[7] This means that facts already tried and determined in another action involving a different claim or cause of action cannot anymore be relitigated.[8] This rule is embodied in Rule 39, Section 47, paragraph (c) of the Rules of Court, which provides:

Section 47. Effect of judgments or final orders. — The effect of a judgment or final order rendered by a court of the Philippines, having jurisdiction to pronounce the judgment or final order, may be as follows:

. . . .

(c) In any other litigation between the same parties or their successors in interest, that only is deemed to have been adjudged in a former judgment or final order which appears upon its face to have been so adjudged, or which was actually and necessarily included therein or necessary thereto. (49a)

This case involves “bar by prior judgment.” Respondents cannot file another action for partition after final judgment on compromise had already been rendered in a previous action for partition involving the same parties and property.

This court explained in FGU Insurance Corporation v. Regional Trial Court[9] the doctrine of finality of judgment:

Under the doctrine of finality of judgment or immutability of judgment, a decision that has acquired finality becomes immutable and unalterable, and may no longer be modified in any respect, even if the modification is meant to correct erroneous conclusions of fact and law, and whether it be made by the court that rendered it or by the Highest Court of the land. Any act which violates this principle must immediately be struck down.[10]

This doctrine admits a few exceptions, usually applied to serve substantial justice:

1. “The correction of clerical errors;

2. the so-called nunc pro tunc entries which cause no prejudice to any party;

3. void judgments; and

4. whenever circumstances transpire after the finality of the decision rendering its execution unjust and inequitable.”[11]

Doctrines on bar by prior judgment and immutability of judgment apply whether judgment is rendered after a full-blown trial or after the parties voluntarily execute a compromise agreement duly approved by the court.1

Because a judicial compromise agreement is in the nature of both an agreement between the parties and a judgment on the merits, it is covered by the Civil Code provisions on contracts. It can be avoided on grounds that may avoid an ordinary contract, e.g., it is not in accord with the law[12]; lack of consent by a party; and existence of fraud or duress. Further, the pertinent Civil Code provisions on compromise agreements provide:

Article 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence, or falsity of documents is subject to the provisions of Article 1330 of this Code.

Article 1330. A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable.

Therefore, courts cannot entertain actions involving the same cause of action, parties, and subject matter without violating the doctrines on bar by prior judgment and immutability of judgments, unless there is evidence that the agreement was void, obtained through fraud, mistake or any vice of consent, or would disrupt substantial justice.

In this case, there was no issue as to the fact that the parties freely entered into the compromise agreement. There was also no dispute about the clarity of its terms. Some of the parties simply do not wish to abide by the compromise agreement’s terms.

This court does not see how substantial justice will be served by disturbing a previous final judgment on compromise when failure of its execution was caused by the parties themselves.

Likewise, respondents’ argument that a supervening event, i.e. disagreement among the parties, was present to justify disturbance of the final judgment on compromise fails to persuade. A supervening event may justify the disturbance of a final judgment on compromise if it “brought about a material change in [the] situation[13]” between the parties. The material change contemplated must render the execution of the final judgment unjust and inequitable. Otherwise, a party to the compromise agreement has a “right to have the compromise agreement executed, according to its terms.”[14]

The subsequent disagreement among the partie1s did not cause any material change in the situation or in the relations among the parties. The situation and relations among the parties remained the same as the situation and their relations prior to the compromise agreement. They remained co-owners of the property, which they desired to partition.

Moreover, the parties voluntarily agreed to the compromise agreement, which was already stamped with judicial approval. The agreement’s execution would bring about the effects desired by all parties and the most just and equitable situation for all. On the other hand, the judgment granting the second action for partition filed by respondent Salamanca was obtained with opposition.

Judges “have the ministerial and mandatory duty to implement and enforce [a compromise agreement[15]].” Absent appeal or motion to set aside the judgment, courts cannot modify, impose terms different from the terms of a compromise agreement, or set aside the compromises and reciprocal concessions made in good faith by the parties without gravely abusing their discretion.[16]

“[They cannot] relieve parties from [their] obligations . . . simply because [the agreements are] . . . unwise.”[17] Further, “[t]he mere fact that the Compromise Agreement favors one party does not render it invalid.”[18] Courts do not have power to “alter contracts in order to save [one party] from [the effects of] adverse stipulations. . . .”[[19]

Respondents have remedies if
parties to the compromise agreement 
refuse to abide by its terms

The issue in this case involves the non-compliance of some of the parties with the terms of the compromise agreement. The law affords complying parties with remedies in case one of the parties to an agreement fails to abide by its terms.

A party may file a motion for execution of judgment. Execution is a matter of right on final judgments. Section 1, Rule 39 of the Rules of Court provides:

Section 1. Execution upon judgments or final orders. — Execution shall issue as a matter of right, on motion, upon a judgment or order that disposes of the action or proceeding upon the expiration of the period to appeal therefrom if no appeal has been duly perfected. (1a)

If the appeal has been duly perfected and finally resolved, the execution may forthwith be applied for in the court of origin, on motion of the judgment obligee, submitting therewith certified true copies of the judgment or judgments or final order or orders sought to be enforced and of the entry thereof, with notice to the adverse party.

The appellate court may, on motion in the same case, when the interest of justice so requires, direct the court of origin to issue the writ of execution. (n)

If a party refuses to comply with the terms of the judgment or resists the enforcement of a lawful writ issued, an action for indirect contempt may be filed in accordance with Rule 71 of the Rules of Court:

Section 3. Indirect contempt to be punished after charge and hearing. — After a charge in writing has been filed, and an opportunity given to the respondent to comment thereon within such period as may be fixed by the court and to be heard by himself or counsel, a person guilty of any of the following acts may be punished for indirect contempt;

. . .

(b) Disobedience of or resistance to a lawful writ, process, order, or judgment of a court, including the act of a person who, after being dispossessed or ejected from any real property by the judgment or process of any court of competent jurisdiction, enters or attempts or induces another to enter into or upon such real property, for the purpose of executing acts of ownership or possession, or in any manner disturbs the possession given to the person adjudged to be entitled thereto[.]

Since a judgment on compromise agreement is effectively a judgment on the case, proper remedies against ordinary judgments may be used against judgments on a compromise agreement. Provided these are availed on time and the appropriate grounds exist, remedies may include the following: a) motion for reconsideration; b) motion for new trial; c) appeal; d) petition for relief from judgment; e) petition for certiorari; and f) petition for annulment of judgment.[20]

Respondent Salamanca knew that the only reason for the failed compromise agreement was the non-compliance with the agreement’s terms of some of her co-heirs. Particularly, it was stipulated that petitioner’s removal from the property was conditioned upon payment of an amount equivalent to his share. Respondent Talao refused to abide by his own undertaking to shoulder respondent Salamanca’s share. He also refused to acknowledge the appraisal of the appraiser appointed in the compromise agreement. This refusal caused the failure of the compromise agreement.

Instead of availing herself of the proper remedies so the compromise could be enforced and the partition could be effected, respondent Salamanca chose to move again for the partition of the property and set aside a valid and final judgment on compromise. This court cannot allow such motion to prosper without going against law and established jurisprudence on judgments.

X x x.”