JUDGMENT UPON A COMPROMISE or JUDGMENT UPON AN AMICABLE SETTLEMENT

Q: What is a JUDGMENT UPON A COMPROMISE?

A: A judgment upon a compromise is a judgment rendered with the consent of the parties for the purpose of effecting a compromise or settlement of an action. (31 Am. Jur. 105-108)

This is the type of judgment which the law encourages because it is a judgment with the consent of the parties for the purpose of effecting a compromise or settlement. Usually mga collection cases ito – tawaran – like i-condone ang interests, or half of the amount na lang, etc. The court will render judgment copying word for word what the parties say. So the compromise agreement becomes the judgment and for a as long as the agreement is not contrary to law, the court will approve it.

Q: In a compromise judgment, is the court required to make findings of fact and conclusions of law? Why?

A: In a compromise judgment, the court is not required to make findings of fact and conclusions of law. In contemplation of law, the court is deemed to have adopted the statement of facts and conclusions of law made and resolved by the parties themselves in their compromise agreement; and their consent has made it both unnecessary and improper for the court to make a preliminary adjudication of the matters thereunder covered. (Palarca vs. Anzon, L-14780, Nov. 29, 1960)

Q: How do you define a compromise?

A: Under Article 2028 of the New Civil Code:

Art. 2028. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. (Civil Code)

So the essence of compromise is reciprocal concessions – give and take. It is a mutual concession to avoid litigation or, if there is already, that which will put an end. There are other definitions given by the SC although the essence or substance is the same. In the case of

SMITH BELL AND CO. vs. COURT OF APPEALS 197 SCRA 201

HELD: “A compromise is an agreement between two (2) or more persons who, in order to forestall or put an end to a law suit, adjust their differences by mutual consent, an adjustment which every one of them prefers to the hope of gaining more, balanced by the danger of losing more.”

If we go to trial, well, winner take all – either the plaintiff wins or the defendant wins. If you are not sure of your position, then you might as well get something out of it rather than risk losing everything.

EXAMPLE: You sue me for P1 million. Then I say, “I would like to offer a settlement”. You would say, “How much do you offer? Well, my complaint is 1 million, so you pay me P1 million.” That is not compromise, that is surrender. Kaya nga umaareglo ako para makatawad. And if you will not receive anything less than a million, you are not asking for a compromise, you are demanding total surrender.

If that is so then, let us go to court and find out if you will get your P1 million and let us find out how many years from now you can get your money.

Kaya in a compromise agreement, there are no winners and there are no losers.

REPUBLIC OF THE PHILIPPINES vs. SANDIGANBAYAN 226 SCRA 314

FACTS: This is a case involving a compromise between the government and Benedicto, a crony of President Marcos. He entered into a compromise with the PCGG and the Supreme Court approved it.

HELD: “Any compromise has its very essence reciprocal concessions, one must give and

Let’s go back to the law on Obligations and Contracts. There are four (4) types of defective contracts: (a) void; (b) voidable; (3) rescissible; and (4) unenforceable. Under the Civil Code, if one party enters into a contract where he lacks the requisite authority, the contract is unenforceable but it is a valid agreement.

Q: What is the effect of a compromise agreement entered into by a lawyer, without any special authority from his client? Is it a null and void agreement?

A: A lawyer cannot, without special authority, compromise his client’s litigation. A judgment upon a compromise entered by the court, not subscribed by the party sought to be bound by the compromise agreement, and in the absence of a special authority to the lawyer to bind his client in the said agreement, is UNENFORCEABLE. (Dungo vs. Lopena, L-18377, Dec. 29, 1962)

Q: Suppose in the above case, the client learned about what his lawyer did and he did not reject the agreement, as a matter of fact he complied with it, what is now the effect on such agreement?

A: The agreement is now perfectly VALID and ENFORCEABLE because the party himself did not question his lawyer’s authority. When it appears that the client, on becoming aware of the compromise and the judgment, failed to repudiate promptly the action of his lawyer, he will not afterwards be heard to contest it. (Banco Español-Filipino vs. Palanca, 37 Phil. 921)

Q: What are the legal effects of a judgment based upon a compromise agreement?

A: A judgment upon a compromise agreement produces the following legal effects:

1.) The compromise judgment is not appealable and it is immediately executory. (Reyes vs.

Ugarte, 75 Phil. 505; Serrano vs. Miave, L-14687, March 31, 1965)

2.) It cannot be annulled unless it is vitiated with error, deceit, violence or forgery of documents. (Morales vs. Fontanos, 64 Phil. 19; Article 2038, Civil Code)

3.) It constitutes res adjudicata. (Art. 2037, Civil Code; Sabino vs. Cuba, L-18328, Dec. 17, 1966) Meaning, the same subject matter or cause of action can no longer be reopened in the future in another litigation.

Q: Suppose you enter into a compromise agreement and there is a judgment. You want to escape from the compromise judgment on the ground that your consent was vitiated by mistake, error, deceit, violence. How do you question it? What is your remedy?

A: There are so many conflicting answers here. Some say you file a motion to set aside the compromise judgment because your consent was vitiated. And if the motion is denied, you appeal from the order denying your motion to set aside. But definitely, you cannot appeal from the compromise judgment because it is not appealable. You appeal from the order denying your motion to set aside the compromise judgment. However, under the new rules, you cannot anymore appeal an order denying a motion to set aside a judgment by consent, confession or compromise on the ground of fraud, mistake, or duress or any other ground vitiating consent (Section 1, Rule 41)

So an order denying a motion to set aside a judgment by compromise on the ground of fraud, mistake, or duress or any other ground vitiating consent is not appealable. Therefore, whatever the answers before are not anymore true now. So what is the REMEDY now?

It would seem that the correct remedy based on the new rules in relation to some new cases, among which was the case of:

DOMINGO vs. COURT OF APPEALS 255 SCRA 189 [1996]

HELD: The correct remedy is for the party to file an action for annulment of judgment before the Court of Appeals pursuant to Section 9, par. 2, of the Judiciary Law. (now incorporated in Rule 47)

“A compromise may however be disturbed and set aside for vices of consent or forgery.

Hence, where an aggrieved party alleges mistake, fraud, violence, intimidation, undue influence, or falsity in the execution of the compromise embodied in a judgment, an action to annul it should be brought before the Court of Appeals, in accordance with Section 9(2) of Batas Pambansa Bilang 129, which gives that court (CA) exclusive original jurisdiction over actions for annulment of judgments of regional trial courts.”

F.) JUDGMENT UPON A CONFESSION (COGNOVIT JUDGMENT)