ARNEL DILAY DIAZ, PLAINTIFF-APPELLEE, VS. PHILIPPINE PORTS AUTHORITY, DEFENDANT-APPELLANT.

Diaz versus Philippine Ports Authority

The Case

This is an appeal brought by the Philippine Ports Authority against a decision of the Regional Trial Court of Batangas City in an action for judicial determination of just compensation. Arnel Dilay Diaz sued the Philippine Ports Authority over a parcel of unregistered land that the Authority had taken for a government building, and which the Authority refused to pay for on the ground that Diaz held no Torrens title. The case matters because it shows how a compromise agreement, perfected by the meeting of the minds of the parties, can end an expropriation dispute even while the appeal is pending, and because it restates the rule that judicial approval is not required for the perfection of a compromise, although the court may render judgment upon it.

Procedural History

Diaz filed a complaint for judicial determination of just compensation before the Regional Trial Court, Branch 2, Batangas City. The trial court rendered a decision in favor of Diaz, finding sufficient evidence of his ownership and directing the Philippine Ports Authority to pay him an amount equivalent to the full zonal valuation of the property under Republic Act Number 8974, and directing the parties to constitute a commission to determine just compensation. The Philippine Ports Authority appealed, and the appeal was docketed before the Court of Appeals. While the appeal was pending, the parties entered into a Compromise Agreement dated January 29, 2014. The Office of the Solicitor General, as counsel for the Authority, then filed a Joint Omnibus Motion to withdraw the appeal and to approve the Compromise Agreement. The appeal was resolved by the Supreme Court, which granted the motion, approved the agreement, and deemed the appeal withdrawn and terminated.

Facts

The controversy involves an unregistered parcel of land in Sta. Clara, Batangas City, with an area of 970 square meters, declared for taxation purposes in the name of Arnel Diaz. Sometime in 1996, the Philippine Ports Authority, in the exercise of its power to expropriate private property, expropriated several parcels of land near the harbor of Sta. Clara, Batangas City, including the untitled lot claimed by Diaz, for the construction of a new building for the Bureau of Customs.

In 1999, the Authority paid just compensation to the other lot owners affected by the project, except Diaz. Diaz and his family, through the Office for Legal Services of Batangas City, wrote several letters formally requesting payment of just compensation. The Authority insisted that the government was not obliged to pay because the Diazes did not have a Torrens title over the property. Thus, on January 10, 2008, Diaz filed a complaint for judicial determination of just compensation.

The trial court ruled that there was sufficient evidence proving Diaz's ownership, citing the approved sales application, a certification that the lot was part of the alienable and disposable land of the public domain, and the tax declaration. The Authority appealed. While the appeal was pending, and after Diaz presented an Order of Award by the Department of Environment and Natural Resources approving the sales patent, the parties entered into a Compromise Agreement on January 29, 2014, under which the Authority would pay Diaz 4,850,000 pesos as full compensation for the 970 square meter lot at 5,000 pesos per square meter, and Diaz would execute the documents needed to transfer title and would quitclaim the Authority from all claims.

Issues

• Whether or not the Compromise Agreement entered into by the Philippine Ports Authority and Diaz may be approved by the Court and made the basis of judgment.
• Whether or not the appeal filed by the Philippine Ports Authority may be withdrawn and deemed terminated in view of the Compromise Agreement.

Applicable Provisions

Article 2028 of the Civil Code defines a compromise:

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

This definition governs the nature of the agreement between Diaz and the Authority and supports its approval as a means of ending the litigation.

Article 2029 of the Civil Code provides:

The court shall endeavor to persuade the litigants in a civil case to agree upon some fair compromise.

This provision reflects the policy of the law encouraging amicable settlement in civil cases, which the Court applies in approving the agreement.

Ruling

On the first issue, the Court held that the Compromise Agreement may be approved. A compromise is a form of amicable settlement that is not only allowed but also encouraged in civil cases. Being a consensual contract, it is perfected upon the meeting of the minds of the parties, and judicial approval is not required for its perfection. However, the parties are not precluded from securing judicial approval, and the court is authorized to render judgment based on the compromise. The Court found that the parties willingly and intelligently entered into the settlement, and that its terms are not contrary to law, morals, good customs, and public policy. The agreement was reviewed by the Office of the Solicitor General, which then filed the Joint Omnibus Motion seeking its approval.

On the second issue, the Court held that the appeal may be withdrawn and deemed terminated. Having stamped its judicial imprimatur on the Compromise Agreement, which becomes the law between the parties, the Court considered the appeal as deemed terminated.

Doctrine

A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. It is a consensual contract, perfected upon the meeting of the minds of the parties, and judicial approval is not required for its perfection. Nevertheless, the parties may secure judicial approval, and the court is authorized to render judgment based on the compromise. A compromise that is willingly and intelligently entered into, and whose terms are not contrary to law, morals, good customs, and public policy, may be approved and becomes the law between the parties. These rules are tied to Articles 2028 and 2029 of the Civil Code, which define a compromise and mandate that the court shall endeavor to persuade the litigants to agree upon a fair compromise.

Disposition

The Supreme Court granted the Joint Omnibus Motion, approved the Compromise Agreement dated January 29, 2014, and withdrew and deemed terminated the appeal of the Philippine Ports Authority.

Remember This

The single line worth memorizing is that a compromise is perfected by the meeting of the minds, and judicial approval is not required for its perfection, although the court may render judgment upon it. Examiners like to use this case to test the nature of a compromise as a consensual contract and the effect of a compromise agreement on a pending appeal.