Magbanua vs.

Uy
G.R. NO. 161003 : May 6, 2005

Facts:
A decision was promulgated by the Supreme Court in a previous case awarding to
the petitioners the amount of 1,487,312.69php as backwages. Petitioners filed a Motion
for Issuance of Writ of Execution. Rizalino Uy filed a manifestation that the cases be
terminated and closed, stating that the judgment award as computed has been complied.
In reply, petitioners claim that they received only partial payments of the judgment
award.
Later, 6 of the 8 petitioners filed a manifestation requesting that the cases be
considered closed and terminated. They attested that they have no more collectible
amount and if there is any, they are abandoning and waiving the same. That’s why, the
Labor arbiter issued an order denying the motion for issuance of writ of execution.

However, the NLRC reversed, holding that a final and executory judgment can no longer
be altered, and that quitclaims and releases are normally frowned upon as contrary to
public policy. CA held that compromise agreements may be entered into even after a
final judgment, thus petitioners validly released respondents from any claims.

Issue:

Whether the final and executory judgment of the Supreme Court could be subject to
compromise settlement and whether their rights may be waived through a compromise
agreement

Held:
Yes. A compromise agreement is a contract whereby parties make reciprocal
concessions in order to resolve their differences and thus avoid or put an end to a law
suit. The validity of the agreement is determined by compliance with the requisites and
principles of contracts, not by when it was entered into.
As provided by the law on contracts, a valid compromise must have the following
elements: (1) the consent of the parties to the compromise, (2) an object certain that is the
subject matter of the compromise, and (3) the cause of the obligation that is established.
The principle of novation supports the validity of a compromise after final
judgment. Novation, a mode of extinguishing an obligation, is done by changing the
object or principal condition of an obligation, substituting the person of the debtor, or
surrogating a third person in the exercise of the rights of the creditor. A compromise of a
final judgment operates as a novation of the judgment obligation.
Rights may be waived through a compromise agreement, notwithstanding a final
judgment that has already settled the rights of the contracting parties. To be binding, the
compromise must be shown to have been voluntarily, freely and intelligently executed by
the parties, who had full knowledge of the judgment. Furthermore, it must not be contrary
to law, morals, good customs and public policy.