CASE BRIEF 2017-0363

CASE: Chiquita Brands, Inc. and Chiquita Brands International, Inc. vs. Hon. George E. Omelio, RTC, Davao City, Branch 14, Sheriff Oberto C. Esguerra, Cecilio G. Abenion [G.R. No. 189102, June 7, 2017]

PONENTE: Leonen, J.:

SUBJECT:

  1. Remedial Law:
    i. Doctrine of Finality/Immutability of Judgments;
    ii. Hierarchy of Courts; General Rule; exceptions;
    iii. Judgment on Compromise
  2. Civil Law: Compromise

“Courts can neither amend nor modify the terms and conditions of a compromise validly entered into by the parties. A writ of execution that varies the respective obligations of the parties under a judicially approved compromise agreement is void.”


FACTS:  Dibromochloropropane (DBCP) is a pesticide used against roundworms and threadworms that thrive on and damage tropical fruits such as bananas and pineapples. It was first introduced in 1955 as a soil fumigant.  Early studies have shown that prolonged exposure to DBCP causes sterility.  DBCP was also found to have mutagenic properties. 

Thousands of banana plantation workers from over 14 countries instituted class suits for damages in the United States against 11 foreign corporations, namely: (1) Shell Oil Company; (2) Dow Chemical Company; (3) Occidental Chemical Corporation; (4) Standard Fruit Company; (5) Standard Fruit and Steamship Co.; (6) Dole Food Company, Inc.; (7) Dole Fresh Fruit Company; (8) Chiquita Brands, Inc.; (9) Chiquita Brands International, Inc.; (10) Del Monte Fresh Produce, N.A.; and (11) Del Monte Tropical Fruit Co.

They claimed to have been exposed to DBCP in the 1970s up to the 1990s while working in plantations that utilized it.  As a result, these workers suffered serious and permanent injuries to their reproductive systems.

The United States courts dismissed the actions on the ground of forum non conveniens and directed the claimants to file actions in their respective home countries. 

So around 1,800 Filipino claimants filed a complaint for damages against the same foreign corporations before the Regional Trial Court in Panabo City, Davao del Norte. 

Before pre-trial,  Chiquita Brands, Inc., Chiquita Brands International, Inc.(Chiquita) and some other foreign corporations entered into a worldwide settlement in the United States with all the banana plantation workers. The parties executed a document denominated as the “Compromise Settlement, Indemnity, and Hold Harmless Agreement” (Compromise Agreement).

The Compromise Agreement provided, among others, that the settlement amount should be deposited in an escrow account, which should be administered by a mediator. After the claimants execute individual releases, the mediator shall give the checks representing the settlement amounts to the claimants’ counsel, who shall then distribute the checks to each claimant.

Consequently, Chiquita  moved to dismiss the case. In support of its Motion it alleged that all claimants executed quitclaims denominated as “Release in Full.” Chiquita attached five (5) quitclaims in its motion.

The Regional Trial Court approved the Compromise Agreement by way of judgment on compromise. Accordingly, it dismissed the suit in the Omnibus Order.

Shortly after the dismissal of the case, several claimants moved for the execution of the judgment on compromise. 

Chiquita opposed the execution on the ground of mootness. They argued that they had already complied with their obligation under the Compromise Agreement by depositing the settlement amounts into an escrow account, which was administered by the designated mediator. Hence, there was nothing left for the court to execute.

The Regional Trial Court granted the Motion for Execution because there was no proof that the settlement amounts had been withdrawn and delivered to each individual claimant.  Although the parties admitted that the funds were already deposited in an escrow account, the Regional Trial Court held that this was insufficient to establish that Chiquita had fulfilled their obligation under the Compromise Agreement. Accordingly, a Writ of Execution was issued directing the sheriff to collect the settlement amount from Chiquiat, et al.

Chiquita instituted before the Supreme Court a Petition for Certiorari and Prohibition with an application for the issuance of a temporary restraining order and writ of preliminary prohibitory or mandatory injunction questioning the issuance of the Writ of Execution.

Chiquita argued that their obligation under the Compromise Agreement consisted of depositing the settlement amount in an escrow fund. They were not required to release and to directly give the settlement amount to each claimant since this duty was delegated to the mediator.

ISSUES:

  1. Whether this case falls under the exceptions to the doctrine on hierarchy of courts;
  2.  Whether respondent court committed “grave abuse of discretion amounting to lack or excess of its jurisdiction in issuing the writ of execution.

RULING:

A) The doctrine on hierarchy of courts prohibits “parties from directly resorting to the Supreme Court when relief may be obtained before the lower courts.” This rule is founded upon judicial economy and practical considerations. The doctrine on hierarchy of courts was designed to promote order and efficiency.

Although this Court has the power to issue extraordinary writs of certiorari, prohibition, and mandamus, it is by no means an exclusive power. It is shared concurrently with the Court of Appeals and the Regional Trial Courts. 

Generally, this Court will dismiss petitions that are directly filed before it if relief can be obtained from the lower courts. Nevertheless, a direct invocation of this Court’s original jurisdiction may be justified “when there are compelling reasons clearly set forth in the petition.”

Immediate resort to this Court may be warranted:

(1) when genuine issues of constitutionality are raised that must be addressed immediately; (2) when the case involves transcendental importance; (3) when the case is novel; (4) when the constitutional issues raised are better decided by this Court; (5) when time is of the essence; (6) when the subject of review involves acts of a constitutional organ; (7) when there is no other plain, speedy, adequate remedy in the ordinary course of law; (8) when the petition includes questions that may affect public welfare, public policy, or demanded by the broader interest of justice; (9) when the order complained of was a patent nullity; and (10) when the appeal was considered as an inappropriate remedy. 

We may take cognizance of this case “in the interest of judicial economy and efficiency.” The records of this case are sufficient for this Court to decide on the issues raised by the parties. Any further delay would unduly prejudice the parties.

B)  The Writ of Execution ordering the collection of the settlement amount directly from Chiquita is void.

Under the judicially approved Compromise Agreement, Chiquita are obliged to deposit the settlement amount in escrow within 10 business days after they receive a signed Compromise Agreement from the counsel of the claimants. 

There was nothing in the Compromise Agreement that required Chiquita to ensure the distribution of the settlement amount to each claimant. Chiquita’s obligation under the Compromise Agreement was limited to depositing the settlement amount in escrow. On the other hand, the actual distribution of the settlement amounts was delegated to the chosen mediator. To require proof that the settlement amounts have been withdrawn and delivered to each claimant would enlarge the obligation of Chiquita under the Compromise Agreement.

A writ of execution derives its validity from the judgment it seeks to enforce. Hence, it should not “vary the terms of the judgment or go beyond its terms.” Otherwise, the writ of execution is void. Courts can neither modify nor “impose terms different from the terms of a compromise agreement” that parties have entered in good faith. To do so would amount to grave abuse of discretion.

A compromise is defined under the Civil Code as “a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced.” It may either be judicial or extrajudicial depending on its object or the purpose of the parties. A compromise is judicial if the parties’ purpose is to terminate a suit already commenced. On the other hand, a compromise is extrajudicial if its object is to avoid litigation. 

In any case, a compromise validly entered into has the authority and effect of res judicata as between the parties.

However, unlike an extrajudicial compromise, a compromise that has received judicial imprimatur “becomes more than a mere contract.”  A judicial compromise is regarded as a “determination of the controversy” between the parties and “has the force and effect of a final judgment.”  In other words, it is both a contract and “a judgment on the merits.” It may neither be disturbed nor set aside except in cases where there is forgery or when either of the parties’ consent has been vitiated.

The doctrine on immutability of judgments applies to compromise agreements approved by the courts in the same manner that it applies to judgments that have been rendered on the basis of a full-blown trial. Thus, a judgment on compromise that has attained finality cannot 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.”

A judgment on compromise may be executed just like any other final judgment in the manner provided in the Rules of Court. The writ of execution derives its validity from the judgment it seeks to enforce and must essentially conform to the judgment’s terms. It can neither be wider in scope nor exceed the judgment that gives it life. Otherwise, it has no validity. Thus, in issuing writs of execution, courts must look at the terms of the judgment sought to be enforced.

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THINGS DECIDED:

A) The doctrine on hierarchy of courts prohibits “parties from directly resorting to the Supreme Court when relief may be obtained before the lower courts.” This rule is founded upon judicial economy and practical considerations. The doctrine on hierarchy of courts was designed to promote order and efficiency.

B) Exceptions to the Doctrine of Hierarchy of Courts:

(1) when genuine issues of constitutionality are raised that must be addressed immediately; (2) when the case involves transcendental importance; (3) when the case is novel; (4) when the constitutional issues raised are better decided by this Court; (5) when time is of the essence; (6) when the subject of review involves acts of a constitutional organ; (7) when there is no other plain, speedy, adequate remedy in the ordinary course of law; (8) when the petition includes questions that may affect public welfare, public policy, or demanded by the broader interest of justice; (9) when the order complained of was a patent nullity; and (10) when the appeal was considered as an inappropriate remedy. 

C) A compromise is defined under the Civil Code as “a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced.”

D) A compromise is judicial if the parties’ purpose is to terminate a suit already commenced. On the other hand, a compromise is extrajudicial if its object is to avoid litigation. 

E) A compromise validly entered into has the authority and effect of res judicata as between the parties.

F) Unlike an extrajudicial compromise, a compromise that has received judicial imprimatur “becomes more than a mere contract.”  A judicial compromise is regarded as a “determination of the controversy” between the parties and “has the force and effect of a final judgment.” 

G) The doctrine on immutability of judgments applies to compromise agreements approved by the courts in the same manner that it applies to judgments that have been rendered on the basis of a full-blown trial.

H) A judgment on compromise that has attained finality cannot 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.”

‘Stand by things decided’ ~ Stare Decisis


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