Compromise After Judgment

When a compromise agreement is given judicial imprimatur, it becomes more than a contract
binding to the parties but a determination of a controversy and becomes immediately executory
and unappealable, except for vices of consent or forgery. Thus, a compromise after final
judgment is unnecessary since the rights of the parties are already settled and there are no more
disputes to compromise.1 However, as upheld by law and jurisprudence, there is no justification
to disallow compromise after final judgment.

Article 2040 of the Civil Code impliedly authorizes that compromise may be effected
notwithstanding final judgment.2 The first paragraph of the said article contemplates a situation
where:

● Litigation has been decided by final judgment

● A compromise has been agreed upon
● Either or both of the parties were unaware of the existence of the final judgment
● The compromise may be rescinded

In this scenario, the law provides a remedy for either parties to impugn the contract through
rescission.

This paragraph is an improvement from its precursor in the former Code which simply provides:
“If, after a lawsuit is resolved by a final judgement, a settlement should be reached because
one of the parties should be unaware of the existence of such final judgement, such party may
request rescission of the settlement. Unawareness of a judgement which may be revoked does
not constitute grounds to challenge the settlement.”3 Noticeably, this provision contemplates
only to extend the remedy of rescission to the party who was unaware, during the compromise
agreement, of the court’s final judgment. Article 2040, on the other hand, extends this remedy to
either or both parties. However, apart from providing a remedy, the first paragraph does not
expressly mention whether such compromise entered into after final judgment is prohibited,
void, or voidable.

The second paragraph, on the other hand, contemplates a situation where:

● There is ignorance of a judgment

● [Judgment] may be revoked or set aside
● Not a valid ground for attacking a compromise

1
Magbanua v Uy, G.R. No. 161003, May 6, 2005
2
Jesalva v Bautista, G.R. Nos. L-11928-11930, March 24, 1959.
3
Article 1819. If, after a lawsuit is resolved by a final judgement, a settlement should be reached because one of the parties
should be unaware of the existence of such final judgement, such party may request rescission of the settlement. Unawareness of
a judgement which may be revoked does not constitute grounds to challenge the settlement.