FGU Insurance Corporation vs. Regional Trial Court of Makati City, Branch 66

A final and executory judgment may be modified or its execution suspended when, after finality, facts and circumstances transpire that render its execution unjust or inequitable; the trial court may hold a hearing to ascertain such supervening facts before issuing the writ of execution.

FGU Insurance Corporation (now BPI/MS Insurance Corporation) is the insurer of Concepcion Industries, Inc. (CII), while G.P. Sarmiento Trucking Corporation (GPS) is the trucking company engaged to transport CII's cargo. After FGU paid CII for a damaged shipment and was subrogated to CII's rights, it sought reimbursement from GPS, and the resulting litigation culminated in a decision of the Supreme Court dated August 6, 2002 holding GPS liable to FGU under the doctrine of culpa contractual. That decision became final and executory on October 3, 2002, and its execution is the subject of the present petition for mandamus.

On June 18, 1994, G.P. Sarmiento Trucking Corporation (GPS) agreed to transport thirty (30) units of Condura S.D. white refrigerators in one of its Isuzu trucks, driven by Lambert Eroles, from the plant site of Concepcion Industries, Inc. (CII) in Alabang to Central Luzon Appliances in Dagupan City. On its way to its destination, the Isuzu truck collided with another truck, resulting in damage to the appliances. FGU Insurance Corporation (FGU), the insurer of the damaged refrigerators, paid CII, the insured, the value of the covered shipment in the sum of ₱204,450.00. FGU, in turn, as subrogee of the insured's rights and interests, sought reimbursement of the amount it paid from GPS.

When GPS failed to heed FGU's claim for reimbursement, FGU filed a complaint for damages and breach of contract of carriage against GPS and its driver, Eroles, with the Regional Trial Court (RTC). During the hearing, FGU presented evidence establishing its claim against GPS. For its part, GPS filed a motion to dismiss by way of demurrer to evidence, which the RTC granted. The RTC ruled, among others, that FGU failed to adduce evidence that GPS was a common carrier and that its driver was negligent, and that GPS could not therefore be made liable for the damage to the subject cargoes. On appeal, the Court of Appeals (CA) affirmed the RTC.

The case was elevated to the Supreme Court. On August 6, 2002, the Court rendered a decision agreeing with the lower courts that GPS was not a common carrier but nevertheless holding it liable under the doctrine of culpa contractual, ordering GPS to pay FGU the value of the damaged and lost cargoes in the amount of ₱204,450.00. On September 18, 2002, the Court denied GPS' motion for reconsideration with finality, and an entry of judgment was issued certifying that the August 6, 2002 decision became final and executory on October 3, 2002.

On October 14, 2002, FGU filed a motion for execution with the RTC praying that a writ of execution be issued to enforce the judgment award. On November 5, 2002, GPS filed its Opposition to Motion for Execution praying that FGU's motion be denied on the ground that the latter's claim was unlawful, illegal, against public policy and good morals, and constituted unjust enrichment. GPS alleged that it discovered, upon verification from the insured, that after the insured's claim was compensated in full, the insured transferred the ownership of the subject appliances to FGU; that FGU sold the same to third parties, thereby receiving and appropriating the consideration and proceeds of the sale; and that FGU should not be allowed to "doubly recover" the losses it suffered. Thereafter, on January 13, 2003, GPS filed its Comment with Motion to Set Case for Hearing on the Merits.

On July 1, 2003, the RTC issued an order granting GPS' motion to set the case for hearing. The RTC observed that GPS contended it had already turned over the 30 refrigerator units to the consignee, and that it appeared from the record that the Accounting/Administrative Manager of Concepcion Industries had executed a certification to the effect that the assured company had turned over the refrigerator units in question to FGU. Considering that FGU may not be allowed to recover more than what it was entitled to, the RTC found a need for the parties to clarify (1) whether there was an actual turn-over of the 30 refrigerators to FGU, and (2) in the affirmative, what the salvage value of the 30 refrigerators was. It ordered both parties to present evidence in support of their respective positions on these issues. Upon denial of its motion for reconsideration, FGU filed this petition for mandamus directly with the Supreme Court.

• Finality of Judgment: FGU argued that the decision of the Supreme Court had already become final and executory and that, accordingly, a writ of execution should issue; the lower court should not be allowed to hear the matter of turnover of the refrigerators to FGU because it was not an issue raised in the Answer of GPS, nor was it argued by GPS in the CA and in this Court, having been brought out only after the decision became final and executory.
• Ministerial Duty to Issue Writ of Execution: FGU maintained that a writ of mandamus lies to compel a judge to issue a writ of execution when the judgment had already become final and executory and the prevailing party is entitled to the same as a matter of right; where the judgment of a higher court has become final and executory and has been returned to the lower court, the only function of the latter is the ministerial act of carrying out the decision and issuing the writ of execution.
• Immutability of Judgment: FGU contended that a final and executory judgment can no longer be amended by adding thereto a relief not originally included; once a judgment becomes final, the winning party is entitled to a writ of execution and the issuance thereof becomes a court's ministerial duty; the lower court cannot vary the mandate of the superior court or reexamine it for any other purpose other than execution, much less review the same upon any matter decided on appeal or error apparent, nor intermeddle with it further than to settle so much as has been demanded.

• Unjust Enrichment and Double Recovery: GPS opposed the motion for execution on the ground that FGU's claim was unlawful, illegal, against public policy and good morals, and constituted unjust enrichment; it alleged that after the insured's claim was compensated in full, the insured transferred ownership of the subject appliances to FGU, which then sold the same to third parties and received and appropriated the consideration and proceeds of the sale, such that FGU should not be allowed to "doubly recover" the losses it suffered.
• Verification of the Whereabouts of the Cargo: GPS claimed that it verified the whereabouts of the subject refrigerators from CII because it wanted to repair and sell them to compensate FGU, and that the certification of the Accounting/Administrative Manager of CII showed that the assured company had turned over the refrigerator units in question to FGU.

• Finality of Judgment: Whether the Regional Trial Court of Makati City, Branch 66, unlawfully neglected the performance of its duty when it reopened a case, the decision of which had already attained finality.
• Issuance of Writ of Execution: Whether the Regional Trial Court of Makati City, Branch 66, unlawfully neglected the performance of its ministerial duty when it denied the issuance of a writ of execution.

• Finality of Judgment: No. The RTC did not unlawfully neglect its duty; the fourth exception to the doctrine of immutability of judgments — whenever circumstances transpire after the finality of the decision rendering its execution unjust and inequitable — applies where supervening facts are alleged.
• Issuance of Writ of Execution: No. The issuance of a writ of execution, though generally a ministerial duty once judgment becomes final, yields where supervening facts must first be determined to prevent unjust enrichment; the RTC may hold a hearing to ascertain such facts.

• Finality of Judgment: The doctrine of finality of judgment, or immutability of judgment, provides that a decision that has acquired finality becomes immutable and unalterable and may no longer 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. Any act which violates this principle must immediately be struck down. The rule, however, admits of exceptions: (1) the correction of clerical errors; (2) the so-called nunc pro tunc entries which cause no prejudice to any party; (3) void judgments; and (4) whenever circumstances transpire after the finality of the decision rendering its execution unjust and inequitable. The Court applied the fourth exception, citing City of Butuan vs. Ortiz, which held that when after judgment has been rendered and the latter has become final, facts and circumstances transpire which render its execution impossible or unjust, the interested party may ask the court to modify or alter the judgment to harmonize the same with justice and the facts. The Court also cited Candelario vs. Cañizares, which ruled that after a judgment has become final, if there is evidence of an event or circumstance which would affect or change the rights of the parties thereto, the court should be allowed to admit evidence of such new facts and circumstances, and thereafter suspend execution thereof and grant relief as the new facts and circumstances warrant. These rulings were reiterated in Abellana vs. Dosdos, The City of Cebu vs. Mendoza, and PCI Leasing and Finance, Inc. vs. Milan, where there were compelling circumstances which clearly warranted the exercise of the Court's equity jurisdiction. In the case at bench, the Court agreed with the RTC that there was indeed a need to find out the whereabouts of the subject refrigerators. A hearing was necessary to determine the issue of whether or not there was an actual turnover of the subject refrigerators to FGU by the assured CII. If there was an actual turnover, it was very important to find out whether FGU sold the subject refrigerators to third parties and profited from such sale. These questions were brought about by the contention of GPS in its Opposition to Motion for Execution that after the assured, CII, was fully compensated for its claim on the damaged refrigerators, it delivered the possession of the subject refrigerators to FGU as shown in the certification of the Accounting/Administrative Manager of CII; that thereafter, the subject refrigerators were sold by FGU to third parties and FGU received and appropriated the consideration and proceeds of the sale. If, indeed, there was an actual delivery of the refrigerators and FGU profited from the sale after the delivery, there would be an unjust enrichment if the realized profit would not be deducted from the judgment amount. The Court is not precluded from rectifying errors of judgment if blind and stubborn adherence to the doctrine of immutability of final judgments would involve the sacrifice of justice for technicality.
• Issuance of Writ of Execution: While the general rule is that a writ of mandamus lies to compel a judge to issue a writ of execution when the judgment had already become final and executory and the prevailing party is entitled to the same as a matter of right, and that where the judgment of a higher court has become final and executory and has been returned to the lower court, the only function of the latter is the ministerial act of carrying out the decision and issuing the writ of execution, the Court held that the RTC did not unlawfully neglect its ministerial duty. The RTC did not vary or reexamine the final judgment; it merely sought to determine facts that arose after finality. The existence of supervening circumstances — the alleged turnover and sale of the subject refrigerators — had to be ascertained before execution could proceed, because if FGU profited from the sale after delivery, allowing it to also recover the full judgment amount would result in unjust enrichment. The Court thus agreed with the RTC that a hearing was necessary to allow a fair and judicious resolution of FGU's motion for issuance of a writ of execution.

• Doctrine of Finality (Immutability) of Judgment — A decision that has acquired finality becomes immutable and unalterable and may no longer 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. Any act which violates this principle must immediately be struck down. The Court recognized four exceptions: (1) the correction of clerical errors; (2) the so-called nunc pro tunc entries which cause no prejudice to any party; (3) void judgments; and (4) whenever circumstances transpire after the finality of the decision rendering its execution unjust and inequitable. The Court applied the fourth exception in this case.
• Exception of Supervening Circumstances — When, after judgment has been rendered and the latter has become final, facts and circumstances transpire which render its execution impossible or unjust, the interested party may ask the court to modify or alter the judgment to harmonize the same with justice and the facts. After a judgment has become final, if there is evidence of an event or circumstance which would affect or change the rights of the parties thereto, the court should be allowed to admit evidence of such new facts and circumstances, and thereafter suspend execution thereof and grant relief as the new facts and circumstances warrant. The Court applied this exception to allow the RTC to hear evidence on the alleged turnover and sale of the refrigerators.
• Ministerial Duty to Issue Writ of Execution — The issuance of a writ of execution is a ministerial duty once a judgment becomes final and executory, and mandamus lies to compel its issuance where the prevailing party is entitled to it as a matter of right. This duty, however, yields where supervening circumstances render execution unjust or inequitable, in which case the court may suspend execution and grant relief as the new facts and circumstances warrant.
• Unjust Enrichment — A party may not be allowed to recover more than what it is entitled to. The Court held that if FGU profited from the sale of the refrigerators after being fully compensated by the insured, allowing it to also recover the full judgment amount would result in unjust enrichment, and the realized profit should be deducted from the judgment amount.
• Equity Jurisdiction — The Court is not precluded from rectifying errors of judgment if blind and stubborn adherence to the doctrine of immutability of final judgments would involve the sacrifice of justice for technicality. The Court exercised its equity jurisdiction in this case to allow the RTC to determine the supervening facts before proceeding with execution.

• "But like any other rule, it has exceptions, namely: (1) the correction of clerical errors; (2) the so-called nunc pro tunc entries which cause no prejudice to any party; (3) void judgments; and (4) whenever circumstances transpire after the finality of the decision rendering its execution unjust and inequitable." — This passage states the four recognized exceptions to the doctrine of immutability of judgments, the fourth of which furnished the basis for dismissing the petition.
• "The Court is not precluded from rectifying errors of judgment if blind and stubborn adherence to the doctrine of immutability of final judgments would involve the sacrifice of justice for technicality." — This is the ratio decidendi for allowing the RTC to proceed with the hearing notwithstanding the finality of the August 6, 2002 decision.
• "If, indeed, there was an actual delivery of the refrigerators and FGU profited from the sale after the delivery, there would be an unjust enrichment if the realized profit would not be deducted from the judgment amount." — This passage applies the unjust enrichment principle to the supervening facts alleged by GPS and explains why the RTC's hearing was necessary.
• "Obviously a prevailing party in a civil action is entitled to a writ of execution of the final judgment obtained by him within five years from its entry (Section 443, Code of Civil Procedure). But it has been repeatedly held, and it is now well-settled in this jurisdiction, that when after judgment has been rendered and the latter has become final, facts and circumstances transpire which render its execution impossible or unjust, the interested party may ask the court to modify or alter the judgment to harmonize the same with justice and the facts." — Quoted from City of Butuan vs. Ortiz, this passage articulates the supervening-circumstances exception that the Court applied.

• City of Butuan vs. Ortiz, 113 Phil. 636 (1961) — Cited as the early case establishing that when after judgment has become final, facts and circumstances transpire which render its execution impossible or unjust, the interested party may ask the court to modify or alter the judgment to harmonize the same with justice and the facts.
• Candelario vs. Cañizares, 114 Phil. 672 (1962) — Cited for the rule that after judgment has become final, if there is evidence of an event or circumstance which would affect or change the rights of the parties thereto, the court should be allowed to admit evidence of such new facts and circumstances, and thereafter suspend execution and grant relief as the new facts and circumstances warrant.
• Abellana vs. Dosdos, 121 Phil. 241 (1965) — Cited as reiterating the supervening-circumstances exception to the immutability of judgments.
• The City of Cebu vs. Mendoza, 160 Phil. 869 (1975) — Cited as reiterating the same exception.
• PCI Leasing and Finance, Inc. vs. Milan, G.R. No. 151215, April 5, 2010 — Cited as reiterating the supervening-circumstances exception where compelling circumstances warranted the exercise of the Court's equity jurisdiction.
• Villa vs. GSIS, G.R. No. 174642, October 31, 2009 — Cited for the four exceptions to the doctrine of immutability of judgments.
• Heirs of Maura So vs. Obliosca, G.R. No. 147082, January 28, 2008 — Cited for the statement that the Court is not precluded from rectifying errors of judgment if blind and stubborn adherence to the doctrine of immutability of final judgments would involve the sacrifice of justice for technicality.
• Tropical Homes vs. Fortun, 251 Phil. 83 (1989) — Cited for the rule that the lower court cannot vary the mandate of the superior court or reexamine it for any other purpose other than execution.
• Ruben Sia vs. Villanueva, G.R. No. 152921, October 9, 2006, 504 SCRA 43 — Cited for the rule that where the judgment of a higher court has become final and executory and has been returned to the lower court, the only function of the latter is the ministerial act of carrying out the decision and issuing the writ of execution.
• Gatmaytan vs. Court of Appeals, G.R. No. 132856, August 28, 2006 — Cited for the rule that a writ of mandamus lies to compel a judge to issue a writ of execution when the judgment had already become final and executory and the prevailing party is entitled to the same as a matter of right.
• Gonzales vs. Sayo, G.R. No. L-58407, May 30, 1983 — Cited for the same rule on the availability of mandamus to compel the issuance of a writ of execution.

• Section 443, Code of Civil Procedure — Cited in the passage quoted from City of Butuan vs. Ortiz, providing that a prevailing party in a civil action is entitled to a writ of execution of the final judgment obtained by him within five years from its entry. The Court acknowledged this right but held that it is subject to the supervening-circumstances exception.
• Section 13, Article VIII, 1987 Constitution — Cited in the Certification accompanying the decision, requiring that the conclusions of the Court had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

• Antonio T. Carpio (Associate Justice, Chairperson)
• Antonio Eduardo B. Nachura (Associate Justice)
• Diosdado M. Peralta (Associate Justice)
• Roberto A. Abad (Associate Justice)
• Renato C. Corona (Chief Justice, in the Certification)