Republic of the Philippines vs. Heirs of Cirilo Gotengco

A trial court commits grave abuse of discretion when it modifies a final and executory judgment to impose legal interest that was never originally adjudged, where the property owner acquiesced in the judgment for nine years before seeking modification. The doctrine of immutability of judgments bars such modification, and the property owner is estopped by laches and barred by res judicata from belatedly claiming legal interest not raised in the original proceedings.

The Republic of the Philippines, through the Department of Public Works and Highways, exercised its power of eminent domain to expropriate private properties for the construction of the Manila South Expressway Extension, now known as the South Luzon Expressway. Among the affected property owners were Cirilo Gotengco, Preciosa B. Garcia, and Emilia de Jesus, whose lands were the subject of expropriation proceedings filed before the RTC of Calamba City, Laguna, Branch 35, docketed as Civil Case No. 184-83-C. The expropriation complaint was initiated on May 16, 1977. The dispute centers on whether legal interest may be imposed on the just compensation awarded, after the judgment fixing such compensation had already attained finality and been partially executed.

On May 16, 1977, the Republic of the Philippines, through the Department of Public Works and Highways, expropriated the properties of Cirilo Gotengco, Preciosa B. Garcia, and Emilia de Jesus for the construction of the Manila South Expressway Extension, now known as the South Luzon Expressway. The expropriation complaint was filed before the RTC of Calamba City, Laguna, Branch 35, and docketed as Civil Case No. 184-83-C.

On January 31, 2000, the RTC rendered a Partial Decision fixing just compensation for the three property owners. Gotengco was awarded ₱29,046,810.00 for 13,637 square meters at ₱2,130.00 per square meter; de Jesus was awarded ₱37,500,000.00 for 15,000 square meters at ₱2,500.00 per square meter; and Garcia was awarded ₱49,741,890.00 for 23,353 square meters at ₱2,130.00 per square meter. The Republic moved for reconsideration to correct the land area covered by the expropriation, which the RTC granted. The areas and corresponding compensation were adjusted: Gotengco's property was reduced to 12,322 square meters yielding ₱26,245,860.00; de Jesus's property was increased to 16,095 square meters yielding ₱40,237,500.00; and Garcia's remained at 23,353 square meters yielding ₱49,741,890.00. Gotengco's property, totaling 12,322 square meters, consisted of three separate lots: Lot 1735-B (9,704 sq.m., referred to as Lot A), Lot 1735-A-7-A (2,148 sq.m., referred to as Lot B), and Lot 1735-C-2 (470 sq.m., referred to as Lot C). This adjustment was embodied in the Modified Partial Decision dated February 15, 2001, which fixed just compensation at ₱2,130.00 per square meter for the properties of Gotengco and Garcia, and ₱2,500.00 per square meter for de Jesus, without any award of legal interest.

After the Modified Partial Decision lapsed into finality, Gotengco, de Jesus, and Garcia jointly moved for its execution, which the RTC approved on March 30, 2001. The Republic and Gotengco executed a Deed of Absolute Sale covering Lot A (TCT No. T-334198) in the amount of ₱20,669,520.00. The Republic paid Gotengco in three installments: ₱4,068,111.40 in July 2002, ₱8,931,733.88 on October 4, 2004, and ₱7,669,520.00 on October 24, 2012. Since the total just compensation was ₱26,245,860.00 and the amount paid was ₱20,669,365.28, a balance of ₱5,576,494.72 remained.

Nine years after the promulgation of the Modified Partial Decision, Gotengco filed an Omnibus Motion on May 19, 2010, seeking payment of accrued interest on the just compensation computed from the date of finality of judgment until fully paid, and seeking to compel the surrender of the title covering Lot A. The Republic filed no opposition, and the RTC granted the motion on July 20, 2010, ordering the Republic to pay the balance with 6% interest per annum from July 15, 1977 until fully paid. The Republic likewise filed no motion for reconsideration. Gotengco subsequently filed a Motion for Writ of Execution Re Payment of Interest, which the Republic opposed, contending that Gotengco was estopped by laches for failing to raise the matter of legal interest as early as when the Partial Decision was rendered. Gotengco countered that the Republic was itself estopped from questioning his claim because it had previously agreed in its Comment dated October 14, 1999 that he was entitled to payment of interest. The Republic disputed this, explaining that while it had acknowledged the reasonableness of the just compensation value, it had clarified that interest should no longer be awarded.

On May 6, 2013, the RTC granted Gotengco's motion and amended the Modified Partial Decision, determining that the interest rate was inadvertently excluded and that modification was warranted in the interest of justice. The RTC ordered the Republic to pay interest at 6% per annum from the date of finality of judgment until the entire amount of just compensation was paid in full. The Republic's motion for reconsideration was denied. The Republic then filed a petition for certiorari before the CA under Rule 65, imputing grave abuse of discretion on the RTC for modifying a final and executory judgment. Meanwhile, Gotengco had sold Lots B and C to Mario V. Tiaoqui during the pendency of the case, and the two later entered into a compromise agreement to equally share the remaining balance of ₱5,576,340.00, which the RTC approved on September 23, 2016. The CA denied the Republic's petition on February 26, 2016, finding no grave abuse of discretion and citing Apo Fruits to justify the imposition of legal interest despite the finality of the judgment. The Republic elevated the matter to the Supreme Court via a petition for review on certiorari under Rule 45.

• Immutability of Judgments: The Republic contended that the CA committed reversible error in finding no grave abuse of discretion on the part of the RTC when the latter modified and altered a judgment that had already become final, thereby violating the doctrine of immutability and finality of judgments.
• Absence of Delay in Payment: The Republic argued that the RTC's orders imposing legal interest due to alleged delay in payment of just compensation, as affirmed by the CA, were issued without basis because there was no delay in payment.

• Estoppel of the Republic: Gotengco argued that the Republic was estopped from questioning his claim to legal interest because it had previously agreed that he was entitled to payment of interest, as shown in the Republic's Comment dated October 14, 1999.
• Interest as a Matter of Law: The CA, siding with Gotengco's position, resolved that payment of interest is a matter of law as provided in Section 10, Rule 67 of the Rules of Court, and that it is against public policy not to impose legal interest, citing Apo Fruits for the proposition that a final judgment may still be modified to impose legal interest.

• Immutability of Judgments: Whether the trial court violated the doctrine of immutability of judgments when it modified its own final and executory decision to include the payment of legal interest.
• Applicability of Apo Fruits: Whether the exception to the immutability doctrine recognized in Apo Fruits vs. Land Bank applies to the present case.
• Laches and Res Judicata: Whether Gotengco is barred by laches and res judicata from belatedly claiming legal interest not raised in the original expropriation proceedings.

• Immutability of Judgments: Yes. The trial court committed grave abuse of discretion in modifying a final and executory judgment to impose legal interest, as the modification did not fall under any recognized exception to the immutability doctrine.
• Applicability of Apo Fruits: No. The exception recognized in Apo Fruits does not apply because, unlike in that case where the motion for reconsideration was timely filed, Gotengco waited nine years after finality before seeking modification.
• Laches and Res Judicata: Yes. Gotengco is barred by laches for his unreasonable nine-year delay in asserting his right to legal interest, and by res judicata under the doctrine of Urtula vs. Republic for failure to timely raise the claim of interest in the original expropriation proceedings.

• Immutability of Judgments: A judgment that has attained finality can never be altered, amended, or modified, even to correct an erroneous judgment. This principle serves to put an end to endless litigation. The doctrine admits only four exceptions: (1) correction of clerical errors; (2) nunc pro tunc entries causing no prejudice; (3) void judgments; and (4) supervening circumstances rendering execution unjust and inequitable. The imposition of 6% legal interest was neither a clerical error nor a nunc pro tunc entry, as it imposed a considerable burden on the Republic. The modification was intended to correct the trial court's purported lapse in not imposing interest—a substantial change, not a clerical one. There was no allegation or proof that the judgment was void. Nor were there supervening events rendering execution unjust or inequitable. None of the exceptions applied, and the RTC therefore exceeded its authority in modifying the final judgment.

• Applicability of Apo Fruits: In Apo Fruits, the Court relaxed the rules of procedure to serve the ends of justice despite the finality of the judgment, due to extraordinary circumstances including a twelve-year delay in payment of the principal obligation. However, that case is the exception, not the general rule. A decisive distinction is that in Apo Fruits, the motion for reconsideration was timely filed within fifteen days from receipt of the assailed judgment by the petitioners. In the present case, Gotengco waited nine years after the Modified Partial Decision attained finality before filing his motion. Moreover, in Apo Fruits, the RTC had categorically ordered the payment of just compensation with legal interest from the outset; here, the RTC never adjudicated legal interest in either the Partial Decision or the Modified Partial Decision. Gotengco acquiesced in the judgment without interest and only belatedly sought its modification. The exception in Apo Fruits does not extend to those who sleep on their rights.

• Laches and Res Judicata: Laches is the failure or neglect for an unreasonable and unexplained length of time to do that which, by exercising diligence, could or should have been done earlier. All four elements of laches are present: Gotengco's conduct gave rise to the situation; he delayed nine years in asserting his right despite knowledge of the Modified Partial Decision, as evidenced by his own motion for execution; the Republic lacked notice that Gotengco would assert the right to interest; and the Republic would be prejudiced by the belated award. Gotengco moved for execution of the Modified Partial Decision and executed a Deed of Absolute Sale pursuant thereto, manifesting his awareness of the judgment's terms. His nine-year silence constituted unreasonable neglect. Under the doctrine of Urtula vs. Republic, a defendant in an expropriation case who fails to present all objections and defenses, including the claim for legal interest, is deemed to have waived them. A subsequent action for collection of legal interest is barred by res judicata, as a former judgment bars not only matters expressly adjudged but all matters that could have been adjudged at the time. Gotengco, like Urtula, is barred by res judicata for failure to timely raise his claim for interest.

• Immutability of Judgments — A judgment, once it has attained finality, can never be altered, amended, or modified, even if the modification is meant to correct an erroneous judgment. The purpose is to put an end to endless litigation. The doctrine admits four exceptions: (1) correction of clerical errors; (2) nunc pro tunc entries which cause no prejudice to any party; (3) void judgments; and (4) circumstances transpiring after finality rendering execution unjust and inequitable. The Court held that none of these exceptions applied to the RTC's modification of its final judgment to impose legal interest, as the modification was a substantial change imposing a considerable burden on the Republic.

• Estoppel by Laches — Laches is the failure or neglect for an unreasonable and unexplained length of time to do that which, by exercising diligence, could or should have been done earlier, warranting a presumption that the party entitled to assert a right has abandoned or declined to assert it. The four elements are: (1) conduct on the part of the defendant giving rise to the situation; (2) delay in asserting the complainant's rights, with knowledge or notice of the defendant's conduct and opportunity to sue; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right; and (4) injury or prejudice to the defendant if relief is accorded. All four elements were found present against Gotengco, who waited nine years after finality before seeking legal interest.

• Res Judicata in Expropriation Proceedings — Pursuant to Section 3, Rule 67 of the Rules of Court, the defendant in an expropriation case must present all objections and defenses; otherwise, they are deemed waived. A former judgment constitutes a bar not only as to matters expressly adjudged but as to all matters that could have been adjudged at the time. Applied in this case under the doctrine of Urtula vs. Republic, Gotengco was barred by res judicata from claiming legal interest because the issue of interest could have been raised in the original expropriation case but was not.

• Apo Fruits Exception — In Apo Fruits Corp. vs. Land Bank of the Philippines, the Court relaxed the rules of procedure to serve the ends of justice despite the finality of the judgment, due to extraordinary circumstances including a twelve-year delay in payment and the fact that the motion for reconsideration was timely filed. The Court clarified that this is the exception, not the general rule, and does not apply to parties who sleep on their rights or whose motions are filed out of time.

• "A judgment, once it has attained finality, can never be altered, amended, or modified, even if the alteration, amendment or modification is to correct an erroneous of judgment." — This passage states the canonical formulation of the immutability of judgments doctrine, the controlling principle upon which the Court reversed the CA and reinstated the original judgment without interest.

• "While, indeed, aside from Gotengco's motion for reconsideration was obviously filed out of time, it was also barred by laches. As defined, laches is the failure or neglect for an unreasonable and unexplained length of time to do that, which, by exercising diligence, could or should have been done earlier." — This passage applies the laches doctrine to the facts, establishing that Gotengco's nine-year delay in asserting his right to legal interest constituted unreasonable neglect barring his claim.

• "As the issue of interest could have been raised in the former case but was not raised, res judicata blocks the recovery of interest in the present case. It is settled that a former judgment constitutes a bar, as between the parties, not only as to matters expressly adjudged, but all matters that could have been adjudged at the time." — This quotation, borrowed from Urtula vs. Republic, articulates the res judicata bar applied to claims for legal interest not raised in the original expropriation proceedings.

• Apo Fruits Corp. vs. Land Bank of the Philippines, 647 Phil. 251 (2010); Resolution, 662 Phil. 572 (2011) — Cited by the CA as basis for allowing modification of a final judgment to impose legal interest. The Supreme Court distinguished this case, holding that the Apo Fruits exception does not apply because the motion for reconsideration there was timely filed and the RTC had originally adjudged interest, unlike in the present case where Gotengco waited nine years and the RTC never imposed interest.

• Urtula vs. Republic, 130 Phil. 449 (1968) — Controlling precedent applied by the Court. In Urtula, a subsequent civil action for collection of legal interest was dismissed as barred by res judicata because the claimant failed to raise the issue of interest in the original expropriation case. The Court found the same principle applicable to Gotengco's belated claim.

• Republic of the Philippines vs. CA, 433 Phil. 106 (2002) — Cited by the CA for the principle that legal interest accrues between the taking of property and actual payment to place the owner in as good a position as before the taking. The Supreme Court did not dispute this principle but held it inapplicable given the procedural bar.

• FGU Insurance Corporation vs. RTC, 659 Phil. 117 (2011) — Cited for the statement of the immutability of judgments doctrine.

• Briones-Vasquez vs. Court of Appeals, 491 Phil. 81 (2005) — Cited for the proposition that a modification imposing a substantial change is not a mere correction of clerical error.

• Section 10, Rule 67, Rules of Court — Cited by the CA as the legal basis for the payment of interest in expropriation proceedings. The CA held that payment of interest is a matter of law and that it is against public policy not to impose legal interest. The Supreme Court did not dispute the provision's relevance to just compensation generally but held that the procedural bars of immutability, laches, and res judicata precluded its application in this case.

• Section 3, Rule 67, Revised Rules of Court — Directs the defendant in an expropriation case to present all objections and defenses; otherwise, they are deemed waived. Applied through the doctrine of Urtula vs. Republic to bar Gotengco's belated claim for legal interest, as he failed to raise the issue during the original expropriation proceedings.

• Section 1, Rule 37, in relation to Section 2, Rule 40, Rules of Court — Cited in connection with the timeliness of motions for reconsideration, supporting the Court's finding that Gotengco's motion was filed out of time.

Presbitero J. Velasco, Jr. (Chairperson), Lucas P. Bersamin, Marvic M.V.F. Leonen (On Official Leave), and Samuel R. Martires concurred in the decision. No separate concurring opinions were written.