FACTS:

The petitioner, Republic of the Philippines, filed a complaint for the expropriation of seven parcels of land owned by the respondents, spouses Antonio and Lili Florendo. The purpose of the expropriation was to establish and develop an export processing zone on the properties. After trial, the Regional Trial Court (RTC) rendered a decision ordering the expropriation of the properties and the payment of just compensation. The petitioner appealed the valuation of the just compensation. While the appeal was pending, the parties entered into a compromise agreement, which included the payment and transfer of ownership of four lots to the petitioner. However, the respondents could not deliver the clean titles of the remaining three lots due to encumbrances and pending cases. The Court of Appeals (CA) later affirmed the decision of the RTC with a modification in the valuation of just compensation. The CA decision became final and executory. The respondents then filed a motion for execution, which the RTC granted. Notices of garnishment were served on the petitioner's bank accounts. The petitioner filed motions to quash the writ of execution and lift the garnishment, which were denied by the RTC. The petitioner filed a petition for certiorari and prohibition before the CA, which also denied the petition. The petitioner then filed a petition for review on certiorari before the Supreme Court.

ISSUES:

1. Whether the compromise agreement of the parties constituted res judicata and therefore the June 25, 2002 decision of the CA could not have superseded it.

2. Whether or not there was a supervening event that rendered the execution of the final judgment inequitable.

RULING:

1. The Court held that the compromise agreement between the parties did not constitute res judicata. The agreement was executed while the appeal was pending in the CA and was not approved by the CA. Therefore, it did not bind the CA and did not supersede its decision. However, the CA also held that in executing the final judgment, any amount that might have already been paid by petitioner to respondents with respect to the four lots should be deducted.

PRINCIPLES:

• A compromise agreement executed while an appeal is pending does not bind the appellate court unless approved by the said court.

• The execution of a final judgment may be rendered inequitable by supervening events.