Short answer. Yes, it may be rescinded. Article 2040 lets a compromise be undone where the parties settled a case already decided by final judgment without knowing that judgment existed. But there is a catch: ignorance of a judgment that could still be revoked or set aside is not a valid ground to attack the compromise.
What the law says
If after a litigation has been decided by a final judgment, a compromise should be agreed upon, either or both parties being unaware of the existence of the final judgment, the compromise may be rescinded. Ignorance of a judgment which may be revoked or set aside is not a valid ground for attacking a compromise.
Civil Code, Article 2040 — Compromise Ignorant of a Final Judgment. Read the full provision →
Settling something already decided
A compromise exists to resolve an uncertain dispute — the parties trade the risk of an unknown outcome for the certainty of an agreed one. Article 2040 addresses what happens when that uncertainty was an illusion: If after a litigation has been decided by a final judgment, a compromise should be agreed upon, either or both parties being unaware of the existence of the final judgment, the compromise may be rescinded. If the case had in truth already been conclusively decided, there was nothing genuine left to compromise, and a party who bargained in ignorance of that fact may have the settlement set aside.
The judgment must be final
The remedy is confined to a final judgment, and the article says so plainly: Ignorance of a judgment which may be revoked or set aside is not a valid ground for attacking a compromise. If the decision was still open to appeal, reconsideration, or being set aside, the outcome was not yet certain — the dispute remained genuinely alive, and settling it was a real exercise of judgment rather than a mistake about a closed matter. Not knowing about a decision that could still change is therefore no basis to undo what you agreed; only ignorance of a judgment that had truly become conclusive qualifies.
What "final" means here
Everything turns on the character of the judgment. A final judgment, in this sense, is one that has become executory — the time to appeal or seek reconsideration has passed and the decision can no longer be disturbed. That is different from a decision just handed down and still within the period for challenge. The distinction is not a technicality: it is the very line the article draws between a compromise that can be rescinded and one that cannot. Establishing that the judgment had already attained finality when you settled is the heart of a claim under this provision.
Check the status before and after
Before settling any matter that has been to court, confirm where it stands — whether a decision has been rendered and, crucially, whether it has become final. That single check prevents the whole problem. If you have already settled and then learn that a final judgment existed which you did not know about, Article 2040 opens the way to rescission, but you will need to show both your genuine ignorance at the time and that the judgment was in fact final when the compromise was made. Those two facts, together, are what the remedy depends on.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Felipe O. Magbanua, et al. vs. Rizalino Uy, G.R. No. 161003, May 6, 2005 — read the decision on LawPhil →
- Equitable PCI Banking Corporation vs. RCBC Capital Corporation, G.R. No. 182248, December 18, 2008 — read the decision on LawPhil →
- National Power Corporation vs. Hon. Rose Marie Alonzo-Legasto, et al, G.R. No. 148318, November 22, 2004 — read the decision on LawPhil →