Thirteen readers suffered injuries after following the paper's instructions to make the fried snacks, the BBC reported.
According to the Associated Press, days after the recipe was printed, in 2004, women began appearing at hospitals with burns sustained from when churros boiling in oil suddenly shot out of kitchen pots.
Supreme court judges ruled this week that the recipe told people to heat oil to such a high temperature that the batter would almost certainly explode when they put it in the pan.
Their judgment stated:
"Faithfully following the recipe published in the newsaper, this damage could not have been avoided."
In some cases, the explosions were so violent that hot liquid splashed right up to the kitchen ceiling and covered the person cooking, the court said.
La Tercera will have to pay more than $163,000 to the unfortunate chefs, who were awarded damages ranging between $279 and $48,000 depending on the severity of their burns.
The paper's publisher had appealed two earlier rulings against it, but says it will accept the supreme court's verdict.
Watch how to make churros without getting hurt courtesy of the Cooking Mexican Recipes website: