Mendiola vs. Court of Appeals

Res judicata as "bar by prior judgment" applies when there is identity of parties, subject matter, and causes of action between a first case that has attained finality and a subsequent case, even if the forms of action differ, provided the same evidence would support and establish both causes of action.

Petitioner Rogelio Mendiola owned two parcels of land in Marikina covered by Transfer Certificate of Title No. 27307. He was persuaded by one Norma S. Nora to enter into a joint venture for prawn export, with financing from PNB secured by his properties. On January 27, 1988, petitioner executed a Special Power of Attorney authorizing Nora to mortgage his properties to PNB for obligations of up to ₱5,000,000. The joint venture failed before it could begin, but Nora, on the strength of the SPA, obtained loans from PNB totaling ₱8,101,400.62 for petitioner's account, secured by the mortgage on petitioner's properties.

Sometime in December 1987, a certain Norma S. Nora convinced petitioner Rogelio Mendiola to enter into a joint venture with her for the export of prawns. As proposed, they were to secure financing from PNB, with the credit line to be secured by collaterals consisting of petitioner's real estate properties — two parcels of land situated in Marikina, covered by Transfer Certificate of Title No. 27307. On January 27, 1988, petitioner signed a Special Power of Attorney authorizing Nora to mortgage his properties to PNB to secure the obligations of the joint venture up to ₱5,000,000. The planned joint venture became a failure even before it could take off. In the meantime, Nora, on the strength of the SPA, obtained loans from PNB in the amount of ₱8,101,400.62 for the account of petitioner, secured by the parcels of land described above.

On November 11, 1988, petitioner belatedly revoked the SPA in favor of Nora and requested PNB to release his properties from the mortgage. The request notwithstanding, petitioner was notified under a Notice of Sheriff Sale, dated April 20, 1989, that PNB had initiated foreclosure proceedings against his properties. On May 16, 1989, petitioner filed a case for injunction against PNB, docketed as Civil Case No. 58173, with Branch 162 of the RTC of Pasig City, seeking to enjoin the foreclosure. PNB filed a motion to dismiss on the ground that the complaint did not state a sufficient cause of action. After hearing, the trial court, in its Order dated August 17, 1989, granted PNB's motion, dismissed the complaint, and lifted the temporary restraining order. Petitioner filed a notice of appeal, which was noted by the lower court in an Order dated November 16, 1989.

While Civil Case No. 58173 was pending appeal, the properties were sold at auction on October 3, 1990, with PNB as the highest bidder. On October 10, 1990, petitioner filed an action to annul the auction sale, docketed as Civil Case No. 60012, raffled to Branch 154 of the RTC of Pasig. PNB moved to dismiss, alleging that "another action is pending between the same parties for the same cause of action," referring to Civil Case No. 58173 then pending with the Court of Appeals. Attached to the motion was a copy of the complaint in Civil Case No. 58173, which contained the same allegations as the complaint in Civil Case No. 60012, except that the relief sought in the first case was to enjoin the foreclosure. Petitioner opposed the motion to dismiss.

After due hearing, Branch 154 issued an Order dated February 28, 1991, granting PNB's motion to dismiss Civil Case No. 60012 on the ground of litis pendentia, dismissing the complaint with prejudice. Petitioner's motion for reconsideration was denied. Petitioner appealed to the Court of Appeals, which rendered its Decision dated November 15, 1995 in CA-G.R. CV No. 37940, affirming the RTC orders in toto. Meanwhile, the appeal in the first case (CA-G.R. CV No. 29601) had been dismissed by the Court of Appeals as abandoned pursuant to Section 1(d), Rule 50 of the Rules of Court, promulgated June 17, 1991. Petitioner did not appeal that dismissal.

• Insufficiency of the Prior Adjudication: Petitioner argued that the CA erred in affirming the February 28, 1991 Order based on the August 17, 1989 Order, because the latter merely resolved that the mortgage in favor of PNB was binding upon petitioner but did not resolve, in its decretal portion, whether PNB had the right to foreclose such mortgage based on the defaulted obligations of Norma Nora, or whether such defaulted obligations were secured by the mortgage.
• Equity Against Technicality: Petitioner maintained that, assuming for the sake of argument that res judicata had set in, its application would involve the sacrifice of justice to technicality.

• Litis Pendentia / Res Judicata: Respondent PNB argued that another action was pending between the same parties for the same cause of action, attaching a copy of the complaint in Civil Case No. 58173 which had the same allegations as the complaint in Civil Case No. 60012, except for the relief sought.

• Res Judicata: Whether res judicata as "bar by prior judgment" applies to bar the second action (Civil Case No. 60012) given the final dismissal of the first action (Civil Case No. 58173).
• Equity vs. Technicality: Whether the application of res judicata in this case would constitute an improper sacrifice of justice to technicality.

• Res Judicata: Yes. All four essential requisites of res judicata as "bar by prior judgment" concur: the former judgment is final, rendered by a court with jurisdiction, is a judgment on the merits, and there is identity of parties, subject matter, and causes of action.
• Equity vs. Technicality: No. Equity is applied only in the absence of, and never against, statutory law or judicial rules of procedure; the pertinent positive rules pre-empt abstract equitable arguments.

• Res Judicata: Section 49(b) of Rule 39 of the Revised Rules of Court enunciates the concept of "bar by prior judgment," which applies when there is identity of parties, subject matter, and causes of action between the first and second cases. The four essential requisites all obtain here. First, the Order of Branch 162, RTC-Pasig, dated August 17, 1989, denying petitioner's application for injunction, had long become final and executory in light of the CA's dismissal of the appeal in CA-G.R. CV No. 29601, which petitioner did not appeal. Second, the parties do not dispute that Branch 162 had jurisdiction over the subject matter and the parties. Third, the judgment is on the merits: a judgment is on the merits when it determines the rights and liabilities of the parties based on the disclosed facts, irrespective of formal or technical objections; it is not necessary that there be a trial, provided the parties had a full legal opportunity to be heard. Here, petitioner was given an actual hearing to argue his complaint on its merits, and the Order was rendered only after due consideration of the facts and evidence presented by both parties. Fourth, there is identity of parties, subject matter, and causes of action. While there is no absolute identity of parties — some defendants differ between the two cases — substantial identity is sufficient, and PNB is a defendant in both. The subject matter is identical: the real properties covered by TCT No. 27307. As to identity of causes of action, the test is whether the same evidence would support and establish both causes of action; although the first action sought to enjoin foreclosure and the second sought to annul the auction sale, the parties were litigating for the same thing and the same contentions and evidence were used in both.

• Equity vs. Technicality: Equity, described as "a justice outside legality," is applied only in the absence of, and never against, statutory law or judicial rules of procedure. The pertinent positive rules being present, they pre-empt and prevail over all abstract arguments based only on equity. Petitioner's equitable argument therefore fails.

• Res Judicata — Bar by Prior Judgment — Applies when, between the first case where the judgment was rendered and the second case where such judgment is invoked, there is identity of parties, subject matter, and causes of action. When the three identities are present, the judgment on the merits in the first constitutes an absolute bar to the subsequent action, final as to the claim or demand in controversy, including not only every matter offered and received to sustain or defeat the claim, but also any other admissible matter which might have been offered for that purpose. The four essential requisites are: (1) the former judgment must be final; (2) it must have been rendered by a court having jurisdiction over the subject matter and the parties; (3) it must be a judgment or order on the merits; and (4) there must be identity of parties, identity of subject matter, and identity of causes of action. The Court found all four present in this case.

• Conclusiveness of Judgment — The second concept of res judicata under Section 49(c), Rule 39, which applies where there is no identity of causes of action between the first and second cases; the judgment is conclusive in the second case only as to those matters actually and directly controverted and determined, not as to matters merely involved therein. This concept was distinguished from but not applied in this case.

• Substantial Identity of Parties — Absolute identity of parties is not required for res judicata to apply; substantial identity is sufficient. In this case, although some defendants differed between the two actions, PNB was a defendant in both, satisfying the requirement.

• Identity of Causes of Action — Same Evidence Test — The test of identity of causes of action lies not in the form of the action but on whether the same evidence would support and establish the former and present causes of action. A difference in the forms of action is of no moment where the parties litigate for the same thing and the same contentions and evidence are advanced.

• Judgment on the Merits — A judgment is on the merits when it determines the rights and liabilities of the parties based on the disclosed facts, irrespective of formal, technical, or dilatory objections. It is not necessary that there be a trial; if the judgment is general, not based on any technical defect, and the parties had a full legal opportunity to be heard, it is on the merits even without an actual hearing.

• Equity as Supplementary to Law — Equity, described as "a justice outside legality," is applied only in the absence of, and never against, statutory law or judicial rules of procedure. Positive rules pre-empt and prevail over abstract equitable arguments.

• "There is 'bar by former judgment' when, between the first case where the judgment was rendered, and the second case where such judgment is invoked, there is identity of parties, subject matter and cause of action." — This passage defines the first concept of res judicata, the doctrine applied as the controlling basis for dismissing the petition.

• "The test of identity of causes of action lies not in the form of an action but on whether the same evidence would support and establish the former and present causes of action." — This formulation of the "same evidence" test is the canonical statement used to determine identity of causes of action for res judicata purposes, frequently cited in subsequent jurisprudence.

• "Equity, which has been aptly described 'a justice outside legality,' is applied only in the absence of, and never against, statutory law or judicial rules of procedure." — This passage articulates the principle that equity cannot override positive procedural rules, rejecting petitioner's argument that res judicata should yield to equitable considerations.

• Nabus vs. Court of Appeals, 193 SCRA 732 (1991) — Cited for the distinction between the two concepts of res judicata: "bar by prior judgment" under Section 49(b) and "conclusiveness of judgment" under Section 49(c), and for the definition of a judgment on the merits.

• Allied Banking Corporation vs. Court of Appeals, 229 SCRA 252 (1994) — Cited (among a line of cases) for the four essential requisites of res judicata as "bar by former judgment."

• Development Bank of the Philippines vs. Pundogar, 218 SCRA 118 (1993) — Cited for the four requisites of res judicata and for the principle that substantial identity of parties is sufficient, absolute identity not being required.

• Gutierrez vs. Court of Appeals, 193 SCRA 437 (1991) — Cited for the "same evidence" test of identity of causes of action and for the proposition that a difference in the form of action is of no moment.

• Causapin vs. Court of Appeals, 223 SCRA 615 (1994) — Cited for the principle that equity is applied only in the absence of, and never against, statutory law or judicial rules of procedure.

• Section 49(b) and (c), Rule 39, Revised Rules of Court — Defines the two concepts of res judicata: "bar by prior judgment" (identity of parties, subject matter, and causes of action) and "conclusiveness of judgment" (no identity of causes of action; conclusive only as to matters actually and directly controverted and determined). Section 49(b) was applied as the controlling provision.

• Section 1(d), Rule 50, Rules of Court — Provides for dismissal of an abandoned appeal in the Court of Appeals. The appeal in CA-G.R. CV No. 29601 was dismissed pursuant to this provision, rendering the first judgment final and executory.

Padilla, Bellosillo, Vitug, and Kapunan, JJ., concurred.