Riviera Golf Club, Inc. vs. CCA Holdings, B.V.

When a contract breach is total and complete at the time of filing the first complaint, all claims for damages arising therefrom constitute a single indivisible cause of action that must be brought in one suit; a subsequent complaint based on the same breach is barred by res judicata, and any compromise agreement provision allowing the splitting of such cause of action is void for being contrary to public policy.

Riviera Golf Club, Inc., a domestic corporation owning a 36-hole golf course and recreational facility in Silang, Cavite, entered into a five-year Management Agreement and a co-terminous Royalty Agreement with CCA Holdings, B.V., a foreign corporation, on October 11, 1996. Under these agreements, Riviera Golf was obligated to pay monthly management fees and royalty fees for the use of CCA Holdings' name and facilities in marketing club shares. Riviera Golf defaulted on licensing fees and reimbursement claims in September 1997, and failed to pay monthly management and incentive fees in June 1999. On October 29, 1999, Riviera Golf sent a letter pre-terminating both agreements purportedly to alleviate the financial crisis of the Armed Forces of the Philippines' Retirement and Separation Benefits System (AFP-RSBS), the Club's developer. CCA Holdings protested the termination and demanded settlement of unpaid fees, but Riviera Golf refused, claiming CCA Holdings violated the agreement terms.

• Riviera Golf Club, Inc. and CCA Holdings, B.V. entered into a Management Agreement on October 11, 1996, for the operation of Riviera Golf Club, a 36-hole golf course in Silang, Cavite, for a period of five years.
• The Management Agreement required Riviera Golf to pay a monthly Base Management Fee of 5.5% of Adjusted Gross Revenue (equivalent to US$16,500.00) adjusted to 4.5% from the opening date, plus an Incentive Management Fee of 10% of Gross Operating Profit.
• The parties also executed a co-terminous Royalty Agreement allowing Riviera Golf and the developer AFP-RSBS to use CCA Holdings' name and facilities in exchange for gross licensing fees of 1% on membership fees, 4% on club shares, and 7% on non-golf memberships.
• Riviera Golf defaulted on licensing fees and reimbursement claims in September 1997, and failed to pay monthly management and incentive fees in June 1999.
• On October 29, 1999, Riviera Golf sent a letter pre-terminating both agreements purportedly to alleviate the financial crisis of AFP-RSBS.
• CCA Holdings protested the termination and demanded settlement of unpaid fees, but Riviera Golf refused, claiming CCA Holdings violated the agreement terms.
• In April 2001, CCA Holdings filed Civil Case No. 01-611 before RTC Branch 146, Makati City for collection of unpaid management and royalty fees.
• During the pendency of Civil Case No. 01-611, the parties executed a Compromise Agreement containing Paragraph 4, which stated that the execution or payment "shall not be construed as a waiver of or with prejudice to plaintiffs rights/cause of action, if any, arising from or relative to the pre-termination of the parties' Management and Royalty Agreements... subject to whatever claims and defenses may have relative thereto."
• The RTC approved the Compromise Agreement on April 25, 2002.
• On November 22, 2002, CCA Holdings demanded US$390,768.00 representing projected net income for the unexpired two-year term of the Management Agreement.
• When demands were unheeded, CCA Holdings filed Civil Case No. 03-399 before RTC Branch 57, Makati City in 2003 for recovery of damages for premature termination.
• Riviera Golf filed a Motion to Dismiss on August 6, 2003, arguing res judicata and splitting of causes of action, noting that both cases involved the same parties, subject matter, and causes of action based on breach of the Management and Royalty Agreements.

• Riviera Golf argued that the filing of the second complaint violated the prohibition against res judicata and splitting of a single cause of action because both complaints involved the same parties, subject matter, and causes of action based on breach of the Management and Royalty Agreements.
• It contended that the facts necessary to support the second case would have been sufficient to authorize recovery in the first case, and that the documentary evidence submitted in both complaints were the same.
• It maintained that although several rights appeared violated, there was only one delict or wrong committed—breach of contract—which was already total at the time of filing Civil Case No. 01-611, requiring all claims to be brought in a single complaint.
• It disagreed with the CA's interpretation of the non-waiver clause, arguing that the phrases "if any" and "subject to whatever claims and defenses the defendant may have relative thereto" limited CCA Holdings' reserved rights, and that the filing of a motion to dismiss based on res judicata fell within the clause's limitation.

• CCA Holdings maintained that there was no identity of subject matter and causes of action because the first case sought payment for services already rendered, while the second sought recovery of damages for projected net income lost due to premature termination.
• It argued that the principles of res judicata and splitting of causes of action did not apply since the two cases were entirely independent, involving separate primary rights under the contract.
• It contended that Riviera Golf was estopped from questioning the second complaint by virtue of the non-waiver clause in the Compromise Agreement, which recognized CCA Holdings' right to seek damages arising from pre-termination.

• Procedural Issues: Whether the filing of the second complaint for damages based on the same Management and Royalty Agreements violated the rule against res judicata and the prohibition against splitting of a single cause of action.
• Substantive Issues: Whether Paragraph 4 of the Compromise Agreement (the "non-waiver clause") validly allows the filing of a subsequent action based on the same cause of action, or whether such provision is void as contrary to public policy.

• Procedural: The Supreme Court held that the second complaint is barred by res judicata. All four requisites were present: (1) the approval of the Compromise Agreement in Civil Case No. 01-611 constituted a final judgment on the merits; (2) the RTC had jurisdiction over the subject matter and parties; (3) there was identity of parties; (4) there was identity of subject matter and causes of action. Applying the "same evidence test," the Court found that both complaints relied on the same documentary evidence (Management Agreement, Royalty Agreement, Fees Receivable Report, and termination letter) to establish breach of contract. The breach was total and complete as early as 1999, before the filing of the first complaint in 2001, integrating all obligations into one indivisible cause of action that could not be split into separate suits.
• Substantive: The Court declared Paragraph 4 of the Compromise Agreement null and void for being contrary to public policy. Res judicata is a principle of public policy against multiplicity of suits designed to prevent unduly burdening court dockets. Parties cannot by contract stipulate to violate this prohibition. Since the clause effectively permitted the splitting of a single cause of action and the relitigation of settled issues, it violated Article 1409 of the Civil Code and was inexistent and void from the beginning.

• Res Judicata — A matter adjudged that bars subsequent suits between the same parties on the same causes of action; requires concurrence of: (1) former judgment final on the merits, (2) rendered by court with jurisdiction, (3) identity of parties, and (4) identity of subject matter and causes of action. Applied to bar the second complaint where the compromise of the first action constituted a final judgment on the merits of the entire breach.
• Same Evidence Test — The test for determining identity of causes of action; if the same evidence would support and establish both the former and present causes of action, there is identity. Applied here where both complaints relied on identical documentary evidence to prove breach of the same agreements.
• Splitting of a Single Cause of Action — The prohibition under Section 4, Rule 2 of the Rules of Court against instituting two or more suits on the basis of the same cause of action; when a contract breach is total, all resulting claims constitute one indivisible cause of action that must be brought in a single complaint.
• Total Breach Doctrine — When a contract breach is complete and total at the time of filing the first complaint, all obligations are integrated into one cause of action, and any claim not included is barred forever. Applied here because the pre-termination and non-payment in 1999 constituted a total breach before the 2001 filing.
• Compromise Agreements and Public Policy — While compromise agreements are binding as contracts, they cannot be contrary to law, morals, good customs, or public policy. Res judicata being a principle of public policy, any contractual provision permitting the splitting of causes of action or reservation of relitigation rights is void under Article 1409 of the Civil Code.

• "Public policy is firmly set against unnecessary multiplicity of suits; the rule of res judicata, like that against splitting causes of action, are all applications of the same policy, that matters once settled by a Court's final judgment should not thereafter be invoked against. Relitigation of issues already settled merely burdens the Courts and the taxpayers, creates uneasiness and confusion, and wastes valuable time and energy that could be devoted to worthier cases. As the Roman maxim goes, Non bis in idem."
• "A cause of action may give rise to several reliefs, but only one action can be filed."
• "The test to determine the identity of causes of action is to ascertain whether the same evidence is necessary to sustain the two suits."
• "The underlying objectives or reliefs sought in both... are essentially the same... The difference in form and nature of the two actions is immaterial and is not a reason to exempt petitioner from the effects of res judicata."

• Aguila v. J.M. Tuason & Co., Inc. — Cited for the principle that res judicata is primarily a rule of public policy against multiplicity of suits and unnecessary relitigation.
• Blossom and Company, Inc. v. Manila Gas Corporation — Cited for the doctrine that when a contract breach is total, there can be only one action in which plaintiff must recover all damages; a judgment for a single breach bars subsequent suits.
• Stilianopulos v. The City of Legaspi — Cited for the principle that difference in the form of actions is immaterial for res judicata purposes if the same evidence and underlying objectives are involved.
• Esperas v. Court of Appeals — Cited for establishing the "same evidence test" as the ultimate test for determining identity of causes of action.
• Sps. Martir v. Sps. Verano — Cited for the principle that a judicial compromise operates as an adjudication on the merits with the force of law and the effect of res judicata.
• Spouses Torres v. Medina — Cited for the definition of the same evidence test in determining identity of causes of action.

• Section 47(b) and (c), Rule 39 of the Rules of Court — Provisions on the effect of judgments establishing the doctrine of res judicata as a bar to subsequent actions involving the same parties and causes of action.
• Section 4, Rule 2 of the Rules of Court — Provision prohibiting the splitting of a single cause of action and providing that filing one suit or a judgment upon the merits in one is available as a ground for dismissal of others.
• Article 2028 of the Civil Code — Definition of compromise as a contract whereby parties make reciprocal concessions to avoid or end litigation.
• Article 1409 of the Civil Code — Provision declaring contracts contrary to public policy as inexistent and void from the beginning.