Valencia vs. Court of Appeals

Litis pendentia does not bar a subsequent action for damages when the prior pending action is for rescission of contract, where the two actions are founded on different acts, involve different rights violated, and seek different reliefs, such that a judgment in either case would not be res judicata in the other.

The dispute arose from a lease contract over a 24-hectare fishpond in Paombong, Bulacan executed on March 1, 1982, with a term expiring in May 1987. Prior to expiration, the lessor filed an action for rescission alleging breaches by the lessees. During the pendency of this action, the lessor obtained a preliminary mandatory injunction from the trial court, which was later restrained by the Intermediate Appellate Court (IAC) upon the lessees' petition. The IAC ordered the maintenance of status quo, but the lessor violated these restraining orders by forcibly ejecting the lessees and damaging the fishpond operations, leading to a separate action for damages.

• Petitioner Eriberto G. Valencia (substituted by his heirs) was the lessor of a 24-hectare fishpond located in Paombong, Bulacan, leased to private respondents Ricardo Bagtas and Miguel Bunye under a contract executed on March 1, 1982, with a term expiring in May 1987.
• On June 25, 1984, petitioner filed a complaint for rescission of the lease contract (Civil Case No. 7554-M) before the Regional Trial Court (RTC) of Malolos, Bulacan, alleging violations of the lease agreement by respondents.
• The RTC of Malolos issued a writ of preliminary mandatory injunction ordering respondents to surrender possession of the fishpond to petitioner.
• Respondents filed a Petition for Certiorari with the Intermediate Appellate Court (IAC), which issued a restraining order on September 21, 1984, enjoining petitioner and the RTC of Malolos from enforcing the mandatory injunction.
• During the IAC proceedings, the parties agreed to maintain the status quo, with respondents continuing to utilize the fishpond hut until the case was resolved.
• Despite the restraining order and status quo agreement, petitioner filed an ex-parte motion for police detail, which the RTC of Malolos granted, enabling petitioner to forcibly eject respondents from the main hut with the aid of Philippine Constabulary personnel.
• Petitioner also dried up a portion of the leased property where respondents had previously scattered chemicals and fertilizer for fish food, preventing the growth of fish food and causing damage to respondents' operations.
• Respondents were prevented from transferring larger fish to more spacious portions of the fishpond, resulting in the death of many fish and additional damages.
• A third party appeared at the fishpond claiming to be the new lessee, and although the RTC of Malolos issued an order declaring that all fish remained the property of respondents, petitioner refused to honor this order.
• The IAC subsequently issued resolutions categorically declaring petitioner without right of possession and ordering him to vacate the main hut, after which respondents regained complete control of the fishpond.
• On April 8, 1985, respondents filed an action for damages (Civil Case No. 85-29514) before the RTC of Manila, seeking exemplary damages, moral damages, attorney's fees, and costs of suit arising from petitioner's violations of the IAC restraining orders.
• In the meantime, on November 29, 1988, the RTC of Malolos rendered its decision in the rescission case, holding that the prayer for rescission had become moot but finding that respondents had fulfilled their obligations and that petitioner acted in bad faith in seeking rescission to lease the property to third parties for higher rent.

• The action for damages filed in RTC Manila is barred by the doctrine of litis pendentia because there is a pending action for rescission of the same lease contract in RTC Malolos, Bulacan involving the same parties and the same subject matter.
• The filing of a separate action for damages constitutes an impermissible splitting of a single cause of action in violation of Section 4, Rule 2 and Section 1(e), Rule 16 of the Revised Rules of Court.
• The claim for damages should have been filed as a compulsory counterclaim in the rescission case pending in Bulacan, or through a supplemental pleading, since the alleged wrongful acts arose from the same transaction or occurrence.
• The filing of the separate action constitutes forum shopping because it seeks to obtain relief from different courts regarding the same lease relationship.
• The injunction bond posted in the rescission case was sufficient to answer for any damages that respondents might suffer, making the separate action for damages unnecessary and improper.

• The causes of action in the two cases are different: the Bulacan case seeks rescission based on alleged violations of the lease contract, while the Manila case seeks damages for petitioner's violation of the IAC restraining orders and forcible ejection from the property.
• The rights violated and reliefs sought are different in each case, preventing the application of litis pendentia.
• The claim for damages is not a compulsory counterclaim because it does not arise out of the same transaction or occurrence as the rescission claim, and the issues and evidence required are substantially different.
• There is no forum shopping because the two actions involve different causes of action, different essential facts, and different reliefs, and a final judgment in one would not amount to res judicata in the other.

• Procedural:
  • Whether the doctrine of litis pendentia bars the action for damages filed in RTC Manila while the action for rescission is pending in RTC Malolos, Bulacan.
  • Whether the filing of the separate action for damages constitutes forum shopping.
  • Whether the claim for damages should have been filed as a compulsory counterclaim in the rescission case.
• Substantive Issues:
  • Whether petitioner is liable for moral, exemplary, and actual damages arising from his violation of the IAC restraining orders.
  • Whether the injunction bond posted in the rescission case covers the damages claimed by respondents.

• Procedural:
  • The Court held that litis pendentia does not apply because the three requisites are not satisfied: while there is identity of parties, there is no identity of rights asserted and reliefs prayed for founded on the same facts, and a judgment in the rescission case would not constitute res judicata in the damages case. The rescission case is founded on alleged violations of the lease contract, while the damages case stems from violations of the IAC restraining orders.
  • Forum shopping does not exist because the test requires either the presence of elements of litis pendentia or that a final judgment in one case would amount to res judicata in the other, neither of which is present here. The two actions involve different transactions, facts, and causes of action.
  • The claim for damages is not a compulsory counterclaim because: (1) the issues of fact and law raised are not largely the same; (2) res judicata would not bar a subsequent suit on the claim for damages; (3) substantially the same evidence would not support or refute both claims; and (4) there is no logical relation between the rescission claim and the damages claim based on violation of restraining orders.
• Substantive:
  • The Court affirmed the award of moral damages (P30,000), exemplary damages (P20,000), and attorney's fees (P10,000) as rendered by the RTC of Manila, and the additional award of actual damages (P50,000) granted by the Court of Appeals.
  • The Court held that the injunction bond posted in the rescission case does not cover the damages claimed, as the bond only answers for damages sustained by reason of the injunction itself if the court finally decides the plaintiff was not entitled thereto, and not for damages caused by the willful contravention of the IAC restraining orders.

• Litis Pendentia — A ground for dismissal of an action which requires: (1) identity of parties or at least such parties as represent the same interest in both actions; (2) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and (3) identity such that any judgment rendered in the pending case would amount to res judicata in the other. The Court applied these requisites and found the second and third elements lacking because the rescission and damages actions were founded on different acts and sought different reliefs.
• Res Judicata — The test for identity of actions in litis pendentia; a prior action is not a bar unless a judgment rendered therein on the merits would be conclusive between the parties and could be pleaded in bar of the second action. The Court applied this test to determine that a judgment in the rescission case would not bar the damages case.
• Splitting of a Single Cause of Action — The malpractice of dividing a single cause of action into separate complaints, which gives rise to the ground of litis pendentia under Section 1(e), Rule 16. The Court distinguished this from the present case where two distinct causes of action existed.
• Forum Shopping — The practice of filing multiple actions in different courts to obtain relief on the same cause, which exists where the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the other. The Court found no forum shopping because the actions involved different causes and reliefs.
• Compulsory Counterclaim — A claim that arises out of the same transaction or occurrence as the opposing party's claim, determined by four tests: (1) whether issues of fact and law are largely the same; (2) whether res judicata would bar a subsequent suit; (3) whether substantially the same evidence supports or refutes both claims; and (4) whether there is a logical relation between the claim and counterclaim. The Court applied these tests to determine the claim for damages was permissive, not compulsory.
• Purpose of Injunction Bond — A bond required under Rule 58, Section 4(b) to protect the defendant against loss or damage by reason of the injunction in case the court finally decides the plaintiff was not entitled thereto. The Court clarified that such bond does not cover damages arising from willful violations of restraining orders by the plaintiff.

• "A plea of the pendency of a prior action is not available unless the prior action is of such a character that, had a judgment been rendered therein on the merits, such a judgment would be conclusive between the parties and could be pleaded in bar of the second action." — Cited by the Court to establish the res judicata test for litis pendentia.
• "The test for determining whether a party violated the rule against forum shopping... is... forum shopping exists where the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the other." — Establishing the test for forum shopping.
• "Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is the vexation caused the courts and parties-litigant by a party who asks different courts to rule on the same or related causes and/or to grant the same or substantially the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the different fora upon the same issue." — Explaining the rationale behind the prohibition against forum shopping.
• "The purpose of the injunction bond is to protect the defendant against loss or damage by reason of the injunction in case the court finally decides that the plaintiff was not entitled to it, and the bond is usually conditioned accordingly." — Clarifying the limited scope of injunction bonds.

• Atienza v. Court of Appeals, 232 SCRA 737 (1994) — Cited for the requisites of litis pendentia.
• Yu v. Court of Appeals, 232 SCRA 594 (1994) — Cited for the requisites of litis pendentia.
• Buan v. Lopez, 145 SCRA 34 (1986) — Cited for the test in determining forum shopping.
• Alarcon v. Torres, 19 SCRA 706 (1967) — Cited for the requisites of litis pendentia.
• Hongkong & Shanghai Bank v. Aldecoa & Co., 30 Phil. 255 (1915) — Cited for the res judicata test in litis pendentia and the definition of the doctrine.
• First Philippine International Bank v. Court of Appeals, G.R. No. 115849 (1996) — Cited for the test for forum shopping.
• International Container Terminal Services, Inc. v. Court of Appeals, 249 SCRA 389 (1995) — Cited for the elements of forum shopping.
• GSIS v. Sandiganbayan, 191 SCRA 655 (1990) — Cited for the elements of forum shopping.
• Silahis International Hotel, Inc. v. NLRC, 225 SCRA 94 (1993) — Cited for the elements of forum shopping.
• Jose Cuenco Borromeo v. Intermediate Appellate Court, G.R. No. 73592 (1996) — Cited for the essence of what is abhorrent in forum shopping.
• National Marketing Corporation v. Federation of United Namarco Distributors, Inc., 49 SCRA 238 (1973) — Cited for the four tests to determine whether a counterclaim is compulsory or permissive.

• Rule 2, Section 4 of the Revised Rules of Court — Provides the effect of splitting a single cause of action and its relation to litis pendentia under Rule 16, Section 1(e).
• Rule 16, Section 1(e) of the Revised Rules of Court — Provides that the existence of another action pending between the same parties for the same cause is a ground for motion to dismiss (litis pendentia).
• Rule 58, Section 4(b) of the Revised Rules of Court — Requires the plaintiff in an injunction case to file a bond to protect the defendant against damages sustained by reason of the injunction if the court finally decides the plaintiff was not entitled thereto.