Case Digest: ERNESTO C. DEL ROSARIO and DAVAO TIMBER CORPORATION v. FAR EAST BANK & DEVELOPMENT COMPANY and PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES

ERNESTO C. DEL ROSARIO and DAVAO TIMBER CORPORATION v. FAR EAST BANK & DEVELOPMENT COMPANY and PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES

537 SCRA 571 (2007), SECOND DIVISION

Petitioner Davao Timber Corporation (Davao Timber) and respondent Private Development Corporation of the Philippines (Private Development) entered into a loan agreement under which Private Development extended to Davao Timber a foreign currency loan and a peso loan. The loans were secured by real estate mortgages over six parcels of land, one of which was registered in the name of petitioner Ernesto C. Del Rosario (Rosario). The loan left Petitioners Davao Timber and Rosario with a substantial amount of outstanding balance from the aforementioned loans. Petitioners Davao Timber and Rosario then filed a complaint against Private Development for violation of Usury Law, annulment of contract and damages This Court ordered Davao Timber and Rosario to pay Php 1.4 Million to Private Development. It must also be noted that pending the decision rendered by the Supreme Court, Private Development assigned its rights over the receivables from Davao Timber and Rosario. Thereafter, Davao Timber and Rosario entered into a Memorandum of Agreement with Far East agreeing to pay and actually paid Far East.

Thus, Davao Timber and Rosario filed a complaint (first complaint) before the Regional Trial Court of Makati (RTC) for the recovery of the excess payment made from Private Development and Far East. RTC ordered Private Development to pay Davao Timber and Rosario while the complaint against Far East was dismissed for lack of cause of action. On appeal, the CA held that despite the excess payment of Php 5 Million, only the amount of P965,000 from Far East may be recovered by Davao Timber as claimed by it in the complaint. Such decision was affirmed by this Court.

Davao Timber and Rosario then filed a complaint (second complaint) against Far East for the recovery of the balance of the excess payment in the amount of Php 4.335 Million before the Regional Trial Court of Makati. The trial court dismissed the complaint on the basis of res judicata and splitting of the cause of action. The trial court also held that the decision in the first complaint had already become final and executory and that the Notice of Satisfaction of Judgment was already filed by the parties.

ISSUE:

Whether or not the complaint is dismissible on the ground of res judicata and splitting of the case

HELD:

Section 49(b) enunciates the first rule of res judicata known as “bar by prior judgment” or “estoppel by judgment,” which makes the judgment rendered in the first case an absolute bar to the subsequent action since that judgment is conclusive not only as to the matters offered and received to sustain it but also as to any other matter which might have been offered for that purpose and which could have been adjudged therein. The second rule of res judicata embodied in Section 47(c), Rule 39 is “conclusiveness of judgment”. It refers to a situation where the judgment in the prior action operates as an estoppel only as to the matters actually determined or which were necessarily included therein.

The case at bar satisfies the four essential requisites of “bar by prior judgment,” viz: (a) finality of the former judgment, (b) the court which rendered it had jurisdiction over the subject matter and the parties, (c) it must be a judgment on the merits, and (d) there must be, between the first and second actions, identity of parties, subject matter and causes of action.

There is no doubt that the judgment on appeal relative to the first complaint was a final judgment. Not only did it dispose of the case on the merits; it also became executory as a consequence of the denial of Far East‘s motion for reconsideration and appeal. Neither is there room to doubt that the judgment in the first complaint was on the merits for it determined the rights and liabilities of the parties.

Right or wrong, judgment bars another case based upon the same cause of action if the same facts or evidence would sustain both, the two actions are considered the same within the rule that the judgment in the former is a bar to the subsequent action. In the two cases, Davao Timber and Rosario imputed to Far East the same alleged wrongful act of mistakenly receiving and refusing to return an amount in excess of what was due it in violation of their right to a refund. The same facts and evidence presented in the first complaint were the very same facts and evidence that petitioners presented in the second complaint.

Section 4 of Rule 2 of the Rules of Court proscribes a party from dividing a single or indivisible cause of action into several parts or claims and instituting two or more actions based on it. Because the plaintiff cannot divide the grounds for recovery, he is mandated to set forth in his first action every ground for relief which he claims to exist and upon which he relies; he cannot be permitted to rely upon them by piecemeal in successive actions to recover for the same wrong or injury. It is well established, however, that a party cannot, by varying the form of action or adopting a different method of presentinghis case, or by pleading justifiable circumstances as herein Davao Timber and Rosario are doing, escape the operation of the principle that one and the same cause of action shall not be twice litigated.