Guevara v. Benito
REITERATIONFacts
The Antecedents: Petitioners spouses Edgardo and Lourdes Guevara and Far East Bank & Trust Co. (FEBTC) entered into a compromise agreement in Civil Case No. 87-4140, concerning property foreclosed by FEBTC. Attached to the agreement was a Deed of Conditional Sale wherein FEBTC agreed to resell the property to petitioners for P498,960.00. Petitioners were to pay a downpayment of P45,000.00 and the balance of P453,960.00 in twelve monthly installments of P37,830.00 each, starting February 4, 1992, with interest at 32%. The agreement stipulated that failure to pay any installment on time would result in the forfeiture of payments made and the rescission of the Deed of Conditional Sale. Procedural History: On March 30, 1992, the RTC approved the compromise agreement and rendered judgment accordingly. Petitioners paid the first three installments. However, on September 30, 1992, they filed a complaint (later amended) in the RTC of Makati, alleging that due to disruptions in their film business in California caused by the Rodney King riots, they requested FEBTC to waive the time clause for monthly installments starting May 4, 1992. They claimed FEBTC agreed but failed to fix a new payment schedule for the remaining balance of P386,605.78. Petitioners prayed for a new payment period and for FEBTC to reconvey the property upon full payment. FEBTC denied agreeing to waive the time clause and moved to dismiss the complaint, arguing it was barred by the judgment in the prior case. The RTC granted FEBTC's motion and dismissed the case on March 17, 1993, denying reconsideration on May 7, 1993. The Petition: Petitioners filed a petition for review on certiorari, seeking to reverse the RTC's orders dismissing their complaint.
Issue(s)
Whether the judgment based on the compromise agreement in Civil Case No. 87-4140 constitutes res judicata in Civil Case No. 92-2818. Whether the RTC erred in dismissing the complaint on the ground of res judicata.
Ruling
The Supreme Court reversed the orders dated March 17, 1993, and May 7, 1993, issued by the RTC of Makati (Branch 132) in Civil Case No. 92-2818.
Ratio Decidendi
On whether the judgment based on the compromise agreement constitutes res judicata: The Supreme Court held that the judgment in Civil Case No. 87-4140 does not constitute res judicata in Civil Case No. 92-2818. For res judicata to apply, there must be identity of parties, subject matter, and causes of action. While there was an identity of parties, there was no identity of subject matter or cause of action between the two cases. The subject matter of the first case was the resale of the property, whereas the subject matter of the second case was the rescheduling of payment after the compromise agreement was made. Furthermore, the causes of action were not the same, as the cause of action in the second case arose after the judgment in the first case was rendered. The principle of res judicata extends only to facts and conditions existing at the time the judgment was rendered, and does not cover claims arising from subsequent events or agreements. The Court cited Calña v. Court of Appeals and Lao Lim v. Court of Appeals to support the principle that a compromise agreement does not bar causes of action arising after its making or from its application or violation. On whether the RTC erred in dismissing the complaint: The Supreme Court found that the RTC erred in dismissing the complaint on the ground of res judicata. The petitioners' claim was that FEBTC agreed to waive the time clause for installments starting May 4, 1992. These alleged facts occurred after the compromise agreement was approved on March 30, 1992. Therefore, the cause of action in the second case did not exist at the time of the judgment in the first case, and thus, res judicata could not apply. The Court noted that while the petitioners' claim, if granted, might modify the judgment in the first case, this does not preclude their right to seek relief based on subsequent events. The possibility that the petitioners might be claiming novation to escape noncompliance or that any new contract might be unenforceable under the Statute of Frauds are matters of defense and proof to be determined by the trial court after trial, not grounds for dismissal on res judicata.
Main Doctrine
A judgment based on a compromise agreement does not constitute res judicata with respect to causes of action that arose after the compromise agreement was entered into and approved, as the principle of res judicata extends only to facts and conditions existing at the time the judgment was rendered.