Spouses Barretto v. Court of Appeals
REITERATIONFacts
The Antecedents: Spouses Mario and Lydia Hernandez were the registered owners of a parcel of land in Pasig, Metro Manila. On April 7, 1989, they executed a Deed of Conditional Sale over a 99-square meter portion of this land, including existing improvements, in favor of Spouses Eriberto and Rosalinda Labrague for P125,000.00. The Labrague spouses paid P70,000.00 and took possession, agreeing to pay the balance upon transfer of title. Subsequently, on March 16, 1990, the Hernandez spouses sold the entire 418-square meter lot, including the portion subject to the conditional sale, to Spouses Rodolfo and Mary Grace Barretto. The Barretto spouses then demanded rent from the Labrague spouses, who refused to pay or vacate. Procedural History: The Labrague spouses initiated a specific performance case against the Hernandez spouses to compel the transfer of title. On April 27, 1990, the Hernandez spouses rescinded the conditional sale and deposited the P70,000.00 down payment. The Regional Trial Court (RTC) dismissed the specific performance case, upholding the rescission. The Labrague spouses' appeal was dismissed for being out of time, and their subsequent Petition for Certiorari to the Supreme Court was also dismissed with finality. Meanwhile, the Barretto spouses filed an ejectment case against the Labrague spouses, which the Metropolitan Trial Court (MTC) ruled in favor of the Barretto spouses. However, the RTC reversed the MTC decision, restoring possession to the Labrague spouses. The Court of Appeals affirmed the RTC's decision. The Petition: Spouses Rodolfo and Mary Grace Barretto filed this Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to set aside the decision of the Court of Appeals. They argue that the lower courts erred in ruling that the Deed of Conditional Sale was a contract of sale, in deciding who had de jure possession in an ejectment case, and in not recognizing their better right of possession as successors-in-interest of the Hernandez spouses. The core of their argument is that the final and executory judgment in the specific performance case, which declared the conditional sale validly rescinded, should have precluded the relitigation of the parties' rights and the issue of possession in the ejectment case, invoking the principle of res judicata.
Issue(s)
Whether the Court of Appeals erred in affirming the Regional Trial Court's decision which disregarded the final and executory judgment in the specific performance case (Civil Case No. 59367) that upheld the rescission of the Deed of Conditional Sale; and whether the determination of ownership, crucial for resolving possession in an ejectment case, can be relitigated when it has already been passed upon and settled by a final and executory judgment.
Ruling
The Petition is GRANTED. The assailed decision of the Court of Appeals is SET ASIDE, and the decision of the Metropolitan Trial Court of Pasig City, Branch 71, in Civil Case No. 2204, is REINSTATED. No pronouncement as to costs.
Ratio Decidendi
On the issue of res judicata, the relitigation of settled issues, the effect of a final and executory judgment, the right to possession in an ejectment case, the application of res judicata to successors in interest, and the error of the Court of Appeals: The Supreme Court held that the contention of the petitioners is tenable. The determination of the parties' rights hinges on the validity of the rescission of the conditional sale between the Hernandez spouses and the Labrague spouses. This issue had already been resolved in the specific performance case (Civil Case No. 59367), which had attained finality and executory status. Therefore, it could not be relitigated in the instant ejectment case between the petitioners, as successors-in-interest of the Hernandez spouses, and the Labrague spouses. To do so would virtually impeach the correctness of the prior decision, which public policy prohibits. Section 47, Rule 39 of the Rules of Court embodies the principles of res judicata, finality of judgment, and estoppel by judgment. Once a judgment becomes final and executory, the issues therein litigated are laid to rest. The doctrine of res judicata precludes the relitigation of a particular fact or issue in another action between the same parties or their successors in interest, even on a different claim or cause of action. In this case, the validity of the rescission of the conditional sale was directly adjudged in the prior case. Both parties anchored their right to possess the subject lot on their alleged ownership. Petitioners claimed ownership via an Absolute Deed of Sale from the Hernandez spouses, while the Labrague spouses asserted ownership based on the Conditional Sale. Consequently, resolving the issue of possession in the ejectment case necessitated delving into the question of ownership. Since the Labrague spouses' claim of ownership, derived from the conditional sale, was rejected with finality in Civil Case No. 59367, they lost their right to possess the property. The principle of res judicata applies not only to the original parties but also to their successors in interest by title subsequent to the commencement of the action. The petitioners, by virtue of the Absolute Deed of Sale from the Hernandez spouses, stepped into their predecessors' shoes and are bound by the prior judgment concerning the rescission of the conditional sale. Therefore, they have a better right to possess the lot in question as against the Labrague spouses, whose claim of ownership was definitively settled against them. The Court of Appeals erred in affirming the Regional Trial Court's ruling, which effectively disregarded the final and executory judgment in Civil Case No. 59367. The appellate court should have recognized that the issue of rescission had already been conclusively decided, thereby precluding its re-examination in the ejectment proceedings.
Main Doctrine
A final and executory judgment on the validity of the rescission of a conditional sale bars the relitigation of the same issue in a subsequent ejectment case between the same parties or their successors in interest, as the issue of possession in an ejectment case necessarily involves the determination of ownership.