Rosario v. Far East Bank
REITERATIONFacts
The Antecedents: Petitioners Davao Timber Corporation (DATICOR) and Ernesto C. Del Rosario obtained a foreign currency and a peso loan from Private Development Corporation of the Philippines (PDCP) secured by real estate and chattel mortgages. Petitioners paid P3 million, but PDCP claimed an outstanding principal balance of over P10 million. Petitioners filed a case for violation of the Usury Law, annulment of contract, and damages, which was initially dismissed but later declared void as to the interest stipulation by the Intermediate Appellate Court (IAC). PDCP appealed to the Supreme Court (SC). In the interim, PDCP assigned receivables from petitioners to Far East Bank and Trust Company (FEBTC). Petitioners and FEBTC executed a Memorandum of Agreement (MOA) where petitioners paid FEBTC P6.4 million as full settlement of the receivables. The SC, in G.R. No. 73198, affirmed the IAC decision, determining the remaining principal balance to be P1.4 million after deducting the P3 million paid to PDCP. Procedural History: Petitioners filed a complaint (Civil Case No. 94-1610) against PDCP and FEBTC to recover the alleged excess payment of P5.3 million. The Regional Trial Court (RTC) ordered PDCP to pay P4.035 million but dismissed the complaint against FEBTC for lack of cause of action. On appeal, the Court of Appeals (CA) ordered PDCP to cancel mortgages and FEBTC to pay petitioners P965,000 with legal interest, holding FEBTC liable for the overpayment based on solutio indebiti. FEBTC's motion for reconsideration and subsequent appeal to the SC were denied. Petitioners then filed another complaint (Civil Case No. 00-540) against FEBTC to recover the balance of the overpayment (P4.335 million). FEBTC denied responsibility, arguing that petitioners failed to claim the full amount in the previous case and were thus barred. FEBTC filed a third-party complaint against PDCP. The RTC dismissed petitioners' complaint in Civil Case No. 00-540 on the ground of res judicata and splitting of a cause of action, noting that the issue between petitioners and FEBTC was settled in the prior case and that a Notice of Satisfaction of Judgment was filed. The RTC also ruled that the MOA excluded the receivables from the effect of the SC decision in G.R. No. 73198. The RTC denied petitioners' motion for reconsideration. The Petition: Petitioners filed a petition for review on certiorari, raising issues of whether their complaint was dismissible on grounds of res judicata and splitting of cause of action, whether FEBTC could be held liable for the balance of the overpayment, and whether PDCP could use the Deed of Assignment and MOA provisions as defenses.
Issue(s)
Whether the RTC correctly dismissed petitioners' complaint on the grounds of res judicata and splitting of a cause of action. Whether FEBTC can be held liable for the balance of the overpayment of P4.335 million plus interest, which petitioners previously claimed against PDCP in Civil Case No. 94-1610. Whether PDCP can interpose as a defense the provision in the Deed of Assignment and the MOA stating that the assignment of receivables shall not be affected by this Court's Decision in G.R. No. 73198.
Ruling
The petition is denied, and the assailed Decision of the RTC, Branch 143, Makati dismissing petitioners' complaint in Civil Case No. 00-540 is affirmed.
Ratio Decidendi
On the issue of res judicata and splitting of cause of action: The Court affirmed the RTC's dismissal, finding that the requisites for "bar by prior judgment" were met. The prior judgment in Civil Case No. 94-1610, as decided by the CA in CA-G.R. CV No. 50591, was final and executory, rendered by a court with jurisdiction on the merits, and involved the same parties, subject matter, and causes of action. The Court reiterated that "bar by former judgment" makes a prior judgment an absolute bar to a subsequent action involving the same cause of action, encompassing matters that could have been offered for judgment. The Court emphasized that a party cannot escape the operation of res judicata by varying the form of action or method of presenting the case. The subsequent filing of Civil Case No. 00-540 by the same petitioners to recover a portion of the overpayment already sought in Civil Case No. 94-1610 constituted a splitting of a single cause of action, which is a ground for dismissal under Section 4 of Rule 2 of the Rules of Court. The Court stressed the public policy against multiplicity of suits (interest reipublicae ut sit finis litium), noting that re-litigation burdens the courts and taxpayers and wastes valuable time and energy. The Court found that the same facts and evidence presented in the first case were the same facts and evidence presented in the second case, thus solidifying the application of res judicata. On the liability of FEBTC for the balance of the overpayment: The Court held that FEBTC could not be held liable for the balance of P4.335 million because the issue of overpayment and the extent of FEBTC's liability had already been determined in Civil Case No. 94-1610. The CA decision in that case, which ordered FEBTC to refund P965,000, became final and executory. The Court noted that petitioners' claim in Civil Case No. 94-1610 was for a total of P5.3 million, broken down into P965,000 from FEBTC and P4.335 million from PDCP. Since the CA limited FEBTC's liability to P965,000, and this was satisfied as evidenced by a Notice of Satisfaction of Judgment, petitioners could not re-litigate the claim for the remaining P4.335 million against FEBTC. The Court reiterated that a party cannot, by varying the form of action or adopting a different method of presenting their case, escape the operation of the principle that one and the same cause of action shall not be twice litigated. The Court also pointed out that the MOA between petitioners and FEBTC explicitly stated that the "pending litigation before the Supreme Court of the Philippines with respect to the Loan exclusive of the Receivables assigned to FEBTC shall prevail up to the extent not covered by this Agreement," indicating that the parties were aware that the receivables settlement was separate from the main loan litigation and that the P6.4 million paid was for the settlement of the receivables. On PDCP's defense based on the Deed of Assignment and MOA: The Court found PDCP's defense to be well-taken in the context of the third-party complaint filed by FEBTC. However, the primary issue before the Court was the dismissal of petitioners' complaint against FEBTC. The Court's affirmation of the res judicata and splitting of cause of action grounds effectively resolved the matter, as the re-litigation of the overpayment claim was barred. The Court noted that the CA decision in the prior case had already determined that PDCP had no further claim against DATICOR because its obligation had been paid in full, and that DATICOR's obligation to PDCP was the same amount payable to FEBTC as assignee. The Court also acknowledged that PDCP was not privy to the MOA between petitioners and FEBTC, and that the MOA explicitly excluded the receivables from the effect of the Supreme Court decision in G.R. No. 73198. The Court's ruling on res judicata and splitting of cause of action rendered the specific defenses raised by PDCP in the third-party complaint moot in relation to the main petition.
Main Doctrine
The dismissal of a complaint on the ground of res judicata and splitting of a cause of action is affirmed when a subsequent suit involves the same parties, subject matter, and cause of action as a prior case that has already been decided on the merits, thereby barring re-litigation of settled issues and preventing multiplicity of suits.