Development Bank of the Philippines v. Court of Appeals
REITERATIONFacts
The Antecedents: Spouses Gregorio and Luz Dizon obtained a loan from the Development Bank of the Philippines (DBP) for the construction of the Manila Manor Hotel, secured by a mortgage contract. The Dizon spouses encountered difficulties in meeting loan amortizations. They filed a Petition for Declaratory Relief (Special Proceeding No. 83-17979) against DBP and the City Sheriff, seeking a declaration of their rights and duties under the mortgage contract and PD 385, and to enjoin the foreclosure proceedings. This case was dismissed by the RTC of Manila (Branch 33) on December 8, 1983, for failure of the parties to appear, which dismissal was considered an adjudication upon the merits. Procedural History: On May 21, 1984, Manila Manor Hotel, Inc. filed a Complaint for Annulment and Damages (Civil Case No. 84-24513) against DBP, seeking to annul the extrajudicial foreclosure sale of the mortgaged properties. DBP moved to dismiss on the ground of res judicata, citing the dismissal of the earlier case. The RTC initially granted the motion, then reconsidered and set aside the dismissal, but subsequently, on March 14, 1985, reconsidered its reconsideration and dismissed the annulment case again on the ground of res judicata. The Court of Appeals reversed the RTC's dismissal, holding that res judicata did not apply due to lack of identity of parties, subject matter, and cause of action. The CA's decision is now under review by the Supreme Court. The Petition: The Development Bank of the Philippines filed a Petition for Review under Rule 45 of the Rules of Court, seeking to reverse the Court of Appeals' decision, arguing that the CA erred in not applying the doctrine of res judicata.
Issue(s)
Whether the Respondent Court abused its discretion when it disregarded its earlier finding that there was a commingling of personalities between the spouses (Gregorio & Luz Dizon) and Manila Manor Hotel, Inc., and whether the Respondent Court erred when it said that there was no identity of parties in the instant case. Whether the Respondent Court erred when it said that there was no identity of cause of action in the instant case, specifically concerning the application of res judicata. Whether DBP complied with the requirements of RA No. 3135 regarding the extrajudicial foreclosure. Whether the Respondent Court erred in its appreciation and application of the cases it cited in its questioned decision.
Ruling
The Petition is GRANTED. The assailed Decision of the Court of Appeals is REVERSED, and the RTC Order of March 14, 1985, is REINSTATED.
Ratio Decidendi
On the issue of commingling of personalities and identity of parties: The Supreme Court held that the doctrine of res judicata applies in this case, barring the relitigation of the same cause of action. The Court found that all four requisites for res judicata were met. Firstly, the December 8, 1983 Order dismissing Special Proceedings No. 83-17979 was a final order as it finally disposed of the action. Secondly, the dismissal for failure to prosecute, under Section 3, Rule 17 of the Rules of Court then in effect, had the effect of an adjudication upon the merits because the dismissal order did not state otherwise. Thirdly, the RTC of Manila (Branch 33) had competent jurisdiction to issue the dismissal order in the declaratory relief case. Fourthly, there was substantial identity of parties, subject matter, and cause of action between the two cases. The Court noted that Manila Manor Hotel, Inc. is owned and controlled by the Spouses Dizon, establishing privity of interest. On the issue of identity of cause of action and res judicata: The subject matter in both cases concerned the mortgage contract and the foreclosure sale of the Manila Manor Hotel properties. Furthermore, the same evidence would sustain the cause of action in both cases, as the core allegations regarding inability to meet amortizations and the challenge to the foreclosure were present in both pleadings, differing only in the form of action. The Court emphasized that the employment of different forms of action does not prevent the application of res judicata if the cause of action is the same. On the issue of procedural compliance for foreclosure: The Court found that DBP complied with the requirements of RA No. 3135. The Dizon spouses were served with notices of extrajudicial foreclosure. Although an auction sale was initially restrained, it proceeded after the TRO lapsed due to the spouses' failure to liquidate the remaining loan balance. The Court also pointed out that the spouses allowed the earlier case to be dismissed on December 8, 1983, which became final and executory, thus constituting a bar to the subsequent civil action. On the issue of the Respondent Court's appreciation and application of cited cases: No ruling found in the provided text.
Main Doctrine
The doctrine of res judicata bars the relitigation of the same cause of action over the same subject matter by substantially the same litigators, provided that four requisites are met: (1) the former judgment or order must be final; (2) it must be a judgment or an order on the merits; (3) it must have been rendered by a court having jurisdiction over the subject matter and the parties; and (4) there must be, between the first and the second actions, identity of parties, of subject matter and of cause of action.