Same effect, different cause

When a matter has already been settled by a court of competent jurisdiction in a final judgment on the merits, that judgment constitutes an absolute bar to a new action or suit invol-ving the same parties and the same cause of action before the same or any other tribunal. Or any right, fact or matter in issue directly adjudicated and con-clusively settled by a court of competent jurisdiction in a final judgment on the merits cannot again be litigated between the same parties and their privies in a new action even if the latter has a different cause or subject matter. These are the two concepts of the principle of res judicata. The first is known as bar by prior judgment and the second, conclusiveness of judgment. These concepts are explained in these cases of the spouses Roger and Marissa, their Corporation OMC and their bank ABC.

The cases involved here were both filed by ABC bank. The first case (case 88) was filed against the couple and OMC while the other case (case 89) was filed only against the couple. The subject matter in both cases was the loan of P780,000 with interest of 22 percent per annum extended by ABC bank to OMC and the spouses payable at a monthly amortization of P20,000 with penalty of one percent per month in case of non-payment as evidenced by a promissory note (PN).The loan was secured by a real estate mortgage of the couple’s properties and their continuing guaranty and comprehensive suretyship.

Case 88 was a collection suit filed by ABC after OMC and the spouses failed to pay their obligation on time as evidenced by the PN. In this suit ABC asked for a writ of preliminary attachment of the couple’s properties. Pending the issuance of the writ, ABC discovered that Roger and Marissa had already sold most of their properties including those mortgage to it. So ABC filed Case 89 against the couple for annulment of the said sale. ABC also filed a criminal complaint for fraudulent insolvency against Roger and Marissa under Art. 314 of the Revised Penal Code. The couple however said that the sale was not fraudulent as they have already paid their obligation.

Case 88 was initially archived by the lower court upon motion of ABC. When it was revived by the court, the spouses and OMC asked for suspension of its proceedings because of the pendency of the criminal case against the spouses. So it was again archived but later on revived upon motion of ABC only with respect to OMC.

As a result of these delays, case 89 was decided ahead of case 88. The couple won in case 89 where the court ruled that the sale they made was valid and not tainted with fraud and that the PN they signed was spurious because they have already fully satisfied and paid their obligation to the bank. This ruling was sustained by the Court of Appeals (CA) and had already become final.

So Roger and Marissa and OMC asked the lower court to dismiss case 88 contending that the final decision of the CA in case 89 constitutes res judicata in case 88. They stressed that the causes of action in both cases were predicated on the same PN which was declared by the CA to be void and of no force and effect. ABC was therefore already barred from further prosecuting case 88. ABC on the other hand contended that since OMC was not included in case 89, the finality of judgment in said case will not bind OMC because neither the lower court or the CA acquired jurisdiction over OMC in said case.

Was ABC correct?

No.

In both cases 88 and 89 ABC was the party plaintiff while the spouses were among the defendants. The rule on identity of parties does not require absolute, but only substantial identity of parties. Where the one offering a final judgment as a bar and the party against whom it is being offered are both parties to the action in which such judgment was rendered, it is no objection that some additional parties are included in the second case. Conversely, the operation of the final judgment or order in a previous case is not altered by the fact that somebody who was not a party in the first action has been impleaded in the second case. Otherwise litigants can always renew litigation by the mere expediency of including new parties. So, the fact that OMC was not a party in case 89 does not nullify the effect of the judgment issued in this case on case 88.

While there is substantial identity of parties, there is no identity of causes of action in cases 88 and 89. The test to determine the identity of cause of action is to consider whether the same evidence would sustain both causes. In case 88 ABC will have to present evidence showing the existence of the loan and the failure to comply with it in accordance with the terms of the PN. In case 89 ABC will, in addition to the foregoing evidence, also have to prove that the couple mortgaged their properties and then subsequently sold them with intent to defraud the bank. So the evidence to sustain the respective causes of action in the two cases is not exactly the same.

There being substantial identity of parties but no identity of causes of action, the applicable aspect of res judicata in the instant case is the conclusiveness of judgment only as to the following matters actually resolved in case 89: (1) that the PN relied upon by ABC is spurious; and (2) that the loan obligation of the spouses has been settled and paid. It having been determined with finality that the debt of the couple has been settled, ABC’s cause of action in case 88 must be deemed extinguished on the ground of res judicata based on conclusiveness of judgment and not because it is barred by prior judgment (Oropeza Marketing etc. et al. vs. Allied Banking Corporation G.R. 129788 December 3,2002).

In effect, the Supreme Court said that case 88 should not be dismissed but only that it cannot be prosecuted anymore because the issue therein has already been finally settled in case 89. Same result but different technical ground in arriving at the result.

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