G.R. No. 111662 October 23, 1997
A.G. DEVELOPMENT CORPORATION, petitioner, vs. HONORABLE COURT OF APPEALS, HONORABLE IGNACIO CAPULONG, Presiding Judge, Regional Trial Court of Makati, Branch 134; NATIONAL HOUSING AUTHORITY; and A. FRANCISCO REALTY AND DEVELOPMENT CORPORATION, respondents.

FACTS

On November 4, 1981, petitioner A.G. Development Corporation (AGDC) and respondent National Housing Authority (NHA) entered into a Memorandum of Agreement for AGDC to construct a building for NHA. AGDC executed a promissory note and a real estate mortgage over the land as security. NHA made an initial payment. On August 30, 1983, NHA rescinded the agreement due to AGDC’s failure to complete the project on time and demanded a refund. Upon AGDC’s refusal, NHA extra-judicially foreclosed the mortgage, purchased the property at the sale, and, after the redemption period, obtained a new title. NHA then applied for and was granted a writ of possession by the Regional Trial Court (RTC) of Quezon City in LRC Case No. 3067 (85). On December 3, 1986, AGDC filed a complaint against NHA before the Makati RTC (Civil Case No. 15495) for breach of contract, declaration of nullity of the promissory note and real estate mortgage, and annulment of the foreclosure sale and reversion of title. While the case was pending, respondent A. Francisco Realty and Development Corporation (AFRDC) intervened, claiming to be an innocent purchaser for value of the property from NHA. AFRDC filed a motion to dismiss, arguing that the Makati RTC had no jurisdiction to annul a writ issued by the Quezon City RTC, a court of co-equal jurisdiction. The Makati RTC dismissed AGDC’s complaint, a decision affirmed by the Court of Appeals.

ISSUE

Whether the issuance of a writ of possession by the Quezon City RTC constitutes res judicata, thereby barring the complaint for annulment of the mortgage and foreclosure sale filed by AGDC before the Makati RTC.

RULING

No. The issuance of the writ of possession does not constitute res judicata. For res judicata to apply, the judgment must be on the merits. The issuance of a writ of possession in an extra-judicial foreclosure is a ministerial and summary function of the court; it is not a judgment on the merits. A judgment on the merits is one rendered after a determination of which party is right, as distinguished from a judgment on preliminary or technical grounds. The proceeding for a writ of possession (LRC Case No. 3067) is not an “action” as defined by law, as it is commenced by an ex parte motion, not a complaint, and the court does not act in a judicial capacity. Since the writ of possession was not a judgment on the merits, and the proceeding was not an action, the requisite elements for res judicata are absent. Therefore, the complaint before the Makati RTC is not barred. The decision of the Court of Appeals is REVERSED and Civil Case No. 15495 is REINSTATED.