G.R. No. 212002 , July 28, 2021
Metropolitan Bank and Trust Company, Petitioner, vs. Spouses Julio Uy and Juliette Uy, Respondents.

FACTS

Spouses Julio and Juliette Uy (respondents) were valued clients of Metropolitan Bank and Trust Company (petitioner). They had fully paid all loans secured by real estate mortgages by May 20, 1996. Respondents deposited Social Security System (SSS) checks totaling ₱3,767,851.15 into their accounts with petitioner. Petitioner allowed immediate withdrawal of these funds, allegedly pursuant to a Bills Purchase Line Agreement. Petitioner endorsed the checks to Philippine National Bank (PNB), which cleared them and transferred the funds. Months later, PNB returned the checks as “fraudulently negotiated,” and the amount was debited from petitioner’s account. Petitioner demanded reimbursement from respondents for the dishonored checks plus charges, totaling ₱7,839,978.34, and initiated extrajudicial foreclosure of the mortgages.
Respondents filed a petition for declaratory relief (Civil Case No. 98-167) to enjoin the foreclosure, arguing the secured loans were fully paid. The parties stipulated, among other facts, that all loans covered by the real estate mortgages had been fully paid and that there was no written bills purchase agreement between them. The Regional Trial Court (RTC) Branch 24 ruled for respondents, enjoining foreclosure and ordering the release of mortgages, finding no basis for foreclosure as the secured loans were paid and no agreement existed regarding the dishonored checks. This decision was affirmed by the Court of Appeals and became final.
Subsequently, petitioner filed a Complaint for Collection of Sum of Money (Civil Case No. 2006-243) before RTC Branch 38, seeking to recover the amount of the dishonored checks based on an alleged “Deposit Agreement and Guidance Line.” Respondents argued the action was barred by res judicata, among other defenses. The RTC Branch 38 dismissed the complaint, finding no cause of action (as no written agreement was attached and any oral contract was time-barred) and that it was barred by res judicata. The Court of Appeals affirmed the dismissal, ruling the collection case was barred by res judicata as it involved the same parties, subject matter (the dishonored SSS checks), and cause of action as the prior declaratory relief case.

ISSUE

Whether the Court of Appeals erred in affirming the dismissal of the Collection of Sum of Money case on the ground of res judicata.

RULING

No, the Court of Appeals did not err. The Supreme Court affirmed the dismissal, holding that the collection case was barred by res judicata under the concept of “conclusiveness of judgment.” The elements are present: (1) the former judgment (the declaratory relief case) is final; (2) it was rendered by a court with jurisdiction; (3) it is a judgment on the merits; and (4) there is identity of parties, subject matter, and causes of action between the prior and subsequent cases.
While the forms of action (declaratory relief vs. collection) differed, there was identity of causes of action because the same evidence—pertaining to the existence and validity of the claim over the dishonored SSS checks—would sustain both. The stipulation of facts in the first case explicitly included the transaction involving the SSS checks, and the RTC in that case ruled there was no basis for petitioner’s claim (the ₱7,839,978.34) under the real estate mortgages and that no bills purchase agreement existed. This finding on the lack of a valid claim over the check amount is conclusive in the subsequent collection suit. Petitioner, having failed to raise its claim for reimbursement as a counterclaim or cross-claim in the first case, is now barred by the rule against splitting a cause of action. The prior final judgment has conclusively settled the rights of the parties regarding the check transaction.