G.R. No. L-17683; July 31, 1962
WILLIAM C. PFLEIDER, plaintiff-appellant, vs. C. N. HODGES, defendant-appellee.

FACTS

Plaintiff-appellant William C. Pfleider filed a complaint alleging that in 1941, he borrowed P10,000 from defendant-appellee C.N. Hodges and mortgaged properties worth substantially more as security. Because Hodges was then jailed for usury, they allegedly entered into a simulated sale of the properties to hide the usurious loan, followed by a simulated lease. In 1954, Hodges filed Civil Case No. 2860 for recovery of possession. Pfleider claimed that to settle this case, Hodges executed a Contract to Sell the properties back to him on installment on February 23, 1954. Pfleider then confessed judgment in Case No. 2860, resulting in a decision against him. In 1958, Pfleider filed the present action, seeking a declaration that the original 1941 transaction was an equitable mortgage or, alternatively, enforcement of the 1954 Contract to Sell.
The defendant moved to dismiss, arguing the action was barred by the prior judgment in Civil Case No. 2860. The trial court granted the motion, ruling the prior judgment constituted res judicata. It reasoned that the recovery of possession case necessarily implied a landlord-tenant relationship, which presupposed Hodges’s ownership, and Pfleider could not now deny that title. The court subsequently denied Pfleider’s petition for relief from judgment.

ISSUE

Whether the judgment in Civil Case No. 2860 for recovery of possession bars the present action, which includes an alternative cause of action for the enforcement of the subsequent 1954 Contract to Sell.

RULING

No, the prior judgment does not bar the present action. The Supreme Court clarified the doctrine of res judicata. For a prior judgment to constitute a bar, there must be, among other elements, identity of causes of action between the first and second cases. The cause of action in Civil Case No. 2860 was for recovery of possession based on the alleged simulated sale and lease. In contrast, the amended complaint in the present case pleads an alternative cause of action explicitly based on the new Contract to Sell executed on February 23, 1954, which was allegedly the consideration for Pfleider’s confession of judgment in the prior case.
The Court held that this alternative cause of action is distinct and separate from the cause adjudicated in the prior recovery case. It arose from a new agreement that post-dated the facts central to the first suit. Therefore, since there is no identity of causes of action concerning this alternative plea for specific performance of the 1954 contract, the defense of res judicata cannot apply to it. The trial court erred in dismissing the entire complaint on that ground. The orders of dismissal and denial of the petition for relief were set aside, and the case was remanded for further proceedings on the amended complaint.