DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS, MANILA MANOR HOTEL, INC., and Spouses GREGORIO and LUZ DIZON, respondents.
FACTS
On May 21, 1984, Manila Manor Hotel, Inc. filed a Complaint for Annulment and Damages (Civil Case No. 84-24513) against the Development Bank of the Philippines (DBP) before the Regional Trial Court (RTC) of Manila. DBP moved to dismiss the complaint on the ground of res judicata, arguing that a prior, legally identical action-a Petition for Declaratory Relief (Special Proceeding No. 83-17979) filed on June 6, 1983, by the spouses Gregorio and Luz Dizon against DBP-had already been dismissed by the RTC (Branch 33) in an Order dated December 8, 1983, for failure to prosecute. The RTC (Branch 17) initially granted the motion to dismiss on September 12, 1984, but later reconsidered and reinstated the case on December 19, 1984. Upon DBP’s motion for reconsideration, the RTC, on March 14, 1985, set aside its December 19, 1984 Order and again dismissed Civil Case No. 84-24513 on the ground of res judicata. The Court of Appeals reversed the RTC’s dismissal order and reinstated the civil case, holding that res judicata did not apply due to a lack of identity of parties and identity of cause of action between the two cases. DBP filed the present Petition for Review.
ISSUE
Whether the doctrine of res judicata bars the complaint filed by Manila Manor Hotel, Inc. in Civil Case No. 84-24513.
RULING
Yes, the doctrine of res judicata bars the complaint. The Supreme Court granted the petition, reversing the Court of Appeals and reinstating the RTC’s order of dismissal. For res judicata to apply, four requisites must concur: (1) the former judgment or order must be final; (2) it must be a judgment or 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 identity of parties, subject matter, and cause of action between the first and second actions. All four requisites are present. First, the December 8, 1983 Order dismissing Special Proceeding No. 83-17979 was a final order as it terminated the proceedings. Second, it was an adjudication on the merits because the dismissal for failure to prosecute, under Section 3, Rule 17 of the Rules of Court, has the effect of an adjudication upon the merits unless otherwise stated, and the order did not state it was without prejudice. Third, the RTC (Branch 33) that issued the dismissal order was a court of competent jurisdiction. Fourth, there is identity of parties because the spouses Dizon, as the controlling stockholders of Manila Manor Hotel, Inc., are in privity with the corporation, making them substantially the same litigants. There is also identity of subject matter (the mortgage contract and the foreclosure under Presidential Decree No. 385) and identity of cause of action (the challenge to DBP’s right to foreclose). Therefore, the subsequent complaint for annulment and damages is barred by res judicata.
