G.R. No. 129788 December 3, 2002
OROPEZA MARKETING CORPORATION, ROGACIANO OROPEZA and IMELDA S. OROPEZA, petitioners, vs. ALLIED BANKING CORPORATION, respondent.

FACTS

On October 12, 1982, respondent Allied Banking Corporation extended a loan of P780,000 to petitioners Oropeza Marketing Corporation (OMC) and spouses Rogaciano and Imelda Oropeza, secured by a promissory note, a Continuing Guaranty/Comprehensive Surety Agreement, and a Real Estate Mortgage. Petitioners allegedly defaulted. Allied Bank filed a collection suit (Civil Case No. 19325-88) before the RTC of Davao City, Branch 15. While its application for a writ of attachment was pending, Allied Bank discovered the spouses had executed an Absolute Deed of Sale with Assumption of Mortgage in favor of Solid Gold Commercial Corporation covering the mortgaged properties. Allied Bank then filed a separate complaint for annulment of that Deed of Sale (Civil Case No. 19634-89) before RTC Branch 9. The RTC in Civil Case No. 19634-89 declared the Deed of Sale valid and the promissory note void. Allied Bank appealed this to the Court of Appeals (CA-G.R. CV No. 41986). Meanwhile, the RTC in Civil Case No. 19325-88 dismissed the collection suit on the ground of litis pendentia, citing identity of parties and cause of action with Civil Case No. 19634-89. Allied Bank appealed this dismissal to the Court of Appeals (CA-G.R. CV No. 47775). The Court of Appeals in CA-G.R. CV No. 47775 reversed the RTC’s dismissal and ordered the reinstatement of Civil Case No. 19325-88. Petitioners sought review. While this petition was pending, the Court of Appeals decided CA-G.R. CV No. 41986, affirming the RTC’s decision in the annulment case that the Deed of Sale was valid and the promissory note was void.

ISSUE

Does the decision of the Court of Appeals in CA-G.R. CV No. 41986 (annulment case) constitute res judicata insofar as Civil Case No. 19325-88 (collection case) is concerned?

RULING

No. The Supreme Court held that the decision in the annulment case (CA-G.R. CV No. 41986) does not constitute res judicata (a “bar by prior judgment”) on the collection case. For res judicata to apply as a bar, there must be identity of parties, subject matter, and causes of action between the two cases. Here, there is no identity of causes of action. Civil Case No. 19634-89 was an action for annulment of a deed of sale, while Civil Case No. 19325-88 was an action for collection of a sum of money based on a promissory note. The rights asserted and the reliefs prayed for are different. Furthermore, there is no complete identity of parties, as the defendant Solid Gold Commercial Corporation in the annulment case was not a party to the collection case. However, the Court ruled that the principle of “conclusiveness of judgment,” a aspect of res judicata, applies. Under this principle, facts actually and directly adjudicated in the former annulment case (specifically, the finding that the promissory note was void and without force and effect) are binding on the parties in the subsequent collection case. Therefore, while the collection case may proceed, the trial court is bound by the final finding in the annulment case that the promissory note, which is the very basis of the collection suit, is void.