G.R. No. 134089; July 14, 2000
ISABEL A. VDA. DE SALANGA, ET AL., petitioners, vs. HON. ADOLFO P. ALAGAR, Presiding Judge, Branch 30, of the REGIONAL TRIAL COURT, With Station at San Fernando City (LU), and SHIPSIDE, INC., respondents.

FACTS

This case originated from an ejectment suit filed by petitioners (the Salangas) against respondent Shipside, Inc. The Municipal Trial Court (MTC) ruled in favor of the Salangas, a decision affirmed by the Regional Trial Court (RTC). During the appeal to the Court of Appeals, the RTC granted execution pending appeal of the monetary award. Shipside’s properties were sold at public auction on September 8, 1992, with the Salangas as the highest bidders. Shipside failed to redeem the properties within the statutory period. Its subsequent petitions to the Court of Appeals and the Supreme Court (G.R. No. 117259) challenging the execution and auction sale were denied, and the judgment became final.
Subsequently, on August 14, 1995, Shipside filed a Petition for Annulment of Public Auction Sale (Civil Case No. 4991) before the RTC, Branch 30, presided by Judge Alagar, alleging insufficiency of notice and inadequacy of the bid price. The Salangas moved to dismiss this petition, arguing it was barred by res judicata, forum shopping, and prescription, and was rendered moot by final MTC orders. The RTC denied the motion to dismiss. The Salangas then filed a petition for certiorari with the Court of Appeals (CA-G.R. SP No. 40534), which ruled that Civil Case No. 4991 had become moot and academic due to final MTC orders issued after the case was remanded for execution. The CA also cautioned against forum shopping.

ISSUE

Whether the Regional Trial Court, Branch 30, committed grave abuse of discretion in not dismissing Civil Case No. 4991 for Annulment of Public Auction Sale.

RULING

The Supreme Court dismissed the petition, finding no grave abuse of discretion by the RTC. The Court clarified that the CA’s declaration of mootness in its resolution was an obiter dictum, not a binding adjudication on the merits that could bar the annulment case. The core legal logic rests on jurisdiction over the subject matter of the auction sale’s validity. The Court held that upon the issuance of the Certificates of Final Sale to the petitioners, the MTC, in the execution proceedings of the ejectment case, lost jurisdiction over matters concerning the auction sale. The satisfaction of that part of the judgment removed it from the MTC’s purview. Consequently, the proper remedy to challenge the validity of the auction sale on grounds like insufficient notice was a separate action, precisely what Shipside filed via Civil Case No. 4991 in the RTC, which has original jurisdiction over such actions.
Furthermore, the defense of res judicata was unavailing. For res judicata to apply, there must be a prior final judgment on the merits of the very issue sought to be litigated. The Supreme Court noted that its prior resolution in G.R. No. 117259 merely affirmed the ejectment judgment and the execution pending appeal; it did not rule on the specific validity of the auction sale based on procedural defects like notice or price adequacy. Since no court had rendered a final judgment on those specific issues, they were not barred by res judicata and could be ventilated in the annulment case.