G.R. No. 135101 . May 31, 2000.
ALADIN CRUZ, petitioner, vs. COURT OF APPEALS and SPOUSES LAZARO AND ENRIQUETA VIDAL, respondents.

FACTS

On July 14, 1971, petitioner Aladin Cruz and respondent Enriqueta Vidal entered into a Joint Venture Agreement to develop Cruz’s land into the “Domini Village” subdivision. Their relationship deteriorated, leading Cruz to extrajudicially rescind the agreement in 1974. In 1975, the Vidal spouses filed a complaint for Specific Performance plus Damages (Civil Case No. 20945) against the Cruz spouses before the Court of First Instance of Rizal. The trial court initially ruled for the Cruzes but, on reconsideration, declared the extrajudicial rescission invalid, ordered strict compliance with the agreement, and awarded damages to the Vidals. This order was affirmed by the Court of Appeals and subsequently by the Supreme Court in a 1994 Resolution that became final.
Undeterred, on August 26, 1996, Aladin Cruz (without his wife) filed a new complaint for judicial rescission of the same Joint Venture Agreement (Civil Case No. 96-80021) before the Regional Trial Court of Manila. He alleged the Vidals failed to perform their obligations. The Vidals moved to dismiss on grounds of res judicata and forum shopping.

ISSUE

Whether the principle of res judicata bars the subsequent action for judicial rescission.

RULING

Yes, res judicata applies. The Supreme Court affirmed the Court of Appeals’ dismissal of the second case. For res judicata to apply, there must be: (a) identity of parties or interests; (b) identity of rights asserted and reliefs prayed for, founded on the same facts; and (c) a prior final judgment on the merits. All elements are present.
First, there is substantial identity of parties. While Cruz’s wife was a party in the first case but not in the second, absolute identity is not required; a shared identity of interest suffices. Here, Cruz sued and was sued concerning his rights and obligations under the same contract. Second, there is identity of subject matter and cause of action. Both cases fundamentally concern the determination of the parties’ compliance with the Joint Venture Agreement. The relief of judicial rescission in the second case is founded on the same facts and breaches previously litigated and resolved in the first. The first case conclusively ruled on the validity of the agreement and the parties’ obligations.
Any judgment granting rescission in the second case would directly contradict the final judgment in the first case, which upheld the agreement and ordered its enforcement. The prior judgment constitutes a bar to relitigating the very issue of the agreement’s continued validity and the parties’ performance. Therefore, the subsequent action is barred by res judicata.