G.R. Nos. 142286-87. April 15, 2005.
KOREA EXCHANGE BANK, Petitioner, vs. HON. ROGELIO C. GONZALES, in his capacity as Presiding Judge of Branch 50 of the Regional Trial Court of Pampanga, PHI-HAN DEVELOPMENT, INC., LOURDES DE MESA MENDOZA, MENELEO MENDOZA, ANTUSA DE MESA MAGNO, FRANCISCO MAGNO, TEODORO DE MESA, FIRMO DE MESA and MERCEDES DE MESA, Respondents.

FACTS

Phi-Han Development, Inc. (PHDI), along with its incorporators, filed a complaint for accounting and damages against Korea Exchange Bank (KEB) and its president, Jae Il Aum, before the RTC of Guagua, Pampanga (Civil Case No. G-3012). They alleged that a US$500,000 loan from KEB was deposited with the bank, and that Aum, with KEB’s alleged connivance, fraudulently withdrew substantial amounts by forging a co-signatory’s signature. KEB moved to dismiss, arguing the case involved intra-corporate matters under the exclusive jurisdiction of the SEC. The RTC denied the motion.
Subsequently, KEB filed a separate collection suit against PHDI and the individual respondents (Civil Case No. G-3119) before another branch of the same RTC, seeking payment of the same US$500,000 loan and reformation of the real estate mortgage securing it. The respondents moved to dismiss this second case on grounds of forum shopping and litis pendentia, arguing the loan was the core subject of the first pending case. The RTC granted the motion and dismissed KEB’s collection suit. KEB elevated the matter to the Court of Appeals, which affirmed the dismissal.

ISSUE

Whether the Court of Appeals erred in affirming the dismissal of KEB’s collection suit (Civil Case No. G-3119) on the ground of litis pendentia.

RULING

No, the Court of Appeals did not err. The Supreme Court affirmed the dismissal based on litis pendentia. For litis pendentia to warrant dismissal, the following requisites must concur: (1) identity of parties, or at least such parties as represent the same interests in both actions; (2) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and (3) identity of the two cases such that a judgment in the first would constitute res judicata in the second. All these elements were present.
First, there was substantial identity of parties. PHDI and its incorporators were plaintiffs in the first case and defendants in the second. KEB was a defendant in the first and the plaintiff in the second. Second, the rights asserted and reliefs prayed for arose from the same core set of facts—the US$500,000 loan transaction. In the first case, PHDI sought an accounting and damages related to the loan’s proceeds, implicitly questioning its validity or the terms of its release. In the second case, KEB sought to enforce the very same loan obligation. The reliefs were mutually exclusive outcomes stemming from the identical transaction. Finally, any judgment in the first case regarding the validity, execution, or effects of the loan agreement would necessarily be res judicata in the collection suit. KEB cannot split its cause of action; its proper recourse was to set up its claim for payment as a compulsory counterclaim in the first case where it was already a defendant.