G.R. No. 149624 ; September 29, 2010
SPOUSES CONRADO ANTONIO and AVELYN ANTONIO, Petitioners, vs. JULITA SAYMAN VDA. DE MONJE, substituted by her heirs, Respondents.

FACTS

The dispute involves a 15,903-square-meter parcel of land. In 1962, the heirs of the original owners sold 7,500 square meters to Macedonio Monje (respondents’ predecessor). In 1967, the same heirs sold the entire lot to Nicanor Manguiob, who then sold it to petitioner Avelyn Antonio, who obtained a transfer certificate of title. Monje filed an action (Civil Case No. 007-125) for annulment of the later deeds and the title. The trial court voided the deeds and title in 1981, a decision affirmed by the Supreme Court in 1992, which clarified that Monje was entitled only to the 7,500 square meters he purchased.
Subsequently, petitioners filed a new complaint (Civil Case No. 506) for sum of money, accounting of copra proceeds, and damages, alleging that respondents, in bad faith, had possessed the entire 15,903-square-meter lot since 1967 and appropriated the income from the 8,403-square-meter portion belonging to petitioners. Respondents moved to dismiss on the ground of res judicata, arguing the claims should have been raised in the prior case. The Regional Trial Court and the Court of Appeals dismissed the complaint, upholding the application of res judicata.

ISSUE

Whether the principle of res judicata bars the filing of Civil Case No. 506 for accounting and damages.

RULING

The Supreme Court reversed the Court of Appeals, ruling that res judicata does not apply. For res judicata to bar a subsequent action, there must be, among other elements, identity of causes of action between the prior and subsequent cases. The cause of action in the first case (Civil Case No. 007-125) was the annulment of deeds and a certificate of title, which involved the determination of ownership and the validity of documents. The cause of action in the second case (Civil Case No. 506) was the recovery of income derived from the petitioners’ portion of the land and damages for bad faith possession, which presupposes the prior resolution of ownership. These are distinct causes of action.
The Court further held that petitioners’ claims for accounting and damages were not compulsory counterclaims in the first action. A compulsory counterclaim arises out of or is necessarily connected with the transaction or occurrence that is the subject matter of the opposing party’s claim. Here, the respondents’ claim in the first case was for annulment. The petitioners’ claim for fruits and damages, which accrued from the respondents’ continued possession of the disputed area after ownership was clarified, did not arise from the same transaction—the sale contracts—that were the subject of the annulment suit. Therefore, the claims could be pursued in a separate action. The case was remanded to the trial court for proceedings on the merits.