G.R. No. 159746; July 18, 2012
SPOUSES RAMON MENDIOLA and ARACELI N. MENDIOLA, Petitioners, vs. THE HON. COURT OF APPEALS, PILIPINAS SHELL PETROLEUM CORPORATION, and TABANGAO REALTY, INC., Respondents.

FACTS

Petitioners executed a real estate mortgage in favor of Pilipinas Shell Petroleum Corporation (Shell) to secure the obligations of a dealership agreement. Upon default, Shell initiated extrajudicial foreclosure. Petitioners claimed they attended the scheduled auction at the Parañaque Municipal Hall but witnessed no sale. They later discovered the property had been sold to Tabangao Realty, Inc. Shell then filed a case in the Manila RTC to recover a deficiency claim after the foreclosure, which was decided in Shell’s favor. That decision was affirmed by the Court of Appeals and ultimately by the Supreme Court, becoming final and executory in 1996. Simultaneously, however, petitioners had earlier filed a separate action in the Makati RTC to annul the foreclosure sale itself, alleging it was void due to a lack of actual auction. Despite the finality of the Manila deficiency judgment, the Makati RTC proceeded and, in 1998, ruled in favor of the petitioners, declaring the foreclosure null and void. Shell appealed this Makati decision.

ISSUE

Whether the Court of Appeals committed grave abuse of discretion in denying the petitioners’ motion to dismiss Shell’s appeal of the Makati RTC decision, which declared the foreclosure sale void.

RULING

No, the Court of Appeals did not commit grave abuse of discretion. The Supreme Court held that the final and executory decision in the Manila deficiency case (G.R. No. 122795) barred the Makati annulment case under the doctrine of res judicata. The principle of conclusiveness of judgment applies, where a fact or question settled by a final judgment becomes conclusive between the same parties in any subsequent case involving a different cause of action. The Manila case, which sought recovery of a deficiency, necessarily involved a determination of the validity of the foreclosure sale, as a deficiency claim presumes a valid foreclosure. The Supreme Court’s 1996 final ruling in that case upholding the foreclosure thus precluded the re-litigation of its validity in the Makati annulment suit. The Makati RTC’s 1998 decision, declaring the same foreclosure void, directly contradicted this settled matter. Therefore, the petitioners’ motion to dismiss Shell’s appeal was correctly denied, as the appeal was the proper remedy to challenge a decision that contravened a final and binding judgment. The Court emphasized that allowing the Makati decision to stand would violate the rule on finality of judgments and sanction forum shopping.