G.R. No. 193078; August 28, 2013
B. STA. RITA & CO., INC. and ARLENE STA. RITA KANAPI, Petitioners, vs. ANGELINE M. GUECO, Respondent.

FACTS

On April 11, 2000, respondent Angeline M. Gueco purchased four parcels of land from petitioner B. Sta. Rita & Co., Inc. through its then President, Ben Sta. Rita, for a total consideration of ₱1,000,000.00, as evidenced by a Deed of Absolute Sale. In October 2001, Gueco filed a petition for the surrender of the titles (Civil Case No. 9245, surrender of titles case). B. Sta. Rita and its corporate secretary, Edgardo Kanapi, claimed the sale was conditional for ₱25,000,000.00, that Gueco had only paid ₱1,565,000.00, and that B. Sta. Rita remained in possession until Ben Sta. Rita’s death. They prayed for rescission of the sale and restoration of possession.
Subsequently, on July 30, 2003, alleged heirs and shareholders of B. Sta. Rita (the Sta. Ritas) filed a derivative suit (Civil Case No. 9532, reformation case) against Gueco for reformation and rescission of contract and quieting of title, alleging the sale was conditional for ₱25,000,000.00 and that Gueco failed to pay the balance. The Sta. Ritas also moved to intervene in the surrender of titles case, which was granted. Gueco moved to dismiss the reformation case, arguing the Sta. Ritas lacked legal personality for a derivative suit and were not parties to the deed. The motion was denied. The two cases were later consolidated.
On March 5, 2004, petitioner Arlene Sta. Rita Kanapi (wife of Edgardo) and the Heirs of Edgardo moved to file a complaint-in-intervention in the reformation case, which was admitted. Meanwhile, the CA, in a related certiorari proceeding (CA-G.R. SP No. 79932), dismissed the reformation case due to the Sta. Ritas’ lack of legal personality to bring a derivative suit, a ruling which became final and executory after the Supreme Court denied their petition (G.R. No. 165858).
The RTC proceeded to hear the surrender of titles case and rendered a Joint Decision on December 8, 2005, rescinding the sale transaction and ordering the return of ₱1,000,000.00 to Gueco with interest, concluding the parties intended a contract to sell, not a sale. Gueco appealed to the CA.

ISSUE

Whether the Court of Appeals correctly reversed the RTC’s Joint Decision, effectively upholding the Deed of Absolute Sale, based on the principles of res judicata and the law of the case, given the final dismissal of the reformation case.

RULING

The Supreme Court DENIED the petition, affirming the CA Decision. The Court held that the final dismissal of the reformation case on the ground of the Sta. Ritas’ lack of legal personality to institute the derivative suit was binding on all parties, including the intervenors (Arlene Kanapi and the Heirs of Edgardo). An intervention is merely ancillary and supplemental to the main action; it cannot survive independently of it. Since the main reformation case was dismissed with finality, the complaint-in-intervention necessarily fell with it. Consequently, the RTC erred in rendering a Joint Decision that effectively granted the relief of rescission sought in the already-dismissed reformation case. The CA correctly applied the doctrine of res judicata, as the issue of rescission was directly involved and finally adjudicated in the reformation case. The only remaining case for resolution was the surrender of titles case. The petitioners’ new argument that the transaction was an equitable mortgage, raised for the first time on appeal, could not be entertained.