G.R. No. 209376, December 6, 2017
JOSE DIAZ, JR. (substituted by Veronica Bolagot-Diaz and Rio Angela Bolagot-Diaz) and ADELINA D. McMULLEN, Petitioners, vs. SALVADOR VALENCIANO, JR. (substituted by Madeline A. Valenciano, et al.), Respondents.

FACTS

Petitioners Jose Diaz, Jr. and Adelina D. McMullen, registered owners of a parcel of land, filed an unlawful detainer case (Civil Case No. 3931) in 1992 against Salvador Valenciano Sr., father of respondent Salvador Valenciano Jr. The parties entered into a Compromise Agreement, judicially approved, whereby Valenciano Sr. agreed to vacate the property by January 31, 1994. Upon his failure to vacate, a writ of execution was issued in 1994, but petitioners chose not to enforce it, allegedly allowing the Valenciano family to stay out of tolerance. After Valenciano Sr. died, petitioners in 2009 demanded that Valenciano Jr. vacate. Upon his refusal, they filed a second unlawful detainer complaint (Civil Case No. 5570).
The Municipal Trial Court in Cities (MTCC) dismissed the second complaint on the ground of res judicata, finding identity of parties, subject matter, and cause of action with the first case. The Regional Trial Court (RTC) reversed, holding the compromise agreement was not a judgment on the merits and thus res judicata did not apply, ordering Valenciano Jr. to vacate. The Court of Appeals reinstated the MTCC dismissal, prompting this petition.

ISSUE

Whether the second action for unlawful detainer is barred by res judicata.

RULING

No, the principle of res judicata does not apply. The Supreme Court reversed the Court of Appeals and reinstated the RTC decision. For res judicata to apply, there must be, among other elements, a final judgment on the merits in the first action. The Court ruled that a judgment based on a compromise agreement is not a judgment on the merits. A compromise is a contract whereby parties make reciprocal concessions to avoid litigation; it is not an adjudication by the court of the parties’ respective claims. Therefore, the MTCC Resolution approving the 1992 Compromise Agreement did not constitute a judgment on the merits that could bar a subsequent action.
The Court further clarified that the causes of action in the two cases were distinct. The first case was based on the breach of the compromise agreement’s specific deadline to vacate (January 31, 1994). The second case, filed in 2009, was based on a new cause of action arising from a different act of tolerance—petitioners’ alleged permission for the family to remain after the writ of execution in 1994—and a subsequent demand to vacate in 2009. Each breach of a lawful possessor’s right, through a demand to vacate following a period of tolerance, creates a new cause of action. The Court also noted that the five-year period to execute the 1992 judgment by motion had long lapsed, necessitating a fresh action to recover possession.