G.R. No. 210606, July 27, 2016
Grace Park International Corporation and Woodlink Realty Corporation, Petitioners vs. Eastwest Banking Corporation, Security Banking Corporation, represented by the Trustee and Attorney-in-Fact of Eastwest Banking Corporation Trust Division, Emmanuel L. Ortega, in his capacity as the Ex-Officio Sheriff of the Regional Trial Court, Malolos City, Bulacan, Edric C. Estrada, in his capacity as Sheriff IV of the Regional Trial Court, Malolos City, Bulacan, Respondents

FACTS

Petitioners Grace Park International Corporation and Woodlink Realty Corporation entered into a Mortgage Trust Indenture (MTI) with several banks, including Eastwest Banking Corporation (EBC) as trustee. The MTI required written instructions from the majority creditors before EBC could initiate foreclosure. Petitioners alleged that Banco De Oro Unibank (BDO), the original majority creditor, had its credit share effectively paid by individuals Sherwyn Yao, Jeremy Jerome Sy, and Leveric Ng (Sherwyn, et al.), who should thus be subrogated to BDO’s rights. When EBC refused to recognize this subrogation, Sherwyn, et al. filed an action for subrogation and injunction before the RTC of Makati City (Civil Case No. 10-323). Subsequently, EBC commenced foreclosure proceedings. Petitioners then filed a separate Amended Complaint for Injunction and Annulment of Foreclosure Sale before the RTC of Malolos (Civil Case No. 543-M-2010), arguing the foreclosure was void for lack of written instructions from the rightful majority creditors, purportedly Sherwyn, et al.
Respondents moved to dismiss the Malolos case on grounds of forum shopping and litis pendentia, contending it involved the same parties, reliefs, and causes of action as the Makati case. The RTC-Malolos and the Court of Appeals agreed, dismissing the complaint. They found a community of interest between the corporate petitioners and the individual plaintiffs in the Makati case, as both actions sought to enjoin the foreclosure and hinged on the validity of the subrogation of Sherwyn, et al. to BDO’s rights under the MTI.

ISSUE

Whether the Court of Appeals correctly upheld the dismissal of Civil Case No. 543-M-2010 on the ground of forum shopping in the concept of litis pendentia.

RULING

The Supreme Court reversed the rulings of the lower courts and reinstated Civil Case No. 543-M-2010. The legal logic centered on the absence of the requisite identity of parties and causes of action for litis pendentia to apply. Litis pendentia requires: (1) identity of parties, or at least such as representing the same interests; (2) identity of rights asserted and reliefs prayed for, with the relief being founded on the same facts; and (3) identity of the two cases such that a judgment in one would constitute res judicata in the other.
First, there was no identity of parties. The Makati case was an action in personam filed by the individuals Sherwyn, et al. against the banks to enforce their alleged personal right of subrogation. The Malolos case was filed by the corporate mortgagors (petitioners) against the banks and the sheriffs to nullify a foreclosure sale, an action that was quasi in rem. The corporations and the individuals are distinct legal personalities. While the individuals owned the corporations, their interests and the reliefs they sought were legally different. Second, the causes of action were distinct. The cause of action in Makati was the enforcement of a right of subrogation under the MTI. The cause of action in Malolos was the annulment of a foreclosure sale for non-compliance with the MTI’