G.R. No. L-14148; February 25, 1960
ALFREDO PUA, plaintiff-appellant, vs. EULOGIO LAPITAN, defendant-appellee.

FACTS

1. On December 15, 1953, Eulogio Lapitan (defendant-appellee) filed an action (Civil Case No. 9739) against Alfredo Pua (plaintiff-appellant) in the Court of First Instance of Laguna for specific performance and damages. Lapitan alleged that Pua, through fraud, deceit, and misrepresentation, caused Lapitan and his wife to sign a document purporting to be a lease agreement when their true understanding was to enter into a partnership. Lapitan claimed moral damages of P5,000.00 due to mental anguish, wounded feelings, and besmirched reputation.
2. Pua answered the complaint, denying the imputations of fraud, and filed a counterclaim alleging that the unjustified filing of the complaint caused him mental torture and anguish, adversely affected his reputation, and resulted in moral damages of P10,000.00, plus P1,000.00 in attorney’s fees.
3. After trial, the court ruled in favor of Lapitan, declaring the contract a partnership and ordering Pua to liquidate the income and pay attorney’s fees. On appeal, the Court of Appeals reversed the judgment and dismissed Lapitan’s complaint, but did not mention or rule on Pua’s counterclaim.
4. Subsequently, Pua initiated the present action (Civil Case No. B-132) against Lapitan for actual and moral damages and attorney’s fees totaling P49,500.00, alleging that Lapitan’s malicious imputations of fraud in the prior case caused him embarrassment, loss of prestige, goodwill, and commercial credit.
5. Lapitan moved to dismiss the complaint on the ground that the cause of action was barred by a prior judgment. The trial court granted the motion and dismissed the complaint, prompting Pua’s appeal.

ISSUE

Whether the trial court correctly dismissed the complaint on the ground that its cause of action is barred by a prior judgment (res judicata).

RULING

Yes, the trial court correctly dismissed the complaint. The Supreme Court affirmed the order of dismissal.
1. The counterclaim for moral damages filed by Pua in the prior case (Civil Case No. 9739) was based on the same imputations of fraud, deceit, and misrepresentation by Lapitan that are now the basis of the present action. This counterclaim was in issue in the former case and could have been litigated and decided therein.
2. The Court of Appeals’ decision in the prior case, which reversed the trial court’s judgment and dismissed Lapitan’s complaint, did not mention Pua’s counterclaim. This implies that Pua either waived his right to the counterclaim, or the court found no evidence to support it, and thus it was passed up sub silentio.
3. Under the principle of res judicata, a judgment is conclusive not only on matters actually determined but also on every other matter that the parties might have litigated and decided as incident to or essentially connected with the subject matter of the original action. This includes matters of claim and defense. The purpose is to avoid multiplicity of suits and piecemeal litigation.
4. Since the counterclaim in the prior case involved the same cause of action now asserted, the decision in that case operates as a prior judgment barring the present complaint. The trial court, therefore, acted correctly in dismissing the complaint on the ground of res judicata.