G.R. No. L-16734; July 31, 1961
Maria V. Lindayag, petitioner-appellant, vs. Dioscoro M. Dana, respondent-appellee.

FACTS

Petitioner Maria V. Lindayag filed a petition for consolidation of ownership over a residential house in Olongapo, Zambales, pursuant to Article 1607 of the Civil Code. She based her claim on a Deed of Sale with pacto de retro executed by respondent Dioscoro M. Dana, alleging his failure to repurchase within the stipulated period. The Court of First Instance of Zambales dismissed her petition on the ground of res judicata, citing a prior final judgment in Civil Case No. 1728.
Civil Case No. 1728 was originally an unlawful detainer action filed by Lindayag against Dana in the Justice of the Peace Court. In that case, Lindayag similarly sought to eject Dana, claiming absolute ownership arising from the same pacto de retro sale. Dana contested, asserting the contract was an equitable mortgage. The Justice of the Peace dismissed the complaint as premature under Article 1606. On appeal, the Court of First Instance, after receiving evidence, definitively ruled that the contract, despite its nomenclature, was an equitable mortgage, not a pacto de retro sale, citing the inadequate purchase price and vendor’s continued possession under Article 1602. No appeal was taken from this decision.

ISSUE

Whether the final judgment in Civil Case No. 1728, which declared the contract between the parties to be an equitable mortgage, constitutes res judicata and bars the present petition for consolidation of ownership.

RULING

Yes, the doctrine of res judicata applies, barring the instant petition. The Supreme Court affirmed the dismissal. The legal logic hinges on the identity of the ultimate issue adjudicated in the prior case. While Civil Case No. 1728 originated as an unlawful detainer action, the Court of First Instance, on appeal, transcended the mere question of possession. By virtue of the defendant’s plea and the evidence presented, the court assumed jurisdiction to determine the fundamental nature of the contract—a question of ownership or title. Its explicit and final finding was that the instrument was an equitable mortgage.
This determination of the contract’s character was essential and necessary to the resolution of the rights of the parties in the first case. Consequently, under Section 45, Rule 39 of the Rules of Court, that which was actually and necessarily adjudged becomes conclusive between the same parties. The present petition seeks to consolidate ownership based on the very contract already judicially declared to be a mortgage, thereby attempting to relitigate the same core issue. The Court rejected Lindayag’s argument that the prior case involved only possession, noting that the lower court’s finding on the contract’s nature was not a mere obiter dictum but the central ruling from which the disposition flowed. Thus, the principle of res judicata precludes re-examination of this settled issue.