G.R. No. L-25755 April 11, 1972
SUPREME INVESTMENT CORPORATION, plaintiff-appellant, vs. ENGINEERING EQUIPMENT, INC., defendant-appellee.

FACTS

Plaintiff-appellant Supreme Investment Corporation and defendant-appellee Engineering Equipment, Inc. entered into a contract for the installation of an air-conditioning system. A dispute arose regarding performance and payment. Appellee alleged that appellant abandoned the building project, preventing the system’s start-up, and consequently removed some equipment for safekeeping. Appellant claimed appellee failed to perform its obligations and, after an independent appraisal, sent a letter on December 7, 1965, advising appellee to consider the contract rescinded if undelivered items were not supplied within ten days.
Before this ten-day period expired, on December 17, 1965, appellee filed a complaint (Civil Case No. 63670) against appellant for specific performance and damages, seeking payment of contract installments and unrealized profits. Subsequently, on December 23, 1965, appellant filed its own complaint (Civil Case No. 63718) against appellee for rescission of the contract and damages. Appellee moved to dismiss appellant’s later-filed complaint on the ground of litis pendentia, arguing another action was pending between the same parties for the same cause. The trial court granted the motion to dismiss and denied reconsideration.

ISSUE

Whether the trial court correctly dismissed the complaint in Civil Case No. 63718 on the ground of litis pendentia.

RULING

Yes, the dismissal was proper. The Supreme Court affirmed the trial court’s orders. The elements of litis pendentia are present: identity of parties, identity of rights asserted and relief prayed for, and identity of the two cases such that any judgment in one would constitute res judicata in the other. Both cases involve the same contract and the same parties asserting reciprocal claims and seeking relief arising from its alleged breach. The reliefs sought—specific performance and damages in the first case, and rescission and damages in the second—are fundamentally inconsistent but arise from the same factual core and contractual relationship. A judgment in either case would necessarily settle the rights and obligations of both parties under the contract, barring the other action.
The Court rejected appellant’s procedural objections regarding notice for the motion to dismiss, finding no reversible error. It also held that the trial court did not abuse its discretion in dismissing the case instead of ordering consolidation. While consolidation was a permissible alternative, the choice to dismiss was within the court’s sound discretion, especially since appellee’s action was filed first and appellant could still assert its claims for rescission and damages via a compulsory counterclaim in the pending case. The dismissal avoids multiplicity of suits and promotes judicial economy.