G.R. No. L-54287 September 28, 1988
Republic Planters Bank, petitioner, vs. Hon. Conrado M. Molina, as Presiding Judge, Court of First Instance of Manila, Branch XX, Sarmiento Export Corporation, Sarmiento Securities Corporation and Feliciano Sarmiento, Jr., respondents.

FACTS

Petitioner Republic Planters Bank filed two separate complaints for the collection of a sum of money based on the same promissory note. The first, Civil Case No. 116028, was dismissed by the trial court (Branch XXXVI) on May 21, 1979, for failure to prosecute within a reasonable time. A motion for reconsideration was denied. It is undisputed that in this first case, the court never acquired jurisdiction over the persons of the private respondents, as summons were never served upon them.
Subsequently, the bank filed a second complaint, Civil Case No. 129829. The private respondents moved to dismiss this second case on the ground of res judicata, arguing that the dismissal of the first case constituted a prior judgment on the merits. The trial court (Branch XX) granted the motion and dismissed the second case, ruling that the dismissal of the first case had the effect of an adjudication upon the merits and was a bar to the new action. The court held that the lack of jurisdiction over the defendants in the first case was “of no moment.”

ISSUE

Whether the trial court committed grave abuse of discretion in dismissing Civil Case No. 129829 on the ground of res judicata, given that the court in the prior Civil Case No. 116028 never acquired jurisdiction over the persons of the defendants.

RULING

Yes, the trial court committed grave abuse of discretion. The Supreme Court reversed the dismissal orders. The legal logic is anchored on the fundamental principles of jurisdiction and due process. For a judgment to operate as res judicata and bar a subsequent action, it must be a final judgment rendered by a court of competent jurisdiction. Jurisdiction over the parties is vitally essential for any order or adjudication to be binding.
In the first case (Civil Case No. 116028), the court explicitly admitted it never acquired jurisdiction over the private respondents. Consequently, any order it issued, including the dismissal for failure to prosecute, could not constitute a binding adjudication on the merits against them. A judgment rendered without jurisdiction is a nullity and cannot serve as the basis for res judicata. The dismissal, at most, could only be considered without prejudice. The respondent judge in the second case therefore acted with grave abuse of discretion in ruling that the lack of jurisdiction was immaterial. To hold otherwise would deprive the petitioner of its property (the loan claim) without due process. The case was remanded to the trial court for proper proceedings on the merits.