Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 128349 September 25, 1998

BACHRACH CORPORATION, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and PHILIPPINE PORTS AUTHORITY,
respondents.

VITUG, J.:

Bachrach Corporation ("Bachrach"), in its petition for review on certiorari, questions the
decision of the Court of Appeals in CA-G.R. SP No. 38763, promulgated on 12 November
1996, the dispositive part of which reading —

WHEREFORE, the petition is granted. The assailed RTC orders art hereby
NULLIFIED and SET ASIDE and public respondent is ordered to dismiss the
subject action before him under Civil Case No. 95-73399. No pronouncement
as to costs. 1 —

on several counts; viz:

I. THE COURT OF APPEALS GRAVELY

ERRED IN NOT DISMISSING CA-G.R. SP
NO. 38673 DESPITE THE FACT THAT A
SIMILAR PETITION EARLIER FILED BY
PPA WAS DISMISSED FOR BEING
INSUFFICIENT NOT ONLY IN FORM BUT
ALSO IN SUBSTANCE WHICH DISMISSAL
CONSTITUTES RES JUDICATA INSOFAR AS
THE ISSUES RAISED THEREIN ARE
CONCERNED.

II. THE COURT OF APPEALS GRAVELY

ERRED IN RULING THAT THE DECISION
IN THE UNLAWFUL DETAINER CASE
CONSTITUTES RES JUDICATA WHICH
BARS THE SPECIFIC PERFORMANCE
CASE.

III. THE COURT CF APPEALS GRAVELY

ERRED IN RULING THAT THE FILING OF
 THE SPECIFIC PERFORMANCE CASE
VIOLATES THE RULE AGAINST FORUM
SHOPPING.

IV. THE COURT OF APPEALS GRAVELY

ERRED IN RULING THAT THE WRIT OF
PRELIMINARY INJUNCTION ISSUED BY
THE TRIAL COURT CONSTITUTES
INTERFERENCE WITH ITS JUDGMENT IN
THE UNLAWFUL DETAINER CASE.

V. THE COURT OF APPEALS GRAVELY

ERRED IN ORDERING THE DISMISSAL OF
CIVIL CASE NO. 95-73399 THEREBY
RULING ON THE MERITS OF THE CASE
WHEN IN FACT, THE ONLY ISSUES FOR
ITS RESOLUTION WERE THE PROPRIETY
OF THE WRIT OF PRELIMINARY
INJUNCTION ISSUED BY THE TRIAL
COURT AND THE DENIAL OF PPA'S
MOTION FOR PRELIMINARY HEARING
ON AFFIRMATIVE DEFENSES.2

It would appear that petitioner corporation entered into two lease contracts with the
Philippine government covering two specified areas, Block 180 and Block 185, located at the
Manila Port Area, then under the control and management of the Director of Lands, for a term
of ninety-nine years each, the first lease to expire on 19 June 2017 and the other on 14
February 2018. During her tenure, President Corazon Aquino issued Executive Order No. 321
transferring the management and administration of the entire Port Area to herein respondent
Philippine Ports Authority ("PPA"). Shortly alter its take-over, PPA issued a Memorandum
increasing the rental rates of Bachrach by 1,500%. Bachrach refused to pay the substantial
increased rates demanded by PPA.

On 23 March 1992, PPA initiated unlawful detainer proceedings, docketed Civil Case No.
138838 of the Metropolitan Trial Court ("MeTC") of Manila, against Bachrach for non-
payment of rent. On 27 April 1993, MeTC rendered a decision ordering the eviction of
Bachrach from the leased premises. Bachrach appealed to the Regional Trial Court ("RTC")
of Manila which, on 21 September 1993, affirmed the decision of the lower court in toto.3

Bachrach elevated the case to the Court of Appeals by way of a petition for review. On 29
July 1994, the appellate court affirmed the decision of the RTC. A motion for reconsideration
was filed by Bachrach; however, the resolution of the motion was put on hold pending
submission of a compromise agreement.4 When tile parties failed to submit the promised
compromise agreement, the Court of Appeals, on 15 May 1995, denied Bachrach's motion for
reconsideration. The decision of the appellate court in the ejectment suit became final and
executory on 20 May 1995.5

Meanwhile on 25 March 1995, while the motion for reconsideration was yet pending with the
appellate court, Bachrach filed a complaint against PPA with the Manila RTC, docketed Civil
Case No. 95-73399 (hereinafter referred to also as the specific performance case), for
refusing to honor a compromise agreement said to have been perfected between Bachrach
and PPA during their 04 February 1994 conference that superseded the ejectment case. In its
complaint, Bachrach prayed for specific performance.

On 08 June 1995, PPA filed a motion for a writ of execution/garnishment in the ejectment
case. The next day, 09 June 1995, Bachrach filed an application in the specific performance
case for the issuance of a temporary restraining order and/or a writ of preliminary injunction
to enjoin the MeTC from issuing the writ of execution/garnishment. PPA countered by filling
a motion for preliminary hearing on its affirmative defenses along the same grounds
mentioned in its motion to dismiss the specific performance case, to wit: (a) the pendency of
another action between the same parties for the same cause; (b) the violation of the anti-
forum-shopping rule; (c) the complaint's lack of cause of action; and (d) the unenforceable
character of the compromise agreement invoked by Bachrach. On 13 July 1995, the trial court
issued an omnibus order, granting the application of Bachrach for a writ of preliminary
injunction, in this tenor —

PREMISES CONSIDERED, this Court is of the opinion and so holds (1) that
plaintiff (Bachrach) is entitled to the injunctive relief prayed for and upon the
posting of a bond in the amount of P300,000.00, let a writ of preliminary
injunction be issued enjoining the defendant (PPA), the Presiding Judge of the
Metropolitan Trial Court of Manila, Branch 2 from issuing a writ of
execution/garnishment in Civil Case No. 238838-CV entitled "Philippine Ports
Authority vs. Bachrach Corporation"; (2) lifting/setting aside the order dated
June 5, 1995 and (3) denying defendant's motion for a preliminary hearing on
affirmative defenses. 6

PPA moved for reconsideration of the above order but the trial court denied the plea in
its order of 29 August 1995.

On 25 September 1995, PPA filed a petition for certiorari and prohibition, with application
for the issuance of a temporary restraining order and/or writ of preliminary injunction,
docketed CA-G.R. SP No. 36508, before the Court of Appeals. The petition was dismissed by
resolution, dated 28 September 1995, of the appellate court for being insufficient in form and
substance, i.e., the failure of PPA to properly attach a certified true copy each of the assailed
order of 13 July 1995 and 29 August 1995 of the trial court. PPA received on 05 October
19957 a copy of the resolution, dated 28 September 1995, of the appellate court. Undaunted,
PPA filed a new petition on 11 October 1995, now evidently in proper form, asseverating that
since it had received a copy of the assailed resolution of the trial court only on 07 September
1995, the refiling of the petition with the Court of Appeals within a period of less than two
months from the date of such receipt was well within the reasonable time requirement under
the Rules for a special civil action for certiorari. 8 In the meantime, the resolution, dated 28
September 1995, of the Court of Appeals which dismissed CA-G.R. No. 38508 became final
on 21 October 1995.9

In its newly filed petition, docketed CA-G.R. SP No. 38673, PPA invoked the following
grounds for its allowance:

I. That respondent judge acted without, or in excess of jurisdiction, or with

grave abuse of discretion when it issued a writ of preliminary injunction
against the final and executory resolution of the Honorable Court of Appeals
 Annex "I") inspite of the well-established rule that courts are allowed to
interfere with each other's judgment or decrees by injunction, and worse, in
this case, against the execution of the judgment of a superior or collegiate
court which had already became final executory.

II. That respondent Judge acted without, or in excess of jurisdiction, or with

grave abuse of discretion when it also denied petitioner's motion for a
preliminary hearing on its affirmative defenses or in failing to have the case
below outrightly dismissed on the grounds stated in its affirmative defenses,
when respondent Judge pronounced there is no identity as to the causes of
action between the case decided by the Court of Appeals (CA-G.R. SP No.
32630) and the case below (Civil Case No. 95-73399) when clearly the causes
or action in both cases revolve on the same issue of possession of the subject
leased premises.

III. That respondent Judge acted without, or in excess of jurisdiction, or with

grave abuse of discretion in refusing to take cognizance (of), abide (by) and
acknowledge the final judgment of the Court of Appeals which, on said
ground alone, is enough justification for the dismissal of the case grounded on
res judicata. Moreover private respondent is guilty of forurn-shopping and the
penalty therefor is the dismissal of its case. 10

On 12 November 1996, the Court of Appeals rendered the assailed decision nullifying
and setting aside the orders of the RTC and ordering the latter to dismiss the specific
performance case.

The Court finds merit in the instant appeal interposed by petitioner.

Verily, the decisive issue raised by the parties before the Court in the instant petition is
whether or not the specific performance case (Civil Case No. 73399) should be held barred
by the unlawful detainer case on the ground of res judicata. There are four (4) essential
conditions which must concur in order that res judicata may effectively apply, viz: (1) The
judgment sought to bar the new action must be final; (2) the decision must have been
rendered by a court having jurisdiction over the subject matter and the parties; (3) the
disposition of the case must be a judgment or order on the merits, and (4) there must be
between the first and second action identity of parties, identity of subject matter, and identity
of causes of action." 11 There is no question about the fact that all the first three elements of
res judicata are here extant; it is the final condition requiring an identity of parties, of subject
matter and of causes of action, particularly the last two, i.e., subject matter and cause of
action, that presents a problem.

A cause of action, broadly defined, is an act or omission of one party in violation of the legal
right of the other. 12 The subject matter, on the other hand, is the item with respect to which
the controversy has arisen, or concerning which the wrong has been done, and it is ordinarily
the right, the thing, or the contract under dispute. 13 In a breach of contract, the contract
violated is the subject matter while the breach thereof by the obligor is the cause of action. It
would appear quite plain then that the RTC did act aptly in taking cognizance of the specific
performance case. In Civil Case No. 138838 of the MeTC, the unlawful detainer case, the
subject matter is the contract of lease between the parties while the breach thereof, arising
from petitioner's non-payment of rentals, constitutes the suit's cause of action. In Civil Case
No. 73399 of the RTC, the specific performance case, the subject matter is the compromise
agreement allegedly perfected between the same parties while the cause of action emanates
from the averred refusal of PPA to comply therewith. The ultimate test in ascertaining the
identity of causes of action is said to be to look into whether or not the same evidence fully
supports and establishes both the present cause of action and the former cause of action. In
the affirmative, the former judgment would be a bar; if otherwise, then that prior judgment
would not serve as such a bar to the second. 14 The evidence needed to establish the cause of
action in the unlawful detainer case would be the lease contract and the violation of that lease
by Bachrach. In the specific performance case, what would be consequential is evidence of
the alleged compromise agreement and its breach by PPA.

The next thing to ask, of course, would be the question of whether or not the issuance by the
trial court of the writ of preliminary injunction was an improper interference with the
judgment in the unlawful detainer suit. It could be argued that, instead of filing a separate
action for specific performance. Bachrach should just have presented the alleged compromise
agreement in the unlawful detainer case. Unfortunately, the refusal of PPA to honor the
agreement after its alleged perfection effectively prevented Bachrach from seeking the
coercive power of the court to enforce the compromise in the unlawful detainer case. The
situation virtually left Bachrach with but the remedy of independently initiating the specific
performance case in a court of competent jurisdiction. In its challenged decision, the Court of
Appeals, on its part, has said that respondent PPA's prayer for the issuance of a writ of
execution and garnishment is but the necessary and legal consequence of its affirmance of the
lower court's decision in the unlawful in the unlawful detainer case which has by then
become final and executory. 15 The rule indeed is, and has almost invariably been, that after a
judgment has gained finality, it becomes the ministerial duty of the court to order its
execution. 16 No court, perforce, should interfere by injunction or otherwise to restrain such
execution. The rule, however, concededly admits of exceptions; hence, when facts and
circumstances later transpire that would render execution inequitable or unjust, the interested
party may ask a competent court to stay its execution or prevent its enforcement. 17 So, also,
a change in the situation of the parties can warrant an injunctive relief. 18 Evidently, in
issuing its orders of 13 July 1995 and 29 August 1995 assailed by PPA in the latter's petition
or certiorari and prohibition before the Court of Appeals, the trial court in the case at bar
would want to preserve status quo pending its disposition of the specific performance case
and to prevent the case from being mooted by an early implementation of the ejectment writ.
In holding differently and ascribing to the trial court grave abuse of discretion amounting to
lack or excess of jurisdiction, the appellate court, in our considered view, has committed
reversible error.

Having reached the above conclusions, other incidental issues raised by petitioner no longer
need to be passed upon.

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals is reversed
and set aside; Civil Case No. 73399 along with the assailed orders of the Regional Trial
Court, aforedated, are hereby reinstated. No costs.

SO ORDERED.

Davide, Jr., Bellosillo, Panganiban and Quisumbing, JJ., concur.

Footnotes
1 Rollo, p. 59.

2 Rollo, p. 14.

3 Rollo, p. 47.

4 Court of Appeals Decision, Rollo, pp. 47-48.

5 Ibid.

6 Rollo, p. 145.

7 Per entry of judgment issued by the Court of Appeals, Rollo, pp. 286-287.

8 Rollo, p. 288.

9 Rollo, p. 264.

10 Rollo, pp. 51-52.

11 Mendiola vs. Court of Appeals, 258 SCRA 492; Blue Bar Coconut Phils., Inc. vs.
National Labor Relations Commission, 208 SCRA 371; Development Bank of the
Philippines vs. Pundogar, 218 SCRA 118, Guevara vs. Benito, 247 SCRA 570.

12 Development Bank of the Philippines vs. Pundogar, 218 SCRA 118; Racoma vs.
Fortich, 39 SCRA 520; Santos vs. IAC, 145 SCRA 238; Republic Planters Bank vs.
IAC, 131 SCRA 631.

13 Yusingco vs. Ong Hing Lian, 42 SCRA 590.

14 Mendiola vs. Court of Appeals, 258 SCRA 492; Development Bank of the Phils.
vs. Pundogar, 218 SCRA 118.

15 Rollo, pp. 53-54.

16 Sec. 1, Rule 39, Rules of Court; Nique vs. Zapatos, 219 SCRA 639; Ortegas vs.
Hidalgo, 198 SCRA 635; Esquivel vs. Alegre, 172 SCRA 315; Rodriguez vs. Project 6
Market Service Cooperative, Inc., 247 SCRA 528.

17 Lee vs. De Guzman, Jr., 187 SCRA 276.

18 Luna vs. Court of Appeals, 137 SCRA 7; Heirs of Guminpin vs. Court of Appeals,
120 SCRA 687.
 Republic of the Philippines
SUPREME COURT

SECOND DIVISION

G.R. No. 157605 December 13, 2005

SPS. ENRIQUETA RASDAS, and TOMAS RASDAS, SPS. ESPERANZA A. VILLA,

and ERNESTO VILLA, and LOLITA GALLEN, Petitioners,
vs.
JAIME ESTENOR, Respondent.

DECISION

Tinga, J.:

The main issue in this Petition for Review under Rule 45 is whether the complaint below is
barred by res judicata. We find that res judicata indeed obtains in this case, albeit of a mode
different from that utilized by the trial court and the Court of Appeals in dismissing the
complaint.
The antecedent facts, as culled from the assailed Decision1 of the Court of Appeals Tenth
Division, follow.

The dispute centers on a parcel of land with an area of 703 square meters, situated in Ilagan,
Isabela. On 29 October 1992, respondent as plaintiff filed a Complaint For Recovery Of
Ownership And Possession With Damages against petitioners as defendants. The complaint
was docketed as Civil Case No. 673 and tried by the Regional Trial Court (RTC) of Ilagan,
Isabela, Branch 16. In the same complaint, respondent asserted that he was the owner of the
subject property, which was then in the possession of petitioners.

On 6 November 1995, the RTC decided Civil Case No. 673 in favor of petitioners.
Respondent appealed the RTC decision before the Court of Appeals, and his appeal was
docketed as CA-G.R. No. 52338.

On 25 September 1997, the Court of Appeals reversed the judgment of the RTC, and declared
respondent as the owner of the subject property. As a result, petitioners were ordered to
vacate the land. The dispositive portion of the appellate court’s decision reads:

WHEREFORE, the Decision of the trial court dated November 6, 1995 is REVERSED and
SET ASIDE, and a new one is rendered declaring the plaintiff as the owner of the land in
question; and ordering the defendants-appellees to vacate the same and jointly and severally
to pay the plaintiff reasonable compensation of ₱300.00 a month for the use and enjoyment of
the land from June 1991 up to the time the land is vacated; attorney’s fees of ₱10,000.00 and
litigation expenses of ₱5,000.00.

Costs against the defendants-appellees.

SO ORDERED.2

The decision became final and executory after a petition for certiorari assailing its validity
was dismissed by this Court.3 Thereafter, a Writ of Execution and Writ of Demolition was
issued against petitioners, who were ordered to demolish their houses, structures, and
improvements on the property.

Petitioners as plaintiffs then filed a Complaint dated 6 July 1999 against respondent for just
compensation and preliminary injunction with temporary restraining order. The case was
docketed as Civil Case No. 1090, and heard by the same RTC Branch 16 that ruled on the
first complaint. Notwithstanding the earlier pronouncement of the Court of Appeals,
petitioners asserted therein that they were the lawful owners of the subject property4 ,
although they ultimately conceded the efficacy of the appellate court’s final and executory
decision. Still, they alleged that they were entitled to just compensation relating to the value
of the houses they had built on the property, owing to their purported status as builders in
good faith. They claimed that the Court of Appeals decision did not declare them as builders
in bad faith, and thus, they were entitled to be reimbursed of the value of their houses before
these could be demolished.5 They posited that without such reimbursement, they could not be
ejected from their houses.

Respondent as defendant countered with a Motion to Dismiss, arguing that petitioners’

complaint was barred by res judicata, owing to the final and executory judgment of the Court
of Appeals. The Motion to Dismiss was initially denied by the RTC in an Order dated 4
August 19996 , and pre-trial ensued. However, before trial proper could begin, respondent
filed a motion for preliminary hearing on the affirmative defense of lack of jurisdiction and
res judicata.

This motion was resolved in an Order dated 16 February 2000, wherein the RTC declared
itself "constrained to apply the principle of res judicata," thus reversing its earlier order. In
doing so, the RTC concluded that the earlier decision of the Court of Appeals had already
effectively settled that petitioners were in fact builders in bad faith. Citing Mendiola v. Court
of Appeals,7 the RTC held that the causes of action between the final judgment and the
instant complaint of petitioners were identical, as it would entail the same evidence that
would support and establish the former and present causes of action. Accordingly, the RTC
ordered the dismissal of petitioners’ complaint. The counsel for petitioners was likewise
issued a warning for having violated the prohibition on forum-shopping on account of the
filing of the complaint barred by res judicata.

The finding of res judicata was affirmed by the Court of Appeals in its assailed Decision. It is
this finding that is now subject to review by this Court. Petitioners argue that since
respondents’ Motion to Dismiss on the ground of res judicata had already been denied, the
consequent preliminary hearing on the special defenses which precluded the dismissal of the
complaint was null and void.8 Petitioners also claim that there was no identity of causes of
action in Civil Case No. 673, which concerned the ownership of the land, and in Civil Case
No. 1090, which pertained to just compensation under Article 448 of the Civil Code. Even
assuming that res judicata obtains, petitioners claim that the said rule may be disregarded if
its application would result in grave injustice.

We observe at the onset that it does appear that the RTC’s act of staging preliminary hearing
on the affirmative defense of lack of jurisdiction and res judicata is not in regular order.
Under Section 6, Rule 16 of the 1997 Rules of Civil Procedure, the allowance for a
preliminary hearing, while left in the discretion of the court, is authorized only if no motion
to dismiss has been filed but any of the grounds for a motion to dismiss had been pleaded as
an affirmative defense in the answer. In this case, respondents had filed a motion to dismiss
on the ground of res judicata, but the same was denied. They thus filed an answer alleging
res judicata as a special affirmative defense, but later presented a Motion for Preliminary
Hearing which was granted, leading to the dismissal of the case.

The general rule must be reiterated that the preliminary hearing contemplated under Section
6, Rule 16 applies only if no motion to dismiss has been filed. This is expressly provided
under the rule, which relevantly states "[i]f no motion to dismiss has been filed, any of the
grounds for dismissal provided for in [Rule 16] may be pleaded as an affirmative defense in
the answer and, in the discretion of the court, a preliminary hearing may be had thereon as if
a motion to dismiss had been filed." An exception was carved out in California and
Hawaiian Sugar Company v. Pioneer Insurance,9 wherein the Court noted that while Section
6 disallowed a preliminary hearing of affirmative defenses once a motion to dismiss has been
filed, such hearing could nonetheless be had if the trial court had not categorically resolved
the motion to dismiss.10 Such circumstance does

not obtain in this case, since the trial court had already categorically denied the motion to
dismiss prior to the filing of the answer and the motion for preliminary hearing.
We observe in this case that the judge who had earlier denied the motion to dismiss, Hon.
Teodulo E. Mirasol, was different from the judge who later authorized the preliminary
hearing,11 Hon. Isaac R. de Alban, a circumstance that bears some light on why the RTC
eventually changed its mind on the motion to dismiss. Still, this fact does not sanction the
staging of a preliminary hearing on affirmative defenses after the denial of the motion to
dismiss. If a judge disagrees with his/her predecessor’s previous ruling denying a motion to
dismiss, the proper recourse is not to conduct a preliminary hearing on affirmative defenses,
but to utilize the contested ground as part of the basis of the decision on the merits

On the part of the movant whose motion to dismiss had already been filed and denied, the
proper remedy is to file a motion for reconsideration of the denial of the motion. If such
motion for reconsideration is denied, the ground for the dismissal of the complaint may still
be litigated at the trial on the merits.

Clearly, the denial of a motion to dismiss does not preclude any future reliance on the
grounds relied thereupon. However, nothing in the rules expressly authorizes a preliminary
hearing of affirmative defenses once a motion to dismiss has been filed and denied. Thus, the
strict application of Section 6, Rule 16 in this case should cause us to rule that the RTC erred
in conducting the preliminary hearing.

However, there is an exceptional justification for us to overlook this procedural error and
nonetheless affirm the dismissal of the complaint. The complaint in question is so evidently
barred by res judicata, it would violate the primordial objective of procedural law to secure a
just, speedy and inexpensive disposition of every action and proceeding12 should the Court
allow this prohibited complaint from festering in our judicial system. Indeed, the rule
sanctioning the liberal construction of procedural rules is tailor-made for a situation such as
this, when a by-the-numbers application of the rule would lead to absurdity, such as the
continued litigation of an obviously barred complaint.

Why is the subject complaint barred by res judicata? It is uncontroverted that in the decision
by the Court of Appeals in Civil Case No. 673, it was observed:

When the occupancy of the lot by Luis Aggabao which was transmitted to his son Vivencio
Aggabao, and later transmitted to the latter’s children . . . expired in April 1965, the late
Vivencio Aggabao verbally begged and pleaded to plaintiff-appellant that he be allowed to
stay on the premises of the land in question as his children, herein appellees, were still
studying and it would be very hard fro them to transfer residence at that time. The plaintiff,
out of Christian fellowship and compassion, allowed the appellees to stay temporarily on the
land in question.

....

In this case, the possession of the land by the appellees derived from their father Luis
Aggabao from March 31, 1955 to March 31, 1965 was by virtue of a stipulation in the deed
of sale (exh. G), while their possession derived from their father, Vivencio Aggabao, from
March 31, 1965 to 1982 (the latter died in 1982) was only by tolerance because of the
pleading of Vivencio Aggabao to the plaintiff-appellant that he be allowed to stay because of
the children going to school. . . . 13
Evidently, the Court of Appeals had previously ruled in the first case that as early as 1965, the
father of the petitioners (and their predecessor-in-interest) had already known that he did not
own the property, and that his stay therein was merely out of tolerance. Such conclusion in
fact bolstered the eventual conclusion that respondents were the owners of the land and that
petitioners should vacate the same.

This fact should be seen in conjunction with the findings of the RTC and the Court of
Appeals in this case that the structures for which petitioners sought to be compensated were
constructed in 1989 and 1990, or long after they had known they were not the owners of the
subject property.

These premises remaining as they are, it is clear that petitioners are not entitled to the just
compensation they seek through the present complaint. Under Article 448 of the Civil Code,
the builder in bad faith on the land of another loses what is built without right to indemnity.14
Petitioners were in bad faith when they built the structures as they had known that the subject
property did not belong to them. Are these conclusions though sufficient to justify dismissal
on the ground of res judicata?

The doctrine of res judicata has two aspects.15 The first, known as "bar by prior judgment,"
or "estoppel by verdict," is the effect of a judgment as a bar to the prosecution of a second
action upon the same claim, demand or cause of action. The second, known as
"conclusiveness of judgment" or otherwise known as the rule of auter action pendant, ordains
that issues actually and directly resolved in a former suit cannot again be raised in any future
case between the same parties involving a different cause of action.16 It has the effect of
preclusion of issues only.17

It appears that both the RTC and the Court of Appeals deemed that the first aspect of res
judicata, "bar by prior judgment," applied in this case.18 We hold that it is the second kind of
res judicata, "conclusiveness of judgment," that barred the instant complaint. As previously
explained by this Court:

[C]onclusiveness of judgment — states that a fact or question which was in issue in a former
suit and there was judicially passed upon and determined by a court of competent
jurisdiction, is conclusively settled by the judgment therein as far as the parties to that action
and persons in privity with them are concerned and cannot be again litigated in any future
action between such parties or their privies, in the same court or any other court of concurrent
jurisdiction on either the same or different cause of action, while the judgment remains
unreversed by proper authority. It has been held that in order that a judgment in one action
can be conclusive as to a particular matter in another action between the same parties or their
privies, it is essential that the issue be identical. If a particular point or question is in issue in
the second action, and the judgment will depend on the determination of that particular point
or question, a former judgment between the same parties or

their privies will be final and conclusive in the second if that same point or question was in
issue and adjudicated in the first suit. Identity of cause of action is not required but merely
identity of issues.19

Stated differently, any right, fact, or matter in issue directly adjudicated or necessarily
involved in the determination of an action before a competent court in which judgment is
rendered on the merits is conclusively settled by the judgment therein and cannot again be
litigated between the parties and their privies whether or not the claim, demand, purpose, or
subject matter of the two actions is the same.20

Indeed, in cases wherein the doctrine of "conclusiveness of judgment" is applicable, there is,
as in the two cases subject of this petition, identity of parties but not of causes of action. The
judgment is conclusive in the second case, only as to those matters actually and directly
controverted and determined, and not as to matters merely involved therein.21 Herein, the
fact that petitioners were in possession in bad faith as early as 1965 was already determined
in the first case. In order that they could successfully litigate their second cause of action,
petitioners will have to convince that they were in possession in good faith at the time they
built their structures, an argument that deviates the previous determination made in the final
judgment that resolved the first case.

The reasons for establishing the principle of "conclusiveness of judgment" are founded on
sound public policy, and to grant this petition would have the effect of unsettling this well-
settled doctrine. It is allowable to reason back from a judgment to the basis on which it
stands, upon the obvious principle that where a conclusion is indisputable, and could have
been drawn only from certain premises, the premises are equally indisputable with the
conclusion.22 When a fact has been once determined in the course of a judicial proceeding,
and a final judgment has been rendered in accordance therewith, it cannot be again litigated
between the same parties without virtually impeaching the correctness of the former decision,
which, from motives of public policy, the law does not permit to be done.23

Contrary to the holdings of both courts below, in the case of Mendiola v. Court of Appeals24
which they relied upon, this Court observed that the causes of action in the two cases
involved were so glaringly similar that it had to affirm the dismissal of the second case by
virtue of the "bar of former judgment rule."

One final note. Petitioners, in their Reply before this Court, raise the argument that assuming
that they were builders in bad faith, respondents should likewise be considered as being in
bad faith, as the structures were built with their knowledge and without their opposition. That
being the case, Article 453 of the Civil Code would apply to the effect both parties could thus
be deemed as being in good faith. Accordingly, petitioners would still be entitled to
compensation on the structures they built.

We are disinclined to accord merit to this argument. For one, it was raised for the first time in
the Reply before this Court. It was not even raised in the Complaint filed with the RTC, hence
it could not be said that petitioners’ cause of action is grounded on Article 453. Issues not
previously ventilated cannot be raised for the first time on appeal25 , much less when first
proposed in the reply to the comment on the petition for review. Even assuming the issue is
properly litigable, the Court can find no basis to declare that respondents were in bad faith as
a matter of fact. Certainly, nothing in the first decision of the Court of Appeals conclusively
establishes that claim, its factual determination being limited to the finding that petitioners
alonewere had been in possession of the property in bad faith. We are not wont to ascribe
points of fact in the said decision which were not expressly established or affirmed.

WHEREFORE, the petition is DENIED. Costs against petitioners.

SO ORDERED.
DANTE O. TINGA
Associate Justice

WE CONCUR:

REYNATO S. PUNO

Associate Justice

Chairman

MA. ALICIA AUSTRIA-MARTINEZ, ROMEO J. CALLEJO, SR.

Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO

Associate Justice
Chairman, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairman’s
Attestation, it is hereby certified that the conclusions in the above Decision had been reached
in consultation before the case was assigned to the writer of the opinion of the Court’s
Division.

HILARIO G. DAVIDE, JR.

Chief Justice

Footnotes

1 Dated 28 February 2002. Decision penned by Justice A.G. Tolentino, concurred in

by Justices C.M. Reyes and A.B. Reyes.

2 Rollo, p. 19.

3 Id. at 41.
4 Id. at 39.

5 Id. at 41.

6 Id. at 58-59. Order penned by Judge Teodulo E. Mirasol.

7 Cited as 258 SCRA 492.

8 Rollo, p. 15.

9 399 Phil. 795 (2000)

10 Id. at 803-804.

11 The judge who rendered the 4 August 1999 Order was Hon. Teodulo E. Mirasol,
while the judge who penned the orders dated 23 October 1999 and 16 February 2000
was Isaac R. de Alban.

12 See Section 6, Rule 1, 1997 Rules of Civil Procedure.

13 Supra note 2 at 114-115.

14 See Article 448, Civil Code. "The owner of the land on which anything has been
built, sown or planted in good faith, shall have the right to appropriate as his own the
works, sowing or planting, after payment of the indemnity provided for in articles 546
and 548, or to oblige the one who built or planted to pay the price of the land, and the
one who sowed, the proper rent. However, the builder or planter cannot be obliged to
buy the land if its value is considerably more than that of the building or trees. In such
case, he shall pay reasonable rent, if the owner of the land does not choose to
appropriate the building or trees after proper indemnity. The parties shall agree upon
the terms of the lease and in case of disagreement, the court shall fix the terms
thereof."

15 See NHA v. Baello, G.R. No. 143230, 30 August 2004, 437 SCRA 86.

16 Chua v. Victorio, G.R. No. 157568, 18 May 2004, 428 SCRA 447. See also Section
47(c), Rule 39, 1997 Rules of Civil Procedure.

17 F. Regalado, Vol. 1, p. 472.

18 Both the RTC and the Court of Appeals cited the four requisites that characterize
"bar by prior judgment", namely: (a) the finality of the former judgment; (b) such
former judgment being rendered by a court that had jurisdiction over the subject
matter and the parties; (c) the former judgment must be a judgment on the merits; and
(d) there must be as between the first and second causes of actions identity of parties,
subject matter and cause of action.

19 Calalang v. Register of Deeds of Quezon City, G.R. No. 76265, 11 March 1994,
231 SCRA 88, 100. See also Intestate Estate of the Late Don Mariano San Pedro y
Esteban v. Court of Appeals, 265 SCRA 733 (1996).
20 Dapar v. Biascan, G.R. No. 141880, 27 September 2004, 439 SCRA 179.

21 See Heirs of Pael v. Court of Appeals, G.R. Nos. 133547 & 133843, 11 November
2003, 415 SCRA 451.

22 Kidpalos vs. Baguio Gold Mining Co., 122 Phil. 249 (1965).

23 NHA v. Baello, supra note 15; citing Kidpalos v. Baguio Gold Mining Co, 122
Phil. 249 (1965), and Burlen v. Shannon, 99 Mass. 200, 96 (1868).

24 Supra note 7.

25 See e.g., R. P. Dinglasan Construction v. Atienza, G.R. No. 156104, 29 June 2004,
433 sCRA 263 citing Tinio v. Manzano, 307 SCRA 460 (1999); Manalili v. Court of
Appeals, 280 SCRA 372 (1989); Ruby International Corporation v. Court of Appeals,
284 SCRA 445 (1998).