TEOFILA MARCELO AND LOPE DEL CARMEN, PLAINTIFFS-APPELLANTS, VS. MERCHANTS BANKING CORPORATION OF THE PHILIPPINES, EMILIA K. GUARIN FERRERAS, EUFEMIO FERRERAS AND THE PROVINCIAL …

Marcelo versus Merchants Banking Corporation of the Philippines

The Case

This is the case of Teofila Marcelo and Lope del Carmen against Merchants Banking Corporation of the Philippines, Emilia K. Guarin Ferreras, Eufemio Ferreras, and the Provincial Sheriff. The spouses Marcelo and del Carmen, as registered owners of a parcel of land in Valenzuela, Bulacan, sued to annul a mortgage over their property and to stop its foreclosure. The case matters because it is the Supreme Court's clean statement of the rule on litis pendentia — the pendency of another action — and of how that rule ripens into res judicata once judgment in the first action is on appeal, and of when a claim against a bank becomes moot because the mortgagor has already paid.

Procedural History

The plaintiffs filed their complaint for annulment of contract with damages and for a writ of preliminary injunction in the Court of First Instance of Bulacan. The parties submitted the case on stipulations of fact. The trial court dismissed the action on the ground of the pendency of another action between the same parties for the same cause. The plaintiffs appealed to the Court of Appeals. The Court of Appeals, in its decision of March 17, 1976, certified the appeal to the Supreme Court as involving essentially a question of law. The Supreme Court took the case and affirmed.

Facts

The spouses Marcelo and del Carmen owned a parcel of land in Valenzuela, Bulacan. Emilia K. Guarin Ferreras, wife of Eufemio Ferreras, mortgaged that property for 40,000 pesos in favor of Merchants Banking Corporation, acting under a special power of attorney given her by the plaintiffs.

Earlier, on January 17, 1968, the plaintiffs had already sued the Ferreras spouses in the Court of First Instance of Bulacan, Branch III. On January 21, 1970, judgment was rendered in that first case in favor of the plaintiffs, sentencing the Ferreras spouses to pay them the amount of the indebtedness to the bank as of June 25, 1968, plus liquidated damages, attorney's fees, and costs. That judgment was on appeal before the Court of Appeals.

On July 15, 1969, while the first case was pending, the plaintiffs filed the present action to annul the mortgage and to enjoin foreclosure. But on September 8, 1970, the plaintiffs paid the entire obligation to the bank — principal, interests, accounts receivable, and attorney's fees — and the bank executed the corresponding cancellation of the real estate mortgage.

Issues

• Whether or not the trial court correctly dismissed the action on the ground of the pendency of another action between the same parties for the same cause.
• Whether or not the action against the bank, which was not a party to the first case, could proceed independently despite that pendency.

Applicable Provisions

Section 1, Rule 16 of the Rules of Court, on the grounds for a motion to dismiss, provides:

Within the time fixed by these Rules, the defending party may file a motion to dismiss the action on any of the following grounds: (e) That there is another action pending between the same parties for the same cause.

This is the ground on which the trial court dismissed the case, and which the Supreme Court affirms.

Ruling

On the first issue, the Court held that there is no merit in the appeal. The lower court correctly dismissed the action by virtue of the pendency of another action between the same parties for the same cause and relief. There was a substantial identity of parties, cause of action, and relief sought. The judgment in the first action, though still on appeal, would amount to res judicata in the case at hand regardless of which party prevailed, rendering the second action unnecessary and merely vexatious. The Court explained that the first judgment, whether it upheld the mortgage or held the Ferreras spouses liable to pay the full amount so as to clear the property, would settle the matter between the same parties.

On the second issue, the Court acknowledged that the action against the bank might initially have proceeded independently, since the bank was not impleaded in the first case and was an indispensable party as to the validity of its mortgage. Still, the Court held that the action against the bank was rendered moot and academic when the plaintiffs ultimately recognized the validity of the mortgage and paid off the entire indebtedness, and the bank in turn cancelled the mortgage.

Doctrine

A bar candidate should retain these rules. First, litis pendentia requires identity of parties, of subject matter, and of cause of action, such that the judgment in one would be res judicata in the other. Second, once judgment has been rendered in the first action and is pending appeal, the pendency of that appeal does not defeat the defense; the judgment, whichever way it is ultimately decided, will bar the second action as res judicata. Third, a second action that duplicates the first is unnecessary and merely vexatious. Fourth, an action against a party not impleaded in the first case may proceed independently, but it becomes moot and academic when the plaintiff has already paid the obligation and the mortgage has been cancelled.

Disposition

The Supreme Court affirmed the decision of the lower court dismissing the action, with costs in all instances against the plaintiffs-appellants.

Remember This

The single line worth memorizing: a judgment pending appeal in a first action is res judicata in a second action between the same parties for the same cause, making the second action vexatious. Examiners use this case to test litis pendentia and res judicata, and the rule that a claim rendered moot by payment cannot be revived.