ALFREDO MONTELIBANO AND ALEJANDRO MONTELIBANO, PETITIONERS, VS. THE HON. COURT OF APPEALS AND BACOLOD-MURCIA MILLING COMPANY, INC., RESPONDENTS.

Montelibano versus Bacolod-Murcia Milling

The Case

This is a petition for review filed by Alfredo Montelibano and Alejandro Montelibano against the Court of Appeals and Bacolod-Murcia Milling Company, Incorporated. The Montelibanos are sugar planters who sued the milling company to recover the differentials or increases in their share of milled sugar and molasses for nine crop years, from 1956 to 1965, based on a resolution of the company's board of directors dated August 20, 1936. The case matters because it is the Supreme Court's clearest teaching on res judicata — the rule that a matter once decided is conclusive — and on the related rule against splitting defenses and presenting them piecemeal in successive actions.

Procedural History

The Montelibanos first sued the milling company in 1953 in the Court of First Instance of Occidental Negros. The trial court dismissed the action, but on appeal the Supreme Court, in a decision dated May 18, 1962, reversed the dismissal and ordered the milling company to pay the differentials for the crop years 1951 to 1956. The milling company filed two motions for reconsideration, which the Supreme Court denied in a resolution dated September 29, 1962, holding that the company had waived its factual defenses by submitting the case on the legal issue alone.

As a sequel, the Montelibanos filed a new action on June 27, 1972 in the Regional Trial Court of Bacolod to recover differentials for the crop years 1956 to 1965. On December 16, 1983, the trial court rendered judgment for the planters, holding itself bound by the earlier Supreme Court decision. The milling company appealed to the Court of Appeals, which, in a decision dated October 19, 1988, reversed the trial court and dismissed the complaint. The Montelibanos moved for reconsideration, but the appellate court denied it. The planters then came to the Supreme Court by petition for review.

Facts

In 1919, Alfredo and Alejandro Montelibano, together with other planters, entered into milling contracts with Bacolod-Murcia Milling Company for a sharing ratio of 55 percent for the planters and 45 percent for the miller, to run for thirty years starting with the 1920 to 1921 crop. In 1936, a proposal was made to amend the contracts by increasing the planters' share to 60 percent and giving other concessions, but extending the term to 45 years. On August 20, 1936, the company's board of directors adopted a resolution granting further concessions, including paragraph 9, which provided that if the other sugar centrals in Negros Occidental, whose annual production exceeded one third of the total production of all centrals in the province, granted their planters better conditions than those stipulated, then those better conditions would be granted to the planters who signed the amended contract. The Montelibanos signed the printed Amended Milling Contract on September 10, 1936, and a copy of the resolution was attached to it on April 27, 1937.

In 1953, the Montelibanos sued, claiming that the three other centrals were granting increased participation to their planters, so that under paragraph 9 the milling company was obligated to grant similar concessions. The milling company opposed the claim, arguing that the resolution was null and void for lack of consideration and was in effect a donation beyond the power of the board to grant. The trial court dismissed, but the Supreme Court reversed, holding the resolution valid and binding and ordering payment of the differentials for the crop years 1951 to 1956.

When the milling company sought reconsideration, the Supreme Court denied it, ruling that because the company had submitted the case on the legal issue without adverting to its factual defenses until the case was decided against it, it had waived all such factual defenses. In the present action for the later crop years, the milling company raised for the first time the defense that the planters had not complied with the mandatory conditions of paragraph 11 of the same resolution, namely the registration of the contracts with the Register of Deeds and compliance with a secret agreement between the parties' representatives.

Issues

• Whether or not the Court of Appeals erred in holding that the milling company was not barred by res judicata from proving the defenses raised in its answer to the original complaint.
• Whether or not the Montelibanos' entitlement to the differentials for the later crop years was already conclusively settled by the earlier Supreme Court decision.

Applicable Provisions

Section 49, paragraph (b) of Rule 39 of the Rules of Court provides:

... the judgment is, with respect to all matters directly adjudged or which could have been raised in relation thereto, conclusive between the parties and their successors-in-interest by title subsequent to the commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity.

This is the codified rule of res judicata that the Court applies to bar the milling company from relitigating matters that were or could have been raised in the earlier case.

Ruling

On the first issue, the Court ruled in favor of the Montelibanos. It held that the Court of Appeals erred in ruling that the milling company was not barred from proving its defenses. The Court laid down the essential requisites for the application of the bar by judgment: first, the former judgment must be final; second, it must have been rendered by a court having jurisdiction of the subject matter and the parties; third, it must be a judgment on the merits; and fourth, there must be between the first and second actions identity of parties, identity of subject matter, and identity of cause of action. All these elements being present, the Court held that the earlier judgment was conclusive not only as to matters actually litigated and determined, but also as to matters necessarily involved or coming within the legitimate purview of the original action, both in respect to matters of claim and of defense.

On the second issue, the Court held that the milling company's new defense under paragraph 11 came too late. A defendant should not be permitted to split his defenses and present them piecemeal in successive actions growing out of the same transaction, for there must be an end to litigation. Where a party has an opportunity to present his defense and neglects to do so, the law requires that he take the consequences. Having submitted the earlier case on the legal issue without adverting to its factual defenses despite ample opportunity, the milling company must be regarded as having waived them, and its inaction is evidence of its intention to waive.

Doctrine

A Bar candidate should retain these rules. First, res judicata bars not only matters actually litigated and determined in the former case, but also all matters that could have been raised in relation thereto. Second, the four requisites of the bar by judgment are a final former judgment, rendered by a court with jurisdiction over the subject matter and the parties, on the merits, and with identity of parties, subject matter, and cause of action between the two actions. Third, a defendant may not split his defenses and present them piecemeal in successive actions arising from the same transaction; having had the opportunity to present a defense and having neglected it, he is deemed to have waived it. These rules rest on the policy of putting an end to litigation and discouraging piecemeal appeals.

Disposition

The Supreme Court granted the petition, reversed and set aside the decision of the Court of Appeals, and affirmed the decision of the trial court in its entirety, with costs against the private respondent.

Remember This

Memorize this line: a judgment is conclusive not only as to matters actually adjudged but also as to matters that could have been raised in relation thereto, and a defendant who neglects to present a defense when he had the chance is deemed to have waived it. Examiners use this case to test res judicata and the rule against splitting defenses or causes of action.