ROLANDO T. DIWA, BLESIDA G. DIWA, PETITIONERS, VS. ARNOLD L. DONATO, NAPOLEON L. DONATO, RESPONDENTS.

This is a petition for certiorari under Rule 45 of the
Revised Rules of Court from two Orders of the RTC of Tuguegarao, Cagayan, Br.
1.^[1]
The first, dated January 8, 1990, dismissed Civil Case No. 4117-(Tug ’90) on
the ground of res judicata; and the second, dated January 31, 1991,
denied petitioners’ motion for reconsideration of the earlier Order.

Petitioners first filed a Complaint for Interpleader And
Execution Of Registerable Deed Of Sale With Damages against respondents
docketed as Civil Case No. 3892, and raffled to Branch 4 of the RTC of
Tuguegarao, Cagayan.^[2] The
Complaint alleged:

“1. Plaintiffs (petitioners herein) are
spouses, of legal age, Filipinos and residents of Tuguegarao, Cagayan;

“2. Defendants (respondents herein) who are
brothers are of legal age; Arnold L. Donato is however a Filipino and a resident
of and with postal address at 10 Masbate Street, Quezon City while Napoleon L.
Donato is an American citizen and resident of Tuguegarao, Cagayan;

“3. DONATO ENTERPRISES COMPANY, LIMITED was a
duly constituted and registered partnership composed of only three (3)
partners, the brothers and sister, Arnold L. Donato, Napoleon L. Donato and
Adoracion Donato, who had equal contributions and shares or interests therein.

“4. DONATO ENTERPRISES COMPANY, LIMITED was the
registered owner per Transfer Certificate of Title No. T-16000 of a
residential-commercial lot situated in Centro, Tuguegarao, Cagayan more
particularly bounded and described as follows:

“xxx    xxx            xxx

“5. Partner Adoracion L. Donato who died single
on October 20, 1985 with neither ascendant nor descendant was survived by the
(respondents) who were her brothers;

“6. The death of partner Adoracion L. Donato ipso
jure dissolved the DONATO ENTERPRISES COMPANY, LIMITED so that her
one-third (1/3) share and interest in the above-described lot devolved upon her
heir or heirs;

“7. Sometime in November 1986 (respondents)
jointly sold the above-described lot to the (petitioners) for P504,000.00
Philippine currency and accordingly delivered to the latter the said lot;

“8. (Petitioners) forthwith took exclusive
possession of said lot and have been possessing it since then continuously up
to the present;

“9. Of the total consideration of P504,000.00
(respondent) Arnold L. Donato already received from (petitioners) P168,000.00
on November 19, 1986 as per xerox copy of a Receipt which he signed and
(respondent) Napoleon L. Donato also already received from (petitioners) on
June 10, 1988 the same amount of P168,000.00 per xerox copy of a Receipt which
he likewise signed, both of which are hereto attached xxx;

“10. Since November 1986 when the sale of said
lot was made by (respondents) to the (petitioners) the latter had been
tendering the payment of the balance of P168,000.00 to (respondents); the
(respondent) Arnold L. Donato wanted to get and receive the whole balance
asserting that his late sister Adoracion L. Donato inter alia conveyed
her share and interest in said lot to him which was however denied by
(respondent) Napoleon L. Donato who claimed that being one of the two intestate
heirs of deceased Adoracion L. Donato, he is entitled to one-half of said
balance which is P84,000.00;

“11. In the light of the conflicting claims of
the (respondents) over the balance of P168,000.00 and in order to finally
relieve (petitioners) of further obligation vis a vis said lot, the
latter hereby deliver and deposit said amount of money with this Honorable
Court which will determine who is/are entitled to receive it and to dispose of
it accordingly;

“12. Despite the consummation of the sale of the
said lot to the (petitioners) the (respondents) have not yet executed a
registerable deed of sale to evidence the same, hence (petitioners) have a
legal right to demand the execution of the said documents;

“13. In fact since
June 1988, (petitioners) had been demanding of (respondents) to execute the
said registerable deed of sale with a proposal to deposit the balance of
P168,000.00 in escrow in a commercial bank in favor of whoever would
finally be judicially declared entitled to it but although (respondent) Napoleon
L. Donato is willing,
(respondent) Arnold L. Donato without just cause refused;

“14. Since the sale
of the lot to the (petitioners) in November 1986, they intended to build a
commercial building thereon with the proceeds of a loan which they planned to
secure from a banking institution with the lot as their collateral;

“15. The delay in
the execution of the registerable deed of sale necessarily delayed the issuance
of a title over said lot in the names of the (petitioners) which resulted in
the delay in securing the loan and ultimately in the construction of the said
building;

“16. The delay
mentioned in the preceding paragraph is directly attributable to the
intransigence of (respondent) Arnold L. Donato which caused (petitioners) to
suffer damages consisting of the big increase in the prices of construction
materials and cost of labor from their index in November 1986 and the present
index which is reasonably estimated to be P200,000.00;

“17. (Petitioners) were constrained to engage the
services of the undersigned counsel for an agreed fee of P20,000.00;”^[3]

Petitioners prayed for judgment: (1) declaring them the owners of the lot in
question; (2) ordering respondents to execute in their favor a registerable
deed of sale over the lot; (3) declaring who is/are entitled to the P168,000.00
balance; and (4) condemning respondent Arnold L. Donato to pay damages,
attorney’s fees and costs.

The Complaint was dismissed on December 29, 1988 on the ground that
interpleader is not the proper remedy for breach of contract. This court^[4]
affirmed the dismissal in a Resolution, dated September 20, 1989.

Accordingly, on February 13, 1990, petitioners filed Civil Case
No. 4117-(Tug ’90) for Specific Performance (Execution of Registerable Deed of
Sale and Delivery of Certificate of
Title) With Damages. The Complaint
contains basically the same allegations and prayers as the Complaint in the interpleader case,
except for the following added allegation, viz:

“That even if the transaction between (petitioners) and
(respondents) constitutes only a contract
to sell the said land, still
(petitioners) who have partially complied with their obligation and are willing
to fully comply with it have the right to compel (respondents) to perform their
obligation to sell the land to them;”^[5]

and the prayer, which reads as follows:

“WHEREFORE, (petitioners) pray this Honorable Court to render
judgment:

1. Declaring (petitioners) to be the owners of
the lot described above or compelling the (respondents) to sell the lot to the
former and ordering (respondent) Arnold L.
Donato to execute with his co-(respondent) Napoleon L. Donato the registerable deed of
sale over said lot in favor of (petitioners) and to deliver to the latter the
owner’s duplicate copy of Transfer Certificate of Title No. T-16000;

2. Applying the deposited amount of P168,000.00
in payment of the balance upon the price of said land;

3. Condemning (respondent) Arnold L. Donato to
pay the (petitioners) a damage of
P100,000.00 and attorney’s fees of P20,000.00 and cost of this suit;

4. Granting other proper reliefs.”^[6]

Private respondents filed separate Answers to the second
Complaint. Their Affirmative Defenses
constituting grounds for dismissal were heard by the trial court.

On January 8, 1990, the trial court issued the first impugned
Order. It dismissed with prejudice the
Complaint for specific performance. It
held, inter alia:

“There is no dispute that the first case entitled Interpleader
and Execution of Registerable Deed of Sale with Damages, Civil Case No. 3892
was upon review by the Supreme Court denied for lack of merit.

“It was held in the case of Leonor Magdangal, et al. vs.
City of Olongapo, et al., x x x ‘that a party cannot by varying the form of
action or adopting a different method of presenting the case, escape the
application of the rule of res judicata.’ This was reiterated in the
case of Filipinas Investment, et al. vs. Intermediate Appellate Court, et
al., x x x” (Citations omitted.)^[7]

In its Order of January 31, 1991 denying
petitioners’ motion for reconsideration, the same court held:

“This Court made a comparison between the first civil case No.
3892 between the same parties is entitled Interpleader and Execution of
Registerable Deed of Sale with Damages while the instant case is for specific
performance (execution of registerable deed of sale and delivery of certificate
of title with damages). Basically, the
two complaints are the same as they involve the same parties, the same cause of
action and the subject matter. The only
difference is in the caption.”

“Granting for the sake of argument that there is no res
judicata and that the present case is for specific performance, will the
latter remedy lie?

‘Specific performance is not an absolute right, but one which rests
entirely in judicial discretion; exercised according to the settled principles
of equity and with reference to the facts of the particular case, and not
arbitrarily or capriciously xxx.’

“One of the requisites for the specific performance of the
agreement is that there must be contract and the contract must be in writing
(Statute of Frauds).

‘The contract must be clearly and unequivocally proved and its
subject matter, consideration and all other essentials must be specific and
unambiguous xxx.’

“Definitely the receipts by Arnold Donato and Napoleon Donato
are not contracts for the following reasons:

(1) They are not in the
prescribed form as provided by law;

(2) They are not specific
as indicated by the wording of last paragraph of Annex “A”,

‘However, should the circumstances occur whereby the transaction
will not push through, then this amount will be refundable to Mr. Rolando T.
Diwa.’

(3) It is
doubted whether the Supreme Court made a pronouncement that there was a
contract to sell considering that the petition for review was denied for lack
of merit for failure of counsel to comply with certain requirements with
regards to his petition.”^[8]
(Citations omitted.)

In this petition, petitioners contend:

“The errors of the lower court are the following:

1. It erroneously applied res
judicata to dismiss with prejudice Civil Case No. 4117 (90-Tug).

2. It mistakenly ruled that
there was no contract between the petitioners and respondents.

3. It incorrectly held that
specific performance was not the proper remedy.

4. It blundered when it
impliedly applied the Statute of Frauds to the agreement between the parties.

5. It goofed when it
dismissed Civil Case No. 4117 (90-Tug) with prejudice.”^[9]

The petition is meritorious.

The elements of res
judicata are: (1) the previous judgment has become final;
(2) the prior judgment was rendered by
a court having jurisdiction over the subject matter and the parties; (3) the first
judgment was made on the merits; and (4) there was substantial identity of
parties, subject matter and causes of action, as between the prior and
subsequent actions.

We hold that the trial court erred in considering our September
20, 1989 Resolution in the interpleader case as an adjudication on the
merits. Said Resolution held:

“xxx                             xxx                                     xxx

“After a careful review of the Petition, its Annexes and the
Comment thereto, the Court finds that no reversible error was committed by the
RTC in dismissing petitioners’ complaint. The RTC correctly applied the doctrine laid down by this Court in the
case of Beltran vs. PHHC,
G.R. No. L-25138, August 28, 1969, 29 SCRA 145, that if the conflicting claims
of the two defendants are only between themselves and are not against the
plaintiff-in-interpleader nor do they involve or affect him, the special civil
action of interpleader will not lie.

“xxx                             xxx                              xxx

“While it is true that petitioners have a cause of action to
compel private respondents to execute a registrable deed of sale pursuant to
their contract, the proper remedy should be an ordinary civil action for breach of contract or an action for specific
performance and not an action for interpleader.”^[10]

A judgment on the merits is one rendered after argument and
investigation, and when there is determination which party is right, as distinguished from a
judgment rendered upon some preliminary or formal or merely technical point, or
by default and without trial.^[11] By
no stretch of the imagination can our Resolution of September 20, 1989 be
considered a judgment on the merits. All it resolved is the issue of the proper action that petitioners
should file in light of the allegations of their Complaint. We ruled that they should file an action for
specific performance and not an action for interpleader. Only after the filing of the proper action
can the substantive rights of the parties be adjudicated. Needless to state, we did not adjudicate the
substantive rights of the parties in our Resolution of September 20, 1989.

The trial court also erred when it further held that specific
performance does not lie against respondent, by applying the Statute of
Frauds. Under said Statute, agreements
for the sale of real property “shall be unenforceable by action, unless
the same, or some note or memorandum thereof, be in writing, and subscribed by
the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the
writing, or a secondary evidence
of its contents.”^[12] Non-compliance with this provision, while not invalidating the contract
which is not in writing, makes
ineffective the action for specific performance.^[13]

It is settled, however, that the Statute of Frauds applies only
to executory and not to completed, executed, or partially executed contracts.^[14]
Thus, as early as 1925, we held
that where the land has been delivered under the oral contract of sale, and the
vendees have already paid part of the purchase price, the heirs of the vendor
cannot invoke the statute of frauds in a
proceeding where the vendees seek to have the land registered in their names.^[15]

In the case at bench, the agreement to sell the lot in question was already partially executed when
the present action was commenced. No
specific denial was made by either respondent that petitioners have paid a part
of the contract price, and that possession of the land has been delivered to
them. Respondent Arnold L. Donato’s
argument in his Memorandum filed on July 2, 1991 that petitioners’ act of
refunding the amount of P168,000.00 covered by a receipt dated November 19,
1986, and consigning it with the trial
court effectively revoked the contract to sell over the property does not
persuade us. In the first place, the
alleged refunding is not supported by evidence; and in the second place, even
assuming it did occur, there is still
the P168,000.00 partial payment made by petitioners to respondent Napoleon L.
Donato that makes for the partial execution of the contract to sell.

Finally, we do not see how the trial court could have doubted our
finding as to the existence of a contract to sell. We clearly stated in our Resolution in the interpleader case
that:

“In the present case, the two private respondents do not
dispute the existence of
the contract to sell the commercial land in question to petitioners nor do they demand adverse
claims against petitioners. In fact,
private respondents did not object when the petitioners deposited in court the
balance of the purchase price. The
conflicting claims of the two private respondents over the sharing of the
balance of the purchase price cannot be the subject of an interpleader case
since they are exclusively between the private respondents and are not against
the petitioners. Neither do they
involve or affect the petitioners’ interest in the commercial land.”

“xxx                             xxx                            xxx

“While it is true that petitioners have a cause of action to
compel private respondents to execute a
registrable deed of sale pursuant to their contract,
the proper remedy should be an ordinary civil action for breach of
contract or an action for specific performance and not an action for
interpleader.”^[16]
(Underscoring supplied.)

IN VIEW WHEREOF, the instant Petition is GRANTED. The Orders, dated January 8, 1990 and
January 31, 1991 in Civil Case No. 4117
(90-Tug) are REVERSED AND SET ASIDE. The RTC of Tuguegarao, Cagayan, Branch 1, is hereby ordered to hear the
reinstated case on its merits. No
costs.

SO ORDERED.

Narvasa, C.J., (Chairman), Padilla, Regalado, and Mendoza, JJ.,
concur.

^[1]
Presided by Judge Roger A. Domagas.

^[2]
Presided by Judge Plaridel L. Villacete.

^[3]
Rollo, pp. 20-24.

^[4]
Through a Resolution of the Third Division, dated September 20, 1989.

^[5]
Complaint in Civil Case No. 4117 (90-Tug), p. 4; Rollo, p. 38.

^[6]
Ibid., at pp. 5-6; Rollo, pp. 39-40.

^[7]
Rollo, pp. 53-54.

^[8]
Ibid., at p. 55.

^[9]
Id., at pp. 7-8.

^[10]
Rollo, pp. 32-33.

^[11]
Black’s Law Dictionary, 4th Ed. (1951), p. 979, citing Bell
Grocery Co. vs. Booth, 250 Ky, 21, 61 S.W. 2d 879; State ex rel. National Lead Co. vs. Smith, Mo. App., 134 S.W. 2d 1061,
1068; See Santos vs. Intermediate Appellate Court, 145 SCRA 238,
245 (1986).

^[12]
Art. 1403(2)(e), Civil Code of the Philippines.

^[13]
A. TOLENTINO, IV Commentaries and Jurisprudence on the Civil Code of the
Philippines p. 617 (1991), citing Hernandez vs. Andal, 78 Phil.
196 (1947).

^[14]
A. TOLENTINO, IV, op. cit., p. 618 (1991).

^[15]
See Almirol and Cariño vs. Monserrat, 48 Phil. 67 (1925).

^[16]
Rollo, p. 33.