Title
Bank of Commerce vs. Dhn Construction and Development Corporation
Case
G.R. No. 225299
Decision Date
Dec 1, 2021
Dispute over P130M loan involving simulated promissory notes; DHN claimed no receipt of proceeds, intended for Fil-Estate. Supreme Court ruled res judicata barred re-litigation, upholding prior dismissal.
Font Size:

Case Digest (G.R. No. 225299)

Facts:

Background of the Case:

  • The case involves a dispute between Bank of Commerce (BOC) and DHN Construction and Development Corporation (DHN) over the validity of two promissory notes signed by DHN's President, Mr. Dionisio P. Reyno, which allegedly gave rise to a loan obligation of P130,312,227.33.
  • DHN claimed that the promissory notes were simulated and fictitious, and that it never received the loan proceeds. Instead, the loan was intended for Fil-Estate Properties, Inc. (Fil-Estate), a real estate developer, to avoid certain Bangko Sentral ng Pilipinas (BSP) regulations.

Arrangement Between DHN, Fil-Estate, and BOC:

  • In 2007, DHN was approached by Fil-Estate and BOC to facilitate a P115,000,000.00 loan for the Eight Sto. Domingo Project. The loan was to be booked under DHN's name to circumvent BSP regulations.
  • DHN initially declined but later agreed to sign blank promissory notes after Fil-Estate allegedly pressured DHN by withholding payments for other projects. DHN claims it was assured that Fil-Estate would be the one liable for the loan.

Discovery of the Loan:

  • In 2008, DHN received letters from BOC's external auditors, SGV and Co., requesting confirmation of the loan and submission of documents for loan renewal.
  • DHN informed BOC that it could not verify the loan as it never received the proceeds. DHN also requested Fil-Estate for copies of the promissory notes, but Fil-Estate failed to provide them.

Fil-Estate's Confirmation:

  • In a letter dated 19 February 2009, Fil-Estate confirmed that the loan was secured by collateral owned by Fil-Estate and that all payments would be settled by Fil-Estate.

BOC's Demand and DHN's Response:

  • When DHN refused to sign additional documents to "regularize" the loan, BOC declared the loan due and demandable on 11 May 2009.
  • DHN filed complaints against BOC, including one before the BSP for unsafe banking practices, false statements, and violation of anti-money laundering laws.

Prior Litigation:

  • DHN had previously filed a Complaint for Annulment of Contract with Damages before the RTC-Quezon City (Civil Case No. Q-09-66170), which was dismissed on 29 December 2011. The court ruled that DHN voluntarily entered into the loan agreement and benefited from it, thus precluding it from impugning the loan's validity.

Current Complaint:

  • DHN filed a new complaint before the RTC-Makati (Civil Case No. 12-167), seeking the declaration of nullity of the promissory notes. BOC moved to dismiss the complaint on the grounds of res judicata and failure to state a cause of action.

Issue:

  • (Unlock)

Ruling:

  • (Unlock)

Ratio:

  1. Res Judicata: The doctrine of res judicata bars the re-litigation of issues that have already been decided by a court of competent jurisdiction. The elements of res judicata are:

    • A final judgment on the merits.
    • Jurisdiction over the subject matter and parties.
    • Identity of parties, subject matter, and causes of action.
  2. Judgment on the Merits: A judgment is considered on the merits if it determines the rights and liabilities of the parties based on the facts disclosed, even without a formal trial. The RTC-Quezon City's dismissal of the prior case was a judgment on the merits because it ruled on the validity of the loan contract.

  3. Identity of Causes of Action: The causes of action in both cases were essentially the same, as they both sought to challenge the validity of the promissory notes. The change in the form of the action (from annulment to declaration of nullity) does not remove the case from the application of res judicata.

  4. Finality of Judgment: The RTC-Quezon City's Order had become final and executory, and DHN failed to challenge it through a timely appeal or a special civil action for certiorari. As a result, the Order bars any subsequent action involving the same parties, subject matter, and causes of action.

  5. No Prejudice to DHN's Rights Against Fil-Estate: The Court noted that DHN may still pursue its claims against Fil-Estate, which was not a party to the proceedings below and did not deny its primary liability for the loan.

Conclusion:

The Supreme Court REVERSED the Court of Appeals' Decision and DISMISSED DHN's complaint on the ground of res judicata. The Court emphasized the importance of finality in judicial decisions and the need to prevent the re-litigation of issues that have already been resolved.


Jur is an AI-powered legal research platform in the Philippines for case digests, summaries, and jurisprudence. AI-generated content may contain inaccuracies; please verify independently.