G.R. No. L-28351 - Universal Mills Corp. vs. Universal Textile Mills, Inc.

The subject property is a Philippine Housing and Homesite Corporation (PHHC) lot, designated as Lot 4, Block E-139, at No. 83 Mabilis St., Pinyahan, Quezon City.
In 1950, Irene Dadul (mother of petitioner Rosa Sabadlan Valencia) built a house on the lot, where she and her family resided.
Around the time prior to the subdivision of the area, the Valencias (Rosa Sabadlan Valencia and Amado Valencia) along with Irene Dadul expressed their intention to purchase the lot with the PHHC; however, due to the lots not being ready for subdivision, they were allowed to continue residing on it.
After the subdivision was effected in 1957, the Valencias returned to file an application to buy the lot, only to discover in 1958 that their application could not be found—prompting them to execute an affidavit asserting that the application had been filed.

Despite the occupation and timely application by the Valencias, the lot was awarded to a non-resident, Jose Balot of Nueva Ecija.
The Valencias subsequently filed complaints with the PHHC (later the National Housing Authority) on 26 May 1960 and again on 14 November 1962 contesting Balot’s award, but these complaints were dismissed.
On 14 July 1964, a Conditional Sale covering the lot was executed between PHHC and Balot, with a Transfer Certificate of Title eventually issued in his name on 12 April 1972.

Initiation of Judicial Proceedings by the Valencias and Intervention of a Third Party

On 26 February 1973, the Valencias instituted Civil Case No. Q-17465 before the RTC of Quezon City, seeking cancellation and annulment of the award in favor of Balot.
During these proceedings, Donelita Carino intervened, asserting that petitioner Rosa Sabadlan Valencia had sold her “squatter’s rights” over the lot.
The Trial Court initially ruled in favor of the intervenor, Donelita Carino; however, on appeal the Intermediate Appellate Court reversed the decision on 29 December 1981, finding no sale of squatter’s rights had taken place.
The Appellate Court ruled that:

Preference should have been given to the bona fide occupants (the Valencias) rather than to a non-resident Balot who had not made improvements on the property.
The lot was awarded to the Valencias upon payment of the requisite consideration, a new Transfer Certificate of Title was to be issued, and all inconsistent previous titles cancelled.

Subsequent petitions for review by intervenor Donelita Carino and Jose Balot were denied by the Supreme Court, thus affirming the Court of Appeals’ decision in effect.

Although a final judgment in Civil Case No. Q-17465 had been rendered ordering the lot in favor of the Valencias, execution was suspended pending clarification on whether the decision included ejectment of the current occupants.
On 12 October 1984, the Appellate Court clarified that the current occupants were illegal and ordered their ejectment in favor of the Valencias.
In a separate but related controversy, on 6 November 1984, Corazon C. Llanes (sister-in-law of Donelita Carino) filed Civil Case No. Q-43239 for Specific Performance and recovery of ownership against Rosa Sabadlan Valencia, alleging that Valencia had sold her squatter’s rights on the lot for P800.00 in August 1965.
The Valencias responded by asserting that the subject matter of Civil Case No. Q-43239 was already adjudicated in Civil Case No. Q-17465, invoking the doctrine of res judicata.
During the course of Civil Case No. Q-43239, various motions were filed:

The Valencias filed both an Answer with special defenses and multiple Motions to Dismiss on the basis of prior adjudication.
Corazon Llanes also sought the issuance of a restraining order, including a Writ of Preliminary Injunction, to prevent the Valencias from exercising ownership over the lot.
The trial court granted the restraining orders and set the case for pre-trial, leading the Valencias to challenge the orders among other procedural matters.

On 18 April 1986, the Valencias elevated the matter by filing a Petition for Review on Certiorari, Prohibition, and Mandamus (G.R. No. 82112) challenging:

The Trial Court’s neglect in resolving their Motions to Dismiss.
The admission of the amended complaint in Civil Case No. Q-43239.
The issuance of restraining orders and preliminary injunctions that delayed the execution of the earlier final judgment in their favor.

The case was eventually referred by the Supreme Court to the Court of Appeals for proper disposition. The Court of Appeals originally ruled in favor of the Valencias on 5 February 1987 but later, upon a Motion for Reconsideration by Corazon Llanes, reversed itself in an Amended Decision dated 11 February 1988—thus differentiating the two civil cases on the ground that the parties and causes of action in Civil Case No. Q-43239 were distinct.

The determinative issue was whether Civil Case No. Q-43239 was barred by the prior judgment in Civil Case No. Q-17465 by way of res judicata.
A subsidiary issue was whether the presiding judge of RTC, Branch 90 (which handled Civil Case No. Q-43239), committed grave abuse of discretion by failing to resolve the Valencias’ Motions to Dismiss.
The doctrine of res judicata—which requires a final judgment on the merits, jurisdiction over subject matter and parties, and identity (or substantial identity) of parties, subject matter, and cause of action—became central in linking both cases.

Whether the institution of Civil Case No. Q-43239 by Corazon C. Llanes is barred by the prior judgment rendered in Civil Case No. Q-17465 under the doctrine of res judicata.
Whether the differences in the formulation of the causes of action and the identity of parties in the two cases are sufficient to avoid the application of res judicata.

Whether the Regional Trial Court, Branch 90, committed grave abuse of discretion by failing to rule on the Valencias’ Motions to Dismiss Civil Case No. Q-43239 on the ground of prior adjudication.

The necessity to uphold finality in judgments and prevent duplicative litigation for the same subject matter and rights.
The balance between the interests of speedy dispensation of justice and the rights of parties to be heard.