G.R. No. 163433 - Spouses Villanueva vs. Court of Appeals

In 1994, Spouses Nelson R. Villanueva and Myra P. Villanueva (petitioners) applied for two separate loans amounting to P100,000.00 and P125,000.00, respectively, from Provident Rural Bank of Sta. Cruz, Laguna, Inc. (respondent Bank).
Petitioners executed two separate promissory notes with due dates both falling on August 20, 1995.
As security, petitioners also executed two separate real estate mortgages over the same parcel of agricultural land in Sta. Cruz, Laguna.

Petitioners failed to pay the loans when due.
On June 14, 1996, the respondent Bank filed a petition for extrajudicial foreclosure of the mortgages with the Office of the Provincial Sheriff of Laguna.
As of June 10, 1996, petitioners' obligations already amounted to P287,187.50 plus interests, charges, and expenses.
Notice of Sale of the mortgaged property was issued on June 25, 1996, but apparently the auction sale did not push through.

On June 9, 2000, the respondent Bank re-applied for extrajudicial foreclosure of the same mortgages.
On July 25, 2000, the Provincial Sheriff issued a Notice of Sale Re-Application and scheduled the public auction for August 25, 2000.
Petitioners’ mortgage debt as of June 15, 2000 was P713,465.35 plus interests, charges, and expenses.

Petitioners sent a letter to the Officer-in-Charge of the RTC Clerk of Court questioning the outstanding loan amount and requesting the suspension of the auction until resolution of their objection.
The request was denied.
On August 2, 2000, petitioners filed a Petition for Declaratory Relief, Accounting, and Damages praying the nullification of stipulated interests, charges, and expenses, asserting they were exorbitant, usurious, and unconscionable.
The petition was docketed as Civil Case No. SC-4032.

On September 5, 2000, the Bank moved to dismiss on grounds of res judicata and forum shopping.
The Bank cited an earlier complaint (Civil Case No. SC-3422) filed by petitioners in 1996 seeking the declaration that interest rates and charges stipulated in the same mortgage and promissory notes were usurious.
The RTC denied the Bank’s Motion to Dismiss in SC-3422, but the Court of Appeals reversed, annulling the RTC order and granting dismissal based on lack of cause of action and suspension of the usury law.

On July 31, 2001, the RTC dismissed petitioners’ petition in SC-4032 citing res judicata, recognizing that the issues were already settled by the CA decision in SC-3422.
Petitioners appealed the dismissal to the Court of Appeals.
On June 16, 2003, the CA affirmed the RTC dismissal, ruling all elements of res judicata were met.
Petitioners’ Motion for Reconsideration was denied by the CA on April 28, 2004.

They argued that res judicata did not apply due to lack of identity of subject matter and cause of action between cases SC-3422 and SC-4032.
Even if elements of res judicata existed, equity required exception to prevent unjust enrichment of the Bank via exorbitant, usurious charges.
They denied violating the rule on forum shopping, stating SC-3422 was already decided before filing the petition for declaratory relief SC-4032 and there was no pending case with the same parties, subject matter, and cause of action.

Whether or not the principle of res judicata applies considering the identity of parties, subject matter, and cause of action between the prior case (SC-3422) and the present petition for declaratory relief (SC-4032).

Whether the stipulated interest rates, penalties, and charges in the mortgage contracts are usurious, exorbitant, unconscionable, or illegal under laws governing interest and usury.

Whether the petitioners committed forum shopping by filing multiple cases involving the same parties, cause of action, and reliefs.

Whether equity demands the disregard of the principle of res judicata to prevent injustice in this case.