Title
De Knecht vs. Court of Appeals
Case
G.R. No. 108015
Decision Date
May 20, 1998
The Knechts lost ownership of their Pasay City property due to tax delinquency, auction sale, and expropriation for flood control and EDSA extension. Their reconveyance case was dismissed, and subsequent legal challenges were barred by res judicata, denying intervention in just compensation proceedings.
res judicata
expropriated property
legal interest

Case Summary (G.R. No. 108015)

Factual Background

The controversy concerned an 8,102.68 square meter parcel at the corner of E. de los Santos Avenue and F.B. Harrison, Pasay City, originally titled to petitioners under TCT No. 9032 and improved with eight houses. In 1979 the government filed Civil Case No. 7001-P for expropriation; this Court in G.R. No. L-51078 annulled the writ of possession for arbitrariness in the choice of area. In 1982 the City Treasurer discovered unpaid real estate taxes for 1980–1982 and, for the deficiency, sold the property at public auction on May 27, 1982. The highest bidders were the Babieras and the Sangalangs; the Knechts failed to redeem within a year. In 1983 the Babieras and Sangalangs filed petitions to register their names as co-owners (LRC Cases Nos. 2636-P and 2652-P). The Register of Deeds canceled TCT No. 9032 and issued TCT No. 86670 in the names of Babiera and Sangalang. Salem purchased the land from them on March 12, 1985 and obtained TCT No. 94059.

Legislative and Subsequent Expropriation Context

In 1983 the Batasang Pambansa enacted B.P. Blg. 340, authorizing expropriation of specified properties in Pasay City for the EDSA Extension and related flood-control projects; the Knechts’ property was among them. While this Court in Republic v. de Knecht, G.R. No. 87335 (1990), ultimately upheld B.P. Blg. 340, litigation continued concerning title, tax sale irregularities, and payment of just compensation.

Reconveyance Suit and Its Disposition

The Knechts filed Civil Case No. 2961-P in Branch 119 on June 24, 1985 to obtain reconveyance and annul the tax sale and subsequent titles. Salem secured appointment of a receiver in that action. The Knechts repeatedly sought postponements and failed to appear at the scheduled hearing of September 13, 1988. The trial court dismissed Civil Case No. 2961-P for "apparent lack of interest of plaintiffs" and for unreasonable pendency. The motion to set aside was denied. The dismissal was appealed to the Court of Appeals and then to this Court; the petitions were dismissed and the order of dismissal became final in February 1990 with entry of judgment on February 19, 1990.

Expropriation Proceedings and Occupation of the Property

On May 15, 1990 the Republic filed Civil Case No. 7327 in Branch 111 "for determination of just compensation" under B.P. Blg. 340. The trial court issued a writ of possession on August 29, 1990; seven houses were demolished the following day and the last house was demolished pursuant to an unlawful detainer action and writ of execution on April 6, 1991. The trial court ordered partial releases of funds to Salem (September 13, 1990; June 7, 1991) and later to Mariano Nocom (April 23, 1992). On September 9, 1991 the court fixed values and determined that the land value of the subject parcel was P28,961.00 per square meter, exclusive of improvements.

Motions, Intervention, and Consolidation

After the expropriation court issued payment orders, the Knechts filed a "Motion for Intervention and to Implead Additional Parties" on September 25, 1991 and a "Motion to Inhibit Respondent Judge Sayo and to Consolidate Civil Case No. 7327 with Civil Case No. 8423." Civil Case No. 8423 had been earlier dismissed by Branch 117 for res judicata; this Court dismissed the Knechts’ related motion for extension and other relief for noncompliance in G.R. No. 103448. The trial court in Civil Case No. 7327 denied the Knechts’ motion to intervene on April 14, 1992 and declined to rule on the inhibition motion as moot and academic. Meanwhile, respondent Nocom sought consolidation of the two actions in this Court, which was granted.

Appellate Proceedings and Questions Presented

The Knechts sought review before the Court of Appeals in CA-G.R. SP No. 27817 from the denial to intervene and in CA-G.R. SP No. 28089 sought annulment of various orders of the land registration courts, dismissal of the reconveyance action, and the expropriation-related releases. The Court of Appeals dismissed both petitions: it denied intervention in CA-G.R. SP No. 27817 on the ground that the Knechts had no legal interest after the dismissal of Civil Case No. 2961-P and it dismissed CA-G.R. SP No. 28089 for lack of merit. The Knechts advanced grounds to this Court that the appellate court erred in holding (a) that Civil Case No. 7327 was not an eminent domain proceeding, (b) that res judicata barred their intervention, and (c) that the trial court erred in not ruling on the motion to inhibit.

Issues before the Supreme Court

The issues distilled by this Court were whether Civil Case No. 2961-P operated as a bar by res judicata to the Knechts’ subsequent challenges; whether dismissal for "lack of interest" constituted an adjudication on the merits under Rule 17, Section 3 (failure to prosecute); whether Civil Case No. 7327 was an expropriation proceeding invoking Rule 67; and whether the Knechts, as occupants, possessed the legal interest necessary to intervene in the expropriation case.

Supreme Court’s Disposition

The Supreme Court denied G.R. No. 109234 and denied the motion for reconsideration in G.R. No. 108015, thereby affirming the Court of Appeals’ decisions in CA-G.R. SP Nos. 27817 and 28089. The Court concluded that Civil Case No. 2961-P was final and had the effect of an adjudication on the merits; consequently, res judicata precluded the Knechts from relitigating ownership. The Court nonetheless corrected the Court of Appeals to the extent that the appellate court erred in characterizing Civil Case No. 7327 as not an expropriation proceeding, but it held that this error did not afford relief to the Knechts because they lacked any legal interest at the time of the filing of Civil Case No. 7327.

Reasoning on Res Judicata and Failure to Prosecute

The Court analyzed the dismissal of Civil Case No. 2961-P under Rule 17, Section 3, which permits dismissal when a plaintiff fails to appear at trial or to prosecute an action for an unreasonable length of time. The dismissal order of September 13, 1988 cited the plaintiffs’ failure to appear despite notice, the prolonged pendency of the case, and apparent lack of interest. The Court reiterated that a dismissal under Section 3, unless qualified as without prejudice, "shall have the effect of an adjudication upon the merits." The Court applied familiar elements of res judicata—finality of the former judgment, a decision on the merits, jurisdiction, and identity of parties, subject matter and cause of action—and found them satisfied. The Court rejected the Knechts’ contention that the dismissal was a mere technicality and that application of res judicata would sacrifice justice. The Court observed that the Knechts had been given a full opportunity to litigate their tax-sale defenses and that their procedural defaults, not the courts’ failure, produced the dismissal.

Reasoning on Eminent Domain, Intervention, an

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