CASE DIGEST: PLU vs. ALS Management

G.R. No. 166642 : October 24, 2012




P.L. Uy Realty Corporation (PLU), as vendor, and ALS Management and Development Corporation (ALS), as vendee, executed a Deed of Absolute Sale with Mortgage covering a parcel of land. The purchase price for the land was set at PhP 8,166,705. Notably, the parties stipulated in the Deed of Absolute Sale that the vendor shall assume the responsibility of removing the informal settlers and that the vendee is authorized to withhold its payment unless the said undertaking has been done and completed to the satisfaction of the vendee. ALS paid its first installment on the purchase price. ALS, however, failed to pay the second payment despite demands.

Thus, PLU filed a complaint against ALS for Foreclosure of Mortgage and Annulment of Documents before the Makati RTC docketed as Civil Case No. 47438. The RTC rendered its decision stating that PLU, as vendee, has the obligation to evict the informal settlers occupying the land. For this reason, the RTC found the obligation of ALS to pay the balance of the purchase price has not yet fallen due and demandable; thus, it dismissed the case for being premature. On appeal, the CA affirmed in toto the decision of the RTC. When the case was elevated to the Supreme Court, both the RTC and the CA were sustained by the Court. Subsequently, the resolution became final and executory.

Sometime thereafter, PLU filed another case against ALS for Judicial Foreclosure of Real Estate Mortgage docketed as Civil Case No. 60221. The Pasig RTC also held that the case was prematurely filed. The CA affirmed the RTCs decision. Hence, the instant petition.


I. Whether or not the case at bar is already barred by res judicata?

II. Whether or not PLU is bound to comply with its undertaking to evict the informal settlers as stipulated?

HELD: The instant petition must be dismissed.

FIRST ISSUE: The case is barred by res judicata.

REMEDIAL LAW: res judicata

The elements of res judicata are: (1) the judgment sought to bar the new action must be final;(2) the decision must have been rendered by a court having jurisdiction over the subject matter and the parties; (3) the disposition of the case must be a judgment on the merits; and (4) there must be as between the first and second action, identity of parties, subject matter, and causes of action. Should identity of parties, subject matter, and causes of action be shown in the two cases, then res judicata in its aspect as a "bar by prior judgment" would apply. All the elements of res judicata, as a "bar by prior judgment," are present in the instant case. Plainly, the two (2) cases involve the very same parties, the same property and the same cause of action arising from the violation of the terms of one and the same deed of absolute sale with mortgage. In fact, PLU prayed substantially the same relief in both complaints.

SECOND ISSUE: PLU is bound by its agreement with ALS.

CIVIL LAW: freedom of parties to stipulate

On a final note, it would be relevant to note that Art. 1306 of the Civil Code guarantees the freedom of parties to stipulate the terms of their contract provided that they are not contrary to law, morals, good customs, public order, or public policy. Thus, when the provisions of a contract are valid, the parties are bound by such terms under the principle that a contract is the law between the parties.

Here, both parties knew for a fact that the property subject of their contract was occupied by informal settlers, whose eviction would entail court actions that in turn, would require some amount of time. They also knew that the length of time that would take to conclude such court actions was not within their power to determine. Despite such knowledge, both parties still agreed to the stipulation that the payment of the balance of the purchase price would be deferred until the informal settlers are ejected. There was never any allegation that PLU was coerced into signing the Deed of Sale with Mortgage or that its consent was in any way vitiated. PLU was free to accept or decline such contracted provision. Thus, PLU cannot now be allowed to renege on its agreement.