G.R. No. 150134 . October 31, 2007.
ERNESTO C. DEL ROSARIO and DAVAO TIMBER CORPORATION, petitioners, vs. FAR EAST BANK & TRUST COMPANY and PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES, respondents.

FACTS

Petitioners Davao Timber Corporation (DATICOR) and Ernesto C. Del Rosario obtained loans from respondent Private Development Corporation of the Philippines (PDCP). After petitioners paid PDCP a total of P3 million, PDCP computed an outstanding balance exceeding P10 million. Petitioners sued PDCP for usury, and the Supreme Court, in G.R. No. 73198 , ultimately ruled that the interest stipulations were void, fixing the true remaining principal obligation at only P1.4 million. Meanwhile, PDCP had assigned its receivables from petitioners to respondent Far East Bank and Trust Company (FEBTC). Petitioners later paid FEBTC P6.4 million in full settlement of the assigned receivables per a Memorandum of Agreement.
Following the Supreme Court’s final ruling in G.R. No. 73198 , petitioners sued both PDCP and FEBTC (Civil Case No. 94-1610) to recover excess payments. The RTC ordered PDCP to refund P4.035 million but dismissed the claim against FEBTC. On appeal, the Court of Appeals modified the decision, applying the principle of solutio indebiti. It held FEBTC, as the recipient, liable to refund the excess but limited the recovery to the P965,000 specifically claimed from FEBTC in the complaint. The CA also ordered PDCP to release the mortgages.

ISSUE

Whether the subsequent complaint (Civil Case No. 00-540) filed by petitioners against FEBTC to recover the balance of the excess payment (P4.335 million) is barred by res judicata or constitutes splitting a cause of action.

RULING

Yes, the complaint is barred. The Supreme Court affirmed the dismissal on the ground of res judicata and splitting of a single cause of action. The Court explained that a cause of action is the act or omission by which a party violates a right of another. Petitioners’ single primary right was to recover the total overpayment made on their loan obligation. This single right was allegedly violated by the respondents’ collective failure to return the excess. Therefore, petitioners had only one cause of action for the recovery of the entire sum, which could and should have been pursued in its totality in the first case (Civil Case No. 94-1610).
By filing a second suit to recover the balance not awarded in the first, petitioners improperly split their cause of action. The judgment in the first case, which became final after appeal to the CA, constitutes a bar to the subsequent action under the doctrine of res judicata. The elements of res judicata are present: a final judgment on the merits rendered by a court of competent jurisdiction, identity of parties, subject matter, and causes of action between the first and second cases. The Court emphasized that the rule against splitting a cause of action is designed to prevent repeated litigation and ensure the finality of judgments. Petitioners’ remedy was to appeal the CA decision in the first case, not to institute a new action for the unclaimed balance.