Republic of the
QUISUMBING, J., Chairperson,
- versus - CARPIO,
VELASCO, JR., JJ.
MONDRAGON LEISURE AND
MONDRAGON INTERNATIONAL Promulgated:
and MONDRAGON SECURITIES March 2, 2007
D E C I S I O N
VELASCO, JR., J.:
For review before the Court is the September 5, 2001 Decision of the Court of Appeals (CA) in CA-G.R. SP No. 58302, setting aside the Orders dated December 2, 1999 and February 8, 2000 of the Angeles City Regional Trial Court (RTC), Branch 60, and directing the presiding judge to continue with the proceeding in Civil Case No. 9596 entitled Mondragon and Leisure and Resorts Corporation, et al. v. Clark Development Corporation.
Petitioner Clark Development Corporation (CDC) is a government-owned and controlled corporation existing under and by virtue of Philippine laws. Through Republic Act No. 7227 or the “Bases Conversion and Development Act of 1992,” petitioner was authorized to develop the Clark Special Economic Zone. On February 28, 1994, petitioner entered into a Lease Agreement with respondents Mondragon Leisure and Resorts Corporation (MLRC), Mondragon International Philippines, Inc., and Mondragon Securities Corporation (herein collectively referred to as “Mondragon”), covering the area now known as the Mimosa Leisure Estate. The parties thereafter executed Supplemental Agreements for additional smaller areas. Mondragon put up Holiday Inn Hotel, Mimosa Golf and Country Club, the North Vista Hotel, Mimosa Regency Casino, and other facilities and amenities.
From said adverse Decision, Mondragon
appealed to this Court and the case was docketed as G.R. Nos. 137796-97. On
in Arrears. MLRC shall pay CDC the
amount of THREE HUNDRED TWENTY FIVE MILLION PESOS (Php325,000,000.00) by way of
rentals in arrears as of
To secure the payment of the foregoing
indebtedness of MLRC to CDC, MLRC shall open an irrevocable domestic letter of
credit in favor of CDC from a reputable commercial or universal bank acceptable
to CDC in the amount of THREE HUNDRED TWENTY FIVE MILLION PESOS
(Php325,000,000.00) and shall submit such letter of credit to CDC not later
than thirty (30) days from the signing of this Compromise Agreement at the
office of CDC at Building 2127, E. Quirino Avenue cor.
2. Minimum Guaranteed Lease Rentals. The Minimum Guaranteed Lease Rentals as provided in the Master Lease Agreement, the Supplemental Lease Agreements are hereby consolidated and modified as follows:
x x x x
In case of Mondragon’s failure to comply with its obligations, Sections 7 and 8 of the Compromise Agreement empowered petitioner to cancel and terminate the said agreement after 30 days counted from Mondragon’s receipt of a demand from petitioner. Mondragon shall leave the leased premises and return to petitioner parcels B, C, D, and F under the Sketch annexed to the Compromise Agreement, the parcel of land known as Wagner, and all lands and improvements along the parade grounds, except the lands where the Mimosa Regency Casino and Chi Restaurant were situated.
Mondragon failed to pay for the
rental arrears and to open the irrevocable domestic letter of credit. In a
Pending resolution of the motion to dismiss in the Second Mondragon Case, the RTC Branch 58 in Civil Case No. 9242 (First Mondragon Case) granted the Motions for Execution in its December 1, 1999 Order. A writ of execution was then issued on the same day. Mondragon subsequently filed a Petition for Certiorari with the CA questioning the Writ of Execution, which was docketed as CA-G.R. No. 56079. Meanwhile, the RTC Branch 60 dismissed the Second Mondragon Case (Civil Case No. 9596) because of forum shopping. Mondragon filed a Motion for Reconsideration of said dismissal, which was likewise denied by the trial court. Hence, it filed another petition with the CA, which was docketed as CA-G.R. SP No. 58302.
The Ruling of the Court of Appeals
The CA held that the presiding judge of the Angeles City RTC, Branch 60 abused her discretion in finding Mondragon guilty of forum shopping. The CA ruled that while there was an identity of parties in both cases, nevertheless, the nature and causes of the actions and the reliefs prayed for in Civil Case Nos. 9242 (First Mondragon Case) and 9596 (Second Mondragon Case) were entirely different. The CA further held, thus:
To address the issue frontally, this Court shall compare the two cases as to: (a) nature of action; (b) causes of action; and (c) reliefs sought. As to nature of action: Civil Case No. 9242 is for Specific Performance while Civil Case No. 9596 is for Declaratory Relief. As to causes of action: In Civil Case No. 9242, Mondragon’s cause of action against [petitioner] CDC was the alleged improper or unlawful termination of the Lease Agreements and its refusal to submit their dispute to arbitration, while in Civil Case No. 9596, Mondragon’s causes of action are the alleged (a) refusal of CDC to accept that Mondragon’s monetary obligation under the Compromise Agreement were already substantially extinguished as a consequence of its turning over to CDC the High School Wagner Site; and (b) CDC’s unlawful insistence that Mondragon’s failure to secure a letter of credit within the period stipulated (which is a mere technicality) justified the termination of the Compromise Agreement.
As to reliefs prayed for: In Civil Case No. 9242, Mondragon asked the court to order CDC to submit to the stipulated Dispute Settlement under Art. XI of the Lease Agreement and if this fails, to submit the case for arbitration. In Civil Case No. 9596, Mondragon prayed the court (a) to nullify CDC’s cancellation of the Compromise Agreement and affirms [sic] Mondragon’s substantial compliance of its obligations thereunder; (b) to direct CDC to allow Mondragon to settle its ₧325 million obligation not later than June 30, 2000; and (c) to order CDC to pay Mondragon ₧1 million attorney’s fees.
It is too obvious that the nature of the action, the causes of action and reliefs prayed for in Civil Case No. 9242 and Civil Case No. 9596 are entirely different. CDC may believe that Civil Case No. 9596 is utterly unmeritorious and intended only to impede the execution of the Compromise Agreement as embodied in the Supreme Court Decision, but that is no reason to charge Mondragon with forum shopping.
The CA however denied petitioner’s Motion
for Reconsideration in its
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT RULED THAT THERE WAS NO FORUM SHOPPING AND ALLOWED CONTINUANCE OF CIVIL CASE NO.  WHEN IN FACT RES JUDICATA HAD ALREADY SET IN AND ANY MATTER/CASE RAISED/FILED RELATING THERETO IS FORUM SHOPPING
The Court’s Ruling
The petition is meritorious.
We defined forum shopping as the “institution of two (2) or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition” or “the act of a party against whom an adverse judgment has been rendered in one forum, of seeking another (and possibly favorable) opinion in another forum other than by appeal or the special civil action of certiorari.” In First Philippine International Bank v. Court of Appeals, we held that the test to determine whether forum shopping exists is whether the elements of litis pendencia are present or where a final judgment in one case will amount to res judicata in the other. Res judicata means a matter or thing adjudged, judicially acted upon or decided, or settled by judgment. Its requisites are: (1) the former judgment or order must be final; (2) the judgment or order must be one on the merits; (3) it must have been rendered by a court having jurisdiction over the subject matter and parties; and (4) between the first and second actions, there must be identity of parties, subject matter, and causes of action. Thus, in First Philippine International Bank, we explained further:
Consequently, where a litigant (or one representing the same interest or person) sues the same party against whom another action or actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending, the defense of litis pendencia in one case is a bar to the others; and, a final judgment in one would constitute res judicata and thus would cause the dismissal of the rest. In either case, forum shopping could be cited by the other party as a ground to ask for summary dismissal of the two (or more) complaints or petitions, and for the imposition of the other sanctions, which are direct contempt of court, criminal prosecution, and disciplinary action against the erring lawyer.
We further held in First Philippine International Bank that “the filing by a party of two apparently different actions, but with the same objective, constituted forum shopping.” The Court discussed this species of forum shopping as follows:
Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was filed by the buyer (herein private respondent and his predecessors-in-interest) against the seller (herein petitioners) to enforce the alleged perfected sale of real estate. On the other hand, the complaint in the Second Case seeks to declare such purported sale involving the same real property “as unenforceable as against the Bank”, which is the petitioner herein. In other words, in the Second Case, the majority stockholders, in representation of the Bank, are seeking to accomplish what the Bank itself failed to do in the original case in the trial court. In brief, the objective or the relief being sought, though worded differently, is the same, namely, to enable the petitioner Bank to escape from the obligation to sell the property to respondent (emphasis supplied).
In Danville Maritime, Inc. v. Commission on Audit, one of the bases of First Philippine International Bank, we ruled as follows:
In the attempt to make the two actions
appear to be different, petitioner impleaded different respondents therein – PNOC
in the case before the lower court and the COA in the case before this Court
and sought what seems to be different reliefs. Petitioner asks this Court to
set aside the questioned letter-directive of the COA dated October 10, 1988 and
to direct said body to approve the Memorandum of Agreement entered into by and
between the PNOC and petitioner, while in the complaint before the lower court
petitioner seeks to enjoin the PNOC from conducting a rebidding and from
selling to other parties the vessel “T/T Andres Bonifacio,” and for an
extension of time for it to comply with the paragraph 1 of the memorandum of
agreement and damages. One
can see that although the relief prayed for in the two (2) actions are
ostensibly different, the ultimate objective in both actions is the same, that
is, the approval of the sale of vessel in favor of petitioner, and to overturn
the letter directive of the COA of
In the case at bar, there is no question that the first requirement of identity of parties was met. As regards the rights asserted and reliefs sought, we depart from the findings of the CA and hold that there existed an identity of causes of action and reliefs based on the “same objective” standard enunciated in the aforecited cases.
Mondragon had only one objective in filing the two cases, that is, the perpetuation of its lease. In Civil Case No. 9242, Mondragon tried to prevent the termination of the Lease Agreement, while in Civil Case No. 9596, it tried to prevent the termination of the Compromise Agreement. While they differ in nomenclature and specific provisions, the subject of the two agreements was the same—the lease over the Mimosa Leisure Estate. Mondragon’s cause of action against petitioner CDC, in essence, was the latter’s alleged premature termination of the lease over the Mimosa Leisure Estate. The ultimate relief sought by Mondragon from the courts, on the other hand, is to be allowed to continue the lease. Without doubt, Mondragon’s objectives in filing the two civil cases were the same, that is, to continue its lease over the Mimosa Leisure Estate.
Mondragon believes that Civil Case No. 9242 (First Mondragon Case) covered a subject matter and cause of action distinct from Civil Case No. 9596 (Second Mondragon Case).
The Compromise Agreement between petitioner
and Mondragon supplanted the Lease Agreement.
By entering into a compromise, the parties decided to set aside the
Lease Agreement in favor of terms and conditions more acceptable to both. They had also waived any issues arising from
the Lease Agreement. Thus, in the
[I]t is apparent that the parties have managed to resolve the dispute among themselves, the only thing left being to put our judicial imprimatur on the compromise agreement, in accordance with Article 2037 of the Civil Code.
ACCORDINGLY, the Compromise Agreement
This judgment by compromise already became final and executory and should be complied with any other judgment, as it stands as the judgment in Civil Case No. 9242. Therefore, Mondragon cannot seriously claim that Civil Case No. 9242 does not encompass the Compromise Agreement. Furthermore, since any issue regarding the lease of the Mimosa Leisure Estate was already amicably settled by the parties through the execution of the Compromise Agreement, Civil Case No. 9596 was already barred by prior judgment, that is, the judgment by compromise in Civil Case No. 9242.
Mondragon had the opportunity to oppose petitioner’s Motion for Issuance of a Writ of Execution of Judgment by Compromise Agreement in Civil Case No. 9242 pending before the Angeles City RTC, Branch 58. However, without waiting for the trial court’s resolution on the motion and opposition, Mondragon filed Civil Case No. 9596 before the RTC Branch 60. This was clearly an attempt to prevent the RTC Branch 58 in the First Mondragon Case from ordering the execution of the judgment on the Compromise Agreement by obtaining a favorable judgment from the RTC Branch 60. Moreover, Mondragon’s Petition for Declaratory Relief and Specific Performance (Civil Case No. 9596) merely reiterated the grounds cited in its opposition to CDC’s motion for execution in the First Mondragon Case (Civil Case No. 9242). In filing the second civil case, Mondragon’s objective was the same as the first civil action—to perpetuate its lease over the Mimosa Leisure Estate. To achieve this objective, and assuming that Mondragon had meritorious grounds against the execution filed by petitioner, Mondragon had sufficient remedies in law to question the writ of execution issued by the RTC Branch 58. Mondragon indeed questioned the writ of execution before the CA which was docketed as CA-G.R. No. 56079.
In the end, the decisive test in forum shopping is the possible vexation caused to the courts and litigants by the filing of actions based on the same or related issues in different fora. We held that:
Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is the vexation caused the courts and parties-litigant by a party who asks different courts and/or administrative agencies to rule on the same or related causes and/or to grant the same or substantially the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the different fora upon the same issue. x x x
The vexation to the courts in this case is evident. There is a high risk of conflict between the decisions of the RTC Branches 58 and 60 regarding their respective civil cases. A decision by one branch of court will constitute res judicata in the other case pending before the other branch of court. Alternatively, if the RTC Branch 60 exercised its jurisdiction over the petition for declaratory relief, then it would have to restrain the execution proceedings in the RTC Branch 58. Thus, interference with the proceedings in another court would ensue. Under the doctrine of non-interference, “a trial court has no authority to interfere with the proceedings of a court of equal jurisdiction, much less to annul the final judgment of a co-equal court.” In Paper Industries Corporation of the Philippines v. Intermediate Appellate Court, we declared that a court has no jurisdiction to restrain the execution proceedings in another court with concurrent jurisdiction.
The consolidation of the two civil cases is also not possible in line with the doctrine on non-interference. As observed by the CA:
In the matter of the consolidation of the two cases, Mondragon should be reminded that the same is addressed to the sound discretion of the courts. Neither of the judges in the two cases can impose upon the other the consolidation of the cases. Additionally, consolidation is no longer practicable because Civil Case No. 9242 is already terminated and is in the execution stage, while in Civil Case No. 9596, the issues have not even been joined.
Furthermore, if Civil Case No. 9596 was allowed to continue, the basic purpose of compromise agreements would be defeated. As defined by the Civil Code:
Art. 2028. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced.
Art. 2037. A compromise has upon the parties the effect and authority of res judicata, but there shall be no execution except in compliance with a judicial compromise.
Thus, in Genova v. De Castro, we held that:
A compromise is an agreement between two or more persons who, for preventing or putting an end to a lawsuit, adjust their respective positions by mutual consent in the way they feel they can live with. Reciprocal concessions are the very heart and life of every compromise agreement, where each party approximates and concedes in the hope of gaining balance by the danger of losing. It is, in essence, a contract.
A compromise is binding and has the force of law between the parties, unless the consent of a party is vitiated—such as by mistake, fraud, violence, intimidation or undue influence—or when there is forgery, or if the terms of the settlement are so palpably unconscionable.
Certainly, a compromise agreement becomes the law between the parties and will not be set aside other than the grounds mentioned above. In Ramnani v. Court of Appeals, we held that the main purpose of a compromise agreement is to put an end to litigation because of the uncertainty that may arise from it. Once the compromise is perfected, the parties are bound to abide by it in good faith. Should a party fail or refuse to comply with the terms of a compromise or amicable settlement, the other party could either enforce the compromise by a writ of execution or regard it as rescinded and so insist upon his/her original demand.
Instead of ending litigation, Mondragon had effectively prolonged the legal battle by filing the second civil case. Considering the investments involved, it is also likely that the parties would unceasingly appeal any judgment/s from the trial and even appellate courts, as the case now exemplifies. The vexation to the courts is already apparent, and the delay from litigating two civil cases is inevitable. Indeed, “[p]rolonging a litigation is anathema to [the purpose of] a compromise agreement.”
Forum shopping is contumacious, as
well as an act of malpractice that is proscribed and condemned as trifling with
the courts and abusive of their processes.
It warrants prosecution for contempt of court and summary dismissal of
the actions involved, without prejudice to appropriate administrative sanction
against the counsel. In this case, only Civil Case No. 9596 is
left to be dismissed considering that a judgment by compromise was already
rendered in Civil Case No. 9242 through the Court’s
WHEREFORE, the September 5, 2001 Decision of the CA is REVERSED and SET ASIDE. Civil Case No. 9596 pending before the Angeles City RTC, Branch 60 is DISMISSED with PREJUDICE. Respondents and their counsel, Atty. Ernesto B. Francisco, Jr., are ordered to SHOW CAUSE, within ten (10) days from notice of this judgment, why they should not be held in contempt for violation of the rule against forum shopping. Costs against the respondents.
PRESBITERO J. VELASCO, JR.
LEONARDO A. QUISUMBING
ANTONIO T. CARPIO CONCHITA CARPIO MORALES
Associate Justice Associate Justice
DANTE O. TINGA
A T T E S T A T I O N
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.
LEONARDO A. QUISUMBING
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
 Rollo, pp. 28-37. The Decision was penned by Associate Justice Hilarion L. Aquino and concurred in by Associate Justices Jose L. Sabio, Jr. and Cancio C. Garcia, who is now a member of this Court.
SEC. 15. Clark and other Special Economic Zones.—Subject to the concurrence
by resolution of the local
government units directly affected, the President is hereby authorized to create by executive proclamation
a Special Economic Zone covering the lands occupied by the
 Gatmaytan v. Court of Appeals, G.R. No. 123332, February 3, 1997, 267 SCRA 487, 500; citing Ortigas & Company Limited Partnership v. Velasco, G.R. Nos. 109645 & 112564, July 25, 1994, 234 SCRA 455, 500.
 Manalo v. Court of Appeals, G.R. No.
v. Galang, G.R. No. 130228,
 Supra note 1, at 36-37.