Wilfredo and Swarnie Aromin, petitioners vs.

PAULO FLORESCA, VICTOR FLORESCA, JUANITO FLORESCA and LILIA FLORESCA-ROXAS, Respondents. G.R. No. 160994 July 27, 2006 FACTS: The present case arose from three civil cases pending before the RTC of Bauang, La Union which originated when respondent Paulo Floresca sold several portions of Cad. Lot No. 4894 to petitioner spouses Aromin as evidenced by several deeds of sale executed by both parties. All these deeds of sale were not registered with the Register of Deeds. The first civil case was filed by the Aromin spouses for specific performance against Paulo to compel the latter to formally execute the corresponding deed of sale covering the entire property. Respondents siblings Victor, Juanito and Lilia filed a Motion for Leave to Intervene alleging that although Cad. Lot No. 4894 was declared in the name of Paulo alone in the tax declarations, it was actually owned in common by him and the siblings. It was further alleged that the said land was the subject of an action for partition involving Paulo and the siblings before the RTC. Based on a compromise agreement, it was later on declared that Paulo will have one-half share over the lot and the other half to the siblings. The second civil case was an action for quieting of title filed by the spouses Aromin against the siblings. In their complaint, the spouses Aromin alleged that they are the owners and in actual physical possession of the subject property which they purchased from Paulo. They alleged further that the judgment with regard to the partition based on compromise agreement is not binding on them as they were not parties thereto. On the other hand, the siblings raised the affirmative defense that the judgment had already become final and executory and that the spouses had no cause of action because they have not acquired any legal title over the portions of the subject property sold to them by Paulo. The third case was filed by the siblings against Paulo and spouses Aromin for the annulment of sale. The siblings alleged that Paulo fraudulently secured Tax Declarations in his name to the exclusion of the siblings who were the co-owners of the subject lot. They further alleged that despite the spouses knowledge that the lot was the subject of a complaint for partition, they still executed the deed of sale. The spouses Aromin raised the defense that they were buyers in good faith as they believed that Paulo was the sole owner of the subject property. The spouses Aromin further alleged that they have been in actual and physical possession thereof, and have been actually appropriating for themselves the fruits thereof for the past years. The trial court decided in favor of spouses Aromin. In nullifying the judicial compromise in the action for partition, the RTC gave credence on the testimony of Paulo that the agreement does not include the properties he sold to the spouses and that the siblings failed to adduce any evidence to support their claim that the spouses were purchasers in bad faith. The appellate court, however, reversed the decision of the RTC explaining that the judicial compromise has the effect of res judicata and is immediately executory and the court cannot set aside such judgment without having declared in an incidental hearing that such a compromise is vitiated by any of the grounds for nullity enumerated in Article 2038 of the Civil Code. It also disclaimed petitioners claim of good faith due to their failure to inquire with the Register of Deeds about the ownership of the subject property but it declared the sale valid as to the one-half share of Paulo. ISSUE: Whether or not petitioners are bound by the compromise agreement, particularly on the question of the co-ownership of the subject property, and thus barred by res judicata. HELD: Yes. Petitioners are Paulos privies-in-interest or successors-in-interest who acquired most of the portions of the subject property after the filing of the complaint of partition as such they are bound by the agreement. To invoke res judicata, absolute identity of parties is not required. A substantial identity of parties is sufficient. And there is substantial identity of parties when there is a community of interest

between a party in the first case and that in the second one, even if the latter party was not impleaded in the first. As his privies-in-interest or successors-in-interest, the petitioners clearly had a community of interest with that of Paulo who was party to the action for partition. The Court further held that having established that the subject property was owned in common by Paulo and the siblings, it necessarily follows that Paulo could only dispose to the petitioners his share in the subject property. Following the well-established principle that the binding force of a contract must be recognized as far as it is legally possible to do so, the disposition affects only Paulos share pro indiviso, and the transferee, in this case the petitioners, gets only what corresponds to Paulos share in the partition of the subject property.