FACTS:

The case involves a Petition for Review on Certiorari, filed by petitioner Central Visayas Finance Corporation, against respondents Eliezer and Leila Adlawan. In 1996, respondents obtained a loan from petitioner and failed to pay it. Petitioner filed an action for replevin to recover possession of a dump truck held as collateral. The trial court ruled in favor of petitioner and ordered the delivery of the dump truck. Petitioner foreclosed on the chattel mortgage and bought the truck at auction. A few years later, petitioner filed another case, this time seeking to collect the supposed unpaid balance of the loan from respondents and hold Eliezer, Sr. and Elena Adlawan liable under their continuing guaranty. The trial court dismissed the case on the ground of res judicata, stating that the issue had been previously settled in the replevin case. Petitioner appealed to the Court of Appeals but was denied. The CA ruled that res judicata applies because the relief sought in both cases is founded on the same facts. Petitioner then filed a Petition for Review on Certiorari before the Supreme Court.

The plaintiff asserts that there is no identity of parties because Elena Adlawan was not sued in the first case. However, the court stresses that only substantial identity is necessary for the application of res judicata. In this case, Elena Adlawan, acting as a guarantor, has the same interest and defenses as the principal debtors. Her exclusion in the first case does not affect the application of res judicata. The plaintiff also claims damages and other fees, believing they have a right to institute a deficiency judgment against the defendants. However, the court denies this claim, citing no bad faith and no reason to reverse the trial court's findings. The court affirms the trial court's dismissal of the appeal. Petitioner moves to reconsider, but the Court of Appeals stands its ground. The petitioner files a petition with the Supreme Court, arguing that res judicata does not apply and that the cited case of PCI Leasing does not apply. The respondents counter that the petition is a rehash of arguments presented in previous courts and that res judicata applies.

ISSUES:

1. Did the Court of Appeals err in applying the doctrine of res judicata to the amended complaint for deficiency judgment given the alleged absence of identity of parties and similarity of causes of action?

2. Did the Court of Appeals err in applying the decision in PCI Leasing vs. Dai to the present case?

RULING:

1. The Court ruled that the doctrine of res judicata applies since the judgment in the earlier replevin case bars the subsequent deficiency suit.

2. The Court upheld the application of PCI Leasing vs. Dai, affirming that a replevin action, which includes possession and, alternatively, monetary recovery, precludes future deficiency claims if not pursued during the initial case.

PRINCIPLES:

• Res Judicata: For res judicata to apply, four requisites must be met: a final judgment on the merits, rendered by a court with jurisdiction, and identity of parties, subject matter, and cause of action between the first and second actions.

• Single Cause of Action Rule: A creditor cannot split a single cause of action by filing separate complaints for recovery of debt and foreclosure of the mortgage.

• Accessory Contract of Guaranty: The obligation of the guarantor is extinguished when the principal obligation is satisfied or for other causes that extinguish the principal obligation.

• Mixed Action: Replevin is a mixed action, partly in rem for recovery of specific property and partly in personam for damages, barring subsequent actions related to the same cause if not pursued within the original case.