Republic of the Philippines SUPREME COURT

Manila

EN BANC

G.R. No. L-23851 March 26, 1976

WACK WACK GOLF & COUNTRY CLUB, INC., plaintiff-appellant, vs. LEE E. WON alias RAMON LEE and BIENVENIDO A. TAN, defendants-appellees.

Leonardo Abola for appellant.

Alfonso V. Agcaoli & Ramon A. Barcelona for appellee Lee E. Won.

Bienvenido A. Tan in his own behalf.

CASTRO, C.J.:

This is an appeal from the order of the Court of First Instance of Rizal, in civil case 7656, dismissing the plaintiff-appellant's complaint of interpleader upon the grounds of failure to state a cause of action

and res judicata.

In its amended and supplemental complaint of October 23, 1963, the Wack Wack Golf & Country Club,

Inc., a non-stock, civic and athletic corporation duly organized under the laws of the Philippines, with principal office in Mandaluyong, Rizal (hereinafter referred to as the Corporation), alleged, for its first cause of action, that the defendant Lee E. Won claims ownership of its membership fee certificate 201, by virtue of the decision rendered in civil case 26044 of the CFI of Manila, entitled "Lee E. Won alias

Ramon Lee vs. Wack Wack Golf & Country Club,Inc." and also by virtue of membership fee certificate

201-serial no. 1478 issued on October 17, 1963 by Ponciano B. Jacinto, deputy clerk of court of the said CFI of Manila, for and in behalf of the president and the secretary of the Corporation and of the People's

Bank & Trust Company as transfer agent of the said Corporation, pursuant to the order of September

23, 1963 in the said case; that the defendant Bienvenido A. Tan, on the other hand, claims to be lawful owner of its aforesaid membership fee certificate 201 by virtue of membership fee certificate 201-serial no. 1199 issued to him on July 24, 1950 pursuant to an assignment made in his favor by "Swan, Culbertson and Fritz," the original owner and holder of membership fee certificate 201; that under

its articles of incorporation and by-laws the Corporation is authorized to issue a maximum of 400

membership fee certificates to persons duly elected or admitted to proprietary membership, all of which have been issued as early as December 1939; that it claims no interest whatsoever in the said membership fee certificate 201; that it has no means of determining who of the two defendants is the lawful owner thereof; that it is without power to issue two separate certificates for the same membership fee certificate 201, or to issue another membership fee certificate to the defendant Lee, without violating its articles of incorporation and by-laws; and that the membership fee certificate 201-serial no. 1199 held by the defendant Tan and the membership fee certificate 201-serial No. 1478 issued

to the defendant Lee proceed from the same membership fee certificate 201, originally issued in the name of "Swan, Culbertson and Fritz".

For its second cause of action. it alleged that the membership fee certificate 201-serial no. 1478 issued by the deputy clerk of court of court of the CFI of Manila in behalf of the Corporation is null and void because issued in violation of its by-laws, which require the surrender and cancellation of the outstanding membership fee certificate 201 before issuance may be made to the transferee of a new certificate duly signed by its president and secretary, aside from the fact that the decision of the CFI of Manila in civil case 26044 is not binding upon the defendant Tan, holder of membership fee certificate 201-serial no. 1199; that Tan is made a party because of his refusal to join it in this action or bring a separate action to protect his rights despite the fact that he has a legal and beneficial interest in the subject matter of this litigation; and that he is made a part so that complete relief may be accorded herein.

The Corporation prayed that (a) an order be issued requiring Lee and Tan to interplead and litigate their conflicting claims; and (b) judgment. be rendered, after hearing, declaring who of the two is the lawful owner of membership fee certificate 201, and ordering the surrender and cancellation of membership fee certificate 201-serial no. 1478 issued in the name of Lee.

In separate motions the defendants moved to dismiss the complaint upon the grounds of res judicata, failure of the complaint to state a cause of action, and bar by prescription. 1 These motions were duly opposed by the Corporation. Finding the grounds of bar by prior judgment and failure to state a cause of action well taken, the trial court dismissed the complaint, with costs against the Corporation.

In this appeal, the Corporation contends that the court a quo erred (1) in finding that the allegations in its amended and supplemental complaint do not constitute a valid ground for an action of interpleader, and in holding that "the principal motive for the present action is to reopen the Manila Case and collaterally attack the decision of the said Court"; (2) in finding that the decision in civil case 26044 of the CFI of Manila constitutes res judicata and bars its present action; and (3) in dismissing its action instead of compelling the appellees to interplead and litigate between themselves their respective claims.

The Corporations position may be stated elsewise as follows: The trial court erred in dismissing the complaint, instead of compelling the appellees to interplead because there actually are conflicting claims between the latter with respect to the ownership of membership fee certificate 201, and, as there is not Identity of parties, of subject-matter, and of cause of action, between civil case 26044 of the CFI of Manila and the present action, the complaint should not have been dismissed upon the ground of res judicata.

On the other hand, the appellees argue that the trial court properly dismissed the complaint, because, having the effect of reopening civil case 26044, the present action is barred by res judicata.

Although res judicata or bar by a prior judgment was the principal ground availed of by the appellees in moving for the dismissal of the complaint and upon which the trial court actually dismissed the complaint, the determinative issue, as can be gleaned from the pleadings of the parties, relates to the propriety and timeliness of the remedy of interpleader.

The action of interpleader, under section 120 of the Code of Civil Procedure, 2 is a remedy whereby a person who has personal property in his possession, or an obligation to render wholly or partially, without claiming any right to either, comes to court and asks that the persons who claim the said personal property or who consider themselves entitled to demand compliance with the obligation, be required to litigate among themselves in order to determine finally who is entitled to tone or the one thing. The remedy is afforded to protect a person not against double liability but against double vexation in respect of one liability. 3 The procedure under the Rules of Court 4 is the same as that under the Code of Civil Procedure, 5 except that under the former the remedy of interpleader is available regardless of the nature of the subject-matter of the controversy, whereas under the latter an interpleader suit is proper only if the subject-matter of the controversy is personal property or relates to the performance of an obligation.

There is no question that the subject matter of the present controversy, i.e., the membership fee certificate 201, is proper for an interpleader suit. What is here disputed is the propriety and timeliness of the remedy in the light of the facts and circumstances obtaining.

A stakeholder 6 should use reasonable diligence to hale the contending claimants to court. 7 He need not await actual institution of independent suits against him before filing a bill of interpleader. 8 He should file an action of interpleader within a reasonable time after a dispute has arisen without waiting to be sued by either of the contending claimants. 9 Otherwise, he may be barred by laches 10 or undue delay. 11 But where he acts with reasonable diligence in view of the environmental circumstances, the remedy is not barred. 12

Has the Corporation in this case acted with diligence, in view of all the circumstances, such that it may properly invoke the remedy of interpleader? We do not think so. It was aware of the conflicting claims of the appellees with respect to the membership fee certificate 201 long before it filed the present interpleader suit. It had been recognizing Tan as the lawful owner thereof. It was sued by Lee who also claimed the same membership fee certificate. Yet it did not interplead Tan. It preferred to proceed with the litigation (civil case 26044) and to defend itself therein. As a matter of fact, final judgment was rendered against it and said judgment has already been executed. It is not therefore too late for it to invoke the remedy of interpleader.

It has been held that a stakeholder's action of interpleader is too late when filed after judgment has been rendered against him in favor of one of the contending claimants, 13 especially where he had notice of the conflicting claims prior to the rendition of the judgment and neglected the opportunity to implead the adverse claimants in the suit where judgment was entered. This must be so, because once judgment is obtained against him by one claimant he becomes liable to the latter. 14 In once case, 15 it was declared:

The record here discloses that long before the rendition of the judgment in favor of relators against the Hanover Fire Insurance Company the latter had notice of the adverse claim of South to the proceeds of the policy. No reason is shown why the Insurance Company did not implead South in the former suit and have the conflicting claims there determined. The Insurance Company elected not to do so and that suit proceeded to a final judgment in favor of relators. The Company thereby became independently liable to relators. It was then too late for such company to invoke the remedy of interpleader

The Corporation has not shown any justifiable reason why it did not file an application for interpleader in civil case 26044 to compel the appellees herein to litigate between themselves their conflicting claims of ownership. It was only after adverse final judgment was rendered against it that the remedy of interpleader was invoked by it. By then it was too late, because to he entitled to this remedy the applicant must be able to show that lie has not been made independently liable to any of the claimants. And since the Corporation is already liable to Lee under a final judgment, the present interpleader suit is clearly improper and unavailing.

It is the general rule that before a person will be deemed to be in a position to ask for an order of intrepleader, he must be prepared to show, among other prerequisites, that he has not become independently liable to any of the claimants. 25 Tex. Jur. p. 52, Sec. 3; 30 Am. Jur. p. 218, Section 8.

It is also the general rule that a bill of interpleader comes too late when it is filed after judgment has been rendered in favor of one of the claimants of the fund, this being especially true when the holder of the funds had notice of the conflicting claims prior to the rendition of the judgment and had an opportunity to implead the adverse claimants in the suit in which the judgment was rendered. United Procedures Pipe Line Co. v. Britton, Tex. Civ. App. 264 S.W. 176; Nash v. McCullum, Tex. Civ. 74 S.W. 2d 1046; 30 Am. Jur. p. 223, Sec. 11; 25 Tex. Jur. p. 56, Sec. 5; 108 A.L.R., note 5, p. 275. 16

Indeed, if a stakeholder defends a suit filed by one of the adverse claimants and allows said suit to proceed to final judgment against him, he cannot later on have that part of the litigation repeated in an interpleader suit. In the case at hand, the Corporation allowed civil case 26044 to proceed to final judgment. And it offered no satisfactory explanation for its failure to implead Tan in the same litigation. In this factual situation, it is clear that this interpleader suit cannot prosper because it was filed much too late.

If a stakeholder defends a suit by one claimant and allows it to proceed so far as a judgment against him without filing a bill of interpleader, it then becomes too late for him to do so. Union Bank v. Kerr, 2 Md. Ch. 460; Home Life Ins. Co. v. Gaulk, 86 Md. 385, 390, 38 A. 901; Gonia v. O'Brien, 223 Mass. 177, 111 N.E. 787. It is one o the main offices of a bill of interpleader to restrain a separate proceeding at law by claimant so as to avoid the resulting partial judgment; and if the stakeholder acquiesces in one claimant's trying out his claim and establishing it at law, he cannot then have that part of the litigation repeated in an interpleader suit. 4 Pomeroy's Eq. Juris. No. 162; Mitfor's Eq. Pleading (Tyler's Ed.) 147 and 236; Langdell's Summary of Eq. Pleading, No. 162' De Zouche v. Garrizon, 140 Pa. 430, 21 A/450. 17

It is the general rule that a bill of interpleader comes too late when application therefore is delayed until after judgment has been rendered in favor of one of the claimants of the fund, and that this is especially true where the holder of the fund had notice of the conflicting claims prior to the rendition of such judgment and an opportunity to implead the adverse claimants in the suit in which such judgment was rendered. (See notes and cases cited 36 Am. Dec. 703, Am. St. Rep. 598, also 5 Pomeroy's Eq. Juris. Sec. 41.)

The evidence in the opinion of the majority shows beyond dispute that the appellant permitted the Parker county suit to proceed to judgment in favor of Britton with full notice of the adverse claims of the defendants in the present suit other than the assignees of the judgment (the bank and Mrs. Pabb) and no excuse is shown why he did not implead them in the suit. 18

To now permit the Corporation to bring Lee to court after the latter's successful establishment of his rights in civil case 26044 to the membership fee certificate 201, is to increase instead of to diminish the number of suits, which is one of the purposes of an action of interpleader, with the possibility that the latter would lose the benefits of the favorable judgment. This cannot be done because having elected to take its chances of success in said civil case 26044, with full knowledge of all the fact, the Corporation must submit to the consequences of defeat.

The act providing for the proceeding has nothing to say touching the right of one, after contesting a claim of one of the claimants to final judgment unsuccessfully, to involve the successful litigant in litigation anew by bringing an interpleader action. The question seems to be one of first impression here, but, in other jurisdictions, from which the substance of the act was apparently taken, the rule prevails that the action cannot be resorted to after an unsuccessful trial against one of the claimants.

It is well settled, both by reasons and authority, that one who asks the interposition of a court of equity to compel others, claiming property in his hands, to interplead, must do so before putting them to the test of trials at law. Yarborough v. Thompson, 3 Smedes & M. 291 (41 Am. Dec. 626); Gornish v. Tanner, 1 You. & Jer. 333; Haseltine v. Brickery, 16 Grat. (Va.) 116. The remedy by interpleader is afforded to protect the party from the annoyance and hazard of two or more actions touching the same property or demand; but one who, with knowledge of all the facts, neglects to avail himself of the relief, or elects to take the chances for success in the actions at law, ought to submit to the consequences of defeat. To permit an unsuccessful defendant to compel the successful plaintiffs to interplead, is to increase instead of to diminish the number of suits; to put upon the shoulders of others the burden which he asks may be taken from his own. ....'

It is urged, however, that the American Surety Company of New York was not in position to file an interpleader until it had tested the claim of relatrix to final judgment, and that, failing to meet with success, it promptly filed the interpleader. The reason why, it urges, it was not in such position until then is that had it succeeded before this court in sustaining its construction of the bond and the law governing the bond, it would not have been called upon to file an interpleader, since there would have been sufficient funds in its hands to have satisfied all lawful claimants. It may be observed, however, that the surety company was acquainted with all of the facts, and hence that it simply took its chances of meeting with success by its own construction of the bond and the law. Having failed to sustain it, it cannot now force relatrix into litigation anew with others, involving most likely a repetition of what has been decided, or force her to accept a pro rata part of a fund, which is far from benefits of the judgment. 19

Besides, a successful litigant cannot later be impleaded by his defeated adversary in an interpleader suit and compelled to prove his claim anew against other adverse claimants, as that would in effect be a collateral attack upon the judgment.

The jurisprudence of this state and the common law states is well-settled that a claimant who has been put to test of a trial by a surety, and has establish his claim, may not be impleaded later by the surety in an interpleader suit, and compelled to prove his claim again with other adverse claimants.American Surety Company of New York v. Brim, 175 La. 959, 144 So. 727; American Surety Company of New York v. Brim (In Re Lyong Lumber Company), 176 La. 867, 147 So. 18; Dugas v. N.Y. Casualty Co., 181 La. 322, 159 So. 572; 15 Ruling Case Law, 228; 33 Corpus Juris, 477; 4 Pomeroy's Jurisprudence, 1023; Royal Neighbors of America v. Lowary (D.C.) 46 F2d 565; Brackett v. Graves, 30 App. Div. 162, 51 N.Y.S. 895; De Zouche v. Garrison, 140 Pa. 430, 21 A. 450, 451;Manufacturer's Finance Co. v. W.I. Jones Co. 141 Ga., 519, 81 S.E. 1033; Hancock Mutual Life Ins. Co. v. Lawder, 22 R.I. 416, 84 A. 383.

There can be no doubt that relator's claim has been finally and definitely established, because that matter was passed upon by three courts in definitive judgments. The only remaining item is the value of the use of the land during the time that relator occupied it. The case was remanded solely and only for the purpose of determining the amount of that credit. In all other aspects the judgment is final. 20

It is generally held by the cases it is the office of interpleader to protect a party, not against double liability, but against double vexation on account of one liability. Gonia v. O'Brien, 223 Mass. 177, 111 N.E. 787. And so it is said that it is too late for the remedy of interpleader if the party seeking this relef has contested the claim of one of the parties and suffered judgment to be taken.

In United P.P.I. Co. v. Britton (Tex. Civ. App.) 264 S.W. 576. 578, it was said: 'It is the general rule that a bill of interpleader comes too late when application therefor is delayed until after judgment has been rendered in favor of one of the claimants of the fund, and this is especially true where the holder of the fund had notice of the conflicting claims prior to the rendition of such judgment and an opportunity to implead the adverse claimants in the suit in which such judgment was rendered. See notes and cases cited 35 Am. Dec. 703; 91 An. St. Rep. 598; also 5 Pomeroy's Equity Jurisprudence No. 41.'

The principle thus stated has been recognized in many cases in other jurisdictions, among which may be cited American Surety Co. v. O'Brien, 223 Mass. 177, 111 N.E. 787; Phillips v. Taylor, 148 Md. 157, 129 A. 18; Moore v. Hill, 59 Ga. 760, 761; Yearborough v. Thompson, 3 Smedes & M. (11 Miss.) 291, 41 Am. Dec. 626. See, also, 33 C.J. p. 447, No. 30; Nash v. McCullum, (Tex. Civ. App.) 74 S.W. 2d 1042, 1047.

It would seem that this rule should logically follow since, after the recovery of judgment, the interpleading of the judgment creditor is in effect a collateral attack upon the judgment. 21

In fine, the instant interpleader suit cannot prosper because the Corporation had already been made independently liable in civil case 26044 and, therefore, its present application for interpleader would in effect be a collateral attack upon the final judgment in the said civil case; the appellee Lee had already established his rights to membership fee certificate 201 in the aforesaid civil case and, therefore, this interpleader suit would compel him to establish his rights anew, and thereby increase instead of

diminish litigations, which is one of the purposes of an interpleader suit, with the possiblity that the benefits of the final judgment in the said civil case might eventually be taken away from him; and because the Corporation allowed itself to be sued to final judgment in the said case, its action of interpleader was filed inexcusably late, for which reason it is barred by laches or unreasonable delay.

ACCORDINGLY, the order of May 28, 1964, dismissing the complaint, is affirmed, at appellant's cost.

Teehankee, Makasiar, Antonio, Esguerra, Muñoz Palma, Aquino and Concepcion, Jr., JJ., concur.

Barredo and Martin, JJ., took no part.

Fernando, J., is on leave.

Footnotes

1 Only Tan interposed the ground of prescription.

2 Now Section 1, Rule 63, and formerly Sec. 1, Rule 14, of the Rules of Court.

3 Alvarez, et al. v. Commonwealth of the Philippines, 65 Phil. 202, 311-312.

4 Section 1 of Rule 63 of the Revised Rules of Court provides:

"Interpleader when proper. — Whenever conflicting claims upon the same subject-matter are or may be made against a person, who claims no interest whatsoever in the subject-matter, or an interest which in whole or in part is not disputed by the claimants, he may bring an action against the conflicting claimants to compel them to interplead and litigate their several claims among themselves."

5 Section 120 of the Code of Civil Procedure reads:

Interpleading. — Whenever conflicting claims are or may be made upon a person for or relating to personal property, or the performance of an obligation or any portion thereof, so that he may be made subject to several actions by different persons, unless the court intervenes, such person may bring an action against the conflicting claimants, disclaiming personal interest in the controversy, to compel them to interplead with one another and thereupon proceed to determine the rights of the several parties to the interpleading to the personal property or the performance of the obligation in controversy and shall determine the rights of all parties in interest."

6 As here used the term "stakeholder" means a person entrusted with the custody of property or money that is subject of litigation or of contention between rival claimants in which the holder claims no right or property interest.

7 Royal Neighbors of America v. Lowary, 46 F. 2d 565.

8 State of Texas v. State of Florida, 59 S. Ct. 563, 306 U.S. 389, 83 L.ed. 817, 121 A.L.R. 1179.

9 Dennis v. Equitable Life Assurance Soc., 88 S.W. 2nd 76.

10 U.S. Land & Investment Co. v. Buessey, 7 N.Y.S. 495.

11 Milton Warehouse Co. v. Basche Sage Hardware Co., 34 P 2d 338.

12 Connecticut General Life Ins. Co. v. Yaw, 53 F.2d 684.

13 Troy v. Troy, 16 P. 2d 290.

14 Yarborough v. Thompson, 41 Am. Dec. 626.

15 Nash, et al. v. McCullum, etc., et al., 74 S.W. 2d 1046, 1047.

16 Farmers State Bank of Meridian v. National Fire Ins. Co. of Hartford, Connecticut, et al., 169 S.W. 2d 545, 549.

17 Phillips, et al. v. Taylor, et al., 129 A. 18, 20.

18 United Producer's Pipe Line Company v. Britton, et al., 264 S.W. 576, 578.

19 American Surety Co. of New York v. Brim, 144 So. 727, 729-730.

20 Victor v. Lewis, et al., 161 So. 597, 598.

21 Benjamin v. Ernst, 83 Wash. 59, 79.

FIRST DIVISION

[G.R. No. 127913. September 13, 2001]

RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs. METRO CONTAINER

CORPORATION, respondent.

D E C I S I O N

KAPUNAN, J.:

Assailed in this petition for review on certiorari are the Decision, promulgated on 18 October 1996

and the Resolution, promulgated on 08 January 1997, of the Court of Appeals in CA-G.R. SP No. 41294.

The facts of the case are as follows:

On 26 September 1990, Ley Construction Corporation (LEYCON) contracted a loan from Rizal

Commercial Banking Corporation (RCBC) in the amount of Thirty Million Pesos (P30,000,000.00). The loan

was secured by a real estate mortgage over a property, located in Barrio Ugong, Valenzuela, Metro Manila

(now Valenzuela City) and covered by TCT No. V-17223. LEYCON failed to settle its obligations prompting RCBC to institute an extrajudicial foreclosure proceedings against it. After LEYCON’s legal attempts to forestall the action of RBCB failed, the foreclosure took place on 28 December 1992 with RCBC as

the highest bidder.

LEYCON promptly filed an action for Nullification of Extrajudicial Foreclosure Sale and Damages

against RCBC. The case, docketed as Civil Case No. 4037-V-93, was raffled to the Regional Trial Court (RTC) of Valenzuela, Branch 172. Meanwhile, RCBC consolidated its ownership over the property due to

LEYCON’s failure to redeem it within the 12-month redemption period and TCT No. V-332432 was issued

if favor of the bank. By virtue thereof, RCBC demanded rental payments from Metro Container Corporation (METROCAN) which was leasing the property from LEYCON.

On 26 May 1994, LEYCON filed an action for Unlawful Detainer, docketed as Civil Case No. 6202, against METROCAN before the Metropolitan Trial Court (MeTC) of Valenzuela, Branch 82.

On 27 May 1994, METROCAN filed a complaint for Interpleader, docketed as Civil Case No. 4398-V-94 before the Regional Trial Court of Valenzuela, Metro Manila, Branch 75 against LEYCON and RCBC to compel them to interplead and litigate their several claims among themselves and to determine which

among them shall rightfully receive the payment of monthly rentals on the subject property. On 04 July

1995, during the pre-trial conference in Civil Case No. 4398-V-94, the trial court ordered the dismissal of the case insofar as METROCAN and LEYCON were concerned in view of an amicable settlement they entered by virtue of which METROCAN paid back rentals to LEYCON.

On 31 October 1995, judgment was rendered in Civil Case No. 6202, which among other things, ordered METROCAN to pay LEYCON whatever rentals due on the subject premises. The MeTC decision became final and executory.

On 01 February 1996, METROCAN moved for the dismissal of Civil Case No. 4398-V-94 for having become moot and academic due to the amicable settlement it entered with LEYCON on 04 July 1995 and the decision in Civil Case No. 6202 on 31 October 1995. LEYCON, likewise, moved for the dismissal of the case citing the same grounds cited by METROCAN.

On 12 March 1996, the two motions were dismissed for lack of merit. The motions for reconsideration filed by METROCAN and LEYCON were also denied prompting METROCAN to seek relief from the Court of Appeals via a petition for certiorari and prohibition with prayer for the issuance of a temporary restraining order and a writ of preliminary injunction. LEYCON, as private respondent, also sought for the nullification of the RTC orders.

In its Decision, promulgated on 18 October 1996, the Court of Appeals granted the petition and set aside the 12 March 1996 and 24 June 1996 orders of the RTC. The appellate court also ordered the dismissal of Civil Case No. 4398-V-94. RCBC’s motion for reconsideration was denied for lack of merit in the resolution of 08 January 1997.

Hence, the present recourse.

RCBC alleged, that:

(1) THE DECISION OF THE METROPOLITAN TRIAL COURT IN THE EJECTMENT CASE BETWEEN METROCAN AND LEYCON DOES NOT AND CANNOT RENDER THE INTERPLEADER ACTION MOOT AND ACADEMIC.

(2) WHILE A PARTY WHO INITIATES AN INTERPLEADER ACTION MAY NOT BE COMPELLED TO LITIGATE IF HE IS NO LONGER INTERESTED TO PURSUE SUCH CAUSE OF ACTION, SAID PARTY MAY NOT UNILATERALLY CAUSE THE DISMISSAL OF THE CASE AFTER THE ANSWER HAVE BEEN FILED. FURTHER, THE DEFENDANTS IN AN INTERPLEADER SUIT SHOULD BE GIVEN FULL OPPORTUNITY TO LITIGATE THEIR RESPECTIVE CLAIMS.[1]

We sustain the Court of Appeals.

Section 1, Rule 63 of the Revised Rules of Court[2] provides:

Section 1. – Interpleader when proper. - Whenever conflicting claims upon the same subject matter are or may be made against a person, who claims no interest whatever in the subject matter, or an interest which in whole or in part is not disputed by the claimants, he may bring an action against the conflicting claimants to compel them to interplead and litigate their several claims among themselves.

In the case before us, it is undisputed that METROCAN filed the interpleader action (Civil Case No. 4398-V-94) because it was unsure which between LEYCON and RCBC was entitled to receive the payment of monthly rentals on the subject property. LEYCON was claiming payment of the rentals as lessor of the property while RCBC was making a demand by virtue of the consolidation of the title of the property in its name.

It is also undisputed that LEYCON, as lessor of the subject property filed an action for unlawful detainer (Civil Case No. 6202) against its lessee METROCAN. The issue in Civil Case No. 6202 is limited to the question of physical or material possession of the premises.[3] The issue of ownership is immaterial therein[4] and the outcome of the case could not in any way affect conflicting claims of ownership, in this case between RCBC and LEYCON. This was made clear when the trial court, in denying RCBC's "Motion for Inclusion x x x as an Indispensable Party" declared that "the final determination of the issue of physical possession over the subject premises between the plaintiff and the defendant shall not in any way affect RCBC's claims of ownership over the said premises, since RCBC is neither a co-lessor or co-lessee of the same, hence he has no legal personality to join the parties herein with respect to the issue of physical possession vis-à-vis the contract of lease between the parties."[5]As aptly pointed by the MeTC, the issue in Civil Case No. 6202 is limited to the defendant LEYCON's breach of the provisions of the Contract of Lease Rentals.[6]

Hence, the reason for the interpleader action ceased when the MeTC rendered judgment in Civil Case No. 6202 whereby the court directed METROCAN to pay LEYCON “whatever rentals due on the subject premises x x x.” While RCBC, not being a party to Civil Case No. 6202, could not be bound by the judgment therein, METROCAN is bound by the MeTC decision. When the decision in Civil Case No. 6202 became final and executory, METROCAN has no other alternative left but to pay the rentals to LEYCON. Precisely because there was already a judicial fiat to METROCAN, there was no more reason to continue with Civil Case No. 4398-V-94. Thus, METROCAN moved for the dismissal of the interpleader action not because it is no longer interested but because there is no more need for it to pursue such cause of action.

It should be remembered that an action of interpleader is afforded to protect a person not against double liability but against double vexation in respect of one liability.[7] It requires, as an indespensable

requisite, that “conflicting claims upon the same subject matter are or may be made against the plaintiff-in-interpleader who claims no interest whatever in the subject matter or an interest which in whole or in part is not disputed by the claimants.”[8] The decision in Civil Case No. 6202 resolved the conflicting claims insofar as payment of rentals was concerned.

Petitioner is correct in saying that it is not bound by the decision in Civil Case No. 6202. It is not a party thereto. However, it could not compel METROCAN to pursue Civil Case No. 4398-V-94. RCBC has other avenues to prove its claim. Is not bereft of other legal remedies. In fact, he issue of ownership can very well be threshed out in Civil Case No. 4037-V-93, the case for Nullification of Extrajudicial Foreclosure Sale and Damages filed by LEYCON against RCBC.

WHEREFORE, the petition for review is DENIED and the Decision of the Court of Appeals, promulgated on 18 October 1996, as well as its Resolution promulgated on 08 January 1997, are AFFIRMED.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Pardo, and Ynares-Santiago, JJ., concur. Puno, J., on official leave.

[1] Rollo, p. 25.

[2] Now Section 1, Rule 62 of the 1997 Rules of Civil Procedure.

[3] Lagrosa vs. Court of Appeals, 312 SCRA 298 (1999); Arcal vs. Court of Appeals, 285 SCRA 34 (1998).

[4] Carreon vs. Court of Appeals, 291 SCRA 78 (1998).

[5] Rollo, p. 79.

[6] Id., at 76.

[7] Wack Wack Golf and Country Club, Inc. vs. Won, 70 SCRA 165 (1976).

[8] Lim vs. Continental Development Corporation, 69 SCRA 349 (1976) citing Beltran vs. People’s Homesite and Housing Corporation, 29 SCRA 145 (1969).

Republic of the Philippines SUPREME COURT

Manila

FIRST DIVISION

G.R. No. L-41818 February 18, 1976

ZOILA CO LIM, petitioner, vs. CONTINENTAL DEVELOPTMENT CORPORATION, respondent.

G.R. No. L-41831 February 18, 1976

CONTINENTAL DEVELOPMENT CORPORATION, petitioner, vs. BENITO GERVASIO TAN and ZOILA CO LIM, respondents.

Jose F. Aguirre for Zoila Co Lim.

Ismael T. Almeda for Continental Development Corporation.

Joaquin G. Chung, Jr. for Benito Gervasio Tan.

MAKASIAR, J.:

These two petitions seek a review of the order dated March 12, 1974 of the Judge presiding Branch XXVI

of the Manila Court of First Instance, dismissing petitioner Continental Development Corporation's

complaint. The COURT resolved to treat these petitions as special civil actions, the petition to dismiss filed by the respondent Benito Gervasio Tan as answer and the cases as submitted for decision. On November 26, 1973, herein petitioner Continental Development Corporation filed a complaint for interpleader against the defendants Benito Gervasio Tan and Zoila Co Lim, alleging among others:

2. That in the books of the plaintiff, there appears the name of the defendant Benito Gervasio Tan as one of its stockholders initially sometime in 1975 with fifty (50) common shares covered by of stock Nos. 12 and 13, and subsequently credited with (75) shares by way of dividends covered by certificates of stock Nos. 20 and 25, or an outstanding total stockholding of one hundred twenty five (125) common shares of the par value of Two Hundred Fifty Pesos (P250.00) each.

3. That said defendant Benito Gervasio Tan, personally or through his lawyer, has since

December, 1972, been demanding from by letters and telegrams, the release to him of the certificates stock aforesaid but which the plaintiff has not done so far and is prevented from doing so because of the vehement and adverse claim thereto by the other defendant, Zoila Co Lim.

4. That the defendant Zoila Co Lim, by letters sent to the plaintiff through her counsel,

has laid claim and persists in claiming the very same shares of stock being demanded by

the other defendant alleging that said stocks really belonged to her mother So now already deceased, and strongly denying her proclaim to the same.

5. That both defendants, through their respective lawyers, threaten to take punitive measures against the plaintiff company should it take any steps that may prejudice their respective interests in so far as the stocks in question are concerned.

6. That plaintiff is not sufficiently informed of the right of the respective claimants and therefore not in a position to determine justly and correctly their conflicting claims.

7. That the plaintiff company has no interest of any kind in said stocks and is ready and willing to deliver the corresponding certificates of ownership to whomsoever as this Honorable Court may direct. (pp. 22-23, rec.)

and praying that the defendants be directed to interplead and litigate their respective claims over the aforementioned shares of stock and to determine their respective rights thereto.

On January 7, 1974, herein respondent Benito Gervasio Tan, as defendant in the lower court, filed

a motion to dismiss the complaint, on the ground, inter alia, that paragraph 2 of the complaint itself

states that the shares of stock in question are recorded in the books of petitioner in the same of defendant Benito Gervasio Tan, who should therefore be declared owner thereof pursuant to Section 52 of the Corporation Law (pp. 25-30, rec.).

On January 14, 1974, defendant Zoila Co Lim filed her answer expressly admitting paragraph 2 of the complaint, but alleging that the said shares of stock had previously been delivered in trust to the defendant Benito Gervasio Tan for her (Zoila's) mother, the late So Bi, alias Tawa, the actual owner of the shares of stock; that now Benito GervasioTan would want the re-issuance and release to him of new replacement certificates, which petitioner has not so far done; and that as the daughter and heir of said So Bi, alias Tawa, she is now the owner of the said shares of stock, which should be delivered to her (pp. 31-33, rec.).

On January 22, 1974, petitioner Continental Development Corporation filed its opposition to Benito's motion to dismiss (pp. 34-40, G.R. No. L-41831).

In the questioned order dated March 12, 1974, the trial judge dismissed the complaint for lack of cause of action, invoking Section 35 of Act No. 1459, as amended, otherwise known as the Corporation Law (pp. 4142, G.R. No. L-41831).

Defendant Zoila Co Lim and herein petitioner as plaintiff, filed their respective motions for reconsideration of the aforesaid order (pp. 43-49, G.R. No. L-41831), to which the defendant Benito Gervasio Tan filed his rejoinder (pp. 50-61, G.R. No. L-41831). Said motions were denied in an order dated July 3, 1974.

Hence these petitions by Continental Development Corporation and Zoila Co Lim.

It is patent from the pleadings in the lower court that both defendants Benito Gervasio Tan and Zoila Co Lim assert conflicting rights to the questioned shares of stock. Precisely in his motion to dismiss the complaint for interpleader, defendant Benito Gervasio Tan states that petitioner corporation, through its Vice-President, notified him on July 23, 1973 "that the shares of stock are in the possession of its treasurer, Mr. Ty Lim, and urged defendant to directly obtain them from the former, who allegedly was

on vacation at the time. Mr. Ty Lim, on August 30, 1973, through counsel, replied to the defendant Benito Gervasio Tan that said certificates were not in his possession but surmised, without reference to any record, that the same might have been delivered to the deceased So Bi. And, on October 29, 1973, same counsel of Mr. Ty Lim, wrote the corporation, in behalf of defendant Zoila Co Lim, alleged heir of So Bi, claiming ownership of the stocks" (pp. 26, 27, G.R. No. L-41831). Defendant Zoila Co Lim, on the other hand. as heretofore stated, claims sole-ownership of said shares of stock as inheritance from her late mother So Bi, alias Tawa.

And petitioner Continental Development Corporation expressly stated in the complaint that both defendants, through their respective lawyers, threatened to take punitive measures against it should it adopt any steps that may prejudice then respective interests in the shares of stock in question; and that it is not sufficiently informed of the rights of the respective claimants and therefore not in a position to determine justly and correctly their conflicting claims (pars. 5, 6 and 7 of the complaint, p. 23, rec.)

And in its opposition to the motion to dismiss its complaint, petitioner Continental Development Corporation s that it might be liable to one defendant should it comply with the demands of the other with respect to the transfer or entry of the shares of stock in the books of the corporation.

Since there is an active conflict of interests between the two defendants, now herein respondent Benito Gervasio Tan and petitioner Zoila Co Lim, over the disputed shares of stock, the trial court gravely abused its discretion in dismissing the complaint for interpleader, which practically decided ownership of the shares of stock in favor of defendant Benito Gervasio Tan. The two defendants, now respondents in G.R. No. L-41831, should be given full opportunity to litigate their respective claims.

Rule 63, Section 1 of the New Rules of Court tells us when a cause of action exists to support a complaint in interpleader:

Whenever conflicting claims upon the same subject matter are or may be made against a person, who claims no interest whatever in the subject matter, or an interest which in whole or in part is not disputed by the complainants to compel them to interplead and litigate their several claims among themselves (Italics supplied).

This provision only requires as an indispensable requisite:

that conflicting claims upon the same subject matter are or may be made against the plaintiff-in-interpleader who claims no interest whatever in the subject matter or an interest which in whole or in part is not disputed by the claimants (Beltran vs. People's Homesite and Housing Corporation, No. L-25138,29 SCRA 145).

This ruling, penned by Mr. Justice Tee the principle in Alvarez vs. Commonwealth (65 Phil. 302), that

The action of interpleader under section 120, is a remedy whereby a person who has personal property in his possession, or an obligation to render wholly or partially, without claiming any right in both comes to court and asks that the persons who claim the said personal property or who consider themselves entitled to demand compliance with the obligation, be required to litigate among themselves, in order to determine

finally who is entitled to one or the other thing. The remedy is afforded not to protect a person against a double liability but to protect him against a double vexation in respect of one liability'

An interpleader merely demands as a sine qua non element

... that there be two or more claimants to the fund or thing in dispute through separate

and different interests. The claims must be adverse before relief can be granted and the

parties sought to be interpleaded must be in a position to make effective claims (33 C.J. 430).

Additionally, the fund, thing, or duty over which the parties assert adverse claims must be one and the same and derived from the same source (33 C.J., 328; Martin, Rules of Court, 1969 ed., Vol. 3, 133-134; Moran, Rules of Court, 1970 ed., Vol. 3, 134136).

Indeed, petitioner corporation is placed in the same situation as a lessee who does not know the person to whom he will pay the rentals due to the conflicting claims over the property leased, or a sheriff who finds himself puzzled by conflicting claims to a property seized by him. In these examples, the lessee (Pangkalinawan vs. Rodas, 80 Phil. 28) and the sheriff Sy-Quia vs. Sheriff, 46 Phil. 400) were each allowed to file a complaint in interpleader to determine the respective rights of the claimants.

WHEREFORE, THE PETITIONS ARE HEREBY GRANTED; THE ORDER DATED MARCH 12, 1974 DISMISSING THE COMPLAINT AND THE ORDER DATED JULY 3, 1974 DENYING THE MOTION FOR RECONSIDERATION OF THE PETITIONERS IN THESE TWO CASES ARE HEREBY SET ASIDE. WITH COSTS AGAINST RESPONDENT BENITO GERVASIO TAN.

Teehankee (Chairman), Esguerra, Muñoz Palma and Martin, JJ., concur.