CasesSCASet12013

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Special ProceedingsCases Rule 62-65

Hernandez, Frauline Camille R.

RULE 62 INTERPLEADER

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

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

SYNOPSIS

Lee E. Won and Bienvenido Tan both claimed ownership over Wack Wack Golf and CountryClub's membership fee certificate 201, the former, by virtue of the decision rendered in CivilCase 26044 of the Court of First Instance of Manila and of membership fee certificate 201-serialNo. 1478 issued pursuant to a court order in said case, and the latter by virtue of membershipfee certificate 201-serial No. 1199 issued to him in July 1950 pursuant to an assignment madein his favor by the original owner and holder thereof. The corporation filed an action ofinterpleader in the court a quoto have defendants litigate among themselves their conflictingclaims of ownership. In separate motions, the defendants moved to dismiss the complaint uponthe grounds of res judicata, failure of the complainant to state a cause of action, and bar byprescription. Finding the first two grounds well taken, the trial court dismissed the complain.

Hence, this appeal, the determinative issue of which is the timeless of the remedy ofinterpleader availed of by the Corporation.

The Supreme Court held that because the Corporation had allowed itself to be sued to finaljudgment and be made independently liable in civil case 26044 and the appellee Lee hadalready established in said case his rights to membership fee certificate 201, its action ofinterpleader is barred by laches.

Order affirmed.

SYLLABUS

1.SPECIAL CIVIL ACTION; INTERPLEADER; A REMEDY TO DETERMINE CONFLICTING CLAIMSON PROPERTY.The actions of interpleader under Section 120 of the Code of Civil Procedureis a remedy whereby a person who has personal property in his posession, or an obligation torender wholly or partially, without claiming any right to either, comes to court and asks that thepersons who claim the said personal property or who consider themselves entitled to demandcompliance with the obligation, be required to litigate among themselves in order to determinefinally who is entitled to one or other thing. The remedy is afforded to protect a person notagainst double liability but against double vexation in respect of one liability.

2.ID.; ID.; PROCEDURE UNDER THE CODE OF CIVIL PROCEDURE AND NEW RULES OF CDISTINGUISHED.The procedure under Section 1 of Rule 63 of the Revised Rules of Cothe same as that under Section 120 of the Code of Civil Procedure, except that under theformer the remedy of interpleader is available regardless of the nature of the subject-mathe controversy, whereas under the latter an interpleader suit is proper only if the subjecmatter of the controversy is personal property or relates to the performance of an obligat

3.ID.; ID.; ACTION TO BE FILED WITHIN A REASONABLE TIME AFTER A DISPUTE ARISEA stakeholder, meaning a person entrusted with the custody of property or money that issubject of ligitation or of contention between rival claimants in which the holder claims noor property interest, should use reasonable diligence to hale the contending claimants to He need not await actual institution of independent suits against him before filing a bill ofinterpleader. He should file an action of interpleader within a reasonable time after a disphas arisen without waiting to be sued by either of the contending claimants. Otherwise, hbe barred by laches or undue delay. But where he acts with reasonable diligence in view environmental circumstances, the remedy is not barred.

4.ID.; ID.; ACTION BARRED IF NOT TIMELY MADE.When a stakeholder's action is filejudgment has been rendered against him in favor of one of the contending claimants, eswhere he had notice of the conflicting claims prior to the rendition of the judgment andneglected the opportunity to implead the adverse claimants in the suit where judgment wentered, the interpleader suit is too late and will be barred by laches or undue delay.

5.ID.; ID.; ID.; ID.; INSTANT CASE. The Corporation was aware of the conflicting claimthe parties with respect to the membership fee certificate 201 long before it filed itsinterpleader suit. It had been recognizing Tan as the lawful owner thereof. It was sued bywho also claimed the same membership fee certificate. Yet it did not interplead Tan. Itpreferred to proceed with the litigation (civil case 26004) and to defend itself therein. Finjudgment was rendered against it and said judgment has already been executed. It is notherefore too late for it to invoke the remedy of interpleader.

6.ID.; ID.; ID.; PARTY WHO HAS SUCCESSFULLY ESTABLISHED A RIGHT CANNOT BE LAIMPLEADED.A successful litigant cannot later be impleaded by his defeated adversaryinterpleader suit and compelled to prove his claim anew against other adverse claimants,

that would in effect be a collateral attack upon the judgment.

D E C I S I O NCASTRO, J p:


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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 statea 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 ofthe 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 claimsownership of its membership fee certificate 201, by virtue of the decision rendered in civil case26044 of the CFI of Manila, entitled "Lee E. Won aliasRamon Lee vs. Wack Wack Golf &Country Club, Inc." and also by virtue of membership fee certificate 201-serial no. 1478 issuedon October 17, 1963 by Ponciano B. Jacinto, deputy clerk of court of the said CFI of Manila, forand 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 September23, 1963 in the said case; that the defendant Bienvenido A. Tan, on the other hand, claims tobe lawful owner of its aforesaid membership fee certificate 201 by virtue of membership feecertificate 201-serial no. 1199 issued to him on July 24, 1950 pursuant to an assignment madein his favor by "Swan, Culbertson and Fritz," the original owner and holder of membership feecertificate 201; that under its articles of incorporation and by-laws the Corporation is authorizedto issue a maximum of 400 membership fee certificates to persons duly elected or admitted toproprietary membership, all of which have been issued as early as December 30, 1939; that it

claims no interest whatsoever in the said membership fee certificate 201; that it has no meansof determining who of the two defendants is the lawful owner thereof; that it is without powerto issue two separate certificates for the same membership fee certificate 201, or to issueanother membership fee certificate to the defendant Lee, without violating its articles ofincorporation and by-laws; and that the membership fee certificate 201-serial no. 1199 held bythe defendant Tan and the membership fee certificate 201-serial no. 1478 issued to thedefendant Lee proceed from the same membership fee certificate 201, originally issued in thename of "Swan, Culbertson and Fritz"

For its second cause of action, it alleged that the membership fee certificate 201-serial no. 1478issued by the deputy clerk of court of the CFI of Manila in behalf of the Corporation is null andvoid because issued in violation of it s by-laws, which require the surrender and cancellation ofthe 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 thedecision of the CFI of Manila in civil case 26044 is not binding upon the defendant Tan, holderof membership fee certificate 201-serial no. 1199; that Tan i s made a party because of hisrefusal to join it in this action or bring a separate action to protect his rights despite the factthat he has a legal and beneficial interest in the subject-matter of this litigation; and that he ismade a party so that complete relief may be accorded herein.

The Corporation prayed that (a) an order be issued requiring Lee and Tan to interplead alitigate their conflicting claims; and (b) judgment be rendered, after hearing, declaring wthe two is the lawful owner of membership fee certificate 201, and ordering the surrendecancellation 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 ofjudicata, failure of the complaint to state a cause of action, and bar by prescription.1Th

motions were duly opposed by the Corporation. Finding the grounds of bar by prior judgmand failure to state a cause of action well taken, the trial court dismissed the complaint, wcosts against the Corporation.

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

The Corporation's position may be stated elsewise as follows: The trial court erred in dism

the complaint, instead of compelling the appellees to interplead because there actually arconflicting claims between the latter with respect to the ownership of membership feecertificate 201, and, as there is no identity of parties, of subject-matter, and of cause of abetween civil case 26044 of the CFI of Manila and the present action, the complaint shouhave been dismissed upon the ground of res judicata.

On the other hand, the appellees argue that the trial court properly dismissed the complabecause, having the effect of reopening civil case 26044, the present action is barred byjudicata.

Although res judicataor bar by a prior judgment was the principal ground availed of by thappellees in moving for the dismissal of the complaint and upon which the trial court actudismissed the complaint, the determinative issue, as can be gleaned from the pleadings oparties, relates to the propriety and timeliness of the remedy of the interpleader.

The action of interpleader, under section 120 of the Code of Civil Procedure,2is a remedwhereby a person who has personal property in his possession, or an obligation to renderwholly or partially, without claiming any right to either, comes to court and asks that thepersons who claim the said personal property or who consider themselves entitled to demcompliance with the obligation, be required to litigate among themselves in order to dete
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finally who is entitled to one or the other thing. The remedy is afforded to protect a person notagainst double liability but against double vexation in respect of one liability.3The procedureunder the Rules of Court4is the same as that under the Code of Civil Procedure,5except thatunder 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 i f thesubject-matter of the controversy is personal property or relates to the performance of anobligation.

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

A stakeholder6should use reasonable diligence to hale the contending claimants tocourt.7He need not await actual institution of independent suits against him before filing a billof interpleader.8He should file an action of interpleader within a reasonable time after adispute has arisen without waiting to be sued by either of the contendingclaimants.9Otherwise, he may be barred by laches10or undue delay.11But where he actswith reasonable diligence in view of the environmental circumstances, the remedy is notbarred.12

Has the Corporation in this case acted with diligence, in view of all the circumstances, such thatit may properly invoke the remedy of interpleader? We do not think so. It was aware of theconflicting claims of the appellees with respect to the membership fee certificate 201 longbefore it filed the present interpleader suit. It had been recognizing Tan as the lawful ownerthereof. It was sued by Lee who also claimed the same membership fee certificate. Yet it didnot interplead Tan. It preferred to proceed with the l itigation (civil case 26044) and to defenditself therein. As a matter of fact, final judgment was rendered against it and said judgment hasalready been executed. It is now 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 judgmenthas been rendered against him in favor of one of the contending claimants,13especially wherehe had notice of the conflicting claims prior to the rendition of the judgment and neglected theopportunity to implead the adverse claimants in the suit where judgment was entered. Thismust be so, because once judgment is obtained against him by one claimant he becomes liable

to the latter.14In one case,15it was declared:

"The record here discloses that long before the rendition of the judgment infavor of relators against the Hanover Fire Insurance Company the latter hadnotice of the adverse claim of South to the proceeds of the pol icy. No reasonis shown why the Insurance Company did not implead South in the former

suit and have the conflicting claims there determined. The InsuranceCompany elected not to do so and that suit proceeded to a final judgment infavor of relators. The Company thereby became independently liable torelators. It was then too late for such company to invoke the remedy ofinterpleader."

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 themsetheir conflicting claims of ownership. It was only after adverse final judgment was renderagainst it that the remedy of interpleader was invoked by it. By then it was too late, becabe entitled to this remedy the applicant must be able to show that he has not been madeindependently liable to any of the claimants. And since the Corporation is already liable tounder 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 positionto ask for an order of interpleader, he must be prepared to show, amongother prerequisites, that he has not become independently liable to any ofthe 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 isfiled after judgment has been rendered in favor of one of the claimants of thefund, this being especially true when the holder of the funds had notice ofthe conflicting claims prior to the rendition of the judgment and had anopportunity to implead the adverse claimants in the suit in which thejudgment was rendered. United Producers 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 ssuit to proceed to final judgment against him, he cannot later on have that part of the litirepeated in an interpleader suit. In the case at hand, the Corporation allowed civil case 2to proceed to final judgment. And i t offered no satisfactory explanation for its failure to imTan in the same litigation. In this factual situation, it is clear that this interpleader suit ca

prosper because it was filed much too late.

"If a stakeholder defends a suit by one claimant and allows it to proceed sofar as a judgment against him without filing a bill of interpleader, it thenbecomes too late for him to do so. Union Bank v. Kerr, 2 Md. Ch. 460; HomeLife Ins. Co. v. Gaulk, 86 Md. 385, 390, 38 A. 901; Gonia v. O'Brien, 223
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Mass. 177, 111 N.E. 787. It is one of the main offices of a bill of interpleaderto restrain a separate proceeding at law by claimant so as to avoid theresulting partial judgment; and if the stakeholder acquiesces in oneclaimant's trying out his claim and establishing it at law, he cannot then havethat part of the litigation repeated in an interpleader suit. 4 Pomeroy's Eq.Juris. # 162; Mitfor's Eq. Pleading (Tyler's Ed.) 147 and 236; Langdell'sSummary of Eq. Pleading, # 162; De Zouche v. Carrison, 140 Pa. 430, 21 A.

450."17

"It is the general rule that a bill of interpleader comes too late whenapplication therefor is delayed until after judgment has been rendered infavor of one of the claimants of the fund, and that this is especially truewhere the holder of the fund had notice of the conflicting claims prior to therendition of such judgment and an opportunity to implead the adverseclaimants in the suit in which such judgment was rendered. (See notes andcases 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 theappellant permitted the Parker county suit to proceed to judgment in favor ofBritton with full notice of the adverse claims of the defendants in the presentsuit other than the assignees of that judgment (the bank and Mrs. Pabb) andno excuse is shown why he did not implead them in that suit."18

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

"The act providing for the proceeding has nothing to say touching the right ofone, after contesting a claim of one of the claimants to final judgmentunsuccessfully, to involve the successful litigant in litigation anew by bringing

an interpleader action. The question seems to be one of first impressionhere, but, in other jurisdictions, from which the substance of the act wasapparently taken, the rule prevails that the action cannot be resorted to afteran unsuccessful trial against one of the claimants.

"'It is well settled, both by reasons and authority, that one who asks theinterposition of a court of equity to compel others, claiming property in hishands, to interplead, must do so before putting them to the test of trials atlaw. 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 theannoyance and hazard of two or more actions touching the same property or

demand; but one who, with knowledge of all the facts, neglects to availhimself of the relief, or elects to take the chances for success in the actionsat law, ought to submit to the consequences of defeat. To permit anunsuccessful defendant to compel the successful plaintiffs to interplead, is toincrease instead of to diminish the number of suits; to put upon theshoulders 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 wasnot in position to file an interpleader until it had tested the claim of relatrix tofinal judgment, and that, failing to meet with success, it promptly filed theinterpleader. The reason why, it urges, it was not in such position until thenis that had it succeeded before this court in sustaining its construction of thebond 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 handsto have satisfied all lawful claimants. It may be observed, however, that thesurety company was acquainted with all of the facts, and hence that it simplytook its chances of meeting with success by its own construction of the bondand the law. Having failed to sustain it, it cannot now force relatrix intolitigation anew with others, involving most likely a repetition of what hasbeen decided, or force her to accept a pro rata part of a fund, which is farfrom benefits of the judgment."19

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

"The jurisprudence of this state and the common law states is well-settledthat a claimant who has been put to test of a trial by a surety, and hasestablished his claim, may not be impleaded later by the surety in aninterpleader suit, and compelled to prove his claim again with other adverseclaimants. American Surety Company of New York v. Brim, 175 La. 959, 144So. 727; American Surety Company of New York v. Brim (In Re Lyong
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Lumber Company), 176 La. 867, 147 So. 18; Dugas v. N.Y. Casualty Co., 181La. 322, 159 So. 572, 15 Ruling Case Law, 228; 33 Corpus Juris, 477; 4Pomeroy's Equity Jurisprudence (4th Ed.) 3172; 2 Lawrence on EquityJurisprudence, 1023; Royal Neighbors of America v. Lowary (D.C.) 46 F2d565; 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 definitelyestablished, because that matter was passed upon by three courts indefinitive judgments. The only remaining item is the value of the use of theland during the time that relator occupied it. The case was remanded solelyand only for the purpose of determining the amount of that credit. In allother respects the judgment is final."20

"It is generally held by the cases it is the office of interpleader to protect aparty, not against double liability, but against double vexation on account ofone liability. Gonia v. O'Brien, 223 Mass. 177, 111 N.E. 787. And so it is saidthat it is too late for the remedy of interpleader if the party seeking this reliefhas 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 wassaid: 'It is the general rule that a bill o f interpleader comes too late whenapplication therefor is delayed until after judgment has been rendered infavor of one of the claimants of the fund, and this i s especially true wherethe holder of the fund had notice of the conflicting claims prior to therendition of such judgment and an opportunity to implead the adverseclaimants in the suit in which such judgment was rendered. See notes andcases cited 35 Am. Dec. 703; 91 An. St. Rep. 598; also 5 Pomeroy's EquityJurisprudence # 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, 223Mass. 177, 111 N.E. 787; Phillips v. Taylor, 148 Md. 157, 129 A. 18; Moore v.Hill, 59 Ga. 760, 761; Yarborough v. Thompson, 3 Smedes & M. (11 Miss.)291, 41 Am. Dec. 626. See, also 33 C.J. p. 447, # 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 recoveryof judgment, the interpleading of the judgment creditor is in effect acollateral attack upon the judgment."21

In fine, the instant interpleader suit cannot prosper because the Corporation had already made independently liable in civil case 26044 and, therefore, its present application forinterpleader would in effect be a collateral attack upon the final judgment in the said civil

the appellee Lee had already established his rights to membership fee certificate 201 in taforesaid civil case and, therefore, this interpleader suit would compel him to establish hirights anew, and thereby increase instead of diminish litigations, which is one of the purpof an interpleader suit, with the possibility that the benefits of the final judgment in the scivil case might eventually be taken away from him; and because the Corporation allowedto be sued to final judgment in the said case, its action of interpleader was filed inexcusalate, for which reason it is barred by laches or unreasonable delay.

ACCORDINGLY, the order of May 28, 1964, dismissing the complaint, is affirmed, at appecosts.

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

RIZAL COMMERCIAL BANKING CORPORATION,petitioner, vs. METROCONTAINER CORPORATION,respondent.

SYNOPSIS

For failure of Ley Construction Corporation (LEYCON) to settle its loan obligatioRizal Commercial Banking Corporation (RCBC) instituted an extrajudicial foreclosureproceeding against it. In a bidding, RCBC was adjudged the highest bidder. LEYCONpromptly filed an action for Nullification of Extrajudicial Foreclosure Sale and Damagesagainst RCBC docketed as Civil Case No. 4037-V-93. Meanwhile, RCBC consolidated i tsownership over the property due to LEYCON's failure to redeem the mortgaged propertwithin the 12-month redemption period. By virtue thereof, RCBC demanded rentalpayments from Metro Container Corporation (METROCAN) which was leasing the

mortgaged property from LEYCON. On the other hand, on 26 May 1994, LEYCON filed aaction for Unlawful Detainer against METROCAN before the Metropolitan Trial Court(MeTC), Branch 82 of Valenzuela, Metro Manila, docketed as Civil Case No. 6202.Consequently, METROCAN filed a complaint for Interpleader against LEYCON and RCBCdocketed as Civil Case No. 4398-V-94 before the Regional Trial Court, Branch 75 ofValenzuela to compel them to interplead and litigate their several claims among themse
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and to determine which among them shall rightfully receive the payment of monthly rentalson the subject property. During the pre-trial conference of the interpleader case, the trialcourt ordered the dismissal of the case insofar as METROCAN and LEYCON were concernedin view of an amicable settlement they entered into. On 31 October 1995, judgment wasrendered in the Unlawful Detainer case, which, among other things, ordered METROCAN topay LEYCON whatever rentals due on the subject premises. The said decision became finaland executory. By reason thereof, METROCAN and LEYCON separately filed a motion to

dismiss in the interpleader case. However, the said two motions were dismissed for lack ofmerit. Thereafter, METROCAN sought relief from the Court of Appeals viaa petitionfor certiorariand prohibition. Thus, the Court of Appeals granted the petition and orderedthe dismissal of the interpleader case. Hence, RCBC filed the instant petition.

The Court sustained the Court of Appeals. An action of interpleader is afforded toprotect a person not against double liability but against double vexation in respect of oneliability. It requires, as an indispensable requisite, that "conflicting claims upon the samesubject matter are or may be made against the plaintiff-in-interpleader who claims nointerest whatever in the subject matter or an interest which in whole or in part i s notdisputed by the claimants. The decision in Civil Case No. 6202 resolved the conflictingclaims insofar as payment of rentals was concerned. Petitioner then was correct in sayingthat it is not bound by the decision in Civil Case No. 5202. It is not a party thereto.However, it could not compel METROCAN to pursue Civil Case No. 4398-V-94. RCBC hasother avenues to prove its claim. I t is not bereft of other legal remedies. In fact, the issueof ownership can very well be threshed out in Civil Case No. 4037-V-93, the case forNullification of Extrajudicial Foreclosure Sale and Damages filed by LEYCON against RCBC.

SYLLABUS

1.REMEDIAL LAW; SPECIAL CIVIL ACTION; UNLAWFUL DETAINER; LIMITED TO THEQUESTION OF PHYSICAL OR MATERIAL POSSESSION OF THE PREMISES.It is alsoundisputed 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 limitedto the question of physical or material possession of the premises. The issue of ownership isimmaterial therein and the outcome of the case could not in any way affect conflicting claims ofownership, in this case between RCBC and LEYCON. This was made clear when the trial court,in denying RCBC's "Motion for Inclusion . . . as an Indispensable Party" declared that "the finaldetermination of the issue of physical possession over the subject premises between theplaintiff and the defendant shall not in any way affect RCBC's claims of ownership over the saidpremises, since RCBC is neither a co-lessor or co-lessee of the same, hence he has no legalpersonality to join the parties herein with respect to the issue of physical possession vis--visthe contract of lease between the parties." As aptly pointed by the MeTC, the issue in CivilCase No. 6202 is limited to the defendant LEYCON's breach of the provisions of the Contract ofLease Rentals.

2.ID.; ID.; INTERPLEADER; PURPOSE.It should be remembered that an action ofinterpleader is afforded to protect a person not against double liability but against doublevexation in respect of one liability. It requires, as an indispensable requisite, that "conflictclaims upon the same subject matter are or may be made against the plaintiff-in-interplewho claims no interest whatever in the subject matter or an interest which in whole or in not disputed by the claimants."

3.ID; ID.; INTERPLEADER FOR PAYMENT OF RENTALS; CEASED TO EXIST WHEN THEDECISION OF THE LOWER COURT IN AN UNLAWFUL DETAINER CASE INVOLVING THE SPROPERTY BECOMES FINAL AND EXECUTORY.When the decision in Civil Case No. 620became final and executory, METROCAN has no other alternative left but to pay the rentaLEYCON. Precisely because there was already a judicial fiat to METROCAN, there was no reason to continue with Civil Case No. 4398-V-94. Thus, METROCAN moved for the dismithe interpleader action not because it is no longer interested but because there is no morfor it to pursue such cause of action.

4.ID.; ID.; ID.; ID.; CLAIM OF OWNERSHIP BY ONE OF THE DEFENDANTS IS NOT AFFECPetitioner is correct in saying that it is not bound by the decision in Civil Case No. 6202not a party thereto. However, it could not compel METROCAN to pursue Civil Case No. 4394. RCBC has other avenues to prove its claim. It is not bereft of other legal remedies. Inthe issue of ownership can very well be threshed out in Civil Case No. 4037-V-93, the cas

Nullification of Extrajudicial Foreclosure Sale and Damages filed by LEYCON against RCBC

D E C I S I O N

KAPUNAN,J p:

Assailed in this petition for review on certiorariare the Decision, promulgated on 18 Octo1996 and the Resolution, promulgated on 08 January 1997, of the Court of Appeals in CASP No. 41294.

The facts of the case are as follows:

On 26 September 1990, Ley Construction Corporation (LEYCON) contracted a loan from RCommercial 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, locatBarrio 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 extrajudiciaforeclosure proceedings against it. After LEYCON's legal attempts to forestall the action ofailed, the foreclosure took place on 28 December 1992 with RCBC as the highest bidder.


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LEYCON promptly filed an action for Nullification of Extrajudicial Foreclosure Sale and Damagesagainst RCBC. The case, docketed as Civil Case No. 4037-V-93, was raffled to the Regional TrialCourt (RTC) of Valenzuela, Branch 172. Meanwhile, RCBC consolidated its ownership over theproperty due to LEYCON's failure to redeem it within the 12-month redemption period and TCTNo. V-332432 was issued if favor of the bank. By virtue thereof, RCBC demanded rentalpayments from Metro Container Corporation (METROCAN) which was leasing the property fromLEYCON.

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, Branch82. CcTHaD

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 againstLEYCON and RCBC to compel them to interplead and litigate their several claims amongthemselves and to determine which among them shall rightfully receive the payment of monthlyrentals on the subject property. On 04 July 1995, during the pre-trial conference in Civil CaseNo. 4398-V-94, the trial court ordered the dismissal of the case insofar as METROCAN andLEYCON were concerned in view of an amicable settlement they entered by virtue of whichMETROCAN 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 MeTCdecision became final and executory.

On 01 February 1996, METROCAN moved for the dismissal of Civil Case No. 4398-V-94 forhaving become moot and academic due to the amicable settlement it entered with LEYCON on04 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 forreconsideration filed by METROCAN and LEYCON were also denied prompting METROCAN toseek relief from the Court of Appeals via a petition for certiorari and prohibition with prayer forthe 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 andset aside the 12 March 1996 and 24 June 1996 orders of the RTC. The appellate court alsoordered the dismissal of Civil Case No. 4398-V-94. RCBC's motion for reconsideration wasdenied 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 THEEJECTMENT CASE BETWEEN METROCAN AND LEYCON DOES NOTAND CANNOT RENDER THE INTERPLEADER ACTION MOOT AND

ACADEMIC.

(2)WHILE A PARTY WHO INITIATES AN INTERPLEADER ACTION MAY NOTBE COMPELLED TO LITIGATE IF HE IS NO LONGER INTERESTED TOPURSUE SUCH CAUSE OF ACTION, SAID PARTY MAY NOTUNILATERALLY CAUSE THE DISMISSAL OF THE CASE AFTER THEANSWER HAVE BEEN FILED. FURTHER, THE DEFENDANTS IN ANINTERPLEADER SUIT SHOULD BE GIVEN FULL OPPORTUNITY TOLITIGATE THEIR RESPECTIVE CLAIMS.1

We sustain the Court of Appeals.

Section 1, Rule 63 of the Revised Rules of Court2provides:

SECTION 1. Interpleader when proper.Whenever conflicting claims uponthe same subject matter are or may be made against a person, who claimsno interest whatever in the subject matter, or an interest which in whole or inpart is not disputed by the claimants, he may bring an action against theconflicting claimants to compel them to interplead and litigate their severalclaims among themselves.

In the case before us, it is undisputed that METROCAN filed the interpleader action (Civil No. 4398-V-94) because it was unsure which between LEYCON and RCBC was entitled toreceive the payment of monthly rentals on the subject property. LEYCON was claiming paof the rentals as lessor of the property while RCBC was making a demand by virtue of theconsolidation 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 unldetainer (Civil Case No. 6202) against its lessee METROCAN. The issue in Civil Case No. 6limited to the question of physical or material possession of the premises.3The issue ofownership is immaterial therein4and the outcome of the case could not in any way affecconflicting claims of ownership, in this case between RCBC and LEYCON. This was made
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when the trial court, in denying RCBC's "Motion for Inclusion . . . as an Indispensable Party"declared that "the final determination of the issue of physical possession over the subjectpremises between the plaintiff and the defendant shall not in any way affect RCBC's claims ofownership 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 i ssue of physicalpossession vis-a-visthe contract of lease between the parties."5As aptly pointed by the MeTC,the issue in Civil Case No. 6202 is limited to the defendant LEYCON's breach of the provisions ofthe Contract of Lease Rentals.6

Hence, the reason for the interpleader action ceased when the MeTC rendered judgment in CivilCase No. 6202 whereby the court directed METROCAN to pay LEYCON "whatever rentals dueon the subject premises . . . ." While RCBC, not being a party to Civil Case No. 6202, could notbe bound by the judgment therein, METROCAN i s bound by the MeTC decision. When thedecision in Civil Case No. 6202 became final and executory, METROCAN has no otheralternative left but to pay the rentals to LEYCON. Precisely because there was already a judicialfiat 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 longerinterested 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 notagainst double liability but against double vexation in respect of one liability.7It requires, as

an indispensable requisite, that "conflicting claims upon the same subject matter are or may bemade against the plaintiff-in-interpleader who claims no interest whatever in the subject matteror an interest which in whole or in part is not disputed by the claimants."8The decision in CivilCase 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 nota 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, theissue of ownership can very well be threshed out in Civil Case No. 4037-V-93, the case forNullification 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.

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

ZOILA CO LIM,petitioner,vs.CONTINENTAL DEVELOPMENTCORPORATION,respondent.

[G.R. No. L-41831. February 18, 1976.]CONTINENTAL DEVELOPMENT CORPORATION,petitioner, vs. BENITOGERVASIO TAN and ZOILA CO LIM, respondents.

SYNOPSIS

A complaint for interpleader was filed by Continental Development Corporation (CDC) agaBenito Gervacio Tan and Zoila Co Lim, praying that said defendants be directed to interpland litigate their respective claims over the shares of stock in its possession. CDC allegedsince both defendants claim ownership of the shares of stock, is it not in a position to juscorrectly determine the conflicting claims; that it cannot dispose of the shares of stock asdefendants threatened to take punitive measure against it should it adopt steps the mayprejudice their respective interest; and that it has no interest over the subject matter of tcomplaint.

The trial court dismissed the complain for lack of cause of action invoking Section 35 of tCorporation Law (Act 1459, as amended). CDC and defendant Zoila Co Lim filed their resmotions for reconsideration of the trial court's order but the same were denied, hence, thpetitions for review on certiorari.

The Supreme Court held that an active conflict of interests over the shares of stock existbetween the defendants, and the courta quogravely abused its discretion in dismissing tcomplaint for interpleader without giving full opportunity to defendants to litigate theirrespective claims, which dismissal has the effect of determining the question of ownershifavor of defendant Benito Gervacio Tan.

Petition granted with costs.

SYLLABUS

1.INTERPLEADER; DISMISSAL; ERROR TO DISMISS ACTION WHERE CLEAR CONFLICT OINTEREST EXISTS.Since there is an active conflict of interests between the two defen

over the disputed shares of stock, which the plaintiff-in-interpleader cannot justly and cordecide thus rendering it impossible to dispose the shares of stock in question, the dismissthe complaint is a grave abuse of the discretion and practically decided the ownership of shares of stock in favor of defendant Benito Gervacio Tan without giving full opportunity tdefendants to litigate their respective claims.
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2.ID.; REQUISITES; CONFLICT OF INTEREST, THE ONLY INDISPENSABLE REQUISITE ININTERPLEADER.Section 1, Rule 63 of the Revised Rules of Court provides that, wheneverconflicting claims upon the same subject matter are or may be made against a person, whoclaims no interest whatever in the object matter, or an interest which in whole or in part is notdisputed by the claimants, he may bring an action against the conflicting claimants to compelthem to interplead and litigate their several claims among themselves. The only indispensablerequisite required by this rule is that conflicting claims upon the same subject matter are maybe made against plaintiff-in-interpleader who claims no interest whatever in the subject matteror an interest which in whole or in part is not disputed by the claimants (Beltran vs. PHHC, L-25138, 39 SCRA 145).

3.ID.; ID.; ID.; SUBJECT MATTER MUST BE THE SAME AND DERIVED FROM THE SAMESOURCE.An interpleader merely demands that there be two or more claimants to the fundor thing in dispute through separate and different interests. The claims must be adverse beforerelief can be granted and the parties sought to be interpleaded must be in a position to makeeffective claims. The fund, thing, or duty over which the parties assert adverse claims must beone and the same and derived from the same source.

4.ID.; NATURE OF REMEDY; A PROTECTION AGAINST DOUBLE VEXATION.An action forinterpleader is a remedy whereby a person who has personal property in his possession or anobligation 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 entitledto demand compliance with the obligation, be required to litigate among themselves, in order todetermine finally who is entitled to one or the other thing. The remedy is afforded not only toprotect a person against a double liability but to protect him against a double vexation inrespect of one liability.

D E C I S I O N

MAKASIAR, J p:

These two petitions seek a review of the order dated March 12, 1974 of the Judge presidingBranch XXVI of the Manila Court of First Instance, dismissing petitioner ContinentalDevelopment Corporation' complaint.

The COURT resolved to treat these petitions as special civil actions, the petition to dismiss filedby the respondent Benito Gervasio Tan as answer and the cases as submitted for decision.

On November 26, 1973, herein petitioner Continental Development Corporation filed acomplaint for interpleader against the defendants Benito Gervasio Tan and Zoila Co Lim,alleging among others: LLphil

"2.That in the books of the plaintiff, there appears the name of the defendantBenito Gervasio Tan as one of i ts stockholders initially accredited sometime in1957 with fifty (50) common shares covered by certificates of stock Nos. 12

and 13, and subsequently credited with seventy five (75) shares by way ofdividends covered by certificates of stock Nos. 20 and 25, or an outstandingtotal stockholding of one hundred twenty five (125) common shares of thepar 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 plaintiff company, byletters and telegrams, the release to him of the certificates of stock aforesaidbut which the plaintiff has not done so far and is prevented from doing sobecause 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 throughher counsel, has laid claim and persists in claiming the very same shares of

stock being demanded by the other defendant as aforesaid, alleging that saidstocks really belonged to her mother So Bi (alias Tawa), now alreadydeceased, and strongly denying her co-defendant's claim to the same.

"5.That both defendants, through their respective lawyers, threaten to takepunitive measures against the plaintiff company should it take any steps thatmay prejudice their respective interests in so far as the stocks in question areconcerned.

"6.That plaintiff is not sufficiently informed of the rights of the respectiveclaimants and therefore not in a position to determine justly and correctlytheir conflicting claims.

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


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and praying that the defendants be directed to interplead and litigate their respectiveclaims over the aforementioned shares of stock and to determine their respective rightsthereto.

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 thecomplaint itself states that the shares of stock in question are recorded in the books of

petitioner in the name of defendant Benito Gervasio Tan, who should therefore be declaredowner thereof pursuant to Section 52 of the Corporation Law (pp. 25-30, rec.). cdphil

On January 14, 1974, defendant in Zoila Co Lim filed her answer expressly admitting paragraph2 of the complaint, but alleging that the said shares of stock had previously been delivered intrust 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 Gervasio Tan would want the re-issuance and release to him of new replacement certificates, which petitioner has not so fardone; and that as the daughter and heir of said So Bi, ali as Tawa, she is now the owner of thesaid shares of stock, which should be delivered to her (pp. 31-33, rec.).

On January 22, 1974, petitioner Continental Development Corporation filed its opposition toBenito'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 lackof cause of action, invoking Section 35 of Act No. 1459, as amended, otherwise known as theCorporation Law (pp. 41-42, G.R. No. L-41831).

Defendant Zoila Co Lim and herein petitioner as plaintiff, filed their respective motions forreconsideration of the aforesaid order (pp. 43-49, G.R. No. L-41831), to which the defendantBenito Gervasio Tan filed his rejoinder (pp. 50-61, G.R. No. L-41831). Said motions were deniedin 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 andZoila 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 petitionercorporation, through its Vice-President, notified him on July 23, 1973 "that the shares of stockare in the possession of its treasurer Mr. Ty Lim, and urged defendant to directly obtain themfrom 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 inhis 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, the corporation, in behalf of defendant Zoila Co Lim, alleged heir of So Bi, claiming owneof the stocks" (pp. 26, 27, G.R. No. L-41831). Defendant Zoila Co Lim, on the other handheretofore stated, claims sole ownership of said shares of stock as inheritance from her lamother So Bi, alias Tawa.

And petitioner Continental Development Corporation expressly stated in the complaint tha

defendants, through their respective lawyers, threatened to take punitive measures againshould it adopt any steps that may prejudice their respective interests in the shares of stoquestion; and that it i s not sufficiently informed of the rights of the respective claimants atherefore not in a position to determine justly and correctly their conflicting claims (pars. and 7 of the complaint, p. 23, rec.).

And in its opposition to the motion to dismiss its complaint, petitioner Continental DeveloCorporation stressed that it might be liable to one defendant should it comply with thedemands of the other with respect to the transfer or entry of the shares of stock in the bothe corporation.

Since there is an active conflict of interests between the two defendants, now hereinrespondent Benito Gervasio Tan and petitioner Zoila Co Lim, over the disputed shares of the trial court gravely abused its discretion in dismissing the complaint for interpleader, w

practically decided ownership of the shares of stock in favor of defendant Benito GervasioThe two defendants, now respondents in G.R. No. L-41831, should be given full opportunlitigate their respective claims.

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

"Whenever conflicting claims upon the same subject matter are or may bemade against a person, who claims no interest whatever in the subjectmatter, or an interest which in whole or in part is not disputed by theclaimants, he may bring an action against the conflicting claimants to compelthem to interplead and litigate their several claims among themselves"(Emphasis supplied).

This provision only requires as an indispensable requisite:

"that conflicting claims upon the same subject matter are or may be madeagainst the plaintiff-in-interpleader who claims no interest whatever in thesubject matter or an interest which in whole or in part is not disputed by the


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claimants" (Beltran vs. People's Homesite and Housing Corporation, No. L-25138, 29 SCRA 145).

This ruling, penned by Mr. Justice Teehankee, reiterated 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 torender wholly or partially, without claiming any right in both comes to courtand asks that the persons who claim the said personal property or whoconsider themselves entitled to demand compliance with the obligation, berequired to litigate among themselves, in order to determine finally who isentitled to one or the other thing. The remedy is afforded not to protect aperson against a double liability but to protect him against a double vexationin respect of one liability."

An interpleader merely demands as a sine qua nonelement

". . . that there be two or more claimants to the fund or thing in disputethrough separate and different interests. The claims must be adverse beforerelief can be granted and the parties sought to be interpleaded must be in aposition to make effective claims" (33 C.J. 430).

Additionally, the fund, thing, or duty over which the parties assert adverse claims must beone 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, 134-136).

Indeed, petitioner corporation is placed in the same situation as a lessee who does not knowthe person to whom he will pay the rentals due to the conflicting claims over tine propertyleased, 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 determinethe respective rights of the claimants. prcd

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

RULE 63 DECLARATORY RELIEF AND SIMILAR REMEDIES

[G.R. No. 150806. January 28, 2008.]

EUFEMIA ALMEDA and ROMEL ALMEDA,petitioners, vs. BATHALAMARKETING INDUSTRIES, INC.,respondent.

D E C I S I O N

NACHURA,J p:

This is a Petition for Review onCertiorari under Rule 45 of the Rules of Court, of theDecision1of the Court of Appeals (CA), dated September 3, 2001, in CA-G.R. CV No. 677and its Resolution2dated November 19, 2001. The assailed Decision affirmed withmodification the Decision3of the Regional Trial Court (RTC), Makati City, Branch 136, daMay 9, 2000 in Civil Case No. 98-411.

Sometime in May 1997, respondent Bathala Marketing Industries, Inc., as lessee, represeby its president Ramon H. Garcia, renewed its Contract of Lease4with Ponciano L. Alme

(Ponciano), as lessor, husband of petitioner Eufemia and father of petitioner Romel AlmedUnder the said contract, Ponciano agreed to lease a portion of the Almeda Compound, locat 2208 Pasong Tamo Street, Makati City, consisting of 7,348.25 square meters, for a morental of P1,107,348.69, for a term of four (4) years from May 1, 1997 unless soonerterminated as provided in the contract.5The contract of lease contained the followingpertinent provisions which gave rise to the instant case:

SIXTHIt is expressly understood by the parties hereto that the rental ratestipulated is based on the present rate of assessment on the property, andthat in case the assessment should hereafter be increased or any new tax,charge or burden be imposed by authorities on the lot and building where theleased premises are located, LESSEE shall pay, when the rental hereinprovided becomes due, the additional rental or charge corresponding to theportion hereby leased; provided, however, that in the event that the presentassessment or tax on said property should be reduced, LESSEE shall beentitled to reduction in the stipulated rental, likewise in proportion to theportion leased by him;
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SEVENTHIn case an extraordinary inflation or devaluation of PhilippineCurrency should supervene, the value of Philippine peso at the t ime of theestablishment of the obligation shall be the basis of payment;6

During the effectivity of the contract, Ponciano died. Thereafter, respondent dealt withpetitioners. In a letter7dated December 29, 1997, petitioners advised respondent that theformer shall assess and collect Value Added Tax (VAT) on its monthly rentals. In response,respondent contended that VAT may not be imposed as the rentals fixed in the contract oflease were supposed to include the VAT therein, considering that their contract was executedon May 1, 1997 when the VAT law had long been in effect.8

On January 26, 1998, respondent received another letter from petitioners informing the formerthat its monthly rental should be increased by 73% pursuant to condition No. 7 of the contractand Article 1250 of the Civil Code. Respondent opposed petitioners' demand and insisted thatthere was no extraordinary inflation to warrant the application of Article 1250 in l ight of thepronouncement of this Court in various cases.9

Respondent refused to pay the VAT and adjusted rentals as demanded by petitioners butcontinued to pay the stipulated amount set forth in their contract.

On February 18, 1998, respondent instituted an action for declaratory relief for purposes ofdetermining the correct interpretation of condition Nos. 6 and 7 of the lease contract to preventdamage and prejudice.10The case was docketed as Civil Case No. 98-411 before the RTC ofMakati.

On March 10, 1998, petitioners in turn filed an action for ejectment, rescission and damagesagainst respondent for failure of the latter to vacate the premises after the demand made bythe former.11Before respondent could file an answer, petitioners filed a Notice ofDismissal.12They subsequently refiled the complaint before the Metropolitan Trial Court ofMakati; the case was raffled to Branch 139 and was docketed as Civil Case No. 53596.

Petitioners later moved for the dismissal of the declaratory relief case for being an improperremedy considering that respondent was already in breach of the obligation and that the casewould not end the litigation and settle the rights of the parties. The trial court, however, was

not persuaded, and consequently, denied the motion.

After trial on the merits, on May 9, 2000, the RTC ruled in favor of respondent and againstpetitioners. The pertinent portion of the decision reads:

WHEREFORE, premises considered, this Court renders judgment on the caseas follows:

1)declaring that plaintiff is not liable for the payment of Value-Added Tax(VAT) of 10% of the rent for [the] use of the leased premises;

2)declaring that plaintiff is not liable for the payment of any rental

adjustment, there being no [extraordinary] inflation or devaluation, asprovided in the Seventh Condition of the lease contract, to justify the same;

3)holding defendants liable to plaintiff for the total amount of P1,119,102.19,said amount representing payments erroneously made by plaintiff as VATcharges and rental adjustment for the months of January, February andMarch, 1999; and

4)holding defendants liable to plaintiff for the amount of P1,107,348.69, saidamount representing the balance of plaintiff's rental deposit still withdefendants.

SO ORDERED.13

The trial court denied petitioners their right to pass on to respondent the burden of payinVAT since it was not a new tax that would call for the application of the sixth clause of thcontract. The court, likewise, denied their right to collect the demanded increase in rentabeing no extraordinary inflation or devaluation as provided for in the seventh clause of thcontract. Because of the payment made by respondent of the rental adjustment demandepetitioners, the court ordered the restitution by the latter to the former of the amounts pnotwithstanding the well-established rule that in an action for declaratory relief, other thadeclaration of rights and obligations, affirmative reliefs are not sought by or awarded to tparties.

Petitioners elevated the aforesaid case to the Court of Appeals which affirmed with modifthe RTC decision. Thefallo reads:

WHEREFORE, premises considered, the present appeal is DISMISSED and theappealed decision in Civil Case No. 98-411 is hereby AFFIRMED withMODIFICATION in that the order for the return of the balance of the rentaldeposits and of the amounts representing the 10% VAT and rentaladjustment, is hereby DELETED.
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No pronouncement as to costs.

SO ORDERED.14

The appellate court agreed with the conclusions of law and the application of the decisionalrules on the matter made by the RTC. However, it found that the trial court exceeded itsjurisdiction in granting affirmative relief to the respondent, particularly the restitution of its

excess payment.

Petitioners now come before this Court raising the following issues:

I.

WHETHER OR NOT ARTICLE 1250 OF THE NEW CIVIL CODE IS APPLICABLETO THE CASE AT BAR.

II.

WHETHER OR NOT THE DOCTRINE ENUNCIATED IN FILIPINO PIPE ANDFOUNDRY CORP. VS. NAWASA CASE, 161 SCRA 32 AND COMPANION CASES

ARE (sic) APPLICABLE IN THE CASE AT BAR.

III.

WHETHER OR NOT IN NOT APPLYING THE DOCTRINE IN THE CASE OFDELROSARIO VS. THE SHELL COMPANY OF THE PHILIPPINES, 164 SCRA 562,THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED ON A QUESTIONOF LAW.

IV.

WHETHER OR NOT THE FINDING OF THE HONORABLE COURT OF APPEALSTHAT RESPONDENT IS NOT LIABLE TO PAY THE 10% VALUE ADDED TAX IS

IN ACCORDANCE WITH THE MANDATE OF RA 7716.

V.

WHETHER OR NOT DECLARATORY RELIEF IS PROPER SINCE PLAINTIFF-APPELLEE WAS IN BREACH WHEN THE PETITION FOR DECLARATORYRELIEF WAS FILED BEFORE THE TRIAL COURT.

In fine, the issues for our resolution are as follows: 1) whether the action for declaratory is proper; 2) whether respondent is liable to pay 10% VAT pursuant to Republic Act (RA) and 3) whether the amount of rentals due the petitioners should be adjusted by reason oextraordinary inflation or devaluation.

Declaratory relief is defined as an action by any person interested in a deed, will, contracother written instrument, executive order or resolution, to determine any question ofconstruction or validity arising from the instrument, executive order or regulation, or statuand for a declaration of his rights and duties thereunder. The only issue that may be raissuch a petition is the question of construction or validity of provisions in an instrument orstatute. Corollary is the general rule that such an action must be justified, as no other aderelief or remedy is available under the circumstances.15

Decisional law enumerates the requisites of an action for declaratory relief, as follows: 1)subject matter of the controversy must be a deed, will, contract or other written instrumestatute, executive order or regulation, or ordinance; 2) the terms of said documents and tvalidity thereof are doubtful and require judicial construction; 3) there must have been no

breach of the documents in question; 4) there must be an actual justiciable controversy o"ripening seeds" of one between persons whose interests are adverse; 5) the issue must ripe for judicial determination; and 6) adequate relief is not available through other meanother forms of action or proceeding.16

It is beyond cavil that the foregoing requisites are present in the instant case, except thatpetitioners insist that respondent was already in breach of the contract when the petitionfiled.

We do not agree.

After petitioners demanded payment of adjusted rentals and in the months that followed,respondent complied with the terms and conditions set forth in their contract of lease by

the rentals stipulated therein. Respondent religiously fulfilled its obligations to petitioners during the pendency of the present suit. There is no showing that respondent committedconstituting a breach of the subject contract of lease. Thus, respondent is not barred frominstituting before the trial court the petition for declaratory relief.
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Petitioners claim that the instant petition is not proper because a separate action for rescission,ejectment and damages had been commenced before another court; thus, the construction ofthe subject contractual provisions should be ventilated in the same forum.

We are not convinced.

It is true that inPanganiban v. Pilipinas Shell Petroleum Corporation17we held that the

petition for declaratory relief should be dismissed in view of the pendency of a separate actionfor unlawful detainer. However, we cannot apply the same ruling to the instant case.InPanganiban, the unlawful detainer case had already been resolved by the trial court beforethe dismissal of the declaratory relief case; and it was petitioner in that case who insisted thatthe action for declaratory relief be preferred over the action for unlawful detainer. Conversely,in the case at bench, the trial court had not yet resolved the rescission/ejectment case duringthe pendency of the declaratory relief petition. In fact, the trial court, where the rescission casewas on appeal, itself initiated the suspension of the proceedings pending the resolution of theaction for declaratory relief.

We are not unmindful of the doctrine enunciated inTeodoro, Jr. v. Mirasol18where thedeclaratory relief action was dismissed because the issue therein could be threshed out in theunlawful detainer suit. Yet, again, in that case, there was already a breach of contract at thetime of the filing of the declaratory relief petition. This dissimilar factual milieu proscribes the

Court from applyingTeodoro to the instant case.

Given all these attendant circumstances, the Court is disposed to entertain the instantdeclaratory relief action instead of dismissing it, notwithstanding the pendency of theejectment/rescission case before the trial court. The resolution of the present petition wouldwritefinis to the parties' dispute, as it would settle once and for all the question of the properinterpretation of the two contractual stipulations subject of this controversy.

Now, on the substantive law issues.

Petitioners repeatedly made a demand on respondent for the payment of VAT and for rentaladjustment allegedly brought about by extraordinary inflation or devaluation. Both the trialcourt and the appellate court found no merit in petitioners' claim. We see no reason to depart

from such findings.

As to the liability of respondent for the payment of VAT, we cite with approval the ratiocinationof the appellate court, viz.:

Clearly, the person primarily liable for the payment of VAT is the lessor whomay choose to pass it on to the lessee or absorb the same. BeginningJanuary 1, 1996, the lease of real property in the ordinary course ofbusiness, whether for commercial or residential use, when the gross annualreceipts exceed P500,000.00, is subject to 10% VAT. Notwithstanding themandatory payment of the 10% VAT by the lessor, the actual shifting of thesaid tax burden upon the lessee is clearly optional on the part of the lessor,under the terms of the statute. The word "may" in the statute, generally

speaking, denotes that it is directory in nature. It is generally permissive onlyand operates to confer discretion. In this case, despite the applicability of therule under Sec. 99 of the NIRC, as amended by R.A. 7716, granting thelessor the option to pass on to the lessee the 10% VAT, to existing contractsof lease as of January 1, 1996, the original lessor, Ponciano L. Almeda didnot charge the lessee-appellee the 10% VAT nor provided for its additionalimposition when they renewed the contract of lease in May 1997. Moresignificantly, said lessor did not actually collect a 10% VAT on the monthlyrental due from the lessee-appellee afterthe execution of the May 1997contract of lea

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