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RULE 62 CASES Effective July 1, 1992 – ₱10,000.

00 with an increment
of 10% every two years.5

Republic of the Philippines For Rooms 33 and 34:


SUPREME COURT
Manila Effective April 1, 1992 – ₱5,000.00 with an increment
of 10% every two years.6
THIRD DIVISION
For Rooms 36, 37 and 38:
G.R. No. 136409 March 14, 2008
Effective when tenants vacate said premises – ₱10,000.00 with
SUBHASH C. PASRICHA and JOSEPHINE A. an increment of 10% every two years.7
PASRICHA, Petitioners,
vs. Petitioners were, likewise, required to pay for the cost of electric
DON LUIS DISON REALTY, INC., Respondent. consumption, water bills and the use of telephone cables.8

DECISION The lease of Rooms 36, 37 and 38 did not materialize leaving
only Rooms 22, 24, 32, 33, 34 and 35 as subjects of the lease
NACHURA, J.: contracts.9 While the contracts were in effect, petitioners dealt
with Francis Pacheco (Pacheco), then General Manager of
This is a petition for review on certiorari under Rule 45 of the private respondent. Thereafter, Pacheco was replaced by
Rules of Court seeking the reversal of the Decision 1 of the Court Roswinda Bautista (Ms. Bautista).10Petitioners religiously paid
of Appeals (CA) dated May 26, 1998 and its Resolution2 dated the monthly rentals until May 1992.11 After that, however,
December 10, 1998 in CA-G.R. SP No. 37739 dismissing the despite repeated demands, petitioners continuously refused to
petition filed by petitioners Josephine and Subhash Pasricha. pay the stipulated rent. Consequently, respondent was
constrained to refer the matter to its lawyer who, in turn, made a
final demand on petitioners for the payment of the accrued
The facts of the case, as culled from the records, are as follows: rentals amounting to ₱916,585.58.12 Because petitioners still
refused to comply, a complaint for ejectment was filed by
Respondent Don Luis Dison Realty, Inc. and petitioners private respondent through its representative, Ms. Bautista,
executed two Contracts of Lease3 whereby the former, as lessor, before the Metropolitan Trial Court (MeTC) of Manila.13The
agreed to lease to the latter Units 22, 24, 32, 33, 34, 35, 36, 37 case was raffled to Branch XIX and was docketed as Civil Case
and 38 of the San Luis Building, located at 1006 M.Y. Orosa No. 143058-CV.
cor. T.M. Kalaw Streets, Ermita, Manila. Petitioners, in turn,
agreed to pay monthly rentals, as follows: Petitioners admitted their failure to pay the stipulated rent for the
leased premises starting July until November 1992, but claimed
For Rooms 32/35: that such refusal was justified because of the internal squabble in
respondent company as to the person authorized to receive
From March 1, 1991 to August 31, 1991 – payment.14 To further justify their non-payment of rent,
₱5,000.00/₱10,000.00 petitioners alleged that they were prevented from using the units
(rooms) subject matter of the lease contract, except Room 35.
Petitioners eventually paid their monthly rent for December
From September 1, 1991 to February 29, 1992 – 1992 in the amount of ₱30,000.00, and claimed that respondent
₱5,500.00/₱11,000.00 waived its right to collect the rents for the months of July to
November 1992 since petitioners were prevented from using
From March 1, 1992 to February 28, 1993 – Rooms 22, 24, 32, 33, and 34.15 However, they again withheld
₱6,050.00/₱12,100.00 payment of rents starting January 1993 because of respondent’s
refusal to turn over Rooms 36, 37 and 38.16 To show good faith
and willingness to pay the rents, petitioners alleged that they
From March 1, 1993 to February 28, 1994 –
prepared the check vouchers for their monthly rentals from
₱6,655.00/₱13,310.00
January 1993 to January 1994.17 Petitioners further averred in
their Amended Answer18 that the complaint for ejectment was
From March 1, 1994 to February 28, 1995 – prematurely filed, as the controversy was not referred to the
₱7,320.50/₱14,641.00 barangay for conciliation.

From March 1, 1995 to February 28, 1996 – For failure of the parties to reach an amicable settlement, the
₱8,052.55/₱16,105.10 pre-trial conference was terminated. Thereafter, they submitted
their respective position papers.
From March 1, 1996 to February 29, 1997 –
₱8,857.81/₱17,715.61 On November 24, 1994, the MeTC rendered a Decision
dismissing the complaint for ejectment.19 It considered
From March 1, 1997 to February 28, 1998 – petitioners’ non-payment of rentals as unjustified. The court
₱9,743.59/₱19,487.17 held that mere willingness to pay the rent did not amount to
payment of the obligation; petitioners should have deposited
their payment in the name of respondent company. On the
From March 1, 1998 to February 28, 1999 –
matter of possession of the subject premises, the court did not
₱10,717.95/₱21,435.89
give credence to petitioners’ claim that private respondent failed
to turn over possession of the premises. The court, however,
From March 1, 1999 to February 28, 2000 – dismissed the complaint because of Ms. Bautista’s alleged lack
₱11,789.75/₱23,579.484 of authority to sue on behalf of the corporation.

For Rooms 22 and 24:

1
Deciding the case on appeal, the Regional Trial Court (RTC) of independently of whether Director Pacana’s Order
Manila, Branch 1, in Civil Case No. 94-72515, reversed and set setting aside the SEC revocation Order is a mere scrap
aside the MeTC Decision in this wise: of paper.

WHEREFORE, the appealed decision is hereby reversed and set II.


aside and another one is rendered ordering defendants-appellees
and all persons claiming rights under them, as follows: Whether the RTC’s and the Honorable Court of
Appeals’ failure and refusal to resolve the most
(1) to vacate the leased premised (sic) and restore fundamental factual issues in the instant ejectment
possession thereof to plaintiff-appellant; case render said decisions void on their face by reason
of the complete abdication by the RTC and the
(2) to pay plaintiff-appellant the sum of ₱967,915.80 Honorable Justice Ruben Reyes of their constitutional
representing the accrued rents in arrears as of duty not only to clearly and distinctly state the facts
November 1993, and the rents on the leased premises and the law on which a decision is based but also to
for the succeeding months in the amounts stated in resolve the decisive factual issues in any given case.
paragraph 5 of the complaint until fully paid; and
III.
(3) to pay an additional sum equivalent to 25% of the
rent accounts as and for attorney’s fees plus the costs Whether the (1) failure and refusal of Honorable
of this suit. Justice Ruben Reyes to inhibit himself, despite his
admission – by reason of his silence – of petitioners’
SO ORDERED.20 accusation that the said Justice enjoyed a $7,000.00
scholarship grant courtesy of the uncle-in-law of
respondent "corporation’s" purported general manager
The court adopted the MeTC’s finding on petitioners’ and (2), worse, his act of ruling against the petitioners
unjustified refusal to pay the rent, which is a valid ground for and in favor of the respondent "corporation" constitute
ejectment. It, however, faulted the MeTC in dismissing the case an unconstitutional deprivation of petitioners’ property
on the ground of lack of capacity to sue. Instead, it upheld Ms. without due process of law.32
Bautista’s authority to represent respondent notwithstanding the
absence of a board resolution to that effect, since her authority
was implied from her power as a general manager/treasurer of In addition to Ms. Bautista’s lack of capacity to sue, petitioners
the company.21 insist that respondent company has no standing to sue as a
juridical person in view of the suspension and eventual
revocation of its certificate of registration.33 They likewise
Aggrieved, petitioners elevated the matter to the Court of question the factual findings of the court on the bases of their
Appeals in a petition for review on certiorari.22 On March 18, ejectment from the subject premises. Specifically, they fault the
1998, petitioners filed an Omnibus Motion23 to cite Ms. Bautista appellate court for not finding that: 1) their non-payment of
for contempt; to strike down the MeTC and RTC Decisions as rentals was justified; 2) they were deprived of possession of all
legal nullities; and to conduct hearings and ocular inspections or the units subject of the lease contract except Room 35; and 3)
delegate the reception of evidence. Without resolving the respondent violated the terms of the contract by its continued
aforesaid motion, on May 26, 1998, the CA affirmed 24 the RTC refusal to turn over possession of Rooms 36, 37 and 38.
Decision but deleted the award of attorney’s fees.25 Petitioners further prayed that a Temporary Restraining Order
(TRO) be issued enjoining the CA from enforcing its Resolution
Petitioners moved for the reconsideration of the aforesaid directing the issuance of a Writ of Execution. Thus, in a
decision.26 Thereafter, they filed several motions asking the Resolution34 dated January 18, 1999, this Court directed the
Honorable Justice Ruben T. Reyes to inhibit from further parties to maintain the status quo effective immediately until
proceeding with the case allegedly because of his close further orders.
association with Ms. Bautista’s uncle-in-law.27
The petition lacks merit.
In a Resolution28 dated December 10, 1998, the CA denied the
motions for lack of merit. The appellate court considered said We uphold the capacity of respondent company to institute the
motions as repetitive of their previous arguments, irrelevant and ejectment case. Although the Securities and Exchange
obviously dilatory.29 As to the motion for inhibition of the Commission (SEC) suspended and eventually revoked
Honorable Justice Reyes, the same was denied, as the appellate respondent’s certificate of registration on February 16, 1995,
court justice stressed that the decision and the resolution were records show that it instituted the action for ejectment on
not affected by extraneous matters.30 Lastly, the appellate court December 15, 1993. Accordingly, when the case was
granted respondent’s motion for execution and directed the RTC commenced, its registration was not yet revoked.35 Besides, as
to issue a new writ of execution of its decision, with the correctly held by the appellate court, the SEC later set aside its
exception of the award of attorney’s fees which the CA earlier orders of suspension and revocation of respondent’s
deleted.31 certificate, rendering the issue moot and academic.36

Petitioners now come before this Court in this petition for We likewise affirm Ms. Bautista’s capacity to sue on behalf of
review on certiorari raising the following issues: the company despite lack of proof of authority to so represent it.
A corporation has no powers except those expressly conferred
I. on it by the Corporation Code and those that are implied from or
are incidental to its existence. In turn, a corporation exercises
Whether this ejectment suit should be dismissed and said powers through its board of directors and/or its duly
whether petitioners are entitled to damages for the authorized officers and agents. Physical acts, like the signing of
unauthorized and malicious filing by Rosario (sic) documents, can be performed only by natural persons duly
Bautista of this ejectment case, it being clear that authorized for the purpose by corporate by-laws or by a specific
[Roswinda] – whether as general manager or by virtue act of the board of directors.37 Thus, any person suing on behalf
of her subsequent designation by the Board of of the corporation should present proof of such authority.
Directors as the corporation’s attorney-in-fact – had Although Ms. Bautista initially failed to show that she had the
no legal capacity to institute the ejectment suit, capacity to sign the verification and institute the ejectment case

2
on behalf of the company, when confronted with such question, Luis Building. Records, likewise, show that respondent
she immediately presented the Secretary’s repeatedly demanded that petitioners vacate the premises, but
Certificate38 confirming her authority to represent the company. the latter refused to heed the demand; thus, they remained in
possession of the premises. The only contentious issue is
There is ample jurisprudence holding that subsequent and whether there was indeed a violation of the terms of the
substantial compliance may call for the relaxation of the rules of contract: on the part of petitioners, whether they failed to pay the
procedure in the interest of justice.39 In Novelty Phils., Inc. v. stipulated rent without justifiable cause; while on the part of
Court of Appeals,40 the Court faulted the appellate court for respondent, whether it prevented petitioners from occupying the
dismissing a petition solely on petitioner’s failure to timely leased premises except Room 35.
submit proof of authority to sue on behalf of the corporation. In
Pfizer, Inc. v. Galan,41 we upheld the sufficiency of a petition This issue involves questions of fact, the resolution of which
verified by an employment specialist despite the total absence of requires the evaluation of the evidence presented. The MeTC,
a board resolution authorizing her to act for and on behalf of the the RTC and the CA all found that petitioners failed to perform
corporation. Lastly, in China Banking Corporation v. their obligation to pay the stipulated rent. It is settled doctrine
Mondragon International Philippines, Inc,42 we relaxed the rules that in a civil case, the conclusions of fact of the trial court,
of procedure because the corporation ratified the manager’s especially when affirmed by the Court of Appeals, are final and
status as an authorized signatory. In all of the above cases, we conclusive, and cannot be reviewed on appeal by the Supreme
brushed aside technicalities in the interest of justice. This is not Court.50 Albeit the rule admits of exceptions, not one of them
to say that we disregard the requirement of prior authority to act obtains in this case.51
in the name of a corporation. The relaxation of the rules applies
only to highly meritorious cases, and when there is substantial To settle this issue once and for all, we deem it proper to assess
compliance. While it is true that rules of procedure are intended the array of factual findings supporting the court’s conclusion.
to promote rather than frustrate the ends of justice, and while the
swift unclogging of court dockets is a laudable objective, we
should not insist on strict adherence to the rules at the expense The evidence of petitioners’ non-payment of the stipulated rent
of substantial justice.43 Technical and procedural rules are is overwhelming. Petitioners, however, claim that such non-
intended to help secure, not suppress, the cause of justice; and a payment is justified by the following: 1) the refusal of
deviation from the rigid enforcement of the rules may be respondent to allow petitioners to use the leased properties,
allowed to attain that prime objective, for, after all, the except room 35; 2) respondent’s refusal to turn over Rooms 36,
dispensation of justice is the core reason for the existence of 37 and 38; and 3) respondent’s refusal to accept payment
courts.44 tendered by petitioners.

As to the denial of the motion to inhibit Justice Reyes, we find Petitioners’ justifications are belied by the evidence on record.
the same to be in order. First, the motion to inhibit came after As correctly held by the CA, petitioners’ communications to
the appellate court rendered the assailed decision, that is, after respondent prior to the filing of the complaint never mentioned
Justice Reyes had already rendered his opinion on the merits of their alleged inability to use the rooms.52 What they pointed out
the case. It is settled that a motion to inhibit shall be denied if in their letters is that they did not know to whom payment
filed after a member of the court had already given an opinion should be made, whether to Ms. Bautista or to Pacheco.53 In
on the merits of the case, the rationale being that "a litigant their July 26 and October 30, 1993 letters, petitioners only
cannot be permitted to speculate on the action of the court x x x questioned the method of computing their electric billings
(only to) raise an objection of this sort after the decision has without, however, raising a complaint about their failure to use
been rendered."45 Second, it is settled that mere suspicion that a the rooms.54 Although petitioners stated in their December 30,
judge is partial to one of the parties is not enough; there should 1993 letter that respondent failed to fulfill its part of the
be evidence to substantiate the suspicion. Bias and prejudice contract,55 nowhere did they specifically refer to their inability
cannot be presumed, especially when weighed against a judge’s to use the leased rooms. Besides, at that time, they were already
sacred pledge under his oath of office to administer justice in default on their rentals for more than a year.
without regard for any person and to do right equally to the poor
and the rich. There must be a showing of bias and prejudice If it were true that they were allowed to use only one of the nine
stemming from an extrajudicial source, resulting in an opinion (9) rooms subject of the contract of lease, and considering that
on the merits based on something other than what the judge the rooms were intended for a business purpose, we cannot
learned from his participation in the case.46 We would like to understand why they did not specifically assert their right. If we
reiterate, at this point, the policy of the Court not to tolerate acts believe petitioners’ contention that they had been prevented
of litigants who, for just about any conceivable reason, seek to from using the rooms for more than a year before the complaint
disqualify a judge (or justice) for their own purpose, under a for ejectment was filed, they should have demanded specific
plea of bias, hostility, prejudice or prejudgment. 47 performance from the lessor and commenced an action in court.
With the execution of the contract, petitioners were already in a
We now come to the more substantive issue of whether or not position to exercise their right to the use and enjoyment of the
the petitioners may be validly ejected from the leased premises. property according to the terms of the lease contract.56 As borne
out by the records, the fact is that respondent turned over to
petitioners the keys to the leased premises and petitioners, in
Unlawful detainer cases are summary in nature. In such cases, fact, renovated the rooms. Thus, they were placed in possession
the elements to be proved and resolved are the fact of lease and of the premises and they had the right to the use and enjoyment
the expiration or violation of its terms.48 Specifically, the of the same. They, likewise, had the right to resist any act of
essential requisites of unlawful detainer are: 1) the fact of lease intrusion into their peaceful possession of the property, even as
by virtue of a contract, express or implied; 2) the expiration or against the lessor itself. Yet, they did not lift a finger to protect
termination of the possessor’s right to hold possession; 3) their right if, indeed, there was a violation of the contract by the
withholding by the lessee of possession of the land or building lessor.
after the expiration or termination of the right to possess; 4)
letter of demand upon lessee to pay the rental or comply with the
terms of the lease and vacate the premises; and 5) the filing of What was, instead, clearly established by the evidence was
the action within one year from the date of the last demand petitioners’ non-payment of rentals because ostensibly they did
received by the defendant.49 not know to whom payment should be made. However, this did
not justify their failure to pay, because if such were the case,
they were not without any remedy. They should have availed of
It is undisputed that petitioners and respondent entered into two the provisions of the Civil Code of the Philippines on the
separate contracts of lease involving nine (9) rooms of the San

3
consignation of payment and of the Rules of Court on It may also be mentioned that the contract specifically provides
interpleader. that the lease of Rooms 36, 37 and 38 was to take effect only
when the tenants thereof would vacate the premises. Absent a
Article 1256 of the Civil Code provides: clear showing that the previous tenants had vacated the
premises, respondent had no obligation to deliver possession of
the subject rooms to petitioners. Thus, petitioners cannot use the
Article 1256. If the creditor to whom tender of payment has non-delivery of Rooms 36, 37 and 38 as an excuse for their
been made refuses without just cause to accept it, the debtor failure to pay the rentals due on the other rooms they
shall be released from responsibility by the consignation of the occupied.1avvphil
thing or sum due.
In light of the foregoing disquisition, respondent has every right
Consignation alone shall produce the same effect in the to exercise his right to eject the erring lessees. The parties’
following cases: contracts of lease contain identical provisions, to wit:

xxxx In case of default by the LESSEE in the payment of rental on the


fifth (5th) day of each month, the amount owing shall as penalty
(4) When two or more persons claim the same right to collect; bear interest at the rate of FOUR percent (4%) per month, to be
paid, without prejudice to the right of the LESSOR to terminate
x x x x. his contract, enter the premises, and/or eject the LESSEE as
hereinafter set forth;62

Consignation shall be made by depositing the things due at the


disposal of a judicial authority, before whom the tender of Moreover, Article 167363 of the Civil Code gives the lessor the
payment shall be proved in a proper case, and the announcement right to judicially eject the lessees in case of non-payment of the
of the consignation in other cases.57 monthly rentals. A contract of lease is a consensual, bilateral,
onerous and commutative contract by which the owner
temporarily grants the use of his property to another, who
In the instant case, consignation alone would have produced the undertakes to pay the rent therefor.64 For failure to pay the rent,
effect of payment of the rentals. The rationale for consignation petitioners have no right to remain in the leased premises.
is to avoid the performance of an obligation becoming more
onerous to the debtor by reason of causes not imputable to
him.58 Petitioners claim that they made a written tender of WHEREFORE, premises considered, the petition is DENIED
payment and actually prepared vouchers for their monthly and the Status Quo Order dated January 18, 1999 is hereby
rentals. But that was insufficient to constitute a valid tender of LIFTED. The Decision of the Court of Appeals dated May 26,
payment. Even assuming that it was valid tender, still, it would 1998 and its Resolution dated December 10, 1998 in CA-G.R.
not constitute payment for want of consignation of the amount. SP No. 37739 are AFFIRMED.
Well-settled is the rule that tender of payment must be
accompanied by consignation in order that the effects of SO ORDERED.
payment may be produced.59
ANTONIO EDUARDO B. NACHURA
Moreover, Section 1, Rule 62 of the Rules of Court provides: Associate Justice

Section 1. When interpleader proper. – Whenever conflicting WE CONCUR:


claims upon the same subject matter are or may be made against
a person who claims no interest whatever in the subject matter, CONSUELO YNARES-SANTIAGO
or an interest which in whole or in part is not disputed by the Associate Justice
claimants, he may bring an action against the conflicting Chairperson
claimants to compel them to interplead and litigate their several
claims among themselves.
LEONARDO A. MA. ALICIA AUSTRIA-
QUISUMBING* MARTINEZ
Otherwise stated, an action for interpleader is proper when the
Associate Justice Associate Justice
lessee does not know to whom payment of rentals should be
made due to conflicting claims on the property (or on the right to
collect).60 The remedy is afforded not to protect a person against MINITA V. CHICO-NAZARIO
double liability but to protect him against double vexation in Associate Justice
respect of one liability.61
ATTESTATION
Notably, instead of availing of the above remedies, petitioners
opted to refrain from making payments.
I attest that the conclusions in the above Decision were reached
in consultation before the case was assigned to the writer of the
Neither can petitioners validly invoke the non-delivery of opinion of the Court’s Division.
Rooms 36, 37 and 38 as a justification for non-payment of
rentals. Although the two contracts embraced the lease of nine
CONSUELO YNARES-SANTIAGO
(9) rooms, the terms of the contracts - with their particular
Associate Justice
reference to specific rooms and the monthly rental for each - Chairperson, Third Division
easily raise the inference that the parties intended the lease of
each room separate from that of the others.lavvphil There is
nothing in the contract which would lead to the conclusion that CERTIFICATION
the lease of one or more rooms was to be made dependent upon
the lease of all the nine (9) rooms. Accordingly, the use of each Pursuant to Section 13, Article VIII of the Constitution, and the
room by the lessee gave rise to the corresponding obligation to Division Chairperson’s Attestation, I certify that the conclusions
pay the monthly rental for the same. Notably, respondent in the above Decision were reached in consultation before the
demanded payment of rentals only for the rooms actually case was assigned to the writer of the opinion of the Court’s
delivered to, and used by, petitioners. Division.

4
24
REYNATO S. PUNO The fallo reads:
Chief Justice
WHEREFORE, the appealed decision is
hereby AFFIRMED with the modification
that the award of attorney’s fees is deleted.

Footnotes SO ORDERED (Rollo, pp. 61-62).

25
* Additional member in lieu of Justice Reyes, who Supra note 1.
took no part.
26 Rollo, pp. 73-116
1Penned by Associate Justice Ruben T. Reyes, with
Associate Justices Quirino D. Abad Santos, Jr. and 27 Id. at 377-386.
Eloy R. Bello, Jr., concurring; rollo, pp. 44-62.
28
2
Id. at 63-72. The fallo reads:
Rollo, pp. 63-72.

3
ACCORDINGLY, petitioners’ motion for
The first Contract of Lease covers Rooms 32 and 35, reconsideration, omnibus motions, motion to
id. at 1034-1042; the second Contract of Lease covers inhibit, motion for contempt and related
Rooms 22, 24, 33, 34, 36, 37 and 38, id. at 1043-1050. motions are hereby DENIED for utter lack
of merit.
4 Rollo, pp. 1034-1036.
Private respondents’ motion for execution is
5 Id. at 1043-1044. GRANTED. In the interest of justice, the
Regional Trial Court, Branch I, Manila is
6 Id. directed to issue a new writ of execution of
its judgment which we affirmed, except as to
7
attorney’s fees which we deleted. For this
Id. purpose, the original records elevated to Us
are ordered remanded to the RTC.
8 Id. at 1037 and 1045.
SO ORDERED.
9 Records, p. 8.
29 Rollo, p. 71.
10 Rollo, p. 901.
30 Id. at 70-71.
11 Records, p. 3.
31 Id. at 72.
12Demand letter dated November 2, 1993, through
private respondent’s counsel Feria, Feria, Lugtu and 32 Id. at 19-20.
Lao; records, p. 36.
33
13
Id. at 978.
Records, pp. 2-5.
34
14
Id. at 520-521.
Id. at 10.
35
15
Id. at 1358.
Id. at 11.
36
16
Id. at 69.
Id. at 14.
37
17
BA Savings Bank v. Sia, 391 Phil. 370, 377 (2000).
Id. at 13.
38
18
Records, p. 100.
Id. at 110-117.
39
19
Wack Wack Golf and Country Club v. National
Penned by Judge Ernesto A. Reyes; records, pp. Labor Relations Commission, G.R. No. 149793, April
261-266. 15, 2005, 456 SCRA 280, 294.

20 Rollo, pp. 302-303. 40 458 Phil. 36 (2003).

21 Record, p. 367. 41 410 Phil. 483 (2001).

22The petitioners adopted a wrong mode of appeal. 42G.R. No. 164798, November 17, 2005, 475 SCRA
Notwithstanding the procedural defect, the CA still 332.
took cognizance of the case and decided the same on
the merits; CA rollo, pp. 1-42. 43Wack Wack Golf and Country Club v. National
23
Labor Relations Commission, supra note 39, at 294.
Rollo, pp. 346-376.

5
44General Milling Corp. v. National Labor Relations causes the deterioration thereof; or if he
Commission, 442 Phil. 425, 428 (2002). does not observe the requirement in No. 2 of
Article 1657, as regards the use thereof.
45Chavez v. Public Estates Authority, 451 Phil. 1, 41
(2003); Limpin, Jr. v. Intermediate Appellate Court, The ejectment of tenants of agricultural
No. L-70987, May 5, 1988, 161 SCRA 83, 97-98. lands is governed by special laws.

46 64
Soriano v. Judge Angeles, 393 Phil. 769, 779 Aguilar v. Court of Appeals, supra note 56, at 640.
(2000); People v. Court of Appeals, 369 Phil. 150, 157
(1999).

47People v. Serrano, G.R. No. 44712, October 28,


1991, 203 SCRA 171, 186.

48
Republic of the Philippines
Ocampo v. Tirona, G.R. No. 147812, April 6, 2005, SUPREME COURT
455 SCRA 62, 72; Manuel v. Court of Appeals, G.R. Manila
No. 95469, July 25, 1991, 199 SCRA 603, 608.

49
SECOND DIVISION
Dela Cruz v. Court of Appeals, G.R. No. 139442,
December 6, 2006, 510 SCRA 103, 115-116.
G.R. Nos. 154470-71 September 24, 2012
50Vda. de Gualberto v. Go, G.R. No. 139843, July 21,
2005, 463 SCRA 671, 682; Ocampo v. Ocampo, G.R. BANK OF COMMERCE, Petitioner,
No. 150707, April 14, 2004, 427 SCRA 545, 563; vs.
Alvarez v. Court of Appeals, 455 Phil. 864, 875 PLANTERS DEVELOPMENT BANK and BANGKO
(2003). SENTRAL NG PILIPINAS, Respondent.

51 Vda. De Gualberto v. Go, supra, at 682. x-----------------------x

52 Rollo, p. 54. G.R. Nos. 154589-90

53 Id. at 1051. BANGKO SENTRAL NG PILIPINAS, Petitioner,


vs.
54
PLANTERS DEVELOPMENT BANK, Respondent.
Id. at 1053-1056.

55
DECISION
Id. at 1058.

56
BRION, J.:
Aguilar v. Court of Appeals, 390 Phil. 621, 641
(2000).
Before the Court are two consolidated petitions for review
57
on certiorari under Rule 45,1 on pure questions of law, filed by
Civil Code, Art. 1258. the petitioners Bank of Commerce (BOC) and the Bangko
Sentral ng Pilipinas (BSP). They assail the January 10, 2002 and
58 July 23, 2002 Orders (assailed orders) of the Regional Trial
Eternal Gardens Memorial Park Corp. v. Court of
Appeals, 347 Phil. 232, 264 (1997). Court (RTC) of Makati City, Branch 143, in Civil Case Nos. 94-
3233 and 94-3254. These orders dismissed (i) the petition filed
59State Investment House, Inc. v. Court of Appeals, by the Planters Development Bank (PDB), (ii) the
G.R. No. 90676, June 19, 1991, 198 SCRA 390, 399. "counterclaim" filed by the BOC, and (iii) the counter-
complaint/cross-claim for interpleader filed bythe BSP; and
denied the BOC’s and the BSP’s motions for reconsideration.
60 Ocampo v. Tirona, supra note 48, at 76.
THE ANTECEDENTS
61 Id.
The Central Bank bills
62 Rollo, pp. 1036 and 1044.
I. First set of CB bills
63The lessor may judicially eject the lessee for any of
the following causes:
The Rizal Commercial Banking Corporation (RCBC) was the
registered owner of seven Central Bank (CB) bills with a total
(1) When the period agreed upon, or that face value of ₱ 70 million, issued on January 2, 1994 and would
which is fixed for the duration of leases mature on January 2, 1995.2 As evidenced by a "Detached
under articles 1682 and 1687, has expired; Assignment" dated April 8, 1994,3 the RCBC sold these CB bills
to the BOC.4 As evidenced by another "Detached
(2) Lack of payment of the price stipulated; Assignment"5 of even date, the BOC, in turn, sold these CB bills
to the PDB.6 The BOC delivered the Detached Assignments to
the PDB.7
(3) Violation of any of the conditions agreed
upon in the contract;
On April 15, 1994 (April 15 transaction), the PDB, in turn, sold
to the BOC Treasury Bills worth ₱ 70 million, with maturity
(4) When the lessee devotes the thing leased
date of June 29, 1994, as evidenced by a Trading Order8 and a
to any use or service not stipulated which

6
Confirmation of Sale.9 However, instead of delivering the
Issue date: January 3, 1994
Treasury Bills, the PDB delivered the seven CB bills to the
BOC, as evidenced by a PDB Security Delivery Receipt, bearing Maturity date: January 2, 1995
a "note: ** substitution in lieu of 06-29-94" – referring to the
Treasury Bills.10 Nevertheless, the PDB retained possession of Denomination: Php 10 million
the Detached Assignments. It is basically the nature of this April
15 transaction that the PDB and the BOC cannot agree on. Total Face value: Php 20 million

The transfer of the first set of seven CB bills


On even date, the PDB delivered to Bancap the two CB
bills18 (April 19 transaction). In turn, Bancap sold the CB bills to
i. CB bill nos. 45351-53 Al-Amanah Islamic Investment Bank of the Philippines, which
in turn sold it to the BOC.19
On April 20, 1994, according to the BOC, it "sold back"11 to the
PDB three of the seven CB bills. In turn, the PDB transferred PDB’s move against the transfer of
these three CB bills to Bancapital Development Corporation the first and second sets of CB bills
(Bancap). On April 25, 1994, the BOC bought the three CB bills
from Bancap – so, ultimately, the BOC reacquired these three
CB bills,12 particularly described as follows: On June 30, 1994, upon learning of the transfers involving the
CB bills, the PDB informed20 the Officer-in-Charge of the BSP’s
Government Securities Department,21 Lagrimas Nuqui, of the
Serial No.: 2BB XM 045351 PDB’s claim over these CB bills, based on the Detached
2BB XM 045352 Assignments in its possession. The PDB requested the BSP22 to
2BB XM 045353 record its claim in the BSP’s books, explaining that its non-
possession of the CB bills is "on account of imperfect
Quantity: Three (3) negotiations thereof and/or subsequent setoff or transfer."23

Denomination: Php 10 million Nuqui denied the request, invoking Section 8 of CB Circular No.
28 (Regulations Governing Open Market Operations,
Total Face Value: Php 30 million
Stabilization of the Securities Market, Issue, Servicing and
Redemption of the Public Debt)24 which requires the
ii. CB bill nos. 45347-50 presentation of the bond before a registered bond may be
transferred on the books of the BSP.25

On April 20, 1994, the BOC sold the remaining four (4) CB bills
to Capital One Equities Corporation13 which transferred them to In a July 25, 1994 letter, the PDB clarified to Nuqui that it was
All-Asia Capital and Trust Corporation (All Asia). On not "asking for the transfer of the CB Bills…. rather it intends to
September 30, 1994, All Asia further transferred the four CB put the BSP on formal notice that whoever is in possession of
bills back to the RCBC.14 said bills is not a holder in due course," and, therefore the BSP
should not make payment upon the presentation of the CB bills
on maturity.26 Nuqui responded that the BSP was "not in a
On November 16, 1994, the RCBC sold back to All Asia one of position at that point in time to determine who is and who is not
these 4 CB bills. When the BSP refused to release the amount of the holder in due course since it is not privy to all acts and time
this CB bill on maturity, the BOC purchased from All Asia this involving the transfers or negotiation" of the CB bills. Nuqui
lone CB bill,15 particularly described as follows:16 added that the BSP’s action shall be governed by CB Circular
No. 28, as amended.27
Serial No.: 2BB XM 045348
On November 17, 1994, the PDB also asked BSP Deputy
Quantity: One (1) Governor Edgardo Zialcita that (i) a notation in the BSP’s books
be made against the transfer, exchange, or payment of the bonds
Denomination: Php 10 million and the payment of interest thereon; and (ii) the presenter of the
bonds upon maturity be required to submit proof as a holder in
Total Face Value: Php 10 million due course (of the first set of CB bills). The PDB relied on
Section 10 (d) 4 of CB Circular No. 28.28 This provision reads:

As the registered owner of the remaining three CB bills, the


RCBC sold them to IVI Capital and Insular Savings Bank. (4) Assignments effected by fraud – Where the assignment of a
Again, when the BSP refused to release the amount of this CB registered bond is secured by fraudulent representations, the
bill on maturity, the RCBC paid back its transferees, reacquired Central Bank can grant no relief if the assignment has been
these three CB bills and sold them to the BOC – ultimately, the honored without notice of fraud. Otherwise, the Central Bank,
BOC acquired these three CB bills. upon receipt of notice that the assignment is claimed to have
been secured by fraudulent representations, or payment of the
bond the payment of interest thereon, and when the bond is
All in all, the BOC acquired the first set of seven CB bills. presented, will call upon the owner and the person presenting
the bond to substantiate their respective claims.If it then appears
II. Second set of CB bills that the person presenting the bond stands in the position of
bonafide holder for value, the Central Bank, after giving the
owner an opportunity to assert his claim, will pass the bond for
On April 19, 1994, the RCBC, as registered owner, (i) sold two
transfer, exchange or payments, as the case may be, without
CB bills with a total face value of ₱ 20 million to the PDB and
further question.
(ii) delivered to the PDB the corresponding Detached
Assignment.17 The two CB bills were particularly described as
follows: In a December 29, 1994 letter, Nuqui again denied the request,
reiterating the BSP’s previous stand.

Serial No.: BB XM 045373 In light of these BSP responses and the impending maturity of
BB XM 045374 the CB bills, the PDB filed29 with the RTC two separate

7
petitions for Mandamus, Prohibition and Injunction with prayer PDB’s delivery of the 2nd set of CB bills to Bancap, likewise by
for Preliminary Injunction and Temporary Restraining Order, way of substitution.
docketed as Civil Case No. 94-3233 (covering the first set of CB
bills) and Civil Case 94-3254 (covering the second set of CB The BOC adds that Section 10 (d) 4 of CB Circular No. 28
bills) against Nuqui, the BSP and the RCBC.30 cannot apply to the PDB’s case because (i) the PDB is not in
possession of the CB bills and (ii) the BOC acquired these bills
The PDB essentially claims that in both the April 15 transaction from the PDB, as to the 1st set of CB bills, and from Bancap, as
(involving the first set of CB bills) and the April 19 transaction to the 2nd set of CB bills, in good faith and for value. The BOC
(involving the second set of CB bills), there was no intent on its also asserted a compulsory counterclaim for damages and
part to transfer title of the CB bills, as shown by its non-issuance attorney’s fees.
of a detached assignment in favor of the BOC and Bancap,
respectively. The PDB particularly alleges that it merely On the other hand, the BSP countered that the PDB cannot
"warehoused"31 the first set of CB bills with the BOC, as invoke Section 10 (d) 4 of CB Circular No. 28 because this
security collateral. section applies only to an "owner" and a "person presenting the
bond," of which the PDB is neither. The PDB has not presented
On December 28, 1994, the RTC temporarily enjoined Nuqui to the BSP any assignment of the subject CB bills, duly recorded
and the BSP from paying the face value of the CB bills on in the BSP’s books, in its favor to clothe it with the status of an
maturity.32 On January 10, 1995, the PDB filed an Amended "owner."39 According to the BSP –
Petition, additionally impleading the BOC and All Asia.33 In a
January 13, 1995 Order, the cases were consolidated.34 On Section 10 d. (4) applies only to a registered bond which is
January 17, 1995, the RTC granted the PDB’s application for a assigned. And the issuance of CB Bills x x x are required to be
writ of preliminary prohibitory injunction.35 In both petitions, recorded/registered in BSP’s books. In this regard, Section 4 a.
the PDB identically prayed: (1) of CB Circular 28 provides that registered bonds "may be
transferred only by an assignment thereon duly executed by the
WHEREFORE, it is respectfully prayed x x x that, after due registered owner or his duly authorized representative x x x and
notice and hearing, the Writs of Mandamus, Prohibition and duly recorded on the books of the Central Bank."
Injunction, be issued; (i) commanding the BSP and Nuqui, or
whoever may take her place - xxxx

(a) to record forthwith in the books of BSP the claim of x x x The alleged assignment of subject CB Bills in PDB’s favor is
PDB on the [two sets of] CB Bills in accordance with Section 10 not recorded/registered in BSP’s books.40(underscoring
(d) (4) of revised C.B. Circular No. 28; and supplied)

(b) also pursuant thereto, when the bills are presented on Consequently, when Nuqui and the BSP refused the PDB’s
maturity date for payment, to call (i) x x x PDB, (ii) x x x RCBC request (to record its claim), they were merely performing their
x x x, (iii) x x x BOC x x x, and (iv) x x x ALL-ASIA x x x; or duties in accordance with CB Circular No. 28.
whoever will present the [first and second sets of] CB Bills for
payment, to submit proof as to who stands as the holder in due
course of said bills, and, thereafter, act accordingly; Alternatively, the BSP asked that an interpleader suit be allowed
between and among the claimants to the subject CB bills on the
position that while it is able and willing to pay the subject CB
and (ii) ordering the BSP and Nuqui to pay jointly and severally bills’ face value, it is duty bound to ensure that payment is made
to x x x PDB the following: to the rightful owner. The BSP prayed that judgment be
rendered:
(a) the sum of ₱ 100,000.00, as and for exemplary
damages; a. Ordering the dismissal of the PDB’s petition for
lack of merit;
(b) the sum of at least ₱ 500,000.00, or such amount as
shall be proved at the trial, as and for attorney’s fees; b. Determining which between/among [PDB] and the
other claimants is/are lawfully entitled to the
(c) the legal rate of interest from the filing of this ownership of the subject CB bills and the proceeds
Petition until full payment of the sums mentioned in thereof;
this Petition; and
c. x x x;
(d) the costs of suit.36
d. Ordering PDB to pay BSP and Nuqui such
After the petitions were filed, the BOC acquired/reacquired all actual/compensatory and exemplary damages… as the
the nine CB bills – the first and second sets of CB bills RTC may deem warranted; and
(collectively, subject CB bills).
e. Ordering PDB to pay Nuqui moral damages… and
Defenses of the BSP and of the BOC37 to pay the costs of the suit.41

The BOC filed its Answer, praying for the dismissal of the Subsequent events
petition. It argued that the PDB has no cause of action against it
since the PDB is no longer the owner of the CB bills. Contrary The PDB agreed with the BSP’s alternative response for an
to the PDB’s "warehousing theory,"38 the BOC asserted that the interpleader –
(i) April 15 transaction and the (ii) April 19 transaction –
covering both sets of CB bills - were valid contracts of sale,
followed by a transfer of title (i) to the BOC (in the April 15 4. PDB agrees that the various claimants should now interplead
transaction) upon the PDB’s delivery of the 1st set of CB bills in and substantiate their respective claims on the subject CB bills.
substitution of the Treasury Bills the PDB originally intended to However, the total face value of the subject CB bills should be
sell, and (ii) to Bancap (in the April 19 transaction) upon the deposited in escrow with a private bank to be disposed of only
upon order of the RTC.42

8
Accordingly, on June 9, 199543 and August 4, 1995,44 the BOC which has jurisdiction to determine who is entitled to receive the
and the PDB entered into two separate Escrow proceeds of the CB bills.
Agreements.45 The first agreement covered the first set of CB
bills, while the second agreement covered the second set of CB The BOC opposed62 the PDB’s Omnibus Motion. The PDB filed
bills. The parties agreed to jointly collect from the BSP the its Reply.63
maturity proceeds of these CB bills and to deposit said amount
in escrow, "pending final determination by Court judgment, or
amicable settlement as to who shall be eventually entitled In a January 10, 2002 Order, the RTC dismissed the PDB’s
thereto."46 The BOC and the PDB filed a Joint petition, the BOC’s counterclaim and the BSP’s counter-
Motion,47 submitting these Escrow Agreements for court complaint/cross-claim for interpleader, holding that under CB
approval. The RTC gave its approval to the parties’ Joint Circular No. 28, it has no jurisdiction (i) over the BOC’s
Motion.48 Accordingly, the BSP released the maturity proceeds "counterclaims" and (ii) to resolve the issue of ownership of the
of the CB bills by crediting the Demand Deposit Account of the CB bills.64 With the denial of their separate motions for
PDB and of the BOC with 50% each of the maturity proceeds of Reconsideration,65 the BOC and the BSP separately filed the
the amount in escrow.49 present petitions for review on certiorari.66

In view of the BOC’s acquisition of all the CB bills, All THE BOC’S and THE BSP’S PETITIONS
Asia50 moved to be dropped as a respondent (with the PDB’s
conformity51 ), which the RTC granted.52 The RCBC The BOC argues that the present cases do not fall within the
subsequently followed suit.53 limited provision of Section 10 (d) 4 of CB Circular No. 28,
which contemplates only of three situations: first, where the
In light of the developments, on May 4, 1998, the RTC required fraudulent assignment is not coupled with a notice to the BSP, it
the parties to manifest their intention regarding the case and to can grant no relief; second, where the fraudulent assignment is
inform the court of any amicable settlement; "otherwise, th[e] coupled with a notice of fraud to the BSP, it will make a
case shall be dismissed for lack of interest."54 Complying with notation against the assignment and require the owner and the
the RTC’s order, the BOC moved (i) that the case be set for pre- holder to substantiate their claims; and third, where the case
trial and (ii) for further proceeding to resolve the remaining does not fall on either of the first two situations, the BSP will
issues between the BOC and the PDB, particularly on "who has have to await action on the assignment pending settlement of the
a better right over the subject CB bills."55 The PDB joined the case, whether by agreement or by court order.
BOC in its motion.56
The PDB’s case cannot fall under the first two situations. With
On September 28, 2000, the RTC granted the BSP’s motion to particular regard to the second situation, CB Circular No. 28
interplead and, accordingly, required the BOC to amend its requires that the conflict must be between an "owner" and a
Answer and for the conflicting claimants to comment "holder," for the BSP to exercise its limited jurisdiction to
thereon.57 In October 2000, the BOC filed its Amended resolve conflicting claims; and the word "owner" here refers to
Consolidated Answer with Compulsory Counterclaim, the registered owner giving notice of the fraud to the BSP. The
reiterating its earlier arguments asserting ownership over the PDB, however, is not the registered owner nor is it in possession
subject CB bills.58 (holder) of the CB bills.67Consequently, the PDB’s case can
only falls under the third situation which leaves the RTC, as a
court of general jurisdiction, with the authority to resolve the
In the alternative, the BOC added that even assuming that there issue of ownership of a registered bond (the CB bills) not falling
was no effective transfer of the nine CB bills ultimately to the in either of the first two situations.
BOC, the PDB remains obligated to deliver to the BOC, as
buyer in the April 15 transaction and ultimate successor-in-
interest of the buyer (Bancap) in the April 19 transaction, either The BOC asserts that the policy consideration supportive of its
the original subjects of the sales or the value thereof, plus interpretation of CB Circular No. 28 is to have a reliable system
whatever income that may have been earned during the to protect the registered owner; should he file a notice with the
pendency of the case.59 BSP about a fraudulent assignment of certain CB bills, the BSP
simply has to look at its books to determine who is the owner of
the CB bills fraudulently assigned. Since it is only the registered
That BOC prayed: owner who complied with the BSP’s requirement of recording
an assignment in the BSP’s books, then "the protective mantle of
1. To declare BOC as the rightful owner of the nine administrative proceedings" should necessarily benefit him only,
(9) CB bills and as the party entitled to the proceeds without extending the same benefit to those who chose to ignore
thereof as well as all income earned pursuant to the the Circular’s requirement, like the PDB.68
two (2) Escrow Agreements entered into by BOC and
PDB. Assuming arguendo that the PDB’s case falls under the second
situation – i.e., the BSP has jurisdiction to resolve the issue of
2. In the alternative, ordering PDB to deliver the ownership of the CB bills – the more recent CB Circular No.
original subject of the sales transactions or the value 769-80 (Rules and Regulations Governing Central Bank
thereof and whatever income earned by way of interest Certificates of Indebtedness) already superseded CB Circular
at prevailing rate. No. 28, and, in particular, effectively amended Section 10 (d) 4
of CB Circular No. 28. The pertinent provisions of CB Circular
Without any opposition or objection from the PDB, on February No. 769-80 read:
23, 2001, the RTC admitted60 the BOC’s Amended Consolidated
Answer with Compulsory Counterclaims. Assignment Affected by Fraud. – Any assignment for transfer of
ownership of registered certificate obtained through fraudulent
In May 2001, the PDB filed an Omnibus Motion,61 questioning representation if honored by the Central Bank or any of its
the RTC’s jurisdiction over the BOC’s "additional authorized service agencies shall not make the Central Bank or
counterclaims." The PDB argues that its petitions pray for the agency liable therefore unless it has previous formal notice of
BSP (not the RTC) to determine who among the conflicting the fraud. The Central Bank, upon notice under oath that the
claimants to the CB bills stands in the position of the bona fide assignment was secured through fraudulent means, shall
holder for value. The RTC cannot entertain the BOC’s immediately issue and circularize a "stop order" against the
counterclaim, regardless of its nature, because it is the BSP transfer, exchange, redemption of the Certificate including the
payment of interest coupons. The Central Bank or service

9
agency concerned shall continue to withhold action on the At the outset, we note that the parties have not raised the validity
certificate until such time that the conflicting claims have been of either CB Circular No. 28 or CB Circular No. 769-80 as an
finally settled either by amicable settlement between the parties issue. What the parties largely contest is the applicable circular
or by order of the Court. in case of an allegedly fraudulently assigned CB bill. The
applicable circular, in turn, is determinative of the proper
Unlike CB Circular No. 28, CB Circular No. 769-80 limited the remedy available to the PDB and/or the BOC as claimants to the
BSP’s authority to the mere issuance and circularization of a proceeds of the subject CB bills.
"stop order" against the transfer, exchange and redemption upon
sworn notice of a fraudulent assignment. Under this Circular, the Indisputably, at the time the PDB supposedly invoked the
BSP shall only continue to withhold action until the dispute is jurisdiction of the BSP in 1994 (by requesting for the annotation
ended by an amicable settlement or by judicial determination. of its claim over the subject CB bills in the BSP’s books), CB
Given the more passive stance of the BSP – the very agency Circular No. 769-80 has long been in effect. Therefore, the
tasked to enforce the circulars involved - under CB Circular No. parties’ respective interpretations of the provision of Section 10
769-80, the RTC’s dismissal of the BOC’s counterclaims is (d) 4 of CB Circular No. 28 do not have any significance unless
palpably erroneous. it is first established that that Circular governs the resolution of
their conflicting claims of ownership. This conclusion is
Lastly, since Nuqui’s office (Government Securities important, given the supposed repeal or modification of Section
Department) had already been abolished,69 it can no longer 10 (d) 4 of CB Circular No. 28 by the following provisions of
adjudicate the dispute under the second situation covered by CB CB Circular No. 769-80:
Circular No. 28. The abolition of Nuqui’s office is not only
consistent with the BSP’s Charter but, more importantly, with ARTICLE XI
CB Circular No. 769-80, which removed the BSP’s adjudicative SUPPLEMENTAL RULES
authority over fraudulent assignments.
Section 1. Central Bank Circular No. 28 – The provisions of
THE PDB’S COMMENT Central Bank Circular No. 28 shall have suppletory application
to matters not specially covered by these Rules.
The PDB claims that jurisdiction is determined by the
allegations in the complaint/petition and not by the defenses set ARTICLE XII
up in the answer.70 In filing the petition with the RTC, the PDB EFFECTIVITY
merely seeks to compel the BSP to determine, pursuant to CB
Circular No. 28, the party legally entitled to the proceeds of the Effectivity – The rules and regulations herein prescribed shall
subject CB bills, which, as the PDB alleged, have been take effect upon approval by the Monetary Board, Central Bank
transferred through fraudulent representations – an allegation of the Philippines, and all circulars, memoranda, or office orders
which properly recognized the BSP’s jurisdiction to resolve inconsistent herewith are revoked or modified accordingly.
conflicting claims of ownership over the CB bills. (Emphases added)

The PDB adds that under the doctrine of primary jurisdiction, We agree with the PDB that in view of CB Circular No. 28’s
courts should refrain from determining a controversy involving a suppletory application, an attempt to harmonize the apparently
question whose resolution demands the exercise of sound conflicting provisions is a prerequisite before one may possibly
administrative discretion. In the present case, the BSP’s special conclude that an amendment or a repeal exists.71 Interestingly,
knowledge and experience in resolving disputes on securities, however, even the PDB itself failed to submit an interpretation
whose assignment and trading are governed by the BSP’s rules, based on its own position of harmonization.
should be upheld.
The repealing clause of CB Circular No. 769-80 obviously did
The PDB counters that the BOC’s tri-fold interpretation of not expressly repeal CB Circular No. 28; in fact, it even
Section 10 (d) 4 of CB Circular No. 28 sanctions split provided for the suppletory application of CB Circular No. 28
jurisdiction which is not favored;but even this tri-fold on "matters not specially covered by" CB Circular No. 769-80.
interpretation which, in the second situation, limits the meaning While no express repeal exists, the intent of CB Circular No.
of the "owner" to the registered owner is flawed. Section 10 (d) 769-80 to operate as an implied repeal,72or at least to amend
4 aims to protect not just the registered owner but anyone who earlier CB circulars, is supported by its text "revoking" or
has been deprived of his bond by fraudulent representation in "modif[ying" "all circulars" which are inconsistent with its
order to deter fraud in the secondary trading of government terms.
securities.
At the outset, we stress that none of the parties disputes that the
The PDB asserts that the existence of CB Circular No. 769-80 or subject CB bills fall within the category of a certificate or
the abolition of Nuqui’s office does not result in depriving the evidence of indebtedness and that these were issued by the
BSP of its jurisdiction: first, CB Circular No. 769-80 expressly Central Bank, now the BSP. Thus, even without resorting to
provides that CB Circular No. 28 shall have suppletory statutory construction aids, matters involving the subject CB
application to CB Circular No. 769-80; and second, the BSP can bills should necessarily be governed by CB Circular No. 769-80.
always designate an office to resolve the PDB’s claim over the Even granting, however, that reliance on CB Circular No. 769-
CB bills. 80 alone is not enough, we find that CB Circular No. 769-80
impliedly repeals CB Circular No. 28.
Lastly, the PDB argues that even assuming that the RTC has
jurisdiction to resolve the issue of ownership of the CB bills, the An implied repeal transpires when a substantial conflict exists
RTC has not acquired jurisdiction over the BOC’s so-called between the new and the prior laws. In the absence of an express
"compulsory" counterclaims (which in truth is merely repeal, a subsequent law cannot be construed as repealing a prior
"permissive") because of the BOC’s failure to pay the law unless an irreconcilable inconsistency and repugnancy exist
appropriate docket fees. These counterclaims should, therefore, in the terms of the new and the old laws.73 Repeal by implication
be dismissed and expunged from the record. is not favored, unless manifestly intended by the legislature, or
unless it is convincingly and unambiguously demonstrated, that
THE COURT’S RULING the laws or orders are clearly repugnant and patently
inconsistent with one another so that they cannot co-exist; the
We grant the petitions.

10
legislature is presumed to know the existing law and would Broadly speaking, jurisdiction is the legal power or authority to
express a repeal if one is intended.74 hear and determine a cause.80 In the exercise of judicial or quasi-
judicial power, it refers to the authority of a court to hear and
There are two instances of implied repeal. One takes place when decide a case.81 In the context of these petitions, we hark back to
the provisions in the two acts on the same subject matter are the basic principles governing the question of jurisdiction over
irreconcilably contradictory, in which case, the later act, to the the subject matter.
extent of the conflict, constitutes an implied repeal of the earlier
one. The other occurs when the later act covers the whole First, jurisdiction over the subject matter is determined only by
subject of the earlier one and is clearly intended as a substitute; the Constitution and by law.82 As a matter of substantive law,
thus, it will operate to repeal the earlier law.75 procedural rules alone can confer no jurisdiction to courts or
administrative agencies.83 In fact, an administrative agency,
A general reading of the two circulars shows that the second acting in its quasi-judicial capacity, is a tribunal of limited
instance of implied repeal is present in this case. CB Circular jurisdiction and, as such, could wield only such powers that are
No. 28, entitled "Regulations Governing Open Market specifically granted to it by the enabling statutes. In contrast, an
Operations, Stabilization of Securities Market, Issue, Servicing RTC is a court of general jurisdiction, i.e., it has jurisdiction
and Redemption of Public Debt," is a regulation governing the over cases whose subject matter does not fall within the
servicing and redemption of public debt, including the issue, exclusive original jurisdiction of any court, tribunal or body
inscription, registration, transfer, payment and replacement of exercising judicial or quasi-judicial functions.84
bonds and securities representing the public debt.76 On the other
hand, CB Circular No. 769-80, entitled "Rules and Regulations Second, jurisdiction over the subject matter is determined not by
Governing Central Bank Certificate of Indebtedness," is the the pleas set up by the defendant in his answer85but by the
governing regulation on matters77 (i) involving certificate of allegations in the complaint,86 irrespective of whether the
indebtedness78issued by the Central Bank itself and (ii) which plaintiff is entitled to favorable judgment on the basis of his
are similarly covered by CB Circular No. 28. assertions.87 The reason is that the complaint is supposed to
contain a concise statement of the ultimate facts constituting the
The CB Monetary Board issued CB Circular No. 28 to regulate plaintiff's causes of action.88
the servicing and redemption of public debt, pursuant to Section
124 (now Section 119 of Republic Act R.A. No. 7653) of the old Third, jurisdiction is determined by the law in force at the time
Central Bank law79 which provides that "the servicing and of the filing of the complaint.89
redemption of the public debt shall also be effected through the
Bangko Sentral." However, even as R.A. No. 7653 continued to Parenthetically, the Court observes that none of the parties ever
recognize this role by the BSP, the law required a phase-out of raised the issue of whether the BSP can simply disown its
all fiscal agency functions by the BSP, including Section 119 of jurisdiction, assuming it has, by the simple expedient of
R.A. No. 7653. promulgating a new circular (specially applicable to a certificate
of indebtedness issued by the BSP itself), inconsistent with an
In other words, even if CB Circular No. 28 applies broadly to old circular, assertive of its limited jurisdiction over ownership
both government-issued bonds and securities and Central Bank- issues arising from fraudulent assignments of a certificate of
issued evidence of indebtedness, given the present state of law, indebtedness. The PDB, in particular, relied solely and heavily
CB Circular No. 28 and CB Circular No. 769-80 now operate on on CB Circular No. 28.
the same subject – Central Bank-issued evidence of
indebtedness. Under Section 1, Article XI of CB Circular No. In light of the above principles pointing to jurisdiction as a
769-80, the continued relevance and application of CB Circular matter of substantive law, the provisions of the law itself that
No. 28 would depend on the need to supplement any deficiency gave CB Circular 769-80 its life and jurisdiction must be
or silence in CB Circular No. 769-80 on a particular matter. examined.

In the present case, both CB Circular No. 28 and CB Circular The Philippine Central Bank
No. 769-80 provide the BSP with a course of action in case of an
allegedly fraudulently assigned certificate of indebtedness.
Under CB Circular No. 28, in case of fraudulent assignments, On January 3, 1949, Congress created the Central Bank of the
the BSP would have to "call upon the owner and the person Philippines (Central Bank) as a corporate body with the primary
presenting the bond to substantiate their respective claims" and, objective of (i) maintaining the internal and external monetary
from there, determine who has a better right over the registered stability in the Philippines; and (ii) preserving the international
bond. On the other hand, under CB Circular No. 769-80, the value and the convertibility of the peso.90 In line with these
BSP shall merely "issue and circularize a ‘stop order’ against the broad objectives, the Central Bank was empowered to issue
transfer, exchange, redemption of the [registered] certificate" rules and regulations "necessary for the effective discharge of
without any adjudicative function (which is the precise root of the responsibilities and exercise of the powers assigned to the
the present controversy). As the two circulars stand, the patent Monetary Board and to the Central Bank."91 Specifically, the
irreconcilability of these two provisions does not require Central Bank is authorized to organize (other) departments for
elaboration. Section 5, Article V of CB Circular No. 769-80 the efficient conduct of its business and whose powers and
inescapably repealed Section 10 (d) 4 of CB Circular No. 28. duties "shall be determined by the Monetary Board, within the
authority granted to the Board and the Central Bank"92 under its
original charter.
The issue of BSP’s jurisdiction, lay hidden
With the 1973 Constitution, the then Central Bank was
On that note, the Court could have written finis to the present constitutionally made as the country’s central monetary
controversy by simply sustaining the BSP’s hands-off approach authority until such time that Congress93 shall have established a
to the PDB’s problem under CB Circular No. 769-80. However, central bank. The 1987 Constitution continued to recognize this
the jurisdictional provision of CB Circular No. 769-80 itself, in function of the then Central Bank until Congress, pursuant to the
relation to CB Circular No. 28, on the matter of fraudulent Constitution, created a new central monetary authority which
assignment, has given rise to a question of jurisdiction - the core later came to be known as the Bangko Sentral ng Pilipinas.
question of law involved in these petitions - which the Court
cannot just treat sub-silencio.
Under the New Central Bank Act (R.A. No. 7653),94 the BSP is
given the responsibility of providing policy directions in the
areas of money, banking and credit; it is given, too, the primary

11
objective of maintaining price stability, conducive to a balanced While this provision empowers the BSP to oversee the
and sustainable growth of the economy, and of promoting and operations and activities of banks to "ascertain that laws and
maintaining monetary stability and convertibility of the peso. 95 regulations are complied with," the existence of the BSP’s
jurisdiction in the present dispute cannot rely on this provision.
The Constitution expressly grants the BSP, as the country’s The fact remains that the BSP already made known to the PDB
central monetary authority, the power of supervision over the its unfavorable position on the latter’s claim of fraudulent
operation of banks, while leaving with Congress the authority to assignment due to the latter’s own failure to comply96 with
define the BSP’s regulatory powers over the operations of existing regulations:
finance companies and other institutions performing similar
functions. Under R.A. No. 7653, the BSP’s powers and In this connection, Section 10 (b) 2 also requires that a
functions include (i) supervision over the operation of banks; (ii) "Detached assignment will be recognized or accepted only upon
regulation of operations of finance companies and non-bank previous notice to the Central Bank x x x." In fact, in a memo
financial institutions performing quasi banking functions; (iii) dated September 23, 1991 xxx then CB Governor Jose L. Cuisia
sole power and authority to issue currency within the Philippine advised all banks (including PDB) xxx as follows:
territory; (iv) engaging in foreign exchange transactions; (v)
making rediscounts, discounts, loans and advances to banking In view recurring incidents ostensibly disregarding certain
and other financial institutions to influence the volume of credit provisions of CB circular No. 28 (as amended) covering
consistent with the objective of achieving price stability; (vi) assignments of registered bonds, all banks and all concerned are
engaging in open market operations; and (vii) acting as banker enjoined to observe strictly the pertinent provisions of said CB
and financial advisor of the government.1âwphi1 Circular as hereunder quoted:

On the BSP’s power of supervision over the operation of banks, xxxx


Section 4 of R.A. No. 8791 (The General Banking Law of 2000)
elaborates as follows:
Under Section 10.b. (2)
CHAPTER II
AUTHORITY OF THE BANGKO SENTRAL x x x Detached assignment will be recognized or accepted only
upon previous notice to the Central Bank and its use is
authorized only under the following circumstances:
SECTION 4. Supervisory Powers. — The operations and
activities of banks shall be subject to supervision of the Bangko
Sentral. "Supervision" shall include the following: (a) x x x

4.1. The issuance of rules of conduct or the (b) x x x


establishment of standards of operation for uniform
application to all institutions or functions covered, (c) assignments of treasury notes and certificates of
taking into consideration the distinctive character of indebtedness in registered form which are not
the operations of institutions and the substantive provided at the back thereof with assignment form.
similarities of specific functions to which such rules,
modes or standards are to be applied; (d) Assignment of securities which have changed
ownership several times.
4.2. The conduct of examination to determine
compliance with laws and regulations if the (e) x x x
circumstances so warrant as determined by the
Monetary Board;
Non-compliance herewith will constitute a basis for non-action
or withholding of action on redemption/payment of interest
4.3. Overseeing to ascertain that laws and regulations coupons/transfer transactions or denominational exchange that
are complied with; may be directly affected thereby. [Boldfacing supplied]

4.4. Regular investigation which shall not be oftener Again, the books of the BSP do not show that the supposed
than once a year from the last date of examination to assignment of subject CB Bills was ever recorded in the BSP’s
determine whether an institution is conducting its books. [Boldfacing supplied]
business on a safe or sound basis: Provided, That the
deficiencies/irregularities found by or discovered by
an audit shall be immediately addressed; However, the PDB faults the BSP for not recording the
assignment of the CB bills in the PDB’s favor despite the fact
that the PDB already requested the BSP to record its assignment
4.5. Inquiring into the solvency and liquidity of the in the BSP’s books as early as June 30, 1994.97
institution (2-D); or

The PDB’s claim is not accurate. What the PDB requested the
4.6. Enforcing prompt corrective action. (n) BSP on that date was not the recording of the assignment of the
CB bills in its favor but the annotation of its claim over the CB
The Bangko Sentral shall also have supervision over the bills at the time when (i) it was no longer in possession of the
operations of and exercise regulatory powers over quasi-banks, CB bills, having been transferred from one entity to another and
trust entities and other financial institutions which under special (ii) all it has are the detached assignments, which the PDB has
laws are subject to Bangko Sentral supervision. (2-Ca) not shown to be compliant with Section 10 (b) 2 above-quoted.
Obviously, the PDB cannot insist that the BSP take cognizance
For the purposes of this Act, "quasi-banks" shall refer to entities of its plaint when the basis of the BSP’s refusal under existing
engaged in the borrowing of funds through the issuance, regulation, which the PDB is bound to observe, is the PDB’s
endorsement or assignment with recourse or acceptance of own failure to comply therewith.
deposit substitutes as defined in Section 95 of Republic Act No.
7653 (hereafter the "New Central Bank Act") for purposes of True, the BSP exercises supervisory powers (and regulatory
relending or purchasing of receivables and other obligations. powers) over banks (and quasi banks). The issue presented
[emphasis ours] before the Court, however, does not concern the BSP’s

12
supervisory power over banks as this power is understood under Scattered provisions in R.A. No. 7653 and R.A. No. 8791, inter
the General Banking Law. In fact, there is nothing in the PDB’s alia, exist, conferring jurisdiction on the BSP on certain
petition (even including the letters it sent to the BSP) that would matters.105 For instance, under the situations contemplated under
support the BSP’s jurisdiction outside of CB Circular No. 28, Section 36, par. 2106 (where a bank or quasi bank persists in
under its power of supervision, over conflicting claims to the carrying on its business in an unlawful or unsafe manner) and
proceeds of the CB bills. Section 37107 (where the bank or its officers willfully violate the
bank’s charter or by-laws, or the rules and regulations issued by
BSP has quasi-judicial powers over a the Monetary Board) of R.A. No. 7653, the BSP may place an
class of cases which does not include entity under receivership and/or liquidation or impose
the adjudication of ownership of the administrative sanctions upon the entity or its officers or
CB bills in question directors.

In United Coconut Planters Bank v. E. Ganzon, Inc.,98 the Court Among its several functions under R.A. No. 7653, the BSP is
considered the BSP as an administrative agency,99exercising authorized to engage in open market operations and thereby
quasi-judicial functions through its Monetary Board. It held: "issue, place, buy and sell freely negotiable evidences of
indebtedness of the Bangko Sentral" in the following manner.
A quasi-judicial agency or body is an organ of government other
than a court and other than a legislature, which affects the rights SEC. 90. Principles of Open Market Operations. – The open
of private parties through either adjudication or rule-making. market purchases and sales of securities by the Bangko Sentral
The very definition of an administrative agency includes its shall be made exclusively in accordance with its primary
being vested with quasi-judicial powers. The ever increasing objective of achieving price stability.
variety of powers and functions given to administrative agencies
recognizes the need for the active intervention of administrative xxxx
agencies in matters calling for technical knowledge and speed in
countless controversies which cannot possibly be handled by SEC. 92. Issue and Negotiation of Bangko Sentral Obligations. –
regular courts. A "quasi-judicial function" is a term which In order to provide the Bangko Sentral with effective
applies to the action, discretion, etc., of public administrative instruments for open market operations, the Bangko Sentral
officers or bodies, who are required to investigate facts, or may, subject to such rules and regulations as the Monetary
ascertain the existence of facts, hold hearings, and draw Board may prescribe and in accordance with the principles
conclusions from them, as a basis for their official action and to stated in Section 90 of this Act, issue, place, buy and sell freely
exercise discretion of a judicial nature. negotiable evidences of indebtedness of the Bangko Sentral:
Provided, That issuance of such certificates of indebtedness
Undoubtedly, the BSP Monetary Board is a quasi-judicial shall be made only in cases of extraordinary movement in price
agency exercising quasi-judicial powers or functions. As aptly levels. Said evidences of indebtedness may be issued directly
observed by the Court of Appeals, the BSP Monetary Board is against the international reserve of the Bangko Sentral or against
an independent central monetary authority and a body corporate the securities which it has acquired under the provisions of
with fiscal and administrative autonomy, mandated to provide Section 91 of this Act, or may be issued without relation to
policy directions in the areas of money, banking and credit. It specific types of assets of the Bangko Sentral.
has power to issue subpoena, to sue for contempt those refusing
to obey the subpoena without justifiable reason, to administer The Monetary Board shall determine the interest rates,
oaths and compel presentation of books, records and others, maturities and other characteristics of said obligations of the
needed in its examination, to impose fines and other sanctions Bangko Sentral, and may, if it deems it advisable, denominate
and to issue cease and desist order. Section 37 of Republic Act the obligations in gold or foreign currencies.
No. 7653, in particular, explicitly provides that the BSP
Monetary Board shall exercise its discretion in determining
whether administrative sanctions should be imposed on banks Subject to the principles stated in Section 90 of this Act, the
and quasi-banks, which necessarily implies that the BSP evidences of indebtedness of the Bangko Sentral to which this
Monetary Board must conduct some form of investigation or section refers may be acquired by the Bangko Sentral before
hearing regarding the same. [citations omitted] their maturity, either through purchases in the open market or
through redemptions at par and by lot if the Bangko Sentral has
reserved the right to make such redemptions. The evidences of
The BSP is not simply a corporate entity but qualifies as an indebtedness acquired or redeemed by the Bangko Sentral shall
administrative agency created, pursuant to constitutional not be included among its assets, and shall be immediately
mandate,100 to carry out a particular governmental retired and cancelled.108 (italics supplied; emphases ours)
function.101 To be able to perform its role as central monetary
authority, the Constitution granted it fiscal and administrative
autonomy. In general, administrative agencies exercise powers The primary objective of the BSP is to maintain price
and/or functions which may be characterized as administrative, stability.109 The BSP has a number of monetary policy
investigatory, regulatory, quasi-legislative, or quasi-judicial, or a instruments at its disposal to promote price stability. To increase
mix of these five, as may be conferred by the Constitution or by or reduce liquidity in the financial system, the BSP uses open
statute.102 market operations, among others.110 Open market operation is a
monetary tool where the BSP publicly buys or sells government
securities111 from (or to) banks and financial institutions in order
While the very nature of an administrative agency and the raison to expand or contract the supply of money. By controlling the
d'être for its creation103 and proliferation dictate a grant of quasi- money supply, the BSP is able to exert some influence on the
judicial power to it, the matters over which it may exercise this prices of goods and services and achieve its inflation
power must find sufficient anchorage on its enabling law, either objectives.112
by express provision or by necessary implication. Once found,
the quasi-judicial power partakes of the nature of a limited and
special jurisdiction, that is, to hear and determine a class of Once the issue and/or sale of a security is made, the BSP would
cases within its peculiar competence and expertise. In other necessarily make a determination, in accordance with its own
words, the provisions of the enabling statute are the yardsticks rules, of the entity entitled to receive the proceeds of the security
by which the Court would measure the quantum of quasi- upon its maturity. This determination by the BSP is an exercise
judicial powers an administrative agency may exercise, as of its administrative powers113 under the law as an incident to its
defined in the enabling act of such agency.104 power to prescribe rules and regulations governing open market
operations to achieve the "primary objective of achieving price

13
stability."114As a matter of necessity, too, the same rules and Given the preceding discussions, even the PDB’s invocation of
regulations facilitate transaction with the BSP by providing for the doctrine of primary jurisdiction is misplaced.
an orderly manner of, among others, issuing, transferring,
exchanging and paying securities representing public debt. In the exercise of its plenary legislative power, Congress may
create administrative agencies endowed with quasi-legislative
Significantly, when competing claims of ownership over the and quasi-judicial powers. Necessarily, Congress likewise
proceeds of the securities it has issued are brought before it, the defines the limits of an agency’s jurisdiction in the same manner
law has not given the BSP the quasi-judicial power to resolve as it defines the jurisdiction of courts.121 As a result, it may
these competing claims as part of its power to engage in open happen that either a court or an administrative agency has
market operations. Nothing in the BSP’s charter confers on the exclusive jurisdiction over a specific matter or both have
BSP the jurisdiction or authority to determine this kind of concurrent jurisdiction on the same. It may happen, too, that
claims, arising out of a subsequent transfer or assignment of courts and agencies may willingly relinquish adjudicatory power
evidence of indebtedness – a matter that appropriately falls that is rightfully theirs in favor of the other. One of the instances
within the competence of courts of general jurisdiction. That the when a court may properly defer to the adjudicatory authority of
statute withholds this power from the BSP is only consistent an agency is the applicability of the doctrine of primary
with the fundamental reasons for the creation of a Philippine jurisdiction.122
central bank, that is, to lay down stable monetary policy and
exercise bank supervisory functions. Thus, the BSP’s As early as 1954, the Court applied the doctrine of primary
assumption of jurisdiction over competing claims cannot find jurisdiction under the following terms:
even a stretched-out justification under its corporate powers "to
do and perform any and all things that may be necessary or
proper to carry out the purposes" of R.A. No. 7653. 115 6. In the fifties, the Court taking cognizance of the move to vest
jurisdiction in administrative commissions and boards the power
to resolve specialized disputes xxx ruled that Congress in
To reiterate, open market operation is a monetary policy requiring the Industrial Court's intervention in the resolution of
instrument that the BSP employs, among others, to regulate the labor-management controversies xxx meant such jurisdiction to
supply of money in the economy to influence the timing, cost be exclusive, although it did not so expressly state in the law.
and availability of money and credit, as well as other financial The Court held that under the "sense-making and expeditious
factors, for the purpose of stabilizing the price level.116 What the doctrine of primary jurisdiction ... the courts cannot or will not
law grants the BSP is a continuing role to shape and carry out determine a controversy involving a question which is within the
the country’s monetary policy – not the authority to adjudicate jurisdiction of an administrative tribunal, where the question
competing claims of ownership over the securities it has issued – demands the exercise of sound administrative discretion
since this authority would not fall under the BSP’s purposes requiring the special knowledge, experience, and services of the
under its charter. administrative tribunal to determine technical and intricate
matters of fact, and a uniformity of ruling is essential to comply
While R.A. No. 7653117 empowers the BSP to conduct with the purposes of the regulatory statute
administrative hearings and render judgment for or against an administered."123 (emphasis ours)
entity under its supervisory and regulatory powers and even
authorizes the BSP Governor to "render decisions, or rulings x x In Industrial Enterprises, Inc. v. Court of Appeals,124 the Court
x on matters regarding application or enforcement of laws ruled that while an action for rescission of a contract between
pertaining to institutions supervised by the BSP and laws coal developers appears to be an action cognizable by regular
pertaining to quasi-banks, as well as regulations, policies or courts, the trial court remains to be without jurisdiction to
instructions issued by the Monetary Board," it is precisely the entertain the suit since the contract sought to be rescinded is
text of the BSP’s own regulation (whose validity is not here "inextricably tied up with the right to develop coal-bearing lands
raised as an issue) that points to the BSP’s limited role in case of and the determination of whether or not the reversion of the coal
an allegedly fraudulent assignment to simply (i) issuing and operating contract over the subject coal blocks to [the plaintiff]
circularizing a ‘"stop order" against the transfer, exchange, would be in line with the country’s national program and
redemption of the certificate of indebtedness, including the objective on coal-development and over-all coal-supply-demand
payment of interest coupons, and (ii) withholding action on the balance." It then applied the doctrine of primary jurisdiction –
certificate.
In recent years, it has been the jurisprudential trend to apply the
A similar conclusion can be drawn from the BSP’s doctrine of primary jurisdiction in many cases involving matters
administrative adjudicatory power in cases of "willful failure or that demand the special competence of administrative agencies.
refusal to comply with, or violation of, any banking law or any It may occur that the Court has jurisdiction to take cognizance of
order, instruction or regulation issued by the Monetary Board, or a particular case, which means that the matter involved is also
any order, instruction or ruling by the Governor."118 The non- judicial in character. However, if the case is such that its
compliance with the pertinent requirements under CB Circular determination requires the expertise, specialized skills and
No. 28, as amended, deprives a party from any right to demand knowledge of the proper administrative bodies because technical
payment from the BSP. matters or intricate questions of facts are involved, then relief
must first be obtained in an administrative proceeding before a
In other words, the grant of quasi-judicial authority to the BSP remedy will be supplied by the courts even though the matter is
cannot possibly extend to situations which do not call for the within the proper jurisdiction of a court. This is the doctrine of
exercise by the BSP of its supervisory or regulatory functions primary jurisdiction. It applies "where a claim is originally
over entities within its jurisdiction.119 cognizable in the courts, and comes into play whenever
enforcement of the claim requires the resolution of issues which,
The fact alone that the parties involved are banking institutions under a regulatory scheme, have been placed within the special
does not necessarily call for the exercise by the BSP of its quasi- competence of an administrative body."
judicial powers under the law.120
Clearly, the doctrine of primary jurisdiction finds application in
The doctrine of primary jurisdiction this case since the question of what coal areas should be
argues against BSP’s purported exploited and developed and which entity should be granted coal
authority to adjudicate ownership operating contracts over said areas involves a technical
issues over the disputed CB bills determination by the Bureau of Energy Development as the
administrative agency in possession of the specialized expertise
to act on the matter. The Trial Court does not have the

14
competence to decide matters concerning activities relative to counterclaim/crossclaim for interpleader. Section 1, Rule 62 of
the exploration, exploitation, development and extraction of the Rules of Court provides when an interpleader is proper:
mineral resources like coal. These issues preclude an initial
judicial determination. [emphases ours] SECTION 1. When interpleader proper. – Whenever conflicting
claims upon the same subject matter are or may be made against
The absence of any express or implied statutory power to a person who claims no interest whatever in the subject matter,
adjudicate conflicting claims of ownership or entitlement to the or an interest which in whole or in part is not disputed by the
proceeds of its certificates of indebtedness finds complement in claimants, he may bring an action against the conflicting
the similar absence of any technical matter that would call for claimants to compel them to interplead and litigate their several
the BSP’s special expertise or competence.125 In fact, what the claims among themselves.
PDB’s petitions bear out is essentially the nature of the
transaction it had with the subsequent transferees of the subject The remedy of an action of interpleader131 is designed to protect
CB bills (BOC and Bancap) and not any matter more a person against double vexation in respect of a single
appropriate for special determination by the BSP or any liability.7 It requires, as an indispensable requisite, that
administrative agency. conflicting claims upon the same subject matter are or may be
made against the stakeholder (the possessor of the subject
In a similar vein, it is well-settled that the interpretation given to matter) who claims no interest whatever in the subject matter or
a rule or regulation by those charged with its execution is an interest which in whole or in part is not disputed by the
entitled to the greatest weight by the courts construing such rule claimants.132
or regulation.126 While there are exceptions127 to this rule, the
PDB has not convinced us that a departure is warranted in this Through this remedy, the stakeholder can join all competing
case. Given the non-applicability of the doctrine of primary claimants in a single proceeding to determine conflicting claims
jurisdiction, the BSP’s own position, in light of Circular No. without exposing the stakeholder to the possibility of having to
769-80, deserves respect from the Court. pay more than once on a single liability.133

Ordinarily, cases involving the application of doctrine of When the court orders that the claimants litigate among
primary jurisdiction are initiated by an action invoking the themselves, in reality a new action arises,134 where the claims of
jurisdiction of a court or administrative agency to resolve the the interpleaders themselves are brought to the fore, the
substantive legal conflict between the parties. In this sense, the stakeholder as plaintiff is relegated merely to the role of
present case is quite unique since the court’s jurisdiction was, initiating the suit. In short, the remedy of interpleader, when
originally, invoked to compel an administrative agency (the proper, merely provides an avenue for the conflicting claims on
BSP) to resolve the legal conflict of ownership over the CB bills the same subject matter to be threshed out in an action. Section 2
- instead of obtaining a judicial determination of the same of Rule 62 provides:
dispute.
SEC. 2. Order. – Upon the filing of the complaint, the court shall
The remedy of interpleader issue an order requiring the conflicting claimants to interplead
with one another. If the interests of justice so require, the court
Based on the unique factual premise of the present case, the may direct in such order that the subject matter be paid or
RTC acted correctly in initially assuming jurisdiction over the delivered to the court.
PDB’s petition for mandamus, prohibition and
injunction.128 While the RTC agreed (albeit erroneously) with This is precisely what the RTC did by granting the BSP’s
the PDB’s view (that the BSP has jurisdiction), it, however, motion to interplead. The PDB itself "agreed that the various
dismissed not only the BOC’s/the BSP’s counterclaims but the claimants should now interplead." Thus, the PDB and the BOC
PDB’s petition itself as well, on the ground that it lacks subsequently entered into two separate escrow agreements,
jurisdiction. covering the CB bills, and submitted them to the RTC for
approval.
This is plain error.
In granting the BSP’s motion, the RTC acted on the correct
Not only the parties themselves, but more so the courts, are premise that it has jurisdiction to resolve the parties’ conflicting
bound by the rule on non-waiver of jurisdiction.129believes that claims over the CB bills - consistent with the rules and the
jurisdiction over the BOC’s counterclaims and the BSP’s parties’ conduct - and accordingly required the BOC to amend
counterclaim/crossclaim for interpleader calls for the application its answer and for the PDB to comment thereon. Suddenly,
of the doctrine of primary jurisdiction, the allowance of the however, the PDB made an about-face and questioned the
PDB’s petition even becomes imperative because courts may jurisdiction of the RTC. Swayed by the PDB’s argument, the
raise the issue of primary jurisdiction sua sponte.130 RTC dismissed even the PDB’s petition - which means that it
did not actually compel the BSP to resolve the BOC’s and the
Of the three possible options available to the RTC, the adoption PDB’s claims.
of either of these two would lead the trial court into serious legal
error: first, if it granted the PDB’s petition, its decision would Without the motion to interplead and the order granting it, the
have to be set aside on appeal because the BSP has no RTC could only dismiss the PDB’s petition since it is the RTC
jurisdiction as previously discussed; and second when it which has jurisdiction to resolve the parties’ conflicting claims –
dismissed the PDB’s petitions and the BOC’s counterclaims on not the BSP. Given that the motion to interplead has been
the ground that it lacks jurisdiction, the trial court seriously actually filed, the RTC could not have really granted the relief
erred because precisely, the resolution of the conflicting claims originally sought in the PDB’s petition since the RTC’s order
over the CB bills falls within its general jurisdiction. granting the BSP’s motion to interplead - to which the PDB in
fact acquiesced into - effectively resulted in the dismissal of the
Without emasculating its jurisdiction, the RTC could have PDB’s petition. This is not altered by the fact that the PDB
properly dismissed the PDB’s petition but on the ground that additionally prayed in its petition for damages, attorney’s fees
mandamus does not lie against the BSP; but even this correct and costs of suit "against the public respondents" because the
alternative is no longer plausible since the BSP, as a respondent grant of the order to interplead effectively sustained the
below, already properly brought before the RTC the remaining propriety of the BSP’s resort to this procedural device.
conflicting claims over the subject CB bills by way of a
Interpleader

15
1. as a special civil action claim as a "permissive counterclaim" which necessitates the
payment of docket fees.
What is quite unique in this case is that the BSP did not initiate
the interpleader suit through an original complaint but through As the preceding discussions would show, however, the BOC’s
its Answer. This circumstance becomes understandable if it is "claim" - i.e., its assertion of ownership over the CB bills – is in
considered that insofar as the BSP is concerned, the PDB does reality just that, a "claim" against the stakeholder and not as a
not possess any right to have its claim recorded in the BSP’s "counterclaim,"144 whether compulsory145or permissive. It is
books; consequently, the PDB cannot properly be considered only the BOC’s alternative prayer (for the PDB to deliver to the
even as a potential claimant to the proceeds of the CB bills upon BOC, as the buyer in the April 15 transaction and the ultimate
maturity. Thus, the interpleader was only an alternative position, successor-in-interest of the buyer in the April 19 transaction,
made only in the BSP’s Answer.135 either the original subjects of the sales or the value thereof plus
whatever income that may have been earned pendente lite) and
The remedy of interpleader, as a special civil action, is primarily its prayer for damages that are obviously compulsory
governed by the specific provisions in Rule 62 of the Rules of counterclaims against the PDB and, therefore, does not require
Court and secondarily by the provisions applicable to ordinary payment of docket fees.146
civil actions.136 Indeed, Rule 62 does not expressly authorize the
filing of a complaint-in-interpleader as part of, although separate The PDB takes a contrary position through its insistence that a
and independent from, the answer. Similarly, Section 5, Rule 6, compulsory counterclaim should be one where the presence of
in relation to Section 1, Rule 9 of the Rules of Court 137 does not third parties, of whom the court cannot acquire jurisdiction, is
include a complaint-in-interpleader as a claim,138 a form of not required. It reasons out that since the RCBC and All Asia
defense,139 or as an objection that a defendant may be allowed to (the intervening holders of the CB bills) have already been
put up in his answer or in a motion to dismiss. This does not dropped from the case, then the BOC’s counterclaim must only
mean, however, that the BSP’s "counter-complaint/cross-claim be permissive in nature and the BOC should have paid the
for interpleader" runs counter to general procedures. correct docket fees.

Apart from a pleading,140 the rules141 allow a party to seek an We see no reason to belabor this claim. Even if we gloss over
affirmative relief from the court through the procedural device the PDB’s own conformity to the dropping of these entities as
of a motion. While captioned "Answer with counter parties, the BOC correctly argues that a remedy is provided
complaint/cross-claim for interpleader," the RTC understood under the Rules. Section 12, Rule 6 of the Rules of Court reads:
this as in the nature of a motion,142 seeking relief which
essentially consists in an order for the conflicting claimants to SEC. 12. Bringing new parties. – When the presence of parties
litigate with each other so that "payment is made to the rightful other than those to the original action is required for the granting
or legitimate owner"143 of the subject CB bills. of complete relief in the determination of a counterclaim or
cross-claim, the court shall order them to be brought in as
The rules define a "civil action" as "one by which a party sues defendants, if jurisdiction over them can be obtained.
another for the enforcement or protection of a right, or the
prevention or redress of a wrong." Interpleader may be Even then, the strict characterization of the BOC’s counterclaim
considered as a stakeholder’s remedy to prevent a wrong, that is, is no longer material in disposing of the PDB’s argument based
from making payment to one not entitled to it, thereby rendering on non-payment of docket fees.
itself vulnerable to lawsuit/s from those legally entitled to
payment.
When an action is filed in court, the complaint must be
accompanied by the payment of the requisite docket and filing
Interpleader is a civil action made special by the existence of fees by the party seeking affirmative relief from the court. It is
particular rules to govern the uniqueness of its application and the filing of the complaint or appropriate initiatory pleading,
operation. Under Section 2, Rule 6 of the Rules of Court, accompanied by the payment of the prescribed docket fee, that
governing ordinary civil actions, a party’s claim is asserted "in a vests a trial court with jurisdiction over the claim or the nature
complaint, counterclaim, cross-claim, third (fourth, etc.)-party of the action.147 However, the non-payment of the docket fee at
complaint, or complaint-in-intervention." In an interpleader suit, the time of filing does not automatically cause the dismissal of
however, a claim is not required to be contained in any of these the case, so long as the fee is paid within the applicable
pleadings but in the answer-(of the conflicting claimants)-in- prescriptive or reglementary period, especially when the
interpleader. This claim is different from the counter-claim (or claimant demonstrates a willingness to abide by the rules
cross-claim, third party-complaint) which is separately allowed prescribing such payment.148
under Section 5, par. 2 of Rule 62.
In the present case, considering the lack of a clear guideline on
2. the payment of docket fees covering BOC’s counterclaim the payment of docket fee by the claimants in an interpleader
suit, compounded by the unusual manner in which the
The PDB argues that, even assuming that the RTC has interpleader suit was initiated and the circumstances surrounding
jurisdiction over the issue of ownership of the CB bills, the it, we surely cannot deduce from the BOC’s mere failure to
BOC’s failure to pay the appropriate docket fees prevents the specify in its prayer the total amount of the CB bills it lays claim
RTC from acquiring jurisdiction over the BOC’s to (or the value of the subjects of the sales in the April 15 and
"counterclaims." April 19 transactions, in its alternative prayer) an intention to
defraud the government that would warrant the dismissal of its
We disagree with the PDB. claim.149

To reiterate and recall, the order granting the "PDB’s motion to At any rate, regardless of the nature of the BOC’s
interplead," already resulted in the dismissal of the PDB’s "counterclaims," for purposes of payment of filing fees, both the
petition. The same order required the BOC to amend its answer BOC and the PDB, properly as defendants-in-interpleader, must
and for the conflicting claimants to comment, presumably to be assessed the payment of the correct docket fee arising from
conform to the nature of an answer-in interpleader. Perhaps, by their respective claims. The seminal case of Sun Insurance
reason of the BOC’s denomination of its claim as a "compulsory Office, Ltd. v. Judge Asuncion150 provides us guidance in the
counterclaim" and the PDB’s failure to fully appreciate the payment of docket fees, to wit:
RTC’s order granting the "BSP’s motion for interpleader" (with
the PDB’s conformity), the PDB mistakenly treated the BOC’s

16
1. x x x Where the filing of the initiatory pleading is WE CONCUR:
not accompanied by payment of the docket fee, the
court may allow payment of the fee within a ANTONIO T. CARPIO
reasonable time but in no case beyond the applicable Associate Justice
prescriptive or reglementary period. Chairperson

2. The same rule applies to permissive counterclaims,


third-party claims and similar pleadings, which shall JOSE PORTUGAL
LUCAS P. BERSAMIN*
not be considered filed until and unless the filing fee PEREZ
Associate Justice
prescribed therefor is paid. The court may also allow Associate Justice
payment of said fee within a reasonable time but also
in no case beyond its applicable prescriptive or ESTELA M. PERLAS-BERNABE
reglementary period. [underscoring ours] Associate Justice

This must be the rule considering that Section 7, Rule 62 of ATTESTATION


which reads:
I attest that the conclusions in the above Decision had been
SEC. 7. Docket and other lawful fees, costs and litigation reached in consultation before the case was assigned to the
expenses as liens. – The docket and other lawful fees paid by the writer or the opinion or the Court's Division.
party who filed a complaint under this Rule, as well as the costs
and litigation expenses, shall constitute a lien or charge upon the
ANTONIO T. CARPIO
subject matter of the action, unless the court shall order
Associate Justice
otherwise.
Chairperson, Second Division

only pertain to the docket and lawful fees to be paid by the one
CERTIFICATION
who initiated the interpleader suit, and who, under the Rules,
actually "claims no interest whatever in the subject matter." By
constituting a lien on the subject matter of the action, Section 7 Pursuant to Section 13, Article VII I of the Constitution, and the
in effect only aims to actually compensate the complainant-in- Division Chairperson's Attestation, I certify that the conclusions
interpleader, who happens to be the stakeholder unfortunate in the above Decision had been reached in consultation before
enough to get caught in a legal crossfire between two or more the case was assigned to the writer of the opinion of the Court's
conflicting claimants, for the faultless trouble it found itself into. Division.
Since the defendants-in-interpleader are actually the ones who
make a claim - only that it was extraordinarily done through the MARIA LOURDES P. A. SERENO
procedural device of interpleader - then to them devolves the Chief Justice
duty to pay the docket fees prescribed under Rule 141 of the
Rules of Court, as amended.151

The importance of paying the correct amount of docket fee


cannot be overemphasized:
Footnotes

The matter of payment of docket fees is not a mere triviality.


* Designated as Additional Member in lieu of
These fees are necessary to defray court expenses in the
Associate Justice Mariano C. del Castillo per Raffle
handling of cases. Consequently, in order to avoid tremendous
dated September 17, 2012
losses to the judiciary, and to the government as well, the
payment of docket fees cannot be made dependent on the
1 Rules
outcome of the case, except when the claimant is a pauper- of Court.
litigant.152
2 Records, Volume II, pp. 565, 571.
WHEREFORE, premises considered the consolidated
PETITIONS are GRANTED. The Planters Development Bank is 3 Rollo, G.R. Nos. 154470-71, p. 69.
hereby REQUIRED to file with the Regional Trial Court its
comment or answer-in-interpleader to Bank of Commerce’s 4 Records,
Amended Consolidated Answer with Compulsory Counterclaim, Volume II, pp. 565, 571.
as previously ordered by the Regional Trial Court. The Regional
5 Rollo,
Trial Court of Makati City, Branch 143, is hereby ORDERED to G.R. Nos. 154470-71, p. 68.
assess the docket fees due from Planters Development Bank and
Bank of Commerce and order their payment, and to resolve with 6 Id. at 55, 68, 193.
DELIBERATE DISPATCH the parties’ conflicting claims of
ownership over the proceeds of the Central Bank bills. 7 On April 12, 1994, the PDB sold ₱ 70 million worth
of securities to the BOC. For its failure to deliver the
The Clerk of Court of the Regional Trial Court of Makati City, securities, the PDB delivered the CB bills to the BOC
Branch 143, or his duly authorized representative is hereby as substitute. On even date, the BOC sold the CB bills
ORDERED to assess and collect the appropriate amount of to Bancapital Development Corporation (Bancap). The
docket fees separately due the Bank of Commerce and Planters PDB reacquired the CB bills from Bancap. Id. at 193-
Development Bank as conflicting claimants in Bangko Sentral 194.
ng Pilipinas’ interpleader suit, in accordance with this decision.
8 Id. at 111.
SO ORDERED.
9 Id. at 112.
ARTURO D. BRION
Associate Justice 10 Id. at 100-101, 113.

17
11 Id. 30 Id.
at 194. at 54, 79.

12 Id. 31 Id.
at 127. at 100.

13 Id. 32 Records,
at 101, 195. Volume I, p. 53.

14 Ibid.; 33 Rollo,
Records, Volume II, p. 566. G.R. Nos. 154470-71, pp. 97-108.

15 Rollo, 34 Id.
G.R. Nos. 154470-71, p. 196. at 96.

16 Records, 35 Records,
Volume I, pp. 193-194. Volume I, pp. 243-246.

17 Rollo, 36 Rollo,
G.R. Nos. 154470-71, p. 80; Records, G.R. Nos. 154470-71, pp. 106-107.
Volume II, p. 552.
37 The RCBC and All Asia filed their respective
18 Asevidenced by a Security Delivery Receipt issued Answers, both seeking the dismissal of the PDB’s
by the PDB and acknowledged by Bancap; rollo, G.R. petition, among others. (Records, Volume II, pp. 551-
Nos. 154589-90, p. 83. 585).

19 Rollo, 38 Rollo,
G.R. Nos. 154470-71, pp. 81, 191. G.R. Nos. 154470-71, p. 131.

20 Through 39 Id.
two separate letters dated June 30, 1994 of at 142, 145.
the PDB’s Executive Vice President, Rodolfo V.
Timbol. Id. at 74; rollo, G.R. Nos. 154589-90, pp. 37, 40 Id. at 144-145.
38.
41 Id.
21 Now
at 150.
defunct.
42 Id.
22 R.A.
at 184. The PDB maintained this position in its
No. 7653 abolished the Central Bank and Pre-Trial Brief (Records, Volume 4, p. 1004).
created a new corporate entity known as the BSP.

23 Rollo,
While the PDB subsequently doubted the
G.R. Nos. 154470-71, pp. 90, 115. necessity of an interpleader, it reasoned as
follows:
24 Section 8 of CB Circular No. 28 reads:
4.1 The parties are now in the process of
A registered bond may be transferred on the threshing out among themselves their
books of the Central Bank into the name of respective claims;
another person upon presentation of the
bond properly assigned in accordance with 4.2 Pending final determination by the RTC
the regulations governing assignments. or amicable settlement as to who shall
Specific instructions for the issue and eventually be entitled to the maturity
delivery of the registered bonds to be issued proceeds of the subject CB bills, PDB and
upon transfer must accompany the bonds BOC have entered into an Escrow
presented. (Use Securities Form No. 14) Agreement. (Records, Volume 4, p. 905.)
Assignment for transfer should be made to
the transferee, or if desired, to the Central 43 Rollo,
Bank of the Philippines for transfer into the G.R. Nos. 154470-71, pp. 156-159.
name of the transferee, who should be
named in the assignment. Assignment in 44 Id. at 171-175.
blank will also be accepted for the purpose
of transfer, if accompanied by the necessary 45 Considering that the proceeds of the CB bills do not
instructions for the issue of the new bonds. earn interest while in the BSP’s possession upon
maturity and thereafter (Records, Volume 4, p. 869).
25 DatedJuly 4, 1994. Rollo, G.R. Nos. 154470-71, pp.
116-117. 46 Rollo, G.R. Nos. 154470-71, p. 156.
26 Records, Volume 1, p. 71. 47 Rollo, G.R. Nos. 154589-90, pp. 140-142, 150-152.
27 Id. at 72. 48 Id.
at 144, 154. The RTC granted the first Joint
Motion to Approve covering the first set of bills
28 Rollo,G.R. Nos. 154470-71, pp. 118-119. The excluding that in the possession of All Asia because of
provision erroneously cited Section 10 (d) 3, instead All Asia’s Opposition, and the PDB and the BOC’s
of Section 10 (d) 4. Comment thereto (Records, Volume 4, pp. 784-789).
However, the BOC and All Asia subsequently
29 The first petition, docketed as Civil Case No. 94- executed an Agreement wherein, essentially, the BOC
3233 was filed on December 23, 1994 (id. at 344), would indemnify All Asia. On joint motion of the
while the second petition, docketed as Civil Case No. BOC and All Asia, the CB bill in All Asia’s
94-3254 was filed on December 29, 1994 (id. at 345). possession was likewise included in escrow.

18
74 The
49 Records, Volume 4, pp. 884-885, 921-922. United Harbor Pilots’ Asso. v. Asso. of Int’l
Shipping Lines, Inc., 440 Phil. 188, 199 (2002).
50 Id. at 959, 961-962.
75 Mecano v. Commission on Audit, supra note 72, at
51 Id. at 967, 971. 506.

76 Section
52 Rollo, G.R. Nos. 154470-71, p. 349. 2, CB Circular No. 28.

77 CB
53 Records, Volume 4, pp. 976, 980. Nuqui was also Circular No. 769-80 provides the following:
dropped as a defendant without objection from PDB Article I (Issue of Central Bank Certificates of
(id. at 1022-1023). Indebtedness); Article II (Bearer and Registered
Certificates); Article III (Registration and Inscription
54 Id.
of Certificates); Article IV (Exchange of Certificates);
at 972. Article V (Assignment for Transfer of Certificates);
and Article VI (Pledge of Certificates).
55 Id. at 973.
78 Acertificate or evidence of indebtedness is a written
56 Id. representation of debt securities or obligations of
at 984.
corporations (like the BSP [Section 1, R.A. No. 7653)
57 Rollo, G.R. Nos. 154470-71, p. 181. such as long term commercial and short term
commercial papers (Securities and Regulations Code
Annotated with Implementing Rules and Regulations,
58 Amended Consolidated Answer with Compulsory Lucila M. Decasa, 2004, 1st ed., p. 7).
Counterclaims; id. at 187-207. The BOC reiterated
that it had already acquired whatever rights the other 79 Section
claimants had over the two sets of CB bills; id. at 16, 124. Servicing and redemption of the public
187, 204. debt. - The servicing and redemption of the public
debt shall also be effected through the Central Bank.
59 Id. at 205. 80 Webser’s Third New Int’l Dictionary.
60 Id. at 239; records, Volume 4, p. 1151. 81 Oscar M. Herrera, Remedial Law, Volume 1, p. 71.
61 Rollo, G.R. Nos. 154589-90, pp. 207- 216. 82 CONSTITUTION, Article VIII, Section 2.
62 Id. at 250-261. 83 Fernandez v. Fulgueras, G.R. No. 178575, June 29,
2010, 622 SCRA 174, 178; Dept. of Agrarian Reform
63 Id. at 272-273. Adjudication Board v. Lubrica, 497 Phil. 313, 322-324
(2005); and Republic v. Court of Appeals, G.R. No.
64 Id. at 50-52. 122256, October 30, 1996, 263 SCRA 758, 764.

84 Batas
at 287-300. The BSP adopted the BOC’s
65 Id. Pambansa Blg. 129, Section 19(6).
arguments in its motion for reconsideration.
85 Tamano
v. Ortiz, G.R. No. 126603, June 29, 1998,
66 Ina Resolution dated November 20, 2002, these two 291 SCRA 584, 588.
cases were consolidated on motion of BOC; id. at 224,
333. 86 Mendoza v. Germino, G.R. No. 165676, November
22, 2010, 635 SCRA 537, 544; Eristingcol v. Court of
67 Id. at 21-22. Appeals, G.R. No. 167702, March 20, 2009, 582
SCRA 139, 146; Lacson Hermanas Inc. v. Heirs of
68 Rollo, Cenon Ignancio, 500 Phil. 673, 678-679 (2005); and
G.R. Nos. 154470-71, pp. 407-408.
Pilipinas Loan Co., Inc. v. Securities and Exchange
Comm., 408 Phil. 291, 300 (2001).
69 Pursuantto Section 129 of Republic Act (RA) No.
7653 (the New Central Bank Act). 87 Multinational Village Homeowners’ Association,
Inc. v. Court of Appeals, G.R. No. 98023, October 17,
70 Rollo,G.R. Nos. 154470-71, p. 353, citing Alemar’s 1991, 203 SCRA 104, 107.
(Sibal & Sons), Inc. v. Court of Appeals, 403 Phil. 236
(2001). 88 Nocum v. Tan, G.R. No. 145022, September 23,
2006, 470 SCRA 639, 644-645.
71 Ruben E. Agpalo, Statutory Construction, pp. 388,
399, 5th ed., 2003. 89 Errectors, Inc. v. NLRC, 326 Phil. 640, 645 (1996).
72 Mecano v. Commission on Audit, G.R. No. 103982, 90 Section 2 of R.A. No. 265, as amended.
December 11, 1992, 216 SCRA 500, 505-506; and
Berces, Sr. v. Guingona, Jr., 311 Phil. 614, 620
91 Section
(1995). 14 of R.A. No. 265, as amended.

92 Section
73 Berces,Sr. v. Guingona, Jr., supra; and Social 35 of R.A. No. 265.
Justice Society (SJS) v. Atienza, Jr., G.R. No. 156052,
February 13, 2008, 545 SCRA 92, 129-130. 93 The National Assembly.

19
94 Took effect on July 3, 1993. rules and regulations; any refusal to permit
examination into the affairs of the
95 Section 3 of R.A. No. 7653, institution; any willful making of a false or
misleading statement to the Board or the
96 Rollo,
appropriate supervising and examining
G.R. Nos. 154470-71, pp. 145-146. department or its examiners; any willful
failure or refusal to comply with, or
97 Rollo, violation of, any banking law or any order,
G.R. Nos. 154470-71, p. 182.
instruction or regulation issued by the
98 G.R.
No. 168859, June 30, 2009, 591 SCRA 321, Monetary Board, or any order, instruction or
338-341. ruling by the Governor; or any commission
of irregularities, and/or conducting business
in an unsafe or unsound manner as may be
99 Seealso Busuego v. Court of Appeals, 364 Phil. determined by the Monetary Board, the
116, 127, 129-130 (1999). following administrative sanctions,
whenever applicable:
100 CONSTITUTION, Article XII, Section 20.
(a) fines in amounts as may be
101 Ruben E. Agpalo, Administrative Law, Law on determined by the Monetary
Public Offices and Election Law, 2005 ed., p. 7. Board to be appropriate, but in no
case to exceed Thirty thousand
102 Soriano pesos (₱ 30,000.00) a day for each
v. Laguardia, G.R. Nos. 164785 and
violation, taking into consideration
165636, April 29, 2009, 587 SCRA 79, 90; and Smart
the attendant circumstances, such
Communications, Inc. v. Nat’l Telecommunications
as the nature and gravity of the
Commission, 456 Phil. 145, 155 (2003).
violation or irregularity and the
size of the bank or quasi-bank;
103 The ever increasing variety of powers and functions
given to administrative agencies recognizes the need
(b) suspension of rediscounting
for the active intervention of administrative agencies
privileges or access to Bangko
in matters calling for technical knowledge and speed
Sentral credit facilities;
in countless controversies which cannot possibly be
handled by regular courts. Francisco, Jr. v. Toll
Regulatory Board, et al., G.R. No. 166910, October (c) suspension of lending or
19, 2010, 633 SCRA 470, 520, citing C.T. Torres foreign exchange operations or
Enterprises, Inc. v. Hibionada, G.R. No. 80916, authority to accept new deposits or
November 9, 1990, 191 SCRA 268. make new investments;

104 Department of Agrarian Reform Adjudication (d) suspension of interbank


Board (DARAB) v. Lubrica, G.R. No. 159145, April clearing privileges; and/or
29, 2005, 457 SCRA 800; and Fernandez v. Fulgeras,
G.R. No. 178575, June 29, 2010, 622 SCRA 174, 179. (e) revocation of quasi-banking
license.
105 See
also Koruga v. Arcenas, Jr., G.R. Nos. 168332
and 169053, June 19, 2009, 590 SCRA 49, 60-70. xxxx

106 Section 36, par. 2 of R.A. No. 7653 reads: Whether or not there is an administrative
proceeding, if the institution and/or the
Section 36. Proceedings Upon Violation of directors and/or officers concerned continue
This Act and Other Banking Laws, Rules, with or otherwise persist in the commission
Regulations, Orders or Instructions. – xxx of the indicated practice or violation, the
Monetary Board may issue an order
requiring the institution and/or the directors
Whenever a bank or quasi-bank persists in
and/or officers concerned to cease and desist
carrying on its business in an unlawful or
from the indicated practice or violation, and
unsafe manner, the Board may, without
may further order that immediate action be
prejudice to the penalties provided in the
taken to correct the conditions resulting
preceding paragraph of this section and the
from such practice or violation. The cease
administrative sanctions provided in Section
and desist order shall be immediately
37 of this Act, take action under Section 30
effective upon service on the respondents.
of this Act.

107 Section The respondents shall be afforded an


37 reads:
opportunity to defend their action in a
hearing before the Monetary Board or any
Section 37. Administrative Sanctions on committee chaired by any Monetary Board
Banks and Quasi-banks. - Without prejudice member created for the purpose, upon
to the criminal sanctions against the culpable request made by the respondents within five
persons provided in Sections 34, 35, and 36 (5) days from their receipt of the order. If no
of this Act, the Monetary Board may, at its such hearing is requested within said period,
discretion, impose upon any bank or quasi- the order shall be final. If a hearing is
bank, their directors and/or officers, for any conducted, all issues shall be determined on
willful violation of its charter or by-laws, the basis of records, after which the
willful delay in the submission of reports or Monetary Board may either reconsider or
publications thereof as required by law, make final its order.

20
110 http://www.bsp.gov.ph/monetary/targeting.asp
The Governor is hereby authorized, at his
discretion, to impose upon banking (accessed on August 15, 2012).
institutions, for any failure to comply with
the requirements of law, Monetary Board 111 Republic Act No. 8799 defines securities as
regulations and policies, and/or instructions follows:
issued by the Monetary Board or by the
Governor, fines not in excess of Ten
thousand pesos (₱ 10,000.00) a day for each 3.1. "Securities" are shares, participation or
violation, the imposition of which shall be interests in a corporation or in a commercial
final and executory until reversed, modified enterprise or profit-making venture and
or lifted by the Monetary Board on appeal. evidenced by a certificate, contract,
instruments, whether written or electronic in
108 RA
character. It includes:
No. 265, as amended, is similarly worded, as
follows:
(a) Shares of stocks, bonds, debentures,
notes, evidences of indebtedness, asset-
Sec. 96. Principles of open market backed securities.
operations. - The open market purchases and
sales of securities by the Central Bank shall 112 http://www.bsp.gov.ph/financial/open.asp
be made exclusively for the purpose of
achieving the objectives of the national (accessed on August 15, 2012).
monetary policy and shall be limited to the
operations authorized in sections 97 and 98 113 Administrative functions are those which involve
of this Act. the regulation and control over the conduct and affairs
of individuals for their own welfare and the
xxxx promulgation of rules and regulations to better carry
out the policy of the legislature or such as are
devolved upon the administrative agency by the
Sec. 98. Issue and negotiation of Central organic law of its existence (In Re: Designation of
Bank obligations. - In order to provide the Judge Rodolfo U. Manzano as member of the Ilocos
Central Bank with effective instruments for Norte Provincial Committee on Justice, 248 Phil. 487,
open market operations, the Bank may, 491-492).
subject to such rules and regulations as the
Monetary Board may prescribe and in 114 R.A.
accordance with the principles stated in No. 7653, Section 90.
section 96 of this Act, issue, place, buy and
sell freely negotiable evidences of 115 R.A. No. 7653, Section 5.
indebtedness of the Bank. Said evidences of
indebtedness may be issued directly against 116 www.bsp.gov.ph/downloads/Publications/FAQs/tar
the international reserve of the Bank or geting.pdf (accessed on August 12, 2012).
against the securities which it has acquired
under the provisions of section 97 of this
117 See
Act, or may be issued without relation to also Presidential Decree No. 72, Section 25.
specific types of assets of the Bank.
118 R.A. No. 7653, Section 37.
The Monetary Board shall determine the
interest rates, maturities and other 119 SeeCemco Holdings, Inc. v. National Life
characteristics of said obligations of the Insurance Company of the Philippines, Inc., G.R. No.
Bank, and may, if it deems it advisable, 171815, August 7, 2007, 529 SCRA 355.
denominate the obligations in gold or
foreign currencies. 120 In
Taule v. Santos (G.R. No. 90336, August 12,
1991, 200 SCRA 512, 521), the Court ruled that –
Subject to the principles stated in section 96
of this Act, the evidences of indebtedness of
"…unless expressly empowered,
the Central Bank to which this section refers
administrative agencies are bereft of quasi-
may be acquired by the Bank before their
judicial powers. The jurisdiction of
maturity, either through purchases in the
administrative authorities is dependent
open market or through redemptions at par
entirely upon the provisions of the statutes
and by lot if the Bank has reserved the right
reposing power in them; they cannot confer
to make such redemptions. The evidences of
it upon themselves. Such jurisdiction is
indebtedness acquired or redeemed by the
essential to give validity to their
Central Bank shall not be included among
determinations."
its assets, and shall be immediately retired
and cancelled. [emphasis ours]
121 CONSTITUTION, Article 8, Section 2; Tropical
109 Since Homes, Inc. v. National Housing Authority, 236 Phil.
2002, the BSP has adopted inflation targeting
580, 587-588 (1987).
as a framework of monetary policy aimed at achieving
the objective of price stability. Inflation targeting is
122 Aaron
focused mainly on achieving a low and stable J. Lockwood, The Primary Jurisdiction
inflation, supportive of the economy’s growth Doctrine: Competing Standards of Appellate Review.
objective. This approach entails the announcement of
an explicit inflation target that the BSP promises to 123 Sps.Abejo v. Judge De la Cruz, 233 Phil. 668, 684-
achieve over a given time period. 685 (1987), citing Pambujan Sur United Mine
(http://www.bsp.gov.ph/monetary/targeting.asp) Workers v. Samar Mining Co., Inc., 94 Phil. 932, 941
(1954).

21
124 263 Phil. 352, 358-359 (1990). when it appears from the pleadings or the
evidence on record that the court has no
125 SeePhil. Pharmawealth, Inc. v. Pfizer, Inc., G.R. jurisdiction over the subject matter, that
No. 167715, November 17, 2010, 635 SCRA 143, there is another action pending between the
153-154; and GMA Network, Inc. v. ABS-CBN same parties for the same cause, or that the
Broadcasting Corp., et al., 507 Phil. 718, 724-726 action is barred by a prior judgment or by
(2005). statute of limitations, the court shall dismiss
the claim.
126 Bagatsingv. Committee on Privatization, PNCC, 138 Section
316 Phil. 404, 429 (1995). 6, Rule 6 of the Rules of Court reads:

127 The courts may disregard contemporaneous Sec. 6. Counterclaim. – A counterclaim is


construction where there is no ambiguity in the law, any claim which a defending party may have
where the construction is clearly erroneous, where a against an opposing party.
strong reason exists to the contrary, and where the
139 Sections
courts have previously given the statute a different 4, 5 and 6, Rule 6 of the Rules of Court
interpretation. (Ruben E. Agpalo, Statutory read:
Construction, 5th ed., 2003, p. 116.)
Sec. 4. Answer. – An answer is a pleading in
128 Batas Pambansa Blg. 129, Section 21(1). which a defending party sets forth his
defenses.
129 Sps. Atuel v. Sps. Valdez, 451 Phil. 631, 641, 645
(2003). Sec. 5. Defenses. – Defenses may either be
negative or affirmative.
130 Euro-Med Laboratories Phil., Inc. v. Province of
Batangas, 527 Phil. 623, 628 (2006). (a) A negative defense is the specific denial
of the material fact or facts alleged in the
131 The action of interpleader is a remedy whereby a pleading of the claimant essential to his
person who has property, whether personal or real, in cause or causes of action.
his possession, or an obligation to render wholly or
partially, without claiming any right in both, or claims (b) An affirmative defense is an allegation
an interest which in whole or in part is not disputed by of a new matter which, while hypothetically
the conflicting claimants, comes to court and asks that admitting the material allegations in the
the persons who claim the said property or who pleading of the claimant, would nevertheless
consider themselves entitled to demand compliance of prevent or bar recovery by him. The
the obligation, be required to litigate among affirmative defenses include fraud, statute of
themselves, in order to determine finally who is limitations, release, payment, illegality,
entitled to one or the other thing. (Oscar M. Herrera, statute of frauds, estoppel, former recovery,
Remedial Law, Book III, 2006 ed., p. 224, citing discharge in bankruptcy, and any other
Alvarez v. Commonwealth, 65 Phil. 302, 311-312. matter by way of confession and avoidance.

132 Rules of Court, Rule 62, Section 1. Sec. 6. Counterclaim. –A counterclaim is


any claim which a defending party may have
133 (digitalcommons.pace.edu/cgi/viewcontent.cgi?arti against an opposing party.
cle=1044). The device was developed on the theory
140 Rule
that the stakeholder should not be forced to take the 6 (Kinds of Pleadings), Section 1 defines a
personal risk of evaluating the claims (44B Am Jur 2d pleading as the parties’ "written statements of their
Interpleader § 1). If the BSP indeed has jurisdiction respective claims and defenses." The pleadings where
over the parties’ conflicting claims, the remedy of a "claim" may be asserted are "in a complaint,
interpleader would obviously be inappropriate since counterclaim, cross-claim, third (fourth, etc.) party
the exercise of a quasi-judicial discretion cannot complaint, or complaint-in-intervention." Under
generally, entail any personal risk to the official who Section 11, Rule 8 of the Rules of Court, a defendant’s
exercises it. Having found that the BSP lacks compulsory counterclaim or a cross-claim existing at
jurisdiction to resolve the parties’ conflicting claims, the time he files his answer should be included in the
payment to anyone of the conflicting claimants would answer.
necessarily result in exposing the BSP to "double
vexation in respect of a single liability." 141 Rules of Court, Rule 15, Section 1.
134 Alvarez v. Commonwealth of the Philippines, 65 142 Records,Volume 4, p. 1091. Even then, the BOC
Phil. 302, 312 (1938). filed a Manifestation and Motion praying that the
BSP’s own prayer for interpleader be granted
135 Rollo, G.R. Nos. 154470-71, pp. 147-151. (Records, Volume 4, pp. 1028-1030).

136 Rule 143 Rollo,


1, Section 3.a of the Rules of Court. G.R. Nos. 154470-71, p. 148.

137 Section 144 Section


1, Rule 9 of the Rules of Court reads: 6, Rule 6, precisely defines a counterclaim
as a "claim which a defending party may have against
Section 1. Defenses and objections not an opposing party." In an interpleader suit, while the
pleaded. – Defenses and objections not defendants are asserting conflicting claims against one
pleaded either in a motion to dismiss or in another over "the same subject matter," in the
the answer are deemed waived. However, ultimate, the prevailing party actually asserts it against

22
the complainant-in-interpleader because he is the
7. ₱ 350,000.00 or 2,250.00
stakeholder.
more but not more
than
145 See Rule 6, Section 7. ₱ 400,000.00

146 When BOC filed its Answer with Compulsory 8. For each ₱ 10.00
Counterclaim, the effective rule then was A.M. No. 1,000.00 in excess
00-2-01-SC (March 1, 2000), which does not require of
payment of docket fees for compulsory counterclaims. ₱ 400,000.00
Effective August 16, 2004, however, under Section 7,
Rule 141, as amended by A.M. No. 04-2-04-SC, 152 Emnace v. Court of Appeals, 422 Phil. 10, 22.
docket fees are now required to be paid even in
compulsory counterclaim or cross-claims. See Korea
Technologies Co., Ltd. v. Lerma, G.R. No. 143581,
January 7, 2008, 542 SCRA 1, 16-17.

147 Fedman Development Corporation v. Agcaoili, G.R. No. 133113 August 30, 2001
G.R. No. 165025, August 31, 2011, 656 SCRA 354,
362; and Ungria v. Court of Appeals, G.R. No.
EDGAR H. ARREZA, petitioner,
165777, July 25, 2011, 654 SCRA 314, 325, citing
vs.
Tacay v. RTC of Tagum, Davao del Norte, G.R. Nos.
MONTANO M. DIAZ, JR., respondent.
88075-77, December 20, 1989, 180 SCRA 433; and
Sun Insurance Office, Ltd. v. Asuncion, 252 Phil. 280
(1989). QUISUMBING, J.:

148 Fedman Development Corporation v. Agcaoili, This petition assails the decision 1 promulgated on December
supra, at 362-363. 24, 1997, and the resolution 2 dated March 6, 1998, by the Court
of Appeals in CA-G.R SP No. 43895. That decision dismissed
149 Manchester the petition for certiorari questioning the order 3 dated February
Development Corporation v. Court of
4, 1997 of the Regional Trial Court of Makati City, Branch 59,
Appeals, 233 Phil. 579, 585 (1987).
in Civil Case No. 96-1372, which had denied petitioner's motion
to dismiss the complaint filed against him on grounds of res
150 252 Phil. 280, 291 (1989). adjudicata.

151 Section 7, Rule 141 of the Rules of Court, as The factual antecedents of the present petition are culled from
amended by A.M. No. 00-2-01-SC (March 1, 2000), the findings of the Court of Appeals.
the effective Rule at the time the RTC granted the
BSP’s motion to interplead and required the PDB and
Bliss Development Corporation is the owner of a housing unit
the BOC to assert their claims, reads:
located at Lot 27. Block 30 New Capitol Estates I, Barangay
Matandang Balara, Quezon City. In the course of a case
SEC. 7. Clerks of Regional Trial Courts.- (a) involving a conflict of ownership between petitioner Edgar H.
For filing an action or a permissive Arreza and respondent Montano M. Diaz, Jr., 4 docketed as
counterclaim or money claim against an Civil Case No. 94-2086 before the Regional Trial Court of
estate not based on judgment, or for filing Makati, Branch 146, Bliss Development Corporation filed a
with leave of court a third-party, fourth- complaint for interpleader.
party, etc. complaint, or a complaint in
intervention, and for all clerical services in
In a decision dated March 27, 1996, the trial court resolved the
the same, if the total sum claimed, exclusive
conflict by decreeing as follows:
of interest, or the stated value of the
property in litigation, is:
WHEREFORE, premises considered, the herein
interpleader is resolved in favor of defendant Edgar H.
1. Less than ₱ P Arreza, and plaintiff Bliss Development is granted
100,000.00 500.00 cognizance of the May 6, 1991 transfer of rights by
Emiliano and Leonila Melgazo thru Manuel Melgazo,
2. ₱ 100,000.00 or 800.00 to said defendant Edgar Arreza. The case is dismissed
more but less than as against defendant Montano M. Diaz, Jr.
₱ 150,000.00

3. ₱ 150,000.00 or 1,000.00 The third-party complaint is likewise dismissed.


more but less than
₱ 200,000.00 SO ORDERED.

4. ₱ 200,000.00 or 1,500.00 The decision became final and was duly executed with Bliss
more but less than executing a Contract to Sell the aforementioned property to
₱ 250,000.00 petitioner Arreza. Respondent Diaz was constrained to deliver
the property with all its improvements to petitioner.
5. ₱ 250,000.00 or 1,750.00
more but less than
₱ 300,000.00 Thereafter respondent Diaz filed a complaint against Bliss
Development Corporation, Edgar H. Arreza, and Domingo
6. ₱ 300,000.00 or Tapay in the Regional Trial Court of Makati, Branch 59,
more but less than docketed as Civil Case No. 96-1372. He sought to hold Bliss
2,000.00 Development Corporation and petitioner Arreza liable for
₱ 350,000.00 reimbursement to him of P1,706,915;58 representing the cost of

23
his acquisition and improvements on the subject property with COST OF IMPROVEMENTS HE ALLEGEDLY
interest at 8% per annum. INTRODUCED TO THE PROPERTY IS LIKEWISE
BARRED BY RES ADJUDICATA OR
Petitioner Arreza filed a Motion to Dismiss the case, citing as CONCLUSIVENESS OF A PRIOR JUDGMENT IN
grounds res adjudicata or conclusiveness of the judgment in the THE PRIOR RTC CASE WHICH WAS
interpleader case as well as lack of cause of action. ULTIMATELY AFFIRMED BY THIS
HONORABLE COURT IN G.R NO. 128726.
In an Order dated February 4, 1997, the motion was denied for
lack of merit. III.

A Motion for Reconsideration filed by Arreza was likewise THE RULING IN THE PRIOR CA PETITION (CA-
denied on March 20, 1997. G.R. SP. NO. 41974) WHICH WAS ULTIMATELY
AFFIRMED BY THIS HONORABLE COURT IN
G.R. NO. 128726 THAT THE DECISION IN THE
On April 16, 1997, Arreza filed a petition for certiorari before PRIOR RTC CASE SETTLED ALL CLAIMS
the Court of Appeals alleging that the Orders dated February 4 WHICH MESSRS. DIAZ AND ARREZA HAD
and March 20, 1997, were issued against clear provisions of AGAINST EACH OTHER CONSTITUTES THE
pertinent laws, the Rules of Court, and established jurisprudence LAW OF THE CASE BETWEEN THEM AND
such that respondent court acted without or in excess of SERVES AS BAR TO THE FILING OF THE
jurisdiction, or grave abuse of discretion amounting to lack or PRESENT RTC CASE INVOLVING THE SAME
excess of jurisdiction. CLAIMS.

The petition was dismissed for lack of merit. The Court of IV.
Appeals said:
IN ITS ENTIRETY, THE AMENDED COMPLAINT
The decision invoked by the petitioner as res IN THE PRESENT RTC CASE IS DISMISSIBLE
adjudicata resolved only the issue of who between ON THE GROUND OF LACK OF CAUSE OF
Edgar H. Arreza and Montano Diaz has the better right ACTION.7
over the property under litigation. It did not resolve
the rights and obligations of the parties.
The issue for our resolution now is whether respondent Diaz's
claims for reimbursement against petitioner Arreza are barred
The action filed by Montano M. Diaz against Bliss by res adjudicata.
Development Corporation, et al. seeks principally the
collection of damages in the form of the payments
Diaz made to the defendant and the value of the The elements of res adjudicata are: (a) that the former judgment
improvements he introduced on the property — must be final; (b) the court which rendered judgment had
matters that were not adjudicated upon in the previous jurisdiction over the parties and the subject matter; (c) it must be
case for interpleader. a judgment on the merits; and (d) there must be between the first
and second causes of action identity of the parties, subject
matter, and cause of action.8
xxx xxx xxx
Worthy of note, the prior case for interpleader filed with Branch
WHEREFORE, this petition is hereby DISMISSED 146 of the Regional Trial Court of Makati, Civil Case No. 94-
with costs against the petitioner. 2086, was settled with finality with this Court's resolution in
G.R. No. 128726. 9 The judgment therein is now final.
SO ORDERED.5
When the Regional Trial Court of Makati (Branch 146) rendered
Petitioner's motion to reconsider the decision of the Court of judgment, it had priorly acquired jurisdiction over the parties
Appeals was denied.6 Hence, the present petition, where and the subject matter. Respondent, however, contends that the
petitioner raises the following grounds for review: trial court did not acquire jurisdiction over the property subject
of the action, as the action was instituted in Makati City while
I the subject unit is situated in Quezon City.

THE CAUSE OF ACTION EMBODIED IN THE We find, however, that in his answer to the complaint dated
PRESENT RTC CASE PERTAINING TO MR. October 3, 1994, respondent alleged:
DIAZ'S CLAIMS FOR REIMBURSEMENT OF
AMOUNTS WHICH HE ALLEGEDLY PAID TO 20. That should the said additional provision be
BLISS BY WAY OF PREMIUM OR declared valid and in the remote possibility that the
INSTALLMENT PAYMENTS FOR THE alleged conflicting claimant is adjudged to possess
ACQUISITION OF THE PROPERTY WAS better right herein answering defendant is asserting
ERRONEOUSLY BROUGHT AGAINST MR. his right as a buyer for value and in good faith against
ARREZA. ALSO, SAID CLAIMS ARE BARRED all persons/parties concerned.10 (Italics supplied)
BY RES ADJUDICATA OR CONCLUSIVENESS
OF A PRIOR JUDGMENT IN THE PRIOR RTC Respondent in his answer also prayed that:
CASE WHICH WAS ULTIMATELY AFFIRMED
BY THIS HONORABLE COURT IN G.R. NO.
128726. D. Should the said additional provision be found valid
and in the event his co-defendant is found to possess
better rights, to adjudge him (Diaz) entitled to rights as
II a buyer in good faith and for value.11

THE CAUSE OF ACTION EMBODIED IN THE By asserting his right as a buyer for value and in good faith of
PRESENT RTC CASE PERTAINING TO MR. the subject property, and asking for relief arising therefrom,
DIAZ'S CLAIMS FOR REIMBURSEMENT OF THE

24
respondent invoked the jurisdiction of the trial court. Having complaint against the petitioners on the ground that
invoked the jurisdiction of the Regional Trial Court of Makati they are builders in good faith and consequently,
(Branch 146) by filing his answer to secure affirmative relief recover the value of the improvements introduced by
against petitioner, respondent is now estopped from challenging them on the subject lot. The case of Heirs of Laureano
the jurisdiction of said court after it had decided the case against Marquez v. Valencia, 99 Phil. 740, provides the
him. Surely we cannot condone here the undesirable practice of answer:
a party submitting his case for decision and then accepting the
judgment only if favorable, but attacking it on grounds of If, aside from relying solely on the deed of
jurisdiction when adverse.12 sale with a right to repurchase and failure on
the part of the vendors to purchase it within
Respondent also claims that there is no identity of causes of the period stipulated therein, the defendant
action between Civil Case No. 94-2086, the prior case, and Civil had set up an alternative though inconsistent
Case No. 96-1372, the present case subject of this petition, as defense that he had inherited the parcel of
the former involved a complaint for interpleader while the latter land from his late maternal grandfather and
now involves an action for a sum of money and damages. He presented evidence in support of both
avers that a complaint for interpleader is nothing more than the defenses, the overruling of the first would
determination of rights over the subject matter involved. not bar the determination by the court of the
second. The defendant having failed to set
In its assailed decision, respondent Court of Appeals pointed out up such alternative defenses and chosen or
that the 1997 Rules of Civil Procedure provide that in a case for elected to rely on one only, the overruling
interpleader, the court shall determine the respective rights and thereof was a complete determination of the
obligations of the parties and adjudicate their respective controversy between the parties which bars
claims.13 The appellate court noted, however, that the defendants a subsequent action based upon an
in that interpleader case, namely Diaz and Arreza, did not pursue unpleaded defense, or any other cause of
the issue of damages and reimbursement although the answer of action, except that of Failure of the
respondent Diaz did pray for affirmative relief arising out of the complaint to state a cause of action and of
rights of a buyer in good faith.14 lack of jurisdiction of the Court. The
determination of the issue joined by the
parties constitutes res judicata. (Italics
Following the same tack, respondent Diaz now alleges that the supplied)
issues in the prior case, Civil Case No. 94-2086, were delimited
by the pre-trial order which did not include matters of damages
and reimbursement as an issue. He faults petitioner for not Although the alternative defense of being builders in
raising such issues in the prior case, with the result that the trial good faith is only permissive, the counterclaim for
court did not resolve the rights and obligations of the parties. reimbursement of the value of the improvements is in
There being no such resolution, no similar cause of action exists the nature of a compulsory counterclaim. Thus, the
between the prior case and the present case, according to failure by the private respondents to set it up bars their
respondent Diaz. right to raise it in a subsequent litigation (Rule 9,
Section 4 of the Rules of Court). While We realize the
plight of the private respondents, the rule on
Respondent in effect argues that it was incumbent upon compulsory counterclaim is designed to enable the
petitioner as a party in Civil Case No. 94-2086 to put in issue disposition of the whole controversy at one time and
respondent's demands for reimbursement. However, it was not in one action. The philosophy of the rule is to
petitioner's duty to do the lawyering for respondent. As stated by discourage multiplicity of suits. (Italics supplied)
the Court of Appeals, the court in a complaint for interpleader
shall determine the rights and obligations of the parties
and adjudicate their respective claims. Such rights, obligations, Having failed to set up his claim for reimbursement, said claim
and claims could only be adjudicated if put forward by the of respondent Diaz being in the nature of a compulsory
aggrieved party in assertion of his rights. That party in this case counterclaim is now barred.16
referred to respondent Diaz. The second paragraph of Section 5
of Rule 62 of the 1997 Rules of Civil Procedure provides that In cases involving res adjudicata, the parties and the causes of
the parties in an interpleader action may file counterclaims, action are identical or substantially the same in the prior as well
cross-claims, third party complaints and responsive pleadings as the subsequent action. The judgment in the first action is
thereto, "as provided by these Rules." The second paragraph was conclusive as to every matter offered and received therein and
added to Section 5 to expressly authorize the additional as to any other matter admissible therein and which might have
pleadings and claims enumerated therein, in the interest of a been offered for that purpose, hence said judgment is an
complete adjudication of the controversy and its incidents.15 absolute bar to a subsequent action for the same cause.17 The bar
extends to questions "necessarily involved in an issue, and
Pursuant to said Rules, respondent should have filed his claims necessarily adjudicated, or necessarily implied in the final
against petitioner Arreza in the interpleader action. Having judgment, although no specific finding may have been made in
asserted his rights as a buyer in good faith in his answer, and reference thereto, and although such matters were directly
praying relief therefor, respondent Diaz should have crystallized referred to in the pleadings and were not actually or formally
his demand into specific claims for reimbursement by petitioner presented"18 Said prior judgment is conclusive in a subsequent
Arreza. This he failed to do. Such failure gains significance in suit between the same parties on the same subject matter, and on
light of our ruling in Baclayon vs. Court of Appeals, 182 SCRA the same cause of action, not only as to matters which were
761, 771-772 (1990), where this Court said: decided in the first action, but also as to every other matter
which the parties could have properly set up in the prior suit.19
A corollary question that We might as well resolve
now (although not raised as an issue in the present In the present case, we find there is an identity of causes of
petition, but conformably with Gayos, et al. v. Gayos, action between Civil Case No. 94-2086 and Civil Case No. 96-
et al., G.R. No. L-27812, September 26, 197S, 67 1372. Respondent Diaz's cause of action in the prior case, now
SCRA 146, that it is a cherished rule of procedure that the crux of his present complaint against petitioner, was in the
a court should always strive to settle the entire nature of an unpleaded compulsory counterclaim, which is now
controversy in a single proceeding leaving no root or barred. There being a former final judgment on the merits in the
branch to bear the seeds in future litigation) is whether prior case, rendered in Civil Case No. 94-2086 by Branch 146 of
or not the private respondents can still file a separate the Regional Trial Court of Makati, which acquired jurisdiction

25
over the same parties, the same subject property, and the same
cause of action, the present complaint of respondent herein
(Diaz) against petitioner Arreza docketed as Civil Case No. 96- THIRD DIVISION
1372 before the Regional Trial of Makati, Branch 59 should be
dismissed on the ground of res adjudicata.
March 12, 2014
WHEREFORE, the instant petition is GRANTED. The decision
dated December 24, 1997 and the resolution dated March 6, G.R. No. 193494
1998 of the Court of Appeals in CA-G.R. SP No. 43895 are
REVERSED and SET ASIDE. Civil Case No. 96-1372 before LUI ENTERPRISES, INC., Petitioners,
the Regional Trial Court of Makati City, Branch 59, is hereby vs.
ordered DISMISSED as against herein petitioner Edgar H. ZUELLIG PHARMA CORPORATION and the
Arreza. Costs against respondent. PHILIPPINE BANK OF
COMMUNICATIONS, Respondents.
SO ORDERED.
DECISION
Bellosillo, Mendoza, Buena and De Leon, Jr., JJ ., concur.
LEONEN, J.:

There should be no inexplicable delay in the filing of a motion


to set aside order of default. Even when a motion is filed within
Footnotes the required period, excusable negligence must be properly
alleged and proven.
1 Rollo, pp. 32-37.
This is a petition for review on certiorari of the Court of
2 Id.
Appeals' decision1 dated May 24, 2010 and resoluticm2dated
at 30. August 13, 2010 in CA- G.R. CV No. 88023. The Court of
Appeals affirmed in toto the Regional
3 Id., at 103-104.
Trial Court of Makati’s decision3 dated July 4, 2006.
4 Without "Jr." in the CA decision and in some
portions of the records and rollo. The facts as established from the pleadings of the parties are as
follows:
5 Rollo, pp. 32-36.
On March 9, 1995, Lui Enterprises, Inc. and Zuellig Pharma
6 Id., at p. 30. Corporation entered into a 10-year contract of lease4over a
parcel of land located in Barrio Tigatto, Buhangin, Davao City.
7 Id., at 16. The parcel of land was covered by Transfer Certificate of Title
No. T-166476 and was registered under Eli L. Lui.5
8 Toledo-Banaga vs. Court of Appeals, 302 SCRA
331, 341 (1999). On January 10, 2003, Zuellig Pharma received a letter6 from the
Philippine Bank of Communications. Claiming to be the new
9 Rollo,
owner of the leased property, the bank asked Zuellig Pharma to
pp. 141-144. pay rent directly to it. Attached to the letter was a copy of
Transfer Certificate of Title No. 336962 under the name of the
10 Id., at 46. Philippine Bank of Communications.7Transfer Certificate
ofTitle No. 336962 was derived fromTransfer Certificate ofTitle
11 Id., at 48. No.T-166476.8

12 Tijam vs. Sibonghanoy, 23 SCRA 29, 36 (1968). Zuellig Pharma promptly informed Lui Enterprises of the
Philippine Bank of Communications’ claim. On January 28,
2003, Lui Enterprises wrote to Zuellig Pharma and insisted on
13 Rollo, p. 35; Section 6, Rule 62. its right to collect the leased property’srent.9

14 Rollo, pp. 35-36. Due to the conflicting claims of Lui Enterprises and the
Philippine Bank of Communications over the rental payments,
15 F.Regalado, REMEDIAL LAW COMPENDIUM, Zuellig Pharma filed a complaint10 for interpleader with the
p. 690 (6th ed. 1997). Regional Trial Court of Makati. In its complaint, Zuellig Pharma
alleged that it already consigned in court P604,024.35 as rental
16 Section payments. Zuellig Pharma prayed that it be allowed to consign
2, Rule 9, 1997 Rules of Civil Procedure.
in court its succeeding monthly rental payments and that Lui
Enterprises and the Philippine Bank of Communications be
17 F.Regalado, REMEDIAL LAW COMPENDIUM, ordered to litigate their conflicting claims.11
p. 472 (6th ed. 1997).
The Philippine Bank of Communications filed its answer12 to the
18 Vergara vs. Rugue, 78 SCRA 312, 327-328 (1977). complaint. On the other hand, Lui Enterprises filed a motion to
dismiss13 on the ground that Zuellig Pharma’s alleged
19 Yusingco vs. Ong Hing Lian, 42 SCRA 589, 602 representative did not have authority to file the complaint for
(1971). interpleader on behalf of the corporation. Under the secretary’s
certificate14 dated May 6, 2003 attached to the complaint, Atty.
Ana L.A. Peralta was only authorized to "initiate and represent
[Zuellig Pharma] in the civil proceedings for consignation of

26
rental payments to be filed against Lui Enterprises, Inc. and/or and [the Philippine Bank of Communications]."26 Since Atty.
[the Philippine Bank of Communications]."15 Ana L.A. Peralta was authorized to file a consignation case, this
authority necessarily included an authority to file the
According to Lui Enterprises, an earlier filed nullification of interpleader case.
deed of dation in payment case pending with the Regional Trial
Court of Davao barred the filing of the interpleader case.16 Lui Nevertheless, Zuellig Pharma filed in court the secretary’s
Enterprises filed this nullification case against the Philippine certificate dated August 28, 2003,27 which expressly stated that
Bank of Communications with respect to several properties it Atty. Ana L.A. Peralta was authorized to file a consignation and
dationed to the bank in payment of its obligations. The property interpleader case on behalf of Zuellig Pharma.28
leased by Zuellig Pharma was among those allegedly dationed to
the Philippine Bank of Communications.17 With respect to the nullification of deed of dation in payment
case, Zuellig Pharma argued that its pendency did not bar the
In the nullification of deed of dation in payment case, Lui filing of the interpleader case. It was not a party to the
Enterprises raised the issue of which corporation had the better nullification case.29
right over the rental payments.18 Lui Enterprises argued that the
same issue was involved in the interpleader case. To avoid As to the writ of preliminary injunction issued by the Regional
possible conflicting decisions of the Davao trial court and the Trial Court of Davao, Zuellig Pharma argued that the writ only
Makati trial court on the same issue, Lui Enterprises argued that pertained to properties owned by Lui Enterprises. Under the writ
the subsequently filed interpleader case be dismissed. of preliminary injunction, the Regional Trial Court of Davao
enjoined the July 3, 2003 auction sale of Lui Enterprises’
To support its argument, Lui Enterprises cited a writ of properties, the proceeds of which were supposed to satisfy its
preliminary injunction19 dated July 2, 2003 issued by the obligations to the Philippine Bank of Communications. As early
Regional Trial Court of Davao, ordering Lui Enterprises and the as April 21, 2001, however, the Philippine Bank of
Philippine Bank of Communications "[to maintain] status Communications already owned the leased property as
quo"20 with respect to the rent. By virtue of the writ of evidenced by Transfer Certificate of Title No. 336962. Thus, the
preliminary injunction, Lui Enterprises argued that it should writ of preliminary injunction did not apply to the leased
continue collecting the rental payments from its lessees until the property.30
nullification of deed of dation in payment case was resolved.
The writ of preliminary injunction dated July 2, 2003 reads: Considering that Lui Enterprises filed its motion to dismiss
beyond the 15-day period to file an answer, Zuellig Pharma
WHEREAS, on June 30, 2003, the Court issued an Order, a moved that Lui Enterprises be declared in default.31
portion of which is quoted:
In its compliance32 dated September 15, 2003, the Philippine
WHEREFORE, PREMISES CONSIDERED, let a Writ of Bank of Communications "[joined Zuellig Pharma] in moving to
Preliminary Injunction issue, restraining and enjoining [the declare [Lui Enterprises] in default, and in [moving for] the
Philippine Bank of Communications], its agents or denial of [Lui Enterprises’] motion to dismiss."33
[representative], the Office of the Clerk of Court- Sheriff and all
persons acting on their behalf, from conducting auction sale on The Regional Trial Court of Makati found that Lui Enterprises
the properties of [Lui Enterprises] in EJF-REM Case No. 6272- failed to file its motion to dismiss within the reglementary
03 scheduled on July 3, 2003 at 10:00 a.m. at the Hall of Justice, period. Thus, in its order34 dated October 6, 2003, the trial court
Ecoland, Davao City, until the final termination of the case, denied Lui Enterprises’motion to dismiss and declared it in
upon plaintiff [sic] filing of a bond in the amount of default.35
P1,000,000.00 to answer for damages that the enjoined parties
may sustain by reason of the injunction if the Court should
finally decide that applicant is not entitled thereto. Lui Enterprises did not move for the reconsideration of the order
dated October 6, 2003. Thus, the Makati trial court heard the
interpleader case without Lui Enterprises’participation.
WHEREAS, that plaintiff posted a bond of P1,000,000.00 duly
approved by this Court.
Despite having been declared in default, Lui Enterprises filed
the manifestation with prayer36 dated April 15, 2004. It
IT IS HEREBY ORDERED by the undersigned Judge that, until manifested that the Regional Trial Court of Davao allegedly
further orders, [the Philippine Bank of Communications] and all issued the order37 dated April 1, 2004, ordering all of Lui
[its] attorneys, representatives, agents and any other persons Enterprises’ lessees to "observe status quo with regard to the
assisting [the bank], are directed to restrain from conducting rental payments"38 and continue remitting their rental payments
auction sale on the Properties of [Lui Enterprises] in EJF-REM to Lui Enterprises while the nullification of deed of dation in
Case No. 6272-03 scheduled on July 3, 2003 at 10:00 a.m. at the payment case was being resolved. The order dated April 1, 2004
Hall of Justice, Ecoland, Davao City, until the final termination of the Regional Trial Court of Davao reads:
of the case.21
ORDER
Zuellig Pharma filed its opposition22 to the motion to dismiss. It
argued that the motion to dismiss should be denied for having
been filed late. Under Rule 16, Section 1 of the 1997 Rules of Posed for Resolution is the Motion for Amendment of Order
Civil Procedure, a motion to dismiss should be filed within the filed by [Lui Enterprises] on September 23, 2003 seeking for the
required time given to file an answer to the complaint, which is preservation of status quo on the payment/remittance of rentals
15 days from service of summons on the defendant.23 Summons to [it] and the disposal/construction of the properties subject
was served on Lui Enterprises on July 4, 2003. It had until July matter of this case.
19, 2003 to file a motion to dismiss, but Lui Enterprises filed the
motion only on July23, 2003.24 xxxx

As to Lui Enterprises’ claim that the interpleader case was filed As elsewhere stated, [the Philippine Bank of Communications]
without authority, Zuellig Pharma argued that an action did not oppose the instant motion up to the present. In fact,
interpleader "is a necessary consequence of the action for during the hearing held on March 15, 2004, [the bank’s] counsel
consignation."25 Zuellig Pharma consigned its rental payments manifested in open court that except for the rentals due from
because of "the clearly conflicting claims of [Lui Enterprises] [Zuellig Pharma] which are the subject of a consignation suit

27
before a Makati Court, the other rental payments are It appears from the records that sometime in February 2003,
continuously received by [Lui Enterprises]. after being threatened with a lawsuit coming from [the
Philippine Bank of Communications], [Zuellig Pharma] stopped
There being no objection from [the Philippine Bank of remitting its rentals to [Lui Enterprises] and instead, has
Communications], and in order to protect the right of [Lui reportedly deposited the monthly rentals before a Makati court
Enterprises] respecting the subject of the action during the for consignation.
pendency of this case, this Court, in the exercise of its discretion
hereby grants the motion. As aptly raised by the plaintiffs, a possible impasse may insist
should the Makati Court’s ruling be contrary to or in conflict
Accordingly, consistent with the order of this Court dated June with the status quo order issued by this Court. To preclude this
30, 2003, the parties are hereby directed to further observe status spectacle, Zuellig Pharma should accordingly be advised with
quo with regard to the rental payments owing or due from the the import of the Order dated September 14, 2004, the salient
lessees of the properties subject of the first set of deeds of portion of which is quoted:
dacion and that the defendants are enjoined from disposing of
the properties located at Green Heights Village, Davao City until x x x prior to the institution of the instant case and by agreement
the case is finally resolved. of the parties, plaintiffs were given as they did exercise the right
to collect, receive and enjoy rental payments x x x.
With the order dated April 1, 2004 issued by the Regional Trial
Court of Davao as basis, Lui Enterprises argued that Zuellig Since the April 1, 2004 status quo order was a necessary
Pharma must remit its rental payments to it and prayed that the implement of the writ of preliminary injunction issued on June
interpleader case be dismissed. 30, 2003, it follows that plaintiff's right to collect and receive
rental payments which he enjoyed prior to the filing of this case,
The Regional Trial Court of Makati only noted the manifestation must be respected and protected and maintained until the case is
with prayer dated April 15, 2004.39 resolved. As such, all rentals due from the above-enumerated
lessees must be remitted to and collectedby the Plaintiffs.
It was only on October 21, 2004, or one year after the issuance
of the order of default, that Lui Enterprises filed a motion to set Status quo simply means the last actual peaceable uncontested
aside order of default40 in the Makati trial court on the ground of status that preceded the actual controversy. (Searth Commodities
excusable negligence. Lui Enterprises argued that its failure to Corp. v. Court ofAppeals, 207 SCRA 622).
file a motion to dismiss on time "was caused by the negligence
of [Lui Enterprises’] former counsel."41 This negligence was As such, the [Philippine Bank of Communications] [is] hereby
allegedly excusable because "[Lui Enterprises] was prejudiced directed to forthwith inform [Zuellig Pharma] of the April 1,
and prevented from fairly presenting [its] case."42 2004 status quo order and the succeeding September 14, 2004
Order, and consequently, for the said lessee to remit all rentals
For its allegedly meritorious defense, Lui Enterprises argued due from February 23, 2003 and onwards to [Lui Enterprises] in
that the earlier filed nullification of deed of dation in payment the meanwhile that the status quo order is subsisting.
case barred the filing of the interpleader case. The two actions
allegedly involved the same parties and the same issue of which In its manifestation and motion to dismiss, Lui Enterprises
corporation had the better right over the rental payments. To reiterated its prayer for the dismissal of the interpleader case to
prevent "the possibility of two courts x x x rendering conflicting prevent "the possibility of [the Regional Trial Court, Branch
rulings [on the same issue],"43 Lui Enterprises argued that the 143, Makati City] and [the Regional Trial Court, Branch 16,
subsequently filed interpleader case be dismissed. Davao City] rendering conflicting rulings [on the same issue of
which corporation has the better right to the rental payments]."48
Zuellig Pharma filed its opposition44 to the motion to set aside
order of default. It argued that a counsel’s failure to file a timely Without resolving the motion to set aside order of default, the
answer was inexcusable negligence which bound his client. Makati trial court denied the manifestation with motion to
dismiss dated April 21, 2005 on the ground that Lui Enterprises
Further, Zuellig Pharma argued that the pending case for already lost its standing in court.49
nullification of deed of dation in payment "[did] not preclude
[Zuellig Pharma] from seeking the relief prayed for in the Lui Enterprises did not file any motion for reconsideration of the
[interpleader case]."45 denial of the manifestation and motion to dismiss dated April
21, 2005.
While the motion to set aside order of default was still pending
for resolution, Lui Enterprises filed the manifestation and In its decision50 dated July 4, 2006, the Regional Trial Court of
motion to dismiss46 dated April 21, 2005 in the Makati trial Makati ruled that Lui Enterprises "[was] barred from any claim
court. It manifested that the Davao trial court issued another in respect of the [rental payments]"51 since it was declared in
order47 dated April 18, 2005 in the nullification of deed of dation default. Thus, according to the trial court, there was no issue as
in payment case. In this order, the Davao trial court directed the to which corporation had the better right over the rental
Philippine Bank of Communications to inform Zuellig Pharma payments.52 The trial court awarded the total consigned amount
to pay rent to Lui Enterprises while the Davao trial court’s order of P6,681,327.30 to the Philippine Bank of Communications and
dated April 1, 2004 was subsisting. The order datedApril 18, ordered Lui Enterprises to pay Zuellig Pharma P50,000.00 in
2005 of the Davao trial court reads: attorney’s fees.53

ORDER Lui Enterprises appealed to the Court of Appeals.54

Plaintiffs move for execution or implementation of the Order The Court of Appeals found Lui Enterprises’ appellant’s brief
dated September 14, 2004. In substance, [Lui Enterprises] insufficient. Under Rule 44, Section 13 of the 1997 Rules of
seek[s] to compel the remittance in their favor of the rentals Civil Procedure, an appellant’s brief must contain a subject
from [Zuellig Pharma], one of the lessees alluded to in the index, page references to the record, table of cases, textbooks
September 14, 2004 Order whose rental payments "must be and statutes cited, and the statement of issues, among others.
remitted to and collected by [Lui Enterprises]." [The Philippine However, Lui Enterprises’ appellant’s brief did not contain these
Bank of Communications] did not submit any opposition. requirements.55

28
As to the denial of Lui Enterprises’ motion to dismiss, the Court I. Whether the Court of Appeals erred in dismissing
of Appeals sustained the trial court. The Court of Appeals found Lui Enterprises’ appeal for lack of subject index, page
that Lui Enterprises filed its motion to dismiss four days late.56 references to the record, table of cases, textbooks and
statutes cited, and the statement of issues in Lui
With respect to Lui Enterprises’ motion to set aside order of Enterprises’appellant’s brief;
default, the Court ofAppeals found that Lui Enterprises failed to
show the excusable negligence that prevented it from filing its II. Whether the Regional Trial Court of Makati erred
motion to dismiss on time. On its allegedly meritorious defense, in denying Lui Enterprises’motion to set aside order of
the Court of Appeals ruled that the nullification of deed of default;
dation in payment case did not bar the filing of the interpleader
case, with Zuellig Pharma not being a party to the nullification III. Whether the annulment of deed of dation in
case.57 payment pending in the Regional Trial Court of Davao
barred the subsequent filing of the interpleader case in
On the award of attorney’s fees, the Court of Appeals sustained the Regional Trial Court of Makati; and
the trial court since "Zuellig Pharma x x x was constrained to
file the action for interpleader with consignation inorder to IV. Whether Zuellig Pharma was entitled to attorney’s
protect its interests x x x."58 fees.

Thus, in its decision59 promulgated on May 24, 2010, the Court Lui Enterprises’ petition for review on certiorari is without
of Appeals dismissed Lui Enterprises’appeal and affirmed in merit. However, we delete the award of attorney’s fees.
toto the Regional Trial Court of Makati’s decision.
I
Lui Enterprises filed a motion for reconsideration.60

Lui Enterprises did not comply with the rules on the contents
The Court of Appeals denied Lui Enterprises’ motion for of the appellant’s brief
reconsideration in its resolution promulgated on August 13,
2010.61 Hence, this petition.
Under Rule 50, Section 1, paragraph (f) of the 1997 Rules of
Civil Procedure, the Court of Appeals may, on its own motion or
In this petition for review on certiorari,62 Lui Enterprises argued that of the appellee, dismiss an appeal should the appellant’s
that the Court of Appeals applied "the rules of procedure brief lack specific requirements under Rule 44, Section 13,
strictly"63 and dismissed its appeal on technicalities. According paragraphs (a), (c), (d), and (f):
to Lui Enterprises, the Court of Appeals should have taken a
liberal stance and allowed its appeal despite the lack of subject
index, page references to the record, table of cases, textbooks Section 1. Grounds for dismissal of appeal. – An appeal may be
and statutes cited, and the statement of issues in its appellant’s dismissed by the Court of Appeals, on its own motion or on that
brief.64 of the appellee, on the following grounds:

Lui Enterprises also claimed that the trial court should have set xxxx
aside the order of default since its failure to file a motion to
dismiss on time was due to excusable negligence.65 (f) Absence of specific assignment of errors in the appellant’s
brief, or of page references to the record as required in Section
For its allegedly meritorious defense, Lui Enterprises argued 13, paragraphs (a), (c), (d), and (f) of Rule 44.
that the pending nullification of deed of dation in payment case
barred the filing of the interpleader case.The nullification of These requirements are the subject index of the matter in brief,
deed of dation in payment case and the interpleader case page references to the record, and a table of cases alphabetically
allegedly involved the same issue of which corporation had the arranged and with textbooks and statutes cited:
better right to the rent. To avoid conflicting rulings on the same
issue, Lui Enterprises argued that the subsequently filed Section 13. Contents of the appellant’s brief. – The appellant’s
interpleader case be dismissed.66 brief shall contain, in the order herein indicated, the following:

No attorney’s fees should have been awarded to Zuellig Pharma (a) A subject index of the matter in brief with a digest of the
as argued by Lui Enterprises. Zuellig Pharma filed the arguments and page references, and a table of cases
interpleader case despite its knowledge of the nullification of alphabetically arranged, textbooks and statutes cited with
deed of dation in payment case filed in the Davao trial court references to the pages where they are cited;
where the same issue of which corporation had the better right
over the rental payments was being litigated. Thus, Zuellig
Pharma filed the interpleader case in bad faith for which it was xxxx
not entitled to attorney’s fees.67
(c) Under the heading "Statement of the Case," a clear and
The Philippine Bank of Communications filed its comment68 on concise statement of the nature of the action, a summary of the
the petition for review on certiorari. It argued that Lui proceedings, the appealed rulings and orders of the court, the
Enterprises failed to raise any error of law and prayed that we nature of the controversy, with page references to the record;
affirm in toto the Court of Appeals’ decision.
(d) Under the heading "Statement of Facts," a clear and concise
For Zuellig Pharma, it manifested that it was adopting the statement in a narrative form of the facts admitted by both
Philippine Bank of Communications’arguments in its parties and of those in controversy, together with the substance
comment.69 of the proof relating thereto in sufficient detail to make it clearly
intelligible, with page references to the record;
The issues for our resolution are:
xxxx

29
(f) Under the heading "Argument," the appellant’s arguments on The subject index serves as the brief’s table of
each assignment of error with page references to the record. The contents.86 Instead of "[thumbing] through the [appellant’s
authorities relied upon shall be cited by the page of the report at brief]"87every time the Court of Appeals Justice encounters an
which the case begins and the page of the report on which the argument or citation, the Justice deciding the case only has to
citation isfound; refer to the subject index for the argument or citation he or she
needs.88 This saves the Court ofAppeals time in reviewing the
xxxx appealed case. Efficiency allows the justices of the appellate
court to substantially attend to this case as well as other cases.
Lui Enterprises’ appellant’s brief lacked a subject index, page
references to the record, and table of cases, textbooks and Page references to the record guarantee that the facts stated in
statutes cited. Under Rule 50, Section 1 of the 1997 Rules of the appellant’s brief are supported by the record.89Astatement of
Civil Procedure, the Court of Appeals correctly dismissed Lui fact without a page reference to the record creates the
Enterprises’ appeal. presumption that it is unsupported by the record and, thus, "may
be stricken or disregarded altogether."90
Except for cases provided in the Constitution,70 appeal is a
"purely statutory right."71 The right to appeal "must be exercised As for the table of cases, textbooks, and statutes cited, this is
in the manner prescribed by law"72 and requires strict required so that the Court of Appeals can easily verify the
compliance with the Rules of Court on appeals.73Otherwise, the authorities cited "for accuracy and aptness."91
appeal shall be dismissed, and its dismissal shall not be a
deprivation of due process of law. Lui Enterprises’ appellant’s brief lacked a subject index, page
references to the record, and a table of cases, textbooks, and
In Mendoza v. United Coconut Planters Bank, Inc.,74 this court statutes cited. These requirements "were designed to assist the
sustained the Court of Appeals’ dismissal of Mendoza’s appeal. appellate court in the accomplishment of its tasks, and, overall,
Mendoza’s appellant’s brief lacked a subject index, assignment to enhance the orderly administration of justice."92 This court
of errors, and page references to the record. In De Liano v. will not disregard rules on appeal "in the guise of liberal
Court of Appeals,75 this court also sustained the dismissal of De construction."93 For this court to liberally construe the Rules, the
Liano’s appeal. De Liano’s appellant’s brief lacked a subject party must substantially comply with the Rules and correct its
index, a table of cases and authorities, and page references to the procedural lapses.94 Lui Enterprises failed to remedy these
record. errors.

There are exceptions to this rule. In Philippine Coconut All told, the Court of Appeals did not err in dismissing Lui
Authority v. Corona International, Inc.,76 the Philippine Coconut Enterprises’ appeal. It failed to comply with Rule 44, Section
Authority’s appellant’s brief lacked a clear and concise 13, paragraphs (a), (c), (d), and (f) of the 1997 Rules of Civil
statement of the nature of the action, a summary of the Procedure on the required contents of the appellant’s brief.
proceedings, the nature of the judgment, and page references to
the record. However, this court found that the Philippine II
Coconut Authority substantially complied with the Rules. Its
appellant’s brief "apprise[d] [the Court of Appeals] of the Lui Enterprises failed to show that its failure to answer the
essential facts and nature of the case as well as the issues raised complaint within the required period was due to excusable
and the laws necessary [to dispose of the case]."77 This court negligence
"[deviated] from a rigid enforcement of the rules"78 and ordered
the Court of Appeals to resolve the Philippine Coconut
Authority’s appeal. When a defendant is served with summons and a copy of the
complaint, he or she is required to answer within 15 days from
the day he or she was served with summons.95 The defendant
In Go v. Chaves,79 Go’s 17-page appellant’s brief lacked a may also move to dismiss the complaint "[w]ithin the time for
subject index. However, Go subsequently filed a subject index. but before filing the answer."96
This court excused Go’s procedural lapse since the appellant’s
brief "[consisted] only of 17 pages which [the Court of Appeals]
may easily peruse to apprise it of [the case] and of the relief Fifteen days is sufficient time for a defendant to answer with
sought."80 This court ordered the Court of Appeals to resolve good defenses against the plaintiff’s allegations in the
Go’s appeal "in the interest of justice."81 complaint. Thus, a defendant who fails to answer within 15 days
from service of summons either presents no defenses against the
plaintiff’s allegations in the complaint or was prevented from
In Philippine Coconut Authority and Go, the appellants filing his or her answer within the required period due to fraud,
substantially complied with the rules on the contents of the accident, mistake or excusable negligence.97
appellant’s brief. Thus, this court excused the
appellants’procedural lapses.
In either case, the court may declare the defendant in default on
plaintiff’s motion and notice to defendant.98 The court shall then
In this case, Lui Enterprises did not substantially comply with try the case until judgment without defendant’s
the rules on the contents of the appellant’s brief. It admitted that participation99 and grant the plaintiff such relief as his or her
its appellant’s brief lacked the required subject index, page complaint may warrant.100
references to the record, and table of cases, textbooks, and
statutes cited. However, it did not even correct its admitted
"technical omissions"82 by filing an amended appellant’s brief A defendant declared in default loses his or her standing in
with the required contents.83 Thus, this case does not allow a court.101 He or she is "deprived of the right to take part in the
relaxation of the rules. The Court of Appeals did not err in trial and forfeits his [or her] rights as a party litigant,"102 has no
dismissing Lui Enterprises’ appeal. right "to present evidence [supporting his or her]
allegations,"103 and has no right to "control the proceedings [or]
cross-examine witnesses."104 Moreover, he or she "has no right
Rules on appeal "are designed for the proper and prompt to expect that [the court] would [act] upon [his or her
disposition of cases before the Court ofAppeals."84 With respect pleadings]"105 or that he or she "may [oppose]motions filed
to the appellant’s brief, its required contents are designed "to against him [or her]."106
minimize the [Court ofAppeals’] labor in [examining]the record
uponwhich the appeal is heard and determined."85

30
However, the defendant declared in default "does not [waive] all The remedies of the motion to set aside order of default, motion
of [his or her] rights."107 He or she still has the right to "receive for new trial, and petition for relief from judgment are mutually
notice of subsequent proceedings."108 Also, the plaintiff must exclusive, not alternative or cumulative. This is to compel
still present evidence supporting his or her allegations "despite defendants to remedy their default at the earliest possible
the default of [the defendant]."109 opportunity. Depending on when the default was discovered and
whether a default judgment was already rendered, a defendant
Default, therefore, is not meant to punish the defendant but to declared in default may avail of onlyone of the three remedies.
enforce the prompt filing of the answer to the complaint. For a
defendant without good defenses, default saves him or her "the Thus, if a defendant discovers his or her default before the trial
embarrassment of openly appearing to defend the court renders judgment, he or she shall file a motion to set aside
indefensible."110 As this court explained in Gochangco v. The order of default. If this motion to set aside order of default is
Court of First Instance of Negros Occidental, Branch denied, the defendant declared in default cannot await the
rendition of judgment, and he or she cannot file a motion for
IV:111 new trial before the judgment becomes final and executory, or a
petition for relief from judgment after the judgment becomes
final and executory.
It does make sense for a defendant without defenses, and who
accepts the correctness of the specific relief prayed for in the
complaint, to forego the filing of the answer or any sort of Also, the remedies against default become narrower and
intervention in the action at all. For even if he did intervene, the narrower as the trial nears judgment. The defendant enjoys the
result would be the same: since he would be unable to establish most liberality from this court with a motion to set aside order of
any good defense, having none in fact, judgment would default, as he or she has no default judgment to contend with,
inevitably go against him. And this would be an acceptable and he or she has the whole period before judgment to remedy
result, if not being in his power to alter or prevent it, provided his or her default.
that the judgment did not go beyond or differ from the specific
relief stated in the complaint. x x x.112 (Emphasis in the original) With a motion for new trial, the defendant must file the motion
within the period for taking an appeal123 or within 15 days from
On the other hand, for a defendant with good defenses, "it would notice of the default judgment. Although a default judgment has
be unnatural for him [or her] not to set x x x up [his or her already been rendered, the filing of the motion for new trial tolls
defenses] properly and timely."113 Thus, "it must be presumed the reglementary period of appeal, and the default judgment
that some insuperable cause prevented him [or her] from cannot be executed against the defendant.
[answering the complaint]."114 In which case, his or her proper
remedy depends on when he or she discovered the default and A petition for relief from judgment is filed after the default
whether the default judgment was already rendered by the trial judgment has become final and executory. Thus, the filing of the
court. petition for relief from judgment does not stay the execution of
the default judgment unless a writ of preliminary injunction is
After notice of the declaration of default but before the court issued pending the petition’s resolution.124
renders the default judgment, the defendant may file, under oath,
a motion to set aside order of default. The defendant must Upon the grant of a motion to set aside order of default, motion
properly show that his or her failure to answer was due to fraud, for new trial, or a petition for relief from judgment, the
accident,115 mistake116 or excusable negligence.117 The defendant is given the chance to present his or her evidence
defendant must also have a meritorious defense. Rule 9, Section against that of plaintiff’s. With an appeal, however, the
3, paragraph (b) of the1997 Rules of Civil Procedure provides: defendant has no right to present evidence on his or her behalf
and can only appeal the judgment for being contrary to
Section 3. Default; declaration of. – x x x x plaintiff’s evidence or the law.

(b) Relief from order of default. – A party declared in default Similar to an appeal, a petition for certiorari does not allow the
may at any time after notice thereof and before judgment file a defendant to present evidence on his or her behalf. The
motion under oath to set aside the order of default upon proper defendant can only argue that the trial court committed grave
showing that his failure to answer was due to fraud, accident, abuse of discretion in declaring him or her in default.
mistake or excusable negligence and that he has a meritorious
defense. In such case, the order of default may be set aside on Thus, should a defendant prefer to present evidence on his or her
such terms and conditions as the judge may impose in the behalf, he or she must file either a motion to set aside order of
interest of justice. default, motion for new trial, or a petition for relief from
judgment.
If the defendant discovers his or her default after judgment but
prior to the judgment becoming final and executory, he or she In this case, Lui Enterprises had discovered its default before the
may file a motion for new trial under Rule 37, Section 1, Regional Trial Court of Makati rendered judgment. Thus, it
paragraph (a) of the 1997 Rules of Civil Procedure. 118 If he or timely filed a motion to set aside order of default, raising the
she discovers his or her default after the judgment has become ground of excusable negligence.
final and executory, a petition for relief from judgment under
Rule 38, Section 1 of the 1997 Rules of Civil Procedure may be Excusable negligence is "one which ordinary diligence and
filed.119 prudence could not have guarded against."125 The circumstances
should be properly alleged and proved. In this case, we find that
Appeal is also available to the defendant declared in default. He Lui Enterprises’ failure to answer within the required period is
or she may appeal the judgment for being contrary to the inexcusable.
evidence or to the law under Rule 41, Section 2 of the 1997
Rules of Civil Procedure.120 He or she may do so even if he or Lui Enterprises’ counsel filed its motion to dismiss four days
she did not file a petition to set aside order of default. 121 late. It did not immediately take steps to remedy its default and
took one year from discovery of default to file a motion to set
A petition for certiorari may also be filed if the trial court aside order of default. In its motion to set aside order of default,
declared the defendant in default with grave abuse of Lui Enterprises only "conveniently blamed its x x x counsel [for
discretion.122 the late filing of the answer]"126without offering any excuse for
the late filing. This is not excusable negligence under Rule 9,

31
Section 3, paragraph (b)127 of the 1997 Rules of Civil Procedure. claimants to compel them to interplead and litigate their several
Thus, the Regional Trial Court of Makati did not err in refusing claims among themselves.
to set aside the order of default.
An interpleader complaint may be filed by a lessee against those
Lui Enterprises argued that the Regional Trial Court of Makati who have conflicting claims over the rent due for the property
should have been liberal in setting aside its order of default. leased.135 This remedy is for the lessee to protect him or her
After it had been declared in default, Lui Enterprises filed from "double vexation in respect of one liability."136 He or she
several manifestations informing the Makati trial court of the may file the interpleader case to extinguish his or her obligation
earlier filed nullification of deed of dation in payment case to pay rent, remove him or her from the adverse
which barred the filing of the interpleader case. Lui Enterprises’ claimants’dispute, and compel the parties with conflicting
president, Eli L. Lui, and counsel even flew in from Davao to claims to litigate among themselves.
Makati to "formally [manifest that] a [similar] action between
[Lui Enterprises] and [the Philippine Bank of In this case, Zuellig Pharma filed the interpleader case to
Communications]"128 was already pending in the Regional Trial extinguish its obligation to pay rent. Its purpose in filing the
Court of Davao. However, the trial court did not recognize Lui interpleader case "was not defeated"137 when the Makati trial
Enterprises’standing incourt. court declared Lui Enterprises in default.

The general rule is that courts should proceed with deciding At any rate, an adverse claimant in an interpleader case may be
cases on the merits and set aside orders of default as default declared in default. Under Rule 62, Section 5 of the 1997 Rules
judgments are "frowned upon."129 As much as possible, cases of Civil Procedure, a claimant who fails to answer within the
should be decided with both parties "given every chance to fight required period may, on motion, be declared in default. The
their case fairly and in the open, without resort to consequence of the default is that the court may "render
technicality."130 judgment barring [the defaulted claimant] from any claim in
respect to the subject matter."138 The Rules would not have
However, the basic requirements of Rule 9, Section 3, paragraph allowed claimants in interpleader cases to be declared in default
(b) of the 1997 Rules of Civil Procedure must first be complied if it would "ironically defeat the very purpose of the suit."139
with.131 The defendant’s motion to set aside order of default
must satisfy three conditions. First is the time element. The The Regional Trial Court of Makati declared Lui Enterprises in
defendant must challenge the default order before judgment. default when it failed to answer the complaint within the
Second, the defendant must have been prevented from filing his required period. Lui Enterprises filed a motion to set aside order
answer due to fraud, accident, mistake or excusable negligence. of default without an acceptable excuse why its counsel failed to
Third, he must have a meritorious defense. As this court held answer the complaint. It failed to prove the excusable
in SSS v. Hon. Chaves:132 negligence. Thus, the Makati trial court did not err in refusing to
set aside the order of default.
Procedural rules are not to be disregarded or dismissed simply
because their non-observance may have resulted in prejudice to III
a party’s substantive rights. Like all rules[,] they are to be
followed, except only when for the most persuasive of reasons
they may be relaxed to relieve a litigant of an injustice not The nullification of deed in dation in payment case did not bar
commensurate with the degree of his thoughtlessness in not the filing of the interpleader case. Litis pendentia is not
complying with the procedure prescribed. x x x.133 present in this case.

As discussed, Lui Enterprises never explained why its counsel Lui Enterprises allegedly filed for nullification of deed of dation
failed to file the motion to dismiss on time. It just argued that in payment with the Regional Trial Court of Davao. It sought to
courts should be liberal in setting aside orders of default. Even nullify the deed of dation in payment through which the
assuming that it had a meritorious defense and that its Philippine Bank of Communications acquired title over the
representative and counsel had to fly in from Davao to Makati to leased property. Lui Enterprises argued that this pending
personally appear and manifest in court its meritorious defense, nullification case barred the Regional Trial Court of Makati
Lui Enterprises must first show that its failure to answer was due from hearing the interpleader case. Since the interpleader case
to fraud, accident, mistake or excusable negligence. This Lui was filed subsequently to the nullification case, the interpleader
Enterprises did not do. case should be dismissed.

Lui Enterprises argued that Zuellig Pharma filed the interpleader Under Rule 16, Section 1, paragraph (e) of the 1997 Rules of
case to compel Lui Enterprises and the Philippine Bank of Civil Procedure, a motion to dismiss may be filed on the ground
Communications to litigate their claims. Thus, "[d]eclaring the of litis pendentia:
other claimant in default would ironically defeat the very
purpose of the suit."134 The RegionalTrial Court of Makati Section 1. Grounds. – Within the time for but before filing the
should not have declared Lui Enterprises in default. answer to the complaint or pleading asserting a claim, a motion
to dismiss may be made on any of the following grounds:
Under Rule 62, Section 1 of the 1997 Rules of Civil Procedure,
a person may file a special civil action for interpleader if xxxx
conflicting claims are made against him or her over a subject
matter in which he or she has no interest. The action is brought (e)That there is another action pending between the same parties
against the claimants to compel them to litigate their conflicting for the same cause;
claims among themselves. Rule 62, Section 1 of the 1997 Rules
of Civil Procedure provides:
xxxx
Section 1. When interpleader proper. – Whenever conflicting
claims upon the same subject matter are or may be made against Litis pendentia is Latin for "a pending suit."140 It exists when
a person who claims no interest whatever in the subject matter, "another action is pending between the same parties for the same
or an interest which in whole or in part is not disputed bythe cause of actionx x x."141 The subsequent action is "unnecessary
claimants, he may bring an action against the conflicting and vexatious"142 and is instituted to "harass the respondent [in
the subsequent action]."143

32
The requisites of litis pendentia are: Zuellig Pharma filed the interpleader case to extinguish its
obligation to pay rent.There is no identity of reliefs prayed for,
(1)Identity of parties or at least such as represent the and the second requisite of litis pendentia is absent.
same interest in both actions;
Since two requisites of litis pendentia are absent, the
(2)Identity of rights asserted and reliefs prayed for, the nullification of deed of dation in payment case did not bar the
reliefs being founded on the same facts; and filing of the interpleader case.

(3)The identity in the two cases should be such that Lui Enterprises alleged that the Regional Trial Court of Davao
the judgment that may be rendered in one would, issued a writ of preliminary injunction against the Regional Trial
regardless of which party is successful, amount to res Court of Makati. The Regional Trial Court of Davao allegedly
judicata in the other.144 enjoined the Regional Trial Court of Makati from taking
cognizance of the interpleader case. Lui Enterprises argued that
the Regional Trial Court of Makati "should have respected the
All of the requisites must be present.145 Absent one requisite, orders issued by the Regional Trial Court of Davao."149 Lui
there is no litis pendentia.146 Enterprises cited Compania General de Tabacos de Filipinas v.
Court of Appeals150 where this court allegedly held:
In this case, there is no litis pendentia since there is no identity
of parties in the nullification of deed of dation in payment case x x x [T]he issuance of the said writ by the RTC ofAgoo, La
and the interpleader case. Zuellig Pharma is not a party to the Union not only seeks to enjoin Branch 9 of the RTC of Manila
nullification case filed in the Davao trial court. from proceeding with the foreclosure case but also has the effect
of pre-empting the latter’s orders. x x x.151
There is also no identity of rights asserted and reliefs prayed for.
Lui Enterprises filed the first case to nullify the deed of dation in Compania General de Tabacos de Filipinas is not an authority
payment it executed in favor of the Philippine Bank of for the claim that a court can issue a writ of preliminary
Communications. Zuellig Pharma subsequently filed the injunction against a co- equal court.1âwphi1 The cited sentence
interpleader case to consign in court the rental payments and was taken out of context. In Compania General de Tabacos de
extinguish its obligation as lessee. The interpleader case was Filipinas, this court held that the Regional Trial Court ofAgoo
necessary and was not instituted to harass either Lui Enterprises had no power to issue a writ of preliminary injunction against
or the Philippine Bank of Communications. the Regional Trial Court of Manila.152 Acourt cannot enjoin the
proceedings of a co-equal court.
Thus, the pending nullification case did not bar the filing of the
interpleader case. Thus, when this court said that the Regional Trial Court of
Agoo’s writ of preliminary injunction "not only seeks to enjoin
Lui Enterprises cited Progressive Development Corporation, x x x [the Regional Trial Court of Manila] from proceeding with
Inc. v. Court of Appeals147 as authority to set aside the the foreclosure case but also has the effect of pre-empting the
subsequently filed interpleader case. In this cited case, petitioner latter’s orders,"153 this court followed with "[t]his we cannot
Progressive Development Corporation, Inc. entered into a lease countenance."154
contract with Westin Seafood Market, Inc. The latter failed to
pay rent. Thus, Progressive Development Corporation, Inc. At any rate, the Regional Trial Court of Davao’s order
repossessed the leased premises, inventoried the movable datedApril 18, 2005 was not a writ of preliminary injunction. It
properties inside the leased premises, and scheduled the public was a mere order directing the Philippine Bank of
sale of the inventoried properties as they agreed upon in their Communications to inform Zuellig Pharma to pay rent to Lui
lease contract. Enterprises while the status quo order between Lui Enterprises
and the Philippine Bank of Communications was subsisting. The
Westin Seafood Market, Inc. filed for forcible entry with Regional Trial Court of Davao did not enjoin the proceedings
damages against Progressive Development Corporation, Inc. It before the Regional Trial Court of Makati.The order datedApril
subsequently filed an action for damages against Progressive 18, 2005 provides:
Development Corporation for its "forcible takeover of the leased
premises."148 As such, [the Philippine Bank of Communications] [is] hereby
directed to forthwith inform Zuellig Pharma Corp., of the April
This court ordered the subsequently filed action for damages 1, 2004 status quo order and the succeeding September 14, 2004
dismissed as the pending forcible entry with damages case Order, and consequently, for the said lessee to remit all rentals
barred the subsequently filed damages case. due from February 23, 2003 and onwards to plaintiff Lui
Enterprises, Inc., in the meanwhile that the status quo order is
Progressive Development Corporation, Inc. does not apply in subsisting.155
this case. The action for forcible entry with damages and the
subsequent action for damages were filed by the same plaintiff Thus, the Regional Trial Court of Davao did not enjoin the
against the same defendant. There is identity of parties in both Regional Trial Court of Makati fromhearing the interpleader
cases. case.

In this case, the nullification of deed of dation in payment case All told, the trial court did not err in proceeding with the
was filed by Lui Enterprises against the Philippine Bank of interpleader case. The nullification of deed of dation in payment
Communications. The interpleader case was filed by Zuellig case pending with the Regional Trial Court of Davao did not bar
Pharma against Lui Enterprises and the Philippine Bank of the filing of the interpleader case with the RegionalTrial Court
Communications. A different plaintiff filed the interpleader case of Makati.
against Lui Enterprises and the Philippine Bank of
Communications. Thus, there is no identity of parties, and the IV
first requisite of litis pendentia is absent.
The Court of Appeals erred in awarding attorney’s fees
As discussed, Lui Enterprises filed the nullification of deed of
dation in payment to recover ownership of the leased premises.

33
In its ordinary sense, attorney’s fees "represent the reasonable MODIFICATION. The award of PS0,000.00 attorney's fees to
compensation [a client pays his or her lawyer] [for legal service Zuellig Pharma Corporation is DELETED.
rendered]."156 In its extraordinary sense, attorney’s fees "[are]
awarded x x x as indemnity for damages [the losing party pays SO ORDERED.
the prevailingparty]."157

MARVIC MARIO VICTOR F. LEONEN


The award of attorney’s fees is the exception rather than the Associate Justice
rule.158 It is not awarded to the prevailing party "as a matter of
course."159 Under Article 2208 of the Civil Code, attorney’s fees
cannot be recovered in the absence of stipulation, except under WE CONCUR:
specific circumstances:
PRESBITERO J. VELASCO, JR.
(1)When exemplary damages are awarded; Associate Justice

(2)When the defendant’s act or omission has DIOSDADO M.


ROBERTO A. ABAD
compelled the plaintiff to litigate with third persons or PERALTA
Associate Justice
to incur expenses to protect his interest; Associate Justice

(3)In criminal cases of malicious prosecution against JOSE CATRAL ENDOZA


the plaintiff; Associate Justice

(4)In case of a clearly unfounded civil action or ATTESTATION


proceeding against the plaintiff;
I attest that the conclusions in the above Decision had been
(5)Where the defendant acted in gross and evident bad reached in consultation before the case was assigned to the
faith in refusing to satisfy the plaintiff’s plainly valid, writer of the opinion of the Court's Division.
just and demandable claim;
PRESBITERO J. VELASCO, JR.
(6)In actions for legal support; Associate Justice
Chairperson, Third Division
(7)In actions for the recovery of wages of household
helpers, laborers and skilled workers; CERTIFICATION

(8)In actions for indemnity under workmen’s Pursuant to Section 13, Article VIII of the Constitution and the
compensation and employer’s liability laws; Division Chairperson's Attestation, I certify that the conclusions
in the above Decision had been reached in consultation before
(9)In a separate civil action to recover civil liability the case was assigned to the writer of the opinion of the Court's
arising froma crime; Division.

(10)When at least double judicial costs are awarded; MARIA LOURDES P.A. SERENO
Chief Justice
(11)In any other case where the court deems it just and
equitable that attorney's fees and expenses of litigation
should be recovered.160

Even if a party is "compelled to litigate with third persons or to Footnotes


incur expenses to protect his [or her] rights,"161attorney's fees
will not be awarded if no bad faith "could be reflected in a 1Rollo, pp. 28-41. This decision was penned by
party's persistence in a case."162 Associate Justice Ramon M. Bato, Jr., with Associate
Justices Juan Q. Enriquez, Jr. and Fiorito S. Macalino,
To award attorney's fees, the court must have "factual, legal, concurring.
[and] equitable justification."163 The court must state the award's
basis in its decision.164These rules are based on the policy that 2 Id. at 43-44.
"no premium should be placed.on the right to litigate."165
3 Id. at 74-79.
In this case, the Court of Appeals awarded attorney's fees as
"[Zuellig Pharma] was compelled to litigate with third persons 4 Id. at 53-66.
or to incur expenses to protect [its] interest[s]."166 This is not a
compelling reason to award attorney's fees. That Zuellig Pharma
5
had to file an interpleader case to consign its rental payments did Record, p. 44.
not mean that Lui Enterprises was in bad faith in insisting that
rental payments be paid to it. Thus, the Court. of Appeals erred 6 Rollo, p. 68.
in awarding attorney's fees to Zuellig Pharma.
7 Id. at 69-70.
All told, the Court of Appeals' award of P50,000.00 as attorney's
fees must be deleted. 8 Id. at77,decision dated July4,2006.

WHEREFORE, in view of the foregoing, the petition for review 9] Id. at71.
on certiorari is DENIED. The Court of Appeals' decision and
resolution in CA- G.R. CV No. 88023 are AFFIRMED with

34
10 35
Id. at47-52,complaint dated May 7, 2003. Id. at112.

11 36
Id. at30. Id. at208-209.

12 37
Record, pp.37-47. Id. at210-211.

13 38
Rollo, pp.80-82.] Id. at211.

14 39
Id. at52. Id. at215,in an order dated April 29, 2004.

15 40
Id. Id. at402-409.

16 41
Record,p. 405. Id. at402.

17 42
Rollo, p. 81. Id.

18 43
Record, pp.77-80. Id. at405.

19 44
Id. at87. Id. at393-395.

20 45
Rollo, p.81. Id. at394.

21 46
Record, p. 87. Rollo, pp. 83-88.

22 47
Id. at 93-98. Id. at 89-90.

23 48
RULES OF COURT, Rule11, sec. 1. Id. at87.

24 49
Rollo, pp. 30-31. Record, p. 451, in an order dated May3, 2005.

25 50
Record, p. 94. Rollo, pp. 74-79.

26 51
Id. at95. Id. at77.

27 52
Id. at98. Id.

28 Id., secretary’scertificate datedAugust28,2003, 53 Id. at 78-79.


states:
54 Court of Appeals rollo, pp. 17-38.
RESOLVED, that the Board of Directors of
ZUELLIG PHARMA CORPORATION (the 55 Rollo, pp. 33-35.
"Corporation") hereby authorize ATTY.
ANA L.A. PERALTA with address as that 56
of the Corporation, to initiate, represent and Id. at 35-36.
act on behalf of the Corporation, including
the authority to execute verifications and 57 Id. at 36-37.
certificate of non-forum shopping, in the
civil proceedings for consignation of rental 58 Id. at40.
payments and interpleader and in all other
legal suits or proceedings to be filed against
59
Lui Enterprises, Inc. and/or Philippine Bank Id. at 28-41.
of Communications, and to be the
Corporation’s true and lawful attorney-in- 60 Court of Appeals rollo,pp.128-137.
fact, in its name, place and stead.
61 Rollo, pp. 43-44.
29 Record, p. 95.
62 Id. at6-26.
30 Id. at 95-96.
63 Id. at16.
31 Id. at96.
64 Id. at 14-16.
32 Id. at101-103.
65
Id. at 18-19.
33 Id. at101.
66 Id. at 20-21.
34 Id. at111-113.
67 Id. at 22-23.

35
68 83
Id. at104-121. Mendoza v. United Coconut Planters, Bank, Inc.,
G.R. No. 165575, February 2, 2011, 641 SCRA 333,
69 Id. at129-130. 348[Per J. Peralta, Second Division].

84
70 CONSTI., Art.VIII, sec. 5, par. 2 provides: Id.

85
Sec. 5. TheSupreme Court shall have the De Liano v. Court of Appeals, 421 Phil. 1033, 1041
following powers: (2001) [Per J. De Leon, Jr., Second Division], citing
Estiva v. Cawil, 59 Phil.67,68-69 (1933) [Per J.
Malcolm, En Banc].
xxxx
86 Id. at1042.
(2)Review, revise, reverse, modify, or affirm
on appeal or certiorari, as the law or the 87
Rules of Court may provide, final judgments Id.
and orders of lower courts in:
88 Id.
(a)All cases in which the constitutionality or
89
validity of anytreaty, international or Id. at1044.
executive agreement, law, presidential
decree, proclamation, order, instruction, 90 Id.
ordinance, or regulation is in question.
91 Id.at 1045-1046.
(b)All cases involving the legality of any
tax, impost, assessment, or toll, or any 92
penalty imposed in relation thereto. Id. at1040.

93
(c)All cases in which the jurisdiction of any Mendoza v. United Coconut Planters Bank, Inc.,
lower court is in issue. G.R. No. 165575, February 2, 2011, 641 SCRA 333,
348[Per J. Peralta, Second Division].
(d)All criminal cases in which the penalty 94
imposed is reclusion perpetua or higher. Id.

95
(e)All cases in which only an error or RULES OF COURT, Rule 11, sec.1.
question oflaw is involved.
96 RULES OF COURT, Rule16, sec. 1.
71Mendoza v. United Coconut Planters Bank, Inc.,
G.R. No. 165575, February 2, 2011, 641 SCRA 333, 97Gochangco v. The Court of First Instance of Negros
345[Per J. Peralta, Second Division]. Occidental, Branch IV, 241 Phil. 48, 67 (1988) [Per
C.J. Narvasa, En Banc].
72De Liano v. Court of Appeals, 421 Phil. 1033, 1040
(2001)[Per J. De Leon, Jr.,SecondDivision]. 98 RULES OF COURT, Rule9, sec. 3.

73 99
Mendoza v. United Coconut Planters Bank, Inc., RULES OF COURT, Rule 9, sec. 3 (a).
G.R. No. 165575, February 2, 2011, 641 SCRA 333,
345[Per J. Peralta, Second Division]. 100 RULES OF COURT, Rule 9, sec. 3.
74 Id. at333. 101
Otero v. Tan, G.R. No. 200134, August 15, 2012,
678 SCRA 583, 591 [Per J. Reyes, Second Division].
75421 Phil.1033 (2001) [Per J. DeLeon, Jr., Second
Division]. 102Mediserv, Inc. v. China Banking Corporation, 408
Phil. 745, 755 (2001) [Per J. Gonzaga-Reyes, Third
76
395 Phil. 742 (2000) [Per J. Kapunan, Division].
FirstDivision].
103 SSS v. Hon. Chaves, 483 Phil.292, 301 (2004) [Per
77 Id. at750. J. Quisumbing,FirstDivision].

78 104
Id. Otero v. Tan, G.R. No. 200134, August 15, 2012,
678 SCRA 583, 591 [Per J. Reyes, Second Division].
79G.R.No. 182341,April23,2010, 619 SCRA333[Per
J.Del Castillo, Second Division]. 105 Id. at591-592.

80 106
Id. at344. Id. at592.

81 107
Id. at342. SSS v. Hon. Chaves, 483 Phil.292, 301 (2004) [Per
J. Quisumbing,FirstDivision].
82 Rollo, p. 14.

36
108Mediserv, Inc. v. China Banking Corporation, 408 aside onsuch terms and conditions as the judge may
Phil. 745, 755 (2001) [Per J. Gonzaga-Reyes, Third impose in theinterest of justice.
Division].
128 Id. at18.
109SSS v. Hon. Chaves, 483 Phil.292, 302 (2004) [Per
J. Quisumbing,FirstDivision]. 129Republic v. Sandiganbayan, 565 Phil. 172, 185
(2007) [Per J. Quisumbing, Second Division];
110Gochangco v. The Court of First Instance of Samartino v. Raon, 433 Phil. 173, 187 (2002) [Per J.
Negros Occidental, Branch IV, 241 Phil. 48, 67 (1988) Ynares-Santiago, First Division]; Tanchan v. Court of
[Per C.J. Narvasa, En Banc]. Appeals, 365Phil.34, 41 (1999) [Per J.Purisima,Third
Division].
111 241 Phil. 48 (1988) [Per C.J.Narvasa, En Banc].
130Tanchan v. Court of Appeals, 365Phil.34,41 (1999)
112 Id. at67. [PerJ. Purisima, Third Division].

131
113 Id. David v. Judge Gutierrez-Fruelda, 597 Phil. 354,
362 (2009) [Per Acting C.J. Quisumbing, Second
114
Division].
Id.
132
115
483 Phil. 292 [Per J. Quisumbing, FirstDivision].
Ong Guan Can v. Century Insurance Co., 45 Phil.
667 (1924) [Per J. Johnson, En Banc], cited in The 133
Mechanics of Lifting an Order of Default, Id. at301.
Annotation,December 14, 1981, 110 SCRA 223, 226.
134 Rollo, p. 19.
116Tanchan v. Court of Appeals, 365 Phil. 34(1999)
[Per J. Purisima, Third Division]. 135Pasricha v. Don Luis Dison Realty, Inc., 572 Phil.
52, 69 (2008) [Per J. Nachura, Third Division];
117Santos v. Hon. Samson, 196 Phil. 398 (1981) [Per Ocampo v. Tirona, 495 Phil.55,68 (2005) [Per J.
C.J. Concepcion, Jr., Second Division]. Carpio,First Division].

136
118David v. Judge Gutierrez-Fruelda, 597 Phil. 354, Pasricha v. Don Luis Dison Realty, Inc., 572 Phil.
361 (2009) [Per Acting C.J. Quisumbing, Second 52, 69 (2008) [Per J. Nachura, Third Division];
Division]. Ocampo v. Tirona, 495 Phil.55,68 (2005) [Per J.
Carpio,First Division].
119 Id. 137 Rollo, p. 19.
120 Id. 138 RULES OF COURT, Rule62, sec. 5.
121 Id. 139 Rollo, p. 19.
122Sps. Delos Santos v. Judge Carpio, 533 Phil. 42, 53- 140
54 (2006) [Per J. Austria-Martinez, First Division]; Feliciano v. Court of Appeals, 350 Phil.499, 505
Acance v. Court of Appeals, 493 Phil.676, 685 (2005) (1998)[PerJ. Bellosillo, First Division].
[Per J.Callejo,Sr., Second Division];
141
University Physicians Services, Inc. v. Court of
Indiana Aerospace University v. Appeals, 381 Phil. 54, 67 (2000) [Per J. Gonzaga-
Commission on Higher Education, 408 Phil. Reyes, Third Division].
483, 497 (2001) [Per C.J. Panganiban, Third
142
Division]. Id.

123 143
RULES OF COURT, Rule37, sec. 1. Id.

124 144
RULES OF COURT, Rule38, sec. 5. Feliciano v. Court of Appeals, 350 Phil.499, 505-
506 (1998)[Per J. Bellosillo, First Division].
125
Magtoto v. Court of Appeals, G.R. No. 175792,
145
November 21, 2012, 686 SCRA 88, 101 [Per J. Del University Physicians Services, Inc. v. Court of
Castillo, Second Division]. Appeals, 381 Phil. 54, 67 (2000) [Per J. Gonzaga-
Reyes, Third Division].
126 Rollo, p. 36.
146 Id.
127RULES OF COURT, Rule 9, sec. 3, par. (b) Relief
147
from order of default. - A party declared in default 361 Phil. 566 (1999) [Per J. Bellosillo, Second
may at any time after notice thereof and before Division].
judgment file a motion under oath to set aside the
order of default upon proper showing that his failure 148 Id. at581.
to answer was due to fraud, accident, mistake or
excusable negligence and that he has a meritorious 149
defense. In such case, the order of default may be set Rollo, p. 22.

37
150422 Phil. 405 (2001) [Per J.De Leon, Jr.,Second FELICIANO, J.:
Division].
Petitioner seeks review of the decision of the respondent
151 Id. at422. appellate court dated 27 June 1985 which annulled and set aside
certain orders of the then Court of First Instance (CFI) of Rizal,
152 Id. Branch 15, Makati so far as said orders dismissed private
respondents' counter-claim.
153 Id.
On 23 July 1979, petitioner United Coconut Planters Bank
154
(Bank) filed in the lower court a complaint-in-interpleader
Id. against private respondent Makati Bel-Air Condominium
Developers, Inc. (Makati Bel-Air) and against Altiura Investors,
155 Inc. (Altiura). The subject matter of the complaint was a
Rollo, p.90.
manager's check in the amount of P494,000.00 issued by
156Philippine National Construction Corporation v. petitioner Bank payable to Makati Bel-Air, having been
APAC Marketing Corporation, G.R. No. 190957, June purchased by Altiura. Altiura delivered the check to Makati Bel-
5, 2013, 697 SCRA 441, 449 [Per C.J. Sereno, First Air as part payment on an office condominium unit in the
Division], citing Benedicto v. Villaflores, G.R.No. Cacho-Gonzales Building, on 16 July 1979.
185020,October6,2010,632SCRA 446.
On 17 July 1979, petitioner Bank received from Altiura
157 Id. instructions to hold payment on the manager's check, in view of
a material discrepancy in the area of the office unit purchased by
Altiura which unit actually measured 124.58 square meters,
158 Id. at450. instead of 165 square meters as stipulated in the contract of sale.
Petitioner Bank immediately requested private respondent
159 Id. Makati Bel-Air, by a letter dated 17 July 1979, to advise the
Bank why it should not issue the stop payment order requested
160 by Altiura.
CIVIL CODE, Art. 2208.

161 The next day, 18 July 1975, petitioner Bank received a reply
Philippine National Construction Corporation v.
from Makati Bel-Air explaining the latter's side of the
APAC Marketing Corporation, G.R. No. 190957, June
controversy and at the same proposing a possible reduction of
5, 2013, 697 SCRA 441, 449 [Per C.J. Sereno, First
the office unit's purchase price.
Division], citing ABS-CBN Broadcasting Corp. v.
CA, 361 Phil. 499 (1999).
On 19 July 1979, petitioner Bank received a letter from Altiura
162 of even date requesting the Bank to hold payment of its
Id. ·
manager's check while Altiura was discussing Makati Bel-Air's
proposal for reduction of the purchase price and requesting the
163 Id. at 450. Bank to give both parties fifteen (15) days within which to settle
their differences. By a letter dated on the same date, petitioner
164 Id. Bank requested Makati Bel-Air to hold in abeyance for a period
not exceeding fifteen (15) days the presentation of the manager's
165 check, so that both parties could settle their differences
Id. at 449.
amicably.
166 Rollo, p. 40.
On 20 July 1979, petitioner Bank was advised in writing by
Makati Bel-Air that the latter did not agree to the request of the
Bank set out in the latter's letter of 19 July 1979.

Thereupon, petitioner Bank filed a complaint-in-interpleader


Republic of the Philippines against Altiura and Makati Bel-Air to require the latter to litigate
SUPREME COURT with each other their respective claims over the funds
Manila represented by the manager's check involved, and at the same
time asking the court for authority to deposit the funds in a
special account until the conflicting claims shall have been
THIRD DIVISION
adjudicated. The trial court ordered the deposit of the funds into
a special account with any reputable banking institution subject
G.R. Nos. 72664-65 March 20, 1990 to further orders of the court.

UNITED COCONUT PLANTERS BANK, petitioner, On 18 August 1979, Makati Bel-Air filed its answer and
vs. incorporated therein a counter-claim against petitioner Bank and
HON. INTERMEDIATE APPELLATE COURT and a cross-claim against Altiura. In turn, Altiura filed an answer to
MAKATI BEL-AIR CONDOMINIUM DEVELOPERS, the complaint-in-interpleader, with motion to dismiss the
INC., respondents. crossclaim of Makati Bel-Air.

Encanto, Mabugat & Associates for petitioner. Meantime, on 23 July 1979, Altiura had filed a complaint for
rescission of the contract of sale of the condominium unit, with
Mena Q. Taganas for private respondent. damages, against Makati Bel-Air docketed as Civil Case No.
33967, which case was eventually consolidated with the
interpleader case.
RESOLUTION
On 29 August 1979, petitioner Bank filed a "motion to withdraw
complaint and motion to dismiss counter-claim", stating that

38
there was no longer any conflict between Makati Bel-Air and entitled to payment; the necessary precautions include,
Altiura as to who was entitled to the funds covered by the precisely, recourse to an interpleader suit.
manager's check, since Makati Bel-Air in its answer had alleged
that it had cancelled and rescinded the sale of the condominium In the instant case, petitioner Bank having been informed by
unit and had relinquished any claim it had over the funds both Altiura and Makati Bel-Air of their respective positions in
covered by the manager's check. their controversy, and Makati Bel-Air having refused the Bank's
suggestion voluntarily to refrain for fifteen (15) days from
On 28 September 1979, Makati Bel-Air delivered to petitioner presenting the check for payment, petitioner Bank felt
Bank the original of the manager's check. On 18 February 1980, compelled to resort to the remedy of interpleader. It will be seen
the trial court in Civil Case No. 33961 issued an order directing that Makati Bel-Air's counter-claim arose out of or was
the release of the funds covered by the manager's check to necessarily connected with the recourse of petitioner to this
Altiura. remedy of interpleader. Makati-Bel Air was in effect claiming
that petitioner Bank had in bad faith refused to honor its
On 28 April 1983, the trial court issued an order resolving undertaking to pay represented by the manager's check it had
petitioner Bank's motion to withdraw complaint-in-interpleader issued. When the trial court granted petitioner's motion for
and to dismiss counter-claim, declaring that motion to withdraw withdrawal of its complaint-in-interpleader, as having become
the complaint-in-interpleader had been rendered moot and moot and academic by reason of Makati Bel-Air's having
academic by the court's earlier order of 18 February 1980 cancelled the sale of the office unit to Altiura and having
directing petitioner Bank to release to Altiura the P494,000.00 returned the manager's check to the Bank and acquiesced in the
covered by the manager's check, which Makati Bel-Air had not release of the funds to Altiura, the trial court in effect held that
opposed nor appealed from. In the same order, the trial court petitioner Bank's recourse to interpleader was proper and not a
granted Makati Bel-Air's motion to consolidate Civil Case No. frivolous or malicious maneuver to evade its obligation to pay to
33961 (the interpleader case) and Civil Case No. 33967 (the the party lawfully entitled the funds represented by the
rescission plus damages case). manager's check. Having done so, the trial court could not have
logically allowed Makati Bel-Air to recover on its counterclaim
for damages against petitioner Bank.
On 12 July 1983, upon motion of petitioner Bank, the trial court
issued an order clarifying its 28 April 1983 order by stating that
the counter-claim of Makati Bel-Air was dismissed when the There are other considerations supporting the conclusion
funds covered by the manager's check were released to Altiura reached by this Court that respondent appellate court had
without objection of Makati Bel-Air. At the same time, the order committed reversible error. Makati Bel-Air was a party to the
denied Altiura's motion to dismiss Makati Bel-Air's cross-claim contract of sale of an office condominium unit to Altiura, for the
in Civil Case No. 33961. payment of which the manager's check was issued. Accordingly,
Makati Bel-Air was fully aware, at the time it had received the
manager's check, that there was, or had arisen, at least partial
Makati Bel-Air moved for reconsideration of the 12 July 1983 failure of consideration since it was unable to comply with its
clarificatory order of the trial court, without success. obligation to deliver office space amounting to 165 square
meters to Altiura. Makati Bel-Air was also aware that petitioner
Makati Bel-Air then went to the respondent appellate court on Bank had been informed by Altiura of the claimed defect in
petition for certiorari. Makati Bel-Air's title to the manager's check or its right to the
proceeds thereof. Vis-a-vis both Altiura and petitioner Bank,
In its decision dated 27 June 1985, the appellate court Makati Bel-Air was not a holder in due course 3 of the manager's
granted certiorari and nullified the trial court's orders of 12 July check.
and 30 August 1983 to the extent that these had dismissed
Makati Bel-Air's counter-claim. The appellate court held that the ACCORDINGLY, the Court Resolved to GRANT the Petition
withdrawal of the complaint-in-interpleader and its dismissal as for Review and to REVERSE and SET ASIDE the Decision of
moot and academic did not operate ipso facto to dismiss Makati respondent appellate court dated 27 June 1985 in AC-G.R. SP
Bel-Air's counter-claim for the reason that said counter-claim Nos. 01669-70.
was based on "an entirely different cause of action from that in
the complaint-[in]-interpleader". Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.

In the instant Petition for Review on Certiorari, petitioner Bank


argues that Makati Bel-Air's counter-claim was compulsory in
nature and had therefore been dissolved when the complaint-in-
interpleader was withdrawn and dismissed. Makati Bel-Air Footnotes
argues upon the other hand, that its counterclaim was not a
compulsory one. 1 See, e.g., Javier v. Intermediate Appellate
Court, G.R. No. 75379, March 31, 1969; Ty
Makati Bel-Air's counterclaim in the interpleader proceedings Tion v. Marsman and Co., 5 SCRA 761
was for damages in the amount of P5,000,000.00, based upon (1962); Berses v. Villanueva, 25 Phil. 473
the theory that petitioner Bank had violated its guarantee (1913).
embodied in its manager's check when it in effect stopped
payment of said check, allegedly causing damages to Makati 2 Mesina v. Intermediate Appelate Court,
Bel-Air the latter having allegedly issued checks against said 145 SCRA 497 (1986).
funds.
3 Sections 28and 52(c), Negotiable
Under Section 4, Rule 9 of the Revised Rules of Court, a Instruments Law.
compulsory counterclaim is "one which arises out of or is
necessarily connected with the transaction or occurrence that is
the subject matter of the opposing party's claim." 1Interpleader is
a proper remedy where a bank which had issued a manager's
check is subjected to opposing claims by persons who Republic of the Philippines
respectively claim a right to the funds covered by the manager's SUPREME COURT
check. 2 The Bank is entitled to take necessary precautions so Manila
that, as far possible, it does not make a mistake as to who is

39
EN BANC Plaintiffs thus claimed that these conflicting claims between the
defendants-corporations caused them great inconvenience and
G.R. No. L-25138 August 28, 1969 incalculable moral and material damage, as they did not know to
whom they should pay the monthly amortizations or payments.
They further alleged that as the majority of them were GSIS
JOSE A. BELTRAN, ET AL., plaintiffs-appellants, policy holders, they preferred to have the implementation of the
vs. outright sale in their favor effected by the GSIS, since the GSIS
PEOPLE'S HOMESITE & HOUSING was "legally entitled to the management, administration and
CORPORATION, defendants-appellees. ownership of the PHHC properties in question." 1

Beltran, Cendaña, Camu, Pelias and Manuel for plaintiffs- Upon urgent ex parte motion of plaintiffs, the trial Court issued
appellants. on August 23, 1962 its Order designating the People's First
Government Corporate Counsel Tomas P. Matic Jr. and Savings Bank at Quezon City "to receive in trust the payments
Assistant Government Corporate Counsel Romualdo Valera for from the plaintiffs on their monthly amortizations on PHHC lots
defendants-appellees. and to be released only upon proper authority of the Court." 2

On August 29, 1962, the two defendant corporations represented


by the Government Corporate Counsel filed a Motion to Dismiss
the complaint for failure to state a cause of action as well as to
TEEHANKEE, J.: lift the Court's order designating the People's First Savings Bank
as trustee to receive the tenants' payments on the PHHC lots.
Appeal on purely questions of law from an order of dismissal of
the complaint for interpleader, on the ground that it does not The trial Court heard the motion on September 1, 1962 in the
state a cause of action, as certified to this Court by the Court of presence of all the parties, and thereafter issued its Order of
Appeals. We affirm the dismissal on the ground that where the September 6, 1962, dismissing the Complaint, ruling
defendants sought to be interpleaded as conflicting claimants that: "During the hearing of the said motion and opposition
have no conflicting claims against plaintiff, as correctly found thereto, the counsel for the defendants ratified the allegations in
by the trial court, the special civil action of interpleader will not his motion and made of record that the defendant Government
lie. Service Insurance System has no objection that payments on the
monthly amortizations from the residents of Project 4 be made
This interpleader suit was filed on August 21, 1962, by plaintiffs directly to the defendant People's Homesite and Housing
in their own behalf and in behalf of all residents of Project 4 in Corporation. From what appears in said motion and the
Quezon City, praying that the two defendant-government statement made in open court by the counsel for defendants that
corporations be compelled to litigate and interplead between there is no dispute as to whom the residents of Project 4 should
themselves their alleged conflicting claims involving said make their monthly amortizations payments, there is, therefore,
Project 4. no cause of action for interpleading and that the order of August
23, 1962 is not warranted by the circumstances surrounding the
case. In so far as payments are concerned, defendant GSIS has
Plaintiffs' principal allegations in their complaint were as expressed its conformity that they be made directly to defendant
follows: Since they first occupied in 1953 their respective PHHC. Counsel for defendants went further to say that whatever
housing units at Project 4, under lease from the People's dispute, if any, may exist between the two corporations over the
Homesite & Housing Corporation (PHHC) and paying monthly lots and buildings in Project 4, payments made to the PHHC will
rentals therefor, they were assured by competent authority that not and cannot in any way affect or prejudice the rights of the
after five years of continuous occupancy, they would be entitled residents thereof as they will be credited by either of the two
to purchase said units. On February 21, 1961, the PHHC defendants." 3
announced to the tenants that the management, administration
and ownership of Project 4 would be transferred by the PHHC to
the Government Service Insurance System (GSIS) in payment of Plaintiffs subsequently filed their motion for reconsideration and
PHHC debts to the GSIS. In the same announcement, the PHHC the trial court, "with a view to thresh out the matter once and for
also asked the tenants to signify their conformity to buy the all," called the Managers of the two defendants-corporations and
housing units at the selling price indicated on the back thereof, the counsels for the parties to appear before it for a conference
agreeing to credit the tenants, as down payment on the selling on October 24, 1962. "During the conference," the trial court
price, thirty (30%) percent of what had been paid by them as related in its Order of November 20, 1962, denying plaintiffs'
rentals. The tenants accepted the PHHC offer, and on March 27, Motion for Reconsideration, "Manager Diaz of the GSIS made
1961, the PHHC announced in another circular that all payments of record that he has no objection that payments be made to the
made by the tenants after March 31, 1961 would be considered PHHC. On the other hand, Manager Eco of the PHHC made of
as amortizations or installment payments. The PHHC record that at present there is a standing arrangement between
furthermore instructed the Project Housing Manager in a the GSIS and the PHHC that as long as there is showing that the
memorandum of May 16, 1961 to accept as installments on the PHHC has remitted 100% of the total purchase price of a given
selling price the payments made after March 31, 1961 by tenants lot to the GSIS, the latter corporation shall authorize the
who were up-to-date in their accounts as of said date. In issuance of title to the corresponding lot. It was also brought out
September, 1961, pursuant to the PHHC-GSIS arrangement, in said conference that there is a new arrangement being
collections from tenants on rentals and/or installment payments negotiated between the two corporations that only 50% of the
were delivered by the PHHC to the GSIS. On December 27, purchase price be remitted to the GSIS by the PHHC, instead of
1961, the agreement of turnover of administration and the 100%. At any rate the two Managers have assured counsel
ownership of PHHC properties, including Project 4 was for the plaintiffs that upon payment of the whole purchase price
executed by PHHC in favor of GSIS, pursuant to the release of of a given lot, the title corresponding to said lot will be issued." 4
mortgage and amicable settlement of the extrajudicial
foreclosure proceedings instituted in May, 1960 by GSIS against On appeal, plaintiffs claim that the trial Court erred in
PHHC. Subsequently, however, PHHC through its new dismissing their suit, contending the allegations in their
Chairman-General Manager, Esmeraldo Eco, refused to complaint "raise questions of fact that can be established only by
recognize all agreements and undertakings previously entered answer and trial on the merits and not by a motion to dismiss
into with GSIS, while GSIS insisted on its legal rights to enforce heard by mere oral manifestations in open court," and that they
the said agreements and was upheld in its contention by both the "do not know who, as between the GSIS and the PHHC, is the
Government Corporate Counsel and the Secretary of Justice. right and lawful party to receive their monthly amortizations as

40
would eventually entitle them to a clear title to their dwelling among themselves in order to determine who is entitled to the
units." 5 property or payment of the obligation. "The remedy is afforded
not to protect a person against a double liability but to protect
Plaintiffs entirely miss the vital element of an action of him against a double vexation in respect of one liability." 8 Thus,
interpleader. Rule 63, section 1 of the Revised Rules of Court in another case, where the occupants of two different parcels of
(formerly Rule 14) requires as an indispensable element that land adjoining each other belonging to two separate plaintiffs,
"conflicting claims upon the same subject matter are or may be but on which the occupants had constructed a building
made" against the plaintiff-in-interpleader "who claims no encroaching upon both parcels of land, faced two ejectment suits
interest whatever in the subject matter or an interest which in from the plaintiffs, each plaintiff claiming the right of
whole or in part is not disputed by the claimants." While the two possession and recovery over his respective portion of the lands
defendant corporations may have conflicting claims between encroached upon, this Court held that the occupants could not
themselves with regard to the management, administration and properly file an interpleader suit, against the plaintiffs, to litigate
ownership of Project 4, such conflicting claims are not against their alleged conflicting claims; for evidently, the two plaintiff
the plaintiffs nor do they involve or affect the plaintiffs. No did not have any conflicting claims upon the same subject matter
allegation is made in their complaint that any corporation other against the occupants, but were enforcing separate and distinct
than the PHHC which was the only entity privy to their lease- claims on their respective properties. 9
purchase agreement, ever made on them any claim or demand
for payment of the rentals or amortization payments. The Plaintiffs' other contention in their appeal is that notwithstanding
questions of fact raised in their complaint concerning the that the issue as to which of the defendants is authorized to
enforceability, and recognition or non-enforceability and non- receive the tenants' payments was resolved in favor of the
recognition of the turnover agreement of December 27, 1961 PHHC, they had raised other issues that were not resolved and
between the two defendant corporations are irrelevant to their would require rendition of judgment after trial on the merits,
action of interpleader, for these conflicting claims, loosely so- such as "the issue of the right of ownership over the houses and
called, are between the two corporations and not against lots in Project 4 (and) the issue of the status of the commitment
plaintiffs. Both defendant corporations were in conformity and agreements and undertakings made by the previous PHHC
had no dispute, as pointed out by the trial court that the monthly Administration, particularly those of the then PHHC General
payments and amortizations should be made directly to the Manager Bernardo Torres." 10 This contention is without merit,
PHHC alone. for no conflicting claims have been made with regard to such
issues upon plaintiffs by defendant corporations, who both
The record rejects plaintiffs' claim that the trial courts order was bound themselves to recognize and respect the rights of
based on "mere oral manifestations in court." The Reply to plaintiffs-tenants. The resolution of such issues affecting the
Opposition of September 11, 1962 filed by the Government defendant corporations exclusively may not properly be sought
Corporate Counsel expressly "reiterates his manifestation in through the special civil action of interpleader. Should there be a
open court that no possible injustice or prejudice would result in breach of the PHHC undertakings towards plaintiffs, plaintiffs'
plaintiffs by continuing to make payments of such rentals or recourse would be an ordinary action of specific performance or
amortizations to defendant PHHC because any such payments other appropriate suit against either the PHHC or GSIS or both,
will be recognized as long as they are proper, legal and in due as the circumstances warrant.
course by anybody who might take over the property.
Specifically, any such payments will be recognized by the GSIS We find no error, therefore, in the trial court's order of dismissal
in the event that whatever conflict there might be (and this is of the complaint for interpleader and the lifting, as a
only on the hypothetical assumption that such conflict exists) consequence, of its other order designating the People's First
between the PHHC and the GSIS should finally be resolved in Savings Bank as trustee to receive the tenants' payments on the
favor of the GSIS". 6 The assurances and undertakings to the PHHC lots.
same affect given by the Managers of the defendants-
corporations at the conference held by the trial Court are ACCORDINGLY, the trial Court's order of dismissal is hereby
expressly embodied in the Court's Order of November 20, 1962 affirmed. Without costs.1äwphï1.ñët
quoted above. The GSIS' undertaking to recognize and respect
the previous commitments of PHHC towards its tenants is
expressly set forth in Par. III, section M of the turnover Concepcion, C.J., Dizon, Makalintal, Sanchez, Castro,
agreement, Annex "F" of plaintiffs' complaint, wherein it is Fernando, Capistrano and Barredo, JJ., concur.
provided that "GSIS shall recognize and respect all awards, Reyes, J.B.L., and Zaldivar, JJ., are on leave.
contracts of sale, lease agreements and transfer of rights to lots
and housing units made and approved by PHHC, subsisting as of
the signing of this agreement, and PHHC commitment to sell its
housing projects 4, 6 and 8-A at the selling prices less rental
credits fixed by PHHC and as finally approved by the OEC. Footnotes
PHHC, however, shall be liable and answerable for any and all
claims and consequences arising from double or multiple awards
1Rec.
or in the case of awards of non-existing houses and/or lots." 7 on App., pp. 2-10.

2Id.,
In fine, the record shows clearly that there were no conflicting pp. 48-49.
claims by defendant corporations as against plaintiff-tenants,
which they may properly be compelled in an interpleader suit to 3Rec. on App., pp. 65-66; emphasis supplied.
interplead and litigate among themselves. Both defendant
corporations were agreed that PHHC should continue receiving 4Rec. on App., pp. 95-96; emphasis supplied.
the tenants' payments, and that such payments would be duly
recognized even if the GSIS should eventually take over Project
5Appellants'
4 by virtue of their turnover agreement of December 27, 1961. Brief, pp. 6-7.
As held by this Court in an early case, the action of interpleader
is a remedy whereby a person who has property in his 6Appellants' Brief, p. 69.
possession or has an obligation to render wholly or partially,
without claiming any right in both, comes to court and asks that 7Id., pp. 34-35.
the defendants who have made upon him conflicting claims
upon the same property or who consider themselves entitled to
demand compliance with the obligation be required to litigate

41
8Alvarez vs. Commonwealth of the Philippines, et al., violating its articles of incorporation and by-laws; and that the
65 Phil. 302, 311-312 (1938); Emphasis supplied. membership fee certificate 201-serial no. 1199 held by the
defendant Tan and the membership fee certificate 201-serial No.
9Camilo vs. Arcamo, 3 SCRA 146 (1961). 1478 issued to the defendant Lee proceed from the same
membership fee certificate 201, originally issued in the name of
10Appellants'
"Swan, Culbertson and Fritz".
Brief, p. 12.
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
Republic of the Philippines require the surrender and cancellation of the outstanding
SUPREME COURT membership fee certificate 201 before issuance may be made to
Manila 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
EN BANC 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
G.R. No. L-23851 March 26, 1976 action or bring a separate action to protect his rights despite the
fact that he has a legal and beneficial interest in the subject
WACK WACK GOLF & COUNTRY CLUB, INC., plaintiff- matter of this litigation; and that he is made a part so that
complete relief may be accorded herein.
appellant,
vs.
LEE E. WON alias RAMON LEE and BIENVENIDO A. The Corporation prayed that (a) an order be issued requiring Lee
TAN, defendants-appellees. and Tan to interplead and litigate their conflicting claims; and
(b) judgment. be rendered, after hearing, declaring who of the
Leonardo Abola for appellant. 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.
Alfonso V. Agcaoli & Ramon A. Barcelona for appellee Lee E.
Won.
In separate motions the defendants moved to dismiss the
complaint upon the grounds of res judicata, failure of the
Bienvenido A. Tan in his own behalf. 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.
CASTRO, C.J.:

In this appeal, the Corporation contends that the court a


This is an appeal from the order of the Court of First Instance of
quo erred (1) in finding that the allegations in its amended and
Rizal, in civil case 7656, dismissing the plaintiff-appellant's
supplemental complaint do not constitute a valid ground for an
complaint of interpleader upon the grounds of failure to state a
action of interpleader, and in holding that "the principal motive
cause of action and res judicata.
for the present action is to reopen the Manila Case and
collaterally attack the decision of the said Court"; (2) in finding
In its amended and supplemental complaint of October 23, 1963, that the decision in civil case 26044 of the CFI of Manila
the Wack Wack Golf & Country Club, Inc., a non-stock, civic constitutes res judicata and bars its present action; and (3) in
and athletic corporation duly organized under the laws of the dismissing its action instead of compelling the appellees to
Philippines, with principal office in Mandaluyong, Rizal interplead and litigate between themselves their respective
(hereinafter referred to as the Corporation), alleged, for its first claims.
cause of action, that the defendant Lee E. Won claims ownership
of its membership fee certificate 201, by virtue of the decision
The Corporations position may be stated elsewise as follows:
rendered in civil case 26044 of the CFI of Manila, entitled "Lee
The trial court erred in dismissing the complaint, instead of
E. Won alias Ramon Lee vs. Wack Wack Golf & Country Club,
compelling the appellees to interplead because there actually are
Inc." and also by virtue of membership fee certificate 201-serial
conflicting claims between the latter with respect to the
no. 1478 issued on October 17, 1963 by Ponciano B. Jacinto,
ownership of membership fee certificate 201, and, as there is not
deputy clerk of court of the said CFI of Manila, for and in behalf
Identity of parties, of subject-matter, and of cause of action,
of the president and the secretary of the Corporation and of the
between civil case 26044 of the CFI of Manila and the present
People's Bank & Trust Company as transfer agent of the said
action, the complaint should not have been dismissed upon the
Corporation, pursuant to the order of September 23, 1963 in the
ground of res judicata.
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 On the other hand, the appellees argue that the trial court
no. 1199 issued to him on July 24, 1950 pursuant to an properly dismissed the complaint, because, having the effect of
assignment made in his favor by "Swan, Culbertson and Fritz," reopening civil case 26044, the present action is barred by res
the original owner and holder of membership fee certificate 201; judicata.
that under its articles of incorporation and by-laws the
Corporation is authorized to issue a maximum of 400 Although res judicata or bar by a prior judgment was the
membership fee certificates to persons duly elected or admitted principal ground availed of by the appellees in moving for the
to proprietary membership, all of which have been issued as dismissal of the complaint and upon which the trial court
early as December 1939; that it claims no interest whatsoever in actually dismissed the complaint, the determinative issue, as can
the said membership fee certificate 201; that it has no means of be gleaned from the pleadings of the parties, relates to the
determining who of the two defendants is the lawful owner propriety and timeliness of the remedy of interpleader.
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

42
The action of interpleader, under section 120 of the Code of The Corporation has not shown any justifiable reason why it did
Civil Procedure, 2 is a remedy whereby a person who has not file an application for interpleader in civil case 26044 to
personal property in his possession, or an obligation to render compel the appellees herein to litigate between themselves their
wholly or partially, without claiming any right to either, comes conflicting claims of ownership. It was only after adverse final
to court and asks that the persons who claim the said personal judgment was rendered against it that the remedy of interpleader
property or who consider themselves entitled to demand was invoked by it. By then it was too late, because to he entitled
compliance with the obligation, be required to litigate among to this remedy the applicant must be able to show that lie has not
themselves in order to determine finally who is entitled to tone been made independently liable to any of the claimants. And
or the one thing. The remedy is afforded to protect a person not since the Corporation is already liable to Lee under a final
against double liability but against double vexation in respect of judgment, the present interpleader suit is clearly improper and
one liability. 3 The procedure under the Rules of Court 4 is the unavailing.
same as that under the Code of Civil Procedure, 5 except that
under the former the remedy of interpleader is available It is the general rule that before a person will
regardless of the nature of the subject-matter of the controversy, be deemed to be in a position to ask for an
whereas under the latter an interpleader suit is proper only if the order of intrepleader, he must be prepared to
subject-matter of the controversy is personal property or relates show, among other prerequisites, that he has
to the performance of an obligation. not become independently liable to any of
the claimants. 25 Tex. Jur. p. 52, Sec. 3; 30
There is no question that the subject matter of the present Am. Jur. p. 218, Section 8.
controversy, i.e., the membership fee certificate 201, is proper
for an interpleader suit. What is here disputed is the propriety It is also the general rule that a bill of
and timeliness of the remedy in the light of the facts and interpleader comes too late when it is filed
circumstances obtaining. after judgment has been rendered in favor of
one of the claimants of the fund, this being
A stakeholder 6 should use reasonable diligence to hale the especially true when the holder of the funds
contending claimants to court. 7 He need not await actual had notice of the conflicting claims prior to
institution of independent suits against him before filing a bill of the rendition of the judgment and had an
interpleader. 8 He should file an action of interpleader within a opportunity to implead the adverse
reasonable time after a dispute has arisen without waiting to be claimants in the suit in which the judgment
sued by either of the contending claimants. 9 Otherwise, he may was rendered. United Procedures Pipe Line
be barred by laches 10 or undue delay. 11 But where he acts with Co. v. Britton, Tex. Civ. App. 264 S.W.
reasonable diligence in view of the environmental 176; Nash v. McCullum, Tex. Civ. 74 S.W.
circumstances, the remedy is not barred. 12 2d 1046; 30 Am. Jur. p. 223, Sec. 11; 25
Tex. Jur. p. 56, Sec. 5; 108 A.L.R., note 5, p.
Has the Corporation in this case acted with diligence, in view of 275. 16
all the circumstances, such that it may properly invoke the
remedy of interpleader? We do not think so. It was aware of the Indeed, if a stakeholder defends a suit filed by one of the
conflicting claims of the appellees with respect to the adverse claimants and allows said suit to proceed to final
membership fee certificate 201 long before it filed the present judgment against him, he cannot later on have that part of the
interpleader suit. It had been recognizing Tan as the lawful litigation repeated in an interpleader suit. In the case at hand, the
owner thereof. It was sued by Lee who also claimed the same Corporation allowed civil case 26044 to proceed to final
membership fee certificate. Yet it did not interplead Tan. It judgment. And it offered no satisfactory explanation for its
preferred to proceed with the litigation (civil case 26044) and to failure to implead Tan in the same litigation. In this factual
defend itself therein. As a matter of fact, final judgment was situation, it is clear that this interpleader suit cannot prosper
rendered against it and said judgment has already been executed. because it was filed much too late.
It is not therefore too late for it to invoke the remedy of
interpleader. If a stakeholder defends a suit by one
claimant and allows it to proceed so far as a
It has been held that a stakeholder's action of interpleader is too judgment against him without filing a bill of
late when filed after judgment has been rendered against him in interpleader, it then becomes too late for him
favor of one of the contending claimants, 13 especially where he to do so. Union Bank v. Kerr, 2 Md. Ch.
had notice of the conflicting claims prior to the rendition of the 460; Home Life Ins. Co. v. Gaulk, 86 Md.
judgment and neglected the opportunity to implead the adverse 385, 390, 38 A. 901; Gonia v. O'Brien, 223
claimants in the suit where judgment was entered. This must be Mass. 177, 111 N.E. 787. It is one o the
so, because once judgment is obtained against him by one main offices of a bill of interpleader to
claimant he becomes liable to the latter. 14 In once case, 15 it was restrain a separate proceeding at law by
declared: claimant so as to avoid the resulting partial
judgment; and if the stakeholder acquiesces
The record here discloses that long before in one claimant's trying out his claim and
the rendition of the judgment in favor of establishing it at law, he cannot then have
relators against the Hanover Fire Insurance that part of the litigation repeated in an
Company the latter had notice of the adverse interpleader suit. 4 Pomeroy's Eq. Juris. No.
claim of South to the proceeds of the policy. 162; Mitfor's Eq. Pleading (Tyler's Ed.) 147
No reason is shown why the Insurance and 236; Langdell's Summary of Eq.
Company did not implead South in the Pleading, No. 162' De Zouche v. Garrizon,
former suit and have the conflicting claims 140 Pa. 430, 21 A/450. 17
there determined. The Insurance Company
elected not to do so and that suit proceeded It is the general rule that a bill of
to a final judgment in favor of relators. The interpleader comes too late when application
Company thereby became independently therefore is delayed until after judgment has
liable to relators. It was then too late for been rendered in favor of one of the
such company to invoke the remedy of claimants of the fund, and that this is
interpleader especially true where the holder of the fund
had notice of the conflicting claims prior to

43
the rendition of such judgment and an would not have been called upon to file an
opportunity to implead the adverse interpleader, since there would have been
claimants in the suit in which such judgment sufficient funds in its hands to have satisfied
was rendered. (See notes and cases cited 36 all lawful claimants. It may be observed,
Am. Dec. 703, Am. St. Rep. 598, also 5 however, that the surety company was
Pomeroy's Eq. Juris. Sec. 41.) acquainted with all of the facts, and hence
that it simply took its chances of meeting
The evidence in the opinion of the majority with success by its own construction of the
shows beyond dispute that the appellant bond and the law. Having failed to sustain it,
permitted the Parker county suit to proceed it cannot now force relatrix into litigation
to judgment in favor of Britton with full anew with others, involving most likely a
notice of the adverse claims of the repetition of what has been decided, or force
defendants in the present suit other than the her to accept a pro rata part of a fund, which
assignees of the judgment (the bank and is far from benefits of the judgment. 19
Mrs. Pabb) and no excuse is shown why he
did not implead them in the suit. 18 Besides, a successful litigant cannot later be impleaded by his
defeated adversary in an interpleader suit and compelled to
To now permit the Corporation to bring Lee to court after the prove his claim anew against other adverse claimants, as that
latter's successful establishment of his rights in civil case 26044 would in effect be a collateral attack upon the judgment.
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 The jurisprudence of this state and the
action of interpleader, with the possibility that the latter would common law states is well-settled that a
lose the benefits of the favorable judgment. This cannot be done claimant who has been put to test of a trial
because having elected to take its chances of success in said by a surety, and has establish his claim, may
civil case 26044, with full knowledge of all the fact, the not be impleaded later by the surety in an
Corporation must submit to the consequences of defeat. interpleader suit, and compelled to prove his
claim again with other adverse
The act providing for the proceeding has claimants. American Surety Company of
nothing to say touching the right of one, New York v. Brim, 175 La. 959, 144 So.
after contesting a claim of one of the 727; American Surety Company of New York
claimants to final judgment unsuccessfully, v. Brim (In Re Lyong Lumber Company),
to involve the successful litigant in litigation 176 La. 867, 147 So. 18; Dugas v. N.Y.
anew by bringing an interpleader action. The Casualty Co., 181 La. 322, 159 So. 572; 15
question seems to be one of first impression Ruling Case Law, 228; 33 Corpus Juris,
here, but, in other jurisdictions, from which 477; 4 Pomeroy's Jurisprudence,
the substance of the act was apparently 1023; Royal Neighbors of America v.
taken, the rule prevails that the action cannot Lowary (D.C.) 46 F2d 565; Brackett v.
be resorted to after an unsuccessful trial Graves, 30 App. Div. 162, 51 N.Y.S.
against one of the claimants. 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.
It is well settled, both by reasons and 1033; Hancock Mutual Life Ins. Co. v.
authority, that one who asks the Lawder, 22 R.I. 416, 84 A. 383.
interposition of a court of equity to compel
others, claiming property in his hands, to
interplead, must do so before putting them to There can be no doubt that relator's claim
the test of trials at law. Yarborough v. has been finally and definitely established,
Thompson, 3 Smedes & M. 291 (41 Am. because that matter was passed upon by
Dec. 626); Gornish v. Tanner, 1 You. & Jer. three courts in definitive judgments. The
333; Haseltine v. Brickery, 16 Grat. (Va.) only remaining item is the value of the use
116. The remedy by interpleader is afforded of the land during the time that relator
to protect the party from the annoyance and occupied it. The case was remanded solely
hazard of two or more actions touching the and only for the purpose of determining the
same property or demand; but one who, with amount of that credit. In all other aspects the
knowledge of all the facts, neglects to avail judgment is final. 20
himself of the relief, or elects to take the
chances for success in the actions at law, It is generally held by the cases it is the
ought to submit to the consequences of office of interpleader to protect a party, not
defeat. To permit an unsuccessful defendant against double liability, but against double
to compel the successful plaintiffs to vexation on account of one liability. Gonia
interplead, is to increase instead of to v. O'Brien, 223 Mass. 177, 111 N.E. 787.
diminish the number of suits; to put upon the And so it is said that it is too late for the
shoulders of others the burden which he asks remedy of interpleader if the party seeking
may be taken from his own. ....' this relef has contested the claim of one of
the parties and suffered judgment to be
It is urged, however, that the American taken.
Surety Company of New York was not in
position to file an interpleader until it had In United P.P.I. Co. v. Britton (Tex. Civ.
tested the claim of relatrix to final judgment, App.) 264 S.W. 576. 578, it was said: 'It is
and that, failing to meet with success, it the general rule that a bill of interpleader
promptly filed the interpleader. The reason comes too late when application therefor is
why, it urges, it was not in such position delayed until after judgment has been
until then is that had it succeeded before this rendered in favor of one of the claimants of
court in sustaining its construction of the the fund, and this is especially true where
bond and the law governing the bond, it the holder of the fund had notice of the

44
conflicting claims prior to the rendition of who claims no interest whatsoever in the
such judgment and an opportunity to subject-matter, or an interest which in whole
implead the adverse claimants in the suit in or in part is not disputed by the claimants, he
which such judgment was rendered. See may bring an action against the conflicting
notes and cases cited 35 Am. Dec. 703; 91 claimants to compel them to interplead and
An. St. Rep. 598; also 5 Pomeroy's Equity litigate their several claims among
Jurisprudence No. 41.' themselves."

The principle thus stated has been 5 Section 120 of the Code of Civil
recognized in many cases in other Procedure reads:
jurisdictions, among which may be
cited American Surety Co. v. O'Brien, 223 Interpleading. — Whenever conflicting
Mass. 177, 111 N.E. 787; Phillips v. Taylor, claims are or may be made upon a person
148 Md. 157, 129 A. 18; Moore v. Hill, 59 for or relating to personal property, or the
Ga. 760, 761; Yearborough v. Thompson, 3 performance of an obligation or any portion
Smedes & M. (11 Miss.) 291, 41 Am. Dec. thereof, so that he may be made subject to
626. See, also, 33 C.J. p. 447, No. 30; Nash several actions by different persons, unless
v. McCullum, (Tex. Civ. App.) 74 S.W. 2d the court intervenes, such person may bring
1042, 1047. an action against the conflicting claimants,
disclaiming personal interest in the
It would seem that this rule should logically controversy, to compel them to interplead
follow since, after the recovery of judgment, with one another and thereupon proceed to
the interpleading of the judgment creditor is determine the rights of the several parties to
in effect a collateral attack upon the the interpleading to the personal property or
judgment. 21 the performance of the obligation in
controversy and shall determine the rights of
In fine, the instant interpleader suit cannot prosper because the all parties in interest."
Corporation had already been made independently liable in civil
case 26044 and, therefore, its present application for interpleader 6 As here used the term "stakeholder" means
would in effect be a collateral attack upon the final judgment in a person entrusted with the custody of
the said civil case; the appellee Lee had already established his property or money that is subject of
rights to membership fee certificate 201 in the aforesaid civil litigation or of contention between rival
case and, therefore, this interpleader suit would compel him to claimants in which the holder claims no
establish his rights anew, and thereby increase instead of right or property interest.
diminish litigations, which is one of the purposes of an
interpleader suit, with the possiblity that the benefits of the final 7 Royal Neighbors of America v. Lowary,
judgment in the said civil case might eventually be taken away 46 F. 2d 565.
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 8 State of Texas v. State of Florida, 59 S. Ct.
unreasonable delay. 563, 306 U.S. 389, 83 L.ed. 817, 121 A.L.R.
1179.
ACCORDINGLY, the order of May 28, 1964, dismissing the
complaint, is affirmed, at appellant's cost. 9 Dennis v. Equitable Life Assurance Soc.,
88 S.W. 2nd 76.
Teehankee, Makasiar, Antonio, Esguerra, Muñoz Palma, Aquino
and Concepcion, Jr., JJ., concur. 10 U.S. Land & Investment Co. v. Buessey,
7 N.Y.S. 495.
Barredo and Martin, JJ., took no part.
11 Milton Warehouse Co. v. Basche Sage
Hardware Co., 34 P 2d 338.
Fernando, J., is on leave.
12 Connecticut General Life Ins. Co. v.
Yaw, 53 F.2d 684.

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

1 Only Tan interposed the ground of 14 Yarborough v. Thompson, 41 Am. Dec.


prescription. 626.

2 Now Section 1, Rule 63, and formerly Sec. 15 Nash, et al. v. McCullum, etc., et al., 74
1, Rule 14, of the Rules of Court. S.W. 2d 1046, 1047.

3 Alvarez, et al. v. Commonwealth of the 16 Farmers State Bank of Meridian v.


Philippines, 65 Phil. 202, 311-312. National Fire Ins. Co. of Hartford,
Connecticut, et al., 169 S.W. 2d 545, 549.
4 Section 1 of Rule 63 of the Revised Rules
of Court provides: 17 Phillips, et al. v. Taylor, et al., 129 A. 18,
20.
"Interpleader when proper. — Whenever
conflicting claims upon the same subject- 18 United Producer's Pipe Line Company v.
matter are or may be made against a person, Britton, et al., 264 S.W. 576, 578.

45
19 American Surety Co. of New York v. On 31 October 1995, judgment was rendered in Civil Case
Brim, 144 So. 727, 729-730. No. 6202, which among other things, ordered METROCAN to
pay LEYCON whatever rentals due on the subject premises. The
20 Victor v. Lewis, et al., 161 So. 597, 598. MeTC decision became final and executory.
On 01 February 1996, METROCAN moved for the
21 Benjamin v. Ernst, 83 Wash. 59, 79. 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
FIRST DIVISION 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
[G.R. No. 127913. September 13, 2001] 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.
RIZAL COMMERCIAL BANKING
CORPORATION, petitioner, vs. METRO In its Decision, promulgated on 18 October 1996, the
CONTAINER CORPORATION, respondent. Court of Appeals granted the petition and set aside the 12 March
1996 and 24 June 1996 orders of the RTC. The appellate court
DECISION also ordered the dismissal of Civil Case No. 4398-V-94. RCBCs
motion for reconsideration was denied for lack of merit in the
KAPUNAN, J.: resolution of 08 January 1997.
Hence, the present recourse.
Assailed in this petition for review on certiorari are the
Decision, promulgated on 18 October 1996 and the Resolution, RCBC alleged, that:
promulgated on 08 January 1997, of the Court of Appeals in
CA-G.R. SP No. 41294. (1) THE DECISION OF THE METROPOLITAN
TRIAL COURT IN THE EJECTMENT CASE
The facts of the case are as follows: BETWEEN METROCAN AND LEYCON
DOES NOT AND CANNOT RENDER THE
On 26 September 1990, Ley Construction Corporation INTERPLEADER ACTION MOOT AND
(LEYCON) contracted a loan from Rizal Commercial Banking ACADEMIC.
Corporation (RCBC) in the amount of Thirty Million Pesos
(P30,000,000.00). The loan was secured by a real estate (2) WHILE A PARTY WHO INITIATES AN
mortgage over a property, located in Barrio Ugong, Valenzuela, INTERPLEADER ACTION MAY NOT BE
Metro Manila (now Valenzuela City) and covered by TCT No. COMPELLED TO LITIGATE IF HE IS NO
V-17223. LEYCON failed to settle its obligations prompting LONGER INTERESTED TO PURSUE SUCH
RCBC to institute an extrajudicial foreclosure proceedings CAUSE OF ACTION, SAID PARTY MAY
against it. After LEYCONs legal attempts to forestall the action NOT UNILATERALLY CAUSE THE
of RBCB failed, the foreclosure took place on 28 December DISMISSAL OF THE CASE AFTER THE
1992 with RCBC as the highest bidder. ANSWER HAVE BEEN FILED. FURTHER,
THE DEFENDANTS IN AN
LEYCON promptly filed an action for Nullification of INTERPLEADER SUIT SHOULD BE
Extrajudicial Foreclosure Sale and Damages against RCBC. The GIVEN FULL OPPORTUNITY TO
case, docketed as Civil Case No. 4037-V-93, was raffled to the LITIGATE THEIR RESPECTIVE CLAIMS.[1]
Regional Trial Court (RTC) of Valenzuela, Branch
172. Meanwhile, RCBC consolidated its ownership over the We sustain the Court of Appeals.
property due to LEYCONs failure to redeem it within the 12-
month redemption period and TCT No. V-332432 was issued if Section 1, Rule 63 of the Revised Rules of
favor of the bank. By virtue thereof, RCBC demanded rental Court[2] provides:
payments from Metro Container Corporation (METROCAN)
which was leasing the property from LEYCON. Section 1. Interpleader when proper. - Whenever conflicting
claims upon the same subject matter are or may be made against
On 26 May 1994, LEYCON filed an action for Unlawful a person, who claims no interest whatever in the subject matter,
Detainer, docketed as Civil Case No. 6202, against or an interest which in whole or in part is not disputed by the
METROCAN before the Metropolitan Trial Court (MeTC) of claimants, he may bring an action against the conflicting
Valenzuela, Branch 82. claimants to compel them to interplead and litigate their several
On 27 May 1994, METROCAN filed a complaint for claims among themselves.
Interpleader, docketed as Civil Case No. 4398-V-94 before the
Regional Trial Court of Valenzuela, Metro Manila, Branch 75 In the case before us, it is undisputed that METROCAN
against LEYCON and RCBC to compel them to interplead and filed the interpleader action (Civil Case No. 4398-V-94) because
litigate their several claims among themselves and to determine it was unsure which between LEYCON and RCBC was entitled
which among them shall rightfully receive the payment of to receive the payment of monthly rentals on the subject
monthly rentals on the subject property. On 04 July 1995, during property. LEYCON was claiming payment of the rentals as
the pre-trial conference in Civil Case No. 4398-V-94, the trial lessor of the property while RCBC was making a demand by
court ordered the dismissal of the case insofar as METROCAN virtue of the consolidation of the title of the property in its name.
and LEYCON were concerned in view of an amicable
settlement they entered by virtue of which METROCAN paid It is also undisputed that LEYCON, as lessor of the
back rentals to LEYCON. 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

46
possession of the premises.[3] The issue of ownership is [8]
Lim vs. Continental Development Corporation, 69 SCRA 349
immaterial therein[4] and the outcome of the case could not in (1976) citing Beltran vs. Peoples Homesite and Housing
any way affect conflicting claims of ownership, in this case Corporation, 29 SCRA 145 (1969).
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--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).

47