G.R. No.

L-45315 February 25, 1938

PRAXEDES ALVAREZ, ET AL., plaintiffs-appellants,

vs.
THE COMMONWEALTH OF THE PHILIPPINES, ET AL., defendants-appellees.
MUNICIPALITY OF SAN PEDRO, LAGUNA, interpleader-appellant.

Juan S. Rustia and Feliciano Gomez for appellants.

Office of the Solicitor General for appellee for Commonwealth of the Philippines.
Araneta, Zaragoza and Araneta for appellee Colegio de San Jose, Inc.
Ramon Diokno for appellee Young.
No appearance for other appellee.

IMPERIAL, J.:

It is asked in this appeal interposed by the plaintiffs and the municipality of San Pedro that we
reverse the resolution entered by the Court of First Instance of Laguna on May 29, 1936, dismissing
the complaint of the former, without costs against them; holding premature and also dismissing the
so-called cross-complaint of the municipality of San Pedro; ordering the striking out of the motion of
Attorney Rustia, of May 1, 1936 and that of Attorney Gomez of the 15th of the same month, and
denying the motions filed by the aforesaid municipality; and it is asked further that the case proceed
to final judgment, with the costs of this instance to the appellees.

In the complaint by which the case was commenced, the plaintiffs allege: that they appear and bring
the action for themselves and in the name of other five thousand persons; that all of them and their
predecessors-in-interest from time immemorial, are in possession for may years of many lots, where
they now have their houses, any many agricultural lands which they have continously cultivated lots,
improvements and agricultural lands which are found within the Hacienda de San Pedro Tunasan,
situated in the municipality of San Pedro, Province of Laguna; that they do not claim to be the
owners of said lots and agricultural lands, but only of the improvements on the former, consisting of
houses, that they are entitled to occupy the lands and agricultural lands, the first because they have
their houses thereon wherein they and their predecessors-in-interest have always lived, and the
latter because they as well as their predecessors-in-interest have always cultivated the same; that
they recognize in favor of someone their obligation to pay reasonable rent or canon for their
occupation of the lots and agricultural lands, rents and canon which they are willing to pay to the
person or entity which the court may determine; that the Commonwealth of the Philippines is the true
owner of the entire Hacienda de San Pedro Tunasan by the right of escheat; that this title was
acquired by the Commonwealth of the Philippines because of the death of Don Esteban Rodriguez
de Figueroa, the original owner of the hacienda, and his two minor daughters without leaving any
heirs; that the Provincial Government of Laguna may have an interest in the hacienda, for the benefit
of the plaintiffs and the residents of the municipality of San Pedro; that this municipality, the plaintiffs
are given to understand, will claim the ownership of the hacienda also by the right of escheat; that
the Colegio de San Jose, without any right, also claims to be the owner of the hacienda; and that
Carlos Young, without any known right, claims to have an interest in the same hacienda. And the
plaintiffs conclude by asking that the court order the defendants or interpleaders to litigate among
themselves over the ownership or dominion of the hacienda and thereafter determine by judgment
who is the rightful owner thereof entitled to collect the rental from them.

In the complaint are joined as defendants the Commonwealth of the Philippines, the Provincial
Government of Laguna, the municipality of San Pedro, the Colegio de San Jose, and Carlos Young.
The municipality of San Pedro filed its complaint of interpleader wherein it is stated: that according to
the history of the Philippines, so alleges, the Hacienda De San Pedro Tunasan originally belonged to
one, Don Esteban Rodriguez de Figueroa, who held the office of Governor and Captain General of
the Island of Mindanao and who executed a will transferring in trust and for administration the entire
hacienda aforesaid to a charitable institution of learning which was subsequently called the Colegio
de San Jose, governed by the Fathers of the Company of Jesus, otherwise known as the Jesuit
Fathers; that Rodriguez de Figueroa died sometime in April, 1596, leaving as heirs his two minors
daughters, who also died without leaving any heirs; that since then the Colegio de San Jose, through
the Jesuit Fathers, had held and administered the hacienda and through the practice called
"sustitucion pupilar" by the claimant, the Jesuit Fathers succeeded in appropriating the same,
considering it from then on as their property and as part of the temporal properties of the church; that
the Jesuit Fathers were expelled from the Philippines in 1768 and their properties, together with
hacienda, were confiscated by the Spanish Government; that by virtue of the treaty of Paris, the
Organic Law of the United States Congress of July 1, 1902, the Jones Law, and finally the Tydings-
McDuffie Independence Law, the aforesaid passed to the ownership of the Commonwealth of the
Philippines and the latter is at present the owner thereof, which should be administered and
conserved for the benefit and advantage of the inhabitants of the Philippines, particularly those of
the municipality of San Pedro; that by the right of escheat the Commonwealth of the Philippines has
likewise become the owner of the hacienda because of the death of the daughters of Rodriguez de
Figueroa without leaving any heirs and because there is no one who is legally entitled thereto; that
the municipality of San Pedro has a right to a hacienda for the exclusive benefit of its inhabitants;
and that the Colegio de San Jose should render an accounting of the rentals which it has been
collecting from the hacienda, which should not be less than P60,000. And for prayer it asks that it be
declared the owner of the Hacienda de San Pedro Tunasan and that the Colegio de San Jose
render an accounting and pay it the aforesaid sum of P60,000.

Carlos Young appeared and interposed a demurrer to the complaint of the plaintiffs on the grounds
that it does not state facts constituting a cause of action and that is allegations are vague,
ambiguous, and unintelligible; and urged that said complaint be finally dismissed inasmuch as it is
not susceptible of amendment. Immediately thereafter, the same Carlos Young filed a motion to
dismiss the complaint of interpleader of the municipality of San Pedro, on the ground that the latter
entity has no standing to bring the action, that the complaint of interpleader is premature because
the court has not yet ordered the parties therein to litigate among themselves, and that the attorney
who represents the said municipality has appeared and is acting as such in favor of two different
parties with conflicting interest.

The municipality of San Pedro filed another motion asking that the prayer of its complaint be deemed
amended in the sense that in the decision it be ordered that the rentals and income produced by the
hacienda be to it. In another motion the same municipality opposed the demurrer and motion to
strike filed by Carlos Young. 1ªvv phïl.nët

The acting Solicitor-General, in behalf of the Commonwealth of the Philippines, appeared specially
by a motion wherein it is asked that the complaint of the plaintiffs be dismissed. As ground he
alleged that the court lacked jurisdiction over the said entity because, it being the representative of
sovereignty, it cannot be sued or compelled to litigate without its express consent, a consent which
the complaint alleges has not been previously obtained.

In other motions the municipality of San Pedro asked that the Colegio de San Jose and Carlos
Young be declared in default, in connection with its complaint of interpleader, for failure to file either
demurrers or answers within the prescribed period.

The Colegio de San Jose, Inc., interposed a demurrer to the plaintiff's complaint, upon the same
grounds advanced by Carlos Young in his demurrer. In another motion filed it asked to strike out
certain allegation contained in paragraph IX, subparagraph (3), pages 14 to 21 of the complaint of
interpleader of the municipality of San Pedro because they are immaterial and offensive.
Subsequently it filed it answer to the complaint of interpleader of the municipality of San Pedro,
wherein it denied the material allegation thereof and put up the defense that the Hacienda de an
Pedro Tunasan is it exclusive property and that its title has been recognized by the government and
the courts.

The provincial fiscal, in behalf of the acting Solicitor-General presented a motion to strike out certain
immaterial, unnecessary and improper allegations in the answer of the plaintiffs to motion to dismiss
filed by the acting Solicitor-General.

The municipality of San Pedro filed another motion to strike out the demurrer and motion filed by
Carlos Young and the motion to strike filed the acting Solicitor-General.

The plaintiff filed their answer to the demurrer interposed by the Colegio de San Jose, Inc. And on
the same date they filed another motion asking that the court suspend the proceedings in the case
on the ground that the municipality of San Pedro commenced in the same court civil case No. 3052,
wherein it is asked that the Hacienda de San Pedro Tunasan be escheated to it.

Finally, the court, on May 29, 1936, entered the appealed resolution dismissing the plaintiff's
complaint, with the costs against them, holding further that the complaint of interpleader of the
municipality of San Pedro is premature, overruling all the motion filed by the latter and ordering the
striking out from the record of the pleadings filed by Attorneys Rustia and Gomez on May 1 and 5,
1939, respectively.

The provincial government of Laguna has neither appeared nor filed a demurrer or answer in the
case. From what appears, it has shown indifference and lack of any interest or intervene.

The foregoing is the contents in abridge form of all the pleadings presented in the case and reflect
the theories of the parties as well as the legal questions raised in the assignments of error which
shall hereafter be resolved. We have omitted other pleadings of minor importance which will have no
influence on the resolution of the appeal.

The appellants assign in their joint brief the following errors: "First. In not abstaining from deciding
any incident in the case, and, consequently, in entering the appealed resolution charged with
prejudice and partiality which Judge Buenaventura Ocampo had against the attorney for the
applicants, which resolution is partial and unjust. Second. In considering, without any ground, that
the applicant for interpleading is equivalent to a complaint in an ordinary action which may be
demurred to, and consequently, in assuming the demurrers of Carlos Young and of the Colegio de
San Jose, Inc. Third. In holding that the applicant (not complaint) of interpleading is sufficient, and,
consequently, in dismissing it summarily and finally, with the costs. Fourth: In sustaining the special
appearance of the Solicitor-General, and, consequently, in ordering the striking out of the motion of
May 1, 1936 in reply to said special appearance. Fifth. In declaring the cross-complaint of the
municipality of San Pedro premature, and, consequently, in not holding Carlos Young and the
Colegio de San Jose (unincorporated) in default as defendants in the said cross-complaint. Sixth.
And in ordering the striking out from the record of pages 14 and 21 of the answer of the municipality,
corresponding to subparagraph (3), paragraph IX, of the cross-complaint of the municipality of San
Pedro, page 31 to 41 of the bill of exceptions. Seventh. In not overruling the said demurrers and
petitions to strike out; and in not granting the petition to suspend the proceedings until the final
resolution of the petition for escheat Exhibit A."
1. In the first assignment of error the appellant question the integrity and impartiality of the judge who
entered the appealed resolution and contend that he should have abstained from taking cognizance
of the case from entering any resolution therein.

The appellants concede that they have not duly questioned at any time, the judge who decided this
case. The facts of record do not furnish any evidence in support of the appellants' contention. The
circumstances pointed out by the appellants that one of their attorney filed a complaint and
administrative charge against the judge, and that this naturally created an enmity between them, is
not a sufficient ground for concluding that the judge acted partially. As we have stated, aside from
this possible animadversion, there is nothing from which it may be inferred that the said judge acted
partially in this case.

The appellants also assert that the appealed resolution was drafted not by the judge but by the
attorney for Young, and that the former merely signed it. The assertion is based entirely on the
circumstances that the theories and reasoning of Attorney Diokno are reproduced and sustained as
good and sound in the resolution. It is true that the theories of said counsel are accepted in the
resolution but from it does not inevitably follow that the entire resolution was drafted by another, and
not by the judge, and that latter merely stamped his signature thereon. We hold that the first
assignment of error is without merit.

2. In the appealed resolution the court sustained both the demurrer of Carlos Young and that of the
Colegio de San Jose, Inc., to the complaint of the plaintiffs. The latter contend in their second
assignment of error that the resolution is consequently erroneous since the pleading which the court
styles and considers a complaint is, under procedural law, a petition and as such cannot be
demurrer to.

The plaintiff commenced the case under the provisions of section 120 of the Code of Civil
Procedure, the English text of which reads:

SEC. 120. Interpleading. — Whenever conflicting claims are or may be made upon a person
for or relation personal property, or the performance of an obligation or any portion thereof,
so that he may be made subject to several actions by different person, unless the court
intervenes, such person may bring an action against the conflicting claimants, disclaiming
personal interest in the controversy, to compel them to interplead and litigate their several
claims among themselves, and the court may order the conflicting claimants to interplead
with one another and thereupon proceed to determine the right of the several parties to the
interpleading to the personal property or the performance of the obligation in controversy and
shall determine the right of all in interest.

Pursuant to this section, the remedy provided for may be availed of by bringing an "action", for no
other meaning may de deduced from the phrase "such person may bring an action against the
conflicting claimants" used to indicate the procedure to be followed by one would avail himself of its
provisions. The word "action" means the ordinary action defined in section 1 of the same Code and
should be commenced by complaint which may be demurrer to as provided in section 91 and upon
the grounds therein stated. The pleading which commences an ordinary action cannot be correctly
called an application or petition because these, generally, are the pleadings used only to commence
special proceedings (Section 1, Part II, Chapter XXV and XLII, Code of Civil Procedure.)

The action of interpleader, under section 120, is a remedy whereby a person who has personal
property in his possession, or an obligation to render wholly or partially, without claiming any right in
both, comes to court and asks that the persons who claim the said personal property or who
consider themselves entitled to demand compliance with the obligation, be required to litigate among
themselves, in order to determine finally who is entitled to one or the other thing. The remedy is
afforded not to protect a person against a double liability but to protect him against a double vexation
in respect of one liability. (33 C. J., sec. 21, p 438; Crawford vs. Fisher, 1 Hare, 436, 441; Johnson
vs. Blackmon, 201 Ala., 537, Pfister vs. Wade, 66 Cal., 43; Rauch vs. Ft. Dearborn Nat. Bank, 233
Ill., 507; Gonia vs. O'Brien, 223 Mass., 171; McCormick vs. Supreme Council C. B. L., 39 N. Y. S.,
1010.) When the court orders that the claimants litigate among themselves, there arises in reality a
new action and the former are styled interpleaders, and in such a case the pleading which initiates
the action is called a complaint of interpleader and not a cross-complaint.

From the foregoing it follows that the court did not err considering and resolving the demurrers,
wherefore, the second assignment of error is likewise without merit.

3. The principal question is discussed by the plaintiffs and by the municipality of San Pedro in their
third assignment of error. It will be recalled that the court sustained the demurrers on the ground that
the complaint of the former does not allege sufficient facts to constitute a right or cause of action. As
to the Commonwealth of the Philippines, because it cannot be compelled to litigate without its
consent, and as to the Colegio de San Jose, Inc., and Carlos Young, because according to the very
allegations of the complaint there is no person or entity, outside of the Colegio de San Jose, Inc.,
who has conflicting or incompatible claims in connection with the obligation to pay rent
or canon which plaintiffs admit devolves upon them. The appellants question the correctness of
these conclusions reached by the court.

Speaking of the intervention of the Commonwealth of the Philippines, there is little to be said. The
question raised is already settled in this jurisdiction. It is a fundamental principle that the
Government of the Philippines, now the Commonwealth of the Philippines, as the supreme authority
which represents in this country the existing sovereignty, cannot be sued without its consent (Merritt
vs. Government of the Philippine Islands, 34 Phil., 311; L. S. Moon & Co. vs. Burton Harrison, 43
Phil., 27; Compania General de Tabacos vs. Government of the Philippine Islands, 45 Phil., 663;
Belarmino vs. Hammond and Director of Public Works, 56 Phil., 462). The prohibition holds true both
in case where it is joined as a defendant as well as in that where, as in the present, it is being
compelled to litigate against other persons without its consent. There is no substantial difference
between making it defend itself against it will in a case where it is a defendant and compelling it,
without its consent, to interplead in an action commenced by another person. In one and the other
case it is compelled, without its consent, to maintain a suit or litigation, and this is what the legal
principal prohibits.

As to the other ground of the court, we have indicated, in summarizing the allegation of the
complaint, that the plaintiff maintains the view that the Commonwealth of the Philippines has
become the owner of the Hacienda de San Pedro Tunasan by transfer or conveyance under the
Tydings-McDuffie Law and by way of escheat upon the death of the daughters of Rodriguez de
Figueroa without leaving any heirs. On the other hand, they allege that the Colegio de San Jose,
which for the purposes of this case is the same El Colegio de San Jose Inc., who has appeared and
is the appellee, likewise claims to be the owner of the hacienda thereby enjoining rights of ownership
adverse to those of the Commonwealth of the Philippines. With the exclusion of the Commonwealth
of the Philippines, because of its unwillingness to litigate or engage with anyone in a suit over an
hacienda the ownership of which is clearly defined and recognized, it becomes evident that the
action of interpleader is indefensible from any standpoint for lack of the basis of reason relied upon
by the plaintiffs in their complaint, namely, that there are two entities, the Commonwealth of the
Philippines and the Colegio de San Jose, contending over the hacienda and claiming to be entitled
to collect the rent or canon coming therefrom. We do not include Carlos Young, because according
to his own admission, he is a mere lessee of the Colegio de San Jose, Inc., and does not claim any
right of ownership adverse to the latter.
In reaching this conclusion we have not lost sight of the fact that the municipality of San Pedro has
already filed its complaint of interpleader wherein it alleges a certain interest in the hacienda and in
its rents; but apart from the fact that in resolving the demurrers only the allegation of the plaintiffs'
complaint should be taken into account (sec. 91, Code of Civil Procedure), because the former are
directed only against it, it appears from the allegations said complaint of interpleader that the
municipality of San Pedro also admits that the Commonwealth of the Philippine is the owner of the
hacienda by transfer and right of escheat.

Another question raised by the appellants has to do with the holding of the court that the complaint
of interpleader of the municipality of San Pedro is premature inasmuch as there has been no order
yet that the defendant litigate among themselves. In the opinion of the court it is necessary that there
be a declaration to this effect before the defendant may litigate among themselves and file a
complaint of interpleader. Section 120 of the Code of Civil Procedure in truth requires such and good
practice demands that the defendants be not permitted to file claims or complaint of interpleader until
after the court has ordered that they should litigate among themselves. This procedure will do way
with groundless suits, and will save the parties time, inconvenience, and unnecessary expenses.

Finally, it remains to be whether, the demurrers having been sustained, the plaintiff are entitled to
amend their complaint, or whether the case should be dismissed. Section 101 of the Code of Civil
Procedure, prescribing the procedure to be followed in cases where a demurrer has been interposed
reads:

SEC. 101. Proceedings on Demurrer. — When a demurrer to any pleading is sustained, the
party whose pleading is thus adjudge defective may amend his pleading within a time to be
fixed by the court, with or without terms, as to be the court shall seem just; but if the party
fails to amend his pleading within the time limited or elect not to amend the court shall render
such judgment upon the subject matter involved in the pleading and demurrer as the law and
the facts of the case as set forth in the pleadings warrant. If the demurrer is overruled, the
court shall proceed, if no answer is filed, to render such judgment as the law and the facts
duly pleaded warrant. But after the overruling of a demurrer to a complaint, the defendant
may answer within a time to be fixed by general rules of court; and after the overruling of a
demurrer to an answer the plaintiff may amend his complaint, if necessary, to meet new facts
or counterclaims set forth in the answer.

Under this section the amendments of a pleading, after a demurrer is sustained, is not an absolute
right of the pleader; and the amendment rest rather in the sound discretion of the court. Generally
when a demurrer is sustained, the party who presented the defective pleading is afforded an
opportunity to amend it under conditions which the court may fix; and this should be done when it
appear clearly that the defect is remediable by amendment (Molina vs. La Electricista, 6 Phil., 519;
Serrano vs. Serrano, 9 Phil., 142; Segovia vs. Provincial Board of Albay, 13 Phil., 331; Balderrama
vs. Compania General de Tabacos, 13 Phil., 609; Macapinlac vs. Gutierrez Repide, 43 Phil., 770).
But when it is evident that the court has no jurisdiction over the person and the subject matter, that
the pleading is so fatally defective as not to be susceptible of amendment or that to permit such
amendment would radically alter the theory and the nature of the action then the court may refuse
the amendment of the defective pleading and the order the dismissal of the case (49 C.J., sec. 563,
pp. 456. 457; San Joaquin etc., Canal, etc., Co. vs. Stanislaus Country, 155 Cal., 21; Bell vs.
California Bank, 153 Cal., 234; Ridgway vs. Bogan, 2 Cal. Unrep. Cas., 718; Schlecht vs. Schlecht,
277 P., 1065; Beal vs. United Properties Co., 46 Cal., A., 287; Demartini vs. Marini, 45 Cal. A., 418;
Lentz vs. Clough, 39 Cal. A., 430; Burki vs. Pleasanton School Dist., 18 Cal. A., 493; Patterson vs.
Steele, 93 Neb., 209; Cox vs. Georgia R., etc. Co., 139 Ga., 532 Peo. vs. McHatton, 7 III., 731
Higgins vs. Gedney, 25 Misc., 248; 55 N.Y.S., 59; Wood vs. Anderson, 25 Pa., 407). Section 101
authorizing the amendment of a defective pleading should be liberally in favor of the amendment; but
when it appear patent that the pleading is not susceptible of amendment upon the ground above set
out, the appellant court should not hold that the former have abused their discretion in not permitting
the amendment and in dismissing the case.

In the present case the plaintiffs' complaint is fatally defective because its allegations are insufficient
to constitute a cause of action, and to permit the amendment thereof the plaintiffs would have to
charge their theory as well as the nature of the action which they have commenced. For this reason
the court did not commit the error assigned in not permitting the amendment and in finally dismissing
the case.

4. In their assigned error the appellants contend that the court erred in sustaining the special
appearance of the Commonwealth of the Philippines, in excluding the latter from the complaint, in
dismissing it with respect thereto, and in striking out from the record the reply of the plaintiffs of may
1, 1936, to the special appearance.

In passing upon the third assignment of error, we already said that the Commonwealth of the
Philippines cannot, without its consent, be compelled to litigate in this action of interpleader. This
being so, the conclusion is inevitable that the court did not err in sustaining the special appearance
of the Commonwealth of the Philippines and in ordering the dismissal of the complaint with respect
to this party. As to the striking out of the reply of May 1, 1936, we agree with the court that the step
is justified in view of the fact that it is in truth a motion replete with allusion and statements reflecting
on he acting Solicitor-General and Assistant attorney Quisumbing and Buenaventura, and it seems
that it was filed for the sole premeditated purpose of molesting these government officials.

5. In their fifth assigned error the appellant assert that the filing of the complaint of interpleader of the
municipality of San Pedro should not have been declared premature and, consequently, the Colegio
de San Jose and Carlos young should have been declared in default.

In resolving the third assignment of error we already expressed the opinion that, in according with
section 120 and good practice the court should order that the defendant litigate among themselves
before any of them may file a complaint of interpleader. Applying this rule, it is evident that the first
part of the assignment of error is without merit. With respect to the default of the Colegio de San
Jose and Carlos Young, it suffices to state that the first and El Colegio de San Jose, Inc., are the
same entity and it, as well as Young, interposed demurrers within the legal period. For these
reasons, we hold that the fifth assignment of error is untenable.

6. We find no merit in the sixth assignment of error impugning the striking out of pages 14 to 21 of
the answer and complaint of interpleader of the municipality of San Pedro. We have already ruled
that the complaint of interpleader was prematurely interposed, at least before the court had ordered
that the defendants litigate among themselves, and it appears that the pages stricken out from a part
of the former, wherefore, the exclusion or striking out of the said pages was not error.

7. In the seventh and last assignment of error, the appellants contend that the court erred in not
overruling the demurrers and petitions to strike out, and in not suspending the proceedings in this
case until the final resolution of the escheat case.

In resolving the third and fourth assignments error we already had occasion to state that in our
opinion the court correctly sustained the demurrers and petitions to strike out, and as the appellants
advance no new reasons, we do not been bound to discuss extensively what is restated upon the
same points in the last assigned error. 1ªvvphïl.nët

We stated at the beginning that before rendering the appealed resolution, the municipality of San
Pedro asked for the suspension of the proceedings in the case for the purpose of first obtaining final
judgement in the other escheat case (Special Proceedings No. 3052) commenced by the same
municipality. The denial of the suspension is the object of the second part of the last assigned error.
In view of the result reached in deciding the whole case, we hold that the said denial is not error.
Moreover, there was no good reason to suspend the proceedings and to put off the resolution or
decision, when at any rate the same result would be reached, and this is the more convincing in view
of the decision rendered by this court in the aforesaid escheat case (G.R. No. 45460, Feb. 25,
1938). At all events, the appellants do not cite the violation of any law, and the suspension of the
proceedings rest entirely in a sound judicial discretion, a discretion which the court exercised
adversely to the municipality of San Pedro.

For all the reasons stated herein, the appealed resolution is affirmed, with the costs of this instance
against all the appellants. So ordered.

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

WACK WACK GOLF & COUNTRY CLUB, INC., plaintiff-appellant,

vs.
LEE E. WON alias RAMON LEE and BIENVENIDO A. TAN, defendants-appellees.

Leonardo Abola for appellant.

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

Bienvenido A. Tan in his own behalf.

CASTRO, C.J.:

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

In its amended and supplemental complaint of October 23, 1963, the Wack Wack Golf & Country
Club, Inc., a non-stock, civic and athletic corporation duly organized under the laws of the
Philippines, with principal office in Mandaluyong, Rizal (hereinafter referred to as the Corporation),
alleged, for its first cause of action, that the defendant Lee E. Won claims ownership of its
membership fee certificate 201, by virtue of the decision rendered in civil case 26044 of the CFI of
Manila, entitled "Lee E. Won alias Ramon Lee vs. Wack Wack Golf & Country Club, Inc." and also by
virtue of membership fee certificate 201-serial no. 1478 issued on October 17, 1963 by Ponciano B.
Jacinto, deputy clerk of court of the said CFI of Manila, for and in behalf of the president and the
secretary of the Corporation and of the People's Bank & Trust Company as transfer agent of the said
Corporation, pursuant to the order of September 23, 1963 in the said case; that the defendant
Bienvenido A. Tan, on the other hand, claims to be lawful owner of its aforesaid membership fee
certificate 201 by virtue of membership fee certificate 201-serial no. 1199 issued to him on July 24,
1950 pursuant to an assignment made in his favor by "Swan, Culbertson and Fritz," the original
owner and holder of membership fee certificate 201; that under its articles of incorporation and by-
laws the Corporation is authorized to issue a maximum of 400 membership fee certificates to
persons duly elected or admitted to proprietary membership, all of which have been issued as early
as December 1939; that it claims no interest whatsoever in the said membership fee certificate 201;
that it has no means of determining who of the two defendants is the lawful owner thereof; that it is
without power to issue two separate certificates for the same membership fee certificate 201, or to
issue another membership fee certificate to the defendant Lee, without violating its articles of
incorporation and by-laws; and that the membership fee certificate 201-serial no. 1199 held by the
defendant Tan and the membership fee certificate 201-serial No. 1478 issued to the defendant Lee
proceed from the same membership fee certificate 201, originally issued in the name of "Swan,
Culbertson and Fritz".

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

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

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

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

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

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

Although res judicata or bar by a prior judgment was the principal ground availed of by the appellees
in moving for the dismissal of the complaint and upon which the trial court actually dismissed the
complaint, the determinative issue, as can be gleaned from the pleadings of the parties, relates to
the propriety and timeliness of the remedy of interpleader.
The action of interpleader, under section 120 of the Code of Civil Procedure, 2 is a remedy whereby
a person who has personal property in his possession, or an obligation to render wholly or partially,
without claiming any right to either, comes to court and asks that the persons who claim the said
personal property or who consider themselves entitled to demand compliance with the obligation, be
required to litigate among themselves in order to determine finally who is entitled to tone or the one
thing. The remedy is afforded to protect a person not against double liability but against double
vexation in respect of one liability. 3 The procedure under the Rules of Court 4 is the same as that
under the Code of Civil Procedure, 5 except that under the former the remedy of interpleader is
available regardless of the nature of the subject-matter of the controversy, whereas under the latter
an interpleader suit is proper only if the subject-matter of the controversy is personal property or
relates to the performance of an obligation.

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

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

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

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

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

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

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

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

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

If a stakeholder defends a suit by one claimant and allows it to proceed so far as a

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In fine, the instant interpleader suit cannot prosper because the Corporation had already been made
independently liable in civil case 26044 and, therefore, its present application for interpleader would
in effect be a collateral attack upon the final judgment in the said civil case; the appellee Lee had
already established his rights to membership fee certificate 201 in the aforesaid civil case and,
therefore, this interpleader suit would compel him to establish his rights anew, and thereby increase
instead of diminish litigations, which is one of the purposes of an interpleader suit, with the possiblity
that the benefits of the final judgment in the said civil case might eventually be taken away from him;
and because the Corporation allowed itself to be sued to final judgment in the said case, its action of
interpleader was filed inexcusably late, for which reason it is barred by laches or unreasonable
delay.

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

Teehankee, Makasiar, Antonio, Esguerra, Muñoz Palma, Aquino and Concepcion, Jr., JJ., concur.
Barredo and Martin, JJ., took no part.

Fernando, J., is on leave.

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

ZOILA CO LIM, petitioner,

vs.
CONTINENTAL DEVELOPTMENT CORPORATION, respondent.

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

CONTINENTAL DEVELOPMENT CORPORATION, petitioner,

vs.
BENITO GERVASIO TAN and ZOILA CO LIM, respondents.

Jose F. Aguirre for Zoila Co Lim.

Ismael T. Almeda for Continental Development Corporation.

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

MAKASIAR, J.:

These two petitions seek a review of the order dated March 12, 1974 of the Judge presiding Branch
XXVI of the Manila Court of First Instance, dismissing petitioner Continental Development
Corporation's complaint. The COURT resolved to treat these petitions as special civil actions, the
petition to dismiss filed by the respondent Benito Gervasio Tan as answer and the cases as
submitted for decision. On November 26, 1973, herein petitioner Continental Development
Corporation filed a complaint for interpleader against the defendants Benito Gervasio Tan and Zoila
Co Lim, alleging among others:

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

3. That said defendant Benito Gervasio Tan, personally or through his lawyer, has
since December, 1972, been demanding from by letters and telegrams, the release
to him of the certificates stock aforesaid but which the plaintiff has not done so far
and is prevented from doing so because of the vehement and adverse claim thereto
by the other defendant, Zoila Co Lim.

4. That the defendant Zoila Co Lim, by letters sent to the plaintiff through her
counsel, has laid claim and persists in claiming the very same shares of stock being
demanded by the other defendant alleging that said stocks really belonged to her
mother So now already deceased, and strongly denying her proclaim to the same.
 5. That both defendants, through their respective lawyers, threaten to take punitive
measures against the plaintiff company should it take any steps that may prejudice
their respective interests in so far as the stocks in question are concerned.

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

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

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

On January 7, 1974, herein respondent Benito Gervasio Tan, as defendant in the lower court, filed a
motion to dismiss the complaint, on the ground, inter alia, that paragraph 2 of the complaint itself
states that the shares of stock in question are recorded in the books of petitioner in the same of
defendant Benito Gervasio Tan, who should therefore be declared owner thereof pursuant to Section
52 of the Corporation Law (pp. 25-30, rec.).

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

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

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

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

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

It is patent from the pleadings in the lower court that both defendants Benito Gervasio Tan and Zoila
Co Lim assert conflicting rights to the questioned shares of stock. Precisely in his motion to dismiss
the complaint for interpleader, defendant Benito Gervasio Tan states that petitioner corporation,
through its Vice-President, notified him on July 23, 1973 "that the shares of stock are in the
possession of its treasurer, Mr. Ty Lim, and urged defendant to directly obtain them from the former,
who allegedly was on vacation at the time. Mr. Ty Lim, on August 30, 1973, through counsel, replied
to the defendant Benito Gervasio Tan that said certificates were not in his possession but surmised,
without reference to any record, that the same might have been delivered to the deceased So Bi.
And, on October 29, 1973, same counsel of Mr. Ty Lim, wrote the corporation, in behalf of defendant
Zoila Co Lim, alleged heir of So Bi, claiming ownership of the stocks" (pp. 26, 27, G.R. No. L-41831).
Defendant Zoila Co Lim, on the other hand. as heretofore stated, claims sole-ownership of said
shares of stock as inheritance from her late mother So Bi, alias Tawa.

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

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

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

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

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

This provision only requires as an indispensable requisite:

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

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

The action of interpleader under section 120, is a remedy whereby a person who has
personal property in his possession, or an obligation to render wholly or partially,
without claiming any right in both comes to court and asks that the persons who
claim the said personal property or who consider themselves entitled to demand
compliance with the obligation, be required to litigate among themselves, in order to
determine finally who is entitled to one or the other thing. The remedy is afforded not
to protect a person against a double liability but to protect him against a double
vexation in respect of one liability'

An interpleader merely demands as a sine qua non element

... that there be two or more claimants to the fund or thing in dispute through
separate and different interests. The claims must be adverse before relief can be
 granted and the parties sought to be interpleaded must be in a position to make
effective claims (33 C.J. 430).

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

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

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

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

G.R. Nos. 154470-71 September 24, 2012

BANK OF COMMERCE, Petitioner,

vs.
PLANTERS DEVELOPMENT BANK and BANGKO SENTRAL NG PILIPINAS, Respondent.

x-----------------------x

G.R. Nos. 154589-90

BANGKO SENTRAL NG PILIPINAS, Petitioner,

vs.
PLANTERS DEVELOPMENT BANK, Respondent.

DECISION

BRION, J.:

Before the Court are two consolidated petitions for review on certiorari under Rule 45,1 on pure
questions of law, filed by the petitioners Bank of Commerce (BOC) and the Bangko Sentral ng
Pilipinas (BSP). They assail the January 10, 2002 and July 23, 2002 Orders (assailed orders) of the
Regional Trial Court (RTC) of Makati City, Branch 143, in Civil Case Nos. 94-3233 and 94-3254.
These orders dismissed (i) the petition filed by the Planters Development Bank (PDB), (ii) the
"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.

THE ANTECEDENTS

The Central Bank bills

I. First set of CB bills

The Rizal Commercial Banking Corporation (RCBC) was the registered owner of seven Central
Bank (CB) bills with a total face value of ₱ 70 million, issued on January 2, 1994 and would mature
on January 2, 1995.2 As evidenced by a "Detached Assignment" dated April 8, 1994,3 the RCBC sold
these CB bills to the BOC.4 As evidenced by another "Detached 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

On April 15, 1994 (April 15 transaction), the PDB, in turn, sold to the BOC Treasury Bills worth ₱ 70
million, with maturity date of June 29, 1994, as evidenced by a Trading Order8 and a Confirmation of
Sale.9 However, instead of delivering the Treasury Bills, the PDB delivered the seven CB bills to the
BOC, as evidenced by a PDB Security Delivery Receipt, bearing a "note: ** substitution in lieu of 06-
29-94" – referring to the Treasury Bills.10 Nevertheless, the PDB retained possession of the Detached
Assignments. It is basically the nature of this April 15 transaction that the PDB and the BOC cannot
agree on.

The transfer of the first set of seven CB bills

i. CB bill nos. 45351-53

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 these three CB bills to Bancapital Development Corporation (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:

Serial No.: 2BB XM 045351

2BB XM 045352
2BB XM 045353
Quantity: Three (3)
Denomination: Php 10 million

Total Face Value: Php 30 million

ii. CB bill nos. 45347-50

On April 20, 1994, the BOC sold the remaining four (4) CB bills to Capital One Equities
Corporation13 which transferred them to All-Asia Capital and Trust Corporation (All Asia). On
September 30, 1994, All Asia further transferred the four CB bills back to the RCBC.14

On November 16, 1994, the RCBC sold back to All Asia one of these 4 CB bills. When the BSP
refused to release the amount of this CB bill on maturity, the BOC purchased from All Asia this lone
CB bill,15 particularly described as follows:16

Serial No.: 2BB XM 045348

Quantity: One (1)
Denomination: Php 10 million
 Total Face Value: Php 10 million

As the registered owner of the remaining three CB bills, the RCBC sold them to IVI Capital and
Insular Savings Bank. Again, when the BSP refused to release the amount of this CB bill on
maturity, the RCBC paid back its transferees, reacquired these three CB bills and sold them to the
BOC – ultimately, the BOC acquired these three CB bills.

All in all, the BOC acquired the first set of seven CB bills.

II. Second set of CB bills

On April 19, 1994, the RCBC, as registered owner, (i) sold two CB bills with a total face value of ₱
20 million to the PDB and (ii) delivered to the PDB the corresponding Detached Assignment.17 The
two CB bills were particularly described as follows:

Serial No.: BB XM 045373

BB XM 045374

Issue date: January 3, 1994

Maturity date: January 2, 1995
Denomination: Php 10 million

Total Face value: Php 20 million

On even date, the PDB delivered to Bancap the two CB bills18 (April 19 transaction). In turn, Bancap
sold the CB bills to Al-Amanah Islamic Investment Bank of the Philippines, which in turn sold it to the
BOC.19

PDB’s move against the transfer of

the first and second sets of CB bills

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 PDB’s
claim over these CB bills, based on the Detached Assignments in its possession. The PDB
requested the BSP22 to record its claim in the BSP’s books, explaining that its non-possession of the
CB bills is "on account of imperfect negotiations thereof and/or subsequent setoff or transfer."23

Nuqui denied the request, invoking Section 8 of CB Circular No. 28 (Regulations Governing Open
Market Operations, Stabilization of the Securities Market, Issue, Servicing and Redemption of the
Public Debt)24 which requires the presentation of the bond before a registered bond may be
transferred on the books of the BSP.25

In a July 25, 1994 letter, the PDB clarified to Nuqui that it was not "asking for the transfer of the CB
Bills…. rather it intends to put the BSP on formal notice that whoever is in possession of 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 position at that point in time
to determine who is and who is not the holder in due course since it is not privy to all acts and time
involving the transfers or negotiation" of the CB bills. Nuqui added that the BSP’s action shall be
governed by CB Circular No. 28, as amended.27
On November 17, 1994, the PDB also asked BSP Deputy Governor Edgardo Zialcita that (i) a
notation in the BSP’s books be made against the transfer, exchange, or payment of the bonds and
the payment of interest thereon; and (ii) the presenter of the bonds upon maturity be required to
submit proof as a holder in 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:

(4) Assignments effected by fraud – Where the assignment of a registered bond is secured by
fraudulent representations, the Central Bank can grant no relief if the assignment has been honored
without notice of fraud. Otherwise, the Central Bank, 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 presented, will call upon the owner and the person presenting
the bond to substantiate their respective claims.If it then appears 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 transfer, exchange or payments, as the case
may be, without further question.

In a December 29, 1994 letter, Nuqui again denied the request, reiterating the BSP’s previous stand.

In light of these BSP responses and the impending maturity of the CB bills, the PDB filed29 with the
RTC two separate petitions for Mandamus, Prohibition and Injunction with prayer for Preliminary
Injunction and Temporary Restraining Order, 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 bills) against Nuqui, the BSP
and the RCBC.30

The PDB essentially claims that in both the April 15 transaction (involving the first set of CB bills)
and the April 19 transaction (involving the second set of CB bills), there was no intent on its part to
transfer title of the CB bills, as shown by its non-issuance of a detached assignment in favor of the
BOC and Bancap, respectively. The PDB particularly alleges that it merely "warehoused"31 the first
set of CB bills with the BOC, as security collateral.

On December 28, 1994, the RTC temporarily enjoined Nuqui and the BSP from paying the face
value of the CB bills on maturity.32 On January 10, 1995, the PDB filed an Amended Petition,
additionally impleading the BOC and All Asia.33 In a January 13, 1995 Order, the cases were
consolidated.34 On January 17, 1995, the RTC granted the PDB’s application for a writ of preliminary
prohibitory injunction.35 In both petitions, the PDB identically prayed:

WHEREFORE, it is respectfully prayed x x x that, after due notice and hearing, the Writs of
Mandamus, Prohibition and Injunction, be issued; (i) commanding the BSP and Nuqui, or whoever
may take her place -

(a) to record forthwith in the books of BSP the claim of x x x PDB on the [two sets of] CB Bills in
accordance with Section 10 (d) (4) of revised C.B. Circular No. 28; and

(b) also pursuant thereto, when the bills are presented on maturity date for payment, to call (i) x x x
PDB, (ii) x x x RCBC x x x, (iii) x x x BOC x x x, and (iv) x x x ALL-ASIA x x x; or 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;

and (ii) ordering the BSP and Nuqui to pay jointly and severally to x x x PDB the following:

(a) the sum of ₱ 100,000.00, as and for exemplary damages;

 (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;

(c) the legal rate of interest from the filing of this Petition until full payment of the sums
mentioned in this Petition; and

(d) the costs of suit.36

After the petitions were filed, the BOC acquired/reacquired all the nine CB bills – the first and second
sets of CB bills (collectively, subject CB bills).

Defenses of the BSP and of the BOC37

The BOC filed its Answer, praying for the dismissal of the 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 to the PDB’s
"warehousing theory,"38 the BOC asserted that the (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 transaction) upon the PDB’s delivery of the 1st set of CB bills in
substitution of the Treasury Bills the PDB originally intended to sell, and (ii) to Bancap (in the April 19
transaction) upon the PDB’s delivery of the 2nd set of CB bills to Bancap, likewise by way of
substitution.

The BOC adds that Section 10 (d) 4 of CB Circular No. 28 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 from the PDB, as
to the 1st set of CB bills, and from Bancap, as to the 2nd set of CB bills, in good faith and for value.
The BOC also asserted a compulsory counterclaim for damages and attorney’s fees.

On the other hand, the BSP countered that the PDB cannot invoke Section 10 (d) 4 of CB Circular
No. 28 because this section applies only to an "owner" and a "person presenting the bond," of which
the PDB is neither. The PDB has not presented to the BSP any assignment of the subject CB bills,
duly recorded in the BSP’s books, in its favor to clothe it with the status of an "owner."39 According to
the BSP –

Section 10 d. (4) applies only to a registered bond which is assigned. And the issuance of CB Bills x
x x are required to be recorded/registered in BSP’s books. In this regard, Section 4 a. (1) of CB
Circular 28 provides that registered bonds "may be transferred only by an assignment thereon duly
executed by the registered owner or his duly authorized representative x x x and duly recorded on
the books of the Central Bank."

xxxx

The alleged assignment of subject CB Bills in PDB’s favor is not recorded/registered in BSP’s
books.40(underscoring supplied)

Consequently, when Nuqui and the BSP refused the PDB’s request (to record its claim), they were
merely performing their duties in accordance with CB Circular No. 28.

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 bills’ face
value, it is duty bound to ensure that payment is made to the rightful owner. The BSP prayed that
judgment be rendered:
 a. Ordering the dismissal of the PDB’s petition for lack of merit;

b. Determining which between/among [PDB] and the other claimants is/are lawfully entitled
to the ownership of the subject CB bills and the proceeds thereof;

c. x x x;

d. Ordering PDB to pay BSP and Nuqui such actual/compensatory and exemplary
damages… as the RTC may deem warranted; and

e. Ordering PDB to pay Nuqui moral damages… and to pay the costs of the suit.41

Subsequent events

The PDB agreed with the BSP’s alternative response for an interpleader –

4. PDB agrees that the various claimants should now interplead and substantiate their respective
claims on the subject CB bills. However, the total face value of the subject CB bills should be
deposited in escrow with a private bank to be disposed of only upon order of the RTC.42

Accordingly, on June 9, 199543 and August 4, 1995,44 the BOC and the PDB entered into two separate
Escrow Agreements.45 The first agreement covered the first set of CB bills, while the second
agreement covered the second set of CB bills. The parties agreed to jointly collect from the BSP the
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
thereto."46 The BOC and the PDB filed a Joint Motion,47 submitting these Escrow Agreements for court
approval. The RTC gave its approval to the parties’ Joint Motion.48 Accordingly, the BSP released the
maturity proceeds of the CB bills by crediting the Demand Deposit Account of the PDB and of the
BOC with 50% each of the maturity proceeds of the amount in escrow.49

In view of the BOC’s acquisition of all the CB bills, All Asia50 moved to be dropped as a respondent
(with the PDB’s conformity51 ), which the RTC granted.52 The RCBC subsequently followed suit.53

In light of the developments, on May 4, 1998, the RTC required the parties to manifest their intention
regarding the case and to inform the court of any amicable settlement; "otherwise, th[e] case shall be
dismissed for lack of interest."54 Complying with the RTC’s order, the BOC moved (i) that the case be
set for pre-trial and (ii) for further proceeding to resolve the remaining issues between the BOC and
the PDB, particularly on "who has a better right over the subject CB bills."55 The PDB joined the BOC
in its motion.56

On September 28, 2000, the RTC granted the BSP’s motion to interplead and, accordingly, required
the BOC to amend its Answer and for the conflicting claimants to comment thereon.57 In October
2000, the BOC filed its Amended Consolidated Answer with Compulsory Counterclaim, reiterating its
earlier arguments asserting ownership over the subject CB bills.58

In the alternative, the BOC added that even assuming that there was no effective transfer of the nine
CB bills ultimately to the 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 original subjects of the sales or the value thereof, plus whatever income that may have
been earned during the pendency of the case.59
That BOC prayed:

1. To declare BOC as the rightful owner of the nine (9) CB bills and as the party entitled to
the proceeds thereof as well as all income earned pursuant to the two (2) Escrow
Agreements entered into by BOC and PDB.

2. In the alternative, ordering PDB to deliver the original subject of the sales transactions or
the value thereof and whatever income earned by way of interest at prevailing rate.

Without any opposition or objection from the PDB, on February 23, 2001, the RTC admitted60 the
BOC’s Amended Consolidated Answer with Compulsory Counterclaims.

In May 2001, the PDB filed an Omnibus Motion,61 questioning the RTC’s jurisdiction over the BOC’s
"additional counterclaims." The PDB argues that its petitions pray for the BSP (not the RTC) to
determine who among the conflicting claimants to the CB bills stands in the position of the bona fide
holder for value. The RTC cannot entertain the BOC’s counterclaim, regardless of its nature,
because it is the BSP which has jurisdiction to determine who is entitled to receive the proceeds of
the CB bills.

The BOC opposed62 the PDB’s Omnibus Motion. The PDB filed its Reply.63

In a January 10, 2002 Order, the RTC dismissed the PDB’s petition, the BOC’s counterclaim and the
BSP’s counter-complaint/cross-claim for interpleader, holding that under CB Circular No. 28, it has
no jurisdiction (i) over the BOC’s "counterclaims" and (ii) to resolve the issue of ownership of the CB
bills.64 With the denial of their separate motions for Reconsideration,65 the BOC and the BSP
separately filed the present petitions for review on certiorari.66

THE BOC’S and THE BSP’S PETITIONS

The BOC argues that the present cases do not fall within the limited provision of Section 10 (d) 4 of
CB Circular No. 28, which contemplates only of three situations: first, where the fraudulent
assignment is not coupled with a notice to the BSP, it can grant no relief; second, where the
fraudulent assignment is coupled with a notice of fraud to the BSP, it will make a notation against the
assignment and require the owner and the holder to substantiate their claims; and third, where the
case does not fall on either of the first two situations, the BSP will have to await action on the
assignment pending settlement of the case, whether by agreement or by court order.

The PDB’s case cannot fall under the first two situations. With particular regard to the second
situation, CB Circular No. 28 requires that the conflict must be between an "owner" and a "holder,"
for the BSP to exercise its limited jurisdiction to resolve conflicting claims; and the word "owner" here
refers to the registered owner giving notice of the fraud to the BSP. The PDB, however, is not the
registered owner nor is it in possession (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 issue of ownership of a registered bond (the CB bills) not falling in either of
the first two situations.

The BOC asserts that the policy consideration supportive of its interpretation of CB Circular No. 28 is
to have a reliable system to protect the registered owner; should he file a notice with the 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 owner who complied
with the BSP’s requirement of recording an assignment in the BSP’s books, then "the protective
mantle of administrative proceedings" should necessarily benefit him only, without extending the
same benefit to those who chose to ignore the Circular’s requirement, like the PDB.68

Assuming arguendo that the PDB’s case falls under the second situation – i.e., the BSP has
jurisdiction to resolve the issue of ownership of the CB bills – the more recent CB Circular No. 769-
80 (Rules and Regulations Governing Central Bank Certificates of Indebtedness) already
superseded CB Circular No. 28, and, in particular, effectively amended Section 10 (d) 4 of CB
Circular No. 28. The pertinent provisions of CB Circular No. 769-80 read:

Assignment Affected by Fraud. – Any assignment for transfer of ownership of registered certificate
obtained through fraudulent representation if honored by the Central Bank or any of its authorized
service agencies shall not make the Central Bank or agency liable therefore unless it has previous
formal notice of the fraud. The Central Bank, upon notice under oath that the assignment was
secured through fraudulent means, shall immediately issue and circularize a "stop order" against the
transfer, exchange, redemption of the Certificate including the payment of interest coupons. The
Central Bank or service agency concerned shall continue to withhold action on the certificate until
such time that the conflicting claims have been finally settled either by amicable settlement between
the parties or by order of the Court.

Unlike CB Circular No. 28, CB Circular No. 769-80 limited the BSP’s authority to the mere issuance
and circularization of a "stop order" against the transfer, exchange and redemption upon sworn
notice of a fraudulent assignment. Under this Circular, the BSP shall only continue to withhold action
until the dispute is ended by an amicable settlement or by judicial determination. Given the more
passive stance of the BSP – the very agency tasked to enforce the circulars involved - under CB
Circular No. 769-80, the RTC’s dismissal of the BOC’s counterclaims is palpably erroneous.

Lastly, since Nuqui’s office (Government Securities Department) had already been abolished,69 it can
no longer adjudicate the dispute under the second situation covered by CB Circular No. 28. The
abolition of Nuqui’s office is not only consistent with the BSP’s Charter but, more importantly, with
CB Circular No. 769-80, which removed the BSP’s adjudicative authority over fraudulent
assignments.

THE PDB’S COMMENT

The PDB claims that jurisdiction is determined by the allegations in the complaint/petition and not by
the defenses set up in the answer.70 In filing the petition with the RTC, the PDB merely seeks to
compel the BSP to determine, pursuant to CB Circular No. 28, the party legally entitled to the
proceeds of the subject CB bills, which, as the PDB alleged, have been transferred through
fraudulent representations – an allegation which properly recognized the BSP’s jurisdiction to
resolve conflicting claims of ownership over the CB bills.

The PDB adds that under the doctrine of primary jurisdiction, courts should refrain from determining
a controversy involving a question whose resolution demands the exercise of sound administrative
discretion. In the present case, the BSP’s special knowledge and experience in resolving disputes
on securities, whose assignment and trading are governed by the BSP’s rules, should be upheld.

The PDB counters that the BOC’s tri-fold interpretation of Section 10 (d) 4 of CB Circular No. 28
sanctions split jurisdiction which is not favored;but even this tri-fold interpretation which, in the
second situation, limits the meaning of the "owner" to the registered owner is flawed. Section 10 (d)
4 aims to protect not just the registered owner but anyone who has been deprived of his bond by
fraudulent representation in order to deter fraud in the secondary trading of government securities.
The PDB asserts that the existence of CB Circular No. 769-80 or the abolition of Nuqui’s office does
not result in depriving the BSP of its jurisdiction: first, CB Circular No. 769-80 expressly provides that
CB Circular No. 28 shall have suppletory application to CB Circular No. 769-80; and second, the
BSP can always designate an office to resolve the PDB’s claim over the CB bills.

Lastly, the PDB argues that even assuming that the RTC has jurisdiction to resolve the issue of
ownership of the CB bills, the RTC has not acquired jurisdiction over the BOC’s so-called
"compulsory" counterclaims (which in truth is merely "permissive") because of the BOC’s failure to
pay the appropriate docket fees. These counterclaims should, therefore, be dismissed and
expunged from the record.

THE COURT’S RULING

We grant the petitions.

At the outset, we note that the parties have not raised the validity of either CB Circular No. 28 or CB
Circular No. 769-80 as an issue. What the parties largely contest is the applicable circular in case of
an allegedly fraudulently assigned CB bill. The applicable circular, in turn, is determinative of the
proper remedy available to the PDB and/or the BOC as claimants to the proceeds of the subject CB
bills.

Indisputably, at the time the PDB supposedly invoked the jurisdiction of the BSP in 1994 (by
requesting for the annotation of its claim over the subject CB bills in the BSP’s books), CB Circular
No. 769-80 has long been in effect. Therefore, the parties’ respective interpretations of the provision
of Section 10 (d) 4 of CB Circular No. 28 do not have any significance unless it is first established
that that Circular governs the resolution of their conflicting claims of ownership. This conclusion is
important, given the supposed repeal or modification of Section 10 (d) 4 of CB Circular No. 28 by the
following provisions of CB Circular No. 769-80:

ARTICLE XI
SUPPLEMENTAL RULES

Section 1. Central Bank Circular No. 28 – The provisions of Central Bank Circular No. 28 shall have
suppletory application to matters not specially covered by these Rules.

ARTICLE XII
EFFECTIVITY

Effectivity – The rules and regulations herein prescribed shall take effect upon approval by the
Monetary Board, Central Bank of the Philippines, and all circulars, memoranda, or office orders
inconsistent herewith are revoked or modified accordingly. (Emphases added)

We agree with the PDB that in view of CB Circular No. 28’s suppletory application, an attempt to
harmonize the apparently conflicting provisions is a prerequisite before one may possibly conclude
that an amendment or a repeal exists.71 Interestingly, however, even the PDB itself failed to submit an
interpretation based on its own position of harmonization.

The repealing clause of CB Circular No. 769-80 obviously did not expressly repeal CB Circular No.
28; in fact, it even provided for the suppletory application of CB Circular No. 28 on "matters not
specially covered by" CB Circular No. 769-80. While no express repeal exists, the intent of CB
Circular No. 769-80 to operate as an implied repeal,72or at least to amend earlier CB circulars, is
supported by its text "revoking" or "modif[ying" "all circulars" which are inconsistent with its terms.

At the outset, we stress that none of the parties disputes that the subject CB bills fall within the
category of a certificate or evidence of indebtedness and that these were issued by the Central
Bank, now the BSP. Thus, even without resorting to statutory construction aids, matters involving the
subject CB bills should necessarily be governed by CB Circular No. 769-80. Even granting, however,
that reliance on CB Circular No. 769-80 alone is not enough, we find that CB Circular No. 769-80
impliedly repeals CB Circular No. 28.

An implied repeal transpires when a substantial conflict exists between the new and the prior laws.
In the absence of an express repeal, a subsequent law cannot be construed as repealing a prior law
unless an irreconcilable inconsistency and repugnancy exist in the terms of the new and the old
laws.73 Repeal by implication is not favored, unless manifestly intended by the legislature, or unless it
is convincingly and unambiguously demonstrated, that the laws or orders are clearly repugnant and
patently inconsistent with one another so that they cannot co-exist; the legislature is presumed to
know the existing law and would express a repeal if one is intended.74

There are two instances of implied repeal. One takes place when the provisions in the two acts on
the same subject matter are irreconcilably contradictory, in which case, the later act, to the extent of
the conflict, constitutes an implied repeal of the earlier one. The other occurs when the later act
covers the whole subject of the earlier one and is clearly intended as a substitute; thus, it will operate
to repeal the earlier law.75

A general reading of the two circulars shows that the second instance of implied repeal is present in
this case. CB Circular No. 28, entitled "Regulations Governing Open Market Operations,
Stabilization of Securities Market, Issue, Servicing and Redemption of Public Debt," is a regulation
governing the servicing and redemption of public debt, including the issue, inscription, registration,
transfer, payment and replacement of bonds and securities representing the public debt.76 On the
other hand, CB Circular No. 769-80, entitled "Rules and Regulations Governing Central Bank
Certificate of Indebtedness," is the governing regulation on matters77 (i) involving certificate of
indebtedness78issued by the Central Bank itself and (ii) which are similarly covered by CB Circular
No. 28.

The CB Monetary Board issued CB Circular No. 28 to regulate the servicing and redemption of
public debt, pursuant to Section 124 (now Section 119 of Republic Act R.A. No. 7653) of the old
Central Bank law79 which provides that "the servicing and redemption of the public debt shall also be
effected through the Bangko Sentral." However, even as R.A. No. 7653 continued to recognize this
role by the BSP, the law required a phase-out of all fiscal agency functions by the BSP, including
Section 119 of R.A. No. 7653.

In other words, even if CB Circular No. 28 applies broadly to both government-issued bonds and
securities and Central Bank-issued evidence of indebtedness, given the present state of law, CB
Circular No. 28 and CB Circular No. 769-80 now operate on the same subject – Central Bank-issued
evidence of indebtedness. Under Section 1, Article XI of CB Circular No. 769-80, the continued
relevance and application of CB Circular No. 28 would depend on the need to supplement any
deficiency or silence in CB Circular No. 769-80 on a particular matter.

In the present case, both CB Circular No. 28 and CB Circular 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, the BSP would have to "call upon the owner and
the person presenting the bond to substantiate their respective claims" and, from there, determine
who has a better right over the registered bond. On the other hand, under CB Circular No. 769-80,
the BSP shall merely "issue and circularize a ‘stop order’ against the transfer, exchange, redemption
of the [registered] certificate" without any adjudicative function (which is the precise root of the
present controversy). As the two circulars stand, the patent irreconcilability of these two provisions
does not require elaboration. Section 5, Article V of CB Circular No. 769-80 inescapably repealed
Section 10 (d) 4 of CB Circular No. 28.

The issue of BSP’s jurisdiction, lay hidden

On that note, the Court could have written finis to the present controversy by simply sustaining the
BSP’s hands-off approach to the PDB’s problem under CB Circular No. 769-80. However, the
jurisdictional provision of CB Circular No. 769-80 itself, in relation to CB Circular No. 28, on the
matter of fraudulent assignment, has given rise to a question of jurisdiction - the core question of law
involved in these petitions - which the Court cannot just treat sub-silencio.

Broadly speaking, jurisdiction is the legal power or authority to 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 decide a
case.81 In the context of these petitions, we hark back to the basic principles governing the question
of jurisdiction over the subject matter.

First, jurisdiction over the subject matter is determined only by the Constitution and by law.82 As a
matter of substantive law, procedural rules alone can confer no jurisdiction to courts or
administrative agencies.83 In fact, an administrative agency, acting in its quasi-judicial capacity, is a
tribunal of limited jurisdiction and, as such, could wield only such powers that are specifically granted
to it by the enabling statutes. In contrast, an RTC is a court of general jurisdiction, i.e., it has
jurisdiction over cases whose subject matter does not fall within the exclusive original jurisdiction of
any court, tribunal or body exercising judicial or quasi-judicial functions.84

Second, jurisdiction over the subject matter is determined not by the pleas set up by the defendant in
his answer85but by the allegations in the complaint,86 irrespective of whether the plaintiff is entitled to
favorable judgment on the basis of his assertions.87 The reason is that the complaint is supposed to
contain a concise statement of the ultimate facts constituting the plaintiff's causes of action.88

Third, jurisdiction is determined by the law in force at the time of the filing of the complaint.89

Parenthetically, the Court observes that none of the parties ever raised the issue of whether the BSP
can simply disown its jurisdiction, assuming it has, by the simple expedient of promulgating a new
circular (specially applicable to a certificate of indebtedness issued by the BSP itself), inconsistent
with an old circular, assertive of its limited jurisdiction over ownership issues arising from fraudulent
assignments of a certificate of indebtedness. The PDB, in particular, relied solely and heavily on CB
Circular No. 28.

In light of the above principles pointing to jurisdiction as a matter of substantive law, the provisions of
the law itself that gave CB Circular 769-80 its life and jurisdiction must be examined.

The Philippine Central Bank

On January 3, 1949, Congress created the Central Bank of the Philippines (Central Bank) as a
corporate body with the primary objective of (i) maintaining the internal and external monetary
stability in the Philippines; and (ii) preserving the international value and the convertibility of the
peso.90 In line with these broad objectives, the Central Bank was empowered to issue rules and
regulations "necessary for the effective discharge of the responsibilities and exercise of the powers
assigned to the Monetary Board and to the Central Bank."91 Specifically, the Central Bank is
authorized to organize (other) departments for the efficient conduct of its business and whose
powers and duties "shall be determined by the Monetary Board, within the authority granted to the
Board and the Central Bank"92 under its original charter.

With the 1973 Constitution, the then Central Bank was constitutionally made as the country’s central
monetary authority until such time that Congress93 shall have established a central bank. The 1987
Constitution continued to recognize this function of the then Central Bank until Congress, pursuant to
the Constitution, created a new central monetary authority which later came to be known as the
Bangko Sentral ng Pilipinas.

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 objective of
maintaining price stability, conducive to a balanced and sustainable growth of the economy, and of
promoting and maintaining monetary stability and convertibility of the peso.95

The Constitution expressly grants the BSP, as the country’s central monetary authority, the power of
supervision over the operation of banks, while leaving with Congress the authority to define the
BSP’s regulatory powers over the operations of finance companies and other institutions performing
similar functions. Under R.A. No. 7653, the BSP’s powers and functions include (i) supervision over
the operation of banks; (ii) regulation of operations of finance companies and non-bank financial
institutions performing quasi banking functions; (iii) sole power and authority to issue currency within
the Philippine territory; (iv) engaging in foreign exchange transactions; (v) making rediscounts,
discounts, loans and advances to banking and other financial institutions to influence the volume of
credit consistent with the objective of achieving price stability; (vi) engaging in open market
operations; and (vii) acting as banker and financial advisor of the government. 1âwphi1

On the BSP’s power of supervision over the operation of banks, Section 4 of R.A. No. 8791 (The
General Banking Law of 2000) elaborates as follows:

CHAPTER II
AUTHORITY OF THE BANGKO SENTRAL

SECTION 4. Supervisory Powers. — The operations and activities of banks shall be subject to
supervision of the Bangko Sentral. "Supervision" shall include the following:

4.1. The issuance of rules of conduct or the establishment of standards of operation for
uniform application to all institutions or functions covered, taking into consideration the
distinctive character of the operations of institutions and the substantive similarities of
specific functions to which such rules, modes or standards are to be applied;

4.2. The conduct of examination to determine compliance with laws and regulations if the
circumstances so warrant as determined by the Monetary Board;

4.3. Overseeing to ascertain that laws and regulations are complied with;

4.4. Regular investigation which shall not be oftener than once a year from the last date of
examination to determine whether an institution is conducting its business on a safe or sound
basis: Provided, That the deficiencies/irregularities found by or discovered by an audit shall
be immediately addressed;
 4.5. Inquiring into the solvency and liquidity of the institution (2-D); or

4.6. Enforcing prompt corrective action. (n)

The Bangko Sentral shall also have supervision over the operations of and exercise regulatory
powers over quasi-banks, trust entities and other financial institutions which under special laws are
subject to Bangko Sentral supervision. (2-Ca)

For the purposes of this Act, "quasi-banks" shall refer to entities engaged in the borrowing of funds
through the issuance, endorsement or assignment with recourse or acceptance of deposit
substitutes as defined in Section 95 of Republic Act No. 7653 (hereafter the "New Central Bank Act")
for purposes of relending or purchasing of receivables and other obligations. [emphasis ours]

While this provision empowers the BSP to oversee the operations and activities of banks to
"ascertain that laws and regulations are complied with," the existence of the BSP’s jurisdiction in the
present dispute cannot rely on this provision. The fact remains that the BSP already made known to
the PDB its unfavorable position on the latter’s claim of fraudulent assignment due to the latter’s own
failure to comply96 with existing regulations:

In this connection, Section 10 (b) 2 also requires that a "Detached assignment will be recognized or
accepted only upon previous notice to the Central Bank x x x." In fact, in a memo dated September
23, 1991 xxx then CB Governor Jose L. Cuisia advised all banks (including PDB) xxx as follows:

In view recurring incidents ostensibly disregarding certain provisions of CB circular No. 28 (as
amended) covering assignments of registered bonds, all banks and all concerned are enjoined to
observe strictly the pertinent provisions of said CB Circular as hereunder quoted:

xxxx

Under Section 10.b. (2)

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:

(a) x x x

(b) x x x

(c) assignments of treasury notes and certificates of indebtedness in registered form which
are not provided at the back thereof with assignment form.

(d) Assignment of securities which have changed ownership several times.

(e) x x x

Non-compliance herewith will constitute a basis for non-action or withholding of action on

redemption/payment of interest coupons/transfer transactions or denominational exchange that may
be directly affected thereby. [Boldfacing supplied]

Again, the books of the BSP do not show that the supposed assignment of subject CB Bills was ever
recorded in the BSP’s books. [Boldfacing supplied]
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 in the BSP’s books
as early as June 30, 1994.97

The PDB’s claim is not accurate. What the PDB requested the 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 bills
at the time when (i) it was no longer in possession of the CB bills, having been transferred from one
entity to another and (ii) all it has are the detached assignments, which the PDB has not shown to be
compliant with Section 10 (b) 2 above-quoted. Obviously, the PDB cannot insist that the BSP take
cognizance of its plaint when the basis of the BSP’s refusal under existing regulation, which the PDB
is bound to observe, is the PDB’s own failure to comply therewith.

True, the BSP exercises supervisory powers (and regulatory powers) over banks (and quasi banks).
The issue presented before the Court, however, does not concern the BSP’s supervisory power over
banks as this power is understood under the General Banking Law. In fact, there is nothing in the
PDB’s petition (even including the letters it sent to the BSP) that would support the BSP’s jurisdiction
outside of CB Circular No. 28, under its power of supervision, over conflicting claims to the proceeds
of the CB bills.

BSP has quasi-judicial powers over a

class of cases which does not include
the adjudication of ownership of the
CB bills in question

In United Coconut Planters Bank v. E. Ganzon, Inc.,98 the Court considered the BSP as an
administrative agency,99exercising quasi-judicial functions through its Monetary Board. It held:

A quasi-judicial agency or body is an organ of government other than a court and other than a
legislature, which affects the rights of private parties through either adjudication or rule-making. The
very definition of an administrative agency includes its being vested with quasi-judicial powers. The
ever increasing variety of powers and functions given to administrative agencies recognizes the
need for the active intervention of administrative agencies in matters calling for technical knowledge
and speed in countless controversies which cannot possibly be handled by regular courts. A "quasi-
judicial function" is a term which applies to the action, discretion, etc., of public administrative officers
or bodies, who are required to investigate facts, or ascertain the existence of facts, hold hearings,
and draw conclusions from them, as a basis for their official action and to exercise discretion of a
judicial nature.

Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising quasi-judicial powers or
functions. As aptly observed by the Court of Appeals, the BSP Monetary Board is an independent
central monetary authority and a body corporate with fiscal and administrative autonomy, mandated
to provide policy directions in the areas of money, banking and credit. It has power to issue
subpoena, to sue for contempt those refusing to obey the subpoena without justifiable reason, to
administer oaths and compel presentation of books, records and others, needed in its examination,
to impose fines and other sanctions and to issue cease and desist order. Section 37 of Republic Act
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 and quasi-banks,
which necessarily implies that the BSP Monetary Board must conduct some form of investigation or
hearing regarding the same. [citations omitted]

The BSP is not simply a corporate entity but qualifies as an administrative agency created, pursuant
to constitutional mandate,100 to carry out a particular governmental 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 and/or functions which may be characterized as
administrative, investigatory, regulatory, quasi-legislative, or quasi-judicial, or a mix of these five, as
may be conferred by the Constitution or by statute.102

While the very nature of an administrative agency and the raison d'être for its creation103 and
proliferation dictate a grant of quasi-judicial power to it, the matters over which it may exercise this
power must find sufficient anchorage on its enabling law, either 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 cases within its peculiar competence
and expertise. In other words, the provisions of the enabling statute are the yardsticks by which the
Court would measure the quantum of quasi-judicial powers an administrative agency may exercise,
as defined in the enabling act of such agency.104

Scattered provisions in R.A. No. 7653 and R.A. No. 8791, inter alia, exist, conferring jurisdiction on
the BSP on certain matters.105 For instance, under the situations contemplated under Section 36, par.
2106 (where a bank or quasi bank persists in carrying on its business in an unlawful or unsafe manner)
and Section 37107 (where the bank or its officers willfully violate the bank’s charter or by-laws, or the
rules and regulations issued by the Monetary Board) of R.A. No. 7653, the BSP may place an entity
under receivership and/or liquidation or impose administrative sanctions upon the entity or its officers
or directors.

Among its several functions under R.A. No. 7653, the BSP is authorized to engage in open market
operations and thereby "issue, place, buy and sell freely negotiable evidences of indebtedness of the
Bangko Sentral" in the following manner.

SEC. 90. Principles of Open Market Operations. – The open market purchases and sales of
securities by the Bangko Sentral shall be made exclusively in accordance with its primary objective
of achieving price stability.

xxxx

SEC. 92. Issue and Negotiation of Bangko Sentral Obligations. – In order to provide the Bangko
Sentral with effective instruments for open market operations, the Bangko Sentral may, subject to
such rules and regulations as the Monetary Board may prescribe and in accordance with the
principles stated in Section 90 of this Act, issue, place, buy and sell freely negotiable evidences of
indebtedness of the Bangko Sentral: Provided, That issuance of such certificates of indebtedness
shall be made only in cases of extraordinary movement in price levels. Said evidences of
indebtedness may be issued directly against the international reserve of the Bangko Sentral or
against the securities which it has acquired under the provisions of Section 91 of this Act, or may be
issued without relation to specific types of assets of the Bangko Sentral.

The Monetary Board shall determine the interest rates, maturities and other characteristics of said
obligations of the Bangko Sentral, and may, if it deems it advisable, denominate the obligations in
gold or foreign currencies.

Subject to the principles stated in Section 90 of this Act, the evidences of indebtedness of the
Bangko Sentral to which this section refers may be acquired by the Bangko Sentral before 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 indebtedness
acquired or redeemed by the Bangko Sentral shall not be included among its assets, and shall be
immediately retired and cancelled.108 (italics supplied; emphases ours)
The primary objective of the BSP is to maintain price stability.109 The BSP has a number of monetary
policy instruments at its disposal to promote price stability. To increase or reduce liquidity in the
financial system, the BSP uses open 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 to expand or contract the supply of money. By controlling the money
supply, the BSP is able to exert some influence on the prices of goods and services and achieve its
inflation objectives.112

Once the issue and/or sale of a security is made, the BSP would necessarily make a determination,
in accordance with its own rules, of the entity entitled to receive the proceeds of the security upon its
maturity. This determination by the BSP is an exercise of its administrative powers113 under the law as
an incident to its power to prescribe rules and regulations governing open market operations to
achieve the "primary objective of achieving price stability."114As a matter of necessity, too, the same
rules and regulations facilitate transaction with the BSP by providing for an orderly manner of,
among others, issuing, transferring, exchanging and paying securities representing public debt.

Significantly, when competing claims of ownership over the proceeds of the securities it has issued
are brought before it, the law has not given the BSP the quasi-judicial power to resolve these
competing claims as part of its power to engage in open market operations. Nothing in the BSP’s
charter confers on the BSP the jurisdiction or authority to determine this kind of claims, arising out of
a subsequent transfer or assignment of evidence of indebtedness – a matter that appropriately falls
within the competence of courts of general jurisdiction. That the statute withholds this power from the
BSP is only consistent with the fundamental reasons for the creation of a Philippine central bank,
that is, to lay down stable monetary policy and exercise bank supervisory functions. Thus, the BSP’s
assumption of jurisdiction over competing claims cannot find 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

To reiterate, open market operation is a monetary policy instrument that the BSP employs, among
others, to regulate the supply of money in the economy to influence the timing, cost and availability
of money and credit, as well as other financial factors, for the purpose of stabilizing the price
level.116 What the law grants the BSP is a continuing role to shape and carry out the country’s
monetary policy – not the authority to adjudicate competing claims of ownership over the securities it
has issued – since this authority would not fall under the BSP’s purposes under its charter.

While R.A. No. 7653117 empowers the BSP to conduct administrative hearings and render judgment
for or against an entity under its supervisory and regulatory powers and even authorizes the BSP
Governor to "render decisions, or rulings x x x on matters regarding application or enforcement of
laws pertaining to institutions supervised by the BSP and laws pertaining to quasi-banks, as well as
regulations, policies or instructions issued by the Monetary Board," it is precisely the text of the
BSP’s own regulation (whose validity is not here raised as an issue) that points to the BSP’s limited
role in case of an allegedly fraudulent assignment to simply (i) issuing and circularizing a ‘"stop
order" against the transfer, exchange, redemption of the certificate of indebtedness, including the
payment of interest coupons, and (ii) withholding action on the certificate.

A similar conclusion can be drawn from the BSP’s administrative adjudicatory power in cases of
"willful failure or refusal to comply with, or violation of, any banking law or any order, instruction or
regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor."118 The
non-compliance with the pertinent requirements under CB Circular No. 28, as amended, deprives a
party from any right to demand payment from the BSP.
In other words, the grant of quasi-judicial authority to the BSP cannot possibly extend to situations
which do not call for the exercise by the BSP of its supervisory or regulatory functions over entities
within its jurisdiction.119

The fact alone that the parties involved are banking institutions does not necessarily call for the
exercise by the BSP of its quasi-judicial powers under the law.120

The doctrine of primary jurisdiction

argues against BSP’s purported
authority to adjudicate ownership
issues over the disputed CB bills

Given the preceding discussions, even the PDB’s invocation of the doctrine of primary jurisdiction is
misplaced.

In the exercise of its plenary legislative power, Congress may create administrative agencies
endowed with quasi-legislative and quasi-judicial powers. Necessarily, Congress likewise defines the
limits of an agency’s jurisdiction in the same manner as it defines the jurisdiction of courts.121 As a
result, it may happen that either a court or an administrative agency has exclusive jurisdiction over a
specific matter or both have concurrent jurisdiction on the same. It may happen, too, that courts and
agencies may willingly relinquish adjudicatory power that is rightfully theirs in favor of the other. One
of the instances when a court may properly defer to the adjudicatory authority of an agency is the
applicability of the doctrine of primary jurisdiction.122

As early as 1954, the Court applied the doctrine of primary jurisdiction under the following terms:

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
requiring the Industrial Court's intervention in the resolution of labor-management controversies xxx
meant such jurisdiction to be exclusive, although it did not so expressly state in the law. The Court
held that under the "sense-making and expeditious doctrine of primary jurisdiction ... the courts
cannot or will not determine a controversy involving a question which is within the jurisdiction of an
administrative tribunal, where the question demands the exercise of sound administrative discretion
requiring the special knowledge, experience, and services of the administrative tribunal to determine
technical and intricate matters of fact, and a uniformity of ruling is essential to comply with the
purposes of the regulatory statute administered."123 (emphasis ours)

In Industrial Enterprises, Inc. v. Court of Appeals,124 the Court ruled that while an action for rescission
of a contract between coal developers appears to be an action cognizable by regular courts, the trial
court remains to be without jurisdiction to entertain the suit since the contract sought to be rescinded
is "inextricably tied up with the right to develop coal-bearing lands and the determination of whether
or not the reversion of the coal operating contract over the subject coal blocks to [the plaintiff] would
be in line with the country’s national program and objective on coal-development and over-all coal-
supply-demand balance." It then applied the doctrine of primary jurisdiction –

In recent years, it has been the jurisprudential trend to apply the doctrine of primary jurisdiction in
many cases involving matters that demand the special competence of administrative agencies. It
may occur that the Court has jurisdiction to take cognizance of a particular case, which means that
the matter involved is also judicial in character. However, if the case is such that its determination
requires the expertise, specialized skills and knowledge of the proper administrative bodies because
technical matters or intricate questions of facts are involved, then relief must first be obtained in an
administrative proceeding before a remedy will be supplied by the courts even though the matter is
within the proper jurisdiction of a court. This is the doctrine of primary jurisdiction. It applies "where a
claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim
requires the resolution of issues which, under a regulatory scheme, have been placed within the
special competence of an administrative body."

Clearly, the doctrine of primary jurisdiction finds application in this case since the question of what
coal areas should be exploited and developed and which entity should be granted coal operating
contracts over said areas involves a technical 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 competence to decide matters concerning activities relative to the
exploration, exploitation, development and extraction of mineral resources like coal. These issues
preclude an initial judicial determination. [emphases ours]

The absence of any express or implied statutory power to adjudicate conflicting claims of ownership
or entitlement to the proceeds of its certificates of indebtedness finds complement in the similar
absence of any technical matter that would call for the BSP’s special expertise or competence.125 In
fact, what the PDB’s petitions bear out is essentially the nature of the transaction it had with the
subsequent transferees of the subject CB bills (BOC and Bancap) and not any matter more
appropriate for special determination by the BSP or any administrative agency.

In a similar vein, it is well-settled that the interpretation given to a rule or regulation by those charged
with its execution is entitled to the greatest weight by the courts construing such rule or
regulation.126 While there are exceptions127 to this rule, the PDB has not convinced us that a departure
is warranted in this case. Given the non-applicability of the doctrine of primary jurisdiction, the BSP’s
own position, in light of Circular No. 769-80, deserves respect from the Court.

Ordinarily, cases involving the application of doctrine of primary jurisdiction are initiated by an action
invoking the jurisdiction of a court or administrative agency to resolve the substantive legal conflict
between the parties. In this sense, the present case is quite unique since the court’s jurisdiction was,
originally, invoked to compel an administrative agency (the BSP) to resolve the legal conflict of
ownership over the CB bills - instead of obtaining a judicial determination of the same dispute.

The remedy of interpleader

Based on the unique factual premise of the present case, the RTC acted correctly in initially
assuming jurisdiction over the PDB’s petition for mandamus, prohibition and injunction.128 While the
RTC agreed (albeit erroneously) with the PDB’s view (that the BSP has jurisdiction), it, however,
dismissed not only the BOC’s/the BSP’s counterclaims but the PDB’s petition itself as well, on the
ground that it lacks jurisdiction.

This is plain error.

Not only the parties themselves, but more so the courts, are bound by the rule on non-waiver of
jurisdiction.129believes that jurisdiction over the BOC’s counterclaims and the BSP’s
counterclaim/crossclaim for interpleader calls for the application of the doctrine of primary
jurisdiction, the allowance of the PDB’s petition even becomes imperative because courts may raise
the issue of primary jurisdiction sua sponte.130

Of the three possible options available to the RTC, the adoption 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 have to be
set aside on appeal because the BSP has no jurisdiction as previously discussed; and second when
it dismissed the PDB’s petitions and the BOC’s counterclaims on the ground that it lacks jurisdiction,
the trial court seriously erred because precisely, the resolution of the conflicting claims over the CB
bills falls within its general jurisdiction.

Without emasculating its jurisdiction, the RTC could have properly dismissed the PDB’s petition but
on the ground that mandamus does not lie against the BSP; but even this correct alternative is no
longer plausible since the BSP, as a respondent below, already properly brought before the RTC the
remaining conflicting claims over the subject CB bills by way of a counterclaim/crossclaim for
interpleader. Section 1, Rule 62 of the Rules of Court provides when an interpleader is proper:

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

The remedy of an action of interpleader131 is designed to protect a person against double vexation in
respect of a single liability.7 It requires, as an indispensable requisite, that conflicting claims upon the
same subject matter are or may be made against the stakeholder (the possessor of the subject
matter) who claims no interest whatever in the subject matter or an interest which in whole or in part
is not disputed by the claimants.132

Through this remedy, the stakeholder can join all competing claimants in a single proceeding to
determine conflicting claims without exposing the stakeholder to the possibility of having to pay more
than once on a single liability.133

When the court orders that the claimants litigate among themselves, in reality a new action
arises,134 where the claims of the interpleaders themselves are brought to the fore, the stakeholder as
plaintiff is relegated merely to the role of initiating the suit. In short, the remedy of interpleader, when
proper, merely provides an avenue for the conflicting claims on the same subject matter to be
threshed out in an action. Section 2 of Rule 62 provides:

SEC. 2. Order. – Upon the filing of the complaint, the court shall issue an order requiring the
conflicting claimants to interplead with one another. If the interests of justice so require, the court
may direct in such order that the subject matter be paid or delivered to the court.

This is precisely what the RTC did by granting the BSP’s motion to interplead. The PDB itself
"agreed that the various claimants should now interplead." Thus, the PDB and the BOC
subsequently entered into two separate escrow agreements, covering the CB bills, and submitted
them to the RTC for approval.

In granting the BSP’s motion, the RTC acted on the correct premise that it has jurisdiction to resolve
the parties’ conflicting claims over the CB bills - consistent with the rules and the parties’ conduct -
and accordingly required the BOC to amend its answer and for the PDB to comment thereon.
Suddenly, however, the PDB made an about-face and questioned the jurisdiction of the RTC.
Swayed by the PDB’s argument, the RTC dismissed even the PDB’s petition - which means that it
did not actually compel the BSP to resolve the BOC’s and the PDB’s claims.

Without the motion to interplead and the order granting it, the RTC could only dismiss the PDB’s
petition since it is the RTC which has jurisdiction to resolve the parties’ conflicting claims – not the
BSP. Given that the motion to interplead has been actually filed, the RTC could not have really
granted the relief originally sought in the PDB’s petition since the RTC’s order granting the BSP’s
motion to interplead - to which the PDB in fact acquiesced into - effectively resulted in the dismissal
of the PDB’s petition. This is not altered by the fact that the PDB additionally prayed in its petition for
damages, attorney’s fees and costs of suit "against the public respondents" because the grant of the
order to interplead effectively sustained the propriety of the BSP’s resort to this procedural device.

Interpleader

1. as a special civil action

What is quite unique in this case is that the BSP did not initiate the interpleader suit through an
original complaint but through its Answer. This circumstance becomes understandable if it is
considered that insofar as the BSP is concerned, the PDB does not possess any right to have its
claim recorded in the BSP’s books; consequently, the PDB cannot properly be considered even as a
potential claimant to the proceeds of the CB bills upon maturity. Thus, the interpleader was only an
alternative position, made only in the BSP’s Answer.135

The remedy of interpleader, as a special civil action, is primarily governed by the specific provisions
in Rule 62 of the Rules of Court and secondarily by the provisions applicable to ordinary civil
actions.136 Indeed, Rule 62 does not expressly authorize the filing of a complaint-in-interpleader as
part of, although separate and independent from, the answer. Similarly, Section 5, Rule 6, in relation
to Section 1, Rule 9 of the Rules of Court137 does not include a complaint-in-interpleader as a
claim,138 a form of defense,139 or as an objection that a defendant may be allowed to put up in his
answer or in a motion to dismiss. This does not mean, however, that the BSP’s "counter-
complaint/cross-claim for interpleader" runs counter to general procedures.

Apart from a pleading,140 the rules141 allow a party to seek an affirmative relief from the court through
the procedural device of a motion. While captioned "Answer with counter complaint/cross-claim for
interpleader," the RTC understood this as in the nature of a motion,142 seeking relief which essentially
consists in an order for the conflicting claimants to litigate with each other so that "payment is made
to the rightful or legitimate owner"143 of the subject CB bills.

The rules define a "civil action" as "one by which a party sues another for the enforcement or
protection of a right, or the prevention or redress of a wrong." Interpleader may be considered as a
stakeholder’s remedy to prevent a wrong, that is, from making payment to one not entitled to it,
thereby rendering itself vulnerable to lawsuit/s from those legally entitled to payment.

Interpleader is a civil action made special by the existence of particular rules to govern the
uniqueness of its application and operation. Under Section 2, Rule 6 of the Rules of Court, governing
ordinary civil actions, a party’s claim is asserted "in a complaint, counterclaim, cross-claim, third
(fourth, etc.)-party complaint, or complaint-in-intervention." In an interpleader suit, however, a claim
is not required to be contained in any of these pleadings but in the answer-(of the conflicting
claimants)-in-interpleader. This claim is different from the counter-claim (or cross-claim, third party-
complaint) which is separately allowed under Section 5, par. 2 of Rule 62.

2. the payment of docket fees covering BOC’s counterclaim

The PDB argues that, even assuming that the RTC has jurisdiction over the issue of ownership of
the CB bills, the BOC’s failure to pay the appropriate docket fees prevents the RTC from acquiring
jurisdiction over the BOC’s "counterclaims."

We disagree with the PDB.

To reiterate and recall, the order granting the "PDB’s motion to interplead," already resulted in the
dismissal of the PDB’s petition. The same order required the BOC to amend its answer and for the
conflicting claimants to comment, presumably to conform to the nature of an answer-in interpleader.
Perhaps, by reason of the BOC’s denomination of its claim as a "compulsory counterclaim" and the
PDB’s failure to fully appreciate the RTC’s order granting the "BSP’s motion for interpleader" (with
the PDB’s conformity), the PDB mistakenly treated the BOC’s claim as a "permissive counterclaim"
which necessitates the payment of docket fees.

As the preceding discussions would show, however, the BOC’s "claim" - i.e., its assertion of
ownership over the CB bills – is in reality just that, a "claim" against the stakeholder and not as a
"counterclaim,"144 whether compulsory145or permissive. It is only the BOC’s alternative prayer (for the
PDB to deliver to the BOC, as the buyer in the April 15 transaction and the ultimate successor-in-
interest of the buyer in the April 19 transaction, either the original subjects of the sales or the value
thereof plus whatever income that may have been earned pendente lite) and its prayer for damages
that are obviously compulsory counterclaims against the PDB and, therefore, does not require
payment of docket fees.146

The PDB takes a contrary position through its insistence that a compulsory counterclaim should be
one where the presence of third parties, of whom the court cannot acquire jurisdiction, is not
required. It reasons out that since the RCBC and All Asia (the intervening holders of the CB bills)
have already been dropped from the case, then the BOC’s counterclaim must only be permissive in
nature and the BOC should have paid the correct docket fees.

We see no reason to belabor this claim. Even if we gloss over the PDB’s own conformity to the
dropping of these entities as parties, the BOC correctly argues that a remedy is provided under the
Rules. Section 12, Rule 6 of the Rules of Court reads:

SEC. 12. Bringing new parties. – When the presence of parties other than those to the original action
is required for the granting of complete relief in the determination of a counterclaim or cross-claim,
the court shall order them to be brought in as defendants, if jurisdiction over them can be obtained.

Even then, the strict characterization of the BOC’s counterclaim is no longer material in disposing of
the PDB’s argument based on non-payment of docket fees.

When an action is filed in court, the complaint must be accompanied by the payment of the requisite
docket and filing fees by the party seeking affirmative relief from the court. It is the filing of the
complaint or appropriate initiatory pleading, accompanied by the payment of the prescribed docket
fee, that vests a trial court with jurisdiction over the claim or the nature of the action.147 However, the
non-payment of the docket fee at the time of filing does not automatically cause the dismissal of the
case, so long as the fee is paid within the applicable prescriptive or reglementary period, especially
when the claimant demonstrates a willingness to abide by the rules prescribing such payment.148

In the present case, considering the lack of a clear guideline on the payment of docket fee by the
claimants in an interpleader suit, compounded by the unusual manner in which the interpleader suit
was initiated and the circumstances surrounding it, we surely cannot deduce from the BOC’s mere
failure to specify in its prayer the total amount of the CB bills it lays claim to (or the value of the
subjects of the sales in the April 15 and April 19 transactions, in its alternative prayer) an intention to
defraud the government that would warrant the dismissal of its claim.149

At any rate, regardless of the nature of the BOC’s "counterclaims," for purposes of payment of filing
fees, both the BOC and the PDB, properly as defendants-in-interpleader, must be assessed the
payment of the correct docket fee arising from their respective claims. The seminal case of Sun
Insurance Office, Ltd. v. Judge Asuncion150 provides us guidance in the payment of docket fees, to
wit:

1. x x x Where the filing of the initiatory pleading is not accompanied by payment of the
docket fee, the court may allow payment of the fee within a reasonable time but in no case
beyond the applicable prescriptive or reglementary period.

2. The same rule applies to permissive counterclaims, third-party claims and similar
pleadings, which shall not be considered filed until and unless the filing fee prescribed
therefor is paid. The court may also allow payment of said fee within a reasonable time but
also in no case beyond its applicable prescriptive or reglementary period. [underscoring ours]

This must be the rule considering that Section 7, Rule 62 of which reads:

SEC. 7. Docket and other lawful fees, costs and litigation expenses as liens. – The docket and other
lawful fees paid by the party who filed a complaint under this Rule, as well as the costs and litigation
expenses, shall constitute a lien or charge upon the subject matter of the action, unless the court
shall order otherwise.

only pertain to the docket and lawful fees to be paid by the one 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 in effect only aims to actually
compensate the complainant-in-interpleader, who happens to be the stakeholder unfortunate
enough to get caught in a legal crossfire between two or more conflicting claimants, for the faultless
trouble it found itself into. Since the defendants-in-interpleader are actually the ones who make a
claim - only that it was extraordinarily done through the procedural device of interpleader - then to
them devolves the 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:

The matter of payment of docket fees is not a mere triviality. These fees are necessary to defray
court expenses in the handling of cases. Consequently, in order to avoid tremendous losses to the
judiciary, and to the government as well, the payment of docket fees cannot be made dependent on
the outcome of the case, except when the claimant is a pauper-litigant.152

WHEREFORE, premises considered the consolidated PETITIONS are GRANTED. The Planters
Development Bank is hereby REQUIRED to file with the Regional Trial Court its comment or
answer-in-interpleader to Bank of Commerce’s Amended Consolidated Answer with Compulsory
Counterclaim, as previously ordered by the Regional Trial Court. The Regional Trial Court of Makati
City, Branch 143, is hereby ORDERED to assess the docket fees due from Planters Development
Bank and Bank of Commerce and order their payment, and to resolve with DELIBERATE
DISPATCH the parties’ conflicting claims of ownership over the proceeds of the Central Bank bills.

The Clerk of Court of the Regional Trial Court of Makati City, Branch 143, or his duly authorized
representative is hereby ORDERED to assess and collect the appropriate amount of docket fees
separately due the Bank of Commerce and Planters Development Bank as conflicting claimants in
Bangko Sentral ng Pilipinas’ interpleader suit, in accordance with this decision.

SO ORDERED.
G.R. No. 136409 March 14, 2008

SUBHASH C. PASRICHA and JOSEPHINE A. PASRICHA, Petitioners,

vs.
DON LUIS DISON REALTY, INC., Respondent.

DECISION

NACHURA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal of
the Decision1 of the Court of Appeals (CA) dated May 26, 1998 and its Resolution2 dated December
10, 1998 in CA-G.R. SP No. 37739 dismissing the petition filed by petitioners Josephine and
Subhash Pasricha.

The facts of the case, as culled from the records, are as follows:

Respondent Don Luis Dison Realty, Inc. and petitioners executed two Contracts of Lease3 whereby
the former, as lessor, agreed to lease to the latter Units 22, 24, 32, 33, 34, 35, 36, 37 and 38 of the
San Luis Building, located at 1006 M.Y. Orosa cor. T.M. Kalaw Streets, Ermita, Manila. Petitioners,
in turn, agreed to pay monthly rentals, as follows:

For Rooms 32/35:

From March 1, 1991 to August 31, 1991 – ₱5,000.00/₱10,000.00

From September 1, 1991 to February 29, 1992 – ₱5,500.00/₱11,000.00

From March 1, 1992 to February 28, 1993 – ₱6,050.00/₱12,100.00

From March 1, 1993 to February 28, 1994 – ₱6,655.00/₱13,310.00

From March 1, 1994 to February 28, 1995 – ₱7,320.50/₱14,641.00

From March 1, 1995 to February 28, 1996 – ₱8,052.55/₱16,105.10

From March 1, 1996 to February 29, 1997 – ₱8,857.81/₱17,715.61

From March 1, 1997 to February 28, 1998 – ₱9,743.59/₱19,487.17

From March 1, 1998 to February 28, 1999 – ₱10,717.95/₱21,435.89

From March 1, 1999 to February 28, 2000 – ₱11,789.75/₱23,579.484

For Rooms 22 and 24:

Effective July 1, 1992 – ₱10,000.00 with an increment of 10% every two years.5

For Rooms 33 and 34:

 Effective April 1, 1992 – ₱5,000.00 with an increment of 10% every two years.6

For Rooms 36, 37 and 38:

Effective when tenants vacate said premises – ₱10,000.00 with an increment of 10% every two
years.7

Petitioners were, likewise, required to pay for the cost of electric consumption, water bills and the
use of telephone cables.8

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 contracts.9 While the contracts were in effect, petitioners dealt with Francis
Pacheco (Pacheco), then General Manager of private respondent. Thereafter, Pacheco was
replaced by Roswinda Bautista (Ms. Bautista).10Petitioners religiously paid the monthly rentals until
May 1992.11 After that, however, despite repeated demands, petitioners continuously refused to 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 rentals amounting to
₱916,585.58.12 Because petitioners still refused to comply, a complaint for ejectment was filed by
private respondent through its representative, Ms. Bautista, before the Metropolitan Trial Court
(MeTC) of Manila.13The case was raffled to Branch XIX and was docketed as Civil Case No. 143058-
CV.

Petitioners admitted their failure to pay the stipulated rent for the leased premises starting July until
November 1992, but claimed that such refusal was justified because of the internal squabble in
respondent company as to the person authorized to receive payment.14 To further justify their non-
payment of rent, 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 1992 in the amount of ₱30,000.00, and claimed that respondent waived its right to collect
the rents for the months of July to November 1992 since petitioners were prevented from using
Rooms 22, 24, 32, 33, and 34.15 However, they again withheld 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 prepared the check vouchers for their
monthly rentals from January 1993 to January 1994.17 Petitioners further averred in their Amended
Answer18 that the complaint for ejectment was prematurely filed, as the controversy was not referred
to the barangay for conciliation.

For failure of the parties to reach an amicable settlement, the pre-trial conference was terminated.
Thereafter, they submitted their respective position papers.

On November 24, 1994, the MeTC rendered a Decision dismissing the complaint for ejectment.19 It
considered petitioners’ non-payment of rentals as unjustified. The court 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 matter of possession of the subject premises,
the court did not give credence to petitioners’ claim that private respondent failed to turn over
possession of the premises. The court, however, dismissed the complaint because of Ms. Bautista’s
alleged lack of authority to sue on behalf of the corporation.

Deciding the case on appeal, the Regional Trial Court (RTC) of Manila, Branch 1, in Civil Case No.
94-72515, reversed and set aside the MeTC Decision in this wise:

WHEREFORE, the appealed decision is hereby reversed and set aside and another one is rendered
ordering defendants-appellees and all persons claiming rights under them, as follows:
 (1) to vacate the leased premised (sic) and restore possession thereof to plaintiff-appellant;

(2) to pay plaintiff-appellant the sum of ₱967,915.80 representing the accrued rents in
arrears as of November 1993, and the rents on the leased premises for the succeeding
months in the amounts stated in paragraph 5 of the complaint until fully paid; and

(3) to pay an additional sum equivalent to 25% of the rent accounts as and for attorney’s fees
plus the costs of this suit.

SO ORDERED.20

The court adopted the MeTC’s finding on petitioners’ unjustified refusal to pay the rent, which is a
valid ground for ejectment. It, however, faulted the MeTC in dismissing the case on the ground of
lack of capacity to sue. Instead, it upheld Ms. 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 the company.21

Aggrieved, petitioners elevated the matter to the Court of Appeals in a petition for review on
certiorari.22 On March 18, 1998, petitioners filed an Omnibus Motion23 to cite Ms. Bautista for
contempt; to strike down the MeTC and RTC Decisions as legal nullities; and to conduct hearings
and ocular inspections or delegate the reception of evidence. Without resolving the aforesaid motion,
on May 26, 1998, the CA affirmed24 the RTC Decision but deleted the award of attorney’s fees.25

Petitioners moved for the reconsideration of the aforesaid decision.26 Thereafter, they filed several
motions asking the Honorable Justice Ruben T. Reyes to inhibit from further proceeding with the
case allegedly because of his close association with Ms. Bautista’s uncle-in-law.27

In a Resolution28 dated December 10, 1998, the CA denied the motions for lack of merit. The
appellate court considered said motions as repetitive of their previous arguments, irrelevant and
obviously dilatory.29 As to the motion for inhibition of the Honorable Justice Reyes, the same was
denied, as the appellate court justice stressed that the decision and the resolution were not affected
by extraneous matters.30 Lastly, the appellate court granted respondent’s motion for execution and
directed the RTC to issue a new writ of execution of its decision, with the exception of the award of
attorney’s fees which the CA deleted.31

Petitioners now come before this Court in this petition for review on certiorari raising the following
issues:

I.

Whether this ejectment suit should be dismissed and whether petitioners are entitled to
damages for the unauthorized and malicious filing by Rosario (sic) Bautista of this ejectment
case, it being clear that [Roswinda] – whether as general manager or by virtue of her
subsequent designation by the Board of Directors as the corporation’s attorney-in-fact – had
no legal capacity to institute the ejectment suit, independently of whether Director Pacana’s
Order setting aside the SEC revocation Order is a mere scrap of paper.

II.

Whether the RTC’s and the Honorable Court of Appeals’ failure and refusal to resolve the
most fundamental factual issues in the instant ejectment case render said decisions void on
 their face by reason of the complete abdication by the RTC and the Honorable Justice
Ruben Reyes of their constitutional duty not only to clearly and distinctly state the facts and
the law on which a decision is based but also to resolve the decisive factual issues in any
given case.

III.

Whether the (1) failure and refusal of Honorable Justice Ruben Reyes to inhibit himself,
despite his admission – by reason of his silence – of petitioners’ 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 and (2), worse, his act of ruling against the
petitioners and in favor of the respondent "corporation" constitute an unconstitutional
deprivation of petitioners’ property without due process of law.32

In addition to Ms. Bautista’s lack of capacity to sue, petitioners 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 question the factual findings of the court on the bases of
their ejectment from the subject premises. Specifically, they fault the appellate court for not finding
that: 1) their non-payment of rentals was justified; 2) they were deprived of possession of all the
units subject of the lease contract except Room 35; and 3) respondent violated the terms of the
contract by its continued refusal to turn over possession of Rooms 36, 37 and 38. Petitioners further
prayed that a Temporary Restraining Order (TRO) be issued enjoining the CA from enforcing its
Resolution directing the issuance of a Writ of Execution. Thus, in a Resolution34 dated January 18,
1999, this Court directed the parties to maintain the status quo effective immediately until further
orders.

The petition lacks merit.

We uphold the capacity of respondent company to institute the ejectment case. Although the
Securities and Exchange Commission (SEC) suspended and eventually revoked respondent’s
certificate of registration on February 16, 1995, records show that it instituted the action for
ejectment on December 15, 1993. Accordingly, when the case was commenced, its registration was
not yet revoked.35 Besides, as correctly held by the appellate court, the SEC later set aside its earlier
orders of suspension and revocation of respondent’s certificate, rendering the issue moot and
academic.36

We likewise affirm Ms. Bautista’s capacity to sue on behalf of the company despite lack of proof of
authority to so represent it. A corporation has no powers except those expressly conferred on it by
the Corporation Code and those that are implied from or are incidental to its existence. In turn, a
corporation exercises said powers through its board of directors and/or its duly authorized officers
and agents. Physical acts, like the signing of documents, can be performed only by natural persons
duly authorized for the purpose by corporate by-laws or by a specific act of the board of
directors.37 Thus, any person suing on behalf of the corporation should present proof of such
authority. Although Ms. Bautista initially failed to show that she had the capacity to sign the
verification and institute the ejectment case on behalf of the company, when confronted with such
question, she immediately presented the Secretary’s Certificate38 confirming her authority to
represent the company.

There is ample jurisprudence holding that subsequent and substantial compliance may call for the
relaxation of the rules of procedure in the interest of justice.39 In Novelty Phils., Inc. v. Court of
Appeals,40 the Court faulted the appellate court for dismissing a petition solely on petitioner’s failure
to timely submit proof of authority to sue on behalf of the corporation. In Pfizer, Inc. v. Galan,41 we
upheld the sufficiency of a petition verified by an employment specialist despite the total absence of
a board resolution authorizing her to act for and on behalf of the corporation. Lastly, in China
Banking Corporation v. Mondragon International Philippines, Inc,42 we relaxed the rules of procedure
because the corporation ratified the manager’s status as an authorized signatory. In all of the above
cases, we brushed aside technicalities in the interest of justice. This is not to say that we disregard
the requirement of prior authority to act in the name of a corporation. The relaxation of the rules
applies only to highly meritorious cases, and when there is substantial compliance. While it is true
that rules of procedure are intended 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 of substantial justice.43 Technical and procedural rules are intended to
help secure, not suppress, the cause of justice; and a deviation from the rigid enforcement of the
rules may be allowed to attain that prime objective, for, after all, the dispensation of justice is the
core reason for the existence of courts.44

As to the denial of the motion to inhibit Justice Reyes, we find the same to be in order. First, the
motion to inhibit came after the appellate court rendered the assailed decision, that is, after Justice
Reyes had already rendered his opinion on the merits of the case. It is settled that a motion to inhibit
shall be denied if filed after a member of the court had already given an opinion on the merits of the
case, the rationale being that "a litigant cannot be permitted to speculate on the action of the court x
x x (only to) raise an objection of this sort after the decision has been rendered."45 Second, it is
settled that mere suspicion that a judge is partial to one of the parties is not enough; there should be
evidence to substantiate the suspicion. Bias and prejudice cannot be presumed, especially when
weighed against a judge’s sacred pledge under his oath of office to administer justice 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 stemming from an extrajudicial source, resulting in an opinion on the merits based on
something other than what the judge learned from his participation in the case.46 We would like to
reiterate, at this point, the policy of the Court not to tolerate acts of litigants who, for just about any
conceivable reason, seek to disqualify a judge (or justice) for their own purpose, under a plea of
bias, hostility, prejudice or prejudgment.47

We now come to the more substantive issue of whether or not the petitioners may be validly ejected
from the leased premises.

Unlawful detainer cases are summary in nature. In such cases, the elements to be proved and
resolved are the fact of lease and the expiration or violation of its terms.48 Specifically, the essential
requisites of unlawful detainer are: 1) the fact of lease by virtue of a contract, express or implied; 2)
the expiration or termination of the possessor’s right to hold possession; 3) withholding by the lessee
of possession of the land or building 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 the action within one year from the date of the last demand received by
the defendant.49

It is undisputed that petitioners and respondent entered into two separate contracts of lease
involving nine (9) rooms of the San Luis Building. Records, likewise, show that respondent
repeatedly demanded that petitioners vacate the premises, but the latter refused to heed the
demand; thus, they remained in possession of the premises. The only contentious issue is whether
there was indeed a violation of the terms of the contract: on the part of petitioners, whether they
failed to pay the stipulated rent without justifiable cause; while on the part of respondent, whether it
prevented petitioners from occupying the leased premises except Room 35.

This issue involves questions of fact, the resolution of which requires the evaluation of the evidence
presented. The MeTC, the RTC and the CA all found that petitioners failed to perform their obligation
to pay the stipulated rent. It is settled doctrine that in a civil case, the conclusions of fact of the trial
court, especially when affirmed by the Court of Appeals, are final and conclusive, and cannot be
reviewed on appeal by the Supreme Court.50 Albeit the rule admits of exceptions, not one of them
obtains in this case.51

To settle this issue once and for all, we deem it proper to assess the array of factual findings
supporting the court’s conclusion.

The evidence of petitioners’ non-payment of the stipulated rent is overwhelming. Petitioners,

however, claim that such non-payment is justified by the following: 1) the refusal of respondent to
allow petitioners to use the leased properties, except room 35; 2) respondent’s refusal to turn over
Rooms 36, 37 and 38; and 3) respondent’s refusal to accept payment tendered by petitioners.

Petitioners’ justifications are belied by the evidence on record. As correctly held by the CA,
petitioners’ communications to respondent prior to the filing of the complaint never mentioned their
alleged inability to use the rooms.52 What they pointed out in their letters is that they did not know to
whom payment should be made, whether to Ms. Bautista or to Pacheco.53 In their July 26 and
October 30, 1993 letters, petitioners only questioned the method of computing their electric billings
without, however, raising a complaint about their failure to use the rooms.54 Although petitioners
stated in their December 30, 1993 letter that respondent failed to fulfill its part of the
contract,55 nowhere did they specifically refer to their inability to use the leased rooms. Besides, at
that time, they were already in default on their rentals for more than a year.

If it were true that they were allowed to use only one of the nine (9) rooms subject of the contract of
lease, and considering that the rooms were intended for a business purpose, we cannot understand
why they did not specifically assert their right. If we believe petitioners’ contention that they had been
prevented from using the rooms for more than a year before the complaint for ejectment was filed,
they should have demanded specific performance from the lessor and commenced an action in
court. With the execution of the contract, petitioners were already in a position to exercise their right
to the use and enjoyment of the 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 fact, renovated the rooms. Thus, they were placed in possession of the premises
and they had the right to the use and enjoyment of the same. They, likewise, had the right to resist
any act of intrusion into their peaceful possession of the property, even as against the lessor itself.
Yet, they did not lift a finger to protect their right if, indeed, there was a violation of the contract by
the lessor.

What was, instead, clearly established by the evidence was petitioners’ non-payment of rentals
because ostensibly they did 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 the provisions of the Civil Code of the Philippines on the consignation of
payment and of the Rules of Court on interpleader.

Article 1256 of the Civil Code provides:

Article 1256. If the creditor to whom tender of payment has been made refuses without just cause to
accept it, the debtor shall be released from responsibility by the consignation of the thing or sum
due.

Consignation alone shall produce the same effect in the following cases:

xxxx
(4) When two or more persons claim the same right to collect;

x x x x.

Consignation shall be made by depositing the things due at the disposal of a judicial authority,
before whom the tender of payment shall be proved in a proper case, and the announcement of the
consignation in other cases.57

In the instant case, consignation alone would have produced the effect of payment of the rentals.
The rationale for consignation 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 payment and actually prepared vouchers for their monthly rentals. But that was insufficient
to constitute a valid tender of payment. Even assuming that it was valid tender, still, it would not
constitute payment for want of consignation of the amount. Well-settled is the rule that tender of
payment must be accompanied by consignation in order that the effects of payment may be
produced.59

Moreover, Section 1, Rule 62 of the Rules of Court provides:

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

Otherwise stated, an action for interpleader is proper when the 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 double liability but to protect him
against double vexation in respect of one liability.61

Notably, instead of availing of the above remedies, petitioners opted to refrain from making
payments.

Neither can petitioners validly invoke the non-delivery of Rooms 36, 37 and 38 as a justification for
non-payment of rentals. Although the two contracts embraced the lease of nine (9) rooms, the terms
of the contracts - with their particular reference to specific rooms and the monthly rental for each -
easily raise the inference that the parties intended the lease of each room separate from that of the
others. There is nothing in the contract which would lead to the conclusion that the lease of one or
lavvphil

more rooms was to be made dependent upon the lease of all the nine (9) rooms. Accordingly, the
use of each room by the lessee gave rise to the corresponding obligation to pay the monthly rental
for the same. Notably, respondent demanded payment of rentals only for the rooms actually
delivered to, and used by, petitioners.

It may also be mentioned that the contract specifically provides that the lease of Rooms 36, 37 and
38 was to take effect only when the tenants thereof would vacate the premises. Absent a 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 non-delivery of
Rooms 36, 37 and 38 as an excuse for their failure to pay the rentals due on the other rooms they
occupied. 1avv phil

In light of the foregoing disquisition, respondent has every right to exercise his right to eject the
erring lessees. The parties’ contracts of lease contain identical provisions, to wit:
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 bear interest at the rate of FOUR percent (4%) per month, to be paid,
without prejudice to the right of the LESSOR to terminate his contract, enter the premises, and/or
eject the LESSEE as hereinafter set forth;62

Moreover, Article 167363 of the Civil Code gives the lessor the right to judicially eject the lessees in
case of non-payment of the 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 undertakes to pay the rent therefor.64 For failure to pay the rent, petitioners have no right to
remain in the leased premises.

WHEREFORE, premises considered, the petition is DENIED and the Status Quo Order dated
January 18, 1999 is hereby LIFTED. The Decision of the Court of Appeals dated May 26, 1998 and
its Resolution dated December 10, 1998 in CA-G.R. SP No. 37739 are AFFIRMED.

SO ORDERED.

G.R. No. L-25138 August 28, 1969

JOSE A. BELTRAN, ET AL., plaintiffs-appellants,

vs.
PEOPLE'S HOMESITE & HOUSING CORPORATION, defendants-appellees.

Beltran, Cendaña, Camu, Pelias and Manuel for plaintiffs-appellants.

Government Corporate Counsel Tomas P. Matic Jr. and Assistant Government Corporate Counsel
Romualdo Valera for defendants-appellees.

TEEHANKEE, J.:

Appeal on purely questions of law from an order of dismissal of the complaint for interpleader, on the
ground that it does not state a cause of action, as certified to this Court by the Court of Appeals. We
affirm the dismissal on the ground that where the defendants sought to be interpleaded as conflicting
claimants have no conflicting claims against plaintiff, as correctly found by the trial court, the special
civil action of interpleader will not lie.

This interpleader suit was filed on August 21, 1962, by plaintiffs in their own behalf and in behalf of
all residents of Project 4 in Quezon City, praying that the two defendant-government corporations be
compelled to litigate and interplead between themselves their alleged conflicting claims involving
said Project 4.

Plaintiffs' principal allegations in their complaint were as follows: Since they first occupied in 1953
their respective housing units at Project 4, under lease from the People's Homesite & Housing
Corporation (PHHC) and paying monthly rentals therefor, they were assured by competent authority
that after five years of continuous occupancy, they would be entitled to purchase said units. On
February 21, 1961, the PHHC 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 PHHC debts to the GSIS. In the same announcement, the PHHC also
asked the tenants to signify their conformity to buy the housing units at the selling price indicated on
the back thereof, agreeing to credit the tenants, as down payment on the selling price, thirty (30%)
percent of what had been paid by them as rentals. The tenants accepted the PHHC offer, and on
March 27, 1961, the PHHC announced in another circular that all payments made by the tenants
after March 31, 1961 would be considered as amortizations or installment payments. The PHHC
furthermore instructed the Project Housing Manager in a memorandum of May 16, 1961 to accept as
installments on the selling price the payments made after March 31, 1961 by tenants who were up-
to-date in their accounts as of said date. In September, 1961, pursuant to the PHHC-GSIS
arrangement, collections from tenants on rentals and/or installment payments were delivered by the
PHHC to the GSIS. On December 27, 1961, the agreement of turnover of administration and
ownership of PHHC properties, including Project 4 was executed by PHHC in favor of GSIS,
pursuant to the release of mortgage and amicable settlement of the extrajudicial foreclosure
proceedings instituted in May, 1960 by GSIS against PHHC. Subsequently, however, PHHC through
its new Chairman-General Manager, Esmeraldo Eco, refused to recognize all agreements and
undertakings previously entered into with GSIS, while GSIS insisted on its legal rights to enforce the
said agreements and was upheld in its contention by both the Government Corporate Counsel and
the Secretary of Justice. Plaintiffs thus claimed that these conflicting claims between the defendants-
corporations caused them great inconvenience and 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 policy holders, they preferred to have the implementation of
the outright sale in their favor effected by the GSIS, since the GSIS was "legally entitled to the
management, administration and ownership of the PHHC properties in question." 1

Upon urgent ex parte motion of plaintiffs, the trial Court issued on August 23, 1962 its Order
designating the People's First Savings Bank at Quezon City "to receive in trust the payments from
the plaintiffs on their monthly amortizations on PHHC lots 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 lift
the Court's order designating the People's First Savings Bank as trustee to receive the tenants'
payments on the PHHC lots.

The trial Court heard the motion on September 1, 1962 in the presence of all the parties, and
thereafter issued its Order of September 6, 1962, dismissing the Complaint, ruling that: "During the
hearing of the said motion and opposition thereto, the counsel for the defendants ratified the
allegations in his motion and made of record that the defendant Government Service Insurance
System has no objection that payments on the monthly amortizations from the residents of Project 4
be made directly to the defendant People's Homesite and Housing Corporation. From what appears
in said motion and the statement made in open court by the counsel for defendants that there is no
dispute as to whom the residents of Project 4 should make their monthly amortizations payments,
there is, therefore, 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 expressed its conformity that they be made directly to defendant PHHC.
Counsel for defendants went further to say that whatever dispute, if any, may exist between the two
corporations over the lots and buildings in Project 4, payments made to the PHHC will not and
cannot in any way affect or prejudice the rights of the residents thereof as they will be credited by
either of the two defendants." 3

Plaintiffs subsequently filed their motion for reconsideration and the trial court, "with a view to thresh
out the matter once and for all," called the Managers of the two defendants-corporations and the
counsels for the parties to appear before it for a conference on October 24, 1962. "During the
conference," the trial court related in its Order of November 20, 1962, denying plaintiffs' Motion for
Reconsideration, "Manager Diaz of the GSIS made of record that he has no objection that payments
be made to the PHHC. On the other hand, Manager Eco of the PHHC made of record that at present
there is a standing arrangement between the GSIS and the PHHC that as long as there is showing
that the PHHC has remitted 100% of the total purchase price of a given lot to the GSIS, the latter
corporation shall authorize the issuance of title to the corresponding lot. It was also brought out in
said conference that there is a new arrangement being negotiated between the two corporations that
only 50% of the purchase price be remitted to the GSIS by the PHHC, instead of the 100%. At any
rate the two Managers have assured counsel for the plaintiffs that upon payment of the whole
purchase price of a given lot, the title corresponding to said lot will be issued." 4

On appeal, plaintiffs claim that the trial Court erred in dismissing their suit, contending the allegations
in their complaint "raise questions of fact that can be established only by answer and trial on the
merits and not by a motion to dismiss heard by mere oral manifestations in open court," and that
they "do not know who, as between the GSIS and the PHHC, is the right and lawful party to receive
their monthly amortizations as would eventually entitle them to a clear title to their dwelling units." 5

Plaintiffs entirely miss the vital element of an action of interpleader. Rule 63, section 1 of the Revised
Rules of Court (formerly Rule 14) requires as an indispensable element 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." While the two defendant corporations may have conflicting claims between
themselves with regard to the management, administration and ownership of Project 4, such
conflicting claims are not against the plaintiffs nor do they involve or affect the plaintiffs. No
allegation is made in their complaint that any corporation other than the PHHC which was the only
entity privy to their lease-purchase agreement, ever made on them any claim or demand for
payment of the rentals or amortization payments. The questions of fact raised in their complaint
concerning the enforceability, and recognition or non-enforceability and non-recognition of the
turnover agreement of December 27, 1961 between the two defendant corporations are irrelevant to
their action of interpleader, for these conflicting claims, loosely so-called, are between the two
corporations and not against plaintiffs. Both defendant corporations were in conformity and had no
dispute, as pointed out by the trial court that the monthly payments and amortizations should be
made directly to the PHHC alone.

The record rejects plaintiffs' claim that the trial courts order was based on "mere oral manifestations
in court." The Reply to Opposition of September 11, 1962 filed by the Government Corporate
Counsel expressly "reiterates his manifestation in open court that no possible injustice or prejudice
would result in plaintiffs by continuing to make payments of such rentals or amortizations to
defendant PHHC because any such payments will be recognized as long as they are proper, legal
and in due course by anybody who might take over the property. Specifically, any such payments
will be recognized by the GSIS in the event that whatever conflict there might be (and this is only on
the hypothetical assumption that such conflict exists) between the PHHC and the GSIS should finally
be resolved in favor of the GSIS". 6 The assurances and undertakings to the same affect given by the
Managers of the defendants-corporations at the conference held by the trial Court are expressly
embodied in the Court's Order of November 20, 1962 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 agreement, Annex "F" of plaintiffs' complaint, wherein it is
provided that "GSIS shall recognize and respect all awards, 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. PHHC, however, shall
be liable and answerable for any and all claims and consequences arising from double or multiple
awards or in the case of awards of non-existing houses and/or lots." 7
In fine, the record shows clearly that there were no conflicting claims by defendant corporations as
against plaintiff-tenants, which they may properly be compelled in an interpleader suit to interplead
and litigate among themselves. Both defendant corporations were agreed that PHHC should
continue receiving the tenants' payments, and that such payments would be duly recognized even if
the GSIS should eventually take over Project 4 by virtue of their turnover agreement of December
27, 1961. As held by this Court in an early case, the action of interpleader is a remedy whereby a
person who has property in his possession or has an obligation to render wholly or partially, without
claiming any right in both, comes to court and asks that 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 among themselves in order to determine who is
entitled to the property or payment of the obligation. "The remedy is afforded not to protect a person
against a double liability but to protect him against a double vexation in respect of one
liability." 8 Thus, in another case, where the occupants of two different parcels of land adjoining each
other belonging to two separate plaintiffs, but on which the occupants had constructed a building
encroaching upon both parcels of land, faced two ejectment suits from the plaintiffs, each plaintiff
claiming the right of possession and recovery over his respective portion of the lands encroached
upon, this Court held that the occupants could not properly file an interpleader suit, against the
plaintiffs, to litigate their alleged conflicting claims; for evidently, the two plaintiff did not have any
conflicting claims upon the same subject matter against the occupants, but were enforcing separate
and distinct claims on their respective properties. 9

Plaintiffs' other contention in their appeal is that notwithstanding that the issue as to which of the
defendants is authorized to receive the tenants' payments was resolved in favor of the PHHC, they
had raised other issues that were not resolved and would require rendition of judgment after trial on
the merits, such as "the issue of the right of ownership over the houses and lots in Project 4 (and)
the issue of the status of the commitment agreements and undertakings made by the previous
PHHC Administration, particularly those of the then PHHC General Manager Bernardo
Torres." 10 This contention is without merit, for no conflicting claims have been made with regard to
such issues upon plaintiffs by defendant corporations, who both bound themselves to recognize and
respect the rights of plaintiffs-tenants. The resolution of such issues affecting the defendant
corporations exclusively may not properly be sought through the special civil action of interpleader.
Should there be a breach of the PHHC undertakings towards plaintiffs, plaintiffs' recourse would be
an ordinary action of specific performance or other appropriate suit against either the PHHC or GSIS
or both, as the circumstances warrant.

We find no error, therefore, in the trial court's order of dismissal of the complaint for interpleader and
the lifting, as a consequence, of its other order designating the People's First Savings Bank as
trustee to receive the tenants' payments on the PHHC lots.

ACCORDINGLY, the trial Court's order of dismissal is hereby affirmed. Without costs. 1äw phï1.ñët

Concepcion, C.J., Dizon, Makalintal, Sanchez, Castro, Fernando, Capistrano and Barredo, JJ.,

G.R. No. 133113 August 30, 2001

EDGAR H. ARREZA, petitioner,

vs.
MONTANO M. DIAZ, JR., respondent.

QUISUMBING, J.:
This petition assails the decision 1 promulgated on December 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 the
petition for certiorari questioning the order 3 dated February 4, 1997 of the Regional Trial Court of
Makati City, Branch 59, in Civil Case No. 96-1372, which had denied petitioner's motion to dismiss
the complaint filed against him on grounds of res adjudicata.

The factual antecedents of the present petition are culled from the findings of the Court of Appeals.

Bliss Development Corporation is the owner of a housing unit located at Lot 27. Block 30 New
Capitol Estates I, Barangay Matandang Balara, Quezon City. In the course of a case involving a
conflict of ownership between petitioner Edgar H. Arreza and respondent Montano M. Diaz, Jr., 4
docketed as Civil Case No. 94-2086 before the Regional Trial Court of Makati, Branch 146, Bliss
Development Corporation filed a complaint for interpleader.

In a decision dated March 27, 1996, the trial court resolved the conflict by decreeing as follows:

WHEREFORE, premises considered, the herein interpleader is resolved in favor of

defendant Edgar H. Arreza, and plaintiff Bliss Development is granted cognizance of the May
6, 1991 transfer of rights by Emiliano and Leonila Melgazo thru Manuel Melgazo, to said
defendant Edgar Arreza. The case is dismissed as against defendant Montano M. Diaz, Jr.

The third-party complaint is likewise dismissed.

SO ORDERED.

The decision became final and was duly executed with Bliss executing a Contract to Sell the
aforementioned property to petitioner Arreza. Respondent Diaz was constrained to deliver the
property with all its improvements to petitioner.

Thereafter respondent Diaz filed a complaint against Bliss Development Corporation, Edgar H.
Arreza, and Domingo Tapay in the Regional Trial Court of Makati, Branch 59, docketed as Civil
Case No. 96-1372. He sought to hold Bliss Development Corporation and petitioner Arreza liable for
reimbursement to him of P1,706,915;58 representing the cost of his acquisition and improvements
on the subject property with interest at 8% per annum.

Petitioner Arreza filed a Motion to Dismiss the case, citing as grounds res adjudicata or
conclusiveness of the judgment in the interpleader case as well as lack of cause of action.

In an Order dated February 4, 1997, the motion was denied for lack of merit.

A Motion for Reconsideration filed by Arreza was likewise denied on March 20, 1997.

On April 16, 1997, Arreza filed a petition for certiorari before the Court of Appeals alleging that the
Orders dated February 4 and March 20, 1997, were issued against clear provisions of pertinent
laws, the Rules of Court, and established jurisprudence such that respondent court acted without or
in excess of jurisdiction, or grave abuse of discretion amounting to lack or excess of jurisdiction.

The petition was dismissed for lack of merit. The Court of Appeals said:
 The decision invoked by the petitioner as res adjudicata resolved only the issue of who
between Edgar H. Arreza and Montano Diaz has the better right over the property under
litigation. It did not resolve the rights and obligations of the parties.

The action filed by Montano M. Diaz against Bliss 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 improvements he introduced on the property — matters that were not
adjudicated upon in the previous case for interpleader.

xxx xxx xxx

WHEREFORE, this petition is hereby DISMISSED with costs against the petitioner.

SO ORDERED.5

Petitioner's motion to reconsider the decision of the Court of Appeals was denied.6 Hence, the
present petition, where petitioner raises the following grounds for review:

THE CAUSE OF ACTION EMBODIED IN THE PRESENT RTC CASE PERTAINING TO MR.
DIAZ'S CLAIMS FOR REIMBURSEMENT OF AMOUNTS WHICH HE ALLEGEDLY PAID
TO BLISS BY WAY OF PREMIUM OR INSTALLMENT PAYMENTS FOR THE
ACQUISITION OF THE PROPERTY WAS ERRONEOUSLY BROUGHT AGAINST MR.
ARREZA. ALSO, SAID CLAIMS ARE BARRED BY RES ADJUDICATA OR
CONCLUSIVENESS OF A PRIOR JUDGMENT IN THE PRIOR RTC CASE WHICH WAS
ULTIMATELY AFFIRMED BY THIS HONORABLE COURT IN G.R. NO. 128726.

II

THE CAUSE OF ACTION EMBODIED IN THE PRESENT RTC CASE PERTAINING TO MR.
DIAZ'S CLAIMS FOR REIMBURSEMENT OF THE COST OF IMPROVEMENTS HE
ALLEGEDLY INTRODUCED TO THE PROPERTY IS LIKEWISE BARRED BY RES
ADJUDICATA OR CONCLUSIVENESS OF A PRIOR JUDGMENT IN THE PRIOR RTC
CASE WHICH WAS ULTIMATELY AFFIRMED BY THIS HONORABLE COURT IN G.R NO.
128726.

III.

THE RULING IN THE PRIOR CA PETITION (CA-G.R. SP. NO. 41974) WHICH WAS
ULTIMATELY AFFIRMED BY THIS HONORABLE COURT IN G.R. NO. 128726 THAT THE
DECISION IN THE PRIOR RTC CASE SETTLED ALL CLAIMS WHICH MESSRS. DIAZ
AND ARREZA HAD AGAINST EACH OTHER CONSTITUTES THE LAW OF THE CASE
BETWEEN THEM AND SERVES AS BAR TO THE FILING OF THE PRESENT RTC CASE
INVOLVING THE SAME CLAIMS.

IV.

IN ITS ENTIRETY, THE AMENDED COMPLAINT IN THE PRESENT RTC CASE IS

DISMISSIBLE ON THE GROUND OF LACK OF CAUSE OF ACTION.7
The issue for our resolution now is whether respondent Diaz's claims for reimbursement against
petitioner Arreza are barred by res adjudicata.

The elements of res adjudicata are: (a) that the former judgment must be final; (b) the court which
rendered judgment had jurisdiction over the parties and the subject matter; (c) it must be 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

Worthy of note, the prior case for interpleader filed with Branch 146 of the Regional Trial Court of
Makati, Civil Case No. 94-2086, was settled with finality with this Court's resolution in G.R. No.
128726. 9 The judgment therein is now final.

When the Regional Trial Court of Makati (Branch 146) rendered judgment, it had priorly acquired
jurisdiction over the parties and the subject matter. Respondent, however, contends that the trial
court did not acquire jurisdiction over the property subject of the action, as the action was instituted
in Makati City while the subject unit is situated in Quezon City.

We find, however, that in his answer to the complaint dated October 3, 1994, respondent alleged:

20. That should the said additional provision be declared valid and in the remote possibility
that the alleged conflicting claimant is adjudged to possess better right herein answering
defendant is asserting his right as a buyer for value and in good faith against all
persons/parties concerned.10 (Italics supplied)

Respondent in his answer also prayed that:

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 a buyer in good
faith and for value.11

By asserting his right as a buyer for value and in good faith of the subject property, and asking for
relief arising therefrom, respondent invoked the jurisdiction of the trial court. Having invoked the
jurisdiction of the Regional Trial Court of Makati (Branch 146) by filing his answer to secure
affirmative relief against petitioner, respondent is now estopped from challenging the jurisdiction of
said court after it had decided the case against him. Surely we cannot condone here the undesirable
practice of a party submitting his case for decision and then accepting the judgment only if favorable,
but attacking it on grounds of jurisdiction when adverse.12

Respondent also claims that there is no identity of causes of action between Civil Case No. 94-2086,
the prior case, and Civil Case No. 96-1372, the present case subject of this petition, as the former
involved a complaint for interpleader while the latter now involves an action for a sum of money and
damages. He avers that a complaint for interpleader is nothing more than the determination of rights
over the subject matter involved.

In its assailed decision, respondent Court of Appeals pointed out that the 1997 Rules of Civil
Procedure provide that in a case for interpleader, the court shall determine the respective rights and
obligations of the parties and adjudicate their respective claims.13 The appellate court noted,
however, that the defendants in that interpleader case, namely Diaz and Arreza, did not pursue the
issue of damages and reimbursement although the answer of respondent Diaz did pray for
affirmative relief arising out of the rights of a buyer in good faith.14
Following the same tack, respondent Diaz now alleges that the 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 raising such issues in the prior case, with the
result that the trial court did not resolve the rights and obligations of the parties. There being no such
resolution, no similar cause of action exists between the prior case and the present case, according
to respondent Diaz.

Respondent in effect argues that it was incumbent upon petitioner as a party in Civil Case No. 94-
2086 to put in issue respondent's demands for reimbursement. However, it was not petitioner's duty
to do the lawyering for respondent. As stated by 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, and claims could only be adjudicated if put forward by the aggrieved
party in assertion of his rights. That party in this case referred to respondent Diaz. The second
paragraph of Section 5 of Rule 62 of the 1997 Rules of Civil Procedure provides that the parties in
an interpleader action may file counterclaims, cross-claims, third party complaints and responsive
pleadings thereto, "as provided by these Rules." The second paragraph was added to Section 5 to
expressly authorize the additional pleadings and claims enumerated therein, in the interest of a
complete adjudication of the controversy and its incidents.15

Pursuant to said Rules, respondent should have filed his claims against petitioner Arreza in the
interpleader action. Having asserted his rights as a buyer in good faith in his answer, and praying
relief therefor, respondent Diaz should have crystallized his demand into specific claims for
reimbursement by petitioner Arreza. This he failed to do. Such failure gains significance in light of
our ruling in Baclayon vs. Court of Appeals, 182 SCRA 761, 771-772 (1990), where this Court said:

A corollary question that We might as well resolve now (although not raised as an issue in
the present petition, but conformably with Gayos, et al. v. Gayos, et al., G.R. No. L-27812,
September 26, 197S, 67 SCRA 146, that it is a cherished rule of procedure that a court
should always strive to settle the entire controversy in a single proceeding leaving no root or
branch to bear the seeds in future litigation) is whether or not the private respondents can
still file a separate complaint against the petitioners on the ground that they are builders in
good faith and consequently, recover the value of the improvements introduced by them on
the subject lot. The case of Heirs of Laureano Marquez v. Valencia, 99 Phil. 740, provides
the answer:

If, aside from relying solely on the deed of sale with a right to repurchase and failure
on the part of the vendors to purchase it within the period stipulated therein, the
defendant had set up an alternative though inconsistent defense that he had
inherited the parcel of land from his late maternal grandfather and presented
evidence in support of both defenses, the overruling of the first would not bar the
determination by the court of the second. The defendant having failed to set up such
alternative defenses and chosen or elected to rely on one only, the overruling thereof
was a complete determination of the controversy between the parties which bars a
subsequent action based upon an unpleaded defense, or any other cause of action,
except that of Failure of the complaint to state a cause of action and of lack of
jurisdiction of the Court. The determination of the issue joined by the parties
constitutes res judicata. (Italics supplied)

Although the alternative defense of being builders in good faith is only permissive, the
counterclaim for reimbursement of the value of the improvements is in the nature of a
compulsory counterclaim. Thus, the failure by the private respondents to set it up bars their
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 compulsory counterclaim is designed
to enable the disposition of the whole controversy at one time and in one action. The
philosophy of the rule is to discourage multiplicity of suits. (Italics supplied)

Having failed to set up his claim for reimbursement, said claim of respondent Diaz being in the
nature of a compulsory counterclaim is now barred.16

In cases involving res adjudicata, the parties and the causes of action are identical or substantially
the same in the prior as well as the subsequent action. The judgment in the first action is conclusive
as to every matter offered and received therein and as to any other matter admissible therein and
which might have been offered for that purpose, hence said judgment is an absolute bar to a
subsequent action for the same cause.17 The bar extends to questions "necessarily involved in an
issue, and necessarily adjudicated, or necessarily implied in the final judgment, although no specific
finding may have been made in reference thereto, and although such matters were directly referred
to in the pleadings and were not actually or formally presented"18 Said prior judgment is conclusive in
a subsequent suit between the same parties on the same subject matter, and on the same cause of
action, not only as to matters which were 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

In the present case, we find there is an identity of causes of action between Civil Case No. 94-2086
and Civil Case No. 96-1372. Respondent Diaz's cause of action in the prior case, now the crux of his
present complaint against petitioner, was in the nature of an unpleaded compulsory counterclaim,
which is now barred. There being a former final judgment on the merits in the prior case, rendered in
Civil Case No. 94-2086 by Branch 146 of the Regional Trial Court of Makati, which acquired
jurisdiction 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.
96-1372 before the Regional Trial of Makati, Branch 59 should be dismissed on the ground of res
adjudicata.

WHEREFORE, the instant petition is GRANTED. The decision dated December 24, 1997 and the
resolution dated March 6, 1998 of the Court of Appeals in CA-G.R. SP No. 43895 are REVERSED
and SET ASIDE. Civil Case No. 96-1372 before the Regional Trial Court of Makati City, Branch 59,
is hereby ordered DISMISSED as against herein petitioner Edgar H. Arreza. Costs against
respondent.

SO ORDERED.