Rizal Commercial Banking Corporation vs. Metro Container Corporation

An interpleader action ceases and may be dismissed as moot when a final and executory ejectment judgment directs the stakeholder to pay rentals to one claimant, there being no more conflicting claim to litigate as to that liability. The bank, though not bound by the ejectment judgment to which it was not a party, could not compel continuation of the interpleader and retained other remedies to litigate ownership, including the pending nullification-of-foreclosure case.

Ley Construction Corporation owned property in Barrio Ugong, Valenzuela covered by TCT No. V-17223, which it leased to Metro Container Corporation. The same property was mortgaged by Ley Construction Corporation to Rizal Commercial Banking Corporation as security for a loan. This overlapping lessor-lessee and mortgagor-mortgagee relationship over one property created competing demands for rental payments once title was consolidated in the bank's name.

On 26 September 1990, Ley Construction Corporation contracted a loan of Thirty Million Pesos (P30,000,000.00) from Rizal Commercial Banking Corporation, secured by a real estate mortgage over property in Barrio Ugong, Valenzuela, Metro Manila covered by TCT No. V-17223. When Ley Construction Corporation failed to settle its obligations, the bank instituted extrajudicial foreclosure proceedings. After Ley Construction Corporation's legal attempts to forestall the action failed, the foreclosure took place on 28 December 1992 with the bank as the highest bidder.

Thereafter, Ley Construction Corporation filed Civil Case No. 4037-V-93 for Nullification of Extrajudicial Foreclosure Sale and Damages against the bank before the Regional Trial Court of Valenzuela, Branch 172. Meanwhile, the bank consolidated its ownership over the property upon Ley Construction Corporation's failure to redeem within the 12-month redemption period, resulting in the issuance of TCT No. V-332432 in the bank's favor. By virtue thereof, the bank demanded rental payments from Metro Container Corporation, which was leasing the property from Ley Construction Corporation.

On 26 May 1994, Ley Construction Corporation filed an action for Unlawful Detainer, Civil Case No. 6202, against Metro Container Corporation before the Metropolitan Trial Court of Valenzuela, Branch 82. The following day, 27 May 1994, Metro Container Corporation filed a complaint for Interpleader, Civil Case No. 4398-V-94, before the Regional Trial Court of Valenzuela, Branch 75, against Ley Construction Corporation and the bank to compel them to litigate among themselves which of them should rightfully receive the monthly rentals. During the pre-trial on 04 July 1995, the interpleader court dismissed the case insofar as Metro Container Corporation and Ley Construction Corporation were concerned in view of an amicable settlement under which Metro Container Corporation paid back rentals to Ley Construction Corporation.

On 31 October 1995, judgment was rendered in Civil Case No. 6202 ordering Metro Container Corporation to pay Ley Construction Corporation whatever rentals were due on the subject premises, and the decision became final and executory. On 01 February 1996, Metro Container Corporation moved for dismissal of Civil Case No. 4398-V-94 as moot and academic because of the 04 July 1995 settlement and the 31 October 1995 decision, and Ley Construction Corporation likewise moved for dismissal on the same grounds. The Regional Trial Court denied both motions on 12 March 1996 and denied reconsideration, prompting Metro Container Corporation to seek certiorari and prohibition from the Court of Appeals, with Ley Construction Corporation also seeking nullification of the trial court orders as private respondent.

• Effect of Ejectment Judgment: Petitioner argued that the decision of the Metropolitan Trial Court in the ejectment case between Metro Container Corporation and Ley Construction Corporation does not and cannot render the interpleader action moot and academic.
• Non-Dismissal After Answer: Petitioner argued that while a party who initiates an interpleader action may not be compelled to litigate if no longer interested, said party may not unilaterally cause dismissal after answers have been filed, and the defendants in an interpleader suit should be given full opportunity to litigate their respective claims.

• Mootness: Respondent countered that Civil Case No. 4398-V-94 had become moot and academic due to the amicable settlement entered with Ley Construction Corporation on 04 July 1995 and the decision in Civil Case No. 6202 on 31 October 1995 ordering payment of rentals to Ley Construction Corporation.

• Mootness of Interpleader: Whether the final ejectment judgment ordering the lessee to pay rentals to the lessor rendered the interpleader action for determination of rental payee moot and academic.
• Right to Continue Interpleader: Whether the plaintiff-in-interpleader may obtain dismissal of the interpleader after answers have been filed, over the objection of a defendant-claimant seeking to litigate its claim therein.

• Mootness of Interpleader: Yes. The reason for interpleader ceased when the final ejectment judgment directed payment of rentals to Ley Construction Corporation, leaving no conflicting rental claim requiring interpleader resolution as to the stakeholder.
• Right to Continue Interpleader: No. The stakeholder could not be compelled to pursue the interpleader once a judicial fiat obligated it to pay one claimant, the non-party bank retaining other avenues such as the nullification case to prove ownership.

• Mootness of Interpleader: Interpleader lies only where conflicting claims upon the same subject matter are or may be made against a person claiming no interest or only an undisputed interest therein. Metro Container Corporation filed interpleader because it was unsure whether Ley Construction Corporation as lessor or the bank as consolidated title holder was entitled to rentals. The unlawful detainer case was limited to physical or material possession, with ownership immaterial and incapable of affecting the ownership dispute between the bank and Ley Construction Corporation. Nevertheless, its judgment directing Metro Container Corporation to pay Ley Construction Corporation whatever rentals were due resolved the conflicting claims insofar as payment of rentals was concerned, and upon finality Metro Container Corporation had no alternative but to pay Ley Construction Corporation, eliminating double vexation and the need to continue Civil Case No. 4398-V-94.
• Right to Continue Interpleader: Although the bank was not a party to Civil Case No. 6202 and was not bound by its judgment, that non-party status did not entitle it to compel Metro Container Corporation to pursue Civil Case No. 4398-V-94 where the stakeholder acted not from mere loss of interest but from existence of a binding judicial order to pay. Interpleader protection against double vexation in respect of one liability no longer served a purpose once the stakeholder was judicially ordered to discharge that liability to a specific claimant. The bank was not bereft of remedies because the ownership issue could be threshed out in Civil Case No. 4037-V-93 for nullification of the extrajudicial foreclosure sale.

• Interpleader when proper — Interpleader is 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, to compel the conflicting claimants to interplead and litigate their several claims among themselves. Applied here, the initial uncertainty between the lessor's rental claim and the consolidated owner's demand justified filing, but the subsequent final order to pay one claimant removed the conflicting-claims predicate for rentals.
• Purpose of interpleader — An action of interpleader is afforded to protect a person not against double liability but against double vexation in respect of one liability. Applied here, Metro Container Corporation needed protection only until a court definitively told it to whom to pay rentals; once so ordered, continued interpleader would serve no protective function.
• Nature of ejectment; ownership immaterial — The issue in an unlawful detainer case is limited to physical or material possession of the premises, and ownership is immaterial and cannot be resolved to affect competing ownership claims. Applied here, the MeTC judgment did not settle ownership between Ley Construction Corporation and Rizal Commercial Banking Corporation, but it conclusively settled to whom the lessee owed rentals, which was sufficient to moot the interpleader as to the stakeholder.

• "Section 1. - Interpleader when proper. - Whenever conflicting claims upon the same subject matter are or may be made against a person, who claims no interest whatever in the subject matter, or an interest which in whole or in part is not disputed by the claimants, he may bring an action against the conflicting claimants to compel them to interplead and litigate their several claims among themselves." — States the statutory basis and indispensable requisite for interpleader applied to justify both the initial filing and its later dismissal.
• "It should be remembered that an action of interpleader is afforded to protect a person not against double liability but against double vexation in respect of one liability." — Defines the protective purpose of interpleader, supporting the conclusion that protection was no longer needed after a final directive to pay.
• "It requires, as an indespensable requisite, that "conflicting claims upon the same subject matter are or may be made against the plaintiff-in-interpleader who claims no interest whatever in the subject matter or an interest which in whole or in part is not disputed by the claimants."" — Formulates the threshold requirement whose satisfaction ceased as to rentals once the ejectment judgment became final.

• Wack Wack Golf and Country Club, Inc. vs. Won, 70 SCRA 165 (1976) — Cited as authority for the proposition that interpleader protects against double vexation in respect of one liability, not against double liability.
• Lim vs. Continental Development Corporation, 69 SCRA 349 (1976) citing Beltran vs. People's Homesite and Housing Corporation, 29 SCRA 145 (1969) — Cited as authority for the indispensable requisite of conflicting claims against a disinterested stakeholder.
• Lagrosa vs. Court of Appeals, 312 SCRA 298 (1999); Arcal vs. Court of Appeals, 285 SCRA 34 (1998) — Cited to support that the issue in the detainer case is limited to physical or material possession.
• Carreon vs. Court of Appeals, 291 SCRA 78 (1998) — Cited to support that ownership is immaterial in the ejectment action.

• Section 1, Rule 63, Revised Rules of Court (now Section 1, Rule 62, 1997 Rules of Civil Procedure) — Provides when interpleader is proper based on conflicting claims against a disinterested stakeholder; applied to hold that the predicate for interpleader as to rentals disappeared after the final ejectment order to pay Ley Construction Corporation.

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