Yupangco Cotton Mills, Inc. vs. Court of Appeals

A third-party claimant whose property has been erroneously levied upon by a sheriff to enforce a judgment against a judgment debtor may file an independent accion reinvindicatoria in a court of competent jurisdiction to recover ownership and possession of the property, and the pursuit of administrative remedies before the Labor Arbiter and the NLRC does not preclude such action nor constitute forum shopping, as the causes of action, parties, and reliefs sought are distinct.

Petitioner Yupangco Cotton Mills, Inc. claimed ownership over certain properties located in the compound and buildings of Artex Development Corporation. These properties were levied upon by a sheriff of the National Labor Relations Commission (NLRC) to enforce a decision rendered in a labor case, NLRC-NCR Case No. 00-05-02960-90, between Artex Development Corporation and Samahang Manggagawa ng Artex (Samar-Anglo). Petitioner was not a party to that labor case. The dispute arose from petitioner's attempts to recover properties it claimed were wrongfully subjected to execution in a proceeding to which it was a stranger.

Petitioner Yupangco Cotton Mills, Inc. claimed ownership over certain properties located in the compound and buildings of Artex Development Corporation. A sheriff of the National Labor Relations Commission levied upon these properties to enforce a decision rendered in a labor case, docketed as NLRC-NCR Case No. 00-05-02960-90, between Artex Development Corporation and Samahang Manggagawa ng Artex (Samar-Anglo). Petitioner was not a party to that labor case.

To protect its claimed interests, petitioner pursued a series of remedies. On May 4, 1995, it filed a notice of third-party claim with the Labor Arbiter. On July 4, 1995, it filed an Affidavit of Adverse Claim with the NLRC, which the Labor Arbiter dismissed on August 30, 1995. On October 6, 1995, petitioner filed a petition for certiorari and prohibition with the RTC of Manila, Branch 49, docketed as Civil Case No. 95-75628, which was dismissed for lack of merit on October 11, 1995. Petitioner also appealed to the NLRC the Labor Arbiter's order of August 13, 1995, but the appeal was dismissed for lack of merit on December 8, 1995. On November 16, 1995, petitioner filed an original petition for mandatory injunction with the NLRC, docketed as Case No. NLRC-NCR-IC. 0000602-95, which remained pending.

Thereafter, petitioner filed a complaint for recovery of property and damages with the RTC of Manila, docketed as Civil Case No. 95-76395. The dismissal of this case by the public respondent judge triggered the filing of a petition with the Court of Appeals. In all of these actions, petitioner raised a common issue: that it is the owner of the properties located in the compound and buildings of Artex Development Corporation, which were erroneously and unlawfully levied upon by the NLRC sheriff.

The Court of Appeals, in its decision promulgated on March 29, 1996, dismissed the petition on the ground of forum shopping and ruled that petitioner's remedy was to seek relief from the Supreme Court. The Court of Appeals sustained the trial court's ruling that the remedies granted under Section 17, Rule 39 of the Rules of Court were not available to petitioner because the Manual of Instructions for Sheriffs of the NLRC does not include the remedy of an independent action by the owner to establish his right to his property. Petitioner's motion for reconsideration was denied on August 27, 1996.

• Propriety of Accion Reinvindicatoria: Petitioner argued that the filing of a complaint for accion reinvindicatoria with the RTC was proper because it is a remedy specifically granted to an owner whose properties were subjected to a writ of execution to enforce a decision rendered in a labor dispute in which it was not a party, pursuant to Section 17 (now 16), Rule 39 of the Revised Rules of Court and the doctrines laid down in Sy vs. Discaya, Santos vs. Bayhon, and Manliguez vs. Court of Appeals.
• No Forum Shopping: Petitioner maintained that the reliefs sought and the issues involved in the complaint for recovery of property and damages filed with the RTC were entirely distinct and separate from the reliefs sought and the issues involved in the proceedings before the Labor Arbiter and the NLRC, and that neither the NLRC nor the Labor Arbiter is empowered to adjudicate matters involving ownership of properties.

• Forum Shopping: Whether the Court of Appeals erred in ruling that petitioner was guilty of forum shopping.
• Jurisdiction of the Trial Court: Whether the Court of Appeals erred in dismissing the petitioner's accion reinvindicatoria on the ground of lack of jurisdiction of the trial court.

• Forum Shopping: No. There was no forum shopping because there was no identity of parties, rights, causes of action, and reliefs sought between the NLRC proceedings and the accion reinvindicatoria filed before the RTC.
• Jurisdiction of the Trial Court: No error was committed insofar as the dismissal was predicated on lack of jurisdiction. A third-party claimant may file a proper action with a competent court to recover ownership of property illegally seized by the sheriff, and the remedies available to a third-party claimant are cumulative and may be resorted to independently of one another.

• Forum Shopping: Forum shopping exists when a party asks different courts or administrative agencies to rule on the same or related causes and grant the same or substantially the same reliefs, creating the possibility of conflicting decisions. Here, the case before the NLRC involved a labor dispute between Artex and Samar-Anglo, in which petitioner was not a party. The only issue petitioner raised before the NLRC was whether the writ of execution issued by the Labor Arbiter could be satisfied against the property of petitioner, a non-party to the labor case. The accion reinvindicatoria filed by petitioner in the trial court, on the other hand, was to recover the property illegally levied upon and sold at auction. The causes of action, parties, and reliefs sought in these cases were different. For forum shopping to exist, both actions must involve the same transactions, the same circumstances, and must raise identical causes of action, subject matter, and issues — conditions not met here.

• Jurisdiction of the Trial Court: A third party whose property has been levied upon by a sheriff to enforce a decision against a judgment debtor is afforded several alternative remedies to protect its interests, and these remedies are cumulative — one does not preclude the third party from availing of the others in the event of failure. A third party may file a third-party claim with the sheriff or the Labor Arbiter, and if denied, may appeal the denial to the NLRC. Even if the third-party claim is denied, the third party may still file a proper action with a competent court to recover ownership of the property illegally seized. This finds support in Section 17 (now 16), Rule 39 of the Rules of Court, which expressly provides that "nothing herein contained shall prevent such claimant or any third person from vindicating his claim to the property by any proper action." Jurisprudence consistently holds that the rights of a third-party claimant should not be decided in the action where the third-party claim was presented, but in a separate action to be instituted by the third person. A separate civil action for recovery of ownership of the property does not constitute interference with the powers or processes of the Labor Arbiter and the NLRC, because property levied upon that belongs to a stranger is not subject to levy.

• Cumulative Remedies for Third-Party Claimants — A third party whose property has been levied upon by a sheriff to enforce a judgment against a judgment debtor is afforded several alternative remedies, which are cumulative and may be resorted to independently of one another. These include: (a) filing a third-party claim with the sheriff or the Labor Arbiter; (b) if denied, appealing the denial to the NLRC; and (c) filing a proper action with a court of competent jurisdiction to recover ownership of the property illegally seized. The failure of one remedy does not preclude resort to the others.
• Proper Action for Vindication of Ownership — Under Section 17 (now 16), Rule 39 of the Rules of Court, a third-party claimant may vindicate his claim to property by "any proper action," which is an entirely separate and distinct action from that in which execution has issued, if instituted by a stranger to the latter suit. Such proper action has for its object the recovery of ownership or possession of the property seized by the sheriff, as well as damages resulting from the allegedly wrongful seizure and detention thereof.
• Forum Shopping Test — For forum shopping to exist, both actions must involve the same transactions, the same circumstances, and must raise identical causes of action, subject matter, and issues. There is no forum shopping where two different orders were questioned, two distinct causes of action and issues were raised, and two objectives were sought.
• NLRC's Limited Execution Power — The power of the NLRC to execute its judgments extends only to properties unquestionably belonging to the judgment debtor. The general rule that no court has the power to interfere by injunction with the judgments or decrees of another court of concurrent or coordinate jurisdiction applies only when no third-party claimant is involved. When a third party or stranger to the action asserts a claim over the property levied upon, the claimant may vindicate his claim by an independent action in the proper civil court.

• "There is no forum-shopping where two different orders were questioned, two distinct causes of action and issues were raised, and two objectives were sought." — This passage, quoted from Golangco vs. Court of Appeals, articulates the controlling test for forum shopping and forms the basis for the Court's ruling that petitioner's multiple filings did not constitute forum shopping.
• "But nothing herein contained shall prevent such claimant or any third person from vindicating his claim to the property by any proper action." — This is the pivotal language of Section 17 (now 16), Rule 39 of the Rules of Court, which the Court underscored as the statutory basis for a third-party claimant's right to file an independent accion reinvindicatoria.
• "The rights of a third-party claimant should not be decided in the action where the third-party claim has been presented, but in a separate action to be instituted by the third person." — Quoted from Lorenzana vs. Cayetano, this passage establishes that the proper venue for resolving ownership claims of third parties over levied properties is a separate reinvindicatory action, not the execution proceeding itself.

• Golangco vs. Court of Appeals, 347 Phil. 771 [1997] — Cited for the test on forum shopping, holding that no forum shopping exists where different orders were questioned, distinct causes of action and issues were raised, and different objectives were sought.
• Chemphil Export & Import Corporation vs. Court of Appeals, 231 SCRA 257 [1994] — Cited for the definition of forum shopping as the institution of two or more actions grounded on the same cause on the supposition that one or the other would make a favorable disposition.
• Sy vs. Discaya, 181 SCRA 378 [1990] — Controlling precedent extensively quoted for the proposition that a third-party claimant's right to file an independent action to vindicate ownership over seized properties is reserved by Section 17 (now 16), Rule 39, and that such remedies are cumulative and may be resorted to independently.
• Santos vs. Bayhon, 199 SCRA 525 [1991] — Followed for the ruling that the NLRC's power to execute judgments extends only to properties belonging to the judgment debtor, and that a third-party claimant may vindicate his claim by an independent action in the proper civil court.
• Manliguez vs. Court of Appeals, 232 SCRA 427 [1994] — Cited in support of the proposition that filing a third-party claim before the Labor Arbiter and NLRC does not preclude filing a subsequent action for recovery of property and damages with the RTC.
• Lorenzana vs. Cayetano, 78 SCRA 425 [1977] — Cited for the doctrine that the rights of a third-party claimant should be decided in a separate action, not in the proceeding where the third-party claim was presented.
• Consolidated Bank and Trust Corp. vs. Court of Appeals, 193 SCRA 158 [1991] — Cited for the doctrine that a proper levy is indispensable to a valid sale on execution, and that a person other than the judgment debtor who claims ownership over levied properties is not precluded from taking other legal remedies.

• Section 17 (now 16), Rule 39, Revised Rules of Court — Governs proceedings where property is claimed by a third person. The provision expressly reserves to any third person the right to vindicate his claim to the property "by any proper action," which the Court held encompasses an independent accion reinvindicatoria in a court of competent jurisdiction. The Court applied this provision to hold that petitioner's filing of a complaint for recovery of property and damages with the RTC was a proper and available remedy notwithstanding the prior administrative remedies pursued before the Labor Arbiter and the NLRC.
• Section 2, Rule VI, Manual of Instructions for Sheriffs of the NLRC — Referenced as providing for the remedy of filing a third-party claim with the sheriff of the Labor Arbiter and appealing a denial to the NLRC. The Court of Appeals had relied on this provision to deny the availability of an independent action, but the Supreme Court ruled that this provision does not preclude the separate remedy provided by Section 17 (now 16), Rule 39.

Davide, Jr., C.J., Puno, Kapunan, and Ynares-Santiago, JJ., concurred.