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RCBC v.

Metro Container Corp

Doctrine: An action of interpleader is afforded to protect a person not against double liability but against
double vexation in respect of one liability. 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.

Facts:

Ley Construction Corporation (LEYCON) contracted a loan from Rizal Commercial Banking Corporation
(RCBC) in the amount of Thirty Million Pesos (P30,000,000.00). The loan was secured by a real estate
mortgage over a property located in Valenzuela City. For failure of Ley Construction Corporation
(LEYCON) to settle its loan obligations, Rizal Commercial Banking Corporation (RCBC) instituted an
extrajudicial foreclosure proceeding against it. In a bidding, RCBC was adjudged the highest bidder.
LEYCON promptly filed an action for Nullification of Extrajudicial Foreclosure Sale and Damages against
RCBC. Meanwhile, RCBC consolidated its ownership over the property due to LEYCON's failure to
redeem the mortgaged property within the 12-month redemption period. By virtue thereof, RCBC
demanded rental payments from Metro Container Corporation (METROCAN) which was leasing the
mortgaged property from LEYCON.

On the other hand, LEYCON filed an action for Unlawful Detainer against METROCAN before the MeTC.
Consequently, METROCAN filed a complaint for Interpleader against LEYCON and RCBC before the RTC
to compel them to interplead and litigate their several claims among themselves and to determine
which among them shall rightfully receive the payment of monthly rentals on the subject property.

On 31 October 1995, judgment was rendered in the Unlawful Detainer case, which, among other things,
ordered METROCAN to pay LEYCON whatever rentals due on the subject premises. The said decision
became final and executory. By reason thereof, METROCAN and LEYCON separately filed a motion to
dismiss the interpleader case. However, the said motions were dismissed for lack of merit. METROCAN
appealed to the Court of Appeals which granted the petition and ordered the dismissal of the
interpleader case. Hence, RCBC filed the instant petition.

Issue: May METROCAN unilaterally cause the dismissal of the interpleader case?

Held: Yes. An action of interpleader is afforded to protect a person not against double liability but
against double vexation in respect of one liability. It 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.

When the decision in the Unlawful Detainer case became final and executory, METROCAN has no other
alternative left but to pay the rentals to LEYCON. Precisely because there was already a judicial fiat to
METROCAN, there was no more reason to continue with the interpleader case. Thus, METROCAN moved
for the dismissal of the interpleader action not because it is no longer interested but because there is no
more need for it to pursue such cause of action. The decision in the Unlawful Detainer case resolved the
conflicting claims insofar as payment of rentals was concerned.

RCBC was correct in saying that it is not bound by the decision in the Unlawful Detainer case. It is not a
party thereto. However, it could not compel METROCAN to pursue the interpleader case. RCBC has
other avenues to prove its claim. It is not bereft of other legal remedies. In fact, the issue of ownership
can very well be threshed out in the case for Nullification of Extrajudicial Foreclosure Sale and Damages
filed by LEYCON against RCBC.

Lim v. Continental Development Corporation

Doctrine:

Facts:

On November 26, 1973, petitioner Continental Development Corporation filed a complaint for
interpleader against the defendants Benito Gervasio Tan and Zoila Co Lim, alleging among others, that in
the books of the plaintiff, that defendant Benito Gervasio Tan is one of its stockholders, with an
outstanding total stockholding of 125 common shares, with a certificate of stock. Said defendant Benito
Gervasio Tan, personally or through his lawyer, has been demanding the release of the certificates stock
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. Defendant Zoila Co Lim persisted 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. Both
defendants, 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. 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. Plaintiff
claimed 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.

Respondent Tan filed a motion to dismiss the complaint, on the ground that par. 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 pursuant to Sec. 52 of the
Corporation Law. Defendant alleged that the said shares of stock had previously been delivered in trust
to the defendant Tan for her late mother, the actual owner of the shares of stock; that defendant Tan
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.
Petitioner Continental Development Corporation filed its opposition to Benito's motion to dismiss. RTC
dismissed the complaint for lack of cause of action, invoking Section 35 of the Corporation Law.

ISSUE: W/N an interpleader is proper (YES)

HELD:

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. petitioner corporation expressly stated in
the complaint that both defendants 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. Petitioner Continental Development Corporation
said in its complaint 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 should be given full opportunity to litigate their respective claims.

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.

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.

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 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. 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.
BELO MEDICAL GROUP, INC v. SANTOS and BELO

Doctrine: A conflict between two (2) stockholders of a corporation does not automatically render their
dispute as intra-corporate. The nature of the controversy must also be examined.

Facts:

Belo Medical Group received a request from Santos for the inspection of corporate records.
Santos claimed that he was a registered shareholder and a co-owner of Belo's shares, as these were
acquired while they cohabited as husband and wife. Santos sought advice on his probable removal as
director of the corporation considering that he was not notified of meetings where he could have been
removed. He also inquired on the election of Henares as Corporate Secretary when Santos had not been
notified of a meeting for Henares' possible election. Finally, he sought explanation on the corporation's
failure to inform him of the annual meetings.

Santos attempted to inspect the corporate books thrice, but it was all unsuccessful; on first
attempt, Henares, officer-in-charge of corporate records, was travelling. On the succeeding attempts,
Belo barred his requests, informing Belo Medical Group that Santos only held the shares in trust for her,
as she, and not Santos, paid for these shares, and that Santos had a business in direct competition with
it. She suspected that Santos' request to inspect the records of Belo Medical Group was a means to
obtain a competitor's business information, and was, therefore, in bad faith. She also informed Belo
Medical Group that Santos already had a pending petition with the RTC to be declared as co-owner of
her properties. She asserted that unless a decision was rendered in Santos' favor, he could not exercise
ownership rights over her properties.

Belo and Belo Medical Group informed him that he was barred from accessing corporate
records because doing so would be inimical to Belo Medical Group's interests. He was reminded of his
majority share in The Obagi Skin Health, Inc. the owner and operator of the House of Obagi clinics. He
was likewise reminded of the service of a notice of the 2007 special meeting of stockholders to his
address at Valero Street, Makati City, contrary to his claim.

Belo Medical Group filed a Complaint for Interpleader with RTC, alleging that while Santos
appeared to be a registered stockholder, there was nothing on the record to show that he had paid for
the shares under his name. The Complaint was filed "to protect its interest and compel them to
interplead and litigate their conflicting claims of ownership of, as well as the corresponding right of
inspection arising from, the 25 shares between themselves pursuant to Rule 62 of the 1997 Rules of Civil
Procedure"

On May 29, 2008, Belo Medical Group filed a Supplemental Complaint for declaratory relief under Rule
63 of the Rules of Court. In its Supplemental Complaint, Belo Medical Group relied on Section 74 of the
Corporation Code to deny Santos' request for inspection. It prayed that Santos be perpetually barred
from inspecting its books due to his business interest in a competitor. Should the ruling for interpleader
be in favor of Santos, Belo Medical Group prayed that the trial court exercise its power under Rule 63 of
the Revised Rules of Civil Procedure and give a proper construction of Sections 74 and 75 of the
Corporation Code in relation to the facts presented above, and declare that plaintiff can rightfully
decline defendant Santos's request for inspection under those sections and related provisions and
jurisprudence.

Belo Medical Group's Complaint and Supplemental Complaint were raffled to the RTC of Makati, a
special commercial court, thus classifying them as intra-corporate.

Belo argued that the proceedings should not have been classified as intra-corporate because while their
right of inspection as shareholders may be considered intra-corporate, "it ceases to be that and
becomes a full-blown civil law question if competing rights of ownership are asserted as the basis for the
right of inspection."

Belo Medical Group filed an Omnibus Motion for Clarificatory Hearing and for Leave to File Consolidated
Reply praying that the case be tried as a civil case and not as an intra-corporate controversy. It argued
that the Interim Rules of Procedure Governing Intra-Corporate Controversies did not include special civil
actions for interpleader and declaratory relief found under the Rules of Court. Belo Medical Group
clarified that the issue on ownership of the shares of stock must first be resolved before the issue on
inspection could even be considered ripe for determination.

The trial court characterized the dispute as "intrinsically connected with the regulation of the
corporation as it involves the right of inspection of corporate records." Included in Santos and Belo's
conflict was a shareholder's exclusive right to inspect corporate records. In addition, the issue on the
ownership of shares requires the application of laws and principles regarding corporations.

However, RTC ruled that the Complaint could not flourish as Belo Medical Group "failed to sufficiently
allege conflicting claims of ownership over the subject shares. Finally, the Complaint for Declaratory
Relief was struck down as improper because it sought an initial determination on whether Santos was in
bad faith and if he should be barred from inspecting the books of the corporation. Only after resolving
these issues can the trial court determine his rights under Sections 74 and 75 of the Corporation Code.
The act of resolving these issues is not within the province of the special civil action as declaratory relief
is limited to the construction and declaration of actual rights and does not include the determination of
issues. Belo filed a Petition for Review but CA dismissed Belo's Petition and ruled that the pending case
before this Court filed by Belo Medical Group was the more appropriate vehicle to determine the issues.

ISSUE:

(1) W/N the present controversy is intra-corporate

(2) W/N Belo Medical Group, Inc. came to this Court using the correct mode of appeal

(3) W/N the RTC had basis in dismissing Belo Medical Group’s Complaint for Declaratory Relief

HELD:
(1) YES.

A.M. No. 01-2-04-SC/ Interim Rules of Procedure Governing Intra-Corporate Controversies, enumerates
the cases where the rules will apply:

Section 1. (a) Cases Covered - These Rules shall govern the procedure to be observed in civil cases
involving the following:

Devices or schemes employed by, or any act of, the board of directors, business associates, officers or
partners, amounting to fraud or misrepresentation which may be detrimental to the interest of the
public and/or of the stockholders, partners, or members of any corporation, partnership, or association;

Controversies arising out of intra-corporate, partnership, or association relations, between and among
stockholders, members, or associates; and between, any or all of them and the corporation, partnership,
or association of which they are stockholders, members, or associates, respectively;

Controversies in the election or appointment of directors, trustees, officers, or managers of


corporations, partnerships, or associations;

Derivative suits; and

Inspection of corporate books.

The same rules prohibit the filing of a motion to dismiss:

Section 8. Prohibited Pleadings. -The following pleadings are prohibited: (1) Motion to dismiss;

(2) Motion for a bill of particulars;

(3) Motion for new trial or for reconsideration of judgment or order, or for re-opening of trial;

(4) Motion for extension of time to file pleadings, affidavits or any other paper, except those filed due to
clearly compelling reasons. Such motion must be verified and under oath; and

(5) Motion for postponement and other motions of similar intent, except those filed due to clearly
compelling reasons. Such motion must be verified and under oath.

To determine whether an intra-corporate dispute exists and whether this case requires the application
of these rules of procedure, this Court evaluated the relationship of the parties.

The types of intra-corporate relationships were reviewed in Union Glass & Container Corporation v.
Securities and Exchange Commission:

[a] between the corporation, partnership or association and the public; [b] between the corporation,
partnership or association and its stockholders, partners, members, or officers; [c] between the
corporation, partnership or association and the state in so far as its franchise, permit or license to
operate is concerned; and [d] among the stockholders, partners or associates themselves.
For as long as any of these intra-corporate relationships exist between the parties, the controversy
would be characterized as intra-corporate. This is known as the "relationship test."

DMRC Enterprises v. Este del Sol Mountain Reserve, Inc. employed what would later be called as the
"nature of controversy test." It became another means to determine if the dispute should be considered
as intra--corporate.

In DMRC Enterprises, the Supreme Court held that it was not just the relationship of the parties that
mattered but also the conflict between them:

“Nowhere in said decree do we find even so much as an intimidation that absolute jurisdiction and
control is vested in the SEC in all matters affecting corporations. To uphold the respondent's argument
would remove without legal imprimatur from the regular courts all conflicts over matters involving or
affecting corporations, regardless of the nature of the transactions which give rise to such disputes. The
courts would then be divested of jurisdiction not by reason of the nature of the dispute submitted to
them for adjudication, but solely for the reason that the dispute involves a corporation. This cannot be
done. To do so would not only be to encroach on the legislative prerogative to grant and revoke
jurisdiction of the courts but such a sweeping interpretation may suffer constitutional infirmity. Neither
can we reduce jurisdiction of the courts by judicial fiat”

This Court now uses both the relationship test and the nature of the controversy test to determine if an
intra-corporate controversy is present.

Applying the relationship test, this Court notes that both Belo and Santos are named shareholders in
Belo Medical Group's Articles of Incorporation and General Information Sheet for 2007. The conflict is
clearly intra-corporate as it involves 2shareholders although the ownership of stocks of one stockholder
is questioned. Unless Santos is adjudged as a stranger to the corporation because he holds his shares
only in trust for Belo, then both he and Belo, based on official records, are stockholders of the
corporation. Belo Medical Group argues that the case should not have been characterized as intra-
corporate because it is not between two shareholders as only Santos or Belo can be the rightful
stockholder of the 25 shares of stock. This may be true. But this finding can only be made after trial
where ownership of the shares of stock is decided.

The trial court cannot classify the case based on potentialities. The two defendants in that case are both
stockholders on record. They continue to be stockholders until a decision is rendered on the true
ownership of the 25 shares of stock in Santos' name. If Santos' subscription is declared fictitious and he
still insists on inspecting corporate books and exercising rights incidental to being a stockholder, then,
and only then, shall the case cease to be intra-corporate.

Applying the nature of the controversy test, this is still an intra--corporate dispute. The Complaint for
interpleader seeks a determination of the true owner of the shares of stock registered in Santos' name.
Ultimately, however, the goal is to stop Santos from inspecting corporate books. This goal is so apparent
that, even if Santos is declared the true owner of the shares of stock upon completion of the
interpleader case, Belo Medical Group still seeks his disqualification from inspecting the corporate books
based on bad faith. Therefore, the controversy shifts from a mere question of ownership over movable
property to the exercise of a registered stockholder's proprietary right to inspect corporate books.

Belo Medical Group argues that to include inspection of corporate books to the controversy is
premature considering that there is still no determination as to who, between Belo and Santos, is the
rightful owner of the 25 shares of stock. Its actions belie its arguments. Belo Medical Group wants the
trial court not to prematurely characterize the dispute as intra-corporate when, in the same breath, it
prospectively seeks Santos' perpetual disqualification from inspecting its books. This case was never
about putting into light the ownership of the shares of stock in Santos' name. If that was a concern at all,
it was merely secondary. The primary aim of Belo and Belo Medical Group was to defeat his right to
inspect the corporate books, as can be seen by the filing of a Supplemental Complaint for declaratory
relief.

The circumstances of the case and the aims of the parties must not be taken in isolation from one
another. The totality of the controversy must be taken into account to improve upon the existing tests.
This Court notes that Belo Medical Group used its Complaint for interpleader as a subterfuge in order to
stop Santos, a registered stockholder, from exercising his right to inspect corporate books.

Belo made no claims to Santos' shares before he attempted to inspect corporate books, and inquired
about the Henares' election as corporate secretary and the conduct of stockholders' meetings. Even as
she claimed Santos' shares as hers, Belo proffered no initial proof that she had paid for these shares. She
failed to produce any document except her bare allegation that she had done so. Even her Answer Ad
Cautelam with Cross-Claim96 contained bare allegations of ownership.

According to its Complaint, although Belo Medical Group's records reflect Santos as the registered
stockholder of the 25 shares, they did not show that Santos had made payments to Belo Medical Group
for these shares, "consistent with Belo's claim of ownership over them." The absence of any document
to establish that Santos had paid for his shares does not bolster Belo's claim of ownership of the same
shares. Santos remains a stockholder on record until the contrary is shown.

Belo Medical Group cites Lim v. Continental Development Corporation as its basis for filing its Complaint
for interpleader. In Lim, Tan appeared as a stockholder of Continental Development Corporation. He
repeatedly requested the corporation to issue certificates of shares of stock in his name but Continental
Development Corporation could not do this due to the claims of Lim. Lim alleged that her mother, So Bi,
was the actual owner of the shares that were already registered in the corporate books as Lim's, and she
delivered these in trust to Lim before she died. Lim wanted to have the certificates of shares cancelled
and new ones re-issued in his name. This Court ruled that Continental Development Corporation was
correct in filing a case for interpleader:
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 claimants, he may bring an action against the conflicting claimants to compel them to
interplead and litigate their several claims among themselves . . .

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.

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. 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.

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 and
the sheriff were each allowed to file a complaint in interpleader to determine the respective rights of
the claimants.

In Lim, the corporation was presented certificates of shares of stock in So Bi's name. This proof was
sufficient for Continental Development Corporation to reasonably conclude that controversy on
ownership of the shares of stock existed.

Furthermore, the controversy in Lim was between a registered stockholder in the books of the
corporation and a stranger who claimed to be the rightful transferee of the shares of stock of her
mother. The relationship of the parties and the circumstances of the case establish the civil nature of
the controversy, which was plainly, ownership of shares of stock. Interpleader was not filed to evade or
defeat a registered stockholder's right to inspect corporate books. It was borne by the sincere desire of a
corporation, not interested in the certificates of stock to be issued to either claimant, to eliminate its
liability should it favor one over the other.
On the other hand, based on the facts of this case and applying the relationship and nature of the
controversy tests, it was understandable how the trial court could classify the interpleader case as intra-
corporate and dismiss it. There was no ostensible debate on the ownership of the shares that called for
an interpleader case. The issues and remedies sought have been muddled when, ultimately, at the front
and center of the controversy is a registered stockholder's right to inspect corporate books.

As an intra-corporate dispute, Santos should not have been allowed to file a Motion to Dismiss. The trial
court should have continued on with the case as an intra-corporate dispute considering that it called for
the judgments on the relationship between a corporation and its two warring stockholders and the
relationship of these two stockholders with each other.

(2) NO. Rule 45 is the wrong mode of appeal.

A.M. No. 04-9-07-SC promulgated by this Court En Banc laid down the rules on modes of appeal in cases
formerly cognizable by the Securities and Exchange Commission:

1. All decisions and final orders in cases falling under the Interim Rules of Corporate Rehabilitation and
the Interim Rules of Procedure Governing Intra-Corporate Controversies under Republic Act No. 8799
shall be appealable to the Court of Appeals through a petition for review under Rule 43 of the Rules of
Court.

2. The petition for review shall be taken within 15 days from notice of the decision or final order of the
Regional Trial Court. Upon proper motion and the payment of the full amount of the legal fee prescribed
in Rule 141 as amended before the expiration of the reglementary period, the Court of Appeals may
grant an additional period of 15 days within which to file the petition for review. No further extension
shall be granted except for the most compelling reasons and in no case to exceed 15 days.

On the other hand, Rule 43 of the Rules of Court allows for appeals to the Court of Appeals to raise
questions of fact, of law, or a mix of both. Hence, a party assailing a decision or a final order of the trial
court acting as a special commercial court, purely on questions of law, must raise these issues before
the Court of Appeals through a petition for review.101 A.M. No. 04-9-07-SC mandates it. Rule 43 allows
it.

Belo Medical Group argues that since it raises only questions of law, the proper mode of appeal is
Rule 45 filed directly to this Court. This is correct assuming there were no rules specific to intra-
corporate disputes. Considering that the controversy was still classified as intra-corporate upon filing
of appeal, special rules, over general ones, must apply.

Based on the policy of judicial economy and for practical considerations, this Court will not dismiss the
case despite the wrong mode of appeal utilized. For one, it would be taxing in time and resources not
just for Belo Medical Group but also for Santos and Belo to dismiss this case and have them refile their
petitions for review before the Court of Appeals. There would be no benefit to any of the parties to
dismiss the case especially since the issues can already be resolved based on the records before this
Court. Also, the Court of Appeals already referred the matter to this Court when it dismissed Belo's
Petition for Review. Remanding this case to the Court of Appeals would not only be unprecedented, it
would further delay its resolution.

(3) NO. Two cases were filed by Belo Medical Group: the Complaint for interpleader and the
Supplemental Complaint for Declaratory Relief. Under Rule 2, Section 5 of the Rules of Court, a joinder
of cause of action is allowed, provided that (c) the joinder shall not include special civil actions or actions
governed by special rules.

Assuming this case continues on as an interpleader, it cannot be joined with the Supplemental
Complaint for declaratory relief as both are special civil actions. However, as the case was classified and
will continue as an intra-corporate dispute, the simultaneous complaint for declaratory relief becomes
superfluous. The right of Santos to inspect the books of Belo Medical Group and the appreciation for his
motives to do so will necessarily be determined by the trial court together with determining the
ownership of the shares of stock under Santos' name.

The trial court may make a declaration first on who owns the shares of stock and suspend its ruling on
whether Santos should be allowed to inspect corporate records. Or, it may rule on whether Santos has
the right to inspect corporate books in the meantime while there has yet to be a resolution on the
ownership of shares. Remedies are available to Belo Medical Group and Belo at any stage of the
proceeding, should they carry on in prohibiting Santos from inspecting the corporate books.

BELTRAN v. PEOPLE’S HOMESITE AND HOUSING CORP

Facts:

This interpleader suit was filed 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.

Since they first occupied in 1953 their housing units at Project 4, under lease from the People's
Homesite & Housing Corporation (PHHC) and paying monthly rentals therefor, they were assured that
after 5 years of continuous occupancy, they would be entitled to purchase said units. In 1961, PHHC
announced to the tenants that the ownership of Project 4 would be transferred to GSIS in payment of
PHHC debts to the GSIS and 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, 30% percent of what had been paid by them as rentals. The tenants accepted the PHHC
offer, and thereafter, PHHC announced that all payments made by the tenants after March 31, 1961
would be considered as installment payments. 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 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 were 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.

RTC designated PFSB "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."

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.

RTC dismissed the complaint, and held that GSIS has no objection that payments on the monthly
amortizations from the residents of Project 4 be made directly to PHHC. From what appears records,
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 previous RTC order is not
warranted by the circumstances of 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."

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."

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."

ISSUE: W/N plaintiff’s interpleader complaint shall lie

HELD:

NO.
Rule 63, sec. 1 of the Revised Rules of Court 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.

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". GSIS' undertaking to recognize and respect the previous
commitments of PHHC towards its tenants is expressly set forth in the turnover agreement.

An 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.

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.
UNITED COCONUT PLANTER’S BANK (UCPB) v. IAC

FACTS:

Altiura delivered a manager’s check issued by Petitioner-bank to Makati Bel-Air, as part payment on a
condominium unit, however, petitioner Bank received from Altiura instructions to hold payment on the
manager's check, in view of a material discrepancy in the area of the office unit, which actually
measured 124.58 sq. m., instead of 165 sq. m. as stipulated in the contract. Petitioner Bank immediately
requested private respondent Makati Bel-Air to advise the Bank why it should not issue the stop
payment order requested by Altiura. Makati Bel-Air explained its side, and proposed a possible
reduction of the office unit's purchase price.

Petitioner Bank filed a complaint-in-interpleader against Altiura and Makati Bel-Air to require the latter
to litigate with each other their respective claims over the funds represented by the manager's check
involved, and at the same time asking the court for authority to deposit the funds in a special account
until the conflicting claims have been adjudicated. The RTC ordered the deposit of the funds into a
special account with any reputable banking institution subject to further orders of the court.

Makati Bel-Air filed its answer and a counter-claim against petitioner Bank and a cross-claim against
Altiura. In turn, Altiura filed an answer to the complaint-in-interpleader, with motion to dismiss the
crossclaim of Makati Bel-Air.

Meantime, Altiura had filed a complaint for rescission of the contract of sale of the condominium unit,
with damages, against Makati Bel-Air, which case was eventually consolidated with the interpleader
case.

Petitioner Bank filed a "motion to withdraw complaint and dismiss counter-claim", stating that there
was no longer any conflict between Makati Bel-Air and Altiura as to who was entitled to the funds
covered by the manager's check, since Makati Bel-Air in its answer had alleged that it had cancelled and
rescinded the sale of the condominium unit and had relinquished any claim it had over the funds
covered by the manager's check.

Makati Bel-Air delivered to petitioner Bank the original of the manager's check. The trial court then
directed the release of the funds covered by the manager's check to Altiura.

On 28 April 1983, the trial court issued an order resolving petitioner Bank's motion to withdraw
complaint-in-interpleader and to dismiss counter-claim, declaring that motion to withdraw the
complaint-in-interpleader had been rendered moot and academic by the court's earlier order directing
petitioner Bank to release to Altiura the manager's check, which Makati Bel-Air had not opposed nor
appealed from.

In 1983, upon motion of petitioner Bank, the trial court issued an order stating that the counter-claim of
Makati Bel-Air was dismissed when the funds covered by the manager's check were released to Altiura
without objection of Makati Bel-Air. At the same time, the order denied Altiura's motion to dismiss
Makati Bel-Air's cross-claim. Makati Bel-Air moved for reconsideration but, without success. It then
went to the respondent appellate court on petition for certiorari.

Appellate court granted certiorari and nullified the trial court's orders to the extent that these had
dismissed Makati Bel-Air's counter-claim. The appellate court held that the withdrawal of the complaint-
in-interpleader and its dismissal as moot and academic did not operate ipso facto to dismiss Makati Bel-
Air's counter-claim for the reason that said counter-claim was based on "an entirely different cause of
action from that in the complaint-in-interpleader".

In the instant Petition for Review on Certiorari, petitioner Bank argues that Makati Bel-Air's counter-
claim was compulsory in nature and had therefore been dissolved when the complaint-in-interpleader
was withdrawn and dismissed. Makati Bel-Air argues upon the other hand, that its counterclaim was not
a compulsory one.

Makati Bel-Air's counterclaim in the interpleader proceedings was for damages in the amount of P5-M
based upon the theory that petitioner Bank had violated its guarantee embodied in its manager's check
when it in effect stopped payment of said check, allegedly causing damages to Makati Bel-Air the latter
having allegedly issued checks against said funds.

ISSUE: W/N Makati Bel-Air’s counterclaim will prosper (NO)

HELD:

Under Sec. 4, Rule 9 of the Revised Rules of Court, a compulsory counterclaim is "one which arises out of
or is necessarily connected with the transaction or occurrence that is the subject matter of the opposing
party's claim." Interpleader is a proper remedy where a bank which had issued a manager's check is
subjected to opposing claims by persons who respectively claim a right to the funds covered by the
manager's check. The Bank is entitled to take necessary precautions so that, as far possible, it does not
make a mistake as to who is entitled to payment; the necessary precautions include, precisely, recourse
to an interpleader suit.

In the instant case, petitioner Bank having been informed by both Altiura and Makati Bel-Air of their
respective positions in their controversy, and Makati Bel-Air, having refused the Bank's suggestion
voluntarily to refrain for fifteen (15) days from presenting the check for payment, petitioner Bank felt
compelled to resort to the remedy of interpleader. It will be seen that Makati Bel-Air's counter-claim
arose out of or was necessarily connected with the recourse of petitioner to this remedy of interpleader.
Makati-Bel Air was in effect claiming that petitioner Bank had in bad faith refused to honor its
undertaking to pay represented by the manager's check it had issued. When the trial court granted
petitioner's motion for withdrawal of its complaint-in-interpleader, as having become moot and
academic by reason of Makati Bel-Air's having cancelled the sale of the office unit to Altiura and having
returned the manager's check to the Bank and acquiesced in the release of the funds to Altiura, the trial
court, in effect, held that petitioner Bank's recourse to interpleader was proper and not a frivolous or
malicious maneuver to evade its obligation to pay to the party lawfully entitled the funds represented by
the manager's check. Having done so, the trial court could not have logically allowed Makati Bel-Air to
recover on its counterclaim for damages against petitioner Bank.

There are other considerations supporting the conclusion reached by this Court that respondent
appellate court had committed reversible error. Makati Bel-Air was a party to the contract of sale of an
office condominium unit to Altiura, for the payment of which the manager's check was issued.
Accordingly, Makati Bel-Air was fully aware, at the time it had received the manager's check, that there
was, or had arisen, at least partial failure of consideration since it was unable to comply with its
obligation to deliver office space amounting to 165 sq. m. to Altiura. Makati Bel-Air was also aware that
petitioner Bank had been informed by Altiura of the claimed defect in Makati Bel-Air's title to the
manager's check or its right to the proceeds thereof. Vis-a-vis both Altiura and petitioner Bank, Makati
Bel-Air was not a holder in due course 3 of the manager's check.

ARREZA v. DIAZ

FACTS:

Bliss Development Corporation is the owner of a housing unit in Quezon City. In the course of a case
involving a conflict of ownership between petitioner Edgar H. Arreza and respondent Montano M. Diaz,
Jr., Bliss Development Corporation filed a complaint for interpleader.

The RTC resolved the conflict by decreeing that interpleader is resolved in favor of Arreza, ordering Bliss
to transfer the rights of the present owner to Arreza. 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, Arreza, and Domingo Tapay in RTC Makati. 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.

The motion was denied; hence, 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.

Petitioner’s MR was likewise denied by the CA. Hence, this petition.

ISSUE: W/N respondent Diazs claims for reimbursement against petitioner Arreza are barred by res
adjudicata (YES)

HELD:

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 parties,
subject matter, and cause of action.

Worthy of note, the prior case for interpleader filed with RTC Makati was settled with finality with this
Courts resolution. The judgment therein is now final.

When the RTC Makati 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.

The SC found, however, that in his answer to the complaint, respondent alleged that 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.

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 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.
Respondent also claims that there is no identity of causes of action between the prior Civil Case and 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. 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.

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 respondents 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.

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.

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.

In one case decided by the SC, the defense of being builders in good faith was set up by defendant in
another case; 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.

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). 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.

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.

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. 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. 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.

In the present case, we find there is an identity of causes of action between the two civil cases.
Respondent Diaz’ cause of action in the prior case, which is now the crux of his present complaint
against petitioner, was in the nature of an unpleaded compulsory counterclaim, and is now barred.
There being a former final judgment on the merits in the prior case, by the RTC of Makati, which
acquired jurisdiction over the same parties, the same subject property, and the same cause of action,
the present complaint of respondent Diaz against petitioner Arreza before RTC Makati should be
dismissed on the ground of res adjudicata.

MALANA, ET AL V. TAPPA ET AL

FACTS:

Petitioners filed before the RTC their Complaint for Reivindicacion, Quieting of Title, and Damages
against respondents, alleging that they are the owners of a parcel of land in Tuguegarao City, Cagayan.
Petitioners inherited the subject property from Anastacio, who died intestate. During the lifetime of
Anastacio, he had allowed Consuelo, who was married to Joaquin Boncad, to build on and occupy the
southern portion of the subject property. Anastacio and Consuelo agreed that the latter would vacate
the said land at any time that Anastacio and his heirs might need it.
Petitioners claimed that respondents, Consuelos family members, continued to occupy the subject
property even after her death, already building their residences thereon using permanent materials.
Petitioners also learned that respondents were claiming ownership over the subject property. Averring
that they already needed it, petitioners demanded that respondents vacate the same. Respondents,
however, refused to heed petitioners demand.

Petitioners referred their land dispute with respondents to the Lupong Tagapamayapa of Barangay
Annafunan West for conciliation. During the conciliation proceedings, respondents asserted that they
owned the subject property and presented documents ostensibly supporting their claim of ownership.

According to petitioners, respondent’s documents were highly dubious, falsified, and incapable of
proving the latter’s claim of ownership over the subject property; nevertheless, they created a cloud
upon petitioner’s title to the property. Thus, petitioners were compelled to file before the RTC a
Complaint to remove such cloud from their title. Petitioners additionally sought in their Complaint an
award against respondents for actual damages, in the amount of P50,000.00, resulting from the latter’s
baseless claim over the subject property that did not actually belong to them, in violation of Article 19 of
the Civil Code on Human Relations.

Before respondents could file their answer, the RTC issued an Order dismissing petitioners Complaint on
the ground of lack of jurisdiction. The RTC referred to Republic Act No. 7691, amending Batas Pambansa
Blg. 129, otherwise known as the Judiciary Reorganization Act of 1980, which vests the RTC with
jurisdiction over real actions, where the assessed value of the property involved exceeds P20,000.00. It
found that the subject property had a value of less than P20,000; hence, petitioners action to recover
the same was outside the jurisdiction of the RTC.
Petitioners filed a MR of the aforementioned RTC Order dismissing their Complaint. They argued that
their principal cause of action was for quieting of title; the accion reivindicacion was included merely to
enable them to seek complete relief from respondents. Petitioner’s Complaint should not have been
dismissed, since Section 1, Rule 63 of the Rules of Court states that an action to quiet title falls under the
jurisdiction of the RTC.
RTC denied petitioners Motion for Reconsideration. It reasoned that an action to quiet title is a real
action. Pursuant to Republic Act No. 7691, it is the Municipal Trial Court (MTC) that exercises exclusive
jurisdiction over real actions where the assessed value of real property does not exceed P20,000.00.
Since the assessed value of subject property per Tax Declaration was P410.00, the real action involving
the same was outside the jurisdiction of the RTC.

Further, they contended that there was no obstacle to their joining the two causes of action, i.e.,
quieting of title and reivindicacion, in a single Complaint, citing Rumarate v. Hernandez. And even if the
two causes of action could not be joined, petitioners maintained that the misjoinder of said causes of
action was not a ground for the dismissal of their Complaint.
The RTC clarified that their Complaint was dismissed, not on the ground of misjoinder of causes of
action, but for lack of jurisdiction. The RTC dissected Section 1, Rule 63 of the Rules of Court, which
provides:

“Section 1. Who may file petition. Any person interested under a deed, will, contract or other written
instrument, or whose rights are affected by a statute, executive order or regulation, ordinance, or any
other governmental regulation may, before breach or violation thereof, bring an action in the
appropriate Regional Trial Court to determine any question of construction or validity arising, and for a
declaration of his rights or duties, thereunder.

An action for the reformation of an instrument, to quiet title to real property or remove clouds
therefrom, or to consolidate ownership under Article 1607 of the Civil Code, may be brought under this
Rule.”

The RTC differentiated between the first and the second paragraphs of Section 1, Rule 63 of the Rules of
Court. The first paragraph refers to an action for declaratory relief, which should be brought before the
RTC. The second paragraph, however, refers to a different set of remedies, which includes an action to
quiet title to real property. The second paragraph must be read in relation to Republic Act No. 7691,
which vests the MTC with jurisdiction over real actions, where the assessed value of the real property
involved does not exceed P50,000.00 in Metro Manila and P20,000.00 in all other places. Petitioner’s
subsequent Motion was denied. Hence, the present Petition.

ISSUE: W/N the RTC committed grave abuse of discretion in dismissing petitioners Complaint for lack of
jurisdiction (NO)

HELD:
An action for declaratory relief should be filed by a person interested under a deed, a will, a contract or
other written instrument, and whose rights are affected by a statute, an executive order, a regulation or
an ordinance. The relief sought under this remedy includes the interpretation and determination of the
validity of the written instrument and the judicial declaration of the parties rights or duties thereunder.
Petitions for declaratory relief are governed by Rule 63 of the Rules of Court. The RTC correctly made a
distinction between the first and the second paragraphs of Section 1, Rule 63 of the Rules of Court.
The first paragraph of Section 1, Rule 63 of the Rules of Court, describes the general circumstances in
which a person may file a petition for declaratory relief, to wit:

Any person interested under a deed, will, contract or other written instrument, or whose rights are
affected by a statute, executive order or regulation, ordinance, or any other governmental regulation
may, before breach or violation thereof, bring an action in the appropriate Regional Trial Court to
determine any question of construction or validity arising, and for a declaration of his rights or duties,
thereunder.

As the afore-quoted provision states, a petition for declaratory relief under the first paragraph of
Section 1, Rule 63 may be brought before the appropriate RTC.

Section 1, Rule 63 of the Rules of Court further provides in its second paragraph that:

An action for the reformation of an instrument, to quiet title to real property or remove clouds
therefrom, or to consolidate ownership under Article 1607 of the Civil Code, may be brought under this
Rule.

The second paragraph of Section 1, Rule 63 of the Rules of Court specifically refers to (1) an action for
the reformation of an instrument, recognized under Articles 1359 to 1369 of the Civil Code; (2) an action
to quiet title, authorized by Articles 476 to 481 of the Civil Code; and (3) an action to consolidate
ownership required by Article 1607 of the Civil Code in a sale with a right to repurchase. These three
remedies are considered similar to declaratory relief because they also result in the adjudication of the
legal rights of the litigants, often without the need of execution to carry the judgment into effect.

To determine which court has jurisdiction over the actions identified in the second paragraph of Section
1, Rule 63 of the Rules of Court, said provision must be read together with those of the Judiciary
Reorganization Act of 1980, as amended.

It is important to note that Section 1, Rule 63 of the Rules of Court does not categorically require that an
action to quiet title be filed before the RTC. It repeatedly uses the word may that an action for quieting
of title may be brought under [the] Rule on petitions for declaratory relief, and a person desiring to file a
petition for declaratory relief may x x x bring an action in the appropriate Regional Trial Court. The use
of the word may in a statute denotes that the provision is merely permissive and indicates a mere
possibility, an opportunity or an option.

In contrast, the mandatory provision of the Judiciary Reorganization Act of 1980, as amended, uses the
word shall and explicitly requires the MTC to exercise exclusive original jurisdiction over all civil actions
which involve title to or possession of real property where the assessed value does not exceed
P20,000.00, thus:
Sec. 33: xxx
(3) Exclusive original jurisdiction in all civil actions which involve title to, possession of, real property, or
any interest therein where the assessed value of the property or interest therein does not exceed
Twenty thousand pesos (P20,000.00) or, in civil actions in Metro Manila, where such assessed value
does not exceeds Fifty thousand pesos (P50,000.00) exclusive of interest, damages of whatever kind,
attorneys fees, litigation expenses and costs: x x x
As found by the RTC, the assessed value of the subject property as stated in Tax Declaration is only
P410.00; therefore, petitioners Complaint involving title to and possession of the said property is within
the exclusive original jurisdiction of the MTC, not the RTC.

Furthermore, an action for declaratory relief presupposes that there has been no actual breach of the
instruments involved or of rights arising thereunder. Since the purpose of an action for declaratory relief
is to secure an authoritative statement of the rights and obligations of the parties under a statute, deed,
or contract for their guidance in the enforcement thereof, or compliance therewith, and not to settle
issues arising from an alleged breach thereof, it may be entertained only before the breach or violation
of the statute, deed, or contract to which it refers. A petition for declaratory relief gives a practical
remedy for ending controversies that have not reached the state where another relief is immediately
available; and supplies the need for a form of action that will set controversies at rest before they lead
to a repudiation of obligations, an invasion of rights, and a commission of wrongs.

Where the law or contract has already been contravened prior to the filing of an action for declaratory
relief, the courts can no longer assume jurisdiction over the action. In other words, a court has no more
jurisdiction over an action for declaratory relief if its subject has already been infringed or transgressed
before the institution of the action.

In the present case, petitioners Complaint for quieting of title was filed after petitioners already
demanded and respondents refused to vacate the subject property. In fact, said Complaint was filed
only subsequent to the latter’s express claim of ownership over the subject property before the Lupong
Tagapamayapa, in direct challenge to petitioner’s title.

Since petitioners averred in the Complaint that they had already been deprived of the possession of
their property, the proper remedy for them is the filing of an accion publiciana or an accion
reivindicatoria, not a case for declaratory relief. An accion publiciana is a suit for the recovery of
possession, filed one year after the occurrence of the cause of action or from the unlawful withholding
of possession of the realty. An accion reivindicatoria is a suit that has for its object ones recovery of
possession over the real property as owner.

Petitioners Complaint contained sufficient allegations for an accion reivindicatoria. Jurisdiction over such
an action would depend on the value of the property involved. Given that the subject property herein is
valued only at P410.00, then the MTC, not the RTC, has jurisdiction over an action to recover the same.
The RTC, therefore, did not commit grave abuse of discretion in dismissing, without prejudice,
petitioners Complaint in Civil Case No. 6868 for lack of jurisdiction.

As for the RTC dismissing petitioner’s Complaint motu proprio, the following pronouncements of the
Court in Laresma v. Abellana proves instructive:
It is axiomatic that the nature of an action and the jurisdiction of a tribunal are determined by the
material allegations of the complaint and the law at the time the action was commenced. Jurisdiction of
the tribunal over the subject matter or nature of an action is conferred only by law and not by the
consent or waiver upon a court which, otherwise, would have no jurisdiction over the subject matter or
nature of an action. Lack of jurisdiction of the court over an action or the subject matter of an action
cannot be cured by the silence, acquiescence, or even by express consent of the parties. If the court has
no jurisdiction over the nature of an action, it may dismiss the same ex mero motu or motu proprio.

Since the RTC, in dismissing petitioners Complaint, acted in complete accord with law and jurisprudence,
it cannot be said to have done so with grave abuse of discretion amounting to lack or excess of
jurisdiction. An act of a court or tribunal may only be considered to have been committed in grave abuse
of discretion when the same was performed in a capricious or whimsical exercise of judgment, which is
equivalent to lack of jurisdiction.

MANGAHAS ET AL V. PAREDES ET AL

FACTS:

Private respondent Avelino Banaag filed before MeTC Caloocan City a complaint for Ejectment against
petitioners, alleging that he is the registered owner of the disputed property in Caloocan City, as
evidenced by a Torren’s title. He averred that petitioners constructed houses on the property without
his knowledge and consent and that several demands were made, but the same fell on deaf ears as
petitioners refused to vacate the premises, prompting private respondent to refer the matter to the
Lupon Tagapayapa for conciliation. The recourse proved futile since the parties were not able to settle
amicably.

Petitioners averred that they have resided in the subject lot with the knowledge and conformity of the
true owner thereof, Pinagkamaligan Indo-Agro Development Corporation (PIADECO), as evidenced by a
Certificate of Occupancy signed by PIADECO’s president in their favor. They then filed a Manifestation
And Motion To Suspend Proceedings on the ground that the subject property is part of the Tala Estate
and that the RTC of Quezon City issued a Writ of Preliminary Injunction enjoining the MeTCs of Quezon
City and Caloocan City from ordering the eviction and demolition of all occupants of the Tala Estate.
They posited that the injunction issued by the Quezon City RTC is enforceable in Caloocan City because
both cities are situated within the National Capital Region.

MeTC denied said manifestation and motion. It ratiocinated that the injunction issued by the Quezon
City RTC has binding effect only within the territorial boundaries of the said court and since Caloocan
City is not within the territorial area of same, the injunction it issued is null and void for lack of
jurisdiction.

Petitioners insisted that they are entitled to the possession of the land because they have been
occupants thereof as early as 1978, long before the property was acquired by private respondent. Since
they possessed the property for that long, the MeTC has no jurisdiction to hear and decide the case as
ejectment suit applies only to instances where possession of the land lasted for a period of not more
than one year. In addition, they claimed that private respondent has not proffered any evidence that he
has prior physical possession over the property. Petitioners reiterated their posture in the motion to
suspend proceedings wherein they urged the MeTC to respect the Writ of Preliminary Injunction issued
by the Quezon City RTC. They also alleged that private respondent’s certificate of title originated from a
fictitious title.

MeTC ruled for private respondent. It opined that TCT in private respondent’s name was an indefeasible
proof of his ownership of the lot and his inherent right to possess the same. This title entitled private
respondent better right to possess the subject property over petitioners’ Certificate of Occupancy
executed in their favor by PIADECO. It held that it has jurisdiction over the controversy since private
respondent filed the case within one year from the time the demand to vacate was given to petitioners.
Petitioners appealed to the RTC, which affirmed in toto the MeTC decision. It ruled that the MeTC was
correct in denying petitioners’ motion to suspend proceedings anchored on the Writ of Preliminary
Injunction issued by the Quezon City RTC reasoning that the writ of the latter court is limited only to its
territorial area, thus, the same has no binding effect on the MeTC of Caloocan City. It sustained the
MeTC’s ruling that the latter court has jurisdiction over the case as the same has been filed within the
reglementary period from the date of demand to vacate. Furthermore, RTC stated that the validity of
private respondent’s title cannot be assailed collaterally in the instant case.

Petitioners filed a MR which the RTC denied. CA affirmed the ruling of the RTC. Petitioners’ Motion for
Reconsideration was, likewise, denied, and the CA decision became final and executor. Meanwhile,
private respondent filed with the RTC a motion for execution pending appeal which was opposed by
petitioners. RTC granted the motion. Petitioners filed a Motion to Suspend Execution before the RTC,
and was. Hence, they filed a petition for Declaratory Relief, Certiorari, Prohibition With Prayer For
Provisional Remedy

ISSUE: W/N petitioner’s direct recourse to the SC is proper (NO)

HELD:

Petitioners’ direct recourse to this Court via petition for Declaratory Relief, Certiorari, Prohibition With
Prayer For Provisional Remedy is an utter disregard of the hierarchy of courts and should have been
dismissed outright. This Court’s original jurisdiction to issue writs of certiorari, prohibition, mandamus,
quo warranto, habeas corpus and injunction is not exclusive. It is shared by this Court with the Regional
Trial Courts and the Court of Appeals. Such concurrence of jurisdiction does not give the petitioners
unbridled freedom of choice of court forum. A direct recourse of the Supreme Court’s original
jurisdiction to issue these writs should be allowed only when there are special and important reasons
therefor, clearly and specifically set out in the petition.

In the instant case, petitioners have not offered any exceptional or compelling reason not to observe the
hierarchy of courts. Hence, the petition should have been filed with the Regional Trial Court.
Equally noteworthy is petitioners’ resort to this Court through petition for declaratory relief. This action
is not among the petitions within the original jurisdiction of the Supreme Court. Rule 63 of the Rules of
Court which deals with actions for declaratory relief, enumerates the subject matter thereof, i.e., deed,
will, contract or other written instrument, the construction or validity of statute or ordinance. Inasmuch
as this enumeration is exclusive, petitioners’ action to declare the RTC order denying their motion to
suspend execution, not being one of those enumerated, should warrant the outright dismissal of this
case.

At any rate, since the complete records of this case have already been elevated, this Court deems it wise
to resolve the controversy on the merits.

Petitioners assail the Order of the RTC Caloocan City and its Decision on the sole ground that the said
court is precluded from issuing said Order and Decision by virtue of the Writ of Injunction issued by the
Quezon City RTC.

It must be remembered that the issue on the enforceability of the injunction order originating from the
Quezon City RTC had already been litigated and finally decided when the Court of Appeals affirmed the
Decision of the RTC. Said Decision had become final and executory, viz:

It was the petitioners’ contention that the injunction writ issued in Quezon City is enforceable also in
Caloocan City inasmuch [as] both cities are situated within the National Capital Region.

Under Sec. 17 of B.P. 129, the exercise of jurisdiction of the Regional Trial Courts and their judges is
basically regional in scope, but under Sec. 18, it may be limited to the territorial area of the branch in
which the judges sits.

Sec. 18 of B.P. 129 states that the Supreme Court shall define the territory over which a branch of the
Regional Trial Court shall exercise its authority. The territory thus defined shall be deemed to be the
territorial area of the branch concerned for purposes of determining the venue of all suits, proceedings
or actions, whether civil or criminal, as well as determining the Metropolitan Trial Courts, Municipal Trial
Courts and Municipal Circuit Trial Courts over which the said branch may exercise appellate jurisdiction.
xxx"

Taking Our bearings from the above pronouncement, the Regional Trial Court of Caloocan City could not
be deemed to have committed a reversible error when it denied the petitioners’ Motion to Suspend
Proceedings. Apparently, the extent of the enforceability of an injunction writ issued by the Regional
Trial Court is defined by the territorial region where the magistrate presides.

Consequently, the issue involving the binding effect of the injunction issued by the Quezon City RTC
became the law of the case between the parties. Under this legal principle, whatever is irrevocably
established as the controlling legal rule or decision between the parties in the same case continues to be
the law of the case, so long as the facts on which the decision was predicated continue. Stated
otherwise, the doctrine holds that once an appellate court has declared the law in a case that
declaration continues to hold even in subsequent appeal. The reason lies in the fact that public policy
dictates that litigations must be terminated at some definite time and that the prevailing party should
not be denied the fruits of his victory by some subterfuge devised by the losing party.

Petitioners are therefore barred from assailing the ruling that the injunction issued by the Quezon City
RTC has no binding effect to the courts of Caloocan City as this issue had already been passed upon with
finality. Issues should be laid to rest at some point; otherwise there would be no end to litigation.

The instant petition assailing the order of the RTC denying petitioners’ motion to suspend execution is a
ploy to deprive private respondent of the fruits of his hard-won case. It must be stressed that once a
decision becomes final and executory, it is the ministerial duty of the presiding judge to issue a writ of
execution except in certain cases, as when subsequent events would render execution of judgment
unjust.16 Petitioners did not allege nor proffer any evidence that this case falls within the exception.
Hence, there is no reason to vacate the writ of execution issued by the RTC.

WHEREFORE, the petition is DENIED. The Order of the Regional Trial Court, Caloocan City, denying
petitioners’ Motion to Supend Execution is AFFIRMED.

VELARDE V. SOCIAL JUSTICE SOCIETY

FACTS:

On January 28, 2003, SJS filed a Petition for Declaratory Relief (SJS Petition) before the RTC-Manila
against Velarde and his aforesaid co-respondents. SJS, a registered political party, sought the
interpretation of several constitutional provisions,[8] specifically on the separation of church and state;
and a declaratory judgment on the constitutionality of the acts of religious leaders endorsing a
candidate for an elective office, or urging or requiring the members of their flock to vote for a specified
candidate.

Bro. Eddie Villanueva submitted, within the period to file an Answer, a Motion to Dismiss. Subsequently,
Executive Minister Erao Manalo and Bro. Mike Velarde, filed their Motions to Dismiss. While His
Eminence Jaime Cardinal L. Sin, filed a Comment and Bro. Eli Soriano, filed an Answer within the
extended period and similarly prayed for the dismissal of the Petition. All sought the dismissal of the
Petition on the common grounds that it does not state a cause of action and that there is no justiciable
controversy.

The trial court said that it had jurisdiction over the Petition, because in praying for a determination as to
whether the actions imputed to the respondents are violative of Article II, Section 6 of the Fundamental
Law, [the Petition] has raised only a question of law. It then proceeded to a lengthy discussion of the
issue raised in the Petition the separation of church and state even tracing, to some extent, the
historical background of the principle. Through its discourse, the court a quo opined at some point that
the endorsement of specific candidates in an election to any public office is a clear violation of the
separation clause. After its essay on the legal issue, however, the trial court failed to include a
dispositive portion in its assailed Decision. Thus, Velarde and Soriano filed separate Motions for
Reconsideration which, as mentioned earlier, were denied by the lower court. Hence, this Petition for
Review.

ISSUE: W/N the Petition for Declaratory Relief raised a justiciable controversy? Did it state a cause of
action? Did respondent have any legal standing to file the Petition for Declaratory Relief? (NO)

HELD:

An action for declaratory relief should be filed by a person interested under a deed, a will, a contract or
other written instrument, and whose rights are affected by a statute, an executive order, a regulation or
an ordinance. The purpose of the remedy is to interpret or to determine the validity of the written
instrument and to seek a judicial declaration of the parties rights or duties thereunder.[16] The essential
requisites of the action are as follows: (1) there is a justiciable controversy; (2) the controversy is
between persons whose interests are adverse; (3) the party seeking the relief has a legal interest in the
controversy; and (4) the issue is ripe for judicial determination.

Justiciable Controversy

A justiciable controversy refers to an existing case or controversy that is appropriate or ripe for judicial
determination, not one that is conjectural or merely anticipatory. The SJS Petition for Declaratory Relief
fell short of this test. It miserably failed to allege an existing controversy or dispute between the
petitioner and the named respondents therein. Further, the Petition did not sufficiently state what
specific legal right of the petitioner was violated by the respondents therein; and what particular act or
acts of the latter were in breach of its rights, the law or the Constitution.

As pointed out by Brother Eliseo F. Soriano in his Comment, what exactly has he done that merited the
attention of SJS? He confesses that he does not know the answer, because the SJS Petition yields
nothing in this respect. His Eminence, Jaime Cardinal Sin, adds that, at the time SJS filed its Petition on
January 28, 2003, the election season had not even started yet; and that, in any event, he has not been
actively involved in partisan politics.

An initiatory complaint or petition filed with the trial court should contain a plain, concise and direct
statement of the ultimate facts on which the party pleading relies for his claim. Yet, the SJS Petition
stated no ultimate facts. Indeed, SJS merely speculated or anticipated without factual moorings that, as
religious leaders, the petitioner and his co-respondents below had endorsed or threatened to endorse a
candidate or candidates for elective offices; and that such actual or threatened endorsement will enable
[them] to elect men to public office who [would] in turn be forever beholden to their leaders, enabling
them to control the government[;] and pos[ing] a clear and present danger of serious erosion of the
peoples faith in the electoral process[;] and reinforc[ing] their belief that religious leaders determine the
ultimate result of elections,which would then be violative of the separation clause. Such premise is
highly speculative and merely theoretical, to say the least. Clearly, it does not suffice to constitute a
justiciable controversy. The Petition does not even allege any indication or manifest intent on the part of
any of the respondents below to champion an electoral candidate, or to urge their so-called flock to
vote for, or not to vote for, a particular candidate. It is a time-honored rule that sheer speculation does
not give rise to an actionable right.

Obviously, there is no factual allegation that SJS rights are being subjected to any threatened, imminent
and inevitable violation that should be prevented by the declaratory relief sought. The judicial power
and duty of the courts to settle actual controversies involving rights that are legally demandable and
enforceable cannot be exercised when there is no actual or threatened violation of a legal right.

All that the 5-page SJS Petition prayed for was that the question raised in paragraph 9 hereof be
resolved. In other words, it merely sought an opinion of the trial court on whether the speculated acts of
religious leaders endorsing elective candidates for political offices violated the constitutional principle
on the separation of church and state. SJS did not ask for a declaration of its rights and duties; neither
did it pray for the stoppage of any threatened violation of its declared rights. Courts, however, are
proscribed from rendering an advisory opinion.

Cause of Action

A cause of action is an act or an omission of one party in violation of the legal right or rights of another,
causing injury to the latter. Its essential elements are the following: (1) a right in favor of the plaintiff; (2)
an obligation on the part of the named defendant to respect or not to violate such right; and (3) such
defendants act or omission that is violative of the right of the plaintiff or constituting a breach of the
obligation of the former to the latter.

The failure of a complaint to state a cause of action is a ground for its outright dismissal. However, in
special civil actions for declaratory relief, the concept of a cause of action under ordinary civil actions
does not strictly apply. The reason for this exception is that an action for declaratory relief presupposes
that there has been no actual breach of the instruments involved or of rights arising thereunder.
Nevertheless, a breach or violation should be impending, imminent or at least threatened.

A perusal of the Petition filed by SJS before the RTC discloses no explicit allegation that the former had
any legal right in its favor that it sought to protect. We can only infer the interest, supposedly in its
favor, from its bare allegation that it has thousands of members who are citizens-taxpayers-registered
voters and who are keenly interested in a judicial clarification of the constitutionality of the partisan
participation of religious leaders in Philippine politics and in the process to insure adherence to the
Constitution by everyone.

Such general averment does not, however, suffice to constitute a legal right or interest. Not only is the
presumed interest not personal in character; it is likewise too vague, highly speculative and uncertain.
The Rules require that the interest must be material to the issue and affected by the questioned act or
instrument, as distinguished from simple curiosity or incidental interest in the question raised.

To bolster its stance, SJS cites the Corpus Juris Secundum and submits that the [p]laintiff in a declaratory
judgment action does not seek to enforce a claim against [the] defendant, but seeks a judicial
declaration of [the] rights of the parties for the purpose of guiding [their] future conduct, and the
essential distinction between a declaratory judgment action and the usual action is that no actual wrong
need have been committed or loss have occurred in order to sustain the declaratory judgment action,
although there must be no uncertainty that the loss will occur or that the asserted rights will be invaded.

SJS has, however, ignored the crucial point of its own reference that there must be no uncertainty that
the loss will occur or that the asserted rights will be invaded. Precisely, as discussed earlier, it merely
conjectures that herein petitioner (and his co-respondents below) might actively participate in partisan
politics, use the awesome voting strength of its faithful flock [to] enable it to elect men to public office x
x x, enabling [it] to control the government.

Petitioner Velarde and his co-respondents below all strongly asserted that they had not in any way
engaged or intended to participate in partisan politics. They all firmly assured this Court that they had
not done anything to trigger the issue raised and to entitle SJS to the relief sought.

Indeed, the Court finds in the Petition for Declaratory Relief no single allegation of fact upon which SJS
could base a right of relief from the named respondents. In any event, even granting that it sufficiently
asserted a legal right it sought to protect, there was nevertheless no certainty that such right would be
invaded by the said respondents. Not even the alleged proximity of the elections to the time the Petition
was filed below would have provided the certainty that it had a legal right that would be jeopardized or
violated by any of those respondents.

Legal Standing

Legal standing or locus standi has been defined as a personal and substantial interest in the case, such
that the party has sustained or will sustain direct injury as a result of the challenged act. Interest means
a material interest in issue that is affected by the questioned act or instrument, as distinguished from a
mere incidental interest in the question involved.

Parties bringing suits challenging the constitutionality of a law, an act or a statute must show not only
that the law [or act] is invalid, but also that [they have] sustained or [are] in immediate or imminent
danger of sustaining some direct injury as a result of its enforcement, and not merely that [they] suffer
thereby in some indefinite way.[40] They must demonstrate that they have been, or are about to be,
denied some right or privilege to which they are lawfully entitled, or that they are about to be subjected
to some burdens or penalties by reason of the statute or act complained of.[41]

First, parties suing as taxpayers must specifically prove that they have sufficient interest in preventing
the illegal expenditure of money raised by taxation.[42] A taxpayers action may be properly brought
only when there is an exercise by Congress of its taxing or spending power.[43] In the present case,
there is no allegation, whether express or implied, that taxpayers money is being illegally disbursed.

Second, there was no showing in the Petition for Declaratory Relief that SJS as a political party or its
members as registered voters would be adversely affected by the alleged acts of the respondents below,
if the question at issue was not resolved. There was no allegation that SJS had suffered or would be
deprived of votes due to the acts imputed to the said respondents. Neither did it allege that any of its
members would be denied the right of suffrage or the privilege to be voted for a public office they are
seeking.

Finally, the allegedly keen interest of its thousands of members who are citizens-taxpayers-registered
voters is too general and beyond the contemplation of the standards set by our jurisprudence. Not only
is the presumed interest impersonal in character; it is likewise too vague, highly speculative and
uncertain to satisfy the requirement of standing.

Transcendental Importance

In not a few cases, the Court has liberalized the locus standi requirement when a petition raises an issue
of transcendental significance or paramount importance to the people. Recently, after holding that the
IBP had no locus standi to bring the suit, the Court in IBP v. Zamora, nevertheless entertained the
Petition therein. It noted that the IBP has advanced constitutional issues which deserve the attention of
this Court in view of their seriousness, novelty and weight as precedents.

Similarly in the instant case, the Court deemed the constitutional issue raised in the SJS Petition to be of
paramount interest to the Filipino people. The issue did not simply concern a delineation of the
separation between church and state, but ran smack into the governance of our country. The issue was
both transcendental in importance and novel in nature, since it had never been decided before.

The Court, thus, called for Oral Argument to determine with certainty whether it could resolve the
constitutional issue despite the barren allegations in the SJS Petition as well as the abbreviated
proceedings in the court below. Much to its chagrin, however, counsels for the parties -- particularly for
Respondent SJS -- made no satisfactory allegations or clarifications that would supply the deficiencies
hereinabove discussed. Hence, even if the Court would exempt this case from the stringent locus standi
requirement, such heroic effort would be futile because the transcendental issue cannot be resolved
anyway.

Contrary to the contentions of the trial judge and of SJS, in proceedings for declaratory relief -- the
petition must state a cause of action; the proceedings must undergo the procedure outlined in the Rules
of Court; and the decision must adhere to constitutional and legal requirements.

Regrettably, it is not legally possible for the Court to take up, on the merits, the paramount question
involving a constitutional principle. It is a time-honored rule that the constitutionality of a statute [or
act] will be passed upon only if, and to the extent that, it is directly and necessarily involved in a
justiciable controversy and is essential to the protection of the rights of the parties concerned.[100]

WHEREFORE, the Petition for Review of Brother Mike Velarde is GRANTED. The assailed June 12, 2003
Decision and July 29, 2003 Order of the Regional Trial Court of Manila (Branch 49) are hereby DECLARED
NULL AND VOID and thus SET ASIDE. The SJS Petition for Declaratory Relief is DISMISSED for failure to
state a cause of action.
REPUBLIC V. ROQUE

FACTS:

Private respondents filed a Petition for declaratory relief before the RTC, assailing the constitutionality
of the following sections of RA 9372: (a) Section 3, for being void for vagueness; (b) Section 7, for
violating the right to privacy of communication and due process and the privileged nature of priest-
penitent relationships; (c)Section 18, for violating due process, the prohibition against ex post facto laws
or bills of attainder, the Universal Declaration of Human Rights, and the International Covenant on Civil
and Political Rights, as well as for contradicting Article 125 of the Revised Penal Code, as amended; (d)
Section 26, for violating the right to travel; and (e) Section 27, for violating the prohibition against
unreasonable searches and seizures.

Petitioners filed the subject motion to dismiss, contending that private respondents failed to satisfy the
requisites for declaratory relief. Likewise, they averred that the constitutionality of RA 9372 had already
been upheld by the Court in the Southern Hemisphere cases.

Private respondents countered that: (a) the Court did not resolve the issue of RA 9372’s constitutionality
in Southern Hemisphere as the SC petitions were dismissed based purely on technical grounds; and (b)
the requisites for declaratory relief were met.

RTC denied the subject motion to dismiss, finding that the Court did not pass upon the constitutionality
of RA 9372 and that private respondents’ petition for declaratory relief was properly filed.

Petitioners moved for reconsideration which was, however, denied by the RTC; it observed that private
respondents have personal and substantial interests in the case and that it would be illogical to await
the adverse consequences of the aforesaid law’s implementation considering that the case is of
paramount impact to the Filipino people. Hence, the instant petition.

ISSUE: W/N the RTC gravely abused its discretion when it denied the subject motion to dismiss

HELD:

YES. While no grave abuse of discretion could be ascribed on the part of the RTC when it found that the
Court did not pass upon the constitutionality of RA 9372 in the Southern Hemisphere cases, it, however,
exceeded its jurisdiction when it ruled that private respondents’ petition had met all the requisites for
an action for declaratory relief. Consequently, its denial of the subject motion to dismiss was altogether
improper.

To elucidate, it is clear that the Court, in Southern Hemisphere, did not make any definitive ruling on the
constitutionality of RA 9372. The certiorari petitions in those consolidated cases were dismissed based
solely on procedural grounds. The same conclusion cannot, however, be reached with regard to the
RTC’s ruling on the sufficiency of private respondents’ petition for declaratory relief.
Case law states that the following are the requisites for an action for declaratory relief:

first , the subject matter of the controversy must be a deed, will, contract or other written instrument,
statute, executive order or regulation, or ordinance; second , the terms of said documents and the
validity thereof are doubtful and require judicial construction; third , there must have been no breach of
the documents in question; fourth , there must be an actual justiciable controversy or the "ripening
seeds" of one between persons whose interests are adverse; fifth , the issue must be ripe for judicial
determination; and sixth , adequate relief is not available through other means or other forms of action
or proceeding.

Based on a judicious review of the records, the Court observes that while the first, second, and third
requirements appear to exist in this case, the fourth, fifth, and sixth requirements, however, remain
wanting.

As to the fourth requisite, there is serious doubt that an actual justiciable controversy or the "ripening
seeds" of one exists in this case.

Pertinently, a justiciable controversy refers to an existing case or controversy that is appropriate or ripe
for judicial determination, not one that is conjectural or merely anticipatory. Corollary thereto, by
"ripening seeds" it is meant, not that sufficient accrued facts may be dispensed with, but that a dispute
may be tried at its inception before it has accumulated the asperity, distemper, animosity, passion, and
violence of a full blown battle that looms ahead.

A perusal of private respondents’ petition for declaratory relief would show that they have failed to
demonstrate how they are left to sustain or are in immediate danger to sustain some direct injury as a
result of the enforcement of the assailed provisions of RA 9372. Not far removed from the factual milieu
in the Southern Hemisphere cases, private respondents only assert general interests as citizens, and
taxpayers and infractions which the government could prospectively commit if the enforcement of the
said law would remain untrammeled. As their petition would disclose, private respondents’ fear of
prosecution was solely based on remarks of certain government officials which were addressed to the
general public. They, however, failed to show how these remarks tended towards any prosecutorial or
governmental action geared towards the implementation of RA 9372 against them. In other words,
there was no particular, real or imminent threat to any of them. As held in Southern Hemisphere:

Without any justiciable controversy, the petitions have become pleas for declaratory relief, over which
the Court has no original jurisdiction. Then again, declaratory actions characterized by "double
contingency," where both the activity the petitioners intend to undertake and the anticipated reaction
to it of a public official are merely theorized, lie beyond judicial review for lack of ripeness.1âwphi1

The possibility of abuse in the implementation of RA 9372 does not avail to take the present petitions
out of the realm of the surreal and merely imagined. Such possibility is not peculiar to RA 9372 since the
exercise of any power granted by law may be abused. Allegations of abuse must be anchored on real
events before courts may step in to settle actual controversies involving rights which are legally
demandable and enforceable.

Thus, in the same light that the Court dismissed the SC petitions in the Southern Hemisphere cases on
the basis of, among others, lack of actual justiciable controversy (or the ripening seeds of one), the RTC
should have dismissed private respondents’ petition for declaratory relief all the same.

It is well to note that private respondents also lack the required locus standi to mount their
constitutional challenge against the implementation of the above-stated provisions of RA 9372 since
they have not shown any direct and personal interest in the case. While it has been previously held that
transcendental public importance dispenses with the requirement that the petitioner has experienced
or is in actual danger of suffering direct and personal injury, it must be stressed that cases involving the
constitutionality of penal legislation belong to an altogether different genus of constitutional litigation.
Towards this end, compelling State and societal interests in the proscription of harmful conduct
necessitate a closer judicial scrutiny of locus standi, as in this case. To rule otherwise, would be to
corrupt the settled doctrine of locus standi, as every worthy cause is an interest shared by the general
public.

As to the fifth requisite for an action for declaratory relief, neither can it be inferred that the controversy
at hand is ripe for adjudication since the possibility of abuse, based on the above-discussed allegations
in private respondents’ petition, remain highly-speculative and merely theorized. It is well-settled that a
question is ripe for adjudication when the act being challenged has had a direct adverse effect on the
individual challenging it. This private respondents failed to demonstrate in the case at bar.

Finally, as regards the sixth requisite, the Court finds it irrelevant to proceed with a discussion on the
availability of adequate reliefs since no impending threat or injury to the private respondents exists in
the first place.

All told, in view of the absence of the fourth and fifth requisites for an action for declaratory relief, as
well as the irrelevance of the sixth requisite, private respondents’ petition for declaratory relief should
have been dismissed. Thus, by giving due course to the same, it cannot be gainsaid that the RTC gravely
abused its discretion. WHEREFORE, the petition is GRANTED.

TAMBUNTING, JR. V. SPS. SUMABAT

FACTS:

This case involves a dispute over a parcel of land in Caloocan City. It was previously registered in the
names of respondents. But they mortgaged it to Tambunting for security of the loan amounting to
P7,000. Respondents were then informed that their debt increased to P15k for failure to pay the
monthly amortizations

When respondents defaulted in their obligation petitioner Commercial House Finance (CHFI) as assignee
of the mortgage, initiated foreclosure proceedings but it did not push through because of the complaint
for injunction filed by respondents. But the case was subsequently dismissed for failure of parities to
appear at the hearing.

Respondents then filed an action for declaratory relief seeking a declaration of the extent of their actual
indebtedness.

Petitioners were declared in default for failure to file an answer with the reglementary period. They
moved for dismissal on the ground that the mortgage deed, had ALREADY been BREACHED PRIOR to the
filing of the declaratory relief. But motion was denied for having filed out of time and petitioners had
already been declared in default.

The CFI fixed respondent’s liability at P15k & authorized them to consign the amount to the court. And
respondents consigned the amount in 1981

Respondents received a notice of sheriff’s sale wherein the mortgaged property was foreclosed by CFHI
on Feb 8, 1995 and an extrajudicial sale of the property would be held on March 27, 1995

Respondents instituted a petition for preliminary injunction, damages and cancellation of annotation of
encumbrance BUT the public action scheduled on the same day proceeded and the property was sold to
CHFI. Respondents failed to redeem the property. Hence consolidation of ownership to CHFI

Because of this, respondents amended their complaint to an action for nullification of foreclosure,
sheriff’s sale and consolidation of titile reconveyance and damages.

RTC ruled that the decision already attained finality and the mortgage was extinguished when
respondents paid by consigning the mount in court. The 10 yr period within which petitioners should
have foreclosed the property was already barred by prescription. RTC nullified the foreclosure and
extrajudicial sale of the property, as well as the consolidation of title in CHFI’s name in 1995. It then
ordered the register of deeds of Caloocan City to cancel TCT No. 310191 and to reconvey the property to
respondents.

Petitioner claims that the CFI was barred from taking cognizance of the action for declaratory relief
since, petitioners being already in default in their loan amortizations, There existed a violation of the
mortgage deed even before the institution of the action. Hence, the CFI could not have rendered a valid
judgment in Civil Case No. C-7496 and the consignation made pursuant to a void judgment was likewise
void.

ISSUE: W/N a petition for declaratory relief is proper (NO)

HELD:

An action for declaratory relief should be filed by a person interested under a deed, will, contract or
other written instrument, and whose rights are affected by a statute, executive order, regulation or
ordinance before breach or violation thereof. The purpose of the action is to secure an authoritative
statement of the rights and obligations of the parties under a statute, deed, contract, etc. for their
guidance in its enforcement or compliance and not to settle issues arising from its alleged breach. It
may be entertained only before the breach or violation of the statute, deed, contract, etc. to which it
refers. Where the law or contract has already been contravened prior to the filing of an action for
declaratory relief, the court can no longer assume jurisdiction over the action. In other words, a court
has no more jurisdiction over an action for declaratory relief if its subject, i.e., the statute, deed,
contract, etc., has already been infringed or transgressed before the institution of the action. Under
such circumstances, inasmuch as a cause of action has already accrued in favor of one or the other
party, there is nothing more for the court to explain or clarify short of a judgment or final order.

Here, an infraction of the mortgage terms had already taken place before the filing of Civil Case. Thus,
the CFI lacked jurisdiction when it took cognizance of the case in 1979. And in the absence of
jurisdiction, its decision was void and without legal effect. However, the petition must fail.

A mortgage action prescribes after ten years. Here, petitioners’ right of action accrued in May 1977
when respondents defaulted in their obligation to pay their loan amortizations.

It was from that time that the ten-year period to enforce the right under the mortgage started to run.
The period was interrupted when respondents filed Civil Case No. C-6329 sometime after May 1977 and
the CFI restrained the intended foreclosure of the property.

However, the period commenced to run again on November 9, 1977 when the case was dismissed. The
respondents’ institution of Civil Case No. C-7496 in the CFI on March 16, 1979 did not interrupt the
running of the ten-year prescriptive period because he court lacked jurisdiction over the action for
declaratory relief. All proceedings therein were without legal effect. Thus, petitioners could have
enforced their right under the mortgage, including its foreclosure, only until November 7, 1987. The
foreclosure held on February 8, 1995 was therefore some seven years too late. The public auction,
consolidation of title in CHFI’s favour and the issuance of the TCT in its name were all void.