Arreza vs Diaz Case Digest

Facts: Bliss Development Corporation is the owner of a housing complex

located in Quezon City. It instituted before RTC Makati an interpleader case
against Arreza and Diaz who were conflicting claimants of the property (Civil
Case No. 94-2086). The RTC ruled in favor of Arreza. In view of said decision,
Bliss executed a contract to sell the property to Arreza and Diaz was constrained to
transfer possession together with all improvements to Arreza.

Thereafter, Diaz filed a case against Arreza and Bliss for the reimbursement of the
cost of his acquisition and improvements on the property (Civil Case No. 96-
1372). Arreza filed a Motion to Dismiss on the ground of res judicata and lack of
cause of action. RTC denied the Motion to Dismiss.

Arreza appealed to CA which dismissed the petition saying that res judicata does
not apply because the interpleader case only settled the issue on who had a better
right. It did not determine the parties‘ respective rights and obligations. The action
filed by Diaz seeks principally the collection of damages in the form of the
payments Diaz made to Bliss and the value of the improvements he introduced on
the property matters that were not adjudicated upon in the previous case for
interpleader.

Issue: Are Diaz's claims for reimbursement against Arreza barred by res
adjudicata?

Held: 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. 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.

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. In the present case, we find there is an identity of causes of action between
Civil Case No. 94-2086 and Civil Case No. 96-1372. Respondent Diaz's cause of
action in the prior case, now the crux of his present complaint against petitioner,
was in the nature of an unpleaded compulsory counterclaim, which is now barred.
There being a former final judgment on the merits in the prior case, rendered in
Civil Case No. 94-2086 by Branch 146 of the Regional Trial Court of Makati,
which acquired jurisdiction over the same parties, the same subject property, and
the same cause of action, the present complaint of respondent herein (Diaz) against
petitioner Arreza docketed as Civil Case No. 96-1372 before the Regional Trial of
Makati, Branch 59 should be dismissed on the ground of res adjudicata. (Arreza vs
Diaz, G.R. No. 133113. August 30, 2001)

RCBC vs Metro Container Corporation

Facts: 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. (RCBC vs Metro Container Corporation, G.R.
No. 127913. September 13, 2001)