YUPANGCO COTTON MILLS, INC., PETITIONER, VS. COURT OF APPEALS, HON. URBANO C. VICTORIO, SR., PRESIDING JUDGE, RTC BRANCH 50, MANILA, RODRIGO SY MENDOZA, SAMAHANG MANGGAGAWA NG A…

Yupangco Cotton Mills versus Court of Appeals

The Case

This is a petition for review on certiorari brought by Yupangco Cotton Mills, Incorporated against the Court of Appeals, a presiding judge of the Regional Trial Court of Manila, Rodrigo Sy Mendoza, Samahang Manggagawa ng Artex and Samar-Anglo. The petitioner's properties had been levied upon by the sheriff of the National Labor Relations Commission to satisfy a labor judgment in a case to which the petitioner was a stranger. When the petitioner went to the Regional Trial Court to recover its property, the Court of Appeals dismissed its petition on the ground of forum shopping. The case matters because it settles the remedies of a third party whose property is taken to answer for another's debt, and because it teaches when the filing of several actions does not amount to forum shopping.

Procedural History

The petitioner filed a complaint for recovery of property and damages with the Regional Trial Court of Manila, presided over by the respondent judge. That court dismissed the complaint. The petitioner then went up to the Court of Appeals by petition for certiorari and mandamus. The Court of Appeals dismissed the petition, holding that the petitioner was guilty of forum shopping and that the proper remedy was an appeal in due course, not certiorari or mandamus. The Court of Appeals also sustained the trial court's ruling that the remedies under Section 17, now Section 16, of Rule 39 were unavailable because the Manual of Instructions for Sheriffs of the National Labor Relations Commission does not include an independent action by the owner. The petitioner moved for reconsideration, and the Court of Appeals denied the motion. Hence, the petitioner came to the Supreme Court by petition for review on certiorari.

Facts

A labor case was decided in favor of Samar-Anglo against Artex Development Corporation. To enforce that decision, the sheriff of the National Labor Relations Commission levied upon properties located in the compound and buildings of Artex. The petitioner, Yupangco Cotton Mills, claimed that those properties belonged to it and that it was not a party to the labor case.

Acting on that claim, the petitioner took a series of steps. It filed a notice of third-party claim with the Labor Arbiter. It filed an affidavit of adverse claim with the National Labor Relations Commission, which was dismissed by the Labor Arbiter. It filed a petition for certiorari and prohibition with the Regional Trial Court of Manila, which was dismissed for lack of merit. It appealed the Labor Arbiter's order to the National Labor Relations Commission, which dismissed the appeal for lack of merit. It filed an original petition for mandatory injunction with the Commission, which remained pending. Finally, it filed a complaint with the Regional Trial Court of Manila for recovery of the property and damages.

In all these actions, the petitioner raised one common claim: that it owned the properties erroneously levied upon by the sheriff. The dismissal of its complaint by the trial court led to the petition before the Court of Appeals, and ultimately to this case.

Issues

• Whether or not the Court of Appeals erred in ruling that the petitioner was guilty of forum shopping.
• Whether or not the Court of Appeals erred in dismissing the petitioner's action for recovery of property on the ground of lack of jurisdiction of the trial court.

Applicable Provisions

Section 17, now Section 16, of Rule 39 of the Revised Rules of Court provides:

SEC. 17 (now 16). Proceedings where property claimed by third person. If property claimed by any other person than the judgment debtor or his agent, and such person makes an affidavit of his title thereto or right to the possession thereof, stating the grounds of such right or title, and serve the same upon the officer making the levy, and a copy thereof upon the judgment creditor, the officer shall not be bound to keep the property, unless such judgment creditor or his agent, on demand of the officer, indemnify the officer against such claim by a bond in a sum not greater than the value of the property levied on. In case of disagreement as to such value, the same shall be determined by the court issuing the writ of execution.

The officer is not liable for damages, for the taking or keeping of the property, to any third-party claimant unless a claim is made by the latter and unless an action for damages is brought by him against the officer within one hundred twenty (120) days from the date of the filing of the bond. But nothing herein contained shall prevent such claimant or any third person from vindicating his claim to the property by any proper action.

When the party in whose favor the writ of execution runs, is the Republic of the Philippines, or any officer duly representing it, the filing of such bond shall not be required, and in case the sheriff or levying officer is sued for damages as a result of the levy, he shall be represented by the Solicitor General and if held liable therefor, the actual damages adjudged by the court shall be paid by the National Treasurer out of such funds as may be appropriated for the purpose.

This provision is the foundation of the ruling, because its reservation of any proper action is what allowed the petitioner to sue in the Regional Trial Court despite its earlier third-party claim.

Ruling

On the first issue, the Court ruled that there was no forum shopping. Forum shopping requires that both actions involve the same transactions and circumstances, and raise identical causes of action, subject matter and issues. Here there was no identity of parties, rights, causes of action and reliefs. The case before the Labor Arbiter and the Commission was a labor dispute between Artex and Samar-Anglo, to which the petitioner was not a party. The only issue the petitioner raised there was whether the writ of execution could be satisfied against its property. The action in the trial court, on the other hand, was to recover the property illegally levied upon and sold at auction. The causes of action were therefore different.

On the second issue, the Court held that a third party whose property is levied upon to enforce a decision against a judgment debtor is given several alternative remedies, which may be availed of cumulatively. The third party may file a third-party claim with the sheriff, may appeal a denial to the Commission, and may still file a proper action with a competent court to recover ownership. The Court anchored this on the reservation in the Rule:

But nothing herein contained shall prevent such claimant or any third person from vindicating his claim to the property by any proper action.

The Court explained that such a proper action is entirely distinct from the action in which execution issued, and that it may be brought against the sheriff and other parties who colluded with him, such as the judgment creditor. The property levied upon being that of a stranger, it is not subject to levy, and a separate action for recovery does not interfere with the powers of the Labor Arbiter and the Commission.

Doctrine

A third-party claimant whose property is seized by a sheriff to answer for the obligation of a judgment debtor has cumulative and alternative remedies: a third-party claim, an appeal from its denial, and an independent action to vindicate ownership. The filing of a third-party claim does not bar the subsequent filing of a proper action in a competent court, because the Rules expressly reserve that right. Forum shopping exists only where the actions involve the same transactions and circumstances and raise identical causes of action, subject matter and issues; where the claimant is a stranger to the labor case and sues only to recover its own property, there is no forum shopping.

Disposition

The Supreme Court reversed the decision of the Court of Appeals and annulled the sale on execution of the subject property, declared the petitioner the rightful owner, and remanded the case to the trial court to determine the liability of the respondents for actual damages, with costs against the respondents except the Court of Appeals.

Remember This

The one line to memorize is that the remedies of a third-party claimant are cumulative, and the filing of a third-party claim does not preclude a separate action to vindicate ownership. Examiners use this case to test forum shopping and the remedies of a stranger to the execution, especially where the levy is made by a labor sheriff.