TRADERS ROYAL BANK, PETITIONER, VS. THE HON. INTERMEDIATE APPELLATE COURT, HON. JESUS R. DE VEGA, AS PRESIDING JUDGE OF THE REGIONAL TRIAL COURT, THIRD JUDICIAL REGION, BRANCH I…

Traders Royal Bank versus Intermediate Appellate Court

The Case

This is a petition brought by Traders Royal Bank against the Intermediate Appellate Court, a presiding judge of the Regional Trial Court of Malolos, Bulacan, and La Tondeña, Incorporated. The bank had obtained a writ of preliminary attachment from the Regional Trial Court of Pasay City over barrels of alcohol belonging to its debtor, Remco Alcohol Distillery, Incorporated. La Tondeña claimed it owned that alcohol and asked the Bulacan court to enjoin the sheriff from selling it. The question is whether one Regional Trial Court may issue an injunction protecting a third-party claimant over property already attached by another Regional Trial Court of equal rank. The case matters because it draws the line between forbidden interference with a coordinate court and the lawful vindication of a stranger's title.

Procedural History

Traders Royal Bank sued Remco Alcohol Distillery, Incorporated before the Regional Trial Court of Pasay City for the recovery of a sum of money and obtained a writ of preliminary attachment. La Tondeña filed a third-party claim with the sheriff and later a complaint in intervention in the Pasay case. The Pasay court denied the motion to intervene and declared that the alcohol not yet withdrawn remained the property of Remco. La Tondeña then filed a separate action before the Regional Trial Court of Malolos, Bulacan, presided over by the respondent judge, asserting ownership of the attached alcohol and praying for injunctive relief. The Bulacan court issued an order declaring La Tondeña the owner of the disputed alcohol and granting the injunction. The bank went to the Intermediate Appellate Court on certiorari and prohibition, but that court dismissed the petition for lack of legal and factual basis, relying on the Detective and Protective Bureau versus Cloribel decision. The bank's motion for reconsideration was denied, so it came to the Supreme Court by petition.

Facts

Traders Royal Bank sued Remco Alcohol Distillery, Incorporated in the Regional Trial Court of Pasay City to recover more than two million pesos and obtained a writ of preliminary attachment. Pursuant to that writ, a deputy sheriff levied on about four thousand six hundred barrels of aged or rectified alcohol found in the distillery premises. La Tondeña filed a third-party claim with the sheriff, asserting that it owned the attached property.

La Tondeña then filed a complaint in intervention in the Pasay case, alleging that it had made advances to Remco and that the attached properties belonged to it. It also moved to withdraw alcohol and molasses from the plant, and the Pasay court initially granted the motion. On reconsideration, however, the Pasay court declared that the alcohol not yet withdrawn remained in the ownership of Remco and denied the motion to intervene. La Tondeña's motion for reconsideration of that order was never resolved, and it later manifested that it was withdrawing the motion.

La Tondeña then filed a separate action before the Regional Trial Court of Malolos, Bulacan, asserting ownership over the attached properties and praying for a writ of preliminary mandatory and prohibitory injunction. After hearings, the Bulacan court issued an order declaring La Tondeña the owner of the disputed alcohol and granting injunctive relief. A writ of preliminary injunction followed. The Pasay court then ordered the sheriff to enforce the attachment and to prevent the Bulacan sheriff and La Tondeña from removing the alcohol.

Issues

• Whether or not the Regional Trial Court of Bulacan acted without jurisdiction in entertaining the separate action of La Tondeña as a third-party claimant over property already attached by the Regional Trial Court of Pasay City.
• Whether or not the injunction issued by the Bulacan court constituted undue interference with the coordinate and co-equal authority of the Pasay court.
• Whether or not the denial or dismissal of La Tondeña's third-party claim and motion to intervene in the Pasay case barred its subsequent independent action before the Bulacan court.

Applicable Provisions

Section 14 of Rule 57 of the Rules of Court provides:

If property taken be claimed by any person other than the party against whom attachment had been issued 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 serves such affidavit upon the officer while the latter has possession of the property, and a copy thereof upon the attaching creditor, the officer shall not be bound to keep the property under the attachment, unless the attaching creditor or his agent, on demand of said officer, secures him against such claim by a bond in a sum not greater than the value of the property attached. In case of disagreement as to such value, the same shall be decided by the court issuing the writ of attachment. The officer shall not be liable for damages, for the taking or keeping of such property, to any such third-party claimant, unless such a claim is so made and the action upon the bond brought within one hundred and twenty (120) days from the date of the filing of said bond. But nothing herein contained shall prevent such third person from vindicating his claim to the property by proper action.

This provision is the very basis of La Tondeña's remedy, because its last sentence expressly preserves the third-party claimant's right to vindicate his claim by a proper action.

Ruling

On the first issue, the Court held that the petition is devoid of merit. The action filed by La Tondeña as a third-party claimant before the Bulacan court is sanctioned by Section 14 of Rule 57. That rule explicitly sets forth the remedy of a person who claims to be the owner of property levied upon by attachment: to lodge a third-party claim with the sheriff, and if the attaching creditor posts an indemnity bond in favor of the sheriff, to file a separate and independent action to vindicate his claim. This was precisely the remedy resorted to by La Tondeña.

On the second issue, the Court held that there was no undue interference. The general rule that no court may interfere by injunction with the judgments of a coordinate court applies only where no third-party claimant is involved. The Court adopted the reasoning of Manila Herald Publishing Company versus Ramos: property legally attached is property in the custody of the law, but this rule is confined to cases where the property belongs to the defendant or one in whom the defendant has a proprietary interest. When the sheriff, acting beyond the bounds of his office, seizes a stranger's property, the rule does not apply, and interference with his custody is not interference with another court's order of attachment. Jurisdiction over an action includes jurisdiction over an interlocutory matter necessary to preserve the subject matter of the suit.

On the third issue, the Court held that intervention is not exclusive but cumulative and suppletory to the right to bring an independent suit. The denial or dismissal of a third-party claim cannot bar a subsequent independent action by the claimant to establish his right to the property, even if he failed to appeal from the order denying his original claim.

Doctrine

A third-party claimant whose property has been levied upon by attachment may file a separate and independent action to vindicate his claim, as expressly preserved by Section 14 of Rule 57. The rule prohibiting one court from enjoining the processes of a coordinate court does not apply where a stranger's property is seized, because such property is not in the custody of the law as against him. Intervention in the attachment proceeding is cumulative and suppletory, not exclusive, so its denial does not bar the independent vindicatory action.

Disposition

The Supreme Court dismissed the petition and affirmed the decision of the Intermediate Appellate Court, with costs against Traders Royal Bank.

Remember This

The one line to memorize: when the sheriff seizes a stranger's property, interference with his custody is not interference with another court's order of attachment. Examiners use this case to test the third-party claim remedy under Section 14 of Rule 57 and the limits of the rule against coordinate-court interference.