G.R. No. L-25885 January 31, 1972
LUZON BROKERAGE CO., INC., plaintiff-appellee, vs. MARITIME BUILDING CO., INC., and MYERS BUILDING CO., INC., defendants, MARITIME BUILDING CO., INC., defendant-appellant.

FACTS

Myers Building Co., Inc. (Myers) entered into a Deed of Conditional Sale over certain properties with Bary Building Co., Inc., later known as Maritime Building Co., Inc. (Maritime). The contract stipulated that failure to pay any installment would give Myers the option to annul the sale, forfeit payments, and retake possession. Maritime, after years of regular payments, defaulted on installments for March to May 1961. Myers then formally cancelled the contract and demanded possession. Meanwhile, Maritime had leased the properties to Luzon Brokerage Co., Inc. (Luzon). Myers demanded that Luzon pay the rentals directly to it and surrender the premises. Faced with conflicting claims from Myers (the original owner claiming cancellation) and Maritime (the lessor under the lease contract), Luzon filed an action for interpleader, depositing the rentals in court to avoid liability for paying the wrong party.

ISSUE

The primary issue was whether Luzon Brokerage Co., Inc. properly availed of the remedy of interpleader given the conflicting claims over the rental payments and possession of the property.

RULING

The Supreme Court affirmed the lower court’s decision, upholding the propriety of the interpleader. The Court ruled that Luzon had reasonable grounds to be in doubt about to whom it should pay the rentals. Myers’ cancellation of the conditional sale with Maritime, if valid, terminated Maritime’s right of possession and, consequently, its right to collect rentals from Luzon thereafter. This conflict created a real and tangible risk for Luzon of being sued by either party, making it a mere stakeholder with no interest in the outcome of the dispute between Myers and Maritime. The Court rejected Maritime’s procedural objections, noting that its subsequent act of renewing Luzon’s lease during the pendency of the suit and authorizing the continued deposit of rentals in court mooted its claim that the interpleader was improper. The interpleader was a valid procedural mechanism to protect Luzon from double liability and to compel the adverse claimants to litigate their respective rights between themselves. The Court also affirmed the lower court’s ruling on the substantive rights, confirming Myers’ valid cancellation of the conditional sale due to Maritime’s default and its consequent entitlement to the rentals and possession.