G.R. No. L-73794 September 19, 1988
Eternal Gardens Memorial Parks Corporation, petitioner, vs. First Special Cases Division Intermediate Appellate Court and North Philippine Union Mission of the Seventh-Day Adventists, respondents.

FACTS

Petitioner Eternal Gardens and private respondent North Philippine Union Mission (MISSION) entered into a Land Development Agreement in 1976, wherein Eternal Gardens would develop MISSION’s land into a memorial park. Eternal Gardens was to remit 40% of the net proceeds from lot sales to MISSION. A Deed of Absolute Sale with Mortgage covering the lots was also executed. However, a third party, the Maysilo Estate, asserted a conflicting claim of ownership over the same property. To resolve this, Eternal Gardens filed an interpleader suit, depositing the funds in court and asking the rival claimants to litigate their claims. During the pendency of this suit, MISSION filed a motion to compel Eternal Gardens to deposit the amounts due under the agreement into a judicial depository. The trial court initially denied this motion and declared the development agreement ineffective pending resolution of the ownership dispute. Upon reconsideration, the trial court amended its order, setting aside the requirement for MISSION to deposit funds it had already received but still denying MISSION’s motion to compel Eternal Gardens to deposit the unpaid balances. MISSION appealed this denial to the Intermediate Appellate Court (IAC).

ISSUE

The core issue is whether the Intermediate Appellate Court acted with grave abuse of discretion in ordering Eternal Gardens to deposit the amounts due under the Land Development Agreement into a reputable bank during the pendency of the interpleader suit, which involves a prejudicial question of ownership.

RULING

The Supreme Court dismissed the petition, upholding the IAC’s order for deposit. The legal logic centers on the nature of an interpleader and the court’s inherent power to preserve the res (the subject matter) of the litigation. An interpleader is precisely designed for a stakeholder, like Eternal Gardens, who claims no interest in the funds but is faced with conflicting claims. By filing the interpleader, Eternal Gardens admitted its obligation to pay and its willingness to pay the rightful claimant. The deposit order is a logical and necessary provisional remedy to safeguard the disputed funds while the ownership issue is being adjudicated. It prevents the funds from being dissipated or the obligation from being evaded, ensuring that whoever is ultimately declared the rightful owner will receive the money. The Court rejected Eternal Gardens’ argument that the ownership question was a prejudicial issue that must be resolved first before any deposit could be ordered. The deposit is not an adjudication of ownership but a conservatory measure ancillary to the main interpleader action. It secures the property in controversy, which is the very purpose of the interpleader suit. The Court also found no merit in the claim of res judicata, as the prior proceedings dealt with different incidental orders and not a final judgment on the merits of the ownership claim. Consequently, the IAC’s order was a valid exercise of discretion to protect the interests of all parties pending the final outcome of the case.