Rule 59-Receivership Cases

[No. 6305. September 26, 1911.
]
COMPAIA GENERA !E "A#ACOS !E $IIPINAS, p%&'(t')) &(* &ppe%%ee, +,. ROMANA GA-.ON &(* /-AN !. POMAR,
*e)e(*&(t,. /-AN !. POMAR, re0e'+er &(* &ppe%%&(t.
1.RECEVERS; POWERS, DUTES, AND RESPONSBLTES.A receiver is generally defined to be an indifferent person
between the parties litigant, appointed by the court and on behalf of all the parties, and not of the plaintiff or defendant only, to
receive and hold the thing or property in litigation, pending the suit, to receive the rents, issues, or profits of the land or thing in
question, to hold possession and control of the property which is the subject-matter of the litigation and to dispose of it in such
manner as may be directed by the court. He is the arm and hand of the court, a
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PHLPPNE REPORTS ANNOTATED
Compaa General de Tabacos vs. Gauzon and Pomar.
part of the machinery of the court, by which the rights of the parties are protected. He is required not only to preserve the property,
but to protect the rights of all the parties interested.
2.D.; LMTED AUTHORTY TO NCUR EXPENSE WTHOUT EXPRESS PERMSSON OF THE COURT.Generally a receiver
has no authority to incur any expense in the administration of his receivership, without express permission of the court, except it
be absolutely necessary to preserve the property, and then only when, under special circumstances, he can not secure such
authority from the court. He should administer the estate as economically as possible, to the end that the interests of all the parties
shall be conserved.
3.D.; COMPENSATON.The amount of compensation of a receiver is fixed by the sound discretion of the court. The court, in
fixing the compensation of the receiver, should take into consideration the general efficiency of the receiver in his administration of
the property under his control.
APPEAL from a judgment of the Court of First nstance of Occidental Negros. McCabe, J.
The facts are stated in the opinion of the court.
M. Fernandez Yamson, for appellant.
A. P. Seva, for appellee.
JOHNSON, J.:
The present appeal is made by the defendant Juan D. Pomar, as receiver, against the order of the Hon. Albert E. McCabe, judge
of the Province of Occidental Negros, disallowing certain items in the final account of the said receiver.
t appears from the record that the defendant, Romana Gauzon, on the 10th day of September, 1904, executed and delivered to
the plaintiff (Compaa General de Tabacos de Filipinas) a mortgage upon an hacienda known as "San Jose," in the municipality
of San Carlos, in the Province of Occidental Negros. The said defendant (Romana Gauzon) having failed to pay the said
mortgage, the plaintiff (Compaia General de Tabacos de Filipinas), on the 22nd day of September, 1905, commenced an action
for the foreclosure of said mortgage, and asked, in addition to the foreclosure of the mortgage, that a receiver be appointed to take
charge
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VOL. 20, SEPTEMBER 26, 1911.
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of the property in question, pending the said action. On the same day (22nd of September, 1905) the Hon. Vicente Jocson, after
hearing the petition filed in said cause, appointed the said defendant, Juan D. Pomar, an employee of the plaintiff, receiver of the
property involved in said foreclosure proceedings. Said foreclosure proceedings continued to a termination. The result of said
proceedings may be found in two decisions of this court, the cases of La Compaa General de Tabacos de Filipinas vs. Ganson
(13 Phil. Rep., 472) and La Compaa General de Tabacos de Filipinas vs. Ganson (13 Phil. Rep., 481). The facts relating to the
foreclosure proceedings and the judgment therein are not important in the present cause, further than to show the history of the
transactions of the receiver, the defendant, Juan D. Pomar.
After the termination of the receivership, the court required of the receiver (Juan D. Pomar) a report and an accounting of his
operations as receiver. t appears from the record that the lower court had a good deal of trouble in securing a final report. The
receiver apparently acted as though his only responsibility was to the plaintiff (Compaa General de Tabacos de Filipinas) ;
however, finally the lower court secured what appears to be a final accounting by the receiver, upon the 9th or 10th day of August,
1909. The report of the receiver contained many items. After a careful consideration of the various items of the account of the
receiver, Judge McCabe allowed the f following items of said account
1. Care of cane before cutting ......................................................................................P1,522.30
2. Cutting and grinding, according to report of commissioners ....................................8,565
3. Fuel .........................................................................................................................150.00
4. Expenses in loilo, according to receiver's Exhibit B ................................................2,591.20
5. Storage .....................................................................................................................428.28
6. nsurance ..................................................................................................................428.28
7. Selling commission ...................................................................................................648.12
8. Judgment for plaintiff in cause No. 249 ....................................................................9,187.80
9. Receiver's pay ..........................................................................................................._1,000.00
Total ...................................................................................................................24,522.04
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and ordered the receiver, Juan D. Pomar, to pay into court on or about the first Tuesday of November, 1909, the sum of
P7,883.76, a balance which he ought to have had in his possession. From the order allowing said items only the defendant
appealed to this court and made the following assignments of error:
". The court erred in reducing to P8,565.97 the P22,-944.73 spent by the receiver for cutting, hauling, and manufacture of
8,005.58 piculs of sugar, for packing, transportation and storage thereof, and insurance and selling commission thereon.
". The court erred in not allowing the item of P147.86 paid out by the receiver as interest on money borrowed to cover the first
expenses of his receivership.
". The court erred in not approving the disbursement made by the receiver of the P3,001.94 delivered to the aparceros as their
share of the crop.
"V. The court erred in reducing to P1,000 the P4,860.87 which the receiver claimed as compensation f or his services.
"V. The court erred in holding that the order appointing the receiver does not extend his powers beyond those prescribed in
section 175 of Act No. 190."
With reference to the first assignment of error, it will be noted that the receiver presented an account for cutting, grinding, etc., of
the sugar cane upon the hacienda, over which he had control as receiver, amounting to P22,944.73. Judge McCabe refused to
allow that amount for the cutting and grinding, etc., of said sugar cane, upon the ground that it was an unreasonable charge. The
parties in the lower court agreed to the appointment of three commissioners f or the purpose of ascertaining the reasonable cost
of cutting, grinding, etc., of the sugar cane upon the said hacienda. The commissioners were duly appointed, the plaintiff selecting
one, the defendant another and the court selecting the third. n due time and after due deliberation, the commissioners reported
that the reasonable cost f or cutting, 'grinding, etc., of the said sugar cane per pico was P1.07. There were 8,005.58 picos of sugar
cane, which calculated at the
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rate of P1.07 per pico for cutting, grinding, etc., would amount to P8,565.97, which amount the lower court allowed the receiver.
The commissioners appointed by the lower court were men who had had experience in the cutting and grinding of sugar cane. t
was the duty of the receiver to harvest the sugar cane at the least possible cost to the owners of the crop. There is much proof in
the record to indicate that the receiver did not harvest the crop of sugar cane as expeditiously as he should have done. There is
no proof in the record which shows that the amount estimated by the said commissioners f or the cutting, grinding, etc., of the
sugar cane in question, was not a reasonable amount for that expense. We find nothing in the record which justifies us in
modifying the decision of the lower court with reference to this first assignment of error.
With reference to the second assignment of error, it appears that the receiver attempted to charge P147.86, as interest on money
borrowed by him during his administration as receiver. There is no proof in the record that the receiver was authorized to borrow
money for the purpose of carrying on his work as receiver of said hacienda; neither is there any proof in the record which shows
that it was necessary for him to borrow money to properly conserve the interests of the owners and creditors interested in the
administration of the hacienda. The lower court correctly said, "a receiver has no authority to borrow money unless the same is
expressly given by the court." We would be inclined, however, to allow this amount (P147.86) had the necessity been fully
demonstrated for borrowing the money. n the absence of authority expressly given and especially in the absence of proof of the
absolute necessity for incurring this item
of expense, we refuse to modify the conclusions of the lower court with respect to this item.
With reference to the third assignment of error above noted, the receiver included in his account the item of P3,001.94, being the
amount, according to' this statement, of money and effects delivered to "los aparceros de la hacienda" during his administration. t
is a well known
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custom among sugar growers in the Philippine slands, that the aparceros plant and cultivate sugar cane at their own expense,
receiving one-half of the sugar produced and delivering the other half to the owner of the land. t is also a well known custom that
the owners of the land from time to time advance money and effects to the aparceros, deducting the value of the same from the
value of the sugar after the same is harvested. n the present case it appears that the receiver delivered one-half of the sugar to
the aparceros without deducting the amount of money and effects advanced to them. f he, in fact, advanced to the aparceros the
said sum (P3,001.94) he should have deducted it from the amount due said aparceros, and not have attempted to collect the
same from the amount due the owner of the hacienda, prejudicing the owner of the hacienda thereby. Here again the receiver
exceeded his authority. Nevertheless we would be inclined to allow this amount (P3,001.94) if it were a just charge against the
administration of the hacienda. But, as was said above, it is not a just charge against the owner of the hacienda. This amount
should have been collected from the aparceros. Judge McCabe committed no error in disallowing this item in the account of the
receiver.
With reference to the fourth assignment of error above noted, it will be seen that the receiver included in his account the sum of
P4,860.87 as compensation for his administration as receiver. The lower court disallowed that amount but did allow him. the sum
of P1,000 as his just compensation as receiver. The lower court, in the appointment of the receiver, did not fix any sum for his
compensation; neither is it customary for courts in appointing receivers to fix their compensation in advance. Their compensation
is a matter which is always left to the sound discretion of the court, to be allowed from time to time. The receiver attempted to
recover as his compensation 15 per cent of the value of the sugar. The lower court found that the amount of P4,860.87 was an
unreasonable amount to be allowed as compensation for the services of the re-
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ceiver in the present case. The court found that the receiver might have done all the work which he did do in the course of his
administration as receiver in one hundred days. The Code of Procedure in Civil Actions allows administrators of estates of
deceased persons the sum of P4 a day for the time actually employed in the administration of the estate. The lower court, f
ollowing this provision of the law, believing the present case to be somewhat analogous, allowed the receiver P4 a day for his
services. The lower court also allowed an additional amount, the basis of which does not clearly appear in the record, making the
total compensation of the receiver the sum of P1,000. Against that order the owner of the hacienda did not appeal. Considering
the negligent manner in which the receiver administered the hacienda, as appears from the record, as well as his negligence in
complying with the various orders of the court with reference to rendering accounts, etc., we are of the opinion that the sum of
P1,000 is, in fact, more than a just compensation for his services. n view, however, of the fact that the owner of the hacienda did
not appeal from the order of the court allowing said sum (P1,000) we approve the finding of the lower court.
With reference to the fifth assignment of error above noted, the appellant seems to believe that section 175 of the Code of
Procedure in Civil Actions gave him full power to administer the property placed under his control as receiver as he might deem
wise and necessary, without any intervention on the part of the court or of the interested parties. The appellant evidently
overlooked the phrase of said article which says: "The receiver shall have, under the control of the court in which the action is
pending, power, etc." The judge of the lower court in his decision goes into detail at length and cites authorities extensively, for the
purpose of showing the general duties, powers and .responsibilities of receivers, evidently for the purpose of instructing receivers
in his district. The receiver is generally defined to be "an indifferent person between the parties litigant, appointed by the court and
on behalf of all the parties,
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and not of the plaintiff or defendant only, to receive and hold the thing or property in litigation, pending the suit (Booth vs. Clark, 17
How. (U. S.), 322, 331), to receive the rents, issues or profits of the land or thing in question (Booth vs. Clark, supra), to receive
the rents or other income, to hold possession and control of the property which is the subject matter of the litigation, and to
dispose of the same or deliver it to such person or persons as may be directed by the court. (Wiswall vs. Kunz, 173 111., 110.)"
The reports of the decisions of the courts are filled with decisions supporting the above doctrine. The receiver is said to be the arm
and hand of the courta part of the machinery of the court, by which the rights of parties are protected. He is required not only to
preserve the property, but to protect the rights of all of the parties interested. f he is not versed in the law, he should secure legal
advice, with the permission of the court and in case of doubt should advise with the court and receive direction.
After a full consideration of the above assignments of error, in connection with the facts contained in the record, we find no reason
for changing or modifying the decision of the lower court, and the same is hereby affirmed, with costs.
Torres, Mapa, and Moreland, JJ., concur.
CARSON, J., concurring:
concur. think it proper, however, to add that the observation of the lower court, quoted with approval in the opinion of this court,
that "a receiver has no authority to borrow money unless the same is expressly given by the court," while undoubtedly true, as a
general proposition, must not be understood as absolutely prohibiting the borrowing of money by a receiver and its repayment with
interest as a lawful and necessary expense incurred by the receiver in the performance of his duty, where it is impracticable or
impossible to secure the prior approbation of the transaction by the court.
As a rule, consent of court should first be obtained; but
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Rallos vs. Yangco.
as clearly indicated in the majority opinion, where the necessity for incurring the expense actually exists, and is fully and clearly
established, the transaction will be ratified and approved when all the facts are shown to the court. The receiver and the lender
take the risk that the transaction may not be ratified by the court, on the ground that in the opinion of the court there was no
necessity therefor; and without the approval of the court previously obtained or the ratification and approval obtained when the
matter is finally reported, the property in the hands of the receiver is not and can not be bound for the repayment of the
indebtedness.
f it were shown in the case at bar that to save a growing crop from destruction, or to harvest it at the proper time, it became
necessary to borrow money to pay laborers or the like, and that under all the circumstances it was impracticable to secure the
previous consent of the court to the transaction, it will not be doubted that on a proper showing the court would ratify and affirm
the transaction, and that this subsequent ratification would bind the property in the hands of the receiver for the repayment of the
money borrowed, together with interest and the expenses necessarily incurred in and about the making of the loan.
Judgment affirmed.
_______________ [Compaa General de Tabacos vs. Gauzon and Pomar., 20 Phil. 261(1911)]
[No. 25129. No+ember 22, 1926]
"3E #EGIAN CA"3OIC MISSIONARIES, INC., p%&'(t')) &(* &ppe%%ee, +,. MAGAANES PRESS, INC., E" A.,
*e)e(*&(t,. /OSE MARIA MEMI/E, &ppe%%&(t.
1.CHATTEL MORTGAGE; DEPOST OF PROPERTY.The trial court did not commit an error in authorizing the plaintiff
corporation to take possession of the personal property in litigation upon the filing of a bond sufficient to secure the conservation
or value of the same, such act not constituting a delivery of the personal property, as the appellant contends, but only a deposit of
the property in litigation applied for by said plaintiff corporation which became a receiver by authority of the court, it being the party
most interested in the conservation and care of said property.
2.lD.; NCREASE OF SECURTY.The increase of a mortgage security becomes a new mortgage where the original mortgage
does not contain any stipulation in regard to the increase of the mortgage credit, and, even if it does, said increase would take
effect only from the date of the increase. A mortgage which contains a stipulation in regard to future increases of credit will take
effect from the date the same are made and not from the date of the original. mortgage.
3.D.; SECURTY OF FUTURE DEBT.Where the statute provides that the parties to a chattel mortgage must take oath that the
debt is a just debt, honestly due and owing from the mortgagor to the mortgagee, it is obvious that a valid mortgage cannot be
made to secure a future debt.
APPEAL from a judgment of the Court of First nstance of Manila. Diaz, J.
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Belgian Catholic Missionaries vs. Magallanes Press
Antonio M. Opisso, Romualdez Hermanos and Luciano de la Rosa for appellant.
Cavanna, Aboitiz & Agan for appellee.
VLLA-REAL, J.:
This is an appeal taken by Jose Maria Memije from a judgment of the Court of First nstance of Manila the dispositive part of which
is as follows:
"For all the foregoing, the court is of the opinion that the plaintiff has a right to the relief prayed for in its complaint. Wherefore,
judgment is rendered declaring that Exhibits C and D, that is, the mortgage deeds in question in this proceeding, in so far as they
prejudice the rights of the plaintiff, are null and void; that the preliminary injunction issued in this case against the defendant Jose
Ma. Memije is final and absolute; and that the plaintiff recover the amount of the fire insurance policies of the defendant
'Magallanes Press, nc.,' which, or the representatives of which, is hereby ordered to endorse said insurance policies to the
plaintiff, with the costs of the proceeding against the defendants, with the exception of J. P. Heilbronn Co., nc. t is so ordered."
n support of his appeal, the appellant assigns the following supposed errors as committed by the lower court in its judgment, to
wit: (1) The court erred in overruling the demurrer filed by this defendant to the complaint in this action; (2) the trial court erred in
giving the plaintiff corporation possession of the property mortgaged to this appellant without following the necessary proceedings
or complying with the provisions of the law; (3) the trial court erred in issuing the writ of preliminary injunction against the appellant
and E. E. Elser, restraining the former from receiving from the latter, or the latter from delivering to the former, the amount of the
insurance policies covering the property mortgaged to the appellant, which was damaged by the fire that occurred in the
establishment of the Magallanes Press, nc.; (4) the trial
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court erred in giving to the unnecessary intervention of the Magallanes Press, nc., in the execution of the deed Exhibit C an
interpretation which is neither based upon law nor upon the contract; (5) the trial court erred in ordering the suspension of the
foreclosure of the appellant's mortgage on the property of the Magallanes Press, nc.; (6) the trial court erred, under the facts
proven in this case, in applying article 1297 of the Civil Code; (7) the trial court erred in finding in its decision that the defendant
Jose Ma. Memije should not have executed the documents Exhibits C and D without taking into account the rights of the plaintiff
corporation, The Belgian Catholic Missionaries, nc.; (8) the trial court erred in declaring Exhibits C and D null and void in so far as
they prejudice the rights of the plaintiff, over whose credit that of the herein appellant is preferential; in declaring the writ of
preliminary injunction issued against the defendant Jose Ma. Memije final and absolute; in giving judgment for the plaintiff to
recover the amount of the fire insurance policies of the defendant the Magallanes Press, nc.; and (9) the trial court erred in not
making any pronouncement as to the counterclaim and cross-complaint of the defendant Jose Ma. Memije in this action, nor
taking the same into consideration and rendering judgment thereon in favor of said defendant.
The oral evidence has not been forwarded to this court so that we are compelled to base our opinion exclusively upon the
documentary evidence and the facts found and stated by the trial court in its judgment. t appears that on December 1, 1921, the
Magallanes
Press, through its manager H. Camea, executed a promissory note in favor of J. P. Heilbronn & Co., nc., for the sum of
P3,472.92, with interest at 10 per cent per annum, payable at the rate of P250 a month, plus the interest earned on the unpaid
balance, until the whole amount of the indebtedness shall have been paid, the first payment to be made on January 1, 1922, with
the condition that upon
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the failure to pay any monthly installment of the interest earned on the unpaid balance, the whole amount of the indebtedness
shall become due, and the maker shall pay the payee an additional sum equivalent to 15 per cent of the total balance, for
attorney's fee and expenses of collection, forfeiting all right of exemption.
On the same date, December 1, 1921, the said Magallanes Press, through its manager H. Camea, also executed a promissory
note in f avor of J. P. Heilbronn & Co., nc., for the sum of P10,715.77, with interest at 12 per cent per annum, payable at the rate
of P500 a month, together with the interest earned on the unpaid balance, until the whole amount of the indebtedness shall have
been paid, the first payment to be made on January 1, 1922, with the condition that upon the failure to pay any monthly installment
or the interest earned on the unpaid balance, the whole amount of the indebtedness shall become due, and the maker shall pay
the payee an additional sum equal to 15 per cent of the total balance for attorney's fee and expenses of collection, forfeiting all
right of exemption.
To secure the payment of said promissory notes which amounted to a total of P14,188.69, H. Camea, as general manager of the
Magallanes Press, executed a chattel mortgage on all the printing machinery and its accessories, belonging to the said
Magallanes Press, in favor of J. P. Heilbronn & Co,, nc.
On June 19, 1922, the Magallanes Press Co., nc., successor to the Magallanes Press, with all the latter's rights and obligations,
through its duly authorized president, E. F. Clemente, executed a chattel mortgage on the same printing machinery and its
accessories in favor of the Belgian Catholic Missionaries Co., nc., which the Magallanes Press had mortgaged to J. P. Heilbronn
& Co., nc., to secure the payment of a loan of P30,500, with interest at 12 per cent per annum, which the said Magallanes Press
& Co., nc., had obtained from the Belgian Catholic Missionaries Co.,
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nc., the duration of the mortgage loan being one year from the execution of the mortgage deed.
n December, 1922 the appellant Jose Ma. Memije made a loan in the sum of P2,000 to E. F. Clemente which was paid on
account of the indebtedness of the Magallanes Press to J. P. Heilbronn & Co., nc., together with the sum of P1,641 which A. F.
Mendoza owed said E. F. Clemente.
On the occasion of the issuance of the writ of attachment in civil cause No. 23818 of the Court of First nstance of Manila, entitled
Jose Ma. Cavanna vs. The Magallanes Press Co., nc., the defendant Jose Ma. Memije, on February 21, 1923, filed an
intervention in said case.
All the promissory notes executed by the Magallanes Press in favor of J. P. Heilbronn & Co., nc., having been overdue for non-
payment of the installments, as well as the respective chattel mortgage, the said J. P. Heilbronn & Co., nc., transferred all its
mortgage credit against the Magallanes Press to Jose Ma. Memije in consideration of the sum of P8,280.90, the balance of said
mortgage credit.
On March 14, 1923, Enrique Clemente, as manager of the Magallanes Press Co., nc., executed a deed in favor of Jose Ma.
Memije by virtue of which the chattel mortgage which was given by the Magallanes Press in favor of J. P. Heilbronn & Co., nc.,
and transferred by the latter to Jose Ma. Memije, was made to cover an additional loan of P5,895.79, which included the sum of
P2,000 which said Jose Ma. Memije had advanced said Enrique Clemente in December, 1922.
On April 21, 1923, a fire occurred in the building where the printing machinery, its accessories and other personal property of the
Magallanes Press Co., nc., were located and which were covered by said chattel mortgages. Said property was insured, and the
insurance policies covering it were endorsed to J. P. Heilbronn & Co., nc., upon the execution of the chattel mortgage thereon in
favor of the latter. When J. P. Heilbronn
& Co., nc., transferred
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its mortgage credit to Jose Ma. Memije it, in turn, endorsed said insurance policies to him. The insurance companies were
disposed to pay the respective insurance policies, which amounted to P7,686.45, but due to the issuance of the above-mentioned
writ of preliminary injunction, payment could not be made.
Due to the filing of the complaint in the present case on May 9, 1923, and the issuance of the writ of preliminary injunction on May
10th of the same year, Jose Ma. Memije was unable to collect the amount of the insurance policies, and when he was summoned
under the complaint on May 14, 1923, he made demand on the Magallanes Press Co., nc., for the payment of his mortgage credit
and on the same date the manager of said corporation, E. F. Clemente, permitted the secretary of the said corporation to place the
property covered by the mortgage into the hands of the said Jose Ma. Memije in order that the same might be sold, but the sale
could not be consummated due to the issuance of the said writ of preliminary injunction.
The first question raised by the defendant and appellant has reference to the overruling of the demurrer filed by him to the
complaint.
One of the grounds of said demurrer was that the complaint in this case did not allege facts sufficient to constitute a cause of
action against the said def endant, in that, notwithstanding the fact that the said complaint was instituted to annul the document of
transfer of the mortgage credit Exhibit C, it was not alleged in the said complaint that the defendant Jose Ma. Memije had any
intention to defraud the interests of the plaintiff corporation, which was absolutely impossible due to the nature of the "transaction
and the preferential character of the mortgage credit of J. P. Heilbronn & Co., nc.
As to this paragraph of the complaint, the plaintiff company having known of the existence of a chattel mortgage in favor of J. P.
Heilbronn & Co., nc., the latter, either as
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the first or as the second mortgagee, had a perfect right to transfer its mortgage credit, without the knowledge or consent of any
other mortgagee, inasmuch as whoever acquired it, would have exactly the same status as the transferor with the same rights and
obligations. The fact, therefore, that the Magallanes Press Co., nc., had consented to the transfer of the mortgage credit of J. P.
Heilbronn & Co., nc., to Jose Ma. Memije, does not constitute a fraud that can vitiate the said transfer, inasmuch as the order of
preference of the existing mortgages has not been altered, and its allegation does not constitute a cause of action to annul the
said transfer.
n regard to the allegation contained in the ninth paragraph of the complaint, it is very clear that the increase made by Jose Ma.
Memije in the mortgage credit acquired by him from J. P. Heilbronn & Co., nc., and the extension made by the Magallanes Press,
nc., of the mortgage to said additional credit without the knowledge or consent of the plaintiff company, as second mortgagee,
prejudices the credit of the latter, inasmuch as the security for the payment of said credit was reduced as to it, and, therefore,
constitutes a fraud that vitiates the contract of extension of the mortgage evidenced by the deed Exhibit D, rendering it void.
The facts alleged in paragraph 9 of the complaint are sufficient to constitute a cause of action of nullity, and the lower court did not
err in overruling the demurrer filed by the defendant Jose Ma. Memije.
n regard to the second assignment of error, it appears that the defendant Jose Ma. Memije having attempted to foreclose the
mortgage, by which the mortgage credit acquired by him from J. P. Heilbronn & Co., nc., was secured, in order to recover not only
the original credit but also the increase, the Belgian Catholic Missionaries Co., nc., filed a complaint, with a petition for a writ of
preliminary injunction against the sheriff, in whose hands the fore-
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closure of the mortgage was placed. The writ of preliminary injunction having been issued, upon the filing of a bond in the sum of
P15,000, and there being no person more interested in the conservation and custody of the property covered by the mortgage
than said plaintiff company, being the largest creditor, it applied and obtained from the court the possession of the same.
Contrary to the contention of the appellant, this case is not one of replevin but simply a proceeding instituted by the plaintiff for the
deposit of the property in litigation, upon the filing of a bond, said plaintiff acting as a receiver by authority of the court, being the
person most interested in the conservation and care of the same (sec. 174, Act No. 190; 11 C. J., 726).
The lower court, therefore, did not err in authorizing the plaintiff company to take possession of the personal property in litigation
upon the filing of a bond sufficient to secure the conservation or value thereof.
The third assignment of error raises the question as to the preference of right between the plaintiff company and the defendant
over the mortgaged property and the amount of the insurance policies covering a part thereof which was destroyed by fire.
As we have seen in the statement of the pertinent facts necessary for the clear and accurate solution of the questions of law
involved in the present appeal, the firm of J. P. Heilbronn & Co., nc., had a mortgage credit against the Magallanes Press for the
sum of P14,186.69, secured by a first chattel mortgage. The plaintiff company, the Belgian Catholic Missionaries Co., nc., also
had a mortgage credit for the amount of P30,500, secured by a second mortgage on the same personal property. After this second
mortgage had been executed, the payment of the mortgage credit of J. P. Heilbronn & Co., nc., became due, which credit had
been reduced to the sum of P8,280.90 through partial pay-
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ments, and the herein defendant-appellant Jose Ma, Memije acquired said mortgage credit and increased it by P5,895.59, of
which increase P2,000 was a previous loan.
There is no question but that J. P. Heilbronn & Co., nc., at the time of the transfer of its mortgage rights to Jose Ma. Memije, had a
preferential right over that of the Belgian Catholic Missionaries Co., nc., for the remainder of the amount of the mortgage credit,
that is, P8,280.90. The plaintiff company had a preferential right to the rest of the value of the mortgaged property after deducting
the remaining mortgage credit of J. P. Heilbronn & Co., nc.
The increase of P5,895.59 made by the defendant Jose Ma. Memije in favor of the Magallanes Press Co., nc., and the extension
of the mortgage thereto, are not only subordinate to the mortgage credit of the plaintiff company, being subsequent in time and in
registration, but said increase in the security is also void. The increase of the mortgage security becomes a new mortgage in itself,
inasmuch as the, original mortgage did not contain any stipulation in regard to the increase of the mortgage credit, and even if it
did, said increase would take effect only from the date of the increase. A mortgage that contains a stipulation in regard to future
advances in the credit will take effect only from the date the same are made and not from the date of the mortgage (11 C. J., 448;
5 R. C. L., 420-421). n accordance with the provisions of section 5 of Act No. 1508, known as the Chattle Mortgage Law, the
parties to the original deed swore that the same was mortgaged "to secure the obligations specified therein and for no other
purpose." Neither the increase in question, nor the extension of the mortgage to secure the payment of the same, is specified in
the deed, consequently said extension is void. "Where the statute provides that the parties to a chattel mortgage must make oath
that the debt is a just debt, honestly due and -owing from the mortgagor to the
656
656
mortgagee, it is obvious that a valid mortgage cannot be made to secure a debt to be thereafter contracted." (11 C. J., 448.)
Briefly, therefore, we have the following:
(a) That Jose Ma. Memije has a preferential right to the value of the chattels mortgaged and the amount of the insurance policies
up to the sum of P8,280.90;
(b) That the plaintiff corporation, the Belgian Catholic Missionaries Co., nc., has a right to the remainder of the value of said
chattels and the insurance policies up to the amount of P30,500, after deducting the preferential credit of Jose Ma. Memije;
(c) That as to the increase of P5,895.59, the right of the defendant Jose Ma. Memije is that of an ordinary creditor.
n regard to the damages claimed by the defendant in his counterclaim and which is the subject-matter of his remaining
assignments of error, said defendant has a right to interest at 12 per cent on the P8,280.90, the amount of the mortgage credit
acquired by him from J. P. Heilbronn & Co., nc., from February 26, 1923, the date of the acquisition until fully paid.
For the foregoing reasons, the judgment appealed from is revoked and it is ordered that another be entered declaring all the
mortgages overdue, and the mortgage credit of Jose Ma. Memije preferential over that of the Belgian Catholic Missionaries Co.,
nc., up to the amount of P8,280.90, with interest at the rate of 12 per cent per annum from February 26, 1923, until fully paid; the
mortgage credit of the Belgian Catholic Missionaries Co., nc., for the sum of P30,500 with interest at the rate
of 12 per cent per annum, from June 19, 1922, until fully paid, plus the sum of P3,000 for attorney's fees, over the additional
credit of Jose Ma. Memije for P5,895.59; and ordering the foreclosure of the said mortgages by selling the mortgaged property at
public auction, to the proceeds of which shall be added the amount of the insurance
657
VOL. 49, DECEMBER 3, 1926
657
O'Brien vs. Del Rosario and Bank of the Philippine slands
policies and the above-mentioned credits in the order of preference above established, without special pronouncement as to
costs. So ordered.
Avancea, C. J., Johnson, Street, Ostrand, and Johns, JJ., concur.
Judgment reversed. [Belgian Catholic Missionaries vs. Magallanes Press, 49 Phil. 647(1926)]
[No. 29295. O0tober 22, 1924]
/. M. PO PA-CO, p%&'(t')), +,. !OORES SIG5EN.A E" A., *e)e(*&(t,. 6ISE 7 Co., '(ter+e(or &(* &ppe%%&(t.
1."SHERFF;" RECEVER.A sheriff, in a sense, is a judicial officer of a general character, who is not appointed in any particular
judicial case; the sheriff is an officer who exercises or may exercise his functions within the limits of his jurisdiction. A receiver, on
the other hand, is a special officer appointed in connection with and in a particular case or action, and whose duties are limited to
his sphere, of action and do not extend further than the case in which he is appointed.
2.D. ; D.While the funds in the hands of a sheriff may be within the reach of processes coming from other judicial proceedings,
such is not the case with respect to those under the custody of a receiver. Those who have any claim to property or sums in the
possession of a receiver, must appear in the same proceeding in which said receiver discharges his duties, and there, by motion
or petition, allege and prove their claims.
APPEAL from an order of the Court of First nstance of loilo. Salas, J.
Block, Johnston ,& Greenbaum for the intervenor.
Roman J. Lacson for receiver-appellee National Bank.
242
242
Po Pauco vs. Sigenza
ROMUALDEZ, J.:
n this case, J. M. Po Pauco obtained final judgment in his favor against Dolores Sigenza and Mariano Aguilar for the sum of
P72,278.01, both parties agreeing to deduct therefrom the sum of P13,007.46 which is the net value of the sugar cane belonging
to said def endants and attached by the plaintiff and manufactured by the Philippine National Bank, the receiver of the said
product. By virtue of said judgment and agreement the court issued a writ of execution for the remaining sum of P59,270.55 on
November 19, 1926.
n another civil case before the same court, No. 6416, Wise & Co., Ltd., had on October 18, 1926 obtained judgment against the
herein plaintiff J. M. Po Pauco ic or the sum of P10,572.80 with legal interest thereon, execution of said judgment having been
ordered in those proceedings, which has not yet, even partially, been paid.
On October 23, 1927, Wise & Co., Ltd., intervened in this case praying that the Philippine National Bank, the receiver of the said
sum of P13,007.46, be ordered to satisfy the judgment in favor of the said petitioner Wise & Co., Ltd., against J. M. Po Pauco, out
of the sum deposited with it, Po Pauco's right and interest in the judgment of this case now before us having been preliminarily
attached in civil case No. 6416, on August 6, 1926.
Opposition was filed to said petition by the Philippine National Bank alleging that said bank has a preferential right over the
surplus of the sale of the sugar delivered to it as receiver, and also that the Hibila Trading Corpo-ration obtained judgment against
the said J. M. Po Pauco, in civil case No. 3197 of the Court of First nstance of Occidental Negros, holding that the rights of the
Hibila Trading Corporation over the sugar harvest of 1923-1924 and 1924-1925 of the spouses Dolores Sigenza and Mariano
Aguilar in the San Agustin Estate, are preferential over those of J. M. Po Pauco and, therefore, the latter is not
243
VOL. 52, OCTOBER 22, 1928
243
Po Pauco vs. Sigenza
at all entitled to any of the surplus remaining from the sale of said sugar; and that said Hibila Trading Corporation is an interested
party which must be summoned before the motion of Wise & Co., Ltd., can be heard, which corporation must institute an ordinary
action to establish whatever right it may have to the surplus of the sugar in question.
The Court of First nstance of loilo denied the motion of Wise & Co., Ltd., granting it permission to institute an action against the
Philippine National Bank and the Hibila Trading Corporation in order to determine which has the better right to the net proceeds of
the sale of said sugar.
Wise & Co., Ltd., appeals from said ruling making several assignments of error.
t should not be forgotten that the sum mentioned is in the custody of a receiver and not of a sheriff. The sheriff is a court officer of
a general character who is not appointed for a certain judicial case; the sheriff is an officer who exercises or can exercise his ic
unctions within the limits of his jurisdiction. A receiver, on the other hand, is a special officer, appointed in relation to and within a
certain case or action, and whose duties are limited to his sphere of action, and do not extend further than the case in which he
was appointed.
For this reason, while the funds in the custody of a sheriff may be within the reach of processes coming from other judicial
proceedings, such is not the case with respect to those under the custody of a depositary. From which it follows that those who, as
in the present case, have any claim to property or sums in the possession of a receiver, must appear in the same proceeding in
which said receiver discharges his duties, and there, by motion or petition,. allege and prove their claims.
The order appealed from is reversed and it is ordered that this proceeding be remanded to the court of origin in order that, without
the necessity of commencing a new ac-
244
244
Zamboanga Transportation Co. vs. Bachrach Motor Co.
tion, the interested parties be given an opportunity to set forth and prove their alleged preferential rights over the sum in
controversy.
Without any special pronouncement as to costs. So ordered.
Johnson, Street, Malcolm, Ostrand, and Villa-Real, JJ., concur.
Order reversed, case remanded for further proceedings.
__________ [Po Pauco vs. Sigenza, 52 Phil. 241(1928)]
[No. 82941. $ebr9&r: 20, 1951]
ERNES" #ERG, p%&'(t')) &(* &ppe%%&(t, +,. ;AEN"IN "E-S, *e)e(*&(t &(* &ppe%%ee.
1.MORATORUM; APPONTMENT OF RECEVER DOES NOT FALL UNDER THE MORATORUM LAW.Where the complaint
for the foreclosure of real and chattel mortgages also prays for the appointment of a receiver, a motion to dismiss on the ground of
the Moratorium Law should not be sustained. The alleged violations of the conditions of the mortgage contract, if true, make it
necessary, if not imperative, for the protection of the interest of the plaintiff, that the mortgaged properties be placed in the custody
of the court. The fact that the appointment of a receiver, as the defendant emphasizes, is an ancillary remedy is precisely one
powerful reason why the case should not be dismissed; dismissal of the main action would eliminate the only basis for the
appointment of a receiver and thus completely bar the door to any relief from mischiefs.
APPEAL from an order of the Court of First nstance of locos Sur. Ortega, J.
The facts are stated in the opinion of the Court.
Alva J. Hill for appellant.
J. Prez Cardenas for appellee.
TUASON, J.:
This appeal is from an order of the Court of First nstance of locos Sur dismissing the above-entitled action by reason of
Executive Order No. 25, as amended by Executive Order No. 32, on moratorium.
Ernest Berg brought the action against Valentin Teus to foreclose a real estate and chattel mortgage executed in November, 1944,
to secure six promissory notes of the aggregate value of P80,000 and payable on demand two years after declaration of armistice
between the United States and Japan. An amended or supplementary complaint was later admitted against the defendant's
objection. The complaints recited that by stipulations of the parties, the mortgagor had undertaken, among other things, to insure
and pay the taxes on the mortgaged properties;
174
174
Berg vs. Teus
not to alienate, sell, lease, encumber or in any manner dispose thereof; and to keep and maintain the said properties in good
order and repair; but that, it was alleged, he (defendant) had failed lo keep taxes fully paid; had made material alterations on the
premises, and had sold and conveyed them to Central Azucarera del Norte. t was further alleged that the mortgagor had agreed
that should he fail to perform any of his obligations as stipulated, "the mortgage shall be deemed to be automatically foreclosed
and the mortgagee may forthwith proceed to foreclose this mortgage either extrajudicially, even after the death of the mortgagor,
in pursuance of the provisions of Act No. 3135, as amended;" and on the basis of this agreement it was prayed that the mortgage
be declared automatically foreclosed and the plaintiff entitled to immediate possession of the properties in question. n a separate
motion Berg's attorney also asked for the appointment of a receiver.
Counsel for the defendant having moved for the dismissal of the complaint on the grounds that plaintiff's cause of action had not
accrued by reason of the executive orders hereinbefore cited, and having opposed the motion for receivership, Judge Zoilo Hilario
entered an order holding that as to the collection of the six notes the suit had been prematurely brought, but setting the cause for
trial on the merits because, according to His Honor, the reasons alleged in the motion to dismiss were not "indubitable" with
reference to the appointment of a receiver sought by the plaintiff. As we understand this order, its result was that the moratorium
ought not to interfere with the plaintiff's motion for appointment of receiver.
However that may be, the plaintiff subsequently filed a "complete complaint" in which the original complaint and the amended or
supplementary complaint were consolidated. This "complete complaint", which was admitted without objection, apparently was
supposed to have restored the case to its original status. Consequently the attorney for
175
VOL. 88, FEBRUARY 20, 1961
175
Berg vs. Teus
the defendant filed a new motion to dismiss; and Judge Luis Ortega, who had replaced Judge Hilario, ignoring the latter's order
entered the order now on appeal by which the entire action was quashed on the theory advanced in the motion to dismiss. The
new order was silent on both the application for receivership and the prayer that the plaintiff be adjudged authorized by the terms
of the mortgage to foreclose it extrajudicially and seize the properties.
Judge Ortega opined that Executive Orders Nos. 25 and 32 were still in force unaffected by Republic Act No. 342 as to debts
contracted during the Japanese occupation. Plaintiff contended that those executive orders had passed out of existence by the
disappearance of the emergency contemplated thereby, and the contention is reiterated in this instance. But from the view we take
of the case, decision on this question can be deferred. For the purpose of the present decision, we will assume that Executive
Orders Nos. 25 and 32 are still in full force and effect. This we do to pave the way for and hasten action on the petition to put the
premises and chattels involved in the hands of a receiver, petition which appears of urgent character. The constitutionality of
Executive Orders Nos. 25 and 32 and Republic Act No. 342 and allied issues can wait. These issues are delicate and would
require prolonged study and deliberation. Besides, there is a pending bill in Congress repealing those executive orders and law.
n Medina vs. Santos (78 Phil., 464; 44 Off. Gaz., [No. 10] 3811), it was held that an action for the recovery of a truck with prayer
for payment of its value in case the truck was not returned, could proceed notwithstanding the moratorium law. The court observed
that the indemnity sought was a subsidiary liability and would not come into being unless and until decision was rendered against
the defendant for such payment.
n Moya vs. Barton (79 Phil., 14; 45 Off. Gaz., [No. 1] 237), the court said that when the cause of action was in
176
176
Berg vs. Teus
part covered by the moratorium and in part not, it was not unjust to render judgment for the payment of the entire obligation with
the understanding that execution with respect to the amounts that had fallen due before March 10, 1945, would be stayed.
n the case of Alejo vs. Gomez (83 Phil., 969), the court ruled that suit for unlawful detainer and rents in arrears was not affected
by the moratorium, the recovery of the unpaid rentals, it was said, being accessory to the main action.
And, lastly, in Realty nvestments, nc. et al. vs. Villanueva et al., (84 Phil., 842; 47 Off. Gaz., 1844), the court, citing the above-
mentioned cases decided that the court should go ahead with the trial of the action on the merits without prejudice to the right of
the defendant to arrest the execution should one for payment of money be issued. n that case the plaintiff, which had sold to the
defendant a piece of land on installment basis, was demanding payment of the installments still unpaid, (installments which the
defendant claimed to have fully settled with the Japanese alien property custodian) or, in default, restoration of the ownership and
possession of the property. n revoking the lower court's order of dismissal, we pointed out that the De Venecia vs. General, (78
Phil., 780; 44 Off. Gaz., 4912), and Ma-ao Sugar Central Co., nc. vs. Barrios, (79 Phil., 666; 45 Off. Gaz., 2444), were
distinguishable from Moya vs. Barton, Medina vs. Santos, and Alejo vs. Gomez, in that the suits in the first two named cases had
for their sole object the enforcement of a monetary obligation.
The case at bar falls within the relaxed rule of this court's later decisions. The alleged violations of the conditions of the mortgage
contract, if true, make it necessary if not imperative, for the protection of the interest of the plaintiff, that the mortgaged properties
be placed in the custody of the court. The fact that the appointment of a
177
177
Berg vs. Teus
receiver, as the defendant emphasizes, is an ancillary remedy is precisely one powerful reason why the case should not be
dismissed. Because receivership is an auxiliary remedy dismissal of the main action would eliminate the only basis for the
appointment of receiver and thus completely bar the door to any relief from mischiefs.
Under the circumstances of the case, the least that should have been done, if that were feasible as a matter of procedure, was to
adopt the steps which Judge Hilario had proposed to do. Judge Hilario evidently saw the grave injustice to the plaintiff and the
irreparable injury to which his rights would be exposed if an indefinite suspension of the entire proceeding were decreed.
n suspending the right of creditor to enforce his right the President and Congress had no idea of depriving him of all means of
preventing the destruction or alienation of the security for the debt, destruction which would virtually write off, in some cases, the
whole credit. f that were the intention, it is doubtful if the orders and the law invoked could stand the test of constitutionality.
The order appealed from will therefore be reversed and the case remanded to the court below f or f urther proceeding according to
the tenor of this decision. We leave the way open to the defendant to ask for the arrest or stay of execution in the event of an
adverse monetary judgment, and for the plaintiff to impugn anew, if necessary, the constitutionality of Executive Orders Nos. 25
and 32 and Republic Act No. 342 and/or their being still in force. Costs of this appeal will be charged against the appellee.
Moran, C. J., Pars, Feria, Pablo, Bengzon, Padilla, Montemayor, Reyes, Jugo and Bautista Angelo, JJ., concur.
Order reversed, and case remanded for further proceedings.
[Berg vs. Teus, 88 Phil. 173(1951)]
G.R. No. 155204. $ebr9&r: 13, 2004.<
/-IO A. ;I;ARES &(* MIA G. IGNAING, pet't'o(er,, +,. ENGR. /OSE /. RE=ES, re,po(*e(t.
Remedial Law; Civil Law; Receivership; He who alleges fraud has the burden to prove it.Petitioners miserably failed to adduce
clear, convincing, and hard evidence to show the alleged fraud in the transfers and the antedating of said transfers. The fact that
the transfers were dated prior to the demise of Torcuato on May 12, 1992 does not necessarily mean the transfers were attended
by fraud. He who alleges fraud has the burden to prove it.
Same; Same; Same; Receivership is a harsh remedy to be granted only in extreme situations.Receivership is a harsh remedy
to be granted only in extreme situations. As early as 1914, the Court already enunciated the doctrinal pronouncement in Velasco &
Co. v. Gochuico & Co., 28 Phil. 39 (1914), that courts must use utmost circumspection in allowing receivership, thus: The power to
appoint a receiver is a delicate one and should be exercised with extreme caution and only under circumstances requiring
summary relief or where the court is satisfied that there is imminent danger of loss, lest the injury thereby caused be far greater
than the injury sought to be averted. The court should consider the consequences to all of the parties and the power should not be
exercised when it is likely to produce irreparable injustice or injury to private rights or the facts demonstrate that the appointment
will injure the interests of others whose rights are entitled to as much consideration from the court as those of the complainant.
PETTON for review on certiorari of a decision of the Court of Appeals.
Mutia, Trinidad & Romero Law Offices for petitioners.
The Law Firm of Hermosisima & nso for respondent.
_______________
* SECOND DVSON.
81
81
Vivares vs. Reyes
VELASCO, JR., J.:
The Case
The kernel dispute in this petition under Rule 45 is the legality of the May 22, 2001 Resolution1 of the Camiguin Regional Trial
Court (RTC), Branch 28 in Civil Case No. 517, which placed the estate of Severino Reyes under receivership. The Court of
Appeals (CA) saw it differently in CA-G.R. SP No. 67492its June 18, 2002 Decision2 recalled the RTC directive on the
appointment of the receiver, prompting Julio Vivares and Mila gnaling to file the petition at bar to convince the Court to reinstate
the receivership.
The Facts
Severino Reyes was the father of respondent Jose Reyes and Torcuato Reyes. Upon the death of Severino, respondent and
Torcuato came upon their inheritance consisting of several properties. They had an oral partition of the properties and separately
appropriated to themselves said properties.
On May 12, 1992, Torcuato died with a last will and testament executed on January 3, 1992. n Reyes v. Court of Appeals,3 we
affirmed the November 29, 1995 CA Decision, admitting the will for probate.
Petitioner Vivares was the designated executor of Torcuato's last will and testament, while petitioner gnaling was declared a
lawful heir of Torcuato.
Believing that Torcuato did not receive his full share in the estate of Severino, petitioners instituted an action for Partition and
Recovery of Real Estate before the Camiguin RTC, Branch 28 entitled Julio A. Vivares, as executor of the estate of
_______________
1 Rollo, pp. 94-95. Penned by Presiding Judge Noli T. Catli.
2 d., at pp. 19-29. Penned by Associate Justice Wenceslao . Agniri, Jr. and concurred in by Associate Justices B.A. Adefuin-De la
Cruz (Chairperson) and Regalado E. Maambong.
3 G.R. No. 124099, October 30, 1997, 281 SCRA 277.
82
82
SUPREME COURT REPORTS ANNOTATED
Vivares vs. Reyes
Torcuato J. Reyes and Mila R. gnaling, as heir v. Engr. Jose J. Reyes and docketed as Civil Case No. 517. With the approval of
the trial court, the parties agreed that properties from the estate of Severino, which were already transferred in the names of
respondent and Torcuato prior to the latter's death on May 12, 1992, shall be excluded from litigation. n short, what was being
contested were the properties that were still in the name of Severino.
On November 24, 1997, for the purpose of collating the common properties that were disputed, the trial court directed the
formation of a three-man commission with due representation from both parties, and the third member, appointed by the trial court,
shall act as chairperson. The disputed properties were then annotated with notices of lis pendens upon the instance of petitioners.
On March 15, 2000, petitioners filed a Motion to Place Properties in Litigation under Receivership4 before the trial court alleging
that to their prejudice respondent had, without prior court approval and without petitioners' knowledge, sold to third parties and
transferred in his own name several common properties. Petitioners also averred that respondent fraudulently antedated, prior to
May 12, 1992, some conveyances and transfers to make it appear that these were no longer part of the estate of Severino under
litigation. They further claimed that respondent was and is in possession of the common properties in the estate of Severino, and
exclusively enjoying the fruits and income of said properties and without rendering an accounting on them and turning over the
share pertaining to Torcuato. Thus, petitioners prayed to place the entire disputed estate of Severino under receivership. They
nominated a certain Lope Salantin to be appointed as receiver.
_______________
4 Rollo, pp. 32-39.
83
83
Vivares vs. Reyes
On March 23, 2000, respondent filed his Opposition to Place the Estate of Severino Reyes under Receivership,5 denying that he
had fraudulently transferred any property of the estate of Severino and asserting that any transfer in his name of said properties
was a result of the oral partition between him and Torcuato that enabled the latter as well to transfer several common properties in
his own name.
On May 24, 2000, petitioners filed their Offer of Exhibits in support of their motion for receivership. On the same date, the trial
court issued an Order6 granting petitioners' motion and appointed Salantin as receiver conditioned on the filing of a PhP 50,000
bond. Respondent filed a motion for reconsideration, contending that the appointment of a receiver was unduly precipitate
considering that he was not represented by counsel and thus was deprived of due process.
On August 4, 2000, the trial court allowed respondent to present his evidence to contest petitioners' grounds for the appointment
of a receiver, and the trial court set the reception of respondent's evidence for September 4, 2000. However, on August 24, 2000,
respondent filed a motion for postponement of the September 4, 2000 scheduled hearing on the ground that he was in the United
States as early as July 23, 2000 for medical examination. On September 5, 2000, the trial court denied respondent's motion for
postponement and reinstated its May 24, 2000 Order.
On September 19, 2000, respondent filed a Manifestation with Motion to Discharge Receiver, reiterating the circumstances which
prevented him from attending the September 4, 2000 hearing and praying for the discharge of the receiver upon the filing of a
counterbond in an amount to be fixed by the court in accordance with Section 3, Rule 59 of the 1997 Revised Rules on Civil
Procedure. On October 10, 2000, peti-
_______________
5 d., at pp. 40-41.
6 d., at pp. 67-68. Penned by Judge-Designate Antonio A. Orcullo.
84
84
Vivares vs. Reyes
tioners filed their undated Opposition to Motion to Discharge Receiver.
Subsequently, respondent filed a Motion to Cancel Notice of Lis Pendens which was annotated on Tax Declaration (TD) No. 112
covering Lot No. 33 allegedly belonging exclusively to him. Respondent asserted in the motion that an adjacent property to Lot
No. 33, particularly a portion of Lot No. 35, which is owned by a certain Elena Unchuan, was erroneously included in Lot No. 33
and, consequently, was subjected to the notice of lis pendens. Petitioners filed their Opposition to the Motion to Cancel Lis
Pendens.
Consequently, on May 22, 2001, the trial court issued a Resolution, denying respondent's motions to discharge receiver and
cancel the notice of lis pendens in TD No. 112. Respondent seasonably filed a partial motion for reconsideration of the May 22,
2001 Resolution, attaching copies of deeds of sale executed by Torcuato covering several common properties of the estate of
Severino to prove that he and Torcuato had indeed made an oral partition of the estate of their father, Severino, and thus allowing
him and Torcuato to convey their respective shares in the estate of Severino to third persons.
On October 19, 2001, the trial court heard respondent's motion for partial reconsideration, and on the same date issued an Order
denying the motion for partial reconsideration on the ground that respondent failed to raise new matters in the motion but merely
reiterated the arguments raised in previous pleadings.
Aggrieved, respondent filed a Petition for Certiorari before the CA, assailing the May 22, 2001 Resolution and October 19, 2001
Order of the RTC.
The Ruling of the Court of Appeals
On June 18, 2002, the CA rendered the assailed Decision, sustaining respondent's position and granted relief, thus:
85
85
Vivares vs. Reyes
"WHEREFORE, premises considered, the Petition is hereby GRANTED. The Resolution dated 22 May 2001 of the Regional Trial
Court of Camiguin, Branch 28 in Civil Case No. 517 is hereby reversed and set aside. The court-appointed receiver, Lope
Salantin, is discharged upon the posting by petitioner of a counterbond in the amount of P100,000.00. The notice of lis pendens in
Tax Declaration 112,
in so far as it covers the property of Elena Unchuan, is cancelled. Let this case be remanded to the court a quo for further
proceedings.7
n reversing the trial court, the CA reasoned that the court a quo failed to observe the well-settled rule that allows the grant of the
harsh judicial remedy of receivership only in extreme cases when there is an imperative necessity for it. The CA thus held that it is
proper that the appointed receiver be discharged on the filing of a counterbond pursuant to Sec. 3, Rule 59 of the 1997 Revised
Rules on Civil Procedure.
Moreover, the CA ratiocinated that respondent has adequately demonstrated that the appointment of the receiver has no sufficient
basis, and further held that the rights of petitioners over the properties in litigation are doubly protected through the notices of lis
pendens annotated on the titles of the subject properties. n fine, the appellate court pointed out that the appointment of a receiver
is a delicate one, requiring the exercise of discretion, and not an absolute right of a party but subject to the attendant facts of each
case. The CA found that the trial court abused its discretion in appointing the receiver and in denying the cancellation of the notice
of lis pendens on TD No. 112, insofar as it pertains to the portion owned by Unchuan.
Aggrieved, petitioners in turn interposed a Motion for Reconsideration that was denied through the assailed September 24, 2002
CA Resolution.
Thus, this petition for review on certiorari is before us, presenting the following issues for consideration:
_______________
7 Supra note 2, at p. 28.
86
86
Vivares vs. Reyes
WHETHER OR NOT THE ANNOTATON OF A NOTCE OF LS PENDENS PRECLUDES THE APPONTMENT OF A RECEVER
WHEN THERE S A NEED TO SAFEGUARD THE PROPERTES N LTGATON.
WHETHER OR NOT A DULY APPONTED RECEVER OF PROPERTES N LTGATON SHOULD BE DSCHARGED SMPLY
BECAUSE THE ADVERSE PARTY OFFERS TO POST A COUNTERBOND.
WHETHER OR NOT THE CANCELLATON OF A NOTCE OF LS PENDENS ANNOTATED ON TAX DECLARATON NO. 112 S
CONTRARY TO LAW.8
The Court's Ruling
The petition must be denied. Being closely related, we discuss the first and second issues together.
Receivership not justified
We sustain the CA ruling that the trial court acted arbitrarily in granting the petition for appointment of a receiver as "there was no
sufficient cause or reason to justify placing the disputed properties under receivership.
First, petitioners asseverate that respondent alienated several common properties of Severino without court approval and without
their knowledge and consent. The fraudulent transfers, they claim, were antedated prior to May 12, 1992, the date of Torcuato's
death, to make it appear that these properties no longer form part of the assets of the estate under litigation in Civil Case No. 517.
Petitioners' position is bereft of any factual mooring.
_______________
8 Rollo, pp. 212-213.
87
87
Vivares vs. Reyes
Petitioners miserably failed to adduce clear, convincing, and hard evidence to show the alleged fraud in the transfers and the
antedating of said transfers. The fact that the transfers were dated prior to the demise of Torcuato on May 12, 1992 does not
necessarily mean the transfers were attended by fraud. He who alleges fraud has the burden to prove it.
Moreover, respondent has adduced documentary proof that Torcuato himself similarly conveyed several lots in the estate of
Severino based on the oral partition between the siblings. To lend credence to the transfers executed by Torcuato but distrust to
those made by respondent would be highly inequitable as correctly opined by the court a quo.
ndeed, receivership is a harsh remedy to be granted only in extreme situations. As early as 1914, the Court already enunciated
the doctrinal pronouncement in Velasco & Co. v. Gochuico & Co. that courts must use utmost circumspection in allowing
receivership, thus:
"The power to appoint a receiver is a delicate one and should be exercised with extreme caution and only under circumstances
requiring summary relief or where the court is satisfied that there is imminent danger of loss, lest the injury thereby caused be far
greater than the injury sought to be averted. The court should consider the consequences to all of the parties and the power
should not be exercised when it is likely to produce irreparable injustice or injury to private rights or the facts demonstrate that the
appointment will injure the interests of others whose rights are entitled to as much consideration from the court as those of the
complainant.9
Petitioners cannot now impugn the oral partition entered into by Torcuato and respondent and hence cannot also assail the
transfers made by respondent of the lots which were subject of said agreement, considering that Torcuato also sold properties
based on said verbal arrangement. ndeed, the parties agreed that the civil action does not encompass the properties covered by
the oral partition. n this factual set-
_______________
9 28 Phil. 39, 41 (1914).
88
88
Vivares vs. Reyes
ting, petitioners cannot convince the Court that the alleged fraudulent transfers of the lots made by respondent, which purportedly
form part of his share in Severino's estate based on the partition, can provide a strong basis to grant the receivership.
Second, petitioner is willing to post a counterbond in the amount to be fixed by the court based on Sec. 3, Rule 59 of the 1997
Rules of Civil Procedure, which reads:
"Sec. 3. Denial of application or discharge of receiver.The application may be denied, or the receiver discharged, when the
adverse party files a bond executed to the applicant, in an amount to be fixed by the court, to the effect that such party will pay the
applicant all damages he may suffer by reason of the acts, omissions, or other matter specified in the application as ground for
such appointment. The receiver may also be discharged if it is shown that his appointment was obtained without sufficient cause.
Anchored on this rule, the trial court should have dispensed with the services of the receiver, more so considering that the alleged
fraud put forward to justify the receivership was not at all established.
Petitioners advance the issue that the receivership should not be recalled simply because the adverse party offers to post a
counterbond. At the outset, we find that this issue was not raised before the CA and therefore proscribed by the doctrine that an
issue raised for the first time on appeal and not timely raised in the proceedings in the lower court is barred by estoppel.10 Even if
we entertain the issue, the contention is nevertheless devoid of merit. The assailed CA decision supported the discharge of the
receiver with several reasons including the posting of the counterbond. While the CA made a statement that the trial court should
have discharged the appointed receiver on the basis of the proposed counterbond, such opinion does not jibe with the import of
Sec. 3, Rule 59.
_______________
10 Philippine Banking Corporation v. Court of Appeals, G.R. No. 127469, January 15, 2004, 419 SCRA 487, 503-504.
89
89
Vivares vs. Reyes
The rule states that the "application may be denied or the receiver discharged. n statutory construction, the word "may has
always been construed as permissive. f the intent is to make it mandatory or ministerial for the trial court to order the recall of the
receiver upon the offer to post a counterbond, then the court should have used the word "shall. Thus, the trial court has to
consider the posting of the counterbond in addition to other reasons presented by the offeror why the receivership has to be set
aside.
Third, since a notice of lis pendens has been annotated on the titles of the disputed properties, the rights of petitioners are amply
safeguarded and preserved since "there can be no risk of losing the property or any part of it as a result of any conveyance of the
land or any encumbrance that may be made thereon posterior to the filing of the notice of lis pendens.11 Once the annotation is
made, any subsequent conveyance of the lot by the respondent would be subject to the outcome of the litigation since the fact that
the properties are under custodia legis is made known to all and sundry by operation of law. Hence, there is no need for a receiver
to look after the disputed properties.
On the issue of lis pendens, petitioners argue that the mere fact that a notice of lis pendens was annotated on the titles of the
disputed properties does not preclude the appointment of a receiver. t is true that the notice alone will not preclude the transfer of
the property pendente lite, for the title to be issued to the transferee will merely carry the annotation that the lot is under litigation.
Hence, the notice of lis pendens, by itself, may not be the "most convenient and feasible means of preserving or administering the
property in litigation. However, the situation is different in the case at bar. A counterbond will also be posted by the respondent to
answer for all damages petitioners may suffer by reason of any transfer of the
_______________
11 Medelo v. Gorospe, No. L-41970, March 25, 1988, 159 SCRA 248, 254.
90
90
Vivares vs. Reyes
disputed properties in the future. As a matter of fact, petitioners can also ask for the issuance of an injunctive writ to foreclose any
transfer, mortgage, or encumbrance on the disputed properties. These considerations, plus the finding that the appointment of the
receiver was without sufficient cause, have demonstrated the vulnerability of petitioners' postulation.
Fourth, it is undisputed that respondent has actual possession over some of the disputed properties which
are entitled to protection. Between the possessor of a subject property and the party asserting contrary rights to the properties,
the for-mer is accorded better rights. n litigation, except for exceptional and extreme cases, the possessor ought not to be
deprived of possession over subject property. Article 539 of the New Civil Code provides that "every possessor has a right to be
respected in his possession; and should he be disturbed therein he shall be protected in or restored to said possession by the
means established by the laws and the Rules of Court. n Descallar v. Court of Appeals, we ruled that the appointment of a
receiver is not proper where the rights of the parties, one of whom is in possession of the property, are still to be determined by
the trial court.12
n view of the foregoing reasons, we uphold the CA ruling that the grant of the receivership was without sufficient justification nor
strong basis.
Anent the third issue that the cancellation of the notice of lis pendens on TD No. 112 is irregular as Lot No. 33 is one of the
disputed properties in the partition case, petitioners' position is correct.
The CA made a factual finding that the property of Unchuan was erroneously included in Lot No. 33, one of the disputed
properties in Civil Case No. 517. t then ruled that the annotation of lis pendens should be lifted.
This ruling is bereft of factual basis.
_______________
12 G.R. No. 106473, July 12, 1993, 224 SCRA 566, 569.
91
91
Vivares vs. Reyes
The determination whether the property of Unchuan is a part of Lot No. 33 and whether that portion really belongs to Unchuan are
matters to be determined by the trial court. Consequently, the notice of lis pendens on TD No. 112 stays until the final ruling on
said issues is made.
WHEREFORE, the petition is PARTLY GRANTED. The June 18, 2002 CA Decision in CA-G.R. SP No. 67492 is AFFRMED with
MODFCATON insofar as it ordered the cancellation of the notice of lis pendens in TD No. 112. As thus modified, the appealed
CA Decision should read as follows:
"WHEREFORE, premises considered, the Petition is hereby PARTLY GRANTED. The Resolution dated 22 May 2001 of the
Regional Trial Court of Camiguin, Branch 28 in Civil Case No. 517 is hereby reversed and set aside. The court-appointed receiver,
Lope Salantin, is discharged upon the posting by petitioner of a counter-bond in the amount of PhP 100,000. The notice of lis
pendens in TD No. 112, including the portion allegedly belonging to Elena Unchuan, remains valid and effective. Let this case be
remanded to the court a quo for further proceedings in Civil Case No. 517.
No costs.
SO ORDERED.
Quisumbing (Chairperson), Carpio, Carpio-Morales and Tinga, JJ., concur.
Petition partly granted, judgment affirmed with modification.
Note.Before appointment of receiver is granted, consequences thereof should be considered to avoid causing irreparable
injustice to others. (Talag vs. Court of Appeals, 189 SCRA 802 [1990]) [Vivares vs. Reyes, 545 SCRA 80(2008)]
G.R. No. 112356.>/&(9&r: 20, 2010.<
E;EINA G. C3A;E. &(* AI!A C3A;E.8!EES, pet't'o(er,, +,. CO-R" O$ APPEAS &(* A""=. $I!EA =. ;ARGAS,
re,po(*e(t,.
Remedial Law; Actions; Forum Shopping; By forum shopping, a party initiates two or more actions in separate tribunals, grounded
on the same cause, trusting that one or the other tribunal would favorably dispose of the matter; Elements of Forum Shopping.
By forum shopping, a party initiates two or more actions in separate tribunals, grounded on the same cause, trusting that one or
the other tribunal would favorably dispose of the matter. The elements of forum shopping are the same as in litis pendentia where
the final judgment in one case will amount to res judicata in the other. The elements of forum shopping are: (1) identity of parties,
or at least such parties as would represent the same interest in both actions; (2) identity of rights asserted and relief prayed for,
the relief being founded on the same facts; and (3) identity of the two preceding particulars such that any judgment rendered in the
other action will, regardless of which party is successful, amount to res judicata in the action under consideration.
Same; Same; Same; Receivership; Receivership is not an action; t is but an auxiliary remedy, a mere incident of the suit to help
achieve its purpose; t cannot be said that the grant of receivership in one case will amount to res judicata on the merits of the
other
_______________
* SECOND DVSON.
400
400
Chavez vs. Court of Appeals
cases.The above cases are similar only in that they involved the same parties and Fidela sought the placing of the properties
under receivership in all of them. But receivership is not an action. t is but an auxiliary remedy, a mere incident of the suit to help
achieve its purpose. Consequently, it cannot be said that the grant of receivership in one case will amount to res judicata on the
merits of the other cases. The grant or denial of this provisional remedy will still depend on the need for it in the particular action.
Same; Same; Same; Same; A petition for receivership under Section 1 (b), Rule 59 of the Rules of Civil Procedure requires that
the property or fund subject of the action is in danger of being lost, removed, or materially injured, necessitating its protection or
preservation; f the action does not require such protection or preservation, the remedy is not receivership.n any event, we hold
that the CA erred in granting receivership over the property in dispute in this case. For one thing, a petition for receivership under
Section 1(b), Rule 59 of the Rules of Civil Procedure requires that the property or fund subject of the action is in danger of being
lost, removed, or materially injured, necessitating its protection or preservation. ts object is the prevention of imminent danger to
the property. f the action does not require such protection or preservation, the remedy is not receivership.
PETTON for review on certiorari of the resolutions of the Court of Appeals.
Jesus G. Chavez for petitioners.
ABAD,J.:
This case is about the propriety of the Court of Appeals (CA), which hears the case on appeal, placing the property in dispute
under receivership upon a claim that the defendant has been remiss in making an accounting to the plaintiff of the fruits of such
property.
401
VOL. 610, JANUARY 20, 2010
401

The Facts and the Case
Respondent Fidela Y. Vargas owned a five-hectare mixed coconut land and rice fields in Sorsogon. Petitioner Evelina G. Chavez
had been staying in a remote portion of the land with her family, planting coconut seedlings on the land and supervising the
harvest of coconut and palay. Fidela and Evelina agreed to divide the gross sales of all products from the land between
themselves. Since Fidela was busy with her law practice, Evelina undertook to hold in trust for Fidela her half of the profits.
But Fidela claimed that Evelina had failed to remit her share of the profits and, despite demand to turn over the administration of
the property to Fidela, had refused to do so. Consequently, Fidela filed a complaint against Evelina and her daughter, Aida C.
Deles, who was assisting her mother, for recovery of possession, rent, and damages with prayer for the immediate appointment of
a receiver before the Regional Trial Court (RTC) of Bulan, Sorsogon.1 n their answer, Evelina and Aida claimed that the RTC did
not have jurisdiction over the subject matter of the case since it actually involved an agrarian dispute.
After hearing, the RTC dismissed the complaint for lack of jurisdiction based on Fidela's admission that Evelina and Aida were
tenants who helped plant coconut seedlings on the land and supervised the harvest of coconut and palay. As tenants, the
defendants also shared in the gross sales of the harvest. The court threw out Fidela's claim that, since Evelina and her family
received the land already planted with fruit-bearing trees, they could not be regarded as tenants. Cultivation, said the court,
included the tending and caring of the trees. The court also regarded as relevant Fidela's pending application for a five-hectare
retention and Evelina's
_______________
1 Branch 65.
402
402
pending protest relative to her three-hectare beneficiary share.2
Dissatisfied, Fidela appealed to the CA. She also filed with that court a motion for the appointment of a receiver. On April 12, 2006
the CA granted the motion and ordained receivership of the land, noting that there appeared to be a need to preserve the property
and its fruits in light of Fidela's allegation that Evelina and Aida failed to account for her share of such fruits.3
Parenthetically, Fidela also filed three estafa cases with the RTC of Olongapo City and a complaint for dispossession with the
Department of Agrarian Reform Adjudication Board (DARAB) against Evelina and Aida. n all these cases, Fidela asked for the
immediate appointment of a receiver for the property.
The ssues Presented
Petitioners present the following issues:
1.Whether or not respondent Fidela is guilty of forum shopping considering that she had earlier filed identical applications for
receivership over the subject properties in the criminal cases she filed with the RTC of Olongapo City against petitioners Evelina
and Aida and in the administrative case that she filed against them before the DARAB; and
2.Whether or not the CA erred in granting respondent Fidela's application for receivership.
_______________
2 Rollo, pp. 59-64.
3 d., at pp. 13-15. Penned by Associate Justice Hakim S. Abdulwahid, with Associate Justices Remedios A. Salazar-Fernando
and Estela M. Perlas-Bernabe concurring.
403
VOL. 610, JANUARY 20, 2010
403

The Court's Ruling
One.By forum shopping, a party initiates two or more actions in separate tribunals, grounded on the same cause, trusting that
one or the other tribunal would favorably dispose of the matter.4 The elements of forum shopping are the same as in litis
pendentia where the final judgment in one case will amount to res judicata in the other. The elements of forum shopping are: (1)
identity of parties, or at least such parties as would represent the same interest in both actions; (2) identity of rights asserted and
relief prayed for, the relief being founded on the same facts; and (3) identity of the two preceding particulars such that any
judgment rendered in the other action will, regardless of which party is successful, amount to res judicata in the action under
consideration.5
Here, however, the various suits Fidela initiated against Evelina and Aida involved different causes of action and sought different
reliefs. The present civil action that she filed with the RTC sought to recover possession of the property based on Evelina and
Aida's failure to account for its fruits. The estafa cases she filed with the RTC accused the two of misappropriating and converting
her share in the harvests for their own benefit. Her complaint for dispossession under Republic Act 8048 with the DARAB sought
to dispossess the two for allegedly cutting coconut trees without the prior authority of Fidela or of the Philippine Coconut Authority.
The above cases are similar only in that they involved the same parties and Fidela sought the placing of the properties under
receivership in all of them. But receivership is not an action. t is but an auxiliary remedy, a mere incident of the suit to help
achieve its purpose. Consequently, it cannot be said that the grant of receivership in one case will amount to
_______________
4 Philippine National Construction Corporation v. Dy, G.R. No. 156887, October 3, 2005, 472 SCRA 1, 6.
5 Cruz v. Caraos, G.R. No. 138208, April 23, 2007, 521 SCRA 510, 522.
404
404
res judicata on the merits of the other cases. The grant or denial of this provisional remedy will still depend on the need for it in the
particular action.
Two.n any event, we hold that the CA erred in granting receivership over the property in dispute in this case. For one thing, a
petition for receivership under Section 1(b), Rule 59 of the Rules of Civil Procedure requires that the property or fund subject of
the action is in danger of being lost, removed, or materially injured, necessitating its protection or preservation. ts object is the
prevention of imminent danger to the property. f the action does not require such protection or preservation, the remedy is not
receivership.6
Here Fidela's main gripe is that Evelina and Aida deprived her of her share of the land's produce. She does not claim that the land
or its productive capacity would disappear or be wasted
if not entrusted to a receiver. Nor does Fidela claim that the land has been materially injured, necessitating its protection and
preservation. Because receivership is a harsh remedy that can be granted only in extreme situations,7 Fidela must prove a clear
right to its issuance. But she has not. ndeed, in none of the other cases she filed against Evelina and Aida has that remedy been
granted her.8
Besides, the RTC dismissed Fidela's action for lack of jurisdiction over the case, holding that the issues it raised properly belong
to the DARAB. The case before the CA is but an offshoot of that RTC case. Given that the RTC has found that it had no
jurisdiction over the case, it would seem more prudent for the CA to first provisionally determine that the RTC had jurisdiction
before granting receivership which is but an incident of the main action. [Chavez vs. Court of Appeals, 610 SCRA 399(2010)]
G.R. No. 106213. /9%: 12, 1993.<
AN"ONIE""A O. !ESCAAR, pet't'o(er, +,. "3E 3ON. CO-R" O$ APPEAS &(* CAMIO $. #ORROMEO, re,po(*e(t,.
Remedial Law; Receivership; The appointment of a receiver is not proper where the rights of the parties are still to be determined
by the trial court.n view of the above circumstances, we find the order of receivership tainted with grave abuse of discretion.
The appointment of a receiver is not proper where the rights of the parties (one of whom is in possession of the property), are still
to be determined by the trial court.
Same; Same; Same; Only when the property is in danger of being materially injured or lost may the appointment of a receiver be
justified.Only when the property is in danger of being materially injured or lost, as by the prospective foreclosure of a mortgage
thereon for non-payment of the mortgage loans despite the considerable income
_______________
* FRST DVSON.
567
VOL. 224, JULY 12, 1993
567
Descallar vs. Court of Appeals
derived from the property, or if portions thereof are being occupied by third persons claiming adverse title thereto, may the
appointment of a receiver be justified.
Same; Same; Same; The practice of appointing as receiver the clerk of court of the trial judge is frowned upon by the Court.
Another flaw in the order of receivership is that the person whom the trial judge appointed as receiver is her own clerk of court.
This practice has been frowned upon by this Court.
PETTON for review on certiorari of the decision of the Court of Appeals.
Gilberto C. Alfafara for petitioner.
Bernadito A. Florido for private respondent.
GRO-AQUNO, J.:
Assailed in this petition for review on certiorari is the decision dated July 29, 1992 of the Court of Appeals in CA-G.R. SP No.
27977, affirming the orders dated March 17, 1992 and April 27, 1992 of the trial court in Civil Case No. MAN-1148, granting
respondent's petition for receivership and denying petitioner's motion for reconsideration thereof.
On August 9, 1991, respondent Camilo Borromeo, a realtor, filed against petitioner a civil complaint for the recovery of three (3)
parcels of land and the house built thereon in the possession of the petitioner and registered in her name under Transfer
Certificates of Title Nos. 24790, 24791 and 24792 of the Registry of Deeds for the City of Mandaue. The case was docketed as
Civil Case No. MAN-1148 of the Regional Trial Court, Branch 28, Mandaue City.
n his complaint, Borromeo alleged that he purchased the property on July 11, 1991 from Wilhelm Jambrich, an Austrian national
and former lover of the petitioner for many years until he deserted her in 1991 for the favors of another woman. Based on the
deed of sale which the Austrian made in his favor, Borromeo filed an action to recover the ownership and possession of the house
and lots from Descallar and asked for the issuance of new transfer certificates of title in his name.
568
568
n her answer to the complaint, Descallar alleged that the property belongs to her as the registered owner thereof; that Borromeo's
vendor, Wilhelm Jambrich, is an Austrian, hence, not qualified to acquire or own real property in the Philippines. He has no title,
right or interest whatsoever in the property which he may transfer to Borromeo.
On March 5, 1992, Borromeo asked the trial court to appoint a receiver for the property during the pendency of the case. Despite
the petitioner's opposition, Judge Mercedes Golo-Dadole granted the application for receivership and appointed her clerk of court
as receiver with a bond of P250,000.00.
Petitioner filed a motion for reconsideration of the court's order, but it was denied.
Petitioner sought relief in the Court of Appeals by a petition for certiorari (CA-G.R. SP No. 27977 "Antonietta O. Descallar vs. Hon.
Mercedes G. Dadole, as Judge, RTC of Mandaue City, Branch 28, and Camilo F. Borromeo).
On July 29, 1992, the Court of Appeals dismissed the petition for certiorari.
n due time, she appealed the Appellate Court's decision to this Court by a petition for certiorari under Rule 45 of the Rules of
Court.
n a nutshell, the issue in this appeal is whether the trial court gravely abused its discretion in appointing a receiver for real
property registered in the name of the petitioner in order to transfer its possession from the petitioner to the court-appointed
receiver. The answer to that question is yes.
The Court is amazed that the trial court and the Court of Appeals appear to have given no importance to the fact that the petitioner
herein, besides being the actual possessor of the disputed property, is also the registered owner thereof, as evidenced by TCTs
Nos. 24790, 24791, and 24792 issued in her name by the Register of Deeds of Mandaue City on December 3, 1987. Her title and
possession cannot be defeated by mere verbal allegations that although she appears in the deed of sale as vendee of the
property, it was her Austrian lover, Jambrich, who paid the price of the sale of the property (Sinoan vs. Sorogan, 136 SCRA 407).
Her Torrens certificates of title are indefeasible or incontrovertible (Sec. 32, P.D. 1529).
Even if it were true that an impecunious former waitress, like
569
VOL. 224, JULY 12, 1993
569
Descallar, did not have the means to purchase the property, and that it was her Austrian lover who provided her with the money to
pay for it, that circumstance did not make her any less the owner, since the sale was made to her, not to the open-handed alien
who was, and still is, disqualified under our laws to own real property in this country (Sec. 7, Art. X, 1987 Constitution). The deed
of sale was duly registered in the Registry of Deeds and new titles were issued in her name. The source of the purchase money is
immaterial for there is no allegation, nor proof, that she bought the property as trustee or dummy for the monied Austrian, and not
for her own benefit and enjoyment.
There is no law which declares null and void a sale where the vendee to whom the title of the thing sold is transferred or
conveyed, paid the price with money obtained from a third person. f that were so, a bank would be the owner of whatever is
purchased with funds borrowed from it by the vendee. The holding of the trial court and the Court of Appeals that Jambrich,
notwithstanding his legal incapacity to acquire real property in the Philippines, is the owner of the house and lot which his
erstwhile mistress, Antonietta, purchased with money she obtained from him, is a legal heresy.
n view of the above circumstances, we find the order of receivership tainted with grave abuse of discretion. The appointment of a
receiver is not proper where the rights of the parties (one of whom is in possession of the property), are still to be determined by
the trial court.
"Relief by way of receivership is equitable in nature, and a court of equity will not ordinarily appoint a receiver where the rights of
the parties depend on the determination of adverse claims of legal title to real property and one party is in possession. (Calo, et
al. vs. Roldan, 76 Phil. 445).
Only when the property is in danger of being materially injured or lost, as by the prospective foreclosure of a mortgage thereon for
non-payment of the mortgage loans despite the considerable income derived from the property, or if portions thereof are being
occupied by third persons claiming adverse title thereto, may the appointment of a receiver be justified (Motoomul vs. Arrieta, 8
SCRA 172).
570
570
n this case, there is no showing that grave or irremediable damage may result to respondent Borromeo unless a receiver is
appointed. The property in question is real property, hence, it is neither perishable or consummable. Even though it is mortgaged
to a third person, there is no evidence that payment of the mortgage obligation is being neglected. n any event, the private
respondent's rights and interests, may be adequately protected during the pendency of the case by causing his adverse claim to
be annotated on the petitioner's certificates of title.
Another flaw in the order of receivership is that the person whom the trial judge appointed as receiver is her own clerk of court.
This practice has been frowned upon by this Court:
"The respondent judge committed grave abuse of discretion in connection with the appointment of a receiver. x x x. The instant
case is similar to Paranete vs. Tan, 87 Phil. 678 (1950) so that what was there said can well apply to the actuations of the
respondent judge. x x x We hold that the respondent judge has acted in excess of his jurisdiction when he issued the order above
adverted to. That order, in effect, made the clerk of court a sort of a receiver charged with the duty of receiving the proceeds of
sale and the harvest of every year during the pendency of the case with the disadvantage that the clerk of court has not filed any
bond to guarantee the faithful discharge of his duties as depositary; and considering that in actions involving title to real property,
the appointment of a receiver cannot be entertained because its effect would be to take the property out of the possession of the
defendant, except in extreme cases when there is clear proof of its necessity to save the plaintiff from grave and irremediable loss
or damage, it is evident that the action of the respondent judge is unwarranted and unfair to the defendants. (Mendoza vs.
Arellano, 36 Phil. 59; Agonoy vs. Ruiz, 11 Phil. 204; Aquino vs. Angeles David, 77 Phil. 1087; Ylarde vs. Enriquez, 78 Phil. 527;
Arcega vs. Pecson, 44 Off. Gaz., [No. 12], 4884, 78 Phil. 743; De la Cruz vs. Guinto, 45 Off. Gaz. pp. 1309, 1311; 79
Phil. 304).' (Abrigo vs. Kayanan, 121 SCRA 20).
During the pendency of this appeal, Judge Dadole rendered a decision in Civil Case No. MAN-1148 upholding Borromeo's claim to
Descallar's property, annulling the latter's TCTs Nos. 24790, 24791 and 24792 and ordering the Register of Deeds of Mandaue
City to issue new ones in the name of Borromeo. This circumstance does not retroactively validate the receivership until the
decision (presumably now pending appeal) shall have
571
VOL. 224, JULY 14, 1993
571
People vs. Patong
attained finality.
WHEREFORE, finding grave abuse of discretion in the order of receiver which the respondent Court of Appeals affirmed in its
decision of July 29, 1992 in CA-G.R. SP No. 27977, the petition for certiorari is hereby GRANTED and the decision of the
appellate court, as well as the order dated March 17, 1992 of the Regional Trial Court of Mandaue City, Branch 28, in Civil Case
No. MAN-1148, are hereby ANNULLED and SET ASDE. Costs against the private respondent.
SO ORDERED.
Cruz (Chairman), Bellosillo and Quiason, JJ., concur.
Davide, Jr., J., No part. was not able to take part in the deliberation.
Petition granted. Decision annulled and set aside.
Note.Before appointment of receiver is granted, consequences thereof should be considered to avoid causing irreparable
injustice to others (Talag vs. Court of Appeals, 189 SCRA 802). [Descallar vs. Court of Appeals, 224 SCRA 566(1993)]
G.R. No. 152239.>A9?9,t 11, 2011.<
MA@ING EN"ERPRISES, INC. AN! SPO-SES /OAA-IN "AMANO AN! ANGEI"A "AMANO, pet't'o(er,, +,. /OSE
MAR$ORI AN! EMERENCIANA MAR$ORI, re,po(*e(t,.
Civil Procedure; Forum Shopping; There is forum shopping when as a result of an adverse decision in one forum, or in anticipation
thereof, a party seeks a favorable opinion in another forum through means other than appeal or certiorari.There is forum-
shopping when as a result of an adverse decision in one forum, or in anticipation thereof, a party seeks a favorable opinion in
another forum through means other than appeal or certiorari. Forum-shopping exists when two or more actions involve the same
transactions, essential facts, and circumstances; and raise identical causes of action, subject matter, and issues. Forum-shopping
exists when the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the
other. Thus, there is forum-shopping when, between an action pending before this Court and another one, there exist: (1) identity
of parties, or at least such parties as represent the same interests in both actions, (2) identity of rights asserted and relief prayed
for, the relief being founded on the same facts, and (3) the identity of the two preceding particulars is such that any judgment
rendered in the other action will, regardless of which party is successful, amount to res judicata in the action under consideration;
said requisites also constitutive of the requisites for auter action pendant or lis pendens.
PETTON for review on certiorari of the decision and resolution of the Court of Appeals.
Hilario G. Orsolino for petitioners.
Eduardo S. Rodriguez co-counsel for petitioners.
P.M. Castillo for respondents.
_______________
* FRST DVSON.
529
VOL. 655, AUGUST 17, 2011
529
Making Enterprises, nc. vs. Marfori
Dela Vega & Associates Law Offices co-counsel for respondents.
VLLARAMA, JR.,J.:
Before us is a petition for review on certiorari assailing the July 24, 2000 Decision1 of the Court of Appeals (CA) in CA-G.R. SP
No. 43076. The CA had ordered the issuance of writs of certiorari and prohibition permanently enjoining the prosecution of Jose
Marfori in Criminal Case Nos. 170660 to 170676 before the Metropolitan Trial Court (MeTC) of Caloocan City, and ordered the
appointment of a receiver in Civil Case No. 94-70092, pending before the Regional Trial Court (RTC) of Manila. Likewise assailed
is the appellate court's Resolution2 dated February 12, 2002, denying petitioners' motion for reconsideration.
The antecedent facts follow:
On June 4, 1984, Jose F. Marfori acquired a five-storey commercial building, known as the Marsman Building, from the
Development Bank of the Philippines. As the land on which the building stood was owned by the Philippine Ports Authority (PPA),
Marfori entered into a contract of lease of the said lot with the PPA. The contract was for a period of twenty-five (25) years,
renewable for a similar period, and was subject to the condition that upon the expiration of lease, the building and all other
improvements found on the leased premises shall become the PPA's sole property. Marfori then incurred huge expenses for the
rehabilitation of the building and leased some portions of the building to the PPA.
_______________
1 Rollo, pp. 65-75. Penned by Associate Justice Demetrio G. Demetria, with Associate Justices Ramon Mabutas, Jr. and Jose L.
Sabio, Jr., concurring.
2 d., at 78-79. Penned by Associate Justice Jose L. Sabio, Jr., with Associate Justices Oswaldo D. Agcaoili and Sergio L.
Pestao, concurring.
530
530
Thereafter, on April 10, 1987, Marfori executed a dacion en pago and assignment of rights transferring the ownership of the
Marsman Building to Making Enterprises, nc. (Making), on the condition that Making would assume all of Marfori's obligations.3
Making was represented by its General Manager, Cristina Lee, and Executive Vice-President, Angelita Ma. Tamano, in the said
transaction.
Marfori's wife, Emerenciana, alleged that she did not consent to the transfer of the Marsman Building to Making. She claimed that
the building is part of their conjugal property as it was acquired during their marriage.4 On April 12, 1994, she filed with the RTC of
Manila a complaint against Making, the spouses Joaquin and Angelita Tamano, the spouses Lester and Cristina Lee, and the PPA
for Recovery of Ownership, Annulment of Contract with Damages, Receivership, Accounting and Preliminary njunction with
Prayer for Restraining Order.5 She sought, among others, to annul the dacion en pago and assignment of rights and prayed for
the appointment of a receiver to preserve the rentals of the building. She also prayed for the issuance of a writ of preliminary
injunction to enjoin the PPA from paying its rentals to Making and from approving the transfer of the Marsman Building.
n an Order6 dated October 18, 1995, Judge Catalino Castaeda, Jr. of the RTC, Branch 17, of Manila denied the prayer for the
issuance of a writ of preliminary injunction and the application for receivership.
The RTC noted that in 1987, Emerenciana's complaint for the same cause of action was dismissed by the RTC, Branch 51, of
Manila for improper venue.7 The RTC was not con-
_______________
3 CA Rollo, Vol. , pp. 504-508.
4 Jose Marfori and Emerenciana Calma-Marfori were married on June 28, 1970 as evidenced by a copy of their marriage contract;
Records, Vol. , p. 13.
5 Docketed as Civil Case No. 94-70092; id., at pp. 1-12.
6 Rollo, pp. 80-86.
7 Civil Case No. 87-42132.
531
VOL. 655, AUGUST 17, 2011
531
vinced that she would indeed suffer grave injustice and irreparable damages if a writ of injunction enjoining the PPA from paying
rentals to Making and approving the transfer of the Marsman Building is not issued considering that she re-filed her complaint only
on April 12, 1994, or more than six years after her first complaint was dismissed. As regards her prayer for the appointment of a
receiver, the RTC held that the appointment of a receiver is an equitable relief and a court of equity will not ordinarily appoint a
receiver where the rights of the parties depend on the determination of adverse claims of legal title to real property and one party
is in possession.
Emerenciana moved for reconsideration of the order. However, the RTC denied the motion.8
Not satisfied, Emerenciana filed before the CA a petition for certiorari and receivership with prayer for preliminary injunction, which
was docketed as CA-G.R. SP No. 39161. On March 29, 1996, however, the CA dismissed the petition for being insufficient in form
and substance.9 Reconsideration of the dismissal was likewise denied in a Resolution dated November 29, 1996.10
Meanwhile, with regard to the criminal cases mentioned at the outset, records show that in 1987, Marfori issued twenty-two (22)
checks in favor of Cristina Lee. Lee deposited the checks to her account with the Philippine Bank of Communications, but the
same were dishonored for the reason of "Account Closed. Thus, she filed complaints against Marfori for estafa and violation of
Batas Pambansa Blg. 22 with the Prosecutor's Office of Caloocan City.11
_______________
8 CA Rollo, Vol. , pp. 163-164.
9 Rollo, p. 90. Resolution dated March 29, 1996, penned by Associate Justice Jaime M. Lantin, with Associate Justices Eduardo
G. Montenegro and Jose C. dela Rama concurring;
10 d., at p. 88.
11 CA Rollo, Vol. , pp. 76-77.
532
532
Before he could be arraigned, Marfori sought reinvestigation of the criminal cases against him, arguing that he was not given the
opportunity to present controverting evidence to prove that the checks were already paid or liquidated.12 The RTC granted
Marfori's motion and ordered the Office of the City Prosecutor to conduct a reinvestigation. Upon reinvestigation, Assistant City
Prosecutor Afable E. Cajigal rendered a joint resolution,13 which was later approved by City Prosecutor Gabriel N. Dela Cruz,
finding cause to dismiss the criminal complaints against Marfori. On August 11, 1995, Asst. City Prosecutor Cajigal filed a motion
to dismiss before the RTC of Caloocan City, which motion was granted by Judge Emilio L. Leachon, Jr. on the same date.14
Claiming that she was not notified of the order for reinvestigation, Angelita Ma. Tamano moved to set aside the joint resolution.15
Prosecutor Cajigal then reversed his previous findings and recommended the setting aside of the joint resolution and dismissal
order.16 Said resolution was approved by 1st Assistant City Prosecutor Rosauro Silverio. Thus, Asst. City Prosecutor Cajigal filed
seventeen (17) informations for violation of B.P. 22 against Marfori before the MeTC of Caloocan City.17 Warrants for Marfori's
arrest were also issued by Judge Marcelino L. Sayo.
Aggrieved, Marfori filed with the Caloocan City RTC a petition18 for certiorari and injunction with prayer for temporary restraining
order against Judge Sayo; Asst. City Prosecutors Cajigal, Silverio and Dela Cruz; and Making, who was represented by Tamano.
Marfori maintained that all the checks were drawn in favor of Cristina Lee, but the prosecutors de-
_______________
12 d., at pp. 96-97.
13 d., at pp. 99-103.
14 Order dated August 11, 1995; id., at p. 105.
15 d., at pp. 106-112.
16 d., at p. 116.
17 d., at pp. 117-133.
18 Rollo, pp. 252-263.
533
VOL. 655, AUGUST 17, 2011
533
liberately made it appear in the new informations that the checks were drawn in favor of Making. He prayed that Judge Sayo be
enjoined from proceeding with the trial of the criminal cases and that the informations
for violation of B.P. 22, as well as the warrants of arrest, be declared void.
Making, represented by Tamano, filed a motion to dismiss arguing that the general rule is that a criminal prosecution may not be
restrained by injunction.19
n an Order dated April 18, 1997, the RTC granted Making's motion and dismissed Marfori's petition.20
Meanwhile, on November 27, 1996, Marfori and his wife had filed with this Court a Consolidated Petition21 docketed as G.R. No.
126841 asking among others, for the appointment of a receiver to preserve the rentals collected from the Marsman Building and
the issuance of an injunction to enjoin the implementation of the warrants of arrest issued against him. Respondents argued that
the filing of the criminal cases against Marfori had no factual and legal justification and hence, should be enjoined.
The Court, after finding no special and important reasons for it to take cognizance of the case in the first instance, referred the
petition to the CA for consideration and adjudication on the merits.22
On February 16, 1998, respondents filed an Amended Consolidated Petition23 with the CA. They added that Judge Castaeda, Jr.
likewise erred in denying in Civil Case No. 94-70092 their motion to present crucial documents wherein Tamano allegedly made a
declaration against her interest.
_______________
19 d., at pp. 264-267.
20 d., at pp. 268-269.
21 d., at pp. 91-123. Petition for Certiorari, Prohibition, Receivership and njunction with prayer for Preliminary njunction and
Temporary Restraining Order.
22 d., at pp. 270-271.
23 d., at pp. 172-204.
534
534
They likewise reiterated in their amended petition their prayer for the appointment of a receiver to take over, manage, and
administer the Marsman Building.
n their Comment, petitioners countered that respondents had lost all their rights to the building after they ceded it to Making in
1987. Petitioners also charged respondents with forum shopping.24 They argued that when Emerenciana's application for a writ of
preliminary injunction and receivership was denied by the RTC, she appealed the denial to the CA. When she failed to obtain a
favorable action, she and her husband filed a petition with the Supreme Court involving the same subject matter and the same
issues as in Emerenciana's earlier petition in CA-G.R. SP No. 39161. Petitioners alleged that respondents hid the real purpose of
their action by cleverly lumping together the civil and the criminal cases in their Consolidated Petition.
On July 24, 2000, the CA rendered the assailed Decision, to wit:
"WHEREFORE, premises considered, the petition filed by petitioners Jose and Emerenciana Marfori is hereby GRANTED, and
judgment rendered as follows:
1)That writs of certiorari and prohibition be issued permanently enjoining the further prosecution of Criminal Case Nos. 170660
to 170676, inclusive, against petitioner Jose Marfori; and
2)That, after posting of a bond in an amount to be determined by the Trial Court, let a receiver be appointed in Civil Case No.
94-70092, to take custody, manage, and administer the Marsman Building and all rents collected therefrom, during the pendency
of the proceedings.
SO ORDERED.25
The CA brushed aside petitioners' argument that respondents were guilty of forum shopping, holding that technical
_______________
24 d., at pp. 205-210.
25 d., at pp. 74-75.
535
VOL. 655, AUGUST 17, 2011
535
rules of procedure must be relaxed in the interest of substantial justice.
As to the order granting the prayer for the appointment of a receiver, the CA ruled that respondents have sufficiently proven their
interest in the Marsman Building. The CA found that unless a receiver is appointed, there is a danger of loss or material injury
considering that petitioners possess absolute control of the building.
Meanwhile, as to the criminal cases, the CA ruled that the public prosecutors gravely abused their discretion when they set aside
the earlier resolution recommending the dismissal of the criminal cases against Marfori based solely on the ground that Tamano
was not given the chance to comment on Marfori's motion for reinvestigation. The CA noted that in the joint resolution, the
prosecutors thoroughly studied the case and concluded that the checks subject of the criminal cases were not issued with
valuable consideration since it was impossible for Marfori to have been indebted or for petitioners to lend the amount of
P4,051,518.08 stated in the checks because the complainants/Making Enterprises only earned P49,352.95 in 1987.
Petitioners filed motions for reconsideration questioning the appointment of a receiver26 and the order permanently enjoining the
further prosecution of Marfori in Criminal Case Nos. 170660 to 170676.27 However, the CA denied both motions in its Resolution
of February 12, 2002 as follows:
"WHEREFORE, the motions are hereby DENED. However, in order to ensure that the objectives of Sec. 1 (a) Rule 59, the basis
of Our decision, will be carried out effectively, the trial court is DRECTED to appoint [as] a receiver, after compliance of the bond
requirement, a private banking institution which shall exercise.powers as such pursuant to Sec. 6, Rule 59 of the Rules of Court.
_______________
26 d., at 224-241.
27 d., at 304-326.
536
536
SO ORDERED.28
Hence, the present petition.
Essentially, petitioners present the following issues: (1) Whether the CA erred in granting the application for the appointment of a
receiver for the Marsman Building; and (2) Whether the CA erred in permanently enjoining the criminal prosecution of Jose
Marfori.
We grant the petition.
At the outset, we note that the CA erred in taking cognizance of respondents' consolidated petition as respondents are guilty of
deliberate forum shopping. We note that the petition for appointment of a receiver for the Marsman Building was originally filed by
Emerenciana before the RTC of Manila in Civil Case No. 94-70092. The RTC denied the prayer for the issuance of a writ of
preliminary injunction and the application for receivership. Emerenciana filed a motion for reconsideration, which was denied by
the RTC. She then filed a petition for certiorari and receivership with prayer for preliminary injunction before the CA docketed as
CA-G.R. SP No. 39161. n a Resolution dated March 29, 1996, the petition was dismissed for being insufficient in form and
substance. She sought reconsideration of the dismissal, and her motion was likewise denied by the CA on November 29, 1996.
However, records show that two days earlier, or on November 27, 1996, while her motion for reconsideration of the CA resolution
dismissing her petition was still pending resolution before the CA, she and her husband filed with this Court a consolidated
petition, praying for the appointment of a receiver over the Marsman Building. Clearly, CA-G.R. SP No. 39161 was still pending
with the CA when respondents filed their consolidated petition with this Court.
Moreover, we note that respondents were not candid when they stated in their certification of non-forum shopping that
_______________
28 d., at 78-79.
537
VOL. 655, AUGUST 17, 2011
537
there is no other action or proceeding involving the same issues that is pending before this Court, the CA, or any other tribunal or
agency.29
There is forum-shopping when as a result of an adverse decision in one forum, or in anticipation thereof, a party seeks a favorable
opinion in another forum through means other than appeal or certiorari. Forum-shopping exists when two or more actions involve
the same transactions, essential facts, and circumstances; and raise identical causes of action, subject matter, and issues. Forum-
shopping exists when the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata
in the other.30 Thus, there is forum-shopping when, between an action pending before this Court and another one, there exist: (1)
identity of parties, or at least such parties as represent the same interests in both actions, (2) identity of rights asserted and relief
prayed for, the relief being founded on the same facts, and (3) the identity of the two preceding particulars is such that any
judgment rendered in the other action will, regardless of which party is successful, amount to res judicata in the action under
consideration; said requisites also constitutive of the requisites for auter action pendant or lis pendens.31
Applying the above test, there is no question that there is identity of parties, cause of action and reliefs sought between the
consolidated petition in G.R. No. 126841 and the petition in CA-G.R. SP No. 39161. For resorting to forum shopping, the
consolidated petition of the spouses Marfori should have been dismissed with prejudice.
But even on the merits, the application for an appointment of a receiver must be denied.
_______________
29 CA Rollo, Vol. , p. 38.
30 Polanco v. Cruz, G.R. No. 182426, February 13, 2009, 579 SCRA 489, 495-496.
31 San Juan v. Arambulo, Sr., G.R. No. 143217, December 14, 2005, 477 SCRA 725, 729.
538
538
An application for the appointment of a receiver under Section 1(a), Rule 59 of the 1997 Rules of Civil Procedure, as amended,
requires that the property or fund subject of the action is in danger of being lost, removed, or materially injured, necessitating its
protection or preservation. Section 1 provides,
"SECTON1.Appointment of receiver.Upon a verified application, one or more receivers of the property subject of the action
or proceeding may be appointed by the court where the action is pending, or
by the Court of Appeals or by the Supreme Court, or a member thereof, in the following cases:
(a)When it appears from the verified application, and such other proof as the court may require, that the party applying for the
appointment of a receiver has an interest in the property or fund which is the subject of the action or proceeding, and that such
property or fund is in danger of being lost, removed, or materially injured unless a receiver be appointed to administer and
preserve it;
x x x x
Here, respondents submit that they have satisfactorily established their legal right over the Marsman Building. They alleged that
the building and the income and rentals thereof are in danger of being lost, removed or materially injured by the apathy, neglect
and fraudulent design of petitioners thereby rendering the appointment of a receiver both urgent and imperative.32 However, they
failed to show how the building as well as the income thereof would disappear or be wasted if not entrusted to a receiver. They
were not able to prove that the property has been materially injured, necessitating its protection and preservation. Because
receivership is a harsh remedy that can be granted only in extreme situations,33 respondents must prove a clear right to its
issuance. This they failed to do.
_______________
32 CA Rollo, Vol. , p. 316.
33 Vivares v. Reyes, G.R. No. 155408, February 13, 2008, 545 SCRA 80, 87.
539
VOL. 655, AUGUST 17, 2011
539
We furthermore observe that in granting the appointment of a receiver, the CA merely concluded that respondents have sufficiently
proven that they have an interest in the Marsman Building. t further held that unless a receiver is appointed, there is a danger of
loss or material injury, considering that petitioners presently possess absolute control of the building and the rentals accruing
thereof. However, there was no justification on how the CA arrived at its conclusion.
t must be stressed that the issue of the validity of the dacion en pago and assignment of rights executed by Marfori in favor of
Making still has to be resolved in Civil Case No. 94-70092. Until the contract is rescinded or nullified, the same remains to be valid
and binding. Thus, we agree with the RTC when it held that courts of equity will not ordinarily appoint a receiver where the rights
of the parties depend on the determination of adverse claims of legal title to real property and one party is in possession.
As regards the second issue, the Court finds no longer necessary to pass upon the correctness of the order of the CA
permanently enjoining the prosecution of Jose Marfori in Criminal Case Nos. 170660 to 170676 before the MeTC of Caloocan
City. The Court notes that during the pendency of this petition, Jose Marfori passed away on October 2, 2004.34 Pursuant to
Article 89, paragraph 135 of the Revised Penal Code, as amended, the death of Marfori totally extinguished his criminal liability.
Because Marfori died even before ar-
_______________
34 See Rollo, pp. 533-537. Attached to the Manifestation is a copy of Marfori's Certificate of Death issued by the Office of the City
Civil Registrar in Angeles City, Pampanga. d., at p. 538.
35 Article 89(1) of the Revised Penal Code, as amended, provides that criminal liability is totally extinguished:
1. By the death of the convict, as to the personal penalties; and as to pecuniary penalties, liability therefor is extinguished only
when the death of the offender occurs before final judgment.
x x x x
540
540
raignment and trial, there is no relevance in declaring the extinction as well of civil liability that was based exclusively on the crime
for which an accused is convicted (i.e., ex delicto). Only civil liability predicated on a source of obligation other than the delict, if
any, survived the death of the accused, which the offended party can recover by means of a separate civil action.36
WHEREFORE, the petition for review on certiorari is PARTLY GRANTED. The July 24, 2000 Decision and February 12, 2002
Resolution of the Court of Appeals in CA-G.R. SP No. 43076, insofar as they ordered the appointment of a receiver in Civil Case
No. 94-70092, are hereby REVERSED and SET ASDE. n view of the death of Jose Marfori, Criminal Case Nos. 170660 to
170676 before the Metropolitan Trial Court of Caloocan City are hereby ordered DSMSSED.
No pronouncement as to costs.
SO ORDERED.
Corona (C.J., Chairperson), Leonardo-De Castro,
Bersamin and Del Castillo, JJ., concur.
Petition partly granted, judgment and resolution reversed and set aside.
Note.Forum shopping, an act of malpractice, is considered as trifling with the courts and abusing their processes. t is improper
conduct and degrades the administration of justice. (Buston-Arendain vs. Gil, 555 SCRA 561 [2008]) [Making Enterprises, nc. vs.
Marfori, 655 SCRA 528(2011)]
[No. 1214. A9?9,t 1, 1903.]
E-GENIO #ONAPA"A, pet't'o(er, +,. #=RON S. AM#ER, B9*?e o) tCe Co9rt o) $'r,t I(,t&(0e o) M&('%&, &(* /.
M0MIC@ING, 0%erD o) tCe Co9rt o) $'r,t I(,t&(0e o) M&('%&, re,po(*e(t,.
1.RECEVER; APPONTMENT; NSOLVENCY; EXECUTON; MANDAMUS.n an action for the recovery of a debt the plaintiff,
A., after stating a cause of action, alleged that the defendant was insolvent and asked for the appointment of a receiver to take
charge of defendant's business and manage it, under the control of the court, for the benefit of creditors. A receiver was appointed
for that purpose and all persons were enjoined from interfering with the property in his hands. After the appointment of the
receiver, B., another creditor, recovered a judgment in the same court against the defendant, but the clerk, by direction of the
court, refused to issue execution thereon. Held, That the appointment of the receiver was practically a bankruptcy proceeding, in
violation of section 524 of the Code of Civil Procedure, and that B. is entitled to a writ of mandamus to compel the issuance of
execution on his judgment.
2.D.; SUBJECT OF LTGATON.n an action for debt in which no attempt is made to enforce a lien upon any specific property
or fund in the hands of the defendant, the subject-matter of litigation is the indebtedness, and before judgment and the return of
the execution unsatisfied the plaintiff has no such interest in the defendant's property as to authorize the appointment of a receiver
at his instance under section 174, paragraphs 2 and 4, of the Code of Civil Procedure.
3.D.; EXTRAORDNARY REMEDES.Courts of equity do not regard with favor the appointment of receivers, except in certain
prescribed cases, until the usual legal remedies have been exhausted.
APPLCATON for mandamus to compel the issuance of writ of execution.
393
VOL. 2, AUGUST 1, 1903
393
Bonaplata vs. Ambler
Augustus A. Montagne, for petitioner.
Frederick Garfield Waite, for respondents.
McDONOUGH, J.:
This was a motion for judgment on the pleadings in a proceeding in which the plaintiff prays that a peremptory order be issued by
this court against Judge Ambler, commanding him, as judge of the Court of First nstance of Manila, to immediately cause to be
issued and subscribed a writ of execution for the enforcement of plaintiff's judgment against Fulgencio Tan Tonco for the sum of
1,541 pesos, Mexican currency, which judgment was recovered January 13, 1903, and against the defendant J. McMicking, as
clerk of the said Court of First nstance of Manila, commanding him to issue and subscribe a writ of execution, sealed with the seal
of the Court of First nstance of Manila, for the enforcement of plaintiff's said judgment.
The facts upon which this application is based are undisputed. The plaintiff, on January 13, 1903, recovered a judgment in the
Court of First nstance of Manila, in an action for debt against Fulgencio Tan Tonco, amounting to 1,541 pesos, Mexican currency.
No exceptions were taken or filed against said judgment, nor was a motion for a new trial made; and the judgment is now in full
force and effect.
After the rendition and entry of said judgment the plaintiff repeatedly requested the defendants above named to duly issue a writ of
execution to satisfy the judgment of the plaintiff against said Fulgencio Tan Tonco, which request was refused. The defendants, by
their attorney, state, as their reason for such refusal, that on the 18th day of December, 1902, one Sergia Reyes instituted a suit
against said Fulgencio Tan Tonco, in the Court of First nstance of Manila, for an indebtedness amounting to the sum of $1,500,
Mexican currency, and in the complaint alleged that the said defendant was insolvent; that several creditors had sued him; that the
assets of his business consisted of real estate, contracts for buildings (many
394
394
partly completed), equities in real estate, and other property of the value of about $ 200,000, Mexican currency; that said property
was in good condition and that it was in the interest of creditors to retain the actual status of the business; that under proper
management the business could be conducted at a good and satisfactory profit, and pay a greater portion of said defendant's
creditors, if not all; that the management of the said business was in the hands of the defendant, who was unable to give it
necessary care and attention; that for various causes the business had been losing money; that the debts of said defendant
amounted to $250,000, Mexican currency; that the assets of the business were then more than enough to pay the indebtedness,
but if said business were managed by the said defendant it will be dissipated and wasted, and therefore the plaintiff in that action
prayed for the appointment of a receiver to take charge of the said business and conduct the same subject to the orders of the
court.
The said Fulgencio Tan Tonco, personally and by his attorney, appeared in court, on the said 18th day of December, 1902, and
accepted service of the complaint in said cause, and thereafter and on the 19th day of December, 1902, Antonio Torres was
appointed receiver of the business, property, rights, and credits of said Tan Tonco; and thereafter, having given a sufficient bond
and taken the prescribed oath, the said receiver took possession of all the property of said Tan Tonco, and under the direction of
and pursuant to an order of said Byron S. Ambler, as judge of the Court of First nstance of Manila, undertook to care for, run,
manage, and operate said business the same as theretofore run and operated by said defendant, and to employ such persons
and make such payments and disbursements as needed. t was further ordered that the said defendant and other persons be
restrained and enjoined from interfering with said property; and the said Tan Tonco was and still continued to be enjoined from
taking possession of or in any way interfering with said property, and said J. McMicking, as such clerk, was and is restrained from
issuing an execution upon the said judgment of Tan Tonco.
395
395
As a general rule the appointment of a receiver is an equitable remedy, and before such remedy is resorted to, except in certain
prescribed cases hereinafter mentioned, the legal remedy must be exhausted. Courts of equity do not encourage proceedings or
actions which are not in conformity with the usual practice, which are unnecessary, and at the, same time are calculated to swell
costs and expenses. (Hart vs. Times, 3 Edwards, Chancery, 226; Congden vs. Lee, 3 Edwards, Chancery, 304.)
n the Congden case the plaintiff sought equitable relief in an action for debt after an execution had been returned unsatisfied; but
the plaintiff and the sheriff knew that the debtor had real estate which was subject to levy and sale. The court held that it was the
duty of the plaintiff to exhaust his legal remedy by selling the real estate on the execution, and it not appearing that there would be
a deficiency on the sale, the court had no jurisdiction to appoint a receiver of the rents.
t may be that very special circumstances may exist, in a given case, involving great danger of loss, such as may be caused by a
debtor's nonresidence, which will justify the appointment of a receiver, but the case at bar is not one of that character; the claim of
the plaintiff, Sergia Reyes, amounted to only $ 1,500, Mexican currency, whereas the property of Tan Tonco was valued at
$200,000, Mexican currency, and it does not appear that there were any judgments against him having priority to that of said
plaintiff, or that the plaintiff's judgment could not be collected in full. Under these conditions, the allegation in the complaint that the
defendant, Tan Tonco, could not give his business "necessary care and attention/' that he was "losing money," and that if the
business was to be continued under his management it would be "dissipated and wasted," might be cause for applying for an
appointment of a committee, but it certainly is not good cause for turning over to a receiver $200,000 worth of property in an action
to recover a debt of $1,500. What was undertaken, in this action, amounts practically to a bankruptcy proceedingthe placing by
the court of the property of the defendant in the hands of a receiver for the purpose,
396
396
after paying costs, fees, and expenses, of distributing that property among creditors.
Bankruptcy proceedings, however, are forbidden until a law shall be enacted for these slands. (Sec. 524 of the Code of Civil
Procedure.)
The learned counsel for the defendants in this mandamus proceeding claims that section 174 of this Code makes provision for the
appointment of a receiver in this case. That section authorizes the appointment of a receiver (1) in certain corporation cases; (2)
where the plaintiff has an interest in the property or fund which is the subject of the action, etc.; (3) in an action to foreclose a
mortgage; (4) and, finally, whenever in other cases it shall appear to the court that the appointment of a receiver is the most
feasible means of preserving and administering the property which is the subject of the litigation during the pendency of the action.
The subject of the action of the plaintiff Sergia Reyes was an indebtedness of $1,500 due to her by the defendant, and the
legitimate object was the collection of that debt. Until after judgment and execution, which was not issued, the plaintiff could not
have had any interest in any property or fund of the defendant; nor until after the return of the execution unsatisfied could she
have had any interest in the preservation of the defendant's propertyproperty
which was not the subject of the litigation. The plaintiff in this mandamus proceeding was not a party to the action of Reyes vs.
Tan Tonco, and he is not, therefore, bound by the order appointing a receiver made therein.
t is not necessary in this proceeding to determine the further effect of that order, or to decide what its effect may be on all those
creditors who consented to the appointment of the receiver, who acquiesced in his control, management, and disposition of the
defendant's property, or on other persons who dealt with him as such receiver.
This court simply decides that the plaintiff, Eugenio Bonaplata, is entitled to have an execution issue on his said judgment. The
motion for judgment on the pleadings is
397
397
United States vs. Mabilangan
granted, and judgment for the plaintiff will be entered accordingly, with costs against the respondents.
Arellano, C. J., Torres, Cooper, Willard, and Mapa, JJ., concur.
Motion granted. [Bonaplata vs. Ambler, 2 Phil., 392(1903)]
G.R. No. 125004. /9(e 19, 1991.<
COMMO!I"IES S"ORAGE 7 ICE PAN" CORPORA"ION, SPO-SES ;IC"OR 7 /O3ANNA3 "RINI!A!, pet't'o(er,, +,.
CO-R" O$ APPEAS, /-S"ICE PE!RO A. RAMIRE., C3AIRMAN &(* $AR EAS" #AN@ 7 "R-S" COMPAN=,
re,po(*e(t,.
Actions; Receivership; Requisites for the Appointment of a Receiver.A receiver of real or personal property, which is the subject
of the action, may be appointed by the court when it appears from the pleadings or such other proof as the judge may require, that
the party applying for such appointment has (1) an actual interest in it; and (2) that (a) such property is in danger of being lost,
removed or materially injured; or (b) whenever it appears to be the most conven-
_________________
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
* SECOND DVSON.
440
440
Commodities Storage & ce Plant Corp. vs. Court of Appeals
ient and feasible means of preserving or administering the property in litigation.
Same; Same; Words and Phrases; A receiver is a person appointed by the court in behalf of all the parties to the action for the
purpose of promoting and conserving the property in litigation and preventing its possible destruction or dissipation, if it were left in
the possession of any of the parties.A receiver is a person appointed by the court in behalf of all the parties to the action for the
purpose of preserving and conserving the property in litigation and prevent its possible destruction or dissipation, if it were left in
the possession of any of the parties. The appointment of a receiver is not a matter of absolute right. t depends upon the sound
discretion of the court and is based on facts and circumstances of each particular case.
Same; Same; The guiding principle in the appointment of a receiver is the prevention of imminent danger to the property.A
petition for receivership under Section 1(b) of Rule 59 requires that the property or fund which is the subject of the action must be
in danger of loss, removal or material injury which necessitates protection or preservation. The guiding principle is the prevention
of imminent danger to the property. f an action by its nature, does not require such protection or preservation, said remedy cannot
be applied for and granted.
Same; Same; Neither party to a litigation should be appointed as receiver without the consent of the other because a receiver
should be a person indifferent to the parties and should be impartial and disinterested.Moreover, the receiver appointed by the
court appears to be a representative of petitioners. Respondent bank alleges that it was not aware that petitioners nominated one
Mr. Pesquera as receiver. The general rule is that neither party to a litigation should be appointed as receiver without the consent
of the other because a receiver should be a person indifferent to the parties and should be impartial and disinterested. The
receiver is not the representative of any of the parties but of all of them to the end that their interests may be equally protected
with the least possible inconvenience and expense.
Same; Same; The power to appoint a receiver must be exercised with extreme caution.The power to appoint a receiver must be
exercised with extreme caution. There must be a clear showing of necessity therefor in order to save the plaintiff from grave and
irre-
441
VOL. 274, JUNE 19, 1997
441
mediable loss or damage. t is only when the circumstances so demand, either because there is imminent danger that the property
sought to be placed in the hands of a receiver be lost or because they run the risk of being impaired, endeavouring to avoid that
the injury thereby caused be greater than the one sought to be avoided.
Same; Same; Venue; The question of venue relates to the principal action and is prejudicial to the ancillary issue of receivership.
Again, we reject petitioners' contention. The motion to dismiss is anchored on improper venue, lack of cause of action and
forum-shopping. We agree with the respondent court that the question of venue relates to the principal action and is prejudicial to
the ancillary issue of receivership. Although the grounds for dismissal were not specifically raised before the appellate court, the
said court may consider the same since the petition for receivership depends upon a determination thereof.
Same; Mortgages; Foreclosure of Mortgage; An action to redeem by the mortgage debtor is a real action.An action to redeem
by the mortgage debtor affects his title to the foreclosed property. f the action is seasonably made, it seeks to erase from the title
of the judgment or mortgage debtor the lien created by registration of the mortgage and sale. f not made seasonably, it may seek
to recover ownership to the land since the purchaser's inchoate title to the property becomes consolidated after expiration of the
redemption period. Either way, redemption involves the title to the foreclosed property. t is a real action.
Same; Venue; Where the action affects title to the property, it should be instituted in the Regional Trial Court where the property is
situated.Section 2 of Rule 4 of the Revised Rules of Court provides: "Sec. 2. Venue in Courts of First nstance.(a) Real
actions.Actions affecting title to, or for recovery of possession, or for partition or condemnation of, or foreclosure of mortgage on,
real property, shall be commenced and tried in the province where the property or any part thereof lies. Where the action affects
title to the property, it should be instituted in the Regional Trial Court where the property is situated. The Sta. Maria ce Plant &
Cold Storage is located in Sta. Maria, Bulacan. The venue in Civil Case No. 94-72076 was therefore laid improperly.
Same; Parties; n a transfer of interest pending litigation, the action may be continued by or against the original party, unless the
442
442
court, upon motion, directs the transferee to be substituted in the action or joined with the original party.There is no merit in
petitioners' claim that the respondent bank is no longer the real party in interest after selling the ice plant to a third person during
the pendency of the case. Section 20 of Rule 3 of the Revised Rules of Court provides that in a transfer of interest pending
litigation, the action may be continued by or against the original party, unless the court, upon motion, directs the transferee to be
substituted in the action or joined with the original party. The court has not ordered the substitution of respondent bank.
PETTON for review of a decision of the Court of Appeals.
Nonette C. Mina for petitioners.
Siguion Reyna, Montecillo & Ongsiako for private respondent.
PUNO, J.:
n this petition for certiorari, petitioner seeks to annul and set aside the decision and resolution of the Court of Appeals1 in CA-
G.R. SP No. 36032 dismissing the complaint in Civil Case No. 94-72076 before the Regional Trial Court, Branch 9, Manila.
The facts show that in 1990, petitioner spouses Victor and Johannah Trinidad obtained a loan of P31,000,000.00 from respondent
Far East Bank & Trust Company to finance the purchase of the Sta. Maria ce Plant & Cold Storage in Sta. Maria, Bulacan. The
loan was secured by a mortgage over the ice plant and the land on which the ice plant stands. Petitioner spouses failed to pay
their loan. The bank extrajudicially foreclosed the mortgage and the ice plant was sold by public bidding on March 22, 1993.
Respondent bank was the
_______________
1 Penned by Associate Justice Pedro A. Ramirez and concurred in by Associate Justices Quirino D. Abad-Santos, Jr. and Eugenio
S. Labitoria.
443
VOL. 274, JUNE 19, 1997
443
highest bidder. t registered the certificate of sale on September 22, 1993 and later took possession of the property.
On November 22, 1993, petitioner spouses filed Civil Case No. 956-M-93 against respondent bank before the Regional Trial
Court, Malolos, Bulacan for reformation of the loan agreement, annulment of the foreclosure sale and damages.2 The trial court
dismissed the complaint for petitioners' failure to pay the docket fees. The dismissal was without prejudice to refiling of the
complaint.3
On October 28, 1994, petitioners filed Civil Case No. 94-72076 against respondent bank before the Regional Trial Court, Branch
9, Manila for damages, accounting and fixing of redemption period.4 As a provisional remedy, petitioners filed on November 16,
1994 an "Urgent Petition for Receivership. They alleged that respondent bank took possession of the ice plant forcibly and
without notice to them; that their occupation resulted in the destruction of petitioners' financial and accounting records making it
impossible for them to pay their employees and creditors; the bank has failed to take care of the ice plant with due diligence such
that the plant has started emitting ammonia and other toxic refrigerant chemicals into the atmosphere and was posing a hazard to
the health of the people in the community; the spouses' attention had been called by several people in the barangay who
threatened to inform the Department of Environment and Natural Resources should they fail to take action. Petitioners thus prayed
for the appointment of a receiver to save the ice plant, conduct its affairs and safeguard its records during the pendency of the
case.5
nstead of an answer, respondent bank filed on November 25, 1994 a "Motion to Dismiss and Opposition to Plaintiff's Petition for
Receivership. t alleged that the complaint states no cause of action and that venue had been improperly
laid. t
________________
2 Annex "2 to Comment, Rollo, pp. 191-209.
444
444
also alleged that petitioners failed to pay the proper docket fees and violated the rule on forum-shopping.6
n an order dated December 13, 1994, the trial court granted the petition for receivership and appointed petitioners' nominee,
Ricardo Pesquera, as receiver. The order disposed as follows:
"WHEREFORE, premises considered the Urgent Petition for Receivership is GRANTED and Mr. Ricardo Pesquera to whose
appointment no opposition was raised by the defendant and who is an ice plant contractor, maintainer and installer is appointed
receiver. Accordingly, upon the filing and approval of the bond of TWO MLLON (P2,000,000.00) pesos which shall answer for all
damages defendant may sustain by reason of the receivership, said Ricardo Pesquera is authorized to assume the powers of a
receiver as well as the obligation as provided for in Rule 59 of the Rules of Court after taking his oath as such receiver.
SO ORDERED.7
Respondent bank assailed this order before the Court of Appeals on a petition for certiorari. On January 11, 1996, the Court of
Appeals annulled the order for receivership and dismissed petitioners' complaint for improper venue and lack of cause of action.
The dispositive portion of the decision reads:
"WHEREFORE, the petition for certiorari is GRANTED. Accordingly, the assailed order dated December 13, 1994 (Annex A,
petition) is ANNULLED and SET ASDE and respondent's complaint in Civil Case No. 94-72076 in the respondent court (Annexes
F, petition; 4, comment), is DSMSSED. Costs against respondents except the court.
SO ORDERED.
Reconsideration was denied on May 23, 1996.8 Hence, this petition.
_______________
7 Annex "D to the Petition, Rollo, p. 63.
8 Annex "L to the Petition, Rollo, p. 142.
445
VOL. 274, JUNE 19, 1997
445
Section 1 of Rule 59 of the Revised Rules of Court provides that:
"Sec. 1. When and by whom receiver appointed.One or more receivers of the property, real or personal, which is the subject of
the action, may be appointed by the judge of the Court of First nstance in which the action is pending, or by a Justice of the Court
of Appeals or of the Supreme Court, in the following cases:
(a) When the corporation has been dissolved, or is insolvent, or is in imminent danger of insolvency, or has forfeited its corporate
rights;
(b) When it appears from the complaint or answer, and such other proof as the judge may require, that the party applying for the
appointment of receiver has an interest in the property or fund which is the subject of the action, and that such property or fund is
in danger of being lost, removed or materially injured unless a receiver be appointed to guard and preserve it;
(c) When it appears in an action by the mortgagee for the foreclosure of a mortgage that the property is in danger of being wasted
or materially injured, and that its value is probably insufficient to discharge the mortgage debt, or that the parties have so
stipulated in the contract of mortgage;
(d) After judgment, to preserve the property during the pend-ency of the appeal, or to dispose of it according to the judgment, or to
aid execution when the execution has been returned unsatisfied or the judgment debtor refuses to apply his property in
satisfaction of the judgment, or otherwise carry the judgment into effect;
(e) Whenever in other cases it appears that the appointment of a receiver is the most convenient and feasible means of
preserving, administering, or disposing of the property in litigation.
A receiver of real or personal property, which is the subject of the action, may be appointed by the court when it appears from the
pleadings or such other proof as the judge may require, that the party applying for such appointment has (1) an actual interest in
it; and (2) that (a) such property is in danger of being lost, removed or materially injured; or (b) whenever it appears to be the most
convenient and feasible means of preserving or administering the property in litigation.9
_______________
9 Ralla v. Hon. Alcasid, 116 Phil. 622, 625 [1962].
446
446
A receiver is a person appointed by the court in behalf of all the parties to the action for the purpose of preserving and conserving
the property in litigation and prevent its possible destruction or dissipation, if it were left in the possession of any of the parties.10
The appointment of a receiver is not a matter of absolute right. t depends upon the sound discretion of the court11 and is based
on facts and circumstances of each particular case.12
Petitioners claim that the appointment of a receiver is justified under Section 1(b) of Rule 59. They argue that the ice plant which is
the subject of the action was in danger of being lost, removed and materially injured because of the following "imminent perils:
"6.1 Danger to the lives, health and peace of mind of the inhabitants living near the Sta. Maria ce Plant;
6.2 Drastic action or sanctions that could be brought against the plaintiff by affected third persons, including workers who have
claims against the plaintiff but could not be paid due to the numbing manner by which the defendant took the Sta. Maria ce Plant;
6.3 The rapid reduction of the ce Plant into a scrap heap because of evident incompetence, neglect and vandalism.13
A petition for receivership under Section 1(b) of Rule 59 requires that the property or fund which is the subject of the action must
be in danger of loss, removal or material injury which necessitates protection or preservation. The guiding principle is the
prevention of imminent danger to the property. f an action by its nature, does not require such protec-
_______________
10 Normandy v. Duque, 29 SCRA 385, 391 [1969]; Cia. General de Tabacos v. Gauzon, 20 Phil. 261, 267-268 [1911].
11 Calo and San Jose v. Roldan, 76 Phil. 445, 453 [1946]; Mendoza v. Arellano, 36 Phil. 59, 63-64 [1917].
12 Duque v. CF of Manila, 13 SCRA 420, 423 [1965]; Ralla v. Alcasid, supra, at 625; Lama v. Apacible, 79 Phil. 68, 73-74 [1947].
13 d., Urgent Petition for Receivership, pp. 2-3, Rollo, pp. 237-238.
447
VOL. 274, JUNE 19, 1997
447
tion or preservation, said remedy cannot be applied for and granted.14
n the instant case, we do not find the necessity for the appointment of a receiver. Petitioners have not sufficiently shown that the
Sta. Maria ce Plant is in danger of disappearing or being wasted and reduced to a "scrap heap. Neither have they proven that
the property has been materially injured which necessitates its protection and preservation.15 n fact, at the hearing on
respondent bank's motion to dismiss, respondent bank, through counsel, manifested in open court that the leak in the ice plant
had already been remedied and that no other leakages had been reported since.16 This statement has not been disputed by
petitioners.
At the time the trial court issued the order for receivership of the property, the problem had been remedied and there was no
imminent danger of another leakage. Whatever danger there was to the community and the environment had already been
contained.
The "drastic sanctions that may be brought against petitioners due to their inability to pay their employees and creditors as a
result of "the numbing manner by which [respondent bank] took the ice plant does not concern the ice plant itself. These claims
are the personal liabilities of petitioners themselves. They do not constitute "material injury to the ice plant.
Moreover, the receiver appointed by the court appears to be a representative of petitioners. Respondent bank alleges that it was
not aware that petitioners nominated one Mr. Pesquera as receiver.17 The general rule is that neither party to a litiga-
_______________
14 Calo and San Jose v. Roldan, supra, at 453; Ysasi v. Fernandez, 23 SCRA 1079 [1968]; Cochingyan v. Cloribel, 76 SCRA 394,
397 [1977]; Ylarde v. Enriquez, 78 Phil. 527, 531 [1947].
15 National nvestment and Development Corporation v. Judge Aquino; Philippine National Bank v. Judge Aquino, 163 SCRA 153,
174 [1988].
16 Comment, pp. 7, 14, Rollo, pp. 171, 178.
17 Comment, p. 8, Rollo, p. 172.
448
448
tion should be appointed as receiver without the consent of the other because a receiver should be a person indifferent to the
parties and should be impartial and disinterested.18 The receiver is not the representative of any of the parties but of all of them to
the end that their interests may be equally protected with the least possible inconvenience and expense.19
The power to appoint a receiver must be exercised with extreme caution. There must be a clear showing of necessity therefor in
order to save the plaintiff from grave and irremediable loss or damage.20 t is only when the circumstances so demand, either
because there is imminent danger that the property sought to be placed in the hands of a receiver be lost or because they run the
risk of being impaired, endeavouring to avoid that the injury thereby caused be greater than the one sought to be avoided.21
The Court of Appeals correctly found that the trial court gravely abused its discretion in issuing the order for receivership. The
respondent court, however, went further and took cognizance of respondent bank's motion to dismiss. And finding merit in the
motion,
it dismissed the complaint. Petitioners now claim that the respondent court should have refrained from ruling on the motion to
dismiss because the motion itself was not before it.22
Again, we reject petitioners' contention. The motion to dismiss is anchored on improper venue, lack of cause of action and forum-
shopping. We agree with the respondent court that the question of venue relates to the principal action and is prejudicial to the
ancillary issue of receivership. Although the grounds for dismissal were not specifically raised before the
______________
18 Alcantara v. Abbas, 9 SCRA 54, 58 [1963]; Cia. General de Tabacos v. Gauzon, supra, at 267-268; Teal Motor Co. v. Court of
First nstance of Manila, 51 Phil. 549, 563, 567 [1928].
19 Normandy v. Duque, supra, at 391.
20 Mendoza v. Arellano, supra, at 64.
21 Diaz v. Hon. Nietes, 110 Phil. 606, 610 [1960]; Ylarde v. Enriquez, supra, at 530.
22 Petition, pp. 6-9, Rollo, pp. 9-11.
449
VOL. 274, JUNE 19, 1997
449
appellate court, the said court may consider the same since the petition for receivership depends upon a determination thereof.23
n their complaint, petitioners prayed for the following:
"WHEREFORE, in view of the foregoing, it is respectfully prayed that after trial on the merits judgment be rendered:
1. Ordering the Defendant to pay COMMODTES actual and compensatory damages in the amount of PESOS: TWO MLLON
FVE HUNDRED THOUSAND and 00/100 (P2,500,000.00);
2. Ordering the Defendant to pay Plaintiffs moral damages in the amount of PESOS: TWO MLLON and 00/100 (P2,000,000.00)
to compensate the Plaintiffs for the anxiety and besmirched reputation caused by the unjust actuations of the Defendant;
3. Ordering the Defendant to pay Plaintiffs nominal and exemplary damages in the amount of PESOS: FVE HUNDRED
THOUSAND and 00/100 (P500,000.00) to deter the repetition of such unjust and malicious actuations of the Defendant;
4.n order to restore the legal right of the Plaintiff COMMODTES to redeem its foreclosed property, a right which COMMODTES
has been unjustly deprived of by the malicious and bad faith machinations of the Defendant, compelling the Defendant to produce
the correct, lawful, official and honest statements of account and application of payment. Concomitantly, ordering the Defendant to
accept the redemption of the foreclosed properties pursuant to Rule 39 of the Revised Rules of Court in conjunction with Act 3135,
within the prescribed period for redemption, said period to commence from the date of receipt by the Plaintiff COMMODTES of
the correct, lawful, official and honest statements of account and application of payments;
______________
23 The appellate court may consider an unassigned error if it is closely related to an error properly assigned, or upon which a
determination of the error properly assigned is dependent. (Garrido v. Court of Appeals, 236 SCRA 450 [1994]; Medida v. Court of
Appeals, 208 SCRA 886, 893 [1992]; Roman Catholic Archbishop of Manila v. Court of Appeals, 198 SCRA 300, 311 [1991];
Philippine Commercial and ndustrial Bank v. Court of Appeals, 159 SCRA 24, 31 [1988]).
450
450
5.Ordering the Defendant to pay attorney's fees in the amount of PESOS: THREE HUNDRED THOUSAND (P300,000.00); and
costs of litigation.
Other reliefs and remedies just and equitable under the circumstances are likewise prayed for.24
Petitioners pray for two remedies: damages and redemption. The prayer for damages is based on respondent bank's forcible
occupation of the ice plant and its malicious failure to furnish them their statements of account and application of payments which
prevented them from making a timely redemption.25 Petitioners also pray that respondent bank be compelled to furnish them said
documents, and upon receipt thereof, allow redemption of the property. They ultimately seek redemption of the mortgaged
property. This is explicit in paragraph 4 of their prayer.
An action to redeem by the mortgage debtor affects his title to the foreclosed property. f the action is seasonably made, it seeks to
erase from the title of the judgment or mortgage debtor the lien created by registration of the mortgage and sale.26 f not made
seasonably, it may seek to recover ownership to the land since the purchaser's inchoate title to the property becomes
consolidated after expiration of the redemption period.27 Either way, redemption involves the title to the foreclosed property. t is a
real action.
Section 2 of Rule 4 of the Revised Rules of Court provides:
"Sec. 2. Venue in Courts of First nstance.(a) Real actions.Actions affecting title to, or for recovery of possession, or for
_______________
24 Annex "4 to Comment, Complaint, pp. 10-11, Rollo, pp. 227-228; Emphasis supplied.
25 Annex "4 to Comment, Complaint, pp. 7-10, Rollo, pp. 224-227.
26 The judgment or mortgage debtor remains the owner of the mortgaged property during the redemption period (Medida v. Court
of Appeals, 208 SCRA 886, 897 [1992]).
27 d., Joven v. Court of Appeals, 212 SCRA 700, 709 [1992]; De Castro v. ntermediate Appellate Court, 165 SCRA 654, 662
[1988].
451
VOL. 274, JUNE 19, 1997
451
partition or condemnation of, or foreclosure of mortgage on, real property, shall be commenced and tried in the province where the
property or any part thereof lies.28
Where the action affects title to the property, it should be instituted in the Regional Trial Court where the property is situated. The
Sta. Maria ce Plant & Cold Storage is located in Sta. Maria, Bulacan. The venue in Civil Case No. 94-72076 was therefore laid
improperly.
Finally, there is no merit in petitioners' claim that the respondent bank is no longer the real party in interest after selling the ice
plant to a third person during the pendency of the case. Section 20 of Rule 3 of the Revised Rules of Court provides that in a
transfer of interest pending litigation, the action may be continued by or against the original party, unless the court, upon motion,
directs the transferee to be substituted in the action or joined with the original party. The court has not ordered the substitution of
respondent bank.
N VEW WHEREOF, the decision dated January 11, 1996 and resolution dated May 23, 1996 of the Court of Appeals in CA-G.R.
SP No. 36032 are affirmed. Costs against petitioners.
SO ORDERED.
Regalado (Chairman), Romero, Mendoza and Torres, Jr., JJ., concur.
Judgment and resolution affirmed.
Notes.Receivership is equivalent to an injunction to restrain the bank officers from intermeddling with the property
_______________
28 Rule 4 has since been amended by Administrative Circular No. 13-95 which took effect on June 20, 1995. Section 1 reads:
"Sec. 1. Venue of real actions.Actions affecting title to or possession of real property, or interest therein shall be commenced
and tried in the proper court which has jurisdiction over the area wherein the real property involved, or a portion thereof, is
situated.
452
452
Lozano vs. De los Santos
of the bank in any way. (Villanueva vs. Court of Appeals, 244 SCRA 395 [1995])
A receiver is a representative of the court appointing him for the purpose of preserving and conserving the property under
receivership and preventing its possible destruction or dissipation. (Salientes vs. ntermediate Appellate Court, 246 SCRA 150
[1995]) [Commodities Storage & ce Plant Corp. vs. Court of Appeals, 274 SCRA 439(1997)]
[No. 82329. O0tober 22, 1924]
$RE! M. 3AR!EN, pet't'o(er, +,. "3E !IREC"OR O$ PRISONS, re,po(*e(t.
1.HABEAS CORPUS; GROUNDS FOR RELEF."Broadly speaking, the grounds for relief by habeas corpus are only (1)
deprivation of any fundamental or constitutional rights, (2) lack of jurisdiction of the court to impose the sentence, or (3) excessive
penalty. (Santiago vs. Director of Prisons,1 L-1083, January 80, 1947, 44 Off. Gaz., 1231.)
2.CONFLCT OF LAWS; RECEVER, AUTHORTY TO ACT WTH RESPECT TO PROPERTY BEYOND TERRTORAL LMT.
While a court can not give its receiver authority to act in another state without the assistance of the courts thereof (53 C.J., 890
891),. yet it may act directly upon the parties before it with respect to property beyond the territorial limits of its jurisdiction, and
hold them in contempt if they resist the court's orders with reference to its custody or disposition (id., 118). Whether the property
was removed before or after the appointment of the receiver is likewise immaterial.
3.CONTEMPT; PUNSHMENT FOR CONTEMPT is NETHER CRUEL NOR EXCESSVE.Punishments are cruel when they
involve torture or a lingering' death, but the punishment of death is not cruel, within the meaning of that word as used in the
constitution. t implies there something inhuman and barbarous,
_______________
1 77 Phil., 927
742
742
Harden vs. Director of Prisons
something more than the mere extinguishment of life. The punishment meted out to the petitioner is not excessive, t is suitable
and. adapted to its objective; and it accords with section 7, Rule 64, of the Rules of Court which provides that "When the contempt
consists in the omission to do an act which is yet in the power of the accused to perform, he may be imprisoned by order of a
superior court until he performs it.
4.D.; TERM OF MPRSONMENT is LEFT OPEN FOR PETTONER TO TERMNATE.f the term of imprisonment in this case
is indefinite and might last through the natural life of the petitioner, yet by the terms of the sentence the way is left open for him to
avoid serving any part of it by complying with the orders of the court, and in this manner put an end to his incarceration. n these
circumstances, the judgment can not be said to be excessive or unjust.
5.D.; NDCATON N COMMTMENT THAT CONTEMNER CAN STLL PERFORM THE ACT is NOT REQURED.The failure of
the order of commitment to state that the acts which the contemner fails to do are still in his power to perform, does not void the
order of imprisonment. Section 7 of Rule 64 does not require such finding to appear in the order.
6.D.; SOURCE OR ORGN OF SECTON 7 OF RULE 64 NDCATED.Former Justice F is authority for the statement that
section 237 of Act No. 190 was borrowed from section 1456 of the Ohio Code of Civil Procedure. (Fisher's Code of Civil
Procedure, 3d ed., p. 136.) The exact similarity in substance though not in language between the two provisions is a confirmation
of this statement.
7.HABEAS CORPUS; WRT DOES NOT LE TO CORRECT ERRORS OF FACT OR LAW.Whether or not in truth the court's
findings are supported by sufficient evidence is a different matter; it is a matter of fact which can not be reviewed by habeas
corpus. n a long line of decisions, this court has steadfastly held that habeas corpus does not He to correct errors of fact or law.
8.lD.; WRT CANNOT BE USED AS A WRT OF ERROR.When a court has jurisdiction of the offense charged and of the party
who is so charged, its judgment, order or decree is not subject to collateral attack by habeas corpus. The writ of. habeas corpus
can not be made to perform the function of a. writ of error; and this holds true even if the judgment, order or decree was
erroneous, provided it is within the jurisdiction of the court which rendered such judgment or issued such an order or decree.
743
743
ORGNAL ACTON in the Supreme Court. Habeas Corpus.
The facts are stated in the opinion of the court,
Vicente J. Francisco for petitioner.
First Assistant Solicitor General Roberto A. Gianzon and Solicitor Felix V. Makasiar for respondent.
Claro M. Recto for the intervenor.
TUASON, J.:
The petitioner, Fred M. Harden, is being confined in prison for contempt of court by virtue of an order of the following tenor:
"t appearing that the defendant Fred M. Harden has not up to this date complied with the orders of this court of October 7, 1947
and March 27, 1948;
"As prayed for, the court orders the arrest of the defendant Fred M. Harden as well as his confinement at the New Bilibid Prisons,
Muntinlupa, Rizal, until he complies with the aforementioned orders.
The proceeding for contempt arose in a civil case between Mrs. Harden as plaintiff and the petitioner and another person as
defendants, commenced on July 12, 1941, and involving the administration of a conjugal partnership, payment of alimony, and
accounting. n that case, a receiver was appointed and a preliminary injunction was issued restraining Fred M. Harden and his
codefendant, Jose Salumbides, from transferring or alienating, except for a valuable consideration and with the consent of the
court first had and obtained, moneys, shares of stock, and other properties and assets, real or personal, belonging to the
aforesaid partnership, and which might be found in the names of said defendants or either of them.
On various dates in 1946, Fred M. Harden transferred to the Hongkong "i Shanghai Banking Corporation and the Chartered Bank
of ndia, Australia "i China, both in Hongkong, over P1,000,000 in drafts or cash; to Virginia
744
744
Recreation Center, 'Long Beach, California, P20,196.80, and to an unknown person, P50,000.
On September 9, 1947, Mrs. Harden moved the court to order Harden to return all these amounts and to redeposit them with the
Manila branch of the Chartered Bank of ndia, Australia "i China. On October 7, 1947, Judge Pea granted the motion in an order
worded as follows:
"Wherefore, finding the motion of the plaintiff of September 9, 1947, to be well founded, for the purpose of preserving the status
quo and in order that the amounts above referred to may stand ready to answer for any legitimate claims of the Government in the
form of taxes, the aforementioned motion is hereby granted and defendant Fred M. Harden is hereby ordered to return,. within a
period of 15 days from the receipt of a copy hereof, the amount of P1,000,608.66 to the Philippines and to redeposit the same with
the accounts of the Plaza Lunch at the Manila Branch of the Chartered Bank of ndia, Australia and China,. with the understanding
that upon failure to comply with this order he will be declared in contempt of court.
After a petition for certiorari was instituted by Harden in the Supreme Court and decided, and after various motions were filed and
heard, Judge Pea, on March 27, 1948, entered an order, which was a modification of that of October 7, 1947, directing, Harden
"to deposit with the Manila Branch of the Chartered Bank of ndia, Australia "i China within five days from receipt of a copy of this
order the money and drafts that he has actually in Hongkong, without prejudice to passing upon later on the different amounts that
the defendant has spent according to his attorney, after he has submitted to the court an itemized account of those expenses.
n the same order there was this decree:
"With respect to the plaintiff's motion filed on March 16, 1948 praying that Fred M. Harden be ordered to deliver the certificate
covering the 368,563 Balatoc Mining Company shares either to the Clerk of this Court or to the receiver in this case for
safekeeping after his compliance with the order of January 17, 1948,.
745
745
the Court, after considering the different pleadings filed, denies defendant's motion for extension of time to register the said
certificate of stock, thereby maintaining its order of January 17, 1948. The said defendant is further ordered, after the registration
of the said certificate, to deposit the same with the Manila Branch of the Chartered Bank of ndia, Australia and China.
The last part of the order was the culmination of another series of motions with their corresponding hearings, The facts taken from
the pleading were in brief as follows:
n a motion dated May 28, 1947, the receiver appointed in the main case prayed that the certificates of stock of the conjugal
partnership, among them 368,553 shares of the Balatoc Mining Co., alleged to be in the possession of defendant Harden, be
ordered turned over to him (receiver) so that he might have them registered in pursuance of the provisions of Republic Act No. 62.
On June 7, 1947, the court "authorized Harden "to register not later than June 30, 1947 the stock certificates in his possession,
notifying the court afterwards of such action.
On July 28, 1947, Mrs. Harden complained that her husband failed to comply with the above order and prayed that he be ordered
to show cause why he should not be declared in contempt. On August 1, 1947, Harden filed a perfunctory compliance, and in an
order dated August 2, 1947, he was required to "make a detailed report of the stock certificates which have been duly registered in
accordance with Republic Act No. 62." n his "compliance dated August 7, 1947, Harden stated that he had been granted an
extension until December 31, 1947, within which to register the Balatoc Mining Co. shares under Republic Act No. 62.
n a motion dated January 7, 1948, the receiver informed the court that, notwithstanding the expiration on December 31, 1947, of
Harden's extended time to comply with Republic Act No. 62, the records of the Balatoc Mining Co. showed that the certificates had
not been
registered as of January 7, 1948; and upon his request,
746
746
an order dated January 17, 1948, was issued giving Harden "an extension until March 31, 1948 within which to comply with the
Order dated June 7, 1947."
n a motion dated March 15, 1948, Mrs. Harden prayed, for the reasons therein stated, that defendant Harden "be ordered to
deliver the certificates covering the 368,553 Balatoc Mining Co. shares either to the Clerk of this Court or to the Receiver herein
for safekeeping, imme-diately after registering them pursuant to Republic Act No. 62." On March 24, 1948, Harden filed a motion
stating that the registration of shares of stock under Republic Act No. 62 had been extended until June 30, 1948, and prayed that
he "be allowed to register the stock certificates in question within such period as by law or regulations is or may be provided.
t was at this stage of the case that the present petitioner was committed to jail.
Broadly speaking, the grounds for relief by habeas corpus are only (1) deprivation of any fundamental or constitutional rights, (2)
lack of jurisdiction of the court to impose the sentence, or (3) excessive penalty. (Santiago vs. Director of Prisons,1 L-1083, Jan.
30, 1947, 44 Off. Gaz., 1231.)
The fact that the property is in a foreign country is said to deprive the court of jurisdiction, the remedy in such case being, it is
contended, ancillary receivership. We can not agree with this view.
While a court can not give its receiver authority to act in another state without the assistance of the courts thereof (53 C.J., 390
391), yet it may act directly upon the parties before it with respect to property beyond the territorial limits of its jurisdiction, and
hold them in contempt if they resist the court's orders with reference to its custody or disposition (d. 118).
Whether the property was removed before or after the appointment of the receiver is likewise immaterial.
_____________
1 77 Phil., 927
747
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n Sercomb vs. Catlin, 21 N.E., 606608, the Supreme Court of llinois said:
"t is true that the property attached is beyond the jurisdiction of the courts of this state, but the appellant, who caused it to be
attached, is in this state, and within the jurisdiction of its courts. f the superior court had no power to reach the goods in Newton's
hands, it had the power to reach appellant, who sought to prevent its receiver from getting possession of the goods. t makes no
difference that the property was in 2. foreign jurisdiction.
The facts of that case as stated in the decision were as follows:
"On April 14, 1887, in the case of Ada S. Havens et al. vs. Caleb Clapp et al. then pending in said superior court, the appellee was
appointed receiver of all the property and effects, real and personal, of the defendants therein, Caleb Clapp and Thomas Davies,
Prior to that date Clapp and Davies had forwarded, on consignment, to Elijah E. Newton, an auctioneer and commission merchant
in Washington city, in the District of Columbia, a lot of jewelry, watches and silverware, to be by him disposed of for their benefit.
So far as appears to the contrary, the goods so consigned were still in the possession of Newton at Washington when the order
was entered on April 7, 1887, for the commitment of appellant for contempt. Within a week or 10 days after his appointment as
receiver, appellee gave notice of such appointment to Newton, and demanded a return of the goods. On May 18, 1887, the
Meriden Britannia Company, a corporation organized under the laws of the state of Connecticut, being a creditor of Clapp and
Davies, commenced an attachment suit against them for the amount of its claim in the Supreme Court of the District of Columbia,
and attached the goods in the hands of Newton.
The penalty complained of is neither cruel, unjust nor excessive. n Ex-parte Kemmler, 136 U.S., 436, the United States Supreme
Court said that "punishments are cruel when they involve torture or a lingering death, but the punishment of death is not cruel,
within the meaning of that word as used in the constitution. t implies there something inhuman and barbarous, something more
than the mere extinguishment of life.
The punishment meted out to the petitioner is not excessive. t is suitable and adapted to its objective; and
748
748
it accords with section 7, Rule 64. of the Rules of Court which provides that "when the contempt consists in the omission to do an
act which is yet in the power of the accused to perform, he may be imprisoned by order of a superior court until he performs it.
f the term of imprisonment in this case is indefinife and might last through the natural life of the petitioner, yet by the terms of the'
sentence the way is left open for him to avoid serving any part of it by complying with the orders of the court, and in this manner
put an end to his incarceration. n these circumstances, the judgment can not be said to be excessive or unjust. (Davis vs. Murphy
[1947], 188 P., 2nd, 229231.) As stated in a more recent case (De Wees [1948], 210 S.W., 2d, 145147), "to order that one be
imprisoned for an indefinite period in a civil contempt is purely a remedial measure. ts purpose is to coerce the contemner to do
an act within his or her power to perform. He must have the means by which he may purge himself of the contempt, The latter
decision cites Staley vs. South Jersey Realty Co., 83 N.J. Eq., 300, 90 A., 1042, 1043, in which the theory is expressed in this
language:
"n a 'civil contempt' the proceeding is remedial, it is 2. step in the case the object of which is to coerce one party for the benefit of
the other party to do or to refrain from doing some act specified in the order of the court, Hence, if imprisonment be ordered, it is
remedial in purpose and coercive in character, and to that end must relate to something to be done by the defendant by the doing
of which he may discharge himself. As quaintly expressed, the imprisoned man 'carries the keys to his prison in his own pocket.'"
The failure of the order of commitment to state that the acts which the contemner fails to do are still in his power to perform, does
not void the order of imprison- C. ment. Section 7 of Rule 64 does not require such finding to appear in the order, unlike section
1219 of the Code of Civil Procedure of California on which the petitioner's contention is rested. Petitioner is in error in
749
749
saying that section 237 of the former Philippine Code of Civil Procedure, from which section 7 of Rule 64, supra, has been copied,
was of California origin. Former Justice Fisher is authority for the statement that section 237 of Act No. 190 was borrowed from
section 1456 of the Ohio Code of Civil Procedure, (Fisher's Code of Civil Procedure, 3d ed., p. 136.) The exact similarity in
substance though not in language between the two provisions is a confirmation of this statement.
At any rate, the order of commitment contains the alleged missing element if it is taken, as it should be taken, in connection with
the orders of October 7, 1947, and March. 27, 1948, and with the charges for contempt t expressly gives non-compliance with the
two last mentioned orders as the grounds for the warrant of commitment, and thus by reference makes them part of it, The orders
of October 7, 1947, and March 27, 1948, in turn clearly specify the acts which the petitioner was commanded to fulfill. t is equally
clear from these orders that in the opinion of the court the petitioner is in a position to bring back to the Philippines from Hongkong
part of the cash and the Balatoc shares he had remitted; to that colony.
Whether or not in truth the court's findings are supported by sufficient evidence is a different matter; it is a matter of fact which can
not be reviewed by habeas corpus.
n a long- line of decisions, this Court has steadfastly held that habeas corpus does not lie to correct errors. of fact or law. (Slade
Perkins vs. Director of Prisons, 58 Phil., 271; Quintos vs. Director of Prisons, 55 Phil., 304; Trono Felipe vs. Director of Prisons, 24
Phil., 121; Gutierrez Repide vs. Peterson, 3, Phil., 276; Santiago vs. Director of Prisons, L-1083,1 44 Off. Gaz., 1231; McMicking
vs. Schields, 238 U.S. 99, 41 Phil., 971; Tinsley vs. Anderson, 43 Law. ed., 91.) When a court has jurisdiction of the offense
charged and of the party who is so charged, its judgment, order or decree is not subject to
________________
1 77 Phil., 927
750
750
collateral attack by habeas corpus. The writ of habeas corpus can not be made to perform the function 01 a writ -of error; and this
holds true even if the judgment, order or decree was erroneous, provided it is within the jurisdiction of the court which rendered
such judgment or issued such an order or decree. (Slade Perkins vs. Director of Prisons. supra; Santiago vs. Director of Prisons,
supra.) So whether the act charged has been committed or can still be performed is conclusively determined by the order or
judgment of the trial court in the proceeding wherein the petitioner for habeas corpus is adjudged in contempt. (Ex-parte Fisher,
206 S.W. 2d, 1000.)
The petition is denied with costs.
Moran, C.J., Ozaeta, Pars, Feria, Pablo, Bengzon, Briones, and Montemayor, JJ.. concur.
PERFECTO, J., dissenting:
Since May 4, 1948, Fred M. Harden has been placed under arrest and confined at the Bilibid Prisons, Muntinglupa, under the
charge of the Director of Prisons.
Respondent's authority for confining petitioner is based on the order of Judge Emilio Pea, of the Court of First nstance of Manila,
issued on April 28,
1948. which reads as follows:
"t appearing that the defendant Fred M. Harden has not up to this date complied with the orders of this court of October 7, 1947,
and March 27, 1948;
"As prayed for, the court orders the arrest of the defendant Fred M. Harden as well as his confinement at the New Bilibid Prisons,
Muntinlupa, Rizal, until he complies with the aforementioned orders.
The order of October 7, 1947, requires Harden to return from abroad within a period of 15 days, the amount of P1,000,608.66 to
the Philippines and to redeposit the same with. the accounts of the Plaza Lunch of the Manila branch of the Chartered Bank of
ndia, Australia and China.
751
751
The order of March 27, 1948, requires Harden to deposit with the same bank the money and drafts that he has actually in
Hongkong and the certificate covering 368,553 Balatoc Mining Company shares, after registering them, as required in the order of
January 18, 1948.
The trial court ordered petitioner's confinement for an indefinite period of time which means that it may last until his death, in virtue
of the provisions of section 7 of Rule 64 which reads as follows:
"SEC. 7. mprisonment until order obeyed.When the contempt consists in the omission to do an act which is yet in the power of
the accused to perform, he may be imprisoned by order of a superior court until he performs it.
The reglementary provision is null and void per se and, therefore, should be denied compliance. Perhaps, there is no other
provision in our statute books more revolting to conscience, more shocking to the most elemental sense of justice, and most
unreasonably Draconian.
The provision is characterized by such an extreme of arbitrariness that is comprehensible only under a dictatorial system of
government.
Petitioner has been and is claiming that he has no means of complying with the orders for non-compliance of which he is
committed to imprisonment for an indefinite period of time. The trial court does not believe him, and we presume that said court
was justified by evidence.
But our presumption cannot take the place of absolute infallibility. When there are conflicting claims as to facts, courts decide the
issue cometimes on a mere preponderance of evidence and sometimes, as in criminal cases, on evidence carrying conviction
beyond all reasonable doubt.
A decision based on a preponderance of evidence does not carry absolute certainty. A decision based on a conclusion of fact
beyond all reasonable doubt is stronger, yet no one is too crazy to believe that it carries absolute certainty or the mark of
infallibility. Judicial history is en ull of bloody pages about many individuals who have
752
752
been burned, decapitated by guillotine, hanged or shot, killed by garrote or electrocuted, because tribunals found them guilty
beyond all reasonable doubt, but later on found to be absolutely innocent. Some of them have been and are loved and enshrined
as martyrs, heroes, and among them are counted the greatest moral figures humanity has ever produced.
Because in petitioner's case the lower court had to act only and must have acted on a mere preponderance of evidence, the
possibility of error is greater in criminal cases where conviction beyond all reasonable doubt is required. Therefore, although the
preponderance of evidence may militate against petitioner, such legal situation does not preclude the possibility that truth, as an
absolute, may after all support petitioner's claim. n such case, unless a miracle should supervene to rescue him from his plight,
he will remain confined for the rest of his days, an imprisonment more perpetual than reclusin perpetua, the longest
imprisonment allowed by law for the worst criminals, kidnapers, robbers, parriciders, traitors.
Should petitioner have embezzled or stolen the money and certificate of shares required of him to be deposited in a bank he can
be punished with years of imprisonment but not nearing even reclusin perpetua. There is no offense or crime for mere
disobedience that is punished by reclusin perpetua or by many years of imprisonment.
But petitioner, for a mere disobedience, which ultimately may not be disobedience at all, is exposed to suffer imprisonment for life.
This, certainly, is a flagrant violation of the constitutional inhibition that no cruel and unusual punishment shall be inflicted. (Section
[19], Article of the Constitution.) This is also a denial to petitioner of the equal protection of the laws which is the first
guarantee in our Bill of Rights. (Section [1], Article of the Constitution.)
The authors of the rules could not have conceived or imagined any contempt of court of such perversity that
753
753
would require a heavier punishment than a fine of P1,000 and six months imprisonment, the maximum penalty provided by section
6 of Rule 64. n the present case, petitioner has already suffered the maximum imprisonment of six months, and is exposed to
remain in prison for many more years. s there a conscience too callous to fail to see the unbearable discrimination of the law
against petitioner?
Punishments are cruel when they involve torture or a lingering death or when they employ something inhuman or barbarous, as
stated in the Kemmler case (136 U.S., 436), an authority invoked in the majority decision. But is there anything more inhuman,
barbarous, more torturing, giving the feeling of lingering death, than to compel a person to unjustly endure an indefinite number of
years of imprisonment, when the only offense that he has committed is that of comtempt and the most serious case of contempt
cannot be punished with imprisonment longer than six months? We have to be blind to fail to see this.
The argument that the incarceration is not cruel because the sentence left the doors open for petitioner to avoid serving any part
of it by complying with the orders of the court has absolutely no merit, because there is absolutely no reasonable ground in the
philosophy of law that would leave to the offender's discretion the length of his imprisonment or the measures of his punishment..
Aside from the unscientific view revealed by the argument, it has the short-sightedness of failing to see the possibilities of error of
judgment on the question as to whether the accused is yet in a position to actually perform the acts ordered.
The allegation that the imprisonment or an indefinite period is purely a remedial measure which assumes that the offender must
have the means by which he may purge himself with the contempt is pure rhetoric that has no ground in fact as can be seen by
any reasonable man. t fails to understand the true situation of a simple dis-
754
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Summers vs. Ozaeta and Agregado
obedience punished with imprisonment that has no possible end except death,
We hold that the lower court erred in issuing the order of April pril 28, 1948, in so far as it orders that petitioner be confined for an
indefinite period of time.
We disagree with the pronouncements in the majority opinion, limiting the scope of the writ of habeas corpus and issuing in favor
of the lower court the patent of infallibility on the en actual question of whether or not the act ordered to be performed is still in the
hands of petitioner to perform. Such pronouncements are not supported by law nor by any principle of substantial justice.
Regardless of the length of the chain of erroneous decisions supporting such pronouncements, the errors shall continue to be
errors. The length of the chain may only emphasize the amount of injustices perpetrated under such pronouncements.
Assuming that the lower court found petitioner guilty of contempt, it could have punished petitioner up to the maximum penalties
provided by section 6 of Rule 64 but never more. Considering that petitioner has already undergone the maximum of six months
imprisonment, even on the assumption that he is guilty, he is entitled to be released from confinement.
We vote to grant the petition and to immediately release Fred M. Harden from confinement and from the custody of respondent
Director of Prisons.
Petition denied. [Harden vs. Director of Prisons, 81 Phil. 741(1948)]
[No. 8252. M&r0C 30, 1926]
"RANA-IINO CAO &(* !ORO"EO SAN /OSE, pet't'o(er,, +,. ARSENIO C. RO!AN, /9*?e o) $'r,t I(,t&(0e o)
&?9(&. REGINO REO;A &(* "EO!-A #AR"OOME, re,po(*e(t,.
1.ACTONS; WHAT DETERMNES NATURE OF.t is a truism in legal procedure that what determines the nature of an action
filed in the courts are the facts alleged in the complaint as constituting the cause of the action. The facts averred as a defense in
the defendant's answer do not and can not determine or change the nature of the plaintiff's action. The theory adopted by the
plaintiff in his complaint is one thing, and that of the defendant in his answer is another. The plaintiff has to establish or prove his
theory or cause of action in order to obtain the remedy he prays for; and the defendant his theory, if necessary, in order to defeat
the claim or action of the plaintiff.
2.D.; NATURE OF, NOT AMENDED OR CHANGED BY PLANTFF'S REPLY.The fact that plaintiffs, in their reply dated
September 4, after reiterating their allegation or claim that they are
446
446
Calo and San Jose vs. Roldan
the owners in fee simple and possessors in good faith of the properties in question, pray that they be declared the owners in fee
simple, has not changed the nature of the action alleged in the complaint or added a new cause of action thereto; because the
allegations in plaintiffs' reply were in answer to defendants' defenses, and the nature of plaintiffs' cause of action, as set forth in
his complaint, was not and could not be amended or changed by the reply, which plaintiff had the right to present as a matter of
course. A plaintiff can not, after defendant's answer, amend his complaint by changing the cause of action or adding a new one
without previously obtaining leave of court (section 2, Rule 17).
3.D. ; EQUTABLE ACTON TO QUET TTLE, WHEN TO BE FLED.An equitable action to quiet title, in order to prevent
harassment by continued assertion of adverse title, or to protect the plaintiff's legal title and possession, may be filed in courts of
equity (and our courts are also of equity), only where no other remedy at law exists or where the legal remedy invokable would not
afford adequate remedy.
4.D.; PROVSONAL REMEDES; WHEN TO BE APPLED FOR AND GRANTED.The provisional remedies denominated
attachment, preliminary injunction, receivership, and delivery of personal property, provided in Rules 59, 60, 61 and 62 of the
Rules of Court, respectively, are remedies to which parties litigant may resort for the preservation or protection of their rights or
interests, and for no other purpose, during the pendency of the principal action. f an action, by its nature, does not require such
protection or preservation, said remedies can not be applied for and granted. To each kind of action or actions a proper provisional
remedy is provided for by law. The Rules of Court clearly specify the cases in which they may be properly granted.
5.RECEVERSHP ; APPONTMENT OF RECEVER N ACTON OF NJUNCTON; CASE AT BAR.The respondent judge acted
in excess of his jurisdiction in appointing a receiver in case No. 7951 of the Court of First nstance of Laguna. Appointment of a
receiver is not proper or does not lie in an action of injunction such as the one filed by the plaintiff.
6.D. ; APPONTMENT OF RECEVER WHEN TTLE is N DSPUTE AND PROPERTY N POSSESSON OF ONE PARTY.
Relief by way of receivership is equitable in nature, and a court of equity will not ordinarily appoint a receiver where the rights of
the parties depend on the determination of adverse claims of legal title to real property and one party is in possession.
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VOL. 76, MARCH 30, 1946
447
ORGNAL ACTON in the Supreme Court. Certiorari with preliminary injunction.
Zosimo D. Tanalega for petitioners.
Estanislao A. Fernandez for respondents Relova and Bartolome.
No appearance for respondent Judge.
FERA, J.:
This is a petition for a writ of certiorari against the respondent Judge Arsenio C. Roldan of the Court of First nstance of Laguna,
on the ground that the latter has exceeded his jurisdiction or acted with grave abuse of discretion in appointing a receiver of
certain lands and their fruits which, according to the complaint filed by the other respondents, as plaintiffs, against petitioners, as
defendants, in case No. 7951, were in the actual possession of and belong to said plaintiffs.
The complaint filed by plaintiffs and respondents against defendants and petitioners in the Court of First nstance of Laguna reads
as follows:
"1. That the plaintiffs and the defendants are all of legal age, Filipino citizens, and residents of Pila, Laguna; the plaintiffs are
husband and wife.
"2. That the plaintiff spouses are the owners and the possessors of the following described parcels of land, to wit:
* * * * * * *
"3. That parcel No. (a) described above is now an unplanted rice land and parcel No. (b) described in the complaint is a coconut
land, both under the possession of the plaintiffs.
"4. That the defendants, without any legal right whatsoever and in connivance with each other, through the use of force, stealth,
threats and intimidation, intend or are intending to enter and work or harvest whatever existing fruits may now be found in the
lands above-mentioned in violation of plaintiffs' proprietary rights thereto and tending to render the judgment in this case
ineffectual.
"5. That unless defendants are barred, restrained, enjoined, and prohibited from entering or harvesting the lands or working
therein
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448
though ex-parte injunction, the plaintiffs will suffer injustice, damages and irreparable injury to their great prejudice.
"6. That the plaintiffs are offering a bond in their application for ex-parte injunction in the amount of P2,000, subject to the approval
of this Hon. Court, which bond is attached hereto marked as Annex A and made an integral part of this complaint.
"7. That on or about June 26, 1945, the defendants, through force, destroyed and took away the madre-cacao fences and barbed
wires built on the northwestern portion of the land designated as parcel No. (b) of this complaint to the damage and prejudice of
the plaintiffs in the amount of at least P200.
"Wherefore, it is respectfully prayed:
"(a) That the accompanying bond in the amount of P2,000 be approved;
"(b) That a writ of preliminary injunction be issued ex-parte immediately restraining, enjoining and prohibiting the defendants, their
agents, servants, representatives, attorneys, and, (or) other persons acting for and in their behalf, from entering in, interfering with.
and/or in any wise taking any participation in the harvest of the lands belonging to the plaintiffs; or in any wise working the lands
above-described;
"(c) That judgment be rendered, after due hearing, declaring the preliminary injunction final;
"(d) That defendants be condemned jointly and severally to pay the plaintiffs the sum of P200 as damages; and
"(e) That plaintiffs be given such other and further relief just and equitable with costs of suit to the defendants."
The defendants filed an opposition dated August 8, 1945, to the issuance of the writ of preliminary injunction prayed for in the
above-quoted complaint, on the ground that they are the owners of the lands and have been in actual possession thereof since
the year 1925; and in their answer to the complaint filed on August 14, 1945, they reiterate that they are the owners and were then
in actual possession of said property, and that the plaintiffs have never been in possession thereof.
The hearing of the petition for preliminary injunction was held on August 9, 1945, at which evidence was introduced by both
parties. After the hearing, Judge Rilloraza, then presiding over the Court of First nstance of Laguna, denied the petition on the
ground that the de-
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VOL. 76, MARCH 30, 1946
449
fendants were in actual possession of said lands. A motion for reconsideration was filed by plaintiffs on August 20, 1945, but said
motion had not yet, up to the hearing of the present case, been decided either by Judge Rilloraza, who was assigned to another
court, or by the respondent judge.
The plaintiffs (respondents) filed on September 4, 1945, a reply to defendants' answer in which, among others, they reiterate their
allegation in the complaint that they are possessors in good faith of the properties in question.
And on December 17, plaintiffs filed an urgent petition ex parte praying that plaintiffs' motion for reconsideration of the order
denying their petition for preliminary injunction be granted and/or for the appointment of a receiver of the properties described in
the complaint, on the ground that (a) the plaintiffs have an interest in the properties in question, and the fruits thereof were in
danger of being lost unless a receiver was appointed; and that (b) the appointment of a receiver was the most convenient and
feasible means of preserving, administering and or disposing of the properties in litigation which include their fruits. Respondent
Judge Roldan, on the same date, December 17, 1945, decided that the court would consider the motion for reconsideration in due
time, and granted the petition for appointment of and appointed a receiver in the case.
The question to be determined in the present special civil action of certiorari is, whether or not the respondent judge acted in
excess of his jurisdiction or with grave abuse of discretion in issuing the order appointing a receiver in the case No. 7951 of the
Court of First nstance of Laguna; for it is evident that there is no appeal or
any other plain, speedy, and adequate remedy in the ordinary course of law against the said order, which is an incidental or
interlocutory one.
t is a truism in legal procedure that what determines the nature of an action filed in the courts are the facts
450
450
alleged in the complaint as constituting the cause of the action. The facts averred as a defense in the defendant's answer do not
and can not determine or change the nature of the plaintiff's action. The theory adopted by the plaintiff in his complaint is one
thing, and that of the defendant in his answer is another. The plaintiff has to establish or prove his theory or cause of action in
order to obtain the remedy he prays for; and the defendant his theory, if necessary, in order to defeat the claim or action of the
plaintiff.
According to the complaint filed in the said case No. 7951, the plaintiff's action is one of ordinary injunction, for the plaintiffs allege
that they are the owners of the lands therein described, and were in actual possession thereof, and that "the defendants without
any legal right whatever and in connivance with each other, through the use of force, stealth, threat and intimidation, intend or are
intending to enter and work or harvest whatever existing fruits may be found in the lands above mentioned in violation of plaintiffs'
proprietary rights thereto;" and prays "that the defendants, their agents, servants, representatives, and other persons acting for or
in their behalf, be restrained, enjoined and prohibited from entering in, interfering with, or in any way taking any participation in the
harvest of the lands above described belonging to the plaintiffs."
That this is the nature of plaintiffs' action is corroborated by the fact that they petitioned in the same complaint for a preliminary
prohibitory injunction, which was denied by the court in its order dated August 17, 1945, and that the plaintiffs, in their motion for
reconsideration of said order filed on August 20 of the same year, and in their urgent petition dated December 17, moving the
court to grant said motion for reconsideration, reiterated that they were actual possessors of the land in question.
The fact that plaintiffs, in their reply dated September 4, after reiterating their allegation or claim that they
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VOL. 76, MARCH 30, 1946
451
are the owners in fee simple and possessors in good faith of the properties in question, pray that they be declared the owners in
fee simple, has not changed the nature of the action alleged in the complaint or added a new cause of action thereto; because the
allegations in plaintiffs' reply were in answer to defendants' defenses, and the nature of plaintiffs' cause of action, as set forth in
their complaint, was not and could not be amended or changed by the reply, which plaintiffs had the right to present as a matter of
course. A plaintiff can not, after defendant's answer, amend his complaint by changing the cause of action or adding a new one
without previously obtaining leave of court (section 2, Rule 17).
Respondents' contention in paragraph of their answer that the action filed by them against petitioners in the case No. 7951 of the
Court of First nstance of Laguna is not only for injunction, but also to quiet title over the two parcels of land described in the
complaint, is untenable for the reasons stated in the previous paragraph. Besides, an equitable action to quiet title, in order to
prevent harassment by continued assertion of adverse title, or to protect the plaintiff's legal title and possession, may be filed in
courts of equity (and our courts are also of equity), only where no other remedy at law exists or where the legal remedy invokable
would not afford adequate remedy (32 Cyc., 1306, 1307). n the present case wherein plaintiffs allege that they are the owners
and were in actual possession of the lands described in the complaint and their fruits, the action of injunction filed by them is the
proper and adequate remedy in law, for a judgment in favor of plaintiffs would quiet their title to said lands.
The provisional remedies denominated attachment, preliminary injunction, receivership, and delivery of personal property,
provided in Rules 59, 60, 61 and 62 of the Rules of Court, respectively, are remedies to which parties litigant may resort for the
preservation or protection of their rights or interests, and for no other purpose, during the
452
452
pendency of the principal action. f an action, by its nature, does not require such protection or preservation, said remedies can
not be applied for and granted. To each kind of action or actions a proper provisional remedy is provided for by law. The Rules of
Court clearly specify the cases in which they may be properly granted.
Attachment may be issued only in the cases or actions specifically stated in section 1, Rule 59, in order that the defendant may
not dispose of his property attached, and thus secure the satisfaction of any. judgment that may be recovered by plaintiff from
defendant. For that reason a property subject of litigation between the parties, or claimed by plaintiff as his, can not be attached
upon motion of the same plaintiff.
The special remedy of preliminary prohibitory injunction lies when the plaintiff's principal action is an ordinary action of injunction,
that is, when the relief demanded in the plaintiff's complaint consists in restraining the commission or continuance of the act
complained of, either perpetually or for a limited period, and the other conditions required by section 3 of Rule 60 are present. The
purpose of this provisional remedy is to preserve the status quo of the things subject of the action or the relation between the
parties, in order to protect the rights of the plaintiff respecting the subject of the action during the pendency of the suit. Because,
otherwise or if no preliminary prohibitory injunction were issued, the defendant may, before final judgment, do or continue the
doing of the act which the plaintiff asks the court to restrain, and thus make ineffectual the final judgment rendered afterwards
granting the relief sought by the plaintiff. But, as this court has repeatedly held, a writ of preliminary injunction should not be
granted to take the property out of the possession of one party to place it in the hands of another whose title has not been clearly
established.
A receiver may be appointed to take charge of personal or real property which is the subject of an ordinary civil
453
VOL. 76, MARCH 30, 1946
453
action, when it appears that the party applying for the appointment of a receiver has an interest in the property or fund which is the
subject of the action or litigation, and that such property or fund is in danger of being lost, removed or materially injured unless a
receiver is appointed to guard or preserve it (section 1 [b], Rule 61) ; or when it appears that the appointment of a receiver is the
most convenient and feasible means of preserving, administering or disposing of the property in litigation (section 1 [e\ of said
Rule). The property or fund must, therefore, be in litigation according to the allegations of the complaint, and the object of
appointing a receiver is to secure and preserve the property or thing in controversy pending the litigation. Of course, if it is not in
litigation and is in the actual possession of the plaintiff, the latter can not apply for and obtain the appointment of a receiver
thereof, for there would be no reason for such appointment.
Delivery of personal property as a provisional remedy consists in the delivery, by order of the court, of a personal property by the
defendant to the plaintiff, who shall give a bond to assure the return thereof or the payment of damages to the defendant if the
plaintiff's action to recover possession of the same property fails, in order to protect the plaintiff's right of possession of said
property, or prevent the defendant from damaging, destroying or disposing of the same during the pendency of the suit.
Undoubtedly, according to law, the provisional remedy proper to plaintiffs' action of injunction is a preliminary prohibitory injunction,
if plaintiffs' theory, as set forth in the complaint, that he is the owner and in actual possession of the premises is correct. But as the
lower court found at the hearing of the said petition for preliminary injunction that the defendants were in possession of the lands,
the lower court acted in accordance with law in denying the petition, although in their motion for reconsideration, which was still
pending at the time the petition in the present case was heard in this court, plaintiffs
454
454
insist that they are in actual possession of the lands and, therefore, of the f ruits thereof.
From the foregoing it appears evident that the respondent judge acted in excess of his jurisdiction in appointing a receiver in case
No. 7951 of the Court of First nstance of Laguna. Appointment of a receiver is not proper or does not lie in an action of injunction
such as the one filed by the plaintiff. The petition for appointment of a receiver filed by the plaintiffs (Exhibit of the petition) is
based on the ground that it is the most convenient and feasible means of preserving, administering and disposing of the properties
in litigation; and according to plaintiffs' theory or allegations in their complaint, neither the lands nor the palay harvested therein,
are in litigation. The litigation or issue raised by plaintiffs in their complaint is not the ownership or possession of the lands and
their f ruits. t is whether or not defendants intend or were intending
to enter or work or harvest whatever existing fruits could then be found in the lands described in the complaint, alleged to be the
exclusive property and in the actual possession of the plaintiffs. t is a matter not only of law but of plain common sense that a
plaintiff will not and legally can not ask for the appointment of a receiver of a property which he alleges to belong to him and to be
actually in his possession. For the owner and possessor of a property is more interested than other persons in preserving and
administering it.
Besides, even if the plaintiffs had amended their complaint and alleged that the lands and palay harvested therein are being
claimed by the defendants, and consequently the ownership and possession thereof were in litigation, it appearing that the
defendants (now petitioners) were in possession of the lands and had planted the crop or palay harvested therein, as alleged in
paragraph 6 (a) and (b) of the petition filed in this court and not denied by the respondent in paragraph 2 of his answer, the
respond-
455
VOL. 76, MARCH 30, 1946
455
ent judge would have acted in excess of his jurisdiction or with a grave abuse of discretion in appointing a receiver thereof.
Because relief by way of receivership is equitable in nature, and a court of equity will not ordinarily appoint a receiver where the
rights of the parties depend on the determination of adverse claims of legal title to real property and one party is in possession (53
C. J., p. 26). The present case falls within this rule.
n the case of Mendoza vs. Arellano and B. de Arellano, this court said:
"Appointments of receivers of real estate in cases of this kind lie largely in the sound discretion of the court, and where the effect
of such an appointment is to take real estate out of the possession of the defendant before the final adjudication of the rights of
the parties, the appointment should be made only in extreme cases and on a clear showing of necessity therefor in order to save
the plaintiff from grave and irremediable loss or damage. (34 Cyc., 51, and cases there cited.) No such showing has been made in
this case as would justify us in interfering with the exercise by the trial judge of his discretion in denying the application for a
receiver." (36 Phil., 59, 63, 64.)
Although the petition is silent on the matter, as the respondents in their answer allege that the Court of First nstance of Laguna
has appointed a receiver in another case No. 7989 of said court, instituted by the respondents Relova against Roberto Calo and
his brothers and sisters, children of Sofia de Oca and Tranquilino Calo (petitioner in this case), and submitted copy of the
complaint filed by the plaintiffs (now respondents) in said case No. 7989 (Exhibit 9 of the respondents' answer), we may properly
express and do hereby express here our opinion, in order to avoid multiplicity of suits, that as the cause of action alleged in the
complaint filed by the respondents Relova in that other case is substantially the same as the cause of action averred in the
complaint filed in the present case, the order of the Court of First nstance of Laguna appointing a receiver in said case No. 7989
was issued in excess of its jurisdiction, and is therefore null and void.
456
456
n view of all the foregoing, we hold that the respondent Judge Arsenio C. Roldan of the Court of First nstance of Laguna has
exceeded his jurisdiction in appointing a receiver in the present case, and therefore the order of said respondent judge appointing
the receiver, as well as all other orders and proceedings of the court presided over by said judge in connection with the
receivership, are null and void.
As to the petitioners' petition that respondents Relova be punished for contempt of court for having disobeyed the injunction
issued by this court against the respondents requiring them to desist and refrain from enforcing the order of receivership and
entering into the possession of the rice lands and harvesting the palay therein, it appearing from the evidence in the record that
the palay was harvested by the receiver and not by said respondents, the petition for contempt of court is denied. So ordered, with
costs against the respondents.
Moran, C. J., Ozaeta, Jaranilla, De Joya, Pablo, Perfecto, Hilado, and Bengzon, JJ., concur.
BRONES, M., con quien est conforme PARS, M., conforme:
Estoy conforme con la parte dispositiva por la nica razn, breve pero lcidamente expuesta en la ponencia, de que cuando hay
controversia sobre el ttulo de propiedad no debe utilizarse el nombramiento de depositario para perturbar el status quo
trasladando la posesin del terreno litigioso de una parte a otra. Solamente cuando el dominio es indisputableverbigracia, hay
de por medio un ttulo Torrenscabe nombrar un depositario para los fines especficos sealados por la ley, entre ellos
principalmente la preservacin del objeto litigioso cuando corre el peligro de daarse o echarse a perder.
Orders and proceedings declared null and void. [Calo and San Jose vs. Roldan, 76 Phil. 445(1946)]
[No. 81201. /9(e 25, 1921]
RO!O$O =AR!E, $OR !E ;I!A =AR!E, repre,e(te* b: M&r'& Cr9E &, ?9&r*'&( &* %'tem, &(* /-IA =AR!E,
pet't'o(er,, +,. /-AN ENRIA-E., /9*?e o) $'r,t I(,t&(0e o) N9e+& E0'B&, #IEN;ENI!O SA#A!O, MAG!AENA SA#A!O
&(* APOINARIO SA#A!O, re,po(*e(t,.
1.RECEVERS; APPONTMENT; How AND WHEN MADE."The appointment of a receiver, because of its drastic nature and of
its character as a special remedy under our Code of Civil Procedure, is a power which should be exercised with great caution."
(Philippine Motor Alcohol Corp. and Palanca vs. Mapa, 64 Phil., 714.) "Where the effect of the appointment of a receiver is to take
real estate out of the possession of the defendant before the final adjudication of the rights of the parties, the appointment should
be made only in extreme cases and on a clear showing of necessity therefor in order to save the plaintiff from grave and
irremediable loss or damage." (Mendoza vs. Arellano and B. de Arellano, 36 Phil., 59.)
2.D.; D.; D.; COMPARSON WTH PRELMNARY NJUNCTON."A court should not, by means of a preliminary injunction,
transfer property in litigation from the possession of one party to another * * * where the legal title is in dispute and the party
having possession asserts ownership in himself." (Gordillo and Mar
528
528
Ylarde vs. Enriquez
tinez vs. Del Rosario, 39 Phil., 829; Evangelista vs. Petreos, 27 Phil., 648; Palafox vs. Madamba, 19 Phil., 444; Deveza vs.
Arbes, 13 Phil., 273; 53 C. J., 26.) f, save in exceptional cases, a preliminary injunction is improper where real property is
involved, receivership is even more so because it is harsher, more drastic and more costly than an injunction. t has been said that
"of all the extraordinary remedies authorized by law, the appointment of a receiver is the most drastic and far-reaching in its
effect." (Delcambre vs. Murphy, 53 S. W. [2d], 789-791, cited as a footnote in 53 C. J., 20.)
3.D.; D.; D.t is necessary in granting the relief of receivership that the "property or fund (be) in danger of being lost, removed
or materially injured."
4.D.; D.; D.; NTEREST OF APPLCANT.Section 1 (6) of Rule 61 requires that the party applying for the appointment of
receiver should have "an interest in the property which is the subject of the action." This rule envisions actual, existing interest.
5.D.; D.; D.A receiver, it has been repeatedly held, should not be granted where the injury resulting therefrom would probably
be greater than the injury ensuing from leaving the possession of the property undisturbed. (53 C. J., 37.)
6.D.; D.; D.; CERTORAR; APPEAL, NADEQUACY OF; CASE AT BAR.The objection that the petitioners have a remedy by
appeal is not well taken. An appointment of a receiver is an interlocutory matter, and an appeal from an order making such
appointment can be interposed only after final judgment is rendered. n this case an appeal would be of no avail to prevent the enf
orcement of the order bef ore damage which the petitioners seek to avoid had been done.
ORGNAL ACTON in the Supreme Court. Certiorari.
Azarias M. Padilla for petitioners.
V. M. Ruiz for respondents.
TUASON, J.:
This is a petition for certiorari to vacate an appointment of a receiver by order of the Court of First nstance of Nueva Ecija. A
preliminary injunction has been granted by us restraining the carrying out of the order.
529
VOL. 78, JUNE 25, 1947
529
Ylarde vs. Enriquez
The appointment would authorize the receiver to take possession of a parcel of land and to "preserve and administer the crops or
products thereon and to perf orm all acts necessary and incident thereto during the pendency of this case."
None of the pleadings filed in the main case are before us, except a copy of a supplemental complaint, and the reference to those
pleadings in the proceeding at bar furnishes indefinite and scanty information on their contents. However, the application for
certiorari, the answer, and the various court orders relative to the appointment of a receiver afford sufficient data to serve as basis
for a decision.
t seems that Eugenia Ylarde was the legal or commonlaw wife of one Simplicio Rosario, now deceased. t would also seem that
in his life time, during his marriage or cohabitation with Eugenia Ylarde, Rosario was granted a free patent to a homestead
measuring fifteen hectares, This is the land or it is a part of this land that is involved in this litigation. According to the respondents'
answer to the application for certiorari, in 1938, after Eugenia Ylarde's legal or common-law husband died, "an extrajudicial
partition (was) executed" by Eugenia Ylarde "wherein she falsely declared under oath that she was the sole heiress of the estate
in question." Following that so-called extrajudicial partition a transfer certificate of title was issued in Eugenia Ylarde's name
cancelling the original document.
n September, 1945, Bienvenido Sabado, Magdalena Sabado and Apolinario Sabado, apparently Simplicio Rosario's collateral
relatives, brought the present action against Eugenia Ylarde. The application for certiorari describes the action as one "relating to
the ownership of a piece of property." The respondents in this proceeding brand this statement, in their answer, as incorrect, "the
true fact being that the action refers (1) to the recovery of land * * *, and (2) for the recovery of damages in the amount of
P50,000." t also appears that during the pendency of the action or beforethere is uncertainty in the allegations as
530
530
Ylarde vs. Enriquez
to the time and the partiestwo or three other so-called extrajudicial partitions were made whereby a portion of three hectares out
of the entire tract was allotted to the Sabados. These partitions are repudiated and sought to be annulled as fraudulent in a
supplemental complaint filed by the respondents herein in the principal case.
On December 17, 1940, Eugenia Ylarde died, and she has been substituted as party defendant by Rodolfo Ylarde, Flor de Vida
Ylarde through a guardian ad litem, and Julia Ylarde. The record does not reveal the degree of relationship between these new
defendants and the deceased Eugenia Ylarde.
The Ylardes, petitioners herein and defendants in the main case, allege that they are and have been in the possession of the part
of the land which corresponded to them or to Eugenia Ylarde in the partition, while the Sabados entered upon the possession of
their share upon the signing of the settlements. The respondents' (the Sabados') attorney denies in a strong and improper
language that the petitioners are in "physical" possession of the property in dispute. But from the use of the adjective "physical" we
are to presume that the respondents admit that the Ylardes enjoy some kind of possession, say, possession through
representatives, croppers or tenants. Be that as it may, f rom the very nature of the remedy of receivership which the Sabados
applied for, from their claim of P50,000 damages, and from their allegations and arguments we cannot avoid the conclusion that
their adversaries and their adversaries' predecessor in interest do have the possession. The opposite theory would be an
incongruity.
Upon these facts we shall proceed to state our opinion.
"The appointment of a receiver, because of its drastic nature and of its character as a special remedy under our Code of Civil
Procedure, is a power which should be exercised with great caution." (Philippine Motor Alcohol Corp. and Palanca vs. Mapa, 64
Phil., 714.) "Where the effect of the appointment of a receiver is to take real
531
VOL. 78, JUNE 25, 1947
531
Ylarde vs. Enriquez
estate out of the possession of the defendant before the final adjudication of the rights of the parties, the appointment should be
made only in extreme cases and on a clear showing of necessity therefor in order to save the plaintiff from grave and irremediable
loss or damage." (Mendoza vs. Arellano and B. de Arellano, 36 Phil., 59.) Of equal application is "the rule that a court should not,
by means of a preliminary injunction, transfer property in litigation from the possession of one party to another * * * where the legal
title is in dispute and the party having possession asserts ownership in himself." (Gordillo and Martinez vs. Del Rosario, 39 Phil.,
829; Evangelista vs. Pedreas, 27 Phil., 648; Palafox vs. Madamba, 19 Phil., 444; Devesa vs. Arbes, 13 Phil., 273; 53 C. J., 26.)
f, save in exceptional cases, a preliminary injunction is improper where real property is involved, receivership is even more so
because it is harsher, more ) drastic and more costly than an injunction. t has been said that "of all the extraordinary remedies
authorized by law, the appointment of a receiver is the most drastic and far-reaching in its effect." (Delcambre vs. Murphy, 5 S. W.
[2d], 789-791, cited as a footnote in 53 C. J., 20.)
No special circumstances are present which would take this case out of the rule enunciated in the foregoing decisions.
Those decisions are rooted in a positive provision of the former Code of Civil Procedure which is now to be found in section 1 (b),
Rule 61, of the Rules of Court. According to this section it is necessary in granting the relief of receivership that the "property or
fund (be) in danger of being lost, removed or materially injured."
The land which is the subject matter of the suit here is not in any danger of disappearing or being wasted. There is no pretense
that it has any permanent improvements or fixtures which produce income, rents or profits to be collected or preserved. At the
most a bond with sufficient sureties would be adequate to protect the plaintiffs from
532
532
Ylarde vs. Enriquez
any possible injury consequent upon being
deprived of the possession of the property.
The fact that there are harvested or standing crops to which the plaintiffs lay claim does not improve their position. f anything, the
existence of such crops adds to the inequity and injustice of the measure. Section 1 (b) of Rule 61 requires that the party applying
for the appointment of receiver should have "an interest in the property which is the subject of the action." We take this rule to
envision actual, existing interest. Except for the plaintiffs' alleged title to the land, (which, as we have pointed out, may not be
taken away from the defendants), the plaintiffs' relation to the products is that of complete strangers. These products are short-
time crops which have been planted and raised exclusively by the defendants personally or through. others. They cost painstaking
care and diligent industry to raise and, it is said, have exacted an investment of P1,000 per hectare. There is no partnership or
anything of the sort formed between the plaintiffs and the defendants by contract or by operation of law in their production.
ndependent of their pretended ownership of the land, the plaintiffs have no title to a single onion or cabbage planted on or
harvested from it, or to any part of the proceeds of the crops, or to the management of the enterprise. Their title to the crops is
contingent upon their success in proving their asserted title to the soil, which is still to be decided. And even if they should
ultimately succeed in that, their rights to the products would still be dependent upon many factors yet undetermined.
These observations bring to mind another well-recognized principle in matters of receivership which has been overlooked. A
receiver, it has been repeatedly held, should not be granted where the injury resulting therefrom would probably be greater than
the injury ensuing from leaving the possession of the property undisturbed. (53 C. J., 37.)
533
VOL. 78, JUNE 25, 1947
533
Ylarde vs. Enriquez
This doctrine fits into the case at bar. The court would place in the hands of a receiver to administer, crops to plant and raise
which, as we have seen, the defendants have spent considerable money and attention with the plaintiffs contributing nothing
beyond their allegation that they own the ground. The receivership would have the defendants replaced in working or looking after
the working of the land by a man who is said to live in Manila and whose ability and experience in farming is, to say the least, has
not been demonstrated. The court has not apparently given thought to where the receiver, if he continued the planting and raising
of onions and other crops, would get the wherewithal. Would he sell the crops and use the money realized therefrom to finance
the enterprise? f that money be insufficient would he borrowif he could? And the Court has not made any provisionif indeed it
would be practical to make such provision at this stage of the litigationregarding the distribution of profitsor losses which
would be the more probable outcome of the intended arrangement.
The allegations in the application for an appointment of a receiver reveals, in our opinion, additional reasons for denying it. As we
have said, we gather from these allegations that Eugenia Ylarde had been in possession of the land and had been cultivating it
and applying its products to her own use to the exclusion of the plaintiffs. Judging by the amount of damages asked by the
plaintiffs, that possession and the enjoyment of the products by Eugenia Ylarde must have lasted a long time. f Eugenia Ylarde's
possession was tolerated so long as to make possible the accumulation of P50,000 damages, we see no special reason why the
status quo should not be maintained now that the cause, as we gather from the pleadings, has entered the trial stage.
t would seem that the application for receivership was motivated by Eugenia Ylarde's death; and the burden of the application is
that the present defendants are not
534
534
Ylarde vs. Enriquez
Eugenia's lawful heirs, besides the plaintiffs' claim for enormous damages. But receivership is not a legal or proper substitute for
an appointment of a judicial administrator or for a relief to secure the payment of damages. Other remedies are indicated to
protect rights based on these considerations. And the allegation that the present defendants are not entitled to succeed to
Eugenia Ylarde's rights and interests in the property in litigation is a matter with which the plaintiffs have little to do. Juridically, it
concerns Eugenia Ylarde's relatives, devisees or legatees alone. The plaintiffs have to rely on the strength of their case and not on
the weakness of their adversaries'. Procedurally, the way is open to the plaintiffs to move for the appointment of an administrator
of Eugenia Ylarde's estate, or to amend their complaint by bringing in as defendants those who, according to them, have a better
right to inherit from the decedent. As a matter of fact, if the defendants' allegation in their application for certiorari is correctthat
they have been substituted for Eugenia Ylardethe change must have been accomplished by an amendment of the complaint by
the plaintiff s themselves. f this be the case, the plaintiffs are assuming two inconsistent positions which they are not allowed to
do.
Other objections of legal, practical and equitable character might be adduced against the receivership in question. What has been
said is enough to show that the court's discretion, in our opinion, has not been exercised in accordance with law and with
established principles and practice. t has apparently not given a careful and full consideration to all the facts of the case and the
harmful and serious consequences of its order in contrast to the possible less injurious effects on the plaintiffs of a decision to
leave matters as they are.
The objection that the petitioners have a remedy by appeal is not well taken. An appointment of a receiver is an interlocutory
matter, and an appeal from an order making such appointment can be interposed only after
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VOL. 78, JUNE 30, 1947
535
People vs. Carlos
final judgment is rendered. n this case an appeal would be of no avail to prevent the enforcement of the order before damage
which the petitioners seek to avoid had been done. (See Comments on the Rules of Court by Moran, p. 18, and cases cited.)
Upon the foregoing considerations, we hold that the court below abused its discretion in appointing a receiver. The appointment is
revoked, with costs against the respondents other than the respondent Judge.
Moran, C. J., Pablo, Perfecto, Hontiveros, and Padilla, JJ., concur.
Judgment reversed. [Ylarde vs. Enriquez, 78 Phil. 527(1947)]
[No. 3230. A9?9,t 1, 1906.]
ROC3A 7 Co., So0'e*&* e( Com&(*'t&, p%&'(t')), +,. A. S. CROSS$IE!, /9*?e o) tCe Co9rt o) $'r,t I(,t&(0e o) M&('%&,
AN! $RANCISCO ". $IG-ERAS, *e)e(*&(t,.
1.LMTED PARTNERSHP.A limited partnership is not a "corporation" within the meaning of that word as it is used in section
174, paragraph 1, of the Code of Civil Procedure.
2.ORDER OF THE COURT; RECEVER; LEN.An order appointing a receiver of the property of a defendant is beyond the
jurisdiction of the court and void when the complaint contains no allegation that the plaintiff
356
356
Rocha & Co. vs. Crossfield
is the owner of the property for which a receiver is appointed, or that he has any interest therein or lien thereon and when the only
prayer of the complaint is for a money judgment against the defendant.
3.D. ; D. ; CERTORAR; APPEAL.ln such cases certiorari is the proper remedy, notwithstanding that the order appointing the
receiver could be reviewed on an appeal from the final judgment in the action.
ORGNAL PETTON for a writ of certiorari.
Chicote & Miranda, for plaintiff.
Coudert Brothers, for defendants.
WLLARD, J.:
On the 25th of January, 1906, Francisco T. Figueras, one of the defendants, commenced in the Court of First nstance of Manila
an action against Rocha & Co. in which he alleged, among other things, that in 1898 a limited partnership had been formed under
the name of "Carman & Co.;" that he and two others were the general partners and that there were various special partners; that
in accordance with the terms of the articles of partnership any one of the partners had the right to withdraw from the partnership
upon six months' notice; that upon giving the said notice his participation in the profits of the partnership should cease but that his
capital should draw interest at the market rate until it was returned, and that it should be returned in four installments, one part
upon giving notice, the second part six months after the notice, the third part twelve months after the notice, and the fourth part
eighteen months after the notice. He further alleged that on the 31st day of January, 1904, he gave notice of his desire to withdraw
from the partnership and waived his right to receive at that time the fourth part of his capital and consented that the fourth part
should be paid at the end of six months. t was further alleged that on the 15th day of February, 1904, the partnership of Carman &
Co. was reorganized under the name of Rocha & Co., which latter company assumed all the debts and liabilities of Carman & Co.
and took possession of all its assets.
The complaint alleged that the plaintiff's participation
357
357
Rocha & Co, vs. Crossfield
in the business consisted (1) of the capital which he had paid in P12,000, (2) his proportionate part of a reserve fund, and (3) his
proportionate part of a sinking fund, and that he was entitled to receive from the partnership the sum of P51,484.17; that the
partnership alleged that his interest did not exceed P34,218.22, and on the 2d day of August, 1904, the partnership paid, and the
plaintiff received, one-fourth of the amount which the partnership admitted that the plaintiff was entitled to.
The prayer of the complaint is as follows:
"Therefore the plaintiff prays that judgment be granted in his favor in the amount of P43,574.95, with interest at 6 per cent per
annum from August 2, 1904, and costs of this action."
There was no allegation in the complaint that the partnership of Carman & Co, was dissolved by the withdrawal of Figueras, nor
was there any allegation that after that withdrawal he was the owner of an undivided or of any interest in the physical property
which belonged to the partnership and which consisted of lorchas, launches, and cascos, nor was there any allegation that he had
any lien upon any of this property.
t is apparent that the real controversy between the parties is over the right of Figueras to receive his proportionate part of the
reserve fund and of the sinking fund.
Notwithstanding the want of these allegations, Figueras, after the presentation 6f the complaint and after the defendants had
demurred thereto, made an application to the court below for the appointment of a receiver of the property of Rocha & Co. A
receiver was appointed who afterwards took possession of the entire property of Rocha & Co., and thereupon Rocha & Co.
commenced this original action of certiorari in this court, asking that the proceedings in reference to the appointment of a receiver
be certified to this court and that after such certification they be examined and that the order appointing the receiver be declared
void because the court making it had no jurisdiction to appoint such receiver. A preliminary injunction was granted by one of the
justices of this court restraining the receiver and the defendants in this action from taking
358
358
further proceedings in the matter during the pendency thereof.
The defendants, having been cited, appeared and answered the complaint, admitting practically all of the facts alleged therein, a
hearing was had upon said complaint and answer, and an order was made by this court requiring the court below to send to it all
of the proceedings in the case relating to the appointment of the receiver. Those proceedings have been remitted, a hearing has
been had thereon, and the case is now before us for final disposition.
Section 174 of the Code of Civil Procedure is as follows:
"SEC. 174. When a receiver may be appointed.A receiver may be appointed in the following cases:
"(1) When a corporation has been dissolved, or is insolvent, or is in imminent danger of insolvency, or has forfeited its corporate
rights.
"(2) Where it is made to appear by the complaint or answer, and by such other proof as the judge may require, that the party
making the application for the appointment of receiver has an interest in the property or fund which is the subject of the action and
it is shown that the property or fund is in danger of being lost, removed, or materially injured unless a receiver shall be appointed
to guard and preserve it.
"(3) n an action by the mortgagee for the foreclosure of a mortgage where it appears that the property is in danger of being
wasted or materially injured and that its value is probably insufficient to discharge the mortgage debt.
"(4) Whenever in other cases it shall be made to appear to the court that the appointment of a receiver is the most convenient and
feasible means of preserving and administering the property which is the subject of litigation during the pendency of the action."
The case at bar does not fall within any of the provisions of this section. There is no allegation in the complaint, as has been
before stated, that the plaintiff is the owner of any of the property of Rocha & Co., nor is there any allegation that he has any lien
thereon, nor are there any facts alleged in the complaint from which it could be
359
359
inferred that he was the owner of such property or had any lien thereon. On the contrary, from the facts that are alleged in the
complaint it would seem that his separation from the partnership of Carman & Co. left that partnership as a going concern and did
not dissolve it. The effect of the provisions of the articles of partnership which are referred to in the complaint is that after the
withdrawal of any partner the remaining partners became the owners of all the assets of the partnership and he became a general
creditor of the partnership.
After this action had been commenced in this court, and after a preliminary injunction had been issued as aforesaid, Figueras
applied to the court below for leave to amend his complaint in the action therein pending and such leave was granted. This
amendment, having been made after the action was commenced in this court and after a receiver was appointed, can not be
considered.
n one of the orders made by the court below relating to the receiver, its authority for making it was based on paragraphs 2 and 4
of section 174 of the Code of Civil Procedure above quoted. n a subsequent order this ground was abandoned and the
appointment was based on paragraph 1 of said section, the court holding that a special partnership was a corporation within the
meaning of said section 174. This claim can not be sustained and, in fact, it was not urged in the argument of this case in this
court.
The case not being one in which a receiver could be appointed, the order making such appointment was void and was beyond the
jurisdiction of the court, although that that court had jurisdiction of the main action has been settled adversely to the defendants in
this suit by the case of Bonaplata vs. Ambler (2 Phil. Rep., 392). (See also Encarnacin vs. Ambler,1 2 Off. Gaz., 490; Findlay &
Co. vs. Ambler,2 2 Off. Gaz., 491).
That certiorari is the proper remedy in such a case was decided in the case of Blanco vs. Ambler3 (2 Off. Gaz., 281, 492).
_____________
13 Phil. Rep., 623. 2 3 Phil. Rep., 690. 3 3 Phil. Rep., 358, 735.
360
360
United States vs. Abad
n the argument in this court it was claimed that this extraordinary remedy would not lie because the plaintiff, Rocha & Co., had a
right to appeal from the order appointing a receiver, although that appeal could not be taken until a final judgment had been
entered in the case. That argument is answered by what is said in the case of Yangco vs. Rohde (1 Phil. Rep., 404).
The order of the court below appointing a receiver in this case was illegal and void, and it and all proceedings taken therein are
hereby annulled. Let judgment be entered to that effect in favor of the
plaintiff in this action and against the defendants, and with costs against the defendant, Figueras. At the expiration of ten days let
judgment be entered in accordance herewith. So ordered.
Arellano, C. J., Torres, Mapa, Carson, and Tracey, JJ., concur.
Petition granted. [Rocha & Co. vs. Crossfield, 6 Phil., 355(1906)]
[No. 83191. No+ember 29, 1950]
AG-S"INA PARANE"E, PERINO ;IAR, PE!RO 3ERNAN!E., COME!ES !AA"ON, ;AERIANO MIANO,
$EISIANA NA;ARRO, &(* E!-AR!O #. OCAMPO, pet't'o(er,, +,. #IEN;ENI!O A. "AN, /9*?e, Co9rt o) $'r,t I(,t&(0e
o) R'E&%, R'E&% C't: #r&(0C, $EIF ACARAS, $R-C"-OSA ;ASA-E., MAFIMA ;ASA-E., NOR#ER"A ;ASA-E. &(*
"3E PRO;INCIA S3ERI$$ O$ RI.A, re,po(*e(t,
679
679
1.PROHBTON; OWNERSHP OF REAL PROPERTY N LTGATON; ORDER REQURNG ACCOUNTNG AND DEPOST OF
PROCEEDS OF HARVEST WTH CLERK OF COURT, MPROPER.A trial court issuing an order requiring the party in
possession of the property whose ownership is in litigation, to make an accounting and to deposit the proceeds of the sale of the
harvest with the Clerk of Court acted in excess of its jurisdiction. That order, in effect, made the Clerk of Court a sort of a receiver
charged with the duty of receiving the proceeds of sale and the harvest of every year during the pendency of the case with the
disadvantage that the Clerk of Court has not filed any bond to guarantee the faithful discharge of his duties as depositary; and
considering that in actions involving title to real property, the appointment of a receiver cannot be entertained because its effect
would be to take the property out of the possession of the defendant, except in extreme cases when there is clear proof of its
necessity to save the plaintiff from grave and irremediable loss or damage, it is evident that the action of the respondent judge is
unwarranted and unfair to the defendants.
2.D..; D.; D.; PARTY N POSSESSON MADE MPROVEMENTS.f the party in possession of the land in litigation in the
exercise of his rights as owner made improvements thereon at his own expense, to order him to render an accounting of the
harvest and to deposit the proceeds in case of sale thereof during the pendency of the case would be to deprive him of his means
of livelihood before the case is decided on the merits.
ORGNAL ACTON in the Supreme Court. Certiorari and prohibition with preliminary injunction.
Emiliano M. Ocampo for petitioners.
Jose E, Morales f or respondents Felix Alcaras, and Fructuosa, Maxima and Norberta, all surnamed Vasquez.
BAUTSTA ANGELO, J.:
This is a petition for a writ of prohibition wherein petitioner seeks to enjoin the respondent judge from enforcing his order of March
4, 1950, on the ground that the same was issued in excess of his jurisdiction.
680
680
Paranete vs. Tan
On January 16, 1950, Felix Alcaras, Fructuosa Vasquez, Maxima Vasquez and Norberta Vasquez filed a case in the Court of First
nstance of Rizal for the recovery of five parcels of land against Agustina Paranete and six other codefendants, (civil case No.
1020). On January 28, 1950, plaintiff's filed a petition for a writ of preliminary injunction for the purpose of ousting the defendants
from the lands in litigation and of having themselves placed in possession thereof. The petition was heard ex parte and as a result
the respondent judge issued the writ of injunction requested. On February 28, 1950, the defendants moved for the reconsideration
of the order granting the writ, to which plaintiffs objected, and after due hearing, at which both parties appeared with their
respective counsel, the respondent judge reconsidered his order, but required the defendants to render an accounting of the
harvest for the year 1949, as well as all future harvests, and if the harvest had already been sold, to deposit the proceeds of the
sale with the clerk of court, allowing the plaintiffs or their representative to be present during each harvest. This order was issued
on March 4, 1950. Defendants again filed a motion for the reconsideration of this order, but it was denied, hence the petition under
consideration.
The question to be determined is whether or not the respondent judge exceeded his jurisdiction in issuing his order of March 4,
1950, under the terms and conditions set forth above.
We hold that the respondent judge has acted in excess of his jurisdiction when he issued the order above adverted to. That order,
in effect, made the clerk of court a sort of a receiver charged with the duty of receiving the proceeds of sale and the harvest of
every year during the pendency of the case with the disadvantage that the clerk of court has not filed any bond to guarantee the
faithful discharge of his duties as depositary; and considering that in actions involving title to real property, the appointment of a
receiver cannot be entertained because its effect would
681
681
Paranete vs. Tan
be to take the property out of the possesion of the defendant, except in extreme cases when there is clear proof of its necessity to
save the plaintiff from grave and irremediable loss or damage, it is evident that the action of the respondent judge is unwarranted
and unfair to the defendants. (Mendoza vs. Arellano, 86 Phil., 59; Agonoy vs. Ruiz, 11 Phil., 204; Aquino vs. Angeles David, 77
Phil., 1087; Ylarde vs. Enriquez, 78 Phil., 527; Arcega vs. Pecson, 44 Off. Gaz., (No. 12), 4884, 78 Phil., 743; De la Cruz vs.
Guinto, 45 Off. Gaz., pp. 1309, 1311; 79 Phil., 304.) Moreover, we find that Agustina Paranete, one of the defendants, has been in
possession of the lands since 1943, in the exercise of her rights as owner, with her codefendants working for her exclusively as
tenants, and that during all these years said Agustina Paranete had made improvements thereon at her own expense. These
improvements were made without any contribution on the part of the plaintiffs. The question of ownership is herein involved and
both parties seem to have documentary evidence in support of their respective claims, and to order the defendants to render an
accounting of the harvest and to deposit the proceeds in case of sale thereof during the pendency of the case would be to deprive
them of their means of livelihood before the case is decided on the merits. The situation obtaining is such that it does not warrant
the placing of the lands in the hands of a neutral person as is required when a receiver is appointed. To do so would be unfair and
would unnecessarily prejudice the defendants.
While the respondent judge claims in his order of March 25, 1950, that he acted as he did because of a verbal agreement entered
into between the lawyers of both parties, we do not consider it necessary to pass on this point because the alleged agreement is
controverted and nothing about it has been mentioned by the respondent judge in his order under consideration.
Wherefore, petition is hereby granted. The Court declares the order of the respondent judge of March 4, 1950
682
682
Go Bon Chiat vs. Gonzales
null and void and enjoins him from enforcing it as prayed for in the petition.
Pars, Feria, Pablo, Bengzon, Padilla, Tuason, Montemayor, Reyes, and Jugo, JJ., concur.
Petition granted. [Paranete vs. Tan, 87 Phil. 678(1950)]
G.R. No. 61504. M&r0C 11, 1999.<
CI"I#AN@, N.A. G$ormer%: $'r,t N&t'o(&% C't: #&(DH, pet't'o(er, +,. "3E 3ONORA#E CO-R" O$ APPEAS &(*
!O-GAS $. ANAMA, re,po(*e(t,.
Property; Replevin; There is substantial compliance with the rule requiring that an affidavit of merit support the complaint for
replevin if the complaint itself contains a statement of every fact required to be stated in the affidavit of merit and the complaint is
verified like an affidavit.Petitioner is correct insofar as it contends that substantial compliance with the affidavit requirement may
be permissible. There is substantial compliance with the rule requiring that an affidavit of merit support the complaint for replevin if
the complaint itself contains a statement of every fact required to be stated in the affidavit of merit and the complaint is verified like
an affidavit. On the matter of replevin, Justice Vicente Francisco's Comment on the Rules of Court, states: "Although the better
practice is to keep the affidavit and pleading separate, if plaintiff's pleading contains a statement of every fact which the statute
requires to be shown in the affidavit, and the pleading is verified by affidavit covering every statement therein, this will be sufficient
without a separate affidavit; but in no event can the pleading supply the absence of the affidavit unless all that the affidavit is
required to contain is embodied in the pleading, and the pleading is verified in the form required in the case of a separate
affidavit. (77 CJS 65
_______________
* THRD DVSON.
680
680
Citibank, N.A. vs. Court of Appeals
cited in Francisco, Rules of Court of the Philippines, Vol. V-A, p. 383)
Same; Same; n the case of an attachment which likewise requires an affidavit of merit, the Court held that the absence of an
affidavit of merit is not fatal where the petition itself, which is under oath, recites the circumstances or facts constitutive of the
grounds for the petition.n the case of an attachment which likewise requires an affidavit of merit, the Court held that the
absence of an affidavit of merit is not fatal where the petition itself, which is under oath, recites the circumstances or facts
constitutive of the grounds for the petition.
Same; Same; Facts that must be set forth in the affidavit of merit.The facts that must be set forth in the affidavit of merit are (1)
that plaintiff owns the property particularly describing the same, or that he is entitled to its possession; (2) wrongful detention by
defendant of said property; (3) that the property is not taken by virtue of a tax assessment or fine pursuant to law or seized under
execution or attachment or, if it is so seized, that it is exempt from such seizure; and (4) the actual value of the property.
Same; Same; Pertinent rules require that the affidavit of merit should state the actual value of the property subject of a replevin
suit and not just its probable value.Then too, petitioner stated the value of subject properties at a "probable value of
P200,000.00, more or less. Pertinent rules require that the affidavit of merit should state the actual value of the property subject of
a replevin suit and not just its probable value. Actual value (or actual market value) means "the price which an article would
command in the ordinary course of business, that is to say, when offered for sale by one willing to sell, but not under compulsion
to sell, and purchased by another who is willing to buy, but under no obligation to purchase it.
Same; Same; Since the valuation made by the petitioner has been disputed by the respondent, the lower court should have
determined first the actual value of the properties.As there was a disagreement on the valuation of the properties in the first
place, proper determination of the value of the bond to be posted by the plaintiff cannot be sufficiently arrived at. Though the rules
specifically require that the needed bond be double the value of the properties, since plaintiff merely denominated a probable
value of P200,000.00
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VOL. 304, MARCH 17, 1999
681
and failed to aver the properties' actual value, which is claimed to be much greater than that declared by plaintiff, the amount of
P400,000.00 would indeed be insufficient as found by the Court of Appeals. The Rules of Court requires the plaintiff to "give a
bond, executed to the defendant in double the value of the property as stated in the affidavit x x x. Hence, the bond should be
double the actual value of the properties involved. n this case, what was posted was merely an amount which was double the
probable value as declared by the plaintiff and, therefore, inadequate should there be a finding that the actual value is actually far
greater than P200,000.00. Since the valuation made by the petitioner has been disputed by the respondent, the lower court should
have determined first the actual value of the properties. t was thus an error for the said court to approve the bond, which was
based merely on the probable value of the properties.
Same; Same; A replevin bond is intended to indemnify the defendant against any loss that he may suffer by reason of its being
compelled to surrender the possession of the disputed property pending trial of the action.t should be noted that a replevin
bond is intended to indemnify the defendant against any loss that he may suffer by reason of its being compelled to surrender the
possession of the disputed property pending trial of the action. The same may also be answerable for damages if any when
judgment is rendered in favor of the defendant or the party against whom a writ of replevin was issued and such judgment
includes the return of the property to him. Thus, the requirement that the bond be double the actual value of the properties litigated
upon. Such is the case because the bond will answer for the actual loss to the plaintiff, which corresponds to the value of the
properties sought to be recovered and for damages, if any.
Same; Same; The remedies provided under Section 5, Rule 60, are alternative remedies.The Court held in a prior case that the
remedies provided under Section 5, Rule 60, are alternative remedies. "x x x f a defendant in a replevin action wishes to have the
property taken by the sheriff restored to him, he should, within five days from such taking, (1) post a counter-bond in double the
value of said property, and (2) serve plaintiff with a copy thereof, both requirementsas well as compliance therewith within the
five-day period mentionedbeing mandatory. This course of action is avail-
682
682
able to the defendant for as long as he does not object to the sufficiency of the plaintiff's bond.
Same; Same; "The defendant may object to the sufficiency of the plaintiff's bond, or of the surety or sureties thereon but if he
does so, "he cannot require the return of the property by posting a counterbond pursuant to Sections 5 and 6."The defendant
may object to the sufficiency of the plaintiff's bond, or of the surety or sureties thereon; but if he does so, "he cannot require the
return of the property by posting a counter-bond pursuant to Sections 5 and 6.
Same; Same; The property seized under a writ of replevin is not to be delivered immediately to the plaintiff.Under the Revised
Rules of Court, the property seized under a writ of replevin is not to be delivered immediately to the plaintiff. This is because a
possessor has every right to be respected in its possession and may not be deprived of it without due process.
SPECAL CVL ACTON in the Supreme Court. Certiorari.
Agcaoili & Associates for petitioner.
Quasha, Asperilla, Ancheta, Pea & Associates for private respondent.
PURSMA, J.:
At bar is a special civil action for certiorari with prayer for a temporary restraining order faulting the Court of Appeals1 with grave
abuse of discretion for nullifying the lower court's order of seizure of mortgaged properties subject of a case for sum of money and
replevin.
The facts leading to the institution of the case are as follows:
_______________
1 Former Third Division with Associate Justice Mama Busran, ponente; Associate Justice Jose Melo and Associate Justice Serafin
Cuevas, members.
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VOL. 304, MARCH 17, 1999
683
n consideration for a loan obtained from Citibank, N.A. (formerly First National City Bank), the defendant (private respondent
herein) Douglas Anama executed a promissory note, dated November 10, 1972,2 to pay the plaintiff bank the sum of P418,000.00
in sixty (60) equal successive monthly installments of P8,722.25, starting on the 10th day of December 1972 and on the 10th of
every month thereafter. The said Promissory Note stipulated further that:
"(a) the loan is subject to interest at the rate of twelve percent (12%) per annum;
(b) the promissory note and the entire amount therein stated shall become immediately due and payable without notice or demand
upon
(aa) default in the payment of any installment of principal or interest at the time when the same is due;
(bb) the occurrence of any change in the condition and affairs of the defendant, which in the opinion of the plaintiff shall increase
its credit risk;
(c) the defendant agrees to pay all costs, expenses, handling and insurance charges incurred in the granting of the loan;
(d) in case the services of a lawyer is made necessary for collection, defendant shall be liable for attorney's fees of at least ten
percent (10%) of the total amount due.3
To secure payment of the loan, private respondent Anama also constituted a Chattel Mortgage of even date in favor of petitioner,
on various machineries and equipment located at No. 1302 Epifanio
delos Santos Avenue, Quezon City, under the following terms and conditions:
"(a) The machineries and equipment, subject of the mortgage, stand as security for defendant's account.
_______________
2 Annex "B, Rollo, p. 32.
3 Rollo, p. 27.
684
684
(b) All replacements, substitutions, additions, increases and accretions to the properties mortgaged shall also be subject to the
mortgage.
(c) The defendant appoints the plaintiff as his attorney-in-fact with authority to enter the premises of the defendant and take actual
possession of the mortgaged chattels without any court order, to sell said property to any party.
(d) All expenses in carrying into effect the stipulations therein shall be for the account of the defendant and shall form part of the
amount of the obligation secured by the mortgage.
(e) n case the plaintiff institutes proceedings for the foreclo-sure of the mortgage, the plaintiff shall be entitled to the appointment
of a receiver without a bond.
(f) n case of default, the defendant shall be liable for attor-ney's fees and cost of collection in the sum equal to twenty-five percent
(25%) of the total amount of the indebtedness outstanding and unpaid.4
On November 25, 1974, for failure and refusal of the private respondent to pay the monthly installments due under the said
promissory note since January 1974, despite repeated demands, petitioner filed a verified complaint against private respondent
Anama for the collection of his unpaid balance of P405,820.52 on the said promissory note, for the delivery and possession of the
chattels covered by the Chattel Mortgage preparatory to the foreclosure thereof as provided under Section 14 of the Chattel
Mortgage Law, docketed as Civil Case No. 95991 before the then Court of First nstance of Manila.
On February 20, 1975, the defendant Anama submitted his Answer with Counterclaim, denying the material averments of the
complaint, and averring, inter alia (1) that the remedy of replevin was improper and the writ of seizure should be vacated; (2) that
he signed the promissory note for P418,000.00 without receiving from plaintiff Citibank any amount, and was even required to pay
the first installment on the supposed loan in December 1974; (3) that the under-
________________
4 Rollo, pp. 28-29.
685
VOL. 304, MARCH 17, 1999
685
standing between him and the Citibank was for the latter to release to him the entire loan applied for prior to and during the
execution of his promissory note, but Citibank did not do so and, instead, delayed the release of any amount on the loan even
after the execution of the promissory note thereby disrupting his timetable of plans and causing him damages; (4) that the amount
released by Citibank to him up to the present was not the amount stated in the promissory note, and his alleged default in paying
the installments on the loan was due to the delay in releasing the full amount of the loan as agreed upon; (5) that the machineries
and equipment described in the chattel mortgage executed by him are really worth more than P1,000,000.00 but he merely
acceded to the valuation thereof by Citibank in said document because of the latter's representation that the same was necessary
to speed up the granting of the loan applied for by him; (6) that the properties covered by said chattel mortgage are real properties
installed in a more or less permanent nature at his (defendant's) premises in Quezon City, as admitted by Citibank in said
mortgage document; (7) that the mortgage contract itself stipulated that the manner and procedure for effecting the sale or
redemption of the mortgaged properties, if made extrajudicially, shall be governed by Act No. 1508 and other pertinent laws which
all pertain to real properties; and (8) that because of the filing of this complaint without valid grounds therefor, he suffered
damages and incurred attorney's fees; the defendant, now private respondent, averred.
On December 2, 1974, the trial court, upon proof of default of the private respondent in the payment of the said loan, issued an
Order of Replevin over the machineries and equipment covered by the Chattel Mortgage.
However, despite the issuance of the said order of seizure of subject chattels, actual delivery of possession thereof to petitioner
did not take place because negotiations for an amicable settlement between the parties were encouraged by the trial
court. On March 24, 1975, a pre-trial conference was held and the lower court issued an order for joint management by the peti-
686
686
tioner and the private respondent of the latter's business for ten (10) days, after which the former would be appointed receiver for
the said business.
On April 1, 1975, the petitioner took over private respondent's business as receiver. When further proposals to settle the case
amicably failed, the lower court proceeded to try the case on the merits.
On January 29, 1977, petitioner presented a Motion for the ssuance of an Alias Writ of Seizure, ordering the sheriff to seize the
properties involved and dispose of them in accordance with the Revised Rules of Court. The lower court then gave private
respondent five (5) days to oppose the said motion and on February 22, 1977, he sent in his opposition thereto on the grounds:
(1) that Citibank's P400,000 replevin bond to answer for damages was grossly inadequate because the market value of the
properties involved is P1,710,000 and their replacement cost is P2,342,300.00 per the appraisal report of the Appraisal and
Research Corp.; (2) that he was never in default to justify the seizure; (3) that the Civil Case No. 18071 of the Court of First
nstance, entitled Hernandes vs. Anama, et al., which, according to Citibank, supposedly increased its credit risk in the alleged
obligation, had already been dismissed as against him and the case terminated with the dismissal of the complaint against the
remaining defendant, First National City Bank, by the Court in its orders of January 12, 1977 and February 7, 1977; (4) that his
(defendant's) supposed obligations with Citibank were fully secured and his mortgaged properties are more than sufficient to
secure payment thereof; and (5) that the writ of seizure if issued would stop his business operations and contracts and expose
him to lawsuits from customers, and also dislocate his employees and their families entirely dependent thereon for their livelihood.
On February 28, 1977, acting on the said Motion and private respondent's opposition, the trial court issued an Order granting the
Motion for Alias Writ of Seizure, ruling thus:
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VOL. 304, MARCH 17, 1999
687
"WHEREFORE, the motion for alias writ of seizure is hereby granted. At any rate, this Order gives another opportunity for
defendant and the intervenor who claims to be a part owner to file a counterbond under Sec. 60 of Rules of Court.5
Private respondent moved for reconsideration of the aforesaid order but the same was denied by the Resolution of March 18,
1977, to wit:
"n view of the foregoing, the motion for reconsideration is hereby denied.
At any rate, as already stated, the defendant has still a remedy available which is to file a bond executed to the plaintiff in double
the value of the properties as stated in the plaintiff's affidavit. The Court at this instance therefore has no authority to stop or
suspend the writ of seizure already ordered.6
Accordingly, by virtue of the Alias Writ of Seizure, petitioner took possession of the mortgaged chattels of private respondent. As a
consequence, the sheriff seized subject properties, dismantled and removed them from the premises where they were installed,
delivered them to petitioner's possession on March 17, 18 and 19, 1977 and advertised them for sale at public auction scheduled
on March 22, 1977.
On March 21, 1977, private respondent filed with the Court of Appeals a Petition for Certiorari and Prohibition7 with njunction to
set aside and annul the questioned resolutions of the trial court on the ground that they were issued "in excess of jurisdiction and
with grave abuse of discretion because of the "lack of evidence and clear cut right to possession of First National City Bank
(herein petitioner) to the machineries subject of the Chattel Mortgage.
On July 30, 1982, finding that the trial court acted with grave abuse of discretion amounting to excess or lack of juris-
_________________
5 Annex "E, Rollo, p. 49.
6 Annex "F, Rollo, p. 51.
7 Annex "G, Rollo, pp. 52-61.
688
688
diction in issuing the assailed resolutions, the Court of Appeals granted the petition, holding that the provisions of the Rules of
Court on Replevin and Receivership have not been complied with, in that (1) there was no Affidavit of Merit accompanying the
Complaint for Replevin; (2) the bond posted by Citibank was insufficient; and (3) there was non-compliance with the requirement
of a receiver's bond and oath of office. The decretal portion of the assailed decision of the Court of Appeals, reads:
"WHEREFORE, the petition is granted. The questioned resolutions issued by the respondent judge in Civil Case No. 95991, dated
February 28, 1977 and March 18, 1977, together with the writs and processes emanating or deriving therefrom, are hereby
declared null and void ab initio.
The respondent ex-officio sheriff of Quezon City and the respondent First National City Bank are hereby ordered to return all the
machineries and equipment with their accessories seized, dismantled and hauled, to their original and respective places and
positions in the shop flooring of the petitioner's premises where these articles were,
before they were dismantled, seized and hauled at their own expense. The said respondents are further ordered to cause the
repair of the concrete foundations destroyed by them including the repair of the electrical wiring and facilities affected during the
seizure, dismantling and hauling.
The writ of preliminary injunction heretofore in effect is hereby made permanent. Costs against the private respondents.
SO ORDERED.8
Therefrom, Citibank came to this Court via its present petition for certiorari, ascribing grave abuse of discretion to the Court of
Appeals and assigning as errors, that:
THE RESPONDENT COURT ERRED N PRACTCALLY AND N EFFECT RENDERNG JUDGMENT ON THE MERTS
AGANST THE HEREN PETTONER BY ORDERNG THE RETURN OF
_______________
8 CA Decision, p. 10; Rollo, p. 171.
689
VOL. 304, MARCH 17, 1999
689
THE MACHNERES AND EQUPMENT AND TS ACCESSORES TO THER ORGNAL AND RESPECTVE PLACES AND
POSTONS.
THE RESPONDENT COURT ERRED N FNDNG THAT THE COMPLANT OF THE PETTONER DD NOT COMPLY WTH
THE PROVSONS OF SEC. 2, RULE 60 OF THE RULES OF COURT.
THAT THE RESPONDENT COURT ERRED N FNDNG THAT THE BOND POSTED BY THE PETTONER S QUESTONABLE
AND/OR NSUFFCENT.
V
THE RESPONDENT COURT ERRED N FNDNG THAT THE PETTONER DD NOT COMPLY WTH THE PROVSONS OF
SEC. 5, RULE 59 BY FALNG TO POST A RECEVER'S BOND.
V
THE RESPONDENT ERRED N FNDNG THAT THE HON. JORGE R. COQUA ACTED WTH GRAVE ABUSE OF DSCRETON
AMOUNTNG TO EXCESS OR LACK OF JURSDCTON N DEALNG WTH THE STUATON.
Anent the first assigned error, petitioner contends that the Court of Appeals, by nullifying the writ of seizure issued below, in effect,
rendered judgment on the merits and adjudged private respondent Anama as the person lawfully entitled to the possession of the
properties subject of the replevin suit. t is theorized that the same cannot be done, as the case before the court below was yet at
trial stage and the lower court still had to determine whether or not private respondent was in fact in default in the payment of his
obligation to petitioner
690
690
Citibank, which default would warrant the seizure of subject machineries and equipment.
The contention is untenable. A judgment is on the merits when it determines the rights and liabilities of the parties on the basis of
the disclosed facts, irrespective of formal, technical or dilatory objections, and it is not necessary that there should have been a
trial.9 The assailed decision of the Court of Appeals did not make any adjudication on the rights and liabilities between Citibank
and Douglas Anama. There was no finding yet of the fact of default. The decision only ruled on the propriety of the issuance of the
writ of seizure by the trial court. As worded by the respondent court itself, "the main issues to be resolved are whether there was
lack or excess of jurisdiction, or grave abuse of discretion, in the issuance of the orders in question, and there is no appeal nor
any plain, speedy, and adequate remedy in the ordinary course of law.10
n resolving the issue posed by the petition, the Court of Appeals limited its disposition to a determination of whether or not the
assailed order of seizure was issued in accordance with law, that is, whether the provisions of the Rules of Court on delivery of
personal property or replevin as a provisional remedy were followed. The Court of Appeals relied on Rule 60 of the Rules of Court,
which prescribes the procedure for the recovery of possession of personal property, which Rule, provides:
Sec. 2. Affidavit and Bond.Upon applying for such order the plaintiff must show by his own affidavit or that of some other person
who personally knows the facts:
(a) That the plaintiff is the owner of the property claimed particularly describing it, or is entitled to the possession thereof;
(b) That the property is wrongfully detained by the defendant, alleging the cause of detention thereof according to his best of
knowledge, information and belief;
______________
9 Mendiola vs. Court of Appeals, 258 SCRA 492.
10 CA Decision, p. 7; Rollo, p. 417.
691
VOL. 304, MARCH 17, 1999
691
(c) That it has not been taken for a tax assessment or fine pursuant to law, or seized under an execution, or an attachment against
the property of the plaintiff, or is so seized, that is exempt from such seizure; and
(d) The actual value of the property.
The plaintiff must also give a bond, executed to the defendant in double of the value of the property as stated in the affidavit
aforementioned, for the return of the property to the defendant of such sum as he may recover from the plaintiff in the action.
The Court of Appeals did not pass upon the issue of who, as between Douglas Anama and Citibank, is entitled to the possession
of subject machineries, as asserted by the latter. When it ordered the restoration of the said machineries to Douglas Anama (now
the private respondent), it merely brought the parties to a status quo, by restoring the defendant to the possession of his
properties, since there was a finding that the issuance of the writ was not in accordance with the specific rules of the Rules of
Court.
n its second assignment of errors, petitioner theorizes that the Court of Appeals erred in finding that it did not comply with Section
2, Rule 60 of the Rules of Court requiring the replevin plaintiff to attach an affidavit of merit to the complaint.
Petitioner maintains that although there was no affidavit of merit accompanying its complaint, there was nonetheless substantial
compliance with the said rule as all that is required to be alleged in the affidavit of merit was set forth in its verified complaint.
Petitioner argues further that assuming arguendo that there was non-compliance with the affidavit of merit requirement, such
defense can no longer be availed of by private respondent Anama as it was not alleged in his Answer and was only belatedly
interposed in his Reply to the Petitioner's Comment on the Petition for Certiorari before the Court of Appeals.
692
692
Petitioner is correct insofar as it contends that substantial compliance with the affidavit requirement may be permissible. There is
substantial compliance with the rule requiring that an affidavit of merit support the complaint for replevin if the complaint itself
contains a statement of every fact required to be stated in the affidavit of merit and the complaint is verified like an affidavit. On the
matter of replevin, Justice Vicente Francisco's Comment on the Rules of Court, states:
"Although the better practice is to keep the affidavit and pleading separate, if plaintiff's pleading contains a statement of every fact
which the statute requires to be shown in the affidavit, and the pleading is verified by affidavit covering every statement therein,
this will be sufficient without a separate affidavit; but in no event can the pleading supply the absence of the affidavit unless all that
the affidavit is required to contain is embodied in the pleading, and the pleading is verified in the form required in the case of a
separate affidavit. (77 CJS 65 cited in Francisco, Rules of Court of the Philippines, Vol. V-A, p. 383)
And similarly, in the case of an attachment which likewise requires an affidavit of merit, the Court held that the absence of an
affidavit of merit is not fatal where the petition itself, which is under oath, recites the circumstances or facts constitutive of the
grounds for the petition.11
The facts that must be set forth in the affidavit of merit are (1) that plaintiff owns the property particularly describing the same, or
that he is entitled to its possession; (2) wrongful detention by defendant of said property; (3) that the property is not taken by virtue
of a tax assessment or fine pursuant to law or seized under execution or attachment or, if it is so seized, that it is exempt from
such seizure; and (4) the actual value of the property.12
But, as correctly taken note of by the Court of Appeals, petitioner's complaint does not allege all the facts that should be
________________
11 Bayog, et al. vs. Natino, et al., 258 SCRA 378, 400.
12 Section 2, Rule 60, Revised Rules of Court; Normal Holdings and Development Corporation vs. Court of Appeals, 194 SCRA
383.
693
VOL. 304, MARCH 17, 1999
693
set forth in an affidavit of merit. Although the complaint alleges that petitioner is entitled to the possession of subject properties by
virtue of the chattel mortgage executed by the private respondent, upon the latter's default on its obligation, and the defendant's
alleged "wrongful detention of the same, the said complaint does not state that subject properties were not taken by virtue of a tax
assessment or fine imposed pursuant to law or seized under execution or attachment or, if they were so seized, that they are
exempt from such seizure.
Then too, petitioner stated the value of subject properties at a "probable value of P200,000.00, more or less. Pertinent rules
require that the affidavit of merit should state the actual value of the property subject of a replevin suit and not just its probable
value. Actual value (or actual market value) means "the price which an article would command in the ordinary course of business,
that is to say, when offered for sale by one willing to sell, but not under compulsion to sell, and purchased by another who is willing
to buy, but under no obligation to purchase it.13 Petitioner alleged that the machineries and equipment involved are valued at
P200,000.00 while respondent denies the same, claiming that per the appraisal report, the market value of the said
properties is P1,710,000.00 and their replacement cost is P2,342,300.00. Petitioner's assertion is belied by the fact that upon
taking possession of the aforesaid properties, it insured the same for P610,593.74 and P450,000.00, separately. t bears stressing
that the actual value of the properties subject of a replevin is required to be stated in the affidavit because such actual value will
be the basis of the replevin bond required to be posted by the plaintiff. Therefore, when the petitioner failed to declare the actual
value of the machineries and equipment subject of the replevin suit, there was non-compliance with Section 2, Rule 60 of the
Revised Rules of Court.
t should be noted, however, that the private respondent interposed the defense of lack of affidavit of merit only in his
_______________
13 Moreno, Federico, Philippine Law Dictionary, (Vera-Reyes, nc., Quezon City), 1972, p. 17.
694
694
Reply to the Comment of Citibank on the Petition for Certiorari which respondent filed with the Court of Appeals. Section 2, Rule 9
of the Revised Rules of Court, provides:
SEC. 2. Defenses and objections not pleaded deemed waived.Defenses and objections not pleaded either in a motion to
dismiss or in the answer are deemed waived; except the failure to state a cause of action which may be alleged in a later
pleading, x x x.
This Rule has been revised and amended, as follows:
SEC. 1. Defenses and objections not pleaded.Defenses and objections not pleaded in a motion to dismiss or in the answer are
deemed waived. However, when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the
subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by a
prior judgment or by statute of limitations, the court shall dismiss the claim.
Thus, although respondent's defense of lack of affidavit of merit is meritorious, procedurally, such a defense is no longer available
for failure to plead the same in the Answer as required by the omnibus motion rule.
Petitioner also faults the Court of Appeals for finding that the bond posted by the petitioner is questionable and/or insufficient. t is
averred that, in compliance with Section 2, Rule 60 requiring the replevin plaintiff to post a bond in double the value of the
properties involved, it filed a bond in the amount of P400,000.00 which is twice the amount of P200,000.00 declared in its
complaint.
The Court reiterates its findings on the second assignment of errors, particularly on the issue of the actual value of subject
properties as against their probable value. Private respondent, at the onset, has put into issue the value of the said
695
VOL. 304, MARCH 17, 1999
695
properties. n the Special Defenses contained in his Answer, private respondent averred:
"That while defendant admits that he executed a Chattel Mortgage in favor of plaintiff, he vigorously denies that the machineries
covered therein are only worth P200,000.00. The fact is that plaintiff knew fully well that said chattels are worth no less than
P1,000,000.00, said defendant having acceded to said valuation upon plaintiff's representation that it would be necessary to
speed up the granting of the loan.
As there was a disagreement on the valuation of the properties in the first place, proper determination of the value of the bond to
be posted by the plaintiff cannot be sufficiently arrived at. Though the rules specifically require that the needed bond be double the
value of the properties, since plaintiff merely denominated a probable value of P200,000.00 and failed to aver the properties'
actual value, which is claimed to be much greater than that declared by plaintiff, the amount of P400,000.00 would indeed be
insufficient as found by the Court of Appeals. The Rules of Court requires the plaintiff to "give a bond, executed to the defendant in
double the value of the property as stated in the affidavit x x x. Hence, the bond should be double the actual value of the
properties involved. n this case, what was posted was merely an amount which was double the probable value as declared by the
plaintiff and, therefore, inadequate should there be a finding that the actual value is actually far greater than P200,000.00. Since
the valuation made by the petitioner has been disputed by the respondent, the lower court should have determined first the actual
value of the properties. t was thus an error for the said court to approve the bond, which was based merely on the probable value
of the properties.
t should be noted that a replevin bond is intended to indemnify the defendant against any loss that he may suffer by reason of its
being compelled to surrender the possession of
696
696
the disputed property pending trial of the action.14 The same may also be answerable for damages if any when judgment is
rendered in favor of the defendant or the party against whom a writ of replevin was issued and such judgment includes the return
of the property to him.15 Thus, the requirement that the bond be double the actual value of the properties litigated upon. Such is
the case because the bond will answer for the actual loss to the plaintiff, which corresponds to the value of the properties sought
to be recovered and for damages, if any.
Petitioner also maintains that, assuming for the sake of argument that its replevin bond was grossly inadequate or insufficient, the
recourse of the respondent should be to post a counterbond or a redelivery bond as provided under Section 5 of Rule 60.
Sections 5 and 6, Rule 60 of the Rules of Court, read:
"SEC. 5. Return of property.f the defendant objects to the sufficiency of the plaintiff's bond, or of the surety or sureties thereon,
he cannot require the return of the property as in this section provided; but if he does not so object, he may, at any time before the
delivery of the property to the plaintiff, if such delivery be adjudged, and for the payment of such sum to him as may be recovered
against the defendant, and by serving a copy of such bond on the plaintiff or his attorney.
SEC. 6. Disposition of property by officer.f within five (5) days after the taking of the property by the officer, the defendant does
not object to the sufficiency of the bond, or of the surety or sureties thereon, or require the return of the property as provided in the
last preceding section; or if the defendant so objects, and the plaintiff's first or new bond is approved; or if the defendant so
requires, and his bond is objected to and found insufficient and he does not forthwith file an approved bond, the property shall be
delivered to the plaintiff, the officer must return it to the defendant.
______________
14 Alim vs. Court of Appeals, 200 SCRA 450, 458; Sapugay, et al. vs. Court of Appeals, et al., G.R. No. 86792, March 21, 1990.
15 Stronghold nsurance Co. vs. Court of Appeals, 179 SCRA 117.
697
VOL. 304, MARCH 17, 1999
697
The Court held in a prior case16 that the remedies provided under Section 5, Rule 60, are alternative remedies. "x x x f a
defendant in a replevin action wishes to have the property taken by the sheriff restored to him, he should, within five days from
such taking, (1) post a counter-bond in double the value of said property, and (2) serve plaintiff with a copy thereof, both
requirementsas well as compliance therewith within the five-day period mentionedbeing mandatory.17 This course of action
is available to the defendant for as long as he does not object to the sufficiency of the plaintiff's bond.
Conformably, a defendant in a replevin suit may demand the return of possession of the property replevined by filing a redelivery
bond executed to the plaintiff in double the value of the property as stated in the plaintiff's affidavit within the period specified in
Sections 5 and 6.
Alternatively, "the defendant may object to the sufficiency of the plaintiff's bond, or of the surety or sureties thereon; but if he does
so, "he cannot require the return of the property by posting a counter-bond pursuant to Sections 5 and 6.18
n the case under consideration, the private respondent did not opt to cause redelivery of the properties to him by filing a counter-
bond precisely because he objected to the sufficiency of the bond posted by plaintiff. Therefore, he need not file a counter-bond or
redelivery bond. When such objection was not given due course in the court belowwhen, instead of requiring the plaintiff to post
a new bond, the court approved the bond in the amount of P400,000.00, claimed by respondent to be insufficient, and ordered the
seizure of the propertiesrecourse to a petition for certiorari before the Court of Appeals assailing such order is proper under the
circumstances.
_______________
16 La Tondea Distillers, nc. vs. Court of Appeals, 209 SCRA 553.
17 La Tondea, id.; Ong vs. ntermediate Appellate Court, 201 SCRA 543; Chan vs. Villanueva, etc., et al., April 30, 1952; Case
and Nantz vs. Jugo, et al., 77 Phil. 517; Bachrach Motor Co., nc. vs. Albert, 60 Phil. 308.
18 La Tondea, supra.
698
698
V
As its fourth assignment of errors, petitioner contends that the Court of Appeals made an error of judgment in finding that the
petitioner did not comply with the provisions of Section 5, Rule 59 by failing to post a receiver's bond. Petitioner contends that
although it is in agreement with the Court of Appeals that a receiver's bond is separate and distinct from a replevin bond, under
the circumstances it was not required to file a receiver's bond because it did not assume
receivership over the properties. t is further argued that assuming that it did assume receivership, the Chattel Mortgage
expressly provides, that:
"n case the MORTGAGEE institutes proceedings, judicially or otherwise, for the foreclosure of this Chattel Mortgage, or to
enforce any of its rights hereunder, the MORTGAGEE shall be entitled as a matter of right to the appointment of a receiver,
without bond, of the mortgaged properties and of such other properties, real or personal, claims and rights of the MORTGAGOR
as shall be necessary or proper to enable the said receiver to properly control and dispose of the mortgaged properties.19
The order of the trial court dated March 24, 1975 provided, among others, that the properties shall be under joint management for
a period of ten days, after which period "the bank, by virtue of the stipulations under the chattel mortgage, becomes the Receiver
to perform all the obligations as such Receiver and "in the event that the bank decides not to take over the receivership, the joint
management continues.20
From the evidence on record, it is palpably clear that petitioner Citibank did, in fact, assume receivership. A letter21 dated April 1,
1975 sent by petitioner to the private respondent, reads:
_______________
19 Annex "B, Rollo, p. 35.
20 Rollo, p. 22.
21 Annex "4, Rollo, p. 142.
699
VOL. 304, MARCH 17, 1999
699
April 1, 1975
Anama Engineering Service Group
114 R. Lagmay Street
San Juan, Rizal
Attention: Mr. Douglas Anama
Gentlemen:
Pursuant to the Court order, we have decided to take over your machine shop as Receiver.
We are hereby appointing Mr. Artemio T. Gonzales as our representative.
Very truly yours,
FRST NATONAL CTY BANK
By:
P.R. REAL, JR.
Assistant Manager
Petitioner cannot therefore deny that nine days after the trial court issued the order of receivership, it informed the private
respondent that it would, as it did, assume receivership.
The Court of Appeals found that the requirements of Section 5, Rule 59 on receivership were not complied with by the petitioner,
particularly the filing or posting of a bond and the taking of an oath.
t should be noted that under the old Rules of Court which was in effect at the time this case was still at trial stage, a bond for the
appointment of a receiver was not generally required of the applicant, except when the application was made ex parte.22
Therefore, petitioner was not absolutely required to file a bond. Besides, as stipulated in the chattel mortgage contract between
the parties, petitioner, as the mortgagee, is entitled to the appointment of a receiver without a bond.
______________
22 Regalado, Florenz, Remedial Law Compendium, Volume , pp. 663-664 (Under the new rules, a bond shall always be required
from the applicant.)
700
700
However, the Court of Appeals was right in finding a defect in such assumption of receivership in that the requirement of taking an
oath has not been complied with. Section 5, Rule 59, states:
"SEC. 5. Oath and bond of receiver.Before entering upon his duties, the receiver must be sworn to perform them faithfully, and
must file a bond, executed to such person and in such sum as the court or judge may direct, to the effect that he will faithfully
discharge the duties of receiver in the action and obey the orders of the court therein.
Consequently, the trial court erred in allowing the petitioner to assume receivership over the machine shop of private respondent
without requiring the appointed receiver to take an oath.
V
n light of the foregoing, the answer to the fifth assignment of error is in the negative. For erroneously issuing the alias writ of
seizure without inquiring into the sufficiency of the replevin bond and for allowing petitioner to assume receivership without the
requisite oath, the Court of Appeals aptly held that the trial court acted with grave abuse of discretion in dealing with the situation.
Under the Revised Rules of Court, the property seized under a writ of replevin is not to be delivered immediately to the plaintiff.23
This is because a possessor has every right to be respected in its possession and may not be deprived of it without due
process.24
As enunciated by this Court in the case of Filinvest Credit Corporation vs. Court of Appeals,25
________________
23 Sebastian vs. Valino, 224 SCRA 256.
24 Viloria vs. Puno, etc., et al., 95 Phil. 802; Rodriguez vs. Tio, 16 Phil. 301; Maglasang vs. Maceren, et al., 46 O.G. No. 11, 90.
25 248 SCRA 549.
701
VOL. 304, MARCH 17, 1999
701
"The reason why the law does not allow the creditor to possess himself of the mortgaged property with violence and against the
will of the debtor is to be found in the fact that the creditor's right of possession is conditioned upon the fact of default, and the
existence of this fact may naturally be the subject of controversy. The debtor, for instance, may claim in good faith, and rightly or
wrongly, that the debt is paid, or that for some other reason the alleged default is nonexistent. His possession in this situation is as
fully entitled to protection as that of any other person, and in the language of Article 446 of the Civil Code, he must be respected
therein. To allow the creditor to seize the property against the will of the debtor would make the former to a certain extent both
judge and executioner in his own causea thing which is inadmissible in the absence of unequivocal agreement in the contract
itself or express provision to the effect in the statute.
WHEREFORE, for lack of merit, the petition is hereby DSMSSED. No pronouncement as to costs.
SO ORDERED.
Romero (Chairman), Vitug, Panganiban and Gonzaga-Reyes, JJ., concur.
Petition dismissed.
Note.Under the Rules of Court, it is indispensable in replevin proceeding that the plaintiff must show by his own affidavit that he
is entitled to the possession of property, that the property is wrongfully detained by the defendant, alleging the cause of detention,
that the same has not been taken for tax assessment, or seized under execution, or attachment, or if so seized, that it is exempt
from such seizure, and the actual value of the property. (Paat vs. Court of Appeals, 266 SCRA 167 [1997]) [Citibank, N.A. vs.
Court of Appeals, 304 SCRA 679(1999)]
[No. 25231. A9?9,t 12, 1926]
SE#AS"IANA MAR"INE. E" A., p%&'(t')), &(* &ppe%%ee,, +,. CEMENCIA GRAO E" A., *e)e(*&(t, &(* &ppe%%ee,I
ES"ANISAO RE=ES, re0e'+er &(* &ppe%%&(t.
RECEVERS; ASSERTON OF ADVERSE NTEREST OVER RECEVERSHP PROPERTY BY RECEVER; REMOVAL OF
RECEVER.A receiver who asserts ownership over the property in his hands as receiver and refuses to submit any account of
the financial status of said property should be removed by the court having charge of the receivership.
APPEAL from an order of the Court of First nstance of Laguna. Paredes, J.
Camus, Delgado & Recto and R. Nepomuceno for appellant.
Sebastian G. Pamatmat for plaintiffs and appellees.
Florencio Manalo for defendants -and appellees.
215
VOL. 49, AUGUST 14, 1926
215
Martinez vs. Grao
STREET, J.:
This appeal is prosecuted by Estanislao Reyes from an order of Judge sidro Paredes dated October 9, 1925, dissolving the
receivership over the property in litigation and directing that said property, theretof ore in the hands of the appellant as receiver,
should be delivered to the parties in interest. The facts appearing of record are voluminous, but the record has already been
before the court upon three prior appeals. n this decision therefore only such facts will be discussed as are appurtenant to the
point, or points, at issue.
t appears that the appellant was appointed receiver and entered into possession of the property in controversy in January, 1921.
During the period that immediately followed the property in his hands did not produce enough income to meet the expenses and
pay the sums due the holder of first mortgage, El Hogar Filipino. For this reason the receiver recommended to the court that the
property be sold; and on January 25, 1922, Judge Paredes made an order authorizing the receiver to sell the land at an upset
price of P38,000, subject to the approval of the court, the proceeds of the sale to be deposited in the clerk's office to abide the
result of the litigation. On May 27, 1922, Judge Borbon renewed this authority upon about the same conditions but with the upset
price fixed at P35,000. On August 19, 1922, the same authority was again expressed by Judge Borbon.
The receiver meanwhile had reported his inability to find a purchaser, and he himself came forward with an offer to take the
property at P35,138.49, it being understood that he would assume all obligations encumbering the property, the amount of which
was to be deducted from the amount of his bid. On August 25, 1922, an order was passed by Judge Borbon authorizing the clerk
of the court to execute a deed transferring the property to Reyes for the sum mentioned, excluding (for reasons not necessary to
be specified) a particular piece of land containing a
216
216
Martinez vs. Grao
thousand coconut trees, it being understood, so the order runs, "that the purchaser, Estanislao Reyes, makes himself responsible
for and assumes the obligation and the duty to pay all debts and obligations encumbering the property sold." The Martinez heirs
opposed the sale and attempted, though ineffectually, to bring the order referred to to this court upon appeal. Clemencia Grao
was also an opponent of the sale because of the inclusion therein of three parcels of property which belonged to her, and she
successfully prosecuted an appeal to this court. When the cause reached us upon the appeal of Clemencia Grao, a decision was
here promulgated on February 28, 1923,1 containing among other features the f ollowing paragraph:
"t results that the said three parcels must be excluded from the sale made to Estanislao Reyes; and the order of July 15, 1922,
with reference to said parcels must be modified to this extent; and a necessary consequence will be that the purchaser, Estanislao
Reyes, should be allowed a reduction in the price offered by him, in an amount proportionate to the value of the lands thus to be
excluded. With said parcels excluded, and proportionate abatement made as indicated, the sale should be approved."
t will be noted that upon the appeal mentioned this court had under consideration merely the question of the propriety of including
Grao's three parcels in the sale, there being no appeal by the Martinez heirs against the sale as a whole. n ordering the
exclusion of Grao's land we stated that, with this exclusion and a proportional abatement of the purchase price to Reyes, "the
sale should be approved." This order treats the sale to Reyes as in every respect valid and indicates that the sale should be
approved.
Accordingly, when the record was returned to the lower court, Reyes submitted a motion to the court on April 4, 1923, asking that
he be declared owner of the property. n response to this request Judge Paredes, instead of declaring the sale approved, entered
an order on July 20,
_______________
1 Martinez vs. Grao, G. R. No. 19864, not reported
217
VOL. 49, AUGUST 14, 1926
217
Martinez vs. Grao
1923, among other things declaring that the sale was a nullity. n disposing of this point his Honor made the following observation:
"As regards the other parcels of land ordered sold in the orders appealed from, also had to deny the motion for the reason that
the sale of the same was not made in conformity with, but in direct violation of, the condition imposed by the court. The condition
was that the bidder was bound to turn over to the clerk of the court the amount of the sale at the disposal of the court, before the
issuance of the deed in his favor; but an examination of the deed of sale executed by said officer shows that the amount of the
sale has not been turned over to the clerk of the court. For that reason the sale of said parcels of land is null, void and without
legal effect. This deed, according to the order of the court, should not have been executed until after the amount of the sale had
been turned over to the clerk of the court."
t will be noted that his Honor in effect here decreed a resolution of the sale for non-performance of the conditions of the sale. This
order contained other features affecting Reyes' right as against Grao, and Reyes' attorneys attempted to bring the cause on
appeal to this court to review the order as it affected both the Martinez heirs and Grao. No notice of the intention to appeal,
however, was served upon the Martinez heirs, with the result that when the bill of exceptions came to this court, a motion was
made by the Martinez heirs to have the appeal dismissed. Upon this the attorneys for Reyes came into court and replied by
demonstrating that the appeal then being prosecuted by Reyes involved only the three parcels of land which had in a previous
decision been declared by this court to belong to Clemencia Grao. Upon this assurance the court denied the motion of the
Martinez heirs to dismiss the appeal, it thus appearing that said Martinez heirs were not interested in the matter in controversy so
far as here involved. (See decision of this court promul-
218
218
Martinez vs. Grao
gated March 24, 1924, in Martinez vs. Reyes, G. R. No. 21618.) 1 t will be seen therefore that the order of Judge Paredes of July
24, 1923, nullifying and resolving the sale of the receivership property to Reyes, was never effectually appealed from, and the
conclusion irresistibly follows that the order of Judge Paredes upon the point mentioned has acquired the character of a final and
irrepealable order. n our decision last above referred to the following paragraph was inserted near the close of the opinion:
"n order to contribute something to clarify a situation which has tended to become complex, we will say that the effect of the
appealed decision was to declare that Estanislao Reyes had not complied with the conditions requisite to enable him to become a
purchaser of the property of which he is receiver, and this has the inevitable effect of eliminating him in the character of purchaser.
t will, therefore, be the duty of the lower court to deal with him hereafter exclusively in the character of receiver and to hold him
responsible in that character only."
The attorneys for Reyes immediately protested against this paragraph and asked the court to strike it from the decision as a mere
dictum. n reply to motion to this effect, the court declared ineffectual so much of the decision as was mere dictum.
We have no hesitation in saying that the paragraph last above quoted can be taken as dictum, and it shows on its face that it was
not intended to express a dispositive feature of the case. Nevertheless it is true that the paragraph quoted expressed the truth and
that truth remains precisely now as when the paragraph was written.
Notwithstanding the declaration of nullity made by Judge Paredes and the observation of this court pointing out that Reyes could
no longer be treated in any other character than that of receiver, he has continuously pretended to be the owner of the property by
virtue of the purchase referred to, and he has refused to submit any account of his
_______________
1 Not reported.
219
VOL. 49, AUGUST 14, 1926
219
Martinez vs. Grao
receivership in the. subsequent years. n view of this attitude on the part of the appellant, a number of motions were made by
adverse parties seeking to bring him to account and to have him removed from the office of receiver, with the result that on
October 9, 1925, Judge Paredes entered an order of which the following is the dispositive portion:
"Therefore, the motion is granted and the appointment of Estanislao Reyes as receiver is revoked, annulled and adjuged to be of
no effect from this date, without prejudice to the rendering of an account within the period of fifteen days from the notification
hereof; and he is ordered to deliver immediately to the parties herein
all of the property, in its present condition, which may have come into his possession by reason of having been appointed
receiver. t is understood that this is without prejudice to the execution of the aforesaid judgment of the Supreme Court as soon as
the parties, or any one of them, should request it. So ordered."
There cannot be the slightest doubt of the power of the lower court to remove a receiver and terminate a receivership under
section 180 of the Code of Civil Procedure; and in view of the attitude of the appellant, the impropriety of his longer remaining in
office is apparent.
But it is claimed by the appellant that he has made expenditures necessary to the care and conservation of the property over and
above the proceeds obtained from the coconuts produced by the land comprised in the receivership; and it is contended that the
lower court had no power to turn him out at least as long as the expenditures made by him have not been reimbursed. This
contention seems to us to come with bad grace from a receiver whose attitude about the receivership property has been such as
that exhibited by the appellant, and particularly in the light of his refusal to render any account of the income from the property in
his possession. The contents of the voluminous record which we have examined carefully and
220
220
People vs. Ranario and Caday
the history of the proceedings afford much material for unfavorable comment upon the attitude of the appellant, but inasmuch as
the case turns in the end upon the efficacy of Judge Paredes' order declaring the sale a nullity, any comment is unnecessary.
The court, however, is of the opinion that if upon the prompt submission and examination of the receiver's accounts, it should be
found that he has actually paid out for the conservation and protection of the property which is the subject of the receivership more
than he has received by way of income, or should have received in the exercise of reasonable diligence, such balance in his favor
should be recognized as a lawful claim constituting a lien on the property.
The order appealed from will therefore be affirmed with the sole modification that the appellant is given forty (40) days from the
date of the return of this record to the lower court within which to submit his accounts as receiver, upon the filing of which the
adverse parties will be notified in order that they may controvert the same if they see fit; and the cause is remanded for further
proceedings. So ordered, with costs against the appellant.
Avancea, C. J., Ostrand, Johns, and Villa-Real, JJ., concur.
Romualdez, J., reserves his vote.
Order modified. [Martinez vs. Grao, 49 Phil. 214(1926)]
[No. 29031.>A9?9,t 24, 1922]
/o,e P%&to( &(* Rom&( C&,t'%%o, pet't'o(er,, +,. 3o(. C%&9*'o S&(*o+&%, '( C', 0&p&0't: &, /9*?e, Co9rt o) $'r,t I(,t&(0e
o) &?9(&, &(* I(e, M&'%om, re,po(*e(t,.
1.Certiorari and Mandamus; Receivers, Discharge of. The property in litigation and under receivership belongs to the
intestateestate of the deceased S.M., deceased wife of the petitioner R.C. The defendant A.C., who is not an heir of said
deceased, does not claim ownership of said property and has signed his conformity to the discharge of the receiver. And the heirs
of said deceased have agreed upon the partition of said property with the approval of the probate court. t seems clear, therefore,
that the declaration of the respondent judge that there was no longer any necessity for the continuation of the receivership was
well founded. n any event, it cannot be said that the respondent judge exceeded his jurisdiction or abused his discretion in
making such a finding.
732
732 PHLPPNE REPORTS ANNOTATED
Platon and Castillo vs. Sandoval
2.d.; Receivers as Officers of the Court.Furthermore, the receiver, being an officer of the court and not the agent or repre-
sentative of either party, has no legal interest or standing to question the court's determination that the necessity for the
continuation of the receivership has ceased to exist.
3.d.; d.; Judgments.An order discharging a receiver and terminating the receivership is interlocutory and not appealable.
ORGNAL ACTON in the Supreme Court. Certiorari and mandamus.
Avelino & Yatco for petitioners.
Galo Al. Acua and T. G. de Castro for respondents.
Ozaeta,J.:
This is an original petition for certiorari and mandamus to annul an order issued by the respondent judge whereby the receiver
appointed in civil case No. 7385 of the Court of First nstance of Laguna, entitled "nes Mailom vs. Antonino Castillo and Roman
Castillo," was discharged, and to compel the respondent judge to approve the appeal of said receiver from said order.
t appears that said civil case was instituted by nes Mailom, one of the heirs of the deceased Servanda Mailom, to annul the sale
of certain parcels of land made by the spouses Roman Castillo and Servanda Mailom (previous to the death of the latter) in favor
of Antonino Castillo, a brother of Roman. After the death of Servanda Mailom, her husband Roman. Castillo was appointed
administrator of the estate left by her. The herein petitioner Jose Platon was appointed receiver of the property in litigation in said
civil case No. 7385 at the instance of the plaintiff (now respondent) nes Mailom.
t was also nes Mailom who, through cier attorney, moved the court on November 11, 1942, to discharge the receiver on the
ground that there was no more necessity for the continuation of the receivership inasmuch as the defendant Antonino Castillo had
renounced his claim to said property in a stipulation of facts submitted to the court on November
733
VOL. 74, AUGUST 28, 1944 733
25, 1940, and the heirs of the deceased Servanda Mailom, including the administrator Roman Castillo, had submitted a project of
partition in the intestate proceedings of the deceased Servanda Mailom, case No. 3148 of said court, which projectof partition had
been approved by the court. Upon such allegations, which the court found to be true, the respondent judge granted the motion,
discharging the receiver and ordering him to deliver the properties under receivership to the persons entitled to receive the same
in accordance with the project of partition aforementioned.
The receiver Jose Platon filed a motion to set aside said order on the grounds (1) that he had not been notified of the motion upon
which the same was issued; (2) that the case in which he was appointed receiver was still pending decision by Judge Proceso
Sebastian; (3) that in the event Antonino Castillo wins the case, the receiver has to deliver to him the properties, thereby rendering
the project of partition useless and of no value; and (4) that irregularities were committed by Attorney Acufia for the plaintiff and the
heirs of Servanda Mailom regarding the disposition of the properties in question after the approval of the project of partition. n a
memorandum submitted by the attorney for the receiver Jose Platon in support of said motion, said attorney, who also represents
the defendant-administrator Roman Castillo, said that the latter joins the receiver in said motion and makes it his own.
After hearing both parties upon said motion to set aside the order discharging the receiver, the respondent judge reaffirmed his
finding that there was no necessity for the continuation of the receivership and denied said motion. Thereupon the receiver filed a
notice of appeal from said order and tendered a record on appeal which the respondent judge disapproved on the ground that the
order was interlocutory and not appealable.
With regard to the order discharging the receiver and terminating the receivership, we find no excess of jurisdiction nor grave
abuse of discretion on the part'of the respondent judge. The property in litigation and under receiver-
734
734 PHLPPNE REPORTS ANNOTATED
ship belongs to the intestate estate of the deceased Servanda Mailom, deceased wife of the petitioner Roman Castillo. The
defendant Antonino Castillo, who is not an heir of said deceased, does not claim ownership of said property and has signed his
conformity to the discharge of the receiver. And the heirs of said deceased have agreed upon the partition of said property'with the
approval of the probate court. t seems clear, therefore, that the declaration of the respondent judge that there was no longer any
necessity for the continuation of the receivership was well founded. n any event, it cannot be said that the respondent judge
exceeded his jurisdiction or abused his discretion in making such a finding. Furthermore, the receiver, being an officer of the court
and not the agent or representative of either party to the action, has no legal interest or standing to question the court's
determination that the necessity for the continuation of the receivership has ceased to exist.
t is immaterial to decide now whether the receiver was entitled to be heard on the original motion to discharge him, for the reason
that he was actually heard in the premises when thru his attorney he filed a motion for reconsideration.
With regard to the approval of the record on appeal, we agree with the respondent judge that the order sought to be appealed
from is interlocutory, and hence mandamus does not lie to compel him to approve and certify the record on appeal. As a matter of
fact, certiorari to annul an order and mandamus to approve an appeal from said order are inconsistent remedies. The first is
predicated on the theory that the second is unavailable. Having decided to. pass upon the petition for certiorari on the merits, we
cannot consistently compel the approval of an appeal from the same order which was the object of the certiorari proceeding.
The petition is denied and the orders assailed are affirmed, with costs against the petitioners.
Yulo, C.J., Moran, Horrilleno, and Paras, JJ. concur.
Petition denied; orders affirmed. [Platon and Castillo vs. Sandoval, 74 Phil., 731(1944)]
G.R. No. 126313. O0tober 31, 2006.<
$ORENCIO OREN!AIN, pet't'o(er, +,. #$ 3OMES, INC., re,po(*e(t.
Actions; Jurisdictions; Jurisdiction over the subject matter is conferred by lawthe nature of an action, as well as which court or
body has jurisdiction over it, is determined based on the allegations contained in the complaint of the plaintiff, irrespective of
whether or not plaintiff is entitled to recover upon all or some of the claims asserted therein.n Speed Distributing Corp. v. Court
of Appeals, 425 SCRA 691 (2004), we held that: Jurisdiction over the subject matter is conferred by law. The nature of an action,
as well as which court or body has jurisdiction over it, is determined based on the allegations contained in the complaint of the
plaintiff, irrespective of whether or not plaintiff is entitled to recover upon all or some of the claims asserted therein. t cannot
depend on the defenses set forth in the answer, in a motion to dismiss, or in a motion for reconsideration by the defendant
(citations omitted). n the case at bench, the BF Homes' Complaint for reconveyance was filed on January 23, 1996 against
LSFSP and Florencio B. Orendain, in Civil Case No. LP96-002.
Same; Same; The better policy in determining which body has jurisdiction over a case would be to consider not only [1] the status
or relationship of the parties but also [2] the nature of the question that is the subject of the controversy.The controversy
involves matters purely civil in character and is beyond the ambit of the limited jurisdiction of the SEC. As held in Viray v. Court of
Appeals, 191 SCRA 308 (1990), "[t]he better policy in determining which body has jurisdiction over a case would be to consider
not only [1] the status or relationship of the parties but also [2] the nature of the question that is the subject of their controversy.
Same; Same; Corporation Law; Civil Law; The determination of the validity of the sale to LSFSP will necessitate the application
of the provisions of the Civil Code on obligations and contracts, agency, and other pertinent provisions.Section 5 of PD No. 902-
A
_______________
* THRD DVSON.
349
VOL. 506, OCTOBER 31, 2006
349
Orendain vs. BF Homes, nc.
does not apply in the instant case. The LSFSP is neither an officer nor a stockholder of BF Homes, and this case does not
involve intracorporate proceedings. n addition, the seller, petitioner Orendain, is being sued in his individual capacity for the
unauthorized sale of the property in controversy. Hence, we find no cogent reason to sustain petitioner's manifestation that the
resolution of the instant controversy depends on the ratification by the SEC of the acts of its agent or the receiver because the act
of Orendain was allegedly not within the scope of his authority as receiver. Furthermore, the determination of the validity of the
sale to LSFSP will necessitate the application of the provisions of the Civil Code on obligations and contracts, agency, and other
pertinent provisions.
Same; Same; Jurisdiction over the case for reconveyance is clearly vested in the Regional Trial Courts as provided in paragraph
(2), Section 19, B.P. Blg. 129.Jurisdiction over the case for reconveyance is clearly vested in the RTC as provided in paragraph
(2), Section 19, B.P. Blg. 129, to wit: Jurisdiction in civil cases.Regional Trial Courts shall exercise exclusive [and] original
jurisdiction (1) n all civil actions in which the subject of the litigation is incapable of pecuniary estimation; and (2) n all civil actions
which involve the title to, or possession of, real property or any interest therein, where the assessed value of the property involved
exceeds Twenty Thousand pesos (P20,000.00) or for civil actions in Metro Manila, where such value exceeds Fifty Thousand
pesos (P50,000.00) x x x
Judgments; Res Judicata; There are two (2) aspects of the doctrine of res judicata: the first is known as "bar by prior judgment, is
the effect of a judgment as a bar to the prosecution of a second action upon the same claim, demand or cause of actionthe
second, known as "conclusiveness of judgment, issues actually and directly resolved in a former suit cannot again be raised in
any future case between the same parties involving a different cause of action.There are two (2) aspects to the doctrine of res
judicata: The first, known as "bar by prior judgment, is the effect of a judgment as a bar to the prosecution of a second action
upon the same claim, demand or cause of action. The second, known as "conclusiveness of judgment, issues actually and
directly resolved in a former suit cannot again be raised in any future case between the same parties involving a different cause of
action. A case is barred by prior judgment when the follow-
350
350
ing requisites are present: "(1) the former judgment is final; (2) it is rendered by a court having jurisdiction over the subject matter
and the parties; (3) it is a judgment or an order on the merits; and (4) there isbetween the first and second actionsidentity of
parties, of subject matter, and causes of action.
Same; Same; A judgment is "on the merits when it amounts to a legal declaration of the respective rights and duties of the parties
based upon the disclosed facts.While the said SEC order denied the motion for intervention filed by intervenor Eduardo S.
Rodriguez, it did not, however, resolve the issues raised in the motion on the merits. A judgment is "on the merits when it amounts
to a legal declaration of the respective rights and duties of the parties based upon the disclosed facts (emphasis supplied and
citation omitted). t is apparent that the SEC order in question merely acknowledged the Closing Report for inclusion in the
records of the case. t did not, however, pass upon the merits and veracity of the report's contents. As such, it cannot, in any wise,
be considered as an adjudication of the rights and obligations of the parties relating to the subject matter of the action.
Same; Same; "Conclusiveness of judgment may operate to bar the second case even if there is no identity of causes of action
the judgment is conclusive in the second case, only as to those matters actually and directly controverted and determined, and not
as to matters merely involved therein.The second type of res judicata is "conclusiveness of judgment. n Francisco v. Co, 481
SCRA 241 (2006), this Court elucidated the nature of this principle, thus: "Conclusiveness of judgment operates as a bar even if
there is no identity as between the first and second causes of judgment. Under the doctrine, any right, fact, or matter in issue
directly adjudicated or necessarily involved in the determination of an action before a competent court in which judgment is
rendered on the merits is conclusively settled by the judgment therein and cannot again be litigated between the parties and their
privies whether or not the claim, demand, purpose, or subject matter of the two actions is the same. Evidently, "conclusiveness of
judgment may operate to bar the second case even if there is no identity of causes of action. The judgment is conclusive in the
second case, only as to those matters actually and directly controverted and determined, and not as to matters merely involved
therein.
351
VOL. 506, OCTOBER 31, 2006
351
Same; Same; One of the general powers of a receiver under Rule 59, Section 6 of the Rules of Court is the power to bring and
defend suits in such capacity.Petitioner argues that the Committee of Receivers should have sought prior clearance from the
SEC before instituting the action for reconveyance before the RTC, because it does not have the legal capacity to sue. This is
incorrect. One of the general powers of a receiver under Rule 59, Section 6 of the Rules of Court is the power to bring and defend
suits in such capacity.
Actions; Receivership; The reason behind Rule 59, Section 6, which requires leave of court for all suits by or against the present
receiver, is to forestall any undue interference with the receiver's performance of duties through improvident suits.The rule talks
of the current receiver of the company and not the previous receiver like petitioner Orendain. The reason behind Rule 59, Section
6, which requires leave of court for all suits by or against the present receiver, is to forestall any undue interference with the
receiver's performance of duties through improvident suits. Apparently, such situation cannot apply to Orendain who is no longer
BF Homes' receiver.
Same; Same; Section 5.2 of RA 8799 transferred exclusive and original jurisdiction of the SEC over actions involving intra-
corporate controversies to the courts of general jurisdiction or the appropriate Regional Trial Courts.Section 5.2 of RA 8799
transferred exclusive and original jurisdiction of the SEC over actions involving intracorporate controversies to the courts of
general jurisdiction or the appropriate RTC. n the transition, all intra-corporate cases pending in the SEC, which were not ripe for
adjudication as of August 8, 2000, were turned over to the RTC. Congress thereby recognized the expertise and competence of
the RTC to take cognizance of and resolve cases involving intra-corporate controversies. Thus, "whether or not the issue is intra-
corporate, it is now the [RTC] and no longer the SEC that takes cognizance of [and resolves cases involving intracorporate
controversies].
Corporation Law; Securities and Exchange Commission (SEC); Regional Trial Courts (RTC); Jurisdictions; t is unequivocal that
the jurisdiction to try and decide cases originally assigned to the SEC under Section 5 of PD 902-A has been transferred to the
Regional Trial Courts.t is unequivocal that the jurisdiction to try and decide cases originally
assigned to the SEC under Section 5 of PD
352
352
902-A has been transferred to the RTC. For clarity, we quote those cases under Section 5, PD 902-A, which now fall within the
RTC's jurisdiction, as follows: (a) Devices or schemes employed by or any acts of the board of directors, business associates, its
officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or
stockholders, partners, members of associations registered with the Commission; (b) Controversies arising out of intra-corporate
or partnership relations, between and among stockholders, members, or associates; between any or all of them and the
corporation, partnership or association and the State insofar as it concerns their individual franchise or right as such entity; (c)
Controversies in the election or appointment of directors, trustees, officers or managers of such corporations, partnerships, or
associations; (d) Petitioners of corporations, partnerships or associations to be declared in the state of suspension of payment in
cases where the corporation, partnership or association possesses sufficient property to cover all its debts but foresees the
impossibility of meeting them when they fall due or in cases where the corporation, partnership or association has no sufficient
assets to cover its liabilities but is under the management of a rehabilitation receiver or management committee created pursuant
to this Decree.
Same; Same; Same; Same; The SEC retained its administrative, regulatory, and oversight powers over all corporations,
partnerships, and associations who are grantees of primary franchises, and/or a license or permit issued by the Government.
Juxtaposing the jurisdiction of the RTC under RA 8799 and the powers that were retained by the SEC, it is clear that the SEC
retained its administrative, regulatory, and oversight powers over all corporations, partnerships, and associations who are
grantees of primary franchises, and/or a license or permit issued by the Government. However, the Securities Regulations Code
(SRC) is clear that when there is a controversy arising out of intra-corporate relations, between and among stockholders,
members or associates, and between, any, or all of them and the corporation, it is the RTC, not SEC, which has jurisdiction over
the case.
Same; Same; Same; Same; A cause of action involving a delict or wrongful act or omission committed by a party in violation of the
primary right of another, or an actual controversy involving rights which are legally demandable or enforceable, the jurisdiction
over
353
VOL. 506, OCTOBER 31, 2006
353
this complaint is lodged with the RTC and not with the SEC.When the complaint involves "an active antagonistic assertion of a
legal right on one side and a denial thereof on the other concerning a real, and not a mere theoretical question or issue, a cause
of action involving a delict or wrongful act or omission committed by a party in violation of the primary right of another, or an actual
controversy involving rights which are legally demandable or enforceable, the jurisdiction over this complaint is lodged with the
RTC and not the SEC.
PETTON for review on certiorari of the decision and resolution of the Court of Appeals.
Alampay, Gatchalian, Mawis & Alampay for petitioner.
Antonio R. Bautista & Partners and Reyes, mbong & Associates Law Offices for respondent BF Homes, nc.
VELASCO, JR., J.:
Before us is a Petition for Review on Certiorari praying for the reversal of the August 18, 2000 Decision and December 6, 2000
Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 48263 entitled Florencio B. Orendain v. Hon. Alfredo R. Enriquez,
Presiding Judge of RTC-Br. 275, Las Pias, and BF Homes, nc., which affirmed the December 4, 1996 and April 22, 1998 Orders
of the Las Pias RTC finding that said court, not SEC, has jurisdiction over Civil Case No. LP-96-0022 for reconveyance of the lot
covered by TCT No. T-36482 to respondent BF Homes, nc. ('BF Homes' for brevity).
BF Homes, nc. is a domestic corporation operating under Philippine laws and organized primarily to develop and sell residential
lots and houses and other related realty business.1
Records show that respondent BF Homes had to avail itself of financial assistance from various sources to enable it to buy
_______________
1 CA Rollo, pp. 63 & 227.
354
354
properties and convert them into residential subdivisions. This resulted in its incurring liabilities amounting to PhP
1,542,805,068.232 as of July 31, 1984. On the other hand, during its business operations, it was able to acquire properties and
assets worth PhP 2,482,843,358.81 as of July 31, 1984, which, if liquidated, were more than enough to pay all its creditors.3
Despite its solvent status, respondent filed a Petition for Rehabilitation and for Declaration in a State of Suspension of Payments
under Section 4 of PD No. 1758 before the Securities and Exchange Commission (SEC) because of the following:
(a) the predatory acts of the Central Bank of trying to take over Banco Filipino and hand it cheap to its unidentified principal and its
buyer financing facility with Banco Filipino has been suspended such that it cannot now consummate its sales transactions
necessary for it to generate cash to service and/or liquidate its various maturing obligations;
(b) the libelous [circulars] made by the Central Bank to banks under its supervision that its deposit accounts and other
transactions with them were being examined such that the creditors of [BF Homes] have [begun] insisting on full liquidation under
pain of foreclosure of their notes x x x; and
(c) the [liquidation] of [BF Homes'] assets cannot be made in such a short time as demanded by its creditors.4
n the said petition, respondent prayed thatin the meantime it was continuing its business operationsit be afforded time to pay
its aforesaid obligations, freed from various proceedings either judicially or extrajudicially against its assets and properties. Also,
respondent highlighted the importance of and prayed for a Rehabilitation Receiver in the petition.
_______________
2 Taken from the February 2, 1988 SEC Order, Records, pp. 86106, at p. 86.
3 Supra note 1, at pp. 63-64.
4 d., at p. 64.
355
VOL. 506, OCTOBER 31, 2006
355
Such receiver, according to respondent, was "imperative to oversee the management and operations of [BF Homes] so that its
business may not be paralyzed and the interest of the creditors may not be prejudiced. t further argued that "rehabilitation [was]
feasible and imperative because otherwise, in view of the extent of its involvement in the shelter program of the government and
in the nation's home mortgage insurance system, which has a secured coverage for at least P900 M of [BF Homes'] P1.5 B
liabilities, not only [the] creditors, [buyers, and stockholders] of the petitioner corporation may suffer but the public as well.5
n SEC Case No. 2693, the SEC subsequently issued its March 18, 1985 Order which stated:
"WHEREFORE, in the interest of the parties-litigants, as well as the general public, and in order to prevent [paralyzation] of
business operation[s] of the B.F. Homes, nc., a Management Committee is hereby created composed of:
1. Atty. Florencio Orendain as Chairman
2. Representative of B.F. Homes, nc.member
3. Representative of Home Financing Commissionmember
4. Two (2) representatives from the major creditorsmembers
x x x x
Accordingly, with the creation of the Management Committee, all actions for claims against B.F. Homes, nc. pending before the
court, tribunal, board or body are hereby deemed suspended.6
Thereafter, on February 2, 1988, the SEC ordered the appointment of a rehabilitation receiver, FBO Management Networks, nc.,
with petitioner Orendain as Chairman to prevent paralyzation of BF Homes' business operations.7
_______________
5 d., at pp. 64-65.
6 d., at pp. 66-67.
7 Supra note 2, at p. 103.
356
356
On October 8, 1993, a Deed of Absolute Sale8 was executed by and between BF Homesrepresented by petitioner Orendain
as absolute and registered owner, and the Local Superior of the Franciscan Sisters of the mmaculate Phils., nc. (LSFSP) over a
parcel of land situated at Barangay Pasong Papaya, BF nternational, Municipality of Las Pias, Metro Manila, covered by
Transfer Certificate of Title No. T-36482.
The portion of land sold to LSFSP was 7,800 square meters, more or less, for Nineteen Million Five Hundred Thousand Pesos
(PhP 19,500,000.00).9
Meanwhile, on November 7, 1994, the SEC hearing panel released an Omnibus Order10 which admitted and confirmed the
Closing Report submitted by the receiver, petitioner Orendain. t further appointed a new Committee of Receivers composed of the
eleven (11) members of the Board of Directors of BF Homes with Albert C. Aguirre as the Chairman of the Committee.
Consequently, receiver Orendain was relieved of his duties and responsibilities.
n its August 22, 1995 Order,11 the SEC denied BF Homes' and the intervenor-derivative suitor Eduardo S. Rodriguez's motions
for reconsideration of its November 7, 1994 Omnibus Order.
On January 23, 1996, BF Homes filed a Complaint before the Las Pias RTC against LSFSP and petitioner Orendain, in Civil
Case No. LP-96-0022, for reconveyance of the property covered by TCT No. T-36482alleging, inter alia, that the LSFSP
transacted with Orendain in his individual capacity and therefore, neither FBO Management, nc. nor Orendain had title to the
property transferred. Moreover, BF Homes averred that the
selling price was grossly inadequate or insufficient amounting to fraud and conspiracy with the
_______________
8 Records, pp. 14-16.
9 d., at p. 14.
10 Records, pp. 108-130.
11 Records, pp. 131-132.
357
VOL. 506, OCTOBER 31, 2006
357
LSFSP. BF Homes also stated that the total assessed value of the property was approximately PhP 802,330.00. Hence, it prayed
in the Complaint that LSFSP reconvey the disputed property or, if reconveyance was no longer feasible, pay the present value of
the property.12
On March 21, 1996, the LSFSP filed its Answer with Compulsory Counterclaim,13 stating, among others, that (1) the Complaint
stated no cause of action since there was a valid sale with sufficient consideration, and there was no fraud; (2) it was barred by a
prior judgment of a tribunal with sufficient jurisdiction over the matter, and BF Homes was liable for forum shopping; and (3) BF
Homes could not question its own acts by way of estoppel.
On June 14, 1996, Florencio B. Orendain filed a Motion to Dismiss stating that (1) the RTC had no jurisdiction over the
reconveyance suit; (2) the Complaint was barred by the finality of the November 7, 1994 Omnibus Order of the SEC hearing
panel; and (3) BF Homes, acting through its Committee of Receivers, had neither the interest nor the personality to prosecute the
said action, in the absence of SEC's clear and actual authorization for the institution of the said suit.14
On July 15, 1996, BF Homes filed its Opposition15 to petitioner's Motion to Dismiss, alleging that the case was within the
exclusive jurisdiction of the RTC, not the SEC, considering that the case was an ordinary reconveyance suit. Likewise, BF Homes
alleged that the cause of action was not barred by the perceived finality of the SEC November 7, 1994 Omnibus Order, and that
the general powers of a receiver authorized BF Homes to institute actions to recover the property.
_______________
12 Records, pp. 1-4.
13 Rollo, pp. 23-24.
14 Records, p. 69.
15 Records, pp. 137-145.
358
358
On December 4, 1996, RTC Las Pias, Branch 275 issued an Order denying the June 14, 1996 Motion to Dismiss for lack of
merit.16
However, on May 8, 1997, the SEC rendered its Order, as follows:
"WHEREFORE, premises considered, the decision of the hearing panel denying the motion for intervention of Mr. Eduardo
Rodriguez is hereby AFFRMED. The Commission hereby receives and notes the Closing Report of the Management Network
and the Joaquin Cunanan Audit Report for inclusion in the records of the case without going into the merits and veracity of the
contents thereof; the order to pay the attorney's fees of Balgos and Perez is hereby SET ASDE; the resolution of the issue on the
alleged payment of receiver's fees of FBO Management Network is hereby deferred, and the order to pay the additional fees of
the receiver is hereby set aside until after the Commission en banc finally clears and releases FBO Management Networks from
its accountabilities in accordance with the policies and orders of the Commission on the receivership.17
On December 27, 1997, petitioner Orendain filed his Motion for Reconsideration18 of the RTC December 4, 1996 Order.
Consequently, BF Homes filed its January 17, 1997 Opposition19 to Orendain's Motion for Reconsideration; and on April 22, 1998,
the RTC issued an Order denying the Motion for Reconsideration for lack of merit and petitioner Orendain was directed to file his
answer to the Complaint within ten (10) days from receipt of the Order.20
Petitioner then filed his Answer Ex Abudante Ad Cautelam with Compulsory Counterclaims21 on May 29, 1998.
_______________
16 Records, pp. 229-233.
17 Records, pp. 179-180.
18 Records, pp. 237-257.
19 Records, pp. 289-296.
20 Records, p. 338.
21 Records, pp. 344-353.
359
VOL. 506, OCTOBER 31, 2006
359
On July 13, 1998, petitioner filed before the CA a Petition for Certiorari and Prohibition with Prayer for the ssuance of a Temporary
Restraining Order and/or Bonded Writ of Preliminary njunction22 which sought to annul the RTC December 4, 1996 and April 22,
1998 Orders, denying petitioner's Motion to Dismiss and Motion for Reconsideration. Petitioner alleged that these motions were
issued without jurisdiction or with grave abuse of discretion amounting to lack or in excess of jurisdiction.
The Ruling of the Court of Appeals
n its August 18, 2000 Decision, the CA held that the action for reconveyance filed by BF Homes was within the exclusive
jurisdiction of the RTC. n the rehabilitation case, the LSFSP was not a party to the said case and did not have any intra-
corporate relation with petitioner at the time of the sale. The SEC could not acquire jurisdiction over the Franciscan Sisters; while
petitioner Orendain was sued in his individual capacity and not in his official capacity as receiver.23
Moreover, the CA stated that at the time the assailed orders were issued, the subject SEC Order had not yet attained finality; that
there was no identity between the first and the second action with respect to the parties; and that the SEC November 7, 1994
Omnibus Order relied on by Orendain was not a decision on the merits of BF Homes' Petition for Rehabilitation and for a
Declaration in a State of Suspension of Payments under Sec. 4 of P.D. No. 1758.
According to the CA:
"Although this Court is not oblivious to the fact that the SEC en banc in a Decision dated May 8, 1997, affirmed the denial of the
_______________
22 Rollo, pp. 104-131.
23 The Decision was penned by Associate Justice Mercedes Gozo-Dadole, with Associate Justices Fermin A. Martin, Jr. and
Martin S. Villarama, Jr. concurring, Rollo, pp. 61-63.
360
360
intervention filed by Rodriguez, still the said order did not go into the merits of the intervention but merely refused to give due
recognition to the intervention as it was allegedly "untimely. Therefore, the contention of petitioner that the principle of res judicata
is applicable in the case at bar does not hold water.24
The CA ultimately rendered its judgment in this wise:
"WHEREFORE, premises considered, the instant petition is DSMSSED for failure to clearly show grave abuse of discretion and
the assailed orders dated December 4, 1996 and April 22, 1998, are hereby AFFRMED in toto without costs to petitioner.25
Hence, this petition is before us.
The Court's Ruling
Petitioner avers that the CA erred in holding that (1) the complaint a quo is a simple reconveyance suit and hence, can be heard
and tried by the court a quo; (2) res judicata is inapplicable to the complaint a quo; and (3) the Committee of Receivers may
institute an action against a former receiver without prior SEC approval.26
The petition is not meritorious.
Action for Reconvenyance in the RTC Does Not nvolve
ntra-Corporate Dispute
The issue central to this petition is: which has jurisdiction over the action for reconveyancethe RTC or SEC.
Petitioner Orendain argues that it is the SEC that has jurisdiction by virtue of Presidential Decree No. 902-A since BF Homes' suit
was instituted against him as its former receiver. He also avers that BF Homes' allegations were nothing more than protestations
against the former receiver who entered
_______________
24 d., at p. 65.
25 d., at p. 66.
26 Rollo, pp. 16-17.
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VOL. 506, OCTOBER 31, 2006
361
into a transaction during BF Homes' regime of rehabilitation; and that the assailed transaction was consummated at the time the
SEC had placed BF Homes under rehabilitation. Therefore, according to petitioner, the SEC, which appointed the rehabilitation
receiver, has the sole power to decide the issue as to whether petitioner acted within the scope of the vested authority.
Petitioner also claims that the resolution of the instant controversy depends on the ratification by the SEC of the acts of its agent,
the receiver. Also, he asserts that for the RTC to insist on hearing and deciding the case below is to dislodge the appointing body
from reviewing, ratifying, confirming, or overruling the acts of its appointee; and such would constitute undue interference on the
jurisdiction of the SEC by a court of equal jurisdiction. Further, petitioner claims that the questions of whether the receiver of a
company undergoing rehabilitation acted within the scope of his authority, and whether a transaction consummated during the
rehabilitation proceedings is impermissible, are matters not within the province of a regular court acting on an ordinary
reconveyance suit. Petitioner avers that the undisputed fact is that at the time of the said transaction, respondent was operating
under rehabilitation whereby receivership places all matters arising from, incidental, or connected with the implementation of said
rehabilitation proceedings beyond the jurisdiction of regular courts. n addition, petitioner avers that the property in question is one
of the many properties which formed part of a pool of assets placed under receivership and that he was the Chairman of the FBO
Management, nc.the SEC-appointed Rehabilitation Receiver at the time of the transaction.
WE hold OTHERWSE.
n Speed Distributing Corp. v. CA, we held that:
"Jurisdiction over the subject matter is conferred by law. The nature of an action, as well as which court or body has jurisdiction
over it, is determined based on the allegations contained in the complaint of the plaintiff, irrespective of whether or not plaintiff is
362
362
entitled to recover upon all or some of the claims asserted therein. t cannot depend on the defenses set forth in the answer, in a
motion to dismiss, or in a motion for reconsideration by the defendant
(citations omitted).27
n the case at bench, the BF Homes' Complaint for reconveyance was filed on January 23, 1996 against LSFSP and Florencio B.
Orendain, in Civil Case No. LP-96-002.
n 1996, Section 5 of PD No. 902-A,28 which was approved on March 11, 1976, was still the law in forcewhereby the SEC still
had original and exclusive jurisdiction to hear and decide cases involving:
"b) controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or
associates; between any and/or all of them and the corporation, partnership, or association of which they are stockholders,
members or associates, respectively; and between such corporation, partnership or association and the state insofar as it
concerns their individual franchise or right to exist as such entity.
Clearly, the controversy involves matters purely civil in character and is beyond the ambit of the limited jurisdiction of the SEC. As
held in Viray v. Court of Appeals, "[t]he better policy in determining which body has jurisdiction over a case would be to consider
not only [1] the status or relationship of the parties but also [2] the nature of the question that is the subject of their controversy.29
More so, in Speed Distributing Corp., we held that:
"The first element requires that the controversy must arise out of intra-corporate or partnership relations between any or all of the
_______________
27 G.R. No. 149351, March 17, 2004, 425 SCRA 691, 705.
28 Reorganization of the Securities and Exchange Commission with Additional Powers and Placing the said Agency under the
Administrative Supervision of the Office of the President (as amended by PD Nos. 1653, 1758, and 1799).
29 G.R. No. 92481, November 9, 1990, 191 SCRA 308, 323.
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VOL. 506, OCTOBER 31, 2006
363
parties and the corporation, partnership or association of which they are stockholders, members or associates; between any or all
of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and
between such corporation, partnership or association and the State insofar as it concerns their individual franchises. The second
element requires that the dispute among the parties be intrinsically connected with the regulation of the corporation. f the nature
of the controversy involves matters that are purely civil in character, necessarily, the case does not involve an intra-corporate
controversy. The determination of whether a contract is simulated or not is an issue that could be resolved by applying pertinent
provisions of the Civil Code (citations omitted).30
However, Section 5 of PD No. 902-A does not apply in the instant case. The LSFSP is neither an officer nor a stockholder of BF
Homes, and this case does not involve intracorporate proceedings. n addition, the seller, petitioner Orendain, is being sued in his
individual capacity for the unauthorized sale of the property in controversy. Hence, we find no cogent reason to sustain petitioner's
manifestation that the resolution of the instant controversy depends on the ratification by the SEC of the acts of its agent or the
receiver because the act of Orendain was allegedly not within the scope of his authority as receiver. Furthermore, the
determination of the validity of the sale to LSFSP will necessitate the application of the provisions of the Civil Code on obligations
and contracts, agency, and other pertinent provisions.
n addition, jurisdiction over the case for reconveyance is clearly vested in the RTC as provided in paragraph (2), Section 19, B.P.
Blg. 129, to wit:
"Jurisdiction in civil cases.Regional Trial Courts shall exercise exclusive [and] original jurisdiction
(1) n all civil actions in which the subject of the litigation is incapable of pecuniary estimation; and
_______________
30 Supra note 27, at pp. 706-707.
364
364
(2) n all civil actions which involve the title to, or possession of, real property or any interest therein, where the assessed value of
the property involved exceeds Twenty Thousand pesos (P20,000.00) or for civil actions in Metro Manila, where such value
exceeds Fifty Thousand pesos (P50,000.00) x x x
Likewise, in DMRC Enterprises v. Este del Sol Mountain Reserve, nc., the Court said:
"Nowhere in said decree [PD 902-A] do we find even so much as an intimidation [sic] that absolute jurisdiction and control is
vested in the Securities and Exchange Commission in all matters affecting corporations. To uphold the respondents' arguments
would remove without the legal imprimatur from the regular courts all conflicts over matters involving or affecting corporations,
regardless of the nature of the transactions which give rise to such dispute. The courts would then be divested of jurisdiction not
by reason of the nature of the dispute submitted to them for adjudication, but solely for the reason that the dispute involves a
corporation. This cannot be done. To do so would not only be to encroach on the legislative prerogative to grant and revoke
jurisdiction of the courts but such a sweeping interpretation may suffer constitutional infirmity. Neither can we reduce jurisdiction of
the court by judicial fiat ([citing] Article X, Section 1, The [1973] Constitution).31
Res Judicata Does Not Apply in the Action for Recon
veyance
According to petitioner, dismissal of the complaint is proper based on res judicata. He alleged that on September 28, 1994, he
filed a Petition for Rehabilitation and for Declaration in a State of Suspension of Payments docketed as SEC Case No. 2693; and
that sometime in 1994, FBO Management Network, nc. submitted its Closing Report to the SEC. n said report, the receiver
disclosed the conveyance of the prop-
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31 G.R. No. L-57936, September 28, 1984, 132 SCRA 293, 299300.
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VOL. 506, OCTOBER 31, 2006
365
erty to the LSFSP. t is the same transaction which BF Homes seeks to nullify in the complaint a quo.
We are not persuaded.
There are two (2) aspects to the doctrine of res judicata:
"The first, known as "bar by prior judgment, is the effect of a judgment as a bar to the prosecution of a second action upon the
same claim, demand or cause of action. The second, known as "conclusiveness of judgment, issues actually and directly
resolved in a former suit cannot again be raised in any future case between the same parties involving a different cause of
action.32
A case is barred by prior judgment when the following requisites are present: "(1) the former judgment is final; (2) it is rendered by
a court having jurisdiction over the subject matter and the parties; (3) it is a judgment or an order on the merits; and (4) there is
between the first and second actionsidentity of parties, of subject matter, and causes of action.33
Petitioner asserts that bar by prior judgment exists since the May 8, 1997 Order of the SEC en banc had become final which
would effectively preclude the adjudication of Civil Case No. LP-96-0022.
We DSAGREE.
While the said SEC order denied the motion for intervention filed by intervenor Eduardo S. Rodriguez, it did not, however, resolve
the issues raised in the motion on the merits. A judgment is "on the merits when it amounts to a legal declaration of the respective
rights and duties of the parties based upon the disclosed facts (emphasis supplied and citation omitted).34 t is apparent that the
SEC order in question merely
_______________
32 Francisco v. Co, G.R. No. 151339, January 31, 2006, 481 SCRA 241, 248.
33 Luzon Development Bank v. Conquilla, G.R. No. 163338, September 21, 2005, 470 SCRA 533, 545.
34 d., at p. 550.
366
366
acknowledged the Closing Report for inclusion in the records of the case. t did not, however, pass upon the merits and veracity of
the report's contents. As such, it cannot, in any wise, be considered as an adjudication of the rights and obligations of the parties
relating to the subject matter of the action.
Likewise, it appears that between the first and second actions, there was no identity of parties, of subject matter, and of cause of
action. Hence, res judicata does not apply in the instant case.
The second type of res judicata is "conclusiveness of judgment. n Francisco v. Co, this Court elucidated the nature of this
principle, thus:
"Conclusiveness of judgment operates as a bar even if there is no identity as between the first and second causes of judgment.
Under the doctrine, any right, fact, or matter in issue directly adjudicated or necessarily involved in the determination of an action
before a competent court in which judgment is rendered on the merits is conclusively settled by the judgment therein and cannot
again be litigated between the parties and their privies whether or not the claim, demand, purpose, or subject matter of the two
actions is the same.
Evidently, "conclusiveness of judgment may operate to bar the second case even if there is no identity of causes of action. The
judgment is conclusive in the second case, only as to those matters actually and directly controverted and determined, and not as
to matters merely involved therein.35
A perusal of the SEC case would show that reconveyance of the property in controversy was neither an issue nor a relief sought
by any party in the SEC proceedings. Evidently, the SEC November 7, 1994 Omnibus Order did not mention any reconveyance of
property.36
_______________
35 Supra note 32, at pp. 249-250.
36 Supra note 10.
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VOL. 506, OCTOBER 31, 2006
367
Eduardo S. Rodriguez, the intervenor in the SEC case, did not demand the reversion of the disputed property precisely because
the SEC has no jurisdiction over the action
for reconveyance. Assuming, arguendo, that intervenor Rodriguez raised the issue on the validity of petitioner's acts in his
capacity as receiver, still, the SEC November 7, 1994 Omnibus Order did not delve into the merits of the intervention nor did the
order give due course to the intervention as it was untimely.
Thus, there is no "conclusiveness of judgment as the reconveyance of the lot sold to LSFSP was not directly decided or
necessarily involved and adjudicated in the said SEC order.
Furthermore, petitioner argues that the Committee of Receivers should have sought prior clearance from the SEC before
instituting the action for reconveyance before the RTC, because it does not have the legal capacity to sue. This is incorrect. One
of the general powers of a receiver under Rule 59, Section 6 of the Rules of Court is the power to bring and defend suits in such
capacity.
Petitioner also contends that an action filed by a successorreceiver against him as predecessor-receiver is not allowed under Rule
59, Section 6 without leave of court which appointed him; as Section 6 provides that "no action may be filed by or against a
receiver without leave of the court which appointed him. This is bereft of merit.
The rule talks of the current receiver of the company and not the previous receiver like petitioner Orendain. The reason behind
Rule 59, Section 6, which requires leave of court for all suits by or against the present receiver, is to forestall any undue
interference with the receiver's performance of duties through improvident suits. Apparently, such situation cannot apply to
Orendain who is no longer BF Homes' receiver.
368
368
Moreover, the instant petition has been rendered moot and academic by the passage of RA 8799 or The Securities Regulation
Code which took effect on August 8, 2000.37
Section 5.2 of RA 8799 transferred exclusive and original jurisdiction of the SEC over actions involving intra-corporate
controversies to the courts of general jurisdiction or the appropriate RTC. n the transition, all intra-corporate cases pending in the
SEC, which were not ripe for adjudication as of August 8, 2000, were turned over to the RTC. Congress thereby recognized the
expertise and competence of the RTC to take cognizance of and resolve cases involving intracorporate controversies. Thus,
"whether or not the issue is intra-corporate, it is now the [RTC] and no longer the SEC that takes cognizance of [and resolves
cases involving intracorporate controversies].38
Section 5.2 of RA 8799 explicitly provides:
"The Commission's jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby transferred
to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, That the Supreme Court in the exercise of
its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over the cases. The Commission shall
retain jurisdiction over pending cases involving intra-corporate disputes submitted for final resolution which should be resolved
within one (1) year from the enactment of this Code. The Commission shall retain jurisdiction over pending suspension of
payment/rehabilitation cases filed as of 30 June 2000 until finally disposed (emphasis supplied).
Subsequently, on January 23, 2001, the Supreme Court issued Supplemental Administrative Circular No. 8-01 which ordered that
effective March 1, 2000, "all SEC cases originally assigned or transmitted to the regular RTC shall be trans-
_______________
37 Nautica Canning Corporation v. Yumul, G.R. No. 164588, October 19, 2005, 473 SCRA 415, 427.
38 d.
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VOL. 506, OCTOBER 31, 2006
369
ferred to the branches of the regular RTC specially designated to hear such cases in accordance with AM No. 00-11-03-SC.
During the Bicameral Conference Committee's discussions on the conflicting provisions of Senate Bill No. 1220 and House Bill
No. 8015 on the "Amendments to the Securities, Regulations and Enforcement Act, former Senator Raul S. Roco rendered his
report,39 as follows:
"The first major departure is as regards the Security Exchange Commission. The Securities and Exchange Commission has been
authorized under this proposal to reorganize itself. As an administrative agency, we strengthened it and at the same time we take
away the quasi-judicial functions. The quasi-judicial functions are now given back to the courts of general jurisdictionthe
Regional Trial Court, except for two categories of cases (emphasis supplied).
n case of corporate disputes, only those that are now submitted for final determination of the SEC will remain with the SEC. So,
all those cases, both memos of the plaintiff and defendant, that have been submitted for resolution will continue. At the same time,
cases involving rehabilitation, bankruptcy, suspension of payments and receiverships that were filed before June 30, 2000 will
continue with the SEC. n other words, we are avoiding the possibility, upon approval of this bill, of people filing cases with the
SEC, in a manner of speaking, to select their court.
x x x t is only right now with this bill that we clarify the independent functions, not only in terms of monetary polity, by giving it to
the Monetary Board, but in matters of commerce and securities and capital formation, by giving them to the [SEC], with sufficient
powers to monitor and regulate capital formation in the Philippines.
That is the first major departure x x x in terms of the powers and responsibilities of the [SEC]. n registration of securities, exempt
transactions [and exempt securities], these are very technical and there are modifications x x x The registration and monitoring of
securities are basically the same as the old law.
Pre-need plans x x x remain with the SEC. Originally we wanted the SEC to concentrate on commerce, corporations and the
_______________
39 CP-SENATE, TSP, Nov. 24, 1998, p. 216.
370
370
securities regulation, but pre-need plan[s] under the Senate report was really with the SEC and under the House report, it was
recommended to remain with the SEC without prejudice to a subsequent law if we should decide to do so to have the pre-need
plans transferred to the Office of the nsurance Commissioner. x x x
Thus, it is unequivocal that the jurisdiction to try and decide cases originally assigned to the SEC under Section 5 of PD 902-A has
been transferred to the RTC. For clarity, we quote those cases under Section 5, PD 902-A, which now fall within the RTC's
jurisdiction, as follows:
"(a) Devices or schemes employed by or any acts of the board of directors, business associates, its officers or partners,
amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or stockholders, partners,
members of associations registered with the Commission;
(b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or
associates; between any or all of them and the corporation, partnership or association and the State insofar as it concerns their
individual franchise or right as such entity;
(c) Controversies in the election or appointment of directors, trustees, officers or managers of such corporations, partnerships, or
associations;
(d) Petitioners of corporations, partnerships or associations to be declared in the state of suspension of payment in cases where
the corporation, partnership or association possesses sufficient property to cover all its debts but foresees the impossibility of
meeting them when they fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its
liabilities but is under the management of a rehabilitation receiver or management committee created pursuant to this Decree.
The remaining powers and functions of the SEC are enumerated in Section 5 of RA 8799, to wit:
"Powers and Functions of the Commission.[5.1] The Commission shall act with transparency and shall have the powers and
functions provided by this Code, Presidential Decree No. 902-A, the
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VOL. 506, OCTOBER 31, 2006
371
Corporation Code, the nvestment Houses Law, the Financing Company Act and other existing law[s]. Pursuant thereto the
Commission shall have, among others, the following powers and functions:
(a) Have jurisdiction and supervision over all corporations, partnerships or associations who are the grantees of primary
franchises and/or a license or permit issued by the Government;
(b) Formulate policies and recommendations on issues concerning the securities market, advise Congress and other government
agencies on all aspects of the securities marker and propose legislation and amendments thereto;
(c) Approve, reject, suspend, revoke or require amendments to registration statements, and registration and licensing applications;
(d) Regulate, investigate and supervise the activities of persons to ensure compliance;
(e) Supervise, monitor, suspend or take over the activities of exchanges, clearing agencies and other SROs;
(f) mpose sanctions for the violation of laws and the rules, regulations and orders issued pursuant thereto;
(g) Prepare, approve, amend or repeal rules, regulations, and orders, and issue opinions and provide guidance on and supervise
compliance with such rules, regulations and orders;
(h) Enlist the aid and support of and/or deputize any and all enforcement agencies of the Government, civil or military as well as
any private institution, corporation, firm, associations or person in the implementation of its powers and functions under this Code;
(i) ssue cease and desist orders to prevent fraud or injury to the investing public;
(j) Punish for contempt
of the Commission, both direct and indirect, in accordance with the pertinent provisions of and penalties prescribed by the Rules
of Court;
(k) Compel the officers of any registered corporation or association to call meetings of stockholders or members thereof under its
supervision;
(l) ssue subpoena duces tecum and summon witnesses to appear in any proceedings of the Commission and in appropriate
cases, order the examination, search and seizure of all documents, papers, files and records, tax returns, and books of accounts
of any
372
372
entity or person under investigation as may be necessary for the proper disposition of the cases before it, subject to the provision
of existing laws;
(m) Suspend, or revoke, after notice and hearing the franchise or certificate of registration of corporations, partnerships or
associations, upon any of the grounds provided by law; and
(n) Exercise such other powers as my be provided by law as well as those which may be implied from, or which are necessary or
incidental to the carrying out of, the express powers granted the Commission to achieve the objectives and purposes of these
laws.
Juxtaposing the jurisdiction of the RTC under RA 8799 and the powers that were retained by the SEC, it is clear that the SEC
retained its administrative, regulatory, and oversight powers over all corporations, partnerships, and associations who are
grantees of primary franchises, and/or a license or permit issued by the Government. However, the Securities Regulations Code
(SRC) is clear that when there is a controversy arising out of intra-corporate relations, between and among stockholders,
members or associates, and between, any, or all of them and the corporation, it is the RTC, not SEC, which has jurisdiction over
the case.
Thus, when the complaint involves "an active antagonistic assertion of a legal right on one side and a denial thereof on the other
concerning a real, and not a mere theoretical question or issue,40 a cause of action involving a delict or wrongful act or omission
committed by a party in violation of the primary right of another,41 or an actual controversy involving rights which are legally
demandable or enforceable,42 the jurisdiction over this complaint is lodged with the RTC but not the SEC.
_______________
40 Delumen v. Republic, G.R. No. L-5552, January 28, 1954, 94 Phil. 288, 288-289.
41 1997 RULES OF CVL PROCEDURE, Rule 2, Section 2; also cited in Joseph v. Bautista, G.R. No. 41423, February 23, 1989,
170 SCRA 540, 544.
42 CONSTTUTON, Article V, Section 1.
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VOL. 506, OCTOBER 31, 2006
373
The passage of RA 8799 has put to rest petitioner Orendain's claim that it is the SEC and not the RTC that has jurisdiction over
Civil Case No. LP-96-0022. At present, the instant petition has nothing to stand on and perforce must fail.
WHEREFORE, the August 18, 2000 Decision and December 6, 2000 Resolution of the Court of Appeals in CA-G.R. SP No. 48263
are hereby AFFRMED N TOTO.
SO ORDERED.
Quisumbing (Chairperson), Carpio, Carpio-Morales and Tinga, JJ., concur.
Judgment and resolution affirmed in toto.
Notes.n an action for reconveyance, the decree of registration is respected as incontrovertible. What is sought instead is the
transfer of the property or its title which has been wrongfully or erroneously registered in another person's name, to its rightful or
legal owner or to the one with a better right. (Heirs of Pomposa Saludares vs. Court of Appeals, 420 SCRA 51 [2004])
A corporation and those who are officially responsible for the conduct of its affairs may be punished for contempt in disobeying
judgments, decrees, or orders of a court made in a case within its jurisdiction. (Heirs of Trinidad De Leon vs. Court of Appeals, 422
SCRA 101 [2004]) [Orendain vs. BF Homes, nc., 506 SCRA 348(2006)]
G.R. No. 111351. /9(e 11, 1991.<
"RA!ERS RO=A #AN@, pet't'o(er, +,. IN"ERME!IA"E APPEA"E CO-R", &(* 3EIRS O$ "3E A"E /OSE C.
"A=ENGCO, re,po(*e(t,.
Remedial Law; Judgments; Res Judicata; Elements of Res Ju-dicata.The elements of res judicata are: (1) the previous
judgment has become final; (2) the prior judgment was rendered by a court having jurisdiction over the matter and parties; (3) the
first judgment was made on the merits; and (4) there was substantial identity of parties, subject matter, and cause of action, as
between the prior and subsequent actions.
Same; Same; Same; Same; The last element of res judicata is absent in the case at bar.The difference between the two causes
of action is unmistakable. n G.R. No. 60076, the petition was for the annulment of the trial court's order requiring Tayengco to
render and submit an accounting of the rental of the buildings and apartments, while C.A. G.R. CV No. 21423 was an appeal
questioning the order of the trial court authorizing the deduction by TRB of its compensation from the receivership funds. There is
clearly no identity of causes of action here. Clearly, the last element of res judicata is absent in the case at bar.
Same; Receivership; When the services of a receiver who has been properly appointed terminates, his compensation is to be
charged against the defeated party or the prevailing litigant may be made to share the expense as justice requires.t is,
therefore, clear that when the services of a receiver who has been properly appointed terminates, his compensation is to be
charged against the defeated party, or the prevailing litigant may be made to share the
___________________
* SECOND DVSON.
522
522
Traders Royal Bank vs. ntermediate Appellate Court
expense, as justice requires. Consequently, the trial court's order approving TRB's compensation to be charged solely against the
funds under its receivership is without legal justification; hence, it was correctly reversed by the Court of Appeals.
PETTON for review of a decision of the then ntermediate Appellate Court.
The facts are stated in the resolution of the Court.
Antonio C. Singson for petitioner.
Tirol & Tirol for private respondent.
R E S O L U T O N
ROMERO, J.:
The factual aspects of this case have already been resolved by this Court in G.R. No. 63855,1 wherein we ruled the deceased
spouses Jose and Salvacion Tayengco to be the lawful owners of the properties under receivership, and G.R. No. 60076,2 where
we affirmed the validity of the appointment of petitioner Traders Royal Bank (TRB) as receiver pendente lite.
n view of these rulings, the receivership proceeding was duly terminated. Thus, TRB rendered its final accounting of the funds
under receivership wherein it retained the amount of P219,016.24 as its receiver's fee, instead of turning over the entire fund to
the Tayengcos. The Regional Trial Court of loilo, Branch 5, in an order dated July 5, 1988, approved the final accounting
submitted by TRB, including the deduction of its fee from the fund under receivership.
The Tayengcos assailed said order before the Court of Appeals,3 contending that TRB's compensation should have been charged
against the losing party and not from the funds under receivership.
________________
1 Cu Bie v. ntermediate Appellate Court, 154 SCRA 599 (1987).
2 Tayengco v. larde, 183 SCRA 504 (1990).
3 Docketed as CA-G.R. CA No. 21423.
523
VOL. 273, JUNE 17, 1997
523
n resolving this issue the Court of Appeals,4 in its decision dated February 12, 1993, ruled that TRB cannot deduct its fee from
the funds under its receivership since this must be shouldered by the losing party or equally apportioned among the parties-
litigants. Consequently, TRB was ordered to return the P219,016.24 to the Tayengcos, and the losing parties, Cu Bie, et al., were
held solely liable for TRB's compensation.5 TRB filed a motion for reconsideration, but this was denied by the appellate court in its
resolution dated August 17, 1993.6
n this appeal, TRB raises the following errors allegedly committed by the Court of Appeals:
1. The Hon. AC (should be CA) erred when it rendered the judgment and Resolution ordering the return by TRB of Receiver's
Fee of P219,016.24 to the heirs of Jose Tayengco, as it reversed the Decision of the Supreme Court in the case of Jose Tayengco
vs. Hon. larde, TRB, et al., G.R. No. 60076, which ordered the Trial Court to "settle the account of the receiver, TRB to thereafter
discharge the receiver and charged as cost against the losing party;
2. The Hon. AC had no jurisdiction in CA-G.R. 21423 and erred in knowingly taking cognizance and rendering the judgment and
resolution on the issue of the payment of receiver's fee to TRB since the same subject matter was already within the jurisdiction of
the Supreme Court in G.R. No. 60076;
3. The Hon. AC erred when it rendered the judgment and Resolution which reversed the final Supreme Court Decision in G.R.
No. 60076 on the payment of the receiver's fee to TRB as it violated the Rule on "Bar by Final Judgment. 7 (talics supplied)
TRB's assignment of errors submits for resolution two vital issues: (1) s the Court of Appeals decision dated February 12, 1993
barred by res judicata by virtue of our ruling in G.R. No.
________________
4 Javellana, J., ponente, Gonzaga-Reyes and Ynares-Santiago, JJ., concurring.
5 Rollo, pp. 19-24.
6 Rollo, pp. 26-30.
7 Rollo, pp. 4-5.
524
524
60076 recognizing the propriety of TRB's appointment as receiver? (2) Who is responsible for TRB's receiver's fee?
With respect to the first assigned error, we are not persuaded.
The elements of res judicata are: (1) the previous judgment has become final; (2) the prior judgment was rendered by a court
having jurisdiction over the matter and parties; (3) the first judgment was made on the merits; and (4) there was substantial
identity of parties, subject matter, and cause of action, as between the prior and subsequent actions.8
The difference between the two causes of action is unmistakable. n G.R. No. 60076, the petition was for the annulment of the trial
court's order requiring Tayengco to render and submit an accounting of the rental of the buildings and apartments, while C.A. G.R.
CV No. 21423 was an appeal questioning the order of the trial court authorizing the deduction by TRB of its compensation from
the receivership funds. There is clearly no identity of causes of action here. Clearly, the last element of res judicata is absent in the
case at bar.
Procedural obstacles aside, we now answer the principal query posed in the instant petition.
Nobody questions the right of TRB to receive compensation. Section 8, Rule 59 of the Rules of Court, however, explicitly provides
for the manner in which it shall be paid for its services, to wit:
"SEC. 8. Termination of receivership; compensation of receiver.Whenever the court, of its own motion or on that of either party,
shall determine that the necessity for a receiver no longer exists, it shall, after due notice to all interested parties and hearing,
settle the accounts of the receiver, direct the delivery of the funds and other property in his hands to the persons adjudged entitled
to receive them, and order the discharge of the receiver from further duty as such. The court shall allow the receiver such
reasonable compensation as the circumstances of the case warrant, to be taxed as
__________________
8 Ybaez v. Court of Appeals, 253 SCRA 540 (1995); Javier v. Court of Appeals, 224 SCRA 704 (1993).
525
VOL. 273, JUNE 17, 1997
525
costs against the defeated party, or apportioned, as justice requires. (talics supplied)
t is, therefore, clear that when the services of a receiver who has been properly appointed terminates, his compensation is to be
charged against the defeated party, or the prevailing litigant may be made to share the expense, as justice requires.
Consequently, the trial court's order approving TRB's compensation to be charged solely against the funds under its receivership
is without legal justification; hence, it was correctly reversed by the Court of Appeals.
N VEW OF THE FOREGONG, the decision appealed from is AFFRMED. Costs against petitioner.
SO ORDERED.
Regalado (Chairman), Mendoza and Torres, Jr., JJ., concur.
Puno, J., No part due to relationship.
Judgment affirmed.
Note.A decision is conclusive upon the parties therein as well as their successors-in-interest under the doctrine of res judicata.
(Suobiron vs. Court of Appeals, 250 SCRA 184 [1995]) [Traders Royal Bank vs. ntermediate Appellate Court, 273 SCRA
521(1997)]
G.R. No. 151925. $ebr9&r: 6, 2003.<
C3AS REA"= AN! !E;EOPMEN" CORPORA"ION, pet't'o(er, +,. 3ON. "OMAS #. "AA;ERA, '( C', 0&p&0't: &,
Pre,'*'(? /9*?e o) tCe Re?'o(&% "r'&% Co9rt o) C&b&(&t9&( C't:, #r&(0C 24, &(* ANGE !. CONCEPCION, SR.,
re,po(*e(t,.
Corporation Law; Rehabilitation; Procedure; Contents of Petition for Corporate Rehabilitation provided under Rule 4, Section 2(k)
of the nterim Rules on Corporate Rehabilitation.Rule 4, Section 2(k), distinctly provides that, first, under letter (a), the filing of
the petition has been duly authorized; and, second, under letter (b), the directors and stockholders have irrevocably approved
and/or consented to, in accordance with existing laws, all actions or matters necessary and desirable to rehabilitate the debtor
including, but not limited to, amendments to the articles of incorpo-
_______________
19 Vda. de Medina, et al. vs. Cresencia, et al., 99 Phil. 506.
* FRST DVSON.
85
85
Chas Realty and Development Corporation vs. Talavera
ration and by-laws or articles of partnership; increase or decrease in the authorized capital stock; issuance of bonded
indebtedness, alienation, transfer, or encumbrance of assets of the debtor; and modification of shareholder's rights.
Same; Same; Same; Observe that Rule 4, Section 2(k), prescribes the need for a certification.Observe that Rule 4, Section 2(k),
prescribes the need for a certification; one, to state that the filing of the petition has been duly authorized, and two, to confirm that
the directors and stockholders have irrevocably approved and/or consented to, in accordance with existing laws, all actions or
matters necessary and desirable to rehabilitate the corporate debtor, including, as and when called for, such extraordinary
corporate actions as may be marked out. The phrase, "in accordance with existing laws, obviously would refer to that which is, or
to those that are, intended to be done by the corporation in the pursuit of its plan for rehabilitation. Thus, if any extraordinary
corporate action (mentioned in Rule 4, Section 2(k), of the nterim Rules on Corporate Rehabilitation) are to be done under the
proposed rehabilitation plan, the petitioner would be bound to make it known that it has received the approval of a majority of the
directors and the affirmative votes of stockholders representing at least two-thirds (2/3) of the outstanding capital stock of the
corporation. Where no such extraordinary corporate acts (or one that under the law would call for a two-thirds [2/3] vote) are
contemplated to be done in carrying out the proposed rehabilitation plan, then the approval of stockholders would only be by a
majority, not necessarily a two-thirds (2/3), vote, as long as, of course, there is a quorum a fact which is not here being disputed.
Civil Procedure; Pleadings and Practice; Certiorari; The filing of a motion for reconsideration before availing of the remedy of
certiorari is not always sine qua non.Relative to the contention that a motion for reconsideration is required prior to bringing up
the petition for certiorari (with the Court of Appeals), it should suffice to say that the filing of a motion for reconsideration before
availing of the remedy of certiorari is not always sine qua non such as when the issue raised is one purely of law, or where the
error is patent or the Questions raised on certiorari are exactly the same as those already squarely presented to and passed upon
by the court a quo.
PETTON for review on certiorari of a decision of the Court of Appeals.
Abello, Concepcion, Regala and Cruz for petitioner.
R.A.S. Dizon Law Office for private respondent.
86
86
VTUG, J.:
Petitioner Chas Realty and Development Corporation (CRDC) is a domestic corporation engaged in property development and
management. t is the owner and developer of a three-hectare shopping complex, also known as the Megacenter Mall
(Megacenter), in Cabanatuan City.
The construction of Megacenter commenced in January 1996, but by the time of its so-called "soft opening in July 1998, it was
only partly completed due to lack of funds, said to have been brought about by construction overages due to the massive
devaluation of the peso during the economic crisis in 1997, low occupancy, and rental arrearages of tenants. The opening of the
upper ground floor and the second floor of the building followed, respectively, in August 1998 and towards the end of 1998.
Eventually, Megacenter opened its third floor in 1999.
Purportedly on account of factors beyond the control of CRDC, such as high interest rates on its loans, unpaid rentals of tenants,
low occupancy rate, sluggishness of the economy and the freezing of its bank account by its main creditor, the Land Bank of the
Philippines, CRDC encountered difficulty in paying its obligations as and when they fell due and had to contend with collection
suits and related cases.
On 04 June 2001, CRDC filed a petition for rehabilitation attaching thereto a proposed rehabilitation plan, accompanied by a
secretary's certificate, consonantly with paragraph 2(k), Section 2, Rule 4, of the nterim Rules of Procedure on Corporate
Rehabilitation. CRDC claimed that it had sufficient assets and a workable rehabilitation plan both of which showed that the
continuance of its business was still feasible. t alleged that, prior to the filing of the petition for rehabilitation, a special meeting of
its stockholders was held on 18 April 2001 during which the majority of the outstanding capital stock of CRDC approved the
resolution authorizing the filing of a petition for rehabilitation.
On 08 June 2001, the Regional Trial Court, Branch 28, of Cabanatuan City, to which the petition was assigned, issued an order
staying all claims against CRDC and prohibited it from making any payment on its outstanding obligations and selling, or
otherwise disposing or encumbering, its property. Forthwith, the court appointed a rehabilitation receiver.
87
87
On 20 July 2001, Angel D. Concepcion, Sr., herein private respondent, filed a complaint in intervention opposing the appointment
of CRDC's nominee for the post of rehabilitation receiver. He belied CRDC's factual allegations and claimed that the predicament
of the corporation was due to serious "mismanagement, fraud, embezzlement, misappropriation and gross/evident violation of the
fiduciary duties of CHAS officers. Concepcion moved to dismiss and/or to deny the petition for rehabilitation on the ground that
there was no approval by the stockholders representing at least two-thirds (2/3) of the outstanding capital stock which, according
to him, would be essential under paragraph 2(k), Section 2, Rule 4, of the nterim Rules on Corporate Rehabilitation. Concepcion
further asserted that the supposed approval of the directors of the filing of the petition for rehabilitation was inaccurate considering
that the membership of petitioner CRDC's board of directors was still then being contested and pending final resolution.
On 10 August 2001, CRDC submitted its opposition ex abundante cautelam contending that the complaint in intervention was a
prohibited pleading and that there was no need for it to secure the irrevocable consent and approval of its stockholders
representing at least two-thirds (2/3) of its outstanding capital stock because the petition did not include in its plan for rehabilitation
acts that would need any amendment of its articles of incorporation and/or by-laws, increase or decrease in the authorized capital
stock, issuance of bonded indebtedness, or the like, where such two-thirds (2/3) vote would be required.
The trial court issued an order, dated 15 October 2001, the decretal portion of which was to the following effect; viz.:
"WHEREFORE, premises considered, in the absence of any showing that the petitioner has complied with the certification
required under Section 2, Rule 4(K) of the nterim Rules of Procedure on Corporate Rehabilitation, the petitioner is hereby given a
period of 15 days from receipt of a copy of this order to secure from its directors and stockholders the desired certification and
submit the same to this Court in accordance with the above-mentioned provision of the nterim Rules of Procedure on Corporate
Rehabilitation.
"With respect to the other oppositions to the petition for rehabilitation including the opposition to the appointment of the
rehabilitation receiver, opposition filed by the land bank and the EE, nc., the resolution of the same is hereby held in abeyance till
after the period given to the
88
88
petitioner to comply with this order as it may become moot and academic after the expiration of the period given to the
petitioner.1
On 29 October 2001, CRDC filed before the Court of Appeals a petition for certiorari, with prayer for temporary restraining order
and/or preliminary injunction, which sought to have the 15th October 2001 order of the trial court set aside.
The Court of Appeals rendered a decision on 18 January 2002 and held:
"WHEREFORE, the foregoing premises considered, the petition for certiorari, with prayer for temporary restraining order and/or
writ of preliminary injunction, is DENED for lack of merit.2
Hence, the instant petition on the following grounds:
"
"Public respondent acted with grave abuse of discretion amounting to lack and/or excess of jurisdiction in issuing the assailed
order considering that:
"A. The petition for rehabilitation and the proposed rehabilitation plan do not require extraordinary corporate actions.
"B. Since no extraordinary
corporate actions are required or even contemplated as necessary and desirable for the rehabilitation of CRDC, the requirements
of the corporation code for the approval of such actions cannot be complied with.
"C. The rehab rules and the corporation code do not allow or intend blind blanket approvals of extraordinary corporate actions.
"D. To require 2/3 stockholders' approval for corporate actions requiring only a majority violates the right of the majority
stockholders.
"
"Public respondent acted with grave abuse of discretion amounting to lack and/or excess of jurisdiction in requiring CRDC's
compliance with paragraph 2(k), Section 2, Rule 4 of the Rehab rules when CRDC already complied therewith.3
_______________
1 Rollo, p. 73.
2 Rollo, p. 44.
3 Rollo, pp. 37-38.
89
89
Rule 4, Section 2(k), of the nterim Rules on Corporate Rehabilitation provides:
"Sec. 2. Contents of the Petition.The petition filed by the debtor must be verified and must set forth with sufficient particularity all
the following material facts: (a) the name and business of the debtor; (b) the nature of the business of the debtor; (c) the history of
the debtor; (d) the cause of its inability to pay its debts; (e) all the pending actions or proceedings known to the debtor and the
courts or tribunals where they are pending; (f) threats or demands to enforce claims or liens against the debtor; and (g) the
manner by which the debtor may be rehabilitated and how such rehabilitation may benefit the general body of creditors,
employees, and stockholders.
"The petitioner shall be accompanied by the following documents:
"x x x x x x x x x.
"k. A Certificate attesting, under oath, that (a) the filing of the petition has been duly authorized; and (b) the directors and
stockholders have irrevocably approved and/or consented to, in accordance with existing laws, all actions or matters necessary
and desirable to rehabilitate the debtor including, but not limited to, amendments to the articles of incorporation and by-laws or
articles of partnership; increase or decrease in the authorized capital stock; issuance of bonded indebtedness; alienation, transfer,
or encumbrance of assets of the debtor; and modification of shareholders' rights.4
Rule 4, Section 2(k), distinctly provides that, first, under letter (a), the filing of the petition has been duly authorized; and, second,
under letter (b), the directors and stockholders have irrevocably approved and/or consented to, in accordance with existing laws,
all actions or matters necessary and desirable to rehabilitate the debtor including, but not limited to, amendments to the articles of
incorporation and by-laws or articles of partnership; increase or decrease in the authorized capital stock; issuance of bonded
indebtedness, alienation, transfer, or encumbrance of assets of the debtor; and modification of shareholder's rights.
Observe that Rule 4, Section 2(k), prescribes the need for a certification; one, to state that the filing of the petition has been duly
authorized, and two, to confirm that the directors and stockholders have irrevocably approved and/or consented to, in accordance
with existing laws, all actions or matters necessary and desirable to
_______________
4 A.M. No. 00-8-10-SC.
90
90
rehabilitate the corporate debtor, including, as and when called for, such extraordinary corporate actions as may be marked out.
The phrase, "in accordance with existing laws, obviously would refer to that which is, or to those that are, intended to be done by
the corporation in the pursuit of its plan for rehabilitation. Thus, if any extraordinary corporate action (mentioned in Rule 4, Section
2(k), of the nterim Rules on Corporate Rehabilitation) are to be done under the proposed rehabilitation plan, the petitioner would
be bound to make it known that it has received the approval of a majority of the directors and the affirmative votes of stockholders
representing at least two-thirds (2/3) of the outstanding capital stock of the corporation. Where no such extraordinary corporate
acts (or one that under the law would call for a two-thirds [2/3] vote) are contemplated to be done in carrying out the proposed
rehabilitation plan, then the approval of stockholders would only be by a majority, not necessarily a two-thirds (2/3), vote, as long
as, of course, there is a quorum5 a fact which is not here being disputed.
The trial court and appellate court, unfortunately, have taken an inaccurate understanding of the memorandum to the Supreme
Court of Justice Reynato S. Puno, the committee chair on the draft of the rules on corporate rehabilitation, still then being
proposed; the memorandum reads, in part, thusly:
"3. Rule 4.Rehabilitation
"The following are the principal deviation from the SEC Rules:
"a) The proposed Rules now require, as an attachment to the petition, a Certificate attesting, among others, that the governing
body and owners of the petitioning debtor have approved and consented to whatever is necessary or desirable (including but not
limited to increasing or decreasing the authorized capital stock of the company and modification of stockholders' right) to
rehabilitate the debtor (Sec. 2, par. (k), Rule 4). This is to avoid a situation where a rehabilitation plan, after being developed for
years, cannot be implemented because of the refusal of shareholders to approve the arrangements necessary for its
implementation.6
_______________
5 Jose C. Campos, Maria Clara L. Campos, The Corporation Code Comments, Notes and Selected Cases, 1990 Ed., p. 419.
6 Rollo, p. 72.
91
91
Nowhere in the aforequoted paragraph can it be inferred that an affirmative vote of stockholders representing at least two-thirds
(2/3) of the outstanding stock is invariably necessary for the filing of a petition for rehabilitation regardless of the corporate action
that the plan envisions. Just to the contrary, it only requires in the filing of the petition that the corporate actions therein proposed
have been duly approved or consented to by the directors and stockholders "in consonance with existing laws. The requirement
is designed to avoid a situation where a rehabilitation plan, after being developed and judicially sanctioned, cannot ultimately be
seen through because of the refusal of directors or stockholders to cooperate in the full implementation of the plan. n fine, a
certification on the approval of stockholders is required but the question, whether such approval should be by a majority or by a
two-thirds (2/3) vote of the outstanding capital stock, would depend on the existing law vis--vis the corporate act or acts proposed
to be done in the rehabilitation of the distressed corporation.
The rehabilitation plan7 submitted by petitioner merely consists of a repayment or re-structuring scheme of CRDC's bank loans to
Land Bank of the Philippines and Equitable-PC Bank and of leasing out most of the available spaces in the Megacenter, including
the completion of the construction of the fourth floor, to increase rental revenues. None of the proposed corporate actions would
require a vote of approval by the stockholders representing at least two-thirds (2/3) of the outstanding capital stock.
Relative to the contention that a motion for reconsideration is required prior to bringing up the petition for certiorari (with the Court
of Appeals), it should suffice to say that the filing of a motion forreconsideration before availing of the remedy of certiorari is not
always sine qua non such as when the issue raised is one purely of law, or where the error is patent or the Questions raised on
certiorari are exactly the same as those already squarely presented to and passed upon by the court aquo.8
WHEREFORE, the instant petition is GRANTED and the questioned decision of the Court of Appeals, dated 18 January 2002, and
the order of the Regional Trial Court, Branch 28, Cabanatuan
_______________
7 Rollo, pp. 94-122.
8 Progressive Development Corp. vs. Court of Appeals, 301 SCRA 637 (1999).
92
92
Velez vs. Flores
City, dated 15 October 2001, in Civil Case No. 4036-AF, are REVERSED and SET ASDE. The Regional Trial Court is directed to
give due course to the Petition for Rehabilitation and conduct with dispatch the necessary proceedings still required thereon. No
costs.
SO ORDERED.
Davide, Jr. (C.J., Chairman), Ynares-Santiago, Carpio and Azcuna, JJ., concur.
Petition granted, assailed decision reversed and set aside.
Note.A court action is ipso jure suspended only upon the appointment of a management committee or a rehabilitation receiver.
(Barotac Sugar Mills, nc. vs. CA, 275 SCRA 497 [1997]) [Chas Realty and Development Corporation vs. Talavera, 397 SCRA
84(2003)]

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