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[G.R. No. 6305. September 26, 1911.]

COMPAÑIA GENERAL DE TABACOS DE FILIPINAS, plaintiff-appellee, vs.

ROMANA GAUZON and JUAN D. POMAR, defendants.JUAN D.

POMAR, receiver-appellant.

M. Fernandez Yamson, for appellant.

A. P. Seva, for appellee.

SYLLABUS

1.RECEIVERS; POWERS, DUTIES, AND RESPONSIBILITIES. — 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 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.ID.; LIMITED AUTHORITY TO INCUR EXPENSE WITHOUT EXPRESS PERMISSION 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.ID.; COMPENSATION. — 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 receiver in his

administration of the property under his control.

D E C I S I O N

JOHNSON, J p:

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.

It appears from the record that the defendant, Romana Gauzon, on the 10th day of

September, 1904, executed and delivered to the plaintiff (Compañia 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 (Compañia General de Tabacos de Filipinas), on the 22d day of

September, 1905, commenced an action for the foreclosure of said mortgage, and asked, in

1

addition to the foreclosure of the mortgage, that a receiver be appointed to take charge of the

property in question, pending the said action. On the same day (22d 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 Compañia General de

Tabacos de Filipinas vs. Ganson (13 Phil. Rep., 472) and La Compañia General de 0 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. It 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 (Compañia 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 following items of said account —

1.Care of cane before cutting1,522.30

2.Cutting and grinding, according to

report of commissioners.8,565.97

3.Fuel150.00

4.Expenses in Iloilo, according to receivers

Exhibit B2,591.20

5.Storage428.28

6.Insurance428.28

7.Selling commission648.12

8.Judgment for plaintiff in cause No. 2499,187.80

9.Receiver's pay1,000.00

————

Total4,522.04

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:

"I.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.

"II 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.

"III.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.

"IV.The court erred in reducing to P1,000 the P4,860.87 which the

receiver claimed as compensation for 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 for 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. In due time and after due deliberation, the 2

commissioners reported that the reasonable cost for 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 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. It 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 for 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. .In 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 ha cienda" during his administration. It is a well known

custom among sugar growers in the Philippine Islands, 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. It 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. In 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. If 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 P4,86.87 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

receiver 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, following 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. In

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 3

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, 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.), P22, 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 Ill., 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 court — a 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. If 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.

Separate Opinions

CARSON, J., concurring:

I concur. I 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 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.

If 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.

4

FIRST DIVISION

[G.R. No. 25729. November 24, 1926.]

THE BELGIAN CATHOLIC MISSIONARIES, INC., plaintiff-appellee, vs.

MAGALLANES PRESS INC., ET AL., defendants JOSE MARIA MEMIJE, appellant.

Antonio M. Opisso, Romualdez Hermanos and Luciano de la Rosa for appellant.

Cavanna, Aboitiz & Agan for appellee.

SYLLABUS

1.CHATTEL MORTGAGE; DEPOSIT 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 received by

authority of the court, it being the party most interested in the conservation and care of said

property.

2.ID.; INCREASE OF SECURITY. — 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.ID.; SECURITY 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 made to secure a future

debt.

D E C I S I O N

VILLA-REAL, J p:

This is an appeal taken by Jose Maria Memije from a judgment of the court of First

Instance 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 deed 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

Inc.,' 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., Inc. It is so ordered."

In 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

5

former from receiving from the latter, or the latter from delivering to the former, the amount of

the insurance policies discovering the property mortgaged to the appellant, which was damaged by

the fire that occurred in the establishment of the Magallanes Press, Inc.; (4) the trial court erred in

giving to the unnecessary intervention of the Magallanes Press, Inc., in the execution of the deed of

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, Inc.; (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 Belgan Catholic Missionaries, Inc., (8)

the trial court erred in declaring Exhibits C and D and 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, Inc.; 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.

It appears that on December 1, 1921, the Magallanes Press, through its manager H.

Cameña, executed a promissory note in favor of J. P. Heilbronn & Co., Inc., 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 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 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.

Cameña also executed a promissory note in favor of J. P. Heilbronn & Co., Inc., for the sum of

P10,715. 77, with interest at 12 per cent 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, 1992, 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. Cameña, 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., Inc.

On June 19, 1922, the Magallanes Press, Inc., 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., Inc., which the Magallanes Press had mortgaged to J. P. Heilbronn & Co.,

Inc., to secure the payment of a loan of P30,500, with interest at 12 per cent per annum, which the

said Magallanes Press & Co., Inc., had obtained from the Belgian Catholic Missionaries Co., Inc., the

duration of the mortgage loan being one year from the execution of the mortgage deed.

In 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., Inc., 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 Instance of Manila, entitled Jose Ma. Cavanna vs. The Magallanes Press Co., Inc., 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., Inc., having been overdue for non-payment of the installments, as well as the respective

chattel mortgage, the said J. P. Heilbronn & Co., Inc., 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 Jose Ma. Memije by virtue of

which the chattel mortgage which was given by the Magallanes Press m favor of J. P. Heilbronn & 6

Co., Inc., 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., Inc., 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., Inc., upon the execution of the chattel mortgage

thereon in favor of the latter. When J. P. Heilbronn & Co., Inc., transferred 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., Inc., 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 defendant, 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., Inc.

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., In., the latter, either as 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., Inc., had consented to the transfer of the mortgage credit of J. P.

Heilbronn & Co., Inc. 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.

In 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., Inc., and the extension made by the Magallanes Press, inc., of the mortgage to

said additional credit without the knowledge or consent of the plaintiff company, as second

mortgage, prejudices the credit 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 evidences 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.

In 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. Inc., was secured in order to recover not only the original credit but

also the increase, the Belgian Catholic Missionaries Co., Inc., filed a complaint, with a petition for a

writ of preliminary injunction against the sheriff, in whose hands the foreclosure 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.

7

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., Inc., 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., Inc., 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., Inc., became due, which credit had been reduced to the sum of

P8,280.90 through partial payments, and the herein defendant-appellant Jose Ma. Memije

acquired said mortgage credit and increased it by P5,895.59, of which increase of P2,000 was a

previous loan.

There is no question but that J. P. Heilbronn & Co., Inc., 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., Inc., 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., Inc.

The increase of P5,895.59 made by the defendant Jose Ma. Memije in favor 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). In 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 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., Inc., has a right

to the remainder of the value of said chattels and the insurance 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.

In 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 of the P8,280.90, the amount of the mortgage credit acquired by him from J. P. Heilbronn

& Co., Inc., 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., Inc., 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., Inc., 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 policies and the above-

mentioned credits in the order of preference above established, without special pronouncement as

to costs. So ordered.

Avanceña, C.J., Johnson, Street, Ostrand, and Johns, JJ., concur.

EN BANC

8

[G.R. No. 29295. October 22, 1928.]

J. M. PO PAUCO, plaintiff, vs. DOLORES SIGUENZA, ET AL., defendants. WISE &

CO., intervenor-appellant.

Block, Johnston & Greenbaum for the intervenor.

Roman J. Lacson for receiver-appellee National Bank.

SYLLABUS

1."SHERIFF;" RECEIVER. — 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.ID.; ID. — 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.

D E C I S I O N

ROMUALDEZ, J p:

In this case, J. M. Po Pauco obtained final judgment in his favor against Dolores Siguenza

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 defendants 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.

In 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 for 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 Corporation obtained judgment against the said J. M. Po Pauco, in civil

case No. 3197 of the Court of First Instance 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 Siguenza and Mariano Aguilar in the San Agustin Estate, are preferential over those of J. M.

Po Pauco and, therefore, the latter is not 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 Instance of Iloilo 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.

It 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 function 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.9

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 action, 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.

EN BANC

[G.R. No. L-2987. February 20, 1951.]

ERNEST BERG, plaintiff-appellant, vs. VALENTIN TEUS, defendant-appellee.

Alva J. Hill, for appellant.

J. Perez Cardenas, for appellee.

SYLLABUS

1.MORATORIUM; APPOINTMENT OF RECEIVE DOES NOT FALL UNDER THE

MORATORIUM 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 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.

D E C I S I O N

TUASON, J p:

This appeal is from an order of the Court of First Instance of Ilocos 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; not to

alienate, sell, lease, encumber or in any manner dispose thereof; and to keep and maintain the said

10

properties in good order and repair; but that, it was alleged, he (defendant) had failed to keep

taxes fully paid; had made material alterations on the premises, and had sold and conveyed them

to Central Azucarera del Norte. It 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. In 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 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.

In 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.

In Moya vs. Barton (79 Phil, 14; 45 Off. Gaz., [No. 1] 237), the court said that when the

cause of action was in 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.

In 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 Investments, Inc. 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. In 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. In

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., Inc. 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 theirsole 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, 11

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.

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.

In 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. If 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 for further 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.

SECOND DIVISION

[G.R. No. 155408. February 13, 2008.]

JULIO A. VIVARES and MILA G. IGNALING, petitioners, vs. ENGR. JOSE J.

REYES, respondent.

D E C I S I O N

VELASCO, JR., J p:

The Case

The kernel dispute in this petition under Rule 45 is the legality of the May 22, 2001 Resolution 1 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. 67492 — its June

18, 2002 Decision 2 recalled the RTC directive on the appointment of the receiver, prompting Julio

Vivares and Mila Ignaling 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. In 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

Ignaling 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  Estatebefore the Camiguin RTC, Branch 28 entitledJulio  A. 

Vivares,  as executor of  the estate of Torcuato J.  Reyes and Mila R.   Ignaling,  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. In 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. aCTHDA

On March 15, 2000, petitioners filed a Motion to Place Properties in Litigation under

Receivership 4 before the trial court alleging that to their prejudice respondent had, without prior court

12

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.

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 Order 6granting petitioners' motion and appointed Salantin as

receiver conditioned on the filing of a PhP50,000 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,

petitioners 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:

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

13

In 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. DSITEH

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. In 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:

I

WHETHER OR NOT THE ANNOTATION OF A NOTICE OF LIS PENDENS PRECLUDES

THE APPOINTMENT OF A RECEIVER WHEN THERE IS A NEED TO SAFEGUARD THE

PROPERTIES IN LITIGATION.

II

WHETHER OR NOT A DULY APPOINTED RECEIVER OF PROPERTIES IN LITIGATION

SHOULD BE DISCHARGED SIMPLY BECAUSE THE ADVERSE PARTY OFFERS TO

POST A COUNTERBOND.

III

WHETHER OR NOT THE CANCELLATION OF A NOTICE OF LIS PENDENS

ANNOTATED ON TAX DECLARATION NO. 112 IS 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.

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.

Indeed, 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 14

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. Indeed, the parties

agreed that the civil action does not encompass the properties covered by the oral partition. In this

factual setting, 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. ESaITA

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. The rule states that the

"application may be denied or the receiver discharged." In statutory construction, the word "may" has

always been construed as permissive. If 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. It 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 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. EaDATc

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 former is accorded better rights. In 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

15

established by the laws and the Rules of Court." In 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

In 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. It then ruled that the annotation of lis pendens should be

lifted.

This ruling is bereft of factual basis.

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. aTEScI

WHEREFORE, the petition is PARTLY GRANTED. The June 18, 2002 CA Decision in CA-G.R. SP No. 67492 is

AFFIRMED with MODIFICATION 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 counterbond in the amount of PhP100,000. 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.

SECOND DIVISION

[G.R. No. 174356. January 20, 2010.]

EVELINA G. CHAVEZ and AIDA CHAVEZ-DELES, petitioners, vs. COURT OF

APPEALS and ATTY. FIDELA Y. VARGAS,respondents.

DECISION

ABAD, J p:

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. ITSCED

The Facts and the Case

16

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 In 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 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. In all these cases, Fidela asked for the immediate appointment of a receiver for the property.

The Issues 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.

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. It 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. DHSEcI

Two. In 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

17

injured, necessitating its protection or preservation. Its object is the prevention of imminent danger to

the property. If 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. Indeed, 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.

WHEREFORE, the Court GRANTS the petition. The Resolutions dated April 12, 2006 and July 7, 2006 of

the Court of Appeals in CA-G.R. CV 85552, are REVERSED and SET ASIDE.

The receivership is LIFTED and the Court of Appeals is directed to resolve CA-G.R. CV 85552 with utmost

dispatch.

FIRST DIVISION

[G.R. No. 106473. July 12, 1993.]

ANTONIETTA O. DESCALLAR, petitioner, vs. THE HON. COURT OF APPEALS and

CAMILO F. BORROMEO, respondents.

Gilberto C. Alfafara for petitioner.

Bernadito A. Florido for private respondent.

SYLLABUS

1.CIVIL LAW; TORRENS SYSTEM OF LAND REGISTRATION; TORRENS TITLE, INDEFEASIBLE OR

INCONTROVERTIBLE; CAN NOT BE DEFEATED BY MERE VERBAL ALLEGATIONS. — 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. Soroñgan, 136 SCRA

407). Her Torrens certificates of title are indefeasible or incontrovertible (Sec. 32, P.D. 1529).

2.ID.; OBLIGATIONS AND CONTRACTS; SALE; SOURCE OF PURCHASE MONEY, IMMATERIAL AS LONG AS

VENDOR DOES NOT ACT AS TRUSTEE OR DUMMY OF AN ALIEN. — Even if it were true that an

18

impecunious former waitress, like 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. XII, 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.

3.REMEDIAL LAW; SPECIAL CIVIL ACTION; CERTIORARI; GRAVE ABUSE OF DISCRETION; MANIFEST IN

ORDER OF RECEIVERSHIP WHERE RIGHTS OF THE PARTIES ARE STILL TO BE DETERMINED. — 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 is erstwhile mistress, Antonietta,

purchased with money she obtained from him, is a legal heresy. In 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. Finding grave abuse of discretion in the order of receivership 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 appellant 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 ASIDE.

4.ID.; PROVISIONAL REMEDIES; RECEIVERSHIP; DANGER TO PROPERTY OF BEING MATERIALLY INJURED

OR LOST, INDISPENSABLE IN APPOINTMENT OF RECEIVER. — 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).

5.ID.; ID.; ID.; ID.; CASE AT BAR. — In 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. In any event, the

private respondent's rights and interest, 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.

6.ID.; ID.; ID.; FILING OF BOND, INDISPENSABLE; DISPENSED WITH BY APPOINTMENT OF CLERK OF

COURT AS RECEIVER. — Another flaw in the order of receivership is that the person whom the trial judge

appointed as receiver is her own clerk of court who did not file any bond to guarantee the faithful

discharge of his duties as depository. This practice has been frowned upon by this Court. (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, and other cases cited.)

7.ID.; ID.; ID.; IRREGULAR APPOINTMENT OF RECEIVER NOT SUBJECT TO RETROACTIVE VALIDATION. —

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 attained finality.

D E C I S I O N

GRIÑO-AQUINO, J p:

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. prcd

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.19

In 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.

In 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. prcd

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.

In 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.

In 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.

Soroñgan, 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 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. XII, 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. If 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.

In 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). LLphil

In 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 20

consummable. Even though it is mortgaged to a third person, there is no evidence that payment of the

mortgage obligation is being neglected. In 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 . . . 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 . . . '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 attained finality. cdphil

WHEREFORE, finding grave abuse of discretion in the order of receivership 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 ASIDE. Costs against the private respondent.

FIRST DIVISION

21

[G.R. No. 152239. August 17, 2011.]

MAKING ENTERPRISES, INC. AND SPOUSES JOAQUIN TAMANO AND ANGELITA

TAMANO, petitioners, vs. JOSE MARFORI AND EMERENCIANA

MARFORI, respondents.

DECISION

VILLARAMA, JR., J p:

Before us is a petition for review on certiorari assailing the July 24, 2000 Decision 1 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 Resolution 2 dated February 12, 2002, denying petitioners’ motion for

reconsideration. SCcHIE

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.

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, Inc. (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 Injunction

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.

In an Order 6 dated October 18, 1995, Judge Catalino Castañeda, 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 convinced 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. cEHITA

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 22

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

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 petition 18 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 deliberately 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 HcaDTE

In 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

Petition 21 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 Petition 23 with the CA. They added

that Judge Castañeda, 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. They likewise

reiterated in their amended petition their prayer for the appointment of a receiver to take over, manage,

and administer the Marsman Building.

In 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 aEcADH

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.

23

SO ORDERED. 25

The CA brushed aside petitioners' argument that respondents were guilty of forum shopping, holding

that technical 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 receiver 26 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 DENIED. 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 DIRECTED 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.

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. cDCaTH

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. In 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 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. 3124

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. CTaIHE

But even on the merits, the application for an appointment of a receiver must be denied.

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,

SECTION 1.  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;

xxx xxx xxx

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.

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. It 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. IDScTE

It 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 1 35 of the Revised

Penal Code, as amended, the death of Marfori totally extinguished his criminal liability. Because Marfori

died even before arraignment 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 ASIDE. In view

of the death of Jose Marfori, Criminal Case Nos. 170660 to 170676 before the Metropolitan Trial Court of

Caloocan City are hereby ordered DISMISSED.

No pronouncement as to costs.

25

EN BANC

[G.R. No. 1278. August 1, 1903.]

EUGENIO BONAPLATA, petitioner, vs. BYRON S. AMBLER, judge of the Court of

First Instance of Manila, and J. McMICKING, clerk of the Court of First Instance

of Manila, respondents.

Augustus A. Montagne for petitioner.

Frederick Garfield Waite for respondents.

SYLLABUS

1.RECEIVER; APPOINTMENT; INSOLVENCY; EXECUTION, MANDAMUS. — In 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.ID.; SUBJECT OF LITIGATION. — In 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.ID.; EXTRAORDINARY REMEDIES. — 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.

D E C I S I O N

McDONOUGH, J p:

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 Instance 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 Instance of Manila,

commanding him to issue and subscribe a writ of execution, sealed with the seal of the Court of

First Instance 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 Instance 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 Instance 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 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

26

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 Instance 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. It 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.

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 such costs and

expenses. (Hart vs. Times, 3 Edwards, Chancery, 226; Congden vs. Lee, 3 Edwards, Chancery, 304.)

In 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.

It 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

proceeding — the placing by the court of the property of the defendant in the hands of a receiver for the

purpose, 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 Islands. (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

theproperty 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 property — property 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.

27

It 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 granted, and judgment for the plaintiff w

ill be entered accordingly, with costs against the respondents.

SECOND DIVISION

[G.R. No. 125008. June 19, 1997.]

COMMODITIES STORAGE & ICE PLANT CORPORATION, SPOUSES VICTOR &

JOHANNAH TRINIDAD, petitioners, vs. COURT OF APPEALS, JUSTICE PEDRO A.

RAMIREZ, CHAIRMAN and FAR EAST BANK & TRUST COMPANY, respondents.

Nonette C. Mina for petitioners.

Siguion Reyna, Montecillo & Ongsiako for private respondents.

SYLLABUS

1.REMEDIAL LAW; PROVISIONAL REMEDIES; RECEIVER OF PROPERTY; DISCUSSED. — A receiver of real or

personal property 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. 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. It depends upon the sound discretion of the court and is based

on facts and circumstances of each particular case.

2.ID.; ID.; ID.; NECESSITY THEREOF, REQUIRED; NOT PRESENT IN CASE AT BAR — 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. If an action by

its nature, does not require such protection or preservation, said remedy cannot be applied for and

granted. Petitioners have not sufficiently shown that the Sta. Maria Ice 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.

3.ID.; ID.; ID.; APPOINTMENT THEREOF. — 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

28

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. 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. It 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. aEIcHA

4.ID.; CIVIL PROCEDURE; ACTIONS; MOTION TO DISMISS; ON THE GROUND OF IMPROPER VENUE; MAY

BE CONSIDERED ALTHOUGH NOT SPECIFICALLY RAISED IN APPELLATE COURT, IN A PETITION FOR

RECEIVERSHIP. — The motion to dismiss is anchored on improper venue, lack of cause of action and

forum-shopping. 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. Under Section 2 of Rule 4 of the Revised Rules of Court, 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 Ice Plant & Cold storage is located in Sta. Maria, Bulacan. The venue in Civil Case No. 94-

72076 was therefore laid improperly, having been instituted in Manila.

5.ID.; ID.; REAL ACTIONS; MORTGAGE; FORECLOSURE; ACTION FOR REDEMPTION; INVOLVES TITLE TO

FORECLOSED PROPERTY. — An action to redeem by the mortgage debtor affects his title to the

foreclosed property. If 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. If 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. It is a real action.

6.ID.; ID.; PARTIES TO CIVIL ACTIONS; TRANSFER OF INTEREST PENDING LITIGATION; ONLY UPON COURT

ORDER. — 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 bas not ordered the substitution of

respondent bank. DHIETc

D E C I S I O N

PUNO, J p:

In this petition for certiorari, petitioner seeks to annul and set aside the decision and resolution of the

Court of Appeals 1 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 Ice 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 highest bidder. It 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; 29

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

Instead of an answer, respondent bank filed on November 25, 1994 a "Motion to Dismiss and Opposition

to Plaintiff's Petition for Receivership." It alleged that the complaint states no cause of action and that

venue had been improperly laid. It also alleged that petitioners failed to pay the proper docket fees and

violated the rule on forum-shopping. 6

In 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 MILLION (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 ASIDE

and respondent's complaint in Civil Case No. 94-72076 in the respondent court

(Annexes F, petition; 4, comment), is DISMISSED. Costs against respondents

except the court.

SO ORDERED."

Reconsideration was denied on May 23, 1996. 8 Hence, this petition.

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 Instance 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 pendency 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."

30

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

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. It depends upon the sound discretion of the court 11 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":

"6.1Danger to the lives, health and peace of mind of the inhabitants living near

the Sta. Maria Ice Plant;

6.2Drastic 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 Ice Plant;

6.3The rapid reduction of the Ice 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. If an action

by its nature, does not require such protection or preservation, said remedy cannot be applied for and

granted. 14

In the instant case, we do not find the necessity for the appointment of a receiver. Petitioners have not

sufficiently shown that the Sta. Maria Ice 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 In 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 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. 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 It 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

31

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. 23

In 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 COMMODITIES actual and compensatory

damages in the amount of PESOS: TWO MILLION FIVE HUNDRED THOUSAND

and 00/100 (P2,500,000.00);

2.Ordering the Defendant to pay Plaintiffs moral damages in the amount of

PESOS: TWO MILLION 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: FIVE HUNDRED THOUSAND and 00/100 (P500,000.00) to

deter the repetition of such unjust and malicious actuations of the Defendant;

4.In order to restore the legal right of the Plaintiff COMMODITIES to redeem its

foreclosed property, a right which COMMODITIES 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 COMMODITIES of the correct, lawful, official and honest statements

of account and application of payments;

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. If 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 If 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. It is a real

action.

Section 2 of Rule 4 of the Revised Rules of Court provides:

"Sec. 2.Venue in Courts of First Instance. — (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." 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 Ice Plant & Cold Storage is located in Sta. Maria, Bulacan. The

venue in Civil Case No. 94-72076 was therefore laid improperly. cdtai

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

32

substituted in the action or joined with the original party. The court has not ordered the substitution of

respondent bank.

IN VIEW 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.

‘

EN BANC

[G.R. No. L-2349. October 22, 1948.]

FRED M. HARDEN, petitioner, vs. THE DIRECTOR OF PRISONS, respondent.

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.

SYLLABUS

1.HABEAS CORPUS; GROUNDS FOR RELIEF. — "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 30, 1947, 44 Off. Gaz., 1231.)

2.CONFLICT OF LAWS; RECEIVER, AUTHORITY TO ACT WITH RESPECT TO PROPERTY

BEYOND TERRITORIAL LIMIT. — 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

(id., 118). Whether the property was removed before or after the appointment of the receiver is

likewise immaterial.

3.CONTEMPT; PUNISHMENT FOR CONTEMPT IS NEITHER CRUEL NOR EXCESSIVE. —

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. It implies there something

inhuman and barbarous, something more than the mere extinguishment of life. The punishment

meted out to the petitioner is not excessive. It 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.ID.; TERM OF IMPRISONMENT IS LEFT OPEN FOR PETITIONER TO TERMINATE. — If 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. In

these circumstances, the judgment can not be said to be excessive or unjust.

5.ID.; INDICATION IN COMMITMENT THAT CONTEMNER CAN STILL PERFORM THE ACT IS

NOT REQUIRED. — 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.ID.; SOURCE OR ORIGIN OF SECTION 7 OF RULE 64 INDICATED. — 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.

33

7.HABEAS CORPUS; WRIT DOES NOT LIE 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. In a long line of

decisions, this court has steadfastly held that habeas corpus does not lie to correct errors of fact or

law.

8.ID.; WRIT CANNOT BE USED AS A WRIT 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.

D E C I S I O N

TUASON, J p:

The petitioner, Fred M. Harden, is being confined in prison for contempt of court by

virtue of an order of the following tenor:

"It 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. In 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 & Shanghai

Banking Corporation and the Chartered Bank of India, Australia & China, both in Hongkong, over

P1,000,000 in drafts or cash; to Virginia 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 India,

Australia & China. On October 7, 1947, Judge Peña 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 India,

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 Peña, 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 India, Australia & 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."

In 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

368,553 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, 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

34

same with the Manila Branch of the Chartered Bank of India, 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:

In 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." In 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.

In 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, 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."

In 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, immediately

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."

It 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 (Id. 118).

Whether the property was removed before or after the appointment of the receiver is

likewise immaterial.

In Sercomb vs. Catlin, 21 N. E., 606-608, the Supreme Court of Illinois said:

"It 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. If 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. It makes no difference that the property was in a 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. In Ex-parte Kemmler,

136 U. S., 436, the United States Supreme Court said that "punishments are cruel when they

35

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. It implies there something inhuman and barbarous,

something more than the mere extinguishment of life."

The punishment meted out to the petitioner is not excessive. It 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."

If 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. In these circumstances, the judgment can not be said to be excessive or unjust.

(Davis vs. Murphy [1947], 188 P., 2nd, 229-231.) As stated in a more recent case (De Wees [1948],

210 S. W., 2d, 145-147), "to order that one be imprisoned for an indefinite period in a civil

contempt is purely a remedial measure. Its 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:

"In a 'civil contempt' the proceeding is remedial, it is a 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 imprisonment. 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 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. It 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. It 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.

In 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

Repidevs. 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; Tinsleyvs. 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 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. (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.

Separate Opinions

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

Peña, of the Court of First Instance of Manila, issued on April 28, 1948, which reads as follows:

36

"It 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 India, Australia and

China.

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.Imprisonment  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 sometimes 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 full of

bloody pages about many individuals who have 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. In 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 thanreclusion 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 reclusion perpetua. There is no offense or crime for mere disobedience that is punished

by reclusion 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 1 [19],

Article III 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 [1], Article III of the Constitution.)

The authors of the rules could not have conceived or imagined any contempt of court of

such perversity that 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. In the present case,

petitioner has already suffered the maximum imprisonment of six months, and is exposed to

remain in prison for many more years. Is 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

37

of contempt 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. It fails to understand the true situation of a simple disobedience punished with imprisonment

that has no possible end except death.

We hold that the lower court erred in issuing the order of April 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 factual

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.

EN BANC

[G.R. No. L-252. March 30, 1946.]

TRANQUILINO CALO and DOROTEO SAN JOSE, petitioners, vs. ARSENIO C.

ROLDAN, Judge of First Instance of Laguna, REGINA RELOVA and TEODULA

BARTOLOME, respondents.

Zosimo D. Tanalega for petitioners.

Estanislao A. Fernandez for respondents Relova and Bartolome.

No appearance for respondent judge.

SYLLABUS

1.ACTIONS; WHAT DETERMINES NATURE OF. — It 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 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 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.

38

2.ID; NATURE OF, NOT AMENDED OR CHANGED BY PLAINTIFF'S REPLY. — The fact that

plaintiffs, in their reply dated September 4, after reiterating their allegation or claim that they 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 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.ID; EQUITABLE ACTION TO QUIET TITLE, WHEN TO BE FILED. — 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.ID.; PROVISIONAL REMEDIES; WHEN TO BE APPLIED 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. If an action, by its

nature, does not require such protection or preservation, said remedies can not be applied 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.RECEIVERSHIP; APPOINTMENT OF RECEIVER IN ACTION OF INJUNCTION; 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 Instance 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.ID; APPOINTMENT OF RECEIVER WHEN TITLE IS IN DISPUTE AND PROPERTY IN

POSSESSION 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.

D E C I S I O N

FERIA, J p:

This is a petition for a writ of certiorari against the respondent Judge Arsenio C. Roldan

of the Court of First Instance 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 actual possession of and belong to said plaintiffs.

The complaint filed by plaintiffs and respondents against defendants and petitioners in

the Court of First Instance 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: . . .

xxx xxx xxx

"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 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.

39

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 Instance of Laguna, denied the petition on the ground that the defendants

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 included 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 Instance 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.

It 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.

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 40

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 facts that plaintiffs, in their reply dated September 4, after reiterating their

allegation or claim that they 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 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 I of their answer that the action filed by them

against petitioners in the case No. 7951 of the Court of First Instance 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, 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 invokable would not afford adequate

remedy (32 Cyc., 1306, 1307). In 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 pendency of the principal action. If 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, 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 provisions remedy is to preserve the status 

quo of the things 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 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.

41

Delivery of personal property as a provisional remedy consists in the deliver, 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 insist that they are in actual possession of the lands

and, therefore, of the fruits 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 Instance 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 I 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 fruits. It 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. It 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 respondent judge would have acted in excess of his jurisdiction or

with 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.

In 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 Instance 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 Instance of Laguna

appointing a receiver in said case No. 7989 was issued in excess of its jurisdiction, and is therefor

null and void.

In view of all the foregoing, we hold that the respondent Judge Arsenio C. Roldan of the

Court of First Instance 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

42

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.

EN BANC

[G.R. No. L-1401. June 25, 1947.]

RODOLFO YLARDE, FLOR DE VIDA YLARDE, represented by Maria Cruz as

guardian and litem, and JULIA YLARDE, petitioners,vs. JUAN ENRIQUEZ, Judge

of First Instance of Nueva Ecija, BIENVENIDO SABADO, MAGDALENA SABADO

and APOLINARIO SABADO, respondents.

Azarias M. Padilla for petitioners.

V. M. Ruiz for respondents.

SYLLABUS

1.RECEIVERS; APPOINTMENT; HOW AND WHEN MADE. — "The appointment of a

receiver, because of its drastic nature and of itscharacter 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.ID.; ID.; ID.; COMPARISON WITH PRELIMINARY INJUNCTION. — 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. Petreños,27 Phil.,

648; Palafox vs. Madamba, 19 Phil., 444; Deveza vs. Arbes, 13 Phil., 273; 53 C. J., 26.) If, save in

exceptional cases, a preliminary injunction i8 improper where real property is involved,

receivership is even more so because it is harsher, more drastic and more costly than an injunction.

It 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.ID.; ID.; ID. — It is necessary in granting the relief of receivership that the "property or

fund (be) in danger of being lost, removed or materially injured."

4.ID.; ID.; ID.; INTEREST OF APPLICANT. — Section 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.ID.; ID.; ID. — A receiver, it has been repeatedly held, should not be granted where the

injury resulting therefrom would provably be greater than the injury ensuing from leaving the

possession of the property undisturbed. (53 C. J., 37.)43

6.ID.; ID.; ID.; CERTIORARI; APPEAL, INADEQUACY 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. In 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.

D E C I S I O N

TUASON, J p:

This is a petition for certiorari to vacate an appointment of a receiver by order of the

Court of First Instance of Nueva Ecija. A preliminary injunction has been granted by us restraining

the carrying out of the order. 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 perform 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 barious court orders relative to the appointment of a receiver afford sufficient

data to serve as basis for a decision.

It seems that Eugenia Ylarde was the legal or common-law wife of one Simplicio Rosario,

now deceased. It 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

canceling the original document.

In 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." It also appears that during the pendency of the

action or before — there is uncertainty in the allegations as to the time and the parties — two 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 17,1946, 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, from 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 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 44

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 vs. 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. Pedrenas, 27 Phil., 648; Palafox vs. Madamba, 19 Phil.,

444; Devesa vs. Arbes, 13 Phil., 273; 53 C. J., 26.) If, 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. It 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 any possible injury consequent upon

being deprived of the possession of the property.

The fact that these are harvested or standing crops to which the plaintiffs lay claim does

not improve their position. If 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.

Independent 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.)

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? If that money be insufficient would he borrow — if he could? And the

Court has not made any provision — if indeed it would be practical to make such provision at this

stage of the litigation — regarding the distribution of profits — or 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 Ylalde must have

lasted a long time. If 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.45

It 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 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 correct — that they have been substituted for Eugenia Ylarde —

the change must have been accomplished by an amendment of the complaint by the plaintiffs

themselves. If 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. It 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 final judgment is rendered. In 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 II 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.

FIRST DIVISION

[G.R. No. 3430. August 7, 1906.]

ROCHA & CO., Sociedad en Comandita, plaintiff, vs. A. S. CROSSFIELD, Judge of

the Court of First Instance of Manila, and FRANCISCO T.

FIGUERAS, defendants.

Chicote & Miranda, for plaintiff.

Coudert Brothers, for defendants.

SYLLABUS

1.LIMITED PARTNERSHIP. — 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; RECEIVER; LIEN. — 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 is the owner of the property for which a receiver is 46

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.ID.; ID.; CERTIORARI; APPEAL. — In 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.

D E C I S I O N

WILLARD, J p:

On the 25th of January, 1906 Francisco T. Figueras, one of the defendants, commenced

in the Court of First Instance 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 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 withdrawn 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 withdraw from the partnership and waived his right to receive at the time the fourth

part of his capital and consented that the fourth part should be paid at the end of six months. It

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 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.

It 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

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 of 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 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

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:

47

"(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 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)In an action by the mortgagee for the foreclosure of a mortgaged

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 inferred that he was 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 opening 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.

In 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. In 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 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 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 Encarnacion 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.

Ambler 3 (2 Off. Gaz., 281, 492.)

In 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 (Phil. Rep., 404).

The order of the court below appointing a receiver in this case was illegal and void, and

it 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.

48

EN BANC

[G.R. No. L-3791. November 29, 1950.]

AGUSTINA PARANETE, PERINO VILLAR, PEDRO HERNANDEZ, COMEDES

DALLATON, VALERIANO MILLANO, FELISIANA NAVARRO, and EDUARDO B.

OCAMPO, petitioners, vs. BIENVENIDO A. TAN, Judge, Court of First Instance of

Rizal, Rizal City Branch, FELIX ALCARAS, FRUCTUOSA VASQUEZ, MAXIMA

VASQUEZ, NORBERTA VASQUEZ and THE PROVINCIAL SHERIFF OF

RIZAL, respondents.

Emiliano M. Ocampo, for petitioners.

Jose E. Morales for respondents Felix Alcaras, and Fructuosa,

Maxima and Norberta, all surnamed Vasquez.

SYLLABUS

1.PROHIBITION OF REAL PROPERTY IN LITIGATION; ORDER REQUIRING ACCOUNTING

AND DEPOSIT OF PROCEEDS OF HARVEST WITH CLERK OF COURT, IMPROPER. — 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 vantage that the Clerk of Court has not filed any bond to guarantee the faithful discharge

of is duties as depository; 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 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.ID.; ID.; ID.; PARTY IN POSSESSION MADE IMPROVEMENTS. — If 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.

D E C I S I O N

BAUTISTA ANGELO, J p:

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.

On January 16, 1950, Felix Alcaras, Fructuosa Vasquez Maxima Vasquez and Norberta

Vasquez filed a case in the Court of First Instance 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,

plaintiffs 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

49

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 depository; 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.) 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 null and void and enjoins him from enforcing it as prayed for in the petition.

THIRD DIVISION

[G.R. No. 203585. July 29, 2013.]

50

MILA CABOVERDE TANTANO and ROSELLER CABOVERDE, petitioners, vs.

DOMINALDA ESPINA-CABOVERDE, EVE CABOVERDE-YU, FE CABOVERDE-

LABRADOR, and JOSEPHINE E. CABOVERDE, respondents.

DECISION

VELASCO, JR., J p:

The Case

Assailed in this petition for review under Rule 45 are the Decision and Resolution of the Court of Appeals

(CA) rendered on June 25, 2012 and September 21, 2012, respectively, in CA-G.R. SP. No. 03834, which

effectively affirmed the Resolutions dated February 8, 2010 and July 19, 2010 of the Regional Trial Court

(RTC) of Sindangan, Zamboanga del Norte, Branch 11, in Civil Case No. S-760, approving respondent

Dominalda Espina-Caboverde's application for receivership and appointing the receivers over the

disputed properties.

The Facts

Petitioners Mila Caboverde Tantano (Mila) and Roseller Caboverde (Roseller) are children of respondent

Dominalda Espina-Caboverde (Dominalda) and siblings of other respondents in this case, namely: Eve

Caboverde-Yu (Eve), Fe Caboverde-Labrador (Fe), and Josephine E. Caboverde (Josephine).

Petitioners and their siblings, Ferdinand, Jeanny and Laluna, are the registered owners and in possession

of certain parcels of land, identified as Lots 2, 3 and 4 located at Bantayan, Sindangan and Poblacion,

Sindangan in Zamboanga del Norte, having purchased them from their parents, Maximo and Dominalda

Caboverde. 1 cdphil

The present controversy started when on March 7, 2005, respondents Eve and Fe filed a complaint

before the RTC of Sindangan, Zamboanga del Norte where they prayed for the annulment of the Deed of

Sale purportedly transferring Lots 2, 3 and 4 from their parents Maximo and Dominalda in favor of

petitioners Mila and Roseller and their other siblings, Jeanny, Laluna and Ferdinand. Docketed as Civil

Case No. S-760, the case was raffled to Branch 11 of the court.

In their verified Answer, the defendants therein, including Maximo and Dominalda, posited the validity

and due execution of the contested Deed of Sale.

During the pendency of Civil Case No. S-760, Maximo died. On May 30, 2007, Eve and Fe filed an

Amended Complaint with Maximo substituted by his eight (8) children and his wife Dominalda. The

Amended Complaint reproduced the allegations in the original complaint but added eight (8) more real

properties of the Caboverde estate in the original list.

As encouraged by the RTC, the parties executed a Partial Settlement Agreement (PSA) where they fixed

the sharing of the uncontroverted properties among themselves, in particular, the adverted additional

eight (8) parcels of land including their respective products and improvements. Under the PSA,

Dominalda's daughter, Josephine, shall be appointed as Administrator. The PSA provided that Dominalda

shall be entitled to receive a share of one-half (1/2) of the net income derived from the uncontroverted

properties. The PSA also provided that Josephine shall have special authority, among others, to provide

for the medicine of her mother.

The parties submitted the PSA to the court on or about March 10, 2008 for approval. 2 CaAIES

Before the RTC could act on the PSA, Dominalda, who, despite being impleaded in the case as defendant,

filed a Motion to Intervene separately in the case. Mainly, she claimed that the verified Answer which

she filed with her co-defendants contained several material averments which were not representative of

the true events and facts of the case. This document, she added, was never explained to her or even

read to her when it was presented to her for her signature.

On May 12, 2008, Dominalda filed a Motion for Leave to Admit Amended Answer, attaching her

Amended Answer where she contradicted the contents of the aforesaid verified Answer by declaring that

there never was a sale of the three (3) contested parcels of land in favor of Ferdinand, Mila, Laluna,

Jeanny and Roseller and that she and her husband never received any consideration from them. She

made it clear that they intended to divide all their properties equally among all their children without

favor. In sum, Dominalda prayed that the reliefs asked for in the Amended Complaint be granted with

the modification that her conjugal share and share as intestate heir of Maximo over the contested

properties be recognized. 3

The RTC would later issue a Resolution granting the Motion to Admit Amended Answer. 4

51

On May 13, 2008, the court approved the PSA, leaving three (3) contested properties, Lots 2, 3, and 4,

for further proceedings in the main case.

Fearing that the contested properties would be squandered, Dominalda filed with the RTC on July 15,

2008 a Verified Urgent Petition/Application to place the controverted Lots 2, 3 and 4 under receivership.

Mainly, she claimed that while she had a legal interest in the controverted properties and their produce,

she could not enjoy them, since the income derived was solely appropriated by petitioner Mila in

connivance with her selected kin. She alleged that she immediately needs her legal share in the income

of these properties for her daily sustenance and medical expenses. Also, she insisted that unless a

receiver is appointed by the court, the income or produce from these properties is in grave danger of

being totally dissipated, lost and entirely spent solely by Mila and some of her selected kin. Paragraphs 5,

6, 7, and 8 of the Verified Urgent Petition/Application for Receivership 5 (Application for Receivership)

capture Dominalda's angst and apprehensions: TIcEDC

5.That all the income of Lot Nos. 2, 3 and 4 are collected by Mila Tantano, thru

her collector Melinda Bajalla, and solely appropriated by Mila Tantano and her

selected kins, presumably with Roseller E. Caboverde, Ferdinand E. Caboverde,

Jeanny Caboverde and Laluna Caboverde, for their personal use and benefit;

6.That defendant Dominalda Espina Caboverde, who is now sickly, in dire need

of constant medication or medical attention, not to mention the check-ups,

vitamins and other basic needs for daily sustenance, yet despite the fact that

she is the conjugal owner of the said land, could not even enjoy the proceeds or

income as these are all appropriated solely by Mila Tantano in connivance with

some of her selected kins;

7.That unless a receiver is appointed by the court, the income or produce from

these lands, are in grave danger of being totally dissipated, lost and entirely

spent solely by Mila Tantano in connivance with some of her selected kins, to

the great damage and prejudice of defendant Dominalda Espina Caboverde,

hence, there is no other most feasible, convenient, practicable and easy way to

get, collect, preserve, administer and dispose of the legal share or interest of

defendant Dominalda Espina Caboverde except the appointment of a receiver . .

.;

xxx xxx xxx

9.That insofar as the defendant Dominalda Espina Caboverde is concerned, time

is of the utmost essence. She immediately needs her legal share and legal

interest over the income and produce of these lands so that she can provide

and pay for her vitamins, medicines, constant regular medical check-up and

daily sustenance in life. To grant her share and interest after she may have

passed away would render everything that she had worked for to naught and

waste, akin to the saying "aanhin   pa   ang   damo   kung   patay   na   ang 

kabayo." HDaACI

On August 27, 2009, the court heard the Application for Receivership and persuaded the parties to

discuss among themselves and agree on how to address the immediate needs of their mother. 6

On October 9, 2009, petitioners and their siblings filed a Manifestation formally expressing their

concurrence to the proposal for receivership on the condition, inter alia, that Mila be appointed the

receiver, and that, after getting the 2/10 share of Dominalda from the income of the three (3) parcels of

land, the remainder shall be divided only by and among Mila, Roseller, Ferdinand, Laluna and Jeanny.

The court, however, expressed its aversion to a party to the action acting as receiver and accordingly

asked the parties to nominate neutral persons. 7

On February 8, 2010, the trial court issued a Resolution granting Dominalda's application for receivership

over Lot Nos. 2, 3 and 4. The Resolution reads:

As regards the second motion, the Court notes the urgency of placing Lot 2

situated at Bantayan, covered by TCT No. 46307; Lot 3 situated at Poblacion,

covered by TCT No. T-8140 and Lot 4 also situated at Poblacion covered by TCT

No. T-8140, all of Sindangan, Zamboanga del Norte under receivership as

defendant Dominalda Espina Caboverde (the old and sickly mother of the rest

of the parties) who claims to be the owner of the one-half portion of the

properties under litigation as her conjugal share and a portion of the estate of

her deceased husband Maximo, is in dire need for her medication and daily

sustenance. As agreed by the parties, Dominalda Espina Caboverde shall be

52

given 2/10 shares of the net monthly income and products of the said

properties. 8 cDHAaT

In the same Resolution, the trial court again noted that Mila, the nominee of petitioners, could not

discharge the duties of a receiver, she being a party in the case. 9 Thus, Dominalda nominated her

husband's relative, Annabelle Saldia, while Eve nominated a former barangay kagawad, Jesus Tan. 10

Petitioners thereafter moved for reconsideration raising the arguments that the concerns raised by

Dominalda in her Application for Receivership are not grounds for placing the properties in the hands of

a receiver and that she failed to prove her claim that the income she has been receiving is insufficient to

support her medication and medical needs. By Resolution 11 of July 19, 2010, the trial court denied the

motion for reconsideration and at the same time appointed Annabelle Saldia as the receiver for

Dominalda and Jesus Tan as the receiver for Eve. The trial court stated:

As to the issue of receivership, the Court stands by its ruling in granting the

same, there being no cogent reason to overturn it. As intimated by the movant-

defendant Dominalda Caboverde, Lots 2, 3 and 4 sought to be under

receivership are not among those lots covered by the adverted Partial Amicable

Settlement. To the mind of the Court, the fulfilment or non-fulfilment of the

terms and conditions laid therein nonetheless have no bearing on these three

lots. Further, as correctly pointed out by her, there is possibility that these Lots

2, 3, and 4, of which the applicant has interest, but are in possession of other

defendants who are the ones enjoying the natural and civil fruits thereof which

might be in the danger of being lost, removed or materially injured. Under this

precarious condition, they must be under receivership, pursuant to Sec. 1 (a) of

Rule 59. Also, the purpose of the receivership is to procure money from the

proceeds of these properties to spend for medicines and other needs of the

movant defendant Dominalda Caboverde who is old and sickly. This

circumstance falls within the purview of Sec. 1(d), that is, "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."

Both Annabelle Saldia and Jesus Tan then took their respective oaths of office and filed a motion to fix

and approve bond which was approved by the trial court over petitioners' opposition. EaCSTc

Undaunted, petitioners filed an Urgent Precautionary Motion to Stay Assumption of Receivers dated

August 9, 2010 reiterating what they stated in their motion for reconsideration and expressing the view

that the grant of receivership is not warranted under the circumstances and is not consistent with

applicable rules and jurisprudence. The RTC, on the postulate that the motion partakes of the nature of a

second motion for reconsideration, thus, a prohibited pleading, denied it via a Resolution dated October

7, 2011 where it likewise fixed the receiver's bond at PhP100,000 each. The RTC stated:

[1]The appointed receivers, JESUS A. TAN and ANNABELLE DIAMANTE-

SALDIA, are considered duly appointed by this Court, not only because their

appointments were made upon their proper nomination from the parties in

this case, but because their appointments have been duly upheld by the

Court of Appeals in its Resolution dated 24 May 2011 denying the herein

defendants' (petitioners therein) application for a writ of preliminary

injunction against the 8 February 2010 Resolution of this Court placing the

properties (Lots 2, 3 and 4) under receivership by the said JESUS A. TAN and

ANNABELLE DIAMANTE-SALDIA, and Resolution dated 29 July 2011 denying

the herein defendants' (petitioners therein) motion for reconsideration of

the 24 May 2011 Resolution, both, for lack of merit. In its latter Resolution,

the Court of Appeals states:

A writ of preliminary injunction, as an ancillary or preventive

remedy, may only be resorted to by a litigant to protect or preserve

his rights or interests and for no other purpose during the pendency

of the principal action. But before a writ of preliminary injunction

may be issued, there must be a clear showing that there exists a

right to be protected and that the acts against which the writ is to be

directed are violative of the said right and will cause irreparable

injury. CaSHAc

Unfortunately, petitioners failed to show that the acts of the

receivers in this case are inimical to their rights as owners of the 53

property. They also failed to show that the non-issuance of the writ

of injunction will cause them irreparable injury. The court-appointed

receivers merely performed their duties as administrators of the

disputed lots. It must be stressed that the trial court specifically

appointed these receivers to preserve the properties and its

proceeds to avoid any prejudice to the parties until the main case is

resolved, Hence, there is no urgent need to issue the injunction.

ACCORDINGLY, the motion for reconsideration is DENIED for lack of

merit.

SO ORDERED.

xxx xxx xxx

WHEREFORE, premises considered, this Court RESOLVES, as it is hereby

RESOLVED, that:

1.The defendants' "Urgent Precautionary Motion to

Stay Assumption of Receivers" be DENIED for lack of

merit. Accordingly, it being patently a second motion

for reconsideration, a prohibited pleading, the same is

hereby ordered EXPUNGED from the records;

2.The "Motion to Fix the Bond, Acceptance and

Approval of the Oath of Office, and Bond of the

Receiver" of defendant Dominalda Espina Caboverde,

be GRANTED with the receivers' bond set and fixed at

ONE HUNDRED THOUSAND PESOS (PhP100,000.00)

each. 12 HDIaET

It should be stated at this juncture that after filing their Urgent Precautionary Motion to Stay Assumption

of Receivers but before the RTC could rule on it, petitioners filed a petition for certiorari with the CA

dated September 29, 2010 seeking to declare null and void the February 8, 2010 Resolution of the RTC

granting the Application for Receivership and its July 19, 2010 Resolution denying the motion for

reconsideration filed by petitioners and appointing the receivers nominated by respondents. The petition

was anchored on two grounds, namely: (1) non-compliance with the substantial requirements under

Section 2, Rule 59 of the 1997 Rules of Civil Procedure because the trial court appointed a receiver

without requiring the applicant to file a bond; and (2) lack of factual or legal basis to place the properties

under receivership because the applicant presented support and medication as grounds in her

application which are not valid grounds for receivership under the rules.

On June 25, 2012, the CA rendered the assailed Decision denying the petition on the strength of the

following premises and ratiocination:

Petitioners harp on the fact that the court a quo failed to require Dominalda to

post a bond prior to the issuance of the order appointing a receiver, in violation

of Section 2, Rule 59 of the Rules of court which provides that:

SEC. 2.Bond on appointment of receiver. – Before

issuing the order appointing a receiver the court shall

require the applicant to file a bond executed to the

party against whom the application is presented, in an

amount to be fixed by the court, to the effect that the

applicant will pay such party all damages he may

sustain by reason of the appointment of such receiver

in case the applicant shall have procured such

appointment without sufficient cause; and the court

may, in its discretion, at any time after the

appointment, require an additional bond as further

security for such damages. aHTEIA

The Manifestation dated September 30, 2009 filed by petitioners wherein "they

formally manifest[ed] their concurrence" to the settlement on the application

for receivership estops them from questioning the sufficiency of the cause for

the appointment of the receiver since they themselves agreed to have the

properties placed under receivership albeit on the condition that the same be

placed under the administration of Mila. Thus, the filing of the bond by

Dominalda for this purpose becomes unnecessary.54

It must be emphasized that the bond filed by the applicant for receivership

answers only for all damages that the adverse party may sustain by reason of

the appointment of such receiver in case the applicant shall have procured such

appointment without sufficient cause; it does not answer for damages suffered

by reason of the failure of the receiver to discharge his duties faithfully or to

obey the orders of the court, inasmuch as such damages are covered by the

bond of the receiver.

As to the second ground, petitioners insist that there is no justification for

placing the properties under receivership since there was neither allegation nor

proof that the said properties, not the fruits thereof, were in danger of being

lost or materially injured. They believe that the public respondent went out of

line when he granted the application for receivership for the purpose of

procuring money for the medications and basic needs of Dominalda despite the

income she's supposed to receive under the Partial Settlement Agreement.

The court a quo has the discretion to decide whether or not the appointment of

a receiver is necessary. In this case, the public respondent took into

consideration that the applicant is already an octogenarian who may not live up

to the day when this conflict will be finally settled. Thus, We find that he did not

act with grave abuse of discretion amounting to lack or excess of jurisdiction

when he granted the application for receivership based on Section 1(d) of Rule

59 of the Rules of Court. DAESTI

A final note, a petition for certiorari may be availed of only when there is no

appeal, nor any plain, speedy and adequate remedy in the ordinary course of

law. In this case, petitioners may still avail of the remedy provided in Section 3,

Rule 59 of the said Rule where they can seek for the discharge of the receiver.

FOR REASONS STATED, the petition for certiorari is DENIED.

SO ORDERED. 13

Petitioners' Motion for Reconsideration was also denied by the CA on September 21, 2012. 14

Hence, the instant petition, petitioners effectively praying that the approval of respondent Dominalda's

application for receivership and necessarily the concomitant appointment of receivers be revoked.

The Issues

Petitioners raise the following issues in their petition:

(1)Whether or not the CA committed grave abuse of discretion in sustaining the appointment of a

receiver despite clear showing that the reasons advanced by the applicant are not any of those

enumerated by the rules; and

(2)Whether or not the CA committed grave abuse of discretion in upholding the Resolution of the RTC

and ruling that the receivership bond is not required prior to appointment despite clear dictates of the

rules.

The Court's Ruling

The petition is impressed with merit. CcSTHI

We have repeatedly held that receivership is a harsh remedy to be granted with utmost circumspection

and only in extreme situations. The doctrinal pronouncement in Velasco  &  Co.   v.  Gochico  &   Co is

instructive:

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. 15

To recall, the RTC approved the application for receivership on the stated rationale that receivership was

the most convenient and feasible means to preserve and administer the disputed properties. As a

corollary, the RTC, agreeing with the applicant Dominalda, held that placing the disputed properties

under receivership would ensure that she would receive her share in the income which she supposedly

55

needed in order to pay for her vitamins, medicines, her regular check-ups and daily sustenance.

Considering that, as the CA put it, the applicant was already an octogenarian who may not live up to the

day when the conflict will be finally settled, the RTC did not act with grave abuse of discretion

amounting to lack or excess of jurisdiction when it granted the application for receivership since it was

justified under Sec. 1 (d), Rule 59 of the Rules of Court, which states:

Section 1.Appointment of a 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:

xxx xxx xxx

(d)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. (Emphasis supplied.)

Indeed, Sec. 1 (d) above is couched in general terms and broad in scope, encompassing instances not

covered by the other grounds enumerated under the said section. 16 However, in granting applications

for receivership on the basis of this section, courts must remain mindful of the basic principle that

receivership may be granted only when the circumstances so demand, either because the property

sought to be placed in the hands of a receiver is in danger of being lost or because they run the risk of

being impaired, 17 and that being a drastic and harsh remedy, receivership must be granted only when

there is a clear showing of necessity for it in order to save the plaintiff from grave and immediate loss or

damage. 18 aTCAcI

Before appointing a receiver, courts should consider: (1) whether or not the injury resulting from such

appointment would probably be greater than the injury ensuing if the status quo is left undisturbed; and

(2) whether or not the appointment will imperil the interest of others whose rights deserve as much a

consideration from the court as those of the person requesting for receivership. 19

Moreover, this Court has consistently ruled that 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. 20

After carefully considering the foregoing principles and the facts and circumstances of this case, We find

that the grant of Dominalda's Application for Receivership has no leg to stand on for reasons discussed

below.

First, Dominalda's alleged need for income to defray her medical expenses and support is not a valid

justification for the appointment of a receiver. The approval of an application for receivership merely on

this ground is not only unwarranted but also an arbitrary exercise of discretion because financial need

and like reasons are not found in Sec. 1 of Rule 59 which prescribes specific grounds or reasons for

granting receivership. The RTC's insistence that the approval of the receivership is justified under Sec. 1

(d) of Rule 59, which seems to be a catch-all provision, is far from convincing. To be clear, even in cases

falling under such provision, it is essential that there is a clear showing that there is imminent danger

that the properties sought to be placed under receivership will be lost, wasted or injured.

Second, there is no clear showing that the disputed properties are in danger of being lost or materially

impaired and that placing them under receivership is most convenient and feasible means to preserve,

administer or dispose of them.

Based on the allegations in her application, it appears that Dominalda sought receivership mainly

because she considers this the best remedy to ensure that she would receive her share in the income of

the disputed properties. Much emphasis has been placed on the fact that she needed this income for her

medical expenses and daily sustenance. But it can be gleaned from her application that, aside from her

bare assertion that petitioner Mila solely appropriated the fruits and rentals earned from the disputed

properties in connivance with some of her siblings, Dominalda has not presented or alleged anything else

to prove that the disputed properties were in danger of being wasted or materially injured and that the

appointment of a receiver was the most convenient and feasible means to preserve their

integrity. cCaATD

Further, there is nothing in the RTC's February 8 and July 19, 2010 Resolutions that says why the

disputed properties might be in danger of being lost, removed or materially injured while in the hands of

the defendants a quo. Neither did the RTC explain the reasons which compelled it to have them placed

under receivership. The RTC simply declared that placing the disputed properties under receivership was

urgent and merely anchored its approval on the fact that Dominalda was an elderly in need of funds for

her medication and sustenance. The RTC plainly concluded that since the purpose of the receivership is

to procure money from the proceeds of these properties to spend for medicines and other needs of 56

the Dominalda, who is old and sickly, this circumstance falls within the purview of Sec. 1 (d), that is,

"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."

Verily, the RTC's purported determination that the appointment of a receiver is the most convenient and

feasible means of preserving, administering or disposing of the properties is nothing but a hollow

conclusion drawn from inexistent factual considerations. cDIHES

Third, placing the disputed properties under receivership is not necessary to save Dominalda from grave

and immediate loss or irremediable damage. Contrary to her assertions, Dominalda is assured of

receiving income under the PSA approved by the RTC providing that she was entitled to receive a share

of one-half (1/2) of the net income derived from the uncontroverted properties. Pursuant to the PSA,

Josephine, the daughter of Dominalda, was appointed by the court as administrator of the eight (8)

uncontested lots with special authority to provide for the medicine of her mother. Thus, it was patently

erroneous for the RTC to grant the Application for Receivership in order to ensure Dominalda of income

to support herself because precisely, the PSA already provided for that. It cannot be over-emphasized

that the parties in Civil Case No. S-760 were willing to make arrangements to ensure that Dominalda was

provided with sufficient income. In fact, the RTC, in its February 8, 2010 Resolution granting the

Application for Receivership, noted the agreement of the parties that "Dominalda Espina Caboverde

shall be given 2/10 shares of the net monthly income and products of said properties." 21

Finally, it must be noted that the defendants in Civil Case No. S-760 are the registered owners of the

disputed properties that were in their possession. In cases such as this, it is settled jurisprudence that the

appointment should be made only in extreme cases and on a clear showing of necessity in order to save

the plaintiff from grave and irremediable loss or damage. 22 TcSCEa

This Court has held that a receiver should not be appointed to deprive a party who is in possession of the

property in litigation, just as a writ of preliminary injunction should not be issued to 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, except in a very clear case of evident usurpation. 23

Furthermore, this Court has declared that the appointment of a receiver is not proper when the rights of

the parties, one of whom is in possession of the property, depend on the determination of their

respective claims to the title of such property 24 unless such property is in danger of being materially

injured or lost, as by the prospective foreclosure of a mortgage on it or its portions are being occupied by

third persons claiming adverse title. 25

It must be underscored that in this case, Dominalda's claim to the disputed properties and her share in

the properties' income and produce is at best speculative precisely because the ownership of the

disputed properties is yet to be determined in Civil Case No. S-760. Also, except for Dominalda's claim

that she has an interest in the disputed properties, Dominalda has no relation to their produce or

income.

By placing the disputed properties and their income under receivership, it is as if the applicant has

obtained indirectly what she could not obtain directly, which is to deprive the other parties of the

possession of the property until the controversy between them in the main case is finally settled. 26 This

Court cannot countenance this arrangement.

To reiterate, the RTC's approval of the application for receivership and the deprivation of petitioners of

possession over the disputed properties would be justified only if compelling reasons exist.

Unfortunately, no such reasons were alleged, much less proved in this case.

In any event, Dominalda's rights may be amply protected during the pendency of Civil Case No. S-760 by

causing her adverse claim to be annotated on the certificates of title covering the disputed properties. 27

As regards the issue of whether or not the CA was correct in ruling that a bond was not required prior to

the appointment of the receivers in this case, We rule in the negative. aAcHCT

Respondents Eve and Fe claim that there are sufficient grounds for the appointment of receivers in this

case and that in fact, petitioners agreed with them on the existence of these grounds when they

acquiesced to Dominalda's Application for Receivership. Thus, respondents insist that where there is

sufficient cause to appoint a receiver, there is no need for an applicant's bond because under Sec. 2 of

Rule 59, the very purpose of the bond is to answer for all damages that may be sustained by a party by

reason of the appointment of a receiver in case the applicant shall have procured such

appointment without sufficient cause. Thus, they further argue that what is needed is the receiver's

bond which was already fixed and approved by the RTC. 28 Also, the CA found that there was no need

for Dominalda to file a bond considering that petitioners filed a Manifestation where they formally

consented to the receivership. Hence, it was as if petitioners agreed that there was sufficient cause to

57

place the disputed properties under receivership; thus, the CA declared that petitioners were estopped

from challenging the sufficiency of such cause.

The foregoing arguments are misplaced. Sec. 2 of Rule 59 is very clear in that before issuing the order

appointing a receiver the court shall require the applicant to file a bond executed to the party against

whom the application is presented. The use of the word "shall" denotes its mandatory nature; thus, the

consent of the other party, or as in this case, the consent of petitioners, is of no moment. Hence, the

filing of an applicant's bond is required at all times. On the other hand, the requirement of a receiver's

bond rests upon the discretion of the court. Sec. 2 of Rule 59 clearly states that the court may, in its

discretion, at any time after the appointment, require an additional bond as further security for such

damages. ETaSDc

WHEREFORE, upon the foregoing considerations, this petition is GRANTED. The assailed CA June 25,

2012 Decision and September 21, 2012 Resolution in CA-G.R. SP No. 03834 are

hereby REVERSED and SET ASIDE. The Resolutions dated February 8, 2010 and July 19, 2010 of the RTC,

Branch 11 in Sindangan, Zamboanga del Norte, in Civil Case No. S-760, approving respondent Dominalda

Espina-Caboverde's application for receivership and appointing the receivers over the disputed

properties are likewise SET ASIDE.

THIRD DIVISION

[G.R. No. 61508. March 17, 1999.]

CITIBANK, N.A. (Formerly First National City Bank), petitioner, vs. THE

HONORABLE COURT OF APPEALS AND DOUGLAS F. ANAMA, respondents.

Agcaoili & Associates for petitioner.

Quasha Asperilla Ancheta Pena & Associates for private respondent.

SYNOPSIS

In consideration of a loan obtained from Citibank, N.A., Anama executed a promissory note to pay the

same and constituted a Chattel Mortgage in favor of the Bank, on his various machineries and

equipment. Later, for failure of Anama to pay the promissory note despite demand, the Bank filed a

complaint for the collection of the unpaid balance, for the delivery and possession of the chattels

preparatory to the foreclosure thereof. An Order of Replevin over the properties covered by the Chattel

Mortgage was issued but the same was not immediately implemented in view of an amicable settlement

then being worked out. But when the same failed, the lower court proceeded to try the case on the

merits. The Bank filed a Motion for the Issuance of an Alias Writ of Seizure, and the same was granted

despite opposition by Anama. Thereafter, the Bank took possession of the mortgaged chattels and they

were advertised for public auction. Anama then went to the Court of Appeals, which ruled, among

others, that there was no Affidavit of Merit accompanying the Complaint for Replevin and the bond

posted by Citibank was insufficient. Hcnce, this petition for certiorari.

There is substantial compliance with the rule requiring an affidavit of merit to 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. Here, the Bank's complaint did not allege all the facts

that should be set forth in an affidavit of merit. At any rate, the defense of lack of affidavit of merit was

interposed only in the Reply to the Comment of the Bank on the Petition for Certiorari which Anama filed

with the Court of Appeals. Procedurally therefore, such defense was no longer available for failure to

plead the same in the Answer as required by the omnibus motion rule.

The Bank also questioned the finding of the Court of Appeals that the bond posted was insufficient. What

was posted was merely an amount which was double the probable value as declared by the Bank and,

58

therefore, inadequate should there be a finding that the actual value is actually greater. Since the

valuation has been disputed, actual value of the properties should have been determined first by the

lower court.

SYLLABUS

1.REMEDIAL LAW; CIVIL ACTION; JUDGMENT ON THE MERITS; NOT MADE IN CASE AT BAR. — 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. 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.

In 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 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.

2.ID.; PROVISIONAL REMEDIES; REPLEVIN; AFFIDAVIT OF MERIT; SUBSTANTIAL COMPLIANCE THEREOF.

— There is substantial compliance with the rule requiring that an affidavit of merit to 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. 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.

3.ID.; ID.; ID.; ID.; FACTS THAT MUST BE SET FORTH. — 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.

4.ID.; ID.; ID.; ID.; ACTUAL VALUE OF THE PROPERTY SUBJECT OF REPLEVIN. — 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." It 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.

5.ID.; CIVIL ACTION; PLEADINGS; DEFENSES AND OBJECTIONS NOT PLEADED DEEMED WAIVED. — It

should be noted, however, that the private respondent interposed the defense of lack of affidavit of

merit only in his Reply to the Comment of Citibank on the Petition for Certiorari which respondent filed

with the Court of Appeals. 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.

6.ID.; PROVISIONAL REMEDIES; REPLEVIN; BOND; SHOULD BE DOUBLE THE ACTUAL VALUE OF THE

PROPERTIES INVOLVED. — 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. 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 . . . ." Hence, the bond should be double the actual

value of the properties involved. In 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 greater. 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. It was thus

an error for the said court to approve the bond, which was based merely on the probable value of the

properties.

59

7.ID.; ID.; ID.; ID.; PURPOSE THEREOF. — It 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.

8.ID.; ID.; ID.; POSTING OF COUNTERBOND OR REDELIVERY BOND; WHEN PROPER; CASE AT BAR. — The

Court held in a prior case that the remedies provided under Section 5, Rule 60, are alternative remedies.

". . . If 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 requirements — as well as compliance

therewith within the fve-day period mentioned — being mandatory." 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. In 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 below — when, instead of requiring the plaintiff to post a new bond, the court

approved the bond claimed by respondent to be insufficient, and ordered the seizure of the properties

— recourse to a petition for certiorari before the Court of Appeals assailing such order is proper under

the circumstances.

9.ID.; RECEIVERSHIP; OATH AND BOND OF RECEIVER; CASE AT BAR. — 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. It 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. 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. 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.

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.

10.ID.; SPECIAL CIVIL ACTIONS; CERTIORARI; GRAVE ABUSE OF DISCRETION, COMMITTED BY THE TRIAL

COURT. — 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. This is because a possessor has every right to be respected in its possession

and may not be deprived of it without due process.

D E C I S I O N

PURISIMA, J p:

At bar is a special civil action for certiorari with prayer for a temporary restraining order faulting the

Court of Appeals 1 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. llcd

The facts leading to the institution of the case are as follows:

In 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

60

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.

(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)In case the plaintiff institutes proceedings for the foreclosure of the

mortgage, the plaintiff shall be entitled to the appointment of a

receiver without a bond.

(f)In case of default, the defendant shall be liable for attorney'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 Instance 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 understanding 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 61

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 petitioner 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 Issuance 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 Instance, 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:

"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:

"In 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

Prohibition 7 with Injunction 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. cdasia

62

On July 30, 1982, finding that the trial court acted with grave abuse of discretion amounting to excess or

lack of jurisdiction 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:

I

THE RESPONDENT COURT ERRED IN PRACTICALLY AND IN EFFECT RENDERING

JUDGMENT ON THE MERITS AGAINST THE HEREIN PETITIONER BY ORDERING

THE RETURN OF THE MACHINERIES AND EQUIPMENT AND ITS ACCESSORIES TO

THEIR ORIGINAL AND RESPECTIVE PLACES AND POSITIONS.

II

THE RESPONDENT COURT ERRED IN FINDING THAT THE COMPLAINT OF THE

PETITIONER DID NOT COMPLY WITH THE PROVISIONS OF SEC. 2, RULE 60 OF

THE RULES OF COURT. LLpr

III

THAT THE RESPONDENT COURT ERRED IN FINDING THAT THE BOND POSTED BY

THE PETITIONER IS QUESTIONABLE AND/OR INSUFFICIENT.

IV

THE RESPONDENT COURT ERRED IN FINDING THAT THE PETITIONER DID NOT

COMPLY WITH THE PROVISIONS OF SEC. 5, RULE 59 BY FAILING TO POST A

RECEIVER'S BOND.

V

THE RESPONDENT ERRED IN FINDING THAT THE HON. JORGE R. COQUIA ACTED

WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OR LACK OF

JURISDICTION IN DEALING WITH THE SITUATION.

I

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. It 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 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 63

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

In 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:

SECTION 2. Affidavit and Bond. — Upon applying or 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;

(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.

II

In 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.

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 to

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. IV-A, p. 383)

64

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 the (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 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. It 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.

It should be noted, however, that the private respondent interposed the defense of lack of affidavit of

merit only in his 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:

SECTION 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, . . . .

This Rule has been revised and amended, as follows:

SECTION 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.

III

Petitioner also faults the Court of Appeals for finding that the bond posted by the petitioner is

questionable and/or insufficient. It 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 properties. In 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

65

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 . . . ." Hence, the

bond should be double the actual value of the properties involved. In 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. It was thus an error for the said court to approve the

bond, which was based merely on the probable value of the properties.

It 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. 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. 15Thus, 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:

"SECTION 5.Return of property. — If 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.

SECTION 6.Disposition of property by officer. — If 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."

The Court held in a prior case 16 that the remedies provided under Section 5, Rule 60, are alternative

remedies. ". . . If 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 requirements — as well as

compliance therewith within the five-day period mentioned — being 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. cdasia

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

66

In 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 below — when, 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 properties — recourse to a petition

for certioraribefore the Court of Appeals assailing such order is proper under the circumstances.

IV

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. It is further

argued that assuming that it did assume receivership, the Chattel Mortgage expressly provides, that:

"In 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 letter 21 dated April 1, 1975 sent by petitioner to the private respondent, reads:

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,

FIRST NATIONAL CITY 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.

It 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.

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:

67

"SECTION 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

In light of the foregoing, the answer to the fifth assignment of errors 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

"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 ofArticle 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 cause — a 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 DISMISSED. No pronouncement as to costs.

SECOND DIVISION

[G.R. No. 16709. August 8, 1921.]

SEBASTIANA MARTINEZ ET AL., plaintiffs-appellants, vs. CLEMENCIA GRAÑO ET

AL., defendants-appellees.

Claro M. Recto and J. E. Blanco for appellants.

Jose G. Generoso and Ramon Diokno for appellee Clemencia Grailo.68

SYLLABUS

1.TRUSTS AND TRUSTEE; PURCHASE OF LAND SOLD WITH "PACTO DE RETRO." — A

person who, before consolidation of property in the purchaser under a contract of sale with  pacto 

de retro, agrees with the vendors to buy the property and administer it till all debts constituting an

incumbrance thereon shall be paid, after which the property shall be turned back to the original

owners, is bound by such agreement; and upon buying in the property under these circumstances

such person becomes in effect a trustee and is bound to administer the property in this character.

2.ID.; RENUNCIATION OF TRUST; REMOVAL OF TRUSTEE. — When a person

administering property in the character of trustee inconsistently assumes to be holding in his own

right, this operates as a renunciation of the trust and the persons interested as beneficiaries in the

property are entitled to maintain an action to declare their right and remove the unfaithful trustee.

3.ID.; REMOVAL OF TRUSTEE; APPOINTMENT OF RECEIVER TO ADMINISTER TRUST

PROPERTY. — In a case where it became necessary to deprive a trustee of the management of trust

property, a receiver was directed to be appointed to administer the property and apply the

proceeds to the satisfaction of a mortgage which had been placed upon the property.

D E C I S I O N

STREET, J p:

Juan Martinez and his wife, Macaria Ticson, both now deceased, were owners in their

lifetime of seven parcels of land of considerable value, located in the municipality of San Pablo, in

the Province of Laguna, which property, upon the death in 1910 of the last of the two spouses

above mentioned, devolved by inheritance upon their numerous living children and the

descendants of such as were dead. In due time partition was effected, with the approval of the

Court of First Instance of Laguna, and appropriate portions were assigned to the several heirs. To

this end it was necessary that the seven parcels of which the property was composed should be

subdivided into numerous smaller parcels, as was in fact done.

The persons participating in this division, according to the project of partition approved

by the court on July 7, 1915, were, first, the four children, Sebastiana Martinez, Julio Martinez,

Isidro Martinez, and Benedicto Martinez, to each of whom was assigned a child's part. Three other

brothers, Inocente, Eleuterio, and Apolonio had meantime died. Of these, Inocente Martinez left a

widow, named Rosario Ebron, and four children named respectively Alfredo, Floriño, Maria-

Salome, and Maria-Jacobe. To these accordingly was assigned in common the portion which would

have pertained to their father, Inocente. The second deceased brother, Eleuterio Martinez, also left

four orphan children, named respectively Leoncio, Ulpiano, Zosima, and Maximo, his wife having

died about the same time as himself or soon thereafter. To these four children, therefore, was

assigned in common the portion that would have pertained to their father, Eleuterio. The third

deceased brother, Apolonio Martinez, was survived by his widow, Clemencia Graño, and by their

only child, a boy named Jose, to whom was assigned the portion that would have pertained to

Apolonio. There was still another brother of the Martinez family, named Ciriaco, but as he died

without issue no account need be taken of him.

All of the nine grandchildren whose names have been given were minors when partition

was effected, and they were still such at the time the present cause was tried in the Court of First

Instance, being represented respectively as follows: the four children of Inocente Martinez, by their

mother Rosario Ebron, as guardian; the four children of Eleuterio Martinez, by their uncle Isidro

Martinez, as guardian; and Jose, son of Apolonio Martinez, by his mother Clemencia Graño, as

guardian.

At the time of the division aforesaid and apparently for a number of years prior thereto,

the property comprising the estate of the deceased spouses, Juan Martinez and Macaria Ticson,

was encumbered with indebtedness, and the parties in interest had long since been compelled to

resort to the dangerous expedient of selling their inheritance under a contract of sale with  pacto de 

retro. Thus, we find that, prior to the year 1911, one W. W. Robinson had acquired title to the

property under such a contract; and on October 11 of that year the property was again sold

under pacto de retroto Alfonso Tiaoqui, of Manila, for the sum of P12,000, apparently in order to

get the means to redeem the property from Robinson.

The period for redemption specified in the sale to Tiaoqui was three years, which

expired in October, 1914. When this date arrived it was still found impossible for the parties in

interest to redeem the property; and apparently by the indulgence of Tiaoqui, the time for

redemption was extended to September 28, 1916, upon which date still another contract of sale 69

with pacto  de retro was executed in favor of the same Tiaoqui, and approved by the court as

regards the minor persons in interest. The price stated in this contract was P20,000, and the period

for redemption was limited to one year, "extendible to another with the consent of the parties."

Once more, as the date thus fixed for the expiration of the time for redemption

approached, it was found that the parties in interest would again be unable to redeem; and it was

then becoming very evident that unless a large loan could be secured under more favorable terms

than had been hitherto obtained, the property would soon be totally lost to its former owners. In

this extremity inquiry was made of "El Hogar Filipino," a mutual building and loan association of

Manila, to ascertain whether the necessary loan could be obtained from it. In response to this

inquiry it was found that said association was prepared to advance, upon comparatively favorable

terms, the capital necessary to redeem the property, provided that a small additional amount of

security could be supplied. One obstacle, however, to the consummation of this loan was found in

the fact that the parties in interest were numerous and many were minors. This made it

inconvenient for "El Hogar Filipino" to handle the business, in view of the peculiar obligations which

would devolve upon the borrower by contract with it.

In view of this difficulty, the adult parties in interest were advised, and decided, to allow

a single individual to effect the redemption from Alfonso Tiaoqui, thus placing the documentary

title exclusively in this one person, who, as was intended, could then deal directly with the

association. The person chosen as the repository of this trust was Clemencia Graño, the widow of

Apolonio Martinez and mother and guardian of Jose.

As the purpose in obtaining the loan from "El Hogar Filipino" was to get the means to

redeem the property from Alfonso Tiaoqui, it was necessary that the redemption from the latter

should be effected contemporaneously with the securing of the loan from the building and loan

association; and this double transaction was accomplished in the city of Manila on December 19,

1917, when the proper representative of "El Hogar Filipino" made out and delivered to Clemencia

Graño a check for the sum of P24,759.61, which was thereupon immediately indorsed and

delivered by her to Alfonso Tiaoqui, in satisfaction of the stipulated price of repurchase (P20,000),

together with rents in arrears, due from the Martinez heirs, and the amount of P4,759.61, including

interest.

Upon this occasion the following documents were executed and duly acknowledged by

the parties respectively concerned therein:

(1)A deed of sale from Alfonso Tiaoqui, conveying to Clemencia Graño all the property

which had been sold to him by the Martinez heirs under contract of sale with pacto de retro, dated

September 28, 1916;

(2)A mortgage of real estate from Clemencia Graño, conveying to "El Hogar Filipino," in

consideration of a loan of P30,000, all of the seven parcels pertaining to the Martinez estate which

had been obtained by her under the deed of purchase from Alfonso Tiaoqui, together with four

additional parcels, to one of which, the parcel (k), more particular reference will be made in the

next succeeding paragraph hereof.

(3)A notarial declaration, signed and acknowledged by Clemencia Graño, in which she

states, among other things, that she had intervened in the aforementioned transactions in behalf

of all the Martinez heirs and that the seven parcels of property proceeding from the Martinez

estate which had been mortgaged by her to "El Hogar Filipino" belonged to said heirs. She also

states in the same declaration that the parcel (k), included in the mortgage to "El Hogar Filipino," is

the property of Julio Martinez, which had been conveyed to her in order that it might be included

in the mortgage as additional security.

It is a matter of common knowledge that a building and loan association, such as "El

Hogar Filipino," upon making a loan, requires the borrower to become subscriber to a sufficient

number of shares of the stock of the association to amortize the loan upon maturity of the shares;

and the borrower is further required to make certain payments upon these shares

contemporaneously with the payment of interest upon the loan, subject to fine in case of

delinquency in meeting either of these obligations, and subject also to foreclosure of the mortgage

in case delinquency should be extended beyond a stated period. It is therefore of the utmost

importance that the borrower from such a society should be prompt in meeting all the obligations

imposed on him by the contract with it.

In consideration of the responsibility thus to be assumed by Clemencia Graño, as

borrower, all of the adult Martinez heirs personally and the guardians of the minor heirs executed a

document jointly with Clemencia Graño, personally and as guardian of her own minor son Jose, in

which it was agreed that Clemencia Graño should have exclusive possession of all the land

pertaining to the Martinez estate and administer the same for the purpose of raising the necessary

revenue to meet her obligations to "El Hogar Filipino." In this contract the heirs all agreed that

Clemencia Graño, as their attorney in fact, should be respected by them in all matters relating to

the administration of the property and they obligated themselves, one and all, to abstain from 70

interfering with her in the slightest degree in said administration. The contract to which reference

is here made is dated November 7, 1917, that is to say, several weeks before the loan from "El

Hogar Filipino" was finally obtained; but it was made in contemplation of said loan, and in it the

transaction with "El Hogar Filipino" is mentioned as if already consummated.

There is still another document, bearing the signatures of Isidro Martinez, Julia

Martinez, Sebastiana Martinez, Rosario Ebron, and Clemencia Graño, and acknowledged before a

notary public on December 17, 1917, which defines in the fullest and most satisfactory way the

interests of all the parties in the property derived from the Martinez estate, which two days later

was to become the subject of the mortgage to "El Hogar Filipino." Furthermore it explains clearly

the function to be undertaken by Clemencia Graño in respect thereto. In this document it is stated,

among other things: (1) that, although the period for repurchase under the contract of sale to

Alfonso Tiaoqui had expired on September 28, 1917, he had nevertheless been extending the time

until then; (2) that a mortgage of the property which had been sold to Tiaoqui was under

contemplation to "El Hogar Filipino," as a means of raising the money to pay off Tiaoqui; but that

(3) it had been found impossible, owing to the continued absence of a judge of First Instance from

the Province of Laguna, to obtain judicial approval of the mortgaging of the minors' interest;

wherefore the parties in interest had decided to permit the property to be consolidated in Tiaoqui,

to the end that he might convey the same absolutely to Clemencia Graño.

On the part of the latter the same document contains the declarations set forth in the

fourth paragraph thereof, as follows:

"4.I, Clemencia Graño, solemnly and under oath, state at I ratify all

the contents of this contract and although I will in reality purchase in my own

name, from the spouses Tiaoqui the coconut lands mentioned in the document

of September 28, 1916, I declare that I cannot be the definitive owner of said

lands; that said sale which is to be executed in my favor is effected with the sole

object of obviating the necessary proceedings in order to gain time and realize

the mortgage in favor of the 'Hogar Filipino' for the sum heretofore mentioned;

that said sale will take legal effect and will be subsisting only during the time

that the mortgage in favor of the 'Hogar Filipino' lasts, upon the expiration of

which, said sale in my favor shall be rendered null and of no value or legal effect

with respect to the ownership of all the lands sold by the Tiaoqui spouses to

me; that after the expiration of the period of the mortgage to the 'Hogar

Filipino' and the payment of all sums owing to it, with interest, I, Clemencia

Graño, my heirs and successors-in-interest, in the proper case, bind ourselves to

deliver said lands to the heirs, according to their respective shares, in

accordance with the partition made by us on April 9, 1915, duly approved by

the Court of First Instance of Laguna, in its judgment of July 7, 1915, as may be

seen from civil case No. 846 of said court and my intervention as Clemencia

Graño from the moment of the absolute sale which the Tiaoqui spouses shall

make to me shall be without effect upon the expiration of the period of the

mortgage to the 'Hogar Filipino,' during which period' I bind myself to

administer all of said lands and to answer for the faithful and exact compliance

with all the obligations and conditions stipulated in favor of the 'Hogar Filipino'

in the mortgage of said lands and until the full payment of said sum, with

interest, within said period of five years, after which I, Clemencia Graño, in

delivering to each heir the portion corresponding to him according to said

judicial partition, shall render an account of all the income and expenses

occasioned during the five years that the properties were mortgaged to the

'Hogar Filipino,' in order that each heir may know the result of my work, the

amount of the income and expenses and the portion thereof corresponding to

each of them after the termination of the five-year period of the mortgage in

favor of the 'Hogar Filipino.' "

Now, notwithstanding the very clear statements contained in the documents

acknowledged respectively on November 7 and December 17, 1917, and the notarial declaration of

December 19, 1917, all stating in unequivocal terms that Clemencia Graño had intervened in behalf

of all persons in interest in effecting the repurchase from Tiaoqui and the making of the mortgage

to "El Hogar Filipino," she nevertheless now asserts that she is the sole and absolute owner of all

the property obtained by her from Tiaoqui and denies that the Martinez heirs have any interest

whatever therein.

In view of the hostile attitude thus assumed by Clemencia Graño, as well as in view of

certain acts of maladministration attributed to her in respect to the application of the income

derived from the property in question, the Martinez heirs, who are named as plaintiffs herein,

instituted the present action in the Court of First Instance of Laguna against Clemencia Graño, both

in her own right and as guardian of Jose Martinez, and against "El Hogar Filipino."71

The ultimate and main object of the action is of course to obtain a judicial declaration to

the effect that the Martinez heirs are the real owners of the parcels of property respectively

apportioned to them under the partition of 1915, and that the title vested in Clemencia Graño is

held by her in trust for all the Martinez heirs as their respective interests appear, subject to the

mortgage in favor of "El Hogar Filipino." In this connection the plaintiffs pray that the agreement

under which Clemencia Graño had been made administrator of the property and had been allowed

to acquire the legal title in her own name should be rescinded for her manifest failure to comply

with the trust reposed in her. In view also of the hostility of Clemencia Graño and the consequent

loss of confidence in her by the adult parties in interest, the plaintiffs ask that another person be

appointed temporary receiver, in order that, pending the litigation, the proceeds of the property

may be properly applied to the satisfaction of the obligations incurred by Clemencia Graño under

the contract with the building and loan association.

In paragraph 5 of the petitory part of the amended complaint the plaintiffs ask that they

be awarded the sum of P2,000 by way of reimbursement of the expenses of litigation, as stipulated

in the final clause of the document acknowledged by Clemencia Graño and others on December 17,

1917, to which reference has already been made. (Exhibit E of plaintiffs.)

In view of the interest of "El Hogar Filipino" in the property which is the subject of the

litigation, said association is named as a defendant in the action, and the plaintiffs ask that the

association be required to recognize the interest of the Martinez heirs, but no effort is made to

disturb the rights of the association under its mortgage.

Upon the filing of the complaint as aforesaid in October of the year 1919, the Honorable

Isidro Paredes, as presiding judge, granted the plaintiffs' motion for the appointment of a receiver,

and Benedicto Martinez was duly appointed and qualified as such receiver. Thus the situation

remained until final judgment in the trial court was rendered by the same judge on April 30, 1920.

By this decision Clemencia Graño was declared to be the sole and exclusive owner of all the

property in question, subject to the mortgage to "El Hogar Filipino." As a consequence she was

ordered to be restored to possession, the receivership was declared to be dissolved, and all the

defendants were absolved entirely from the complaint. From this judgment the plaintiffs appealed.

The conclusion reached by his Honor, the trial judge, rests upon the very simple and

undeniable fact that the defendant, Clemencia Graño, is the holder of the legal title to the

questioned property by the deed of conveyance directly from Alfonso Tiaoqui, dated December 19,

1917; and the three several documents wherein Clemencia Graño had recognized that she was to

acquire, or had acquired, said property in behalf of all the Martinez heirs were rejected by his

Honor as of no weight. This conclusion is in our opinion quite without support either in the

evidence of record or the law applicable to the case.

In this connection it may be noted that Clemencia Graño is an illiterate person, and

hence she was unable to place her formal signature in writing to the documents of November 7,

December 17, and December 19, 1917, so often mentioned. but she admits that her thumb mark is

genuine, and in order to evade the full legal effect of those documents she pretends that she did

not understand their actual purport. This pretension is in our opinion absolutely and transparently

false. The first in point of time of the documents referred to was acknowledged November 7, 1917,

before Mr. Benito G. Zoboli, an attorney and notary public of Santa Cruz, in the Province of Laguna.

Mr. Zoboli appeared as a witness at the hearing of this cause, and he testified that the contents of

the document was explained by him to Clemencia Graño in the Tagalog language, that she

indicated her conformity with it, and that she executed the same voluntarily. It is true that this

witness is not a master of the Tagalog tongue, having been brought up in Iloilo, but he commands it

sufficiently to enable him to communicate reasonably well with persons who speak Tagalog; and

we do not hesitate to hold that Clemencia Graño fully understood the document to which her mark

was then placed and that she is bound by it. The next in point of time of the documents referred to

is that actually bearing the date of December 16, but acknowledged on December 17, 1917, before

E. P. Virata, a notary public of the city of Manila, Clemencia Graño does not deny having placed her

mark on this document, but she evasively asserts that it does not contain a true statement of the

agreement which was in fact made. A perusal of her testimony is convincing of the falsity of this

pretension, even if there were nothing else for the guidance of the court. But again, there is the

document executed by Clemencia Graño, among others, on December 19, 1917, and acknowledged

before J. W. Ferrier, an attorney and notary public of Manila. All three of the notarial documents

mentioned tell the same story and in our judgment conclusively show that Clemencia Graño

intended to act for all the Martinez heirs in repurchasing the questioned property from Alfonso

Tiaoqui. Her assertion that she has been deluded into signing successively three notarial documents

all of which, though consistent among themselves, are different in their contents from what had

been actually agreed upon seems to us to be preposterous and puerile in the extreme. A

reasonable supposition is that if the parties opposed to her in interest had intended to perpetrate a

fraud upon her in the manner supposed, they would have been content when they had secured her

72

acknowledgment to the first document, without subjecting their scheme to the danger of discovery

upon going before a new notary a second and third time.

In addition to the conclusive proof supplied by the three notarial documents to which

reference has been made, we may add that an examination of the entire history of the efforts of

the parties in interest to recover the property from Alfonso Tiaoqui, as revealed in other evidence,

both oral and documentary, is convincing that the intention of everybody concerned was that

when the property was finally recovered and disencumbered — if fortunately this could be

accomplished — it should belong to all the Martinez heirs in the respective proportions indicated in

the judicial partition.

It should not pass unnoticed that a strong motive on the part of Clemencia Graño to act

for the Martinez heirs in the matter of taking over the property from Alfonso Tiaoqui is to be found

in the fact that her own minor son, Jose Martinez, was himself one of those heirs; and there can be

no doubt that at the time the agreement was made she had a natural desire to assist all her

relatives, as well as her own son, in recovering the property. This circumstance adds weight to the

antecedent probability that she would have entered into the exact agreement which she now seeks

to evade.

The decision in the court below was in part, if not chiefly, based on the circumstance

that the time for redemption stated in the contract of sale with pacto de retro to Alfonso Tiaoqui

had already passed when the repurchase was effected by Clemencia Graño, with the consequence

that, in the opinion of the trial judge, the property had already consolidated in the purchaser. But it

can be readily demonstrated that the consolidation of the property had not taken place, for this,

among other reasons, that by virtue of a stipulation contained in the contract between Tiaoqui and

the Martinez heirs consolidation was not to take place until the fact that the vendors had failed to

redeem the property should be noted in the registry of titles of Laguna. No such annotation was in

fact made at any time.

Moreover, upon examining the proof relative to the efforts of the Martinez heirs to

redeem the property, and considering the just attitude of continuous indulgence exhibited by

Tiaoqui, it is entirely clear that all he wanted was to get back the money which had been advanced

by him, together with the stipulated rent. He at no time showed any desire to keep the property or

assert title as owner by purchase otherwise than as was necessary to secure the money which he

had advanced upon the property. In other words, the sale with, pacto de retro to him involved a

mere loan to the Martinez heirs, secured by that form of conveyance. This being true, the property

had not consolidated in him; and the heirs could still have enforced the right of redemption.

As the Martinez heirs thus demonstrably retained their redemptionary interest in the

property in question at the time it was acquired by Clemencia Graño, the latter was unquestionably

bound by the stipulations contained in the documents in which she had recognized their rights and

had agreed to hold and administer the property for the common benefit of all. Those stipulations

are not mere nuda pacta, but are supported by a sufficient consideration in law, which is found in

the circumstance that by virtue of those agreements Clemencia Graño was able to acquire, and did

acquire, the legal title to property in which others had a subsisting interest, whereby she became

entitled to use and administer the same for the purpose and to the end contemplated. Nor is the

situation in anywise changed by the circumstance that when the property in question was

hypothecated to "El Hogar Filipino," a few other parcels, some of which belonged exclusively to

Clemencia Graño, were included in the mortgage.

The point being determined that Clemencia Graño is bound by the stipulations

contained in the documents so often alluded to, it results that, but for her renunciation of the trust,

she would have been entitled to retain possession and administer the property for the purpose of

liquidating the loan from "El Hogar Filipino." In such case she would have remained in the position

of an active trustee, with a duty to administer the property and liquidate the mortgage for the

benefit of all concerned. But when a person thus circumstanced assumes an attitude hostile to the

real parties in interest, this necessarily operates as a renunciation of the trust; and this is sufficient

to justify the court in displacing such unfaithful trustee. Speaking in terms of the doctrine of the

civil law, we may say that the failure of the trustee in the present case to administer the property

for the benefit of all persons in interest entitles the plaintiffs in this action to have the contract of

agency and administration rescinded; and if necessary to the accomplishment of justice, we should

not hesitate to make such disposition. However, we think that the object aimed at in this case can

be more conveniently accomplished by the device of reinstating the temporary receivership, as will

be ordered in the dispositive part of this decision.

As to the rights of "El Hogar Filipino," it is evident that this association is an innocent

purchaser which has lent its money in good faith upon the security of the mortgage covering the

property here in question as well as the three additional parcels belonging to Clemencia Graño and

another, parcel (k), belonging to Julio Martinez already referred to. The present litigation therefore

must not be allowed to prejudice the substantial rights of the building and loan association.73

The premises considered, we hereby declare that the title acquired by Clemencia Graño

by purchase, on December 19, 1917, from Alfonso Tiaoqui of the property which had been acquired

by him under the contract of sale with pacto de retro dated September 28, 1916, from the heirs of

Juan Martinez and Macaria Ticson, was acquired and is now held in trust by the said Clemencia

Graño for the benefit of the said heirs in the manner indicated in the judicial partition approved by

the Court of First Instance of Laguna on July 7, 1915, subject, however, to the mortgage in favor of

"El Hogar Filipino" executed by Clemencia Graño on December 19, 1917. The plaintiffs are,

furthermore, entitled to have an accounting from the said Clemencia Graño of all the proceeds

obtained by her from the property in question during the period of her administration, or which

might have been obtained by her in the exercise of reasonable diligence; and if it should appear

that any part of said proceeds have been appropriated or squandered by her, instead of being

applied to the debt due to "El Hogar Filipino," she will be required to pay the same into court.

Again, it being manifestly improper that a person in the hostile attitude occupied by Clemencia

Graño towards the Martinez heirs should be allowed to administer the property in question, it

results that the receivership should be reinstated; and a proper receiver shall be appointed who,

under the orders and supervision of the Court of First Instance, will proceed to administer the

property in a faithful and husbandly way for the speedy liquidation of the debt to "El Hogar

Filipino." When said debt shall have been liquidated, the receiver shall be required to render his

final account and the receivership shall be discharged; after which Clemencia Graño shall be

required by proper order in this cause to execute such documents and do such other acts as may

be necessary to place the title of the different parcels of property concerned in this litigation in the

particular persons to whom it beneficially belongs. And for the further assuring of the purposes of

this decree, the said Clemencia Graño and her successors in interest are hereby enjoined from

alienating or incumbering any part of the questioned property during the pendency of this litigation

without an order of court permitting the same. The court of origin is also directed to assess the

damages, fees, and costs which the plaintiffs are entitled to recover of Clemencia Graño in

accordance with the final stipulation expressed in the document dated December 16, 1917, and

acknowledged on December 17 of the same year before the notary E. P. Virata; and to this end

additional proof may be submitted by the respective parties if they so desire.

It must not be overlooked that, after the debt to "El Hogar Filipino" shall have been

liquidated, the owners of the four parcels of land — belonging, one to Julio Martinez, and the other

three to Clemencia Graño — which were hypothecated to "El Hogar Filipino" in conjunction with

the property which is the subject of the present controversy, should be reimbursed to the extent

that the income from those four parcels may have contributed to the satisfaction of the debt to "El

Hogar Filipino ;" and the amount thus to be returned to the owners of said four parcels shall be

paid to them before Clemencia Graño shall be required to execute the documents of conveyance

hereinabove referred to.

In accordance with the foregoing the judgment appealed from will be reversed and the

cause remanded to the court of origin for further proceedings in conformity with this opinion, with

costs against the appellee Clemencia Graño. So ordered.

Separate Opinions

VILLAMOR, J., concurring:

I concur. I only desire to add that in my opinion even granting that the ownership of the

lands in question had been consolidated in the vendor Alfonso Tiaoqui, the appellants nevertheless

have the right to participate, in the proportion agreed upon, in the properties bought by the

appellee by virtue of the contracts executed between the parties on November 7, 1917 and

December 19, of the same year, in accordance with the provisions of article 1091 of the Civil Code.

74

FIRST DIVISION

[G.R. No. 49031. August 28, 1944.]

JOSE PLATON and ROMAN CASTILLO, petitioners, vs. HON. CLAUDIO

SANDOVAL, in his capacity as Judge, Court of First Instance of Laguna, and

INES MAILOM, respondents.

Avelino & Yatco for petitioners.

Galo Al. Acuña and T. G. de Castro for respondents.

SYLLABUS

1.CERTIORARI AND MANDAMUS; RECEIVERS, DISCHARGE OF. — The property in

litigation and under receivership belongs to the intestate estate 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. It 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. In any

event, it cannot be said that the respondent judge exceeded his jurisdiction or abused his

discretion in making such a finding.

2.ID.; RECEIVERS AS OFFICERS OF THE COURT. — Furthermore, the receiver, being an

officer of the court and not the agent or representative 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.ID.; ID.; JUDGMENTS. — An order discharging a receiver and terminating the

receivership is interlocutory and not appealable.

D E C I S I O N

OZAETA, J p:

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

Instance of Laguna, entitled "Ines 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.

It appears that said civil case was instituted by Ines 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) Ines Mailom.

It was also Ines Mailom who, through her 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 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 project of partition had been approved by the court. Upon such

75

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 Acuña 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. In 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 receivership 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. It 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. In 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.

It 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.

76

THIRD DIVISION

[G.R. No. 146313. October 31, 2006.]

FLORENCIO ORENDAIN, petitioner, vs. BF HOMES, INC., respondent.

D E C I S I O N

VELASCO, JR., J p:

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 entitledFlorencio 

B. Orendain v. Hon. Alfredo R. Enriquez, Presiding Judge of RTC-Br. 275, Las Piñas, and BF Homes, Inc.,

which affirmed the December 4, 1996 and April 22, 1998 Orders of the Las Piñas 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, Inc. ('BF Homes' for brevity).

BF Homes, Inc. 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 properties and convert them into residential subdivisions. This resulted in its incurring

liabilities amounting to PhP 1,542,805,068.23 2 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 . . .; and ACcaET

(c)the [liquidation] of [BF Homes'] assets cannot be made in such a short time as

demanded by its creditors. 4

In the said petition, respondent prayed that — in the meantime it was continuing its business operations

— it be afforded time to pay its aforesaid obligations, freed from various proceedings either judicially or

extra-judicially against its assets and properties. Also, respondent highlighted the importance of and

prayed for a Rehabilitation Receiver in the petition. 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." It further argued that "rehabilitation

[was] feasible and imperative because otherwise, in view of the extent of its involvement in the shelter

77

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

In 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, Inc., a Management Committee is hereby created composed of:

1.Atty. Florencio Orendain as Chairman

2.Representative of B. F. Homes, Inc. — member

3.Representative of Home Financing Commission — member

4.Two (2) representatives from the major creditors — members

xxx xxx xxx

Accordingly, with the creation of the Management Committee, all actions for

claims against B.F. Homes, Inc. 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, Inc., with petitioner Orendain as Chairman to prevent paralyzation of BF Homes'

business operations. 7

On October 8, 1993, a Deed of Absolute Sale 8 was executed by and between BF Homes — represented

by petitioner Orendain — as absolute and registered owner, and the Local Superior of the Franciscan

Sisters of the Immaculate Phils., Inc. (LSFSIPI) over a parcel of land situated at Barangay Pasong Papaya,

BF International, Municipality of Las Piñas, Metro Manila, covered by Transfer Certificate of Title No. T-

36482.

The portion of land sold to LSFSIPI 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 Order 10 which admitted

and confirmed the Closing Report submitted by the receiver, petitioner Orendain. It 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. DEICHc

In 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 Piñas RTC against LSFSIPI and petitioner

Orendain, in Civil Case No. LP-96-0022, for reconveyance of the property covered by TCT No. T-36482 —

alleging, inter alia, that the LSFSIPI transacted with Orendain in his individual capacity and therefore,

neither FBO Management, Inc. 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 LSFSIPI. 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 LSFSIPI reconvey the disputed property or, if

reconveyance was no longer feasible, pay the present value of the property. 12

78

On March 21, 1996, the LSFSIPI 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 Opposition 15 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.

On December 4, 1996, RTC Las Piñas, 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 herebyAFFIRMED. 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 ASIDE; 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 Reconsideration 18 of the RTC

December 4, 1996 Order. Consequently, BF Homes filed its January 17, 1997 Opposition 19 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 Counterclaims 21 on May

29, 1998.

On July 13, 1998, petitioner filed before the CA a Petition for Certiorari and Prohibition with Prayer for

the Issuance of a Temporary Restraining Order and/or Bonded Writ of Preliminary Injunction 22 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. aSTAcH

The Ruling of the Court of Appeals

79

In 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. In the rehabilitation case, the LSFSIPI 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 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 DISMISSED for failure

to clearly show grave abuse of discretion and the assailed orders dated

December 4, 1996 and April 22, 1998, are hereby AFFIRMED 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 Involve Intra-Corporate Dispute

The issue central to this petition is: which has jurisdiction over the action for reconveyance — the 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 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

80

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. In 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, Inc. — the SEC-appointed

Rehabilitation Receiver at the time of the transaction. TaDCEc

WE hold OTHERWISE.

In 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 entitled to recover upon all or some of the claims

asserted therein. It 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

In the case at bench, the BF Homes' Complaint for reconveyance was filed on January 23, 1996 against

LSFSIPI and Florencio B. Orendain, in Civil Case No. LP-96-002.

In 1996, Section 5 of PD No. 902-A, 28 which was approved on March 11, 1976, was still the law in force

— whereby 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 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. If 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

81

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 LSFSIPI is neither an officer

nor a stockholder of BF Homes, and this case does not involve intra-corporate proceedings. In 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 LSFSIPI will necessitate the application of

the provisions of the Civil Code on obligations and contracts, agency, and other pertinent provisions.

In 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)In all civil actions in which the subject of the litigation is incapable

of pecuniary estimation; and

(2)In 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) . . .

Likewise, in DMRC Enterprises v. Este del Sol Mountain Reserve, Inc., 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 Reconveyance

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, Inc.

submitted its Closing Report to the SEC. In said report, the receiver disclosed the conveyance of the

property to the LSFSIPI. It is the same transaction which BF Homes seeks to nullify in the complaint a 

quo.

We are not persuaded.

82

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 havingjurisdiction 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 actions — identity

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 DISAGREE.

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 It is apparent that the SEC order

in question merely acknowledged the Closing Report for inclusion in the records of the case. It 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. ASIDTa

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." In 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

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

83

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 LSFSIPI 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 successor-receiver 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.

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. In 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 intra-corporate 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). AEIHCS

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 transferred to the branches of the regular RTC specially designated to hear such

cases in accordance with AM No. 00-11-03-SC."

84

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 jurisdiction — the

Regional Trial Court, except for two categories of cases (emphasis supplied).

In 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. In 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.

. . . It 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 . . . in terms of the powers and responsibilities

of the [SEC]. In registration of securities, exempt transactions [and exempt

securities], these are very technical and there are modifications . . . The

registration and monitoring of securities are basically the same as the old law.

Pre-need plans . . . remain with the SEC. Originally we wanted the SEC to

concentrate on commerce, corporations and the 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 Insurance Commissioner. . . .

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

85

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;ACEIac

(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 Corporation Code, the Investment 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)Impose 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)Issue cease and desist orders to prevent fraud or injury to the investing

public;

86

(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)Issue 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 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; SCHATc

(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.

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 is hereby AFFIRMED IN TOTO.

87

SECOND DIVISION

[G.R. No. 111357. June 17, 1997.]

TRADERS ROYAL BANK, petitioner, vs. INTERMEDIATE APPELLATE COURT, and

HEIRS OF THE LATE JOSE C. TAYENGCO,respondents.

Antonio C. Singson for petitioner.

Tirol & Tirol for private respondents.

SYLLABUS

1.REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT; RES JUDICATA; ELEMENTS. — 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. SETAcC

2.ID.; PROVISIONAL REMEDIES; RECEIVERSHIP; TERMINATION THEREOF; COMPENSATION; WHEN

PROPER. — 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 costs against the defeated party, or apportioned, as justice requires." It 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. IDCScA

R E S O L U T I O N

ROMERO, J p:

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.

In 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 Iloilo,

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.

88

In 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

In this appeal, TRB raises the following errors allegedly committed by the Court of Appeals:

1.The Hon. IAC (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. Ilarde, TRB, et al., GR. 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. IAC had no   jurisdiction in CA-GR. 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 GR. No. 60076;

3.The Hon. IAC erred when it rendered the judgment and Resolution which

reversed the final Supreme Court Decision in GR. No. 60076 on the payment of

the receiver's fee to TRB as it violated the Rule on "Bar   by   Final 

Judgment". 7 (Emphasis supplied)

TRB's assignment of errors submits for resolution two vital issues: (1) Is the Court of Appeals decision

dated February 12, 1993 barred by res judicata by virtue of our ruling in G.R. No. 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. In 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

89

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   costs  against   the 

defeated party, or apportioned, as justice requires." (Emphasis supplied)

It 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. cdasia

IN VIEW OF THE FOREGOING, the decision appealed from is AFFIRMED. Costs against petitioner.

FIRST DIVISION

[G.R. No. 151925. February 6, 2003.]

CHAS REALTY AND DEVELOPMENT CORPORATION, petitioner, vs. HON. TOMAS

B. TALAVERA, in his capacity as Presiding Judge of the Regional Trial Court of

Cabanatuan City, Branch 28, and ANGEL D. CONCEPCION, SR., respondents.

Abello Concepcion Regala and Cruz for petitioner.

R. A. S. Dizon Law Office for private respondent.

SYNOPSIS

Petitioner Chas Realty and Development Corporation (CRDC) is the owner and developer of a three-

hectare shopping complex, also known as the Megacenter Mall (Megacenter), in Cabanatuan City.

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. CRDC

filed a petition with the Regional Trial Court, Branch 28, of Cabanatuan City, for rehabilitation attaching

thereto a proposed rehabilitation plan. Prior to the filing of the petition for rehabilitation, a special

meeting of its stockholders was held, during which the majority of the outstanding capital stock of CRDC

90

approved the resolution authorizing the filing of a petition for rehabilitation. Private respondent Angel D.

Concepcion, Sr., 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 Interim

Rules on Corporate Rehabilitation. Concepcion further asserted that the supposed approval by 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. The

trial court issued an order directing petitioner within 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 in

accordance with the provision of the Interim Rules of Procedure on Corporate Rehabilitation. On petition

forcertiorari, the Court of Appeals denied the petition for lack of merit. Hence, the present petition for

review on certiorari. CDAcIT

The Supreme Court reversed and set aside the decision of the Court of Appeals and that of the Regional

Trial Court of Cabanatuan City. Nowhere in Section 2, Rule 4(k) of the Interim Rules of Procedure on

Corporate Rehabilitation 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

Court stressed that the said 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. The

rehabilitation plan 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-PCI 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.

SYLLABUS

1.MERCANTILE LAW; PRIVATE CORPORATIONS; INTERIM RULES ON CORPORATE REHABILITATION;

CONTENTS OF PETITION FOR REHABILITATION; EXPLAINED. — 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

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

Interim 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 91

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.

2.ID.; ID.; ID.; ID.; PROPOSED CORPORATE ACTIONS IN CASE AT BAR DOES NOT REQUIRE A VOTE OF

APPROVAL BY THE STOCKHOLDERS REPRESENTING AT LEAST TWO THIRDS (2/3) OF THE OUTSTANDING

CAPITAL STOCKS. — 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." 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. In

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 lawvis-a-vis the corporate act or acts proposed to be done in the rehabilitation of the

distressed corporation. The rehabilitation plan 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-PCI 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.cACDaH

D E C I S I O N

VITUG, J p:

Petitioner Chas Realty and Development Corporation (CRDC) is a domestic corporation engaged in

property development and management. It 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.

92

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

Interim 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.

It 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.

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 Interim 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 Interim 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 Interim 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 EEI, Inc., the resolution of the same is

93

hereby held in abeyance till after the period given to the 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 DENIED for lack of merit." 2

Hence, the instant petition on the following grounds:

"I

"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.

"II

"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

Rule 4, Section 2(k), of the Interim 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:

"xxx xxx xxx.

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"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 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 Interim 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 5 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

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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. In 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-a-vis the corporate act or acts proposed to be done in the

rehabilitation of the distressed corporation.

The rehabilitation plan 7 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-PCI 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 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. 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 City, dated 15

October 2001, in Civil Case No. 4036-AF, are REVERSED and SET ASIDE. 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. SH

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