1

EN BANC
[G.R. No. 6305. September 26, 1911.]
COMPAIA 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 (Compaia General de Tabacos de
Filipinas) a mortgage upon an hacienda known as "San Jose," in the municipality of San Carlos, in
the Province of Occidental Negros. The said defendant (Romana Gauzon) having failed to pay the
said mortgage, the plaintiff (Compaia General de Tabacos de Filipinas), on the 22d day of
September, 1905, commenced an action for the foreclosure of said mortgage, and asked, in
addition to the foreclosure of the mortgage, that a receiver be appointed to take charge 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 Compaia General de
Tabacos de Filipinas vs. Ganson (13 Phil. Rep., 472) and La Compaia 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.
2

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 (Compaia 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
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
3

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
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
4

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.








5

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
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
6

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.
Camea, 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.
Camea 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. Camea, as general manager of the Magallanes Press, executed a chattel mortgage
on all the printing machinery and its accessories, belonging to the said Magallanes Press, in favor of
J. P. Heilbronn & Co., 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 &
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
7

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.
8

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


9

EN BANC
[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.
10

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.
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.
11

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
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
12

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,
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.
13

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
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
14

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
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.

15

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
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
16

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
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.










17





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
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.
18

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
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.













19




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. Sorogan, 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
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
20

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
GRIO-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.
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.
21

Sorogan, 136 SCRA 407). Her Torrens certificates of title are indefeasible or incontrovertible (Sec. 32,
P.D. 1529).
Even if it were true that an impecunious former waitress, like 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
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
22

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
[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
23

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 PPAs 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 Castaeda, Jr. of the RTC, Branch 17, of Manila
denied the prayer for the issuance of a writ of preliminary injunction and the application for receivership.
The RTC noted that in 1987, Emerencianas 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
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.
24

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 Castaeda, Jr. likewise erred in denying in Civil Case No. 94-70092 their motion to present
crucial documents wherein Tamano allegedly made a declaration against her interest. 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 Emerencianas 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.
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
25

compliance of the bond requirement, a private banking institution which shall
exercisepowers 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. 31
Applying the above test, there is no question that there is identity of parties, cause of action and reliefs
sought between the consolidated petition in G.R. No. 126841 and the petition in CA-G.R. SP No. 39161.
For resorting to forum shopping, the consolidated petition of the spouses Marfori should have been
dismissed with prejudice. 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
26

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.



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
27

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
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
28

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.
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.













29






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
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
30

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;
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.
31

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."
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;
32

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
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;
33

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
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.













34



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.
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
35

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 Pea granted the motion in an order worded as follows:
"Wherefore, finding the motion of the plaintiff of September 9,
1947, to be well founded, for the purpose of preserving the status quo and in
order that the amounts above referred to may stand ready to answer for any
legitimate claims of the Government in the form of taxes, the aforementioned
motion is hereby granted and defendant Fred M. Harden is hereby ordered to
return, within a period of 15 days from the receipt of a copy hereof, the amount
of P1,000,608.66 to the Philippines and to redeposit the same with the accounts
of the Plaza Lunch at the Manila Branch of the Chartered Bank of 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 Pea, on March 27, 1948, entered
an order, which was a modification of that of October 7, 1947, directing Harden "to deposit with
the Manila Branch of the Chartered Bank of 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
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,
36

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
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.
37

(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
Pea, of the Court of First Instance of Manila, issued on April 28, 1948, which reads as follows:
"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
38

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
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.
39

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
40

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.
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
41

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.
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.
42

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
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,
43

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.
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
44

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
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
45

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. Petreos,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.)
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
46

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
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
47

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.
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.
48














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
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
49

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:
"(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
50

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.
















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
51

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
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
52

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.]
MILA CABOVERDE TANTANO and ROSELLER CABOVERDE, petitioners, vs.
DOMINALDA ESPINA-CABOVERDE, EVE CABOVERDE-YU, FE CABOVERDE-
LABRADOR, and JOSEPHINE E. CABOVERDE, respondents.
DECISION
53

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
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
54

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
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
55

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
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.
56

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.
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
57

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
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:
58

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
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."
59

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
place the disputed properties under receivership; thus, the CA declared that petitioners were estopped
from challenging the sufficiency of such cause.
60

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.
61

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, 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
62

an error for the said court to approve the bond, which was based merely on the probable value of the
properties.
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,
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1972, 2 to pay the plaintiff bank the sum of P418,000.00 in sixty (60) equal successive monthly
installments of P8,722.25, starting on the 10th day of December 1972 and on the 10th of every month
thereafter. The said Promissory Note stipulated further that:
"(a)the loan is subject to interest at the rate of twelve percent (12%) per
annum;
(b)the promissory note and the entire amount therein stated shall become
immediately due and payable without notice or demand upon
(aa)default in the payment of any installment of principal or interest
at the time when the same is due;
(bb)the occurrence of any change in the condition and affairs of the
defendant, which in the opinion of the plaintiff shall
increase its credit risk;
(c)the defendant agrees to pay all costs, expenses, handling and insurance
charges incurred in the granting of the loan;
(d)in case the services of a lawyer is made necessary for collection, defendant
shall be liable for attorney's fees of at least ten percent (10%) of the
total amount due." 3
To secure payment of the loan, private respondent Anama also constituted a Chattel Mortgage of even
date in favor of petitioner, on various machineries and equipment located at No. 1302 Epifanio delos
Santos Avenue, Quezon City, under the following terms and conditions:
"(a)The machineries and equipment, subject of the mortgage, stand as security
for defendant's account.
(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
64

than P1,000,000.00 but he merely acceded to the valuation thereof by Citibank in said document
because of the latter's representation that the same was necessary to speed up the granting of the loan
applied for by him; (6) that the properties covered by said chattel mortgage are real properties installed
in a more or less permanent nature at his (defendant's) premises in Quezon City, as admitted by Citibank
in said mortgage document; (7) that the mortgage contract itself stipulated that the manner and
procedure for effecting the sale or redemption of the mortgaged properties, if made extrajudicially, shall
be governed by Act No. 1508 and other pertinent laws which all pertain to real properties; and (8) that
because of the filing of this complaint without valid grounds therefor, he suffered damages and incurred
attorney's fees; the defendant, now private respondent, averred.
On December 2, 1974, the trial court, upon proof of default of the private respondent in the payment of
the said loan, issued an Order of Replevin over the machineries and equipment covered by the Chattel
Mortgage.
However, despite the issuance of the said order of seizure of subject chattels, actual delivery of
possession thereof to petitioner did not take place because negotiations for an amicable settlement
between the parties were encouraged by the trial court.
On March 24, 1975, a pre-trial conference was held and the lower court issued an order for joint
management by the 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
65

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
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.
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The contention is untenable. A judgment is on the merits when it determines the rights and liabilities of
the parties on the basis of the disclosed facts, irrespective of formal, technical or dilatory objections, and
it is not necessary that there should have been a trial. 9 The assailed decision of the Court of Appeals did
not make any adjudication on the rights and liabilities between Citibank and Douglas Anama. There was
no finding yet of the fact of default. The decision only ruled on the propriety of the issuance of the writ
of seizure by the trial court. As worded by the respondent court itself, "the main issues to be resolved
are whether there was lack or excess of jurisdiction, or grave abuse of discretion, in the issuance of the
orders in question, and there is no appeal nor any plain, speedy, and adequate remedy in the ordinary
course of law." 10
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
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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)
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
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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
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
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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
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
70

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:
"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.



















71

SECOND DIVISION
[G.R. No. 16709. August 8, 1921.]
SEBASTIANA MARTINEZ ET AL., plaintiffs-appellants, vs. CLEMENCIA GRAO ET
AL., defendants-appellees.
Claro M. Recto and J. E. Blanco for appellants.
Jose G. Generoso and Ramon Diokno for appellee Clemencia Grailo.
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, Florio, 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 Grao, 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 Grao, as
guardian.
72

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
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 Grao, 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
Grao 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 Grao 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 Grao, 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 Grao, 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
73

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 Grao, as
borrower, all of the adult Martinez heirs personally and the guardians of the minor heirs executed a
document jointly with Clemencia Grao, personally and as guardian of her own minor son Jose, in
which it was agreed that Clemencia Grao 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 Grao, 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
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 Grao, 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 Grao 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 Grao.
On the part of the latter the same document contains the declarations set forth in the
fourth paragraph thereof, as follows:
"4.I, Clemencia Grao, 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
Grao, 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
Grao 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 Grao, 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
74

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 Grao 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 Grao, 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 Grao, both
in her own right and as guardian of Jose Martinez, and against "El Hogar Filipino."
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 Grao 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 Grao 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 Grao 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 Grao 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 Grao 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 Grao 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 Grao, 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 Grao 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 Grao 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.
75

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 Grao 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 Grao 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 Grao 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 Grao, 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 Grao
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
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 Grao 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 Grao, 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 Grao, 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 Grao was able to acquire, and did
acquire, the legal title to property in which others had a subsisting interest, whereby she became
76

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 Grao, were included in the mortgage.
The point being determined that Clemencia Grao 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 Grao 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.
The premises considered, we hereby declare that the title acquired by Clemencia Grao
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
Grao 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 Grao on December 19, 1917. The plaintiffs are,
furthermore, entitled to have an accounting from the said Clemencia Grao 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
Grao 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 Grao 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 Grao 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 Grao 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 Grao 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 Grao shall be required to execute the documents of conveyance
hereinabove referred to.
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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 Grao. 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.



















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. Acua 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.
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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
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 Acua 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
79

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.




















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 Pias, and BF Homes, Inc.,
which affirmed the December 4, 1996 and April 22, 1998 Orders of the Las Pias RTC finding that said
court, not SEC, has jurisdiction over Civil Case No. LP-96-0022 for reconveyance of the lot covered by TCT
No. T-36482 to respondent BF Homes, Inc. ('BF Homes' for brevity).
80

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
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
81

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 Pias, 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 Pias 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
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.
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On December 4, 1996, RTC Las Pias, Branch 275 issued an Order denying the June 14, 1996 Motion to
Dismiss for lack of merit. 16
However, on May 8, 1997, the SEC rendered its Order, as follows:
WHEREFORE, premises considered, the decision of the hearing panel denying
the motion for intervention of Mr. Eduardo Rodriguez is 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
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
83

"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
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
84

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
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:
85

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.
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
86

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
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.
87

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."
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
88

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
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,
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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;
(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
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(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.






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
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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.
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
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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
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.
93








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
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
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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
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
95

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.
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.
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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
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
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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.
"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
98

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
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.
99

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