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RECEIVERSHIP lower court in CivCase No. 34998. He was required to post a bond of
What is Receivership?
1. Normandy vs. Duque
29 SCRA 385 | August 29, 1969 | Barredo, J.
Consolidated
Petitioners (1): PILAR M. NORMANDY, in her own behalf and of others
similarly situated, as well as of the World War II Veterans Enterprises, Inc., &
LORENZO B. CAMINS, plaintiffs-appellees
Respondents (1): CALIXTO DUQUE, CLARO P. LIZARDO, FLORENCIO SELGA,
ALBERTO RAMOS, MANUEL BUENAFE & FILIPINAS MERCHANDISING
CORPORATION, defendants-appellees;
Petitioners (2): JOSE COCHINGYAN, SR. and SUSANA COCHINGYAN,
intervenors-appellees
Respondents (2): RAMON E. SAURA, former first receiver-appellant.
Summary: Saura was appointed as a receiver in another Civil Case (see below)
for the WARVETS. After 3 years of service without compensation, Saura
resigned as the receiver, and approved by the court. Thereafter, he asked the
court that he be paid compensation. The lower court granted this, and fixed the
amount of 10,000 pesos as his compensation as receiver. Subsequently, he filed
a second motion for reimbursement, asking that the court reimburse him for
the sum he paid to a clerk that he employed during the course of his duty as a
receiver. The lower court denied this, and said that since a previous amount of
10,000 pesos was already fixed, and any sum in addition to that would be
improper. He is also estopped from claiming any amount without prior
approval from the court. The Supreme Court agreed with the lower court, and
reiterated its ruling. The SC added that there is more reason to deny his motion
for reimbursement because Saura hired the clerk without prior leave of court.
Decision of lower court affirmed.
Facts:
Saura was appointed receiver (Note: He is the “Former first receiver”) of
the World War II Veterans Enterprises, Inc. (WARVETS) on 1960 by the
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50k. His functions as indicated are:
o "Generally to do and perform such acts respecting the property,
assets and transactions" of the organization "as the court may
authorize."
During his term, Saura went to Japan by authority of the lower court's
order dated October 12, 1960 for the purpose of:
o Checking on the reported undervaluation of goods shipped to
the WARVETS; and
o Preparing the shipment of the goods which had not yet been
committed.
For this trip, he incurred around 9k pesos worth of expenses, and was
ordered by the lower court to be reimbursed. The reimbursement
order is as follows:
o “The order permits the claim for reimbursement as part of the
receiver's compensation as such receiver. It does not prohibit the
reimbursement of the expenses before the payment of the
receiver's compensation, and it is only fair and just that at least
the expenses which the receiver advanced, if found reasonable
and necessary, be reimbursed as soon as the funds of the
WARVETS permit.”
For a continuous period of three years performing his duty, he received
no other fee or compensation from WARVETS (except for the
reimbursed one).
Hence, on 1963 (3 years after appointment), he asked the lower court
to fix his compensation, as well as that of his co-receiver Ofilada.
The lower court denied this, hence he asked for reconsideration.
Without awaiting action on his MR, Saura filed another motion, on May
28, 1964, resigning from his post as receiver and praying that the
lower court accept it and at the same time fix the amount of his fees
and compensation as receiver.
On June 5, 1964, the motion was approved and he was discharged as
the receiver and his compensation was fixed at P10,000. The pertinent
portions of the order of the court are:
o No one objected to his withdrawal and compensation;
o The defendants in this case (Warvets) themselves asked for
the removal of Saura as the receiver;
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o Jose and Susana Cochingyan shall advance the amount of 10k such receiver without prior approval or authority of this
for the account of WARVETS. Court.
After this, a certain Atty. Magno appeared. He presented into the lower Hence, this appeal.
court a motion for the payment of attorney's fees to him in the amount
of P10,000.00 for his alleged services as legal counsel for Saura when Issue/Held: Whether or not Saura is entitled to the second reimbursement –
he was still a receiver. NO
Saura filed another motion for the payment and cancellation of his Dispositive Portion: WHEREFORE, the order appealed from is affirmed, with
receiver's bond (yung 50k kanina) and for the reimbursement to him of costs against appellant.
the sum of P2,030.00 which he paid out of his personal funds as
Ratio:
premium for said bond from Sept 1960-1964.
A receiver is a representative of the court appointed for the purpose of
TC: Allowed only 1k compensation to Magno, and granted the whole
preserving and conserving the property in litigation and prevent its
amount prayed for by Saura (2,030). The following is the reasoning of
possible destruction or dissipation if it were left in the possession of
the TC (in case sir asks):
any of the parties.
o Ramon E. Saura is himself a lawyer and he did not have to retain
The receiver is not the representative of any of the parties but of all of
legal counsel. If he did, the matter should be for his own account,
them to the end that their interests may be equally protected with the
particularly because it was a unilateral act on Saura's part to
least possible inconvenience and expense.
get Magno as his lawyer in the receivership.
It is inherent in the office of a receiver not only that he should act at all
o Nevertheless, the Court is not unaware that Atty. Magno did in
times with the diligence and prudence of a good father of a family but
fact work for Saura, for the former appeared in Court and
should also not incur any obligation or expenditure without leave of
signed pleadings for Saura as receiver.
the court and it is the responsibility of the court to supervise the
o Wherefore, in fairness to Atty. Magno, it is hereby ordered that
receiver and see to it that he adheres to the above standard of his trust
he be paid P1,000.00 from the funds under receivership. If he is
and limits the expenses of the receivership to the minimum.
not satisfied with this amount, he can go after Saura.
For these reasons, it is generally the receivership court that is in a
After two months, Saura filed ANOTHER motion for reimbursement,
better position to determine whether a particular expenditure is
for the amount he allegedly paid as compensation of a clerk, a certain
reasonable and satisfied or not and its ruling thereon may not be
Melchor Ordoño whom he employed when he was still a receiver, at
disturbed by this Court.
the rate of P120.00 a month, or a total of P5,236.00.
The motion in question of the receiver was not opposed by any of the
o This is because his work involves voluminous paper and legal
parties. It is to be observed, however, that the records show that the
work.
court a quo had previously allowed or approved reimbursements to
o Ordono served as the typist-stenographer, messenger, filing
the receiver of expenditures made by him in connection with the
clerk, utility clerk, and records clerk.
performance of his duties, more particularly, for a trip made to Japan
Lower court denied this second motion for reimbursement (although
and for the fees of a lawyer who had allegedly assisted him,
nobody opposed), reasoning that the Court has previously ordered the
notwithstanding he is a lawyer himself.
payment of 10k as compensation for Saura for his services. Any
o Besides, the court a quo fixed the total compensation to the
amount in addition thereto would be improper.
appellant receiver at P10,000.00 for his services as such and
o He is now estopped from claiming any further amount as
said amount, from all appearances, is agreeable to everyone,
compensation for alleged clerical services employed by him as
including appellant.

AQUINO.DEGUZMAN.GERONA.GILTENDEZ.MEER.PINEDA.TAYLO.
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(Note: The SC refers again to the reasoning of the lower court, and said
that---) We find these reasons to be cogent enough in the premises,
specially because appellant's alleged employment of a clerk was made
without prior leave of court. <- (IMPT!!! Hence, it is better if the
receiver obtained a leave of court before employing the receiver!!)
In these circumstances, it cannot be said that the court a quo abused its
discretion, much less gravely.
FOOTNOTE SUMMARY: CIVCASE No. 34998 (I think this is important too
because this will illustrate the circumstances leading to the appointment of Saura
as receiver)
This is a case filed by Normandy as well as of the WARVETS against
defendants Duque, etc (look at Respondents (1)). to set aside certain
contracts between WARVETS and the Respondents.
Cochingyan spouses intervened, petitioned for the appointment of a
receiver, and was granted. The following bulletpoints are the
background facts/reasons leading to the appointment of a receiver:
o The Cabinet approved the proposal of the WARVETS to
undertake the procurement and sale of specific items of
reparation goods from Japan, valued at $8,000,000.00, in order
to generate trust funds for the benefit of veterans, war widows
and orphans as contemplated in the Reparations Agreement
between the Philippines and Japan, and RA 1789.
o Hence, WARVETS and Cochingyan entered into an agreement.
Cochingyan was given the right to dispose of the reparation
goods aforementioned with marginal profits given to
WARVETS, 40% and 60% depending on the classification of
the items..
o WARVETS also entered into a contract with Filipinas
Merchandising whereby Filipinas will negotiate the sale and
distribution of the goods. WARVETS will also receive marginal
profits.
o "By reason of these overlapping contracts, Cochingyans filed a
specific performance suit against WARVETS. However, this
case was subsequently dismissed after the agreed to settle
Filipinas assigned to in favor of the Cochingyans all its rights
and privileges under its two contracts, and whereby WARVETS
agreed to receive greatly reduced marginal profits, from the
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Cochingyans, of 20% and 25% on non-unclassified and
unclassified items, respectively. Thus, as a result of the
confusion that resulted in the execution of these various
contracts, the ultimate beneficiaries, namely, the veterans, war
widows and orphans would suffer losses equivalent to a
decrease or reduction in expected profits, from 40% and 60%,
to 20% and 25%, or roughly P3,400,000.00 to P6,600,000.00.
o It cannot be said that the original profits of 40% and 60%
assigned under the contract with the Cochingyans of
November 4, 1957 would be hard to realize, for it is common
knowledge that imported goods command very high prices
much above their procurement costs, and because the
Cochingyans would not have sacrificed time, energy and
expenses in filing their performance suit, Civil Case No. 34392
of this Court, against the World War II Veterans Enterprises,
Inc. had they not been sure that they could easily obtain those
percentage gains and at the same time make a safe margin of
profits for themselves. As things now stand, the interest of the
beneficiaries cannot be amply protected by the World War II
Veterans Enterprises, Inc. which naturally feels bound to
support its commitment under the Memorandum of
Settlement aforementioned.
o "For the above reasons, the Court considers the petition for
the appointment of a receiver to be well founded, and the
same is, therefore, hereby granted.
2. Carlo and San Jose v. Roldan
TRANQUILINO CALO and DOROTEO SAN JOSE vs ARSENIO C.
ROLDAN, Judge of First Instance of Laguna, REGINO RELOVA and
TEODULA BARTOLOME
Summary: Respondents filed a complaint against the petitioners alleging that they
are the owners and possessors of the 2 parcels of land and that the latter intend or
intending to enter and work whatever fruits may be found. Thus, respondents filed
an application for the issuance of preliminary injunction while the petitioners filed
an application for the appointment of a receiver. SC said that the judge committed
GADALEJ when he issued the appointment order. The property or fund must
therefore be in litigation according to the allegations of the complaint, and the object
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of appointing a receiver is to secure and preserve the property or things in
controversy pending the litigation. If it is not in litigation and is in actual possession
of the respondents, the latter cannot apply for and obtain the appointment of a
receiver.
NOTE: RESPONDENTS = PLAINTIFFS; PETITIONERS = DEFENDANTS
Facts:
A complaint was by respondents against the petitioners in the CFI Laguna
Respondents alleged that they are the owners and the possessors of the
parcels of land subject of the dispute: unplanted rice land and coconut land.
Petitioners, 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.
Respondents alleged that unless petitioners are barred, restrained, enjoined,
and prohibited from entering or harvesting the lands or working therein
through ex-parte injunction, the petitioners will suffer injustice, damages
and irreparable injury to their great prejudice.
They offered a bond in their application for ex-parte injunction in the
amount of P2,000.
June 26, 1945 - petitioners, through force, destroyed and took away the
madre-cacao fencer, and barbed wires built on the northwestern portion of
the coconut land
Petitioners filed an opposition on the ground that they are owners of the
lands and have been in actual possession thereof since the year 1925 and
that they have never been in possession thereof.
Judge Rilloraza denied the petition on the ground that petitioners were in
actual possession of said lands.
MR was filed but had not been decided either by Judge Rilloraza (assigned
to another court) or by the respondent judge.
Respondents filed an urgent petition ex-parte praying that 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
o (a) the respondents have an interest in the properties in question,
and the fruits thereof were in danger of being lost unless a receiver
was appointed; and
o (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.
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Judge Roldan 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.
Issue: 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 –YES
SC:
According to the complaint filed, the Respondents’ action is one of
ordinary injunction. This is corroborated by the fact that they petitioned in
the same complaint for a preliminary injunction.
The fact that the Respondents, in their reply, pray that they be declared the
owners in fee simple, has not changed the nature of the action or added a
new cause of action.
o A respondents cannot, after petitioners’ 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).
In the present case wherein respondents alleged 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 respondents would quiet their
title to said lands..
The provisional remedies (attachment, preliminary injunction, receivership,
and delivery of personal property) provided in Rules 59, 60, 61, and 62 of
the Rules of Court, are remedies to which parties litigant may resort for the
preservation or protection of their rights or interest, and for no other
purpose, during the pendency of the principal action.
o If an action, by its nature, does not require such protection or
preservation, said remedies cannot be applied for and granted.
1. Attachment may be issued only in the case or actions specifically
stated in section 1, Rule 59, in order that the petitioners may not
dispose of his property attached, and thus secure the satisfaction of any
judgment that may be recovered by respondents from petitioners.
2. Preliminary prohibitory injunction lies when the respondents’ principal
action is an ordinary action of injunction, that is, when the relief
demanded in the respondents’ 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.
3. Delivery of personal property consists in the delivery, by order of the
court, of a personal property by the petitioners to the respondents, who
shall give a bond to assure the return thereof or the payment of
damages to the petitioners in the respondents’ action to recover
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possession of the same property fails, in order to protect the
respondents right of possession of said property, or prevent the
petitioners from damaging, destroying or disposing of the same during
the pendency of the suit.
4. 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:
o The party applying for the appointment of a receiver has
an interest in the property/fund which is the subject of the
action or litigation, and that such property/fund is in
danger of being lost, removed or materially injured unless
a receiver is appointed to guard and preserve it
o That the appointment of a receiver is the most convenient
and feasible means of preserving, administering or
disposing of the property in litigation.
o 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 things in controversy
pending the litigation.
If it is not in litigation and is in actual possession of the respondents, the
latter cannot apply for and obtain the appointment of a receiver.
o The Respondents insist that they are in actual possession of the
lands and, therefore, of the fruits thereof.
Furthermore, the issue raised by the respondents in their complaint is
within petitioners intend or were intending to enter or work or harvest
whatever existing fruits could then be found on the lands, and NOT the
issue of ownership/possession. Respondents will not and legally cannot
ask for the appointment or receiver of property, which he alleges to
belong to him and to be actually in his possession.
The petition for appointment of a receiver does not lie in an action for
injunction such as the one filed by the Respondents.
According to law, the ProvRem proper to respondents’ action of injunction
is a preliminary prohibitory injunction, if respondents’ theory, as set forth
in the complaint, that he is the owner and in actual possession of the
premises.
Mendoza vs. Arellano and B. de Arellano - 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
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of the possession of the petitioners 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
respondents from grave and irremediable loss or damage. No such showing
has been made in this case as would justify us in interfering with the
exercise by trial judge of his discretion in denying the application for
receiver.
As to the petitioners' petition that 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 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
3. National Investment and Development Corp v. Aquino
G.R. No. L-34192 June 30, 1988
NATIONAL INVESTMENT AND DEVELOPMENT CORPORATION, EUSEBIO
VILLATUYA MARIO Y. CONSING and ROBERTO S. BENEDICTO, petitioners,

 vs.
 HON. BENJAMIN AQUINO, in his official capacity as Presiding Judge of
Branch VIII of the Court of First Instance of Rizal, BATJAK INC., GRACIANO
A. GARCIA and MARCELINO CALINAWAN JR., respondents.
G.R. No. L-34213 June 30, 1988
PHILIPPINE NATIONAL BANK, petitioner, 
 vs.
 HON. BENJAMIN H. AQUINO,
in his capacity as Presiding Judge of the Court of First Instance of Rizal,
Branch VIII and BATJAK INCORPORATED, respondents.
Emergency: Batjak Inc. is engaged in the manufacture of coconut oil and copra
cake for export. Due to indebtedness, it mortgaged 3 coco-processing oil mills
to Manila Bank, RB, and PCIB. To finance its indebtedness, it executed a
financial agreement with PNB wherein NIDC (a corp owned by PNB) would
invest money in Batjak and pay its indebtedness to RB and PCIB. In exchange,
the 2 mortgaged mills would now be mortgaged to PNB. The 3 rd mortgaged mill
was transferred to NIDC after it paid the obligations of Batjak to Manila bank.
So now all 3 mills were mortgaged to PNB/NIDC. After, a voting trust
agreement was executed between NIDC and stockholders of Batjak
representing 60% of the corp. basically, NIDC was made a trustee to the voting
rights of the stockholders. Due to insolvency, all 3 mills were foreclosed and
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acquired by NIDC. 3 years later, Batjak asks NIDC/PNB if they would like to
renew the voting trust agreement. Getting no response, Batjak demanded that
the 3 mills be returned to them pursuant to the voting trust agreement. It then
filed a case of mandamus in CFI Rizal. A petition for receivership was also filed
which was granted by CFI Rizal. SC – Receivership is invalid. 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 that the party applying for the
appointment of receiver has an interest in said property. The right, interest, or
claim in property, to entitle one to a receiver over it, must be present and
existing. The interest of Batjak over the 3 oil mills ceased upon the issuance of
the certificates of title to PNB and NIDC confirming their ownership over the
said properties after they were foreclosed. Nowhere in the Voting Trust
Agreement is mention made of any transfer or assignment to NIDC of Batjak's
assets, operations, and management. NIDC was constituted as trustee only of
the voting rights of 60% of the paid-up and outstanding shares of stock in
Batjak. The acquisition by PNB-NIDC of the properties in question was not
made or effected under the capacity of a trustee but as a foreclosing creditor for
the purpose of recovering on a just and valid obligation of Batjak. Furthermore,
Batjak failed to present any evidence, to establish the requisite condition that
the property is in danger of being lost, removed or materially injured unless a
receiver is appointed to guard and preserve it.
Facts:
1. Batjak Inc., (Basic Agricultural Traders Jointly Administered
Kasamahan) is a Filipino-American corporation, primarily engaged in
the manufacture of coconut oil and copra cake for export. In 1965,
Batjak's financial condition deteriorated to the point of bankruptcy. As
of that year, Batjak's indebtedness to some private banks and to the
Philippine National Bank (PNB) amounted to P11,915,000.00.
2. As security for the payment of its obligations and advances against
shipments, Batjak mortgaged its 3 coco-processing oil mills in Sasa,
Davao City, Jimenez, Misamis Occidental and Tanauan, Leyte to Manila
Banking Corp. (Manila Bank), Republic Bank (RB), and Philippine
Commercial and Industrial Bank (PCIB), respectively.
3. In need for additional operating capital to place the 3 coco-processing
mills at their optimum capacity and to settle pending financial
obligations with the different private banks, Batjak applied to PNB for
additional financial assistance. On 5 Oct 1965, a Financial Agreement
was submitted.
4. (not impt. Fyi lang) As agreed, PNB granted Batjak an export-advance
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line of P 5million, and a standby letter of credit facility of
P5,850,000.00. As of 29 September 1966, the financial accomodation
that had been extended by PNB to Batjak was P 14,207,859.51.
5. Under said Agreement, NIDC (a wholly-owned subsidiary of PNB)
would invest P6,722,500.00 in Batjak in the form of preferred shares of
stock to liquidate Batjak's obligations to RB, Manufacturers Bank and
Trust Company (MBTC) and PCIB, and the balance of the investment
was to be applied to Batjak's past due account of P 5 million with the
PNB. Upon receiving payment, RB, PCIB, and MBTC released in favor of
PNB the mortgages they held on the properties of Batjak. Thus, Batjak
executed a first mortgage in favor of PNB on all its properties located at
Jimenez, Misamis Occidental and Tanauan, Leyte
6. On the other hand, Batjak's plant in Sasa, Davao City was mortgaged to
the Manila Bank which, in 1967, but was settled through the payment
of P2,400,000.00 advanced to Batjak by NIDC. To secure the advance,
Batjak mortgaged the oil mill in Sasa, Davao City to NIDC.(So 2
mortgaged to PNB, 1 to NDIC)
7. Next, a Voting Trust Agreement was executed on 26 October 1965 in
favor of NIDC by the stockholders representing 60% of the outstanding
paid-up shares of Batjak. This agreement was for a period of five (5)
years subject to negotiation. (voting trust merely stated that voting
rights would be given to NIDC as trustee)
8. In July 1967, forced by the insolvency of Batjak, PNB instituted
extrajudicial foreclosure proceedings against the oil mills of Batjak
located in Tanauan, Leyte and Jimenez, Misamis Occidental. The
properties were sold to PNB as the highest bidder. Subsequently, PNB
transferred the ownership of the two (2) oil mills to NIDC. As regards
the oil mill located at Sasa, Davao City, the same was similarly
foreclosed extrajudicial by NIDC. It was sold to NIDC as the highest
bidder.
9. Three (3) years later, or on 31 August 1970, Batjak, represented by
majority stockholders, through Atty. Amado Duran, legal counsel of
Batjak, wrote a letter to NIDC inquiring if the latter was still interested
in negotiating the renewal of the Voting Trust Agreement. On 22
September 1970, legal counsel of Batjak wrote another letter that it
would now safely assume that NIDC was no longer interested in the
renewal. And, in view thereof, requested for the turn-over and transfer
of all Batjak assets, properties, management and operations, with
complete accounting of assets. NDIC replied it had no intention of
complying.
10. On 24 February 1971, Batjak filed before the CFI Rizal a special civil
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action for mandamus with preliminary injunction against NDIC and
PNB. Respondent judge issued a restraining order "prohibiting NDIC
from removing any record, books, cash, and leasing, renting out,
disposing of or otherwise transferring any or all of the properties, now
in the factory sites of the three (3) modem coco milling plants.
11. Batjak then filed on 3 May 1971 a petition for receivership as
alternative to writ of preliminary prohibitory and mandatory
injunction. This was opposed. On 8 May 1971. NIDC and PNB filed a
motion to dismiss Batjak's complaints.
12. On 16 August 1971, respondent judge issued the now assailed order
denying PNB/NIDC's motion to dismiss and appointing a set of three
(3) receivers. MR denied. Petition for certiorari.
13. FYI, in their manifestation with motion for early decision, Batjak
contends that the NIDC has already been abolished or scrapped by its
parent company, the PNB.
Issue 1: SHOULD THE MOTION TO DISMISS HAVE BEEN GRANTED? YES
Under certain situations, recourse to the extraordinary legal remedies
of certiorari, prohibition and mandamus to question the denial of a
motion to dismiss or quash is considered proper, in the interest of
more enlightened and substantial justice.
No jurisdiction over the subject of the action or suit.
SC – It is a well-settled rule that the jurisdiction of a CFI to issue a writ of
preliminary or permanent injunction is confined within the boundaries of the
province where the land in controversy is situated. The petition for mandamus
of Batjak prayed that NIDC and PNB be ordered to surrender, relinquish and
turnover to Batjak the assets, management and operation of Batjak particularly
the three (3) oil mills located in Sasa, Davao City, Jimenez, Misamis Occidental
and Tanauan, Leyte. Clearly, what Batjak asked of respondent court was the
exercise of power or authority outside its jurisdiction.
The venue is improperly laid
SC - Batjak's complaint should have been filed in the provinces where said oil
mills are located. Under Rule 4, Sec. 2, paragraph A of the Rules of Court,
"actions affecting title to, or for recovery of possession, or for partition or
condemnation of, or foreclosure of mortgage on, real property, shall be
AQUINO.DEGUZMAN.GERONA.GILTENDEZ.MEER.PINEDA.TAYLO.
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commenced and tried in the province where the property or any part thereof
lies."
Plaintiff has no legal capacity to sue and has no cause of action.
SC - PNB and NIDC contend that Batjak's complaint for mandamus is based on
its claim or right to recovery of possession of the three (3) oil mills, on the
ground of an alleged breach of fiduciary relationship. Noteworthy is the fact
that, in the Voting Trust Agreement, the parties thereto were NIDC and certain
stockholders of Batjak. Batjak itself was not a signatory thereto. The action
should have been filed by the stockholders of Batjak, who executed the Voting
Trust Agreement with NIDC, and not by Batjak itself.
Nature of Mandamus
Generally, mandamus is not a writ of right and its allowance or refusal
is a matter of discretion. It will issue only where there is a clear legal
right sought to be enforced. It will not issue to enforce a doubtful right.
It should be noted that the petition for mandamus filed by it prayed
that NIDC and PNB be ordered to surrender, relinquish and turn-over
to Batjak the assets, management, and operation of Batjak particularly
the three (3) oil mills and to make the order permanent, after trial. In
effect, what Batjak seeks to recover is title to, or possession of, real
property but which the records show already belong to NIDC. From the
foregoing, it is evident that Batjak had no clear right to be entitled to
the writ prayed for.
ISSUE 2: WAS THE APPOINTMENT OF A RECEIVER VALID? NO
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 that the party applying for the appointment of receiver has
an interest in said property. The right, interest, or claim in property, to
entitle one to a receiver over it, must be present and existing.
PNB acquired ownership of 2 of the 3 oil mills by virtue of mortgage
foreclosure sales. NIDC acquired ownership of the third oil mill also
under a mortgage foreclosure sale. Certificates of title were issued to
PNB and NIDC after the lapse of the one (1) year redemption period.
Subsequently, PNB transferred the ownership of the two (2) oil mills to
NIDC. There can be no doubt, therefore, that NIDC not only has
 [PROVREM DIGESTS-RECEIVERSHIP]
possession of, but also title of said mills. The interest of Batjak over the
three (3) oil mills ceased upon the issuance of the certificates of title to
PNB and.
Moreover, Batjak does not impugn the validity of the foreclosure
proceedings.
Batjak premises its right to the possession of the three (3) off mills on
the Voting Trust Agreement, claiming that under said agreement, NIDC
was constituted as trustee of the assets, management and operations of
Batjak, that due to the expiration of the Voting Trust Agreement, on 26
October 1970, NIDC should tum over the assets of the three (3) oil
mills to Batjak.
It is clear that, under the Voting trust Agreement, what was assigned to
NIDC was the power to vote the shares of stock of the stockholders of
Batjak, representing 60% of Batjak's outstanding shares. The power
entrusted to NIDC also included the authority to execute any
agreement or document that may be necessary to express the consent
or assent to any matter, by the stockholders. Nowhere in the said
provisions is mention made of any transfer or assignment to NIDC of
Batjak's assets, operations, and management.
What was to be returned by NIDC as trustee to Batjak's stockholders,
upon the termination of the agreement, are the certificates of shares of
stock belonging to Batjak's stockholders, not the properties or assets of
Batjak itself which were never delivered, in the first place to NIDC,
under the terms of said Voting Trust Agreement.
The acquisition by PNB-NIDC of the properties in question was not
made or effected under the capacity of a trustee but as a foreclosing
creditor for the purpose of recovering on a just and valid obligation of
Batjak.
Moreover, the prevention of imminent danger to property is the
guiding principle that governs courts in the matter of appointing
receivers. Under Sec. 1 (b), Rule 59 of the Rules of Court, it is necessary
in granting the relief of receivership that the property or fired be in
danger of loss, removal or material injury. In the case at bar, Batjak in
its petition for receivership, or in its amended petition therefor, failed
to present any evidence, to establish the requisite condition that the
property is in danger of being lost, removed or materially injured
unless a receiver is appointed to guard and preserve it.
WHEREFORE, the petitions are GRANTED. The orders of the respondent judge,
dated 16 August 1971 and 30 September 1971, are hereby ANNULLED and SET
ASIDE. The respondent judge and/or his successors are ordered to desist from
AQUINO.DEGUZMAN.GERONA.GILTENDEZ.MEER.PINEDA.TAYLO.
8
hearing and/or conducting any further proceedings in Civil Case No. 14452,
except to dismiss the same. With costs against private respondents.
4. Delos Reyes v. Bayona (GR No. L-13832)
Petitioner: Geronimo De Los Reyes
Respondent: Hon. Froilan Bayona (Presiding Judge, CFI of Manila), Maria
Castro, and Arsenio Tenchavez
Date: March 29, 1960
Summary: Reyes loaned P120k from Castro and executed a document
purporting to be a deed of sale with right of repurchase of 2 parcels of land to
guarantee loan. Same day, Castro purportedly leased said parcels but which
annual rental was equivalent to the annual interest rate of the loan. Reyes now
alleges this was a mortgage and he’s been tendering the principal amount of the
loan but Castro won’t accept. Castro also filed an unlawful detainer case against
Reyes. Upon certiorari of the unlawful detainer case, SC said writ of execution
not proper until trial on the merits and since Reyes was the original owner, he
should stay in possession. But in the original case filed by Reyes, Castro filed a
petition for appointment of receiver, Tenchavez, which Judge Bayona granted.
SC said this was improper because then, Castro would get what she wanted,
which is to deprive Reyes of possession even though SC already said he should
stay in possession until termination of the trial of the case. (read my digest
super short lang)
Facts:
1. Geronimo de los Reyes (Reyes) obtained a loan of P120,000 in
Japanese military war notes from Maria Castro (Castro), with interest
at the rate of 6%/year, interest for the first 2 years to be paid in
advance. To guarantee payment of the loan, Reyes executed a
document purporting to be a deed of sale with right of repurchase,
over 2 parcels of land in Calisunga, Calauan, Laguna. On the same day,
Castro, as vendee, allegedly leased the 2 parcels to Reyes for an annual
rental equivalent to the interest on the loan for a year.
2. Claiming that the deed of sale did not express the true intention of the
parties, but that was merely a mortgage to secure the payment of the
loan, Reyes filed a Civil Case (3910) with the CFI of Manila against
Castro and her husband Espinosa, alleging in his complaint that since
December 1944 – January 1945 he had repeatedly tendered to Castro
the payment of the principal of the loan, but that she refused to accept
it, and so he filed another Civil Case (3134) in the CFI of Manila, at the
same time consigning in court in her favor the sum of P120,000.
 [PROVREM DIGESTS-RECEIVERSHIP]
a. Despite the pendency of said Civil Case, Castro executed an
affidavit of consolidation of ownership of the 2 parcels of land,
all without his knowledge and consent and new TCTs were
issued
b. Upon discovery of the consolidation of ownership, Castro took
steps toward the reconstitution of the records of the
consignment case (3134), whose original records presumably
were destroyed during the war but his efforts were frustrated
by the denial by the TC on the ground that the period for
reconstitution had already expired.
3. In the meantime, on the theory that the 2 parcels in question had
already been sold to her by Reyes and that she had thereafter leased
the same to him and that he failed to pay the annual rentals, Castro
filed a complaint for unlawful detainer against Reyes in the Justice of
the Peace Court of Calauan, which rendered judgment in favor of
Castro.
4. Pending appeal of the unlawful detainer case in the CFI of Laguna, the
said court issued a writ of execution of the judgment of the Justice of
the Peace Court. Reyes filed a petition for certiorari before this
Tribunal to annul said order of execution.
a. In said certiorari case, we held that the order of execution was
improvidently issued, inasmuch as more than 5 years had
elapsed since the judgment of the Justice of the Peace Court
was rendered; that there was reason to believe that the deed
conveying the 2 parcels of land to Castro was one of mortgage,
rather than of sale, and that furthermore, even assuming that
it were a sale, Castro not being the original owner and
possessor of the parcels but only a vendee a retro, the vendor,
Reyes had the right to continue in his possession until the case
between them was finally determined.
5. However, that as a result of the writ of execution issued, Castro was
placed in possession of the property in question from 1955 -1957.
Then a decision of the TC was issued ordering her to return possession
of the land to Reyes and to account for the income she received
therefrom – CA denied certiorari
6. According to the present petition for certiorari before us, in Civil Case
3910, Reyes was notified of the hearing of the Urgent Petition for
Receivership filed by Castro; that Reyes opposed the petition; and that
Judge Bayona issued an order denying the petition for appointment of
a receiver until termination of trial. However, Reyes was served a copy
of the order of Judge Bayona appointing Arsenio Tenchaves receiver of
AQUINO.DEGUZMAN.GERONA.GILTENDEZ.MEER.PINEDA.TAYLO.
9
the properties in question. This order based on an ex-parte petition
reiterating the request for appointment.
Issue: WoN appointment of Receiver was proper? – NOT PROPER
Held: Petition for certiorari is hereby granted; the order appointing Arsenio
Tenchaves receiver, is set aside and the writ of preliminary injunction is made
permanent. Respondent Maria Castro will pay the costs.
1. It should not be difficult to gather from our decision and the decision of
the CA that the courts, in justice to the parties, particularly, Reyes,
considered possession in him instead of Castro as more reasonable and
just. It is, therefore, to be expected that we cannot look with favor on
any judicial order or arrangement whereby this possession of Reyes
should be transferred to a receiver, because by so doing, Castro would
be obtaining indirectly what she could not obtain directly, namely,
deprive Reyes of the possession of the property until the controversy
between them is finally settled.
5. DESCALLAR v. CA
July 12 1993 | GR No 106473
Petitioner: Antonietta O. Descallar
Respondents: CA; Camilo F. Borromeo
Summary: Borromeo claimed that he is the owner of three parcels of land
registered in the name of Descallar. Borromeo said that the lands were sold to
him by an Austrian national named Jambrich, the former lover of Descallar.
Descallar, however, was the original vendee to the land, as evinced by TCTs
registered in her name. Borromeo filed an application for receivership of the
property, which Judge Dadole granted. The SC said that Judge Dadole acted with
grave abuse of discretion in granting the receivership. Firstly, the TCTs were
registered in Descallar’s name. Second, the appointment of a receiver is not
proper where the rights of the parties are yet to be determined by the court
(the case for recovery has yet to attain finality). Lastly, there is no showing that
any grave or irremediable damage may result to Borromeo if a receiver is not
appointed, because land, being real property, is neither perishable nor
consumable.
Facts
Private respondent Borromeo, a realtor, filed a civil complaint against Descallar
for the recovery of three parcels of land and a house thereon, which are in the
 [PROVREM DIGESTS-RECEIVERSHIP]
possession of Descallar. The lands were registered in Descallar’s name under
three TCTs duly recorded in the Registry of Deeds in Mandaue, Cebu.
Borromeo claimed that he previously purchased the properties from an
Austrian national named Wilhelm Jambrich, who is also the former lover of
Descallar. (Jambrich left Descallar for another woman. Hence, they are no
longer together.)
Descallar answered by saying that Jambrich, being a foreigner, is not qualified
to acquire or own real property in the Philippines; that Jambrich had no title,
right or interest whatsoever in the property which he may transfer to
Borromeo.
Borromeo asked the trial court for the appointment of a receiver during the
pendency of the case. Trial Judge Mercedes Dadole granted the application for
receivership, and appointed her clerk of court as receiver, with a bond worth
P250k.
Issue/Held: W/N Judge Dadole acted with GADALEJ in appointing a receiver
for real property registered in the name of Descallar, in order to have the
possession of it transferred to Borromeo—YES.
Ratio:
Descallar is the registered owner, having three TCTs of the property registered
in her name.
The TCTs are indefeasible or incontrovertible
Her title 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.
“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.”
The deed of sale (between the original unnamed vendor and Descallar)
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 Jambrich.
AQUINO.DEGUZMAN.GERONA.GILTENDEZ.MEER.PINEDA.TAYLO.
10
Thus, the order for receivership was granted 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 courts.
o Citing Calo v. Roldan: 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.
o 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
In this case, there is no showing that grave or irremediable damage
may result to Borromeo unless a receiver is appointed.
o The property in question is real property, which is neither
perishable or consummable.
o Even though it is mortgaged to a third person, there is no
evidence that payment of the mortgage obligation is being
neglected.
o In any event, Borromeo’s rights and interests may be
adequately protected during the pendency of the case by
causing his adverse claim to be annotated on Descallar’s TCTs.
The practice of appointing a judge’s own clerk of court as receiver is frowned
upon by the SC.
Sometimes, the clerk of court does not post bonds to guarantee the
faithful discharge of his duty (but not in this case, cause a bond was
filed).
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 of damage.
o ^ I dunno how that is connected to clerks of court being
receivers
 [PROVREM DIGESTS-RECEIVERSHIP]
Lastly, during the pendency of this appeal, Judge Dadole rendered a decision
upholding Borromeo's claim to Descallar's property, thus annulling Descallar’s
TCTs, 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.
GROUNDS AND PROCEDURE
6. Pacific Merchandising Corporation v Consolacion Insurance & Surety
Co., Inc.
GR No. L-30204 | October 29, 1976 | Antonio
Plaintiff-appellee: Pacific Merchandising Corporation
Defendant-appellee: Consolacion Insurance & Surety Co., Inc.
Third party plaintiff-appellee: Consolacion Insurance & Surety Co., Inc
Third party defendant-appellant:
 Gregorio V. Pajarillo
Summary: Pacific instituted an action against Consolacion (who in turn filed a
third party complaint against Parajillo for the payment of P2.562.88. The City
Court rendered judgment ordering Consolacion to pay. Pajarillo appealed and
the parties submitted a Stipulation of Facts: A judgment was rendered in favor
of Pacific against Leo Enterprises. A public auction of properties was scheduled
but this was postponed by Pajarillo, who was appointed Receiver of Leo
Enterprises, Inc. (operates the Paris Theater). Pajarillo undertook the payment
of judgment rendered in favor of Pacific and a surety bond was issued by
Consolacion to guarantee payment. To protect Consolacion against damage and
injury, Pajarillo executed an indemnity agreement. CFI rendered a decision in a
civil case by virtue of which, Pajarillo, as receiver, stopped making payments to
Pacific. Pacific’s counsel demanded from Paiarillo, the payment of the
installments which remain unpaid in spite of said demand. When reminded by
Consolacion regarding his obligations in favor of the Pacific, Pajarillo replied
that he no longer was bound to pay because he had ceased to be the receiver of
Paris Theatre operated by Leo Enterprises, Inc. by virtue of the decision of the
Court, and for this reason, Consolacion refused to pay the demand of Pacific. I:
W/N Pajarillo is liable to plaintiff for the unpaid amount claimed (upon the
resolution of this issue will in turn depend the liability of Consolacion under the
Surety Bond) – YES. R: A receiver is not an agent or representative of any party
to the action. He is an officer of the court exercising his functions in the interest
of neither plaintiff nor defendant, but for the common benefit of all the parties
in interest. He performs his duties "subject to the control of the Court," and
every question involved in the receivership may be determined by the court
AQUINO.DEGUZMAN.GERONA.GILTENDEZ.MEER.PINEDA.TAYLO.
11
taking cognizance of the receivership proceedings. Thus, "a receiver has no
right or power to make any contract binding the property or fund in his custody
or to pay out funds in his hands without the authority or approval of the court.
Pajarillo does not dispute the fact that he never secured the court's approval of
either the agreement (undertaking payment of judgment) with Pacific or of his
Indemnity Agreement with the Consolacion. Unauthorized contracts of a
receiver do not bind the court in charge of receivership. They are the receiver's
own contracts and are not recognized by the courts as contracts of the
receivership.
Facts:
In an action instituted by Pacific Merchandising Corporation (Pacific)
to collect the sum of P2,562.88 from Consolacion Insurance & Surety
Co., Inc., (Consolacion) who in turn filed a third-party complaint
against Gregorio Pajarillo, the City Court of Manila rendered judgment:
o WHEREFORE, in view of the foregoing, judgment is hereby
rendered in favor of Pacific and against Consolacion, ordering
the latter to pay the former the sum of P2,562.88 with interest
thereon at the rate of 12%/annum from May 30, 1963 until
fully paid, P100.00 as for attorney's fees, plus the costs of suit;
condemning third defendant to pay third-party plaintiff for
whatever sums or amounts the latter paid the Pacific on
account of this judgment.
Pajarillo appealed and the case was elevated to the CFI Manila. The
parties submitted the following Stipulation of Facts:
1. Writ of Execution was issued by CFI Manila under Civil Case,
entitled Pacific Merchandising Corporation vs. Leo Enterprises, Inc.,
Byvvirtue of the Writ of Execution, the Sheriff of Manila levied and
attached the following:
a. Second Hand AUTOMATICKET Machine; and
b. Cinema Projectors Complete, which items were advertised
for sale on March 2, 1963;
2. That Atty. Greg Pajarillo was appointed on March 2, 1963 as
Receiver of all the assets, properties and equipment of Paris
Theatre, operated by Leo Enterprises, Inc.;
3. That the sale at public auction of the properties was postponed
and was later cancelled due to the representation of Atty. Pajarillo
as Receiver, in which he undertook the payment of the judgment
rendered in favor of Pacific against Leo Enterprises, Inc.;
4. Pajarillo approached Consolacion and applied for a surety bond in
the amount of P5k to be rated in favor of the Pacific in order to
 [PROVREM DIGESTS-RECEIVERSHIP]
guarantee to Pacific the payment of obligations in its favor by the
Leo Enterprises, Inc.; The bond applied for was executed in favor
of Pacific with Pajarillo as principal and Consolacion as surety; To
protect Consolacion against damage and injury, Pajarillo executed
in favor of the former an INDEMNITY AGREEMENT,
5. Pacific received from Pajarillo the sum of P2k leaving a balance of
P2,562.88 still unpaid;
6. CFI Manila in a Civil Case rendered a decision, by virtue of which
Pajarillo, as said Receiver, stopped making payments to Pacific;
Said decision was appealed by Leo Enterprises, Inc. to the CA;
7. Pacific’s counsel demanded from Paiarillo, the payment of the
installments which remain unpaid in spite of said demand,
Consolacion was duly notified of the demand made on Pajarillo and
in spite of said notice Consolacion has failed and refused to pay the
unpaid obligation; When reminded by Consolacion regarding his
obligations in favor of the Pacific, Pajarillo replied that he no
longer was bound to pay because he had ceased to be the receiver
of Paris Theatre operated by Leo Enterprises, Inc. by virtue of the
decision of the Court, and for this reason, Consolacion refused to
pay the demand of Pacific.
CFI affirmed the decision of the City Court.
a) Since the unpaid claim represents the cost of certain materials
used in the construction of the Paris Theatre, the possession of
which reverted to Pajarillo as owner by virtue of the judgment
in Civil Case, "it is only simple justice that Pajarillo should pay
for the said claim. Otherwise he would be enriching himself by
having the said building without paying Pacific for the cost of
certain materials that went into its construction";
b) "under Sec 7 of Rule 61 of the former Rules of Court, one of the
powers of a receiver is to pay outstanding debts, and since
Pacific’s claim has been outstanding since Aug 27, 1962, if not
before, Pajarillo should have paid the same long before the
alleged termination of the receivership on July 1, 1963";
c) Procedure outlined in Sec 8 of the Rule: whenever the court
"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," has not been
followed;\
AQUINO.DEGUZMAN.GERONA.GILTENDEZ.MEER.PINEDA.TAYLO.
12
d) When Pajarillo undertook to pay the amount owed to Pacific
and executed the surety bond in favor of Pacific, he “stepped
into the shoes" of the Leo Enterprises, Inc., “and the properties
of the said debtor having all subsequently passed on to
Pajarillo, there is no reason, legal or otherwise, for relieving
defendants of their said undertaking."
The court a quo likewise declared that (1) "the receivership was not
terminated by virtue of the appeal by Leo Enterprises, Inc. because a
decision which is appealed cannot be the subject of execution"; (2)
"granting arguendo that the decision is final and executory, the said
decision cannot bind nor can it be enforced against Pacific in the
present case because it is not a party in Civil Case No. 50201"; and (3)
"when Pajarillo assumed the obligation of Leo Enterprises, Inc., as a
Receiver, there was a subrogation of the party liable and, therefore,
Pacific cannot enforce the judgment against Leo Enterprises, Inc."
Pajarillo appealed to the CA.
Issue/Held: W/N Pajarillo is liable to plaintiff for the unpaid amount claimed
(upon the resolution of this issue will in turn depend the liability of Consolacion
under the Surety Bond) – YES.
Ratio:
1. A receiver is not an agent or representative of any party to the action.
He is an officer of the court exercising his functions in the interest of
neither plaintiff nor defendant, but for the common benefit of all the
parties in interest. He performs his duties "subject to the control of the
Court," and every question involved in the receivership may be
determined by the court taking cognizance of the receivership
proceedings. Thus, "a receiver has no right or power to make any
contract binding the property or fund in his custody or to pay out funds
in his hands without the authority or approval of the court ...
a. As explained by Justice Moran, in a 1939 case: “...The custody
of the receiver is the custody of the court. His acts and
possession are the acts and possession of the court, and his
contracts and liabilities are, in contemplation of law, the
contracts and liabilities of the court. As a necessary
consequence, receiver is subject to the control and supervision
of the court at every step in his management of the property or
funds placed in his hands. ... He cannot operate independently
of the court, and cannot enter into any contract without its
approval.
2. Pajarillo does not dispute the fact that he never secured the court's
 [PROVREM DIGESTS-RECEIVERSHIP]
approval of either the agreement (undertaking payment of judgment)
with Pacific or of his Indemnity Agreement with the Consolacion, in
consideration of the performance bond submitted by the latter to
Pacific to guarantee the payment of the obligation. As the person to
whom the possession of the theater and its equipment was awarded by
the court, it was certainly to his personal profit and advantage that the
sale at public auction of the equipment of the theater was prevented by
his execution of the agreement and submission of the bond. In order to
bind the property or fund in his hands as receiver, he should have
applied for and obtained from the court authority to enter into the
contract.
a. Unauthorized contracts of a receiver do not bind the court in
charge of receivership. They are the receiver's own contracts
and are not recognized by the courts as contracts of the
receivership. Consequently, the agreement and undertaking
entered into by Pajarillo not having been approved or
authorized should be considered as his personal undertaking
or obligation. Certainly, if such agreements were known by the
receivership court, it would not have terminated the
receivership without due notice to the judgment creditor as
required by Sec 8 of Rule 59 of the Rules of Court.
b. Indeed, if it were true that he entered into the agreement and
undertaking as a receiver, he should have, as such receiver,
submitted to the court an account of the status of the
properties in his hands including the outstanding obligations
of the receivership. Had he done so, it is reasonable to assume
that the judgment creditor would have opposed the
termination of the receivership, unless its claim was paid.
Having failed to perform his duty, to the prejudice of the
creditor, Pajarillo should not be permitted to take advantage of
his own wrong. The judgment creditor having been induced to
enter into the agreement by Pajarillo, it was the duty of the
latter to comply with is end of the bargain. He not only failed
to perform his undertaking, but now attempts to evade
completely his liability. Under such circumstances, he is not
entitled to equitable relief. No ground for equitable relief can
be found in a case where a party has not only failed to perform
the conditions upon which he alone obtained the execution of
the contract, but where it is clear that he never, at any time,
intended to perform them.
3. Obligation due Pacific represented the cost of materials used in the
AQUINO.DEGUZMAN.GERONA.GILTENDEZ.MEER.PINEDA.TAYLO.
13
construction of the Paris Theatre. There can not be any question that
such improvements redounded to the advantage and personal profit of
Pajarillo because of the judgment in Civil Case ordering that the
"possession of the lands, building equipment, furniture, and
accessories ..." of the theater be transferred to Pajarillo as owner.
a. As the trial court aptly observed "... it is only simple justice
that Pajarillo should pay for the said claim, otherwise he
would be enriching himself without paying plaintiff for the
cost of certain materials that went into its construction. ...
b. Perez v. Pomar: where one has rendered services to another,
and these services are accepted by the latter, in the absence of
proof that the service "as rendered gratuitously, it is but just
that he should pay a reasonable remuneration therefore
because "it is a well-known principle of law, that no one
should be permitted to enrich himself to the damage of
another."
ACCORDINGLY, in view of the foregoing, the judgment unirilleal is httcf
AFFIRMED. Costs against appellant.
7. Traders Royal Bank v. IAC
G.R. No. 111357. June 17, 1997
Petitioners: TRADERS ROYAL BANK
Respondents: INTERMEDIATE APPELLATE COURT and HEIRS OF THE LATE
JOSE C. TAYENGCO
Summary: Our issue in this case is who is responsible for TRB's receiver's fee?
As correctly pointed out by the CA, 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.
Facts:
The factual aspects of this case have already been resolved by this
Court in G.R. No. 63855, 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, where we affirmed the validity
of the appointment of petitioner Traders Royal Bank (TRB) as receiver
pendente lite.
 [PROVREM DIGESTS-RECEIVERSHIP]
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 RTC of Iloilo, Branch 5, 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 CA contending that TRB's
compensation should have been charged against the losing party and
not from the funds under receivership.
The CA 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.
TRB filed a motion for reconsideration, but this was denied by the
appellate court in its resolution.
TRB raises the following errors allegedly committed by the Court of
Appeals:
o 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 SC in the case of Jose
Tayengco vs. Hon. Ilarde, TRB, et al. which ordered the Trial
Court to "settle the account of the receiver, TRB" to thereafter
discharge the receiver and charged as cost against the losing
party;
o 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;
o 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".
Issues:
AQUINO.DEGUZMAN.GERONA.GILTENDEZ.MEER.PINEDA.TAYLO.
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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? NO
2. Who is responsible for TRB's receiver's fee? Defeated party, or the
prevailing litigant may be made to share the expense, as justice
requires.
Ratio:
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 action.
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.
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:
o "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. Consequently, the trial court's
 [PROVREM DIGESTS-RECEIVERSHIP]
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.
Held: IN VIEW OF THE FOREGOING, the decision appealed from is
AFFIRMED. Costs against petitioner.
SO ORDERED.
8. Vivares v. Reyes
GR No. 155408 | February 13, 2008 | Velasco, Jr., J.
Petitioners: Julio A. Vivares (executor of Torcuato) and Mila G. Ignaling (heir of
Torcuato)
Respondent: Engr. Jose J. Reyes
Summary: Severino has two sons: Jose and Torcuato. Severino died, leaving
properties. The sons agreed to partition it orally. Now, Torcuato died. The
executor named in his will comes forward and claims some of the properties
under the possession of Jose, alleging that Jose fraudulently transferred those
properties and that those properties should be included in the estate of
Torcuato. They annotated a notice of lis pendens upon the disputed properties.
They also filed for receivership, which was both granted by the Court. Despite
the offering of counterbond of Jose for the discharge of the receiver, TC still did
not dissolve the receivership. However, TC was reversed by CA, saying that the
receiver and the notice of lis pendens must both be discharged. The SC partially
granted the petition, saying that the CA was correct in the discharge of the
receiver, but the lis pendens must stay.. The discharge of receiver was correct
because Vivares was not able to prove his case and that Severino offered to file
a counterbond. However, take note that the mere filing of a counterbond does
not discharge the receiver. The court should consider all the circumstances.
Moreover, notice of lis pendens, by itself, is not the most convenient and
feasible means of preserving property in litigation.
Facts
Severino Reyes was the father of Jose Reyes and Torcuato, died leaving
properties to his sons Jose and Torcuato. Jose and Torcuato orally
partitioned these properties.
Torcuato died on May 12, 1992, with a last will and testament, which
was admitted for probate. Vivares was the designated executor, while
Ignaling was declared a lawful heir of Torcuato.
AQUINO.DEGUZMAN.GERONA.GILTENDEZ.MEER.PINEDA.TAYLO.
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Believing that Torcuato did not receive his full share in the estate of
Severino, petitioners instituted an action for Partition and Recovery of
Real Estate before the Camiguin RTC.
o Parties agreed that properties already transferred into their
respective names (Jose and Torcuato) shall be excluded. The
properties that they are contending here refers to those still
under the name of Severino.
o For purposes of collating these properties, a three man
commission was created.
The disputed properties were then annotated with notices of lis
pendens upon the instance of Vivares and Ignaling.
Petitioners then filed a Motion to Place Properties in Litigation under
Receivership. Main allegations are:
o That Jose Reyes, without court approval and without
petitioners’ knowledge, sold to third parties and transferred in
his own name several common properties, to the prejudice of
the petitioners.
o He fraudulently antedated some transactions prior to May 12,
1992, the death of Torcuato, to make it appear that these were
no longer part of the estate under liquidation.
o Jose was and is in possession of the common properties still
under the estate of Severino and exclusively enjoying its fruits
without rendering an accounting and turning over Torcuato’s
share.
o Nominated certain Lope Salantin to be appointed as receiver.
Jose filed an opposition wherein he:
o Denied any fraudulent transfer
o Asserted that any transfer in his name was a result of the oral
partition between him and Torcuato.
Trial Court granted the petition for receivership, appointed Salantin as
receiver upon filing of 50,000 bond.
Jose sought for reconsideration, alleging that he was deprived of due
process contending that the appointment of a receiver was unduly
precipitate, and was not represented by counsel.
o TC allowed presentation of evidence, but Jose was not able to
present such on the day itself because he was in the US for a
medical exam. In fact, he also asked for postponement of
hearing due to this.
o TC disregarded such excuse, and reiterates the order granting
receivership.
 [PROVREM DIGESTS-RECEIVERSHIP]
Respondent filed a motion to discharge receiver, reiterating
circumstances why he was not able to attend, AND praying for the
discharge of the receiver UPON THE FILING OF A COUNTERBOND in an
amount to be fixed by the court (Sec. 3, Rule 59, 1997 CivPro).
Respondent also filed a Motion to Cancel Notice of Lis Pendens
covering Lot No. 33, alleging that it completely belongs to him, and a
portion of an adjacent land owned by a certain Unchuan was
erroneously included in the notice of lis pendens.
TC denied both motions of Jose. Jose tried a motion for partial
reconsideration by attaching copies of deed of sales executed by
Torcuato to prove that they indeed made an oral partition of the estate
of their father. But this, too, was denied.
Jose raised the issue via petition for certiorari to CA. CA sided with him
and reversed TC. Receiver is discharged because of upon filing of the
counterbond.
o CA said that TC failed to observe the rule that allows the grant
of the harsh judicial remedy of receivership ONLY IN extreme
cases when there is an IMPERATIVE NECESSITY for it.
o Jose has also shown that the appointment of receiver was
without basis, and the rights of petitioners are double
protected through the notice of lis pendens.
o CA said that appointment of a receiver is a delicate one,
requiring the exercise of discretion, and not an absolute right
of the party but subject to the attendant facts of each case.
o CA held that “it is proper that the appointed receiver be
discharged on the filing of a counterbond pursuant to Sec. 3 Rule
59” (remember this, this will be another source of controversy
later)
Hence, this petition for certiorari.
Issues/Held:
1. WN 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 – NO, notice of lis pendens, by itself, is not the
most convenient and feasible means of preserving property in
litigation.
2. WN a duly appointed receiver be discharged simply because the
adverse party offers to post a counterbond – NO, the wording of the
law is permissive.
3. WN the cancellation of a notice of lis pendens annotated on tax
declaration 112 (the document involved here where the notice was
AQUINO.DEGUZMAN.GERONA.GILTENDEZ.MEER.PINEDA.TAYLO.
16
annotated) is contrary to law. (Not relevant, but SC said that the notice
of lis pendens should continue)
Dispositive Portion: Petition Partly Granted. Notice of Lis Pendens becomes
VALID AND EFFECTIVE, but the RECEIVER IS DISCHARGED.
Ratio
Petitioners said that Jose made a fraudulent transfer through
antedating of the documents. But petitioners failed to adduce clear,
convincing, and hard evidence to prove fraud and the fact of
antedating.
o The fact that the transfers were dated prior to the death of
Torcuato does not necessarily mean that they were fraudulent.
o Jose was able to adduce documentary proof that Torcuato
himself similarly conveyed several lots – hence, bolstering his
assertion that there was indeed an oral partition.
o Petitioners cannot now impugn the oral partition, and hence
cannot assail the transfers because Torcuato did the same
thing too.
o Since they agreed that the civil action does not encompass
properties covered by the oral partition, they cannot now
impugn the acts of Jose.
RECEIVERSHIP, IN GENERAL
Receivership is a harsh remedy to be granted only in extreme
situations
o Velasco vs. Gochuico – 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.
COUNTERBOND ISSUE
 [PROVREM DIGESTS-RECEIVERSHIP]
Petitioner says that receivership should not be recalled simply because
the adverse party offers to post a counterbond.
o This was not raised in the CA – proscribed! (raise first time on
appeal barred by estoppel),
o Even if SC entertains this, it is devoid of merit.
CA 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.
o 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.
o 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. ( SC said to
petitioners that what they were thinking was wrong. Petitioners
thought that CA discharged the receiver merely because of the
filing of the counterbond. But nope, SC said that the CA is not
tanga and they should have taken Sec. 3 into consideration, so
what the CA meant by their pronouncement is that the trial court
should consider: (1) Counterbond, (2) Other circumstances.
NOTICE OF LIS PENDENS ISSUE
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. They are correct on this point.
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(capslockparaintense, bold, underline, italicize), may
not be the “most convenient and feasible means of preserving or
administering the property in litigation.”
BUT BUT BUT this does not render the dissolution of the receivership
invalid in this case because the situation is different. 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.
o As a matter of fact, petitioners can also ask for the issuance of an
injunctive writ to foreclose any transfer, mortgage, or
AQUINO.DEGUZMAN.GERONA.GILTENDEZ.MEER.PINEDA.TAYLO.
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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.
SOME RANDOM STUFFS STILL RELATED TO RECEIVERSHIP (Might be
important so still read!)
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
(Not Important) – ERRONEOUS INCLUSION OF UNCHUAN’S PROPERTY IN THE
NOTICE OF LP
Since CA found erroneous inclusion, such notice must be lifted. But the
trial court must determine which part of the property is erroneously
included in the notice of lis pendens.
The notice of lis pendens stays until final ruling on said issues is made.
9. Dela Riva v. Molina Salvador
ANTONIO DE LA RIVA, Plaintiff-Appellee, vs. RAFAEL MOLINA SALVADOR, ET
AL., Defendants-Appellants.
G.R. No. L-10106 November 23, 1915
Summary: Salvador filed an action against Dela Riva for recovery of money. The
former secured the appointment of Navarro as a receiver of real and personal
property owned by the latter. The receiver took possession of the property and
gave bond subject to faithful performance of his duties, Garcia and Martinez as
the sureties. However, SC subsequently set aside the appointment of the
receiver – issued without just cause. The property which the receiver had in his
 [PROVREM DIGESTS-RECEIVERSHIP]
possession at the termination of the receivership was seized by the sheriff of
Albay under executions issued on judgments against De la Riva, in favor of
Gibbs, Gale & Carr and Enrique F. Somes, and was duly sold at public sale under
said executions but the proceeds were insufficient. SC said that the trial court
confused the damages resulting from the appointment of the receiver, where
the appointment was procured without just cause, and the damages which arise
after the receiver has been appointed, due to his negligence or mismanagement.
The liability in these two cases rests in different principles. The right to
damages for procuring the appointment of a receiver without just cause is
statutory while the right to damages based on the negligence or misconduct of
the receiver arises under the general principles of the law. The bond is given by
the receiver, and not by the person procuring his appointment, and the liability
of the receiver, if any, arises from his own negligence, and involves in no way
the person who obtained his appointment. For the acts of the receiver after his
appointment no one is responsible but himself and his sureties. Molina cannot,
in this action, therefore, be made to respond for the acts of the receiver, it not
having been demonstrated that he exercised control over or that he connived
with the receiver.
FACTS:
In 1905, Rafael Molina Salvador (Salvador) began an action against
Dela Riva for the recovery of about P42,000.
Salvador secured the appointment of Joaquin Navarro as a receiver of
real and personal property owned by De la Riva in the Island of
Catanduanes.
The receiver took possession of the property and gave a bond in the
sum of P50,000 conditioned for the faithful performance of the duties
of his office, the other defendants, Juan Garcia and Fernando Martinez,
becoming sureties thereon.
The receiver was appointed in August, 1905.
In January 1907, the SC (Molina vs. De la Riva) set aside the order
appointing a receiver on the ground that, under the provisions of law
relative to receiverships, there was no authority for the appointment of
a receiver in the action named.
The property was inventoried at the time possession was taken by the
receiver and the value, as set out in the inventory, was something more
than P231,000.
After the reversal by the SC of the order appointing the receiver, the
latter began a proceeding to account. Objections were presented to
certain phases of the account, but none touching the condition of the
property.
AQUINO.DEGUZMAN.GERONA.GILTENDEZ.MEER.PINEDA.TAYLO.
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It appears, however, that the property, both real and personal, which
the receiver had in his possession at the termination of the
receivership was seized by the sheriff of Albay under executions issued
on judgments against De la Riva, in favor of Gibbs, Gale & Carr and
Enrique F. Somes, and was duly sold at public sale under said
executions.
It further appears that the proceeds of the sale of such property were
not sufficient to pay the judgment under which the levies were made.
The present action began in 1908.
o Recovery of P8,000 for the deterioration of the property,
during the receivership, due to the negligence of the receiver;
P30,000 for the negligent failure of the receiver to
continue the business which, it is alleged, was in
operation at the time the receiver was appointed;
P50,000 damages resulting from an alleged
conspiracy between the receiver and Salvador,
whereby
o 2nd cause of action - wrongful appointment of the receiver -
without just cause.
ISSUE:
WON there was a wrongful appointment of the receiver, it being alleged that
the appointment was procured by Molina without just cause. - NO
SC:
The application for the receivership was not ex parte and no bond was
given to protect the defendant from the effects of an appointment
without cause; and since no bond having been given, no liability
existed. Moreover, if damages were to be sought for such appointment,
they should have been demanded in the action in which the receiver
was appointed and not in action begun separately for that purpose.
Even though Molina had given no bond himself directly, there was an
implied contract in obtaining the appointment of a receiver, under
which he was obligated to pay the defendant in that action the
damages which he might suffer from such appointment, no matter how
they came about, that appointment being improper.
It is apparent that the trial court confused the damages resulting from
the appointment of the receiver, where the appointment was procured
without just cause, and the damages which arise after the receiver has
been appointed, due to his negligence or mismanagement. The liability
in these two cases rests in different principles.
 [PROVREM DIGESTS-RECEIVERSHIP]
The right to damages for procuring the appointment of a receiver
without just cause is statutory while the right to damages based on the
negligence or misconduct of the receiver arises under the general
principles of the law.
In the former case the damages, or part of them, may be caused before
the receiver qualifies or takes possession of the property, while in the
latter, the injury occurs only after the receiver has qualified and taken
possession of the property. In the former case the liability rests on
statute while in the other it rests on the negligence or misconduct of
the receiver. In the former the person obtaining the appointment of the
receiver is responsible for the damages, if he has signed the bond
described in section 177 of the Code of Civil Procedure. In the latter he
is not responsible in any event.
The bond is given by the receiver, and not by the person procuring his
appointment, and the liability of the receiver, if any, arises from his
own negligence, and involves in no way the person who obtained his
appointment. For the acts of the receiver after his appointment no one
is responsible but himself and his sureties. Molina cannot, in this
action, therefore, be made to respond for the acts of the receiver, it not
having been demonstrated that he exercised control over or that he
connived with the receiver.
It has been shown, there is no doubt, that some of the property
deteriorated, both in form and value, during the time that the receiver
held it in his possession, and that some of it was considerably
damaged; but it also appears, by the weight of the evidence, that such
deterioration and damage were due to force over which the receiver
had no control and concerning which he was in no way responsible.
On another note, an action against the receiver and his sureties cannot
be maintained under the circumstances shown to have existed in this
case.
When this action was brought there was pending before the court in
the action in which the receiver was appointed a proceeding wherein
the receiver was accounting for the property which he had in his
possession. There had been certain objections presented to such
account by the plaintiff herein but based on grounds entirely apart
from the negligence or misconduct of the receiver. That proceeding is
still pending, so far as we know.
A receiver is to be regarded as the arm, officer, or representative of the
court appointing him. The custody of the receiver is the custody of the
court. His acts and possession are the acts and possession of the court,
AQUINO.DEGUZMAN.GERONA.GILTENDEZ.MEER.PINEDA.TAYLO.
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and his contracts and liabilities are, in contemplation of law, the
contracts and liabilities of the court.
As a necessary consequence, a receiver is subject to the control and
supervision of the court at every step in his management of the
property or funds placed in his hands. On the other hand, it is the duty
of the court to protect the possession of its receiver and to prevent all
interference with him in the performance of his official functions and
duties.
It is well settled that any unauthorized interference with a receiver’s
possession of the property committed to his charge, or with the
receiver in the discharge of his official duties, is contempt of the court
by which he was appointed. It is the relationship which exists between
the court and the receiver which has led to the general rule, followed in
jurisdiction where statutes have not been passed to the contrary, that
no action can be brought against a receiver without leave of the court
appointing him.
o And this rule applies as well where suit is brought to recover a
money judgment merely as where it is to take from the
receiver specific property whereof he is in possession by order
of the court.
One who feels himself sufficiently aggrieved by acts of a receiver to
warrant active intervention should take the matter into the court
which appointed the receiver and ask either for an accounting or take
some other proceeding, and ask for the consequent judgment of the
court on the acts complained of, or for leave to bring action directly.
If, under the facts presented, it is the judgment of the court that the
interests of all concerned will be best observed by such a suit or by any
other proceeding, permission will be given to bring it.
10. Umale v. ASB Realty
G.R. No. 181126 June 15, 2011
Petitioners: LEONARDO S. UMALE, [deceased] represented by CLARISSA
VICTORIA, JOHN LEO, GEORGE LEONARD, KRISTINE, MARGUERITA ISABEL,
AND MICHELLE ANGELIQUE, ALL SURNAMED UMALE
Respondents:
 ASB REALTY CORPORATION
Emergency: This involves an ejectment case over a parcel of land in Ortigas
originally owned by Amethyst Pearl, a corp wholly owned by ASB Realty. The
land was then assigned to ASB Realty. A few years later, ASB enter into a lease
contract over the premise with Umale. Upon termination of the lease, ASB
demanded Umale to vacate. Umale refused claiming that the contract was
 [PROVREM DIGESTS-RECEIVERSHIP]
between him and Amethyst, not ASB, and that ASB was under receivership and
that the SEC rules provide rehabilitation receiver the power to "take
possession, control and custody of the debtor’s assets.” Thus the case must only
be filed by the receiver. SC – The SEC Rules state that the interim rehabilitation
receiver of the debtor corporation "does not take over the control and
management of the debtor corporation." Likewise, the rehabilitation receiver
that will replace the interim receiver is tasked only to monitor the successful
implementation of the rehabilitation plan. There is nothing in the concept of
corporate rehabilitation that would ipso facto deprive the Board of Directors
and corporate officers of a debtor corporation, such as ASB Realty, of control
such that it can no longer enforce its right to recover its property from an
errant lessee. (regarding SEC rules which give receiver same powers as that
provided in R59 of Roc) While the SEC has the discretion to authorize the
rehabilitation receiver, as the case may warrant, to exercise the powers in Rule
59 of RoC, the SEC’s exercise of such discretion cannot simply be assumed.
There is no allegation whatsoever in this case that the SEC gave ASB Realty’s
rehabilitation receiver the exclusive right to sue (In other words, rehabilitation
receivers only monitor the the rehab plan, not take over the power of the
corporation). Lastly, the lease contract and acts pursuant to the contract are
proof that the contract was between Umale and ASB, not Amethyst.
Facts:
1. This case involves a parcel of land identified as Lot 7, Block 5,
Amethyst Street, Ortigas Center, Pasig City which was originally owned
by Amethyst Pearl Corporation (Amethyst Pearl), a company that is, in
turn, wholly-owned by respondent ASB Realty Corporation (ASB
Realty).
2. In 1996, Amethyst Pearl executed a Deed of Assignment in Liquidation
of the subject premises in favor of ASB Realty in consideration of the
full redemption of Amethyst Pearl’s outstanding capital stock from ASB
Realty. Thus, ASB Realty became the owner of the subject premises.
3. Sometime in 2003, ASB Realty commenced an action in the MTC of
Pasig City for unlawful detainer of the subject premises against
petitioner Leonardo S. Umale (Umale). ASB Realty alleged that it
entered into a lease contract with Umale for the period June 1, 1999-
May 31, 2000. Their agreement was for Umale to conduct a pay-
parking business on the property and pay a monthly rent of
P60,720.00.
4. Upon the contract’s expiration on May 31, 2000, Umale continued
occupying the premises and paying rentals albeit at an increased
AQUINO.DEGUZMAN.GERONA.GILTENDEZ.MEER.PINEDA.TAYLO.
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monthly rent of P100,000.00. The last rental payment made by Umale
to ASB Realty was for the June 2001 to May 2002 period, as evidenced
by the Official Receipt No. 56511.
5. On June 23, 2003, ASB Realty served on Umale a Notice of Termination
of Lease and Demand to Vacate and Pay. ASB Realty stated that it was
terminating the lease effective midnight of June 30, 2003; and pay to
ASB Realty the rental arrears amounting to P1.3 million by July 15,
2003. Umale failed to comply.
6. Umale admitted occupying the property since 1999 by virtue of a
verbal lease contract but vehemently denied that ASB Realty was his
lessor. He was adamant that his lessor was the original owner,
Amethyst Pearl.
7. In asserting his right to remain on the property based on the oral lease
contract with Amethyst Pearl, Umale interposed that the lease period
agreed upon was "for a long period of time." He then allegedly paid
P1.2 million in 1999 as one year advance rentals to Amethyst Pearl.
8. Umale further claimed that when his oral lease contract with Amethyst
Pearl ended in May 2000, they both agreed on an oral contract to sell.
They agreed that Umale did not have to pay rentals until the sale over
the subject property had been perfected between them.
9. Umale also challenged ASB Realty’s personality to recover the subject
premises considering that ASB Realty had been placed under
receivership by the Securities and Exchange Commission (SEC) and a
rehabilitation receiver had been duly appointed. Under Section 14(s),
Rule 4 of the Administrative Memorandum No. 00-8-10SC, otherwise
known as the Interim Rules of Procedure on Corporate Rehabilitation
(Interim Rules), it is the rehabilitation receiver that has the power to
"take possession, control and custody of the debtor’s assets." Since ASB
Realty claims that it owns the subject premises, it is its duly-appointed
receiver that should sue to recover possession of the same.
10. ASB Realty replied that it was impossible for Umale to have entered
into a Contract of Lease with Amethyst Pearl in 1999 because
Amethyst Pearl had been liquidated in 1996. ASB Realty insisted that,
as evidenced by the written lease contract, Umale contracted with ASB
Realty, not with Amethyst Pearl. As further proof thereof, ASB Realty
cited the official receipt evidencing the rent payments made by Umale
to ASB Realty.
11. MTC - dismissed ASB Realty’s complaint against Umale without
prejudice.
a. The trial court noted an inconsistency in the written lease
contract that was presented by ASB Realty as basis for its
 [PROVREM DIGESTS-RECEIVERSHIP]
complaint. Its whereas clauses cited ASB Realty, with Eden C.
Lin as its representative, as Umale’s lessor; but its signatory
page contained Eden C. Lin’s name under the heading
Amethyst Pearl. The MTC then concluded from such
inconsistency that Amethyst Pearl was the real lessor.
b. Likewise, the MTC agreed with Umale that only the
rehabilitation receiver could file suit to recover ASB Realty’s
property.
12. RTC - ASB Realty appealed, which then reversed the MTC ruling, and
ordered Umale to vacate the premises.
a. In addition to the written lease contract, the official receipt
evidencing Umale’s rental payments for the period June 2001
to May 2002 to ASB Realty adequately established that Umale
was aware that his lessor, the one entitled to receive his rent
payments, was ASB Realty, not Amethyst Pearl.
b. With respect to ASB Realty’s personality to file the unlawful
detainer suit, the RTC ruled that ASB Realty retained all its
corporate powers, including the power to sue, despite the
appointment of a rehabilitation receiver.
13. CA – on appeal, CA affirmed the RTC decision.
a. ADDITIONAL ARGUMENT RAISED BY UMALE: Assuming that
there was a lease, it was at most an implied lease. Hence its
period depended on the rent payments. Since Umale paid rent
annually, ASB Realty had to respect his lease for the entire
year. It cannot terminate the lease at the end of the month, as
it did in its Notice of Termination of Lease.30
b. Pending the resolution thereof, Umale died and was
substituted by his
 widow and legal heirs.
c. The CA found no merit in Umale’s claim that in light of Article
1687 of the Civil Code the lease should be extended until the
end of the year. The said provision stated that in cases where
the lease period was not fixed by the parties, the lease period
depended on the payment periods. In the case at bar, the rent
payments were made on a monthly basis, not annually.
d. The CA then upheld ASB Realty’s, as well as its corporate
officers’, personality to recover an unlawfully withheld
corporate property. As expressly stated in Section 14 of Rule 4
of the Interim Rules, the rehabilitation receiver does not take
over the functions of the corporate officers.
AQUINO.DEGUZMAN.GERONA.GILTENDEZ.MEER.PINEDA.TAYLO.
21
Issue 1: Can a corporate officer of ASB Realty (duly authorized by the Board of
Directors) file suit to recover an unlawfully detained corporate property
despite the fact that the corporation had already been placed under
rehabilitation? YES
Issue 2: Whether a contract of lease exists between ASB Realty and Umale. YES
Issue 3: Whether Umale is entitled to avail of the lease periods provided in
Article 1687 of the Civil Code. NO
Re. RECEIVERSHIP
1. Petitioners maintain that the appointment of a rehabilitation receiver
for ASB Realty deprived its corporate officers of the power to recover
corporate property and transferred such power to the rehabilitation
receiver. Section 6, Rule 59 of the Rules of Court states that a receiver
has the power to bring actions in his own name and to collect debts
due to the corporation. Under PD No. 902-A and the Interim Rules, the
rehabilitation receiver has the power to take custody and control of the
assets of the corporation.
2. Corporate rehabilitation is defined as "the restoration of the debtor to
a position of successful operation and solvency, if it is shown that its
continuance of operation is economically feasible and its creditors can
recover by way of the present value of payments projected in the plan
more if the corporation continues as a going concern than if it is
immediately liquidated."
3. It was first introduced in the Philippine legal system through PD 902-A,
as amended. The intention of the law is "to effect a feasible and viable
rehabilitation by preserving a floundering business as a going concern,
because the assets of a business are often more valuable when so
maintained than they would be when liquidated." This concept of
preserving the corporation’s business as a going concern while it is
undergoing rehabilitation is called debtor-in-possession or debtor-in-
place.
4. This means that the debtor corporation (the corporation undergoing
rehabilitation), through its Board of Directors and corporate officers,
remains in control of its business and properties, subject only to the
monitoring of the appointed rehabilitation receiver.
5. The concept of debtor-in-possession, is carried out more particularly in
the SEC Rules, the rule that is relevant to the instant case.
a. It states therein that the interim rehabilitation receiver of the
debtor corporation "does not take over the control and
management of the debtor corporation." Likewise, the
rehabilitation receiver that will replace the interim receiver is
 [PROVREM DIGESTS-RECEIVERSHIP] 22

tasked only to monitor the successful implementation of the
rehabilitation plan.
6. There is nothing in the concept of corporate rehabilitation that would
ipso facto deprive the Board of Directors and corporate officers of a
debtor corporation, such as ASB Realty, of control such that it can no
longer enforce its right to recover its property from an errant lessee.
7. To be sure, the rules enumerate the prohibited corporate actions and
transactions (most of which involve some kind of disposition or
encumbrance of the corporation’s assets) during the pendency of the
rehabilitation proceedings but none of which touch on the debtor
corporation’s right to sue.
8. Indeed, PD 902-A, as amended, provides that the receiver shall have
the powers enumerated under Rule 59 of the Rules of Court. But Rule
59 is a rule of general application.
9. While the SEC has the discretion to authorize the rehabilitation
receiver, as the case may warrant, to exercise the powers in Rule 59,
the SEC’s exercise of such discretion cannot simply be assumed. There
is no allegation whatsoever in this case that the SEC gave ASB Realty’s
rehabilitation receiver the exclusive right to sue.
10. Petitioners cite Villanueva, Yam, and Abacus Real Estate Cases as
authorities for their theory that the corporate officers of a corporation
under rehabilitation is incapacitated to act. These jurisprudence are
inapplicable to the case at bar because they involve banking and
financial institutions that are governed by different laws. In stark
contrast to rehabilitation where the corporation retains control and
management of its affairs, Section 29 of the Central Bank Act, as
amended, expressly forbids the bank or the quasi-bank from doing
business in the Philippines. Moreover, the nullified transactions in the
cited cases involve dispositions of assets and claims, which are
prohibited transactions even for corporate rehabilitation.
Re. ART. 1687 of CIVIL CODE
1. Petitioners then try to turn the table on ASB Realty with their third
argument. They say that under Article 1687 of the New Civil Code, the
period for rent payments determines the lease period. Judging by the
official receipt presented by ASB Realty, which covers the 12-month
period from June 2001 to May 2002, the lease period should be annual
because of the annual rent payments.
2. In arguing for an extension of lease under Article 1687, petitioners lost
sight of the restriction provided in Article 1675 of the Civil Code. It
states that a lessee that commits any of the grounds for ejectment cited
in Article 1673, including non-payment of lease rentals and devoting
the leased premises to uses other than those stipulated, cannot avail of
the periods established in Article 1687.âwphi1
3. Moreover, the extension in Article 1687 is granted only as a matter of
equity. The law simply recognizes that there are instances when it
would be unfair to abruptly end the lease contract causing the eviction
of the lessee. Petitioners have not paid, much less offered to pay, the
rent for 14 months and even had the temerity to disregard the pay-
and-vacate notice served on them.

Re. TRUE LESSOR

1. Ineluctably, the errors they raised involve factual findings the review
of which is not within the purview of the Court’s functions under Rule
45, particularly when there is adequate evidentiary support on record.
2. While petitioners assail the authenticity of the written lease contract by
pointing out the inconsistency in the name of the lessor in two separate
pages, they fail to account for Umale’s actions which are consistent with the
terms of the contract – the payment of lease rentals to ASB Realty (instead
of his alleged lessor Amethyst Pearl) for a 12-month period.
AQUINO.DEGUZMAN.GERONA.GILTENDEZ.MEER.PINEDA.TAYLO.