G.R. No.

6305

September 26, 1911

COMPAIA GENERAL DE TABACOS DE FILIPINAS, plaintiff-appellee, vs. ROMANA GAUZON and JUAN D. POMAR, defendants. JUAN D. POMAR, receiver-appellant. M. Fernandez Yamson, for appellant. A. P. Seva, for appellee. JOHNSON, J.: The present appeal is made by the defendant Juan D. Pomar, as receiver, against the order of the Hon. Albert e. McCabe, judge of the Province of Occidental Negros, disallowing certain items in the final account of the said receiver. It appears from the record that the defendant, Romana Gauzon, on the 10th day of September, 1904, executed and delivered to the plaintiff (Compaia General de Tabacos de Filipinas) a mortgage upon an hacienda known as "San Jose," in the municipality of San Carlos, in the Province of Occidental Negros. The said defendant (Romana Gauzon) having failed to pay the said mortgage, the plaintiff (Compaia General de Tabacos de Filipinas), on the 22d day September, 1905, commenced an action for the foreclosure of said mortgage, and asked, in addition to the foreclosure of the mortgage, that a receiver be appointed to take change of the property in question, pending the said action. On the same day (22nd of September, 1905) the Hon. Vicente Jocson, after hearing the petition filed in said cause, appointed the said defendant, Juan D. Pomar, an employee of the plaintiff, receiver of the property involved in said foreclosure proceedings. Said foreclosure proceedings continued to a termination. The result of said proceedings may be found in two decisions of this court, the cases of La Compaia General de Tabacos de Filipinas vs. Ganzon (13 Phil. Rep., 472) and La Compaia General de Tabacos de Filipinas vs. Ganzon (13 Phil. Rep., 481). The facts relating to the foreclosure proceedings and the judgment therein are not important in the present cause, further than to show the history of the transactions of the receiver, the defendant, Juan D. Pomar. After the termination of the receivership, the court required of the receiver (Juan D. Pomar) a report and an accounting of his operations as receiver. It appears from the record that the lower court had a good deal of trouble in securing a final report. The receiver apparently acted as though his only responsibility was to the plaintiff (Compaia General de Tabacos de Filipinas); however, finally the lower court secured what appears to be a final accounting by the receiver, upon the 9th or 10th day of August, 1909. The report of the receiver contained many items. After a careful consideration of the various items of the account of the receiver, Judge McCabe allowed the following items of said account 1. Care of cane before cutting 2. Cutting and grinding, according to report of commissioners 3. Fuel 4. Expenses in Iloilo, according to receiver's Exhibit B 5. Storage 6. Insurance P1,522.30 8,565.97 150.00 2,591.28 428.28 428. 28

7. Selling commission 8. Judgment for plaintiff in cause No. 249 9. Receiver's pay Total

648. 28 9,187.80 1,000.00 24,522.04

or about the first Tuesday of November, 1909, the sum of P7,883.76, a balance which he ought to have had in his possession. From the order allowing said items only the defendant appealed to this court and made the following assignments of error: . I. The court erred in reducing to P8,565.97 the P22,944.73 spent by the receiver for cutting, hauling, and manufacture of 8,005.58 piculs of sugar, for packing, transportation and storage thereof, and insurance and selling commission thereon. II. The court erred in not allowing the item of P147.86 paid out by the receiver as interest on money borrowed to cover the first expenses of his receivership. III. The court erred in not approving the disbursement made by the receiver of the P3,001.94 delivered to the aparceros as their share of the crop. IV. The court erred in reducing to P1,000 the P4,860.87 which the receiver claimed as compensation for his services. V. The court erred in holding that the order appointing the receiver does not extend his powers beyond those prescribed in section 175 of Act No. 190. With reference to the first assignment of error, it will be noted that the receiver presented an account for cutting, grinding, etc., of the sugar cane upon the hacienda, over which he had control as receiver, amounting to P22,944.73. Judge McCabe refused to allow that amount for cutting and grinding, etc., of said sugar cane, upon the ground that it was an unreasonable charge. The parties in the lower court agreed to the appointment of three commissioners for the purpose of ascertaining the reasonable cost of cutting, grinding, etc., of the sugar cane upon the said hacienda. The commissioners were duly appointed, the plaintiff selecting one, the defendant another and the court selecting the third. In due time and after due deliberation, the commissioners etc., of the said sugar cane per pico was P1.07. There were 8,005.58 picos of sugar cane, which calculated at the rate of per pico for cutting, grinding, etc., would amount to P8,565.97, which amount the lower court allowed the receiver. The commissioners appointed by the lower court were men who had experience in the cutting and grinding of sugar cane. It was the duty of the receiver to harvest the sugar cane at least possible cost to the owners of the crop. There is much proof in the record to indicate that the receiver did not harvest the crop of sugar cane as expeditiously as he should have done. There is no proof in the record which shows that the amount estimated by the said commissioner for the cutting, grinding, etc., of the sugar cane in question, was not a reasonable amount for that expense. We find nothing in the record which justifies us in modifying the decision of the lower court with reference to this first assignment of error. With reference to the second assignment of error, it appears that the receiver attempted to charge P147.86, as interest on money borrowed by him during his administration as receiver. There is no proof in the record which shows that it was necessary for him to borrow money to properly conserve the interests of the owners and creditors interested in the administration of the hacienda. The lower court correctly said, "a receiver has no authority to borrow money unless the same is expressly given by the court." We would be inclined, however, to allow this amount (P147.86) had the necessity been fully demonstrated for borrowing the money. In the absence of authority expressly given and especially in the absence of proof of the absolute necessity for incurring this item of

expense, we refuse to modify the conclusions of the lower court with respect to this item. With reference to the third assignment of error above noted, the receiver included in his account the item of P3,001.94, being the amount, according to this statement, of money and effects delivered to "los aparceros de la hacienda" during his administration. It is a well known custom among sugar growers in the Philippine Islands, that the aparceros plant and cultivate sugar cane at their own expense, receiving one-half of the sugar produced and delivering the other half to the owner land. It is also a well known custom that the owners of the land from time to time advance money and effects to the aparceros, deducting the value of the same from the value of the sugar after the same is harvested. In the present case it appears that the receiver delivered one-half of the sugar to the aparceros without deducting the amount of money and effects advanced to them. If he, in fact, advanced to the aparceros the said sum (P3,001.94) he should have deducted it from the amount due said aparceros, and not have attempted to collect the same from the amount due the owner of the hacienda, prejudicing the owner of the hacienda thereby. Here again the receiver exceeded his authority. Nevertheless we would be inclined to allow this amount (P3,001.94) if it were a just charge against the administration of the hacienda. But, as was said above, it is not a just charge against the owner of the hacienda. This amount should have been collected from the aparceros. Judge McCabe committed no error in disallowing this item in the account of the receiver. With reference to the fourth assignment of error above noted, it will be seen that the receiver included in his account the sum of P4,860.87 as compensation for his administration as receiver. The lower court disallowed that amount but did allow him the sum of P1,000 as his just compensation as receiver. The lower court, in the appointment of the receiver, did not fix any sum for his compensation; neither is it customary for courts in appointing receivers to fix their compensation in advance. Their compensation is a matter which is always left to the sound discretion of the court, to be allowed from time to time. The receiver attempted to recover as his compensation 15 per cent of the value of the sugar. The lower court found that the amount of P4,860. 87 was an unreasonable amount to be allowed as compensation for the services of the receiver in the present case. The court found that the receiver might have done all the work which he did do in the course of his administration as receiver in one hundred days. The Code of Procedure in Civil Actions allows administrators of estates of deceased persons the sum of P4 a day for the time actually employed in the administration of the estate. The lower court, following this provision of the law, believing the present case to be somewhat analogous, allowed the receiver P4 a day for his services. The lower court also allowed an additional amount, the basis of which does not clearly appear in the record, making the total compensation of the receiver the sum of P1,000. Against that order the owner of the hacienda did not appeal. Considering the negligent manner in which the receiver administered the hacienda, as appears from the record, as well as his negligence in complying with the various orders of the court with reference to rendering accounts, we are of the opinion that the sum of P1,000 is, in fact, more than a just compensation for his services. In view, however, of the fact that the owner of the hacienda did not appeal from the order of the court allowing said sum (P1,000) we approve the finding of the lower court. With reference to the fifth assignment of error above noted, the appellant seems to believe that section 175 of the Code of Procedure in Civil Actions gave him full power to administer the property placed under his control as receiver as he might deem wise and necessary, without any intervention on the part of the court or of the interested parties. The appellant evidently overlooked the phrase of said article which says: "The receiver shall have, under the control of the court in which the action is pending, power, etc." The judge of the lower court in his decision goes into detail at length and cites authorities extensively, for the purpose of showing the general duties, powers and responsibilities of receivers, evidently for the purpose of instructing receivers in his district. The receiver is generally defined to be "an indifferent person between the parties litigant, appointed by the court and on behalf of all the parties, and not of the

plaintiff or defendant only, to receive and hold the thing or property in litigation, pending the suit (Booth vs. Clark, 17 How. (U. S.),322, 331), to receive the rents, issues or profits of the land or thing in question (Both vs. Clark, supra), to receive the rents or other income, to hold possession and control of the property which is the subject matter of the litigation, and to dispose of the same or deliver it to such person or persons as may be directed by the court. (Wiswall vs. Kunz, 173 Ill., 110.)" The reports of the decisions of the courts are filled with decisions supporting the above doctrine. The receiver is said to be the arm and hand of the courta part of the machinery of the court, by which the rights of parties are protected. He is required not only to preserve the property, but to protect the rights of all of the parties interested. If he is not versed in the law, he should secure legal advice, with the permission of the court and in case of doubt should advise with the court and receive direction. After a full consideration of the above assignments of error, in connection with the facts contained in the record, we find no reason for changing or modifying the decision of the lower court, and the same is hereby affirmed, with costs.

G.R. No. L-25729

November 24, 1926

THE BELGIAN CATHOLIC MISSIONARIES, INC., plaintiff-appellee, vs. MAGALLANES PRESS, INC., ET AL., defendants. JOSE MARIA MEMIJE, appellant. Antonio M. Opisso, Romualdez Hermanos and Luciano de la Rosa for appellant. Cavanna, Aboitiz & Agan for appellee.

VILLA-REAL, J.: This is an appeal by Jose Marie Memije from a judgment of the Court of First Instance of Manila the dispositive part of which is as follows: For all the foregoing, the court is of the opinion that the plaintiff has a right to the relief prayed for in its complaint. Wherefore, judgment is rendered declaring that Exhibits C and D, that is, the mortgage deeds in question in this proceeding, in so far as they prejudice the rights of the plaintiff, are null and void; that the preliminary injunction issued in this case against the defendant Jose Ma. Memije is final and absolute; and that the plaintiff recover the amount of the fire insurance policies of the defendant "Magallanes Press, Inc.," which, or the representatives of which, is hereby ordered to endorse said insurance policies to the plaintiff, with the costs of the proceedings against the defendants, with the exception of J.P. Heilbronn Co., Inc. It is so ordered. In support of his appeal, the appellant assigns the following supposed errors as committed by the lower court in its judgment, to wit: (1) The court erred in overruling the demurrer filed by this defendant to the complaint in this action; (2) the trial court erred in giving the plaintiff corporation possession of the property mortgaged to this appellant without following the necessary proceedings or complying with the provisions of the law; (3) the trial court erred in issuing the writ of preliminary injunction against the appellant and E. E. Elser, restraining the former from receiving from the latter, or the latter from delivering to the former, the amount of the insurance policies covering the property mortgaged to the appellant, which was damaged by the fire that occurred in the establishment of the Magallanes Press, Inc; (4) the trial court erred in giving to the unnecessary intervention of the Magallanes Press, Inc., in the execution of the deed Exhibit C an interpretation which is neither based upon law nor upon the contract; (5)

the trial court erred in ordering the suspension of the foreclosure of the appellant's mortgage on the property of the Magallanes Press, Inc.; (6) the trial court erred, under the facts proven in this case, in applying article 1297 of the Civil Code; (7) the trial court erred in finding in its decision that the defendant Jose Ma. Memije should not have executed the documents Exhibits C and D without taking into account the rights of the plaintiff corporation, The Belgian Catholic Missionaries, Inc; (8) the trial court erred in declaring Exhibits C and D null and void in so far as they prejudice the rights of the plaintiff, over whose credit that of the herein appellant is preferential; in declaring the writ of preliminary injunction issued against the defendant Jose Ma. Memije final and absolute; in giving judgment for the plaintiff to recover the amount of the fire insurance policies of the defendant the Magallanes Press, Inc; and (9) the trial court erred in not making any pronouncement as to the counterclaim and cross-complaint of the defendant Jose Ma. Memije in this action, nor taking the same into consideration and rendering judgment thereon in favor of said defendant. The oral evidence has not been forwarded to this court so that we are compelled to base our opinion exclusively upon the documentary evidence and the facts found and stated by the trial court in its judgment. It appears that on December 1, 1921, the Magallanes Press, through its manager H. Camena, executed a promissory note in favor of J. P. Heilbronn & Co., Inc., for the sum of P3,472.92, with interest at 10 per cent per annum, payable at the rate of P250 a month, plus the interest earned on the unpaid balance, until the whole amount of the indebtedness shall have been paid, the first payment to be made on January 1, 1922, with the condition that upon the failure to pay any monthly installment or the interest earned on the unpaid balance, the whole amount of the indebtedness shall become due, and the maker shall pay the payee an additional sum equivalent to 15 per cent of the total balance, for attorney's fee and expenses of collection, forfeiting all right of exemption. On the same date, December 1, 1921, the said Magallanes Press, through its managers H. Camena, also executed a promissory note in favor of J. P. Heilbronn & Co., Inc., for the sum of P10,715.77, with interest at 12 per cent per annum, payable at the rate of P500 a month, together with the interest earned on the unpaid balance, until the whole amount of the indebtedness shall have been paid, the first payment to be made on January 1, 1922, with the condition that upon the failure to pay any monthly installment or the interest earned on the unpaid balance, the whole amount of the indebtedness shall become due, and the maker shall pay the payee an additional sum equal to 15 per cent of the total balance for attorney's fee and expenses of collection, forfeiting all right of exemption. To secure the payment of said promissory notes which amounted to a total of P14,188.69, H. Camena, as general manager of the Magallanes Press, executed a chattel mortgage on all of the printing machinery and its accessories, belonging to the said Magallanes Press, in favor of J. P. Heilbronn & Co., Inc. One June 19, 1922, the Magallanes Press Co., Inc., successor to the Magallanes Press, with all the latter's rights and obligations, through its duly authorized president, E. F. Clemente, executed a chattel mortgage on the same printing machinery ad its accessories in favor of the Belgian Catholic Missionaries Co., Inc., which the Magallanes Press had mortgaged to J. P. Heilbronn & Co., Inc., to secure the payment of a loan of P30,500, with interest at 12 per cent per annum, which the said Magallanes Press & Co., Inc., had obtained from the Belgian Catholic Missionaries Co., Inc., the duration of the mortgage loan being one year from the execution of the mortgage deed. In December, 1922 the appellant Jose Ma. Memije made a loan in the sum of P2,000 to E. F. Clemente which was paid on account of the indebtedness of the Magallanes Press to J. P. Heilbronn & co., Inc., together with the sum of P1,641 which A. F. Mendoza owed said E. F. Clemente.

On the occasion of the issuance of the writ of attachment in civil cause No. 23818 of the Court of First Instance of Manila, entitled Jose Ma. Cavanna vs. the Magallanes Press Co., Inc., the defendant Jose Ma. Memije, on February 21, 1923, filed an intervention in said case. All the promissory note executed by the Magallanes Press in favor of J. P. Heilbronn & Co., Inc., having been overdue for non-payment of the installments as well as the respective chattel mortgage, the said J. P. Heilbronn & Co., Inc., transferred all its mortgage credit against the Magallanes Press to Jose Ma. Memije in consideration of the sum of P8,280.90, the balance of said mortgage credit. On March 14, 1923, Enrique Clemente, as manager of the Megallane Press Co., Inc., executed a deed in favor of Jose Ma. Memije by virtue of which the chattel mortgage which was given by the Magallanes Press in favor of J. P. Heilbronn & Co., Inc., and transferred by the latter to Jose Ma. Memije, was made to cover an additional loan of P5,895.79, which included the sum of P2,000 which said Jose Ma. Memije had advanced said Enrique Clemente in December, 1922. On April 21, 1923, a fire occurred in the building where the pointing machinery, its accessories and other personal property of the Magallanes Press Co., Inc., were located and which were covered by said chattel mortgages. Said property was insured, and the insurance policies covering it were endorsed to J. P. Heilbronn & Co., Inc., upon the execution of the chattel mortgage thereon in favor of the latter. When J. P. Heilbronn & Co., Inc., transferred its mortgage credit to Jose Ma. Memije it, in turn, endorsed said insurance policies to him. The insurance companies were disposed to pay the respective insurance policies, which amounted to P7,686.45, but due to the issuance of the above-mentioned writ of preliminary injunction, payment could not be made. Due to the filing of the complaint in the present case on May 9, 1923, and the issuance of the writ of preliminary injunction on May 10th of the same year, Jose Ma. Memije was unable to collect the amount of the insurance policies, and when he was summoned under the complaint on May 14, 1923, he made demand on the Magallanes Press Co., Inc., for the payment of his mortgage credit on the same date the manager of said corporation, E. F. Clemente, permitted the secretary of the said corporation to place the property covered by the mortgage into the hands of the said Jose Ma. Memije in order that the same might be sold, but the sale could not be consummated due to the issuance of the said writ of preliminary injunction. The first question raised by the defendant and appellant has reference to the overruling of the demurrer filed by him to complaint. One of the grounds of said demurrer was that the complaint in this case did not allege facts sufficient to constitute a cause of action against the said defendant, in that, notwithstanding the fact that the said complaint was instituted to annul the document of transfer of the mortgage credit Exhibit C, it was not alleged in the said complaint that the defendant Jose Ma. Memije had any intention to defraud the interests of the plaintiff corporation, which was absolutely impossible due to the nature of the transaction and the preferential character of the mortgage credit of J. P. Heilbronn & Co., Inc. As to this paragraph of the complaint, the plaintiff company having known of the existence of a chattel mortgage in favor of J. P. Heilbronn & Co., Inc., the latter, either as the first or as the second mortgage, had a perfect right to transfer its mortgage credit, without the knowledge or consent of any other mortgagee, inasmuch as whoever acquired it, would have exactly the same status as the transferor with the same rights and obligations. The fact, therefore, that the Magallanes Press Co., Inc., had consented to the transfer of the mortgage credit of J. P. Heilbronn & Co., Inc., to Jose Ma. Memije, does not constitute a fraud that an vitiate the said transfer, inasmuch as the order of preference of the mortgages has not been altered, and its allegations does not constitute a cause of action to annul the said transfer.

In regard to the allegation contained in the ninth paragraph of the complaint, it is very clear that the increase made by Jose Ma. Memije in the mortgage credit acquired by him from J.P. Heilbronn & Co., Inc., and the extension made by the Magallanes Press, Inc., of the mortgage to said additional credit without the knowledge or consent of the plaintiff company, as second mortgagee, prejudices the credit of the latter, inasmuch as the security for the payment of said credit was reduced as to it, and, therefore, constitute a fraud that vitiates the contract of extension of the mortgage evidence by the deed Exhibit D, rendering it void.lawphil.net The facts allege in paragraph 9 of the complaint are sufficient to constitute a cause of action of nullity, and the lower court did nor err in overruling the demurrer filed by the defendant Jose Ma. Memije. In regard to the second assignment of error, it appears that the defendant Jose Ma. Memije having attempted to foreclose the mortgage, by which the mortgage credit acquired by him from J. P. Heilbronn & Co., Inc., was secured, in order to recover not only the original credit but also the increase, the Belgian Catholic Missionaries Co., Inc., filed a complaint, with a petition for a writ of preliminary injunction against the sheriff, in whose hands the foreclosure of the mortgage was placed. The writ of preliminary injunction having been issued, upon the filing of a bond in the sum of P15,000, and there being no person more interested in the conservation and custody of the property covered by the mortgage than said plaintiff company, being the largest creditor, it applied and obtained from the court the possession of the same. Contrary to the contention of the appellant, this case is not one of replevin but simply a proceeding instituted by the plaintiff for the deposit of the property in litigation, upon the filing of a bond, said plaintiff, acting as a receiver by authority of the court, being the person most interested in the conservation and care of the same (sec. 174, Act No. 190; 11 C. J., 726). The lower court, therefore, did not err in authorizing the plaintiff company to take possession of the personal property in litigation upon the filing of a bond sufficient to secure the conservation or value thereof. The third assignment of error raises the question as to the preference of right between the plaintiff company and the defendant over the mortgaged property and the amount of the insurance policies covering a part thereof which was destroyed by fire. As we have seen in the statement of the pertinent facts necessary for the clear and accurate solution of the questions of law involved in the present appeal, the firm of J. P. Heilbronn & Co., Inc., had a mortgage credit against the Magallanes Press for the sum of P14,186.69, secured by a first chattel mortgage. The plaintiff company, the Belgian Catholic Missionaries Co., Inc., also had a mortgage credit for the amount of P30,500, secured by a second mortgage on the same personal property. After this second mortgage had been executed, the payment of the mortgage credit of J.P. Heilbronn & Co., Inc., became due, which credit had been reduced to the sum of P8,280,90 through partial payments, and the herein defendant-appellant Jose Ma. Memije acquired said mortgage credit and increased it by P5,895.59 of which increase P2,000 was a previous loan. There is no question but that J. P. Heilbronn & Co., Inc., at the time of the transfer of this mortgage rights to Jose Ma. Memije, had a preferential right over that of the Belgian Catholic Missionaries Co., Inc., for the remainder of the amount of the mortgage credit, that is, P8,280.90. The plaintiff company had a preferential right to the rest of the value of the mortgaged property after deducting the remaining mortgage credit of J. P. Heilbronn & Co., Inc. The increase of P5,895.59 made by the defendant Jose Ma. Memije in favor of the Magallanes Press Co., Inc., and the extension of the mortgage thereto, are not only

subordinate to the mortgage credit of the plaintiff company, being subsequent in time and in registration, but said increase in the security is also void. The increase of the mortgage security becomes a new mortgage in itself, inasmuch as the original mortgage did not contain any stipulation in regard to the increase of the mortgage credit, and even if it did, said increase would take effect only from the date of the increase. A mortgage that contains a stipulation in regard to future advances in the credit will take effect only from the date the same are made and not from the date of the mortgage (11 C. J., 448; 5 R. C. L., 420-421). In accordance with the provisions of section 5 of Act No. 1508, known as the Chattle Mortgage Law, the parties to the original deeds swore that the same was mortgaged "to secure the obligations specified therein and for no other purpose." Neither the increase in question, nor the extension of the mortgage to secure the payment of the same is specified in the deed, consequently said extension is void. "Where the statute provides that the parties to a chattel mortgage must make oath that the debt is a just debt, honestly due and owing from the mortgagor to the mortgagee, it is obvious that a valid mortgage cannot be made to secure a debt to be thereafter contacted." (11 C. J., 448.) Briefly, therefore, we have the following: (a) That Jose Ma. Memije has a preferential right to the value of the chattels mortgage and the amount of the insurance policies up to the sum of P8,280.90; (b) That the plaintiff corporation, the Belgian Catholic Missionaries Co., Inc., has a right to the remainder of the value of said chattels and the insurance policies up to the amount of P30,500, after deducting the preferential credit of Jose Ma. Memije; (c) That as to the increase of P5,895.59, the right of the defendant Jose Ma. Memije is that of an ordinary creditor. In regard to the damages claimed by the defendant in his counterclaim and which is the subject-matter of his remaining assignments of error, said defendant has a right to interest at 12 per cent on the P8,280.90 the amount of the mortgage credit acquired by him from J. P. Heilbronn & Co., Inc., from February 26, 1923, the date of the acquisition until fully paid. For the foregoing reasons, the judgment appealed from is revoked and it is ordered the another be entered declaring all the mortgages overdue, and the mortgage credit of Jose Ma. Memije preferential over that of the Belgian Catholic Missionaries Co., Inc., up to the amount of P8,280.90, with interest at the rate of 12 per cent per annum from February 26, 1923, until fully paid; the mortgage credit of the Belgian Catholic Missionaries Co., Inc., for the sum of P30,500 with interest at the rate of 12 per cent per annum, from June 19, 1922, until fully paid, plus the sum of P3,000 for attorney's fees, over the additional credit of Jose Ma. Memije for P5,895.59; and ordering the foreclosure of the said mortgages by selling the mortgaged property at public auction, to the proceeds of which shall be added the amount of the insurance policies and the abovementioned credits in the order of preference above established, without special pronouncement as to costs. So ordered.

G.R. No. L-29295

October 22, 1928

J. M. PO PAUCO, plaintiff, vs. DOLORES SIGUENZA, ET AL., defendants. WISE & CO., intervenor-appellant. Block, Johnston and Greenbaum for the intervenor. Roman J. Lacson for receiver-appellee National Bank.

ROMUALDEZ, J.: In this case, J.M. Po Pauco obtained final judgment in his favor against Dolores Siguenza and Mariano Aguilar for the sum of P72,278.01, both parties agreeing to deduct therefrom the sum of P13,007.46 which is the net value of the sugar cane belonging to said defendants and attached by the plaintiff and manufactured by the Philippine National Bank, the receiver of the said product. By virtue of said judgment and agreement the court issued a writ of execution for the remaining sum of P59,270.55 on November 19, 1926. In another civil case before the same court, No. 6416, Wise & Co., Ltd., had on October 18, 1926 obtained judgment against the herein plaintiff J. M. Po Pauco for the sum of P10,572.80 with legal interest thereon, execution of said judgment having been ordered in those proceedings, which has not yet, even partially, been paid. On October 23, 1927, Wise & Co., Ltd., intervened in this case praying that the Philippine National Bank, the receiver of the said sum of P13,007.46, be ordered to satisfy the judgment in favor of the said petitioner Wise & Co., Ltd., against J.M. Po Pauco, out of the sum deposited with it, Po Pauco's right and interest in the judgment of this case now before us having been preliminary attached in civil case No. 6416, on August 6, 1926. Opposition was filed to said petition by the Philippine National Bank alleging that said bank has a preferential right over the surplus of the sale of the sugar delivered to it as receiver, and also that the Hibila Trading Corporation obtained judgment against the said J. M. Po Pauco, in civil case No. 3197 of the Court of First Instance of Occidental Negros, holding that the rights of the Hibila Trading Corporation over the sugar harvest of 1923-1924 and 1924-1925 of the spouses Dolores Siguenza and Mariano Aguilar in the San Agustin Estate, are preferential over those of J. M. Po Pauco and, therefor, the latter is not at all entitled to any of the surplus remaining from the sale of said sugar; and that said Hibila Trading Corporation is an interested party which must be summoned before the motion of Wise & Co., Ltd., can be heard, which corporation must institute an ordinary action to establish whatever right it may have to the surplus of the sugar in question. 1awph!l.net The court of First Instance of Iloilo denied the motion of Wise & Co., Ltd., granting it permission to institute an action against the Philippine National Bank and the Hibila Trading Corporation in order to determine which has the better right to the net proceeds of the sale of said sugar. Wise & Co., Ltd., appeals from said ruling making several assignments of error. It should not be forgotten that the sum mentioned is in the custody of a receiver and not of a sheriff. The sheriff is a court officer of a general character who is not appointed for a certain judicial case; the sheriff is an officer who exercises or can exercise his functions within the limits of his jurisdicition. A receiver, on the other hand, is a special officer, appointed in relation to and within a certain case or action, and whose duties are limited to his sphere of action, and do not extend further than the case in which he was appointed. For this reason, while the funds in the custody of a sheriff may be within the reach of processes coming from other judicial proceedings, such is not the case with respect to those under the custody of a depositary. From which it follows that those who, as in the present case, have any claim to property or sum in the possession of a receiver, must appear in the same proceeding in which said receiver discharges his duties, and there, by motion or petition, allege and prove their claims.

The order appealed from is reversed and it is ordered that this proceeding be remanded to the court of origin in order that, without the necessity of commencing a new action, the interested parties be given an opportunity to set forth and prove their alleged preferential rights over the sum in controversy. Without any special pronouncement as to costs. So ordered.

G.R. No. L-2987

February 20, 1951

ERNEST BERG, plaintiff-appellant, vs. VALENTIN TEUS, defendant-appellee. Alva J. Hill for appellant. J. Perez Cardeas for appellee. TUAZON, J.: This appeal is from an order of the Court of First Instance of Ilocos Sur dismissing the above-entitled action by reason of Executive Order No. 25, as amended by Executive Order No. 32, on moratorium. Ernest Berg brought the action against Valentin Teus to foreclose a real estate and chattel mortgage executed in November, 1944, to secure six promissory notes of the aggregate value of P80,000 and payable on demand two years after declaration of armistice between the United States and Japan. An amended or supplementary complaint was later admitted against the defendant's objection. The complaints recited that by stipulations of the parties, the mortgagor had undertaken, among other things, to insure and pay the taxes on the mortgaged properties; not to alienate, sell, lease, encumber or in any manner dispose thereof; and to keep and maintain the said properties in good order and repair; but that, it was alleged, he (defendant) had failed to keep taxes fully paid; had made material alterations on the premises, and had sold and conveyed them to Central Azucarera del Norte. It was further alleged that the mortgagor had agreed that should he fail to perform any of his obligations as stipulated, "the mortgage shall be deemed to be automatically foreclosed and the mortgagee may forthwith proceed to foreclose this mortgage either extrajudicially, even after the death of the mortgagor, in pursuance of the provisions of Act No. 3135, as amended;" and on the basis of this agreement it was prayed that the mortgage be declared automatically foreclosed and the plaintiff entitled to immediate possession of the properties in question. In a separate motion Berg's attorney also asked for the appointment of a receiver. Counsel for the defendant having moved for the dismissal of the complaint on the grounds that plaintiff's cause of action had not accrued by reason of the executive orders herein before cited, and having opposed the motion for receivership, Judge Zoilo Hilario entered an order holding that as to the collection of the six notes the suit had been prematurely brought, but setting the cause for trial on the merits because, according to His Honor, the reasons alleged in the motion to dismiss were not "indubitable" with reference to the appointment of a receiver sought by the plaintiff. As we understand this order, its result was that the moratorium ought not to interfere with the plaintiff's motion for appointment of receiver. However that may be, the plaintiff subsequently filed a "complete complaint" in which the original complaint and the amended or supplementary complaint were consolidated. This "complete complaint", which was admitted without objection, apparently was supposed to have restored the case to its original status. Consequently the attorney for the defendant filed a new motion to dismiss; the Judge Luis Ortega, who had replaced

Judge Hilario, ignoring the latter's order entered the order now on appeal by which the entire action was quashed on the theory advanced in the motion to dismiss. The new order was silent on both the application for receivership and the prayer that the plaintiff be adjudged authorized by the terms of the mortgage to foreclose it extrajudicially and seize the properties. Judge Ortega opined that Executive Orders Nos. 25 and 32 were still in force unaffected by Republic Act No. 342 as to debts contracted during the Japanese occupation. Plaintiff contended that those executive orders had passed out of existence by the disappearance of the emergency contemplated thereby, and the contention is reiterated in his instance. But from the view we take of the case, decision on this question can be deferred. For the purpose of the present decision, we will assume that Executive Orders Nos. 25 and 32 are still in full force and effect. This we do to pave the way for and hasten action on the petition to put the premises and chattels involved in the hands of a receiver, petition which appears of urgent character. The constitutionality of Executive Orders Nos. 25 and 32 and Republic Act No. 342 and allied issues can wait. These issues are delicate and would require prolonged study and deliberation. Besides, there is a pending bill in Congress repealing those executive orders and law. In Medina vs. Santos (78 Phil., 464; 44 Off. Gaz., [No. 10] 3811), it was held that an action for the recovery of a truck with prayer for payment of its value in case the truck was not returned, could proceed notwithstanding the moratorium law. The court observed that the indemnity sought was a subsidiary liability and would not come into being unless and until decision was rendered against the defendant for such payment. In Moya vs. Barton (79 Phil., 14; 45 Off Gaz., [No. 1] 237), the court said that when the cause of action was in part covered by the moratorium and in part not, it was not unjust to render judgment for the payment of the entire obligation with the understanding that execution with respect to the amounts that had fallen due before March 10, 1945, would be stayed. In the case of Alejo vs. Gomez (83 Phil., 969), the court ruled that suit for unlawful detainer and rents in arrears was not affected by the moratorium, the recovery of the unpaid rentals, it was said, being accessory to the main action. And, lastly, in Realty Investments Inc. et al. vs. Villanueva et al., (84 Phil., 842; 47. Off. Gaz., 1844), the court, citing the above-mentioned cases decided that the court should go ahead with the trial of the action on the merits without prejudice to the right of the defendant to arrest the execution should one for payment of money be issued. In that case plaintiff, which had sold to the defendant a piece of land on installment basis, was demanding payment of the installments still unpaid, (installments which the defendant claimed to have fully settled with the Japanese alien property custodian) or, in default, restoration of the ownership and possession of the property. In revoking the lower court's order of dismissal, we pointed out that the De Vencia vs. General, (78 Phil., 780; 44 Off. Gaz., 4912), and Ma-ao Sugar Central Co., Inc. vs. Barrios, (79 Phil., 666; 45 Off. Gaz., 2444), were distinguishable from Moya vs. Barton, Medina vs. Santos, and Alejo vs. Gomez, in that the suits in the first two named cases had for their sole object the enforcement of a monetary obligation. The case at bar falls within the relaxed rule of this court's later decisions. The alleged violations of the conditions of the mortgage contract, if true, make it necessary if not imperative, for the protection of the interest of the plaintiff, that the mortgaged properties be placed in the custody of the court. The fact that the appointment of a receiver, as the defendant emphasizes, is an ancillary remedy is precisely one powerful reason why the case should not be dismissed. Because receivership is an auxiliary remedy dismissal of the main action would eliminate the only basis for the appointment or receiver and thus completely bar the door to any relief from mischiefs.

Under the circumstances of the case, the least that should have been done, if that were feasible as a matter of procedure, was to adopt the steps which Judge Hilario had proposed to do. Judge Hilario evidently saw the grave injustice to the plaintiff and the irreparable injury to which his rights would be exposed if an indefinite suspension of the entire proceeding were decreed. In suspending the right of creditor to enforce his right the President and Congress had no idea of depriving him of all means of preventing the destruction or alienation of the security for the debt, destruction which would virtually write off, in some cases, the whole credit. If that were the intention, it is doubtful if the orders and the law invoked could stand the test of constitutionality. The order appealed from will therefore be reversed and the case remanded to the court below for further proceeding according to the tenor of this decision. We leave the way open to the defendant to ask for the arrest or stay of execution in the event of an adverse monetary judgment, and for the plaintiff to impugn anew, if necessary, the constitutionality of Executive Orders Nos. 25 and 32 and Republic Act No. 342 and/or their being still in force. Costs of this appeal will be charged against the appellee.

G.R. No. 155408

February 13, 2008

JULIO A. VIVARES and MILA G. IGNALING, petitioners, vs. ENGR. JOSE J. REYES, respondent. DECISION VELASCO, JR., J.: The Case The kernel dispute in this petition under Rule 45 is the legality of the May 22, 2001 Resolution1 of the Camiguin Regional Trial Court (RTC), Branch 28 in Civil Case No. 517, which placed the estate of Severino Reyes under receivership. The Court of Appeals (CA) saw it differently in CA-G.R. SP No. 67492its June 18, 2002 Decision2 recalled the RTC directive on the appointment of the receiver, prompting Julio Vivares and Mila Ignaling to file the petition at bar to convince the Court to reinstate the receivership. The Facts Severino Reyes was the father of respondent Jose Reyes and Torcuato Reyes. Upon the death of Severino, respondent and Torcuato came upon their inheritance consisting of several properties. They had an oral partition of the properties and separately appropriated to themselves said properties. On May 12, 1992, Torcuato died with a last will and testament executed on January 3, 1992. In Reyes v. Court of Appeals,3 we affirmed the November 29, 1995 CA Decision, admitting the will for probate. Petitioner Vivares was the designated executor of Torcuatos last will and testament, while petitioner Ignaling was declared a lawful heir of Torcuato. Believing that Torcuato did not receive his full share in the estate of Severino, petitioners instituted an action for Partition and Recovery of Real Estate before the Camiguin RTC, Branch 28 entitled Julio A. Vivares, as executor of the estate of Torcuato J. Reyes and Mila R. Ignaling, as heir v. Engr. Jose J. Reyes and docketed as Civil Case No. 517. With the approval of the trial court, the parties agreed that properties from the

estate of Severino, which were already transferred in the names of respondent and Torcuato prior to the latters death on May 12, 1992, shall be excluded from litigation. In short, what was being contested were the properties that were still in the name of Severino. On November 24, 1997, for the purpose of collating the common properties that were disputed, the trial court directed the formation of a three-man commission with due representation from both parties, and the third member, appointed by the trial court, shall act as chairperson. The disputed properties were then annotated with notices of lis pendens upon the instance of petitioners. On March 15, 2000, petitioners filed a Motion to Place Properties in Litigation under Receivership4 before the trial court alleging that to their prejudice respondent had, without prior court approval and without petitioners knowledge, sold to third parties and transferred in his own name several common properties. Petitioners also averred that respondent fraudulently antedated, prior to May 12, 1992, some conveyances and transfers to make it appear that these were no longer part of the estate of Severino under litigation. They further claimed that respondent was and is in possession of the common properties in the estate of Severino, and exclusively enjoying the fruits and income of said properties and without rendering an accounting on them and turning over the share pertaining to Torcuato. Thus, petitioners prayed to place the entire disputed estate of Severino under receivership. They nominated a certain Lope Salantin to be appointed as receiver. On March 23, 2000, respondent filed his Opposition to Place the Estate of Severino Reyes under Receivership,5 denying that he had fraudulently transferred any property of the estate of Severino and asserting that any transfer in his name of said properties was a result of the oral partition between him and Torcuato that enabled the latter as well to transfer several common properties in his own name. On May 24, 2000, petitioners filed their Offer of Exhibits in support of their motion for receivership. On the same date, the trial court issued an Order6 granting petitioners motion and appointed Salantin as receiver conditioned on the filing of a PhP 50,000 bond. Respondent filed a motion for reconsideration, contending that the appointment of a receiver was unduly precipitate considering that he was not represented by counsel and thus was deprived of due process. On August 4, 2000, the trial court allowed respondent to present his evidence to contest petitioners grounds for the appointment of a receiver, and the trial court set the reception of respondents evidence for September 4, 2000. However, on August 24, 2000, respondent filed a motion for postponement of the September 4, 2000 scheduled hearing on the ground that he was in the United States as early as July 23, 2000 for medical examination. On September 5, 2000, the trial court denied respondents motion for postponement and reinstated its May 24, 2000 Order. On September 19, 2000, respondent filed a Manifestation with Motion to Discharge Receiver, reiterating the circumstances which prevented him from attending the September 4, 2000 hearing and praying for the discharge of the receiver upon the filing of a counterbond in an amount to be fixed by the court in accordance with Section 3, Rule 59 of the 1997 Revised Rules on Civil Procedure. On October 10, 2000, petitioners filed their undated Opposition to Motion to Discharge Receiver. Subsequently, respondent filed a Motion to Cancel Notice of Lis Pendens which was annotated on Tax Declaration (TD) No. 112 covering Lot No. 33 allegedly belonging exclusively to him. Respondent asserted in the motion that an adjacent property to Lot No. 33, particularly a portion of Lot No. 35, which is owned by a certain Elena Unchuan, was erroneously included in Lot No. 33 and, consequently, was subjected to the notice of lis pendens. Petitioners filed their Opposition to the Motion to Cancel Lis Pendens.

Consequently, on May 22, 2001, the trial court issued a Resolution, denying respondents motions to discharge receiver and cancel the notice of lis pendens in TD No. 112. Respondent seasonably filed a partial motion for reconsideration of the May 22, 2001 Resolution, attaching copies of deeds of sale executed by Torcuato covering several common properties of the estate of Severino to prove that he and Torcuato had indeed made an oral partition of the estate of their father, Severino, and thus allowing him and Torcuato to convey their respective shares in the estate of Severino to third persons. On October 19, 2001, the trial court heard respondents motion for partial reconsideration, and on the same date issued an Order denying the motion for partial reconsideration on the ground that respondent failed to raise new matters in the motion but merely reiterated the arguments raised in previous pleadings. Aggrieved, respondent filed a Petition for Certiorari before the CA, assailing the May 22, 2001 Resolution and October 19, 2001 Order of the RTC. The Ruling of the Court of Appeals On June 18, 2002, the CA rendered the assailed Decision, sustaining respondents position and granted relief, thus: WHEREFORE, premises considered, the Petition is hereby GRANTED. The Resolution dated 22 May 2001 of the Regional Trial Court of Camiguin, Branch 28 in Civil Case No. 517 is hereby reversed and set aside. The court-appointed receiver, Lope Salantin, is discharged upon the posting by petitioner of a counterbond in the amount of P100,000.00. The notice of lis pendens in Tax Declaration 112, in so far as it covers the property of Elena Unchuan, is cancelled. Let this case be remanded to the court a quo for further proceedings.7 In reversing the trial court, the CA reasoned that the court a quo failed to observe the well-settled rule that allows the grant of the harsh judicial remedy of receivership only in extreme cases when there is an imperative necessity for it. The CA thus held that it is proper that the appointed receiver be discharged on the filing of a counterbond pursuant to Sec. 3, Rule 59 of the 1997 Revised Rules on Civil Procedure. Moreover, the CA ratiocinated that respondent has adequately demonstrated that the appointment of the receiver has no sufficient basis, and further held that the rights of petitioners over the properties in litigation are doubly protected through the notices of lis pendens annotated on the titles of the subject properties. In fine, the appellate court pointed out that the appointment of a receiver is a delicate one, requiring the exercise of discretion, and not an absolute right of a party but subject to the attendant facts of each case. The CA found that the trial court abused its discretion in appointing the receiver and in denying the cancellation of the notice of lis pendens on TD No. 112, insofar as it pertains to the portion owned by Unchuan. Aggrieved, petitioners in turn interposed a Motion for Reconsideration that was denied through the assailed September 24, 2002 CA Resolution. Thus, this petition for review on certiorari is before us, presenting the following issues for consideration: I WHETHER OR NOT THE ANNOTATION OF A NOTICE OF LIS PENDENS PRECLUDES THE APPOINTMENT OF A RECEIVER WHEN THERE IS A NEED TO SAFEGUARD THE PROPERTIES IN LITIGATION. II

WHETHER OR NOT A DULY APPOINTED RECEIVER OF PROPERTIES IN LITIGATION SHOULD BE DISCHARGED SIMPLY BECAUSE THE ADVERSE PARTY OFFERS TO POST A COUNTERBOND. III WHETHER OR NOT THE CANCELLATION OF A NOTICE OF LIS PENDENS ANNOTATED ON TAX DECLARATION NO. 112 IS CONTRARY TO LAW.8 The Courts Ruling The petition must be denied. Being closely related, we discuss the first and second issues together. Receivership not justified We sustain the CA ruling that the trial court acted arbitrarily in granting the petition for appointment of a receiver as "there was no sufficient cause or reason to justify placing the disputed properties under receivership." First, petitioners asseverate that respondent alienated several common properties of Severino without court approval and without their knowledge and consent. The fraudulent transfers, they claim, were antedated prior to May 12, 1992, the date of Torcuatos death, to make it appear that these properties no longer form part of the assets of the estate under litigation in Civil Case No. 517. Petitioners position is bereft of any factual mooring. Petitioners miserably failed to adduce clear, convincing, and hard evidence to show the alleged fraud in the transfers and the antedating of said transfers. The fact that the transfers were dated prior to the demise of Torcuato on May 12, 1992 does not necessarily mean the transfers were attended by fraud. He who alleges fraud has the burden to prove it. Moreover, respondent has adduced documentary proof that Torcuato himself similarly conveyed several lots in the estate of Severino based on the oral partition between the siblings. To lend credence to the transfers executed by Torcuato but distrust to those made by respondent would be highly inequitable as correctly opined by the court a quo. Indeed, receivership is a harsh remedy to be granted only in extreme situations. As early as 1914, the Court already enunciated the doctrinal pronouncement in Velasco & Co. v. Gochuico & Co. that courts must use utmost circumspection in allowing receivership, thus: The power to appoint a receiver is a delicate one and should be exercised with extreme caution and only under circumstances requiring summary relief or where the court is satisfied that there is imminent danger of loss, lest the injury thereby caused be far greater than the injury sought to be averted. The court should consider the consequences to all of the parties and the power should not be exercised when it is likely to produce irreparable injustice or injury to private rights or the facts demonstrate that the appointment will injure the interests of others whose rights are entitled to as much consideration from the court as those of the complainant.9 Petitioners cannot now impugn the oral partition entered into by Torcuato and respondent and hence cannot also assail the transfers made by respondent of the lots which were subject of said agreement, considering that Torcuato also sold properties based on said verbal arrangement. Indeed, the parties agreed that the civil action does not encompass the properties covered by the oral partition. In this factual setting,

petitioners cannot convince the Court that the alleged fraudulent transfers of the lots made by respondent, which purportedly form part of his share in Severinos estate based on the partition, can provide a strong basis to grant the receivership. Second, petitioner is willing to post a counterbond in the amount to be fixed by the court based on Sec. 3, Rule 59 of the 1997 Rules of Civil Procedure, which reads: Sec. 3. Denial of application or discharge of receiver.The application may be denied, or the receiver discharged, when the adverse party files a bond executed to the applicant, in an amount to be fixed by the court, to the effect that such party will pay the applicant all damages he may suffer by reason of the acts, omissions, or other matter specified in the application as ground for such appointment. The receiver may also be discharged if it is shown that his appointment was obtained without sufficient cause. Anchored on this rule, the trial court should have dispensed with the services of the receiver, more so considering that the alleged fraud put forward to justify the receivership was not at all established. Petitioners advance the issue that the receivership should not be recalled simply because the adverse party offers to post a counterbond. At the outset, we find that this issue was not raised before the CA and therefore proscribed by the doctrine that an issue raised for the first time on appeal and not timely raised in the proceedings in the lower court is barred by estoppel.10 Even if we entertain the issue, the contention is nevertheless devoid of merit. The assailed CA decision supported the discharge of the receiver with several reasons including the posting of the counterbond. While the CA made a statement that the trial court should have discharged the appointed receiver on the basis of the proposed counterbond, such opinion does not jibe with the import of Sec. 3, Rule 59. The rule states that the "application may be denied or the receiver discharged." In statutory construction, the word "may" has always been construed as permissive. If the intent is to make it mandatory or ministerial for the trial court to order the recall of the receiver upon the offer to post a counterbond, then the court should have used the word "shall." Thus, the trial court has to consider the posting of the counterbond in addition to other reasons presented by the offeror why the receivership has to be set aside. Third, since a notice of lis pendens has been annotated on the titles of the disputed properties, the rights of petitioners are amply safeguarded and preserved since "there can be no risk of losing the property or any part of it as a result of any conveyance of the land or any encumbrance that may be made thereon posterior to the filing of the notice of lis pendens."11 Once the annotation is made, any subsequent conveyance of the lot by the respondent would be subject to the outcome of the litigation since the fact that the properties are under custodia legis is made known to all and sundry by operation of law. Hence, there is no need for a receiver to look after the disputed properties. On the issue of lis pendens, petitioners argue that the mere fact that a notice of lis pendens was annotated on the titles of the disputed properties does not preclude the appointment of a receiver. It is true that the notice alone will not preclude the transfer of the property pendente lite, for the title to be issued to the transferee will merely carry the annotation that the lot is under litigation. Hence, the notice of lis pendens, by itself, may not be the "most convenient and feasible means of preserving or administering the property in litigation." However, the situation is different in the case at bar. A counterbond will also be posted by the respondent to answer for all damages petitioners may suffer by reason of any transfer of the disputed properties in the future. As a matter of fact, petitioners can also ask for the issuance of an injunctive writ to foreclose any transfer, mortgage, or encumbrance on the disputed properties. These considerations, plus the finding that the appointment of the receiver was without sufficient cause, have demonstrated the vulnerability of petitioners postulation.

Fourth, it is undisputed that respondent has actual possession over some of the disputed properties which are entitled to protection. Between the possessor of a subject property and the party asserting contrary rights to the properties, the former is accorded better rights. In litigation, except for exceptional and extreme cases, the possessor ought not to be deprived of possession over subject property. Article 539 of the New Civil Code provides that "every possessor has a right to be respected in his possession; and should he be disturbed therein he shall be protected in or restored to said possession by the means established by the laws and the Rules of Court." In Descallar v. Court of Appeals, we ruled that the appointment of a receiver is not proper where the rights of the parties, one of whom is in possession of the property, are still to be determined by the trial court.12 In view of the foregoing reasons, we uphold the CA ruling that the grant of the receivership was without sufficient justification nor strong basis. Anent the third issue that the cancellation of the notice of lis pendens on TD No. 112 is irregular as Lot No. 33 is one of the disputed properties in the partition case, petitioners position is correct. The CA made a factual finding that the property of Unchuan was erroneously included in Lot No. 33, one of the disputed properties in Civil Case No. 517. It then ruled that the annotation of lis pendens should be lifted. This ruling is bereft of factual basis. The determination whether the property of Unchuan is a part of Lot No. 33 and whether that portion really belongs to Unchuan are matters to be determined by the trial court. Consequently, the notice of lis pendens on TD No. 112 stays until the final ruling on said issues is made. WHEREFORE, the petition is PARTLY GRANTED. The June 18, 2002 CA Decision in CA-G.R. SP No. 67492 is AFFIRMED with MODIFICATION insofar as it ordered the cancellation of the notice of lis pendens in TD No. 112. As thus modified, the appealed CA Decision should read as follows: WHEREFORE, premises considered, the Petition is hereby PARTLY GRANTED. The Resolution dated 22 May 2001 of the Regional Trial Court of Camiguin, Branch 28 in Civil Case No. 517 is hereby reversed and set aside. The court-appointed receiver, Lope Salantin, is discharged upon the posting by petitioner of a counterbond in the amount of PhP 100,000. The notice of lis pendens in TD No. 112, including the portion allegedly belonging to Elena Unchuan, remains valid and effective. Let this case be remanded to the court a quo for further proceedings in Civil Case No. 517. No costs. SO ORDERED.

G.R. No. 174356

January 20, 2010

EVELINA G. CHAVEZ and AIDA CHAVEZ-DELES, Petitioners, vs. COURT OF APPEALS and ATTY. FIDELA Y. VARGAS, Respondents. DECISION ABAD, J.:

This case is about the propriety of the Court of Appeals (CA), which hears the case on appeal, placing the property in dispute under receivership upon a claim that the defendant has been remiss in making an accounting to the plaintiff of the fruits of such property. The Facts and the Case Respondent Fidela Y. Vargas owned a five-hectare mixed coconut land and rice fields in Sorsogon. Petitioner Evelina G. Chavez had been staying in a remote portion of the land with her family, planting coconut seedlings on the land and supervising the harvest of coconut and palay. Fidela and Evelina agreed to divide the gross sales of all products from the land between themselves. Since Fidela was busy with her law practice, Evelina undertook to hold in trust for Fidela her half of the profits. But Fidela claimed that Evelina had failed to remit her share of the profits and, despite demand to turn over the administration of the property to Fidela, had refused to do so. Consequently, Fidela filed a complaint against Evelina and her daughter, Aida C. Deles, who was assisting her mother, for recovery of possession, rent, and damages with prayer for the immediate appointment of a receiver before the Regional Trial Court (RTC) of Bulan, Sorsogon.1 In their answer, Evelina and Aida claimed that the RTC did not have jurisdiction over the subject matter of the case since it actually involved an agrarian dispute. After hearing, the RTC dismissed the complaint for lack of jurisdiction based on Fidelas admission that Evelina and Aida were tenants who helped plant coconut seedlings on the land and supervised the harvest of coconut and palay. As tenants, the defendants also shared in the gross sales of the harvest. The court threw out Fidelas claim that, since Evelina and her family received the land already planted with fruit-bearing trees, they could not be regarded as tenants. Cultivation, said the court, included the tending and caring of the trees. The court also regarded as relevant Fidelas pending application for a five-hectare retention and Evelinas pending protest relative to her three-hectare beneficiary share.2 Dissatisfied, Fidela appealed to the CA. She also filed with that court a motion for the appointment of a receiver. On April 12, 2006 the CA granted the motion and ordained receivership of the land, noting that there appeared to be a need to preserve the property and its fruits in light of Fidelas allegation that Evelina and Aida failed to account for her share of such fruits.3 Parenthetically, Fidela also filed three estafa cases with the RTC of Olongapo City and a complaint for dispossession with the Department of Agrarian Reform Adjudication Board (DARAB) against Evelina and Aida. In all these cases, Fidela asked for the immediate appointment of a receiver for the property. The Issues Presented Petitioners present the following issues: 1. Whether or not respondent Fidela is guilty of forum shopping considering that she had earlier filed identical applications for receivership over the subject properties in the criminal cases she filed with the RTC of Olongapo City against petitioners Evelina and Aida and in the administrative case that she filed against them before the DARAB; and 2. Whether or not the CA erred in granting respondent Fidelas application for receivership. The Courts Ruling

One. By forum shopping, a party initiates two or more actions in separate tribunals, grounded on the same cause, trusting that one or the other tribunal would favorably dispose of the matter.4 The elements of forum shopping are the same as in litis pendentia where the final judgment in one case will amount to res judicata in the other. The elements of forum shopping are: (1) identity of parties, or at least such parties as would represent the same interest in both actions; (2) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and (3) identity of the two preceding particulars such that any judgment rendered in the other action will, regardless of which party is successful, amount to res judicata in the action under consideration.5 Here, however, the various suits Fidela initiated against Evelina and Aida involved different causes of action and sought different reliefs. The present civil action that she filed with the RTC sought to recover possession of the property based on Evelina and Aidas failure to account for its fruits. The estafa cases she filed with the RTC accused the two of misappropriating and converting her share in the harvests for their own benefit. Her complaint for dispossession under Republic Act 8048 with the DARAB sought to dispossess the two for allegedly cutting coconut trees without the prior authority of Fidela or of the Philippine Coconut Authority. The above cases are similar only in that they involved the same parties and Fidela sought the placing of the properties under receivership in all of them. But receivership is not an action. It is but an auxiliary remedy, a mere incident of the suit to help achieve its purpose. Consequently, it cannot be said that the grant of receivership in one case will amount to res judicata on the merits of the other cases. The grant or denial of this provisional remedy will still depend on the need for it in the particular action. Two. In any event, we hold that the CA erred in granting receivership over the property in dispute in this case. For one thing, a petition for receivership under Section 1(b), Rule 59 of the Rules of Civil Procedure requires that the property or fund subject of the action is in danger of being lost, removed, or materially injured, necessitating its protection or preservation. Its object is the prevention of imminent danger to the property. If the action does not require such protection or preservation, the remedy is not receivership.6 Here Fidelas main gripe is that Evelina and Aida deprived her of her share of the lands produce. She does not claim that the land or its productive capacity would disappear or be wasted if not entrusted to a receiver. Nor does Fidela claim that the land has been materially injured, necessitating its protection and preservation. Because receivership is a harsh remedy that can be granted only in extreme situations,7 Fidela must prove a clear right to its issuance. But she has not. Indeed, in none of the other cases she filed against Evelina and Aida has that remedy been granted her.8 Besides, the RTC dismissed Fidelas action for lack of jurisdiction over the case, holding that the issues it raised properly belong to the DARAB. The case before the CA is but an offshoot of that RTC case. Given that the RTC has found that it had no jurisdiction over the case, it would seem more prudent for the CA to first provisionally determine that the RTC had jurisdiction before granting receivership which is but an incident of the main action.1 a vv p h i 1 WHEREFORE, the Court GRANTS the petition. The Resolutions dated April 12, 2006 and July 7, 2006 of the Court of Appeals in CA-G.R. CV 85552, are REVERSED and SET ASIDE. The receivership is LIFTED and the Court of Appeals is directed to resolve CA-G.R. CV 85552 with utmost dispatch. SO ORDERED.

G.R. No. 106473 July 12, 1993

ANTONIETTA O. DESCALLAR, petitioner, vs. THE HON. COURT OF APPEALS and CAMILO F. BORROMEO, respondents.

Gilberto C. Alfafara for petitioner.

Bernadito A. Florido for private respondent.

GRIO-AQUINO, J.:

Assailed in this petition for review on certiorari is the decision dated July 29, 1992 of the Court of Appeals in CA-G.R. SP No. 27977, affirming the orders dated March 17, 1992 and April 27, 1992 of the trial court in Civil Case No. MAN-1148, granting respondent's petition for receivership and denying petitioner's motion for reconsideration thereof.

On August 9, 1991, respondent Camilo Borromeo, a realtor, filed against petitioner a civil complaint for the recovery of three (3) parcels of land and the house built thereon in the possession of the petitioner and registered in her name under Transfer Certificates of Title Nos. 24790, 24791 and 24792 of the Registry of Deeds for the City of Mandaue. The case was docketed as Civil Case No. MAN-1148 of the Regional Trial Court, Branch 28, Mandaue City.

In his complaint, Borromeo alleged that he purchased the property on July 11, 1991 from Wilhelm Jambrich, an Austrian national and former lover of the petitioner for many years until he deserted her in 1991 for the favors of another woman. Based on the deed of sale which the Austrian made in his favor, Borromeo filed an action to recover the ownership and possession of the house and lots from Descallar and asked for the issuance of new transfer certificates of title in his name.

In her answer to the complaint, Descallar alleged that the property belongs to her as the registered owner thereof; that Borromeo's vendor, Wilhelm Jambrich, is an Austrian, hence, not qualified to acquire or own real property in the Philippines. He has no title, right or interest whatsoever in the property which he may transfer to Borromeo.

On March 5, 1992, Borromeo asked the trial court to appoint a receiver for the property during the pendency of the case. Despite the petitioner's opposition, Judge Mercedes Golo-Dadole granted the application for receivership and appointed her clerk of court as receiver with a bond of P250,000.00.

Petitioner filed a motion for reconsideration of the court's order, but it was denied.

Petitioner sought relief in the Court of Appeals by a petition for certiorari (CA-G.R. SP No. 27977 "Antonietta O. Descallar vs. Hon. Mercedes G. Dadole, as Judge, RTC of Mandaue City, Branch 28, and Camilo F. Borromeo").

On July 29, 1992, the Court of Appeals dismissed the petition for certiorari.

In due time, she appealed the Appellate Court's decision to this Court by a petition for certiorari under Rule 45 of the Rules of Court.

In a nutshell, the issue in this appeal is whether the trial court gravely abused its discretion in appointing a receiver for real property registered in the name of the petitioner in order to transfer its possession from the petitioner to the court-appointed receiver. The answer to that question is yes.

The Court is amazed that the trial court and the Court of Appeals appear to have given no importance to the fact that the petitioner herein, besides being the actual possessor of the disputed property, is also the registered owner thereof, as evidenced by TCTs Nos. 24790, 24791, and 24792 issued in her name by the Register of Deeds of Mandaue City on December 3, 1987. Her title and possession cannot be defeated by mere verbal allegations that although she appears in the deed of sale as vendee of the property, it was her Austrian lover, Jambrich, who paid the price of the sale of the property (Sinoan vs. Sorogan, 136 SCRA 407). Her Torrens certificates of title are indefeasible or incontrovertible (Sec. 32, P.D. 1529).

Even if it were true that an impecunious former waitress, like Descallar, did not have the means to purchase the property, and that it was her Austrian lover who provided her with the money to pay for it, that circumstance did not make her any less the owner, since the sale was made to her, not to the open-handed alien who was, and still is, disqualified under our laws to own real property in this country (Sec. 7, Art. XII, 1987 Constitution). The deed of sale was duly registered in the Registry of Deeds and new titles were issued in her name. The source of the purchase money is immaterial for there is no allegation, nor proof, that she bought the property as trustee or dummy for the monied Austrian, and not for her own benefit and enjoyment.

There is no law which declares null and void a sale where the vendee to whom the title of the thing sold is transferred or conveyed, paid the price with money obtained from a third person. If that were so, a bank would be the owner of whatever is purchased with funds borrowed from it by the vendee. The holding of the trial court and the Court of Appeals that Jambrich, notwithstanding his legal incapacity to acquire real property in the Philippines, is the owner of the house and lot which his erstwhile mistress, Antonietta, purchased with money she obtained from him, is a legal heresy.

In view of the above circumstances, we find the order of receivership tainted with grave abuse of discretion. The appointment of a receiver is not proper where the rights of the parties (one of whom is in possession of the property), are still to be determined by the trial court.

Relief by way of receivership is equitable in nature, and a court of equity will not ordinarily appoint a receiver where the rights of the parties depend on the determination of adverse claims of legal title to real property and one party is in possession. (Calo, et al. vs. Roldan, 76 Phil., 445).

Only when the property is in danger of being materially injured or lost, as by the prospective foreclosure of a mortgage thereon for non-payment of the mortgage loans despite the considerable income derived from the property, or if portions thereof are being occupied by third persons claiming adverse title thereto, may the appointment of a receiver be justified (Motoomul vs. Arrieta, 8 SCRA 172).

In this case, there is no showing that grave or irremediable damage may result to respondent Borromeo unless a receiver is appointed. The property in question is real property, hence, it is neither perishable or consummable. Even though it is mortgaged to a third person, there is no evidence that payment of the mortgage obligation is being neglected. In any event, the private respondent's rights and interests, may be adequately protected during the pendency of the case by causing his adverse claim to be annotated on the petitioner's certificates of title.

Another flaw in the order of receivership is that the person whom the trial judge appointed as receiver is her own clerk of court. This practice has been frowned upon by this Court:

The respondent judge committed grave abuse of discretion in connection with the appointment of a receiver. . . . The instant case is similar to Paranete vs. Tan, 87 Phil. 678 (1950) so that what was there said can well apply to the actuations of the respondent judge. . . . "We hold that the respondent judge has acted in excess of his jurisdiction when he issued the order above adverted to. That order, in effect, made the clerk of court a sort of a receiver charged with the duty of receiving the proceeds of sale and the harvest of every year during the pendency of the case with the disadvantage that the clerk of court has not filed any bond to guarantee the faithful discharge of his

duties as depositary; and considering that in actions involving title 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, it is evident that the action of the respondent judge is unwarranted and unfair to the defendants. (Mendoza vs. Arellano, 36 Phil. 59; Agonoy vs. Ruiz, 11 Phil. 204; Aquino vs. Angeles David, 77 Phil. 1087; Ylarde vs. Enriquez, 78 Phil. 527; Arcega vs. Pecson, 44 Off. Gaz., [No. 12], 4884, 78 Phil. 743; De la Cruz vs. Guinto, 45 Off. Gaz. pp. 1309, 1311; 79 Phil. 304). (Abrigo vs. Kayanan, 121 SCRA 20).

During the pendency of this appeal, Judge Dadole rendered a decision in Civil Case No. MAN-1148 upholding Borromeo's claim to Descallar's property, annulling the latter's TCTs Nos. 24790, 24791 and 24792 and ordering the Register of Deeds of Mandaue City to issue new ones in the name of Borromeo. This circumstance does not retroactively validate the receivership until the decision (presumably now pending appeal) shall have attained finality.

WHEREFORE, finding grave abuse of discretion in the order of receiver which the respondent Court of Appeals affirmed in its decision of July 29, 1992 in CA-G.R. SP No. 27977, the petition for certiorari is hereby GRANTED and the decision of the appellate court, as well as the order dated March 17, 1992 of the Regional Trial Court of Mandaue City, Branch 28, in Civil Case No. MAN-1148, are hereby ANNULLED and SET ASIDE. Costs against the private respondent.

SO ORDERED.

G.R. No. 152239

August 17, 2011

MAKING ENTERPRISES, INC. AND SPOUSES JOAQUIN TAMANO AND ANGELITA TAMANO, Petitioners, vs. JOSE MARFORI AND EMERENCIANA MARFORI, Respondents. DECISION VILLARAMA, JR., J.: Before us is a petition for review on certiorari assailing the July 24, 2000 Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No. 43076. The CA had ordered the issuance of writs of certiorari and prohibition permanently enjoining the prosecution of Jose Marfori in Criminal Case Nos. 170660 to 170676 before the Metropolitan Trial Court (MeTC) of Caloocan City, and ordered the appointment of a receiver in Civil Case No. 94-70092, pending before the Regional Trial Court (RTC) of Manila. Likewise assailed is the appellate courts Resolution2 dated February 12, 2002, denying petitioners motion for reconsideration. The antecedent facts follow:

On June 4, 1984, Jose F. Marfori acquired a five-storey commercial building, known as the Marsman Building, from the Development Bank of the Philippines. As the land on which the building stood was owned by the Philippine Ports Authority (PPA), Marfori entered into a contract of lease of the said lot with the PPA. The contract was for a period of twenty-five (25) years, renewable for a similar period, and was subject to the condition that upon the expiration of lease, the building and all other improvements found on the leased premises shall become the PPAs sole property. Marfori then incurred huge expenses for the rehabilitation of the building and leased some portions of the building to the PPA. Thereafter, on April 10, 1987, Marfori executed a dacion en pago and assignment of rights transferring the ownership of the Marsman Building to Making Enterprises, Inc. (Making), on the condition that Making would assume all of Marforis obligations.3 Making was represented by its General Manager, Cristina Lee, and Executive VicePresident, Angelita Ma. Tamano, in the said transaction. Marforis wife, Emerenciana, alleged that she did not consent to the transfer of the Marsman Building to Making. She claimed that the building is part of their conjugal property as it was acquired during their marriage.4 On April 12, 1994, she filed with the RTC of Manila a complaint against Making, the spouses Joaquin and Angelita Tamano, the spouses Lester and Cristina Lee, and the PPA for Recovery of Ownership, Annulment of Contract with Damages, Receivership, Accounting and Preliminary Injunction with Prayer for Restraining Order.5 She sought, among others, to annul the dacion en pago and assignment of rights and prayed for the appointment of a receiver to preserve the rentals of the building. She also prayed for the issuance of a writ of preliminary injunction to enjoin the PPA from paying its rentals to Making and from approving the transfer of the Marsman Building. In an Order6 dated October 18, 1995, Judge Catalino Castaeda, Jr. of the RTC, Branch 17, of Manila denied the prayer for the issuance of a writ of preliminary injunction and the application for receivership. The RTC noted that in 1987, Emerencianas complaint for the same cause of action was dismissed by the RTC, Branch 51, of Manila for improper venue.7 The RTC was not convinced that she would indeed suffer grave injustice and irreparable damages if a writ of injunction enjoining the PPA from paying rentals to Making and approving the transfer of the Marsman Building is not issued considering that she re-filed her complaint only on April 12, 1994, or more than six years after her first complaint was dismissed. As regards her prayer for the appointment of a receiver, the RTC held that the appointment of a receiver is an equitable relief and a court of equity will not ordinarily appoint a receiver where the rights of the parties depend on the determination of adverse claims of legal title to real property and one party is in possession. Emerenciana moved for reconsideration of the order. However, the RTC denied the motion.8 Not satisfied, Emerenciana filed before the CA a petition for certiorari and receivership with prayer for preliminary injunction, which was docketed as CA-G.R. SP No. 39161. On March 29, 1996, however, the CA dismissed the petition for being insufficient in form and substance.9 Reconsideration of the dismissal was likewise denied in a Resolution dated November 29, 1996.10 Meanwhile, with regard to the criminal cases mentioned at the outset, records show that in 1987, Marfori issued twenty-two (22) checks in favor of Cristina Lee. Lee deposited the checks to her account with the Philippine Bank of Communications, but the same were dishonored for the reason of "Account Closed." Thus, she filed complaints against Marfori for estafa and violation of Batas Pambansa Blg. 22 with the Prosecutor's Office of Caloocan City.11

Before he could be arraigned, Marfori sought reinvestigation of the criminal cases against him, arguing that he was not given the opportunity to present controverting evidence to prove that the checks were already paid or liquidated.12 The RTC granted Marforis motion and ordered the Office of the City Prosecutor to conduct a reinvestigation. Upon reinvestigation, Assistant City Prosecutor Afable E. Cajigal rendered a joint resolution,13 which was later approved by City Prosecutor Gabriel N. Dela Cruz, finding cause to dismiss the criminal complaints against Marfori. On August 11, 1995, Asst. City Prosecutor Cajigal filed a motion to dismiss before the RTC of Caloocan City, which motion was granted by Judge Emilio L. Leachon, Jr. on the same date.14 Claiming that she was not notified of the order for reinvestigation, Angelita Ma. Tamano moved to set aside the joint resolution.15 Prosecutor Cajigal then reversed his previous findings and recommended the setting aside of the joint resolution and dismissal order.16 Said resolution was approved by 1st Assistant City Prosecutor Rosauro Silverio. Thus, Asst. City Prosecutor Cajigal filed seventeen (17) informations for violation of B.P. 22 against Marfori before the MeTC of Caloocan City.17 Warrants for Marforis arrest were also issued by Judge Marcelino L. Sayo. Aggrieved, Marfori filed with the Caloocan City RTC a petition18 for certiorari and injunction with prayer for temporary restraining order against Judge Sayo; Asst. City Prosecutors Cajigal, Silverio and Dela Cruz; and Making, who was represented by Tamano. Marfori maintained that all the checks were drawn in favor of Cristina Lee, but the prosecutors deliberately made it appear in the new informations that the checks were drawn in favor of Making. He prayed that Judge Sayo be enjoined from proceeding with the trial of the criminal cases and that the informations for violation of B.P. 22, as well as the warrants of arrest, be declared void. Making, represented by Tamano, filed a motion to dismiss arguing that the general rule is that a criminal prosecution may not be restrained by injunction.19 In an Order dated April 18, 1997, the RTC granted Makings motion and dismissed Marfori's petition.20 Meanwhile, on November 27, 1996, Marfori and his wife had filed with this Court a Consolidated Petition21 docketed as G.R. No. 126841 asking among others, for the appointment of a receiver to preserve the rentals collected from the Marsman Building and the issuance of an injunction to enjoin the implementation of the warrants of arrest issued against him. Respondents argued that the filing of the criminal cases against Marfori had no factual and legal justification and hence, should be enjoined. The Court, after finding no special and important reasons for it to take cognizance of the case in the first instance, referred the petition to the CA for consideration and adjudication on the merits.22 On February 16, 1998, respondents filed an Amended Consolidated Petition23 with the CA. They added that Judge Castaeda, Jr. likewise erred in denying in Civil Case No. 9470092 their motion to present crucial documents wherein Tamano allegedly made a declaration against her interest. They likewise reiterated in their amended petition their prayer for the appointment of a receiver to take over, manage, and administer the Marsman Building. In their Comment, petitioners countered that respondents had lost all their rights to the building after they ceded it to Making in 1987. Petitioners also charged respondents with forum shopping.24 They argued that when Emerencianas application for a writ of preliminary injunction and receivership was denied by the RTC, she appealed the denial to the CA. When she failed to obtain a favorable action, she and her husband filed a petition with the Supreme Court involving the same subject matter and the same issues as in Emerencianas earlier petition in CA-G.R. SP No. 39161. Petitioners alleged that

respondents hid the real purpose of their action by cleverly lumping together the civil and the criminal cases in their Consolidated Petition. On July 24, 2000, the CA rendered the assailed Decision, to wit: WHEREFORE, premises considered, the petition filed by petitioners Jose and Emerenciana Marfori is hereby GRANTED, and judgment rendered as follows: 1) That writs of certiorari and prohibition be issued permanently enjoining the further prosecution of Criminal Case Nos. 170660 to 170676, inclusive, against petitioner Jose Marfori; and 2) That, after posting of a bond in an amount to be determined by the Trial Court, let a receiver be appointed in Civil Case No. 94-70092, to take custody, manage, and administer the Marsman Building and all rents collected therefrom, during the pendency of the proceedings. SO ORDERED.25 The CA brushed aside petitioners' argument that respondents were guilty of forum shopping, holding that technical rules of procedure must be relaxed in the interest of substantial justice. As to the order granting the prayer for the appointment of a receiver, the CA ruled that respondents have sufficiently proven their interest in the Marsman Building. The CA found that unless a receiver is appointed, there is a danger of loss or material injury considering that petitioners possess absolute control of the building. Meanwhile, as to the criminal cases, the CA ruled that the public prosecutors gravely abused their discretion when they set aside the earlier resolution recommending the dismissal of the criminal cases against Marfori based solely on the ground that Tamano was not given the chance to comment on Marforis motion for reinvestigation. The CA noted that in the joint resolution, the prosecutors thoroughly studied the case and concluded that the checks subject of the criminal cases were not issued with valuable consideration since it was impossible for Marfori to have been indebted or for petitioners to lend the amount of P4,051,518.08 stated in the checks because the complainants/Making Enterprises only earned P49,352.95 in 1987. Petitioners filed motions for reconsideration questioning the appointment of a receiver26 and the order permanently enjoining the further prosecution of Marfori in Criminal Case Nos. 170660 to 170676.27 However, the CA denied both motions in its Resolution of February 12, 2002 as follows: WHEREFORE, the motions are hereby DENIED. However, in order to ensure that the objectives of Sec. 1 (a) Rule 59, the basis of Our decision, will be carried out effectively, the trial court is DIRECTED to appoint [as] a receiver, after compliance of the bond requirement, a private banking institution which shall exercisepowers as such pursuant to Sec. 6, Rule 59 of the Rules of Court. SO ORDERED.28 Hence, the present petition. Essentially, petitioners present the following issues: (1) Whether the CA erred in granting the application for the appointment of a receiver for the Marsman Building; and (2) Whether the CA erred in permanently enjoining the criminal prosecution of Jose Marfori. We grant the petition.

At the outset, we note that the CA erred in taking cognizance of respondents consolidated petition as respondents are guilty of deliberate forum shopping. We note that the petition for appointment of a receiver for the Marsman Building was originally filed by Emerenciana before the RTC of Manila in Civil Case No. 94-70092. The RTC denied the prayer for the issuance of a writ of preliminary injunction and the application for receivership. Emerenciana filed a motion for reconsideration, which was denied by the RTC. She then filed a petition for certiorari and receivership with prayer for preliminary injunction before the CA docketed as CA-G.R. SP No. 39161. In a Resolution dated March 29, 1996, the petition was dismissed for being insufficient in form and substance. She sought reconsideration of the dismissal, and her motion was likewise denied by the CA on November 29, 1996. However, records show that two days earlier, or on November 27, 1996, while her motion for reconsideration of the CA resolution dismissing her petition was still pending resolution before the CA, she and her husband filed with this Court a consolidated petition, praying for the appointment of a receiver over the Marsman Building. Clearly, CA-G.R. SP No. 39161 was still pending with the CA when respondents filed their consolidated petition with this Court. Moreover, we note that respondents were not candid when they stated in their certification of non-forum shopping that there is no other action or proceeding involving the same issues that is pending before this Court, the CA, or any other tribunal or agency.29 There is forum-shopping when as a result of an adverse decision in one forum, or in anticipation thereof, a party seeks a favorable opinion in another forum through means other than appeal or certiorari. Forum-shopping exists when two or more actions involve the same transactions, essential facts, and circumstances; and raise identical causes of action, subject matter, and issues. Forum-shopping exists when the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the other.30 Thus, there is forum-shopping when, between an action pending before this Court and another one, there exist: (1) identity of parties, or at least such parties as represent the same interests in both actions, (2) identity of rights asserted and relief prayed for, the relief being founded on the same facts, and (3) the identity of the two preceding particulars is such that any judgment rendered in the other action will, regardless of which party is successful, amount to res judicata in the action under consideration; said requisites also constitutive of the requisites for auter action pendant or lis pendens.31 Applying the above test, there is no question that there is identity of parties, cause of action and reliefs sought between the consolidated petition in G.R. No. 126841 and the petition in CA-G.R. SP No. 39161. For resorting to forum shopping, the consolidated petition of the spouses Marfori should have been dismissed with prejudice. But even on the merits, the application for an appointment of a receiver must be denied. An application for the appointment of a receiver under Section 1(a), Rule 59 of the 1997 Rules of Civil Procedure, as amended, requires that the property or fund subject of the action is in danger of being lost, removed, or materially injured, necessitating its protection or preservation. Section 1 provides, SECTION 1. Appointment of receiver.Upon a verified application, one or more receivers of the property subject of the action or proceeding may be appointed by the court where the action is pending, or by the Court of Appeals or by the Supreme Court, or a member thereof, in the following cases: (a) When it appears from the verified application, and such other proof as the court may require, that the party applying for the appointment of a receiver has an interest in the property or fund which is the subject of the action or proceeding, and that such property

or fund is in danger of being lost, removed, or materially injured unless a receiver be appointed to administer and preserve it; xxxx Here, respondents submit that they have satisfactorily established their legal right over the Marsman Building. They alleged that the building and the income and rentals thereof are in danger of being lost, removed or materially injured by the apathy, neglect and fraudulent design of petitioners thereby rendering the appointment of a receiver both urgent and imperative.32 However, they failed to show how the building as well as the income thereof would disappear or be wasted if not entrusted to a receiver. They were not able to prove that the property has been materially injured, necessitating its protection and preservation. Because receivership is a harsh remedy that can be granted only in extreme situations,33 respondents must prove a clear right to its issuance. This they failed to do. We furthermore observe that in granting the appointment of a receiver, the CA merely concluded that respondents have sufficiently proven that they have an interest in the Marsman Building. It further held that unless a receiver is appointed, there is a danger of loss or material injury, considering that petitioners presently possess absolute control of the building and the rentals accruing thereof. However, there was no justification on how the CA arrived at its conclusion. It must be stressed that the issue of the validity of the dacion en pago and assignment of rights executed by Marfori in favor of Making still has to be resolved in Civil Case No. 94-70092. Until the contract is rescinded or nullified, the same remains to be valid and binding. Thus, we agree with the RTC when it held that courts of equity will not ordinarily appoint a receiver where the rights of the parties depend on the determination of adverse claims of legal title to real property and one party is in possession. As regards the second issue, the Court finds no longer necessary to pass upon the correctness of the order of the CA permanently enjoining the prosecution of Jose Marfori in Criminal Case Nos. 170660 to 170676 before the MeTC of Caloocan City. The Court notes that during the pendency of this petition, Jose Marfori passed away on October 2, 2004.34 Pursuant to Article 89, paragraph 135 of the Revised Penal Code, as amended, the death of Marfori totally extinguished his criminal liability. Because Marfori died even before arraignment and trial, there is no relevance in declaring the extinction as well of civil liability that was based exclusively on the crime for which an accused is convicted (i.e., ex delicto). Only civil liability predicated on a source of obligation other than the delict, if any, survived the death of the accused, which the offended party can recover by means of a separate civil action.36 1avvphi1 WHEREFORE, the petition for review on certiorari is PARTLY GRANTED. The July 24, 2000 Decision and February 12, 2002 Resolution of the Court of Appeals in CA-G.R. SP No. 43076, insofar as they ordered the appointment of a receiver in Civil Case No. 9470092, are hereby REVERSED and SET ASIDE. In view of the death of Jose Marfori, Criminal Case Nos. 170660 to 170676 before the Metropolitan Trial Court of Caloocan City are hereby ordered DISMISSED. No pronouncement as to costs. SO ORDERED.

G.R. No. 1278

August 1, 1903

EUGENIO BONAPLATA, petitioner, vs.

BYRON S. AMBLER, judge of the Court of First Instance of Manila, and J. MCMICKING, clerk of the Court of First Instance of Manila, respondents. Augustus A. Montagne for petitioner. Frederick Garfield Waite for respondents. MCDONOUGH, J.: This was a motion for judgment on the pleadings in a proceeding in which the plaintiff prays that a peremptory order be issued by this court against Judge Ambler, commanding him, as judge of the Court of First Instance of Manila, to immediately cause to be issued and subscribed a writ of execution for the enforcement of plaintiff's judgment against Fulgencio Tan Tonco for the sum of 1,541 pesos, Mexican currency, which judgment was recovered January 13, 1903, and against the defendant J. McMicking, as clerk of the said Court of First Instance of Manila, commanding him to issue and subscribe a writ of execution, sealed with the seal of the Court of First Instance of Manila, for the enforcement of plaintiff's said judgment. The facts upon which this application is based are undisputed. The plaintiff, on January 13, 1903, recovered a judgment in the Court of First Instance of Manila, in an action for debt against Fulgencio Tan Tonco, amounting to 1,541 pesos, Mexican currency. No exceptions were taken or filed against said judgment, nor was a motion for a new trial made; and the judgment is now in full force and effect. After the rendition and entry of said judgment the plaintiff repeatedly requested the defendants above named to duly issue a writ of execution to satisfy the judgment of the plaintiff against said Fulgencio Tan Tonco, which request was refused. The defendants, by their attorney, state, as their reason for such refusal, that on the 18th day of December, 1902, one Sergia Reyes instituted a suit against said Fulgencio Tan Tonco, in the Court of First Instance of Manila, for an indebtedness amounting to the sum of $1,500, Mexican currency, and in the complaint alleged that the said defendant was insolvent; that several creditors had sued him; that the assets of his business consisted of real estate, contracts for buildings (many partly completed), equities in real estate, and other property of the value of about $200,000, Mexican currency; that said property was in good condition and that it was in the interest of creditors to retain the actual status of the business; that under proper management the business could be conducted at a good and satisfactory profit, and pay a greater portion of said defendant's creditors, if not all; that the management of the said business was in the hands of the defendant, who was unable to give it necessary care and attention; that for various causes the business had been loosing money; that the debts of the said defendant amounted to $250,000, Mexican currency; that the assets of the business were then more than enough to pay the indebtedness, but if said business were managed by the said defendant it will be dissipated and wasted, and therefore the plaintiff in that action prayed for the appointment of a receiver to take charge of the said business and conduct the same subject to the order of the court. The said Fulgencio Tan Tonco, personally and by his attorney, appeared in court, on the said 18th day of December, 1902, and accepted service of the complaint in said cause, and thereafter and on the 19th day of December, 1902, Antonio Torres was appointed receiver of the business, property, rights, and credits of said Tan Tonco; and thereafter, having given a sufficient bond and of all the property of said Tan Tonco, and under the direction of and pursuant to an order of said Byron S. Ambler, as judge of the Court of First Instance of Manila, undertook to care for, run, manage, and operate said business the same as therefore run and operated by said defendant, and to employ such persons and make such payments and disbursements as needed. It was further ordered that the said defendant and other persons be restrained and enjoined from interfering with said property; and the said Tan Tonco was and still continued to be enjoined from taking possession of or in any way interfering with said property, and said J. McMicking, as

such clerk, was and is restrained from issuing an execution upon the said judgment of Tan Tonco. As a general rule the appointment of a receiver is an equitable remedy, and before such remedy is resorted to, except in certain prescribed cases hereinafter mentioned, the legal remedy must be exhausted. Courts of equity do not encourage proceedings or actions which are not in conformity with the usual practice, which are necessary and at the same time are calculated to swell costs and expenses. (Hart vs. Times, 3 Edwards, Chancery, 226; Congden vs. Lee, 3 Edwards, Chancery, 304.) In the Congden case the plaintiff sought equitable relief in an action for debt after an execution had been returned unsatisfied; but the plaintiff and the sheriff knew that the debtor had real estate which was subject to levy and sale. The court held that it was the duty of the plaintiff to exhaust his legal remedy by selling the real estate on the execution, and it not appearing that there would be a deficiency on the sale, the court had no jurisdiction to appoint a receiver of the rents. It may be that very special circumstances may exist, in a given case, involving great danger of loss, such as may be caused by a debtor's nonresidence, which will justify the appointment of a receiver, but the case at bar is not one of that character; the claim of the plaintiff, Sergia Reyes, amounted to only $1,500, Mexican currency, whereas the property of Tan Tonco was valued at $200,000, Mexican currency, and it does not appear that there were any judgments against him having priority to that of said plaintiff, or that the plaintiff's judgment could not be collected in full. Under these conditions, the allegation in the complaint that the defendant, Tan Tonco, could not give his business "necessary care and attention," that he was "losing money," and that if the business was to be continued under his management it would be "dissipated and wasted," might be cause for applying for an appointment of a committee, but it certainly is not good cause for turning over to a receiver $200,000 worth of property in an action to recover a debt of $1,500. What was undertaken, in this action, amounts practically to a bankruptcy proceeding the placing by the court of the property of the defendant in the hands of a receiver for the purpose, after paying costs, fees, and expenses, of disturbing that property among creditors. Bankruptcy proceedings, however, are forbidden until a law shall be enacted for these Islands. (Sec. 524 of the Code of Civil Procedure.) The learned counsel for the defendants in this mandamus proceeding claims that section 174 of this Code makes provision for the appointment of a receiver in this case. That section authorizes the appointment of a receiver (1) in certain corporation cases; (2) where the plaintiff has an interest in the property of fund which is the subject of the action, etc; (3) in an action to foreclose a mortgage; (4) and, finally, whenever in other cases it shall appear to the court that the appointment of a receiver is the most feasible means of preserving and administering the property which is the subject of the litigation during the pendency of the action. The subject of the action of the plaintiff Sergia Reyes was an indebtedness of $1,500 due to her by the defendant, and the legitimate object was the collection of that debt. Until after judgment and execution, which was not issued, the plaintiff could not have had interest in any property or fund of the defendant; nor until after the return of the execution unsatisfied could she have had any interest in the preservation of the defendant's property property which was not the subject of the litigation. The plaintiff in this mandamus proceeding was not a party to the action of Reyes vs. Tan Tonco, and he is not, therefore, bound by the order appointing a receiver made therein. It is not necessary in this proceeding to determine the further effect of that order, or to decide what its effect may be on all those creditors who consented to the appointment of

the receiver, who acquiesced in his control, management, and disposition of the defendant's property, or on other persons who dealt with him as such receiver. This court simply decides that the plaintiff, Eugenio Bonaplata, is entitled to have an execution issue on his said judgment. The motion for judgment on the pleadings is granted, and judgment for the plaintiff will be entered accordingly, with costs against the respondents.

G.R. No. 125008 June 19, 1997 COMMODITIES STORAGE & ICE PLANT CORPORATION, SPOUSES VICTOR & JOHANNAH TRINIDAD, petitioners, vs. COURT OF APPEALS, JUSTICE PEDRO A.. RAMIREZ, CHAIRMAN and FAR EAST BANK & TRUST COMPANY, respondents.

PUNO, J.: In this petition for certiorari, petitioner seeks to annul and set aside the decision and resolution of the Court of Appeals 1 in CA-G.R. SP No. 36032 dismissing the complaint in Civil Case No. 94-72076 before the Regional Trial Court, Branch 9, Manila. The facts show that in 1990, petitioner spouses Victor and Johannah Trinidad obtained a loan of P31,000,000.00 from respondent Far East Bank & Trust Company to finance the purchase of the Sta. Maria Ice Plant & Cold Storage in Sta. Maria, Bulacan. The loan was secured by a mortgage over the ice plant and the land on which the ice plant stands. Petitioner spouses failed to pay their loan. The bank extrajudicially foreclosed the mortgage and the ice plant was sold by public bidding on March 22, 1993. Respondent bank was the highest bidder. It registered the certificate of sale on September 22, 1993 and later took possession of the property. On November 22, 1993, petitioner spouses filed Civil Case No. 956-M-93 against respondent bank before the Regional Trial Court, Malolos, Bulacan for reformation of the loan agreement, annulment of the foreclosure sale and damages. 2 The trial court dismissed the complaint for petitioners' failure to pay the docket fees. The dismissal was without prejudice to refiling of the complaint. 3 On October 28, 1994, petitioners filed Civil Case No. 94-72076 against respondent bank before the Regional Trial Court, Branch 9, Manila for damages, accounting and fixing of redemption period. 4 As a provisional remedy, petitioners filed on November 16, 1994 an "Urgent Petition for Receivership." They alleged that respondent bank took possession of the ice plant forcibly and without notice to them; that their occupation resulted in the destruction of petitioners' financial and accounting records making it impossible for them to pay their employees and creditors; the bank has failed to take care of the ice plant with due diligence such that the plant has started emitting ammonia and other toxic refrigerant chemicals into the atmosphere and was posing a hazard to the health of the people in the community; the spouses' attention had been called by several people in the barangay who threatened to inform the Department of Environment and Natural Resources should they fail to take action. Petitioners thus prayed for the appointment of a receiver to save the ice plant, conduct its affairs and safeguard its records during the pendency of the case. 5 Instead of an answer, respondent bank filed on November 25, 1994 a "Motion to Dismiss and Opposition to Plaintiff's Petition for Receivership." It alleged that the complaint states no cause of action and that venue had been improperly laid. It also alleged that

petitioners failed to pay the proper docket fees and violated the rule on forum-shopping.
6

In an order dated December 13, 1994, the trial court granted the petition for receivership and appointed petitioners' nominee, Ricardo Pesquera, as receiver. The order disposed as follows: WHEREFORE, premises considered the Urgent Petition for Receivership is GRANTED and Mr. Ricardo Pesquera to whose appointment no opposition was raised by the defendant and who is an ice plant contractor, maintainer and installer is appointed receiver. Accordingly, upon the filing and approval of the bond of TWO MILLION (P2,000,000.00) pesos which shall answer for all damages defendant may sustain by reason of the receivership, said Ricardo Pesquera is authorized to assume the powers of a receiver as well as the obligation as provided for in Rule 59 of the Rules of Court after taking his oath as such receiver. SO ORDERED. 7 Respondent bank assailed this order before the Court of Appeals on a petition for certiorari. On January 11, 1996, the Court of Appeals annulled the order for receivership and dismissed petitioners' complaint for improper venue and lack of cause of action. The dispositive portion of the decision reads: WHEREFORE, the petition for certiorari is GRANTED. Accordingly, the assailed order dated December 13, 1994 (Annex A, petition) is ANNULLED and SET ASIDE and respondent's complaint in Civil Case No. 94-72076 in the respondent court (Annexes F, petition; 4, comment), is DISMISSED. Costs against respondents except the court. SO ORDERED. Reconsideration was denied on May 23, 1996. 8 Hence, this petition. Section 1 of Rule 59 of the Revised Rules of Court provides that: Sec. 1. When and by whom receiver appointed. One or more receivers of the property, real or personal, which is the subject of the action, may be appointed by the judge of the Court of First Instance in which the action is pending, or by a Justice of the Court of Appeals or of the Supreme Court, in the following cases: (a) When the corporation has been dissolved, or is insolvent, or is in imminent danger of insolvency, or has forfeited its corporate rights; (b) When it appears from the complaint or answer, and such other proof as the judge may require, that the party applying for the appointment of receiver has an interest in the property or fund which is the subject of the action, and that such property or fund is in danger of being lost, removed or materially injured unless a receiver be appointed to guard and preserve it; (c) When it appears in an action by the mortgagee for the foreclosure of a mortgage that the property is in danger of being wasted or materially injured, and that its value is probably insufficient to discharge the mortgage debt, or that the parties have so stipulated in the contract of mortgage; (d) After judgment, to preserve the property during the pendency of the appeal, or to dispose of it according to the judgment, or to aid execution when the execution has been returned unsatisfied or the judgment debtor

refuses to apply his property in satisfaction of the judgment, or otherwise carry the judgment into effect; (e) Whenever in other cases it appears that the appointment of a receiver is the most convenient and feasible means of preserving, administering, or disposing of the property in litigation. A receiver of real or personal property, which is the subject of the action, may be appointed by the court when it appears from the pleadings or such other proof as the judge may require, that the party applying for such appointment has (1) an actual interest in it; and (2) that (a) such property is in danger of being lost, removed or materially injured; or (b) whenever it appears to be the most convenient and feasible means of preserving or administering the property in litigation. 9 A receiver is a person appointed by the court in behalf of all the parties to the action for the purpose of preserving and conserving the property in litigation and prevent its possible destruction or dissipation, if it were left in the possession of any of the parties. 10 The appointment of a receiver is not a matter of absolute right. It depends upon the sound discretion of the court 11 and is based on facts and circumstances of each particular case. 12 Petitioners claim that the appointment of a receiver is justified under Section 1 (b) of Rule 59. They argue that the ice plant which is the subject of the action was in danger of being lost, removed and materially injured because of the following "imminent perils": 6.1 Danger to the lives, health and peace of mind of the inhabitants living near the Sta. Maria Ice Plant; 6.2 Drastic action or sanctions that could be brought against the plaintiff by affected third persons, including workers who have claims against the plaintiff but could not be paid due to the numbing manner by which the defendant took the Sta. Maria Ice Plant; 6.3 The rapid reduction of the Ice Plant into a scrap heap because of evident incompetence, neglect and vandalism. 13 A petition for receivership under Section 1 (b) of Rule 59 requires that the property or fund which is the subject of the action must be in danger of loss, removal or material injury which necessitates protection or preservation. The guiding principle is the prevention of imminent danger to the property. If an action by its nature, does not require such protection or reservation, said remedy cannot be applied for and granted.
14

In the instant case, we do not find the necessity for the appointment of a receiver. Petitioners have not sufficiently shown that the Sta. Maria Ice Plant is in danger of disappearing or being wasted and reduced to a "scrap heap." Neither have they proven that the property has been materially injured which necessitates its protection and preservation. 15 In fact, at the hearing on respondent bank's motion to dismiss, respondent bank, through counsel, manifested in open court that the leak in the ice plant had already been remedied and that no other leakages had been reported since. 16 This statement has not been disputed by petitioners. At the time the trial court issued the order for receivership of the property, the problem had been remedied and there was no imminent danger of another leakage. Whatever danger there was to the community and the environment had already been contained. The "drastic sanctions" that may be brought against petitioners due to their inability to pay their employees and creditors as a result of "the numbing manner by which

[respondent bank] took the ice plant" does not concern the ice plant itself. These claims are the personal liabilities of petitioners themselves. They do not constitute "material injury" to the ice plant. Moreover, the receiver appointed by the court appears to be a representative of petitioners. Respondent bank alleges that it was not aware that petitioners nominated one Mr. Pesquera as receiver. 17 The general rule is that neither party to a litigation should be appointed as receiver without the consent of the other because a receiver should be a person indifferent to the parties and should be impartial and disinterested. 18 The receiver is not the representative of any of the parties but of all of them to the end that their interests may be equally protected with the least possible inconvenience and expense. 19 The power to appoint a receiver must be exercised with extreme caution. There must be a clear showing of necessity therefor in order to save the plaintiff from grave and irremediable loss or damage. 20 It is only when the circumstances so demand, either because there is imminent danger that the property sought to be placed in the hands of a receiver be lost or because they run the risk of being impaired, endeavouring to avoid that the injury thereby caused be greater than the one sought to be avoided. 21 The Court of Appeals correctly found that the trial court gravely abused its discretion in issuing the order for receivership. The respondent court, however, went further and took cognizance of respondent bank's motion to dismiss. And finding merit in the motion, it dismissed the complaint. Petitioners now claim that the respondent court should have refrained from ruling on the motion to dismiss because the motion itself was not before it. 22 Again, we reject petitioners' contention. The motion to dismiss is anchored on improper venue, lack of cause of action and forum-shopping. We agree with the respondent court that the question of venue relates to the principal action and is prejudicial to the ancillary issue of receivership. Although the grounds for dismissal were not specifically raised before the appellate court, the said court may consider the same since the petition for receivership depends upon a determination thereof. 23 In their complaint, petitioners prayed for the following: WHEREFORE, in view of the foregoing, it is respectfully prayed that after trial on the merits judgment be rendered: 1. Ordering the Defendant to pay COMMODITIES actual and compensatory damages in the amount of PESOS: TWO MILLION FIVE HUNDRED THOUSAND and 00/100 (P2,500,000.00); 2 Ordering the Defendant to pay Plaintiffs moral damages in the amount of PESOS: TWO MILLION and 00/100 (P2,000,000.00) to compensate the Plaintiffs for the anxiety and besmirched reputation caused by the unjust actuations of the Defendant; 3. Ordering the Defendant to pay Plaintiffs nominal and exemplary damages in the amount of PESOS: FIVE HUNDRED THOUSAND and 00/100 (P500,000.00) to deter the repetition of such unjust and malicious actuations of the Defendant; 4. In order to restore the legal right of the Plaintiff COMMODITIES to redeem its foreclosed property, a right which COMMODITIES has been unjustly deprived of by the malicious and bad faith machinations of the Defendant, compelling the Defendant to produce the correct, lawful, official and honest statements of account and application of payment. Concomitantly, ordering the Defendant to accept the redemption of the foreclosed properties

pursuant to Rule 39 of the Revised Rules of Court in conjunction with Act 3135, within the prescribed period for redemption, said period to commence from the date of receipt by the Plaintiff COMMODITIES of the correct, lawful, official and honest statements of account and application of payments; 5. Ordering the Defendant to pay attorney's fees in the amount of PESOS: THREE HUNDRED THOUSAND (P300,000.00); and costs of litigation. Other reliefs and remedies just and equitable under the circumstances are likewise prayed for. 24 Petitioners pray for two remedies: damages and redemption. The prayer for damages is based on respondent bank's forcible occupation of the ice plant and its malicious failure to furnish them their statements of account and application of payments which prevented them from making a timely redemption. 25 Petitioners also pray that respondent bank be compelled to furnish them said documents, and upon receipt thereof, allow redemption of the property. They ultimately seek redemption of the mortgaged property. This is explicit in paragraph 4 of their prayer. An action to redeem by the mortgage debtor affects his title to the foreclosed property. If the action is seasonably made, it seeks to erase from the title of the judgment or mortgage debtor the lien created by registration of the mortgage and sale. 26 If not made seasonably, it may seek to recover ownership to the land since the purchaser's inchoate title to the property becomes consolidated after expiration of the redemption period. 27 Either way, redemption involves the title to the foreclosed property. It is a real action. Section 2 of Rule 4 of the Revised Rules of Court provides: Sec. 2. Venue in Courts of First Instance. (a) Real actions. Actions affecting title to, or for recovery of possession, or for partition or condemnation of, or foreclosure of mortgage on, real property, shall be commenced and tried in the province where the property or any part thereof lies. 28 Where the action affects title to the property, it should be instituted in the Regional Trial Court where the property is situated. The Sta. Maria Ice Plant & Cold Storage is located in Sta. Maria, Bulacan. The venue in Civil Case No. 94-72076 was therefore laid improperly. Finally, there is no merit in petitioners' claim that the respondent bank is no longer the real party in interest after selling the ice plant to a third person during the pendency of the case. Section 20 of Rule 3 of the Revised Rules of Court provides that in a transfer of interest pending litigation, the action may be continued by or against the original party, unless the court, upon motion, directs the transferee to be substituted in the action or joined with the original party. The court has not ordered the substitution of respondent bank. IN VIEW WHEREOF, the decision dated January 11, 1996 and resolution dated May 23, 1996 of the Court of Appeals in CA-G.R. SP No. 36032 are affirmed. Costs against petitioners. SO ORDERED.

.R. No. L-2349

October 22, 1948

FRED M. HARDEN, petitioner, vs. THE DIRECTOR OF PRISONS, respondent. Vicente J. Francisco for petitioner. First Assistant Solicitor General Roberto A. Gianzon and Solicitor Felix V. Makasiar for respondent. Claro M. Recto for the intervenor.

TUASON, J.: The petitioner, Fred M. Harden, is being confined in prison for contempt of court by virtue of an order of the following tenor: It appearing that the defendant Fred M. Harden has not up to this date complied with the orders of this court of October 7, 1947 and March 27, 1948; As prayed for, the court orders the arrest of the defendant Fred M. Harden as well as his confinement at the New Bilibid Prisons, Muntinlupa, Rizal, until he complies with the aforementioned orders. The proceedings for contempt arose in a civil case between Mrs. Harden as plaintiff and the petitioner and another person as defendants, commenced on July 12, 1941, and involving the administration of a conjugal partnership, payment of alimony, and accounting. In that case, a receiver was appointed and a preliminary injunction was issued restraining Fred M. Harden and his codefendant, Jose Salumbides, from transferring or alienating, except for a valuable consideration and with the consent of the court first had and obtained, moneys, shares of stock, and other properties and assets, real or personal, belonging to the aforesaid partnership, and which might be found in the names of said defendants or either of them. On various dates in 1946, Fred M. Harden transferred to the Hongkong & Shanghai Banking Corporation and the Chartered Bank of India, Australia & China, both in Hongkong, over P1,000,000 in drafts or cash; to Virginia Recreation Center, Long Beach, California, P20,196.80, and to an unknown person, P50,000. On September 9, 1947, Mrs. Harden moved the court to order Harden to return all these amounts and to redeposit them with the Manila branch of the Chartered Bank of India, Australia & China. On October 7, 1947, Judge Pea granted the motion in an order worded as follows: Wherefore, finding the motion of the plaintiff of September 9, 1947, to be well founded, for the purpose of preserving the status quo and in order that the amounts above referred to may stand ready to answer for any legitimate claims of the Government in the form of taxes, the aforementioned motion is hereby ordered to return, within a period of 15 days from the receipt of a copy hereof, the amount of P1,000,608.66 to the Philippines and to redeposit the same with the accounts of the Plaza Lunch at the Manila Branch of the Chartered Bank of India, Australia and China, with the understanding that upon failure to comply with this order he will be declared in contempt of court. After a petition for certiorari was instituted by Harden in the Supreme Court and decided, and after various motions were filed and heard, Judge Pea, on March 27, 1948, entered an order, which was a modification of that of October 7, 1947, directing Harden "to deposit with the Manila Branch of the Chartered Bank of India, Australia & China within five days from receipt of a copy of this order the money and drafts that he has actually in Hongkong, without prejudice to passing upon later on the different

amounts that the defendant has spent according to his attorney, after he has submitted to the court an itemized account of those expenses. In the same order there was this decree: With respect to the plaintiff's motion filed on March 16, 1948 praying that Fred M. Harden be ordered to deliver the certificate covering the 368,553 Balatoc Mining Company shares either to the Clerk of this Court or to the receiver in this case for safekeeping after his compliance with the order of January 17, 1948, the Court, after considering the different pleadings filed, denies defendant's motion for extension of time to register the said certificate of stock, thereby maintaining its order of January 17, 1948. The said defendant is further ordered, after the registration of the said certificate, to deposit the same with the Manila Branch of the Chartered Bank of India, Australia and China. The last part of the order was the culmination of another series of motions with their corresponding hearings. The facts taken from the pleading were in brief as follows: In a motion dated May 28, 1947, the receiver appointed in the main case prayed that the certificates of stock of the conjugal partnership, among them 368,553 shares of the Balatoc Mining Co., alleged to be in the possession of defendant Harden, be ordered turned over to him (receiver) so that he might have them registered in pursuance of the provisions of Republic Act No. 62. On June 7, 1947, the court "authorized" Harden "to register not later than June 30, 1947 the stock certificates in his possession, notifying the court afterwards of such action. On July 28, 1947, Mrs. Harden complained that her husband failed to comply with the above order and prayed that he be ordered to show cause why he should not be declared in contempt. On August 1, 1947, Harden filed a perfunctory compliance, and in order dated August 2, 1947, he was required to "make a detailed report of the stock certificates which have been duly registered in accordance with Republic Act No. 62." In his "compliance" dated August 7, 1947, Harden stated that he had been granted an extension until December 31, 1947, within which to register the Balatoc Mining Co. shares under Republic Act No. 62. In a motion dated January 7, 1948, the receiver informed the court that, notwithstanding the expiration on December 31, 1947, of Harden's extended time to comply with Republic Act No. 62, the records of the Balatoc Mining Co. showed that the certificate had not been registered as of January 7, 1948; and upon his request, an order dated January 17, 1948, was issued giving Harden "an extension until March 31, 1948 within which to comply with the Order dated June 7, 1947." In a motion dated March 15, 1948, Mrs. Harden prayed for the reasons therein stated, that defendant Harden "be ordered to deliver the certificates covering the 368,553 Balatoc Mining Co. shares either to the Clerk of this Court or to the Receiver herein for safekeeping, immediately after registering them pursuant to Republic Act No. 62." On March 24, 1948, Harden filed a motion stating that the registration of shares of stock under Republic Act No. 62 had been extended until June 30, 1948, and prayed that he "be allowed to register the stock certificates in question within such period as by law or regulations is or may be provided." It was at this stage of the case that the present petitioner was committed to jail. Broadly speaking, the grounds for relief by habeas corpus are only (1) deprivation of any fundamental or constitutional rights, (2) lack of jurisdiction of the court to impose the sentence, or (3) excessive penalty. (Santiago vs. Director of Prisons, 1 L-1083, Jan. 30, 1947, 44 Off. Gaz., 1231.)

The fact that the property is in a foreign country is said to deprive the court of jurisdiction, the remedy in such case being, it is contended, ancillary receivership. We can not agree with this view. While a court can not give its receiver authority to act in another state without the assistance of the courts thereof (53 C. J., 390-391), yet it may act directly upon the parties before it with respect to property beyond the territorial limits of its jurisdiction, and hold them in contempt if they resist the court's orders with reference to its custody or disposition (Id. 118) Whether the property was removed before or after the appointment of the receiver is likewise immaterial. In Sercomb vs. Catlin, 21 N. E., 606-608, the Supreme Court of Illinois said: It is true that the property attached is beyond the jurisdiction of the courts of this state, but the appellant, who caused it to be attached, is in this state, and within the jurisdiction of its courts. If the superior court had no power to reach the goods in Newton's hands, it had the power to reach appellant, who sought to prevent its receiver from getting possession of the goods. It makes no difference that the property was in a foreign jurisdiction. The facts of that case as stated in the decision were as follows: On April 14, 1887, in the case of Ada S. Havens et al. vs. Caleb Clapp et al. then pending in said superior court, the appellee was appointed receiver of all the property and effects, real and personal, of the defendants therein, Caleb Clapp and Thomas Davies. Prior to that date Clapp and Davies had forwarded, on consignment, to Elijah E. Newton, an auctioneer and commission merchant in Washington city, in the District of Columbia, a lot of jewelry, watches and silverware, to be by him disposed of for their benefit. So far as appears to the contrary, the goods so consigned were still in the possession of Newton at Washington when the order was entered on April 7, 1887, for the commitment of appellant for contempt. Within a week or 10 days after his appointment as receiver, appellee gave notice of such appointment to Newton, and demanded a return of the goods. On May 18, 1887, the Meriden Britannia Company, a corporation organized under the laws of the state of Connecticut, being a creditor of Clapp and Davies, commenced an attachment suit against them for the amount of its claim in the Supreme Court of the District of Columbia, and attached the goods in the hands of Newton. The penalty complained of is neither cruel, unjust nor excessive. In Ex-parte Kemmler, 136 U. S., 436, the United States Supreme Court said that "punishments are cruel when they involve torture or a lingering death, but the punishment of death is not cruel, within the meaning of that word as used in the constitution. It implies there something inhuman and barbarous, something more than the mere extinguishment of life. The punishment meted out to the petitioner is not excessive. It is suitable and adapted to its objective; and it accords with section 7, Rule 64, of the Rules of Court which provides that "when the contempt consists in the omission to do an act which is yet in the power of the accused to perform, he may be imprisoned by order of a superior court until he performs it. If the term of imprisonment in this case is indefinite and might last through the natural life of the petitioner, yet by the terms of the sentence the way is left open for him to avoid serving any part of it by complying with the orders of the court, and in this manner put an end to his incarceration. In these circumstances, the judgment can not be said to be excessive or unjust. (Davis vs. Murphy [1947] 188 P., 2nd, 229-231.) As

stated in a more recent case (De Wees [1948], 210 S.W., 2d, 145-147), "to order that one be imprisoned for an indefinite period in civil contempt is purely a remedial measure. Its purpose is to coerce the contender to do an act within his or her power to perform. He must have the means by which he may purge himself of the contempt." The latter decision cites Stanley vs. South Jersey Realty Co., 83 N.J. Eq. 300, 90 A., 1042, 1043, in which the theory is expressed in this language: In a "civil contempt" the proceeding is remedial, it is a step in the case the object of which is to coerce one party for the benefit of the other party to do or to refrain from doing some act specified in the order of the court. Hence, if imprisonment be ordered, it is remedial in purpose and coercive in character, and to that end must relate to something to be done by the defendant by the doing of which he many discharge himself. As quaintly expressed, the imprisoned man "carries the keys to his prison in his own pocket." The failure of the order of commitment to state that the acts which the contemner fails to do are still in his power to perform, does not void the order of imprisonment. Section 7 of Rule 64 does not require such finding to appear in the order, unlike section 1219 of the Code of Civil Procedure of California on which the petitioner's contention is rested. Petitioner is in error in saying that section 237 of the former Philippine Code of Civil Procedure, from which section 7 of Rule 64, supra, has been copied, was of California origin. Former Justice Fisher is authority for the statement that section 237 of Act No. 190 was borrowed from section 1456 of the Ohio Code of Civil Procedure. (Fisher's Code of Civil Procedure, 3rd ed., p. 136.) The exact similarity in substance though not in language between the two provisions is a confirmation of this statement. At any rate, the order of commitment contains the alleged missing element if it is taken, as it should be taken, in connection with the orders of October 7, 1947, and March 27, 1948, and with the charges for contempt. It expressly gives non-compliance with the two last mentioned orders as the grounds for the warrant of commitment, and thus by reference makes them part of it. The orders of October 7, 1947, and March 27, 1948, in turn clearly specify the acts with the petitioner was commanded to fulfill. It is equally clear from these orders that in the opinion of the court the petitioner is in a position to bring back to the Philippines from Hongkong part of the cash and the Balatoc shares he had remitted to that colony. Whether or not in truth the court's findings are supported by sufficient evidence is a different matter; it is a matter of fact which can not be reviewed by habeas corpus. In a long line of decisions, this Court has steadfastly held that habeas corpus does not lie to correct errors of fact or law. (Slade Perkins vs. Director of Prisons, 58 Phil., 271; Quintos vs. Director of Prisons, 55 Phil., 304; Toronto Felipe vs. Director of Prisons, 24 Phil., 121; Gutierrez Repide vs. Peterson, 3 Phil., 276; Santiago vs. Director of Prisons, L-1083, 1 44 Off. Gaz., 1231; McMicking vs. Schields, 238 U.S. 99. 41 Phil., 971; Tinsley vs. Anderson, 43 Law. ed., 91.) When a court has jurisdiction of the offense charged and of the party who is so charged, its judgment, order or decree is not subject to collateral attack by habeas corpus. the writ of habeas corpus can not be made to perform the function of a writ of error; and this holds true even if the judgment, orders or decree was erroneous, provided it is within the jurisdiction of the court which rendered such judgment or issued such an order or decree. (Slade Perkins vs. Director of Prisons, supra; Santiago vs. Director of Prisons, supra.) So whether the act charged has been committed or can still be performed is conclusively determined by the order or judgment of the trial court in the proceeding wherein the petitioner for habeas corpus is adjudged in contempt. (Ex-parte Fisher, 206 S.W. 2d. 1000.). The petition is denied with costs.

CALO VS. ROLDAN REFER TO RULE 57

G.R. No. L-1401

June 25, 1947

RODOLFO YLARDE, FLOR DE VIDA YLARDE, represented by Maria Cruz as guardian ad litem, and JULIA YLARDE, petitioners, vs. JUAN ENRIQUEZ, Judge of First Instance of Nueva Ecija, BIENVENIDO SABADO, MAGDALENA SABADO and APOLINARIO SABADO, respondents. Azarias M. Padilla for petitioners. V. M. Ruiz for respondents. TUASON, J.: This is a petition for certiorari to vacate an appointment of a receiver by order of the Court of First Instance of Nueva Ecija. A preliminary injunction has been granted by us restraining the carrying out of the order. The appointment would authorize the receiver to take possession of a parcel of land and to "preserve and administer the crops or products thereon and to perform all acts necessary and incident thereto during the pendency of this case." None of the pleadings filed in the main case are before us, except a copy of a supplemental complaint, and the reference to the pleadings in the proceeding at bar furnishes indefinite and scanty information on their contents. However, the application for certiorari, the answer, and the various court orders relative to the appointment of a receiver afford sufficient data to serve as basis for a decision. It seems that Eugenia Ylarde was the legal or common law wife of one Simplicio Rosario, now deceased. It would also seem that in his life time, during his marriage or cohabitation with Eugenia Ylarde, Rosario was granted a free patent to a homestead measuring fifteen hectares. This is the land or it is a part of this land that is involved in this litigation. According to the respondents' answer to the application for certiorari, in 1938, after Eugenia Ylarde's legal or common-law husband died, "an extrajudicial partition (was) executed" by Eugenia Ylarde "wherein she falsely declared under oath that she was the sole heiress of the estate in question." Following that so-called extrajudicial partition a transfer certificate of title was issued in Eugenia Ylarde's name cancelling the original document. In September, 1945, Bienvenido Sabado, Magdalena Sabado and Apolinario Sabado, apparently Simplicio Rosario's collateral relatives, brought the action against Eugenia Ylarde. The application for certiorari describes the action as one "relating to the ownership of a piece of property." The respondents in this proceeding brand this statement, in their answer, as incorrect, "the true fact being that the action refers (1) to the recovery of land. . . ., and (2) for the recovery of damages in the amount of P50,000." It also appears that during the pendency of the action or before there is uncertainty in the allegations as to the time and the parties two or three other socalled extrajudicial partitions were made whereby a portion of three hectares out of the entire tract was alloted to the Sabados. These partitions are repudiated and sought to be annulled as fraudulent in a supplemental complaint filed by the respondents herein in the principal case. On December 17, 1946, Eugenia Ylarde died, and she has been substituted as party defendant by Rodolfo Ylarde, Flor de Vida Ylarde through a guardian ad litem, and Julia Ylarde. The record does not reveal the degree of relationship between these new defendants and the deceased Eugenia Ylarde.

The Ylardes, petitioners herein and defendants in the main case, allege that they are and have been in the possession of the part of the land which corresponded to them or to Eugenia Ylarde in the partition, while the Sabados entered upon the possession of their share upon the signing of the settlements. The respondents' (the Sabados') attorney denies in a strong and improper language that the petitioners are in "physical" possession of the property in dispute. But from the use of the adjective "physical" we are to presume that the respondents admit that the Ylardes enjoy some kind of possession, say, possession through representatives, croppers or tenants. Be that as it may, from the very nature of the remedy of receivership which the Sabados applied for, from their claim of P50,000 damages, and from their allegations we cannot avoid the conclusion that their adversaries and their adversaries' predecessor-in-interest do have the possession. The opposite theory would be an incongruity. Upon these facts we shall proceed to state our opinion. "The appointment of a receiver, because of its drastic nature and of its character as a special remedy under our Code of Civil Procedure, is a power which should be exercised with great caution." (Philippine Motor Alcohol Corp. and Palanca vs. Mapa, 64 Phil., 714.) "Where the effect of the appointment of a receiver is to take real estate out of the possession of the defendant before the final adjudication of the rights of the parties, the appointment should be made only in extreme cases and on a clear showing of necessity therefor in order to save the plaintiff from grave and irremediable loss or damages." (Mendoza vs. Arellano and B. de Arellano, 36 Phil., 59.) Of equal application is "the rule that a court should not, by means of a preliminary injunction, transfer property in litigation from the possession of one party to another . . . where the legal title is in dispute and the party having possession asserts ownership in himself." (Gordillo and Martinez vs. Del Rosario, 39 Phil., 829; Evangelista vs. Pedreas, 27 Phil., 648; Palafox vs. Madamba, 19 Phil., 444; Devesa vs. Arbes, 13 Phil., 273; 53 C.J., 26.) If, save in exceptional cases, a preliminary injunction is improper where real property is involved, receivership is even more so because it is harsher, more drastic and more costly than an injunction. It has been said that "of all the extraordinary remedies authorized by law, the appointment of a receiver is the most drastic and far-reaching in its effect." (Delcambre vs. Murphy, 5 S.W. [2d], 789-791, cited as a footnote in 53 C.J., 20.) No special circumstances are present which would take this case out of the rule enunciated in the foregoing decisions. Those decisions are rooted in a positive provision of the former Code of Civil Procedure which is now found in section 1 (b), Rule 61, of the Rules of Court. According to this section it is necessary in granting the relief of receivership that the "property or fund (be) in danger of being lost, removed or materially injured." The land which is the subject matter of the suit here is not in any danger of disappearing or being wasted. There is no pretense that it has any permanent improvements or fixtures which produce income, rents or profits to be collected or preserved. At the most a bond with sufficient sureties would be adequate to protect the plaintiffs from any possible injury consequent upon being deprived of the possession of the property. The fact that there are harvested or standing crops to which the plaintiffs lay claim does not improve their position. If anything, the existence of such crops adds to the inequity and injustice of the measure. Section 1 (b) of Rule 61 requires that the party applying for the appointment of receiver should have "an interest in the property which is the subject of the action. "We take this rule to envision actual, existing interest. Except for the plaintiffs' alleged title to the land, (which, as we have pointed out, may not be taken away from the defendants), the plaintiffs' relation to the products is that of complete strangers. These products are short-time crops which have been planted and raise exclusively by the defendants personally or through others. They cost painstaking care and diligent industry to raise and, it is said, have exacted an investment of P1,000 per hectare. There is no partnership or anything of the sort formed between the plaintiffs

and the defendants by contract or by operation of law in their pretended ownership of the land, the plaintiffs have no title to a single onion or cabbage planted on or harvested from it, or to any part of the proceeds of the crops, or to the management of the enterprise. Their title to the crops is contingent upon their success in proving their asserted title to the soil, which is still to be decided. And even if they should ultimately succeed in that, their rights to the products would still be dependent upon many factors yet undetermined. These observations bring to mind another well-recognized principle in matters of receivership which has been overlooked. A receiver, it has been repeatedly held, should not be granted where the injury resulting therefrom would probably be greater than the injury ensuing from leaving the possession of the property undisturbed. (53 C.J., 37.) This doctrine fits into the case at bar. The court would place in the hands of a receiver to administer, crops to plant and raise which, as we have seen, the defendants have spent considerable money and attention with the plaintiffs contributing nothing beyond their allegation that they own the ground. The receivership would have the defendants replaced in working or looking after the working of the land by a man who is said to live in Manila and whose ability and experience in farming is, to say the least, has not been demonstrated. The court has not apparently given thought to where the receiver, if he continued the planting and raising of onions and other crops, would get the wherewithal. Would he sell the crops and use the money realized therefrom to finance the enterprise? If that money be insufficient would he borrow if he could? And the Court has not made any provision if indeed it would be practical to make such provision at this stage of the litigation regarding the distribution of profits or losses which would be the more probable outcome of the intended arrangement. The allegations in the application for an appointment of a receiver reveals, in our opinion, additional reasons for denying it. As we have said, we gather from these allegations that Eugenia Ylarde had been in possession of the land and had been cultivating it and applying its products to her own use to the exclusion of the plaintiffs. Judging by the amount of damages asked by the plaintiffs, that possession and the enjoyment of the products by Eugenia Ylarde must have lasted a long time. If Eugenia Ylarde's possession was tolerated so long as to make possible the accumulation of P50,000 damages, we see no special reason why the status quo should not be maintained now that the cause, as we gather from the pleadings, has entered the trial stage. It would seem that the application for receivership was motivated by Eugenia Ylarde's death; and the burden of the application is that the present defendants are not Eugenia's lawful heirs, besides the plaintiffs' claim for enormous damages. But receivership is not a legal or proper substitute for an appointment of a judicial administrator or for a relief to secure the payment of damages. Other remedies are indicated to protect rights based on these considerations. And the allegation that the present defendants are not entitled to succeed to Eugenia Ylarde's rights and interest in the property in litigation is a matter with which the plaintiffs have little to do. Juridically, it concerns Eugenia Ylarde's relatives, devisees or legatees alone. The plaintiffs have to rely on the strength of their case and not on the weakness of their adversaries'. Procedurally, the way is open to the plaintiffs to move for the appointment of an administrator of Eugenia Ylarde's estate, or to amend their complaint by bringing in as defendants those who, according to them, have a better right to inherit from the decedent. As a matter of fact, if the defendants' allegation in their application for certiorari is correct that they have been substituted for Eugenia Ylarde the change must have been accomplished by an amendment of the complaint by the plaintiffs themselves. If this be the case, the plaintiffs are assuming two inconsistent positions which they are not allowed to do. Other objections of legal, practical and equitable character might be adduced against the receivership in question. What has been said is enough to show that the court's

discretion, in our opinion, has not been exercised in accordance with law and with established principles and practice. It has apparently not given a careful and full consideration to all the facts of the case and the harmful and serious consequences of its order in contrast to the possible less injurious effects on the plaintiffs of a decision to leave matters as they are. The objection that the petitioners have a remedy by appeal is not well-taken. An appointment of a receiver is an interlocutory matter; and an appeal from an order making such appointment can be interposed only after final judgment is rendered. In this case on appeal would be of no avail to prevent the enforcement of the order before damage which the petitioners seek to avoid had been done. (See II Comments on the Rules of Court By Moran, p. 18, and cases cited.) Upon the foregoing considerations, we hold that the court below abused its discretion in appointing a receiver. The appointment is revoked, with costs against the respondents other than the respondent Judge.

August 7, 1906 G.R. No. 3430 ROCHA & CO., Sociedad en Comandita, plaintiff, vs. A. S. CROSSFIELD, Judge of the Court of First Instance of Manila, and FRANCISCO T. FIGUERAS, defendants. Chicote and Miranda, for plaintiff. Coudert Brothers, for defendants. WILLARD, J.: On the 25th of January, 1906 Francisco T. Figueras, one of the defendants, commenced in the Court of First Instance of Manila an action against Rocha & Co. in which he alleged, among other things, that in 1898 a limited partnership had been formed under the name of Carman & Co.; that he and two others were general partners and that there were various special partners; that in accordance with the terms of the articles of partnership any one of the partners had the right to withdrawn from the partnership upon six months notice; that upon giving the said notice his participation in the profits of the partnership should cease but that his capital should draw interest at the market rate until it was returned, and that it should be returned in four installments, one part upon giving notice, the second part six months after the notice, the third part twelve months after the notice, and the fourth part eighteen months after the notice. He further alleged that on the withdraw from the partnership and waived his right to receive at the time the fourth part of his capital and consented that the fourth part should be paid at the end of six months. It was further alleged that on the 15th day of February, 1904, the partnership of Carman & Co., was reorganized under the name of Rocha & Co., which latter company assumed all the debts and liabilities of Carman & Co., and took possession of all its assets. The complaint alleged that the plaintiffs participation in the business consisted (1) of the capital which he had paid in, P12,000 (2) his proportionate part of a reserve fund, and (3) his proportionate part of a sinking fund, and that he was entitled to receive from the partnership the sum of P51,484.17; that the partnership alleged that his interest did not exceed P34,218.22, and on the 2d day of August, 1904, the partnership paid, and the plaintiff received, one-fourth of the amount which the partnership admitted that the plaintiff was entitled to. The prayer of the complaint is as follows:

Therefore the plaintiff prays that judgment be granted in his favor in the amount of P43,574.95, with interest at 6 per cent per annum from August 2, 1904, and costs of this action. There was no allegation in the complaint that the partnership of Carman & Co., was dissolved by the withdrawal of Figueras, nor was there any allegation that after that withdrawal he was the owner of an undivided or of any interest in the physical property which belonged to the partnership and which consisted of lorchas, launches, and cascos, nor was there any allegation that he had any lien upon any of this property. It is apparent that the real controversy between the parties is over the right of Figueras to receive his proportionate part of the reserve fund and of the sinking fund. Notwithstanding the want of these allegations, Figueras, after the presentation complaint and after the defendants had demurred thereto, made an application to the court below for the appointment of a receiver of the property of Rocha & Co. A receiver was appointed who afterwards took possession of the entire property of Rocha & Co., and thereupon Rocha & Co., commenced this original action of certiorari in this court, asking that the proceedings in reference to the appointment of a receiver be certified of this court and that after such certification they be examined and that the order appointing the receiver be declared void because the court making it had no jurisdiction to appoint such receiver. A preliminary injunction was granted by one of the justices of this court restraining the receiver and the defendants in this action from taking further proceedings in the matter during the pendency thereof. The defendants, having been cited, appeared and answered the complaint, admitting practically all of the facts alleged therein, a hearing was had upon said complaint and answer, and order was made by this court requiring the court below to send to it all of the proceedings in the case relating to the appointment of the receiver. Those proceedings have been remitted, a hearing has been had thereon, and the case is now before us for final disposition. Section 174 of the Code of Civil Procedure is as follows: SEC. 174. When a receiver may be appointed. A receiver may be appointed in the following cases: (1) When a corporation has been dissolved, or is insolvent, or is in imminent danger of insolvency, or has forfeited its corporate rights. (2) Where it is made to appear by the complaint or answer, and by such other proof as the judge may require, that the party making the application for the appointment of receiver has an interest in the property or fund which is the subject of the action and it shown that the property or fund is in danger of being lost, removed, or materially injured unless a receiver shall be appointed to guard and preserve it. (3) In an action by the mortgagee for the foreclosure of a mortgaged where it appears that the property is in danger of being wasted or materially injured and that its value is probably insufficient to discharge the mortgage debt. (4) Whenever in other cases it shall be made to appear to the court that the appointment of a receiver is the most convenient and feasible means of preserving and administering the property which is the subject of litigation during the pendency of the action. The case at bar does not fall within any of the provisions of this section. There is no allegation in the complaint, as has been before stated, that the plaintiff is the owner of any of the property of Rocha & Co., nor is there any allegation that he has any lien thereon, nor are there any facts alleged in the complaint from which it could be inferred

that he was owner of such property or had any lien thereon. On the contrary, from the facts that are alleged in the complaint it would seem that his separation from the partnership of Carman & Co., left that partnership as a going concern and did not dissolve it. The effect of the provisions of the articles of partnership which are referred to in the complaint is that after the withdrawal of any partner the remaining partners became the owners of all the assets of the partnership and he became a general creditor of the partnership. After this action had been commenced in this court, and after a preliminary injunction had been issued as aforesaid, Figueras applied to the court below for leave to amend his complaint in the action therein opening and such leave was granted. This amendment, having been made after the action was commenced in this court and after a receiver was appointed, can not be considered. In one of the orders made by the court below relating to the receiver, its authority for making it was based on paragraphs 2 and 4 of section 174 of the Code of Civil Procedure above quoted. In a subsequent order this ground was abandoned and the appointment was based on paragraph 1 of said section, the court holding that a special partnership was corporation within the meaning of said section 174. This claim can not be sustained and, in fact, it was not urged in the argument of this case in this court. The case not being one in which a receiver could be appointed, the order making such appointment was void and was beyond the jurisdiction of the court, although that court had jurisdiction of the main action has been settled adversely to the defendants in this suit by the case of Bonaplata vs. Ambler (2 Phil. Rep., 392). (See also Encarnacion vs. Ambler,[[1]] 2 Off Gaz., 490; Findlay & Co., vs. Ambler,[[2]] 2 Off. Gaz., 491). That certiorari is the proper remedy in such a case was decided in the case of Blanco vs. Ambler[[3]] (2 Off. Gaz., 281, 492.) In the argument in this court it was claimed that this extraordinary remedy would not lie because the plaintiff, Rocha & Co., had a right to appeal from the order appointing a receiver, although that appeal could not be taken until a final judgment had been entered in the case. That argument is answered by what is said in the case of Yangco vs. Rohde (Phil. Rep., 404). The order of the court below appointing a receiver in this case was illegal and void, and it all proceedings taken therein are hereby annulled. Let judgment be entered to that effect in favor of the plaintiff in this action and against the defendants, and with costs against the defendant, Figueras. At the expiration of ten days let judgment be entered in accordance herewith. So ordered.

November 29, 1950 G.R. No. L-3791 AGUSTINA PARANETE, PERINO VILLAR, PEDRO HERNANDEZ, COMEDES DALLATON, VALERIANO MILLANO, FELISIANA NAVARRO, and EDUARDO B. OCAMPO, petitioners, vs. BIENVENIDO A. TAN, Judge, Court of First Instance of Rizal, Rizal City Branch, FELIX ALCARAS, FRUCTUOSA VASQUEZ, MAXIMA VASQUEZ, NORBERTA VASQUEZ and THE PROVINCIAL SHERIFF OF RIZAL, respondents. Emiliano M. Ocampo for petitioners. Jose E. Morales for respondents Felix Alcaras, and Fructuosa, Maxima and Norberta, all surnamed Vasquez.

, J.: This is a petition for a writ of prohibition wherein petitioner seeks to enjoin the respondent judge from enforcing his order of March 4, 1950, on the ground that the same was issued in excess of his jurisdiction. On January 16, 1950, Felix Alcaras, Fructuosa Vasquez Maxima Vasquez filed a case in the Court of First Instance of Rizal for the recovery of five parcels of the land against Agustina Paranete and six other codefendants, (civil case No. 1020 ). On January 28, 1950, plaintiffs filled a petition for a writ of preliminary injunction for the purpose of ousting the defendants from the lands in litigation and of having themselves placed in possession thereof. The petition was heard ex parte and as a result the respondent judge issued the writ of injunction requested. On February 28, 1950, the defendants moved for the reconsideration of the order granting the writ, to which plaintiff objected, and after due hearing, at which both parties appeared with their respective counsel, the respondent judge reconsidered his order, but required the defendants to render an accounting of the harvest for the year 1949, as well as all future harvests, and if the harvest had already been sold, to deposit the proceeds of the sale with the clerk of court, allowing the plaintiff or their representative to be present during each harvest. This order was issued on March 4, 1950. Defendants again filed a motion for the reconsideration of this order, but it was denied, hence the petition under consideration. The question to be determined is whether or not the respondent judge exceeded his jurisdiction in issuing his order of March 4, 1950, under the terms and conditions set forth above. We hold that the respondent judge has acted in excess jurisdiction when he issued the order above adverted to. That order, in effect, made the clerk of court a sort of a receiver charged with the duty of receiving the proceeds of sale and the harvest of every year during the pendency of the case with the disadvantage that the clerk of court has not filed any bond to guarantee the faithful discharge of his duties as depositary; and considering that in actions involving title to real property, the appointment of a receiver cannot be entertained because its effect would be to take the property out of the possession of the defendant, except in extreme cases when there is clear proof of its necessity to save the plaintiff from grave and irremediable loss or damage, it is evident that the action of the respondent judge is unwarranted and unfair to the defendants. (Mendoza vs. Arellano vs. 36 Phil. 59; Agonoy vs. Ruiz, 11 Phil. 204; Aquino vs. Angeles David, 77 Phil. 1087; Ylarde vs. Enriquez, 78 Phil. 527; Arcega vs. Pecson, 44 O.G. (No. 12), 4884, 78 Phil. 743; De La Cruz vs. Guinto, 45 O.G. pp. 1309; 1311; 79 Phil. 304.) Moreover, we find that Agustina Paranete, one of the defendants, has been in possession of the lands since 1943, in the exercise of her rights as owner, with her codefendants working for her exclusively as tenants, and that during all these years said Agustina Paranete had made improvements thereon at her own expense. These improvements were made without any contribution on the part of the plaintiffs. The question of ownership is herein involved and both parties seem to have documentary evidence in support of their respective claims, and to order the defendants to render an accounting of the harvest and to deposit the proceeds in case of sale thereof during the pendency of the case would be to deprive them of their means of livelihood before the case is decided on the merits. The situation obtaining is such that it does not warrant the placing of the lands in the hands of a neutral person as is required when a receiver is appointed. To do so would be unfair and would unnecessarily prejudice the defendants. While the respondent judge claims in his order of March 25, 1950, that he acted as he did because of a verbal agreement entered into between the lawyers of both parties, we do not consider it necessary to pass on this point because the alleged agreement is controverted and nothing about it has been mentioned by the respondent judge in his order under consideration.

Wherefore, petition is hereby granted. The court declares the order of the respondent judge of March 4, 1950 null and void and enjoins him from enforcing it as prayed for in the petition.

G.R. No. 61508 March 17, 1999 Citibank, N.A. (Formerly First National City Bank), petitioner, vs. The Honorable Court of Appeals and Douglas F. Anama, respondents.

PURISIMA, J.: At bar is a special civil action for certiorari with prayer for a temporary restraining order faulting the Court of Appeals 1 with grave abuse of discretion for nullifying the lower court's order of seizure of mortgaged properties subject of a case for sum of money and replevin. The facts leading to the institution of the case are as follows: In considering for a loan obtained from Citibank, N.A. (formerly First National City Bank), the defendant (private respondent herein) Douglas Anama executed a promissory note, dated November 10, 1972, 2 to pay the plaintiff bank the sum of P418,000.00 in sixty (60) equal successive monthly installments of P8,722.25, starting on the 10th day of December 1972 and on the 10th of every month thereafter. The said Promissory Note stipulated further that: (a) the loan is subject to interest at the rate of twelve percent (12%) per annum; (b) the promissory note and the entire amount therein stated shall become immediately due and payable without notice or demand upon (aa) default in the payment of any installment of principal or interest at the time when the same is due; (bb) the occurrence of any change in the condition and affairs of the defendant, which in the opinion of the plaintiff shall increase its credit risk; (c) the defendant agrees to pay all costs, expenses, handling and insurance charges incurred in the granting of the loan; (d) in case the services of a lawyer is made necessary for collection, defendant shall be liable for attorney's fees of at least ten percent (10%) of the total amount due. 3 To secure payment of the loan, private respondent Anama also constituted a Chattel Mortgage of even date in favor of petitioner, on various machineries and equipment located at No. 1302 Epifanio delos Santos Avenue, Quezon City, under the following terms and conditions: (a) The machineries and equipment subject of the mortgage, stand as security for defendant's account.

(b) All replacement, substitutions, additions, increases and accretions to the properties mortgaged shall also be subject to the mortgage. (c) The defendant appoints the plaintiff as his attorney-in-fact with authority to enter the premises of the defendant and take actual possession of the mortgaged chattels without any court order, to sell said property to any party. (d) All expenses in carrying into effect the stipulations therein shall be for the account of the defendant and shall form part of the amount of the obligation secured by the mortgage. (e) In case the plaintiff institutes proceedings for the foreclosure of the mortgage, the plaintiff shall be entitled to the appointment of a receiver without a bond. (f) In case of default, the defendant shall be liable for attorney's fees and cost of collection in the sum equal to twenty-five (25%) of the total amount of the indebtedness outstanding and unpaid.
4

On November 25, 1974, for failure and refusal of the private respondent to pay the monthly installment due under the said promissory note since January 1974, despite repeated demands, petitioner filed a verified complaint against private respondent Anama for the collection of his unpaid balance of P405,820.52 on the said promissory note, for the delivery and possession of the chattels covered by the Chattel Mortgage preparatory to the foreclosure thereof as provided under Section 14 of the Chattel Mortgage Law, docketed as Civil Case No. 95991 before the then Court of First Instance of Manila. On February 20, 1975, the defendant Anama submitted his Answer with Counterclaim, denying the material averments of the complaint, and averring inter alia (1) that the remedy of replevin was improper and the writ of seizure should be vacated; (2) that he signed the promissory note for P418,000.00 without receiving from plaintiff Citibank any amount, and was even required to pay the first installment on the supposed loan in December 1974; (3) that the understanding between him and the Citibank was for the latter to release to him the entire loan applied for prior to and during the execution of his promissory note, but Citibank did not do so and, instead, delayed the release of any amount on the loan even after the execution of the promissory note thereby disrupting his timetable of plans and causing him damages; (4) that the amount released by Citibank to him up to the present was not the amount stated in the promissory note, and his alleged default in paying the installment on the loan was due to the delay in releasing the full amount of the loan as agreed upon; (5) that the macheniries and equipment described in the chattel mortgage executed by him are really worth more than P1,000,000.00 but he merely acceded to the valuation thereof by Citibank in said document because of the latter's representation that the same was necessary to speed up the granting of the loan applied for by him; (6) that the properties covered by said chattel mortgage are real properties installed in a more or less permanent nature at his (defendant's) premises in Quezon City, as admitted by Citibank in said mortgage document; (7) that the mortgage contract itself stipulated that the manner and procedure for affecting the sale or redemption of the mortgage properties, if made extrajudicial, shall be governed by Act No. 1508 and other pertinent laws which all pertain to real properties; and (8) that because of the filing of this complaint without valid grounds therefor, he suffered damages and incurred attorney's fees; the defendant, now private respondent, averred.

On December 2, 1974, the trial court upon proof of default of the private respondent in the payment of the said loan, issued an Order of Replevin over the macheneries and equipment covered by the Chattel Mortgage. However, despite the issuance of the said order of seizure of subject chattels, actual delivery of possession thereof to petitioner did not take place because negotiations for an amicable settlement between the parties were encouraged by the trial court. On March 24, 1975, a pre-trial conference was held and the lower court issued an order for joint management by the petitioner and the private respondent of the latter's business for ten (10) days, after which the former would appointed receiver for the said business. On April 1, 1975, the petitioner took over private respondent's business as receiver. When further proposals to settle the case amicably failed, the lower court proceeded to try the case on the merits. On January 29, 1977, petitioner presented a Motion for the Issuance of an Alias Writ of Seizure, ordering the sheriff to seize the properties involved and dispose of them in accordance with the Revised Rules of Court. The lower court then gave private respondent five (5) days to oppose the said motion and on February 22, 1977, he sent in his opposition thereto on the grounds: (1) that Citibank's P400,000 replevin bond to answer for damages was grossly inadequate because the market value of the properties involved is P1,710,000 and their replacement cost is P2,342,300.00 per the appraisal report of the Appraisal and Research Corp.; (2) that he was never in default to justify the seizure; (3) that the Civil Case No. 18071 of the Court of First Instance, entitled Hernandes vs. Anama, et al., which, according to Citibank, supposedly increased its credit risk in the alleged obligation, had already been dismissed as against him and the case terminated with the dismissal of the complaint against the remaining defendant, First National City Bank, by the Court in its orders of January 12, 1977 and February 7, 1977; (4) that his (defendant's) supposed obligations with Citibank were fully secured and his mortgaged properties are more than sufficient to secure payment thereof; and (5) that the writ of seizure if issued would stop his business operations and contracts and expose him to lawsuits from customers, and also dislocate his employees and their families entirely dependent thereon for their livelihood. On February 28, 1977, acting on the said Motion and private respondent's opposition, the trial court issued an Order granting the Motion for Alias Writ of Seizure, ruling thus: WHEREFORE, the motion for alias writ of seizure is hereby granted. At any rate, this Order gives another opportunity for defendant and the intervenor who claims to be a part owner to file a counterbond under Sec. 60 of Rules of Court. 5 Private respondent moved for reconsideration of the aforesaid order but the same was denied by the Resolution of March 18, 1977, to wit: In view of the foregoing, the motion for reconsideration is hereby denied. At any rate, as already stated, the defendant has still a remedy available which is to file a bond executed to the plaintiff in double the value of the properties as stated in the plaintiff's affidavit. The Court at this instance therefore has no authority to stop or suspended the writ of seizure already ordered. 6 Accordingly, by virtue of the Alias writ of Seizure, petitioner took possession of the mortgaged chattels of private respondent. As a consequence, the sheriff seized subject properties, dismantled and removed them from the premises where they were installed,

delivered them to petitioner's possession on March 17, 18 and 19, 1977 and advertised them for sale at public auction scheduled on March 22, 1977. On March 21, 1977, private respondent filed with the Court of Appeals a Petition for Certiorari and Prohibition 7 with Injunction to set aside and annul the questioned resolution of the trial court on the ground that they were issued "in excess of jurisdiction and with grave abuse of discretion" because of the "lack of evidence and clear cut right to possession of First National City Bank (herein petitioner)" top the machineries subject of the Chattel Mortgage. On July 30, 1982, finding that the trial court acted with grave abuse of discretion amounting to excess of lack of jurisdiction in issuing the assailed resolutions, the Court of Appeals granted petition, holding that the provision of the Rules of Court on Replevin and Receivership have not been complied with, in that (1) there was no Affidavit of Merit accompanying the Complaint for Replevin; (2) the bond posted by Citibank was insufficient; and (3) there was non-compliance with the requirement of a receiver's bond and oath of office. The decretal portion of the assailed decision of the Court of Appeals, reads: WHEREFORE, the petition is granted. The questioned resolutions issues by the respondent judge in Civil Case No. 95991, dated February 28, 1977 and March 18, 1977, together with the writs and processes emanating or deriving therefrom, are hereby declare null and void ab initio. The respondent ex-officio sheriff of Quezon City and the respondent First National City Bank are hereby ordered to return all the machineries and equipment with their accessories seized, dismantled and hauled, to their original and respective places and position in the shop flooring of the petitioner's premises where these articles were, before they were dismounted, seized and hauled at their own expense. The said respondents are further ordered to cause the repair of the concrete foundations destroyed by them including the repair of the electrical wiring and facilities affected during the seizure, dismanting and hauling. The writ of preliminary injunction heretofore in effect is hereby made permanent. Costs against the private respondents. SO ORDERED
8

Therefrom, Citibank came to this Court via its present petition for certiorari, ascribing grave abuse of discretion to the Court of Appeals and assigning as errors, that: I THE RESPONDENT COURT ERRED IN PRACTICALLY AND IN EFFECT RENDERING JUDGMENT ON THE MERITS AGAINST THE HEREIN PETITIONER BY ORDERING THE RETURN OF THE MACHINERIES AND EQUIPMENT AND ITS ACCESSORIES TO THEIR ORIGINAL AND RESPECTIVE PLACES AND POSITIONS. II THE RESPONDENT COURT ERRED IN FINDING THAT THE COMPLAINT OF THE PETITIONER DID NOT COMPLY WITH THE PROVISIONS OF SEC. 2, RULE 60 OF THE RULES OF COURT. III

THAT THE RESPONDENT COURT ERRED IN FINDING THAT THE BOND POSTED BY THE PETITIONER IS QUESTIONABLE AND/OR INSUFFICIENT. IV THE RESPONDENT COURT ERRED IN FINDING THAT THE PETITIONER DID NOT COMPLY WITH THE PROVISIONS OF SEC. 5, RULE 59 BY FAILING TO POST A RECEIVER'S BOND. V THE RESPONDENT ERRED IN FINDING THAT THE HON. JORGE R. COQUIA ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OR LACK OF JURISDICTION IN DEALING WITH THE SITUATION. I Anent the first assigned error, petitioner contends that the Court of Appeals, by nullifying the writ of seizure issued below, in effect, rendered judgment on the merits and adjudged private respondent Anama as the person lawfully entitled to the possession of the properties subject of the replevin suit. It is theorized that the same cannot be done, as the case before the court below was yet at trial stage and lower court still had to determine whether or not private respondent was in fact in default in the payment of his obligation to petitioner Citibank, which default would warrant the seizure of subject machineries and equipment. The contention is untenable. A judgment is on the merits when it determines the rights and liabilities of the parties on the basis of the disclosed facts, irrespective of formal technical or dilatory objections, and it is not necessary that there should have been a trial. 9 The assailed decision of the Court of Appeals did not make any adjudication on the rights and liabilities between Citibank and Douglas Anama. There was no finding yet of the fact of default. The decision only ruled on the propriety of the issuance of the writ of seizure by the trial court. As worded by the respondent court itself, "the main issues to be resolved are whether there was lack or excess of jurisdiction, or grave abuse of discretion, in the issuance of the orders in question, and there is no appeal nor any plain, speedy, and adequate remedy in the ordinary course of law." 10 In resolving the issue posed by the petition, the Court of Appeals limited its disposition to a determination of whether or not the assailed order of seizure was issued in accordance with law, that is, whether the provisions of the Rules of Court on delivery of personal property or replevin as a provisional remedy were followed. The Court of Appeals relied on Ruled 60 of the Rules of Court, which prescribed the procedure for the recovery of possession of personal property, which Rule, provides: Sec. 2. Affidavit and Bond. Upon applying or such order the plaintiff must show by his own affidavit or that of some other person who personally knows the facts: (a) That the plaintiff is the owner of the property claimed particularly describing it, or is entitled to the possession thereof; (b) That the property is wrongfully detained by the defendant, alleging the cause of detention thereof according to his best of knowledge, information and belief; (c) That it has nor been taken for a tax assessment or fine pursuant to law, or seized under an execution, or an attachment

against the property of the plaintiff, or is so seized, that is exempt from such seizure; and (d) The actual value of the property. The plaintiff must also give a bond, executed to the defendant in double of the value of the property as stated in the affidavit aforementioned, for the property to the defendant of such sum as he may recover from the plaintiff in the action. The Court of Appeals did not pass upon the issue of who, as between Douglas Anama and Citibank, is entitled to the possession of subject machineries, as asserted by the latter. When it ordered the restoration of the said machineries to Douglas Anama (now the private respondent), it merely defendant to the possession of his properties, since there was a finding that the issuance of the writ was not in accordance with the specific rules of the Rules of Court. II In its second assignment of errors, petitioner theorizes that the Court of Appeals erred in finding that it did not comply with Section 2, Rule 60 of the Rules of Court requiring the replevin plaintiff to attach an affidavit of merit to the compliant. Petitioner maintains that although there was no affidavit of merit accompanying its complaint, there was nonetheless substantial compliance with the said rule as all that is required to be alleged in the affidavit of merit was set forth in its verified complaint. Petitioner argues further that assuming arguendo that there was non-compliance with the affidavit of merit requirement, such defense can no longer be availed of by private respondent Anama as it was not alleged in his Answer and was only belatedly interposed in his Reply to the Petitioner's Comment on the Petitioner for Certiorari before the Court of Appeals. Petitioner is correct insofar as it contends that substantial compliance with the affidavit requirement may be permissible. There is substantial compliance with the rule requiring that an affidavit of merit to support the complaint for replevin if the complaint itself contains a statements of every fact required to be stated in the affidavit of merit and the complaint is verified like an affidavit. On the matter of replevin, Justice Vicente Francisco's Comment on the Rules of Court, states: Although the better practice is to keep the affidavit and pleading separate, if plaintiff's pleading contains a statement of every fact which the statute requires to be shown in the affidavits, and the pleading is verified by affidavit covering every statement therein, this will be sufficient without a separate affidavit; but in no event can the pleading supply the absence of the affidavit unless all that the affidavit is required to contain is embodied in the pleading, and the pleading is verified in the form required in the case of a separate affidavit. (77 CJS 65 cited in Francisco, Rules of Court of the Philippines, Vol. IV-A, p. 383) And similarly, in the case of an attachment which likewise requires an affidavit of merit, the Court held that the absence of an affidavit of merit is not fatal where the petition itself, which is under oath, recites the circumstances or facts constitutive of the grounds for the petition. 11 The facts that must be set forth in the affidavit of merit are (1) that plaintiff owns the property particularly describing the same, or that he is entitled to its possession; (2) wrongful detention by defendants of said property; (3) that the property is not taken by virtue of a tax assessment or fine pursuant to law or seized under execution or

attachment or, if it is so seized, that it is exempt from seizure; and the, (4) the actual value of the property. 12 But, as correctly taken note of by the Court of Appeals, petitioner's complaint does not allege all the facts that should be set forth in an affidavit of merit. Although the complaint alleges that petitioner is entitled to the possession of subject properties by virtue of the chattel mortgage executed by the private respondent, upon the latter's default on its obligation, and the defendant's alleged "wrongful detention" of the same, the said complaint does not state that subject properties were not taken by virtue of a tax assessment or fine imposed pursuant to law or seized under execution or attachment or, if they were so seized, that they are exempt from such seizure. Then too, petitioner stated the value of subject properties at a "probable value of P200,000.00, more or less". Pertinent rules require that the affidavit of merit should state the actual value of the property subject of a replevin suit and not just its probable value. Actual value (or actual market value) means "the price which an article would command in the ordinary course of business, that is to say, when offered for sale by one willing to sell, but not under compulsion to sell and purchased by another who is willing to buy, but under no obligation to purchase it". 13 Petitioner alleged that the machineries and equipment involved are valued at P200,000.00 while respondent denies the same, claiming that per the appraisal report, the market value of the said properties is P1,710,000.00 and their replacement cost is P2,342,300.00. Petitioner's assertion is belied by the fact that upon taking possession of the aforesaid properties, it insured the same for P610,593.74 and P450,000.00, separately. It bears stressing that the actual value of the properties subject of a replevin is required to be in the affidavit because such actual value will be the basis of the replevin bond required to be posted by the plaintiff. Therefore, when the petitioner failed to declare the actual value of the machineries and equipment subject of the replevin suit, there was non-compliance with Section 2, Rule 60 of the Revised Rules of Court. It should be noted, however, that the private respondent interposed the defense of lack of affidavit of merit only in his Reply to the Comment of Citibank on the Petition for Certiorari which respondent filed with the Court of Appeals. Section 2, Rule 9 of the Revised Rules of Court, provides: Sec. 2. Defenses and objections not pleaded deemed waived Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived; except the failure to state a cause of action which may be alleged in later pleading, . . . . This Rule has been revised and amended, as follows: Sec. 1. Defenses and objection not pleaded. Defenses and objections not pleaded in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the claim. Thus, although respondent's defense of lack of affidavit of merit is meritorious, procedurally, such a defense is no longer available for failure to plead the same in the Answer as required by the omnibus motion rule. III Petitioner also faults the Court of Appeals for finding that the bond posted by the petitioner is questionable and/or insufficient. It is averred that, in compliance with Section 2, Rule 60 requiring the replevin plaintiff to post a bond in double the value of

the properties involved, it filed a bond in the amount P400,000.00 which is twice the amount of P200,000.00 declared in its complaint. The Court reiterates its findings on the second assignment of errors, particularly on the issue of the actual of subject properties as against their probable value. Private respondent, at the onset, has put into issues the value of the said properties. In the Special Defenses contained in his Answer, private respondent averred: That while defendant admits that he executed a Chattel Mortgage in favor of plaintiff, he vigorously denies that the machineries covered therein are worth P200,000.00. The fact is that plaintiff knew fully well that said chattels are worth no less than P1,000,000.00, said defendant having acceded to said valuation upon plaintiff's representation that it would be necessary to speed up the granting of the loan. As here was a disagreement on the valuation of the properties in the first place, proper determination of the value of the bond to be posted by the plaintiff cannot be sufficiently arrived at. Though the rules specifically require that the needed bond be double the value of the properties, since plaintiff merely denominated a probable value of P200,000.00 and failed to aver the properties' actual value, which is claimed to be much greater than that declared by plaintiff, the amount of P400,000.00 would indeed be insufficient as found by the Court of Appeals. The Rules of Court requires the plaintiff to "give a bond, executed to the defendant in double the value of the property as stated in the affidavit . . . ." Hence, the bond should be double the actual value of the properties involved. In this case, what was posted was merely an amount which was double the probable value as declared by the plaintiff and, therefore, inadequate should there be a finding that the actual value is actually far greater than P200,000.00. Since the valuation made by the petitioner has been disputed by the respondent, the lower court should have determined first the actual value of the properties. It was thus as error for the said court to approve the bond, which was based merely on the probable value of the properties. It should be noted that a replevin bond is intended to indemnify the defendant against any loss that he may suffer by reason of its being compelled to surrender the possession of the disputed property pending trial of the action. 14 The same may also be answerable for damages if any when judgment is rendered in favor of the defendant or the party against whom a writ of replevin was issued and such judgment includes the return of the property to him. 15 Thus, the requirement that the bond be double the actual value of the properties litigated upon. Such is the case because the bond will answer for the actual loss to the plaintiff, which corresponds to the value of the properties sought to be recovered and for damages, if any. Petitioner also maintains that, assuming for the sake of argument that its replevin bond was grossly inadequate or insufficient, the recourse of the respondent should be to post a counterbound or a redelivery bond as provided under Section 5 of Rule 60. Sec. 5 and 6, Rule 60 of the Rules of Court, read: Sec. 5. Return of property. If the defendant objects to the sufficient of the plaintiff's bond, or of the surety or sureties thereon, he cannot require the return of the property as in this section provided; but if he does not so object, he may, at any time before the delivery of the property to the plaintiff, if such delivery be adjudge, and for the payment of such sum to him as may be recovered against the defendant, and by serving a copy of such bond on the plaintiff or his attorney. Sec. 6. Disposition of property by officer. If within five (5) days after the taking of the property by the officer, the defendant does not object to the

sufficiecy of the bond, or of the surety or sureties thereon, or require the return of the property as provided in the last preceding section; or if the defendant so objects, and the plaintiff's first or new bond is approved; or if the defendant so require, and his bond is object to and found insufficient and he does not forthwith file an approved bond, the property shall be delivered to the plaintiff, the officer must return it to the defendant. The Court held in a prior case 16 that the remedies provided under Section 5, Rule 60, are alternative remedies. ". . . If a defendant in a replevin action wishes to have the property taken by the sheriff restored to him, he should, within five days from such taking, (1) post a counter-bond in double the value of said property, and (2) serve plaintiff with a copy thereof, both requirements as well as compliance therewith within the five-day period mentioned being mandatory." 17 This course of action is available to the defendant for as long as he does not object to the sufficiency of the plaintiff's bond. Conformably, a defendant in a replevin suit may demand the return of possession of the property replevined by filing a redelivery bond executed to the plaintiff in double the value of the property as stated in the plaintiff's affidavit within the period specified in Section 5 and 6. Alternatively, "the defendant may object to the sufficiency of the plaintiff's bond, or of the surety or sureties thereon;" but if he does so, "he cannot require the return of the property" by posting a counter-bond pursuant to Section 5 and 6. 18 In the case under consideration, the private respondent did not opt to cause redelivery of the properties to him by filing a counter-bond precisely because he objected to the sufficiency of the bond posted by plaintiff. Therefore, he need not file a counter-bond or redelivery bond. When such objection was not given due course in the court below when, instead of requiring the plaintiff to post a new bond, the court approved the bond in the amount of P400,000.00, claimed by respondent to be insufficient, and ordered the seizure of the properties recourse to a petition for certiorari before the Court of Appeals assailing such order is proper under the circumstances. IV As its fourth assignment of errors, petitioner contends that the Court of Appeals made an error of judgment in finding that the petitioner did not comply with the provisions of Section 5, Rule 59 by failing to post a receiver's bond. Petitioner contends that although it is in agreement with the Court of Appeals that a receiver's bond is separate and distinct from a replevin bond, under the circumstances it was not required to file a receiver's bond because it did not assume receivership over the properties. It is further argued that assuming that it did assume receivership, the Chattel Mortgage expressly provides, that: In case the MORTGAGEE institutes proceedings, judicially or otherwise, for the foreclosure of this Chattel Mortgage, or to enforce any of its rights hereunder, the MORTGAGEE shall be entitled as a matter of right to the appointment of a receiver, without bond, of the mortgaged properties and of such properties, real or personal, claims and rights of the MORTGAGOR as shall be necessary or proper to enable the said receiver to property control and dispose of the mortgaged properties. 19 The order of the trial court dated March 24, 1975 provided, among others, that the properties shall be under joint management for a period of ten days, after which period "the bank, by virtue of the stipulations under the chattel mortgage, becomes the Receiver to perform all the obligations as such Receiver" and "in the event that the bank decides not to take over the receivership, the joint management continues." 20

From the evidence on record, it is palpably clear that petitioner Citibank did, in fact, assume receivership. A letter 21 dated April 1, 1975 sent by petitioner to the private respondent, reads:

Anama Engineering Service Group 114 R. Lagmay Street San Juan, Rizal Attention: Mr. Douglas Anama Gentlemen: Pursuant to the Court order, we have decided to take over your machine shop as Receiver. We are hereby appointing Mr. Artemio T. Gonzales as our representative. Very truly yours, FIRST NATIONAL CITY BANK By: P.R. REAL, JR. Assistant Manager Petitioner cannot therefore deny that nine days after the trial court issued the order of receivership, it informed he private respondent that it would, as it did, assume receivership. The Court of Appeals found that the requirements of Section 5, Rule 59 on receivership were not complied with by the petitioner, particularly the filing or posting of a bond and the taking of an oath. It should be noted that under the old Rules of Court which was in effect at the time this case was still at trial stage, a bond for the appointment of a receiver was not generally required of the applicant, except when the application was ex parte. 22 Therefore, petitioner was not absolutely required to file a bond. Besides, as stipulated in the chattel mortgage contract between the parties, petitioner, as the mortgagee, is entitled to the appointment of a receiver without a bond.

However, the Court of Appeals was right in finding a defect in such assumption of receiver in that the requirement of taking an oath has not been complied with Section 5, Rule 59, states: Sec. 5. Oath and bond of receiver. Before entering upon his duties, the receiver must be sworn to perform them faithfully, and must file a bond, executed to such person and in such sum as the court or judge may direct, to the effect that he will faithfully discharge the duties of receiver in the action and obey the orders of the court therein. Consequently, the trail court erred in allowing the petitioner to assume receivership over the machine shop of private respondent without requiring the appointed receiver to take an oath. V In light of the foregoing, the answer to the fifth assignment of errors is in the negative. For erroneously issuing the alias writ of seizure without inquiring into the sufficiency of the replevin bond and for allowing petitioner to assume receivership without the requisite oath, the Court of Appeals aptly held that the trial court acted with grave abuse of discretion in dealing with situation. Under the Revised Rules of Court, the property seized under a writ of replevin is not to be delivered immediately to the plaintiff. 23 This is because a possessor has every right to respected in its possession and may not be deprived of it without due process. 24 As enunciated by this Court in the case of Filinvest Credit Corporation vs. Court of Appeals, 25 The reason why the law does not allow the creditor to possess himself of the mortgaged property with violence and against the will of the debtor is to be found in the fact that the creditor's right of possession is conditioned upon the fact of default, and the existence of this fact may naturally be the subject of controversy. The debtor, for instance, may claim in good faith, and rightly or wrongly, that the debt is paid, or that for some other reason the alleged default is nonexistent. His possession in this situation is as fully entitled to protection as that of any other person, and in the language of Article 446 of the Civil Code, he must be respected therein. To allow the creditor to seized the property against the will of the debtor would make the former to a certain extent both judge and executioner in his own cause a thing which is inadmissible in the absence of unequivocal agreement in the contract itself or express provision to the effect in the statute. WHEREFORE, for lack of merit, the petition is hereby DISMISSED. No pronouncement as to costs. SO ORDERED.

August 14, 1926 G.R. No. L-25437 SEBASTIANA MARTINEZ, ET AL., plaintiffs-appellees, vs. CLEMENCIA GRAO, ET AL., defendants-appellees; ESTANISLAO REYES, receiver-appellant.

Camus, Delgado and Recto and R. Nepomuceno for appellant. Sebastian C. Pamatmat for plaintiffs and appellees. Street, J.: This appeal is prosecuted by Estanislao Reyes from an order of Judge Isidro Paredes dated October 9, 1925, dissolving the receivership over the property in litigation and directing that said property, therefore in the hands of the appellant as receiver, should be delivered to the parties in interest. The facts appearing of record are voluminous, but the record has already been before the court upon three prior appeals. In this decision therefore only such facts will be discussed as true appurtenant to the point, or points, at issue. It appears that the appellant was pointed receiver and entered into possession of the property in controversy in January, 1921. During the period that immediately followed the property in his hands did not produce enough income to meet the expenses and pay the sums due the holder of first mortgage, El Hogar Filipino. For this reason the receiver recommended to the court that the property be sold; and on January 25, 1922, Judge Paredes made an order authorizing the receiver to sell the land at an upset price of P38,000 subject to the approval of the court, the proceeds of the sale to be deposited in the clerks office to abide the result of the litigation. On May 27, 1922, Judge Borbon renewed this authority upon about the same conditions but with the upset priced fixed at P35,000. On August 19, 1922, the same authority was again expressed by Judge Borbon. The receiver meanwhile had reported his inability to find a purchaser, and he himself came forwards with an offer to take the property at P35,138.49, it being understood that he would assume all obligations encumbering the property, the amount of which was to be deducted from the amount of his bid. On August 25, 1922, an order was passed by Judge Borbon authorizing the clerk of the court to execute a deed transferring the property to Reyes for the sum mentioned, excluding (for reasons not necessary to be specified) a particular piece of land containing a thousand coconut trees, it being understood so the order runs, that the purchaser, Estanislao Reyes, makes himself responsible for and assumes the obligation and the duty to pay all debts obligations encumbering the property sold. The Martinez heirs opposed the sale and attempted, though inefectually, to bring the order referred to this court upon appeal. Clemencia Grao was also an opponent of the sale because of the inclusion therein of three parcels of property which belonged to her, and she successfully prosecuted an appeal to this court. When the cause reached us upon the appeal of Clemencia Grao, a decision was here promulgated on February 28, 1923, 1 containing among other features the following paragraph: It results that the said three parcels must be excluded from the sale made to Estanislao Reyes; and the order of July 15, 1922, with reference to said parcels must be modified to this extent; and a necessary consequence will be that the purchaser, Estanislao Reyes, should be allowed a reduction in the price offered by him, in an amount proportionate to the value of the lands thus to be excluded. With said parcels excluded, and proportionate abatement made as indicated, the sale should be approved. It will be noted that upon the appeal mentioned this court had under consideration merely the question of the propriety of including Graos three parcels in the sale, there being no appeal by the Martinez heirs against the sale as a whole. In ordering the exclusion of Graos land we stated that, with this exclusion and proportional abatement of the purchase price to Reyes, the sale should be approved. This order treats the sale to Reyes as in every respect valid and indicates that the sale should be approved. Accordingly, when the record was returned to the lower court, Reyes submitted a motion to the court on April 4, 1923, asking that he be declared owner of the property. In response to this request Judge Paredes, instead of declaring the sale approved, entered

an order on July 20, 1923, among other things declaring that the sale was a nullity. In disposing of this point his Honor made the following observation: As regards the other parcels of land ordered sold in the orders appealed from, I also had to deny the motion for the reason that the sale of the same was not made in conformity with, but in direct violation of, the condition imposed by the court. The condition was that the bidder was bound to turn over to the clerk of the court the amount of the sale at the disposal of the court, before the issuance of the deed in his favor; but an examination of the deed of sale executed by said officer shows that the amount of the sale has not been turned over to the clerk of the court. For that reason the sale of said parcels of land is null, void and without legal effect. This deed, according to the order of the court, should not have been executed until after the amount of the sale had been turned over to the clerk of the court. It will be noted that his Honor in effect here decreed a resolution of the sale for nonperformance of the conditions of the sale. This order contained other features affecting Reyes right as against Grao, and Reyes attorneys attempted to bri ng the cause on appeal to this court to review the order as it affected both the Martinez heirs and Grao. No notice of the intention to appeal, however, was served upon the Martinez heirs, with the result that when the bill of exceptions came to this court, a motion was made by the Martinez heirs to have the appeal dismissed. Upon this the attorneys for Reyes came into court and replied by demonstrating that the appeal then being prosecuted by Reyes involved only the three parcels of land which had in a previous decision been declared by this court to belong to Clemencia Grao. Upon this assurance the court denied the motion of the Martinez heirs to dismiss the appeal, it thus appearing that said Martinez heirs were not inserted in the matter in controversy so far as here involved. (See decision of this court promulgated March 24, 1924, in Martinez vs. Reyes, G. R. No. 21618.) 2 It will be seen therefore that the order of Judge Paredes of July 24, 1923, nullifying and resolving the sale of the receivership to Reyes, was never effectually appealed from, and the conclusion irresistibly follows that the order of Judge Paredes upon the point mentioned has acquired the character of a final and irrepealable order. In our decision last above referred to the following paragraph was inserted near the close of the opinion: In order to contribute something to clarify a situation which has tended to become complex, we will say that the effect of the appealed decision was to declare that Estanislao Reyes had not noticed with the conditions requisite to enable to him to become a purchaser of the property of which he is receiver, and this has the inevitable effect of eliminating him in the character of purchaser. It will, therefore, be the duty of the lower court to deal with him hereafter exclusively in the character of receiver and to hold him responsible in that character only. The attorneys for Reyes immediately protested against this paragraph and asked the court to strike it from the decision as a mere dictum. In reply to motion to this effect, the court declared in efectual so much of the decision as was mere dictum. We have no hesitation in saying that the paragraph last above quoted can be taken as dictum, at it shows on its face that it was not intended to express a dispositive feature of the case. Nevertheless it is true that the paragraph quoted expressed the truth and that truth remains precisely now as when the paragraph was written. Notwithstanding the declaration of nullity made by Judge Paredes and the observation of this court pointing out that Reyes could no longer be treated in any other character than that of receiver, he has continuously pretended to be the owner of the property by virtue of the purchase referred to, and he has refused to submit any account of his receivership in the subsequent years. In view of this attitude on the part of the appellant, a number of motions were made by adverse parties seeking to bring him to account and to have him removed from the office of receiver, with the result that on

October 9, 1925, Judge Paredes entered an order of which the following is the dispositive portion: Therefore, the motion is granted and the appointment of Estanislao Reyes as receiver is revoked, annulled and adjudged to be of no effect from this date, without prejudice to the rendering of an account within the period of fifteen days from the notification hereof; and he is ordered to deliver immediately to the parties herein all of the property, in its present condition, which may have come into his possession by reason of having been appointed receiver. It is understood that this is without prejudice to the execution of the aforesaid judgment of the Supreme Court as soon as the parties, or any of them, should request it. So ordered. There cannot be the slightest doubt of the power of the lower court to remove a receiver and terminate a receivership under section 180 of the Code of Civil Procedure; and in view of the attitude of the appellant, the impropriety of his longer remaining in office is apparent. But it is claimed by the appellant that he has made expenditures necessary to the care and conservation of the property over and above the proceeds obtained from the coconuts produced by the land comprised in the receivership; and it is contended that the lower court had no power to turn him out at least as long as the expenditures made by him have not been reimbursed. This contention seems to us to come with bad grace from a receiver whose attitude about the receivership property has been such as that exhibited by the appellant, and particularly in the light of his refusal to render any account of the income from the property in his possession. The contents of the voluminous record which we have examined carefully and the history proceedings afford much material for unfavorable comment upon the attitude of the appellant, but inasmuch as the case turns in the end upon the efficacy of Judge Paredes order declaring the sale as nullity any comment is unnecessary. The court, however, is the opinion that if upon the prompt submission and examination of the receivers accounts, it should be found that he has actually paid out for the conservation and protection of the property which is the subject of the receivership than he has received by way of income, or should have received in the exercise of reasonable diligence, such balance in his favor should be recognized as a lawful claim constituting a lien on the property. The order appealed from will therefore be affirmed with the sole modification that the appellant is given forty (40) days from the date of the return of this record to the lower court within which to submit his accounts as receiver, upon the filing of which the adverse parties will be notified in order that they may controvert the same if they see fit; and the cause is remanded for further proceedings. So ordered, with costs against the appellant.

G.R. No. L-49031

August 28, 1944

JOSE PLATON and ROMAN CASTILLO, petitioners, vs. HON. CLAUDIO SANDOVAL, in his capacity as Judge, Court of First Instance of Laguna, and INES MAILOM, respondents. Avelino & Yatco for petitioners. Galo Al. Acua and T. G. de Castro for respondents. OZAETA, J.:

This is an original petition for certiorari and mandamus to annul an order issued by the respondent judge whereby the receiver appointed in civil case No. 7385 of the Court of First Instance of La entitled "Ines Mailom vs. Antonio Castillo and Roman Castillo," was discharge, and to compel the respondent judge to approve the appeal of said from said order. It appears that said civil case was instituted by Ines Mailom, one of the heirs of the deceased Servanda Mailom, to annul the sale of certain parcels of land made by the spouses Roman Castillo and Servanda Mailom (previous to the death of the latter) in favor of Antonio Castillo, a brother of Roman. After the death of Servanda Mailom, her husband Roman Castillo was appointed administrator of the estate left by her. The herein petitioner Jose Platon was appointed receiver of the property in litigation in said civil case No. 7385 at the instance of the plaintiff (now respondent) Ines Mailom. It was also Ines Mailom who, through her attorney, moved the court on November 11, 1942, to discharge the receiver on the ground that there was no more necessity for the continuation of the receivership inasmuch as the defendant Antonio Castillo had renounce his claim to said property in a stipulation of facts submitted to the court on November 25,1940, and the heirs of the deceased Servanda Mailom, including the administrator Roman Castillo, had submitted a project of partition in the intestate proceedings of the deceased Servanda Mailom, case Mo. 3148 of said court which upon such allegations, which the court found to be true upon such allegations, which the court found to be true, the respondent judge granted the motion, discharging the receiver and ordering him to deliver the properties under receivership to the persons entitled to receive the same in accordance with the project of partition aforementioned. The receiver Jose Platon filed a motion to set aside said order on the grounds (1) that the had not been notified of the motion upon which the same was issued; (2) that the case in which he was appointed receiver was still pending decision by Judge Proceso Sebastian; (3) that in the event Antonio Castillo wins the case, the receiver has to deliver to him the properties, thereby rendering the project of partition useless and of no value; and (4) that irregularities were committed by Attorney Acua for the plaintiff and the heirs of Sevanda Mailom regarding the disposition of the properties in question after the approval of the project of partition. In a memorandum submitted by the attorney for the receiver Jose Platon in support of said motion, said attorney who also represents the defendant-administrator Roman Castillo, said that the latter joins the receiver in said motion and makes it his own. After hearing both parties upon said motion to set aside the order discharging the receiver, the respondent judge reaffirmed his finding that there was no necessity for the continuation of the receivership and denied said motion Thereupon the receiver filed a notice of appeal from said order and tendered a record on appeal which the respondent judge disapproved on the ground that the order was interlocutory and not appealable. With regard to the order discharging the receiver and terminating the receivership, we find no excess of jurisdiction nor grave abuse of discretion on the part of the respondent judge. The property in litigation and under receivership belongs to the intestate estate of the deceased Servanda Mailom, deceased wife of the petitioner Roman Castillo. The defendant Antonino Castillo, who is not a heir of said deceased, does not claim ownership of said property and has signed his conformity to the discharge of the receiver. And the heirs of said deceased have agreed upon the partition of said property with the approval of the probate court. It seems clear, therefore, that the declaration of the respondent judge that there was no longer any necessity for the continuation of the receivership was well founded. In any event, it cannot be said that the respondent judge exceeded his jurisdiction or abused his discretion in making such a finding. Furthermore, the receiver, being an officer of the court and not the agent or representative of either party to the action, has no legal interest or standing to question the court's determination that the necessity for the continuation of the receivership has ceased to exist.

It is immaterial to decide now whether the receiver was entitled to be heard on the original motion to discharge him, for the reason that he was actually heard in the premises when thru his attorney he filed a motion for reconsideration. With regard to the approval of the record on appeal, we agree with the respondent judge that the order sought to be appealed from is interlocutory, and hence mandamus does not lie to compel him to approve and certify the record on appeal. As a matter of fact, certiorari to annul an order and mandamus to approve an appeal from said order are inconsistent remedies. The first is predicated on the theory that the second is unavailable. Having decided to pass upon the petition for certiorari on the merits, we cannot consistently compel the approval of an appeal from the same order which was the object of the certiorari proceeding. The petition is denied and the orders assailed are affirmed, with costs against the petitioners.

G.R. No. 146313

October 31, 2006

FLORENCIO ORENDAIN, petitioner, vs. BF HOMES, INC., respondent.

DECISION

VELASCO, JR., J.: Before us is a Petition for Review on Certiorari praying for the reversal of the August 18, 2000 Decision and December 6, 2000 Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 48263 entitled Florencio B. Orendain v. Hon. Alfredo R. Enriquez, Presiding Judge of RTC-Br. 275, Las Pias, and BF Homes, Inc., which affirmed the December 4, 1996 and April 22, 1998 Orders of the Las Pias RTC finding that said court, not SEC, has jurisdiction over Civil Case No. LP-96-0022 for reconveyance of the lot covered by TCT No. T-36482 to respondent BF Homes, Inc. (BF Homes for brevity). BF Homes, Inc. is a domestic corporation operating under Philippine laws and organized primarily to develop and sell residential lots and houses and other related realty business.1 Records show that respondent BF Homes had to avail itself of financial assistance from various sources to enable it to buy properties and convert them into residential subdivisions. This resulted in its incurring liabilities amounting to PhP 1,542,805,068.23 2 as of July 31, 1984. On the other hand, during its business operations, it was able to acquire properties and assets worth PhP 2,482,843,358.81 as of July 31, 1984, which, if liquidated, were more than enough to pay all its creditors.3 Despite its solvent status, respondent filed a Petition for Rehabilitation and for Declaration in a State of Suspension of Payments under Section 4 of PD No. 1758 before the Securities and Exchange Commission (SEC) because of the following: (a) the predatory acts of the Central Bank of trying to take over Banco Filipino and hand it cheap to its unidentified principal and its buyer financing facility with Banco Filipino has been suspended such that it cannot now consummate its sales

transactions necessary for it to generate cash to service and/or liquidate its various maturing obligations; (b) the libelous [circulars] made by the Central Bank to banks under its supervision that its deposit accounts and other transactions with them were being examined such that the creditors of [BF Homes] have [begun] insisting on full liquidation under pain of foreclosure of their notes x x x; and (c) the [liquidation] of [BF Homes] assets cannot be made in such a short time as demanded by its creditors.4 In the said petition, respondent prayed thatin the meantime it was continuing its business operationsit be afforded time to pay its aforesaid obligations, freed from various proceedings either judicially or extra-judicially against its assets and properties. Also, respondent highlighted the importance of and prayed for a Rehabilitation Receiver in the petition. Such receiver, according to respondent, was "imperative to oversee the management and operations of [BF Homes] so that its business may not be paralyzed and the interest of the creditors may not be prejudiced." It further argued that "rehabilitation [was] feasible and imperative because otherwise, in view of the extent of its involvement in the shelter program of the government and in the nations home mortgage insurance system, which has a secured coverage for at least P900 M of [BF Homes] P1.5 B liabilities, not only [the] creditors, [buyers, and stockholders] of the petitioner corporation may suffer but the public as well."5 In SEC Case No. 2693, the SEC subsequently issued its March 18, 1985 Order which stated: WHEREFORE, in the interest of the parties-litigants, as well as the general public, and in order to prevent [paralyzation] of business operation[s] of the B.F. Homes, Inc., a Management Committee is hereby created composed of: 1. Atty. Florencio Orendain as Chairman 2. Representative of B. F. Homes, Inc. member 3. Representative of Home Financing Commission member 4. Two (2) representatives from the major creditors members xxxx Accordingly, with the creation of the Management Committee, all actions for claims against B.F. Homes, Inc. pending before the court, tribunal, board or body are hereby deemed suspended.6 Thereafter, on February 2, 1988, the SEC ordered the appointment of a rehabilitation receiver, FBO Management Networks, Inc., with petitioner Orendain as Chairman to prevent paralyzation of BF Homes business operations.7 On October 8, 1993, a Deed of Absolute Sale8 was executed by and between BF Homesrepresented by petitioner Orendainas absolute and registered owner, and the Local Superior of the Franciscan Sisters of the Immaculate Phils., Inc. (LSFSIPI) over a parcel of land situated at Barangay Pasong Papaya, BF International, Municipality of Las Pias, Metro Manila, covered by Transfer Certificate of Title No. T-36482. The portion of land sold to LSFSIPI was 7,800 square meters, more or less, for Nineteen Million Five Hundred Thousand Pesos (PhP 19,500,000.00).9

Meanwhile, on November 7, 1994, the SEC hearing panel released an Omnibus Order 10 which admitted and confirmed the Closing Report submitted by the receiver, petitioner Orendain. It further appointed a new Committee of Receivers composed of the eleven (11) members of the Board of Directors of BF Homes with Albert C. Aguirre as the Chairman of the Committee. Consequently, receiver Orendain was relieved of his duties and responsibilities. In its August 22, 1995 Order,11 the SEC denied BF Homes and the intervenor-derivative suitor Eduardo S. Rodriguezs motions for reconsideration of its November 7, 1994 Omnibus Order. On January 23, 1996, BF Homes filed a Complaint before the Las Pias RTC against LSFSIPI and petitioner Orendain, in Civil Case No. LP-96-0022, for reconveyance of the property covered by TCT No. T-36482alleging, inter alia, that the LSFSIPI transacted with Orendain in his individual capacity and therefore, neither FBO Management, Inc. nor Orendain had title to the property transferred. Moreover, BF Homes averred that the selling price was grossly inadequate or insufficient amounting to fraud and conspiracy with the LSFSIPI. BF Homes also stated that the total assessed value of the property was approximately PhP 802,330.00. Hence, it prayed in the Complaint that LSFSIPI reconvey the disputed property or, if reconveyance was no longer feasible, pay the present value of the property.12 On March 21, 1996, the LSFSIPI filed its Answer with Compulsory Counterclaim,13 stating, among others, that (1) the Complaint stated no cause of action since there was a valid sale with sufficient consideration, and there was no fraud; (2) it was barred by a prior judgment of a tribunal with sufficient jurisdiction over the matter, and BF Homes was liable for forum shopping; and (3) BF Homes could not question its own acts by way of estoppel. On June 14, 1996, Florencio B. Orendain filed a Motion to Dismiss stating that (1) the RTC had no jurisdiction over the reconveyance suit; (2) the Complaint was barred by the finality of the November 7, 1994 Omnibus Order of the SEC hearing panel; and (3) BF Homes, acting through its Committee of Receivers, had neither the interest nor the personality to prosecute the said action, in the absence of SECs clear and actual authorization for the institution of the said suit.14 On July 15, 1996, BF Homes filed its Opposition15 to petitioners Motion to Dismiss, alleging that the case was within the exclusive jurisdiction of the RTC, not the SEC, considering that the case was an ordinary reconveyance suit. Likewise, BF Homes alleged that the cause of action was not barred by the perceived finality of the SEC November 7, 1994 Omnibus Order, and that the general powers of a receiver authorized BF Homes to institute actions to recover the property. On December 4, 1996, RTC Las Pias, Branch 275 issued an Order denying the June 14, 1996 Motion to Dismiss for lack of merit.16 However, on May 8, 1997, the SEC rendered its Order, as follows: WHEREFORE, premises considered, the decision of the hearing panel denying the motion for intervention of Mr. Eduardo Rodriguez is hereby AFFIRMED. The Commission hereby receives and notes the Closing Report of the Management Network and the Joaquin Cunanan Audit Report for inclusion in the records of the case without going into the merits and veracity of the contents thereof; the order to pay the attorneys fees of Balgos and Perez is hereby SET ASIDE; the resolution of the issue on the alleged payment of receivers fees of FBO Management Network is hereby deferred, and the order to pay the additional fees of the receiver is hereby set aside until after the Commission en banc finally clears and releases FBO Management Networks from its accountabilities in accordance with the policies and orders of the Commission on the receivership.17

On December 27, 1997, petitioner Orendain filed his Motion for Reconsideration18 of the RTC December 4, 1996 Order. Consequently, BF Homes filed its January 17, 1997 Opposition19 to Orendains Motion for Reconsideration; and on April 22, 1998, the RTC issued an Order denying the Motion for Reconsideration for lack of merit and petitioner Orendain was directed to file his answer to the Complaint within ten (10) days from receipt of the Order.20 Petitioner then filed his Answer Ex Abudante Ad Cautelam with Compulsory Counterclaims21 on May 29, 1998. On July 13, 1998, petitioner filed before the CA a Petition for Certiorari and Prohibition with Prayer for the Issuance of a Temporary Restraining Order and/or Bonded Writ of Preliminary Injunction22 which sought to annul the RTC December 4, 1996 and April 22, 1998 Orders, denying petitioners Motion to Dismiss and Motion for Reconsideration. Petitioner alleged that these motions were issued without jurisdiction or with grave abuse of discretion amounting to lack or in excess of jurisdiction. The Ruling of the Court of Appeals In its August 18, 2000 Decision, the CA held that the action for reconveyance filed by BF Homes was within the exclusive jurisdiction of the RTC. In the rehabilitation case, the LSFSIPI was not a party to the said case and did not have any intra-corporate relation with petitioner at the time of the sale. The SEC could not acquire jurisdiction over the Franciscan Sisters; while petitioner Orendain was sued in his individual capacity and not in his official capacity as receiver.23 Moreover, the CA stated that at the time the assailed orders were issued, the subject SEC Order had not yet attained finality; that there was no identity between the first and the second action with respect to the parties; and that the SEC November 7, 1994 Omnibus Order relied on by Orendain was not a decision on the merits of BF Homes Petition for Rehabilitation and for a Declaration in a State of Suspension of Payments under Sec. 4 of P.D. No. 1758. According to the CA: Although this Court is not oblivious to the fact that the SEC en banc in a Decision dated May 8, 1997, affirmed the denial of the intervention filed by Rodriguez, still the said order did not go into the merits of the intervention but merely refused to give due recognition to the intervention as it was allegedly "untimely." Therefore, the contention of petitioner that the principle of res judicata is applicable in the case at bar does not hold water. 24 The CA ultimately rendered its judgment in this wise: WHEREFORE, premises considered, the instant petition is DISMISSED for failure to clearly show grave abuse of discretion and the assailed orders dated December 4, 1996 and April 22, 1998, are hereby AFFIRMED in toto without costs to petitioner.25 Hence, this petition is before us. The Courts Ruling Petitioner avers that the CA erred in holding that (1) the complaint a quo is a simple reconveyance suit and hence, can be heard and tried by the court a quo; (2) res judicata is inapplicable to the complaint a quo; and (3) the Committee of Receivers may institute an action against a former receiver without prior SEC approval.26 The petition is not meritorious.

Action for Reconvenyance in the RTC Does Not Involve Intra-Corporate Dispute The issue central to this petition is: which has jurisdiction over the action for reconveyancethe RTC or SEC. Petitioner Orendain argues that it is the SEC that has jurisdiction by virtue of Presidential Decree No. 902-A since BF Homes suit was instituted against him as its former receiver. He also avers that BF Homes allegations were nothing more than protestations against the former receiver who entered into a transaction during BF Homes regime of rehabilitation; and that the assailed transaction was consummated at the time the SEC had placed BF Homes under rehabilitation. Therefore, according to petitioner, the SEC, which appointed the rehabilitation receiver, has the sole power to decide the issue as to whether petitioner acted within the scope of the vested authority. Petitioner also claims that the resolution of the instant controversy depends on the ratification by the SEC of the acts of its agent, the receiver. Also, he asserts that for the RTC to insist on hearing and deciding the case below is to dislodge the appointing body from reviewing, ratifying, confirming, or overruling the acts of its appointee; and such would constitute undue interference on the jurisdiction of the SEC by a court of equal jurisdiction. Further, petitioner claims that the questions of whether the receiver of a company undergoing rehabilitation acted within the scope of his authority, and whether a transaction consummated during the rehabilitation proceedings is impermissible, are matters not within the province of a regular court acting on an ordinary reconveyance suit. Petitioner avers that the undisputed fact is that at the time of the said transaction, respondent was operating under rehabilitation whereby receivership places all matters arising from, incidental, or connected with the implementation of said rehabilitation proceedings beyond the jurisdiction of regular courts. In addition, petitioner avers that the property in question is one of the many properties which formed part of a pool of assets placed under receivership and that he was the Chairman of the FBO Management, Inc.the SEC-appointed Rehabilitation Receiver at the time of the transaction. WE hold OTHERWISE. In Speed Distributing Corp. v. CA, we held that: Jurisdiction over the subject matter is conferred by law. The nature of an action, as well as which court or body has jurisdiction over it, is determined based on the allegations contained in the complaint of the plaintiff, irrespective of whether or not plaintiff is entitled to recover upon all or some of the claims asserted therein. It cannot depend on the defenses set forth in the answer, in a motion to dismiss, or in a motion for reconsideration by the defendant (citations omitted).27 In the case at bench, the BF Homes Complaint for reconveyance was filed on January 23, 1996 against LSFSIPI and Florencio B. Orendain, in Civil Case No. LP-96-002. In 1996, Section 5 of PD No. 902-A,28 which was approved on March 11, 1976, was still the law in forcewhereby the SEC still had original and exclusive jurisdiction to hear and decide cases involving: b) controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or associates; between any and/or all of them and the corporation, partnership, or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the state insofar as it concerns their individual franchise or right to exist as such entity. Clearly, the controversy involves matters purely civil in character and is beyond the ambit of the limited jurisdiction of the SEC. As held in Viray v. Court of Appeals, "[t]he better policy in determining which body has jurisdiction over a case would be to consider

not only [1] the status or relationship of the parties but also [2] the nature of the question that is the subject of their controversy."29 More so, in Speed Distributing Corp., we held that: The first element requires that the controversy must arise out of intra-corporate or partnership relations between any or all of the parties and the corporation, partnership or association of which they are stockholders, members or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the State insofar as it concerns their individual franchises. The second element requires that the dispute among the parties be intrinsically connected with the regulation of the corporation. If the nature of the controversy involves matters that are purely civil in character, necessarily, the case does not involve an intra-corporate controversy. The determination of whether a contract is simulated or not is an issue that could be resolved by applying pertinent provisions of the Civil Code (citations omitted).30 However, Section 5 of PD No. 902-A does not apply in the instant case. The LSFSIPI is neither an officer nor a stockholder of BF Homes, and this case does not involve intracorporate proceedings. In addition, the seller, petitioner Orendain, is being sued in his individual capacity for the unauthorized sale of the property in controversy. Hence, we find no cogent reason to sustain petitioners manifestation that the resolution of the instant controversy depends on the ratification by the SEC of the acts of its agent or the receiver because the act of Orendain was allegedly not within the scope of his authority as receiver. Furthermore, the determination of the validity of the sale to LSFSIPI will necessitate the application of the provisions of the Civil Code on obligations and contracts, agency, and other pertinent provisions. In addition, jurisdiction over the case for reconveyance is clearly vested in the RTC as provided in paragraph (2), Section 19, B.P. Blg. 129, to wit: Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive [and] original jurisdiction (1) In all civil actions in which the subject of the litigation is incapable of pecuniary estimation; and (2) In all civil actions which involve the title to, or possession of, real property or any interest therein, where the assessed value of the property involved exceeds Twenty Thousand pesos (P20,000.00) or for civil actions in Metro Manila, where such value exceeds Fifty Thousand pesos (P50,000.00) x x x Likewise, in DMRC Enterprises v. Este del Sol Mountain Reserve, Inc., the Court said: Nowhere in said decree [PD 902-A] do we find even so much as an intimidation [sic] that absolute jurisdiction and control is vested in the Securities and Exchange Commission in all matters affecting corporations. To uphold the respondents arguments would remove without the legal imprimatur from the regular courts all conflicts over matters involving or affecting corporations, regardless of the nature of the transactions which give rise to such dispute. The courts would then be divested of jurisdiction not by reason of the nature of the dispute submitted to them for adjudication, but solely for the reason that the dispute involves a corporation. This cannot be done. To do so would not only be to encroach on the legislative prerogative to grant and revoke jurisdiction of the courts but such a sweeping interpretation may suffer constitutional infirmity. Neither can we reduce jurisdiction of the court by judicial fiat ( [citing] Article X, Section 1, The [1973] Constitution).31

Res Judicata Does Not Apply in the Action for Reconveyance According to petitioner, dismissal of the complaint is proper based on res judicata. He alleged that on September 28, 1994, he filed a Petition for Rehabilitation and for Declaration in a State of Suspension of Payments docketed as SEC Case No. 2693; and that sometime in 1994, FBO Management Network, Inc. submitted its Closing Report to the SEC. In said report, the receiver disclosed the conveyance of the property to the LSFSIPI. It is the same transaction which BF Homes seeks to nullify in the complaint a quo. We are not persuaded. There are two (2) aspects to the doctrine of res judicata: The first, known as "bar by prior judgment," is the effect of a judgment as a bar to the prosecution of a second action upon the same claim, demand or cause of action. The second, known as "conclusiveness of judgment," issues actually and directly resolved in a former suit cannot again be raised in any future case between the same parties involving a different cause of action.32 A case is barred by prior judgment when the following requisites are present: "(1) the former judgment is final; (2) it is rendered by a court having jurisdiction over the subject matter and the parties; (3) it is a judgment or an order on the merits; and (4) there isbetween the first and second actionsidentity of parties, of subject matter, and causes of action."33 Petitioner asserts that bar by prior judgment exists since the May 8, 1997 Order of the SEC en banc had become final which would effectively preclude the adjudication of Civil Case No. LP-96-0022. We DISAGREE. While the said SEC order denied the motion for intervention filed by intervenor Eduardo S. Rodriguez, it did not, however, resolve the issues raised in the motion on the merits. A judgment is "on the merits when it amounts to a legal declaration of the respective rights and duties of the parties based upon the disclosed facts (emphasis supplied and citation omitted)."34 It is apparent that the SEC order in question merely acknowledged the Closing Report for inclusion in the records of the case. It did not, however, pass upon the merits and veracity of the reports contents. As such, it cannot, in any wise, be considered as an adjudication of the rights and obligations of the parties relating to the subject matter of the action. Likewise, it appears that between the first and second actions, there was no identity of parties, of subject matter, and of cause of action. Hence, res judicata does not apply in the instant case. The second type of res judicata is "conclusiveness of judgment." In Francisco v. Co, this Court elucidated the nature of this principle, thus: "Conclusiveness of judgment" operates as a bar even if there is no identity as between the first and second causes of judgment. Under the doctrine, any right, fact, or matter in issue directly adjudicated or necessarily involved in the determination of an action before a competent court in which judgment is rendered on the merits is conclusively settled by the judgment therein and cannot again be litigated between the parties and their privies whether or not the claim, demand, purpose, or subject matter of the two actions is the same. Evidently, "conclusiveness of judgment" may operate to bar the second case even if there is no identity of causes of action. The judgment is conclusive in the second

case, only as to those matters actually and directly controverted and determined, and not as to matters merely involved therein.35 A perusal of the SEC case would show that reconveyance of the property in controversy was neither an issue nor a relief sought by any party in the SEC proceedings. Evidently, the SEC November 7, 1994 Omnibus Order did not mention any reconveyance of property.36 Eduardo S. Rodriguez, the intervenor in the SEC case, did not demand the reversion of the disputed property precisely because the SEC has no jurisdiction over the action for reconveyance. Assuming, arguendo, that intervenor Rodriguez raised the issue on the validity of petitioners acts in his capacity as receiver, still, the SEC November 7, 1994 Omnibus Order did not delve into the merits of the intervention nor did the order give due course to the intervention as it was untimely. Thus, there is no "conclusiveness of judgment" as the reconveyance of the lot sold to LSFSIPI was not directly decided or necessarily involved and adjudicated in the said SEC order. Furthermore, petitioner argues that the Committee of Receivers should have sought prior clearance from the SEC before instituting the action for reconveyance before the RTC, because it does not have the legal capacity to sue. This is incorrect. One of the general powers of a receiver under Rule 59, Section 6 of the Rules of Court is the power to bring and defend suits in such capacity. Petitioner also contends that an action filed by a successor-receiver against him as predecessor-receiver is not allowed under Rule 59, Section 6 without leave of court which appointed him; as Section 6 provides that "no action may be filed by or against a receiver without leave of the court which appointed him." This is bereft of merit. The rule talks of the current receiver of the company and not the previous receiver like petitioner Orendain. The reason behind Rule 59, Section 6, which requires leave of court for all suits by or against the present receiver, is to forestall any undue interference with the receivers performance of duties through improvident suits. Apparently, such situation cannot apply to Orendain who is no longer BF Homes receiver. Moreover, the instant petition has been rendered moot and academic by the passage of RA 8799 or The Securities Regulation Code which took effect on August 8, 2000.37 Section 5.2 of RA 8799 transferred exclusive and original jurisdiction of the SEC over actions involving intra-corporate controversies to the courts of general jurisdiction or the appropriate RTC. In the transition, all intra-corporate cases pending in the SEC, which were not ripe for adjudication as of August 8, 2000, were turned over to the RTC. Congress thereby recognized the expertise and competence of the RTC to take cognizance of and resolve cases involving intra-corporate controversies. Thus, "whether or not the issue is intra-corporate, it is now the [RTC] and no longer the SEC that takes cognizance of [and resolves cases involving intra-corporate controversies]."38 Section 5.2 of RA 8799 explicitly provides: The Commissions jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, That the Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over the cases. The Commission shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final resolution which should be resolved within one (1) year from the enactment of this Code. The Commission shall retain jurisdiction over

pending suspension of payment/rehabilitation cases filed as of 30 June 2000 until finally disposed (emphasis supplied). Subsequently, on January 23, 2001, the Supreme Court issued Supplemental Administrative Circular No. 8-01 which ordered that effective March 1, 2000, "all SEC cases originally assigned or transmitted to the regular RTC shall be transferred to the branches of the regular RTC specially designated to hear such cases in accordance with AM No. 00-11-03-SC." During the Bicameral Conference Committees discussions on the conflicting provisions of Senate Bill No. 1220 and House Bill No. 8015 on the "Amendments to the Securities, Regulations and Enforcement Act," former Senator Raul S. Roco rendered his report, 39 as follows: The first major departure is as regards the Security Exchange Commission. The Securities and Exchange Commission has been authorized under this proposal to reorganize itself. As an administrative agency, we strengthened it and at the same time we take away the quasi-judicial functions. The quasijudicial functions are now given back to the courts of general jurisdiction the Regional Trial Court, except for two categories of cases (emphasis supplied). In case of corporate disputes, only those that are now submitted for final determination of the SEC will remain with the SEC. So, all those cases, both memos of the plaintiff and defendant, that have been submitted for resolution will continue. At the same time, cases involving rehabilitation, bankruptcy, suspension of payments and receiverships that were filed before June 30, 2000 will continue with the SEC. In other words, we are avoiding the possibility, upon approval of this bill, of people filing cases with the SEC, in a manner of speaking, to select their court. x x x It is only right now with this bill that we clarify the independent functions, not only in terms of monetary polity, by giving it to the Monetary Board, but in matters of commerce and securities and capital formation, by giving them to the [SEC], with sufficient powers to monitor and regulate capital formation in the Philippines. That is the first major departure x x x in terms of the powers and responsibilities of the [SEC]. In registration of securities, exempt transactions [and exempt securities], these are very technical and there are modifications x x x The registration and monitoring of securities are basically the same as the old law. Pre-need plans x x x remain with the SEC. Originally we wanted the SEC to concentrate on commerce, corporations and the securities regulation, but preneed plan[s] under the Senate report was really with the SEC and under the House report, it was recommended to remain with the SEC without prejudice to a subsequent law if we should decide to do so to have the pre-need plans transferred to the Office of the Insurance Commissioner. x x x Thus, it is unequivocal that the jurisdiction to try and decide cases originally assigned to the SEC under Section 5 of PD 902-A has been transferred to the RTC. For clarity, we quote those cases under Section 5, PD 902-A, which now fall within the RTCs jurisdiction, as follows: (a) Devices or schemes employed by or any acts of the board of directors, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or stockholders, partners, members of associations registered with the Commission;

(b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or associates; between any or all of them and the corporation, partnership or association and the State insofar as it concerns their individual franchise or right as such entity; (c) Controversies in the election or appointment of directors, trustees, officers or managers of such corporations, partnerships, or associations; (d) Petitioners of corporations, partnerships or associations to be declared in the state of suspension of payment in cases where the corporation, partnership or association possesses sufficient property to cover all its debts but foresees the impossibility of meeting them when they fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities but is under the management of a rehabilitation receiver or management committee created pursuant to this Decree. The remaining powers and functions of the SEC are enumerated in Section 5 of RA 8799, to wit: Powers and Functions of the Commission. [5.1] The Commission shall act with transparency and shall have the powers and functions provided by this Code, Presidential Decree No. 902-A, the Corporation Code, the Investment Houses Law, the Financing Company Act and other existing law[s]. Pursuant thereto the Commission shall have, among others, the following powers and functions: (a) Have jurisdiction and supervision over all corporations, partnerships or associations who are the grantees of primary franchises and/or a license or permit issued by the Government; (b) Formulate policies and recommendations on issues concerning the securities market, advise Congress and other government agencies on all aspects of the securities marker and propose legislation and amendments thereto; (c) Approve, reject, suspend, revoke or require amendments to registration statements, and registration and licensing applications; (d) Regulate, investigate and supervise the activities of persons to ensure compliance; (e) Supervise, monitor, suspend or take over the activities of exchanges, clearing agencies and other SROs; (f) Impose sanctions for the violation of laws and the rules, regulations and orders issued pursuant thereto; (g) Prepare, approve, amend or repeal rules, regulations, and orders, and issue opinions and provide guidance on and supervise compliance with such rules, regulations and orders; (h) Enlist the aid and support of and/or deputize any and all enforcement agencies of the Government, civil or military as well as any private institution, corporation, firm, associations or person in the implementation of its powers and functions under this Code; (i) Issue cease and desist orders to prevent fraud or injury to the investing public; (j) Punish for contempt of the Commission, both direct and indirect, in accordance with the pertinent provisions of and penalties prescribed by the Rules of Court;

(k) Compel the officers of any registered corporation or association to call meetings of stockholders or members thereof under its supervision; (l) Issue subpoena duces tecum and summon witnesses to appear in any proceedings of the Commission and in appropriate cases, order the examination, search and seizure of all documents, papers, files and records, tax returns, and books of accounts of any entity or person under investigation as may be necessary for the proper disposition of the cases before it, subject to the provision of existing laws; (m) Suspend, or revoke, after notice and hearing the franchise or certificate of registration of corporations, partnerships or associations, upon any of the grounds provided by law; and (n) Exercise such other powers as my be provided by law as well as those which may be implied from, or which are necessary or incidental to the carrying out of, the express powers granted the Commission to achieve the objectives and purposes of these laws. Juxtaposing the jurisdiction of the RTC under RA 8799 and the powers that were retained by the SEC, it is clear that the SEC retained its administrative, regulatory, and oversight powers over all corporations, partnerships, and associations who are grantees of primary franchises, and/or a license or permit issued by the Government. However, the Securities Regulations Code (SRC) is clear that when there is a controversy arising out of intra-corporate relations, between and among stockholders, members or associates, and between, any, or all of them and the corporation, it is the RTC, not SEC, which has jurisdiction over the case. Thus, when the complaint involves "an active antagonistic assertion of a legal right on one side and a denial thereof on the other concerning a real, and not a mere theoretical question or issue,"40 a cause of action involving a delict or wrongful act or omission committed by a party in violation of the primary right of another,41 or an actual controversy involving rights which are legally demandable or enforceable,42 the jurisdiction over this complaint is lodged with the RTC but not the SEC. The passage of RA 8799 has put to rest petitioner Orendains claim that it is the SEC and not the RTC that has jurisdiction over Civil Case No. LP-96-0022. At present, the instant petition has nothing to stand on and perforce must fail. WHEREFORE, the August 18, 2000 Decision and December 6, 2000 Resolution of the Court of Appeals in CA-G.R. SP No. 48263 is hereby AFFIRMED IN TOTO. SO ORDERED.

TRADERS ROYAL BANK REFER TO RULE 58

G.R. No. 151925

February 6, 2003

CHAS REALTY AND DEVELOPMENT CORPORATION, petitioner, vs. HON. TOMAS B. TALAVERA, in his capacity as Presiding Judge of the Regional Trial Court of Cabanatuan City, Branch 28, and ANGEL D. CONCEPCION, SR., respondents. DECISION

VITUG, J.: Petitioner Chas Realty and Development Corporation (CRDC) is a domestic corporation engaged in property development and management. It is the owner and developer of a three-hectare shopping complex, also known as the Megacenter Mall (Megacenter), in Cabanatuan City. The construction of Megacenter commenced in January 1996, but by the time of its socalled "soft opening" in July 1998, it was only partly completed due to lack of funds, said to have been brought about by construction overages due to the massive devaluation of the peso during the economic crisis in 1997, low occupancy, and rental arrearages of tenants. The opening of the upper ground floor and the second floor of the building followed, respectively, in August 1998 and towards the end of 1998. Eventually, Megacenter opened its third floor in 1999.l^vvphi1.net Purportedly on account of factors beyond the control of CRDC, such as high interest rates on its loans, unpaid rentals of tenants, low occupancy rate, sluggishness of the economy and the freezing of its bank account by its main creditor, the Land Bank of the Philippines, CRDC encountered difficulty in paying its obligations as and when they fell due and had to contend with collection suits and related cases. On 04 June 2001, CRDC filed a petition for rehabilitation attaching thereto a proposed rehabilitation plan, accompanied by a secretarys certificate, consonantly with paragraph 2(k), Section 2, Rule 4, of the Interim Rules of Procedure on Corporate Rehabilitation. CRDC claimed that it had sufficient assets and a workable rehabilitation plan both of which showed that the continuance of its business was still feasible. It alleged that, prior to the filing of the petition for rehabilitation, a special meeting of its stockholders was held on 18 April 2001 during which the majority of the outstanding capital stock of CRDC approved the resolution authorizing the filing of a petition for rehabilitation. On 08 June 2001, the Regional Trial Court, Branch 28, of Cabanatuan City, to which the petition was assigned, issued an order staying all claims against CRDC and prohibited it from making any payment on its outstanding obligations and selling, or otherwise disposing or encumbering, its property. Forthwith, the court appointed a rehabilitation receiver. On 20 July 2001, Angel D. Concepcion, Sr., herein private respondent, filed a complaint in intervention opposing the appointment of CRDCs nominee for the post of rehabilitation receiver. He belied CRDCs factual allegations and claimed that the predicament of the corporation was due to serious "mismanagement, fraud, embezzlement, misappropriation and gross/evident violation of the fiduciary duties of CHAS officers." Concepcion moved to dismiss and/or to deny the petition for rehabilitation on the ground that there was no approval by the stockholders representing at least two-thirds (2/3) of the outstanding capital stock which, according to him, would be essential under paragraph 2(k), Section 2, Rule 4, of the Interim Rules on Corporate Rehabilitation. Concepcion further asserted that the supposed approval of the directors of the filing of the petition for rehabilitation was inaccurate considering that the membership of petitioner CRDCs board of directors was still then being contested and pending final resolution. On 10 August 2001, CRDC submitted its opposition ex abundante cautelam contending that the complaint in intervention was a prohibited pleading and that there was no need for it to secure the irrevocable consent and approval of its stockholders representing at least two-thirds (2/3) of its outstanding capital stock because the petition did not include in its plan for rehabilitation acts that would need any amendment of its articles of incorporation and/or by-laws, increase or decrease in the authorized capital stock, issuance of bonded indebtedness, or the like, where such two-thirds (2/3) vote would be required.

The trial court issued an order, dated 15 October 2001, the decretal portion of which was to the following effect; viz: "WHEREFORE, premises considered, in the absence of any showing that the petitioner has complied with the certification required under Section 2, Rule 4(K) of the Interim Rules of Procedure on Corporate Rehabilitation, the petitioner is hereby given a period of 15 days from receipt of a copy of this order to secure from its directors and stockholders the desired certification and submit the same to this Court in accordance with the above-mentioned provision of the Interim Rules of Procedure on Corporate Rehabilitation. "With respect to the other oppositions to the petition for rehabilitation including the opposition to the appointment of the rehabilitation receiver, opposition filed by the land bank and the EEI, Inc., the resolution of the same is hereby held in abeyance till after the period given to the petitioner to comply with this order as it may become moot and academic after the expiration of the period given to the petitioner."1 On 29 October 2001, CRDC filed before the Court of Appeals a petition for certiorari, with prayer for temporary restraining order and/or preliminary injunction, which sought to have the 15th October 2001 order of the trial court set aside. The Court of Appeals rendered a decision on 18 January 2002 and held: "WHEREFORE, the foregoing premises considered, the petition for certiorari, with prayer for temporary restraining order and/or writ of preliminary injunction, is DENIED for lack of merit."2 Hence, the instant petition on the following grounds: "I "Public respondent acted with grave abuse of discretion amounting to lack and/or excess of jurisdiction in issuing the assailed order considering that: "A. The petition for rehabilitation and the proposed rehabilitation plan do not require extraordinary corporate actions. "B. Since no extraordinary corporate actions are required or even contemplated as necessary and desirable for the rehabilitation of CRDC, the requirements of the corporation code for the approval of such actions cannot be complied with. "C. The rehab rules and the corporation code do not allow or intend blind blanket approvals of extraordinary corporate actions. "D. To require 2/3 stockholders approval for corporate actions requiring only a majority violates the right of the majority stockholders. "II "Public respondent acted with grave abuse of discretion amounting to lack and/or excess of jurisdiction in requiring CRDCs compliance with paragraph 2(k), Section 2, Rule 4 of the Rehab rules when CRDC already complied therewith."3 Rule 4, Section 2(k), of the Interim Rules on Corporate Rehabilitation provides: "Sec. 2. Contents of the Petition. The petition filed by the debtor must be verified and must set forth with sufficient particularity all the following material facts: (a) the name and business of the debtor; (b) the nature of the business of the debtor; (c) the history of the debtor; (d) the cause of its inability to pay its debts; (e) all the pending actions or

proceedings known to the debtor and the courts or tribunals where they are pending; (f) threats or demands to enforce claims or liens against the debtor; and (g) the manner by which the debtor may be rehabilitated and how such rehabilitation may benefit the general body of creditors, employees, and stockholders. "The petitioner shall be accompanied by the following documents: "x x x x x x x x x. "k. A Certificate attesting, under oath, that (a) the filing of the petition has been duly authorized; and (b) the directors and stockholders have irrevocably approved and/or consented to, in accordance with existing laws, all actions or matters necessary and desirable to rehabilitate the debtor including, but not limited to, amendments to the articles of incorporation and by-laws or articles of partnership; increase or decrease in the authorized capital stock; issuance of bonded indebtedness; alienation, transfer, or encumbrance of assets of the debtor; and modification of shareholders rights."4 Rule 4, Section 2(k), distinctly provides that, first, under letter (a), the filing of the petition has been duly authorized; and, second, under letter (b), the directors and stockholders have irrevocably approved and/or consented to, in accordance with existing laws, all actions or matters necessary and desirable to rehabilitate the debtor including, but not limited to, amendments to the articles of incorporation and by-laws or articles of partnership; increase or decrease in the authorized capital stock; issuance of bonded indebtedness, alienation, transfer, or encumbrance of assets of the debtor; and modification of shareholders rights. Observe that Rule 4, Section 2(k), prescribes the need for a certification; one, to state that the filing of the petition has been duly authorized, and two, to confirm that the directors and stockholders have irrevocably approved and/or consented to, in accordance with existing laws, all actions or matters necessary and desirable to rehabilitate the corporate debtor, including, as and when called for, such extraordinary corporate actions as may be marked out.1awphi1.nt The phrase, "in accordance with existing laws," obviously would refer to that which is, or to those that are, intended to be done by the corporation in the pursuit of its plan for rehabilitation. Thus, if any extraordinary corporate action (mentioned in Rule 4, Section 2(k), of the Interim Rules on Corporate Rehabilitation) are to be done under the proposed rehabilitation plan, the petitioner would be bound to make it known that it has received the approval of a majority of the directors and the affirmative votes of stockholders representing at least two-thirds (2/3) of the outstanding capital stock of the corporation. Where no such extraordinary corporate acts (or one that under the law would call for a two-thirds (2/3) vote) are contemplated to be done in carrying out the proposed rehabilitation plan, then the approval of stockholders would only be by a majority, not necessarily a two-thirds (2/3), vote, as long as, of course, there is a quorum5 a fact which is not here being disputed. The trial court and appellate court, unfortunately, have taken an inaccurate understanding of the memorandum to the Supreme Court of Justice Reynato S. Puno, the committee chair on the draft of the rules on corporate rehabilitation, still then being proposed; the memorandum reads, in part, thusly: "3. Rule 4. Rehabilitation "The following are the principal deviation from the SEC Rules: "a) The proposed Rules now require, as an attachment to the petition, a Certificate attesting, among others, that the governing body and owners of the petitioning debtor have approved and consented to whatever is necessary or desirable (including but not limited to increasing or decreasing the authorized capital stock of the company and modification of stockholders right) to rehabilitate the debtor (Sec. 2, par. (k), Rule 4).

This is to avoid a situation where a rehabilitation plan, after being developed for years, cannot be implemented because of the refusal of shareholders to approve the arrangements necessary for its implementation."6 Nowhere in the aforequoted paragraph can it be inferred that an affirmative vote of stockholders representing at least two-thirds (2/3) of the outstanding stock is invariably necessary for the filing of a petition for rehabilitation regardless of the corporate action that the plan envisions. Just to the contrary, it only requires in the filing of the petition that the corporate actions therein proposed have been duly approved or consented to by the directors and stockholders "in consonance with existing laws." The requirement is designed to avoid a situation where a rehabilitation plan, after being developed and judicially sanctioned, cannot ultimately be seen through because of the refusal of directors or stockholders to cooperate in the full implementation of the plan. In fine, a certification on the approval of stockholders is required but the question, whether such approval should be by a majority or by a two-thirds (2/3) vote of the outstanding capital stock, would depend on the existing law vis--vis the corporate act or acts proposed to be done in the rehabilitation of the distressed corporation. The rehabilitation plan7 submitted by petitioner merely consists of a repayment or restructuring scheme of CRDCs bank loans to Land Bank of the Philippines and Equitable PCI Bank and of leasing out most of the available spaces in the Megacenter, including the completion of the construction of the fourth floor, to increase rental revenues. None of the proposed corporate actions would require a vote of approval by the stockholders representing at least two-thirds (2/3) of the outstanding capital stock. Relative to the contention that a motion for reconsideration is required prior to bringing up the petition for certiorari (with the Court of Appeals), it should suffice to say that the filing of a motion for reconsideration before availing of the remedy of certiorari is not always sine qua non such as when the issue raised is one purely of law, or where the error is patent or the questions raised on certiorari are exactly the same as those already squarely presented to and passed upon by the court a quo.8 WHEREFORE, the instant petition is GRANTED and the questioned decision of the Court of Appeals, dated 18 January 2002, and the order of the Regional Trial Court, Branch 28, Cabanatuan City, dated 15 October 2001, in Civil Case No. 4036-AF, are REVERSED and SET ASIDE. The Regional Trial Court is directed to give due course to the Petition for Rehabilitation and conduct with dispatch the necessary proceedings still required thereon. No costs. SO ORDERED.