PROVISIONAL REMEDIES (Rule 59) 33

RULE 59
RECEIVERSHIP
Sec. 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 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 by appointed to administer and preserve
it;

b.) When it appears in an action by the mortgagee for the foreclosure of a mortgage
that the property in is danger of being wasted or dissipated 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;

c.) After judgment, to preserve the property during the pendency of an appeal, or
to dispose of it according to the judgment, or to aid execution when the writ
of execution has been returned unsatisfied or the judgment obligor refuses to
apply his property in satisfaction of the judgment, or otherwise to carry the
judgment into effect;
d.) Whenever in other cases it appears that the appointment of the receiver is the
most convenient and feasible means of preserving, administering, or disposing
of the property in litigation.

During the pendency of an appeal, the appellate court may allow an application for the
appointment of a receiver to be filed in and decided by court of origin and the receiver
appointed to be subject to the control of said court.

RECEIVER - an indifferent person, neutral between the parties, appointed by the court
to receive and preserve the property in litigation pendente lite when it is not seem
reasonable to the court that either party will hold it.

Q: Who among the parties does the receiver represent?

A: Neither the plaintiff nor the defendant. He is an AGENT OF THE COURT.

Example: The ownership of a piece of land is in controversy. To be fair for both parties
claiming the land, especially when both of them are in possession of it, the court will
manage it. The court will appoint a receiver and the income will be deposited. So it is
the same as an administrator.

Q: Who appoints the receiver?

A: 1. Court where the case is pending.
2. By the CA, or a member thereof.
3. By the SC, or a member thereof.

Under the new rules the application for receivership is now verified.

Q: What are grounds for receivership?

A: We have a,b,c,d of section 1.

a) When it appears from the verified application, and such other proof 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 by appointed to administer and preserve it;

BAR Q: A filed a case against B to collect unpaid loan. B, the defendant has no other
property left except a piece of land. Meaning of A wins, that land is the only property the
he can levy. And to preserve the property A, the plaintiff filed an application to place the
property under receivership. Is the petition proper?
ANSWER: The SC said NO, because receivership is only proper when the property to be
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placed under receivership is the subject of the litigation. In this case, the subject of
litigation is not the property but money. I am collecting a loan which is different from
recovery of possession or ownership of land.

QUESTION: Suppose the defendant is trying to destroy the property or run away with it
or dispose it?
ANSWER: You better get an attachment and not a receivership. That is the tricky part.

b.) When it appears in an action by the mortgagee for the foreclosure of a mortgage
that the property in is danger of being wasted or dissipated 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;

This applies or granted by law to a mortgagee.

Under the law on mortgage, if the mortgagor cannot pay, mortgagee can foreclose. And
if the property is in danger of being wasted or dissipated or materially injured,
mortgagee can ask for receivership.

Or the parties have stipulated in their agreement that while foreclosure proceeding is
going on, they can place the property under receivership. In Bank Mortgage Contracts,
meron nito.

c.) After judgment, to preserve the property during the pendency of an appeal, or
to dispose of it according to the judgment, or to aid execution when the writ of
execution has been returned unsatisfied or the judgment obligor refuses to apply
his property in satisfaction of the judgment, or otherwise to carry the judgment
into effect;

Generally, you file a Provisional Remedy while the case is going on. Except under par.
c.

Receivership is not only available while the case is pending. It is available even after
judgment to:
1. preserve the property during the pendency of an appeal.

QUESTION: Where will you file you petition for receivership? Before the CA or the trial
court?
ANSWER: The last par. of sec. 1, appellate court may allow the filing of the
receivership in the trial court that decided it although the trial court has already lost
jurisdiction because of the appeal.

QUESTION: Is this supported by Rule 41?

ANSWER: YES. Rule 41, Section 9, last paragraph. Once the appeal is perfected, the
trial court losses jurisdiction over the case except to issue orders for the preservation
and protection of the rights of the parties while on appeal. This is part of the Residual
Powers of the RTC.

2. dispose of it according to the judgment.

3. to aid execution when the writ of execution has been returned unsatisfied
or the judgment obligor refuses to apply his property in satisfaction of the
judgment.

QUESTION: Is this provision or ground supported by the rules on execution? Is there a

provision in the rules of court ?
ANSWER: YES, in remedies in aid of execution. Rule 39 sec. 41. In the execution stage,
you can appoint a receiver to preserve the property which is to be levied.

4. carry the judgment into effect.

d.) Whenever in other cases it appears that the appointment of the receiver is the
most convenient and feasible means of preserving, administering, or disposing
of the property in litigation.

It’s the broadest. Anything under the sun can fall on this ground.
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Sec. 2. Bond on appointment on receiver.- Before issuing the order appointing a

receiver, the court shall require the applicant to file a bond executed to the party
against whom the application is presented, in an amount to fixed by the court, to the
effect that the applicant will pay such party all damages he may sustain by reason of
the appointment of such receiver in case the applicant shall have procured such
appointment without sufficient cause, and the court may, in its discretion, at any time
after the appointment require an additional bond as further security for such
damages.

REQUISITES FOR RECEIVERSHIP:

1. Verified application. (under Section 1).
2. Bond (under this section – 2).

Sect. 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
matters 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.

Sect. 4. Oath and bond of receiver.- Before entering upon his duties, the receiver shall
be sworn to perform them faithfully, and shall file a bond, executed to such person and
in such sum as the court may direct, to the effect that he will faithfully discharge his
duties in the action or proceeding and obey the orders of the court.

Do not confuse the bond here with the bond in Section 2.

Section 2 – Bond is posted by the party. Section 4 – Bond is posted by the receiver.

Sect. 5. Service of copies of bonds; effect of disapproval of the same. – The person filing
a bond in accordance with the provisions of this Rule shall forthwith serve a copy
thereof on each interested party, who may except to its sufficiency or of the surety or
sureties thereon. If either the applicant’s or the receiver’s bond is found to be
insufficient in amount, or if the surety or sureties thereon fail to justify, and a bond
sufficient in amount with sufficient sureties approved after justification is not filed
forthwith, the application shall be denied or the receiver discharged, as the case may
be. If the bond of the adverse party is found to be insufficient in amount or the surety
or sureties thereon fail to justify, and a bond sufficient in amount with sufficient
sureties approved after justification is not filed forthwith, the receiver shall be
appointed or re-appointed, as the case may be.

Sec. 6. General powers of receiver.- Subject to the control of the court in which the
action or proceeding is pending, a receiver shall have the power to bring and defend in
such capacity, actions in his own name: to take and keep possession of the property
in controversy; to receive rents; to collect debts due to himself as receiver or to the
fund, property, estate, person, or corporation of which he is a receiver; to compound
for and compromise the same; to make transfers; to pay outstanding debts; to dived
the money and other property that shall remain among the persons legally entitled to
receive the same; and generally to do such acts respecting the property as the court
may authorize. However, funds in the hands of a receiver may be invested only by
order of the court upon which consent of all parties to the action.

No action may be filed by or against a receiver without leave of the court which
appointed him.

What are the powers of the receiver? Just read the provision. It is like the power of the
manager.
The last paragraph is new. The one who files an action for receivership must secure the
permission of the court.

Sec. 7. Liability for refusal or neglect to deliver property to receiver.- A person who
refuses or neglects, upon reasonable demand, to deliver to the receiver all the
property, money, books, deeds, notes, bills, documents and papers within his power
or control, subject of or involved in the action or proceeding , or in case of
disagreement, as determined and ordered by the court, may be punished for
contempt and shall be liable to the receiver for the money or the value of the
property and other things so refused or neglected to be surrendered , together with all
damages that may have been sustained by the party or parties entitled thereto as a
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consequence of such refusal or neglect.

If you refuse or neglect to deliver the property to the receiver, you will be liable for
contempt of court.

Sec. 8. Termination of receivership; compensation of receiver.-Whenever the court,

motu propio or on motion of either party, shall determine that the necessity for a
receiver no longer exists, it shall, after due notice to all interested parties and
hearing, settle the accounts of the receiver, direct the delivery of the funds and other
property in his possession to the person adjudged to be entitled to receive them,
and order the discharge of the receiver from further duty as such. The court shall
allow the receiver such reasonable compensation as the circumstances of the case
warrant, to be taxed as costs against the defeated party or apportioned as justice
requires.

QUESTION: When do you terminate a receivership?

ANSWER: When the grounds enumerated under section 1 no longer exists.

Sect. 9. Judgment to include recovery against sureties.- The amount, if any, to be

awarded to any party upon any bond filed in accordance with the provisions of this
Rule, shall be claimed, ascertained, and granted under the same procedure prescribed
in Section 20 of Rule 57.

QUESTION: How do you claim for damages?

ANSWER: Follow Rule 57, Sect. 20. Take note: No separate action to claim for
damages