[G.R. No. 28611. January 30, 1929.

]
ILDEFONSO DE LA ROSA, and GO KEE, plaintiffs-appellees, vs.
FRANCISCO DE BORJA, defendant-appellant.
Sumulong, Lavides & Hilado for appellant.
Crispin Oben for appellees.
SYLLABUS
1. RECEIVES; COMMON LAW RECEIVE; VALIDITY OF BONDS. A
person who exercises the functions of a receiver without a judicial
appointment thereto, may nevertheless be regarded as a common law
receiver and a receiver's bond given by him is valid and enforcible.
2. ID.; LIABILITY FOR LOSSES. A person who has assumed a
receiver's responsibility for the care and conservation of the property left in his
possession is liable for losses due to unauthorized business ventures carried
on with the assets entrusted to him.
3. VENUE; EFFECT OF FAILURE TO OBJECT IN TIME. The
defendant did not object to the venue of the present action at the time of
entering his appearance in the case. Held, that his failure to do so constituted
a waiver on his part of all objection to the place or tribunal in which the action
was brought.

DECISION

OSTRAND, J :
p

Over ten years ago, Ildefonso de la Rosa, in his capacity as

administrator of the estate of the deceased Go Lio, brought an action in the

Court of First Instance of Nueva Ecija against one Enrique Go Cotay for the
liquidation and partition of a partnership alleged to have been formed by Go
Lio and the also deceased Go Cosing, the father of Go Cotay. After the death
of the original partners, Go Cotay took possession of the property of the
partnership and assumed the management of its affairs. Go Cotay denied the
existence of the partnership, but upon trial the Court of First Instance, on July
20, 1918, rendered a decision declaring that the business relations between
Go Lio and Go Cosing were that of a true partnership and held that the estate
of Go Lio was entitled to one-half of the net assets of said partnership. The
court further ordered the liquidation of the partnership for the purpose of
distributing its assets.
Thereafter, the trial court, on motion of the plaintiff, appointed a receiver
to take charge of the property in question, but on his own representation, Go
Cotay was intrusted with the care of the property in controversy upon the filing
of a bond in the sum of P10,000. Three years later, the parties to the original
action presented the following stipulations in writing to the trial court:
"AGREEMENT
"Both parties through their respective counsel, submit the
following agreement to the honorable court:
"That the case be forwarded to the Supreme Court upon the
defendant's appeal, in its present state, suspending the liquidation
proceedings ordered in the appealed judgment; defendant to remain in
possession of the property in controversy upon giving a bond in favor of
the plaintiff in the sum of twenty-five thousand pesos (P25,000),
Philippine currency, which must be filed within a period of twenty (20)
days from this date, in order to answer for the execution of the judgment
to be rendered fixing the plaintiff's participation in the property in
question, should the latter be affirmed by the Supreme Court, it being
understood that the former bond of P10,000 is hereby cancelled.
"Both parties so submit it, and respectfully pray the honorable
court to approve this agreement, issuing orders in pursuance thereof.

"Cabanatuan, Nueva Ecija, December 7, 1921."

In accordance with the terms of the stipulation, Go Cotay
furnished a bond for P25,000, which reads as follows:
"PHILIPPINE ISLANDS, PROVINCE OF NUEVA ECIJA, CABANATUAN
"Whereas in an action pending before the Court of First Instance
of the Province of Nueva Ecija, Sixth District, Philippine Islands, wherein
Ildefonso de la Rosa, administrator of the intestate estate of Go Lio,
deceased, is plaintiff, and Enrique Ortega Go Cotay defendant, the said
defendant has applied to be the receiver of the property of this
complaint.
"And whereas the law gives security to the plaintiff.
"Now therefore, know all men by these presents:
"That Enrique Go Cotay, of San Isidro, Nueva Ecija, as principal
obligor, and Francisco de Borja, of Santa Rosa, Nueva Ecija, Santiago
Lucero, of Cabanatuan, Nueva Ecija, and Antonio Vallarta, of San Isidro,
Nueva Ecija, as sureties, do hereby acknowledge themselves bound
jointly and severally to the said plaintiff Ildefonso de la Rosa,
administrator of the estate of the deceased Go Lio, in the sum of twentyfive thousand pesos (P25,000), to the faithful payment of which we, our
heirs, and our legal representatives, are really and truly and jointly and
severally bound.
"The conditions of this obligation are as follows:
"To answer for the payment of the damages which Enrique Go
Cotay as receiver of the store for the purchase and sale of sundry
mercantile goods, abandonment and any other inexcusable cause, may
come to the aforesaid objects contained in the complaint, of which he is
the receiver.
"In which case, this obligation shall become null and void;
otherwise, it shall remain in full force and effect.

"(Sgd.) ENRIQUE GO COTAY

"Principal Obligor"

The bond was signed on January 13, 1922, by Francisco Borja,

Santiago Lucero, and Antonio Vallarta as sureties.
The appeal referred to in the aforesaid stipulations was dismissed by
this court on the ground that the liquidation of the affairs of the partnership
was not completed. 1 Upon the return of the record to the Court of First
Instance of Nueva Ecija, the proceedings in the liquidation were renewed. In
the meantime Go Cotay continued as a common law receiver, and on
December 13, 1924, the Court of First Instance issued an order in which it
was recited that all of the property of the partnership had disappeared, due to
losses sustained during the period from 1918 until 1922 and that, therefore,
the plaintiff could recover nothing from the defendant. From that order both
parties appealed to this court, the plaintiff appealing from the order of
December 13, 1924, in which it was declared that the partnership had no
assets. The defendant appealed from the decision of July 20, 1918, in which it
was declared that the partnership existed and that the estate of Go Lio was
entitled to one-half of the property in question. This court, in a decision dated
January 15, 1926, affirmed the decision of the 20th of July, 1918, and
reversed the order of December 13, 1924. 1 The court further held that while
Go Cotay was a manager of the partnership prior to August 3, 1918, he must
be classified as a receiver (depositario) subsequent to that date and,
consequently, was responsible for the losses during that receivership, which
losses amounted to the sum of P60,598.28; that the losses were due to the
fact that Go Cotay continued the business of the partnership while it was in
liquidation; that the continuation of the business after he had been appointed
receiver was not authorized by the court and that he, therefore, was bound to
indemnify the estate of Go Lio for one-half of the losses incurred during that
period.
After the case was returned to the Court of First Instance, that court,
upon motion of the administrator De la Rosa, appointed Go Kee, one of the

sons and heirs of Go Lio, coadministrator of the estate. Thereafter, a writ of

execution of the judgment of the Supreme Court was issued against Go Cotay
but was returned unsatisfied by the sheriff, who was unable to find any
property belonging to the partnership or to Go Cotay himself. In view of this
fact, that plaintiff filed a motion praying the Court of First Instance to issue
execution against the herein defendant, Francisco de Borja, as one of the joint
and several sureties on the bond hereinbefore set forth, but under the date of
July 12, 1926, said court denied the motion on the ground that the sureties
were liable only for the damages caused through the fault, negligence or
abandonment of Go Cotay in his capacity as receiver of the partnership
property and that the existence of such damages had not been shown. The
plaintiff thereupon filed a petition with the Supreme Court of First Instance to
issue the writ of execution prayed for, but following the decision in the case of
De la Riva vs. Molina Salvador (32 Phil., 277), the Supreme Court denied the
petition 1 on the ground that the damages in question were not for unlawful
appointment of a receiver, but for the receiver's mismanagement, and that,
therefore, the liability of the sureties on the bond could only be enforced by a
separate action and not by a mere motion in the receivership proceedings.
In conformity with the indications in the order quoted, the administrators
of the estate of Go Lio brought the present action upon aforesaid bond against
Francisco de Borja, the sole surviving surety. The venue was laid in Manila,
the coadministrator Go Kee alleging that he was a resident of the city. In their
complaint the plaintiffs set forth the essential facts and prayed that the
defendant be ordered to pay the full amount of the bond, P25,000. The
defendant, in his answer, pleaded the general issue and set up as special
defenses (1) that Go Cotay was never appointed receiver and was only left in
possession of the partnership property upon the filing of the bond referred to;
(2) that as surety on the bond, in question, he did not undertake to respond for
all the acts of Go Cotay but that his liability is limited to that set forth in the
penultimate clause of the bond, viz., "to answer for the payment of the
damages which Enrique Go Cotay as receiver of the store for the purchase
and sale of sundry mercantile goods, abandonment and any other inexcusable

cause, may come to the aforesaid objects contained in the complaint, of which
he is the receiver;" (3) that the bond was not renewed after the appeal referred
to in the stipulations of December 7, 1921, had been finally determined by the
Supreme Court and that therefore the bond had lost its force and effect; and
(4) that the decision of the Court of First Instance of Nueva Ecija dated July
12, 1926, isres adjudicata. The defendant also set up a counterclaim for the
sum of P8,000 as damages caused by the institution of this action.
Upon trial the Court of First Instance of Manila dismissed the
defendant's counterclaim and rendered judgment in favor of the plaintiffs for
the sum of P25,000, with legal interest from the date of the filing of the
complaint, and for the costs. From this judgment the defendant appealed.
Under his first assignment of error, the appellant argues in substance
that the bond in question purports to be the bond of a receiver; that the
principal Go Cotay never was appointed receiver for the property and affairs of
the partnership; that there therefore was no valid principal obligation; and that
consequently under the provisions of article 1824 of the Civil Code, there
could be no valid bond. This argument seems far-fetched and may be
answered in very few words. It is true that the principal Go Cotay was not
formally appointed receiver in equity, but he virtually assumed the obligation of
a common law receiver and as such was bound to account for the assets of
the partnership placed under his care. That obligation was perfectly valid and
it was no error to require a bond for its fulfillment. It is true that the court had
no power to compel the execution of the bond, but it had the power to appoint
a receiver in equity, and if Go Cotay chose to give the bond rather than to
submit to such a receivership, he is bound by such bond and, together with his
sureties, must take the consequences. As stated in the standard work of High
on Receivers, 4th ed., par. 124:
"Where, upon a bill in equity to enforce an interest in a trust fund
and for a receiver pendente lite, the court refuses to appoint a receiver,
upon condition of defendant executing a bond to account as receiver for

all goods and money which have come into his possession, and to pay
them over pursuant to the decree of the court, such a bond will be
deemed good as a common-law obligation. And the obligor, although not
considered as a receiver or officer of the court, stands in the light of one
who, for a personal accommodation, has assumed a legal responsibility,
and after receiving the benefits of the obligation he is estopped from
denying its legality."

Appellant's second, third and fourth assignments of error deal with the
nature and extent of the liability of the defendant as surety on the bond. It is
argued that under the terms of the bond, the defendant can only be held
responsible for negligence and abandonment on the part of the principal; that
no such negligence or abandonment has been shown; and that there is no
proof of losses subsequently to the execution of the bond.
At first blush, this argument may seem rather plausible, but upon further
consideration, this impression vanishes. While the principal Go Cotay was not
formally named receiver, it is evident from the bond itself, as well as from the
previous stipulations, that he assumed a receiver's responsibility for the care
and conservation of the property left in his possession and that responsibility
was not confined to acts of negligence or abandonment on his part; "any other
inexcusable cause" would render him liable, and no excuse has been offered
for his failure to account for the property and assets in his possession and
under his control. The losses may have been due to unfortunate business
ventures, but acting in the place of a receiver, Go Cotay had not authority or
right to use the assets of the partnership for that purpose, and misfortunes of
that character can, therefore, not serve as excuses.
As to the amount of the plaintiff's recovery, it is to be observed that
shortly before the execution of the bond and after Go Cotay had entered upon
his common law receivership, the plaintiffs' share of the net assets of the
partnership were valued at over P30,000, and the presumption is that this
condition continued until the contrary was shown (Torres vs. Genato, 7 Phil.,
204). The fact that a bond of as much as P25,000 was given, strengthens this

presumption and indicates that the disappearance of the property must have
occurred after the bond was executed.
The fifth assignment of error relates to the effect of the order of July 12,
1926, in which the Court of First Instance refused to issue a writ of execution
against the herein appellant, who now contends that the conclusions
contained in that order are res adjudicata. We do not think that such is the
case; in the mandamus case, this court held that in order to enforce the herein
appellant's liability on the bond, a separate action was necessary. The
pronouncements of the Nueva Ecija Court can, therefore, only be regarded
as obiter dicta expressed outside of the jurisdiction of the court and therefore
lacking the force of an adjudication.
The sixth assignment of error has reference to the fact that the plaintiff
Go Kee, as a foreign subject, was not a resident of the City of Manila, and
that, therefore, the present action was brought in a jurisdiction where neither
the plaintiffs nor the defendant were residing. There is nothing in this
contention. The residence referred to in section 377 of the Code of Civil
Procedure need not necessarily be permanent and the record shows that Go
Kee had his actual residence in Manila at the time the action was brought. But
be this as it may, the fact remains that the defendant submitted to the
jurisdiction of the Manila Court and did not properly raise the point in question
until after the judgment in the case had been rendered. Section 377 of the
Code of Civil Procedure provides, among other things that "the failure of a
defendant to object to the venue of the action at the time of entering his
appearance in the action shall be deemed a waiver on his part of all objection
to the place or tribunal in which the action is brought, except in the action
referred to in the first sixteen lines of this section relating to real estate, and
actions against executors, administrators, and guardians, and for the
distribution of estates and payments of legacies." As will be seen, the
defendant's objection came altogether too late.
The defendant's remaining assignments of error are consequences of
the foregoing assignments and need not be discussed.

The appealed judgment is, in our opinion, in accordance with the law
and the facts and is affirmed with the costs against the appellant. So ordered.
|||

(de la Rosa v. de Borja, G.R. No. 28611, [January 30, 1929], 53 PHIL 990-999)
[G.R. No. L-17176. October 30, 1962.]
ROSENDO RALLA and PABLO RALLA, petitioners, vs. HON.
MATEO L. ALCASID, as Judge of the Court of First Instance of
Albay and PEDRO RALLA,respondents.

Madrid Law Office for petitioners.

Victorino P. Abrera for respondents.
SYLLABUS
1. RECEIVERSHIP; APPOINTMENT OF RECEIVER NOT A MATTER OF
ABSOLUTE RIGHT; MATTERS TO BE CONSIDERED BY COURTS. The
appointment of a receiver is not a matter of absolute right, but depends principally
upon the sound discretion of the court. Among the consequences and effects
considered by the courts before appointing a receiver are: (a) whether or not the
injury resulting from such appointment would probably be greater than the injury
ensuing if the status quo is left undisturbed; and (b) whether or not the
appointment will imperil the interests of others whose rights deserve as much a
consideration from the court as those of the person requesting for receivership.

DECISION

BENGZON, J :
p

Statement. The instant petition for certiorari seeks to annul the orders of
respondent judge appointing a receiver and refusing a bond to dissolve the
receivership.
Seeking to recover physical possession of the parcels of land involved in the
receivership, petitioners submit as alternative prayers (a) modification of the order
appointing the receiver so that the receivership would only embrace certain
parcels of land, and exclude others; or (b) discharge of receiver upon submission
of a counter-bond of P20,000.00; or (c) increase of the receiver's bond from
P10,000.00 to P20,000.00.
Facts. On January 5, 1960, in the Court of First Instance of Albay, Pedro Ralla
filed against his father Rosendo Ralla and his brother Pablo Ralla, an action for
partition involving 212 parcels of land allegedly valued at P270,000.00. The
complaint after making proper allegations, also prayed for the appointment of a
receiver.
Pablo Ralla, in his answer, asserted exclusive ownership over a number of those
parcels; Rosendo Ralla's ownership of other parcels; and ownership of the rest
by the conjugal estate of Rosendo and his deceased wife, Paz Escarilla.
Rosendo Ralla equally asserted exclusive ownership over a number of the said
parcels; Pablo Ralla's exclusive ownership of those claimed by the latter; and
conjugal ownership of the rest of the parcels by Rosendo with his deceased wife,
Paz Escarilla.
After hearing the prayer for appointment of a receiver, the respondent court
issued an order appointing a receiver of all the parcels of land enumerated in the
inventory submitted by Pedro Ralla, except certain parcels of land. The Municipal
Treasurer of Ligao, Albay, Vicente Real, qualified as receiver with a bond of
P10,000.00.
A motion for reconsideration was denied. While such motion was pending, above
petitioners presented an omnibus "Motion to be allowed to file a bond for the
discharge of the receiver and/or Motion to resolve the motion for reconsideration

of the order dated July 21, 1959 and motion to require accounting and increase of
bond, if discharge of the receiver is not allowed."
However, respondent court entered an order denying the motion to reconsider the
appointment of a receiver, and the motion to discharge the receivership upon the
filing of a bond.
Issue. On the principal contention that the respondent judge exceeded his
jurisdiction or abused his discretion when he decreed the receivership and
appointed a receiver in a partition proceeding, petitioners submit the instant
petition for certiorari.
Discussion. They rest their case on the following propositions: (1) in a partition
proceeding, generally, no administration is necessary and the appointment of a
receiver is irregular; (2) the court appoints a receiver only after full consideration
of the facts and circumstances of each particular case; (3) the consequences and
effects thereof should be well taken into account, with a view to avoiding
irreparable injustice or injury to the other parties who are entitled to as much
consideration as those seeking it; (4) in an action involving title to real property,
as in the above case, where the appointment of a receiver to take charge of the
property has the effect of taking the property out of the possession of the above
petitioners, application therefor should only be granted after a clear showing of
the necessity thereof; (5) in this case, however, there is no such necessity,
inasmuch as the rights of above respondent may be protected by notice of lis
pendens or by the filing of a bond by petitioners to compensate for the damage
sought to be prevented. Above petitioners had offered a counterbond of
P20,000.00 twice the bond submitted by the receiver; (6) as the pleadings
submitted in the lower court show the presence of adverse claim of title to a
greater portion of the lands in question, the constitution of the receivership
although protective of the rights of herein respondent Pedro Ralla would, on the
other hand, cause disproportionate injury to the rights of herein petitioners.
Respondents have met the above propositions with arguments equally
impressive, and these are, in brief, our conclusions:

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, and/or such other
proof as the judge may require, that the party applying for such appointment has
an actual interest in it and that such property is in danger of being lost, removed
or materially injured. 1 The appointment is also proper whenever it appears to be
the most convenient and feasible means of preserving, or administering the
property in litigation. 2
The appointment of a receiver depends principally upon the sound discretion of
the court; it is not a matter of absolute right. The facts and circumstances, of
each particular case determine the soundness of the exercise of such
discretion. 3 Among the consequences and effects considered by the courts
before appointing a receiver are: (a) whether or not the injury resulting from such
appointment would probably be greater than the injury ensuing if the status quo is
left undisturbed 4 ; and (b) whether or not the appointment will imperil the
interests of others whose rights deserve as much a consideration from the court
as those of the person requesting for receivership. 5
In the case at bar, the respondent court ordered the appointment of a receiver
after hearing and presentation of evidence by both parties. Eleven sessions were
had for that purpose, numerous documentary proofs were submitted. The facts
and circumstances upon which the order was based which this Court is not
prepared to revise at this time are as follows:
"(1) It was not established to the satisfaction of the Court, with few
exceptions, that the properties subject matter of the complaint for
partition are exclusive properties of the surviving spouse, the defendant
Rosendo Ralla. Most of the properties were either acquired or titled
during the marriage and in fact in the various certificates of title Exhibits
"11" to "114" the one half (1/2) undivided portion is registered in the
name of Rosendo Ralla married to Paz Escarilla, the deceased mother
of the plaintiff (Pedro Ralla).

"(2) The defendants have been disposing, conveying and transferring

properties and converting them from the character of conjugal properties
left by the deceased Paz Escarilla to the exclusive properties of the
defendants with the avowed purpose and intention of depriving plaintiff of
his right, interest, title and participation thereto and to the great damage
and prejudice of the plaintiff, as evidenced by the documents of
conveyance executed by the defendant Rosendo Ralla, marked Exhibits
"C", "D" and "E";
"(3) The products, rentals, income, assets and funds collected and
received by the defendants, since the death of said late Paz Escarilla on
December 27, 1957, up to the present, from the properties, are in danger
of being lost or removed;
"(4) The relations of the plaintiff and defendants who are co-owners are
strained, and no satisfactory arrangement for administration of the
property can be made and accomplished in spite of the efforts exerted
by this Court to prevail upon the defendants toward this end on equitable
basis;
"(5) The actuation of the defendants, the majority co-owners, results in
serious prejudice to the minority, the plaintiff, and that the plaintiff has not
been given the benefit or accounting of the products and income
therefrom, and has not been given whatsoever his corresponding and
due share thereof;
"(6) The plaintiff is being prevented by the defendants from entering the
lands in question and from even interfering and aiding in the
administration thereof."

In this atmosphere of strained relationship between the parties, of unsatisfactory

arrangement for the administration of the properties involved, not to mention the
conveyance by petitioners of some of the conjugal properties left by the
deceased spouse of Rosendo Ralla, Paz Escarilla, it was not entirely improper to
direct the appointment of a receiver. All the circumstances found by the lower

court apparently justify the constitution of the receivership of the lands in

question. The requirements of law have been more than satisfied. 6 Even under
petitioners' theory that the granting therefor should only be "after a clear showing
of the necessity thereof" the instant appointment of a receiver appears to be
proper.
The case of Leonides Chunaco, et al. vs. Hon. Perfecto Quicho, et al., 7 similar in
nature to the present case, was resolved by this Court along the same lines with
our conclusion in this litigation. There we held:
"While in a partition proceeding it is generally unnecessary for the court
to appoint a receiver, however, (as held in the case of Tuason vs.
Concepcion, 54 Phil., 408) where the relations among the co-owners are
strained, and no satisfactory arrangement for administration can be
accomplished, the appointment of a receiver is not an abuse of
discretion.

"This ruling has been confirmed by Art. 492, par. 3 of the New Civil Code
authorizing the appointment of an administrator (which term would
include a receiver) in cases where the action of the majority co-owners
results in serious prejudice to the minority.
"Should there be no majority, or should the resolution of the majority be
seriously prejudicial to those interested in the property owned in
common, the court, at the instance of an interested party, shall order
such measures as it may deem proper, including the appointment of an
administrator."

We likewise sustain the lower court's order fixing the receiver's bond at only
P10,000.00 because the records show, the gross income of the estate under
receivership lands, can not be lost amounted quarterly to more or less
P7,000.00 only. 8 Considering that the parties have been withdrawing their
corresponding share from the net income, it is easy to understand that the bond
already filed sufficiently answers for any cash remaining in the receiver's hands.

Judgment. Without further discussing the other points raised by petitioners, we

find no inclination to hold that the respondent court abused its discretion in the
issuance of its questioned orders.
[G.R. No. L-13832. March 29, 1960.]
GERONIMO DE LOS REYES, petitioner, vs. HON. FROILAN
BAYONA, ETC., ET AL., respondents.
Bausa, Ampil & Suarez for petitioner.
Tansinsin, Delgado, Flores & Macapagal for respondents.
SYLLABUS
RECEIVERSHIP; WHEN APPOINTMENT OF A RECEIVER SHOULD
NOT BE ALLOWED. The Supreme Court cannot look with favor on any
judicial order or arrangement whereby the possession of a certain property by
one of the parties, which that court and the Court of Appeals, in previous
cases, considered as just and reasonable, should be transferred to a receiver,
if by so doing the other party would be obtaining indirectly what he could not
obtain directly, namely, deprive the former of the possession of the property
until the controversy between them is finally settled.

DECISION

MONTEMAYOR, J :
p

This is a petition for certiorari with preliminary injunction filed by

Geronimo de los Reyes against respondent Hon. Bayona, as Presiding Judge,
Branch I, Court of First Instance of Manila, Maria B. Castro and Arsenio
Tenchavez, to annul the order of respondent Judge, dated April 30, 1958, in

Civil Case No. 3910, appointing Tenchavez receiver of the property in

question on the filing of a bond in the sum of P50,000.
In our resolution of May 14, 1958, giving due course to the petition, we
granted the petition for preliminary injunction upon the filing of a surety bond
in the amount of P2,000.
The following may serve as background for a better understanding of
this case. On August 31, 1943, Geronimo de los Reyes, later referred to as
Reyes, obtained a loan of P120,000 in Japanese military war notes from Maria
B. Castro, later referred to as Castro, with interest at the rate of 6% per year,
said interest for the first two years to be paid in advance. To guarantee the
payment of the loan, Reyes executed in favor of Castro a document purporting
to be a deed of sale with right of repurchase, over two parcels of land in
Calisunga, Calauan, Laguna, one parcel containing 168.9909 hectares and
the other 77.2798 hectares, covered by certificates of title Nos. 8254 and 8255
of the Register of Deeds of Laguna. On the same day, Castro as vendee,
allegedly leased the two parcels to Reyes for an annual rental equivalent to
the interest on the loan for a year. Claiming that the deed of sale with right to
repurchase did not express the true intention of the parties, but that it was
merely a mortgage to secure the payment of the loan, Reyes, in October
1947, filed Civil Case No. 3910 with the Court of First Instance of Manila
against Castro and her husband Espinosa, alleging in his complaint that since
December 1944 up to January 1945, he (Reyes) had repeatedly tendered to
Castro the payment of the principal of the loan, but that she refused to accept
it, and so he filed Civil Case No. 3134 in the Court of First Instance of Manila,
at the same time consigning in court in her favor the sum of P120,000,
evidenced by an official receipt issued by the Clerk of Court; that despite the
pendency of said Civil Case No. 3134, Castro executed an affidavit of
consolidation of ownership of the two parcels of land, all without his
knowledge and consent, as a result of which, the Register of Deeds of Laguna
cancelled transfer certificates of title Nos. 8254 and 8255 in his name and
issued in lieu thereof, transfer certificates of title Nos. 953 and 954 in Castro's

name. Upon discovery of the consolidation of ownership made by Castro he

(Reyes) took steps toward the reconstitution of the records of Civil Case No.
3134, whose original records presumably were destroyed during the war,
particularly the battle for the liberation of Manila, but his efforts were frustrated
by the denial by the trial court on the ground that the period for reconstitution
had already expired. So, as already said, Reyes filed Civil Case No. 3910 in
the Court of First Instance of Manila.
In the meantime, on the theory that the two parcels in question had
really been sold to her by Reyes and that she had thereafter leased the same
to him and that he failed to pay the annual rentals, Castro on October 24,
1947 filed a complaint for unlawful detainer against Reyes in the Justice of the
Peace Court of Calauan, Laguna. Despite the answer filed by him setting up
the defense that the two parcels had not really been sold by him to Castro, but
only mortgaged to secure the payment on the loan of 120,000 in Japanese
military notes; that during the Japanese occupation, he had repeatedly
tendered payment of the loan to her, but that she refused to accept payment,
as a result of which he consigned the amount in court and filed Civil Case No.
3134 of the Court of First Instance of Manila to compel her to accept the
payment of the loan, whose sum had been consigned in court; that because
he failed to reconstitute the records of Civil Case No. 3134 on time, he had to
file Civil Case No. 3910 in the same Court and that said case was then
pending, the Justice of the Peace Court on October 12, 1949, rendered
judgment in favor of Castro. Pending appeal of the unlawful detainer case in
the Court of First Instance of Laguna (Civil Case No. 9858), the said court
over his objection issued a writ of execution of the judgment of the Justice of
the Peace Court. Failing to secure a reconsideration of the order of execution,
Reyes filed a petition for certiorari before this Tribunal to annul said order of
execution, G. R. No. L 8960. * On January 31, 1957, we promulgated a
decision in the said certiorari case, holding that the order of execution was
improvidently issued, inasmuch as more than five years had elapsed since the
judgment of the Justice of the Peace Court was rendered; that there was
reason to believe that the deed conveying the two parcels of land to Castro

was one of mortgage, rather than of sale, and that furthermore, even
assuming that it were a sale, Castro not being the original owner and
possessor of the parcels but only a vendee a retro, the vendor, Reyes had the
right to continue in his possession until the case between them was finally
determined. As a result, the order of execution was set aside and the writ of
preliminary injunction issued was made permanent.
It would appear, however, that as a result of the writ of execution issued
by the Court of First Instance of Laguna in Civil Case No. 9858, which as
already stated was brought to this Court on certiorari in G. R. No. L-8960,
Castro was placed in possession of the property in question from March 16,
1955 to July 30, 1957, she evidently giving up possession in favor of Reyes,
only as a result of our decision in G. R. No. L-8960. This explanation of
Castro's possession of the property for over two years, will help us understand
the later decision of the trial court, ordering her to return possession of the
land to Reyes and to account for the income she received therefrom. The
dispositive part of said decision reads:
"WHEREFORE, judgment is hereby rendered dismissing the case
for lack of appellate jurisdiction over the subject matter of the action and
the plaintiff is ordered to return to the defendant the possession of the
two parcels of land now covered by Transfers Certificates of Title Nos. T953 and T-964 and to account to the latter for the income she received
therefrom during the period she was in possession thereof. The plaintiff
is further ordered to pay the costs in both instances."

Castro filed a petition for certiorari in the Court of Appeals to set aside
the above-mentioned judgment. The Court of Appeals citing and reproducing
our decision in G. R. No. L-8960, aforementioned, on November 7, 1957,
denied the petition for certiorari, saying:
"The circumstances of the case have not changed from the time
of the promulgation of the decision of the Supreme Court referred to and,
therefore, the instant petition for certiorari should be, as it is hereby
DENIED, for lack of merit. With costs against the petitioner."

According to the present petition for certiorari before us (G. R. No. L13832), in Civil Case No. 3910 of the Court of First Instance of Manila, on
August 29, 1957, petitioner Reyes was notified of the hearing of the Urgent
Petition for Receivership" filed by Castro; that Reyes opposed the petition on
October 28, 1957; and that respondent Judge Bayona issued an order
denying the petition for appointment of a receiver, thus:.
"After going over the arguments of the parties, this Court is of the
opinion and so holds that the appointment of a receiver at this time is
inappropriate except until after the termination of the trial of this case.
The trial of this case has been set for several days in accordance with
the calendar, and this Court as well as the parties are bent in terminating
this case as soon as possible.
"In view of the foregoing, this Court is of the opinion and so holds
that the appointment of a receiver in this case should be held in
abeyance until after the decision of this Court shall have been rendered."

However, on May 7, 1958, Reyes was served a copy of the order of

respondent Judge, dated April 30, 1958, appointing respondent Arsenio
Tenchavez receiver of the properties in question. This order based on an exparte petition reiterating the request for appointment of a receiver, which
request had previously been denied.
It should not be difficult to gather from our decision in G. R. No. L-8960
and the decision of the Court of Appeals in CA-G.R. No. 19833-R that the
courts, in justice to the parties, particularly, Reyes, considered possession in
him instead of Castro as more reasonable and just. It is, therefore, to be
expected that we cannot look with favor on any judicial order or arrangement
whereby this possession of Reyes should be transferred to a receiver,
because by so doing, Castro would be obtaining indirectly what she could not
obtain directly, namely, deprive Reyes of the possession of the property until
the controversy between them is finally settled.

Petition for certiorari is hereby granted; the order of April 30, 1958
appointing Arsenio Tenchavez receiver, is set aside and the writ of preliminary
injunction is made permanent. Respondent Maria B. Castro will pay the costs.
[G.R. No. L-34192. June 30, 1988.]
NATIONAL INVESTMENT AND DEVELOPMENT CORPORATION,
EUSEBIO VILLATUYA, MARIO Y. CONSING and ROBERTO S.
BENEDICTO, petitioners, vs.HON. BENJAMIN AQUINO, in his official
capacity as Presiding Judge of Branch VIII of the Court of First
Instance of Rizal, BATJAK, INC., GRACIANO A. GARCIA and
MARCELINO CALINAWAN, JR., respondents.
[G.R. No. L-34213 June 30, 1988]
PHILIPPINE NATIONAL BANK, petitioner, vs. HON. BENJAMIN H.
AQUINO, in his capacity as Presiding Judge of the Court of First
Instance of Rizal, Branch VIII and BATJAK, INCORPORATED,
respondents.
Cruz, Palafox, Alfonso and Associates for petitioner NIDC in G.R. No. 34192.
The Chief Legal Counsel for petitioner PNB in G.R. No. 34213.
Reyes and Sundiam Law Office for respondent Batjak, Inc.
Duran, Chuanico, Oebanda, Benemerito & Associates for private respondents in
G.R. Nos. 34192 & 34213.
Tolentino, Garcia, Cruz & Reyes for movant in G.R. No. L-34192.

DECISION

PADILLA, J :
p

These two (2) separate petitions for certiorari and prohibition, with preliminary
injunction, seek to annul and set aside the orders of respondent judge, dated 16
August 1971 and 30 September 1971, in Civil Case No. 14452 of the Court of
First Instance of Rizal, entitled "Batjak, Inc. vs. NIDC, et al." The order of 16
August 1971 1 granted the alternative petition of private respondent Batjak, Inc.
(Batjak, for short) for the appointment of receiver and denied petitioners' motion
to dismiss the complaint of said private respondent. The order dated 30
September 1971 2 denied petitioners' motion for reconsideration of the order
dated 16 August 1971.
The herein petitions likewise seek to prohibit the respondent judge from hearing
and/or conducting any further proceedings in Civil Case No. 14452 of said court.
Batjak, (Basic Agricultural Traders Jointly Administered Kasamahan) is a FilipinoAmerican corporation organized under the laws of the Philippines, primarily
engaged in the manufacture of coconut oil and copra cake for export. In 1965,
Batjak's financial condition deteriorated to the point of bankruptcy. As of that year,
Batjak's indebtedness to some private banks and to the Philippine National Bank
(PNB) amounted to P11,915,000.00, shown as follows:
Republic Bank P2,324,000.00
Philippine Commercial and
Industrial Bank 1,346,000.00
Manila Banking Corporation 2,000,000.00
Manufacturers Bank 440,000.00
Hongkong and Shanghai
Banking Corporation 250,000.00
Foreign Export Advances
(against immediate shipment) 555,000.00
PNB export advance line
(against immediate shipment) 5,000,000.00
TOTAL 11,915,000.00

As security for the payment of its obligations and advances against shipments,
Batjak mortgaged its three (3) coco-processing oil mills in Sasa, Davao City,
Jimenez, Misamis Occidental and Tanauan, Leyte to Manila Banking Corporation
(Manilabank), Republic Bank (RB), and Philippine Commercial and Industrial
Bank (PCIB), respectively. In need for additional operating capital to place the
three (3) coco-processing mills at their optimum capacity and maximum efficiency
and to settle, pay or otherwise liquidate pending financial obligations with the
different private banks, Batjak applied to PNB for additional financial assistance.
On 5 October 1965, a Financial Agreement was submitted by PNB to Batjak for
acceptance. The Financial Agreement reads:
"PHILIPPINE

NATIONAL

BANK

Manila,

Philippines

International Department
October 5, 1965
BATJAK,
3rd

INCORPORATED
Floor,

G.

Puyat

Bldg.

Escolta, Manila
Attn.: Mr. CIRIACO B. MENDOZA
Vice-President & General Manager
Gentlemen:
We are pleased to advise that our Board of Directors approved for you
the following:
1) That NIDC shall invest P6,722,500.00 in the form of preferred shares
of stocks at 9% cumulative, participating and convertible within 5 years
at par into common stocks to liquidate your accounts with the Republic
Bank, Manufacturers Bank & Trust Company and the PCIB which,
however, shall be applied to the latter three (3) banks accounts with the
Loans & Discounts Dept. NIDC shall match your P10 million subscription

by an additional investment of P3,277,500 within a period of one to two

years at NIDC's option;
2) That NIDC will guaranty for five (5 ) years your account with the
Manila Banking Corporation;
3) That the above banks (Republic Bank, PCIB, MBTC and Manila
Banking Corp.) shall release in favor of PNB the first and any mortgage
they hold on your properties;
4) That you shall exercise (execute) a first mortgage on all your
properties located at Sasa, Davao City; Jimenez, Misamis Occidental;
and Tanauan, Leyte and assign leasehold rights on the property on
which your plant at Sasa, Davao City is erected in favor of PNB;
5) That a voting trust agreement for five (5) years over 60% of the
outstanding paid up and subscribed shares shall be executed by your
stockholders in favor of NIDC;
6) That this accommodation shall be secured by the joint and several
signatures of officers and directors;
7) That the number of the Board of Directors shall be increased to seven
(7), three (3) from your firm and the other four (4) from the PNB-NIDC;
8) That a comptroller, at your expense, shall be appointed by PNB-NIDC
to supervise the financial management of your firm;
9) That the past due accounts of P5 million with the International
Department of the PNB shall be transferred to the Loans & Discount
Department and to be treated as a Demand Loan;
10) That any excess of NIDC investment as required in Condition 1 after
payment of the obligations to three (3) Banks (RB, MBTC, & PCIB) shall
be applied to reduce the above Demand Loan of P5 million;
11) That we shall grant you an export advance of P3 million to be used
for copra purchases, subject to the following conditions:

a) That the line shall expire on September 30, 1966 but

revocable at the Bank(s) option;

LLpr

b) That drawings against the line shall be allowed only

when an irrevocable export L/C for coconut products has been
established or assigned in your favor and you shall assign to
us all proceeds of negotiations to be received from your export
letters of credit;
c) That drawings against the line shall be limited to 50%
of the peso value of the export letters of credit computed at
P3.50 per $1.00 but total drawings shall not in any event
exceed P3,000,000.00;
d) That release or releases against the line shall be
covered by promissory note or notes for 90 days but not
beyond the expiry dates of the covering L/C and proceeds of
said L/C shall first be applied to the correspondent drawings
on the line;
e) That drawings against the line shall be charged
interest at the rate of 9% per annum and subject to 1/2%
penalty charge on all drawings not paid or extended on
maturity date; and
f) That within 90 days from date of release against the
line, you shall negotiate with us on equivalent amount in
export bills, otherwise, the line shall be temporarily suspended
until the outstanding export advance is fully liquidated.
We are writing the National Investment & Development Corporation, the
Republic Bank, the Philippine Commercial & Industrial Bank and the
Manufacturers Bank & Trust Company and the Manila Banking
Corporation regarding the above.
In connection with the above, kindly submit to us two (2) copies of your
board resolution certified to under oath by your corporate secretary

accepting the conditions enumerated above authorizing the above

transactions and the officer or officers to sign on behalf of the
corporation.
Thank you.
Very

truly

yours,

(SGD.) JOSE B. SAMSON" 3

The terms and conditions of the Financial Agreement were duly accepted by
Batjak. Under said Agreement, NIDC would, as it actually did, invest
P6,722,500.00 in Batjak in the form of preferred shares of stock convertible within
five (5) years at par into common stock, to liquidate Batjak's obligations to
Republic Bank (RB), Manufacturers Bank and Trust Company (MBTC) and
Philippine Commercial & Industrial Bank (PCIB), and the balance of the
investment was to be applied to Batjak's past due account of P5 million with the
PNB.
Upon receiving payment, RB, PCIB, and MBTC released in favor of PNB the first
and any mortgages they held on the properties of Batjak.
As agreed, PNB also granted Batjak an export-advance line of P3 million, later
increased to P5 million, and a standby letter of credit facility in the amount of
P5,850,000.00. As of 29 September 1966, the financial accommodation that had
been extended by PNB to Batjak amounted to a total of P14,207,859.51.
As likewise agreed, Batjak executed a first mortgage in favor of PNB on all its
properties located at Jimenez, Misamis Occidental and Tanauan, Leyte. Batjak's
plant in Sasa, Davao City was mortgaged to the Manila Bank which, in 1967,
instituted foreclosure proceedings against the same but which were aborted by
the payment by Batjak of the sum of P2,400,000.00 to Manila Bank, and which
amount was advanced to Batjak by NIDC, a wholly-owned subsidiary of PNB. To
secure the advance, Batjak mortgaged the oil mill in Sasa, Davao City to NIDC.

Next, a Voting Trust Agreement was executed on 26 October 1965 in favor of

NIDC by the stockholders representing 60% of the outstanding paid-up and

subscribed shares of Batjak. This agreement was for a period of five (5) years
and, upon its expiration, was to be subject to negotiation between the parties.
The Voting Trust Agreement reads:

LLphil

"VOTING TRUST AGREEMENT

KNOW ALL MEN BY THESE PRESENTS:
This AGREEMENT made and executed by the undersigned stockholders
of BATJAK, INC., a corporation duly organized and existing under the
laws of the Philippines, whose names are hereinbelow subscribed
hereinafter

called

the

SUBSCRIBERS,

and

the

NATIONAL

INVESTMENT AND DEVELOPMENT CORPORATION, hereinafter

referred to as the trustee.
WITNESSETH:
WHEREAS, the SUBSCRIBERS are owners respectively of the capital
stock of the BATJAK, INC. (hereinafter called the CORPORATION) in the
amounts represented by the number of shares set forth opposite their
respective names hereunder;

AND WHEREAS, with a view of establishing a safe and competent

management to operate the corporation for the best interest of all the
stockholders

thereof,

and

as

mutually

agreed

between

the

SUBSCRIBERS and the TRUSTEE, this Voting Trust Agreement has

been executed under the following terms and conditions.
NOW THEREFORE, the undersigned stockholders, in consideration of
the premises and of the mutual covenants and agreements herein
contained and to carry out the foregoing purposes in order to vest in the
TRUSTEE the voting rights of the shares of stock held by the
undersigned in the CORPORATION as hereinafter stated it is mutually
agreed as follows:

1. PERIOD OF DESIGNATION For a period of five (5) years from and

after date hereof, without power of revocation on the part of the
SUBSCRIBERS, the TRUSTEE designated in the manner herein
provided is hereby made, constituted and appointed as a VOTING
TRUSTEE to act for and in the name of the SUBSCRIBERS, it being
understood, however, that this Voting Trust Agreement shall, upon its
expiration be subject to a re-negotiation between the parties, as may be
warranted by the balance and attending circumstance of the loan
investment of the TRUSTEE or otherwise in the CORPORATION.
2. ASSIGNMENT OF STOCK CERTIFICATES UPON ISSUANCE The
undersigned stockholders hereby transfer and assign their common
shares to the capital stock of the CORPORATION to the extent shown
hereunder:
JAMES A. KEISTER 21,500 shares
JOHNNY LIEUSON 20,300 shares
CBM FINANCE & INVESTMENT
CORP. (C.B. Mendoza, Pres.) 5,000 shares
ALEJANDRO G. BELTRAN 4,000 shares
ESPERANZA A. ZAMORA 3,000 shares
CIRIACO B. MENDOZA 2,000 shares
FIDELA DE GUZMAN 2,000 shares
LLOYD D. COMBS 2,000 shares
RENATO B. BEJAR 200 shares
TOTAL 60,000 shares
to the TRUSTEE by virtue of the provisions hereof and do hereby
authorize

the

Secretary

of

the

CORPORATION

to

issue

the

corresponding certificate directly in the name of the TRUSTEE and on

which certificates it shall appear that they have been issued pursuant to
this Voting Trust Agreement and the said TRUSTEE shall hold in escrow
all such certificates during the term of the Agreement. In turn, the
TRUSTEE

shall

deliver

to

the

undersigned

stockholders

the

corresponding Voting Trust certificates provided for in Sec. 36 of Act No.

1459.

cdphil

3. VOTING POWER OF TRUSTEE The TRUSTEE and its successors

in trust, if any, shall have the power and it shall be its duty to vote the
shares of the undersigned subject hereof and covered by this Agreement
at all annual, adjourned and special meetings of the CORPORATION on
all questions, motions, resolutions and matters including the election of
directors and such matters on which the stockholders, by virtue of the
by-laws of the CORPORATION and of the existing legislations are
entitled to vote, which may be voted upon at any and all said meetings
and shall also have the power to execute and acknowledge any
agreements or documents that may be necessary in its opinion to
express the consent or assent of all or any of the stockholders of the
CORPORATION with respect to any matter or thing to which any consent
or assent of the stockholders may be necessary, proper or convenient.
4. FILING OF AGREEMENT An executed copy of this Agreement
shall be filed with the CORPORATION at its office in the City of Manila
wherever it may be transferred therefrom and shall constitute irrevocable
authority and absolute direction to the Officers of the CORPORATION
whose duty is to sign and deliver stock certificates to make delivery only
to said voting trustee of the shares and certificates of stock subject to the
provisions of this Agreement as aforesaid. Such copy of this Agreement
shall at all times be open to inspection by any stockholder, as provided
by law.
5. DIVIDEND The full and absolute beneficial interest in the shares
subject of this Agreement shall remain with the stockholders executing
the same and any and all dividends which may be declared by the

CORPORATION shall belong and be paid to them exclusively in

accordance with their stockholdings after deducting therefrom or
applying the same to whatever liabilities the stockholders may have in
favor of the TRUSTEE by virtue of any Agreement or Contract that may
have been or will be executed by and between the TRUSTEE and the
CORPORATION

or

between

the

former

and

the

undersigned

stockholders.
6. COMPENSATION; IMMUNITY The TRUSTEE or its successor in
trust shall not receive any compensation for its service except perhaps
that which the CORPORATION may grant to the TRUSTEE's authorized
representative, if any. Expenses, costs, charges, and other liabilities
incurred in the carrying out of the trust herein established or by reason
thereof, shall be paid for with the funds of the CORPORATION. The
TRUSTEE or any of its duly authorized representative shall incur no
liability by reason of any error of law or of any matter or thing done or
omitted

under

this

Agreement,

except

for

his

own

individual

malfeasance.
7. REPRESENTATION The TRUSTEE, being a corporation and a
juridical person shall accomplish the foregoing objectives and perform its
functions under this Agreement as well as enjoy and exercise the
powers, privileges, rights and interests herein established through its
duly authorized and accredited representative/s with full authority under
the specific appointment or designation or Proxy.
8. IRREVOCABILITY This Agreement shall during its 5-year term or
any extension thereof be binding upon and inure to the benefit of the
undersigned stockholders and their respective legal representatives,
pledges, transferees, and/or assigns and shall be irrevocable during the
said terms and/or its extension pursuant to the provisions of paragraph 1
hereof. It is hereby understood and the undersigned stockholders have
bound as they hereby bind themselves to make a condition of every
pledge, transfer of assignment of their interests in the CORPORATION

that the interests and participation so pledged, transferred or assigned is

evidenced by annotations in the certificates of stocks or in the books of
the corporation, shall be subject to this Agreement and the same shall
be binding upon the pledgees, transferees and assigns while the trust
herein created still subsists.

LLphil

9. TERMINATION Upon termination of this Agreement as heretofore

provided, the certificates delivered to the TRUSTEE by virtue hereof
shall be returned and delivered to the undersigned stockholders as the
absolute owners thereof, upon surrender of their respective voting trust
certificates, and the duties of the TRUSTEE shall cease and terminate.
10. ACCEPTANCE OF TRUST The TRUSTEE hereby accepts the
trust created by this Agreement under the signature of its duly authorized
representative affixed hereinbelow and agrees to perform the same in
accordance with the term/s hereof.
IN WITNESS HEREOF, the undersigned stockholders and the
TRUSTEE by its representatives, have hereunto affixed their signatures
this 26 day of October, 1965 in the City of Manila, Philippines.
(SGD) JAMES A. KEISER (SGD) JOHNNY LIEUSON
Stockholder Stockholder
CBM FINANCE & INVESTMENT CORPORATION
By: (SGD) C.B. MENDOZA
President
ESPERANZA A. ZAMORA (SGD) ALEJANDRO G. BELTRAN
By: (SGD) MARIANO ZAMORA
Stockholder
ESPERANZA A. ZAMORA
(SGD) FIDELA DE GUZMAN (SGD) CIRIACO B. MENDOZA

Stockholder Stockholder
(SGD) RENATO B. BEJAR (SGD) LLOYD D. COMBS
Stockholder Stockholder
NATIONAL

INVESTMENT

AND

DEVELOPMENT CORPORATION
By:
(SGD) IGNACIO DEBUQUE, JR.
Vice-President" 5

In July 1967, forced by the insolvency of Batjak, PNB instituted extrajudicial

foreclosure proceedings against the oil mills of Batjak located in Tanauan, Leyte
and Jimenez, Misamis Occidental. The properties were sold to PNB as the
highest bidder. One year thereafter, or in September 1968, final Certificates of
Sale were issued by the provincial sheriffs of Leyte 6 and Misamis Occidental 7 for
the two (2) oil mills in Tanauan and Jimenez in favor of PNB, after Batjak failed to
exercise its right to redeem the foreclosed properties within the allowable one
year period of redemption. Subsequently, PNB transferred the ownership of the
two (2) oil mills to NIDC which, as aforestated, was a wholly-owned PNB
subsidiary.
As regards the oil mill located at Sasa, Davao City, the same was similarly
foreclosed extrajudiciai by NIDC. It was sold to NIDC as the highest bidder. After
Batjak failed to redeem the property, NIDC consolidated its ownership of the oil
mill. 8
Three (3) years thereafter, or on 31 August 1970, Batjak represented by majority
stockholders, through Atty. Amado Duran, legal counsel of private respondent
Batjak, wrote a letter to NIDC inquiring if the latter was still interested in
negotiating the renewal of the Voting Trust Agreement. 9 On 22 September 1970,
legal counsel of Batjak wrote another letter to NIDC informing the latter that
Batjak would now safely assume that NIDC was no longer interested in the
renewal of said Voting Trust Agreement and, in view thereof, requested for the

turn-over and transfer of all Batjak assets, properties, management and

operations. 10
On 23 September 1970, legal counsel of Batjak sent still another letter to NIDC,
this time asking for a complete accounting of the assets, properties, management
and operation of Batjak, preparatory to their turn-over and transfer to the
stockholders of Batjak. 11
NIDC replied, confirming the fact that it had no intention whatsoever to comply
with the demands of Batjak. 12
On 24 February 1971, Batjak filed before the Court of First Instance of Rizal a
special civil action for mandamus with preliminary injunction against herein
petitioners docketed as Civil Case No. 14452. 13
On 14 April 1971, in said Civil Case No. 14452, Batjak filed an urgent ex
parte motion for the issuance of a writ of preliminary prohibitory and mandatory
injunction. 14On the same day, respondent judge issued a restraining order
"prohibiting defendants (herein petitioners) from removing any record, books,
commercial papers or cash, and leasing, renting out, disposing of or otherwise
transferring any or all of the properties, machineries, raw materials and finished
products and/or by-products thereof now in the factory sites of the three (3)
modern coco milling plants situated in Jimenez, Misamis Occidental, Sasa,
Davao City, and Tanauan, Leyte." 15

The order of 14 April 1971 was subsequently amended by respondent judge

upon an ex parte motion of private respondent Batjak so as to include the
premises of NIDC in Makati and those of PNB in Manila, as among the premises
which private respondent Batjak was authorized to enter in order to conduct an
inventory.
On 24 April 1971, NIDC and PNB filed an opposition to the ex parte application
for the issuance of a writ of preliminary prohibitory and mandatory injunction and
a motion to set aside restraining order.

Before the court could act on the said motion, private respondent Batjak filed on
3 May 1971 a petition for receivership as alternative to writ of preliminary
prohibitory and mandatory injunction. 16 This was opposed by PNB and NIDC. 17
On 8 May 1971, NIDC and PNB filed a motion to dismiss Batjak's complaint.

18

On 16 August 1971, respondent judge issued the now assailed order denying
petitioners' motion to dismiss and appointing a set of three (3) receivers.
moved for reconsideration of the aforesaid order.

20

19

NIDC

On 30 September 1971,

respondent judge denied the motion for reconsideration. 21

Hence, these two (2) petitions, which have been consolidated, as they involve a
resolution of the same issues.
In their manifestation with motion for early decision, dated 25 August 1986,
private respondent, Batjak contends that the NIDC has already been abolished or
scrapped by its parent company, the PNB.
After a careful study and examination of the records of the case, the Court finds
and holds for the petitioners.
1. On the denial of petitioners' motion to dismiss.
As a general rule, an order denying a motion to quash or to dismiss is
interlocutory and cannot be the subject of a petition for certiorari. The remedy of
the aggrieved party in a denied motion to dismiss is to file an answer and
interpose, as defense or defenses, the objection or objections raised by him in
said motion to dismiss, then proceed to trial and, in case of adverse decision, to
elevate the entire case by appeal in due course. However, under certain
situations, recourse to the extraordinary legal remedies of certiorari, prohibition
and mandamus to question the denial of a motion to dismiss or quash is
considered proper, in the interest of more enlightened and substantial justice. As
the court said in Pineda and Ampil Manufacturing Co. vs. Bartolome, 95 Phil.
930, 938:
"For analogous reasons it may be said that the petition for certiorari
interposed by the accused against the order of the court a quo denying

the motion to quash may be entertained, not only because it was

rendered in a criminal case, but because it was rendered, as claimed,
with grave abuse of discretion, as found by the Court of Appeals . . ."

and reiterated in Mead v. Argel 22 citing Yap v. Lutero (105 Phil. 1307):
"However, were we to require adherence to this pretense, the case at bar would
have to be dismissed and petitioner required to go through the inconvenience, not
to say the mental agony and torture, of submitting himself to trial on the merits in
Case No. 166443, apart from the expenses incidental thereto, despite the fact
that his trial and conviction therein would violate one of this [sic] constitutional
rights, and that, an appeal to this Court, we would, therefore, have to set aside
the judgment of conviction of the lower court. This would, obviously, be most
unfair and unjust. Under the circumstances obtaining in the present case, the flaw
in the procedure followed by petitioner herein may be overlooked, in the interest
of a more enlightened and substantial justice."

LibLex

Thus, where there is patent grave abuse of discretion, in denying the motion to
dismiss, as in the present case, this Court may entertain the petition for certiorari
interposed by the party against whom the said order is issued.
In their motion to dismiss Batjak's complaint, in Civil Case No. 14452, NIDC and
PNB raised common grounds for its allowance, to wit:
1. This Honorable Court (the trial court) has no jurisdiction over the
subject of the action or suit;
2. The venue is improperly laid; and
3. Plaintiff has no legal capacity to sue.

In addition, PNB contended that the complaint states no cause of action (Rule 16,
Sec. 1, Par. a, c, d & g, Rules of Court).
Anent the first ground, it is a well-settled rule that the jurisdiction of a Court of
First Instance to issue a writ of preliminary or permanent injunction is confined
within the boundaries of the province where the land in controversy is
situated. 23 The petition for mandamus of Batjak prayed that NIDC and PNB be

ordered to surrender, relinquish and turnover to Batjak the assets, management

and operation of Batjak particularly the three (3) oil mills located in Sasa, Davao
City, Jimenez, Misamis Occidental and Tanauan, Leyte.
Clearly, what Batjak asked of respondent court was the exercise of power or
authority outside its jurisdiction.
On the matter of proper venue, Batjak's complaint should have been filed in the
provinces where said oil mills are located. Under Rule 4, Sec. 2, paragraph A of
the Rules of Court, "actions affecting title to, or for recovery of possession, or for
partition or condemnation of, or foreclosure of mortgage on, real property, shall
be commenced and tried in the province where the property or any part thereof
lies."
In support of the third ground of their motion to dismiss, PNB and NIDC contend
that Batjak's complaint for mandamus is based on its claim or right to recovery of
possession of the three (3) oil mills, on the ground of an alleged breach of
fiduciary relationship. Noteworthy is the fact that, in the Voting Trust Agreement,
the parties thereto were NIDC and certain stockholders of Batjak. Batjak itself
was not a signatory thereto. Under Sec. 2, Rule 3 of the Rules of Court, every
action must be prosecuted and defended in the name of the real party in interest.
Applying the rule in the present case, the action should have been filed by the
stockholders of Batjak, who executed the Voting Trust Agreement with NIDC, and
not by Batjak itself which is not a party to said agreement, and therefore, not the
real party in interest in the suit to enforce the same.
In addition, PNB claims that Batjak has no cause of action and prays that the
petition for mandamus be dismissed. A careful reading of the Voting Trust
Agreement shows that PNB was really not a party thereto. Hence, mandamus will
not lie against PNB.
Moreover, the action instituted by Batjak before the respondent court was a
special civil action for mandamus with prayer for preliminary mandatory
injunction. Generally, mandamus is not a writ of right and its allowance or refusal
is a matter of discretion to be exercised on equitable principles and in accordance

with well-settled rules of law, and that it should never be used to effectuate an
injustice, but only to prevent a failure of justice.

24

The writ does not issue as a

matter of course. It will issue only where there is a clear legal right sought to be
enforced. It will not issue to enforce a doubtful right. A clear legal right within the
meaning of Sec. 3, Rule 65 of the Rules of Court means a right clearly founded in
or granted by law, a right which is enforceable as a matter of law.
Applying the above-cited principles of law in the present case, the Court finds no
clear right in Batjak to be entitled to the writ prayed for. It should be noted that the
petition for mandamus filed by it prayed that NIDC and PNB be ordered to
surrender, relinquish and turn-over to Batjak the assets, management, and
operation of Batjak particularly the three (3) oil mills and to make the order
permanent, after trial, and ordering NIDC and PNB to submit a complete
accounting of the assets, management and operation of Batjak from 1965. In
effect, what Batjak seeks to recover is title to, or possession of, real property (the
three (3) oil mills which really made up the assets of Batjak) but which the
records show already belong to NIDC. It is not disputed that the mortgages on
the three (3) oil mills were foreclosed by PNB and NIDC and acquired by them as
the highest bidder in the appropriate foreclosure sales. Ownership thereto was
subsequently consolidated by PNB and NIDC, after Batjak failed to exercise its
right of redemption. The three (3) oil mills are now titled in the name of NIDC.
From the foregoing, it is evident that Batjak had no clear right to be entitled to the
writ prayed for. In Lamb vs. Philippines (22 Phil. 456) citing the case of Gonzales
V. Salazar vs. The Board of Pharmacy, 20 Phil. 367, the Court said that the writ of
mandamus will not issue to give to the applicant anything to which he is not
entitled by law.

prLL

2. On the appointment of receiver.

A receiver of real or personal property, which is the subject of the action, may be
appointed by the court when it appears from the pleadings that the party applying
for the appointment of receiver has an interest in said property. 25 The right,
interest, or claim in property, to entitle one to a receiver over it, must be present
and existing.

As borne out by the records of the case, PNB acquired ownership of two (2) of
the three (3) oil mills by virtue of mortgage foreclosure sales. NIDC acquired
ownership of the third oil mill also under a mortgage foreclosure sale. Certificates
of title were issued to PNB and NIDC after the lapse of the one (1) year
redemption period. Subsequently, PNB transferred the ownership of the two (2)
oil mills to NIDC. There can be no doubt, therefore, that NIDC not only has
possession of, but also title to the three (3) oil mills formerly owned by Batjak.
The interest of Batjak over the three (3) oil mills ceased upon the issuance of the
certificates of title to PNB and NIDC confirming their ownership over the said
properties. More so, where Batjak does not impugn the validity of the foreclosure
proceedings. Neither Batjak nor its stockholders have instituted any legal
proceedings to annul the mortgage foreclosure sales aforementioned.

Batjak premises its right to the possession of the three (3) oil mills on the Voting
Trust Agreement, claiming that under said agreement, NIDC was constituted as
trustee of the assets, management and operations of Batjak, that due to the
expiration of the Voting Trust Agreement, on 26 October 1970, NIDC should turn
over the assets of the three (3) oil mills to Batjak.
The relevant provisions of the Voting Trust Agreement, particularly paragraph 4 &
No. 1 thereof, are hereby reproduced:
"NOW THEREFORE, the undersigned stockholders, in consideration of
the premises and of the mutual covenants and agreements herein
contained and to carry out the foregoing purposes in order to vest in the
TRUSTEE the voting rights of the shares of stock held by the
undersigned in the CORPORATION as hereinafter stated it is mutually
agreed as follows:
"1. PERIOD OF DESIGNATION For a period of five (5) years from
and after date hereof, without power of revocation on the part of the
SUBSCRIBERS, the TRUSTEE designated in the manner herein
provided is hereby made, constituted and appointed as a VOTING

TRUSTEE to act for and in the name of the SUBSCRIBERS, it being

understood, however, that this Voting Trust Agreement shall, upon its
expiration be subject to a re-negotiation between the parties, as may be
warranted by the balance and attending circumstance of the loan
investment of the TRUSTEE or otherwise in the CORPORATION.

and No. 3 thereof reads:

"3. VOTING POWER OF TRUSTEE The TRUSTEE and its
successors in trust, if any, shall have the power and it shall be its duty to
vote the shares of the undersigned subject hereof and covered by this
Agreement at all annual, adjourned and special meetings of the
CORPORATION on all questions, motions, resolutions and matters
including the election of directors and all such matters on which the
stockholders, by virtue of the by-laws of the CORPORATION and of the
existing legislations are entitled to vote, which may be voted upon at any
and all said meetings and shall also have the power to execute and
acknowledge any agreements or documents that may be necessary in
its opinion to express the consent or assent of all or any of the
stockholders of the CORPORATION with respect to any matter or thing
to which any consent or assent of the stockholders may be necessary,
proper or convenient."

From the foregoing provisions, it is clear that what was assigned to NIDC was the
power to vote the shares of stock of the stockholders of Batjak, representing 60%
of Batjak's outstanding shares, and who are the signatories to the agreement.
The power entrusted to NIDC also included the authority to execute any
agreement or document that may be necessary to express the consent or assent
to any matter, by the stockholders. Nowhere in the said provisions or in any other
part of the Voting Trust Agreement is mention made of any transfer or assignment
to NIDC of Batjak's assets, operations, and management. NIDC was constituted
as trustee only of the voting rights of 60% of the paid-up and outstanding shares
of stock in Batjak. This is confirmed by paragraph No. 9 of the same Voting Trust
Agreement, thus:

"9. TERMINATION Upon termination of this Agreement as heretofore

provided, the certificates delivered to the TRUSTEE by virtue hereof
shall be returned and delivered to the undersigned stockholders as the
absolute owners thereof, upon surrender of their respective voting trust
certificates, and the duties of the TRUSTEE shall case and terminate."

LLphil

Under the aforecited provision, what was to be returned by NIDC as trustee to

Batjak's stockholders, upon the termination of the agreement, are the certificates
of shares of stock belonging to Batjak's stockholders, not the properties or assets
of Batjak itself which were never delivered, in the first place to NIDC, under the
terms of said Voting Trust Agreement.
In any event, a voting trust transfers only voting or other rights pertaining to the
shares subject of the agreement, or control over the stock. The law on the matter
isSection 59, paragraph 1 of the Corporation Code (BP 68) which provides:
"Sec. 59. Voting Trusts One or more stockholders of a stock
corporation may create a voting trust for the purpose of conferring upon
a trustee or trustees the right to vote and other rights pertaining to the
shares for a period not exceeding five (5) years at any one time: . . ."

26

The acquisition by PNB-NIDC of the properties in question was not made or

effected under the capacity of a trustee but as a foreclosing creditor for the
purpose of recovering on a just and valid obligation of Batjak.
Moreover, the prevention of imminent danger to property is the guiding principle
that governs courts in the matter of appointing receivers. Under Sec. 1 (b), Rule
59 of the Rules of Court, it is necessary in granting the relief of receivership that
the property or fund be in danger of loss, removal or material injury.
In the case at bar, Batjak in its petition for receivership, or in its amended petition
therefor, failed to present any evidence to establish the requisite condition that
the property is in danger of being lost, removed or materially injured unless a
receiver is appointed to guard and preserve it.

WHEREFORE, the petitions are GRANTED. The orders of the respondent judge,
dated 16 August 1971 and 30 September 1971, are hereby ANNULLED and SET
ASIDE. The respondent judge and/or his successors are ordered to desist from
hearing and/or conducting any further proceedings in Civil Case No. 14452,
except to dismiss the same. With costs against private respondents.
SO ORDERED.
[G.R. No. 125008. June 19, 1997.]
COMMODITIES STORAGE & ICE PLANT CORPORATION,
SPOUSES VICTOR & JOHANNAH TRINIDAD, petitioners, vs.
COURT

OF

CHAIRMAN

APPEALS,
and

FAR

JUSTICE

PEDRO

EAST

BANK

A.

RAMIREZ,
&

TRUST

COMPANY, respondents.
Nonette C. Mina for petitioners.
Siguion Reyna, Montecillo & Ongsiako for private respondents.
SYLLABUS
1. REMEDIAL LAW; PROVISIONAL REMEDIES; RECEIVER OF PROPERTY;
DISCUSSED. A receiver of real or personal property may be appointed by the
court when it appears from the pleadings or such other proof as the judge may
require, that the party applying for such appointment has (1) an actual interest in
it; and (2) that (a) such property is in danger of being lost, removed or materially
injured; or (b) whenever it appears to be the most convenient and feasible means
of preserving or administering the property in litigation. A receiver is a person
appointed by the court in behalf of all the parties to the action for the purpose of
preserving and conserving the property in litigation and prevent its possible
destruction or dissipation, if it were left in the possession of any of the parties.
The appointment of a receiver is not a matter of absolute right. It depends upon

the sound discretion of the court and is based on facts and circumstances of
each particular case.
2. ID.; ID.; ID.; NECESSITY THEREOF, REQUIRED; NOT PRESENT IN CASE
AT BAR A petition for receivership under Section 1 (b) of Rule 59 requires that
the property or fund which is the subject of the action must be in danger of loss,
removal or material injury which necessitates protection or preservation. The
guiding principle is the prevention of imminent danger to the property. If an action
by its nature, does not require such protection or preservation, said remedy
cannot be applied for and granted. Petitioners have not sufficiently shown that the
Sta. Maria Ice Plant is in danger of disappearing or being wasted and reduced to
a "scrap heap." Neither have they proven that the property has been materially
injured which necessitates its protection and preservation.
3. ID.; ID.; ID.; APPOINTMENT THEREOF. Neither party to a litigation should
be appointed as receiver without the consent of the other because a receiver
should be a person indifferent to the parties and should be impartial and
disinterested. The receiver is not the representative of any of the parties but of all
of them to the end that their interests may be equally protected with the least
possible inconvenience and expense. The power to appoint a receiver must be
exercised with extreme caution. There must be a clear showing of necessity
therefor in order to save the plaintiff from grave and irremediable loss or damage.
It is only when the circumstances so demand, either because there is imminent
danger that the property sought to be placed in the hands of a receiver be lost or
because they run the risk of being impaired, endeavouring to avoid that the injury
thereby caused be greater than the one sought to be avoided.

aEIcHA

4. ID.; CIVIL PROCEDURE; ACTIONS; MOTION TO DISMISS; ON THE

GROUND OF IMPROPER VENUE; MAY BE CONSIDERED ALTHOUGH NOT
SPECIFICALLY RAISED IN APPELLATE COURT, IN A PETITION FOR
RECEIVERSHIP. The motion to dismiss is anchored on improper venue, lack
of cause of action and forum-shopping. The question of venue relates to the
principal action and is prejudicial to the ancillary issue of receivership. Although
the grounds for dismissal were not specifically raised before the appellate court,

the said court may consider the same since the petition for receivership depends
upon a determination thereof. Under Section 2 of Rule 4 of the Revised Rules of
Court, where the action affects title to the property, it should be instituted in the
Regional Trial Court where the property is situated. The Sta. Maria Ice Plant &
Cold storage is located in Sta. Maria, Bulacan. The venue in Civil Case No. 9472076 was therefore laid improperly, having been instituted in Manila.
5. ID.; ID.; REAL ACTIONS; MORTGAGE; FORECLOSURE; ACTION FOR
REDEMPTION; INVOLVES TITLE TO FORECLOSED PROPERTY. An action
to redeem by the mortgage debtor affects his title to the foreclosed property. If the
action is seasonably made, it seeks to erase from the title of the judgment or
mortgage debtor the lien created by registration of the mortgage and sale. If not
made seasonably, it may seek to recover ownership to the land since the
purchaser's inchoate title to the property becomes consolidated after expiration of
the redemption period. Either way, redemption involves the title to the foreclosed
property. It is a real action.
6. ID.; ID.; PARTIES TO CIVIL ACTIONS; TRANSFER OF INTEREST PENDING
LITIGATION; ONLY UPON COURT ORDER. There is no merit in petitioners'
claim that the respondent bank is no longer the real party in interest after selling
the ice plant to a third person during the pendency of the case. Section 20 of
Rule 3 of the Revised Rules of Court provides that in a transfer of interest
pending litigation, the action may be continued by or against the original party,
unless the court, upon motion, directs the transferee to be substituted in the
action or joined with the original party. The court bas not ordered the substitution
of respondent bank.

DHIETc

DECISION

PUNO, J :
p

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

appointment of a receiver to save the ice plant, conduct its affairs and safeguard
its records during the pendency of the case. 5
Instead of an answer, respondent bank filed on November 25, 1994 a "Motion to
Dismiss and Opposition to Plaintiff's Petition for Receivership." It alleged that the
complaint states no cause of action and that venue had been improperly laid. It
also alleged that petitioners failed to pay the proper docket fees and violated the
rule on forum-shopping. 6
In an order dated December 13, 1994, the trial court granted the petition for
receivership and appointed petitioners' nominee, Ricardo Pesquera, as receiver.
The order disposed as follows:
"WHEREFORE,

premises

considered

the

Urgent

Petition

for

Receivership is GRANTED and Mr. Ricardo Pesquera to whose

appointment no opposition was raised by the defendant and who is an
ice plant contractor, maintainer and installer is appointed receiver.
Accordingly, upon the filing and approval of the bond of TWO MILLION
(P2,000,000.00) pesos which shall answer for all damages defendant
may sustain by reason of the receivership, said Ricardo Pesquera is
authorized to assume the powers of a receiver as well as the obligation
as provided for in Rule 59 of the Rules of Court after taking his oath as
such receiver.
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 preservation, said remedy
cannot be applied for and granted. 14
In the instant case, we do not find the necessity for the appointment of a receiver.
Petitioners have not sufficiently shown that the Sta. Maria Ice Plant is in danger of
disappearing or being wasted and reduced to a "scrap heap." Neither have they
proven that the property has been materially injured which necessitates its
protection and preservation. 15 In fact, at the hearing on respondent bank's
motion to dismiss, respondent bank, through counsel, manifested in open court
that the leak in the ice plant had already been remedied and that no other
leakages had been reported since. 16 This statement has not been disputed by
petitioners.
At the time the trial court issued the order for receivership of the property, the
problem had been remedied and there was no imminent danger of another
leakage. Whatever danger there was to the community and the environment had
already been contained.
The "drastic sanctions" that may be brought against petitioners due to their
inability to pay their employees and creditors as a result of "the numbing manner
by which [respondent bank] took the ice plant" does not concern the ice plant
itself. These claims are the personal liabilities of petitioners themselves. They do
not constitute "material injury" to the ice plant.
Moreover, the receiver appointed by the court appears to be a representative of
petitioners. Respondent bank alleges that it was not aware that petitioners
nominated one Mr. Pesquera as receiver. 17 The general rule is that neither party
to a litigation should be appointed as receiver without the consent of the other
because a receiver should be a person indifferent to the parties and should be
impartial and disinterested. 18 The receiver is not the representative of any of the

parties but of all of them to the end that their interests may be equally protected
with the least possible inconvenience and expense. 19
The power to appoint a receiver must be exercised with extreme caution. There
must be a clear showing of necessity therefor in order to save the plaintiff from
grave and irremediable loss or damage.

20

It is only when the circumstances so

demand, either because there is imminent danger that the property sought to be
placed in the hands of a receiver be lost or because they run the risk of being
impaired, endeavouring to avoid that the injury thereby caused be greater than
the one sought to be avoided. 21
The Court of Appeals correctly found that the trial court gravely abused its
discretion in issuing the order for receivership. The respondent court, however,
went further and took cognizance of respondent bank's motion to dismiss. And
finding merit in the motion, it dismissed the complaint. Petitioners now claim that
the respondent court should have refrained from ruling on the motion to dismiss
because the motion itself was not before it. 22
Again, we reject petitioners' contention. The motion to dismiss is anchored on
improper venue, lack of cause of action and forum-shopping. We agree with the
respondent court that the question of venue relates to the principal action and is
prejudicial to the ancillary issue of receivership. Although the grounds for
dismissal were not specifically raised before the appellate court, the said court
may consider the same since the petition for receivership depends upon a
determination thereof.23
In their complaint, petitioners prayed for the following:
"WHEREFORE, in view of the foregoing, it is respectfully prayed that
after trial on the merits judgment be rendered:
1. Ordering

the

Defendant

to

pay

COMMODITIES

actual

and

compensatory damages in the amount of PESOS: TWO MILLION FIVE

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

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

of PESOS: TWO MILLION and 00/100 (P2,000,000.00) to compensate
the Plaintiffs for the anxiety and besmirched reputation caused by the
unjust actuations of the Defendant;
3. Ordering the Defendant to pay Plaintiffs nominal and exemplary
damages in the amount of PESOS: FIVE HUNDRED THOUSAND and
00/100 (P500,000.00) to deter the repetition of such unjust and malicious
actuations of the Defendant;
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. 9472076 was therefore laid improperly.

cdtai

Finally, there is no merit in petitioners' claim that the respondent bank is no

longer the real party in interest after selling the ice plant to a third person during
the pendency of the case. Section 20 of Rule 3 of the Revised Rules of Court
provides that in a transfer of interest pending litigation, the action may be
continued by or against the original party, unless the court, upon motion, directs
the transferee to be substituted in the action or joined with the original party. The
court has not ordered the substitution of respondent bank.

IN VIEW WHEREOF, the decision dated January 11, 1996 and resolution dated
May 23, 1996 of the Court of Appeals in CA-G.R. SP No. 36032 are affirmed.
Costs against petitioners.
SO ORDERED.
[G.R. No. 131683. June 19, 2000.]
JESUS LIM ARRANZA; LORENZO CINCO; QUINTIN TAN; JOSE
ESCOBAR; ELBERT FRIEND; CLASSIC HOMES VILLAGE
ASSOCIATION,

INC.;

BF

NORTHWEST

HOMEOWNERS'

ASSOCIATION,

INC.;

and

UNITED

HOMEOWNERS'

BF

ASSOCIATIONS, INC., petitioners, vs. B.F. HOMES, INC. AND

THE HONORABLE COURT OF APPEALS, respondent.
Robles Ricafrente Aguirre San Vicente and Cacho Law Firm and Veneranda
Acaylar-Cruz for petitioners.
Benjamin B. Bernardino for respondents.
Antonio R. Bautista & Partners for BF Homes, Inc.
Ata & Habawel for Intervenors.
SYNOPSIS
The issue involved in this petition is whether it is the SEC or the HLURB that has
jurisdiction over a complaint for specific performance filed by subdivision
homeowners against a subdivision developer to enforce the latter's obligations to
provide them their basic needs as purchasers of the lots: water, security and
open spaces. Respondent BF Homes, Inc. (BFHI) claimed that inasmuch as
BFHI is under receivership, the case is exclusively within the jurisdiction of the
SEC.
The Supreme Court upheld HLURB's jurisdiction over the specific performance
case as the SEC proceeds with the rehabilitation of BFHI. Applicable laws confer

upon the HLURB jurisdiction over matters relating to the observance of laws
governing corporations engaged in developing subdivisions and condominiums.
As BFHI undergoes rehabilitation receivership, BFHI continues to exist as a
corporation, hence, should continue to perform its obligations to petitioners as
homeowners. Petitioners' complaint against BFHI should not be considered as
"claims" of creditors which should be suspended as provided in Sec. 6 (c) of P.D.
No. 902-A. Such claims referred solely to monetary claims, which are but
incidental to petitioners' complaint against BFHI. Once monetary awards are
determined in the HLURB, however, the same should be submitted to the SEC as
established claims.

cdrep

SYLLABUS
1. ADMINISTRATIVE LAW; ADMINISTRATIVE AGENCIES; HOUSING AND
LAND USE REGULATORY BOARD (HLURB); JURISDICTION OF HLURB IS
DETERMINED BY APPLICABLE LAWS AND THE ALLEGATIONS OF THE
COMPLAINT. Jurisdiction is the authority to hear and determine a cause
the right to act in a case. It is conferred by law and not by mere administrative
policy of any court or tribunal. It is determined by the averments of the complaint
and not by the defense contained in the answer. Hence, the jurisdictional issue
involved here shall be determined upon an examination of the applicable laws
and the allegations of petitioners' complaint before the HLURB.
2. ID.; ID.; ID.; ID.; THE HLURB HAS JURISDICTION OVER CASES ARISING
FROM CONTRACTS BETWEEN SUBDIVISION DEVELOPER AND LOT
OWNERS; CASE AT BAR. In the cases that reached this Court, the ruling has
consistently been that the NHA or the HLURB has jurisdiction over complaints
arising from contracts between the subdivision developer and the lot buyer or
those aimed at compelling the subdivision developer to comply with its
contractual and statutory obligations to make the subdivision a better place to live
in. . . . In the case at bar, petitioners' complaint is for specific performance to
enforce their rights as purchasers of subdivision lots as regards rights of way,

water, open spaces, road and perimeter wall repairs, and security. Indisputably
then, the HLURB has jurisdiction over the complaint. . . . The fact that respondent
is under receivership does not divest the HLURB of that jurisdiction.
3. CORPORATION LAW; RECEIVER; DEFINITION AND DUTIES; EFFECT OF
THE APPOINTMENT OF A RECEIVER ON THE CORPORATION'S EXISTENCE
AND ON ITS OBLIGATIONS; PURPOSE OF RECEIVERSHIP. A receiver is a
person appointed by the court, or in this instance, by a quasi-judicial
administrative agency, in behalf of all the parties for the purpose of preserving
and conserving the property and preventing its possible destruction or
dissipation, if it were left in the possession of any of the parties. It is the duty of
the receiver to administer the assets of the receivership estate; and in the
management and disposition of the property committed to his possession, he
acts in a fiduciary capacity and with impartiality towards all interested persons.
The appointment of a receiver does not dissolve a corporation, nor does it
interfere with the exercise of its corporate rights. In this case where there appears
to be no restraints imposed upon respondent as it undergoes rehabilitation
receivership, respondent continues to exist as a corporation and hence,
continues or should continue to perform its contractual and statutory
responsibilities to petitioners as homeowners. Receivership is aimed at the
preservation of, and at making more secure, existing rights; it cannot be used as
an instrument for the destruction of those rights.
4. ID.; RECEIVERSHIP; SUSPENSION OF CLAIMS IN PAYMENTS; ACTION
FOR SPECIFIC PERFORMANCE BEFORE HLURB IS NOT PECUNIARY IN
NATURE AS

TO

WARRANT THE SUSPENSION OF PROCEEDINGS

PROVIDED IN SEC. 6(C) OF P.D. NO. 902-A, AS AMENDED; CASE AT BAR.

Neither may petitioners be considered as having "claims" against respondent
within the context of the following proviso of Section 6 (c) of P.D. No. 902-A, as
amended by P.D. Nos. 1653, 1758 and 1799, to warrant suspension of the
HLURB proceedings. . . . No violation of the SEC order suspending payments to
creditors would result as far as petitioners' complaint before the HLURB is
concerned. To reiterate, what petitioners seek to enforce are respondent's

obligations as a subdivision developer. Such claims are basically not pecuniary in

nature although it could incidentally involve monetary considerations. All that
petitioners' claims entail is the exercise of proper subdivision management on the
part of the SEC-appointed Board of Receivers towards the end that homeowners
shall enjoy the ideal community living that respondent portrayed they would have
when they bought real estate from it. . . . Whatever monetary awards the HLURB
may impose upon respondent are incidental matters that should be addressed to
the sound discretion of the Board of Receivers charged with maintaining the
viability of respondent as a corporation. Any controversy that may arise in that
regard should then be addressed to the SEC. It is worth noting that the parties
agreed at the 1 July 1998 hearing that should the HLURB establish and grant
petitioners' claims, the same should be referred to the SEC. Thus, the
proceedings at the HLURB should not be suspended notwithstanding that
respondent is still under receivership.
5. ID.; P.D. NO. 902-A, AS AMENDED; JURISDICTION OF THE SECURITIES
AND EXCHANGE COMMISSION (SEC), ELEMENTS; THE SEC HAS NO
JURISDICTION OVER COMPLAINTS FOR SPECIFIC PERFORMANCE FILED
BY LOT BUYERS AGAINST SUBDIVISION DEVELOPERS. On the other
hand the jurisdiction of the SEC is defined by P.D. No. 902-A, as amended. . . .
For the SEC to acquire jurisdiction over any controversy under these provisions,
two elements must be considered: (1) the status or relationship of the parties;
and (2) the nature of the question that is the subject of their controversy. The first
element requires that the controversy must arise "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 of
which they are stockholders, members or associates, respectively; and between
such corporation, partnership or association and the State in so far as it concerns
their individual franchises." Petitioners are not stockholders, members or
associates of respondent. They are lot buyers and now homeowners in the
subdivision developed by the respondent. The second element requires that the
dispute among the parties be intrinsically connected with the regulation or the
internal affairs of the corporation, partnership or association. The controversy in

this case is remotely related to the "regulation" of respondent corporation or to

respondent's "internal affairs." . . . Their claim for reimbursement should be
viewed in the light of respondent's alleged failure to observe its statutory and
contractual obligations to provide petitioners a "decent human settlement" and
"ample opportunities for improving their quality of life." The HLURB, not the SEC,
is equipped with the expertise to deal with that matter.
6. ID.; ID.; ID.; ID.; PROVISIONS OF P.D. NO. 902-A AND P.D. NO. 957, ARE
LAWS IN PARI MATERIA. It should be stressed that the main concern in this
case is the issue of jurisdiction over petitioners' complaint against respondent for
specific performance. P.D. No. 902-A, as amended, defines the jurisdiction of the
SEC; while P.D. No. 957, as amended, delineates that of the HLURB. These two
quasi-judicial agencies exercise functions that are distinct from each other. The
SEC has authority over the operation of all kinds of corporations, partnerships or
associations with the end in view of protecting the interests of the investing public
and creditors. On the other hand, the HLURB has jurisdiction over matters
relating to observance of laws governing corporations engaged in the specific
business of development of subdivisions and condominiums. The HLURB and
the SEC being bestowed with distinct powers and functions, the exercise of those
functions by one shall not abate the performance by the other of its own
functions. As respondent puts it, "there is no contradiction between P.D. No. 902A and P.D. No. 957." . . . P.D. Nos. 902-A and 957, as far as both are concerned
with corporations, are laws in pari materia. P.D. No. 902-A relates to all
corporations, while P.D. No. 957 pertains to corporations engaged in the
particular business of developing subdivisions and condominiums. Although the
provisions of these decrees on the issue of jurisdiction appear to collide when a
corporation engaged in developing subdivisions and condominiums is under
receivership, the same decrees should be construed as far as reasonably
possible to be in harmony with each other to attain the purpose of an expressed
national policy.

DECISION

DAVIDE, JR., C.J :

p

For resolution in this petition is the issue of whether it is the Securities and
Exchange Commission (SEC) or the Housing and Land Use Regulatory Board
(HLURB) that has jurisdiction over a complaint filed by subdivision homeowners
against a subdivision developer that is under receivership for specific
performance regarding basic homeowners' needs such as water, security and
open spaces.

cdrep

Respondent BF Homes, Inc. (BFHI), is a domestic corporation engaged in

developing subdivisions and selling residential lots. One of the subdivisions that
respondent developed was the BF Homes Paraaque Subdivision, which now
sprawls across not only a portion of the City of Paraaque but also those of the
adjoining cities of Las Pias and Muntinlupa.
When the Central Bank ordered the closure of Banco Filipino, which had
substantial investments in respondent BFHI, respondent filed with the SEC a
petition for rehabilitation and a declaration that it was in a state of suspension of
payments. On 18 March 1985, the SEC placed respondent under a management
committee. Upon that committee's dissolution on 2 February 1988, the SEC
appointed Atty. Florencio B. Orendain as a Receiver, and approved a Revised
Rehabilitation Plan.
As a Receiver, Orendain instituted a central security system and unified the sixtyfive homeowners' associations into an umbrella homeowners' association called
United BF Homeowners' Associations, Inc. (UBFHAI), which was thereafter
incorporated with the Home Insurance and Guaranty Corporation (HIGC). 1
In 1989, respondent, through Orendain, turned over to UBFHAI control and
administration of security in the subdivision, the Clubhouse and the open spaces
along Concha Cruz Drive. Through the Philippine Waterworks and Construction
Corporation (PWCC), respondent's managing company for waterworks in the

various BF Homes subdivisions, respondent entered into an agreement with

UBFHAI for the annual collection of community assessment fund and for the
purchase of eight new pumps to replace the over-capacitated pumps in the old
wells.
On 7 November 1994, Orendain was relieved by the SEC of his duties as a
Receiver, and a new Board of Receivers consisting of eleven members of
respondent's Board of Directors was appointed for the implementation of Phases
II and III of respondent's rehabilitation. 2 The new Board, through its Chairman,
Albert C. Aguirre, revoked the authority given by Orendain to use the open
spaces at Concha Cruz Drive and to collect community assessment funds;
deferred the purchase of new pumps; recognized BF Paraaque Homeowners'
Association, Inc., (BFPHAI) as the representative of all homeowners in the
subdivision; took over the management of the Clubhouse; and deployed its own
security guards in the subdivision.
Consequently, on 5 July 1995, herein petitioners filed with the HLURB a class suit
"for and in behalf of the more than 7,000 homeowners in the subdivision" against
respondent BFHI, BF Citiland Corporation, PWCC and A.C. Aguirre Management
Corporation "to enforce the rights of purchasers of lots" in BF Homes
Paraaque. 3 They alleged that:
1. The forty (40) wells, mostly located at different elevations in
Phases 3 and 4 of the subdivision and with only twentyseven (27) productive, are the sources of the inter-connected
water system in the 765-hectare subdivision;
2. There is only one drainage and sewer system;
3. There is one network of roads;
4. There are eight (8) entry and exit points to the subdivision and
from three (3) municipalities (now cities), a situation
obtaining in this subdivision only and nowhere else;
5. There was no security force for the entire subdivision until 1988;

6. There are not enough open spaces in the subdivision in relation

to the total land area developed; and whatever open spaces
are available have been left unkempt, undeveloped and
neglected;
7. There are no zoning guidelines which resulted in unregulated
constructions of structures and the proliferation of business
establishments in residential areas; and
8. The BFPHAI became "moribund" sometime in 1980 on account
of its failure to cope with the delivery of basic services except
for garbage collection.
Petitioners raised "issues" on the following basic needs of the homeowners:
rights-of-way; water; open spaces; road and perimeter wall repairs; security; and
the interlocking corporations that allegedly made it convenient for respondent "to
compartmentalize its obligations as general developer, even if all of these are
hooked

into

the

water,

roads,

drainage

and

sewer

systems

of

subdivision." 4 Thus, petitioners prayed that:

A. A cease-and-desist order from selling any of the properties
within the subdivision be issued against respondent BFHI,
BF Citi, ACAMC, and/or any and all corporations acting as
surrogates/alter-egos, sister companies of BFHI and/or its
stockholders until the warranties, facilities and infrastructures
shall have been complied with or put up (and) the advances
of UBFHAI reimbursed, otherwise, to cease and desist from
rescinding valid agreements or contracts for the benefit of
complainants, or committing acts diminishing, diluting or
otherwise depriving complainants of their rights under the
law as homeowners;
B. After proper proceedings the bond or deposit put up by
respondent BF Homes, Inc. be forfeited in favor of
petitioners;

the

C. Respondent BFHI be ordered to immediately turnover the roads,

open spaces, and other facilities built or put up for the benefit
of lot buyers/homeowners in the subdivision to complainant
UBFHAI as representative of all homeowners in BF Homes
Paraaque, free from all liens, encumbrances, and taxes in
arrears;
D. If the open spaces in the subdivision are not sufficient as
required by law, to impose said penalties/sanctions against
BFHI or the persons responsible therefor;
E. Order the reimbursement of advances made by UBFHAI;
F. Turn over all amounts which may have been collected from
users' fees of the strip of open space at Concha Cruz Drive;
G. Order PWCC to effect and restore 24-hour water supply to all
residents by adding new wells replacing over-capacitated
pumps and otherwise improving water distribution facilities;
H. Order

PWCC

to

continue

collecting

the

Community

Development Fund and remit all amounts collected to

UBFHAI;
I. Order BFHI to immediately withdraw the guards at the clubhouse
and the 8 entry and exit points to the subdivision, this being
an act of usurpation and blatant display of brute force;
J. The appropriate penalties/sanctions be imposed against BF Citi,
ACAMC or any other interlocking corporation of BFHI or any
of

its

principal

stockholders

diminution/encroaching/violation
residents

of

the

subdivision

in
on
to

respect

of

the

rights

of

the

enjoy/avail

of

the

the

facilities/services due them; and

K. Respondents be made to pay attorney's fees and the costs of
this suit. 5

In its answer, respondent claimed that (a) it had complied with its contractual
obligations relative to the subdivision's development; (b) respondent could not be
compelled to abide by agreements resulting from Orendain's ultra vires acts; and
(c) petitioners were precluded from instituting the instant action on account of
Section 6(c) of P.D. No. 902-A providing for the suspension of all actions for
claims against a corporation under receivership. Respondent interposed
counterclaims and prayed for the dismissal of the complaint. 6
Petitioners thereafter filed an urgent motion for a cease-and-desist/status
quo order. Acting on this motion, HLURB Arbiter Charito M. Bunagan issued a
20-day temporary restraining order to avoid rendering nugatory and ineffectual
any judgment that could be issued in the case; 7 and subsequently, an Order
granting petitioners' prayer for preliminary injunction was issued
enjoining and restraining respondent BF Homes, Incorporated, its agents
and all persons acting for and in its behalf from taking over/administering
the Concha Garden Row, from issuing stickers to residents and nonresidents alike for free or with fees, from preventing necessary
improvements and repairs of infrastructures within the authority and
administration of complainant UBFHAI, and from directly and indirectly
taking over security in the eight (8) exit points of the subdivision or in any
manner interfering with the processing and vehicle control in subject
gates and otherwise to remove its guards from the gates upon posting of
a bond of One Hundred Thousand Pesos (P100,000.00) which bond
shall answer for whatever damages respondents may sustain by reason
of the issuance of the writ of preliminary injunction if it turns out that
complainant is not entitled thereto.

Respondent thus filed with the Court of Appeals a petition for certiorari and
prohibition docketed as CA-G.R. SP No. 39685. It contended in the main that the
HLURB acted "completely without jurisdiction" in issuing the Order granting the
writ of preliminary injunction considering that inasmuch as respondent is under
receivership, the "subject matter of the case is one exclusively within the
jurisdiction of the SEC." 9

On 28 November 1997, the Court of Appeals rendered a decision

10

annulling

and setting aside the writ of preliminary injunction issued by the HLURB. It ruled
that private respondents' action may properly be regarded as a "claim" within the
contemplation of PD No. 902-A which should be placed on equal footing with
those of petitioners' other creditor or creditors and which should be filed with the
Committee of Receivers. In any event, pursuant to Section 6(c) of P.D. No. 902-A
and SEC's Order of 18 March 1985, petitioners' action against respondent, which
is under receivership, should be suspended.
Hence, petitioners filed the instant petition for review on certiorari. On 26 January
1998, the Court issued a temporary restraining order (TRO) enjoining
respondent, its officers, representatives and persons acting upon its orders from.

(a) taking over/administering the Concha Garden Row; (b) issuing

stickers to residents and non-residents alike for free or with fees; (c)
preventing necessary improvements and repairs of infrastructures within
the authority and administration of complainant United BF Homeowners'
Association, Inc. (UBFHAI); (d) directly and indirectly taking over security
in the eight (8) exit points of all of BF Homes Paraaque Subdivision or
in any-manner interfering with the processing and vehicle control in the
subject gates; and (e) otherwise to remove its guards from the
gates . . . 11

Respondent's motion to lift the TRO was denied.

At the hearing on 1 July 1998, the primary issue in this case was defined as
"which body has jurisdiction over petitioners' claims, the Housing and Land Use
Regulatory Board (HLURB) or the Securities and Exchange Commission (SEC)?"
The collateral issue to be addressed is "assuming that the HLURB has
jurisdiction, may the proceedings therein be suspended pending the outcome of
the receivership before the SEC?"
For their part, petitioners argue that the complaint referring to rights of way, water,
open spaces, road and perimeter wall repairs, security and respondent's

interlocking corporations that facilitated circumvention of its obligation involves

unsound real estate practices. The action is for specific performance of a real
estate developers' obligations under P.D. No. 957, and the relief sought is
revocation of the subdivision project's registration certificate and license to sell.
These issues are within the jurisdiction of the HLURB. Even if respondent is
under receivership, its obligations as a real estate developer under P.D. No.
957 are not suspended. Section 6(c) of P.D. No. 902-A, as amended by P.D. No.
957, on "suspension of all actions for claims against corporations" refers solely to
monetary claims which are but incidental to petitioner's complaints against BFHI,
and if filed elsewhere than the HLURB, it would result to splitting causes of
action. Once determined in the HLURB, however, the monetary awards should be
submitted to the SEC as established claims. Lastly, the acts enjoined by the
HLURB are not related to the disposition of BFHI's assets as a corporation
undergoing its final phase of rehabilitation.
On the other hand, respondent asserts that the SEC, not the HLURB, has
jurisdiction over petitioners' complaint based on the contracts entered into by the
former receiver. The SEC, being the appointing authority, should be the one to
take cognizance of controversies arising from the performance of the receiver's
duties. Since respondent's properties are under the SEC's custodia legis, they
are exempt from any court process.

cdll

Jurisdiction is the authority to hear and determine a cause the right to act in a
case. 12 It is conferred by law and not by mere administrative policy of any court
or tribunal. 13 It is determined by the averments of the complaint and not by the
defense contained in the answer. 14 Hence, the jurisdictional issue involved here
shall be determined upon an examination of the applicable laws and the
allegations of petitioners' complaint before the HLURB.
Presidential Decree No. 957 (The Subdivision and Condominium Buyers'
Protective Decree) was issued on 12 July 1976 in answer to the popular call for
correction of pernicious practices of subdivision owners and/or developers that
adversely affected the interests of subdivision lot buyers. Thus, one of the
"whereas clauses" of P.D. No. 957 states:

WHEREAS, numerous reports reveal that many real estate subdivision

owners, developers, operators, and/or sellers have reneged on their
representations and obligations to provide and maintain properly
subdivision roads, drainage, sewerage, water systems, lighting systems,
and other similar basic requirements, thus endangering the health and
safety of home and lot buyers . . .

Section 3 of P.D. No. 957 empowered the National Housing Authority (NHA) with
the "exclusive jurisdiction to regulate the real estate trade and business." On 2
April 1978, P.D. No. 1344 was issued to expand the jurisdiction of the NHA to
include the following:
SECTION 1. In the exercise of its functions to regulate the real estate
trade and business and in addition to its powers provided for
in Presidential Decree No. 957, the National Housing Authority shall
have exclusive jurisdiction to hear and decide cases of the following
nature:
A. Unsound real estate business practices;
B. Claims involving refund and any other claims filed by
subdivision lot or condominium unit buyer against the
project owner, developer, dealer, broker or salesman; and
C. Cases involving specific performance of contractual and
statutory obligations filed by buyers of subdivision lot or
condominium unit against the owner, developer, dealer,
broker or salesman. (Italics supplied.)

Thereafter, the regulatory and quasi-judicial functions of the NHA were

transferred to the Human Settlements Regulatory Commission (HSRC) by virtue
of Executive Order No. 648 dated 7 February 1981. Section 8 thereof specifies
the functions of the NHA that were transferred to the HSRC including the
authority to hear and decide "cases on unsound real estate business practices;
claims involving refund filed against project owners, developers, dealers, brokers
or salesmen and cases of specific performance." Executive Order No. 90 dated

17 December 1986 renamed the HSRC as the Housing and Land Use
Regulatory Board (HLURB). 15
The boom in the real estate business all over the country resulted in more
litigation between subdivision owners/developers and lot buyers with the issue of
the jurisdiction of the NHA or the HLURB over such controversies as against that
of regular courts. In the cases

16

that reached this Court, the ruling has

consistently been that the NHA or the HLURB has jurisdiction over complaints
arising from contracts between the subdivision developer and the lot buyer or
those aimed at compelling the subdivision developer to comply with its
contractual and statutory obligations to make the subdivision a better place to live
in.
Notably, in Antipolo Really Corporation v. National Housing Authority 17 one of the
issues raised by the homeowners was the failure of Antipolo Realty to develop
the subdivision in accordance with its undertakings under the contract to sell.
Such undertakings include providing the subdivision with concrete curbs and
gutters, underground drainage system, asphalt paved roads, independent water
system, electrical installation with concrete posts, landscaping and concrete
sidewalks, developed park or amphitheater and 24-hour security guard service.
The Court held that the complaint filed by the homeowners was within the
jurisdiction of the NHA.
Similarly, in Alcasid v. Court of Appeals, 18 the Court ruled that the HLURB, not
the RTC, has jurisdiction over the complaint of lot buyers for specific performance
of alleged contractual and statutory obligations of the defendants, to wit, the
execution of contracts of sale in favor of the plaintiffs and the introduction in the
disputed property of the necessary facilities such as asphalting and street lights.
In the case at bar, petitioners' complaint is for specific performance to enforce
their rights as purchasers of subdivision lots as regards rights of way, water, open
spaces, road and perimeter wall repairs, and security. Indisputably then, the
HLURB has jurisdiction over the complaint.

The fact that respondent is under receivership does not divest the HLURB of that
jurisdiction. A receiver is a person appointed by the court, or in this instance, by a
quasi-judicial administrative agency, in behalf of all the parties for the purpose of
preserving and conserving the property and preventing its possible destruction or
dissipation, if it were left in the possession of any of the parties.

19

It is the duty of

the receiver to administer the assets of the receivership estate; and in the
management and disposition of the property committed to his possession, he
acts in a fiduciary capacity and with impartiality towards all interested
persons. 20 The appointment of a receiver does not dissolve a corporation, nor
does it interfere with the exercise of its corporate rights.

21

In this case where

there appears to be no restraints imposed upon respondent as it undergoes

rehabilitation receivership, 22 respondent continues to exist as a corporation and
hence, continues or should continue to perform its contractual and statutory
responsibilities to petitioners as homeowners.
Receivership is aimed at the preservation of, and at making more secure, existing
rights; it cannot be used as an instrument for the destruction of those rights. 23
No violation of the SEC order suspending payments to creditors would result as
far as petitioners' complaint before the HLURB is concerned. To reiterate, what
petitioners seek to enforce are respondent's obligations as a subdivision
developer. Such claims are basically not pecuniary in nature although it
could incidentallyinvolve monetary considerations. All that petitioners' claims
entail is the exercise of proper subdivision management on the part of the SECappointed Board of Receivers towards the end that homeowners shall enjoy the
ideal community living that respondent portrayed they would have when they
bought real estate from it.
Neither may petitioners be considered as having "claims" against respondent
within the context of the following proviso of Section 6 (c) of P.D. No. 902-A, as
amended by P.D. Nos. 1653, 1758 and 1799, to warrant suspension of the
HLURB proceedings:

[U]pon appointment of a management committee, rehabilitation receiver,

board or body, pursuant to this Decree, all actions for claims against
corporations, partnerships or associations under management or
receivership pending before any court, tribunal, board or body shall be
suspended accordingly. (Italics supplied.)

In Finasia Investments and Finance Corporation v. Court of Appeals, 24 this Court

defined and explained the term "claim" in Section 6 (c) of P.D. No. 902-A, as
amended, as follows:
We agree with the public respondent that the word "claim" as used in
Sec. 6 (c) of P.D. 902-A, as amended, refers to debts or demands of a
pecuniary nature. It means "the assertion of a right to have money paid.
It is used in special proceedings like those before administrative court,
on insolvency." (Italics supplied.)

Hence, in Finasia Investments, the Court held that a civil case to nullify a special
power of attorney because the principal's signature was forged should not be
suspended upon the appointment of a receiver of the mortgagee to whom a
person mortgaged the property owned by such principal. The Court ruled that the
cause of action in that civil case "does not consist of demand for payment of debt
or enforcement of pecuniary liability." It added:
It has nothing to do with the purpose of Section 6 (c) of P.D. 902-A, as
amended, which is to prevent a creditor from obtaining an advantage or
preference over another with respect to action against corporation,
partnership, association under management or receivership and to
protect and preserve the rights of party litigants as well as the interest of
the investing public or creditors. Moreover, a final verdict on the question
of whether the special power of attorney in question is a forgery or not
will not amount to any preference or advantage to Castro who was not
shown to be a creditor of FINASIA. 25

In this case, under the complaint for specific performance before the HLURB,
petitioners do not aim to enforce a pecuniary demand. Their claim for
reimbursement should be viewed in the light of respondent's alleged failure to
observe its statutory and contractual obligations to provide petitioners a "decent
human settlement" and "ample opportunities for improving their quality of
life." 26 The HLURB, not the SEC, is equipped with the expertise to deal with that
matter.
On the other hand, the jurisdiction of the SEC is defined by P.D. No. 902-A, as
amended, as follows:
SEC. 5. In addition to the regulatory and adjudicative functions of the
Securities and Exchange Commission over corporations, partnerships
and other forms of associations registered with it as expressly granted
under existing laws and decrees, it shall have original and exclusive
jurisdiction to hear and decide cases involving:
a) Devices or schemes employed by or any act 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 of the
stockholders, partners, members of associations or
organizations registered with the Commission;
b) Controversies arising out of intra-corporate or partnership
relations, between and among stockholders, members of
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 franchise or right to
exist as such entity; [and]

c) Controversies in the election or appointments of directors,

trustees, officers, or managers of such corporation,
partnerships or associations.

For the SEC to acquire jurisdiction over any controversy under these provisions,
two elements must be considered: (1) the status or relationship of the parties;
and (2) the nature of the question that is the subject of their controversy.

27

The

first element requires that the controversy must arise "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 of
which they are stockholders, members or associates, respectively; and between
such corporation, partnership or association and the State in so far as it concerns
their individual franchises." 28 Petitioners are not stockholders, members or
associates of respondent. They are lot buyers and now homeowners in the
subdivision developed by the respondent.
The second element requires that the dispute among the parties be intrinsically
connected with the regulation or the internal affairs of the corporation, partnership
or association. 29 The controversy in this case is remotely related to the
"regulation" of respondent corporation or to respondent's "internal affairs."
It should be stressed that the main concern in this case is the issue of jurisdiction
over petitioners' complaint against respondent for specific performance. P.D. No.
902-A, as amended, defines the jurisdiction of the SEC; while P.D. No. 957, as
amended, delineates that of the HLURB. These two quasi-judicial agencies
exercise functions that are distinct from each other. The SEC has authority over
the operation of all kinds of corporations, partnerships or associations with the
end in view of protecting the interests of the investing public and creditors. On the
other hand, the HLURB has jurisdiction over matters relating to observance of
laws governing corporations engaged in the specific business of development of
subdivisions and condominiums. The HLURB and the SEC being bestowed with
distinct powers and functions, the exercise of those functions by one shall not
abate the performance by the other of its own functions. As respondent puts it,
"there is no contradiction between P.D. No. 902-A and P.D. No. 957." 30

What complicated the jurisdictional issue in this case is the fact that petitioners
are primarily praying for the retention of respondent's obligations under the
Memorandum of Agreement that Receiver Orendain had entered into with them
but which the present Board of Receivers had revoked.
In Figueroa v. SEC, 31 this Court has declared that the power to overrule or
revoke the previous acts of the management or Board of Directors of the entity
under receivership is within a receiver's authority, as provided for by Section 6 (d)
(2) of P.D. No. 902-A. Indeed, when the acts of a previous receiver or
management committee prove disadvantageous or inimical to the rehabilitation of
a distressed corporation, the succeeding receiver or management committee
may abrogate or cast aside such acts. However, that prerogative is not absolute.
It should be exercised upon due consideration of all pertinent and relevant laws
when public interest and welfare are involved. The business of developing
subdivisions and corporations being imbued with public interest and welfare, any
question arising from the exercise of that prerogative should be brought to the
proper agency that has technical know-how on the matter.
P.D. No. 957 was promulgated to encompass all questions regarding subdivisions
and condominiums. It is aimed at providing for an appropriate government
agency, the HLURB, to which all parties aggrieved in the implementation of its
provisions and the enforcement of contractual rights with respect to said category
of real estate may take recourse. Nonetheless, the powers of the HLURB may not
in any way be deemed as in derogation of the SEC's authority. P.D. Nos. 902-A
and 957, as far as both are concerned with corporations, are laws in pari materia.
P.D. No. 902-A relates to all corporations, while P.D. No. 957 pertains to
corporations engaged in the particular business of developing subdivisions and
condominiums. Although the provisions of these decrees on the issue of
jurisdiction appear to collide when a corporation engaged in developing
subdivisions and condominiums is under receivership. the same decrees should
be construed as far as reasonably possible to be in harmony with each other to
attain the purpose of an expressed national policy. 32

Hence, the HLURB should take jurisdiction over petitioners' complaint because it
pertains to matters within the HLURB's competence and expertise. The HLURB
should view the issue of whether the Board of Receivers correctly revoked the
agreements entered into between the previous receiver and the petitioners from
the perspective of the homeowners' interests, which P.D. No. 957 aims to protect.
Whatever monetary awards the HLURB may impose upon respondent are
incidental matters that should be addressed to the sound discretion of the Board
of Receivers charged with maintaining the viability of respondent as a
corporation. Any controversy that may arise in that regard should then be
addressed to the SEC.

Cdpr

It is worth noting that the parties agreed at the 1 July 1998 hearing that should
the HLURB establish and grant petitioners' claims, the same should be referred
to the SEC. Thus, the proceedings at the HLURB should not be suspended
notwithstanding that respondent is still under receivership. The TRO that this
Court has issued should accordingly continue until such time as the HLURB shall
have resolved the controversy. The present members of the Board of Receivers
should be reminded of their duties and responsibilities as an impartial Board that
should serve the interests of both the homeowners and respondent's creditors.
Their interests, financial or otherwise, as members of respondent's Board of
Directors should be circumscribed by judicious and unbiased performance of
their duties and responsibilities as members of the Board of Receivers.
Otherwise, respondent's full rehabilitation may face a bleak future. Both parties
should never give full rein to acts that could prove detrimental to the interests of
the homeowners and eventually jeopardize respondent's rehabilitation.
WHEREFORE, the questioned Decision of the Court of Appeals is hereby
REVERSED and SET ASIDE. The case is REMANDED to the Housing and Land
Use Regulatory Board for continuation of proceedings with dispatch as the
Securities and Exchange Commission proceeds with the rehabilitation of
respondent BF Homes, Inc., through the Board of Receivers. Thereafter, any and
all monetary claims duly established before the HLURB shall be referred to the

Board of Receivers for proper disposition and thereafter, to the SEC, if necessary.
No costs.

prLL

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.
SYLLABUS
1. CIVIL LAW; TORRENS SYSTEM OF LAND REGISTRATION; TORRENS
TITLE, INDEFEASIBLE OR INCONTROVERTIBLE; CAN NOT BE DEFEATED
BY MERE VERBAL ALLEGATIONS. The Court is amazed that the trial court
and the Court of Appeals appear to have given no importance to the fact that the
petitioner herein, besides being the actual possessor of the disputed property, is
also the registered owner thereof, as evidenced by TCTs Nos. 24790, 24791, and
24792 issued in her name by the Register of Deeds of Mandaue City on
December 3, 1987. Her title and possession cannot be defeated by mere verbal
allegations that although she appears in the deed of sale as vendee of the
property, it was her Austrian lover, Jambrich, who paid the price of the sale of the
property (Sinoan vs. Sorogan, 136 SCRA 407). Her Torrens certificates of title
are indefeasible or incontrovertible (Sec. 32, P.D. 1529).
2. ID.; OBLIGATIONS AND CONTRACTS; SALE; SOURCE OF PURCHASE
MONEY, IMMATERIAL AS LONG AS VENDOR DOES NOT ACT AS TRUSTEE
OR DUMMY OF AN ALIEN. Even if it were true that an impecunious former
waitress, like Descallar, did not have the means to purchase the property, and
that it was her Austrian lover who provided her with the money to pay for it, that

circumstance did not make her any less the owner, since the sale was made to
her, not to the open-handed alien who was, and still is, disqualified under our
laws to own real property in this country (Sec. 7, Art. XII, 1987 Constitution). The
deed of sale was duly registered in the Registry of Deeds and new titles were
issued in her name. The source of the purchase money is immaterial for there is
no allegation, nor proof, that she bought the property as trustee or dummy for the
monied Austrian, and not for her own benefit and enjoyment. There is no law
which declares null and void a sale where the vendee to whom the title of the
thing sold is transferred or conveyed, paid the price with money obtained from a
third person.
3. REMEDIAL LAW; SPECIAL CIVIL ACTION; CERTIORARI; GRAVE ABUSE
OF DISCRETION; MANIFEST IN ORDER OF RECEIVERSHIP WHERE
RIGHTS OF THE PARTIES ARE STILL TO BE DETERMINED. The holding of
the trial court and the Court of Appeals that Jambrich, notwithstanding his legal
incapacity to acquire real property in the Philippines, is the owner of the house
and lot which is erstwhile mistress, Antonietta, purchased with money she
obtained from him, is a legal heresy. In view of the above circumstances, we find
the order of receivership tainted with grave abuse of discretion. The appointment
of a receiver is not proper where the rights of the parties (one of whom is in
possession of the property), are still to be determined by the trial court. Finding
grave abuse of discretion in the order of receivership which the respondent Court
of Appeals affirmed in its decision of July 29, 1992 in CA-G.R. SP No. 27977,
The petition for certiorari is hereby granted and the decision of the appellant
court, as well as the order dated March 17, 1992 of the Regional Trial Court of
Mandaue City, Branch 28, in Civil Case No. MAN-1148, are hereby ANNULLED
and SET ASIDE.
4. ID.; PROVISIONAL REMEDIES; RECEIVERSHIP; DANGER TO PROPERTY
OF

BEING

MATERIALLY

INJURED

OR

LOST,

INDISPENSABLE

IN

APPOINTMENT OF RECEIVER. Only when the property is in danger of being

materially injured or lost, as by the prospective foreclosure of a mortgage thereon
for non-payment of the mortgage loans despite the considerable income derived

from the property, or if portions thereof are being occupied by third persons
claiming adverse title thereto, may the appointment of a receiver be justified
(Motoomul vs. Arrieta, 8 SCRA 172).
5. ID.; ID.; ID.; ID.; CASE AT BAR. In this case, there is no showing that grave
or irremediable damage may result to respondent Borromeo unless a receiver is
appointed. The property in question is real property, hence, it is neither
perishable or consummable. Even though it is mortgaged to a third person, there
is no evidence that payment of the mortgage obligation is being neglected. In any
event, the private respondent's rights and interest, may be adequately protected
during the pendency of the case by causing his adverse claim to be annotated on
the petitioner's certificates of title.
6. ID.; ID.; ID.; FILING OF BOND, INDISPENSABLE; DISPENSED WITH BY
APPOINTMENT OF CLERK OF COURT AS RECEIVER. Another flaw in the
order of receivership is that the person whom the trial judge appointed as
receiver is her own clerk of court who did not file any bond to guarantee the
faithful discharge of his duties as depository. This practice has been frowned
upon by this Court. (Off. Gaz., [No. 12], 4884, 78 Phil. 743; (De la Cruz vs.
Guinto, 45 Off. Gaz. pp. 1309, 1311; 79 Phil. 304, Abrigo vs. Kayanan, 121
SCRA 20, and other cases cited.)
7. ID.; ID.; ID.; IRREGULAR APPOINTMENT OF RECEIVER NOT SUBJECT TO
RETROACTIVE VALIDATION. During the pendency of this appeal, Judge
Dadole rendered a decision in Civil Case No. MAN-1148 upholding Borromeo's
claim to Descallar's property annulling the latter's TCTs Nos. 24790, 24791 and
24792 and ordering the Register of Deeds of Mandaue City to issue new ones in
the name of Borromeo. This circumstance does not retroactively validate the
receivership until the decision (presumably now pending appeal) shall have
attained finality.

DECISION

GRIO-AQUINO, J :
p

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

prcd

On August 9, 1991, respondent Camilo Borromeo, a realtor, filed against

petitioner a civil complaint for the recovery of three (3) parcels of land and the
house built thereon in the possession of the petitioner and registered in her name
under Transfer Certificates of Title Nos. 24790, 24791 and 24792 of the Registry
of Deeds for the City of Mandaue. The case was docketed as Civil Case No.
MAN-1148 of the Regional Trial Court, Branch 28, Mandaue City.
In his complaint, Borromeo alleged that he purchased the property on July 11,
1991 from Wilhelm Jambrich, an Austrian national and former lover of the
petitioner for many years until he deserted her in 1991 for the favors of another
woman. Based on the deed of sale which the Austrian made in his favor,
Borromeo filed an action to recover the ownership and possession of the house
and lots from Descallar and asked for the issuance of new transfer certificates of
title in his name.
In her answer to the complaint, Descallar alleged that the property belongs to her
as the registered owner thereof; that Borromeo's vendor, Wilhelm Jambrich, is an
Austrian, hence, not qualified to acquire or own real property in the Philippines.
He has no title, right or interest whatsoever in the property which he may transfer
to Borromeo.

prcd

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

Petitioner sought relief in the Court of Appeals by a petition for certiorari (CA-G.R.
SP No. 27977 "Antonietta O. Descallar vs. Hon. Mercedes G. Dadole, as Judge,
RTC of Mandaue City, Branch 28, and Camilo F. Borromeo").
On July 29, 1992, the Court of Appeals dismissed the petition for certiorari.
In due time, she appealed the Appellate Court's decision to this Court by a
petition for certiorari under Rule 45 of the Rules of Court.
In a nutshell, the issue in this appeal is whether the trial court gravely abused its
discretion in appointing a receiver for real property registered in the name of the
petitioner in order to transfer its possession from the petitioner to the courtappointed 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).

LLphil

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

Another flaw in the order of receivership is that the person whom the trial judge
appointed as receiver is her own clerk of court. This practice has been frowned
upon by this Court:
"The respondent judge committed grave abuse of discretion in
connection with the appointment of a receiver . . . The instant case is
similar to Paranete vs. Tan, 87 Phil. 678 (1950) so that what was there
said can well apply to the actuations of the respondent judge . . . 'We
hold that the respondent judge has acted in excess of his jurisdiction
when he issued the order above adverted to. That order, in effect, made
the clerk of court a sort of a receiver charged with the duty of receiving
the proceeds of sale and the harvest of every year during the pendency
of the case with the disadvantage that the clerk of court has not filed any
bond to guarantee the faithful discharge of his duties as depositary; and
considering that in actions involving title to real property, the appointment
of a receiver cannot be entertained because its effect would be to take
the property out of the possession of the defendant, except in extreme
cases when there is clear proof of its necessity to save the plaintiff from
grave and irremediable loss or damage, it is evident that the action of the
respondent judge is unwarranted and unfair to the defendants. (Mendoza
vs. Arellano, 36 Phil. 59; Agonoy vs. Ruiz, 11 Phil. 204; Aquino vs.
Angeles David, 77 Phil. 1087; Ylarde vs. Enriquez, 78 Phil. 527; Arcega
vs. Pecson, 44 Off. Gaz., [No. 12], 4884, 78 Phil. 743; De la Cruz vs.
Guinto, 45 Off. Gaz. pp. 1309, 1311; 79 Phil. 304).' " (Abrigo vs.
Kayanan, 121 SCRA 20).

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

cdphil

WHEREFORE, finding grave abuse of discretion in the order of receivership

which the respondent Court of Appeals affirmed in its decision of July 29, 1992 in
CA-G.R. SP No. 27977, the petition for certiorari is hereby GRANTED and the
decision of the appellate court, as well as the order dated March 17, 1992 of the
Regional Trial Court of Mandaue City, Branch 28, in Civil Case No. MAN-1148,
are hereby ANNULLED and SET ASIDE. Costs against the private respondent.
SO ORDERED.
[G.R. No. 111357. June 17, 1997.]
TRADERS

ROYAL

BANK, petitioner, vs.

INTERMEDIATE

APPELLATE COURT, and HEIRS OF THE LATE JOSE C.

TAYENGCO, respondents.
Antonio C. Singson for petitioner.
Tirol & Tirol for private respondents.
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT; RES JUDICATA;
ELEMENTS. The elements of res judicata are: (1) The previous judgment has
become final; (2) the prior judgment was rendered by a court having jurisdiction
over the matter and parties; (3) the first judgment was made on the merits; and
(4) there was substantial identity of parties, subject matter, and cause of action,
as between the prior and subsequent actions.

SETAcC

2. ID.; PROVISIONAL REMEDIES; RECEIVERSHIP; TERMINATION THEREOF;

COMPENSATION; WHEN PROPER. Section 8, Rule 59 of the Rules of Court,
however, explicitly provides for the manner in which it shall be paid for its
services, to wit: "SEC. 8. Termination of receivership; compensation of receiver.
Whenever the court, of its own motion or on that of either party, shall
determine that the necessity for a receiver no longer exists, it shall, after due

notice to all interested parties and hearing, settle the accounts of the receiver,
direct the delivery of the funds and other property in his hands to the persons
adjudged entitled to receive them, and order the discharge of the receiver from
further duty as such. The court shall allow the receiver such reasonable
compensation as the circumstances of the case warrant, to be taxed as costs
against the defeated party, or apportioned, as justice requires." It is, therefore,
clear that when the services of a receiver who has been properly appointed
terminates, his compensation is to be charged against the defeated party, or the
prevailing litigant may be made to share the expense, as justice requires.

IDCScA

RESOLUTION

ROMERO, J :
p

The factual aspects of this case have already been resolved by this Court in G.R.
No. 63855, 1 wherein we ruled the deceased spouses Jose and Salvacion
Tayengco to be the lawful owners of the properties under receivership, and G.R.
No. 60076, 2 where we affirmed the validity of the appointment of petitioner
Traders Royal Bank (TRB) as receiver pendente lite.
In view of these rulings, the receivership proceeding was duly terminated. Thus,
TRB rendered its final accounting of the funds under receivership wherein it
retained the amount of P219,016.24 as its receiver's fee, instead of turning over
the entire fund to the Tayengcos. The Regional Trial Court of Iloilo, Branch 5, in
an order dated July 5, 1988, approved the final accounting submitted by TRB,
including the deduction of its fee from the fund under receivership.
The Tayengcos assailed said order before the Court of Appeals, 3 contending that
TRB's compensation should have been charged against the losing party and not
from the funds under receivership.
In resolving this issue the Court of Appeals, 4 in its decision dated February 12,
1993, ruled that TRB cannot deduct its fee from the funds under its receivership

since this must be shouldered by the losing party or equally apportioned among
the parties-litigants. Consequently, TRB was ordered to return the P219,016.24 to
the Tayengcos, and the losing parties, Cu Bie, et al., were held solely liable for
TRB's compensation. 5 TRB filed a motion for reconsideration, but this was
denied by the appellate court in its resolution dated August 17, 1993. 6
In this appeal, TRB raises the following errors allegedly committed by the Court
of Appeals:
1. The Hon. IAC (should be CA) erred when it rendered the judgment
and Resolution ordering the return by TRB of Receiver's Fee of
P219,016.24 to the heirs of Jose Tayengco, as it reversed the Decision
of the Supreme Court in the case of Jose Tayengco vs. Hon. Ilarde, TRB,
et al., GR. No. 60076, which ordered the Trial Court to "settle the
account of the receiver, TRB" to thereafter discharge the receiver and
charged as cost against the losing party;
2. The Hon. IAC had no jurisdiction in CA-GR. 21423 and erred in
knowingly taking cognizance and rendering the judgment and resolution
on the issue of the payment of receiver's fee to TRB since the same
subject matter was already within the jurisdiction of the Supreme Court
in GR. No. 60076;
3. The Hon. IAC erred when it rendered the judgment and Resolution
which reversed the final Supreme Court Decision in GR. No. 60076 on
the payment of the receiver's fee to TRB as it violated the Rule on "Bar
by Final Judgment". 7 (Emphasis supplied)

TRB's assignment of errors submits for resolution two vital issues: (1) Is the
Court of Appeals decision dated February 12, 1993 barred by res judicata by
virtue of our ruling in G.R. No. 60076 recognizing the propriety of TRB's
appointment as receiver? (2) Who is responsible for TRB's receiver's fee?
With respect to the first assigned error, we are not persuaded.

The elements of res judicata are: (1) The previous judgment has become final;
(2) the prior judgment was rendered by a court having jurisdiction over the matter
and parties; (3) the first judgment was made on the merits; and (4) there was
substantial identity of parties, subject matter, and cause of action, as between the
prior and subsequent actions. 8
The difference between the two causes of action is unmistakable. In G.R. No.
60076, the petition was for the annulment of the trial court's order requiring
Tayengco to render and submit an accounting of the rental of the buildings and
apartments, while C.A. G.R. CV No. 21423 was an appeal questioning the order
of the trial court authorizing the deduction by TRB of its compensation from the
receivership funds. There is clearly no identity of causes of action here. Clearly,
the last element of res judicata is absent in the case at bar.
Procedural obstacles aside, we now answer the principal query posed in the
instant petition.
Nobody questions the right of TRB to receive compensation. Section 8, Rule 59
of the Rules of Court, however, explicitly provides for the manner in which it shall
be paid for its services, to wit:
"SEC. 8. Termination of receivership; compensation of receiver.
Whenever the court, of its own motion or on that of either party, shall
determine that the necessity for a receiver no longer exists, it shall, after
due notice to all interested parties and hearing, settle the accounts of the
receiver, direct the delivery of the funds and other property in his hands
to the persons adjudged entitled to receive them, and order the
discharge of the receiver from further duty as such. The court shall allow
the receiver such reasonable compensation as the circumstances of the
case warrant, to be taxed as costs against the defeated party, or
apportioned, as justice requires." (Emphasis supplied)

It is, therefore, clear that when the services of a receiver who has been properly
appointed terminates, his compensation is to be charged against the defeated
party, or the prevailing litigant may be made to share the expense, as justice

requires. Consequently, the trial court's order approving TRB's compensation to

be charged solely against the funds under its receivership is without legal
justification; hence, it was correctly reversed by the Court of Appeals.

cdasia

IN VIEW OF THE FOREGOING, the decision appealed from is AFFIRMED.

Costs against petitioner.
SO ORDERED.
[G.R. No. 174356. January 20, 2010.]
EVELINA

G.

CHAVEZ

DELES, petitioners, vs.

COURT

and
OF

AIDA
APPEALS

CHAVEZand

ATTY.

FIDELA Y. VARGAS, respondents.

DECISION

ABAD, J :
p

This case is about the propriety of the Court of Appeals (CA), which hears the
case on appeal, placing the property in dispute under receivership upon a claim
that the defendant has been remiss in making an accounting to the plaintiff of the
fruits of such property.

ITSCED

The Facts and the Case

Respondent Fidela Y. Vargas owned a five-hectare mixed coconut land and rice
fields in Sorsogon. Petitioner Evelina G. Chavez had been staying in a remote
portion of the land with her family, planting coconut seedlings on the land and
supervising the harvest of coconut and palay. Fidela and Evelina agreed to divide
the gross sales of all products from the land between themselves. Since Fidela
was busy with her law practice, Evelina undertook to hold in trust for Fidela her
half of the profits.

But Fidela claimed that Evelina had failed to remit her share of the profits and,
despite demand to turn over the administration of the property to Fidela, had
refused to do so. Consequently, Fidela filed a complaint against Evelina and her
daughter, Aida C. Deles, who was assisting her mother, for recovery of
possession, rent, and damages with prayer for the immediate appointment of a
receiver before the Regional Trial Court (RTC) of Bulan, Sorsogon. 1 In their
answer, Evelina and Aida claimed that the RTC did not have jurisdiction over the
subject matter of the case since it actually involved an agrarian dispute.
After hearing, the RTC dismissed the complaint for lack of jurisdiction based on
Fidela's admission that Evelina and Aida were tenants who helped plant coconut
seedlings on the land and supervised the harvest of coconut and palay. As
tenants, the defendants also shared in the gross sales of the harvest. The court
threw out Fidela's claim that, since Evelina and her family received the land
already planted with fruit-bearing trees, they could not be regarded as tenants.
Cultivation, said the court, included the tending and caring of the trees. The court
also regarded as relevant Fidela's pending application for a five-hectare retention
and Evelina's pending protest relative to her three-hectare beneficiary share. 2
Dissatisfied, Fidela appealed to the CA. She also filed with that court a motion for
the appointment of a receiver. On April 12, 2006 the CA granted the motion and
ordained receivership of the land, noting that there appeared to be a need to
preserve the property and its fruits in light of Fidela's allegation that Evelina and
Aida failed to account for her share of such fruits. 3
Parenthetically, Fidela also filed three estafa cases with the RTC of Olongapo
City and a complaint for dispossession with the Department of Agrarian Reform
Adjudication Board (DARAB) against Evelina and Aida. In all these cases, Fidela
asked for the immediate appointment of a receiver for the property.
The Issues Presented
Petitioners present the following issues:
1. Whether or not respondent Fidela is guilty of forum shopping
considering that she had earlier filed identical applications for

receivership over the subject properties in the criminal cases she filed
with the RTC of Olongapo City against petitioners Evelina and Aida and
in the administrative case that she filed against them before the DARAB;
and
2. Whether or not the CA erred in granting respondent Fidela's
application for receivership.

The Court's Ruling

One. By forum shopping, a party initiates two or more actions in separate
tribunals, grounded on the same cause, trusting that one or the other tribunal
would favorably dispose of the matter. 4 The elements of forum shopping are the
same as in litis pendentia where the final judgment in one case will amount to res
judicata in the other. The elements of forum shopping are: (1) identity of parties,
or at least such parties as would represent the same interest in both actions; (2)
identity of rights asserted and relief prayed for, the relief being founded on the
same facts; and (3) identity of the two preceding particulars such that any
judgment rendered in the other action will, regardless of which party is
successful, amount to res judicata in the action under consideration. 5
Here, however, the various suits Fidela initiated against Evelina and Aida involved
different causes of action and sought different reliefs. The present civil action that
she filed with the RTC sought to recover possession of the property based on
Evelina and Aida's failure to account for its fruits. The estafa cases she filed with
the RTC accused the two of misappropriating and converting her share in the
harvests for their own benefit. Her complaint for dispossession under Republic
Act 8048 with the DARAB sought to dispossess the two for allegedly cutting
coconut trees without the prior authority of Fidela or of the Philippine Coconut
Authority.
The above cases are similar only in that they involved the same parties and
Fidela sought the placing of the properties under receivership in all of them. But
receivership is not an action. It is but an auxiliary remedy, a mere incident of the
suit to help achieve its purpose. Consequently, it cannot be said that the grant of

receivership in one case will amount to res judicata on the merits of the other
cases. The grant or denial of this provisional remedy will still depend on the need
for it in the particular action.

DHSEcI

Two. In any event, we hold that the CA erred in granting receivership over the
property in dispute in this case. For one thing, a petition for receivership under
Section 1(b), Rule 59 of the Rules of Civil Procedure requires that the property or
fund subject of the action is in danger of being lost, removed, or materially
injured, necessitating its protection or preservation. Its object is the prevention of
imminent danger to the property. If the action does not require such protection or
preservation, the remedy is not receivership. 6
Here Fidela's main gripe is that Evelina and Aida deprived her of her share of the
land's produce. She does not claim that the land or its productive capacity would
disappear or be wasted if not entrusted to a receiver. Nor does Fidela claim that
the land has been materially injured, necessitating its protection and
preservation. Because receivership is a harsh remedy that can be granted only in
extreme situations, 7 Fidela must prove a clear right to its issuance. But she has
not. Indeed, in none of the other cases she filed against Evelina and Aida has
that remedy been granted her. 8
Besides, the RTC dismissed Fidela's action for lack of jurisdiction over the case,
holding that the issues it raised properly belong to the DARAB. The case before
the CA is but an offshoot of that RTC case. Given that the RTC has found that it
had no jurisdiction over the case, it would seem more prudent for the CA to first
provisionally determine that the RTC had jurisdiction before granting receivership
which is but an incident of the main action.
WHEREFORE, the Court GRANTS the petition. The Resolutions dated April 12,
2006 and July 7, 2006 of the Court of Appeals in CA-G.R. CV 85552,
are REVERSED and SET ASIDE.
The receivership is LIFTED and the Court of Appeals is directed to resolve CAG.R. CV 85552 with utmost dispatch.
SO ORDERED.