Provisional Remedies Cases_Rule 59

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PROVISIONAL REMEDIES

Rule 59: Receivership 1

Commodities vs. CA, June 19, 1997....................................................2

Vivares vs. Reyes, February 13, 2008................................................8

Citibank vs. CA, March 17, 1999.......................................................15

Traders Royal Bank vs. IAC, et. Al., June 17, 1997.......................... ..28


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Commodities vs. CA, June 19, 1997

SECOND DIVISION

G.R. No. 125008 June 19, 1997

COMMODITIES STORAGE & ICE PLANT CORPORATION,

SPOUSES VICTOR & JOHANNAH TRINIDAD, petitioners,

vs.

COURT OF APPEALS, JUSTICE PEDRO A.. RAMIREZ, CHAIRMAN

and FAR EAST BANK & TRUST COMPANY, respondents.

PUNO,J.:

In this petition for certiorari, petitioner seeks to annul and set aside

the decision and resolution of the Court of Appeals 1 in CA-G.R. SP

No. 36032 dismissing the complaint in Civil Case No. 94-72076

before the Regional Trial Court, Branch 9, Manila.

The facts show that in 1990, petitioner spouses Victor and Johannah

Trinidad obtained a loan of P31,000,000.00 from respondent Far East

Bank & Trust Company to finance the purchase of the Sta. Maria Ice

Plant & Cold Storage in Sta. Maria, Bulacan. The loan was secured by

a mortgage over the ice plant and the land on which the ice plant

stands. Petitioner spouses failed to pay their loan. The bank

extrajudicially foreclosed the mortgage and the ice plant was sold by

public bidding on March 22, 1993. Respondent bank was the highest

bidder. It registered the certificate of sale on September 22, 1993

and later took possession of the property.

On November 22, 1993, petitioner spouses filed Civil Case No. 956-

M-93 against respondent bank before the Regional Trial Court,

Malolos, Bulacan for reformation of the loan agreement, annulment

of the foreclosure sale and damages. 2 The trial court dismissed the

complaint for petitioners' failure to pay the docket fees. The

dismissal was without prejudice to refiling of the complaint. 3

On October 28, 1994, petitioners filed Civil Case No. 94-72076

against respondent bank before the Regional Trial Court, Branch 9,

Manila for damages, accounting and fixing of redemption period. 4 As

a provisional remedy, petitioners filed on November 16, 1994 an

"Urgent Petition for Receivership." They alleged that respondent

bank took possession of the ice plant forcibly and without notice to

them; that their occupation resulted in the destruction of petitioners'

financial and accounting records making it impossible for them to

pay their employees and creditors; the bank has failed to take care

of the ice plant with due diligence such that the plant has started

emitting ammonia and other toxic refrigerant chemicals into the

atmosphere and was posing a hazard to the health of the people in

the community; the spouses' attention had been called by several

people in the barangay who threatened to inform the Department of

Environment and Natural Resources should they fail to take action.

Petitioners thus prayed for the appointment of a receiver to save the

ice plant, conduct its affairs and safeguard its records during the

pendency of the case. 5


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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


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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 11and 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


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A petition for receivership under Section 1 (b) of Rule 59 requires

that the property or fund which is the subject of the action must be

in danger of loss, removal or material injury which necessitates

protection or preservation. The guiding principle is the prevention of

imminent danger to the property. If an action by its nature, does not

require such protection or reservation, said remedy cannot be

applied for and granted. 14

In the instant case, we do not find the necessity for the appointment

of a receiver. Petitioners have not sufficiently shown that the Sta.

Maria Ice Plant is in danger of disappearing or being wasted and

reduced to a "scrap heap." Neither have they proven that the

property has been materially injured which necessitates its

protection and preservation. 15 In fact, at the hearing on respondent

bank's motion to dismiss, respondent bank, through counsel,

manifested in open court that the leak in the ice plant had already

been remedied and that no other leakages had been reported

since. 16 This statement has not been disputed by petitioners.

At the time the trial court issued the order for receivership of the

property, the problem had been remedied and there was no

imminent danger of another leakage. Whatever danger there was to

the community and the environment had already been contained.

The "drastic sanctions" that may be brought against petitioners due

to their inability to pay their employees and creditors as a result of

"the numbing manner by which [respondent bank] took the ice

plant" does not concern the ice plant itself. These claims are the

personal liabilities of petitioners themselves. They do not constitute

"material injury" to the ice plant.

Moreover, the receiver appointed by the court appears to be a

representative of petitioners. Respondent bank alleges that it was

not aware that petitioners nominated one Mr. Pesquera as

receiver. 17 The general rule is that neither party to a litigation

should be appointed as receiver without the consent of the other

because a receiver should be a person indifferent to the parties and

should be impartial and disinterested. 18 The receiver is not the

representative of any of the parties but of all of them to the end that

their interests may be equally protected with the least possible

inconvenience and expense. 19

The power to appoint a receiver must be exercised with extreme

caution. There must be a clear showing of necessity therefor in order

to save the plaintiff from grave and irremediable loss or

damage. 20It 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-


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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 bythe 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


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thereof, allow redemption of the property. They ultimately

seek redemption of the mortgaged property. This is explicit in

paragraph 4 of their prayer.

An action to redeem by the mortgage debtor affects his title to the

foreclosed property. If the action is seasonably made, it seeks to

erase from the title of the judgment or mortgage debtor the lien

created by registration of the mortgage and sale. 26 If not made

seasonably, it may seek to recover ownership to the land since the

purchaser's inchoate title to the property becomes consolidated after

expiration of the redemption period. 27 Either way, redemption

involves the title to the foreclosed property. It is a real action.

Section 2 of Rule 4 of the Revised Rules of Court provides:

Sec. 2. Venue in Courts of First Instance. (a) Real

actions. Actions affecting title to, or for recovery of

possession, or for partition or condemnation of, or

foreclosure of mortgage on, real property, shall be

commenced and tried in the province where the

property or any part thereof lies. 28

Where the action affects title to the property, it should be

instituted in the Regional Trial Court where the property is

situated. The Sta. Maria Ice Plant & Cold Storage is located in

Sta. Maria, Bulacan. The venue in Civil Case No. 94-72076

was therefore laid improperly.

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

bank is no longer the real party in interest after selling the ice plant

to a third person during the pendency of the case. Section 20 of Rule

3 of the Revised Rules of Court provides that in a transfer of interest

pending litigation, the action may be continued by or against the

original party, unless the court, upon motion, directs the transferee

to be substituted in the action or joined with the original party. The

court has not ordered the substitution of respondent bank.

IN VIEW WHEREOF, the decision dated January 11, 1996 and

resolution dated May 23, 1996 of the Court of Appeals in CA-G.R. SP

No. 36032 are affirmed. Costs against petitioners.

SO ORDERED.


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Vivares vs. Reyes, February 13, 2008

SECOND DIVISION

G.R. No. 155408 February 13, 2008

JULIO A. VIVARES and MILA G. IGNALING, petitioners,

vs.

ENGR. JOSE J. REYES, respondent.

D E C I S I O N

VELASCO, JR.,J.:

The Case

The kernel dispute in this petition under Rule 45 is the legality of the

May 22, 2001 Resolution1 of the Camiguin Regional Trial Court (RTC),

Branch 28 in Civil Case No. 517, which placed the estate of Severino

Reyes under receivership. The Court of Appeals (CA) saw it

differently in CA-G.R. SP No. 67492its June 18, 2002

Decision2recalled the RTC directive on the appointment of the

receiver, prompting Julio Vivares and Mila Ignaling to file the petition

at bar to convince the Court to reinstate the receivership.

The Facts

Severino Reyes was the father of respondent Jose Reyes and

Torcuato Reyes. Upon the death of Severino, respondent and

Torcuato came upon their inheritance consisting of several

properties. They had an oral partition of the properties and

separately appropriated to themselves said properties.

On May 12, 1992, Torcuato died with a last will and testament

executed on January 3, 1992. In Reyes v. Court of Appeals,3 we

affirmed the November 29, 1995 CA Decision, admitting the will for

probate.

Petitioner Vivares was the designated executor of Torcuatos last will

and testament, while petitioner Ignaling was declared a lawful heir of

Torcuato.

Believing that Torcuato did not receive his full share in the estate of

Severino, petitioners instituted an action forPartition and Recovery

of Real Estate before the Camiguin RTC, Branch 28 entitledJulio A.

Vivares, as executor of the estate of Torcuato J. Reyes and Mila R.

Ignaling, as heir v. Engr. Jose J. Reyes and docketed as Civil Case No.

517. With the approval of the trial court, the parties agreed that

properties from the estate of Severino, which were already

transferred in the names of respondent and Torcuato prior to the

latters death on May 12, 1992, shall be excluded from litigation. In

short, what was being contested were the properties that were still

in the name of Severino.

On November 24, 1997, for the purpose of collating the common

properties that were disputed, the trial court directed the formation

of a three-man commission with due representation from both

parties, and the third member, appointed by the trial court, shall act

as chairperson. The disputed properties were then annotated with

notices oflis pendens upon the instance of petitioners.
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On March 15, 2000, petitioners filed a Motion to Place Properties in

Litigation under Receivership4 before the trial court alleging that to

their prejudice respondent had, without prior court approval and

without petitioners knowledge, sold to third parties and transferred

in his own name several common properties. Petitioners also averred

that respondent fraudulently antedated, prior to May 12, 1992, some

conveyances and transfers to make it appear that these were no

longer part of the estate of Severino under litigation. They further

claimed that respondent was and is in possession of the common

properties in the estate of Severino, and exclusively enjoying the

fruits and income of said properties and without rendering an

accounting on them and turning over the share pertaining to

Torcuato. Thus, petitioners prayed to place the entire disputed

estate of Severino under receivership. They nominated a certain

Lope Salantin to be appointed as receiver.

On March 23, 2000, respondent filed his Opposition to Place the

Estate of Severino Reyes under Receivership,5denying that he had

fraudulently transferred any property of the estate of Severino and

asserting that any transfer in his name of said properties was a

result of the oral partition between him and Torcuato that enabled

the latter as well to transfer several common properties in his own

name.

On May 24, 2000, petitioners filed their Offer of Exhibits in support of

their motion for receivership. On the same date, the trial court

issued an Order6 granting petitioners motion and appointed Salantin

as receiver conditioned on the filing of a PhP 50,000 bond.

Respondent filed a motion for reconsideration, contending that the

appointment of a receiver was unduly precipitate considering that he

was not represented by counsel and thus was deprived of due

process.

On August 4, 2000, the trial court allowed respondent to present his

evidence to contest petitioners grounds for the appointment of a

receiver, and the trial court set the reception of respondents

evidence for September 4, 2000. However, on August 24, 2000,

respondent filed a motion for postponement of the September 4,

2000 scheduled hearing on the ground that he was in the United

States as early as July 23, 2000 for medical examination. On

September 5, 2000, the trial court denied respondents motion for

postponement and reinstated its May 24, 2000 Order.

On September 19, 2000, respondent filed a Manifestation with

Motion to Discharge Receiver, reiterating the circumstances which

prevented him from attending the September 4, 2000 hearing and

praying for the discharge of the receiver upon the filing of a

counterbond in an amount to be fixed by the court in accordance

with Section 3, Rule 59 of the 1997 Revised Rules on Civil Procedure.

On October 10, 2000, petitioners filed their undated Opposition to

Motion to Discharge Receiver.

Subsequently, respondent filed a Motion to Cancel Notice ofLis

Pendens which was annotated on Tax Declaration (TD) No. 112

covering Lot No. 33 allegedly belonging exclusively to him.

Respondent asserted in the motion that an adjacent property to Lot

No. 33, particularly a portion of Lot No. 35, which is owned by a

certain Elena Unchuan, was erroneously included in Lot No. 33 and,

consequently, was subjected to the notice oflis pendens. Petitioners

filed their Opposition to the Motion to Cancel Lis Pendens.
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Consequently, on May 22, 2001, the trial court issued a Resolution,

denying respondents motions to discharge receiver and cancel the

notice oflis pendens in TD No. 112. Respondent seasonably filed a

partial motion for reconsideration of the May 22, 2001 Resolution,

attaching copies of deeds of sale executed by Torcuato covering

several common properties of the estate of Severino to prove that he

and Torcuato had indeed made an oral partition of the estate of their

father, Severino, and thus allowing him and Torcuato to convey their

respective shares in the estate of Severino to third persons.

On October 19, 2001, the trial court heard respondents motion for

partial reconsideration, and on the same date issued an Order

denying the motion for partial reconsideration on the ground that

respondent failed to raise new matters in the motion but merely

reiterated the arguments raised in previous pleadings.

Aggrieved, respondent filed a Petition for Certiorari before the CA,

assailing the May 22, 2001 Resolution and October 19, 2001 Order of

the RTC.

The Ruling of the Court of Appeals

On June 18, 2002, the CA rendered the assailed Decision, sustaining

respondents position and granted relief, thus:

WHEREFORE, premises considered, the Petition is

hereby GRANTED. The Resolution dated 22 May 2001 of the

Regional Trial Court of Camiguin, Branch 28 in Civil Case No.

517 is hereby reversed and set aside. The court-appointed

receiver, Lope Salantin, is discharged upon the posting by

petitioner of a counterbond in the amount of P100,000.00.

The notice oflis pendens in Tax Declaration 112, in so far as

it covers the property of Elena Unchuan, is cancelled. Let this

case be remanded to the court a quo for further proceedings.7

In reversing the trial court, the CA reasoned that the court a

quo failed to observe the well-settled rule that allows the grant of

the harsh judicial remedy of receivership only in extreme cases when

there is an imperative necessity for it. The CA thus held that it is

proper that the appointed receiver be discharged on the filing of a

counterbond pursuant to Sec. 3, Rule 59 of the 1997 Revised Rules

on Civil Procedure.

Moreover, the CA ratiocinated that respondent has adequately

demonstrated that the appointment of the receiver has no sufficient

basis, and further held that the rights of petitioners over the

properties in litigation are doubly protected through the notices oflis

pendens annotated on the titles of the subject properties. In fine, the

appellate court pointed out that the appointment of a receiver is a

delicate one, requiring the exercise of discretion, and not an

absolute right of a party but subject to the attendant facts of each

case. The CA found that the trial court abused its discretion in

appointing the receiver and in denying the cancellation of the notice

oflis pendens on TD No. 112, insofar as it pertains to the portion

owned by Unchuan.

Aggrieved, petitioners in turn interposed a Motion for

Reconsideration that was denied through the assailed September 24,

2002 CA Resolution.
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Thus, this petition for review on certiorari is before us, presenting the

following issues for consideration:

I

WHETHER OR NOT THE ANNOTATION OF A NOTICE OF LIS

PENDENS PRECLUDES THE APPOINTMENT OF A RECEIVER

WHEN THERE IS A NEED TO SAFEGUARD THE PROPERTIES IN

LITIGATION.

II

WHETHER OR NOT A DULY APPOINTED RECEIVER OF

PROPERTIES IN LITIGATION SHOULD BE DISCHARGED SIMPLYBECAUSE THE ADVERSE PARTY OFFERS TO POST A

COUNTERBOND.

III

WHETHER OR NOT THE CANCELLATION OF A NOTICE OF LIS

PENDENS ANNOTATED ON TAX DECLARATION NO. 112 IS

CONTRARY TO LAW.8

The Courts Ruling

The petition must be denied. Being closely related, we discuss the

first and second issues together.

Receivership not justified

We sustain the CA ruling that the trial court acted arbitrarily in

granting the petition for appointment of a receiver as "there was no

sufficient cause or reason to justify placing the disputed properties

under receivership."

First, petitioners asseverate that respondent alienated several

common properties of Severino without court approval and without

their knowledge and consent. The fraudulent transfers, they claim,

were antedated prior to May 12, 1992, the date of Torcuatos death,

to make it appear that these properties no longer form part of the

assets of the estate under litigation in Civil Case No. 517.

Petitioners position is bereft of any factual mooring.

Petitioners miserably failed to adduce clear, convincing, and hard

evidence to show the alleged fraud in the transfers and theantedating of said transfers. The fact that the transfers were dated

prior to the demise of Torcuato on May 12, 1992 does not

necessarily mean the transfers were attended by fraud. He who

alleges fraud has the burden to prove it.

Moreover, respondent has adduced documentary proof that Torcuato

himself similarly conveyed several lots in the estate of Severino

based on the oral partition between the siblings. To lend credence tothe transfers executed by Torcuato but distrust to those made by

respondent would be highly inequitable as correctly opined by the

court a quo.

Indeed, receivership is a harsh remedy to be granted only in extreme

situations. As early as 1914, the Court already enunciated the

doctrinal pronouncement in Velasco & Co. v. Gochuico & Co. that

courts must use utmost circumspection in allowing receivership,

thus:
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The power to appoint a receiver is a delicate one and should

be exercised with extreme caution and only under

circumstances requiring summary relief or where the court is

satisfied that there is imminent danger of loss, lest the injury

thereby caused be far greater than the injury sought to be

averted. The court should consider the consequences to all of

the parties and the power should not be exercised when it is

likely to produce irreparable injustice or injury to private

rights or the facts demonstrate that the appointment will

injure the interests of others whose rights are entitled to as

much consideration from the court as those of the

complainant.9

Petitioners cannot now impugn the oral partition entered into by

Torcuato and respondent and hence cannot also assail the transfers

made by respondent of the lots which were subject of said

agreement, considering that Torcuato also sold properties based on

said verbal arrangement. Indeed, the parties agreed that the civil

action does not encompass the properties covered by the oral

partition. In this factual setting, petitioners cannot convince the

Court that the alleged fraudulent transfers of the lots made by

respondent, which purportedly form part of his share in Severinos

estate based on the partition, can provide a strong basis to grant the

receivership.

Second, petitioner is willing to post a counterbond in the amount to

be fixed by the court based on Sec. 3, Rule 59 of the 1997 Rules of

Civil Procedure, which reads:

Sec. 3. Denial of application or discharge of receiver.The

application may be denied, or the receiver discharged, when

the adverse party files a bond executed to the applicant, in

an amount to be fixed by the court, to the effect that such

party will pay the applicant all damages he may suffer by

reason of the acts, omissions, or other matter specified in the

application as ground for such appointment. The receiver may

also be discharged if it is shown that his appointment was

obtained without sufficient cause.

Anchored on this rule, the trial court should have dispensed with the

services of the receiver, more so considering that the alleged fraud

put forward to justify the receivership was not at all established.

Petitioners advance the issue that the receivership should not be

recalled simply because the adverse party offers to post a

counterbond. At the outset, we find that this issue was not raised

before the CA and therefore proscribed by the doctrine that an issue

raised for the first time on appeal and not timely raised in the

proceedings in the lower court is barred by estoppel. 10 Even if we

entertain the issue, the contention is nevertheless devoid of merit.

The assailed CA decision supported the discharge of the receiver

with several reasons including the posting of the counterbond. While

the CA made a statement that the trial court should have discharged

the appointed receiver on the basis of the proposed counterbond,

such opinion does not jibe with the import of Sec. 3, Rule 59. The

rule states that the "application may be denied or the receiver

discharged." In statutory construction, the word "may" has always

been construed as permissive. If the intent is to make it mandatory

or ministerial for the trial court to order the recall of the receiver
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upon the offer to post a counterbond, then the court should have

used the word "shall." Thus, the trial court has to consider the

posting of the counterbond in addition to other reasons presented by

the offeror why the receivership has to be set aside.

Third, since a notice oflis pendens has been annotated on the titles

of the disputed properties, the rights of petitioners are amply

safeguarded and preserved since "there can be no risk of losing the

property or any part of it as a result of any conveyance of the land or

any encumbrance that may be made thereon posterior to the filing

of the notice oflis pendens."11 Once the annotation is made, any

subsequent conveyance of the lot by the respondent would be

subject to the outcome of the litigation since the fact that the

properties are under custodia legis is made known to all and sundry

by operation of law. Hence, there is no need for a receiver to look

after the disputed properties.

On the issue oflis pendens, petitioners argue that the mere fact that

a notice oflis pendens was annotated on the titles of the disputed

properties does not preclude the appointment of a receiver. It is true

that the notice alone will not preclude the transfer of the

propertypendente lite, for the title to be issued to the transferee will

merely carry the annotation that the lot is under litigation. Hence,

the notice oflis pendens, by itself, may not be the "most convenient

and feasible means of preserving or administering the property in

litigation." However, the situation is different in the case at bar. A

counterbond will also be posted by the respondent to answer for all

damages petitioners may suffer by reason of any transfer of the

disputed properties in the future. As a matter of fact, petitioners can

also ask for the issuance of an injunctive writ to foreclose any

transfer, mortgage, or encumbrance on the disputed properties.

These considerations, plus the finding that the appointment of the

receiver was without sufficient cause, have demonstrated the

vulnerability of petitioners postulation.

Fourth, it is undisputed that respondent has actual possession over

some of the disputed properties which are entitled to protection.

Between the possessor of a subject property and the party asserting

contrary rights to the properties, the former is accorded better

rights. In litigation, except for exceptional and extreme cases, the

possessor ought not to be deprived of possession over subject

property. Article 539 of the New Civil Code provides that "every

possessor has a right to be respected in his possession; and should

he be disturbed therein he shall be protected in or restored to said

possession by the means established by the laws and the Rules of

Court." In Descallar v. Court of Appeals, we ruled that the

appointment of a receiver is not proper where the rights of the

parties, one of whom is in possession of the property, are still to be

determined by the trial court.12

In view of the foregoing reasons, we uphold the CA ruling that the

grant of the receivership was without sufficient justification nor

strong basis.

Anent the third issue that the cancellation of the notice oflis

pendens on TD No. 112 is irregular as Lot No. 33 is one of the

disputed properties in the partition case, petitioners position is

correct.
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The CA made a factual finding that the property of Unchuan was

erroneously included in Lot No. 33, one of the disputed properties in

Civil Case No. 517. It then ruled that the annotation oflis

pendens should be lifted.

This ruling is bereft of factual basis.

The determination whether the property of Unchuan is a part of Lot

No. 33 and whether that portion really belongs to Unchuan are

matters to be determined by the trial court. Consequently, the notice

oflis pendens on TD No. 112 stays until the final ruling on said issues

is made.

WHEREFORE, the petition is PARTLY GRANTED. The June 18, 2002CA Decision in CA-G.R. SP No. 67492

isAFFIRMED with MODIFICATION insofar as it ordered the

cancellation of the notice oflis pendens in TD No. 112. As thus

modified, the appealed CA Decision should read as follows:

WHEREFORE, premises considered, the Petition is

hereby PARTLY GRANTED. The Resolution dated 22 May

2001 of the Regional Trial Court of Camiguin, Branch 28 inCivil Case No. 517 is hereby reversed and set aside. The

court-appointed receiver, Lope Salantin, is discharged upon

the posting by petitioner of a counterbond in the amount of

PhP 100,000. The notice oflis pendens in TD No.

112,including the portion allegedly belonging to Elena

Unchuan, remains valid and effective. Let this case be

remanded to the court a quo for further proceedings in Civil

Case No. 517.

No costs.

SO ORDERED.


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Citibank vs. CA, March 17, 1999

THIRD DIVISION

G.R. No. 61508 March 17, 1999

Citibank, N.A. (Formerly First National City Bank), petitioner,

vs.

The Honorable Court of Appeals and Douglas F.

Anama, respondents.

PURISIMA,J.:

At bar is a special civil action for certiorari with prayer fora

temporary restraining order faulting the Court of Appeals 1 with

grave abuse of discretion for nullifying the lower court's order of

seizure of mortgaged properties subject of a case for sum of moneyand replevin.

The facts leading to the institution of the case are as follows:

In considering for a loan obtained from Citibank, N.A. (formerly First

National City Bank), the defendant (private respondent herein)

Douglas Anama executed a promissory note, dated November 10,

1972, 2 to pay the plaintiff bank the sum of P418,000.00 in sixty (60)

equal successive monthly installments of P8,722.25, starting on the

10th day of December 1972 and on the 10th of every month

thereafter. The said Promissory Note stipulated further that:

(a) the loan is subject to interest at the

rate of twelve percent (12%) per

annum;

(b) the promissory note and the entire

amount therein stated shall become

immediately due and payable without

notice or demand upon

(aa) default in the

payment of anyinstallment of principal or

interest at the time when

the same is due;

(bb) the occurrence of

any change in the

condition and affairs of

the defendant, which inthe opinion of the plaintiff

shall increase its credit

risk;

(c) the defendant agrees to pay all

costs, expenses, handling and insurance

charges incurred in the granting of the

loan;


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(d) in case the services of a lawyer is

made necessary for collection,

defendant shall be liable for attorney's

fees of at least ten percent (10%) of the

total amount due. 3

To secure payment of the loan, private respondent Anama also

constituted a Chattel Mortgage of even date in favor of petitioner, on

various machineries and equipment located at No. 1302 Epifanio

delos Santos Avenue, Quezon City, under the following terms and

conditions:

(a) The machineries and equipment

subject of the mortgage, stand as

security for defendant's account.

(b) All replacement, substitutions,

additions, increases and accretions to

the properties mortgaged shall also be

subject to the mortgage.

(c) The defendant appoints the plaintiffas his attorney-in-fact with authority to

enter the premises of the defendant and

take actual possession of the mortgaged

chattels without any court order, to sell

said property to any party.

(d) All expenses in carrying into effect

the stipulations therein shall be for the

account of the defendant and shall form

part of the amount of the obligation

secured by the mortgage.

(e) In case the plaintiff institutes

proceedings for the foreclosure of the

mortgage, the plaintiff shall be entitled

to the appointment of a receiver without

a bond.

(f) In case of default, the defendant shall

be liable for attorney's fees and cost of

collection in the sum equal to twenty-

five (25%) of the total amount of the

indebtedness outstanding and unpaid. 4

On November 25, 1974, for failure and refusal of the private

respondent to pay the monthly installment due under the said

promissory note since January 1974, despite repeated demands,

petitioner filed a verified complaint against private respondent

Anama for the collection of his unpaid balance of P405,820.52 on the

said promissory note, for the delivery and possession of the chattels

covered by the Chattel Mortgage preparatory to the foreclosurethereof as provided under Section 14 of the Chattel Mortgage Law,

docketed as Civil Case No. 95991 before the then Court of First

Instance of Manila.

On February 20, 1975, the defendant Anama submitted his Answer

with Counterclaim, denying the material averments of the complaint,

and averring inter alia (1) that the remedy of replevin was improper

and the writ of seizure should be vacated; (2) that he signed the


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promissory note for P418,000.00 without receiving from plaintiff

Citibank any amount, and was even required to pay the first

installment on the supposed loan in December 1974; (3) that the

understanding between him and the Citibank was for the latter to

release to him the entire loan applied for prior to and during the

execution of his promissory note, but Citibank did not do so and,

instead, delayed the release of any amount on the loan even after

the execution of the promissory note thereby disrupting his

timetable of plans and causing him damages; (4) that the amount

released by Citibank to him up to the present was not the amount

stated in the promissory note, and his alleged default in paying the

installment on the loan was due to the delay in releasing the full

amount of the loan as agreed upon; (5) that the macheniries and

equipment described in the chattel mortgage executed by him are

really worth more than P1,000,000.00 but he merely acceded to the

valuation thereof by Citibank in said document because of the

latter's representation that the same was necessary to speed up the

granting of the loan applied for by him; (6) that the properties

covered by said chattel mortgage are real properties installed in a

more or less permanent nature at his (defendant's) premises in

Quezon City, as admitted by Citibank in said mortgage document; (7)

that the mortgage contract itself stipulated that the manner and

procedure for affecting the sale or redemption of the mortgage

properties, if made extrajudicial, shall be governed by Act No. 1508

and other pertinent laws which all pertain to real properties; and (8)

that because of the filing of this complaint without valid grounds

therefor, he suffered damages and incurred attorney's fees; the

defendant, now private respondent, averred.

On December 2, 1974, the trial court upon proof of default of the

private respondent in the payment of the said loan, issued an Order

of Replevin over the macheneries and equipment covered by the

Chattel Mortgage.

However, despite the issuance of the said order of seizure of subject

chattels, actual delivery of possession thereof to petitioner did not

take place because negotiations for an amicable settlement between

the parties were encouraged by the trial court.

On March 24, 1975, a pre-trial conference was held and the lower

court issued an order for joint management by the petitioner and the

private respondent of the latter's business for ten (10) days, after

which the former would appointed receiver for the said business.

On April 1, 1975, the petitioner took over private respondent's

business as receiver. When further proposals to settle the case

amicably failed, the lower court proceeded to try the case on the

merits.

On January 29, 1977, petitioner presented a Motion for the Issuance

of anAlias Writ of Seizure, ordering the sheriff to seize the propertiesinvolved and dispose of them in accordance with the Revised Rules

of Court. The lower court then gave private respondent five (5) days

to oppose the said motion and on February 22, 1977, he sent in his

opposition thereto on the grounds: (1) that Citibank's P400,000

replevin bond to answer for damages was grossly inadequate

because the market value of the properties involved is P1,710,000

and their replacement cost is P2,342,300.00 per the appraisal report

of the Appraisal and Research Corp.; (2) that he was never in default


18/30



to justify the seizure; (3) that the Civil Case No. 18071 of the Court of

First Instance, entitled Hernandes vs. Anama, et al., which, according

to Citibank, supposedly increased its credit risk in the alleged

obligation, had already been dismissed as against him and the case

terminated with the dismissal of the complaint against the remaining

defendant, First National City Bank, by the Court in its orders of

January 12, 1977 and February 7, 1977; (4) that his (defendant's)

supposed obligations with Citibank were fully secured and his

mortgaged properties are more than sufficient to secure payment

thereof; and (5) that the writ of seizure if issued would stop his

business operations and contracts and expose him to lawsuits from

customers, and also dislocate his employees and their families

entirely dependent thereon for their livelihood.

On February 28, 1977, acting on the said Motion and private

respondent's opposition, the trial court issued an Order granting the

Motion forAlias Writ of Seizure, ruling thus:

WHEREFORE, the motion for alias writ of seizure is

hereby granted. At any rate, this Order gives another

opportunity for defendant and the intervenor who

claims to be a part owner to file a counterbond under

Sec. 60 of Rules of Court. 5

Private respondent moved for reconsideration of the aforesaid order

but the same was denied by the Resolution of March 18, 1977, to

wit:

In view of the foregoing, the motion for

reconsideration is hereby denied.

At any rate, as already stated, the defendant has still a

remedy available which is to file a bond executed to

the plaintiff in double the value of the properties as

stated in the plaintiff's affidavit. The Court at this

instance therefore has no authority to stop or

suspended the writ of seizure already ordered. 6

Accordingly, by virtue of theAlias writ of Seizure, petitioner took

possession of the mortgaged chattels of private respondent. As a

consequence, the sheriff seized subject properties, dismantled and

removed them from the premises where they were installed,

delivered them to petitioner's possession on March 17, 18 and 19,

1977 and advertised them for sale at public auction scheduled on

March 22, 1977.

On March 21, 1977, private respondent filed with the Court of

Appeals a Petition for Certiorari and Prohibition 7with Injunction to

set aside and annul the questioned resolution of the trial court on

the ground that they were issued "in excess of jurisdiction and with

grave abuse of discretion" because of the "lack of evidence and clear

cut right to possession of First National City Bank (herein petitioner)"

top the machineries subject of the Chattel Mortgage.

On July 30, 1982, finding that the trial court acted with grave abuse

of discretion amounting to excess of lack of jurisdiction in issuing the

assailed resolutions, the Court of Appeals granted petition, holding

that the provision of the Rules of Court on Replevin and Receivership

have not been complied with, in that (1) there was no Affidavit of

Merit accompanying the Complaint for Replevin; (2) the bond posted

by Citibank was insufficient; and (3) there was non-compliance with


19/30



the requirement of a receiver's bond and oath of office. The decretal

portion of the assailed decision of the Court of Appeals, reads:

WHEREFORE, the petition is granted. The questioned

resolutions issues by the respondent judge in Civil

Case No. 95991, dated February 28, 1977 and March

18, 1977, together with the writs and processes

emanating or deriving therefrom, are hereby declare

null and void ab initio.

The respondent ex-officio sheriff of Quezon City and

the respondent First National City Bank are hereby

ordered to return all the machineries and equipment

with their accessories seized, dismantled and hauled,

to their original and respective places and position in

the shop flooring of the petitioner's premises where

these articles were, before they were dismounted,

seized and hauled at their own expense. The said

respondents are further ordered to cause the repair of

the concrete foundations destroyed by them including

the repair of the electrical wiring and facilities affected

during the seizure, dismanting and hauling.

The writ of preliminary injunction heretofore in effect

is hereby made permanent. Costs against the private

respondents.

SO ORDERED 8

Therefrom, Citibank came to this Court via its present petition

for certiorari, ascribing grave abuse of discretion to the Court of

Appeals and assigning as errors, that:

I

THE RESPONDENT COURT ERRED IN PRACTICALLY AND

IN EFFECT RENDERING JUDGMENT ON THE MERITS

AGAINST THE HEREIN PETITIONER BY ORDERING THE

RETURN OF THE MACHINERIES AND EQUIPMENT AND

ITS ACCESSORIES TO THEIR ORIGINAL AND

RESPECTIVE PLACES AND POSITIONS.

II

THE RESPONDENT COURT ERRED IN FINDING THAT

THE COMPLAINT OF THE PETITIONER DID NOT COMPLY

WITH THE PROVISIONS OF SEC. 2, RULE 60 OF THE

RULES OF COURT.

III

THAT THE RESPONDENT COURT ERRED IN FINDING

THAT THE BOND POSTED BY THE PETITIONER IS

QUESTIONABLE AND/OR INSUFFICIENT.

IV

THE RESPONDENT COURT ERRED IN FINDING THAT

THE PETITIONER DID NOT COMPLY WITH THE


20/30



PROVISIONS OF SEC. 5, RULE 59 BY FAILING TO POST

A RECEIVER'S BOND.

V

THE RESPONDENT ERRED IN FINDING THAT THE HON.

JORGE R. COQUIA ACTED WITH GRAVE ABUSE OF

DISCRETION AMOUNTING TO EXCESS OR LACK OF

JURISDICTION IN DEALING WITH THE SITUATION.

I

Anent the first assigned error, petitioner contends that the

Court of Appeals, by nullifying the writ of seizure issued

below, in effect, rendered judgment on the merits and

adjudged private respondent Anama as the person lawfully

entitled to the possession of the properties subject of the

replevin suit. It is theorized that the same cannot be done, as

the case before the court below was yet at trial stage and

lower court still had to determine whether or not private

respondent was in fact in default in the payment of his

obligation to petitioner Citibank, which default would warrant

the seizure of subject machineries and equipment.

The contention is untenable. A judgment is on the merits

when it determines the rights and liabilities of the parties on

the basis of the disclosed facts, irrespective of formal

technical or dilatory objections, and it is not necessary that

there should have been a trial. 9 The assailed decision of the

Court of Appeals did not make any adjudication on the rights

and liabilities between Citibank and Douglas Anama. There

was no finding yet of the fact of default. The decision only

ruled on the propriety of the issuance of the writ of seizure by

the trial court. As worded by the respondent court itself, "the

main issues to be resolved are whether there was lack or

excess of jurisdiction, or grave abuse of discretion, in the

issuance of the orders in question, and there is no appeal nor

any plain, speedy, and adequate remedy in the ordinary

course of law." 10

In resolving the issue posed by the petition, the Court of

Appeals limited its disposition to a determination of whether

or not the assailed order of seizure was issued in accordance

with law, that is, whether the provisions of the Rules of Court

on delivery of personal property or replevin as a provisional

remedy were followed. The Court of Appeals relied on Ruled

60 of the Rules of Court, which prescribed the procedure for

the recovery of possession of personal property, which Rule,

provides:

Sec. 2. Affidavit and Bond. Upon applying or such

order the plaintiff must show by his own affidavit or

that of some other person who personally knows the

facts:

(a) That the plaintiff is the owner of the

property claimed particularly describing

it, or is entitled to the possession

thereof;


21/30



(b) That the property is wrongfully

detained by the defendant, alleging the

cause of detention thereof according to

his best of knowledge, information and

belief;

(c) That it has nor been taken for a tax

assessment or fine pursuant to law, or

seized under an execution, or an

attachment against the property of the

plaintiff, or is so seized, that is exempt

from such seizure; and

(d) The actual value of the property.

The plaintiff must also give a bond, executed to the

defendant in double of the value of the property as

stated in the affidavit aforementioned, for the property

to the defendant of such sum as he may recover from

the plaintiff in the action.

The Court of Appeals did not pass upon the issue of who, as between

Douglas Anama and Citibank, is entitled to the possession of subject

machineries, as asserted by the latter. When it ordered the

restoration of the said machineries to Douglas Anama (now the

private respondent), it merely defendant to the possession of his

properties, since there was a finding that the issuance of the writ

was not in accordance with the specific rules of the Rules of Court.

II

In its second assignment of errors, petitioner theorizes that

the Court of Appeals erred in finding that it did not comply

with Section 2, Rule 60 of the Rules of Court requiring the

replevin plaintiff to attach an affidavit of merit to the

compliant.

Petitioner maintains that although there was no affidavit of merit

accompanying its complaint, there was nonetheless substantial

compliance with the said rule as all that is required to be alleged in

the affidavit of merit was set forth in its verified complaint. Petitioner

argues further that assuming arguendo that there was non-

compliance with the affidavit of merit requirement, such defense can

no longer be availed of by private respondent Anama as it was not

alleged in his Answer and was only belatedly interposed in his Reply

to the Petitioner's Comment on the Petitioner for Certiorari before

the Court of Appeals.

Petitioner is correct insofar as it contends that substantial

compliance with the affidavit requirement may be permissible. There

is substantial compliance with the rule requiring that an affidavit of

merit to support the complaint for replevin if the complaint itself

contains a statements of every fact required to be stated in the

affidavit of merit and the complaint is verified like an affidavit. On

the matter of replevin, Justice Vicente Francisco's Comment on the

Rules of Court, states:

Although the better practice is to keep the affidavit

and pleading separate, if plaintiff's pleading contains a

statement of every fact which the statute requires to

be shown in the affidavits, and the pleading is verified


22/30



by affidavit covering every statement therein, this will

be sufficient without a separate affidavit; but in no

event can the pleading supply the absence of the

affidavit unless all that the affidavit is required to

contain is embodied in the pleading, and the pleading

is verified in the form required in the case of a

separate affidavit. (77 CJS 65 cited in Francisco, Rules

of Court of the Philippines, Vol. IV-A, p. 383)

And similarly, in the case of an attachment which likewise requires

an affidavit of merit, the Court held that the absence of an affidavit

of merit is not fatal where the petition itself, which is under oath,

recites the circumstances or facts constitutive of the grounds for the

petition. 11

The facts that must be set forth in the affidavit of merit are (1) that

plaintiff owns the property particularly describing the same, or that

he is entitled to its possession; (2) wrongful detention by defendants

of said property; (3) that the property is not taken by virtue of a tax

assessment or fine pursuant to law or seized under execution or

attachment or, if it is so seized, that it is exempt from seizure; and

the, (4) the actual value of the property. 12

But, as correctly taken note of by the Court of Appeals, petitioner's

complaint does not allege all the facts that should be set forth in an

affidavit of merit. Although the complaint alleges that petitioner is

entitled to the possession of subject properties by virtue of the

chattel mortgage executed by the private respondent, upon the

latter's default on its obligation, and the defendant's alleged

"wrongful detention" of the same, the said complaint does not state

that subject properties were not taken by virtue of a tax assessment

or fine imposed pursuant to law or seized under execution or

attachment or, if they were so seized, that they are exempt from

such seizure.

Then too, petitioner stated the value of subject properties at a

"probable value of P200,000.00, more or less". Pertinent rules

require that the affidavit of merit should state the actual value of the

property subject of a replevin suit and not just its probable value.

Actual value (or actual market value) means "the price which an

article would command in the ordinary course of business, that is to

say, when offered for sale by one willing to sell, but not under

compulsion to selland purchased by another who is willing to buy,

but under no obligation to purchase it".13 Petitioner alleged that the

machineries and equipment involved are valued at P200,000.00

while respondent denies the same, claiming that per the appraisal

report, the market value of the said properties is P1,710,000.00 and

their replacement cost is P2,342,300.00. Petitioner's assertion is

belied by the fact that upon taking possession of the aforesaid

properties, it insured the same for P610,593.74 and P450,000.00,

separately. It bears stressing that the actual value of the properties

subject of a replevin is required to be in the affidavit because such

actual value will be the basis of the replevin bond required to be

posted by the plaintiff. Therefore, when the petitioner failed to

declare the actual value of the machineries and equipment subject

of the replevin suit, there was non-compliance with Section 2, Rule

60 of the Revised Rules of Court.

It should be noted, however, that the private respondent interposed

the defense of lack of affidavit of merit only in his Reply to the


23/30



Comment of Citibank on the Petition for Certiorari which respondent

filed with the Court of Appeals. Section 2, Rule 9 of the Revised Rules

of Court, provides:

Sec. 2. Defenses and objections not pleaded deemed

waived Defenses and objections not pleaded either

in a motion to dismiss or in the answer are deemed

waived; except the failure to state a cause of action

which may be alleged in later pleading, . . . .

This Rule has been revised and amended, as follows:

Sec. 1. Defenses and objection not pleaded.

Defenses and objections not pleaded in a motion todismiss or in the answer are deemed waived.

However, when it appears from the pleadings or the

evidence on record that the court has no jurisdiction

over the subject matter, that there is another action

pending between the same parties for the same

cause, or that the action is barred by a prior judgment

or by statute of limitations, the court shall dismiss the

claim.

Thus, although respondent's defense of lack of affidavit of merit is

meritorious, procedurally, such a defense is no longer available for

failure to plead the same in the Answer as required by the omnibus

motion rule.

III

Petitioner also faults the Court of Appeals for finding that the bond

posted by the petitioner is questionable and/or insufficient. It is

averred that, in compliance with Section 2, Rule 60 requiring the

replevin plaintiff to post a bond in double the value of the properties

involved, it filed a bond in the amount P400,000.00 which is twice

the amount of P200,000.00 declared in its complaint.

The Court reiterates its findings on the second assignment of errors,

particularly on the issue of the actual of subject properties as against

their probable value. Private respondent, at the onset, has put into

issues the value of the said properties. In the Special Defenses

contained in his Answer, private respondent averred:

That while defendant admits that he executed a

Chattel Mortgage in favor of plaintiff, he vigorously

denies that the machineries covered therein are worth

P200,000.00. The fact is that plaintiff knew fully well

that said chattels are worth no less than

P1,000,000.00, said defendant having acceded to said

valuation upon plaintiff's representation that it would

be necessary to speed up the granting of the loan.

As here was a disagreement on the valuation of the properties in the

first place, proper determination of the value of the bond to be

posted by the plaintiff cannot be sufficiently arrived at. Though the

rules specifically require that the needed bond be double the value

of the properties, since plaintiff merely denominated a probable

value of P200,000.00 and failed to aver the properties' actual value,

which is claimed to be much greater than that declared by plaintiff,

the amount of P400,000.00 would indeed be insufficient as found by


24/30



the Court of Appeals. The Rules of Court requires the plaintiff to

"give a bond, executed to the defendant in double the value of the

property as stated in the affidavit

. . . ." Hence, the bond should be double the actual value of the

properties involved. In this case, what was posted was merely an

amount which was double the probable value as declared by the

plaintiff and, therefore, inadequate should there be a finding that the

actual value is actually far greater than P200,000.00. Since the

valuation made by the petitioner has been disputed by the

respondent, the lower court should have determined first the actual

value of the properties. It was thus as error for the said court to

approve the bond, which was based merely on the probable value of

the properties.

It should be noted that a replevin bond is intended to indemnify the

defendant against any loss that he may suffer by reason of its being

compelled to surrender the possession of the disputed property

pending trial of the

action. 14 The same may also be answerable for damages if any

when judgment is rendered in favor of the defendant or the party

against whom a writ of replevin was issued and such judgment

includes the return of the property to him. 15 Thus, the requirement

that the bond be double the actual value of the properties litigated

upon. Such is the case because the bond will answer for the actual

loss to the plaintiff, which corresponds to the value of the properties

sought to be recovered and for damages, if any.

Petitioner also maintains that, assuming for the sake of argument

that its replevin bond was grossly inadequate or insufficient, the

recourse of the respondent should be to post a counterbound or a

redelivery bond as provided under Section 5 of Rule 60.

Sec. 5 and 6, Rule 60 of the Rules of Court, read:

Sec. 5. Return of property. If the defendant objects

to the sufficient of the plaintiff's bond, or of the surety

or sureties thereon, he cannot require the return of

the property as in this section provided; but if he does

not so object, he may, at any time before the delivery

of the property to the plaintiff, if such delivery be

adjudge, and for the payment of such sum to him as

may be recovered against the defendant, and by

serving a copy of such bond on the plaintiff or his

attorney.

Sec. 6. Disposition of property by officer. If within

five (5) days after the taking of the property by the

officer, the defendant does not object to the sufficiecy

of the bond, or of the surety or sureties thereon, or

require the return of the property as provided in the

last preceding section; or if the defendant so objects,and the plaintiff's first or new bond is approved; or if

the defendant so require, and his bond is object to and

found insufficient and he does not forthwith file an

approved bond, the property shall be delivered to the

plaintiff, the officer must return it to the defendant.

The Court held in a prior case 16 that the remedies provided under

Section 5, Rule 60, are alternative remedies. ". . . If a defendant in a


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replevin action wishes to have the property taken by the sheriff

restored to him, he should, within five days from such taking, (1)

post a counter-bond in double the value of said property, and (2)

serve plaintiff with a copy thereof, both requirements as well as

compliance therewith within the five-day period mentioned being

mandatory." 17 This course of action is available to the defendant for

as long as he does not object to the sufficiency of the plaintiff's

bond.

Conformably, a defendant in a replevin suit may demand the return

of possession of the property replevined by filing a redelivery bond

executed to the plaintiff in double the value of the property as stated

in the plaintiff's affidavit within the period specified in Section 5 and

6.

Alternatively, "the defendant may object to the sufficiency of the

plaintiff's bond, or of the surety or sureties thereon;" but if he does

so, "he cannot require the return of the property" by posting a

counter-bond pursuant to Section 5 and 6. 18

In the case under consideration, the private respondent did

not opt to cause redelivery of the properties to him by filing acounter-bond precisely because he objected to the sufficiency

of the bond posted by plaintiff. Therefore, he need not file a

counter-bond or redelivery bond. When such objection was

not given due course in the court below when, instead of

requiring the plaintiff to post a new bond, the court approved

the bond in the amount of P400,000.00, claimed by

respondent to be insufficient, and ordered the seizure of the

properties recourse to a petition for certiorari before the

Court of Appeals assailing such order is proper under the

circumstances.

IV

As its fourth assignment of errors, petitioner contends that the Court

of Appeals made an error of judgment in finding that the petitioner

did not comply with the provisions of Section 5, Rule 59 by failing to

post a receiver's bond. Petitioner contends that although it is in

agreement with the Court of Appeals that a receiver's bond is

separate and distinct from a replevin bond, under the circumstances

it was not required to file a receiver's bond because it did not

assume receivership over the properties. It is further argued that

assuming that it did assume receivership, the Chattel Mortgage

expressly provides, that:

In case the MORTGAGEE institutes proceedings,

judicially or otherwise, for the foreclosure of this

Chattel Mortgage, or to enforce any of its rights

hereunder, the MORTGAGEE shall be entitled as a

matter of right to the appointment of a receiver,

without bond, of the mortgaged properties and of suchproperties, real or personal, claims and rights of the

MORTGAGOR as shall be necessary or proper to

enable the said receiver to property control and

dispose of the mortgaged properties. 19

The order of the trial court dated March 24, 1975 provided, among

others, that the properties shall be under joint management for a

period of ten days, after which period "the bank, by virtue of the

O S O S


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stipulations under the chattel mortgage, becomes the Receiver to

perform all the obligations as such Receiver" and "in the event that

the bank decides not to take over the receivership, the joint

management continues." 20

From the evidence on record, it is palpably clear that petitioner

Citibank did, in fact, assume receivership. A letter 21 dated April 1,

1975 sent by petitioner to the private respondent, reads:

1, 1975

Anama Engineering Service Group

114 R. Lagmay Street

San Juan, Rizal

Attention: Mr. Douglas Anama

Gentlemen:

Pursuant to the Court order, we have decided to take

over your machine shop as Receiver.

We are hereby appointing Mr. Artemio T. Gonzales as

our representative. Verytruly yours, FIRST NATIONAL

CITY BANK By: P.R. REAL, JR. Assistant

ManagerPetitioner cannot therefore deny that nine

days after the trial court issued the order of

receivership, it informed he private respondent that it

would, as it did, assume receivership.

The Court of Appeals found that the requirements of Section 5, Rule

59 on receivership were not complied with by the petitioner,

particularly the filing or posting of a bond and the taking of an oath.

It should be noted that under the old Rules of Court which was in

effect at the time this case was still at trial stage, a bond for the

appointment of a receiver was not generally required of the

applicant, except when the application was ex parte. 22 Therefore,

petitioner was not absolutely required to file a bond. Besides, as

stipulated in the chattel mortgage contract between the parties,

petitioner, as the mortgagee, is entitled to the appointment of a

receiver without a bond.

However, the Court of Appeals was right in finding a defect in such

assumption of receiver in that the requirement of taking an oath has

not been complied with Section 5, Rule 59, states:

Sec. 5. Oath and bond of receiver. Before entering

upon his duties, the receiver must be sworn to perform

them faithfully, and must file a bond, executed to such

person and in such sum as the court or judge may

direct, to the effect that he will faithfully discharge theduties of receiver in the action and obey the orders of

the court therein.

Consequently, the trail court erred in allowing the petitioner to

assume receivership over the machine shop of private respondent

without requiring the appointed receiver to take an oath.

V



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In light of the foregoing, the answer to the fifth assignment of errors

is in the negative. For erroneously issuing the alias writ of seizure

without inquiring into the sufficiency of the replevin bond and for

allowing petitioner to assume receivership without the requisite

oath, the Court of Appeals aptly held that the trial court acted with

grave abuse of discretion in dealing with situation.

Under the Revised Rules of Court, the property seized under a writ of

replevin is not to be delivered immediately to the plaintiff. 23 This is

because a possessor has every right to respected in its possession

and may not be deprived of it without due process. 24

As enunciated by this Court in the case ofFilinvest Credit

Corporation vs. Court of Appeals, 25

The reason why the law does not allow the creditor to

possess himself of the mortgaged property with

violence and against the will of the debtor is to be

found in the fact that the creditor's right of possession

is conditioned upon the fact of default, and the

existence of this fact may naturally be the subject of

controversy. The debtor, for instance, may claim ingood faith, and rightly or wrongly, that the debt is

paid, or that for some other reason the alleged default

is nonexistent. His possession in this situation is as

fully entitled to protection as that of any other person,

and in the language of Article 446 of the Civil Code, he

must be respected therein. To allow the creditor to

seized the property against the will of the debtor

would make the former to a certain extent both judge

and executioner in his own cause a thing which is

inadmissible in the absence of unequivocal agreement

in the contract itself or express provision to the effect

in the statute.

WHEREFORE, for lack of merit, the petition is hereby DISMISSED. No

pronouncement as to costs.

SO ORDERED.



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Traders Royal Bank vs. IAC, et. Al., June 17, 1997

G.R. No. 111357 June 17, 1997

TRADERS ROYAL BANK, petitioner,

vs.

INTERMEDIATE APPELLATE COURT, and HEIRS OF THE LATE

JOSE C. TAYENGCO, respondents.

R E S O L U T I O N

ROMERO,J.:

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, 4in 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. 5TRB 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 theSupreme Courtin 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



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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 ofres 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 ofres 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 thenecessity 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 thecase 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



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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.

IN VIEW OF THE FOREGOING, the decision appealed from is

AFFIRMED. Costs against petitioner.

SO ORDERED.

Documents

Provisional Remedies Cases_Rule 59