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G.R. No. 6305 September 26, 1911

COMPAIA GENERAL DE TABACOS DE FILIPINAS, plaintiff-appellee,vs.ROMANA GAUZON and JUAN D. POMAR, defendants.JUAN D. POMAR, receiver-appellant.

M. Fernandez Yamson, for appellant.A. P. Seva, for appellee.

JOHNSON,J.:

The present appeal is made by the defendant Juan D. Pomar, as receiver, against theorder of the Hon. Albert e. McCabe, judge of the Province of Occidental Negros,disallowing certain items in the final account of the said receiver.

It appears from the record that the defendant, Romana Gauzon, on the 10th day ofSeptember, 1904, executed and delivered to the plaintiff (Compaia General de Tabacos

de Filipinas) a mortgage upon an hacienda known as "San Jose," in the municipality ofSan Carlos, in the Province of Occidental Negros. The said defendant (Romana Gauzon)having failed to pay the said mortgage, the plaintiff (Compaia General de Tabacos deFilipinas), on the 22d day September, 1905, commenced an action for the foreclosure ofsaid mortgage, and asked, in addition to the foreclosure of the mortgage, that a receiverbe appointed to take change of the property in question, pending the said action. On thesame day (22nd of September, 1905) the Hon. Vicente Jocson, after hearing the petitionfiled in said cause, appointed the said defendant, Juan D. Pomar, an employee of theplaintiff, receiver of the property involved in said foreclosure proceedings. Saidforeclosure proceedings continued to a termination. The result of said proceedings maybe found in two decisions of this court, the cases of La Compaia General de Tabacos deFilipinas vs. Ganzon (13 Phil. Rep., 472) and La Compaia General de Tabacos deFilipinas vs. Ganzon (13 Phil. Rep., 481). The facts relating to the foreclosureproceedings and the judgment therein are not important in the present cause, furtherthan to show the history of the transactions of the receiver, the defendant, Juan D.Pomar.

After the termination of the receivership, the court required of the receiver (Juan D.Pomar) a report and an accounting of his operations as receiver. It appears from therecord that the lower court had a good deal of trouble in securing a final report. Thereceiver apparently acted as though his only responsibility was to the plaintiff (Compaia

General de Tabacos de Filipinas); however, finally the lower court secured what appearsto be a final accounting by the receiver, upon the 9th or 10th day of August, 1909. Thereport of the receiver contained many items.

After a careful consideration of the various items of the account of the receiver, JudgeMcCabe allowed the following items of said account

1. Care of cane before cutting P1,522.30

2. Cutting and grinding, according toreport of commissioners 8,565.97

3. Fuel 150.00

4. Expenses in Iloilo, according toreceiver's Exhibit B 2,591.28

5. Storage 428.28

6. Insurance 428. 28

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7. Selling commission 648. 28

8. Judgment for plaintiff in cause No.249 9,187.80

9. Receiver's pay 1,000.00

Total 24,522.04

or about the first Tuesday of November, 1909, the sum of P7,883.76, a balance whichhe ought to have had in his possession. From the order allowing said items only thedefendant appealed to this court and made the following assignments of error: .

I. The court erred in reducing to P8,565.97 the P22,944.73 spent by the receiverfor cutting, hauling, and manufacture of 8,005.58 piculs of sugar, for packing,transportation and storage thereof, and insurance and selling commission thereon.

II. The court erred in not allowing the item of P147.86 paid out by the receiver as

interest on money borrowed to cover the first expenses of his receivership.III. The court erred in not approving the disbursement made by the receiver of theP3,001.94 delivered to the aparceros as their share of the crop.

IV. The court erred in reducing to P1,000 the P4,860.87 which the receiverclaimed as compensation for his services.

V. The court erred in holding that the order appointing the receiver does notextend his powers beyond those prescribed in section 175 of Act No. 190.

With reference to the first assignment of error, it will be noted that the receiverpresented an account for cutting, grinding, etc., of the sugar cane upon the hacienda,over which he had control as receiver, amounting to P22,944.73. Judge McCabe refusedto allow that amount for cutting and grinding, etc., of said sugar cane, upon the groundthat it was an unreasonable charge. The parties in the lower court agreed to theappointment of three commissioners for the purpose of ascertaining the reasonable costof cutting, grinding, etc., of the sugar cane upon the said hacienda. The commissionerswere duly appointed, the plaintiff selecting one, the defendant another and the courtselecting the third. In due time and after due deliberation, the commissioners etc., ofthe said sugar cane per pico was P1.07. There were 8,005.58 picos of sugar cane, which

calculated at the rate of per pico for cutting, grinding, etc., would amount to P8,565.97,which amount the lower court allowed the receiver. The commissioners appointed by thelower court were men who had experience in the cutting and grinding of sugar cane. Itwas the duty of the receiver to harvest the sugar cane at least possible cost to theowners of the crop. There is much proof in the record to indicate that the receiver didnot harvest the crop of sugar cane as expeditiously as he should have done. There is noproof in the record which shows that the amount estimated by the said commissioner forthe cutting, grinding, etc., of the sugar cane in question, was not a reasonable amountfor that expense. We find nothing in the record which justifies us in modifying thedecision of the lower court with reference to this first assignment of error.

With reference to the second assignment of error, it appears that the receiver attemptedto charge P147.86, as interest on money borrowed by him during his administration asreceiver. There is no proof in the record which shows that it was necessary for him toborrow money to properly conserve the interests of the owners and creditors interestedin the administration of the hacienda. The lower court correctly said, "a receiver has noauthority to borrow money unless the same is expressly given by the court." We wouldbe inclined, however, to allow this amount (P147.86) had the necessity been fullydemonstrated for borrowing the money. In the absence of authority expressly given andespecially in the absence of proof of the absolute necessity for incurring this item of

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expense, we refuse to modify the conclusions of the lower court with respect to thisitem.

With reference to the third assignment of error above noted, the receiver included in hisaccount the item of P3,001.94, being the amount, according to this statement, of moneyand effects delivered to "los aparceros de la hacienda"during his administration. It is awell known custom among sugar growers in the Philippine Islands, that the aparcerosplant and cultivate sugar cane at their own expense, receiving one-half of the sugarproduced and delivering the other half to the owner land. It is also a well known customthat the owners of the land from time to time advance money and effects to theaparceros, deducting the value of the same from the value of the sugar after the same isharvested. In the present case it appears that the receiver delivered one-half of thesugar to the aparceros without deducting the amount of money and effects advanced tothem. If he, in fact, advanced to the aparceros the said sum (P3,001.94) he should havededucted it from the amount due said aparceros, and not have attempted to collect thesame from the amount due the owner of the hacienda, prejudicing the owner of thehacienda thereby. Here again the receiver exceeded his authority. Nevertheless wewould be inclined to allow this amount (P3,001.94) if it were a just charge against the

administration of the hacienda. But, as was said above, it is not a just charge againstthe owner of the hacienda. This amount should have been collected from the aparceros.Judge McCabe committed no error in disallowing this item in the account of the receiver.

With reference to the fourth assignment of error above noted, it will be seen that thereceiver included in his account the sum of P4,860.87 as compensation for hisadministration as receiver. The lower court disallowed that amount but did allow him thesum of P1,000 as his just compensation as receiver. The lower court, in the appointmentof the receiver, did not fix any sum for his compensation; neither is it customary forcourts in appointing receivers to fix their compensation in advance. Their compensationis a matter which is always left to the sound discretion of the court, to be allowed fromtime to time. The receiver attempted to recover as his compensation 15 per cent of thevalue of the sugar. The lower court found that the amount of P4,860. 87 was anunreasonable amount to be allowed as compensation for the services of the receiver inthe present case. The court found that the receiver might have done all the work whichhe did do in the course of his administration as receiver in one hundred days. The Codeof Procedure in Civil Actions allows administrators of estates of deceased persons thesum of P4 a day for the time actually employed in the administration of the estate. Thelower court, following this provision of the law, believing the present case to besomewhat analogous, allowed the receiver P4 a day for his services. The lower courtalso allowed an additional amount, the basis of which does not clearly appear in the

record, making the total compensation of the receiver the sum of P1,000. Against thatorder the owner of the hacienda did not appeal. Considering the negligent manner inwhich the receiver administered the hacienda, as appears from the record, as well as hisnegligence in complying with the various orders of the court with reference to renderingaccounts, we are of the opinion that the sum of P1,000 is, in fact, more than a justcompensation for his services. In view, however, of the fact that the owner of thehacienda did not appeal from the order of the court allowing said sum (P1,000) weapprove the finding of the lower court.

With reference to the fifth assignment of error above noted, the appellant seems tobelieve that section 175 of the Code of Procedure in Civil Actions gave him full power toadminister the property placed under his control as receiver as he might deem wise andnecessary, without any intervention on the part of the court or of the interested parties.The appellant evidently overlooked the phrase of said article which says: "The receivershall have, under the control of the court in which the action is pending, power, etc."The judge of the lower court in his decision goes into detail at length and citesauthorities extensively, for the purpose of showing the general duties, powers andresponsibilities of receivers, evidently for the purpose of instructing receivers in hisdistrict. The receiver is generally defined to be "an indifferent person between theparties litigant, appointed by the court and on behalf of all the parties, and not of the

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the trial court erred in ordering the suspension of the foreclosure of the appellant'smortgage on the property of the Magallanes Press, Inc.; (6) the trial court erred, underthe facts proven in this case, in applying article 1297 of the Civil Code; (7) the trial courterred in finding in its decision that the defendant Jose Ma. Memije should not haveexecuted the documents Exhibits C and D without taking into account the rights of theplaintiff corporation, The Belgian Catholic Missionaries, Inc; (8) the trial court erred indeclaring Exhibits C and D null and void in so far as they prejudice the rights of theplaintiff, over whose credit that of the herein appellant is preferential; in declaring thewrit of preliminary injunction issued against the defendant Jose Ma. Memije final andabsolute; in giving judgment for the plaintiff to recover the amount of the fire insurancepolicies of the defendant the Magallanes Press, Inc; and (9) the trial court erred in notmaking any pronouncement as to the counterclaim and cross-complaint of the defendantJose Ma. Memije in this action, nor taking the same into consideration and renderingjudgment thereon in favor of said defendant.

The oral evidence has not been forwarded to this court so that we are compelledto base our opinion exclusively upon the documentary evidence and the facts found andstated by the trial court in its judgment.

It appears that on December 1, 1921, the Magallanes Press, through its managerH. Camena, executed a promissory note in favor of J. P. Heilbronn & Co., Inc., for thesum of P3,472.92, with interest at 10 per cent per annum, payable at the rate of P250 amonth, plus the interest earned on the unpaid balance, until the whole amount of theindebtedness shall have been paid, the first payment to be made on January 1, 1922,with the condition that upon the failure to pay any monthly installment or the interestearned on the unpaid balance, the whole amount of the indebtedness shall become due,and the maker shall pay the payee an additional sum equivalent to 15 per cent of thetotal balance, for attorney's fee and expenses of collection, forfeiting all right ofexemption.

On the same date, December 1, 1921, the said Magallanes Press, through itsmanagers H. Camena, also executed a promissory note in favor of J. P. Heilbronn & Co.,Inc., for the sum of P10,715.77, with interest at 12 per cent per annum, payable at therate of P500 a month, together with the interest earned on the unpaid balance, until thewhole amount of the indebtedness shall have been paid, the first payment to be madeon January 1, 1922, with the condition that upon the failure to pay any monthlyinstallment or the interest earned on the unpaid balance, the whole amount of theindebtedness shall become due, and the maker shall pay the payee an additional sumequal to 15 per cent of the total balance for attorney's fee and expenses of collection,

forfeiting all right of exemption.

To secure the payment of said promissory notes which amounted to a total ofP14,188.69, H. Camena, as general manager of the Magallanes Press, executed achattel mortgage on all of the printing machinery and its accessories, belonging to thesaid Magallanes Press, in favor of J. P. Heilbronn & Co., Inc.

One June 19, 1922, the Magallanes Press Co., Inc., successor to the MagallanesPress, with all the latter's rights and obligations, through its duly authorized president,E. F. Clemente, executed a chattel mortgage on the same printing machinery ad itsaccessories in favor of the Belgian Catholic Missionaries Co., Inc., which the MagallanesPress had mortgaged to J. P. Heilbronn & Co., Inc., to secure the payment of a loan ofP30,500, with interest at 12 per cent per annum, which the said Magallanes Press & Co.,Inc., had obtained from the Belgian Catholic Missionaries Co., Inc., the duration of themortgage loan being one year from the execution of the mortgage deed.

In December, 1922 the appellant Jose Ma. Memije made a loan in the sum ofP2,000 to E. F. Clemente which was paid on account of the indebtedness of theMagallanes Press to J. P. Heilbronn & co., Inc., together with the sum of P1,641 which A.F. Mendoza owed said E. F. Clemente.

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On the occasion of the issuance of the writ of attachment in civil cause No. 23818of the Court of First Instance of Manila, entitled Jose Ma. Cavanna vs. the MagallanesPress Co., Inc., the defendant Jose Ma. Memije, on February 21, 1923, filed anintervention in said case.

All the promissory note executed by the Magallanes Press in favor of J. P.Heilbronn & Co., Inc., having been overdue for non-payment of the installments as wellas the respective chattel mortgage, the said J. P. Heilbronn & Co., Inc., transferred allits mortgage credit against the Magallanes Press to Jose Ma. Memije in consideration ofthe sum of P8,280.90, the balance of said mortgage credit.

On March 14, 1923, Enrique Clemente, as manager of the Megallane Press Co.,Inc., executed a deed in favor of Jose Ma. Memije by virtue of which the chattelmortgage which was given by the Magallanes Press in favor of J. P. Heilbronn & Co.,Inc., and transferred by the latter to Jose Ma. Memije, was made to cover an additionalloan of P5,895.79, which included the sum of P2,000 which said Jose Ma. Memije hadadvanced said Enrique Clemente in December, 1922.

On April 21, 1923, a fire occurred in the building where the pointing machinery,its accessories and other personal property of the Magallanes Press Co., Inc., werelocated and which were covered by said chattel mortgages. Said property was insured,and the insurance policies covering it were endorsed to J. P. Heilbronn & Co., Inc., uponthe execution of the chattel mortgage thereon in favor of the latter. When J. P.Heilbronn & Co., Inc., transferred its mortgage credit to Jose Ma. Memije it, in turn,endorsed said insurance policies to him. The insurance companies were disposed to paythe respective insurance policies, which amounted to P7,686.45, but due to the issuanceof the above-mentioned writ of preliminary injunction, payment could not be made.

Due to the filing of the complaint in the present case on May 9, 1923, and theissuance of the writ of preliminary injunction on May 10th of the same year, Jose Ma.Memije was unable to collect the amount of the insurance policies, and when he wassummoned under the complaint on May 14, 1923, he made demand on the MagallanesPress Co., Inc., for the payment of his mortgage credit on the same date the manager ofsaid corporation, E. F. Clemente, permitted the secretary of the said corporation to placethe property covered by the mortgage into the hands of the said Jose Ma. Memije inorder that the same might be sold, but the sale could not be consummated due to theissuance of the said writ of preliminary injunction.

The first question raised by the defendant and appellant has reference to the

overruling of the demurrer filed by him to complaint.

One of the grounds of said demurrer was that the complaint in this case did notallege facts sufficient to constitute a cause of action against the said defendant, in that,notwithstanding the fact that the said complaint was instituted to annul the document oftransfer of the mortgage credit Exhibit C, it was not alleged in the said complaint thatthe defendant Jose Ma. Memije had any intention to defraud the interests of the plaintiffcorporation, which was absolutely impossible due to the nature of the transaction andthe preferential character of the mortgage credit of J. P. Heilbronn & Co., Inc.

As to this paragraph of the complaint, the plaintiff company having known of theexistence of a chattel mortgage in favor of J. P. Heilbronn & Co., Inc., the latter, eitheras the first or as the second mortgage, had a perfect right to transfer its mortgagecredit, without the knowledge or consent of any other mortgagee, inasmuch as whoeveracquired it, would have exactly the same status as the transferor with the same rightsand obligations. The fact, therefore, that the Magallanes Press Co., Inc., had consentedto the transfer of the mortgage credit of J. P. Heilbronn & Co., Inc., to Jose Ma. Memije,does not constitute a fraud that an vitiate the said transfer, inasmuch as the order ofpreference of the mortgages has not been altered, and its allegations does not constitutea cause of action to annul the said transfer.

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In regard to the allegation contained in the ninth paragraph of the complaint, it isvery clear that the increase made by Jose Ma. Memije in the mortgage credit acquiredby him from J.P. Heilbronn & Co., Inc., and the extension made by the Magallanes Press,Inc., of the mortgage to said additional credit without the knowledge or consent of theplaintiff company, as second mortgagee, prejudices the credit of the latter, inasmuch asthe security for the payment of said credit was reduced as to it, and, therefore,constitute a fraud that vitiates the contract of extension of the mortgage evidence bythe deed Exhibit D, rendering it void.lawphil.net

The facts allege in paragraph 9 of the complaint are sufficient to constitute acause of action of nullity, and the lower court did nor err in overruling the demurrer filedby the defendant Jose Ma. Memije.

In regard to the second assignment of error, it appears that the defendant JoseMa. Memije having attempted to foreclose the mortgage, by which the mortgage creditacquired by him from J. P. Heilbronn & Co., Inc., was secured, in order to recover notonly the original credit but also the increase, the Belgian Catholic Missionaries Co., Inc.,filed a complaint, with a petition for a writ of preliminary injunction against the sheriff, in

whose hands the foreclosure of the mortgage was placed. The writ of preliminaryinjunction having been issued, upon the filing of a bond in the sum of P15,000, andthere being no person more interested in the conservation and custody of the propertycovered by the mortgage than said plaintiff company, being the largest creditor, itapplied and obtained from the court the possession of the same.

Contrary to the contention of the appellant, this case is not one of replevin butsimply a proceeding instituted by the plaintiff for the deposit of the property in litigation,upon the filing of a bond, said plaintiff, acting as a receiver by authority of the court,being the person most interested in the conservation and care of the same (sec. 174,Act No. 190; 11 C. J., 726).

The lower court, therefore, did not err in authorizing the plaintiff company to takepossession of the personal property in litigation upon the filing of a bond sufficient tosecure the conservation or value thereof.

The third assignment of error raises the question as to the preference of rightbetween the plaintiff company and the defendant over the mortgaged property and theamount of the insurance policies covering a part thereof which was destroyed by fire.

As we have seen in the statement of the pertinent facts necessary for the clear

and accurate solution of the questions of law involved in the present appeal, the firm ofJ. P. Heilbronn & Co., Inc., had a mortgage credit against the Magallanes Press for thesum of P14,186.69, secured by a first chattel mortgage. The plaintiff company, theBelgian Catholic Missionaries Co., Inc., also had a mortgage credit for the amount ofP30,500, secured by a second mortgage on the same personal property. After thissecond mortgage had been executed, the payment of the mortgage credit of J.P.Heilbronn & Co., Inc., became due, which credit had been reduced to the sum ofP8,280,90 through partial payments, and the herein defendant-appellant Jose Ma.Memije acquired said mortgage credit and increased it by P5,895.59 of which increaseP2,000 was a previous loan.

There is no question but that J. P. Heilbronn & Co., Inc., at the time of thetransfer of this mortgage rights to Jose Ma. Memije, had a preferential right over that ofthe Belgian Catholic Missionaries Co., Inc., for the remainder of the amount of themortgage credit, that is, P8,280.90. The plaintiff company had a preferential right to therest of the value of the mortgaged property after deducting the remaining mortgagecredit of J. P. Heilbronn & Co., Inc.

The increase of P5,895.59 made by the defendant Jose Ma. Memije in favor of theMagallanes Press Co., Inc., and the extension of the mortgage thereto, are not only

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subordinate to the mortgage credit of the plaintiff company, being subsequent in timeand in registration, but said increase in the security is also void. The increase of themortgage security becomes a new mortgage in itself, inasmuch as the original mortgagedid not contain any stipulation in regard to the increase of the mortgage credit, andeven if it did, said increase would take effect only from the date of the increase. Amortgage that contains a stipulation in regard to future advances in the credit will takeeffect only from the date the same are made and not from the date of the mortgage (11C. J., 448; 5 R. C. L., 420-421). In accordance with the provisions of section 5 of ActNo. 1508, known as the Chattle Mortgage Law, the parties to the original deeds sworethat the same was mortgaged "to secure the obligations specified therein and for noother purpose." Neither the increase in question, nor the extension of the mortgage tosecure the payment of the same is specified in the deed, consequently said extension isvoid. "Where the statute provides that the parties to a chattel mortgage must make oaththat the debt is a just debt, honestly due and owing from the mortgagor to themortgagee, it is obvious that a valid mortgage cannot be made to secure a debt to bethereafter contacted." (11 C. J., 448.)

Briefly, therefore, we have the following:

(a) That Jose Ma. Memije has a preferential right to the value of the chattelsmortgage and the amount of the insurance policies up to the sum of P8,280.90;

(b) That the plaintiff corporation, the Belgian Catholic Missionaries Co., Inc., has aright to the remainder of the value of said chattels and the insurance policies up tothe amount of P30,500, after deducting the preferential credit of Jose Ma. Memije;

(c) That as to the increase of P5,895.59, the right of the defendant Jose Ma.Memije is that of an ordinary creditor.

In regard to the damages claimed by the defendant in his counterclaim and whichis the subject-matter of his remaining assignments of error, said defendant has a rightto interest at 12 per cent on the P8,280.90 the amount of the mortgage credit acquiredby him from J. P. Heilbronn & Co., Inc., from February 26, 1923, the date of theacquisition until fully paid.

For the foregoing reasons, the judgment appealed from is revoked and it isordered the another be entered declaring all the mortgages overdue, and the mortgagecredit of Jose Ma. Memije preferential over that of the Belgian Catholic Missionaries Co.,Inc., up to the amount of P8,280.90, with interest at the rate of 12 per cent per annum

from February 26, 1923, until fully paid; the mortgage credit of the Belgian CatholicMissionaries Co., Inc., for the sum of P30,500 with interest at the rate of 12 per cent perannum, from June 19, 1922, until fully paid, plus the sum of P3,000 for attorney's fees,over the additional credit of Jose Ma. Memije for P5,895.59; and ordering the foreclosureof the said mortgages by selling the mortgaged property at public auction, to theproceeds of which shall be added the amount of the insurance policies and the above-mentioned credits in the order of preference above established, without specialpronouncement as to costs. So ordered.

G.R. No. L-29295 October 22, 1928

J. M. PO PAUCO, plaintiff,vs.DOLORES SIGUENZA, ET AL., defendants.WISE & CO., intervenor-appellant.

Block, Johnston and Greenbaum for the intervenor.Roman J. Lacson for receiver-appellee National Bank.

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ROMUALDEZ,J.:

In this case, J.M. Po Pauco obtained final judgment in his favor against DoloresSiguenza and Mariano Aguilar for the sum of P72,278.01, both parties agreeing todeduct therefrom the sum of P13,007.46 which is the net value of the sugar canebelonging to said defendants and attached by the plaintiff and manufactured by thePhilippine National Bank, the receiver of the said product. By virtue of said judgmentand agreement the court issued a writ of execution for the remaining sum of P59,270.55on November 19, 1926.

In another civil case before the same court, No. 6416, Wise & Co., Ltd., had onOctober 18, 1926 obtained judgment against the herein plaintiff J. M. Po Pauco for thesum of P10,572.80 with legal interest thereon, execution of said judgment having beenordered in those proceedings, which has not yet, even partially, been paid.

On October 23, 1927, Wise & Co., Ltd., intervened in this case praying that the

Philippine National Bank, the receiver of the said sum of P13,007.46, be ordered tosatisfy the judgment in favor of the said petitioner Wise & Co., Ltd., against J.M. PoPauco, out of the sum deposited with it, Po Pauco's right and interest in the judgment ofthis case now before us having been preliminary attached in civil case No. 6416, onAugust 6, 1926.

Opposition was filed to said petition by the Philippine National Bank alleging thatsaid bank has a preferential right over the surplus of the sale of the sugar delivered to itas receiver, and also that the Hibila Trading Corporation obtained judgment against thesaid J. M. Po Pauco, in civil case No. 3197 of the Court of First Instance of OccidentalNegros, holding that the rights of the Hibila Trading Corporation over the sugar harvestof 1923-1924 and 1924-1925 of the spouses Dolores Siguenza and Mariano Aguilar inthe San Agustin Estate, are preferential over those of J. M. Po Pauco and, therefor, thelatter is not at all entitled to any of the surplus remaining from the sale of said sugar;and that said Hibila Trading Corporation is an interested party which must be summonedbefore the motion of Wise & Co., Ltd., can be heard, which corporation must institute anordinary action to establish whatever right it may have to the surplus of the sugar inquestion. 1awph!l.net

The court of First Instance of Iloilo denied the motion of Wise & Co., Ltd.,granting it permission to institute an action against the Philippine National Bank and the

Hibila Trading Corporation in order to determine which has the better right to the netproceeds of the sale of said sugar.

Wise & Co., Ltd., appeals from said ruling making several assignments of error.

It should not be forgotten that the sum mentioned is in the custody of a receiverand not of a sheriff. The sheriff is a court officer of a general character who is notappointed for a certain judicial case; the sheriff is an officer who exercises or canexercise his functions within the limits of his jurisdicition. A receiver, on the other hand,is a special officer, appointed in relation to and within a certain case or action, andwhose duties are limited to his sphere of action, and do not extend further than the casein which he was appointed.

For this reason, while the funds in the custody of a sheriff may be within thereach of processes coming from other judicial proceedings, such is not the case withrespect to those under the custody of a depositary. From which it follows that thosewho, as in the present case, have any claim to property or sum in the possession of areceiver, must appear in the same proceeding in which said receiver discharges hisduties, and there, by motion or petition, allege and prove their claims.

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The order appealed from is reversed and it is ordered that this proceeding beremanded to the court of origin in order that, without the necessity of commencing anew action, the interested parties be given an opportunity to set forth and prove theiralleged preferential rights over the sum in controversy.

Without any special pronouncement as to costs. So ordered.

G.R. No. L-2987 February 20, 1951

ERNEST BERG, plaintiff-appellant,vs.VALENTIN TEUS, defendant-appellee.

Alva J. Hill for appellant.J. Perez Cardeas for appellee.

TUAZON,J.:

This appeal is from an order of the Court of First Instance of Ilocos Sur dismissing theabove-entitled action by reason of Executive Order No. 25, as amended by ExecutiveOrder No. 32, on moratorium.

Ernest Berg brought the action against Valentin Teus to foreclose a real estate andchattel mortgage executed in November, 1944, to secure six promissory notes of theaggregate value of P80,000 and payable on demand two years after declaration ofarmistice between the United States and Japan. An amended or supplementarycomplaint was later admitted against the defendant's objection. The complaints recitedthat by stipulations of the parties, the mortgagor had undertaken, among other things,to insure and pay the taxes on the mortgaged properties; not to alienate, sell, lease,encumber or in any manner dispose thereof; and to keep and maintain the saidproperties in good order and repair; but that, it was alleged, he (defendant) had failedto keep taxes fully paid; had made material alterations on the premises, and had soldand conveyed them to Central Azucarera del Norte. It was further alleged that themortgagor had agreed that should he fail to perform any of his obligations as stipulated,"the mortgage shall be deemed to be automatically foreclosed and the mortgagee mayforthwith proceed to foreclose this mortgage either extrajudicially, even after the deathof the mortgagor, in pursuance of the provisions of Act No. 3135, as amended;" and on

the basis of this agreement it was prayed that the mortgage be declared automaticallyforeclosed and the plaintiff entitled to immediate possession of the properties inquestion. In a separate motion Berg's attorney also asked for the appointment of areceiver.

Counsel for the defendant having moved for the dismissal of the complaint on thegrounds that plaintiff's cause of action had not accrued by reason of the executiveorders herein before cited, and having opposed the motion for receivership, Judge ZoiloHilario entered an order holding that as to the collection of the six notes the suit hadbeen prematurely brought, but setting the cause for trial on the merits because,according to His Honor, the reasons alleged in the motion to dismiss were not"indubitable" with reference to the appointment of a receiver sought by the plaintiff. Aswe understand this order, its result was that the moratorium ought not to interfere withthe plaintiff's motion for appointment of receiver.

However that may be, the plaintiff subsequently filed a "complete complaint" in whichthe original complaint and the amended or supplementary complaint were consolidated.This "complete complaint", which was admitted without objection, apparently wassupposed to have restored the case to its original status. Consequently the attorney forthe defendant filed a new motion to dismiss; the Judge Luis Ortega, who had replaced

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Judge Hilario, ignoring the latter's order entered the order now on appeal by which theentire action was quashed on the theory advanced in the motion to dismiss. The neworder was silent on both the application for receivership and the prayer that the plaintiffbe adjudged authorized by the terms of the mortgage to foreclose it extrajudicially andseize the properties.

Judge Ortega opined that Executive Orders Nos. 25 and 32 were still in force unaffectedby Republic Act No. 342 as to debts contracted during the Japanese occupation. Plaintiffcontended that those executive orders had passed out of existence by the disappearanceof the emergency contemplated thereby, and the contention is reiterated in his instance.But from the view we take of the case, decision on this question can be deferred. For thepurpose of the present decision, we will assume that Executive Orders Nos. 25 and 32are still in full force and effect. This we do to pave the way for and hasten action on thepetition to put the premises and chattels involved in the hands of a receiver, petitionwhich appears of urgent character. The constitutionality of Executive Orders Nos. 25 and32 and Republic Act No. 342 and allied issues can wait. These issues are delicate andwould require prolonged study and deliberation. Besides, there is a pending bill inCongress repealing those executive orders and law.

In Medina vs. Santos (78 Phil., 464; 44 Off. Gaz., [No. 10] 3811), it was held that anaction for the recovery of a truck with prayer for payment of its value in case the truckwas not returned, could proceed notwithstanding the moratorium law. The courtobserved that the indemnity sought was a subsidiary liability and would not come intobeing unless and until decision was rendered against the defendant for such payment.

In Moya vs. Barton (79 Phil., 14; 45 Off Gaz., [No. 1] 237), the court said that when thecause of action was in part covered by the moratorium and in part not, it was not unjustto render judgment for the payment of the entire obligation with the understanding thatexecution with respect to the amounts that had fallen due before March 10, 1945, wouldbe stayed.

In the case ofAlejo vs. Gomez(83 Phil., 969), the court ruled that suit for unlawfuldetainer and rents in arrears was not affected by the moratorium, the recovery of theunpaid rentals, it was said, being accessory to the main action.

And, lastly, in Realty Investments Inc. et al. vs. Villanueva et al., (84 Phil., 842; 47. Off.Gaz., 1844), the court, citing the above-mentioned cases decided that the court shouldgo ahead with the trial of the action on the merits without prejudice to the right of thedefendant to arrest the execution should one for payment of money be issued. In that

case plaintiff, which had sold to the defendant a piece of land on installment basis, wasdemanding payment of the installments still unpaid, (installments which the defendantclaimed to have fully settled with the Japanese alien property custodian) or, in default,restoration of the ownership and possession of the property. In revoking the lowercourt's order of dismissal, we pointed out that the De Vencia vs. General, (78 Phil., 780;44 Off. Gaz., 4912), and Ma-ao Sugar Central Co., Inc. vs. Barrios, (79 Phil., 666; 45Off. Gaz., 2444), were distinguishable from Moya vs. Barton, Medina vs. Santos, andAlejo vs. Gomez, in that the suits in the first two named cases had for their sole objectthe enforcement of a monetary obligation.

The case at bar falls within the relaxed rule of this court's later decisions. The allegedviolations of the conditions of the mortgage contract, if true, make it necessary if notimperative, for the protection of the interest of the plaintiff, that the mortgagedproperties be placed in the custody of the court. The fact that the appointment of areceiver, as the defendant emphasizes, is an ancillary remedy is precisely one powerfulreason why the case should not be dismissed. Because receivership is an auxiliaryremedy dismissal of the main action would eliminate the only basis for the appointmentor receiver and thus completely bar the door to any relief from mischiefs.

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Under the circumstances of the case, the least that should have been done, if that werefeasible as a matter of procedure, was to adopt the steps which Judge Hilario hadproposed to do. Judge Hilario evidently saw the grave injustice to the plaintiff and theirreparable injury to which his rights would be exposed if an indefinite suspension of theentire proceeding were decreed.

In suspending the right of creditor to enforce his right the President and Congress hadno idea of depriving him of all means of preventing the destruction or alienation of thesecurity for the debt, destruction which would virtually write off, in some cases, thewhole credit. If that were the intention, it is doubtful if the orders and the law invokedcould stand the test of constitutionality.

The order appealed from will therefore be reversed and the case remanded to the courtbelow for further proceeding according to the tenor of this decision. We leave the wayopen to the defendant to ask for the arrest or stay of execution in the event of anadverse monetary judgment, and for the plaintiff to impugn anew, if necessary, theconstitutionality of Executive Orders Nos. 25 and 32 and Republic Act No. 342 and/ortheir being still in force. Costs of this appeal will be charged against the appellee.

G.R. No. 155408 February 13, 2008

JULIO A. VIVARES and MILA G. IGNALING, petitioners,vs.ENGR. JOSE J. REYES, respondent.

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, 2001Resolution1of 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 RTCdirective on the appointment of the receiver, prompting Julio Vivares and Mila Ignalingto 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 thedeath of Severino, respondent and Torcuato came upon their inheritance consisting ofseveral properties. They had an oral partition of the properties and separatelyappropriated 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,3we affirmed the November 29, 1995 CA Decision,admitting the will for probate.

Petitioner Vivares was the designated executor of Torcuatos last will and testament,while petitioner Ignaling was declared a lawful heir of Torcuato.

Believing that Torcuato did not receive his full share in the estate of Severino,petitioners instituted an action for Partition and Recovery of Real Estate before theCamiguin RTC, Branch 28 entitledJulio A. Vivares, as executor of the estate of TorcuatoJ. Reyes and Mila R. Ignaling, as heir v. Engr. Jose J. Reyes and docketed as Civil CaseNo. 517. With the approval of the trial court, the parties agreed that properties from the

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estate of Severino, which were already transferred in the names of respondent andTorcuato prior to the latters death on May 12, 1992, shall be excluded from litigation. Inshort, what was being contested were the properties that were still in the name ofSeverino.

On November 24, 1997, for the purpose of collating the common properties that weredisputed, the trial court directed the formation of a three-man commission with duerepresentation from both parties, and the third member, appointed by the trial court,shall act as chairperson. The disputed properties were then annotated with notices oflispendens upon the instance of petitioners.

On March 15, 2000, petitioners filed a Motion to Place Properties in Litigation underReceivership4before the trial court alleging that to their prejudice respondent had,without prior court approval and without petitioners knowledge, sold to third parties andtransferred in his own name several common properties. Petitioners also averred thatrespondent fraudulently antedated, prior to May 12, 1992, some conveyances andtransfers to make it appear that these were no longer part of the estate of Severinounder 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 andincome of said properties and without rendering an accounting on them and turning overthe share pertaining to Torcuato. Thus, petitioners prayed to place the entire disputedestate of Severino under receivership. They nominated a certain Lope Salantin to beappointed as receiver.

On March 23, 2000, respondent filed his Opposition to Place the Estate of SeverinoReyes under Receivership,5denying that he had fraudulently transferred any property ofthe estate of Severino and asserting that any transfer in his name of said properties wasa result of the oral partition between him and Torcuato that enabled the latter as well totransfer several common properties in his own name.

On May 24, 2000, petitioners filed their Offer of Exhibits in support of their motion forreceivership. On the same date, the trial court issued an Order6granting petitionersmotion and appointed Salantin as receiver conditioned on the filing of a PhP 50,000bond. Respondent filed a motion for reconsideration, contending that the appointment ofa receiver was unduly precipitate considering that he was not represented by counseland thus was deprived of due process.

On August 4, 2000, the trial court allowed respondent to present his evidence to contestpetitioners 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 scheduledhearing on the ground that he was in the United States as early as July 23, 2000 formedical examination. On September 5, 2000, the trial court denied respondents motionfor postponement and reinstated its May 24, 2000 Order.

On September 19, 2000, respondent filed a Manifestation with Motion to DischargeReceiver, reiterating the circumstances which prevented him from attending theSeptember 4, 2000 hearing and praying for the discharge of the receiver upon the filingof 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, petitionersfiled their undated Opposition to Motion to Discharge Receiver.

Subsequently, respondent filed a Motion to Cancel Notice ofLis Pendens which wasannotated on Tax Declaration (TD) No. 112 covering Lot No. 33 allegedly belongingexclusively to him. Respondent asserted in the motion that an adjacent property to LotNo. 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 noticeoflis 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, denyingrespondents motions to discharge receiver and cancel the notice oflis pendens in TDNo. 112. Respondent seasonably filed a partial motion for reconsideration of the May 22,2001 Resolution, attaching copies of deeds of sale executed by Torcuato coveringseveral common properties of the estate of Severino to prove that he and Torcuato hadindeed made an oral partition of the estate of their father, Severino, and thus allowinghim and Torcuato to convey their respective shares in the estate of Severino to thirdpersons.

On October 19, 2001, the trial court heard respondents motion for partialreconsideration, and on the same date issued an Order denying the motion for partialreconsideration on the ground that respondent failed to raise new matters in the motionbut 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 respondentsposition and granted relief, thus:

WHEREFORE, premises considered, the Petition is hereby GRANTED. TheResolution dated 22 May 2001 of the Regional Trial Court of Camiguin, Branch 28in Civil Case No. 517 is hereby reversed and set aside. The court-appointedreceiver, Lope Salantin, is discharged upon the posting by petitioner of acounterbond in the amount of P100,000.00. The notice oflis pendens in TaxDeclaration 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 thewell-settled rule that allows the grant of the harsh judicial remedy of receivership only inextreme cases when there is an imperative necessity for it. The CA thus held that it isproper that the appointed receiver be discharged on the filing of a counterbond pursuantto Sec. 3, Rule 59 of the 1997 Revised Rules on Civil Procedure.

Moreover, the CA ratiocinated that respondent has adequately demonstrated that theappointment of the receiver has no sufficient basis, and further held that the rights ofpetitioners 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 courtpointed out that the appointment of a receiver is a delicate one, requiring the exercise ofdiscretion, and not an absolute right of a party but subject to the attendant facts of eachcase. The CA found that the trial court abused its discretion in appointing the receiverand in denying the cancellation of the notice oflis pendens on TD No. 112, insofar as itpertains to the portion owned by Unchuan.

Aggrieved, petitioners in turn interposed a Motion for Reconsideration that was deniedthrough the assailed September 24, 2002 CA Resolution.

Thus, this petition for review on certiorari is before us, presenting the following issues

for consideration:

I

WHETHER OR NOT THE ANNOTATION OF A NOTICE OF LIS PENDENS PRECLUDESTHE APPOINTMENT OF A RECEIVER WHEN THERE IS A NEED TO SAFEGUARD THEPROPERTIES IN LITIGATION.

II

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WHETHER OR NOT A DULY APPOINTED RECEIVER OF PROPERTIES IN LITIGATIONSHOULD BE DISCHARGED SIMPLY BECAUSE THE ADVERSE PARTY OFFERS TOPOST A COUNTERBOND.

III

WHETHER OR NOT THE CANCELLATION OF A NOTICE OF LIS PENDENSANNOTATED 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 secondissues together.

Receivership not justified

We sustain the CA ruling that the trial court acted arbitrarily in granting the petition forappointment 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 ofSeverino without court approval and without their knowledge and consent. Thefraudulent transfers, they claim, were antedated prior to May 12, 1992, the date ofTorcuatos death, to make it appear that these properties no longer form part of theassets of the estate under litigation in Civil Case No. 517.

Petitioners position is bereft of any factual mooring.

Petitioners miserably failed to adduce clear, convincing, and hard evidence to show the

alleged fraud in the transfers and the antedating of said transfers. The fact that thetransfers were dated prior to the demise of Torcuato on May 12, 1992 does notnecessarily mean the transfers were attended by fraud. He who alleges fraud has theburden to prove it.

Moreover, respondent has adduced documentary proof that Torcuato himself similarlyconveyed several lots in the estate of Severino based on the oral partition between thesiblings. To lend credence to the transfers executed by Torcuato but distrust to thosemade 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. Asearly as 1914, the Court already enunciated the doctrinal pronouncement in Velasco &Co. v. Gochuico & Co. that courts must use utmost circumspection in allowingreceivership, thus:

The power to appoint a receiver is a delicate one and should be exercised withextreme caution and only under circumstances requiring summary relief or wherethe court is satisfied that there is imminent danger of loss, lest the injury therebycaused be far greater than the injury sought to be averted. The court shouldconsider the consequences to all of the parties and the power should not beexercised when it is likely to produce irreparable injustice or injury to private

rights or the facts demonstrate that the appointment will injure the interests ofothers whose rights are entitled to as much consideration from the court as thoseof the complainant.9

Petitioners cannot now impugn the oral partition entered into by Torcuato andrespondent and hence cannot also assail the transfers made by respondent of the lotswhich were subject of said agreement, considering that Torcuato also sold propertiesbased on said verbal arrangement. Indeed, the parties agreed that the civil action doesnot encompass the properties covered by the oral partition. In this factual setting,

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petitioners cannot convince the Court that the alleged fraudulent transfers of the lotsmade by respondent, which purportedly form part of his share in Severinos estatebased 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 courtbased 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 bedenied, or the receiver discharged, when the adverse party files a bond executedto the applicant, in an amount to be fixed by the court, to the effect that suchparty 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 suchappointment. The receiver may also be discharged if it is shown that hisappointment was obtained without sufficient cause.

Anchored on this rule, the trial court should have dispensed with the services of thereceiver, more so considering that the alleged fraud put forward to justify thereceivership was not at all established.

Petitioners advance the issue that the receivership should not be recalled simply becausethe adverse party offers to post a counterbond. At the outset, we find that this issue wasnot raised before the CA and therefore proscribed by the doctrine that an issue raisedfor the first time on appeal and not timely raised in the proceedings in the lower court isbarred by estoppel.10Even if we entertain the issue, the contention is neverthelessdevoid of merit. The assailed CA decision supported the discharge of the receiver withseveral reasons including the posting of the counterbond. While the CA made astatement that the trial court should have discharged the appointed receiver on thebasis 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. Ifthe intent is to make it mandatory or ministerial for the trial court to order the recall ofthe receiver upon the offer to post a counterbond, then the court should have used theword "shall." Thus, the trial court has to consider the posting of the counterbond inaddition to other reasons presented by the offeror why the receivership has to be setaside.

Third, since a notice oflis pendens has been annotated on the titles of the disputedproperties, the rights of petitioners are amply safeguarded and preserved since "therecan 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 thenotice oflis pendens."11Once the annotation is made, any subsequent conveyance ofthe lot by the respondent would be subject to the outcome of the litigation since the factthat the properties are under custodia legis is made known to all and sundry byoperation of law. Hence, there is no need for a receiver to look after the disputedproperties.

On the issue oflis pendens, petitioners argue that the mere fact that a notice oflispendens was annotated on the titles of the disputed properties does not preclude theappointment of a receiver. It is true that the notice alone will not preclude the transferof the propertypendente lite, for the title to be issued to the transferee will merely carrythe 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 theproperty in litigation." However, the situation is different in the case at bar. Acounterbond will also be posted by the respondent to answer for all damages petitionersmay suffer by reason of any transfer of the disputed properties in the future. As amatter of fact, petitioners can also ask for the issuance of an injunctive writ to forecloseany transfer, mortgage, or encumbrance on the disputed properties. Theseconsiderations, plus the finding that the appointment of the receiver was withoutsufficient cause, have demonstrated the vulnerability of petitioners postulation.

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Fourth, it is undisputed that respondent has actual possession over some of the disputedproperties which are entitled to protection. Between the possessor of a subject propertyand the party asserting contrary rights to the properties, the former is accorded betterrights. In litigation, except for exceptional and extreme cases, the possessor ought notto be deprived of possession over subject property. Article 539 of the New Civil Codeprovides that "every possessor has a right to be respected in his possession; and shouldhe be disturbed therein he shall be protected in or restored to said possession by themeans 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 trialcourt.12

In view of the foregoing reasons, we uphold the CA ruling that the grant of thereceivership was without sufficient justification nor strong basis.

Anent the third issue that the cancellation of the notice oflis pendens on TD No. 112 isirregular as Lot No. 33 is one of the disputed properties in the partition case, petitionersposition is correct.

The CA made a factual finding that the property of Unchuan was erroneously included inLot No. 33, one of the disputed properties in Civil Case No. 517. It then ruled that theannotation 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 whetherthat 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 saidissues is made.

WHEREFORE, the petition is PARTLY GRANTED. The June 18, 2002 CA Decision inCA-G.R. SP No. 67492 is AFFIRMED with MODIFICATION insofar as it ordered thecancellation of the notice oflis pendens in TD No. 112. As thus modified, the appealedCA Decision should read as follows:

WHEREFORE, premises considered, the Petition is hereby PARTLY GRANTED. TheResolution dated 22 May 2001 of the Regional Trial Court of Camiguin, Branch 28in Civil Case No. 517 is hereby reversed and set aside. The court-appointedreceiver, 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, remainsvalid and effective. Let this case be remanded to the court a quo for furtherproceedings in Civil Case No. 517.

No costs.

SO ORDERED.

G.R. No. 174356 January 20, 2010

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

D E C I S I O N

ABAD,J.:

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

The Facts and the Case

Respondent Fidela Y. Vargas owned a five-hectare mixed coconut land and rice fields inSorsogon. Petitioner Evelina G. Chavez had been staying in a remote portion of the landwith her family, planting coconut seedlings on the land and supervising the harvest ofcoconut and palay. Fidela and Evelina agreed to divide the gross sales of all productsfrom the land between themselves. Since Fidela was busy with her law practice, Evelinaundertook 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, despitedemand 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.1In their answer, Evelina and Aida claimed that the RTC didnot have jurisdiction over the subject matter of the case since it actually involved anagrarian dispute.

After hearing, the RTC dismissed the complaint for lack of jurisdiction based on Fidelasadmission that Evelina and Aida were tenants who helped plant coconut seedlings on theland and supervised the harvest of coconut and palay. As tenants, the defendants alsoshared in the gross sales of the harvest. The court threw out Fidelas claim that, sinceEvelina and her family received the land already planted with fruit-bearing trees, theycould not be regarded as tenants. Cultivation, said the court, included the tending andcaring of the trees. The court also regarded as relevant Fidelas pending application for afive-hectare retention and Evelinas pending protest relative to her three-hectarebeneficiary share.2

Dissatisfied, Fidela appealed to the CA. She also filed with that court a motion for theappointment of a receiver. On April 12, 2006 the CA granted the motion and ordainedreceivership of the land, noting that there appeared to be a need to preserve theproperty and its fruits in light of Fidelas allegation that Evelina and Aida failed toaccount for her share of such fruits.3

Parenthetically, Fidela also filed three estafa cases with the RTC of Olongapo City and acomplaint for dispossession with the Department of Agrarian Reform Adjudication Board(DARAB) against Evelina and Aida. In all these cases, Fidela asked for the immediateappointment 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 thatshe had earlier filed identical applications for receivership over the subject

properties in the criminal cases she filed with the RTC of Olongapo City againstpetitioners Evelina and Aida and in the administrative case that she filed againstthem before the DARAB; and

2. Whether or not the CA erred in granting respondent Fidelas application forreceivership.

The Courts Ruling

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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 favorablydispose of the matter.4The elements of forum shopping are the same as in litispendentia where the final judgment in one case will amount to resjudicata in the other.The elements of forum shopping are: (1) identity of parties, or at least such parties aswould represent the same interest in both actions; (2) identity of rights asserted andrelief prayed for, the relief being founded on the same facts; and (3) identity of the twopreceding particulars such that any judgment rendered in the other action will,regardless of which party is successful, amount to resjudicata in the action underconsideration.5

Here, however, the various suits Fidela initiated against Evelina and Aida involveddifferent causes of action and sought different reliefs. The present civil action that shefiled with the RTC sought to recover possession of the property based on Evelina andAidas failure to account for its fruits. The estafa cases she filed with the RTC accusedthe two of misappropriating and converting her share in the harvests for their ownbenefit. Her complaint for dispossession under Republic Act 8048 with the DARAB soughtto 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 Fidelasought the placing of the properties under receivership in all of them. But receivership isnot an action. It is but an auxiliary remedy, a mere incident of the suit to help achieveits purpose. Consequently, it cannot be said that the grant of receivership in one casewill amount to resjudicata on the merits of the other cases. The grant or denial of thisprovisional remedy will still depend on the need for it in the particular action.

Two. In any event, we hold that the CA erred in granting receivership over the propertyin dispute in this case. For one thing, a petition for receivership under Section 1(b), Rule59 of the Rules of Civil Procedure requires that the property or fund subject of the actionis in danger of being lost, removed, or materially injured, necessitating its protection orpreservation. Its object is the prevention of imminent danger to the property. If theaction does not require such protection or preservation, the remedy is not receivership.6

Here Fidelas main gripe is that Evelina and Aida deprived her of her share of the landsproduce. She does not claim that the land or its productive capacity would disappear orbe wasted if not entrusted to a receiver. Nor does Fidela claim that the land has beenmaterially injured, necessitating its protection and preservation. Because receivership isa harsh remedy that can be granted only in extreme situations,7Fidela must prove a

clear right to its issuance. But she has not. Indeed, in none of the other cases she filedagainst Evelina and Aida has that remedy been granted her.8

Besides, the RTC dismissed Fidelas action for lack of jurisdiction over the case, holdingthat the issues it raised properly belong to the DARAB. The case before the CA is but anoffshoot of that RTC case. Given that the RTC has found that it had no jurisdiction overthe case, it would seem more prudent for the CA to first provisionally determine that theRTC had jurisdiction before granting receivership which is but an incident of the mainaction.1 a vv p h i 1

WHEREFORE, the Court GRANTS the petition. The Resolutions dated April 12, 2006 andJuly 7, 2006 of the Court of Appeals in CA-G.R. CV 85552, are REVERSED and SETASIDE.

The receivership is LIFTED and the Court of Appeals is directed to resolve CA-G.R. CV85552 with utmost dispatch.

SO ORDERED.

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G.R. No. 106473 July 12, 1993

ANTONIETTA O. DESCALLAR, petitioner,

vs.

THE HON. COURT OF APPEALS and CAMILO F. BORROMEO, respondents.

Gilberto C. Alfafara for petitioner.

Bernadito A. Florido for private respondent.

GRIO-AQUINO, J.:

Assailed in this petition for review on certiorari is the decision dated July 29, 1992 of theCourt 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'spetition for receivership and denying petitioner's motion for reconsideration thereof.

On August 9, 1991, respondent Camilo Borromeo, a realtor, filed against petitioner acivil complaint for the recovery of three (3) parcels of land and the house built thereonin the possession of the petitioner and registered in her name under Transfer Certificatesof 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, 1991from Wilhelm Jambrich, an Austrian national and former lover of the petitioner for manyyears until he deserted her in 1991 for the favors of another woman. Based on the deedof sale which the Austrian made in his favor, Borromeo filed an action to recover theownership and possession of the house and lots from Descallar and asked for theissuance of new transfer certificates of title in his name.

In her answer to the complaint, Descallar alleged that the property belongs to her as theregistered 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.

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On March 5, 1992, Borromeo asked the trial court to appoint a receiver for the propertyduring the pendency of the case. Despite the petitioner's opposition, Judge MercedesGolo-Dadole granted the application for receivership and appointed her clerk of court asreceiver 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. SPNo. 27977 "Antonietta O. Descallar vs. Hon. Mercedes G. Dadole, as Judge, RTC ofMandaue 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 forcertiorari under Rule 45 of the Rules of Court.

In a nutshell, the issue in this appeal is whether the trial court gravely abused itsdiscretion in appointing a receiver for real property registered in the name of thepetitioner in order to transfer its possession from the petitioner to the court-appointed

receiver. The answer to that question is yes.

The Court is amazed that the trial court and the Court of Appeals appear to have givenno importance to the fact that the petitioner herein, besides being the actual possessorof the disputed property, is also the registered owner thereof, as evidenced by TCTsNos. 24790, 24791, and 24792 issued in her name by the Register of Deeds of MandaueCity on December 3, 1987. Her title and possession cannot be defeated by mere verbalallegations 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 (Sinoanvs. Sorogan, 136 SCRA 407). Her Torrens certificates of title are indefeasible orincontrovertible (Sec. 32, P.D. 1529).

Even if it were true that an impecunious former waitress, like Descallar, did not have themeans to purchase the property, and that it was her Austrian lover who provided herwith 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, 1987Constitution). The deed of sale was duly registered in the Registry of Deeds and newtitles were issued in her name. The source of the purchase money is immaterial for thereis no allegation, nor proof, that she bought the property as trustee or dummy for themonied Austrian, and not for her own benefit and enjoyment.

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There is no law which declares null and void a sale where the vendee to whom the titleof the thing sold is transferred or conveyed, paid the price with money obtained from athird person. If that were so, a bank would be the owner of whatever is purchased withfunds borrowed from it by the vendee. The holding of the trial court and the Court ofAppeals that Jambrich, notwithstanding his legal incapacity to acquire real property inthe 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 graveabuse of discretion. The appointment of a receiver is not proper where the rights of theparties (one of whom is in possession of the property), are still to be determined by thetrial court.

Relief by way of receivership is equitable in nature, and a court of equity will notordinarily appoint a receiver where the rights of the parties depend on the determinationof adverse claims of legal title to real property and one party is in possession. (Calo, etal. vs. Roldan, 76 Phil., 445).

Only when the property is in danger of being materially injured or lost, as by theprospective foreclosure of a mortgage thereon for non-payment of the mortgage loansdespite 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 areceiver be justified (Motoomul vs. Arrieta, 8 SCRA 172).

In this case, there is no showing that grave or irremediable damage may result torespondent Borromeo unless a receiver is appointed. The property in question is realproperty, hence, it is neither perishable or consummable. Even though it is mortgagedto a third person, there is no evidence that payment of the mortgage obligation is beingneglected. 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 beannotated on the petitioner's certificates of title.

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

The respondent judge committed grave abuse of discretion in connection with theappointment 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 therespondent judge. . . . "We hold that the respondent judge has acted in excess of hisjurisdiction when he issued the order above adverted to. That order, in effect, made theclerk of court a sort of a receiver charged with the duty of receiving the proceeds of saleand the harvest of every year during the pendency of the case with the disadvantagethat the clerk of court has not filed any bond to guarantee the faithful discharge of his

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duties as depositary; and considering that in actions involving title real property, theappointment of a receiver cannot be entertained because its effect would be to take theproperty out of the possession of the defendant, except in extreme cases when there isclear proof of its necessity to save the plaintiff from grave and irremediable loss ofdamage, it is evident that the action of the respondent judge is unwarranted and unfairto 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'sTCTs Nos. 24790, 24791 and 24792 and ordering the Register of Deeds of Mandaue Cityto issue new ones in the name of Borromeo. This circumstance does not retroactivelyvalidate the receivership until the decision (presumably now pending appeal) shall haveattained finality.

WHEREFORE, finding grave abuse of discretion in the order of receiver which therespondent 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 appellatecourt, as well as the order dated March 17, 1992 of the Regional Trial Court of MandaueCity, Branch 28, in Civil Case No. MAN-1148, are hereby ANNULLED and SET ASIDE.

Costs against the private respondent.

SO ORDERED.

G.R. No. 152239 August 17, 2011

MAKING ENTERPRISES, INC. AND SPOUSES JOAQUIN TAMANO AND ANGELITA

TAMANO, Petitioners,vs.JOSE MARFORI AND EMERENCIANA MARFORI, Respondents.

D E C I S I O N

VILLARAMA, JR.,J.:

Before us is a petition for review on certiorari assailing the July 24, 2000 Decision1of theCourt of Appeals (CA) in CA-G.R. SP No. 43076. The CA had ordered the issuance ofwrits of certiorari and prohibition permanently enjoining the prosecution of Jose Marfori

in Criminal Case Nos. 170660 to 170676 before the Metropolitan Trial Court (MeTC) ofCaloocan City, and ordered the appointment of a receiver in Civil Case No. 94-70092,pending before the Regional Trial Court (RTC) of Manila. Likewise assailed is theappellate courts Resolution2dated February 12, 2002, denying petitioners motion forreconsideration.

The antecedent facts follow:

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On June 4, 1984, Jose F. Marfori acquired a five-storey commercial building, known asthe Marsman Building, from the Development Bank of the Philippines. As the land onwhich the building stood was owned by the Philippine Ports Authority (PPA), Marforientered into a contract of lease of the said lot with the PPA. The contract was for aperiod of twenty-five (25) years, renewable for a similar period, and was subject to thecondition that upon the expiration of lease, the building and all other improvementsfound on the leased premises shall become the PPAs sole property. Marfori thenincurred huge expenses for the rehabilitation of the building and leased some portions ofthe building to the PPA.

Thereafter, on April 10, 1987, Marfori executed a dacion en pago and assignment ofrights transferring the ownership of the Marsman Building to Making Enterprises, Inc.(Making), on the condition that Making would assume all of Marforis obligations.3Making was represented by its General Manager, Cristina Lee, and Executive Vice-President, Angelita Ma. Tamano, in the said transaction.

Marforis wife, Emerenciana, alleged that she did not consent to the transfer of theMarsman Building to Making. She claimed that the building is part of their conjugal

property as it was acquired during their marriage.4

On April 12, 1994, she filed with theRTC of Manila a complaint against Making, the spouses Joaquin and Angelita Tamano,the spouses Lester and Cristina Lee, and the PPA for Recovery of Ownership, Annulmentof Contract with Damages, Receivership, Accounting and Preliminary Injunction withPrayer for Restraining Order.5She sought, among others, to annul the dacion en pagoand assignment of rights and prayed for the appointment of a receiver to preserve therentals of the building. She also prayed for the issuance of a writ of preliminaryinjunction to enjoin the PPA from paying its rentals to Making and from approving thetransfer of the Marsman Building.

In an Order6dated October 18, 1995, Judge Catalino Castaeda, Jr. of the RTC, Branch17, of Manila denied the prayer for the issuance of a writ of preliminary injunction andthe application for receivership.

The RTC noted that in 1987, Emerencianas complaint for the same cause of action wasdismissed by the RTC, Branch 51, of Manila for improper venue.7The RTC was notconvinced that she would indeed suffer grave injustice and irreparable damages if a writof injunction enjoining the PPA from paying rentals to Making and approving the transferof the Marsman Building is not issued considering that she re-filed her complaint only onApril 12, 1994, or more than six years after her first complaint was dismissed. Asregards her prayer for the appointment of a receiver, the RTC held that the appointment

of a receiver is an equitable relief and a court of equity will not ordinarily appoint areceiver where the rights of the parties depend on the determination of adverse claimsof legal title to real property and one party is in possession.

Emerenciana moved for reconsideration of the order. However, the RTC denied themotion.8

Not satisfied, Emerenciana filed before the CA a petition for certiorari and receivershipwith prayer for preliminary injunction, which was docketed as CA-G.R. SP No. 39161. OnMarch 29, 1996, however, the CA dismissed the petition for being insufficient in formand substance.9Reconsideration of the dismissal was likewise denied in a Resolutiondated November 29, 1996.10

Meanwhile, with regard to the criminal cases mentioned at the outset, records show thatin 1987, Marfori issued twenty-two (22) checks in favor of Cristina Lee. Lee depositedthe checks to her account with the Philippine Bank of Communications, but the samewere dishonored for the reason of "Account Closed."Thus, she filed complaints againstMarfori for estafa and violation ofBatas Pambansa Blg. 22 with the Prosecutor's Office ofCaloocan City.11

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