Receivership 1

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.
D E C I S I O N - PUNO, J.:
In this petition for certiorari, petitioner seeks to annul and set aside the decision and resolution of the
Court of Appeals[1] in CA-G.R. SP No. 36032 dismissing the complaint in Civil Case No. 94-72076 before the
Regional Trial Court, Branch 9, Manila.
The facts show that in 1990, petitioner spouses Victor and Johannah Trinidad obtained a loan
of P31,000,000.00 from respondent Far East Bank & Trust Company to finance the purchase of the Sta. Maria
Ice Plant & Cold Storage in Sta. Maria, Bulacan. The loan was secured by a mortgage over the ice plant and the
land on which the ice plant stands. Petitioner spouses failed to pay their loan. The bank extrajudicially
foreclosed the mortgage and the ice plant was sold by public bidding on March 22, 1993. Respondent bank
was the highest bidder.It registered the certificate of sale on September 22, 1993 and later took possession of
the property.
On November 22, 1993, petitioner spouses filed Civil Case No. 956-M-93 against respondent bank before
the Regional Trial Court, Malolos, Bulacan for reformation of the loan agreement, annulment of the
foreclosure sale and damages.[2] The trial court dismissed the complaint for petitioners' failure to pay the
docket fees. The dismissal was without prejudice to refiling of the complaint.[3]
On October 28, 1994, petitioners filed Civil Case No. 94-72076 against respondent bank before the
Regional Trial Court, Branch 9, Manila for damages, accounting and fixing of redemption period.[4] As a
provisional remedy, petitioners filed on November 16, 1994 an "Urgent Petition for Receivership." They
alleged that respondent bank took possession of the ice plant forcibly and without notice to them; that their
occupation resulted in the destruction of petitioners' financial and accounting records making it impossible for
them to pay their employees and creditors; the bank has failed to take care of the ice plant with due diligence
such that the plant has started emitting ammonia and other toxic refrigerant chemicals into the atmosphere
and was posing a hazard to the health of the people in the community; the spouses' attention had been called
by several people in the barangay who threatened to inform the Department of Environment and Natural
Resources should they fail to take action. Petitioners thus prayed for the appointment of a receiver to save the
ice plant, conduct its affairs and safeguard its records during the pendency of the case.[5]
Instead of an answer, respondent bank filed on November 25, 1994 a "Motion to Dismiss and Opposition
to Plaintiff's Petition for Receivership." It alleged that the complaint states no cause of action and that venue
had been improperly laid. It also alleged that petitioners failed to pay the proper docket fees and violated the
rule on forum-shopping.[6]
In an order dated December 13, 1994, the trial court granted the petition for receivership and appointed
petitioners' nominee, Ricardo Pesquera, as receiver. The order disposed as follows:

"WHEREFORE, premises considered the Urgent Petition for Receivership is GRANTED and Mr. Ricardo Pesquera
to whose appointment no opposition was raised by the defendant and who is an ice plant contractor,
maintainer and installer is appointed receiver. Accordingly, upon the filing and approval of the bond of TWO
MILLION (P2,000,000.00) pesos which shall answer for all damages defendant may sustain by reason of the
receivership, said Ricardo Pesquera is authorized to assume the powers of a receiver as well as the obligation
as provided for in Rule 59 of the Rules of Court after taking his oath as such receiver.

SO ORDERED."[7]

Respondent bank assailed this order before the Court of Appeals on a petition for certiorari. On January
11, 1996, the Court of Appeals annulled the order for receivership and dismissed petitioners' complaint for
improper venue and lack of cause of action. The dispositive portion of the decision reads:
 Receivership 2
"WHEREFORE, the petition for certiorari is GRANTED. Accordingly, the assailed order dated December 13, 1994
(Annex A, petition) is ANNULLED and SET ASIDE and respondent's complaint in Civil Case No. 94-72076 in the
respondent court (Annexes F, petition; 4, comment), is DISMISSED. Costs against respondents except the court.

SO ORDERED."

Reconsideration was denied on May 23, 1996.[8] Hence, this petition.

Section 1 of Rule 59 of the Revised Rules of Court provides that:

"Sec. 1. When and by whom receiver appointed.-- One or more receivers of the property, real or personal,
which is the subject of the action, may be appointed by the judge of the Court of First Instance in which the
action is pending, or by a Justice of the Court of Appeals or of the Supreme Court, in the following cases:

(a) When the corporation has been dissolved, or is insolvent, or is in imminent danger of insolvency, or has
forfeited its corporate rights;

(b) When it appears from the complaint or answer, and such other proof as the judge may require, that the
party applying for the appointment of receiver has an interest in the property or fund which is the subject of
the action, and that such property or fund is in danger of being lost, removed or materially injured unless
a receiver be appointed to guard and preserve it;

(c) When it appears in an action by the mortgagee for the foreclosure of a mortgage that the property is in
danger of being wasted or materially injured, and that its value is probably insufficient to discharge the
mortgage debt, or that the parties have so stipulated in the contract of mortgage;

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

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

A receiver of real or personal property, which is the subject of the action, may be appointed by the court when
it appears from the pleadings or such other proof as the judge may require, that the party applying for such
appointment has (1) an actual interest in it; and (2) that (a) such property is in danger of being lost, removed
or materially injured; or (b) whenever it appears to be the most convenient and feasible means of preserving
or administering the property in litigation.[9]
A receiver is a person appointed by the court in behalf of all the parties to the action for the purpose of
preserving and conserving the property in litigation and prevent its possible destruction or dissipation, if it
were left in the possession of any of the parties.[10] The appointment of a receiver is not a matter of absolute
right. It depends upon the sound discretion of the court[11] and is based on facts and circumstances of each
particular case.[12]
Petitioners claim that the appointment of a receiver is justified under Section 1 (b) of Rule 59. They argue
that the ice plant which is the subject of the action was in danger of being lost, removed and materially injured
because of the following "imminent perils":

"6.1 Danger to the lives, health and peace of mind of the inhabitants living near the Sta. Maria Ice Plant;
 Receivership 3
6.2 Drastic action or sanctions that could be brought against the plaintiff by affected third persons, including
workers who have claims against the plaintiff but could not be paid due to the numbing manner by which the
defendant took the Sta. Maria Ice Plant;

6.3 The rapid reduction of the Ice Plant into a scrap heap because of evident incompetence, neglect and
vandalism."[13]

A petition for receivership under Section 1 (b) of Rule 59 requires that the property or fund which is the
subject of the action must be in danger of loss, removal or material injury which necessitates protection or
preservation. The guiding principle is the prevention of imminent danger to the property. If an action by its
nature, does not require such protection or preservation, said remedy cannot be applied for and granted.[14]
In the instant case, we do not find the necessity for the appointment of a receiver. Petitioners have
not sufficiently shown that the Sta. Maria Ice Plant is in danger of disappearing or being wasted and reduced to
a "scrap heap." Neither have they proven that the property has been materially injured which necessitates its
protection and preservation.[15] In fact, at the hearing on respondent bank's motion to dismiss, respondent
bank, through counsel, manifested in open court that the leak in the ice plant had already been remedied and
that no other leakages had been reported since.[16] This statement has not been disputed by petitioners.
At the time the trial court issued the order for receivership of the property, the problem had been
remedied and there was no imminent danger of another leakage. Whatever danger there was to the
community and the environment had already been contained.
The "drastic sanctions" that may be brought against petitioners due to their inability to pay their
employees and creditors as a result of "the numbing manner by which [respondent bank] took the ice plant"
does not concern the ice plant itself. These claims are the personal liabilities of petitioners themselves. They
do not constitute "material injury" to the ice plant.
Moreover, the receiver appointed by the court appears to be a representative of petitioners. Respondent bank
alleges that it was not aware that petitioners nominated one Mr. Pesquera as receiver. [17] The general rule is
that neither party to a litigation should be appointed as receiver without the consent of the other because a
receiver should be a person indifferent to the parties and should be impartial and disinterested.[18] The
receiver is not the representative of any of the parties but of all of them to the end that their interests may be
equally protected with the least possible inconvenience and expense.[19]

The power to appoint a receiver must be exercised with extreme caution. There must be a clear showing of
necessity therefor in order to save the plaintiff from grave and irremediable loss or damage.[20] It is only when
the circumstances so demand, either because there is imminent danger that the property sought to be placed
in the hands of a receiver be lost or because they run the risk of being impaired, endeavouring to avoid that
the injury thereby caused be greater than the one sought to be avoided.[21]
The Court of Appeals correctly found that the trial court gravely abused its discretion in issuing the order
for receivership. The respondent court, however, went further and took cognizance of respondent bank's
motion to dismiss. And finding merit in the motion, it dismissed the complaint. Petitioners now claim that the
respondent court should have refrained from ruling on the motion to dismiss because the motion itself was
not before it.[22]
Again, we reject petitioners' contention. The motion to dismiss is anchored on improper venue, lack of
cause of action and forum-shopping. We agree with the respondent court that the question of venue relates to
the principal action and is prejudicial to the ancillary issue of receivership. Although the grounds for dismissal
were not specifically raised before the appellate court, the said court may consider the same since the petition
for receivership depends upon a determination thereof.[23]
In their complaint, petitioners prayed for the following:
 Receivership 4
"WHEREFORE, in view of the foregoing, it is respectfully prayed that after trial on the merits judgment be
rendered:
1. Ordering the Defendant to pay COMMODITIES actual and compensatory damages in the amount of
PESOS: TWO MILLION FIVE HUNDRED THOUSAND and 00/100 (P2,500,000.00);
2. Ordering the Defendant to pay Plaintiffs moral damages in the amount of PESOS: TWO MILLION and
00/100 (P2,000,000.00) to compensate the Plaintiffs for the anxiety and besmirched reputation caused by
the unjust actuations of the Defendant;
3. Ordering the Defendant to pay Plaintiffs nominal and exemplary damages in the amount of PESOS: FIVE
HUNDRED THOUSAND and 00/100 (P500,000.00) to deter the repetition of such unjust and malicious
actuations of the Defendant;

4. In order to restore the legal right of the Plaintiff COMMODITIES to redeem its foreclosed property, a right
which COMMODITIES has been unjustly deprived of by the malicious and bad faith machinations of the
Defendant, compelling the Defendant to produce the correct, lawful, official and honest statements of
account and application of payment. Concomitantly, ordering the Defendant to accept the redemption of
the foreclosed properties pursuant to Rule 39 of the Revised Rules of Court in conjunction with Act 3135,
within the prescribed period for redemption, said period to commence from the date of receipt by the
Plaintiff COMMODITIES of the correct, lawful, official and honest statements of account and application of
payments;

5. Ordering the Defendant to pay attorney's fees in the amount of PESOS: THREE HUNDRED THOUSAND
(P300,000.00); and costs of litigation.
Other reliefs and remedies just and equitable under the circumstances are likewise prayed for."[24]

Petitioners pray for two remedies: damages and redemption. The prayer for damages is based on respondent
bank's forcible occupation of the ice plant and its malicious failure to furnish them their statements of account
and application of payments which prevented them from making a timely redemption.[25] Petitioners also pray
that respondent bank be compelled to furnish them said documents, and upon receipt thereof, allow
redemption of the property. They ultimately seek redemption of the mortgaged property. This is explicit in
paragraph 4 of their prayer.
An action to redeem by the mortgage debtor affects his title to the foreclosed property. If the action is
seasonably made, it seeks to erase from the title of the judgment or mortgage debtor the lien created by
registration of the mortgage and sale.[26] If not made seasonably, it may seek to recover ownership to the land
since the purchaser's inchoate title to the property becomes consolidated after expiration of the redemption
period.[27] Either way, redemption involves the title to the foreclosed property. It is a real action.
Section 2 of Rule 4 of the Revised Rules of Court provides:
"Sec. 2. Venue in Courts of First Instance.-- (a) Real actions.-- Actions affecting title to, or for recovery of
possession, or for partition or condemnation of, or foreclosure of mortgage on, real property, shall be
commenced and tried in the province where the property or any part thereof lies."[28]
Where the action affects title to the property, it should be instituted in the Regional Trial Court where the
property is situated. The Sta. Maria Ice Plant & Cold Storage is located in Sta. Maria, Bulacan. The venue in Civil
Case No. 94-72076 was therefore laid improperly.
Finally, there is no merit in petitioners' claim that the respondent bank is no longer the real party in interest
after selling the ice plant to a third person during the pendency of the case.Section 20 of Rule 3 of the Revised
Rules of Court provides that in a transfer of interest pending litigation, the action may be continued by or
against the original party, unless the court, upon motion, directs the transferee to be substituted in the action
or joined with the original party. The court has not ordered the substitution of respondent bank.
IN VIEW WHEREOF, the decision dated January 11, 1996 and resolution dated May 23, 1996 of the Court
of Appeals in CA-G.R. SP No. 36032 are affirmed. Costs against petitioners.
SO ORDERED.
 Receivership 5
SECOND DIVISION G.R. No. L-30204 October 29, 1976
PACIFIC MERCHANDISING CORPORATION, plaintiff-appellee, vs. CONSOLACION INSURANCE & SURETY CO.,
INC., defendant-appellee,
CONSOLACION INSURANCE & SURETY CO., INC., third party plaintiff-appellee, vs. GREGORIO V. PAJARILLO,
third party defendant-appellant.
Vicente T. Velasco, Jr. & Associates for plaintiff-appellee.
Castro, Panlaque & De Pano for defendant and third-party plaintiff-appellee.
Yuseco, Abdon & Yuseco for third-party defendant-appellant.

ANTONIO, J.:

Appeal, on a question of law, from the judgment of the Court of First Instance Of Manila, dated August
8, 1964, affirming the decision of the City Court in Civil Case No. 117811. The issue arose from the
following facts:

In Civil Case No. 117811, which was an action instituted by Pacific Merchandising Corporation
(plaintiff-appellee) to collect the sum of P2,562.88 from Consolacion Insurance & Surety Co., Inc.,
(defendant- appellee) who in turn filed a third-party complaint against Gregorio V. Pajarillo (third-party
defendant-appellant). the City Court of Manila rendered judgment on April 6, 1964, the dispositive
portion of which reads, in part, thus:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the plaintiff and
against the defendant, ordering the latter to pay the former the sum of P2,562.88 with interest
thereon at the rate of 12% per annum from May 30, 1963 until fully paid, P100.00 as for attorney's
fees, plus the costs of suit; condemning third defendant to pay third-party plaintiff for whatever
sums or amounts tlie latter paid the plaintiff on account of this judgment.

By virtue of the appeal interposed by the third-party defendant Gregorio V. Pajarillo, the case was
elevated, on May 12, 1964, to the Court of First Instance of Manila. On July 21, 1964, the parties,
through their respective counsel, submitted the following Stipulation of Facts:

1. That on the 19th day of October, 1962, a Writ of Execution as isstica Iy the Court of First
Instance of Manila under Civil Case No. 49691, entitled Pacific Merchandising Corporation vs.
Leo Enterprises, Inc., a copy of the said Writ of Execution is attached as ANNEX Ato the
complaint;
2. That by virtue of the aforesaid Writ of Execution, the Sheriff of Manila levied and attached the
following:

'l. Second Hand AUTOMATICKET Machine No. MG-31833;and

'2. Cinema Projectors Complete, trademark SIMPLEX PEERLESS MAGNARC NOS. 52625 and 62387' which
items were advertised for sale on March 2, 1963, copy of Notice of sale attached as ANNEX 'B' to the
Complaint;
3. That Atty. Greg V. Pajarillo was appointed on March 2, 1963 as Receiver of all the assets, properties and
equipment of Paris Theatre, olwrated by Leo Enterprises, Inc. under Civil Case No. 50201
entitled Gregorio V. Pajarillo vs. Leo Enterprises, Inc.;
4. That the sale at public auction of the above described properties was postponed and was later cancelled
due to thc representation of Atty. Greg V. Pajarillo as Receiver of Paris Theatre operated by Leo
Enterprises, Inc. in which he undertook the 1anient of the judgment rendered in favor of the plaintiff
against Leo Enterprises, Inc. as Ier undertaking dated March 11, 1963, copy of which is attached as ANNEX
'C' to the complaint;
5. That on or about hie third of March, 1963, third-party defendant Pajarillo approached the third-party
plaintiff and applied for a surety bond in the amount of P5,000.00 to be rated in favor of the abovenamed
 Receivership 6
plaintiff in order to guarantee to said plaintiff the payment of obligations in its favor by the Leo
Enterprises, Inc.;
6. That the bond applied for was in fact executed in favor of the pIaintiff rith third-party defendant Pajarillo
as principal and third-party plaintiff as surety in the context of the allegations of the preceding paragraph
and a copy of the said bond is attached a ANNEX 'A' to the third party complaint;
7. That to protect thirrd party plaintiff against damage and injury, the third party defendant Pajarillo
executed in favor of the former an INDEMNITY AGREEMENT, copy of which is attached as ANNEX 'B' to
third party complaint; tlie trms of which aie incorporated by reference;
8. That the plaintiff received from hie aid principal, Greg V. Pajarillo the sum of P2,000.00 leaving a balance
of P2,562.88 still unpaid aside from interest at the rate of 1% per month and atto lnen s f cluiaient to 25%
of tht amount due as provided for in said undertaking (ANNEX 'C' to tlie complaint);
9. That on July 1, 1963, a decision was rendered tne court of First Instance of Manila in Civil case No. 50201,
copy of' which is attached its ANNEX 'A' to Answer to Third Party Complaint, by virtue of which Greg V.
Pajarillo, as said Received stololcl making payments to plaintiff;
10. That the said decision in Civl Case No. 50201 dated July 1, 1963 was appealed lix defendant Leo
Enterprises, Inc. to the court of Appeals and that the records kere eleattd to the aid ApiIiat court on
August 27, 1963;
11. That on October 9, 1963, plaintiff's counsel demanded from the said principal, Greg V. Paiarillo, the
payment of the installments corresponding to the months of May, June, July, August and September,
1963, which remain unpaid in spite of said demand, copy of said letter being, attached as ANNEX 'E' to the
complaint;
12. That the defendant was duly notified of the demand made on the principal, Greg V. Pajarillo and in spite
of said notice the defendant has failed and refused to pay the unpaid obligation;
13. That on December 19, 1963, plaintiff's counsel demanded from the defendant the payment of the unpaid
obligation of the principal, Greg V. Pajarillo but refused and failed to pay the same in spite of said
demand;
14. That when reminded by third-party plaintiff regarding his obligations in favor of the plaintiff, the third-
party defendant, Greg V. Pajarillo replied that he no longer was bound to pay because he had ceased to
be the receiver of Paris Theatre operated by Leo Enterprises, Inc. by virtue of the decision of the Court in
Civil Case No. 50201 cited above, and for this reason, third- party plaintiff refused to pay the demand of
the plaintiff 2

On the basis of the foregoing Stipulation of Facts, the Court of First Instance rendered judgment on
August 8, 1964, which judgment was amended on August 25, 1964, affirming the appealed decision
of the City Court .2*

The trial court predicated its judgment on the following considerations: (1) Since the unpaid claim
represents the cost of certain materials used in the construction of the Paris Theatre, the possession
of which reverted to Gregorio V. Pajarillo as owner of said property by virtue of the judgment in Civil
Case No. 50201, "it is only simple justice that Pajarillo should pay for the said claim. otherwise he
would be enriching himself by having the said building without paying plaintiff for the cost of certain
materials that went into its construction"; (2) "under Section 7 of Rule 61 of the former Rules of Court,
one of the powers of a receiver i8 to pay outstanding debts, and since the said plaintiff's claim has
been outstanding since August 27, 1962, if not before, Pajarillo should have paid the same long
before the alleged termination of the receivership on July 1, 1963"; (3) the procedure outlined in
Section 8 of the Rule, namely, that whenever the court "shall determine that the necessity for a
receiver no longer exists, it shall, after due notice to all interested parties and hearing, settle the
accounts of the receiver, direct the delivery of the funds and other property in his hands to the
persons adjudged entitled to receive them, and order the discharge of the receiver from further duty
as such," has not been followed; and (4) when Gregorio V. Pajarillo undertook to pay the amount
owed to plaintiff (Annex "C") and executed the surety bond (Annex "D") in favor of plaintiff, he 4 6
stepped into the shoes" of the dr Leo Enterprises, Inc., .4 and the properties of the said debtor having
 Receivership 7
all subsequently passed on to Pajarillo, there is no reason, legal or otherwise, for relieving defendants
of their said undertaking."

The court a quo likewise declared that (1) "the receivership was not terminated by virtue of the appeal
interposed by Leo Enterprises, Inc., one of the defendants in Civil Case No. 50201, because a
decision which is appealed cannot be the subject of execution"; (2) "granting arguendo that the
decision is final and executory, the said decision cannot bind nor can it be enforced against the
plaintiff in the present case because it is not a party in Civil Case No. 50201"; and (3) "when Atty.
Pajarillo assumed the obligation of Leo Enterprises, Inc., as a Receiver, there was a subrogation of
the party liable and, therefore, the plaintiff cannot enforce the judgment in Civil Case No. 49691
against Leo Enterprises, Inc."

From the foregoing judgment, third-party defendant Gregorio V. Pajarillo interposed an appeal to the
Court of Appeals. The aforesaid Appellate Court, in turn certified the same to this Court on the ground
that there is no question of fact involved, but only one of law.

The legal question is whether or not third party defendant-appellant Gregorio V. Pajarillo is, under the
facts and circumstances obtaining, liable to plaintiff for the unpaid amount claimed. Upon the
resolution of this issue will in turn depend the liability of defendant-third-party plaintiff Consolacion
Insurance & surety Co., Inc. under the Surety Bond, on the basis of which it was ordered by the
court a quo to pay the amount involved to plaintiff-appellee.

1. A receiver is not an agent or representative of any party to the action. He is an officer of the court
exercising his functions in the interest of neither plaintiff nor defendant, but for the common benefit
of all the parties in interest.[3] He performs his duties "subject to the control of the Court", and every
question involved in the receivership may be determined by the court taking cognizance of the
receivership proceedings.[4] Thus, "a receiver, strictly speaking, has no right or power to make any
contract binding the property or fund in his custody or to pay out funds in his hands without the
authority or approval of the court * * *".[5] As explained by Justice Moran, speaking for the Court in a
1939 case,[6] "* * * The custody of the receiver is the custody of the court. His acts and possession are
the acts and possession of the court, and his contracts and liabilities are, in contemplation of law,
the contracts and liabilities of the court. As a necessary consequence, a receiver is subject to the
control and supervision of the court at everystep in his management of the property or funds placed in
his hands. * * *"[7] He cannot operate independently of the court, and cannot enter into any contract
without its approval."
"* * * El depositario no puede obrar independientemente del jusgado; contrata bajo el control del
mismo; sin su autorizacion o aprobacion expresa, el depositario no puede perfeccionar ningun
contrato. * * *"[8]

2. In the case at bar, appellant Pajarillo does not dispute the fact that he never secured the court's
approval of either the agreement of March 11, 1963, with Pacific Merchandising Corporation or of his
Indemnity Agreement with the Consolacion Insurance Surety Co., Inc. on March 14, 1963, in
consideration of the performance bond submitted by the latter to Pacific Merchandising Corporation
to guarantee the payment of the obligation. As the person to whom the possession of the theater and
its equipment was awarded by the court in Civil Case No. 50201, it was certainly to his personal profit
and advantage that the sale at public auction of the equipment of the theater was prevented by his
execution of the aforesaid agreement and submission of the afore-mentioned bond. In order to bind
the property or fund in his hands as receiver, he should have applied for and obtained from the court
authority to enter into the aforesaid contract.[9] Unauthorized contracts of a receiver do not bind the
court in charge of receivership. They are the receiver's own contracts and are not recognized by the
courts as contracts of the receivership.[10] Consequently, the aforesaid agreement and undertaking
entered into by appellant Pajarillo not having been approved or authorized by the receivership court
should, therefore, be considered as his personal undertaking or obligation. Certainly, if such
agreements were known by the receivership court, it would not have terminated the receivership
without due notice to the judgment creditor as required by Section 8 of Rule 59 of the Rules of
 Receivership 8
Court. This must be assumed because of the legal presumption that official duty has been regularly
performed.[11] Indeed, if it were true that he entered into the agreement and undertaking as a receiver,
he should have, as such receiver, submitted to the court an account of the status of the properties in
his hands including the outstanding obligations of the receivership.[12] Had he done so, it is
reasonable to assume that the judgment creditor would have opposed the termination of the
receivership, unless its claim was paid. Having failed to perform his duty, to the prejudice of the
creditor, appellant should not be permitted to take advantage of his own wrong. The judgment
creditor having been induced to enter into the aforesaid agreement by appellant Pajarillo it was the
duty of the latter to comply with his end of the bargain. He not only failed to perform his undertaking,
but now attempts to evade completely his liability. Under such circumstances, appellant is not
entitled to equitable relief. No ground for equitable relief can be found in a case where a party has not
only failed to perform the conditions upon which he alone obtained the execution of the contract, but
where it is clear that he never, at any time, intended to perform them.[13]
3. Moreover, it will be recalled that the obligation due the Pacific Merchandising Corporation
represented the cost of materials used in the construction of the Paris Theatre. There can not be any
question that such improvements, in the final analysis, redounded to the advantage and personal
profit of appellant Pajarillo because the judgment in Civil Case No. 50201, which was in substance
affirmed by the Appellate Court, ordered that the "possession of the lands, building, equipment,
furniture, and accessories * * *" of the theater be transferred to said appellant as owner thereof.
As the trial court aptly observed "* * * it is only simple justice that Pajarillo should pay for the said
claim, otherwise he would be enriching himself without paying plaintiff for the cost of certain
materials that went into its construction. * * * It is argued, however, that he did so only as a receiver
of Leo Enterprises, Inc.. This may be so, but it is equally true that * * * all of the properties of Leo
Enterprises, Inc, passed on to Pajarillo by virtue of the judgment in Civil Case No. 50201 * * *". This
Roman Law principle of "Nemo Cum alterious detrimento locupletari protest" is embodied in Article
22 (Human Relations),[14] and Articles 2142 to 2175 (Quasi-Contracts) of the New Civil Code. Long
before the enactment of this Code, however, the principle of unjust enrichment which is basic in every
legal system, was already expressly recognized in this jurisdiction.
As early as 1903, in Perez v. Pomar,[15] this Court ruled that where one has rendered services to
another, and these services are accepted by the latter, in the absence of proof that the service was
rendered gratuitously, it is but just that he should pay a reasonable remuneration therefor because "it
is a well-known principle of law that no one should be permitted to enrich himself to the damage of
another." Similarly in 1914, this Court declared that in this jurisdiction, even in the absence of statute,
"* * * under the general principle that one person may not enrich himself at the expense of another, a
judgment creditor would not be permitted to retain the purchase price of land sold as the property of
the judgment debtor after it has been made to appear that the judgment debtor had no title to the land
and that the purchaser had failed to secure title thereto * * *". [16] The foregoing equitable principle
which springs from the fountain of good conscience are applicable to the case at bar.
ACCORDINGLY, in view of the foregoing, the judgment under appeal is hereby AFFIRMED. Costs
against appellant.
 Receivership 9
FIRST DIVISION [G.R. No. 131683. June 19, 2000]
JESUS LIM ARRANZA; LORENZO CINCO; QUINTIN TAN; JOSE ESCOBAR; ELBERT FRIEND; CLASSIC HOMES
VILLAGE ASSOCIATION, INC.; BF NORTHWEST HOMEOWNERS ASSOCIATION, INC.; and UNITED BF
HOMEOWNERS ASSOCIATIONS, INC., petitioners, vs. B.F. HOMES, INC. AND THE HONORABLE COURT OF
APPEALS, respondent.
D E C I S I O N - DAVIDE, JR., C.J.:

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

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

and selling residential lots. One of the subdivisions that respondent developed was the BF Homes
Paraaque Subdivision, which now sprawls across not only a portion of the City of Paraaque but also
those of the adjoining cities of Las Pias and Muntinlupa.

When the Central Bank ordered the closure of Banco Filipino, which had substantial investments in
respondent BFHI, respondent filed with the SEC a petition for rehabilitation and a declaration that it
was in a state of suspension of payments. On 18 March 1985, the SEC placed respondent under a
management committee. Upon that committees dissolution on 2 February 1988, the SEC appointed
Atty. Florencio B. Orendain as a Receiver, and approved a Revised Rehabilitation Plan.

As a Receiver, Orendain instituted a central security system and unified the sixty~five homeowners
associations into an umbrella homeowners association called United BF Homeowners Associations,
Inc. (UBFHAI), which was thereafter incorporated with the Home Insurance and Guaranty Corporation
(HIGC).[1]

In 1989, respondent, through Orendain, turned over to UBFHAI control and administration of security
in the subdivision, the Clubhouse and the open spaces along Concha Cruz Drive. Through the
Philippine Waterworks and Construction Corporation (PWCC), respondents managing company for
waterworks in the various BF Homes subdivisions, respondent entered into an agreement with
UBFHAI for the annual collection of community assessment fund and for the purchase of eight new
pumps to replace the over~capacitated pumps in the old wells.

On 7 November 1994, Orendain was relieved by the SEC of his duties as a Receiver, and a new
Board of Receivers consisting of eleven members of respondents Board of Directors was appointed
for the implementation of Phases II and III of respondents rehabilitation.[2] The new Board, through its
Chairman, Albert C. Aguirre, revoked the authority given by Orendain to use the open spaces at
Concha Cruz Drive and to collect community assessment funds; deferred the purchase of new
pumps; recognized BF Paraaque Homeowners Association, Inc., (BFPHAI) as the representative of
all homeowners in the subdivision; took over the management of the Clubhouse; and deployed its
own security guards in the subdivision.

Consequently, on 5 July 1995, herein petitioners filed with the HLURB a class suit "for and in behalf of
the more than 7,000 homeowners in the subdivision" against respondent BFHI, BF Citiland
Corporation, PWCC and A.C. Aguirre Management Corporation "to enforce the rights of purchasers of
lots" in BF Homes Paraaque.[3] They alleged that:

1. The forty (40) wells, mostly located at different elevations in Phases 3 and 4 of the subdivision and
with only twenty~seven (27) productive, are the sources of the inter~connected water system in
the 765~hectare subdivision;
2. There is only one drainage and sewer system;
3. There is one network of roads;
 Receivership 10
4. There are eight (8) entry and exit points to the subdivision and from three (3) municipalities (now
cities), a situation obtaining in this subdivision only and nowhere else;
5. There was no security force for the entire subdivision until 1988;
6. There are not enough open spaces in the subdivision in relation to the total land area developed;
and whatever open spaces are available have been left unkempt, undeveloped and neglected;
7. There are no zoning guidelines which resulted in unregulated constructions of structures and the
proliferation of business establishments in residential areas; and
8. The BFPHAI became "moribund" sometime in 1980 on account of its failure to cope with the
delivery of basic services except for garbage collection.

Petitioners raised "issues" on the following basic needs of the homeowners: rights~of~way; water;
open spaces; road and perimeter wall repairs; security; and the interlocking corporations that
allegedly made it convenient for respondent "to compartmentalize its obligations as general
developer, even if all of these are hooked into the water, roads, drainage and sewer systems of the
subdivision."[4] Thus, petitioners prayed that:

A. A cease~and~desist order from selling any of the properties within the subdivision be issued against
respondent BFHI, BF Citi, ACAMC, and/or any and all corporations acting as surrogates/alter~egos, sister
companies of BFHI and/or its stockholders until the warranties, facilities and infrastructures shall have
been complied with or put up (and) the advances of UBFHAI reimbursed, otherwise, to cease and desist
from rescinding valid agreements or contracts for the benefit of complainants, or committing acts
diminishing, diluting or otherwise depriving complainants of their rights under the law as homeowners;
B. After proper proceedings the bond or deposit put up by respondent BF Homes, Inc. be forfeited in favor of
petitioners;
C. Respondent BFHI be ordered to immediately turnover the roads, open spaces, and other facilities built or
put up for the benefit of lot buyers/homeowners in the subdivision to complainant UBFHAI as
representative of all homeowners in BF Homes Paraaque, free from all liens, encumbrances, and taxes in
arrears;
D. If the open spaces in the subdivision are not sufficient as required by law, to impose said
penalties/sanctions against BFHI or the persons responsible therefor;
E. Order the reimbursement of advances made by UBFHAI;
F. Turn over all amounts which may have been collected from users fees of the strip of open space at Concha
Cruz Drive;
G. ..Order PWCC to effect and restore 24~hour water supply to all residents by adding new wells replacing
over~capacitated pumps and otherwise improving water distribution facilities;
H. Order PWCC to continue collecting the Community Development Fund and remit all amounts collected to
UBFHAI;
I... Order BFHI to immediately withdraw the guards at the clubhouse and the 8 entry and exit points to the
subdivision, this being an act of usurpation and blatant display of brute force;
J. .The appropriate penalties/sanctions be imposed against BF Citi, ACAMC or any other interlocking
corporation of BFHI or any of its principal stockholders in respect of the diminution/encroaching/violation
on the rights of the residents of the subdivision to enjoy/avail of the facilities/services due them; and
K.. Respondents be made to pay attorneys fees and the costs of this suit.[5]

In its answer, respondent claimed that (a) it had complied with its contractual obligations relative to
the subdivisions development; (b) respondent could not be compelled to abide by agreements
resulting from Orendains ultra vires acts; and (c) petitioners were precluded from instituting the instant
action on account of Section 6(c) of P.D. No. 902~A providing for the suspension of all actions for
claims against a corporation under receivership. Respondent interposed counterclaims and prayed for
the dismissal of the complaint.[6]

Petitioners thereafter filed an urgent motion for a cease~and~desist/status quo order. Acting on this
motion, HLURB Arbiter Charito M. Bunagan issued a 20~day temporary restraining order to avoid
 Receivership 11
[7]
rendering nugatory and ineffectual any judgment that could be issued in the case; and subsequently,
an Order granting petitioners prayer for preliminary injunction was issued enjoining and restraining
respondent BF Homes, Incorporated, its agents and all persons acting for and in its behalf from taking
over/administering the Concha Garden Row, from issuing stickers to residents and non-residents alike
for free or with fees, from preventing necessary improvements and repairs of infrastructures within the
authority and administration of complainant UBFHAI, and from directly and indirectly taking over
security in the eight (8) exit points of the subdivision or in any manner interfering with the processing
and vehicle control in subject gates and otherwise to remove its guards from the gates upon posting
of a bond of One Hundred Thousand Pesos (P100,000.00) which bond shall answer for whatever
damages respondents may sustain by reason of the issuance of the writ of preliminary injunction if it
turns out that complainant is not entitled thereto.[8]

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

On 28 November 1997, the Court of Appeals rendered a decision[10] annulling and setting aside the
writ of preliminary injunction issued by the HLURB. It ruled that private respondents action may
properly be regarded as a "claim" within the contemplation of PD No. 902~A which should be placed
on equal footing with those of petitioners other creditor or creditors and which should be filed with the
Committee of Receivers. In any event, pursuant to Section 6(c) of P.D. No. 902~A and SECs Order of
18 March 1985, petitioners action against respondent, which is under receivership, should be
suspended.

Hence, petitioners filed the instant petition for review on certiorari. On 26 January 1998, the Court
issued a temporary restraining order (TRO) enjoining respondent, its officers, representatives and
persons acting upon its orders from

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

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

Respondents motion to lift the TRO was denied.

At the hearing on 1 July 1998, the primary issue in this case was defined as "which body has
jurisdiction over petitioners claims, the Housing and Land Use Regulatory Board (HLURB) or the
Securities and Exchange Commission (SEC)?" The collateral issue to be addressed is "assuming that
the HLURB has jurisdiction, may the proceedings therein be suspended pending the outcome of the
receivership before the SEC?"

For their part, petitioners argue that the complaint referring to rights of way, water, open spaces, road
and perimeter wall repairs, security and respondents interlocking corporations that facilitated
circumvention of its obligation involves unsound real estate practices. The action is for specific
performance of a real estate developers obligations under P.D. No. 957, and the relief sought is
revocation of the subdivision projects registration certificate and license to sell. These issues are
within the jurisdiction of the HLURB. Even if respondent is under receivership, its obligations as a real
estate developer under P.D. No. 957 are not suspended. Section 6(c) of P.D. No. 902~A, as amended
by P.D. No. 957, on "suspension of all actions for claims against corporations" refers solely to
 Receivership 12
monetary claims which are but incidental to petitioners complaints against BFHI, and if filed elsewhere
than the HLURB, it would result to splitting causes of action. Once determined in the HLURB,
however, the monetary awards should be submitted to the SEC as established claims. Lastly, the acts
enjoined by the HLURB are not related to the disposition of BFHIs assets as a corporation undergoing
its final phase of rehabilitation.

On the other hand, respondent asserts that the SEC, not the HLURB, has jurisdiction over petitioners
complaint based on the contracts entered into by the former receiver. The SEC, being the appointing
authority, should be the one to take cognizance of controversies arising from the performance of the
receivers duties. Since respondents properties are under the SECs custodia legis, they are exempt
from any court process.

Jurisdiction is the authority to hear and determine a cause the right to act in a case. [12] It is conferred
by law and not by mere administrative policy of any court or tribunal.[13] It is determined by the
averments of the complaint and not by the defense contained in the answer.[14] Hence, the
jurisdictional issue involved here shall be determined upon an examination of the applicable laws and
the allegations of petitioners complaint before the HLURB.

Presidential Decree No. 957 (The Subdivision and Condominium Buyers Protective Decree) was
issued on 12 July 1976 in answer to the popular call for correction of pernicious practices of
subdivision owners and/or developers that adversely affected the interests of subdivision lot buyers.
Thus, one of the "whereas clauses" of P.D. No. 957 states:

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

Section 3 of P.D. No. 957 empowered the National Housing Authority (NHA) with the "exclusive
jurisdiction to regulate the real estate trade and business." On 2 April 1978, P.D. No. 1344 was issued
to expand the jurisdiction of the NHA to include the following:

SECTION 1. In the exercise of its functions to regulate the real estate trade and business and in
addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority
shall have exclusive jurisdiction to hear and decide cases of the following nature:

A...Unsound real estate business practices;

B..Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer
against the project owner, developer, dealer, broker or salesman; and

C..Cases involving specific performance of contractual and statutory obligations filed by buyers of
subdivision lot or condominium unit against the owner, developer, dealer, broker or salesman.
(Italics supplied.)

Thereafter, the regulatory and quasi~judicial functions of the NHA were transferred to the Human
Settlements Regulatory Commission (HSRC) by virtue of Executive Order No. 648 dated 7 February
1981. Section 8 thereof specifies the functions of the NHA that were transferred to the HSRC
including the authority to hear and decide "cases on unsound real estate business practices; claims
involving refund filed against project owners, developers, dealers, brokers or salesmen and cases of
specific performance." Executive Order No. 90 dated 17 December 1986 renamed the HSRC as the
Housing and Land Use Regulatory Board (HLURB).[15]
 Receivership 13
The boom in the real estate business all over the country resulted in more litigation between
subdivision owners/developers and lot buyers with the issue of the jurisdiction of the NHA or the
HLURB over such controversies as against that of regular courts. In the cases [16] that reached this
Court, the ruling has consistently been that the NHA or the HLURB has jurisdiction over complaints
arising from contracts between the subdivision developer and the lot buyer or those aimed at
compelling the subdivision developer to comply with its contractual and statutory obligations to make
the subdivision a better place to live in.

Notably, in Antipolo Realty Corporation v. National Housing Authority,[17] one of the issues raised by
the homeowners was the failure of Antipolo Realty to develop the subdivision in accordance with its
undertakings under the contract to sell. Such undertakings include providing the subdivision with
concrete curbs and gutters, underground drainage system, asphalt paved roads, independent water
system, electrical installation with concrete posts, landscaping and concrete sidewalks, developed
park or amphitheater and 24~hour security guard service. The Court held that the complaint filed by
the homeowners was within the jurisdiction of the NHA.

Similarly, in Alcasid v. Court of Appeals,[18] the Court ruled that the HLURB, not the RTC, has
jurisdiction over the complaint of lot buyers for specific performance of alleged contractual and
statutory obligations of the defendants, to wit, the execution of contracts of sale in favor of the
plaintiffs and the introduction in the disputed property of the necessary facilities such as asphalting
and street lights.

In the case at bar, petitioners complaint is for specific performance to enforce their rights as
purchasers of subdivision lots as regards rights of way, water, open spaces, road and perimeter wall
repairs, and security. Indisputably then, the HLURB has jurisdiction over the complaint.

The fact that respondent is under receivership does not divest the HLURB of that jurisdiction. A
receiver is a person appointed by the court, or in this instance, by a quasi~judicial administrative
agency, in behalf of all the parties for the purpose of preserving and conserving the property and
preventing its possible destruction or dissipation, if it were left in the possession of any of the
parties.[19] It is the duty of the receiver to administer the assets of the receivership estate; and in the
management and disposition of the property committed to his possession, he acts in a fiduciary
capacity and with impartiality towards all interested persons.[20] The appointment of a receiver does
not dissolve a corporation, nor does it interfere with the exercise of its corporate rights. [21] In this case
where there appears to be no restraints imposed upon respondent as it undergoes rehabilitation
receivership,[22] respondent continues to exist as a corporation and hence, continues or should
continue to perform its contractual and statutory responsibilities to petitioners as homeowners.

Receivership is aimed at the preservation of, and at making more secure, existing rights; it cannot be
used as an instrument for the destruction of those rights.[23]

No violation of the SEC order suspending payments to creditors would result as far as petitioners
complaint before the HLURB is concerned. To reiterate, what petitioners seek to enforce are
respondents obligations as a subdivision developer. Such claims are basically not pecuniary in nature
although it could incidentally involve monetary considerations. All that petitioners claims entail is the
exercise of proper subdivision management on the part of the SEC~appointed Board of Receivers
towards the end that homeowners shall enjoy the ideal community living that respondent portrayed
they would have when they bought real estate from it.

Neither may petitioners be considered as having "claims" against respondent within the context of the
following proviso of Section 6 (c) of P.D. No. 902~A, as amended by P.D. Nos. 1653, 1758 and 1799,
to warrant suspension of the HLURB proceedings:
 Receivership 14
[U]pon appointment of a management committee, rehabilitation receiver, board or body, pursuant
to this Decree, all actions for claims against corporations, partnerships or associations under
management or receivership pending before any court, tribunal, board or body shall be suspended
accordingly. (Italics supplied.)

In Finasia Investments and Finance Corporation v. Court of Appeals,[24] this Court defined and
explained the term "claim" in Section 6 (c) of P.D. No. 902~A, as amended, as follows:

We agree with the public respondent that the word "claim" as used in Sec. 6 (c) of P.D. 902~A, as
amended, refers to debts or demands of a pecuniary nature. It means "the assertion of a right
to have money paid. It is used in special proceedings like those before administrative court, on
insolvency." (Emphasis supplied.)

Hence, in Finasia Investments, the Court held that a civil case to nullify a special power of attorney
because the principals signature was forged should not be suspended upon the appointment of a
receiver of the mortgagee to whom a person mortgaged the property owned by such principal. The
Court ruled that the cause of action in that civil case "does not consist of demand for payment of debt
or enforcement of pecuniary liability." It added:

It has nothing to do with the purpose of Section 6 (c) of P.D. 902~A, as amended, which is to
prevent a creditor from obtaining an advantage or preference over another with respect to action
against corporation, partnership, association under management or receivership and to protect
and preserve the rights of party litigants as well as the interest of the investing public or creditors.
Moreover, a final verdict on the question of whether the special power of attorney in question is a
forgery or not will not amount to any preference or advantage to Castro who was not shown to be
a creditor of FINASIA.[25]

In this case, under the complaint for specific performance before the HLURB, petitioners do not aim to
enforce a pecuniary demand. Their claim for reimbursement should be viewed in the light of
respondents alleged failure to observe its statutory and contractual obligations to provide petitioners a
"decent human settlement" and "ample opportunities for improving their quality of life." [26] The HLURB,
not the SEC, is equipped with the expertise to deal with that matter.

On the other hand, the jurisdiction of the SEC is defined by P.D. No. 902~A, as amended, as follows:

SEC. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange
Commission over corporations, partnerships and other forms of associations registered with it as
expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction
to hear and decide cases involving:

(a) Devices or schemes employed by or any act of the board of directors, business associates, its
officers or partners, amounting to fraud and misrepresentation which may be detrimental to the
interest of the public and/or of the stockholders, partners, members of associations or
organizations registered with the Commission;
(b) Controversies arising out of intra~corporate or partnership relations, between and among
stockholders, members of associates; between any or all of them and the corporation,
partnership or association of which they are stockholders, members, or associates, respectively;
and between such corporation, partnership or association and the State insofar as it concerns
their individual franchise or right to exist as such entity; [and]
(c) Controversies in the election or appointments of directors, trustees, officers, or managers of
such corporation, partnerships or associations.

For the SEC to acquire jurisdiction over any controversy under these provisions, two elements must
be considered: (1) the status or relationship of the parties; and (2) the nature of the question that is
 Receivership 15
[27]
the subject of their controversy. The first element requires that the controversy must arise "out of
intra~corporate or partnership relations between and among stockholders, members or associates;
between any or all of them and the corporation, partnership or association of which they are
stockholders, members or associates, respectively; and between such corporation, partnership or
association and the State in so far as it concerns their individual franchises." [28] Petitioners are not
stockholders, members or associates of respondent. They are lot buyers and now homeowners in the
subdivision developed by the respondent.

The second element requires that the dispute among the parties be intrinsically connected with the
regulation or the internal affairs of the corporation, partnership or association.[29] The controversy in
this case is remotely related to the "regulation" of respondent corporation or to respondents "internal
affairs."

It should be stressed that the main concern in this case is the issue of jurisdiction over petitioners
complaint against respondent for specific performance. P.D. No. 902~A, as amended, defines the
jurisdiction of the SEC; while P.D. No. 957, as amended, delineates that of the HLURB. These two
quasi~judicial agencies exercise functions that are distinct from each other. The SEC has authority
over the operation of all kinds of corporations, partnerships or associations with the end in view of
protecting the interests of the investing public and creditors. On the other hand, the HLURB has
jurisdiction over matters relating to observance of laws governing corporations engaged in the specific
business of development of subdivisions and condominiums. The HLURB and the SEC being
bestowed with distinct powers and functions, the exercise of those functions by one shall not abate
the performance by the other of its own functions. As respondent puts it, "there is no contradiction
between P.D. No. 902~A and P.D. No. 957."[30]

What complicated the jurisdictional issue in this case is the fact that petitioners are primarily praying
for the retention of respondents obligations under the Memorandum of Agreement that Receiver
Orendain had entered into with them but which the present Board of Receivers had revoked.

In Figueroa v. SEC,[31] this Court has declared that the power to overrule or revoke the previous acts
of the management or Board of Directors of the entity under receivership is within a receivers
authority, as provided for by Section 6 (d) (2) of P.D. No. 902~A. Indeed, when the acts of a previous
receiver or management committee prove disadvantageous or inimical to the rehabilitation of a
distressed corporation, the succeeding receiver or management committee may abrogate or cast
aside such acts. However, that prerogative is not absolute. It should be exercised upon due
consideration of all pertinent and relevant laws when public interest and welfare are involved. The
business of developing subdivisions and corporations being imbued with public interest and welfare,
any question arising from the exercise of that prerogative should be brought to the proper agency that
has technical know~how on the matter.

P.D. No. 957 was promulgated to encompass all questions regarding subdivisions and condominiums.
It is aimed at providing for an appropriate government agency, the HLURB, to which all parties
aggrieved in the implementation of its provisions and the enforcement of contractual rights with
respect to said category of real estate may take recourse. Nonetheless, the powers of the HLURB
may not in any way be deemed as in derogation of the SECs authority. P.D. Nos. 902~A and 957, as
far as both are concerned with corporations, are laws in pari materia. P.D. No. 902~A relates to all
corporations, while P.D. No. 957 pertains to corporations engaged in the particular business of
developing subdivisions and condominiums. Although the provisions of these decrees on the issue of
jurisdiction appear to collide when a corporation engaged in developing subdivisions and
condominiums is under receivership, the same decrees should be construed as far as reasonably
possible to be in harmony with each other to attain the purpose of an expressed national policy.[32]

Hence, the HLURB should take jurisdiction over petitioners complaint because it pertains to matters
within the HLURBs competence and expertise. The HLURB should view the issue of whether the
Board of Receivers correctly revoked the agreements entered into between the previous receiver and
 Receivership 16
the petitioners from the perspective of the homeowners interests, which P.D. No. 957 aims to protect.
Whatever monetary awards the HLURB may impose upon respondent are incidental matters that
should be addressed to the sound discretion of the Board of Receivers charged with maintaining the
viability of respondent as a corporation. Any controversy that may arise in that regard should then be
addressed to the SEC.

It is worth noting that the parties agreed at the 1 July 1998 hearing that should the HLURB establish
and grant petitioners claims, the same should be referred to the SEC. Thus, the proceedings at the
HLURB should not be suspended notwithstanding that respondent is still under receivership. The
TRO that this Court has issued should accordingly continue until such time as the HLURB shall have
resolved the controversy. The present members of the Board of Receivers should be reminded of
their duties and responsibilities as an impartial Board that should serve the interests of both the
homeowners and respondents creditors. Their interests, financial or otherwise, as members of
respondents Board of Directors should be circumscribed by judicious and unbiased performance of
their duties and responsibilities as members of the Board of Receivers. Otherwise, respondents full
rehabilitation may face a bleak future. Both parties should never give full rein to acts that could prove
detrimental to the interests of the homeowners and eventually jeopardize respondents rehabilitation.

WHEREFORE, the questioned Decision of the Court of Appeals is hereby REVERSED and SET
ASIDE. This case is REMANDED to the Housing and Land Use Regulatory Board for continuation of
proceedings with dispatch as the Securities and Exchange Commission proceeds with the
rehabilitation of respondent BF Homes, Inc., through the Board of Receivers. Thereafter, any and all
monetary claims duly established before the HLURB shall be referred to the Board of Receivers for
proper disposition and thereafter, to the SEC, if necessary. No costs.

SO ORDERED.
 Receivership 17
EN BANC

G.R. No. L-14890 September 30, 1963

CONRADO ALCANTARA, petitioner, vs. HON. MACAPANTON ABBAS, Presiding Judge, Branch II of the Court of
First Instance of Davao and MARTIN T. BACARON, respondents.
Conrado Alcantara in his own behalf as petitioner.
Desquitado and Acurantes for respondent Martin T. Bacaron.
BENGZON, C.J.:

The Case. Petitioner seeks to annul the order of the respondent judge removing him as receiver,
and appointing Martin T. Bacaron in his place.

Material Facts. In March, 1957, Alcantara sued Bacaron partly to foreclose the chattel mortgage
executed by the latter on a caterpillar tractor with its accessories (Civil Case No. 2282 of Davao).
Pursuant to a clause in the mortgage contract, the Davao court designated Alcantara as receiver of
the tractor; and he duly qualified as such. Thereafter, with the court's approval, he leased the machine
to Serapio Sablada. Upon the expiration of the lease, and after Sablada's failure to return the
machine, said court at the instance of Alcantara,1 declared Sablada to be in contempt of court and
fined him in the amount of P100.00 on October 6, 1958.

Meanwhile, on October 2, 1958, alleging that Alcantara had neglected his duties as receiver, because
he did not get the tractor, Bacaron petitioned the court to relieve such receiver, and to appoint him
(Bacaron) as the receiver instead.2 Opposing the petition, Alcantara made the following
manifestations, in a pleading to the court dated November 26, 1958.

2. That in fact the herein plaintiff-receiver has exerted all efforts to secure the possession of the
tractor will question, and has come to court time and again to compel the lessee, Serapio Sablada,
to deliver the tractor to the receiver, but it seems that even Honorable Court is at mercy of said
Serapio Sablada;.

3. That in fact, until and unless the tractor is delivered to the receiver as ordered by the Honorable
Court, the said Serapio Sablada is liable to the Honorable Court for continues contempt in as much
as the subject of the contempt is non-compliance with the order of the Honorable Court; ....

6. That in the view of the attendant circumstances related to the tractor in this case, it most
respectfully prayed that the plaintiff-receiver be immediately authorized to file a case of replevin
with damages against the person of Serapio Sablada, holding his surety bond liable therefor, if
proper, as most legal and expedient procedure to retake the tractor in question. .

However, despite the above representations, the respondent dent judge of the Davao court, in an
order dated December 10, 1958, relieved Alcantara and appointed Bacaron as receiver of the tractor,
without bond, with authority to receive the sum of P2,000.00 in Alcantara's hands as rentals of the
tractor, and to the end the same for repairs if necessary.

His motion to reconsider having been denied, Alcantara filed with this Court the instant special civil
action. And his request a preliminary injunction was issued to restrain enforcement of His Honor's
aforesaid order of December 10, 1958.

The questions are: (a) the propriety of Alcantara's removal; and (b) the legality of Bacaron's
appointment and qualifications.

Discussion. It appears that acting on the complaint of Alcantara on September 11, 1958, 3 the court
required Sablada under pain of contempt, to deliver the tractor on or before September 30, 1958, at
the junction of the Davao Penal Colony Road and the National Road going to Agusan in Panabo,
 Receivership 18
Agusan. It also appears that upon Sablada's failure, he was declared to be contempt on October 6,
1958, and fined P100.00 as previously stated. The order further said that upon failure to pay in one
week, he will be imprisoned for ten days. Lastly, the order directed Alcantara to take steps to recover
possession of the tractor, with the admonition that "should he fail to take possession of the tractor
within fifteen (15) days after notice thereof, he may relieved as receiver and the defendant who is
willing to be the receiver may be appointed in his place".1awphl.nt

Then on December 10, 1958, the court overlooking or overruling Alcantara's pleading issued the
order now in question, which for convenience is quoted below:.

It appearing that plaintiff-receiver failed to take steps to take possession of the tractor leased to
Sablada and bring it to Davao City as directed in the Order of the Court dated October 6, 1958, the
plaintiff is hereby relieved as receiver, and in his stead the defendant is hereby appointed as
receiver without bond. Upon his qualification as such receiver, the defendant is hereby authorized
to receive from the plaintiff the sum of P2,000.00 representing the rentals received by the latter
from Sablada for the use of the tractor, and to spend said sum or so much thereof as may be
necessary for bringing the tractor to Davao City and for payment of necessary repairs; and the
plaintiff is hereby ordered to turn over to the defendant the said sum of P2,000.00 on demand.

It is not clear what steps the court had in mind when it declared that "plaintiff-receiver failed to take
steps to take possession of the tractor leased to Sablada". It could have meant that Alcantara failed to
take the tractor directly from the hands of Sablada from the place where it was, without resorting to
official help. If the court meant as it must have meant that Alcantara failed to exhaust judicial
remedies to compel Sablada to comply with the order to place the tractor at the "junction" previously
mentioned, then it fell into error, because Alcantara had in effect, suggested that Sablada be held in
"continuous contempt" (Annex J) i.e., imprisoned until he placed the tractor at the "junction"; and the
court instead of acting accordingly under Rule 64, sec. 74 held Alcantara to be negligent, and removed
him.

In this connection, it should be observed that in his aforesaid pleading of November 26, 1958,
Alcantara even asked for permission to sue Sablada for replevin.

If it was error to remove Alcantara, a clearer error occurred when Bacaron the defendant was
appointed, as receiver without bond, over the objection of Alcantara the plaintiff. The general rule is
that neither to a litigation should be appointed receiver without the other's consent 5 because "a
receiver ought to be an indifferent person between the parties"6 and "should be impartial and
disinterested"7. Note that Bacaron was the defendant, and his personal interest would conflict with his
duties to the court and the plaintiff.8 Furthermore, under the Rules of Court, the receiver must file a
bond; and yet Bacaron was exempted from such obligation. The effect of the whole proceeding was to
discharge the receiver ship at the request of the defendant, without so much a bond contrary to
sec. 4, Rule 61, of the Rules of Court.9

Conclusion. Such mistakes causing prejudice to petitioner, call for interference with that discretion
which usually vests in trial courts in the matter of receivership Consequently, the order of December
10, 1958, should be, and is hereby annulled. Costs against respondent Bacaron. So ordered.
 Receivership 19
SECOND DIVISION G.R. No. L-28601 March 18, 1983
ENRIQUE ABRIGO, petitioner, vs. THE HON. JUDGE UNION C. KAYANAN, COURT OF FIRST INSTANCE OF
QUEZON, NINTH JUDICIAL DISTRICT, BRANCH IV, ANTONIA ABAS, HERMOGENES, MERCEDES, MARIA,
ARSENIA, PURIFICACION, ESTELITA, JOSE, LUISA AND SERGIO, ALL SURNAMED ABRIGO, respondents.
Quijano & Arroyo for petitioner.
De Mesa & De Mesa for respondents.
ABAD SANTOS, J.:

Petition to annul and set aside several orders of the respondent judge on the ground that they were
issued with grave abuse of discretion.

In Civil Case No. 178-G (later designated as No. 07) of the defunct Court of First Instance of Quezon,
the plaintiffs sought the partition of seven (7) parcels of land under a claim of co-ownership with the
defendants. The plaintiffs claimed that except for one-half of the fifth parcel (e), two of the defendants,
Leon and Enrique Abrigo, were in possession of the lands. The defendants put up the defense of
ownership; they claimed ownership by hereditary title by virtue of an alleged duly approved Amended
Project of Partition in the Testate Estate of Nazario Abrigo.

One of the lands sought to be partitioned is described in the Amended Complaint as follows:

a A parcel of coconut and pasture land, with its improvements. Bounded on the NORTH, by
Public land; on the SOUTH, by the Piris River and Public Land; and on the WEST, by the
Macalawan River; containing an area of 802 hectares, more or less; covered by Tax Declaration
No. 416, and assessed at P15,450.00.

As stated above, this parcel, including several others, are said to be in the possession of Leon and
Enrique Abrigo.

On October 21, 1967, the plaintiffs filed an Urgent Motion for the appointment of a receiver to
administer parcel (a) on the ground that numerous squatters had invaded the property to the plaintiffs'
great damage and prejudice. The motion was set for hearing on November 3, 1967, but counsel for
the defendants asked by telegram that the hearing be re-set to another date because of another court
engagement. The motion was heard as scheduled in the absence of defendants' counsel and
pursuant thereto then Judge Union C. Kayanan issued an Order on the same day with the following
dispositive portion:

WHEREFORE, Atty. Pedro S. Nantes, Acting Clerk of Court, Branch IV, CFI, Quezon City is
hereby appointed as receiver and before entering his duties he must be sworn to perform them
faithfully, without the necessity of a bond being a public officer, who is expected to faithfully
discharge the duties of a receiver in these actions and obey the orders of the Court accordingly.
He is allowed compensation of P30.00 per day of actual service plus incidental expenses to be
charged as costs against the losing party. Atty. Nantes shall follow strictly his general powers
pursuant to Section 7, Rule 59 of the New Rules of Court. (Rollo, p. 50.)

On November 8, 1967, the respondent judge, motu propio, issued the following Order:

In order to insure the absolute and complete protection of the interest of party litigants, aside from
Atty. Pedro S. Nantes who has been appointed as Receiver herein, Mr. Benjamin M. Santiago is
hereby appointed as Assistant to the Receiver, to stay as general filed overseer in all the
properties in question, subject to the control and supervision of the Receiver, to perform all the
necessary rights and obligation heretofore to be assigned by the Receiver, to make periodic
reports of his activities and to do all other acts pursuant to the general powers of a receiver under
Section 7, Rule 59 of the New Rules of Court. As soon as Mr. Santiago shall have taken his oath,
he shall assume the duties of his office with a reasonable compensation, plus incidental expenses
 Receivership 20
at the discretion of the receiver, but which compensation shall not exceed P30.00 a day for both of
actual service. (Rollo, p, 52,)

It was only on November 15, 1967, that the defendants filed an Opposition to the Motion for the
appointment of a receiver but by then the two Order above-quoted had been issued. Accordingly, the
defendants filed a - Motion to have the Orders of November 3 and 8, 1967, reconsidered but the
Motion was denied by the respondent judge in his Order of December 15, 1967. The Order, however,
provided that "to forestall mismanagement, the Receiver is required to put up a surety bond in the
amount of Five Thousand Pesos (P5,000.00), the expenses of which shall be borne by plaintiffs ..."
(Rollo, p. 69.)

On December 19, 1967, the respondent judge issued an Order which reads as follows:

The attention of the Court was called by Atty. Pedro S. Nantes and Mr. Benjamin Santiago,
Receiver and Assistant, respectively, to the effect that only party litigants Antonia Abas and others
represented by the De Mesa Law Office, deposited the sum of P200.00 to defray their expenses
during the ocular inspection of the properties in question from November 20 to 27, 1967, but that
defendants Crisanta Manaluan and others represented by Atty. Manuel R. Edao of Lucena City,
and party litigants Enrique Abrigo and others represented by Quejano and Arroyo Law Office, thru
Atty. Cesar Parelejo, 320 Natividad Bldg., Escolta, Manila have not paid their corresponding
shares. It appears that the Receiver and his Assistant spent the actual amount of P275.05
excluding their compensation at P30.00 a day for eight (8) days or a total of P240.00. It will thus
appear that the valid claim of the Receiver and his Assistant would total to P515.05 so that party
litigants represented by Attys. Edao and Parelejo are directed to deposit the balance of P315.05
or P157.53 each, within ten (10) days upon receipt hereof. The parties are requested to study the
recommendations of the Receiver and his Assistant, copies of which have been furnished them
accordingly, and if they so desire they should make representations with any banking institution to
mortgage the properties in order to raise a reasonable amount to cover the expenses of cultivation
and improvement of the property to the end that it will become a going concern pending litigation.
(Rollo, pp. 70-71.)

On January 9, 1968, one of the defendants who is the petitioner herein, filed a Motion for the
reconsideration of the Order of December 15, 1967 he claimed that there was no legal basis for the
appointment of a receiver under the facts of the case; and alternatively, he offered to post a bond so
that the receiver be discharged. The Motion was denied in an Order dated January 15, 1968.

On January 14, 1968, the respondent judged issued another Order which reads in part:

Acting on the oral manifestation of counsel for the plaintiffs to the effect that six (6) of his
witnesses came from Quezon City and three (3) others from Buenavista, Quezon and that they
have been staying in Lucena City since the other day and as a result incurred expenses totalling
P300.00, for which he requests that they be reimbursed of said expenses, and finding the same to
be well-taken the defendant Enrique Abrigo is hereby ordered to reimburse to the plaintiffs, thru
counsel, the sum of P300.00 on or before the next hearing of this case. (Rollo, pp. 79-80.)

Petitioner Enrique Abrigo who is one of the defendants in the action for partition now seeks the
annulment and setting aside of the foregoing orders on the ground that they were issued with grave
abuse of discretion.

After the private respondents had filed their answer to the petition, the case was set for hearing but
while counsel for the petitioner appeared there was no appearance for the private respondents. The
parties were required to file memoranda and reply memoranda. The petitioner filed a memorandum
but the private respondents did not despite an extension granted to them. Hence, the case was
submitted for decision the indifference of the private respondents notwithstanding.
 Receivership 21
The petition is highly impressed with merit.

The respondent judge committed grave abuse of discretion in connection with the appointment of a
receiver and he can be faulted on the following counts:

1. The instant case is similar to Paranete vs. Tan, 87 Phil. 678 (1950) so that what was there said can
well apply to the actuations of the respondent judge, to wit:

On January 16, 1950, Felix Alcaras, Fructuosa Vasquez, Maxima Vasquez and Norberta Vasquez
filed a case in the Court of First Instance of Rizal for the recovery of five parcels of land against
Agustina Paranete and six other co-defendants, (Civil Case No. 1020). On January 28, 1950,
plaintiffs filed a petition for a writ of preliminary injunction for the purpose of ousting the defendants
from the lands in litigation and of having themselves placed in possession thereof. The petition
was heard ex parte and as a result the respondent judged issued the writ of injunction requested.
On February 28, 1950, the defendants moved for the reconsideration of the order granting the writ,
to which plaintiffs objected, and after due hearing, at which both parties appeared with their
respective counsel, the respondent judge reconsidered his order, but required the defendants to
render an accounting of the harvest for the year 1949, as well as all future harvests, and if the
harvest had already been sold, to deposit the proceeds of the sale with the clerk of court, allowing
the plaintiffs or their representative to be present during each harvest. This order was issued on
March 4, 1950. Defendants again filed a motion for the reconsideration of this order, but it was
denied, hence the petition under consideration.

The question to be determined is whether or not the respondent judge exceeded his jurisdiction in
issuing his order of March 4, 1950, under the terms and conditions set forth above.

We hold that the respondent judge has acted in excess of his jurisdiction when he issued the order
above adverted to. That order, in effect, made the clerk of court a sort of a receiver charged with
the duty of receiving the proceeds of sale and the harvest of every year during the pendency of
the case with the disadvantage that the clerk of court has not filed any bond to guarantee the
faithful discharge of his duties as depositary; and considering that in actions involving title to real
property, the appointment of a receiver cannot be entertained because its effect would be to take
the property out of the possession of the defendant, except in extreme cases when there is clear
proof of its necessity to save the plaintiff from grave and irremediable loss or damage, it is evident
that the action of the respondent judge is unwarranted and unfair to the defendants. (Mendoza vs.
Arellano, 36 Phil. 59; Agonoy vs, Ruiz, 11 Phil. 204; Aquino vs. Angeles David, 77 Phil. 1087;
Ylarde vs. Enriquez, 78 Phil. 527; Arcega vs. Pecson, 44 Off. Gaz., (No. 12), 4884, 78 Phil. 743;
De la Cruz vs. Guinto, 45 Off. Gaz., pp. 1309, 131 1; 79 Phil. 304.). (At pp. 680-681.)

2. The reason for the appointment of the receiver was the fact that the land had been entered by
numerous squatters. But a receiver who is also burdened with his duties as Clerk of Court cannot be
in a better position than the actual possessors in dealing with the squatters. As the petitioner has
pointed out:

The appointed receiver does not acquire any advantage from the owners and/or present possessors,
nor is he in a better position in order to protect the respective interest of the herein parties for he has
to apply as are the present possessors deprived of their possession, for the same remedies and relief
normally afforded to an aggrieved property owner, under our legal system. A receiver is not endowed
with extra-legal power to take the law in his hands with a view to quell and disband the squatters short
of taking legal action; nor is he conferred with a magic wand not possessed by herein party-litigants
as property owners. On the contrary, the receivership placed the parties at a disadvantage. He stands
between the squatters and owner. possessors, so much so that any action of the owner-possessor
against the squatters will have to pass through the receiver. Whereas, if the status quo were left
undisturbed, the owner-possessor, whose holding over the parcel of land under litigation is actually
 Receivership 22
occupied and entered by squatters can take direct legal action as he has the legal right to proceed
against the intruders. (Rollo p. 187.)

3. The respondent judge should at least have accepted the bond offered by the petitioner. Rule 59,
Sec. 4 stipulates that "the receiver (may be) discharged when the party opposing the appointment
files a bond executed to the applicant in an amount to be fixed by the court, to the effect that such
party will pay the applicant all damages he may suffer by reason of the acts, omissions, or other
matters specified in the application as ground for such appointment." In Lacson vs. Hodges, 80 Phil.
216 (1948), this Court said:

El nombramiento, por tanto, de depositario debe hacerse solamente cuando ya no hay otro medio
para garantizar los derechos del demandante; pero ofrecida la fianza, ya deja de tenerj
justificacion el deposito, especialmente cuando, como en el caso presente, la responsabilidad del
demandado ya esta determinada, aunque sujeta desde luego a las resultas de la apelacion

El Honorable Juez recurrido ha abusado de su discrecion al no permitir al demandado que

prestase fianza de con la Regla 61, articulo 4. (At p. 220.)

Anent the order of the respondent judge that the petitioner should reimburse to the plaintiffs the sum
of P300.00 for the reason stated in the Order dated January 14, 1968, it suffices to state that it was
issued without notice and in the absence of the party affected and consequently void for lack of
jurisdiction in its issuance.

WHEREFORE, the petition is granted; the Orders issued by the respondent judge mentioned above
are hereby annulled and set aside. Costs against the private respondents.

SO ORDERED.
 Receivership 23
EN BANC G.R. No. L-17176 October 30, 1962
ROSENDO RALLA and PABLO RALLA, petitioners, vs. HON. MATEO L. ALCASID as Judge of the Court of First
Instance of Albay and PEDRO RALLA, respondents.
Madrid Law Office for petitioners.
Victorino P. Abrera for respondents.
BENGZON, C.J.:

Statement. The instant petition for certiorari seeks to annul the orders of respondent judge
appointing a receiver and refusing a bond to dissolve the receivership.

Seeking to recover physical possession of the parcels of land involved in the receivership, petitioner
submit alternative prayers: (a) modification of the order appointing the receiver so that the
receivership would only embrace certain parcels of land, and exclude others; or (b) discharge of
receiver upon submission of a counter-bond of P20,000.00; or (c) increase of the receiver's bond from
P10,000.00 to P20,000.00.

Facts. On January 5, 1960, in the Court of First Instance of Albay, Pedro Ralla filed against his
father Rosendo Ralla and his brother Pablo Ralla, an action for partition involving 212 parcels of land
allegedly valued P270,000.00. The complaint after making proper allegations, also prayed for the
appointment of a receiver.

Pablo Ralla, in his answer, asserted exclusive ownership over a number of those parcels; Rosendo
Ralla's ownership of other parcels and ownership of the rest by the conjugal estate of Rosendo and
his deceased wife, Paz Escarilla. Rosendo Ralla equally asserted exclusive ownership over a number
of the said parcels Pablo Ralla's exclusive ownership of those claimed by the latter; and conjugal
ownership of the rest of the parcels by Rosendo with his deceased wife, Paz Escarilla.

After hearing the prayer for appointment of a receive the respondent court issued an order appointing
a receiver of all the parcels of land enumerated in the inventory submitted by Pedro Ralla, except
certain parcels of land. The Municipal Treasurer of Ligao, Albay, Vicente Real, qualified as receiver
with a bond of P10,000.00.

A motion for reconsideration was denied. While such motion was pending, above petitioners
presented an omnibus "Motion to be allowed to file a bond for the discharge of the receiver and/or
Motion to resolve the motion for reconsideration of the order dated July 21, 1959 and motion to
require accounting and increase of bond, if discharge of the receiver is not allowed."

However, respondent court entered an order denying the motion to reconsider the appointment of a
receiver, and the motion to discharge the receivership upon the filing of a bond.

Issue. On the principal contention that the respondent judge exceeded his jurisdiction or abused
his discretion when he decreed the receivership and appointed a receiver in a partition proceeding,
petitioners submit the instant petition for certiorari.

Discussion. They rest their case on the following propositions: (1) in a partition proceeding,
generally, no administration is necessary and the appointment of a receiver is irregular; (2) the court
appoints a receiver only after full consideration of the facts and circumstances of each particular case;
(3) the consequences and effects thereof should be well taken into account, with a view to avoiding
irreparable, injustice or injury to the other parties who are entitled to as much consideration as those
seeking it; (4) in an action involving title to real property, as in the above case, where the appointment
of a receiver to take charge of the property has the effect of taking the property out of the possession
of the above petitioners, application therefor should only be granted after a clear showing of the
necessity thereof; (5) in this case, however, there is no such necessity, in as much as the rights of
above respondent may be protected by notice of lis pendens or by the filing of a bond by petitioners to
 Receivership 24
compensate for the damage sought to be prevented. Above petitioners had offered a counterbond of
P20,000.00 twice the bond submitted by the receiver; (6) as the pleadings submitted in the lower
court show the presence of adverse claim of title to a greater portion of the lands in question, the
constitution of the receivership although protective of the rights of herein respondent Pedro Ralla
would, on the other hand, cause disproportionate injury to the rights of herein petitioners.

Respondents have met the above propositions with arguments equally impressive, and these are, in
brief, our conclusions:

A receiver of real or personal property, which is the subject of the action, may be appointed by the
court where it appears from the pleadings, and/or such other proof as the judge may require, that the
party applying for such appointment has an actual interest in it and that such property is in danger of
being lost, removed or materially injured.1 The appointment is also proper whenever it appears to be
the most convenient and feasible means of preserving, or administering the property in litigation.2

The appointment of a receiver depends principally upon the sound discretion of the court; it is not a
matter absolute right. The facts and circumstances, of each particular case determine the soundness
of the exercise such discretion.3 Among the consequences and effects considered by the courts
before appointing a receiver are: (a) whether or not the injury resulting from such a appointment would
probably be greater than the injury suing if the status quo is left undisturbed;4 and (b) whether or not
the appointment will imperil the interests of other whose rights deserve as much a consideration from
the court as those of the person requesting for receivership.5

In the case at bar, the respondent court ordered the a appointment of a receiver after hearing and
presentation of evidence by both parties. Eleven sessions were had follows that purpose, numerous
documentary proofs were submitted. The facts and circumstances upon which the order was based
which this Court is not prepared to revise at this time are as follows:

(1) It was not established to the satisfaction of the Court with few exceptions, that the properties
subject matter of the complaint for partition are exclusive properties of the surviving spouse, the
defendant Rosendo Ralla most of the properties were either acquired or titled during the marriage
and in fact in the various certificates of title Exhibits "11" to "114" the one half (1/2) undivided
portion is registered in the name of Rosendo Ralla married to Paz Escarilla, the deceased mother
of the plaintiff (Pedro Ralla).
(2) The defendants have been disposing, conveying an transferring properties and converting them
from the character of conjugal properties left by the deceased Paz Escarilla to the exclusive
properties of the defendants with the avowed purpose and intention of depriving plaintiff of his
right, interest, title and participation thereto and to the great damage and prejudice of the plaintiff,
as evidenced by the documents of conveyance executed by the defendant Rosendo Ralla,
marked Exhibits "C", "D", and "E";
(3) The products, rentals, income, assets and funds collected and received by the defendants, since
the death of said late Paz Escarilla on December 27, 1957, up to the present, from the properties,
are in danger of being lost or removed;
(4) The relations of the plaintiff and defendants who are co-owners are strained, and no satisfactory
arrangement for administration of the property can be made and accomplished in spite of the
efforts exerted by this Court to prevail upon the defendants toward this and on equitable basis;
(5) The actuation of the defendants, the majority co-owners, results in serious prejudice to the
minority, the plaintiff, and that the plaintiff has not been given the benefit or accounting of the
products and income therefrom, and has not been given whatsoever his corresponding and due
share thereof;
(6) The plaintiff is being prevented by the defendants from entering the lands in question and from
even interfering and aiding in the administration thereof.

In this atmosphere of strained relationship between the parties, of unsatisfactory arrangement for the
administration of the properties involved, not to mention the conveyance by petitioners of some of the
 Receivership 25
conjugal properties left by the deceased spouse of Rosendo Ralla, Paz Escarilla it was not entirely
improper to direct the appointment of a receiver. All the circumstances found by the lower court
apparently justify the constitution of the receivership of the lands in question. The requirements of law
have been more than satisfied.6 Even under petitioners' theory that the granting therefor should only
be "after a clear showing of the necessity thereof", the instant appointment of a receiver appears to be
proper.

The case of Leonides Chunaco, et al. vs. Hon. Perfecto Quicho, et al.,7 similar in nature to the present
case, was resolved by this Court along the same lines with our conclusion in this litigation. There we
held:

While in a partition proceeding it is generally unnecessary for the court to appoint a receiver,
however, (as held in the case of Tuason vs. Concepcion, 54 Phil. 408) where the relationship
among the co-owners are strained, and no satisfactory arrangement for administration can be
accomplished, the appointment of a receiver is not an abuse of discretion.

This ruling has been confirmed by Art. 492, par. 3 of the New Civil Code authorizing the
appointment of an a administrator (which term would include a receiver) in cases where the action
of the majority co-owners results in serious prejudice to the minority.

Should there be no majority, or should the resolution the majority be seriously prejudicial to those
interested in the property owned in common, the court, at the instance of a interested party, shall
order such measures as it may deem proper, including the appointment of an administrator.

We likewise sustain the lower court's order fixing the receiver's bond at only P10,000.00 because the records
show, the gross income of the estate under receivership land, can not be lost amounted quarterly to
more or less P7,000.00 only.8 Considering that the parties have been withdrawing their corresponding share
from the net income, it is easy to understand that the bond already filed sufficiently answers for any cash
remaining in the receiver's hands.
Judgment. Without further discussing the other points raised by petitioners, we find no inclination to hold
that the respondent court abused its discretion in the issuance of its questioned orders.
Petition denied with costs against petitioners