Rule 59 Receivership-Cases Pelaez

Rule 59 – Receivership
1. Commodities Storage & Ice Plant Corporation vs. CA
G.R. No. 125008; June 19, 1997
Facts:
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. The loan was secured by a mortgage over the ice plant and
the land on which it stands. Petitioners 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 and it registered the certificate of sale on September 22,
1993. Petitioner spouses filed a case against respondent bank for reformation of the loan
agreement, annulment of the foreclosure sale, and damages. The RTC dismissed the complaint
for failure to pay the docket fees. On October 28, 1994, another civil case was filed by
petitioners for damages, accounting and fixing of redemption period. An Urgent Petition for
Receivership was also filed on November 16, 1994. They prayed for the appointment to save the
ice plant, conduct its affairs and safeguard its records during the pendency of the case.
The RTC assigned petitioners nominee as receiver. On appeal, the order was annulled
and set aside. 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": 1) Danger to
the lives, health and peace of mind of the inhabitants living near the Sta. Maria Ice Plant; 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; 3) The rapid reduction of the Ice
Plant into a scrap heap because of evident incompetence, neglect and vandalism.
Issue:
Whether or not the assignment of a receiver is justified.
Ruling:
No. A petition for receivership under Section 1 (b) of Rule 59 requires that the property
or fund which is the subject of the action must be in danger of loss, removal or material injury
which necessitates protection or preservation. The guiding principle is the prevention of
imminent danger to the property. If an action by its nature, does not require such protection or
reservation, said remedy cannot be applied for and granted.
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. 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. This statement has not been disputed by petitioners
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2. Vivares vs. Reyes
G.R. No. 155408; February 13, 2008
Facts:
Severino Reyes was the father of respondent Jose Reyes and Torcuato Reyes. Upon the
death of Severino, respondent and Torcuato came upon their inheritance consisting of several
properties. They had an oral partition of the properties and separately appropriated to themselves
said properties. Torcuato died with a last will and testament. Petitioner Vivares was the
designated executor of Torcuatos last will and testament, while petitioner Ignaling was declared
a lawful heir of Torcuato.
Believing that Torcuato did not receive his full share in the estate of Severino, petitioners
instituted an action for Partition and Recovery of Real Estate before the Camiguin RTC. With the
approval of the trial court, the parties agreed that properties from the estate of Severino, which
were already transferred in the names of respondent and Torcuato prior to the latters death on
May 12, 1992, shall be excluded from litigation. In short, what was being contested were the
properties that were still in the name of Severino.

The disputed properties were then annotated with notices of lis pendens upon the instance
of petitioners. Petitioners filed a Motion to Place Properties in Litigation under Receivership
before the trial court alleging that to their prejudice respondent had, without prior court approval
and without petitioners knowledge, sold to third parties and transferred in his own name several
common properties. They further claimed that respondent was and is in possession of the
common properties in the estate of Severino, and exclusively enjoying the fruits and income of
said properties and without rendering an accounting on them and turning over the share
pertaining to Torcuato. Thus, petitioners prayed to place the entire disputed estate of Severino
under receivership. The trial court issued a Resolution, denying respondents motions to
discharge receiver and cancel the notice of lis pendens .

The CA rendered the assailed Decision, sustaining respondents position and granted
relief. In reversing the trial court, the CA reasoned that the court a quo failed to observe the well
settled rule that allows the grant of the harsh judicial remedy of receivership only in extreme
cases when there is an imperative necessity for it. The CA thus held that it is proper that the
appointed receiver be discharged on the filing of a counterbond pursuant to Sec. 3, Rule 59 of the
1997 Revised Rules on Civil Procedure.

Issue:
Whether or not Receivership is proper.
Ruling:
Petitioners miserably failed to adduce clear, convincing, and hard evidence to show the
alleged fraud in the transfers and the antedating of said transfers. Moreover, respondent has
adduced documentary proof that Torcuato himself similarly conveyed several lots in the estate of
Severino based on the oral partition between the siblings. To lend credence to the transfers
executed by Torcuato but distrust to those made by respondent would be highly inequitable as
correctly opined by the court a quo.

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Indeed, receivership is a harsh remedy to be granted only in extreme situations. As early
as 1914, the Court already enunciated the doctrinal pronouncement in Velasco & Co. v.
Gochuico & Co. that courts must use utmost circumspection in allowing receivership, thus:

The power to appoint a receiver is a delicate one and should be exercised with extreme
caution and only under circumstances requiring summary relief or where the court is satisfied
that there is imminent danger of loss, lest the injury thereby caused be far greater than the injury
sought to be averted. The court should consider the consequences to all of the parties and the
power should not be exercised when it is likely to produce irreparable injustice or injury to
private rights or the facts demonstrate that the appointment will injure the interests of others
whose rights are entitled to as much consideration from the court as those of the complainant.

3. Citibank vs CA
GR No. 61508; March 17, 1999

Facts:
Douglas Anama obtained a loan from Citibank executing a promissory note in a sum of
P480,000 payable in sixty monthly installments. To secure payment of loan it mortgage its
various machineries and equipment. Private respondent failed to pay the note that leads petitioner
to file collection for the unpaid balance of P408,820.
Defendant denied the material averments of the complaint. The trial court issued an order
of Replevin over the machineries and equipment. Thereafter it issued an Order granting the
Motion for Alias Writ of Seizure.
Respondent herein filed with Court of Appeals a Petition for Certiorari and Prohibition
which it granted holding that the Rules of Court on Replevin and Receivership have not been
complied with in that (1) there was no Affidavit of Merit (2) the bond was insufficient and (3)
there was noncompliance of a receivers bond and oath of office. Therefrom Citibank presents
petition for certiorari for grave abuse of discretion.

Issue:
Whether or not the petitioner did not comply with Section 5, Rule 59 of the Rules of
Court.

Ruling:
The petitioner did not comply with Section 5, Rule 59 of the Rules of Court. However, it
should be noted that under the old Rules of Court which was still in effect at the time this case
was still at trial stage, a bond for the appointment was not generally required of the applicant
except when application was ex parte. Furthermore, as stipulated in the chattel mortgage
contract, petitioner as mortgagee is entitled to the appointment of a receiver without a bond.

However, the Court of Appeals was right in finding a defect in such assumption in that
the requirement of taking an oath has not been complied. Sec. 5. Oath and bond of receiver. –
Before entering upon his duties, the receiver must be sworn to perform them faithfully….

Consequently, the trial court erred in allowing the petitioner to assume receivership over
the machine shop without requiring the appointed receiver to take an oath.
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4. Traders Royal vs. IAC
G.R. No. 111357; June 17, 1997
Facts:
In G.R. No. 63855, the Court ruled that Spouses Jose and Salvacion Tayengco was the lawful
owners of the properties under receivership, and G.R. No. 60076, where we affirmed the validity
of the appointment of petitioner Traders Royal Bank (TRB) as receiver pendente lite.
In view of these rulings, the receivership proceeding was duly terminated. Thus, TRB rendered
its final accounting of the funds under receivership wherein it retained the amount of
P219,016.24 as its receiver's fee, instead of turning over the entire fund to the Tayengcos. The
Regional Trial Court of Iloilo, Branch 5, in an order dated July 5, 1988, approved the final
accounting submitted by TRB, including the deduction of its fee from the fund under
receivership.
The Tayengcos assailed said order before the Court of Appeals, contending that TRB's
compensation should have been charged against the losing party and not from the funds under
receivership. The Court of Appeals ruled that TRB cannot deduct its fee from the funds under its
receivership since this must be shouldered by the losing party or equally apportioned among the
partieslitigants.
Issue:
Whether or not TRB's compensation can be charged solely against the funds under its
receivership
Held:
No. Section 8, Rule 59 of the Rules of Court, however, explicitly provides for the manner
in which it shall be paid for its services, to wit:
"SEC. 8. Termination of receivership; compensation of receiver. Whenever the court, of
its own motion or on that of either party, shall determine that the necessity for a receiver
no longer exists, it shall, after due notice to all interested parties and hearing, settle the
accounts of the receiver, direct the delivery of the funds and other property in his hands
to the persons adjudged entitled to receive them, and order the discharge of the receiver
from further duty as such. The court shall allow the receiver such reasonable
compensation as the circumstances of the case warrant, to be taxed as costs against the
defeated party, or apportioned, as justice requires." (Underscoring supplied)
It is, therefore, clear that when the services of a receiver who has been properly appointed
terminates, his compensation is to be charged against the defeated party, or the prevailing litigant
may be made to share the expense, as justice requires. Consequently, the trial court's order
approving TRB's compensation to be charged solely against the funds under its receivership is
without legal justification; hence, it was correctly reversed by the Court of Appeals.
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5. Nat'l Investment and Develoment Corp vs Judge Aquino
G.R. No. L34192 June 30, 1988
Facts:
Batjak, (Basic Agricultural Traders Jointly Administered Kasamahan) is a Filipino
American corporation organized under the laws of the Philippines, primarily engaged in the
manufacture of coconut oil and copra cake for export. In 1965, Batjak's financial condition
deteriorated to the point of bankruptcy. As of that year, Batjak's indebtedness to some private
banks and to the Philippine National Bank (PNB) amounted to P11,915,000.00
As security for the payment of its obligations and advances against shipments, Batjak
mortgaged its three (3) cocoprocessing oil mills in Sasa, Davao City, Jimenez, Misamis
Occidental and Tanauan, Leyte to Manila Banking Corporation (Manila Bank), Republic Bank
(RB), and Philippine Commercial and Industrial Bank (PCIB), respectively. Batjak applied to
PNB for additional financial assistance for additional operating capital to place the mills at their
optimum capacity and maximum efficiency and to settle, pay or otherwise liquidate pending
financial obligations with the different private banks.
A Financial Agreement was submitted by PNB to Batjak for acceptance. The terms and
conditions of the Financial Agreement were duly accepted by Batjak. Under said Agreement,
NIDC would, as it actually did, invest P6,722,500.00 in Batjak in the form of preferred shares of
stock convertible within five (5) years at par into common stock, to liquidate Batjak's obligations
to Republic Bank (RB), Manufacturers Bank and Trust Company (MBTC) and Philippine
Commercial & Industrial Bank (PCIB), and the balance of the investment was to be applied to
Batjak's past due account of P 5 million with the PNB. Upon receiving payment, RB, PCIB, and
MBTC released in favor of PNB the first and any mortgages they held on the properties of
Batjak. As agreed, PNB also granted Batjak an exportadvance line of P 3 million, later increased
to P 5million, and a standby letter of credit facility in the amount of P5,850,000.00. As of 29
September 1966, the financial accomodation that had been extended by PNB to Batjak amounted
to a total of P 14,207,859.51.
As likewise agreed, Batjak executed a first mortgage in favor of PNB on all its properties
located at Jimenez, Misamis Occidental and Tanauan, Leyte. Batjak's plant in Sasa, Davao City
was mortgaged to the Manila Bank which, in 1967, instituted foreclosure proceedings against the
same but which were aborted by the payment by Batjak of the sum of P2,400,000.00 to Manila
Bank, and which amount was advanced to Batjak by NIDC, a whollyowned subsidiary of PNB.
To secure the advance, Batjak mortgaged the oil mill in Sasa, Davao City to NIDC.
Next, a Voting Trust Agreement was executed on 26 October 1965 in favor of NIDC by the
stockholders representing 60% of the outstanding paidup and subscribed shares of Batjak. This
agreement was for a period of five (5) years and, upon its expiration, was to be subject to
negotiation between the parties.
In July 1967, forced by the insolvency of Batjak, PNB instituted extrajudicial foreclosure
proceedings against the oil mills of Batjak located in Tanauan, Leyte and Jimenez, Misamis
Occidental. The properties were sold to PNB as the highest bidder. One year thereafter, or in
September 1968, final Certificates of Sale were issued by the provincial sheriffs of Leyte and
Misamis Occidental for the two (2) oil mills in Tanauan and Jimenez in favor of PNB, after
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Batjak failed to exercise its right to redeem the foreclosed properties within the allowable one
year period of redemption. Subsequently, PNB transferred the ownership of the two (2) oil mills
to NIDC which, as aforestated, was a whollyowned PNB subsidiary.
As regards the oil mill located at Sasa, Davao City, the same was similarly foreclosed
extrajudicial by NIDC. It was sold to NIDC as the highest bidder. After Batjak failed to redeem
the property, NIDC consolidated its ownership of the oil mill.
Three (3) years thereafter, or on 31 August 1970, Batjak represented by majority

stockholders, through Atty. Amado Duran, legal counsel of private respondent Batjak, wrote a
letter to NIDC inquiring if the latter was still interested in negotiating the renewal of the Voting
Trust Agreement. 9On 22 September 1970, legal counsel of Batjak wrote another letter to NIDC
informing the latter that Batjak would now safely assume that NIDC was no longer interested in
the renewal of said Voting Trust Agreement and, in view thereof, requested for the turnover and
transfer of all Batjak assets, properties, management and operations.
On 23 September 1970, legal counsel of Batjak sent stin another letter to NIDC, this time asking
for a complete accounting of the assets, properties, management and operation of Batjak,
preparatory to their turnover and transfer to the stockholders of Batjak.
NIDC replied, confirming the fact that it had no intention whatsoever to comply with the
demands of Batjak.
On 24 February 1971, Batjak filed before the Court of First Instance of Rizal a special
civil action for mandamus with preliminary injunction against herein petitioners docketed as
Civil Case No. 14452. 13
On 14 April 1971, in said Civil Case No. 14452, Batjak filed an urgent ex parte motion
for the issuance of a writ of preliminary prohibitory and mandatory injunction. On the same day,
respondent judge issued a restraining order "prohibiting defendants (herein petitioners) from
removing any record, books, commercial papers or cash, and leasing, renting out, disposing of or
otherwise transferring any or all of the properties, machineries, raw materials and finished
products and/or byproducts thereof now in the factory sites of the three (3) modem coco milling
plants situated in Jimenez, Misamis Occidental, Sasa, Davao City, and Tanauan, Leyte."
The order of 14 April 1971 was subsequently amended by respondent judge upon an ex
parte motion of private respondent Batjak so as to include the premises of NIDC in Makati and
those of PNB in Manila, as among the premises which private respondent Batjak was authorized
to enter in order to conduct an inventory.
On 24 April 1971, NIDC and PNB filed an opposition to the ex parte application for the
issuance of a writ of preliminary prohibitory and mandatory injunction and a motion to set aside
restraining order. Before the court could act on the said motion, private respondent Batjak filed
on 3 May 1971 a petition for receivership as alternative to writ of preliminary prohibitory and
mandatory injunction. This was opposed by PNB and NIDC . On 8 May 1971., NIDC and PNB
filed a motion to dismiss Batjak's complaints.
RTC : On 16 August 1971, respondent judge issued the now assailed order denying petitioners'
motion to dismiss and appointing a set of three (3) receivers. NIDC moved for reconsideration
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of the aforesaid order. On 30 September 1971, respondent judge denied the motion for
reconsideration. Hence, these two (2) petitions, which have been consolidated, as they involve a
resolution of the same issues. In their manifestation with motion for early decision, dated 25
August 1986, private respondent, Batjak contends that the NIDC has already been abolished or
scrapped by its parent company, the PNB.
Issue:
Whether or not the receivership filed by Batjak should be given due course.
Ruling:
No. A receiver of real or personal property, which is the subject of the action, may be
appointed by the court when it appears from the pleadings that the party applying for the
appointment of receiver has an interest in said property. 25The right, interest, or claim in property,
to entitle one to a receiver over it, must be present and existing.
As borne out by the records of the case, PNB acquired ownership of two (2) of the three (3) oil
mills by virtue of mortgage foreclosure sales. NIDC acquired ownership of the third oil mill also
under a mortgage foreclosure sale. Certificates of title were issued to PNB and NIDC after the
lapse of the one (1) year redemption period. Subsequently, PNB transferred the ownership of the
two (2) oil mills to NIDC. There can be no doubt, therefore, that NIDC not only has possession
of, but also title to the three (3) oil mills formerly owned by Batjak. The interest of Batjak over
the three (3) oil mills ceased upon the issuance of the certificates of title to PNB and NIDC
confirming their ownership over the said properties. More so, where Batjak does not impugn the
validity of the foreclosure proceedings. Neither Batjak nor its stockholders have instituted any
legal proceedings to annul the mortgage foreclosure aforementioned.
Batjak premises its right to the possession of the three (3) off mills on the Voting Trust
Agreement, claiming that under said agreement, NIDC was constituted as trustee of the assets,
management and operations of Batjak, that due to the expiration of the Voting Trust Agreement,
on 26 October 1970, NIDC should tum over the assets of the three (3) oil mills to Batjak.
It is clear that what was assigned to NIDC was the power to vote the shares of stock of
the stockholders of Batjak, representing 60% of Batjak's outstanding shares, and who are the
signatories to the agreement. The power entrusted to NIDC also included the authority to execute
any agreement or document that may be necessary to express the consent or assent to any matter,
by the stockholders. Nowhere in the said provisions or in any other part of the Voting Trust
Agreement is mention made of any transfer or assignment to NIDC of Batjak's assets, operations,
and management. NIDC was constituted as trustee only of the voting rights of 60% of the paid
up and outstanding shares of stock in Batjak. This is confirmed by paragraph No. 9 of the Voting
Trust Agreement.
What was to be returned by NIDC as trustee to Batjak's stockholders, upon the

termination of the agreement, are the certificates of shares of stock belonging to Batjak's
stockholders, not the properties or assets of Batjak itself which were never delivered, in the first
place to NIDC, under the terms of said Voting Trust Agreement.
In any event, a voting trust transfers only voting or other rights pertaining to the shares subject of
the agreement or control over the stock.
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The acquisition by PNBNIDC of the properties in question was not made or effected
under the capacity of a trustee but as a foreclosing creditor for the purpose of recovering on a just
and valid obligation of Batjak.
Moreover, the prevention of imminent danger to property is the guiding principle that
governs courts in the matter of appointing receivers. Under Sec. 1 (b), Rule 59 of the Rules of
Court, it is necessary in granting the relief of receivership that the property or fired be in danger
of loss, removal or material injury.
In the case at bar, Batjak in its petition for receivership, or in its amended petition
therefor, failed to present any evidence, to establish the requisite condition that the property is in
danger of being lost, removed or materially injured unless a receiver is appointed to guard and
preserve it.
6. Aguilar vs Manila Banking Corp
G.R. No. 157911; September 19, 2006
Facts:
Spouses Aguilar availed a loan from respondent Manila Banking Corporation, with their
property as collateral. When petitioners failed to pay their loan obligation, the property was
extrajudicially foreclosed in favor of respondent bank. However, both parties entered in a
Compromise Agreement agreeing that petitioner will pay the balance of his debt in installment
basis, and in case of default, shall vacate the premises immediately.
When petitioner still failed to pay his debt, respondent bank requested for the issuance of
a Writ of Execution directing petitioner to immediately vacate the premises.
When petitioners defaulted, respondent bank requested for the issuance of a writ of
Execution directing the petitioner to vacate the premises and turned it over to respondent bank.
The lower court rendered a Decision granting the issuance of a writ of execution. Petitioner prays
for the delay of the execution of the writ contending that their obligation was already novated by
a Letter from respondent’s Statutory Receiver.
Petitioner further contends that respondent's receivership is a supervening event that

rendered execution of the Decision impossible, if not unjust; that since a bank under receivership
is relieved of its obligation to pay interest on the deposits of its depositors, they (petitioners) are
also not obliged to pay interest on a loan due it and interest shall commence again only after
respondent's resumption of banking operations.
Respondent averred that the letter merely serves as an accommodation of the petitioner’s
request for a liberal mode of payment of their account but still failed to comply, hence this prayer
for the issuance of the writ of execution.
Issue:
Whether or not petitioner is no longer obliged to pay their loan obligations when
respondent bank was placed under receivership.
Ruling:
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No. It would be absurd to adopt petitioners’ position that they are not obliged to pay
interest on their obligation when respondent was placed under receivership. When a bank is
placed under receivership, it would only not be able to do new business, that is, to grant new
loans or to accept new deposits. However, the receiver of the bank is in fact obliged to collect
debts owing to the bank, which debts form part of the assets of the bank. Thus, petitioners’
obligation to pay interest subsists even when respondent was placed under receivership. The
respondent’s receivership is an extraneous circumstance and has no effect on petitioners’
obligation.
8. Larrobis vs Phil. Veterans Bank
G.R. No. 135706; October 1, 2004
Facts:
Petitioner spouses contracted a monetary loan with herein respondent bank secured by a
REM executed on their lot. Respondent bank then went bankrupt and was placed under
receivership/liquidation by the Central Bank. Sometime after, respondent bank sent a demand
letter for the amount of the insurance premiums advanced by it over the mortgaged property of
petitioners. More than 14 years from the time the loan became due and demandable, respondent
bank moved for the extrajudicial foreclosure of the mortgaged property and was sold to it as
being the lone bidder. Petitioners moved to declare the foreclosure null and void contending that
the respondent bank being placed under receivership did not interrupt the running of the
prescriptive period. RTC ruled in favor of respondents.
Issues:
(1) Whether or not foreclosure of mortgage is included in the acts prohibited during
receivership/liquidation proceedings.
(2) Whether or not the period within which the respondent bank was placed under
receivership and liquidation proceedings interrupted the running of the prescriptive
period in bringing actions.
Rulings:
(1) No. While it is true that foreclosure falls within the broad definition of “doing business,”
it should not be considered included, however, in the acts prohibited whenever banks are
“prohibited from doing business” during receivership and liquidation proceedings. This is
consistent with the purpose of receivership proceedings, i.e., to receive collectibles and
preserve the assets of the bank in substitution of its former management, and prevent the
dissipation of its assets to the detriment of the creditors of the bank.
There is also no truth to respondent’s claim that it could not continue doing business
from the time it was under receivership. As correctly pointed out by petitioner,
respondent was even able to send petitioners a demand letter, through Francisco Go, for
the insurance premiums advanced by respondent bank over the mortgaged property of
petitioners. How it could send a demand letter on unpaid insurance premiums and not
foreclose the mortgage during the time it was “prohibited from doing business” was not
adequately explained by respondent.
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(2) No. A close scrutiny of the Provident case shows that the Court arrived at said
conclusion, which is an exception to the general rule, due to the peculiar circumstances
of Provident Savings Bank at the time. The Superintendent of Banks, which was
instructed to take charge of the assets of the bank in the name of the Monetary Board,
had no power to act as a receiver of the bank and carry out the obligations specified in
Sec. 29 of the Central Bank Act.
In this case, it is not disputed that Philippine Veterans Bank was placed under
receivership by the Monetary Board of the Central Bank pursuant to Section 29 of the
Central Bank Act on insolvency of banks. Unlike Provident Savings Bank, there was no
legal prohibition imposed upon herein respondent to deter its receiver and liquidator from
performing their obligations under the law. Thus, the ruling laid down in the Provident
case cannot apply in the case at bar.
9. Koruga vs. Arcenas
G.R. No. 168332; June 19, 2009
Facts:
Ana Maria A. Koruga filed two petitions against the Board of Directors of Banco Filipino
and the Members of the Monetary Board of the Bangko Sentral ng Pilipinas for violation of
Sections 31 to 34 of the Corporation Code which prohibit selfdealing and conflicts of interest of
directors and officers. Arcenas, filed their Answer raising the trial court's lack of jurisdiction to
take cognizance of the case. In an Order, the trial court denied the Motion.
Arcenas, et al. moved for reconsideration but the RTC denied the motion. This prompted
Arcenas, et al. to file before the CA a Petition for Certiorari and Prohibition under Rule 65 of the
Rules of Court with a prayer for the issuance of a writ of preliminary injunction. Thus, the CA
issued the assailed Resolution ordering the writ of preliminary injunction be issued in order not
to render ineffectual whatever final resolution this Court may render in this case. Dissatisfied,
Koruga filed this Petition for Certiorari. Koruga alleged that the CA effectively gave due course
to Arcenas’ petition when it issued a writ of preliminary injunction without factual or legal basis.
She prayed that this Court restrain the CA from implementing the writ of preliminary injunction.
In their Petition, Arcenas, asked the Court to set aside the which denied their petition,
Arcenas, anchored their prayer on the following grounds: that, in their Answer before the RTC,
alleged that there is another case involving the same parties for the same cause pending before
the Monetary Board of the BSP, and this constituted forumshopping; and that jurisdiction over
the subject matter of the case is vested by law in the BSP.
Issue:
Which body has jurisdiction over the Koruga Complaint, the RTC or the BSP?
Ruling:
The BSP that has jurisdiction over the case. It is clear that the acts complained of pertain
to the conduct of Banco Filipino's banking business. A bank, as defined in the General Banking
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Law, refers to an entity engaged in the lending of funds obtained in the form of deposits. Banks
are affected with public interest because they receive funds from the general public in the form
of deposits. The BSP, is authorized to administer the monetary, banking, and credit system of the
Philippines. The law vests in the BSP the supervision over operations and activities of banks.

In this case, Koruga’s allegations call for the examination of the allegedly questionable
loans. These are not ordinary intracorporate matters, they involve banking activities which are
by law regulated and supervised by the BSP. Consequently, it is not the Interim Rules of
Procedure on IntraCorporate Controversies, or Rule 59 of the Rules of Civil Procedure on
Receivership, that would apply to this case. Instead, Sections 29 and 30 of the New Central
Bank Act should be followed, viz.:
Section 29. Appointment of Conservator. Whenever, on the basis of a report submitted
by the appropriate supervising or examining department, the Monetary Board finds that
a bank or a quasibank is in a state of continuing inability or unwillingness to maintain a
condition of liquidity deemed adequate to protect the interest of depositors and creditors,
the Monetary Board may appoint a conservator with such powers as the Monetary Board
shall deem necessary to take charge of the assets, liabilities, and the management
thereof, reorganize the management, collect all monies and debts due said institution,
and exercise all powers necessary to restore its viability. The conservator shall report
and be responsible to the Monetary Board and shall have the power to overrule or
revoke the actions of the previous management and board of directors of the bank or
quasibank.
x x x
The Monetary Board shall terminate the conservatorship when it is satisfied that the
institution can continue to operate on its own and the conservatorship is no longer necessary. The
conservatorship shall likewise be terminated should the Monetary Board, on the basis of the
report of the conservator or of its own findings, determine that the continuance in business of the
institution would involve probable loss to its depositors or creditors, in which case the provisions
of Section 30 shall apply.
Section 30. Proceedings in Receivership and Liquidation. Whenever, upon report of
the head of the supervising or examining department, the Monetary Board finds that a
bank or quasibank:
(a) is unable to pay its liabilities as they become due in the ordinary course of business:
Provided, That this shall not include inability to pay caused by extraordinary demands
induced by financial panic in the banking community;
(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its
liabilities; or
(c) cannot continue in business without involving probable losses to its depositors or
creditors; or
(d) has willfully violated a cease and desist order under Section 37 that has become final,
involving acts or transactions which amount to fraud or a dissipation of the assets of the
institution; in which cases, the Monetary Board may summarily and without need for
prior hearing forbid the institution from doing business in the Philippines and designate
the Philippine Deposit Insurance Corporation as receiver of the banking institution.
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x x x
The designation of a conservator under Section 29 of this Act or the appointment of a
receiver under this section shall be vested exclusively with the Monetary Board. Furthermore,
the designation of a conservator is not a precondition to the designation of a receiver. Section 30
proviedes "appointment of a receiver under this section shall be vested exclusively with the
Monetary Board." The term "exclusively" connotes that only the Monetary Board can resolve the
issue of whether a bank is to be placed under receivership and, upon an affirmative finding, it
also has authority to appoint a receiver. This is further affirmed by the fact that the law allows
the Monetary Board to take action "summarily and without need for prior hearing."
10. Tantano vs EspinaCaboverde
G.R. No. 203585; July 29, 2013
Facts:
Petitioners Mila Caboverde Tantano and Roseller Caboverde are children of respondent
Dominalda EspinaCaboverde and siblings of other respondents namely: Eve CaboverdeYu, Fe
CaboverdeLabrador, and Josephine E. Caboverde. Petitioners and their siblings, Ferdinand,
Jeanny and Laluna, are the registered owners and in possession of certain parcels of land, having
purchased them from their parents, Maximo and Dominalda Caboverde.
The present controversy started when, respondents Eve and Fe filed a complaint where
they prayed for the annulment of the Deed of Sale transferring the subject lots from their parents
Maximo and Dominalda in favor of petitioners Mila and Roseller. In their verified Answer, the
defendants therein, alleged the validity and due execution of the contested Deed of Sale.

As encouraged by the RTC, the parties executed a Partial Settlement Agreement where
they fixed the sharing of the uncontroverted properties among themselves.
Before the RTC could act on the PSA, Dominalda, filed a Motion to Intervene. Where
she alleged that unless a receiver is appointed by the court, the income or produce from these
properties is in grave danger and entirely spent solely by Mila and some of her selected kin. The
trial court issued a Resolution granting Dominalda’s application for receivership.
Petitioners thereafter moved for reconsideration raising the arguments that the concerns
raised by Dominalda in her Application for Receivership are not grounds for placing the
properties in the hands of a receiver. By Resolution, the trial court denied the motion.
Undaunted, petitioners filed an Urgent Precautionary Motion reiterating what they stated
in their motion for reconsideration to which the RTC denied. Petitioners’ Motion for
Reconsideration was also denied by the CA. Hence, the instant petition, petitioners effectively
praying that the approval of respondent Dominalda’s application for receivership and necessarily
the concomitant appointment of receivers be revoked.
Issue:
(1) Whether the CA committed grave abuse of discretion in sustaining the appointment of a
receiver?
134
(2) Whether the CA committed grave abuse of discretion in upholding that the receivership
bond is not required prior to appointment?
Held:
(1) Yes, receivership is a harsh remedy to be granted with utmost circumspection and only in
extreme situations. The doctrinal pronouncement in Velasco & Co. v. Gochico & Co is
instructive: The power to appoint a receiver is a delicate one and should be exercised
with extreme caution and only under circumstances requiring summary relief or where
the court is satisfied that there is imminent danger of loss, lest the injury thereby caused
be far greater than the injury sought to be averted. The court should consider the
consequences to all of the parties and the power should not be exercised when it is likely
to produce irreparable injustice or injury to private rights or the facts demonstrate that
the appointment will injure the interests of others whose rights are entitled to as much
consideration from the court as those of the complainant.

Sec. 1(d) or Rule 59 is couched in general terms and broad in scope, encompassing
instances not covered by the other grounds enumerated under the said section. However,
in granting applications for receivership on the basis of this section, courts must remain
mindful of the basic principle that receivership may be granted only when the
circumstances so demand, either because the property sought to be placed in the hands of
a receiver is in danger of being lost or because they run the risk of being impaired, and
that being a drastic and harsh remedy, receivership must be granted only when there is a
clear showing of necessity for it in order to save the plaintiff from grave and immediate
loss or damage.
Before appointing a receiver, courts should consider: (1) whether or not the injury
resulting from such appointment would probably be greater than the injury ensuing if the
status quo is left undisturbed; and (2) whether or not the appointment will imperil the
interest of others whose rights deserve as much a consideration from the court as those of
the person requesting for receivership.
After carefully considering the foregoing principles and the facts and circumstances of
this case, We find that the grant of Dominalda’s Application for Receivership has no leg
to stand on for the following reasons:
First, Dominalda’s alleged need for income to defray her medical expenses and support is
not a valid justification for the appointment of a receiver. The approval of an application
for receivership merely on this ground is an arbitrary exercise of discretion because
financial need are not found in Sec. 1 of Rule 59 which prescribes specific grounds for
granting receivership. Second, there is no clear showing that the disputed properties are
in danger of being lost or materially impaired thus placing them under receivership is
most convenient and feasible means to preserve them.
In the case at bar, Dominalda has not presented or alleged anything else to prove that the
disputed properties were in danger of being wasted or materially injured and that the
appointment of a receiver was the most convenient and feasible means to preserve their
integrity. Further, there is nothing in the RTC’s Resolutions that says why the disputed
135
properties might be in danger of being lost, removed or materially injured while in the
hands of the defendants a quo.
Third, placing the disputed properties under receivership is not necessary. Contrary to her
assertions, Dominalda is assured of receiving income under the PSA approved by the
RTC providing that she was entitled to receive a share of onehalf (1/2) of the net income
derived from the uncontroverted properties. Thus, it was patently erroneous for the RTC
to grant the Application for Receivership in order to ensure Dominalda of income to
support herself.
Further, Dominalda’s claim to the disputed properties and her share in the properties’
income and produce is at best speculative because the ownership of the disputed
properties is yet to be determined. Also, except for Dominalda’s claim that she has an
interest in the disputed properties, Dominalda has no relation to their produce or income.
(2) Yes, respondents insist that where there is sufficient cause to appoint a receiver, there is
no need for an applicant’s bond because under Sec. 2 of Rule 59, the very purpose of the
bond is to answer for all damages that may be sustained by a party by reason of the
appointment of a receiver in case the applicant shall have procured such appointment
without sufficient cause.
The foregoing arguments are misplaced. Sec. 2 of Rule 59 is very clear in that before
issuing the order appointing a receiver the court shall require the applicant to file a bond
executed to the party against whom the application is presented. The use of the word
"shall" denotes its mandatory nature; thus, the consent of the other party, is of no
moment. Hence, the filing of an applicant’s bond is required at all times.
On the other hand, the requirement of a receiver’s bond rests upon the discretion of the
court. Sec. 2 of Rule 59 clearly states that the court may, in its discretion, at any time
after the appointment, require an additional bond as further security for such damages.

11. Chavez vs CA
G.R. No. 174356; January 20, 2010

Facts:
Evelina G. Chavez had been staying in a remote portion of the land owned by Fidela Y.
Vargas with her family, planting coconut seedlings on the land and supervising the harvest of
coconut and palay. Fidela and Evelina agreed to divide the gross sales of all products from the
land between themselves. Since Fidela was busy with her law practice, Evelina undertook to hold
in trust for Fidela her half of the profits. However, Evelina failed to remit Fidela’s share of the
profits and refused to turn over the administration of the property despite the latter’s demand.
Consequently, Fidela filed a complaint against Evelina and her daughter, Aida C. Deles, who
was assisting her mother, for recovery of possession, rent, and damages with prayer for the
immediate appointment of a receiver before the Regional Trial Court (RTC) of Bulan, Sorsogon.
The RTC dismissed the complaint for lack of jurisdiction. Dissatisfied, Fidela appealed and filed
a motion for the appointment of a receiver with the CA. The CA granted the motion and ordained
136
receivership of the land, noting that there appeared to be a need to preserve the property and its
fruits in light of Fidela’s allegation that Evelina and Aida failed to account for her share of such
fruits.

Issue:
Whether or not granting Fidela’s application for receivership is proper.

Ruling:
No. Petition for receivership under Section 1(b), Rule 59 of the Rules of Civil Procedure
requires that the property or fund subject of the action is in danger of being lost, removed, or
materially injured, necessitating its protection or preservation. Its object is the prevention of
imminent danger to the property. If the action does not require such protection or preservation,
the remedy is not receivership.

Here Fidela’s main gripe is that Evelina and Aida deprived her of her share of the land’s
produce. She does not claim that the land or its productive capacity would disappear or be
wasted if not entrusted to a receiver. Nor does Fidela claim that the land has been materially
injured, necessitating its protection and preservation. Because receivership is a harsh remedy that
can be granted only in extreme situations, Fidela must prove a clear right to its issuance. But she
has not. Indeed, in none of the other cases she filed against Evelina and Aida has that remedy
been granted her.

Besides, the RTC dismissed Fidela’s action for lack of jurisdiction over the case, holding
that the issues it raised properly belong to the DARAB. The case before the CA is but an
offshoot of that RTC case. Given that the RTC has found that it had no jurisdiction over the case,
it would seem more prudent for the CA to first provisionally determine that the RTC had
jurisdiction before granting receivership which is but an incident of the main action.
137

Rule 59 Receivership-Cases Pelaez

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Rule 59 Receivership-Cases Pelaez

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Rule 59 – Receivership

Three (3) years thereafter, or on 31 August 1970, Batjak represented by majority

What was to be returned by NIDC as trustee to Batjak's stockholders, upon the

Petitioner further contends that respondent's receivership is a supervening event that

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