PROVISIONAL REMEDIES Rule 59: Receivership Commodities vs. CA, June 19, 1997....................................................2 Vivares vs.

Reyes, February 13, 2008................................................8 Citibank vs. CA, March 17, 1999.......................................................15 Traders Royal Bank vs. IAC, et. Al., June 17, 1997............................28

PROVISIONAL REMEDIES Rule 59: Receivership

extrajudicially foreclosed the mortgage and the ice plant was sold by public bidding on March 22, 1993. Respondent bank was the highest Commodities vs. CA, June 19, 1997 SECOND DIVISION 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. 956M-93 against respondent bank before the Regional Trial Court, G.R. No. 125008 June 19, 1997 COMMODITIES SPOUSES vs. COURT OF APPEALS, JUSTICE PEDRO A.. RAMIREZ, CHAIRMAN and FAR EAST BANK & TRUST COMPANY, respondents. STORAGE & & ICE PLANT CORPORATION, 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 PUNO, J.: In this petition for certiorari, petitioner seeks to annul and set aside the decision and resolution of the Court of Appeals 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
1

VICTOR

JOHANNAH

TRINIDAD, petitioners,

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

PROVISIONAL REMEDIES Rule 59: Receivership 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 maintainer and and who is an is ice plant contractor, receiver. installer appointed

complaint for improper venue and lack of cause of action. The dispositive portion of the decision reads: WHEREFORE, the petition for certiorari is GRANTED. Accordingly, the assailed order dated December 13, 1994 (Annex A, petition) is ANNULLED and SET ASIDE and respondent's complaint in Civil Case No. 94-72076 in the respondent court (Annexes F, petition; 4, comment), is DISMISSED. Costs against respondents except the court. SO ORDERED. Reconsideration was denied on May 23, 1996. 8 Hence, this petition. Section 1 of Rule 59 of the Revised Rules of Court provides that: Sec. 1. When and by whom receiver appointed . One or more receivers of the property, real or personal, which is the subject of the action, may be appointed by the judge of the Court of First Instance in which the action is pending, or by a Justice of the Court of Appeals or of the Supreme Court, in the following cases: (a) When the corporation has been dissolved, or is insolvent, or is in imminent danger of insolvency, or has forfeited its corporate rights; (b) When it appears from the complaint or answer, and such other proof as the judge may require, that the

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'

PROVISIONAL REMEDIES Rule 59: Receivership 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

11

right. It depends upon the sound discretion of the court based on facts and circumstances of each particular case.
12

and is

Petitioners claim that the appointment of a receiver is justified under Section 1 (b) of Rule 59. They argue that the ice plant which is the subject of the action was in danger of being lost, removed and materially injured because of the following "imminent perils": 6.1 Danger to the lives, health and peace of mind of the inhabitants living near the Sta. Maria Ice Plant; 6.2 Drastic action or sanctions that could be brought against the plaintiff by affected third persons, including workers who have claims against the plaintiff but could not be paid due to the numbing manner by which the defendant took the Sta. Maria Ice Plant; 6.3 The rapid reduction of the Ice Plant into a scrap heap because of evident incompetence, neglect and vandalism.
13

PROVISIONAL REMEDIES Rule 59: Receivership A petition for receivership under Section 1 (b) of Rule 59 requires that the property or fund which is the subject of the action must be in danger of loss, removal or material injury which necessitates protection or preservation. The guiding principle is the prevention of imminent danger to the property. If an action by its nature, does not require such protection or reservation, said remedy cannot be applied for and granted.
14

Moreover, the receiver appointed by the court appears to be a representative of petitioners. Respondent bank alleges that it was not aware
17

that

petitioners

nominated

one

Mr.

Pesquera

as

receiver.

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 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
15

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
20

injured

which

necessitates

its

protection and preservation.

In fact, at the hearing on respondent

plaintiff

from

grave

and

irremediable

loss

or

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

damage.

It is only when the circumstances so demand, either

because there is imminent danger that the property sought to be placed in the hands of a receiver be lost or because they run the risk of being impaired, endeavouring to avoid that the injury thereby caused be greater than the one sought to be avoided.
21

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. Again, we reject petitioners' contention. The motion to dismiss is anchored on improper venue, lack of cause of action and forumThe 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

PROVISIONAL REMEDIES Rule 59: Receivership 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

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

In their complaint, petitioners prayed for the following: WHEREFORE, in view of the foregoing, it is respectfully prayed that after trial on the merits judgment be rendered: 1. Ordering the Defendant to pay COMMODITIES actual and compensatory damages in the amount of PESOS: TWO MILLION FIVE HUNDRED THOUSAND and 00/100 (P2,500,000.00); 2 Ordering the Defendant to pay Plaintiffs moral damages in the amount of PESOS: TWO MILLION and 00/100 (P2,000,000.00) to compensate the Plaintiffs for the anxiety and besmirched reputation caused by the unjust actuations of the Defendant; 3. Ordering the Defendant to pay Plaintiffs nominal and exemplary damages in the amount of PESOS: FIVE HUNDRED THOUSAND and 00/100 (P500,000.00) to deter the repetition of such unjust and malicious actuations of the Defendant;

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

PROVISIONAL REMEDIES Rule 59: Receivership 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

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.

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

PROVISIONAL REMEDIES Rule 59: Receivership

properties. They had an oral partition of the properties and separately appropriated to themselves said properties. Vivares vs. Reyes, February 13, 2008 On May 12, 1992, Torcuato died with a last will and testament SECOND DIVISION G.R. No. 155408 JULIO vs. ENGR. JOSE J. REYES, respondent. DECISION VELASCO, JR., J.: The Case The kernel dispute in this petition under Rule 45 is the legality of the May 22, 2001 Resolution1 of the Camiguin Regional Trial Court (RTC), Branch 28 in Civil Case No. 517, which placed the estate of Severino Reyes under receivership. The Court of Appeals (CA) saw it differently
2

executed on January 3, 1992. In Reyes v. Court of Appeals ,3 we February 13, 2008 and MILA G. IGNALING, petitioners, affirmed the November 29, 1995 CA Decision, admitting the will for probate. Petitioner Vivares was the designated executor of Torcuatos last will and testament, while petitioner Ignaling was declared a lawful heir of Torcuato. Believing that Torcuato did not receive his full share in the estate of Severino, petitioners instituted an action for Partition and Recovery of Real Estate before the Camiguin RTC, Branch 28 entitled Julio A. Vivares, as executor of the estate of Torcuato J. Reyes and Mila R. Ignaling, as heir v. Engr. Jose J. Reyes and docketed as Civil Case No. 517. With the approval of the trial court, the parties agreed that properties from the estate of Severino, which were already transferred in the names of respondent and Torcuato prior to the latters death on May 12, 1992, shall be excluded from litigation. In short, what was being contested were the properties that were still in the name of Severino. On November 24, 1997, for the purpose of collating the common properties that were disputed, the trial court directed the formation of a three-man commission with due representation from both parties, and the third member, appointed by the trial court, shall act as chairperson. The disputed properties were then annotated with notices of lis pendens upon the instance of petitioners.

A.

VIVARES

in

CA-G.R.

SP

No.

67492its

June

18,

2002

Decision recalled the RTC directive on the appointment of the receiver, prompting Julio Vivares and Mila Ignaling to file the petition at bar to convince the Court to reinstate the receivership. The Facts Severino Reyes was the father of respondent Jose Reyes and Torcuato Reyes. Upon the death of Severino, respondent and Torcuato came upon their inheritance consisting of several

PROVISIONAL REMEDIES Rule 59: Receivership On March 15, 2000, 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. Petitioners also averred that respondent fraudulently antedated, prior to May 12, 1992, some conveyances and transfers to make it appear that these were no longer part of the estate of Severino under litigation. They further claimed that respondent was and is in possession of the common properties in the estate of Severino, and exclusively enjoying the fruits and income of said properties and without rendering an accounting on them and turning over the share pertaining to Torcuato. Thus, petitioners prayed to place the entire disputed estate of Severino under receivership. They nominated a certain Lope Salantin to be appointed as receiver. On March 23, 2000, respondent filed his Opposition to Place the Estate of Severino Reyes under Receivership, 5denying that he had fraudulently transferred any property of the estate of Severino and asserting that any transfer in his name of said properties was a result of the oral partition between him and Torcuato that enabled the latter as well to transfer several common properties in his own name. On May 24, 2000, petitioners filed their Offer of Exhibits in support of their motion for receivership. On the same date, the trial court issued an Order6 granting petitioners motion and appointed Salantin as receiver conditioned on the filing of a PhP 50,000 bond. Respondent filed a motion for reconsideration, contending that the appointment of a receiver was unduly precipitate considering that he
4

was not represented by counsel and thus was deprived of due process. On August 4, 2000, the trial court allowed respondent to present his evidence to contest petitioners grounds for the appointment of a receiver, and the trial court set the reception of respondents evidence for September 4, 2000. However, on August 24, 2000, respondent filed a motion for postponement of the September 4, 2000 scheduled hearing on the ground that he was in the United States as early as July 23, 2000 for medical examination. On September 5, 2000, the trial court denied respondents motion for postponement and reinstated its May 24, 2000 Order. On September 19, 2000, respondent filed a Manifestation with Motion to Discharge Receiver, reiterating the circumstances which prevented him from attending the September 4, 2000 hearing and praying for the discharge of the receiver upon the filing of a counterbond in an amount to be fixed by the court in accordance with Section 3, Rule 59 of the 1997 Revised Rules on Civil Procedure. On October 10, 2000, petitioners filed their undated Opposition to Motion to Discharge Receiver. Subsequently, respondent filed a Motion to Cancel Notice of Lis Pendens which was annotated on Tax Declaration (TD) No. 112 covering Lot No. 33 allegedly belonging exclusively to him. Respondent asserted in the motion that an adjacent property to Lot No. 33, particularly a portion of Lot No. 35, which is owned by a certain Elena Unchuan, was erroneously included in Lot No. 33 and, consequently, was subjected to the notice of lis pendens. Petitioners filed their Opposition to the Motion to Cancel Lis Pendens.

PROVISIONAL REMEDIES Rule 59: Receivership Consequently, on May 22, 2001, the trial court issued a Resolution, denying respondents motions to discharge receiver and cancel the notice of lis pendens in TD No. 112. Respondent seasonably filed a partial motion for reconsideration of the May 22, 2001 Resolution, attaching copies of deeds of sale executed by Torcuato covering several common properties of the estate of Severino to prove that he and Torcuato had indeed made an oral partition of the estate of their father, Severino, and thus allowing him and Torcuato to convey their respective shares in the estate of Severino to third persons. On October 19, 2001, the trial court heard respondents motion for partial reconsideration, and on the same date issued an Order denying the motion for partial reconsideration on the ground that respondent failed to raise new matters in the motion but merely reiterated the arguments raised in previous pleadings. Aggrieved, respondent filed a Petition for Certiorari before the CA, assailing the May 22, 2001 Resolution and October 19, 2001 Order of the RTC. The Ruling of the Court of Appeals On June 18, 2002, the CA rendered the assailed Decision, sustaining respondents position and granted relief, thus: WHEREFORE, premises considered, the Petition is

10

The notice of lis pendens in Tax Declaration 112, in so far as it covers the property of Elena Unchuan, is cancelled. Let this case be remanded to the court a quo for further proceedings.7 In reversing the trial court, the CA reasoned that the court a quo failed to observe the well-settled rule that allows the grant of the harsh judicial remedy of receivership only in extreme cases when there is an imperative necessity for it. The CA thus held that it is proper that the appointed receiver be discharged on the filing of a counterbond pursuant to Sec. 3, Rule 59 of the 1997 Revised Rules on Civil Procedure. Moreover, the CA ratiocinated that respondent has adequately demonstrated that the appointment of the receiver has no sufficient basis, and further held that the rights of petitioners over the properties in litigation are doubly protected through the notices of lis pendens annotated on the titles of the subject properties. In fine, the appellate court pointed out that the appointment of a receiver is a delicate one, requiring the exercise of discretion, and not an absolute right of a party but subject to the attendant facts of each case. The CA found that the trial court abused its discretion in appointing the receiver and in denying the cancellation of the notice oflis pendens on TD No. 112, insofar as it pertains to the portion owned by Unchuan. Aggrieved, petitioners in turn interposed a Motion for

hereby GRANTED. The Resolution dated 22 May 2001 of the Regional Trial Court of Camiguin, Branch 28 in Civil Case No. 517 is hereby reversed and set aside. The court-appointed receiver, Lope Salantin, is discharged upon the posting by petitioner of a counterbond in the amount of P100,000.00.

Reconsideration that was denied through the assailed September 24, 2002 CA Resolution.

PROVISIONAL REMEDIES Rule 59: Receivership Thus, this petition for review on certiorari is before us, presenting the following issues for consideration: I WHETHER OR NOT THE ANNOTATION OF A NOTICE OF LIS PENDENS PRECLUDES THE APPOINTMENT OF A RECEIVER WHEN THERE IS A NEED TO SAFEGUARD THE PROPERTIES IN LITIGATION. II WHETHER BECAUSE OR THE NOT A DULY APPOINTED OFFERS RECEIVER TO POST OF A

11

sufficient cause or reason to justify placing the disputed properties under receivership." First, petitioners asseverate that respondent alienated several common properties of Severino without court approval and without their knowledge and consent. The fraudulent transfers, they claim, were antedated prior to May 12, 1992, the date of Torcuatos death, to make it appear that these properties no longer form part of the assets of the estate under litigation in Civil Case No. 517. Petitioners position is bereft of any factual mooring. Petitioners miserably failed to adduce clear, convincing, and hard evidence to show the alleged fraud in the transfers and the antedating of said transfers. The fact that the transfers were dated prior to the demise of Torcuato on May 12, 1992 does not necessarily mean the transfers were attended by fraud. He who alleges fraud has the burden to prove it. Moreover, respondent has adduced documentary proof that Torcuato himself similarly conveyed several lots in the estate of Severino based on the oral partition between the siblings. To lend credence 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. 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:

PROPERTIES IN LITIGATION SHOULD BE DISCHARGED SIMPLY ADVERSE PARTY COUNTERBOND. III WHETHER OR NOT THE CANCELLATION OF A NOTICE OF LIS PENDENS ANNOTATED ON TAX DECLARATION NO. 112 IS CONTRARY TO LAW.8 The Courts Ruling The petition must be denied. Being closely related, we discuss the first and second issues together. Receivership not justified We sustain the CA ruling that the trial court acted arbitrarily in granting the petition for appointment of a receiver as "there was no

PROVISIONAL REMEDIES Rule 59: Receivership 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

12

Sec. 3. Denial of application or discharge of receiver. The application may be denied, or the receiver discharged, when the adverse party files a bond executed to the applicant, in an amount to be fixed by the court, to the effect that such party will pay the applicant all damages he may suffer by reason of the acts, omissions, or other matter specified in the application as ground for such appointment. The receiver may also be discharged if it is shown that his appointment was obtained without sufficient cause. Anchored on this rule, the trial court should have dispensed with the services of the receiver, more so considering that the alleged fraud put forward to justify the receivership was not at all established.

complainant.9 Petitioners cannot now impugn the oral partition entered into by Torcuato and respondent and hence cannot also assail the transfers made by respondent of the lots which were subject of said agreement, considering that Torcuato also sold properties based on said verbal arrangement. Indeed, the parties agreed that the civil action does not encompass the properties covered by the oral partition. In this factual setting, petitioners cannot convince the Court that the alleged fraudulent transfers of the lots made by respondent, which purportedly form part of his share in Severinos estate based on the partition, can provide a strong basis to grant the receivership. Second, petitioner is willing to post a counterbond in the amount to be fixed by the court based on Sec. 3, Rule 59 of the 1997 Rules of Civil Procedure, which reads:

Petitioners advance the issue that the receivership should not be recalled simply because the adverse party offers to post a counterbond. At the outset, we find that this issue was not raised before the CA and therefore proscribed by the doctrine that an issue raised for the first time on appeal and not timely raised in the proceedings in the lower court is barred by estoppel. 10 Even if we entertain the issue, the contention is nevertheless devoid of merit. The assailed CA decision supported the discharge of the receiver with several reasons including the posting of the counterbond. While the CA made a statement that the trial court should have discharged the appointed receiver on the basis of the proposed counterbond, such opinion does not jibe with the import of Sec. 3, Rule 59. The rule states that the "application may be denied or the receiver discharged." In statutory construction, the word "may" has always been construed as permissive. If the intent is to make it mandatory or ministerial for the trial court to order the recall of the receiver

PROVISIONAL REMEDIES Rule 59: Receivership upon the offer to post a counterbond, then the court should have used the word "shall." Thus, the trial court has to consider the posting of the counterbond in addition to other reasons presented by the offeror why the receivership has to be set aside. Third, since a notice of lis pendens has been annotated on the titles of the disputed properties, the rights of petitioners are amply safeguarded and preserved since "there can be no risk of losing the property or any part of it as a result of any conveyance of the land or any encumbrance that may be made thereon posterior to the filing of the notice of lis pendens."11 Once the annotation is made, any subsequent conveyance of the lot by the respondent would be subject to the outcome of the litigation since the fact that the properties are under custodia legis is made known to all and sundry by operation of law. Hence, there is no need for a receiver to look after the disputed properties. On the issue of lis pendens, petitioners argue that the mere fact that a notice of lis pendens was annotated on the titles of the disputed properties does not preclude the appointment of a receiver. It is true that the notice alone will not preclude the transfer of the property pendente lite, for the title to be issued to the transferee will merely carry the annotation that the lot is under litigation. Hence, the notice of lis pendens, by itself, may not be the "most convenient and feasible means of preserving or administering the property in litigation." However, the situation is different in the case at bar. A counterbond will also be posted by the respondent to answer for all damages petitioners may suffer by reason of any transfer of the disputed properties in the future. As a matter of fact, petitioners can also ask for the issuance of an injunctive writ to foreclose any

13

transfer, mortgage, or encumbrance on the disputed properties. These considerations, plus the finding that the appointment of the receiver was without sufficient cause, have demonstrated the vulnerability of petitioners postulation. Fourth, it is undisputed that respondent has actual possession over some of the disputed properties which are entitled to protection. Between the possessor of a subject property and the party asserting contrary rights to the properties, the former is accorded better rights. In litigation, except for exceptional and extreme cases, the possessor ought not to be deprived of possession over subject property. Article 539 of the New Civil Code provides that "every possessor has a right to be respected in his possession; and should he be disturbed therein he shall be protected in or restored to said possession by the means established by the laws and the Rules of Court." In Descallar v. Court of Appeals, we ruled that the appointment of a receiver is not proper where the rights of the parties, one of whom is in possession of the property, are still to be determined by the trial court.12 In view of the foregoing reasons, we uphold the CA ruling that the grant of the receivership was without sufficient justification nor strong basis. Anent the third issue that the cancellation of the notice of lis pendens on TD No. 112 is irregular as Lot No. 33 is one of the disputed properties in the partition case, petitioners position is correct.

PROVISIONAL REMEDIES Rule 59: Receivership The CA made a factual finding that the property of Unchuan was erroneously included in Lot No. 33, one of the disputed properties in Civil Case No. 517. It then ruled that the annotation of lis pendens should be lifted. This ruling is bereft of factual basis. The determination whether the property of Unchuan is a part of Lot No. 33 and whether that portion really belongs to Unchuan are matters to be determined by the trial court. Consequently, the notice of lis pendens on TD No. 112 stays until the final ruling on said issues is made. WHEREFORE, the petition is PARTLY GRANTED. The June 18, 2002 CA Decision in CA-G.R. SP as it No. 67492 the isAFFIRMED with MODIFICATION insofar ordered SO ORDERED. No costs.

14

cancellation of the notice of lis pendens in TD No. 112. As thus modified, the appealed CA Decision should read as follows: WHEREFORE, premises considered, the Petition is

hereby PARTLY GRANTED. The Resolution dated 22 May 2001 of the Regional Trial Court of Camiguin, Branch 28 in Civil Case No. 517 is hereby reversed and set aside. The court-appointed receiver, Lope Salantin, is discharged upon the posting by petitioner of a counterbond in the amount of PhP 100,000. The notice of lis pendens in TD No. 112, including the portion allegedly belonging to Elena Unchuan, remains valid and effective. Let this case be remanded to the court a quo for further proceedings in Civil Case No. 517.

PROVISIONAL REMEDIES Rule 59: Receivership

15

10th day of December 1972 and on the 10th of every month thereafter. The said Promissory Note stipulated further that: Citibank vs. CA, March 17, 1999 (a) the loan is subject to interest at the THIRD DIVISION rate of twelve percent (12%) per annum; (b) the promissory note and the entire amount therein stated shall become immediately due and payable without notice or demand upon (aa) default of in the any

G.R. No. 61508 March 17, 1999 Citibank, N.A. (Formerly First National City Bank), petitioner, vs. The Honorable Court of Appeals and Douglas F. Anama, respondents.

payment

installment of principal or interest at the time when PURISIMA, J.: At bar is a special civil action for certiorari with prayer for a temporary restraining order faulting the Court of Appeals
1

the same is due; (bb) any the occurrence in of the

with

change

grave abuse of discretion for nullifying the lower court's order of seizure of mortgaged properties subject of a case for sum of money and replevin. The facts leading to the institution of the case are as follows: In considering for a loan obtained from Citibank, N.A. (formerly First National City Bank), the defendant (private respondent herein) Douglas Anama executed a promissory note, dated November 10, 1972,
2

condition and affairs of the defendant, which in the opinion of the plaintiff shall increase its credit risk; (c) the defendant agrees to pay all costs, expenses, handling and insurance charges incurred in the granting of the loan;

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

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

PROVISIONAL REMEDIES Rule 59: Receivership (d) in case the services of a lawyer is made necessary for collection, defendant shall be liable for attorney's fees of at least ten percent (10%) of the total amount due.
3

16

part of the amount of the obligation secured by the mortgage. (e) In case the plaintiff institutes

proceedings for the foreclosure of the mortgage, the plaintiff shall be entitled to the appointment of a receiver without a bond. (f) In case of default, the defendant shall be liable for attorney's fees and cost of collection in the sum equal to twenty-

To secure payment of the loan, private respondent Anama also constituted a Chattel Mortgage of even date in favor of petitioner, on various machineries and equipment located at No. 1302 Epifanio delos Santos Avenue, Quezon City, under the following terms and conditions: (a) The machineries and equipment subject of the mortgage, stand as security for defendant's account.

five (25%) of the total amount of the indebtedness outstanding and unpaid.
4

On November 25, 1974, for failure and refusal of the private (b) All replacement, substitutions, respondent to pay the monthly installment due under the said promissory note since January 1974, despite repeated demands, petitioner filed a verified complaint against private respondent Anama for the collection of his unpaid balance of P405,820.52 on the said promissory note, for the delivery and possession of the chattels (c) The defendant appoints the plaintiff as his attorney-in-fact with authority to enter the premises of the defendant and take actual possession of the mortgaged chattels without any court order, to sell said property to any party. (d) All expenses in carrying into effect the stipulations therein shall be for the account of the defendant and shall form On February 20, 1975, the defendant Anama submitted his Answer with Counterclaim, denying the material averments of the complaint, and averring inter alia (1) that the remedy of replevin was improper and the writ of seizure should be vacated; (2) that he signed the covered by the Chattel Mortgage preparatory to the foreclosure thereof as provided under Section 14 of the Chattel Mortgage Law, docketed as Civil Case No. 95991 before the then Court of First Instance of Manila. additions, increases and accretions to the properties mortgaged shall also be subject to the mortgage.

PROVISIONAL REMEDIES Rule 59: Receivership promissory note for P418,000.00 without receiving from plaintiff Citibank any amount, and was even required to pay the first installment on the supposed loan in December 1974; (3) that the understanding between him and the Citibank was for the latter to release to him the entire loan applied for prior to and during the execution of his promissory note, but Citibank did not do so and, instead, delayed the release of any amount on the loan even after the execution of the promissory note thereby disrupting his timetable of plans and causing him damages; (4) that the amount released by Citibank to him up to the present was not the amount stated in the promissory note, and his alleged default in paying the installment on the loan was due to the delay in releasing the full amount of the loan as agreed upon; (5) that the macheniries and equipment described in the chattel mortgage executed by him are really worth more than P1,000,000.00 but he merely acceded to the valuation thereof by Citibank in said document because of the latter's representation that the same was necessary to speed up the granting of the loan applied for by him; (6) that the properties covered by said chattel mortgage are real properties installed in a more or less permanent nature at his (defendant's) premises in Quezon City, as admitted by Citibank in said mortgage document; (7) that the mortgage contract itself stipulated that the manner and procedure for affecting the sale or redemption of the mortgage properties, if made extrajudicial, shall be governed by Act No. 1508 and other pertinent laws which all pertain to real properties; and (8) that because of the filing of this complaint without valid grounds therefor, he suffered damages and incurred attorney's fees; the defendant, now private respondent, averred.

17

On December 2, 1974, the trial court upon proof of default of the private respondent in the payment of the said loan, issued an Order of Replevin over the macheneries and equipment covered by the Chattel Mortgage. However, despite the issuance of the said order of seizure of subject chattels, actual delivery of possession thereof to petitioner did not take place because negotiations for an amicable settlement between the parties were encouraged by the trial court. On March 24, 1975, a pre-trial conference was held and the lower court issued an order for joint management by the petitioner and the private respondent of the latter's business for ten (10) days, after which the former would appointed receiver for the said business. On April 1, 1975, the petitioner took over private respondent's business as receiver. When further proposals to settle the case amicably failed, the lower court proceeded to try the case on the merits. On January 29, 1977, petitioner presented a Motion for the Issuance of an Alias Writ of Seizure, ordering the sheriff to seize the properties involved and dispose of them in accordance with the Revised Rules of Court. The lower court then gave private respondent five (5) days to oppose the said motion and on February 22, 1977, he sent in his opposition thereto on the grounds: (1) that Citibank's P400,000 replevin bond to answer for damages was grossly inadequate because the market value of the properties involved is P1,710,000 and their replacement cost is P2,342,300.00 per the appraisal report of the Appraisal and Research Corp.; (2) that he was never in default

PROVISIONAL REMEDIES Rule 59: Receivership to justify the seizure; (3) that the Civil Case No. 18071 of the Court of First Instance, entitled Hernandes vs. Anama, et al., which, according to Citibank, supposedly increased its credit risk in the alleged obligation, had already been dismissed as against him and the case terminated with the dismissal of the complaint against the remaining defendant, First National City Bank, by the Court in its orders of January 12, 1977 and February 7, 1977; (4) that his (defendant's) supposed obligations with Citibank were fully secured and his mortgaged properties are more than sufficient to secure payment thereof; and (5) that the writ of seizure if issued would stop his business operations and contracts and expose him to lawsuits from customers, and also dislocate his employees and their families entirely dependent thereon for their livelihood. On February 28, 1977, acting on the said Motion and private respondent's opposition, the trial court issued an Order granting the Motion for Alias Writ of Seizure, ruling thus: WHEREFORE, the motion for alias writ of seizure is hereby granted. At any rate, this Order gives another opportunity for defendant and the intervenor who claims to be a part owner to file a counterbond under Sec. 60 of Rules of Court.
5

18

At any rate, as already stated, the defendant has still a remedy available which is to file a bond executed to the plaintiff in double the value of the properties as stated in the plaintiff's affidavit. The Court at this instance therefore has no authority to stop
6

or

suspended the writ of seizure already ordered.

Accordingly, by virtue of the Alias writ of Seizure, petitioner took possession of the mortgaged chattels of private respondent. As a consequence, the sheriff seized subject properties, dismantled and removed them from the premises where they were installed, delivered them to petitioner's possession on March 17, 18 and 19, 1977 and advertised them for sale at public auction scheduled on March 22, 1977. On March 21, 1977, private respondent filed with the Court of Appeals a Petition for Certiorari and Prohibition 7with Injunction to set aside and annul the questioned resolution of the trial court on the ground that they were issued "in excess of jurisdiction and with grave abuse of discretion" because of the "lack of evidence and clear cut right to possession of First National City Bank (herein petitioner)" top the machineries subject of the Chattel Mortgage. On July 30, 1982, finding that the trial court acted with grave abuse

Private respondent moved for reconsideration of the aforesaid order but the same was denied by the Resolution of March 18, 1977, to wit: In view of the foregoing, the motion for

of discretion amounting to excess of lack of jurisdiction in issuing the assailed resolutions, the Court of Appeals granted petition, holding that the provision of the Rules of Court on Replevin and Receivership have not been complied with, in that (1) there was no Affidavit of Merit accompanying the Complaint for Replevin; (2) the bond posted by Citibank was insufficient; and (3) there was non-compliance with

reconsideration is hereby denied.

PROVISIONAL REMEDIES Rule 59: Receivership the requirement of a receiver's bond and oath of office. The decretal portion of the assailed decision of the Court of Appeals, reads: WHEREFORE, the petition is granted. The questioned resolutions issues by the respondent judge in Civil Case No. 95991, dated February 28, 1977 and March 18, 1977, together with the writs and processes emanating or deriving therefrom, are hereby declare null and void ab initio. The respondent ex-officio sheriff of Quezon City and the respondent First National City Bank are hereby ordered to return all the machineries and equipment with their accessories seized, dismantled and hauled, to their original and respective places and position in the shop flooring of the petitioner's premises where these articles were, before they were dismounted, seized and hauled at their own expense. The said respondents are further ordered to cause the repair of the concrete foundations destroyed by them including the repair of the electrical wiring and facilities affected during the seizure, dismanting and hauling. The writ of preliminary injunction heretofore in effect is hereby made permanent. Costs against the private respondents. SO ORDERED
8

19

Therefrom, Citibank came to this Court via its present petition for certiorari, ascribing grave abuse of discretion to the Court of Appeals and assigning as errors, that: I THE RESPONDENT COURT ERRED IN PRACTICALLY AND IN EFFECT RENDERING JUDGMENT ON THE MERITS AGAINST THE HEREIN PETITIONER BY ORDERING THE RETURN OF THE MACHINERIES AND EQUIPMENT AND ITS ACCESSORIES TO THEIR ORIGINAL AND RESPECTIVE PLACES AND POSITIONS. II THE RESPONDENT COURT ERRED IN FINDING THAT THE COMPLAINT OF THE PETITIONER DID NOT COMPLY WITH THE PROVISIONS OF SEC. 2, RULE 60 OF THE RULES OF COURT. III THAT THE RESPONDENT COURT ERRED IN FINDING THAT THE BOND POSTED BY THE PETITIONER IS QUESTIONABLE AND/OR INSUFFICIENT. IV THE RESPONDENT COURT ERRED IN FINDING THAT THE PETITIONER DID NOT COMPLY WITH THE

PROVISIONAL REMEDIES Rule 59: Receivership PROVISIONS OF SEC. 5, RULE 59 BY FAILING TO POST A RECEIVER'S BOND. V THE RESPONDENT ERRED IN FINDING THAT THE HON. JORGE R. COQUIA ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OR LACK OF JURISDICTION IN DEALING WITH THE SITUATION. I Anent the first assigned error, petitioner contends that the Court of Appeals, by nullifying the writ of seizure issued below, in effect, rendered judgment on the merits and adjudged private respondent Anama as the person lawfully entitled to the possession of the properties subject of the replevin suit. It is theorized that the same cannot be done, as the case before the court below was yet at trial stage and lower court still had to determine whether or not private respondent was in fact in default in the payment of his obligation to petitioner Citibank, which default would warrant the seizure of subject machineries and equipment. The contention is untenable. A judgment is on the merits when it determines the rights and liabilities of the parties on the basis of the disclosed facts, irrespective of formal technical or dilatory objections, and it is not necessary that there should have been a trial.
9

20

was no finding yet of the fact of default. The decision only ruled on the propriety of the issuance of the writ of seizure by the trial court. As worded by the respondent court itself, "the main issues to be resolved are whether there was lack or excess of jurisdiction, or grave abuse of discretion, in the issuance of the orders in question, and there is no appeal nor any plain, speedy, and adequate remedy in the ordinary course of law."
10

In resolving the issue posed by the petition, the Court of Appeals limited its disposition to a determination of whether or not the assailed order of seizure was issued in accordance with law, that is, whether the provisions of the Rules of Court on delivery of personal property or replevin as a provisional remedy were followed. The Court of Appeals relied on Ruled 60 of the Rules of Court, which prescribed the procedure for the recovery of possession of personal property, which Rule, provides: Sec. 2. Affidavit and Bond. Upon applying or such order the plaintiff must show by his own affidavit or that of some other person who personally knows the facts: (a) That the plaintiff is the owner of the property claimed particularly describing it, or is entitled to the possession thereof;

The assailed decision of the

Court of Appeals did not make any adjudication on the rights and liabilities between Citibank and Douglas Anama. There

PROVISIONAL REMEDIES Rule 59: Receivership (b) That the property is wrongfully detained by the defendant, alleging the cause of detention thereof according to his best of knowledge, information and belief; (c) That it has nor been taken for a tax assessment or fine pursuant to law, or seized under an execution, or an attachment against the property of the plaintiff, or is so seized, that is exempt from such seizure; and (d) The actual value of the property. The plaintiff must also give a bond, executed to the defendant in double of the value of the property as stated in the affidavit aforementioned, for the property to the defendant of such sum as he may recover from the plaintiff in the action. The Court of Appeals did not pass upon the issue of who, as between Douglas Anama and Citibank, is entitled to the possession of subject machineries, as asserted by the latter. When it ordered the restoration of the said machineries to Douglas Anama (now the private respondent), it merely defendant to the possession of his properties, since there was a finding that the issuance of the writ was not in accordance with the specific rules of the Rules of Court. II

21

In its second assignment of errors, petitioner theorizes that the Court of Appeals erred in finding that it did not comply with Section 2, Rule 60 of the Rules of Court requiring the replevin plaintiff to attach an affidavit of merit to the compliant. Petitioner maintains that although there was no affidavit of merit accompanying its complaint, there was nonetheless substantial compliance with the said rule as all that is required to be alleged in the affidavit of merit was set forth in its verified complaint. Petitioner argues further that assuming arguendo that there was noncompliance with the affidavit of merit requirement, such defense can no longer be availed of by private respondent Anama as it was not alleged in his Answer and was only belatedly interposed in his Reply to the Petitioner's Comment on the Petitioner for Certiorari before the Court of Appeals. Petitioner is correct insofar as it contends that substantial

compliance with the affidavit requirement may be permissible. There is substantial compliance with the rule requiring that an affidavit of merit to support the complaint for replevin if the complaint itself contains a statements of every fact required to be stated in the affidavit of merit and the complaint is verified like an affidavit. On the matter of replevin, Justice Vicente Francisco's Comment on the Rules of Court, states: Although the better practice is to keep the affidavit and pleading separate, if plaintiff's pleading contains a statement of every fact which the statute requires to be shown in the affidavits, and the pleading is verified

PROVISIONAL REMEDIES Rule 59: Receivership by affidavit covering every statement therein, this will be sufficient without a separate affidavit; but in no event can the pleading supply the absence of the affidavit unless all that the affidavit is required to contain is embodied in the pleading, and the pleading is verified in the form required in the case of a separate affidavit. (77 CJS 65 cited in Francisco, Rules of Court of the Philippines, Vol. IV-A, p. 383) And similarly, in the case of an attachment which likewise requires an affidavit of merit, the Court held that the absence of an affidavit of merit is not fatal where the petition itself, which is under oath, recites the circumstances or facts constitutive of the grounds for the petition.
11

22

that subject properties were not taken by virtue of a tax assessment or fine imposed pursuant to law or seized under execution or attachment or, if they were so seized, that they are exempt from such seizure. Then too, petitioner stated the value of subject properties at a "probable value of P200,000.00, more or less". Pertinent rules require that the affidavit of merit should state the actual value of the property subject of a replevin suit and not just its probable value. Actual value (or actual market value) means "the price which an article would command in the ordinary course of business, that is to say, when offered for sale by one willing to sell, but not under compulsion to sell and purchased by another who is willing to buy, but under no obligation to purchase it".13 Petitioner alleged that the machineries and equipment involved are valued at P200,000.00 while respondent denies the same, claiming that per the appraisal report, the market value of the said properties is P1,710,000.00 and their replacement cost is P2,342,300.00. Petitioner's assertion is belied by the fact that upon taking possession of the aforesaid properties, it insured the same for P610,593.74 and P450,000.00, separately. It bears stressing that the actual value of the properties subject of a replevin is required to be in the affidavit because such actual value will be the basis of the replevin bond required to be posted by the plaintiff. Therefore, when the petitioner failed to declare the actual value of the machineries and equipment subject of the replevin suit, there was non-compliance with Section 2, Rule 60 of the Revised Rules of Court. It should be noted, however, that the private respondent interposed the defense of lack of affidavit of merit only in his Reply to the

The facts that must be set forth in the affidavit of merit are (1) that plaintiff owns the property particularly describing the same, or that he is entitled to its possession; (2) wrongful detention by defendants of said property; (3) that the property is not taken by virtue of a tax assessment or fine pursuant to law or seized under execution or attachment or, if it is so seized, that it is exempt from seizure; and the, (4) the actual value of the property.
12

But, as correctly taken note of by the Court of Appeals, petitioner's complaint does not allege all the facts that should be set forth in an affidavit of merit. Although the complaint alleges that petitioner is entitled to the possession of subject properties by virtue of the chattel mortgage executed by the private respondent, upon the latter's default on its obligation, and the defendant's alleged "wrongful detention" of the same, the said complaint does not state

PROVISIONAL REMEDIES Rule 59: Receivership Comment of Citibank on the Petition for Certiorari which respondent filed with the Court of Appeals. Section 2, Rule 9 of the Revised Rules of Court, provides: Sec. 2. Defenses and objections not pleaded deemed waived Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived; except the failure to state a cause of action which may be alleged in later pleading, . . . . This Rule has been revised and amended, as follows: Sec. 1. Defenses and objection not pleaded. Defenses and objections not pleaded in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the claim.

23

Petitioner also faults the Court of Appeals for finding that the bond posted by the petitioner is questionable and/or insufficient. It is averred that, in compliance with Section 2, Rule 60 requiring the replevin plaintiff to post a bond in double the value of the properties involved, it filed a bond in the amount P400,000.00 which is twice the amount of P200,000.00 declared in its complaint. The Court reiterates its findings on the second assignment of errors, particularly on the issue of the actual of subject properties as against their probable value. Private respondent, at the onset, has put into issues the value of the said properties. In the Special Defenses contained in his Answer, private respondent averred: That while defendant admits that he executed a Chattel Mortgage in favor of plaintiff, he vigorously denies that the machineries covered therein are worth P200,000.00. The fact is that plaintiff knew fully well that said chattels are worth no less than P1,000,000.00, said defendant having acceded to said valuation upon plaintiff's representation that it would be necessary to speed up the granting of the loan. As here was a disagreement on the valuation of the properties in the

Thus, although respondent's defense of lack of affidavit of merit is meritorious, procedurally, such a defense is no longer available for failure to plead the same in the Answer as required by the omnibus motion rule. III

first place, proper determination of the value of the bond to be posted by the plaintiff cannot be sufficiently arrived at. Though the rules specifically require that the needed bond be double the value of the properties, since plaintiff merely denominated a probable value of P200,000.00 and failed to aver the properties' actual value, which is claimed to be much greater than that declared by plaintiff, the amount of P400,000.00 would indeed be insufficient as found by

PROVISIONAL REMEDIES Rule 59: Receivership the Court of Appeals. The Rules of Court requires the plaintiff to "give a bond, executed to the defendant in double the value of the property as stated in the affidavit Sec. 5 and 6, Rule 60 of the Rules of Court, read: . . . ." Hence, the bond should be double the actual value of the properties involved. In this case, what was posted was merely an amount which was double the probable value as declared by the plaintiff and, therefore, inadequate should there be a finding that the actual value is actually far greater than P200,000.00. Since the valuation made by the petitioner has been disputed by the respondent, the lower court should have determined first the actual value of the properties. It was thus as error for the said court to approve the bond, which was based merely on the probable value of the properties. It should be noted that a replevin bond is intended to indemnify the defendant against any loss that he may suffer by reason of its being compelled to surrender the possession of the disputed property pending action.
14

24

recourse of the respondent should be to post a counterbound or a redelivery bond as provided under Section 5 of Rule 60.

Sec. 5. Return of property. If the defendant objects to the sufficient of the plaintiff's bond, or of the surety or sureties thereon, he cannot require the return of the property as in this section provided; but if he does not so object, he may, at any time before the delivery of the property to the plaintiff, if such delivery be adjudge, and for the payment of such sum to him as may be recovered against the defendant, and by serving a copy of such bond on the plaintiff or his attorney. Sec. 6. Disposition of property by officer. If within five (5) days after the taking of the property by the officer, the defendant does not object to the sufficiecy of the bond, or of the surety or sureties thereon, or require the return of the property as provided in the last preceding section; or if the defendant so objects, and the plaintiff's first or new bond is approved; or if the defendant so require, and his bond is object to and found insufficient and he does not forthwith file an approved bond, the property shall be delivered to the plaintiff, the officer must return it to the defendant. The Court held in a prior case
16

trial

of

the

The same may also be answerable for damages if any

when judgment is rendered in favor of the defendant or the party against whom a writ of replevin was issued and such judgment includes the return of the property to him.
15

Thus, the requirement

that the bond be double the actual value of the properties litigated upon. Such is the case because the bond will answer for the actual loss to the plaintiff, which corresponds to the value of the properties sought to be recovered and for damages, if any. Petitioner also maintains that, assuming for the sake of argument that its replevin bond was grossly inadequate or insufficient, the

that the remedies provided under

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

PROVISIONAL REMEDIES Rule 59: Receivership replevin action wishes to have the property taken by the sheriff restored to him, he should, within five days from such taking, (1) post a counter-bond in double the value of said property, and (2) serve plaintiff with a copy thereof, both requirements as well as compliance therewith within the five-day period mentioned being mandatory." bond. Conformably, a defendant in a replevin suit may demand the return of possession of the property replevined by filing a redelivery bond executed to the plaintiff in double the value of the property as stated in the plaintiff's affidavit within the period specified in Section 5 and 6. Alternatively, "the defendant may object to the sufficiency of the plaintiff's bond, or of the surety or sureties thereon;" but if he does so, "he cannot require the return of the property" by posting a counter-bond pursuant to Section 5 and 6.
18 17

25

Court of Appeals assailing such order is proper under the circumstances. IV As its fourth assignment of errors, petitioner contends that the Court of Appeals made an error of judgment in finding that the petitioner did not comply with the provisions of Section 5, Rule 59 by failing to post a receiver's bond. Petitioner contends that although it is in agreement with the Court of Appeals that a receiver's bond is separate and distinct from a replevin bond, under the circumstances it was not required to file a receiver's bond because it did not assume receivership over the properties. It is further argued that assuming that it did assume receivership, the Chattel Mortgage expressly provides, that: In case the MORTGAGEE institutes proceedings,

This course of action is available to the defendant for

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

judicially or otherwise, for the foreclosure of this Chattel Mortgage, or to enforce any of its rights hereunder, the MORTGAGEE shall be entitled as a matter of right to the appointment of a receiver, without bond, of the mortgaged properties and of such properties, real or personal, claims and rights of the MORTGAGOR as shall be necessary or proper to enable the said receiver to property control and dispose of the mortgaged properties.
19

In the case under consideration, the private respondent did not opt to cause redelivery of the properties to him by filing a counter-bond precisely because he objected to the sufficiency of the bond posted by plaintiff. Therefore, he need not file a counter-bond or redelivery bond. When such objection was not given due course in the court below when, instead of requiring the plaintiff to post a new bond, the court approved the bond in the amount of P400,000.00, claimed by

The order of the trial court dated March 24, 1975 provided, among others, that the properties shall be under joint management for a period of ten days, after which period "the bank, by virtue of the

respondent to be insufficient, and ordered the seizure of the properties recourse to a petition for certiorari before the

PROVISIONAL REMEDIES Rule 59: Receivership stipulations under the chattel mortgage, becomes the Receiver to perform all the obligations as such Receiver" and "in the event that the bank decides not to take over the receivership, the joint management continues."
20

26

The Court of Appeals found that the requirements of Section 5, Rule 59 on receivership were not complied with by the petitioner, particularly the filing or posting of a bond and the taking of an oath. It should be noted that under the old Rules of Court which was in

From the evidence on record, it is palpably clear that petitioner Citibank did, in fact, assume receivership. A letter
21

effect at the time this case was still at trial stage, a bond for the appointment of a receiver was not generally required of the applicant, except when the application was ex parte.
22

dated April 1,

1975 sent by petitioner to the private respondent, reads: 1, 1975 Anama Engineering Service Group 114 R. Lagmay Street San Juan, Rizal Attention: Mr. Douglas Anama Gentlemen: Pursuant to the Court order, we have decided to take over your machine shop as Receiver. We are hereby appointing Mr. Artemio T. Gonzales as our representative. Verytruly yours, FIRST NATIONAL CITY days BANK after the By: trial P.R. court REAL, issued JR. the Assistant order of

Therefore,

petitioner was not absolutely required to file a bond. Besides, as stipulated in the chattel mortgage contract between the parties, petitioner, as the mortgagee, is entitled to the appointment of a receiver without a bond. However, the Court of Appeals was right in finding a defect in such assumption of receiver in that the requirement of taking an oath has not been complied with Section 5, Rule 59, states: Sec. 5. Oath and bond of receiver. Before entering upon his duties, the receiver must be sworn to perform them faithfully, and must file a bond, executed to such person and in such sum as the court or judge may direct, to the effect that he will faithfully discharge the duties of receiver in the action and obey the orders of the court therein. Consequently, the trail court erred in allowing the petitioner to assume receivership over the machine shop of private respondent without requiring the appointed receiver to take an oath. V

ManagerPetitioner cannot therefore deny that nine receivership, it informed he private respondent that it would, as it did, assume receivership.

PROVISIONAL REMEDIES Rule 59: Receivership In light of the foregoing, the answer to the fifth assignment of errors is in the negative. For erroneously issuing the alias writ of seizure without inquiring into the sufficiency of the replevin bond and for allowing petitioner to assume receivership without the requisite oath, the Court of Appeals aptly held that the trial court acted with grave abuse of discretion in dealing with situation. Under the Revised Rules of Court, the property seized under a writ of replevin is not to be delivered immediately to the plaintiff. and may not be deprived of it without due process.
24 23

27

and executioner in his own cause a thing which is inadmissible in the absence of unequivocal agreement in the contract itself or express provision to the effect in the statute. WHEREFORE, for lack of merit, the petition is hereby DISMISSED. No pronouncement as to costs.

This is

SO ORDERED.

because a possessor has every right to respected in its possession

As enunciated by this Court in the case of Filinvest Credit Corporation vs. Court of Appeals,
25

The reason why the law does not allow the creditor to possess himself of the mortgaged property with violence and against the will of the debtor is to be found in the fact that the creditor's right of possession is conditioned upon the fact of default, and the existence of this fact may naturally be the subject of controversy. The debtor, for instance, may claim in good faith, and rightly or wrongly, that the debt is paid, or that for some other reason the alleged default is nonexistent. His possession in this situation is as fully entitled to protection as that of any other person, and in the language of Article 446 of the Civil Code, he must be respected therein. To allow the creditor to seized the property against the will of the debtor would make the former to a certain extent both judge

PROVISIONAL REMEDIES Rule 59: Receivership The Traders Royal Bank vs. IAC, et. Al., June 17, 1997 G.R. No. 111357 June 17, 1997 TRADERS vs. INTERMEDIATE APPELLATE COURT, and HEIRS OF THE LATE JOSE C. TAYENGCO, respondents. RESOLUTION ROYAL BANK, petitioner, Tayengcos
3

28
of

assailed

said

order

before

the

Court

Appeals,

contending that TRB's compensation should have been

charged against the losing party and not from the funds under receivership. In resolving this issue the Court of Appeals, 4 in its decision dated February 12, 1993, ruled that TRB cannot deduct its fee from the funds under its receivership since this must be shouldered by the losing party or equally apportioned among the parties-litigants. Consequently, TRB was ordered to return the P219,016.24 to the Tayengcos, and the losing parties, Cu Bie, et al., were held solely liable for TRB's compensation. 5 TRB filed a motion for reconsideration, but this was denied by the appellate court in its resolution dated August 17, 1993. 6

ROMERO, J.: In this appeal, TRB raises the following errors allegedly committed by The factual aspects of this case have already been resolved by this Court in G.R. No. 63855, wherein we ruled the deceased spouses Jose and Salvacion Tayengco to be the lawful owners of the properties under receivership, and G.R. No. 60076, 2 where we affirmed the validity of the appointment of petitioner Traders Royal Bank (TRB) as receiver pendente lite. In view of these rulings, the receivership proceeding was duly terminated. Thus, TRB rendered its final accounting of the funds under receivership wherein it retained the amount of P219,016.24 as its receiver's fee, instead of turning over the entire fund to the Tayengcos. The Regional Trial Court of Iloilo, Branch 5, in an order dated July 5, 1988, approved the final accounting submitted by TRB, including the deduction of its fee from the fund under receivership. 2. The Hon. IAC had no jurisdiction in CA-GR. 21423 and erred in knowingly taking cognizance and 1. The Hon. IAC (should be CA) erred when it rendered the judgment and Resolution ordering the return by TRB of Receiver's Fee of P219,016.24 to the heirs of Jose Tayengco, as it reversed the Decision of the Supreme Court in the case of Jose Tayengco vs.Hon. Ilarde, TRB, et al., GR No. 60076, which ordered the Trial Court to "settle the account of the receiver, TRB" to thereafter discharge the receiver and charged as cost against the losing party;
1

the Court of Appeals:

PROVISIONAL REMEDIES Rule 59: Receivership rendering the judgment and resolution on the issue of the payment of receiver's fee to TRB since the same subject matter was already within the jurisdiction of the Supreme Court in GR. No. 60076;

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deduction by TRB of its compensation from the receivership funds. There is clearly no identity of causes of action here. Clearly, the last element of res judicata is absent in the case at bar. Procedural obstacles aside, we now answer the principal query posed

3. The Hon. IAC erred when it rendered the judgment and Resolution which reversed the final Supreme Court Decision in GR. No. 60076 on the payment of the receiver's fee to TRB as it violated the Rule on " Bar by Final Judgment". 7(Emphasis supplied). TRB's assignment of errors submits for resolution two vital issues: (1) Is the Court of Appeals decision dated February 12, 1993 barred by res judicata by virtue of our ruling in G.R. No. 60076 recognizing the propriety of TRB's appointment as receiver? (2) Who is responsible for TRB's receiver's fee? With respect to the first assigned error, we are not persuaded. The elements of res judicata are: (1) The previous judgment has become final; (2) the prior judgment was rendered by a court having jurisdiction over the matter and parties; (3) the first judgment was made on the merits; and (4) there was substantial identity of parties, subject matter, and cause of action, as between the prior and subsequent actions. 8 The difference between the two causes of action is unmistakable. In G.R. No. 60076, the petition was for the annulment of the trial court's order requiring Tayengco to render and submit an accounting of the rental of the buildings and apartments, while C.A. G.R. CV No. 21423 was an appeal questioning the order of the trial court authorizing the

in the instant petition. Nobody questions the right of TRB to receive compensation. Section 8, Rule 59 of the Rules of Court, however, explicitly provides for the manner in which it shall be paid for its services, to wit: Sec. 8. Termination of receivership; compensation of receiver. Whenever the court, of its own motion or on that of either party, shall determine that the necessity for a receiver no longer exists, it shall, after due notice to all interested parties and hearing, settle the accounts of the receiver, direct the delivery of the funds and other property in his hands to the persons adjudged entitled to receive them, and order the discharge such. The of the court receiver from shall allow the further duty as receiver such

reasonable compensation as the circumstances of the case warrant, to be taxed as costs against the defeated party, or apportioned, as justice requires. (Emphasis supplied). It is, therefore, clear that when the services of a receiver who has been properly appointed terminates, his compensation is to be charged against the defeated party, or the prevailing litigant may be made to share the expense, as justice requires. Consequently, the

PROVISIONAL REMEDIES Rule 59: Receivership trial court's order approving TRB's compensation to be charged solely against the funds under its receivership is without legal justification; hence, it was correctly reversed by the Court of Appeals. IN VIEW OF THE FOREGOING, the decision appealed from is AFFIRMED. Costs against petitioner. SO ORDERED.

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