G.R. No.

L-14890
September 30, 1963
CONRADO
ALCANTARA, petitioner,
vs.
HON. MACAPANTON ABBAS, Presiding Judge, Branch II of the Court
of First Instance of Davao and MARTIN T. BACARON, respondents.
Conrado
Alcantara
in
his
own
behalf
as
petitioner.
Desquitado and Acurantes for respondent Martin T. Bacaron.
BENGZON, C.J.:
The Case. Petitioner seeks to annul the order of the respondent judge
removing him as receiver, and appointing Martin T. Bacaron in his place.
Material Facts. In March, 1957, Alcantara sued Bacaron partly to
foreclose the chattel mortgage executed by the latter on a caterpillar
tractor with its accessories (Civil Case No. 2282 of Davao). Pursuant to a
clause in the mortgage contract, the Davao court designated Alcantara as
receiver of the tractor; and he duly qualified as such. Thereafter, with the
court's approval, he leased the machine to Serapio Sablada. Upon the
expiration of the lease, and after Sablada's failure to return the machine,
said court at the instance of Alcantara, 1 declared Sablada to be in
contempt of court and fined him in the amount of P100.00 on October 6,
1958.
Meanwhile, on October 2, 1958, alleging that Alcantara had neglected his
duties as receiver, because he did not get the tractor, Bacaron petitioned
the court to relieve such receiver, and to appoint him (Bacaron) as the
receiver instead.2 Opposing the petition, Alcantara made the following
manifestations, in a pleading to the court dated November 26, 1958.
2. That in fact the herein plaintiff-receiver has exerted all efforts to
secure the possession of the tractor will question, and has come to
court time and again to compel the lessee, Serapio Sablada, to
deliver the tractor to the receiver, but it seems that even
Honorable Court is at mercy of said Serapio Sablada;.
3. That in fact, until and unless the tractor is delivered to the
receiver as ordered by the Honorable Court, the said Serapio
Sablada is liable to the Honorable Court for continues contempt in
as much as the subject of the contempt is non-compliance with the
order of the Honorable Court; ....
6. That in the view of the attendant circumstances related to the
tractor in this case, it most respectfully prayed that the plaintiffreceiver be immediately authorized to file a case of replevin with
damages against the person of Serapio Sablada, holding his surety
bond liable therefor, if proper, as most legal and expedient
procedure to retake the tractor in question. .
However, despite the above representations, the respondent dent judge of
the Davao court, in an order dated December 10, 1958, relieved Alcantara
and appointed Bacaron as receiver of the tractor, without bond, with

authority to receive the sum of P2,000.00 in Alcantara's hands as rentals of

the tractor, and to the end the same for repairs if necessary.
His motion to reconsider having been denied, Alcantara filed with this
Court the instant special civil action. And his request a preliminary
injunction was issued to restrain enforcement of His Honor's aforesaid
order of December 10, 1958.
The questions are: (a) the propriety of Alcantara's removal; and (b) the
legality of Bacaron's appointment and qualifications.
Discussion. It appears that acting on the complaint of Alcantara on
September 11, 1958, 3 the court required Sablada under pain of contempt,
to deliver the tractor on or before September 30, 1958, at the junction of
the Davao Penal Colony Road and the National Road going to Agusan in
Panabo, Agusan. It also appears that upon Sablada's failure, he was
declared to be contempt on October 6, 1958, and fined P100.00 as
previously stated. The order further said that upon failure to pay in one
week, he will be imprisoned for ten days. Lastly, the order directed
Alcantara to take steps to recover possession of the tractor, with the
admonition that "should he fail to take possession of the tractor within
fifteen (15) days after notice thereof, he may relieved as receiver and the
defendant who is willing to be the receiver may be appointed in his
place".1awphl.nt
Then on December 10, 1958, the court overlooking or overruling
Alcantara's pleading issued the order now in question, which for
convenience is quoted below:.
It appearing that plaintiff-receiver failed to take steps to take
possession of the tractor leased to Sablada and bring it to Davao
City as directed in the Order of the Court dated October 6, 1958,
the plaintiff is hereby relieved as receiver, and in his stead the
defendant is hereby appointed as receiver without bond. Upon his
qualification as such receiver, the defendant is hereby authorized
to receive from the plaintiff the sum of P2,000.00 representing the
rentals received by the latter from Sablada for the use of the
tractor, and to spend said sum or so much thereof as may be
necessary for bringing the tractor to Davao City and for payment of
necessary repairs; and the plaintiff is hereby ordered to turn over
to the defendant the said sum of P2,000.00 on demand.
It is not clear what steps the court had in mind when it declared that
"plaintiff-receiver failed to take steps to take possession of the tractor
leased to Sablada". It could have meant that Alcantara failed to take the
tractor directly from the hands of Sablada from the place where it
was, without resorting to official help. If the court meant as it must have
meant that Alcantara failed to exhaust judicial remedies to compel
Sablada to comply with the order to place the tractor at the "junction"
previously mentioned, then it fell into error, because Alcantara had in

effect, suggested that Sablada be held in "continuous contempt" (Annex J)

i.e., imprisoned until he placed the tractor at the "junction"; and the court
instead of acting accordingly under Rule 64, sec. 7 4 held Alcantara to be
negligent, and removed him.
In this connection, it should be observed that in his aforesaid pleading of
November 26, 1958, Alcantara even asked for permission to sue Sablada
for replevin.
If it was error to remove Alcantara, a clearer error occurred when Bacaron
the defendant was appointed, as receiver without bond, over the
objection of Alcantara the plaintiff. The general rule is that neither to a
litigation
should
be
appointed
receiver
without
the
other's
consent 5 because "a receiver ought to be an indifferent person between
the parties"6 and "should be impartial and disinterested" 7. Note that
Bacaron was the defendant, and his personal interest would conflict with
his duties to the court and the plaintiff. 8 Furthermore, under the Rules of
Court, the receiver must file a bond; and yet Bacaron was exempted from
such obligation. The effect of the whole proceeding was to discharge the
receiver ship at the request of the defendant, without so much a bond
contrary to sec. 4, Rule 61, of the Rules of Court. 9
Conclusion. Such mistakes causing prejudice to petitioner, call for
interference with that discretion which usually vests in trial courts in the
matter of receivership Consequently, the order of December 10, 1958,
should be, and is hereby annulled. Costs against respondent Bacaron. So
ordered.
G.R. No. L-27631 April 30, 1971
CIRILO
D.
DOLAR
and
LUIS
B.
TUPAS petitioners,
vs.
CARLOS
L.
SUNDIAM,
GREGORIO
LIRA
and
REMEGIO
LUMAMPAO, respondents.
Gaudencio D. Demaisip for petitioners.
Lopez Vito for respondents.
CASTRO, J.:
This is an original action for certiorari and prohibition to set aside an order
of the Court of First Instance of Iloilo dated December 1, 1966, in Special
Proceeding 472, granting the petition of the herein respondent Remigio
Lumampao for the appointment of a receiver over two (2) parcels of land
subject of a motion, filed by the said respondent Lumampao, to set aside
the sale thereof made by the herein petitioner Luis Tupas, in his capacity as
judicial administrator of the testate estate of one Generoso Tupas, Sr., in
favor of his herein co-petitioner Cirilo Dolar.
On June 25, 1948, one Generoso Tupas, Jr. filed a petition with the Court of
First Instance of Iloilo (docketed as Special Proceeding 472) for the
allowance of his father's will and the appointment of an administrator for
the deceased's estate. The deceased was survived by his spouse, his son
Generoso Tupas, Jr., and his other children by a first marriage.

After the probate of the will and the appointment of the deceased's widow
(later replaced by Luis Tupas) as judicial administrator of the testate
estate, Generoso Tupas, Jr., on December 5, 1953, sold to the herein
respondent Lumampao, for the price of P40,000, two (2) parcels of land
bequeathed to him by his father. On August 9, 1955, Lumampao, by virtue
of this purchase, asked the surrogate court to be allowed to intervene in
the proceedings. The court granted his motion.
On, July 9, 1956, a project of partition of the testate estate, comprising at
least two hundred twenty-three (223) hectares, was submitted to the
probate court for approval, by the herein petitioner Luis Tupas, as judicial
administrator thereof. The two parcels of land of the testate estate
previously sold to Lumampao, with an area of ninety-two (92) hectares,
more or less, were thereunder expressly assigned to Generoso Tupas, Jr.
This project of partition was approved by the probate court on July 16,
1956.
On February 18, 1957, however, a complaint for the recovery of the said
two parcels of land was filed by Lumampao against Generoso Tupas, Jr. and
Luis Tupas with the Court of First Instance of Iloilo (docketed as civil case
4276), on the ground that the defendants therein, by use of force, threats,
stealth, strategy and intimidation, deprived him of the possession of the
said properties and gathered all the products therefrom. The validity of the
sale to him of these properties, which was brought in issue in the, said
case, was upheld by the court a quo on May 15, 1959.
This decision, in turn, was affirmed on appeal, by the Court of Appeals in
CA-G.R. 26507-R on April 2, 1964. The dispositive portion of the appellate
court's decision reads as follows:
WHEREFORE, the judgment appealed from [declaring
Lumampao the owner of said parcels of real estate] is
AFFIRMED, with the modification that Generoso Tupas, Jr.
pay plaintiff P437.20 and that defendants pay plaintiff
P4,000.00 for the bodega and sugar mill and P6,000.00
annually from the crop year 1954-55 up to the delivery of
the land to plaintiff against defendants.
The foregoing decision was appealed to this Court in L-23134, but in a
minute resolution dated December 15, 1964 we dismissed the appeal.
Prior to the final adjudication on the aforementioned complaint of
Lumampao, however, Luis Tupas filed with the probate court, on February
9, 1960, a motion for authority to sell four (4) parcels of land of the testate
estate for the payment of taxes due to the Government in the amount of
P1,701.68, attorney's fees and other obligations. The said motion included
the two parcels of land previously sold to Lumampao. The motion was
approved by the probate court on February 13, 1960 with Judge Wenceslao
Fernan, presiding, subject to the condition that "before executing the sale,
the price must first be referred [to] and approved by his Court."

For some unexplained reason, Luis Tupas did not take any action relative to
the foregoing authority, for, on May 14, 1963, or more than three (3) years
later, another motion for authority to sell the same parcels of land
mentioned in his motion of February 9, 1960 was filed by him with the
probate court, again for the payment of municipal taxes in the same
amount of P1,701.68 and P10,000 for counsel's services. This motion,
however, unlike the first motion, bore the signed conformity of the heirs of
the deceased, except Generoso Tupas, Jr. The said motion was approved on
May 31, 1963 by the probate court, with Judge Jesus Rodriguez, presiding,
subject to the condition that the real properties mentioned therein shall be
said, as per prayer of Luis Tupas, for not less than P15,000.
On June 4, 1963, Luis Tupas sold to his herein co-petitioner Cirilo Dolar for
the price of P15,000 the four (4) parcels of land specified in the motion,
comprising an aggregate area of 143 hectares, more or less, inclusive of
the 92 hectares previously sold to Lumampao by Generoso Tupas, Jr. for
P40,000. It will be noted that at this time, the validity of the sale to
Lumampao was still pending adjudication in the Court of Appeals.
On January 24, 1964, the probate court, through Judge Imperial Reyes, who
temporarily took over the functions of the court a quo in the absence of its
presiding judge who was then in Manila, affixed his signature at the foot of
the deed of sale executed by Luis Tupas to his co-petitioner Cirilo Dolar,
indicating his conformity therewith.
On November 6, 1965, Lumampao, in his capacity as intervenor in the
settlement proceedings, filed with the surrogate court an amended motion
to set aside the order of the said court dated May 31, 1963 insofar as it
authorized the sale of the two (2) parcels of land conveyed to him by
Generoso Tupas, Jr. Among the grounds adduced by Lumampao in his
motion are (a) that the said parcels of land belong to him by virtue of a
final and executory decision of the Court of Appeals; (b) that contrary to
section 7 (b), Rule 89 (formerly Rule 90) of the New Rules of Court no
notice was given to him and to some of the heirs of the deceased of both
motions of Luis Tupas for authority to sell said properties; (c) that the
probate court's approvals of the said motions were all made without his
knowledge; (d) that the approval of the conveyance to Cirilo Dolar of the
said parcels was made without any corresponding motion therefor; and (e)
that the testate estate has other properties with which to pay its
obligations.
On October 22, 1966, pending decision on his motion to set aside,
Lumampao filed with the probate court a petition for the appointment of a
receiver over the two parcels of land conveyed and adjudicated to him.
On December 1, 1966, the probate court, with Judge Carlos Sundiam
presiding, granted Lumampao's petition, and, on February 8, 1967,
appointed the herein respondent Gregorio Lira receiver over the said
parcels of land.

On June 7, 1967, Tupas and Dolar filed with this Court the instant petition
to set aside the receivership order of the court a quo. On June 16, 1967, we
issued a writ of preliminary injunction against the herein respondents Judge
Sundiam, Lumampao and Lira.
The principal object of the ancillary relief of receivership is to secure and
preserve the property or thing in controversy pending litigation in order
that, as far as practicable, a judicial tribunal, in aid of its jurisdiction, may
be able to effectively bestow to the parties litigant the rights to which they
are entitled, or exact from them the obligations to which they are subject,
under the law. Ordinarily, therefore, this remedy will not lie where the
property involved is already in custody of law, such as that in the hands of
an executor or administrator. In these cases, the practical and equitable
purposes to be accomplished under a receivership are then virtually
available.
The fact remains, however, that relief by way of receivership is essentially
equitable in nature, and consequently, must be controlled by, and
administered on, equitable principles, in the absence of statutory principles
specifically defining or laying out the dimension of its coverage, scope or
application.
Thus,
the Corpus
Juris
Secundum, 1 in a brief resume of the decisions of several learned American
tribunals, says:
Ordinarily, a receiver cannot be put on property which is
already in custody of the law under process from another
court of competent jurisdiction; and there cannot be more
than one receiver over the same property ... A court of
equity has power to appoint a receiver of property which is
already in the hands of an executor or administrator, but
such power should be exercised with caution, and a
receiver should not be appointed to take assets out of the
hands of legally appointed representatives except in cases
of manifest danger of loss or destruction of, or material
injury to, assets. ...
... Also, a receiver will be appointed when the executor or
administrator has been guilty of misconduct, waste, or
misuse of assets, and there is real danger of loss; and
conversely, a receiver will not be appointed to take assets
from the custody of an executor or administrator unless
there is manifest danger of loss or destruction of, or
material injury to, the assets and a receivership is clearly
necessary to protect and preserve the property.
In appreciating the foregoing principles, it must be borne in mind that, thus
far, we have proceeded upon the assumption that the estate upon which
receivership is prayed for is under the custody of law. Apparently, the two
parcels of land in dispute cannot be said to be within this category, judged
from the records of this case. The said two parcels of real estate were, by

virtue of a final and executory judgment, adjudicated in favor of

Lumampao. Consequently, they can no longer be said to form part of the,
testate estate of the late Generoso Tupas, Sr. over which the probate court
can validly exercise jurisdiction in connection with the distribution and
liquidation of the said estate.
The Probate court's order authorizing the sale of the said parcels of land
was issued and their subsequent sale to Cirilo Dolar was consummated
prior to the rendition of the judgment of the Court of Appeals upholding the
validity of the sale to Lumampao. Consequently, at the time of the sale of
these two parcels to Cirilo Dolar, the status of such parcels as belonging to
the testate estate or to Lumampao was then still fairly controversial. But
the inevitable time-lag that goes with the disposal of court cases cannot, in
the present controversy, alter the fact that the Court of Appeals' decision
on the merits of the controversy below was based upon the validity of the
deed of sale of the said parcels to Lumampao, and, thus, in law, said
properties belonged to him even before the authority to sell them was
issued by the probate court to Luis Tupas. Hence, although the appellate
court's decision on the ownership question came later, it nevertheless had
merely the effect of erasing once and for all any doubt or uncertainty
about the real ownership of the said parcels. Appellate courts, beset as
they are by heaps of cases, cannot be expected naturally to act on the
hour on every litigation brought to them. A court exercising original
jurisdiction over a suit ought, by constant exposure to his exacting job of
unraveling what is true and just, to comprehend the quantum of caution
required for the avoidance of simple problems that may in the future
hamper the closure of a dispute before it. There appears, for instance no
plausible reason why the sale of the two parcels in dispute was authorized
by the probate court considering that the testate estate was still quite
enormous, and considering further that the court a quo itself had, only a
short time before that, upheld the validity of their sale to Lumampao.
Moreover, it is essentially the duty of every person dealing at arms' length
with the administrator of an estate subject to settlement and liquidation to
inquire about the existence of claims against, or of persons having
interests in, the estate subject of probate and settlement proceedings, for
such proceedings are, by their nature and purpose, open notice to all and
sundry once put into motion. Every diligent person ought to know that such
proceedings require not just the collection, identification, division and
distribution of assets; they not infrequently involve matters more
complicated than these.
The foregoing opinion notwithstanding, we find it essential for the purpose
of disposing of the specific issue raised in the instant petition that the
respondent court has no jurisdiction to grant receivership over the said
parcels of land in dispute to allow the respondent court the benefit of
the doubt, that when it authorized Luis Tupas to sell the real properties in
dispute and approved their sale in favor of Cirilo Dolar, it was acting under

an honestlymistaken impression that the questioned properties still formed

part of the inventoriable estate of the late Generoso Tupas, Sr.
In our opinion, where, as in this case, a piece of property which originally is
a part of the estate of a deceased person is sold by an heir of the deceased
having a valid claim thereto, and said piece of property is, by mistake,
subsequently inventoried or considered part of the deceased's estate
subject to settlement, and, thereafter, with the authority and approval of
the probate court, is sold once more to another person, a receiver of the
property so sold may, during the pendency of a motion to set aside the
second sale, be appointed by the court when in its sound judgment the
grant of such temporary relief is reasonably necessary to secure and
protest the rights of its real owner against any danger of loss or material
injury to him arising from the use and enjoyment thereof by another who
manifestly cannot acquire any right of dominion thereon because the
approving surrogate court had already lost jurisdiction to authorize the
further sale of such property to another person.
Under the particular facts of the instant dispute, we find no compelling
reason for disturbing the respondent court's order granting the petition of
Lumampao for the appointment of a receiver over the parcels of land in
question.
ACCORDINGLY, the order of the court a quo dated December 1, 1966 is
hereby affirmed. The said court is, however, enjoined to act in consonance
with the tenor and intendment of this decision. No costs.
CENTRAL
SAWMILLS,
INC., plaintiff-appellee,
vs.
ALTO
SURETY
&
INSURANCE
CO.,
ET
AL., defendants,
ALTO SURETY & INSURANCE CO., defendant-appellant.
M.
Peres
Cardenas
for
plaintiff-appellee.
Aristorenas and Relova for defendant-appellant.
BARREDO, J.:
This appeal from the order of the Court of First Instance of Manila dated
October 4, 1960 in its Civil Case No. 27374, entitled Central Sawmills, Inc.
vs. Alto Surety & Insurance Co., et al., ordering the appointment of a
receiver of the properties of defendant-appellant Alto Surety & Insurance
Company as well as from the order of October 25, 1960 denying the
motion for reconsideration thereof was certified to this Court by the Court
of Appeals in a resolution, the pertinent portions of which read thus:
The undisputed evidence presented during the hearing on the
petition for receivership is summarized by the court a quo, as
follows:
That a decision was rendered in the above-entitled case in
favor of plaintiff and against the defendants, jointly and
solidarily, one of which is the defendant Alto Surety &
Insurance Co., Inc. (Exhibit A-Receivership); that a writ of
execution (Exhibit B-Receivership was issued to enforce
said judgment; that said writ of execution was returned by

the Sheriff of Manila unsatisfied (Exhibit C- Receivership);

that on August 4, 1958, the Insurance Commissioner wrote
a letter addressed to Alto Surety & Insurance Co., Inc.
(Exhibit E-Receivership), the last portion of which is quoted
as follows:
Financial Condition The examination disclosed
that the Alto Surety & Insurance Co., Inc., had, as
of December 31, 1957, total admitted assets of
P715,689.29, as against total liabilities of
P645,096.94 and capital paid-up of P259,700.00
which was impaired in the amount of P189,097.65,
The company's net worth amounted to P70,602.35
as of December 31, 1957. Compliance with our
letter of July 18, 1958, regarding the covering of
said impairment is reiterated.
Your failure to comply with all the foregoing
requirements within the time limit set forth in this
letter will compel us to suspend or revoke the
certificates of authority to do insurance business
issued in favor of the company, as well as all other
certificates granted to the company's officers,
general agents, and/or to recommend the
prosecution of its officers.
that on May 16, 1960, the Insurance Commissioner addressed another
letter marked exhibit G-Receivership, the last portion of which is also
quoted as follows:
6. Financial Condition as of September 30, 1959. The
examination disclosed that the Alto Surety & Insurance Company
Inc., had, as of September 30, 1959, total admitted assets of
P161,121.84 as against total liabilities of P649,130.88 and total net
worth or capital deficiency of P488,009.04. The capital stock paidup of P59,700.00 was impaired to the extent of P747,709.04, which
is equal to the paid-up capital of P259,700.00 and capital
deficiency of P488,009.04.
In view of the precarious financial condition of the company, it is
required that the stockholders of the Alto Surety & Insurance Co.,
Inc., put up within fifteen (15) days from receipt of this letter, the
amount of P747,709.04 in order to cover the impairment or deficit
of an equal amount, and to comply immediately with all the other
requirements mentioned in the foregoing.
Receipt of your advice within the fifteen-day period given you for
complying with the requirement stated above, will be appreciated.
In granting the petition for receivership, the court a quo said:
Firstly, plaintiff has offered the provisions of Section 1, Rule 61 of
the Rules of Court, more particularly paragraph (d) thereof. In

support of its claim, plaintiff has cited the case of Philippine Trust
Co. vs. Francisco Santamaria 53 Phil. 463, wherein the Supreme
Court ordered the appointment of a receiver of all the properties
and assets of a judgment debtor in aid of execution of judgment
rendered against it. The action against the judgement debtor in the
said case was for the recovery of a sum of money.lawphi1.nt
Secondly plaintiff has cited the provisions of Section 2, Rule 61 of
the Rule of court, quoted as follows:
SEC. 2. Creditor or stockholder may apply for receiver for
corporation. When a corporation has been dissolved, or
is insolvent or is in imminent danger or insolvency, or has
forfeited its corporate rights, a receiver may be appointed
on the complaint of a creditor, stockholder, or member of
the corporation.
In relation to this provision of law, Exhibits E-Receivership and GReceivership tend to show that defendant Alto Surety & Insurance
Co., Inc., is in imminent danger of insolvency. As a matter of fact,
no less than the Insurance Commissioner of the Philippines has
manifested in his letter dated May 16, 1960 and marked as Exhibit
G-Receivership that the defendant corporation and is in a
precarious financial condition.
Thirdly, plaintiff has cited the provision of Section Rule 39 of the
Rules of Court, quoted as follows:
SEC. 39. Appointment and bond of receiver. The judge
may, by order, appoint the sheriff, or other proper officer or
person, receiver of the property of the judgment debtor;
and he may also, by order, forbid a transfer or other
disposition of, or any interference with, the property of the
judgment debtor not exempt from execution. If a bonded
officer be appointed receiver, he and his sureties shall be
liable on his official bond as such receiver, but if another
person be appointed he shall give a bond as receiver as in
other cases.
It must be remembered that plaintiff filed the present petition for
receivership in view of the return of the Sheriff of Manila (Exhibit CReceivership) to the effect that the writ of execution marked
Exhibit B-Receivership could not be satisfied for the reasons stated
therein.
It is not disputed by the appellant company that though in the
years 1955 and 1956 it was in a position to pay installments, or
September 1, 1958 and thereafter, it was no longer in a position to
mark any payments whatsoever.
In view of all the above, the issue raised in this appeal is purely a
question of law; this appeal is therefore beyond the competence of
this Court.

ACCORDINGLY, let this case be certified, as it is hereby certified,

under the provisions of the Judiciary Act of 1948, as amended, to
the Honorable Supreme Court for proper disposition.
Accordingly, the only issue for resolution by this Court in this appeal is
whether or not, in an action for the collection of a debt, where there is
already a final and executory judgment, the Court has the authority to
appoint a receiver of the properties of the judgment debtor which are not
involved in the action, in aid of the execution of said judgement.
This issue is not new. Almost on all fours with the present case is that
of Philippine Trust Co. vs. Santamaria, 1decided way back on September 4,
1929. There it was held:
This is a petition for mandamus in which the petitioner alleges that
it is plaintiff in civil cases Nos. 6720 and 6721 pending in the Court
of First Instance of Iloilo. That on October 19, 1927, that court in
those actions rendered the following judgments:
CIVIL CASE NO. 6720
Wherefore, judgment is rendered in so far as it refers to said case
No. 6720, in favor of the Philippine Trust Co. and against the
defendant F. M. Yaptico & Co., Ltd., for the sum of P25,000.00, with
interest thereon at the rate of 9 per cent per annum from March 6,
1924, until paid, and with legal interest of 6 per cent per annum on
the accumulated interest from the filing of the complaint to the
date of the judgment, together with the costs of the action.
CIVIL CASE NO. 6721
Wherefore, judgment is rendered against F. M. Yaptico & Co., Ltd.,
jointly with the Visayan General Supply Co., Inc., for the sum of
P50,000.00 with interest thereon at the rate of 9 per cent per
annum from February 11, 1924, until paid, and with legal interest
from the filing of the complaint to the date of the judgment. And
judgment is rendered against the defendant F. M. Yaptico & Co.,
Ltd., for per cent per annum from March 5, 1924, plus the legal
interest of 6 per cent per annum on the accummulated interest
from the date of filing of the complaint to that of the judgment,
together with costs of this action.
It is alleged that on such judgments there is now due and owing from the
defendant to the petitioner about P110,000.00. That on November 25,
1927, the plaintiff asked the court to issue and execution pending the
defendant's appeal to this court, which request was denied on December
5, 1927. That an appeal was taken to this court which affirmed the
judgments on October 25, 1928. That on November 23, 1928, plaintiff
again asked the lower court to issue an execution on the judgments, and
that execution was issued on December 14, 1928. That the sheriff made
return that no property of defendant F.M. Yaptico & Co., Ltd., could not pay
them. That on January 18, 1929, the petitioner asked the lower court to
appoint a receiver of the property of F. M. Yaptico & Co., Ltd. That on March

6, 1929, the court denied that petition. That on April 24, 1929, the
petitioner prayed the court for an order to require the manager of F. M.
Yaptico & Co., Ltd., to appear and answer interrogatories as to the assets of
F.M. Yaptico & Co., Ltd. That on June 13, 1929, F. M. Yaptico & Co., Ltd.,
asked the court to suspend the execution of the judgments for a period of
four months, which request was opposed by the petitioner on the ground
that the court was without jurisdiction, and it again renewed its motion for
the court to appoint a receiver. That the manager appear in court on June
29, 1929, from which it appeared that the property of the defendant was
being disposed of to the damage of the petitioner; that F. M. Yaptico & Co.,
Ltd., had rendered the petitioner a false and misleading statement of its
assets and liabilities; and that after an examination of the manager and as
a result of the disclosures made by him, petitioner again prayed for the
appointment if a receiver. That on June 30, 1929, the court denied the
application, and "suspended execution of the said judgments for a period
of four months from and after the 30th day of June, 1929, to give the
respondent F. M. Yaptico & Co., Ltd., more time to pay said judgments."
That on July 12, 1929, the court again affirmed its order of June thirtieth,
and on July 15, 1929, denied the motion for reconsideration.
xxx
xxx
xxx
We are clearly of the opinion that the lower court exceeded its
jurisdiction in suspending the execution for the period of four
months from June 30, 1929. We are also of the opinion that upon
the facts shown in this record, it was the duty of the court to
appoint a receiver for the F. M Yaptico & Co., Ltd., to protect and
preserve its property and assets for the use and benefit of its
creditors and, in particular, this petitioner, under the provisions of
section 483 of the Code of Civil Procedure. The very fact that the
judgments in question were rendered on October 19, 1927, and
that no part of them has yet been paid, and that F. M. Yaptico &
Co., Ltd., has so far been able to defeat the petitioner in the
collection of its judgments, in a very strong and cogent reason why
a receiver should be appointed.
It is the order of the court that a writ of mandamus be forthwith
issued as prayed for in the petition, and that the lower court at
once appoint a receiver of all the property and assets of F. M.
Yaptico & Co., Ltd., and that petitioner have judgments for costs.
So ordered.
With this precedent, it is obvious that the order of receivership appealed
from should be affirmed.
Only one point of procedure need be clarified now. In its petition for the
appointment of a receiver, plaintiff-appellee relied expressly only on the
provisions of Section 1(d) of Rule 61 (Rules of 1940) which provided as
follows:

SECTION 1. When and by whom receiver appointed. One or more

receiver of the property, real or personal, which is 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:
xxx
xxx
xxx
(d) After judgment, to preserve the property during the tendency of
an appeal or to dispose of it according to the judgement, 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 to carry the judgement into effect;
This specific citation naturally gave defendant-appellant cause to oppose
the petition on the ground that underline provision thus cited, the
receivership contemplated is only that "of the property, real or personal,
which is the subject of the action." It was only in its memorandum, which is
not included in the record on appeal but mentioned only in the opposition
to the motion for reconsideration of the order granting the receivership (p.
50, Record on Appeal), that plaintiff-appellant must have referred the
court a quo to other provisions of the Rules, particularly, Section 2 of Rule
61 and Section 39 of Rule 39. Thus, as may be seen from the above-quoted
portions of its order of receivership, the said court, made reference to all
the three provisions which it said were "offered" or cited by the plaintiffappellee, namely: Section 1 (d), Rule 61, Section 2, Rule 61 and Section 39,
Rule 39. Seemingly, the court a quo was uncertain as to which particular
one of these provisions was the proper basis of authority because it simply
ruled that "after considering the evidence and the argument adduced by
the parties in relation to plaintiff's petition for receivership and further
considering the outstanding obligations of defendant corporation, the
Court is of the opinion that plaintiff's motion for receivership is well-taken
and made no commitment as to which rule or provision it was relying upon
for its action.
It will be noted that in that case of Philippine Trust Co. vs. Santamaria,
above-referred to, this Court cited Section 483 of the Code of Civil
Procedure (Act 190) in holding that "it was the duty of the court to appoint
a receiver for the F.M. Yaptico & Co., Ltd. to protect and preserve its
property and assets for the use and benefit of its creditors and, in
particular, this petitioner." The section cited reads thus:
SEC. 483. Judge may Appoint Receiver and Prohibit Transfers, and
so forth. The judge may, by order, appoint the governor, or his
deputy of the proper province, or other suitable person, a receiver
of the property of the judgment debtor, and he may also, by order,
forbid a transfer or other disposition of, or any interference with,
the property of the judgment debtor not exempt by law.
This section was under Chapter XX entitled "Proceedings Supplementary to
the Execution". In other words, it was part of the rules of proceeding

governing aids to the execution of judgments. In the Rules of Court of

1940, the said section had its counter-part in Section 39 of Rule 39 reading
as follows:
SEC. 39. Appointment and bond of receiver. The judge may, by
order, appoint the sheriff, or other proper officer or person,
receiver of the property of the judgment debtor; and he may also,
by order, forbid the transfer or other disposition of, or any
interference with, the property of the judgment debtor not exempt
from execution. If a bonded officer be appointed receiver, he and
his sureties shall be liable on his official bond as such receiver but
if another person be appointed he shall give a bond as receiver as
in other cases.2
Indeed, this is the provision applicable to the circumstances of the case at
bar. Clearly, Section 1 (d) of Rule 61 3is not applicable here because, as
contended by defendant-appellant, all the cases of receivers contemplated
in said section are only cases wherein the property or properties being
placed under receivership are those involved in the very litigation in which
such receivership is ordered. This is evident from the opening paragraph of
said section which says that "one or more receivers of the property, real or
personal, which is the subject of the action, may be appointed ... in the
following cases. [Emphasis Ours]. In other words, this qualifying clause,
"the property, real or personal, which is the subject of the action" applies
to all the cases specified in the five paragraphs in said Section 1, which
are:
Section 1. ....
(a) When a corporation has been dissolved, or is insolvent, or is in
imminent danger of insolvency, or has forfeited its corporate
rights;
(b) When it appears from the complaint or answer, and such other
proof as the judge may require, that the party applying for the
appointment of receiver has an interest in the property or fund
which is 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 an 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 to carry the judgment into effect;

(e) Whenever in other cases it appears that the appointment of a

receiver is the most convinient and feasible means of preserving,
administering, or disposing of the property in litigation.
And it is undisputed that in the case at bar, the properties being placed
under receivership are not the subject of the action.
Likewise, it is quite plain that Section 2 of Rule 61 4 is not also applicable to
this case. This section refers to a receivership, not as an aid to execution of
a final judgment in an ordinary action, but as a consequence of the
dissolution of a corporation or its forfeiture of its corporate rights; and with
respect to cases of insolvency or imminent danger of insolvency of
corporations, the receivership contemplated in this section must be in
relation exclusively to such insolvency or imminent danger thereof placed
before the court in an appropriate principal action, and again, not merely
as an ordinary action.
In an event, it is necessary or superfluos to bring in Sections 1 and 2 of
Rule 61, which, to say the least, are of doubtful applicability, when Section
39 appears to be clearly and fittingly applicable. If at all, the other
provisions of Rule 61, may be resorted to only insofar as they prescribe the
procedure and the bond related to the carrying out of such receivership.
There being no detailed rules under the authority of Section 6, Rule 124
(now Rule 135), the pertinent provisions of Rule 61 may be adopted. Said
section provides:
SEC. 6. Means to carry jurisdiction into effect. When by law
jurisdiction is conferred on a court or judicial officer, all auxiliary
writs, processes and other means necessary to carry it into effect
may be employed by such court or officer; and if the procedure to
be followed in the exercise of such jurisdiction is not specifically
pointed out by these rules, any suitable process or mode of
proceeding may be adopted which appears most conformable to
the spirit of said rules.5
WHEREFORE, with the above clarification that Section 39 of Rule 39 of the
Rules of 1940, now Section 43 of Rule 39 of the current Rules, is the
provision applicable to the receivership herein in question, the same being
in aid for money, the disputed orders of the court a quo dated October 4,
1960 and October 15, 1960 are hereby affirmed, with costs against
defendant-appellant, Alto Surety & Insurance Company, Inc.
ANTONIETTA
O.
DESCALLAR, petitioner,
vs.
THE
HON.
COURT
OF
APPEALS
and
CAMILO
F.
BORROMEO, respondents.
Gilberto C. Alfafara for petitioner.
Bernadito A. Florido for private respondent.
GRIO-AQUINO, J.:
Assailed in this petition for review on certiorari is the decision dated July
29, 1992 of the Court of Appeals in CA-G.R. SP No. 27977, affirming the

orders dated March 17, 1992 and April 27, 1992 of the trial court in Civil
Case No. MAN-1148, granting respondent's petition for receivership and
denying petitioner's motion for reconsideration thereof.
On August 9, 1991, respondent Camilo Borromeo, a realtor, filed against
petitioner a civil complaint for the recovery of three (3) parcels of land and
the house built thereon in the possession of the petitioner and registered in
her name under Transfer Certificates of Title Nos. 24790, 24791 and 24792
of the Registry of Deeds for the City of Mandaue. The case was docketed as
Civil Case No. MAN-1148 of the Regional Trial Court, Branch 28, Mandaue
City.
In his complaint, Borromeo alleged that he purchased the property on July
11, 1991 from Wilhelm Jambrich, an Austrian national and former lover of
the petitioner for many years until he deserted her in 1991 for the favors of
another woman. Based on the deed of sale which the Austrian made in his
favor, Borromeo filed an action to recover the ownership and possession of
the house and lots from Descallar and asked for the issuance of new
transfer certificates of title in his name.
In her answer to the complaint, Descallar alleged that the property belongs
to her as the registered owner thereof; that Borromeo's vendor, Wilhelm
Jambrich, is an Austrian, hence, not qualified to acquire or own real
property in the Philippines. He has no title, right or interest whatsoever in
the property which he may transfer to Borromeo.
On March 5, 1992, Borromeo asked the trial court to appoint a receiver for
the property during the pendency of the case. Despite the petitioner's
opposition, Judge Mercedes Golo-Dadole granted the application for
receivership and appointed her clerk of court as receiver with a bond of
P250,000.00.
Petitioner filed a motion for reconsideration of the court's order, but it was
denied.
Petitioner sought relief in the Court of Appeals by a petition
for certiorari (CA-G.R. SP No. 27977 "Antonietta O. Descallar vs. Hon.
Mercedes G. Dadole, as Judge, RTC of Mandaue City, Branch 28, and Camilo
F. Borromeo").
On July 29, 1992, the Court of Appeals dismissed the petition for certiorari.
In due time, she appealed the Appellate Court's decision to this Court by a
petition for certiorari under Rule 45 of the Rules of Court.
In a nutshell, the issue in this appeal is whether the trial court gravely
abused its discretion in appointing a receiver for real property registered in
the name of the petitioner in order to transfer its possession from the
petitioner to the court-appointed receiver. The answer to that question is
yes.
The Court is amazed that the trial court and the Court of Appeals appear to
have given no importance to the fact that the petitioner herein, besides
being the actual possessor of the disputed property, is also the registered
owner thereof, as evidenced by TCTs Nos. 24790, 24791, and 24792 issued
in her name by the Register of Deeds of Mandaue City on December 3,

1987. Her title and possession cannot be defeated by mere verbal

allegations that although she appears in the deed of sale as vendee of the
property, it was her Austrian lover, Jambrich, who paid the price of the sale
of the property (Sinoan vs. Sorogan, 136 SCRA 407). Her Torrens
certificates of title are indefeasible or incontrovertible (Sec. 32, P.D. 1529).
Even if it were true that an impecunious former waitress, like Descallar, did
not have the means to purchase the property, and that it was her Austrian
lover who provided her with the money to pay for it, that circumstance did
not make her any less the owner, since the sale was made to her, not to
the open-handed alien who was, and still is, disqualified under our laws to
own real property in this country (Sec. 7, Art. XII, 1987 Constitution). The
deed of sale was duly registered in the Registry of Deeds and new titles
were issued in her name. The source of the purchase money is immaterial
for there is no allegation, nor proof, that she bought the property as
trustee or dummy for the monied Austrian, and not for her own benefit and
enjoyment.
There is no law which declares null and void a sale where the vendee to
whom the title of the thing sold is transferred or conveyed, paid the price
with money obtained from a third person. If that were so, a bank would be
the owner of whatever is purchased with funds borrowed from it by the
vendee. The holding of the trial court and the Court of Appeals that
Jambrich, notwithstanding his legal incapacity to acquire real property in
the Philippines, is the owner of the house and lot which his erstwhile
mistress, Antonietta, purchased with money she obtained from him, is a
legal heresy.
In view of the above circumstances, we find the order of receivership
tainted with grave abuse of discretion. 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.
Relief by way of receivership is equitable in nature, and a
court of equity will not ordinarily appoint a receiver where
the rights of the parties depend on the determination of
adverse claims of legal title to real property and one party
is in possession. (Calo, et al. vs. Roldan, 76 Phil., 445).
Only when the property is in danger of being materially injured or lost, as
by the prospective foreclosure of a mortgage thereon for non-payment of
the mortgage loans despite the considerable income derived from the
property, or if portions thereof are being occupied by third persons
claiming adverse title thereto, may the appointment of a receiver be
justified (Motoomul vs. Arrieta, 8 SCRA 172).
In this case, there is no showing that grave or irremediable damage may
result to respondent Borromeo unless a receiver is appointed. The property
in question is real property, hence, it is neither perishable or
consummable. Even though it is mortgaged to a third person, there is no
evidence that payment of the mortgage obligation is being neglected. In

any event, the private respondent's rights and interests, may be

adequately protected during the pendency of the case by causing his
adverse claim to be annotated on the petitioner's certificates of title.
Another flaw in the order of receivership is that the person whom the trial
judge appointed as receiver is her own clerk of court. This practice has
been frowned upon by this Court:
The respondent judge committed grave abuse of discretion
in connection with the appointment of a receiver. . . . The
instant case is similar to Paranete vs. Tan, 87 Phil. 678
(1950) so that what was there said can well apply to the
actuations of the respondent judge. . . . "We hold that the
respondent judge has acted in excess of his jurisdiction
when he issued the order above adverted to. That order, in
effect, made the clerk of court a sort of a receiver charged
with the duty of receiving the proceeds of sale and the
harvest of every year during the pendency of the case with
the disadvantage that the clerk of court has not filed any
bond to guarantee the faithful discharge of his duties as
depositary; and considering that in actions involving title
real property, the appointment of a receiver cannot be
entertained because its effect would be to take the
property out of the possession of the defendant, except in
extreme cases when there is clear proof of its necessity to
save the plaintiff from grave and irremediable loss of
damage, it is evident that the action of the respondent
judge is unwarranted and unfair to the defendants.
(Mendoza vs. Arellano, 36 Phil. 59; Agonoy vs. Ruiz, 11 Phil.
204; Aquino vs. Angeles David, 77 Phil. 1087; Ylarde vs.
Enriquez, 78 Phil. 527; Arcega vs. Pecson, 44 Off. Gaz., [No.
12], 4884, 78 Phil. 743; De la Cruz vs. Guinto, 45 Off. Gaz.
pp. 1309, 1311; 79 Phil. 304). (Abrigo vs. Kayanan, 121
SCRA 20).
During the pendency of this appeal, Judge Dadole rendered a decision in
Civil Case No. MAN-1148 upholding Borromeo's claim to Descallar's
property, annulling the latter's TCTs Nos. 24790, 24791 and 24792 and
ordering the Register of Deeds of Mandaue City to issue new ones in the
name of Borromeo. This circumstance does not retroactively validate the
receivership until the decision (presumably now pending appeal) shall have
attained finality.
WHEREFORE, finding grave abuse of discretion in the order of receiver
which the respondent Court of Appeals affirmed in its decision of July 29,
1992 in CA-G.R. SP No. 27977, the petition for certiorari is hereby
GRANTED and the decision of the appellate court, as well as the order
dated March 17, 1992 of the Regional Trial Court of Mandaue City, Branch

28, in Civil Case No. MAN-1148, are hereby ANNULLED and SET ASIDE.
Costs against the private respondent.
NATALIO
VENTOSA, petitioner,
vs.
HON. WENCESLAO L. FERNAN, Judge of the Court of First Instance
of
Iloilo,
C. N. HODGES, RICARDO GUTTEA and JOSE DINEROS, as Receiver of
the La Paz lee Plant & Cold Storage Co., Inc., respondents.
Estanislao
A.
Fernandez
for
petitioner.
Felix D. Bacabac and Domingo P. Laurea for respondents.
PAREDES, J.:
By virtue of the resolution (Exhibit A), dated January 6, 1958, of the
stockholders of the La Paz Ice Plant and Cold Storage Co., Inc. (corporation
for short); a corporation authorized to manufacture and sell ice, in Iloilo
City, its franchise, factory and equipments and the premises were leased
to petitioner Natalio Ventosa. The formal document of lease (Exh. B) was
executed on January 31, 1958 and duly ratified before Notary Public Pedrito
A. Gianzon, and approved in a resolution (Exh. C), by the Board of Directors
of the said company. The contract of lease was further approved by the
Public Service Commission on May 2, 1958 (Exh. D). On February 4, 1958,
Ventosa allegedly took possession of the leased premises, including the
factory and equipment and operated the same, of such lessee.
On September 24, 1958, respondent C. N. Hodges and Ricardo Gurrea filed
an action in the CFI of Iloilo (being case No. 4994), against Manuel Lezama,
as President and Paquita B. Lezama, as Secretary of the corporation (Exh.
E) praying, among others, for the appointment ex-parte of a receiver for
the properties of the corporation. Respondent Jose Dineros was appointed
receiver and took possession of the plant. Benjamin Borja was then, the
one in charge of the factory, as manager, having been allegedly appointed
as such by Ventosa.
Under date of October 1, 1958, petitioner wrote a letter to receiver Dineros
(Exh. H) and another letter dated Oct. 3, 1958, (Exh. H-1), stating that he
could not deliver the possession of the properties of the corporation, as the
same were leased to him and requesting respondent receiver not to
interfere with the management thereof. The respondent receiver continued
to possess and refused to return the possession of the properties to the
corporation.
Petitioner filed in said case No. 4994, a motion to intervene (Exh. I) and a
complaint in intervention (Exh. J). On October 8, 1958, the defendants
Lezama spouses in the civil case, filed their answer, with counterclaims. On
October 13, 1958, the complaint in intervention was admitted (Exh. J). On
October 8, 1958, petitioner filed a motion (Exh. L) for an order from the
respondent Judge, directing the receiver not to interfere with the
management of the corporation, claiming that the ice plant was leased to
him, that the receiver had no legal right to deprive petitioner of the

possession thereof during the term of the lease, without due process of
law, and that the only right of the receiver was to receive from petitioner
the monthly rentals stipulated in the contract of lease. The consideration of
the motion was deferred, until the parties shall have filed their pleadings in
the complaint in intervention.
On October 29, 1958, Hodges and Gurrea filed their answers (Exh. M) to
the complaint in intervention, assailing the contract of lease, and claiming
that the receiver had the power and authority to continue to operate and
manage the ice plant in question, followed by petitioner's answer to the
former's counterclaim (Exh. N).
On November 22, 1958, the respondent Judge denied petitioner's motion
for restraining order, on the ground that "plaintiffs are questioning the
validity of the contract of lease in favor of petitioner". On December 23,
1958, the respondent Judge issued an order (Exh. S) denying the
petitioner's motion for reconsideration (Exh. O), because the validity of the
contract of lease, must first be decide before the petitioner could regain or
assume control of the management and administration of the corporation.
The present action for certiorari with preliminary in junction, was filed on
January 22, 1959, seeking the annulment of the orders dated November
23, 1958 and December 23, 1958, claiming that said orders were issue by
the respondent Judge, in grave abuse of discretion. A preliminary
mandatory injunction prayed for by the petitioner, was issued by this
Court.
It appears that on February 8, 1959, respondents Hodges and Gurrea filed
with this Court an ex-parte motion to dismiss the petition on the ground
that the lease had area expired as per order of the Public Service
Commission Jan. 6, 1959 or in the alternative that the writ of preliminary
mandatory injunction be lifted. Petitioner, however explained that upon
motion of Atty. Roman Cruz, said Commission on February 18, 1959,
reconsidered its order of January 6, 1959, approving the renewal of the
lease. Respondents ex parte motions were, therefore, denied. The
respondent Judge was directed to cite respondents Jose Dineros and
Ernesto Gianzon for contempt, in connection with the said preliminary
injunction, result of which proceeding has not been reported by the
respondent Judge, until the present.
On February 18, 1959, respondents Judge Fernan, Gurrea and Hodges filed
their answer to the present petition alleging, among others, that Hodges
was the registered owner of 2230 shares of the capital stock of the
corporation while Gurrea 215 shares; that they filed civil case No. 4994 as
majority stockholders and in behalf of the corporation, to recover damages
against defendants therein, for the mismanagement of the corporation; to
effect an election of the Board of Directors and for the appointment of
receiver for the properties of said corporation; that the lease contract was
simulated, fictitious and contrary to law; and if valid, the same had already
expired by virtue of the order of the Public Service Commission dated

January 6, 1959. Later, receiver Dineros filed his answer, with the usual
admissions and denials, alleging as special and affirmative defenses, the
same as those of his co-respondents, and also to the following: that the
petition lacks the proper verification; that assuming the lease to be valid,
the same could not be considered as a lien, in the sense the petitioner
wanted to convey in the citation of authorities and that the present
proceeding is not the proper remedy available to petitioner, because he
was not a stranger in the receivership proceedings.
In accordance with our resolution dated April 6, 1959 the parties adduced
the evidence, before deputy Clerk Ejercito of this Court, as Commissioner.
After petitioner had presented his first witness, Jose Manuel Lezama, the
petitioner asked the Commissioner to limit the cross-examination of
respondent on matters relevant to the main question pending before this
Court. This Court, however, promulgated a resolution deferring action on
said motion to limit evidence, until the date when this case could be heard
on the merits, without prejudice to the Commissioner continuing the
reception of evidence in the meanwhile. Respondents, thru receiver
Dineros, were able to show that he took possession of the ice plant in the
afternoon of September 27, 1958 and found therein Benjamin Borja who
did not tell him anything, much less identified himself as manager of the
petitioner; that one week thereafter, Atty. Trenas and Borja told him that
the ice plant was leased to the petitioner; that in his investigation of the
corporate papers, Borja was not a manager of the said corporation; that
the City Hall papers showed that the license of the business, taxes paid,
and purchases made of were not in the name of petitioner Ventosa but in
name of the corporation.
It would, therefore, appear that the dominant issue in the present
proceeding, is whether or not respondent Judge acted with grave abuse of
discretion, when he issued the order dated November 23, 1958, denying
petitioner's motion dated October 8, 1958 (Exh. L), which prayed for an
order restraining the respondent receiver Jose S. Dineros from interfering
with the possession, management and control of the corporation; and his
order dated December 23, 1958 (Exh. S), which denied petitioner's motion
for reconsideration, dated November 26, 1958 (Exh. P).
One fact stands in bold relief from the evidence of record, and that is, at
the time the petitioner had intervened in the civil case No. 4994, the
receiver was already in possession, operation and control of the ice plant.
The receiver took possession of the ice plant in the afternoon of Sept. 27,
1958, from the defendants in said civil case No. 4994 and not from the
petitioner. It was only on October 8, 1958, that petitioner filed his motion,
in said case, praying that the respondent receiver be restrained from
interfering with the possession and Control of the ice plant, because he
said he was a lessee. As things stand in the record, before the respondent
Court, there was no evidence at all, showing that the petitioner had been
in the actual possession and control of the ice plant. As a matter of fact an

issue before that court is whether or not the intervenor had ever been in
possession of the ice plant or its properties. Neither is there evidence in
said case that respondent-receiver took over the operation and control of
the said ice plant. There were allegations on the part of petitioner that he
was already in possession of the ice plant, when the respondent-receiver
forcibly took it over, which the latter denied, by asserting also that it was
delivered to him, voluntarily, without objection on the part of anyone.
Having thus submitted himself to the jurisdiction of the respondent court
by his intervention, petitioner necessarily became a party to civil case No.
4994. He must lay his cards before the said court, for adjudication and
determination. "After the appointment of a receiver, claimants of the
property or any interest therein may enforce their claims only by
permission of the court appointing the receiver. Such a claimant may be
made party to the suit in order to establish his claim; or he may petition to
have it heard before a master; or he may, by express permission of the
court, bring a suit for the possession, care being taken to protect the
receiver. But a receiver will not be ordered to deliver the property to a
claimant until his right is established in one of these modes." (23 R.C.L. P.
55 and cases cited therein.) "The procedure in the presentation of claims
against a receivership is either by motion or petition in the same
proceeding, or by way of intervention ... But whichever procedure is
followed, all parties in interest must be notified of each claim, which shall
be determined not in a summary manner, but after regular hearing." (Po
Pauco v. Siguenza, et al., 52 Phil. 241; China Banking Corp., et al. v.
Michelin & Cie., 58 Phil. 261, cited in II Moran's Comments on the Rules of
Court, 1957 Ed., pp. 99-100.) It is also held that property under
receivership is property in custodia legis which should remain under the
administration and control of the receivership court, through its creation,
the receiver, for the purpose of preservation and for the benefit of the
party who may be adjudged entitled to it; that the effect of the
appointment of a receiver is to remove the parties to the suit from the
possession of the property (34 Cyc. 183-184, 187). These principles of law
being true, there must be hearing of some form or a regular trial of
the issues in the said civil case No. 4994, as between respondents Gurrea
and Hodges, on one hand, and the petitioner herein, on the other, as
intervenor therein, so as to determine the party who is legally entitled to
the possession and control of the ice plant in question; and until such party
is adjudged that right, the property must remain under the control and
supervision of the court, through its receiver.
In denying the motion to restrain dated October 8, 1958, and the motion
for reconsideration dated November 26, 1958, the respondent judge did
not act with abuse of discretion, much less grave abuse of discretion. On
the contrary, respondent court acted precisely within its jurisdiction and on
what the law and jurisprudence dictated on the matter and under the facts

obtaining in that particular case. Neither were the acts capricious and
whimsical exercise of judgment.
The question of whether or not the petitioner was in possession of the
properties of the corporation prior to and the time the respondent-receiver
herein took possession the same, pursuant to the order of the respondent
Court in civil case No. 4994; and the other issues raised the parties in the
present proceedings can be best ventilated in the said civil case.
The petition is, therefore, dismissed; the Orders of respondent Judge
complained of affirmed, and the of preliminary injunction issued herein
dissolved, with costs against the petitioner.
G.R. No. L-30204 October 29, 1976
PACIFIC
MERCHANDISING
CORPORATION, plaintiff-appellee,
vs.
CONSOLACION INSURANCE & SURETY CO., INC., defendant-appellee,
CONSOLACION INSURANCE & SURETY CO., INC., third party plaintiffappellee,
vs.
GREGORIO V. PAJARILLO, third party defendant-appellant.
Vicente T. Velasco, Jr. & Associates for plaintiff-appellee.
Castro, Panlaque & De Pano for defendant and third-party plaintiffappellee.
Yuseco, Abdon & Yuseco for third-party defendant-appellant.
ANTONIO, J.:
Appeal, on a question of law, from the judgment of the Court of First
Instance Of Manila, dated August 8, 1964, affirming the decision of the City
Court in Civil Case No. 117811. The issue arose from the following facts:
In Civil Case No. 117811, which was an action instituted by Pacific
Merchandising Corporation (plaintiff-appellee) to collect the sum of
P2,562.88 from Consolacion Insurance & Surety Co., Inc., (defendantappellee) who in turn filed a third-party complaint against Gregorio V.
Pajarillo (third-party defendant-appellant). the City Court of Manila
rendered judgment on April 6, 1964, the dispositive portion of which reads,
in part, thus:
WHEREFORE, in view of the foregoing, judgment is hereby
rendered in favor of the plaintiff and against the defendant,
ordering the latter to pay the former the sum of P2,562.88
with interest thereon at the rate of 12% per annum from
May 30, 1963 until fully paid, P100.00 as for attorney's
fees, plus the costs of suit; condemning third defendant to
pay third-party plaintiff for whatever sums or amounts tlie
latter paid the plaintiff on account of this judgment.
By virtue of the appeal interposed by the third-party defendant Gregorio V.
Pajarillo, the case was elevated, on May 12, 1964, to the Court of First
Instance of Manila. On July 21, 1964, the parties, through their respective
counsel, submitted the following Stipulation of Facts:

1. That on the 19th day of October, 1962, a Writ of

Execution as isstica Iy the Court of First Instance of Manila
under Civil Case No. 49691, entitled Pacific Merchandising
Corporation vs. Leo Enterprises, Inc., a copy of the said
Writ of Execution is attached as ANNEX Ato the complaint;
2. That by virtue of the aforesaid Writ of Execution, the
Sheriff of Manila levied and attached the following:
'l. Second Hand AUTOMATICKET Machine No. MG31833;and
'2. Cinema Projectors Complete, trademark SIMPLEX
PEERLESS MAGNARC NOS. 52625 and 62387' which items
were advertised for sale on March 2, 1963, copy of Notice
of sale attached as ANNEX 'B' to the Complaint;
3. That Atty. Greg V. Pajarillo was appointed on March 2,
1963 as Receiver of all the assets, properties and
equipment of Paris Theatre, olwrated by Leo Enterprises,
Inc. under Civil Case No. 50201 entitled Gregorio V.
Pajarillo vs. Leo Enterprises, Inc.;
4. That the sale at public auction of the above described
properties was postponed and was later cancelled due to
thc representation of Atty. Greg V. Pajarillo as Receiver of
Paris Theatre operated by Leo Enterprises, Inc. in which he
undertook the 1anient of the judgment rendered in favor of
the plaintiff against Leo Enterprises, Inc. as Ier undertaking
dated March 11, 1963, copy of which is attached as ANNEX
'C' to the complaint;
5. That on or about hie third of March, 1963, third-party
defendant Pajarillo approached the third-party plaintiff and
applied for a surety bond in the amount of P5,000.00 to be
rated in favor of the abovenamed plaintiff in order to
guarantee to said plaintiff the payment of obligations in its
favor by the Leo Enterprises, Inc.;
6. That the bond applied for was in fact executed in favor
of the pIaintiff rith third-party defendant Pajarillo as
principal and third-party plaintiff as surety in the context of
the allegations of the preceding paragraph and a copy of
the said bond is attached a ANNEX 'A' to the third party
complaint;
7. That to protect thirrd party plaintiff against damage and
injury, the third party defendant Pajarillo executed in favor
of the former an INDEMNITY AGREEMENT, copy of which is
attached as ANNEX 'B' to third party complaint; tlie trms of
which aie incorporated by reference;
8. That the plaintiff received from hie aid principal, Greg V.
Pajarillo the sum of P2,000.00 leaving a balance of
P2,562.88 still unpaid aside from interest at the rate of 1%

per month and atto lnen s f cluiaient to 25% of tht amount

due as provided for in said undertaking (ANNEX 'C' to tlie
complaint);
9. That on July 1, 1963, a decision was rendered tne court
of First Instance of Manila in Civil case No. 50201, copy of'
which is attached its ANNEX 'A' to Answer to Third Party
Complaint, by virtue of which Greg V. Pajarillo, as said
Received stololcl making payments to plaintiff;
10. That the said decision in Civl Case No. 50201 dated July
1, 1963 was appealed lix defendant Leo Enterprises, Inc. to
the court of Appeals and that the records kere eleattd to
the aid ApiIiat court on August 27, 1963;
11. That on October 9, 1963, plaintiff's counsel demanded
from the said principal, Greg V. Paiarillo, the payment of
the installments corresponding to the months of May, June,
July, August and September, 1963, which remain unpaid in
spite of said demand, copy of said letter being, attached as
ANNEX 'E' to the complaint;
12. That the defendant was duly notified of the demand
made on the principal, Greg V. Pajarillo and in spite of said
notice the defendant has failed and refused to pay the
unpaid obligation;
13. That on December 19, 1963, plaintiff's counsel
demanded from the defendant the payment of the unpaid
obligation of the principal, Greg V. Pajarillo but refused and
failed to pay the same in spite of said demand;
14. That when reminded by third-party plaintiff regarding
his obligations in favor of the plaintiff, the third-party
defendant, Greg V. Pajarillo replied that he no longer was
bound to pay because he had ceased to be the receiver of
Paris Theatre operated by Leo Enterprises, Inc. by virtue of
the decision of the Court in Civil Case No. 50201 cited
above, and for this reason, third- party plaintiff refused to
pay the demand of the plaintiff 2
On the basis of the foregoing Stipulation of Facts, the Court of First
Instance rendered judgment on August 8, 1964, which judgment was
amended on August 25, 1964, affirming the appealed decision of the City
Court . 2*
The trial court predicated its judgment on the following considerations: (1)
Since the unpaid claim represents the cost of certain materials used in the
construction of the Paris Theatre, the possession of which reverted to
Gregorio V. Pajarillo as owner of said property by virtue of the judgment in
Civil Case No. 50201, "it is only simple justice that Pajarillo should pay for
the said claim. otherwise he would be enriching himself by having the said
building without paying plaintiff for the cost of certain materials that went

into its construction"; (2) "under Section 7 of Rule 61 of the former Rules of
Court, one of the powers of a receiver i8 to pay outstanding debts, and
since the said plaintiff's claim has been outstanding since August 27, 1962,
if not before, Pajarillo should have paid the same long before the alleged
termination of the receivership on July 1, 1963"; (3) the procedure outlined
in Section 8 of the Rule, namely, that whenever the court "shall determine
that the necessity for a receiver no longer exists, it shall, after due notice
to all interested parties and hearing, settle the accounts of the receiver,
direct the delivery of the funds and other property in his hands to the
persons adjudged entitled to receive them, and order the discharge of the
receiver from further duty as such," has not been followed; and (4) when
Gregorio V. Pajarillo undertook to pay the amount owed to plaintiff (Annex
"C") and executed the surety bond (Annex "D") in favor of plaintiff, he 4 6
stepped into the shoes" of the dr Leo Enterprises, Inc., .4 and the
properties of the said debtor having all subsequently passed on to Pajarillo,
there is no reason, legal or otherwise, for relieving defendants of their said
undertaking."
The court a quo likewise declared that (1) "the receivership was not
terminated by virtue of the appeal interposed by Leo Enterprises, Inc., one
of the defendants in Civil Case No. 50201, because a decision which is
appealed cannot be the subject of execution"; (2) "granting arguendo that
the decision is final and executory, the said decision cannot bind nor can it
be enforced against the plaintiff in the present case because it is not a
party in Civil Case No. 50201"; and (3) "when Atty. Pajarillo assumed the
obligation of Leo Enterprises, Inc., as a Receiver, there was a subrogation
of the party liable and, therefore, the plaintiff cannot enforce the judgment
in Civil Case No. 49691 against Leo Enterprises, Inc."
From the foregoing judgment, third-party defendant Gregorio V. Pajarillo
interposed an appeal to the Court of Appeals. The aforesaid Appellate
Court, in turn certified the same to this Court on the ground that there is
no question of fact involved, but only one of law.
The legal question is whether or not third party defendant-appellant
Gregorio V. Pajarillo is, under the facts and circumstances obtaining, liable
to plaintiff for the unpaid amount claimed. Upon the resolution of this issue
will in turn depend the liability of defendant-third-party plaintiff
Consolacion Insurance & surety Co., Inc. under the Surety Bond, on the
basis of which it was ordered by the court a quo to pay the amount
involved to plaintiff-appellee.
1. A receiver is not an agent or representative of any party to the action.
He is an officer of the court exercising his functions in the interest of
neither plaintiff nor defendant, but for the common benefit of all the
parties in interest. 3He performs his duties "subject to the control of the
Court," and every question involved in the receivership may be determined
by the court taking cognizance of the receivership proceedings. 4 Thus, "a
receiver, strictly speaking, has no right or power to make any contract

binding the property or fund in his custody or to pay out funds in his hands
without the authority or approval of the court ... . 5 As explained by Justice
Moran, speaking for the Court in a 1939 case 6 ... The custody of the
receiver is the custody of the court. His acts and possession are the acts
and possession of the court, and his contracts and liabilities are, in
contemplation of law, the contracts and liabilities of the court. As a
necessary consequence, receiver is f subject to the control and supervision
of the court at every step in his management of the property or funds
placed in his hands. ... 7 He cannot operate independently of the court, and
cannot enter into any contract without its approval.
... El depositario no puede obrar independientemente del
jusgado; contrata bajo el control del mismo; sin su
autorizacion o aprobaci6n expresa, el depositario no puede
perfeccionar ningun contrato. ... 8
2. In the case at bar, appellant Pajarillo does not dispute the fact that he
never secured the court's approal of either the agreement of March 11,
1963, with Pacific Merchandising Corporation or of his Indemnity
Agreement with the Consolacion Insurance & Surety Co., Inc. on March 14,
1963, in consideration of the performance bond submitted by the latter to
Pacific Merchandising Corporation to guarantee the payment of the
obligation. As the person to whom the possession of the theater and its
equipment was awarded by the court in Civil Case No. 50201, it was
certainly to his personal profit and advantage that the sale at public
auction of the liquipment of the theater was prevented by his execution of
the aforesaid agreement and submission of the afore-mentioned bond. In
order to bind the property or fund in his hands as receiver, he should have
applied for and obtained from the court authority to enter into the
aforesaid contract. 9 Unauthorized contracts of a receiver do not bind the
court in charge of receivership. They are the receiver's own contracts and
are
not
recognized
by
the
courts
as
contracts
of
the
receivership. 10 Consequently, the aforesaid agreement and undertaking
entered into by appellant Pajarillo not having been approved or authorized
by the receivership court should, therefore, be considered as his personal
undertaking or obligation. Certainly, if such agreements were known by the
receivership court, it would not have terminated the receivership without
due notice to the judgment creditor as required by Section 8 of Rule 59 of
the Rules of Court. This must be assumed because of the legal
presumption that official duty has been regularly performed. 11 Indeed, if it
were true that he entered into the agreement and undertaking as a
receiver, he should have, as such receiver, submitted to the court an
account of the status of the properties in his hands including the
outstanding obligations of the receivership. 12 Had he done so, it is
reasonable to assume that the judgment creditor would have opposed the
termination of the receivership, unless its claim was paid. Having failed to
perform his duty, to the prejudice of the creditor, appellant should not be

permitted to take advantage of his own wrong. The judgment creditor

having been induced to enter into the aforesaid agreement by appellant
Pajarillo it was the duty of the latter to comply with is end of the bargain.
He not only failed to perform his undertaking, but now attempts to evade
completely his liability. Under such circumstances, appellant is not entitled
to equitable relief. No ground for equitable relief can be found in a case
where a party has not only failed to perform the conditions upon which he
alone obtained the execution of the contract, but where it is clear that he
never, at any time, intended to perform them. 13
3. Moreover, it will be recalled that the obligation due the Pacific
Merchandising Corporation represented the cost of materials used in the
construction of the Paris Theatre. There can not be any question that such
improvements, in the final analysis, redounded to the advantage and
personal profit of appellant Pajarillo because the judgment in Civil Case No.
50201, which was in substance affirmed by the Appellate Court, ordered
that the "possession of the lands, building equipment, furniture, and
accessories ..." of the theater be transferred to said appellant as owner
thereof.
As the trial court aptly observed "... it is only simple justice that Pajarillo
should pay for the said claim, otherwise he would be enriching himself
without paying plaintiff for the cost of certain materials that went into its
construction. ... It is argLicd however, that he did so only as a receiver of
Leo Pajarillo by virtue of the judgment in Civil Case No. 50201 all of the
properties of Leo Enterprises, Inc. passed on to Pajarillo by virtue of the
judgment in Civil Case No. %201 ...". This Roman Law principle of "Nemo
Cum alterious detrimento locupletari protest" is embodied in Article 22
(Human Relations), 14 and Articles 2142 to 2175 (QuasiContracts) of the
New Civil Code. Long before the enactment of this Code, however, the
principle of unjust enrichment which is basic in every legal system, was
already expressly recognized in this jurisdiction.
As early as as 1903, in Perez v. Pomar, 15 this Court ruled that where one
has rendered services to another, and these services are accepted by the
latter, in the absence of proof that the service ",as rendered gratuitously, it
is but just that he should pay a reasonable remuneration therefore because
"it is a wellknown principle of law, that no one should be permitted to
enrich himself to the damage of another." Similarly in 1914, this Court
declared that in this jurisdiction, even in the absence of statute," ... under
the general principle that one person may not enrich himself at the
expense of another, a judgment creditor would not be permitted to retain
the purchase price of land sold as the property of the judgment debtor
after it has been made to appear that the judgment debtor had no title to
the land and that the purchaser had failed to secure title thereto ... 16 The
foregoing equitable principle which springs from hie fountain of good
conscience are applicable to the case at bar.

ACCORDINGLY, in view of the foregoing, the judgment unirilleal is httcf

AFFIRMED. Costs against appellant.