FULL TEXT

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 203585 July 29, 2013

MILA CABOVERDE TANTANO and ROSELLER

CABOVERDE, Petitioners,
vs.
DOMINALDA ESPINA-CABOVERDE, EVE CABOVERDE-YU, FE
CABOVERDE-LABRADOR, and JOSEPHINE E.
CABOVERDE, Respondents.

DECISION

VELASCO, JR., J.:

The Case

Assailed in this petition for review under Rule 45 are the Decision and
Resolution of the Court of Appeals (CA) rendered on June 25, 2012 and
September 21, 2012, respectively, in CA-G.R. SP. No. 03834, which
effectively affirmed the Resolutions dated February 8, 20 I 0 and July 19,
2010 of the Regional Trial Court (RTC) of Sindangan, Zamboanga del
Norte, Branch 11, in Civil Case No. S-760, approving respondent Dominalda
Espina-Caboverde's application for receivership and appointing the receivers
over the disputed properties.

The Facts
Petitioners Mila Caboverde Tantano (Mila) and Roseller Caboverde
(Roseller) are children of respondent Dominalda Espina-Caboverde
(Dominalda) and siblings of other respondents in this case, namely: Eve
Caboverde-Yu (Eve), Fe Caboverde-Labrador (Fe), and Josephine E.
Caboverde (Josephine).

Petitioners and their siblings, Ferdinand, Jeanny and Laluna, are the
registered owners and in possession of certain parcels of land, identified as
Lots 2, 3 and 4 located at Bantayan, Sindangan and Poblacion, Sindangan in
Zamboanga del Norte, having purchased them from their parents, Maximo
and Dominalda Caboverde.1

The present controversy started when on March 7, 2005, respondents Eve

and Fe filed a complaint before the RTC of Sindangan, Zamboanga del
Norte where they prayed for the annulment of the Deed of Sale purportedly
transferring Lots 2, 3 and 4 from their parents Maximo and Dominalda in
favor of petitioners Mila and Roseller and their other siblings, Jeanny,
Laluna and Ferdinand. Docketed as Civil Case No. S-760, the case was
raffled to Branch 11 of the court.

In their verified Answer, the defendants therein, including Maximo and

Dominalda, posited the validity and due execution of the contested Deed of
Sale.

During the pendency of Civil Case No. S-760, Maximo died. On May 30,
2007, Eve and Fe filed an Amended Complaint with Maximo substituted by
his eight (8) children and his wife Dominalda. The Amended Complaint
reproduced the allegations in the original complaint but added eight (8) more
real properties of the Caboverde estate in the original list.

As encouraged by the RTC, the parties executed a Partial Settlement

Agreement (PSA) where they fixed the sharing of the uncontroverted
properties among themselves, in particular, the adverted additional eight (8)
parcels of land including their respective products and improvements. Under
the PSA, Dominaldas daughter, Josephine, shall be appointed as
Administrator. The PSA provided that Dominalda shall be entitled to receive
a share of one-half (1/2) of the net income derived from the uncontroverted
properties. The PSA also provided that Josephine shall have special
authority, among others, to provide for the medicine of her mother.

The parties submitted the PSA to the court on or about March 10, 2008 for
approval.2

Before the RTC could act on the PSA, Dominalda, who, despite being
impleaded in the case as defendant, filed a Motion to Intervene separately in
the case. Mainly, she claimed that the verified Answer which she filed with
her co-defendants contained several material averments which were not
representative of the true events and facts of the case. This document, she
added, was never explained to her or even read to her when it was presented
to her for her signature.

On May 12, 2008, Dominalda filed a Motion for Leave to Admit Amended
Answer, attaching her Amended Answer where she contradicted the contents
of the aforesaid verified Answer by declaring that there never was a sale of
the three (3) contested parcels of land in favor of Ferdinand, Mila, Laluna,
Jeanny and Roseller and that she and her husband never received any
consideration from them. She made it clear that they intended to divide all
their properties equally among all their children without favor. In sum,
Dominalda prayed that the reliefs asked for in the Amended Complaint be
granted with the modification that her conjugal share and share as intestate
heir of Maximo over the contested properties be recognized.3

The RTC would later issue a Resolution granting the Motion to Admit
Amended Answer.4

On May 13, 2008, the court approved the PSA, leaving three (3) contested
properties, Lots 2, 3, and 4, for further proceedings in the main case.
Fearing that the contested properties would be squandered, Dominalda filed
with the RTC on July 15, 2008 a Verified Urgent Petition/Application to
place the controverted Lots 2, 3 and 4 under receivership. Mainly, she
claimed that while she had a legal interest in the controverted properties and
their produce, she could not enjoy them, since the income derived was solely
appropriated by petitioner Mila in connivance with her selected kin. She
alleged that she immediately needs her legal share in the income of these
properties for her daily sustenance and medical expenses. Also, she insisted
that unless a receiver is appointed by the court, the income or produce from
these properties is in grave danger of being totally dissipated, lost and
entirely spent solely by Mila and some of her selected kin. Paragraphs 5, 6,
7, and 8 of the Verified Urgent Petition/Application for
Receivership5(Application for Receivership) capture Dominaldas angst and
apprehensions:

5. That all the income of Lot Nos. 2, 3 and 4 are collected by Mila
Tantano, thru her collector Melinda Bajalla, and solely appropriated
by Mila Tantano and her selected kins, presumably with Roseller E.
Caboverde, Ferdinand E. Caboverde, Jeanny Caboverde and Laluna
Caboverde, for their personal use and benefit;

6. That defendant Dominalda Espina Caboverde, who is now sickly, in

dire need of constant medication or medical attention, not to mention
the check-ups, vitamins and other basic needs for daily sustenance, yet
despite the fact that she is the conjugal owner of the said land, could
not even enjoy the proceeds or income as these are all appropriated
solely by Mila Tantano in connivance with some of her selected kins;

7. That unless a receiver is appointed by the court, the income or

produce from these lands, are in grave danger of being totally
dissipated, lost and entirely spent solely by Mila Tantano in
connivance with some of her selected kins, to the great damage and
prejudice of defendant Dominalda Espina Caboverde, hence, there is
 no other most feasible, convenient, practicable and easy way to get,
collect, preserve, administer and dispose of the legal share or interest
of defendant Dominalda Espina Caboverde except the appointment of
a receiver x x x;

xxxx

9. That insofar as the defendant Dominalda Espina Caboverde is

concerned, time is of the utmost essence. She immediately needs her
legal share and legal interest over the income and produce of these
lands so that she can provide and pay for her vitamins, medicines,
constant regular medical check-up and daily sustenance in life. To
grant her share and interest after she may have passed away would
render everything that she had worked for to naught and waste, akin to
the saying "aanhin pa ang damo kung patay na ang kabayo."

On August 27, 2009, the court heard the Application for Receivership and
persuaded the parties to discuss among themselves and agree on how to
address the immediate needs of their mother.6

On October 9, 2009, petitioners and their siblings filed a Manifestation

formally expressing their concurrence to the proposal for receivership on the
condition, inter alia, that Mila be appointed the receiver, and that, after
getting the 2/10 share of Dominalda from the income of the three (3) parcels
of land, the remainder shall be divided only by and among Mila, Roseller,
Ferdinand, Laluna and Jeanny. The court, however, expressed its aversion to
a party to the action acting as receiver and accordingly asked the parties to
nominate neutral persons.7

On February 8, 2010, the trial court issued a Resolution granting

Dominaldas application for receivership over Lot Nos. 2, 3 and 4. The
Resolution reads:
As regards the second motion, the Court notes the urgency of placing Lot 2
situated at Bantayan, covered by TCT No. 46307; Lot 3 situated at
Poblacion, covered by TCT No. T-8140 and Lot 4 also situated at Poblacion
covered by TCT No. T-8140, all of Sindangan, Zamboanga del Norte under
receivership as defendant Dominalda Espina Caboverde (the old and sickly
mother of the rest of the parties) who claims to be the owner of the one-half
portion of the properties under litigation as her conjugal share and a portion
of the estate of her deceased husband Maximo, is in dire need for her
medication and daily sustenance. As agreed by the parties, Dominalda
Espina Caboverde shall be given 2/10 shares of the net monthly income and
products of the said properties.8

In the same Resolution, the trial court again noted that Mila, the nominee of
petitioners, could not discharge the duties of a receiver, she being a party in
the case.9 Thus, Dominalda nominated her husbands relative, Annabelle
Saldia, while Eve nominated a former barangay kagawad, Jesus Tan.10

Petitioners thereafter moved for reconsideration raising the arguments that

the concerns raised by Dominalda in her Application for Receivership are
not grounds for placing the properties in the hands of a receiver and that she
failed to prove her claim that the income she has been receiving is
insufficient to support her medication and medical needs. By Resolution11 of
July 19, 2010, the trial court denied the motion for reconsideration and at the
same time appointed Annabelle Saldia as the receiver for Dominalda and
Jesus Tan as the receiver for Eve. The trial court stated:

As to the issue of receivership, the Court stands by its ruling in granting the
same, there being no cogent reason to overturn it. As intimated by the
movant-defendant Dominalda Caboverde, Lots 2, 3 and 4 sought to be under
receivership are not among those lots covered by the adverted Partial
Amicable Settlement. To the mind of the Court, the fulfilment or non-
fulfilment of the terms and conditions laid therein nonetheless have no
bearing on these three lots. Further, as correctly pointed out by her, there is
possibility that these Lots 2, 3, and 4, of which the applicant has interest, but
are in possession of other defendants who are the ones enjoying the natural
and civil fruits thereof which might be in the danger of being lost, removed
or materially injured. Under this precarious condition, they must be under
receivership, pursuant to Sec. 1 (a) of Rule 59. Also, the purpose of the
receivership is to procure money from the proceeds of these properties to
spend for medicines and other needs of the movant defendant Dominalda
Caboverde who is old and sickly. This circumstance falls within the purview
of Sec. 1(d), that is, "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."

Both Annabelle Saldia and Jesus Tan then took their respective oaths of
office and filed a motion to fix and approve bond which was approved by
the trial court over petitioners opposition.

Undaunted, petitioners filed an Urgent Precautionary Motion to Stay

Assumption of Receivers dated August 9, 2010 reiterating what they stated
in their motion for reconsideration and expressing the view that the grant of
receivership is not warranted under the circumstances and is not consistent
with applicable rules and jurisprudence. The RTC, on the postulate that the
motion partakes of the nature of a second motion for reconsideration, thus, a
prohibited pleading, denied it via a Resolution dated October 7, 2011 where
it likewise fixed the receivers bond at PhP 100,000 each. The RTC stated:

[1] The appointed receivers, JESUS A. TAN and ANNABELLE

DIAMANTE-SALDIA, are considered duly appointed by this Court, not
only because their appointments were made upon their proper nomination
from the parties in this case, but because their appointments have been duly
upheld by the Court of Appeals in its Resolution dated 24 May 2011 denying
the herein defendants (petitioners therein) application for a writ of
preliminary injunction against the 8 February 2010 Resolution of this Court
placing the properties (Lots 2, 3 and 4) under receivership by the said
JESUS A. TAN and ANNABELLE DIAMANTE-SALDIA, and Resolution
dated 29 July 2011 denying the herein defendants (petitioners therein)
motion for reconsideration of the 24 May 2011 Resolution, both, for lack of
merit. In its latter Resolution, the Court of Appeals states:

A writ of preliminary injunction, as an ancillary or preventive remedy, may

only be resorted to by a litigant to protect or preserve his rights or interests
and for no other purpose during the pendency of the principal action. But
before a writ of preliminary injunction may be issued, there must be a clear
showing that there exists a right to be protected and that the acts against
which the writ is to be directed are violative of the said right and will cause
irreparable injury.

Unfortunately, petitioners failed to show that the acts of the receivers in this
case are inimical to their rights as owners of the property. They also failed to
show that the non-issuance of the writ of injunction will cause them
irreparable injury. The court-appointed receivers merely performed their
duties as administrators of the disputed lots. It must be stressed that the trial
court specifically appointed these receivers to preserve the properties and its
proceeds to avoid any prejudice to the parties until the main case is resolved,
Hence, there is no urgent need to issue the injunction.

ACCORDINGLY, the motion for reconsideration is DENIED for lack of

merit.

SO ORDERED.

xxxx

WHEREFORE, premises considered, this Court RESOLVES, as it is hereby

RESOLVED, that:

1. The defendants "Urgent Precautionary Motion to Stay Assumption

of Receivers" be DENIED for lack of merit. Accordingly, it being
 patently a second motion for reconsideration, a prohibited pleading,
the same is hereby ordered EXPUNGED from the records;

2. The "Motion to Fix the Bond, Acceptance and Approval of the Oath
of Office, and Bond of the Receiver" of defendant Dominalda Espina
Caboverde, be GRANTED with the receivers bond set and fixed at
ONE HUNDRED THOUSAND PESOS (PhP100,000.00) each.12

It should be stated at this juncture that after filing their Urgent Precautionary
Motion to Stay Assumption of Receivers but before the RTC could rule on it,
petitioners filed a petition for certiorari with the CA dated September 29,
2010 seeking to declare null and void the February 8, 2010 Resolution of the
RTC granting the Application for Receivership and its July 19, 2010
Resolution denying the motion for reconsideration filed by petitioners and
appointing the receivers nominated by respondents. The petition was
anchored on two grounds, namely: (1) non-compliance with the substantial
requirements under Section 2, Rule 59 of the 1997 Rules of Civil

Procedure because the trial court appointed a receiver without requiring the
applicant to file a bond; and (2) lack of factual or legal basis to place the
properties under receivership because the applicant presented support and
medication as grounds in her application which are not valid grounds for
receivership under the rules.

On June 25, 2012, the CA rendered the assailed Decision denying the
petition on the strength of the following premises and ratiocination:

Petitioners harp on the fact that the court a quo failed to require Dominalda
to post a bond prior to the issuance of the order appointing a receiver, in
violation of Section 2, Rule 59 of the Rules of court which provides that:

SEC. 2. Bond on appointment of receiver.-- Before issuing the order

appointing a receiver the court shall require the applicant to file a bond
executed to the party against whom the application is presented, in an
amount to be fixed by the court, to the effect that the applicant will pay such
party all damages he may sustain by reason of the appointment of such
receiver in case the applicant shall have procured such appointment without
sufficient cause; and the court may, in its discretion, at any time after the
appointment, require an additional bond as further security for such
damages.

The Manifestation dated September 30, 2009 filed by petitioners wherein

"they formally manifested their concurrence" to the settlement on the
application for receivership estops them from questioning the sufficiency of
the cause for the appointment of the receiver since they themselves agreed to
have the properties placed under receivership albeit on the condition that the
same be placed under the administration of Mila. Thus, the filing of the bond
by Dominalda for this purpose becomes unnecessary.

It must be emphasized that the bond filed by the applicant for receivership
answers only for all damages that the adverse party may sustain by reason of
the appointment of such receiver in case the applicant shall have procured
such appointment without sufficient cause; it does not answer for damages
suffered by reason of the failure of the receiver to discharge his duties
faithfully or to obey the orders of the court, inasmuch as such damages are
covered by the bond of the receiver.

As to the second ground, petitioners insist that there is no justification for

placing the properties under receivership since there was neither allegation
nor proof that the said properties, not the fruits thereof, were in danger of
being lost or materially injured. They believe that the public respondent
went out of line when he granted the application for receivership for the
purpose of procuring money for the medications and basic needs of
Dominalda despite the income shes supposed to receive under the Partial
Settlement Agreement.

The court a quo has the discretion to decide whether or not the appointment
of a receiver is necessary. In this case, the public respondent took into
consideration that the applicant is already an octogenarian who may not live
up to the day when this conflict will be finally settled. Thus, We find that he
did not act with grave abuse of discretion amounting to lack or excess of
jurisdiction when he granted the application for receivership based on
Section 1(d) of Rule 59 of the Rules of Court.

A final note, a petition for certiorari may be availed of only when there is no
appeal, nor any plain, speedy and adequate remedy in the ordinary course of
law. In this case, petitioners may still avail of the remedy provided in
Section 3, Rule 59 of the said Rule where they can seek for the discharge of
the receiver.

FOR REASONS STATED, the petition for certiorari is DENIED.

SO ORDERED.13

Petitioners Motion for Reconsideration was also denied by the CA on

September 21, 2012.14

Hence, the instant petition, petitioners effectively praying that the approval
of respondent Dominaldas application for receivership and necessarily the
concomitant appointment of receivers be revoked.

The Issues

Petitioners raise the following issues in their petition:

(1) Whether or not the CA committed grave abuse of discretion in

sustaining the appointment of a receiver despite clear showing that the
reasons advanced by the applicant are not any of those enumerated by
the rules; and

(2) Whether or not the CA committed grave abuse of discretion in

upholding the Resolution of the RTC and ruling that the receivership
 bond is not required prior to appointment despite clear dictates of the
rules.

The Courts Ruling

The petition is impressed with merit.

We have repeatedly held that receivership is a harsh remedy to be granted

with utmost circumspection and only in extreme situations. The doctrinal
pronouncement in Velasco & Co. v. Gochico & Co is instructive:

The power to appoint a receiver is a delicate one and should be exercised

with extreme caution and only under circumstances requiring summary relief
or where the court is satisfied that there is imminent danger of loss, lest the
injury thereby caused be far greater than the injury sought to be averted. The
court should consider the consequences to all of the parties and the power
should not be exercised when it is likely to produce irreparable injustice or
injury to private rights or the facts demonstrate that the appointment will
injure the interests of others whose rights are entitled to as much
consideration from the court as those of the complainant.15

To recall, the RTC approved the application for receivership on the stated
rationale that receivership was the most convenient and feasible means to
preserve and administer the disputed properties. As a corollary, the RTC,
agreeing with the applicant Dominalda, held that placing the disputed
properties under receivership would ensure that she would receive her share
in the income which she supposedly needed in order to pay for her vitamins,
medicines, her regular check-ups and daily sustenance. Considering that, as
the CA put it, the applicant was already an octogenarian who may not live
up to the day when the conflict will be finally settled, the RTC did not act
with grave abuse of discretion amounting to lack or excess of jurisdiction
when it granted the application for receivership since it was justified under
Sec. 1(d), Rule 59 of the Rules of Court, which states:
Section 1. Appointment of a receiver. Upon a verified application, one or
more receivers of the property subject of the action or proceeding may be
appointed by the court where the action is pending, or by the Court of
Appeals or by the Supreme Court, or a member thereof, in the following
cases:

xxxx

(d) 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. (Emphasis supplied.)

Indeed, Sec. 1(d) above is couched in general terms and broad in scope,
encompassing instances not covered by the other grounds enumerated under
the said section.16 However, in granting applications for receivership on the
basis of this section, courts must remain mindful of the basic principle that
receivership may be granted only when the circumstances so demand, either
because the property sought to be placed in the hands of a receiver is in
danger of being lost or because they run the risk of being impaired,17 and
that being a drastic and harsh remedy, receivership must be granted only
when there is a clear showing of necessity for it in order to save the plaintiff
from grave and immediate loss or damage.18

Before appointing a receiver, courts should consider: (1) whether or not the
injury resulting from such appointment would probably be greater than the
injury ensuing if the status quo is left undisturbed; and (2) whether or not the
appointment will imperil the interest of others whose rights deserve as much
a consideration from the court as those of the person requesting for
receivership.19

Moreover, this Court has consistently ruled that where the effect of the
appointment of a receiver is to take real estate out of the possession of the
defendant before the final adjudication of the rights of the parties, the
appointment should be made only in extreme cases.20
After carefully considering the foregoing principles and the facts and
circumstances of this case, We find that the grant of Dominaldas
Application for Receivership has no leg to stand on for reasons discussed
below.

First, Dominaldas alleged need for income to defray her medical expenses
and support is not a valid justification for the appointment of a receiver. The
approval of an application for receivership merely on this ground is not only
unwarranted but also an arbitrary exercise of discretion because financial
need and like reasons are not found in Sec. 1 of Rule 59 which prescribes
specific grounds or reasons for granting receivership. The RTCs insistence
that the approval of the receivership is justified under Sec. 1(d) of Rule 59,
which seems to be a catch-all provision, is far from convincing. To be clear,
even in cases falling under such provision, it is essential that there is a clear
showing that there is imminent danger that the properties sought to be placed
under receivership will be lost, wasted or injured.

Second, there is no clear showing that the disputed properties are in danger
of being lost or materially impaired and that placing them under receivership
is most convenient and feasible means to preserve, administer or dispose of
them.

Based on the allegations in her application, it appears that Dominalda sought

receivership mainly because she considers this the best remedy to ensure
that she would receive her share in the income of the disputed properties.
Much emphasis has been placed on the fact that she needed this income for
her medical expenses and daily sustenance. But it can be gleaned from her
application that, aside from her bare assertion that petitioner Mila solely
appropriated the fruits and rentals earned from the disputed properties in
connivance with some of her siblings, Dominalda has not presented or
alleged anything else to prove that the disputed properties were in danger of
being wasted or materially injured and that the appointment of a receiver
was the most convenient and feasible means to preserve their integrity.
Further, there is nothing in the RTCs February 8 and July 19, 2010
Resolutions that says why the disputed properties might be in danger of
being lost, removed or materially injured while in the hands of the
defendants a quo. Neither did the RTC explain the reasons which compelled
it to have them placed under receivership. The RTC simply declared that
placing the disputed properties under receivership was urgent and merely
anchored its approval on the fact that Dominalda was an elderly in need of
funds for her medication and sustenance. The RTC plainly concluded that
since the purpose of the receivership is to procure money from the proceeds
of these properties to spend for medicines and other needs of the Dominalda,
who is old and sickly, this circumstance falls within the purview of Sec.
1(d), that is, "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."

Verily, the RTCs purported determination that the appointment of a receiver

is the most convenient and feasible means of preserving, administering or
disposing of the properties is nothing but a hollow conclusion drawn from
inexistent factual considerations.

Third, placing the disputed properties under receivership is not necessary to

save Dominalda from grave and immediate loss or irremediable damage.
Contrary to her assertions, Dominalda is assured of receiving income under
the PSA approved by the RTC providing that she was entitled to receive a
share of one-half (1/2) of the net income derived from the uncontroverted
properties. Pursuant to the PSA, Josephine, the daughter of Dominalda, was
appointed by the court as administrator of the eight (8) uncontested lots with
special authority to provide for the medicine of her mother. Thus, it was
patently erroneous for the RTC to grant the Application for Receivership in
order to ensure Dominalda of income to support herself because precisely,
the PSA already provided for that. It cannot be over-emphasized that the
parties in Civil Case No. S-760 were willing to make arrangements to ensure
that Dominalda was provided with sufficient income. In fact, the RTC, in its
February 8, 2010 Resolution granting the Application for Receivership,
noted the agreement of the parties that "Dominalda Espina Caboverde shall
be given 2/10 shares of the net monthly income and products of said
properties."21

Finally, it must be noted that the defendants in Civil Case No. S-760 are the
registered owners of the disputed properties that were in their possession. In
cases such as this, it is settled jurisprudence that the appointment should be
made only in extreme cases and on a clear showing of necessity in order to
save the plaintiff from grave and irremediable loss or damage.22

This Court has held that a receiver should not be appointed to deprive a
party who is in possession of the property in litigation, just as a writ of
preliminary injunction should not be issued to transfer property in litigation
from the possession of one party to another where the legal title is in dispute
and the party having possession asserts ownership in himself, except in a
very clear case of evident usurpation.23

Furthermore, this Court has declared that the appointment of a receiver is not
proper when the rights of the parties, one of whom is in possession of the
property, depend on the determination of their respective claims to the title
of such property24 unless such property is in danger of being materially
injured or lost, as by the prospective foreclosure of a mortgage on it or its
portions are being occupied by third persons claiming adverse title.25

It must be underscored that in this case, Dominaldas claim to the disputed

properties and her share in the properties income and produce is at best
speculative precisely because the ownership of the disputed properties is yet
to be determined in Civil Case No. S-760. Also, except for Dominaldas
claim that she has an interest in the disputed properties, Dominalda has no
relation to their produce or income.1wphi1

By placing the disputed properties and their income under receivership, it is

as if the applicant has obtained indirectly what she could not obtain directly,
which is to deprive the other parties of the possession of the property until
the controversy between them in the main case is finally settled.26 This Court
cannot countenance this arrangement.

To reiterate, the RTCs approval of the application for receivership and the
deprivation of petitioners of possession over the disputed properties would
be justified only if compelling reasons exist. Unfortunately, no such reasons
were alleged, much less proved in this case.

In any event, Dominaldas rights may be amply protected during the

pendency of Civil Case No. S-760 by causing her adverse claim to be
annotated on the certificates of title covering the disputed properties.27

As regards the issue of whether or not the CA was correct in ruling that a
bond was not required prior to the appointment of the receivers in this case,
We rule in the negative.

Respondents Eve and Fe claim that there are sufficient grounds for the
appointment of receivers in this case and that in fact, petitioners agreed with
them on the existence of these grounds when they acquiesced to
Dominaldas Application for Receivership. Thus, respondents insist that
where there is sufficient cause to appoint a receiver, there is no need for an
applicants bond because under Sec. 2 of Rule 59, the very purpose of the
bond is to answer for all damages that may be sustained by a party by reason
of the appointment of a receiver in case the applicant shall have procured
such appointment without sufficient cause. Thus, they further argue that
what is needed is the receivers bond which was already fixed and approved
by the RTC.28 Also, the CA found that there was no need for Dominalda to
file a bond considering that petitioners filed a Manifestation where they
formally consented to the receivership. Hence, it was as if petitioners agreed
that there was sufficient cause to place the disputed properties under
receivership; thus, the CA declared that petitioners were estopped from
challenging the sufficiency of such cause.
The foregoing arguments are misplaced. Sec. 2 of Rule 59 is very clear in
that before issuing the order appointing a receiver the court shall require the
applicant to file a bond executed to the party against whom the application is
presented. The use of the word "shall" denotes its mandatory nature; thus,
the consent of the other party, or as in this case, the consent of petitioners, is
of no moment. Hence, the filing of an applicants bond is required at all
times. On the other hand, the requirement of a receivers bond rests upon the
discretion of the court. Sec. 2 of Rule 59 clearly states that the court may, in
its discretion, at any time after the appointment, require an additional bond
as further security for such damages.

WHEREFORE, upon the foregoing considerations, this petition is

GRANTED. The assailed CA June 25, 2012 Decision and September 21,
2012 Resolution in CA-G.R. SP No. 03834 are hereby REVERSED and SET
ASIDE. The Resolutions dated February 8, 2010 and July 19, 2010 of the
RTC, Branch 11 in Sindangan, Zamboanga del Norte, in Civil Case No. S-
760, approving respondent Dominalda Espina-Caboverdes application for
receivership and appointing the receivers over the disputed properties are
likewise SET ASIDE.

SO ORDERED.

PRESBITERO J. VELASCO, JR.

Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 168332 June 19, 2009

ANA MARIA A. KORUGA, Petitioner,

vs.
TEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE, CESAR S.
PAGUIO, FRANCISCO A. RIVERA, and THE HONORABLE COURT
OF APPEALS, THIRD DIVISION, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 169053 June 19, 2009

TEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE, CESAR S.

PAGUIO, and FRANCISCO A. RIVERA,Petitioners,
vs.
HON. SIXTO MARELLA, JR., Presiding Judge, Branch 138, Regional
Trial Court of Makati City, and ANA MARIA A.
KORUGA, Respondents.

DECISION

NACHURA, J.:

Before this Court are two petitions that originated from a Complaint filed by
Ana Maria A. Koruga (Koruga) before the Regional Trial Court (RTC) of
Makati City against the Board of Directors of Banco Filipino and the
Members of the Monetary Board of the Bangko Sentral ng Pilipinas (BSP)
for violation of the Corporation Code, for inspection of records of a
corporation by a stockholder, for receivership, and for the creation of a
management committee.

G.R. No. 168332

The first is a Petition for Certiorari under Rule 65 of the Rules of Court,
docketed as G.R. No. 168332, praying for the annulment of the Court of
Appeals (CA) Resolution1 in CA-G.R. SP No. 88422 dated April 18, 2005
granting the prayer for a Writ of Preliminary Injunction of therein petitioners
Teodoro O. Arcenas, Jr., Albert C. Aguirre, Cesar S. Paguio, and Francisco
A. Rivera (Arcenas, et al.).

Koruga is a minority stockholder of Banco Filipino Savings and Mortgage

Bank. On August 20, 2003, she filed a complaint before the Makati RTC
which was raffled to Branch 138, presided over by Judge Sixto Marella,
Jr.2Korugas complaint alleged:

10. 1 Violation of Sections 31 to 34 of the Corporation Code ("Code") which

prohibit self-dealing and conflicts of interest of directors and officers, thus:

(a) For engaging in unsafe, unsound, and fraudulent banking practices

that have jeopardized the welfare of the Bank, its shareholders, who
includes among others, the Petitioner, and depositors. (sic)

(b) For granting and approving loans and/or "loaned" sums of money
to six (6) "dummy" borrower corporations ("Borrower Corporations")
which, at the time of loan approval, had no financial capacity to
justify the loans. (sic)

(c) For approving and accepting a dacion en pago, or payment of

loans with property instead of cash, resulting to a diminished future
cumulative interest income by the Bank and a decline in its liquidity
position. (sic)
 (d) For knowingly giving "favorable treatment" to the Borrower
Corporations in which some or most of them have interests, i.e.
interlocking directors/officers thereof, interlocking ownerships. (sic)

(e) For employing their respective offices and functions as the Banks
officers and directors, or omitting to perform their functions and
duties, with negligence, unfaithfulness or abuse of confidence of
fiduciary duty, misappropriated or misapplied or ratified by inaction
the misappropriation or misappropriations, of (sic) almost P1.6 Billion
Pesos (sic) constituting the Banks funds placed under their trust and
administration, by unlawfully releasing loans to the Borrower
Corporations or refusing or failing to impugn these, knowing before
the loans were released or thereafter that the Banks cash resources
would be dissipated thereby, to the prejudice of the Petitioner, other
Banco Filipino depositors, and the public.

10.2 Right of a stockholder to inspect the records of a corporation (including

financial statements) under Sections 74 and 75 of the Code, as implemented
by the Interim Rules;

(a) Unlawful refusal to allow the Petitioner from inspecting or otherwise

accessing the corporate records of the bank despite repeated demand in
writing, where she is a stockholder. (sic)

10.3 Receivership and Creation of a Management Committee pursuant to:

(a) Rule 59 of the 1997 Rules of Civil Procedure ("Rules");

(b) Section 5.2 of R.A. No. 8799;

(c) Rule 1, Section 1(a)(1) of the Interim Rules;

(d) Rule 1, Section 1(a)(2) of the Interim Rules;

(e) Rule 7 of the Interim Rules;

 (f) Rule 9 of the Interim Rules; and

(g) The General Banking Law of 2000 and the New Central Bank
Act.3

On September 12, 2003, Arcenas, et al. filed their Answer raising, among
others, the trial courts lack of jurisdiction to take cognizance of the case.
They also filed a Manifestation and Motion seeking the dismissal of the case
on the following grounds: (a) lack of jurisdiction over the subject matter; (b)
lack of jurisdiction over the persons of the defendants; (c) forum-shopping;
and (d) for being a nuisance/harassment suit. They then moved that the trial
court rule on their affirmative defenses, dismiss the intra-corporate case, and
set the case for preliminary hearing.

In an Order dated October 18, 2004, the trial court denied the Manifestation
and Motion, ruling thus:

The result of the procedure sought by defendants Arcenas, et al. (sic) is for
the Court to conduct a preliminary hearing on the affirmative defenses raised
by them in their Answer. This [is] proscribed by the Interim Rules of
Procedure on Intracorporate (sic) Controversies because when a preliminary
hearing is conducted it is "as if a Motion to Dismiss was filed" (Rule 16,
Section 6, 1997 Rules of Civil Procedure). A Motion to Dismiss is a
prohibited pleading under the Interim Rules, for which reason, no favorable
consideration can be given to the Manifestation and Motion of defendants,
Arcenas, et al.

The Court finds no merit to (sic) the claim that the instant case is a nuisance
or harassment suit.

WHEREFORE, the Court defers resolution of the affirmative defenses

raised by the defendants Arcenas, et al.4
Arcenas, et al. moved for reconsideration5 but, on January 18, 2005, the RTC
denied the motion.6 This prompted Arcenas, et al. to file before the CA a
Petition for Certiorari and Prohibition under Rule 65 of the Rules of Court
with a prayer for the issuance of a writ of preliminary injunction and a
temporary retraining order (TRO).7

On February 9, 2005, the CA issued a 60-day TRO enjoining Judge Marella

from conducting further proceedings in the case.8

On February 22, 2005, the RTC issued a Notice of Pre-trial9 setting the case
for pre-trial on June 2 and 9, 2005. Arcenas, et al. filed a Manifestation and
Motion10 before the CA, reiterating their application for a writ of preliminary
injunction. Thus, on April 18, 2005, the CA issued the assailed Resolution,
which reads in part:

(C)onsidering that the Temporary Restraining Order issued by this Court on

February 9, 2005 expired on April 10, 2005, it is necessary that a writ of
preliminary injunction be issued in order not to render ineffectual whatever
final resolution this Court may render in this case, after the petitioners shall
have posted a bond in the amount of FIVE HUNDRED THOUSAND
(P500,000.00) PESOS.

SO ORDERED.11

Dissatisfied, Koruga filed this Petition for Certiorari under Rule 65 of the
Rules of Court. Koruga alleged that the CA effectively gave due course to
Arcenas, et al.s petition when it issued a writ of preliminary injunction
without factual or legal basis, either in the April 18, 2005 Resolution itself or
in the records of the case. She prayed that this Court restrain the CA from
implementing the writ of preliminary injunction and, after due proceedings,
make the injunction against the assailed CA Resolution permanent.12

In their Comment, Arcenas, et al. raised several procedural and substantive

issues. They alleged that the Verification and Certification against Forum-
Shopping attached to the Petition was not executed in the manner prescribed
by Philippine law since, as admitted by Korugas counsel himself, the same
was only a facsimile.

They also averred that Koruga had admitted in the Petition that she never
asked for reconsideration of the CAs April 18, 2005 Resolution, contending
that the Petition did not raise pure questions of law as to constitute an
exception to the requirement of filing a Motion for Reconsideration before a
Petition for Certiorari is filed.

They, likewise, alleged that the Petition may have already been rendered
moot and academic by the July 20, 2005 CA Decision,13 which denied their
Petition, and held that the RTC did not commit grave abuse of discretion in
issuing the assailed orders, and thus ordered the RTC to proceed with the
trial of the case.

Meanwhile, on March 13, 2006, this Court issued a Resolution granting the
prayer for a TRO and enjoining the Presiding Judge of Makati RTC, Branch
138, from proceeding with the hearing of the case upon the filing by
Arcenas, et al. of a P50,000.00 bond. Koruga filed a motion to lift the TRO,
which this Court denied on July 5, 2006.

On the other hand, respondents Dr. Conrado P. Banzon and Gen. Ramon
Montao also filed their Comment on Korugas Petition, raising
substantially the same arguments as Arcenas, et al.

G.R. No. 169053

G.R. No. 169053 is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court, with prayer for the issuance of a TRO and a writ of
preliminary injunction filed by Arcenas, et al.

In their Petition, Arcenas, et al. asked the Court to set aside the
Decision14 dated July 20, 2005 of the CA in CA-G.R. SP No. 88422, which
denied their petition, having found no grave abuse of discretion on the part
of the Makati RTC. The CA said that the RTC Orders were interlocutory in
nature and, thus, may be assailed by certiorari or prohibition only when it is
shown that the court acted without or in excess of jurisdiction or with grave
abuse of discretion. It added that the Supreme Court frowns upon resort to
remedial measures against interlocutory orders.

Arcenas, et al. anchored their prayer on the following grounds: that, in their
Answer before the RTC, they had raised the issue of failure of the court to
acquire jurisdiction over them due to improper service of summons; that the
Koruga action is a nuisance or harassment suit; that there is another case
involving the same parties for the same cause pending before the Monetary
Board of the BSP, and this constituted forum-shopping; and that jurisdiction
over the subject matter of the case is vested by law in the BSP.15

Arcenas, et al. assign the following errors:

I. THE COURT OF APPEALS, IN "FINDING NO GRAVE ABUSE OF

DISCRETION COMMITTED BY PUBLIC RESPONDENT REGIONAL
TRIAL COURT OF MAKATI, BRANCH 138, IN ISSUING THE
ASSAILED ORDERS," FAILED TO CONSIDER AND MERELY
GLOSSED OVER THE MORE TRANSCENDENT ISSUES OF THE
LACK OF JURISDICTION ON THE PART OF SAID PUBLIC
RESPONDENT OVER THE SUBJECT MATTER OF THE CASE
BEFORE IT, LITIS PENDENTIA AND FORUM SHOPPING, AND THE
CASE BELOW BEING A NUISANCE OR HARASSMENT SUIT,
EITHER ONE AND ALL OF WHICH GOES/GO TO RENDER THE
ISSUANCE BY PUBLIC RESPONDENT OF THE ASSAILED ORDERS A
GRAVE ABUSE OF DISCRETION.

II. THE FINDING OF THE COURT OF APPEALS OF "NO GRAVE

ABUSE OF DISCRETION COMMITTED BY PUBLIC RESPONDENT
REGIONAL TRIAL COURT OF MAKATI, BRANCH 138, IN ISSUING
THE ASSAILED ORDERS," IS NOT IN ACCORD WITH LAW OR WITH
THE APPLICABLE DECISIONS OF THIS HONORABLE COURT.16

Meanwhile, in a Manifestation and Motion filed on August 31, 2005, Koruga

prayed for, among others, the consolidation of her Petition with the Petition
for Review on Certiorari under Rule 45 filed by Arcenas, et al., docketed as
G.R. No. 169053. The motion was granted by this Court in a Resolution
dated September 26, 2005.

Our Ruling

Initially, we will discuss the procedural issue.

Arcenas, et al. argue that Korugas petition should be dismissed for its
defective Verification and Certification Against Forum-Shopping, since only
a facsimile of the same was attached to the Petition. They also claim that the
Verification and Certification Against Forum-Shopping, allegedly executed
in Seattle, Washington, was not authenticated in the manner prescribed by
Philippine law and not certified by the Philippine Consulate in the United
States.

This contention deserves scant consideration.

On the last page of the Petition in G.R. No. 168332, Korugas counsel
executed an Undertaking, which reads as follows:

In view of that fact that the Petitioner is currently in the United States,
undersigned counsel is attaching a facsimile copy of the Verification and
Certification Against Forum-Shopping duly signed by the Petitioner and
notarized by Stephanie N. Goggin, a Notary Public for the Sate (sic) of
Washington. Upon arrival of the original copy of the Verification and
Certification as certified by the Office of the Philippine Consul, the
undersigned counsel shall immediately provide duplicate copies thereof to
the Honorable Court.17
Thus, in a Compliance18 filed with the Court on September 5, 2005,
petitioner submitted the original copy of the duly notarized and
authenticated Verification and Certification Against Forum-Shopping she
had executed.19 This Court noted and considered the Compliance satisfactory
in its Resolution dated November 16, 2005. There is, therefore, no need to
further belabor this issue.

We now discuss the substantive issues in this case.

First, we resolve the prayer to nullify the CAs April 18, 2005 Resolution.

We hold that the Petition in G.R. No. 168332 has become moot and
academic. The writ of preliminary injunction being questioned had
effectively been dissolved by the CAs July 20, 2005 Decision. The
dispositive portion of the Decision reads in part:

The case is REMANDED to the court a quo for further proceedings and to
resolve with deliberate dispatch the intra-corporate controversies and
determine whether there was actually a valid service of summons. If, after
hearing, such service is found to have been improper, then new summons
should be served forthwith.20

Accordingly, there is no necessity to restrain the implementation of the writ

of preliminary injunction issued by the CA on April 18, 2005, since it no
longer exists.

However, this Court finds that the CA erred in upholding the jurisdiction of,
and remanding the case to, the RTC.

The resolution of these petitions rests mainly on the determination of one

fundamental issue: Which body has jurisdiction over the Koruga Complaint,
the RTC or the BSP?

We hold that it is the BSP that has jurisdiction over the case.
A reexamination of the Complaint is in order.

Korugas Complaint charged defendants with violation of Sections 31 to 34

of the Corporation Code, prohibiting self-dealing and conflict of interest of
directors and officers; invoked her right to inspect the corporations records
under Sections 74 and 75 of the Corporation Code; and prayed for
Receivership and Creation of a Management Committee, pursuant to Rule
59 of the Rules of Civil Procedure, the Securities Regulation Code, the
Interim Rules of Procedure Governing Intra-Corporate Controversies, the
General Banking Law of 2000, and the New Central Bank Act. She accused
the directors and officers of Banco Filipino of engaging in unsafe, unsound,
and fraudulent banking practices, more particularly, acts that violate the
prohibition on self-dealing.

It is clear that the acts complained of pertain to the conduct of Banco

Filipinos banking business. A bank, as defined in the General Banking
Law,21 refers to an entity engaged in the lending of funds obtained in the
form of deposits.22 The banking business is properly subject to reasonable
regulation under the police power of the state because of its nature and
relation to the fiscal affairs of the people and the revenues of the state. Banks
are affected with public interest because they receive funds from the general
public in the form of deposits. It is the Governments responsibility to see to
it that the financial interests of those who deal with banks and banking
institutions, as depositors or otherwise, are protected. In this country, that
task is delegated to the BSP, which pursuant to its Charter, is authorized to
administer the monetary, banking, and credit system of the Philippines. It is
further authorized to take the necessary steps against any banking institution
if its continued operation would cause prejudice to its depositors, creditors
and the general public as well.23

The law vests in the BSP the supervision over operations and activities of
banks. The New Central Bank Act provides:
Section 25. Supervision and Examination. - The Bangko Sentral shall have
supervision over, and conduct periodic or special examinations of, banking
institutions and quasi-banks, including their subsidiaries and affiliates
engaged in allied activities.24

Specifically, the BSPs supervisory and regulatory powers include:

4.1 The issuance of rules of conduct or the establishment of standards

of operation for uniform application to all institutions or functions
covered, taking into consideration the distinctive character of the
operations of institutions and the substantive similarities of specific
functions to which such rules, modes or standards are to be applied;

4.2 The conduct of examination to determine compliance with

laws and regulations if the circumstances so warrant as
determined by the Monetary Board;

4.3 Overseeing to ascertain that laws and Regulations are

complied with;

4.4 Regular investigation which shall not be oftener than once a

year from the last date of examination to determine whether an
institution is conducting its business on a safe or sound
basis: Provided, That the deficiencies/irregularities found by or
discovered by an audit shall be immediately addressed;

4.5 Inquiring into the solvency and liquidity of the institution (2-
D); or

4.6 Enforcing prompt corrective action.25

Koruga alleges that "the dispute in the trial court involves the manner with
which the Directors (sic) have handled the Banks affairs, specifically the
fraudulent loans and dacion en pago authorized by the Directors in favor of
several dummy corporations known to have close ties and are indirectly
controlled by the Directors."26 Her allegations, then, call for the examination
of the allegedly questionable loans. Whether these loans are covered by the
prohibition on self-dealing is a matter for the BSP to determine. These are
not ordinary intra-corporate matters; rather, they involve banking activities
which are, by law, regulated and supervised by the BSP. As the Court has
previously held:

It is well-settled in both law and jurisprudence that the Central Monetary

Authority, through the Monetary Board, is vested with exclusive authority to
assess, evaluate and determine the condition of any bank, and finding such
condition to be one of insolvency, or that its continuance in business would
involve a probable loss to its depositors or creditors, forbid bank or non-
bank financial institution to do business in the Philippines; and shall
designate an official of the BSP or other competent person as receiver to
immediately take charge of its assets and liabilities.27

Correlatively, the General Banking Law of 2000 specifically deals with

loans contracted by bank directors or officers, thus:

SECTION 36. Restriction on Bank Exposure to Directors, Officers,

Stockholders and Their Related Interests. No director or officer of any
bank shall, directly or indirectly, for himself or as the representative or agent
of others, borrow from such bank nor shall he become a guarantor, indorser
or surety for loans from such bank to others, or in any manner be an obligor
or incur any contractual liability to the bank except with the written approval
of the majority of all the directors of the bank, excluding the director
concerned: Provided, That such written approval shall not be required for
loans, other credit accommodations and advances granted to officers under a
fringe benefit plan approved by the Bangko Sentral. The required approval
shall be entered upon the records of the bank and a copy of such entry shall
be transmitted forthwith to the appropriate supervising and examining
department of the Bangko Sentral.
Dealings of a bank with any of its directors, officers or stockholders and
their related interests shall be upon terms not less favorable to the bank than
those offered to others.

After due notice to the board of directors of the bank, the office of any bank
director or officer who violates the provisions of this Section may be
declared vacant and the director or officer shall be subject to the penal
provisions of the New Central Bank Act.

The Monetary Board may regulate the amount of loans, credit

accommodations and guarantees that may be extended, directly or indirectly,
by a bank to its directors, officers, stockholders and their related interests, as
well as investments of such bank in enterprises owned or controlled by said
directors, officers, stockholders and their related interests. However, the
outstanding loans, credit accommodations and guarantees which a bank may
extend to each of its stockholders, directors, or officers and their related
interests, shall be limited to an amount equivalent to their respective
unencumbered deposits and book value of their paid-in capital contribution
in the bank: Provided, however, That loans, credit accommodations and
guarantees secured by assets considered as non-risk by the Monetary Board
shall be excluded from such limit: Provided, further, That loans, credit
accommodations and advances to officers in the form of fringe benefits
granted in accordance with rules as may be prescribed by the Monetary
Board shall not be subject to the individual limit.

The Monetary Board shall define the term "related interests."

The limit on loans, credit accommodations and guarantees prescribed herein

shall not apply to loans, credit accommodations and guarantees extended by
a cooperative bank to its cooperative shareholders.28

Furthermore, the authority to determine whether a bank is conducting

business in an unsafe or unsound manner is also vested in the Monetary
Board. The General Banking Law of 2000 provides:
SECTION 56. Conducting Business in an Unsafe or Unsound
Manner. In determining whether a particular act or omission, which is
not otherwise prohibited by any law, rule or regulation affecting banks,
quasi-banks or trust entities, may be deemed as conducting business in an
unsafe or unsound manner for purposes of this Section, the Monetary Board
shall consider any of the following circumstances:

56.1. The act or omission has resulted or may result in material loss or
damage, or abnormal risk or danger to the safety, stability, liquidity or
solvency of the institution;

56.2. The act or omission has resulted or may result in material loss or
damage or abnormal risk to the institution's depositors, creditors, investors,
stockholders or to the Bangko Sentral or to the public in general;

56.3. The act or omission has caused any undue injury, or has given any
unwarranted benefits, advantage or preference to the bank or any party in the
discharge by the director or officer of his duties and responsibilities through
manifest partiality, evident bad faith or gross inexcusable negligence; or

56.4. The act or omission involves entering into any contract or transaction
manifestly and grossly disadvantageous to the bank, quasi-bank or trust
entity, whether or not the director or officer profited or will profit thereby.

Whenever a bank, quasi-bank or trust entity persists in conducting its

business in an unsafe or unsound manner, the Monetary Board may, without
prejudice to the administrative sanctions provided in Section 37 of the New
Central Bank Act, take action under Section 30 of the same Act and/or
immediately exclude the erring bank from clearing, the provisions of law to
the contrary notwithstanding.

Finally, the New Central Bank Act grants the Monetary Board the power to
impose administrative sanctions on the erring bank:
Section 37. Administrative Sanctions on Banks and Quasi-banks. - Without
prejudice to the criminal sanctions against the culpable persons provided in
Sections 34, 35, and 36 of this Act, the Monetary Board may, at its
discretion, impose upon any bank or quasi-bank, their directors and/or
officers, for any willful violation of its charter or by-laws, willful delay in
the submission of reports or publications thereof as required by law, rules
and regulations; any refusal to permit examination into the affairs of the
institution; any willful making of a false or misleading statement to the
Board or the appropriate supervising and examining department or its
examiners; any willful failure or refusal to comply with, or violation of, any
banking law or any order, instruction or regulation issued by the Monetary
Board, or any order, instruction or ruling by the Governor; or any
commission of irregularities, and/or conducting business in an unsafe or
unsound manner as may be determined by the Monetary Board, the
following administrative sanctions, whenever applicable:

(a) fines in amounts as may be determined by the Monetary Board to

be appropriate, but in no case to exceed Thirty thousand pesos
(P30,000) a day for each violation, taking into consideration the
attendant circumstances, such as the nature and gravity of the
violation or irregularity and the size of the bank or quasi-bank;

(b) suspension of rediscounting privileges or access to Bangko Sentral

credit facilities;

(c) suspension of lending or foreign exchange operations or authority

to accept new deposits or make new investments;

(d) suspension of interbank clearing privileges; and/or

(e) revocation of quasi-banking license.

Resignation or termination from office shall not exempt such director or

officer from administrative or criminal sanctions.
The Monetary Board may, whenever warranted by circumstances,
preventively suspend any director or officer of a bank or quasi-bank pending
an investigation: Provided, That should the case be not finally decided by the
Bangko Sentral within a period of one hundred twenty (120) days after the
date of suspension, said director or officer shall be reinstated in his position:
Provided, further, That when the delay in the disposition of the case is due to
the fault, negligence or petition of the director or officer, the period of delay
shall not be counted in computing the period of suspension herein provided.

The above administrative sanctions need not be applied in the order of their
severity.

Whether or not there is an administrative proceeding, if the institution and/or

the directors and/or officers concerned continue with or otherwise persist in
the commission of the indicated practice or violation, the Monetary Board
may issue an order requiring the institution and/or the directors and/or
officers concerned to cease and desist from the indicated practice or
violation, and may further order that immediate action be taken to correct the
conditions resulting from such practice or violation. The cease and desist
order shall be immediately effective upon service on the respondents.

The respondents shall be afforded an opportunity to defend their action in a

hearing before the Monetary Board or any committee chaired by any
Monetary Board member created for the purpose, upon request made by the
respondents within five (5) days from their receipt of the order. If no such
hearing is requested within said period, the order shall be final. If a hearing
is conducted, all issues shall be determined on the basis of records, after
which the Monetary Board may either reconsider or make final its order.

The Governor is hereby authorized, at his discretion, to impose upon

banking institutions, for any failure to comply with the requirements of law,
Monetary Board regulations and policies, and/or instructions issued by the
Monetary Board or by the Governor, fines not in excess of Ten thousand
pesos (P10,000) a day for each violation, the imposition of which shall be
final and executory until reversed, modified or lifted by the Monetary Board
on appeal.29

Koruga also accused Arcenas, et al. of violation of the Corporation Codes

provisions on self-dealing and conflict of interest. She invoked Section 31 of
the Corporation Code, which defines the liability of directors, trustees, or
officers of a corporation for, among others, acquiring any personal or
pecuniary interest in conflict with their duty as directors or trustees, and
Section 32, which prescribes the conditions under which a contract of the
corporation with one or more of its directors or trustees the so-called "self-
dealing directors"30 would be valid. She also alleged that Banco Filipinos
directors violated Sections 33 and 34 in approving the loans of corporations
with interlocking ownerships, i.e., owned, directed, or managed by close
associates of Albert C. Aguirre.

Sections 31 to 34 of the Corporation Code provide:

Section 31. Liability of directors, trustees or officers. - Directors or trustees

who wilfully and knowingly vote for or assent to patently unlawful acts of
the corporation or who are guilty of gross negligence or bad faith in
directing the affairs of the corporation or acquire any personal or pecuniary
interest in conflict with their duty as such directors or trustees shall be liable
jointly and severally for all damages resulting therefrom suffered by the
corporation, its stockholders or members and other persons.

When a director, trustee or officer attempts to acquire or acquires, in

violation of his duty, any interest adverse to the corporation in respect of any
matter which has been reposed in him in confidence, as to which equity
imposes a disability upon him to deal in his own behalf, he shall be liable as
a trustee for the corporation and must account for the profits which
otherwise would have accrued to the corporation.

Section 32. Dealings of directors, trustees or officers with the corporation. -

A contract of the corporation with one or more of its directors or trustees or
officers is voidable, at the option of such corporation, unless all the
following conditions are present:

1. That the presence of such director or trustee in the board meeting in

which the contract was approved was not necessary to constitute a
quorum for such meeting;

2. That the vote of such director or trustee was not necessary for the
approval of the contract;

3. That the contract is fair and reasonable under the circumstances;

and

4. That in case of an officer, the contract has been previously authorized by

the board of directors.

Where any of the first two conditions set forth in the preceding paragraph is
absent, in the case of a contract with a director or trustee, such contract may
be ratified by the vote of the stockholders representing at least two-thirds
(2/3) of the outstanding capital stock or of at least two-thirds (2/3) of the
members in a meeting called for the purpose: Provided, That full disclosure
of the adverse interest of the directors or trustees involved is made at such
meeting: Provided, however, That the contract is fair and reasonable under
the circumstances.

Section 33. Contracts between corporations with interlocking directors. -

Except in cases of fraud, and provided the contract is fair and reasonable
under the circumstances, a contract between two or more corporations
having interlocking directors shall not be invalidated on that ground alone:
Provided, That if the interest of the interlocking director in one corporation
is substantial and his interest in the other corporation or corporations is
merely nominal, he shall be subject to the provisions of the preceding
section insofar as the latter corporation or corporations are concerned.
Stockholdings exceeding twenty (20%) percent of the outstanding capital
stock shall be considered substantial for purposes of interlocking directors.

Section 34. Disloyalty of a director. - Where a director, by virtue of his

office, acquires for himself a business opportunity which should belong to
the corporation, thereby obtaining profits to the prejudice of such
corporation, he must account to the latter for all such profits by refunding
the same, unless his act has been ratified by a vote of the stockholders
owning or representing at least two-thirds (2/3) of the outstanding capital
stock. This provision shall be applicable, notwithstanding the fact that the
director risked his own funds in the venture.

Korugas invocation of the provisions of the Corporation Code is misplaced.

In an earlier case with similar antecedents, we ruled that:

The Corporation Code, however, is a general law applying to all types of

corporations, while the New Central Bank Act regulates specifically banks
and other financial institutions, including the dissolution and liquidation
thereof. As between a general and special law, the latter shall prevail
generalia specialibus non derogant.31

Consequently, it is not the Interim Rules of Procedure on Intra-Corporate

Controversies,32 or Rule 59 of the Rules of Civil Procedure on Receivership,
that would apply to this case. Instead, Sections 29 and 30 of the New Central
Bank Act should be followed, viz.:

Section 29. Appointment of Conservator. - Whenever, on the basis of a

report submitted by the appropriate supervising or examining department,
the Monetary Board finds that a bank or a quasi-bank is in a state of
continuing inability or unwillingness to maintain a condition of liquidity
deemed adequate to protect the interest of depositors and creditors, the
Monetary Board may appoint a conservator with such powers as the
Monetary Board shall deem necessary to take charge of the assets, liabilities,
and the management thereof, reorganize the management, collect all monies
and debts due said institution, and exercise all powers necessary to restore
its viability. The conservator shall report and be responsible to the Monetary
Board and shall have the power to overrule or revoke the actions of the
previous management and board of directors of the bank or quasi-bank.

xxxx

The Monetary Board shall terminate the conservatorship when it is satisfied

that the institution can continue to operate on its own and the
conservatorship is no longer necessary. The conservatorship shall likewise
be terminated should the Monetary Board, on the basis of the report of the
conservator or of its own findings, determine that the continuance in
business of the institution would involve probable loss to its depositors or
creditors, in which case the provisions of Section 30 shall apply.

Section 30. Proceedings in Receivership and Liquidation. - Whenever, upon

report of the head of the supervising or examining department, the Monetary
Board finds that a bank or quasi-bank:

(a) is unable to pay its liabilities as they become due in the ordinary
course of business: Provided, That this shall not include inability to
pay caused by extraordinary demands induced by financial panic in
the banking community;

(b) has insufficient realizable assets, as determined by the Bangko

Sentral, to meet its liabilities; or

(c) cannot continue in business without involving probable losses to

its depositors or creditors; or

(d) has willfully violated a cease and desist order under Section 37
that has become final, involving acts or transactions which amount to
fraud or a dissipation of the assets of the institution; in which cases,
the Monetary Board may summarily and without need for prior
 hearing forbid the institution from doing business in the Philippines
and designate the Philippine Deposit Insurance Corporation as
receiver of the banking institution.

xxxx

The actions of the Monetary Board taken under this section or under Section
29 of this Act shall be final and executory, and may not be restrained or set
aside by the court except on petition for certiorari on the ground that the
action taken was in excess of jurisdiction or with such grave abuse of
discretion as to amount to lack or excess of jurisdiction. The petition for
certiorari may only be filed by the stockholders of record representing the
majority of the capital stock within ten (10) days from receipt by the board
of directors of the institution of the order directing receivership, liquidation
or conservatorship.

The designation of a conservator under Section 29 of this Act or the

appointment of a receiver under this section shall be vested exclusively with
the Monetary Board. Furthermore, the designation of a conservator is not a
precondition to the designation of a receiver.33

On the strength of these provisions, it is the Monetary Board that exercises

exclusive jurisdiction over proceedings for receivership of banks.

Crystal clear in Section 30 is the provision that says the "appointment of a

receiver under this section shall be vested exclusively with the Monetary
Board." The term "exclusively" connotes that only the Monetary Board can
resolve the issue of whether a bank is to be placed under receivership and,
upon an affirmative finding, it also has authority to appoint a receiver. This
is further affirmed by the fact that the law allows the Monetary Board to take
action "summarily and without need for prior hearing."

And, as a clincher, the law explicitly provides that "actions of the Monetary
Board taken under this section or under Section 29 of this Act shall be final
and executory, and may not be restrained or set aside by the court except on
a petition for certiorari on the ground that the action taken was in excess of
jurisdiction or with such grave abuse of discretion as to amount to lack or
excess of jurisdiction."1avvphi1

From the foregoing disquisition, there is no doubt that the RTC has no
jurisdiction to hear and decide a suit that seeks to place Banco Filipino under
receivership.

Koruga herself recognizes the BSPs power over the allegedly unlawful acts
of Banco Filipinos directors. The records of this case bear out that Koruga,
through her legal counsel, wrote the Monetary Board34 on April 21, 2003 to
bring to its attention the acts she had enumerated in her complaint before the
RTC. The letter reads in part:

Banco Filipino and the current members of its Board of Directors should be
placed under investigation for violations of banking laws, the commission of
irregularities, and for conducting business in an unsafe or unsound manner.
They should likewise be placed under preventive suspension by virtue of the
powers granted to the Monetary Board under Section 37 of the Central Bank
Act. These blatant violations of banking laws should not go by without
penalty. They have put Banco Filipino, its depositors and stockholders, and
the entire banking system (sic) in jeopardy.

xxxx

We urge you to look into the matter in your capacity as regulators. Our
clients, a minority stockholders, (sic) and many depositors of Banco Filipino
are prejudiced by a failure to regulate, and taxpayers are prejudiced by
accommodations granted by the BSP to Banco Filipino35

In a letter dated May 6, 2003, BSP Supervision and Examination

Department III Director Candon B. Guerrero referred Korugas letter to
Arcenas for comment.36 On June 6, 2003, Banco Filipinos then Executive
Vice President and Corporate Secretary Francisco A. Rivera submitted the
banks comments essentially arguing that Korugas accusations lacked legal
and factual bases.37

On the other hand, the BSP, in its Answer before the RTC, said that it had
been looking into Banco Filipinos activities. An October 2002 Report of
Examination (ROE) prepared by the Supervision and Examination
Department (SED) noted certain dacion payments, out-of-the-ordinary
expenses, among other dealings. On July 24, 2003, the Monetary Board
passed Resolution No. 1034 furnishing Banco Filipino a copy of the ROE
with instructions for the bank to file its comment or explanation within 30 to
90 days under threat of being fined or of being subjected to other remedial
actions. The ROE, the BSP said, covers substantially the same matters raised
in Korugas complaint. At the time of the filing of Korugas complaint on
August 20, 2003, the period for Banco Filipino to submit its explanation had
not yet expired.38

Thus, the courts jurisdiction could only have been invoked after the
Monetary Board had taken action on the matter and only on the ground that
the action taken was in excess of jurisdiction or with such grave abuse of
discretion as to amount to lack or excess of jurisdiction.

Finally, there is one other reason why Korugas complaint before the RTC
cannot prosper. Given her own admission and the same is likewise
supported by evidence that she is merely a minority stockholder of Banco
Filipino, she would not have the standing to question the Monetary Boards
action. Section 30 of the New Central Bank Act provides:

The petition for certiorari may only be filed by the stockholders of record
representing the majority of the capital stock within ten (10) days from
receipt by the board of directors of the institution of the order directing
receivership, liquidation or conservatorship.
All the foregoing discussion yields the inevitable conclusion that the CA
erred in upholding the jurisdiction of, and remanding the case to, the RTC.
Given that the RTC does not have jurisdiction over the subject matter of the
case, its refusal to dismiss the case on that ground amounted to grave abuse
of discretion.

WHEREFORE, the foregoing premises considered, the Petition in G.R. No.

168332 is DISMISSED, while the Petition in G.R. No. 169053 is
GRANTED. The Decision of the Court of Appeals dated July 20, 2005 in
CA-G.R. SP No. 88422 is hereby SET ASIDE. The Temporary Restraining
Order issued by this Court on March 13, 2006 is made PERMANENT.
Consequently, Civil Case No. 03-985, pending before the Regional Trial
Court of Makati City, is DISMISSED.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA

Associate Justice
DIGESTED CASES

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 203585 July 29, 2013

MILA CABOVERDE TANTANO and ROSELLER

CABOVERDE, Petitioners,
vs.
DOMINALDA ESPINA-CABOVERDE, EVE CABOVERDE-YU, FE
CABOVERDE-LABRADOR, and JOSEPHINE E.
CABOVERDE, Respondents.

The Facts

Petitioners Mila Caboverde Tantano (Mila) and Roseller Caboverde

(Roseller) are children of respondent Dominalda Espina-Caboverde
(Dominalda) and siblings of other respondents in this case, namely: Eve
Caboverde-Yu (Eve), Fe Caboverde-Labrador (Fe), and Josephine E.
Caboverde (Josephine).

Petitioners and their siblings, Ferdinand, Jeanny and Laluna, are the
registered owners and in possession of certain parcels of land, identified as
Lots 2, 3 and 4 located at Bantayan, Sindangan and Poblacion, Sindangan in
Zamboanga del Norte, having purchased them from their parents, Maximo
and Dominalda Caboverde.
The present controversy started when on March 7, 2005, respondents Eve
and Fe filed a complaint before the RTC of Sindangan, Zamboanga del
Norte where they prayed for the annulment of the Deed of Sale purportedly
transferring Lots 2, 3 and 4 from their parents Maximo and Dominalda in
favor of petitioners Mila and Roseller and their other siblings, Jeanny,
Laluna and Ferdinand. Docketed as Civil Case No. S-760, the case was
raffled to Branch 11 of the court.

In their verified Answer, the defendants therein, including Maximo and

Dominalda, posited the validity and due execution of the contested Deed of
Sale.

During the pendency of Civil Case No. S-760, Maximo died. On May 30,
2007, Eve and Fe filed an Amended Complaint with Maximo substituted by
his eight (8) children and his wife Dominalda. The Amended Complaint
reproduced the allegations in the original complaint but added eight (8) more
real properties of the Caboverde estate in the original list.

As encouraged by the RTC, the parties executed a Partial Settlement

Agreement (PSA) where they fixed the sharing of the uncontroverted
properties among themselves, in particular, the adverted additional eight (8)
parcels of land including their respective products and improvements. Under
the PSA, Dominaldas daughter, Josephine, shall be appointed as
Administrator. The PSA provided that Dominalda shall be entitled to receive
a share of one-half (1/2) of the net income derived from the uncontroverted
properties. The PSA also provided that Josephine shall have special
authority, among others, to provide for the medicine of her mother.

Fearing that the contested properties would be squandered, Dominalda filed

with the RTC on July 15, 2008 a Verified Urgent Petition/Application to
place the controverted Lots 2, 3 and 4 under receivership. Mainly, she
claimed that while she had a legal interest in the controverted properties and
their produce, she could not enjoy them, since the income derived was solely
appropriated by petitioner Mila in connivance with her selected kin. She
alleged that she immediately needs her legal share in the income of these
properties for her daily sustenance and medical expenses. Also, she insisted
that unless a receiver is appointed by the court, the income or produce from
these properties is in grave danger of being totally dissipated, lost and
entirely spent solely by Mila and some of her selected kin.

ISSUE

1) Whether or not the CA committed grave abuse of discretion in sustaining

the appointment of a receiver despite clear showing that the reasons
advanced by the applicant are not any of those enumerated by the rules

Ruling:

After carefully considering the foregoing principles and the facts and
circumstances of this case, We find that the grant of Dominaldas
Application for Receivership has no leg to stand on for reasons discussed
below.

First, Dominaldas alleged need for income to defray her medical expenses
and support is not a valid justification for the appointment of a receiver. The
approval of an application for receivership merely on this ground is not only
unwarranted but also an arbitrary exercise of discretion because financial
need and like reasons are not found in Sec. 1 of Rule 59 which prescribes
specific grounds or reasons for granting receivership. The RTCs insistence
that the approval of the receivership is justified under Sec. 1(d) of Rule 59,
which seems to be a catch-all provision, is far from convincing. To be clear,
even in cases falling under such provision, it is essential that there is a clear
showing that there is imminent danger that the properties sought to be placed
under receivership will be lost, wasted or injured.
Second, there is no clear showing that the disputed properties are in danger
of being lost or materially impaired and that placing them under receivership
is most convenient and feasible means to preserve, administer or dispose of
them.

Based on the allegations in her application, it appears that Dominalda sought

receivership mainly because she considers this the best remedy to ensure
that she would receive her share in the income of the disputed properties.
Much emphasis has been placed on the fact that she needed this income for
her medical expenses and daily sustenance. But it can be gleaned from her
application that, aside from her bare assertion that petitioner Mila solely
appropriated the fruits and rentals earned from the disputed properties in
connivance with some of her siblings, Dominalda has not presented or
alleged anything else to prove that the disputed properties were in danger of
being wasted or materially injured and that the appointment of a receiver
was the most convenient and feasible means to preserve their integrity.

Further, there is nothing in the RTCs February 8 and July 19, 2010
Resolutions that says why the disputed properties might be in danger of
being lost, removed or materially injured while in the hands of the
defendants a quo. Neither did the RTC explain the reasons which compelled
it to have them placed under receivership. The RTC simply declared that
placing the disputed properties under receivership was urgent and merely
anchored its approval on the fact that Dominalda was an elderly in need of
funds for her medication and sustenance. The RTC plainly concluded that
since the purpose of the receivership is to procure money from the proceeds
of these properties to spend for medicines and other needs of the Dominalda,
who is old and sickly, this circumstance falls within the purview of Sec.
1(d), that is, "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."
Verily, the RTCs purported determination that the appointment of a receiver
is the most convenient and feasible means of preserving, administering or
disposing of the properties is nothing but a hollow conclusion drawn from
inexistent factual considerations.

Third, placing the disputed properties under receivership is not necessary to

save Dominalda from grave and immediate loss or irremediable damage.
Contrary to her assertions, Dominalda is assured of receiving income under
the PSA approved by the RTC providing that she was entitled to receive a
share of one-half (1/2) of the net income derived from the uncontroverted
properties. Pursuant to the PSA, Josephine, the daughter of Dominalda, was
appointed by the court as administrator of the eight (8) uncontested lots with
special authority to provide for the medicine of her mother. Thus, it was
patently erroneous for the RTC to grant the Application for Receivership in
order to ensure Dominalda of income to support herself because precisely,
the PSA already provided for that. It cannot be over-emphasized that the
parties in Civil Case No. S-760 were willing to make arrangements to ensure
that Dominalda was provided with sufficient income. In fact, the RTC, in its
February 8, 2010 Resolution granting the Application for Receivership,
noted the agreement of the parties that "Dominalda Espina Caboverde shall
be given 2/10 shares of the net monthly income and products of said
properties."

Finally, it must be noted that the defendants in Civil Case No. S-760 are the
registered owners of the disputed properties that were in their possession. In
cases such as this, it is settled jurisprudence that the appointment should be
made only in extreme cases and on a clear showing of necessity in order to
save the plaintiff from grave and irremediable loss or damage.
Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 168332 June 19, 2009

ANA MARIA A. KORUGA, Petitioner,

vs.
TEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE, CESAR S.
PAGUIO, FRANCISCO A. RIVERA, and THE HONORABLE COURT
OF APPEALS, THIRD DIVISION, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 169053 June 19, 2009

TEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE, CESAR S.

PAGUIO, and FRANCISCO A. RIVERA,Petitioners,
vs.
HON. SIXTO MARELLA, JR., Presiding Judge, Branch 138, Regional
Trial Court of Makati City, and ANA MARIA A.
KORUGA, Respondents.

FACTS:
Koruga is a minority stockholder of Banco Filipino Savings and Mortgage
Bank. On August 20, 2003, she filed a complaint before the Makati RTC
which was raffled to Branch 138, presided over by Judge Sixto Marella, Jr.
Korugas complaint alleged:
xxxx
10.3 Receivership and Creation of a Management Committee pursuant to:

(a) Rule 59 of the 1997 Rules of Civil Procedure ("Rules");

 (b) Section 5.2 of R.A. No. 8799;

(c) Rule 1, Section 1(a)(1) of the Interim Rules;

(d) Rule 1, Section 1(a)(2) of the Interim Rules;

(e) Rule 7 of the Interim Rules;

(f) Rule 9 of the Interim Rules; and

(g) The General Banking Law of 2000 and the New Central Bank
Act.3

On September 12, 2003, Arcenas, et al. filed their Answer raising, among
others, the trial courts lack of jurisdiction to take cognizance of the case.
They also filed a Manifestation and Motion seeking the dismissal of the case
on the following grounds: (a) lack of jurisdiction over the subject matter; (b)
lack of jurisdiction over the persons of the defendants; (c) forum-shopping;
and (d) for being a nuisance/harassment suit. They then moved that the trial
court rule on their affirmative defenses, dismiss the intra-corporate case, and
set the case for preliminary hearing.

In an Order dated October 18, 2004, the trial court denied the Manifestation
and Motion, ruling thus:

The result of the procedure sought by defendants Arcenas, et al. (sic) is for
the Court to conduct a preliminary hearing on the affirmative defenses raised
by them in their Answer. This [is] proscribed by the Interim Rules of
Procedure on Intracorporate (sic) Controversies because when a preliminary
hearing is conducted it is "as if a Motion to Dismiss was filed" (Rule 16,
Section 6, 1997 Rules of Civil Procedure). A Motion to Dismiss is a
prohibited pleading under the Interim Rules, for which reason, no favorable
consideration can be given to the Manifestation and Motion of defendants,
Arcenas, et al.
The Court finds no merit to (sic) the claim that the instant case is a nuisance
or harassment suit.

WHEREFORE, the Court defers resolution of the affirmative defenses

raised by the defendants Arcenas, et al.

ISSUE:
Whether or not the Monetary Board, not the RTC, has the jurisdiction over
the case of Receivership

RULING
On the strength of these provisions, it is the Monetary Board that exercises
exclusive jurisdiction over proceedings for receivership of banks.

Crystal clear in Section 30 is the provision that says the "appointment of a

receiver under this section shall be vested exclusively with the Monetary
Board." The term "exclusively" connotes that only the Monetary Board can
resolve the issue of whether a bank is to be placed under receivership and,
upon an affirmative finding, it also has authority to appoint a receiver. This
is further affirmed by the fact that the law allows the Monetary Board to take
action "summarily and without need for prior hearing."

And, as a clincher, the law explicitly provides that "actions of the Monetary
Board taken under this section or under Section 29 of this Act shall be final
and executory, and may not be restrained or set aside by the court except on
a petition for certiorari on the ground that the action taken was in excess of
jurisdiction or with such grave abuse of discretion as to amount to lack or
excess of jurisdiction."1avvphi1
From the foregoing disquisition, there is no doubt that the RTC has no
jurisdiction to hear and decide a suit that seeks to place Banco Filipino under
receivership.

Koruga herself recognizes the BSPs power over the allegedly unlawful acts
of Banco Filipinos directors. The records of this case bear out that Koruga,
through her legal counsel, wrote the Monetary Board on April 21, 2003 to
bring to its attention the acts she had enumerated in her complaint before the
RTC. The letter reads in part:

Banco Filipino and the current members of its Board of Directors should be
placed under investigation for violations of banking laws, the commission of
irregularities, and for conducting business in an unsafe or unsound manner.
They should likewise be placed under preventive suspension by virtue of the
powers granted to the Monetary Board under Section 37 of the Central Bank
Act. These blatant violations of banking laws should not go by without
penalty. They have put Banco Filipino, its depositors and stockholders, and
the entire banking system (sic) in jeopardy.
G.R. No. L-29169 August 19, 1968

ROGER CHAVEZ, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, THE PEOPLE OF THE
PHILIPPINES and THE WARDEN OF THE CITY JAIL OF
MANILA, respondents.

Estanislao E. Fernandez and Fausto Arce for petitioner.

Office of the Solicitor General for respondents.

But receivership is not an action. It is but an auxiliary remedy, a mere

incident of the suit to help achieve its purpose. Consequently, it cannot be
said that the grant of receivership in one case will amount to res judicata on
the merits of the other cases. The grant or denial of this provisional remedy
will still depend on the need for it in the particular action.

Facts
Respondent Fidela Y. Vargas owned a five-hectare mixed coconut land
and rice fields in Sorsogon. Petitioner Evelina G. Chavez had been staying
in a remote portion of the land with her family, planting coconut seedlings
on the land and supervising the harvest of coconut and palay. Fidela and
Evelina agreed to divide the gross sales of all products from the land
between themselves. Since Fidela was busy with her law practice, Evelina
undertook to hold in trust for Fidela her half of the profits.
But Fidela claimed that Evelina had failed to remit her share of the
profits and, despite demand to turn over the administration of the property to
Fidela, had refused to do so. Consequently, Fidela filed a complaint against
Evelina and her daughter, Aida C. Deles, who was assisting her mother, for
recovery of possession, rent, and damages with prayer for the immediate
appointment of a receiver before the Regional Trial Court (RTC) of Bulan,
Sorsogon.[1] In their answer, Evelina and Aida claimed that the RTC did
not have jurisdiction over the subject matter of the case since it actually
involved an agrarian dispute.

After hearing, the RTC dismissed the complaint for lack of

jurisdiction based on Fidelas admission that Evelina and Aida were tenants
who helped plant coconut seedlings on the land and supervised the harvest
of coconut and palay. As tenants, the defendants also shared in the gross
sales of the harvest. The court threw out Fidelas claim that, since Evelina
and her family received the land already planted with fruit-bearing trees,
they could not be regarded as tenants. Cultivation, said the court, included
the tending and caring of the trees. The court also regarded as relevant
Fidelas pending application for a five-hectare retention and Evelinas
pending protest relative to her three-hectare beneficiary share.

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

Parenthetically, Fidela also filed three estafa cases with the RTC of
Olongapo City and a complaint for dispossession with the Department of
Agrarian Reform Adjudication Board (DARAB) against Evelina and Aida.
In all these cases, Fidela asked for the immediate appointment of a receiver
for the property.

ISSUES:
1. Whether or not respondent Fidela is guilty of forum shopping
considering that she had earlier filed identical applications for
receivership over the subject properties in the criminal cases she
filed with the RTC of Olongapo City against petitioners Evelina and
Aida and in the administrative case that she filed against them
before the DARAB; and

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

application for receivership.

RULING:

One. By forum shopping, a party initiates two or more actions in separate

tribunals, grounded on the same cause, trusting that one or the other tribunal
would favorably dispose of the matter. The elements of forum shopping are
the same as in litispendentia where the final judgment in one case will
amount to res judicatain the other. The elements of forum shopping are: (1)
identity of parties, or at least such parties as would represent the same
interest in both actions; (2) identity of rights asserted and relief prayed for,
the relief being founded on the same facts; and (3) identity of the two
preceding particulars such that any judgment rendered in the other action
will, regardless of which party is successful, amount to res judicata in the
action under consideration.

Here, however, the various suits Fidela initiated against Evelina and Aida
involved different causes of action and sought different reliefs. The present
civil actionthat she filed with the RTC sought to recover possession of the
property based on Evelina and Aidas failure to account for its fruits. The
estafa cases she filed with the RTC accused the two of misappropriating and
converting her share in the harvests for their own benefit. Her complaint for
dispossession under Republic Act 8048 with the DARAB sought to
dispossess the two for allegedly cutting coconut trees without the prior
authority of Fidela or of the Philippine Coconut Authority.

The above cases are similar only in that they involved the same parties and
Fidela sought the placing of the properties under receivership in all of them.
But receivership is not an action. It is but an auxiliary remedy, a mere
incident of the suit to help achieve its purpose. Consequently, it cannot be
said that the grant of receivership in one case will amount to res judicata on
the merits of the other cases. The grant or denial of this provisional remedy
will still depend on the need for it in the particular action.

Two. In any event, we hold that the CA erred in granting receivership over
the property in dispute in this case. For one thing, a petition for receivership
under Section 1(b), Rule 59 of the Rules of Civil Procedure requires that the
property or fund subject of the action is in danger of being lost, removed, or
materially injured, necessitating its protection or preservation. Its object is
the prevention of imminent danger to the property. If the action does not
require such protection or preservation, the remedy is not receivership.

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

Besides, the RTC dismissed Fidelas action for lack of jurisdiction over the
case, holding that the issues it raised properly belong to the DARAB. The
case before the CA is but an offshoot of that RTC case. Given that the RTC
has found that it had no jurisdiction over the case, it would seem more
prudent for the CA to first provisionally determine that the RTC had
jurisdiction before granting receivership which is but an incident of the main
action.
WHEREFORE, the Court GRANTS the petition. The Resolutions dated
April 12, 2006 and July 7, 2006 of the Court of Appeals in CA-G.R. CV
85552, areREVERSED and SET ASIDE.
The receivership is LIFTED and the Court of Appeals is directed to resolve
CA-G.R. CV 85552 with utmost dispatch.