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K.

Grounds for Appointment

ROCHA & CO., Sociedad en Comandita vs. A. S. CROSSFIELD, Judge of the Court of First Instance of
Manila, and FRANCISCO T. FIGUERAS

FACTS: Figueras filed an action against Rocha & Co. in which he alleged that he is one of the general
partners of the limited partnership under the name of Carman & Co. It was also alleged that under the
articles of partnership, any one of the partners had the right to withdraw from the partnership upon six
months' notice and that upon giving the said notice, his participation in the profits of the partnership
should cease but that his capital should draw interest at the market rate until it was returned

Later, such partnership was reorganized under the name of Rocha & Co. which assumed all the debts
and liabilities of Carman & Co., and took possession of all its assets.

The issue in this case involves the right of Figueras to receive his proportionate part of the reserve fund
and of the sinking fund.

Although there was no allegation that the partnership was dissolved by the withdrawal of Figueras, the
lower court granted the application for the appointment receiver filed by Figueras with respect to the
property of Rocha & Co.

Rocha & Co. filed an original action for certiorari before the Supreme Court asking that the order
appointing the receiver be declared void.

ISSUE: WON the appointing of the receiver was void.

HELD: The order of the court below appointing a receiver in this case was illegal and void.

Section 174 of the Code of Civil Procedure provides for the grounds upon which a receiver
may be appointed.

"SEC. 174. When a receiver may be appointed. A receiver may be appointed


in the following cases:

"(1) When a corporation has been dissolved, or is insolvent, or is in imminent


danger of insolvency, or has forfeited its corporate rights.

"(2) Where it is made to appear by the complaint or answer, and by such other
proof as the judge may require, that the party making the application for the
appointment of receiver has an interest in the property or fund which is the subject of
the action and it shown that the property or fund is in danger of being lost, removed,
or materially injured unless a receiver shall be appointed to guard and preserve it.

"(3) In an action by the mortgagee for the foreclosure of a mortgaged where it


appears that the property is in danger of being wasted or materially injured and that its
value is probably insufficient to discharge the mortgage debt.
"(4) Whenever in other cases it shall be made to appear to the court that the
appointment of a receiver is the most convenient and feasible means of preserving and
administering the property which is the subject of litigation during the pendency of the
action."

The case at bar does not fall within any of the provisions of this section. There is no allegation
in the complaint that the plaintiff is the owner of any of the property of Rocha & Co., nor is there any
allegation that he has any lien thereon, nor are there any facts alleged in the complaint from which it
could be inferred that he was owner of such property or had any lien thereon.

The order making such appointment was void and was beyond the jurisdiction of the court,
although that court had jurisdiction of the main action.
AGUSTINA PARANETE, PERINO VILLAR, PEDRO HERNANDEZ, COMEDES DALLATON, VALERIANO
MILLANO, FELISIANA NAVARRO, and EDUARDO B. OCAMPO vs. BIENVENIDO A. TAN, Judge,
Court of First Instance of Rizal, Rizal City Branch, FELIX ALCARAS, FRUCTUOSA VASQUEZ,
MAXIMA VASQUEZ, NORBERTA VASQUEZ and THE PROVINCIAL SHERIFF OF RIZAL

FACTS: Alcaras, Vasquez, et. al., (plaintiffs) filed a case for the recovery of five parcels of land
against Paranete, et. al. (defendants).

Plaintiffs filed a petition for a writ of preliminary injunction for the purpose of ousting the
defendants from the lands. The judge issued the writ of injunction. The defendants moved for the
reconsideration, thus the judge reconsidered his order but required the defendants to render an
accounting of the harvest, as well as all future harvests, and if the harvest had already been sold,
to deposit the proceeds of the sale with the clerk of court.

Defendants again filed a motion for the reconsideration of this order, but it was denied.

ISSUE: WON the respondent judge exceeded his jurisdiction in issuing his reconsidered order
under the terms and conditions set forth.

HELD: The respondent judge has acted in excess of his jurisdiction.

That order, in effect, made the clerk of court a sort of a receiver charged with the duty of receiving
the proceeds of sale and the harvest of every year during the pendency of the case with the
disadvantage that the clerk of court has not filed any bond to guarantee the faithful discharge of
his duties as depository.

In actions involving title to real property, the appointment of a receiver cannot be entertained
because its effect would be to take the property out of the possession of the defendant, except
in extreme cases when there is clear proof of its necessity to save the plaintiff from grave and
irremediable loss or damage.

(NOTE [not so related to the topic but still related]: Paranete, one of the defendants, has been in
possession of the lands since 1943, in the exercise of her rights as owner and made improvements
thereon at her own expense.

The question of ownership is herein involved and both parties seem to have documentary evidence in
support of their respective claims, and to order the defendants to render an accounting of the harvest
and to deposit the proceeds in case of sale thereof during the pendency of the case would be to deprive
them of their means of livelihood before the case is decided on the merits. The situation obtaining is
such that it does not warrant the placing of the lands in the hands of a neutral person as is required
when a receiver is appointed. To do so would be unfair and would unnecessarily prejudice the
defendants.)
MILA CABOVERDE TANTANO and ROSELLER CABOVERDE vs. DOMINALDA ESPINA-CABOVERDE, EVE
CABOVERDE-YU, FE CABOVERDE-LABRADOR, and JOSEPHINE E. CABOVERDE

FACTS: A Deed of Sale was allegedly executed by Maximo and Dominalda in favor of their children, Mila,
Roseller, Jeanny, Laluna and Ferdinand.

Respondents, Eve and Fe filed a complaint before the RTC for the annulment of such Deed of Sale.

As encouraged by the RTC, the parties executed a Partial Settlement Agreement (PSA). Under the PSA,
Dominalda's daughter, Josephine, shall be appointed as Administrator. But before the RTC could act on
the PSA, Dominalda filed a Motion to Intervene separately in the case, declaring that there never was a
sale of the 3 contested parcels of land in favor of Ferdinand, Mila, Laluna, Jeanny and Roseller.

The court approved the PSA, leaving 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 a Verified
Urgent Petition/Application to place the controverted Lots 2, 3 and 4 under receivership.

The trial court issued a Resolution granting Dominalda's application for receivership over Lot Nos. 2, 3
and 4.

Dominalda nominated her husband's relative, Annabelle Saldia, while Eve nominated a
former barangay kagawad, Jesus Tan.

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.

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.

Petitioners filed a petition for certiorari with the CA seeking to declare null and void the Resolution of the
RTC granting the Application for Receivership. They alleged that 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.

The CA denied the petition for certiorari.

ISSUES:

1. WON the appointment of a receiver was valid.

2. WON the receivership bond was not required prior to the appointment.

HELD:

First Issue
The RTCs appointment of a receiver was not valid.

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 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.

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:

xxx xxx xxx

(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.

Sec. 1 (d) is couched in general terms and broad in scope. 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.

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.

The grant of Dominalda's Application for Receivership has no leg to stand on based on the following
reasons:

1. The financial need (for Dominaldas medical expenses) and like reasons are not found in Sec. 1 of Rule
59 which prescribes specific grounds or reasons for granting receivership;

2. 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;

3. Dominalda is assured of receiving income under the PSA approved by the RTC providing that she was
entitled to receive a share of 1/2 of the net income derived from the uncontroverted properties.

(NOTE: 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.
The Supreme 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 property 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.

The ownership of the disputed properties is yet to be determined. 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.)

Second Issue:

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. Hence, the filing of an applicant's bond is required at
all times. On the other hand, the requirement of a receiver's bond rests upon the discretion of the court.
Sec. 2 of Rule 59 clearly states that the court may, in its discretion, at any time after the appointment,
require an additional bond as further security for such damages.
L. Oath, Bond

CITIBANK, N.A. (Formerly First National City Bank), petitioner, vs. THE HONORABLE COURT OF
APPEALS AND DOUGLAS F. ANAMA

FACTS: Anama obtained a loan from Citibank. In consideration for the loan, Anama executed a
promissory note to pay the bank in installments. Anama also constituted a Chattel Mortgage of even
date in favor of petitioner, on various machineries and equipment.

Upon Anamas failure to pay the monthly installments, Citibank filed a verified complaint against private
respondent Anama for the collection of his unpaid balance of P405,820.52 for the delivery and
possession of the chattels.

The trial court issued an Order of Replevin over the machineries and equipment covered by the Chattel
Mortgage. However, after the pre-trial conference, the lower court issued an order for joint management
by the Citibank and Anama of the latter's business for 10 days, after which the former would be appointed
receiver for the said business.
Citibank took over private respondent's business as receiver. Later, the lower court proceeded to try the
case on the merits.
The Citibank presented a Motion for the Issuance of an Alias Writ of Seizure, ordering the sheriff to seize
the properties involved and dispose of them in accordance with the Revised Rules of Court, which was
granted by the trial court.
By virtue of the Alias Writ of Seizure, petitioner took possession of the mortgaged chattels. Upon Anamas
petition, the Court of Appeals held that the provisions of the Rules of Court on Receivership have not been
complied with.
ISSUE: WON the Citibank was required to file a receivers bond and to take an oath.
HELD: The Citibank was required to file a receivers bond.
From the evidence on record, it is palpably clear that petitioner Citibank did, in fact, assume receivership.
It should be noted, however, that under the old Rules of Court which was in effect at the time this case
was still at trial stage, a bond for the appointment of a receiver was not generally required of the
applicant, except when the application was made ex parte. Therefore, petitioner was not absolutely
required to file a bond. Besides, as stipulated in the chattel mortgage contract between the parties,
petitioner, as the mortgagee, is entitled to the appointment of a receiver without a bond.
However, the Court of Appeals was right in finding a defect in such assumption of receivership in that the
requirement of taking an oath has not been complied with. Section 5, Rule 59, states:
"SECTION 5. Oath and bond of receiver. Before entering upon his duties, the receiver
must be sworn to perform them faithfully, and must file a bond, executed to such
person and in such sum as the court or judge may direct, to the effect that he will
faithfully discharge the duties of receiver in the action and obey the orders of the court
therein."
Thus, the trial court erred in allowing the petitioner to assume receivership over the machine shop of
private respondent without requiring the appointed receiver to take an oath.
N. Powers

SEBASTIANA MARTINEZ ET AL. vs. CLEMENCIA GRAO ET AL., ESTANISLAO REYES

FACTS: Reyes was appointed receiver and entered into possession of the property in controversy. The
property in his hands did not produce enough income to meet the expenses and pay the sums due the
holder of first mortgage. For this reason the receiver recommended to the court that the property be
sold. Judge Paredes made an order authorizing the receiver to sell the land. The proceeds of the sale to
be deposited in the clerk's office to abide the result of the litigation.

The receiver meanwhile had reported his inability to find a purchaser, and he himself came forward
with an offer to take the property. An order was passed by Judge Borbon authorizing the clerk of the
court to execute a deed transferring the property to Reyes.

The Martinez heirs opposed the sale and attempted to bring the order upon appeal. Grao was also an
opponent of the sale because of the inclusion therein of three parcels of property which belonged to
her.

The Supreme Court ruled that the said three parcels must be excluded from the sale made to Reyes.
Such order treats the sale to Reyes as in every respect valid and indicates that the sale should be
approved.

Reyes submitted a motion to the lower court asking that he be declared owner of the property. Judge
Paredes, instead entered an order declaring that the sale was a nullity for failure of Reyes turn over the
amount of the sale to the clerk of the court.

The Supreme Court thus clarified that Reyes had not complied with the conditions required to enable
him to become a purchaser of the property of which he is receiver. It will therefore, be the duty of the
lower court to deal with him hereafter exclusively in the character of receiver and to hold him
responsible in that character only.

(The SC said that the above paragraph can be taken as dictum, nevertheless it is true that the paragraph
quoted expressed the truth.)

Despite the decisions, Reyes continuously pretended to be the owner of the property by virtue of the
purchaser referred to, and he has refused to submit any account of his receivership in the subsequent
years.

In view of this attitude on the part of the appellant, a number of motions were made by adverse parties
seeking to bring him to account and to have him removed from the office of receiver.

Judge Parades entered an order granting the motion and the appointment of Estanislao Reyes as
receiver is revoked, annulled and adjudged to be of no effect without prejudice to the rendering of an
account.

Reyes appealed such order to the Supreme Court and claimed that the he has made expenditures
necessary to the care and conservation of the property over and above the proceeds obtained from the
land. He further contended that the lower court had no power to turn him out at least as long as the
expenditures made by him have not been reimbursed.

ISSUE: WON a receiver may refuse to submit any account of his receivership.

HELD: The order appealed from was affirmed with the sole modification that the appellant is given 40
days from the date of the return of this record to the lower court within which to submit his accounts
as receiver.

The court, however, is of the opinion that if upon the prompt submission and examination of the
receiver's accounts, it should be found that he has actually paid out for the conservation and protection
of the property is the subject of the receivership more than he has received by way of income, or should
have received in the exercise of reasonable diligence, such balance in his favor should be recognized as
a lawful claim constituting a lie on the property.
JOSE PLATON and ROMAN CASTILLO vs. HON. CLAUDIO SANDOVAL, in his capacity as Judge, Court of
First Instance of Laguna, and INES MAILOM

FACTS: Ines Mailom, one of the heirs of the deceased Servanda Mailom, instituted a civil case to annul
the sale of certain parcels of land made by the spouses Roman Castillo and Servanda Mailom in favor of
Antonino, brother of Roman.

Platon was appointed receiver of the property in litigation.

Later, Ines moved to discharge the receiver on the ground that there was no more necessity for the
continuation of the receivership since Antonino had renounced his claim to said property.

The respondent judge granted the motion discharging the receiver and ordering him to deliver the
properties under receivership to the persons entitled to receive the same.

Platon filed a motion to set aside the order on the grounds (1) that he had not been notified of the
motion upon which the same was issued; (2) that the case in which he was appointed receiver was still
pending; (3) that in the event Antonino wins the case, the receiver has to deliver to him the properties,
thereby rendering the project of partition useless and of no value; and (4) that irregularities were
committed by Attorney Acua for the plaintiff and the heirs of Servanda Mailom regarding the
disposition of the properties in question after the approval of the project of partition.

The respondent judge reaffirmed his finding that there was no necessity for the continuation of the
receivership and denied said motion. Thereupon the receiver filed a notice of appeal from said order.

ISSUE: WON a receiver has the power to question the courts determination that the necessity for the
continuation of the receivership has ceased to exist.

HELD: The receiver, being an officer of the court and not the agent or representative of either party to
the action, has no legal interest or standing to question the court's determination that the necessity for
the continuation of the receivership has ceased to exist.

Thus, there was no excess of jurisdiction nor grave abuse of discretion on the part of the respondent
judge.