PRELIMINARY ATTACHMENT 1. CALO VS ROLDAN ID.; PROVISIONAL REMEDIES; WHEN TO BE APPLIED FOR AND GRANTED. The provisional remedies denominated attachment, preliminary injunction, receivership, and delivery of personal property, provided in Rules 59, 60, 61 and 62 of the Rules of Court, respectively, are remedies to which parties litigant may resort for the preservation or protection of their rights or interests, and for no other purpose, during the pendency of the principal action. If an action, by its nature, does not require such protection or preservation, said remedies can not be applied and granted. To each kind of action or actions a proper provisional remedy is provided for by law. The Rules of Court clearly specify the cases in which they may be properly granted. 2. BORJA VS PLATON 1.ATTACHMENT; ISSUANCE IN FAVOR OF A DEFENDANT WHO SETS UP A COUNTERCLAIM; DISCRETION OF TRIAL COURT. A writ of preliminary attachment may be issued in favor of a defendant who sets up a counterclaim. For the purpose of the protection afforded by such attachment, it is immaterial whether the defendants simply presented a counterclaim or brought a separate civil action against the plaintiff. To lay down a subtle distinction would be to sanction that formalism and that technicality which are discountenanced by the modern laws of procedure for the sake of speedy and substantial justice. 3. PROFESSIONAL VIDEO VS TESDA Jurisprudence teaches us that the rule on the issuance of a writ of attachment must be construed strictly in favor of the defendant. Attachment, a harsh remedy, must be issued only on concrete and specific grounds and not on general averments merely quoting the words of the pertinent rules. 42 Thus, the applicant's affidavit must contain statements clearly showing that the ground relied upon for the attachment exists. Section 1 (d), Rule 57 of the Rules of Court applies where a party is guilty of fraud in contracting a debt or incurring an obligation, or in concealing or disposing of the property for the taking, detention or conversion of which the action is brought. In Wee v. Tankiansee, 43 we held that for a writ of attachment to issue under this Rule, the applicant must sufficiently show the factual circumstances of the alleged fraud because fraudulent intent cannot be inferred from the debtor's mere non-payment of the debt or failure to comply with his obligation. The affidavit, being the foundation of the writ, must contain particulars showing how the imputed fraud was committed for the court to decide whether or not to issue the writ. To reiterate, a writ of attachment can only be granted on concrete and specific grounds and not on general averments merely quoting the words of the rules. 44 4. LIBERTY INSURANCE CORPORATION VS CA

RMCDELOSSANTOS

Page 1

1.REMEDIAL LAW; PROVISIONAL REMEDIES; ATTACHMENT; REMEDY AGAINST A PARTY GUILTY IN CONTRACTING DEBT OR INCURRING AN OBLIGATION. In an action against a party who has been guilty of fraud in contracting the debt or incurring the obligation upon which the action is brought, Section 1 (d) of Rule 57 authorizes the plaintiff or any proper party to have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered therein. To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt or incurring the obligation intended to defraud the creditor. The fraud must relate to the execution of the agreement and must have been the reason which induced the other party into giving consent which he would not have otherwise given. To constitute a ground for attachment in Section 1 (d), Rule 57 of the Rules of Court, fraud should be committed upon contracting the obligation sued upon. 2.ID.; ID.; ID.; ID.; CASE AT BAR. A debt is fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention not to pay, as it is in this case. Fraud is a state of mind and need not be proved by direct evidence but may be inferred from the circumstances attendant in each case (Republic v. Gonzales, 13 SCRA 633 [1965]). Here, it has been established that all the collaterals given by the respondent Arkin as security for the bond were either fraudulent or heavily encumbered. Records show that Transfer Certificate of Title No. 300011 supposedly issued by the Register of Deeds of Rizal covering a parcel of land with an area of 25,750 square meters located at Muntinlupa, Las Pias, M.M. and registered in the name of Carmen Madlangbayan, used as one of the collaterals, turned out to be fake and spurious as the genuine TCT No. 300011 of the Office of the Register of Deeds of Rizal covers a parcel of land located in Angono, Rizal with an area of 514 square meters registered in the name of persons other than respondents Imperial, Arkin, and Madlangbayan. Likewise, the supposed lien-free motor vehicle offered as collateral turned out to be heavily mortgaged and was even disposed of without informing petitioner. Furthermore, it has also been proven that subsequent to the issuance of the May 30, 1988 surety bond, respondent Arkin started disposing of his other properties. Prior to the filing of the complaint, respondent not only had sold the motor vehicle given as collateral but that his two other condominium units, were also alienated in favor of a company of which respondent Arkin is the president. All these circumstances unerringly point to the devious scheme of respondent Arkin to defraud petitioner. 3.ID.; ID.; ID.; MOTION TO DISSOLVE ATTACHMENT, NOT ALLOWED WHERE MAIN ACTION IS BASED ON FRAUD. When the preliminary attachment is issued upon a ground which is at the same time the applicant's cause of action: e.g., . . . an action against a party who has been guilty of fraud in contracting the debt or incurring the obligation upon which the action is brought, the defendant is not allowed to file a motion to dissolve the attachment under Section 13 of Rule 57 by offering to show the falsity of the factual averments in the plaintiff's application and affidavits on which the writ was based and consequently that the writ based therein had been improperly or irregularly issued the reason being that the hearing on such RMCDELOSSANTOS Page 2

motion for dissolution of the writ would be tantamount to a trial on the merits. In other words, the merits of the action would be ventilated at a mere hearing of a motion, instead of the regular trial. Therefore, when the writ of attachment is of this nature, the only way it can be dissolved is by a counterbond. (Mindanao Savings and Loan Assoc. vs. Court of Appeals, 172 SCRA 480 [1989]) 5. OLSEN VS OLSEN PRELIMINARY ATTACHMENT; DENIAL OF ANNULMENT OF; APPEAL. An order denying a motion or the annulment of a preliminary attachment may be renewed is an appeal taken from the final judgment rendered in the principal case. CORPORATIONS; CIVIL FRAUD; ABUSE OF CONFIDENCE OF OFFICERS. He who has almost an exclusive control over the function of the corporation and its funds on account of his triple capacity as president, treasurer and general manager must be very scrupulous in the application of the funds of said corporation to his own use. The act of taking money of the corporation for his personal use without being duly authorized therefor constitutes such an irregularity that, while it does not amount to a criminal fraud, is undoubtedly a fraud of a civil character, because it is an abuse of confidence to the damage of the corporation and its stockholders and constitutes one of the grounds enumerated in section 424, in connection with 412, of the Code of Civil Procedure for the issuance of a preliminary attachment. 6. NG WE VS TANKIANSEE The affidavit, being the foundation of the writ, 35 must contain such particulars as to how the fraud imputed to respondent was committed for the court to decide whether or not to issue the writ. 36 Absent any statement of other factual circumstances to show that respondent, at the time of contracting the obligation, had a preconceived plan or intention not to pay, or without any showing of how respondent committed the alleged fraud, the general averment in the affidavit that respondent is an officer and director of Wincorp who allegedly connived with the other defendants to commit a fraud, is insufficient to support the issuance of a writ of preliminary attachment. 37 In the application for the writ under the said ground, compelling is the need to give a hint about what constituted the fraud and how it was perpetrated 38 because established is the rule that fraud is never presumed. 39 Verily, the mere fact that respondent is an officer and director of the company does not necessarily give rise to the inference that he committed a fraud or that he connived with the other defendants to commit a fraud. While under certain circumstances, courts may treat a corporation as a mere aggroupment of persons, to whom liability will directly attach, this is only done when the wrongdoing has been clearly and convincingly established. 40 7. FCY CONSTRUCTION VS CA "SECTION 1. Grounds upon which attachment may issue. A plaintiff or any proper party may, at the commencement of the action or at any time thereafter, have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered in the following cases: . . . (d) In an action RMCDELOSSANTOS Page 3

against a party who has been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is brought, or in concealing or disposing of the property for the taking, detention or conversion of which the action is brought; . . .." The fraud of which petitioners are accused of and which was the basis for the issuance of the questioned attachment, is fraud alleged to have been committed upon contracting the obligation sued upon. In Liberty Insurance Corporation vs. Court of Appeals, this Court, discussing Section 1(d), Rule 57, cautioned as follows To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt or incurring the obligation intended to defraud the creditor. The fraud must relate to the execution of the agreement and must have been the reason which induced the other party into giving consent which he would not have otherwise given. To constitute a ground for attachment in Section 1 (d), Rule 57 of the Rules of Court, fraud should be committed upon contracting the obligation sued upon. 8. ABOITIZ VS COTABATO ID.; PROVISIONAL REMEDIES; ATTACHMENT; INSOLVENCY NOT A GROUND FOR ISSUANCE THEREOF. On the strength of the explicit ruling of this Court in Max Chamorro & Co. vs. Philippine Ready Mix Concrete Company, Inc. and Hon. Manuel P. Barcelona, the respondent Court of Appeals correctly took its position in the negative on the question of whether insolvency is a ground for the issuance of a writ of attachment. 9. MIALHE VS DE LENCQUESAING While it is true that from the aforequoted provision attachment may issue "in an action against a party who resides out of the Philippines, " irrespective of the nature of the action or suit, and while it is also true that in the case of Cu Unjieng, et al vs. Albert, 58 Phil. 495, it was held that "each of the six grounds treated ante is independent of the others," still it is imperative that the amount sought be liquidated. 10. TOLEDO VS BURGOS REMEDIAL LAW; PROVISIONAL REMEDIES; WRIT OF PRELIMINARY ATTACHMENT; NOTICE AND HEARING; NOT AN INDISPENSABLE AND MANDATORY REQUISITE. There was no need for him to, as against petitioner's claim, set a hearing on the said application. This is because the issuance of a writ of preliminary attachment may be made by the Court ex parte. As We held in the case of Filinvest Credit Corporation vs. Relova, 117 SCRA 420, and reiterated in Belisle Investment and Finance Co., Inc. vs. State Investment House, Inc., 151 SCRA 630: "Nothing in the Rules of Court makes notice and hearing indispensable and mandatory requisites for the issuance of a writ of attachment. The statement in the case Blue Green Waters, Inc. vs. Hon. Sundiam and Tan cited by private respondent, to the effect that the order of attachment issued without notice to therein petitioner Blue Green Waters, Inc. and without giving it a chance to prove that it was not fraudulently disposing of its properties is irregular, gives the wrong implication. As

RMCDELOSSANTOS

Page 4

clarified in the separate opinion of Mr. Justice Claudio Teehankee in the same cited case, a writ of attachment may be issued ex parte." 11. PHILIPPINE BANK OF COMMUNICATIONS VS CA We find an absence of factual allegations as to how the fraud alleged by petitioner was committed. As correctly held by respondent Court of Appeals, such fraudulent intent not to honor the admitted obligation cannot be inferred from the debtor's inability to pay or to comply with the obligations. 9 On the other hand, as stressed, above, fraud may be gleaned from a preconceived plan or intention not to pay. This does not appear to be so in the case at bar. In fact, it is alleged by private respondents that out of the total P419,613.96 covered by the subject trust receipts, the amount of P400,000.00 had already been paid, leaving only P19,613.96 as balance. Hence, regardless of the arguments regarding penalty and interest, it can hardly be said that private respondents harbored a preconceived plan or intention not to pay petitioner. 12. G.B. INC VS SANCHEZ The merits of a main action are not triable in a motion to discharge an attachment, otherwise an applicant for the dissolution could force a trial on the merits of the case on this motion. 13. INSULAR SAVINGS BANK VS CA With the view we take of this case, the trial court, in requiring petitioner to post a counter-bond in the amount of P27,237,700.00, obviously glossed over one certain fundamental. We refer to the fact that the attachment respondent applied for and the corresponding writ issued was only for the amount of P25.2 Million. Respondent, it bears to stress, did not pray for attachment on its other claims, contingent and unliquidated as they were. Then, too, the attaching writ rightly excluded such claims. While the records do not indicate, let alone provide a clear answer as to the actual value of the property levied upon, it may reasonably be assumed that it is equal to respondent's principal claim. Be that as it may, it was simply unjust for the trial court to base the amount of the counter-bond on a figure beyond the P25,200,000.00 threshold, as later reduced to P12,600,200.00. TSIaAc

PRELIMINARY INJUNCTION 14. LIMITLESS POTENTIALS VS CA A preliminary injunction is a provisional remedy that a party may resort to in order to preserve and protect certain rights and interests during the pendency of an action. 19 It is an order granted at any stage of an action, prior to the judgment or final order, requiring a party, court, agency or person to perform or to refrain from performing a particular act or acts. A preliminary injunction, as the term itself suggests, is merely temporary, subject to the final disposition of the principal action. RMCDELOSSANTOS Page 5

20 It is issued to preserve the status quo ante, which is the last actual, peaceful, and uncontested status that preceded the actual controversy, 21 in order to protect the rights of the plaintiff during the pendency of the suit. Otherwise, if no preliminary injunction is issued, the defendant may, before final judgment, do the act which the plaintiff is seeking the court to restrain. This will make ineffectual the final judgment that the court may afterwards render in granting relief to the plaintiff. 22 The status quo should be existing ante litem motam, or at the time of the filing of the case. For this reason, a preliminary injunction should not establish new relations between the parties, but merely maintain or re-establish the pre-existing relationship between them. 23 The purpose of a preliminary injunction is to prevent threatened or continuous irremediable injury to some of the parties before their claims can be thoroughly studied and adjudicated. Thus, to be entitled to an injunctive writ, the petitioner has the burden to establish the following requisites: ETIDaH (1)a right in esse or a clear and unmistakable right to be protected; (2)a violation of that right; (3)that there is an urgent and permanent act and urgent necessity for the writ to prevent serious damage. 24 15. SEMIRARA COAL CORPORATION VS HGL DEVELOPMENT Under Article 539 of the New Civil Code, a lawful possessor is entitled to be respected in his possession and any disturbance of possession is a ground for the issuance of a writ of preliminary mandatory injunction to restore the possession. It is likewise established that a writ of mandatory injunction is granted upon a showing that (a) the invasion of the right is material and substantial; (b) the right of complainant is clear and unmistakable; and (c) there is an urgent and permanent necessity for the writ to prevent serious damage. 23 In the instant case, it is clear that as holder of a pasture lease agreement under FLGLA No. 184, HGL has a clear and unmistakable right to the possession of the subject property. Recall that under the FLGLA, HGL has the right to the lawful possession of the subject property for a period of 25 years or until 2009. As lawful possessor, HGL is therefore entitled to protection of its possession of the subject property and any disturbance of its possession is a valid ground for the issuance of a writ of preliminary mandatory injunction in its favor. The right of HGL to the possession of the property is confirmed by petitioner itself when it sought permission from HGL to use the subject property in 1999. In contrast to HGL's clear legal right to use and possess the subject property, petitioner's possession was merely by tolerance of HGL and only because HGL permitted petitioner to use a RMCDELOSSANTOS Page 6

portion of the subject property so that the latter could gain easier access to its mining area in the Panaan Coal Reserve. aACEID 16. CHINA BANKING CORPORATION VS CO It is settled that the grant of a preliminary mandatory injunction rests on the sound discretion of the court, and the exercise of sound judicial discretion by the lower court should not be interfered with except in cases of manifest abuse. 14 It is likewise settled that a court should avoid issuing a writ of preliminary mandatory injunction which would effectively dispose of the main case without trial. 15 To be entitled to a writ of preliminary injunction, however, the petitioners must establish the following requisites: (a) the invasion of the right sought to be protected is material and substantial; (b) the right of the complainant is clear and unmistakable; and (c) there is an urgent and permanent necessity for the writ to prevent serious damage. 16 Since a preliminary mandatory injunction commands the performance of an act, it does not preserve the status quo and is thus more cautiously regarded than a mere prohibitive injunction. 17 Accordingly, the issuance of a writ of preliminary mandatory injunction is justified only in a clear case, free from doubt or dispute. 18 When the complainant's right is thus doubtful or disputed, he does not have a clear legal right and, therefore, the issuance of injunctive relief is improper. 17. DEVESA VS ARBES INJUNCTIONS; SPECIAL REMEDY OF THE CODE OF CIVIL PROCEDURE DISTINGUISHED FROM THE OLD SPANISH WRITS. Injunctions or interdictos prohibitorios, for the issuance of which provision is made in the new Code of Civil Procedure, while they resemble the interdictal actions of the Spanish procedural law in some respects, are wholly distinct therefrom and, as a rule, the circumstances under which, in accordance with the Spanish law, interdictos de adquirir, de retener, de recobrar or de despojo properly issued would not justify nor sustain the issuance of an injunction, interdicto prohibitorio, as defined and provided in the new Code of Civil Procedure. 2.ID.; LIMITATION UPON USE OF WRITS OF INJUNCTION. An injunction is a special remedy contained in the new Code of Civil Procedure and adopted from American and English law of procedure, and the accepted American doctrine limiting its use to cases where there is no other adequate remedy, and otherwise controlling the issue thereof, must be deemed to limit its use in like manner in this jurisdiction. 3.ID.; WRITS NOT AVAILABLE FOR RECOVERY OF PROPERTY WHEN TITLE IS NOT ESTABLISHED. Injunctions, as a rule, will not be granted to take property out of RMCDELOSSANTOS Page 7

the possession or control of one party and place it into that of another whose title has not clearly been established by law. 18. PREYSLER VS CA (purpose) Prefatorily, we note that what was granted by the trial court was the preliminary injunction, and that the main case for right of way has not yet been settled. We have in previous cases 9 said that the objective of a writ of preliminary injunction is to preserve the status quo until the merits of the case can be fully heard. Status quo is the last actual, peaceable and uncontested situation which precedes a controversy. 10 The Court of Appeals was correct in its findings that the last actual, peaceful and uncontested situation that preceded the controversy was solely the access of petitioner and his household to his property outside the subdivision for visits and inspections. At the time the writ was applied for in 1995, there was still no construction going on in the property. It was merely raw land. The use of the subdivision roads for ingress and egress of construction workers, heavy equipment, delivery of construction materials, and installation of power lines, are clearly not part of the status quo in the original writ. Along this line, the Court of Appeals properly set aside the amended writ and reinstated the original writ. 19. MANTILE VS CAJUCOM (scope) 1.PRELIMINARY INJUNCTION; ACTS ALREADY PERFORMED CAN NOT BE PROHIBITED; CONTEMPT. Section 162 of the Code of Civil Procedure, in defining a preliminary injunction, states: That it is the order or writ which prohibits a particular person from performing a particular act, and therefore, if a writ of preliminary injunction has been issued against a particular person, enjoining him, for example, from performing any act whatever that may tend to close and obstruct an irrigation ditch by preventing the passage of the water, when the said ditch was already closed, it can not be understood that the person, against whom the prohibitory order was issued, willfully disregarded and disobeyed the said judicial writ by not removing the obstacle that prevented the flow of the water, because this last operation is not covered by the writ of injunction. 2.ID.; ID.; ID. If in a writ of preliminary injunction those who become the defendants are not enjoined or required to remove the impediment or obstacle complained of as being prejudicial to the rights and interests of the plaintiff, but merely to abstain or desist from performing any act contrary and prejudicial to such rights and interests, the mere fact of their not having taken out or removed the obstacle or impediment, which already existed at the time of the issuance of the injunction, does not constitute disobedience to, or contempt of, a judicial order, because what has already been done can not be prohibited. (Municipal Council of Sta. Rosa vs. Provincial Board of La Laguna, 3 Phil. Rep., 206.) 20. FELICIANO VS ALIPIO (Vs prohubition) ACTION FOR DECLARATORY RELIEF CONSIDERED AS ONE FOR PROHIBITION. Although the petition filed against public Officers is for declaratory relief, yet if it prays also for the issuance of a permanent injunction from carrying out the RMCDELOSSANTOS Page 8

provisions of a Department Circular on grounds of unconstitutionality, the same is equivalent to an action for prohibition and the court should not dismiss the petition but should proceed with the case considering the action as one for prohibition. 21. PHILIPPINE NATIONAL BANK VS RJ VENTURES (irreparable injury defines) To be sure, this court has declared that the term irreparable injury has a definite meaning in law. It does not have reference to the amount of damages that may be caused but rather to the difficulty of measuring the damages inflicted. If full compensation can be obtained by way of damages, equity will not apply the remedy of injunction. The Court of Appeals declared that the evidence adduced by respondents more than satisfies the legal and jurisprudential requirements of irreparable injury. It behooves this court to appreciate the unique character of the collaterals that stand to be affected should the Writ of Preliminary Injunction be dissolved as PNB would have it. The direct and inevitable result would be the stoppage of the operations of respondents' radio stations, consequently, losing its listenership, and tarnishing the image that it has built over time. It does not stretch one's imagination to see that the cost of a destroyed image is significantly the loss of its good name and reputation. As aptly appreciated by the appellate court, the value of a radio station's image and reputation are not quantifiable in terms of monetary value. 22. OVERSEAS WORKER WELFARE ADMINISTRATION VS CHAVEZ (status quo def) More significantly, a preliminary injunction is merely a provisional remedy, an adjunct to the main case subject to the latter's outcome, the sole objective of which is to preserve the status quo until the trial court hears fully the merits of the case. 47 The status quo should be that existing at the time of the filing of the case. 48 The status quo usually preserved by a preliminary injunction is the last actual, peaceable and uncontested status which preceded the actual controversy. The status quo ante litem is, ineluctably, the state of affairs which is existing at the time of the filing of the case. Indubitably, the trial court must not make use of its injunctive power to alter such status. 50 We hold that the RTC, in granting the assailed writ of preliminary injunction, committed grave abuse of discretion amounting to lack of jurisdiction. In the case at bar, the RTC did not maintain the status quo when it issued the writ of preliminary injunction. Rather, it effectively restored the situation prior to the status quo, in effect, disposing the issue of the main case without trial on the merits. What was preserved by the RTC was the state of affairs before the issuance of Resolution No. 001, which approved the structure of the OWWA, and the subsequent administrative orders pursuant to its passing. The RTC forgot that what is imperative in preliminary injunction cases is that the writ can not be effectuated to establish new relations between the parties.

RMCDELOSSANTOS

Page 9

23. DUNGOG VS CA (status quo def) ID.; PROVISIONAL REMEDIES; PRELIMINARY INJUNCTION; DEFINED; PURPOSE THEREOF TO PRESERVE THE STATUS QUO OF THE MATTER SUBJECT OF THE ACTION; CONSTRUED. Preliminary injunction is an order granted at any stage of an action, prior to the judgment or final order, requiring a party, court, agency or person to perform or to refrain from performing a particular act or acts. A preliminary injunction, as the term itself suggests, is merely temporary, subject to the final disposition of the principal action. Its purpose is to preserve the statusquo of the matter subject of the action to protect the rights of the plaintiff during the pendency of the suit. Otherwise, if no preliminary injunction is issued, the defendant may, before final judgment, do the act which the plaintiff is seeking the court to restrain. This will make ineffectual the final judgment that the court may afterwards render in granting relief to the plaintiff. The issuance of a writ of preliminary injunction rests entirely within the discretion of the court and is generally not interfered with except in cases of manifest abuse. The assessment and evaluation of evidence in the issuance of the writ of preliminary injunction involve findings of facts ordinarily left to the trial court for its conclusive determination. Against whom is injunction issued: 24. EXECUTIVE SECRETARY VS CA The possibility that the officers and employees of the recruitment agencies, which are members of the respondent, and their relatives who are employed in the government agencies charged in the enforcement of the law, would be indicted for illegal recruitment and, if convicted sentenced to life imprisonment for large scale illegal recruitment, absent proof of irreparable injury, is not sufficient on which to base the issuance of a writ of preliminary injunction to suspend the enforcement of the penal provisions of Rep. Act No. 8042 and avert any indictments under the law. 48 The normal course of criminal prosecutions cannot be blocked on the basis of allegations which amount to speculations about the future. 49 25. MABAYO FARM VS CA 1.REMEDIAL LAW; PROVISIONAL REMEDIES; PRELIMINARY INJUNCTION; CANNOT BIND A PERSON WHO IS NOT A PARTY IN THE MAIN SUIT; CASE AT BAR. A preliminary injunction is an order granted at any stage of an action prior to final judgment, requiring a person to refrain from a particular act. As an ancillary or preventive remedy, a writ of preliminary injunction may therefore be resorted to by a party to protect or preserve his rights and for no other purpose during the pendency of the principal action. Its object is to preserve the status quo until the merits of the case can be heard. It is not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit. Thus, a person who is not a party in the main suit, like private respondent in the instant case, cannot be bound by an ancillary writ, such as the writ of preliminary injunction issued against the defendants in Civil Case No. 6695. He cannot be affected by any proceeding to which he is a stranger.

RMCDELOSSANTOS

Page 10

2.ID.; ACTIONS; INTERVENTION; NOT COMPULSORY. Intervention in an action is neither compulsory nor mandatory but only optional and permissive. 3.ID.; ID.; ID.; REQUISITES. [T]o warrant intervention, two requisites must concur: (a) the movant has a legal interest in the matter in litigation, and (b) intervention must not unduly delay or prejudice the adjudication of the rights of the parties nor should the claim of the intervenor be capable of being properly decided in a separate proceeding. The interest, which entitles a person to intervene in a suit, must involve the matter in litigation and of such direct and immediate character that the intervenor will either gain or lose by the direct legal operation and effect of the judgment. AaHcIT 26. SENATE BLUE RIBBON COMMITTEE VS MAJADUCON Finally, he cites the case of Bengzon v. Senate Blue Ribbon Committee, 9 and argues that preliminary injunction may issue in cases pending before administrative bodies such as the Ombudsman or the Office of the Prosecutor as long as the right to selfincrimination guaranteed by the Bill of Rights is in danger. Furthermore, an information against him has been filed with the Sandiganbayan. When the Senate Blue Ribbon Committee served subpoena on respondent Flaviano to appear and testify before it in connection with its investigation of the alleged misuse and mismanagement of the AFP-RSBS funds, it did so pursuant to its authority to conduct inquiries in aid of legislation. 27. SOUTHERN CROSS CEMENT V PHILIPPINE CEMENT MANUFACTURERS Propriety of the Temporary Restraining Order Before the merits of the Petition, a brief comment on Southern Cross's application for provisional relief. It sought to enjoin the DTI Secretary from enforcing the definitive safeguard measure he imposed in his 25 June 2003 Decision. The Court did not grant the provisional relief for it would be tantamount to enjoining the collection of taxes, a peremptory judicial act which is traditionally frowned upon, 49 unless there is a clear statutory basis for it. 50 In that regard, Section 218 of the Tax Reform Act of 1997 prohibits any court from granting an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by the internal revenue code. 51 A similar philosophy is expressed by Section 29 of the SMA, which states that the filing of a petition for review before the CTA does not stop, suspend, or otherwise toll the imposition or collection of the appropriate tariff duties or the adoption of other appropriate safeguard measures. 52 This evinces a clear legislative intent that the imposition of safeguard measures, despite the availability of judicial review, should not be enjoined notwithstanding any timely appeal of the imposition. cdasia 28. DELTA VENTURES VS COTABATO JURISDICTION; COURTS HAVE NO JURISDICTION TO ACT ON LABOR CASES OR VARIOUS INCIDENTS ARISING THEREFROM, INCLUDING THE EXECUTION OF RMCDELOSSANTOS Page 11

DECISIONS, AWARDS OR ORDERS; CASE AT BAR. Ostensibly the complaint before the trial court was for the recovery of possession and injunction, but in essence it was an action challenging the legality or propriety of the levy vis-a-vis the alias writ of execution, including the acts performed by the Labor Arbiter and the Deputy Sheriff implementing the writ. The complaint was in effect a motion to quash the writ of execution of a decision rendered on a case properly within the jurisdiction of the Labor Arbiter, to wit: Illegal Dismissal and Unfair Labor Practice. Considering the factual setting, it is then logical to conclude that the subject matter of the third party claim is but an incident of the labor case, a matter beyond the jurisdiction of regional trial courts. Precedent abound confirming the rule that said courts have no jurisdiction to act on labor cases or various incidents arising therefrom, including the execution of decisions, awards or orders. Jurisdiction to try and adjudicate such cases pertains exclusively to the proper labor official concerned under the Department of Labor and Employment. To hold otherwise is to sanction split jurisdiction which is obnoxious to the orderly administration of justice. 29. BSP MONETARY BOARD VS ANTONIO-VALENZUELA The writs of preliminary injunction issued by the trial court hinder the MB from fulfilling its function under the law. The actions of the MB under Secs. 29 and 30 of RA 7653 "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 writs of preliminary injunction order are precisely what cannot be done under the law by preventing the MB from taking action under either Sec. 29 or Sec. 30 of RA 7653. 30. TRADERS ROYAL BANK VS IAC REMEDIAL LAW; PROVISIONAL REMEDIES; ATTACHMENT; INDEPENDENT VINDICATORY ACTION MAY BE FILED BY THIRD PARTY WHOSE PROPERTY HAS BEEN WRONGFULLY LEVIED UPON BY ATTACHMENT. Section 14, Rule 57 of the Rules of Court explicitly sets forth the remedy that may be availed of by a person who claims to be the owner of property levied upon by attachment, viz: to lodge a third-party claim with the sheriff and if the attaching creditor posts an indemnity bond in favor of the sheriff, to file a separate and independent action to vindicate his claim (Abiera vs. Court of Appeals, 45 SCRA 314). 2.ID.; ID.; INJUNCTION; COURTS MAY NOT INTERFERE WITH JUDGMENT OF ANOTHER COURT OF COORDINATE AND CONCURRENT JURISDICTION BY INJUNCTION; RULE IS APPLICABLE ONLY WHERE NO THIRD-PARTY CLAIMANT IS INVOLVED; PURPOSE OF THAT RULE. Generally, the rule that no court has the power to interfere by injunction with the judgments or decrees of a concurrent or coordinate jurisdiction having equal power to grant the injunctive relief sought by injunction, is applied in cases where no third-party claimant is involved, in order to prevent one court from nullifying the judgment or process of another court of the same rank or category, a power which devolves upon the proper appellate court. The purpose of the rule is to avoid conflict of power between different courts of RMCDELOSSANTOS Page 12

coordinate jurisdiction and to bring about a harmonious and smooth functioning of their proceedings.

RECEIVERSHIP 1. Definition (Section 1) a. Compania General de Tabacos Vs Gauzon RECEIVERS; POWERS, DUTIES, AND RESPONSIBILITIES. A receiver is generally defined to be an indifferent person between the parties litigant, appointed by the court and on behalf of all the parties, and not of the plaintiff or defendant only, to receive and hold the thing or property in litigation, pending the suit, to receive the rents, issues, or profits of the land or thing in question, to hold possession and control of the property which is the subjectmatter of the litigation and to dispose of it in such manner as may be directed by the court. He is the arm and hand of the court, a part of the machinery of the court, by which the rights of the parties are protected. He is required not only to preserve the property, but to protect the rights of all the parties interested. ID.; LIMITED AUTHORITY TO INCUR EXPENSE WITHOUT EXPRESS PERMISSION OF THE COURT. Generally a receiver has no authority to incur any expense in the administration of his receivership, without express permission of the court, except it be absolutely necessary to preserve the property, and then only when, under special circumstances, he can not secure such authority from the court. He should administer the estate as economically as possible, to the end that the interests of all the parties shall be conserved. ID.; COMPENSATION. The amount of compensation of a receiver is fixed by the sound discretion of the court. The court, in fixing the compensation of the receiver, should take into consideration the general efficiency of the receiver in his administration of the receiver in his administration of the property under his control.

2. Distinguished from Replevin a. Belgian Catholic Missionaries Vs Magallanes Press Contrary to the contention of the appellant, this case is not one of replevin but simply a proceeding instituted by the plaintiff for the deposit of the property in litigation, upon the filing of a bond, said plaintiff acting as a receiver by authority of the court, being the person most interested in the conservation and care of the same (sec. 174, Act No. 190; 11 C. J., 726). The lower court, therefore, did not err in authorizing the plaintiff company to take possession of the personal property in litigation upon the filing of a bond sufficient to secure the conservation or value thereof. 3. Distinguished from a Sheriff a. Po Pauco Vs. Siguenz [G.R. No. 29295. October 22, 1928]

RMCDELOSSANTOS

Page 13

"SHERIFF;" RECEIVER. A sheriff, in a sense, is a judicial officer of a general character, who is not appointed in any particular judicial case; the sheriff is an officer who exercises or may exercise his functions within the limits of his jurisdiction. A receiver, on the other hand, is a special officer appointed in connection with and in a particular case or action, and whose duties are limited to his sphere of action and do not extend further than the case in which he is appointed. ID.; ID. While the funds in the hands of a sheriff may be within the reach of processes coming from other judicial proceedings, such is not the case with respect to those under the custody of a receiver. Those who have any claim to property or sums in the possession of a receiver, must appear in the same proceeding in which said receiver discharges his duties, and there, by motion or petition, allege and prove their claims. 4. Purpose - preservation of the property and protection of the rights of the parties 5. Effect of Dismissal of Case a. Berg Vs Teus [G.R. No. L-2987. February 20, 1951.] MORATORIUM; APPOINTMENT OF RECEIVE DOES NOT FALL UNDER THE MORATORIUM LAW. Where the complaint for the foreclosure of real and chattel mortgages also prays for the appointment of a receiver, a motion to dismiss on the ground of the Moratorium Law should not be sustained. The alleged violations of the conditions of the mortgage contract, if true, make it necessary, if not imperative, for the protection of the interest of the plaintiff, that the mortgaged properties be placed in the custody of the court. The fact that the appointment of a receiver, as the defendant emphasizes, is an ancillary remedy precisely one powerful reason why the case should not be dismissed; dismissal of the main action would eliminate the only basis for the appointment of a receiver and thus completely bar the door to any relief from mischiefs. 6. Granted only in extreme situations b. Vivares Vs Reyes [G.R. No. 155408. February 13, 2008.] Indeed, receivership is a harsh remedy to be granted only in extreme situations. As early as 1914, the Court already enunciated the doctrinal pronouncement in Velasco & Co. v. Gochuico & Co. that courts must use utmost circumspection in allowing receivership, thus: The power to appoint a receiver is a delicate one and should be exercised with extreme caution and only under circumstances requiring summary relief or where the court is satisfied that there is imminent danger of loss, lest the injury thereby caused be far greater than the injury sought to be averted. The court should consider the consequences to all of the parties and the power should not be exercised when it is likely to produce irreparable injustice or injury to private rights or the facts demonstrate that the appointment will injure the interests of others whose rights are entitled to as much consideration from the court as those of the complainant. 7. Where Rights of the Parties are still to be determined c. Descallar Vs CA

RMCDELOSSANTOS

Page 14

REMEDIAL LAW; SPECIAL CIVIL ACTION; CERTIORARI; GRAVE ABUSE OF DISCRETION; MANIFEST IN ORDER OF RECEIVERSHIP WHERE RIGHTS OF THE PARTIES ARE STILL TO BE DETERMINED. The holding of the trial court and the Court of Appeals that Jambrich, notwithstanding his legal incapacity to acquire real property in the Philippines, is the owner of the house and lot which is erstwhile mistress, Antonietta, purchased with money she obtained from him, is a legal heresy. In view of the above circumstances, we find the order of receivership tainted with grave abuse of discretion. The appointment of a receiver is not proper where the rights of the parties (one of whom is in possession of the property), are still to be determined by the trial court. Finding grave abuse of discretion in the order of receivership which the respondent Court of Appeals affirmed in its decision of July 29, 1992 in CA-G.R. SP No. 27977, The petition for certiorari is hereby granted and the decision of the appellant court, as well as the order dated March 17, 1992 of the Regional Trial Court of Mandaue City, Branch 28, in Civil Case No. MAN-1148, are hereby ANNULLED and SET ASIDE. ID.; PROVISIONAL REMEDIES; RECEIVERSHIP; DANGER TO PROPERTY OF BEING MATERIALLY INJURED OR LOST, INDISPENSABLE IN APPOINTMENT OF RECEIVER. Only when the property is in danger of being materially injured or lost, as by the prospective foreclosure of a mortgage thereon for non-payment of the mortgage loans despite the considerable income derived from the property, or if portions thereof are being occupied by third persons claiming adverse title thereto, may the appointment of a receiver be justified (Motoomul vs. Arrieta, 8 SCRA 172). ID.; ID.; ID.; ID.; CASE AT BAR. In this case, there is no showing that grave or irremediable damage may result to respondent Borromeo unless a receiver is appointed. The property in question is real property, hence, it is neither perishable or consummable. Even though it is mortgaged to a third person, there is no evidence that payment of the mortgage obligation is being neglected. In any event, the private respondent's rights and interest, may be adequately protected during the pendency of the case by causing his adverse claim to be annotated on the petitioner's certificates of title. ID.; ID.; ID.; FILING OF BOND, INDISPENSABLE; DISPENSED WITH BY APPOINTMENT OF CLERK OF COURT AS RECEIVER. Another flaw in the order of receivership is that the person whom the trial judge appointed as receiver is her own clerk of court who did not file any bond to guarantee the faithful discharge of his duties as depository. This practice has been frowned upon by this Court. (Off. Gaz., [No. 12], 4884, 78 Phil. 743; (De la Cruz vs. Guinto, 45 Off. Gaz. pp. 1309, 1311; 79 Phil. 304, Abrigo vs. Kayanan, 121 SCRA 20, and other cases cited.) ID.; ID.; ID.; IRREGULAR APPOINTMENT OF RECEIVER NOT SUBJECT TO RETROACTIVE VALIDATION. During the pendency of this appeal, Judge Dadole rendered a decision in Civil Case No. MAN-1148 upholding Borromeo's claim to Descallar's property annulling the latter's TCTs Nos. 24790, 24791 and 24792 and ordering the Register of Deeds of Mandaue City to issue new ones in the name of Borromeo. This circumstance does not retroactively

RMCDELOSSANTOS

Page 15

validate the receivership until the decision (presumably now pending appeal) shall have attained finality. 8. Exhaustion of local remedies d. Bonaplata Vs Amber [G.R. No. 1278. August 1, 1903.] ID.; EXTRAORDINARY REMEDIES. Courts of equity do not regard with favor the appointment of receivers, except in certain prescribed cases, until the usual legal remedies have been exhausted. As a general rule the appointment of a receiver is an equitable remedy, and before such remedy is resorted to, except in certain prescribed cases hereinafter mentioned, the legal remedy must be exhausted. Courts of equity do not encourage proceedings or actions which are not in conformity with the usual practice, which are unnecessary, and at the same time are calculated to such costs and expenses. It may be that very special circumstances may exist, in a given case, involving great danger of loss, such as may be caused by a debtor's nonresidence, which will justify the appointment of a receiver, but the case at bar is not one of that character. 9. Appointment e. Commodities Storage and Ice Plant Vs CA [G.R. No. 125008. June 19, 1997.] Moreover, the receiver appointed by the court appears to be a representative of petitioners. Respondent bank alleges that it was not aware that petitioners nominated one Mr. Pesquera as receiver. The general rule is that neither party to a litigation should be appointed as receiver without the consent of the other because a receiver should be a person indifferent to the parties and should be impartial and disinterested. The receiver is not the representative of any of the parties but of all of them to the end that their interests may be equally protected with the least possible inconvenience and expense. The power to appoint a receiver must be exercised with extreme caution. There must be a clear showing of necessity therefor in order to save the plaintiff from grave and irremediable loss or damage. It is only when the circumstances so demand, either because there is imminent danger that the property sought to be placed in the hands of a receiver be lost or because they run the risk of being impaired, endeavouring to avoid that the injury thereby caused be greater than the one sought to be avoided. 10. Jurisdiction f. Harden Vs Director of Prisons [G.R. No. L-2349. October 22, 1948.] The fact that the property is in a foreign country is said to deprive the court of jurisdiction, the remedy in such case being, it is contended, ancillary receivership. We can not agree with this view. While a court can not give its receiver authority to act in another state without the assistance of the courts thereof (53 C. J., 390-391), yet it may act directly upon the parties before it with respect to property beyond the territorial limits

RMCDELOSSANTOS

Page 16

of its jurisdiction, and hold them in contempt if they resist the court's orders with reference to its custody or disposition (Id. 118). Whether the property was removed before or after the appointment of the receiver is likewise immaterial. 11. Grounds for Appointment of Receiver g. Calo Vs Roldan [G.R. No. L-252. March 30, 1946.] A receiver may be appointed to take charge of personal or real property which is the subject of an ordinary civil action, 1. when it appears that the party applying for the appointment of a receiver has an interest in the property or fund which is the subject of the action or litigation, and that such property or fund is in danger of being lost, removed or materially injured unless a receiver is appointed to guard or preserve it (section 1[b], Rule 61); or 2. when 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 (section 1[e] of said Rule). The property or fund must, therefore, be in litigation according to the allegations of the complaint, and the object of appointing a receiver is to secure and preserve the property or thing in controversy pending the litigation. Of course, if it is not in litigation and is in the actual possession of the plaintiff, the latter can not apply for and obtain the appointment of a receiver thereof, for there would be no reason for such appointment. From the foregoing it appears evident that the respondent judge acted in excess of his jurisdiction in appointing a receiver in case No. 7951 of the Court of First Instance of Laguna. Appointment of a receiver is not proper or does not lie in an action of injunction such as the one filed by the plaintiff. The petition for appointment of a receiver filed by the plaintiffs (Exhibit I of the petition) is based on the ground that it is the most convenient and feasible means of preserving, administering and disposing of the properties in litigation; and according to plaintiffs' theory or allegations in their complaint, neither the lands nor the palay harvested therein, are in litigation. The litigation or issue raised by plaintiffs in their complaint is not the ownership or possession of the lands and their fruits. It is whether or not defendants intend or were intending to enter or work or harvest whatever existing fruits could then be found in the lands described in the complaint, alleged to be the exclusive property and in the actual possession of the plaintiffs. It is a matter not only of law but of plain common sense that a plaintiff will not and legally can not ask for the appointment of a receiver of a property which he alleges to belong to him and to be actually in his possession. For the owner and possessor of a property is more interested than other persons in preserving and administering it. h. Ylarde Vs Enriquez [G.R. No. L-1401. June 25, 1947.]

RMCDELOSSANTOS

Page 17

RECEIVERS; APPOINTMENT; HOW AND WHEN MADE. "The appointment of a receiver, because of its drastic nature and of its character as a special remedy under our Code of Civil Procedure, is a power which should be exercised with great caution." (Philippine Motor Alcohol Corp. and Palanca vs. Mapa, 64 Phil., 714.) "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 and on a clear showing of necessity therefor in order to save the plaintiff from grave and irremediable loss or damage." (Mendoza vs. Arellano and B. de Arellano, 36 Phil., 59. ) ID.; ID.; ID. It is necessary in granting the relief of receivership that the "property or fund (be) in danger of being lost, removed or materially injured." The land which is the subject matter of the suit here is not in any danger of disappearing or being wasted. There is no pretense that it has any permanent improvements or fixtures which produce income, rents or profits to be collected or preserved. At the most a bond with sufficient sureties would be adequate to protect the plaintiffs from any possible injury consequent upon being deprived of the possession of the property. ID.; ID.; ID.; INTEREST OF APPLICANT. Section of Rule 61 requires that the party applying for the appointment of receiver should have "an interest in the property which is the subject of the action." This rule envisions actual, existing interest. ID.; ID.; ID. A receiver, it has been repeatedly held, should not be granted where the injury resulting therefrom would probably be greater than the injury ensuing from leaving the possession of the property undisturbed. (53 C. J., 37.) The court would place in the hands of a receiver to administer, crops to plant and raise which, as we have seen, the defendants have spent considerable money and attention with the plaintiffs contributing nothing beyond their allegation that they own the ground. i. Rocha and Co Vs Crossfield [G.R. No. 3430. August 7, 1906.] An order appointing a receiver of the property of a defendant is beyond the jurisdiction of the court and void when the complaint contains no allegation that the plaintiff is the owner of the property for which a receiver is appointed, or that he has any interest therein or lien thereon and when the only prayer of the complaint is for a money judgment against the defendant. The case at bar does not fall within any of the provisions of this section. There is no allegation in the complaint, as has been before stated, 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

RMCDELOSSANTOS

Page 18

from which it could be inferred that he was owner of such property or had any lien thereon. On the contrary, from the facts that are alleged in the complaint it would seem that his separation from the partnership of Carman & Co., left that partnership as a going concern and did not dissolve it. The effect of the provisions of the articles of partnership which are referred to in the complaint is that after the withdrawal of any partner the remaining partners became the owners of all the assets of the partnership and he became a general creditor of the partnership. j. Paranete Vs Tan [G.R. No. L-3791. November 29, 1950.] A trial court issuing an order requiring the party in possession of the property whose ownership is in litigation, to make an accounting and to deposit the proceeds of the sale of the harvest with the Clerk of Court acted in excess of its 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 vantage that the Clerk of Court has not filed any bond to guarantee the faithful discharge of is duties as depository; and considering that 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 of its necessity to save the plaintiff from grave and irremediable loss or damage, it is evident that the action of the respondent judge is unwarranted and unfair to the defendants. If the party in possession of the land in litigation in the exercise of his rights as owner made improvements thereon at his own expense to order him 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 him of his means of livelihood before the case is decided on the merits. 12. Oath, bond (Sections 2, 4, 5) k. Citibank NA Vs CA [G.R. No. 61508. March 17, 1999.]The Court of Appeals found that the requirements of Section 5, Rule 59 on receivership were not complied with by the petitioner, particularly the filing or posting of a bond and the taking of an oath. It should be noted that under the old Rules of Court which was in 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. Consequently, 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. 13. Discharge (Section 3)

RMCDELOSSANTOS

Page 19

l. Vivares, Supra

Anchored on this rule, the trial court should have dispensed with the services of the receiver, more so considering that the alleged fraud put forward to justify the receivership was not at all established. Petitioners advance the issue that the receivership should not be recalled simply because the adverse party offers to post a counterbond. At the outset, we find that this issue was not raised before the CA and therefore proscribed by the doctrine that an issue raised for the first time on appeal and not timely raised in the proceedings in the lower court is barred by estoppel. Even if we entertain the issue, the contention is nevertheless devoid of merit. The assailed CA decision supported the discharge of the receiver with several reasons including the posting of the counterbond. While the CA made a statement that the trial court should have discharged the appointed receiver on the basis of the proposed counterbond, such opinion does not jibe with the import of Sec. 3, Rule 59. The rule states that the "application may be denied or the receiver discharged." In statutory construction, the word "may" has always been construed as permissive. If the intent is to make it mandatory or ministerial for the trial court to order the recall of the receiver upon the offer to post a counterbond, then the court should have used the word "shall." Thus, the trial court has to consider the posting of the counterbond in addition to other reasons presented by the offeror why the receivership has to be set aside. m. Martinez Vs Grano [G.R. No. 27685. December 24, 1927.] RECEIVERS; ACCOUNTS OF RECEIVER; SATISFACTION OF CREDIT. A receiver who has a credit against receivership property for money expended for the protection of the property cannot be permitted to charge it in his accounts against the property after he has used it to pay the price of land purchased by him as judgment creditor at a sheriff's sale in an action prosecuted for his personal benefit. The application of such credit to the end stated operates as satisfaction thereof. ID.; ID.; DUTY OF RECEIVER TO PRESENT VOUCHERS FOR DISBURSEMENT AND EXPENSES. It is a dereliction of duty on the part of a receiver to fail to submit vouchers, when practicable, showing disbursements and expenses on account of the trust property. A failure to produce such vouchers gives rise to unfavorable inferences against the receiver. ID.; ADMINISTRATION OF RECEIVERSHIP PROPERTY. In the administration of receivership property the receiver is accountable for the income that should be received in the exercise of reasonable diligence. n. Platon Vs Sandoval [G.R. No. 49031. August 28, 1944.] CERTIORARI AND MANDAMUS; RECEIVERS, DISCHARGE OF. The property in litigation and under receivership belongs to the intestate estate of the deceased S.M., deceased wife of the petitioner R.C. The defendant A.C., who is not an heir of said deceased, does not claim ownership of said property and has signed his conformity to the discharge of the receiver. And the heirs of said deceased have agreed upon the partition of said property with the approval of the probate court. It seems clear, therefore, that the declaration of the

RMCDELOSSANTOS

Page 20

respondent judge that there was no longer any necessity for the continuation of the receivership was well founded. In any event, it cannot be said that the respondent judge exceeded his jurisdiction or abused his discretion in making such a finding. ID.; RECEIVERS AS OFFICERS OF THE COURT. Furthermore, the receiver, being an officer of the court and not the agent or representative of either party, 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. ID.; ID.; JUDGMENTS. An order discharging a receiver and terminating the receivership is interlocutory and not appealable. 14. Power of Receivers (Section 6) 15. Actions against receivers; Leave of court (Section 6) o. Orendain Vs BF Homes [G.R. No. 146313. October 31, 2006.] Furthermore, petitioner argues that the Committee of Receivers should have sought prior clearance from the SEC before instituting the action for reconveyance before the RTC, because it does not have the legal capacity to sue. This is incorrect. One of the general powers of a receiver under Rule 59, Section 6 of the Rules of Court is the power to bring and defend suits in such capacity. Petitioner also contends that an action filed by a successor-receiver against him as predecessor-receiver is not allowed under Rule 59, Section 6 without leave of court which appointed him; as Section 6 provides that "no action may be filed by or against a receiver without leave of the court which appointed him." This is bereft of merit. The rule talks of the current receiver of the company and not the previous receiver like petitioner Orendain. The reason behind Rule 59, Section 6, which requires leave of court for all suits by or against the present receiver, is to forestall any undue interference with the receiver's performance of duties through improvident suits. Apparently, such situation cannot apply to Orendain who is no longer BF Homes' receiver. 16. Liability for refusal or neglect to deliver property to receiver (Section 7) 17. Termination and Compensation of Receiver (Section 8)

p. Traders Royal Bank Vs IAC [G.R. No. 111357. June 17, 1997.] Section 8, Rule 59 of the Rules of Court, however, explicitly provides for the manner in which it shall be paid for its services, to wit: "SEC. 8. Termination of receivership; compensation of receiver. Whenever the court, of its own motion or on that of either party, shall determine that the necessity for a receiver no longer exists, it shall, after due notice to all interested parties and hearing, settle the accounts of the receiver,

RMCDELOSSANTOS

Page 21

direct the delivery of the funds and other property in his hands to the persons adjudged entitled to receive them, and order the discharge of the receiver from further duty as such. The court shall allow the receiver such reasonable compensation as the circumstances of the case warrant, to be taxed as costs against the defeated party, or apportioned, as justice requires." It is, therefore, clear that when the services of a receiver who has been properly appointed terminates, his compensation is to be charged against the defeated party, or the prevailing litigant may be made to share the expense, as justice requires.18. Judgment against sureties (Section 9) 19. New Central Bank Act, Section 30, RA 7653 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 to 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. For a quasi-bank, any person of recognized competence in banking or finance may be designed as receiver. The receiver shall immediately gather and take charge of all the assets and liabilities of the institution, administer the same for the benefit of its creditors, and exercise the general powers of a receiver under the Revised Rules of Court but shall not, with the exception of administrative expenditures, pay or commit any act that will involve the transfer or disposition of any asset of the institution: Provided, That the receiver may deposit or place the funds of the institution in non-speculative investments. The receiver shall determine as soon as possible, but not later than ninety (90) days from take-over, whether the institution may be rehabilitated or otherwise placed in such a condition so

RMCDELOSSANTOS

Page 22

that it may be permitted to resume business with safety to its depositors and creditors and the general public: Provided, That any determination for the resumption of business of the institution shall be subject to prior approval of the Monetary Board. If the receiver determines that the institution cannot be rehabilitated or permitted to resume business in accordance with the next preceding paragraph, the Monetary Board shall notify in writing the board of directors of its findings and direct the receiver to proceed with the liquidation of the institution. The receiver shall: (1)file ex parte with the proper regional trial court, and without requirement of prior notice or any other action, a petition for assistance in the liquidation of the institution pursuant to a liquidation plan adopted by the Philippine Deposit Insurance Corporation for general application to all closed banks. In case of quasi-banks, the liquidation plan shall be adopted by the Monetary Board. Upon acquiring jurisdiction, the court shall, upon motion by the receiver after due notice, adjudicate disputed claims against the institution, assist the enforcement of individual liabilities of the stockholders, directors and officers, and decide on other issues as may be material to implement the liquidation plan adopted. The receiver shall pay the cost of the proceedings from the assets of the institution. (2)convert the assets of the institution to money, dispose of the same to creditors and other parties, for the purpose of paying the debts of such institution in accordance with the rules on concurrence and preference of credit under the Civil Code of the Philippines and he may, in the name of the institution, and with the assistance of counsel as he may retain, institute such actions as may be necessary to collect and recover accounts and assets of, or defend any action against, the institution. The assets of an institution under receivership or liquidation shall be deemed in custodia legis in the hands of the receiver and shall, from the moment the institution was placed under such receivership or liquidation, be exempt from any order of garnishment, levy, attachment, or execution. 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. cd i 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.

RMCDELOSSANTOS

Page 23

20. Interim Rules of Procedure for Intra-Corporate Controversies, Rule 9 (A.M. NO. 01-204-SC) Management Committee SECTION 1. Creation of a Management Committee. As an incident to any of the cases filed under these Rules or the Interim Rules on Corporate Rehabilitation, a party may apply for the appointment of a management committee for the corporation, partnership or association, when there is imminent danger of: (1) Dissipation, loss, wastage or destruction of assets or other properties; and (2) Paralyzation of its business operations which may be prejudicial to the interest of the minority stockholders, parties-litigants or the general public. SECTION 2. Receiver. In the event the court finds the application to be sufficient in form and substance, the court shall issue an order: (a) appointing a receiver of known probity, integrity and competence and without any conflict of interest as hereunder defined to immediately take over the corporation, partnership or association, specifying such powers as it may deem appropriate under the circumstances, including any of the powers specified in section 5 of this Rule; (b) fixing the bond of the receiver, (c) directing the receiver to make a report as to the affairs of the entity under receivership and on other relevant matters within sixty (60) days from the time he assumes office; (d) prohibiting the incumbent management of the company, partnership or association from selling, encumbering, transferring or disposing in any manner any of its properties except in the ordinary course of business; and (e) directing the payment in full of all administrative expenses incurred after the issuance of the order. SECTION 3. Receiver and Management Committee as Officers of the Court. The receiver and the members of the management committee in the exercise of their powers and performance of their duties are considered officers of the court and shall be under its control and supervision. SECTION 4. Composition of the Management Committee. After due notice and hearing, the court may appoint a management committee composed of three (3) members chosen by the court. In the appointment of the members of the management committee, the following qualifications shall be taken into consideration by the court: (1) Expertise and acumen to manage and operate a business similar in size and complexity as that of the corporation, association or partnership sought to be put under management committee; (2) Knowledge in management and finance; (3) Good moral character, independence and integrity; (4) A lack of a conflict of interest as defined in these Rules; and

RMCDELOSSANTOS

Page 24

(5) Willingness and ability to file a bond in such amount as may be determined by the court. Without limiting the generality of the following, a member of a management committee may be deemed to have a conflict of interest if: (1) He is engaged in a line of business which competes with the corporation, association or partnership sought to be placed under management; (2) He is a director, officer or stockholder charged with mismanagement, dissipation or wastage of the properties of the entity under management; or (3) He is related by consanguinity or affinity within the fourth civil degree to any director, officer or stockholder charged with mismanagement, dissipation or wastage of the properties of the entity under management. SECTION 5. Powers and Functions of the Management Committee. Upon assumption to office of the management committee, the receiver shall immediately render a report and turn over the management and control of the entity under his receivership to the management committee. The management committee shall have the power to take custody of and control all assets and properties owned or possessed by the entity under management. It shall take the place of the management and board of directors of the entity under management, assume their rights and responsibilities, and preserve the entity's assets and properties in its possession. Without limiting the generality of the foregoing, the management committee shall exercise the following powers and functions: (1) To investigate the acts, conduct, properties, liabilities, and financial condition of the corporation, association or partnership under management; (2) To examine under oath the directors and officers of the entity and any other witnesses that it may deem appropriate; (3) To report to the court any fact ascertained by it pertaining to the causes of the problems, fraud, misconduct, mismanagement and irregularities committed by the stockholders, directors, management or any other person; (4) To employ such person or persons such as lawyers, accountants, auditors, appraisers and staff as are necessary in performing its functions and duties as management committee;

RMCDELOSSANTOS

Page 25

(5) To report to the court any material adverse change in the business of the corporation, association or partnership under management; (6) To evaluate the existing assets and liabilities, earnings and operations of the corporation, association or partnership under management; (7) To determine and recommend to the court the best way to salvage and protect the interest of the creditors, stockholders and the general public, including the rehabilitation of the corporation, association or partnership under management; (8) To prohibit and report to the court any encumbrance, transfer, or disposition of the debtor's property outside of the ordinary course of business or what is allowed by the court; (9) To prohibit and report to the court any payments made outside of the ordinary course of business; (10) To have unlimited access to the employees, premises, books, records and financial documents during business hours; cTSDAH (11) To inspect, copy, photocopy or photograph any document, paper, book, account or letter, whether in the possession of the corporation, association or partnership or other persons; (12) To gain entry into any property for the purposes of inspecting, measuring, surveying, or photographing it or any designated relevant object or operation thereon; (13) To bring to the attention of the court any material change affecting the entity's ability to meet its obligations; (14) To revoke resolutions passed by the Executive Committee or Board of Directors/Trustees or any governing body of the entity under management and pass resolution in substitution of the same to enable it to more effectively exercise its powers and functions; (15) To modify, nullify or revoke transactions coming to its knowledge which it deems detrimental or prejudicial to the interest of the entity under management; (16) To recommend the termination of the proceedings and the dissolution of the entity if it determines that the continuance in business of such entity is no longer feasible or profitable or no longer works to the best interest of the stockholders, partieslitigants, creditors or the general public;

RMCDELOSSANTOS

Page 26

(17) To apply to the court for any order or directive that it may deem necessary or desirable to aid it in the exercise of its powers and performance of its duties and functions; and (18) To exercise such other powers as may, from time to time, be conferred upon it by the court. SECTION 6. Action by Management Committee. A majority of its members shall be necessary for the management committee to act or make a decision. The chairman of the management committee shall be chosen by the members from among themselves. The committee may delegate its management functions as may be necessary to operate the business of the entity under management and preserve its assets. SECTION 7. Transactions Deemed to be in Bad Faith. All transactions made by the previous management and directors shall be deemed fraudulent and are rescissible if made within thirty (30) days prior to the appointment of the receiver or management committee or during their incumbency as receiver or management committee. SECTION 8. Fees and Expenses. The receiver or the management committee and the persons hired by it shall be entitled to reasonable professional fees and reimbursement of expenses which shall be considered as administrative expenses. SECTION 9. Immunity From Suit. The receiver and members of the management committee and the persons employed by them shall not be subject to any action, claim or demand in connection with any act done or omitted by them in good faith in the exercise of their functions and powers. All official acts and transactions of the receiver or management committee duly approved or ratified by the court shall render them immune from any suit in connection with such act or transaction. SECTION 10. Reports. Within a period of sixty (60) days from the appointment of its members, the management committee shall make a report to the court on the state of the corporation, partnership or association under management. Thereafter, the management committee shall report every three (3) months to the court or as often as the court may require on the general condition of the entity under management. SECTION 11. Removal and Replacement of a Member of the Management Committee. A member of the management committee is deemed removed upon appointment by the court of his replacement chosen in accordance with section 4 of this Rule. SECTION 12. Discharge of the Management Committee. The management committee shall be discharged and dissolved under the following circumstances: (1) Whenever the court, on motion or motu proprio, has determined that the necessity for the management committee no longer exists; (2) By agreement of the parties; and (3) Upon termination of the proceedings.

RMCDELOSSANTOS

Page 27

Upon its discharge and dissolution, the management committee shall submit its final report and render an accounting of its management within such reasonable time as the court may allow. 21. Rules of Procedure for Corporate Rehabilitation q. Chas Realty & Devt Corp Vs Talavera [G.R. No. 151925. February 6, 2003.] Observe that Rule 4, Section 2(k), prescribes the need for a certification; one, to state that the filing of the petition has been duly authorized, and two, to confirm that the directors and stockholders have irrevocably approved and/or consented to, in accordance with existing laws, all actions or matters necessary and desirable to rehabilitate the corporate debtor, including, as and when called for, such extraordinary corporate actions as may be marked out.

The phrase, "in accordance with existing laws," obviously would refer to that which is, or to those that are, intended to be done by the corporation in the pursuit of its plan for rehabilitation. Thus, if any extraordinary corporate action (mentioned in Rule 4, Section 2(k), of the Interim Rules on Corporate Rehabilitation) are to be done under the proposed rehabilitation plan, the petitioner would be bound to make it known that it has received the approval of a majority of the directors and the affirmative votes of stockholders representing at least two-thirds (2/3) of the outstanding capital stock of the corporation. Where no such extraordinary corporate acts (or one that under the law would call for a two-thirds (2/3) vote) are contemplated to be done in carrying out the proposed rehabilitation plan, then the approval of stockholders would only be by a majority, not necessarily a two-thirds (2/3), vote, as long as, of course, there is a quorum 5 a fact which is not here being disputed. Nowhere in the aforequoted paragraph can it be inferred that an affirmative vote of stockholders representing at least two-thirds (2/3) of the outstanding stock is invariably necessary for the filing of a petition for rehabilitation regardless of the corporate action that the plan envisions. Just to the contrary, it only requires in the filing of the petition that the corporate actions therein proposed have been duly approved or consented to by the directors and stockholders "in consonance with existing laws." The requirement is designed to avoid a situation where a rehabilitation plan, after being developed and judicially sanctioned, cannot ultimately be seen through because of the refusal of directors or stockholders to cooperate in the full implementation of the plan. In fine, a certification on the approval of stockholders is required but the question, whether such approval should be by a majority or by a two-thirds (2/3) vote of the outstanding capital stock, would depend on the existing law vis-a-vis the corporate act or acts proposed to be done in the rehabilitation of the distressed corporation. The rehabilitation plan 7 submitted by petitioner merely consists of a repayment or re-structuring scheme of CRDC's bank loans to Land Bank of the Philippines and Equitable-PCI Bank and of leasing out most of the available spaces in the

RMCDELOSSANTOS

Page 28

Megacenter, including the completion of the construction of the fourth floor, to increase rental revenues. None of the proposed corporate actions would require a vote of approval by the stockholders representing at least two-thirds (2/3) of the outstanding capital stock.

REPLEVIN CASE DOCTRINES 1. Definition 2. Nature a. BA Finance Corporation Vs CA [G.R. No. 102998. July 5, 1996.] Replevin, broadly understood, is both a form of principal remedy and of a provisional relief. It may refer either to the action itself, i.e., to regain the possession of personal chattels being wrongfully detained from the plaintiff by another, or to the provisional remedy that would allow the plaintiff to retain the thing during the pendency of the action and hold it pendente lite. The action is primarily possessory in nature and generally determines nothing more than the right of possession. Replevin is so usually described as a mixed action, being partly in rem and partly in personam in rem insofar as the recovery of specific property is concerned, and in personam as regards to damages involved. As an "action in rem," the gist of the replevin action is the right of the plaintiff to obtain possession of specific personal property by reason of his being the owner or of his having a special interest therein. Consequently, the person in possession of the property sought to be replevied is ordinarily the proper and only necessary party defendant, and the plaintiff is not required to so join as defendants other persons claiming a right on the property but not in possession thereof. Rule 60 of the Rules of Court allows an application for the immediate possession of the property but the plaintiff must show that he has a good legal basis, i.e., a clear title thereto, for seeking such interim possession. A chattel mortgagee, unlike a pledgee, need not be in, nor entitled to the possession of the property unless and until the mortgagor defaults and the mortgagee thereupon seeks to foreclose thereon. Since the mortgagee's right of possession is conditioned upon the actual fact of default which itself may be controverted, the inclusion of other parties, like the debtor or the mortgagor himself, may be required in order to allow a full and conclusive determination of the case. When the mortgagee seeks a replevin in order to effect the eventual foreclosure of the mortgage, it is not only the existence of, but also the mortgagor's default on, the chattel mortgage that, among other things, can properly uphold the right to replevy the property. The burden to establish a valid justification for that action lies with the plaintiff. An adverse possessor, who is not the mortgagor, cannot just be deprived of his possession, let alone be bound by the terms of the chattel mortgage contract, simply because the mortgagee brings up an action for replevin. 3. Application a. Servicewide Specialists Inc. Vs CA [G.R. No. 110048. November 19, 1999.] In a suit for replevin, a clear right of possession must be established. (Italics supplied) A foreclosure under a chattel mortgage may properly be commenced only once there is default on the part of the mortgagor of his obligation secured by the mortgage. The replevin in this case has been resorted to in order to pave the way for the foreclosure of what is covered by the chattel mortgage. The conditions essential for such foreclosure would be to show, firstly,

RMCDELOSSANTOS

Page 29

the existence of the chattel mortgage and, secondly, the default of the mortgagor. These requirements must be shown because the validity of the plaintiff's exercise of the right of foreclosure is inevitably dependent thereon. Leticia Laus (mortgagor), being an indispensable party (because Servicewide filed for replevin only on the possers), should have been impleaded in the complaint for replevin and damages. An indispensable party is one whose interest will be affected by the court's action in the litigation, and without whom no final determination of the case can be had. The party's interest in the subject matter of the suit and in the relief sought are so inextricably intertwined with the other parties that his legal presence as a party to the proceeding is an absolute necessity. In his absence, there cannot be a resolution of the dispute of the parties before the Court which is effective, complete, or equitable. 4. Affidavit and Bond a. Citibank Vs CA [G.R. No. 61508. March 17, 1999.] There is substantial compliance with the rule requiring that an affidavit of merit to support the complaint for replevin if the complaint itself contains a statement of every fact required to be stated in the affidavit of merit and the complaint is verified like an affidavit. And similarly, in the case of an attachment which likewise requires an affidavit of merit, the Court held that the absence of an affidavit of merit is not fatal where the petition itself, which is under oath, recites the circumstances or facts constitutive of the grounds for the petition. The facts that must be set forth in the affidavit of merit are (1) that plaintiff owns the property particularly describing the same, or that he is entitled to its possession; (2) wrongful detention by defendant of said property; (3) that the property is not taken by virtue of a tax assessment or fine pursuant to law or seized under execution or attachment or, if it is so seized, that it is exempt from such seizure; and (4) the actual value of the property. (now, Market Value) As there was a disagreement on the valuation of the properties in the first place, proper determination of the value of the bond to be posted by the plaintiff cannot be sufficiently arrived at. The Rules of Court requires the plaintiff to "give a bond, executed to the defendant in double the value of the property as stated in the affidavit . . . ." Hence, the bond should be double the actual value of the properties involved. In this case, what was posted was merely an amount which was double the probable value as declared by the plaintiff and, therefore, inadequate should there be a finding that the actual value is actually greater. Since the valuation made by the petitioner has been disputed by the respondent, the lower court should have determined first the actual value of the properties. It was thus an error for the said court to approve the bond, which was based merely on the probable value of the properties. It should be noted that a replevin bond is intended to indemnify the defendant against any loss that he may suffer by reason of its being compelled to surrender the possession of the disputed property pending trial of the action. The same may also be answerable for damages if any when judgment is rendered in favor of the defendant or the party against whom a writ of replevin was issued and such judgment includes the return of the property to him. Thus, the requirement that the bond be double the actual value of the properties litigated upon. Such is the case because the bond will answer for the actual loss to the plaintiff, which corresponds to the value of the properties sought to be recovered and for damages, if any.

RMCDELOSSANTOS

Page 30

POSTING OF COUNTERBOND OR REDELIVERY BOND; WHEN PROPER; CASE AT BAR. The Court held in a prior case that the remedies provided under Section 5, Rule 60, are alternative remedies. ". . . If a defendant in a replevin action wishes to have the property taken by the sheriff restored to him, he should, within five days from such taking, (1) post a counter-bond in double the value of said property, and (2) serve plaintiff with a copy thereof, both requirements as well as compliance therewith within the five-day period mentioned being mandatory." This course of action is available to the defendant for as long as he does not object to the sufficiency of the plaintiff's bond. Conformably, a defendant in a replevin suit may demand the return of possession of the property replevined by filing a redelivery bond