Provisional Remedies Rule 59

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Provisional Remedies Rule 59 1

[G.R. No. 125008. June 19, 1997]

COMMODITIES STORAGE & ICE PLANT CORPORATION,

SPOUSES VICTOR & JOHANNAH

TRINIDAD, petitioners, vs. COURT OF APPEALS,JUSTICE PEDRO A. RAMIREZ, CHAIRMAN and FAR

EAST BANK & TRUST COMPANY, respondents.

D E C I S I O N

PUNO, J .:

In this petition for certiorari, petitioner seeks to annul and

set aside the decision and resolution of the Court of Appeals[1] in

CA-G.R. SP No. 36032 dismissing the complaint in Civil Case No.

94-72076 before the Regional Trial Court, Branch 9, Manila.

The facts show that in 1990, petitioner spouses Victor and

Johannah Trinidad obtained a loan of P31,000,000.00 from

respondent Far East Bank & Trust Company to finance the

purchase of the Sta. Maria Ice Plant & Cold Storage in Sta. Maria,

Bulacan. The loan was secured by a mortgage over the ice plant

and the land on which the ice plant stands. Petitioner

spouses failed to pay their loan. The bank extrajudicially

foreclosed the mortgage and the ice plant was sold by public

bidding on March 22, 1993. Respondent bank was the highestbidder. It registered the certificate of sale on September 22, 1993

and later took possession of the property.

On November 22, 1993, petitioner spouses filed Civil Case

No. 956-M-93 against respondent bank before the Regional Trial

Court, Malolos, Bulacan for reformation of the loan agreement,

annulment of the foreclosure sale and damages.[2] The trial court

dismissed the complaint for petitioners' failure to pay the docket

fees. The dismissal was without prejudice to refiling of the

complaint .[3]

On October 28, 1994, petitioners filed Civil Case No. 94-

72076 against respondent bank before the Regional Trial Court,

Branch 9, Manila for damages, accounting and fixing of

redemption period.[4] As a provisional remedy, petitioners filedon November 16, 1994 an "Urgent Petition for

Receivership." They alleged that respondent bank took

possession of the ice plant forcibly and without notice to them;

that their occupation resulted in the destruction of petitioners'

financial and accounting records making it impossible for them to

pay their employees and creditors; the bank has failed to take

care of the ice plant with due diligence such that the plant has

started emitting ammonia and other toxic refrigerant chemicals

into the atmosphere and was posing a hazard to the health of the

people in the community; the spouses' attention had been called

by several people in the barangay who threatened to inform the

Department of Environment and Natural Resources should they

fail to take action. Petitioners thus prayed for the appointment of

a receiver to save the ice plant, conduct its affairs and safeguard

its records during the pendency of the case.[5]

Instead of an answer, respondent bank filed on November

25, 1994 a "Motion to Dismiss and Opposition to Plaintiff's

Petition for Receivership." It alleged that the complaint states no

cause of action and that venue had been improperly laid. It also

alleged that petitioners failed to pay the proper docket fees and

violated the rule on forum-shopping.[6]

In an order dated December 13, 1994, the trial court

granted the petition for receivership and appointed petitioners'

nominee, Ricardo Pesquera, as receiver. The order disposed as

follows:

"WHEREFORE, premises considered the Urgent Petition for

Receivership is GRANTED and Mr. Ricardo Pesquera to whose

appointment no opposition was raised by the defendant and who

is an ice plant contractor, maintainer and installer is appointed

receiver. Accordingly, upon the filing and approval of the bond of

TWO MILLION (P2,000,000.00) pesos which shall answer for al

damages defendant may sustain by reason of the receivership

said Ricardo Pesquera is authorized to assume the powers of areceiver as well as the obligation as provided for in Rule 59 of the

Rules of Court after taking his oath as such receiver.

SO ORDERED."[7]

Respondent bank assailed this order before the Court o

Appeals on a petition for certiorari. On January 11, 1996, the

Court of Appeals annulled the order for receivership and

dismissed petitioners' complaint for improper venue and lack o

cause of action. The dispositive portion of the decision reads:

"WHEREFORE, the petition for certiorari is

GRANTED. Accordingly, the assailed order dated December 13

1994 (Annex A, petition) is ANNULLED and SET ASIDE andrespondent's complaint in Civil Case No. 94-72076 in the

respondent court (Annexes F, petition; 4, comment), is

DISMISSED.Costs against respondents except the court.

SO ORDERED."

Reconsideration was denied on May 23, 1996.[8] Hence, this

petition.

Section 1 of Rule 59 of the Revised Rules of Court provides

that:

"Sec. 1. When and by whom receiver appointed .-- One or more

receivers of the property, real or personal, which is the subject o

the action, may be appointed by the judge of the Court of First

Instance in which the action is pending, or by a Justice of the

Court of Appeals or of the Supreme Court, in the following cases:

(a) When the corporation has been dissolved, or is insolvent, or is

in imminent danger of insolvency, or has forfeited its corporate

rights;

(b) When it appears from the complaint or answer, and such

other proof as the judge may require, that the party applying for

the appointment of receiver has an interest in the property or

fund which is the subject of the action, and that such property or

fund is in danger of being lost, removed or materially injuredunless a receiver be appointed to guard and preserve it;

(c) When it appears in an action by the mortgagee for the

foreclosure of a mortgage that the property is in danger of being

wasted or materially injured, and that its value is probably

insufficient to discharge the mortgage debt, or that the parties

have so stipulated in the contract of mortgage;

(d) After judgment, to preserve the property during the pendency

of the appeal, or to dispose of it according to the judgment, or to

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aid execution when the execution has been returned unsatisfied

or the judgment debtor refuses to apply his property in

satisfaction of the judgment, or otherwise carry the judgment

into effect;

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

receiver is the most convenient and feasible means of preserving,

administering, or disposing of the property in litigation."

A receiver of real or personal property, which is the subject of the

action, may be appointed by the court when it appears from thepleadings or such other proof as the judge may require, that the

party applying for such appointment has (1) an actual interest in

it; and (2) that (a) such property is in danger of being lost,

removed or materially injured; or (b) whenever it appears to be

the most convenient and feasible means of preserving or

administering the property in litigation.[9]

A receiver is a person appointed by the court in behalf of all

the parties to the action for the purpose of preserving and

conserving the property in litigation and prevent its possible

destruction or dissipation, if it were left in the possession of any

of the parties.[10] The appointment of a receiver is not a matter of

absolute right. It depends upon the sound discretion of the

court [11] and is based on facts and circumstances of each

particular case.[12]

Petitioners claim that the appointment of a receiver is

justified under Section 1 (b) of Rule 59. They argue that the ice

plant which is the subject of the action was in danger of being

lost, removed and materially injured because of the following

"imminent perils":

"6.1 Danger to the lives, health and peace of mind of the

inhabitants living near the Sta. Maria Ice Plant;

6.2 Drastic action or sanctions that could be brought against the

plaintiff by affected third persons, including workers who have

claims against the plaintiff but could not be paid due to the

numbing manner by which the defendant took the Sta. Maria IcePlant;

6.3 The rapid reduction of the Ice Plant into a scrap heap because

of evident incompetence, neglect and vandalism."[13]

A petition for receivership under Section 1 (b) of Rule 59

requires that the property or fund which is the subject of the

action must be in danger of loss, removal or material injury

which necessitates protection or preservation. The guiding

principle is the prevention of imminent danger to the property. If

an action by its nature, does not require such protection or

preservation, said remedy cannot be applied for and granted.[14]

In the instant case, we do not find the necessity for theappointment of a receiver. Petitioners have not sufficiently

shown that the Sta. Maria Ice Plant is in danger of disappearing or

being wasted and reduced to a "scrap heap." Neither have they

proven that the property has been materially injured which

necessitates its protection and preservation.[15] In fact, at the

hearing on respondent bank's motion to dismiss, respondent

bank, through counsel, manifested in open court that the leak in

the ice plant had already been remedied and that no other

leakages had been reported since.[16] This statement has not been

disputed by petitioners.

At the time the trial court issued the order for receivership

of the property, the problem had been remedied and there was

no imminent danger of another leakage. Whatever danger there

was to the community and the environment had already been

contained.

The "drastic sanctions" that may be brought against

petitioners due to their inability to pay their employees and

creditors as a result of "the numbing manner by which

[respondent bank] took the ice plant" does not concern the ice

plant itself. These claims are the personal liabilities of petitioners

themselves. They do not constitute "material injury" to the iceplant.

Moreover, the receiver appointed by the court appears to

be a representative of petitioners. Respondent bank alleges tha

it was not aware that petitioners nominated one Mr. Pesquera as

receiver.[17] The general rule is that neither party to a litigation

should be appointed as receiver without the consent of the other

because a receiver should be a person indifferent to the parties

and should be impartial and disinterested.[18] The receiver is no

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.[19]

The power to appoint a receiver must be exercised with

extreme caution. There must be a clear showing of necessitytherefor in order to save the plaintiff from grave and

irremediable loss or damage.[20] It is only when the circumstances

so demand, either because there is imminent danger that the

property sought to be placed in the hands of a receiver be lost or

because they run the risk of being impaired, endeavouring to

avoid that the injury thereby caused be greater than the one

sought to be avoided.[21]

The Court of Appeals correctly found that the trial cour

gravely abused its discretion in issuing the order for

receivership. The respondent court, however, went further and

took cognizance of respondent bank's motion to dismiss. And

finding merit in the motion, it dismissed the

complaint. Petitioners now claim that the respondent cour

should have refrained from ruling on the motion to dismissbecause the motion itself was not before it .[22]

Again, we reject petitioners' contention. The motion to

dismiss is anchored on improper venue, lack of cause of action

and forum-shopping. We agree with the respondent court that

the question of venue relates to the principal action and

is prejudicial to the ancillary issue of receivership. Although the

grounds for dismissal were not specifically raised before the

appellate court, the said court may consider the same since the

petition for receivership depends upon a determination

thereof .[23]

In their complaint, petitioners prayed for the following:

"WHEREFORE, in view of the foregoing, it is respectfully prayed

that after trial on the merits judgment be rendered:

1. Ordering the Defendant to pay COMMODITIES actual and

compensatory damages in the amount of PESOS: TWO MILLION

FIVE HUNDRED THOUSAND and 00/100 (P2,500,000.00);

2. Ordering the Defendant to pay Plaintiffs moral damages in the

amount of PESOS: TWO MILLION and 00/100 (P2,000,000.00) to

compensate the Plaintiffs for the anxiety and besmirched

reputation caused by the unjust actuations of the Defendant;
































































3. Ordering the Defendant to pay Plaintiffs nominal and

exemplary damages in the amount of PESOS: FIVE HUNDRED

THOUSAND and 00/100 (P500,000.00) to deter the repetition of

such unjust and malicious actuations of the Defendant;

4. In order to restore the legal right of the Plaintiff

COMMODITIES to redeem its foreclosed property, a right

which COMMODITIES has been unjustly deprived of by the

malicious and bad faith machinations of the Defendant,compelling the Defendant to produce the correct, lawful,

official and honest statements of account and application ofpayment. Concomitantly, ordering the Defendant to accept

the redemption of the foreclosed properties pursuant to

Rule 39 of the Revised Rules of Court in conjunction with Act

3135, within the prescribed period for redemption, saidperiod to commence from the date of receipt by the Plaintiff

COMMODITIES of the correct, lawful, official and honest

statements of account and application of payments;

5. Ordering the Defendant to pay attorney's fees in the amount of

PESOS: THREE HUNDRED THOUSAND (P300,000.00); and costs

of litigation.

Other reliefs and remedies just and equitable under the

circumstances are likewise prayed for."[24]

Petitioners pray for two remedies: damages and redemption. The

prayer for damages is based on respondent bank's forcible

occupation of the ice plant and its malicious failure to furnish

them their statements of account and application of payments

which prevented them from making a timely

redemption.[25] Petitioners also pray that respondent bank be

compelled to furnish them said documents, and upon receipt

thereof, allow redemption of the property. They ultimately seek

redemption of the mortgaged property. This is explicit in

paragraph 4 of their prayer.

An action to redeem by the mortgage debtor affects his title

to the foreclosed property. If the action is seasonably made, it

seeks to erase from the title of the judgment or mortgage debtor

the lien created by registration of the mortgage and sale.[26] If not

made seasonably, it may seek to recover ownership to the land

since the purchaser's inchoate title to the property becomes

consolidated after expiration of the redemption period.[27] Either

way, redemption involves the title to the foreclosed property. It is

a real action.

Section 2 of Rule 4 of the Revised Rules of Court provides:

"Sec. 2. Venue in Courts of First Instance.-- (a) Real actions.--

Actions affecting title to, or for recovery of possession, or for

partition or condemnation of, or foreclosure of mortgage on, real

property, shall be commenced and tried in the province where

the property or any part thereof lies."[28]

Where the action affects title to the property, it should be

instituted in the Regional Trial Court where the property is

situated. The Sta. Maria Ice Plant & Cold Storage is located in Sta.

Maria, Bulacan. The venue in Civil Case No. 94-72076 was

therefore laid improperly.

Finally, there is no merit in petitioners' claim that the

respondent bank is no longer the real party in interest after

selling the ice plant to a third person during the pendency of the

case. Section 20 of Rule 3 of the Revised Rules of Court provides

that in a transfer of interest pending litigation, the action may be

continued by or against the original party, unless the court, upon

motion, directs the transferee to be substituted in the action or

joined with the original party. The court has not ordered the

substitution of respondent bank.

IN VIEW WHEREOF, the decision dated January 11, 1996

and resolution dated May 23, 1996 of the Court of Appeals in CA

G.R. SP No. 36032 are affirmed. Costs against petitioners.

SO ORDERED.
























JULIO A. VIVARES and G.R. No. 155408

MILA G. IGNALING,

Petitioners,

Present:

QUISUMBING, J.,

Chairperson,

- versus - CARPIO,

CARPIO MORALES,

TINGA, and

VELASCO, JR., JJ.

ENGR. JOSE J. REYES,Respondent Promulgated:

February 13, 2008

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

D E C I S I O N

VELASCO, JR., J.:

The Case

The kernel dispute in this petition under Rule 45 is the

legality of the May 22, 2001 Resolution[1] of the Camiguin

Regional Trial Court (RTC), Branch 28 in Civil Case No. 517,

which placed the estate of Severino Reyes under

receivership. The Court of Appeals (CA) saw it differently in CA-G.R. SP No. 67492its June 18, 2002 Decision[2] recalled the RTC

directive on the appointment of the receiver, prompting Julio

Vivares and Mila Ignaling to file the petition at bar to convince

the Court to reinstate the receivership.

The Facts

Severino Reyes was the father of respondent Jose Reyes

and Torcuato Reyes. Upon the death of Severino, respondent and

Torcuato came upon their inheritance consisting of several

properties. They had an oral partition of the properties and

separately appropriated to themselves said properties.

On May 12, 1992, Torcuato died with a last will and

testament executed on January 3, 1992. In Reyes v. Court of Appeals,[3]we affirmed the November 29, 1995 CA Decision,

admitting the will for probate.

Petitioner Vivares was the designated executor of

Torcuatos last will and testament, while petitioner Ignaling was

declared a lawful heir of Torcuato.

Believing that Torcuato did not receive his full share in

the estate of Severino, petitioners instituted an action

for Partition and Recovery of Real Estate before the Camiguin

RTC, Branch 28 entitled Julio A. Vivares, as executor of the estate of

Torcuato J. Reyes and Mila R. Ignaling, as heir v. Engr. Jose J.

Reyes and docketed as Civil Case No. 517. With the approval of

the trial court, the parties agreed that properties from the estateof Severino, which were already transferred in the names of

respondent and Torcuato prior to the latters death on May 12,

1992, shall be excluded from litigation. In short, what was being

contested were the properties that were still in the name of

Severino.

On November 24, 1997, for the purpose of collating the

common properties that were disputed, the trial court directed

the formation of a three-man commission with due

representation from both parties, and the third member,

appointed by the trial court, shall act as chairperson. The

disputed properties were then annotated with notices of lis

pendens upon the instance of petitioners.

On March 15, 2000, petitioners filed a Motion to Place

Properties in Litigation under Receivership[4] before the tria

court alleging that to their prejudice respondent had, without

prior court approval and without petitioners knowledge, sold to

third parties and transferred in his own name several common

properties. Petitioners also averred that respondent fraudulently

antedated, prior to May 12, 1992, some conveyances and

transfers to make it appear that these were no longer part of the

estate of Severino under litigation. They further claimed tha

respondent was and is in possession of the common properties in

the estate of Severino, and exclusively enjoying the fruits and

income of said properties and without rendering an accounting

on them and turning over the share pertaining to Torcuato. Thus

petitioners prayed to place the entire disputed estate of Severino

under receivership. They nominated a certain Lope Salantin to be

appointed as receiver.

On March 23, 2000, respondent filed his Opposition to

Place the Estate of Severino Reyes under Receivership,[5] denying

that he had fraudulently transferred any property of the estate of

Severino and asserting that any transfer in his name of said

properties was a result of the oral partition between him and

Torcuato that enabled the latter as well to transfer severacommon properties in his own name.

On May 24, 2000, petitioners filed their Offer of Exhibits

in support of their motion for receivership. On the same date, the

trial court issued an Order[6] granting petitioners motion and

appointed Salantin as receiver conditioned on the filing of a PhP

50,000 bond. Respondent filed a motion for reconsideration

contending that the appointment of a receiver was unduly

precipitate considering that he was not represented by counse

and thus was deprived of due process.

On August 4, 2000, the trial court allowed respondent to

present his evidence to contest petitioners grounds for the

appointment of a receiver, and the trial court set the reception o

respondents evidence for September 4, 2000. However, on

August 24, 2000, respondent filed a motion for postponement of

the September 4, 2000 scheduled hearing on the ground that he

was in theUnited States as early as July 23, 2000 for medica

examination. On September 5, 2000, the trial court denied

respondents motion for postponement and reinstated its May 24

2000 Order.

On September 19, 2000, respondent filed a

Manifestation with Motion to Discharge Receiver, reiterating the

circumstances which prevented him from attending the

September 4, 2000 hearing and praying for the discharge of the

receiver upon the filing of a counterbond in an amount to be fixed

by the court in accordance with Section 3, Rule 59 of the 1997

Revised Rules on Civil Procedure. On October 10, 2000petitioners filed their undated Opposition to Motion to Discharge

Receiver.

Subsequently, respondent filed a Motion to Cance

Notice of Lis Pendens which was annotated on Tax Declaration

(TD) No. 112 covering Lot No. 33 allegedly belonging exclusively

to him. Respondent asserted in the motion that an adjacent

property to Lot No. 33, particularly a portion of Lot No. 35, which

is owned by a certain Elena Unchuan, was erroneously included

in Lot No. 33 and, consequently, was subjected to the notice of li

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pendens. Petitioners filed their Opposition to the Motion to

Cancel Lis Pendens.

Consequently, on May 22, 2001, the trial court issued a

Resolution, denying respondents motions to discharge receiver

and cancel the notice of lis pendens in TD No. 112. Respondent

seasonably filed a partial motion for reconsideration of the May

22, 2001 Resolution, attaching copies of deeds of sale executed by

Torcuato covering several common properties of the estate of

Severino to prove that he and Torcuato had indeed made an oral

partition of the estate of their father, Severino, and thus allowing

him and Torcuato to convey their respective shares in the estate

of Severino to third persons.

On October 19, 2001, the trial court heard respondents

motion for partial reconsideration, and on the same date issued

an Order denying the motion for partial reconsideration on the

ground that respondent failed to raise new matters in the motion

but merely reiterated the arguments raised in previous

pleadings.

Aggrieved, respondent filed a Petition for Certiorari

before the CA, assailing the May 22, 2001 Resolution and October

19, 2001 Order of the RTC.

The Ruling of the Court of Appeals

On June 18, 2002, the CA rendered the assailed

Decision, sustaining respondents position and granted relief,

thus:

WHEREFORE, premises considered,

the Petition is hereby GRANTED. The

Resolution dated 22 May 2001 of the Regional

Trial Court of Camiguin, Branch 28 in Civil

Case No. 517 is hereby reversed and set

aside. The court-appointed receiver, Lope

Salantin, is discharged upon the posting by

petitioner of a counterbond in the amount of

P100,000.00. The notice of lis pendens in Tax

Declaration 112, in so far as it covers the

property of Elena Unchuan, is cancelled. Let

this case be remanded to the court a quo for

further proceedings.[7]

In reversing the trial court, the CA reasoned that the

court a quo failed to observe the well-settled rule that allows the

grant of the harsh judicial remedy of receivership only in extreme

cases when there is an imperative necessity for it. The CA thus

held that it is proper that the appointed receiver be discharged

on the filing of a counterbond pursuant to Sec. 3, Rule 59 of the

1997 Revised Rules on Civil Procedure.

Moreover, the CA ratiocinated that respondent has

adequately demonstrated that the appointment of the receiverhas no sufficient basis, and further held that the rights of

petitioners over the properties in litigation are doubly protected

through the notices of lis pendens annotated on the titles of the

subject properties. In fine, the appellate court pointed out that

the appointment of a receiver is a delicate one, requiring the

exercise of discretion, and not an absolute right of a party but

subject to the attendant facts of each case. The CA found that the

trial court abused its discretion in appointing the receiver and in

denying the cancellation of the notice of lis pendens on TD No.

112, insofar as it pertains to the portion owned by Unchuan.

Aggrieved, petitioners in turn interposed a Motion for

Reconsideration that was denied through the assailed September

24, 2002 CA Resolution.

Thus, this petition for review on certiorari is before us,

presenting the following issues for consideration:

I

WHETHER OR NOT THE ANNOTATION OF A

NOTICE OF LIS PENDENS PRECLUDES THE

APPOINTMENT OF A RECEIVER WHEN THERE

IS A NEED TO SAFEGUARD THE PROPERTIES

IN LITIGATION.

II

WHETHER OR NOT A DULY APPOINTED

RECEIVER OF PROPERTIES IN LITIGATION

SHOULD BE DISCHARGED SIMPLY BECAUSE

THE ADVERSE PARTY OFFERS TO POST A

COUNTERBOND.

III

WHETHER OR NOT THE CANCELLATION OF A

NOTICE OF LIS PENDENS ANNOTATED ON

TAX DECLARATION NO. 112 IS CONTRARY TO

LAW.[8]

The Courts Ruling

The petition must be denied. Being closely related, we

discuss the first and second issues together.

Receivership not justified

We sustain the CA ruling that the trial court acted arbitrarily in

granting the petition for appointment of a receiver as there was

no sufficient cause or reason to justify placing the disputed

properties under receivership.

First , petitioners asseverate that respondent alienated severa

common properties of Severino without court approval and

without their knowledge and consent. The fraudulent transfers

they claim, were antedated prior to May 12, 1992, the date o

Torcuatos death, to make it appear that these properties no

longer form part of the assets of the estate under litigation in

Civil Case No. 517.

Petitioners position is bereft of any factual mooring.

Petitioners miserably failed to adduce clear, convincing, and hard

evidence to show the alleged fraud in the transfers and the

antedating of said transfers. The fact that the transfers were

dated prior to the demise of Torcuato on May 12, 1992 does not

necessarily mean the transfers were attended by fraud. He who

alleges fraud has the burden to prove it.

Moreover, respondent has adduced documentary proof that

Torcuato himself similarly conveyed several lots in the estate o

Severino based on the oral partition between the siblings. To lend












credence to the transfers executed by Torcuato but distrust to

those made by respondent would be highly inequitable as

correctly opined by the court a quo.

Indeed, receivership is a harsh remedy to be granted only in

extreme situations. As early as 1914, the Court already

enunciated the doctrinal pronouncement in Velasco & Co. v.

Gochuico & Co. that courts must use utmost circumspection in

allowing receivership, thus:

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 .[9]

Petitioners cannot now impugn the oral partition entered into by

Torcuato and respondent and hence cannot also assail the

transfers made by respondent of the lots which were subject of

said agreement, considering that Torcuato also sold properties

based on said verbal arrangement. Indeed, the parties agreed that

the civil action does not encompass the properties covered by the

oral partition.In this factual setting, petitioners cannot convince

the Court that the alleged fraudulent transfers of the lots made by

respondent, which purportedly form part of his share in

Severinos estate based on the partition, can provide a strong

basis to grant the receivership.

Second , petitioner is willing to post a counterbond in the amount

to be fixed by the court based on Sec. 3, Rule 59 of the 1997 Rules

of Civil Procedure, which reads:

Sec. 3. Denial of application or

discharge of receiver .The application may be

denied, or the receiver discharged, when the

adverse party files a bond executed to the

applicant, in an amount to be fixed by the

court, to the effect that such party will pay the

applicant all damages he may suffer by reason

of the acts, omissions, or other matter

specified in the application as ground for such

appointment. The receiver may also be

discharged if it is shown that his appointment

was obtained without sufficient cause.

Anchored on this rule, the trial court should have

dispensed with the services of the receiver, more so considering

that the alleged fraud put forward to justify the receivership was

not at all established.

Petitioners advance the issue that the receivership

should not be recalled simply because the adverse party offers to

post a counterbond. At the outset, we find that this issue was not

raised before the CA and therefore proscribed by the doctrine

that an issue raised for the first time on appeal and not timely

raised in the proceedings in the lower court is barred by

estoppel.[10] Even if we entertain the issue, the contention is

nevertheless devoid of merit. The assailed CA decision supported

the discharge of the receiver with several reasons including the

posting of the counterbond. While the CA made a statement that

the trial court should have discharged the appointed receiver on

the basis of the proposed counterbond, such opinion does not

jibe with the import of Sec. 3, Rule 59. The rule states that the

application may be denied or the receiver discharged. In

statutory construction, the word may has always been construed

as permissive. If the intent is to make it mandatory or ministeria

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.

Third , since a notice of lis pendens has been annotated on the

titles of the disputed properties, the rights of petitioners are

amply safeguarded and preserved since there can be no risk of

losing the property or any part of it as a result of any conveyance

of the land or any encumbrance that may be made thereon

posterior to the filing of the notice of lis pendens.[11] Once the

annotation is made, any subsequent conveyance of the lot by the

respondent would be subject to the outcome of the litigation

since the fact that the properties are under custodia legis is made

known to all and sundry by operation of law. Hence, there is noneed for a receiver to look after the disputed properties.

On the issue of lis pendens, petitioners argue that the mere fac

that a notice of lis pendens was annotated on the titles of the

disputed properties does not preclude the appointment of a

receiver. It is true that the notice alone will not preclude the

transfer of the property pendente lite, for the title to be issued to

the transferee will merely carry the annotation that the lot is

under litigation.Hence, the notice of lis pendens, by itself, may no

be the most convenient and feasible means of preserving or

administering the property in litigation. However, the situation is

different in the case at bar. A counterbond will also be posted by

the respondent to answer for all damages petitioners may suffer

by reason of any transfer of the disputed properties in the

future. As a matter of fact, petitioners can also ask for the

issuance of an injunctive writ to foreclose any transfer, mortgage

or encumbrance on the disputed properties. These

considerations, plus the finding that the appointment of the

receiver was without sufficient cause, have demonstrated the

vulnerability of petitioners postulation.

Fourth, it is undisputed that respondent has actua

possession over some of the disputed properties which are

entitled to protection. Between the possessor of a subjec

property and the party asserting contrary rights to the

properties, the former is accorded better rights. In litigation

except for exceptional and extreme cases, the possessor ought

not to be deprived of possession over subject property. Article

539 of the New Civil Code provides that every possessor has aright to be respected in his possession; and should he be

disturbed therein he shall be protected in or restored to said

possession by the means established by the laws and the Rules o

Court. In Descallar v. Court of Appeals, we ruled that the

appointment of a receiver is not proper where the rights of the

parties, one of whom is in possession of the property, are still to

be determined by the trial court .[12]

In view of the foregoing reasons, we uphold the CA

ruling that the grant of the receivership was without sufficient

justification nor strong basis.




















Anent the third issue that the cancellation of the notice of lis

pendens on TD No. 112 is irregular as Lot No. 33 is one of the

disputed properties in the partition case, petitioners position is

correct.

The CA made a factual finding that the property of Unchuan was

erroneously included in Lot No. 33, one of the disputed

properties in Civil Case No. 517. It then ruled that the annotation

of lis pendens should be lifted.

This ruling is bereft of factual basis.

The determination whether the property of Unchuan is a part of

Lot No. 33 and whether that portion really belongs to Unchuan

are matters to be determined by the trial court. Consequently, the

notice of lis pendens on TD No. 112 stays until the final ruling on

said issues is made.

WHEREFORE, the petition is PARTLY GRANTED. The

June 18, 2002 CA Decision in CA-G.R. SP No. 67492

is AFFIRMED with MODIFICATION insofar as it ordered the

cancellation of the notice of lis pendens in TD No. 112. As thus

modified, the appealed CA Decision should read as follows:

WHEREFORE, premises considered,the Petition is hereby PARTLY GRANTED. The

Resolution dated 22 May 2001 of the Regional

Trial Court of Camiguin, Branch 28 in Civil

Case No. 517 is hereby reversed and set

aside. The court-appointed receiver, Lope

Salantin, is discharged upon the posting by

petitioner of a counterbond in the amount of

PhP 100,000. The notice of lis pendens in TD

No. 112, including the portion allegedlybelonging to Elena Unchuan, remains valid

and effective. Let this case be remanded to

the court a quo for further proceedings in Civil

Case No. 517.

No costs.

SO ORDERED.




G.R. No. 61508 March 17, 1999

Citibank, N.A. (Formerly First National City Bank), petitioner,

vs.

The Honorable Court of Appeals and Douglas F.

Anama, respondents.

PURISIMA, J.:

At bar is a special civil action for certiorari with prayer for a

temporary restraining order faulting the Court of Appeals1 with

grave abuse of discretion for nullifying the lower court's order of

seizure of mortgaged properties subject of a case for sum of

money and replevin.

The facts leading to the institution of the case are as follows:

In considering for a loan obtained from Citibank, N.A. (formerly

First National City Bank), the defendant (private respondent

herein) Douglas Anama executed a promissory note, dated

November 10, 1972, 2 to pay the plaintiff bank the sum of

P418,000.00 in sixty (60) equal successive monthly installments

of P8,722.25, starting on the 10th day of December 1972 and on

the 10th of every month thereafter. The said Promissory Notestipulated further that:

(a) the loan is subject to interest at the rate of

twelve percent (12%) per annum;

(b) the promissory note and the entire amount

therein stated shall become immediately due

and payable without notice or demand upon

—

(aa) default in the payment of any

installment of principal or interest at

the time when the same is due;

(bb) the occurrence of any change in

the condition and affairs of the

defendant, which in the opinion of

the plaintiff shall increase its credit

risk;

(c) the defendant agrees to pay all costs,

expenses, handling and insurance charges

incurred in the granting of the loan;

(d) in case the services of a lawyer is made

necessary for collection, defendant shall be

liable for attorney's fees of at least ten percent(10%) of the total amount due. 3

To secure payment of the loan, private respondent Anama also

constituted a Chattel Mortgage of even date in favor of petitioner,

on various machineries and equipment located at No. 1302

Epifanio delos Santos Avenue, Quezon City, under the following

terms and conditions:

(a) The machineries and equipment subject o

the mortgage, stand as security for defendant's

account.

(b) All replacement, substitutions, additions

increases and accretions to the properties

mortgaged shall also be subject to the

mortgage.

(c) The defendant appoints the plaintiff as his

attorney-in-fact with authority to enter thepremises of the defendant and take actua

possession of the mortgaged chattels withou

any court order, to sell said property to any

party.

(d) All expenses in carrying into effect the

stipulations therein shall be for the account o

the defendant and shall form part of the

amount of the obligation secured by the

mortgage.

(e) In case the plaintiff institutes proceedings

for the foreclosure of the mortgage, the

plaintiff shall be entitled to the appointment ofa receiver without a bond.

(f) In case of default, the defendant shall be

liable for attorney's fees and cost of collection

in the sum equal to twenty-five (25%) of the

total amount of the indebtedness outstanding

and unpaid. 4

On November 25, 1974, for failure and refusal of the private

respondent to pay the monthly installment due under the said

promissory note since January 1974, despite repeated demands

petitioner filed a verified complaint against private respondent

Anama for the collection of his unpaid balance of P405,820.52 on

the said promissory note, for the delivery and possession of the

chattels covered by the Chattel Mortgage preparatory to the

foreclosure thereof as provided under Section 14 of the Chatte

Mortgage Law, docketed as Civil Case No. 95991 before the then

Court of First Instance of Manila.

On February 20, 1975, the defendant Anama submitted his

Answer with Counterclaim, denying the material averments o

the complaint, and averring inter alia (1) that the remedy o

replevin was improper and the writ of seizure should be vacated

(2) that he signed the promissory note for P418,000.00 without

receiving from plaintiff Citibank any amount, and was even

required to pay the first installment on the supposed loan in

December 1974; (3) that the understanding between him and the

Citibank was for the latter to release to him the entire loanapplied for prior to and during the execution of his promissory

note, but Citibank did not do so and, instead, delayed the release

of any amount on the loan even after the execution of the

promissory note thereby disrupting his timetable of plans and

causing him damages; (4) that the amount released by Citibank to

him up to the present was not the amount stated in the

promissory note, and his alleged default in paying the installment

on the loan was due to the delay in releasing the full amount of

the loan as agreed upon; (5) that the macheniries and equipment

described in the chattel mortgage executed by him are really




worth more than P1,000,000.00 but he merely acceded to the

valuation thereof by Citibank in said document because of the

latter's representation that the same was necessary to speed up

the granting of the loan applied for by him; (6) that the

properties covered by said chattel mortgage are real properties

installed in a more or less permanent nature at his (defendant's)

premises in Quezon City, as admitted by Citibank in said

mortgage document; (7) that the mortgage contract itself

stipulated that the manner and procedure for affecting the sale or

redemption of the mortgage properties, if made extrajudicial,

shall be governed by Act No. 1508 and other pertinent laws

which all pertain to real properties; and (8) that because of the

filing of this complaint without valid grounds therefor, he

suffered damages and incurred attorney's fees; the defendant,

now private respondent, averred.

On December 2, 1974, the trial court upon proof of default of the

private respondent in the payment of the said loan, issued an

Order of Replevin over the macheneries and equipment covered

by the Chattel Mortgage.

However, despite the issuance of the said order of seizure of

subject chattels, actual delivery of possession thereof to

petitioner did not take place because negotiations for an

amicable settlement between the parties were encouraged by thetrial court.

On March 24, 1975, a pre-trial conference was held and the lower

court issued an order for joint management by the petitioner and

the private respondent of the latter's business for ten (10) days,

after which the former would appointed receiver for the said

business.

On April 1, 1975, the petitioner took over private respondent's

business as receiver. When further proposals to settle the case

amicably failed, the lower court proceeded to try the case on the

merits.

On January 29, 1977, petitioner presented a Motion for theIssuance of an Alias Writ of Seizure, ordering the sheriff to seize

the properties involved and dispose of them in accordance with

the Revised Rules of Court. The lower court then gave private

respondent five (5) days to oppose the said motion and on

February 22, 1977, he sent in his opposition thereto on the

grounds: (1) that Citibank's P400,000 replevin bond to answer

for damages was grossly inadequate because the market value of

the properties involved is P1,710,000 and their replacement cost

is P2,342,300.00 per the appraisal report of the Appraisal and

Research Corp.; (2) that he was never in default to justify the

seizure; (3) that the Civil Case No. 18071 of the Court of First

Instance, entitled Hernandes vs. Anama, et al ., which, according to

Citibank, supposedly increased its credit risk in the alleged

obligation, had already been dismissed as against him and thecase terminated with the dismissal of the complaint against the

remaining defendant, First National City Bank, by the Court in its

orders of January 12, 1977 and February 7, 1977; (4) that his

(defendant's) supposed obligations with Citibank were fully

secured and his mortgaged properties are more than sufficient to

secure payment thereof; and (5) that the writ of seizure if issued

would stop his business operations and contracts and expose him

to lawsuits from customers, and also dislocate his employees and

their families entirely dependent thereon for their livelihood.

On February 28, 1977, acting on the said Motion and private

respondent's opposition, the trial court issued an Order granting

the Motion for Alias Writ of Seizure, ruling thus:

WHEREFORE, the motion for alias writ o

seizure is hereby granted. At any rate, this

Order gives another opportunity for defendan

and the intervenor who claims to be a part

owner to file a counterbond under Sec. 60 o

Rules of Court. 5

Private respondent moved for reconsideration of the aforesaid

order but the same was denied by the Resolution of March 18

1977, to wit:

In view of the foregoing, the motion for

reconsideration is hereby denied.

At any rate, as already stated, the defendant

has still a remedy available which is to file a

bond executed to the plaintiff in double the

value of the properties as stated in the

plaintiff's affidavit. The Court at this instance

therefore has no authority to stop or

suspended the writ of seizure alreadyordered. 6

Accordingly, by virtue of the Alias writ of Seizure, petitioner took

possession of the mortgaged chattels of private respondent. As a

consequence, the sheriff seized subject properties, dismantled

and removed them from the premises where they were installed

delivered them to petitioner's possession on March 17, 18 and

19, 1977 and advertised them for sale at public auction scheduled

on March 22, 1977.

On March 21, 1977, private respondent filed with the Court o

Appeals a Petition for Certiorari and Prohibition 7 with Injunction

to set aside and annul the questioned resolution of the trial court

on the ground that they were issued "in excess of jurisdiction and

with grave abuse of discretion" because of the "lack of evidence

and clear cut right to possession of First National City Bank

(herein petitioner)" top the machineries subject of the Chatte

Mortgage.

On July 30, 1982, finding that the trial court acted with grave

abuse of discretion amounting to excess of lack of jurisdiction in

issuing the assailed resolutions, the Court of Appeals granted

petition, holding that the provision of the Rules of Court on

Replevin and Receivership have not been complied with, in that

(1) there was no Affidavit of Merit accompanying the Complaint

for Replevin; (2) the bond posted by Citibank was insufficient

and (3) there was non-compliance with the requirement of a

receiver's bond and oath of office. The decretal portion of theassailed decision of the Court of Appeals, reads:

WHEREFORE, the petition is granted. The

questioned resolutions issues by the

respondent judge in Civil Case No. 95991

dated February 28, 1977 and March 18, 1977

together with the writs and processes

emanating or deriving therefrom, are hereby

declare null and void ab initio.




The respondent ex-officio sheriff of Quezon

City and the respondent First National City

Bank are hereby ordered to return all the

machineries and equipment with their

accessories seized, dismantled and hauled, to

their original and respective places and

position in the shop flooring of the petitioner's

premises where these articles were, before

they were dismounted, seized and hauled at

their own expense. The said respondents are

further ordered to cause the repair of the

concrete foundations destroyed by them

including the repair of the electrical wiring

and facilities affected during the seizure,

dismanting and hauling.

The writ of preliminary injunction heretofore

in effect is hereby made permanent. Costs

against the private respondents.

SO ORDERED 8

Therefrom, Citibank came to this Court via its present petition

for certiorari, ascribing grave abuse of discretion to the Court of

Appeals and assigning as errors, that:

I

THE RESPONDENT COURT ERRED IN

PRACTICALLY AND IN EFFECT RENDERING

JUDGMENT ON THE MERITS AGAINST THE

HEREIN PETITIONER BY ORDERING THE

RETURN OF THE MACHINERIES AND

EQUIPMENT AND ITS ACCESSORIES TO THEIR

ORIGINAL AND RESPECTIVE PLACES AND

POSITIONS.

II


FINDING THAT THE COMPLAINT OF THE

PETITIONER DID NOT COMPLY WITH THE

PROVISIONS OF SEC. 2, RULE 60 OF THE

RULES OF COURT.

III

THAT THE RESPONDENT COURT ERRED IN

FINDING THAT THE BOND POSTED BY THE

PETITIONER IS QUESTIONABLE AND/OR

INSUFFICIENT.

IV


FINDING THAT THE PETITIONER DID NOT

COMPLY WITH THE PROVISIONS OF SEC. 5,

RULE 59 BY FAILING TO POST A RECEIVER'S

BOND.

V

THE RESPONDENT ERRED IN FINDING THAT

THE HON. JORGE R. COQUIA ACTED WITH

GRAVE ABUSE OF DISCRETION AMOUNTING

TO EXCESS OR LACK OF JURISDICTION IN

DEALING WITH THE SITUATION.

I

Anent the first assigned error, petitioner contends that

the Court of Appeals, by nullifying the writ of seizure

issued below, in effect, rendered judgment on the meritsand adjudged private respondent Anama as the person

lawfully entitled to the possession of the properties

subject of the replevin suit. It is theorized that the same

cannot be done, as the case before the court below was

yet at trial stage and lower court still had to determine

whether or not private respondent was in fact in default

in the payment of his obligation to petitioner Citibank

which default would warrant the seizure of subject

machineries and equipment.

The contention is untenable. A judgment is on the

merits when it determines the rights and liabilities o

the parties on the basis of the disclosed facts

irrespective of formal technical or dilatory objectionsand it is not necessary that there should have been a

trial. 9 The assailed decision of the Court of Appeals did

not make any adjudication on the rights and liabilities

between Citibank and Douglas Anama. There was no

finding yet of the fact of default. The decision only ruled

on the propriety of the issuance of the writ of seizure by

the trial court. As worded by the respondent court itself

"the main issues to be resolved are whether there was

lack or excess of jurisdiction, or grave abuse o

discretion, in the issuance of the orders in question, and

there is no appeal nor any plain, speedy, and adequate

remedy in the ordinary course of law." 10

In resolving the issue posed by the petition, the Court ofAppeals limited its disposition to a determination of

whether or not the assailed order of seizure was issued

in accordance with law, that is, whether the provisions

of the Rules of Court on delivery of personal property or

replevin as a provisional remedy were followed. The

Court of Appeals relied on Ruled 60 of the Rules o

Court, which prescribed the procedure for the recovery

of possession of personal property, which Rule

provides:

Sec. 2. Affidavit and Bond.— Upon applying or

such order the plaintiff must show by his own

affidavit or that of some other person who

personally knows the facts:

(a) That the plaintiff is the owner of

the property claimed particularly

describing it, or is entitled to the

possession thereof;

(b) That the property is wrongfully

detained by the defendant, alleging

the cause of detention thereo




according to his best of knowledge,

information and belief;

(c) That it has nor been taken for a

tax assessment or fine pursuant to

law, or seized under an execution, or

an attachment against the property

of the plaintiff, or is so seized, that is

exempt from such seizure; and

(d) The actual value of the property.

The plaintiff must also give a bond, executed to

the defendant in double of the value of the

property as stated in the affidavit

aforementioned, for the property to the

defendant of such sum as he may recover from

the plaintiff in the action.

The Court of Appeals did not pass upon the issue of who, as

between Douglas Anama and Citibank, is entitled to the

possession of subject machineries, as asserted by the latter.

When it ordered the restoration of the said machineries to

Douglas Anama (now the private respondent), it merely

defendant to the possession of his properties, since there was afinding that the issuance of the writ was not in accordance with

the specific rules of the Rules of Court.

II

In its second assignment of errors, petitioner theorizes

that the Court of Appeals erred in finding that it did not

comply with Section 2, Rule 60 of the Rules of Court

requiring the replevin plaintiff to attach an affidavit of

merit to the compliant.

Petitioner maintains that although there was no affidavit of merit

accompanying its complaint, there was nonetheless substantialcompliance with the said rule as all that is required to be alleged

in the affidavit of merit was set forth in its verified complaint.

Petitioner argues further that assuming arguendo that there was

non-compliance with the affidavit of merit requirement, such

defense can no longer be availed of by private respondent Anama

as it was not alleged in his Answer and was only belatedly

interposed in his Reply to the Petitioner's Comment on the

Petitioner for Certiorari before the Court of Appeals.

Petitioner is correct insofar as it contends that substantial

compliance with the affidavit requirement may be permissible.

There is substantial compliance with the rule requiring that an

affidavit of merit to support the complaint for replevin if the

complaint itself contains a statements of every fact required to bestated in the affidavit of merit and the complaint is verified like

an affidavit. On the matter of replevin, Justice Vicente Francisco's

Comment on the Rules of Court, states:

Although the better practice is to keep the

affidavit and pleading separate, if plaintiff's

pleading contains a statement of every fact

which the statute requires to be shown in the

affidavits, and the pleading is verified by

affidavit covering every statement therein, this

will be sufficient without a separate affidavit;

but in no event can the pleading supply the

absence of the affidavit unless all that the

affidavit is required to contain is embodied in

the pleading, and the pleading is verified in the

form required in the case of a separate

affidavit. (77 CJS 65 cited in Francisco, Rules of

Court of the Philippines, Vol. IV-A, p. 383)

And similarly, in the case of an attachment which likewise

requires an affidavit of merit, the Court held that the absence of

an affidavit of merit is not fatal where the petition itself, which isunder oath, recites the circumstances or facts constitutive of the

grounds for the petition. 11

The facts that must be set forth in the affidavit of merit are (1)

that plaintiff owns the property particularly describing the same

or that he is entitled to its possession; (2) wrongful detention by

defendants of said property; (3) that the property is not taken by

virtue of a tax assessment or fine pursuant to law or seized under

execution or attachment or, if it is so seized, that it is exemp

from seizure; and the, (4) the actual value of the property. 12

But, as correctly taken note of by the Court of Appeals

petitioner's complaint does not allege all the facts that should be

set forth in an affidavit of merit. Although the complaint allegesthat petitioner is entitled to the possession of subject properties

by virtue of the chattel mortgage executed by the private

respondent, upon the latter's default on its obligation, and the

defendant's alleged "wrongful detention" of the same, the said

complaint does not state that subject properties were not taken

by virtue of a tax assessment or fine imposed pursuant to law or

seized under execution or attachment or, if they were so seized

that they are exempt from such seizure.

Then too, petitioner stated the value of subject properties at a

"probable value of P200,000.00, more or less". Pertinent rules

require that the affidavit of merit should state the actual value of

the property subject of a replevin suit and not just its probable

value. Actual value (or actual market value) means "the pricewhich an article would command in the ordinary course o

business, that is to say, when offered for sale by one willing to

sell, but not under compulsion to sell and purchased by another

who is willing to buy, but under no obligation to purchase

it". 13Petitioner alleged that the machineries and equipment

involved are valued at P200,000.00 while respondent denies the

same, claiming that per the appraisal report, the market value of

the said properties is P1,710,000.00 and their replacement cost is

P2,342,300.00. Petitioner's assertion is belied by the fact tha

upon taking possession of the aforesaid properties, it insured the

same for P610,593.74 and P450,000.00, separately. It bears

stressing that the actual value of the properties subject of a

replevin is required to be in the affidavit because such actual

value will be the basis of the replevin bond required to be posted

by the plaintiff. Therefore, when the petitioner failed to declare

the actual value of the machineries and equipment subject of the

replevin suit, there was non-compliance with Section 2, Rule 60

of the Revised Rules of Court.

It should be noted, however, that the private responden

interposed the defense of lack of affidavit of merit only in his

Reply to the Comment of Citibank on the Petition

for Certiorari which respondent filed with the Court of Appeals

Section 2, Rule 9 of the Revised Rules of Court, provides:




Sec. 2. Defenses and objections not pleaded

deemed waived — Defenses and objections

not pleaded either in a motion to dismiss or in

the answer are deemed waived; except the

failure to state a cause of action which may be

alleged in later pleading, . . . .

This Rule has been revised and amended, as follows:

Sec. 1. Defenses and objection not pleaded. —

Defenses and objections not pleaded in a

motion to dismiss or in the answer are

deemed waived. However, when it appears

from the pleadings or the evidence on record

that the court has no jurisdiction over the

subject matter, that there is another action

pending between the same parties for the

same cause, or that the action is barred by a

prior judgment or by statute of limitations, the

court shall dismiss the claim.

Thus, although respondent's defense of lack of affidavit of merit

is meritorious, procedurally, such a defense is no longer availablefor failure to plead the same in the Answer as required by the

omnibus motion rule.

III

Petitioner also faults the Court of Appeals for finding that the

bond posted by the petitioner is questionable and/or insufficient.

It is averred that, in compliance with Section 2, Rule 60 requiring

the replevin plaintiff to post a bond in double the value of the

properties involved, it filed a bond in the amount P400,000.00

which is twice the amount of P200,000.00 declared in its

complaint.

The Court reiterates its findings on the second assignment of

errors, particularly on the issue of the actual of subject properties

as against their probable value. Private respondent, at the onset,

has put into issues the value of the said properties. In the Special

Defenses contained in his Answer, private respondent averred:

That while defendant admits that he executed

a Chattel Mortgage in favor of plaintiff, he

vigorously denies that the machineries

covered therein are worth P200,000.00. The

fact is that plaintiff knew fully well that said

chattels are worth no less than P1,000,000.00,

said defendant having acceded to said

valuation upon plaintiff's representation thatit would be necessary to speed up the granting

of the loan.

As here 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.

Though the rules specifically require that the needed bond be

double the value of the properties, since plaintiff merely

denominated a probable value of P200,000.00 and failed to aver

the properties' actual value, which is claimed to be much greater

than that declared by plaintiff, the amount of P400,000.00 would

indeed be insufficient as found by the Court of Appeals. The Rules

of Court requires the plaintiff to "give a bond, executed to the

defendant in double the value of the property as stated in the

affidavit

. . . ." Hence, the bond should be double the actual value of the

properties involved. In this case, what was posted was merely an

amount which was double the probable value as declared by the

plaintiff and, therefore, inadequate should there be a finding that

the actual value is actually far greater than P200,000.00. Since

the valuation made by the petitioner has been disputed by the

respondent, the lower court should have determined first the

actual value of the properties. It was thus as error for the said

court to approve the bond, which was based merely on the

probable value of the properties.

It should be noted that a replevin bond is intended to indemnify

the defendant against any loss that he may suffer by reason of its

being compelled to surrender the possession of the disputed

property pending trial of the

action. 14 The same may also be answerable for damages if any

when judgment is rendered in favor of the defendant or the party

against whom a writ of replevin was issued and such judgment

includes the return of the property to him. 15 Thus, the

requirement that the bond be double the actual value of the

properties litigated upon. Such is the case because the bond will

answer for the actual loss to the plaintiff, which corresponds tothe value of the properties sought to be recovered and for

damages, if any.

Petitioner also maintains that, assuming for the sake of argument

that its replevin bond was grossly inadequate or insufficient, the

recourse of the respondent should be to post a counterbound or a

redelivery bond as provided under Section 5 of Rule 60.

Sec. 5 and 6, Rule 60 of the Rules of Court, read:

Sec. 5. Return of property. — If the defendan

objects to the sufficient of the plaintiff's bond

or of the surety or sureties thereon, he cannotrequire the return of the property as in this

section provided; but if he does not so object

he may, at any time before the delivery of the

property to the plaintiff, if such delivery be

adjudge, and for the payment of such sum to

him as may be recovered against the

defendant, and by serving a copy of such bond

on the plaintiff or his attorney.

Sec. 6. Disposition of property by officer. — I

within five (5) days after the taking of the

property by the officer, the defendant does not

object to the sufficiecy of the bond, or of the

surety or sureties thereon, or require thereturn of the property as provided in the las

preceding section; or if the defendant so

objects, and the plaintiff's first or new bond is

approved; or if the defendant so require, and

his bond is object to and found insufficient and

he does not forthwith file an approved bond

the property shall be delivered to the plaintiff

the officer must return it to the defendant.

The Court held in a prior case 16 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." 17 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 aredelivery bond executed to the plaintiff in double the value of

the property as stated in the plaintiff's affidavit within the period

specified in Section 5 and 6.

Alternatively, "the defendant may object to the sufficiency of the

plaintiff's bond, or of the surety or sureties thereon;" but if he

does so, "he cannot require the return of the property" by posting

a counter-bond pursuant to Section 5 and 6. 18

In the case under consideration, the private respondent

did not opt to cause redelivery of the properties to him

by filing a counter-bond precisely because he objected

to the sufficiency of the bond posted by plaintiff.

Therefore, he need not file a counter-bond or redeliverybond. When such objection was not given due course in

the court below — when, instead of requiring the

plaintiff to post a new bond, the court approved the

bond in the amount of P400,000.00, claimed by

respondent to be insufficient, and ordered the seizure of

the properties — recourse to a petition

for certiorari before the Court of Appeals assailing such

order is proper under the circumstances.

IV

As its fourth assignment of errors, petitioner contends that the

Court of Appeals made an error of judgment in finding that the

petitioner did not comply with the provisions of Section 5, Rule59 by failing to post a receiver's bond. Petitioner contends that

although it is in agreement with the Court of Appeals that a

receiver's bond is separate and distinct from a replevin bond,

under the circumstances it was not required to file a receiver's

bond because it did not assume receivership over the properties.

It is further argued that assuming that it did assume receivership,

the Chattel Mortgage expressly provides, that:

In case the MORTGAGEE institutes

proceedings, judicially or otherwise, for the

foreclosure of this Chattel Mortgage, or to

enforce any of its rights hereunder, the

MORTGAGEE shall be entitled as a matter of

right to the appointment of a receiver, withoutbond, of the mortgaged properties and of such

properties, real or personal, claims and rights

of the MORTGAGOR as shall be necessary or

proper to enable the said receiver to property

control and dispose of the mortgaged

properties. 19

The order of the trial court dated March 24, 1975 provided,

among others, that the properties shall be under joint

management for a period of ten days, after which period "the

bank, by virtue of the stipulations under the chattel mortgage

becomes the Receiver to perform all the obligations as such

Receiver" and "in the event that the bank decides not to take over

the receivership, the joint management continues." 20

From the evidence on record, it is palpably clear that petitioner

Citibank did, in fact, assume receivership. A letter 21dated April 1

1975 sent by petitioner to the private respondent, reads:

April 1, 1975

Anama Engineering Service Group

114 R. Lagmay Street

San Juan, Rizal

Attention: Mr. Douglas Anama

Gentlemen:

Pursuant to the Court order, we have decided

to take over your machine shop as Receiver.

We are hereby appointing Mr. Artemio T

Gonzales as our representative.

Very truly yours,

FIRST NATIONAL CITY BANK

By:

P.R. REAL, JR.

Assistant Manager

Petitioner cannot therefore deny that nine days after the tria

court issued the order of receivership, it informed he private

respondent that it would, as it did, assume receivership.

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 ineffect 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 wasex parte. 22 Therefore

petitioner was not absolutely required to file a bond. Besides, as

stipulated in the chattel mortgage contract between the parties

petitioner, as the mortgagee, is entitled to the appointment of a

receiver without a bond.

However, the Court of Appeals was right in finding a defect in

such assumption of receiver in that the requirement of taking an

oath has not been complied with Section 5, Rule 59, states:




Sec. 5. Oath and bond of receiver. — Before

entering upon his duties, the receiver must be

sworn to perform them faithfully, and must

file a bond, executed to such person and in

such sum as the court or judge may direct, to

the effect that he will faithfully discharge the

duties of receiver in the action and obey the

orders of the court therein.

Consequently, the trail court erred in allowing the petitioner to

assume receivership over the machine shop of privaterespondent without requiring the appointed receiver to take an

oath.

V

In light of the foregoing, the answer to the fifth assignment of

errors is in the negative. For erroneously issuing the alias writ of

seizure without inquiring into the sufficiency of the replevin

bond and for allowing petitioner to assume receivership without

the requisite oath, the Court of Appeals aptly held that the trial

court acted with grave abuse of discretion in dealing with

situation.

Under the Revised Rules of Court, the property seized under awrit of replevin is not to be delivered immediately to the

plaintiff. 23 This is because a possessor has every right to

respected in its possession and may not be deprived of it without

due process. 24

As enunciated by this Court in the case of Filinvest Credit

Corporation vs. Court of Appeals, 25

The reason why the law does not allow the

creditor to possess himself of the mortgaged

property with violence and against the will of

the debtor is to be found in the fact that the

creditor's right of possession is conditioned

upon the fact of default, and the existence of

this fact may naturally be the subject of

controversy. The debtor, for instance, may

claim in good faith, and rightly or wrongly,

that the debt is paid, or that for some other

reason the alleged default is nonexistent. His

possession in this situation is as fully entitled

to protection as that of any other person, and

in the language of Article 446 of the Civil Code,

he must be respected therein. To allow the

creditor to seized the property against the will

of the debtor would make the former to a

certain extent both judge and executioner in

his own cause— a thing which is inadmissible

in the absence of unequivocal agreement inthe contract itself or express provision to the

effect in the statute.

WHEREFORE, for lack of merit, the petition is hereby DISMISSED.

No pronouncement as to costs.

SO ORDERED.




[G.R. No. 111357. June 17, 1997]

TRADERS ROYAL BANK, petitioner, vs. INTERMEDIATE

APPELLATE COURT and HEIRS OF THE LATE JOSE C.

TAYENGCO, respondents. R E S O L U T I O N

ROMERO, J .:

The factual aspects of this case have already been resolved

by this Court in G.R. No. 63855,[1] wherein we ruled the deceased

spouses Jose and Salvacion Tayengco to be the lawful owners of

the properties under receivership, and G.R. No. 60076,[2] where

we affirmed the validity of the appointment of petitioner Traders

Royal Bank (TRB) as receiver pendente lite.

In view of these rulings, the receivership proceeding was

duly terminated. Thus, TRB rendered its final accounting of the

funds under receivership wherein it retained the amount

of P219,016.24 as its receiver's fee, instead of turning over the

entire fund to the Tayengcos.The Regional Trial Court of Iloilo,

Branch 5, in an order dated July 5, 1988, approved the final

accounting submitted by TRB, including the deduction of its fee

from the fund under receivership.

The Tayengcos assailed said order before the Court of

Appeals,[3] contending that TRB's compensation should have

been charged against the losing party and not from the funds

under receivership.

In resolving this issue the Court of Appeals,[4] in its decision

dated February 12, 1993, ruled that TRB cannot deduct its fee

from the funds under its receivership since this must be

shouldered by the losing party or equally apportioned among the

parties-litigants. Consequently, TRB was ordered to return

the P219,016.24 to the Tayengcos, and the losing parties, Cu

Bie, et al., were held solely liable for TRB's compensation.[5] TRB

filed a motion for reconsideration, but this was denied by the

appellate court in its resolution dated August 17, 1993.[6]

In this appeal, TRB raises the following errors allegedly

committed by the Court of Appeals:

1. The Hon. IAC (should be CA) erred when it rendered the

judgment and Resolution ordering the return by TRB

of Receiver's Fee of P219,016.24 to the heirs of Jose Tayengco, as

it reversed the Decision of the Supreme Court in the case of Jose

Tayengco vs. Hon. Ilarde, TRB, et al., GR. No. 60076, which

ordered the Trial Court to "settle the account of the receiver,

TRB" to thereafter discharge the receiver and charged as cost

against the losing party;

2. The Hon. IAC had no jurisdiction in CA-GR. 21423 and erred in

knowingly taking cognizance and rendering the judgment and

resolution on the issue of the payment of receiver's fee to TRB

since the same subject matter was already within the jurisdiction

of the Supreme Court in GR. No. 60076;

3. The Hon. IAC erred when it rendered the judgment and

Resolution which reversed the final Supreme Court Decision in

GR. No. 60076 on the payment of the receiver's fee to TRB as it

violated the Rule on "Bar by Final Judgment".[7] (Underscoring

supplied)

TRB's assignment of errors submits for resolution two vital

issues: (1) Is the Court of Appeals decision dated February 12,

1993 barred by res judicata by virtue of our ruling in G.R. No

60076 recognizing the propriety of TRB's appointment as

receiver? (2) Who is responsible for TRB's receiver's fee?

With respect to the first assigned error, we are not

persuaded.

The elements of res judicata are: (1) The previous judgment

has become final; (2) the prior judgment was rendered by a court

having jurisdiction over the matter and parties; (3) the first

judgment was made on the merits; and (4) there was substantia

identity of parties, subject matter, and cause of action, asbetween the prior andsubsequent actions.[8]

The difference between the two causes of action is

unmistakable. In G.R. No. 60076, the petition was for the

annulment of the trial court's order requiring Tayengco to render

and submit an accounting of the rental of the buildings and

apartments, while C.A. G. R. CV No. 21423 was an appea

questioning the order of the trial court authorizing the deduction

by TRB of its compensation from the receivership funds. There is

clearly no identity of causes of action here. Clearly, the last

element of res judicata is absent in the case at bar.

Procedural obstacles aside, we now answer the principa

query posed in the instant petition.

Nobody questions the right of TRB to receive

compensation. Section 8, Rule 59 of the Rules of Court, however

explicitly provides for the manner in which it shall be paid for its

services, to wit:

"SEC. 8. Termination of receivership; compensation of receiver.

Whenever the court, of its own motion or on that of either party

shall determine that the necessity for a receiver no longer exists

it shall, after due notice to all interested parties and hearing

settle the accounts of the receiver, direct the delivery of the funds

and other property in his hands to the persons adjudged entitled

to receive them, and order the discharge of the receiver from

further duty as such. The

court shall allow the receiver such reasonable compensation as t

he circumstances of the casewarrant, to be taxed as costs against the defeatedparty, or apport

oned, as justice requires." (Underscoring supplied)

It is, therefore, clear that when the services of a receiver

who has been properly appointed terminates, his compensation

is to be charged against the defeated party, or the prevailing

litigant may be made to share the expense, as justice

requires. Consequently, the trial court's order approving TRB's

compensation to be charged solely against the funds under its

receivership is without legal justification; hence, it was correctly

reversed by the Court of Appeals.

IN VIEW OF THE FOREGOING, the decision appealed from

is AFFIRMED. Costs against petitioner.

SO ORDERED.

































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