Receivership

1. Larrobis jr Vs Phil. Veterans Bank

G.R. No. 135706. October 1, 2004.*

SPS. CESAR A. LARROBIS, JR. and VIRGINIA S. LARROBIS, petitioners, vs. PHILIPPINE VETERANS BANK, respondent.

Banks; Receivership; Obligations; The receiver of the bank is obliged to collect pre-existing debts due to the bank, and in
connection therewith, to foreclose mortgages securing such debts.—When a bank is prohibited from continuing to do
business by the Central Bank and a receiver is appointed for such bank, that bank would not be able to do new business,
i.e., to grant new loans or to accept new deposits. However, the receiver of the bank is in fact obliged to collect debts
owing to the bank, which debts form part of the assets of the bank. The receiver must assemble the assets and pay the
obligation of the bank under receivership, and take steps to prevent dissipation of such assets. Accordingly, the receiver
of the bank is obliged to collect pre-existing debts due to the bank, and in connection therewith, to foreclose mortgages
securing such debts.

Same; Same; Same; Settled is the principle that a bank is bound by the act, or failure to act of its receiver.—Settled is the
principle that a bank is bound by the acts, or failure to act of its receiver. As we held in Philippine Veterans Bank vs.
NLRC,a labor case which also involved respondent bank, . . . all the acts of the receiver and liquidator pertain to
petitioner, both having assumed petitioner’s corporate existence. Petitioner cannot disclaim liability by arguing that the
non-payment of MOLINA’s just wages was committed by the liquidators during the liquidation period. However, the
bank may go after the receiver who is liable to it for any culpable or negligent failure to collect the assets of such bank
and to safeguard its assets.

Actions; Prescription; Prescription of actions is interrupted in the following instances.—Prescription of actions is

interrupted when they are filed before the court, when there is a written extrajudicial demand by the creditors, and
when there is any written acknowledgment of the debt by the debtor.

Civil Law; Contracts; Mortgage; Foreclosure; Notice; Notices of foreclosure sent by the mortgagee to the mortgagor
cannot be considered tantamount to written extrajudicial demands.—The notices of foreclosure sent by the mortgagee
to the mortgagor cannot be considered tantamount to written extrajudicial demands, which may validly interrupt the
running of the prescriptive period, where it does not appear from the records that the notes are covered by the
mortgage contract.

PETITION for review on certiorari of the decision and resolution of the Regional Trial Court of Cebu City, Br. 24.

The facts are stated in the opinion of the Court.

Florante L. Abad for petitioner.
The Chief Legal Counsel and Ma. Corazon L. Leynes for Philippine Veterans Bank.
AUSTRIA-MARTINEZ, J.:

Before us is a petition for review of the decision of the Regional Trial Court (RTC), Cebu City, Branch 24, dated April 17,
1998,1 and the order denying petitioner’s motion for reconsideration dated August 25, 1998, raising pure questions of
law.

The following facts are uncontroverted:

On March 3, 1980, petitioner spouses contracted a monetary loan with respondent Philippine Veterans Bank in the
amount of P135,000.00, evidenced by a promissory note, due and demandable on February 27, 1981, and secured by a
Real Estate Mortgage executed on their lot together with the improvements thereon.

On March 23, 1985, the respondent bank went bankrupt and was placed under receivership/liquidation by the Central
Bank from April 25, 1985 until August 1992.
On August 23, 1985, the bank, through Francisco Go, sent the spouses a demand letter for “accounts receivable in the
total amount of P6,345.00 as of August 15, 1984,”4 which pertains to the insurance premiums advanced by respondent
bank over the mortgaged property of petitioners.

On August 23, 1995, more than fourteen years from the time the loan became due and demandable, respondent bank
filed a petition for extrajudicial foreclosure of mortgage of petitioners’ property.6 On October 18, 1995, the property
was sold in a public auction by Sheriff Arthur Cabigon with Philippine Veterans Bank as the lone bidder.

On April 26, 1996, petitioners filed a complaint with the RTC, Cebu City, to declare the extrajudicial foreclosure and the
subsequent sale thereof to respondent bank null and void.

In the pre-trial conference, the parties agreed to limit the issue to whether or not the period within which the bank was
placed under receivership and liquidation was a fortuitous event which suspended the running of the ten-year
prescriptive period in bringing actions.

On April 17, 1998, the RTC rendered its decision, the fallo of which reads:

“WHEREFORE, premises considered judgment is hereby rendered dismissing the complaint for lack of merit. Likewise the
compulsory counterclaim of defendant is dismissed for being unmeritorious.”9

It reasoned that:

“. . . defendant bank was placed under receivership by the Central Bank from April 1985 until 1992. The defendant bank
was given authority by the Central Bank to operate as a private commercial bank and became fully operational only on
August 3, 1992. From April 1985 until July 1992, defendant bank was restrained from doing its business. Doing business
as construed by Justice Laurel in 222 SCRA 131 refers to:

“. . . a continuity of commercial dealings and arrangements and contemplates to that extent, the performance of acts or
words or the exercise of some of the functions normally incident to and in progressive prosecution of the purpose and
object of its organization.”

The defendant bank’s right to foreclose the mortgaged property prescribes in ten (10) years but such period was
interrupted when it was placed under receivership. Article 1154 of the New Civil Code to this effect provides:

“The period during which the obligee was prevented by a fortuitous event from enforcing his right is not reckoned
against him.”

In the case of Provident Savings Bank vs. Court of Appeals, 222 SCRA 131, the Supreme Court said.

“Having arrived at the conclusion that a foreclosure is part of a bank’s activity which could not have been pursued by the
receiver then because of the circumstances discussed in the Central Bank case, we are thus convinced that the
prescriptive period was legally interrupted by fuerza mayor in 1972 on account of the prohibition imposed by the
Monetary Board against petitioner from transacting business, until the directive of the Board was nullified in 1981.
Indeed, the period during which the obligee was prevented by a caso fortuito from enforcing his right is not reckoned
against him. (Art. 1154, NCC) When prescription is interrupted, all the benefits acquired so far from the possession cease
and when prescription starts anew, it will be entirely a new one. This concept should not be equated with suspension
where the past period is included in the computation being added to the period after the prescription is presumed (4
Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines 1991 ed. pp. 18-19), consequently,
when the closure of the petitioner was set aside in 1981, the period of ten years within which to foreclose under Art.
1142 of the N.C.C. began to run and, therefore, the action filed on August 21, 1986 to compel petitioner to release the
mortgage carried with it the mistaken notion that petitioner’s own suit for foreclosure has prescribed.”

“Even assuming that the liquidation of defendant bank did not affect its right to foreclose the plaintiffs’ mortgaged
property, the questioned extrajudicial foreclosure was well within the ten (10) year prescriptive period. It is noteworthy
to mention at this point in time, that defendant bank through authorized Deputy Francisco Go made the first
extrajudicial demand to the plaintiffs on August 1985. Then on March 24, 1995 defendant bank through its officer-in-
charge Llanto made the second extrajudicial demand. And we all know that a written extrajudicial demand wipes out the
period that has already elapsed and starts anew the prescriptive period. (Ledesma vs. C.A., 224 SCRA 175.)”10

Petitioners filed a motion for reconsideration which the RTC denied on August 25, 1998.11 Thus, the present petition for
review where petitioners claim that the RTC erred:

. . . IN RULING THAT THE PERIOD WITHIN WHICH RESPONDENT BANK WAS PUT UNDER RECEIVERSHIP AND LIQUIDATION
WAS A FORTUITOUS EVENT THAT INTERRUPTED THE RUNNING OF THE PRESCRIPTIVE PERIOD.

II

. . . IN RULING THAT THE WRITTEN EXTRAJUDICIAL DEMAND MADE BY RESPONDENT ON PETITIONERS WIPED OUT THE
PERIOD THAT HAD ALREADY ELAPSED.

III

. . . IN DENYING PETITIONERS’ MOTION FOR RECONSIDERATION OF ITS HEREIN ASSAILED DECISION.12

Petitioners argue that: since the extra-judicial foreclosure of the real estate mortgage was effected by the bank on
October 18, 1995, which was fourteen years from the date the obligation became due on February 27, 1981, said
foreclosure and the subsequent sale at public auction should be set aside and declared null and void ab initio since they
are already barred by prescription; the court a quo erred in sustaining the respondent’s theory that its having been
placed under receivership by the Central Bank between April 1985 and August 1992 was a fortuitous event that
interrupted the running of the prescriptive period;13 the court a quo’s reliance on the case of Provident Savings Bank vs.
Court of Appeals14 is misplaced since they have different sets of facts; in the present case, a liquidator was duly
appointed for respondent bank and there was no judgment or court order that would legally or physically hinder or
prohibit it from foreclosing petitioners’ property; despite the absence of such legal or physical hindrance, respondent
bank’s receiver or liquidator failed to foreclose petitioners’ property and therefore such inaction should bind respondent
bank;15 foreclosure of mortgages is part of the receiver’s/liquidator’s duty of administering the bank’s assets for the
benefit of its depositors and creditors, thus, the ten-year prescriptive period which started on February 27, 1981,

was not interrupted by the time during which the respondent bank was placed under receivership; and the Monetary
Board’s prohibition from doing business should not be construed as barring any and all business dealings and
transactions by the bank, otherwise, the specific mandate to foreclose mortgages under Sec. 29 of R.A. No. 265 as
amended by Executive Order No. 65 would be rendered nugatory.16 Said provision reads:

“Section 29. Proceedings upon Insolvency.—Whenever, upon examination by the head of the appropriate supervising or
examining department or his examiners or agents into the condition of any bank or non-bank financial intermediary
performing quasi-banking functions, it shall be disclosed that the condition of the same is one of insolvency, or that its
continuance in business would involve probable loss to its depositors or creditors, it shall be the duly of the department
head concerned forthwith, in writing, to inform the Monetary Board of the facts. The Board may, upon finding the
statements of the department head to be true, forbid the institution to do business in the Philippines and designate the
official of the Central Bank or a person of recognized competence in banking or finance, as receiver to immediately take
charge its assets and liabilities, as expeditiously as possible, collect and gather all the assets and administer the same for
the benefit of its creditors, and represent the bank personally or through counsel as he may retain in all actions or
proceedings for or against the institution, exercising all the powers necessary for these purposes including, but not
limited to, bringing and foreclosing mortgages in the name of the bank.”

Petitioners further contend that: the demand letter, dated March 24, 1995, was sent after the ten-year prescriptive
period, thus it cannot be deemed to have revived a period that has already elapsed; it is also not one of the instances
enumerated by Art. 1115 of the Civil Code when prescription is interrupted;17 and the August 23, 1985 letter by
Francisco Go demanding P6,345.00, refers to the insurance premium on the house of petitioners, advanced by
respondent bank, thus such demand letter referred to another obligation and could not have the effect of interrupting
the running of the prescriptive period in favor of herein petitioners insofar as foreclosure of the mortgage is
concerned.18

Petitioners then prayed that respondent bank be ordered to pay them P100,000.00 as moral damages, P50,000.00 as
exemplary damages and P100,000.00 as attorney’s fees.19

Respondent for its part asserts that: the period within which it was placed under receivership and liquidation was a
fortuitous event that interrupted the running of the prescriptive period for the foreclosure of petitioners’ mortgaged
property; within such period, it was specifically restrained and immobilized from doing business which includes
foreclosure proceedings; the extrajudicial demand it made on March 24, 1995 wiped out the period that has already
lapsed and started anew the prescriptive period; respondent through its authorized deputy Francisco Go made the first
extrajudicial demand on the petitioners on August 23, 1985; while it is true that the first demand letter of August 1985
pertained to the insurance premium advanced by it over the mortgaged property of petitioners, the same however
formed part of the letter’s total loan obligation with respondent under the mortgage instrument and therefore
constitutes a valid extrajudicial demand made within the prescriptive period.

In their Reply, petitioners reiterate their earlier arguments and add that it was respondent that insured the mortgaged
property thus it should not pass the obligation to petitioners through the letter dated August 1985.

To resolve this petition, two questions need to be answered: (1) Whether or not the period within which the respondent
bank was placed under receivership and liquidation proceedings may be considered a fortuitous event which interrupted
the running of the prescriptive period in bringing actions; and (2) Whether or not the demand letter sent by respondent
bank’s representative on August 23, 1985 is sufficient to in terrupt the running of the prescriptive period.

Anent the first issue, we answer in the negative.

One characteristic of a fortuitous event, in a legal sense and consequently in relations to contract, is that its occurrence
must be such as to render it impossible for a party to fulfill his obligation in a normal manner.22

Respondent’s claims that because of a fortuitous event, it was not able to exercise its right to foreclose the mortgage on
petitioners’ property; and that since it was banned from pursuing its business and was placed under receivership from
April 25, 1985 until August 1992, it could not foreclose the mortgage on petitioners’ property within such period since
foreclosure is embraced in the phrase “doing business,” are without merit.

While it is true that foreclosure falls within the broad definition of “doing business,” that is:

“. . . a continuity of commercial dealings and arrangements and contemplates to that extent, the performance of acts or
words or the exercise of some of the functions normally incident to and in progressive prosecution of the purpose and
object of its organization.”

it should not be considered included, however, in the actsprohibited whenever banks are “prohibited from doing
business” during receivership and liquidation proceedings.

This we made clear in Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank of the Philippines24
where we explained that:

“Section 29 of the Republic Act No. 265, as amended known as the Central Bank Act, provides that when a bank is
forbidden to do business in the Philippines and placed under receivership, the person designated as receiver shall
immediately take charge of the bank’s assets and liabilities, as expeditiously as possible, collect and gather all the assets
and administer the same for the benefit of its creditors, and represent the bank personally or through counsel as he may
retain in all actions or proceedings for or against the institution, exercising all the powers necessary for these purposes
including, but not limited to, bringing and foreclosing mortgages in the name of the bank.”25
This is consistent with the purpose of receivership proceedings, i.e., to receive collectibles and preserve the assets of the
bank in substitution of its former management, and prevent the dissipation of its assets to the detriment of the creditors
of the bank.

When a bank is declared insolvent and placed under receivership, the Central Bank, through the Monetary Board,
determines whether to proceed with the liquidation or reorganization of the financially distressed bank. A receiver, who
concurrently represents the bank, then takes control and possession of its assets for the benefit of the bank’s creditors.
A liquidator meanwhile assumes the role of the receiver upon the determination by the Monetary Board that the bank
can

no longer resume business. His task is to dispose of all the assets of the bank and effect partial payments of the bank’s
obligations in accordance with legal priority. In both receivership and liquidation proceedings, the bank retains its
juridical personality notwithstanding the closure of its business and may even be sued as its corporate existence is
assumed by the receiver or liquidator. The receiver or liquidator meanwhile acts not only for the benefit of the bank, but
for its creditors as well.

In Provident Savings Bank vs. Court of Appeals,28 we further stated that:

“When a bank is prohibited from continuing to do business by the Central Bank and a receiver is appointed for such
bank, that bank would not be able to do new business, i.e., to grant new loans or to accept new deposits. However, the
receiver of the bank is in fact obliged to collect debts owing to the bank, which debts form part of the assets of the bank.
The receiver must assemble the assets and pay the obligation of the bank under receivership, and take steps to prevent
dissipation of such assets. Accordingly, the receiver of the bank is obliged to collect pre-existing debts due to the bank,
and in connection therewith, to foreclose mortgages securing such debts.”29 (Emphasis supplied.)

It is true that we also held in said case that the period during which the bank was placed under receivership was deemed
fuerza mayor which validly interrupted the prescriptive period.30 This is being invoked by the respondent and was used
as basis by the trial court in its decision. Contrary to the position of the respondent and court a quo however, such ruling
does not find application in the case at bar.

A close scrutiny of the Provident case, shows that the Court arrived at said conclusion, which is an exception to the
general rule, due to the peculiar circumstances of Provident Savings Bank at the time. In said case, we stated that:

“Having arrived at the conclusion that a foreclosure is part of a bank’s business activity which could not have been
pursued by the receiver then because of the circumstances discussed in the Central Bank case, we are thus convinced
that the prescriptive period was legally interrupted by fuerza mayor in 1972 on account of the prohibition imposed by
the Monetary Board against petitioner from transacting business, until the directive of the Board was nullified in
1981.”31 (Emphasis supplied.)

Further examination of the Central Bank case reveals that the circumstances of Provident Savings Bank at the time were
peculiar because after the Monetary Board issued MB Resolution No. 1766 on September 15, 1972, prohibiting it from
doing business in the Philippines, the bank’s majority stockholders immediately went to the Court of First Instance of
Manila, which prompted the trial court to issue its judgment dated February 20, 1974, declaring null and void the
resolution and ordering the Central Bank to desist from liquidating Provident. The decision was appealed to and
affirmed by this Court in 1981. Thus, the Superintendent of Banks, which was instructed to take charge of the assets of
the bank in the name of the Monetary Board, had no power to act as a receiver of the bank and carry out the obligations
specified in Sec. 29 of the Central Bank Act.

In this case, it is not disputed that Philippine Veterans Bank was placed under receivership by the Monetary Board of the
Central Bank by virtue of Resolution No. 364 on April 25, 1985, pursuant to Section 29 of the Central Bank Act on
insolvency of banks.33
Unlike Provident Savings Bank, there was no legal prohibition imposed upon herein respondent to deter its receiver and
liquidator from performing their obligations under the law. Thus, the ruling laid down in the Provident case cannot apply
in the case at bar.

There is also no truth to respondent’s claim that it could not continue doing business from the period of April 1985 to
August 1992, the time it was under receivership. As correctly pointed out by petitioner, respondent was even able to
send petitioners a demand letter, through Francisco Go, on August 23, 1985 for “accounts receivable in the total amount
of P6,345.00 as of August 15, 1984” for the insurance premiums advanced by respondent bank over the mortgaged
property of petitioners. How it could send a demand letter on unpaid insurance premiums and not foreclose the
mortgage during the time it was “prohibited from doing business” was not adequately explained by respondent.

Settled is the principle that a bank is bound by the acts, or failure to act of its receiver.34 As we held in Philippine
Veterans Bank vs. NLRC,35a labor case which also involved respondent bank,

“. . . all the acts of the receiver and liquidator pertain to petitioner, both having assumed petitioner’s corporate
existence. Petitioner cannot disclaim liability by arguing that the non-payment of MOLJNA’s just wages was committed
by the liquidators during the liquidation period.”

However, the bank may go after the receiver who is liable to it for any culpable or negligent failure to collect the assets
of such bank and to safeguard its assets.

Having reached the conclusion that the period within which respondent bank was placed under receivership and
liquidation proceedings does not constitute a fortuitous event which interrupted the prescriptive period in bringing
actions, we now turn to the second issue on whether or not the extrajudicial demand made by respondent bank,
through Francisco Go, on August 23, 1985 for the amount of P6,345.00, which pertained to the insurance premiums
advanced by the bank over the mortgaged property, constitutes a valid extrajudicial demand which interrupted the
running of the prescriptive period. Again, we answer this question in the negative.

Prescription of actions is interrupted when they are filed before the court, when there is a written extrajudicial demand
by the creditors, and when there is any written acknowledgment of the debt by the debtor.

Respondent’s claim that while its first demand letter dated August 23, 1985 pertained to the insurance premium it
advanced over the mortgaged property of petitioners, the same formed part of the latter’s total loan obligation with
respondent under the mortgage instrument, and therefore, constitutes a valid extrajudicial demand which interrupted
the running of the prescriptive period, is not plausible.

The real estate mortgage signed by the petitioners expressly states that:

“This mortgage is constituted by the Mortgagor to secure the payment of the loan and/or credit accommodation
granted to the spouses Cesar A. Larrobis, Jr. and Virginia S. Larrobis in the amount of ONE HUNDRED THIRTY FIVE
THOUSAND (P135,000.00) PESOS ONLY Philippine Currency in favor of the herein Mortgagee.”39

The promissory note, executed by the petitioners, also states that:

. . . FOR VALUE RECEIVED, I/WE, JOINTLY AND SEVERALLY, PROMISE TO PAY THE PHILIPPINE VETERANS BANK, OR
ORDER, AT ITS OFFICE AT CEBU CITY THE SUM OF ONE HUNDRED THIRTY FIVE THOUSAND PESOS (P135,000.00),
PHILIPPINE CURRENCY WITH INTEREST AT THE RATE OF FOURTEEN PER CENT (14%) PER ANNUM FROM THIS DATE UNTIL
FULLY PAID.

Considering that the mortgage contract and the promissory note refer only to the loan of petitioners in the amount of
P135,000.00, we have no reason to hold that the insurance premiums, in the amount of P6,345.00, which was the
subject of the August 1985 demand letter, should be considered as pertaining to the entire obligation of petitioners.

In Quirino Gonzales Logging Concessionaire vs. Court of Appeals,41 we held that the notices of foreclosure sent by the
mortgagee to the mortgagor cannot be considered tantamount to written extrajudicial demands, which may validly
interrupt the running of the prescriptive period, where it does not appear from the records that the notes are covered
by the mortgage contract.

In this case, it is clear that the advanced payment of the insurance premiums is not part of the mortgage contract and
the promissory note signed by petitioners. They pertain only to the amount of P135,000.00 which is the principal loan of
petitioners plus interest. The arguments of respondent bank on this point must therefore fail.

As to petitioners’ claim for damages, however, we find no sufficient basis to award the same. For moral damages to be
awarded, the claimant must satisfactorily prove the existence of the factual basis of the damage and its causal relation
to defendant’s acts.43 Exemplary damages meanwhile, which are imposed as a deterrent against or as a negative
incentive to curb socially deleterious actions, may be awarded only after the claimant has proven that he is entitled to
moral, temperate or compensatory damages.44 Finally, as to attorney’s fees, it is demanded that there be factual, legal
and equitable justification for its award.45 Since the bases for these claims were not adequately proven by the
petitioners, we find no reason to grant the same.

WHEREFORE, the decision of the Regional Trial Court, Cebu City, Branch 24, dated April 17, 1998, and the order denying
petitioners’ motion for reconsideration dated August 25, 1998 are hereby REVERSED and SET ASIDE. The extrajudicial
foreclosure of the real estate mortgage on October 18, 1995, is hereby declared null and void and respondent is ordered
to return to petitioners their owner’s duplicate certificate of title.

Costs against respondent.

SO ORDERED. Larrobis, Jr. vs. Philippine Veterans Bank, 440 SCRA 34, G.R. No. 135706 October 1, 2004
2. TANTANO VS ESPINA-CABOVERDE

G.R. No. 203585. July 29, 2013.*

MILA CABOVERDE TANTANO and ROSELLER CABO-VERDE, petitioners, vs. DOMINALDA ESPINA-CABO-VERDE,
EVE CABOVERDE-YU, FE CABOVERDE-LABRADOR, and JOSEPHINE E. CABOVERDE, respondents.

Remedial Law; Provisional Remedies; Receivership; Receivership is a harsh remedy to be granted with utmost
circumspection and only in extreme situations.―We have repeatedly held that receivership is a harsh remedy to
be granted with utmost circumspection and only in extreme situations. The doctrinal pronouncement in Velasco
& Co. v. Gochico & Co is instructive: The power to appoint a receiver is a delicate one and should be exercised
with extreme caution and only under circumstances requiring summary relief or where the court is satisfied that
there is imminent danger of loss, lest the injury thereby caused be far greater than the injury sought to be averted.
The court should consider the consequences to all of the parties and the power should not be exercised when it
is likely to produce irreparable injustice or injury to private rights or the facts demonstrate that the appointment
will injure the interests of others whose rights are entitled to as much consideration from the court as those of
the complainant.

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

Same; Same; Same; Before appointing a receiver, courts should consider: (1) whether or not the injury resulting
from such appointment would probably be greater than the injury ensuing if the status quo is left undisturbed;
and (2) whether or not the appointment will imperil the interest of others whose rights deserve as much a
consideration from the court as those of the person requesting for receivership.―Before appointing a receiver,
courts should consider: (1) whether or not the injury resulting from such appointment would probably be greater
than the injury ensuing if the status quo is left undisturbed; and (2) whether or not the appointment will imperil
the interest of others whose rights deserve as much a consideration from the court as those of the person
requesting for receivership. Moreover, this Court has consistently ruled that where the effect of the appointment
of a receiver is to take real estate out of the possession of the defendant before the final adjudication of the rights
of the parties, the appointment should be made only in extreme cases.

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

party to another where the legal title is in dispute and the party having possession asserts ownership in himself,
except in a very clear case of evident usurpation. Furthermore, this Court has declared that the appointment of a
receiver is not proper when the rights of the parties, one of whom is in possession of the property, depend on the
determination of their respective claims to the title of such property unless such property is in danger of being
materially injured or lost, as by the prospective foreclosure of a mortgage on it or its portions are being occupied
by third persons claiming adverse title.

Same; Same; Same; Section 2 of Rule 59, Rules of Court is very clear in that before issuing the order appointing a
receiver the court shall require the applicant to file a bond executed to the party against whom the application is
presented.―Sec. 2 of Rule 59 is very clear in that before issuing the order appointing a receiver the court shall
require the applicant to file a bond executed to the party against whom the application is presented. The use of
the word “shall” denotes its mandatory nature; thus, the consent of the other party, or as in this case, the consent
of petitioners, is of no moment. Hence, the filing of an applicant’s bond is required at all times. On the other hand,
the requirement of a receiver’s bond rests upon the discretion of the court. Sec. 2 of Rule 59 clearly states that
the court may, in its discretion, at any time after the appointment, require an additional bond as further security
for such damages.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Jacinto, Magtanong, Wui, Jacinto, Esguerra & Uy for petitioners.
Pacatang Law Office for respondent Eve Caboverde-Yu and Fe Caboverde-Labrador.
Peter Y. Co for respondent Dominalda Espina-Caboverde.511
Gudmalin, Castillo, Vallecer Law Office for respondent Josephine E. Caboverde.

VELASCO, JR., J.:

The Case

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

The Facts

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

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

The present controversy started when on March 7, 2005, respondents Eve and Fe filed a complaint before the RTC
of Sindangan, Zamboanga del Norte where they prayed for the annulment of the Deed of Sale purportedly
transferring Lots 2, 3 and 4 from their parents Maximo and Dominalda in favor of petitioners Mila and Roseller
and their other siblings, Jeanny, Laluna and Ferdinand. Docketed as Civil Case No. S-760, the case was raffled to
Branch 11 of the court.
In their verified Answer, the defendants therein, including Maximo and Dominalda, posited the validity and due
execution of the contested Deed of Sale.

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

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

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

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

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

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

On May 13, 2008, the court approved the PSA, leaving three (3) contested properties, Lots 2, 3, and 4, for further
proceedings in the main case.

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

5. That all the income of Lot Nos. 2, 3 and 4 are collected by Mila Tantano, thru her collector Melinda Bajalla,
and solely appropriated by Mila Tantano and her selected kins, presumably with Roseller E. Caboverde, Ferdinand
E. Caboverde, Jeanny Caboverde and Laluna Caboverde, for their personal use and benefit;
6. That defendant Dominalda Espina Caboverde, who is now sickly, in dire need of constant medication or
medical attention, not to mention the check-ups, vitamins and other basic needs for daily sustenance, yet despite
the fact that she is the conjugal owner of the said land, could not even enjoy the proceeds or income as these are
all appropriated solely by Mila Tantano in connivance with some of her selected kins;

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

xxxx

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

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

On October 9, 2009, petitioners and their siblings filed a Manifestation formally expressing their concurrence to
the proposal for receivership on the condition, inter alia, that Mila be appointed the receiver, and that, after
getting the 2/10 share of Dominalda from the income of the three (3) parcels of land, the remainder shall be
divided only by and among Mila, Roseller, Ferdinand, Laluna and Jeanny. The court, however, expressed its
aversion to a party to the action acting as receiver and accordingly asked the parties to nominate neutral persons.

On February 8, 2010, the trial court issued a Resolution granting Dominalda’s application for receivership over Lot
Nos. 2, 3 and 4. The Resolution reads:

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

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

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

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

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

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

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

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

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

ACCORDINGLY, the motion for reconsideration is DENIED for lack of merit.

SO ORDERED.

xxxx

WHEREFORE, premises considered, this Court RESOLVES, as it is hereby RESOLVED, that:

1. The defendants’ “Urgent Precautionary Motion to Stay Assumption of Receivers” be DENIED for lack of merit.
Accordingly, it being patently a second motion for reconsideration, a prohibited pleading, the same is hereby
ordered EXPUNGED from the records;

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

It should be stated at this juncture that after filing their Urgent Precautionary Motion to Stay Assumption of
Receivers but before the RTC could rule on it, petitioners filed a petition for certiorari with the CA dated September
29, 2010 seeking to declare null and void the February 8, 2010 Resolution of the RTC granting the Application for
Receivership and its July 19, 2010 Resolution denying the motion for reconsideration filed by petitioners and
appointing the receivers nominated by respondents. The petition was anchored on two grounds, namely: (1) non-
compliance with the substantial requirements under Section 2, Rule 59 of the 1997 Rules of Civil Procedure
because the trial court appointed a receiver without requiring the applicant to file a bond; and (2) lack of factual
or legal basis to place the properties under receivership because the applicant presented support and medication
as grounds in her application which are not valid grounds for receivership under the rules.

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

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

SEC. 2. Bond on appointment of receiver.—Before issuing the order appointing a receiver the court shall require
the applicant to file a bond executed to the party against whom the application is presented, in an amount to be
fixed by the court, to the effect that the applicant will pay such party all damages he may sustain by reason of the
appointment of such receiver in case the applicant shall have procured such appointment without sufficient cause;
and the court may, in its discretion, at any time after the appointment, require an additional bond as further
security for such damages.

The Manifestation dated September 30, 2009 filed by petitioners wherein “they formally manifest[ed] their
concurrence” to the settlement on the application for receivership estops them from questioning the sufficiency
of the cause for the appointment of the receiver since they themselves agreed to have the properties placed under
receivership albeit on the condition that the same be placed under the administration of Mila. Thus, the filing of
the bond by Dominalda for this purpose becomes unnecessary.

It must be emphasized that the bond filed by the applicant for receivership answers only for all damages that the
adverse party may sustain by reason of the appointment of such receiver in case the applicant shall have procured
such appointment without sufficient cause; it does not answer for damages suffered by reason of the failure of
the receiver to discharge his duties faithfully or to obey the orders of the court, inasmuch as such damages are
covered by the bond of the receiver.
As to the second ground, petitioners insist that there is no justification for placing the properties under
receivership since there was neither allegation nor proof that the said properties, not the fruits thereof, were in
danger of being lost or materially injured. They believe that the public respondent went out of line when he
granted the application for receivership for the purpose of procuring money for the medications and basic needs
of Dominalda despite the income she’s supposed to receive under the Partial Settlement Agreement.

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

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

FOR REASONS STATED, the petition for certiorari is DENIED.

SO ORDERED.

Petitioners’ Motion for Reconsideration was also denied by the CA on September 21, 2012.14

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

The Issues

Petitioners raise the following issues in their petition:

(1) Whether or not the CA committed grave abuse of discretion in sustaining the appointment of a receiver
despite clear showing that the reasons advanced by the applicant are not any of those enumerated by the rules;
and

(2) Whether or not the CA committed grave abuse of discretion in upholding the Resolution of the RTC and ruling
that the receivership bond is not required prior to appointment despite clear dictates of the rules.

The Court’s Ruling

The petition is impressed with merit.

We have repeatedly held that receivership is a harsh remedy to be granted with utmost circumspection and only
in extreme situations. The doctrinal pronouncement in Velasco & Co. v. Gochico & Co is instructive:

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

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

Section 1. Appointment of a receiver.—Upon a verified application, one or more receivers of the property
subject of the action or proceeding may be appointed by the court where the action is pending, or by the Court
of Appeals or by the Supreme Court, or a member thereof, in the following cases:

(d) Whenever in other cases it appears that the appointment of a receiver is the most convenient and feasible
means of preserving, administering, or disposing of the property in litigation. (Emphasis supplied.)

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

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

Moreover, this Court has consistently ruled that where the effect of the appointment of a receiver is to take real
estate out of the possession of the defendant before the final adjudication of the rights of the parties, the
appointment should be made only in extreme cases.20

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

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

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

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

Verily, the RTC’s purported determination that the appointment of a receiver is the most convenient and feasible
means of preserving, administering or disposing of the properties is nothing but a hollow conclusion drawn from
inexistent factual considerations.

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

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

This Court has held that a receiver should not be appointed to deprive a party who is in possession of the property
in litigation, just as a writ of preliminary injunction should not be issued to transfer property in litigation from the
possession of one party to another where the legal title is in dispute and the party having possession asserts
ownership in himself, except in a very clear case of evident usurpation.23
Furthermore, this Court has declared that the appointment of a receiver is not proper when the rights of the
parties, one of whom is in possession of the property, depend on the determination of their respective claims to
the title of such property24 unless such property is in danger of being materially injured or lost, as by the
prospective foreclosure of a mortgage on it or its portions are being occupied by third persons claiming adverse
title.25

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

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

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

In any event, Dominalda’s rights may be amply protected during the pendency of Civil Case No. S-760 by causing
her adverse claim to be annotated on the certificates of title covering the disputed properties.27

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

Respondents Eve and Fe claim that there are sufficient grounds for the appointment of receivers in this case and
that in fact, petitioners agreed with them on the existence of these grounds when they acquiesced to Dominalda’s
Application for Receivership. Thus, respondents insist that where there is sufficient cause to appoint a receiver,
there is no need for an applicant’s bond because under Sec. 2 of Rule 59, the very purpose of the bond is to answer
for all damages that may be sustained by a party by reason of the appointment of a receiver in case the applicant
shall have procured such appointment without sufficient cause. Thus, they further argue that what is needed is
the receiver’s bond which was already fixed and approved by the RTC.28 Also, the CA found that there was no
need for Dominalda to file a bond considering that petitioners filed a Manifestation where they formally
consented to the receivership. Hence, it was as if petitioners agreed that there was sufficient cause to place the
disputed properties under receivership; thus, the CA declared that petitioners were estopped from challenging
the sufficiency of such cause.

The foregoing arguments are misplaced. Sec. 2 of Rule 59 is very clear in that before issuing the order appointing
a receiver the court shall require the applicant to file a bond executed to the party against whom the application
is presented. The use of the word “shall” denotes its mandatory nature; thus, the consent of the other party, or
as in this case, the consent of petitioners, is of no moment. Hence, the filing of an applicant’s bond is required at
all times. On the other hand, the requirement of a receiver’s bond rests upon the discretion of the court. Sec. 2 of
Rule 59 clearly states that the court may, in its discretion, at any time after the appointment, require an additional
bond as further security for such damages.

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

SO ORDERED. Tantano vs. Espina-Caboverde, 702 SCRA 508, G.R. No. 203585 July 29, 2013
3. G.R. No. 168332. June 19, 2009.*
ANA MARIA A. KORUGA, petitioner, vs. TEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE, CESAR S. PAGUIO,
FRANCISCO A. RIVERA, and THE HONORABLE COURT OF APPEALS, THIRD DIVISION, respondents. Koruga vs.
Arcenas, Jr., 590 SCRA 49, G.R. No. 168332 June 19, 2009

G.R. No. 169053. June 19, 2009.*

TEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE, CESAR S. PAGUIO, and FRANCISCO A. RIVERA, petitioners, vs.
HON. SIXTO MARELLA, JR., Presiding Judge, Branch 138, Regional Trial Court of Makati City, and ANA MARIA A.
KORUGA, respondents.

Banks and Banking; General Banking Law of 2000 (R.A. No. 8971); New Central Bank Act; Bangko Sentral ng
Pilipinas (BSP); Jurisdiction; The law vests in the Bangko Sentral ng Pilipinas (BSP) the supervision over operations
and activities of banks.—The law vests in the BSP the supervision over operations and activities of banks. The New
Central Bank Act provides: Section 25. Supervision and Examination.—The Bangko Sentral shall have supervision
over, and conduct periodic or special examinations of, banking institutions and quasi-banks, including their
subsidiaries and affiliates engaged in allied activities.

Same; Same; Same; Same; Same; Allegations regarding the questionable loans are not ordinary intra-corporate
matters; rather, they involve banking activities which are, by law, regulated and supervised by the Bangko Sentral
ng Pilipinas (BSP).—Koruga alleges that “the dispute in the trial court involves the manner with which the
Directors’ (sic) have handled the Bank’s affairs, specifically the fraudulent loans and dacion en pago authorized by
the Directors in favor of several dummy corporations known to have close ties and are indirectly controlled by the
Directors.” Her allegations, then, call for the examination of the allegedly questionable loans. Whether these loans
are covered by the prohibition on self-dealing is a matter for the BSP to determine. These are not ordinary intra-
corporate matters; rather, they involve banking activities which are, by law, regulated and supervised by the BSP.

Same; Same; Same; Same; Same; The authority to determine whether a bank is conducting business in an unsafe
or unsound manner is also vested in the Monetary Board.—The authority to determine whether a bank is
conducting business in an unsafe or unsound manner is also vested in the Monetary Board.

Same; Same; Same; Same; Same; Receivership; The appointment of a receiver under Section 30 shall be vested
exclusively with the Monetary Board.—Crystal clear in Section 30 is the provision that says the “appointment of a
receiver under this section shall be vested exclusively with the Monetary Board.” The term “exclusively” connotes
that only the Monetary Board can resolve the issue of whether a bank is to be placed under receivership and,
upon an affirmative finding, it also has authority to appoint a receiver. This is further affirmed by the fact that the
law allows the Monetary Board to take action “summarily and without need for prior hearing.”

Same; Same; Same; Same; Same; Same; There is no doubt that the Regional Trial Court (RTC) has no jurisdiction
to hear and decide a suit that seeks to place Banco Filipino under receivership.—There is no doubt that the RTC
has no jurisdiction to hear and decide a suit that seeks to place Banco Filipino under receivership.

Same; Same; Same; Same; Same; Same; Court’s jurisdiction could only have been invoked after the Monetary
Board had taken action on the matter and only on the ground that the action taken was in excess of jurisdiction
or with such grave abuse of discretion as to amount to lack or excess of jurisdiction.—The court’s jurisdiction could
only have been invoked after the Monetary Board had taken action on the matter and only on the ground that
the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess
of jurisdiction.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari and PETITION for review on certiorari of a decision of the
Court of Appeals.

The facts are stated in the opinion of the Court.

Bernas Law Office for Ana Maria A. Koruga.
Filemon L. Fernandez and Francisco A. Rivera for Teodoro O. Arcenas, Jr.
Abelardo L. Aportadera, Jr. for Dr. Conrado P. Banzo and Gen. Ramon E. Montano.
Morales, Rojas & Risos-Vidal for Orlando O. Samson and Jovito N. Hernandez.

NACHURA, J.:

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

G.R. No. 168332

The first is a Petit6ion for Certiorari u6nder Rule 65 of the Rules of Court, docketed as G.R. No. 168332, praying
for the annulment of the Court of Appeals (CA) Resolution1 in CA-G.R. SP No. 88422 dated April 18, 2005 granting
the prayer for a Writ of Preliminary Injunction of therein petitioners Teodoro O. Arcenas, Jr., Albert C. Aguirre,
Cesar S. Paguio, and Francisco A. Rivera (Arcenas, et al.).

Koruga is a minority stockholder of Banco Filipino Savings and Mortgage Bank. On August 20, 2003, she filed a
complaint before the Makati RTC which was raffled to Branch 138, presided over by Judge Sixto Marella, Jr.2
Koruga’s complaint alleged:

“10.1 Violation of Sections 31 to 34 of the Corporation Code (“Code”) which prohibit self-dealing and conflicts
of interest of directors and officers, thus:

(a) For engaging in unsafe, unsound, and fraudulent banking practices that have jeopardized the welfare of the
Bank, its shareholders, who includes among others, the Petitioner, and depositors. (sic)

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

(c) For approving and accepting a dacion en pago, or payment of loans with property instead of cash, resulting
to a diminished future cumulative interest income by the Bank and a decline in its liquidity position. (sic)

(d) For knowingly giving “favorable treatment” to the Borrower Corporations in which some or most of them
have interests, i.e. interlocking directors/officers thereof, interlocking ownerships. (sic)

(e) For employing their respective offices and functions as the Bank’s officers and directors, or omitting to
perform their functions and duties, with negligence, unfaithfulness or abuse of confidence of fiduciary duty,
misappropriated or misapplied or ratified by inaction the misappropriation or misappropriations, of (sic) almost
P1.6 Billion Pesos (sic) constituting the Bank’s funds placed under their trust and administration, by unlawfully
releasing loans to the Borrower Corporations or refusing or failing to impugn these, knowing before the loans
were released or thereafter that the Bank’s cash resources would be dissipated thereby, to the prejudice of the
Petitioner, other Banco Filipino depositors, and the public.
 10.2 Right of a stockholder to inspect the records of a corporation (including financial statements) under
Sections 74 and 75 of the Code, as implemented by the Interim Rules;

(a) Unlawful refusal to allow the Petitioner from inspecting or otherwise accessing the corporate records of the
bank despite repeated demand in writing, where she is a stockholder. (sic)

10.3 Receivership and Creation of a Management Committee pursuant to:

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

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

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

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

(e) Rule 7 of the Interim Rules;

(f) Rule 9 of the Interim Rules; and

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

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

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

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

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

WHEREFORE, the Court defers resolution of the affirmative defenses raised by the defendants Arcenas, et al.”4

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

On February 9, 2005, the CA issued a 60-day TRO enjoining Judge Marella from conducting further proceedings in
the case.8
On February 22, 2005, the RTC issued a Notice of Pre-trial9 setting the case for pre-trial on June 2 and 9, 2005.
Arcenas, et al. filed a Manifestation and Motion10 before the CA, reiterating their application for a writ of
preliminary injunction. Thus, on April 18, 2005, the CA issued the assailed Resolution, which reads in part:

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

SO ORDERED.”

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

In their Comment, Arcenas, et al. raised several procedural and substantive issues. They alleged that the
Verification and Certification against Forum-Shopping attached to the Petition was not executed in the manner
prescribed by Philippine law since, as admitted by Koruga’s counsel himself, the same was only a facsimile.

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

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

Meanwhile, on March 13, 2006, this Court issued a Resolution granting the prayer for a TRO and enjoining the
Presiding Judge of Makati RTC, Branch 138, from proceeding with the hearing of the case upon the filing by
Arcenas, et al. of a

P50,000.00 bond. Koruga filed a motion to lift the TRO, which this Court denied on July 5, 2006.

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

G.R. No. 169053

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

In their Petition, Arcenas, et al. asked the Court to set aside the Decision14 dated July 20, 2005 of the CA in CA-
G.R. SP No. 88422, which denied their petition, having found no grave abuse of discretion on the part of the Makati
RTC. The CA said that the RTC Orders were interlocutory in nature and, thus, may be assailed by certiorari or
prohibition only when it is shown that the court acted without or in excess of jurisdiction or with grave abuse of
discretion. It added that the Supreme Court frowns upon resort to remedial measures against interlocutory orders.
Arcenas, et al. anchored their prayer on the following grounds: that, in their Answer before the RTC, they had
raised the issue of failure of the court to acquire jurisdiction over them due to improper service of summons; that
the Koruga action is a nuisance or harassment suit; that there is another case involving the same parties for the
same cause pending before the Monetary Board of the BSP, and this constituted forum-shopping; and that
jurisdiction over the subject matter of the case is vested by law in the BSP.15

Arcenas, et al. assign the following errors:

I. THE COURT OF APPEALS, IN “FINDING NO GRAVE ABUSE OF DISCRETION COMMITTED BY PUBLIC RESPONDENT
REGIONAL TRIAL COURT OF MAKATI, BRANCH 138, IN ISSUING THE ASSAILED ORDERS,” FAILED TO CONSIDER AND
MERELY GLOSSED OVER THE MORE TRANSCENDENT ISSUES OF THE LACK OF JURISDICTION ON THE PART OF SAID
PUBLIC RESPONDENT OVER THE SUBJECT MATTER OF THE CASE BEFORE IT, LITIS PENDENTIA AND FORUM
SHOPPING, AND THE CASE BELOW BEING A NUISANCE OR HARASSMENT SUIT, EITHER ONE AND ALL OF WHICH
GOES/GO TO RENDER THE ISSUANCE BY PUBLIC RESPONDENT OF THE ASSAILED ORDERS A GRAVE ABUSE OF
DISCRETION.

II. THE FINDING OF THE COURT OF APPEALS OF “NO GRAVE ABUSE OF DISCRETION COMMITTED BY PUBLIC
RESPONDENT REGIONAL TRIAL COURT OF MAKATI, BRANCH 138, IN ISSUING THE ASSAILED ORDERS,” IS NOT IN
ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THIS HONORABLE COURT.16

Meanwhile, in a Manifestation and Motion filed on August 31, 2005, Koruga prayed for, among others, the
consolidation of her Petition with the Petition for Review on Certiorari under Rule 45 filed by Arcenas, et al.,
docketed as G.R. No. 169053. The motion was granted by this Court in a Resolution dated September 26, 2005.

Our Ruling

Initially, we will discuss the procedural issue.

Arcenas, et al. argue that Koruga’s petition should be dismissed for its defective Verification and Certification
Against Forum Shopping, since only a facsimile of the same was attached to the Petition. They also claim that the
Verification and Certification Against Forum-Shopping, allegedly executed in Seattle, Washington, was not
authenticated in the

manner prescribed by Philippine law and not certified by the Philippine Consulate in the United States.

This contention deserves scant consideration.

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

“In view of that fact that the Petitioner is currently in the United States, undersigned counsel is attaching a
facsimile copy of the Verification and Certification Against Forum-Shopping duly signed by the Petitioner and
notarized by Stephanie N. Goggin, a Notary Public for the Sate (sic) of Washington. Upon arrival of the original
copy of the Verification and Certification as certified by the Office of the Philippine Consul, the undersigned
counsel shall immediately provide duplicate copies thereof to the Honorable Court.”17

Thus, in a Compliance18 filed with the Court on September 5, 2005, petitioner submitted the original copy of the
duly notarized and authenticated Verification and Certification Against Forum-Shopping she had executed.19 This
Court noted and considered the Compliance satisfactory in its Resolution dated November 16, 2005. There is,
therefore, no need to further belabor this issue.

We now discuss the substantive issues in this case.

First, we resolve the prayer to nullify the CA’s April 18, 2005 Resolution.

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

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

Accordingly, there is no necessity to restrain the implementation of the writ of preliminary injunction issued by
the CA on April 18, 2005, since it no longer exists.

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

The resolution of these petitions rests mainly on the determination of one fundamental issue: Which body has
jurisdiction over the Koruga Complaint, the RTC or the BSP?

We hold that it is the BSP that has jurisdiction over the case.

A reexamination of the Complaint is in order.

Koruga’s Complaint charged defendants with violation of Sections 31 to 34 of the Corporation Code, prohibiting
self-dealing and conflict of interest of directors and officers; invoked her right to inspect the corporation’s records
under Sections 74 and 75 of the Corporation Code; and prayed for Receivership and Creation of a Management
Committee, pursuant to Rule 59 of the Rules of Civil Procedure, the Securities Regulation Code, the Interim Rules
of Procedure Governing Intra-Corporate Controversies, the General Banking Law of 2000, and the New Central
Bank Act. She accused the directors and officers of Banco Filipino of engaging in unsafe, unsound, and fraudulent
banking practices, more particularly, acts that violate the prohibition on self-dealing.

It is clear that the acts complained of pertain to the conduct of Banco Filipino’s banking business. A bank, as
defined in the General Banking Law,21 refers to an entity engaged in

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

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

Specifically, the BSP’s supervisory and regulatory powers include:

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

4.2 The conduct of examination to determine compliance with laws and regulations if the circumstances so
warrant as determined by the Monetary Board;

4.3 Overseeing to ascertain that laws and Regulations are complied with;

4.4 Regular investigation which shall not be oftener than once a year from the last date of examination to
determine whether an institution is conducting its business on a safe or sound basis: Provided, That the
deficiencies/irregularities found by or discovered by an audit shall be immediately addressed;

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

4.6 Enforcing prompt corrective action.25

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

“It is well-settled in both law and jurisprudence that the Central Monetary Authority, through the Monetary Board,
is vested with exclusive authority to assess, evaluate and determine the condition of any bank, and finding such
condition to be one of insolvency, or that its continuance in business would involve a probable

loss to its depositors or creditors, forbid bank or non-bank financial institution to do business in the Philippines;
and shall designate an official of the BSP or other competent person as receiver to immediately take charge of its
assets and liabilities.”27

Correlatively, the General Banking Law of 2000 specifically deals with loans contracted by bank directors or
officers, thus:

“SECTION 36. Restriction on Bank Exposure to Directors, Officers, Stockholders and Their Related Interests.—
No director or officer of any bank shall, directly or indirectly, for himself or as the representative or agent of
others, borrow from such bank nor shall he become a guarantor, indorser or surety for loans from such bank to
others, or in any manner be an obligor or incur any contractual liability to the bank except with the written
approval of the majority of all the directors of the bank, excluding the director concerned: Provided, That such
written approval shall not be required for loans, other credit accommodations and advances granted to officers
under a fringe benefit plan approved by the Bangko Sentral. The required approval shall be entered upon the
records of the bank and a copy of such entry shall be transmitted forthwith to the appropriate supervising and
examining department of the Bangko Sentral.

Dealings of a bank with any of its directors, officers or stockholders and their related interests shall be upon terms
not less favorable to the bank than those offered to others.

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

The Monetary Board may regulate the amount of loans, credit accommodations and guarantees that may be
extended, directly or indirectly, by a bank to its directors, officers, stockholders and their related interests, as well
as investments of such bank in enterprises owned or controlled by said directors, officers, stockholders and their
related interests. However, the outstanding loans, credit accommodations

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

The Monetary Board shall define the term “related interests.”

The limit on loans, credit accommodations and guarantees prescribed herein shall not apply to loans, credit
accommodations and guarantees extended by a cooperative bank to its cooperative shareholders.”28

Furthermore, the authority to determine whether a bank is conducting business in an unsafe or unsound manner
is also vested in the Monetary Board. The General Banking Law of 2000 provides:

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

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

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

56.3. The act or omission has caused any undue injury, or has given any unwarranted benefits, advantage or
preference to the bank or any party in the discharge by the director or officer of his duties and responsibilities
through manifest partiality, evident bad faith or gross inexcusable negligence; or
56.4. The act or omission involves entering into any contract or transaction manifestly and grossly
disadvantageous to the bank, quasi-bank or trust entity, whether or not the director or officer profited or will
profit thereby.

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

Finally, the New Central Bank Act grants the Monetary Board the power to impose administrative sanctions on
the erring bank:

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

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

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

(c) suspension of lending or foreign exchange operations or authority to accept new deposits or make new
investments;

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

(e) revocation of quasi-banking license.

Resignation or termination from office shall not exempt such director or officer from administrative or criminal
sanctions.

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

The above administrative sanctions need not be applied in the order of their severity.
Whether or not there is an administrative proceeding, if the institution and/or the directors and/or officers
concerned continue with or otherwise persist in the commission of the indicated practice or violation, the
Monetary Board may issue an order requiring the institution and/or the directors and/or officers concerned to
cease and desist from the indicated practice or violation, and may further order that immediate action be taken
to correct the conditions resulting from such practice or violation. The cease and desist order shall be immediately
effective upon service on the respondents.

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

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

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

Sections 31 to 34 of the Corporation Code provide:

“Section 31. Liability of directors, trustees or officers.—Directors or trustees who wilfully and knowingly vote
for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in
directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as
such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the
corporation, its stockholders or members and other persons.

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

Section 32. Dealings of directors, trustees or officers with the corporation.—A contract of the corporation with
one or more of its directors or trustees or officers is voidable, at the option of such corporation, unless all the
following conditions are present:

1. That the presence of such director or trustee in the board meeting in which the contract was approved was
not necessary to constitute a quorum for such meeting;

2. That the vote of such director or trustee was not necessary for the approval of the contract;
3. That the contract is fair and reasonable under the circumstances; and

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

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

Section 33. Contracts between corporations with interlocking directors.—Except in cases of fraud, and provided
the contract is fair and reasonable under the circumstances, a contract between two or more corporations having
interlocking directors shall not be invalidated on that ground alone: Provided, That if the interest of the
interlocking director in one corporation is substantial and his interest in the other corporation or corporations is
merely nominal, he shall be subject to the provisions of the preceding section insofar as the latter corporation or
corporations are concerned.

Stockholdings exceeding twenty (20%) percent of the outstanding capital stock shall be considered substantial for
purposes of interlocking directors.

Section 34. Disloyalty of a director.—Where a director, by virtue of his office, acquires for himself a business
opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such
corporation, he must account to the latter for all such profits by refunding the same, unless his act has been
ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital
stock. This provision shall be applicable, notwithstanding the fact that the director risked his own funds in the
venture.”

Koruga’s invocation of the provisions of the Corporation Code is misplaced. In an earlier case with similar
antecedents, we ruled that:

“The Corporation Code, however, is a general law applying to all types of corporations, while the New Central
Bank Act regulates specifically banks and other financial institutions, including the dissolution and liquidation
thereof. As between a general and special law, the latter shall prevail—generalia specialibus non derogant.”31

Consequently, it is not the Interim Rules of Procedure on Intra-Corporate Controversies,32 or Rule 59 of the Rules
of Civil Procedure on Receivership, that would apply to this case. Instead, Sections 29 and 30 of the New Central
Bank Act should be followed, viz.:

“Section 29. Appointment of Conservator.—Whenever, on the basis of a report submitted by the appropriate
supervising or examining department, the Monetary Board finds that a bank or a quasi-bank is in a state of
continuing inability or unwillingness to maintain a condition of liquidity deemed adequate to protect the interest
of depositors and creditors, the Monetary Board may appoint a conservator with such powers as the Monetary
Board shall deem necessary to take charge of the assets, liabilities, and the management thereof, reorganize the
management, collect all monies and debts due said institution, and exercise all powers necessary to restore its
viability. The conservator shall report and be responsible to the Monetary Board and shall have the power to
overrule or revoke the actions of the previous management and board of directors of the bank or quasi-bank.

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

Section 30. Proceedings in Receivership and Liquidation.—Whenever, upon report of the head of the
supervising or examining department, the Monetary Board finds that a bank or quasi-bank:

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

(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities; or

(c) cannot continue in business without involving probable losses to its depositors or creditors; or

(d) has willfully violated a cease and desist order under Section 37 that has become final, involving acts or
transactions which amount to fraud or a dissipation of the assets of the institution; in which cases, the Monetary
Board may summarily and without need for prior hearing forbid

the institution from doing business in the Philippines and designate the Philippine Deposit Insurance Corporation
as receiver of the banking institution.

xxxx

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

The designation of a conservator under Section 29 of this Act or the appointment of a receiver under this section
shall be vested exclusively with the Monetary Board. Furthermore, the designation of a conservator is not a
precondition to the designation of a receiver.”33

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

Crystal clear in Section 30 is the provision that says the “appointment of a receiver under this section shall be
vested exclusively with the Monetary Board.” The term “exclusively” connotes that only the Monetary Board can
resolve the issue of whether a bank is to be placed under receivership and, upon an affirmative finding, it also has
authority to appoint a receiver. This is further affirmed by the fact that the law allows the Monetary Board to take
action “summarily and without need for prior hearing.”

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

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

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

xxxx

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

In a letter dated May 6, 2003, BSP Supervision and Examination Department III Director Candon B. Guerrero
referred Koruga’s letter to Arcenas for comment.36 On June 6, 2003, Banco Filipino’s then Executive Vice
President and Corporate Secretary Francisco A. Rivera submitted the bank’s comments essentially arguing that
Koruga’s accusations lacked legal and factual bases.37

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

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

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

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

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

SO ORDERED. Koruga vs. Arcenas, Jr., 590 SCRA 49, G.R. No. 168332 June 19, 2009
4. Chavez vs CA
G.R. No. 174356. January 20, 2010.*
EVELINA G. CHAVEZ and AIDA CHAVEZ-DELES, petitioners, vs. COURT OF APPEALS and ATTY. FIDELA Y. VARGAS,
respondents.

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

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

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

PETITION for review on certiorari of the resolutions of the Court of Appeals.

The facts are stated in the opinion of the Court.

Jesus G. Chavez for petitioners.

ABAD, J.:

This case is about the propriety of the Court of Appeals (CA), which hears the case on appeal, placing the property
in dispute under receivership upon a claim that the defendant has been remiss in making an accounting to the
plaintiff of the fruits of such property.

The Facts and the Case

Respondent Fidela Y. Vargas owned a five-hectare mixed coconut land and rice fields in Sorsogon. Petitioner
Evelina G. Chavez had been staying in a remote portion of the land with her family, planting coconut seedlings on
the land and supervising the harvest of coconut and palay. Fidela and Evelina agreed to divide the gross sales of
all products from the land between themselves. Since Fidela was busy with her law practice, Evelina undertook to
hold in trust for Fidela her half of the profits.

But Fidela claimed that Evelina had failed to remit her share of the profits and, despite demand to turn over the
administration of the property to Fidela, had refused to do so. Consequently, Fidela filed a complaint against
Evelina and her daughter, Aida C. Deles, who was assisting her mother, for recovery of possession, rent, and
damages with prayer for the immediate appointment of a receiver before the Regional Trial Court (RTC) of Bulan,
Sorsogon.1 In their answer, Evelina and Aida claimed that the RTC did not have jurisdiction over the subject matter
of the case since it actually involved an agrarian dispute.

After hearing, the RTC dismissed the complaint for lack of jurisdiction based on Fidela’s admission that Evelina
and Aida were tenants who helped plant coconut seedlings on the land and supervised the harvest of coconut and
palay. As tenants, the defendants also shared in the gross sales of the harvest. The court threw out Fidela’s claim
that, since Evelina and her family received the land already planted with fruit-bearing trees, they could not be
regarded as tenants. Cultivation, said the court, included the tending and caring of the trees. The court also
regarded as relevant Fidela’s pending application for a five-hectare retention and Evelina’s pending protest
relative to her three-hectare beneficiary share.2

Dissatisfied, Fidela appealed to the CA. She also filed with that court a motion for the appointment of a receiver.
On April 12, 2006 the CA granted the motion and ordained receivership of the land, noting that there appeared
to be a need to preserve the property and its fruits in light of Fidela’s allegation that Evelina and Aida failed to
account for her share of such fruits.3

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

The Issues Presented

Petitioners present the following issues:

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

2. Whether or not the CA erred in granting respondent Fidela’s application for receivership.

The Court’s Ruling

One. By forum shopping, a party initiates two or more actions in separate tribunals, grounded on the same
cause, trusting that one or the other tribunal would favorably dispose of the matter.4 The elements of forum
shopping are the same as in litis pendentia where the final judgment in one case will amount to res judicata in the
other. The elements of forum shopping are: (1) identity of parties, or at least such parties as would represent the
same interest in both actions; (2) identity of rights asserted and relief prayed for, the relief being founded on the
same facts; and (3) identity of the two preceding particulars such that any judgment rendered in the other action
will, regardless of which party is successful, amount to res judicata in the action under consideration.5
Here, however, the various suits Fidela initiated against Evelina and Aida involved different causes of action and
sought different reliefs. The present civil action that she filed with the RTC sought to recover possession of the
property based on Evelina and Aida’s failure to account for its fruits. The estafa cases she filed with the RTC
accused the two of misappropriating and converting her share in the harvests for their own benefit. Her complaint
for dispossession under Republic Act 8048 with the DARAB sought to dispossess the two for allegedly cutting
coconut trees without the prior authority of Fidela or of the Philippine Coconut Authority.

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

Two. In any event, we hold that the CA erred in granting receivership over the property in dispute in this case.
For one thing, a petition for receivership under Section 1(b), Rule 59 of the Rules of Civil Procedure requires that
the property or fund subject of the action is in danger of being lost, removed, or materially injured, necessitating
its protection or preservation. Its object is the prevention of imminent danger to the property. If the action does
not require such protection or preservation, the remedy is not receivership.6

Here Fidela’s main gripe is that Evelina and Aida deprived her of her share of the land’s produce. She does not
claim that the land or its productive capacity would disappear or be wasted if not entrusted to a receiver. Nor
does Fidela claim that the land has been materially injured, necessitating its protection and preservation. Because
receivership is a harsh remedy that can be granted only in extreme situations,7 Fidela must prove a clear right to
its issuance. But she has not. Indeed, in none of the other cases she filed against Evelina and Aida has that remedy
been granted her.

Besides, the RTC dismissed Fidela’s action for lack of jurisdiction over the case, holding that the issues it raised
properly belong to the DARAB. The case before the CA is but an offshoot of that RTC case. Given that the RTC has
found that it had no jurisdiction over the case, it would seem more prudent for the CA to first provisionally
determine that the RTC had jurisdiction before granting receivership which is but an incident of the main action.

WHEREFORE, the Court GRANTS the petition. The Resolutions dated April 12, 2006 and July 7, 2006 of the Court
of Appeals in CA-G.R. CV 85552, are REVERSED and SET ASIDE.

The receivership is LIFTED and the Court of Appeals is directed to resolve CA-G.R. CV 85552 with utmost dispatch.

SO ORDERED. Chavez vs. Court of Appeals, 610 SCRA 399, G.R. No. 174356 January 20, 2010