[No. 6305. September 26, 1911.]COMPAIA GENERAL DE TABACOS DE FILIPINAS, plaintiff and appellee, vs. ROMANA GAUZON and JUAN D. POMAR, defendants. JUAN D. POMAR, receiver and appellant.

1.RECEIVERS; POWERS, DUTIES, AND RESPONSIBILITIES.A receiver is generally defined to be an indifferent person between the parties litigant, appointed by the court and on behalf of all the parties, and not of the plaintiff or defendant only, to receive and hold the thing or property in litigation, pending the suit, to receive the rents, issues, or profits of the land or thing in question, to hold possession and control of the property which is the subject-matter of the litigation and to dispose of it in such manner as may be directed by the court. He is the arm and hand of the court, a262

262PHILIPPINE REPORTS ANNOTATEDCompaa General de Tabacos vs. Gauzon and Pomar.part of the machinery of the court, by which the rights of the parties are protected. He is required not only to preserve the property, but to protect the rights of all the parties interested.2.ID.; LIMITED AUTHORITY TO INCUR EXPENSE WITHOUT EXPRESS PERMISSION OF THE COURT.Generally a receiver has no authority to incur any expense in the administration of his receivership, without express permission of the court, except it be absolutely necessary to preserve the property, and then only when, under special circumstances, he can not secure such authority from the court. He should administer the estate as economically as possible, to the end that the interests of all the parties shall be conserved.3.ID.; COMPENSATION.The amount of compensation of a receiver is fixed by the sound discretion of the court. The court, in fixing the compensation of the receiver, should take into consideration the general efficiency of the receiver in his administration of the property under his control.APPEAL from a judgment of the Court of First Instance of Occidental Negros. McCabe, J.The facts are stated in the opinion of the court.M. Fernandez Yamson, for appellant.A. P. Seva, for appellee.JOHNSON, J.:

The present appeal is made by the defendant Juan D. Pomar, as receiver, against the order of the Hon. Albert E. McCabe, judge of the Province of Occidental Negros, disallowing certain items in the final account of the said receiver.It appears from the record that the defendant, Romana Gauzon, on the 10th day of September, 1904, executed and delivered to the plaintiff (Compaa General de Tabacos de Filipinas) a mortgage upon an hacienda known as "San Jose," in the municipality of San Carlos, in the Province of Occidental Negros. The said defendant (Romana Gauzon) having failed to pay the said mortgage, the plaintiff (Compaia General de Tabacos de Filipinas), on the 22nd day of September, 1905, commenced an action for the foreclosure of said mortgage, and asked, in addition to the foreclosure of the mortgage, that a receiver be appointed to take charge263

VOL. 20, SEPTEMBER 26, 1911.263Compaa General de Tabacos vs. Gauzon and Pomar.of the property in question, pending the said action. On the same day (22nd of September, 1905) the Hon. Vicente Jocson, after hearing the petition filed in said cause, appointed the said defendant, Juan D. Pomar, an employee of the plaintiff, receiver of the property involved in said foreclosure proceedings. Said foreclosure proceedings continued to a termination. The result of said proceedings may be found in two decisions of this court, the cases of La Compaa General de Tabacos de Filipinas vs. Ganson (13 Phil. Rep., 472) and La Compaa General de Tabacos de Filipinas vs. Ganson (13 Phil. Rep., 481). The facts relating to the foreclosure proceedings and the judgment therein are not important in the present cause, further than to show the history of the transactions of the receiver, the defendant, Juan D. Pomar.After the termination of the receivership, the court required of the receiver (Juan D. Pomar) a report and an accounting of his operations as receiver. It appears from the record that the lower court had a good deal of trouble in securing a final report. The receiver apparently acted as though his only responsibility was to the plaintiff (Compaa General de Tabacos de Filipinas) ; however, finally the lower court secured what appears to be a final accounting by the receiver, upon the 9th or 10th day of August, 1909. The report of the receiver contained many items. After a careful consideration of the various items of the account of the receiver, Judge McCabe allowed the f following items of said account1. Care of cane before cutting ......................................................................................P1,522.302. Cutting and grinding, according to report of commissioners ....................................8,5653. Fuel .........................................................................................................................150.004. Expenses in Iloilo, according to receiver's Exhibit B ................................................2,591.205. Storage .....................................................................................................................428.286. Insurance ..................................................................................................................428.287. Selling commission ...................................................................................................648.128. Judgment for plaintiff in cause No. 249 ....................................................................9,187.809. Receiver's pay ..........................................................................................................._1,000.00 Total ...................................................................................................................24,522.04264

264PHILIPPINE REPORTS ANNOTATEDCompaa General de Tabacos vs. Gauzon and Pomar.and ordered the receiver, Juan D. Pomar, to pay into court on or about the first Tuesday of November, 1909, the sum of P7,883.76, a balance which he ought to have had in his possession. From the order allowing said items only the defendant appealed to this court and made the following assignments of error:"I. The court erred in reducing to P8,565.97 the P22,-944.73 spent by the receiver for cutting, hauling, and manufacture of 8,005.58 piculs of sugar, for packing, transportation and storage thereof, and insurance and selling commission thereon."II. The court erred in not allowing the item of P147.86 paid out by the receiver as interest on money borrowed to cover the first expenses of his receivership.

"III. The court erred in not approving the disbursement made by the receiver of the P3,001.94 delivered to the aparceros as their share of the crop."IV. The court erred in reducing to P1,000 the P4,860.87 which the receiver claimed as compensation f or his services."V. The court erred in holding that the order appointing the receiver does not extend his powers beyond those prescribed in section 175 of Act No. 190."With reference to the first assignment of error, it will be noted that the receiver presented an account for cutting, grinding, etc., of the sugar cane upon the hacienda, over which he had control as receiver, amounting to P22,944.73. Judge McCabe refused to allow that amount for the cutting and grinding, etc., of said sugar cane, upon the ground that it was an unreasonable charge. The parties in the lower court agreed to the appointment of three commissioners f or the purpose of ascertaining the reasonable cost of cutting, grinding, etc., of the sugar cane upon the said hacienda. The commissioners were duly appointed, the plaintiff selecting one, the defendant another and the court selecting the third. In due time and after due deliberation, the commissioners reported that the reasonable cost f or cutting, 'grinding, etc., of the said sugar cane per pico was P1.07. There were 8,005.58 picos of sugar cane, which calculated at the265

VOL. 20, SEPTEMBER 26, 1911.265Compaa General de Tabacos vs. Gauzon and Pomar.rate of P1.07 per pico for cutting, grinding, etc., would amount to P8,565.97, which amount the lower court allowed the receiver. The commissioners appointed by the lower court were men who had had experience in the cutting and grinding of sugar cane. It was the duty of the receiver to harvest the sugar cane at the least possible cost to the owners of the crop. There is much proof in the record to indicate that the receiver did not harvest the crop of sugar cane as expeditiously as he should have done. There is no proof in the record which shows that the amount estimated by the said commissioners f or the cutting, grinding, etc., of the sugar cane in question, was not a reasonable amount for that expense. We find nothing in the record which justifies us in modifying the decision of the lower court with reference to this first assignment of error.With reference to the second assignment of error, it appears that the receiver attempted to charge P147.86, as interest on money borrowed by him during his administration as receiver. There is no proof in the record that the receiver was authorized to borrow money for the purpose of carrying on his work as receiver of said hacienda; neither is there any proof in the record which shows that it was necessary for him to borrow money to properly conserve the interests of the owners and creditors interested in the administration of the hacienda. The lower court correctly said, "a receiver has no authority to borrow money unless the same is expressly given by the court." We would be inclined, however, to allow this amount (P147.86) had the necessity been fully demonstrated for borrowing the money. In the absence of authority expressly given and especially in the absence of proof of the absolute necessity for incurring this item of expense, we refuse to modify the conclusions of the lower court with respect to this item.With reference to the third assignment of error above noted, the receiver included in his account the item of P3,001.94, being the amount, according to' this statement, of money and effects delivered to "los aparceros de la hacienda" during his administration. It is a well known266

266PHILIPPINE REPORTS ANNOTATEDCompaa General de Tabacos vs. Gauzon and Pomar.custom among sugar growers in the Philippine Islands, that the aparceros plant and cultivate sugar cane at their own expense, receiving one-half of the sugar produced and delivering the other half to the owner of the land. It is also a well known custom that the owners of the land from time to time advance money and effects to the aparceros, deducting the value of the same from the value of the sugar after the same is harvested. In the present case it appears that the receiver delivered one-half of the sugar to the aparceros without deducting the amount of money and effects advanced to them. If he, in fact, advanced to the aparceros the said sum (P3,001.94) he should have deducted it from the amount due said aparceros, and not have attempted to collect the same from the amount due the owner of the hacienda, prejudicing the owner of the hacienda thereby. Here again the receiver exceeded his authority. Nevertheless we would be inclined to allow this amount (P3,001.94) if it were a just charge against the administration of the hacienda. But, as was said above, it is not a just charge against the owner of the hacienda. This amount should have been collected from the aparceros. Judge McCabe committed no error in disallowing this item in the account of the receiver.With reference to the fourth assignment of error above noted, it will be seen that the receiver included in his account the sum of P4,860.87 as compensation for his administration as receiver. The lower court disallowed that amount but did allow him. the sum of P1,000 as his just compensation as receiver. The lower court, in the appointment of the receiver, did not fix any sum for his compensation; neither is it customary for courts in appointing receivers to fix their compensation in advance. Their compensation is a matter which is always left to the sound discretion of the court, to be allowed from time to time. The receiver attempted to recover as his compensation 15 per cent of the value of the sugar. The lower court found that the amount of P4,860.87 was an unreasonable amount to be allowed as compensation for the services of the re-267

VOL. 20, SEPTEMBER 26, 1911.267Compaa General de Tabacos vs. Gauzon and Pomar.ceiver in the present case. The court found that the receiver might have done all the work which he did do in the course of his administration as receiver in one hundred days. The Code of Procedure in Civil Actions allows administrators of estates of deceased persons the sum of P4 a day for the time actually employed in the administration of the estate. The lower court, f ollowing this provision of the law, believing the present case to be somewhat analogous, allowed the receiver P4 a day for his services. The lower court also allowed an additional amount, the basis of which does not clearly appear in the record, making the total compensation of the receiver the sum of P1,000. Against that order the owner of the hacienda did not appeal. Considering the negligent manner in which the receiver administered the hacienda, as appears from the record, as well as his negligence in complying with the various orders of the court with reference to rendering accounts, etc., we are of the opinion that the sum of P1,000 is, in fact, more than a just compensation for his services. In view, however, of the fact that the owner of the hacienda did not appeal from the order of the court allowing said sum (P1,000) we approve the finding of the lower court.With reference to the fifth assignment of error above noted, the appellant seems to believe that section 175 of the Code of Procedure in Civil Actions gave him full power to administer the property placed under his control as receiver as he might deem wise and necessary, without any intervention on the part of the court or of the interested parties. The appellant evidently

overlooked the phrase of said article which says: "The receiver shall have, under the control of the court in which the action is pending, power, etc." The judge of the lower court in his decision goes into detail at length and cites authorities extensively, for the purpose of showing the general duties, powers and .responsibilities of receivers, evidently for the purpose of instructing receivers in his district. The receiver is generally defined to be "an indifferent person between the parties litigant, appointed by the court and on behalf of all the parties,268

268PHILIPPINE REPORTS ANNOTATEDCompaa General de Tabacos vs. Gauzon and Pomar.and not of the plaintiff or defendant only, to receive and hold the thing or property in litigation, pending the suit (Booth vs. Clark, 17 How. (U. S.), 322, 331), to receive the rents, issues or profits of the land or thing in question (Booth vs. Clark, supra), to receive the rents or other income, to hold possession and control of the property which is the subject matter of the litigation, and to dispose of the same or deliver it to such person or persons as may be directed by the court. (Wiswall vs. Kunz, 173 111., 110.)" The reports of the decisions of the courts are filled with decisions supporting the above doctrine. The receiver is said to be the arm and hand of the courta part of the machinery of the court, by which the rights of parties are protected. He is required not only to preserve the property, but to protect the rights of all of the parties interested. If he is not versed in the law, he should secure legal advice, with the permission of the court and in case of doubt should advise with the court and receive direction.After a full consideration of the above assignments of error, in connection with the facts contained in the record, we find no reason for changing or modifying the decision of the lower court, and the same is hereby affirmed, with costs.Torres, Mapa, and Moreland, JJ., concur.CARSON, J., concurring:

I concur. I think it proper, however, to add that the observation of the lower court, quoted with approval in the opinion of this court, that "a receiver has no authority to borrow money unless the same is expressly given by the court," while undoubtedly true, as a general proposition, must not be understood as absolutely prohibiting the borrowing of money by a receiver and its repayment with interest as a lawful and necessary expense incurred by the receiver in the performance of his duty, where it is impracticable or impossible to secure the prior approbation of the transaction by the court.As a rule, consent of court should first be obtained; but269

VOL. 20, SEPTEMBER 27, 1911.269Rallos vs. Yangco.as clearly indicated in the majority opinion, where the necessity for incurring the expense actually exists, and is fully and clearly established, the transaction will be ratified and approved when all the facts are shown to the court. The receiver and the lender take the risk that the transaction may not be ratified by the court, on the ground that in the opinion of the court there was no necessity therefor; and without the approval of the court previously obtained or the ratification and approval obtained when the matter is finally reported, the property in the hands of the receiver is not and can not be bound for the repayment of the indebtedness.If it were shown in the case at bar that to save a growing crop from destruction, or to harvest it at the proper time, it became necessary to borrow money to pay laborers or the like, and that under all the circumstances it was impracticable to secure the previous consent of the court to the transaction, it will not be doubted that on a proper showing the court would ratify and affirm the transaction, and that this subsequent ratification would bind the property in the hands of the receiver for the repayment of the money borrowed, together with interest and the expenses necessarily incurred in and about the making of the loan.Judgment affirmed._______________ [Compaa General de Tabacos vs. Gauzon and Pomar., 20 Phil. 261(1911)]

[No. 25729. November 24, 1926]THE BELGIAN CATHOLIC MISSIONARIES, INC., plaintiff and appellee, vs. MAGALLANES PRESS, INC., ET AL., defendants. JOSE MARIA MEMIJE, appellant.

1.CHATTEL MORTGAGE; DEPOSIT OF PROPERTY.The trial court did not commit an error in authorizing the plaintiff corporation to take possession of the personal property in litigation upon the filing of a bond sufficient to secure the conservation or value of the same, such act not constituting a delivery of the personal property, as the appellant contends, but only a deposit of the property in litigation applied for by said plaintiff corporation which became a receiver by authority of the court, it being the party most interested in the conservation and care of said property.2.lD.; INCREASE OF SECURITY.The increase of a mortgage security becomes a new mortgage where the original mortgage does not contain any stipulation in regard to the increase of the mortgage credit, and, even if it does, said increase would take effect only from the date of the increase. A mortgage which contains a stipulation in regard to future increases of credit will take effect from the date the same are made and not from the date of the original. mortgage.3.ID.; SECURITY OF FUTURE DEBT.Where the statute provides that the parties to a chattel mortgage must take oath that the debt is a just debt, honestly due and owing from the mortgagor to the mortgagee, it is obvious that a valid mortgage cannot be made to secure a future debt.APPEAL from a judgment of the Court of First Instance of Manila. Diaz, J.The facts are stated in the opinion of the court.648

648PHILIPPINE REPORTS ANNOTATEDBelgian Catholic Missionaries vs. Magallanes PressAntonio M. Opisso, Romualdez Hermanos and Luciano de la Rosa for appellant.Cavanna, Aboitiz & Agan for appellee.VILLA-REAL, J.:

This is an appeal taken by Jose Maria Memije from a judgment of the Court of First Instance of Manila the dispositive part of which is as follows:"For all the foregoing, the court is of the opinion that the plaintiff has a right to the relief prayed for in its complaint. Wherefore, judgment is rendered declaring that Exhibits C and D, that is, the mortgage deeds in question in this proceeding, in so far as they prejudice the rights of the plaintiff, are null and void; that the preliminary injunction issued in this case against the defendant Jose Ma. Memije is final and absolute; and that the plaintiff recover the amount of the fire insurance policies of the defendant 'Magallanes Press, Inc.,' which, or the representatives of which, is hereby ordered to endorse said insurance policies to the plaintiff, with the costs of the proceeding against the defendants, with the exception of J. P. Heilbronn Co., Inc. It is so ordered."In support of his appeal, the appellant assigns the following supposed errors as committed by the lower court in its judgment, to wit: (1) The court erred in overruling the demurrer filed by this defendant to the complaint in this action; (2) the trial court erred in giving the plaintiff corporation possession of the property mortgaged to this appellant without following the necessary proceedings or complying with the provisions of the law; (3) the trial court erred in issuing the writ of preliminary injunction against the appellant and E. E. Elser, restraining the former from receiving from the latter, or the latter from delivering to the former, the amount of the insurance policies covering the property mortgaged to the appellant, which was damaged by the fire that occurred in the establishment of the Magallanes Press, Inc.; (4) the trial649

VOL. 49, NOVEMBER 24, 1926649Belgian Catholic Missionaries vs. Magallanes Presscourt erred in giving to the unnecessary intervention of the Magallanes Press, Inc., in the execution of the deed Exhibit C an interpretation which is neither based upon law nor upon the contract; (5) the trial court erred in ordering the suspension of the foreclosure of the appellant's mortgage on the property of the Magallanes Press, Inc.; (6) the trial court erred, under the facts proven in this case, in applying article 1297 of the Civil Code; (7) the trial court erred in finding in its decision that the defendant Jose Ma. Memije should not have executed the documents Exhibits C and D without taking into account the rights of the plaintiff corporation, The Belgian Catholic Missionaries, Inc.; (8) the trial court erred in declaring Exhibits C and D null and void in so far as they prejudice the rights of the plaintiff, over whose credit that of the herein appellant is preferential; in declaring the writ of preliminary injunction issued against the defendant Jose Ma. Memije final and absolute; in giving judgment for the plaintiff to recover the amount of the fire insurance policies of the defendant the Magallanes Press, Inc.; and (9) the trial court erred in not making any pronouncement as to the counterclaim and cross-complaint of the defendant Jose Ma. Memije in this action, nor taking the same into consideration and rendering judgment thereon in favor of said defendant.The oral evidence has not been forwarded to this court so that we are compelled to base our opinion exclusively upon the documentary evidence and the facts found and stated by the trial court in its judgment. It appears that on December 1, 1921, the MagallanesPress, through its manager H. Camea, executed a promissory note in favor of J. P. Heilbronn & Co., Inc., for the sum of P3,472.92, with interest at 10 per cent per annum, payable at the rate of P250 a month, plus the interest earned on the unpaid balance, until the whole amount of the indebtedness shall have been paid, the first payment to be made on January 1, 1922, with the condition that upon650

650PHILIPPINE REPORTS ANNOTATEDBelgian Catholic Missionaries vs. Magallanes Pressthe failure to pay any monthly installment of the interest earned on the unpaid balance, the whole amount of the indebtedness shall become due, and the maker shall pay the payee an additional sum equivalent to 15 per cent of the total balance, for attorney's fee and expenses of collection, forfeiting all right of exemption.On the same date, December 1, 1921, the said Magallanes Press, through its manager H. Camea, also executed a promissory note in f avor of J. P. Heilbronn & Co., Inc., for the sum of P10,715.77, with interest at 12 per cent per annum, payable at the rate of P500 a month, together with the interest earned on the unpaid balance, until the whole amount of the indebtedness shall have been paid, the first payment to be made on January 1, 1922, with the condition that upon the failure to pay any monthly installment or the interest earned on the unpaid balance, the whole amount of the indebtedness shall become due, and the maker shall pay

the payee an additional sum equal to 15 per cent of the total balance for attorney's fee and expenses of collection, forfeiting all right of exemption.To secure the payment of said promissory notes which amounted to a total of P14,188.69, H. Camea, as general manager of the Magallanes Press, executed a chattel mortgage on all the printing machinery and its accessories, belonging to the said Magallanes Press, in favor of J. P. Heilbronn & Co,, Inc.On June 19, 1922, the Magallanes Press Co., Inc., successor to the Magallanes Press, with all the latter's rights and obligations, through its duly authorized president, E. F. Clemente, executed a chattel mortgage on the same printing machinery and its accessories in favor of the Belgian Catholic Missionaries Co., Inc., which the Magallanes Press had mortgaged to J. P. Heilbronn & Co., Inc., to secure the payment of a loan of P30,500, with interest at 12 per cent per annum, which the said Magallanes Press & Co., Inc., had obtained from the Belgian Catholic Missionaries Co.,651

VOL. 49, NOVEMBER 24, 1926651Belgian Catholic Missionaries vs. Magallanes PressInc., the duration of the mortgage loan being one year from the execution of the mortgage deed.In December, 1922 the appellant Jose Ma. Memije made a loan in the sum of P2,000 to E. F. Clemente which was paid on account of the indebtedness of the Magallanes Press to J. P. Heilbronn & Co., Inc., together with the sum of P1,641 which A. F. Mendoza owed said E. F. Clemente.On the occasion of the issuance of the writ of attachment in civil cause No. 23818 of the Court of First Instance of Manila, entitled Jose Ma. Cavanna vs. The Magallanes Press Co., Inc., the defendant Jose Ma. Memije, on February 21, 1923, filed an intervention in said case.All the promissory notes executed by the Magallanes Press in favor of J. P. Heilbronn & Co., Inc., having been overdue for non-payment of the installments, as well as the respective chattel mortgage, the said J. P. Heilbronn & Co., Inc., transferred all its mortgage credit against the Magallanes Press to Jose Ma. Memije in consideration of the sum of P8,280.90, the balance of said mortgage credit.On March 14, 1923, Enrique Clemente, as manager of the Magallanes Press Co., Inc., executed a deed in favor of Jose Ma. Memije by virtue of which the chattel mortgage which was given by the Magallanes Press in favor of J. P. Heilbronn & Co., Inc., and transferred by the latter to Jose Ma. Memije, was made to cover an additional loan of P5,895.79, which included the sum of P2,000 which said Jose Ma. Memije had advanced said Enrique Clemente in December, 1922.On April 21, 1923, a fire occurred in the building where the printing machinery, its accessories and other personal property of the Magallanes Press Co., Inc., were located and which were covered by said chattel mortgages. Said property was insured, and the insurance policies covering it were endorsed to J. P. Heilbronn & Co., Inc., upon the execution of the chattel mortgage thereon in favor of the latter. When J. P. Heilbronn & Co., Inc., transferred652

652PHILIPPINE REPORTS ANNOTATEDBelgian Catholic Missionaries vs. Magallanes Pressits mortgage credit to Jose Ma. Memije it, in turn, endorsed said insurance policies to him. The insurance companies were disposed to pay the respective insurance policies, which amounted to P7,686.45, but due to the issuance of the above-mentioned writ of preliminary injunction, payment could not be made.Due to the filing of the complaint in the present case on May 9, 1923, and the issuance of the writ of preliminary injunction on May 10th of the same year, Jose Ma. Memije was unable to collect the amount of the insurance policies, and when he was summoned under the complaint on May 14, 1923, he made demand on the Magallanes Press Co., Inc., for the payment of his mortgage credit and on the same date the manager of said corporation, E. F. Clemente, permitted the secretary of the said corporation to place the property covered by the mortgage into the hands of the said Jose Ma. Memije in order that the same might be sold, but the sale could not be consummated due to the issuance of the said writ of preliminary injunction.The first question raised by the defendant and appellant has reference to the overruling of the demurrer filed by him to the complaint.One of the grounds of said demurrer was that the complaint in this case did not allege facts sufficient to constitute a cause of action against the said def endant, in that, notwithstanding the fact that the said complaint was instituted to annul the document of transfer of the mortgage credit Exhibit C, it was not alleged in the said complaint that the defendant Jose Ma. Memije had any intention to defraud the interests of the plaintiff corporation, which was absolutely impossible due to the nature of the "transaction and the preferential character of the mortgage credit of J. P. Heilbronn & Co., Inc.As to this paragraph of the complaint, the plaintiff company having known of the existence of a chattel mortgage in favor of J. P. Heilbronn & Co., Inc., the latter, either as653

VOL. 49, NOVEMBER 24, 1926653Belgian Catholic Missionaries vs. Magallanes Pressthe first or as the second mortgagee, had a perfect right to transfer its mortgage credit, without the knowledge or consent of any other mortgagee, inasmuch as whoever acquired it, would have exactly the same status as the transferor with the same rights and obligations. The fact, therefore, that the Magallanes Press Co., Inc., had consented to the transfer of the mortgage credit of J. P. Heilbronn & Co., Inc., to Jose Ma. Memije, does not constitute a fraud that can vitiate the said transfer, inasmuch as the order of preference of the existing mortgages has not been altered, and its allegation does not constitute a cause of action to annul the said transfer.In regard to the allegation contained in the ninth paragraph of the complaint, it is very clear that the increase made by Jose Ma. Memije in the mortgage credit acquired by him from J. P. Heilbronn & Co., Inc., and the extension made by the Magallanes Press, Inc., of the mortgage to said additional credit without the knowledge or consent of the plaintiff company, as second mortgagee, prejudices the credit of the latter, inasmuch as the security for the payment of said credit was reduced as to it, and, therefore, constitutes a fraud that vitiates the contract of extension of the mortgage evidenced by the deed Exhibit D, rendering it void.The facts alleged in paragraph 9 of the complaint are sufficient to constitute a cause of action of nullity, and the lower court did not err in overruling the demurrer filed by the defendant Jose Ma. Memije.In regard to the second assignment of error, it appears that the defendant Jose Ma. Memije having attempted to foreclose the mortgage, by which the mortgage credit acquired by him from J. P. Heilbronn & Co., Inc., was secured, in order to recover not only

the original credit but also the increase, the Belgian Catholic Missionaries Co., Inc., filed a complaint, with a petition for a writ of preliminary injunction against the sheriff, in whose hands the fore-654

654PHILIPPINE REPORTS ANNOTATEDBelgian Catholic Missionaries vs. Magallanes Pressclosure of the mortgage was placed. The writ of preliminary injunction having been issued, upon the filing of a bond in the sum of P15,000, and there being no person more interested in the conservation and custody of the property covered by the mortgage than said plaintiff company, being the largest creditor, it applied and obtained from the court the possession of the same.Contrary to the contention of the appellant, this case is not one of replevin but simply a proceeding instituted by the plaintiff for the deposit of the property in litigation, upon the filing of a bond, said plaintiff acting as a receiver by authority of the court, being the person most interested in the conservation and care of the same (sec. 174, Act No. 190; 11 C. J., 726).The lower court, therefore, did not err in authorizing the plaintiff company to take possession of the personal property in litigation upon the filing of a bond sufficient to secure the conservation or value thereof.The third assignment of error raises the question as to the preference of right between the plaintiff company and the defendant over the mortgaged property and the amount of the insurance policies covering a part thereof which was destroyed by fire.As we have seen in the statement of the pertinent facts necessary for the clear and accurate solution of the questions of law involved in the present appeal, the firm of J. P. Heilbronn & Co., Inc., had a mortgage credit against the Magallanes Press for the sum of P14,186.69, secured by a first chattel mortgage. The plaintiff company, the Belgian Catholic Missionaries Co., Inc., also had a mortgage credit for the amount of P30,500, secured by a second mortgage on the same personal property. After this second mortgage had been executed, the payment of the mortgage credit of J. P. Heilbronn & Co., Inc., became due, which credit had been reduced to the sum of P8,280.90 through partial pay-655

VOL. 49, NOVEMBER 24, 1926655Belgian Catholic Missionaries vs. Magallanes Pressments, and the herein defendant-appellant Jose Ma, Memije acquired said mortgage credit and increased it by P5,895.59, of which increase P2,000 was a previous loan.There is no question but that J. P. Heilbronn & Co., Inc., at the time of the transfer of its mortgage rights to Jose Ma. Memije, had a preferential right over that of the Belgian Catholic Missionaries Co., Inc., for the remainder of the amount of the mortgage credit, that is, P8,280.90. The plaintiff company had a preferential right to the rest of the value of the mortgaged property after deducting the remaining mortgage credit of J. P. Heilbronn & Co., Inc.The increase of P5,895.59 made by the defendant Jose Ma. Memije in favor of the Magallanes Press Co., Inc., and the extension of the mortgage thereto, are not only subordinate to the mortgage credit of the plaintiff company, being subsequent in time and in registration, but said increase in the security is also void. The increase of the mortgage security becomes a new mortgage in itself, inasmuch as the, original mortgage did not contain any stipulation in regard to the increase of the mortgage credit, and even if it did, said increase would take effect only from the date of the increase. A mortgage that contains a stipulation in regard to future advances in the credit will take effect only from the date the same are made and not from the date of the mortgage (11 C. J., 448; 5 R. C. L., 420-421). In accordance with the provisions of section 5 of Act No. 1508, known as the Chattle Mortgage Law, the parties to the original deed swore that the same was mortgaged "to secure the obligations specified therein and for no other purpose." Neither the increase in question, nor the extension of the mortgage to secure the payment of the same, is specified in the deed, consequently said extension is void. "Where the statute provides that the parties to a chattel mortgage must make oath that the debt is a just debt, honestly due and -owing from the mortgagor to the656

656PHILIPPINE REPORTS ANNOTATEDBelgian Catholic Missionaries vs. Magallanes Pressmortgagee, it is obvious that a valid mortgage cannot be made to secure a debt to be thereafter contracted." (11 C. J., 448.)Briefly, therefore, we have the following:(a) That Jose Ma. Memije has a preferential right to the value of the chattels mortgaged and the amount of the insurance policies up to the sum of P8,280.90;(b) That the plaintiff corporation, the Belgian Catholic Missionaries Co., Inc., has a right to the remainder of the value of said chattels and the insurance policies up to the amount of P30,500, after deducting the preferential credit of Jose Ma. Memije;(c) That as to the increase of P5,895.59, the right of the defendant Jose Ma. Memije is that of an ordinary creditor.In regard to the damages claimed by the defendant in his counterclaim and which is the subject-matter of his remaining assignments of error, said defendant has a right to interest at 12 per cent on the P8,280.90, the amount of the mortgage credit acquired by him from J. P. Heilbronn & Co., Inc., from February 26, 1923, the date of the acquisition until fully paid.For the foregoing reasons, the judgment appealed from is revoked and it is ordered that another be entered declaring all the mortgages overdue, and the mortgage credit of Jose Ma. Memije preferential over that of the Belgian Catholic Missionaries Co., Inc., up to the amount of P8,280.90, with interest at the rate of 12 per cent per annum from February 26, 1923, until fully paid; the mortgage credit of the Belgian Catholic Missionaries Co., Inc., for the sum of P30,500 with interest at the rate of 12 per cent per annum, from June 19, 1922, until fully paid, plus the sum of P3,000 for attorney's fees, over the additional credit of Jose Ma. Memije for P5,895.59; and ordering the foreclosure of the said mortgages by selling the mortgaged property at public auction, to the proceeds of which shall be added the amount of the insurance657

VOL. 49, DECEMBER 3, 1926657O'Brien vs. Del Rosario and Bank of the Philippine Islandspolicies and the above-mentioned credits in the order of preference above established, without special pronouncement as to costs. So ordered.Avancea, C. J., Johnson, Street, Ostrand, and Johns, JJ., concur.Judgment reversed. [Belgian Catholic Missionaries vs. Magallanes Press, 49 Phil. 647(1926)]

[No. 29295. October 22, 1928]J. M. PO PAUCO, plaintiff, vs. DOLORES SIGENZA ET AL., defendants. WISE & Co., intervenor and appellant.

1."SHERIFF;" RECEIVER.A sheriff, in a sense, is a judicial officer of a general character, who is not appointed in any particular judicial case; the sheriff is an officer who exercises or may exercise his functions within the limits of his jurisdiction. A receiver, on the other hand, is a special officer appointed in connection with and in a particular case or action, and whose duties are limited to his sphere, of action and do not extend further than the case in which he is appointed.2.ID. ; ID.While the funds in the hands of a sheriff may be within the reach of processes coming from other judicial proceedings, such is not the case with respect to those under the custody of a receiver. Those who have any claim to property or sums in the possession of a receiver, must appear in the same proceeding in which said receiver discharges his duties, and there, by motion or petition, allege and prove their claims.APPEAL from an order of the Court of First Instance of Iloilo. Salas, J.The facts are stated in the opinion of the court.Block, Johnston ,& Greenbaum for the intervenor.Roman J. Lacson for receiver-appellee National Bank.242

242PHILIPPINE REPORTS ANNOTATEDPo Pauco vs. SigenzaROMUALDEZ, J.:

In this case, J. M. Po Pauco obtained final judgment in his favor against Dolores Sigenza and Mariano Aguilar for the sum of P72,278.01, both parties agreeing to deduct therefrom the sum of P13,007.46 which is the net value of the sugar cane belonging to said def endants and attached by the plaintiff and manufactured by the Philippine National Bank, the receiver of the said product. By virtue of said judgment and agreement the court issued a writ of execution for the remaining sum of P59,270.55 on November 19, 1926.In another civil case before the same court, No. 6416, Wise & Co., Ltd., had on October 18, 1926 obtained judgment against the herein plaintiff J. M. Po Pauco ic or the sum of P10,572.80 with legal interest thereon, execution of said judgment having been ordered in those proceedings, which has not yet, even partially, been paid.On October 23, 1927, Wise & Co., Ltd., intervened in this case praying that the Philippine National Bank, the receiver of the said sum of P13,007.46, be ordered to satisfy the judgment in favor of the said petitioner Wise & Co., Ltd., against J. M. Po Pauco, out of the sum deposited with it, Po Pauco's right and interest in the judgment of this case now before us having been preliminarily attached in civil case No. 6416, on August 6, 1926.Opposition was filed to said petition by the Philippine National Bank alleging that said bank has a preferential right over the surplus of the sale of the sugar delivered to it as receiver, and also that the Hibila Trading Corpo-ration obtained judgment against the said J. M. Po Pauco, in civil case No. 3197 of the Court of First Instance of Occidental Negros, holding that the rights of the Hibila Trading Corporation over the sugar harvest of 1923-1924 and 1924-1925 of the spouses Dolores Sigenza and Mariano Aguilar in the San Agustin Estate, are preferential over those of J. M. Po Pauco and, therefore, the latter is not243

VOL. 52, OCTOBER 22, 1928243Po Pauco vs. Sigenzaat all entitled to any of the surplus remaining from the sale of said sugar; and that said Hibila Trading Corporation is an interested party which must be summoned before the motion of Wise & Co., Ltd., can be heard, which corporation must institute an ordinary action to establish whatever right it may have to the surplus of the sugar in question.The Court of First Instance of Iloilo denied the motion of Wise & Co., Ltd., granting it permission to institute an action against the Philippine National Bank and the Hibila Trading Corporation in order to determine which has the better right to the net proceeds of the sale of said sugar.Wise & Co., Ltd., appeals from said ruling making several assignments of error.It should not be forgotten that the sum mentioned is in the custody of a receiver and not of a sheriff. The sheriff is a court officer of a general character who is not appointed for a certain judicial case; the sheriff is an officer who exercises or can exercise his ic unctions within the limits of his jurisdiction. A receiver, on the other hand, is a special officer, appointed in relation to and within a certain case or action, and whose duties are limited to his sphere of action, and do not extend further than the case in which he was appointed.For this reason, while the funds in the custody of a sheriff may be within the reach of processes coming from other judicial proceedings, such is not the case with respect to those under the custody of a depositary. From which it follows that those who, as in the present case, have any claim to property or sums in the possession of a receiver, must appear in the same proceeding in which said receiver discharges his duties, and there, by motion or petition,. allege and prove their claims.The order appealed from is reversed and it is ordered that this proceeding be remanded to the court of origin in order that, without the necessity of commencing a new ac-244

244PHILIPPINE REPORTS ANNOTATEDZamboanga Transportation Co. vs. Bachrach Motor Co.tion, the interested parties be given an opportunity to set forth and prove their alleged preferential rights over the sum in controversy.Without any special pronouncement as to costs. So ordered.Johnson, Street, Malcolm, Ostrand, and Villa-Real, JJ., concur.Order reversed, case remanded for further proceedings.__________ [Po Pauco vs. Sigenza, 52 Phil. 241(1928)]

[No. L-2987. February 20, 1951]ERNEST BERG, plaintiff and appellant, vs. VALENTIN TEUS, defendant and appellee.

1.MORATORIUM; APPOINTMENT OF RECEIVER DOES NOT FALL UNDER THE MORATORIUM LAW.Where the complaint for the foreclosure of real and chattel mortgages also prays for the appointment of a receiver, a motion to dismiss on the ground of the Moratorium Law should not be sustained. The alleged violations of the conditions of the mortgage contract, if true, make it necessary, if not imperative, for the protection of the interest of the plaintiff, that the mortgaged properties be placed in the custody of the court. The fact that the appointment of a receiver, as the defendant emphasizes, is an ancillary remedy is precisely one powerful reason why the case should not be dismissed; dismissal of the main action would eliminate the only basis for the appointment of a receiver and thus completely bar the door to any relief from mischiefs.APPEAL from an order of the Court of First Instance of Ilocos Sur. Ortega, J.The facts are stated in the opinion of the Court.Alva J. Hill for appellant.J. Prez Cardenas for appellee.TUASON, J.:

This appeal is from an order of the Court of First Instance of Ilocos Sur dismissing the above-entitled action by reason of Executive Order No. 25, as amended by Executive Order No. 32, on moratorium.Ernest Berg brought the action against Valentin Teus to foreclose a real estate and chattel mortgage executed in November, 1944, to secure six promissory notes of the aggregate value of P80,000 and payable on demand two years after declaration of armistice between the United States and Japan. An amended or supplementary complaint was later admitted against the defendant's objection. The complaints recited that by stipulations of the parties, the mortgagor had undertaken, among other things, to insure and pay the taxes on the mortgaged properties;174

174PHILIPPINE REPORTS ANNOTATEDBerg vs. Teusnot to alienate, sell, lease, encumber or in any manner dispose thereof; and to keep and maintain the said properties in good order and repair; but that, it was alleged, he (defendant) had failed lo keep taxes fully paid; had made material alterations on the premises, and had sold and conveyed them to Central Azucarera del Norte. It was further alleged that the mortgagor had agreed that should he fail to perform any of his obligations as stipulated, "the mortgage shall be deemed to be automatically foreclosed and the mortgagee may forthwith proceed to foreclose this mortgage either extrajudicially, even after the death of the mortgagor, in pursuance of the provisions of Act No. 3135, as amended;" and on the basis of this agreement it was prayed that the mortgage be declared automatically foreclosed and the plaintiff entitled to immediate possession of the properties in question. In a separate motion Berg's attorney also asked for the appointment of a receiver.Counsel for the defendant having moved for the dismissal of the complaint on the grounds that plaintiff's cause of action had not accrued by reason of the executive orders hereinbefore cited, and having opposed the motion for receivership, Judge Zoilo Hilario entered an order holding that as to the collection of the six notes the suit had been prematurely brought, but setting the cause for trial on the merits because, according to His Honor, the reasons alleged in the motion to dismiss were not "indubitable" with reference to the appointment of a receiver sought by the plaintiff. As we understand this order, its result was that the moratorium ought not to interfere with the plaintiff's motion for appointment of receiver.However that may be, the plaintiff subsequently filed a "complete complaint" in which the original complaint and the amended or supplementary complaint were consolidated. This "complete complaint", which was admitted without objection, apparently was supposed to have restored the case to its original status. Consequently the attorney for175

VOL. 88, FEBRUARY 20, 1961175Berg vs. Teusthe defendant filed a new motion to dismiss; and Judge Luis Ortega, who had replaced Judge Hilario, ignoring the latter's order entered the order now on appeal by which the entire action was quashed on the theory advanced in the motion to dismiss. The new order was silent on both the application for receivership and the prayer that the plaintiff be adjudged authorized by the terms of the mortgage to foreclose it extrajudicially and seize the properties.Judge Ortega opined that Executive Orders Nos. 25 and 32 were still in force unaffected by Republic Act No. 342 as to debts contracted during the Japanese occupation. Plaintiff contended that those executive orders had passed out of existence by the disappearance of the emergency contemplated thereby, and the contention is reiterated in this instance. But from the view we take of the case, decision on this question can be deferred. For the purpose of the present decision, we will assume that Executive Orders Nos. 25 and 32 are still in full force and effect. This we do to pave the way for and hasten action on the petition to put the premises and chattels involved in the hands of a receiver, petition which appears of urgent character. The constitutionality of Executive Orders Nos. 25 and 32 and Republic Act No. 342 and allied issues can wait. These issues are delicate and would require prolonged study and deliberation. Besides, there is a pending bill in Congress repealing those executive orders and law.In Medina vs. Santos (78 Phil., 464; 44 Off. Gaz., [No. 10] 3811), it was held that an action for the recovery of a truck with prayer for payment of its value in case the truck was not returned, could proceed notwithstanding the moratorium law. The court observed that the indemnity sought was a subsidiary liability and would not come into being unless and until decision was rendered against the defendant for such payment.In Moya vs. Barton (79 Phil., 14; 45 Off. Gaz., [No. 1] 237), the court said that when the cause of action was in176

176PHILIPPINE REPORTS ANNOTATEDBerg vs. Teuspart covered by the moratorium and in part not, it was not unjust to render judgment for the payment of the entire obligation with the understanding that execution with respect to the amounts that had fallen due before March 10, 1945, would be stayed.In the case of Alejo vs. Gomez (83 Phil., 969), the court ruled that suit for unlawful detainer and rents in arrears was not affected by the moratorium, the recovery of the unpaid rentals, it was said, being accessory to the main action.And, lastly, in Realty Investments, Inc. et al. vs. Villanueva et al., (84 Phil., 842; 47 Off. Gaz., 1844), the court, citing the above-mentioned cases decided that the court should go ahead with the trial of the action on the merits without prejudice to the right of

the defendant to arrest the execution should one for payment of money be issued. In that case the plaintiff, which had sold to the defendant a piece of land on installment basis, was demanding payment of the installments still unpaid, (installments which the defendant claimed to have fully settled with the Japanese alien property custodian) or, in default, restoration of the ownership and possession of the property. In revoking the lower court's order of dismissal, we pointed out that the De Venecia vs. General, (78 Phil., 780; 44 Off. Gaz., 4912), and Ma-ao Sugar Central Co., Inc. vs. Barrios, (79 Phil., 666; 45 Off. Gaz., 2444), were distinguishable from Moya vs. Barton, Medina vs. Santos, and Alejo vs. Gomez, in that the suits in the first two named cases had for their sole object the enforcement of a monetary obligation.The case at bar falls within the relaxed rule of this court's later decisions. The alleged violations of the conditions of the mortgage contract, if true, make it necessary if not imperative, for the protection of the interest of the plaintiff, that the mortgaged properties be placed in the custody of the court. The fact that the appointment of a177

VOL. 88, FEBRUARY 20, 1951177Berg vs. Teusreceiver, as the defendant emphasizes, is an ancillary remedy is precisely one powerful reason why the case should not be dismissed. Because receivership is an auxiliary remedy dismissal of the main action would eliminate the only basis for the appointment of receiver and thus completely bar the door to any relief from mischiefs.Under the circumstances of the case, the least that should have been done, if that were feasible as a matter of procedure, was to adopt the steps which Judge Hilario had proposed to do. Judge Hilario evidently saw the grave injustice to the plaintiff and the irreparable injury to which his rights would be exposed if an indefinite suspension of the entire proceeding were decreed.In suspending the right of creditor to enforce his right the President and Congress had no idea of depriving him of all means of preventing the destruction or alienation of the security for the debt, destruction which would virtually write off, in some cases, the whole credit. If that were the intention, it is doubtful if the orders and the law invoked could stand the test of constitutionality.The order appealed from will therefore be reversed and the case remanded to the court below f or f urther proceeding according to the tenor of this decision. We leave the way open to the defendant to ask for the arrest or stay of execution in the event of an adverse monetary judgment, and for the plaintiff to impugn anew, if necessary, the constitutionality of Executive Orders Nos. 25 and 32 and Republic Act No. 342 and/or their being still in force. Costs of this appeal will be charged against the appellee.Moran, C. J., Pars, Feria, Pablo, Bengzon, Padilla, Montemayor, Reyes, Jugo and Bautista Angelo, JJ., concur.Order reversed, and case remanded for further proceedings. [Berg vs. Teus, 88 Phil. 173(1951)]

G.R. No. 155408. February 13, 2008.*JULIO A. VIVARES and MILA G. IGNALING, petitioners, vs. ENGR. JOSE J. REYES, respondent.

Remedial Law; Civil Law; Receivership; He who alleges fraud has the burden to prove it.Petitioners miserably failed to adduce clear, convincing, and hard evidence to show the alleged fraud in the transfers and the antedating of said transfers. The fact that the transfers were dated prior to the demise of Torcuato on May 12, 1992 does not necessarily mean the transfers were attended by fraud. He who alleges fraud has the burden to prove it.Same; Same; Same; Receivership is a harsh remedy to be granted only in extreme situations.Receivership is a harsh remedy to be granted only in extreme situations. As early as 1914, the Court already enunciated the doctrinal pronouncement in Velasco & Co. v. Gochuico & Co., 28 Phil. 39 (1914), that courts must use utmost circumspection in allowing receivership, thus: The power to appoint a receiver is a delicate one and should be exercised with extreme caution and only under circumstances requiring summary relief or where the court is satisfied that there is imminent danger of loss, lest the injury thereby caused be far greater than the injury sought to be averted. The court should consider the consequences to all of the parties and the power should not be exercised when it is likely to produce irreparable injustice or injury to private rights or the facts demonstrate that the appointment will injure the interests of others whose rights are entitled to as much consideration from the court as those of the complainant.PETITION for review on certiorari of a decision of the Court of Appeals.The facts are stated in the opinion of the Court. Mutia, Trinidad & Romero Law Offices for petitioners. The Law Firm of Hermosisima & Inso for respondent._______________

* SECOND DIVISION.81

VOL. 545, FEBRUARY 13, 200881Vivares vs. ReyesVELASCO, JR., J.:

The CaseThe kernel dispute in this petition under Rule 45 is the legality of the May 22, 2001 Resolution1 of the Camiguin Regional Trial Court (RTC), Branch 28 in Civil Case No. 517, which placed the estate of Severino Reyes under receivership. The Court of Appeals (CA) saw it differently in CA-G.R. SP No. 67492its June 18, 2002 Decision2 recalled the RTC directive on the appointment of the receiver, prompting Julio Vivares and Mila Ignaling to file the petition at bar to convince the Court to reinstate the receivership.The FactsSeverino Reyes was the father of respondent Jose Reyes and Torcuato Reyes. Upon the death of Severino, respondent and Torcuato came upon their inheritance consisting of several properties. They had an oral partition of the properties and separately appropriated to themselves said properties.On May 12, 1992, Torcuato died with a last will and testament executed on January 3, 1992. In Reyes v. Court of Appeals,3 we affirmed the November 29, 1995 CA Decision, admitting the will for probate.Petitioner Vivares was the designated executor of Torcuatos last will and testament, while petitioner Ignaling was declared a lawful heir of Torcuato.Believing that Torcuato did not receive his full share in the estate of Severino, petitioners instituted an action for Partition and Recovery of Real Estate before the Camiguin RTC, Branch 28 entitled Julio A. Vivares, as executor of the estate of_______________

1 Rollo, pp. 94-95. Penned by Presiding Judge Noli T. Catli.2 Id., at pp. 19-29. Penned by Associate Justice Wenceslao I. Agniri, Jr. and concurred in by Associate Justices B.A. Adefuin-De la Cruz (Chairperson) and Regalado E. Maambong.3 G.R. No. 124099, October 30, 1997, 281 SCRA 277.82

82SUPREME COURT REPORTS ANNOTATEDVivares vs. ReyesTorcuato J. Reyes and Mila R. Ignaling, as heir v. Engr. Jose J. Reyes and docketed as Civil Case No. 517. With the approval of the trial court, the parties agreed that properties from the estate of Severino, which were already transferred in the names of respondent and Torcuato prior to the latters death on May 12, 1992, shall be excluded from litigation. In short, what was being contested were the properties that were still in the name of Severino.On November 24, 1997, for the purpose of collating the common properties that were disputed, the trial court directed the formation of a three-man commission with due representation from both parties, and the third member, appointed by the trial court, shall act as chairperson. The disputed properties were then annotated with notices of lis pendens upon the instance of petitioners.On March 15, 2000, petitioners filed a Motion to Place Properties in Litigation under Receivership4 before the trial court alleging that to their prejudice respondent had, without prior court approval and without petitioners knowledge, sold to third parties and transferred in his own name several common properties. Petitioners also averred that respondent fraudulently antedated, prior to May 12, 1992, some conveyances and transfers to make it appear that these were no longer part of the estate of Severino under litigation. They further claimed that respondent was and is in possession of the common properties in the estate of Severino, and exclusively enjoying the fruits and income of said properties and without rendering an accounting on them and turning over the share pertaining to Torcuato. Thus, petitioners prayed to place the entire disputed estate of Severino under receivership. They nominated a certain Lope Salantin to be appointed as receiver._______________

4 Rollo, pp. 32-39.83

VOL. 545, FEBRUARY 13, 200883

Vivares vs. ReyesOn March 23, 2000, respondent filed his Opposition to Place the Estate of Severino Reyes under Receivership,5 denying that he had fraudulently transferred any property of the estate of Severino and asserting that any transfer in his name of said properties was a result of the oral partition between him and Torcuato that enabled the latter as well to transfer several common properties in his own name.On May 24, 2000, petitioners filed their Offer of Exhibits in support of their motion for receivership. On the same date, the trial court issued an Order6 granting petitioners motion and appointed Salantin as receiver conditioned on the filing of a PhP 50,000 bond. Respondent filed a motion for reconsideration, contending that the appointment of a receiver was unduly precipitate considering that he was not represented by counsel and thus was deprived of due process.On August 4, 2000, the trial court allowed respondent to present his evidence to contest petitioners grounds for the appointment of a receiver, and the trial court set the reception of respondents evidence for September 4, 2000. However, on August 24, 2000, respondent filed a motion for postponement of the September 4, 2000 scheduled hearing on the ground that he was in the United States as early as July 23, 2000 for medical examination. On September 5, 2000, the trial court denied respondents motion for postponement and reinstated its May 24, 2000 Order.On September 19, 2000, respondent filed a Manifestation with Motion to Discharge Receiver, reiterating the circumstances which prevented him from attending the September 4, 2000 hearing and praying for the discharge of the receiver upon the filing of a counterbond in an amount to be fixed by the court in accordance with Section 3, Rule 59 of the 1997 Revised Rules on Civil Procedure. On October 10, 2000, peti-_______________

5 Id., at pp. 40-41.6 Id., at pp. 67-68. Penned by Judge-Designate Antonio A. Orcullo.84

84SUPREME COURT REPORTS ANNOTATEDVivares vs. Reyestioners filed their undated Opposition to Motion to Discharge Receiver.Subsequently, respondent filed a Motion to Cancel Notice of Lis Pendens which was annotated on Tax Declaration (TD) No. 112 covering Lot No. 33 allegedly belonging exclusively to him. Respondent asserted in the motion that an adjacent property to Lot No. 33, particularly a portion of Lot No. 35, which is owned by a certain Elena Unchuan, was erroneously included in Lot No. 33 and, consequently, was subjected to the notice of lis pendens. Petitioners filed their Opposition to the Motion to Cancel Lis Pendens.Consequently, on May 22, 2001, the trial court issued a Resolution, denying respondents motions to discharge receiver and cancel the notice of lis pendens in TD No. 112. Respondent seasonably filed a partial motion for reconsideration of the May 22, 2001 Resolution, attaching copies of deeds of sale executed by Torcuato covering several common properties of the estate of Severino to prove that he and Torcuato had indeed made an oral partition of the estate of their father, Severino, and thus allowing him and Torcuato to convey their respective shares in the estate of Severino to third persons.On October 19, 2001, the trial court heard respondents motion for partial reconsideration, and on the same date issued an Order denying the motion for partial reconsideration on the ground that respondent failed to raise new matters in the motion but merely reiterated the arguments raised in previous pleadings.Aggrieved, respondent filed a Petition for Certiorari before the CA, assailing the May 22, 2001 Resolution and October 19, 2001 Order of the RTC.The Ruling of the Court of AppealsOn June 18, 2002, the CA rendered the assailed Decision, sustaining respondents position and granted relief, thus:85

VOL. 545, FEBRUARY 13, 200885Vivares vs. ReyesWHEREFORE, premises considered, the Petition is hereby GRANTED. The Resolution dated 22 May 2001 of the Regional Trial Court of Camiguin, Branch 28 in Civil Case No. 517 is hereby reversed and set aside. The court-appointed receiver, Lope Salantin, is discharged upon the posting by petitioner of a counterbond in the amount of P100,000.00. The notice of lis pendens in Tax Declaration 112, in so far as it covers the property of Elena Unchuan, is cancelled. Let this case be remanded to the court a quo for further proceedings.7In reversing the trial court, the CA reasoned that the court a quo failed to observe the well-settled rule that allows the grant of the harsh judicial remedy of receivership only in extreme cases when there is an imperative necessity for it. The CA thus held that it is proper that the appointed receiver be discharged on the filing of a counterbond pursuant to Sec. 3, Rule 59 of the 1997 Revised Rules on Civil Procedure.Moreover, the CA ratiocinated that respondent has adequately demonstrated that the appointment of the receiver has no sufficient basis, and further held that the rights of petitioners over the properties in litigation are doubly protected through the notices of lis pendens annotated on the titles of the subject properties. In fine, the appellate court pointed out that the appointment of a receiver is a delicate one, requiring the exercise of discretion, and not an absolute right of a party but subject to the attendant facts of each case. The CA found that the trial court abused its discretion in appointing the receiver and in denying the cancellation of the notice of lis pendens on TD No. 112, insofar as it pertains to the portion owned by Unchuan.Aggrieved, petitioners in turn interposed a Motion for Reconsideration that was denied through the assailed September 24, 2002 CA Resolution.Thus, this petition for review on certiorari is before us, presenting the following issues for consideration:_______________

7 Supra note 2, at p. 28.86

86SUPREME COURT REPORTS ANNOTATEDVivares vs. ReyesI

WHETHER OR NOT THE ANNOTATION OF A NOTICE OF LIS PENDENS PRECLUDES THE APPOINTMENT OF A RECEIVER WHEN THERE IS A NEED TO SAFEGUARD THE PROPERTIES IN LITIGATION.II

WHETHER OR NOT A DULY APPOINTED RECEIVER OF PROPERTIES IN LITIGATION SHOULD BE DISCHARGED SIMPLY BECAUSE THE ADVERSE PARTY OFFERS TO POST A COUNTERBOND.III

WHETHER OR NOT THE CANCELLATION OF A NOTICE OF LIS PENDENS ANNOTATED ON TAX DECLARATION NO. 112 IS CONTRARY TO LAW.8The Courts RulingThe petition must be denied. Being closely related, we discuss the first and second issues together.Receivership not justifiedWe sustain the CA ruling that the trial court acted arbitrarily in granting the petition for appointment of a receiver as there was no sufficient cause or reason to justify placing the disputed properties under receivership.First, petitioners asseverate that respondent alienated several common properties of Severino without court approval and without their knowledge and consent. The fraudulent transfers, they claim, were antedated prior to May 12, 1992, the date of Torcuatos death, to make it appear that these properties no longer form part of the assets of the estate under litigation in Civil Case No. 517.Petitioners position is bereft of any factual mooring._______________

8 Rollo, pp. 212-213.87

VOL. 545, FEBRUARY 13, 200887Vivares vs. ReyesPetitioners miserably failed to adduce clear, convincing, and hard evidence to show the alleged fraud in the transfers and the antedating of said transfers. The fact that the transfers were dated prior to the demise of Torcuato on May 12, 1992 does not necessarily mean the transfers were attended by fraud. He who alleges fraud has the burden to prove it.Moreover, respondent has adduced documentary proof that Torcuato himself similarly conveyed several lots in the estate of Severino based on the oral partition between the siblings. To lend credence to the transfers executed by Torcuato but distrust to those made by respondent would be highly inequitable as correctly opined by the court a quo.Indeed, receivership is a harsh remedy to be granted only in extreme situations. As early as 1914, the Court already enunciated the doctrinal pronouncement in Velasco & Co. v. Gochuico & Co. that courts must use utmost circumspection in allowing receivership, thus:The power to appoint a receiver is a delicate one and should be exercised with extreme caution and only under circumstances requiring summary relief or where the court is satisfied that there is imminent danger of loss, lest the injury thereby caused be far greater than the injury sought to be averted. The court should consider the consequences to all of the parties and the power should not be exercised when it is likely to produce irreparable injustice or injury to private rights or the facts demonstrate that the appointment will injure the interests of others whose rights are entitled to as much consideration from the court as those of the complainant.9Petitioners cannot now impugn the oral partition entered into by Torcuato and respondent and hence cannot also assail the transfers made by respondent of the lots which were subject of said agreement, considering that Torcuato also sold properties based on said verbal arrangement. Indeed, the parties agreed that the civil action does not encompass the properties covered by the oral partition. In this factual set-_______________

9 28 Phil. 39, 41 (1914).88

88SUPREME COURT REPORTS ANNOTATEDVivares vs. Reyesting, petitioners cannot convince the Court that the alleged fraudulent transfers of the lots made by respondent, which purportedly form part of his share in Severinos estate based on the partition, can provide a strong basis to grant the receivership.Second, petitioner is willing to post a counterbond in the amount to be fixed by the court based on Sec. 3, Rule 59 of the 1997 Rules of Civil Procedure, which reads:Sec. 3. Denial of application or discharge of receiver.The application may be denied, or the receiver discharged, when the adverse party files a bond executed to the applicant, in an amount to be fixed by the court, to the effect that such party will pay the applicant all damages he may suffer by reason of the acts, omissions, or other matter specified in the application as ground for such appointment. The receiver may also be discharged if it is shown that his appointment was obtained without sufficient cause.Anchored on this rule, the trial court should have dispensed with the services of the receiver, more so considering that the alleged fraud put forward to justify the receivership was not at all established.Petitioners advance the issue that the receivership should not be recalled simply because the adverse party offers to post a counterbond. At the outset, we find that this issue was not raised before the CA and therefore proscribed by the doctrine that an issue raised for the first time on appeal and not timely raised in the proceedings in the lower court is barred by estoppel.10 Even if we entertain the issue, the contention is nevertheless devoid of merit. The assailed CA decision supported the discharge of the receiver with several reasons including the posting of the counterbond. While the CA made a statement that the trial court should have discharged the appointed receiver on the basis of the proposed counterbond, such opinion does not jibe with the import of Sec. 3, Rule 59._______________

10 Philippine Banking Corporation v. Court of Appeals, G.R. No. 127469, January 15, 2004, 419 SCRA 487, 503-504.89

VOL. 545, FEBRUARY 13, 2008

89Vivares vs. ReyesThe rule states that the application may be denied or the receiver discharged. In statutory construction, the word may has always been construed as permissive. If the intent is to make it mandatory or ministerial for the trial court to order the recall of the receiver upon the offer to post a counterbond, then the court should have used the word shall. Thus, the trial court has to consider the posting of the counterbond in addition to other reasons presented by the offeror why the receivership has to be set aside.Third, since a notice of lis pendens has been annotated on the titles of the disputed properties, the rights of petitioners are amply safeguarded and preserved since there can be no risk of losing the property or any part of it as a result of any conveyance of the land or any encumbrance that may be made thereon posterior to the filing of the notice of lis pendens.11 Once the annotation is made, any subsequent conveyance of the lot by the respondent would be subject to the outcome of the litigation since the fact that the properties are under custodia legis is made known to all and sundry by operation of law. Hence, there is no need for a receiver to look after the disputed properties.On the issue of lis pendens, petitioners argue that the mere fact that a notice of lis pendens was annotated on the titles of the disputed properties does not preclude the appointment of a receiver. It is true that the notice alone will not preclude the transfer of the property pendente lite, for the title to be issued to the transferee will merely carry the annotation that the lot is under litigation. Hence, the notice of lis pendens, by itself, may not be the most convenient and feasible means of preserving or administering the property in litigation. However, the situation is different in the case at bar. A counterbond will also be posted by the respondent to answer for all damages petitioners may suffer by reason of any transfer of the_______________

11 Medelo v. Gorospe, No. L-41970, March 25, 1988, 159 SCRA 248, 254.90

90SUPREME COURT REPORTS ANNOTATEDVivares vs. Reyesdisputed properties in the future. As a matter of fact, petitioners can also ask for the issuance of an injunctive writ to foreclose any transfer, mortgage, or encumbrance on the disputed properties. These considerations, plus the finding that the appointment of the receiver was without sufficient cause, have demonstrated the vulnerability of petitioners postulation.Fourth, it is undisputed that respondent has actual possession over some of the disputed properties which are entitled to protection. Between the possessor of a subject property and the party asserting contrary rights to the properties, the for-mer is accorded better rights. In litigation, except for exceptional and extreme cases, the possessor ought not to be deprived of possession over subject property. Article 539 of the New Civil Code provides that every possessor has a right to be respected in his possession; and should he be disturbed therein he shall be protected in or restored to said possession by the means established by the laws and the Rules of Court. In Descallar v. Court of Appeals, we ruled that the appointment of a receiver is not proper where the rights of the parties, one of whom is in possession of the property, are still to be determined by the trial court.12In view of the foregoing reasons, we uphold the CA ruling that the grant of the receivership was without sufficient justification nor strong basis.Anent the third issue that the cancellation of the notice of lis pendens on TD No. 112 is irregular as Lot No. 33 is one of the disputed properties in the partition case, petitioners position is correct.The CA made a factual finding that the property of Unchuan was erroneously included in Lot No. 33, one of the disputed properties in Civil Case No. 517. It then ruled that the annotation of lis pendens should be lifted.This ruling is bereft of factual basis._______________

12 G.R. No. 106473, July 12, 1993, 224 SCRA 566, 569.91

VOL. 545, FEBRUARY 13, 200891Vivares vs. ReyesThe determination whether the property of Unchuan is a part of Lot No. 33 and whether that portion really belongs to Unchuan are matters to be determined by the trial court. Consequently, the notice of lis pendens on TD No. 112 stays until the final ruling on said issues is made.WHEREFORE, the petition is PARTLY GRANTED. The June 18, 2002 CA Decision in CA-G.R. SP No. 67492 is AFFIRMED with MODIFICATION insofar as it ordered the cancellation of the notice of lis pendens in TD No. 112. As thus modified, the appealed CA Decision should read as follows:WHEREFORE, premises considered, the Petition is hereby PARTLY GRANTED. The Resolution dated 22 May 2001 of the Regional Trial Court of Camiguin, Branch 28 in Civil Case No. 517 is hereby reversed and set aside. The court-appointed receiver, Lope Salantin, is discharged upon the posting by petitioner of a counter-bond in the amount of PhP 100,000. The notice of lis pendens in TD No. 112, including the portion allegedly belonging to Elena Unchuan, remains valid and effective. Let this case be remanded to the court a quo for further proceedings in Civil Case No. 517.No costs.SO ORDERED. Quisumbing (Chairperson), Carpio, Carpio-Morales and Tinga, JJ., concur.Petition partly granted, judgment affirmed with modification.Note.Before appointment of receiver is granted, consequences thereof should be considered to avoid causing irreparable injustice to others. (Talag vs. Court of Appeals, 189 SCRA 802 [1990]) [Vivares vs. Reyes, 545 SCRA 80(2008)]

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_______________

* SECOND DIVISION.400

400SUPREME COURT REPORTS ANNOTATEDChavez vs. Court of Appealscases.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.401

VOL. 610, JANUARY 20, 2010401Chavez vs. Court of Appeals The Facts and the CaseRespondent Fidela Y. Vargas owned a five-hectare mixed coconut land and rice fields in Sorsogon. Petitioner Evelina G. Chavez had been staying in a remote portion of the land with her family, planting coconut seedlings on the land and supervising the harvest of coconut and palay. Fidela and Evelina agreed to divide the gross sales of all products from the land between themselves. Since Fidela was busy with her law practice, Evelina undertook to hold in trust for Fidela her half of the profits.But Fidela claimed that Evelina had failed to remit her share of the profits and, despite demand to turn over the administration of the property to Fidela, had refused to do so. Consequently, Fidela filed a complaint against Evelina and her daughter, Aida C. Deles, who was assisting her mother, for recovery of possession, rent, and damages with prayer for the immediate appointment of a receiver before the Regional Trial Court (RTC) of Bulan, Sorsogon.1 In their answer, Evelina and Aida claimed that the RTC did not have jurisdiction over the subject matter of the case since it actually involved an agrarian dispute.After hearing, the RTC dismissed the complaint for lack of jurisdiction based on Fidelas admission that Evelina and Aida were tenants who helped plant coconut seedlings on the land and supervised the harvest of coconut and palay. As tenants, the defendants also shared in the gross sales of the harvest. The court threw out Fidelas claim that, since Evelina and her family received the land already planted with fruit-bearing trees, they could not be regarded as tenants. Cultivation, said the court, included the tending and caring of the trees. The court also regarded as relevant Fidelas pending application for a five-hectare retention and Evelinas_______________

1 Branch 65.402

402SUPREME COURT REPORTS ANNOTATEDChavez vs. Court of Appealspending protest relative to her three-hectare beneficiary share.2Dissatisfied, Fidela appealed to the CA. She also filed with that court a motion for the appointment of a receiver. On April 12, 2006 the CA granted the motion and ordained receivership of the land, noting that there appeared to be a need to preserve the property and its fruits in light of Fidelas allegation that Evelina and Aida failed to account for her share of such fruits.3Parenthetically, 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 PresentedPetitioners 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; and2.Whether or not the CA erred in granting respondent Fidelas application for receivership._______________

2 Rollo, pp. 59-64.3 Id., at pp. 13-15. Penned by Associate Justice Hakim S. Abdulwahid, with Associate Justices Remedios A. Salazar-Fernando and Estela M. Perlas-Bernabe concurring.403

VOL. 610, JANUARY 20, 2010403Chavez vs. Court of Appeals The Courts RulingOne.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.5Here, 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 Aidas failure to account for its fruits. The estafa cases she filed with the RTC accused the two of misappropriating and converting her share in the harvests for their own benefit. Her complaint for dispossession under Republic Act 8048 with the DARAB sought to dispossess the two for allegedly cutting coconut trees without the prior authority of Fidela or of the Philippine Coconut Authority.The above cases are similar only in that they involved the same parties and Fidela sought the placing of the properties under receivership in all of them. But receivership is not an action. It is but an auxiliary remedy, a mere incident of the suit to help achieve its purpose. Consequently, it cannot be said that the grant of receivership in one case will amount to_______________

4 Philippine National Construction Corporation v. Dy, G.R. No. 156887, October 3, 2005, 472 SCRA 1, 6.5 Cruz v. Caraos, G.R. No. 138208, April 23, 2007, 521 SCRA 510, 522.404

404SUPREME COURT REPORTS ANNOTATEDChavez vs. Court of Appealsres 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.6Here Fidelas main gripe is that Evelina and Aida deprived her of her share of the lands produce. She does not claim that the land or its productive capacity would disappear or be wasted if not entrusted to a receiver. Nor does Fidela claim that the land has been materially injured, necessitating its protection and preservation. Because receivership is a harsh remedy that can be granted only in extreme situations,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.8Besides, the RTC dismissed Fidelas action for lack of jurisdiction over the case, holding that the issues it raised properly belong to the DARAB. The case before the CA is but an offshoot of that RTC case. Given that the RTC has found that it had no jurisdiction over the case, it would seem more prudent for the CA to first provisionally determine that the RTC had jurisdiction before granting receivership which is but an incident of the main action. [Chavez vs. Court of Appeals, 610 SCRA 399(2010)]

G.R. No. 106473. July 12, 1993.*ANTONIETTA O. DESCALLAR, petitioner, vs. THE HON. COURT OF APPEALS and CAMILO F. BORROMEO, respondents.

Remedial Law; Receivership; The appointment of a receiver is not proper where the rights of the parties are still to be determined by the trial court.In view of the above circumstances, we find the order of receivership tainted with grave abuse of discretion. The appointment of a receiver is not proper where the rights of the parties (one of whom is in possession of the property), are still to be determined by the trial court.Same; Same; Same; Only when the property is in danger of being materially injured or lost may the appointment of a receiver be justified.Only when the property is in danger of being materially injured or lost, as by the prospective foreclosure of a mortgage thereon for non-payment of the mortgage loans despite the considerable income_______________

* FIRST DIVISION.567

VOL. 224, JULY 12, 1993567Descallar vs. Court of Appealsderived from the property, or if portions thereof are being occupied by third persons claiming adverse title thereto, may the appointment of a receiver be justified.Same; Same; Same; The practice of appointing as receiver the clerk of court of the trial judge is frowned upon by the Court.Another flaw in the order of receivership is that the person whom the trial judge appointed as receiver is her own clerk of court. This practice has been frowned upon by this Court.PETITION for review on certiorari