SECOND DIVISION

G.R. No. 135706

It reasoned that:
October 1, 2004

SPS.
CESAR
A.
LARROBIS,
JR.
vs.
PHILIPPINE VETERANS BANK, respondent.

and

VIRGINIA

S.

LARROBIS, petitioners,

".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."

DECISION
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 petitioners motion for reconsideration dated August
25, 1998, raising pure questions of law.2
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
receivership/liquidation by the Central Bank from April 25, 1985 until August 1992. 3

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:

under

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. 5
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 extra-judicial
foreclosure and the subsequent sale thereof to respondent bank null and void. 7
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. 8
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

The defendant banks 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 banks 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 petitioners 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-incharge 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:
I
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 EXTRA-JUDICIAL 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 respondents 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 quos reliance on the case of ProvidentSavings 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 banks receiver or liquidator failed to foreclose petitioners property
and therefore such inaction should bind respondent bank; 15 foreclosure of mortgages is part of the
receivers/liquidators duty of administering the banks 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 Boards 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 duty 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 tenyear 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 attorneys 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 extra-judicial 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 latters total loan obligation with respondent under
the mortgage instrument and therefore constitutes a valid extra-judicial demand made within the
prescriptive period.20
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 1985.21
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 banks representative on
August 23, 1985 is sufficient to interrupt 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
Respondents 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. 23
it should not be considered included, however, in the acts prohibited 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 banks
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. 26
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 banks 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
banks 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. 27
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 newdeposits. 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 quohowever, 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 banks 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 banks 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. 32
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 Providentcase cannot apply in the case at bar.
There is also no truth to respondents 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,35 a labor case which also involved respondent bank,
all the acts of the receiver and liquidator pertain to petitioner, both having assumed
petitioners corporate existence. Petitioner cannot disclaim liability by arguing that the nonpayment of MOLINAs just wages was committed by the liquidators during the liquidation
period.36
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. 37

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 extra-judicial 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
extra-judicial demand by the creditors, and when there is any written acknowledgment of the debt by
the debtor.38
Respondents 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 latters total loan obligation with respondent under the mortgage instrument, and therefore,
constitutes a valid extra-judicial demand which interrupted the running of the prescriptive period, is
not plausible.

basis of the damage and its causal relation to defendants 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 attorneys 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 extra-judicial 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 owners duplicate certificate of title.
Costs against respondent.
SO ORDERED.

The real estate mortgage signed by the petitioners expressly states that:
SECOND DIVISION
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. 40
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. 42
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

G.R. No. 174356 : January 20, 2010

EVELINA G. CHAVEZ and AIDA CHAVEZ-DELES, Petitioners, v. COURT OF APPEALS and ATTY.
FIDELA Y. VARGAS, Respondents.
DECISION
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. 1cralaw 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 pending protest relative to her three-hectare
beneficiary share.2crlwvirtualibrry
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 Fidelas allegation
that Evelina and Aida failed to account for her share of such fruits. 3crlwvirtualibrry
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 Fidelas application for receivership.
The Courts 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. 4cralaw The
elements of forum shopping are the same as inlitis 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. 5crlwvirtualibrry
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 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 resjudicata 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.6crlwvirtualibrry
Here 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,7cralaw 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.8crlwvirtualibrry
Besides, 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.
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.

THIRD DIVISION
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.
x - - - - - - - - - - - - - - - - - - - - - - -x

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.
DECISION
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.

(e) For employing their respective offices and functions as the Banks 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
Banks 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 Banks 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");

G.R. No. 168332

(b) Section 5.2 of R.A. No. 8799;
The first is a Petition for Certiorari under Rule 65 of the Rules of Court, docketed as G.R. No. 168332,
praying for the annulment of the Court of Appeals (CA) Resolution 1 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.2Korugas 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)

(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 courts 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

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

Arcenas, et al. moved for reconsideration 5 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

G.R. No. 169053

On February 9, 2005, the CA issued a 60-day TRO enjoining Judge Marella from conducting further
proceedings in the case.8

In their Petition, Arcenas, et al. asked the Court to set aside the Decision 14 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.

On February 22, 2005, the RTC issued a Notice of Pre-trial 9 setting the case for pre-trial on June 2
and 9, 2005. Arcenas, et al. filed a Manifestation and Motion 10 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.11
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 Korugas 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 CAs 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.

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.

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 Korugas 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, Korugas 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 Compliance 18 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 CAs 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 CAs July 20, 2005 Decision. The
dispositive portion of the Decision reads in part:

Korugas 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 corporations 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 Filipinos 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 Governments 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 BSPs supervisory and regulatory powers include:

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

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;

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.

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

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

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

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?

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;

We hold that it is the BSP that has jurisdiction over the case.
4.5 Inquiring into the solvency and liquidity of the institution (2-D); or
A reexamination of the Complaint is in order.
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 Banks 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 Codes 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 Filipinos 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.

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

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 twothirds (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.

(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

Korugas 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 quasibank 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

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."1avvphi1
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 BSPs power over the allegedly unlawful acts of Banco Filipinos
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 35

SO ORDERED.
ANTONIO
Associate Justice

On the other hand, the BSP, in its Answer before the RTC, said that it had been looking into Banco
Filipinos 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 Korugas complaint. At the time of the filing
of Korugas complaint on August 20, 2003, the period for Banco Filipino to submit its explanation had
not yet expired.38
Thus, the courts 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 Korugas 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 Boards
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.

B.

NACHURA

THIRD DIVISION
G.R. No. 203585

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

EDUARDO

July 29, 2013

MILA
CABOVERDE
TANTANO
and
ROSELLER
CABOVERDE, Petitioners,
vs.
DOMINALDA ESPINA-CABOVERDE, EVE CABOVERDE-YU, FE CABOVERDE-LABRADOR, and
JOSEPHINE E. CABOVERDE, Respondents.
DECISION
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, 20 I 0 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.

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;

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, Dominaldas 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.

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;

The parties submitted the PSA to the court on or about March 10, 2008 for approval. 2

xxxx

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.

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 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

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

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

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. 7

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.

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

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 Dominaldas angst and apprehensions:

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

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;

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
husbands 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 Resolution 11 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:

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.

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 receivers 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

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 manifested
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.

(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 Courts Ruling

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 shes 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.

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:

FOR REASONS STATED, the petition for certiorari is DENIED.

SO ORDERED.13
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
Dominaldas 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

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:
xxxx
(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.18

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 Dominaldas Application for Receivership has no leg to stand on for reasons
discussed below.
First, Dominaldas 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 RTCs 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 RTCs 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 RTCs 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 overemphasized 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. 22
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 property 24 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, Dominaldas 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 Dominaldas claim
that she has an interest in the disputed properties, Dominalda has no relation to their produce or
income.1wphi1
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 RTCs 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, Dominaldas 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 Dominaldas Application for Receivership. Thus, respondents insist that where there is
sufficient cause to appoint a receiver, there is no need for an applicants 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 receivers
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 applicants bond is required at all times. On the other hand, the requirement of
a receivers 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 EspinaCaboverdes application for receivership and appointing the receivers over the disputed properties are
likewise SET ASIDE.
SO ORDERED.