Tantano vs. Espina-Caboverde

Receivership may not be granted on the sole ground of an applicant's financial need for medical expenses or support, as such reason is not among the grounds enumerated under Section 1 of Rule 59 of the Rules of Court; moreover, the filing of an applicant's bond under Section 2 of Rule 59 is mandatory in all cases, the word "shall" denoting its obligatory nature, and the consent of the opposing party cannot dispense with this requirement.

Petitioners Mila Caboverde Tantano and Roseller Caboverde are children of respondent Dominalda Espina-Caboverde and siblings of respondents Eve Caboverde-Yu, Fe Caboverde-Labrador, and Josephine E. Caboverde. The family dispute centers on three parcels of land (Lots 2, 3, and 4) in Sindangan, Zamboanga del Norte, which petitioners and their siblings Ferdinand, Jeanny, and Laluna claim to own by virtue of a deed of sale from their parents, Maximo and Dominalda. Respondents Eve and Fe challenged the validity of that deed of sale in Civil Case No. S-760 before the RTC of Sindangan, Branch 11. During the pendency of that case, Maximo died, prompting the substitution of his heirs and the execution of a Partial Settlement Agreement covering eight uncontested parcels of land, while the three contested lots remained for adjudication.

Petitioners Mila Caboverde Tantano and Roseller Caboverde are children of respondent Dominalda Espina-Caboverde and siblings of respondents Eve Caboverde-Yu, Fe Caboverde-Labrador, and Josephine E. Caboverde. Petitioners, together with their siblings Ferdinand, Jeanny, and Laluna, are the registered owners and in possession of three parcels of land identified as Lots 2, 3, and 4 located in Bantayan and Poblacion, Sindangan, Zamboanga del Norte, having purchased them from their parents, Maximo and Dominalda Caboverde.

On March 7, 2005, respondents Eve and Fe filed a complaint before the RTC of Sindangan, Zamboanga del Norte, praying for the annulment of the Deed of Sale purportedly transferring Lots 2, 3, and 4 from their parents in favor of petitioners and their other siblings. The case was docketed as Civil Case No. S-760 and raffled to Branch 11. In their verified Answer, the defendants, including Maximo and Dominalda, posited the validity and due execution of the contested Deed of Sale. During the pendency of the case, Maximo died, prompting Eve and Fe to file an Amended Complaint on May 30, 2007, substituting Maximo with his eight children and his wife Dominalda, and adding eight more real properties of the Caboverde estate to the original list.

As encouraged by the RTC, the parties executed a Partial Settlement Agreement (PSA) fixing the sharing of the uncontroverted properties among themselves, particularly the eight additional parcels of land and their respective products and improvements. Under the PSA, Dominalda's daughter Josephine was to be appointed as administrator, and Dominalda was entitled to receive one-half of the net income derived from the uncontroverted properties. The PSA also gave Josephine special authority to provide for her mother's medicine. The parties submitted the PSA to the court on or about March 10, 2008 for approval.

Before the RTC could act on the PSA, Dominalda, despite being impleaded as a defendant, filed a Motion to Intervene, claiming that the verified Answer she had signed with her co-defendants contained material averments not representative of the true facts and was never explained or read to her. On May 12, 2008, she filed a Motion for Leave to Admit Amended Answer, declaring that there never was a sale of the three contested parcels of land and that she and her husband never received any consideration. She prayed that her conjugal share and share as intestate heir of Maximo over the contested properties be recognized. The RTC granted the motion and, on May 13, 2008, approved the PSA, leaving the three contested properties for further proceedings.

On July 15, 2008, Dominalda filed a Verified Urgent Petition/Application to place Lots 2, 3, and 4 under receivership. She claimed that while she had a legal interest in the controverted properties and their produce, she could not enjoy them because the income was solely appropriated by petitioner Mila in connivance with selected kin. She alleged that she immediately needed her legal share in the income for daily sustenance and medical expenses, and that unless a receiver was appointed, the income or produce from the properties was in grave danger of being dissipated. On August 27, 2009, the RTC heard the application and persuaded the parties to discuss how to address their mother's immediate needs. On October 9, 2009, petitioners and their siblings filed a Manifestation expressing concurrence to the proposal for receivership on the condition that Mila be appointed receiver and that, after Dominalda's 2/10 share, the remainder be divided among Mila, Roseller, Ferdinand, Laluna, and Jeanny. The RTC, however, expressed its aversion to a party acting as receiver and asked the parties to nominate neutral persons.

On February 8, 2010, the RTC issued a Resolution granting Dominalda's application for receivership, noting the urgency of placing the properties under receivership because Dominalda, as the old and sickly mother, was in dire need of medication and daily sustenance. The RTC again noted that Mila could not serve as receiver, being a party to the case. Dominalda nominated Annabelle Saldia, while Eve nominated Jesus Tan. Petitioners moved for reconsideration, arguing that the concerns raised were not valid grounds for receivership and that Dominalda failed to prove her income was insufficient. By Resolution of July 19, 2010, the RTC denied the motion and appointed Saldia and Tan as receivers, finding that the properties might be in danger of being lost, removed, or materially injured while in the possession of other defendants who were enjoying the fruits thereof. Petitioners filed an Urgent Precautionary Motion to Stay Assumption of Receivers, which the RTC denied on October 7, 2011 as a prohibited second motion for reconsideration, fixing the receivers' bonds at PhP 100,000 each. Petitioners then filed a petition for certiorari with the CA, which denied the petition on June 25, 2012, holding that the RTC did not act with grave abuse of discretion and that the applicant's bond was unnecessary because petitioners had consented to the receivership. Petitioners' motion for reconsideration was denied on September 21, 2012.

• Invalid Grounds for Receivership: Petitioners argued that the concerns raised by Dominalda in her Application for Receivership — namely, her need for support and medication — are not valid grounds for placing properties under receivership under the rules, and that she failed to prove her claim that the income she had been receiving was insufficient for her medical needs.
• No Danger of Loss or Injury: Petitioners insisted that there was no justification for placing the properties under receivership since there was neither allegation nor proof that the properties themselves, not merely the fruits, were in danger of being lost or materially injured.
• Mandatory Applicant's Bond: Petitioners contended that the trial court appointed a receiver without requiring the applicant to file a bond, in violation of Section 2, Rule 59 of the 1997 Rules of Civil Procedure, which mandates that before issuing the order appointing a receiver, the court shall require the applicant to file a bond.

• Sufficient Grounds for Receivership: Respondents Eve and Fe claimed that sufficient grounds existed for the appointment of receivers and that petitioners had agreed with them on the existence of these grounds when they acquiesced to Dominalda's Application for Receivership.
• Estoppel on Bond Requirement: Respondents argued that where there is sufficient cause to appoint a receiver, there is no need for an applicant's bond because under Section 2 of Rule 59, the very purpose of the bond is to answer for damages sustained by a party if the appointment was procured without sufficient cause; since petitioners consented to the receivership, they were estopped from challenging the sufficiency of such cause, making the applicant's bond unnecessary.
• Receiver's Bond Already Filed: Respondents further argued that what was needed was the receiver's bond, which had already been fixed and approved by the RTC.

• Validity of Receivership Grounds: Whether 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.
• Mandatory Nature of Applicant's Bond: Whether the CA committed grave abuse of discretion in upholding the RTC's ruling that the receivership bond is not required prior to appointment despite clear dictates of the rules.

• Validity of Receivership Grounds: Yes. The CA erred in sustaining the appointment of a receiver. Financial need for medical expenses and support is not a valid ground for receivership under Section 1 of Rule 59, and no imminent danger of loss or injury to the properties was shown.
• Mandatory Nature of Applicant's Bond: Yes. The CA erred in ruling that the applicant's bond was not required. Section 2 of Rule 59 uses the word "shall," denoting its mandatory nature; the consent of the opposing party cannot dispense with this requirement.

• Validity of Receivership Grounds: Receivership is a harsh remedy to be granted with utmost circumspection and only in extreme situations. The power to appoint a receiver is delicate and should be exercised with extreme caution, only where there is imminent danger of loss. While Section 1(d) of Rule 59 — "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" — is couched in general terms and broad in scope, even in cases falling under this provision, it is essential that there be a clear showing of imminent danger that the properties will be lost, wasted, or injured. Dominalda's alleged need for income to defray medical expenses and support is not a valid justification because financial need is not found in Section 1 of Rule 59. There was no clear showing that the disputed properties were in danger of being lost or materially impaired; Dominalda presented only a bare assertion that Mila solely appropriated the fruits, without proving the properties themselves were at risk. The RTC's conclusion that receivership was the most convenient and feasible means was a hollow conclusion drawn from inexistent factual considerations. Moreover, the PSA already provided for Dominalda's support: she was entitled to one-half of the net income from the uncontroverted properties, and Josephine was appointed administrator with special authority to provide for her mother's medicine. Additionally, the defendants were the registered owners in possession of the disputed properties, and jurisprudence holds that appointment of a receiver to deprive a party in possession should be made only in extreme cases and on a clear showing of necessity. Dominalda's claim to the properties was speculative because ownership was yet to be determined in the main case. By placing the properties under receivership, Dominalda would obtain indirectly what she could not obtain directly — depriving the other parties of possession before the controversy was settled. Her rights could be amply protected by annotating an adverse claim on the certificates of title.

• Mandatory Nature of Applicant's Bond: Section 2 of Rule 59 is clear 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 is of no moment. The filing of an applicant's bond is required at all times. The applicant's bond answers for all damages the adverse party may sustain by reason of the appointment if it was procured without sufficient cause, while the receiver's bond answers for damages caused by the receiver's failure to discharge duties faithfully. These are distinct purposes. The CA's ruling that petitioners were estopped from questioning the sufficiency of cause because they consented to the receivership was misplaced — the mandatory requirement of the applicant's bond cannot be waived by consent.

• Receivership as a Harsh Remedy — Receivership is a drastic and harsh remedy to be granted with utmost circumspection and only in extreme situations. The power to appoint a receiver is delicate 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. 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 consideration from the court as those of the person requesting for receivership. In this case, the Court found no compelling reasons justifying the appointment, as there was no showing of imminent danger to the properties and the applicant's financial need was not a valid ground.

• Mandatory Filing of Applicant's Bond — Under Section 2, Rule 59 of the Rules of Court, the filing of an applicant's bond before the issuance of the order appointing a receiver is mandatory, the word "shall" denoting its obligatory nature. The consent of the opposing party cannot dispense with this requirement. The applicant's bond is distinct from the receiver's bond: the former answers for damages sustained by the adverse party if the appointment was procured without sufficient cause, while the latter answers for damages caused by the receiver's failure to discharge duties faithfully. The Court held that the CA erred in ruling that the applicant's bond was unnecessary merely because petitioners had consented to the receivership.

• Receivership Over Property in Possession of a Party — Where the effect of appointing 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. 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 from the possession of one party to another where legal title is in dispute and the party in possession asserts ownership, except in a very clear case of evident usurpation. The appointment of a receiver is not proper when the rights of the parties depend on the determination of their respective claims to title, unless the property is in danger of being materially injured or lost.

• "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." — This passage, quoting Velasco & Co. vs. Gochico & Co., articulates the foundational doctrine governing the exercise of the court's power to appoint receivers and is the controlling standard against which receivership applications are measured.

• "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." — This passage clarifies that Section 1(d) of Rule 59, though a catch-all provision, still requires a showing of imminent danger to the properties, establishing the threshold that financial need alone cannot satisfy.

• "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." — This passage establishes the mandatory nature of the applicant's bond requirement and rejects the proposition that party consent can waive it.

• "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." — This passage articulates the principle that receivership cannot be used as an indirect means of dispossessing a party in possession before the main case is resolved.

• Velasco & Co. vs. Gochico & Co., 28 Phil. 39 (1914) — Controlling doctrinal pronouncement cited for the principle that the power to appoint a receiver is delicate and should be exercised with extreme caution and only where there is imminent danger of loss.
• Mendoza vs. Arellano, 36 Phil. 59 (1917) — Cited for the principle that receivership must be granted only when there is a clear showing of necessity to save the plaintiff from grave and immediate loss or damage, and that where the effect is to take property out of a defendant's possession, appointment should be made only in extreme cases.
• Diaz vs. Hon. Nietes, 110 Phil. 606 (1960) — Cited for the principle that receivership may be granted only when the property is in danger of being lost or impaired.
• Ralla vs. Alcasid, 6 SCRA 311 (1962) — Cited for the two-factor test courts should consider before appointing a receiver: (1) whether the injury from appointment would probably be greater than if the status quo were left undisturbed; and (2) whether the appointment will imperil the interests of others.
• Motoomull vs. Arrieta, 8 SCRA 172 (1963) — Cited for the principle that appointment of a receiver is not proper when the rights of the parties depend on the determination of their respective claims to title, unless the property is in danger of being materially injured or lost.
• De los Reyes vs. Hon. Bayona, 107 Phil. 49 (1960) — Cited for the principle that placing properties under receivership indirectly deprives parties of possession until the main controversy is settled.
• Descallar vs. Court of Appeals, G.R. No. 106473, July 12, 1993, 224 SCRA 566 — Cited for the alternative remedy of annotating an adverse claim on certificates of title to protect a party's rights during the pendency of the main case.

• Section 1, Rule 59, Rules of Court — Enumerates the grounds for the appointment of a receiver, including: (a) when the property or fund is in danger of being lost, removed, or materially injured; (b) in foreclosure actions where the property is in danger of being wasted or dissipated; (c) after judgment, to preserve property during appeal or aid execution; and (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. The Court held that Dominalda's financial need for medical expenses does not fall under any of these grounds, and that Section 1(d) still requires a showing of imminent danger to the properties.

• Section 2, Rule 59, Rules of Court — Provides 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, in an amount fixed by the court, to the effect that the applicant will pay all damages sustained by reason of the appointment if it was procured without sufficient cause. The Court held that the use of "shall" makes the filing of the applicant's bond mandatory in all cases, and that the opposing party's consent cannot dispense with this requirement. The provision also distinguishes the applicant's bond from the receiver's bond, the latter being discretionary and answerable for the receiver's faithful discharge of duties.

Justices Diosdado M. Peralta, Roberto A. Abad, Jose Catral Mendoza, and Marvic Mario Victor F. Leonen concurred in the decision. No separate concurring opinions were noted.