Vivares vs. Reyes

Receivership is a harsh remedy granted only in extreme situations requiring summary relief or where there is imminent danger of loss, and the appointment of a receiver is without sufficient cause where the alleged fraud is unproven, the disputed properties are already protected by a notice of lis pendens, the adverse party offers to post a counterbond, and the adverse party is in actual possession of the properties. The word "may" in Section 3, Rule 59 of the Rules of Civil Procedure is permissive, not mandatory, meaning the trial court must consider the counterbond in addition to other reasons presented, but is not automatically required to discharge the receiver upon the mere offer of a counterbond.

Severino Reyes was the father of respondent Jose Reyes and Torcuato Reyes. Upon Severino's death, the two brothers orally partitioned his estate and separately appropriated their respective shares. Torcuato died on May 12, 1992, leaving a last will and testament executed on January 3, 1992, which was admitted to probate in Reyes vs. Court of Appeals. Petitioner Julio Vivares was the designated executor of Torcuato's will, while petitioner Mila Ignaling was declared a lawful heir of Torcuato. Believing that Torcuato did not receive his full share in Severino's estate, petitioners instituted an action for Partition and Recovery of Real Estate against respondent before the Camiguin RTC, docketed as Civil Case No. 517, contesting the properties that remained in Severino's name.

Severino Reyes was the father of respondent Jose Reyes and Torcuato Reyes. Upon Severino's death, the two brothers orally partitioned his estate and separately appropriated their respective shares. On May 12, 1992, Torcuato died leaving a last will and testament executed on January 3, 1992. In Reyes vs. Court of Appeals, the Supreme Court affirmed the CA decision admitting the will to probate. Petitioner Julio Vivares was the designated executor of Torcuato's will, while petitioner Mila Ignaling was declared a lawful heir of Torcuato.

Believing that Torcuato did not receive his full share in the estate of Severino, petitioners instituted an action for Partition and Recovery of Real Estate before the Camiguin RTC, Branch 28, docketed as Civil Case No. 517. With the trial court's approval, the parties agreed that properties already transferred in the names of respondent and Torcuato prior to Torcuato's death would be excluded from litigation; only properties still in Severino's name were contested. On November 24, 1997, the trial court directed the formation of a three-man commission to collate the disputed common properties, and the disputed properties were annotated with notices of lis pendens upon petitioners' instance.

On March 15, 2000, petitioners filed a motion to place the properties in litigation under receivership, alleging that respondent had, without prior court approval and without petitioners' knowledge, sold to third parties and transferred in his own name several common properties. Petitioners further claimed that respondent fraudulently antedated some conveyances prior to May 12, 1992 to make it appear they were no longer part of Severino's estate under litigation, and that respondent was exclusively enjoying the fruits and income of the common properties without rendering an accounting or turning over Torcuato's share. Petitioners nominated Lope Salantin as receiver. Respondent opposed the motion, denying any fraudulent transfer and asserting that any transfer in his name resulted from the oral partition, which likewise enabled Torcuato to transfer several common properties in his own name.

On May 24, 2000, the trial court granted petitioners' motion and appointed Salantin as receiver conditioned on a ₱50,000 bond. Respondent moved for reconsideration, contending that the appointment was unduly precipitate as he was not represented by counsel. The trial court allowed respondent to present evidence but, after he sought postponement on the ground that he was in the United States for medical examination, denied the postponement and reinstated its May 24, 2000 Order. Respondent then filed a manifestation with motion to discharge the receiver, offering to post a counterbond under Section 3, Rule 59 of the 1997 Rules of Civil Procedure. Respondent also moved to cancel the notice of lis pendens on Tax Declaration No. 112 covering Lot No. 33, asserting that a portion of the adjacent Lot No. 35 owned by Elena Unchuan was erroneously included in Lot No. 33. On May 22, 2001, the trial court denied both motions. Respondent's partial motion for reconsideration was likewise denied on October 19, 2001 for failing to raise new matters.

Respondent filed a petition for certiorari before the CA, which on June 18, 2002 reversed the RTC, discharged the receiver upon posting of a ₱100,000 counterbond, and cancelled the notice of lis pendens on TD No. 112 insofar as it covered Unchuan's property. The CA found that the trial court failed to observe the rule that receivership is granted only in extreme cases of imperative necessity, and that petitioners' rights were doubly protected by the lis pendens annotations. Petitioners' motion for reconsideration was denied on September 24, 2002, prompting the present petition.

• Fraudulent Transfers: Petitioners argued that respondent alienated several common properties of Severino without court approval and without their knowledge and consent, and that the transfers were fraudulently antedated prior to May 12, 1992 to make it appear they no longer formed part of the estate under litigation.
• Counterbond Does Not Automatically Discharge Receiver: Petitioners maintained that a duly appointed receiver should not be discharged simply because the adverse party offers to post a counterbond.
• Lis Pendens Does Not Preclude Receivership: Petitioners contended that the annotation of a notice of lis pendens does not preclude the appointment of a receiver when there is a need to safeguard the properties in litigation, since lis pendens alone does not prevent the transfer of the property pendente lite.
• Invalid Cancellation of Lis Pendens: Petitioners argued that the cancellation of the notice of lis pendens on TD No. 112 is contrary to law because Lot No. 33 is one of the disputed properties in the partition case.

• No Fraudulent Transfers: Respondent denied that he fraudulently transferred any property of the estate of Severino, asserting that any transfer in his name was a result of the oral partition between him and Torcuato, which also enabled Torcuato to transfer several common properties in his own name.
• Due Process Violation: Respondent contended that the appointment of the receiver was unduly precipitate because he was not represented by counsel at the time, thus depriving him of due process.
• Discharge via Counterbond: Respondent prayed for the discharge of the receiver upon filing of a counterbond in an amount to be fixed by the court pursuant to Section 3, Rule 59 of the 1997 Revised Rules of Civil Procedure.
• Erroneous Inclusion in Lis Pendens: Respondent asserted that a portion of Lot No. 35 owned by Elena Unchuan was erroneously included in Lot No. 33 and consequently subjected to the notice of lis pendens, warranting cancellation of the annotation on that portion.

• Receivership and Lis Pendens: Whether the annotation of a notice of lis pendens precludes the appointment of a receiver when there is a need to safeguard the properties in litigation.
• Discharge of Receiver via Counterbond: Whether a duly appointed receiver of properties in litigation should be discharged simply because the adverse party offers to post a counterbond.
• Cancellation of Lis Pendens: Whether the cancellation of a notice of lis pendens annotated on Tax Declaration No. 112 is contrary to law.

• Receivership and Lis Pendens: No. While lis pendens alone does not preclude the transfer of property pendente lite, the combination of lis pendens, the offer of a counterbond, the availability of injunctive relief, and the absence of proven fraud renders receivership unnecessary.
• Discharge of Receiver via Counterbond: No, not simply because of the counterbond offer. The word "may" in Section 3, Rule 59 is permissive, not mandatory; the trial court must consider the counterbond in addition to other reasons. However, the issue was not raised before the CA and is barred by estoppel, and even on the merits, the lack of sufficient cause independently justifies discharge.
• Cancellation of Lis Pendens: Yes, petitioners' position is correct. The cancellation of the notice of lis pendens on TD No. 112 was improper because the determination of whether Unchuan's property is part of Lot No. 33 is a matter for the trial court to resolve.

• Receivership and Lis Pendens: Receivership is a harsh remedy to be granted only in extreme situations. The Court relied on the doctrinal pronouncement in Velasco & Co. vs. Gochuico & Co. that the power to appoint a receiver should be exercised with extreme caution and only where there is imminent danger of loss. Petitioners failed to adduce clear, convincing, and hard evidence of fraud in the transfers or of antedating. The mere fact that transfers were dated prior to Torcuato's death does not necessarily indicate fraud; he who alleges fraud bears the burden of proving it. Respondent adduced documentary proof that Torcuato himself conveyed several lots based on the oral partition, making it inequitable to distrust respondent's transfers while crediting Torcuato's. Since a notice of lis pendens was already annotated, petitioners' rights were amply safeguarded — any subsequent conveyance would be subject to the outcome of the litigation. Moreover, a counterbond would answer for damages from future transfers, and petitioners could seek an injunctive writ. Finally, respondent was in actual possession of some disputed properties, and under Article 539 of the Civil Code, a possessor has the right to be respected in his possession. Citing Descallar vs. Court of Appeals, the appointment of a receiver is not proper where the rights of the parties, one of whom is in possession, are still to be determined.

• Discharge of Receiver via Counterbond: The Court found that this issue was not raised before the CA and is therefore barred by estoppel under the doctrine that issues raised for the first time on appeal are proscribed. Even if entertained, the contention lacks merit. Section 3, Rule 59 states that the application "may" be denied or the receiver discharged — the word "may" is permissive in statutory construction. If the intent were to make discharge mandatory upon offer of a counterbond, the rule would have used "shall." The trial court must consider the counterbond in addition to other reasons. Nevertheless, the CA supported the discharge with several reasons beyond the counterbond, and the alleged fraud justifying receivership was not established, independently warranting discharge.

• Cancellation of Lis Pendens: The CA made a factual finding that Unchuan's property was erroneously included in Lot No. 33 and ordered the lifting of the lis pendens annotation. The Court found this ruling bereft of factual basis. The determination of whether Unchuan's property is part of Lot No. 33 and whether that portion truly belongs to Unchuan are matters to be resolved by the trial court. Consequently, the notice of lis pendens on TD No. 112 must remain until a final ruling on those issues is made.

• Doctrine on Receivership as a Harsh Remedy — Receivership is a harsh judicial remedy to be granted only in extreme situations where there is an imperative necessity for it. 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. The court must consider the consequences to all parties and should not exercise the power when it is likely to produce irreparable injustice or injury. Originating from Velasco & Co. vs. Gochuico & Co. (1914), this doctrine was applied to hold that petitioners failed to prove fraud or imminent danger of loss, rendering the appointment of a receiver without sufficient cause.

• Permissive Nature of "May" in Section 3, Rule 59 — The word "may" in Section 3, Rule 59 of the 1997 Rules of Civil Procedure, which states that the application for receivership "may" be denied or the receiver discharged upon the filing of a counterbond, is permissive and not mandatory. The trial court is not automatically required to discharge a receiver upon the mere offer of a counterbond; it must consider the counterbond in addition to other reasons presented by the offeror.

• Protection of Possessor's Rights Against Receivership — Under Article 539 of the Civil Code, every possessor has a right to be respected in his possession and should be protected or restored to said possession if disturbed. The appointment of a receiver is not proper where the rights of the parties, one of whom is in actual possession of the property, are still to be determined by the trial court. Applied in this case where respondent was in actual possession of some disputed properties.

• Effect of Lis Pendens on Subsequent Conveyances — Once a notice of lis pendens is annotated on the titles of disputed properties, there can be no risk of losing the property as a result of any conveyance or encumbrance made posterior to the filing of the notice. Any subsequent conveyance is subject to the outcome of the litigation, as the fact that the properties are under custodia legis is made known to all by operation of law.

• "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 reproduces the canonical formulation of the receivership doctrine from Velasco & Co. vs. Gochuico & Co., frequently cited as the controlling standard for when receivership is justified.

• "He who alleges fraud has the burden to prove it." — This principle was applied to reject petitioners' claim of fraudulent antedating of property transfers, establishing that the mere fact of transfers being dated prior to Torcuato's death does not necessarily indicate fraud without clear, convincing, and hard evidence.

• "The determination whether the property of Unchuan is a part of Lot No. 33 and whether that portion really belongs to Unchuan are matters to be determined by the trial court. Consequently, the notice of lis pendens on TD No. 112 stays until the final ruling on said issues is made." — This passage states the ratio decidendi on the third issue, holding that the CA erred in cancelling the lis pendens annotation without the trial court first resolving the factual question of property boundaries.

• Velasco & Co. vs. Gochuico & Co., 28 Phil. 39 (1914) — Controlling doctrinal pronouncement on the standard for appointing a receiver: the power is delicate and should be exercised with extreme caution, only where there is imminent danger of loss. Followed and applied to find the RTC's appointment arbitrary.
• Reyes vs. Court of Appeals, G.R. No. 124099, October 30, 1997, 281 SCRA 277 — Prior related litigation in which the Supreme Court affirmed the CA decision admitting Torcuato Reyes's will to probate. Cited as background context.
• Philippine Banking Corporation vs. Court of Appeals, G.R. No. 127469, January 15, 2004, 419 SCRA 487 — Cited for the doctrine that an issue raised for the first time on appeal and not timely raised in the lower court is barred by estoppel. Applied to bar petitioners' argument on the counterbond issue.
• Medelo vs. Gorospe, No. L-41970, March 25, 1988, 159 SCRA 248 — Cited for the principle that with a notice of lis pendens annotated, there can be no risk of losing the property through subsequent conveyance. Applied to show that petitioners' rights were already protected.
• Descallar vs. Court of Appeals, G.R. No. 106473, July 12, 1993, 224 SCRA 566 — Cited for the rule that the appointment of a receiver is not proper where the rights of the parties, one of whom is in possession of the property, are still to be determined by the trial court. Applied to protect respondent's possession.

• Section 3, Rule 59, 1997 Revised Rules of Civil Procedure — Provides that the application for receivership may be denied, or the receiver discharged, when the adverse party files a bond in an amount fixed by the court, and that the receiver may also be discharged if the appointment was obtained without sufficient cause. The Court construed the word "may" as permissive, not mandatory, and applied the provision to uphold the discharge of the receiver given the lack of sufficient cause and the offer of a counterbond.
• Article 539, New Civil Code — Provides that every possessor has a right to be respected in his possession and should be protected or restored to said possession by the means established by law and the Rules of Court. Applied to protect respondent's actual possession of the disputed properties against the receivership order.

Leonardo A. Quisumbing (Chairperson), Antonio T. Carpio, Conchita Carpio Morales, and Dante O. Tinga concurred.