STA. CECILIA SAWMILLS, INC., PETITIONER, VS. HON. UNION C. KAYANAN, IN HIS CAPACITY AS PRESIDING JUDGE, BRANCH IV, QUEZON CFI AT CALAUAG, QUEZON; PEDRO PICA, JR.; AND FRANCISCO …

In 1964 the Sta. Cecilia Sawmills, Inc. (hereinafter referred to
as Sta. Cecilia), due to its critical fiscal posture, entered into a management
contract captioned “Lease of Services with Profit Participation,”
with the Veneer Trading and Development Corporation (hereinafter referred to as
Veneer).  Contrary to the expectations of
Sta. Cecilia, however, the agreement proved to be another unrewarding financial
venture.  As a result, Sta. Cecilia found itself not only in deeper
financial distress but as well threatened with foreclosure of mortgage over its
assets.

Late in October, 1965 Sta. Cecilia filed with the Court of First
Instance, Quezon
Province, a complaint against Veneer, the latter’s president, Robert Siy, and its vice-president, secretary and treasurer,
Roberto Sabido, principally for the annulment and/or
reformation of the management contract. 
Sta. Cecilia prayed for (a) the return to it of “the possession of
its veneer and cold press mills and all
its related facilities, including the possession of the land on which
they are located;” (b) the appointment of a receiver of its “veneer
and cold press mills including its funds, export receipts and receivables and
the business of said mills;” and (c) the issuance of a writ of preliminary
injunction.  Veneer, Siy and Sabido filed a joint answer to Sta. Cecilia’s complaint.

In the first week of December, 1965 Pedro Pica, Jr., a logging
contractor, filed a complaint-in-intervention for the payment to him of an
amount corresponding to unpaid “Credit Memos” and unredeemed
“Logs Received Invoices” allegedly issued to him by Veneer as Sta.
Cecilia’s administrator.  Sta. Cecilia
and Veneer duly filed their respective answers to Pica’s complaint-in-intervention.

In mid-December, 1965 Sta. Cecilia, in pursuance of its
complaint, filed a petition for
the appointment of Eugenio G. Palileo
as receiver.  Sta. Cecilia sought to
place under receivership its own properties then in the possession,
administration and control of Veneer, in the belief that the said properties
were “in danger of being lost, removed or materially injured” unless
the lower court appointed a receiver
to guard and preserve them. 
Subsequently, the lower court granted Sta. Cecilia’s petition and
appointed Palileo as receiver.

In the second week of April, 1967 the lower
court, upon representations of Sta. Cecilia, relieved Palileo
as receiver.  Thereafter, Jorge B.
Siacunco, appointed judicial receiver by the lower
court in May, 1967 in place of Palileo, took charge
of all the properties of Sta. Cecilia placed under receivership.

In late April, 1967 Francisco Dee, another logging contractor,
filed his complaint-in-intervention for the collection of an amount
corresponding to unpaid “Credit Memos” and unredeemed “Logs Received Invoices”
allegedly issued in his favor by Veneer acting as Sta. Cecilia’s
administrator.  Sta. Cecilia and Veneer
duly filed their respective answers to Dee’s complaint-in-intervention.

In mid-November, 1967
Sta. Cecilia, on the one hand, and Veneer, Siy and Sabido, on the other, entered into a com­promise
agreement.  The parties agreed, inter alia, on:

1.  The termination of the management
contract;

2.  The delivery to Sta.
Cecilia of the pos­session and administration of its veneer and cold press
mills, together with all the equip­ment, machineries and other related
facilities, and the land occupied by the said equipments subject matter of the
management contract; and

3.  The dismissal by Sta. Cecilia of its complaint
against Veneer, Siy and Sabido,
and, likewise, the dismissal by the latter of their respective counterclaims
against the former.

The parties filed the said compromise agreement,
dated November 15, 1967,
with the lower court in late December, 1967, for approval.

In February, 1968 the intervenors Pica
and Dee filed their respective oppositions to the
approval of the aforementioned compromise agreement.  Sta. Cecilia moved to dismiss the complaints
in intervention respectively filed by Pica and Dee.  Subsequently, Pica and Dee
filed their oppositions to Sta. Cecilia’s motion.

In late March, 1968 Siacunco, in his
capacity as judicial receiver, filed with the lower court an annual report for
the year 1967.  In October of the same
year, Pica filed a motion with the lower court praying for the removal of Siacunco as receiver and for the submission by Siacunco of a report on certain log ex­portations Sta.
Cecilia had allegedly made.  In early
December, 1968 Pica followed up
the said motion with a supplemental motion wherein he reiterated his prayer for
the immediate removal of Siacunco as receiver.

In the third week of December, 1968 Sta. Cecilia filed with the
lower court a motion to terminate and/or dissolve re­ceivership on the
following grounds:

“(a)
There is now no more controversy between plaintiff and defendants by
reason of their having entered into a compromise
agreement, notwithstanding the same has not been judicially approved;

“(b) There being no longer any controversy or no more ‘case’
so to speak between plaintiff and defendants, receivership ought to be at once
terminated, the same being merely an ancillary remedy which could not exist independently of the main case which is
already compromised;

“(c) Receivership ought further to be termi­nated by virtue of the return by
defendants to plain­tiff of the possession and administration of the lat­ter’s
property under receivership.”

Apparently, Sta. Cecilia found out that
the receivership of its own properties,
rather than providing the panacea for its finan­cial ills, only served to
aggravate its fast-declining fiscal con­dition. 
The receivership of its properties, according to Sta. Cecilia, resulted
in tremendous losses.

Thereupon, the lower
court set the motion to terminate and/or dissolve receivership for hearing on December
20, 1968 and January
9, 1969.  At the hearing of the said motion on De­cember
20, Veneer, Siy and Sabido “remained neutral” and
disavowed any “interest whatsoever whether the receivership is terminated or not, or whether the receiver is
removed or changed.” However, they changed their stand at the January 9,
1969 hearing by
announcing before the lower court their
assent to the proposed
termination of the receivership.

On January
10, 1969, the lower
court issued an order

1)   Denying the motion filed by Sta. Cecilia for
the termination and/or dissolution of the re­ceivership;

2)   Discharging Siacunco
as receiver; and

3)   Asking the intervenors
to recommend a competent person to succeed Siacunco.

As
to Sta. Cecilia’s application for the termination of the re­ceivership, the lower court stated
that

“… its termination at this stage
would cause greater injury and will imperil the interests of intervenors whose rights deserve as much con­sideration from the Court as those of the person requesting for receivership…”

Whereupon, on January 17,
1969, Sta. Cecilia lodged with this Court the instant petition for certiorari and/or prohibition with
preliminary injunction, alleging that the Hon. Union C. Ka­yanan, presiding
judge of the lower court, committed grave abuse of discretion in refusing to terminate the receivership of its own properties.  Sta. Cecilia asked for the termination of the receivership, arguing that no
legal and practical necessity warrants the continuation of the receivership
because

“(1) the main complaint on the basis of which the receivership
was ordered as an ancillary relief has been finally settled and terminated by
the Com­promise Agreement entered into by the principal parties – plaintiff and
defendants;

“(2) the complaints in intervention of res­pondents-intervenors are pure unsecured money claims and have no
direct bearing on the proper­ties originally placed under receivership;

“(3) the continuation of the receivership has worked and
continues to work damage and pre­judice to petitioner, owner of the properties,
as the receivership has resulted in heavy losses during its operation; (and)

“(4) these damages and losses are
irre­parable in the sense that respondents-intervenors
who seek the continuation of the receivership have posted no bonds either for
the receiver himself, resulting in the absurdity that petitioner, because of
the bond posted by it when it originally sought the receivership, now has to
respond for its own losses incurred by the receiver.  In other words, respondents-intervenors, in effect, caused the pro­perties of
petitioner to be placed under receivership upon the strength of petitioner’s
own bond.”

Sta. Cecilia therefore prayed for (1) the
issuance of a restraining order or, upon its filing of a bond, the issuance ex
parte
of a writ of preliminary injunction restraining the respondent Judge from
continuing to place under receivership petitioner’s proper­ties, and, likewise,
restraining the respondent Judge from fur­ther taking cognizance of the main
case, particularly from doing any act in connection with and/or relating to the
receivership as­pects thereof, and (2) the issuance, after hearing on the
merits, of an order and/or writ of certiorari and/or prohibition nullifying
respondent Judge’s order of January 10, 1969 insofar as it denies the
petitioner’s motion to terminate and/or dissolve receivership.

On January 17, 1969 the respondent Judge issued two new orders –
the first, providing for the appointment of Jose G. Gatchalian
as the new judicial receiver vice Siacunco, and the
sec­ond, providing for the powers of the new receiver, particularly granting
him authority to “devise ways and means to operate the Sta. Cecilia
Sawmills, Inc. by buying from other sources and cutting or securing logs within
the forest concession of the plain­tiff (L-15-C) upon approval of the
Court…”

Subsequently, on January 22, 1969, Veneer, Siy
and Sabido filed with this Court a manifestation and
motion, alleging “that as creditors of Sta. Cecilia, the order of the
respondent Judge dated January 10, 1969 adversely affects their rights and
inter­ests under the compromise agreement,” specially so if the ma­nagement
and administration of the petitioner’s properties re­mained under
receivership.  Veneer, Siy and Sabido prayed that they
be allowed to intervene in the present case, manifesting that they are joining
the petitioner in its petition for certiorari particularly in its prayer for
the issuance of the writ of preli­minary injunction, and that if the order of
the respondent Judge of January 10, 1969 sought to be enjoined has already been
im­plemented, the said Judge be ordered to restore and maintain the status
quo existing prior to that date.

Two days later, on January 24, 1969, the respondent Judge issued another order authorizing
the field overseer of the receiver Gatchalian to
impound and confiscate all logs cut and found within the petitioner’s forest
concession and to deli­ver the same to the petitioner’s veneer and cold press
mills in order to generate funds.

On February 5, 1969 Sta. Cecilia filed with this Court an urgent
motion for issuance of a restraining order to suspend and/or hold in abeyance
the implementation of the January 17 and January 24, 1969 orders issued by the
respondent Judge and to restrain the respondent Judge and the receiver Gatchalian from hiring laborers at the petitioner’s veneer
and cold press mills and forest concession. 
Sta. Cecilia reiterated its prayer for the termination of the
receivership of its properties.

Whereupon, on the following day, February 6, 1969, this Court
issued a temporary restraining order directing the respon­dent Judge to suspend
and/or hold in abeyance the implementa­tion of his two orders of January 17,
1969 and his other order of January 24, 1969, restraining the respondent Judge and his new­ly appointed
receiver from hiring laborers at the petitioner’s veneer and cold press mills
and forest concession, restraining the respondent Judge from doing any further
acts in connection with and/or relating to the receivership in the main case,
and directing the respondent Judge to maintain the status quo
prior to the issuance of the orders complained of.

On February 8, 1969 Pica filed his Answer
with this Court, claiming that the termination of the receivership, as prayed
for by Sta. Cecilia, will definitely prejudice his just claim for the unpaid
“Credit Memos” and unredeemed “Logs Received Invoices.”
Pica maintained that his claims, having been admitted and accept­ed by the
petitioner Sta. Cecilia and the defendants Veneer, Siy
and Sabido,
should be paid and satisfied.  Pica
furthermore averred that the respondent Judge, considering the facts and the
circumstances of the case, neither committed nor intended to commit grave abuse
of discretion in denying Sta. Cecilia’s mo­tion to terminate the receivership,
in holding in abeyance ac­tion on the compromise agreement, and in ordering the
remo­val of the receiver Siacunco.

Sta. Cecilia, on February
17, 1969, filed with this Court an urgent manifestation and motion
reiterating its offer proposed at the hearing of the present petition before this Court on Feb­ruary 11, 1969.  It restated its outstanding offer to put up a
bond to answer for whatever claims may be adjudged by the compe­tent court in
favor of Pica and Dee by virtue of their complaints-in-intervention
in order to obviate any possible objection to the immediate termination of the
receivership.

On June 18, 1969
Sta. Cecilia filed with this Court its memorandum wherein it repeated its
discussion of the factual background of the present case and again urged the
immediate termination of the receivership.

On September 12, 1969
Pica filed with this Court a ma­nifestation and motion primarily
to the effect that he has no more interest in the main case in the lower court
and in the ins­tant proceedings.  Pica
prayed that “the corresponding order be issued accepting and confirming
his desistance” as regards the instant petition by virtue of a compromise
agreement he had en­tered into with Sta. Cecilia re his complaint-in-intervention.  In the said compromise agreement filed with
the lower court on August 29, 1969,
Sta. Cecilia agreed to liquidate its obligations with Pica.  The parties also mutually agreed ”to
release, dis­miss, waive and/or abandon absolutely and forever whatever claim,
demand, or cause of action each may have against each other.”

On January 17, 1970
Sta. Cecilia filed with this Court a motion to withdraw the bond it filed on February 17, 1969, which bond
purported “to answer for any amount which the competent court may adjudge
in favor of respondents Pica and Dee by virtue of their complaints-in-intervention.”
Sta. Cecilia claims that there no longer exists any need for the maintenance of
the said bond because Pica has already compromised his complaint in
intervention per the compromise agreement filed with the lower court on August
29, 1969 and attached to Pica’s manifes­tation and motion filed with this Court
on September 12, 1969; and Dee,
likewise, has already compromised his complaint-in-intervention per the partial
compromise agreement dated July 30, 1969 filed with the lower court on August
5, 1969 and the com­promise agreement dated October 27, 1969.

The said partial compromise agreement, attached to Sta. Cecilia’s motion to withdraw bond,
mainly provides for the set­tlement of the petitioner’s obligations with Dee.  The compromise agreement, on the other hand,
provides for the terms and conditions for the said settlement of claims between
the peti­tioner and Pica.  According to
the said agreement, Dee obligates himself “to move and/or give his
conformity to the termination of the receivership of Sta. Cecilia’s
properties” and ”to sign any and all necessary documents as regards the
giving of his said conformity to the termination of the
receivership.”

The lower court, on April
29, 1970, rendered a decision
on the main case terminating the disputes between the petitioner-plaintiff and
the defendants, and between Pica or Dee,
each on the one hand, and the petitioner-plaintiff or defendants or both the
latter two, on the other.  The lower
court, however, made no adjudication in connection with and/or relating to the
receiver­ship of Sta. Cecilia’s properties.

Thus, on May 7, 1970,
Sta. Cecilia filed with this Court a motion to terminate receivership, praying
for the issuance of an order terminating at once the receivership of its
properties.

Sta. Cecilia, as the record shows, brought the present petition
to this Court primarily to annul the respondent Judge’s order of January 10, 1969, denying its motion
to terminate and/or dissolve the receivership of its properties.  Sta. Cecilia, as previously stated,
predicates the instant petition on the allega­tion that the respondent Judge
gravely abused his discretion in issuing the order in question, particularly
that portion thereof denying the petitioner’s motion to terminate the
receivership.  Apparently, the respondent
Judge issued the order in question because Pica and Dee
“stand to suffer great injustice and irre­parable injury” should the
receivership be terminated, for the said intervenors
have an interest in the property or funds main subject of the litigation.  The protection of the interests of Pica and Dee
provided the respondent Judge the reason to deny Sta. Cecilia’s motion to
terminate the receivership.  The
respondent Judge believed that
the termination of the receivership would deprive Pica and Dee
the opportunity to recoup their claims, thereby prejudicing their interests.

However, during the pendency of the
case before this Court, certain events supervened, altering the situation of
the parties and appropriately threshing out the differences between them.  Pica and Dee, as the
record reveals, compromised their respective complaints-in-intervention with
Sta. Cecilia, thereby not only adjusting their difficulties but also
terminating the con­troversy between them, including all its incidents and
ramifications.  The said compromise
agreements provide Pica and Dee the strong weapons to
protect whatever remaining claims they have against Sta. Cecilia.  As the court below stated in its deci­sion
rendered on April 29, 1970,
putting an end to the litigation re the main case,

“... where the
terms of the compromise agreements involved herein are such as to impose
compliance with certain stipulations, such as, for instance, the periodic
payments of certain pres­tations, should the obligor
fail to do so, the right of the obligee to seek
enforcement of the claim arising from the corresponding compromise agree­ment
shall not be in paired in any manner what­ever…”

The termination of the controversy
between the petitioner Sta. Cecilia and the respondents Pica and Dee
per their compromise agreements have thus rendered the basic issue posed by the
pre­sent petition moot and academic.

Consequently, this Court finds no reason for the conti­nued
receivership of Sta. Cecilia’s properties. 
The defendants Veneer, Siy and Sabido have expressed their assent to the ter­mination of
the receivership.  Likewise, Pica and Dee
have manifested their conformity to the termination of said receiver­ship.  Also as we have already observed, the
respondent Judge, in his decision dated April 29, 1970, refrained from making
any adjudication in connection with, and/or relating to, the receiver­ship, in
strict compliance with the temporary restraining order issued by this Court on
February 6, 1969 which restrained the respondent Judge, among others,
“from doing any further acts in connection with, and/or relating to the
receivership.”

The foregoing considerations provide this Court with am­ple
reason to lift the temporary restraining order issued on
February 6, 1969, to enable
the lower court to properly termi­nate the receivership, there being neither
further objection nor in pediment to the said termination.

ACCORDINGLY, the temporary restraining order issued by
this Court on February 6, 1969
is hereby lifted.  This case is hereby
remanded to the lower court for the sole and limited purpose of terminating the
receivership in accordance with law.  No
costs.

Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Barredo, and Villamor, JJ., concur.

Fernando and Teehankee, JJ., did not take part.

Dizon
and Makasiar, JJ., on
official leave.