HARRY LYONS ET AL., PETITIONERS, VS. CONRADO V. SANCHEZ, JUDGE OF THE COURT OF FIRST INSTANCE OF MANILA, ET AL., RESPONDENTS.

In Branch VII of the Court of First Instance of Manila, presided over
by Hon. Conrado V. Sanchez, the following five civil cases are pending
hearing and consideration:

Civil Case No. 5859 —Material Distributors (Phil.) Inc., plaintiff, versus Miles Timber & Teansport Corporation, Prentice M. Miles and Harry Lyons, et al., defendants.

Civil Case No. 5700.—Harry Lyons, et al., plaintiffs, versus Allison J. Gibbs, et al., defendants.

Civil Case No. 5505.—Harry Lyons, et al., plaintiffs, versus Allison J., Gibbs, et al., defendants.

Civil Case No. 5062.—Harry Lyons, Construction, Inc., et al., plaintiffs, versus Harry Lyons, defendant.

Civil Case No. 5228.—Harry Lyons, et al., plaintiffs, versus Levant Brown, et al., defendants.

A
joint order for the five cases, dated July 26, 1949} was issued by
Judge Sanchez ordering the sale of all the properties in litigation
between the parties therein involved, located at 179 Inverness, Sta.
Ana, Manila, and at Malolos, B lilac an, except those mortgaged to the
Far Eastern Surety and Insurance Co., under the terms and conditions
set forth in said order.

In five corresponding petitions before this Tribunal wherein the
petitioners are either Harry Lyons alone or he and his wife Creal M.
Lyons or Harry Lyons and Harry Lyons Jr., the petitioners thru
certiorari seek to review and later set aside and annul the said order
of sale of Judge Sanchez on the ground that he had acted with grave
abuse of discretion in issuing the same against the vigorous objections
of the petitioners. It appears.that the petitioners and the respondents
herein are either the plaintiffs or defendants in the five civil cases
pending in the lower court.

At the beginning, there was an attempt on the part of the
petitioners to consolidate these five petitions into one single case
but by resolution of this Court dated August 31, 1949, it was ordered
that these five cases be docketed under five separate entries and that
the petitioners .pay the corresponding docketing fees.

To give a fair idea of the interests or alleged interests of the
parties in the properties involved and ordered sold by the lower court,
which interests are naturally conflicting, and to understand the
situation and condition of said properties,—rather precarious and
extremely unfavorable, to be sure, as far as their deterioration and
depreciation are concerned, it is convenient to briefly state the
following facts as may be gathered from the pleadings and their annexes
appearing in our record. We cannot go into the record of the five
civil cases pending in the lower court and on which the present
petitions are based, for the reason that the records of those five
cases are not before us, We, therefore, have no definite idea as to the
nature of the said five cases pending in the lower court but on page 6
of the present petition for certiorari there is a brief description of
each case which may give us a rough notion and which we are quoting for
purposes of information:

“Civil Case No. 5062, filed April 6, 1948, which is an action for injunction against your petitioner Harry Lyons;

“Civil Case No. 5228, filed April 23, 1948, which is an action for injunction against Allison J. Gibbs, et al.;

“Civil Case No. 5505,
filed May 23, 1948, which is an action to compel the defendants Allison
J. Gibbs and Finley J. Gibbs, to reconvey to your petitioner Harry
Lyons his 50% interest or 98 shares of stock in the Material
Distributors (Phil.) Inc., etc.;

“Civil Case No. 5700,
filed June 19, 1948, which is an action for Quo Warranto and Injunction
against Allison J. Gibbs, et al., who have illegally constituted
themselves as officers and members of the Board of the Material
Distributors (Phil.) Inc.; and

“Civil Case No. 5859,
filed July 13, 1948, which is an action for injunction, damages, sums
of money, with cross claims against and among the parties thereto.”

It would appear from the petition and its annexes that about June
3, 1946, Harry Lyons was appointed agent for an American Company,
Material Distributors Inc. of Wichita, Kansas, U.S.A., in the
purchase and sale of surplus stocks or property, presumably from the U.S. Armed Forces, in the island of Guam and other locations in the
Pacific war area and that as his remuneration he was to receive 10% of
the profits realized after proper allowances for expenses and costs,
Harry Lyons acted as such agent in the purchase and sale of surplus
property and actually made purchases up to December, 1946 in Guam and
in the Philippines. Such property consisted mostly of heavy equipment
and machinery. For his work and services he claims he was entitled to
about P500,000 from the American company. In September, 1946 Harry
Lyons still acting as agent for the Wichita company bought for the
latter from the Philippine Exchange Co., Inc. and the Filipino
Businessmen’s Syndicate of Manila heavy construction equipment worth
about P500,000. Because Harry Lyons was not paid what he believed was
due him by the Wichita company, and in order to protect himself, he did
not surrender to the said company the equipment bought by him and kept
in the Philippines, the bulk of said equipment being deposited at 179
calle Inverness, Sta. Ana, Manila, and the rest at Malolos, Bulacan. He
then proceeded to organize a Philippine corporation known as the
“Material Distributors (Phil.) Inc.”, one of the respondents
herein,capitalized at P400,000 of which P80,000 was subscribed by him
in full with the exception of four qualifying shares.

Judging from the Articles of Incorporation of said Material
Distributors (Phil.) Inc., it had rather ambitious and extensive
objectives—to engage in business of civil engineers, designers,
contractors of roads, bridges, docks, piers, mills, refineries,
manufacturing plants, and installations of all kinds; to act as
consulting and construction engineers in connection with the promotion,
development, rehabilitation, administration and operation of every kind
of commercial, manufacturing, industrial, mining, or prospecting
enterprise; and to purchase, convey or sell, lease, rent, mortgage or
otherwise deal in such real and personal property in any part of the
Philippines or elsewhere as may be convenient, etc. It was intended to
engage in almost all kinds of business,especially, construction,
commercial and industrial, and this, on a large scale. This will
explain in some way the volume and kind of equipment and surplus
property involved in the order of sale complained against.

Harry Lyons paid P19,900 on his subscription, receiving therefore
195 shares of the Material Distributors (Phil.) Inc., while his four
co-incorporators had one share each, Harry Lyons was subsequently
elected President of the corporation. At a meeting of the stockholders
held on June 30, 1947, Harry Lyons and his wife Creal M. Lyons were
elected two of the four Directors of the corporation and upon the
constitution of the board of directors, Harry Lyons v/as elected
President and General Manager and his wife Creal M. Lyons as
Vice-president, Levant Brown as Treasurer, and Francisco Collantes as
Secretary.

According to Harry Lyons, after the Material Distributors (Phil.)
Inc. was organized, he as agent of the Wichita company, transferred and
assigned all the miscellaneous heavy construction equipment acquired
from the Philippine Exchange Co., Inc. and the Filipino Businessmen’s
Syndicate of Manila, all located in the Philippines, to the said
Material Distributors (Phil.) Inc. for and in consideration of the
nominal sum of P100. Later, Harry Lyons, according to himself, acting
as President, entered into a purchase-lease agreement with the
corporation Harry Lyons Construction Inc. (whose name was later changed
to Malakas Construction Inc.) whereby a great deal of the equipments,
particularly that in Malolos, Bulacan, was delivered to the aid
company by way of lease.

Harry Lyons further claims that about the first day of July, 1947,
in consideration of a loan of P17,000 made to him by Atty. Allison J.
Gibbs, without interest, he (Lyons) conveyed 98 of his 195 shares of
stock of the Material Distributors (Phil.) Inc. to the said Allison J.
Gibbs as a result of which, Harry Lyons retained only 97 shares, Atty.
Allison J, Gibbs had 49 shares and his brother Atty. Finley J. Gibbs
another 49 shares, while Levant Brown, Francisco Collantes, Grover C.
Brooks, Creal M. Lyons, and Raymond W. Lehman had one share each. It is
further claimed on behalf of Harry Lyons that about the same time that
he conveyed 98 of his 195 shares, as he was about to leave the
Philippines for Australia for a short visit, he gave a proxy to Allison
J. Gibbs authorizing the latter “to attend and represent him at any and
all meetings of the stockholders of the Material Distributors (Phil.)
Inc. and to vote upon any and all matters or questions, and he thereby
ratifies all that Atty. Gibbs would do in the premises” but that this
authority or proxy was good only during his absence from the
Philippines. lie further claims that Atty. Gibbs, taking advantage of
and abusing this authority, called several meetings of the stockholders
of the company and had himself elected General Manager and later
President of the same company to the exclusion of himself (Lyons) and
his wife Greal; that Atty, Gibbs and his associates later passed a
resolution calling upon the stockholders and subscribers to pay up the
balance of their subscriptions fixing a date for said payment under
penalty of having the subscribed shares sold at public auction, and all
this, while Harry Lyons was already in the Philippines and when the
proxy in favor of Atty. Gibbs had already lapsed and was no longer in
force.

The foregoing facts, tho not complete, will in some measure explain
the alleged interests of the different parties in the property herein
involved, referred to in the order of sale by Judge Sanchez, as well as
the reasons behind the five civil cases now pending before said Judge
and for which the joint order of sale was issued.

On three occasions—July 12, 1948, July 19, 1948 and September 1, 1948, petitions for the appointment of a receiver pendente lite
to take charge of the assets of the Material Distributors (Phil.) Inc.
were filed on behalf of Lyons. On September 9, 1948, Judge Sanchez
appointed one Prentice M. Miles as receiver of the properties deposited
at 179 Inverness, Sta. Ana, Manila, of which Miles had already taken
possession. It will be well to state that the lot at 179 Inverness,
Sta. Ana where the machineries and equipment are located, belongs to
one Stewart E. Tait, leased to Marsman, Inc. and, presumably, subleased
to Materials Distributors (Phil.) Inc.

On October 1, 1948, Harry Lyons petitioned the court to enlarge the
scope of 1he receivership given to Miles so as to include the
equipments located at Malolos,. Bulacan, on the ground that according
to his own inspection, some of the said equipments in Malolos had been
stripped and others abandoned and left at the mercy of the elements.
The record does not show what action, if any was taken by the court on
this motion. But on March 1, 1949, Harry Lyons in an urgent petition
informed the trial court that receiver Prentice M. Miles had completely
abandoned all the properties under his receivership at 173 Inverness,
Sta, Ana, Manila, said Miles having allegedly surrendered said
properties to the owner or lessor of the lot or premises, Stewart H,
Tait who was taking possession of the same thru his counsel Atty.
Allison J. Gibbs, and he asked the court to appoint another receiver
not only to keep and preserve the said equipment but also to keep it
away from Atty. Gibbs.

Then, on April 27, 1949, the Material Distributors (Phil.) Inc. and
the Malagas Construction Inc. represented by Attys. Allison J. Gibbs
and his brother Finley J. Gibbs and their law partners filed in the
trial court an urgent motion to sell, alleging among other things that
ever since October, 19^-8, both corporations had sought to sell the
machinery and equipments and to deposit the proceeds less expenses with
the Clerk of Court but due to the opposition of other parties, the
court had refused to act on the petition; that because of the adverse
publicity from the various law suits (presumably referring to the five
civil cases aforementioned) it was impossible to interest reputable
parties to even inspect and submit their offers to purchase the
equipments owned by said corporations; that because of the adverse
publicity produced by said suits, both corporations have been unable to
engage in business and so had to shut down all business operations;
that the equipments in the possessions of both corporations were
rapidly deteriorating and that unless sold before the coming rainy
season, said equipments will become valueless except as junk and scrap
iron; and that the Malakas Construction Inc. was incurring an expense
of approximately P1,500 a month in guarding the equipments in its
possession; that overhead expenses of the Manila offices of both
corporations amount to approximately P3,000 monthly. Harry Lyons
vigorously opposed this motion to sell, alleging that all the
properties in question really ………. to him and was merely held in
trust for him by the Material Distributors (Phil.) Inc., and that it
would be unfair to sell said property over his objection.

As we understand it, the position maintained by Harry Lyons not.
only in the present petitions for certiorari but also in the five civil
cases pending in the trial court is that he is the real owner of all
the equipments and property involved in these proceedings located at
Sta. Ana, Manila and at Malolos, Bulacan, and that furthermore, he is
not only the organizer but also the majority stockholder and
practically the owner of the Material Distributors (Phil.) Inc. which
is holding those properties in trust for him; and that the respondents
herein, particularly Atty. Allison J. Gibbs,are mere intruders who, by
manipulations and unfair tactics had practically eliminated him and his
wife from the Material Distributors (Phil.) Inc., have taken control of
the Malakas Construction Inc. which holds and possesses the equipments
at Malolos, Bulacan, and … now desire to sell all these equipments at
presumably great loss and at a very low price, all to his great
prejudice.

From the record we gathers the impression that Harry Lyons is not
opposed to the eventual sale of the equipments. What he wants is that a
competent man be first appointed as receiver to take charge of the
machineries and equipments, have them reconditioned and later sold
under more advantageous conditions and at a good price. This scheme
seems to be fair enough and if it is feasible and can be carried out,
we can see no valid objection to it. This, on the assumption that he
(Lyons) is the real owner, if not of the whole, at least of a
considerable part of the property involved, altho, until the five civil
cases pending in the trial court are finally determined, we must also
consider the possibility that the different parties therein,
particularly the Gibbs brothers may have a material and substantial
interest in the property. At least, according to the agreement between
Harry Lyons and Atty. Allison J. Gibbs, the latter and his brother
Finley were to have 98 shares as against 97 shares of Harry Lyons in
the Material Distributors (Phil.) Inc., this, further assuming that the
Wichita company in America no longer has a valid claim to the property.

We have carefully gone over the order of sale issued by the
respondent Judge. Under the circumstances we have to accept the
findings of fact contained in his order and it seems that said findings
and considerations find basis and support in the pleadings and their
annexes now before us.

In order to determine whether respondent Judge had abused his
discretion in deciding to issue the order of sale of the property in
question, we should consider the circumstances and the conditions in
which said property was then found. There is every reason to believe
that the equipment since 1948 has not been well-kept and preserved,
perhaps due to its very nature, weight and bulk. That is the reason why
Harry Lyons himself was so much concerned, even frantic, in having a
receiver appointed to take charge of the property and arrest
deterioration and depreciation due to disuse and to exposure to the
elements. According to his petition for receivership of September 7,
1948, particularly the affidavit of Civil Engineer Ramon Veto attached
to said petition, as per inspection of said Engineer on September 4,
1948, of the equipments at 179 Inverness, Sta. Ana, Manila, during the
flood of September 2, 1948, at the deepest part of the yard where the
equipments were stored, the water was 1 1/2 meters high, and that to
the best of his technical knowledge, unless said equipments were
overhauled and put in condition they will be useless and become mere
junk in less than two week’s time. Again, in his petition of October 1,
1948, to enlarge the scope of the receivership, Harry Lyons informed
the court that some of the equipments at Malolos, Bulacan had been
found stripped and others abandoned and at the mercy of the elements.
In said petition he speaks of an attached affidavit which gives
“reasonable grounds of apprehension as to the conditions of the
machineries and equipment, now at Malolos, Bulacan,” but said affidavit
is not before us. Anyway, it is not hard to imagine that said
equipments on July 26, 1949, when the order of sale was issued, stored
at places completely at the mercy of the elements and subject even to
floods, was fast deteriorating and losing its value as such equipment,
and that something had to be done either to store and keep it, and if
possible recondition it, or sell it outright. The respondent Judge had
to decide between these two alternatives, and without loss of time. But
this was not all. It seems that the two companies,—the Material
Distributors (Phil.) Inc., which was supposed to own all the property,
and the Malakas Construction Co., which was leasing and holding the
equipments at Malolos, Bulacan, had no funds to continue paying guards
and caretakers, including the fees of a receiver if one was appointed,
much less the amount needed to recondition the machineries and
equipment in order to attract buyers and command a better price. We
quote some portions of Judge Sanchez’s order which we deem important
and pertinent:

“Since the very start, in view of the multifarious
interests involved, the opposing claims, and the fact that even at the
pleading stage the records of these cases plainly indicate a long and
protracted litigation, the court attempted as best it could to bring
the parties into an equitable settlement of their differences without
the necessity of trial. The effort of the court did not bear fruit.
Thus it was that the trial on the merits started. Several sessions were
had and even then the direct examination of only one witness (Allison
J. Gibbs), as the court understands, has not covered a respectable
fraction of his direct testimony.

“Primarily involved are
certain heavy equipment and machinery for purposes of construction
work. As adverted to at the beginning, part of the equipment is at No.
179 Inverness Street, Santa Ana, Manila, and the rest at Malolos,
Bulacan. The equipment is not in use. That there was and there will be
deterioration does not need the adroit mind of an engineer to realize.
In the meantime, as days go on, it must be expected that depreciation
will continue, and as depreciation continue the value correspondingly
declines. As late as June 22, 1949, information was received by the
court to the effect that because of the June rains the equipment at
Inverness Street was partly under water. Now, the rainy season is at
hand.

“In the meantime, expenses must be incurred for the
preservation of these properties. The parties can ill afford to leave
the properties at the mercy of the elements or the looters. Tue
property at Malolos is under guard. The guardians of the said property,
naturally, must be paid.

“The-owner of the land at Calle
Inverness (Stewart S. Tait) and the lessee thereof (Marsman, Inc.) have
served notice that they would protect their interests in connection
with the properties located thereat. Both claim liens on the property
for rentals. Marsman, Inc. made it plain that they would not answer for
losses, theft or pilferage. They need the space occupied by the
equipment which hampers their activities. This situation may mean one
or both of two things: The said properties may be thrown out of the
premises and/or rentals have to be paid. None of the parties has
offered to advance the necessary money for the preservation or payment
of rentals. Inaction may well result in a great part of the value of
the property being eaten up by expenses or progressively increasing
liens thereon.

*           *           *           *           *           *           *

“The primary question drumming the mind of the court is what to do’at
this stage, for the benefit of the parties. At first the court was
under the impression that Harry Lyons would be willing to put up money
for the purpose of reconditioning the equipment so that the components
thereof may be in serviceable condition and thereafter leased; and
whatever is expended on the property would be a gravamen thereon. It
developed later in the course of the arguments on this point that such
proposition of Harry Lyons was predicated on the condition sine qua non that the man to be proposed as receiver would first receive his Imprimatur.

*           *           *           *           *           *           *

“Another situation which faces the court is the fact that the parties
amongst themselves could not agree on a receiver. If one party proposes
a person as receiver the other objects, and vice versa. Furthermore,
the court is faced with the situation that there are no sufficient
funds available within the reach of the court with which to recondition
the property if a receiver be appointed. The court is not even in a
position to say whether or not a receiver appointed by the court would
be willing to undertake the job of receivership without any assurance
that for his efforts he would be justly compensated.

“Receivership is not a panacea for all business ills. Proof of this is
the fact that the partial receivership issued by the court on behalf of
Prentice II. Miles was not a happy experiment. It has to be closed.”

Particularly significant is the following paragraph of the order:

“All the parties involved in the cases now before
this branch of the court including Stewart in. Tait and Mars-man,
Inc.—except Harry Lyons—are agreed in that the most feasible solution
to the difficulties is to sell the properties and deposit the proceeds
thereof in court pending the final determination of these suits and the
claims thereon.”

And, the lower court finally says:

“Balancing the claims of all of. the parties in one
equation, the court is of the opinion that.. the best remedy to the
situation is the disposal of the properties by sale.”

Considering all the facts and circumstances involved in these
cases, particularly those that confronted the trial court when it had
to make a decision as to the best solution to be arrived at or step be
taken,—either the appointment of receiver if a competent man could be
found, agreeable to all the parties, who was willing to serve with the
payment of his compensation deferred until funds are available, either
from the parties or from the eventual sale of the machinery and
equipment after reconditioning, or to sell the properties immediately,
the proceeds to be deposited in court, we cannot say that respondent
Judge committed an error of judgment or appreciation or abused his
discretion in deciding upon immediate sale. On the contrary, we are
inclined to believe that under the circumstances, his choice and
decision was probably the best.

In view of the foregoing, we find no merit in these five petitions
for certiorari and the same are hereby dismissed. The petitioners will
pay costs for one case only. So ordered.

Moran, C. J., Ozaeta, Pablo, Bengzon, Tuason, and Reyes, JJ., concur.