VIGAN ELECTRIC LIGHT CO., INC. AND LUIS C. SINGSON, PETITIONERS, VS. HON. LODIVICO D. ARCIAGA, JUDGE OF THE COURT OF FIRST INSTANCE OF ILOCOS SUR; NATIONAL POWER CORPORATION; RE…

Vigan Electric Light versus Arciaga

The Case

This is a special civil action of certiorari and prohibition brought by the Vigan Electric Light Company and its president and general manager, Luis Singson, against Judge Lodivico Arciaga of the Court of First Instance of Ilocos Sur, the National Power Corporation, and the Province of Ilocos Sur. The petitioners ask the Supreme Court to annul two sets of orders issued by the respondent judge in two separate civil cases: first, an order setting aside a judicial compromise that had already been approved and partly performed; and second, an order placing the company's properties under receivership upon an ex parte motion, with the Clerk of Court appointed as receiver. The case matters because it fixes two enduring rules: a compromise judgment may be disturbed only for vices of consent or forgery, and receivership is a delicate equitable remedy that demands sworn allegations of specific facts and great caution, never precipitate action.

Procedural History

The National Power Corporation sued the Vigan Electric Light Company in the Court of First Instance of Ilocos Sur for unpaid electric power and energy. The parties entered into a compromise agreement, which the trial court approved in a decision rendered on April 29, 1968, expressly stating that the agreement was not contrary to law, public policy, or public morals. After the company paid the ten percent down payment and monthly installments, the Provincial Fiscal of Ilocos Sur, purportedly for the Province, filed a motion for reconsideration, followed by an amended motion, and the National Power Corporation filed its own unverified motion for reconsideration. The respondent judge granted these motions and set aside the compromise judgment. Meanwhile, the Republic filed a separate complaint for deficiency franchise taxes, and upon an urgent motion the respondent judge, ex parte, placed the company's properties under receivership. The petitioners then came to the Supreme Court by a special civil action of certiorari and prohibition, and the Court granted the petition.

Facts

On May 31, 1967, the National Power Corporation sued the Vigan Electric Light Company for unpaid electric power and energy amounting to 295,370 pesos and 97 centavos, plus interest, attorney's fees, and costs. On April 26, 1968, the parties executed a compromise agreement. The terms had been recommended for approval by the General Manager, approved by the Board of Directors on April 25, 1968, and the Board authorized the General Manager to sign. The company acknowledged an indebtedness of 390,137 pesos and 67 centavos and undertook to pay ten percent upon signing, then 5,000 pesos monthly for the first twelve months and 10,000 pesos monthly thereafter, plus current bills, with the National Power Corporation releasing all securities and mortgages. On April 29, 1968, the trial court approved the compromise in toto and rendered judgment in accordance with it.

The company paid the ten percent down payment of 39,013 pesos and 76 centavos and monthly installments of 25,000 pesos. On May 27, 1968, the Provincial Fiscal of Ilocos Sur, although never allowed to intervene, filed a motion for reconsideration alleging that the compromise was contrary to public interest and that the facts were not true. An amended motion followed, and on May 28, 1968, the National Power Corporation filed an unverified motion for reconsideration asking that the release of securities be clarified and that additional securities be executed. The company opposed, arguing that the compromise judgment was final and executory and not vitiated by any vice of consent.

On June 24, 1968, the Republic filed a complaint for deficiency franchise taxes of 57,773 pesos and 24 centavos. The next day, the fiscal filed an urgent motion for appointment of a receiver, alleging that the company's known indebtedness exceeded half a million pesos and that it was in imminent danger of insolvency. On June 26, 1968, the respondent judge granted the motion ex parte and appointed the Clerk of Court as receiver with a bond of only 1,000 pesos, directing the company's officers and employees to allow the receiver to take over. On June 27, 1968, the respondent judge granted the motions for reconsideration and set aside the compromise judgment, without any finding that the National Power Corporation's consent was vitiated by violence, force, intimidation, undue influence, or fraud.

Issues

• Whether or not the Province of Ilocos Sur, which was never admitted as an intervenor, had legal personality to move for reconsideration and set aside the compromise judgment in the collection case.
• Whether or not the respondent judge acted in excess of jurisdiction in setting aside a final and partly executed judicial compromise absent any vice of consent or forgery.
• Whether or not the respondent judge gravely abused his discretion in granting, ex parte and with precipitate haste, the appointment of a receiver over properties not the subject of the action, upon mere conclusions of insolvency.

Applicable Provisions

Section 2 of Rule 12 of the Revised Rules of Court, on intervention, provides:

A person may, before or during the trial, be allowed to intervene in an action if he has a legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both, or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof.

This provision governs the Province's attempt to intervene, which the Court found was never validly made.

Section 2 of Rule 59 of the Revised Rules of Court, on receivership, provides:

A receiver may be appointed by the court in which the action is pending, upon the relation of a creditor of a corporation, where the corporation has been dissolved, or is insolvent, or has forfeited its corporate rights.

This provision is the ground invoked for receivership, which the Court held was not sufficiently established by the applicant's allegations.

Ruling

On the first issue, the Court held that the Province of Ilocos Sur had no legal personality to file the motion for reconsideration. It was not a party, and it never obtained leave of court to intervene. Intervention must be sought before or during the trial, and a petition filed after trial and after decision is out of time. In any event, the Province had no interest in the subject matter, which was a purely personal action for the collection of a debt.

On the second issue, the Court held that the respondent judge acted in excess of jurisdictional authority. A compromise has the force of res judicata and cannot be disturbed except for vices of consent or forgery. The grounds invoked, namely insolvency and public interest, were not sanctioned by law. The National Power Corporation had approved the compromise through its Board, had received the down payment and installments, and was therefore estopped from assailing it. The Court stressed that the order setting aside the compromise contained no finding of vitiated consent.

On the third issue, the Court held that the appointment of a receiver is not a matter of strict or absolute right. The applicant must file a sworn application alleging specific facts sufficient to show insolvency or the imminence of insolvency, not broad conclusions. Solvency is presumed, especially for a going concern. The respondent judge granted the motion ex parte with precipitate haste, without hearing the company, and without considering the consequences, when he knew the obligation to the National Power Corporation had been settled by compromise and the foreclosure had been withdrawn.

Doctrine

A judgment upon a compromise is not appealable and is immediately executory, unless a motion is filed to set aside the compromise on the ground of fraud, mistake, or duress. A compromise has the force of res judicata upon the parties and cannot be disturbed except for vices of consent or forgery, and a party who has received the consideration is estopped from questioning its terms. Intervention must be sought before or during the trial, and one who is not a party and has not been admitted as an intervenor has no legal personality to assail the judgment. The appointment of a receiver is a delicate remedy, not a matter of absolute right, and requires an application under oath alleging specific facts showing insolvency or imminent danger of insolvency, for solvency is presumed especially where a going concern is involved.

Disposition

The petition was granted; the receivership orders and the orders setting aside the compromise were annulled and set aside, the restraining order was made permanent, and costs were taxed against the Province of Ilocos Sur and the National Power Corporation.

Remember This

Memorize the line that a compromise has the force of res judicata and cannot be disturbed except for vices of consent or forgery. Examiners use this case to test the finality of compromise judgments and the strict requirements, sworn and specific, for appointing a receiver.