MARCELO D. MENDIOLA, PETITIONER, VS. THE HONORABLE COURT OF APPEALS, MAXIMO VITUG, PRAGMACIO VITUG, CONCORDIA KABILING AND MARIA FAJARDO, RESPONDENTS.

This is a petition to review the decision of the Court of Appeals^[1]
in CA-G.R. No. 43149-R promulgated on January
10, 1970 setting aside the Orders of the Court of First Instance of
Pampanga, Branch III.

Records show that this case originated in the Court of First
Instance of Pampanga as Civil Case No. 3348 where a
complaint was filed by Marcelo D. Mendiola as special
administrator of the Intestate Estate of Donata Montemayor, against Pragmacio Vitug and Maximo Vitug, children of the late Donata
Montemayor, and several others.

The Amended Complaint alleged inter alia,
that during her lifetime, the deceased Donata Montemayor executed a Contract of Lease in favor of
defendant Maximo Vitug and Pragmacio Vitug over a parcel of
land for a five crop-year period; that through fraud, undue influence and
without any consideration, said defendants affixed the thumbmark
of Donata to an Extension of the aforesaid Contract
of Lease for another five crop-year period; that through undue influence,
deceit and fraud, defendant Pragmacio affixed the thumbmark of Donata, when the
latter was already completely blind, mentally unsound and absolutely
incompetent, to a General Power of Attorney in his favor; that pursuant to such
General Power of Attorney, defendant Pragmacio executed
a Contract of Lease in favor of his co-defendant Maximo
over several parcels of land owned by Donata; that
likewise acting as attorney-in-fact of Donata and for
the purpose of circumventing the law, defendant Pragmacio
executed Deeds of Absolute Sale in favor of his other co-defendants over real
properties owned by Donata and thereafter bought some
of these properties back in his name from said co-defendants.  It was further alleged that defendants Maximo and Pragmacio never paid
the rentals stipulated in the Contracts of Lease above-mentioned and have
retained possession of the properties subject of the lease despite the
expiration of the period provided for in the contracts.  Complainant, therefore, prayed for the
annulment of the General Power of Attorney, the Contracts of Lease and
extension thereof and the Deeds of Absolute Sale mentioned in the Amended
Complaint, including all subsequent documents and/or transactions arising
and/or emanating from the said documents. 
It was also prayed that defendants be required to pay the accrued
rentals up to the time they vacate the properties in question, and that
defendant Pragmacio be ordered to render an
accounting of all fruits, rentals, benefits and other amounts received as
attorney-in-fact of the deceased Donata Montemayor.^[2]

Defendants Maximo and Pragmacio, in their Answer, admitted that they gathered the
produce of the lands in question on the strength of the lease contracts subject
of the Amended Complaint, and alleged that they paid all the rentals due Donata Montemayor during her
lifetime.  They vigorously denied the
allegation that Donata Montemayor
was legally incompetent at the time she executed the contracts of lease and
general power of attorney in question, alleging that the deceased Donata during her lifetime was sued by her own children
(other than answering defendants), namely Anunciacion,
Salvador, Francisca (represented by her children), Jesus, Enrique, and Prudencia, in two civil cases, one filed in 1960 and the
other in 1964; that as a consequence of said cases, properties of Donata were sold at public auction; that thereafter Donata caused the preparation of the General Power of
Attorney in favor of defendant Pragmacio so that the
latter could raise more than P100,000.00
to be used for the redemption of the properties sold at public auction,
as well as the payment of attorney’s fees, land taxes, registration fees and
other incidental expenses; that Pragmacio sold
properties of Donata pursuant to such General Power of Attorney with an agreement
with the respective vendees that should Donata be
financially able in the future, they would resell the properties to her, and if
not, then to defendant Pragmacio; that the
proceeds of the sale made by Pragmacio were used to
effect the redemption of Donata’s properties sold at
public auction in the aforementioned civil cases and which amounts were in fact
received by the children and grandchildren of Donata
who had sue her.^[3]

Before trial of Civil Case No. 3348, therein plaintiff Mendiola filed a verified Petition for the Appointment of a Receiver reiterating his interest in
the ricelands and sugarcane lands subject matter of
the action and alleging that the produce of said properties, valued at
P70,000.00, more or less, annually, was about to be harvested and in danger of
being lost, wasted, removed or materially injured.  He therefore, prayed that a receiver be
appointed to take possession of the properties and the products thereof, to
guard and preserve the same pending
final determination of the case.^[4]

Defendants opposed the Petition contending that the appointment
of a receiver is superfluous and improper for the following reasons:  (1) the plaintiff, as administrator of the
estate of the deceased Donata Montemayor,
was already in custodia legis
of the properties left by said decedent; (2) plaintiff has no legal right before
actual trial and final adjudication of the conflicting rights of the parties to
take possession of the lands in question and the fruits thereof; (3) the action
does not involve lands and their fruits but the annulment of a general power of
attorney, deeds of sale and contracts of lease; the documents sought to be
annulled are all duly notarized and registered, hence presumed to be valid; the
mere allegation of fraud in the execution of the documents in question is not
sufficient to overthrow the presumption of legality; (6) even if Donata Montemayor were alive, she
had no legal right to ask for the recovery of the possession of her lands from
the lessees and vendees by the
appointment of a receiver; and (7) to grant the petition for appointment of a
receiver would virtually amount to prejudging the case on the merits before the trial and judgment on the validity or
nullity of the documents sought to be annulled.^[5]

On January 14, 1969,
the Court of First Instance ordered the appointment of a receiver to be recommended by the parties, provided that if they
do not agree, the Court would appoint a person of its own choice.^[6] Reconsideration of this Order sought by the
defendants was denied by the Court in its Order dated March
24, 1969.^[7]

Defendants then went to
the Court of Appeals by way of a Petition for certiorari and prohibition
challenging the aforementioned Orders of the Court of First Instance and praying
that a writ of preliminary injunction be issued ex parte
enjoining, prohibiting and restraining the enforcement of said Orders.^[8]

Pending action by the appellate Court on the Petition, plaintiff Mendiola in the Court of First Instance filed a
Manifestation praying that a receiver be appointed without prejudice to any
restraining order that may be issued by the Court of Appeals.^[9]
Granting the prayer, the Court of First Instance by its Order dated June 19, 1969 appointed Estanislao Laxa, Municipal
Treasurer of Lubao, Pampanga
as receiver, after requiring the plaintiff to file a bond in the amount of
P10,000.00 to answer for any
damages which defendants may suffer by reason of such appointment.^[10]

Meanwhile, pursuant to a Resolution of the Court of Appeals dated
July 24, 1969,^[11]
the Acting Deputy Clerk of Court of said court issued a Restraining Order of
even date requiring the respondents Court of First Instance Judge Honorio Romero and Marcelo D. Mendiola,
or any person or persons acting in their behalf or stead, to “REFRAIN and
DESIST from carrying out or enforcing the said orders of January 14, 1969
(Annex 1) and March 24, 1969 (Annex L), or from taking any further action in
said case, during the pendency of this case, or until
further order from this Court.”^[12]
Upon petition of counsel for respondent Mendiola, the
appellate Court clarified its Restraining Order by deleting the portion
“or from taking any further action in said case” and allowing the
Court of First Instance to hear the case on the merits to enable the parties to present their evidence.^[13]

After the parties filed
their respective pleadings and memoranda, the Court of Appeals rendered a
decision finding the appointment of a receiver to be not in order and setting
aside the Orders of the Court of First Instance complained of. Petitioner filed
a Motion for Reconsideration but the same was denied, hence the present
petition.

In his Brief, petitioner
assigns the following errors:

1.     
The Court of Appeals erred when it held that the
appointment of a receiver prior to the final determination by the lower Court
of the status of the parties in relation to the crops, plants, trees and
buildings constitutes abuse of discretion;

2.     
The Court of Appeals erred when it held that
when the action is for annulment of deeds of sale, said action does not involve
recovery of possession of the parcels of land affected by the contracts which
are the subject of the annulment proceedings;

3.     
The Court of Appeals erred when it reversed the
Order of the Court of First Instance of Pampanga
appointing a receiver to take care of the harvest, produce and fruits of the
lands subject matter of the various deeds of sale which are sought to be
annulled.^[14]

The pivotal issue raised
by petitioner is whether or not the appointment of a receiver by the Court of
First Instance on January 14, 1969 was in order.

Respondent Court correctly
stated that the appointment of a receiver pendente
lite is a matter principally addressed to and
resting largely on the sound discretion of the court to which the application
is made.  This Tribunal has so held in a
number of cases.^[15] However, receivership being admittedly a
harsh remedy, it should be granted with extreme caution.^[16] Sound reasons for receivership must appear
of record, and there should be a clear showing of a necessity therefor.^[17] Before granting the remedy, the court is advised to consider the consequence or effects thereof in order to
avoid irreparable injustice or injury to others who are entitled to as much
consideration as those seeking it.^[18]

The facts and
circumstances attendant to each particular case of receivership determine the
soundness of the exercise of discretion of the court.^[19] We have gone over the record of the instant
case and find that the Court of First Instance acted arbitrarily in granting
the petition for the appointment of a receiver. 
We agree with respondent Court of Appeals that “there (was) no
sufficient cause or reason to justify placing the lands in question under
receivership.”^[20]

At the time the Court of
First Instance issued the assailed Order dated January 14, 1969, the case had not yet gone to trial.  Before said Court then were merely the
pleadings so far filed by the parties – the Amended Complaint, Answer to
Amended Complaint, Petition for Appointment of a Receiver, and Opposition to
Petition for Receivership – and their respective annexes, on the basis of which
the Court ordered that a receiver be appointed. 
It likewise appears that no hearing was held on the Petition for the
appointment of a receiver or even on the main action itself.

Extant from the
aforementioned pleadings and their respective annexes are the following
undisputed facts:  Private respondents
are in material occupation of the properties sought to be placed under receivership.  In addition to such physical possession,
private respondents have Torrens
certificates of title in their names and/or Deeds of Sale executed in their
favor over some of the parcels of land. 
As to the properties not covered by such titles or contracts of sale,
private respondents are lessees thereof under contracts of lease.  All the documents in question appear on their
face to have been fairly and regularly executed, signed in the presence of two
witnesses, and duly notarized.

Private respondents,
therefore, clearly have prima facie valid and legal claims to the
properties subject of the documents sought to be annulled in the main
action.  The validity of such documents
is presumed until proof to the contrary is adduced.  This is in consonance with the well-known
presumption of regularity and lawfulness of private and commercial
transactions.^[21] Such presumption is fortified by the fact
that the documents are all notarized. 
“A rule of long standing which, through the years, has been adhered
to is that a notarial document is evidence of the
facts in clear, unequivocal manner therein expressed.”^[22] Moreover, being actual possessors of the
lands covered by the documents sought to be annulled, private respondents are
entitled to protection.  Article 539 of
the New Civil Code of the Philippines provides that “Every possessor has a
right to be respected in his possession; and should he be disturbed therein he
shall be protected in or restored to said possession by the means established
by the laws and the Rules of Court.” Furthermore, with respect to the
lands already registered in the names of private respondents, the law is
strongly in their favor.  Pertinent
portions of Section 38 of Act No. 496, otherwise known as the Land Registration
Act,^[23] state: 
“Every decree of registration shall bind the land, and quiet title
thereto x x x.  It shall be conclusive upon and against all
persons x x x.  Such decree shall not be opened by reason of
the absence, infancy, or other disability of any person affected thereby, nor
by any proceeding in any court for reversing judgments or decrees; subject,
however, to the right of any person deprived of land or interest therein by
decree of registration obtained by fraud to file in the competent Court of
First Instance a petition for review within one year after entry of the decree,
provided no innocent purchaser for value has acquired an interest.”

For herein petitioner, on
the other hand, there is nothing in the record to support his bare and
self-serving allegations that there was fraud in the execu­tion of the
documents sought to be annulled.  No
evidence had been adduced thereon.

This is not to say that a
hearing is an indispensable requirement for the appointment of a receiver.  As petitioner correctly contends in his first
assignment of error, courts may appoint receivers without prior presentation of
evidence and solely on the basis of the averments of the pleadings.  Rule 59 of the Revised Rules of Court allows
the appointment of a receiver upon an ex parte
application.^[24] Nevertheless, such procedure is drastic and
must be resorted to only in extreme cases and only where imperative necessity
requires it,^[25] more so if the purpose or effect of the
receivership is to dispossess a party litigant of the property
in litigation.^[26] In other words, not in all instances is it
within the discretion of a trial court to grant a petition for receivership
without the benefit of hearing.  Thus, in
the case of Leviste vs. Hon. Ramos, et al.,^[27] this Court upheld the denial by the lower
court of the application for the appointment of a receiver stating that
“(a)s the good faith or bad faith of the respondents is yet to be
determined by the respondent court, the
status of the parties in relation to the crops, plants, trees and buildings
sown and erected thereon should not be disturbed until after the case shall
have been fully decided.”^[28] And in De los
Reyes vs. Hon. Bayona, et al.,^[29] the order of the lower court appointing a
receiver was set aside since by a transfer of possession of the properties in
litigation from therein petitioner De los Reyes to a receiver,
therein respondent Castro would be obtaining indirectly what she would not
obtain directly, that is, deprive De los Reyes of the
possession of the properties until the controversy between them is
finally settled.^[30]
In the De los Reyes case, a document
purporting to be a deed of sale with right of repurchase was in question.  One of the parties claimed that the deed did
not express the true intention of the parties but was merely a mortgage to
secure the payment of a loan.^[31]

Thus, while as a general rule a reviewing court will not
interfere with the trial court’s exercise of discretion in receivership
matters, such interference is called for where, as in the instant case, it is
shown that the element of arbitrariness taints the actuation of the lower
court.^[32]
As shown above, the particular facts and circumstances of the case at bar show
that the Court of First Instance did not act with reasonable­ness, but in a
capricious, arbitrary and whimsical manner.

WHEREFORE, the petition is hereby denied and the decision
of the respondent Court of Appeals sought to be reviewed is affirmed.  Without pronouncement as to costs.

SO ORDERED.

Teehankee, (Chairman), Makasiar, Fernandez, and
Melencio-Herrera, JJ., concur.

^[1]
Special Fifth Division, Mendoza, J.,
ponente, Lucero and Perez, JJ., concurring.

^[2]
C. A. Rollo, pp. 61-72.

^[3]
C.A. Rollo, pp.
93-106.

^[4]
Ibid., pp. 107-109.

^[5]
Ibid., pp. 110-117.

^[6]
Ibid., pp. 118-123.

^[7]
Ibid., pp. 137-140.

^[8]
Ibid., pp. 1-15.

^[9]
Ibid., pp. 146-147.

^[10]
Ibid., pp. 173-174.

^[11]
Ibid., p. 152.

^[12]
Ibid., p. 153.

^[13]
Ibid., p. 184.

^[14]
Brief for Petitioner-Appellant, pp.
10-11.

^[15]
Mendoza vs. Arellano, 36 Phil.
59, 63-64; Teal Motor Co. vs. Manila CFI, et al., 51 Phil. 549, 560-561;
Sabado vs. Cristina Gonzales, Inc., 53 Phil.
770, 778-779; Sanson vs. Barrios, 63 Phil.
198, 202; Sanson vs. Araneta,
64 Phil. 549, 553; Lacson vs. Hodges, 80 Phil.
415; Go Tecson vs. Macadaeg,
88 Phil. 605, 607; Medel vs. Hon. Aquino, et al., 92 Phil. 895, 898; Ralla
vs. Hon. Alcasid et al., 6 SCRA 311, 314; Alcantara vs. Hon. Abbas,
et al., 9 SCRA 54, 58; Duque, et al. vs. CFI
Manila, et al., 13 SCRA 420, 423; Chase vs. CFI
Manila, et al., 18 SCRA 602, 605; Surigao Development
Bank, et al. vs. Hon. Buslon et al., 48 SCRA
308, 322.

^[16]
Ysasi vs. Hon. Fernandez, et al., 23 SCRA 1079, 1084, citing Velasco vs. Go Chiuco,
28 Phil. 39, 41; Tuason vs. Concepcion, 54 Phil. 408, 419, and Claudio vs. Zandueta, 64 Phil. 812, 818.

^[17]
Motoomull vs. Hon. Arrieta,
et al., 8 SCRA 172, 176; Arce vs. Sundiam, 70 SCRA
44, 52-54.

^[18]
Velasco vs. Go Chiuco, supra; Claudio vs. Zandueta,
supra.

^[19]
53 C.J., pp. 35-36, cited in Ralla vs. Hon. Alcasid, et
al., supra.

^[20]
C.A. Decision, p. 5; Rollo,
p. 22.

^[21]
Section 5, paragraphs p and q, Rule
131, Revised Rules of Court.

^[22]
Yturralde vs. Azurin,
et al., L-22158, May 30, 1969, 28 SCRA 407, 417.

^[23]
This provision is reproduced
substantially in Section 31, last paragraph, and Section 32 of Presidential
Decree No. 1529, otherwise known as the Property Registration Decree.

^[24]
Section 3 thereof provides:  “If a receiver be appointed upon an ex
parte application, the court, before making
the order, may require the person applying for such appointment to file a bond
executed to the party against whom the application is presented in an amount to
be fixed by the court, to the effect that the applicant will pay such party all
damages he may sustain by reason of the appointment of such receiver in case
the appli­cant shall have procured such appointment without sufficient cause;
and the court may, in its discretion, at any time after the appointment,
require an additional bond as further security for such damages.”  See also Medel and Jojuyco vs. Hon. de Aquino,
et al., 92 Phil. 895, 897.

^[25]
Arce vs. Sundiam, supra, p. 52

^[26]
See also Mendoza vs. Arellano, supra, p.
64; Diaz and Elechicon vs. Hon. Nietes, et al., 110 Phil. 606, 610.

^[27]
L-14769, November 29, 1960, 110 Phil. 190.

^[28]
Ibid., p. 193.

^[29]
L-13832, March 29, 1960,
107 Phil. 447.

^[30]
Ibid., p. 454.

^[31]
Ibid., p. 451.

^[32]
Alcantara vs. Hon. Abbas,
et al., L-14890, Sept. 30, 1963,
9 SCRA 54, 58; Duque, et al. vs. CFI Manila,
et al., L-18359, March 26, 1965,
13 SCRA 420, 423, and cases cited therein.