D. Receivership (Rule 59)

Receivership (Rule 59)

Concept

Receivership places property under a receiver’s administration when the circumstances warrant judicial intervention. The need for a receiver must be established on the facts; appointment is not justified merely because a party requests it. A court must exercise particular care before placing assets or business operations under a receiver. (Hiteroza v. Cruzada, G.R. No. 203527, 27 June 2016)¹

Governing provisions

Rule 59 governs receivership. Its Section 8 addresses termination, the receiver’s accounting and discharge, delivery of property, and compensation. Separate provisions permit appointment of a receiver in proceedings involving a judgment obligor’s property and in corporate dissolution proceedings. (Rule 59, Rules of Court)² (Rule 59, Sec. 8, Rules of Court)³ (Rule 39, Sec. 41, Rules of Court)⁴ (Rule 104, Sec. 3, Rules of Court)⁵

Requisites / Rules

• Evidence for appointment. The court must have sufficient evidence of imminent danger of dissipation, loss, or destruction of assets, or paralysis of business operations prejudicial to stakeholders. An appointment made prematurely, without adequate evidence of the circumstances relied upon, may constitute grave abuse of discretion. (Hiteroza v. Cruzada)¹
• Receivership in aid of execution. The court may appoint a receiver of a judgment obligor’s property and forbid its transfer, disposition, or interference, insofar as the property is not exempt from execution. (Rule 39, Sec. 41, Rules of Court)⁴
• Termination. Once the court determines, on its own initiative or on either party’s motion, that a receiver is no longer necessary, it must give interested parties notice and a hearing, settle the receiver’s accounts, direct delivery of the property to the person entitled to it, and discharge the receiver. Reasonable compensation may be taxed as costs against the defeated party or apportioned as justice requires. (Rule 59, Sec. 8, Rules of Court)³

Distinctions

A receiver appointed over a judgment obligor’s property assists in satisfying a judgment. In a corporate dissolution proceeding, a receiver may instead be appointed to collect corporate assets and pay corporate debts after the court renders judgment dissolving the corporation. The authority for appointment and the work assigned to the receiver should therefore be identified from the proceeding involved. (Rule 39, Sec. 41, Rules of Court)⁴ (Rule 104, Sec. 3, Rules of Court)⁵

Key doctrines

Findings made on an application for receivership do not necessarily settle the principal dispute. Their possible preclusive effect depends in part on whether the application was a separate principal action or an ancillary remedy; findings on an ancillary application may leave the principal matter open to fuller litigation. (Pascual v. Pulumbarit, G.R. No. 166573, 14 October 2015)⁶

Exceptions

A judgment in an action for receivership is enforceable after rendition and is not stayed merely by an appeal, unless the trial court orders otherwise. On appeal, the appellate court may suspend, modify, restore, or grant receivership; a stay may be made subject to terms protecting the adverse party. (Rule 39, Sec. 4, Rules of Court)⁷

Bar tip

Identify the proceeding and the evidence of necessity before discussing appointment. If the question concerns ending receivership, address notice and hearing, accounting, delivery, discharge, and compensation. (Hiteroza v. Cruzada)¹ (Rule 59, Sec. 8, Rules of Court)³