RULE 59 - Receivership

Receiver
An indifferent person between the parties to a cause, appointed by the court to receive and preserve the
property or fund in litigation pendente lite, when it does not seem reasonable to the court that either party
should hold it.

In What Cases Receiver May Be Appointed

a. interest in the property or fund subject of the action and such is in danger of being lost, removed, or
materially injured
b. mortgaged property is in danger of being wasted or materially injured and that its value is probably
insufficient to discharge the mortgage debt, OR that the parties have so stipulated in the contract of
mortgage;
c. After judgment, to preserve the property during the pendency of the appeal, or to dispose of it
according to the judgment, or to aid in execution when execution has been returned unsatisfied or
the judgment debtor refuses to apply his property to satisfy judgment, or to carry out the judgment;
d. most convenient and feasible means to preserve, administer, or dispose of the property in litigation.

Who may appoint

- court where the action is pending
- Court of Appeals
- Supreme Court
- or a member thereof

How
1. upon verified application
2. file a bond in an amount to be fixed by the court
3. comply with additional bond required by the court as further security for damages
4. issuance of order appointing the receiver (or denial of application)
5. the receiver shall be sworn to perform faithfully and shall file a bond
6. termination/discharge of receiver

Note:
1. the appellate court may allow an application to be filed in and decided by the court of origin and the
receiver appointed to be subject to the control of said court
2. copy of bond shall be served to interested party who may except to its sufficiency or of the surety or
sureties thereon.
3. Judgment to include recovery against sureties

When
- When the action is pending
- Pendency of appeal
- During the pendency of an appeal,

Purpose of Bond
- Applicant: To pay such party all damages he may sustain in case the applicant shall have procured
such appointment without sufficient cause
- Adverse party: To pay the applicant all damages he may suffer by reason of the acts, omissions, or
other matters
- Receiver: To the effect that he will faithfully discharge his duties in the action or proceeding and obey
the orders of the court

Reasons of denial or discharge of receiver

- when the adverse party files a bond executed to the applicant
- if it is shown that his appointment was obtained without sufficient cause
 - If bond is insufficient in amount, or if the surety or sureties thereon fail to justify
- a bond sufficient in amount with sufficient sureties approved after justification is not filed

Powers of Receiver
(subject to the control of the court)
1. bring and defend, in such capacity, actions in his own name
2. take and keep possession of the property in controversy
3. receive rents
4. collect debts due to himself as receiver or to the fund, property, estate, person, or corporation of
which he is the receiver
5. compound for and compromise the same
6. make transfers
7. pay outstanding debts
8. divide the money and other property that shall remain among the persons legally entitled to receive
the same
9. generally to do such acts respecting the property as the court may authorize

Note:
Funds in the hands of a receiver may be invested only by
1. order of the court
2. upon the written consent of all the parties to the action

No action may be filed by or against a receiver without leave of the court which appointed him

Liability for refusal or neglect to deliver property to receiver

Elements:
1. A person who refuses or neglects to deliver to the receiver all the property, money, books, deeds,
notes, bills, documents and papers
2. within his power or control
3. subject of or involved in the action or proceeding
4. reasonable demand

Liabilities:
1. contempt
2. liable to the receiver for the money or the value of the property
3. damages

Termination of receivership
How:
1. court, motu proprio or on motion of either party
2. court to determine whether the necessity for a receiver no longer exists
3. due notice to all interested parties and hearing
4. settle the accounts of the receiver
5. direct the delivery of the funds and other property in his possession to the person adjudged to be
entitled to receive them
6. order the discharge of the receiver from further duty

Compensation of receiver
The court shall allow the receiver such reasonable compensation as the circumstances of the case warrant, to
be taxed as costs against the defeated party, or apportioned, as justice requires.

The amount, if any, to be awarded to any party upon any bond filed in accordance with the provisions of this
Rule, shall be claimed, ascertained, and granted under the same procedure prescribed in section 20 of Rule
57. (9a)
Claims Against Bond
It shall be filed, ascertained and granted under the same procedure as Section 20, Rule 57, whether it be
1. damages against the applicant’s bond for the unlawful appointment of the receiver or
2. enforcing the liability of the sureties of the receiver’s bond by reason of the receiver’s management
(no need to file a separate action).

When to Apply for Damages Against the Attachment Bond

1. Before trial;
2. Before appeal is perfected;
3. Before judgment becomes executory; or
4. In the appellate court for damages pending appeal, before judgment becomes executory.

Claims for Damages

Claims for damages cannot be subject of independent action EXCEPT:
1. When principal case is dismissed by the trial court for lack of jurisdiction without giving the claiming
party opportunity to prove claim for damages;
2. When damages was sustained by a third person not a party to the action.