Rule 59

Receivership
Section 1 to Section 4
Receiver
 Provisional remedy to preserve a property subject of litigation from further loss, wastage, damage,
dissipation for the protection of another person.
 An indifferent person, neutral between the parties, appointed by the court to receive and preserve
the property in litigation pendent lite when it is not seem reasonable to the court that either party
will hold it.
 Is a representative of the court appointed for the purpose of preserving and conserving the
property in litigation and prevent its possible destruction or dissipation if it were left in the
possession of any of the parties.
Q: Who among the parties does the receiver represent?
A: Neither the plantiff nor the defendant. He is an Agent of the Court.

Example: The ownership of a piece of land is in controversy. To be fair both parties claiming the land,
especially when both of them are in possession of it, the court will manage it. The court will appoint a
receiver and the income will be deposited. So it is the as an administrator.

Nature of Receivership
 The purpose of a receivership as a provisional remedy is to protect and preserve the rights of the
parties during the pendency of the main action. It also aimed at preservation of, and at making
more secure, existing rights.
o It cannot be used as an instrument for the destruction of those rights.
 The receivership provided in Rule 59 refers to the property, which is the subject of the action.
o It does not refer to the receivership authorized under banking laws and other rules of laws.

Who is a receiver?
 A person appointed by the court on behalf of all the parties to the action.
 For the purpose of preserving and conserving the property in litigation and preventing its possible
destruction or dissipation if it were left in the possession of any of the parties.

Q: Who appoints the receiver?

A: 1. Court where the case is pending.
2. By the CA, or a member thereof.
3. By the SC, or a member thereof.
Note: Under the new rules the application for receivership is now verified.
When may a receiver be appointed?
 When it appears from the verified application and such other proofs the court may require, that the
party applying for the appointment of a receiver has an interest in the property or fund which is the
subject of the action or proceeding and:
o that such property or fund is in danger of being lost, removed, or materially injured unless
a receiver be appointed to administer and preserve it.
 When it appears in an action by the mortgagee for the foreclosure of a mortgage that:
o The property is in danger of being wasted or dissipated or materially injured, and that its
value is probably insufficient to discharge the mortgage debt, or;
o That the parties have so stipulated in the contract of mortgage.
 After judgment:
o To preserve the property during the pendency of an appeal, or
o To dispose of it according to the judgment, or
o To aid execution when the execution has been returned unsatisfied or the judgment obligor
refuses to apply his property in satisfaction of the judgment, or otherwise to carry the
judgment into effect.
 Whenever in other cases it appears that:
o The appointment of a receiver is the most convenient and feasible means of preserving,
administering or disposing of the property in litigation.
Bar Question: A filed a case against B to collect unpaid loan. B, the defendant has no other property
left except a piece of land. Meaning of A wins, that land is the only property the he can levy. And to
preserve the property A, the plaintiff filed an application to place the property under receivership. Is the
petition proper?
Answer: The Supreme Court said No, because receivership is only proper when the property to be
placed under receivership is the subject of the litigation. In this case, the subject of litigation is not the
property but money. I am collecting a loan which is different from recovery of possession or ownership
of land.

Illustration
Bar Question: Anna filed a complaint against Jose for the foreclosure of a mortgage of a furniture factory
with a large number of machinery and equipment. During the pendency of the foreclosure suit, Anna
learned from reliable sources that Jose was also engaged in furniture manufacturing such that from
confirmed reports Anna gathered, the machinery and equipment left with Jose were no longer sufficient to
answer for the latter’s mortgage indebtedness. In the meantime, judgment was rendered by the court in
favour of Anna but the same is not final yet.
Knowing what Jose has been doing. If you were Anna’s Lawyer, what action would you take to preserve
whatever remaining machinery and equipment left with Jose?
Suggested Answer: To preserve whatever remaining machinery and equipment are left with Jose, Anna’s
Lawyer should file a verified application for the appointment by the court of one or more receivers.
The rules provide that receivership is proper in an action by the mortgagee for the foreclosure of a
mortgage when it appears that the property is in danger of being wasted or dissipated or materially injured
and that its value is probably insufficient to discharge the mortgage debt (Section 1, Rule 59).

Requirements for appointment of a receiver

 A verified application must be filed by the party applying for the appointment of a receiver. The
applicant must have an interest in the property or funds subject of the action.
 The applicant must show that the property or funds is in danger of being lost, wasted or dissipated.
 The application must be with notice and must be set for hearing.
 Before issuing the appointment of a receiver, the court shall require the applicant to post a bond in
favour of the adverse party.
o When the receiver is appointed, the receiver shall take his oath but before doing so, he
shall file a bond.
o There are two bonds: the applicant’s bond and the receiver’s bond.
 Before entering upon his duties the receiver must be sworn to perform his duties faithfully.

Two Kinds of Bonds in Receivership

 Bond filed by the applicant in an amount 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 (Section 2,
Rule 59).
 Bond filed by the receiver himself in such sum as the court may direct, to the effect that he will
faithfully discharge his duties in the action or proceeding and obey the orders of the court. (Section
4, Rule 59).

Denial of Application or Discharge of a Receiver

A receivership may be denied or lifted:
 If the appointment sought or granted is without sufficient cause.
 If the adverse party files a sufficient bond to answer for damages.
 Where the bond posted by the applicant for the grant of the receivership is insufficient
 If the bond of the receiver is insufficient.

Case: Normandy vs Duque, L- 25407, August 29, 1969