G.R. No. 253428 - Guerrero Estate Development Corp. vs. Leviste and Guerrero Realty Corp.

Case Summary (G.R. No. 253428)

Petitioner and Respondents

Petitioner: Guerrero Estate Development Corporation (GEDCOR). Respondents: Leviste & Guerrero Realty Corporation (LGRC) and the heirs of Conrad C. Leviste, represented by Lauro S. Leviste II.

Key Dates and Procedural Milestones

Joint Venture Agreement converting part of the property: January 13, 1983; Updated JV: April 29, 1986.
Joint venture with Conrad to construct warehouse: June 2, 1987.
Formation of LGRC: August 3, 1988. Lease and remittances began in 1988.
GEDCOR’s letters offering termination and later demanding turnover: October 23, 2006; September 18, 2009; demand for remittance: October 27, 2011.
LGRC stopped remitting GEDCOR’s 45% share: June 2009. GEDCOR filed Complaint (Civil Case No. 12-003).
RTC Orders: Motion to Deposit granted (February 19, 2018); Motion for Reconsideration denied (September 6, 2018).
Court of Appeals Decision reversing RTC: June 26, 2019; Resolution denying reconsideration: August 24, 2020.
Supreme Court decision reinstating RTC orders: February 16, 2022.

Applicable Law and Authorities Cited

Primary legal frameworks and authorities relied on in the decision include: the 1987 Constitution (applicable to decisions from 1990 onward), the Rules of Court (Rule 135 Sections 5(g) and 6 regarding inherent powers and means to carry jurisdiction into effect; Rule 57 on preliminary attachment), Article 1197 of the Civil Code (fixing of period), Republic Act No. 8799 (transfer of SEC adjudicatory functions to the RTC), and jurisprudence including Lorenzo Shipping Corp. v. Villarin, Province of Bataan v. Villafuerte, Go v. Go, and Gonzales v. GJH Land, Inc.

Core Facts Relevant to Relief Sought

GEDCOR owned the land on which a warehouse was constructed under a June 2, 1987 joint venture with Conrad, who later organized LGRC to operate the asset. The parties agreed to a 45% (GEDCOR) / 55% (Conrad) sharing of rental income. LGRC remitted GEDCOR’s share from 1988 until June 2009, when remittances ceased. GEDCOR asserted it was owed P2,596,041.09 as of September 1, 2011 (arrears from June 1, 2009 to September 1, 2011) and sought collection, accounting, and fixing of the contractual period under Article 1197.

Trial Court Ruling (RTC)

Branch 274, RTC, Parañaque City granted GEDCOR’s Motion to Deposit, directing respondents to deposit: (1) P5,936,461.65 representing 45% of rental income from June 1, 2009 to September 30, 2015 (computed from a monthly rent of P173,580.75 over 76 months, multiplied by 45%); and (2) 45% of the rental income each month thereafter until final resolution. The RTC treated the order as an extraordinary provisional remedy to preserve the disputed rentals in custodia legis.

Court of Appeals Ruling and Grounds for Reversal

The CA reversed the RTC, finding grave abuse of discretion because: (1) the Deposit Order was tantamount to preliminary attachment yet GEDCOR did not comply with Rule 57 procedures for attachment; and (2) the Deposit Order prejudged the merits by accepting GEDCOR’s computation (P5,936,461.65) despite the absence of a full accounting and documentary proof, and despite issues of deductible expenses and liabilities. The CA held the proper procedure for such preservatory relief was governed by Rule 57, not by the RTC’s invocation of Rule 135.

Legal Issue before the Supreme Court

Whether the Court of Appeals erred in concluding that the RTC gravely abused its discretion in issuing the Deposit Order directing LGRC (and Conrad) to deposit GEDCOR’s claimed 45% share of rental income with the court.

Supreme Court’s Holding on Jurisdictional Question

The Supreme Court held that the RTC correctly exercised jurisdiction. The dispute was not an intra-corporate controversy because GEDCOR was not a stockholder of LGRC and the controversy did not fall within the relationship test or the nature-of-controversy test for intra-corporate disputes. The Court reiterated that designation of Special Commercial Courts is procedural and does not divest other RTC branches of jurisdiction conferred by law (citing RA 8799 and Gonzales v. GJH Land, Inc.).

Supreme Court’s Analysis on Deposit as a Provisional Remedy

The Court affirmed that deposit orders are an extraordinary provisional remedy recognized under the court’s inherent powers (Rule 135 Sections 5(g) and 6), even though not enumerated among provisional remedies in Rules 57–61. The Court distilled two categories of provisional deposit orders: (1) where the depositor cannot contest demandability (e.g., interpleader or rescission contexts), and (2) where the depositor regularly receives payments from a non-party and the cou

Case Syllabus (G.R. No. 253428)

Facts and Background

Guillerma Santos was the registered owner of a 33,895 sq. m. parcel in Brgy. San Dionisio, Parañaque City covered by Original Certificate of Title No. 96, Registry of Deeds for the Province of Rizal.
Upon Guillerma’s death, the property was inherited by numerous surviving heirs (listed in the record) who subsequently entered into development arrangements for portions of the property.
A 20,379 sq. m. portion of the property was converted for commercial and industrial sites under a Joint Venture Agreement with Allanigue Realty and Development Corporation (ADRC) dated January 13, 1983.
The surviving heirs organized Guerrero Estate Development Corporation (GEDCOR) on October 28, 1985 to participate in the development and division of lots from the converted portion.
GEDCOR and ADRC agreed to a 60%-40% sharing scheme under an Updated Joint Venture Agreement dated April 29, 1986, with 60% allocated to GEDCOR.
A parcel of approximately 1,506 sq. m. in San Dionisio, Parañaque (subject property) was allocated to GEDCOR and is covered by Transfer Certificate of Title No. (103259) 23998, Registry of Deeds of Pasay City.

Contracts and Transactions Relevant to the Dispute

GEDCOR entered into a Joint Venture Contract with Conrad Leviste dated June 2, 1987 for construction of a warehouse on the subject property.
Key terms of the June 2, 1987 contract included: Conrad (Second Party) to construct the warehouse within specified time frames; after completion the parties would register a corporation as holding company with participation of 45% for GEDCOR and 55% for Conrad.
Conrad completed the warehouse construction at an estimated cost of P995,102.20 and organized Leviste & Guerrero Realty Corporation (LGRC) on August 3, 1988.
LGRC began leasing the warehouse in 1988; practice thereafter was to remit 45% of rental income to GEDCOR and 55% to Conrad.

Events Leading to Litigation

On October 23, 2006 GEDCOR offered to terminate the Joint Venture Contract with Conrad for P1,000,000.00, asserting the warehouse had existed over 18 years and that Conrad had been adequately compensated; Conrad did not act on the offer.
On or about September 18, 2009 GEDCOR demanded turnover of possession and control of the subject property, offering settlement on the basis Conrad had recouped investments.
LGRC ceased remitting GEDCOR’s 45% share of monthly rental income beginning June 2009.
As of September 1, 2011, GEDCOR calculated unremitted share at P2,596,041.09 and on October 27, 2011 demanded remittance of that amount and subsequent rental shares; LGRC refused.

Complaint, Causes of Action and Relief Sought

GEDCOR filed a Complaint before RTC, Branch 274, Parañaque City, docketed Civil Case No. 12-003, for: fixing of period under Article 1197 of the Civil Code, collection of sum of money and/or accounting.
GEDCOR’s main contentions included: the Joint Venture Contract lacked a fixed term and parties did not intend indefinite holding by LGRC; Conrad had recouped his investment and earned reasonable profit; the contract was akin to a build-operate-transfer (customarily 25 years) and the court should fix the term at 25 years under Article 1197; and LGRC’s failure to remit 45% share warranted recovery of P2,596,041.09 plus 45% of rental income from Sept. 1, 2011 forward. GEDCOR also prayed for an accounting.

Answer, Counterclaims and Defenses by Conrad/LGRC

Conrad and LGRC filed an Answer with Counterclaims dated February 27, 2012 asserting: the Joint Venture Contract’s effectivity coincided with the life of the corporation; the contract was a partnership agreement and not a build-operate-transfer; the dispute is governed by the Corporation Code not Civil Code; LGRC was not required to regularly declare dividends; the decision to stop declaring dividends was a management prerogative; and the action was premature absent a demand for accounting from stockholders.
LGRC sought actual and moral damages and attorney’s fees.

Trial Proceedings and Pre-Trial Admissions

Parties filed pre-trial briefs and proceeded to trial, with GEDCOR submitting documentary evidence.
In the Pre-Trial Order of November 8, 2012 respondents expressly admitted that since 1988 LGRC remitted 45% of the rental income of the warehouse to GEDCOR monthly, and that the warehouse was then leased to Lambert Williams Logistics, Inc.
Conrad and LGRC admitted that on July 16, 2009 LGRC’s Board resolved to stop distribution of rental income to address expenditures (pre-trial brief proposed stipulation).

GEDCOR’s Motion to Deposit and Supporting Evidence

After formal offer of evidence, GEDCOR filed a Motion to Deposit Rentals in Court seeking deposit of its claimed 45% share in rental income to preserve its interest pending adjudication.
GEDCOR presented receipts evidencing LGRC remittances up to June 9, 2009 (last receipt covering May 2009) and lease contracts showing the rental rate relied upon for computation.

RTC Orders — Deposit Order and Denial of Reconsideration

On February 19, 2018 the RTC issued an Order granting GEDCOR’s Motion to Deposit directing defendants to deposit within 30 days:
- P5,936,461.65 representing GEDCOR’s 45% share in rental income from June 1, 2009 to September 30, 2015; and
- the amount equivalent to GEDCOR’s 45% share in rental income from October 1, 2015 and every month thereafter until final resolution.
Defendants filed motion for reconsideration which the RTC denied on September 6, 2018.
The RTC’s September 6, 2018 Order recognized respondents’ concern about corporate operations and provided that upon motion either party could seek release of deposit for operating or maintenance expenses when need arises.

Petition for Certiorari to Court of Appeals and CA Decision

After Conrad’s death and substitution by his heirs, respondents filed a Petition for Certiorari under Rule 65 before the Court of Appeals.
The CA, in a Decision dated June 26, 2019, granted the petition and reversed and set aside the RTC Orders dated February 19, 2018 and September 6, 2018.
The CA found respondents established grave abuse of discretion by the RTC on two principal grounds:
- The Deposit Order was akin to preliminary attachment under Rule 57 and the RTC did not strictly comply with the procedural requirements of Rule 57.
- The Deposit Order constituted a prejudgment of the case because the RTC adopted GEDCOR’s computation of P5,936,461.65 without requiring an accounting or sufficient supporting documents, thereby effectively assuming GEDCOR’s claimed amount.
The CA emphasized that the Rules of Court do not expressly provide for deposit as a p