Case Summary (G.R. No. 253428)
Factual Background
GUERRERO ESTATE DEVELOPMENT CORPORATION traced its title to land inherited from Guillerma Santos and her surviving heirs who formed GEDCOR in 1985 after engaging in joint ventures to develop portions of the property. A 1,506-square-meter parcel of that property was developed into a warehouse pursuant to a June 2, 1987 agreement between GEDCOR and Conrad Leviste. The agreement contemplated construction by Leviste and the later formation of a corporation holding the asset with participation of forty-five percent for GEDCOR and fifty-five percent for Leviste.
Formation of LGRC and Leasing History
After completing the warehouse at an estimated cost of P995,102.20, Conrad Leviste organized Leviste & Guerrero Realty Corporation (LGRC) on August 3, 1988. LGRC leased the warehouse beginning in 1988 and historically remitted forty-five percent of rental receipts to GEDCOR while retaining fifty-five percent for Leviste or the corporate respondent, until remittances ceased in June 2009.
Dispute and Pleadings
When remittances stopped, GEDCOR asserted that the joint venture had no fixed term, that Leviste had recouped his investment, and that the Court should fix the term under Article 1197, Civil Code or otherwise declare termination and require accounting. GEDCOR filed a Complaint for Fixing of Period under Article 1197, Collection of Sum of Money and/or Accounting against Conrad and LGRC; it alleged arrears totaling P2,596,041.09 as of September 1, 2011 and sought an accounting and collection of GEDCOR’s forty-five percent share thereafter. Conrad and LGRC countered that the agreement was an intra-corporate or partnership matter governed by the Corporation Code, that GEDCOR was not a stockholder of LGRC, and that distribution of dividends or withholding thereof was a corporate managerial prerogative.
Trial Court Proceedings and the Motion to Deposit
During pretrial and trial, GEDCOR filed a separate Motion to Deposit Rentals in Court seeking an order directing Conrad and LGRC to deposit in custodia legis GEDCOR’s claimed forty-five percent share of rental income, specifically PHP 5,936,461.65 for June 1, 2009 to September 30, 2015 and forty-five percent of rents thereafter. On February 19, 2018, Branch 274, RTC, Parañaque City granted the Motion to Deposit and directed defendants to deposit the specified amounts, and it denied reconsideration on September 6, 2018.
Court of Appeals Ruling
The Court of Appeals granted respondents’ petition for certiorari under Rule 65 and reversed and set aside the RTC Orders. The CA concluded that the RTC committed grave abuse of discretion because the Deposit Order resembled a preliminary attachment under Rule 57 yet was obtained without complying with that rule’s procedures, and because the Deposit Order constituted a prejudgment by adopting GEDCOR’s computation of obligations without a complete accounting or supporting documents.
Parties’ Positions Before the Supreme Court
GEDCOR argued that the RTC properly issued a preservatory deposit order under the court’s inherent powers as embodied in Sections 5(g) and 6, Rule 135, that the deposit order was not a species of attachment triggering Rule 57, and that the order was provisional and preservatory rather than a determination on the merits. Respondents maintained that the deposit order operated as an attachment in all but name and that the RTC prejudged the merits by fixing an amount without the accounting that the complaint sought.
Issue Presented
The sole issue before the Supreme Court was whether the Court of Appeals erred in finding grave abuse of discretion by the RTC in granting GEDCOR’s Motion to Deposit.
Jurisdictional and Intra-Corporate Dispute Analysis
The Supreme Court determined that the RTC properly acquired subject-matter jurisdiction over Civil Case No. 12-003. The Court explained that the question whether a case involves an intra-corporate controversy is governed by the relationship test and the nature of the controversy test as articulated in prior jurisprudence. The Court found no intra-corporate dispute because GEDCOR was not a stockholder of LGRC, and the dispute did not involve enforcement of correlative rights under the Corporation Code. The Court relied on its decisions in Gonzales v. GJH Land, Inc. and related authorities to emphasize that erroneous raffling to a regular RTC branch is procedural and does not deprive the RTC of jurisdiction conferred by RA 8799 over cases formerly cognizable by the SEC.
Nature and Basis of Provisional Deposit Orders
Turning to the remedy, the Supreme Court reaffirmed that provisional deposit orders exist as an extraordinary preservatory remedy grounded in the courts’ inherent powers under Sections 5(g) and 6, Rule 135, even though Rules 57 to 61 do not expressly enumerate deposit. The Court relied on Lorenzo Shipping Corporation v. Villarin to describe two categories of provisional deposit orders: (one) where the depositor cannot contest demandability because the relief sought renders the depositor’s claim effectively renounced, and (two) where the depositor regularly receives payments from a nonparty during litigation and the court places those payments in custodia legis pending resolution of entitlement.
Application of Doctrine to the Present Case
The Court concluded that the RTC’s Deposit Order fell within the second category because LGRC regularly received rental payments from the lessee and historica
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Parties and Procedural Posture
- Guerrero Estate Development Corporation (GEDCOR) filed Civil Case No. 12-003 in Branch 274, RTC, Paranaque City seeking fixing of period under Article 1197, collection of sum of money, and accounting against Leviste & Guerrero Realty Corporation (LGRC) and Conrad Leviste and later his heirs.
- The RTC granted GEDCOR's Motion to Deposit in Orders dated February 19, 2018 and September 6, 2018 directing respondents to deposit GEDCOR's claimed 45% share of rental proceeds in court.
- Respondents filed a petition for certiorari under Rule 65 before the Court of Appeals, which issued a Decision dated June 26, 2019 and a Resolution dated August 24, 2020 reversing the RTC Orders.
- GEDCOR sought review by the Supreme Court via a Petition for Review on Certiorari assailing the CA Decision and Resolution.
Key Factual Allegations
- The subject lot in Paranaque originated with Guillerma Santos and was inherited by her surviving heirs who formed GEDCOR on October 28, 1985.
- GEDCOR allocated a 1,506-square-meter parcel to a joint venture with Conrad Leviste for construction of a warehouse under a June 2, 1987 agreement providing a 45% share to GEDCOR and 55% to Conrad upon corporate registration.
- Conrad completed the warehouse at an estimated cost of P995,102.20 and organized LGRC on August 3, 1988, which thereafter leased the warehouse and remitted 45% of rentals to GEDCOR until June 2009.
- LGRC ceased remitting GEDCOR's share beginning June 2009 and GEDCOR claimed unremitted rentals of P2,596,041.09 as of September 1, 2011 and later computed entitlement of P5,936,461.65 for June 2009 to September 30, 2015.
- GEDCOR demanded remittance and accounting prior to filing its complaint and later filed a separate Motion to Deposit for its claimed 45% share pending resolution of the case.
Procedural History
- The RTC granted the Motion to Deposit and ordered deposit of P5,936,461.65 representing GEDCOR's 45% share for June 1, 2009 to September 30, 2015 and 45% of monthly rentals thereafter until final resolution.
- The RTC denied respondents' Motion for Reconsideration of the Deposit Order on September 6, 2018.
- The CA granted respondents' Rule 65 petition and set aside the RTC Orders in a Decision dated June 26, 2019 and denied GEDCOR's motion for reconsideration in a Resolution dated August 24, 2020.
- The Supreme Court granted GEDCOR's petition and reviewed both the jurisdictional and provisional-relief issues raised.
Contentions of Parties
- GEDCOR contended that the RTC properly exercised its inherent powers under Section 5(g) and Section 6, Rule 135 to issue a preservatory deposit order, that such order was not equivalent to preliminary attachment under Rule 57, and that sufficient evidence supported the computation of GEDCOR's 45% share.
- Respondents contended that the Deposit Order was tantamount to preliminary attachment and therefore required strict compliance with Rule 57, that the order constituted a prejudgment and exceeded what GEDCOR prayed for in the complaint, and that the dispute was an intra-corporate matter outside the regular branch's proper exercise of jurisdiction.
Issues
- Whether the Court of Appeals erred in finding that the RTC committed grave abuse of discretion in granting GEDCOR's Motion to Deposit.