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JESUS SY v. CA

FACTS:

This case involves two consolidated petitions for review on certiorari under Rule 45. The first petition (G.R. No. 94285) seeks to reinstate the Resolution and Decision of the Court of Appeals, challenging the Resolution of the Court of Appeals granting the Motion for Reconsideration filed by the petitioners (now the private respondents). The second petition (G.R. No. 100313) was filed due to the dismissal by the Court of Appeals of a petition seeking to annul the orders issued in Civil Case No. 5326.

The partnership involved in the case is Sy Yong Hu & Sons, registered with the SEC, and owning valuable assets such as tracts of lands and commercial lots in Bacolod City. In September 1977, Keng Sian filed a case against the partnership and the individual partners for accounting of all the properties allegedly owned by Sy Yong Hu and Keng Sian in common. In 1978, Marciano Sy filed a petition for declaratory relief seeking to be appointed as the managing partner of the partnership. The SEC named Jesus Sy as the managing partner. In 1982, the children of Keng Sian filed a petition to revoke the certificate of registration of the partnership and revert its assets to the estate of Sy Yong Hu, which was dismissed by the SEC.

The children of Keng Sian also sought to intervene in SEC Case No. 1648, but their motion to intervene was denied. Meanwhile, a Special Administrator for the Intestate Estate of Sy Yong Hu was appointed by the Regional Trial Court. The case involves a dispute over the assets of the partnership, with the respondent Intestate Estate filing an Amended Complaint alleging that the assets belong to Keng Sian and Sy Yong Hu in co-ownership.

During the proceedings in SEC Case No. 1648, a receivership committee was placed over the partnership assets. The petitioners filed an appeal against the intervenor, which was affirmed by the SEC en banc. The petitioners then filed a petition for certiorari with the Court of Appeals, initially granted but later reversed, remanding the case to the SEC for the formation of a receivership committee.

The second petition (G.R. No. 100313) involves a dispute regarding the reconstruction or renovation of a property owned by the partnership. The respondent objected to the authority of Jesus Sy, the manager of the partnership, to apply for a building permit. The respondent filed a Petition for Mandamus seeking to padlock the building until the necessary permits were obtained. The Regional Trial Court issued a Writ of Preliminary Mandatory Injunction. Petitioners filed a Motion for Intervention and requested the immediate issuance of a certificate of occupancy. The City Engineer refused to issue the Occupancy Permit without the consent of the respondent and another claimant to inheritance. The court modified the Writ of Preliminary Mandatory Injunction, directing the City Engineer to stop all construction activities.

ISSUES:

  1. G.R. No. 94285:

  2. Whether the Court of Appeals erred in reversing its main decision in CA-G.R. No. 17070, which remanded the case for the implementation of previous decisions ordering the distribution and partition of partnership properties?

  3. Whether the Court of Appeals erred in reinstating the Tongco order, suspending the dissolution of the partnership and placing the partnership properties under receivership, on a ground not made the basis of the SEC resolution under review?

  4. G.R. No. 100313:

  5. Whether the respondent judge acted without jurisdiction and with grave abuse of discretion in issuing the writ of preliminary mandatory injunction?

  6. Whether the respondent judge acted without jurisdiction and with grave abuse of discretion in disallowing the intervention of the petitioners in Civil Case No. 5326?

  7. Whether the lower court acted with grave abuse of discretion in issuing the writ of preliminary mandatory injunction despite the absence or lack of an injunction bond?

  8. Whether the order placing the partnership under a receivership committee was erroneous and tainted with excess of jurisdiction.

  9. Whether the appointment of a receiver during the pendency of the dissolution is interlocutory in nature and within the jurisdiction of the SEC.

  10. Whether the suspension of the partition and distribution of the partnership assets was valid based on the agreement by the parties.

  11. Whether the appointment of a receiver was necessary to preserve the rights of parties-litigants and protect the interest of the investing public and creditors.

  12. Whether or not there is a need for a receivership committee to manage the partnership assets during the pendency of the civil case.

  13. Whether or not the appointment of a receiver in the case constitutes an abuse of discretion.

  14. Whether the trial court and the Court of Appeals violated the petitioners' right to due process by granting the prayer for the issuance of a writ of preliminary injunction without giving the petitioners the opportunity to be heard.

RULING:

  1. In G.R. No. 94285, the Court ruled in favor of respondents, affirming the decision of the Court of Appeals.

  2. In G.R. No. 100313, the Court ruled in favor of respondents, affirming the decision of the Court of Appeals.

  3. The order placing the partnership under a receivership committee was not erroneous and was within the jurisdiction of the SEC. The dissolution of the partnership did not mean that the juridical entity was immediately terminated and that the distribution of the assets to its partners should perfunctorily follow. The dissolution simply effected a change in the relationship among the partners and the partnership continues to exist until its termination. The receivership order suspended the partition and distribution of the partnership assets pending disposition of the civil case, but did not vary the final order of dissolution.

  4. The appointment of a receiver during the pendency of the dissolution is interlocutory in nature and within the jurisdiction of the SEC. The SEC has the power to appoint one or more receivers of the property, real or personal, which is the subject of the action pending before it, in accordance with the pertinent provisions of the Rules of Court. This power is necessary to preserve the rights of parties-litigants and protect the interest of the investing public and creditors.

  5. The suspension of the partition and distribution of the partnership assets was valid based on the agreement by the parties. Petitioners consented to the suspension by agreeing not to dispose of the partnership assets and they are estopped from questioning the order of the Hearing Officer issued in accordance with the said agreement.

  6. The appointment of a receiver was necessary to preserve the rights of parties-litigants and protect the interest of the investing public and creditors. The appointment was justified based on the agreement by the parties and the potential risk of damage or dissipation of the partnership properties. Notices of lis pendens of the civil case were also annotated on the real properties of the partnership to protect the rights of the respondent Intestate Estate.

  7. The Court ruled that there is a need for a receivership committee to manage the partnership assets during the pendency of the civil case. The properties of the partnership were in danger of being damaged or lost due to certain acts of the appointed manager in liquidation. The failure of the manager to submit an accounting of all partnership assets justified the placement of the assets under receivership. The protection of the private respondents' rights and preservation of the properties are best left to a receivership committee in which all opposing parties are represented.

  8. The Court held that there was no clear abuse of discretion in the appointment of a receiver in the case. The power to appoint a receiver pendente lite is discretionary with the court of first instance, and once the discretion is exercised, the appellate court will not interfere except in cases of clear abuse or an extra limitation of jurisdiction.

  9. The trial court and the Court of Appeals violated the petitioners' right to due process by granting the prayer for the issuance of a writ of preliminary injunction without giving the petitioners the opportunity to be heard. The Court held that the essence of due process is the opportunity to be heard, and as long as a party was given the opportunity to defend their interest, they cannot be said to have been denied due process. The trial court was erroneous in granting the prayer for the writ of preliminary injunction based solely on the testimony of the lone witness for the respondent, without giving the petitioners the opportunity to cross-examine the witness and present contradicting evidence. The violation of a substantive law does not warrant an ex parte and summary resolution of the petition; there should be compliance with the requirements of due process. Therefore, the trial court's orders and the writ of preliminary injunction issued were without jurisdiction and the petitioners cannot be bound by them. The trial court also acted with grave abuse of discretion in disallowing the intervention of the petitioners in the case. The Court further noted that the trial court's issuance of the writ of preliminary injunction disposed of the case before it was heard on the merits, which should be avoided. Hence, the Court affirmed the resolution of the Court of Appeals and reversed its decision.

PRINCIPLES:

  • The court cannot see any logical reason for the intervenors to be allowed to intervene in a case, especially if their presence would only confuse and complicate the issues.

  • The means do not justify the end, and the end does not justify the means.

  • The dissolution of a partnership does not immediately terminate the juridical entity. The partnership continues to exist until its termination and the winding up of its affairs should be completed before the partition and distribution of the assets.

  • The SEC has the jurisdiction to adjudicate all incidents relative to the dissolution of a partnership until its termination.

  • The appointment of a receiver during the pendency of the dissolution is interlocutory in nature and within the jurisdiction of the SEC.

  • The SEC has the power to appoint one or more receivers to preserve the rights of parties-litigants and protect the interest of the investing public and creditors.

  • Parties can agree to suspend the partition and distribution of partnership assets pending disposition of a civil case.

  • Receivership should be granted with extreme caution, with sound bases and a clear showing of its necessity.

  • The appointment of a receiver to wind up a partnership's affairs and protect the interest of a party is not tainted with grave abuse of discretion.

  • The need for a receivership can be established if the partnership assets are in danger of irreparable injury or loss.

  • The protection of rights and preservation of properties are best left to a receivership committee where opposing parties are represented.

  • The power to appoint a receiver pendente lite is discretionary with the court of first instance, and the appellate court will not interfere unless there is a clear abuse of discretion or an extra limitation of jurisdiction.

  • Due process requires both procedural and substantive aspects. Procedural due process refers to the method or manner by which the law is enforced, while substantive due process requires that the law itself is fair, reasonable, and just.

  • The essence of due process is the opportunity to be heard.

  • No man shall be affected by any proceeding to which he is a stranger; strangers to a case are not bound by the judgment rendered by the court.

  • The invasion of the right sought to be protected by a writ of preliminary injunction must be material and substantial, the right of the complainant must be clear and unmistakable, and there must be an urgent and paramount necessity for the writ to prevent serious damage.

  • Courts should avoid issuing a writ of preliminary injunction that disposes of the main case without trial.