G.R. No. 27764, December 31, 1927
JOSE M. NAVA and MARIANO N. NAVA, JR., plaintiffs-appellants, vs. PRESENTACION HOFILENA, ET AL., defendants-appellees.

FACTS

In 1900, Juan de Leon, Francisco Villanueva, Esperidion Guanco, and Benito Lopez formed a partnership to publish the newspaper “El Tiempo” in Iloilo. After Benito Lopez’s death in 1908, his widow, Presentacion Hofilena, and minor children succeeded to his interest. Juan de Leon died in 1919, and his estate was placed under administration.

On March 24, 1921, plaintiffs Jose M. Nava and Mariano N. Nava, Jr. entered into a five-year lease contract for the “El Tiempo” enterprise with Francisco Villanueva, the administrator of Juan de Leon’s estate (Jose B. Magalona), and Vicente Lopez (as attorney-in-fact for Presentacion Hofilena). The contract granted the Navas absolute control and administration of the newspaper.

Subsequently, Presentacion Hofilena (personally and as guardian of her children) filed an action (Civil Case No. 4319) against the other partners and the administrator, seeking the appointment of a receiver to liquidate the partnership. The court appointed a receiver. Despite the Navas’ intervention and protests, the court ordered them to turn over the leased property to the receiver on May 24, 1922, effectively ousting them from possession.

The Navas filed a complaint in intervention in the receivership case, claiming damages due to the allegedly improvident appointment of the receiver. The court dismissed their intervention without prejudice, stating their claim should be litigated in a separate action. The Navas did not appeal this order.

The receivership case proceeded, and the partnership property was sold. The Navas then filed the present separate action for damages against Presentacion Hofilena, her husband, and the other partners/administrator, alleging that the receivership was conspired to deprive them of their lease rights, constituting a breach of contract.

The trial court sustained a demurrer and dismissed the complaint, holding that the cause of action, being based on damages from the receivership, was barred because such damages should have been claimed and determined in the receivership proceeding itself under the mandatory provisions of the Code of Civil Procedure.

ISSUE

Whether the trial court correctly dismissed the Navas’ complaint for damages on the ground that their cause of action was barred, as the damages arising from the appointment of a receiver should have been adjudicated in the receivership proceeding.

RULING

Yes, the Supreme Court affirmed the trial court’s dismissal.

The Court held that the Navas’ cause of action for damages, which arose directly from their ouster due to the court’s order placing the leased property under receivership, was of the kind that must be determined in the receivership case itself. Section 177 of the Code of Civil Procedure (Act No. 190) mandated that all claims for damages resulting from the appointment of a receiver be filed and adjudicated within the receivership proceeding. This provision was mandatory and left no alternative.

Since the Navas failed to prosecute their claim for damages within the receivership case (their intervention was dismissed, and they did not appeal), they were barred from raising it in a separate action. The Court noted that while the Navas might have had a valid claim for breach of the implied warranties in their lease, the proper remedy was to seek those damages in the receivership proceeding. The Court declined to remand the case for amendment, as the plaintiffs never sought to amend their complaint, and there were potential questions regarding the validity of the lease itself (e.g., whether the administrator had authority to lease estate property for a term exceeding the legal period for estate settlement, and whether all necessary partners consented).

The judgment of the trial court was affirmed.