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 their minor children succeeded to his interest. Juan de Leon died in 1919. 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’ protest and intervention in that case, the court eventually ordered them to turn over the leased property to the receiver. The Navas’ complaint in intervention in the receivership case, where they sought damages for being deprived of their leasehold rights, was dismissed by the court without prejudice to filing a separate action. No appeal was taken from this dismissal.

The Navas then filed the present separate action for damages against Presentacion Hofilena, her husband, and the other lessors (Villanueva, Magalona, and Guanco). They alleged that Hofilena, in connivance with the others, caused the appointment of the receiver for the malicious purpose of ousting them from their lease, thereby breaching the contract and causing them damages. The defendants filed a demurrer, arguing that the complaint did not state a cause of action and that the claim was barred by prior judgment. The trial court sustained the demurrer and dismissed the complaint. The Navas appealed.

ISSUE

Whether the trial court erred in sustaining the demurrer and dismissing the complaint on the grounds that it failed to state a cause of action and that the claim was barred.

RULING

No, the trial court did not err. The Supreme Court affirmed the dismissal of the complaint.

1. On the Cause of Action: The complaint failed to state a valid cause of action against the defendants other than Presentacion Hofilena. The core allegation was that the damages resulted from the court’s appointment of a receiver in the separate liquidation case. The act of Francisco Villanueva, Jose B. Magalona (administrator), and Esperidion Guanco in not opposing the receivership did not constitute a breach of the lease contract. The partnership had been dissolved since Benito Lopez’s death in 1908, and the appointment of a receiver for liquidation was a proper and often necessary judicial proceeding. The ouster of the Navas was effected by the receiver under court order, not by a direct act of these defendants breaching the lease.

2. On the Bar by Prior Proceedings: The Navas’ claim for damages arising from the receivership was the precise subject matter that should have been litigated and determined in the receivership case itself (Civil Case No. 4319), where they had intervened. Section 177 of the Code of Civil Procedure mandated that claims for damages caused by the appointment of a receiver should be ascertained and awarded in the receivership proceeding, to be paid by the party at whose instance the receiver was appointed (and her sureties). By filing a separate action instead of pursuing their claim within the receivership case, the Navas’ cause of action became barred.

The Supreme Court noted that while the Navas might have had a potential claim for breach of the implied warranties in the lease, they never sought to amend their complaint to assert such a theory. Furthermore, the Court observed potential issues regarding the validity of the lease itself (e.g., the administrator’s authority to lease estate property for a term exceeding the settlement period, and the non-participation of partner Esperidion Guanco). However, these issues did not need to be resolved since the complaint as filed was properly dismissed.