G.R. No. 29119 , February 18, 1928
TEAL MOTOR CO., INC. and E. H. TEAL, petitioners, vs. COURT OF FIRST INSTANCE OF MANILA, E. M. BACHRACH and THEODORE G. DAVIS, receiver, respondents.

FACTS

E. M. Bachrach, a stockholder and creditor of Teal Motor Co., Inc., filed a complaint against the corporation and its president, E. H. Teal. Bachrach alleged that Teal fraudulently induced him to invest by misrepresenting that Teal had fully paid his subscription to the capital stock. Bachrach further accused Teal of mismanaging the corporation, dissipating its assets, engaging in fraudulent transactions (including double-discounting notes and canceling chattel mortgages without authority), causing corporate losses, and placing the company in imminent danger of insolvency. Based on these allegations, Bachrach prayed for the appointment of a receiver. The Court of First Instance of Manila granted the application and appointed Theodore G. Davis as receiver. The receiver subsequently filed a report recommending the allowance of a claim by the accounting firm Haskins & Sells for professional services. The court approved this claim. Teal and the corporation filed a petition for certiorari, seeking to annul both the order appointing the receiver and the order allowing the accounting firm’s claim.

ISSUE

1. Whether the Court of First Instance acted with grave abuse of discretion or in excess of jurisdiction in appointing a receiver for the Teal Motor Co., Inc.
2. Whether the Court of First Instance acted with grave abuse of discretion or in excess of jurisdiction in approving the receiver’s report and allowing the claim of Haskins & Sells.

RULING

1. On the appointment of the receiver: The Supreme Court DENIED the writ of certiorari and SUSTAINED the appointment of the receiver. The Court held that the lower court did not commit a grave abuse of discretion. The allegations in Bachrach’s complaintincluding fraud, mismanagement, dissipation of assets, and imminent insolvencywere sufficient to constitute a prima facie case warranting the appointment of a receiver under Section 174 of the Code of Civil Procedure ( Act No. 190 ). The purpose of such an appointment is to preserve the property during litigation for the benefit of all parties who may ultimately establish rights. The Court emphasized that a receiver is an officer of the court, must remain neutral and impartial, and derives powers from the statute and as incidents to expressly granted powers.

2. On the allowance of the Haskins & Sells claim: The Supreme Court REFRAINED from ruling on this matter. The Court noted that an ordinary appeal had already been taken from the order allowing the claim. Therefore, the issue was removed from the scope of the certiorari proceeding, as certiorari is not a substitute for appeal. The matter of the claim’s propriety should be resolved in the pending appeal.

The petition for certiorari was denied without costs.