G.R. Nos. L-29207 and L-29222. July 31, 1974.
VIGAN ELECTRIC LIGHT CO., INC. and LUIS C. SINGSON, petitioners, vs. HON. LODIVICO D. ARCIAGA, Judge of the Court of First Instance of Ilocos Sur; NATIONAL POWER CORPORATION; REPUBLIC OF THE PHILIPPINES; PROVINCE OF ILOCOS SUR; CARMELING CRISOLOGO, and AGILEO R. REDOBLE, respondents.

FACTS

In Civil Case No. 2701-V, the National Power Corporation (NPC) sued Vigan Electric Light Co., Inc. (VELCO) for unpaid electric bills. The parties entered into a Compromise Agreement, which was approved by the NPC Board of Directors and subsequently submitted to and approved by the trial court in a decision dated April 29, 1968. VELCO complied with the terms. However, on June 27, 1968, respondent Judge, acting on an ex-parte motion by NPC, issued an order setting aside the compromise and reinstating the case, despite the absence of any allegation that NPC’s consent was vitiated by fraud, mistake, or undue influence.
In a separate action, Civil Case No. 2748-V, the Republic of the Philippines sued VELCO for deficiency franchise taxes. Upon the mere filing of the complaint, and on an ex-parte motion, respondent Judge issued an order on June 26, 1968, placing VELCO’s properties under receivership. This was done despite the properties not being the subject of the tax collection suit and without any proof that VELCO was insolvent or in imminent danger of insolvency. The appointed receiver was the Clerk of Court.

ISSUE

Whether respondent Judge acted with grave abuse of discretion amounting to lack or excess of jurisdiction in: (1) setting aside a duly approved judicial compromise without legal grounds; and (2) placing a defendant’s properties under receivership in a collection case without legal basis.

RULING

Yes, the Supreme Court granted the petition and annulled the challenged orders. Regarding the compromise agreement, the Court ruled that a judicial compromise, once approved by final order of the court, has the force of res judicata and is immediately executory. It can only be set aside on grounds vitiating consent, such as mistake, violence, intimidation, undue influence, or fraud. Since NPC did not allege any of these grounds, the respondent Judge had no legal basis to disturb the final and executory judgment based on the compromise. His order constituted a grave abuse of discretion.
Concerning the receivership, the Court held that a receivership is a harsh remedy to be granted with extreme caution. Under Section 1(b), Rule 59 of the Rules of Court, a receiver may be appointed in an action by a creditor to subject property under the defendant’s control when such property is in danger of being lost, removed, or materially injured. In this tax collection case, the properties sought to be placed under receivership were not even the subject matter of the litigation. Furthermore, the applicant for receivership must prove the grounds by clear and convincing evidence. The respondent Judge issued the receivership order ex-parte, without any hearing or proof of VELCO’s insolvency or that the properties were in peril. This constituted a patent and gross abuse of discretion. The Court emphasized that receivership should not be used as a weapon to coerce payment but only when necessary to preserve property pending litigation.