G.R. No. L-5227
INTERNATIONAL BANKING CORPORATION, plaintiff-appellant, vs. PILAR CORRALES, ET AL., defendants. CIPRIANA GARGANTA, intervener-appellee.
October 25, 1909

FACTS:
International Banking Corporation (IBC) filed a claim for nearly P450,000 against Pilar Corrales et al., specifically the Casa Comisión (a mercantile association), on which IBC claimed a mortgage. On May 10, 1904, W. H. Anderson was appointed receiver to take possession of all property of Casa Comisión.

On April 18, 1907, Cipriana Garganta intervened, alleging that the receiver had used and occupied her house and lot from May 10, 1904, to September 30, 1904, with a rental value of P470, and prayed that the receiver be ordered to pay this amount from the receivership funds as an expense incurred in his duties. The receiver denied having used or occupied the property.

The trial court found that Casa Comisión (not the receiver) had a rental contract with Garganta from January 10, 1904, for P100 monthly, and Casa Comisión occupied the property from May 10, 1904, to September 30, 1904. The agreed rent for this period (P466.66) remained unpaid. Based on these findings, the trial court ordered the receiver to pay Garganta P466.66 from Casa Comisión’s funds. IBC appealed this order.

ISSUE:
Did the trial court err in ordering the receiver to pay the intervener’s claim for unpaid rent, which arose from a pre-existing contract with the entity in receivership (Casa Comisión), out of the receivership funds?

RULING:
Yes, the trial court erred. The Supreme Court revoked the order and dismissed Garganta’s complaint in intervention.

The Court held that:
1. No liability of receiver for his own acts: The trial court’s finding that Casa Comisión, not the receiver, occupied the property during the period in question was crucial. A receiver is not automatically liable for pre-existing contracts of the entity in receivership; their liability arises solely by reason of their own acts, such as electing to take possession or adopting a contract. Since the receiver did not occupy the property, he was not liable for rent as an expense incurred in the performance of his duties.
2. Intervener as a general unsecured creditor: Garganta’s claim for unpaid rent against Casa Comisión rendered her a general unsecured creditor. While Article 1922 of the Civil Code provides a preferential right for landlords, this preference applies only to property of the tenant found on the rented property, a condition not alleged or established in this case.
3. No right of intervention for general creditors: Allowing a general unsecured creditor to intervene in a receivership action to secure an adjudication of her claim and an order for payment from receivership funds (without regard to other creditors’ priorities) is improper. Such an order would unfairly grant a preference to one general unsecured creditor over others, including those with specific liens, and undermines the purpose of receivership to preserve assets for the benefit of all creditors according to their legal priorities, and renders the prohibition of bankruptcy proceedings meaningless (Section 524, Code of Civil Procedure).

The Court clarified that Garganta retained the right to institute a separate action against Casa Comisión to reduce her claim to judgment and then take steps to recover her judgment, asserting any preferential rights as a judgment creditor under Article 1924 of the Civil Code.