G.R. No. L-9126; March 31, 1915
NEMESIO MONTEVERDE, plaintiff-appellant, vs. NAKATA (Japanese), defendant-appellee.

FACTS:
Nemesio Monteverde filed an action in the justice of the peace court of Davao against Nakata, seeking to cancel a mortgage, compel the mortgagee to accept payment of the loan, and recover possession of the mortgaged land. The justice of the peace court ruled in favor of Monteverde and appointed a receiver for the land pending Nakata’s appeal to the Court of First Instance (CFI). Upon appeal, the CFI judge dismissed the case because Monteverde failed to file a new complaint as required by procedural rules for appealed cases. Prior to dismissal, however, the CFI entertained Nakata’s motion to discharge the receiver and award damages for the allegedly unlawful receivership. After taking testimony, the CFI issued an order discharging the receiver and holding Monteverde, the receiver, and the receiver’s sureties jointly liable for ₱500 in damages. Monteverde appealed this order to the Supreme Court, contesting only the CFI’s authority to award damages in the appellate proceedings, not the discharge of the receiver.

ISSUE:
1. Did the Court of First Instance, acting in its appellate capacity, have jurisdiction to entertain a motion for damages arising from an improvidently appointed receiver by the inferior court?
2. Was the assessment of damages proper under the circumstances?

RULING:
Yes, on both counts. The Supreme Court affirmed the CFI’s order.

1. On Jurisdiction to Award Damages: The Court held that while a CFI’s appellate power in such cases is generally limited to dismissing the action when the inferior court lacked jurisdiction or the appellant failed to prosecute, it necessarily retains ancillary powers to control proceedings pending before it. This includes the authority to grant special remedies like discharging a receiver appointed by the lower court. Since the justice of the peace court clearly lacked jurisdiction over the main action (an action for cancellation of mortgage and recovery of land), the appointment of the receiver was void from the beginning. The CFI, having the parties before it, had the jurisdiction to correct this manifest wrong by discharging the receiver and adjudicating the resulting claim for damages in the same appellate proceedings. This procedure is in accord with Section 177 of the Code of Civil Procedure, which provides that damages for the improper appointment of a receiver should be ascertained in the action wherein the receiver was appointed.

2. On the Propriety of the Damages Awarded: The Court found the evidence in the record, though not wholly satisfactory, sufficient to sustain the trial judge’s factual finding on the amount of damages. In the absence of conclusive evidence to the contrary, the Supreme Court declined to disturb the lower court’s assessment.

DISPOSITION: The judgment of the Court of First Instance was AFFIRMED. Costs were taxed against the appellant, Monteverde.

NOTE: Justice Torres dissented without opinion, stating that the proceedings in both instances should be annulled.