Guerrero Estate Development Corp. v. Leviste & Guerrero Realty Corp.
REITERATIONFacts
The Antecedents: Guillerma Santos owned a parcel of land in Parañaque City. Her heirs formed Guerrero Estate Development Corporation (GEDCOR) and entered into a Joint Venture Agreement with Allanigue Realty and Development Corporation (ADRC) for the development of a portion of the property. GEDCOR was allocated a 1,506-square-meter parcel, covered by Transfer Certificate of Title No. (103259) 23998. GEDCOR then entered into a Joint Venture Contract with Conrad Leviste (Conrad) for the construction of a warehouse on this property. Conrad completed the warehouse and formed Leviste & Guerrero Realty Corporation (LGRC). LGRC began leasing the warehouse in 1988, remitting 45% of the rental income to GEDCOR and 55% to Conrad. Procedural History: GEDCOR sent letters to Conrad in 2006 and 2008, offering to terminate the Joint Venture Contract and demanding the turnover of possession, respectively. LGRC stopped remitting GEDCOR's 45% share of rental income starting June 2009. As of September 1, 2011, the unremitted share amounted to P2,596,041.09. GEDCOR filed a Complaint for Fixing of Period, Collection of Sum of Money, and/or Accounting against Conrad and LGRC. GEDCOR prayed for the fixing of the contract's term, collection of the unremitted rentals, and an accounting. The Regional Trial Court (RTC), Branch 274, Parañaque City, granted GEDCOR's Motion to Deposit Rentals in Court, ordering defendants to deposit P5,936,461.65 representing GEDCOR's 45% share from June 2009 to September 2015, and 45% of subsequent rentals. The RTC denied the Motion for Reconsideration. The Court of Appeals (CA) reversed the RTC Orders, finding grave abuse of discretion. GEDCOR filed a Petition for Review on Certiorari. The Petition: GEDCOR maintains that the CA erred in ruling that the RTC committed grave abuse of discretion in granting the Motion to Deposit. GEDCOR argues that the deposit order is sanctioned by the inherent power of courts under Rule 135 of the Rules of Court, is not akin to preliminary attachment, and does not amount to prejudgment.
Issue(s)
Whether the Court of Appeals erred in ruling that the Regional Trial Court gravely abused its discretion when it granted Guerrero Estate Development Corporation's (GEDCOR) Motion to Deposit. Whether the deposit order issued by the RTC is akin to the provisional remedy of preliminary attachment requiring strict compliance with Rule 57 of the Rules of Court. Whether the deposit order issued by the RTC amounted to a prejudgment of the case. Whether the RTC had jurisdiction over the case, specifically whether it involved an intra-corporate controversy.
Ruling
The petition is meritorious. The Court of Appeals erred in finding grave abuse of discretion on the part of the RTC. The Orders dated February 19, 2018 and September 6, 2018 of Branch 274, Regional Trial Court, Parañaque City are reinstated.
Ratio Decidendi
On the Propriety of the Deposit Order: The Court held that the CA erred in finding grave abuse of discretion. The issuance of deposit orders is an extraordinary provisional remedy, not explicitly listed in Rules 57 to 61, but sanctioned under Sections 5(g) and 6 of Rule 135 of the Rules of Court, pertaining to the inherent power of courts to control their process and orders and to employ means necessary to carry their jurisdiction into effect. Such orders are for the preservation of property or money in custodia legis pending final determination of entitlement. The Court clarified that the deposit order in this case falls under the category where a party regularly receives money from a non-party during the pendency of the case, and the court deems it proper to place such money in custodia legis. LGRC, as the recipient of rental payments from Lambert Williams Logistics, Inc., was ordered to deposit GEDCOR's claimed share. This order was based on the existing juridical tie (joint venture contract and lease agreements) and the admitted practice of remitting rental shares. On the Comparison with Preliminary Attachment: The Court distinguished the deposit order from preliminary attachment. While both are provisional remedies, the deposit order in this case was not meant to create a lien or act as security for a judgment, but rather to preserve disputed funds pending litigation. GEDCOR's 45% share in the rental income was not LGRC's property being levied as security. The order aimed to preserve the funds that were allegedly due to GEDCOR based on their agreement. On the Allegation of Prejudgment: The Court found no merit in the respondents' argument that the deposit order amounted to prejudgment. The order was provisional and preservatory, intended to ensure that the court could effectuate its judgment and protect the interests of the rightful claimants after trial on the merits. It was not an adjudication of the main case's merits. The RTC's order to deposit was based on the renewed lease contract and the established practice of remittance, and the RTC explicitly stated that funds could be released for operating expenses upon motion. On the RTC's Jurisdiction: The Court found that the case did not involve an intra-corporate controversy. Applying the relationship test and the nature of the controversy test, the conflict was not between a corporation and its stockholders, nor was it rooted in the enforcement of rights and obligations under the Corporation Code. GEDCOR was not a stockholder of LGRC, and its claim was based on a joint venture contract and rental income, not dividend entitlement. Therefore, Branch 274, RTC, Parañaque City, correctly exercised its jurisdiction.
Main Doctrine
The Court of Appeals erred in finding grave abuse of discretion on the part of the Regional Trial Court in issuing a deposit order for rental income, as such order is an extraordinary provisional remedy based on the inherent power of courts to preserve subject matter and protect parties' interests pending litigation, and does not constitute prejudgment of the case.