In the case of of Villamor v. Umale, the Supreme Court passed upon the issue whether the Court of Appeals properly placed the corporation, Pasig Printing Corporation, under receivership and created a receiver or management committee.
ALFREDO L. VILLAMOR, JR., Petitioner, v. JOHN S. UMALE, IN SUBSTITUTION OF HERNANDO F. BALMORES, Respondent; G.R. No. 172843; 24 September 2014
Reversing the Court of Appeals, the Supreme Court said:
A corporation may be placed under receivership, or management committees may be created to preserve properties involved in a suit and to protect the rights of the parties under the control and supervision of the court. Management committees and receivers are appointed when the corporation is in imminent danger of “(1) [d]issipation, loss, wastage or destruction of assets or other properties; and (2) [p]aralysation of its business operations that may be prejudicial to the interest of the minority stockholders, parties-litigants, or the general public.”
Applicants for the appointment of a receiver or management committee need to establish the confluence of these two requisites. This is because appointed receivers and management committees will immediately take over the management of the corporation and will have the management powers specified in law. This may have a negative effect on the operations and affairs of the corporation with third parties, as persons who are more familiar with its operations are necessarily dislodged from their positions in favor of appointees who are strangers to the corporation’s operations and affairs.
Thus, in Sy Chim v. Sy Sly Ho & Sons, Inc., this court said:
. . . the creation and appointment of a management committee and a receiver is an extraordinary and drastic remedy to be exercised with care and caution; and only when the requirements under the Interim Rules are shown. It is a drastic course for the benefit of the minority stockholders, the parties-litigants or the general public are allowed only under pressing circumstances and, when there is inadequacy, ineffectual or exhaustion of legal or other remedies . . . The power of the court to continue a business of a corporation . . . must be exercised with the greatest care and caution. There should be a full consideration of all the attendant facts, including the interest of all the parties concerned.
PPC waived its rights, without any consideration in favor of Villamor. The checks were already in Villamor’s possession. Some of the checks may have already been encashed. This court takes judicial notice that the goodwill money of ₱18,000,000.00 and the rental payments of ₱4,500,000.00 every month are not meager amounts only to be waived without any consideration. It is, therefore, enough to constitute loss or dissipation of assets under the Interim Rules.
Respondent Balmores, however, failed to show that there was an imminent danger of paralysis of PPC’s business operations. Apparently, PPC was earning substantial amounts from its other sub-lessees. Respondent Balmores did not prove otherwise. He, therefore, failed to show at least one of the requisites for appointment of a receiver or management committee.