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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
In receivership, a person, called the receiver, is appointed by the court on behalf of all the parties to the action for the purpose of preserving and conserving the property in litigation.
In trusteeship, a person, called the trustee, is appointed by another wherein confidence is reposed as regards a property for the benefits of the other person.
Receivership
A receiver is a person appointed by the court on behalf of all the parties to the action for the purpose of preserving and conserving the property in litigation and preventing its possible destruction or dissipation if it were left in the possession of any of the parties.
The purpose of a receivership as a provisional remedy is to protect and preserve the rights of the parties during the pendency of an appeal, or as an aid in the execution of a judgment when the writ of execution has been returned unsatisfied.
The Rule of Court provides:
Section 1. Appointment of receiver. — Upon a verified application, one or more receivers of the property subject of the action or proceeding may be appointed by the court where the action is pending or by the Court of Appeals or by the Supreme Court, or a member thereof, in the following cases:
(a) When it appears from the verified application, and such other proof as the court may require, that the party applying for the appointment of a receiver has an interest in the property or fund which is the subject of the action or proceeding, and that such property or fund is in danger of being lost, removed, or materially injured unless a receiver be appointed to administer and preserve it;
(b) When it appears in an action by the mortgagee for the foreclosure of a mortgage that the property is in danger of being wasted or dissipated or materially injured, and that its value is probably insufficient to discharge the mortgage debt, or that the parties have so stipulated in the contract of mortgage;
(c) After judgment, to preserve the property during the pendency of an appeal, or to dispose of it according to the judgment, or to aid execution when the execution has been returned unsatisfied or the judgment obligor refuses to apply his property in satisfaction of the judgment, or otherwise to carry the judgment into effect;
(d) Whenever in other cases it appears that the appointment of a receiver is the most convenient and feasible means of preserving, administering, or disposing of the property in litigation.
During the pendency of an appeal, the appellate court may allow an application for the appointment of a receiver to be filed in and decided by the court of origin and the receiver appointed to be subject to the control of said court. (Section 1, Rule 59, Rules of Court)
Trusteeship
A trusteeship is a contractual relationship that can be created by a corporation through its Board of Directors.
The Civil Code provides that:
“A person who establishes a trust is called the trustor; one in whom confidence is reposed as regards property for the benefit of another person is known as the trustee; and the person for whose benefit the trust has been created is referred to as the beneficiary.” (Article 1440, Civil Code)
Creation
Receivership is created by judicial appointment of a rehabilitation receiver and/or management committee, while trusteeship is a contractual relationship that can be created by a corporation through its Board of Directors.
Accountability
The receiver and the management committee members are deemed officers of the court and must therefore be accountable to the court by provision of law; whereas, a trustee in liquidation is accountable under the terms of the trust agreement.
Transfer of title
Both receivership and trusteeship involve transfer of legal or naked title from the corporation to the trustee, receiver, or management committee. From the time the assets of the corporation are transferred to a trustee or receiver pursuant to liquidation, all such assets are then held by and in the name of the trustee or receiver who can lawfully proceed with liquidation even if the corporation no longer exists, because he has title to the assets.
Application of the three-year period in case of dissolution
Both receivership and trusteeship are not subject to the three-year period since the corporation is substituted in either case by the trustee or the receiver who may sue or be sued even after the expiration of the three-year period. However, in cases of trusteeship, the trustee must have been designated within the three-year period.
Read also: When should the election of directors or trustees be made?
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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