Further, in Clemente v. Court of Appeals, ⁶² the Court ruled:

The corporation continues to be a body corporate for three [ ] years after its dissolution for purposes of prosecuting and defending suits by and against it and for enabling it to settle and close its affairs, culminating in the disposition and distribution of its remaining assets. It may, during the three-year term, appoint a trustee or a receiver who may act beyond that period. The termination of the life of a juridical entity does not by itself cause the extinction or diminution of the rights and liabilities of such entity […] nor those of its owners and creditors. If the three-year extended life has expired without a trustee or receiver having been expressly designated by the corporation within that period, the board of directors (or trustees) itself, […] may be permitted to so continue as “trustees” by legal implication to complete the corporate liquidation. Still in the absence of a board of directors or trustees, those having any pecuniary interest in the assets, including not only the shareholders but likewise the creditors of the corporation, acting for and in its behalf, might make proper representations with the [SEC], which has primary and sufficiently broad jurisdiction in matters of this nature, for working out a final settlement of the corporate concerns.⁶³ (Emphasis supplied)

Thus, as clearly illustrated by the cited authorities, the trustee may continue to prosecute a case commenced by the corporation within three years from its dissolution until the rendition of the final judgment, even if such judgment is rendered beyond the three years. An already defunct corporation can no longer initiate a suit after the lapse of the said three-year period.

The trustee may be a court appointed receiver, whom the Court may appoint within the three-year winding-up period following the corporation’s dissolution. In absence of the such court-appointed trustee, the same may be the board of directors or trustees or the shareholder or creditor of the corporation.

In other words, if the three-year extended life expires without a designated trustee or receiver, the board of directors or trustees may continue to act as trustees by legal implication to complete the corporate liquidation. In the absence of a board, those having pecuniary interests in the assets, including shareholders and creditors, may act on behalf of the corporation.

In Reves v. Bancom,⁶⁴ the Court held that the non-appointment of the receiver or assignee does not extinguish any right or remedy in favor of the corporation.

[T]he mere revocation of the charter of a corporation does not result in the abatement of proceedings. Since its directors are considered trustees by legal implication, the fact that [the corporation] did not convey its assets to a receiver or assignee was of no consequence. It must also be emphasized that the dissolution of a creditor-corporation does not extinguish any right or remedy in its favor. Section 145 of the Corporation Code is explicit on this point:

 

Sec. 145. Amendment or repeal.- No right or remedy in favor of or against any corporation, its stockholders, members, directors, trustees, or officers, nor any liability incurred by any such corporation, stockholders, members, directors, trustees, or officers shall be removed or impaired either by the subsequent dissolution of said corporation or by any subsequent amendment or repeal of this Code or of any part thereof.

 

As a necessary consequence of the above rule, the corresponding liability of the debtors of a dissolved corporation must also be deemed subsisting. To rule otherwise would be to sanction the unjust enrichment of the debtor at the expense of the corporation.⁶⁵ (Emphasis in the original, citations omitted)

In Gelano v. Court of Appeals,⁶⁶ the Court held that the counsel of a dissolved corporation is deemed a trustee for purposes of continuing such action or actions as may be pending at the time of the dissolution to counter petitioners’ contention that the corporation lost its capacity to sue and be sued long before the trial court rendered judgment and hence execution of such judgment could not be complied with as the judgment creditor has ceased to exist.

The Court shall consider the foregoing legal backdrop in determining the propriety of the Petition for Appointment of Receiver.

The propriety of the Petition for
Appointment of Receiver

Receivership is a remedy to place property in litigation under the control of the court for the purpose of preserving, administering or disposing of the property as demanded by the case.⁶⁷

Jurisprudence defines receivership as “a remedy by which property, real or personal, which is subject of litigation, is placed in the possession and control of a receiver appointed by the Court, who shall conserve it pending final determination of the title or right of possession over it.”⁶⁸

Moreover, the Court has ruled that receivership is a harsh remedy which should be granted with utmost circumspection and only in extreme situations.

The power to appoint a receiver is a delicate one and should be exercised with extreme caution and only under the circumstances requiring summary relief or where the court is satisfied that there is imminent danger of loss, lest the injury thereby caused be far greater than the injury sought to be averted. The court should consider the consequences to all of the parties, and the power should not be exercised when it is likely to produce irreparable injustice or injury to private rights or the facts demonstrate that the appointment will injure the interests of others whose rights are entitled to as much consideration from the court as those of the complainant.⁶⁹

In the Petition for Receivership before the RTC, Dee asserted that while the charter of MCI has expired, it continues to be a body corporate for the purpose of prosecuting and defending suits to close its affairs, to dispose of and convey or distribute its assets. Thus, there is a need for a court-appointed receiver to collect its receivables, and execute judgments on its debts.⁷⁰

The RTC ruled that Rule 59 of the Rules of the Court is a rule of general application. It covers all kinds of receivers for different kinds of situations.⁷¹

It also explained that

[i]t must be remembered, however, that the beneficial interest remains the corporation’s members, stockholders, creditors and other interested persons, thus the Supreme Court [ruled that] . . . if the corporation carries out the liquidation of its assets through its own officers and continues and defends the actions brought by or against it, its existence shall terminate at the end of three years from the time of dissolution[.] [B]ut if a receiver or assignee is appointed, . . ., with or without a transfer of its properties within three years, the legal interest passes to the assignee, the beneficial interest remaining in the members, stockholders, creditors and other interested persons; and said assignee may bring an action, prosecute that which has already been commenced for the benefit of the corporation or defend [it] against any other action already instituted or which may be instituted even outside the period of three years. . . .⁷²

Section 1(d) of Rule 59 on Receivership, of the Rules of Court, the primary basis of the RTC in granting the Petition for Receivership, provides as follows:

Rule 59

 

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. (1a) (Emphasis supplied)

Thus, based on the principles of corporate liquidation and dissolution, including those of receivership, Dee was not required to file a Petition for Liquidation, and the Petition for Receivership to install him as the receiver of MCI for purposes of liquidation was in accordance with law and existing jurisprudence.

The CA’s assertion that Rule 59 of the Rules of Court does not provide for the appointment of a receiver-in-liquidation is misplaced. While Rule 59 primarily governs provisional remedies in pending litigation, it does not preclude the appointment of a receiver for corporate liquidation purposes. Jurisprudence recognizes that after a corporation’s dissolution, a receiver or trustee may be designated to wind up its affairs, even in the absence of a main case. This aligns with the principle that corporations continue to exist for three years post-dissolution solely for the purpose of prosecuting and defending suits and finalizing their business affairs. If no trustee or receiver is appointed within that period, the board of directors or the shareholders may continue as trustees by legal implication to complete the liquidation process, even beyond the three-year winding-up period.

Additionally, the CA’s argument that Dee should have filed a separate Petition for Liquidation is flawed. The appointment of a receiver serves as a recognized method of corporate liquidation. Rule 59, Section 1(d), which was relied upon by the RTC in granting the petition, provides that a receiver may be appointed “[w]henever 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.” This provision further reinforces that receivership is a valid and appropriate mechanism in situations where corporate assets need to be safeguarded and properly administered. The Court has consistently upheld that a receiver or trustee may be designated to wind up corporate affairs, distribute assets, and resolve liabilities. Given that MCI had already exceeded the three-year period without appointing a trustee, it was necessary to seek court approval for a receiver to oversee liquidation. Without such an appointment, the corporation would remain in legal limbo, unable to settle its affairs, distribute assets, or address its obligations. Dee’s appointment ensured compliance with legal requirements and protected the interests of creditors and shareholders. Therefore, the Petition for Receivership was a valid and appropriate recourse, as it facilitated the proper liquidation of MCI in accordance with law and jurisprudence.

All said, Dee’s appointment as a receiver was a necessary and proper step following MCI’s corporate dissolution. Since MCI’s corporate life had already ended on October 25, 2011, and a Petition for Receivership was only filed on December 10, 2014—well beyond the three-year winding-up period provided under Section 122 of the Corporation Code—MCI could no longer initiate actions in its own name. Given this, Dee’s appointment as a receiver by the RTC on June 15, 2015, was crucial to preserving the interests of creditors and stakeholders. Moreover, Dee was qualified to be appointed as a receiver, as he was the majority shareholder of MCI and thus had a direct pecuniary interest in its remaining assets.

The propriety of Union Bank’s intervention
in the Petition for Appointment of Receiver

To recall, Union Bank filed an Omnibus Motion to be allowed to intervene in the receivership proceedings, to discharge Dee as a receiver and to dismiss the Petition on the principal ground that MCI’s corporate existence had already ceased.⁷³

The RTC denied the Motion, holding that Union Bank was not able to show a clear legal interest in the appointment of a receiver for MCI and that the rights or interests of Union Bank may be adequately protected in Civil Case No. R-QZN-15-07016-CV, involving the revival of judgments pending between the same parties.⁷⁴

On appeal, the CA reversed the RTC, implicitly granting the intervention and revoking Dee’s appointment as MCI’s receiver.

In his Petition, Dee asserts that the CA exceeded its jurisdiction when it decided to revoke the appointment of Dee as receiver as this issue has not been decided by the RTC in ruling on the Omnibus Motion to intervene.⁷⁵

The Court agrees.

Intervention is a legal remedy that allows a third party, not originally included in the proceedings, to become a litigant in order to protect or preserve a right or interest that may be affected by the case.⁷⁶

Rule 19, Section 1 of the Rules of Court provides:

Section 1. Who may intervene. – A person who has a legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both, or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof may, with leave of court, be allowed to intervene in the action. The court shall consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties, and whether or not the intervenor’s rights may be fully protected in a separate proceeding. (Emphasis supplied)

As the provision makes clear, an intervenor must have a legal interest in the matter in litigation. In other words, legal interest serves as the fundamental basis for the court’s determination of whether to grant the intervention.

In this regard, the Court ruled that intervention shall be allowed when the purported intervenor possesses: (1) a legal interest in the matter in litigation; (2) or in the success of any of the parties; (3) or an interest against the parties; (4) or when he is so situated as to be adversely affected by a distribution or disposition of property in the custody of the court or an officer thereof. Not only that, the court must consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties, and whether or not the intervenor’s right or interest can be adequately pursued and protected in a separate proceeding.⁷⁷

Union Bank alleged that it has legal interest in the matter in litigation because MCI used the appointment of Dee as a receiver as a basis for filing a separate action against Union Bank, notwithstanding that MCI no longer has any right to file an independent action after the lapse of the three-year winding up period.⁷⁸

In denying the intervention, the RTC ruled that the interest contemplated under Rule 19 must be one that is actual, substantial, material, direct and immediate, and not simply contingent or expectant. It must be of such direct and immediate character that the intervenor will either gain or lose by the direct legal operation and effect of the judgment.⁷⁹

The Court agrees.

Union Bank has no legal interest in the Petition for Receivership as contemplated under Rule 19 of the Rules of Court. The interest that would warrant intervention must be actual, substantial, material, direct, and immediate, rather than merely contingent or expectant.⁸⁰ In this case, Union Bank’s claim of legal interest is premised on the fact that MCI allegedly used the appointment of Dee as a receiver as a basis to file a separate action against it. However, such an interest is not direct and immediate in relation to the receivership proceedings. Union Bank’s concern pertains to a potential consequence of the receivership, rather than an immediate legal effect stemming from the judgment of receivership itself.

Furthermore, the RTC correctly ruled that any claims Union Bank wishes to assert can be adequately pursued and protected in the cases for revival of judgments, rather than through intervention in the receivership case. Allowing its intervention would only unduly delay the resolution of the main case without serving the purpose of intervention as envisioned by Rule 19. Thus, the RTC rightly denied Union Bank’s Omnibus Motion for intervention.

ACCORDINGLY, the Petition for Review on Certiorari is GRANTED. The Decision, dated May 28, 2019, and the Resolution, dated January 8, 2020, of the Court of Appeals in CA-G.R. SP No. 150158, are REVERSED. The appointment of petitioner Jaime T. Dee as the receiver of Mabasa and Company, Inc. is REINSTATED.

SO ORDERED.