Velasco vs. Rosenbergs, Inc.

A purchaser at an execution sale cannot recover rental payments from the judgment debtor who remains in possession during the one-year redemption period, because under sections 464, 465, 468, and 469 of Act No. 190, rents collected by the purchaser must be applied to reduce the redemption price; requiring the debtor to pay rent would amount to the debtor paying rent to himself. Claims for damages caused by a receiver appointed in the action must be raised in the receivership proceedings and settled in the receiver’s final accounting, not as counterclaims in the main suit for possession.

On July 1, 1912, Jose Velasco purchased at execution sale a parcel of land together with the buildings thereon. Rosenberg’s, Incorporated was the judgment debtor and remained in possession of the property after the sale. Velasco subsequently sought to recover possession and rental payments.

• Nature of the Action: Plaintiff Jose Velasco filed a complaint on July 14, 1913, seeking to recover possession of a parcel of land with buildings, monthly rent of P500 from July 1, 1912 until delivery, and the appointment of a receiver. A receiver was appointed the same day and took possession.

• Execution Sale and Possession: Velasco had purchased the property at an execution sale on July 1, 1912. Defendant Rosenberg’s, Incorporated, the judgment debtor, remained in physical possession of the premises thereafter.

• Defendant’s Counterclaims: The defendant denied the plaintiff’s right to possession and interposed a cross-complaint asserting that the receiver had taken possession of property beyond the land described, had fraudulently used the name “Rosenberg” to solicit business to the defendant’s damage of P20,000, and had caused additional damages of P5,000 by the mere fact of the receivership. The defendant prayed for a total judgment of P29,350.

• Trial Court Findings: After hearing the evidence, the trial court found that during the receiver’s occupation, the receiver continued the livery business and used the defendant’s trade name, causing P500 in damages. It also found that the receiver had taken certain personal property—twenty garbage cans, thirty-four feed boxes, and other similar items—and retained them, to the defendant’s damage of P350. The court awarded possession to the plaintiff but entered a monetary judgment for the defendant in the total amount of P850.

• Rent During Redemption: Petitioner maintained that as owner of the property from July 1, 1912, he was entitled to recover for its subsequent use and occupation, and the lower court erred in failing to award such rent.
• Lawfulness of Occupation: Petitioner contended that the defendant corporation was not lawfully occupying the premises after the execution sale and should be compelled to pay for its use.
• Damages for Trade-Name Use: Petitioner argued that having established his ownership and right to possession, no damages could be allowed against him simply because the receiver, a court officer, continued the business previously conducted by the defendant on the premises.
• Personal Property Claims: Petitioner asserted error in the lower court’s failure to allow him payment for the use of personal property and for property sold or converted by the defendant after July 1, 1912, and in awarding P350 to the defendant for personal property taken by the receiver.

• Damages for Trade-Name Use: Respondent alleged that the receiver fraudulently used the trade name “Rosenberg” to solicit business from the public, causing actual injury, and that the award of P500 was proper.
• Personal Property Loss: Respondent claimed that the receiver took possession of garbage cans, feed boxes, and other personalty not covered by the real-property description, and that its value should be recovered from the plaintiff.

• Right to Rent During Redemption: Whether a purchaser at an execution sale may collect rent from the judgment debtor who remains in possession during the period allowed for redemption.
• Liability for Receiver’s Acts: Whether damages caused by the receiver’s continuation of the business and use of the defendant’s trade name may be awarded against the plaintiff in the main action for possession.
• Liability for Personal Property Taken by Receiver: Whether the defendant is entitled to recover the value of personal property taken by the receiver in the possession suit, or whether such claims must be asserted in the receivership accounting.

• Right to Rent During Redemption: The purchaser was not entitled to rent. Under the provisions of the Code of Civil Procedure, rents received by the purchaser during the redemption period must be applied on account of the redemption price. The judgment debtor in possession cannot be required to pay rent, because any rent paid would merely be credited toward the amount the debtor must pay to redeem, making the payment self-defeating. The rule in De la Rosa vs. Revita Santos (10 Phil. 148) and subsequent cases was controlling.
• Liability for Receiver’s Acts: The award of P500 was disallowed. The receiver, as an officer of the court appointed to conserve the property, was presumably authorized to continue the business. Any question of damages arising from the receiver’s conduct should have been raised and adjudicated in the receiver’s final accounting to the court, not as a counterclaim in the principal case.
• Liability for Personal Property Taken by Receiver: The award of P350 was revoked. There was no showing that the garbage cans, feed boxes, and other items were not among the property turned over to the receiver. Even assuming they were, the receiver was bound to account for them in his final report. Any objection for failure to account, loss, or negligent administration could properly have been made during the receivership accounting, and no evidence of such loss or negligence appeared in the record.

• Rents During Redemption Period — Under Act No. 190, the purchaser at an execution sale who takes possession during the one-year redemption period must credit all rents and profits received against the redemption price. Accordingly, the judgment debtor in possession cannot be compelled to pay rent directly to the purchaser; doing so would be redundant because the law already treats such rents as a reduction of the redemption amount. This principle precludes a separate action for rent against the debtor in possession.
• Exclusive Remedy for Claims Against a Receiver — Any claim for damages arising from a receiver’s administration—including the use of trade names, loss of property, or negligence—must be presented in the receivership proceedings and resolved in the receiver’s final accounting. Such claims are not cognizable as counterclaims in the main action in which the receiver was appointed.

• “That, inasmuch as, under the law, the rents received by the purchaser during the period allowed for redemption must be applied on account of the redemption price, the judgment debtor in possession of such property should not be required to pay rent, inasmuch as he would thereby simply be paying rent to himself.” (Quoting De la Rosa vs. Revita Santos, 10 Phil. 148)
• “The question of damages arising from his running the business should have been settled in his final accounting to the court.”
• “If in such final accounting the receiver had not properly reported the same or accounted therefor, an objection might properly have then been made to the accounting of the receiver and he held responsible therefor in case of loss through negligence or by bad administration of the property given into his care.”

• De la Rosa vs. Revita Santos, 10 Phil. Rep. 148 — Followed; controlling authority establishing that a judgment debtor in possession during the redemption period is not liable for rent to the execution purchaser.
• Aldecoa & Co. vs. Navarro, 23 Phil. Rep. 203, 206 — Cited as sustaining the same principle.
• Riosa vs. Verzosa and Bulan, 26 Phil. Rep. 86, 89 — Cited as additional support for the rule on rents during redemption.

• Sections 464, 465, 468, and 469, Act No. 190 (Code of Civil Procedure) — These provisions regulate execution sales, the period and conditions of redemption, and the application of rents and profits received by the purchaser. The Court applied them to hold that rents collected by the purchaser during the redemption term must be credited to the redemption price, thereby precluding a separate rental claim against the judgment debtor in possession.

Arellano, C.J., Torres, Carson, and Araullo, JJ.