G.R. No. 181126. June 15, 2011.
LEONARDO S. UMALE, [deceased] represented by CLARISSA VICTORIA, JOHN LEO, GEORGE LEONARD, KRISTINE, MARGUERITA ISABEL, AND MICHELLE ANGELIQUE, ALL SURNAMED UMALE, Petitioners, vs. ASB REALTY CORPORATION, Respondent.

FACTS

Respondent ASB Realty Corporation (ASB Realty) became the owner of a parcel of land in Pasig City after a Deed of Assignment in Liquidation from its wholly-owned subsidiary, Amethyst Pearl Corporation. ASB Realty filed an unlawful detainer complaint in the Metropolitan Trial Court (MTC) against petitioner Leonardo S. Umale. ASB Realty alleged it entered into a written lease contract with Umale for a pay-parking business from June 1, 1999, to May 31, 2000, with a monthly rent of ₱60,720.00. After the contract expired, Umale continued occupying the premises, paying an increased rent of ₱100,000.00 monthly until May 2002. After demands to vacate and pay arrears of ₱1.3 million were ignored, ASB Realty sued. Umale denied ASB Realty was his lessor, claiming an oral lease “for a long period of time” and an advance payment of ₱1.2 million in 1999 were made to Amethyst Pearl. He further claimed that after May 2000, they agreed to an oral contract to sell and a waiver of rentals. He also challenged ASB Realty’s legal capacity to sue, arguing that since ASB Realty was under corporate rehabilitation and a receiver had been appointed by the Securities and Exchange Commission (SEC), only the rehabilitation receiver could take possession of assets and file suit under the Interim Rules of Procedure on Corporate Rehabilitation. The MTC dismissed the complaint, agreeing that ASB Realty lacked cause of action and personality to sue due to the receivership. The Regional Trial Court (RTC) reversed the MTC, ruling that ASB Realty was the true lessor based on the written contract and receipt of payments, and that it retained the power to sue despite the appointment of a rehabilitation receiver. The Court of Appeals affirmed the RTC decision.

ISSUE

Whether a corporation under rehabilitation and with an appointed receiver is ipso facto deprived of the power to sue to recover its unlawfully detained property.

RULING

No. The Supreme Court affirmed the Court of Appeals’ decision. The Court ruled that being placed under corporate rehabilitation and having a receiver appointed does not automatically strip the corporation or its officers of the power to recover unlawfully detained property. The appointment of a rehabilitation receiver is intended to preserve and administer the corporate assets for the benefit of all stakeholders and to facilitate rehabilitation, not to divest the corporation of its fundamental rights. The Interim Rules of Procedure on Corporate Rehabilitation grant the receiver powers of administration, but do not expressly deprive the corporation of its capacity to sue, especially for actions necessary to protect and recover its assets. The suit filed by ASB Realty to recover possession of its property and collect unpaid rentals was beneficial to the rehabilitation process as it aimed to conserve corporate assets. Therefore, ASB Realty retained the legal personality to institute the unlawful detainer action. The Court also upheld the factual findings of the RTC and CA that a lease existed between ASB Realty and Umale, and that Umale had violated its terms, justifying his ejectment.