G.R. No. 201700 & G.R. No. 201777. April 18, 2022.
DEUTSCHE BANK AG LONDON SUBSTITUTED BY A & L FISHPOND AND HATCHERY, INC., PETITIONER, VS. KORMASINC, INC., RESPONDENT. [G.R. No. 201777] METROPOLITAN BANK & TRUST COMPANY, SUBSTITUTED BY KORMASINC, INC., PETITIONER, VS. VITARICH CORPORATION, RESPONDENT.

FACTS

Vitarich Corporation, a company engaged in poultry and feed milling, entered into a Mortgage Trust Indenture (MTI) on January 30, 1998, with several banks to secure its loan obligations. Philippine Commercial International Bank (PCIB) was appointed as the MTI trustee, holding mortgaged properties and related documents for the benefit of the creditor banks. Due to financial distress, Vitarich filed a petition for corporate rehabilitation on September 15, 2006, and a rehabilitation receiver was appointed. Kormasinc, Inc., a successor-in-interest to one of the secured creditors (RCBC), objected to the continued appointment and fees of a separate MTI trustee during rehabilitation, arguing the receiver’s functions overlapped with the trustee’s. Kormasinc filed a motion before the Regional Trial Court (RTC) for the rehabilitation receiver to take possession, custody, and control of the MTI properties and related documents. The RTC denied the motion, ruling that the receiver’s power to take possession under the Financial Rehabilitation and Insolvency Act (FRIA) pertained only to physical possession of assets, not titles or documents. The Court of Appeals reversed the RTC, granting Kormasinc’s petition and ordering the MTI trustee to transfer possession, custody, and control of the MTI properties and related documents to the rehabilitation receiver. Creditors Metrobank, Barclays Bank PLC, and Deutsche Bank AG London filed petitions for review before the Supreme Court.

ISSUE

Whether the rehabilitation receiver is entitled to take possession, custody, and control of the titles and other documents relating to the properties subject of the Mortgage Trust Indenture (MTI).

RULING

The Supreme Court DENIED the petitions and AFFIRMED the Decision of the Court of Appeals. The rehabilitation receiver is entitled to possession, custody, and control over the MTI properties, including all related documents. The Court held that the receiver’s principal duty under Section 31 of the FRIA to preserve and maximize the value of the debtor’s assets necessitates control over the documents of title to effectively manage, preserve, and potentially dispose of or mortgage the properties as part of the rehabilitation plan. The functions of the MTI trustee are subsumed by the rehabilitation receiver during the proceedings, and maintaining a separate trustee creates redundancy and unnecessary expense, which is contrary to the purpose of rehabilitation. The Court emphasized that the rehabilitation receiver’s comprehensive powers are designed to facilitate the successful rehabilitation of the debtor, which includes having control over all indicia of ownership.