JAIMIE LYN E. TAN CASES DECIDED BY JUSTICE MARIANO C.

DEL CASTILLO
LLB FOURTH YEAR COMMERCIAL LAW/ MERCANTILE
LAW

LEONARDO S. UMALE, ET. AL VS ASB REALTY CORPORATION

G.R. No. 181126, June 15, 2011

CASE DOCTRINE:
“Being placed under corporate rehabilitation and having a receiver appointed to carry out the
rehabilitation plan do not ipso facto deprive a corporation and its corporate officers of the power
to recover its unlawfully detained property.”

Corporate rehabilitation is defined as “the restoration of the debtor to as position of

successful operation and solvency, if it is shown that its continuance of operation is
economically feasible and its creditors can recover by way of the present value
of payments projected in the plan more if the corporation continues as a going
concern than if it is immediately liquidated.

FACTS OF THE CASE:

In 1996, Amethyst Pearl executed a Deed of Assignment in Liquidation of a parcel of

land in favor of ASB Realty in consideration of Amethyst Pearl’s outstanding capital
stock from ABS Realty making ASB Realty the owner of the parcel of land. Sometime in
2003, ASB Realty commenced an action in the MTC for unlawful detainer against Umale.
ASB Realty alleged that it entered into a lease contract with Umale. Their agreement was
for Umale to conduct a pay-parking business on the property and pay a monthly rent of
P 60,720.00. Upon the contract’s expiration on continued occupying the premises and
paying rentals. On June 2003, ASB Realty served on Umale a Notice of Termination of
Lease and Demand to vacate and pay. ASB Realty stated that it was termination the lease
effective midnight of June 30, 2003. Umale failed to comply with ASB Realty’s demands
and continued in possession of the subject permises even constructing commercial
establishments thereon.
JAIMIE LYN E. TAN CASES DECIDED BY JUSTICE MARIANO C.
DEL CASTILLO
LLB FOURTH YEAR COMMERCIAL LAW/ MERCANTILE
LAW

ISSUE:

Whether or not a corporate officer of ASB Realty (duly authorized by the Board of Directors) file
suit to recover an unlawfully detained corporate property despite the fact that the corporation
had already been placed under rehabilitation?

RULING:

The Court resolves the issue in favor of ASB Realty and its officers.

What petitioners argue is that the corporate officer of ASB Realty is incapacitated to file this suit
to recover a corporate property because ASB Realty has a duly-appointed rehabilitation
receiver. Allegedly, this rehabilitation receiver is the only one that can file the instant suit.

Corporations, such as ASB Realty, are juridical entities that exist by operation of law. As a
creature of law, the powers and attributes of a corporation are those set out, expressly or
impliedly, in the law. Among the general powers granted by law to a corporation is the power to
sue in its own name. This power is granted to a duly-organized corporation,
unless specifically revoked by another law. The question becomes: Do the laws on corporate
rehabilitation particularly PD 902-A, as amended, and its corresponding rules of procedure
forfeit the power to sue from the corporate officers and Board of Directors.

While the Court rules that ASB Realty and its corporate officers retain their power to sue to
recover its property and the back rentals from Umale, the necessity of keeping the receiver
apprised of the proceedings and its results is not lost upon this Court. Tasked to closely monitor
the assets of ASB Realty, the rehabilitation receiver has to be notified of the developments in the
case, so that these assets would be managed in accordance with the approved rehabilitation
plan.