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.

The facts of the case are as follows:

 This involves a parcel of land as Lot 7, Block 5, Amethyst street, Ortigas Center, Pasog City
o Originally owned by Amethyst Pearl Corporation (Amethyst Pearl),.
o Its mother company is ASB Realty Corporation (respondent)
o The land was liquidated in 1996 to ASB Realty, making the mother company as its sole
owner in 1997, with a Transfer Certificateof Title.
 In 2003, ASB Realty filed an unlawful detainer suit against Leonardo Umale in the Metropolita
Trial Court of Pasig.
 The lease agreement of Umale’s pay parking busimess in the building started in June 1, 1999-May
31, 2000. With a monthly rent of P60,720.
o Upon contract’s expiration in May 31,200p, Umale continued occupying the premises
whilst he paid the increased monthly rent to P100,000.
o The last payment made by Umale was for the period of June 2001 to May 2002. (Receipt
evidence, payment made on November 19, 2001.
 On June 23, 2003 ASB Realty served Umale a Notice of Termination of Lease and Demand to
Vacate and Pay
o ASB Realty stated that it was terminating the lease effective midnight of June 30, 2003
o Umale was ordered to vacate the premises and to pay his unpaid rent amounting to
P1.3Million by July 15, 2003.
o Umale failed to comply
 Umale said that he has been occupying the premises by virtue of a verbal lease “for a long period
of time” since 1999, but he denied that ASB Realty was his lessor. He insisted that Amethyst Pearl
was and his only lessor.
o Thus, he thought that ASB Realty has no cause of action to file the unlawful detainer
complaint.
o Even though, Amethyst Pearl liquidated the property, their verbal agreement remained,
as he paid his annual lease of 1.2 million
o Thus, he said that he was surprised to have received the Notice of Termination of Leas
from ASB Realty.
o It was impossible for Umale to have gone in lease contract with Amethyst Pearl since it
was liquidated in 1996.
 MTC RULING
o It dismissed ASB‘s complaint, it was held that Umale cannot be vacated since it was not
Umale’s lessor.
o The court found an incocnsisitency with the written lease
o Its whereas clauses cited ASB Realty, with Eden C. Lin as its representative, as Umale’s
lessor; but its signatory page contained Eden C. Lin’s name under the heading Amethyst
Pearl.
o The MTC then ruled with such inconsistency that Amethyst Pearl was the real lessor who
can terminate and vacate Umale from the property.
  RTC RULING
o RTC held that MTC erred in dismissing ASB Realty’s complaint for lack of cause of action.
o It found sufficient evidence that it was ASB that entered into a lease of contract with
Umale.
o The receipt of Umale’s last payment was sufficient enough.
o Thus, when the contract expired on June 30, 2003 (as stated in the Notice of Termination
of Lease), Umale lost his right to remain on the premises and his continued refusal to
vacate the same constituted sufficient cause of action for his ejectment.
o WHEREFORE, premises considered, the appealed decision is hereby reversed and set
aside. Accordingly, judgment is hereby rendered in favor of the plaintiff-appellant
ordering defendant-appellee and all persons claiming rights under him:
 1) To immediately vacate the subject leased premises located at Lot 7, Block 5,
Amethyst St., Pearl Drive, Ortigas Center, Pasig City and deliver possession
thereof to the plaintiff-appellant;
 2) To pay plaintiff-appellant the sum of ₱1,300,000.00 representing rentals in
arrears from June 2002 to June 2003
 3) To pay plaintiff-appellant the amount of ₱100,000.00 a month starting from
July 2003 and every month thereafter until they finally vacate the subject
premises as reasonable compensation for the continued use and occupancy of
the same;
 4) To pay plaintiff-appellant the sum of ₱200,000.00 as and by way of attorney’s
fees; and the costs of suit.

 Umale then filed for a motion of reconsideration, however it was denied by the RTC.
Umale then filed to the Court of Appeals.
o The CA affirmed the RTC’s decision in toto
o The CA then upheld ASB Realty’s, as well as its corporate officers’, personality to recover
an unlawfully withheld corporate property. As expressly stated in Section 14 of Rule 4 of
the Interim Rules, the rehabilitation receiver does not take over the functions of the
corporate officers.
o
ISSUE:

 Whether or not Umale was entitled to not perform his obligation to pay the rent and vacate the
premises as he failed to do so.
 Can 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?

HELD:
 No. Umale is not exempt from his obligation to pay his rent no matter the inconsistency
presented of his lessor. There was no denying that ASB as the owner of the leased property.
 To be sure, corporate rehabilitation imposes several restrictions on the debtor
corporation. The rules enumerate the prohibited corporate actions and transactions
(most of which involve some kind of disposition or encumbrance of the corporation’s
assets) during the pendency of the rehabilitation proceedings but none of which touch
on the debtor corporation’s right to sue. The implication therefore is that our concept of
 rehabilitation does not restrict this particular power, save for the caveat that all its
actions are monitored closely by the receiver, who can seek an annulment of any
prohibited or anomalous transaction or agreement entered into by the officers of the
debtor corporation.
 The concept of debtor-in-possession, is carried out more particularly in the SEC Rules, the rule
that is relevant to the instant case.60It states therein that the interim rehabilitation receiver of the
debtor corporation "does not take over the control and management of the debtor
corporation."61 Likewise, the rehabilitation receiver that will replace the interim receiver is tasked
only to monitor the successful implementation of the rehabilitation plan.62 There is nothing in the
concept of corporate rehabilitation that would ipso facto deprive63 the Board of Directors and
corporate officers of a debtor corporation, such as ASB Realty, of control such that it can no
longer enforce its right to recover its property from an errant lessee.
 Wherefore, the court affirmed the decision of the CA. ASB Realty Corporation is ordered
to FURNISH a copy of the Decision on its incumbent Rehabilitation Receiver and to
INFORM the Court of its compliance therewith within 10 days.

Recommended provisions under the syllabus:

(A rescissible contract is one that was entered into legally by the contracting parties but has resulted in
economic damage to one of the parties or an outside party. The court can therefore rescind, or set aside,
the contract for equitable reasons.)
Art. 1381. The following contracts are rescissible:
* (1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by
more than one-fourth of the value of the things which are the object thereof, (2) Those agreed upon in
representation of absentees, if the latter suffer the lesion stated in the preceding number; (3) Those
undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them,
(4) Those which refer to things under litigation if they have been entered into by the defendant without the
knowledge and approval of the litigants or of competent judicial authority; (5) All other contracts specially
declared by law to be subject to rescission. (1291a)
Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in
person or through the mediation of another:
(1) The guardian, the property of the person or persons who may be under his guardianship;
(2) Agents, the property whose administration or sale may have been entrusted to them, unless the
consent of the principal has been given;
(3) Executors and administrators, the property of the estate under administration;
(4) Public officers and employees, the property of the State or of any subdivision thereof, or of any
government-owned or controlled corporation, or institution, the administration of which has been
intrusted to them; this provision shall apply to judges and government experts who, in any manner
whatsoever, take part in the sale;
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and
employees connected with the administration of justice, the property and rights in litigation or levied upon
an execution before the court within whose jurisdiction or territory they exercise their respective functions;
this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the
property and rights which may be the object of any litigation in which they may take part by virtue of their
profession.
(6) Any others specially disqualified by law. (1459a)
Art. 2236. The debtor is liable with all his property, present and future, for the fulfillment of his obligations,
subject to the exemptions provided by law. (1911a)
Art. 2237. Insolvency shall be governed by special laws insofar as they are not inconsistent with this Code.
(n)