Civil Law Review 2

John Dominic T. Buhangin

Justice Carmelita S. Manahan
 Umale v. ASB Realty
• G.R. No. 181126
• June 15, 2011
• Summary: 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
• Ponente: J. Del Castillo
 Facts:
• Subject Property: Lot 7, Blk 5, Amethyst St., Ortigas Center, Pasig
• Originally owned by Amethyst Pearl Corp., which in turn is wholly owned by herein
respondent ASB Realty Corp.
• 1996: Amethyst Pearl executed a Deed of Assignment in Liquidation of the
subject premises in favor of ASB realty in consideration of the full
redemption of Amethyst Pearl’s outstanding capital stock from ASB Realty.
• ASB Realty leased the property to Umale for a pay-parking business
(Duration: June 1, 1999-May 31, 2000).
 Facts:
• Umale failed to remit the required amounts which resulted to aggregate
arrears worth Php1.3-million.
• Umale continued occupying the property even after the lease agreement expired on
May 31, 2000.
• 2003: ASB Realty commenced an action in the MTC for unlawful detainer
against Umale
• June 23, 2003: ASB Realty served on Umale a Notice of Termination of Lease and
Demand to Vacate and Pay
 Facts:
• Umale: admitted to continue occupying the property but averred that it was
by virtue of a verbal lease contract it entered not with ASB Realty but its
predecessor-in-interest Amethyst
• Lease duration: “for a long period of time”
• Umale challenged personality of ASB Realty which at the time was
undergoing rehabilitation
• Argued that action must commence with the appointed receiver of ASB Realty
 Facts:
• MTC: Agreed with Umale that only the rehabilitation receiver could file suit to
recover ASB Realty’s property
• RTC reversed – ASB Realty entered into a lease contract with Umale
• Evidence presented by ASB Realty showed that Amethyst was indeed liquidated before
existence of lease
• Evidence presented by Umale was lacking – bare negative assertions
• ASB retained all its corporate powers, including the power to sue, despite the appointment
of a rehabilitation receiver
• Interim Rules: Rehabilitation receiver not granted power to file complaints on behalf of the
corporation
 Facts:
• Umale filed an appeal with the CA who ruled affirmed the RTC ruling in toto
• Umale added the argument that he was entitled to Art. 1687 of the Civil Code
• Art. 1687. If the period for the lease has not been fixed, it is understood to be from year to
year, if the rent agreed upon is annual; from month to month, if it is monthly; from week
to week, if the rent is weekly; and from day to day, if the rent is to be paid daily. However,
even though a monthly rent is paid, and no period for the lease has been set, the courts
may fix a longer term for the lease after the lessee has occupied the premises for over one
year. If the rent is weekly, the courts may likewise determine a longer period after the
lessee has been in possession for over six months. In case of daily rent, the courts may
also fix a longer period after the lessee has stayed in the place for over one month.
 Facts:
• CA: Umale’s failure to pay the monthly rent gave ASB Realty the
corresponding right to terminate the lease at the end of the month
• CA on ASB Realty’s legal personality:
• As expressly stated in Section 14, Rule 4 of the Interim Rules, the rehabilitation receiver
DOES NOT take over the functions of the corporate officers.
 Issues:
• Can a corporate officer of ASB Realty (duly authorized by the BOD) file suit
to recover an unlawfully detained corporate property despite the fact that the
corporation had already been placed under rehabilitation?
• Whether a contract of lease exists between ASB Realty and Umale
• Whether Umale is entitled to avail of the lease periods provided in Article
1687
 First Issue Ruling:
• SC: There is no denying that ASB Realty, as the owner of the leased
premises, is the real party-in-interest in the unlawful detainer suit.
• Indeed, PD 902-A, provides that the receiver shall have the powers enumerated under
Rule 59 of the Rules of Court. But Rule 59 (Receivership) is a rule of general
application. It applies to different receivers. While the SEC has the discretion to
authorize the rehabilitation receiver, as the case may warrant, to exercise the powers in
Rule 59, the SEC’s exercise of such discretion cannot simply be assumed.
• No allegation that SEC gave ASB Realty’s rehabilitation receiver the exclusive right to
sue.
 First Issue Ruling:
• SC: Nevertheless, there is a 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 rehabilitation plan.
 Second Issue Ruling:
• On the existence of a lease between ASB Realty and Umale:
• Receipts show Umale paid lease dues to ASB Realty rather than Amethyst, which belies
Umale’s claim that the lease was between him and Amethyst
• Umale’s version of the facts is “incredible” especially his claim that his verbal lease
agreement with Amethyst contained a very broad stipulation – “for a very long time”
 Third Issue Ruling:
• On the application of NCC 1687:
• Petitioner Umale lost sight of the restriction provided in NCC 1675: a lessee that
commits any of the grounds of ejectment cited under NCC 1673, including non-
payment of lease rentals and devoting the leased premises to uses other than those
stipulated, cannot avail of the periods established in NCC 1687
• Moreover, extension granted by NCC 1687 is a matter of equity – only when there are
unfair or unjust instances of lease termination
 Held:
• SC: Petition is DENIED.
• CA decision affirmed. ASB Realty ordered to furnish copy of decision to its
receiver.