RCBC vs. IAC G.R. No.

74851, December 9, 1999

Labels: Case Digests, Commercial Law

Facts: On September 28, 1984, BF Homes filed a Petition for Rehabilitation and for
Declaration

of

Suspension

of

Payments

with

the

SEC.

RCBC, one of the creditors listed in BF Homes inventory of creditors and liabilities, on
October 26, 1984, requested the Provincial Sheriff of Rizal to extra-judicially foreclose its
real estate mortgage on some properties of BF Homes. BF Homes opposed the auction sale
and the SEC ordered the issuance of a writ of preliminary injunction upon petitioners filing
of a bond. Presumably unaware of the filing of the bond on the very day of the auction sale,
the sheriff proceeded with the public auction sale in which RCBC was the highest bidder for
the properties auctioned. But because of the proceedings in the SEC, the sheriff withheld
the delivery to RCBC of the certificate of sale covering the auctioned properties.

On March 13, 1985, despite the SEC case, RCBC filed with RTC an action for mandamus
against the provincial sheriff of Rizal to compel him to execute in its favor a certificate of
sale

of

the

auctioned

properties.

On March 18, 1985, the SEC appointed a Management Committee for BF Homes.

Consequently, the trial court granted RCBCs motion for judgment on the pleading ordering
respondents to execute and deliver to petitioner the Certificate of Auction Sale.

On appeal, the SC affirmed CAs decision (setting aside RTCs decision dismissing the
mandamus case and suspending issuance to RCBC of new land titles until the resolution of
the SEC case) ruling that whenever a distressed corporation asks the SEC for rehabilitation
and suspension of payments, preferred creditors may no longer assert such preference but
stand on equal footing with other creditors. Hence, this Motion for Reconsideration.

Issue: When should the suspension of actions for claims against BF Homes take effect?

Held: The issue of whether or not preferred creditors of distressed corporations stand on

equal footing with all other creditors gains relevance and materiality only upon the
appointment

of

management

committee,

rehabilitation

receiver, board

or

body.

Upon cursory reading of Section 6, par (c) of PD 902-A, it is adequately clear that
suspension of claims against a corporation under rehabilitation is counted or figured up only
upon the appointment of a management committee or a rehabilitation takes effect as soon
as the application or a petition for rehabilitation is filed with the SEC may to some, be more
logical and wise but unfortunately, such is incongruent with the clear language of the law. To
insist on such ruling, no matter how practical and noble would be to encroach upon
legislative prerogative to define the wisdom of the law --- plainly judicial legislation.

Once a management committee, rehabilitation receiver, board or body is appointed pursuant

to PD 902-A, all actions for claims against a distressed corporation pending before any
court, tribunal, board or body shall be suspended accordingly; Suspension shall not
prejudice or render ineffective the status of a secured creditor as compared to a totally
unsecured creditor. What it merely provides is that all actions for claims against the
corporation, partnership or association shall be suspended. This should give the receiver a
chance to rehabilitate the corporation if there should still be a possibility for doing so. In the
event that rehabilitation is no longer feasible and claims against the distressed corporation
would eventually have to be settled, the secured creditors shall enjoy preference over the
unsecured creditors subject only to the provisions of the Civil Code on Concurrence and
Preferences of Credit.

Sps. Sobrejuanite vs. ASB Development Corporation

Facts:
The spouses Sobrejuanite and ASB Development Corporation (ASBDC) entered into
a contract to sell a condominium located in Mandaluyong. After full payment and
after repeated demands, the ASBDC failed to make good of its obligation due to the
rehabilitation plan of ASB Group of Companies, which includes ASBDC. The spouses
resorted the intervention of the Housing and Land Use Regulatory Board (HLURB).
HLURB resolved the complaint in favor of the spouses Sobrejuanite. This was
affirmed by the Office of the President. On appeal, the Court of Appeals reversed
and set aside the decision of the Office of the President. It ratiocinated that the
Sobrejuanites complaint for rescission and damages is a claim under the
contemplation of Presidential Decree (PD) No. 902-A or the SEC Reorganization Act
and A.M. No. 00-8-10-SC or the Interim Rules of Procedure on Corporate
Rehabilitation. Therefore, the Securities and Exchange Commission (SEC) has
jurisdiction over the complaint, not HLURB.
Issue:
Whether claim of spouses Sobrejuanite lies with the jurisdiction of SEC.
Held:
Yes.
As provided under Section 6(c) of PD No. 902-A, all actions for claims against
corporations, partnerships or associations under management or receivership
pending before any court, tribunal, board or body shall be suspended accordingly.
The aforecited law defines claim as the debts or demands of a pecuniary nature. In
settled jurisprudence, claim means actions involving monetary considerations or all
claims or demands, of whatever nature or character against a debtor or its property,
whether for money or otherwise. It is evident that the spouses claim falls within
the definition of PD 902-A and settled jurisprudence. Hence, jurisdiction, as correctly
held by the Court of Appeals, lies with SEC and not HLURB. The ratio behind is
"equality is equity." When a corporation threatened by bankruptcy is taken over by
a receiver, all the creditors should stand on equal footing. Not anyone of them
should be given any preference by paying one or some of them ahead of the others.
This is precisely the reason for the suspension of all pending claims against the
corporation under receivership. Instead of creditors vexing the courts with suits
against the distressed firm, they are directed to file their claims with the receiver
who is a duly appointed officer of the SEC.

Moreover, Section 7 of the Contract to Sell allows the developer to extend the
period of delivery on account of causes beyond its control, such as financial
reverses.

Petition dismissed.
Spouses Sobrejuanite
v.
ASB Development Corp., G.R. No. 165675

FACTS OF THE CASE

1. On March 7, 2001, spouses Eduardo and Fidela Sobrejuanite (Sobrejuanite) filed a

Complaint for rescission of contract, refund of payments and damages, against ASB
Development Corporation (ASBDC) before the Housing and Land Use Regulatory Board
(HLURB).

2. Sobrejuanite alleged that they entered into a Contract to Sell with ASBDC over a
condominium unit and a parking space in the BSA Twin Tower-B Condominum located at
Bank Drive, Ortigas Center, Mandaluyong City. They averred that despite full payment and
demands, ASBDC failed to deliver the property on or before December 1999 as agreed.
They prayed for the rescission of the contract; refund of payments amounting to
P2,674,637.10; payment of moral and exemplary damages, attorneys fees, litigation
expenses, appearance fee and costs of the suit.

3. ASBDC filed a motion to dismiss or suspend proceedings in view of the approval by the
Securities and Exchange Commission (SEC) on April 26, 2001 of the rehabilitation plan of
ASB Group of Companies, which includes ASBDC, and the appointment of a rehabilitation
receiver. The HLURB arbiter however denied the motion and ordered the continuation of the
proceedings.

ISSUE:
Whether the SECs approval of the corporate rehabilitation plan has the effect of
suspending the proceeding before HLURB.

RULING:
Yes. Section 6(c) of PD No. 902-A empowers the SEC:

c)
To appoint one or more receivers of the property, real and personal, which is the
subject of the action pending before the Commission whenever necessary in order to
preserve the rights of the parties-litigants and/or protect the interest of the investing public
and creditors: Provided, finally, That upon appointment of a management committee,
rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against
corporations, partnerships or associations under management or receivership pending
before any court, tribunal, board or body shall be suspended accordingly.

The purpose for the suspension of the proceedings is to prevent a creditor from obtaining an
advantage or preference over another and to protect and preserve the rights of party
litigants as well as the interest of the investing public or creditors. Such suspension is
intended to give enough breathing space for the management committee or rehabilitation
receiver to make the business viable again, without having to divert attention and resources
to litigations in various fora.

The suspension would enable the management committee or rehabilitation receiver to

effectively exercise its/his powers free from any judicial or extra-judicial interference that
might unduly hinder or prevent the rescue of the debtor company.

To allow such other action to continue would only add to the burden of the management
committee or rehabilitation receiver, whose time, effort and resources would be wasted in
defending claims against the corporation instead of being directed toward its restructuring
and rehabilitation.

Metropolitan Waterworks and Sewerage System V. Hon. Reynaldo B.

Daway G.R. No. 160732. June 21, 2004
MARCH 15, 2014LEAVE A COMMENT

The prohibition under Sec 6 (b) of Rule 4 of the Interim Rules does not
apply to the the standby letter of credit issued by the bank as the
former prohibition is on the enforcement of claims against guarantors
or sureties of the debtors whose obligations are not solidary with the
debtor.
The concept of guarantee vis--vis the concept of an irrevocable letter
of credit are inconsistent with each other. The guarantee theory
destroys the independence of the banks responsibility from the
contract upon which it was opened and the nature of both contracts is
mutually in conflict with each other. A Standby Letter of Credit is not a
guaranty because under a Standby Letter of Credit, the bank
undertakes a primary obligation. On the other hand, a guarantor
undertakes a collateral obligation which arises only upon the debtors
default. A Standby Letter of Credit is a primary obligation and not an
accessory contract.
Facts: Maynilad obtained a 20-year concession to manage, repair, refurbish, and
upgrade existing Metropolitan Waterworks and Sewerage System (MWSS) water
delivery and sewerage services in Metro Manilas west zone. Maynilad, under
the concession agreement undertook to pay concession fees and itsforeign
loans. To secure its obligations, Maynilad was required under Section 9 of the
concession contract to put up a bond, bank guarantee or other security
acceptable to MWSS. Pursuant to this requirement, Maynilad arranged on for a
three-year facility with a number of foreign banks led by Citicorp Intl for the
issuance of an irrevocable standby letter of credit (SLC) in the amount of $ 120
million in favor of MWSS for the full and prompt payment of Maynilads
obligations to MWSS. Due to devaluation of the peso and other business
reversals of Maynilad, MWSS filed a notice of early termination of the concession
contract. Upon certification of the non performance of Maynilad obligation, the
MWSS moved to collect from Citicorp on the standby letters of credit issued.
Maynilad filed for corporate rehabilitation. Judge Daway stayed the payment of

the letter of credit by Citicorp pursuant to Sec 6 (b) of Rule 4 of the Interim Rules
on Corporate Rehabilitation.
Issue: Whether or not the payment of the standby of letter of credit can be
stayed by filing of a petition for rehabilitation
Held: No. The prohibition under Sec 6 (b) of Rule 4 of the Interim Rules does not
apply to the the standby letter of credit issued by the bank as the former
prohibition is on the enforcement of claims against guarantors or sureties of the
debtors whose obligations are not solidary with the debtor.
The participating banks obligation under the letter of credit are solidary with
respondent Maynilad in that it is a primary, direct, definite and an absolute
undertaking to pay and is not conditioned on the prior exhaustion of the debtors
assets. These are the same characteristics of a surety or solidary obligor. And
being solidary, the claims against them can be pursued separately from and
independently of the rehabilitation case.
Issuing banks under the letters of credit are not equivalent to guarantors. The
concept of guarantee vis--vis the concept of an irrevocable letter of credit are
inconsistent with each other. The guarantee theory destroys the independence
of the banks responsibility from the contract upon which it was opened and the
nature of both contracts is mutually in conflict with each other. In contracts of
guarantee, the guarantors obligation is merely collateral and it arises only upon
the default of the person primarily liable. On the other hand, in an irrevocable
letter of credit, the bank undertakes a primary obligation. We have also defined
a letter of credit as an engagement by a bank or other person made at the
request of a customer that the issuer shall honor drafts or other demands of
payment upon compliance with the conditions specified in the credit.
A Standby Letter of Credit is not a guaranty because under a Standby Letter of
Credit, the bank undertakes a primary obligation. On the other hand, a
guarantor undertakes a collateral obligation which arises only upon the debtors
default. A Standby Letter of Credit is a primary obligation and not an accessory
contract.
JOSE MARCEL PANLILIO, ET AL. VS. REGIONAL TRIAL COURT, PEOPLE OF THE
PHILIPPINES AND SOCIAL SECURITY SYSTEM, G.R. NO. 173846, FEBRUARY 2, 2011
FACTS:
The petitioners are corporate officers of Silahis International Hotel,Inc. (SIHI) who have filed
a petition for Suspension of Payments and Rehabilitation before a commercial court.
However, at the time of the filing of the petition for rehabilitation by the Silahis Hotel, there
were a number of criminal charges pending against the corporate officers for violation of the

SSS law. Subsequently, the officers filed with the criminal court a motion to suspend
proceedings arguing that the stay order issued by the commercial court should also apply to
the criminal cases then pending. The criminal court ruled against the petitioners on the
ground that the Stay Order issued by the commercial court does not cover the prosecution
of criminal offenses. On appeal, the Court of Appeals confirmed the criminal courts ruling.
Hence, the petitioners filed a petition for review on certiorari before the Supreme Court.
ISSUE:
Does the suspension of all claims as an incident to a corporate rehabilitation also
contemplate the suspension of criminal charges filed against the corporate officers of the
distressed corporation?
HELD:
No. The petition is not meritorious.
RATIO:
Corporate rehabilitation connotes the restoration of the debtor to a position of successful
operation and solvency, if it is shown that its continued operation is economically
feasible and its creditors can recover more, by way of the present value of payments
projected in the rehabilitation plan, if the corporation continues as a going concern than
if it is immediately liquidated. It contemplates a continuance of corporate life and
activities in an effort to restore and reinstate the corporation to its former position of
successful operation and solvency, the purpose being to enable the company to gain a
new lease on life and allow its creditors to be paid their claims out of its earnings
A principal feature of corporate rehabilitation is the suspension of claims against the
distressed corporation.
The rehabilitation of SIHI and the settlement of claims against the corporation is not a
legal ground for the extinction of petitioners criminal liabilities. There is no reason why
criminal proceedings should be suspended during corporate rehabilitation, more so,
since the prime purpose of the criminal action is to punish the offender in order to deter
him and others from committing the same or similar offense, to isolate him from society,
reform and rehabilitate him or, in general, to maintain social order. As correctly observed
in Rosario, it would be absurd for one who has engaged in criminal conduct could escape
punishment by the mere filing of a petition for rehabilitation by the corporation of which
he is an officer.
The prosecution of the officers of the corporation has no bearing on the pending
rehabilitation of the corporation, especially since they are charged in their individual
capacities. Such being the case, the purpose of the law for the issuance of the stay order
is not compromised, since the appointed rehabilitation receiver can still fully discharge
his functions as mandated by law. It bears to stress that the rehabilitation receiver is not
charged to defend the officers of the corporation. If there is anything that the
rehabilitation receiver might be remotely interested in is whether the court also rules
that petitioners are civilly liable. Such a scenario, however, is not a reason to suspend
the criminal proceedings, because as aptly discussed in Rosario, should the court
prosecuting the officers of the corporation find that an award or indemnification is
warranted, such award would fall under the category of claims, the execution of which
would be subject to the stay order issued by the rehabilitation court. The penal sanctions
as a consequence of violation of the SSS law, in relation to the revised penal code can
therefore be implemented if petitioners are found guilty after trial. However, any civil
indemnity awarded as a result of their conviction would be subject to the stay order
issued by the rehabilitation court. Only to this extent can the order of suspension be
considered obligatory upon any court, tribunal, branch or body where there are pending
actions for claims against the distressed corporation.
Congress has recently enacted Republic Act No. 10142, or the Financial Rehabilitation
and Insolvency Act of 2010. Section 18 thereof explicitly provides that criminal actions
against the individual officer of a corporation are not subject to the Stay or Suspension
Order in rehabilitation proceedings.

Furthermore, the Court pointed out that Congress has recently enacted Republic Act No.
10142, or the Financial Rehabilitation and Insolvency Act of 2010 where Section 18
thereof explicitly provides that criminal actions against the individual officer of a
corporation are not subject to the Stay or Suspension Order in rehabilitation
proceedings.

BPI v. SEC, (2007)

Cram Down Effect, Sec. 63 to 73

Facts: The ASB Group filed a petition for rehabilitation and suspension of payments before the SEC. The
Rehabilitation Plan provides a dacion en pago by the ASB Group to BPI of one of the properties mortgaged to the
latter at the ASB Group. The dacion would constitute full payment of the entire obligation due to BPI because
the balance was then to be considered waived, as per the Rehabilitation Plan. BPI opposed the Rehabilitation
Plan and moved for the dismissal of the ASB Groups petition for rehabilitation. BPI argued that
the Order constituted an arbitrary violation of BPIs freedom and right to contract since the Rehabilitation
Plan compelled BPI to enter into a dacion en pago agreement with the ASB Group.
Rehabilitation proceedings in our jurisdiction have equitable and rehabilitative purposes. On the one hand, they
attempt to provide for the efficient and equitable distribution of an insolvent debtors remaining assets to its
creditors; and on the other, to provide debtors with a fresh start by relieving them of the weight of their
outstanding debts and permitting them to reorganize their affairs. The rationale of P.D. No. 902-A, as amended,
is to effect a feasible and viable rehabilitation, by preserving a foundering business as going concern, because
the assets of a business are often more valuable when so maintained than they would be when liquidated.
The Court reiterates that the SECs approval of the Rehabilitation Plan did not impair BPIs right to contract. As
correctly contended by private respondents, the non-impairment clause is a limit on the exercise of legislative
power and not of judicial or quasi-judicial power. The SEC, through the hearing panel that heard the petition for
approval of the Rehabilitation Plan, was acting as a quasi-judicial body and thus, its order approving the plan
cannot constitute an impairment of the right and the freedom to contract.
Besides, the mere fact that the Rehabilitation Plan proposes a dacion en pago approach does not render it
defective on the ground of impairment of the right to contract. Dacion en pago is a special mode of payment
where the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding
debt. The undertaking really partakes in a sense of the nature of sale, that is, the creditor is really buying the
thing or property of the debtor, the payment for which is to be charged against the debtors debt. As such, the
essential elements of a contract of sale, namely; consent, object certain, and cause or consideration must be
present. Being a form of contract, the dacion en pago agreement cannot be perfected without the consent of the
parties involved.

CONSUELO METAL CORP v. PLANTERS DEVELOPMENT BANK & MANINGAS, (2008)

Secured Creditor Claims, Sec. 113, Sec. 114
While the SEC has jurisdiction to order the dissolution of a corporation, [16]jurisdiction over the liquidation of the
corporation now pertains to the appropriate regional trial courts. This is the reason why the SEC, in its 29 November
2000 Omnibus Order, directed that the proceedings on and implementation of the order of liquidation be
commenced at the Regional Trial Court to which this case shall be transferred. This is the correct procedure because
the liquidation of a corporation requires the settlement of claims for and against the corporation, which clearly falls

under the jurisdiction of the regular courts. The trial court is in the best position to convene all the creditors of the
corporation, ascertain their claims, and determine their preferences.
Rules
If rehabilitation is no longer feasible and the assets of the corporation are finally liquidated, secured creditors shall
enjoy preference over unsecured creditors, subject only to the provisions of the Civil Code on concurrence and
preference of credits. Creditors of secured obligations may pursue their security interest or lien, or they may choose
to abandon the preference and prove their credits as ordinary claims.
Moreover, Section 2248 of the Civil Code provides:
Those credits which enjoy preference in relation to specific real property or real rights, exclude all others to the
extent of the value of the immovable or real right to which the preference refers.
Held: In this case, Planters Bank, as a secured creditor, enjoys preference over a specific mortgaged property and
has a right to foreclose the mortgage under Section 2248 of the Civil Code. The creditor-mortgagee has the right to
foreclose the mortgage over a specific real property whether or not the debtor-mortgagor is under insolvency or
liquidation proceedings. The right to foreclose such mortgage is merely suspended upon the appointment of a
management committee or rehabilitation receiver or upon the issuance of a stay order by the trial court. However,
the creditor-mortgagee may exercise his right to foreclose the mortgage upon the termination of the rehabilitation
proceedings or upon the lifting of the stay order.

[G.R. No. 181126. June 15, 2011.]LEONARDO S. UMALE, [deceased] represented

by CLARISSA VICTORIA, JOHN LEO, GEORGE LEONARD, KRISTINE, MARGUERITA
ISABEL, ANDMICHELLE ANGELIQUE, ALL SURNAMED UMALE, petitioners, vs. ASB
REALTY CORPORATION, respondent.FACTS:1.

This case involves a parcel of land located in Amethyst Street, Ortigas Center, Pasig City
which was originally owned by AmethystPearl Corporation (Amethyst Pearl), a company that
is, in turn, wholly-owned by respondent ASB Realty Corporation (ASB Realty).2.

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. making ASB Realty the owner of the subjectpremises3.

Sometime in 2003, ASB Realty commenced an action in the MTC for unlawful detainer
against petitioner Leonardo S. Umale.4.

ASB Realty alleged that it entered into a lease contract with Umale for the period June 1,
1999-May 31, 2000. Their agreementwas for Umale to conduct a pay-parking business on
the property and pay a monthly rent of P60,720.00.5.

Upon the contract's expiration on continued occupying the premises and paying rentals.6.

On June 2003, ASB Realty served on Umale a Notice of Termination of Lease and Demand to
Vacate and Pay. ASB Realty statedthat it was terminating the lease effective midnight of
June 30, 2003.7.

Umale failed to comply with ASB Realty's demands and continued in possession of the
subject premises, even constructingcommercial establishments thereon.8.

Umale admitted occupying the property since 1999 by virtue of a verbal lease contract but
vehemently denied that ASB Realtywas his lessor. He was adamant that his lessor was the
original owner, Amethyst Pearl. Since there was no contract betweenhimself and ASB
Realty.9.

In asserting his right to remain on the property based on the oral lease contract with
Amethyst Pearl, Umale interposed that thelease period agreed upon was "for a long period
of time." Umale further claimed that when his oral lease contract with AmethystPearl ended,

they both agreed on an oral contract to sell. They agreed that Umale did not have to pay
rentals until the sale overthe subject property had been perfected between them.10.

Umale also challenged ASB Realty's personality to recover the subject premises considering
that ASB Realty had been placedunder receivership by SEC and a rehabilitation receiver had
been duly appointed. Under the Interim Rules of Procedure onCorporate Rehabilitation
(Interim Rules), it is the rehabilitation receiver that has the power to "take possession,
control andcustody of the debtor's assets." Since ASB Realty claims that it owns the subject
premises, it is its duly-appointed receiver thatshould sue to recover possession of the
same.11.

ASB Realty replied that it was impossible for Umale to have entered into a Contract of Lease
with Amethyst Pearl in 1999 becauseAmethyst Pearl had been liquidated in 1996.12.

MTC dismissed ASB Realty's complaint against Umale without prejudice. It held that ASB
Realty had no cause to seek Umale'souster from the subject property because it was not
Umale's lessor. MTC agreed with Umale that only the rehabilitation receivercould file suit to
recover ASB Realty's property. Having been placed under receivership, ASB Realty had no
more personality to filethe complaint for unlawful detainer.13.

RTC reversed decision of the MTC. It found sufficient evidence to support the conclusion that
it was indeed ASB Realty thatentered into a lease contract with Umale. With respect to ASB
Realty's personality to file the unlawful detainer suit, the RTC ruledthat ASB Realty retained
all its corporate powers, including the power to sue, despite the appointment of a
rehabilitationreceiver. Citing the Interim Rules, the RTC noted that the rehabilitation receiver
was not granted therein the power to filecomplaints on behalf of the corporation. Moreover,
the retention of its corporate powers by the corporation under rehabilitationwill advance the
objective of corporate rehabilitation, which is to conserve and administer the assets of the
corporation in thehope that it may eventually be able to go from financial distress to
solvency.14.

Umale filed MR while ASB Realty moved for the issuance of a writ of execution, the RTC
denied reconsideration of its Decisionand granted ASB Realty's Motion for Issuance of a Writ
of Execution.15.

Umale then filed his appeal with the CA insisting that the parties did not enter into a lease
contract.16.

Pending the resolution thereof, Umale died and was substituted by his widow and legal
heirs. CA affirmed RTC decision in toto.Issues: Can a corporate officer of ASB Realty (duly
authorized by the Board of Directors) file suit to recover an unlawfully detainedcorporate
property despite the fact that the corporation had already been placed under rehabilitation?
The Court resolves the issue in favor of ASB Realty and its officers.
There is no denying that ASB Realty, as the owner of the leased premises, is the real partyin-interest in the unlawful detainer suit. Realparty-in-interest is defined as "the party who
stands to be benefited or injured by the judgment in the suit, or the party entitled to
theavails of the suit.What petitioners argue is that the corporate officer of ASB Realty is
incapacitated to file this suit to recover a corporate property becauseASB Realty has a dulyappointed 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 acorporation are those
set out, expressly or impliedly, in the law. Among the general powers granted by law to a
corporation is the power tosue in its own name. This power is granted to a duly-organized
corporation, unless specifically revoked by another law. The questionbecomes: Do the laws
on corporate rehabilitation

particularly PD 902-A, as amended and its corresponding rules of procedure

forfeitthe power to sue from the corporate officers and Board of Directors?Corporate
rehabilitation is defined as "the restoration of the debtor to a position of successful
operation and solvency, if it is shown that itscontinuance of operation is economically
feasible and its creditors can recover by way of the present value of payments projected in
theplan more if the corporation continues as a going concern than if it is immediately
liquidated." This concept of preserving the corporation'sbusiness as a going concern while it
is undergoing rehabilitation is called debtor-in-possession or debtor-in-place. This means
that thedebtor corporation (the corporation undergoing rehabilitation), through its Board of
Directors and corporate officers, remains in control of its business and properties, subject
only to the monitoring of the appointed rehabilitation receiver. The concept of debtor-inpossession, iscarried out more particularly in the SEC Rules, the rule that is relevant to the
instant case. It states therein that the interim rehabilitationreceiver of the debtor
corporation "does not take over the control and management of the debtor corporation."
Likewise, therehabilitation receiver that will replace the interim receiver is tasked only to
monitor the successful implementation of the rehabilitationplan. There is nothing in the
concept of corporate rehabilitation that would ipso facto deprive the Board of Directors and
corporate officersof a debtor corporation, such as ASB Realty, of control such that it can no
longer enforce its right to recover its property from an errantlessee.To be sure, corporate
rehabilitation imposes several restrictions on the debtor corporation. The rules enumerate
the prohibited corporateactions and transactions 64 (most of which involve some kind of
disposition or encumbrance of the corporation's assets) during thependency of the

rehabilitation proceedings but none of which touch on the debtor corporation's right to
sue.While the Court rules that ASB Realty and its corporate officers retain their power to sue
to recover its property and the back rentals fromUmale, the necessity of keeping the
receiver apprised of the proceedings and its results is not lost upon this Court. Tasked to
closelymonitor the assets of ASB Realty, the rehabilitation receiver has to be notified of the
developments in the case, so that these assets wouldbe managed in accordance with the
approved rehabilitation plan.