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[58] TOWN AND COUNTRY ENTERPRISES, INC. v. HON. QUISUMBING, JR.

DOCTRINE
Corporate rehabilitation 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 Stay Order which defers all actions or claims against the corporation seeking corporate rehabilitation from the date of
its issuance until the dismissal of the petition or termination of the rehabilitation proceedings.

FACTS
Town and Country Enterprises, Inc. (TCEI) borrowed P12 million from Metrobank, and said loan was secured by a mortgage
over 20 parcels of land. Unable to pay upon demand, TCEI lost the properties to Metrobank due to foreclosure and auction.
When TCEI held on to the properties, Metrobank asked the Regional Trial Court (RTC) to issue a writ of possession in the
bank's favor. Meanwhile, in a separate corporate rehabilitation proceeding, TCEI successfully asked the Securities and
Exchange Commission (SEC) for a stay order on the payment of its obligations. Based on that stay order, TCEI asked the
RTC which is hearing the writ of possession case to suspend the said proceedings, which the RTC granted. On review by the
Court of Appeals, the latter reversed the decision and ordered the RTC to continue with the writ of possession case. The RTC
later granted Metrobank's petition and issued a writ of possession. On appeal, the Court of Appeals affirmed the RTC's
decision, after which TCEI's land titles were then cancelled in exchange for new titles in the name of Metrobank. TCEI sought
remedy before the SEC, the rehabilitation court which had earlier issued the stay order, to annul the said cancellation and
transfer of titles, but the SEC denied TCEI's petition. On review, the Court of Appeals agreed with the SEC.

ISSUES

(1) Whether the granting of the Writ of Possession by the RTC in favor of Metrobank is valid, in view of the stay order issued
by the SEC in the rehabilitation proceeding
(2) Can the Register of Deeds legally transfer the titles subject matter of the Petition for Rehabilitation in favor of Metrobank,
in view of the existence of the Stay Order?
RULING

(1) Yes, the granting of the Writ of Possession is valid because the subject properties are no longer within the scope of the
corporate rehabilitation proceeding.
The purpose of corporate rehabilitation is to enable an insolvent company to gain a new lease on life and eventually pay its
loans. To allow this to happen, a stay order is issued to defer all present claims against the company until the time of its
projected recovery. In this case, however, Metrobank had already acquired ownership over the mortgaged parcels of land
when TCEI started its petition for corporate rehabilitation. No doubt Metrobank acquired ownership over the properties when
TCEI failed to redeem these within the three-month period prescribed by Section 47 of Republic Act 8791.
It does not matter, then, if Metrobank only had the certificate of sale registered before the Deed of Registry a couple of months
later, and had consolidated its ownership over a year later. "The mortgagor loses all interest over the foreclosed property after
the expiration of the redemption period and the purchaser becomes the absolute owner thereof when no redemption is made."
Thus, having acquired ownership of the said properties, Metrobank can simply file an ex-parte motion for issuance of the writ
of possession - "the issuance of which has been held to be a ministerial function which cannot be hindered by an injunction
or an action for the annulment of the mortgage or the foreclosure itself." There is an exception to this rule, however, and that
is where the property is held by a third party claiming a right adverse to that of the judgment debtor. But, on the other hand,
the rehabilitation receiver's claim is far from adverse. He is an officer of the court who is appointed to protect the interests of
TCEI's investors and creditors, not the interests of TCEI per se or its officers and directors.

(2) It follows then that the register of deeds can transfer the titles to Metrobank. "Upon failure to redeem foreclosed realty,
consolidation of title becomes a matter of right on the part of the auction buyer, and the issuance of a certificate of title in favor
of the purchaser becomes ministerial upon the Register of Deeds."
Finally, proceedings in corporate rehabilitation cases are summary and non-adversarial, and do not impair the debtor's
contracts or diminish the status of preferred creditors. Thus, the stay order, which only suspends the enforcement of all claims,
cannot be held to extend to the period not within its scope. In this case, there was no more claim by Metrobank to speak of
because the bank had already acquired ownership over the subject properties prior to the issuance of the stay order.