PATRICIA CABRIETO DELA TORRE, REPRESENTED BY BENIGNO T. CABRIETO, JR., v.

PRIMETOWN
PROPERTY GROUP, INC.
G.R. No. 221932 ; February 14, 2018
PERALTA, J

Doctrine: It is provided under the law that if the RTC finds the petition to be sufficient in form and substance,
it shall issue, not later than five (5) days from the filing of the petition, an Order as follows:
(a) appointing a Rehabilitation Receiver and fixing his bond;
(b) staying enforcement of all claims, whether for money or otherwise and whether such enforcement is by
court action or otherwise, against the debtor, its guarantors and sureties not solidarity liable with the debtor;
(c) prohibiting the debtor from selling, encumbering, transferring, or disposing in any manner any of its
properties except in the ordinary course of business;
(d) prohibiting the debtor from making any payment of its liabilities outstanding as at the date of filing of the
petition;

In addition, it is also stated under the same Section that all creditors and all interested parties are directed to
file and serve on the debtor a verified comment on or opposition to the petition not later than ten (10) days
before the date of the initial hearing and their failure to do so will bar them from participating in the
proceedings.

Facts: Primetown Property Group, Inc. (Respondent) is primarily engaged in holding, owning and developing
real estate. The ascent of respondent was arrested and its shares were brought down by the Asian financial
crisis in 1997. It experienced financial difficulties due to the devaluation of the Philippine peso, the increase
in interest rates and lack of access to adequate credit. Thus, in 2003, respondent filed a petition for corporate
rehabilitation and a stay order was issued.

Patricia Cabrieto dela Torre filed a Motion for Leave to Intervene seeking judicial order for specific performance,
i.e., for respondent to execute in her favor a deed of sale covering Unit 3306, Makati Prime Citadel
Condominium which she bought from the former as she had allegedly fully paid the purchase price.

Respondent opposed the motion arguing that it was filed out of time considering that the Stay Order was
issued on August 15, 2003 and under the Interim Rules of Procedure on Corporate Rehabilitation (Interim
Rules), any claimants and creditors shall file their claim before the rehabilitation court not later than ten (10)
days before the date of the initial hearing; and that since the Stay Order was issued on August 15, 2003 and
the publication thereof was done in September 2003 with the initial hearing on the petition set on September
24 2003, the motion for intervention should have been filed on or before September 14, 2003.5

RTC granted the motion for intervention. RTC denied the MR. CA annulled and set aside the decision of the
RTC and denied petitioner’s motion for intervention.

Issue: WON petitioner’s claim is suspended due to the stay order

Held: Yes. An essential function of corporate rehabilitation is the Stay Order which is a mechanism of
suspension of all actions and claims against the distressed corporation upon the due appointment of a
management committee or rehabilitation receiver. It is provided under the law that if the RTC finds the petition
to be sufficient in form and substance, it shall issue, not later than five (5) days from the filing of the petition,
an Order as follows:
(a) appointing a Rehabilitation Receiver and fixing his bond;
(b) staying enforcement of all claims, whether for money or otherwise and whether such enforcement is by
court action or otherwise, against the debtor, its guarantors and sureties not solidarity liable with the debtor;
(c) prohibiting the debtor from selling, encumbering, transferring, or disposing in any manner any of its
properties except in the ordinary course of business;
(d) prohibiting the debtor from making any payment of its liabilities outstanding as at the date of filing of the
petition;
In addition, it is also stated under the same Section that all creditors and all interested parties are directed to
file and serve on the debtor a verified comment on or opposition to the petition not later than ten (10) days
before the date of the initial hearing and their failure to do so will bar them from participating in the
proceedings.

In this case, respondent filed a petition for rehabilitation and suspension of payments with the RTC which
issued a Stay Order on August 15, 2003. The initial hearing was set on September 24, 2003; thus, any
comment or opposition to the petition should have been filed 10 days before the initial hearing but petitioner
did not file any and already barred from participating in the proceedings. However, petitioner filed a motion
for leave to intervene on October 15, 2004, one year after, praying that respondent be ordered to execute in
her favor a deed of absolute sale over Unit 3306 of the Makati Prime Citadel Condominium, subject matter of
their earlier contract to sell. It bears stressing that intervention is prohibited under Section 1,14 Rule 3 of the
Interim Rules. Hence, the RTC should not have entertained the petition for intervention at all.

Petitioner's prayer in intervention for respondent to execute the deed of sale in her favor for the condominium
unit is a claim as defined under the Interim Rules which is already stayed as early as August 15, 2003. In fact,
the same order also prohibited respondent from selling, encumbering, transferring or disposing in any manner
of any of its properties, except in the ordinary course of business. The RTC's Order granting petitioner's
intervention and directing respondent to execute a deed of sale in her favor and to deliver the copy of the
owner's duplicate copy of the condominium certificate, with all the pertinent documents needed to effect
registration of the deed of sale and issuance of a new title in petitioner's name, is a violation of the law. And
the RTC gave undue preference to petitioner over respondent's other creditors and claimants. The CA correctly
found that the RTC committed grave abuse of discretion in issuing its Orders dated August 24, 2011 and April
16, 2012.