Professional Documents
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Credit Compilation PDF
Credit Compilation PDF
Credit Compilation PDF
Transactions
longer
than
the
period
stipulated
or
when
the
thing
loaned
has
been
delivered
with
appraisal
of
its
value,
unless
there
is
a
Concept
of
credit
stipulation
exempting
him
from
responsibility
in
case
of
a
fortuitous
event.
People
v.
Concepcion
Pajuyo
v.
CA
The
credit
of
an
individual
means
his
ability
to
borrow
money
by
virtue
of
the
trust
or
confidence
reposed
by
a
lender
that
he
will
In
a
contract
of
commodatum,
one
of
the
parties
delivers
to
pay
what
he
may
promise.
another
something
not
consumable
so
that
the
latter
may
use
the
same
for
a
certain
time
and
return
it.
An
essential
feature
of
A
loan
means
the
delivery
by
one
party
and
the
receipt
by
the
commodatum
is
that
it
is
gratuitous.
The
use
of
the
thing
other
of
a
given
sum
of
money,
upon
an
agreement,
express
or
belonging
to
another
is
for
a
certain
period
such
that
the
bailor
implied,
to
repay
the
sum
loaned,
with
or
without
interest.
cannot
demand
the
return
of
the
thing
loaned
until
after
the
expiration
of
the
period
stipulated
or
after
accomplishment
of
The
concession
of
a
credit
necessarily
involves
the
granting
of
the
use
for
which
the
commodatum
is
constituted.
If
the
bailor
loans
up
to
the
limit
of
the
amount
fixed
in
the
credit.
should
have
urgent
need
of
the
thing,
he
may
demand
its
return
for
temporary
use.
If
the
use
of
the
thing
is
merely
tolerated
by
To
discount
a
paper
is
only
a
mode
of
loaning
money,
with
the
the
bailor,
he
can
demand
the
return
of
the
thing
at
will,
in
which
following
distinctions:
case,
the
contractual
relation
is
a
precarium.
a.
In
a
discount,
interest
is
deducted
in
advance,
while
in
Quintos
v.
Beck
a
loan,
interest
is
taken
at
the
expiration
of
a
credit;
b.
A
discount
is
always
on
a
double-‐name
paper;
a
loan
is
The
bailee
is
bound
to
return
all
the
things
subject
of
the
generally
on
a
single-‐name
paper
commodatum
upon
demand
of
the
bailor.
He
is
not
deemed
to
have
complied
with
his
obligation
if
he
retains
for
himself
some
Commodatum
of
the
things
loaned
or
when
he
merely
placed
them
at
the
disposal
of
the
bailor,
when
the
agreement
between
them
is
for
Republic
v.
Bagtas
him
to
return
them
at
the
bailor’s
residence.
The
bailee
is
not
entitled
to
place
the
thing
on
deposit,
and
the
bailor
cannot
be
A
contract
of
commodatum
is
essentially
gratuitous.
Ownership
compelled
to
accept
the
offer
to
return
only
some
of
things
of
the
thing
does
not
transfer
to
the
bailee,
thus,
the
bailor
bears
loaned.
the
risk
of
loss
due
to
force
majeure.
However,
the
bailee
is
liable
for
loss
of
the
thing
due
to
fortuitous
event
if
he
keeps
the
thing
A
bailee
who
breached
the
contract
of
commodatum
and
without
mortgage
was
executed
and
registered,
there
arises
a
perfected
any
reason
refused
to
return
and
deliver
all
the
things
loaned
consensual
contract
of
loan.
upon
the
bailor’s
demand
is
bound
to
pay
the
legal
expenses
and
judicial
costs
which
the
bailor
would
not
have
otherwise
Since
mutual
agreement
can
create
a
contract,
mutual
defrayed.
disagreement
by
the
parties
can
cause
its
extinguishment.
Producer’s
Bank
of
the
Philippines
v.
CA
BPI
Investment
Corp.
v.
CA
A
commodatum
may
have
for
its
object
a
consumable
thing
if
the
A
loan
contract
is
not
a
consensual,
but
a
real,
contract.
It
is
consumable
goods
are
loaned
only
for
the
purpose
of
exhibition,
perfected
only
upon
the
delivery
of
the
object
of
the
contract.
or
when
the
intention
of
the
parties
is
to
lend
consumable
goods
and
to
have
the
very
same
goods
returned
at
the
end
of
the
A
loan
contract
involves
a
reciprocal
obligation
wherein
the
period
agreed
upon.
obligation
or
promise
of
each
party
is
the
consideration
for
that
of
the
other.
Neither
party
incurs
in
delay
if
the
other
does
not
Simple
loan
or
mutuum
comply
or
is
not
ready
to
comply
in
a
proper
manner
with
what
is
incumbent
upon
him.
Garcia
v.
Thio
People
v.
Puig
and
Porras
A
loan
is
a
real
contract,
not
consensual,
and
as
such
is
perfected
only
upon
the
delivery
of
the
object
of
the
contract.
Upon
The
bank
acquires
ownership
of
the
money
deposited
by
its
delivery
of
the
object
of
the
contract
of
loan,
the
debtor
acquires
clients.
The
relationship
between
banks
and
depositors
is
that
of
ownership
of
such
money
or
loan
proceeds
and
is
bound
to
pay
a
creditor
and
debtor.
the
creditor
an
equal
amount.
The
employees
of
the
bank
who
are
entrusted
with
the
Delivery
is
the
act
by
which
the
res
or
substance
thereof
is
placed
possession
of
the
deposits
in
the
bank
occupy
positions
of
within
the
actual
or
constructive
possession
or
control
of
confidence
by
virtue
of
the
confidence
reposed
in
them.
It
is
not
another.
the
depositor-‐client
who
is
the
real-‐party-‐in-‐interest
in
a
case
for
qualified
theft
filed
by
the
bank
against
its
employees
who
Saura
Inc.
v.
DBP
misappropriated
the
money
deposited
in
the
bank,
but
the
bank
itself,
as
it
is
now
the
owner
of
such
money.
Where
an
application
for
a
loan
of
money
was
approved
by
resolution
of
the
corporation
(lender)
and
the
corresponding
BPI
Family
Bank
v.
Franco
The
quality
of
being
fungible
depends
upon
the
possibility
of
the
unconscionable
or
if
the
principal
obligation
has
been
partly
or
property,
because
of
its
nature
or
the
will
of
the
parties,
being
irregularly
complied
with.
substituted
by
others
of
the
same
kind,
not
having
a
distinct
individuality.
Money
is
generic
and
fungible
and
bears
no
A
penalty
stipulation
is
not
necessarily
preclusive
of
interest,
if
earmarks
of
peculiar
ownership.
there
is
an
agreement
to
that
effect,
the
two
being
distinct
concepts
which
may
be
separately
demanded.
What
may
justify
The
deposit
of
money
in
banks
is
governed
by
the
provisions
on
the
court
in
reducing
penalty
or
surcharges
may
not
equally
simple
loan.
As
there
is
a
debtor-‐creditor
relationship
between
a
justify
non-‐payment
or
reduction
of
interest.
bank
and
its
depositor,
a
bank
acquires
ownership
of
the
deposits,
but
such
ownership
is
coupled
with
an
obligation
to
pay
GSIS
v.
CA
(1986)
him
an
equal
amount
on
demand.
Stipulation
in
the
Contract:
Interest
The
rate
of
interest
shall
be
9%
per
annum
compounded
monthly,
and
that
any
due
and
unpaid
monthly
amortization
Frias
v.
San
Diego-Sison
shall
bear
interest
at
the
rate
of
9%/12%
per
month.
For
a
debtor
to
continue
in
possession
of
the
principal
of
the
loan
Ratio:
and
to
continue
to
use
the
same
after
maturity
of
the
loan
The
Usury
Law
applies
only
to
interest
by
way
of
compensation
without
payment
of
the
monetary
interest
would
constitute
for
the
use
or
forbearance
of
money.
Interest
by
way
of
damages
unjust
enrichment
on
the
part
of
the
debtor
at
the
expense
of
the
is
governed
by
Art.
2209.
creditor.
Art.
2209.
If
the
obligation
consists
in
the
payment
of
a
sum
of
money,
and
the
debtor
incurs
in
delay,
the
indemnity
for
Ligutan
v.
CA
damages,
there
being
no
stipulation
to
the
contrary,
shall
be
the
payment
of
the
interest
agreed
upon.
A
penalty
clause
is
an
accessory
undertaking
to
assume
greater
liability
on
the
part
of
the
obligor
in
case
of
breach
of
an
The
Civil
Code
permits
the
agreement
upon
a
penalty
apart
from
obligation.
It
functions
to
strengthen
the
coercive
force
of
the
interest.
Should
there
be
such
agreement,
the
penalty
does
not
obligation
and
to
provide
in
effect,
for
what
would
be
the
include
the
interest,
and
as
such
the
two
are
different
and
liquidated
damages
resulting
from
such
a
breach.
The
obligor
distinct
things
which
may
be
demanded
separately.
would
then
be
bound
to
pay
the
stipulated
indemnity
without
the
The
stipulation
about
payment
of
additional
rate
partakes
of
necessity
of
proof
on
the
existence
and
on
the
measure
of
the
nature
of
a
penalty
clause,
which
is
sanctioned
by
damages
caused
by
the
breach.
Such
stipulated
penalty
may
still
law.
be
equitably
reduced
by
the
courts
if
iniquitous
or
Eastern
Shipping
Lines
v.
CA
(1994)
Other
Obligations
CB
Circular
416:
the
rate
of
interest
for
loan
or
forbearance
of
·
When
an
obligation,
not
constituting
a
loan
or
money,
goods
or
credit,
and
the
rate
allowed
in
judgments,
in
the
forbearance
of
money,
is
breached,
an
interest
in
the
absence
of
expressly
contract
as
to
such
rate
of
interest,
shall
be
amount
of
damages
awarded
may
be
imposed
at
the
12%
per
annum.
discretion
of
the
court
at
the
rate
of
6%
p.a.
No
interest,
however,
shall
be
adjudged
on
unliquidated
claims
or
If
the
claim
does
not
constitute
a
loan
or
forbearance,
then
CB
damages
except
when
or
until
the
demand
can
be
Circular
416
will
not
apply.
In
this
case,
the
claim
is
one
established
with
reasonable
certainty.
for
damages
which
is
still
unliquidated,
hence,
the
legal
o
Where
the
demand
is
established
with
interest
to
be
paid
is
6%
on
the
amount
due
computed
reasonable
certainty,
the
interest
shall
begin
to
from
the
decision
of
the
court
a
quo.
run
from
the
time
the
claim
is
made
judicially
or
extrajudicially.
Rules
of
thumb
in
computing
interest
as
damages:
o
When
such
certainty
cannot
be
reasonably
When
an
obligation,
regardless
of
its
source,
is
breached,
the
established
at
the
time
the
demand
is
made,
the
contravenor
can
be
held
liable
for
damages.
interest
shall
begin
to
run
only
from
the
date
the
With
regard
particularly
to
an
award
of
interest
in
the
concept
judgment
of
the
court
is
made.
of
actual
and
compensatory
damages,
the
rate
of
interest,
as
well
as
the
accrual
thereof,
is
imposed
as
follows:
When
Judgment
Final
and
Executory
·
When
the
judgment
of
the
court
awarding
a
sum
Loan
or
Forbearance
of
Money
of
money
becomes
final
and
executor,
the
rate
of
legal
interest,
whether
the
case
falls
under
par.
1
or
par.
2,
·
With
stipulation.
When
an
obligation
is
shall
be
12%
p.a.
from
such
finality
until
its
breached
and
it
consists
in
the
payment
of
a
satisfaction,
this
interim
period
being
deemed
to
be
by
sum
of
money,
i.e.,
a
loan
or
forbearance
of
then
an
equivalent
to
a
forbearance
of
credit.
money,
the
interest
due
should
be
that
stipulated,
commencing
from
the
time
it
is
Discussion:
judicially
demanded.
Other
Obligations
Not
Constituting
Loan
or
Forbearance
of
·
Without
stipulation.
In
the
absence
of
Money:
stipulation,
the
rate
of
interest
shall
be
12%
·
Recovery
of
damages
for
injury
to
person
and
per
annum
to
be
computed
from
default,
i.e.,
loss
of
property
from
judicial
or
extrajudicial
demand
and
·
Recovery
of
damages
arising
from
the
collapse
of
subject
to
the
provisions
of
Art.
1169[1].
the
building
·
Moral
and
exemplary
damages
indebiti
applies.
It
applies
to
erroneous
payment
of
undue
·
Damages
for
breach
of
employment
contract
interest.
·
Complaint
for
a
sum
of
money
as
just
compensation
for
lands
expropriated
Requisites:
1.
A
payment
is
made
when
there
exists
no
binding
Siga-an
v.
Villanueva
(2009)
relation
between
the
payor,
who
has
no
duty
to
pay,
and
the
person
who
received
the
payment
Monetary
Interest
2.
The
payment
is
made
through
mistake,
and
not
No
monetary
interest
shall
be
due
unless
it
has
been
expressly
through
liberality
of
some
other
cause
stipulated
in
writing
(Art.
1956).
Monetar
interest
is
compensation
fixed
by
the
parties
for
the
use
or
forbearance
of
DEPOSIT
money.
Voluntary
Deposit
Requisites
for
payment
of
monetary
interest:
1.
An
express
stipulation
for
the
payment
of
BPI
v.
IAC
(1988)
interest
2.
Such
agreement
for
the
payment
of
interest
must
Zschornack
entrusted
to
COMTRUST
$3,000
cash
(greenbacks)
be
reduced
in
writing
for
safekeeping,
and
that
the
agreement
was
embodied
in
a
document.
Compensatory
Interest
Compensatory
interest
is
interest
as
penalty
or
indemnity
for
Ratio:
damages[2].
Interest
can
be
payable
even
in
the
absence
of
an
express
stipulation
in
writing.
Compensatory
interest
CANNOT
The
document
and
the
subsequent
acts
of
the
parties
show
that
be
charged
as
compensation
for
the
use
of
forbearance
of
money.
they
intended
the
bank
to
safekeep
the
foreign
exchange,
and
The
right
to
interest
arises
only:
return
it
later
to
Zschornack.
The
parties
did
not
intend
to
sell
·
By
virtue
of
a
contract
the
US
dollars
to
the
Central
Bank
within
one
business
day
from
·
By
virtue
of
damages
for
delay
or
failure
to
pay
receipt.
Otherwise,
the
contract
of
depositum
would
never
have
the
principal
loan
on
which
interest
is
demanded
been
entered
into
at
all.
Solutio
indebiti
However,
since
safekeeping
of
greenback
is
prohibited,
both
parties
are
in
pari
delicto
and
Zschornack
cannot
recover
the
Under
Art.
1960[3],
if
the
borrower
of
loan
pays
interest
when
amount.
there
has
been
no
stipulation
therefor,
the
principle
of
solution
Roman
Catholic
Bishop
of
Jaro
v.
De
la
Pena
Triple
V
v.
Filipino
Merchants
No
one
shall
be
liable
for
events
which
could
not
be
foreseen,
or
De
Asis
availed
of
the
valet
p
arking
service
of
Triple
V
and
which
having
been
foreseen
were
inevitable,
with
the
exception
entrusted
her
car
key
to
the
vale
counter.
The
car
and
the
key
of
the
cases
expressly
mentioned
in
the
law
or
those
in
which
the
were
stolen.
obligation
so
declares.
·
By
placing
the
money
in
the
bank
and
mixing
it
Ratio:
with
his
personal
funds,
De
la
Pena
did
not
thereby
assume
an
obligation
different
from
that
under
which
In
a
contract
of
deposit,
a
person
receives
an
object
belonging
to
he
would
have
lain
if
such
deposit
had
not
been
made,
another
with
the
obligation
of
safely
keeping
it
and
returning
the
nor
did
he
thereby
make
himself
liable
to
repay
the
same.
A
deposit
may
be
constituted
even
without
any
money
at
all
hazards.
The
fact
that
he
placed
the
trust
consideration.
It
is
not
necessary
that
the
depositary
receives
a
fund
in
the
bank
in
his
personal
account
does
not
add
fee
before
it
becomes
obligated
to
keep
the
item
entrusted
for
to
his
responsibility.
The
question
here
is
not
safekeeping
and
to
return
it
later
to
the
depositor.
negligence.
Discussion:
There
was
no
law
prohibiting
him
from
depositing
it
as
he
did
and
there
was
no
law
which
changed
his
responsibility
by
reason
Why
liable:
of
the
deposit.
Art.
2000.
The
responsibility
referred
to
in
the
two
preceding
articles
shall
include
the
loss
of,
or
injury
to
the
personal
Discussion:
property
of
the
guests
caused
by
the
servants
or
employees
of
the
keepers
of
hotels
or
inns
as
well
as
strangers;
but
not
that
Ma’am
disagrees.
The
change
of
way
of
the
deposit
was
which
may
proceed
from
any
force
majeure.
The
fact
that
unwarranted
within
the
purview
of
Art.
1973.
Change
of
way
of
travellers
are
constrained
to
rely
on
the
vigilance
of
the
keeper
of
deposit
–
the
contract
was
converted
from
a
deposit
to
a
loan
the
hotels
or
inns
shall
be
considered
in
determining
the
degree
·
Art.
1973.
Unless
there
is
a
stipulation
to
the
of
care
required
of
him.
contrary,
the
depositary
cannot
deposit
the
thing
with
a
third
person.
If
deposit
with
a
third
person
is
Situation:
If
the
car
key
was
with
the
owner,
would
it
be
a
allowed,
the
depositary
is
liable
for
the
loss
if
he
contract
of
deposit?
deposited
the
thing
with
a
person
who
is
manifestly
No.
It
would
be
a
contract
of
lease
as
there
was
no
delivery
as
to
careless
or
unfit.
The
depositary
is
responsible
for
the
constitute
deposit
and
the
owner
had
the
control
of
the
thing.
negligence
of
his
employees.
CA
Agro-Industrial
Dev’t
Corp.
v.
CA
o
General
Banking
Act:
The
banks
may
The
contract
for
the
rent
of
the
safety
deposit
box
is
not
an
receive
in
custody
funds,
documents,
and
ordinary
contract
of
lease
of
things
but
a
special
kind
of
valuable
objects,
and
rent
safety
deposit
deposit.
boxes
for
its
safeguarding.
The
banks
shall
·
It
cannot
be
characterized
as
an
ordinary
perform
these
services
as
depositaries
or
as
contract
of
lease
of
things
because
the
full
and
absolute
agents.
possession
and
control
of
the
safety
deposit
box
was
o
The
rending
out
of
the
safety
not
given
to
the
joint
renters.
deposit
boxes
is
not
independent
o
The
guard
key
remained
with
the
Bank.
from,
but
related
to
or
in
conjunction
Without
this
key,
neither
of
the
renters
with,
this
principal
function.
could
open
the
box.
o
On
the
other
hand,
the
Bank
cannot
Discussion:
likewise
open
the
box
without
the
renter’s
key.
Ma’am
disagrees.
Bailment
contract
is
a
common
law
concept
in
the
US.
The
2nd
par.
of
Art.
1975
means
that
the
depositary
has
Art.
1975[4]
cannot
be
invoked
as
an
argument
against
the
no
duty
to
preserve
the
value
as
long
they
are
certificates,
bonds,
deposit
theory.
securities
or
instruments.
The
contract
is
one
of
deposit,
not
a
·
Obviously,
the
first
paragraph
cannot
apply
to
a
bailment
contract.
depositary
of
certificates,
bonds,
securities
or
instruments
which
earn
interest
if
such
documents
are
Necessary
Deposit
kept
in
a
rented
safety
deposit
box.
It
is
clear
that
the
depositary
cannot
open
the
box
without
the
renter
YHT
Realty
Corporation
v.
CA
(2005)
being
present.
Those
who
in
the
performance
of
their
obligations
are
guilty
of
The
contractual
relation
between
a
commercial
bank
and
fraud,
negligence,
or
delay,
and
those
who
in
any
manner
another
party
in
a
contract
of
rent
of
a
safety
deposit
box
with
contravene
the
tenor
thereof,
are
liable
for
damages
(Art.
1170).
respect
to
its
contents
is
one
of
bailor
and
bailee.
The
owners
and
managers
of
an
establishment
or
enterprise
are
·
The
prevailing
rule
in
American
jurisprudence
is
likewise
responsible
for
damages
caused
by
their
employees
in
that
the
relation
between
a
bank
renting
out
safe-‐ the
service
of
the
branches
in
which
the
latter
are
employed
or
deposit
boxes
and
its
customers
with
respect
to
the
on
the
occasion
of
their
functions
Art.
2180
(4).
contents
of
the
box
is
that
of
a
bailor
and
bailee,
the
bailment
being
for
hire
and
mutual
benefit.
o
Tropicana
is
guilty
of
gross
negligence.
The
guest
·
We
adopted
the
prevailing
rule
in
the
US.
alone
cannot
open
the
safety
deposit
box
without
the
assistance
of
the
management
or
its
employees.
With
separate
obligation
from
the
underlying
agreement
more
reason
that
access
of
the
safety
box
should
be
like
for
instance
a
typical
standby
denied
if
the
one
requesting
for
the
opening
of
the
·
Independence
may
only
be
as
to
the
justification
safety
deposit
box
is
a
stranger.
aspect
like
in
a
commercial
letter
of
credit
or
repayment
standby,
which
is
identical
with
the
same
The
hotel-‐keeper
cannot
free
himself
from
responsibility
by
obligations
under
the
underlying
agreement.
posting
notices
to
the
effect
that
he
is
not
liable
for
the
articles
In
both
cases,
the
payment
may
be
enjoined
if
in
light
of
the
brought
by
the
guest.
Any
stipulation
between
the
hotel-‐keeper
purpose
of
the
credit,
the
payment
of
the
credit
would
constitute
and
the
guest
whereby
the
responsibility
of
the
former
as
set
fraudulent
abuse
of
credit.
forth
in
articles
1998
to
2001
is
suppressed
or
diminished
shall
be
void
(Art.
2003).
Surety
Contract
Responsibility
of
the
hotel-‐keeper
shall
extend
to
loss
of,
or
The
surety
has
no
duty
to
pay
beneficiary
until
the
latter
proves
injury
to,
the
personal
property
of
the
guests
even
if
causes
by
the
fact
of
obligor’s
performance
in
a
litigation.
During
the
servants
or
employees
of
the
keepers
of
hotels
or
inns
as
well
as
litigation,
the
surety
holds
the
money
and
the
beneficiary
bears
by
strangers,
except
as
it
may
proceed
from
any
force
majeure.
most
of
the
cost
of
delay
in
performance.
o
In
the
case
at
bar,
there
is
no
showing
that
the
act
of
the
thief
or
robber
was
done
with
the
use
of
arms
or
Letter
of
Credit
through
an
irresistible
force
to
qualify
the
same
as
force
majeure.
In
a
standby
credit
case,
the
beneficiary
avoids
that
litigation
burden
and
receives
his
money
promptly
upon
presentation
of
LETTERS
OF
CREDIT
the
required
document.
It
may
be
that
the
applicant
has
in
fact
performed
his
obligation
and
that
the
beneficiary’s
presentation
Transfield
Phil.
v.
Luzon
Hydro
Corporation
(2004)
of
documents
is
wrongful.
In
that
case,
applicant
may
sue
the
beneficiary
in
tort,
contract
or
in
breach
of
warranty;
but
during
A
letter
of
credit
is
a
written
instrument
whereby
the
writer
the
litigation,
the
beneficiary,
not
the
applicant,
holds
the
money.
requests
or
authorizes
the
addressee
to
pay
money
or
deliver
goods
to
a
third
person
and
assumes
responsibility
for
payment
Ratio:
of
debt
therefor
to
the
addressee.
Letters
of
credit,
by
their
nature,
are
separate
transactions
from
The
independent
nature
of
a
letter
of
credit
may
be:
the
sales
or
other
contracts
on
which
they
may
be
based.
The
·
Independence
in
toto
where
the
credit
is
engagement
of
the
issuing
bank
is
to
pay
the
seller
or
beneficiary
independent
from
the
justification
aspect
and
is
a
of
the
credit
once
the
draft
and
the
required
documents
are
presented
to
it.
Trust
receipt
transactions
are
intended
to
aid
in
financing
·
The
independence
principle
assures
the
seller
or
importers
and
retail
dealers
who
do
not
have
sufficient
funds
or
the
beneficiary
of
prompt
payment
independent
of
any
resources
to
finance
the
importation
or
purchase
of
breach
of
the
main
contract
and
precludes
the
issuing
merchandise,
and
who
may
not
be
able
to
acquire
credit
except
bank
from
determining
whether
the
main
contract
is
through
utilization,
as
collateral,
of
the
merchandise
imported
or
actually
accomplished
or
not.
The
beneficiary
can
purchased.
invoke
the
independence
principle
to
justify
its
drawing
of
the
securities
because
the
letter
of
credit
The
Trust
Receipts
Law
does
not
seek
to
enforce
payment
of
the
was
precisely
entered
into
for
the
benefit
of
both
loan,
rather
it
punishes
the
dishonesty
and
abuse
of
confidence
issuing
bank
and
beneficiary.
in
the
handling
of
money
or
goods
to
the
prejudice
of
another
o
Banks
are
in
no
way
concerned
with
or
regardless
of
whether
the
latter
is
the
owner.
bound
by
such
contracts,
even
if
any
reference
whatsoever
to
such
contract
is
included
in
the
·
The
practice
of
banks
of
making
borrowers
sign
credit.
trust
receipts
to
facilitate
collection
of
loans
and
place
o
Banks
assume
no
responsibility
for
the
them
under
the
threats
of
criminal
prosecution
should
form,
sufficiency
or
genuineness
of
any
they
be
unable
to
pay
it
may
be
unjust
and
inequitable,
document
presented
to
it,
nor
does
it
assume
if
not
reprehensible.
Such
agreements
are
contracts
of
responsibility
for
the
good/bad
faith
of
the
adhesion
which
borrowers
have
no
option
but
to
sign
consignor.
lest
their
loan
be
disapproved.
Injunction
does
not
lie
to
prevent
LHC
to
draw
on
the
letter
of
Ratio:
credit.
To
require
that
any
dispute
must
first
be
resolved
by
the
parties
would
convert
the
letter
of
credit
into
a
mere
guaranty.
In
The
transaction
was
a
contract
of
loan.
Petitioners
received
the
a
letter
of
credit,
the
settlement
of
a
dispute
between
the
parties
merchandise
from
CM
Builders
on
Oct.
30.
On
the
same
day,
is
not
a
prerequisite
for
the
release
of
funds.
ownership
over
the
merchandise
was
already
transferred
to
·
Furthermore,
nothing
in
the
contract
suggested
them
who
were
to
use
the
materials
for
their
construction
that
all
disputes
regarding
delay
must
first
be
settled
project.
It
was
only
on
Oct.
31
when
they
went
to
the
bank
to
before
LHC
can
draw
on
the
securities.
apply
for
a
loan
to
pay
for
the
merchandise.
The
situation
belies
what
normally
obtains
in
a
pure
trust
receipt
transaction.
TRUST
RECEIPTS
LAW
Petitioners
are
not
importers
acquiring
the
goods
for
re-‐sale,
contrary
to
the
express
provision
embodied
in
the
trust
receipt.
Colinares
v.
CA
(2000)
Trust
Receipt
Transaction:
·
The
bank
acquires
a
“security
interest”
in
the
·
The
rationale
of
this
provision
is
to
protect
goods
as
holder
of
a
security
title
for
the
advances
it
debtors
by
permitting
them
to
fully
appreciate
the
true
had
made
to
the
entrustee.
cost
of
their
loan,
to
enable
them
to
give
full
consent
to
o
The
ownership
of
the
merchandise
the
contract,
and
to
properly
evaluate
their
options
in
continues
to
be
vested
in
the
person
who
arriving
at
business
decisions.
had
advanced
payment
until
he
has
been
·
Opening
a
credit
line
does
not
create
a
credit
paid
in
full,
or
if
the
merchandise
has
transaction
of
loan
or
mutuum,
since
the
former
is
already
been
sold,
the
proceeds
of
the
sale
merely
a
preparatory
contract
to
the
contract
of
loan
should
be
turned
over
to
him
by
the
or
mutuum.
The
credit
transaction
thus
occurred
not
importer
or
by
his
representative
or
when
the
credit
line
was
opened,
but
rather
when
the
successor
in
interest.
credit
line
was
availed
of.
The
violation
occurred
not
when
the
parties
executed
the
Credit
Agreement,
·
To
secure
that
the
bank
shall
be
paid,
it
takes
full
where
not
interest
rate
was
mention,
but
when
the
title
to
the
goods
at
the
very
beginning
and
continues
parties
executed
the
promissory
notes,
where
the
to
hold
that
title
as
his
indispensable
security
until
the
allegedly
offending
interest
rate
was
stipulated.
goods
are
sold
and
the
vendee
is
called
upon
to
pay
for
them;
hence,
the
importer
has
never
owned
the
goods
The
penalty
for
the
violation
of
the
act
is
P100
or
an
amount
and
is
not
able
to
deliver
possession.
equal
to
twice
the
finance
charge
required
by
such
creditor
in
o
In
a
certain
manner,
trust
receipts
connection
with
such
transaction,
whichever
is
greater,
except
partake
of
the
nature
of
a
conditional
sale
that
such
liability
shall
not
exceed
P2,000
on
any
credit
where
the
importer
becomes
absolute
transaction.
As
this
penalty
depends
on
the
finance
charge
owner
of
the
imported
merchandise
as
soon
required
of
the
borrower,
the
borrower’s
cause
of
action
would
as
he
has
paid
its
price.
only
accrue
when
such
finance
charge
is
required.
·
The
date
of
the
demand
for
payment
of
the
Truth
in
Lending
Act
finance
charge
is
Sept.
2,
1998
while
the
foreclosure
was
made
on
Dec.
28,
1998.
The
filing
of
the
case
on
UCPB
v.
Samuel
and
Beluso
(2007)
Feb.
9,
1999
is
therefore
within
the
1-‐year
prescriptive
period.
Sec.
4
of
the
Truth
in
Lending
Act
clearly
provides
that
the
disclosure
statement
must
be
furnished
prior
to
the
Note:
Penalty
is
P26,000,
not
P2,000
à
computation
is
per
credit
consummation
of
the
transaction.
The
promissory
notes,
the
transaction
copies
of
which
were
presented
to
the
spouses
Beluso
after
execution,
are
not
sufficient
notification
from
UCPB.
Usury
Law
debtor
incurs
in
delay,
the
debt
earns
interest
from
the
Carpo
v.
Chua
(2005)
date
of
the
demand
(in
this
case
from
the
filing
of
the
complaint).
Such
interest
is
not
due
to
stipulation,
for
Pursuant
to
the
freedom
of
contract
principle
embodied
in
there
was
none,
the
same
being
void.
Rather,
it
is
due
to
Article
1306
of
the
Civil
Code,
contracting
parties
may
establish
the
general
provision
of
law
that
in
obligations
to
pay
such
stipulations,
clauses,
terms
and
conditions
as
they
may
money,
where
the
debtor
incurs
in
delay,
he
has
to
pay
deem
convenient,
provided
they
are
not
contrary
to
law,
morals,
interest
by
way
of
damages
(Art.
2209,
Civil
Code).
good
customs,
public
order,
or
public
policy.
·
(lowest
interest
rate
reduced
by
the
SC)
Since
an
excessive
stipulated
interest
rate
may
be
void
for
being
In
Ruiz
v.
Court
of
Appeals,
we
equitably
reduced
the
contrary
to
public
policy,
an
action
to
annul
said
interest
rate
agreed
3%
per
month
or
36%
per
annum
interest
to
does
not
prescribe.
Such
indeed
is
the
remedy;
it
is
not
the
action
1%
per
month
or
12%
per
annum
interest.
for
annulment
of
the
ancillary
real
estate
mortgage.
Article
1420
provides:
"In
case
of
a
divisible
contract,
if
the
Warehouse
Receipts
Law
illegal
terms
can
be
separated
from
the
legal
ones,
the
latter
may
be
enforced."
In
simple
loan
with
stipulation
of
usurious
interest,
PNB
v.
Se
(1996)
the
prestation
of
the
debtor
to
pay
the
principal
debt,
which
is
the
cause
of
the
contract
(Article
1350),
is
not
illegal.
By
the
A
warehouseman
shall
have
a
lien
on
goods
deposited
in
his
same
token,
since
the
mortgage
contract
derives
its
vitality
from
hands,
for
all
lawful
charges
for
storage
and
preservation
of
the
the
validity
of
the
principal
obligation,
the
invalid
stipulation
on
goods
(Sec.
27).
A
warehouseman
having
a
lien
valid
against
the
interest
rate
is
similarly
insufficient
to
render
void
the
ancillary
person
demanding
the
goods
may
refuse
to
deliver
the
goods
to
mortgage
contract.
him
until
the
lien
is
satisfied
(Sec.
31).
Therefore,
while
PNB
is
·
The
illegality
lies
only
as
to
the
prestation
to
pay
entitled
to
the
sugar
stocks
as
the
endorsee
of
the
quedans,
the
stipulated
interest;
hence,
being
separable,
the
delivery
to
it
shall
be
effected
only
upon
payment
of
the
storage
latter
only
should
be
deemed
void,
since
it
is
the
only
fees.
one
that
is
illegal.
·
After
being
declared
not
the
owner,
but
the
·
The
invalidation
of
the
interest
rates
is
congruent
warehouseman,
Noah’s
Ark
cannot
be
deprived
of
its
with
the
rule
that
a
usurious
loan
transaction
is
not
a
right
to
enforce
its
claim
for
warehouseman’s
lien,
for
complete
nullity
but
defective
only
with
respect
to
the
reasonable
storage
fees
and
preservation
expenses.
agreed
interest.
·
The
principal
debt
remaining
without
stipulation
The
unconditional
presentment
of
the
receipts
by
PNB
for
for
payment
of
interest
can
thus
be
recovered
by
payment
against
Noah’s
Ark
on
the
strength
of
the
provisions
of
judicial
action.
And
in
case
of
such
demand,
and
the
the
Warehouse
Receipts
Law
carried
with
it
the
admission
of
the
existence
and
validity
of
the
stipulations
written
on
the
face
of
A
lien
may
be
lost
where
the
the
warehouse
receipts,
including
the
unqualified
recognition
of
warehouseman
surrenders
the
the
payment
of
the
warehouseman’s
lien
for
storage
fees
and
possession
of
the
goods
without
requiring
preservation
expenses.
payment
of
his
lien,
because
a
warehouseman’s
lien
is
possessory
in
Imperative
is
the
right
of
a
warehouseman
to
demand
payment
nature.
of
his
lien
at
this
juncture,
because
under
Sec.29,
the
lien
may
be
lost
where
the
warehouseman
surrenders
the
possession
of
the
GUARANTY
AND
SURETY
goods
without
requiring
payment
of
his
lien,
because
a
warehouseman’s
lien
is
possessory
in
nature.
E.
ZOBEL
INC.
V.
CA
In
the
document
referred
to
as
“Continuing
Guaranty,”
E.
Zobel
Inc.
PNB
.V
SE
(double)
obligated
itself
to
Solidbank
as
a
“surety.”
• A
surety
is
distinguished
from
a
guaranty
in
that
a
guarantor
After
being
declared
not
the
owner
of
the
goods
subject
of
the
is
the
insurer
of
the
solvency
of
the
debtor
and
thus
binds
warehouse
receipts,
but
the
warehouseman,
Noah’s
Ark
is
claiming
himself
to
pay
if
the
principal
is
unable
to
pay,
while
a
the
right
to
a
warehouseman’s
lien
(for
payment
of
storage
fees
surety
is
the
insurer
of
the
debt,
and
he
obligates
himself
to
and
preservation
expenses).
pay
if
the
principal
does
not
pay.
• The
subject
warehouse
receipts
themselves
contained
a
• Surety
stipulation
which
provides
for
Noah’s
Ark
right
to
impose
o He
is
usually
bound
with
his
principal
by
the
and
collect
warehouseman’s
lien.
same
instrument,
executed
at
the
same
time,
and
• Even
in
the
absence
of
such
a
stipulation,
law
and
equity
on
the
same
consideration.
dictate
the
payment
of
the
warehouseman’s
lien
pursuant
to
o He
is
an
original
promissor
and
debtor
from
the
Secs.
27
and
31
of
the
Warehouse
Receipts
Law.
beginning,
and
is
held,
ordinarily,
to
know
every
o Sec.
27:
“A
warehouseman
shall
have
a
lien
on
default
of
his
principal.
goods
deposited
in
his
hands,
for
all
lawful
o Usually,
he
will
not
be
discharged,
either
by
the
charges
for
storage
and
preservation
of
the
mere
indulgence
of
the
creditor
to
the
principal,
goods.”
or
by
want
of
notice
of
the
default
of
the
principal,
o Sec.
31:
“A
warehouseman
having
a
lien
valid
no
matter
how
much
he
may
be
injured
thereby.
against
the
person
demanding
the
goods
may
• Guarantor
refuse
to
deliver
the
goods
to
him
until
the
o The
contract
of
guaranty
is
the
guarantor’s
own
lien
is
satisfied.”
separate
undertaking,
in
which
the
principal
does
not
join.
It
is
usually
entered
into
before
or
after
that
of
the
principal,
and
is
often
supported
on
a
• The
use
of
the
word
“guarantee”
does
not
ipso
facto
make
the
separate
consideration
from
that
supporting
the
contract
one
of
guaranty.
The
word
is
frequently
used
in
contract
of
the
principal.
business
transactions
to
describe
the
intention
to
be
bound
o The
original
contract
of
his
principal
is
not
his
by
a
primary
or
an
independent
obligation.
contract,
and
he
is
not
bound
to
take
notice
of
its
non-‐performance.
o He
is
often
discharged
by
the
mere
indulgence
of
PHIL.
BLOOMING
MILLS
V.
CA
the
creditor
to
the
principal,
and
is
usually
not
liable
unless
notified
of
the
default
of
the
Under
a
Deed
of
Suretyship,
Ching
obligated
himself
as
surety
of
principal.
PBM.
Later,
PBM
(with
Ching)
filed
a
petition
for
suspension
of
• The
use
of
the
term
“guarantee”
does
not
ipso
facto
mean
payments
with
the
SEC.
that
the
contract
is
one
of
guarantee.
“Guarantee”
is
• Creditors
may
sue
individual
sureties
of
debtor-
frequently
employed
in
business
transactions
to
describe
not
corporations
in
a
separate
proceeding
before
regular
the
security
of
the
debt
but
an
intention
to
be
bound
by
a
courts
despite
the
pendency
of
a
case
before
the
SEC
primary
or
independent
obligation.
involving
a
debtor-corporation.
o The
contract,
albeit
denominated
as
a
“Continuing
o Being
a
nominal
party
in
the
SEC
case,
Ching’s
Guaranty,”
is
a
contract
of
surety.
The
terms
of
properties
were
not
included
in
the
rehabilitation
the
contract
categorically
obligates
E.
Zobel
Inc.
receivership
that
the
SEC
constituted
to
take
as
“surety”.
custody
of
PBM’s
assets.
Therefore,
the
Bank
was
not
barred
from
filing
a
suit
against
Ching,
as
surety
for
PBM.
INT’L
FINANCE
CORP.
V.
IMPERIAL
TEXTILE
MILLS
(ITM)
An
anomalous
situation
would
arise
if
individual
sureties
for
debtor-‐
The
“Guarantee
Agreement”
provided
for
the
solidary
liability
of
corporations
may
escape
liability
by
ITM
with
PPIC,
the
principal
debtor.
simply
co-‐filing
with
the
corporation
a
• If
a
person
binds
himself
solidarily
with
the
principal
petition
for
suspension
of
payments
in
the
debtor,
the
contract
is
a
suretyship.
SEC
whose
jurisdiction
is
limited
only
to
o When
the
“Guarantee
Agreement”
provided
for
corporations
and
their
assets.
the
solidary
liability
of
ITM,
it
brought
ITM
to
the
• As
the
insurer
of
debt,
a
surety
is
bound
to
pay
the
debt
level
of
PPIC
and
thus,
not
merely
secondarily
in
the
original
amount,
not
the
reduced/rehabilitated
liable
but
primarily
liable
as
a
surety.
ITM
became
amount.
a
surety
when
it
bound
itself
solidarily
with
the
o In
granting
the
loan
to
PBM,
the
Bank
required
principal
debtor.
Ching’s
surety
precisely
to
insure
full
recovery
of
the
loan
in
case
PMB
becomes
insolvent
or
fails
to
not
mean
that
suretyship
is
withdrawn
from
the
pay
in
full.
Thus,
Ching
cannot
use
PBM’s
failure
applicable
provisions
governing
guaranty.
to
pay
in
full
as
justification
for
his
own
reduced
Otherwise,
there
would
be
no
difference
between
liability.
As
surety,
Ching
agreed
to
pay
in
full
the
surety
and
the
joint
and
several
debtors.
PBM’s
loan
in
case
it
fails
to
pay
in
full
for
any
reason,
including
insolvency.
TUPAZ
IV
&
TUPAZ
V.
CA
ESCANO
&
SOLIS
V.
ORTIGAS
• A
corporate
representative
signing
as
a
solidary
guarantee
in
his
capacity
as
corporate
representative
does
not
undertake
• Joint
and
several
debtors
(active
solidarity)
v.
Surety
to
guarantee
personally
the
payment
of
the
corporation’s
o Similarity:
Solidarity
signifies
that
the
creditor
debt.
can
compel
any
one
of
the
joint
and
solidary
o Debts
incurred
by
corporate
representatives,
debtors
or
the
surety
alone
to
answer
for
the
acting
as
such,
are
not
theirs
but
the
direct
entirety
of
the
principal
debt.
liability
of
the
corporation.
As
an
exception,
they
o Difference:
The
difference
lies
in
the
respective
are
personally
liable
only
if
they
so
stipulate.
faculties
of
the
joint
and
several
debtor
and
the
• Solidary
guarantee
v.
surety
surety
to
seek
reimbursement/indemnification.
o The
clause
“we
jointly
and
severally
agree
and
In
the
case
of
joint
and
several
debtors,
undertake”
refers
to
the
understanding
between
the
solidary
debtor
who
pays
may
claim
the
2
parties
who
are
to
sign
it
or
to
the
liability
from
his
co-‐debtors
only
the
share
existing
between
themselves.
It
does
not
refer
to
which
corresponds
to
each
(with
the
undertaking
between
either
one
or
both
of
interest).
them
on
the
one
hand,
and
the
bank
on
the
other
In
contrast,
even
as
the
surety
is
solidarily
with
respect
to
the
liability
described
in
the
trust
bound
with
the
principal
debtor
to
the
receipt.
creditor,
the
surety
who
pays
has
the
o Had
there
been
more
than
one
signatory
to
right
to
recover
the
full
amount
paid,
the
trust
receipts,
the
solidarity
liability
and
not
just
the
proportional
share,
would
exist
between
the
guarantors.
from
the
principal
debtor/s.
• Excussion
is
not
a
prerequisite
to
secure
judgment
• The
rights
to
indemnification
and
subrogation
as
against
a
guarantor.
granted
to
the
guarantor
extend
as
well
to
sureties.
o The
guarantor
can
still
demand
deferment
of
the
o The
application
of
the
provisions
on
joint
and
execution
of
the
judgment
against
him
until
after
solidary
obligations
on
suretyship,
however,
does
the
assets
of
the
principal
debtor
shall
have
been
There
should
be
a
stipulation
for
exhausted.
automatic
appropriation
by
the
• The
benefit
of
excussion
may
be
waived.
creditor
of
the
thing
mortgaged
in
case
o Tupaz
waived
excussion
when
he
agreed
that
his
of
non-payment
of
the
principal
liability
in
the
guaranty
shall
be
direct
and
obligation
within
the
stipulated
immediate,
without
any
need
on
the
part
of
the
period.
bank
to
take
any
steps
or
exhaust
any
legal
o Condition
12
did
not
provide
that
the
ownership
remedies.
over
the
leasehold
rights
would
automatically
pass
to
DBP
upon
Cuba’s
failure
to
pay
the
loans
on
time.
It
merely
provided
for
the
appointment
PLEDGE
AND
MORTGAGE
(Common
Provisions)
of
DBP
as
attorney-‐in-‐fact
for
the
sale.
• DBP
however,
exceeded
the
authority
vested
by
Condition
12.
DBP
V.
CA
o It
had,
without
foreclosure
proceedings,
whether
judicial
or
extrajudicial,
appropriated
Cuba’s
Simultaneous
with
the
execution
of
the
loans
was
the
execution
of
leasehold
rights.
Assignment
of
Leasehold
Rights
by
Cuba
in
favor
of
DBP
as
security.
Condition
12
of
the
Assignment
provides
for
the
appointment
of
DBP
as
attorney-in-fact
with
authority
to
sell
the
BUSTAMANTE
V.
ROSEL
leasehold
rights
in
case
of
default
by
Cuba,
the
proceeds
to
be
applied
to
the
payment
of
the
loans.
Upon
default,
DBP,
without
To
guarantee
payment
of
the
loan,
the
debtors
put
as
collateral
a
foreclosure
proceedings,
appropriated
the
leasehold
rights.
parcel
of
land.
It
was
stipulated
that
in
the
event
they
fail
to
pay,
• An
assignment
to
guarantee
an
obligation
is
in
effect
a
the
creditor
has
the
option
to
buy
the
collateral
for
a
pre-arranged
mortgage.
price
inclusive
of
the
amount
of
the
loan
and
interest.
o The
Assignment
of
Leasehold
Rights
is
a
• A
scrutiny
of
the
stipulation
of
the
parties
reveals
a
mortgage
contract.
It
is
by
way
of
security
for
the
subtle
intention
of
the
creditor
to
acquire
the
property
payment
of
the
loans.
given
as
security
for
the
loan.
This
is
embraced
in
the
• Condition
12
did
not
constitute
a
pactum
commissorium.
concept
of
pactum
commissorium.
o Elements:
o The
debtors
are
obliged
to
dispose
of
the
There
would
be
a
property
mortgaged
collateral
at
the
pre-‐arranged
consideration
by
way
of
security
for
the
payment
of
amounting
to
practically
the
same
amount
as
the
the
principal
obligation.
loan.
In
effect,
the
creditor
acquires
the
collateral
in
the
event
of
non-‐payment
of
the
loan.
• Ma’am
comments:
It
is
pactum
commissorium
since
the
consignation
with
the
Clerk
of
Court
of
certain
amounts
which
option
has
no
separate
consideration
independent
of
the
allegedly
were
tendered
to
Paray
beforehand.
However,
the
price.
auction
took
place.
• In
order
for
consignation
to
have
the
effect
of
extinguishing
the
pledge,
the
amounts
should
cover
not
ONG
V.
ROBAN
LENDING
CORP.
only
the
principal
loan
but
also
the
stipulated
interest.
• The
right
of
the
creditor
to
retain
possession
of
the
thing
Ong
spouses
executed
a
promissory
note
for
their
debt
to
Roban
on
pledged
exists
only
until
the
debt
is
paid.
the
same
day
they
signed
a
dacion
in
payment
agreement.
In
the
• The
debtor
cannot
ask
for
the
return
of
the
thing
pledged
agreement,
Ong
would
assign
the
mortgaged
properties
to
Roban
against
the
will
of
the
creditor
unless
and
until
he
had
in
settlement
of
their
obligation.
A
MOA
was
also
signed
on
the
paid
the
debt
and
its
interest.
same
day,
which
provides
that
failure
of
Ong
to
pay
their
debt
on
o At
the
same
time,
the
right
of
the
pledgee
to
time
would
give
Roban
the
right
to
enforce
the
dacion
in
payment
foreclose
pledge
is
also
established
under
the
agreement
and
transfer
to
it
the
ownership
of
the
mortgaged
Code.
When
the
credit
has
not
been
satisfied
properties.
in
due
time,
the
creditor
may
proceed
with
the
• While
the
agreement
is
named
“dacion
in
payment,”
it
in
sale
by
public
auction.
fact
constitutes
pactum
commissorium,
as
failure
of
by
Ong
to
pay
their
debts
grants
Roban
the
right
to
REAL
ESTATE
MORTGAGE
automatically
acquire
ownership
of
the
mortgaged
properties.
MEDIDA
V.
CA
o In
a
true
dacion
en
pago,
the
assignment
of
property
extinguishes
the
monetary
debt.
Another
mortgage
was
constituted
on
the
mortgaged
properties
Here,
Ong
still
had
to
execute
a
promissory
during
the
redemption
period.
note
for
their
debt
on
the
same
day
as
they
• Since
the
mortgagor
remains
as
the
absolute
owner
of
signed
the
dacion
en
pago
agreement.
the
property
during
the
redemption
period
and
has
free
disposal
of
his
property,
there
would
be
compliance
with
PLEDGE
the
requisites
of
Art.
2085
for
the
constitution
of
another
mortgage
on
the
property.
PARAY
&
ESPELETA
V.
RODRIGUEZ
o During
the
redemption
period,
it
cannot
be
said
that
the
mortgagor
is
no
longer
the
Rodriguez
et
al.
pledged
their
shares
of
stocks
to
Paray
to
secure
owner
of
the
foreclosed
property
since
the
certain
obligations.
Upon
their
default,
attempted
to
foreclosure
rule
is
that
the
right
of
the
purchaser
at
a
the
pledges.
Prior
to
the
foreclosure,
Rodriguez
et
al.
caused
the
foreclosure
sale
is
merely
inchoate
until
after
the
period
of
redemption
has
expired
without
opposition
to
a
motion
for
issuance
of
a
writ
of
possession
the
right
being
exercised.
after
confirmation
of
sale
by
the
court
of
the
foreclosure
sale
o The
redemption
of
property
sold
under
a
and
the
registration
of
the
certificate
of
sale.
foreclosure
sale
defeats
the
inchoate
right
of
the
purchaser
and
restores
the
property
to
the
same
condition
as
if
no
sale
had
been
Suico
v.
Philippine
National
Bank
made.
It
does
not
give
to
the
mortgagor
a
new
title,
which
was
never
lost,
but
merely
• It
is
true
that
statutory
provisions
governing
publication
of
restores
to
him
the
title
freed
of
the
notice
of
mortgage
foreclosure
sales
must
be
strictly
encumbrance
of
the
lien
foreclosed.
complied
with,
and
that
even
slight
deviations
therefrom
will
invalidate
the
notice
and
render
the
sale
at
least
voidable.
• Nonetheless,
we
must
not
also
lose
sight
of
the
fact
that
the
HUERTA
ALBA
RESORT
V.
CA
purpose
of
the
publication
of
the
Notice
of
Sheriff’s
Sale
is
to
inform
all
interested
parties
of
the
date,
time,
and
place
of
• Right
of
redemption
v.
Equity
of
redemption
the
foreclosure
sale.
o The
right
of
redemption
–
understood
in
the
o Logically,
this
not
only
requires
that
the
correct
date,
sense
of
a
prerogative
to
re-‐acquire
mortgaged
time
and
place
of
the
foreclosure
sale
appear
in
the
property
1
year
after
registration
of
the
notice,
but
also
that
any
and
all
interested
parties
be
certificate
of
sale
–
exists
only
in
the
case
of
able
to
determine
that
what
is
about
to
be
sold
at
the
extrajudicial
foreclosure
of
the
mortgage.
foreclosure
sale
is
the
real
property
in
which
they
No
such
right
is
recognized
in
a
judicial
have
an
interest.
foreclosure
except
only
when
the
• Notices
are
given
for
the
purpose
of
securing
bidders
and
mortgagee
is
the
PNB
or
a
bank
or
a
to
prevent
sacrifice
of
the
property.
banking
institution.
o If
these
objectives
are
attained,
immaterial
errors
and
o Equity
of
redemption
is
the
right
of
the
mistakes
will
not
affect
the
sufficiency
of
the
notice.
mortgagor
in
a
judicial
foreclosure
of
the
o But
if
mistakes
or
omissions
occur
in
the
notices
of
mortgage
to
extinguish
the
mortgage
by
paying
sale,
which
are
calculated
to
deter
or
mislead
bidders,
the
debt
90-120
days
from
entry
of
judgment,
to
depreciate
the
value
of
the
property,
or
to
prevent
or
even
after
but
before
the
confirmation
of
it
from
bringing
a
fair
price,
such
mistakes
or
sale.
omissions
will
be
fatal
to
the
validity
of
the
notice,
•
Where
a
party
failed
to
assert
a
right
to
redeem
in
and
also
to
the
sale
made
pursuant
thereto.
several
crucial
stages
of
the
proceedings,
it
is
too
late
in
• Non-delivery
of
the
bid
price
or
the
surplus
in
a
the
day
for
it
to
subsequently
invoke
such
right
in
foreclosure
sale
does
not
invalidate
the
sale.
• If
the
mortgagee
retains
more
of
the
proceeds
of
the
sale
ISSUE:
WON
a
chattel
mortgage
can
extend
to
cover
after-
than
he
is
entitled
to,
this
fact
alone
will
not
affect
the
incurred
obligations
validity
of
the
sale
but
simply
give
the
mortgagor
a
cause
of
action
to
recover
such
surplus.
HELD:
NO.
A
chattel
mortgage
can
only
cover
obligations
• If
the
amount
of
the
loan
is
equal
to
the
amount
of
the
existing
at
the
time
the
mortgage
is
constituted.
bid,
there
is
no
need
to
pay
the
amount
in
cash.
o The
raison
d’etre
is
that
it
would
obviously
be
Contracts
of
security
are
either
personal1
or
real2.
senseless
for
the
sheriff
or
the
notary
public
conducting
the
foreclosure
sale
to
go
through
the
idle
• Contracts
of
real
security
are
subject
to
the
essential
ceremony
of
receiving
the
money
and
paying
it
back
condition
that
if
the
obligation
becomes
due
and
the
debtor
to
the
creditor.
defaults,
then
the
property
encumbered
can
be
alienated
for
• The
proceeds
of
the
foreclosure
sale
shall
be
applied
to
ff
the
payment
of
the
obligation,
but
that
should
the
obligation
in
order:
be
duly
paid,
then
the
contract
is
automatically
extinguished
o costs
of
the
sale
proceeding
from
the
accessory
character
of
the
agreement.
o mortgaged
debt
As
the
law
so
puts
it,
once
the
obligation
is
o payment
to
the
junior
encumbrancers,
if
any
in
the
complied
with,
the
contract
of
security
becomes,
order
of
priority
ipso
facto,
NULL
AND
VOID.
o balance
to
the
mortgagor
• The
applications
of
the
proceeds
of
the
sale
of
the
• While
a
pledge,
real
estate
mortgage,
or
antichresis
may
mortgaged
property
to
the
mortgagor’s
obligation
is
an
exceptionally
secure
after-‐incurred
obligations
so
long
as
act
of
payment,
not
payment
by
dacion;
hence,
it
is
the
these
future
debts
are
accurately
described,
a
chattel
mortgagee’s
duty
to
return
any
surplus
in
the
selling
price
mortgage,
however,
can
only
cover
obligations
existing
at
the
to
the
mortgagor.
time
the
mortgage
is
constituted.
o A
mortgagee
who
exercises
the
power
of
sale
Although
a
promise
expressed
in
a
chattel
mortgage
to
contained
in
a
mortgage
is
considered
a
custodian
of
include
debts
that
are
yet
to
be
contracted
can
be
a
the
fund
and,
being
bound
to
apply
it
properly,
is
binding
commitment
that
can
be
compelled
upon,
the
liable
to
the
persons
entitled
thereto
if
he
fails
to
do
security
itself,
however,
does
not
come
into
existence
so.
or
arise
until
after
a
chattel
mortgage
agreement
covering
the
newly
contracted
debt
is
executed
Chattel
Mortgage
either
by
concluding
a
fresh
chattel
mortgage
or
by
amending
the
old
contract
conformably
with
the
Acme
Shoe
Rubber
and
Plastic
Corp.
v.
CA
(after-‐incurred
form
prescribed
by
the
Chattel
Mortgage
Law.
obligations)
Refusal
on
the
part
of
the
borrower
to
execute
the
principal
debtor
is
secured
by
the
personal
commitment
of
agreement
so
as
to
cover
the
after-‐incurred
obligation
another
(the
guarantor
or
surety).
can
constitute
an
act
of
default
on
the
part
of
the
borrower
of
the
financing
agreement
whereon
the
In
a
contract
of
real
security,
that
fulfillment
is
secured
by
an
promise
is
written
but,
of
course,
the
remedy
of
encumbrance
of
property.
foreclosure
can
only
cover
the
debts
extant
at
the
time
of
in
pledge,
the
placing
of
movable
property
in
the
constitution
and
during
the
life
of
the
chattel
mortgage
possession
of
the
creditor;
sought
to
be
foreclosed.
in
chattel
mortgage,
by
the
execution
of
the
corresponding
deed
substantially
in
the
form
prescribed
• A
chattel
mortgage
must
comply
substantially
with
the
form
by
law;
prescribed
by
the
Chattel
Mortgage
Law
itself.
in
real
estate
mortgage,
by
the
execution
of
a
public
One
of
the
requisites,
under
Section
5
thereof,
is
instrument
encumbering
the
real
property
covered
an
affidavit
of
good
faith.
While
it
is
not
doubted
thereby;
that
if
such
an
affidavit
is
not
appended
to
the
in
antichresis,
by
a
written
instrument
granting
to
the
agreement,
the
chattel
mortgage
would
still
be
creditor
the
right
to
receive
the
fruits
of
an
immovable
valid
between
the
parties
(not
against
third
property
with
the
obligation
to
apply
such
fruits
to
the
persons
acting
in
good
faith),
the
fact,
however,
payment
of
interest,
if
owing,
and
thereafter
to
the
that
the
statute
has
provided
that
the
parties
to
principal
of
his
credit
the
contract
must
execute
an
oath
makes
it
obvious
that
the
debt
referred
to
in
the
law
is
a
Notes
from
Ma’am:
current,
not
an
obligation
that
is
yet
merely
To
protect
debtor-‐mortgagor
in
cases
where
the
agreement
contemplated.
provides
that
the
mortgage
will
extend
to
after-‐incurred
FORM
OF
OATH
obligations
(to
make
sure
that
the
mortgagee
will
undertake
to
o "We
severally
swear
that
the
foregoing
amend
the
old
contract
or
create
a
new
one
to
include
the
after-‐
mortgage
is
made
for
the
purpose
of
incurred
obligations),
it
is
best
to
include
an
agency
securing
the
obligation
specified
in
the
agreement/contract.
A
third
party
may
be
hired
to
act
as
the
conditions
thereof,
and
for
no
other
collateral
agent
of
the
parties
who
will
execute
the
purpose,
and
that
the
same
is
a
just
and
aforementioned
on
the
parties’
behalf.
valid
obligation,
and
one
not
entered
into
for
the
purpose
of
fraud."
People’s
Bank
and
Trust
Company
v.
Dahican
Lumber
Company
(after-‐acquired
properties)
In
contracts
of
personal
security,
such
as
a
guaranty
or
a
suretyship,
the
faithful
performance
of
the
obligation
by
the
Issue:
WON
after-acquired
properties
may
be
subject
of
a
to
criminal
prosecution
under
Article
319
par.
2
of
the
mortgage
(in
the
case,
it
was
a
real
mortgage)
Revised
Penal
Code.
However,
even
if
no
consent
is
obtained
Ratio:
YES.
A
stipulation
that
after-‐acquired
properties
shall
from
the
mortgagee,
the
validity
of
the
sale
will
not
be
immediately
become
subject
to
the
lien
of
a
mortgage
is
not
affected.
unlawful,
as
its
purpose
is
to
maintain
the
original
value
of
the
• The
only
remedy
given
to
the
mortgagee
is
to
have
said
properties
given
as
security.
These
stipulations
are
often
present
property
sold
at
public
auction
and
the
proceeds
of
the
sale
in
cases
where
properties
given
as
collateral
are
perishable
or
applied
to
the
payment
of
the
obligation
secured
by
the
subject
to
wear
and
tear
(i.e.
machineries
and
tools
bought
as
mortgagee.
replacements,
*stocks-‐in-‐trade)
• Where
a
third
person
purchases
the
mortgaged
property,
he
automatically
steps
into
the
shoes
of
the
original
mortgagor.
His
right
of
ownership
shall
be
subject
to
the
mortgage
of
the
Makati
Leasing
and
Finance
Corporation
v.
Wearever
Textile
thing
sold
to
him.
Mills
ISSUE:
WON
machinery
that
has
been
immobilized
by
Servicewide
Specialist
Inc.
v.
CA
destination
may
be
the
subject
of
a
chattel
mortgage?
HELD:
YES.
There
is
no
reason
why
a
machinery,
which
is
When
a
creditor-‐mortgagee
assigns
his
credit,
he
need
not
movable
in
its
nature
and
becomes
immobilized
only
by
get
the
consent
of
the
debtor
in
order
to
bind
the
latter.
He
destination
or
purpose,
may
not
be
treated
as
such.
This
is
only
needs
to
give
NOTICE
of
such
assignment.
because
one
who
has
agreed
is
estopped
from
denying
the
Legal
Basis:
Art
2128
(on
pledge):
The
mortgage
existence
of
the
chattel
mortgage.
credit
may
be
alienated
or
assigned
to
a
third
person,
The
characterization
of
the
machinery
as
chattel
by
the
private
in
whole
or
in
part,
with
the
formalities
required
by
respondent
is
indicative
of
intention.
It
impresses
upon
the
law.
property
the
character
determined
by
the
parties.
• The
provision
applies
because:
Art
2141.
The
provisions
on
pledge
shall
apply
to
chattel
mortgages
insofar
as
they
are
not
in
conflict
Dy
v.
CA
with
the
chattel
mortgage
law
The
purpose
of
notice
is
to
inform
the
debtor
that
• A
mortgagor
who
gives
his
property
as
security
under
a
from
the
date
of
the
assignment
of
credit,
he
should
chattel
mortgage
does
not
part
with
the
ownership
of
the
make
payments
to
the
assignee
and
not
to
the
same,
even
upon
his
default.
He
has
the
right
to
sell
such
original
creditor.
mortgaged
property,
although
under
the
obligation
to
secure
the
written
consent
of
the
mortgagee
lest
he
lay
himself
open
• Notice
is
for
the
protection
of
the
assignee
impleaded
for
the
complete
determination
and
resolution
since
before
notice
but
after
assignment,
of
the
controversy.
payment
to
the
original
creditor
is
valid
• In
a
suit
for
replevin,
a
clear
right
of
possession
must
be
o The
consent
of
creditor-mortgagee
to
alienation
of
first
established.
mortgaged
property
by
debtor-mortgagor
is
necessary
in
o The
replevin
in
this
case
has
been
resorted
to
in
order
to
bind
the
former.
order
to
pave
the
way
for
the
foreclosure
of
what
is
covered
by
the
chattel
mortgage.
o The
conditions
essential
for
such
foreclosure
would
be
Servicewide
Specialist
Inc.
v.
CA
to
show,
firstly,
the
existence
of
the
chattel
mortgage
and,
secondly,
the
default
of
the
mortgagor.
(Where
right
of
possession
is
not
disputed)
• Since
the
mortgagee’s
right
of
possession
is
conditioned
• Where
the
right
of
the
plaintiff
(applicant
for
replevin)
to
upon
the
actual
fact
of
default
which
itself
may
be
the
possession
of
the
specified
property
is
so
conceded
controverted,
the
inclusion
of
other
parties,
like
the
or
evident,
the
action
for
replevin
need
only
be
debtor
or
the
mortgagor
himself,
may
be
required
in
maintained
against
him
who
possesses
the
property.
order
to
allow
a
full
and
conclusive
determination
of
the
o In
default
of
the
mortgagor,
the
mortgagee
is
thereby
case.
constituted
as
attorney-in-fact
of
the
mortgagor,
o An
adverse
possessor,
who
is
not
the
mortgagor,
enabling
such
mortgagee
to
act
for
and
in
behalf
of
cannot
just
be
deprived
of
his
possession,
let
alone
be
the
owner.
bound
by
the
terms
of
the
chattel
mortgage
contract,
o That
the
defendant
is
not
privy
to
the
chattel
mortgage
simply
because
the
mortgagor
brings
up
an
action
for
should
be
inconsequential.
By
the
fact
that
the
object
replevin.
of
replevin
is
traced
to
his
possession,
one
properly
can
be
a
defendant
in
an
action
for
replevin.
PAMECA
Wood
Treatment
Plant
v.
CA
(Where
right
of
possession
is
disputed)
• However,
in
case
the
right
of
possession
on
the
part
of
the
Under
Section
14
of
Act
No.
1508,
as
amended,
or
the
Chattel
plaintiff,
or
his
authority
to
claim
such
possession
or
that
Mortgage
Law,
the
balance
from
the
proceeds
of
the
sale,
after
of
his
principal,
is
put
to
great
doubt
(a
contending
party
paying
the
mortgage,
shall
be
paid
to
the
mortgagor
or
may
contest
the
legal
bases
for
plaintiff’s
cause
of
action
or
an
persons
holding
under
him
on
demand.
adverse
and
independent
claim
of
ownership
or
right
of
possession
may
be
raised
by
that
party,
i.e.
an
adverse
and
• It
is
clear
that
the
effects
of
foreclosure
under
the
Chattel
independent
claim
of
ownership
by
a
third
party),
it
could
Mortgage
Law
run
inconsistent
with
those
of
pledge
under
become
essential
to
have
other
persons
involved
and
Article
2115.
Whereas,
in
pledge,
the
sale
of
the
thing
pledged
extinguishes
De
Barreto
v.
Villanueva
the
entire
principal
obligation,
such
that
the
pledgor
may
no
longer
recover
proceeds
of
the
sale
in
excess
of
the
amount
of
A
preferred
creditor’s
3rd
party
claim
to
the
proceeds
of
a
the
principal
obligation,
Section
14
of
the
Chattel
Mortgage
judicial
foreclosure
sale
is
not
the
proceeding
contemplated
Law
expressly
entitles
the
mortgagor
to
the
balance
of
by
law
for
the
enforcement
of
preferences
under
Art.
2242,
the
proceeds,
upon
satisfaction
of
the
principal
unless
the
claimant
were
enforcing
a
credit
for
taxes
which
obligation
and
costs.
enjoy
absolute
priority.
If
none
of
the
claims
is
for
taxes,
a
dispute
between
2
creditors
will
not
enable
the
court
to
• Since
the
Chattel
Mortgage
Law
bars
the
creditor-‐mortgagee
ascertain
the
pro
rate
dividend
corresponding
to
each,
from
retaining
the
excess
of
the
sale
proceeds,
there
is
a
because
the
rights
of
other
creditors
likewise
enjoying
corollary
obligation
on
the
part
of
the
debtor-mortgagor
preference
under
Art.
2242
cannot
be
ascertained.
to
pay
the
deficiency
in
case
of
a
reduction
in
the
price
at
What
the
law
contemplates,
thus,
is
a
proceeding
where
the
public
auction.
claims
of
all
preferred
creditors
may
be
bindingly
As
explained
in
Manila
Trading
and
Supply
Co.
vs.
Tamaraw
adjudicated,
such
as
insolvency,
the
settlement
of
the
Plantation
Co.:
decedent’s
estate
under
Rule
87
of
the
ROC,
and
other
liquidation
proceedings
of
similar
import.
“While
it
is
true
that
section
3
of
Act
No.
1508
provides
• Art
2243
explains:
“the
claims
or
credits
enumerated
in
that
‘a
chattel
mortgage
is
a
conditional
sale’,
it
the
2
preceding
articles
shall
be
considered
as
mortgages
further
provides
that
it
‘is
a
conditional
sale
of
or
pledges
of
real
or
personal
property,
or
liens
within
the
personal
property
as
security
for
the
payment
of
a
purview
of
legal
provisions
governing
insolvency.”
debt,
or
for
the
performance
of
some
other
obligation
• These
proceedings
make
pro-‐rating
fully
effective,
as
the
specified
therein.’
preferred
creditors
are
convened
and
the
import
of
their
claims
ascertained.
IMPLICATION:
the
chattels
included
in
the
chattel
mortgage
In
the
absence
of
insolvency
proceedings,
the
conflict
are
only
given
as
security
and
not
as
a
payment
of
the
debt,
in
between
claiming
parties
must
be
decided
according
to
the
case
of
a
failure
of
payment.
If
the
creditor
is
not
permitted
to
principle
that
a
purchaser
in
good
faith
and
for
value
takes
retain
the
excess,
then
the
same
token
would
require
the
registered
property
free
from
liens
and
encumbrances
other
debtor
to
pay
the
deficiency
in
case
of
a
reduction
in
the
price
than
statutory
liens
and
those
recorded
in
the
certificate
of
of
the
chattels.
title.
Privileged
creditors
must
cause
their
claims
to
be
Antichresis
recorded
in
the
books
of
the
registry
of
Deeds
to
Concurrence
and
Preference
of
Credits
protect
their
rights
even
outside
liquidation
or
insolvency
proceedings.
o In
the
new
CC,
no
more
order
of
preference
among
preferred
• full
application
of
2241,
2242,
2249
demands
that
there
credits,
except
for
taxes,
which
enjoy
absolute
preference.
All
must
be
some
proceeding
where
the
claims
of
all
the
preferred
creditors
must
be
paid
prorata
in
proportion
to
preferred
creditors
may
be
bindingly
adjudicated
such
amount
of
their
respective
credits.
Thus,
for
prorating
to
be
as:
effective,
all
the
creditors
must
be
convened
and
the
import
o insolvency
proceedings
of
their
claims
ascertained.
This
can
be
done
through
o settlement
of
decedent’s
estate
liquidation
and
insolvency
proceedings.
o other
liquidation
proceedings
of
the
same
import
• Only
taxes
enjoy
an
absolute
preference.
All
other
creditors
enjoy
no
priority
among
themselves,
but
must
J.L.
Bernardo
Construction
v.
CA
be
paid
pro
rata,
in
proportion
to
the
amount
of
their
respective
credits.
(Art.
2249)
• A
statutory
lien
cannot
be
enforced
in
an
action
for
specific
performance
and
damages.
Insolvency
Law
• Art
2242
only
finds
application
when
there
is
a
concurrence
of
credits,
i.e.
when
the
same
specific
Gateway
Electronics
Corp.
v.
AsianBank
Corporation
property
of
the
debtor
is
subjected
to
the
claims
of
several
debtors
and
the
value
of
such
property
of
the
• Under
sec.
18
of
Act
1956,
the
issuance
of
an
order
debtor
is
insufficient
to
pay
in
full
all
the
creditors.
In
adjudicating
insolvency,
after
the
insolvency
court
finds
the
such
a
situation,
the
question
of
preference
will
arise.
petition
for
insolvency
meritorious,
shall
stay
ALL
pending
There
will
be
a
need
to
determine
which
of
the
creditors
civil
actions
against
insolvent’s
property.
The
claimants
must
will
be
paid
ahead
of
the
others
seek
relief
in
the
insolvency
proceedings.
• Due
process
dictates
that
a
statutory
lien
should
only
be
• Sec.
18,
however,
must
be
read
with
Sec.
60
of
the
same
act,
enforced
in
the
context
of
some
kind
of
proceeding
where
which
applies
to
the
period
after
the
commencement
of
the
the
claims
of
all
preferred
creditors
may
be
bindingly
proceedings
in
insolvency.
Thus,
the
2
provisions
should
be
adjudicated,
such
as
insolvency
proceedings
harmonized
as
follows:
o Art
2243:
the
claims
and
liens
enumerated
in
o Upon
the
filing
of
the
petition
for
insolvency,
pending
2241
and
2242
shall
be
considered
mortgages
or
civil
actions
against
the
property
of
the
debtor
are
pledges
of
real
or
personal
property,
or
liens
not
ipso
facto
stayed,
but
the
insolvent
may
apply
within
the
purview
of
legal
provisions
governing
with
the
court
in
which
the
actions
are
pending
for
a
insolvency
stay
of
the
actions
against
the
insolvent’s
property.
If
the
court
grants
it,
pending
civil
actions
against
the
DBP
v.
CA
property
shall
be
stayed;
otherwise,
they
shall
continue.
Once
an
order
of
insolvency
nevertheless
issues,
all
civil
proceedings
against
the
debtor’s
expediency
of
attachment,
execution
or
otherwise.
As
between
property
are
by
statutory
command,
automatically
the
creditors,
the
key
phrase
is
equality
in
equity.
Once
the
stayed.
corporation
threatened
by
bankruptcy
is
taken
over
by
a
• The
issuance
of
an
insolvency
order
has
the
effect
of
receiver,
all
the
creditors
ought
to
stand
on
equal
footing.
Not
automatically
staying
all
pending
civil
actions.
Under
sec.
any
one
of
them
should
be
paid
ahead
of
the
others.
This
is
60
of
Act
1956,
such
actions
may
only
be
justified
to
continue
precisely
the
reason
for
suspending
all
pending
claims
against
for
purposes
of
ascertaining
the
amount
due
from
debtor.
the
corporation
under
receivership.
• Insolvency
court
is
bereft
of
jurisdiction
over
sureties
of
the
principal
debtor.
A
suit
against
the
surety,
insofar
as
the
NOTES:
surety’s
liability
is
concerned,
is
not
affected
by
insolvency
Between
Benhar
and
Ruby
–
contract
TO
loan
proceedings.
The
same
principle
holds
true
for
sureties
of
o There
is
no
true
loan
if
there
was
a
contract
OF
distressed
corporations
undergoing
rehabilitation
loan,
the
creditor
would
have
been
Chinabank,
as
proceedings.
Sureties
of
distressed
corporations
can
be
sued
Benhar
only
offered
Ruby
to
use
its
credit
facility
separately
to
enforce
his
liability
as
such,
notwithstanding
an
Remember
that
it
was
Benhar
that
paid
some
of
the
order
declaring
the
debtor
under
a
state
of
suspension
of
creditors
and
not
Ruby.
But
the
creditors
assigned
their
payment.
rights
to
Benhar,
effectively
making
Benhar
one
of
Ruby’s
creditors.
And
under
the
revised
rehab
plan,
payments
made
by
Benhar
under
the
voided
deeds
of
assignment
Corporate
Rehabilitation
were
recognized
as
payable
to
Benhar
under
the
revised
plan.
Ruby
Industrial
v
CA
RCBC
v
IAC
Rehabilitation
contemplates
a
continuance
of
corporate
life
and
activities
in
an
effort
to
restore
and
reinstate
the
corporation
to
Rules
of
thumb:
its
former
position
of
successful
operation
and
solvency.
When
a
1. All
claims
against
corporations,
partnerships,
or
distressed
company
is
placed
under
rehabilitation,
the
associations
that
are
pending
before
any
court,
tribunal
appointment
of
a
management
committee
follows
to
avoid
or
board,
without
distinction
as
to
whether
or
not
a
collusion
between
the
previous
management
and
creditors
it
creditor
is
secured
or
unsecured
shall
be
suspended
might
favor,
to
the
prejudice
of
the
other
creditors.
All
assets
of
a
effective
upon
the
appointment
of
a
management
corporation
under
rehabilitation
receivership
are
held
in
trust
committee,
rehabilitation
receiver,
board
or
body
in
for
the
equal
benefit
of
all
creditors
to
preclude
one
from
accordance
with
the
provisions
of
PD
902-‐A.
obtaining
an
advantage
or
preference
over
another
by
the
2. Secured
creditors
retain
their
preferences
over
Rubberworld
v
NLRC
unsecured
creditors
but
enforcement
of
such
preference
is
equally
suspended
upon
the
appointment
of
a
The
law
is
clear:
upon
the
creation
of
a
management
management
committee,
rehabilitation
receiver,
board
or
committee
or
the
appointment
of
a
rehabilitation
receiver,
all
body.
In
the
event
that
assets
of
the
corporation,
claims
for
actions
“shall
be
suspended
accordingly.”
No
partnership
or
association
are
finally
liquidated,
exception
in
favor
of
labor
claims
is
mentioned
in
the
law.
however,
secured
and
preferred
credits
under
the
The
law
makes
no
distinction
or
exemptions.
Ubi
lex
non
applicable
provisions
of
the
Civil
Code
will
definitely
distinguit
nec
nos
distinguere
debemos.
Allowing
labor
cases
have
preference
over
unsecured
ones.
to
proceed
clearly
defeats
the
purpose
of
the
automatic
stay
and
severely
encumbers
the
management
committee’s
time
NOTES:
All
claims
are
treated
equally
concept
of
pari
passu
and
resources.
The
preferential
right
of
workers
and
employees
under
Art.
Rules
of
Procedure
on
Corporate
Rehabilitation
110
of
the
Labor
Code
may
be
invoked
only
upon
the
institution
of
insolvency
or
judicial
liquidation
proceedings.
LECA
Realty
Corp
v
Manuela
Corp
The
purpose
of
rehabilitation
proceedings
is
to
enable
the
company
to
gain
a
new
lease
on
life
and
thereby
allow
The
amount
of
rental
is
an
essential
condition
of
any
lease
creditors
to
be
paid
their
claims
from
its
earnings.
In
contract.
The
change
of
its
rate
(gross
discrepancy
between
the
insolvency
proceedings
on
the
other
hand,
the
company
amounts
of
rent
agreed
upon
by
the
parties
and
those
provided
stops
operating
and
the
claims
of
creditors
are
satisfied
from
in
the
Rehabilitation
plan)
is
not
justified
as
it
impairs
the
the
assets
of
the
insolvent
corporation.
The
present
case
stipulation
between
the
parties.
involves
the
rehabilitation
and
not
the
liquidation.
Hence
the
preference
of
credit
granted
to
workers
or
employees
under
The
Stay
Order
issued
by
the
court
directed
Manuela
to
pay
in
Art.
110
is
not
applicable.
full
all
administrative
expenses
incurred
after
its
issuance.
Administrative
expenses
are
costs
associated
with
the
general
administration
of
an
organization
and
include
such
items
as
PAL
v
CA
utilities,
rents,
salaries,
postages,
furniture
and
housekeeping
charges.
Inasmuch
as
rents
are
considered
as
administrative
Claims
for
damages
based
on
a
breach
of
contract
of
carriage
are
expenses
and
considering
that
the
Stay
Order
directed
also
stayed
upon
the
appointment
by
the
SEC
of
management
respondent
Manuela
to
pay
the
rents
in
full,
then
it
must
comply
committee
or
a
rehabilitation
receiver.
at
the
rates
agreed
upon.
NOTES:
If
claims
are
stayed,
the
recourse
of
the
family
is
either
and
restructuring
of
the
distressed
corporation.
By
allowing
the
to:
1)
file
claim
for
damages
with
the
rehabilitation
receiver;
or
proceedings,
the
HLURB
arbiter
gave
undue
preference
to
2)
file
a
Relief
of
Stay
Order
(Sec.
10,
Rules
of
Corp.
Rehab)
Sobrejuanite
over
the
other
creditors
and
claimants
of
ASBDC.
arguing
that
damages
need
not
be
restructured.
DO
NOT
IGNORE
CORP.
REHAB.
PROCEEDINGS.
Metrobank
v
SLGT
Holdings
Clarion
v
NLRC
SLGT’s
and
Dylanco’s
complaints
did
not
seek
monetary
recovery
or
to
touch
the
corporate
coffers
of
ASB
ahead
of
others.
They
did
The
LA,
NLRC
or
CA
should
not
have
proceeded
to
resolve
the
not
even
consider
themselves
as
money
claimants.
All
they
ask
complaint
for
illegal
dismissal
in
view
of
the
rehabilitation
was
for
the
enforcement
of
ASB’s
statutory
and
contractual
proceedings.
Instead,
it
should
have
directed
the
complainant
to
obligations
as
a
condominium
developer.
Hence
their
claims
are
lodge
her
claim
before
the
receiver
of
Clarion.
However,
to
refile
not
stayed
for
they
do
not
involve
pecuniary
consideration
unlike
the
claim
after
8
years
lapsed,
the
Court
deems
it
most
expedient
in
the
case
of
Sobrejuanite.
and
advantageous
for
both
parties
that
Clarion’s
liability
be
determined
with
finality
instead
of
filing
before
liquidators
of
Also,
Sec.
24
of
the
interim
rules
limits
the
coverage
of
the
Rules
Clarion.
on
rehabilitation
and
consequently
the
rule
of
suspension
of
action
to
those
who
stand
in
the
category
or
debtors
and
creditors.
The
relationship
between
the
petitioner
banks,
as
Sobrejuanite
v
ASB
Devt.
Corp
mortgagor
and
respondents,
as
unit
buyers,
cannot
be
that
of
a
debtor-‐creditor
so
as
to
bring
the
case
within
the
purview
of
the
The
interim
rules
define
a
claim
as
referring
to
all
claims
or
rules
on
corporate
recovery.
demands,
of
whatever
nature
or
character
against
a
debtor
or
its
property,
whether
for
money
or
otherwise.
The
definition
is
all
NOTES:
encompassing
as
it
refers
to
all
actions
whether
for
money
or
Creditor-‐debtor
should
have
been
construed
in
a
more
otherwise.
There
are
no
distinctions
or
exemptions.
general
concept
(as
in
obligations)
Claim
what
about
“money
or
otherwise”
do
you
not
As
such
the
HLURB
arbiter
should
have
suspended
the
understand?
proceedings
for
rescission
of
contract
and
damages
upon
the
Ruling
might
have
been
correct
but
ratiocination
was
approval
by
the
SEC
of
the
ASB
Group
of
Companies’
dubious
rehabilitation
plan
and
the
appointment
of
its
rehabilitation
o Should
have
focused
on
the
fact
that
condo
sellers
receiver.
By
the
suspension
of
the
proceedings,
the
receiver
is
cannot
claim
the
units
as
their
assets
but
only
allowed
to
fully
devote
his
time
and
efforts
to
the
rehabilitation
hold
them
in
trust;
hence
claims
against
the
units
The
bank
as
creditor
may
proceed
against
petitioner-‐spouses
as
are
not
stayed
or
suspended
sureties
despite
the
execution
of
the
MOA
which
provided
for
the
suspension
of
payment
and
filing
of
collection
suits
against
BMC.
The
bank’s
right
to
collect
payment
from
the
surety
exists
MWSS
v
Daway
independently
of
its
right
to
proceed
directly
against
the
principal
debtor.
A
letter
of
credit
is
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
Metrobank
v
ASB
Holdings
conditions
specified
in
the
credit.
It
is
an
absolute
undertaking
to
pay
the
money
advanced
or
the
amount
for
which
credit
is
given
There
is
no
compulsion
on
the
part
of
the
bank
to
accept
a
dacion
on
the
faith
of
the
instrument.
It
is
a
primary
obligation
and
not
en
pago
arrangement
of
the
mortgaged
properties
based
on
ASB
an
accessory
contract.
While
it
is
a
security
arrangement,
it
is
not
Group
of
Companies’
transfer
values
and
to
condone
interests
converted
into
a
contract
of
guaranty.
and
penalties.
The
prohibition
is
on
the
enforcement
of
claims
against
The
dacion
en
pago
program
and
the
intent
of
ASB
to
ask
guarantors
or
sureties
of
the
debtors
whose
obligations
are
not
creditors
to
waive
the
interests,
penalties
and
related
charges
solidary
with
the
debtor.
The
participating
bank’s
obligation
are
are
not
compulsory
in
nature.
They
are
merely
proposals
for
the
solidary
with
Maynilad
in
that
it
is
a
primary,
direct,
definite
and
creditors
to
accept.
If
the
dacion
en
pago
does
not
materialize
in
an
absolute
undertaking
to
pay
and
is
not
conditioned
on
the
case
secured
creditors
refuse
to
agree
thereto,
the
Rehabilitation
prior
exhaustion
of
the
debtor’s
assets.
Being
solidary,
the
claims
Plan
contemplates
to
settle
the
obligations
to
secured
creditors
against
the
bank
can
be
pursued
separately
from
and
with
mortgaged
properties
at
selling
prices.
independently
of
the
rehabilitation
case.
The
approval
of
the
Rehabilitation
Plan
by
the
SEC
Hearing
Panel
NOTES:
Why
is
Maynilad
so
interested?
LOC
is
in
effect
a
contract
is
in
furtherance
of
the
rationale
behind
PD
902-‐A,
as
amended,
TO
loan;
that
when
MWSS
calls
for
the
letter
of
credit
and
the
which
is
“to
effect
a
feasible
and
viable
rehabilitation”
of
ailing
bank
pays,
it
becomes
a
contract
OF
loan.
The
bank
becomes
corporations
which
affect
the
public
welfare.
Maynilad’s
creditor.
If
this
is
the
case,
Maynilad
cannot
use
the
same
defenses
against
the
bank.
NOTES:
But
isn’t
the
rehab
plan
compulsory?
(that
the
court
may
even
approve
it
over
the
objections
of
the
creditor)
Ong
v
PCIB
Chas
Realty
and
Development
Corp.
v
Talavera
Where
no
extraordinary
corporate
acts
(or
one
that
under
the
law
would
call
for
a
2/3
vote)
are
contemplated
to
be
done
in
carrying
out
the
proposed
rehabilitation
plan,
then
the
approval
of
stockholders
would
only
be
by
a
majority,
not
necessarily
2/3
vote,
as
long
as,
there
is
a
quorum.