credit case table

7/28/2019 Credit Case Table

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CASE TABLE CREDIT TRANSACTIONS (Prof. Rocky Reyes | AY 2009-2010)Page 2 of23

pay the bulls book value but subject toreduction for yearly depreciation. The Bureaurefused this request and asked him to eitherreturn or pay the entire book value.Bagtas was unable to return the bulls becauseof bad peace and order situation and thepending appeal of the case.Bagtas died during pendency of case. Hisadminitratrix return two bulls because thethird one had been accidentally shot duringa raid by the Huks. Bagtas then claims thathe is not liable for the loss of the bull as it wascaused by a force majeure.

Issue: Is Bagtas liable to pay for the dead bull?Yes!

A contract of commodatum is essentially gratuitoIf the breeding fee be considered a compensatthen the contract would be a lease. Under 1671,Bagtas would be subject to the responsibilities ofpossessor in BF because he had continuedpossession after the expiry of the contract.And if the contract be commodatum, he is still liabecause of 1942 which provides that bailee is liabeven in case of fortuitous event if:2. he keeps it longer than the period stipulated3. thing loaned has been delivered with appraisaits value, unless there is a stipulation exempting bailee from responsibility in case of fortuitous eve

Chi asks: It appears that the GR in case ofunstipulated liability for fortuitous event, the bailis liable. Must the exemption be express?

Quintos v Beck(1939; Imperial)

Beck is a tenant of Quintos. Quintos grantedBeck the use of the furniture found in theleased house, among these were 3 gasheaters and 4 electric lamps. Quintos sold thepieces of furniture to Lopez and thereafternotified Beck of the conveyance. Beck

informed Quintos that the latter can get thefurniture at the ground floor of the house.However, at a later date, Beck told Quintosthat he will not return the furniture until afterthe expiration of lease contract. When thelease contract expired, Beck deposited thefurniture to Sheriffs warehouse.

- Chi says:Theres express prohibition in CCon the deposit with third persons of thinggiven by way of commmodatum. The closestwould be 1942 as to liability for loss of thingdue if the bailee lends to third person notmember of his household.

Issue No. 1: Did Beck comply with hisobligation to return the furniture uponQuintos demand? No.- The K entered into between the parties is one ocommodatum, because under it the plaintiffgratuitously granted the use of the furniture to th

defendant, reserving for herself the ownershipthereof, by this K, the defendant bound himself toreturn the furniture to the plaintiff, upon the lattedemand.- The obligation voluntarily assumed by Beck toreturn the furniture upon the plaintiffs demandmeans that he should return ALL of them toplaintiff AT THE BAILORSS RESIDENCE ORHOUSE. Beck did not comply with this obligationwhen he merely placed them at the disposal of thplaintiff, retaining for his benefit the 3 gas heaterand 4 electric lamps.

Issue No. 2: Where Quintos is bound to bearthe deposit fees due to Sheriff? No.- The court could not legally compel her to bear texpenses occasioned by the deposit of the furnituaT the defendants behest. The bailee was notentitled to place the furniture on deposit; nowas the bailor under a duty to accept the offer toreturn because it was incomplete.

Saura Import &Export Co v

DBP(1972; Makalintal,

J.)

Saura applied for P500,000 loan with DBP(then RFC) for the construction of factorybuilding and payment of balance price of thejute mill machinery and equipment. Sauraintended to produce bags using locally grownraw materials (the first serious attempt inhistory, as they would call it). There wasreexamination of the loan grant due to the

atras-abante attitude of China Engineers whowere to sign as co-makers, which even led tothe reduction of loan price to P300,000. But atthe end of the day, RFC granted the loansubject to two conditions: 1) raw materialsneeded by the Saura to carry out its operationare available in the immediate vicinity 2) thereis prospect of increased production of rawmaterials to provide adequately for therequirements of the factory.

However, in view of Sauras statement thatthey will have to import jute to produce thebags (read: inconsistent with the

Issue: Is there a perfected contract of loan?yes, did DBP breach it? Yes, theres a perfectecontract of loan. There was no breach though, bumutual desistance by the parties.- There was indeed a perfected consensual contraas recognized in 1934. There was undoubtedly ofand acceptance, Saura applied for a loan which Dapproved by resolution.

- Realizing that it will not meet the two conditionsSaura asked for cancellation of mortgage. Theaction thus taken was in the nature of mutualdesistance (mutuo disenso, if you feel like invokinManresa). Mutual disagreement by the parties cacause the contracts extinguishment.

Rocky says: What is a jute sack?

karichi santos 0410862 | UPlaw2012


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conditions), DBP refused to approve the loan.Saura then asked for cancellation of themortgage.

9 years later, Saura filed this suit for damagesagainst DBP claiming that for the lattersfailure to release the proceeds of loan appliedfor and approved, it was prevented fromcompleting or paying its contractualcommitments in connection with the jute millproject.

GSIS v CA(1986; Paras, J.)

The Medinas were granted a loan of P350,000by GSIS for which they constituted a RealEstate Mortgage. Thereafter, they againobtained an additional loan of P230,000.Medinas defaulted and naturally GSISforeclosed.

Medinas demands refund for overpaymentalleging that the Amendment of the RealEstate Mortgage superseded the originalcontract and failed to stipulate thecompounded interest discharged them from

the payment of the same.

Issue No. 1: Was there an overpayment? No- The Amendment of the Real Estate Mortgage neintended to completely supersede the originalmortgage contract.- This is shown by1. prior, contemporaneous and subsequent acts othe parties2. the contract itself, which:

- recognized the existence of the previousmortgage K- clearly stated in the last provision that allother terms and condition of previous real esta

mortgage continue to be in full force and effec- it just being amended as to amount andamortization

- As a matter of policy, GSIS imposes uniform termand conditions for all its real estate loans,particularly with respect to compounding of inter- It would be contrary to human experience and tordinary practice for mortgagee to impose lessonerous conditions on an increased loan by deletion of compounded interest exacted on a lesloan.

Issue No. 2: WON the interest rates on theloan accounts were usurious? No!- Interest by way of damages is governed by 2209If obligation consists in payment of sum of moneand debtor incurs in delay, the indemnity fordamages there being no stipulation to contrary,shall be the payment of the interest agreed upon- CC permits agreement upon a penalty apartfrom the interest.- Stipulation about payment of such additional rapartakes of the nature of a penalty clause, whicis sanctioned by law.

7 Ligutan v CA(2002; Vitug, J.)

Spouses Ligutan obtained a loan of P120,000from Security Bank and Trust Company. Itcontained the following stipulations as tointerest:

- 15.189% per annum upon maturity

- Penalty clause (in case of default): 5%every month on the outstandingprincipal and interest

- Attorneys fees: 10% of total amount dueIF:

- Matters endorsed to a lawyer forcollection

- Suit instituted to enforce paymentUpon default, bank filed a collection suit. Forspouses failure to answer, judgment wasrendered on default. Upon MR and newevidence, it was revealed that 3 years afterthe loan, spouses executed a real estatemortgage which they claim to be a novation

Issue No. 1: WON penalty interestunconscionable?Yes.- CA correctly reduced the penalty interest from 5to 3%- Penalty clause, expressly recognized by

CC1226, is an accessory undertaking to assumgreater liability on the part of an obligor in casbreach of an obligation.- It functions [1] to strengthen the coercive force the obligation AND [2] to provide for what could bthe liquidated damages resulting from such abreach.- The obligor would then be bound to pay thestipulated indemnity without the necessity of proon the existence and on the measure of damagescaused by the breach.- Altho court may not at liberty ignore freedom ofparties to agree on such terms and conditions asthey see fit, a stipulated penalty may be



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of the contract. It was even foreclosedwithout notification of spouses and that thebank did not even credit them with proceedsof the sale. (MR was denied bec its alreadytheir second! And the evidence was not reallynew because it was known since thecommencement of the case)

Ligutan also appeals as to the amounts ofinterests imposable.

Chi recited this but only appreciated its valueduring the finals review when she actually

read it. SAYANG!

equitably reduced by court if:- it is iniquitous or unconscionable OR- the principal obligation has been partly orirregularly complied with.

- If may even be deleted if/when:- there has been substantial performance in go

faith- penalty clause itself suffers from fatal infirmi- exceptional circumstances so exist as to

warrant it- Whether penalty is reasonable or iniquitous canpartly subjective and partly objective. Its resolutidepend on such factors as, but not necessarilyconfined to, the:

1. type, extent and purpose of the penalty2. nature of the obligation3. mode of breach and its consequences4. supervening realities5. standing and relationship of the parties

Issue No. 2: WON stipulated interestunconscionable? No.- The essence/rationale for the payment of intere

quite often referred to as cost of money, is noexactly the same as that of a surcharge/penalty.- A penalty stipulation is not necessarily preclusivof interest, if there is an agreement to that effectthe two being distinct concepts which may beseparately demanded. Judicial grounds fordisallowing imposition of full surcharges/penaltiesdespite express stipulation therefor in a validagreement, may not equally apply in non-paymeor reduction of interest.- Indeed, interest prescribed in loan financingagreement is a fundamental part of the bankingbusiness and the core of a banks existence.

Issue No. 2: Did the subsequent execution o

the real estate mortgage for the existing loresulted in the extinguishment of originalcontract because of novation? No.- Mortgage is but an accessory contract to securethe loan.- Elements ofextinctive novation

1. previous valid obligation2. agreement of all the parties3. extinguishment of the obligation: must be:

[a] declared in unequivocal terms (i.e. express) o[b] old and new obligation be on every pointincompatible with each other (i.e. incompatibilityshould take place in any of the essential elementobligation (i.e. juridical relation/tie, object, subjec

4. validity of the new oneEasternShipping Lines

v CA(1994; Vitug, J.)

The case of the broken drums of riboflavin. See Appendix A i.e. my amazing concept map of Eastern Shipping Line doctrine on Rules on

Interest.



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TWO CONCEPTS ON PAYMENT OF INTEREST (from Sir Labitags handout)

1 Interest for the use or loan or forbearance of money, goods orcredit

If no stipulation on payment ofinterest

No interest for use or forbearance* No interest shall be due unless it has beenexpressly stipulated in writing (CC1956)

If there is express stipulation (whichmust be in writing to be valid

CC1956) for payment of interests,but no rate mentioned

Interest shall be 12% per annum (Sec. 2,

Monetary Board Circular 905, 10 Dec 1982)

If there is stipulation in writing andrate of interest is agreed upon(including commissions, premiums,fees and other charges)

Such interest stipulated shall not be subjectto ceiling prescribed under the Usury Law (Sec.1, Monetary Board Circular 905, 10 Dec 1982)

2 Interest as damages for breach or default in payment of loan or forbearance of mon

goods, credit

No stipulation as to interest for useof money

In case ofDEFAULT, loan or forbearance shallearn legal interest, at rate of12% per annumfrom date of judicial or extrajudicialdemand, subject to Art 1169 (delay/mora)

If rate of interest stipulated, e.g.24% per annum

Loan + stipulated interest, shall earn 12% per

annumfrom date of judicial demand* Interest due shall earn legal interest from thetime it is judicially demanded, although theobligation may be silent upon this point (Art2212)

3 If obligation NOT consisting of a loan or forbearance of money, goods or credit isbreached, e.g. obligation to give, to do, not to do

o Interest may be imposed at the discretion of court at the rate of6% per annum.o No interest adjudged on unliquidated claims or damages, until demand can be

established with reasonable certainty.o After thus established with reasonable certainty , interest of6% per annum shall begi

to run from the date of judicial orextrajudicial demand.But if obligation cannot be established with reasonable certainty at time of demand, 6per annum interest shall begin to run only from date of judgment on amount finaadjudged by court.

4 Whenjudgment of court awarding money becomes final and executory, money judgment isB and C (above) shall earn 12% per annum from finality of judgment until full paymentmoney judgment shall be considered as forbearance of credit

Macalinao vBPI

(2009; Velasco, Jr.,J.)

Macalinao defaulted on the payment of hercredit card dues. There was stipulation thatthe charges/balance shall earn 3%/month andadditional penalty fee of another 3%/month.RTC reduced the 3% monthly interest to 2%.CA reversed the reduction saying thatMacalinao freely availed herself of the CCfacility offered by BPI to general public ergo,contracts of adhesion are not invalid per se.

Credit card interests and penalty chargesare unconscionable and iniquitous at36%!

- SC said that the interest rate and penalty charg3%/mo or 36%pa should be reduced to 2%/mo or24%pa. this is not the first time that SC considerethe 36%pa to be excessive and unconscionable.- Citing 1229: In exercising this power to determiwhat is iniquitous and unconscionable, courts muconsider the circumstances of each case since whmay be iniquitous and unconscionable in one mabe totally just and equitable in another.

- In the instant case, Macalinao made partialpayments to BPI.

ProducersBank of thePhil v CA

(2003; Callejo, Sr.,J.)

Vives was asked by his friend Sanchez todeposit P200,000 in the name of SterelaMarketing and Services (owned by Doronillawho is friend of Sanchez) for purposes of itsincorporation and on the promise that it willbe returned after 30 days.

Vives agreed and had his wife open anaccount in name of Sterela and deposit theamount there. The authorized signatories inthe passbook were Sanchez and/or Vives.

Banks Defenses: The contract between them wa simple loan or mutuum because [1] the subjectwas money, there was an interest amounting to12,000 and I was not privy thereto!As regards the subject- 1933 may seem to imply that if subject of contris a consumable thing, e.g. money, the contractwould be a mutuum. However, there are exceptioto this rule where the loan is commodatum and nmutuum.

- if consumable goods are loaned only for



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However, Vives learned that Sterela was nolonger holding office in the address given tohim. Doronilla promised to return his moneyand issued checks therefor. The checksbounced. Vives later on found out that Atieza(the bank manager) allowed Doronilla towithdraw the money on the basis that he wasthe sole proprietor of Sterela.

Main issue: Is the bank liable to return toVives the amount withdrawn byDoronilla? Yes!

purposes of exhibition OR- when the intention of parties is to lend

consumable goods and to have the very same goreturned at the end of the period agreed upon- Intention of parties shall be accorded primordiaconsideration in determining the actual charactea contract. In case of doubt, the contemporaneouand subsequent acts of the parties shall beconsidered.As regards the interest- Attempt to return P200,000 with additionalP12,000 does not convert the transaction fromcommodatum to muttum absent any showing ofsuch intention.- In fact, the 12k corresponds to the fruits of thething.- 1935: bailee acquires only the USE but NOT theFRUITS.- It was only proper for Doronilla to remit to Vivesthe interest accruing to the money deposited in tbank.As regards the privity- Whether the transaction was mutuum or

commodatum has no bearing on your liability. Yoliability is founded upon your employees fault un2180 (vicarious).- Atienza was in conspiracy with Doronillas schemThe passbook in custody of Vives says that onecannot withdraw without that passbook. How comDoronilla was able to get the money?- Atienza also knew very well that Vives was theowner of the money as he was expressly told by twife.

Garcia v Thio(2007; Corona, J.)

Carolyn Garcia gave to Rica Thio two crossedchecks payable to the order of Marilou

Santiago [the scenario here is Carolyn Rica

Marilou]. Thio paid faithfully at first buteventually failed to pay the loans when theyfell due. No PN because Carol and Rica used tobe friends then.

Rica denied the loans and shifted the blame toMalou. She said that the initial payment wereonly to accommodate Carols request to useher own checks instead of Malous.

Rocky says:- What is a cross check?- What do you call yung pinautang mo yunginutang mo? Chi almost answered (becauseshe was on deck at that time) 5-6-7, thecorrect answer is relending

Issue: Who borrowed money from Carol: Ricor Malou? Rica!- A loan is a real contract, not consensual as suchperfected only upon the delivery of the object of contract.- Delivery is the act by which the res or substancthereof is placed within the actual or constructivepossession or control of another. Although Rica dnot actually receive the proceeds of these checksthese instruments were placed in her control andpossession, under an arrangement whereby sheactually re-lent the amounts to Malou.- Factors to support this conclusion:1. Carol did not personally know Malou, why woushe issue checks to strangers without any securitwhatsoever?2. Leticia (witness for both parties) said that Ricareal plan was to lend amounts to Malou at a highamount.

3. Why would Rica issue checks to cover for loansand interest which she did not contract. Incrediblcommon experience.4. In Malous petition for insolvency, Rica and notCarol was listed as creditor.5. Rica did not present Malou as witness.

- The interest was deleted though because there not written proof therefor.

Pajuyo v CA(2004; Carpio, J.)

Pajuyo allowed Guevarra to occupy his housemade of light materials (squatter) on thecondition that Guev will ensure itsmaintenance and orderliness and vacate thepremises upon demand. However, Guev

- The Kasunduan is not a commodatum. In acommodatum, the parties delivers to anothersomething not consumable so that the latter mayuse the same for a certain time and then return it- Features of a commodatum:



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refused to vacate when Pajuyo asked him tosaying that the latter had no valid title to thehouse or lot as a squatter. CA said that theirKasunduan was not a lease but acommodatum.

- gratuitous- for a certain period

- Thus, bailor cannot demand: [1] until afterexpiration of stipulated period or [2] afteraccomplishment of use for which the commodatuis constituted.- If bailor should have urgent need of the thing,may demand its return for temporary use.- PRECARIUM: If use of thing is merely toleratedthe bailor, he can demand the return of the thingwill- the imposition of obligation to maintain properin good condition makes the Kasunduan a contrdifferent from commodatum.- Case law on ejectment has treated relationshipbased on tolerance as one that is akin to alandlord tenant relationship where thewithdrawal of permission would result in thetermination of the lease.- There must be honor even between squatters. Tagreement is not void for purposes of determininwho between Pajuyo and Guevarra has a right tophysical possession of the contested property.

BPI FamilyBank v Franco(2007; Nachura, J.)

[1] Tevetesco opened a savings and currentaccount with BPI-FB P80M debited fromFMIC[2] FMIC also opened a time deposit with same

branch with P100M authority to debitP80M to Tevetesco[3] Franco opened savings (500k), current

(500k) and time deposit (1M) with BPI-FB allamounts traceable to check issued byTevetesco

The authority to debit was later on found tobe a forgery. However, Tevetesco had alreadywithdrawn several amounts from its current

account amounting to 3M + 2M of FrancoBPI-FB debit from Francos savings and currentaccounts all amounts remaining therein.Francos checks were also dishonored in viewof the freezing/grarnishement .FMIC claims recovery of 80M from BPI-FB.

- BPI cannot unilaterally freeze Francos accountsand preclude him from withdrawing his deposits.- Art 559 on recovery of unlawfully deprivedproperty is not applicable because the samepertains to specific/determinate thing Francosaccount consists of money which is movable,generic and fungible. The quality of being fungibldepends upon the possibility of property, becauseits NATURE or the WILL OF THE PARTIES, to besubstituted by others of the same kind, not havindistinct individuality.- BPI owns the deposited monies in the accounts Franco, but not as a legal consequence of itsunauthorized transfer of FMICs deposits toTevestecos account. It should not forget thatdeposits of money in banks is governed by CCprovisions on mutuum.- As there is a debtor-creditor relationship betweebank and depositor, BPI-FB ultimately acquiredownership of Francos deposits, but suchownership is couple with a correspondingobligation to pay him an equal amount ondemand.

Pp v Puig(2008; Chico-

Nazario, J.)

Puig and Porras were bookkeeper and cashierof a bank. 112 informations for qualified theftwere filed against them for their willful takingof cash deposited to the bank. RTC dismissedall the cases for insufficiency of allegations.Republic appeals.

What is the nature of possession by the banCashiers, bookkeepers and other employees of abank who come into possession of the moniesdeposited therein enjoy the confidence reposed ithem by their employer. Banks, on the other handwhere the monies are deposited, are considered

owners thereof. 1953 (person who receives loan omoney acquires ownership thereof) and 1980 (fixcurrent and savings deposit of money in banks ansimilar institutions shall be governed by provisionon loan) attests to this. The information sufficientallege all the essential elements constituting thecrime of Qualified Theft i.e.

1.Taking of personal property2.Property belongs to another (bank)3.Taking done with intent to gain4.Taking done without owners consent5.Accomplished without use of violence or

intimidation against persons, nor of forceupon things



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6.Done with grave abuse of confidence (natuof job)

DEPOSIT

BPI v IAC(1988; Cortes, J.)

Zaldy deposited US dollars in cash forsafekeeping, but the bank sold the dollars.Banks defense: it credited the proceeds to thepeso account of Zaldy.

- The contract is one of deposit as the greenbackwere given only for safekeeping. Zshornackdemanded the return of the money five monthslater.- The bank violated its obligation as depositary. T

contract is void though. They are in pari delictotherefore, they shall have no cause of action agaeach other. The only remedy is one on behalf of tState to prosecute the parties for violating the law

Rocky says:- Who is Rizaldy Zschornack? An actor contemporof FPJ and Erap.- Back then there was a prohibition on use of dollto promote the use of peso currency. BUT we needollars to purchase oil an plastic. Read theConstitutional case about Bataan Petrochemical.Sige nga, makakakuha ka ban g peso equivalent $200,000 in cash? There was even a time that Ph

announced to the world in a 10m telex that we donot have dollars anymore. We need dollars becauwe do not have sufficient amount of peso incirculation. At that point nakipagbarter pa tayo ngbanana with Czech for military hardware.

Bishop of Jarov Dela Pena

(1913; Moreland, J.)

Bishop of Jaro sued Father dela Pena for thelatters inability to return the amount intendedfor the construction of leper hospital. Theamount was deposited by Father in his ownaccount. But when he was arrested by the USArmy, the funds were confiscated because itwas purportedly for the support of theinsurgent and for revolutionary purposes.

- Bishop of Jaro lost this case, he was unable torecover.- By placing the money in the bank and mixing itwith his personal funds, Father did not assumeobligation different fromt hat under which he wouhave lain if such deposit had not been made, nor he thereby make himself liable to repay the monat all hazards.- If the money had been forcibly taken from hispocket or from his house by military forces, he

would have been exempt from responsibility. Thefact he placed the trust fund in the bank in hispersonal account did not make him a debtor whomust respond for all hazards.- There was no law prohibiting him from depositinas he did and there was no law which changed hiresponsibility by reason of the deposit.

CA Agro-

IndustrialDevelopment

Corp v CA(1993; Davide, J.)

As a condition for sale, the two partied agreedto deposit the TCT in an SDB. However, whenthe vendee was to resell the property, the titlewas no longer there. As a result of delay ofTCT reconstruction, the customer withdrew itsoffer. Vendee charges bank for unrealizedprofits.

Is the contractual relation between acommercial bank and another party in acontract of rent of safety deposit box withrespect to its contents placed by the later oneof bailor/bailee or one of lessor/lessee?

Contract is not an ordinary contract of leasebut a special kind of deposit.- Not lease because full and absolute possession control of SDB was not given to the joint renters.Guard key remained with Bank without whichrenters could not open the box.- 1975 not applicable.Relation created is that of bailor and bailee- The prevailing rule is that the relation between bank rention out SDB and its customers with respto the contents of the box is that of a bailor andbailee, the bailment being for hire and mutualbenefit.- CA Agros petition is dismissed though becausetheres no evidence that the bank is aware of theagreement between the two renters that theycannot withdraw the contents without the consenthe other.

Triple V Food vFilipino

Merchants

De Asis loss her employer-given MitsubishiGalant when it was given to the valet serviceof Kamayan.

- Customer expected safe return of car at the endher meal, thus Triple V constituted as a depositarIt cannot evade liability by arguing that neither a



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(2005)

Restos defense: The ticket contains waiver ofclaims. Valet parking service did not includeextending a contract of insurance or warrantyfor the loss of the vehicle.

contract of deposit nor that of insurance, guarantor surety for the loss of the car was constitutedwhen De Asis availed of its free valet parkingservice.- Parking claim stub embodying the terms andconditions of the parking, including that of relievipetitioner from any loss or damage to the car isessentially a contract of adhesion, drafted andprepared as it is by the petitioner alone with noparticipation whatsoever on the part of thecustomers.- De Asis deposited her car as part of Triple Vsenticement for customers by providing them a saparking space within the vicinity of their restauraIn a very real sense, a parking space is an addedattraction to petitioners restaurant businessbecause customers are thereby somehow assurethat their vehicle are safely kept, rather thanparking them somewhere else at their own risk.

YHT RealtyCorporation v

CA(2005; Tinga, J.)

McLoughlin, a philanthropist, loss his dollarsduring his stay at Copacabana. This wasdiscovered to be the act of his Filipina friendthrough the hotel employees who thought that

she was his wife.Whether a hotel may evade liability for theloss of items left with it for safekeeping by itsguest, by having these guests execute writtenwaivers holding the establishment or itsemployees, free from blame for such loss inlight of 2003 which voids such waivers?

- 2003 was incorporated in the CC as expression public policy precisely to apply to situations suchhere. The hotel business like common carriers isimbued with public interest.

- Catering to the public, hotel keepers are bound provide not only lodging for hotel guests but alsosecurity to their persons and belongings.- It is not necessary that they be actually delivereto the innkeepers or their employees. It is enoughthat such effects are within the hotel or inn.- CC is explicite that the responsibility of the hk sextend to the LOSS of or INJURY to the personalproperty of the guests even if caused by servantsemployees and strangers. It is loss due to forcemajeure that may spare the hk from liability.- 2002 (acts of guest, servants, family or his visitois not applicable. What if the negligence of theemployer or its employees facilitated theconsummation of a crime committed by theregistered guests visitors or relatives? 2002presupposes that hk is not guilty of concurrentnegligence or has not contributed to any degree the occurrence of the loss.- A depositary is not responsible for the loss ofgoods by theft, unless his actionable negligencecontributes to the loss.

SECURITY DEVICESE. Zobel Inc v

CA(1998; Martinez, J.)

Claveria obtained a loan with ConsolidatedBank for P2.875M to purchase 2 maritimebarges and 1 tugboat. As security, theyconstituted chattel mortgage over the boatsand executed a Continuing Guaranty by E.Zobel. They defaulted so SolidBank filed acase against Claveria and E. Zobel. (Note: Itdid not foreclose.)

E. Zobels defense: Relieved as guarantorpursuant to 2080 when it lost its right to besubrogated to chattel mortgage forSolidBanks failure to register the chattelmortgage with appropriate govt agency.

SolidBank: 2080 not applicable bec youre asurety, not a guarantor.

- Continuing guaranty is a surety! Petitionerassumed liability to SOLIDBANK, as a regular partto the undertaking and obligated itself as an origpromissor. It bound itself jointly and severally to tobligation with the respondent spouses. In fact,SOLIDBANK need not resort to all other legalremedies or exhaust respondent spouses' properbefore it can hold petitioner liable for the obligati

- 2080 does not apply where the liability is as asurety, not as a guarantor. Even assuming that 2is applicable, SOLIDBANK's failure to register thechattel mortgage did not release petitioner from obligation. In the Continuing Guaranty executed ifavor of SOLIDBANK, petitioner bound itself to thecontract irrespective of the existence of anycollateral.

SURETY GUARANTY



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Accessory promise by which aperson binds himself foranother already bound, andagrees with the creditor tosatisfy the obligation if thedebtor does not

Collateral undertakingpay the debt of anothcase the latter does npay the debt

bound with his principal bythe same instrument,executed at the same time,and on the same

consideration

guarantor's own sepaundertaking, in which principal does not join

original promissor and debtorfrom the beginning, and isheld, ordinarily, to know everydefault of his principal

- usually entered intobefore or after that ofprincipal, and is oftensupported on a separaconsideration from thasupporting the contrathe principal- original contract of hprincipal is not hiscontract, and he is nobound to take notice oits non-performance

not discharged, either by themere indulgence of thecreditor to the principal, or by

want of notice of the defaultof the principal, no matterhow much he may be injuredthereby

often discharged by thmere indulgence of thcreditor to the princip

and is usually not liabunless notified of thedefault of the principa

insurer of the debt, and heobligates himself to pay if theprincipal does not pay

insurer of the solvencythe debtor and thus bhimself to pay if theprincipal is unable to p

PhilippineBlooming Mills

v CA(2003; Carpio, J.)

PBM loaned from TRB. Ching signed Deed ofSuretyship in his personal capacity, not asmere guarantors but as primary obligors.PBM and Ching filed petition for suspension ofpayments with SEC, and eventually placedunder rehabilitation receivership. Because ofthis, TRB dismissed complaint as to PBM.

Chings defense: Deed of Suretyship executedin 1977 could not answer for obligations notyet in existence at the time of its execution. Itcould not answer for debts contracted by PBMin 1980 and 1981. No accessory contract ofsuretyship could arise without an existingprincipal contract of loan.

Rocky says:- Does 2053 apply even if there is no pre-existing loan? Or kailangan ba may pre-existing loan bago to mag-operate?

Chi recited this. Dismal.

Ching is liable for credit obligations contractedPBM against TRB before and after the executiothe 21 July 1977 Deed of Suretyship. This is evidfrom the tenor of the deed itself, referringamounts PBM may now be indebted or mhereafter become indebted to TRB.

- The law expressly allows a suretyship for "futdebts". 2053 provides: A guaranty may alsogiven as security for future debts, the amounwhich is not yet known; there can be no clagainst the guarantor until the debt liquidated.xxx

- Dio v. Court of Appeals: A guaranty may be gito secure even future debts, the amount of whmay not be known at the time the guarantyexecuted. This is the basis for contradenominated as continuing guaranty suretyship. A continuing guaranty is one whicnot limited to a single transaction , but whcontemplates a future course of deal

covering a series of transactions, generally foindefinite time or until revoked. It is prospecin its operation and is generally intended to provsecurity with respect to future transactions wicertain limits, and contemplates a successionliabilities, for which, as they accrue, the guaranbecomes liable.

- Continuing guaranty covers all transactiincluding those arising in the future, which within the description or contemplation of contract of guaranty, until the expiration termination thereof. A guaranty shall be constras continuing when by the terms thereof i



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evident that the object is to give a standing creto the principal debtor to be used from timetime either indefinitely or until a certperiod; especially if the right to recall guaranty is expressly reserved. Hence, whthe contract states that the guaranty is to secadvances to be made "from time to time," it wilconstrued to be a continuing one.

- In other jurisdictions, it has been held that the of particular words and expressions such payment of "any debt," "any indebtedness," or "sum," or the guaranty of "any transaction,"money to be furnished the principal debtor "at time," or "on such time" that the principal debmay require, have been construed to indicatcontinuing guaranty.

IFC v ImperialTextile Mills

(2005; Panganiban)

After extrajudicially foreclosing the mortgage,there still remained deficiency so IFC askedsurety to pay the outstanding balance. Issue:WON ITM a surety under the contract.

Rocky says:

- What on earth does not as sureties merelymean?! Do they mean sureties as well Itsredundant in Civil law pero under common lawit has different meaning. Pero shempre,walang Pilipinong nagcomment saredundancy.- IFC is the lending arm of the World Bank. HQis in Washington, so Amerikano mga lawyersnito. Hence, the confusion. Yung foreign formis bangga with CC.

- The Agreement uses guarantee and guarantoprompting ITM to base its argument on those woSC is not convinced that the use of the two wolimits the Contract to a mere guaranty. The specstipulations in the Contract show otherwise.- While referring to ITM as a guarantor,

Agreement specifically stated that the corporawas 'jointly and severally liable. To put emphasisthe nature of that liability, the Contract furtstated that ITM was a primary obligor, not a msurety. Those stipulations meant only one ththat at bottom, and to all legal intents and purpoit was a surety.- IFC was justified in taking action directly agarespondent.- The use of the word guarantee does not ipso famake the contract one of guaranty. The worfrequently employed in business transactionsdescribe the intention to be bound by a primaryan independent obligation. The very terms ocontract govern the obligations of the parties or extent of the obligor's liability. Thus, this Court ruled in favor of suretyship, even though contrawere denominated as a 'Guarantor's Undertakina 'Continuing Guaranty.

DBP v CA &Cuba

(1998; Davide, Jr.,J.)

Lydia Cuba has Fishpond Lease Agreement.She assigned the same to DBP as security forher loans (security by way of assignment).Upon default, DBP appropriated the Leaseholdrights without foreclosure proceedings. Issue:Is the act of DBP a violation of 2088?

Rocky says:- Why was it an issue? Because it was an

assignment and not pledge or mortgage- There was intention to sell. At best itsequitable mortgage. Round peg on a squarehole.

The assignment of leasehold rights was a mortgacontract.- Simultaneous with the execution of the notes wthe execution of "Assignments of LeaseholdRights"where Cuba assigned her leasehold rightsand interest on a 44-hectare fishpond, together wthe improvements thereon. As pointed out by Cuthe deeds of assignment constantly referred to thCuba as "borrower"; the assigned rights, as

mortgaged properties; and the instrument itself, mortgage contract. 0- Under condition no. 22 of the deed, it was provithat "failure to comply with the terms and conditof any of the loans shall cause all other loans tobecome due and demandable and all mortgagesshall be foreclosed." And, condition no. 33 providthat if"foreclosure is actually accomplished, theusual 10% attorney's fees and 10% liquidateddamages of the total obligation shall be imposed- There is no shred of doubt that a mortgage wasintended.- In their stipulation of facts the parties admittedthat the assignment was by way of security for th



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payment of the loans- People's Bank & Trust Co. vs. Odom: Anassignment to guarantee an obligation is in effecmortgage.BUT IT WAS NOT PACTUM COMMISSORIUM.Condition no. 12 did not provide that the ownershover the leasehold rights would automaticallypass to DBP upon CUBA's failure to pay the loan time. It merely provided for the appointment of Das attorney-in-fact with authority, among otherthings, to sell or otherwise dispose of the said rearights, in case of default by Cuba, and to apply thproceeds to the payment of the loan. This provisiis a standard condition in mortgage contracts ais in conformity with 2087, which authorizes themortgagee to foreclose the mortgage and alienatthe mortgaged property for the payment of theprincipal obligation.

Bustamante vRosel

(1999; Pardo, J.)

- Bustamante spouses borrowed P100,000from Rosel and used as a guaranty 70 sqm ofthe 423 sqm land she owns. In case of failureto pay, Rosel is given the right to buy saidland at P200,000 inclusive of the P100,000

borrowed amount and the interest.- Upon maturity of loan, Rosel proposed to buythe land. However, Bustamante refused tosell, but instead asked for extension of time topay and offered Rosel another land they couldbuy.- Bustamante then offered to pay the loan butRosel refused to accept payment and insistedthat Bustamante sign the prepared deed ofsale of the collateral land.- Both parties filed case against each other:

- Bustamante filed complaint for specificperformance and consignation againstBustamante (for the payment of the loan)

- Rosel filed petition for consignation anddeposited P153K with City Treasurer (for thepurchase of the collateral). When Bustamanterefused to sell, Rosel consigned the amount ofP47,500.00 with the trial court. In arriving atthe amount deposited, Rosel considered theprincipal loan of P100,000.00 and 18% interestper annum thereon, which amounted toP52,500.00. The principal loan and the interesttaken together amounted to P152,500.00,leaving a balance of P 47,500.00.- RTC: In favor of Bustamante and payment ofthe loan (conversely, against Rosel and sale ofcollateral)- CA: Reversed in favor of Rosel

- SC initially affirmed CA decision (saying thatthe contract is the law between the parties)but reversed on MR when Bustamante allegedthat real intention of the parties to the loanwas to put up the collateral as guaranteesimilar to an equitable mortgage according to1602.

Issue No. 1 Whether Bustamante failed to pay tloan at its maturity date - NO- The loan was due for payment on March 1, 19On said date, Bustamante tendered paymentsettle the loan which ROSEL refused to acc

insisting that BUSTAMANTE sell to them collateral of the loan. When ROSELs refusedaccept payment, BUSTAMANTE consigned amount with the trial court.Issue No. 2 Whether the stipulation (sale ofcollateral) in the loan contract was valid andenforceable - NO- Rosel was eager to purchase the land givenguaranty, but Bustamantes correlative obligatiosell is subject to suspensive condition (i.e. failurepay debt upon maturity). Contract has the forcelaw between parties but this is subject to provisiof A1306 CC that stipulations should not be contto law, morals, good customs, public policy public order.- A scrutiny of the stipulation of the parties reveasubtle intention of the creditor to acquire property given as security for the loan. Thiembraced in the concept ofpactum commissoriwhich is proscribed by law.- ELEMENTS OF PACTUM COMMISSORIUM

(1) there should be a property mortgagedway ofsecurity for the payment of principal obligation,

(2) there should be a stipulation for automaappropriation by the creditor of the thmortgaged in case ofnon-payment of principal obligation within stipulated period.

- The intent to appropriate the property givencollateral in favor of the creditor appears toevident, for the debtor is obliged to dispose of collateral at the pre-agreed consideraamounting to practically the same amount as loan. In effect, the creditor acquires the collaterathe event of non-payment of the loan- All persons in need of money are liable to eninto contractual relationships whatever the condiif only to alleviate their financial burden altemporarily. Hence, courts are duty boundexercise caution in the interpretation and resoluof contracts lest the lenders devour the borrowlike vultures do with their prey.



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Ong v RobanLending Corp

(2008; Carpio-Morales)

Spouses obtained several loans totaling toP4M, secured by real estate mortgage. Partiesexecuted Dacion in Payment Agreementand Memo of Agreement where the agreedamount of indebtedness ballooned to P5.9M.

Issue: Is the DPA a pactum? Yes!- The MoA and DPA contain no provisions foreclosure proceedings nor redemption. Under MoA, the failure by the petitioners to pay their dwithin the one-year period gives respondent right to enforce the DPA transferring to it ownersof the properties. Roban, in effect, automaticacquires ownership of the properties upetitioners failure to pay their debt within stipulated period.- In a true dacion en pago, the assignment of property extinguishes the monetary debt.[33] In case at bar, the alienation of the properties wasway of security, and not by way of satisfying debt.[34] The Dacion in Payment did not extingupetitioners obligation to respondent. On contrary, under the Memorandum of Agreemexecuted on the same day as the DacionPayment, petitioners had to execute a promissnote for P5,916,117.50 which they were to within one year.

Paray vEspeleta-

Rodriquez(2006; Tinga, J.)

Rodriguezes used their shares of stocks aspledge security to the loans they obtained

from Paray. Paray filed a petition with theCourt to sell the said stocks. Court upheldParays right to sell it at a public sale (thoughSC notes that it was not mandatory sincepledge foreclosure is generally doneextrajudicially e.g. without the need for anycourt intervention). Rodriquezes consignatedwith the court their redemption money.

The CAs upholding of the right ofredemption muddles the case because suchright only pertains to payments made bydebtor after foreclosure and not before the

foreclosure sale. It should have concentratedon the validity of the consignation which couldhave had the effect of extinguishing theprincipal obligation as well as the accessorycontract of pledge.

They would have had a better right had theymatched the terms of the highest bidder.

Under the circumstances, with the highinterest payments that accrued after severalyears, respondents were even placed in afavorable position by the pledge agreements,since the creditor would be unable to recoverany deficiency from the debtors should thesale price be insufficient to cover the principal

amounts with interests. Certainly, hadrespondents participated in the auction, therewould have been a chance for them to recoverthe shares at a price lower than the amountthat was actually due from them to theParays. That respondents failed to avail of thisbeneficial resort wholly accorded them by lawis their loss. Now, all respondents can recoveris the amounts they had consigned.

1. No right of redemption over pledgedproperties.

2. Foreclosure of pledge is alwaysextrajudicial.

Does the right of redemption exist overpersonal property? No law or jurisprudenceestablishes or affirms such right. Indeed, no suchright exists.

- The right to redeem property sold as security fothe satisfaction of an unpaid obligation does notexist preternaturally. Neither is it predicated onproprietary right, which, after the sale of propertyexecution, leaves the judgment debtor and vests the purchaser. Instead, it is a bare statutoryprivilege to be exercised only by the persons namin the statute.- The right of redemption over mortgaged realproperty sold extrajudicially is established by ANo. 3135, as amended. The said law does notextend the same benefit to personal property.- Sibal v Valdez: Personal property are not subjecredemption.

Can pledged properties be sold together?- There is nothing in the CC governing theextrajudicial sale of pledged properties that prohithe pledgee of several different pledge contractsfrom auctioning all of the pledged properties on asingle occasion, or from the buyer at the auction

sale in purchasing all the pledged properties withsingle purchase price. The relative insignificance ascertaining the definite apportionments of the saprice to the individual shares lies in the fact thatonce a pledged item is sold at auction, neither thepledgee nor the pledgor can recover whateverdeficiency or excess there may be between thepurchase price and the amount of the principalobligation.

Termination of pledge by consignation of thobligation price?If the principal obligation is satisfied, the pledgesshould be terminated as well. 2098 provides that

http://www.chanrobles.com/scdecisions/jurisprudence2008/july2008/172592.php#_ftn34http://www.chanrobles.com/scdecisions/jurisprudence2008/july2008/172592.php#_ftn35http://www.chanrobles.com/scdecisions/jurisprudence2008/july2008/172592.php#_ftn35http://www.chanrobles.com/scdecisions/jurisprudence2008/july2008/172592.php#_ftn34


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though the mortgagee is not strictlyconsidered a trustee in a purely equitablesense, but as far as concerns the unconsumedbalance, the mortgagee is deemed a trusteefor the mortgagor or owner of the equity ofredemption.If the mortgagee is retaining more of theproceeds of the sale than he is entitled to, thisalone will not affect the validity of the sale butsimply give the mortgagor a cause of action torecover such surplus.

pointless application of the law in requiring that creditor must bid under the same conditions as other bidder. It bears stressing that the rule hotrue only where the amount of the bid represethe total amount of the mortgage debt.

Huerta Alba vCA

(2000; Purisima, J.)

Main issue: WON the petitioner has the one-yearright of redemption of subject properties underSection 78 of Republic Act No. 337 otherwise knownas the General Banking Act.

What petitioner has been adjudged to have was only thequityof redemption over subject properties.

The right of redemption in relation to a mortgage understood in the sense of a prerogative to re-acquiremortgaged property after registration of the foreclosuresale exists only in the case ofthe extrajudicialforeclosure of the mortgage. No such right is recognizea judicial foreclosure except only where the mortgagis the PNB or a bank or banking institution.

- Where a mortgage is foreclosed extrajudicially, Act 31grants to the mortgagor the right of redemption withyear from the registration of the sheriff's certificate offoreclosure sale.

- Where the foreclosure is judicially effected, however, equivalent right of redemption exists. The law declaresthat ajudicial foreclosure sale 'when confirmed be anorder of the court. . . . shall operate to divest the rights all the parties to the action and to vest their rights in thpurchaser, subject to such rights of redemption as mayallowed by law.' Such rights exceptionally 'allowed by la(i.e., even after confirmation by an order of the court) athose granted by the charter of the PNB (Acts No. 2747and 2938), and the General Banking Act (R.A. 337). Thelaws confer on the mortgagor, his successors in interesany judgment creditor of the mortgagor, the right toredeem the property sold on foreclosure afterconfirmation by the court of the foreclosure sale whi

right may be exercised within a period of 1 year, countefrom the date of registration of the certificate of sale inRegistry of Property.

But, to repeat, no such right of redemption exists in casjudicial foreclosure of a mortgage if the mortgagee is nthe PNB or a bank or banking institution. In such a casethe foreclosure sale, 'when confirmed by an order of tcourt. . . shall operate to divest the rights of all theparties to the action and to vest their rights in thepurchaser.' There then exists only what is known as theequity of redemption. This is simply the right of thedefendant mortgagor to extinguish the mortgage andretain ownership of the property by paying the secureddebt within the 90-day period after the judgment becomfinal, in accordance with Rule 68, or even after theforeclosure sale but prior to its confirmation.

Peoples BankTrust vDahicanLumber

(1967; Dizon, J.)

DALCO executed real estate mortgage in favorof the bank, which contained a stipulation asto the extension of the security to afteracquired properties referring to properties tobe subsequently acquired. DALCO purchasednew properties, Bank compelled DALCO toregister the mortgage over the properties butbefore DALCO was able to do so, the purchasecontract had already been rescinded.

DALCOs arguments:1. The inclusion of after acquired propertiesis void because they were not registered in

Even if contract was entered into under the old Cthe pertinent provisions were reproduced into NCin 2127. The "after acquired properties" werepurchased by DALCO in connection with, and for in the development of its lumber concession andthat they were purchased in addition to, or inreplacement of those already existing in thepremises on July 13, 1950. In law, therefore, theymust be deemed to have been immobilized, withresult that the real estate mortgages involvedherein which were registered as such did nohave to be registered a second time as chattelmortgages in order to bind the "after acquired



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accordance with the Chattel Mortgage Law2. The provision did not automatically makesubject to such mortgages the properties andit only meant the willingness of DALCO toconstitute a lien over the same

properties" and affect third parties.

Makati Leasingv Wearever

(1983; De Castro,J.)

Chattel mortgage was executed over certainraw materials inventory and Artos Aero DryerStentering Range. Sheriff could only take outthe motor because it was too large and theyhad to drill it or destroy the concrete floor ifonly to take it out.

Is the machinery in suit a real or personalproperty? In which case, what law shouldgovern?

- If a house of strong materials, like what involved in the above Tumalad case, may considered as personal property for purposesexecuting a chattel mortgage thereon as long asparties to the contract so agree and no innocthird party will be prejudiced thereby, thereabsolutely no reason why a machinery, whicmovable in its nature and becomes immobilized oby destination or purpose, may not be likewtreated as such. This is really because one who so agreed is estopped from denying the existencthe chattel mortgage.- It must be pointed out that the characterizatiothe subject machinery as chattel by the privrespondent is indicative of intention and impresupon the property the character determined by parties. As stated in Standard Oil Co. of New YorJaramillo, it is undeniable that the parties t

contract may by agreement treat as persoproperty that which by nature would be property, as long as no interest of third parwould be prejudiced thereby.

Dy v CA(1991; Gutierrez, J.)

Wilfred bought a tractor through a loan fromLibra, to which he also executed a chattelmortgage. Wilfreds brother Perfecto boughtthe tractor from him and assumed themortgage with Libras consent. However Libradid not release the tractor immediatelybecause of uncleared check. The dealyresulted to the tractors purchase by Gerlac.

- The mortgagor who gave the property as secuunder a chattel mortgage did not part with ownership over the same. He had the right to sealthough he was under the obligation to secure written consent of the mortgagee or he lays himopen to criminal prosecution under the provisioArticle 319 par. 2 of the RPC. Even if no consent obtained from the Libra, the validity of the would still not be affected.- Where a 3P purchases the mortgaged propertyautomatically steps into the shoes of the origmortgagor. His right of ownership shall be subjecthe mortgage of the thing sold to him. In the casbar, Perfecto was fully aware of the exismortgage of the subject tractor to Libra. In fwhen he was obtaining Libra's consent to the she volunteered to assume the remaining balancthe mortgage debt of Wilfredo Dy which Lundeniably agreed to.

Pameca Woodv CA

(1999; Gonzaga-Reyes)

DBP foreclosed on the chattel mortgage andthen claimed for the deficiency. PAMECA saysthat the book value of their chattel was P2Mbut DBP, being the sole bidder purchased itonly for P322,350.

Rocky says:- Salbahe tong DBP no? Nawalan na nga ngproperty, siningil pa. Ang baba na nga ng bidtapos nagdeficiency pa.- Kinalimutan ng lawyers dito ang 2141. 2115lang naman ang bangga dun eh.- Pledge is intended to regulate pawnshops.Its a different concept from mortgage. At tayolang ang ganun sa buong Asia.- Whats the intention of 2088? Get the bestprice for borrower. Its okay to bid low. Sabidding kasi may chance, nagkataon lang nawalang nagbid nang mataas. Sa pactum kasi,yung creditor lang ang may chance bumili.

Issue: Can DBP recover the deficiency?Yes.- Whereas, in pledge, the sale of the thing pledgeextinguishes the entire principal obligation, suchthat the pledgor may no longer recover proceedsthe sale in excess of the amount of the principalobligation, S14 of Chattel Mortgage Law expressl

entitles the mortgagor to the balance of theproceeds, upon satisfaction of the principalobligation and costs.- Since the Chattel Mortgage Law bars the creditomortgagee from retaining the excess of the saleproceeds there is a corollary obligation on thepart of the debtor-mortgagee to pay thedeficiency in case of a reduction in the pricepublic auction.- 1484 does not apply here because it is specificaapplicable to sale on installments.



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Acme Shoe vCA

(1996; Vitug, J.)

Main issue: Would it be valid and effective tohave a clause in a chattel mortgage thatpurports to likewise extend its coverage toobligations yet to be contracted or incurred?

Rocky says:- What is the purpose of affidavit of goodfaith? Bakit sa real estate mortgage wala?

No. Chattel mortgage must comply substantiallywith the prescribed form. The execution of the oameans that the debt/obligation secured must becurrent and not that is yet merely contemplated.- While a pledge, real estate mortgage, orantichresis may exceptionally secure after-incurrobligations so long as these future debts areaccurately described, a chattel mortgage, howevcan only cover obligations existing at the time thmortgage is constituted. Although a promiseexpressed in a chattel mortgage to include debtsthat are yet to be contracted can be a bindingcommitment that can be compelled upon, thesecurity itself, however, does not come intoexistence or arise until after a chattel mortgageagreement covering the newly contracted debt executed either by concluding a fresh chattelmortgage OR by amending the old contractconformably with the form prescribed by the ChaMortgage Law. Refusal on the part of the borroweto execute the agreement so as to cover the afteincurred obligation can constitute an act of defaon the part of the borrower of the financing

agreement whereon the promise is written but, ocourse, the remedy of foreclosure can only coverdebts extant at the time of constitution and durinthe life of the chattel mortgage sought to beforeclosed.

ServicewideSpecialist v CA

(1999; Ynares-Santiago)

Ponce bought from CR Tecson a HoldenTorana and also executed Chattel Mortgage inits favor. CR Tecson assigned the credit toFilinvest with conformity of Ponce. Ponce soldthe car to Tecson. Filinvest assigned its rightsto Servicewide without notice to Ponce.Servicewide sues Ponce. Ponce files 3Pcomplaint against Tecson.

ISSUES:- Whether the assignment of a credit requiresnotice to the Ponce in order to bind him?- More specifically, is Ponce, who sold theproperty to Tecson, entitled to notice of theassignment of credit made by the Filinvest toServicewide such that if the Ponce was notnotified of the assignment, he can no longerbe held liable since he already alienated theproperty?- Conversely, is the consent of Servicewidenecessary when Ponce alienated the propertyto Tecson?

Chi recited this. Fairly okay.

Only notice to the debtor (Ponce) of the assignmeof credit is required. His consent is not required. contrast, consent of the creditor-mortgagee(Servicewide) to the alienation of the mortgagedproperty is necessary in order to bind said credito

Article 2141, on the other hand, states that theprovisions concerning a contract of pledgeshall be applicable to a chattel mortgage, suas the one at bar, insofar as there is no conflict wAct No. 1508, the Chattel Mortgage Law. Asprovided in 2097 in relation to 2141, a thing pledmay be alienated by the pledgor or owner with thconsent of the pledgee. This provision is inaccordance with Act No. 1508 which provides thamortgagor of personal property shall not sell orpledge such property, or any part thereof,mortgaged by him without the consent of themortgagee in writing on the back of the mortgaand on the margin of the record thereof in the offwhere such mortgage is recorded. Although thisprovision in the chattel mortgage has beenexpressly repealed by Article 367 of the RevisePenal Code, yet under Article 319 (2) of the same

Code, the sale of the thing mortgaged may be maprovided that the mortgagee gives his consent anthat the same is recorded. In any case, applying analogy 2128 to a chattel mortgage, it appears tha mortgage credit may be alienated orassigned to a third person. Since the assigneethe credit steps into the shoes of the creditor-mortgagee to whom the chattel was mortgaged, follows that the assignees consent is necessaryorder to bind him of the alienation of the mortgagthing by the debtor-mortgagor. This is tantamouto a novation. As the new assignee, petitionersconsent is necessary before respondent spousalienation of the vehicle can be considered as



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Nakinabang si Benhar eh wala naman siyaginawa.- Ang mga lawyers hindi pwedeng maramingpera, hindi tayo marunong magbilang eh.- Rehab receiver is a good job.

prejudice of the other creditors.All assets of the corporation under rehabilitationreceivership are held in trust for the equal benefiall creditors to preclude one from obtaining anadvantage or preference over another by theexpediency of attachment, execution or otherwisAs between the creditors, the key phrase is equain equity.Once the corporation threatened by bankruptcy itaken over by a receiver, all the creditors ought tstand on equal footing. Not any one of them shoube paid ahead of the others.

Rubberworld vNLRC

(1999; Panganiban,J.)

Should NLRC suspend the proceedings beforeit when company is under declaration ofsuspension of payments i.e. all actions forclaims are suspended?

Rocky says: Distinction between suspensionof payments and corporate rehabSUSPENSION OFPAYMENTS

CORPORATEREHABLITATION

Foresees impossibility of meeting debts

when they dueApplicable to bothnatural and juridicalentity

Only corporations

Initiated by the debtoronly

Initiated by debtor orcreditor

- Convince the court na kaya pang i-rehab.- Eat at Esukiji, men fall in love with what theysee, what is. Women with what they

- Upon creation of a management committee or tappointment of the rehabilitation receiver, all clafor actions shall be suspended accordingly. Noexception in favor of labor claims is mentioned inthe law. Allowing them to proceed may clearlydefeats the purpose of the automatic stay andseverely encumbers the management committeetime and resources.- Preferential right of workers and employees undA110 of LC may be invoked only upon the institut

of insolvency or judicial liquidation proceedings.

Leca RealtyCorp v

Manuela Corp(2007; Sandoval-

Gutierrez, J.)

Rocky says: Non-impairment of contracts- Iba talaga ang adrenalin level namin datikapag nakikipagdate kasi hindi pa uso angcredit card. Wala pang price yung menu na

para sa ladies. Kaya dapat- Pinakamasarap na part ng tuna yung batok.Oily yun. Pero hindi naman generally oily angtuna dahil it lives in warm water.- In view of the Valentines Day tomorrow,tinamad na magdiscuss ng Credit Trans siRocky. Nagbigay na lang ng dating tips. Putyour money where your motives are. Parangpoker lang yan. All in.- Story about about a boy who was looking fora wife and his mother fed three ladies withcheese.- Bumili kayo ng ceramic knife. Parang papel ogulaman lang lahat ng hinihiwa niyo.- Dont go Chinese pag date, ang dami nun.

Wala kayong magagawa. Pangfamily lang angChinese.

- The amount of rental is an essential condition oany lease contract. Needless to state, the changeits rate in the Rehabilitation Plan is not justified aimpairs the stipulation between the parties. RehaPlan is declared void insofar as it amends the ren

rates agreed upon by the parties.- PD 502-A never authorized the change ormodification of contracts entered into by thedistressed corporation and its creditors.

Chas RealtyDevt Corp v

Talavera(2003; Vitug, J.)

Validity of approval is in issue. Board ofdirectors was even still being contested.

Rocky says:- Why 2/3 vote? In a big corporation, itsdangerous to go to the stockholders. Exampleis PLDT where mere subscription to theirservices makes you a stockholder.- No similar provision in present Rules.- Is it not important enough to file petition for

Certification from the board of directors that filingpetition has been duly authorized and that it hasbeen confirmed

Subject: repayment or restructuring schemeExtraordinary corporate action 2/3 of stockholdoutstanding capital stockNo extraordinary corporate action majority in aquorum



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rehab?

RCBC v IAC(1999; Melo, J.)

Rules of thumb laid down by the SC1. All claims against corporations, partnerships or associations that are pending before any court,tribunal or board, without distinction as to WON a creditor is secured or unsecured, shall besuspended effective upon the appointment of a management committee, rehabilitation receiver,board, or body in accordance with the provisions of PD 902-A.

2. Secured creditors retain their preference over unsecured creditors, but enforcement of such

preference is equally suspended upon the appointment of a management committee, rehabilitatioreceiver, board or body. In the event that the assets of the corporation, partnership or association finally liquidated, however, secured and preferred credits under applicable provisions of CC will

definitely have preference over unsecured ones. All actions for claims against a distressedcorporation pending before any court, tribunal or body shall be suspended accordingly to givereceiver the chance to rehabilitate the corporation if there should still be possibility for doing so.

3. In the event that rehabilitation is no longer feasible and claims against the distressed corporatiowould eventually have to be settled, the secured creditors shall enjoy preference over the unsecurcreditors, subject only to the provisions of CC on Concurrence and Preference of Credit.

The issue of WON preferred creditors of distressed corporations stand on equal footing with all othcreditors gains relevance and materiality only upon the appointment of management committee,rehabilitation receiver, board or body.

Sobrejuanite vASB

(2005; Ynares-Santiago)

Company failed to deliver the condo unit uponthe spouses demand. Spouses now wantrescission of contract and refunt of payment +payment of moral damages, attys fees,litigation expenses, appearance fees and costsof suit

Issue: WON complaint for rescission withdamages (specific performance) a claimcovered by stay order? Yes, it is a claim whichmust be suspended.

Rocky asks:- What is the definition of claim under presentrules? Same as Interim: all claims ordemands of whatever nature or characteragainst a debtor or its property, whether formoney or otherwise.- Why do we have surnames? Its forgeographical security to track movement.Parang pinaglaruan yung mga apelyido natin,Santos Reyes Cruz. Hinda naman apelyido yansa Espanya eh. Mga Ordonez, Villalobos, Zobelsila dun.- First row ng bumaril kay Rizal eh Pinoy, nasa2nd row eh mga Espanyol na nakatutok saPinoy na di babaril. We kill each other.

- The purpose of suspension of the proceedings isprevent a creditor from obtaining an advantage opreference over another and to protect andpreserve the rights of party litigants as well as thinterest of the investing public or creditors. It isintended to give enough breathing space for themanagement committee or rehabilitation receivemake business viable again, without having to divattention and resources to litigations in various foIt would enable the management committee/rehareceiver to effectively exercise powers free from judicial/extrajudicial interference that might undu

hinder or prevent the rescue of the debtorcompany.

Definitions of claim:- Finasia v CA: debts/demands pecuniary in natur-Arranza v BF Homes: actions involving monetaryconsiderations- Interim rules: All claims or demands, of whatevenature or character against a debtor or its properwhether for money or otherwise. No distinctions oexemptions.

Metrobank vSLGT

(2007; Garcia, J.)

Condominium project mortgaged withoutnotice to owners of condominium units andwithout permission from HLURB. Banksdefense: Divisibility/separability.Court said that the mortgage is void inentirety because it is indivisible by nature.Dylanco demanded the delivery of their unitsfree from all liens and encumbrances.Issue: Is it a claim covered by the stay order?

There is an undue reliance on Sobrejuanite. Theclaim there involved pecuniary consideration(refund + damages) while here, it was only for thenforcement of contractual obligations (specificperformance).- The Rules on rehabilitation and suspension ofaction apply only to those who stand in the categof debtors and creditors, which the parties in thecase at bar are not.

PAL v CA(2005; Ponente, J.)

Two minor children left by the plane. Parentsseek indemnity for damages from PAL.Execution stage na lang ito.

Upon the appointment by SEC of a managementcommittee or rehab receiver, all actions for claimagainst a corp pending before any court, tribunalboard shall ipso jure be suspended in whatever



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stage such actions may be found.

It must be stressed that what are automaticallystayed or suspended are the proceedings of a suand not just the payment of claims during theexecution stage after the case had become final executory.

ClarionPrinting House

v NLRC(2005; Carpio-

Morales)Handled by UP OLA

Complaint for illegal dismissal of probationaryemployee. She was retrenched but during herretrenchment, the petition for declaration ofsuspension of payments by the company wasdenied.

Court took judicial notice of its own acts. It evenallowed Miclat to recover despite the appointmenmanagement committee for the company (this timtheir petition for corp rehab was granted).

Ong v PCIB(2005; Puno, J.)

Spouses are surety of the corporation of whichthey are the presidents and treasurers.

Rocky says:- Delikado maging surety, thats the point

Despite the execution of the MoA which providedthe suspension of payment and filing of collectionsuits against BMC, the bank has the right to collepayment from the surety as it exists independentof its right to proceed directly against the principdebtor.

Sy Chim v SySiy Ho

(2006; Callejo Sr.,J.)

Chinese family owns a company, a disputetook place between the stockholders. Oneparty moved for the appointment of amanagement committee. Court granted.

Rocky says:- If someone takes over, it would be hard torecover. There may be something wrong goingon internally, but as long as it does not affectthe finances, dont appoint managementcommittee hastily.- Are the two requisites still required under thepresent rules?

Is the appointment of management committproper under the Interim Rules? No.- Upon appointment of managementcommittee/receiver, the elected/appointed office

of the corporation are divested of the managemeof such corporation in favor of the managementcommittee/receiver.- The creation and appointment of a managemencommittee and receiver is an extraordinary anddrastic remedy to be exercised with care andcaution; and only when the requirements under tInterim Rules are shown. It is a drastic course forbenefit of the minority stockholders, the parties-litigant or the general public are allowed only undpressing circumstances, and when there isinadequacy, ineffectual or exhaustion of legal orotre remedies.- In the absence of a strong showing of imminentdanger of dissipation, loss, wastage or destructio

assets or other properties of a corporation andparalysis of its business operations, the mereapprehension of future misconduct based upon pmanagement will not authorize the appointment management committee/receiver.

Metrobank vASB

(2007; Sandoval-Gutierrez , J.)

ASB drafted a dacion en pago in itsRehabilitation Plan. Metrobank refuse toaccept because it does not agree with thevaluation of the properties included therein.

Rocky says:- Confused yung lawyer dito. Malinaw namingsubject to approval yung rehab plan,kinwestiyon pa. Sayang ang oras ng korte.

Dapat bineberate yung mga ganitong abogadoeh.

- The dacion en pago program and the intent of Ato ask creditors to waive the interests, penalties related charges are not compulsory in nature.They are merely proposals for the creditors toaccept. There was even an initial discussion onthese proposals and the majority of the securedcreditors showed their desire to complete dacionpago transactions, but they must be based onmutually agreed upon terms.

- The purpose of rehabilitation proceedings is toenable the company to gain a new lease on life athereby allows creditors to be paid their claims frits earnings.

MWSS v Daway(2004; Azcuna, J.)

Maynilad applied for Rehabilitation withSuspension of Actions and Proceedings. It hadan Irrevocable Standby Letter of Credit issuedby Citicorp. MWSS asked for its encashmentfor payment of concession fees. Is the claimcovered by the stay order?Rocky says:- Maynilad owned by the Lopezes. ManilaWater sa QC. Wala bang taga-Manila dito?Homogenous talaga kayo.

LoC is not covered by the stay order (hence, MWScan enforce its claim) because it is solidary andprimary undertaking. As such, claims against thecan be pursued separately from and independentof the rehabilitation case (PBM v CA).



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- Alam niyo ba kung bakit Brand X lang angginagamit sa mga local ads when in the USthey bluntly say that Pepsi is better thanCoke? No of course, its not delecadeza. Its byagreement of ad companies, they have self-regulating rules.

Colinares v CA(2000; Davide, J.)

Colinares renovated the convent of CarmeliteSisters. To purchase materials for theconstruction, Colinares signed a pro-formatrust receipt with PBC. After default, PBCcharged Colinares with violation of PD 115 inrelation to A315 RPC (estafa).

Defense: They believed it was only a cleanloan, the trust receipt implication was in fineprint.

HELD:- The parties intended a simple loan and not atrust receipt agreement. Colinares alreadyowned the goods when they applied for a loanfor the payment of goods.- Usually, goods are owned by the bank. Upon

release to entrustee, bank acquires securityinterest- Moreover, Colinares are not importersacquiring the goods for re-sale, contrary to theexpress provision embodied in the trustreceipt.

Rocky says:- This may also be called title retentionsecurity agreement its the best type ofsecurity kasi nasa iyo na kagad in case ofbankruptcy.- Eh bakit hindi lahat naka-trust receipt? Itsnot because of the risk of loss, because youcan transfer it naman. Magastos kasi to.Ibinebenta-benta pa, maraming tax nabinabayaran tuloy. Theres also a limit on whatthe bank can purchase.- Whats another example of title retentionContract to sell. Its better than mortgage kasiwala kang kalaban.

What is a trust receipt?S4 of PD 115: any transaction by and between aperson referred to as the entruster and anotheperson referred to as the entrustee, whereby thformer who owns or holds absolute title orsecurity interest over certain specified goods,documents or instruments, releases the same to possession of the entrustee upon the lattersexecution and delivery to the entruster of a signedocument called a trust receipt wherein theentrustee binds himself to hold the designatedgoods, documents, or instruments with theobligation to turn over to the entruster theproceeds thereof to the extent of the amountowing to the entruster or as appears in the trustreceipt or the goods, documents or instrumentsthemselves if they are unsold or not otherwise

disposed of, in accordance with the terms andconditions specified in the trust receipt.

Two possible situations in trust receipt transact1.Money received (entregaria)2.Merchandise received (devolvera)

Failure of entrustee to turn over proceeds ispunishable as estafa, without need of proving intto defraud.

Policy questions:- Intended to aid in financing the importers andretail traders who do not have sufficient funds orresources to finance the importation or purchase merchandise, and who may not be able to acquircredit except through utilization as collateral, of tmerchandise importer or purchased.- It does not seek the payment of the loan, butpunishment of dishonesty and abuse of confidencin handling of money/goods to prejudice of anoth

UCPB v Beluso(2007; Chico-

Nazario, J.)

Beluso obtained a credit line from UCPB.Interest was not numerically quantified butonly categorically fixed [rate indicative ofDBD retail rate]. Beluso says that its aninfringement of the mutuality of contracts.

Rocky says:

- Buddha died because of ulcer and bleeding.

- The interest rate provisions are illegal not onlybecause of the CC provision on mutuality ofcontracts but also because its violative of the Truin Lending Act. Not disclosing the true financecharges in connection with the extensions of credis a form of deception which We cannotcountenance.

As to failure of Beluso to explicitly allegeviolation of Truth in Lending Act andprescription of 1 year- Allegations in complaint are much more controlthan its title. It can be inferred from the allegatiounilateral imposition of increased interest rates- Truth in Lending gives rise to both crim and civiliabilities.- Rationale for requiring the disclosure statementbe given prior to consummation: Protect users ofcredit from a lack of awareness of the true costthereof, proceeding from the experience that banare able to conceal such true cost by hiddencharges, uncertainty of interest rates, deduction



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interests from the loaned amount and the like. Fuappreciate the true cost of loan, give full consentthe contract, and properly evaluate their options arriving at business decisions.

Manila Bankingv Teodoro

(1989; Bidin, J.)

Assignment of rights executed to guarantee an obligation.- An assignment of rights, receivables, titles or interest under a contract to guarantee an obligationin effect, a pledge or mortgage contract to guarantee an obligation is, in effect, a pledge or mortgaand NOT an absolute conveyance of title which confers ownership on the assignee. In case of doubas to whether a transaction is a pledge (or mortgage), or a dation in payment, the presumption is favor of pledge, the latter being the lesser transmission of rights and interests.

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