YHT REALTY CORPORATION, ERLINDA LAINEZ and ANICIA PAYAM

VS.
THE COURT OF APPEALS and MAURICE McLOUGHLIN

FACTS
Respondent McLoughlin would always stay at Tropicana Hotel every time he was
here in thePhilippines and would rent a safety deposit box. The safety deposit box
could only be opened through the use of 2 keys, one of which is given to the
registered guest, and the other remaining in the possession of the management of
the hotel.McLoughlin allegedly placed the following in his safety deposit box – 2
envelopes containingUS Dollars, one envelope containing Australian Dollars, Letters,
credit cards, bankbooks and acheckbook.On 12 December 1987, before leaving for a
brief trip, McLoughlin took some items from the safety box which includes the ff:
envelope containing Five Thousand US Dollars (US$5,000.00), the other envelope
containing Ten Thousand Australian Dollars (AUS$10,000.00), his passports and his
credit cards. The other items were left in the deposit box. Upon arrival, he found out
that a few dollars were missing and the jewelry he bought was likewise
missing.Eventually, he confronted Lainez and Paiyam who admitted that Tan
opened the safety deposit box with the key assigned to him. McLoughlin went up to
his room where Tan was staying and confronted her. Tan admitted that she had
stolen McLouglin’s key and was able to open the safety deposit box with the
assistance of Lopez, Paiyam and Lainez. Lopez also told McLoughlinthat Tan stole
the key assigned to McLouglin while the latter was asleep.McLoughlin insisted that it
must be the hotel who must assume responsibility for the loss suffered. Lopez
refused to accept responsibility relying on the conditions for renting the safety
deposit box entitled “Undertaking For the Use of Safety Deposit Box”

ISSUE
WON the “Undertaking for the Use of Safety Deposit Box” admittedly executed by
private respondent is null and void.

HELD
YES Article 2003 was incorporated in the New Civil Code as an expression of public
policy precisely to apply to situations such as that presented in this case. The hotel
business like the common carrier’s business is imbued with public interest. Catering
to the public, hotelkeepers are bound to provide not only lodging for hotel guests
and security to their persons and belongings. The twin duty constitutes the essence
of the business. The law in turn does not allow such duty to the public to be negated
or diluted by any contrary stipulation in so-called “undertakings” that ordinarily
appear in prepared forms imposed by hotel keepers on guests for their signature.In
an early case (De Los Santos v. Tan Khey), CA ruled that to hold hotelkeepers or
innkeepers liable for the effects of their guests, it is not necessary that they be
actually delivered to the innkeepers or their employees. It is enough that such
effects are within the hotel or inn. Withgreater reason should the liability of the
hotelkeeper be enforced when the missing items are taken without the guest’s
knowledge and consent from a safety deposit box provided by the hotel itself, as in
this case.Paragraphs (2) and (4) of the “undertaking” manifestly contravene Article
2003, CC for they allow Tropicana to be released from liability arising from any loss in
the contents and/or use of the safety deposit box for any cause whatsoever.
Evidently, the undertaking was intended to bar anyclaim against Tropicana for any
loss of the contents of the safety deposit box whether or not negligence was
incurred by Tropicana or its employees. The New Civil Code is explicit that the
responsibility of the hotel-keeper shall extend to loss of, or injury to, the personal
property of the guests even if caused by servants or employees of the keepers of
hotels or inns as well as by strangers, except as it may proceed from any force
majeure.

PHILIPPINE BLOOMING MILLS VS. CA

FACTS
Ching was the Senior Vice President of PBM. In his personal capacity and not as a
corporate officer, Ching signed a Deed of Suretyship dated 21 July 1977 binding
himself

On 24 March and 6 August 1980, TRB granted PBM letters of credit on application of
Ching in his capacity as Senior Vice President of PBM. Ching later accomplished and
delivered to TRB trust receipts, which acknowledged receipt in trust for TRB of the
merchandise subject to the... letters of credit.

Under the trust receipts, PBM had the right to sell the merchandise for cash with the
obligation to turn over the entire proceeds of the sale to TRB as payment of PBM's
indebtedness.

On 27 April 1981, PBM obtained a P3,500,000 trust loan from TRB. Ching signed as
co-maker in the notarized Promissory Note evidencing this trust loan.

On 1 April 1982, PBM and Ching filed a petition for suspension of payments with the
Securities and Exchange Commission ("SEC"), docketed as SEC Case No. 2250.

The petition sought to suspend payment of PBM's obligations and prayed that the
SEC allow PBM... to continue its normal business operations free from the
interference of its creditors. One of the listed creditors of PBM was TRB. [11]
On 9 July 1982, the SEC placed all of PBM's assets, liabilities, and obligations under
the rehabilitation receivership of Kalaw, Escaler and Associates.

On 13 May 1983, ten months after the SEC placed PBM under rehabilitation
receivership, TRB filed with the trial court a complaint for collection against PBM
and Ching.

On 25 May 1983, TRB moved to withdraw the complaint against PBM on the ground
that the SEC had already placed PBM under receivership.

ISSUES:
THE COURT OF APPEALS COMMITTED AN ERROR WHEN IT RULED THAT THE
PETITIONERS WERE LIABLE FOR THE TRUST RECEIPTS DESPITE THE FACT THAT
PRIVATE RESPONDENT HAD PREVENTED THEIR FULFILLMENT.

HE COURT OF APPEALS COMMITTED AN ERROR WHEN IT FOUND PETITIONER

ALFREDO CHING LIABLE FOR P15,773,708.78 WITH LEGAL INTEREST AT 12% PER
ANNUM UNTIL FULLY PAID DESPITE THE FACT THAT UNDER THE REHABILITATION
PLAN OF PETITIONER PBM

RULING:
The petition has no merit.

The case before us is an offshoot of the trial court's denial of Ching's motion to have
the case dismissed against him. The petition is a thinly veiled attempt to make this
Court reconsider its decision in the prior case of Traders Royal Bank v. Court of
Appeals.

[48] This Court has already resolved the issue of Ching's separate liability as a surety
despite the rehabilitation proceedings before the SEC.

Ching can be sued separately to enforce his liability as surety for PBM, as expressly
provided by Article 1216 of the New Civil Code.

It is elementary that a corporation has a personality distinct and separate from its
individual stockholders and members. Being an officer or stockholder of a
corporation does not make one's property the property also of the corporation, for
they are separate entities (Adelio

Cruz vs. Quiterio Dalisay, 152 SCRA 482).

Ching's act of joining as a co-petitioner with PBM in SEC Case No. 2250 did not vest
in the SEC jurisdiction over his person or property, for jurisdiction does not depend
on the consent or acts of the parties but upon express provision of law

Traders Royal Bank has fully resolved the issue regarding Ching's liability as a surety
of the credit accommodations TRB extended to PBM.

Whether Ching is liable for obligations PBM contracted after execution of the Deed
of Suretyship

Ching is liable for credit obligations contracted by PBM against TRB before and after
the execution of t... he 21 July 1977 Deed of Suretyship.

The law expressly allows a suretyship for "future debts". Article 2053 of the Civil Code
provides:

A guarantee may also be given as security for future debts, the amount of which is
not yet known; there can be no claim against the guarantor until the debt is
liquidated. A conditional obligation may also be secured.

Ching would like this Court to rule that his liability is limited, at most, to the amount
stated in PBM's rehabilitation plan.

In granting the loan to PBM, TRB required Ching's surety precisely to insure full
recovery of the loan in case PBM becomes insolvent or fails to pay in full. This was
the very purpose of the surety. Thus, Ching cannot use PBM's failure to pay in full as
justification for his own... reduced liability to TRB. As surety, Ching agreed to pay in
full PBM's loan in case PBM fails to pay in full for any reason, including its insolvency.

TRB, as creditor, has the right under the surety to proceed against Ching for the
entire amount of PBM's loan. This is clear from Article 1216 of the Civil Code:

ART. 1216. The creditor may proceed against any one of the solidary debtors or some
or all of them simultaneously. The demand made against one of them shall not be
an obstacle to those which may subsequently be directed against the others, so long
as the debt has not... been fully collected

Ching's attempts to have this Court review the factual issues of the case are
improper. It is not a function of the Supreme Court to assess and evaluate again the
evidence, testimonial and evidentiary, adduced by the parties particularly where the
findings of both the trial... court and the appellate court coincide on the matter.
Ching is still liable for the amounts stated in the letters of credit covered by the trust
receipts. Other than his bare allegations, Ching has not shown proof of payment or
settlement with TRB. Atty. Vicente Aranda, TRB's corporate secretary and First Vice

President of its Human Resource Management Department, testified that the

conditions in the TRB board resolution presented by Ching were not met or
implemented

The trial court found and the appellate court affirmed that the outstanding principal
amounts as of the filing of the complaint with the trial court on 13 May 1983

WHEREFORE, we AFFIRM the decision of the Court of Appeals with MODIFICATION

IFC vs. IMPERIAL TEXTILE MILLS, INC

FACTS
"On December 17, 1974, [Petitioner] International Finance Corporation (IFC) and
[Respondent] Philippine Polyamide Industrial Corporation (PPIC) entered into a loan
agreement wherein IFC extended to PPIC a loan of US$7,000,000.00, payable in
sixteen (16) semi-annual... installments of US$437,500.00 each, beginning June 1, 1977
to December 1, 1984, with interest at the rate of 10% per annum on the principal
amount of the loan advanced and outstanding from time to time.

On December 17, 1974, a 'Guarantee Agreement' was executed with x x x Imperial

Textile Mills, Inc. (ITM), Grand Textile Manufacturing Corporation (Grandtex) and IFC
as parties thereto. ITM and Grandtex agreed to guarantee PPIC's obligations under
the loan agreement.

PPIC paid the installments due on June 1, 1977, December 1, 1977 and June 1, 1978.
The payments due on December 1, 1978, June 1, 1979 and December 1, 1979 were
rescheduled as requested by PPIC. Despite the rescheduling of the installment
payments, however, PPIC... defaulted.

Hence, on April 1, 1985, IFC served a written notice of default to PPIC demanding the
latter to pay the outstanding principal loan and all its accrued interests. Despite
such notice, PPIC failed to pay the loan and its interes

On July 30, 1985, the deputy sheriff of Calamba, Laguna issued a notice of
extrajudicial sale.

IFC's bid was for P99,269,100.00 which was equivalent to US$5,250,000.00 (at the
prevailing... exchange rate of P18.9084 = US$1.00). The outstanding loan, however,
amounted to US$8,083,967.00 thus leaving a balance of US$2,833,967.00. PPIC failed
to pay the remaining balance.

Consequently, IFC demanded ITM and Grandtex, as guarantors of PPIC, to pay the
outstanding balance. However, despite the demand made by IFC, the outstanding
balance remained unpaid.

ISSUES
Whether or not ITM and Grandtex[11] are sureties and therefore, jointly and severally
liable with PPIC, for the payment of the loan.

RULING
IFC claims that, under the Guarantee Agreement, ITM bound itself as a surety to
PPIC's obligations proceeding from the Loan Agreement.[15] For its part, ITM asserts
that, by the terms of the Guarantee Agreement, it was merely a guarantor[16] and
not a surety. Moreover, any ambiguity in the Agreement should be construed
against IFC -- the party that drafted it.[17]

Section 2.01. The Guarantors jointly and severally, irrevocably, absolutely and
unconditionally guarantee, as primary obligors and not as sureties merely, the due
and punctual payment of the principal of, and... interest and commitment charge
on, the Loan, and the principal of, and interest on, the Notes, whether at stated
maturity or upon prematuring, all as set forth in the Loan Agreement and in the
Notes.

The Agreement uses "guarantee" and "guarantors," prompting ITM to base its
argument on those words.[20] This Court is not convinced that the use of the two
words limits the Contract to a mere guaranty. The specific stipulations in the
Contract... show otherwise.

The Court does not find any ambiguity in the provisions of the Guarantee
Agreement. When qualified by the term "jointly and severally," the use of the word
"guarantor" to refer to a "surety" does not violate the law.

As Article 2047... provides, a suretyship is created when a guarantor binds itself

solidarily with the principal obligor. Likewise, the phrase in the Agreement -- "as
primary obligor and not merely as surety" -- stresses that ITM is being placed on the
same level as PPIC. Those words... emphasize the nature of their liability, which the
law characterizes as a suretyship.

The use of the word "guarantee" does not ipso facto make the contract one of
guaranty.[24] This Court has recognized that the word is frequently employed in
business transactions to describe the intention to be bound by a primary or an...
independent obligation.[25] The very terms of a contract govern the obligations of
the parties or the extent of the obligor's liability. Thus, this Court has ruled in favor of
suretyship, even though contracts were denominated as a "Guarantor's

Undertaking" [26] or a "Continuing Guaranty."[27]

Principles:

While referring to ITM as a guarantor, the Agreement specifically stated that the
corporation was "jointly and severally" liable. To put emphasis on the nature of that
liability, the Contract further stated that ITM was a primary obligor, not a mere...
surety. Those stipulations meant only one thing: that at bottom, and to all legal
intents and purposes, it was a surety.

ONG VS. ROBAN LENDING CORP

FACTS
On different dates from July 14, 1999 to March 20, 2000, petitioner-spouses Wilfredo
N. Ong and Edna Sheila Paguio-Ong obtained several loans from Roban Lending
Corporation (respondent) in the total amount of P4,000,000.00. These loans were
secured by... a real estate mortgage on petitioners' parcels of land located in
Binauganan, Tarlac City

On February 12, 2001, petitioners and respondent executed an Amendment to

Amended Real Estate Mortgage[2] consolidating their loans inclusive of charges
thereon which totaled P5,916,117.50.

On even date, the parties executed a Dacion in Payment Agreement[3] wherein

petitioners assigned the properties covered by TCT No. 297840 to respondent in
settlement of their total obligation, and a Memorandum of Agreement

In April 2002 (the day is illegible), petitioners filed a Complaint,[6] docketed as Civil
Case No. 9322, before the Regional Trial Court (RTC) of Tarlac City, for declaration of
mortgage contract as abandoned, annulment of deeds, illegal exaction, unjust...
enrichment, accounting, and damages, alleging that the Memorandum of
Agreement and the Dacion in Payment executed are void for being pactum
commissorium.

ISSUES
Both parties admit the execution and contents of the Memorandum of Agreement
and Dacion in Payment. They differ, however, on whether both contracts constitute
pactum commissorium or dacion en pago.

RULING
This Court finds that the Memorandum of Agreement and Dacion in Payment
constitute pactum commissorium, which is prohibited under Article 2088 of the Civil
Code which provides:

The creditor cannot appropriate the things given by way of pledge or mortgage, or
dispose of them. Any stipulation to the contrary is null and void."

The elements of pactum commissorium, which enables the mortgagee to acquire

ownership of the mortgaged property without the need of any foreclosure
proceedings,[30] are: (1) there should be a property mortgaged by way of security for
the... payment of the principal obligation, and (2) there should be a stipulation for
automatic appropriation by the creditor of the thing mortgaged in case of non-
payment of the principal obligation within the stipulated period.

In the case at bar, the Memorandum of Agreement and the Dacion in Payment
contain no provisions for foreclosure proceedings nor redemption.

Under the Memorandum of Agreement, the failure by the petitioners to pay their
debt within the one-year period gives respondent the... right to enforce the Dacion
in Payment transferring to it ownership of the properties covered by TCT No. 297840.
Respondent, in effect, automatically acquires ownership of the properties upon
petitioners' failure to pay their debt within the stipulated period.

The Dacion in Payment did... not extinguish petitioners' obligation to respondent.

On the contrary, under the Memorandum of Agreement executed on the same day
as the Dacion in Payment, petitioners had to execute a promissory note for
P5,916,117.50 which they were to pay within one year.

That the questioned contracts were freely and voluntarily executed by petitioners
and respondent is of no moment, pactum commissorium being void for being
prohibited by law.

Principles:
That the questioned contracts were freely and voluntarily executed by petitioners
and respondent is of no moment, pactum commissorium being void for being
prohibited by law.

SUICO vs. PNB

FACTS
Herein petitioners, Spouses Esmeraldo and Elizabeth Suico, obtained a loan from the
Philippine National Bank (PNB) secured by a real estate mortgage[1] on real
properties in the name of the former.

The petitioners were unable to pay... their obligation prompting the PNB to
extrajudicially foreclose the mortgage over the subject properties before the City
Sheriff of Mandaue City under EJF Case No. 92-5-15.

The petitioners thereafter filed a Complaint against the PNB before the Regional
Trial Court (RTC) of Mandaue City, Branch 55, docketed as Civil Case No. MAN-2793
for Declaration of Nullity of Extrajudicial Foreclosure of Mortgage.[

Petitioners claimed that during the foreclosure sale of the subject properties held on
30 October 1992, PNB, as the lone bidder, offered a bid in the amount of
P8,511,000.00. By virtue of the said bid, a Certificate of Sale of the subject properties
was issued by the Mandaue

City Sheriff in favor of PNB. PNB did not pay to the Sheriff who conducted the
auction sale the amount of its bid which was P8,511,000.00 or give an accounting of
how said amount was applied against petitioners' outstanding loan, which, as of 10
March 1992, amounted only to

P1,991,770.38. Since the amount of the bid grossly exceeded the amount of
petitioners' outstanding obligation as stated in the extrajudicial foreclosure of
mortgage, it was the legal duty of the winning bidder, PNB, to deliver to the
Mandaue City Sheriff the bid price or what... was left thereof after deducting the
amount of petitioners' outstanding obligation. PNB failed to deliver the amount of
their bid to the Mandaue City Sheriff or, at the very least, the amount of such bid in
excess of petitioners' outstanding obligation.
Owing to the failure of PNB as the winning bidder to deliver to the petitioners the
amount of its bid or even just the amount in excess of petitioners' obligation, the
latter averred that the extrajudicial foreclosure conducted over the subject
properties by the Mandaue City

Sheriff, as well as the Certificate of Sale and the Certificate of Finality of Sale of the
subject properties issued by the Mandaue City Sheriff, in favor of PNB, were all null
and void.

ISSUES
(1) the alleged defect or misrepresentation in the notice of sheriff's sale; and/or (2)
failure of PNB to pay and tender the price of its bid or the surplus thereof to the
sheriff.

RULING
It is true that statutory provisions governing publication of notice of mortgage
foreclosure sales must be strictly 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 purpose of the
publication of the Notice of Sheriff's Sale is to inform all interested parties of the
date, time and place of the foreclosure sale of the real property subject thereof.
Logically, this not only... requires that the correct date, time and place of the
foreclosure sale appear in the notice, but also that any and all interested parties be
able to determine that what is about to be sold at the foreclosure sale is the real
property in which they have an... interest.

Notices are given for the purpose of securing bidders and to prevent a sacrifice of
the property. If these objects are attained, immaterial errors and mistakes will not
affect the sufficiency of the notice;

All these considered, we are of the view that the Notice of Sale in this case is valid.
Petitioners failed to convince this Court that the difference between the amount
stated in the Notice of Sale and the amount of PNB's bid resulted in discouraging or
misleading bidders,... depreciated the value of the property or prevented it from
commanding a fair price.

We now proceed to the effect of the non-delivery by PNB of the bid price or the
surplus to the petitioners.
Given that the Statement of Account from PNB, being the only existing
documentary evidence to support its claim, shows that petitioners' loan obligations
to PNB as of 30 October 1992 amounted to P6,409,814.92, and considering that the
amount of PNB's bid is P8,511,000.00, there... is clearly an excess in the bid price
which PNB must return, together with the interest computed in accordance with
the guidelines laid down by the court in Eastern Shipping Lines v. Court of Appeals

PRINCIPLES
It is true that statutory provisions governing publication of notice of mortgage
foreclosure sales must be strictly complied with, and that even slight deviations
therefrom will invalidate the notice and render the sale at least voidable.[19]
Nonetheless,... we must not also lose sight of the fact that the purpose of the
publication of the Notice of Sheriff's Sale is to inform all interested parties of the
date, time and place of the foreclosure sale of the real property subject thereof.
Logically, this not only... requires that the correct date, time and place of the
foreclosure sale appear in the notice, but also that any and all interested parties be
able to determine that what is about to be sold at the foreclosure sale is the real
property in which they have an... interest.

HUERTA ALBA RESORT INC. v CA

FACTS
Syndicated Management Group, Inc. (SMGI), as mortgagee-assignee, filed a
complaint before the RTC for foreclosure of 4 parcels of land mortgaged by Huerta
Alba Resort to Intercon Fund Resource (“Intercon”).
DECISION OF LOWER COURTS:
(a) RTC – granted the complaint
(b) CA – dismissed appeal due to late payment of docket fees (c) Supreme Court –
dismissed petition for certiorari.
SMGI then filed with the trial court of origin a motion for execution of decision. Thus,
a writ of execution was issued. Petitioner filed an urgent motion to quash and set
aside the writ of execution. The dispute is principally is as to when the 150 period
within which Huerta Alba may exercise its equity of redemption be counted.

DECISIONS
(a) RTC – denied to urgent motion to quash.
Meanwhile, the auction sale proceeded with SMGI as the sole bidder.
(b) CA – held that the 150 periods should be computed from the date petitioner was
notified of the Entry of Judgment but the same period has expired already.
Huerta Alba filed with the RTC a motion for clarification seeking clarification
whether or not the 12 month period of redemption for ordinary execution should
apply.

DECISIONS
(1) RTC: redemption should be governed by the rule on the sale of judicially
foreclosed property under Rule 68 of the Rules of Court
Huerta Alba again sought clarification with CA of the date of the commencement of
the 1 year period for the redemption of the properties
(2) CA: Foreclosure in this case is judicial and as such mortgagor has only the equity
and not the right or redemption. Even if under section 78 of RA 337 (General
Banking Act), a mortgagor of a bank, banking or credit institution, whether the
foreclosure was done judicially or extrajudicially, has a period of 1 year from the
auction sale within which to redeem the foreclosed property, it was never raised
whether SMGI is a bank or credit institution. Upon motion for a writ of possession by
SMGI, Huerta Alba then filed in opposition a motion to compel respondent to accept
redemption, alleging for the first time his right under RA 337, theorizing that the
original mortgagee being a credit institution, its assignment of mortgage credit did
not remove the coverage of RA 337

DECISIONS
(1) RTC: denied SMGI’s writ of possession.
(2) CA: set aside the RTC’s decision.
Hence, the present petition.

ISSUE
Whether or not Huerta Alba has the one year right of redemption of subject
properties under Section 78 of RA 337

RULING
YES, however, this was not seasonably filed.
The claim that it is entitled to the beneficial provisions of RA 337 – since SMGI’s
predecessor-in-interest is a credit institution – is in a nature of a compulsory
counterclaim which should have been averred in its answer to the complaint for
judicial foreclosure.
The failure of petitioner to seasonably assert its right under RA 337 precludes it from
so doing at this late stage case. Estoppel may be successfully invoked if the party
fails to raise the question in the early stages in proceeding.
The sale of the properties, as confirmed by the court, operated to divest Huerta Alba
of its right of redemption. There then existed only what is known as equity of
redemption, which is simply the right of the petitioner to extinguish the mortgage
and retain ownership of the property by paying the secured debt within the 90 day
period after the judgment became final. However, redemption can no longer be
effected since petitioner failed to exercise its equity of redemption within the
prescribed period.
“The equity of redemption is, to be sure, different from and should not be confused
with the right of redemption.

RIGHT OF REDEMPTION
General Rule:
The right of redemption in relation to a mortgage – understood in the sense of a
prerogative to re-acquire mortgaged property after registration of the foreclosure
sale – exists only in the case of the extrajudicial foreclosure of the mortgage.
Exception:
No such right is recognized in a judicial foreclosure except only where the
mortgagee is the Philippine National Bank or a bank or banking institution.
I. Extrajudicial foreclosure –right of redemption
Where a mortgage is foreclosed extrajudicially, Act 3135 grants to the mortgagor the
right of redemption within one (1) year from the registration of the sheriff’s
certificate of foreclosure sale.
II. Judicial foreclosure
Where the foreclosure is judicially effected, however, no equivalent right of
redemption exists. The law declares that a judicial foreclosure sale, ‘when confirmed
by an order of the court, x x shall operate to divest the rights of all the parties to the
action and to vest their rights in the purchaser, subject to such rights of redemption
a may be allowed by law.’
Such rights exceptionally “allowed by law’ (i.e. even after confirmation by an order of
the court) are those granted by the charter of the Philippine National Bank (Acts No.
2747 and 2938), and the General Banking Act (R.A. 337). These laws confer on the
mortgagor, his successors in interest or any judgment creditor of the mortgagor, the
right to redeem the property sold on foreclosure – after confirmation by the court of
the foreclosure sale – which may be exercised within a period of one (1) year, counted
from the date of registration of the certificate of sale in the Registry Property.
But, to repeat, no such right of redemption exists in case of judicial foreclosure of a
mortgage if the mortgagee is not the PNB or a bank or banking institution. In such a
case, the foreclosure sale, ‘when confirmed by an order of the court. x x shall operate
to divest the rights of all the parties to the action and to vest their rights in the
purchaser.’

EQUITY OF REDEMPTION
There then exists only what is known as the equity of redemption. This is simply the
right of the defendant mortgagor to extinguish the mortgage and retain ownership
of the property by paying the secured debt:
1. within the 90-day period after the judgment becomes final, in accordance with
Rule 68, or
2. even after judgment becomes final, in accordance with Rule 68, or
3. even after the foreclosure sale but prior to its confirmation.
Section 2, Rule 68 provides that – ‘xx If upon the trial xx the court shall find the facts
set forth in the complaint to be true, it shall ascertain the amount due to the plaintiff
upon the mortgage debt or obligation, including interest and costs, and shall render
judgment for the sum so found due and order the same to be paid into court within
a period of not less than ninety (90) days from the date of the service of such order,
and that in default of such payment the property be sold to realize the mortgage
debt and costs.’ This is the mortgagor’s equity (not right) of redemption which, as
above stated, may be exercised by him even beyond the 90-day period ‘from the
date of service of the order,’ and even after the foreclosure sale itself, provided it be
before the order of confirmation of the sale. After such order of confirmation, no
redemption can be effected any longer.”
LECA REALTY CORPORATION VS. MANUELA CORPORATION

FACTS
1. Manuela Corporation (Manuela) is a duly registered domestic corporation,
principally engaged in the business of leasing commercial spaces in shopping malls
to retailers. At the time, respondent owned and operated M Star One, M Star,
Starmall, Metropolis Star, and Pacific Mall.
2. Manuela obtained several loans from two syndicates of lenders to finance the
costs of two of its buildings. Aside from its Php2.174 billion loan from banks, the
company also had Php1.476 billion indebtedness to Hero Holdings, Inc. and its trade
suppliers, and other parties.
3. The region was then beset by the 1997 Asian financial crisis which prompted banks
to stop their lending activities. This severely affected Manuela whose malls did not
operate sufficiently,
causing serious losses to the company. The adjusted interest rates on Manuela’s
loans were around 18% to 30%, which contributed to its liquidity problems.
4. The company, however, exerted all efforts to cushion the financial blow by “closing
down non-income generating businesses, concentrating on its business of leasing
commercial spaces, intensifying collection efforts, reducing personnel,
negotiating for restructuring of loan with creditors, and working out a viable
payment scheme without giving undue preference to any creditor.” In spite of all
these initiatives, Manuela still failed to pay its financial obligations.
5. This forced the company to ask the court to issue a Stay Order and approve its
proposed Rehabilitation Plan, which if successfully implemented will “enable it to
settle its remaining obligations in an orderly manner, restore its financial viability,
and allow it to resume its normal operations.” The trial court subsequently issued the
Stay Order, which stated:’
a) a stay in the enforcement of all claims, whether for money or otherwise and
whether such enforcement is by court action or otherwise, against petitioner
MANUELA, its guar-antors and sureties not solidarily liable with it; …
e) directing the payment in full of all administrative expenses incurred after the
issuance of this Stay Order.
6. The trial court appointed Marilou Adea as rehabilitation receiver. Adea
recommended the approval of Manuela’s Rehabilitation Plan and convened with
Manuela’s creditors for the latter to air their concerns.
7. Leca Realty Corporation (Leca) filed its Comment and/or Formal Claim
against Manuela amounting to Php193.7 million, comprised of unpaid rentals,
security deposits, interests, and penalty charges. After Leca’s receipt of Adea’s Report
and Recommendation, petitioner questioned the reduction of Manuela’s liability,
“considering its contractual nature which cannot beimpaired during the process of
rehabilitation.” The trial court eventually approved the Rehabilitation Plan. Leca’s
appeal to the Court of Appeals was dismissed for lack of merit.
8. The disagreement is grounded on the fact that the rental rates agreed upon by
Leca and Manuela were reduced in the Rehabilitation Plan. There was a gross
discrepancy between the amounts of rent agreed upon by the parties and those
provided in the Rehabilitation Plan.
9. Leca filed another petition before the appellate court alleging violation of its
constitutional right to non-impairment contract and the Interim Rules of Procedure
on Corporate Rehabilitation. The Court of Appeals, in denying the petition, ruled:
The pendency of the rehabilitation proceedings cannot be interpreted to impair the
contractual obligations previously entered into by the contracting parties because
the automatic stay of all actions is sanctioned by P.D. [No.] 902-A which provides that
“all actions for claims against corporations, partnerships or associations under
management or receivership pending before any court, tribunal, board or body shall
be suspended accordingly.”
10. Thus, Leca filed a petition for review on certiorari before the Supreme Court.

ISSUE
Whether the pendency of the rehabilitation proceedings can justify impairment of
contractual obligations previously entered into by the parties?

HELD
No, the pendency of the rehabilitation plan can no justify the impairment of
contractual obligations. The amount provided in the rehabilitation plan is null and
void.

RATIO
Petitioner, in support of its contention, cites in its Memorandum the treatises of
Ateneo Law Dean Cesar L. Villanueva and former SEC Commissioner Danilo L.
Concepcion, both known authorities on Corporation Law. In his Article which
appeared in the Ateneo Law Journal, Dean Villanueva
said:
The nature and extent of the power of the SEC to approve and
enforce a rehabilitation plan is certainly an important issue. Often, a re-
habilitation plan would require a diminution, if not destruction, of contrac-
tual and property rights of some, if not most of the various stakeholders in
the petitioning corporation. In the absence of clear coercive legal provi-
sions, the courts of justice and much less the SEC would have no power
to amend or destroy the property and contractual rights of private parties,
much less relieve a petitioning corporation from its contractual commit-
ments. On the other hand, Professor Concepcion stated that what is allowed in
rehabilitation proceedings is only the suspension of payments, or the stay of all
actions for claims of distressed corporations, and upon its successful rehabilitation,
the claims must be settled in full.
The Supreme Court, in agreeing with Leca, cited its ruling in The Insular
LifeAssurance Company, Ltd. v. Court of Appeals, which provides:
When the language of the contract is explicit leaving no doubt as to the intention of
the drafters thereof, the courts may not read into it any other intention that would
contradict its plain import. The Court would be rewriting the contract of lease
between Insular and Sun Brothers under the guise of construction were we to
interpret the ‘option to renew’ clause as Sun Brothers propounds it, despite the
express provision in the original contract of lease and the contracting parties’
subsequent acts. As the Court has held in Riviera Filipina, Inc. vs. Court of Appeals, ‘a
court, even the Supreme Court, has no right to make new contracts for the parties or
ignore those already made by them, simply to avoid seeming hardships. Neither
abstract justice nor the rule of liberal construction justifies the creation
of a contract for the parties which they did not make themselves or the imposition
upon one party to a contract of an obligation not assumed.
The Court voided the Rehabilitation Plan insofar as it amends the rental rates agreed
upon by the parties. It opined that the change is not justified as the amount of rent
is an “essential condition of any lease contract;” thus, any alteration on the rate is
tantamount to impairment of stipulation of the parties.

METROPOLITAN BANK & TRUST COMPANY

VS.
ASB HOLDINGS, INC.

FACTS
Metropolitan Bank and Trust company is a creditor bank of respondents corporation
collectively known as the ASB Group of Companies. ASB group of companies is
owner and developer of condominium and real estate projects which contracted
loans to the petitioner which were secured by real estate mortgages.

Later, ASB group of companies filed with the Securities and Exchange Commission a
petition for rehabilitation with prayer for suspension of actions and proceedings
against petitioners. However, despite the objection of Metropolitan bank and trust
company for the rehabilitation plan, SEC granted the same.

Meanwhile, the contention of the petitioner in their objection was that, the approval
on the rehabilitation plan will impair the contract entered into by the ASB group of
companies with the petitioner.

ISSUE
Whether or not the approval of rehabilitation plan impairs contract entered into and
prejudiced creditors.

HELD
The Supreme Court were not convinced that the approval of the rehabilitation plan
impair petitioner bank's lien over the mortgaged properties. Section 6 (c) of P.D. no.
902-A provides that "upon appointment of a management committee, rehabilitation
receiver, board or body, pursuant to this Decree, all actions for claims against
corporations, partnership or associations under management or receivership
pending before any curt, tribunal, board or body shall be suspended." By that
statutory provision, it is clear that the approval of the rehabilitation plan and the
appointment of a rehabilitation reciever merely suspend the action for claims
against respondent corporations. Petitioners banks preferred status over the
unsecured creditors relative to the mortgage liens is retained, but the enforcement
of such preference is suspended. the loan agreement between the parties have not
been set aside and petitioner bank may still enforce its preference when the assets
of ASB Group of companies will be liquidated. considering that the provisions of the
loan agreements and merely suspends, there is no impairment of contracts,
specifically its lien on the mortgaged properties.

The court also emphasized that the purpose of rehabilitating proceedings is to

enable the company to gain new lease on life thereby allows creditors to be paid
their claims from its earnings. rehabilitation contemplates a continuance of
corporate life and activities in an effort to restore ad reinstate the financially
distressed corporation to its former position of successful operation and solvency.
this is in consonance with the state's equitable distribution of wealth to protect
investments and the public. The approval of the rehabilitation plan by the SEC
hearing panel, affirmed by both the SEC en banc and the court of appeals, is
precisely in furtherance if the rationale behind P.D. No. 902-A, as amended which is
"to effect a feasible and viable rehabilitation" of ailing corporations which affect the
public welfare.

METROPOLITAN BANK & TRUST Co.

VS.
ASB HOLDINGS, INC.

FACTS
Metrobank is a creditor bank of respondent corporations, collectively known as the
ASB Group of Companies, owner and developer of condominium and real estate
projects. The loans were secured by real estate mortgages.

ASB Group of Companies filed with the SEC a Petition For Rehabilitation With Prayer
For Suspension Of Actions And Proceedings Against Petitioners, pursuant to
Presidential Decree (P.D.) No. 902-A, as amended. ASB Group of Companies
submitted to the SEC for its approval a Rehabilitation Plan, to which Metrobank
objected, specifically as to the arrangement concerning the mode of payment by
respondents ASB Realty Corporation and ASB Development Corporation of their
loan obligations. Under the plan, ASB will dacion the bank's equity in St. Francis
Square and apply the excess dacion value on its BSA Twin Tower loan. Further,
Makati Hope, Buendia cor. Malugay, 21 Annapolis (which is expected to be released
by PNB) and # 28 & 23 Eisenhower St., will be dacioned to Metrobank, the excess of
which will also be applied to Metrobank's exposure on BSA Twin Towers. In return,
State Condominium will be freed up and placed in the ASB creditors' asset pool.
Further, Metrobank shall also undertake the completion of BSA Twin Towers. The
SEC Hearing Panel, finding petitioner bank’s objections unreasonable, approved the
Rehabilitation Plan. Metrobank then filed with the SEC En Banc a Petition for
Certiorari, alleging that the SEC Hearing Panel, in approving the Rehabilitation Plan,
committed grave abuse of discretion amounting to lack or excess of jurisdiction; and
praying for the issuance of a temporary restraining order and/or a writ of preliminary
injunction to enjoin its implementation. Subsequently, the ASB Group of Companies
filed their Opposition to the petition, to which petitioner bank filed its Reply. SEC En
Banc denied petitioner bank’s Petition for Certiorari and affirmed the SEC Hearing
Panel’s approval of the plan.
ISSUE
Whether or not the decision of the SEC En Banc absent any showing of arbitrariness
can still be disturbed by a judicial review.

HELD
No. The SEC En Banc found that the SEC Hearing Panel "acted within its legal
authority in resolving this case. Neither it overstepped its lawful authority nor acted
whimsically in approving the Rehabilitation Plan. Hence, it cannot be faulted of
grave abuse of discretion. The Court said that it found no reason to disturb such
finding, it being a fundamental rule that factual findings of quasijudicial agencies,
like the SEC, which have acquired expertise as their jurisdiction is confined to special
matters such as the subject of this case, are generally accorded great respect and
even finality, absent any showing that they arbitrarily disregarded evidence or
misapprehended evidence to such an extent as to compel a contrary conclusion if
such evidence had been properly appreciated.

MWSS VS. DAWAY

The prohibition under Sec 6 (b) of Rule 4 of the Interim Rules does not apply to the
the standby letter of credit issued by the bank as the former prohibition is on the
enforcement of claims against guarantors or sureties of the debtors whose
obligations are not solidary with the debtor.

The concept of guarantee vis-à-vis the concept of an irrevocable letter of credit are
inconsistent with each other. The guarantee theory destroys the independence of
the bank’s responsibility from the contract upon which it was opened and the
nature of both contracts is mutually in conflict with each other. A Standby Letter of
Credit is not a guaranty because under a Standby Letter of Credit, the bank
undertakes a primary obligation. On the other hand, a guarantor undertakes a
collateral obligation which arises only upon the debtor’s default. A Standby Letter of
Credit is a primary obligation and not an accessory contract.

FACTS
Maynilad obtained a 20-year concession to manage, repair, refurbish, and upgrade
existing Metropolitan Waterworks and Sewerage System (MWSS) water delivery and
sewerage services in Metro Manila’s west zone. Maynilad, under the concession
agreement undertook to pay concession fees and itsforeign loans. To secure its
obligations, Maynilad was required under Section 9 of the concession contract to put
up a bond, bank guarantee or other security acceptable to MWSS. Pursuant to this
requirement, Maynilad arranged on for a three-year facility with a number of foreign
banks led by Citicorp Intl for the issuance of an irrevocable standby letter of credit
(SLC) in the amount of $ 120 million in favor of MWSS for the full and prompt
payment of Maynilad’s obligations to MWSS. Due to devaluation of the peso and
other business reversals of Maynilad, MWSS filed a notice of early termination of the
concession contract. Upon certification of the non performance of Maynilad
obligation, the MWSS moved to collect from Citicorp on the standby letters of credit
issued. Maynilad filed for corporate rehabilitation. Judge Daway stayed the
payment of the letter of credit by Citicorp pursuant to Sec 6 (b) of Rule 4 of the
Interim Rules on Corporate Rehabilitation.

ISSUE
Whether or not the payment of the standby of letter of credit can be stayed by filing
of a petition for rehabilitation

HELD
No. The prohibition under Sec 6 (b) of Rule 4 of the Interim Rules does not apply to
the the standby letter of credit issued by the bank as the former prohibition is on the
enforcement of claims against guarantors or sureties of the debtors whose
obligations are not solidary with the debtor.

The participating bank’s obligation under the letter of credit are solidary with
respondent Maynilad in that it is a primary, direct, definite and an absolute
undertaking to pay and is not conditioned on the prior exhaustion of the debtors
assets. These are the same characteristics of a surety or solidary obligor. And being
solidary, the claims against them can be pursued separately from and
independently of the rehabilitation case.

Issuing banks under the letters of credit are not equivalent to guarantors. The
concept of guarantee vis-à-vis the concept of an irrevocable letter of credit are
inconsistent with each other. The guarantee theory destroys the independence of
the bank’s responsibility from the contract upon which it was opened and the
nature of both contracts is mutually in conflict with each other. In contracts of
guarantee, the guarantor’s obligation is merely collateral and it arises only upon the
default of the person primarily liable. On the other hand, in an irrevocable letter of
credit, the bank undertakes a primary obligation. We have also defined a letter of
credit as an engagement by a bank or other person made at the request of a
customer that the issuer shall honor drafts or other demands of payment upon
compliance with the conditions specified in the credit.
A Standby Letter of Credit is not a guaranty because under a Standby Letter of
Credit, the bank undertakes a primary obligation. On the other hand, a guarantor
undertakes a collateral obligation which arises only upon the debtor’s default. A
Standby Letter of Credit is a primary obligation and not an accessory contract.

UNITED COCONUT PLANTERS BANK

VS.
SPS. SAMUEL AND ODETTE BELUSO

FACTS
On 16 April 1996, UCPB granted the spouses Beluso a Promissory Notes Line under a
Credit Agreement whereby the latter could avail from the former credit of up to a
maximum amount of P1.2 Million pesos for a term ending on 30 April 1997.

On 2 September 1998, UCPB demanded that the spouses Beluso pay their total
obligation of P2,932,543.00 plus 25% attorney's fees, but the spouses Beluso failed to
comply therewith. On 28 December 1998, UCPB foreclosed the properties
mortgaged by the spouses Beluso to secure their... credit line, which, by that time,
already ballooned to P3,784,603.00.

On 9 February 1999, the spouses Beluso filed a Petition for Annulment, Accounting
and Damages against UCPB with the RTC of Makati City.

On 23 March 2000, the RTC ruled in favor of the spouses Beluso

On 8 May 2000, the RTC denied UCPB's Motion for Reconsideration

On 9 September 2003, the Court of Appeals denied UCPB's Motion for

Reconsideration for lack of merit.

ISSUES
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS
AND REVERSIBLE ERROR WHEN IT AFFIRMED THE DECISION OF THE TRIAL COURT

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS

AND REVERSIBLE ERROR WHEN IT AFFIRMED THE COMPUTATION BY THE TRIAL
COURT OF RESPONDENTS' INDEBTEDNESS

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS

AND REVERSIBLE ERROR WHEN IT AFFIRMED THE DECISION OF THE TRIAL COURT
WHICH ANNULLED THE FORECLOSURE BY PETITIONER OF THE SUBJECT
PROPERTIES DUE

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS

AND REVERSIBLE ERROR WHEN IT AFFIRMED THE DECISION OF THE TRIAL COURT
WHICH FOUND PETITIONER LIABLE FOR VIOLATION OF THE TRUTH IN LENDING
ACT

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS

AND REVERSIBLE ERROR WHEN IT FAILED TO ORDER THE DISMISSAL OF THE
CASE

RULING
The Court of Appeals held that the imposition of interest in the following provision
found in the promissory notes of the spouses Beluso is void, as the interest rates and
the bases therefor were determined solely by petitioner

We agree with the Court of Appeals, and find no merit in the contentions of UCPB.

The provision stating that the interest shall be at the "rate indicative of DBD retail
rate or as determined by the Branch Head" is indeed dependent solely on the will of
petitioner UCPB.

It should be pointed out that the authority to review the interest rate was given
UCPB alone as the lender. Moreover, UCPB may apply the considerations
enumerated in this provision as it wishes.

In view of the foregoing, the Separability Clause cannot save either of the two
options of UCPB as to the interest to be imposed, as both options violate the
principle of mutuality of contracts.

We agree with UCPB on this score. Default commences upon judicial or extrajudicial
demand.[

We agree with UCPB and affirm the validity of the foreclosure proceedings.

As argued by UCPB, none of the grounds for the annulment of a foreclosure sale are
present in this case.

We agree with the Court of Appeals. The allegations in the complaint, much more
than the title thereof, are controlling. Other than that stated by the Court of Appeals,
we find that the allegation of violation of the Truth in Lending Act can also be
inferred from the same... allegation in the complaint

In the case at bar, Civil Case... before the RTC of Roxas City was an action for
injunction against a foreclosure sale that has already been held, while Civil Case No.
99-314 before the RTC of Makati City includes an action for the annulment of said
foreclosure, an... action certainly more proper in view of the execution of the
foreclosure sale.

WHEREFORE, the Decision of the Court of Appeals is hereby AFFIRMED

SPS. DAVID B. CARPO AND RECHILDA S. CARPO

VS.
ELEANOR CHUA

FACTS
On 18 July 1995, they borrowed from Eleanor Chua and Elma Dy Ng (respondents)
the amount of One Hundred Seventy-Five Thousand Pesos (P175,000.00), payable
within six (6) months with an interest rate of six percent

(6%) per month.

On 23 July 1999, petitioners filed a complaint for annulment of real estate mortgage
and the consequent foreclosure proceedings, docketed as Civil Case No. 99-4376 of
the RTC. Petitioners consigned the amount of Two Hundred Fifty-Seven Thousand
One Hundred Ninety-Seven

Pesos and Twenty-Six Centavos (P257,197.26) with the RTC.

During the pendency of the case before the Court of Appeals, RTC Judge Filemon B.
Montenegro dismissed the complaint in Civil Case No. 99-4376 on the ground that it
was filed out of time and barred by laches.

ISSUES
that the agreed rate of interest of 6% per month or 72% per annum is so excessive,
iniquitous, unconscionable and exorbitant that it should have been declared null
and void.

RULING
In Medel, the Court found that the interest stipulated at 5.5% per month or 66% per
annum was so iniquitous or unconscionable as to render the stipulation void.

There is no need to unsettle the principle affirmed in Medel and like cases.

In the case at bar, the stipulated interest rate is 6% per month, or 72% per annum. By
the standards set in the above-cited cases, this stipulation is similarly invalid.

We do not agree with such reasoning. Article 1411 of the New Civil Code is not new; it
is the same as Article 1305 of the Old Civil Code. Therefore, said provision is no
warrant for departing from previous interpretation that, as provided in the Usury
Law (Act No. 2655, as... amended), a loan with usurious interest is not totally void only
as to the interest.

Clearly then, with the absence of undue influence, petitioners have no cause of
action. Even assuming undue influence vitiated their consent to the loan contract,
their action would already be barred by prescription when they filed it. Moreover,
petitioners had clearly slept on... their rights as they failed to timely assail the validity
of the mortgage agreement. The denial of the petition in G.R. No. 150773 is
warranted.

he issue on the validity of the stipulated interest rates, regrettably for petitioners,
was not raised at the earliest possible opportunity.

WHEREFORE, in view of all the foregoing, the petitions are DENIED.