SIMPLE LOAN

SIMPLE LOAN: INTEREST

Frias vs San Diego-Sison

This means that no interest will be charged for the first six-month period while appellee was making up her mind
whether to buy the property, but only for the second period of six months after appellee had decided not to buy the
property. MOA Executed by the party is the law between them and shall be complied with.

Siga-an vs Villanueva
Payment of interest is only allowed if it is in writing, lawful and expressly stipulated. In this case there was no
stipulation, therefore resulted to overpayment in which solution indebiti will arise. Requisite of solution indebiti
includes a. No duty to pay b. Pay through mistake and not through liberality. If paid through liberality it will under
the natural obligation. The amount to be refund can be charge with interest due to the USE OF MONEY.

Art. 1960. If the borrower pays interest when there has been no stipulation therefor, the provisions of this Code
concerning solutio indebiti, or natural obligations, shall be applied, as the case may be.”

JUICO VS CBC
Escalation clause which grants the the creditor an unbridled right to adjust the interest independently and
upwardly, completely depriving the debtor the right to assent to the modification is absolutely void. Any modification
of rate must be agreed upon.

GUARANTY AND SURETYSHIP

Tupaz IV & Tupaz VS CA

Jose Tupaz signed in personal capacity a trust receipt in 1st LOC
Spouses signed the 2nd LOC as officer of the company
They did not paid their obligation and the bank filed ESTAFA. And court ruled that they are solidarily liable. They
argued that they signed only as officer, however since they sign surety agreement they were nevertheless liable.

HELD: OFFICIAL CAPACITY: If a person sign in official capacity they did not bind themselves personally liable in
case the company failed to pay. They are just acting in behalf of the company.

If they sign in PERSONAL CAPACITY: They make themselves solidarily liable with the company. In the instant case
Jose Tupaz signed under Solidarily Guaranty Clause which can be interpreted as GUARANTOR, however since he
waive his right of excussion, he will be liable personally.

A corporation, being a juridical entity, may act only through its directors, officers, and employees. Debts incurred
by these individuals, acting as such corporate agents, are not theirs but the direct liability of the corporation they
represent. As an exception, directors or officers are personally liable for the corporation’s debts only if they so
contractually agree or stipulate In the trust receipt dated 9 October 1981, petitioners signed as officers of El Oro
Corporation. By so signing that trust receipt, petitioners did not bind themselves personally liable for El Oro
Corporation’s obligation. Hence, for the trust receipt dated 9 October 1981, petitioners are not personally liable for El
Oro Corporation’s obligation. For the trust receipt dated 30 September 1981, petitioner Jose Tupaz signed alone in his
personal capacity, he did not indicate that he was signing as El Oro Corporation’s Vice-President for Operations.
Hence, petitioner Jose Tupaz bound himself personally liable for El Oro Corporation’s debts. Not being a party to the
trust receipt dated 30 September 1981, petitioner Petronila Tupaz is not liable under such trust receipt.
SBTC vs Cuenca

ANTICHRESIS
Diego VS. Fernando
Fernando Mortgage the property to Diego for 2k Loan and deliver the said property. Failed to pay and forclose.
Fernando said it is Antichresis and not mortgage and Diego already receive 120cavan of palay.
YES. It is an antichretic transaction, based on the foregoing there is a transfer of property in the possession of the
mortgagee. The respective rights and obligations of the parties to a contract of antichresis, under the Civil Code,
appear to be similar and in many respects identical with those recognized in the equity jurisprudence of England and
America as incident to the position of a mortgagee in possession, in reference to which the following propositions
may be taken to be established, namely, that if the mortgagee acquires possession in any lawful manner, he is entitled
to retain such possession until the indebtedness is satisfied and the property redeemed; that the non-payment of the
debt within the term agreed does not vest the ownership of the property in the creditor; that the general duty of the
mortgagee in possession towards the premises is that of the ordinary prudent owner; that the mortgagee must account
for the rents and profits of the land, or its value for purposes of use and occupation, any amount thus realized going
towards the discharge on the mortgage debt; that if the mortgage remains in possession after the mortgage debt has
been satisfied, he becomes a trustee for the mortgagor as to the excess of the rents and profits over such debt; and
lastly, that the mortgagor can only enforce his rights to the land by an equitable action for an account and to redeem.

CONCURRENCE AND PREFERENCE OF CREDITS

1. Special Preferred Credits:

De Barreto et. al vs Villanueva et. al

Cruzado sold all right to house and lot to Villanueva for 19k. Villanueva paid 1500 and PN for the balance.
Previous to sale, the land was mortgage to RFC and the title remain under his name. Cruzado only transfer his rights
to Villanuve, Therefore Cruzado is not the tru vendor. Therefore his vendors lien lied.
Villanueva able to obtain the title and mortgage to Barreto to loan 30K. He defaulted therefore Barreto
foreclosed. Cruzado filed vendors lien now over the property invoking 2242, 2243 and 2249 of CC. The court rendered
decision after foreclosure it shall be paid PRO RATA. Bareto insist that it will only be applicable if prove INSOLVENT.
HELD: Before pro rata shall be applied under Article 2249, preferred creditors under No 2-14 shall first be
satisfied. Within the purview of legal provision it shall be considered as pledge or mortgage under Art 2243. Civil
Code and Insolvency law are now harmonized by this Article. Therefore apportionment between the two claimant
is incorrect. There being no insolvency or liquidation, the claim of the Villanueva, as unpaid vendor, did not
acquire the character and rank of a statutory lien co-equal to the mortgagee's recorded encumbrance, and must
remain subordinate to the latter. No argument is needed to stress that if a person dealing with registered land were
to be held to take it in every instance subject to all the fourteen preferred claims enumerate in Article 2242 of the
new Civil Code, even if the existence and import thereof can not be ascertained from the records, all confidence in
Torrens titles would be destroyed, and credit transactions on the faith of such titles would be hampered, if not
prevented, with incalculable results. Loans on real estate security would become aleatory and risky transactions,
for no prospective lender could accurately estimate the hidden liens on the property offered as security, unless he
indulged in complicated, tedious investigations. The logical result might well be contraction of credit to
unforeseable proportions that could lead to economic disaster. Therefore Barreto shall be considered as preferred
creditor.

JL Bernardo Construction vs CA
Construction of Public Market in Nueva Ecija. They are not reimbursed for the demolition of old market
by Salongga. RTC ruled in favour or JLB and With regards to the contractor's lien, the trial court held that since
plaintiffs have not been reimbursed for the cash equity and for the demolition, clearing and site filling expenses,
they stand in the position of an unpaid contractor and as such are entitled, pursuant to articles 2242 and 2243 of the
Civil Code, to a lien in the amount of P2,653,576.84 (as of August 1, 1991), excluding the other claimed damages,
attorney's fees and litigation expenses, upon the public market which they constructed. Reversed by CA.
HELD: Wether Art 2242 shall apply to Contractors Lien??
Art.'s 2241 and 2242 of the Civil Code enumerates certain credits which enjoy preference with respect to specific
personal or real property of the debtor. Specifically, the contractor's lien claimed by petitioners is granted under
the third paragraph of Article 2242 which provides that the claims of contractors engaged in the construction,
reconstruction or repair of buildings or other works shall be preferred with respect to the specific building or other
immovable property constructed.

IMPORTANT: However, Article 2242 only finds application when there is a concurrence of credits, i.e. when the
same specific property of the debtor is subjected to the claims of several creditors and the value of such property of
the debtor is insufficient to pay in full all the creditors. In such a situation, the question of preference will arise,
that is, there will be a need to determine which of the creditors will be paid ahead of the others.14 Fundamental
tenets of due process will dictate that this statutory lien should then only be enforced in the context of some kind
of a proceeding where the claims of all the preferred creditors may be bindingly adjudicated, such as insolvency
proceedings
This is made explicit by Article 2243 which states that the claims and liens enumerated in articles 2241 and 2242
shall be considered as mortgages or pledges of real or personal property, or liens within the purview of legal
provisions governing insolvency. The action filed by petitioners in the trial court does not partake of the nature of
an insolvency proceeding. It is basically for specific performance and damages.17 Thus, even if it is finally
adjudicated that petitioners herein actually stand in the position of unpaid contractors and are entitled to invoke
the contractor's lien granted under Article 2242, such lien cannot be enforced in the present action for there is no
way of determining whether or not there exist other preferred creditors with claims over the San Antonio Public
Market. The records do not contain any allegation that petitioners are the only creditors with respect to such
property. The fact that no third party claims have been filed in the trial court will not bar other creditors from
subsequently bringing actions and claiming that they also have preferred liens against the property involved.

COMMON CREDITS

Cordova vs Reyes Daway

Cordova purchased Security stocks to Philfinance, but the latter was subject to Rehabilitation where Reyes
Daway as liquidator. Sometime in 1991, without the knowledge and consent of petitioner and without authority from
the SEC, private respondents withdrew the CSPI shares from the custodian banks. On May 27, 1996, they sold the
shares to Northeast Corporation and included the proceeds thereof in the funds of Philfinance. So he filed a complaint.
SeC dismissed the complaint, and since it was sold his claim shall become ORDINARY CREDITOR.
ISSUE: WON he should be considered preferred? WON he is entitled to 15% Common Credit?
HELD: We agree with both the SEC and the CA that petitioner had become an ordinary creditor of Philfinance.
Petitioner’s CSPI shares were specific or determinate movable properties. But after they were sold, the money
raised from the sale became generic and were commingled with the cash and other assets of Philfinance. Unlike
shares of stock, money is a generic thing. It is designated merely by its class or genus without any particular
designation or physical segregation from all others of the same class. This means that once a certain amount is
added to the cash balance, one can no longer pinpoint the specific amount included which then becomes part of a
whole mass of money. Neither was he entitled to legal interest of 6% per annum under Article 2209 of the Civil
Code33 since this provision applies only when there is a delay in the payment of a sum of money.34 This was not
the case here. In fact, petitioner himself manifested before the CA that the SEC (as liquidator) had already paid
him ₱5,062,500 representing 15% of ₱33,750,000.35

REHABILITATION

Viva Shipping vs Keppel

Vessels that they are going to sell. WON Rehab can be approve? NO
HELD: The first rule breached by petitioner is the failure to implead all the indispensable parties. Petitioner did
not even interpose reasons why it should be excused from compliance with the rule to “state the full names of the
parties to the case, without impleading the court . . . as . . . respondents.” Petitioner did exactly the opposite. It
failed to state the full names of its creditors as respondents. Instead, it impleaded the Presiding Judge of the
originating court.

Professor Stephanie V. Gomez of the University of the Philippines College of Law suggests specific characteristics
of an economically feasible rehabilitation plan:

a. The debtor has assets that can generate more cash if used in its daily operations than if sold.

b. Liquidity issues can be addressed by a practicable business plan that will generate enough cash to sustain daily
operations.

c. The debtor has a definite source of financing for the proper and full implementation of a Rehabilitation Plan that
is anchored on realistic assumptions and goals.

These requirements put emphasis on liquidity: the cash flow that the distressed corporation will obtain from
rehabilitating its assets and operations. A corporation’s assets may be more than its current liabilities, but some
assets may be in the form of land or capital equipment, such as machinery or vessels. Rehabilitation sees to it that
these assets generate more value if used efficiently rather than if liquidated.

On the other hand, this court enumerated the characteristics of a rehabilitation plan that is infeasible:

(a) the absence of a sound and workable business plan;

(b) baseless and unexplained assumptions, targets and goals;

(c) speculative capital infusion or complete lack thereof for the execution of the business plan;

(d) cash flow cannot sustain daily operations; and

(e) negative net worth and the assets are near full depreciation or fully depreciated.

The Regional Trial Court correctly dismissed petitioner’s rehabilitation plan. It found that petitioner’s assets are
non-performing. Petitioner admitted this in its Amended Petition when it stated that its vessels were no longer
serviceable. In Wonder Book Corporation v. Philippine Bank of Communications, a rehabilitation plan is
infeasible if the assets are nearly fully or fully depreciated. This reduces the probability that rehabilitation may
restore and reinstate petitioner to its former position of successful operation and solvency.

Petitioner’s rehabilitation plan should have shown that petitioner has enough serviceable assets to be able to
continue its business. Yet, the plan showed that the source of funding would be to sell petitioner’s old vessels.
Disposing of the assets constituting petitioner’s main business cannot result in rehabilitation. A business primarily
engaged as a shipping line cannot operate without its ships. On the other hand, the plan to purchase new vessels
sacrifices the corporation’s cash flow. This is contrary to the goal of corporate rehabilitation, which is to allow
present value recovery for creditors. The plan to buy new vessels after selling the two vessels it currently owns is
neither sound nor workable as a business plan.

COURT SUPERVISED REHABILITATION

BIR VS LEPANTO CERAMICS

Issued Commencement Order but BIR send Tax Assessment. Is BIR Defy and liable for contempt of Court?
YES. According to RA 10142, upon the issuance of a commencement order, the distressed corporation shall be
temporarily immune from the enforcement of all claims against it, including all claims of the government, whether
national or local, including taxes, tariffs and customs duties.

To clarify, however, creditors of the distressed corporation are not without remedy as they may still submit their
claims to the rehabilitation court for proper consideration so that they may participate in the proceedings, keeping
in mind the general policy of the law.

Petitioners' act of issuing a notice of informal conference and later a formal letter of demand, all despite the written
reminder by LCI regarding the pendency of the rehab proceeding, is in clear defiance of the Commencement Order.

As aptly put by the RTC Br. 35, they could have easily tolled the running of such prescriptive period, and at the
same time, perform their functions as officers of the BIR, without defying the Commencement Order and without
violating the laudable purpose of RA 10142 by simply ventilating their claim before the Rehabilitation Court.

RCBC vs IAC- Suspension of Proceedings

Once a management committee, rehabilitation receiver, board or body is appointed pursuant to PD 902-A, all actions
for claims against a distressed corporation pending before any court, tribunal, board or body shall be suspended
accordingly; Suspension shall not prejudice or render ineffective the status of a secured creditor as compared to a
totally unsecured creditor. What it merely provides is that all actions for claims against the corporation, partnership or
association shall be suspended. This should give the receiver a chance to rehabilitate the corporation if there should
still be a possibility for doing so. In the event that rehabilitation is no longer feasible and claims against the distressed
corporation would eventually have to be settled, the secured creditors shall enjoy preference over the unsecured
creditors subject only to the provisions of the Civil Code on Concurrence and Preferences of Credit.
SOBREJUANITE VS ASB- Suspension of Proceeding against HLURB

The purpose for the suspension of the proceedings is to prevent a creditor from obtaining an advantage or
preference over another and to protect and preserve the rights of party litigants as well as the interest of the
investing public or creditors. Such suspension is intended to give enough breathing space for the management
committee or rehabilitation receiver to make the business viable again, without having to divert attention and
resources to litigations in various fora.

The suspension would enable the management committee or rehabilitation receiver to effectively exercise its/his
powers free from any judicial or extra-judicial interference that might unduly hinder or prevent the “rescue” of the
debtor company.

To allow such other action to continue would only add to the burden of the management committee or
rehabilitation receiver, whose time, effort and resources would be wasted in defending claims against the
corporation instead of being directed toward its restructuring and rehabilitation.

TOWN and Country VS Quisumbing

Claiming difficulty in servicing its obligations as a consequence of the Asian financial crisis, on the other hand,
TCEI filed on 1 October 2002 the petition for declaration of a state of suspension of payments, with approval of a
proposed rehabilitation plan, which was docketed as SEC Case No. 023-02 before the same court, sitting as a Special
Commercial Court (Rehabilitation Court).9 With the issuance of a Stay Order on 8 October 2002 in the corporate
rehabilitation case.
 Considering that Metrobank acquired ownership over the mortgaged properties upon the expiration of the
redemption period on 6 February 2002, TCEI is also out on a limb in invoking the Stay Order issued by the
Rehabilitation Court on 8 October 2002 and the approval of its rehabilitation plan on 29 March 2004. An essential
function of corporate rehabilitation is, admittedly, the Stay Order which is a mechanism of suspension of all actions
and claims against the distressed corporation upon the due appointment of a management committee or rehabilitation
receiver.39 The Stay Order issued by the Rehabilitation Court in SEC Case No. 023-02 cannot, however, apply to the
mortgage obligations owing to Metrobank which had already been enforced even before TCEI’s filing of its petition for
corporate rehabilitation on 1 October 2002.

MWSS vs DAWAY- Exemotion from Stay Order (not exempted still continue the proceedings) DAHIL SOLIDARY
LIABILITY YOU MAY CONTINUE THE PROCEEDINGS. NOT EXEMTED FROM STAY ORDER.
Secondly, Sec. 6 (b) of Rule 4 of the Interim Rules does not enjoin the enforcement of all claims against
guarantors and sureties, but only those claims against guarantors and sureties who are not solidarily liable with the
debtor. Respondent Maynilads claim that the banks are not solidarily liable with the debtor does not find support
in jurisprudence. Letters of credit were developed for the purpose of insuring to a seller payment of a definite
amount upon the presentation of documentsand is thus a commitment by the issuer that the party in whose favor it
is issued and who can collect upon it will have his credit against the applicant of the letter, duly paid in the amount
specified in the letter They are in effect absolute undertakings to pay the money advanced or the amount for which
credit is given on the faith of the instrument. They are primary obligations and not accessory contracts and while
they are security arrangements, they are not converted thereby into contracts of guaranty. What distinguishes
letters of credit from other accessory contracts, is the engagement of the issuing bank to pay the seller once the
draft and other required shipping documents are presented to it. They are definite undertakings to pay at sight
once the documents stipulated therein are presented.

The prohibition under Sec 6 (b) of Rule 4 of the Interim Rules does not apply to herein petitioner as the
prohibition is on the enforcement of claims against guarantors or sureties of the debtors whose obligations are not
solidary with the debtor. The participating banks obligation 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.

PANLILIO ET AL VS RTC- CRIMINAL LIABILITY ARE NOT EXEMPTED ALSO FROM STAY ORDER
The prosecution of the officers of the corporation has no bearing on the pending rehabilitation of the
corporation, especially since they are charged in their individual capacities. Such being the case, the purpose of the law
for the issuance of the stay order is not compromised, since the appointed rehabilitation receiver can still fully
discharge his functions as mandated by law. It bears to stress that the rehabilitation receiver is not charged to defend
the officers of the corporation. If there is anything that the rehabilitation receiver might be remotely interested in is
whether the court also rules that petitioners are civilly liable. Such a scenario, however, is not a reason to suspend the
criminal proceedings, because as aptly discussed in Rosario, should the court prosecuting the officers of the
corporation find that an award or indemnification is warranted, such award would fall under the category of claims,
the execution of which would be subject to the stay order issued by the rehabilitation court. The penal sanctions as a
consequence of violation of the SSS law, in relation to the revised penal code can therefore be implemented if
petitioners are found guilty after trial. However, any civil indemnity awarded as a result of their conviction would be
subject to the stay order issued by the rehabilitation court. Only to this extent can the order of suspension be
considered obligatory upon any court, tribunal, branch or body where there are pending actions for claims against the
distressed corporation.

LIQUIDATION

Consuelo Metal Corp vs Planters Development Bank

CMC Petition has no merit. PDB requested for forclosure after SEC convert rehab to Liquidation.
WON Foreclosure is porper?? YES. CMC adds that the rules on concurrence and preference of credits should apply
in foreclosure proceedings. Assuming that Planters Bank can foreclose the mortgage, CMC argues that the
foreclosure is still void because it was conducted in violation of Section 15, Rule 39 of the Rules of Court which
states that the sale "should not be earlier than nine o’clock in the morning and not later than two o’clock in the
afternoon." On the other hand, Planters Bank argues that it has the right to foreclose the real estate mortgage
because of non-payment of the loan obligation. Planters Bank adds that the rules on concurrence and preference of
credits and the rules on insolvency are not applicable in this case because CMC has been not been declared
insolvent and there are no insolvency proceedings against CMC.
In Rizal Commercial Banking Corporation v. Intermediate Appellate Court,17 we held that if rehabilitation is
no longer feasible and the assets of the corporation are finally liquidated, secured creditors shall enjoy preference over
unsecured creditors, subject only to the provisions of the Civil Code on concurrence and preference of credits.
Creditors of secured obligations may pursue their security interest or lien, or they may choose to abandon the
preference and prove their credits as ordinary claims.18

Moreover, Section 2248 of the Civil Code provides:

Those credits which enjoy preference in relation to specific real property or real rights, exclude all others to the
extent of the value of the immovable or real right to which the preference refers.

In this case, Planters Bank, as a secured creditor, enjoys preference over a specific mortgaged property and has a right
to foreclose the mortgage under Section 2248 of the Civil Code. The creditor-mortgagee has the right to foreclose the
mortgage over a specific real property whether or not the debtor-mortgagor is under insolvency or liquidation
proceedings. The right to foreclose such mortgage is merely suspended upon the appointment of a management
committee or rehabilitation receiver19 or upon the issuance of a stay order by the trial court.20 However, the creditor-
mortgagee may exercise his right to foreclose the mortgage upon the termination of the rehabilitation proceedings or
upon the lifting of the stay order.21

Foreclosure proceedings have in their favor the presumption of regularity and the burden of evidence to rebut the
same is on the party that seeks to challenge the proceedings.22 CMC’s challenge to the foreclosure proceedings has no
merit. The notice of sale clearly specified that the auction sale will be held "at 10:00 o’clock in the morning or soon
thereafter, but not later than 2:00 o’clock in the afternoon."23 The Sheriff’s Minutes of the Sale stated that "the
foreclosure sale was actually opened at 10:00 A.M. and commenced at 2:30 P.M."24 There was nothing irregular about
the foreclosure proceedings.
Yngson (liquidator of arcam) vs PNB- right to foreclose under liquidation
ARCAM & Company, Inc. (ARCAM) is engaged in the operation of a sugar mill in Pampanga.5 Between 1991
and 1993, ARCAM applied for and was granted a loan by respondent Philippine National Bank (PNB).6 To secure the
loan, ARCAM executed a Real Estate Mortgage over a 350,004-square meter parcel of land covered by TCT No. 340592-
R and a Chattel Mortgage over various personal properties consisting of machinery, generators, field transportation
and heavy equipment. Rehab on 1993, sec liquidate 2000. PNB revived the foreclosure case and requested the RTC
Clerk of Court to re-schedule the sale at public auction of the mortgaged properties. Contending that foreclosure
during liquidation was improper, petitioner filed with the SEC a Motion for the Issuance of a Temporary Restraining
Order and/or Writ of Preliminary Injunction to enjoin the foreclosure sale of ARCAM’s assets. Is PNB has right to
foreclose? YES OF COURSE. In this case, Planters Bank, as a secured creditor, enjoys preference over a specific
mortgaged property and has a right to foreclose the mortgage under Section 2248 of the Civil Code. The creditor-
mortgagee has the right to foreclose the mortgage over a specific real property whether or not the debtor-mortgagor is
under insolvency or liquidation proceedings. The right to foreclose such mortgage is merely suspended upon the
appointment of a management committee or rehabilitation receiver or upon the issuance of a stay order by the trial
court. However, the creditor-mortgagee may exercise his right to foreclose the mortgage upon the termination of the
rehabilitation proceedings or upon the lifting of the stay order.27 (Emphasis supplied)

IN CASE OF LABOR WAGES: A preference applies only to claims which do not attach to specific properties. A lien
creates a charge on a particular property. The right of first preference as regards unpaid wages recognized by Article
110 of the Labor Code, does not constitute a lien on the property of the insolvent debtor in favor of workers. It is but a
preference of credit in their favor, a preference in application. It is a method adopted to determine and specify the
order in which credits should be paid in the final distribution of the proceeds of the insolvent's assets. It is a right to a
first preference in the discharge of the funds of the judgment debtor. Consequently, the right of first preference for
unpaid wages may not be invoked in this case to nullify the foreclosure sales conducted pursuant to PNB 's right as a
secured creditor to enforce its lien on specific properties of its debtor, ARCAM.