SPECIAL LAWS CHATTEL MORTGAGE LAW (Act No. 1508, in relation to Articles 1484, 1485, 2140 and 2141, NCC) Chattel Mortgage, defined Chattel mortgage is a contract by virtue of which personal property is recorded in the Chattel Mortgage egister as a security for the performance of an obligation! "Art! #$%&'! Characteristics of chattel mortgage It is( "$' an accessory contract because it is for the purpose of securing the performance of a principal obligation) "#' a formal contract because of its validity* registration in the Chattel Mortgage egister is indispensable) and "+' a nilateral contract because it produces only obligations on the part of the creditor to free the thing from the encumbrance on fulfillment of the obligation! !a"s #rinci#ally go$erning chattel mortgages ,hey are( "$' the Chattel Mortgage Law* Act -o! $.&/* as amended) "#' the Civil Code) "+' the evised Administrative Code) and "%' the evised Penal Code %ssential re&isites of chattel mortgage "$' constituted to secure the fulfillment of a principal obligation) "#' that the mortgagor be the absolute owner of the thing mortgage) "+' the persons constituting the mortgage have the free disposal of their property* and in the absence thereof* that they be legally authori0ed for the purpose! "Art!#&/.' It is also of the essence that when the principal obligation becomes due* the thing in which mortgage consists may 'e alienated for the payment to the creditor "Art! #&/1'! Mortgagor may be a third person! It is not necessary that the principal debtor should always be the mortgagor! "Art! #&/.* par! #'! (')ect matter of chattel mortgage 2nly movable or personal properties "certain deviations* however* have been allowed' such as( "$' shares of stoc3 " the mortgage to be registered both in the Chattel Mortgage egistries of the province where the mortgagor resides* and the province where the corporation has its principal business') "#' interest in business) "+' growing crops) "%' large cattles) ".' machinery treated by the parties as personal property subse4uently installed on leased land) "5' motor vehicles "the mortgage to be registered also with the Land ,ransportation 2ffice' - with respect to vehicles used for public services* the mortgage must also carry the approval of L,67! "1' house built on rented land but as between the parties only under the doctrine of estoppel) and "/' house to be demolished and portable nipa huts for what are really mortgaged in this case are the materials thereof and they are* therefore* personal property! Growing crops and large cattle are considered personal property under the Chattel Mortgage Law. They cannot, howeer, !e the o!"ect o# a contract o# pledge !ecause they are considered i$$oa!le under the Ciil Code which principally goerns pledge (imilarities 'et"een *ledge and Chattel mortgage ,hey are( "$' 7oth are e8ecuted to secure performance of a principal obligation) "#' 7oth are constituted only on personal property) "+' 7oth are indivisible) "%' 7oth constitute lien on the property) ".' In both cases* when the debtor defaults* the property must be sold for the payment of the creditor) and "5' 7oth are e8tinguished by the fulfillment of the principal obligation and by the destruction of the property pledged or mortgaged! +istinctions 'et"een Chattel mortgage and *ledge "$' In chattel mortgage* the deli$ery of the personal property to the mortgagee is not necessary* while in pledge* such delivery is necessary) "#' In chattel mortgage* the registration of the same in the Chattel Mortgage egister is necessary for its validity* while in pledge* registration in the egistry of Property is not necessary) "+' ,he #rocedre for the sale of the thing given as security is different! In chattel mortgage* the procedure is found in Section $% of Act -o! $.&/* as amended* while in pledge* it is found in Article #$$# of the -CC) "%' In chattel mortgage* the e,cess over the amount due after foreclosure* goes to the debtor* while in pledge* if the property is sold* the debtor is not entitled to the e8cess unless it is otherwise agreed upon or e8cept in the case of legal pledge) and ".' In chattel mortgage* the creditor is entitled to recover any deficiency e8cept if the chattel mortgage is a security for the purchase of personal property in installments "see Art! $%/%'* while in pledge* the creditor is not entitled to recover the deficiency notwithstanding any stipulation to the contrary!"Art! #$$.'! Chattel mortgage and -eal %state mortgage distingished "$' In chattel mortgage* the thing mortgaged must be personal or movable property) in real estate mortgage* the thing mortgaged must be real or immovable property) "#' An affidavit of good faith is re4uired to be e8ecuted in a chattel mortgage but not in a real estate mortgage) "+' In chattel mortgage* the mortgagor cannot alienate the thing mortgaged without the written consent of the mortgagee annotated on the bac3 of the mortgage instrument) in real estate mortgage* the mortgagor can alienate the thing mortgaged without the written consent of the mortgagee and any stipulation prohibiting such alienation is void! "%' In chattel mortgage* redemption of the thing mortgaged may be made only before the sale thereof) in real estate mortgage* the thing mortgaged may be redeemed after it is 9udicially sold but before 9udicial confirmation of the sale* or if e8tra 9udicially sold* within $ year from and after the date of sale! Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. + COMMERCIAL LAW REVIEWER SAINT LOUIS UNIVERSITY BAR OPERATIONS %,tent of chattel mortgage It covers only property in the contract* and e8cludes li3e or substituted property thereafter ac4uired by the mortgagor* notwithstanding any thing in the contract to the contrary! Exception: In the case of stoc3 or merchandise contained in drugstores* grocery stores* etc!* which are constantly sold and substituted with new stoc3! A stipulation in the chattel mortgage e8tending its scope and effect to after:ac4uired property is valid and binding where the after:ac4uired property is in renewal or* in substitution for* goods on hand when the mortgage was e8ecuted* or is purchased with the proceeds of the sale of such goods! Ruling: Acme Shoe* et al! v! CA* et al*! August ##* $;;5! While a pledge* real estate mortgage* or antichresis may e8ceptionally secure after:incurred obligations so long as these future debts are accurately described* a chattel mortgage* however* can only cover obligations e8isting at the time the mortgage is constituted! Although a promise e8pressed in a chattel mortgage to include debts that are yet to be contracted can be a binding commitment that can be compelled upon* the security itself* however* does not come into e8istence or arise until after a chattel mortgage agreement covering the newly contracted debt is e8ecuted either by concluding a fresh chattel mortgage or by amending the old contract conformably with the form prescribed by the Chattel Mortgage Law! Affida$it of .ood /aith, defined An oath in a contract of chattel mortgage wherein the parties <severally swear that the mortgage is made for the purpose of securing the obligation specified in the conditions thereof and for no other purpose and that the same is 9ust and valid obligation and one not entered into for the purpose of fraud! ,he absence of the affidavit vitiates a mortgage only as against third #ersons without notice* li3e creditors and subse4uent encumbrancers Creation of a chattel mortgage ,he law as it now stands provides for only one way for e8ecuting a valid chattel mortgage* i.e!* the registration of the personal property in the Chattel Mortgage egister as security for the performance of an obligation! 0hen to register ,he law does not provide any specific time within which a chattel mortgage should be recorded in the Chattel Mortgage egister! +ty of -egister of +eeds ,he duties of a register of deeds in respect to the registration of chattel mortgages are of purely ministerial character! -ight of redem#tion "$' When the condition of a chattel mortgage is bro3en* the following may redeem( "a' the mortgagor) "b' a person holding a subse4uent mortgage) or "c' a subse4uent attaching creditor "#' An attaching creditor who so redeems shall be subrogated to the rights of the mortgagee and entitled to foreclose the mortgage in the same manner that the mortgagee could foreclose it! "+' ,he redemption is made by #aying or deli$ering to the mortgagee the amount due on such mortgage and the costs and e8penses incurred by such breach of condition before the sale thereof! "Sec! $+* Act -o! $.&/'! -ight ac&ired 'y second mortgagee and s'se&ent #rchaser "$' Before payment of debt = After a chattel mortgage is e8ecuted* there remains in the mortgagor a mere right of redemption and only this right passes to the second mortgagee in case of a second mortgage! As between the first and second mortgages* therefore* the latter can only recover the property from the former by paying him the mortgage debt! "#' After payment of debt = If the only leviable or attachable interest of a chattel mortgagor in a mortgaged property is his right of redemption* it follows that the 9udgment or attaching creditor who purchased the property at the e8ecution sale could not ac4uire anything e8cept such right of redemption! >e is not entitled to the actual possession and delivery of the property without first paying the mortgaged debt! 1inds of /oreclosre of chattel mortgage "$' 2dicial foreclosre = the mortgagee institutes an action in court) and "#' %,tra)dicial foreclosre = the sale is made by the mortgagee himself when authori0ed by the chattel mortgage contract or by special law! *eriod to foreclose ,he mortgagee may* after +& days from the time of the condition bro3en* caused the mortgaged property to be sold at a public auction by a public officer! ,he +&:day period to foreclose a chattel mortgage is the minimum period after violation of the mortgage condition for the mortgage creditor to cause the sale at public auction of the mortgaged chattel with at least ten "$&' days notice to the mortgagor and posting of public notice of time* place* and purpose of such sale* and is a period of grace for the mortgagor* to discharge the mortgage obligation! A##lication of #roceeds of sale ,he proceeds of the sale are to be applied in the following order( "$' Costs and e8penses of 3eeping and sale) "#' Payment of the obligation secured by the mortgage) "+' Claims of persons holding subse4uent mortgages in their order) and "%' 7alance* if any* shall be paid to the mortgagor* or person holding under him! "Sec! $%* Act -o!$.&/'! -ight of mortgagee to reco$er deficiency "$' Where mortgaged foreclosed = the creditor may maintain an action for the deficiency although the Chattel Mortgage Law is silent on this point! ,he reason is that a chattel mortgage is only given as a security and not as payment Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. ( COMMERCIAL LAW REVIEWER SAINT LOUIS UNIVERSITY BAR OPERATIONS for the debt in case of failure of payment! ,he action must be brought within $& years from the cause of action accrues! "#' Where mortgage constituted as security for purchase of personal property payable in installments = no deficiency can be as3ed and any agreement to the contrary shall be void! "Art! $%/%'! "+' Where mortgaged property subsequently attached and sold = the chattel mortgagee is entitled to deficiency 9udgment in action for specific performance "Art! $%/%?$@' where the mortgaged property is subse4uently attached and sold! ,he e8ecution sale in such a case is not a foreclosure sale! Recto Law %Articles &'(')&'(*, +CC, It is the law* now reflected in Articles $%/% and $%/. of the -CC* which provides that in a contract of sale of personal property the price of which is payable in installments* the vendor may e8ercise any of the following remedies( "$' E8act fulfillment of the obligation* should the vendee fail to pay "specific performance') "#' Cancel the sale* should the vendeeAs failure to pay cover two or more installments "not the same as rescission because here the vendor gets bac3 the ob9ect of the sale and retains the installments paid) however* this is not available in the absence of stipulation in the contract') "+' 6oreclose the chattel mortgage on the thing sold* if one has been constituted* should the vendeeAs failure to pay cover two or more installments! In this case* he shall have no further action against the purchaser to recover any unpaid balance of the price! Any agreement to the contrary is void! EAL ES,A,E M2,BABE %Articles -&-' . -&/&, +CC, -eal %state Mortgage, defined A contract whereby the debtor guarantees the performance of the principal obligation by sub9ecting real property or real rights as security in case of non:performance of such obligation within the period agreed upon! %ssential -e&isites of -eal %state Mortgage "$' It must be constituted to secure the performance of the principal obligation! "#' ,he mortgagor must be the absolute owner of the property mortgaged! "+' ,he mortgagor should have the free disposal of the property mortgaged* and in the absence thereof* he should be legally authori0ed for the purpose! "%' When the principal obligation becomes due* the property mortgaged may be alienated for the payment of such obligation! ".' ,he sub9ect matter of the contract must be immovable property or alienable real rights upon immovables! (')ect Matter of Mortgage ,hey are( "$' immovables) and "#' alienable real rights imposed upon immovables! Characteristics of Mortgage "$' real contract) "#' accessory contract) "+' subsidiary contract) and "%' unilateral contract because it creates only an obligation on the part of the creditor who must free the property from the encumbrance once the obligation is fulfilled! Kinds of Mortgages A mortgage may be( "$' 3olntary 4 one which is agreed to be between the parties or constituted by the will of the owner of the property on which it is created! "#' !egal 4 one re4uired by law to be e8ecuted in favor of certain persons! "+' %&ita'le 4 one which* although it lac3s the proper formalities of mortgage* shows the intention of the parties to ma3e the property as a security for a debt! Effects of Mortgage "$' Creates real right 4 A mortgage creates a real right) a lien inseparable from the property mortgaged* which is enforceable against the whole word! Cntil discharged* it follows the property wherever it goes and subsists notwithstanding changes of ownership! "#' Creates merely on encm'rance 4 A mortgage does not involve a transfer* cession or conveyance of property but only constitutes a lien thereon! It gives the mortgagee no right or claim to the possession of the property* and* therefore* a mere mortgagee has no right to e9ect an occupant of the property mortgaged! Extent of Mortgage A real estate mortgage constituted on immovable property is not limited to the property itself but also e8tends to all its accessions* improvements* growing fruits and rents or income* as well as to the proceeds of insurance should the property be destroyed* or the e8propriation value of the property should it be e8propriated! oreclosure! defined 6oreclosure is the remedy available to the mortgagee by which he sub9ects the mortgaged property to the satisfaction of the obligation to secure which the mortgage was given! "alidity and Effects of oreclosure "$' In a real estate mortgage* when the principal obligation is not paid when due* the mortgage has the right to foreclose the mortgage and to have the property sei0ed and sold with a view of applying the proceeds to the payment of the principal obligation! 6oreclosure is valid where the debtor is in default of his obligation! "#' ,he essence of a contract of mortgage indebtedness is that a property has been identified or set apart from the mass of the property of the debtor:mortgagor as security for the payment of money or the fulfillment of an obligation to answer the amount of indebtedness in case of default of payment! Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. * COMMERCIAL LAW REVIEWER SAINT LOUIS UNIVERSITY BAR OPERATIONS ,he power to foreclose a mortgage or not resides in the mortgagee! "+' 2nce the proceeds have been applied to the payment of obligation* the debtor cannot anymore be re4uired to pay* unless* of course* there is a deficiency between the amount of the loan and the foreclosure sale price* because the obligation has already been e8tinguished! "%' ,he rule is that statutory provisions governing public notice of foreclosure sales must be strictly complied with* and even slight deviations there from will invalidate the sale or render it at least voidable! 1inds of /oreclosre "$' 2dicial foreclosre 4 it is an ordinary action) governed by ule 5/ of the rules of Court "#' %,tra)dicial foreclosre 4 foreclosure under power of sale contained in the mortgage) governed by Act -o! +$+.* as amended 0udicial 1oreclosure under the Rules o# Court %Rule 2(, 0udicial action #or the 3urpose A mortgage may be foreclosed 9udicially by bringing an action for that purpose* in the proper court which has 9urisdiction over the area wherein the real property involved or a portion thereof* is situated! Order o# Mortgagor to pay Mortgage de!t If the court finds the complaint to be well:founded* it shall order the mortgagor to pay the amount due upon the mortgage debt or obligation with interest and other charges within a period of not less than ;& days or more than $#& days from entry of 9udgment "Sec! #* ule 5/' 4ale to the highest !idder If the mortgagor fails to pay at the time directed in the order* the court* upon motion* shall order the property to be sold to the highest bidder at public auction "Sec! +* Ibid!' Con#ir$ation o# 4ale ,he sale when confirmed by an order of the court* also upon motion* shall operate to divest the rights of all parties to the action and to vest their rights in the purchaser sub9ect to such right of redemption as may be allowed by law! E5ecution o# 0udg$ent -o 9udgment rendered in an action for foreclosure or mortgage can be e8ecuted otherwise than in the manner prescribed by law on mortgages* because parties to an action are not authori0ed to change the procedure which it prescribed! Application o# proceeds o# sale ,he proceeds of the sale shall be applied to the payment of the( "a' costs of sale) "b' the amount due the mortgagee) "c' claims of 9unior emcumbrances or persons holding subse4uent mortgages in the order of their priority) and "d' the balance* if any! E5ecution o# sheri##6s certi#icate In 9udicial foreclosure* the foreclosure is not complete until the sheriffAs certificate is e8ecuted ac3nowledged and recorded! In the absence of a certificate of sale* no title passes by the foreclosure proceedings to the vendee! EXTRAJUDICIAL FORECLOSURE OF REAL ESTATE MORTAE %Act +o. /&/*, as a$ended !y Act +o. '&&(, *r#ose of the la" ((ec. 1) ,o regulate the manner in which the e8tra9udicial foreclosure and redemption of real estate mortgages may be made! 0here to condct the sale of the mortgaged real estate ,he sale must be made within the province in which the property sold is situated! In case the place within said province in w+hich the sale is to be made is the sub9ect of stipulation* such the sale in said place in the municipal building of the municipality in which the property or part thereof is situated! Notice -e&irement -otice shall be given by posting notices of the sale for not less than twenty "#&' days in at least three public places of the municipality or city where the property is situated! If the property is worth more than four hundred pesos* such notice shall also be published once a wee3 for at least three consecutive wee3s in a newspaper of general circulation in the municipality or city! personal notice to the mortgagee is not re4uired to be a newspaper of general circulation@ : it is enough that <it is published for the dissemination of local news and general information( that is has a bonafide subscription list of paying subscribers) that it is published at regular intervals!D 5o" shold the sale 'e made ,he sale must be made( "$' at public auction) "#' between ; oAcloc3 in the morning and % oAcloc3 in the afternoon) and "+' shall be under the direction of then sheriff of the province* the 9ustice or au8iliary 9ustice of the place of the municipality in which such sale has to be made* or of a notary public of said municipality* who shall be entitled to collect the fee foe each day of actual wor3 performed* in addition to his e8penses! *ersons "ho may #artici#ate in the 'idding At any sale* the creditor* trustee* or other person* authori0ed to act for the creditor* may participate in the bidding* and purchase under the same conditions as any other bidder* unless the contrary has been e8pressly provided in the mortgage or trust deed under which the sale is made 0ho may redeem the foreclosed #ro#erty "$' the debtor) "#' his successors in interest* or "+' any 9udicial creditor or 9udgment creditor of said debtor* or "%' any person having a lien on the property or deed of trust under which the property is sold! Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. , COMMERCIAL LAW REVIEWER SAINT LOUIS UNIVERSITY BAR OPERATIONS *eriod of -edem#tion At any time within the term of one "$& year from the date when the certificate of sale issued by the Sheriff is registered in the 2ffice of egister of Eeeds! -ight to -eco$er the deficiency In e8tra9udicial foreclosure of mortgage* the mortgagee has the right to recover the deficiency from the debtor where the proceeds of the sale are insufficient to pay the debt! Procedure to be followed in E8tra 9udicial 6oreclosure of mortgage "Supreme Court Administrative 2rder -o!+ dated 2ctober $;* $;/%' "$' Application must be filed before the E8ecutive Fudge through the cler3 of court who is also the E8:2ffice Sheriff) "#' In case of real estate mortgage* before the auction sale is conducted* the cler3 of court must e8amine whether the re4uirements of the law have been complied with* that is* whether the notice of sale has been posted for not less than #& days in at least three "+' public places of the municipality or city where the property is situated* and if such property is worth more than P%&&!&&* that such notice has been published once a wee3 for at least three "+& consecutive wee3s in a newspaper of general circulation in the municipality or city "+' ,he certificate of sale must be approved by the E8ecutive Fudge or in his absence* by the Gice E8ecutive Fudge) "%' Where the application concerns the e8tra9udicial foreclosure of mortgages of real estate andHor chattels in different locations covering one indebtedness* only one filing fee corresponding to such indebtedness shall be collected ".' ,he cler3 of court* apart from the official receipt of the fees* shall issue a certificate of payment indicating the amount of indebtedness* the filing fees collected* the mortgages sought to be foreclosed* the description of the real estate andHor chattels mortgaged and their respective locations* which certificate shall serve the purpose of having the application doc3eted with the Cler3 of Court of the places where other properties are located and of allowing the e8tra9udicial foreclosure to proceed thereat! "5' ,he notice of sale shall be published in a newspaper of general circulation pursuant to Section $ of PE $&1; and non:compliance therewith shall constitute a violation of Section 5 thereof! "1' ,he application shall be raffled among all sheriffs* including those assigned to the 2ffice of the Cler3 of Court and Sheriffs assigned in the branches! "/' After the redemption period has e8pired* the Cler3 of Court shall archive the records! ";' -o auction sale shall be held unless there arte at least two "#' participating bidders* otherwise* the sale shall be postponed to another date! If on the new date set forth for the sale there shall not be at least two "#' bidders* the sale shall then proceed! ,he names of the bidders shall be reported to the Sheriff of the -otary Public* who conducted the sale to the Cler3 of Court before the issuance of the certificate of sale! -edem#tion (of foreclosed #ro#erty), defined edemption may be defined as a transaction by which the mortgagor reac4uires or buys the property which may have passed under the mortgage or divests the property of the lien which the mortgage may have created! 1inds of -edem#tion ,hey are( "$' %&ity of -edem#tion 4 the right of the mortgager to redeem the mortgaged property after his default in the performance of the conditions of the mortgage but before the sale of the mortgaged property! In 9udicial foreclosure* the mortgagor may e8ercise his e4uity of redemption before but not after the sale is confirmed by the court! "#' -ight of -edem#tion 4 the right of the mortgagor to redeem the mortgaged property within a certain period after it was sold for the satisfaction of the mortgage debt! In all cases of e8tra9udicial sale* the mortgagor may redeem the property at any time within the term of one "$' year from and after the date of registration of the sale! In 9udicial foreclosure* the general rule is that the mortgagor cannot e8ercise his right of redemption after the sale is confirmed by the court! %ffect of %,ercise of the right of redem#tion ,he redemption defeats the inchoate right of the purchaser and restores the property to the same condition as if no sale had been made! It does not give to the mortgagor a new title* but merely restores to him the title freed of the encumbrance of the lien foreclosed! %ffect of failre to e,ercise the right of redem#tion If no redemption is made within the prescribed period* the purchaser has the absolute right to a writ of possession which is the final process to carry out or consummate the e8tra9udicial foreclosure! >enceforth* the mortgagor loses his right over the property! ,>E I-S2LGE-CI LAW "Act -o! $;.5* as amended' 6nsol$ency, +efined : the state of a person whose liabilities are more than his assets! It is that relative condition of manAs assets and liabilities that the former if all made immediately available* would not be sufficient to discharge the latter "'alance sheet test'! : the inability of a person to pay his debts as they become due in the ordinary course of business "e&ity test'! Insolvency law "IL' is subsidiary to the Civil Code! 6or the "IL' to be A33L7CA8LE( - there must be a proceeding in insolvency in the proper RTC. #urposes of $% "$' ,o effect an e4uitable distribution of the ban3ruptAs property among his creditors! "#' ,o benefit the debtor in discharging him from his liabilities and enabling him to start afresh with the property set apart to him as e8empt! "+' ,o have a uniform procedure in asserting the claims against an entity threatened by insolvency in a manner which would prevent creditors from obtaining any preference by paying one or some ahead of the others! Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. - COMMERCIAL LAW REVIEWER SAINT LOUIS UNIVERSITY BAR OPERATIONS &ature of the #roceedings 'nder the $% ,he proceedings are considered in rem* hence binding upon the whole world! All persons having an interest on the sub9ect matter involved* whether notified or not are e4ually bound! -emedies o#en to an insol$ent de'tor Cnder the law* the insolvent debtor may be permitted to( $! to petition the court to suspend payments of his debts) 2 #! to be discharged from his debts and liabilities by voluntary or involuntary insolvency proceedings! "Sec! $'! (s#ension of #ayments, +efined It is the postponement by court order* of the payments of debts of one who* while possessing sufficient property to cover his debts* foresees the impossibility of meeting them when they respectively fall due! "Sec! #* par! $'! *r#ose of (s#ension - to suspend or delay payments! 7asis of (s#ension - the probability of the debtorAs inability to meet his obligations when they respectively fall due! *rocedral -e&irements (he petition should be filed by a debtor) $! possessing sufficient property to cover all his debts) #! foreseeing the impossibility of meeting them when they respectively fall due) and +! petitioning that he be declared in the state of suspension of payments! ,he petition need not be verified! The petition should !e acco$panied !y9 $! a verified schedule containing a full and true statement of the debts and liabilities of the petitioner with a list of creditors* residence* sum due* nature of liability* consideration* e8isting pledge* lien or security! "Sec! $.') #! a verified inventory containing a list of creditors* description of all the property including those e8empt from e8ecution and statement as to value of each item of property* location and encumbrances thereon! "Sec! $5') +! a statement of assets and liabilities) %! proposed agreements he re4uests of his creditors! %ffects of /iling of *etition ,he following are the effects( $! -o disposition in any manner of his property may be made by the petitioner e8cept insofar as concerns the ordinary operations of commerce or of industry in which he is engaged! "Sec! +* par! #'! #! -o payments may be made by the petitioner e8cept in the ordinary course of his business or industry! "ibid!') +! Cpon re4uest to the court* all pending e8ecutions against the debtor shall be suspended e8cept e8ecution against property especially mortgaged! "Sec! 5'! Creditors affected 'y the filing of #etition 2nly those creditors included in the schedules filed by the debtor shall be cited to appear and ta3e part in the meeting! "Sec! .'! Creditors N89 affected 'y order of ss#ension of #ayments ,hey are the following( $! Persons having claims for personal labor* maintenance* e8penses of last illness or funeral of the wife or children of the debtor incurred in si8ty "5&' days immediately preceding the filing of the petition) and #! Persons having legal or contractual mortgages! "Sec! ;'! (te#s in (s#ension $! 6iling of petition by the debtor! "Sec! #') #! Issuance by the court of an order calling a meeting of creditors! "Sec! +') +! Publication of the order and service of summons! "Sec! %') %! Meeting of creditors for the consideration of debtorAs proposition! "Sec! %') .! Approval by creditors of the debtorAs proposition! "Sec! /') 5! 2b9ections* if any* made wHin $& days following the meeting! "Sec! $$') and 1! Issuance by the court of an order directing that the argument be carried out in case the decision is declared valid! "Sec! $$' -le of E2C7LE MAF2I,I in the meeting of creditors ,he ma9ority shall be #H+ of the creditors voting upon same proposition* which #H+ represent at least +H. of the total lia'ilities of the debtor! "Sec! /?e@'! When proposed agreement deemed re*ected If the number of the creditors re4uired for holding a meeting does not attend thereat! ,he two ma9orities mentioned in Sec! /?e@ are not in favor of the proposed agreement! "Sec! $&'! Cases for 8')ection to +ecisions of Creditors ,hey are( $! Eefects in the call for the meeting* in the holding thereof* and in the deliberation had thereat which pre9udice the rights of the creditors) #! 6raudulent connivance between one or more creditors and the debtor to vote in favor of the proposed agreement) and +! 6raudulent conveyance of claims for the purpose of obtaining a ma9ority! "Sec! $#'! Cor#orate (s#ension of *ayments Section ."d' of PE ;&#:A has transferred original and e8clusive 9urisdiction over petitions for suspensions of payments by corporation to the SEC* and in addition* it increased the co$erage of :ss#ension of #ayments; for cor#oration to inclde a sitation "hen the assets of the de'tor<cor#oration are less than its lia'ilities, "hen it is nder a management committee or a reha'ilitation recei$er. 3ursuant to the 4u!section *.- o# the 4ecurities Regulation Code, the "urisdiction o# the 4EC oer corporate suspension o# pay$ents proceedings is trans#erred to the R(Cs+ Conse:uently, the e5isting "urisprudence on corporate suspension o# Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. . COMMERCIAL LAW REVIEWER SAINT LOUIS UNIVERSITY BAR OPERATIONS pay$ents proceedings under 4ection *%d, o# 3; <=-)A should now apply to the R(C+ *o"er to A##oint Management Committee nder *+ =02<A Cnder Section 5"c' and "d' of PE ;&#:A* in order to effectively e8ercise its 9urisdiction* the ,C is empowered( $! ,o appoint one or more receivers of the property* real or personal* which is the sub9ect of action pending before the ,C in accordance with the pertinent provisions of the ules of Court) #! In appropriate cases* appoint a rehabilitation receiver of corporations not supervised or regulated by other government agencies who shall have* in addition to the powers of a regular receiver under the provisions of the ules of Court* such functions and powers as provided in the Eecree) and +! Cpon petition or motu proprio* to appoint a management committee* board* or body to underta3e the management of corporations not supervised or regulated by other government agencies in appropriate cases when there is imminent danger of dissipation* loss wastage or destruction of assets of other properties or paraly0ation of business operations of such corporations which may be pre9udicial to the interest of minority stoc3holders* parties:litigants or the general public! !egal effect of A##ointment of Management Committee>-eha'ilitation -ecei$er Section 5"c' of PE ;&#:A provides that <upon appointment of a management committee* rehabilitation receiver* board or body! ! ! all actions for claims against the corporation! ! ! under management or receivership pending before any court* tribunal* board or body shall 'e ss#ended accordingly!D
+ifferences 'et"een (s#ension of *ayments *roceedings nder the 6nsol$ency !a" (6!) and nder *+ =02<A $! ,he appointment of a management committee or a rehabilitation receiver automatically ta3es the case out of the provisions of IL and would ma3e the provisions of PE ;&#:A e8clusively applicable) #! Cnder the IL* the suspensive effect of the order issued pursuant to the petition for suspension of payment does not cover secured creditors* while the suspensive effect under PE ;&#:A upon appointment of the management committee or rehabilitation receiver* would cover all corporate creditors* both secured and unsecured) +! Cnder the IL* in the absence of any agreement among the corporate creditors* the suspension would e8pire after + months) whereas* under PE ;&#:A* the suspensive effect has no time limit and would prevail for so long as the corporate debtor is under a management committee or rehabilitation receiver and there is no directive to have its assets li4uidated) %! ,he effectiveness of final agreement on the manner of payment of the obligations of the corporate debtor is sub9ect to the 4ualifying ma9ority votes re4uired under the IL) whereas* under PE ;&#:A* the management committee or the rehabilitation receiver is granted sufficient powers to ta3e such measures as are necessary to bring bac3 to financial health the distressed company without need to obtain approval of the corporate creditors! Cor#orate -eha'ilitation, defined Cor#orate reha'ilitation as a process <to try to conserve and administer the corporationAs assets in the hope that it may eventually be able to return from financial stress to solvency! It contemplates of the continuation of corporate life and activities so that it may be able to return to its former condition of successful operations and financial stability!D *reference of secred creditors retained Secured creditors retain their preference over unsecured creditors* 't enforcement of sch #reference is e&ally ss#ended #on the a##ointment of a management committee, reha'ilitation recei$er 'oard or 'ody! ,his suspension shall not pre9udice or render ineffective the status of a secured creditor as compared to a totally unsecured creditor! PE ;&#:A does not state anything to this effect! What it merely provides is that all actions for claims against the cor#oration, #artnershi# or association shall 'e ss#ended .,his should give the receiver a chance to rehabilitate the corporation if there should still be a possibility for doing so! ,he 3ey phrase is e&ality in e&ity >owever* in the event that the rehabilitation is no longer feasible and claims against the distressed corporation would eventually have to be settled* the secured creditors shall en9oy preference over the unsecured creditors* sub9ect only to the provisions of the -CC on Concurrence and Preference of Credit! *o"er to !i&idate Cor#orate +e'tor Cnder Sec! 5"d'* the ,C may* on the basis of the findings and recommendation of the management committee* or rehabilitation receiver* board or body* or in its own findings* determine that the continuance in business or such corporation or entity would not be feasible or profitable nor wor3 to the best interest of the stoc3holders* parties:litigants* creditors* or the general public* and order the dissolution of such corporation or entity and its remaining assets li4uidated accordingly! >OL?+TAR@ 7+4OL>E+C@ Concept o# >oluntary 7nsolency A voluntary insolvency proceeding is e8actly what its name implies and the debtor is under no obligation* and cannot be forced* to bring such proceeding) nor with his default* through failure to appeal in an involuntary proceeding* convert the proceedings to a voluntary ones! Natre of 3olntary 6nsol$ency An insolvent debtor* owing debts e8ceeding in amount the sum of P$*&&&!&& may apply to be discharged from his debts and liabilities by petition to the RTC of the province or city in which he has resided for si8 "5' months ne8t preceding the filing of such petition! +istinctions 'et"een (s#ension of *ayments and 6nsol$ency $! In the former* the purpose is to suspend or delay the payment of debts* while in the latter* to discharge the debtor from the payment of debts) #! In the former* the debtor has sufficient property to pay his debts* while in the latter* the debtor does not have sufficient property to pay all his debts) +! In the former* the amount of indebtedness is not affected* while in the latter* the creditors receive less than their credits* and in case where there are preferences* some creditors may not receive any amount at all) and %! In the former* the number of the creditors is immaterial* while in the case of involuntary insolvency* three or more creditors are re4uired! Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. / COMMERCIAL LAW REVIEWER SAINT LOUIS UNIVERSITY BAR OPERATIONS (te#s in 3olntary 6nsol$ency 3rocedure in general #or oluntary insolency( $! 6iling of the petition by the debtor praying for the declaration of insolvency "Sec! $%') #! Issuance of an order of ad9udication declaring the petitioner insolvent "Sec! $/') +! Publication and service of the order declaring a state of insolvency "Sec! $;') %! Meeting of creditors to elect the assignee in insolvency "Sec! +&') .! Conveyance of the debtorAs property by the cler3 of court to the assignee "Sec! +#') 5! Li4uidation of the debtorAs assets and payment of his debts "Sec! ++') 1! Composition* if agreed upon "Sec! 5+') /! Eischarge of the debtor on his application "Sec! 5%'* e,ce#t a corporation "Sec! .#') ;! 2b9ection to the discharge* if any "Sec! 55') and $&! Appeal in certain cases "Sec! 5#' Requisites of #etition for "oluntary $nsol,ency ,he petition* which must be $erified* is to be filed = $! by an insolvent debtor* #! owing debts e8ceeding in amount the sum of P$*&&&!&&* +! in the ,C of the province or city in which he has resided for si8 "5' months ne8t preceding the filing of such petition* and %! setting forth in his petition the following( "a' his place of residence) "b' the period of his residence therein immediately prior to the filing of petition) "c' his inability to pay all his debts in full) "d' his willingness to surrender all his property* estate* and effects not e8empt from e8ecution for the benefit of the creditors) and "e' an application to be ad9udged insolvent "Sec! $%'! +ocments to accom#any the *etition ,hey are the following( $! A ,erified schedule which must contain = "a' a full and true statement of all debts and liabilities of the insolvent debtor) and "b' an outline of the facts giving rise or which might give rise to a cause of action against such insolvent debtor "Sec! $.') and #! A ,erified in,entory which must contain = "a' an accurate description of all the personal and real property of the insolvent e8empt or not from e8ecution including a statement as to its value* location* and encumbrances thereon) and "b' an outline of the facts giving rise or which might give rise to a right of action in favor of the insolvent debtor "Sec! $5'! %ffect of errors in descri#tion or omission of #ro#erty in in$entory $! ,hat the property is erroneously or ambiguously described in the insolventAs inventory will not affect the title of purchasers in the insolvency proceedings! All the property of the insolvent passes to his assignee and is administered in the insolvency proceedings regardless of the errors in the inventory! #! If the insolvent omits property from his inventory* through either mista3e or fraud* it is the duty of the assignee to have the inventory amended so as to include it and to ta3e possession and administer it! +! Even property e8empt from e8ecution must be included in order to preclude possible fraudulent omissions under the prete8t that such property is e8empt! 7ut where the petitioner did not attach an inventory to its petition for insolvency* alleging under oath that it had no property to inventory* the lac3 of inventory was held not fatal to the petition because it must be assumed* until proven otherwise* that the petitioner was stating the truth! %ffect of the /iling of *etition 2nce the petition is filed* it i#so facto ta3es away and deprives the debtor:petitioner of the right to do or commit any act of preference as to creditors* pending the final ad9udication! %ffect of cort order declaring the de'tor insol$ent Cpon the filing of the petition* the court* as a matter of course* shall issue an order declaring the petitioning debtor insolvent "Sec! $;'! ,he effects of such order are the following( $! All the assets of the debtor not e8empt from e8ecution are ta3en possession of by the sheriff until the appointment of a receiver or assignee "Ibid!') #! ,he payment to the debtor of any debts due to him and the delivery to the debtor or to any person for him of any property belonging to him* and the transfer of any property by him are forbidden "Ibid!') +! All civil proceedings pending against the insolvent debtor shall be stayed "Ibid!') and %! Mortgages or pledges* attachments or e8ecutions on property of the debtor duly recorded and not dissolved are not* however* affected by the order "Sec! .;'! *rohi'ited Acts of an 6nsol$ent ,he following are forbidden( $! ,he payment to the debtor of any debts due him! #! ,he delivery to the debtor or to any person for him of any property for him of any property belonging to said debtor! +! ,he transfer of any property by the debtor! All civil proceedings pending against the insolvent are stayed* either by forbidding the maintenance of such actions* or by authori0ing the insolvency court to grant such stay! 7+>OL?+TAR@ 7+4OL>E+C@ Natre of 6n$olntary 6nsol$ency *roceedings It is not a mere personal action against the insolvent for the collection of debts) but its purpose is to impound all of his non:e8empt property* to distribute it e4uitably among his creditors* and to release him from further liability! It is accordingly a proceeding in rem as well as in personam! (te#s in 6n$olntary 6nsol$ency ,hey are the following( $! 6iling of the petition by three or more creditors* who are residents of the Philippines* with an aggregate credit of not less than P$*&&&!&&* none of whom become a creditor by assignment within thirty "+&' days prior to the filing of the petition) #! Issuance of the order re4uiring the debtor to show cause why he should not be ad9udged insolvent) +! Service of order to show cause) %! 6iling of answer or motion to dismiss) .! >earing of the case) Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. 0 COMMERCIAL LAW REVIEWER SAINT LOUIS UNIVERSITY BAR OPERATIONS 5! Issuance of order or decision ad9udging the debtor insolvent) 1! Publication and service of order) /! Meeting of creditors for election of an assignee in insolvency) ;! Conveyance of the debtorAs property by cler3 of court to the assignee) $&! Li4uidation of assets and payment of debts) $$! Composition* if agreed upon) $#! Eischarge of the debtor on his application* e8cept a corporation) $+! 2b9ection to the discharge* if any) and $%! Appeal in certain cases! -e&isites of *etition for 6n$olntary 6nsol$ency ,he petition is to be filed by = $! ,hree or more creditors* #! -one of whom has become such a creditor by assignment* within +& days prior to the filing of said petition* +! Whose credits accrued in the Philippines* %! ,he total amount of which credits is not less than P$*&&&!&&* and .! In the ,C of the province or city in which the debtor resides or has his principal place of business! ,he petition = $! Must be verified by at least three of the petitioning creditors* #! Must set forth one or more acts of insolvency mentioned in the law* and +! Must be accompanied by a bond* approved by the court with at least two sureties* in such a penal sum as the court shall direct! Acts of 6nsol$ency ,he following are acts of insolvency when a creditor can invo3e in filing a petition to declare a debtor in a state of involuntary insolvency( $! Intention to depart or departure from the Philippines to defraud creditors) #! Absence from the Philippines to defraud creditors) +! Concealment of debtor to avoid legal process) %! Concealment or removal of his property to avoid legal process) .! Confession of 9udgment in favor of a creditor to defraud other creditors) 5! Allowing default 9udgment in favor of a creditor to defraud other creditors) 1! Allowing his property to be ta3en under legal process in preference of a particular creditor to defraud other creditors) /! Ma3ing conveyance* assignment or transfer of his property to defraud his creditors) ;! Ma3ing conveyance* assignment or transfer of his property in contemplation of insolvency) $&! Eefault of a merchant or a tradesman to pay his current obligations for a period of +& days) $$! 6ailure to pay money on deposit or received in a fiduciary capacity for a period of +& days after demand) and $#! Insufficiency of property to satisfy an e8ecution issued against him! Ad)dication of 6nsol$ency Where the debtor fails to appear or admits the allegations of the petition* or the evidence of the petitioner is sufficient* an ad9udication of insolvency shall be made! ,he declaration of insolvency retroacts to the date of the filing of the petition for insolvency! +istinctions 'et"een $olntary insol$ency and in$olntary insol$ency $! In the former* one creditor is sufficient* while in the latter* three or more creditors are re4uired) #! In the former* it is filed by the insolvent debtor* while in the latter* it is filed by three or more creditors who possess the 4ualifications re4uired by law) +! In the former* the debtor must not be guilty of any of the acts of insolvency enumerated in Section #&* while in the latter* the debtor must have committed one or more of such acts of insolvency) %! In the former* the amount of indebtedness must e8ceed P$*&&&!&&* while in the latter* it must not be less than P$*&&&!&&) .! In the former* a bond is not re4uired* while in the latter* the petition must be accompanied by a bond) 5! In the former* an order of ad9udication of insolvency may be granted e8 parte* while in the latter* it is granted only after hearing) 1! In the former* the petition is filed in the ,C of the province or the city in which the debtor has resided for 5 months* while in the latter* the length of residence is immaterial) and /! In the former* the court issues the order of ad9udication declaring the petitioner insolvent upon the filing of the voluntary petition* while in the latter* the debtor is not ad9udicated insolvent until after the hearing of the case! A447G+EE4 Assignee, ;e#ined A person elected by the creditors or appointed by the court to whom an insolvent debtor ma3es an assignment of all his property for the benefit of his creditors! Creditors not entitled to $ote in the election of assignee ,hey are the following( $! ,hose who did not file their claims at least two days prior to the time appointed for such election "Sec! #;') #! ,hose whose claims are barred by the statute of limitations "Ibid!') +! Secured creditors unless they surrender their security or lien to the sheriff or receiver or unless they shall first have the value of such security fi8ed as provided in Section .;) and %! >olders of claims for unli4uidated damages arising out of pure tort! 7ond of Assignee After his election* the assignee is re4uired to give a bond for the faithful performance of his duties! ,o establish his official character and his right to sue in that capacity* it is incumbent on the assignee to show that the bond re4uired has been given! #roperties if insol,ent that pass to the assignee ,hey are( $! All real and personal property* estate and effects of the debtor including all deeds* boo3s and papers in relation thereto) #! Properties fraudulently conveyed) Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. 1 COMMERCIAL LAW REVIEWER SAINT LOUIS UNIVERSITY BAR OPERATIONS +! ight of action for damages to real property) and %! ,he undivided share or interest of the insolvent debtor in property held under co:ownership *ro#erties of insol$ent that do not #ass to the assignee ,hey are( $! Property e8empt from e8ecution) #! Property held in trust) +! Property of the con9ugal partnership or absolute community so long as said partnership or community e8ists insofar as the insolvent debtorAs obligations have redounded to the benefit of the former) %! Property over which a mortgage or pledge e8ists unless the creditor surrenders his security or lien) .! After:ac4uired property e8cept fruits and income of property owned by the debtor and which had passed to the assignee in insolvency) 5! -on:leviable assets li3e a life insurance policy which does not have any cash surrender value) and 1! ight of action for tort which is purely personal in nature! %ffects of assignment ,hey are( $! ,he assignee ta3es the property in the plight and conditions that the insolvent held it) #! Cpon appointment* the legal title to all the property of the insolvent is vested in the assignee* and the control of the property is vested in court) +! All actions to recover all the estate* debts and effects of the insolvent shall be brought by the assignee and not by the creditors) and %! ,he assignment shallJ - dissolve any attachment levied within one month ne8t preceding the commencement of insolvency proceedings) - vacate and set aside 9udgment entered in any action commenced within +& days immediately prior to the commencement of insolvency proceedings) and - vacate and set aside any e8ecution issued thereon) and - vacate and set aside any 9udgment entered by default or consent of the debtor within +& days prior to the commencement of insolvency proceedings! *o"ers of the assignee ,he assignee shall have the power( $! ,o sue and recover all the estate* debts and claims belonging to or due to the creditors) #! ,o ta3e into possession all the estate of the debtor e8cept property e8empt from e8ecution) +! In case of a non:resident or absconding or concealed debtor* to demand and receive of every sheriff all the property and moneys in his possession belonging to the debtor) %! ,o sell* upon court order* any estate of the debtor which has come into his possession) .! ,o redeem all mortgages and pledges and to satisfy any 9udgment which may be an encumbrance on any property sold by him) 5! ,o settle all accounts between the debtor and his debtors* sub9ect to the approval of the court) 1! ,o compound* under the order of the court* with any person indebted to such debtor) and /! ,o recover any property fraudulently by the debtor! +ties of the assignee ,he assignee shall have the following duties( &. ,o register the assignment to him of the real estate of the debtor) -. ,o file the schedule and the inventory of the property of the debtor) /. ,o convert* as speedily as possible* the estate* real and personal* into money) '. ,o 3eep a regular account of all moneys received by him as assignee) *. ,o petition the court to allow the private sale of the debtorAs property if it appears that it is for the best interest of the estate) 2. ,o file a 9ust and true accounts of all receipts and payments) A. ,o file accounts upon order of the court on motion of two or more creditors) (. ,o distribute such dividends as he may be re4uired) and <. ,o file his final account within one "$' year from the date of order of ad9udication! -ale of assets $! Benerally : ,he law provided for the reduction of the insolventAs assets into cash by means of public sales! Proceedings for the sale of assets are proceedings in rem! ,he only 4uestion of 9urisdiction is the power of the court over the sub9ect matter without regard to the parties who may have interest in it! ,here are no adversary parties to the proceedings! #! Persons competent to purchase : 2n the sale in insolvency proceedings* the insolvent will not generally be permitted to purchase the assets* either in his own name or acting through a dummy! If he does so* the property purchased becomes sub9ect to the claims of his creditors! 7ut otherwise* any person legally 4ualified to contract may purchase at a 9udicial sale unless he has a duty to perform in reference thereto which is inconsistent with the character of a purchaser or is so connected with the transaction that his individual interest as a purchaser may be inconsistent with his duty! +! ,itle ac4uired : As a general rule* the purchaser at a 9udicial sale ta3es by virtue of his purchase all the right* title* and interest of the interest of the parties to the proceedings in and to the property conveyed to him! ,he circumstances that an insolvent schedule contain an erroneous or ambiguous description of certain property does not affect the title of the purchaser! All the property passes to the assignee and is sold regardless of its description in the schedules +i$idends in insol$ency, +efined A parcel of the fund arising from the assets of the estate* rightfully allotted to a creditor entitled to share in the fund* whether in the same proportion with other creditors or in a different proportion! It is paid by the assignee only upon the order of the court! Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. +) COMMERCIAL LAW REVIEWER SAINT LOUIS UNIVERSITY BAR OPERATIONS CLA44717CAT7O+ A+; 3RE1ERE+CE O1 CRE;7T4 *reference of credit, defined A legal situation whereby one person is given a superior right or claim over another! 6or this reason* the law as to preference shall be strictly construed! Concrrence of credits, defined Implies the possession by two or more creditors of e4ual rights or privileges over the same property or all of the property of the debtor! Classi#ication o# Credits %Arts. --'&, --'-, --'', B --'*, 7. 3re#erred and concurring with respect to speci#ic $oa!le property o# the de!tor %Art. --'&,, which are )) "$' Euties* ta8es* and fees due thereon to the State or any subdivision thereof) "#' Claims arising from misappropriation* breach of trust* or malfeasance by public officials committed in the performance of their duties* on the movables* money or securities obtained by them) "+' Claims for the unpaid price of movable sold* as long as they are in the possession of the debtor* up to the value of the same) and if the movable has been resold by the debtor and the price is still unpaid* the lien may be enforced on the price) this right is not lost by the immobili0ation of the thing by destination* provided it has not lost its form* substance and identity) neither is the right lost by the sale of the thing together with other property for a lump sum* when the price thereof can be determined proportionally) "%' Credits guaranteed with a pledge so long as the thing pledge are in the hands of the creditor* or those guaranteed by a chattel mortgage* upon the things pledged or mortgaged* up to the value thereof) ".' Credits for the ma3ing* repairs* safe3eeping or preservation of personal property* on the movable thus made* repaired* 3ept or possessed) "5' Claims for laborersA wages* on the goods manufactured or the wor3 done) "1' 6or e8penses of salvage* upon the goods salvaged) "/' Credits between the landlord and the tenant* arising from the agricultural leasehold contract* on the share of each in the fruits or harvest) ";' Credits for transportation* upon the goods carried* for the price of the contract and incidental e8penses* until their delivery and for thirty days thereafter) "$&' Credits for lodging and supplies usually furnished to travelers by hotel:3eepers* on the movables belonging to the guest* as long as such movables are in the hotel* but not for the money loaned to the guests) "$$' Credits for seeds and e8penses for cultivation and harvest advanced to the debtor* upon the fruits harvested) "$#' Credits for rent for one "$' year* upon the personal property of the lessee e8isting on the immovable leased and on the fruits of the same* but not on the money or instruments of credit) "$+' Claims in favor of the depositor if the depositary has wrongfully sold the thing deposited* upon the price of the sale! In the foregoing cases* if the movables to which the lien or preference attaches have been wrongfully ta3en* the creditor may demand them from any possessor* within +& days from the unlawful sei0ure! $$+ #referred and concurring .ith respect to specific immo,able and real rights of the debtor /Art+ 00102! .hich are) "$' ,a8es due upon the land or building) "#' 6or the unpaid price of real property sold* upon the immovable sold) "+' Claims of laborers* masons* mechanic and other wor3men* as well as of architects* engineers and contractors* engaged in the construction* reconstruction or repair of buildings* canals* or other wor3* upon said buildings* canals or other wor3s) "%' Claims of furnishers of materials used in the construction* reconstruction* or repair of buildings* canals* and other wor3s* upon aid buildings* canals or other wor3s) ".' Mortgage credits recorded in the egistry of Property* upon the real estate mortgaged) "5' E8penses for the preservation or improvement of real property when the law authori0es reimbursement* upon the immovable preserved or improved) "1' Credits annotated in the egistry of Property* in virtue of a 9udicial order* by attachments or e8ecutions* upon the property affected* and only as to later credits) "/' Claims of co:heirs for warranty in the partition of an immovable among them* upon the real property thus divided) ";' Claims of donors of real property for pecuniary charges or other conditions imposed upon the donee* upon the immovable donated) "$&' Credits of insurers* upon the property insured* for the insurance premium for two "#' years! ,hose credits which en9oy preference in relation to specific real property or real rights* e8clude all other to the e8tent of the value of the immovable or real right to which the preference refers! "Art! ##%/* -CC'! If there are two or more credits with respect to the same specific real property or real rights* they shall be satisfied #ro rata* after the payment of the ta8es and assessments upon the immovable property or real right! "Art! ##%;'! III! #referred insofar as to other real and personal properties of the debtor /Art+ 00112+ 3rder of preference is obser,ed+ (hese are) "$' Credits for services rendered the insolvent by employees* laborers* or household helpers preceding the commencement of the proceedings in insolvency) "#' Proper funeral e8penses for the debtor* or children under his or her parental authority who have no property of their own* when approved by the court) "+' E8penses during the last illness of the debtor or of his or her spouse and children under his or her parental authority* if they have no property of their own) "%' Compensation due to the laborers or their dependents under laws providing for indemnity for damages in cases of labor accident* or illness resulting from the nature of the employment) ".' Credits and advancements made to the debtor for the support of himself or herself* and family* during the last year preceding the insolvency) Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. ++ COMMERCIAL LAW REVIEWER SAINT LOUIS UNIVERSITY BAR OPERATIONS "5' Support during the insolvency proceedings* and for + months thereafter) "1' 6ines and civil indemnification arising from a criminal offense) "/' Legal e8penses* and e8penses incurred in the administration of the insolventAs estate for the common interest of the creditors* when properly authori0ed and approved by the court) ";' ,a8es and assessments due the national government* other than those mentioned in Articles ##%$* -o! $* and ##%#* -o! $) "$&' ,a8es and assessments due any province other than those referred to in Articles ##%$* -o! $* and ##%#* -o! $) "$$' ,a8es and assessments due any city or municipality* other than those mentioned in Articles ##%$* -o! $ and ##%#* -o! $) "$#' Eamages for death or personal in9uries caused by a 4uasi: delict) "$+' Bifts due to public and private institutions of charity or beneficence) "$%' Credits which* without special privilege* appear in "a' a public instrument) or "b' in the final 9udgment* if they had been the sub9ect of litigation! ,hese credits shall have preference among themselves in the order of priority of the dates of the instruments and of the 9udgments* respectively ,he credits enumerated in Articles ##%$ and ##%#* although preferred as against other credits in respect to specific property of the insolvent* do not have preference as among themselves* and shall be satisfied #ro rata from the specific property* after the payment of the duties* ta8es and fees due the state or any subdivision thereof! 2n the other hand* the credits enumerated in Article ##%% not only are preferred as against other credits* but they are preferred as against each other* in the order of enumeration! 3ART+ER4H734 A+; COR3ORAT7O+4 When partnership may be declared insolvent A partnership may be ad9udged insolvent during the continuation of the partnership business or after its dissolution but before the final settlement thereof! Properties included in the insolvency proceedings( Cpon order of the court* the following property shall be ta3en( "$' All the property of the partnership) and "#' All the separate property of each of the partners* e8ceptJ "a' separate properties of limited partners) and "b' properties which are e8empt by law! 3ROO1 O1 ;E8T4 *ro$a'le +e'ts ,he debts which may be proved against the estate of the debtor in insolvency proceedings are the following( $! All debts due and payable from the debtor at the time of the ad9udication of insolvency! #! All debts e8isting at the time of the ad9udication of insolvency but not payable until a future time* a discount being made if no interest is payable by the terms of the contract) +! Any debt of the insolvent arising from his liability as indorser* surety* bail or guarantor* where such liability became absolute after the ad9udication of insolvency but before the final dividend shall have been declared) %! 2ther contingent debts and contingent liabilities contracted by the insolvent if the contingency shall happen before the order of final dividend) and .! Any debt of the insolvent arising from his liability to any person liable as bail* surety* or guarantor or otherwise* for the insolvent* who shall have paid the debt in full or in part! Contingent claim, defined A claim in which liability depends on some future event that may or may not happen and which ma3es it uncertain whether there will be any liability! +e'ts that may N89 'e #ro$ed ,he following debts are not provable or allowed in insolvency proceedings( $! Claims barred by the statute of limitations) #! Claims of secured creditors with a mortgage or pledge in their favor unless they surrender their security) +! Claims of creditors who hold an attachment or e8ecution on the property of the debtor duly recorded and not dissolved) %! Claims on account of which a fraudulent preference was made or given) .! Support* as it does not arise from any business transaction but from the relation of marriage) and 5! A claim for unli4uidated damages arising out of a pure tort which neither constitutes a breach of an e8press contract nor results in any un9ust enrichment of the tortfeasor that may form the basis of an implied contract! Alternati$e rights of secred creditor ,hey are the following( $! ,o maintain his right under the security or lien and ignore the insolvency proceedings* in which case it is the duty of the assignee to surrender to him the property encumbered) or #! ,o waive his right under the security or lien and thereby share in the distribution of the assets of the debtor* or +! ,o have the value of the encumbered property appraised and then share in the distribution of the assets of the debtor with respect to the balance of his credit! COM3O47T7O+ Com#osition defined It is an agreement* made upon a sufficient consideration* between an insolvent or embarrassed debtor and his creditors* whereby the latter for the sa3e of immediate or sooner payment* agree to accept a dividend less than the whole amount of their claims* to be distributed pro rata* in discharge and satisfaction of the whole debt! -e&irements for a 3alid 8ffer of Com#osition ,hey are as follows( $! ,he offer of the terms of composition must be made after the filing in court of the schedule of property and submission of the list of creditors) #! ,he offer must be accepted in writing by a ma9ority of the creditors representing a ma9ority of the claims which have been allowed) +! It must be made after depositing in such place designated by the court* the consideration to be paid and the costs of the proceedings) and Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. +( COMMERCIAL LAW REVIEWER SAINT LOUIS UNIVERSITY BAR OPERATIONS %! ,he terms of the composition must be approved or confirmed by the court! When court may confirm composition ,he court shall confirm a composition on the application of the debtor if satisfied that( $! It is for the best interest of the creditors) #! ,he debtor has not been guilty of any of the acts* or of a failure to perform any of the duties which would create a bar to his discharge) and +! ,he offer and its acceptance are in good faith and have not been made or procured in a manner forbidden by the Act! Effects of the Confirmation of Composition ,he following are the effects( $! ,he consideration shall be distributed as the 9udge shall direct) #! ,he insolvency proceeding shall be dismissed) +! ,he title to the insolventAs property shall revest in him) and %! ,he insolvent shall be released from his debts! 0hen confirmation may 'e set aside ,he court may* upon application of a party in interest* filed at any time within 5 months after the composition has been confirmed* set the same aside and reinstate the case if it shall be made to appear upon trial( "$' ,hat fraud was practiced in the procuring of such composition) and "#' ,hat the 3nowledge thereof has come to the petitioner since the confirmation of such composition!
the effect of lawful composition is e4uivalent to discharge! the corporation will not be discharged by a lawful composition! It is only for natral #erson! ;74CHARGE +ischarge defined A discharge is the formal and 9udicial release of an insolvent debtor from all his debts contracted prior to the insolvency proceedings* with the e8ception of those e8pressly named by law! 7y discharge* the debtor is released from the obligation of all his debts which were or might be proved in the proceedings* so that they are no longer a charge upon him and so that he may thereafter engage in business and ac4uire property without its being liable for the satisfaction of such former debts 0hen to A##ly for +ischarge A debtor may applyJ to the ,C for a discharge* at any time after the e8piration of + months from the ad9udication of insolvency* 7C, not later than $ year from such ad9udication of insolvency* C-LESS the property of the insolvent has not been converted into money without his fault* thereby delaying the distribution of dividends among the creditors in which case the court may e8tend the period! Circmstances "hich 7ar +ischarge -o discharge shall be granted* or if granted* shall be invalid* in the following cases( "$' 6alse swearing) "#' Concealment of any part of his estate or effects) "+' 6raud or willful neglect in the care of his property or in the delivery thereof to the assignee) "%' Procuring his property to be attached or sei0ed on e8ecution within $ month before the commencement of insolvency proceedings) ".' Eestruction* mutilation* alteration or falsification of his boo3s* documents or papers) "5' Biving fraudulent preference to a creditor) "1' -on:disclosure to the assignee of a proven false or fictitious debt within $ month after ac4uiring 3nowledge) "/' 7eing a merchant* failure to 3eep proper boo3s of accounts) ";' Influencing the action of any creditor* at any state of the proceedings* by any pecuniary consideration) "$&' Effecting any transfer* conveyance or mortgage in contemplation of insolvency) "$$' Conviction of any misdemeanor under the Insolvency Law) "$#' In case of voluntary insolvency* he has received the benefit of insolvency within 5 years ne8t preceding his application for discharge) and "$+' If insolvency proceedings in which he could have applied for a discharge are pending by or against him in the ,C of any other province or city! !egal effects of discharge "$' It releases the debtor from all claims* debts* liabilities and demand set forth in the schedule or which were or might have been proved against his estate in insolvency! >ence* non:provable debts are not affected whether or not they were properly scheduled! "#' It operates as a discharge of the insolvent and future ac4uisitions* but permits mortgages and other lien creditors to have their satisfaction out of the mortgage or sub9ect of the lien) "+' It is a special defense which may be pleaded and be a complete bar to all suits brought on any such debts* claims* liabilities or demands) "%' It does not operate to release any person liable for the same debt* for or with the debtor* either as partner* 9oint contractor* indorser* surety* or otherwise) and ".' ,he certificate of discharge is #rima facie evidence of the fact of release* and the regularity of such discharge! Where a debtor is 9udicially declared insolvent* the remedy of the guarantor or surety would be to file a contingent claim in the insolvency proceeding* if his rights as such guarantor or surety are not to be barred by the subse4uent discharge of the insolvent debtor from all his liabilities! +e'ts released 'y discharge "$' All claims* debts* and liabilities* and demands set forth in the schedule) and "#' All claims* debts* liabilities and demands which were or might have been proved against the estate in insolvency! +e'ts not released 'y discharge "$' ,a8es or assessments due the Bovernment* whether national or local) "#' Any debt created by the fraud or embe00lement of the debtor) Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. +* COMMERCIAL LAW REVIEWER SAINT LOUIS UNIVERSITY BAR OPERATIONS "+' Any debt created by the defalcation of the debtor as a public officer or while acting in a fiduciary capacity) "%' Eebt of any person liable for the same debt* for or with the insolvent debtor* either as partner* 9oint contractor* indorser* surety or otherwise! ".' Eebts of a corporation because is not granted a discharge) "5' Claim for support) otherwise it will ma3e the law a means of avoiding the enforcement of the obligation* moral and legal* devolving upon the husband to support his family) "1' Eischarged debt but revived by a subse4uent new promise to pay because the discharge does not put to an end the moral obligation to pay) "/' Claims for unli4uidated damages arising out of a pure tort) ";' Claims of secured creditors) "$&' Claims not in e8istence or not mature at the time of the discharge are generally unaffected thereby) and "$$' Claims that are contingent at the time of the discharge are not barred thereby* and conse4uently* an action may be maintained against the debtor for collection thereof! 0hen discharged may 'e re$o?ed A discharge in insolvency may be revo3ed by the court which granted it on petition of any creditorJ $! Whose debt was proved or provable against the estate in insolvency* on the ground that the discharge was fraudulently obtained) #! Who has discovered facts constituting the fraud subse4uent to the discharged) and provided* +! ,he petition is filed within one year after the date of the discharge! 1RA?;?LE+T 3RE1ERE+CE4 A+; TRA+41ER4 Meaning of transfer A transfer within the meaning of the Insolvency Law* includes the sale and every other and different modes of disposing of or parting with property* or the possession of property* absolutely or conditionally* as a payment* pledge* mortgage* gift* or security! A deposit of money is not a transfer! When preferential transfer exists ,o constitute a #referential transfer* there must be a parting with the insolventAs property for the benefit of the creditor and a conse4uent diminution of the insolventAs estate with the result that such creditor receives a greater proportion of his claim than other creditors of the same class! A deposit of money to oneAs credit in a ban3 does not create any preference! ,he estate of the depositor is not diminished for there is an obligation on the part of the ban3 to pay the amount of the deposit as soon as the depositor may see fit to draw a chec3 against it! 0hen fradlent #reference e,ists A fradlent #reference is committed when the debtor procures any part of his property to be attached* se4uestered* or sei0ed on e8ecution or ma3es any payment* pledge* mortgage* assignment* transfer* sale or conveyance of any part of his property* whether directly or indirectly* absolutely or conditionally* to any one under the following circumstances( $! ,he debtor is insolvent or in contemplation of insolvency) #! ,he transaction in 4uestion is made within +& days before the filing of a petition by or against the debtor) +! It is made with a view to giving preference to any creditor or person having a claim against him) and %! ,he person receiving a benefit thereby has reasonable cause to believe( a! that the debtor is insolvent) and b! that the transfer is made with a view to prevent his property from coming to his assignee in insolvency* or to prevent the same from being distributed ratably among his creditors* or to defeat the ob9ect of or any way hinder the operation of or evade the provisions of the Insolvency Law! 0hen #resm#tion of frad e,ists If such payment* pledge* mortgage* conveyance* sale* assignment* or transfer is not made in the usual and ordinary course of business of the debtor* or if such sei0ure is made under a 9udgment which the debtor has confessed or offered to allow* that fact shall be #rima facie evidence of fraud! 0hen fradlent transfer e,ists A fradlent transfer is any payment* pledge* mortgage* conveyance* sale* assignment* or transfer of property of whatever character made by the insolvent within $ month before the filing of a petition in insolvency by or against him* e8cept for a valuable pecuniary consideration in good faith! Such a transfer is void! %ffect of fradlent transfer As against the creditors of the insolventJ - any conveyance or assignment fraudulently made is void! >ence* no title is ac4uired by the transferee 3E+AL 3RO>747O+4 Acts criminally #nisha'le nder this Act A debtor who commits any of the following acts shall* upon conviction thereof* be punished by imprisonment* for not less + months nor more than . years for each offense( I! After the commencement of insol,ency proceedings 44 "$' Concealing any part of his estate) "#' Eestroying* altering* mutilating or falsifying any boo3* deed* document* or writing relating thereto) "+' emoving the same with the intent to prevent or delay its recovery by the assignee) "%' Ma3ing any payment* gift* sale* assignment* transfer or conveyance of property belonging to his estate with li3e intent) ".' Spending any part thereof in gaming) "5' Concealing from his assignee or omitting from the schedule any part of his property with intent to defraud) "1' 6ailing to disclose to his assignee the fact that a person has proved a false or fictitious claim against his estate within $ month after coming to the 3nowledge or belief thereof) or "/' Attempting to account for any of his property by fictitious losses or e8penses) $$+ Within 5 months before commencement of insol,ency proceedings) Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. +, COMMERCIAL LAW REVIEWER SAINT LOUIS UNIVERSITY BAR OPERATIONS $! 2btaining on credit from any person any goods or chattels with intent to defraud* under the false pretense of carrying an ordinary course of business) #! Ma3ing any pledge or disposition of* otherwise than by 'ona fide transactions in the ordinary course of his trade* with intent to defraud* any of his goods or chattels which have been obtained on credit and remained unpaid for) +! Suffering loss in any 3ind of gaming when such loss is one of the causes determining the commencement of insolvency proceedings) %! Selling at a loss or for less than the current price any goods brought on credit and still unpaid for) or .! Advancing payment to the pre9udice of his creditors! 777. ;uring proceedings #or suspension o# pay$ents9 $! Concealing or destroying any property belonging to his estate) #! Eestroying* altering* mutilating or falsifying any boo3* deed* document* or writing relating thereto) +! Ma3ing any payment* sale* assignment* transfer* or conveyance of any property belonging to his estate) %! Spending any part thereof in gaming) .! 6alsely swearing to the schedule and inventory with intent to defraud his creditors) or 5! Giolating in any manner whatsoever the in9unction issued by the court under Section +! M74CELLA+EO?4 3RO>747O+4 %ffect of death of insol$ent de'tor #ending insol$ency #roceedings $t depends) $! If the debtor shall die after the order of ad9udication* the proceedings shall be continued and concluded in li3e manner and with li3e validity* and effect as if he had lived! #! If the death occurs 'efore the order of ad9udication* the proceedings shall be discontinued! ,he claims must be filed in the proper testate or intestate proceedings as provided by the ules of Court on the settlement of a decedentAs estate! +ty of cort "here #ro#erty e,em#t from e,ection It shall be the duty of the court having 9urisdiction of the proceedings* upon petition and after hearing held upon due notice* to e8empt and set apart* for the use and benefit of the insolvent* such real and personal property as is by law e8empt from e8ecution! 0hen insol$ency #roceedings deemed to commence ,he filing of a petition by or against a debtor upon which* or upon an amendment of which* an order of ad9udication in insolvency may be made* shall be deemed to be the commencement of proceedings in insolvency under the Act! 0hen #etition may 'e dismissed ,he court* upon giving due notice* may dismiss the petition and discontinue the proceedings at any time before the appointment of an assignee( $! If it be a voluntary petition* upon the application of the debtor* if no creditor files written ob9ections) #! If a creditorAs petition* upon the application of the petitioning creditors) or +! 7y written consent of all creditors filed in court* in which case* the proceedings may be dismissed at any time! After the appointment of an assignee* dismissal is not allowed without the consent of all parties interested in or affected thereby! 0hen a##eal may 'e ta?en to the (#reme Cort An appeal may be ta3en to the Supreme Court in the following cases( "$' 6rom an order granting or refusing an ad9udication in insolvency and in the latter case* from the order fi8ing the amount of costs* e8penses* damages* and attorneyAs fees allowed the debtor) "#' 6rom an order allowing or re9ecting a creditorAs claim when the amount in dispute e8ceeds P+&&!&&) "+' 6rom an order allowing or denying a claim for property not belonging to the insolvent* presented under Section %/) "%' 6rom an order settling an account of an assignee) ".' 6rom an order against or in favor of setting apart homestead or other property claimed as e8empt from e8ecution) and "5' 6rom an order granting or refusing a discharge to the debtor! C2P2A,E E>A7ILI,A,I2- Interim ules of Procedure on Corporate ehabilitation "A!M! -o! &&:/:$&:SC'* effective Eecember $.* #&&& What is the scope o# the rulesC %ule $* Sec! #' ,he rules apply to petitions for rehabilitation filed by corporations* partnerships and associations pursuant to PE ;&#: A* as amended! How should the rules !e construedK "ule #* Sec! #' ,he rules are to be liberally construed in order to carry out the ob9ectives of Sections ."d' and 5"c' and "d' of PE ;&#:A* and to assist the parties in obtaining a 9ust* e8peditious and ine8pensive determination of cases! What is the nature o# the proceedings under the rulesC%ule +' ,he proceedings under the rules shall be in rem! Furisdiction over all those affected by the proceedings shall be considered as ac4uired upon publication of the notice of the commencement of the proceedings in a newspaper of a general circulation in the Philippines! ,he proceedings shall also be summary and non: adversarial in nature! 6or e8ample: "a' motions to dismiss* for bills of particulars* for new trail or for reconsideration* among others* are prohibited "ule +*Sec! $') "b' the court may decide matters on the basis of affidavits and other documentary evidence " ule +* Sec! $') "c' pleadings and documents may be filed with the court or served on the other parties* when so authori0ed by the court* by facsimile transmission "fa8' or electronic mail "email' "ule +* Sec! +') "d' incase of voluminous pleading or document* the court may* motu proprio or upon motion* waive the re4uirement of service* provided that a copy thereof* together with all its attachments* is duly filed with the court and made available for e8amination and reproduction by any party* and Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. +- COMMERCIAL LAW REVIEWER SAINT LOUIS UNIVERSITY BAR OPERATIONS provided* further that a notice of such filing and availability is duly served on the parties "ule +* Sec! .') and "e' any orders issued by the court under the rules is immediately e8ecutory* and a petition for review or appeal therefrom shall not stay the e8ecution of the order unless restrained or en9oined by the appellate court "ule +* Sec! .'! Who $ay petition #or reha!ilitationC "ule %* Sec! $' "a' any debtor who foresees the impossibility of meeting its debts when they respectively fall due) or "b' any creditor or creditors holding at least #.L of the debtorAs total liabilities! Where should a petition #or reha!ilitation !e #iledC "ule + Sec! #' Petitions for rehabilitation shall be filed in the appropriate egional ,rial Court having 9urisdiction over the territory where the debtorAs principal office is located! Are the rule o# court applica!le to the proceedingsC "ule #* Sec! #' Ies* the rules of court* where appropriate* shall apply suppletorily to proceedings under the rules! What are the contents o# the petition #iled !y the de!torC "ule %* Sec! #' "a' name and business of the debtor) "b' nature of debtorAs business) "c' history of the debtor) "d' cause of the debtorAs inability to pay its debts) "e' all the pending actions or proceedings 3nown to the debtor and the courts or tribunals where they are pending) "f' threats or demands to enforce claims or liens against the debtor) "g' the manner by which the debtor may be rehabilitated and how such rehabilitation may benefit the general body of creditors* employees and stoc3holders! What should !e attached to the petition #iled !y the de!torK "ule %* Sec!%' "a' audited financial statements as of the end of the debtorAs last fiscal year) "b' interim financial statements as of the end of the month prior to the filing of the petition) "c' schedule of debts and liabilities) "d' inventory of assets) "e' rehabilitation plan) "f' schedule of the debtorAs cash flow) "g' affidavit of general financial condition) "h' names of at least three nominees for the position of ehabilitation receiver* including their 4ualifications and contact information) "i' certificate under oath attesting to the fact that "i' the filing has been duly authori0ed* and "ii' the directors and stoc3holders have irrevocably approved andHor consented to all actions or matters necessary and desirable to rehabilitate the debtor including* but not limited to* amendments to the articles of incorporation and by:laws "or articles of partnership') increase or decrease in the authori0ed capital stoc3) issuance of bonded indebtedness) alienation* transfer or encumbrance of assets of the debtor* and modification of shareholderAs rights! What are the attach$ents tot eh petition #iled !y creditor%s,K "ule % Sec! %' "a' rehabilitation plan) "b' list of nominees to the position of rehabilitation receiver) under what circu$stance could the petition !e dis$issedC "ule %* Sec! $$' the petition shall be dismissed if no rehabilitation plan is approved by the court upon the lapse of $/& days from the date of initial hearing! ,he court may grant an e8tension beyond this period if it appears by convincing and compelling evidence that the debtor may be rehabilitated! In no instance* however* shall the period for approving or disapproving a rehabilitation plan e8ceed $/ months from the date of filing of the petition! What are the contents o# the order that the court shall issue i# it #inds the petition #or reha!ilitation to !e su##icient in #or$ and su!stanceC "ule %* Sec! 5 and $$' If the court finds the petition to be sufficient in form and substance* it shall* not later than . days from the filing of the petition issue an order which shall* among others( "a' appoint a rehabilitation receiver and fi8 his bond) "b' stay enforcement of all claims* whether for money or otherwise and whether such enforcement is by court action or otherwise* against the debtor* its guarantors and sureties not solidarily liable with the debtor) "c' prohibit the debtor from selling* encumbering* transferring or disposing in any manner any of its properties e8cept in the ordinary course of business) "d' prohibit the debtor from ma3ing any payment of its outstanding liabilities as the date of filing of the petition) "e' prohibit the debtorAs suppliers of goods or services from withholding supply of goods or services in the ordinary course or business for as long as the debtor ma3es payments from the services and goods supplied after the issuance of the stay order) "f' fi8 the initial hearing on the petition not earlier than %. days but not later than 5& days from the filing thereof) "g' direct the petitioner to publish the order in a newspaper of general circulation in the Philippines once a wee3 for two consecutive wee3s) "h' direct all creditors and interested parties "including the SEC' to file and serve on the debtor a verified comment or opposition to the petition* with supporting affidavits and documents* not later than $& days before the date of the initial hearing and putting them on notice that their failure to do so will bar them from participating in the proceedings! 1or how long the stay holder to !e e##ectieC"ule %* Sec! $$' ,he stay order shall be effective from the date of its issuance until the dismissal of the petition or termination of the rehabilitation proceedings! Could the stay order !e $odi#ied or ter$inatedC Could conditions !e set #or its continuanceC Could a clai$ !e relieed #ro$ the coerage o# the orderC"ule %* Sec $#' Ies* to all the 4uestions! ,he court may* on motion or motu proprio* terminate* modify* or set conditions for the continuance of the stay order* or relieve a claim from the coverage thereof* upon showing that: "a' any of the allegations of the petition* or any of the contents of any attachment* or the verification thereof* has ceased to be true) "b' a creditor does not have ade4uate protection over property securing its claim) or "c' the debtorAs secured obligation is more than the fair mar3et value of the property sub9ect of the stay and such property is not necessary fort eh rehabilitation of the debtor! Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. +. COMMERCIAL LAW REVIEWER SAINT LOUIS UNIVERSITY BAR OPERATIONS What is the concept o# ade:uate protection oer propertyK "ule %* Sec $#' A creditor does not hae ade:uate protection oer property securing its clai$ i# it can !e shown that) "a' the debtor fails or refuses to honor a pre:e8isting agreement with the creditor to 3ept he property insured) "b' the debtor fails or refuses to ta3e commercially reasonable steps to maintain the property) or "c' the property has depreciated to the e8tent that the creditor is undersecured! What are the contents o# the reha!ilitation planC "ule %* Sec .' "a' the desired business targets or goal* and the duration and coverage of the rehabilitation) "b' the terms and conditions of such rehabilitation) "c' the material financial commitments to support the rehabilitation plan) "d' the means for the e8ecution of the rehabilitation plan* e!g! conversion of debts into e4uity* restructuring the debts* dacion en pago* sale of assets or controlling interest) "e' li4uidation analysis* i!e! an estimate of the proportion of the claims that the creditors and stoc3holders would receive if the debtorAs properties were li4uidated) "f' other relevant information to enable a reasonable investor to ma3e an informed decision on the feasibility of the rehabilitation plan! What is the power o# the court to cra$ down a reha!ilitation planK"ule %* Sec! #+' ,he power of the court to cram down a rehabilitation plan refers to its authority to approve a rehabilitation plan even over the opposition of the creditors holding a ma9ority oft eh total liabilities of the debtor if* in its 9udgment* the rehabilitation of the debtor is feasible and the opposition of the creditors is manifestly unreasonable! In determining whether or not he opposition of the creditor is manifestly unreasonable* the court shall consider the following( "a' the plan would li3ely provide the ob9ecting class of the creditors with compensation greater than that which they would have received if the assets of the debtor were sold by the li4uidator within a three:month period) "b' that the shareholders or owners of the debtor lost at least their controlling interest as a result of the plan) and "c' that the rehabilitation receiver has recommended approval of the plan! What is the e##ect o# the approal o# the court o# the reha!ilitation plan on the de!tor and creditorsK"ule %* Sec! #%' ,he approval of the rehabilitation plan by the court shall result* among other effects* in the said plan and its provisions being binding upon the debtor and all the persons who may be affected by it* including the creditors* whether or not such persons have participated in the proceedings or opposed the plan or whether or not their claims have been scheduled! What is the pri$ary tasD o# the reha!ilitation receierC ;oes he taDe oer the $anage$ent and control o# the de!torK "ule %* Sec $%' The reha!ilitation receier i$ple$ents the reha!ilitation plan a#ter its approal !y the court. His pri$ary tasD is to study the !est way to reha!ilitate the de!tor and to ensure that the alue o# the de!tor6s property is reasona!ly $aintained pending the deter$ination o# whether or not the de!tor should !e reha!ilitated. >e does not ta3e over the management and control of the debtor but simple oversees and monitors closely the operations of the debtor during the pendency of the proceedings! ,his reflects the concept of debtor:in:place! 6or this purpose* he has been granted the powers* duties and functions of a receiver under PE $%&#:A* as amended* and the ules of Court! E,AIL ,AEE LI7EALIMA,I2- AC, 26 #&&& RA (A2- -%9A6! 9-A+% Any act* occupation or calling of habitually selling direct to the general public merchandise* commodities or goods for consumption! PCP2SE( ,o promote consumer welfare in attracting* promoting and welcoming productive investments that will bring down prices for the 6ilipino Consumer* create more 9obs* promote tourism* assist small manufacturers* stimulate economic growth and enable Philippine goods and services to become globally competitive through the liberali0ation of the retail trade sector! ELEME+T4E $! ,he seller must be habitually engaged in selling) #! ,he sale must be direct to the general public) +! ,he ob9ect of the sale is limited to merchandise* commodities or goods for consumption! EFCE3T7O+E $! Sales by a manufacture to the general public if his capital does not e8ceed one hundred thousand pesos "P$&&* &&&!&&' #! Sales by a farmer or agriculture selling the products of his farm! +! Sales in restaurant operations by a hotel owner or inner: 3eeper irrespective of the amount of capital! Provided* that the restaurant is incidental to the hotel business! %! Sales which are limited only to products manufactured* processed or assembled by a manufacture through single outlet* irrespective of capitali0ation! .! -atural: born citi0en of the Philippines who has lost his Philippines citi0enship but who resides in the Philippines shall be granted the same rights as 6ilipino citi0ens! /8-%6.N %@A69B *A-96C6*A968N 6oreign 9uridical entity must register with SEC and E,I 6oreign Individuals registered with E,I! Category A = Enterprises with paid:up capital of the peso e4uivalent of less than CSN#!.M shall be reserved e8clusively Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. +/ COMMERCIAL LAW REVIEWER SAINT LOUIS UNIVERSITY BAR OPERATIONS for 6ilipino Citi0ens and Corporations wholly owned by 6ilipino Citi0ens! Category 8 : Enterprises with paid:up capital of the peso e4uivalent of CSN#!.M but less than CSN1!.M may be wholly owned by foreigners e8cept for the first # years after the effectivity of this Act wherein foreign participation shall be limited to not more than 5&L of total e4uity! Category C : Enterprises with paid:up capital of the peso e4uivalent of CSN1!.M or more may be wholly owned by foreigners( provided* however* that in no case shall the investments for establishing a store in Categories 7 and C be less than the peso e4uivalent CS/+&*&&&! Category ; : Enterprises speciali0ing in high end or lu8ury products with paid:up capital of the peso e4uivalent of CSN#.&*&&& per store may be wholly owned by foreigners REG74TRAT7O+E A. 1oreign . owned corporation, association, partnership #or$ed and organiGed under 3hilippines Laws - Securities and e8change commission "SEC' and "E,I' 8. 1oreign . owned single proprietorship . ;T7 6oreign investor shall be re4uired to maintain in the Philippines the full amount of the prescribed minimum capital! E5ceptionE the foreign investor has notified the SEC and E,I of its intention to repatriate its capital and cease operations in the Philippines! ,he actual use in Philippines of the inwardly remitted minimum capital re4uirements = monitored by the SEC! 7AN.18 (%N9-A! N. *6!6*6NA( AN+ +96 - Will verify or confirm inward remittance of the minimum re4uired capital investment - 6ailure retail stores shall secure certification from the said agencies! 6oreign investor ac4uiring shares of stoc3 of Local etailers whose net worth in e8cess of CS N #*.&&*&&&!&& may purchase only up to a minimum of 5&L of the e4uity within the first two "#' years from the affectivity percentage consistent with the allowable foreign participation! @AA!6/6CA968N 8/ /8-%6.N -%9A6!%-( C $! A minimum of two hundred million CS dollar "CSN #&&*&&&!&&' net worth in its parent corporation! #! 6ive ".' retailing branches or franchises in operation anywhere around the world unless such retailers has at least one "$' store capitali0ed at a minimum of #.M +! 6ive ".' year trac3 record in retailing %! 2nly rational from or 9udicial entities formed or incorporated in countries which allow the entry of 6ilipino retailers* shall be allowed to engaged in retail trade in the Philippines ;T7 = authori0ed to pre = 4ualify all foreign retailers and shall 3eep a record of 4ualified foreign retailers! The 7nter . Agency Co$$ittee on Tari## and Related Matters o# the +ational Econo$ic ;eelop$ent Authority %+E;A, 8oard shall formulate and regularly update a list of foreign retailers of high = end or lu8ury and render an annual report on the same to congress! 3rohi!ited Actiities o# Huali#ication 1oreign Retailers( $! -ot allowed to engage in certain retailing of activities outsides their accredited stores through the use of mobile or rolling stores or carts #! ,he use of sales representative +! Eoor to door selling %! estaurants and sari: sari stores .! 2ther retailing activities Provided* such detailed list of prohibited activities shall hereafter be formulated by the E,I! 6M*!%M%N96N. A.%NC6%( ,he E,I* in coordination with the SEC* the -EEA* and the 7SP shall formulate and issue the implementing rules and regulations! 3enaltyE A! Any person found guilty( $! Imprisonment of not less than 5 years and one "$' day but not more than eight "/' years #! 6ive = of not less than $M but more than #&M 7! In the case of associations* partnership* or corporations( $! Imposed upon its partners* presidents* directors and manager and other officials responsible for the violation! #! It not a 6ilipino citi0en immediate deportation +! If public officer to the penalty* dismissal and permanent dis4ualification from public office! 888888888888888888888888888888888888888888888888888888888 6I-A-CI-B C2MPA-I AC, RA (**2
/6NANC6N. C8M*AN6%( Corporations or partnerships* e8cept those regulated by the Central 7an3 of the Philippines* the Insurance commissioner and the Cooperative Administration 2ffice! Which are primarily organi0ed for the purpose of e8tending credit facilities to consumers and to industrial* commercial or agricultural enterprises* either by discounting or factoring commercial pares or accounts receivable* or by buying and Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. +0 COMMERCIAL LAW REVIEWER SAINT LOUIS UNIVERSITY BAR OPERATIONS selling contracts* leases* chattel mortgages or other evidence of indebtedness* or by leasing of motor vehicles* heavy e4uipment and industrial machinery* business and office machines and e4uipment* appliances and other movable property! 3OL7C7E4E $! ,o regulates and promote activities of financing and leasing company to place their operations on a sound* competitive* stable and efficient basis #! ,o recogni0e and strengthen their critical role in providing medium and long term credit for investment in capital goods and e4uipments for small and medium enterprises! +! ,o curtail and prevent practices pre9udicial to public interest H to have a better position and efficient service in a fair manner to the general public* industry* commerce* agriculture and thereby more fully contribute to sound development of the national economy 1inancing Co$panies . are Corporations EFCE3TE $! 7an3s #! Investment houses +! Saving and loam associations* %! Insurance companies .! Cooperatives 5! 2ther financial institutions organi0ed under other special laws 4EC?R7T@ O1 EFCHA+GE COMM7447O+ %4EC, Empowered to enforce provisions implementing regulation EOCEP, as the 7SP have supervisory authority under A -o! 15.+ 95% M8N%9A-B 78A-+ 8/ 95% 7(* Empowered to prescribe the ma8imum rate of rental fees* services and other changes of financing company in consultation with financing companies and the SEC! -%@A6-%M%N9 /8- -%.6(9-A968N Aside from re4uiring compliance with the provisions of the corporation code! $! All the re4uirements of e8isting laws to engage in the business should be complied with the applicant #! ,he organi0ation* integrity and responsibility of the organi0ers should assure the protection of the interest of the general public! +! All the re4uirements of this Act have been complied with! Provided( financing companies registered prior to the approval of this Act shall fill an information sheet with the SEC with 5& days after notice! -6.59( AN+ *80%- 8/ /6NANC6N. C8M*ANB $! Engage in 4uasi = ban3ing and money mar3et operations with prior approval of the 7SP #! Engage in trust operations sub9ects to the Beneral ban3ing Act upon prior approval of the 7SP +! Issue bonds and other capital instruments sub9ect to rules and regulations of the 7SP! %! ediscount their paper with government financial institutions .! Participate in special loan or credit programs 5! Provide foreign currency loans and leases to ente%rprises who lain foreign currency by e8ports( -%.6(9-B 8/ /6NANC6A! !%A(% ,he egistry of Eeeds shall open and maintain a register of financial leases* ad9unct to the chattel mortgage registry LEA4E REG74TER 4HALL CO+TA7+E $! -ameH Eescription of property including a! 7rand nameH name of manufacturer b! -ame of model) if any c! Iear of model) if available d! Serial number) if any #! Ac4uisition cost +! -ame of owner H finance company lessee %! -ame of lessee .! Eate of lease agreementH schedule 5! Eate of e8piry of lease 1! Eate of entry in lease registry *%NA!9B>6%( $! A fine of not less than P $&*&&& and not more than P $&&*&&&!&& #! Imprisonment for not more than 5 mos! 2r both at the discretion of the court* shall be imposed upon( a! Persons* associations* partnerships or corporation* managing officer that shall( i! Engage in business without authority from the SEC ii! >old themselves out to be financing companies iii! Giolate provisions of this Act b! Any officer* employee* or agent of a financing company who shall( $! Pnowingly and willingly ma3e any false statement or misleading with respect to any material #! 2vervalues on aid in overvaluing any securities to influence action of the company on any loan or discounting line +! Any officer* employee or e8aminer of the SEC who shall commit* connive* aid or assist in the commission of acts enumerated in the preceding section xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx ,>E ,C,> I- LE-EI-B AC, R.A. /A2* Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. +1 COMMERCIAL LAW REVIEWER SAINT LOUIS UNIVERSITY BAR OPERATIONS A LAW SCPPLEME-,I-B 2 C2MPLIME-,I-B ,>E A-,I: CSCI LAW CICCMGE-,EE EGE- 7I 7A-PS! 3?R3O4EE ,o protect citi0ens from a lac3 of awareness of the true cost of credit to the user by assuring a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy! -%@A6-%M%N9 8/ +6(C!8(A-% ,he creditor shall furnish the debtor prior to the consummation a loan or sale * a clear statement in writing containing the ff( $! Cash price or delivered price of the property or service #! Amounts to be credited as down payment and trade:in +! ,he difference the amounts of cash price and as down payment %! ,he charges* individuality itemi0ed .! ,otal amount to be financed 5! ,he percentage that the finance charges bears to the total amount to be finance as a simple annual rate! (im#le Annal -ate Is the uniform percentage* which represents the ratio* on annual basis* between the finance charges and the amount to be financedK In case of Simple Payment upon maturity( Q # 8 finance charge 8 $# 8 $&& L Amount to be financed maturity rate in months In the case of normal installment type of credit of at least $ yr! In deviation Q #8 finance charge 8 no! of payments in a year Amount to be financed total number of payment R $ In cases where the credit matures in less than a yr* the same formula will apply e8cept that the number of payments in a year would refer to the number of installment periods! In cases where credit terms provides for premium or penalty charges depending on for e8ample* the timeliness of the debtors payment* the annual rate to be disclosed in writing shall be the rate for regular payments! E11ECT O1 +O+ ;74CLO4?REE $! ,he creditor is liable to the debtor for P$&& or amount e4ual to twice the finance charge* whichever is greater provided liability shall not e8ceed P#*&&& on any credit transaction! Action to recover penalty must be brought within $ year from date of violation! #! ,he creditor can be held criminally liable! +! ,he transaction is still valid! 4CO3E O1 REH?7REME+T4E ,he regulations shall apply the ff! types of credit transactions( $! Any loans* mortgages* deeds of trust* advances and discounts #! Any conditional sale +! Any rental:purchase contract %! Any contract for hire* bailment or leasing of property .! Any option* demand* loan* ledge 5! Any transaction or series of transactions having a similar purpose ,>E 66! CA,EB2IES 26 CEEI, ,A-SAC,I2- AE 2C,SIEE ,>E SC2PE 26 ,>E SAIE EBCLA,I2-S( $! Credit transactions which to not involve the payment of finance which to not involve the payment of finance charge by the debtor #! Credit transactions in which the debtor specifies a definite and fi8ed set of terms such as ban3 deposits* insurance contracts* etc! Phil! Bovernment : -o punishment or penalty shall apply Any Person $! 6ined by not less P $*&&& nor more than P .* &&& #! Imprisonment for not less than 5 mos! -or more than $ year +! 7oth 266ICES AC,>2IMEE ,2 E-62CE CLES A-E EBCLA,I2-S $! Eepartment of Commercial and Savings 7an3 #! Eepartment of rural ban3 and Savings and Loan Association +! 2ffice of -on:ban3 6inancial Intermediaries ,he respective heads of the + departments have the authority to e8amine all boo3s* documents* papers or records of creditors Creditor Shall include but shall not be limited to ban3s and ban3ing institutions* insurance and bonding co!* savings and loan associations* credit unions* financing companies* etc!
Prepared by the COMMERCIAL LAW SECTION Chief MARLON CORPUZ Assistant Chief MA. LOURDES COMTIAG Members MARLON BACUNO, VOLTAIRE GARCIA, JEANNYLENE ISIP, BEVERLY MANZANO, KATHRYN BOLINAS, LOTTA OBADO, GRESIL SANTOS and VENUS DUGAYON. All Ri!"# R$#$%&$d by the SAINT LOUIS UNIVERSITY COLLEGE O' LAW BAR OPERATIONS ())*. ()