Law 107: Credit Transactions

Course Outline 2016

The Concept of Credit

A. Credit, Debt and Security
Const. Art. III, Section 20, Bill of Rights
B. Credit and Credit Transactions Defined
Truth in Lending Act, Sec. 3. (2)
People v. Concepcion, G.R. No. L-19190, November 29, 1922, 44 Phil 126.
C. Commercial Credit Transactions
Code of Commerce, Art. 1, Art. 2, Art. 3

Part I. Loan
The Concept of Loan
A. General Concepts
Civil Code, Art. 1933
B. Obligation to Deliver
Art. 1934
Garcia v. Thio, G.R. No. 154878, March 16, 2007, 518 SCRA 433.
C. Kinds of Loan
1. Object of a Loan
Art. 1933, Art. 418
2. Consideration of a Loan
Art. 1933
3. Obligation to Return or Pay
Art. 1933, Art. 1232, Art. 1233
D. Contract to Loan
Art. 1934
Saura Import & Export Co. Inc. v. Development Bank of the Philippines, G.R. No.
L-24968, April 27, 1972, 44 SCRA 445.
BPI Investment Corporation v. Court of Appeals & ALS Management &
Development Corporation, G.R. No. 133632, February 15, 2002, 377 SCRA 117.
Pantaleon v. American Express International, Inc., G.R. No. 174269, August 25,
2010, 629 SCRA 276.

Commodatum
A. General Concepts
Art. 1933
B. Object of Commodatum
Art. 1937, Art. 1936
Producers Bank of the Philippines v. Court of Appeals, G.R. No. 115324, February
19, 2003, 397 SCRA 651.
C. Consideration in Commodatum
Art. 1933, Art. 1935, Art. 1939
D. Parties to a Commodatum
1. Ownership by Bailor
Art. 1938, Art. 1933
2. Use by Bailee
Art. 1935, Art. 1940, Art. 1939 (2)
3. Solidary Liability of Bailees
Art. 1945
E. Liability for Expenses and Damages
1. Ordinary Expenses
Art. 1933, Art. 1935, Art. 1941, Art. 1943
Pajuyo v. Court of Appeals, G.R. No. 146364, June 3, 2004, 430 SCRA 492.

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2. Extraordinary Expenses
Art. 1949
3. Other Expenses
Art. 1950
4. Abandonment by Bailor
Art. 1952.
F. Liability for Loss
Art. 1933, Art. 1942
Republic v. Bagtas, G.R. No. L-17474, October 25, 1962, 6 SCRA 262.
G. Obligation to Return
1. General Concepts
Art. 1946, Art. 1947, Art. 1948
Quintos & Ansaldo v. Beck, G.R. No. L-46240, November 3, 1939, 69 Phil
108.
2. Right of Retention of Bailee
Art. 1944, Art. 1951

Simple Loan
A. General Concepts
Art. 1933, Art. 1980
B. Object of Simple Loan
Art. 1933, Art. 1953, Art. 1954
Act No. 2137 (1912), Sec. 58, definition of fungible goods
People v. Puig & Porras, G.R. No. 173654-765, August 28, 2008, 563 SCRA 564.
BPI Family Bank v. Franco, G.R. No. 123498, November 23, 2007, 538 SCRA 184.
C. Obligation to Pay
Civil Code, Art. 1955, Art. 1249, Art. 1250
D. Interest
1. Conventional Interest
a. General Concepts
Art. 1933, Art. 1956, Art. 1306, Art. 1253, Art. 1958, Art. 1960, Art.
2154, Art. 1423
b. Monetary Interest
Frias v. San Diego-Sison, G.R. No. 155223, April 3, 2007, 520 SCRA
244.
Siga-an v. Villanueva, G.R. No. 173227, January 20, 2009, 576
SCRA 696.
c. Interest Rate
Usury Law, Sec. 1
d. Escalation Clauses
Civil Code, Art. 1308
Usury Law, Sec. 7, Sec. 7-a
Spouses Juico v. China Banking Corporation, G.R. No. 187678,
April 10, 2013, 695 SCRA 520.
Spouses Silos v. Philippine National Bank, G.R. No. 181045, July 2,
2014, 728 SCRA 617.
e. Interest on Interest
Civil Code, Art. 1959, Art. 2212
Usury Law, Sec. 5.
2. Compensatory Interest
a. General Concepts
Civil Code, Art. 1169, Art. 2209, Art. 1226, Art. 2210, Art. 2213, Art.

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2226, Art. 2227

Ligutan v. Court of Appeals, G.R. No. 138677, February 12, 2002,
376 SCRA 560.
b. Interest Rate
Art. 2209
Usury Law, Sec. 1
Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412,
July 12, 1994, 234 SCRA 78, restated in Nacar v. Gallery Frames,
G.R. No. 189871, August 13, 2013, 703 SCRA 439.
Estores v. Spouses Supangan, G.R. No. 175139, April 18, 2012, 670
SCRA 95.
c. Interest on Interest
Civil Code, Art. 2212
3. Finance Charges
Truth in Lending Act, Sec. 4, Sec. 6
United Coconut Planters Bank v. Samuel & Beluso, G.R. No. 159912,
August 17, 2007, 530 SCRA 567.
4. Usury
a. General Concepts
Civil Code, Art. 1175, Art. 1957, Art. 1961
Usury Law, Sec. 1, Sec. 1-a, Sec. 4-a, Sec. 4-b, Sec. 5, Sec. 9-a
Central Bank Circular No. 905, Series of 1982, Sec. 1.
Advocates for Truth in Lending, Inc. & Olaguer v. Bangko Sentral
Monetary Board, G.R. No. 192986, January 15, 2013, 688 SCRA 530.
b. Usurious Acts
Usury Law, Sec. 2, Sec. 3, Sec. 4
c. Remedies
Civil Code, Art. 1413
Usury Law, Sec. 6, Sec. 7, Sec. 8, Sec. 9, Sec. 10
1) Remedy of Debtor
2) Remedy of Creditor
Carpo v. Chua & Dy Ng, G.R. Nos. 150773, September 30,
2005, 471 SCRA 471.

Part II. Deposit

The Concept of Deposit
A. General Concepts
Art. 1962
B. Kinds of Deposit
Art. 1964, Art. 1967

Voluntary Deposit
A. General Concepts
Art. 1963, Art. 1968, Art. 1995
B. Form of Deposit
Art. 1969
C. Object of Deposit
Art. 1966
D. Consideration in Deposit
Art. 1965
E. Parties to a Deposit
Art. 1962

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F. Obligation to Safekeep
Art. 1962
Bank of the Philippine Islands v. The Intermediate Appellate Court & Zshornack,
G.R. No. L-66826 August 19, 1988, 164 SCRA 630.
1. Way of the Deposit
Art. 1974, Art. 1975, Art. 1976, Art. 1977, Art. 1978, Art. 1981, Art. 1982
CA Agro-Industrial Development Corporation v. Court of Appeals &
Security Bank & Trust Company, G.R. No. 90027, March 3, 1993, 219
SCRA 426.
Roman Catholic Bishop of Jaro v. De La Pea, G.R. No. L-6913, November
21, 1913, 26 Phil 144.
2. Liability for Loss and Damage
Art. 1972, Art. 1973, Art. 1977, Art. 1981, Art. 1979, Art. 1990, Art. 1993
a. Liability of Depositary
b. Liability of Depositor
3. Liability for Expenses
Art. 1992
G. Obligation to Return
1. By Whom and To Whom
Art. 1972, Art. 1970, Art. 1971, Art. 1984, Art. 1985, Art. 1212, Art. 1214,
Art. 1986, Art. 1991
2. What to Return
Art. 1983, Art. 1896
3. Where to Return
Art. 1987
4. When to Return
Art. 1988, Art. 1989
5. Right of Retention
Art. 1994

Necessary Deposit
A. General Concepts
Art. 1967, Art. 1996, Art. 1966
B. Examples of Necessary Deposit
1. Compliance with a Legal Obligation
Art. 1996, Art. 1997
2. On the Occasion of a Calamity
Art. 1996, Art. 1997, Art. 2168
3. Passenger Baggage with Common Carriers
Art. 1754
4. Hotels or Inns
Art. 1998, Art. 1999, Art. 2000, Art. 2001, Art. 2002, Art. 2003, Art. 2004
Durban Apartments Corp. v. Pioneer Insurance and Surety Corp., G.R.
No. 179419, January 12, 2011, 639 SCRA 441.
YHT Realty Corporation v. Court of Appeals, G.R. No. 126780, February
17, 2005, 451 SCRA 638.

Judicial Deposit
Art. 1964, Art. 2005, Art. 2006, Art. 2007, Art. 2008, Art. 2009

Warehouse Receipts
A. General Concepts

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Warehouse Receipts Law, Sec. 1

B. Form of Warehouse Receipts
Sec. 2, Sec. 3, Sec. 6, Sec. 15, Sec. 4, Sec. 7, Sec. 5
C. Obligations and Rights of a Warehouseman
1. Liability for Goods
Sec. 20, Sec. 21, Sec. 22, Sec. 23, Sec. 24, Sec. 25, Sec. 26
2. Obligation to Deliver
Sec. 16, Sec. 8, Sec. 9, Sec. 10, Sec. 11, Sec. 12, Sec. 13, Sec. 14, Sec. 17, Sec.
18, Sec. 19
3. Warehousemans Lien
Sec. 32, Sec. 27, Sec. 28, Sec. 29, Sec. 30, Sec. 31, Sec. 33, Sec. 34, Sec. 35, Sec.
36
Philippine National Bank v. Se, et al., G.R. No. 119231, April 18, 1996, 256
SCRA 380.
D. Negotiation and Transfer of Warehouse Receipts
1. Negotiation
Sec. 40, Sec. 37, Sec. 38, Sec. 45, Sec. 41, Sec. 44, Sec. 46, Sec. 47, Sec. 48, Sec.
49
2. Transfer
Sec. 39, Sec. 42, Sec. 43, Sec. 44
E. Criminal Liability
Sec. 50, Sec. 51, Sec. 52, Sec. 53, Sec. 54, Sec. 55
F. General Bonded Warehouses
General Bonded Warehouse Act, Sec. 2, Sec. 1, Sec. 3, Sec. 4

Part III. Secured Transactions

The Concept of Security
A. General Concepts
1. Distinguished from Securities
Securities Regulation Code, Sec. 3.1.
2. Distinguished from Securitization
B. Events of Default
C. Kinds of Secured Transactions
1. Personal Security
2. Real Security
3. In the Context of Insolvency
FRIA, Sec. 4 (p) (s) (ll) (kk) (jj) (qq) (pp) (t)

Letters of Credit
A. General Concepts
Code of Commerce, Art. 567, Art. 568, Art. 2
Transfield Philippines, Inc. v. Luzon Hydro Corporation Australia, et al., G.R.
No. 146717, November 22, 2004, 443 SCRA 307.
B. Kinds of Letters of Credit
1. Commercial Letters of Credit
2. Standby Letters of Credit
C. Rule of Strict Compliance
D. Independence Principle

Trust Receipts
A. General Concepts
Trust Receipts Law, Sec. 4

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B. Form of Trust Receipts

Sec. 3 ( j), Sec. 5, Sec. 6
C. Rights of Entruster
Sec. 7, Sec. 8
D. Rights of Purchaser
Sec. 11
E. Obligations of Entrustee
Sec. 9, Sec. 10, Sec. 12, Sec. 13
Revised Penal Code, Art. 315.
Colinares & Veloso v. Court of Appeals, G.R. No. 90828, September 5, 2000, 339
SCRA 609.

Guaranty
A. General Concepts
Civil Code, Art. 2047, Art. 2051
B. Form of Guaranty
Art. 2055
C. Consideration of a Guaranty
Art. 2048
D. Obligations Secured
Art. 2052, Art. 2053, Art. 2054
E. Parties to a Guaranty
Art. 2056, Art. 2057, Art. 2049, Art. 2064, Art. 2065
F. Benefit of Excussion
Art. 2062, Art. 2058, Art. 2059, Art. 2060, Art. 2061, Art. 2063, Art. 2064, Art. 2081
Tupaz IV & Tupaz v. Court of Appeals & Bank of the Philippine Islands, G.R. No.
145578, November 18, 2005, 475 SCRA 398.
G. Right to Protection
Art. 2071
H. Right to Indemnification
Art. 2066 Art. 2050, Art. 1236, Art. 2069, Art. 2070, Art. 2072,
I. Right to Subrogation
Art. 2067, Art. 2050, Art. 1237, Art. 2068, Art. 2080
J. Rights of Co-Guarantors
1. Benefit of Division
Art. 2065, Art. 2078
2. Right to Reimbursement
Art. 2073, Art. 2075
K. Extinguishment and Right of Release
Art. 2076, Art. 2077, Art. 2079, Art. 2080

Surety
A. General Concepts
Art. 2047, Art. 1211, Art. 1216, Art. 2082, Art. 2056, Art. 2083, Art. 2084,
B. Form of Suretyship
C. Obligations Secured
Art. 2053
Security Bank & Trust Company v. Cuenca, G.R. No. 138544, October 3, 2000, 341
SCRA 781.
D. Distinguished from Standby Letter of Credit
E. Distinguished from Guaranty

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Palmares v. Court of Appeals & M.B. Lending Corporation, G.R. No. 126490,
March 31, 1998, 288 SCRA 422.
E. Zobel, Inc. v. Court of Appeals, G.R. No. 113931, May 6, 1998, 290 SCRA 1.
Philippine Blooming Mills, Inc. & Ching, v. Court of Appeals, G.R. No. 142381,
October 15, 2003, 413 SCRA 445.
F. Distinguished from Joint and Solidary Obligations
Art. 2066, Art. 2067, Art. 1217
Escano & Silos v. Ortigas, Jr., G. R. No. 151953, June 29, 2007, 526 SCRA 26.

Pledge and Mortgage

A. General Concepts
Art. 2085, Art. 2087
B. Obligations Secured
Art. 2086, Art. 2052, Art. 2091
C. Contract to Pledge or to Mortgage
Art. 2092
Revised Penal Code, Art. 316
D. Remedies of Pledgee and Mortgagee
E. Indivisibility of a Pledge or Mortgage
Civil Code, Art. 2089, Art. 2090
F. Pactum Commissorium
Art. 2087, Art. 2088
1. Elements
2. Effect on Pledge or Mortgage
Development Bank of the Philippines v. Court of Appeals, G.R. No.
118342, January 5, 1998, 284 SCRA 14.
Bustamante v. Rosel, G.R. No. 126800, November 29, 1999, 319 SCRA 413.
Ong v. Roban Lending Corporation, G.R. No. 172592, July 9, 2008, 557
SCRA 516.
G. Equitable Mortgage
Art. 1602, Art. 1603, Art. 1604, Art. 1605

Pledge
A. General Concepts
Art. 2085, Art. 2087, Art. 2093, Art. 2123
B. Form of Pledge
Art. 2096
C. Object of Pledge
Art. 2094, Art. 2095
D. Obligations Secured
E. Ownership of Collateral
Art. 2103, Art. 2102, Art. 2101, Art. 1951
1. Expropriation of the collateral.
2. Sale by public auction
Art. 2108, Art. 2112
3. Voluntary sale
Art. 2097.
Estate of Litton v. Mendoza & Court of Appeals, G.R. No. L-49120, June
30, 1988, 163 SCRA 246.
F. Rights of Third Party Pledgor
Art. 2120, Art. 2117, Art. 2066, Art. 2067, Art. 2068, Art. 2069, Art. 2070, Art. 2077,
Art. 2078, Art. 2079, Art. 2080, Art. 2081

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G. Right to Possession
Art. 2093, Art. 2110
1. Right of Retention
Art. 2098, Art. 2109, Art. 2099, Art. 2100, Art. 2104, Art. 2106
2. Right to Payment
Art. 2102
Manila Banking Corporation v. Teodoro, Jr. and Teodoro, G.R. No. 53955,
January 13, 1989, 169 SCRA 95.
Yau Chu v. Court of Appeals et al., G.R. No. L-78519, September 26, 1989,
177 SCRA 793.
Citibank, N.A. & Investors Finance Corporation v. Sabeniano, G.R. No.
156132, October 12, 2006, 504 SCRA 378.
H. Return of Collateral
Art. 2105, Art. 2107, Art. 2108, Art. 2110, Art. 2111
I. Foreclosure of Pledge
Art. 2112, Art. 2119
1. Who May Bid
Art. 2113, Art. 2114
2. Effect of Notarial Sale
a. Extinction of Principal Obligation
Art. 2115, Art. 2116
b. No Right of Redemption
Paray & Espeleta v. Rodriguez, et al., G.R. No. 132287, January 24,
2006, 479 SCRA 571.
c. Right to Surplus or Deficiency
Art. 2115
J. Legal Pledges
Art. 2121
1. Examples of Legal Pledges
Art. 1944, Art. 1951, Art. 1994, Art. 2004, Art. 546, Art. 1731
2. Foreclosure of Legal Pledge
Art. 2122, Art. 2121

Chattel Mortgage
A. General Concepts
Art. 2085, Art. 2087, Art. 2140, Art. 2141
PCI Leasing & Finance, Inc. v. Trojan Metal Industries Inc., et al., G.R. No.
176381, December 15, 2010, 638 SCRA 615.
B. Form of Chattel Mortgage
Chattel Mortgage Law, Sec. 4, Sec. 5, Sec. 6
C. Obligations Secured
Sec. 5
ACME Shoe, Rubber & Plastic Corporation v. Court of Appeals, G.R. No. 103576,
August 22, 1996, 260 SCRA 714.
D. Object of Chattel Mortgage
Civil Code, Art. 2124
Makati Leasing & Finance Corporation v. Wearever Textile Mills, Inc. & Court of
Appeals, G.R. No. L-58469, May 16, 1983, 122 SCRA 296.
1. Reasonable Description Rule
Chattel Mortgage Law, Sec. 7
2. After Acquired Properties
Sec. 7

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E. Ownership of Collateral
Revised Penal Code, Art. 319
Dy v. Court of Appeals, G.R. No. 92989, July 8, 1991, 198 SCRA 826.
Servicewide Specialists, Inc. v. Court of Appeals, G.R. No. 116363, December 10,
1999, 320 SCRA 478.
F. Foreclosure of Chattel Mortgage
Chattel Mortgage Law, Sec. 8, Sec. 14
A.M. No. 99-10-05-0, Sec. 1, Sec. 2, Sec. 3, Sec. 4, Sec. 5, Sec. 6, Sec. 7, Sec. 8, Sec. 9
1. Equity of Redemption
Chattel Mortgage Law, Sec. 13, Sec. 14
2. No Right of Redemption
Rizal Commercial Banking Corporation v. Royal Cargo Corporation, G.R.
No. 179756, October 2, 2009, 602 SCRA 545.
3. Right to Possession
Servicewide Specialists, Inc. v. Court of Appeals, G.R. No. 110048, November
19, 1999, 318 SCRA 493.
4. Right to Surplus or Deficiency
Chattel Mortgage Law, Sec. 14
Civil Code, Art. 1484
PAMECA Wood Treatment Plant, Inc. v. Court of Appeals, G.R. No.
106435, July 14, 1999, 310 SCRA 281.

Real Estate Mortgage

A. General Concepts
Civil Code, Art. 2085, Art. 2087, Art. 2124, Art. 2125
B. Form of Real Estate Mortgage
Art. 2125, Art. 2131
C. Obligations Secured
1. Dragnet or Blanket Mortgage Clause
2. Reliance on Security Test
Prudential Bank v. Alviar & Alviar, G.R. No. 150197, July 28, 2005, 464
SCRA 353.
D. Object of Real Estate Mortgage
Art. 2124
1. After Acquired Properties
Peoples Bank & Trust Company & Atlantic Gulf and Pacific Co. of
Manila v. Dahican Lumber Company, et al., G.R. No. L-17500, May 16,
1967, 20 SCRA 84.
2. Effect and Extent
Art. 2126, Art. 2127
Star Two (SPV-AMC), Inc. v. Paper City Corp. of the Phil. , G.R. No.
169211, March 06, 2013, 692 SCRA 438.
E. Right to Alienate Mortgage Credit
Art. 2128, Art. 1625, Art. 1627
F. Right to Alienate Collateral
Art. 2085, Art. 2130, Art. 2129
Garcia v. Villar, G.R. No. 158891, June 27, 2012, 675 SCRA 80.
G. Foreclosure of Real Estate Mortgage
1. Judicial Foreclosure
a. Complaint for Foreclosure
Rules of Court, Rule 68, Sec. 1
b. Judgment on Foreclosure

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Rules of Court, Rule 68, Sec. 2

Korea Exchange Bank v. Filkor Business Integrated, Inc., et al.,
G.R. No. 138292, April 10, 2002, 380 SCRA 381.
c. Equity of Redemption
Rules of Court, Rule 68, Sec. 2
d. Foreclosure Sale
Rules of Court, Rule 68, Sec. 3, Sec. 5., Sec. 7, Sec. 8
Rules of Court, Rule 39, Sec. 31, Sec. 32, Sec. 34
e. Right of Redemption
Huerta Alba Resort, Inc. v. Court of Appeals, G.R. No. 128567,
September 1, 2000, 339 SCRA 534.
f. Right to Surplus or Deficiency
Rules of Court, Rule 68, Sec. 4, Sec. 6
Rules of Court, Rule 86, Sec. 7
2. Extrajudicial Foreclosure
a. Special Powers
Act No. 3135, Sec. 1
b. Foreclosure Sale
1) Requirement of Notice
Act No. 3135, Sec. 3
A.M. No. 99-10-05-0, as amended, Sec. 1, Sec. 2, Sec. 3, Sec.
4
Grand Farms, Inc. & Philippine Shares Corporation v.
Court of Appeals, et al., G.R. No. 91779, February 7, 1991,
193 SCRA 748.
2) Conduct of Sale
Act No. 3135, Sec. 2, Sec. 4
A.M. No. 99-10-05-0, as amended, Sec. 5, Sec. 6, Sec. 8, Sec.
9
3) Bid Price
Act No. 3135, Sec. 5
A.M. No. 99-10-05-0, as amended, Sec. 5
c. Right of Redemption
Act No. 3135, Sec. 6
General Banking Law, Art. III, Sec. 47
A.M. No. 99-10-05-0, as amended, Sec. 10.
1) Who may Redeem
Act No. 3135, Sec. 6
Rules of Court, Rule 39, Sec. 27
Medida, et al. v. Court of Appeals, et al., G.R. No. 98334,
May 8, 1992, 208 SCRA 887.
2) How to Redeem
Rules of Court, Rule 39, Sec. 28, Sec. 29, Sec. 30
Spouses Yap v. Spouses Dy, et al., G.R. No. 171991 and
171868, July 27, 2011, 654 SCRA 593.
d. Right to Deficiency
Rules of Court, Rule 86, Sec. 7
e. Right to Surplus
Suico v. Philippine National Bank, G.R. No. 170215, August 28,
2007, 531 SCRA 514.
f. Right to Possession
1) During Redemption Period

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Act No. 3135, Sec. 7, Sec. 8, Sec. 9

2) After Consolidation of Ownership
Rules of Court, Rule 39, Sec. 33
Cua Lai Chu, et al. v. Lacqui & Philippine Bank of Commu-
nications, G.R. No. 169190, February 11, 2010, 612 SCRA
227.
3) Exceptions
Rules of Court, Rule 39, Sec. 33, Sec. 16
Spouses Tolosa v. United Coconut Planters Bank, G.R. No.
183058, April 03, 2013, 695 SCRA 138.
BPI Family Savings Bank, Inc. v. Golden Power Diesel
Sales Center, Inc., G.R. No. 176019, January 12, 2011, 639
SCRA 405.

Antichresis
A. General Concepts
Civil Code, Art. 2132, Art. 2133, Art. 2135, Art. 2138
B. Form of Antichresis
Art. 2134
C. Obligations Secured
Art. 2139, Art. 2085, Art. 2089, Art. 2090, Art. 2091
D. Object of Antichresis
Art. 2132
E. Right of Retention
Art. 2136
F. Foreclosure of Antichresis
Art. 2137
Diego v. Fernando, G.R. No. L-15128, August 25, 1960, 109 Phil 143.

Part IV. Insolvency

The Concept of Insolvency
A. General Concepts
Art. 2236, Art. 2237
FRIA, Sec. 2, Sec. 146, Sec. 147, Sec. 148
FR Rules, Rule 1, Sec. 5(c)
B. Nature of Insolvency Proceedings
FRIA, Sec. 3, Sec. 7, Sec. 6
C. Civil and Criminal Liability in Insolvency Proceedings
Sec. 10, Sec. 145
D. Cross-Border Insolvency Proceedings
Sec. 139, Sec. 140, Sec. 141, Sec. 142

Concurrence & Preference of Credits

A. General Concepts
FRIA, Sec. 62, Sec. 133
B. Classification of Credits
1. Special Preferred Credits
Civil Code, Art. 2241, Art. 2242, Art. 2243, Art. 2246, Art. 2247, Art. 2248,
Art. 2249, Art. 2250
FRIA, Sec. 136.
De Barreto, et al. v. Villanueva, et al., G.R. No. L-14938, January 28, 1961, 1
SCRA 288.

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J.L. Bernardo Construction v. Court of Appeals, G.R. No. 105827, January

31, 2000, 324 SCRA 24.
2. Ordinary Preferred Credits
Civil Code, Art. 2244
P. D. No. 442, Art. 110
FRIA, Sec. 133
Civil Code, Art. 2251
3. Common Credits
Art. 2245, Art. 2251
Cordova v. Reyes Daway Lim Bernardo Lindo Rosales Law Offices, et. al,
G.R. No. 146555, July 3, 2007, 526 SCRA 300.

Suspension of Payments
A. General Concepts
FRIA, Sec. 2, Sec. 94
1. Suspension of Payments Order
Sec. 95, Sec. 96
a. Automatic Stay
b. Injunction Against Debtor
2. Order Suspending Execution
Sec. 96
B. Commissioner
Sec. 95
FLSP Rules, Rule 3 (A), Sec. 5
FRIA, Sec. 97
C. Creditors Meeting
Sec. 97, Sec. 99, Sec. 100
D. Proposed Agreement
Sec. 94, Sec. 101, Sec. 102
E. Treatment of Claims
1. General Concepts
Sec. 96, Sec. 98, Sec. 101
2. Secured Creditor Claims
3. Exempt Claims
Sec. 101
4. Excluded Claims
Sec. 101

Rehabilitation
A. General Concepts
FRIA, Sec. 2
1. Requirements for Rehabilitation
2. Modes of Rehabilitation
B. Court-Supervised Rehabilitation
1. Voluntary Proceedings
Sec. 12
2. Involuntary Proceedings
Sec. 13, Sec. 14
3. Provisions Common to Voluntary and Involuntary Rehabilitation
Proceedings
a. Commencement Order
Sec. 15, Sec. 16, Sec. 17, Sec. 21

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b. Stay or Suspension Order

1) General Concepts
Sec. 16 (q), Sec. 20
Rizal Commercial Banking Corporation v. Intermediate
Appellate Court, G.R. No. 74851, December 9, 1999, 320
SCRA 279.
2) Extent of the Stay or Suspension Order
Sobrejuanite v. ASB Development Corporation, G.R. No.
165675, September 30, 2005, 471 SCRA 763.
Town and Country Enterprises, Inc. v. Quisumbing, et al.,
G.R. No. 173610 & 174132, October 01, 2012, 682 SCRA 128.
3) Exceptions to the Stay or Suspension Order
Sec. 18, Sec. 16
FR Rules, Rule 2, Sec. 8 (V)
Metropolitan Waterworks & Sewerage System v. Daway
and Maynilad Water Services, Inc., G.R. No. 160732, June
21, 2004, 432 SCRA 559.
Panlilio, et al. v. Regional Trial Court, Branch 51, City of
Manila, G.R. No. 173846, February 2, 2011, 641 SCRA 438.
c. Subsequent Actions
FRIA, Sec. 22, Sec. 24, Sec. 25, Sec. 26, Sec. 27
d. Rehabilitation Receiver
1) General Concepts
Sec. 28, Sec. 29, Sec. 30, Sec. 32, Sec. 33, Sec. 34, Sec. 35, Sec.
40
2) Powers, Duties and Responsibilities
Sec. 47, Sec. 24, Sec. 31, Sec. 39, Sec. 41
e. Creditors Committees
Sec. 63, Sec. 42, Sec. 43, Sec. 8, Sec. 9
f. Management Committee
Sec. 36, Sec. 37, Sec. 38
g. Treatment of Claims
1) General Concepts
Sec. 4(c), Sec. 16, Sec. 44, Sec. 45, Sec. 46
2) Secured Creditor Claims
Sec. 60, Sec. 61
3) Employee Claims
Sec. 56, Sec. 16, Sec. 133
4) Taxes
Sec. 19, Sec. 62
5) Excluded Claims
Sec. 23
h. Treatment of Assets
1) General Concepts
Sec. 47
2) Unencumbered Assets
Sec. 48, Sec. 49, Sec. 52
3) Encumbered Assets
Sec. 17, Sec. 50, Sec. 51, Sec. 53
i. Treatment of Contracts
1) Confirmation or Termination of Contracts
Sec. 57

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2) Avoidance Proceedings
Sec. 58, Sec. 59
j. Rehabilitation Plan
1) General Concepts
Sec. 4 (ii), Sec. 62, Sec. 54, Sec. 55
2) Cram Down Effect
Sec. 64, Sec. 65, Sec. 66, Sec. 67, Sec. 68, Sec. 69, Sec. 70, Sec.
71, Sec. 72, Sec. 73
Pryce Corporation v. China Banking Corporation, G.R. No.
172302, February 18, 2014, 716 SCRA 207.
k. Termination of Proceedings
Sec. 74, Sec. 75
l. Conversion to Liquidation Proceedings
Sec. 92
C. Pre-negotiated Rehabilitation
Sec. 76, Sec. 77, Sec. 78, Sec. 79, Sec. 80, Sec. 81, Sec. 82, Sec. 92
D. Out-of-Court Rehabilitation
1. General Concepts
Sec. 83, Sec. 84
2. Benefits of Out-of-Court Rehabilitation
Sec. 85, Sec. 86, Sec. 87, Sec. 88, Sec. 89
3. Annulment of the Standstill Agreement or OCRA

Liquidation
A. General Concepts
Civil Code, Art. 2236, Art. 2238, Art. 2239, Art. 2240
FRIA, Sec. 2
B. Liquidation of Insolvent Individual Debtor
1. Voluntary Liquidation
Sec. 103, Sec. 104
2. Involuntary Liquidation
a. Acts of Insolvency
Sec. 105
b. Show Cause Order
Sec. 106
c. Injunction Order
Sec. 106, Sec. 107
d. Custody of Property; Sale of Property
Sec. 108, Sec. 109, Sec. 110
C. Liquidation of Insolvent Juridical Debtors
1. General Concepts
Sec. 93
2. Voluntary Liquidation
Sec. 90
3. Involuntary Liquidation
Sec. 91
FLSP Rules, Rule 2 (B), Sec. 5
D. Provisions Common to Liquidation of Individual and Juridical Debtors
FRIA, Sec. 111.
1. Liquidation Order
Sec. 112, Sec. 113
2. Liquidator

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a. General Concepts
Sec. 115, Sec. 116, Sec. 117, Sec. 118, Sec. 29, Sec. 120, Sec. 122
b. Powers, Duties and Responsibilities
Sec. 119, Sec. 113, Sec. 123, Sec. 126, Sec. 129, Sec. 131, Sec. 132, Sec.
121
3. Claims
a. General Concepts
Sec. 4 (c)
b. Determination of Claims
Sec. 112, Sec. 123, Sec. 124, Sec. 125, Sec. 126
c. Treatment of Claims
1) Secured Creditor Claims
Sec. 113, Sec. 114
Consuelo Metal Corporation v. Planters Development
Bank & Maningas, G.R. No. 152580, June 26, 2008, 555
SCRA 465.
Yngson v. Philippine National Bank, G.R. No. 171132,
August 15, 2012, 678 SCRA 447.
2) Unsecured Creditor Claims
Sec. 123, Sec. 113
4. Treatment of Contracts
a. Termination or Breach of Contracts
Sec. 113
b. Avoidance Proceedings
Sec. 127, Sec. 128
5. Liquidation Plan
Sec. 129, Sec. 130, Sec. 131, Sec. 132, Sec. 133
6. Termination of Proceedings
Sec. 121, Sec. 134, Sec. 135
FLSP Rules, Rule 4 (F), Sec. 29
E. Ancillary Proceedings
1. Securities Market Participant
FRIA, Sec. 136
2. Banks and Other Financial Institutions Under Rehabilitation Receivership
Pursuant to a State-funded or State-mandated Insurance System.
Sec. 137, Sec. 138

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