UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW

CREDIT TRANSACTIONS SYLLABUS – ATTY. JANNET CRUZ-REGALADO

I. General Principles: Credit

A. Common definition of Credit and related transactions

B. What is debt?
C. What is a security
D. Legal Basis:
1) Art. III, Sec. 20, Bill of Rights, the Philippine Constitution
2) Truth in Lending Act, Sec. 3. (2)
3) Code of Commerce, Arts. 1-3
4) R.A. 11057, Personal Security Act

E. Cases:
1) Navoa vs. Court of Appeals, 251 SCRA 545
2) People vs. Concepcion, 44 Phil 126

II. The Loan Contract

A. Art. 1933 – What is a loan – nature and object

B. Art. 1933 – Two kinds of loan: commodatum and simple mutuum
C. Loan vs. credit / credit vs. debt
D. Art 1934 – When may a simple loan be perfected?
E. Arts. 1232, 1233 – When a debt is considered to have been performed/paid
F. Cases:
1) Tolentino & Manio vs. Gonzales Sy Chiam, 50 Phil. 558
2) Saura Import & Export Co. Inc. vs. DBP, 44 SCRA 445
3) BPI Investment Corporation vs. CA & ALS Management and Development Corp, 377
SCRA 117
4) Garcia vs. Thio, 518 SCRA, 433
5) Producers Bank of the Philippines vs. CA, 397 SCRA 651

III. Commodatum

A. Art. 1933 – Definition and Features of a commodatum (Parties, Object & Cause)
B. Arts. 1933, 1935 – The role of the bailor and the bailee
C. Arts. 1936, 1937 – Subject matter of commodatum
D. Arts. 1938, 1939, 1940 – Limitations / Obligations in a commodatum
E. Arts. 1941, 1945 – Obligations of the Bailee
F. Arts. 1946, 1952 – Obligations of the Bailor
G. Art. 1947 – Precarium
H. Cases:
1) BPI Investment Corporation (see above)
2) Producer’s Bank of the Philippines (see above)
3) Republic vs. Court of Appeals, 430 SCRA 493
4) Pajuyo vs. Court of Appeals, 430 SCRA 493
5) Quintos & Ansaldo vs. Beck, 69 Phil. 108

IV. Simple Loan or Mutuum

A. Arts 1933, 1980, 1953 – Definition and Features of a simple loan (Debtor & Creditor as Parties,
Object & Cause)
B. Arts. 1954, 1955 – Fungible/Non-fungible/consumable goods in a loan
C. Arts. 1955, 1249 and 1250 – Payment as an obligation
D. Cases:
1) BPI Family Bank vs. Franco, 538 SCRA 184
2) People vs. Puig and Porras, 563 SCRA 564

E. Difference between a loan and:

1) A credit line
2) Barter
3) Promissory note
4) Trust Receipt
 5) Credit Card and Related Contracts

F. Cases:
1) UCPB vs. Beluso, 530 SCRA 567
2) Bank of the Philippine Islands vs. Yu, 610 SCRA 412
3) Pantaleon vs. American Express, 629 SCRA 276
4) DBP vs. COA, 422 SCRA 459
5) Ching vs. CA, 331 SCVRA 16
6) Landl vs. Metropolitan Bank, 435 SCRA 639

V. Interest: Definition and Principles Involved

A. Art. 1956 – When is interest due

1) Other precepts that govern the imposition of Interest – Civil Code – Arts. 1306, 1958, 1960,
1253, 1423 and 2154
2) Absence and presence of stipulations to pay interests and effects (read: Comment on Cases
on Credit Transactions, Hector de Leon and Hector M. De Leon, Jr. pages 69-76)
3) Monetary interest vis-à-vis Compensatory Interest – Civil Code – Arts. 1956, 2209 and 2212

B. Monetary Interest:

1) Kinds of Interest:
a. Simple – Civil Code – Art. 2209
b. Compound – Civil Code, Art. 2212 in relation to Art. 1959
c. Legal interest – Sec. 1, Usury Law, BSP circular no. 799, series of 2013
d. Lawful Interest – Sec. 2 & 3 of the Usury Law
e. Unlawful/ Usurious interest – Usury Law – Sec. 1, Civil Code – Art. 1957
2) What are escalation clauses? Civil Code – Art. 1308, Usury Law – Sec. 7
3) Cases:
a. De la Paz vs. L & J Development Company Inc., 734 SCRA 364
b. Siga-an vs. Villanueva, 576 SCRA 696
c. PNB vs. Court of Appeals, 263 SCRA 1996
d. Spouses Silos vs. PNB, 728 SCRA 617
e. Abella vs. Abella, G.R. No. 195166, July 8, 2015
f. Rivera vs. Chua, 746 SCVRA 1

C. Compensatory Interest:
1) Precepts: Art. 1169, 1226, 2209, 2210, 2212, 2213, 2226 and 2227
2) Sec. 1, Usury Law and Art. 2209 on the interest rate
3) Cases:
a. Eastern Shipping Lines Inc. vs. CA, 234 SCRA 78
b. Estores vs. Spouses Supangan, 670 SCRA 95

D. Truth Lending Act – R.A. 3765

1) Section 3 – Definition of the following terms:
a. Credit
b. Finance Charge
c. Creditor
d. Person

2) Section 4 – Information to be furnished by a creditor to a person wanting credit

3) Section 6 – Effects of Non-disclosure of Information in Sec. 4
4) Cases:
a. United Coconut Planters Bank vs. Beluso, 530 SCRA 567
b. Consolidated Bank and Trust Company vs. Ca, 246 SCRA 193
c. New Sampaguita Builders vs. PNB, 435 SCRA 565

E. The Usury Law

1) Principles: Civil Code – Art. 1175, 1957, 1961, Usury Law – Secs. 1, 1a, 4a, & B, Sec. 5 & 9a
2) What are usurious act? Secs, 2,3, & 4 of Usury Law
3) Elements of Usury – Case: Herrera vs. Petrophil Corporation, 146 SCRA 385
4) The need to discourage usurious interest – Case: Briones vs. Cammayo, 41 SCRA 404
5) Relevance in view of Sec. 1, Central Bank Circular No. 905, Series of 1982
Case: Advocates of Truth in Lending Act Inc. vs. Bangko Sentral Monetary Board, 688 SCRA
530
 6) Remedies in case of Usurious Interests: Civil Code – Art. 1413, Usury Law – Secs. 6-10

VI. Deposit

A. Definition and features – Arts. 1962, 1963, 1965, 1966

B. Kinds of Deposit – Arts. 1964, 1966

1) Extrajudicial Deposit:
a. Voluntary deposit in general – Arts. 1962, 1963, 1965, 1966, 1968-1971
i. Obligations of the depositary – Arts. 1972-1991
ii. Obligations of the depositor – Arts. 1992-1995
iii. Cases: Calibo Jr. vs. Court of Appeals, 350 SCRA 427
BPI vs. Court of Appeals, 164 SCRA 630
iv. Cases: Roman Catholic Bishop of Jaro vs. de la Pena, 26 Phil. 144
Baron vs. David, 51 Phil. 1

b. Necessary deposit:
i. Deposit in compliance of a legal obligation – Art. 1996 (1)
ii. Deposit due to a calamity – Art. 1996 (2), Art. 2168
iii. Rules governing deposit in compliance of a legal obligation/calamity –
Art. 1997
iv. Deposits made by travelers in hotels or inns/ Responsibilities of Hotel
keeper – Art. 1998 and 1999
v. Other responsibilities of Hotel / Hotel Keeper / Hotel servants &
employees / Strangers – Arts. 2000-2004
vi. Cases: YHT Realty Corp. vs. Court of Appeals, 451 SCRA 638
Makati Shangrila Hotel & Resort vs. Harper, 679 SCRA 444
Durban Apts. Corporation vs. Pioneer Insurance and Surety Corp., 639
SCRA 441
Triple V Food Services vs. Filipino Merchants Insurance Co., G.R.
160544, 2/2/05

c. Judicial Deposit:

i. Definition, Object, Responsibility, Rules governing sequestration – Arts.

1964, 2005-2009
ii. Cases: Del Moral vs. Republic, 457 SCRA 188
Republic vs. Sandiganbayan, 206 SCRA 506

VIII. GUARANTY AND SURETY

Nature of a guaranty:

A. What is guaranty? – Art. 2047

B. A guarantee is not the same as a suretyship – Art. 2048, 1211, 1216, 1217, 2053, 2066, 2067
C. Cause of the contract of Guaranty – Art. 2048
D. A guarantee entered without knowledge and against will of debtor – Art. 2015
1. Effect of payment against will of debtor – Art. 1236
2. Effect of payment on behalf of the debtor against latter’s consent – Art. 1237

E. Kinds of guaranty (manner of creation) – Art. 2051

F. In whose favor is a guaranty constituted? – Art. 2051
G. Guarantee as an accessory contract – Art. 2052
H. Guarantee as a security for future debts – Art. 2053
I. Who are the parties to a guaranty? Arts. 2056, 2057, 2049
J. May the Guarantor bind himself for more that the principal debtor? – Art. 2054
K. Form of a Guaranty – Art. 2055
L. When can the Creditor compel the guarantor to pay? Art. 2058

Effects of a Guaranty:

A. What is excussion? – Art. 2058

B. When will excusion not take place? – Art. 2059
C. How can guarantor use the benefit of excussion? – Art. 2060
D. Effect of Creditor’s failure in Exhausting – Art. 2061
E. Guarantor and debtor as defendants to the suit. – Art. 2062
F. Effect of a Compromise – Art. 2063
G. Several Guarantors of one debtor and same debt: Division process – Art. 2065

The Guarantor who pays for a Debtor: Implications

A. Debtor to indemnify Guarantor – Art. 2066, 2067

B. Payment without notification to Debtor – Art. 2068, 2070
C. Payment before due date – Art. 2069
D. When can guarantor proceed against debtor he pays? – Art. 2071
E. Guarantor of a Third person – Art. 2072

Effects of Guaranty between Co-Guarantors: Arts. 2073-2075

Extinguish of Guaranty

A. When is a guaranty extinguished? – Art. 2076

B. Acceptance of immovable or other property as payment – Art. 2078
C. Creditor’s extension of time to pay to debtor and effect on guaranty – Art. 2079
D. Release of Solidary guarantors from payment of obligation – Art. 2080
E. Defenses to be set up by Guarantor against Creditor – Art. 2081

Cases:

A. E. Zobel Inc. vs. CA, 290 SCRA 1

B. Tupaz IV vs. Tupaz vs. Court of Appeals & BPI, 475 SCRA 398
C. Ong vs. PCIB, 448 SCRA 705
D. Dino vs. Court of Appeals, 216 SCRA 9
E. Toh vs. Solid Bank, 408 SCRA 544
F. Palmares vs. CA and MB Lending Corp., 288 SCRA 422

IX. LEGAL AND JUDICIAL BONDS

A. Definition, Nature and Form of Bond – Art. 2082

B. Qualifications of Sureties in a Property Bond – Rule 114, Secs. 11,12,13, Rules of Court
C. Alternative to provision of a Bond – Art. 2083
1. Pledge – Arts. 2085, 2087, 2094, 2095
2. Mortgage – Arts. 2124, 2126
D. Excussion and the bondsman / sub-surety – Art. 2084, 2058, 2059

X. PLEDGE AND MORTGAGE

A. Concepts Common to Pledge and Mortgage

1. Essential Requisites of the Contracts of Pledge and Mortgage - Art. 2085, 2086 and 2087
2. Creditor is prohibited to Appropriate Property Pledged or Mortgaged – Art. 2088
3. The Concept of Pactum Commissiorium - Art. 2088
4. Indivisibility of a Pledge or Mortgage – Arts. 2089 and 2090
5. Pledge and Mortgage as Security for Obligations – Art. 2091
6. Promise to Create a Pledge or Mortgage as a Personal Action – Art. 2092

B. The Personal Property Security Act- Republic Act No. 11057 (“PPSA”)

1. Focus on R.A. 11057’s Title – Strengthening the Legal Framework of secured transactions
involving persona property
2. Sec. 2 - Declaration of Policy: Promotion of Economic Activity / Access to Credit
3. Effectivity of the PPSA - Secs. 62, 67, 68, R.A. 11057
4. Effect of the PPSA on Civil Code/ special laws on: a) Pledge / Chattel Mortgage : Arts.
2085-2092 & 2127, 2140-2141, CC b) Arts. 2241, 2243 & 2247, CC
5. Scope of the PPSA – Chap. 1, Sec. 4,
a. In relation to Arts. 416 & 417, Civil Code
b. Other personal property in PPSA: Secs. 3(b)(3), 3(c)(3), 3(j), Sec. 7, Sec. 8(b), Sec.
12, Sec. 14 (a), Sec.18 (e & f), Sec. 23 (b) and (c), Secs. 24&25
6. Nature of a Security Interest under the PPSA:
a. Continuity – Chap. 2, Sec. 9
b. Collateral: description – Chap. 2, Sec, 7
c. Proceeds – Chap. 2, Sec. F
d. Right to Proceeds ad commingled funds & Money- Chap. 2, Sec. 8
e. Property mortgaged subject to fulfillment of obligation- Art. 2126, CC
7. The Security Interest and Parties Involved:
a. Definition of Security Interest – Chap.1, Sec. 3 (j)
b. The Grantor – Chap. 1, Sec. 3 (c)
c. The Secured Creditor - Chap. 1, Sec. 3 (i)
8. How is a Security Interest created? - Chap. 2, Sec. 5
9. Form of Security Agreement? – Chap. 2, Sec. 6 ,PPSA, Art. 1307/1157,CC, Chap.1, Sec. 3
(k),
10. Collateral described – Chap. 2, Sec. 7, PPSA
11. Perfection of Security Interest – Chap. 3, Sec. 11, PPSA
12. Means of Perfection & Change in Means of Perfection- Chap.3,Secs.12/15, PPSA
a. In relation to Art. 2140, 2125, CC
13. Perfection by:
a. Control – Chap. 3, Sec. 13, PPSA, Chap.1, Sec, 3b(1-3)
b. Possession – R.A. 11057, Sec. 12, Arts. 523, 2093, CC
c. Registration – Chap. 3, Sec. 12, PPSA
14. Assignment of Security Interest – Chap. 3, Sec. 16, PPSA
15. Disposition of Collateral and Perfection of Interest- Chap. 2 Sec. 9, Chap. 3, Sec. 14, Chap.
4, Sec. 21, PPSA
16. Priority of Security Interest and the Importance of Registration in the Electronic Registry of
the Land Registration Authority (LRA) – Chap. 4, Sec. 17, Chap. 5, Secs. 26, 27, 28, 29, 30
-43, PPSA
17. Priority of Security Interest:
a. By Perfection of Control- Chap. 4, Sec.18, PPSA
b. Instruments and Negotiable documents – Chap. 4, Sec. 19, PPSA
c. By Operation of Law- Chap. 4, Secs. 20 – 22 in relation to Arts. 2241, 2243, 2247-47,
Civil Code
d. Purchase Money Security Interest – Chap. 4, Secs. 23, 24 and 25, PPSA

C. Cases:

A. Ong vs. Roban Lending Corp., 557 SCRA 516

B. DBP vs. CA, 284 SCRA14,
C. Bustamante vs. Rosel, 319 SCRA 413

D. The Personal Property Security Act- Republic Act No. 11057 (“PPSA”)

18. Focus on R.A. 11057’s Title – Strengthening the Legal Framework of secured transactions
involving persona property
19. Sec. 2 - Declaration of Policy: Promotion of Economic Activity / Access to Credit
20. Effectivity of the PPSA - Secs. 62, 67, 68, R.A. 11057
21. Effect of the PPSA on Civil Code/ special laws on: a) Pledge / Chattel Mortgage : Arts.
2085-2092 & 2127, 2140-2141, CC b) Arts. 2241, 2243 & 2247, CC
22. Scope of the PPSA – Chap. 1, Sec. 4,
a. In relation to Arts. 416 & 417, Civil Code
b. Other personal property in PPSA: Secs. 3(b)(3), 3(c)(3), 3(j), Sec. 7, Sec. 8(b), Sec.
12, Sec. 14 (a), Sec.18 (e & f), Sec. 23 (b) and (c), Secs. 24&25
23. Nature of a Security Interest under the PPSA:
a. Continuity – Chap. 2, Sec. 9
b. Collateral: description – Chap. 2, Sec, 7
c. Proceeds – Chap. 2, Sec. F
d. Right to Proceeds ad commingled funds & Money- Chap. 2, Sec. 8
e. Property mortgaged subject to fulfillment of obligation- Art. 2126, CC
24. The Security Interest and Parties Involved:
a. Definition of Security Interest – Chap.1, Sec. 3 (j)
b. The Grantor – Chap. 1, Sec. 3 (c)
c. The Secured Creditor - Chap. 1, Sec. 3 (i)
25. How is a Security Interest created? - Chap. 2, Sec. 5
26. Form of Security Agreement? – Chap. 2, Sec. 6 ,PPSA, Art. 1307/1157,CC, Chap.1, Sec. 3
 (k),
27. Collateral described – Chap. 2, Sec. 7, PPSA
28. Perfection of Security Interest – Chap. 3, Sec. 11, PPSA
29. Means of Perfection & Change in Means of Perfection- Chap.3,Secs.12/15, PPSA
a. In relation to Art. 2140, 2125, CC
30. Perfection by:
a. Control – Chap. 3, Sec. 13, PPSA, Chap.1, Sec, 3b(1-3)
b. Possession – R.A. 11057, Sec. 12, Arts. 523, 2093, CC
c. Registration – Chap. 3, Sec. 12, PPSA
31. Assignment of Security Interest – Chap. 3, Sec. 16, PPSA
32. Disposition of Collateral and Perfection of Interest- Chap. 2 Sec. 9, Chap. 3, Sec. 14, Chap.
4, Sec. 21, PPSA
33. Priority of Security Interest and the Importance of Registration in the Electronic Registry of
the Land Registration Authority (LRA) – Chap. 4, Sec. 17, Chap. 5, Secs. 26, 27, 28, 29, 30
-43, PPSA
34. Priority of Security Interest:
a. By Perfection of Control- Chap. 4, Sec.18, PPSA
b. Instruments and Negotiable documents – Chap. 4, Sec. 19, PPSA
c. By Operation of Law- Chap. 4, Secs. 20 – 22 in relation to Arts. 2241, 2243, 2247-47,
Civil Code
d. Purchase Money Security Interest – Chap. 4, Secs. 23, 24 and 25, PPSA

35. Enforcement of Security:

a. Repossession Without the need of a judicial process:
1)Expedited Repossession of Collateral – Chap. 6,Sec. 47, (a) and (b)
2)Recovery in special cases – Chap. 6, Sec. 48
b. Repossession Through a judicial process – Chap. 6, Sec. 47 (c), Sec. 63
c. Recovery without judicial process – Chap 6, Sec. 48
d. Disposition of Collateral – Chap. 6, Secs. 49-52
e. Retention of Collateral by Secured Creditor – Chap. 6, Sec. 54
f. Rights related to Enforcement:
1)Right of Redemption- Chap. 6, Sec. 45
2)Right of Higher Ranking Secured Creditor – Chap. 6, Sec. 46

36. Transitional Provisions:

a. Interpretation- Chap. 7, Sec. 55-59

37. Cases:

a. Nature of a Security Agreement – Mla. Banking vs. Teodoro , G.R. No. 53955,
January 13, 1989, 169 SCRA 95, Yao Chu vs. Court of Appeals, G.R. No. L-78519,
September 26, 1989, 177 SCRA 793*

b. Registration and Priority of Rights- Gatioan vs. Gaffud, G.R. No. L-21953, March 28,
1969, 27 SCRA 706*

c. Recovery as an enforcement procedure- Citibank N.A. vs. Investors Finance

Corporation vs. Sabeniano, G.R. No. 156132, Oct. 12, 2006, 504 SCRA 378*
d. Redemption – Medida et.al vs. Court of Appeals, et.al, G.R. No. 98334, May 8, 1992,
208 SCRA 887, Paray vs. Espeleta vs. Rodriguez, G.R. No.132287, 479 SCRA 571*

Note: Cases taken from Prof. Stephanie Somera’s Notes and Cases on the Personal Security
Act.

E. Mortgage

1. Object of a Mortgage Contract – Art. 2124

- Characteristics
- Difference from a pledge
2. Registration as a requirement for validity of a mortgage – Art. 2125
- Effects of unrecorded mortgage
- Effect of registration
3. Objects to which a mortgage extends – Art. 2127
4. Alienation of a mortgage credit – Art. 2128
5. Right of the Creditor to seek relief from possessor of mortgaged property-Art.2129
6. Effect of stipulation forbidding alienation of property mortgaged – Art. 2130
7. Rules governing the form, extent and consequences of a mortgage – Art. 2131
8. Foreclosure of Real Estate Mortgage
- Judicial foreclosure – Rule 68, secs. 1-8, 31-34, Rules of Court
- Extrajudicial foreclosure – Secs. 1-9, Act 3135 , Rule 39, secs.27-30, Rules of Court

Cases:

A. Prudential Bank vs. Alviar, 464 SCRA 353,

B. Star Two Inc. vs. Paper City Corp. of the Phil., 692 SCRA 438,
C. People’s Bank & Trust Company & Atlantic Gulf vs. Dahican, 20 SCRA 84,
D. Garcia vs. Villar, 675 SCRA 80,
E. Korea Exchange Bank vs. Filkor Integrated, 380 SCRA 381,
F. Huerta Alba Resort Inc. vs CA, 339 SCRA 534,
G. Grand Farms Inc. vs. Philippine Shares Corp. vs. CA, 193 SCRA 748,
H. Spouses Yap vs. Spouses Dy, et al, 654 SCRA 593,
I. Medida vs. CA, 208 SCRA 887,
J. Suico vs. PNB, 531 SCRA 514,
K. Cua Lai Chu vs. Lacqui and Phil. Bank of Communications, 612 SCRA 227,
L. BPI vs. Golden Power Diesel Sales Center, 639 SCRA 405

XI. Antichresis

A. Definition of Antichresis - Art. 2132

- Difference from a mortgage and pledge
B. Measure of application of the value of fruits – Art. 2133
C. Obligation of the creditor to pay taxes and expenses for preservation – Art. 2135
D. When can debtor reacquire enjoyment of the immovable – Art. 2136
E. Applicability of pactum commissorium to antichresis - Art. 2137
F. When value of fruits exceed the amount of interest of the debt upon which an antichresis has
been entered into – Art. 2138

XII. Concurrence and Preference of Credits

A. Concurrence and preference of credits of the Civil Code in relation to rehabilitation under the
Financial Rehabilitation and Insolvency Act of 2010 (FRIA) – Secs. 62 and 133, FRIA
B. General Classification / Categories of Credit: (Movables) -Secs. 2241, Art. 416-417, Civil
Code and other personal property in PPSA: Secs. 3(b)(3), 3(c)(3), 3(j), Sec. 7, Sec. 8(b),
Sec. 12, Sec. 14 (a), Sec.18 (e & f), Sec. 23 (b) and (c), Secs. 24&25, (Immovables) – Art.
2242
C. Art. 2242 – not a preference but an enumeration except for taxes under par. (1):
- Effects of registered / unregistered price of real property sold under par. (2)
- Recorded mortgage credits – how it is given preference under par. (5)
- Credits annotated in the Registry of Property – how priority is given under par. (7)
- Expenses for repair or reconstruction of thing (labor, materials, preservation/ improvement of
real property under pars. (3), (4) and (6)
D. Claims or credits in Art. 2242 to be considered as a mortgage
E. Preference of credits in real property in Art. 2244 – not an enumeration but a preference:
- Precedence of Liens over ordinary preferred credits
- Order of priority provided in relation to Insolvent’s free property
- Monetary claims and unpaid wages
- Credits evidenced in public instruments and final judgments
- In relation to obligations of the state
F. No preference for credits of any other kind or class -Art. 2245
G. Order of Preference of Credits – Art. 2248, 2249 and 2250 in relation to Art. 2242: Two tier
order of preference
H. Satisfaction of credits with/ without order of preference – Art. 2242/2251
I. Cases in relation to PPSA and Concurrence / Preference of Credits
-Yun Chu vs. CA, 177 SCRA 793
-Manila Banking Corporation vs. Teodoro Jr, 169 SCRA 95
-PCI Leasing and Finance Inc. vs. Trojan Metal, 638 SCRA 615
 -Citibank, N.A. and Investors Finance Corp vs. Sabeniano, 504 SCRA 378
-J.L. Bernardo Construction vs. CA, 324 SCRA 34
-Cordova vs. Reyes Daway Lim Bernardo Lindo Rosales Law Offices, 526 SCRA 300

XIII. The Financial Rehabilitation and Insolvency Act of 2010 (“FRIA”)

A.FRIA’s background and related rules - ( Financial Rehabilitation Rules of Procedure, Supreme
Court (FR Rules ), Rule 1, Sec. 1, Financial Liquidation and Suspension Rules of Procedure for
insolvent debtors, (FSLP, Rule 1, Sec. 1)
B. Purpose of the FRIA – Sec. 2, FRIA
C. What is insolvency?
- Definition under the FRIA , (Sec. 4, FR Rules)
- Is insolvency similar to Bankruptcy or Illiquidity?
D. Definition of terms:
- What are considered claims under the FRIA? – Chap. 1, Sec. 4 (c)
- Who are considered as debtors ? – Chap. 1, Secs. 4 (k), (m), (n), (o)
- Difference between liabilities and lien – Chap 1, Sec. 4 (s), (t), (cc)
- Role of the Commissioner – FLSP Rules, Rule 3, Sec. 5
E. Definition & Nature of the various proceedings under the FRIA – Chap. 1, Sec. 3
- What is a rehabilitation? FRIA, Sec. 4 (gg)
- Court Supervised Rehabilitation: Voluntary and Involuntary Petitions ( Chap. II, Secs. 12
&13)
1) Aims of Rehabilitation
2) Court’s issuance of a Commencement Order: Duration and Effects -(Chap.II, Secs.15,16, 21)
3) Inclusion of a Stay or Suspension Order- ( Chap. II, Sec. 16 (q))
4) Effects of a Suspension Order -(Chap. II Secs. 17, 19)
5) Cases where a Stay or Suspension Order does not apply - (Chap. II, Sec. 18)
6) Effectivity and Duration of a Commencement Order - (Chap. II, Sec. 21)
7) Factors to be considered by the Court to determine successful rehabilitation of Debtor [Chap II,
Sec 21 (a) to (g) ]
8) The Rehabilitation Plan and its contents – (Chap. 2, Secs. 62 -64, 65-73)
9) The Rehabilitation Receiver:
- Qualifications and Appointment – (Chap. II, Secs. 28, 29,30)
- Role and functions – [Chap. ll, Sec. 17(a), Secs. 21(b),(d), Sec. 24, 31, 36,44]
- Grounds for Removal of Rehabilitation Receiver – (Chap. 2, Sec. 32)
10) What happens before and during the hearings? - (Chap. 2, Secs. 45, 22, 23, 24)
11) Creation of a Management Committee: Whys and Hows - (Chap.2, Sec. 36-38)
12) Creation of a Creditor’s Committee and its Role – (Chap. 2, Secs. 42-43)
13) Actions on the Petition – (Chap. 2, Sec. 22, 24,25, 26, 27)
14). The Various Claims
- In general- Secs. 4(c), 16, 44-46
- Secured Claims of Creditors- Secs. 60-61
- Taxes – Sec. 19 and 62
- Claims of Employees / Workers – Secs. 16, 56, 133
- Claims not included – Sec. 23
15) Contracts: Confirmation and Avoidance- Secs. 57, 58 and 59
16) Termination of Proceedings- Secs. 74 and 75

-Pre-negotiated Rehabilitation: FRIA, Secs. 76-82 and 92

-Out of Court or Informal Restructuring Agreements / Rehabilitation: Secs. 83-89

-Liquidation:

1) Under the Civil Code - Arts. 2236, 2238, 2239, 2240

2) Insolvent Juridical Debtor:
-Voluntary / Involuntary – FRIA, Chap. V, Secs. 90, 91
-Conversion into Liquidation proceedings- FRIA, Chap.V, Sec. 93
3) Insolvent Individual Debtor:
-Voluntary Liquidation by suspension of payments: FRIA,Chap V, Sec.94
-Voluntary Liquidation by petition : FRIA, Sec. 103-104
-Involuntary Liquidation: Processes Involved – FRIA Secs. 105-110
4) What is a liquidation order? – FRIA Secs. 112-113
5) The liquidator: Election, Qualifications, Powers – FRIA Secs. 115-122
6) The liquidation Plan- FRIA Secs. 129-133
6) How claims are established -FRIA Secs. 112, 123-126
7) How claims are treated – FRIA, Secs. 113-114 & 123
8) Avoidance Proceedings – FRIA Secs. 127-128
9) Completion of liquidation – FRIA Secs. 134-135

-Proceedings Ancillary to Other Insolvency or Rehabilitation processes:

1) Banks and other Financial Institutions Under Rehabilitation- FRIA,Chap. VIII,

Secs. 137 -138
2)Cross border Insolvency Proceedings- FRIA, Chap. VIII, Secs. 139-142

-Cases:

1) Viva Shipping Lines vs. Keppel Philippines Mining, G.R. 177382, 2/17/16
2) Rizal Commercial Banking Corp. vs. IAC, 320 SCRA 279
3) Town and Country Enterprises Inc. vs. Quisumbing, 682 SCRA 128
4) Metropolitan Waterworks vs. Daway and Maynilad Water Services, 432 SCRA 559
5) Philippine Assets Growth Two Inc. & Planters Devt. Bank vs. Fastech Synergy Phils.
G.R. No. 206528, June 28, 2016
6) Pryce Corporation vs. China Banking Corporation, 716 SCRA 207
7) Consuelo Metal Corporation vs. Planters Devt. Bank & Maningas, 555 SCRA 465
8) Yngzon vs. PNB, 678 SCRA 447