Home Guaranty Corporation vs. La Savoie Development Corporation

A stipulation allowing a paying guarantor to acquire the secured Asset Pool through automatic conveyance without foreclosure is void pactum commissorium and does not vest ownership; the properties remain within the debtor’s dominion and subject to rehabilitation, and the guarantor becomes a subrogated creditor.

Home Guaranty Corporation is the guarantor under a Contract of Guaranty covering La Savoie Development Corporation’s La Savoie Development Certificates, which were issued through Planters Development Bank as nominal issuer and trustee and secured by an Asset Pool of real properties. La Savoie is a domestic corporation engaged in real estate development, subdivision, and brokering. The Interim Rules of Procedure on Corporate Rehabilitation governed petitions for rehabilitation filed by corporations under Presidential Decree No. 902-A at the time of the relevant incidents.

La Savoie Development Corporation, a domestic corporation incorporated on April 2, 1990, was engaged in real estate development, subdivision, and brokering. With the onset of the Asian financial crisis in 1997, the devaluation of the Philippine peso, lack of working capital, high interest rates, penalties and charges, low demand for real estate properties, and poor peace and order situations in some project sites, La Savoie found itself unable to pay its obligations to its creditors. On April 25, 2003, it filed before the RTC, Makati City a petition for declaration of state of suspension of payments with approval of proposed rehabilitation plan under the Interim Rules. The proceedings were initially held in abeyance because La Savoie failed to attach some requirements; after compliance, the RTC found the petition sufficient in form and substance and issued the June 4, 2003 Stay Order staying enforcement of all claims against La Savoie, its guarantors and sureties not solidarily liable, prohibiting La Savoie from selling, encumbering, transferring, or disposing of its properties except in the ordinary course of business, and prohibiting it from paying liabilities outstanding as of April 25, 2003. The RTC appointed Rito C. Manzana as Rehabilitation Receiver.

After the Stay Order, La Savoie’s creditors Planters Development Bank, Philippine Veterans Bank, and Robinsons Savings Bank filed their Comments and/or Oppositions. HGC filed an Opposition even though it was not a creditor of La Savoie, asserting a material and beneficial interest in relation to the interests of Philippine Veterans Bank, Planters Development Bank, and Land Bank of the Philippines, which were listed as creditors, vis-à-vis certain properties or assets that might have been placed under the RTC or the Rehabilitation Receiver. HGC noted that through the La Savoie Asset Pool Formation and Trust Agreement, La Savoie obtained financing for some of its projects through a securitization process in which Planters Development Bank as nominal issuer issued asset participation certificates dubbed the La Savoie Development Certificates to be sold to investors. The projects financed consisted of the development of real properties in General Trias, Cavite; Sto. Tomas, Batangas; Los Banos, Laguna; and Quezon City. The same properties were conveyed in trust by La Savoie, as trustor, to Planters Development Bank, as trustee, and constituted into the La Savoie Asset Pool. The redemption of the certificates and interest payments were backed or collateralized by the assets conveyed to the trust, and the certificates were covered by a guaranty extended by HGC through a Contract of Guaranty with La Savoie and Planters Development Bank. HGC added that La Savoie collected a total amount of P60,569,134.30 from buyers of some properties covered by the Asset Pool but did not remit it to the trust; with La Savoie’s failure to complete some projects and remit sales collections, the Asset Pool defaulted in redeeming and paying interest on the certificates, and the investors placed a call on the guaranty. HGC held the settlement of the investors’ call in abeyance, but this was overtaken by La Savoie’s Petition for Rehabilitation. HGC argued that it and the investors had preferential rights over the Asset Pool properties because these were conveyed as security or collaterals for the redemption of the certificates, and that they should be excluded from the coverage of La Savoie’s petition. On September 1, 2003, La Savoie filed a Consolidated Answer arguing that the assignment of assets to the Asset Pool was not absolute and was subject to conditions; for the assignment to take effect, HGC had to first pay the holders of the certificates, so the properties comprising the Asset Pool remained its assets. The Rehabilitation Receiver filed a Verification Report on Accuracy of Petition.

On October 1, 2003, the RTC issued an Order denying due course to La Savoie’s Petition for Rehabilitation and lifting the June 4, 2003 Stay Order. The RTC reasoned that the findings of sufficiency in form and substance were flawed and that it could not countenance a petition based on inaccurate or unverifiable allegations and false representations. It noted that per the Rehabilitation Receiver’s Report, there were various inaccuracies in the material allegations of the petition and its annexes, and several documents to verify other material statements were lacking. It added that La Savoie had not presented any concrete and feasible plan on how it would secure additional funds to continue the development of its raw land and on-going joint-venture projects. La Savoie appealed to the CA and filed its Appellant’s Brief on May 5, 2004. In the meantime, HGC approved and processed the call on the guaranty for the redemption of the certificates. HGC, through Planters Development Bank, paid a total of P128.5 million as redemption value to certificate holders. Acting on this, Planters Development Bank executed a Deed of Assignment and Conveyance in favor of HGC through which, in HGC’s words, Planters Development Bank absolutely conveyed and assigned to HGC the ownership and possession of the entire assets that formed part of the La Savoie Asset Pool. HGC also claimed that through the same Deed, Planters Development Bank absolutely conveyed and assigned to it the right to collect from La Savoie cash receivables representing the amount collected by La Savoie from sales in the course of the development of the projects which it failed to remit to the Trust. HGC filed its Appellee’s Brief on August 18, 2004, arguing that all properties comprising the Asset Pool should be excluded from the rehabilitation proceedings in view of the Deed of Assignment and Conveyance, and attached a copy of the Deed to its Brief.

In its Decision dated June 21, 2005, the CA reversed and set aside the RTC’s October 1, 2003 Order, reinstated the Stay Order, gave due course to the Petition for Rehabilitation, and remanded the case to the trial court for further proceedings. The CA characterized the inaccuracies noted by the RTC as minor and trivial and insufficient to render the allegations false. It added that La Savoie convincingly showed that it could undertake to market its projects through the Pag-Ibig Overseas Program, sell the existing inventories of unsold subdivision lots, and use the un-remitted collections due to HGC which would be converted as additional loan to fund its on-going projects. Regarding HGC’s payment of the guaranty call, the CA noted that it was made after the Petition for Rehabilitation had been brought and after the issuance of the Stay Order, so HGC had no right to make such payment. HGC filed the present Petition for Review on Certiorari on August 12, 2005, asserting that the Asset Pool properties should be excluded because they had been removed from La Savoie’s dominion and conveyed and assigned to HGC, and underscoring that the transfer by Planters Development Bank was made after the Stay Order had been lifted by the RTC’s October 1, 2003 Order. La Savoie filed its Comment on October 28, 2005, claiming that the assignment and conveyance to HGC was ineffectual because at the time of the guaranty call the Stay Order dated June 4, 2003 was in effect. It faulted HGC for not adducing proof of the transfer, and added that even assuming full payment and execution of the Deed, the Subject Properties remained within the RTC’s jurisdiction even after the lifting of the Stay Order, and any contract or document affecting title to the Subject Properties was subject to the rehabilitation proceedings. It also asserted that by paying the guaranty, HGC effectively became its creditor, and excluding the Asset Pool from rehabilitation would give HGC preference over other creditors, which is prohibited in rehabilitation proceedings. It ascribed procedural infirmities: that Atty. Danilo C. Javier was not authorized to sign the verification and certificate of non-forum shopping, and that HGC engaged in forum shopping. HGC filed its Reply on February 6, 2006, noting that the Deed of Assignment and Conveyance, the Trust Agreement, the Contract of Guaranty, and certificates of title covering each property comprising the Asset Pool were already attached to its Appellee’s Brief and were re-attached to its Reply.

• Exclusion of the Asset Pool: HGC argued that the properties comprising the Asset Pool should be excluded from La Savoie’s rehabilitation proceedings because they had been removed from La Savoie’s dominion and conveyed and assigned to HGC; it underscored that the transfer by Planters Development Bank was made after the Stay Order had been lifted by the RTC’s October 1, 2003 Order.
• Validity of Payment and Conveyance: HGC maintained that it approved and processed the guaranty call, paid P128.5 million as redemption value to certificate holders through Planters Development Bank, and received a Deed of Assignment and Conveyance conveying the entire Asset Pool and the right to collect La Savoie’s cash receivables.
• Authority to Sign Verification and Certificate of Non-Forum Shopping: HGC argued that Atty. Danilo C. Javier was authorized to sign the verification and certificate of non-forum shopping pursuant to Board Resolution No. 30, Series of 2001, which authorized the President to designate the officer to institute appropriate legal actions and verify pleadings.
• No Forum Shopping: HGC argued that it could not be guilty of forum shopping because the present case is an offshoot of a Petition for Corporate Rehabilitation while Civil Case No. 05314 is an action for injunction, mandamus, specific performance, and sum of money with application for temporary restraining order and/or preliminary prohibitory and mandatory injunction; the reliefs sought are different.

• Effectivity of the Stay Order: La Savoie claimed that the supposed assignment and conveyance to HGC was ineffectual because at the time of the guaranty call, the Stay Order dated June 4, 2003 was in effect.
• Lack of Proof and Continuing Jurisdiction: La Savoie faulted HGC for not adducing proof of the transfer effected by Planters Development Bank; it added that even assuming full payment and execution of the Deed, the Subject Properties remained within the RTC’s jurisdiction even after the lifting of the Stay Order, and any contract or document affecting title was subject to the rehabilitation proceedings.
• Preference of Creditors: La Savoie asserted that by paying the guaranty, HGC effectively became its creditor, and excluding the Asset Pool from rehabilitation would give HGC preference over other creditors, which is prohibited in rehabilitation proceedings; it invoked Article 2067 of the Civil Code.
• Authority to Sign Verification and Certificate of Non-Forum Shopping: La Savoie claimed that Atty. Danilo C. Javier, who signed the verification and certificate of non-forum shopping, was not authorized to do so.
• Forum Shopping: La Savoie claimed that HGC engaged in forum shopping.

• Authority to Sign Verification and Certificate of Non-Forum Shopping: Whether Atty. Danilo C. Javier was authorized to sign the verification and certificate of non-forum shopping on behalf of HGC.
• Forum Shopping: Whether HGC engaged in forum shopping by simultaneously pursuing the present case and Civil Case No. 05314.
• Effect of Appeal on the Stay Order: Whether, following the RTC’s October 1, 2003 Order and pending La Savoie’s appeal, HGC was barred from making payment on the guaranty call and Planters Development Bank was barred from conveying the Asset Pool to HGC.
• Preference of Creditors and Subrogation: Whether HGC’s payment and the conveyance made it a creditor of La Savoie and whether recognizing the validity of the transfer was tantamount to giving it inordinate preference as a creditor.
• Pactum Commissorium and Constructive Trust: Whether the conveyance of the Asset Pool to HGC without foreclosure was void for being pactum commissorium and whether it created a constructive trust in favor of La Savoie.
• Exclusion of the Asset Pool: Whether the properties comprising the Asset Pool should be excluded from La Savoie’s rehabilitation proceedings.

• Authority to Sign Verification and Certificate of Non-Forum Shopping: Yes. Board Resolution No. 30, Series of 2001 authorized the President to designate the officer to institute legal actions and verify initiatory or responsive pleadings; Atty. Javier was designated under that authority.
• Forum Shopping: Yes. HGC engaged in forum shopping by filing Civil Case No. 05314 while pursuing this case, both invoking the same claimed ownership over the Asset Pool and seeking recognition of that ownership.
• Effect of Appeal on the Stay Order: No. The October 1, 2003 Order was immediately executory under Rule 3, Section 5 of the Interim Rules; absent restraint by the CA, the lifted Stay Order did not bar HGC’s payment or Planters Development Bank’s conveyance.
• Preference of Creditors and Subrogation: HGC became a creditor by subrogation, but recognizing the transfer would not be an inordinate preference under the rule because La Savoie was not under receivership at the critical time. The transfer nevertheless failed for pactum commissorium.
• Pactum Commissorium and Constructive Trust: Yes. The conveyance without foreclosure was void pactum commissorium; it did not vest ownership in HGC and created a constructive trust over the Asset Pool for La Savoie.
• Exclusion of the Asset Pool: No. The Asset Pool properties remain within La Savoie’s dominion and subject to the rehabilitation proceedings; HGC must submit as a subrogated creditor.

• Authority to Sign Verification and Certificate of Non-Forum Shopping: HGC’s board issued Board Resolution No. 30, Series of 2001, specifically authorizing the President to designate the officer to institute appropriate legal actions. The resolution states that the authority includes but is not limited to verification of complaints, petitions, answers, replies, and other initiatory or responsive pleadings. Pursuant to this resolution, Atty. Danilo C. Javier, HGC’s then Officer-in-Charge and Vice President for Legal, was made signatory to the Petition’s verification and certificate of non-forum shopping. He was therefore authorized.

• Forum Shopping: The SC applied the settled test: forum shopping exists when the elements of litis pendentia are present or when a final judgment in one case will amount to res judicata in another, tested by identity of parties, rights or causes of action, and reliefs sought. Litis pendentia requires (1) identity of parties or representation of the same interests; (2) identity of rights asserted and relief prayed for, founded on the same facts; and (3) identity of the two cases such that judgment in one, regardless of which party succeeds, would be res judicata in the other. There was identity of parties. HGC argued that the reliefs differed: Civil Case No. 05314 sought to restrain La Savoie’s collections and compel remittance, while this case sought exclusion from rehabilitation. But in both, HGC’s basis was the same supposed ownership of the Asset Pool; the same right and cause of action were invoked, and the same basic relief—recognition of ownership—was sought. The exclusion and remittance were mere incidents. HGC thus engaged in forum shopping. The present Petition or Appeal was not the act constitutive of forum shopping; forum shopping was committed through the filing of Civil Case No. 05314 before the RTC. Apart from this procedural lapse, the transfer also violated pactum commissorium.

• Effect of Appeal on the Stay Order: Rule 4, Section 6 of the Interim Rules authorized the June 4, 2003 Stay Order, which stayed enforcement of all claims against La Savoie and its guarantors and sureties not solidarily liable, and prohibited La Savoie from paying liabilities outstanding as of April 25, 2003. While that Stay Order was in effect, certificate holders were barred from insisting on and receiving payment from La Savoie or HGC, and La Savoie and HGC were barred from paying. But the RTC’s October 1, 2003 Order denied due course to the rehabilitation petition and lifted the Stay Order. Under Rule 3, Section 5 of the Interim Rules, any order issued in rehabilitation proceedings is immediately executory, and a petition for review or appeal does not stay execution unless restrained or enjoined by the CA. La Savoie appealed, but the CA did not issue an injunctive writ or TRO, and La Savoie did not specifically pray for one. The October 1, 2003 Order therefore remained effective; creditors were free to enforce claims, and La Savoie and its guarantors were no longer restrained from paying. HGC, as guarantor, was capacitated under Sections 12 and 13 of the Contract of Guaranty to pay the certificate holders. The formal and substantive requisites for the Deed of Assignment and Conveyance appeared fulfilled, and La Savoie did not show that any condition or requisite was not satisfied.

• Preference of Creditors and Subrogation: Article 2067 of the Civil Code provides that a guarantor who pays is subrogated to all the rights the creditor had against the debtor. By paying the LSDC redemption value, HGC became a creditor of La Savoie. La Savoie invoked the rule against preference, citing Araneta vs. Court of Appeals and the authorities cited there, which explained that suspension of claims during receivership prevents one creditor from obtaining an advantage over others and keeps assets for equitable distribution. Sobrejuanite vs. ASB Development Corporation similarly explained that suspension gives the management committee or rehabilitation receiver breathing space to rescue the debtor. But the SC held that this rule applies in the context of an ongoing receivership; it is not an end in itself but serves the receiver’s breathing space. It does not apply to a corporation that sought receivership but, for lack of judicial sanction, was not put under receivership or was no longer under it. The RTC’s October 1, 2003 Order denied due course to the petition, superseded the June 4, 2003 Stay Order, relieved the receiver, and removed La Savoie from receivership. There was no Stay Order at the critical time HGC paid. If a valid transfer had been made while La Savoie was not under receivership, the properties would no longer be under La Savoie’s dominion and would be beyond the reach of rehabilitation and the rule against preference. However, the transfer was ineffectual. HGC remains a subrogated creditor pending satisfaction of La Savoie’s obligation, and the void conveyance did not terminate the creditor-debtor relationship.

• Pactum Commissorium and Constructive Trust: Articles 2088 and 2137 of the Civil Code prohibit a creditor from appropriating things given by way of pledge or mortgage and from acquiring ownership of real estate for non-payment; contrary stipulations are void. Garcia vs. Villar states the elements of pactum commissorium: (1) a property mortgaged by way of security for the payment of the principal obligation; and (2) a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of non-payment within the stipulated period. Nakpil vs. Intermediate Appellate Court applied the rule where the property was to be considered sold upon failure to reimburse, which amounted to automatic appropriation. Here, Sections 13.1 and 13.2 of the Contract of Guaranty called for the prompt assignment and conveyance to HGC of all corresponding properties in the Asset Pool held as security in favor of the guarantor, and dispensed with foreclosure proceedings, judicial or otherwise. Although the trustee’s intervention was required, the provisions spelled out automatic appropriation by the paying guarantor of the properties held as security. This was a clear case of pactum commissorium, null and void. The conveyance by Planters Development Bank to HGC was ineffectual and did not vest ownership. Under Buan Vda. De Esconde vs. Court of Appeals, constructive trusts are created by equity to satisfy justice and prevent unjust enrichment, and arise contrary to intention against one who, by fraud, duress, or abuse of confidence, obtains or holds a legal right to property he ought not, in equity and good conscience, to hold. Article 1456 of the Civil Code provides that if property is acquired through mistake or fraud, the person obtaining it is a trustee of an implied trust for the benefit of the person from whom the property comes. HGC acquired the Asset Pool by mistake or through the ineffectual transfer—pactum commissorium—made by Planters Development Bank. HGC therefore holds the properties as constructive trustee for La Savoie.

• Exclusion of the Asset Pool: The CA’s June 21, 2005 Decision restored La Savoie’s status as a corporation under receivership. With the constructive trust, the Asset Pool properties remained within La Savoie’s dominion. The restoration of receivership brought the rule against preference into operation, and La Savoie’s continuing ownership entailed the continuing competence of the RTC in the rehabilitation proceedings to rule on how the Asset Pool properties should be disposed, managed, or administered to satisfy La Savoie’s obligations and/or effect its rehabilitation. HGC must therefore submit itself, like La Savoie’s other creditors, to the resolution of the rehabilitation petition. As a paying guarantor, HGC was subrogated into the rights of La Savoie’s creditors and now stands as La Savoie’s own creditor; it remains so pending satisfaction of the obligation, and the void conveyance did not terminate that relationship. The Asset Pool properties are not excluded from the rehabilitation proceedings.

• Pactum Commissorium — A stipulation is void when it allows the creditor to automatically appropriate the property given as security upon the debtor’s non-payment, without foreclosure. The elements are: (1) a property mortgaged by way of security for the payment of the principal obligation; and (2) a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of non-payment within the stipulated period. The SC applied this to Sections 13.1 and 13.2 of the Contract of Guaranty, which allowed HGC to acquire the Asset Pool by conveyance without foreclosure after paying the guaranty; the conveyance was void and did not vest ownership.
• Constructive Trust — A constructive trust is created by equity to satisfy justice and prevent unjust enrichment; it arises contrary to intention against one who, by fraud, duress, or abuse of confidence, obtains or holds a legal right to property he ought not, in equity and good conscience, to hold. Under Article 1456, if property is acquired through mistake or fraud, the person obtaining it is a trustee of an implied trust for the benefit of the person from whom the property comes. The SC held that HGC acquired the Asset Pool through an ineffectual pactum commissorium transfer and therefore held it as constructive trustee for La Savoie.
• Forum Shopping — Forum shopping is committed by a party who institutes two or more suits in different courts, simultaneously or successively, to ask the courts to rule on the same or related causes or grant the same or substantially the same reliefs, on the supposition that one or the other court would make a favorable disposition. The test is whether the elements of litis pendentia are present or whether a final judgment in one case will amount to res judicata in another, namely identity of parties, rights or causes of action, and reliefs sought. The SC found HGC guilty because both this case and Civil Case No. 05314 invoked the same claimed ownership and sought recognition of that ownership, despite differences in specific reliefs.
• Immediately Executory Orders in Rehabilitation Proceedings — Under Rule 3, Section 5 of the Interim Rules, any order issued by the court in rehabilitation proceedings is immediately executory; a petition for review or appeal does not stay execution unless restrained or enjoined by the appellate court. The SC applied this to the RTC’s October 1, 2003 Order lifting the Stay Order; because the CA did not restrain it, the lifting remained effective and HGC was not barred from paying the guaranty.
• Rule Against Preference in Rehabilitation — The suspension of enforcement of claims during receivership is intended to prevent one creditor from obtaining an advantage or preference over others and to give the rehabilitation receiver breathing space. The SC held that the rule applies only while the corporation is under receivership; it does not apply when the corporation sought receivership but was not placed under it or was no longer under it. At the time HGC paid, La Savoie was not under receivership because the RTC had lifted the Stay Order.
• Subrogation of a Paying Guarantor — Under Article 2067 of the Civil Code, a guarantor who pays is subrogated to all the rights the creditor had against the debtor. The SC held that HGC, by paying the LSDC redemption value, became a creditor of La Savoie by subrogation, but this did not validate the void conveyance or remove the Asset Pool from the rehabilitation proceedings.

• "The following are the elements of pactum commissorium: (1) There should be a property mortgaged by way of security for the payment of the principal obligation; and (2) There should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of non-payment of the principal obligation within the stipulated period." — The SC adopted this formulation from Garcia vs. Villar to test the Contract of Guaranty provisions.
• "In this case, Sections 13.1 and 13.2 of the Contract of Guaranty call for the "prompt assignment and conveyance to [Home Guaranty Corporation] of all the corresponding properties in the Asset Pool" that are held as security in favor of the guarantor. Moreover, Sections 13.1 and 13.2 dispense with the need of conducting foreclosure proceedings, judicial or otherwise. Albeit requiring the intervention of the trustee of the Asset Pool, Sections 13.1 and 13.2 spell out what is, for all intents and purposes, the automatic appropriation by the paying guarantor of the properties held as security. This is thus a clear case of pactum commissorium." — The SC applies the doctrine to the guaranty provisions and voids the conveyance.
• "Thus, in both cases, Home Guaranty Corporation is invoking the same right and is proceeding from the same cause of action, i.e., its supposed ownership. True, there is divergence in the details of the specific reliefs it is seeking, but Home Guaranty Corporation is seeking the same basic relief, i.e., the recognition of its alleged ownership. The exclusion of the properties from corporate rehabilitation proceedings and the remittance to it of payments are mere incidents of this basic relief. Accordingly, in simultaneously pursuing the present case and Civil Case No. 05314, Home Guaranty Corporation engaged in forum shopping." — The SC finds forum shopping despite different specific reliefs.
• "So, too, this case falls squarely under Article 1456 of the Civil Code. Home Guaranty Corporation acquired the properties comprising the Asset Pool by mistake or through the ineffectual transfer (i.e., for being pactum commissorium) made by the original trustee, Planters Development Bank." — The SC imposes a constructive trust over the Asset Pool for La Savoie.

• Garcia vs. Villar, G.R. No. 158891, June 27, 2012, 675 SCRA 80 — Cited for the elements of pactum commissorium; the SC applied the test to the Contract of Guaranty.
• Nakpil vs. Intermediate Appellate Court, G.R. No. 74449, August 20, 1993, 225 SCRA 456 — Cited as a similar case where automatic appropriation on failure to pay was treated as pactum commissorium; applied by analogy.
• Buan Vda. De Esconde vs. Court of Appeals, 323 Phil. 81 (1996) — Cited for the definition and classification of trusts, including constructive trusts; applied to hold HGC as constructive trustee.
• Aboitiz Equity Ventures vs. Chiongbian, G.R. No. 197530, July 9, 2014 — Cited for the concept and rationale of forum shopping; applied.
• Top Rate Construction & General Services, Inc. vs. Paxton Development Corporation, 457 Phil. 740 (2003) — Quoted for the definition of forum shopping; applied.
• Yap vs. Chua, G.R. No. 186730, June 13, 2012, 672 SCRA 419 — Cited for the forum-shopping test and the requisites of litis pendentia; applied.
• Araneta vs. Court of Appeals, G.R. No. 95253, July 10, 1992, 211 SCRA 390 — Cited on the rule against preference in receivership; distinguished and limited to ongoing receivership.
• Spouses Sobrejuanite vs. ASB Development Corporation, 508 Phil. 715 (2005) — Cited on the purpose of suspending claims during rehabilitation; distinguished and limited to ongoing receivership.

• Rule 4, Section 6, Interim Rules of Procedure on Corporate Rehabilitation (A.M. No. 00-8-10-SC) — Authorized the June 4, 2003 Stay Order staying enforcement of all claims against La Savoie and its guarantors and sureties not solidarily liable, and prohibiting La Savoie from paying liabilities outstanding as of April 25, 2003.
• Rule 3, Section 5, Interim Rules of Procedure on Corporate Rehabilitation — Provides that any order issued in rehabilitation proceedings is immediately executory and that an appeal or petition for review does not stay execution unless restrained or enjoined by the appellate court; applied to the October 1, 2003 Order lifting the Stay Order.
• Article 2067, Civil Code — Provides that a guarantor who pays is subrogated to all the rights the creditor had against the debtor; applied to make HGC a creditor of La Savoie after it paid the LSDC redemption value.
• Articles 2088 and 2137, Civil Code — Prohibit the creditor from appropriating things given by way of pledge or mortgage and from acquiring ownership of real estate for non-payment; contrary stipulations are void. Applied to Sections 13.1 and 13.2 of the Contract of Guaranty, which allowed automatic conveyance of the Asset Pool without foreclosure.
• Article 1456, Civil Code — Provides that if property is acquired through mistake or fraud, the person obtaining it is a trustee of an implied trust for the benefit of the person from whom the property comes; applied to make HGC a constructive trustee of the Asset Pool for La Savoie.