Digests

The case involves a dispute over a loan transaction secured by a real estate mortgage on a co-owned property, where the creditor imposed a monthly interest rate of 5%. The litigation addresses the validity of such high interest rates in light of the removal of usury ceilings by Central Bank Circular No. 905-82, the effect of unconscionable interest on the validity of foreclosure proceedings, and the extent of a co-owner's authority to encumber property held in common.

A stipulated interest rate of 5% per month or 60% per annum in a contract of simple loan (mutuum) is unconscionable, excessive, and void ab initio for being contrary to morals and the law, regardless of the debtor's voluntariness or capacity to pay; such void stipulation is replaced by the BSP-mandated legal rate of 12% per annum (until June 30, 2013) and 6% per annum (from July 1, 2013 onwards) for the entire duration of the unpaid loan; foreclosure proceedings premised on a demand that includes void interest are invalid for lack of a valid demand and default; and a co-owner may validly mortgage only her proportionate undivided share in a co-owned property under Article 493 of the Civil Code.

Spouses Rodrigo and Erlinda Mercado obtained a revolving credit line from Security Bank Corporation, which they secured with real estate mortgages over five parcels of land located in Lipa City, San Jose, and Batangas City. Following their default, Security Bank initiated extrajudicial foreclosure proceedings under Act No. 3135. The spouses contested the foreclosure sales and the interest rates imposed, leading to consolidated civil actions for annulment and petitions for writ of possession that eventually reached the Supreme Court on appeal.

Foreclosure sale notices containing substantial errors in property descriptions—such as incorrect lot numbers and omitted locations—that could deter or mislead prospective bidders render the foreclosure sale void; and contractual provisions granting the creditor sole and unbridled discretion to determine floating interest rates, without reference to market-based rates and without the borrower's written consent for modifications, violate the principle of mutuality of contracts and are void ab initio.

The case involves a dispute over the validity of a real estate mortgage and its foreclosure where the mortgagor, Edgardo Del Rosario, represented himself as single despite being married to Rosie Gonzales Del Rosario. The mortgage covered six parcels of land in Quezon City that formed part of the conjugal partnership of gains. After defaulting on the loan obligations, the mortgagee, Boston Equity Resources, Inc., foreclosed the mortgage extrajudicially and emerged as the sole bidder. The spouse and children of the mortgagor subsequently intervened to challenge the validity of the mortgage and foreclosure on the ground that the properties were conjugal and the mortgage lacked the wife's written consent.

A real estate mortgage executed over conjugal properties without the written consent of the other spouse, as required by Article 124 of the Family Code, is void ab initio and renders the foreclosure proceedings null and void, even though the principal loan obligation remains valid and enforceable through ordinary judicial action.

Petitioners-spouses Miles were registered owners of a parcel of land in Makati City covered by Transfer Certificate of Title (TCT) No. 120427. Prior to leaving for the United States, they entrusted the duplicate certificate of title to their niece, Rodora Jimenez, to offer the property to prospective buyers. While the petitioners were abroad, the property was allegedly transferred to spouses Ricardo and Cresencia Ocampo through a falsified Deed of Donation, resulting in the cancellation of TCT No. 120427 and the issuance of TCT No. 212314 in the name of spouses Ocampo.

A mortgagee who relies in good faith on the mortgagor's certificate of title, without any signs arousing suspicion as to the title's validity, is considered a mortgagee in good faith entitled to protection under the Torrens system; dealing with the mortgagor through a middleman does not per se constitute bad faith absent corrupt motive or intention to take unconscientious advantage of another.

The case arises from the employment of an overseas Filipino seafarer under the 2010 Philippine Overseas Employment Administration-Standard Employment Contract (POEA-SEC). It involves a dispute over the validity of dismissal for alleged breach of shipboard discipline standards, specifically the refusal to acknowledge receipt of a written reprimand for returning late from shore leave.

For insubordination to constitute a just cause for dismissal under the Labor Code and the POEA Standard Employment Contract, the employer must prove that the employee's conduct was willful (characterized by a wrongful and perverse attitude) and that the order disobeyed was reasonable, lawful, known to the employee, and directly connected to the performance of his duties. The refusal to sign administrative documents unrelated to core duties does not warrant the supreme penalty of dismissal. Furthermore, the mandatory disciplinary procedures under Section 17 of the POEA-SEC must be strictly observed before termination, absent any clear and existing danger to the safety of the crew or vessel.

The dispute arose from a Contract of Building Construction dated May 22, 1979 for the construction of "Vista Del Mar Executive Houses" in Mariveles, Bataan. Spouses Roxas, as owners, engaged Dominguez as contractor to complete the project for P300,000.00 in labor costs, while Philtrust Bank agreed to finance materials up to P900,000.00. To guarantee performance, Dominguez secured FGU Surety Bond No. G(23) 5954 for P450,000.00, binding FGU and Dominguez jointly and severally to pay the obligees in case of non-performance. When Dominguez abandoned the project due to payment disputes, litigation ensued regarding the extent of the surety's liability, the validity of liquidated damages clauses, and the rights of the parties to set off mutual obligations.

The liability of a surety under a performance bond is strictly limited to the amount stipulated in the bond and is determined in accordance with the bond's specific terms; the surety is solidarily liable with the principal for the full face amount upon default, but may invoke compensation (set-off) against amounts owed by the creditor to the principal debtor pursuant to Article 1280 of the Civil Code.

The case arose from a P300 million term loan obtained by Gotesco Properties, Inc. from Solidbank Corporation in 1995, secured by a Mortgage Trust Indenture over several properties. Following the 1997 Asian Financial Crisis, Gotesco faced financial difficulties and proposed loan restructuring, which Solidbank allegedly accepted by implication when it demanded additional collateral due to decreased property values. The dispute centers on whether the subsequent extrajudicial foreclosure was valid and whether the requirements of Act No. 3135 were satisfied.

The requirement for publication of a Notice of Sale in an extrajudicial foreclosure under Act No. 3135 is complied with when the publication is circulated in the city where the property is located, regardless of where the newspaper is printed or published; and the mortgagor's failure to maintain the sound value of collateral as required by the mortgage contract constitutes an event of default authorizing foreclosure.

In extrajudicial foreclosure proceedings under Act No. 3135, while personal notice to the mortgagor is not generally required, parties may contractually stipulate for such notice, and failure to comply with this stipulation renders the foreclosure null and void; additionally, a dragnet clause in a real estate mortgage does not automatically extend to future advances secured by other collateral unless the subsequent advance specifically refers to the mortgage as security or there is clear evidence that the parties relied on the original security (reliance on security test).

The dispute arose from a real estate mortgage executed by A&A Swiss International Commercial, Inc. over a parcel of land in Cebu City to secure credit purchases of Move Overland Venture and Exploring, Inc. from Dura Tire. After A&A Swiss sold the mortgaged property to Makilito Mahinay, who expressly acknowledged the mortgage and assumed liability, the principal debtor defaulted. This triggered an extrajudicial foreclosure and a Certificate of Sale in favor of Dura Tire, initiating over a decade of litigation regarding the validity of the foreclosure and the existence of the right to redeem.

The one-year period for redemption under Section 6 of Act No. 3135 is fixed and non-extendible; it is not tolled or interrupted by the filing of an action to annul the foreclosure sale or to enforce the right of redemption, as allowing otherwise would create a dangerous precedent encouraging frivolous suits and prolonging economic uncertainty over property ownership.

The case involves a dispute over the evidentiary requirements for proving credit card debt in a collection suit. The creditor sued for non-payment of credit card obligations but presented only a Statement of Account reflecting a previous balance with accumulated interest and penalty charges, without detailing the specific purchase transactions that gave rise to the principal debt. The issue required clarification on whether such a statement constitutes sufficient proof of the debt under the rules on preponderance of evidence and the nature of credit card arrangements as simple loans.

Credit card arrangements are simple loan arrangements (mutuum) between the card issuer and the card holder, involving three distinct contracts: (1) the sales contract between the credit card holder and the merchant, (2) the loan agreement between the credit card issuer and the credit card holder, and (3) the promise to pay between the credit card issuer and the merchant. A Statement of Account showing a running balance of accumulated debt from past transactions is valid, but the creditor must prove the underlying debt by preponderance of evidence; the mere presentation of a statement showing only previous balance, late charges, and interest without supporting transaction details is insufficient to warrant judgment without giving the creditor an opportunity to present additional evidence.

The case arose from the discovery by spouses Eliseo and Carmelita Borlongan in 2012 that their conjugal property in Pasig City had been sold at public auction to Banco de Oro (BDO) in 2009. The sale was executed pursuant to a 2007 judgment of the Regional Trial Court (RTC) of Makati in a collection suit where Carmelita was impleaded as a surety for the obligations of Tancho Corporation. The husband, Eliseo, was not a party to the surety agreements or the collection suit. The central dispute involves the validity of the service of summons upon Carmelita, the effect of the surety obligation on conjugal property, and the right of the non-debtor spouse to challenge the execution sale in an independent proceeding.

A non-debtor spouse is considered a "stranger" to a collection suit who may file an independent action to annul the levy and execution sale of conjugal property under Section 16, Rule 39 of the Rules of Court if the surety agreement executed by the debtor-spouse did not redound to the benefit of the conjugal partnership; furthermore, service of summons by publication is improper unless the defendant's whereabouts are unknown despite diligent inquiry, and the denial of a TRO constitutes a violation of the constitutional right to due process where the validity of the judgment and execution is directly assailed.

The case arises from the intersection of a lease agreement and a loan secured by real estate mortgage between the same parties. The petitioner, a banking institution, was simultaneously the lessee of a commercial building and the creditor of the respondent-lessor. The dispute centered on the proper application of rental payments—whether they could be offset against loan obligations, whether they were properly consigned when a third party claimed ownership, and whether the bank could retain such rentals to cover an alleged deficiency after foreclosing on a substituted collateral.

Consignation of debt payments is necessarily a judicial act that requires deposit with the court or judicial authorities; deposit in a private non-drawing savings account is legally ineffective and does not extinguish the obligation or prevent delay. Furthermore, a mortgagee seeking to recover a deficiency after foreclosure must strictly prove the debtor's exact outstanding obligation as of the date of the foreclosure sale, and cannot apply disputed rental proceeds to an unproven deficiency claim.

DBP held certificates of title as security for loans extended to Abad, et al. When the loans became due, DBP called on the guarantee of Guarantee Fund for Small and Medium Enterprise (GFSME) and turned over the titles to GFSME. Abad, et al. subsequently filed a replevin action to recover the titles, obtaining a writ of seizure secured by a bond from Country Bankers Insurance Corporation (CBIC). The case was dismissed for improper venue before trial on the merits.

A claim for damages against a surety bond posted to secure a provisional remedy (such as replevin or attachment) must be filed before trial or before appeal is perfected or before the judgment becomes executory under Section 20, Rule 57 and Section 10, Rule 60 of the Rules of Court. A trial court does not acquire residual jurisdiction over a case dismissed without prejudice (such as for improper venue) where no appeal was filed, and equity cannot be invoked to circumvent procedural rules.

The case arose from a credit accommodation obtained by United Alloy Philippines Corporation (UNIALLOY) from United Coconut Planters Bank (UCPB), evidenced by a Credit Agreement, Surety Agreement executed by corporate officers, and six promissory notes. The transaction constitutes a simple loan (mutuum) whereby the bank delivered sums of money to the borrower with the obligation to return the same amount with interest. When UNIALLOY defaulted, UCPB initiated collection proceedings, while UNIALLOY filed a separate annulment action alleging fraud, leading to complex procedural litigation involving forum shopping allegations and venue disputes.

Contractual stipulations in loan agreements that grant lenders sole and exclusive discretion to adjust interest rates, penalties, and other charges without prior notice to and consent of borrowers are void ab initio for being contrary to the principle of mutuality of contracts under Article 1308 of the Civil Code; consequently, courts possess the authority to strike down or modify such unconscionable rates and impose the legal interest rates of 12% and 6% per annum as prescribed in Nacar v. Gallery Frames.

The case arose from a dispute over alleged loan obligations totaling P6,429,500.00. The petitioners, doing business as Moondrops General Merchandising, claimed that their loan application with Westmont Bank was denied and that they instead obtained financing from a third party, Amado Chua. Westmont Bank, however, sued for collection based on two promissory notes allegedly executed by the petitioners, asserting that the loans were granted and the proceeds delivered.

A simple loan (mutuum) is a real contract that is not perfected until the delivery of the object of the contract (the loan proceeds) to the borrower; consequently, the lender bears the burden of proving such delivery to enforce the obligation. Additionally, substantial compliance with Section 8, Rule 8 of the Rules of Court is sufficient to contest the genuineness and due execution of actionable documents, provided the adverse party is placed on adequate notice that the issue will be tried.

The case involves a dispute over a P2,100,000.00 debt evidenced by a dishonored check. Respondent claimed the entire amount was personally owed by petitioner, while petitioner contended that P700,000.00 thereof constituted her deceased parents' obligation. The controversy required the Court to distinguish between a true novation by substitution of debtor (which would extinguish the parents' liability) and mere debt assumption (which results in cumulative liability), and to determine the applicability of interest charges on the principal obligation under the Civil Code provisions governing simple loans or mutuum.

Novation by substitution of debtor requires the express release of the original debtor from the obligation; mere assumption of debt by a third person without such release results only in the addition of debtors, not novation. Furthermore, monetary interest on a simple loan (mutuum) is not recoverable absent an express written stipulation between the parties.

Go Tong Electrical Supply Co., Inc. obtained financial assistance from DBS Bank (which later merged with BPI Family Savings Bank, the respondent) in 1999 to finance its business operations. As additional security for the loan, George C. Go, the company's president, executed a Comprehensive Surety Agreement covering all obligations of the corporation. Upon default, the bank filed a collection suit. The defendants denied executing the loan documents and claimed that no demand was made, while asserting that the surety could not be held solidarily liable with the principal debtor.

A defendant who fails to make a specific denial under oath of the genuineness and due execution of an actionable document, as required by Section 8, Rule 8 of the Rules of Court, is deemed to have admitted the document's authenticity, thereby waiving defenses relating to forgery or unauthorized execution; furthermore, a surety under Article 2047 of the Civil Code binds himself solidarily with the principal obligor, making him jointly and severally liable for the entire obligation despite the contract's ancillary nature.

The parties were long-time friends and "kumpadres" since 1973, with Rivera serving as godfather to the Spouses Chua's son. Rivera had maintained a loan account with the Spouses Chua, who were engaged in money lending, with previous transactions secured by real estate mortgages or checks. The dispute arose from a P120,000 loan obtained on February 24, 1995, which Rivera allegedly secured only by a promissory note without the usual collateral, creating a controversy regarding the existence and authenticity of the obligation when Rivera defaulted.

In a contract of simple loan (mutuum) where the promissory note fixes a specific maturity date and expressly provides for the payment of interest commencing from the "date of default," extrajudicial demand is not necessary to place the debtor in delay under Article 1169 of the Civil Code; furthermore, stipulated interest rates of 60% per annum are unconscionable and may be equitably reduced by the courts to the legal rate of 12% per annum (for obligations incurred before July 1, 2013) or 6% per annum (for obligations incurred after said date), and interest due shall earn legal interest from the time of judicial demand pursuant to Article 2212 of the Civil Code.

Pacific Plans, Inc. (now Abundance Providers and Entrepreneurs Corporation) engaged in the sale of pre-need educational plans, specifically traditional open-ended educational plans (PEPTrads), which guaranteed payment of full tuition fees regardless of actual costs at the time of enrollment. Due to financial distress arising from the deregulation of tuition fees and the 1997 Asian financial crisis, PPI found itself unable to meet obligations to approximately 34,000 planholders. In 2005, PPI filed for corporate rehabilitation under Presidential Decree No. 902-A, seeking to restructure its debts and continue operations as a going concern while providing equitable treatment to its creditors.

A rehabilitation court possesses the authority under the Interim Rules of Procedure on Corporate Rehabilitation and the Financial Rehabilitation and Insolvency Act (FRIA) to approve modifications to an existing rehabilitation plan— including the conversion of currency denominations and suspension of certain benefits—over the objection of creditors ("cram-down" power), provided the modification is necessary to preserve the trust fund, ensure the debtor's viability, and secure equitable treatment of all stakeholders; such judicial approval does not constitute an impairment of contractual obligations under Article III, Section 10 of the Constitution because the non-impairment clause limits legislative, not judicial or quasi-judicial, power.

The case arises from conflicting decisions by two divisions of the CA regarding the rehabilitation of Pryce Corporation, a distressed corporate debtor. The dispute centers on the validity of RTC orders approving a rehabilitation plan that modified contractual obligations to creditors, and the procedural requirements for issuing stay orders under the Interim Rules.

Under the Interim Rules of Procedure on Corporate Rehabilitation, a rehabilitation court is not required to hold a hearing prior to issuing a stay order; it need only find the petition sufficient in form and substance and must issue the order within five days from filing. Furthermore, the principle of res judicata bars subsequent challenges to rehabilitation orders by creditors who were not parties to a prior final judgment upholding those orders, provided there is substantial identity of parties and causes of action.

The dispute arises from international construction financing involving a Philippine corporation (ASPAC) that obtained foreign loans to finance a subcontracting project in Libya. To secure these loans, a government financial institution (TIDCORP) issued Letters of Guarantee to foreign banks. To protect itself against potential liability, TIDCORP required ASPAC to obtain counter-surety bonds from insurance companies. When ASPAC defaulted and TIDCORP negotiated a debt restructuring with the foreign banks—extending payment schedules without the sureties' consent—the lower courts held that the sureties were released under Article 2079 of the Civil Code, necessitating Supreme Court review to clarify the scope of this provision in complex guarantee-surety arrangements.

Article 2079 of the Civil Code—which provides that an extension granted to the debtor by the creditor without the surety's consent extinguishes the suretyship—applies only when the extension is granted to the principal debtor whose obligation is secured by the surety. Where the creditor grants an extension to an intermediary guarantor of the principal debt (rather than to the principal debtor itself), the surety's obligation to the creditor is not extinguished, as the surety retains the right to pay upon maturity and be subrogated to the creditor's remedies against the principal debtor.

Steel Corporation of the Philippines (SCP) is a domestic corporation engaged in manufacturing cold-rolled and galvanized steel products. After suffering financial difficulties, SCP was placed under corporate rehabilitation in 2006. During the rehabilitation period, SCP's plant suffered two fire incidents (June 2008 and December 2009), damaging critical machineries. SCP held insurance policies covering these assets. While the rehabilitation proceedings were ongoing, SCP filed motions in the rehabilitation court seeking to compel payment of insurance proceeds from the first fire (from trustee BPI) and the second fire (from respondent insurers), arguing that the proceeds were necessary to repair machineries and continue rehabilitation. The insurers contested the rehabilitation court's authority to adjudicate these claims, leading to a determination of the scope of jurisdiction of rehabilitation courts under FRIA.

Rehabilitation courts have limited jurisdiction covering only claims against the debtor or its property; they have no jurisdiction over claims by the debtor against third parties (such as insurance claims), which require separate adversarial proceedings where disputed facts can be fully litigated.

Sarabia Manor Hotel Corporation, engaged in the hotel business in Iloilo City since 1972, obtained substantial loans from Far East Bank and Trust Company (later merged with BPI) in 1997 to finance the construction of a new hotel building. Due to contractor default, delayed completion, and external economic shocks including the September 11 attacks, the company faced severe cash flow problems despite having assets exceeding liabilities. Sarabia filed for corporate rehabilitation in 2002 to restructure its debts and continue operations as a going concern, leading to a dispute with BPI over the reasonableness of the proposed interest rates and repayment terms.

A rehabilitation plan may be approved over the opposition of majority creditors (the "cram-down" provision) if the rehabilitation is feasible and the opposition is manifestly unreasonable; an opposition insisting on higher interest rates that would impede corporate recovery is manifestly unreasonable when the plan already provides adequate safeguards for creditor interests and the proposed rate exceeds the creditor's cost of funds.

During the Asian financial crisis, petitioner Town and Country Enterprises, Inc. (TCEI) encountered financial difficulties in servicing its loan obligations to respondent Metropolitan Bank and Trust Co. (Metrobank). This led to extrajudicial foreclosure of mortgaged properties and subsequent conflicting claims between the mortgagee's foreclosure rights and the debtor's attempt to seek relief through corporate rehabilitation mechanisms.

A Stay Order issued in corporate rehabilitation proceedings does not suspend the enforcement of claims or rights that have already vested in creditors prior to the filing of the petition; consequently, a mortgagee-creditor who has acquired ownership of foreclosed property before rehabilitation may obtain a writ of possession despite the Stay Order, and the rehabilitation receiver does not hold possession adverse to the creditor that would prevent such ministerial issuance.

JAPRL Development Corporation, engaged in steel fabrication and distribution, obtained a credit facility from Security Bank Corporation (SBC). To secure the obligation, JAPRL's Chairman and President executed a Continuing Suretyship Agreement (CSA) guaranteeing payment. When JAPRL defaulted and subsequently filed for corporate rehabilitation, SBC sought to enforce the suretyship agreement against the individual sureties despite stay orders issued in the rehabilitation proceedings, leading to a determination of whether the rehabilitation court's stay order extends to sureties solidarily liable with the debtor.

Sureties who are solidarily liable with a debtor-corporation are excluded from the coverage of stay orders issued in corporate rehabilitation proceedings under Rule 4, Section 6(b) of the Interim Rules of Procedure on Corporate Rehabilitation. Pursuant to Article 1216 of the Civil Code, a creditor may proceed against any one of the solidary debtors or some or all of them simultaneously, and the pendency of rehabilitation proceedings against the principal debtor does not bar the creditor from separately enforcing the sureties' solidary liability.

During the Asian Financial Crisis, two real estate and construction corporations, First Aikka Development, Inc. and Univac Development, Inc., encountered financial difficulties in repaying their loans from Asiatrust Development Bank. Despite negotiations for alternative payment modes through assignment of receivables, the bank demanded full payment claiming default. The corporations subsequently filed a consolidated petition for corporate rehabilitation with the RTC of Baguio City, triggering the issuance of a stay order that prevented the bank from enforcing its claims. The bank's attempts to oppose the petition and contest the rehabilitation plan were denied by the trial court on technical grounds, leading to the approval of the rehabilitation plan without the bank's participation.

In corporate rehabilitation proceedings under the Interim Rules of Procedure on Corporate Rehabilitation, venue is jurisdictional and must be filed in the Regional Trial Court where the debtor's principal office is located; consequently, a court lacks jurisdiction over a corporation whose principal office is outside its territorial jurisdiction. Furthermore, while rehabilitation proceedings are summary and non-adversarial, courts must liberally construe procedural rules to allow major creditors to participate, especially when there exists a substantial dispute regarding the amount of indebtedness and the creditor is a banking institution imbued with public interest.

The case arises from the intersection of corporate rehabilitation law and criminal procedure, specifically addressing whether the suspension of "all claims" against a distressed corporation includes criminal prosecutions of its officers for offenses arising from corporate activities. The legal context involves the interpretation of "claims" under PD 902-A and the Interim Rules on Corporate Rehabilitation, the nature of criminal liability under the SSS Law (RA 8282) and the Revised Penal Code, and the distinction between criminal and civil liabilities in the context of corporate financial distress.

A stay order issued in corporate rehabilitation proceedings does not cover criminal actions against individual corporate officers, as criminal liability is personal to the offender and the primary objective of criminal prosecution is the punishment of the offender and the maintenance of social order; however, any civil indemnity that may be awarded pursuant to such criminal conviction remains subject to the stay order as a claim against the corporation.

The case interprets the liability of hotels and inns under the Civil Code as depositaries for the personal effects of their guests, specifically addressing whether valet parking services create a contractual relationship of deposit and the extent of a hotel's responsibility for vehicles parked outside its immediate premises but under its control as an annex.

A contract of necessary deposit is perfected when a hotel guest delivers a vehicle to the hotel's parking attendant who issues a claim stub and assumes the obligation of safekeeping, making the hotel liable as a depositary for the loss of the vehicle even if parked at an adjacent area used as a parking annex, pursuant to Articles 1962 and 1998 of the Civil Code.

Carlos de Castro was employed by LBNI as chief building administrator. In May 1996, LBNI dismissed de Castro for alleged serious misconduct, fraud, and breach of trust. De Castro filed an illegal dismissal complaint, leading to protracted litigation through the Labor Arbiter, NLRC, and Court of Appeals. While the case was pending before the Supreme Court, LBNI initiated corporate rehabilitation proceedings before the Regional Trial Court (RTC) of Makati, which issued a Stay Order suspending enforcement of claims against LBNI. The Supreme Court eventually ruled in favor of de Castro on September 23, 2008, prompting LBNI to file the present Motion for Reconsideration seeking to set aside the decision and suspend proceedings based on the rehabilitation Stay Order.

A Stay Order issued by a rehabilitation court pursuant to the Interim Rules of Procedure on Corporate Rehabilitation suspends the execution of monetary claims against the corporation undergoing rehabilitation but does not oust courts of jurisdiction to adjudicate pending cases on their merits; execution remains suspended until the rehabilitation proceedings are terminated or the Stay Order is lifted.

The case involves a dispute between condominium unit buyers and a property developer regarding the non-delivery of a condominium unit and parking space despite full payment. The developer, ASB Development Corporation, sought protection under corporate rehabilitation proceedings to shield itself from individual creditor actions while attempting to restructure its financial obligations. The controversy centers on whether individual buyers can maintain separate actions for rescission and damages before the HLURB or must file their claims with the rehabilitation receiver, involving the interpretation of suspension provisions under rehabilitation law (now substantially adopted in the Financial Rehabilitation and Insolvency Act or FRIA).

A complaint for rescission of contract with damages, seeking refund of payments and monetary awards, constitutes a "claim" under Section 6(c) of Presidential Decree No. 902-A and the Interim Rules of Procedure on Corporate Rehabilitation, which automatically suspends all pending proceedings before any court, tribunal, or administrative body, including the HLURB, upon the approval of a rehabilitation plan and appointment of a rehabilitation receiver by the SEC.

The case arose from a concession agreement between the Metropolitan Waterworks and Sewerage System (MWSS) and Maynilad Water Services, Inc., wherein Maynilad undertook to manage water and sewerage services and pay concession fees. To secure its obligations, Maynilad obtained an Irrevocable Standby Letter of Credit from a consortium of foreign banks. After disputes over concession fees and foreign exchange losses led to arbitration, MWSS sought to draw on the letter of credit following a favorable arbitration award. However, Maynilad had commenced corporate rehabilitation proceedings, prompting the rehabilitation court to issue a Stay Order and subsequently enjoin MWSS from drawing on the letter of credit.

A rehabilitation court has no jurisdiction to enjoin a beneficiary from drawing on an Irrevocable Standby Letter of Credit issued by banks for the account of a debtor undergoing rehabilitation, because (1) the letter of credit is not an asset of the debtor subject to rehabilitation proceedings, and (2) the banks' obligation is solidary with the debtor, not merely that of a guarantor or surety, and thus falls outside the automatic stay provision that only covers non-solidary guarantors.

The case arose from the financial distress of Philippine Underwriters Finance Corporation (Philfinance), a financing company that executed a pledge agreement with petitioner Philippine Commercial International Bank (PCIB) to secure outstanding obligations. Following the discovery of irregularities in the financial sector and upon the directive of the President of the Philippines to conserve assets and ensure equitable payment to creditors, the SEC placed Philfinance under suspension of payments and appointed a receivership committee. Subsequently, the SEC ordered the dissolution and liquidation of Philfinance, but appeals delayed the liquidation process, prompting the SEC to appoint a private law office as Rehabilitation Receiver. The conflict emerged when PCIB sought to foreclose on pledged shares of stocks and bonds, and the Rehabilitation Receiver attempted to enjoin the foreclosure sale to preserve assets for equitable distribution to all creditors.

An SEC order suspending payments and actions against a corporation under receivership does not bind secured creditors holding mortgages, pledges, or liens on the corporation's assets; such creditors retain the right to foreclose on their security unless they voluntarily surrender it for the benefit of all creditors, and this principle applies by analogy to suspension of payments proceedings under Presidential Decree No. 902-A.

The case arose from transactions between Rizaldy T. Zshornack and the Commercial Bank and Trust Company of the Philippines (COMTRUST), Quezon City Branch, during a period when the Philippines maintained strict foreign exchange controls. In 1980, the Bank of the Philippine Islands (BPI) absorbed COMTRUST through a corporate merger and was substituted as party to the litigation. The dispute centers on banking practices regarding dollar accounts and the legal consequences of receiving foreign currency cash for safekeeping contrary to Central Bank regulations.

A contract for the safekeeping of foreign currency cash (depositum) entered into by a bank and a depositor is void ab initio when it violates mandatory foreign exchange regulations requiring immediate sale of foreign exchange to the Central Bank; under the principle of in pari delicto, neither party may maintain an action against the other for recovery, though banks remain strictly liable for unauthorized withdrawals from deposit accounts.

The case arises from a financial arrangement between a landowner in default of mortgage obligations and a third party willing to assume such obligations to prevent the land from remaining idle. After the Development Bank of the Philippines foreclosed on the mortgaged properties, the owner (Dizon) entered into agreements with Gaborro whereby the latter would assume the mortgage debts in exchange for possession and enjoyment of the lands, with the understanding that the owner could eventually recover the properties. The dispute centers on whether this arrangement created an absolute sale with a repurchase option or a security transaction akin to antichresis where the creditor-possessor applies the fruits to the debt.

A transaction labeled as an absolute sale but where the vendor retains the right to repurchase the property, the transferee assumes the mortgage debts as consideration, and the transferee takes possession and enjoys the fruits of the property, constitutes an innominate contract under Article 1307 of the New Civil Code partaking of the nature of antichresis rather than an absolute sale, and is subject to reformation to reflect the true intention of the parties that the vendor may recover the property upon reimbursement of the principal debt assumed.

A contract of loan with security wherein possession is transferred to the creditor does not constitute antichresis unless there is an express stipulation that the fruits of the property shall be applied to the payment of interest, if owing, and thereafter to the principal; absent such stipulation, the contract remains a mortgage, and the creditor, as mortgagee in possession, must account for the fruits received and apply them to the discharge of the debt.

The case arises from conflicting claims of ownership over a parcel of land originally owned by Marcos Bernardo in Barrio S. Sebastian, Hagonoy, Bulacan. Following Bernardo's death, his daughter and sole heir Vicenta Bernardo executed an absolute sale in favor of Nazario Trillana in 1948. However, the defendants had been in possession of the property since 1934 under a contract executed by Marcos Bernardo, which they claimed gave them ownership either through absolute conveyance or through acquisitive prescription having possessed the land for more than 15 years.

An antichretic creditor cannot acquire ownership of the mortgaged property through acquisitive prescription because the possession is not adverse to the true owner but is merely in pursuance of the mortgage contract; furthermore, a stipulation authorizing the creditor to automatically appropriate the property upon default constitutes a prohibited pactum commissorium under Articles 1859 and 1884 of the Civil Code and is void.