ANTICHRESIS

DIEGO v. FERNANDO, 109 PHIL 143 (1960)

Foreclosure of Antichresis, Art. 2137
Issue: Whether the contract between the parties is one of mortgage or of antichresis. MORTGAGE.
Appellant, while admitting that the contract Exhibit "A" shows a deed of mortgage, contends that the
admitted fact that the loan was without interest, coupled with the transfer of the possession of the
properties mortgaged to the mortgagee, reveals that the true transaction between him and appellee was one
of antichresis.
Held: It is not an essential requisite of a mortgage that possession of the mortgaged premises be retained by the
mortagagor. To be antichresis, it must be expressly agreed between creditor and debtor that the former, having
been given possession of the properties given as security, is to apply their fruits to the payment of the interest, if
owing, and thereafter to the principal of his credit (Art. 2132, Civil Code); so that if a contract of loan with
security does not stipulate the payment of interest but provides for the delivery to the creditor by the debtor of the
property given as security, in order that the latter may gather its fruits, without stating that said fruits are to be
applied to the payment of interest, if any, and afterwards that of the principal, the contract is a mortgage and not
antichresis.
As such mortgagee in possession, his rights and obligations are similar to those of an antichretic creditor:
1.
If the mortgagee acquires possession in any lawful manner, he is entitled to retain such possession until
the indebtedness is satisfied and the property redeemed;
2.
that the non-payment of the debt within the term agreed does not vest the ownership of the property in
the creditor;
3.
that the general duty of the mortgagee in possession towards the premises is that of the ordinary prudent
owner;
4.
that the mortgagee must account for the rents and profits of the land, or its value for purposes of use and
occupation, any amount thus realized going towards the discharge on the mortgage debt;
5.
that if the mortgage remains in possession after the mortgage debt has been satisfied, he becomes a
trustee for the mortgagor as to the excess of the rents and profits over such debt; and lastly,
6.
that the mortgagor can only enforce his rights to the land by an equitable action for an account and to
redeem.
A creditor with a lien on real property who took possession thereof with the consent of the debtor, held it as
an "antichretic creditor with the right to collect the credit with interest from the fruits, returning to the
antichretic creditor the balance, if any, after deducting the expenses," because the fact that the debtor
consented and asked the creditor to take charge of managing his property "does not entitle the latter to
appropriate to itself the fruits thereof unless the former has expressly waived his right thereto."
In the present case, the parties having agreed that the loan was to be without interest, and the appellant not having
expressly waived his right to the fruits of the properties mortgaged during the time they were in appellee's
possession, the latter, like an antichretic creditor, must account for the value of the fruits received by him, and
deduct it from the loan obtained by appellant. The appellee should be made to account for the fruits he received
from the properties mortgaged from the time of the filing of this action until full payment by appellant, which
fruits should be deducted from the total amount due him from appellant under this judgment. (deficiency should
be recovered)
INSOLVENCY
DE BARRETO, ET. AL. v. VILLANUEVA, ET. AL., (1961)
Special Preferred Credits
(Important: See full text of the Resolution)
Facts: Rosario Cruzado sold all her right, title, and interest and that of her children in the house and lot herein
involved to Villanueva for P19K. The purchaser paid P1,500 in advance, and executed a promissory note for the
balance. However, the buyer could only pay P5,500 On account of the note, for which reason the vendor obtained
judgment for the unpaid balance. In the meantime, the buyer Villanueva was able to secure a clean certificate of

title and mortgaged the property to appellant Barretto to secure a loan of P30K, said mortgage having been duly
recorded.
Villanueva defaulted on the mortgage loan in favor of Barretto. The latter foreclosed the mortgage in her favor,
obtained judgment, and upon its becoming final asked for execution. Cruzado filed a motion for recognition for
her "vendor's lien" invoking Articles 2242, 2243, and 2249 of the new Civil Code. After hearing, the court below
ordered the "lien" annotated on the back of the title, with the proviso that in case of sale under the foreclosure
decree the vendor's lien and the mortgage credit of appellant Barretto should be paid pro rata from the proceeds.
Appellants insist that:
1.
The vendor's lien, under Articles 2242 and 2243 of the new, Civil Code of the Philippines, can only become
effective in the event of insolvency of the vendee, which has not been proved to exist in the instant case; and .
2.
That the Cruzado is not a true vendor of the foreclosed property.
Article 2242 of the new Civil Code enumerates the claims, mortgage and liens that constitute an encumbrance on
specific immovable property, and among them are: .
(2) For the unpaid price of real property sold, upon the immovable sold; and
(5) Mortgage credits recorded in the Registry of Property."
Article 2249 of the same Code provides that "if there are two or more credits with respect to the same specific
real property or real rights, they shall be satisfied pro-rata after the payment of the taxes and assessment upon the
immovable property or real rights.
Held: Application of the above-quoted provisions to the case at bar would mean that the herein appellee Rosario
Cruzado as an unpaid vendor of the property in question has the right to share pro-rata with the appellants the
proceeds of the foreclosure sale.
Issue: Appellants argument: inasmuch as the unpaid vendor's lien in this case was not registered, it should not
prejudice the said appellants' registered rights over the property.
Held: There is nothing to this argument. Note must be taken of the fact that article 2242 of the new Civil Code
enumerating the preferred claims, mortgages and liens on immovables, specifically requires that. Unlike the
unpaid price of real property sold. mortgage credits, in order to be given preference, should be recorded in the
Registry of Property. If the legislative intent was to impose the same requirement in the case of the vendor's lien,
or the unpaid price of real property sold, the lawmakers could have easily inserted the same qualification which
now modifies the mortgage credits. The law, however, does not make any distinction between registered and
unregistered vendor's lien, which only goes to show that any lien of that kind enjoys the preferred credit status.
As to the point made that the articles of the Civil Code on concurrence and preference of credits are applicable
only to the insolvent debtor, suffice it to say that nothing in the law shows any such limitation. If we are to
interpret this portion of the Code as intended only for insolvency cases, then other creditor-debtor relationships
where there are concurrence of credits would be left without any rules to govern them, and it would render
purposeless the special laws on insolvency.
Resolution on Motion to Consider (1962)
Appellants, spouses Barretto, have filed a motion vigorously urging that our decision be reconsidered and set
aside, and a new one entered declaring that their right as mortgagees remain superior to the unrecorded claim of
herein appellee for the balance of the purchase price of her rights, title, and interests in the mortgaged property.
We have reached the conclusion that our original decision must be reconsidered and set aside:
Under the system of the Civil Code of the Philippines, only taxes enjoy a similar absolute preference. All the
remaining thirteen classes of preferred creditors under Article 2242 enjoy no priority among themselves, but must
be paid pro-rata i.e., in proportion to the amount of the respective credits. Thus, Article 2249 provides:
If there are two or more credits with respect to the same specific real property or real rights, they, shall be
satisfied pro-rata after the payment of the taxes and assessments upon the immovable property or real
rights."
The full application of Articles 2249 and 2242 demands that there must be first some proceedings where the
claims of all the preferred creditors may be bindingly adjudicated, such as:

1.
2.
3.

insolvency,
the settlement of decedents estate under Rule 87 of the Rules of Court, or
other liquidation proceedings of similar import.
This explains the rule of Article 2243 of the new Civil Code that
The claims or credits enumerated in the two preceding articles" shall be considered as mortgages or
pledges of real or personal property, or liens within the purview of legal provisions governing insolvency.
And the rule is further clarified in the Report of the Code Commission, as follows:
The question as to whether the Civil Code and the insolvency Law can be harmonized is settled by Article
2243. The preferences named in Articles 2261 and 2262 (now 2241 and 2242) are to be enforced in
accordance with the Insolvency Law."
Rule
Thus, it becomes evident that one preferred creditor's third-party claim to the proceeds of a foreclosure sale (as in
the case now before us) is not the proceeding contemplated by law for the enforcement of preferences under
Article 2242, unless the claimant were enforcing a credit for taxes that enjoy absolute priority. If none of the
claims is for taxes, a dispute between two creditors will not enable the Court to ascertain the pro-rata dividend
corresponding to each, because the rights of the other creditors likewise" enjoying preference under Article 2242
can not be ascertained.
Held: There being no insolvency or liquidation, the claim of the appellee, as unpaid vendor, did not require the
character and rank of a statutory lien co-equal to the mortgagee's recorded encumbrance, and must remain
subordinate to the latter.
DBP v. CA, 363 SCRA 307 (2001)
Special Preferred Credits
Rule
Directors of insolvent corporation, who are creditors of the company, can not secure to themselves any preference
or advantage over other creditors in the payment of their claims. The governing body of officers thereof are
charged with the duty of conducting its affairs strictly in the interest of its existing creditors, and it would be a
breach of such trust for them to undertake to give any one of its members any advantage over any other creditors
in securing the payment of his debts in preference to all others. The legal principle prevents directors of an
insolvent corporation from giving themselves a preference over outside creditors.
There exists in Remingtons favor a lien on the unpaid purchases of Marinduque Mining, and as transferee of
these purchases, DBP should be held liable for the value thereof. In the absence of liquidation proceedings,
however, the claim of Remington cannot be enforced against DBP. Article 2241 of the Civil Code provides:
Article 2241. With reference to specific movable property of the debtor, the following claims or liens shall be
preferred:
xxx
(3) Claims for the unpaid price of movables sold, on said movables, so long as they are in the possession of the
debtor, up to the value of the same; and if the movable has been resold by the debtor and the price is still unpaid,
the lien may be enforced on the price; this right is not lost by the immobilization of the thing by destination,
provided it has not lost its form, substance and identity, neither is the right lost by the sale of the thing together
with other property for a lump sum, when the price thereof can be determined proportionally;
(4) Credits guaranteed with a pledge so long as the things pledged are in the hands of the creditor, or those
guaranteed by a chattel mortgage, upon the things pledged or mortgaged, up to the value thereof;
Held: Although Barretto involved specific immovable property, the ruling therein should apply equally in this
case where specific movable property is involved. As the extra-judicial foreclosure instituted by PNB and DBP is
not the liquidation proceeding contemplated by the Civil Code, Remington cannot claim its pro rata share from
DBP.
J.L. BERNARDO CONSTRUCTION v. CA, (2000)

Special Preferred Credits

There is no contractors lien in favor of petitioners.
Articles 2241 and 2242 of the Civil Code enumerates certain credits which enjoy preference with respect to
specific personal or real property of the debtor. Specifically, the contractors lien claimed by petitioners is granted
under the third paragraph of Article 2242 which provides that the claims of contractors engaged in the
construction, reconstruction or repair of buildings or other works shall be preferred with respect to the specific
building or other immovable property constructed.
However, Article 2242 only finds application when there is a concurrence of credits, i.e. when the same specific
property of the debtor is subjected to the claims of several creditors and the value of such property of the debtor is
insufficient to pay in full all the creditors. In such a situation, the question of preference will arise, that is, there
will be a need to determine which of the creditors will be paid ahead of the others. Fundamental tenets of due
process will dictate that this statutory lien should then only be enforced in the context of some kind of a
proceeding where the claims of all the preferred creditors may be bindingly adjudicated, such as insolvency
proceedings.
This is made explicit by Article 2243 which states that the claims and liens enumerated in articles 2241 and 2242
shall be considered as mortgages or pledges of real or personal property, or liens within the purview of legal
provisions governing insolvency.
Held: The action filed by petitioners in the trial court does not partake of the nature of an insolvency proceeding.
It is basically for specific performance and damages. Thus, even if it is finally adjudicated that petitioners herein
actually stand in the position of unpaid contractors and are entitled to invoke the contractors lien granted under
Article 2242, such lien cannot be enforced in the present action for there is no way of determining whether or not
there exist other preferred creditors with claims over the San Antonio Public Market. The records do not contain
any allegation that petitioners are the only creditors with respect to such property. The fact that no third party
claims have been filed in the trial court will not bar other creditors from subsequently bringing actions and
claiming that they also have preferred liens against the property involved.
CORDOVA v. REYES DAWAY LIM BERNARDO LINDO ROSALES LAW OFFICES, (2007)
Common Credits, Art. 2245, Art. 2251
The Civil Code provisions on concurrence and preference of credits are applicable to the liquidation proceedings.
Issue: Was petitioner a preferred or ordinary creditor under these provisions?
Petitioner argues that he was a preferred creditor because private respondents illegally withdrew his shares from
the custodian banks and sold them without his knowledge and consent and without authority from the SEC. He
quotes Article 2241 (2) of the Civil Code:
With reference to specific movable property of the debtor, the following claims or liens shall be preferred:
(2) Claims arising from misappropriation, breach of trust, or malfeasance by public officials committed in the
performance of their duties, on the movables, money or securities obtained by them;
He asserts that, as a preferred creditor, he was entitled to the entire monetary value of his shares.
Held: Petitioners argument is incorrect. Article 2241 refers only to specific movable property. His claim was
for the payment of money, which is generic property and not specific or determinate. Petitioners CSPI shares
were specific or determinate movable properties. But after they were sold, the money raised from the sale became
generic and were commingled with the cash and other assets of Philfinance. Unlike shares of stock, money is a
generic thing. It is designated merely by its class or genus without any particular designation or physical
segregation from all others of the same class. This means that once a certain amount is added to the cash balance,
one can no longer pinpoint the specific amount included which then becomes part of a whole mass of money.
Considering that petitioner did not fall under any of the provisions applicable to preferred creditors, he was
deemed an ordinary creditor under Article 2245:
Credits of any other kind or class, or by any other right or title not comprised in the four preceding
articles, shall enjoy no preference.
This being so, Article 2251 (2) states that:

Common credits referred to in Article 2245 shall be paid pro rata regardless of dates.
Like all the other ordinary creditors or claimants against Philfinance, he was entitled to a rate of recovery of only
15% of his money claim.
REHABILITATION
RCBC v. IAC, (1999)
General Concepts
Facts: BF Homes filed a Petition for Rehabilitation and for Declaration of Suspension of Payments (SEC Case
No. 002693) with the SEC. One of the creditors listed in its inventory of creditors and liabilities was RCBC.
RCBC requested the Provincial Sheriff of Rizal to extra-judicially foreclose its REM on some properties of BF
Homes. In the auction sale, RCBC was the highest bidder.
RCBC argued that the SEC Case No. 2693 cannot be invoked to suspend the extra-judicial foreclosure of the
REM in petitioners favor, as these do not constitute actions against private respondent contemplated under
Section 6(c) of PD 902-A.
Majority opinion
Whenever a distressed corporation asks the SEC for rehabilitation and suspension of payments, preferred creditors
may no longer assert such preference, but . . . stand on equal footing with other creditors. Foreclosure shall be
disallowed so as not to prejudice other creditors, or cause discrimination among them. If foreclosure is
undertaken despite the fact that a petition for rehabilitation has been filed, the certificate of sale shall not be
delivered pending rehabilitation. Likewise, if this has also been done, no transfer of title shall be effected also,
within the period of rehabilitation. The rationale behind PD 902-A, as amended, is to effect a feasible and viable
rehabilitation. This cannot be achieved if one creditor is preferred over the others.
In this connection, the prohibition against foreclosure attaches as soon as a petition for rehabilitation is
filed. Were it otherwise, what is to prevent the petitioner from delaying the creation of a Management Committee
and in the meantime dissipate all its assets. The sooner the SEC takes over and imposes a freeze on all the assets,
the better for all concerned.
DISSENTING OPINION
The dissent maintain that Section 6 (c) of PD 902-A is clear and unequivocal that, claims against the
corporations, partnerships, or associations shall be suspended only upon the appointment of a management
committee, rehabilitation receiver, board or body. Thus, in the case under consideration, only upon the
appointment of the Management Committee for BF Homes should the suspension of actions for claims against BF
Homes have taken effect and not earlier.
Motion for Reconsideration
In support of its motion for reconsideration, RCBC contends:
Petitioner, being a mortgage creditor, is entitled to rely solely on its security and to refrain from joining the
unsecured creditors in SEC Case No. 002693, the petition for rehabilitation filed by private respondent.
Issue: WON preferred creditors of distressed corporations stand on equal footing with all other creditors. YES.
Held: We find the motion for reconsideration meritorious.
The issue gains relevance and materiality only upon the appointment of a management committee, rehabilitation
receiver, board, or body. Insofar as petitioner RCBC is concerned, the provisions of PD No. 902-A are not yet
applicable and it may still be allowed to assert its preferred status because it foreclosed on the mortgage prior to
the appointment of the management committee. The Court, therefore, grants the motion for reconsideration on
this score.
Section 6(c) of PD 902-A, provides:
Sec. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers:

c) To appoint one or more receivers of the property, real and personal, which is the subject of the action pending
before the Commission in accordance with the pertinent provisions of the Rules of Court in such other cases
whenever necessary to preserve the rights of the parties-litigants to and/or protect the interest of the investing
public and creditors; Provided, however, that the Commission may, in appropriate cases, appoint a rehabilitation
receiver of corporations, partnerships or other associations not supervised or regulated by other government
agencies who shall have, in addition to the powers of a regular receiver under the provisions of the Rules of
Court, such functions and powers as are provided for in the succeeding paragraph (d) hereof: Provided,
finally, That upon appointment of a management committee, rehabilitation receiver, board or body, pursuant to
this Decree, all actions for claims against corporations, partnerships or associations under management or
receivership pending before any court, tribunal, board or body shall be suspended accordingly. (As amended by
PDs No. 1673, 1758 and by PD No. 1799)
Rules

It is thus adequately clear that suspension of claims against a corporation under rehabilitation is counted or
figured up only upon the appointment of a management committee or a rehabilitation receiver.

The holding that suspension of actions for claims against a corporation under rehabilitation takes effect as
soon as the application or a petition for rehabilitation is filed with the SEC may, to some, be more logical
and wise but unfortunately, such is incongruent with the clear language of the law.

Furthermore, a petition for rehabilitation does not always result in the appointment of a receiver or the
creation of a management committee. The SEC has to initially determine whether such appointment is
appropriate and necessary under the circumstances.
Under Paragraph (d), Section 6, certain situations must be shown to exist before a management committeemay
be created or appointed, such as;
1.
when there is imminent danger of dissipation, loss, wastage or destruction of assets or other properties;
or
2.
when there is paralization of business operations of such corporations or entities which may be
prejudicial to the interest of minority stockholders, parties-litigants or to the general public.
On the other hand, receivers may be appointed whenever:
1. necessary in order to preserve the rights of the parties-litigants; and/or
2. protect the interest of the investing public and creditors. (Section 6 (c), P.D. 902-A.)
Otherwise, when such circumstances are not obtaining or when the SEC finds no such imminent danger of losing
the corporate assets, a management committee or rehabilitation receiver need not be appointed and suspension of
actions for claims may not be ordered by the SEC.
Petitioner additionally argues in its motion for reconsideration that, being a mortgage creditor, it is entitled to rely
on its security and that it need not join the unsecured creditors in filing their claims before the SEC-appointed
receiver. To support its position, petitioner cites the Courts ruling in the case of Philippine Commercial
International Bank vs. Court of Appeals, (172 SCRA 436 [1989]) that an order of suspension of payments as well
as actions for claims applies only to claims of unsecured creditors and cannot extend to creditors holding a
mortgage, pledge, or any lien on the property.
The majority opinion relied upon BF Homes, Inc. vs. CA held that when a corporation threatened by bankruptcy
is taken over by a receiver, all the creditors should stand on an equal footing. Not anyone of them should be given
preference by paying one or some of them ahead of the others. This is precisely the reason for the suspension of
all pending claims against the corporation under receivership. Instead of creditors vexing the courts with suits
against the distressed firm, they are directed to file their claims with the receiver who is a duly appointed officer
of the SEC.
The following rules of thumb shall are laid down:
1.
All claims against corporations, partnerships, or associations that are pending before any court, tribunal, or
board, without distinction as to whether or not a creditor is secured or unsecured, shall be suspended effective
upon the appointment of a management committee, rehabilitation receiver, board, or body in accordance with
the provisions of Presidential Decree No. 902-A.
2.
Secured creditors retain their preference over unsecured creditors, but enforcement of such preference is
equally suspended upon the appointment of a management committee, rehabilitation receiver, board, or
body. In the event that the assets of the corporation, partnership, or association are finally liquidated,

however, secured and preferred credits under the applicable provisions of the Civil Code will definitely have
preference over unsecured ones.
In other words, once a management committee, rehabilitation receiver, board or body is appointed pursuant to
P.D. 902-A, all actions for claims against a distressed corporation pending before any court, tribunal, board or
body shall be suspended accordingly.
This suspension shall not prejudice or render ineffective the status of a secured creditor as compared to a totally
unsecured creditor.
However, in the event that rehabilitation is no longer feasible and claims against the distressed corporation would
eventually have to be settled, the secured creditors shall enjoy preference over the unsecured creditors (still
maintaining PCIB ruling), subject only to the provisions of the Civil Code on Concurrence and Preferences of
Credit.
All claims of both a secured or unsecured creditor, without distinction on this score, are suspended once a
management committee is appointed. Secured creditors, in the meantime, shall not be allowed to assert such
preference before the SEC. It may be stressed, however, that this shall only take effect upon the appointment of a
management committee, rehabilitation receiver, board, or body, as opined in the dissent.
In fine, the Court grants the motion for reconsideration for the cogent reason that suspension of actions for claims
commences only from the time a management committee or receiver is appointed by the SEC. Petitioner RCBC,
therefore, could have rightfully, as it did, move for the extrajudicial foreclosure of its mortgage because a
management committee was not appointed by the SEC until.
SUBREJUANITE v. ASB DEVELOPMENT CORPORATION, (2005)
General Concepts
Purpose for the suspension of the proceedings

to prevent a creditor from obtaining an advantage or preference over another and to protect and preserve the
rights of party litigants as well as the interest of the investing public or creditors.

intended to give enough breathing space for the management committee or rehabilitation receiver to make
the business viable again, without having to divert attention and resources to litigations in various fora.

enable the management committee or rehabilitation receiver to effectively exercise its/his powers free from
any judicial or extra-judicial interference that might unduly hinder or prevent the rescue of the debtor
company.

to allow such other action to continue would only add to the burden of the management committee or
rehabilitation receiver, whose time, effort and resources would be wasted in defending claims against the
corporation instead of being directed toward its restructuring and rehabilitation.
In order to resolve whether the proceedings before the HLURB should be suspended, it is necessary to determine
whether the complaint for rescission of contract with damages is a claim within the contemplation of PD No. 902A.
Definition of claim as used in Sec. 6(c) of PD 902-A
refer only to debts or demands pecuniary in nature
claim as used in Sec. 6(c) of P.D. 902-A refers to debts or demands of a pecuniary nature. It means the assertion
of a right to have money paid. It is used in special proceedings like those before administrative court, on
insolvency.
Right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or right to an equitable remedy
for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, unsecured.
In conflicts of law, a receiver may be appointed in any state which has jurisdiction over the defendant who owes a
claim.
In Arranza v. B.F. Homes, Inc., claim is defined as referring to actions involving monetary considerations.
Note: Finasia Investments and Finance Corp. v. CA and Arranza v. B.F. Homes, Inc. were promulgated prior to
the effectivity of the Interim Rules of Procedure on Corporate Rehabilitation on December 15, 2000. The interim

rules define a claim as referring to all claims or demands, of whatever nature or character against a debtor or its
property, whether for money or otherwise. The definition is all-encompassing as it refers to all actions whether
for money or otherwise. There are no distinctions or exemptions.
Incidentally, although the petition for rehabilitation with prayer for suspension of actions and proceedings was
filed before the SEC or prior to the effectivity of the interim rules, the same would still apply pursuant to Section
1, Rule 1 thereof which provides:
Section 1. Scope These Rules shall apply to petitions for rehabilitation filed by corporations,
partnerships, and associations pursuant to Presidential Decree No. 902-A, as amended.
Held: Clearly then, the complaint filed by Sobrejuanite is a claim as defined under the Interim Rules of Procedure
on Corporate Rehabilitation. Even under our rulings in Finasia Investments and Finance Corp. v.
CA and Arranza v. B.F. Homes, Inc., the complaint for rescission with damages would fall under the category
of claim considering that it is for pecuniary considerations.
Facts: In their complaint, Sobrejuanite pray for the rescission of the contract and the refund their total payments
to ASBDC; damages and costs. In the decision of the HLURB arbiter, ASBDC was ordered to pay. As such, the
HLURB arbiter should have suspended the proceedings upon the approval by the SEC of the ASB Group of
Companies rehabilitation plan and the appointment of its rehabilitation receiver. By the suspension of the
proceedings, the receiver is allowed to fully devote his time and efforts to the rehabilitation and restructuring of
the distressed corporation.
It is well to note that even the execution of final judgments may be held in abeyance when a corporation is under
rehabilitation. Hence, there is more reason in the instant case for the HLURB arbiter to order the suspension of
the proceedings as the motion to suspend was filed soon after the institution of the complaint. By allowing the
proceedings to proceed, the HLURB arbiter unwittingly gave undue preference to Sobrejuanite over the other
creditors and claimants of ASBDC, which is precisely the vice sought to be prevented by Section 6(c) of PD 902A. Thus:
As between creditors, the key phrase is equality is equity. When a corporation threatened
by bankruptcy is taken over by a receiver, all the creditors should stand on equal footing. Not
anyone of them should be given any preference by paying one or some of them ahead of the
others. This is precisely the reason for the suspension of all pending claims against the corporation
under receivership. Instead of creditors vexing the courts with suits against the distressed firm,
they are directed to file their claims with the receiver who is a duly appointed officer of the SEC.
Petitioners reliance on Arranza v. B.F. Homes, Inc. is misplaced. In that case, we held that the HLURB
retained its jurisdiction despite the rehabilitation proceedings since the claim filed by the homeowners did not
involve pecuniary considerations. The claim therein was for specific performance to enforce the homeowners
rights as regards right of way, open spaces, road and perimeter wall repairs, and security. However, it can also
be deduced therefrom that if the claim was for monetary awards, the proceedings before the HLURB should be
suspended during the rehabilitation. In this case, under the complaint for specific performance before the
HLURB, petitioners do not aim to enforce a pecuniary demand. Their claim for reimbursement. The HLURB, not
the SEC, is equipped with the expertise to deal with that matter.
TOWN AND COUNTRY ENTERPRISES, INC. v. QUISUMBING, 2012
General Concepts
Corporate rehabilitation contemplates a continuance of corporate life and activities in an effort to restore and
reinstate the corporation to its former position of successful operation and solvency.
Purpose: to enable the company to gain a new lease on life and allow its creditors to be paid their claims out of
its earnings.
Principal feature: the Stay Order which defers all actions or claims against the corporation seeking corporate
rehabilitation from the date of its issuance until the dismissal of the petition or termination of the rehabilitation
proceedings.

a.
b.
c.
d.
e.

Under Section 24, Rule 4 of the Interim Rules of Procedure on Corporate Rehabilitation, the approval of the
rehabilitation plan also produces the following results:
The plan and its provisions shall be binding upon the debtor and all persons who may be affected by it,
including the creditors, whether or not such persons have participated in the proceedings or opposed the plan or
whether or not their claims have been scheduled;
The debtor shall comply with the provisions of the plan and shall take all actions necessary to carry out the
plan;
Payments shall be made to the creditors in accordance with the provisions of the plan;
Contracts and other arrangements between the debtor and its creditors shall be interpreted as continuing to
apply to the extent that they do not conflict with the provisions of the plan; and
Any compromises on amounts or rescheduling of timing of payments by the debtor shall be binding on
creditors regardless of whether or not the plan is successfully implemented.
Facts: In addition to the issuance of the Stay Order, petitioners call attention to the fact that the Rehabilitation
Court approved TCEIs rehabilitation plan in the Order. Considering that orders issued by the Rehabilitation Court
are immediately executory, petitioners argue that the subject properties were placed in custodia legis upon
approval of TCEIs rehabilitation plan and that the grant of the writ of possession in favor of Metrobank was
tantamount to taking said properties away from the rehabilitation receiver. Petitioners maintain that the
rehabilitation receiver, as an officer of the court empowered to take possession, control and custody of the
debtors assets, should have been considered a third person whose possession of the foreclosed properties was an
exception to the rule that the grant of a writ of possession is ministerial. For these reasons, petitioners claim that
the writ of possession issued in favor of Metrobank is invalid and unenforceable.
The dearth of merit in petitioners position is, however, evident from the fact that, Metrobank had already
acquired ownership over the subject realties when TCEI commenced its petition for corporate rehabilitation.
Viewed in the foregoing light, the CA cannot be faulted for upholding the RTCs grant of a writ of possession in
favor of Metrobank. An essential function of corporate rehabilitation is, admittedly, the Stay Order which is a
mechanism of suspension of all actions and claims against the distressed corporation upon the due appointment of
a management committee or rehabilitation receiver. The Stay Order issued by the Rehabilitation Court cannot,
however, apply to the mortgage obligations owing to Metrobank which had already been enforced even before
TCEIs filing of its petition for corporate rehabilitation.

Rules (Case Laws)

The writ of possession procured by the creditor is valid despite the subsequent issuance of a stay order in the
rehabilitation proceedings instituted by the debtor.
In RCBC, we upheld the extrajudicial foreclosure sale of the mortgage properties of BF Homes wherein RCBC
emerged as the highest bidder as it was done before the appointment of the management committee. Noteworthy
to mention was the fact that the issuance of the certificate of sale in RCBCs favor, the consolidation of title, and
the issuance of the new titles in RCBCs name had also been upheld notwithstanding that the same were all done
after the management committee had already been appointed and there was already a suspension of claims. Since
the foreclosure of respondent DNG's mortgage and the issuance of the certificate of sale in petitioner EPCIB's
favor were done prior to the appointment of a Rehabilitation Receiver and the Stay Order, all the actions taken
with respect to the foreclosed mortgage property which were subsequent to the issuance of the Stay Order were
not affected by the Stay Order.
Held: A similar dearth of merit may be said of TCEIs claim that the subject properties were in custodia
legis upon the issuance of the Stay Order and the approval of the rehabilitation plan fails to persuade. Metrobank
acted well-within its rights in applying for a writ of possession, the issuance of which has consistently been held
to be a ministerial function which cannot be hindered by an injunction or an action for the annulment of the
mortgage or the foreclosure itself. While it is true that the function ceases to be ministerial where the property is
in the possession of a third party claiming a right adverse to that of the judgment debtor, the rehabilitation
receivers power to take possession, control and custody of TCEIs assets is far from adverse to the latter.
Arehabilitation receiver is an officer of the court who is appointed for the protection of the interests of the
corporate investors and creditors. It has been ruled that there is nothing in the concept of corporate rehabilitation
that would ipso facto deprive the officers of a debtor corporation of control over its business or properties.
SITUS DEVELOPMENT CORP., ET. AL. v. ASIATRUST BANK
General Concepts

G.R. NO. 180036, (2012)

The Rules provide that "the petition (Petition for Rehabilitation) shall be dismissed if no rehabilitation plan is
approved by the court upon the lapse of 180 days from the date of the initial hearing." While the Rules expressly
provide that the 180-day period may be extended, such extension may be granted only "if it appears by
convincing and compelling evidence that the debtor may successfully be rehabilitated."

It is a fundamental principle in corporate law that a corporation is a juridical entity with a legal personality
separate and distinct from the people comprising it. Hence, the rule is that assets of stockholders may not be
considered as assets of the corporation, and vice-versa. The mere fact that one is a majority stockholder of a
corporation does not make one s property that of the corporation, since the stockholder and the corporation are
separate entities.

The Stay Order does not suspend the foreclosure of a mortgage constituted over the property of a third-party
mortgagor.
Petitioners insist that the Stay Order covers the mortgaged properties, citing the Interim Rules on Corporate
Rehabilitation (the Rules). Under the Rules, one of the effects of a Stay Order is the stay of the "enforcement of
all claims, whether for money or otherwise and whether such enforcement is by court action or otherwise, against
the debtor, its guarantors and sureties not solidarily liable with the debtor."
Based on a reading of the Rules, we rule that the Stay Order cannot suspend foreclosure proceedings already
commenced over properties belonging to spouses Chua. The Stay Order can only cover those claims directed
against petitioner corporations or their properties, against petitioners guarantors, or against petitioners sureties
who are not solidarily liable with them.

Spouses Chua may not be considered as "debtors." The Interim Rules on Corporate Rehabilitation (the Rules)
define the term "debtor" as follows:rl
"Debtor" shall mean any corporation, partnership, or association, whether supervised or regulated by the
Securities and Exchange Commission or other government agencies, on whose behalf a petition for rehabilitation
has been filed under these Rules.
The issuance of a Stay Order cannot suspend the foreclosure of accommodation mortgages, because the Stay
Order may only cover the suspension of the enforcement of all claims against the debtor, its guarantors, and
sureties not solidarily liable with the debtor. Thus, the suspension of enforcement of claims does not extend to the
foreclosure of accommodation mortgages.
Moreover, the intent of the Rules is to exclude from the scope of the Stay Order the foreclosure of properties
owned by accommodation mortgagors. The newly adopted Rules of Procedure on Corporate Rehabilitation
provides for one of the effects of a Stay Order:
SEC. 7. Stay Order.
(b) staying enforcement of all claims, whether for money or otherwise and whether such enforcement is by court
action or otherwise, against the debtor, its guarantors and persons not solidarily liable with the debtor; provided,
that the stay order shall not cover claims against letters of credit and similar security arrangements issued by a
third party to secure the payment of the debtor's obligations; provided, further, that the stay order shall not cover
foreclosure by a creditor of property not belonging to a debtor under corporate rehabilitation; provided, however,
that where the owner of such property sought to be foreclosed is also a guarantor or one who is not solidarily
liable, said owner shall be entitled to the benefit of excussion as such guarantor.
From the foregoing, we therefore hold that foreclosure proceedings over the properties in question are not
suspended by the trial court s issuance of the Stay Order.
G.R. No. 180036, (2013)
Petitioners incorrectly argue that the properties belonging to their majority stockholders may be included in the
rehabilitation plan, because these properties were mortgaged to secure petitioners loans. Under the FRIA, the
Stay Order may now cover third-party or accommodation mortgages, in which the "mortgage is necessary for the
rehabilitation of the debtor as determined by the court upon recommendation by the rehabilitation receiver." The
FRIA likewise provides that its provisions may be applicable to further proceedings in pending cases, except to
the extent that, in the opinion of the court, their application would not be feasible or would work injustice.
Sec. 146 of the FRIA, which makes it applicable to "all further proceedings in insolvency, suspension of
payments and rehabilitation cases x x x except to the extent that in the opinion of the court their application would

not be feasible or would work injustice," still presupposes a prospective application. The wording of the law
clearly shows that it is applicable to all further proceedings. In no way could it be made retrospectively applicable
to the Stay Order issued by the rehabilitation court back in 2002.
At the time of the issuance of the Stay Order, the rules in force were the 2000 Interim Rules of Procedure on
Corporate Rehabilitation (the "Interim Rules"). Under those rules, one of the effects of a Stay Order is the stay of
the "enforcement of all claims, whether for money or otherwise and whether such enforcement is by court action
or otherwise, against the debtor, its guarantors and sureties not solidarily liable with the debtor." Nowhere in the
Interim Rules is the rehabilitation court authorized to suspend foreclosure proceedings against properties of thirdparty mortgagors. In fact, we have expressly ruled in Pacific Wide Realty and Development Corp. v. Puerto Azul
Land, Inc. that the issuance of a Stay Order cannot suspend the foreclosure of accommodation mortgages.
Whether or not the properties subject of the third-party mortgage are used by the debtor corporation or are
necessary for its operation is of no moment, as the Interim Rules do not make a distinction. To repeat, when the
Stay Order was issued, the rehabilitation court was only empowered to suspend claims against the debtor, its
guarantors, and sureties not solidarily liable with the debtor. Thus, it was beyond the jurisdiction of the
rehabilitation court to suspend foreclosure proceedings against properties of third-party mortgagors.
The third issue, therefore, is immaterial.1wphi1 Whether or not respondent banks had acquired ownership of the
subject properties at the time of the issuance of the Stay Order, the same conclusion will still be reached. The
subject properties will still fall outside the ambit of the Stay Order issued by the rehabilitation court. Since the
subject properties are beyond the reach of the Stay Order, and since foreclosure and consolidation of title may no
longer be stalled, petitioners rehabilitation plan is no longer feasible. We therefore affirm our earlier finding that
the dismissal of the Petition for the Declaration of State of Suspension of Payments with Approval of Proposed
Rehabilitation Plan is in order.
MWSS v. DAWAY AND MAYNILAD WATER SERVICES, INC., (2004)
Exceptions to Stay or Suspension Order, Sec. 18, Sec. 16
I
The prohibition under Sec 6 (b) of Rule 4 of the Interim Rules does not apply to herein petitioner as the
prohibition is on the enforcement of claims against guarantors or sureties of the debtors whose obligations are not
solidary with the debtor. The participating banks obligation are solidary with respondent Maynilad in that it is a
primary, direct, definite and an absolute undertaking to pay and is not conditioned on the prior exhaustion of the
debtors assets. These are the same characteristics of a surety or solidary obligor.
II
Sec. 5, Rule 3 of the Interim Rules would preclude any other effective remedy questioning the orders of the
rehabilitation court since they are immediately executory and a petition for review or an appeal therefrom shall
not stay the execution of the order unless restrained or enjoined by the appellate court.
It is not enough that a remedy is available to prevent a party from making use of the extraordinary remedy
of certiorari but that such remedy be an adequate remedy which is equally beneficial, speedy and sufficient, not
only a remedy which at some time in the future may offer relief but a remedy which will promptly relieve the
petitioner from the injurious acts of the lower tribunal. It is the inadequacy -- not the mere absence -- of all other
legal remedies and the danger of failure of justice without the writ, that must usually determine the propriety
of certiorari.
III
Respondent Maynilad argues that by commencing the process for payment under the Standby Letter of Credit,
petitioner violated an immediately executory order of the court and, therefore, comes to Court with unclean hands
and should therefore be denied any relief.
It is true that the stay order is immediately executory. It is also true, however, that the Standby Letter of Credit
and the banks that issued it were not within the jurisdiction of the rehabilitation court. The call on the Standby
Letter of Credit, therefore, could not be considered a violation of the Stay Order.

PANLILIO ET AL., v. REGIONAL TRIAL COURT, (2011)

Exceptions to Stay or Suspension Order, Sec. 18, Sec. 16

Principal feature of corporate rehabilitation is the suspension of claims against the distressed corporation. Section
6 (c) of Presidential Decree No. 902-A, as amended, provides for suspension of claims against corporations
undergoing rehabilitation, to wit:
Section 6 (c). x x x Provided, finally, that upon appointment of a management committee,
rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against
corporations, partnerships or associations under management or receivership pending before any
court, tribunal, board or body, shall be suspended accordingly.
In November 21, 2000, this Court En Banc promulgated the Interim Rules of Procedure on Corporate
Rehabilitation, Section 6, Rule 4 of which provides a stay order on all claims against the corporation, thus:
Stay Order. - If the court finds the petition to be sufficient in form and substance, it shall, not later
than five (5) days from the filing of the petition, issue an Order x x x; (b) staying enforcement of
all claims, whether for money or otherwise and whether such enforcement is by court action or
otherwise, against the debtor, its guarantors and sureties not solidarily liable with the debtor; x x x
Issue: Does the suspension of all claims as an incident to a corporate rehabilitation also contemplate the
suspension of criminal charges filed against the corporate officers of the distressed corporation? NO.
In Rosario v. Co (Rosario), a case of recent vintage, the issue resolved by this Court was whether or not during the
pendency of rehabilitation proceedings, criminal charges for violation of Batas Pambansa Bilang 22 should be
suspended, was disposed of as follows:
The filing of the case for violation of B.P. Blg. 22 is not a "claim" that can be enjoined within the
purview of P.D. No. 902-A. True, although conviction of the accused for the alleged crime could
result in the restitution, reparation or indemnification of the private offended party for the damage
or injury he sustained by reason of the felonious act of the accused, nevertheless, prosecution for
violation of B.P. Blg. 22 is a criminal action.
Facts: Rosario is at fours with the case at bar. Petitioners are charged with violations of Section 28 (h) of the SSS
law, in relation to Article 315 (1) (b) of the Revised Penal Code, or Estafa. The SSS law clearly criminalizes
the non-remittance of SSS contributions by an employer to protect the employees from unscrupulous employers.
Therefore, public interest requires that the said criminal acts be immediately investigated and prosecuted for the
protection of society.
Held: The rehabilitation of SIHI and the settlement of claims against the corporation is not a legal ground for the
extinction of petitioners criminal liabilities. There is no reason why criminal proceedings should be suspended
during corporate rehabilitation, more so, since the prime purpose of the criminal action is to punish the offender in
order to deter him and others from committing the same or similar offense, to isolate him from society, reform and
rehabilitate him or, in general, to maintain social order. As correctly observed in Rosario, it would be absurd for
one who has engaged in criminal conduct could escape punishment by the mere filing of a petition for
rehabilitation by the corporation of which he is an officer.
The prosecution of the officers of the corporation has no bearing on the pending rehabilitation of the
corporation, especially since they are charged in their individual capacities. Such being the case, the purpose of
the law for the issuance of the stay order is not compromised, since the appointed rehabilitation receiver can still
fully discharge his functions as mandated by law. It bears to stress that the rehabilitation receiver is not charged to
defend the officers of the corporation. If there is anything that the rehabilitation receiver might be remotely
interested in is whether the court also rules that petitioners are civilly liable. Such a scenario, however, is not a
reason to suspend the criminal proceedings, because as aptly discussed in Rosario, should the court prosecuting
the officers of the corporation find that an award or indemnification is warranted, such award would fall under the
category of claims, the execution of which would be subject to the stay order issued by the rehabilitation
court. The penal sanctions as a consequence of violation of the SSS law, in relation to the revised penal code can
therefore be implemented if petitioners are found guilty after trial. However, any civil indemnity awarded as a
result of their conviction would be subject to the stay order issued by the rehabilitation court. Only to this extent
can the order of suspension be considered obligatory upon any court, tribunal, branch or body where there are
pending actions for claims against the distressed corporation.
On a final note, this Court would like to point out that Congress has recently enacted Republic Act No. 10142, or
the Financial Rehabilitation and Insolvency Act of 2010. Section 18 thereof explicitly provides that criminal

actions against the individual officer of a corporation are not subject to the Stay or Suspension Order in
rehabilitation proceedings, to wit:

The Stay or Suspension Order shall not apply:

xxxx
(g) any criminal action against individual debtor or owner, partner, director or officer of a debtor
shall not be affected by any proceeding commenced under this Act.

BPI v. SEC, (2007)

Cram Down Effect, Sec. 63 to 73
Facts: The ASB Group filed a petition for rehabilitation and suspension of payments before the SEC. The
Rehabilitation Plan provides a dacion en pago by the ASB Group to BPI of one of the properties mortgaged to the
latter at the ASB Group. The dacion would constitute full payment of the entire obligation due to BPI because the
balance was then to be considered waived, as per the Rehabilitation Plan. BPI opposed the Rehabilitation Plan and
moved for the dismissal of the ASB Groups petition for rehabilitation. BPI argued that the Order constituted an
arbitrary violation of BPIs freedom and right to contract since the Rehabilitation Plan compelled BPI to enter into
a dacion en pago agreement with the ASB Group.
Rehabilitation proceedings in our jurisdiction have equitable and rehabilitative purposes. On the one hand, they
attempt to provide for the efficient and equitable distribution of an insolvent debtors remaining assets to its
creditors; and on the other, to provide debtors with a fresh start by relieving them of the weight of their
outstanding debts and permitting them to reorganize their affairs. The rationale of P.D. No. 902-A, as amended, is
to effect a feasible and viable rehabilitation, by preserving a foundering business as going concern, because the
assets of a business are often more valuable when so maintained than they would be when liquidated.
The Court reiterates that the SECs approval of the Rehabilitation Plan did not impair BPIs right to contract. As
correctly contended by private respondents, the non-impairment clause is a limit on the exercise of legislative
power and not of judicial or quasi-judicial power. The SEC, through the hearing panel that heard the petition for
approval of the Rehabilitation Plan, was acting as a quasi-judicial body and thus, its order approving the plan
cannot constitute an impairment of the right and the freedom to contract.
Besides, the mere fact that the Rehabilitation Plan proposes a dacion en pago approach does not render it
defective on the ground of impairment of the right to contract. Dacion en pago is a special mode of payment
where the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding
debt. The undertaking really partakes in a sense of the nature of sale, that is, the creditor is really buying the
thing or property of the debtor, the payment for which is to be charged against the debtors debt. As such, the
essential elements of a contract of sale, namely; consent, object certain, and cause or consideration must be
present. Being a form of contract, the dacion en pago agreement cannot be perfected without the consent of the
parties involved.
BPI v. SARABIA MANOR HOTEL CORP., G.R. NO. 175844 JULY 29, 2013
Cram Down Effect, Sec. 63 to 73
Cram-down clause
Among other rules that foster the foregoing policies, Section 23, Rule 4 of the Interim Rules of Procedure on
Corporate Rehabilitation (Interim Rules) states that a rehabilitation plan may be approved even over the
opposition of the creditors holding a majority of the corporations total liabilities if there is a showing that
rehabilitation is feasible and the opposition of the creditors is manifestly unreasonable. Also known as the "cramdown" clause, this provision, which is currently incorporated in the FRIA, is necessary to curb the majority
creditors natural tendency to dictate their own terms and conditions to the rehabilitation, absent due regard to the
greater long-term benefit of all stakeholders. Otherwise stated, it forces the creditors to accept the terms and
conditions of the rehabilitation plan, preferring long-term viability over immediate but incomplete recovery.

i. Feasibility of Sarabias rehabilitation.

If the results of the financial examination and analysis clearly indicate that there lies no reasonable probability
that the distressed corporation could be revived and that liquidation would, in fact, better subserve the interests of
its stakeholders, then it may be said that a rehabilitation would not be feasible. In such case, the rehabilitation
court may convert the proceedings into one for liquidation.
Rehabilitation is x x x available to a corporation [which], while illiquid, has assets that can generate more cash if
used in its daily operations than sold. Its liquidity issues can be addressed by a practicable business plan that will
generate enough cash to sustain daily operations, has a definite source of financing for its proper and full
implementation, and anchored on realistic assumptions and goals. This remedy should be denied to corporations
whose insolvency appears to be irreversible and whose sole purpose is to delay the enforcement of any of the
rights of the creditors, which is rendered obvious by the following: (a) the absence of a sound and workable
business plan; (b) baseless and unexplained assumptions, targets and goals; (c) speculative capital infusion or
complete lack thereof for the execution of the business plan; (d) cash flow cannot sustain daily operations; and (e)
negative net worth and the assets are near full depreciation or fully depreciated.
LIQUIDATION
CONSUELO METAL CORP v. PLANTERS DEVELOPMENT BANK & MANINGAS, (2008)
Secured Creditor Claims, Sec. 113, Sec. 114
While the SEC has jurisdiction to order the dissolution of a corporation, [16]jurisdiction over the liquidation of the
corporation now pertains to the appropriate regional trial courts. This is the reason why the SEC, in its 29
November 2000 Omnibus Order, directed that the proceedings on and implementation of the order of liquidation
be commenced at the Regional Trial Court to which this case shall be transferred. This is the correct procedure
because the liquidation of a corporation requires the settlement of claims for and against the corporation, which
clearly falls under the jurisdiction of the regular courts. The trial court is in the best position to convene all the
creditors of the corporation, ascertain their claims, and determine their preferences.
Rules
If rehabilitation is no longer feasible and the assets of the corporation are finally liquidated, secured creditors shall
enjoy preference over unsecured creditors, subject only to the provisions of the Civil Code on concurrence and
preference of credits. Creditors of secured obligations may pursue their security interest or lien, or they may
choose to abandon the preference and prove their credits as ordinary claims.
Moreover, Section 2248 of the Civil Code provides:
Those credits which enjoy preference in relation to specific real property or real rights,
exclude all others to the extent of the value of the immovable or real right to which the preference
refers.
Held: In this case, Planters Bank, as a secured creditor, enjoys preference over a specific mortgaged property and
has a right to foreclose the mortgage under Section 2248 of the Civil Code. The creditor-mortgagee has the right
to foreclose the mortgage over a specific real property whether or not the debtor-mortgagor is under insolvency or
liquidation proceedings. The right to foreclose such mortgage is merely suspended upon the appointment of a
management committee or rehabilitation receiver or upon the issuance of a stay order by the trial court. However,
the creditor-mortgagee may exercise his right to foreclose the mortgage upon the termination of the rehabilitation
proceedings or upon the lifting of the stay order.
YNGSON v. PNB, G.R. NO.171132, AUGUST 15, 2012
Secured Creditor Claims, Sec. 113, Sec. 114
Issue: Whether PNB, as a secured creditor, can foreclose on the mortgaged properties of a corporation under
liquidation without the knowledge and prior approval of the liquidator or the SEC. YES.
It is worth mentioning that under RA 10142, otherwise known as the Financial Rehabilitation and Insolvency
Act (FRIA) of 2010, the right of a secured creditor to enforce his lien during liquidation proceedings is retained.
Section 114 of said law thus provides:

SEC. 114. Rights of Secured Creditors. The Liquidation Order shall not affect the right of a secured creditor to
enforce his lien in accordance with the applicable contract or law. A secured creditor may:
a)
waive his rights under the security or lien, prove his claim in the liquidation proceedings and share in the
distribution of the assets of the debtor; or
b)
maintain his rights under his security or lien;
If the secured creditor maintains his rights under the security or lien:
1.
the value of the property may be fixed in a manner agreed upon by the creditor and the liquidator.
When the value of the property is less than the claim it secures, the liquidator may convey the property to
the secured creditor and the latter will be admitted in the liquidation proceedings as a creditor for the
balance; if its value exceeds the claim secured, the liquidator may convey the property to the creditor and
waive the debtors right of redemption upon receiving the excess from the creditor;
2.
the liquidator may sell the property and satisfy the secured creditors entire claim from the proceeds of
the sale; or
3.
the secured creditor may enforce the lien or foreclose on the property pursuant to applicable laws.
Held: In this case, PNB elected to maintain its rights under the security or lien; hence, its right to foreclose the
mortgaged properties should be respected, in line with our pronouncement in Consuelo Metal Corporation.