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    MBTC vs. International Exchange Bank

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    Ian Cabana
    This document summarizes a Supreme Court case involving a dispute over mortgaged equipment between Sacramento Steel Corporation (SSC), International Exchange Bank (IEB), and Metrobank. The Supreme Court ruled that Metrobank could not intervene in the case between SSC and IEB. The Court held that before bringing an action to rescind a contract allegedly executed fraudulently, a creditor must first exhaust the debtor's properties through attachment and execution and exercise the debtor's rights, prior to filing an accion pauliana or action to rescind. As Metrobank had not taken these successive measures, it could not intervene in the case according to the Civil Code requirements for actions in fraud of creditors.

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    © All Rights Reserved
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    MBTC vs. International Exchange Bank

    Uploaded by

    Ian Cabana
    606 views2 pages
    This document summarizes a Supreme Court case involving a dispute over mortgaged equipment between Sacramento Steel Corporation (SSC), International Exchange Bank (IEB), and Metrobank. The Supreme Court ruled that Metrobank could not intervene in the case between SSC and IEB. The Court held that before bringing an action to rescind a contract allegedly executed fraudulently, a creditor must first exhaust the debtor's properties through attachment and execution and exercise the debtor's rights, prior to filing an accion pauliana or action to rescind. As Metrobank had not taken these successive measures, it could not intervene in the case according to the Civil Code requirements for actions in fraud of creditors.

    Original Title

    11. MBTC vs. International Exchange Bank

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    This document summarizes a Supreme Court case involving a dispute over mortgaged equipment between Sacramento Steel Corporation (SSC), International Exchange Bank (IEB), and Metrobank. The Supreme Court ruled that Metrobank could not intervene in the case between SSC and IEB. The Court held that before bringing an action to rescind a contract allegedly executed fraudulently, a creditor must first exhaust the debtor's properties through attachment and execution and exercise the debtor's rights, prior to filing an accion pauliana or action to rescind. As Metrobank had not taken these successive measures, it could not intervene in the case according to the Civil Code requirements for actions in fraud of creditors.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    606 views2 pages

    MBTC vs. International Exchange Bank

    Uploaded by

    Ian Cabana
    This document summarizes a Supreme Court case involving a dispute over mortgaged equipment between Sacramento Steel Corporation (SSC), International Exchange Bank (IEB), and Metrobank. The Supreme Court ruled that Metrobank could not intervene in the case between SSC and IEB. The Court held that before bringing an action to rescind a contract allegedly executed fraudulently, a creditor must first exhaust the debtor's properties through attachment and execution and exercise the debtor's rights, prior to filing an accion pauliana or action to rescind. As Metrobank had not taken these successive measures, it could not intervene in the case according to the Civil Code requirements for actions in fraud of creditors.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Cabana, Adrian C.

    Doctrine : It is thus apparent that an action to rescind, or an accion pauliana, must


    be of last resort, availed of only after the creditor has exhausted all the properties of the debtor not
    exempt from execution or after all other legal remedies have been exhausted and have been proven
    futile

    Case Title : MBTC vs. International Exchange Bank


    GR. No. 176008
    August 10, 2011

    Facts

    Sacramento Steel Corporation (SSC) is a business entity engaged in manufacturing and


    producing steel and steel products. For the purpose of increasing its capital, SSC entered into a Credit
    Agreement with herein respondent International Exchange Bank (IEB) wherein the latter granted the
    former an omnibus credit line. As security for its loan obligations, SSC executed five separate deeds of
    chattel mortgage constituted over various equipment found in its steel manufacturing plant.

    Subsequently, SSC defaulted in the payment of its obligations. IEB's demand for payment went
    unheeded. The IEB filed with the RTC of Misamis Oriental an action for injunction for the purpose of
    enjoining SSC from taking out the mortgaged equipment from its premises

    On the other hand, on July 18, 2004, SSC filed with the same RTC of Misamis Oriental a
    Complaint for annulment of mortgage and specific performance for the purpose of compelling the IEB to
    restructure SSC's outstanding obligations

    Petitioner Metrobank filed a motion for intervention contending that it has legal interest in the
    properties subject of the litigation between IEB and SSC because it is a creditor of SSC and that the
    mortgage contracts between IEB and SSC were entered into to defraud the latter's creditors

    Issue

    whether or not petitioner Metrobank may be allowed to intervene?

    Ruling

    No, Metrobank cannot be allowed to intervene

    The Supreme Court held that under Article 1381 of the Civil Code, an accion pauliana is an
    action to rescind contracts in fraud of creditors.

    However, jurisprudence is clear that the following successive measures must be taken by a
    creditor before he may bring an action for rescission of an allegedly fraudulent contract: (1) exhaust the
    properties of the debtor through levying by attachment and execution upon all the property of the
    debtor, except such as are exempt by law from execution; (2) exercise all the rights and actions of the
    debtor, save those personal to him (accion subrogatoria); and (3) seek rescission of the contracts
    executed by the debtor in fraud of their rights (accion pauliana).

    WHEREFORE. Based on the foregoing, the Court finds no error in the ruling of the CA that the
    RTC committed grave abuse of discretion in allowing Metrobank's intervention

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