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Here are select August 2012 ruling of the Supreme Court of the Philippines on commercial law:
Liquidation; right of secured creditor to foreclose mortgage. In the case of Consuelo Metal Corporation v. Planters Development Bank, which involved factual antecedents similar to the present case, the court has already settled the above question and upheld the right of the secured creditor to foreclose the mortgages in its favor during the liquidation of a debtor corporation. Manuel D. Yngson, Jr., (in his capacity as the Liquidator of ARCAM & Co., Inc.) vs. Philippine National Bank, G.R. No. 171132, August 15, 2012.
Liquidation; right of secured creditor to foreclose mortgage. Under Republic Act No. 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 debtor’s right of redemption upon receiving the excess from the creditor;(2) the liquidator may sell the property and satisfy the secured creditor’s 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.
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. Manuel D. Yngson, Jr., (in his capacity as the Liquidator of ARCAM & Co., Inc.) vs. Philippine National Bank, G.R. No. 171132, August 15, 2012.
Liquidation; preference for unpaid wages. As to petitioner’s argument on the right of first preference as regards unpaid wages, the Court has elucidated in the case of Development Bank of the Philippines v. NLRC that a distinction should be made between a preference of credit and a lien. A preference applies only to claims which do not attach to specific properties. A lien creates a charge on a particular property. The right of first preference as regards unpaid wages recognized by Article 110 of the Labor Code, does not constitute a lien on the property of the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a preference in application. It is a method adopted to determine and specify the order in which credits should be paid in the final distribution of the proceeds of the insolvent’s assets. It is a right to a first preference in the discharge of the funds of the judgment debtor. Consequently, the right of first preference for unpaid wages may not be invoked in this case to nullify the foreclosure sales conducted pursuant to PNB ‘s right as a secured creditor to enforce its lien on specific properties of its debtor, ARCAM. Manuel D. Yngson, Jr., (in his capacity as the Liquidator of ARCAM & Co., Inc.) vs. Philippine National Bank, G.R. No. 171132, August 15, 2012.
(Hector thanks Rommell Lumagui for his assistance to Lexoterica.)
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