Banking Morales

7/24/2019 Banking Morales

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BANKS AND FINANCIAL INTERMEDIARIES: Atty. Rafael Morales

E. Commercial papers

F. Security Devices and other Credit Supports/Enhancements

1. Types

(a) Real Estate Mortae

(!) Chattel Mortae

(c) Mortae Trust "ndenture

(d) #lede

(e) $uarantee/Suretyship/Stand!y %etter o& Credit

(&) 'val

() oldout

(h) 'ssinment !y *ay o& Security

In cases, youll notce t!at t!s "as c!aracter#e$ as a %&le$'e( un$er CM

)ecause *ustces +n$set s te$ to t!e Cl Co$e B-T t!ere s a NCC &roson

on free$o+ to contract, an$ o)scure &roson Art. /0/ "!c! states t!at an

a)solute coneyance of &ro&erty s +a$e to secure an o)l'aton t!ere s an

+&le$ trust. If t!e o)l'aton s fulflle$ )y t!e 'rantor, !e +ay $e+an$

coneyance of &ro&erty. 1Art. /0/ re+ans o)scure2

"!en t!e $ocu+entaton s re&lete "t! "or$s suc! as 3)y "ay of securty3,

3'uaranty34 SC "oul$ rec!aracter#e t!e ass'n+ent as a &le$'e or a +ort'a'e

In Sycip, Salazar: "Deed of Assignment without recourse by way of Security"

Ao$s securty lan'ua'e suc! as 3)y "ay of securty3 to secure4 555n or$er to

secure t!e &ro+&t &ay+ent of t!e o)l'aton, ass'n a)solutely t!e recea)les

$efne$ )elo" 1so a)solute ass'n+ent "!c! transfers fro+ $ay one )ot! le'al

an$ )enefcal ttle fro+ t!e ass'nor to t!e ass'nee2

6roson t!at "oul$ clarfy t!at no $acon en &a'o nten$e$ fro+ $ay

3not"t!stan$n' t!e ass'n+ent, t s not t!e ntenton of t!e &artes to

e7tn'us! t!e o)l'aton. 6rnc&al o)l'aton e7tn'us!e$ )y t!e t+e t!e

&rocee$s are actually a&&le$ to &ay+ent3 1ao$ ar'u+ent t!at t!ere s $acon

en &a'o, t!erefore e7tn'us!+ent of t!e o)l'aton2

8 Reconeyance of t!e recea)le...once t!e o)l'aton s satsfe$, t!ere9s an

auto+atc reconeyance fro+ t!e ass'nee to t!e ass'nor 1n accor$ance "t!

A/0/ of NCC2

3Not!n' n t!s ass'n+ent s!all )e construe$ as creatn' a &le$'e or a c!attel

+ort'a'e3 1so as to clarfy t!e ntenton of t!e &artes2

;6a'es


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T!s ?n$ of $ocu+ent s s+lar to a $ee$ of ass'n+ent4e9re 'on' to ta?e

t!at u& n $erate transactons

(i) Trust Receipt

'llied +an,in Corp v. -rdone (10)

v. #eople (2010)

Colinares v. C' (2000)

D+# v. #rudential +an, (2003)

Rosario Te4tile Mills v. ome +an,ers Savins and Trust (2003)

5intola v. "+'' (167)

F: 6uca s!ells case: ntola s&ouses "!o )ou'!t 6uca s!ells e7ecute$ a trust

rece&t a'ree+ent "t! IBAA. !en s&ouses "ere una)le to sell t!e sea s!ell

&ro$ucts, t!ey offere$ to surren$er t!e 'oo$s to IBAA nstea$. IBAA refuse$ to

acce&t t!e &ro$ucts.

IBAA fle$ a cr+ case for estafa a'anste ntola. Ds+sse$ "!en ntola S6s

cons'ne$ t!e 6uca s!ells to t!e court.

IBAA fle$ anot!er case, t!s t+e a cl case for recoery of t!e a+ount un$er

t!e Trust Rece&t A'ree+ent. ntola s&ouses ar'ue$ t!at IBAA s alre$y )arre$:

No reseraton res *u$cata

: For IBAA

Letter of cre$ttrust rece&t a'ree+ent: 8 features

Loan feature securty feature

Trust rece&t s a securty a'ree+ent "!ere t!e )an? ac@ures a r'!t oer t!e

&rocee$s, not oer t!e &ro&erty.

IBAA, )y t!e surren$er of t!e sea s!ells, can stll recoer )ase$ on BC of t!e

loan contract, not t!e trust rece&t a'ree+ent.

SC +a$e so+e trou)ln' &ronounce+ents. If you loo? at your SCRA erson, on

&a'e =G, st t"o &ara'ra&!, laste sentence.....($stncton )et"een loan feature

an$ securty feature: It coneys t!at t!e trust rece&t s NT an accessory to t!e

loan transacton "!en n fact t sH It coneys t!e &erce&ton t!at t s se&arate

an$ $stnct )ut n realty t s connecte$ "t! one anot!er. A trust rece&t s n

t!e sa+e &oston as a &le$'e an$ +ort'a'e, t!us, a securty, "!c! cannot e7st

f t!ere s no &rnc&al o)l'aton.

;t!e surren$er of t!e 'oo$s e7tn'us!es t!e Cr+nal acton, )ut NT TE

CIIL ACTINH

#eople v. ita&an (12)

Trust rece&t a'ree+ent oer &lastc &ro$ucts. Ntafan assale$ t!e Trust

Rece&ts La" un$er 8 ar'u+ents:

: No olaton of const r'!t a'anst co+&elln' to &ay for non&ay+ent of

$e)ts:

It alrea$y seres as &rotecton of &u)lc nterest.

2


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No nee$ for +alce. It s +ala &ro!)tu+ t!us not an ele+ent of t!e cr+e.

6uns!+ent s a al$ e7ercse of &olce &o"er.

;;Dssentn' o&non of C "!c! &ro&oses cr+nal#aton of trust rece&t

transacton. Too? out &enalty for trust rece&t olatons...

Rea$ serously t!e $fferent &rosons an$ $ecsons, SC confuse$ conce&ts of

trust rec&ts transactons

E7a+&le: In ntola, court +entone$ t!at ntola s&ouses !ol$ t!e &ro&erty at

t!er o"n rs?5 )ut t!e )an? o"ns t, not t!e entrusteeH

Trust n Cl Co$e: trustor !as t!e le'al ttle, t!eres a trustee, an$ a )enefcary.

But n a trust rece&t arran'e+ent: entrustor !as le'al ttle, no &assn' of ttle to

t!e entrustee, entrustee "oul$ *ust et!er sell t!e 'oo$s an$ $eler t!e &rocee$s

of t!e sale to t!e entruster or *ust return t f fale$ to sell t. T!e )uyer fro+ t!e

entrustee s free fro+ t!e securty nterest of t!e entrustee oer t!e 'oo$. T!e

ter+nolo'y n t!e trust rece&ts la" s $fferent fro+ t!e conce&ts of Trust n t!e

Cl Co$e so t!e SC +'!t !ae )een confuse$.

(8) Seto&&/ettin

Art. 8=>. Co+&ensaton s!all ta?e &lace "!en t"o &ersons, n t!er o"n r'!t, are

cre$tors an$ $e)tors of eac! ot!er. 1


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(,) Com&ort %etter (%etter o& a*areness;


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Aff$at of oo$ Fat! s nter&rete$ to coer only 6resent o)l'atons an$ only t!e

&ro&ertes lste$ t!eren.

!at f t!e CM &ro$es a contractual st&ulaton t!at t!e CM coers %future

o)l'atons(

Court sa$ t!at t s an enforcea)le o)l'aton for t!e e7ecuton of et!er a ne"

$ocu+ent or a+en$ t!e e7stn' $ocu+ent

Secton =: coers only 6R6ERTIES $escr)e$ n t!e $ee$.

So any &roson cannot $o t!e trc?. No "ay out )ut to e7ecute a ne" contractor a+en$ t!e e7stn' $ocu+ent. 6a' !n$ na?alsta, "ala naH

Floatin chare vs. Fi4ed chare

n 6!l&&nes, f7e$ c!ar'e$ only. S&ecfc &ro&ertes are su)*ect to a len.

(a) 5alidity o& >a&terac?uired property@ and >a&terincurred

o!liation@ clauses in a chattel mortae

'rticle 201; Civil Code

Art. 8G0, CC.

Art. 8G>0. T!e follo"n' re@ustes are essental to t!e contracts of &le$'e an$

+ort'a'e:

12 T!at t!ey )e consttute$ tosecure the fulfillment of a principal obligationJ

182 T!at t!e &le$'or or +ort'a'or )e t!e absolute ownerof t!e t!n' &le$'e$ or

5


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+ort'a'e$J

12 T!at t!e &ersons consttutn' t!e &le$'e or +ort'a'e !ae t!e free disposal of

their property, an$ n t!e a)sence t!ereof, t!at t!ey )e le'ally aut!or#e$ for t!e

&ur&ose.

T!r$ &ersons "!o are not &artes to t!e &rnc&al o)l'aton +ay secure t!e latter )y

&le$'n' or +ort'a'n' t!er o"n &ro&erty. 1>0=2

CM: No, n e" of Secton = of C!attel Mort'a'e La". o"eer, t!ere are

e7ce&tons to t!s.

C!attel Mort'a'e La" &ro$es t!at NLO S-C 6ERSNAL 6R6ERTO

AS STATED IN TE MRTAE DC-MENT SALL BE CERED BOTE SAME MRTAE.

E7ce&ton..............

Torres s. L+*a&: reoln' stoc? or 'oo$s "!c! are for retal sale 1acc$' to

6rof. Catn$'2: &ers!a)le 'oo$s, su)*et to "ear5an$5tear

!en t!e Mort'a'e A'ree+ent &ro$es t!at after5ac@ure$ &ro&ertes +ay )e

nclu$e$ as securtes to t!e o)l'aton, an$ a ne" contract or a+en$+ent of t!e

contract s e7ecute$ 1as re@ure$ n ACME S!oe, Ru))er 6lastc Cor& s. CA2

;t s stll necessary to nclu$e a su&&le+ent of REM to coer after ac@ure$

&ro&ertes an$ re'ster t "t! t!e Re'strar of $ee$s so t!at at foreclosure t+e,

t!ere "oul$ )e no ssue as to t!e sco&e of t!e REM.

'FTER "CBRRED -+%"$'T"- ('"-)

Is AI al$ n REM c!attel +ort'a'e

REM: Artcle 8G


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5enson9s !ers 1&atay na s enson2 alle'e$ t!e follo"n' $efenses:

c!attel +ort'a'es ID for lac? of suffcent &artcularty n

t!e $escr&ton of t!e &ro&erty +ort'a'e

c!attels sou'!t to )e recoere$ )y t!e &lantffs "ere not t!esa+e &ro&erty $escr)e$ n t!e +ort'a'e

;NTE: TERE AS A STI6-LATIN IN TE MRTAE

A-TRIQIN ENSN T SELL TE DS CERED BO TE

MRTAE AND RE6LACE TEM IT TE TER DS

TEREAFTER ACP-IRED

TC:

o ensons $efaulte$ n &ay+ent

o +ort'a'es )eca+e $ue

o &lantffs, as +ort'a'ees, "ere enttle$ to t!e &ossesson of t!e DR-

STRES

ELD: Affr+. Allo"e$ AA6 to )e nclu$e$ n t!e +ort'a'eJ t!e &roson of

t!e last &ara'ra&! of secton = of Act. 0G> s not a&&lca)le to $ru' stores,

)a#aars, an$ all ot!er stores n t!enature o& revolvin and &loatin !usiness.

INTENT F CML: to &ro+ote )usness an$ tra$e n t!ese Islan$s an$ to 'e

+&etus to t!e econo+c $eelo&+ent of t!e country

...t coul$ not !ae )een t!e ntenton of t!e 6!l&&ne Co++sson to a&&ly t!e

&roson of secton = a)oe @uote$ to stores o&en to t!e &u)lc for retal

)usness, "!ere t!e 'oo$s are constantly sol$ an$ su)sttute$ "t! ne" stoc?,

suc! as $ru' stores, 'rocery stores, $ry5'oo$s stores, etc. If sa$ &roson "ere

nten$e$ to a&&ly to t!s class of )usness, t "oul$ )e &ractcally +&oss)le to

consttute a +ort'a'e on suc! stores "t!out closn' t!e+, contrary to t!e ery

s&rt a)out a !an$ca& to tra$e an$ )usness, "oul$ restran t!e crculaton of

ca&tal, an$ "oul$ $efeat t!e &ur&ose for "!c! t!e la" "as enacte$, to "t, t!e

&ro+oton of )usness an$ t!e econo+c $eelo&+ent of t!e country.

STI6-LATIN ALID AND BINDIN: "!ere t!e after5ac@ure$ &ro&erty s n

rene"al of, or n su)sttuton for, 'oo$s on !an$ "!en t!e +ort'a'e "ase7ecute$, or s &urc!ase$ "t! t!e &rocee$s of t!e sale of suc! 'oo$s, etc.

Co))ey, a "ell5?no"n aut!orty on C!attel Mort'a'es, reco'n#es t!e al$ty

of st&ulatons relatn' to after5ac@ure$ an$ su)sttute$ c!attels.

5DA6AT BO E6RESS STI6-LATIN: the mortgage must e&pressly provide

that such future ac'uisitions shall be held as included in the mortgage

T!e case &resents an ECE6TIN to al$ty of AA6. It s &ractca)le an$

soun$.

#eoples +an, and Trust Co. v. Dahican %um!er Company (17)

. N after AA6 are nclu$e$ n t!e $ee$ of +ort'a'e OES.

It s clear fro+ t!e &roson n )ot! $ee$s of +ort'a'e t!at t!e Lu+)er

concesson 3s!all ++e$ately )e an$ )eco+e su)*ect to t!e len3 of )ot!

+ort'a'es as f alrea$y nclu$e$ t!eren at t!e t+e of e7ecuton.

It s co++on an$ lo'cal n cases "!ere t!e &ro&ertes 'en as collateral are

perishable or sub(ect to inevitable wear and tear or were intended to be sold

or were intended to be used thus becoming inevitable to wear and tear

6ur&ose: to maintain, to t!e e7tent allo"e$ )y crcu+stances, the oriinal

value o& the properties iven as security .

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8. N t!e +ort'a'e of t!e AA6 s o$ )ecause t!ey "ere not re'stere$ n

accor$ance "t! t!e C!attel Mort'a'e La"

CML DES NT A66LO T TIS CASE. TIS CNCERNS REAL ESTATE

MRTAEH

T!e Mort'a'es "ere e7ecute$ "!en t!e LD CIIL CDE "as stll n force.

Stll, BT ol$ an$ ne" cl co$es reco'n#e t!at +ac!nery, rece&tacles,

nstru+ents or re&lace+ents nten$e$ )y t!e o"ner of t!e tene+ent for an

n$ustry or "or?s "!c! +ay )e carre$ on n a )ul$n' or on a &ece of lan$,

an$ s!all ten$ $rectly to +eet t!e nee$s of t!e sa$ n$ustry or "or?s. S, t!e

&ro&ertes n $s&ute s!oul$ )e $ee+e$ as real estate an$ t!e +ort'a'es

e7ecute$ are REMs not CMsH

;So $oes not nee$ to )e re'stere$ a secon$ t+e as c!attel +ort'a'es n or$er to

)n$ t!e 3after ac@ure$ &ro&ertes3 an$ affect t!r$ &artes.;DAA SA MILL CASE not a&&lca)le )ecause n t!s case )ot! &artes

reco'n#e$ t!e after ac@ure$ &ro&ertes as REAL 6R6ERTIES an$ not as

c!attel.

;T!s s a +ort'a'e5trust n$enture snce t!e )an? s a trustee for t!e fore'n

)an?.

n t!e $scusson of &ers!a)le collateral...t!en 'oes on to say t!at t s not

++oral, etc. &oor *u$'+ent on t!e cre$tor not to nclu$e suc! &roson n t!e

a'ree+ent.. B-T t!eres Secton = "!c! &ro!)ts &recsely ncluson of AA6

clauseHHH o" can t )e &oor *u$'+ent

6lus s"ee&n' &ronounce+ent on e7cluson of collaterals su)*ect to "ear an$

tear. B-T all &roe&rtes are su)*ect to "ear an$ tearH No nee$ een to $scuss t!e

sa$ e7ce&ton snce t!s noles &ro&erty "!c! "as cons$ere$ REAL

ESTATE MRTAE, not C!attel +ort'a'eH

+elian Catholic Missionaries v. Maallanes #ress (12)

F: Ma'allanes 6ress o)tane$ t"o loans:

1st loan: fro+ 6 el)ronn for 6/?. CATTEL MRTAE on all ts

&rntn' +ac!nery an$ accessores "as e7ecute$ n faor of EILBRNN

2nd %oan: fro+ Bel'an Cat!olc Mssonares for 6G?. CATTEL

MRTAE on t!e sa+e &ro&ertes e7ecute$ n faor of Bel'an Cat!olc

Mssonares

5el)ronn transferre$ all ts +ort'a'e cre$t to Me+*e

E4tension o& 1st loan: Me+*e, as successor n nterest of el)ronn, e7ten$e$an a$$tonal 60? loan, an$ t!e c!attel +ort'a'e e7ecute$ )efore "as +a$e to

coer t!e ne" 60? loan

5fre occurre$. 6ro&ertes coere$ )y t!e CM "ere )urne$. Snce t "as coere$

)y an nsurance &olcy, Me+*e coul$ !ae recoere$ t!e a+ount $ue fro+ t!e

nsurance &olcy )ut Bel'an Cat!olc Mssonares fle$ a &etton for "rt of

n*uncton to sto& t!e a"ar$ of t!e &rocee$s of t!e nsurance to Me+*e "t! t!e

acton to cancel t!e $ocu+ent of transfer of +ort'a'e

N Mort'a'e e7tenson +a$e )y Me+*e 1so t!at t!e CM "oul$ coer after

ncurre$ o)l'aton2 s o$

OES

5ncrease +a$e )y Me+*e n t!e +ort'a'e cre$t an$ t!e e7tenson +a$e )y

Ma'allanes &ress of t!e +ort'a'e to t!e a$$tonal cre$t, w#o the )nowledge or

consent of *elgian $atholic as +nd mortgagee, &re*u$ces t!e cre$t of t!e 8n$

8


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+ort'a'ee nas+uc! as t!e securty for t!e &ay+ent of sa$ cre$t "as re$uce$

frau$ t!at tates t!e contract of e7tenson of t!e +ort'a'e, ID

3T!e ncrease of 60,>


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contract confor+a)ly "t! t!e for+ &rescr)e$ n t!e CML

;Refusal to e7ecute a ne" a'ree+ent )y t!e )orro"er $efault

;t!e re+e$y of foreclosure can only coer $e)ts e&tent at the time of

constitution and during the life of the $ sought to be foreclosed

;SEC0, CML: Aff$at of F: t!e &artes +ust e7ecute an oat! t!at t!e

+ort'a'e s +a$e for t!e &ur&ose of SEC-RIN TE BLIATIN

S6ECIFIED IN TE CNDITINS TEREF, AND FR N TER

6-R6SE4

4t!e $e)t referre$ to n t!e la" s a current, not an o)l'aton t!at s yet +erely

conte+&late$.

DECISIN IN ACME SE C-LD AE BEEN ALRIT IT-TCITIN TE BELIAN CATLIC CASE. BO -ST CITIN SECTIN 0,

ITS CLEAR. Bel'an contra$cts t!e early &oston. Secton 0 stll re@ures

$ocu+entaton )ut t!e Bel'an case $oesn9tH

NTE: SIR INTENDS T CANE IS P-ESTINSH IS ST-DENTS

TEND T CITE ACME SE AND BELIAN IN REMH ACME an$

BELIAN concerns CMHH

-n %ion Tia, v. %uneta Motor Co. (16)

F: C!ao Son' &urc!ase$ a C!rysler Se$an fro+ Luneta Motors co for 6.>?,

secure$ )y > 6Ns for 6GG eac! an$ a CM n faor of Luneta. CM nclu$e$ a

clause as follo"s:

. . t )en' e7&ressly a'ree$ furt!er t!at t!s +ort'a'e s!all also sere as securty

for t!e &ay+ent to t!e sa$ +ort'a'ee n a$$ton to t!e aforesa$ notes of t!e

&urc!ase &rce or cost of any an$ all 'asolne, tres, auto+o)le accessores or

&arts, an$ re&ars furns!e$ or +a$e )y t!e sa$ +ort'a'ee at any t+e u& to t!e

$ate t!s +ort'a'e s co+&letely satsfe$ as an$ "!en t!e sa+e )eco+es $ue,

and of any other indebtedness of the mortgagor in favor of the mortgagee

incurred in any other manner whatever.

C!oa Son' acte$ as surety for 6GG for a certan An'eles for &ants an$

accessores t!e latter o)tane$ fro+ Macon$ray. Macon$ray ass'ne$ ts cre$t

to Luneta, as C!oa Son' stll !a$ 6/G )alance. C!ao Son' &a$ 6/G so t!ere

"asP1 left unpaid.

C!oa Son' "as a)le to &ay all t!e 6Ns t!ou'!. But snce t!ere s stll 6GG left

un&a$ arsn' fro+ t!e surety +a$e )y C!oa Son', t!e cre$t of "!c! "as

ass'ne$ to Luneta, Luneta refuse$ to e7tn'us! t!e CM.

C!ao Son' sol$ t!e auto to n' Lon' Ta?.

For t!e non&ay+ent of t!e 6GG, Luneta sou'!t t!e forclosure of t!e CM.

S!erff attac!e$ t!e auto 1&&or n' Lon' Ta? :1 2

n' Lon' Ta? fle$ &etton for "rt of n*uncton an$ $a+a'es s. Luneta. CFI

rule$ a'anst !+

N t!e surety secure$ )y n' Lon' Ta? s nclu$e$ n t!e CM e7ecute$ )y n'

Lon' Ta? n faor of Luneta Motor Co

OES

Instru+ents of +ort'a'e, as sa$ E7!)t 8, are )n$n', "!le t!ey su)sst, not

only u&on t!e &artes e7ecutn' t!e+ )ut also u&on t!ose "!o later, )y &urc!ase

or ot!er"se, ac@ure t!e &ro&ertes referre$ to t!eren.

10


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T!e r'!t of t!ose "!o so ac@ure sa$ &ro&ertes s!oul$ not an$ can not )e

su&eror to t!at of t!e cre$tor "!o !as n !s faor an nstru+ent of +ort'a'e

e7ecute$ for t!e for+altes of t!e la", n 'oo$ fat!, an$ "t!out t!e least

n$caton of frau$. T!s s all t!e +ore true n t!e &resent case, )ecause, "!en

t!e &lantff &urc!ase$ t!e auto+o)le n @ueston on au'ust 88,


12/39


t!e &artes e7ecute$ different promissory notes agreeing to a particular

security for each loan. T!us, t!e a&&ellate court rule$ t!at t!e e7tra*u$cal

foreclosure sale of t!e &ro&erty for t!e t!ree loans s +&ro&er.

5o"eer, t foun$ t!at t!e s&ouses !as not &a$ un$er t!e st o)l'aton as t!e

68M &ay+ent "as for t!e o)l'aton of t!e B Alar Realty an$ Deelo&+entInc an$ not n t!er &ersonal ca&acty

N T!e 3Blan?et +ort'a'e clause3 or t!e 3$ra'net +ort'a'e clause3 e7&ressly

coers not only t!e st loan )ut also t!e 8 su)se@uent loans An$ f t s al$

5Court !el$ t!at t!e r$ loan "as clearly not coere$ )y t!e 3)lan?et +ort'a'e

clause3 )ecause t!e sa$ loan "as un$erta?en )y t!e s&ouses n )e!alf of

DNALC an$ not n t!er &ersonal ca&acty. No &ercn' of cor&orate el asno e$ence of eason an$ frau$ "as s!o"n.

>!lan,et mortae clause/dranet clause@G

5one "!c! s s&ecfcally &!rase$ tosubsume all debts of past or future origins.

5s!oul$ )e carefully scrutn#e$ an$ strctly construe$

5Mort'a'es of t!s c!aracter ena)le t!e &artes toprovide continuous dealings,

t!e nature or e7tent of "!c! +ay not )e ?no"n or antc&ate$ at t!e t+e, an$

they avoid the e&pense and inconvenience of e&ecuting a new security on each

new transaction

5o&erates as a convenience and accommodation to the !orro*ers as t +a?es

aala)le a$$tonal fun$s "t!out t!er !an' to e7ecute a$$tonal securty

$ocu+ents, t!ere)y san' t+e, trael, loan closn' costs, costs of e7tra le'al

serces, recor$n' fees, et cetera.

5+ort'a'es 'en to secure &uture advancements are valid and leal

contracts, an$ t!e a+ounts na+e$ as cons$eraton n sa$ contracts $o not l+t

t!e a+ount for "!c! t!e +ort'a'e +ay stan$ as securty f fro+ t!e four

corners of t!e nstru+ent t!e ntent to secure future an$ ot!er n$e)te$ness can)e 'at!ere$.

In t!s case:

T!at for and in consideration of certain loans, overdraft and other credit

accommodations obtained from the ortgagee by the ortgagor and#or

---------------- hereinafter referred to, rres&ecte of nu+)er, as

DEBTR, an$ to secure the payment of the same and those that may hereafter

be obtained, t!e &rnc&al or all of "!c! s !ere)y f7e$ at T"o un$re$ Ffty

T!ousan$ 1680G,GGG.GG2 6esos, 6!l&&ne Currency, as "ell as t!ose t!at t!eMort'a'ee +ay e7ten$ to t!e Mort'a'or an$or DEBTR, nclu$n' nterest

an$ e7&enses or any ot!er o)l'aton o"n' to t!e Mort'a'ee, "!et!er $rect or

n$rect, &rnc&al or secon$ary as a&&ears n t!e accounts, )oo?s an$ recor$s of

t!e Mort'a'ee, t!e Mort'a'or $oes !ere)y transfer an$ coney )y "ay of

+ort'a'e unto t!e Mort'a'ee, ts successors or ass'ns, t!e &arcels of lan$

"!c! are $escr)e$ n t!e lst nserte$ on t!e )ac? of t!s $ocu+ent, an$or

a&&en$e$ !ereto, to'et!er "t! all t!e )ul$n's an$ +&roe+ents no" e7stn'

or "!c! +ay !ereafter )e erecte$ or constructe$ t!ereon, of "!c! t!e

Mort'a'or $eclares t!at !et s t!e a)solute o"ner free fro+ all lens an$

ncu+)rances. . . .

SC: ALL TER LANS INCL-DEDH 6artes nten$e$ t!e real estate

+ort'a'e to secure not only the P&'!. loan from the petitioner! but also

future credit facilities and advancements that may be obtained by the

respondents. T!e ter+s of t!e a)oe &roson )en' clear an$ una+)'uous,

t!ere s net!er nee$ nor e7cuse to construe t ot!er"se.

The pro!lem: oul$ t!e 3)lan?et Mort'a'e clause$ra'net clause3 a&&ly "!en

t!e su)se@uent loans are coere$ )y se&arate securtes

12


13/39


8 SCLS F T-T:

Dra'net clause coers ALL TER DEBTS, EEN IF TE TER DEBT IS

SEC-RED BO ANTER MRTAE

Dra'net clause "oul$ not secure a note t!at s ot!er"se secure$ as to ts

entrety. oul$ only coer t!e $efcency after e7!austn' t!e securty s&ecfe$t!eren. 1so &a' +ay natra &an' o)l'aton, yun un' un$er n' $ra'net clause

SC: 8n$ sc!ool of t!ou'!tH

RELIANCE N TE SEC-RITO TEST: "!en t!e +ort'a'or ta?es anot!er

loan for "!c! anot!er securty "as 'en t coul$ not )e nferre$ t!at suc! loan

"as +a$e n relance solely on t!e or'nal securty "t! t!e %$ra'net clause,(

)ut rat!er, on t!e ne" securty 'en

atio t!e %$ra'net clause( n t!e frst securty nstru+ent consttute$ acontnun' offer )y t!e )orro"er to secure furt!er loans un$er t!e securty of t!e

frst securty nstru+ent, an$ t!at when the lender accepted a different security

he did not accept the offer

;!ere $ee$s a)solute n for+ "ere e7ecute$ to secure any an$ all ?n$s of

n$e)te$ness t!at +'!t su)se@uently )eco+e $ue, a balance due on a note,

after e&hausting the special security given for the payment of such note, was in

the absence of a special agreement to the contrary, within the protection of the

mortgage, notwithstanding the giving of the special securityT!s s reco'nton

t!at "!le t!e %$ra'net clause( su)ssts, t!e securty s&ecfcally e7ecute$ forsu)se@uent loans +ust frst )e e7!auste$ )efore t!e +ort'a'e$ &ro&erty can )e

resorte$ to.

;any a+)'uty n a contract "!ose ter+s are susce&t)le of $fferent

nter&retatons +ust )e rea$ a'anst t!e &arty "!o $rafte$ t, 6ru$ental Ban?.

;B-T 6R-DENTIAL BANK coul$ stll su)*ect t!e &ro&ertes to foreclosure

&rocee$n's for t!e un&a$ 680G?, "!c! )ot! TC an$ CA foun$ to !ae not yet

)een &a$. If t!ere are $efcences for t!e secon$ loan, coul$ also a&&ly t!e

&rocee$s as to t!e secon$ loan.

Pualfcaton to t!e al$ty of t!e AI clause: Dra'net Clause

Een f t!ere s a Dra'net Clause n REM "!c! +'!t !ae secure$ future

o)l'atons, "!en t!e future o)l'atons are secure$ se&arately,

R: +ort'a'ee cannot foreclose t!e REM to satsfy t!e un&a$ su)se@uent

o)l'atons. E7!aust frst t!e s&ecfe$ collateral for t!e loan, not t!e &ro&erty

un$er t!e Dra'net clauseH

: unless t!ere9s an e7&lct st&ulaton to t!e contraryH

ustce Tn'a, "!o loes to cte A+ercan *urs&ru$ence, s sayn' t!at $ra'net

clause s use$ n +ort'a'es to allo"4.!e s actually $escr)n' a Mort'a'e

Trust In$enture 1t!e 6!l&&ne E@ualent2H

Cuyco v. Cuyco (200)

F: 6ettoners o)tane$ a 6.0M loan fro+ res&on$ents, secure$ )y REM oer

t!er Cu)ao &ro&erty.

REM &ro$es:

6RIDED EER, t!at s!oul$ t!e MRTAR $uly &ay or cause to

)e &a$ unto t!e MRTAEE or !s !ers an$ ass'ns, t!e sa$ n$e)te$ness

of NE MILLIN FIE -NDRED T-SAND 6ESS 1,0GG,GGG.GG2,

6!l&&ne Currency, to'et!er "t! t!e a'ree$ nterest t!ereon, "t!n t!e a'ree$

ter+ of one year on a +ont!ly )ass t!en t!s MRTAE s!all )e $sc!ar'e$,

an$ ren$ere$ of no force an$ effect, ot!er"se t s!all su)sst an$ )e su)*ect to

13


14/39


foreclosure n t!e +anner an$ for+ &ro$e$ )y la".

Su)se@uently, &ettoners o)tane$ a$$tonal loans fro+ t!e res&on$ents n t!e

a''re'ate a+ount of 6,80G,GGG.

6ettoners only &a$ 68 +o2

s. 6ettoners: REM only coers 6.0M loan, no a'ree+ent t!at t!e >

nterest "as to )e co+&oun$e$ +o as t "as &er annu+H

RTC: For res&on$ents

CA: REM "as e7&ressly nten$e$ to coer only t!e or'nal 6.0M loan an$ t!e

su)se@uent 60G? an$ 60GG? loans, not t!e 60G? loan, t!e 68GG? loan an$

680G? loan. 8 nterest +&ose$ )y TC also &ro&er

N t!e 8 nterest rate +&ose$ )y TC 6ro&er

OES. As "as !el$ n Eastern s!&&n' lnes an$ n t!e la". Interest on *u$cal

a"ar$s untl &a$.

N all fe a$$tonal loans "ere nten$e$ to )e secure$ )y t!e real estate

+ort'a'e

N.

1eto an' na5'ets ?o4un' 6.0M loan lan' an' ?asa+a2

R: a mortae lia!ility is usually limited to the amount mentioned in the

contract.

: o"eer, t!e a+ounts na+e$ as cons$eraton n a contract of +ort'a'e $onot l+t t!e a+ount for "!c! t!e +ort'a'e +ay stan$ as securty f fro+ t!e

four corners of t!e nstru+ent the intent to secure future and other

indebtedness can be gathered. T!s st&ulaton s al$ an$ )n$n' )et"een t!e

&artes an$ s ?no"n n A+ercan urs&ru$ence as t!e %)lan?et +ort'a'e

clause,( also ?no"n as a %$ra'net clause.(

A >dranet clause@ o&erates as a conenence an$ acco++o$aton to t!e

)orro"ers as t +a?es aala)le a$$tonal fun$s "t!out t!er !an' to e7ecute

a$$tonal securty $ocu+ents, t!ere)y san' t+e, trael, loan closn' costs,

costs of e7tra le'al serces, recor$n' fees, et cetera.

!le a real estate +ort'a'e +ay e7ce&tonally secure future loans or

a$ance+ents, these future debts must be sufficiently described in the

mortgage contract.An o)l'aton s not secure$ )y a +ort'a'e unless t co+es

farly "t!n t!e ter+s of t!e +ort'a'e contract. EER, t s clear fro+ a

&erusal of t!e real estate +ort'a'e t!at there is no stipulation that the

mortgaged realty shall also secure future loans and advancements. T!us, "!at

a&&les s t!e 'eneral rule a)oe state$.

!at t!e &artes coul$ !ae $one n or$er to )n$ t!e realty for t!e a$$tonal

loans "as

to e7ecute a ne" real estate +ort'a'e or

to a+en$ t!e ol$ +ort'a'e confor+a)ly "t! t!e for+ &rescr)e$ )y t!e la".

Faln' to $o so, t!e realty cannot )e )oun$ )y suc! a$$tonal loans, "!c! +ay

)e recoere$ )y t!e res&on$ents n an or$nary acton for collecton of su+s of

+oney.

14


15/39


N t!e a+ount of o)l'aton s!oul$ nclu$e nterest

OES. Rule >.8 &ro$es so.

No $ra'net clause nole$ !ereH

(!) o de&iciency claim in a plede

6actu+ co++soru+ s not allo"e$ un$er R6 La"s. If you !ae a +ult&le

securty a'ree+ent 1c!attel +ort'a'e, REM, &le$'e, ass'n+ent2 for t!e sa+e

&rnc&al o)l'aton, ALAOS REMEMBER TAT FRECLS-RE F TE

P.!D/! S-LD BE DNE LAST 1As t!ere9s a &ro!)ton to un$er'o ot!er

re+e$es un$er Artcle 802

Sr "as sayn' so+et!n' a)out &le$'e of s!ares of stoc? an$ t!e ar'u+ent t!at

t!e stus s not 6!l&&nes )ut sr sa$ t!at een f t )e ar'ue$ t!at stus not n

R6, R6 la"s "oul$ stll a&&ly4)asta sorry I $on9t ?no" e!...

o de&iciency claim in a plede

'rt. 2113. T!e sale of t!e t!n' &le$'e$ s!all e7tn'us! t!e &rnc&al

o)l'aton, "!et!er or not t!e &rocee$s of t!e sale are e@ual to t!e a+ount of t!e

&rnc&al o)l'aton, nterest an$ e7&enses n a &ro&er case. If t!e &rce of t!e

sale s +ore t!an sa$ a+ount, t!e $e)tor s!all not )e enttle$ to t!e e7cess,

unless t s ot!er"se a'ree$. "& the price o& the sale is less; neither shall the

creditor !e entitled to recover the de&iciency; not*ithstandin any

stipulation to the contrary.

In &le$'e, f t!ere9s a $efcency4

R: Cre$tor cannot cla+ $efcency once foreclosure o)tane$

EC: f st&ulate$

(c) De&iciency claim in a chattel mortaeH e4ception ('rticle 1=6=;

par ; Civil Code)

Art 0121In a contract of sale of personal propertyt!epriceof "!c! s &aya)le n

nstall+ents, t!e en$or +ay e7ercse any of t!e follo"n' re+e$es:

...

12 Foreclose t!e c!attel +ort'a'e on t!e t!n' sol$, f one !as )een consttute$,

s!oul$ t!e en$ee9s falure to &ay coer t"o or +ore nstall+ents.

...In t!s case, !e s!all !ae no furt!er acton a'anst t!e &urc!aser to recoer anyun&a$ )alance of t!e &rce. Any a'ree+ent to t!e contrary s!all )e o$. 1/0/5A5a2

Ree" for Artcle />/:

eneral Rule: Cre$tor s!all al"ays )e enttle$ to collect t!e $efcency *u$'e+ent.

1Ablaza v Ignacio, U322.

15


16/39


Di&&erentiatin #lede and Chattel Mortae

#lede Chattel Mortae

In &le$'e, t!e &le$'or cannot )e +a$e

ans"era)le for $efcency after

foreclosure snce t!e &rnc&al

o)l'aton s e7tn'us!e$. T!us,

foreclosure of &le$'e +ust )e your

last remedy.

6oss)le Soluton: Su)*ect &le$'e to

fore'n la".

R: Action for deficiency is

allowed 1C!attel Mort'a'e La",

arr$o . Tuason2

E7ce&ton: Artcle />/12, Cl

Co$e Recto La".

$arrido v. Tuason (16)

F: 6la Tuason e7ecute$ a CM oer !er car for t!e su+ of 6? "!c! s!e o"e$

to ose arr$o. As s!e "as una)le to &ay, ose arr$o co++ence$ a case for

t!e foreclosure of t!e CM atty9s fees an$ costs 1note: not for collecton of t!e

outstan$n' o)l'atonH2

TC: &ay 6? nterests 6GG costs 1een f arr$o &raye$ for foreclosureH2

"rt of e7ecuton ssue$, car of Tuason "as sol$ at a &u)lc aucton for 600G

"t! arr$o as t!e !'!est )$$er

as t!ere "as stll 6/0G left unsatsfe$ 60 alle'e$ly s&en$ to carry out "rt

of e7ecuton an$ 6,8 as a''re'ate outstan$n' )alance $ue un$er

$ecson, arr$o fle$ +otons 1for alas "rt of e7ecuton2 "!c! "ere )ot!

$ene$.

arr$o co++ence$ a cl case s. 6la Tuason, an$ no" "t! !er !us)an$, for

t!e recoery of t!e alle'e$ )alance n t!e earler case. MTD fle$ )y Tuason. TC

for T-ASN,

CFI: Affr+e$ $s+ssal of cl case n &ursuance toArticle &11' of *ivil *ode:

'rticle 2113 providesG

3. . . T!e sale o& the thin plededs!all e7tn'us! t!e &rnc&al o)l'aton,

"!et!er or not t!e &rocee$s of t!e sale are e@ual to t!e a+ount of t!e &rnc&al

o)l'aton, nterest an$ e7&enses n a &ro&er case. If t!e &rce of t!e sale s +ore

t!an sa$ a+ount, t!e $e)tor s!all not )e enttle$ to t!e e7cess, unless t s

ot!er"se a'ree$.$f the price of the sale is less! neither shall the creditor be

entitled to recover the deficiency! notwithstanding any stipulation to thecontrary.3

N arr$o coul$ stll cla+ t!e $efcency

N, )ut )ase$ on res *u$cata, not )ecause t!ere "as alrea$y foreclosure of t!e

CM.

;Artcle 80 of t!e Cl Co$e $oes not a&&ly to C!attel Mort'a'e. Artcle80 s nconsstent "t! t!e &rosons of t!e C!attel Mort'a'e La", an$ t!at,

accor$n'ly, the chattel mortgage creditor may maintain an action for the

deficiency.

TC +ust !ae a&&le$ 80 )ase$ on Artcle 8/ of CC "!c! &ro$es t!at

&rosons on &le$'e s!all )e a&&lca)le to c!attel +ort'a'es 3nsofar as t!ey are

not n conflct "t! t!e C!attel Mort'a'e La"3. But as t $oes conflct, t s!oul$

not )e a&&le$H

16


17/39


CNFLICT DI ?o rn ala+ e!. e!e. Eto sa) sa footnote sa case:

T!e last &art of t!e secon$ &ara'ra&! of Secton / of Act No. 0G>, &ro$es:

SECTIN /. Sale of &ro&erty at &u)lc

3. . . T!e &rocee$s of suc! sale s!all )e a&&le$ to t!e &ay+ent, frst, of t!e costs

an$ e7&enses of ?ee&n' an$ sale, an$ t!en to t!e &ay+ent of t!e $e+an$ or

o)l'aton secure$ )y suc! +ort'a'e, an$ t!e res$ue s!all )e &a$ to &ersons

!ol$n' su)se@uent +ort'a'es n t!er or$er, an$ t!e )alance, after &ayn' t!e

+ort'a'es, s!all )e &a$ to t!e +ort'a'or or &erson !ol$n' un$er !+ on

$e+an$.3

6ero !ellur!, t!s conte+&lates a stuaton "!ere t!ere s e7cess n t!e &rocee$s

of t!e sale, an$ not "!en t!ere9s a $efcency. So !o" $oes t!s conflct

TC +'!t !ae acte$ un$er t!e +&resson t!at t!e frst case "as for t!e

foreclosure of a c!attel +ort'a'e. But t!e frst case "as an or$nary +oney

*u$'+ent so no &reous ruln' on foreclosure

...1o?ay eto &a'?a'ets ?o a, snce $ &a na+an *u$cally or$ere$ an'

foreclosure, &e$e &a +a'foreclosure on ot!er &ro&ertes to coer t!e $efcency

of t!e +oney *u$'+ent. In t!s case, arr$o &raye$ for foreclosure an$ not

&ay+ent )ut snce t!e MTC or$ere$ &ay+ent nstea$, no *u$cal or$er of

foreclosure2

SC: Munc&al court s!oul$ !ae NT DENIED &lantff9s +oton for ssuance

of alas "rt of e7ecuton

5)ut snce nstea$ of fln' an a&&eal to t!e $enal of !s +oton, t!e $ecson of

t!e MC !ae )een fnal an$ e7ecutory an$ t!us )n$n' an$ res *u$cata on t!e

Cl Acton !e later fle$.

NTE: !y $$ CM arse May sale )a or +ay utan' lan' If +ay sale, A/>/

"oul$ a&&lyH

T!ere9s no e7&lct state+ent n t!e C!attel Mort'a'e la" "!c! &ro$es t!at

t!e cre$tor coul$ recoer $efcency. SC nter&rete$ t an$ $eclare$ t!at t!ere9s

suc! r'!t IT-T E6LAININ O4 Sr sa$ t!at n &reous cases,

t!e ruln' "as $fferent )ut !e $$n9t ass'n to us t!e sa$ cases )ecause t "as

not ass'ne$ to !+ "!en !e "as a stu$ent...

#C" %easin and Finance v. Tro8an Metal "ndustries (2010)

Mana Financial Services $roup v. Colarina (2003)

F: Colorna )ou'!t on installment fro+ Ma'na Fnancal Serces a Su#u?

Multca). e e7ecute$ a 6N for t!e )alance of 688/ an$ e7ecute$ an

nte'rate$ 6N an$ $ee$ of CM oer t!e Multca) as securty.

5Colorna fale$ to &ay t!e +ont!ly a+ort#aton, "t! accu+ulatn' un&a$

)alance of 6,G=. Colorna stll fale$ to &ay ns&te of $e+an$s so MANAfle$ a CM6LAINT FR FRECLS-RE of CATTEL MRTAE "

RE6LEIN

5)on$ "as fle$ )y MANA, "rt of re&len "as ssue$

TC: Colarna &ay t!e 6,G= &lus &enalty atty9s fees costs. In case of

non&ay+ent, +ultca) s!all )e sol$ at &u)lc aucton

RTC: affr+

17
http://var/www/apps/conversion/tmp/scratch_2/onenote:%23Act%201508%20Chattel%20mortgage%20law&section-id=%7BAC66DC68-235E-4CA9-AFE1-DFDB9E938A5C%7D&page-id=%7B44AE5131-0B53-487E-B84E-FF6CC87317D3%7D&object-id=%7B4D1B6A40-11B8-4556-A883-1F947A91A91C%7D&B5&base-path=MAGANDA-4B1DAE7%5C4y1s%20ver2%20-%202%5CBankinhttp://var/www/apps/conversion/tmp/scratch_2/onenote:%23Act%201508%20Chattel%20mortgage%20law&section-id=%7BAC66DC68-235E-4CA9-AFE1-DFDB9E938A5C%7D&page-id=%7B44AE5131-0B53-487E-B84E-FF6CC87317D3%7D&object-id=%7B4D1B6A40-11B8-4556-A883-1F947A91A91C%7D&B5&base-path=MAGANDA-4B1DAE7%5C4y1s%20ver2%20-%202%5CBankin


18/39


CA: co+&lant "as for foreclosure of t!e c!attel +ort'a'e so "ron' to or$er

Colorna to &ay t!e )alance $ue

!at s t!e true nature of a foreclosure of c!attel +ort'a'e un$er Artcle />/12

OEOH Eto na un' snasa) n +a9a+ C!tH

+'CR'C M-T-R C-. 5S. M"%%' : %-n$ou)te$ly t!e &rnc&al o)*ect

of t!e a)oe a+en$+ent 1referrn' to Act /88 a+en$n' Art. /0/, Cl Co$e

of >>


19/39


Dacon en 6a'o: +o$e of e7tn'us!n' an o)l'aton "!ere)y t!e $e)tor

alenates n faor of t!e cre$tor &ro&erty for t!e satsfacton of +onetary $e)tJ

e7tn'us! u& to a+ount of &ro&erty unless " contrary st&ulatonJ A s&ecal

for+ of &ay+ent )ecause ele+ent of &ay+ent s +ssn': IDENTITO

result s t!e sa+e, n t!e sense t!at t!e +ort'a'or en$s u& "t! t!e &ro&erty )utno foreclosure &rocee$n'4

Is t!s a crcu+enton of &actu+ co++soru+

OES. 6recsely, t!e +ort'a'e s set as$e. N +ort'a'e to s&ea? of n t!e frst

&lace as t9s su)sttute$ "t! anot!er contractual arran'e+ent. But al$ as t s

un$er t!e free$o+ of t!e &artes to contract.

(e) E&&ect o& >stay order@ on en&orcement o& security

In 6etton for Re!a)ltaton, t!e Court +ay ssue a stay or$er "!c! "or?s as a

stan$stll or$er &ro!)tn' cre$tors to enforce t!er securtes.

court nee$s to see f t!e &etton s suffcent n for+ an$ su)stance

3Cra+ $o"n3 clause

(&) Foreclosure o& real estate mortae

Section =7; $+% o& 2000

R' 1

Sr9s )oo?:

REM +ay )e foreclose$ u$cally or e7tra*u$cally:

Iudicially E4tra8udicially

R>, Rules of C 6ro Act 0

No r'!t of re$e+&ton, only an e@uty of re$e+&ton

1r'!t of +ort'a'or to e7tn'us! t!e +ort'a'e an$

retan o"ners!& of t!e &ro&erty )y &ayn' t!e

+ort'a'e $e)t "n &ero$ of not less t!an


20/39


e7tra*u$cal foreclosure

4fore'n )an?s may not !ene&itfro+ t!e 8n$ &ara'ra&! of Secton /= snce t +ay

not )e a)le to resort to e7tra*u$cal foreclosure an$ t!erefore, "ll )e una)le to

)eneft fro+ t!e 8n$ &ara'ra&! of A=

SECTIN /=. Foreclosure ofeal +state ,ortgage. W

In t!e eent of foreclosure,

"!et!er *u$cally or e7tra*u$cally,

of any +ort'a'e on real estate "!c! s securty for any loan or ot!er cre$t

acco++o$aton 'rante$,

t!e mortaor or de!tor"!ose real &ro&erty !as )een sol$ for t!e full or &artal

&ay+ent of !s o)l'aton s!all !ae t!e riht *ithin one year a&ter the sale o& the

real estate; to redeem

the property

)y &ayn' t!e a+ount $ue un$er t!e +ort'a'e $ee$, "t! nterest t!ereon at t!e rate

s&ecfe$ n t!e +ort'a'e, an$ all t!e costs an$ e7&enses ncurre$ )y t!e )an? or

nsttuton fro+ t!e sale an$ custo$y of sa$ &ro&erty less t!e nco+e $ere$t!erefro+. 1RIT T REDEEM 6R6ERTO N OEAR FRM DATE F

REISTRATIN F TE CERTIFICATE F SALE IN TE REISTRO F

6R6ERTO2

o"eer, t!e purchaser at t!e aucton sale concerne$ "!et!er n a *u$cal or

e7tra*u$cal foreclosure s!all !ae t!e r'!t to enter u&on an$ ta?e &ossesson of

suc! &ro&erty ++e$ately after t!e $ate of t!e confr+aton of t!e aucton sale an$

a$+nster t!e sa+e n accor$ance "t! la". 1RIT F TE 6-RCASER T

ENTER 6R6ERTO AFTER SALE 5 -ERTA S. CA2

Any petitionn court to en8oin or restrain the conduct o& &oreclosure proceedinsnsttute$ &ursuant to t!s &roson s!all )e iven due course only upon the &ilin

)y t!e &ettoner o& a !ondn an a+ount f7e$ )y t!e court con$tone$ t!at !e "ll

&ay all t!e $a+a'es "!c! t!e )an? +ay suffer )y t!e en*onn' or t!e restrant of

t!e foreclosure &rocee$n'.

Not"t!stan$n' 'ct 13,

8uridical persons "!ose &ro&erty s )en' sol$ &ursuant to an e7tra*u$cal

foreclosure,

s!all !ae t!e right to redeem the propertyn accor$ance "t! t!s &roson

until; !ut not a&ter; the reistration o& the certi&icate o& &oreclosure sale *ith the

applica!le Reister o& Deeds

"!c! n no case shall be more than three (-) months after foreclosure ,

"!c!eer s earler.

"ners of &ro&erty t!at !as )een sol$ n a foreclosure sale &ror to t!e effectty of

t!s Act s!all retan

t!er re$e+&ton r'!ts untl t!er e7&raton. 1=>a2

RA N.

20
http://var/www/apps/conversion/tmp/scratch_2/onenote:%23RA%20NO.%20133&section-id=%7BAC66DC68-235E-4CA9-AFE1-DFDB9E938A5C%7D&page-id=%7BD733F843-6F00-4311-8338-CD063EEA60E1%7D&end&base-path=MAGANDA-4B1DAE7%5C4y1s%20ver2%20-%202%5CBanking2.onehttp://var/www/apps/conversion/tmp/scratch_2/onenote:%23RA%20NO.%20133&section-id=%7BAC66DC68-235E-4CA9-AFE1-DFDB9E938A5C%7D&page-id=%7BD733F843-6F00-4311-8338-CD063EEA60E1%7D&end&base-path=MAGANDA-4B1DAE7%5C4y1s%20ver2%20-%202%5CBanking2.one


21/39


Sec. . Any &roson of la" to t!e contrary not"t!stan$n',

&rate real &ro&erty +ay )e +ort'a'e$ for a &ero$ not e4ceedin &ive years,

rene"a)le for anot!er fe,

n faor of any n$$ual, cor&oraton, or assocaton,

)ut t!e +ort'a'ee or !s successor n nterest,

if dis'ualified to ac'uire or hold lands of the public domain in the Philippines,

shall not !id or ta,e part in any sale o& such real propertyas a conse@uence of

suc! +ort'a'e.

Sr: fore'n )an?s can )e +ort'a'ees )ut cannot ac@ure t!e &ro&erty n a foreclosure

sale4only enttle$ to &rocee$s of t!e sale

Note !o"eer t!at RA s&ecfes *u$cal foreclosure, not e7tra*u$cal

foreclosure

1o?ay, I can9t fn$ t any"!ere n RA 4"ala na+an' na?as&ecfy ?un' *u$cal

or e7tra*u$cal )asta as a conse@uence of suc! +ort'a'e2

See &a'e 04

Reister o& Deeds v. China +an,in Corp (12)

acts6an'lnan an$ C!ua "ere c!ar'e$ an$ concte$ of @ualfe$ t!eft for 68=0?

fro+ C!na Ban?n' Cor&oraton. In furt!erance of t!e *u$'+ent, 6an'lnan

e7ecute$ n faor of C!na Ban?n' Cor&oraton a &u)lc nstru+ent enttle$ DEED

F TRANSFER "!ere)y !e ce$e$ an$ transferre$ to CBC a &arcel of lan$ locate$

n Manla.

5!en CBC &resente$ t!e $ocu+ent to t!e Re'strar of Dee$s, Re'strar $ene$ t

)ecause CBC "as alen5o"ne$ an$ as suc!, )arre$ fro+ ac@urn' lan$s n t!e

6!l&&nes

5CBC su)+tte$ +atter to t!e Lan$ Re'straton Co++sson for Resoluton.

LRC: unre'stra)le

E%DG C+C cannot reister the property in their name

5Secton 80, RA = &ar X an$ 1$2 ARE NT A66LICABLE T ALIEN BANKSH

- #'R JG

3Sec. 80. Any co++ercal )an? +ay &urc!ase, !ol$, an$ coney real estate for t!e

follo"n' &ur&oses:

1c2Suc! as s!all )e coneye$ to t n satsfacton of debts previously contracted in

the course of its dealingsJ

t!e 3$e)ts3 referre$ to are NLO TSE RES-LTIN FRM 6REI-S

LANS AND TER SIMILAR TRANSACTINS MADE R ENTERED

INT BO A CMMERCIAL BANK IN TE RDINARO C-RSE F ITS

B-SINESS AS S-C

3CIIL LIABILITO3 arsn' fro+ a cr+nal offense AS NT A DEBT

21


22/39


RES-LTIN FRM A LAN R A SIMILAR TRANSACTIN AD

BETEEN T 6ARTIES IN TE RDINARO C-RSE F BANKIN

B-SINESS

- #'R (D)

3Sec. 80. Any co++ercal )an? +ay &urc!ase, !ol$, an$ coney real estate for t!e

follo"n' &ur&oses:

1$2 Suc! as t s!all &urc!ase at sales under (udgments, decrees, mortgages, or trust

deeds!el$ )y t an$ suc! as t s!all &urc!ase to secure $e)ts $ue to t.

But no suc! )an? s!all !ol$ t!e &ossesson of any real estate un$er +ort'a'e or trust

$ee$, or t!e ttle an$ &ossesson of any real estate &urc!ase$ to secure any $e)t $ue

to t, for a lon'er &ero$ t!an fe years.3

t!e $ee$ of transfer Y sale +a$e )y rtue of *u$'+ent, $ecree, +ort'a'e, or

trust $ee$ !el$ )y CBC

real &ro&erty n @ueston "as not &urc!ase$ )y CBC to secure $e)ts $ue t

$e)ts: refer only to suc! $e)ts as +ay )eco+e &aya)le to a&&ellant )an? as a

result of a )an?n' transacton.

- 'rument that consti prohi!ition should !e li!erally construed to !e limited

to #ERM'ET 'CAB"S"T"- -F RE'% EST'TE + '%"ES

t!e const &ro!)ton s ABSL-TE IN TERMS. S+t! Bell Co Case not

a&&lca)le )ecause "!at "as allo"e$ to )e re'stere$ t!ere "as a 0G5year

LEASE "!c! $oes not nole transfer of $o+non oer t!e lan$

T!s s t!e case "!en SOCI6 lost 1SOCI69s $a$ "as one of t!e foun$ers of C!na

Ban?2

SECTIN 80 SEC 08 of t!e NE LA

SECTIN 08. Ac@uston of Real Estate )y ay of Satsfacton of Cla+s. W

Not"t!stan$n' t!e l+tatons of t!e &rece$n' Secton, a )an? +ay ac@ure, !ol$

or coney real

&ro&erty un$er t!e follo"n' crcu+stances:

08.. Suc! as s!all )e +ort'a'e$ to t n 'oo$ fat! )y "ay of securty for $e)tsJ

08.8. Suc! as s!all )e coneye$ to t n satsfacton of $e)ts &reously contracte$ n

t!e course of

ts $ealn'sJ or

08.. Suc! as t s!all &urc!ase at sales un$er *u$'+ents, $ecrees, +ort'a'es, or trust

$ee$s !el$

)y t an$ suc! as t s!all &urc!ase to secure $e)ts $ue t.

Any real &ro&erty ac@ure$ or !el$ un$er t!e crcu+stances enu+erate$ n t!e a)oe

&ara'ra&!

shall be disposed of by the bank within a period of five (') years or as may be

prescribed by the

,onetary /oard: 6ro$e$, !o"eer, T!at t!e )an? +ay, after sa$ &ero$, contnue

to !ol$ t!e &ro&erty

for ts o"n use, su)*ect to t!e l+tatons of t!e &rece$n' Secton. 180a2

See sr9s annotaton of t!e sectonH 3st &ara'ra&! of +y annotaton4 t too? +e

!ours to &ut u& t!s &ara'ra&!3

22


23/39


El o)ar Fl&no: Ban? +a$e so+e effort n F to sell t!e &ro&erty "n 0 years. So

su)stantal co+&lance "t! Secton 08.

No" t!ere are onlne sales of t!e R6AH

#aderes v. C' (2003)

actsMICC o)tane$ a loan fro+ Banco Fl&no San's an$ Mort'a'e Ban?

an$ e7ecute$ REM oer 8 &arcels of lan$, nclu$n' 8 &arcels of lan$ n 6@ue

"!c! MICC sol$ t!ou'! unre'stere$.

5snce MICC $efaulte$ n t!er o)l'aton, Banco Fl&no fle$ 6ETITIN FR

TE ETRA-DICIAL FRECLS-RE of MICC9s Mort'a'e 1@ueston: f

e7tra*u$cal, )a?t +ay &etton2.

5Aucton Sale: BF $eclare$ t!e !'!est )$$er. Certfcate of Sale ssue$ n faor

of BF.

5N REDEM6TIN N RELEMENTARO 6ERID so BF fle$ a &etton

for ssuance of "rt of &ossesson of foreclose$ &ro&ertes "!c! "as 'rante$.

Notce to acate sere$ on s&ouses "!o )ou'!t 8 lan$s fro+ MICC. S&ouses

1&ettoners2 fle$ &etton )efore CA 5 $s+sse$ for lac? of +ert.

N s&ouses !ae su&eror r'!t oer BF 1alle'n' Buyers n F2

N. Sale occurre$ AFTER MRTAE n faor of BF re'stere$. A real r'!t

or len n faor of BF !a$ alrea$y )een esta)ls!e$, su)sstn' oer t!e

&ro&ertes untl t!e $sc!ar'e of t!e &rnc&al o)l'aton, EER

6SSESSR F TE LAND MAO BE.

N S&ouses !ae r'!t to re$ee+

OES. But r'!t alrea$y &rescr)e$.

5as successors5n5nterest of MICC, t!ey !ae r'!t to re$ee+ year FRM

TE DATE F REISTRATIN F TE CERTIFICATE F SALE TE

REISTRO F DEEDS. T!at s, fro+ uly 8


24/39


N. Artcle //>, NCC $oes not a&&ly

5T!e !ouses &urc!ase$ )y t!e s&ouses fro+ MICC are +&roe+ents on t!e

&ro&ertes su)*ecte$ to t!e REM, t!us coere$ )y t!e REM as +&roe+ents are

$ee+e$ &art of real &ro&erty

N "rt of &ossesson coul$ stll )e enforce$ after > years fro+ &ro+ul'aton

OES. R'!t of a&&lcantsu)se@uent &urc!aser to re@uest for t!e ssuance of a

"rt of &ossesson of lan$ NEER 6RESCRIBES

If you re'ster your REM an$ !ae t annotate$ to t!e )ac? of your ttle, su)se@uent)uyers of t!e lan$ are )oun$ )y t!e REM

+anco Filipino Savins and Mortae +an, v. C' (2003)

actsSanta'o Me+oral 6ar? o)tane$ a loan "t! BF an$ e7ecute$ a REM oer a

&arcel of lot. Because of $efault, BF foreclose$ REM an$ certfcate of sale "as

ssue$ n faor of BF.

5Santa'o +anfeste$ ts nterest to e7ercse ts r'!t to re$e+&ton an$ offere$ as

&ay+ent 6=GG? 1loan "as for 60GG?2. De&uty l@u$ator 'ae Santa'o untl en$ of

Marc!


25/39


s&ecfe$ t+e l+t, "!c! s one 12 year fro+ $ate of re'straton of certfcate of

sale. In case of $sa'ree+ent oer t!e re$e+&ton &rce, t!e re$e+&toner +ay

&resere !s r'!t of re$e+&ton t!rou'! *u$cal acton "!c! n eery case +ust )e

fle$ "t!n t!e sa+e one 12 year.

Note: Re$e+&ton a+ount as &ro$e$ n Secton /= of BL s $fferent fro+ t!at n

Rules of Court. T!s s to nsure t!at t!e )an? "ll not ncur losses.

;6rosons of BL are *u7ta&ose$ "t! RC &rosons.

If non )an? Ban?

Re$e+&ton &rce: foreclosure sale Re$e+&ton &rce: +ort'a'e $ee$ nterest

e.'. loan 6M, REM, foreclose$, sol$ for only 60GG?

!at t!e +ort'a'or "oul$ $o to re$ee+ t!e &ro&erty s to 'e you )ac?

60GG?:: f non5)an?

6M nterests :: f )an?

Tanchan v. 'llied +an,in Corporation (2006)

""". -ther Ta4 Matters

'. 'pplica!le Ta4es

1. "ncome Ta4

2. DST

. $RT

8. DST

BIR RR


26/39


If t!e )an? len$s +oney, t!e nterest s su)*ect to 'ross rece&ts ta7 1nor+ally

02 )ut t!e sa+e a+ount s nclu$a)le as &art of t!e 'ross nco+e of t!e )an?,

t!e net ta7a)le &orton of "!c! s ta7e$ )y nco+e ta7 1G )e'nnn' 8GG


27/39


+n)us A'ree+ent

An o+n)us loan a'ree+ent s a loan a'ree+ent "t! t!e +ort'a'e a'ree+ent

alrea$y nclu$e$ as one of t!e &rosons

s!oul$ also nclu$e a "aer 1f +ort'a'e s REM2 of t!e cre$t &references n

NCC as a loan a'ree+ent "t! &ar &assu &roson re@ures t!at t!e loan

a'ree+ent s!oul$ not )e notar#e$. o"eer, REM s re@ure$ to )e notar#e$.

To co+&ly "t! t!e latter re@ure+ent, t!e cre$tor n t!e loan a'ree+ent s!oul$

"ae t!e &reference of cre$t &roson n t!e NCC an$ s&ecfy t!at t!e

notar#aton s only for t!e &ur&ose of t!e loan a'ree+ent

An o+n)us a'ree+ent s a ta7 +n+#n' structure )ecause for e7ecutn'transactons, DST s re@ure$ to )e &a$ for eac! transacton. o"eer, as t!e

o+n)us a'ree+ent co+)nes t"o transactons, only DST s re@ure$ to )e

&a$ 1BIR RR


28/39


"5. #ro8ect Financin

6ro*ect Fnancn' s t!e fnancn' of an econo+c asset ca&a)le of 'eneratn' enou'!

reenues to coer o&eraton costs an$ $e)t sercn' for a $uraton of t+e lon'er

t!an t!e lfe of suc! asset. It s +ost often un$erta?en n &ro*ects noln' electrcty

an$ &o"er 'eneraton, trans&ortaton nfrastructures an$ t!e l?e.

!at usually !a&&ens s t!at a s&onsor un$erta?es to coer t!e ntal fnancn' of

t!e &ro*ect, len$ers are resorte$ to coer t!e $efcency, a S6ECIAL 6RECT

EICLE 1S62 s esta)ls!e$ 1"!c! s usually a *ont enture or l+te$

&artners!&2 to un$erta?e t!e )ul$n' of t!e nfrastructure, t!e S6 enters nto a

loan a'ree+ent "t! t!e len$ers )ac?e$ )y securtes: +ort'a'e oer t!e assets of t!e

S6 an$ &le$'e of e@uty of s&onsors4. 1!ay, )asta on &a'e G2

SIR n lecture

Relates to nfrastructure &ro*ects you see aroun$

e.'. MRT, &o"er &lants, s?y"ay4

Oou !ae a &ro*ect, ts econo+c lfe +ore or less s +ore t!an 80 years 1+ust

e7cee$ t!e ter+ of t!e loan2. It s antc&ate$ )y t!e len$ers t!at t!e &ro*ect"oul$ earn reenues )ecause t!e len$ers "oul$ loo? at t!e reenues

t s a "t!out recourse transacton so t!e len$ers usually nee$ an offta?er

If t!e &ro*ect $oes not earn reenues, t!e len$ers "oul$ not 'et &a$. So t s

essental for t!e &ro*ect to !ae an offta?er 1entty t!at9s 'on' to )uy t!e &u)lc

&ro*ect2

e.'. n &o"er&lant &ro*ect

FFTAKER: N6C 1N N6C uses t!e electrcty 'enerate$ )y t!e &o"er

&lant, N6C !as to &ay2

In MRT

ffta?er: DTC 1een f no)o$y r$es t!e tran, DTC "oul$ stll &ay t!e

&ero$c lease &ay+ents2

S&onsors of t!e &ro*ect

5t "oul$ esta)ls! a s&ecal &ur&ose co+&any

S6NSRS VVVesta)ls!VVV S6ECIAL 6-R6SE CM6ANO 1S62 VVV

S&onsors "oul$ &ro$e an EP-ITO "!c! "oul$ fun$ t!e &ro*ect 1)ut t9s not

suffcent2 so t!ere "oul$ )e len$ers t!at "oul$ &ut +oney n t!e co+&any

LENDERS: +anly )an?s an$ +ultlateral $eelo&+ent )an?s suc! as ADB, -S

EIM Ban? or a&an EIM Ban?4

VVVT!e &ro*ect co+&any "oul$ +ort'a'e to t!e len$ers 1trustee $es'nate$ )y

t!e len$ers2 t!e &ro&ertye@u&+entfacltesVVVt!ere "oul$ )e REM, CM, &le$'e of s!ares 1&le$'e$ )y t!e s&onsors n

faor of t!e len$ers not )ecause t!e s!ares are ery alua)le on t!e stan$&ont of

t!e len$ers4)ut for t!e len$ers to )e a)le to ta?e oer t!e &ro*ect co+&any *ust

n case t!e s&onsors "oul$ not )e a)le to &ay t!e loan

VVVto +a?e sure t!at t!e reenues are all $elere$ an$ re+tte$ to t!e len$ers,

t!ere9s t!e TR-ST RETENTIN ACC-NTAREEMENT "!eren all

reenues fro+ t!e &ro*ect "oul$ )e re+tte$

e.'. all &ay+ents fro+ N6C are re+tte$ to t!e trust account +ana'e$ )y t!e

trustees of t!e len$ers. If for nstance t!ere9s a nee$ to &ay t!e e+&loyees of t!e

&ro*ect co+&any, a re@uest "oul$ )e +a$e to t!e trustee of t!e account torelease 1$s)urse2 +oney fro+ t!e account

1t!e $a'ra+ $ra"n )y sr 3loo?s l?e a "aterfall3 so t s calle$ cas! "aterfall

account2

VVVt!e ssue s N t!e co+&any coul$ )e o"ne$ )y fore'ners 1as usually,

fore'ners &ro$e t!e fun$s2

5SC ruln' sa$ t!at 1+&lctly2 yes, )ecause t!e actual o&eraton s natonal#e$,

not t!e facltes 5 &ara n'an' +ay 'anto na &na)asa on MRT

28


29/39


-peration Maintenance 'reement

usually len$ers re@ure tec!ncans to run t!e faclty to +a?e sure t!at t "oul$

earn reenues

"nterCreditor 'reement

len$ers a'ree a+on' t!e+seles !o" to sync!ron#e t!er acttes n case

t!ere9s a $efault

;MNIB-S AREEMENT...contan all t!ese a'ree+entsHHH

'. Mechanism

"t!out recourse fnancn'

T!ere +ust )e a 'uarantee$ ta?er&urc!aser of t!e out&ut of t!e &ro*ect

e.'. MRT VVr$n' &u)lc

6o"er &lant VV N6C

len$ers loo? to reenues of t!e &ro*ect as t!e +an soure of t!e &ay+ent 1!ence,

t s +&ortant t!at t!e &ro*ect s earnn' +oney2

+. +-T and similar aranements

Fel$ Lst transfer: t!e arran'e+ent n MRT

Re!a)lttate5&erate5Transfer: re!a)ltate

Re!a)ltate5"n:

;-nsolcte$ 6ro&osal

e.'. Me'a"orl$ 6ro&osal

5$eelo& !ectares of lan$ n lo)al Cty

e.'. Ter+nal

BT La"

5. Derivative Transactions

'. Concept

Fnancal asset $ere$ fro+ anot!er fnancal asset.e. o&ton on treasury )ll

CALL 6TIN: o&ton to )uy

6-T 6TIN: o&ton to sell

5t!e o&ton s calle$ a $erate

;)uyer: one "!o "ants t!e o&ton

29


30/39


seller"rter: one 'n' t!e o&ton

;A+ercan &ton: e7ercse o&ton )efore t!e str?e $ate 1any t+e $urn' t!e o&ton

&ero$2

5+ore fle7)le )ut !'!er &re+u+

;Euro&ean &ton: e7ercse o&ton on t!e str?e $ate 1en$ of t!e o&ton2

5strcter )ut lo"er &re+u+

;Ber+u$an &ton: E7ercse o&ton on any $ate

DER"5'T"5E C-TR'CT

contract for t!e $fferences

concerne$ "t! t!e $fferences )et"een t!e &rce on str?e $ate an$ &rce on

tra$e $ate

.e. for"ar$ fore'n e7c!an'e contract

TRADE DATE: 60= Z

After +ont!s 1str?e $ate2: 6G Z

5t!e )uyer s sa$ to )e 3n t!e +oney3 )ecause !a !as a 'an of 6Z

B-T IF D-RIN TE STRIKE DATE4

60 Z

5)uyer s 3out of +oney3 )ecause !e loses 6Z. ence, !e s!all fore'o t!e

o&ton an$ "ll )uy t!e $ollars else"!ee.

;C-RRENCO SA6

5s+ultaneous &urc!ase an$ sale of currency noln' t!e sa+e counter &arty

Fro+ ree"er:

DER"5'T"5E

a fnancal nstru+ent, t!e alue of "!c! s $e&en$ent u&on t!e &rce of one or

+ore ot!er assets, suc! as co++o$tes, fore'n currences, etc.

5re&!rase: t!ey are fnancal assets "!c! $ere t!er alue fro+ ot!er fnancal

assets suc! as:

12 e@uty, securtes

182 f7e$5nco+e securtes

12 fore'n currency an$

1/2 co++o$tes

5a?a Contracts for $fferences: $fference )et"een a'ree$ future &rce an$ actual

&rce

DER"5'T"5E TR'S'CT"-

one t!at noles $erates

&ur&ose: +ana'e rs?s of e7&osurenest+ent to t!e un$erlyn' fnancal assets

t re&resents

t can et!er )e 6TINS R FRARDS

a. 6TINS

;CALL 6TIN: t!e )uyer s 'en t!e r'!t 1not o)l'aton2 to &urc!ase an asset at

a s&ecfe$ &rce on or )efore a s&ecfe$ $ate

;6-T 6TIN: t!e sellerr$er s 'en t!e r'!t 1not t!e o)l'aton2 to sell an asset

for a s&ecfe$ &rce on or )efore a s&ecfe$ $ate

30


31/39


). FRARD

5noles t!e BLIATIN to et!er )uy or sell an asset at a s&ecfe$ &rce on or

)efore a s&ecfe$ $ate

Illustraton:

Co. A "ll )uy -SZM +t!s fro+ no" at 6!6/G-SZ

ForE7 Rate n +t!s Stuaton

6!60G-SZ In t!e +oney

6!6G-SZ ut of t!e +oneyJ )ut n t!e +ar?et

6!6/G-SZ At t!e +oneyJ e7ercse for"ar$ 'en assure$ a+ount

co++on e7a+&les of Derate Transactons:

;currency s"a&

;for"ar$ contract

;call o&ton;&ut o&ton

T!s s a contract for $fferences. T!e nco+e s $ere$ fro+ t!e $fference )et"een

a'ree$ settle+ent &rce an$ actual +ar?et &rce on t!e a'ree$ settle+ent $ate.

CBRREC SL'#G

It s t!e s+ultaneous )uyn' an$ selln' of currences noln' s&ot 1near le'2

an$ for"ar$ 1far le'2 rates.

;;;A )an? cannot en'a'e n $erate transactons "t!out necessary BS6 lcense.

E7a+&le n sr fro+ lecture

FRARD: )uy currency fro+ t!e future

e.'. you9re a )orro"er, you earn an nterest rate eery +ont!s at Z. Oou "ant to

loc? t!e nterest rate. Let9s assu+e t!at t!e E7c!an'e rate s Z60G

5you enter nto a for"ar$ contract, you )uy Z "!c! s e@ualent to 60G.

4 +ont!s fro+ no":

Su&&osn' e7c!an'e rate s

Z.GG6G Oou +a$e t!e r'!t $ecsonH In t!e +oney: you "oul$ e7ercse your

o&tonH 1you antc&ate a 'an2

Z.GG 60G ut of t!e +oney: t!e +ar?et &rce +ont!s fro+ no" s lo"er t!an t!e

a'ree$ &rce un$er t!e for"ar$ a'ree+ent 5 you "oul$ not e7ercse your o&ton to

)uy 1you "oul$ *ust lose t!e &re+u+ you &a$2. Oou "oul$ )uy so+e"!ere else not

un$er for"ar$ contract

Z.GG600 At t!e +oney

8 Derates In t!e 6!l&&nes

. E@uty relate$ securtes

8. E7c!an'e for De)t Securtes

All ot!er transactons outs$e t!e e7c!an'e are calle$ TC 1oer t!e counter2:

IN -S

. Ne" Oor? Future E7c!an'e8. Ne" Oor? Cotton E7c!an'e

. CSCE 1Coffee Su'ar an$ Cocoa E7c!an'e2

5co++o$tes E7c!an'e

In E7c!an'e: you !ae re+e$y: clearn' a'ency +a?es sure t!at t!e )uyer s a)le to

&ay an$ t!e seller s a)le to $eler

E7c!an'e Tra$e$ Derates

5'oerne$ )y a'ree+ents n &rescr)e$ for+s

5TC $erates: t!ere9s an or'an#aton t!at too? ntate to &ro$e unfor+

$ocu+entaton 1Internatonal S"a&s an$ Dealers Assocaton 5ISDA2 5 see )elo"

CRSS5C-RRENCO SA6

1refer to $a'ra+ on &a'e /> of t!e ree"er2

+. +S# %icensin Re?uirements

31


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A. BS6 Lcensn' Re@ure+ents

Secton G8 1BS6 Crcular2

5t!e lcense "ll ena)le t!e lcensee to en'a'e n currency for"ar$s an$ currency

s"a&

2 Types o& %icenseG

a. Re'ular Derate lcense: any )an?, NBPB, afflate

). E7&an$e$ Derate Lcense: only Co++ercal an$ unersal )an?s can a&&ly

+S# Circ. o. 1023

Secton 8. eneral Aut!orty

5any

;BANK

;NBPB

;An$ or ts su)s$aresafflates

4+ay en'a'e n fnancal $erates acttes u&on &ror a&&roal of t!e BS6

5a )an? +ay en'a'e n $erate acttes BT n ts RB- an$ FCD-e7&an$e$FCD-

+S# Circ. o 2701

a. for e7&an$e$ $erates aut!orty

SC6E: NLO -Bs an$ KBs

5"!at +ay )e $one after ac@urn' lcense: +ay

;tra$e

;Sell

;$eal

;ta?e &ostons n currency s"a&

;for"ar$ of any tenor as "ell as all ot!er $erates for t!er o"n account or on

)e!alf of custo+ers

). For re'ular $erates aut!orty

SC6E: ot!er Fnancal nsttutons 1Fs2 su&erse$ )y t!e BS6 &e$e

5"!at +ay )e $one after ac@urn' lcense: +ay

;sell $erate &ro$ucts to ts custo+ers 6RIDED

VFI s!all !e$'e suc! $erates

Vt!e rs? )en' !e$'e$ s alrea$y e7stn' "t! t!e FI tself

c. No lcense $erates

SC6E: -B an$ KB " no lcense

5"!at +ay )e $one:

;tra$e

;sell

;$eal

;ta?e &ostons for t!er o"n account or n )e!alf of custo+ers n currency s"a&s

an$

;for"ar$s " tenor of one year or less

;sell ot!er $erate &ro$ucts of lcense$ enttes to ts custo+ers 6RIDED

Vcusto+er currently !as a rs? " t!e )an? t "s!es to !e$'e

$. For en'a'n' n $erate transactons as en$5users

SC6E: Ban?s, NBPB, t!er BS6 su&erse$ FI

5no lcense nee$e$ as t!ey are &urely en$5users

+S# Circ 3=

5latest Crcular on $erate transactons

;f )an?s $oes !e$'n', no nee$ for lcense )ut ot!er t!an t!at, nee$s s&ecal lcense

;cor&orates 1cor&oratons2: not 'oerne$ )y BS6, t "oul$ $e&en$ on t!e artcles of

ncor&oratons on N t!ey coul$ enter nto $erate transactons 1or else,

transacton s ultra res2

555n ot!er *urs$ctons, cor&orates $oes not $o ultra res transactons: t!ey coul$ $o

anyt!n'H But sr t!n?s t9s )etter to re'ulate t!e acttes of t!e cor&orates4

)ecause t soun$s 'oo$4ultra res..

C. "SD' Master 'reements

32


33/39



34/39


SIR: T!ere9s a secton t!at &en$n' t!e ssuance of SEC of rules of tra$n' of

securtes of futures, tra$n' s sus&en$e$. o"eer, n t!e $ocu+ent calle$

ISTRO F BACKR-ND of SEC, "!at s sus&en$e$ s &u)lc tra$n' of

co++o$ty future transactons

na&al !a&&ene$ "!en co++o$tes tra$n' "as stll allo"e$. T!e &ro)le+ n t!s

case s t!at een f t!e contract "as al$, ts +&le+entaton "as suc! t!at t!ere "as

no $elery of t!e co++o$ty, n olaton of ART 8G>, NCC

T!e ssue no" s N cross5currency s"a&&n' after t!s, or contracts a)out

currences, s co+&re!en$e$ n ART 8G>. In ot!er "or$s, s ForE7 securtes S!are

of stoc?s N, N4But s t 'oo$s

Loo? at A: oo$s $efne$. It e7clu$es +oney an$ le'al ten$er n t!e

6!l&&nes. It s +&le$ to nclu$e fore'n e7c!an'e. If t!at s t!e case, t!en s

Fore7 su&&ose$ to )e conte+&late$ un$er Art 8G> SIR says no, )ecause

ntro$uctory &ara'ra&! of A states t!at t!e $efnton of 'oo$s un$r t!at artcle

s for t!e ttle of sales, not un$er t!e ttle of aleatory contracts. S A8G> $oes not

conte+&late fore7.

First #hilippine "nternational +an, v. C' (1)

F: Frst 6!l&&ne Internatonal Ban? "ent nsolent

: C!erry &c?n' 1l@u$ator &c?s out t!e contracts not faora)le to t!e nsolent

)an?2 s not allo"e$. T!e conserator s not allo"e$ to $sre'ar$ contracts

unfaora)le to t!e nsolent )an?.

5&o"er of conserator s not unlateral...

SECTIN =G, nsolency la"

5&ro!)ts t!e sale, transfer, etc. of t!e assets of t!e nsolent +ont! &ror to fln'

for nsolency

5$oes not a&&ly to )an?s an$ nsurance co+&anes )ecause t!ey !ae t!er o"n set of

nsolency rules

F6IC . CA: C!erry &c?n' s not allo"e$ n 6!l&&ne *urs$cton. T!e &o"ers

'rante$ to t!e conserator, enor+ous an$ e7tense as t!ey are, cannot e7ten$ to t!e

&ost facto re&u$aton of &erfecte$ transactons. t!er"se, t!ey "oul$ nfrn'e u&on

non5+&ar+ent of contracts clause n Consttuton.

SIR:

5)ecause of t!e sn'le transactons clause, t!ere9s no c!erry &c?n' )ecause t!ere

"oul$ only )e one c!erry to &c?

&a'e == of sr9s )oo?

5". Securitiation

'. Concept

Securt#aton5+eans )y "!c! t!e selleror'nator $scounts recea)les to t!e )uyer on a true

sale )ass

5a)solute transfer: cre$tors of t!e seller cannot reac! t!e assets

5"t!out recourse transacton

5)uyer +ust )e a S&ecal 6ur&ose Entty 1s&ecal &ur&ose cor&oraton or s&ecal

&ur&ose trust2

VVt!e S6E re&ac?a'es t!e recea)les n t!e asset &ool an$ ssues a securty ?no"n

as ABS 1Asset Brac?et Securty2

1See &art B2

34


35/39


5recea)les transfor+e$ nto securtes

DIFFERENTIATED FRM AN S6:

S6: noles )a$ $e)ts

Securt#aton: &erfor+n' recea)les 1cre$t car$ recea)les, 6LDT2

+. 'sset!ac,ed securities

B. Asset5)ac?e$ securtes

VVABS s sol$ to nestors "!o loo? to reenues collecte$ fro+ t!e asset &ool

VVt!ere s oercollateral#aton n t!s stuaton

BS6 Crc. >0

5r'natn' )an? cannot use ts o"n trust $e&art+ent to ssue ABS, !as to $o t

t!rou'! anot!er )an?

C. Securitiation 'ct o& 200= (R.'. 27)

SECTIN . Defnton of Ter+s. 5 For &ur&ose of t!s Act, t!e ter+:

1a2 3Securt#aton3 +eans t!e &rocess )y "!c! assets are sol$ on a "t!out recourse

)ass )y t!e Seller to a S&ecal 6ur&ose Entty 1S6E2 an$ t!e ssuance of asset5

)ac?e$ securtes 1ABS2 )y t!e S6E "!c! $e&en$, for t!er &ay+ent, on t!e cas!

flo" fro+ t!e assets so sol$ an$ n accor$ance "t! t!e 6lan.

1)2 Asset5)ac?e$ securtes 1ABS23 refer to t!e certfcates ssue$ )y an S6E, t!e

re&ay+ent of "!c! s!all )e $ere$ fro+ t!e cas! flo" of t!e assets n accor$ance

"t! t!e 6lan.

1c2 3Assets3, "!et!er use$ alone or n t!e ter+ 3Asset5)ac?e$ securtes,3 refer to

loans or recea)les or ot!er s+lar fnancal assets "t! an e7&ecte$ cas! &ay+ent

strea+. T!e ter+ 3Assets3 s!all nclu$e, )ut s!all not )e l+te$ to, recea)les,

+ort'a'e loans an$ ot!er $e)t nstru+ents: 6ro$e$, T!at recea)les t!at are to

arse n t!e future an$ ot!er recea)les of s+lar nature s!all )e su)*ect to a&&roal

)y t!e Securtes an$ E7c!an'e Co++sson 1SEC2 or t!e Ban'?o Sentral n'

6l&nas 1BS62, as t!e case +ay )e: 6ro$e$, furt!er, T!at t!e ter+ 3Assets3 s!all

e7clu$e recea)les fro+ future e7&ectaton of reenues )y 'oern+ent, natonal or

local, arsn' fro+ royaltes, fees or +&osts.

1$2 3Asset 6ool3 +eans t!e 'rou& of $entfe$, !o+o'eneous assets un$erlyn' t!e

ABS.

1e2 3Co++sson3 refers to t!e Securtes an$ E7c!an'e Co++sson 1SEC2.

1f2 3Cre$t En!ance+ent3 +eans any le'ally enforcea)le sc!e+e nten$e$ to

+&roe t!e +ar?eta)lty of t!e ABS an$ ncrease t!e &ro)a)lty t!at t!e !ol$ers of

t!e ABS recee &ay+ent of a+ounts $ue t!e+ un$er t!e ABS n accor$ance "t!

t!e 6lan.

1'2 3r'nator3 +eans t!e &erson or entty "!c! "as t!e or'nal o)l'ee of t!eAssets, suc! as fnancal nsttuton t!at 'rants a loan or a cor&oraton n t!e )oo?s of

"!c! t!e Assets "ere create$ n accor$ance "t! t!e 6lan.

1!2 36lan3 +eans t!e &lan for securt#atons as a&&roe$ )y t!e Co++sson

12 3Secon$ary Mort'a'e Insttuton 1SMI23 +eans an entty create$ for t!e &ur&ose

of en!ancn' a secon$ary +ar?et for res$ental +ort'a'es an$ !ousn'5relate$ ABS.

1*2 3Seller3 +eans t!e &erson or entty "!c! coneys to t!e S6E t!e Assets for+n'

t!e Asset 6ool n accor$ance "t! t!e 6lan. In +ost nstances, t!e Seller +ay tself

)e t!e r'nator.

1?2 3Sercer3 refers to t!e entty $es'nate$ )y t!e S6E to collect an$ recor$

&ay+ents recee$ on t!e assets, to re+t suc! collectons to t!e S6E, an$ &erfor+

suc! ot!er serces as +ay )e s&ecfcally re@ure$ )y t!e S6E, e7clu$n' asset

+ana'e+ent or a$+nstraton.

1l2 3S&ecal 6ur&ose Entty 1S6E23 +eans et!er a S&ecal 6ur&ose Cor&oraton

1S6C2 or a S&ecal 6ur&ose Trust 1S6T2.

1+2 3S&ecal 6ur&ose Cor&oraton 1S6C23 refers to a *ur$cal &erson create$ n

accor$ance "t! t!e Cor&oraton Co$e of t!e 6!l&&ne solely for t!e &ur&ose of

securt#aton an$ to "!c! t!e Seller +a?es a true an$ a)solute sale of assets.

1n2 3S&ecal 6ur&ose Trust 1S6T23 +eans a trust a$+nstere$ )y an entty $uly

lcense$ to &erfor+ trust functons un$er t!e eneral Ban?n' La", an$ create$

35


36/39


solely for t!e &ur&ose of securtes an$ to "!c! t!e Seller +a?es a true an$ a)solute

sale of assets

SIR: een f securt#aton act &asse$ 8GG/, not +uc! securt#aton transacton un$er

t!e act

5@ute recently, )ecause of t!e su)6r+e &rces, securt#aton ac@ure$ )a$

re&utaton

5S6 Entty 1S6E2, "!c! can )e an S6C or S6 trust, "ll )e t!e one to ssue t!e asset5

)ac?e$ securtes 1ABS2

ABS: recea)les t!at "ere ac@ure$ )y t!e S6E

55t9s source or re&ay+ent "oul$ co+e fro+ t!e o)l'ors of t!e recea)les

55t!e !ol$ers of ABS are loo?n' to t!e &ay+ents fro+ t!e o)l'ors, n a sense, t9s a

l+te$ recourse

DNE: Collateral#aton

e.'. Issue s 6M, t!e &ool of recea)les su&&ortn' t s ,

SELLER of t!e recea)les or'nator lo)e, S+art, 6LDT4

Sercer can also )e t!e or'nator

S6T: trust $e&art+ent can act as one. A +ere account "n trust $e&art+ent 1t!ere can

)e seeral S6Ts n one trust $e&art+ent2

S6C: cor&oraton t!at s for+e$ an$ esta)ls!e$ for t!e &ur&ose of t!at sn'le

securt#aton transacton

55+ore cu+)erso+e: s!oul$ !ae )oar$ of $rectors, +eet re&ortn' re@ure+ents of

SEC4etc.

5555EER, f you use an S6T, t "oul$ )e easer t!an S6CH

5)ut "!y s t t!at t!ere9s not +uc! securt#aton transactons: a )an? t!at "ant to

enter a securt#aton transacton CANNT -SE ITS N TR-ST

DE6ARTMENTH T!e S6T +ust )e n$e&en$ent fro+ t!e RIINATRH

5sr says t!s s!oul$ )e reerse$ as t!e trust $e&art+ent of a )an? s se&arate an$

$stnct fro+ t!e )an?9s o&eratonsH

5"!at entty n t!e 6!l&&nes e7&ect lots of recea)les BANKSHHH

N a )an? can &urc!ase ABS BS6 ssue$ Crc /> t!at states t!at )an? can

ac@ure ABS 1to t!at effect, t!ere9s un$erlyn' securtes +entone$ )ut sr sa$ t!at

t9s t!e sa+e as ABS2

e.'. s!are of L-s on t!e to)acco ta7es "ere securt#e$ 1)ut t!ere9s a &roson n

t!e ne" act "!c! &ro!)ts securt#aton of ta7 reenues. Sr says t!e e7a+&le s

not coere$ )y t!e &ro!)ton )ecause t s not reenue flo", t s not l@u$ yet42

5"". DueDilience "nvestiation

Due $l'ence tea+ n a la"fr+: e7a+nes an entty4

8 ty&es:

1. #rospectus

Due Dl'ence

5$ere$ fro+ securtes act "!ere t!ere9s astate+ent to t!e effect t!at securtes to )e

sol$ to t!e &u)lc +ust )e re'stere$ "t! SEC an$ t!ere +ust )e a &ros&ectus

acco+&anyn' state+ent an$ t!e facts +entone$ t!eren +ust )e accurate n all

+ateral res&ect, no o+ssons "!c! "oul$ +a?e any state+ent n t +slea$n'. In

t!at act, t "as a $efense on t!e &art of t!e ssuer t!at t !as e7ercse$ D-E

DILIENCE n +a?n' t!e RS n t!e &ros&ectus. T!at $efense s su&&orte$ )y t!e

ssuer9s e+&loyn' a D-E DILIENCE TEAM.

[so )al? sa D-E DILIENCE TEAM: ns&ects t!e $ocu+ents of t!e co+&any,

transactons, etc. to +a?e sure t!at all +ateral nfor+aton a)out t!e co+&any s

correct4

-n$er SRC, $ue $l'ence s no lon'er a $efense. T!e KNLEDE DEFENSE s

t!e only $efense left: t!e ssuer or un$er"rter +'!t esca&e la)lty f &roes t!at

&urc!aser !a$ ?no"le$'e of t!e fact ncorrectly state$. D-E DILIENCE +ay )e

+t'atn' crcu+stance n a$+n case )efore SEC )ut not $efense.

36


37/39


2. 'c?uisition Due Dilience

e.'. 6!la+lfe s )en' sol$ )y AI, t!ere are seeral la"yers an$ un$er"rters4

Nye?, +oot )ecause transacton "as a)orte$

5""". Certain Financial #roducts/Esoteric Structures

'. Trade 'ccount/+ro,erin

e.'.SMC !as seeral $ealers4SMC $elers &ro$ucts to SMC, Dealers "oul$ not &ay

all at once

SMC coul$ +an$ate a )an? to loo? for nestors t!at "oul$ )uy t!e recea)les

)an? actn' for seeral nestors, nestors "oul$ enter a'ree+ent "t! t!e )an? to

loo? for nest+ents

!en SMC sells recea)les to a )an? re&resentn' seeral nestors, t!e )an?

+erely 'es 6ARTICI6ATIN 6ARTICI6ATESCNFIRMATIN SALE to t!e

nestors, t!s "ay t!e )an? recees co++sson 1Manla Ty&e of Tra$e Bro?ern'2

+. Credit%in,ed otes/Deposits

E.'. Fore'n )an? )uys R6 )on$s For ZM

5)ut fore'n )an? "orres a)out cre$t5"ort!ness of R6 1no5electon ne"s42 so t

"ants to 'et r$ of t!e transacton "t! R6. S )an? ssues CLN to a local )an?,

local )an? 'es ZM to fore'n )an? n e7c!an'e of CLN. T!e a'ree+ent s t!at t!e

CLN "oul$ carry a !'!er nterest t!an t!e cre$t rate4 t!en I9+ lost4

Cas! settle+ent: fore'n )an? "oul$ sell ts !ol$n's of R6 )on$s to +ar?et 1an$

&ro)a)ly for a lesser &rce2. T!e &rocee$s of t!e sale "oul$ t!en )e &a$ to t!e local

)an?

6!yscal settle+ent: t!e R6 )on$ s $elere$ to t!e local )an?J t!s s )etter )ecause

t!e R6 )on$ s t!e +ost &r+e 1nonrs? te+2 n t!e 6!l&&nes. If "orse co+es to

"orst, t!e local )an? "oul$ stll )e &a$ n 6esos.

". Certain -ther Matters

'. 'ntiMoney %aunderin 'ct

Fnancal Acton Tas? Force 1FATF2: a tas? force or'an#e$ )y $eelo&e$ countres

"!c! $entfe$ noncoo&erate countres 16!l&&nes "as for+erly nclu$e$ n t,

to'et!er "t! Nauru an$ Russa2

5f t!e 6!l&&nes $$ not co+&ly "t! t "n t!e $ea$lne, t!ere9s a sanctonH 1+oney

5 re+ttances to t!e 6!l&&nes "oul$ )e cross c!ec?e$, +eann' $elay n t!e rece&t

37


38/39


of re+ttances n t!e 6!l&&nes2

5!o"eer, st AMLA "as not co+&lant n certan as&ects.

AMLC: aut!or#e$ to free#e assets )ut t!s &o"er ta?en out fro+ t, s!oul$ &etton

CA for free#n' of assets 1)ut t!s s &ro)le+atc )ecause a +ole n t!e SC coul$

easly nfor+ t!e +oney5laun$erer of t!e atte+&t to free#e t!e latter9s assets, an$ t!us

t!e account "oul$ )e "$ra"n2 5 T!e 8n$ AMLA "as nferor fro+ t!e st one )ut t

)eca+e co+&lant )ecause t!e one "!o c!ec?e$ t "ne$ an$ $ne$ "t!

Con'ress+enH

n cases "!en t!ere9s no nee$ for free#n' or$er fro+ CA:

;5*ac?n'

;Dru' traffc?n'

1as f t!e frst t!n' t!at t!e olators "oul$ $o s to $e&ost t!e &rocee$s of t!er

lle'al acts n t!e )an?sH25t!ere9s also su''eston t!at la"yers )e "!stle5)lo"ers: B-T TIS -LD NT

D BECA-SE F TE CNFIDENTIALITO AREEMENT BETEEN

LAOERS AND CLIENTS

5t!ere are +any reco++en$atons of t!e FATF: )ut only fe" are ta?en

5a+on' t!e reco++en$aton s to a+en$ t!e )an? secrecy la"4

5t!res!!ol$ a+ount lo"ere$4f you transact "t! coere$ nsttutons an$ t!e

a+ount of t!e transacton s a)oe t!e t!res!ol$, t!e )an? s o)l'ate$ to fle a

CTR4)ut een f lo"er t!an t!e t!res!ol$ an$ t!e )an? "oul$ )e sus&cous, t!e

)an? coul$ stll fle a 3sus&cous transacton re&ort3 1CA: I $on9t ?no" "!y t9s

CTR "!en t stan$s for sus&cous transactons re&ort42

+. Scurities Reulation Code

B. Securtes Re'ulaton Co$e

5statute n Securtes la", a+on' "!c! are:

;Trut! n len$n' act

;BL &ros: trut! n )orro"n' act

;SRC: trut! n securtes act

5&ersons "!o "ant to sell securtes nee$ to co+&ly "t! t!e re@ure+ents of

re'straton )y SEC

E7ce&tons:

. E7e+&t securtes: "!en sol$ to t!e &u)lc, no nee$ to re'ster t 1e7a+&le, 'o9t

securtes ssue$ to t!e &u)lc42

8. Securtes sol$ n transactons classfe$ as e7e+&t n SEC: e.'. 6rate &lace+ent

555*ust fle "t! SEC a notcefor+ of e7ce&ton "n G$ fro+ $ate of sale

. ffs!ore offern': not coere$ )y SEC )ecause SEC "oul$ not !ae *urs$cton

oer sale of securtes outs$e t!e 6!l&&nes

;SEC coul$ co+e u& "t! a lst of e7e+&t securtes an$ transactons;so+e of t!e lst are $scusse$ n Sr9s )oo?4"!c! s unfortunately out of stoc?4

!e!e.

5Any &u)lc offern' of securtes s &ro!)te$ unless t!e securtes are re'stere$ "

SEC an$ SEC !as $eclare$ effecte t!e Re'straton State+ent

6RIATE 6LACEMENT: sale to not +ore t!an < non@ualfe$ )uyers 1@ualfe$

)uyers are t!e )an?s, fnancal nsttutons2

6-BLIC FFERIN: ran$o+ or n$scr+nate offern' to t!e &u)lc 1any +e+)er

of @ualfe$ )uyers2

Pualfe$ )uyers: t!ey can fen$ for t!e+seles

;;;To ao$ re'ulaton )y t!e SEC:

FFSRE FFERIN: a contract s s'ne$ a)roa$ an$ &ay+ents are +a$e

t!rou'! FCD-

INSIDER TRADIN: "!en you are n &ossesson of nfor+aton not ?no"n to t!e

&u)lc, you9re not su&&ose$ to tra$e "t! t!at s!ares untl t!e &u)lc "as +a$e a"are

of t!e nfor+aton 1only after $sclosure can an ns$er tra$e2

5ns$er tra$n' rules +eant to re+e$y t!e asy++etry n nfor+aton to +a?e t!e

ns$er an$ non5ns$er &ar &assu n ter+s of nfor+aton

38


39/39


5INSIDER: 'en, you !ae access to non5&u)lc nfor+aton fro+ an ns$er

1ns$er )eco+es t!e T&&er, you )eco+e a T&&ee2

5ns$ers +an$ate$ to $s'or'e 3s!ort5s"n' &roft3 1f you "ere a)le to $etect

transactons n "!c! t!e ns$er !as +a$e +oney, t!en t!e net 'an +ust )e

$s'or'e$ )y t!e ns$er2 5 turnoer t!e &roft to t!e co+&any

Ten$er5offer

5f you nten$ to ac@ure at least 0 of t!e outstan$n' ca&tal stoc? of a &u)lc

co+&any, e.'. lste$ co+&any, "!et!er alone or n concert "t! ot!er &ersons, you

nee$ to +a?e a ten$er5offer to t!e re+ann' s!are!ol$ers "!o +'!t )e left out

1)ecause = s control2.

In a case, t!e SC !as rule$ t!at t!e 0 can )e $rect or n$rect s!are!ol$n'

Contnun' $sclosure re@ure+ents

5for cor&oratons

39

Documents

Banking Morales