XXVI.

a.

Is the act of the President valid? Why or why not?

DMP Corporation (DMP) obtained a loan of P20 million from National

Bank (NB) secured by a real estate mortgage over a 63,380-squaremeter land situated in Cabanatuan City. Due to the Asian Economic
Crisis, DMP experienced liquidity problems disenabling it from paying
its loan on time. For that reason, NB sought the extra judicial
foreclosure of the said mortgage by filing a petition for sale on June 30,
2003. On September 4, 2003, the mortgaged property was sold at
public auction, which was eventually awarded to NBas the highest
bidder. That same day, the Sheriff executed a Certificate of Sale in
favor of NB.

b.

Will a suit to enforce the exclusive right of the investors to

purchase the property prosper? Reason briefly

On October 21, 2003, DMP filed a Petition for Rehabilitation before the
Regional Trial Court (RTC). Pursuant to this, a Stay Order was issued by
the RTC on October 27, 2003.
On the other hand, NB caused the recording of the Sheriffs Certificate
of Sale on December 3, 2003 with the Register of Deeds of Cabanatuan
City. NB executed an Affidavit of Consolidation of Ownership and had
the same annotated on the title of DMP. Consequently, the Register of
Deeds cancelled DMPs title and issued a new title in the name of NB
on December 10, 2003.
NB also filed on March 17, 2004 an Ex-Parte Petition for Issuance of
Writ of Possession before the RTC of Cabanatuan City. After hearing, the
RTC issued on September 6, 2004 an Order directing the Issuance of
the Writ of Possession, which was issued on October 4, 2004.

On December 4, 2003, RED Corporation executed a real estate

mortgage in favor of BLUE Bank. RED Corporation defaulted in the
payment of its loan. Consequently, on June 4, 2004, BLUE Bank
extrajudicially foreclosed the property. Being the highest bidder in the
auction sale conducted, the Bank was issued a Certificate of Sale which
was registered on August 4, 2004.
Does RED Corporation still have the right to redeem the property as of
September 14, 2007? Reason briefly.

a.

What are the preferred claims that shall be satisfied first

from the assets of an insolvent corporation?

b.

How shall the remaining non-preferred creditors share in the

estate of the insolvent corporation above?

DMP claims that all subsequent actions pertaining to the Cabanatuan

property should have been held in abeyance after the Stay Order was
issued by the rehabilitation court. Is DMP correct? (4%)
Maharlikang Pilipino Banking Corporation (MPBC) operates several
branches of Maharlikang Pilipino Rural Bank in Eastern Visayas. Almost
all the branch managers are close relatives of the members of the
Board of Directors of the corporation. Many undeserving relatives of
the branch managers were granted loans. In time, the branches could
not settle their obligations to depositors and creditors.
Receiving reports of these irregularities, the Supervising and Examining
Department (SED) of the Monetary Board prepared a detailed report
(SED Report) specifying the facts and the chronology of events relative
to the problems that beset MPBC rural bank branches. The report
concluded that the bank branches were unable to pay their liabilities as
they fell due, and could not possibly continue in business without
incurring substantial losses to its depositors and creditors.
a.

May the Monetary Board order the closure of the MPBC rural
banks relying only on the SED Report, without need of an
examination? Explain. (3%)

b.

If MPBC hires you as lawyer because the Monetary Board has

forbidden it from carrying on its business due to its imminent
insolvency, what action will you institute to question the
Monetary Boards order? Explain. (3%)

Due to growing financial difficulties, Z Bank was unable to finish

construction of its 21-storey building on a prime lot located in Makati
City. Inevitably, the Bangko Sentral ordered the closure of Z Bank and
consequently placed it under receivership. In a bid to save the bank's
property investment, the President of Z Bank entered into a financing
agreement with a group of investors for the completion of the
construction of the 21-storey building in exchange for a ten year lease
and the exclusive option to purchase the building.

- VIII Pio is the president of Western Bank. His wife applied for a loan with
the said bank to finance an internet cafe. The loan officer told her that
her application will not be approved because the grant of loans to
related interests of bank directors, officers, and stockholders is
prohibited by the General Banking Law.
Explain whether the loan officer is correct. 5%
- IX The Blue Star Corporation filed with the Regional Trial Court a petition
for rehabilitation on the ground that it foresaw the impossibility of
paying its obligations as they fall due. Finding the petition sufficient in
form and substance, the court issued an Order appointing a
rehabilitation receiver and staying the enforcement of all claims
against the corporation.
What is the rationale for the Stay Order? 5%

Under Republic Act No.1405 (The Bank Secrecy Law), bank deposits are
considered absolutely confidential and may not be examined, inquired
or looked into by any person, government official, bureau or office.
What are the exceptions? 5%