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    Eloise: From Execution (2) Exercise All The Rights and Actions of The Debtor, Save

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    Eloise Coleen Sulla Perez
    Metrobank sought to intervene in a case between IEB and SSC regarding chattel mortgages SSC executed in favor of IEB. Metrobank claimed the mortgages were fraudulent as it is a creditor of SSC. However, jurisprudence requires creditors to first exhaust the debtor's properties, exercise the debtor's rights, and only then can seek rescission of fraudulent contracts through an accion pauliana. Metrobank did not show it took these initial steps and instead directly filed for annulment of the mortgages, which is not allowed. An accion pauliana is a last resort remedy that must follow exhausting other legal measures. Thus, Metrobank's intervention was not

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    Eloise: From Execution (2) Exercise All The Rights and Actions of The Debtor, Save

    Uploaded by

    Eloise Coleen Sulla Perez
    31 views1 page
    Metrobank sought to intervene in a case between IEB and SSC regarding chattel mortgages SSC executed in favor of IEB. Metrobank claimed the mortgages were fraudulent as it is a creditor of SSC. However, jurisprudence requires creditors to first exhaust the debtor's properties, exercise the debtor's rights, and only then can seek rescission of fraudulent contracts through an accion pauliana. Metrobank did not show it took these initial steps and instead directly filed for annulment of the mortgages, which is not allowed. An accion pauliana is a last resort remedy that must follow exhausting other legal measures. Thus, Metrobank's intervention was not

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    61 MTBC V. IEB

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    Metrobank sought to intervene in a case between IEB and SSC regarding chattel mortgages SSC executed in favor of IEB. Metrobank claimed the mortgages were fraudulent as it is a creditor of SSC. However, jurisprudence requires creditors to first exhaust the debtor's properties, exercise the debtor's rights, and only then can seek rescission of fraudulent contracts through an accion pauliana. Metrobank did not show it took these initial steps and instead directly filed for annulment of the mortgages, which is not allowed. An accion pauliana is a last resort remedy that must follow exhausting other legal measures. Thus, Metrobank's intervention was not

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    31 views1 page

    Eloise: From Execution (2) Exercise All The Rights and Actions of The Debtor, Save

    Uploaded by

    Eloise Coleen Sulla Perez
    Metrobank sought to intervene in a case between IEB and SSC regarding chattel mortgages SSC executed in favor of IEB. Metrobank claimed the mortgages were fraudulent as it is a creditor of SSC. However, jurisprudence requires creditors to first exhaust the debtor's properties, exercise the debtor's rights, and only then can seek rescission of fraudulent contracts through an accion pauliana. Metrobank did not show it took these initial steps and instead directly filed for annulment of the mortgages, which is not allowed. An accion pauliana is a last resort remedy that must follow exhausting other legal measures. Thus, Metrobank's intervention was not

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    ELOISE

    CASE NO. 61 A perusal of Metrobank's Complaint-in-Intervention would show that its


    METROPOLITAN BANK AND TRUST CO. V. INTERNATIONAL main objective is to have the chattel mortgages executed by SSC in favor
    EXCHANGE BANK of IEB rescinded.Under Article 1381 of the Civil Code, an accion
    RESCISSIBLE CONTRACTS pauliana is an action to rescind contracts in fraud of creditors.

    FACTS: For the purpose of increasing its capital, Sacramento Steel However, jurisprudence is clear that the following successive
    Corporation (SSC) entered into a Credit Agreement with herein measures must be taken by a creditor before he may bring an action
    respondent International Exchange Bank (IEB) on September 10, 2001 for rescission of an allegedly fraudulent contract: (1) exhaust the
    wherein the latter granted the former an omnibus credit line in the properties of the debtor through levying by attachment and execution
    amount of P60 million a loan of P20million and a subsequent credit line upon all the property of the debtor, except such as are exempt by law
    with a limit of P100million. from execution; (2) exercise all the rights and actions of the debtor, save
    those personal to him (accion subrogatoria); and (3) seek rescission of
    As security for its loan obligations, SSC executed 5 separate deeds of the contracts executed by the debtor in fraud of their rights (accion
    chattel mortgage constituted over various equipment found in its steel pauliana). It is thus apparent that an action to rescind, or an accion
    manufacturing plant. Subsequently, SSC defaulted in the payment of its pauliana, must be of last resort, availed of only after the creditor has
    obligations. IEB's demand for payment went unheeded. exhausted all the properties of the debtor not exempt from execution or
    after all other legal remedies have been exhausted and have been proven
    On July 7, 2004, the IEB filed with the RTC – Misamis Oriental an action futile.
    for injunction for the purpose of enjoining SSC from taking out the
    mortgaged equipment from its premises. Thereafter, IEB filed a It does not appear that Metrobank sought other properties of SSC other
    Supplemental Complaint praying for the issuance of a writ of replevin or, than the subject lots alleged to have been transferred in fraud of
    in the alternative, for the payment of SSC's outstanding obligations and creditors. Neither is there any showing that Metrobank subrogated itself
    attorney's fees. in SSC's transmissible rights and actions. Without availing of the first
    and second remedies, Metrobank simply undertook the third measure
    On the other hand, on July 18, 2004, SSC filed with the same RTC a and filed an action for annulment of the chattel mortgages. This cannot
    Complaint for annulment of mortgage and specific performance for the be done. Article 1383 of the New Civil Code is very explicit that the right
    purpose of compelling the IEB to restructure SSC's outstanding or remedy of the creditor to impugn the acts which the debtor may have
    obligations. done to defraud them is subsidiary in nature.

    On October 21, 2004, herein 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 petitioner Metrobank may be allowed to intervene.

    RULING:
    NO. Metrobank’s action is an accion pauliana and is only subsidiary in
    nature.

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