Tanchan v. Allied Banking Corp. Cebu Foremost executed and delivered to Allied Banking Corp. seven US $ promissory notes.

Foremost also issued to respondent several Phil. peso promissory notes. The PNs are secured by two Continuing Guaranty / Comprehensive Surety AGreements of Sps. Tanchan, and Santiago and Rufina Tanchan (petitioners). In the SPA granted by Rufina to Santiago. The Phil. peso PNs are secured by a real estate mortgage. Cebu Foremost defauled. Thus, respondent institutes the extrajudicial foreclosure of the real estate mortgage. At public auction, it was adjudged the sole and highest bidder. Allied filed with the RTC a complaint for collection of sum of money with petition for issuance of writ of preliminary injunction against Foremost, Sps Tanchan and petitioners. Thereafter, it applied for the issuance of a writ of preliminary attachment which was granted by the RTC. The application avers: Defendants committed fraud in contracting the obligations xxx that they were not in such financial position when they failed to pay their obligations on maturity date. Petitioners claim that they had no personal participation or influence in the loan transactions except to ensure its payment. Hence, they could not have practiced fraud upon respondent. They also argue that the respondent is barred from claiming any amount under the PN because it had already elected to foreclose on the mortgage security, and it failed to allege in its pleadings that a deficiency remained after the public auction sale.7 The RTC ruled in favor of Allied Bank. Petitioners filed a Motion to Lift the Writ of Preliminary Attachment which was denied by the RTC. Issues: WON the petitioners as mere sureties of the loans obtained by Cebu Foremost were guilty of fraud in incurring the obligations so that a writ of preliminary attachment may be issued against them[NO] Ratio:

I. There is no factual basis for the issuance of the writ of preliminary attachment. Sec. 1 (d), Rule 57 provides grounds upon which attachment may issue: xxx d) in an action against a party who has been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is brought, or in concealing or disposing of the property for the taking, detention or conversion of which the action is brought. General averment will not suffice to support the issuance of the writ of preliminary attachment. It is necessary to recite in what particular manner an applicant for the writ of attachment was defrauded. Fraud is never presumed in this jurisdiction. The affidavit narrating the fraudulent transaction must contain particulars as to how the fraud imputed to respondent was committed for the court to decided whether or not to issue the writ. The mere fact that respondent is an officer and director of the company does not necesarily give rise to the inference that he committed a fraud or that he connived with the other defendants to commit a fraud. There is every reason to extend the said rule to a mere surety of the defendant. A surety's involvement is marginal to the principal agreement between the defendant and the plaintiff. II. A mortgage creditor has a single cause of action against a mortgagor debtor, which is to recover the debt. But it has the option of either filing a personal action for collection of sum of money or instituting a real action to foreclose on th emortgage security. An election of the first bars recourse to the second. On the other hand, a creditor who elects to foreclose on the mortgage may yet file an independent civil action for recovery of whatever deficiency may remain in the outstanding obligation of the debtor, after deducting the price obtgained in the sale of the mortgaged properties at public auction. The complaint, though, must specifically allege that what is being sought is the recovery of the deficiency. Disposition: Partly granted.

Mondragon v. CA Mondragon Int'l Phil., Inc., and Mondragon Securities Corp. entered into a lease agreement with Clark Dev't Corp. for the development of Mimosa

Leisure Estate. Mondragon Leisure and Resorts Corp. entered into an Omnibus Loan and Security Agreement with FEBTC and UCPB. Petitioner pledged in favor of respondents US $20M worht of MIPI shares of stocks, assigned all the interest in the pledged shares, and assigned by way of security its leasehold rights over the projects. Petitioners defaulted. Respondents filed a complaint for the foreclosuer of leasehold rights against petitioner. Petitioner filed a motion to dismiss on the ground that respondents have no cause of action. Petitioner contends the subject obligation of the instant case is not yet due and demandable because the Omnibus Agreement allows a full six-year term of payment. Even if it failed to pay some installments, petitioner insists it is not in default because respondents merely sent collection and demand letters, but failed to give the written notice of default required under their agreement. Moreover, petitioner avers that the provisions on default in the Omnibus Agreement have been rendered inapplicable and unenforceable by fortuitous events, namely the Asian economic crisis and the closure of the Mimosa Regency Casino, which was petitioners primary source of revenues. Respondents counter that the Omnibus Agreement defines, as an event of default, the failure of petitioner to pay when due at stated maturity, by acceleration or otherwise, any amount payable under the loan documents. Since petitioner is also required to pay interest, respondents posit that nonpayment thereof constituted a clear and unmistakable case of default. Respondents add that they had properly advised the petitioner that it had been declared in default, referring to the January 6 and February 5, 1999 letters as their compliance with the notice requirement. 6.02 Consequences of Default [i] declare all Commitments to be terminated whereupon the obligation of the LENDERS to make or maintain the Advances hereunder shall forthwith terminate, [ii] accelerate payment and declare the Loan, all interest accrued and unpaid thereon and all other amounts payable hereunder, and default interest hereunder, to be forthwith due and payable, whereupon the same shall become immediately due and payable, without demand, protest or further notice of any kind, all of which are hereby expressly waived by the

BORROWER, [iii] foreclose on the Collaterals or take such other necessary steps conformably with the Collaterals, or [iv] immediately, without notice to the BORROWER, apply and compensate or set-off toward the partial or full liquidation of such amount or amounts, any funds, securities, or other property of the BORROWER held by the LENDERS in deposit or under any other concept without prejudice to the adoption by the Majority Lenders of any other steps or action, which, in the Majority Lenders sole discretion, is needed to protect the LENDERS rights and interests, and without prejudice to the application of the provisions of the Collaterals, as provided in Section 3 of Part A. For purposes of this provision, the BORROWER hereby appoints each LENDER as its attorney-in-fact with full power and authority to do any and all acts required to give full force and effect to this provision. The trial court and CA denied the motion to dismiss. Issue: WON Petitioner defaulted in its obligation [YES] Ratio: I. Petitioner may be declared in default for failure to pay the interest. 6.01 Events of Default Each of the following events shall constitute an Event of Default under this Omnibus Agreement: (a) Payment Default The BORROWER defaults in the payment when due at stated maturity, by acceleration or otherwise, of any amount payable under the Loan Documents.[14] II. Written notices were sent to the petitioner by the respondents. The notices clearly indicate respondents' choice of remedy: to accelerate all payments payable under the loan agreement. On February 5, 1999, the respondents actually made their demand in writing for the payment of the principal plus interest and penalty charges due on or before February 28, 1999, with express notice that they would take all legal remedies available to protect the interests of their clients. III. Respondents could file an action for foreclosure of the leasehold rights. It should be noted that the agreement also provides that the choice of

remedy is without prejudice to the action on the collateral. Thus, respondents could properly file an action for foreclosure of the leasehold rights to obtain payments for the amount demanded. IV. The Asian Financial Crisis is not a fortuitous event. Every business venture involves risks. Risks are not unforeseeable; they are inherent in business. Worthy of note, risk is an exception to the general rule on fortuitous events. Under the law, these exceptions are: (1) when the law expressly so specifies; (2) when it is otherwise declared by the parties; and (3) when the nature of the obligation requires the assumption of risks. We find that in the Omnibus Agreement, the parties expressly agreed that any enactment, official action, act of war, act of nature or other force majeure or other similar circumstances shall in no way affect the obligation of the borrowers to make payments. Disposition: Affirmed.