Re : Foreclosure of real estate propertyin the name of share holder in the eventof default of corporate loan

April 20, 2004 SEC OPINION NO. 26-04 Re : Foreclosure of real estate property in the name of share holder in the event of default of corporate loan Mr. Benedicto C. David 156 V. Cruz Street Barangay Maytunas 1500 San Juan, Metro Manila S i r : This refers to your query on the issue whether or not a bank can foreclose the real estate property in your name in the event the corporation (in which your are a stockholder) fails to settle its loan obligation with the bank. According to you, the property is registered under your name but was used as collateral for the loan secured by the corporation from the bank. Regretfully, this Commission cannot render the opinion requested in view of SEC Memorandum Circular No. 15 (2003), which requires that "The query must relate to interpretation and application of laws and rules being enforced and implemented by the Commission ." The law on mortgage is not among the laws being implemented by the Commission. Further, as a matter of policy, the Commission refrains from rendering opinion on the following: "5.2 Matters which involve the s ubstantive and contractual rights of private parties who would, in all probability, contest the same in court if the opinion turns out to be adverse to their interest; 5.3 Matters which would necessarily require a review and interpretation of contracts or an opinion on the validity of contracts since interpretation of contract is justiciable in nature and contract review calls for legal examination of contract on a general basis and not on specific legal issues; 5.4 Questions which are too general in scope or hypothetical, abstract, speculative and anticipatory in character and those pertaining to undisclosed entities ; xxx xxx xxx 5.10 The request will entail gathering of legal materials or writing abstract essay for the requesting party since the Commission should not function or resemble as legal counsel of private firms ." Nonetheless, for your guidance, we are attaching herewith pertinent provisions on mortgage under the Civil Code, Property Registration Decree (PD 1529), Act No. 3135, and Rule 68 of the Rules of Court. We also enclosed excerpts from the commentary on mortgage law written by an acknowledged authority on the subject. For your information and guidance. DEcTIS Very truly yours, (SGD.) VERNETTE G. UMALI PACO General Counsel