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PRESIDENTIAL DECREE NO. 385
PRESIDENTIAL DECREE NO. 385 -
REQUIRING GOVERNMENT FINANCIAL INSTITUTIONS TO FORECLOSE MANDATORILY
ALL LOANS WITH ARREARAGES, INCLUDING INTEREST AND CHARGES AMOUNTING TO
AT LEAST TWENTY (20%) PERCENT OF THE TOTAL OUTSTANDING OBLIGATION
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WHEREAS,
the government financial institutions particularly the Philippine
National Bank and its subsidiary the National Investment and
Development Corporation, the Development Bank of the Philippines, the
Government Service Insurance System and the Social Security System, are
the largest individual mobilizer of savings and investment capital in
the country;chanroblesvirtualawlibrary
WHEREAS, these institutions have a large and important role to play in
the economic development of the country by reason of the magnitude of
the resources they command for financing in essential and high-priority
program and projects;chanroblesvirtualawlibrary
WHEREAS, the loans and investments made by these institutions in favor
of private projects and enterprises reflect the trust and confidence
placed by these institutions in the ability and willingness of the
recipients to use such funds efficiently and faithfully in pursuing the
projects being financed and to manage their affairs in such a manner as
to enable them to pay back their loans and investments to these
institutions on due dates together with the income and charges thereon;chanroblesvirtualawlibrary
WHEREAS, borrowing or obtaining investment funds from these government
financial institutions is not a demandable right but is a privilege
enjoyed by the recipients of such funds;chanroblesvirtualawlibrary
WHEREAS, borrower of recipients of investment funds from these
financial institutions have a clear legal and moral obligation to repay
their obligation to these institutions on due dates; chanroblesvirtualawlibrary
WHEREAS, a number of large borrower from these institutions have long
records of failure to pay their obligations when due;chanroblesvirtualawlibrary
WHEREAS, said long-standing delinquencies deny said financial
institutions of substantial cash inflow which could otherwise be used
to finance other development projects for the benefit of the whole
country;chanroblesvirtualawlibrary
WHEREAS, borrowers who accumulate large arrearages have already
received to the fullest extent the most lenient and the patient
consideration that government financial institutions can afford to
give; chanroblesvirtualawlibrary
WHEREAS, the government financial institutions prejudiced by such
borrower should not be unreasonably hampered in their efforts to
recover their loans and investments in order to rechannel the same to
new or additional projects that further enhance the development of the
country;chanroblesvirtualawlibrary
WHEREAS, it has been the experience of government financial
institutions that their efforts to recover their large loans and
investments are frequently prevented or delayed by action brought to
the courts by such borrower;chanroblesvirtualawlibrary
WHEREAS, in many foreclosure/collection cases brought to court, legal
niceties and technicalities are invoked in their own favor by
delinquent borrowers to cover and distract the court's attention away
from the undeniable and compelling fact of their delinquencies with
government financial institutions;chanroblesvirtualawlibrary
WHEREAS, on the ground usually invoked by delinquent borrower in
seeking restraining orders and/or injunctions from the court to block
the foreclosure by government financial institutions and their loans
are alleged discrepancies between the accounting records of the
creditor and the debtor with respect to the amount of the outstanding
obligations of the debtor, when as a matter of fact the arrearages have
reached such proportions as to render said discrepancies insignificant;chanroblesvirtualawlibrary
WHEREAS, it has been shown by the experience of government financial
institutions that in instances where extrajudicial foreclosure on large
loans is successfully pursued, the assets, aside from land, that form
part of the foreclosed collaterals, including buildings, machinery,
equipment, materials, furniture and fixtures, are usually pilfered or
lost rendering it necessary that the foreclosing government creditor
have a writ of possession issued in its favor without delay after the
foreclosure auction sale; and
WHEREAS, the accumulation of such large delinquencies by borrowers from
the government financial institutions are not in accord with the
principle of discipline being instilled in the people and promoted by
the New Society.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines,
by virtue of the powers vested in me by the Constitution as
Commander-in-Chief all the Armed Forces of the Philippines, and
pursuant to Proclamation No. 1081, dated September 21, 1972, as
amended, by Proclamation No. 1104, and General Order No. 1, dated
September 22, 1972, as amended, in order to effect the early collection
of delinquent loans from government financial institutions and enable
them to continue effectively financing the development needs of our
country; and in accordance with desired policies of achieving changes
and reform in the social and economic structure of our society, hereby
order and decree.
Section 1. It shall be mandatory for government
financial institutions, after the lapse of sixty (60) days from the
issuance of this Decree, to foreclose the collaterals and/or securities
for any loan, credit, accommodation, and/or guarantees granted by them
whenever the arrearages on such account, including accrued interest and
other charges, amount to at least twenty percent (20%) of the total
outstanding obligations, including interest and other charges, as
appearing in the books of account and/or related records of the
financial institution concerned. This shall be without prejudice to the
exercise by the government financial institutions of such rights and/or
remedies available to them under their respective contracts with their
debtors, including the right to foreclose on loans, credits,
accommodations and/or guarantees on which the arrearages are less than
twenty per cent (20%).
Section 2. No restraining order, temporary or
permanent injunction shall be issued by the court against any
government financial institution in any action taken by such
institution in compliance with the mandatory foreclosure provided in
Section 1 hereof, whether such restraining order, temporary or
permanent injunction is sought by the borrower(s) or any third party or
parties, except after due hearing in which it is established by the
borrower and admitted by the government financial institution concerned
that twenty percent (20%) of the outstanding arrearages has been paid
after the filing of foreclosure proceedings. chanroblesvirtualawlibrary
In case a restraining order or injunction is issued, the borrower shall
nevertheless be legally obligated to liquidate the remaining balance of
the arrearages outstanding as of the time of foreclosure, plus interest
and other charges, on every succeeding thirtieth (30th) day after the
issuance of such restraining order or injunction until the entire
arrearages have been liquidated. These shall be in addition to the
payment of amortization currently maturing. The restraining order or
injunction shall automatically be dissolved should the borrower fail to
make any of the above-mentioned payments on due dates, and no
restraining order or injunction shall be issued thereafter. This shall
be without prejudice to the exercise by the government financial
institutions of such rights and/or remedies available to them under
their respective charters and their respective contracts with their
debtors, nor should this provision be construed as restricting the
government financial institutions concerned from approving, solely at
its own discretion, any restructuring, recapitalization, or any other
arrangement that would place the entire account on a current basis,
provided, however, that at least twenty percent (20%) of the arrearages
outstanding at the time of the foreclosure is paid.
All restraining orders and injunctions existing as of the date of this
Decree on foreclosure proceedings filed by said government financial
institutions shall be considered lifted unless finally resolved by the
court within sixty (60) days from date hereof.
Section 3. Upon the application for foreclosure of
the collateral of delinquent borrowers, whether judicially or extra
judicially, by any government financial institution, the court and/or
officials concerned shall immediately act and give priority to the same
and schedule the publication thereof within Five (5) days from receipt
of the application, the auction sale to be held not later than ten (10)
days from date of the last publication. The Certificate of Sale must be
issued on the date of sale and the same must be registered by the
Register of Deeds concerned not later than five (5) days after
submission of the Certificate of Sale. chanroblesvirtualawlibrary
Section 4. As a result of foreclosure or any other
legal proceedings wherein the properties of the debtor which are
foreclosed, attached, or levied upon in satisfaction of a judgment are
sold to a government financial institution, the said properties shall
be placed in the possession and control of the financial institution
concerned, with the assistance of the Armed Forces of the Philippines
whenever necessary. The Petition for Writ of Possession shall be acted
upon by the court within fifteen (15) days from the date of filing.
Section 5. The government financial institutions are
hereby directed to report to the Office of the President any official
who delays the proceedings as provided herein or who violates any of
the provisions of this Decree. Actions taken pursuant to the provisions
of this Decree shall, likewise, be reported by the government financial
institution concerned to the Monetary Board, through the Governor,
Central Bank of the Philippines, in accordance with such schedule,
forms and procedures as the Government may prescribe for the purpose.
Section 6. This Decree shall take effect
immediately. chanroblesvirtualawlibrary
Done in the City of Manila,
this 31st day of January, in the year of Our Lord, nineteen hundred and
seventy-four.
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