I am currently having a problem with a friend owing me money. I loaned him some money, and his loan is evidenced by a promissory note. When he failed to pay at the time we agreed upon, he asked me to just wait, because he is selling one of his properties.
However, four months after he made this promise, I went to look at his property, and I found out that he never put up this property for sale. This has led me to suspect that he is not sincere in paying up. I told him to let this property be the security, so when he sells it, I am assured that part of the proceeds will be paid to me, but he refused.
My question is: Can I secure his debt by going for the property he told me he was going to use to pay for his debt to me? How do I go about this?
Please enlighten me on this issue. I hope you can help me.
Yes, it is possible for you to use the property as security for payment of your friend’s debt.
However, it appears in your letter that your friend already refused to offer this property as security for payment of his debt. It also appears in your letter that his debt is already due.
If we are correct in assuming that the debt is already due and demandable, then you have a right to file an action for the collection of sum of money before our courts.
Prior to doing this, it is advisable that you send a demand letter to your debtor. The demand letter is important, so that you can give your debtor another chance to pay up and to avoid the inconvenience of going to court. Another reason for its importance is that you can also use the demand letter as evidence in court that you formally demanded payment of the debt due.
When you file this action before the courts, you can have the property attached as provided in Rule 57 of the Revised Rules of Court. Attachment is the process of including the adverse party’s property in the proceedings, so it can be used as security for the satisfaction of the judgment.
A property is attached by including an application for preliminary attachment when you file your action for collection of sum of money in court. Before you include an application for preliminary attachment, you must make sure that one or more of the grounds for preliminary attachment apply to you. In your case, you may file an application for preliminary attachment when your debtor is about to depart from the Philippines with the intent to defraud you, when your debtor has been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is brought or in the performance thereof, when your debtor has removed or disposed of his property, or is about to do so, with the intent to defraud his creditors, or if the debtor does not reside and is not found in the Philippines.
As you can see, attachment on the debtor’s property is done, so that in case the creditor is successful in his action against the debtor and the debtor has no money or other means to pay his debt, the creditor can proceed to the property. He may ask that the property be sold, and the proceeds be paid to him in the amount of his demand, in accordance with Sec. 9 (b) of the Revised Rules of Court. This provision states that “if a judgment obligor cannot pay all or part of the obligation in cash, certified bank check or other mode of payment acceptable to the judgment obligee, the officer shall levy upon the properties of the judgment obligor of every kind and nature . . .” A preliminary attachment on the property at the beginning of the action ensures that the property may be levied upon if the creditor wins his case and the debtor has no other means to pay his obligation. The order of preliminary attachment will also be recorded on the title of the property. This act will notify any party who will buy the property while the case is pending that this property may be levied upon at the end of the case.
We hope that we were able to enlighten you on the matter. Please be reminded that this advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.
Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to firstname.lastname@example.org