Bangko Sentral Ng Pilipinas v. Agustin Libo-On

Summary

This case involves BSP's attempt to foreclose on a real estate mortgage originally executed between Spouses Libo-on and Rural Bank of Hinigaran. BSP claimed authority through an alleged assignment of credit via a promissory note with trust receipt agreement when Rural Bank pledged the Libo-on documents as collateral for its own loan from BSP. The Supreme Court unanimously ruled that BSP lacked foreclosure authority, holding that the trust receipt agreement was not a valid assignment of credit under Civil Code Article 1625, which requires a public instrument and registration for real property assignments. The Court emphasized that Rural Bank could not validly pledge the mortgage documents as it was not the absolute owner during the subsisting mortgage term. The decision protects property rights by requiring strict compliance with legal formalities for mortgage assignment and reinforces the distinction between pledge agreements and assignment of credit in commercial transactions.