110282667-Comparison-Chart-for-Guaranty-Pledge-and-Mortgage.doc

CATEGORY

GUARANTY

SURETYSHIP

LAW

CIVIL CODE Articles 2047-2084

DEFINITION

By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. Art. 2047 (1)

The second paragraph of Article 2047 states the law applicable to the contract of suretyship. It covers Articles 1207 to 1222, Title I (Obligations), Chapter 3 (Different Kinds of Obligations), Section 4 (Joint and Solidary Obligations), Book IV (Obligations and Contracts) of the CIVIL CODE If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title 1 of this Book shall be observed. In such case the contract is called

PLEDGE

MORTGAGE CHATTEL REAL MORTGAGE ESTATE MORTGAGE CIVIL CODE CIVIL CODE CIVIL CODE Articles 2085Articles 2085-2092 Articles 2123 2140-2141 THE 2083-2092 CHATTEL 2124-2131 MORTGAGE LAW SUPREME (Act No. 1508, as COURT A.M. amended) NO. 99-10-050 AS AMENDED BY RESOLUTION OF JUNE 30, 2001 AND AUGUST 7, 2002 JUDICIAL FORECLOSU RE OF REAL ESTATE MORTGAGE (Rule 68, ROC) It is a contract by By a chattel A real estate virtue of which mortgage, personal mortgage is a the debtor property is recorded contract delivers to the in the Chattel whereby the creditor or to a Mortgage Register as debtor secures third person a a security for the to the creditor movable performance of an the fulfillment or a document obligation. If the of a principal involving movable, instead of obligation, incorporeal rights being recorded, is specially for the purpose of delivered to the subjecting to securing the creditor or a third such security fulfillment of a person, immovable

ANTICHRESIS

CIVIL CODE Articles 2085-2092 2132-2139

By the contract of antichresis the creditor acquires the right to receive the fruits of an immovable of his debtor, with the obligation to app apply them to the payment of the interest, if owing, and thereafter to the

PURPOSE

PARTIES SUBJECT MATTER

Special promise to answer for the debt, default or miscarriage of another Guarantor, Creditor & Debtor personal: the guaranty is the credit given by the person who guarantees the fulfillment of the principal obligation (guarantor) real: the guaranty is property. If the guaranty is immovable property: real mortgage or antichresis; If the guaranty is movable property: pledge or chatter mortgage

a suretyship. (Art. 2047 (2))

principal obligation with the understanding that when the obligation is fulfilled, the thing delivered shall be returned with all its fruits and accessions.

Surety promises to answer for the debt, default or miscarriage of the principal. Obligor, surety and obligee personal: the guaranty is the credit given by the person who guarantees the fulfillment of the principal obligation (guarantor)

To secure fulfillment of a principal obligation.

real: the guaranty is property. If the guaranty is immovable property: real mortgage or antichresis; If the guaranty is movable

Incorporeal rights (Art. 2095. )

Pledgor & Pledgee All movables, which are within commerce, may be pledged, provided they are susceptible of possession. (Art. 2094)

the contract is a pledge and not a chattel mortgage. (Art. 2140)

property or real rights over immovable property in case the principal obligation is not complied with at the time stipulated. To secure fulfillment To secure of principal obligation fulfillment of principal obligation

principal of his credit. (Art. 2132.)

Mortgagor & Mortgagee

Creditor & Debtor

personal or movable property.

1. Immovables 2. Alienable rights imposed upon immovables

It secures the performance of a principal obligation

Immovables or Real Property

property: pledge or chatter mortgage KINDS/ CLASSIFICATION

1. Conventional- one constituted by agreement of the parties (art. 2051, par. 1)

1. Voluntary or conventional (created by agreement of the parties); 2. Legal (by operation of law).

2. Legal- one imposed by virtue of a provision of law; (Ibid) 3. Judicial- one required by a court to guarantee the eventual right of one of the parties in a case.

1. Accessory: It is NATURE AND CHARACTERISTICS dependent for its

existence upon the principal obligation guaranteed by it. 2. Subsidiary and Conditional: It takes effect only when the principal debtor fails in his obligation. 3. Unilateral: a. It gives rise to

1. Contractual and Accessory BUT Direct: The contractual obligation of the surety is merely an accessory or collateral to the obligation contracted by the principal. BUT, his liability to the creditor is direct,

Real, because it is perfected by delivery of the thing pledged. 2. Acessory, because it has no independent existence. 3. Unilateral, because it creates

1. It is an accessory contract because it secures performance of a principal obligation 2. It is a formal contract because it requires registration in the Chattel Mortgage

1. Voluntary – Agreed to between the parties or constituted by the will of the owner of the property 2. Legal – Required by law to be executed in favor of certain persons 3. Equitable – Lacks the proper formalities of mortgage but shows the intention of the parties to make the property as a security for a debt Mortgage is a real, accessory, and subsidiary contract

1. Accessory – It secures the performance of a principal obligation. Manresa, however, believes that it is an independent contract.

obligations on the part of the guarantor in relation to the creditor and not vice-versa. (Although after its fulfillment, the principal debtor should indemnify the guarantor, but this obligation is only incidental) b. It may be entered into even without the intervention of the principal debtor. 4. Distinct Person: It requires that the person of the guarantor must be distinct from the person of the principal debtor (you cannot guaranty your own debt). However, in a real guaranty, a person may guarantee his own obligation with his own properties. GENERAL RULE: Guaranty is gratuitous. EXCEPTION: Guaranty is onerous only if it is stipulated guarantee is given.

primary, and absolute. 2. Liability is limited by the terms of the contract: The extent of a surety’s liability is determined only by the terms of the contract and cannot be extended by implication. 3. Liability arises only if principal debtor is held liable: If the principal debtor and the surety are held liable, their liability to pay the creditor would be solidary. But, the surety does not incur liability unless and until the principal debtor is held liable. 4. Surety is not entitled to exhaustion: A surety is not entitled to the exhaustion of the properties of the principal debtor since the surety assumes a solidary liability for the fulfillment of the principal obligation. 5. The undertaking is to the CREDITOR, not to the principal debtor: The debtor cannot claim that the surety breached its obligation to pay for

an obligation solely on the part of the creditor to return the thing pledged upon fulfillment of the principal obligation. 4. Subsidiary, because the obligation of the creditor does not arise until fulfillment of the principal obligation.

Register for its validity (but only against third persons) 3. It is a unilateral contract because it produces only obligations on the part of the creditor to free the thing from the encumbrance on fulfillment of the obligation.

2. Formal Contract – It must be in specified form to be valid (in writing). 3. A third person, who is not a party to the principal contract, may offer his immovable under the contract of antichresis to secure the debt of another. (2085) 4. The contract of antichresis is indivisible. (2089) 5. The indivisibility of the antichresis is not affected by the fact that the debtors are not solidarily liable. (2090) 6. The contract of antichresis may secure all kinds of obligations – pure or conditional. (2091)

the principal obligation because there is no obligation as between the surety and the debtor. If the surety does not pay, the principal debtor is still not relieved of his obligation.

PERFECTION

CONSENSUAL

CONSENSUAL

FORMALITY

Must be in writing to Must be in be enforceable. It is writing govern by the Statute of Frauds.

LIABILITY

Real – There must be delivery of the thing.

CONSENSUAL

REAL CONTRACT BUT NO DELIVERY

Delivery is not required for the validity of the contract itself. BUT, it is required in order that the creditor may receive the fruits. CONSENSUAL

Must be in writing

Must be in writing, a specific form is required.

Must be in writing, a specific form is required.

Must be in writing, otherwise it is void.

No registration needed

Formal Registered in chattel mortgage register

Formal Written or oral But the oral mortgage is not binding against third persons. Registered public document

The amount of the principal and of the interest shall be specified in writing; otherwise, the contract of antichresis shall be void (Art. 2134).

Serves as an accessory contract *with regard to suretyship it is contractual and accessory but direct. In other words he is directly, primarily and equally bound with the principal as original promisor although he possesses no direct or personal interest over the latter’s obligations nor does he receive any benefit therfrom. (Garcia, Jr. Vs. CA)

DELIVERY

Delivery is not necessary

Delivery of the thing is

Delivery of the thing In Chattel Mortgage, pledge is necessary. delivery of the personal

In Real Mortgage,

Delivery may or may not be

not necessary

OWNERSHIP

The guarantor need not be the owner.

VALIDITY

The contract of guaranty is valid only between the contracting parties.

PROHIBITION

RIGHTS AND OBLIGATIONS OF THE PARTIES

Against unjust enrichment

Guarantor: 1) Guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the property of the debtor and has resorted to all the legal remedies against the debtor. Creditor:

Obligorundertakes an obligation; he is the principal obligor Surety- a person who engages himself to be answerable to a third person for debt, default, miscarriage of another.

property to the mortgage is not necessary.

delivery is not necessary.

necessary.

Pledgor must be the owner of the thing pledge, otherwise the pledge is void. Not valid against third persons unless a description of the thing pledged and the date of the pledge appear in a public instrument. Against Pactum Commissorium

Mortgagor must be the owner of the thing mortgaged, otherwise the mortgage is void.

Against Pactum Commissorium

Against Pactum Commissorium Against Usurious Rates

Pledgor’s Rights: 1) To demand the return in case of reasonable grounds to fear destruction or impairment of the thing without the pledgee’s fault, subject to the duty of replacement. 2) To bid and be preferred at the public auction. 3) To alienate the thing pledged provided the pledgee consent to the sale. 4) To ask that the

In Chattel Mortgage:

Creditor: 1) To pay the taxes and charges upon the estate unless there is a contrary stipulation. 2) To pay expenses for necessary repairs. Debtor: To pay what he owes the creditor

In Chattel Mortgage, not valid against third person unless registered in the Chattel Mortgage Register.

In Real Mortgage, not valid against third persons if not registered.

In Real Mortgage, Mortgagor’s Right: 1) To alienate the thing mortgaged property but the mortgage shall remain attached to the property. A stipulation forbidding the owner from alienating the immovable mortgage shall be void being contrary to public policy inasmuch as the transmission of property should not be unduly impede. Mortgagee’s Right: 1) To claim from third a person in possession of the mortgaged property the payment of the part of the credit secured by which

Creditor must be the owner The contract is valid only between the parties.

1) Exhaust all the property of the debtor unless the guarantor is not entitled to such benefit under art. 2059. 2) Resort to all the legal remedies against the debtor. 3) Prove that the debtor is still unable to pay. Debtor: Payment of his principal obligation.

Obligee- to whom the obligation is made.

thing pledged be deposited in one of the following cases: a) F the creditor uses the thing without authority. b) He misuses the thing. c) The thing is endangered of being lost or impaired because of negligence or willful act of the pledgee. Pledgor’s Obligations: 1) To advise the pledgee of the flaws of the thing. 2) Not to demand the return of the thing until after full payment of the debt, including interest due thereon and expenses incurred for this preservation. Pledgee’s Rights: 1) Option to demand replacement or immediate payment of the debt in case of deception as to substance or

said third person possesses. in order to It is necessary that prior demand for reacquire the payment must have been made on the enjoyment of the debtor and the latter failed to pat. immovable.

quality. 2) To sell at public auction in case of reasonable grounds to fear destruction or impairment of the thing without his fault. 3) To bring actions pertaining to the owner or to defend it against third persons. 4) To choose which of several things pledged shall be sold. 5) To collect and receive amount due on credit pledged. 6) To bid at public auction, unless he is the only bidder. To appropriate the thing

REMEDIES

In case of paying guarantor: 1) Right of indemnity or reimbursement 2) Right of subrogation

Other remedies: 1) Obtain release from the guaranty.

Demand a security that shall protect him from any

Sale of the thing pledged at a public auction. In case of legal pledge, it can be made from the date of demand otherwise; the debtor may require the return of the thing.

Foreclosure of Chattel Mortgage by public auction under Act 1508 but the parties may stipulate that it may be by private sale.

1) Action for specific performanc e 2) Petition for the sale of the mortgages under Rule 68 of the Rules of Court. 3) Judicial Foreclosure

SPECIAL REQUISITES

proceedings by the creditor and against the danger of insolvency of the debtor. 1) A guaranty cannot exist without a valid obligation. 2) May also be given as security for future debts.

1. Possession of In Chattel Mortgage, the thing pledged 1) It can cover must be only personal transferred to the or movable creditor or a third property in person by general; agreement however, the 2) Subject parties may matter: treat as movable and personal incorporeal rights property that evidenced by which by its documents of the nature would title and the be real instruments property. proving the right 2) Registration pledged shall be of the delivered to the mortgage creditor and if with the negotiable must Chattel be endorsed. Mortgage The description of Register the thing pledged where the and the date of must mortgagor appear in a public resides; if property is instrument to bind located in a third persons but not different for the validity of province, the contract. registration in both provinces is required. 3) Description of the property as would

In Real Mortgage, 1) It can cover only immo vable proper ty and aliena ble real rights impos ed upon immo vable. 2) It must appea r in a public instru ment.

1) It can cover only the fruits of an immovabl e property 2) Delivery of the immovabl e is necessar y for the creditor to receive the fruits and not that the contract shall be biding. 3) Amount of the principal and interest must be specified in writing.

Registration in the registry of property is necessary to bind third Express agreement persons but not that debtor will for the validity give possession of of the contract. the property to creditor and that the latter will

enable the parties or other persons to identify the same after reasonable investigation and inquiry. 4) Accompanied by an affidavit of good faith to bind thirds persons but not for the validity of the contract. 5) It can cover only obligations existing at the time the mortgage s constituted.

EXTINGUISHMENT 1) Release in favor OF A CONTRACT of one of the guarantors, without the consent of the other, benefits all to the extent of the share of all the guarantor to whom it has been granted. 2) If the creditor voluntarily accepts immovable or

1) For the same causes as all other obligations. 2) Return of the thing pledged by the pledgee to the pledgor. 3) Statement in writing by the pledge that

1) Foreclosure of the thing mortgaged. Judicial – ordinary action for foreclosure under Rule 68 of the Rules of Court Extra-judicial – when mortgagee is given a special power of attorney to sell the mortgaged property by public auction under Act No. 3135

apply the fruits to the interest if any ten to the principal of his credit.

The debtor shall have the right to the extinguishment of the pledge or mortgage as the portion of the debt for which each thing is especially answerable is satisfied.

other properties in payment of the debt, even if he should afterwards lose the same trough eviction or conveyance of property. 3) Whenever by some act of the creditor, the guarantors even though they are solidarily liable cannot be subrogated to the rights, mortgages and preferences of the former. 4) For the same causes as all other obligations under art. 1231. 5) When the principal obligation is extinguished. 6) Extension granted to the debtor by the creditor without the consent of the

he renounces or abandons the pledge. 4) Payment of the debt. 5) Sale of the thing pledged at public auction. Appropriation under Art. 2112.

guarantor.