Credit Transaction Memory Aid PDF Free

   

San Beda College of Law 182

MEMORY  A  AID IN CIVIL LAW  1. bail bailo or - th the e CREDIT TRANSACTIONS property

CREDIT TRANSACTIONS All tran transsac acti tio ons invo involv lviing the the  purchase or loan loan of goods, services, o r omis mone mo yto inpa theor prese re ntr w ith hthe a pr prom ise eney pay ythe deli desent live ver init the future

Contracts of security Types: 1. Secured transactions or contracts of  reall securi rea security  ty   - suppo porrte ted d by a co coll llat ater eral al or an enc encum umbr bran ance ce of  property 2. Unsecured transactions or contracts of personal security   - supported only by a promise or personal co commi mmitm tment ent of an anot othe herr such such as a guarantor or surety Security So Some meth thin ing g give given, n, de depo posi site ted, d, or  serv erving as a means to ens nsu ure fu fulf lfil ilme ment nt or enf enfor orce ceme ment nt of an obli obliga gati tion on or of pr prot otec ecti ting ng some some interest in property Types of Security  a.  personal – wh when en an indi indivi vidu dual al becomes surety or guarantor b. real or property – when a mortgage, mortg age, pledge pledge,, antic antichresi hresis, s, charge or lien or other device used to have property held, out of which the person to be made secure can be compensated for loss

Bailment Th The e deli delive very ry of pr prop oper erty ty of on one e  pe pers rson on to anot anothe herr in tr trus ustt for for a specif spe cific ic pur purpos pose, e, with with a contra contract, ct, expres exp resss or imp implie lied, d, tha thatt the trust trust shall be faithfully executed and the property returned or duly accounted for for wh when en the the spec specia iall pu purp rpos ose e is accomplished or kept until the bailor claims it. 

Parties:

giv iver er;; on one e who who deli deliv ver erss

2. ba bail ilee ee-- th the e re reci cipi pien ent; t; one who rec receiv eives es the custody or possession of the thing thus delivered

LOAN (Articles 1933 – 1961)   A contract contract wherein wherein one of the partie partiess  delivers to another, either something not consumable so that the latter may use the same for a certain time and return it or money money or other other consum consumabl able e thi thing, ng, up upon on the the cond condit itiion th tha at the the sa same me amou am ount nt of th the e same same ki kind nd and and qu qual alit ity y shall be paid. (Art 1933) Characteristics: 1. Real Real Cont Contra ract ct – de deli live very ry of th the e thing thing loaned is necessary for the perfection of  the contract NOTE NO TE:: An accepted promise to make a future loan is a consensual contract, and therefore binding upon the parties but it is only only af after ter de deli live very ry,, will will th the e re real al contract of loan arise. (Art 1934) 2. Unilateral Unilateral Contract Contract - once the subject matter mat ter has bee been n delive delivered red,, it create createss obligations on the part of only one of  the parties (i.e. borrower).

Kinds: 1. Commodatum Commodatum –  – when the bailor (lender) delivers to the bailee (borrower) a nonconsumable thing so that the latter may use it for a certain time and return the identical thing. Kinds of commodatum:  a. Ordinary Commodatum – Commodatum – use by the borrower of the thing is for a certain period of time b. Precarium - one whereby the bailor may demand the thing loaned at will and it exists in the t he following cases: i. ne neit ither her th the e dura durati tion on nor nor pu purp rpos ose e of the contract is stipulated ii ii.. th the e use use of th the e thi thing ng is mere merely ly tolerated by the owner 

CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

 

San Beda College of Law 183

MEMORY  A  AID IN CIVIL LAW 

2. Simple loan or mutuum – mutuum  – where the lend lender er de deli live vers rs to th the e borr borrow ower er money mon ey or oth other er con consum sumabl able e thin thing g upon the condition the of latter shall pay the same that amount the same kind and quality.

Commodatum Mutuum Key: COPS-LOTR  1. Object Non-consumable Consumable 2. Cause Gratuitous May or may not be gratuitous 3. Purpose Use Use or temp tempor orar ary y Consumption possession 4. Subject Matter  Real or pers person ona al Only personal property property 5. Ownership of the thing Retained by the Passes to the debtor bailor 6. Thing to be returned  Exact thing loaned ned Equal amo amount o f th the e same kind and quality 7. Who bears risk of loss Bailor Debtor 8. When to return after the In case ase of ur urge gent nt Only ne need ed,, ev even en befo before re ex expi pira rattion ion of the the expiration of the term term

Loan

Credit

Delivery by one party an and d th the e rece receip iptt of  other party of a giv given en sum of mon money ey or other consumable thing upon an agr agreem eement, ent, exp expres resss or implied, to repay the same.

Ability of a person to Ability borrow money or th thin ings gs by vi virt rtue ue of  the trust or confid con fidenc ence e rep repos osed ed by the lender that he will pay what he promised.

Loan

Credit

1. Inte Intere rest st ta tak ken at

Int nter eres estt is ta tak ken in

the expiration of the credit 2. Always on a doub double le name name pa pape perr (two signatures appe appea ar with ith both both part partie iess he held ld liab liable le

advance Alwa Always ys on a sing single le name paper (i.e .e.. promissory note with no indorse-me -ment other than the

for payment)

maker)

COMMODATUM (Articles 1935 – 1952) Nature:



1. PURPOSE: Ba Baiile lee e in comm ommod odat atum um acquires the temporary use of use of the thing but not its fruits (unless stipulated as an incidental   pa incidental part rt of th the e co cont ntra ract ct). ).(A (Art rt 1935) Use must be temporary temporary,, otherwise  the contract may be a deposit. 2. CAUSE: CAUSE: Essentially gratuitous; it ceases to be a commodatum if an y comp compe ens nsat atiion is to be paid paid by the the borrower who acquires the use, in such case there arises a lease contract. Si Simi mila larr to a do dona nati tion on in that that it  confers a benefit to the recipient. The presumption is that the bailor has loaned the thing for having no need therefor the refor.. 3. SUBJECT MATTER: Ge Gener neral ally ly no nonnconsum con sumabl able e whether whether real real or person personal al but if the consumable goods are not for consum con sumpti ption on as whe when n they are merely merely for exhibition, consumable goods may be the subjec subjectt of the commod commodatum atum.. (Art (Art 1936) 4. Ba Bail ilor or need need not not be th the e owne nerr of the the thing thing owned owned (A (Art rt.. 1938 1938)) si sinc nce e by th the e loan, loa n, ow owners nership hip does not pass to the borrower. A mere lessee or usufructuary may  le lend nd bu butt th the e bo borr rrow ower er or bail bailee ee himself may not lend nor lease the thing loaned to him to a third person (Art 1932[2])

5. Purely Purely Perso Personal nal (Art (Art 193 1939): 9):

CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

   

San Beda College of Law 184

MEMORY  A  AID IN CIVIL LAW  



Death of either party terminates the contract unless by stipulation, the commodatum is transmitted to the heirs of either or both parties. Bailee can neither lend nor lease

4. To pay for for extrao extraordina rdinary ry expenses expenses arising arising from the actual use of the thing by the bailee, which shall be borne equally by bo both th th the e ba bail ilor or and and th the e ba bail ilee, ee, even even though the bailee acted without fault, un unle less ss ther there e is a stip stipul ulat atio ion n to the the

the object of the contract to a third person.

contrary 2) 5. T o rret etur urn n(Art the 1949 thi thing ngpar loan loaned ed The bailee has no right to retain the  thing loaned as security for claims he has against the bailor even for extraordinar extrao rdinary y expenses expenses except for a claim for damages damages suffered suffered because because of the flaws of the thing loaned.

NOTE:Use Use of th the e thing thing loan loaned ed may ex may exte tend nd to me memb mber erss of th the e bailee’s household except: a. contrary stipulation; b. nature of the thing forbids such use

NOTES: Howe weve verr,  Ho

th the e ba bail ilee ee’’s ri righ ghtt extends no further than re reten tenti tion on of th the e th thing ing lo loan aned ed unti untill he is re reim imbur burse sed d fo forr th the e damages suffered by him.

Obligations of the Bailee: (Arts 1941 – 1945) 1. To pay for for the the or ordin dinary ary e expe xpense nsess fo forr the use and of the thing loaned. (Art preservation 1941) 2. To be liable for the loss of the thing ev even en if iitt shoul should d be th thro roug ugh h a fort fortui uito tous us event event in th the e foll follow owin ing g cases: (KLAS D) a. when h he e keeps it longer than the period per iod stipul stipulate ated, d, or aft after er the accomplishment of its use b. when h he e lends ends or leas leases es it to th thir ird d pers ersons who are not members of his household c. wh when en the the thing thing loan loaned ed ha hass bee been n de deliv liver ered ed with appr pprais aisal al of its value d. wh when en,, be beiing abl able e to save either of the thing borrowed or his own thin things gs,, he chos chose e to sa save ve the the latter; or e. when the bailee devo evoted ted the thing thin g for any pur purpos pose e differ different ent from that for which it has been loaned (Art 1942) 3. To be liabl liable e for the det deter erio iora rati tion on of  thing loaned (a) if expressly stipulated; (b) if guilty of fault or negligence; or (c) if he devotes the thing to any purpose different from that for which it has been loaned

 He cannot lawfully sell the thing

to satisfy such damages without court’s approval.  In case there are two or more bailees, their obligation shall be solidary.

Obligations of the bailor (Art 1946 – Art 1952): 1. To respec respectt the dura duratio tion n of the the loan loan GENERAL RULE:  RULE:  Allow the bailee the  GENERAL use of the thing loaned for the duration of th the e peri period od stip stipul ulat ated ed or unti untill th the e acco accomp mpli lish shme ment nt of th the e pu purp rpos ose e fo forr which the commodatum was instituted. EXCEPTIONS:   EXCEPTIONS:  a. In cca a se o off ur urgent ne need in which case bailee may demand its return or temporary use; b. The The bai bailo lorr may dema demand nd immediate return of the thing if the bailee commits any act of   ingratitude specified in Art. 765. 765 . 2. To re refu fund nd to the the bail bailee ee ex extr trao aord rdin inar ary y expens exp enses es fo forr th the e pr pres eser erva vati tion on of th the e thing loaned, provided the bailee brings the same to the knowledge of the bailor befor bef ore e in incu curr rring ing th them, em, ex exce cept pt when when

CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

 

San Beda College of Law 185

MEMORY  A  AID IN CIVIL LAW  they are so urgent that the reply to the notification notification cannot cannot be awaite awaited d without danger. danger. 3. To be liable to the bailee for damages for known hidden flaws. 

Requisites: a. Ther Th ere e is flaw flaw o orr def efec ectt in the thing loaned; b. The The flaw flaw o orr de defe fect ct iiss hi hidd dden; en; c. The The bail bailor or is is aw awar are e th ther ereo eof; f; d. He do does es no nott ad advis vise e the b bai aile lee e of  the same; and e. Th The e bail bailee ee su suff ffer erss da dama mage gess by reason of said flaw or defect

NOTES: above requisi requisites tes concur concur,,  If the above th the e bailee ilee has the righ ight of  retention for damages. bailor cannot not exempt  The hi hims msel elff from from the the paym paymen entt of  expenses or damages by aban abando doni ning ng th the e thin thing g to the the bailee.

SIMPLE LOAN OR MUTUUM (Art 1953 – 1961) A cont ntrract act whe herreb eby y on one e par party  delivers to another, money or other consumable thing with the understanding that the same amount of the same kind and quality shall be

contr ntract of loan may be deem eemed perfected.  The obligation is “to pay” and not to return because the consumption of the thin thing g loa oane ned d is th the e di dist stin ingu guis ishi hing ng charac cha racter ter of the contra contract ct of mutuum mutuum from that of commodatum.

 No estafa is committed by a person who

re refu fuse sess to pa pay y hi hiss de debt bt or de deni nies es it itss existence.

Simple Loan/Mutuum 1. Delivery of money or some consumable thing with a promise to pay an equivalent of the same kind and quality

Delivery of some nonconsumable thing in order that the other may use it during a certain period and return it to the former.

2. There is a transfer of ownership of the thing delivered

There is no transfer of ownership of the thing delivered

3. Relationship between the parties is that of obligorobligee

Relationship is that of a landlord and tenant

4. Creditor receives payment for his loan

Owner of the property rented receives compensation or price either in money, provisions, chattels, or labor

paid. (Art. 1953)

NOTES:  The The mer mere e is issu suan ance ce of th the e chec checks ks does not result in the perfection of  the contract of loan. The Civil Code provides that the delivery of bills of  exchange and mercantile do docu cume ments nts,, such such as chec checks ks,, shal shalll produce the effect of payment only whe hen n they they ha have ve been been enc encas ashe hed d (Gerales vs. CA 218 SCRA 638). 638 ). It is only after the checks have produced th the e effe effect ct of paym paymen entt that that th the e

Rent

from the occupant thereof in return for its use (Tolentino vs Gonzales, 50 Phil 558 1927)

Loan 1.

Real contract

2. Generally unilateral because only borrower has obligations

CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

Sale Consensual contract Bilateral reciprocal

and

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

   

San Beda College of Law 186

MEMORY  A  AID IN CIVIL LAW  NOTE: If the property is “sold”, but the real intent is only to give the object as security  for  for a debt – as when the “price” is comparatively small – there really is a contra tract of loan  with with an “e “equ quit itab able le mortgage.” Commodatum/ Mutuum 1. Subject matter is money or fungible things

Barter Subject matter is non-fungible, (non consumable) things

2. In commodatum, the bailee is bound to return the identical thing borrowed when the time has expired or purpose served

The thing with equivalent value is given in return for what has been received

3. Mutuum may be gratuitous and commodatum is always gratuitous

Onerous, actually a mutual sale

Form of Payment (Art 1955): 1. If the thing loaned is money   payment ent must ust be ma mad de in the currency curre ncy stipu stipulated, lated, if it is possible; possible; other herwise ise it is payable ble in the currency which is legal tender in the Philippines and in case of   





The compen compensat sation ion all allowe owed d by law or fi fixe xed d by the the part partie iess fo forr the the lo loan an or forbearance of money, goods or credits Requisites for Demandability: (ELI) 1. must b be e expressly stipulated Exceptions: a. in inde demn mnity ity fo forr da damag mages es b. in inte tere rest st accr accrui uing ng fr from om un unpa paid id interest 2. must b be e lawful 3. must b be e in writing

Compound Interest RULE:  Unpaid interest shall not RULE:  earn interest. EXCEPTIONS:  EXCEPTIONS: 1. wh when en jud judic icia iall lly y dema demand nded ed 2. wh when en there there is an expr expres esss stipu stipula lati tion on (must be in writing in view of Art. 1956) GENERAL  GENERAL

Guideliness for the application Guideline application of prop proper er interest rates 1. If th there ere is sti stipul pulati ation: on: that that rrate ate shal shalll be applied 2. The foll following owing are are the rules of thumb thumb for the applic applicati ation/ on/imp imposi ositio tion n of intere interest st rates: a) Whe When n an o obli bligat gation ion,, regard regardles lesss of its its source, sourc e, i.e., law law,, contr contracts, acts, quasiquasicontracts, delicts or quasi-delicts is breach bre ached, ed, the contra contraven venor or can be held liable for damages. b) Wit With h regard regard part particu icular larly ly to an an award award of interest in the concept of actual an and d comp compens ensat ator ory y da dama mage ges, s, the

extraordinary inflation or deflation, the basisi of payment shall be the value of the currency at the time of  the creation of the obligation 2. If what was l oa oaned i s a  fungible th thin ing g othe otherr th than an mo mone ney  y   - t h he e borrower is under obligation to pay the lender another thing of the same kind, quality and quantity. In case it is impossible to do so, the borrower shall pay its value at the time of the perfection of the loan.

Interest CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

rate rate of in inte tere rest st, as im well wepose ll sed, as thas e accr ac crua ual l ther th ereo eof, f,, is impo d, the follows: When Whe n the obliga obligatio tion n breach breached ed i. consists of payment of a sum of  money (loan or forbearance of  money),, the money) the in inte tere rest st shal shalll be that that whic which h is stip stipul ula ated ted or agreed upon by the parties. In absenc abs ence e of an agreeme agreement, nt, the rate shall be the legal rate (i.e. 12% per annum) computed from default. The in inte tere rest st du due e shal shalll NOTE:  The its itself elf earn earn legal legal inte interes restt from from

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

   

San Beda College of Law 187

MEMORY  A  AID IN CIVIL LAW 

ii.

th the e ti time me it is ju judi dic ciall ially y demanded In other other cases, cases, the ra rate te of  interest shall be six percent (6%) per annum. NOTE: No interest, however,

suhnalilql uid digms ed oonr uidabteed adjcula da dama mage gess exce except pt wh when en or un unti till the the dem eman and d ca can n be established establ ished with reasonable reasonable certainty. When the demand cannot can not be est establ ablish ished, ed, the intere interest st sha shall ll beg begin in to run only only from from the da date te of the judg judgme ment nt of th the e cour courtt is made. ii iii. i. When When th the e ju judg dgme ment nt of the co cour urtt awar awardi ding ng a su sum m of  mone mo ney y bec eco omes mes  final and  executory , the rate of legal intere interest, st, whether whether the case case falls under paragraph i or ii ab abov ove, e, sha hall ll be 12% per per annu annum m from from su such ch fina finali lity ty unti untill its sa sati tisf sfac acti tion on,, th this is interim period being deemed to be by then an equivalent to a forbea forbearan rance ce of cre credit dit.. (Eas Easter tern n Shi Shippi pping ng Lines Lines vs. CA, July 12, 1994) 1994 )

and and un unse secu cure red d maturity.

of any money money, goods or hcredits judgme jud gments nts involv inv,olving ing suc such loans, loans,and or fo forrbear bearan ance ce in the the ab abssence ence of  express agreement to such rate  Inter Interest est as indemnity indemnity for damages is payabl pay able e only only in cas case e of defaul defaultt or non-performance of the contract. As they are distinct claims, they may be de dema mand nded ed sepa separa ratel tely y. (Sen (S enti tinel nel Insurance Co., Inc. vs CA, 182 SCRA 517) Centrall Bank Circular No. 905  (Dec.  Centra 10, 10, 1982) 1982) rem remove oved d the Usu Usury ry Law ceiling on interest rates for secured

re rega gard rdle less ss

of 

Validity of unconscionable interest rate in a loan Suprem Sup reme e Court Court in Sps. Solangon vs.  Jose Salazar , G.R. 125944, 29, 2001,, Salazar, 2001 said that since No. the usury law June had been repealed by CB Cir. No. 905 there is no more maximum rate of interest and the rate will just depend on the mutual agreement of the parties parti es (citing (citing Lim Law vs. Olympic Sawmill Co., 129 SCRA 439 ). ). But the Supreme Court said said th that at no nothi thing ng in said said ci circ rcul ular ar gr gran ants ts lend lender erss ca cart rta a bl blan anch che e aut author hority ity to rai raise se inter interes estt ra rates tes to le leve vell whic which h will will ei eith ther er en ensslav ave e th thei eirr borr borrow ower erss or le lead ad to a hemorrhagi hemor rhaging ng of their assets (citing Almeda (citing  Almeda vs. CA, 256 SCRS 292). 292 ). In Medel vs. CA, 299  SCRA 481, 481, it was ruled that while stipulated inte intere rest st of 5.5% 5.5% pe perr mont month h on a lo loan an is usurio usu rious us pursua pursuant nt to CB Cir Circul cular ar No. 905, 905, th the e same same must must be equi equita tabl bly y re redu duce ced d fo forr be bein ing g in iniq iqui uito tous us,, un unco cons nsci cion onab able le and and exorbitant. exorb itant. It is contrary to morals, morals, (contra ( contra bonos more moress). It was reduced to 12% per annum ann um in conson consonant ant wit with h justic justice e and fai fairr play.

DEPOSIT (Articles 1962 – 2009) 

NOTES:  Central Bank Circular No. 416  416   fixing th the e rate rate of inte interres estt at 12 12% % per per annum deals with loans, forbearance

lo loan ans, s,

A contract constituted from the moment a person receives a thing belonging to another ano ther,, with with the obliga obligatio tion n of safely safely keeping it and of returning the same.

Characteristics: 1. Real Contract - contract is perfected by the del deliv ive ery of the the subj subjec ectt matter. 2. Unila Unilateral teral (gratutito (gratutitous us deposit) deposit)   only the depositary has an obligation. 3. Bilat Bilateral eral (onerous (onerous deposit) deposit)   - gives gives ri rise se to oblig obligat atio ions ns on th the e part part of  both the depositary and depositor. depositor. Deposit

Mutuum

1. Purpose Principal purpose is Principal purpose is safekeeping or consumption

CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

 

San Beda College of Law 188

MEMORY  A  AID IN CIVIL LAW  custody

2. When to Return The lender must wait Depositor can demand the return of  until the expiration the subject matter at of the period granted to the debtor will 3. Subject Matter  Subject matter may Subject matter is be movable or only money or other immovable property fungible thing 4. Relationship Relationship is that of  Relationship is that depositor and of lender (creditor) depositary. and borrower (debtor). 5. Compensation NO compensation of There can be things deposited with compensation of each other (except credits. by mutual agreement).

2004), or by travellers with common carriers (Art 1734 – 1735). NOTE: The chief difference between a vo volu lunt ntar ary y de depo posi sitt and and a ne nece cess ssar ary y de depo posi sitt is that that in the the fo form rmer er,, th the e deposi dep ositor tor has a comple complete te freedom freedom in choosing the is depositary, whereas the latter,, there latter lack of free choice in in the depositor.

Judicial

Extra-judicial

1. Creation Will of the court Will of the parties or contract 2. Purpose Security or to insure Custody and the right of a party safekeeping to property or to recover in case of favorable judgment 3. Subject Matter 

Deposit

Commodatum

1. Purpose is Safekeeping

1. Purpose is the transfer of the use

2. May May be g gra ratu tuit itou ouss

2. E Ess ssen enti tial ally ly an and d always gratuitous

3. Movable/corporeal things only in case of extrajudicial deposit

3. Both movable and immovable may be the object

Kinds of Deposit: 1. Jud Judici icial al (Seque (Sequestr strati ation) on) ––tak takes es place place when whe n an attach attachmen mentt or seiz seizure ure of  property in litigation is ordered.

 

2. Ex Extr traa-ju judi dici cial al a. Volunta ntary – one wher herein ein the delivery is made by the will of  the depositor or by two or more person per sonss eac each h of who whom m bel believ ieves es hi hims msel elff enti entitl tled ed to th the e thin thing g deposited. (Arts 1968 – 1995) b. Necessary – one made in compliance with a legal obligation, or on the occasion of  any calamity, or by travellers in hote hotels ls an and d inns inns (Art rtss 199 1996 -

Movables or immovables, but generally immovables Always onerous

Movables only

4. Cause May be compensated or not, but generally gratuitous

5. When must the thing be returned  Upon demand of Upon order of the depositor court or when litigation is ended 6. In whose behalf it is held  Person who has a Depositor or third right person designated

GENE ENERA RAL L  G

RU RULE LE:: Co Contr ntrac actt of de depo posi sitt is gratuitous (Art 1965) EXCEPTIONS:  EXCEPTIONS: 1. whe when n there there is cont contrar rary y stipu stipulat lation ion 2. de depo posi sita tary ry is engag engaged ed in busin busines esss of  storing goods 3. pro proper perty save saved d fr from om dest destru ruc cti tio on without knowledge of the owner

NOTES:  Article 1966 does not embrace incorporeal property, such as rights and

CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

   

San Beda College of Law 189

MEMORY  A  AID IN CIVIL LAW  actions, for it follows the person of  the owner, wherever he goes.  A contr contrac actt for for th the e rent of safety  not an ordi ordina nary ry deposit depos it boxes  is not co contr ntrac actt of leas lease e of th thin ings gs bu butt a special kind of deposit; deposit ; hence, it is

who acquired the thing in good faith (Art 1971) 

not to be strictly governed by the provisions provi sions on deposit. deposit. The relatio relation n between a bank and its customer is that of a bailor and bailee. (CA Agro vs CA, 219 SCRA 426)

ret return urnthe may have havis e judicially been been fixed fixed except except when thing attached while in the depositary’s possession or should he have been notified of  the opposition of a third person to th the e re retu turn rn or th the e re remo mova vall of th the e thing deposited. (Art 1998) b. If de depo posi sitt grat gratui uito tous us,, the de depo posi sita tary ry may may re retu turn rn th the e th thing ing deposi dep osited ted notwit notwithst hstand anding ing that a period has has been fixed for th the e deposit if justifiable reasons exists for its return. c. If the deposit is for a va valu luab able le co cons nsid ider erat atio ion n, the

Obligations of the Depositary (Art 1972 –1991): 1. To keep the thing thing saf safely ely (Art (Art 1972 1972)) E x e r c i s e o v e r t h e thing  deposited the same diligence as he would uld ex exer erc cis ise e over over his his property 2. To return return the tthin hing g (A (Art rt 1972 1972)) Person to whom the thing must  be returned: De Depo posi sito torr, to his his heirs heirs and and succes suc cessor sors, s, or the person person who may have been designated in the contract b. If the depositary is capacitated   he is subject to all the obli oblig gat atio ions ns of a dep epos osit itar ary y whether or not the depositor is capacitated capac itated.. If the depositor is incapa inc apacit citate ated, d, the deposi depositar tary y must return the property to the leg legal repr repres esen enta tati tiv ve of th the e incapacitated or to the depositor hi hims msel elff if he shou should ld acqu acquir ire e

depositary the thing dehas posino tedrightbto eforeturn re the expira exp iratio tion n of the time time design designate ated d even if he should suffer inconvenience as a consequence.(Art 1989)

a.

c.

Time of return: a. Upo pon n demand ev even en thou though gh a sp spec ecifi ified ed pe peri riod od or ti time me fo forr such such



What to return: product, access acc essori ories, es, and access accession ionss of the thing deposited (Art 1983) 3. No Nott to depo depossit the the th thin ing g wit ith h a thir third d pe pers rson on unle unless ss au auth thor oriz ized ed by ex expr pres esss stipulation (Art 1973)  The depositor is liable for the loss of  the thi thing ng dep deposi osited ted under under Artic Article le

capacity (Art 1970). If the deposi depositor tor is cap capaci acitat tated ed and the depositary is incapacitated   - the latter latter doe doess no nott in incu curr the the obli obliga gati tion on of a depositary but he is liable: i..to return the thing deposi dep osited ted whi while le still still in his possession; ii.t ii.to o pay pay the the de depo posi sito torr the the amount which he may have benefit ben efited ed hims himself elf wit with h the thing or its price subject to the right of any third person

CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

1973 if: a. he transfers the the de depo posi sitt wi with th a thir third d pe pers rson on without authority although there is no negligence on his part and the third person; b. he deposits the thing with a third person who is manifestly careless or unfit although authorized even in the absence of  negligence; or c. the thing is lost lost throug through h the neglig negligenc ence e of his

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

 

San Beda College of Law 190

MEMORY  A  AID IN CIVIL LAW  employe emplo yees es wh whet ether her the latte latterr are manifestly careless or not. 4. If th the e thin thing g de depo posi site ted d sh shou ould ld ea earn rn interest (Art 1975): a. to collect interest and the capital itself as it fall due

7. Wh When en th the e thin thing g de depo posi site ted d is deliv deliver ered ed sealed and closed : a. to re retur turn n the thin thing g depos deposit ited ed in the the same condition b. to pay pay for dam damag ages es sshou hould ld th the e seal seal or lock be broken through his fault,

b. to takand e srights teps eps corresponding to preser eserv ve ito ts value it 5. Not to comm comming ingle le th thing ingss de depos posite ited d if  so stipulated (Art 1976) 6. Not to make use of the thing de depo posi sited ted unl unles esss au auth thor oriz ized ed (A (Art rt 1977) GENERAL L RULE: RULE:   De Depo posi sitt is for for  GENERA safeke saf ekeepin eping g of the subjec subjectt matter matter and not for use. The una unauth uthori orized zed use by the dep deposi ositar tary y wou would ld make make him liable for damages. EXCEPTIONS:  EXCEPTIONS: 1. Wh When en th the e pres preser erva vati tion on of the the

whic wh ich h is pr pres esum umed ed unles unlesss pr prov oved ed otherwise c. to ke keep ep the the secre ecrett of the the depo deposi sitt when the seal or lock is broken with or without his fault (Art 1981) NOTE: The depositary is authorized to open the thing deposited which is closed and sealed when (Art 1982): i. ther there e is presum presumed ed authori authority ty (i. (i.e. e. when the key has been delivered to him or the instructions instructions of the depositor cannot be done without opening it) ii ii.. ne nece cess ssit ity y 8. To chan chang ge the the way of th the e depo deposi sitt if 

thing 2. W hen deposited authorirequires zed bits y use the depositor

NOTE: The permission to use is NOT presumed except when such use is necessary for the preservation of the thing deposited. Effect if permission to use is given (Art 1978): 1. If th t hing d de eposited iiss non-co non -consum nsumabl able, e, the contra contract ct loses the character of a deposit and acquires that of a com commod despit emathe fact th tha atmodatum thatum e pardes tiespite y hfac avet de deno nomi mina nated ted it as a depo deposi sit, t, unles unl esss safek safekee eepi ping ng is st stil illl the principal purpose. 2. If thin thing g depo deposi site ted d co cons nsis ists ts of  money/ mon ey/con consum sumabl able e thi things ngs,, the cont contra ract ct is co conv nver erte ted d into into a simp simple le loan loan or mu mutu tuum um unl unles esss safekeeping is still the principal purpose in which case it is called an irr irregu egular lar dep deposi osit. t. Exa Exampl mple: e: bank deposits are irregular  deposits   in nature but governed deposits by law on loans.

under circumstances, the may ma y the reaso eason nably ably pres presum ume e depositary that that the the depositor would consent to the change if  he knew of the facts of the situation, provid pro vided, ed, that that the former former notifi notifies es the de depo posi sito torr th ther ereo eoff and and wa wait it fo forr hi hiss de deci cisi sion on,, un unle less ss de dela lay y woul would d caus cause e danger 9. To pay pay in inte tere rest st on sums sums conve convert rted ed to personal use if the deposit consists of  money (Art 1983) 10. To be liable for loss through fortuitous event (SUDA): (Art 1979): a. if stipulated b. if he he use sess the thing thing with withou outt the depositor's permission c. if he delays its return d. if he allows others to use it, even though tho ugh he himself himself may have have been authorized to use the same

NOTES:  Fixed, savings, and current deposits of  money in banks and similar institutions shal shalll be go gove vern rned ed by the pr prov ovis isio ions ns concerning simple loan. (Art loan. (Art 1980) The e gene genera rall rule rule is that that a ba bank nk can can  Th compensate or set off the deposit in its hands for the payment of any

CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

 

San Beda College of Law 191

MEMORY  A  AID IN CIVIL LAW  indebtedness to it on the part of the depo depossitor itor.. In true true d dep epos osit it,, compensation is not allowed.

Irregular deposit

Mutuum

1. Thedeposited consumable thing may be demanded at will by the depositor

1. is boundof by Lender the provisions the contract and cannot demand restitution until the time for payment, as provided in the contract, has arisen

2. The only benefit is that which accrues to the depositor

2. Essential cause for the transaction is the necessity of the borrower

3. The irregular depositor has a preference over

3. Common creditors enjoy no preference in the distribution of

other creditors with respect to the thing deposited

the debtor’s property

Rule Rule wh when en th ther ere e ar are e tw two o or mo more re depositors (Art 1985): 1. If thi thing ng deposi deposited ted is div divisi isible ble and  depositors depos itors are not soli solidary  dary : Each Each depo depossitor itor can dema deman nd only nly his his proportionate share thereto. 2. If obligation is solidary or if thing is not not di divi visi sibl ble e: Rules on active solidarity shall apply, i.e. each one of the solida solidary ry deposi depositor torss may do w ha hattev ever er may be usef useful ul to may th the e others but ma noty anything which be pre prejud judici icial al to the lat latter ter,, (Ar (Art. t. 1212) and the depositary may return the thing to anyone of the solidary depositors unless a demand, judicial or extraj extrajudi udicia cial, l, for its return return has been made by one of them in which case, delivery should be made to him (Art. 1214). 3. Return to one of depositors stipulated . The depositary is bound to ret etur urn n it only nly to the the pers perso on designated although he has not made any demand for its return.

NOTES:  The depositary may retain the thing in pledge until full payment of what may be due him by reason of the deposit (Art 1994).  The depositor’s heir who in good faith

may have sold the thing which he did not know was deposited, shall only be bound to return the price he may have received or to assign his right of action against the buyer in case the price has not been paid him (Art 1991).

Obligatio Obliga tions ns of the Depos Depositor itor (Art (Art 19 1992 92 – 1995): 1. To pay expe expenses nses for pres preserv ervati ation on a. If the the de depo posi sitt is gr grat atui uito tous us,, th the e deposi dep ositor tor is oblige obliged d to rei reimbu mburse rse the depositary for exp expens nses es incurred for the preservation of the thing deposited (Art 1992) b. If the the depos eposit it is fo forr valu valuab ablle consideration,, consideration expenses for pres reser erva vati tio on are born borne e by th the e depositary unless there is a contrary stipulation 2. To pay pay loses loses incu incurr rred ed by the the depos deposita itary ry due due to the the char charac acte terr of the thin thing g deposited G ENERA RAL L  GENE

RULE RULE::  Th The e de depo posi sito torr shal shalll reimburse the depositary for any loss arising from the character of the thing deposited. EXCEPTIONS:  EXCEPTIONS: 1. at the time of the deposit, the depositor was no nott aw awar are e  of the dangerous character of the thing when n deposi depositor tor was not expected to 2. whe know   the dangerous character of the thing 3. when the depositor notified   the depository of the same 4. the depositary wa wass awar aware e  of it without advice from advice from the depositor

Extinguishmen Extinguish mentt of Vo Volunta luntary ry Depo Deposit sit (Art 1995) 1. Lo Losss or destruct uctio ion n of the thing deposited

CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

   

San Beda College of Law 192

MEMORY  A  AID IN CIVIL LAW  2.

3.

In case of gratuitous deposit, upon the death of either the depositor or the depositary Other causes, such as return of the thing, novation, novation, merger merger,, expiration expiration of the term fulfilment of the resolutory condition, etc (Art 1231)

Necessary Deposits 1. Made Made in co comp mpli lian ance ce with with a lega legall obligation 2. Made on the occasion of any calamity such as fire, storm, flood, pil pillag lage, e, shipwr shipwreck eck or oth other er sim simila ilarr events (deposito (deposito miserable) miserable) 3. Made by travellers in hotels and inns or by travellers with common carrier

De Depos posit it by Trav avell ellers ers in hot hotels els and and inns: The keepers of hotels or inns shall be  respon res ponsib sible le as deposi depositar taries ies for the deposit of effects made by travellers  provided : Notice was given to them or to a. theirr employ thei employees ees of the eff effect ectss brought by the guest; and b. The The guest guestss take take the prec precau auti tion onss which said hotel-keepers or their substit sub stitutes utes adv advise ised d relati relative ve to the car care e and vigilanc vigilance e of the their ir effects. NOTES: 

Liability extends to vehicles, animals and artic ticles whic hich have been een introduced or placed in the annexes of the hotel.  Liability shall EXCLUDE losses which proceed from force majeure. The act of a thief or robber is not deemed force majeure unless done with the use of arms or irresistible force.  The hote hotell-ke kee eper per canno annott free free himsel him selff from from the respons responsibi ibilit lity y by posting posti ng notices to the effect that he is not liable for the articles brought

by the guest. guest. Any stipul stipulati ation on to such such effect shall be void.  Notice is necessary only for suing civil liability but not in criminal liability liability..

GUARANTY (Articles 2047 – 2084) 

A contract whereby a person (guarantor) binds himself to the creditor to fulfil the obligation of the principal debtor in case the latter fail to do so. so .

Classification of Guaranty: 1. In the Broad sense: sense: a. Pe Perso rsonal nal - the g guar uarant anty y is tthe he credi creditt given by the person who guarantees the the fu fulf lfil ilme ment nt of the the pr prin inci cipa pall obligation. b. Real eal - the gu guar arant anty y is the pro proper perty ty,, movable or immovable. 

2. As to its Origin a. Co Conve nventi ntion onal al - agre agreed ed upon upon by the the parties. b. Le Lega gall - on one e impos imposed ed by virt virtue ue of a provision of a law. c. Jud Judici icial al - one which which is is re requi quired red by a co cour urtt to guar guaran ante tee e the event eventua uall right of one of the parties in a case. 3. As to Consideration a. Gr Grat atui uito tous us - the guara guarant ntor or do does es not receive recei ve any price or remuneration remuneration for acting as such. b. On Oner erou ouss - the the guar guaran anto torr re rece ceiv ives es valuable consideration. 4. As to the Person guaranteed  a. Si Sing ngle le - one one cons consti titu tute ted d sole solely ly to guarantee or secure performance by the debtor of the principal obligation. b. Double or sub-guaranty - one constituted to secure the fulfilment by the guarantor of a prior guaranty. 5. As to Scope and Extent a. Defi Defini nite te - the gua guara rant nty y is limi limite ted d to the principal obligation only, or to a specific portion thereof.

CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

 

San Beda College of Law 193

MEMORY  A  AID IN CIVIL LAW  NOTE: He directly, primarily and equally bi bind ndss hi hims msel elff wi with th the the pr prin inci cipa pall as original promisor, although he possesses no direct or personal interest over the latter’s obligation, nor does he receive any benefits therefrom. (PNB vs CA, 198

b. In Inde defi fini nite te or sim simpl ple e - one wh whic ich h not only only includ includes es the princi principal pal obligation but also all its access acc essori ories es inc includ luding ing judici judicial al costs

SURETYSHIP 



2.

A contract whereby a person (surety) bind bindss hi hims msel elff solidarily   wi with th the principal debtor A rel relati ation on which which exis exists ts whe where re one person (principal) has undertaken an obl blig igat atiion and an ano other ther pers perso on (surety) is also under a direct and primary obligation or other duty to the obligee, who is entitled to but one perf perform ormanc ance, e, and as between between the two who are bound, the second rather than the first should perform ( Agro  Agro Conglomerates, Inc. vs. CA,

348  SCRA 450 ) NOTES: The re refer feren ence ce in Artic rticle le 20 2047 47 to  The sol solidar idary y obl obliga igatio tions ns doe doess not mea mean n thatt suretys tha suretyship hip is wit withdr hdrawn awn from from the applicable applicable provi provisions sions governing governing guaran gua ranty ty.. A sure surety ty is alm almost ost the same sam e as a sol solida idary ry debtor debtor,, except except that he himself is a principal debtor. surety tysh ship ip,, ther here is but but on one e  In sure contract, contr act, and the surety is bound by the same agreement which binds the principal. A surety is usually bound wit ith h the the princ rincip ipa al by th the e same ame instru instrumen ment, t, exe execut cuted ed at the same same time and upon the same considerat cons ideration ion (Palmares vs CA, 288 SCRA 422) 422)  It is not for the obligee to see to it thatt the pri tha princi ncipal pal debtor pays the debt or fulfill the contract, but for th the e su sure rety ty to se see e to it th that at the the pri princi ncipal pal deb debtor tor pay payss or per perfor forms ms (Par Paramo amount unt Ins Insura urance nce Corp Corp vs CA, 310 SCRA 377 )

Nature of Surety’s undertaking: 1. Liability is contractual accessory but direct

and 

3.

SCRA 767) Liabil Lia bility ity li limit mited ed by the terms of the contract. NOTE: It cannot be extended by impli imp lica cati tion on beyo beyond nd th the e terms terms of the contract (PNB vs CA, 198 SCRA 767) Liability arises only if principal debtor  is held liable. NOTES:   The creditor may sue separately or togethe tog etherr the pri princi ncipal pal deb debtor tor and the surety. Where there are several sureti sur eties, es, the oblige obligee e may proceed proceed against any one of them. the e ab abse senc nce e of co coll llus usio ion, n, th the e  In th sur uret ety y is boun bound d by a ju judg dgme ment nt against the principal even though he was not a party to the proceedings. The nature of its undertaking makes it privy to all proceedings against its principal (Finman (Finman General Assurance Corp. vs. Salik, 188 SCRA 740 )

4.

5.

Surety is not entitled to the benefit of  exhaustion NOTE: He assumes a solidary liability for the fulfilment of the principal obligation (Towers wers Assur Assuranc ance e Cor Corp p vs. Oro Ororam rama a Supermart, 80 SCRA 262) 262 ) as an original pr pro omis isssory and debtor from th the e beginning. Undertaking is to creditor and not to debtor. NOTE: The surety makes no covenant or agreement with the principal that principal that it will fulfil the obligation guaranteed for the benefit of the principal. Such a promise is not implied by law either; and this is true even where under the contract the cred credito itorr is gi give ven n th the e ri righ ghtt to sue sue th the e principal, or the latter and the surety at th the e same ti time me.. ( Arranz vs. Manila Fideli Fid elity ty & Surety Surety Co. Co.,, Inc., Inc., 101 Phil. 272)) 272

CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

 

San Beda College of Law 194

MEMORY  A  AID IN CIVIL LAW  6.

7.

8.

Surety is not entitled to notice of   principal’s default NOTE: The creditor owes no duty of  active diligence to take care of the interest intere st of the surety and the surety is boun bound d to ta tak ke no noti tice ce of th the e pri princi ncipal pal’s ’s defaul default and to complain per perfor form m the obligation. Het cannot thatt the credito tha creditorr has not not notifie ified d hi him m in the the abse absenc nce e of a sp spec ecia iall agreement agree ment to that effect. (Palmares ( Palmares vs CA, 288 SCRA 422) 422 ) Prior demand by the creditor upon  principal is not required  NOTE: As soon as the principal is in de defa faul ult, t, th the e sure surety ty like likewi wise se is in default. Surety is not exonerated by neglect of creditor to sue principal

Ch Cha aract cte eris ristic tics

of

Guar uaranty

and

Suretyship: 1.  Accessory  

- It is indispensa nsable condition for its existence that there must be a principal obligation. NOTES:  Guaranty may be constituted to guarantee the performance of a void voida abl ble e or un unen enfo forrce ceab able le contract. contr act. It may a also lso guarant guarantee ee a natural obligation. (Art 2052)  The The gu guar aran anto torr ca cann nnot ot bind bind hi hims mse elf for mo morre than the principal debtor and even if he does, his liab iability shall be reduced to the limits of that of 

2.

 A guaranty may be given as security

fo forr futu future re de debt bts, s, th the e amou amount nt of  which is not yet known; there can be no claim claim agains againstt the guaran guarantor tor un unti till the debt debt is liqu liquid idat ated ed.. A conditional condi tional obligation obligation may also be 3.

4. 5. 6.

secured. (Art 2053) Unilateral  - may be entered even w/o Unilateral  the intervention of the principal debtor, in which case Art. 1236 and 1237 shall apply and it gives rise only to a duty on the part of the guarantor in relation to the creditor and not vice versa. Nominate Consensual It is a contract between the guarantor/surety and creditor. creditor.

NOTES:  Acceptance of guaranty by creditor and notice thereof to guara guarantor: ntor: In declaring that guaranty must  be express, the law refers solely and exclusively to the obligation of the guarantor because it is he alone who binds himself by his acceptance. With respect to the creditor, no such requirement is needed because he binds himself  to nothing.  However, when there is merely an of offe ferr of a gu guar aran anty  ty , or merrel me ely y a conditional guaranty , in th the e sens sense e that that it re requ quir ires es action by the creditor before the

the debtor debt or.. Subsidiary and Condit Subsidiary Conditional ional   - take takess effe effect ct only only in ca case se th the e pr princ incip ipal al debtor fails in his obligation.

NOTES:   The The gu guar aran anto torr ca cann nnot ot bind bind hi hims mse elf for mo morre than the principal debtor and even if he does, his liab iability shall be reduced to the limits of that of  the debtor. But a guarantor may bind himself for less than that of  the principal (Art 2054) CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad



obli ob liga gati tion onbecome be beco come mes s fi fixe xed, d, it it does not binding until is accept accepted ed and until notice notice of  such acceptance acceptance by the creditor is given to, or acquired by, the guarantor, or until he has notice or knowledge that the creditor has performed the condition and intends to act upon the guaranty. But in any case, the creditor is not precluded from waiving the requirement of notice.

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

 

San Beda College of Law 195

MEMORY  A  AID IN CIVIL LAW  person cannot be the personal the personal guarantor of himself. NOTE: However, in a real guaranty, like pl pledg edge e an and d mort mortga gage ge,, a pe pers rson on may may guaran gua rantee tee his own obliga obligatio tion n with with his personal or real properties.

 The

consideration of the gu gua aran ranty is the the same ame as th the e consid con sidera eratio tion n of the princi principal pal obligation.  The credito itor may proceed against aga inst the guaran guarantor tor althou although gh he has no right of action against the principal debtor. debtor. 7. Not Not pre presu sume med. d. It mu must st be ex expr pres esse sed d and reduced in writing. NOTE:  A power of attorney to loan money does not authorize the agent to ma make ke th the e prin princi cipa pall liab liable le as a surety for the payment of the debt of a third person. (BPI ( BPI vs. Coster, 47  Phil. 594) 594) 8. Falls alls un und der the the Statu tatute te of Fraud raudss sinc since e it is a “spe “speci cial al prom promis ise e to answ answer er for for the the debt debt,, de defa faul ultt or miscarriage of another”. Stri rict ctly ly in inte terp rpre rete ted d agai agains nstt the the 9. St creditor and in favor of the guaran gua rantor tor/s /sure urety ty and is not to be extended nded beyond it itss terms or specified limits. (Magdalena (Magdalena Estates, Inc. vs Rodriguez, 18 SCRA 967 ) The rule of strict strictiss issimi imi jur juris is commonly pertains to an accommodation surety be beca caus use e th the e latt latter er acts acts wi with thou outt motive of pecuniary gain and hence, should shoul d be protected protected against unjus unjustt pec pecuni uniar ary y impo impove verris ishm hmen entt by impo imposi sing ng on th the e pr prin inci cipa pal, l, du duti ties es akin to those of a fiduciary.

NOTES: 

10.

 The rule will apply only after it has been definitely definitely ascer ascertained tained th that at the the con ontr trac actt is on one e of  suretyship or guaranty. It cannot be used as an aid in determ determining ining whether a party’s undertaking is th that at of a sure surety ty or guar guaran anto torr. (Palmares vs CA, 288 SCRA 292 292)) does no nott apply pply in ca casse of   It does compensated sureties. It is a contract which requires that the the gu guar aran anto torr mu must st be a pe pers rson on distinct form the debtor because a

Guaranty

Suretyship

1. Liability depends upon an independent agreement to pay the obligation oblig ation if prima primary ry debtor fails to do so

1. Sur uret ety y ass ssum umes es liab liabil ilit ity y as re regul gular ar party to the undertaking

2. Coll Collateral ateral taking

2. Surety is original promisor

an

3. Surety primarily liable

is

under-

3. Guarantor secondarily liable

is

undertakes es Guarantor Guaran tor bin binds ds 4. Surety undertak to pay if the principal hims himsel elff to pa pay y if  the principal DOES NOT PAY CANNOT PAY PAY

4.

5. Ins nsu urer of   5. Insu Insurrer of tthe he solvency of debtor debt 6. Gua Guaran rantor tor can avail ava il of the ben benefi efitt of excussion and division in case cred credit itor or pr proc ocee eeds ds against him

6. Su Sure rety ty cann cannot ot avail of the benefit of  excussion and division

Indorsement

Guaranty

1. Primarily transfer

of   1. Contract security

2. Unless the note is prompt pro mptly ly pre presen sented ted for payment at matu maturrity ity and and due due noti notice ce of dish dishon onor or given to the indorser within wit hin a rea reason sonabl able e time he will be di disc scha harg rged ed abso abso-lutely from all lia iabi billity ity th ther ereo eon, n, whether he has suffer suffered ed any actu actual al damage or not

CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

of  

2. Failure in either or both of these partic par ticula ulars rs doe doess not generally work as an absolute abso lute discharge discharge of  a guarantor’s liability, but his is discharged only to the extent of  the loss which he may have suffered in consequence thereof 

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

 

San Beda College of Law 196

MEMORY  A  AID IN CIVIL LAW  3. Indors Indorser er doe doess not warrant the solvency. He is answerable on a st stri rict ct co comp mpli lian ance ce with the law by the holderr, whethe holde whetherr the

3. Guarantor warrants the solvency of the promisor

Continuing guaranty (Art 2053) One One whic which h is no nott li limi mite ted d to a sing single le 

promisor is solvent or not 4. Indo Indorrser can sued as promisor

be

Double or sub-guaranty (Art 2051 2nd par) One One cons consti titu tutted to guar uaran ante tee e the the obligation of a guarantor



4. Guarantor cannot be sued as promisor

Guaranty

Warranty

A contract by which a person is bound to another for the fulfilment of a promise or engagement of a third party

An undertaking that the title, quality quality,, or quantity of the subject matter of the contract is what it has been represented to be, and relates to some agreement made ordinarily by the warranty party who makes the

NOTES:  A guaranty is gratuitous, unless there is a stipulation to the contrary. contrary. The cause cau se of the contr contract act is the same cause which supports the obligation as to the principal debtor.  The peculiar nature of a guaranty or suret urety y agree eem ment is that is is rega egarded as valid despite ite the absence of any direct consideration received by the guarantor or surety either from the principal debtor or from the credit from creditor; or; a con consid sidera eratio tion n moving mov ing to the princi principal pal alone wil willl suffice.  It is ne nev ver nece ecessary th tha at the guaran gua rantor tor or sur surety ety sho should uld receiv receive e any part or benefit, if such there be, accrui acc ruing ng to the pri princi ncipal pal.. (Wi (Wille llex x Plastic Industries Corp. vs. CA, 256 SCRA 478)

transa tra nsacti ction on but which which co contem ntempla plates tes a future course future course of dealin dealings, gs, cov coveri ering ng a series ser ies of transa transacti ctions ons gen genera erally lly for an indefinite time or until revoked.

NOTES:   Pr Prosp ospect ective ive in operat operation ion ( Diño Diño vs CA CA,, 216 SCRA 9 )  Con Constr strued ued as con contin tinuing uing when by the terms ter ms th ther ereof eof it is evid eviden entt th that at th the e object is to give a standing credit to the principal debtor to be used from time to time either indefinitely or until a certain period, especially if the right to recall the guaranty is expressly reserved (Diño ( Diño vs CA, 216 SCRA 9 )  “Future debts” may also refer to debts existing at the time of the constitution of the guaranty but the amount thereof  is unkno unknown wn an and d no nott to de debt btss no nott ye yett incurred and existing at that time.  Exception to the concept of continuing guaranty is chattel mortgage. mortgage. A chattel mort mo rtga gage ge ca can n only only co cove verr obli obliga gati tions ons ex exis isti ting ng at the the ti time me th the e mort mortga gage ge is consti con stitute tuted d and not those those contra contracte cted d subs subsequ equent ent to th the e ex exec ecut utio ion n th ther ereo eof  f  (The Belgian Catholic Missionaries, Inc. vs. Magallanes Press, Inc., 49 Phil 647). An exception tostores, this is drug in case of stocks in department stores, etc. (Torres (To rres vs. Limjap, L imjap, 56 Phil 141).

Extent of Guarantor’s liability: (Art 2055) 1. Where the guaranty definite definite:: It is li limi mite ted d in who holle or in par part to the the pr prin inci cipa pall de debt bt,, to the the ex excl clus usio ion n of  accessories. 2. Where ere guarant nty y indefinite or simple: simple : It shall sha ll compri comprise se not only only the pri princi ncipal pal obligation, but also all its accessories, includ inc luding ing the judici judicial al costs, costs, pro provid vided ed with with re resp spec ectt to th the e latte latterr, th that at th the e guarantor shall only be liable for those

CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

   

San Beda College of Law 197

MEMORY  A  AID IN CIVIL LAW  co cost stss in incu curr rred ed afte afterr he has has been been judicially required to pay.

Qualifica Qualif icatio tions ns of a guara guaranto ntor: r: (Arts (Arts 2056-2057) 1. possesses integrity 2. 3.

capacity to bind himself  has sufficient property to answer fo forr the the obli oblig gatio ation n wh whic ich h he guarantees

NOTES:   Th The e qu qual alif ific icat atio ions ns ne need ed only only be present at the time of the perfection of the contract.  The subsequent loss of the integrity or property or supervening incapa inc apacit city y of the guaran guarantor tor would would not operate to exonerate the guarantor or the eventual liability he has contracted, and the contract of  guaranty continues.  However, the creditor may demand another ano ther guaran guarantor tor wit with h the pro proper per qualifications. But he may waive it if  he chooses and hold the guarantor to his bargain. Benefit of Excussion (Art 2058) The The righ rightt by whic which h the guar guaran anto torr  cann cannot ot be comp compel elle led d to pa pay y the the credit editor or un unle lesss th the e lat atte terr has has exhausted all the properties of the principal debtor, and has resorted to all of the legal remedies against such debtor. NOTE:  Not Not appl applic icab able le to a co cont ntra ract ct of  sur uret etys yshi hip p (A (Arrts 2047 047, par par. 2; 2059[2]) Canno nnott even even begi begin n to ta take ke plac place e  Ca before judgment has been obtained agains aga instt the debtor debtor (Bayl (Baylon on vs CA, 312 SCRA 502) When Guaranto When Guarantorr is not entitled to the benefit of excussion: (PAIRS)

1. If iitt ma may b be e presumed that an execution on the property of the principal debtor would not result in the satisfaction of  the obligation  Not necessar necessary y that that the debtor debtor be judi judici cial ally ly de decl clar ared ed in inso solv lven entt or bankrupt 2. When he he h ha as absconded, or cannot be sued within the Philippines unless he has left a manager or representative 3. In c ca ase o off insolvency of the debtor  Must be actual 4. If the guaran guarantor tor has exp expres ressly sly renounced it 5. If h he e has has boun bound d hims himsel elff solidarily with the debtor Other grounds: (BIPS) 6. If he is a judicial bond ondsma sman n or subsurety 7. If h he e fa fails tto o interpose it as a defense before judgment is rendered against him 8. If th the e gu guar aran anto torr does does not not set up the benefit bene fit agains againstt the credito creditorr upon upon the latter’s demand for payment from him, an and d point out to the creditor available property to the debtor within Philippine territory, sufficient to cover the amount of the debt (Art 2060) Dema De mand nd can can be made made on only ly af afte terr  judgment on the debt  Demand must be actual; joining the guar guaran anto torr in th the e suit suit ag agai ains nstt th the e principal debtor is not the demand intended by law 9. given Wh Wher ere eby the pled plas edge ge or mort mo rtga gage ge has bee been n him security special

Benefit of Division (Art 2065) Shou Should ld the there re be several guarantors  guarantors  of   only one debtor  and   and for the same debt, debt, the obligation obligation to answer for the same is divided among all. Liability: Joint  NOTES: the e  The creditor can claim from th guara gua rant ntor orss only only th the e shar shares es th they ey ar are e respectively respec tively bound bound to pay except when

CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

 

San Beda College of Law 198

MEMORY  A  AID IN CIVIL LAW  solidarity is stipulated   or if any of  the cir circum cumsta stance ncess enumer enumerate ated d in  Article 2059 should take place. place. right of contribution of   The guaran gua rantor torss who pays pays requir requires es tha thatt the payment must have been made (a) in virtue of a judicial demand, or (b) because the principal debtor is insolvent (Art 2073).    If any of the guarantors should be insolvent, his share shall be borne by the the othe others rs incl includ udin ing g th the e payi paying ng guarantor in the same joint pr prop opor ortio tion n foll follow owing ing the the ru rule le in solidary obligations.  The above rule shall not be applic app licabl able e unle unless ss the pay paymen mentt has be been en made made in virt virtue ue of a ju judi dici cial al de dema mand nd or un unle less ss the the prin princi cipa pall debtor is insolvent. 

T t entto frcoom ntribuhtiison co rehiemburrisgehm orguaran gua rantor torss is acq acquir uired ed ipso jure  jure  by virtue of said payment without the need of obtaining from the creditor any prior cession cession of rights rights to suc such h guarantor.  The co-gu o-gua arant rantor orss ma may y set up against the one who paid, the same defens def enses es which which hav have e pertai pertained ned to th the e pr princ incip ipal al de debt btor or ag agai ains nstt th the e credit creditor or and whi which ch are not purely purely personal to the debtor. (Art 2074)

Pr Proc oced edur ure e when when cred credit itor or su sues es:: (Art.



defenses if he does not appear and it may no longer be possible for him to ques questi tion on the vali validi dity ty of th the e judg judgme ment nt re rend nder ered ed agai agains nstt the the debtor. 2. A guar uarantor is entitled to be heard befor bef ore e an and d ex exec ecuti ution on ca can n be is issu sued ed against him where he is not a party in th the e case inv nvo olving his princi ncipal (procedural due process).

Guar uarantor ntor’’s Ri Righ ghtt of Inde ndemnit ity y or Reimbursement Reimburseme nt (Art 2066) GENERAL RULE: Guaranty RULE: Guaranty is a contract of   GENERAL indemnity . The guarantor who makes payment is entitled to be reimbursed by the principal debtor.

NOTE: The indemnity consists of: (DIED) 1. Total amount of the d ebt e bt – no right to demand reimbursement until he has actually paid the debt, unless by the the te term rmss of the the co cont ntra ract ct,, he is gi give ven n the the ri righ ghtt befo beforre mak makin ing g payment.. He cannot payment cannot collect collect more more than what he has paid. 2. Legal interest the there reon on fr from om th the e time the payment was made known (not (notic ice e of paym paymen entt in ef effe fect ct a demand so that if the debtor does

2062) The creditor must sue the principal  alone; the guarantor cannot be sued with his principal, much less alone except in Art. 2059. 1. Not Notice ice to guar guarant antor or o off th the e ac actio tion n The guarantor must be NOTIFIED  so that he may appear, if he so desires, and set up defenses he may want to offer. If the guarantor appears, he is  still given the benefit of  ex exha haus usti tion on ev even en if judg judgme ment nt

should be rendered against him and pr prin inci cipa pall de debt btor or.. Hi Hiss vo volu lunt ntar ary y appear app earanc ance e does does not consti constitute tute a renunciation of his right to excussion (see Art. 2059(1)). Guarantor cannot set up the

3.

CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

not pay immedi immediate ately ly,, he incurs incurs in delay) to the debtor, even though it did not earn interest est for the creditor.. Guarantor’s right to legal creditor interest is granted by law by virtue of the payment he has made.  xpenses incurred by the guarantor  E  after having notified the debtor that payment has been demanded of him by the creditor; only those expenses that the guarantor has to satisfy in accordance with law as a conseq con sequen uence ce of the guaran guaranty ty (Art. (Art. 2055) not those which depend upon his will or own acts or his fault for

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

   

San Beda College of Law 199

MEMORY  A  AID IN CIVIL LAW 

4.

these are his exclusive personal responsibility and it is not just that they be shouldered by the debtor. Damages if they are due in accordance wi with th la law w. Ge Gene nera rall rules rules on damages apply.

debt to subrogation does not stand upon co contr ntrac actt but but upon upon th the e pr prin inci cipl ples es of  natural justice.  The guarantor is subrogated by virtue of  th the e payment ent to the rights of the creditor, not those of the debtor. 

EXCEPTIONS:  EXCEPTIONS: 1. Where the guaranty is constituted without the knowledge or against the will of  th the e princi ncipal debtor, the gu gua aran rantor tor can rec ecov over er on only ly insofar as the payment had been be benef nefic icia iall to th the e de debto btorr (A (Art rt.. 2050). 2. Paymen ymentt by a thir third d per perso son n who does not intend to be reimbursed by the debtor is deemed to be a

Guarantor cannot exercise the right of re rede demp mpti tion on of hi hiss prin princi cipa pall (Urrut Urrutia ia & Co vs Morena Morena and Reyes, Reyes, 28 Phil 261) 261)

Effect of Payment by Guarantor 1. Withou Withoutt notice notice tto o deb debtor tor:: (Art (Art 2068) 2068)  The debtor debtor may interpo interpose se agains againstt the guarantor those defenses which he co coul uld d have have se sett up agai agains nstt th the e credit cre ditor or at the time the payment payment was made, e.g. the debtor can set up against the guarantor the defense of previo previous us exting extinguis uishme hment nt of the obligation by payment.

dona donati tio on, the wh whic ich, h, ho wsent. ev ever er, req requir uires es deb debtor tor’s ’s how consen con t., But the payment is in any case valid as to the creditor who has accepted it (Art. 1238). 3. Waiver iver of the the rig right to dema demand nd reimbursement.

2. Before Before Mat Matur urity ity (Art (Art 2069 2069)) Not Not en enti titl tled ed to re reim imbu burs rsem emen entt  unless the payment was made with the consent or has been ratified by the debtor

Gu Guar ara ant ntor or’’s ri righ ghtt to Su Subr brog ogat atio ion n (ART.2067) Subrogation transfers to the person  subrogated, the credit with all the rig rights hts thereto thereto appert appertain aining ing either either agains aga instt the deb debtor tor or aga agains instt thi third rd pe pers rson ons, s, be they they guar guaran anto tors rs or

Effect of Repeat Payment by debtor: (Art 2070) GENERAL RULE: Before RULE: Before guarantor pays the  GENERAL creditor,, he must first notify the debtor (Art. creditor 2068). If he fails to give such notice and the debtor repeats payment, the guarantor can only collect from the creditor and guarantor

possessors stipulation of mortgages, in cosubject nventionto al subrogation.

has cause action against for the no return ofof the amount paidthe by debtor guarantor even if the credit edito or should be bec come insolvent.

NOTE:  Th This is righ rightt of subr subrog ogat atio ion n is necessary necess ary to ena enable ble the guaran guarantor tor to enforce the indemnity given in Art. 2066.  It arises arises by operat operation ion of law upon paymentt by the guara paymen guarantor ntor.. It is not necessary that the creditor cede to the guaran guarantor tor the for former mer’s ’s rig rights hts against the debtor. debtor.  It is not not a cont contrac ractua tuall rig right. ht. Th The e righ rightt of gu guar aran anto torr wh who o has has paid paid a

EXCEPTION: The  EXCEPTION: The

guarantor can still claim reimbursement from the debtor in spite of  lack of notice if the following conditions are present: (PIG) a. guarantor was preve evente nted by fortuitous event to advise the debtor of the payment; and b. th the e cre credi dito torr b bec ecom omes es insolvent; c. the the g gua uarranty anty is gratuitous.

CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

   

San Beda College of Law 200

MEMORY  A  AID IN CIVIL LAW  Right of Guarantor to proceed against debtor before payment Guar aran anto torr ha hass no  GENERAL RULE: Gu cause of action against debtor until after the former has paid the obligation EXCEPTION: Article 2071  EXCEPTION: NOTES: rticle le 207 071 1 is appl applic icab able le and and  Artic avai availa labl ble e to the the sure surety ty.. (Manila Surety & Fidelity Co., Inc. vs Batu Construction & Co., 101 Phil 494) 494 )  Remedy of guarantor: (a) obtain release from the guaranty; or (b) (b) dema demand nd a secu securi rity ty that that shal shalll protect him from any proceedings by the creditor, and against the danger of insolvency of the debtor Art. 2066

Art. 2071

Provides for the enforcement of the rights of the guarantor/surety against the debtor after  he  he has paid the debt Gives a right of action after  payment  payment Substantive ri right

Provides for his protection before before he  he has paid but after he has become liable

Protective remedy before payment. before  payment. Preliminary re remedy

Extinguishment of guaranty: guaranty: (RA2CE2) 1. R elea easse in favor of one of the guarantors guara ntors,, without without the cons consent ent of  the others, benefits all to the extent of th the e sh shar are e of th the e guar guaran anto torr to who hom m it ha hass been een gr gran ante ted d (A (Arrt 2078); 2. If th the e cred edit itor or volu volunt ntar aril ily y accepts immova imm ovable ble or other other pro proper pertie tiess in pa paym ymen entt of the the debt debt,, ev even en if he shou should ld after afterwa ward rdss lose lose the same same throug thr ough h evicti eviction on or con convey veyanc ance e of  property (Art 2077); 3. Whenever by some act of the creditor, the guarantors even though they are solidarily liable cannot be subrogated to the rights, mortgages

and and pr pref efer eren ence cess of the the fo form rmer er (A (Art rt 2080); 4. For the same cau ausses as all all othe otherr obligations (Art 1231); 5. When the principal obligation is extinguished; 6. Extension granted to the debtor by the cred credito itorr witho without ut the co cons nsent ent of th the e guarantor (Art 2079)

BOND An un unde dert rtak akin ing g that that is suff suffic icie ient ntly ly secured, and not cash or currency



Bondsman (Art 2082) A surety offered in virtue of a provision  of law or a judicial order. He must have th the e qualificati tio ons req equ uired of a guarantor and in special laws like the Rules of Court. NOTES:  Judi Judici cial al bo bond ndss cons consti titu tute te mere merely ly a special class of contracts of guaranty by the fact that they are given “in virtue… of a judicial order.”  If the person required to give a legal or judicial bond should not be able to do so, a pledge or mortgage sufficient to cover cov er the obliga obligatio tion n shall shall admitt admitted ed in lieu thereof (Art 2083)  A judicial bondsman and the sub-surety ar are e NOT NOT en enti titl tled ed to the the be bene nefi fitt of  excuss exc ussion ion becaus because e they are not mere mere guarantors, but sureties whose liability is primary and solidary. solidary. (Art (Art 2084) PLEDGE, MORTGAGE AND ANTICHRESIS I. Common Elements of Pledge, Mortgage, and Antichresis (Articles 2085 – 2092)

 A. Essential Requisites (SOD) (Art 2085) 1. Secu ecures res the ful fulfil fillme lment nt of a pri princi ncipal pal obligation; 2. Ple Pledgo dgorr, mortgago mortgagorr, antichre antichretic tic debtor must be the absolute owner of the thing pledged or mortgaged; and The reason being that in anticipation  of a possible foreclosure sale in case of default which is still a sale, the

CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

   

San Beda College of Law 201

MEMORY  A  AID IN CIVIL LAW  rule is that the seller must be th the e own owner of th the e thin thing g sold old (Cavit (Ca vite e Develo Developme pment nt Bank Bank vs. Lim, 324 SCRA 346) 3. Pled Pledgo gorr, mortg ortgag ago or, an anti tich chrret etic ic de debt btor or must must have have free dispos isposal al of  their property ty,, or be authorized for such purpose.

legally

NOTES:  Third persons can pledge or mort mo rtga gage ge th thei eirr own own pr prop oper erty ty to secure the principal obligation.  It is no nott ne nece cess ssar aril ily y vo void id si simp mply ly because the accommodation pledgor or mor mortga tgagor gor did not benefit benefit fro from m the same. So long as valid consent was given, the fact that the loan was given solely for the benefit of the principal debtor would not invalidate the mortgage (GSIS (GSIS vs CA, 170 SCRA 533)) 533  Th The e acco accomm mmod odat atio ion n pled pledgo gorr or morrtg mo tgag ago or, with witho out expr expres esssly assuming assum ing personal personal liabi liability lity for such debt, is not liable for the payment of  any deficiency, should the property not be sufficient to cover the debt (Bank Bank of Am Amer eric ica a vs vs.. Am Amer eric ican an Realty Corporation, 321 SCRA 659 ))..  Th The e acco accomm mmod odat atio ion n pled pledgo gorr or mortga mor tgagor gor is not so solid lidari arily ly bou bound nd with with th the e prin princi cipa pall oblig obligor or but but his his liability extents only to the property pledged or mortgaged. Should there be any deficiency, the creditor has recourse on the principal debtor who remains to be primarily bound. law grants to the  The accommodation pledgor or mort mo rtga gago gorr the the sa same me righ rights ts as a guarantor and he cannot be prejudiced by any waiver of defense by the principal debtor.

B. Prohibition against Pactum Commissorium (Art 2088; 2137) Pactum Commissorium



Stipulation whereby the thing pledged  thing pledged   or or mortgaged , or under antichresis antichresis   shall automatical automa tically ly become the property property of  the the credi redito torr in th the e ev even entt of no nonnpayme pay ment nt of th the e debt debt withi within n th the e te term rm fixed.

Requisites: 1. There sshould hould be be a pledge, pledge, mortgag mortgage, e, or an anti tich chrres esis is of pro propert perty y by way of  security for the payment of the principal obligation; and 2. The There sho hou uld be a stip stipul ulat atio ion n fo forr an automatic appropriation by the creditor of the property in event of nonpayment of the obligation within the stipulated period. GENERAL  GENERAL

RULE:   Pactum Commissorium is RULE: forbidden by law and is declared null and void.

EXCEPTION: The  EXCEPTION: The

pledgee may appropriate th the e th thin ing g pl pledg edged ed if af after ter the fi firs rstt an and d second auctions, the thing is not sold. (Art 2112)

 

NOTE: The securi NO security ty contra contract ct remain remainss valid; only valid; only the prohib prohibited ited stipul stipulati ation on is void. C. Capability to secure all kinds nds of  obligat obl igations ions,, i.e i.e.. pure pure or con condit ditiona ionall (Art 2091)

D. In Indi divi visi sibi bili lity ty (Art 2089) GENERAL RULE:  RULE:  A pledge, pledge, mortga mortgage, ge, or  GENERAL antich ant ichres resis is is indivisible, even though the debt may be divided among the successors in interest of the debtor or of the creditor. Their indivisibility is not affected by the  fact that the debtors are jointly or not solidarily liable.

Consequences of indivisibility: 1. Si Sing nglle thi thing – Ev Ever ery y por porti tion on of the the pro proper perty ple ledg dged ed or mor ortg tgag aged ed is answerable for the whole obligation 2. Several things – things – All of the several things pledged or mortgaged are liable for the totality of the debt 3. Debtor’s heir/creditor’s heir   - Neither Neither the debtor’s heir who has paid part of 

CCIVIL  LAW  COMMITTEE HAIRPERSON : Romuald Padilla  ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

   

San Beda College of Law 202

MEMORY  A  AID IN CIVIL LAW  the debt cannot ask for proportiona propo rtionate te exting extinguishme uishment, nt, nor cred credito itor’ r’ss heir heir wh who o re rece ceiv ived ed his his share of the debt return the pledge or cancel the mortgage as long as the debt is not completely  satisfied.  satisfied.

 If he wish wishes es to secure secure a ti titl tle e to the

mortgaged property, he can buy it in the foreclosure sale (Montevirgin vs. CA, 112 SCRA 641)

F. Pledgor,

NOTES:  Th The e mere mere embo embodi dime ment nt of a real real es esta tate te mort mortga gage ge and a chat chatte tell mortgage in one document does not ha have ve the the ef efffec ectt of fu fusi sing ng both oth securities into an indivisible whole. The e mort mortga gage gee, e, ther theref efor ore, e, ma may y  Th lega legall lly y fore forecl clos ose e th the e re real al esta estate te mortgage mortg age extrajudic extrajudicially ially and waive the chattel chattel mortga mortgage ge forecl foreclosu osure, re, an and d ma maint intai ain n inst instea ead d a pers person onal al action for the recovery of the unpaid balance of the credit (Phil. Bank of  Commer Com merce ce vs. Macada Macadaeg, eg, 109 Phil Phil 981)

E. When the prin rincipa pall obligat gation becomes due, the things in which the pledge, mortgage, or   anti ticchresis consists may be alienated for the payment to the creditor. (Art. 2087) NOTES:  If the debtor fails to comply with the obligation at the time it falls due, the credit creditor or is mer merely ely entitl entitled ed to move mo ve fo forr the the sale ale of the the th thin ing g pledge ple dged d or mor mortga tgaged ged in ord order er to collect the amount of his claim from the proceeds.

antichretic

debtor retains debtor retains ownership of the thing given as a security 



EXCEPTIONS: 1. Where each one of several things guar uarante tee es a determinate portion of the credit 2. Wh Wher ere e on only ly a po port rtio ion n of th the e lo loan an was released 3. Where there was failure of   consideration. 4. Where there is no debtorcreditor relationship

mortg tga ago gorr,

PLEDGE (Arts 2093 – 2123) 

A contract wherein the debtor delivers to the creditor or to a third person a mova mo vabl ble e or docu docume ment nt evi vid denc encin ing g incorp inc orpore oreal al rig rights hts for the purpos purpose e of  se secu curi ring ng fu fulf lfil ilme ment nt of a pri princ ncip ipal al obligation oblig ation with the unders understanding tanding that when wh en th the e obli obliga gati tion on is fu fulf lfil illed led,, th the e thing thin g delive delivered red shall shall be return returned ed with with all its fruits and accessions.

Special Requisites (in addition to the common essential requisites): 1. Po Posse ssessi ssion on of the thing thing p pled ledged ged must must be be transf tra nsferr erred ed to the creditor creditor or a thi third rd person by agreement (Art 2093); 2. It ca can n onl only y cover cover mova movabl ble e prope propert rty y and in inc corporeal rights ev eviidence nced by documents of title and the instruments pr prov ovin ing g the the ri righ ghtt pl pled edge ged d shal shalll be deli deliv ver ered ed to the the credi redito torr, and and if  negotiable must be endorsed (Art 2094); and 3. The description description of  of the thing pledged and the date date   must must app ppea earr in a pub ubli lic c instrume inst rument nt to bind bind thi third rd person persons, s, but



not for the validity of the contract (Art 2096). 

1. 2.

Kinds: Conven Con ventio tional nal /Vol /Volunt untary ary – cr crea eated ted by contract Leg Legal – cr crea eate ted d by oper operat atio ion n of law law (examples: Art. 546, 1731 and 1914 NCC)

NOTES:  The provisions of possession, care and sa salle of the the th thin ing g as wel elll as on th the e termin ter minat atio ion n of th the e pl pled edge ge go gove vern rnin ing g conventiona conve ntionall pledges pledges are applicable applicable to

CCIVIL  LAW COMMITTEE  HAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

   

San Beda College of Law 203

MEMORY  A  AID IN CIVIL LAW  pledges created by operation of law (Art 2121)  Unl Unlike, ike, how however ever,, in con conven ventio tional nal pled pledge ge wh wher ere e the the de debt btor or is no nott enti entitl tled ed to th the e exce excess ss unle unless ss it is otherw oth erwise ise agreed agreed,, in leg legal al ple pledge dge,, the remainder remainder of the price of the sale after payment of the debt and expenses, shall be delivered to the debtor.  In legal pledge, there is no definite per period iod fo forr the the paym paymen entt of th the e pri princi ncipal pal obliga obligatio tion. n. The ple pledge dgee e must make a demand for the pa paym yment ent of th the e am amou ount nt du due e him him;; other otherwi wise se he ca canno nnott exer exercis cise e the right of sale at public auction (Art 2122)

Characteristics: 1. Real contract   – it is pe contract perf rfec ecte ted d by the delivery of the thing pledged by the debtor who is called the pledgor the  pledgor to the the cr cred edit itor or wh who o is calle alled d th the e  pledgee,, or to a thir  pledgee third d pe pers rson on by common agreement; 2.  Accessor  y contract contract – it has no independent existence of its own; 3. Unilater  al contract – it creates an obligation solely on the part of the creditor to re retur turn n th the e th thin ing g subj subjec ectt th ther ereo eof  f  upon the fulfilment fulfilment of the principal obligation; and 4. Subsidiar  y contract – the obligation incurred does not arise until the fulfilment of the principal obligation which is secured. Consideration in pledge: Consideration  Insofar as the pledgor is concerned, the cause is the principal obligation.  If the pledgor is not the debtor, the cause is the compensation stipulated for the pledge or the mere liberality liberality of the pledgor.

Ex Exte ten nt of pl ple edge dge:  Un Unles lesss stip stipul ulat ated ed otherw oth erwise ise,, pledge pledge extends extends to the fruits fruits,, interests or earnings of the thing. Rights and Obligations of a Pledgor Rights Obligations 1. To d dema emand nd re retur turn n in case of reasonable grounds to fear destruction or impairment of the thing without the pledgee’s fault, subject to the duty of replacement (Art 2107) 2. To bid bid a and nd b be e preferred at the public auction (Art 2113) 3. To al aliena ienate te the th thing ing pledged provided the pledgee consents to the sale (Art 2097) 4. To ask ask th that at the tthing hing

1. To advi advise se th the e pledgee of the flaws of the thing (Art 2101) 2. Not Not to d dem eman and d the return of the thing until after full payment of the debt, including interest due thereon and expenses incurred for its preservation (Art 2105)

pledged be deposited (Arts 2104 & 2106)

Rights of the Pledgee KEY: D SBC BA2R2OPS2 1. Option to dem emand and repla replacem cement ent or immediate payment of the debt in case of  decepti dec eption on as to substa substance nce or quality quality (Art (Art 2109) 2. To sel elll at publi public c aucti auction on in case case of  reasonable reaso nable grounds to fear destructi destruction on or impair imp airmen mentt of the thi thing ng wit withou houtt his fault fault (Art 2108) 3. To bring actions pertaining to the owner (Art 2103) 4. To choose whic ich h of severa eral thi hing ngss pledged shall be sold 5. To bid at the public auction (Art 2113) 6. To app ppro ropr pria iate te the the thing thing in ca case se of  nd failure of the 2  public auction (Art 2112) 7. To apply said fruits, interests or earnings to the interest, if any, then to the principal of the credit (Art 2102) 8. To retain excess value received in the public sale (Art 2115) 9. To retain the thing until after full payment of the debt (Art 2098) 10 10.. To be be reimbursed for the expenses made for the preservation of the thing pledged (Art 2099)

CCIVIL  LAW COMMITTEE  HAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

   

San Beda College of Law 204

MEMORY  A  AID IN CIVIL LAW  11. To object to the alienation of the thing 12. 12. To possess the thing (Art 2098) 13. To sell at public auction in case of  non-pa non -payme yment nt of deb debtt at mat maturi urity ty (Art (Art 2112)

2. Not Not   to use thing unless authorized or by the owner or its preservation requires its use (Art 2104) 3. Not Not to  to deposit the thing with a 3 rd person unless so stipulated (Art 2100) 4. Res espo pons nsib ibil ilit ity y fo forr acts acts of agen agents ts and and

To choose choose whi which ch of the sev severa erall thi things ngs pledged shall be sold (Art 2119) 14. Optio tion to dema emand nd rep replac lacemen ementt or immediate payment of the debt in case of deception as to substance or quality (Art 2109) 15. To sell at public aucti auction on in c case ase of  reasonable reaso nable grounds to fear destru destruction ction or impairment of the thing without his fault (Art 2108) 16. To brin ring g act action ionss per pertai tainin ning g to the owner (Art 2103) 17 17.. To ch choo oose se whic which h of seve severa rall th thing ingss pledged shall be sold 18. To bid at th the e pu publ blic ic auct auctio ion n (Art (Art

employees as regards the thing (Art 2100) 5. To advise advise pledgor pledgor of danger danger to the thi thing ng (Art 2107) 6. To advi advise se pl pled edgo gorr of th the e re resu sult lt of th the e public auction (Art 2116)

2113) 19. To appropriate the thing in case of  fail failur ure e of th the e 2nd  publ public ic auc auctio tion n (Art (Art 2112) 20. To app pply ly said said frui fruits ts,, inter interes ests ts or earnings to the interest, if any, then to the principal of the credit (Art 2102) 21. 21. To retain excess value received in the public sale (Art 2115) 22. To reta etain in the thing unt until il after after ful fulll payment of the debt (Art 2098) 23. To be be reimbursed for the expenses made for the preservation of the thing pledged (Art 2099) 24. To object to the alienation of the

the thi thing, ng, ano another ther thing in pledge pledge which is of the same kin ind d and quality as the former 4. The pledge does not choose to exercise his right to cause the thing pledged to be sold at public pu blic auction NOTE: The pledgee’s right to have the thing pledge ple dged d sol sold d at public public sale granted granted under the Article 2108 is superior to that given to the pledgor to substitute the thing pledged under Article 2107.

thing 25. 25. To possess the thing (Art 2098) 26. To sell at public auction in case of  non-pa non -payme yment nt of deb debtt at mat maturi urity ty (Art (Art 2112) 27. 27. To choose which of the several things pledged shall be sold (Art 2119)

pledged to another as long as the first one subsists. NOTE: Possession of a creditor of the thing pledged is an essential requisite of pledge.   Extinguishment of Pledge (CRAPS) 1. For the same causes as all other obligations (Art 1231) R eturn e turn of th the e th thin ing g pl pledg edged ed by th the e 2. pledgee to the pledgor (Art 2110) Statement State ment in writing writing   by the pledge pledgee e 3. th tha at he ren eno oun unce cess or aban bandon donss the pledge (Art 2111) Payment of the debt (Art 2105) 4.

Obligations of the Pledgee KEY: CUDA3 1. Take care of th the e thing hing with th the e diligence of a good father of a family (Art 2099)

RIGHT OF PLEDGOR TO SUBSTITUTE THING PLEDGED (ART.2107) Requisites:  1. The The pled pledgo gorr has reaso reasona nabl ble e ground groundss to fear the destruction or impairment of the thin pledged 2. Ther There e is no fa faul ultt on the the part part of of the the pledgee 3. Th The e pl pled edgo gorr is of offe feri ring ng in place place of 

Prohibition against double pledge Prop oper erty ty whi hich ch has has been been lawfu awfull lly y  pl pled edge ged d to on one e cr cred edit itor or cann cannot ot be

CCIVIL  LAW COMMITTEE  HAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

   

San Beda College of Law 205

MEMORY  A  AID IN CIVIL LAW  Sale ale of thin thing g pled pledge ged d at pu publ blic ic auction (Art 2115) NOTE NO TE:: The possession by the debtor or owner of the thing pledged subsequent to the perfection of the pledge gives rise to a  prima facie presumption that the

2. Accessory  3. Sub ubssidiary  4. Unilateral – it creates only nly an oblig iga ation on the part of the creditor who must free the property fr from om th the e encu encumb mbra ranc nce e once once th the e

5.

thing has been returned and, therefore, thatt the ple tha pledge dge has been been ext exting inguis uished hed but not the pri princi ncipal pal obl obliga igatio tion n its itself elf.. (Art 2110)

Requirements for sale of thing pledged at public auction: (Art 2112) 1. The The debt debt is due due and and unpa unpaid id 2. Sa Sale le must must be at a p publ ublic ic auctio auction n 3. th ther ere e mus mustt be no noti tice ce to tthe he pl pled edgo gorr and owner, stating the amount due 4. Sa Sale le must must be with with the inter interve vent ntio ion n of a notary public Effect of sale of the thing pledged: (Art 2115) 1. Th The e sa sale le of the thin thing g pled pledge ged d shal shalll extinguish exting uish the principal principal obligation, obligation, whether or not the proceeds of the sale are equal to the amount of the pri princi ncipal pal obliga obligatio tion, n, inte interes restt and expenses in a proper case 2. If tthe he pric price e of the the sa sale le is mor more e tha than n the amount amount due the credit creditor or,, the debtor is not entitled to the excess unless the contrary is provided 3. If th the e pri price ce o off the sa sale le is lles ess, s, th the e credit creditor or is not enti entitled tled to rec recover over the the de defi fici cien ency cy ev even en if ther there e is a stipulation to that effect RE REAL AL EST ESTATE 2124-2131) 

MORT MORTGA GAGE GE

(Art (Artic icle less

A cont contra ract ct wh wher ereb eby y the the de debt btor or secures to the creditor the fulfilment of a principal obligation, specially subjecting to such security immova imm ovable ble pro proper perty ty or rea reall rig rights hts over immovable property in case the principal obligation is not complied with at the time stipulated.

Characteristics of the contract: Characteristics 1. Real

obligation is fulfilled.

NOTES: an accessory contract, its  As consid con sidera eratio tion n is that that of the pri princi ncipal pal contract from which it receives life.  A mortgage does not involve a transfer, cession cessio n or conveyance of property property but only onl y consti constitut tutes es a lie lien n thereo thereon. n. Until Until dis disch char arge ged, d, it fo foll llow owss th the e prop proper erty ty wherever it goes and subsists notwithstanding changes of ownership.  A mortgage gives the mortgagee no right or claim laim to the the poss posses essi sion on of the the pro proper perty, ty, and ther theref efor ore, e, a mer ere e mort mo rtga gage gee e has has no ri righ ghtt to ej ejec ectt an occu occupa pant nt of th the e pr prop oper erty ty mort mortga gage ged d unles unl esss th the e mort mortga gage ge shou should ld co cont ntai ain n some provision to that effect. The only ri righ ghtt of a mort mortga gage gee e in ca case se of no nonnpayment of a debt secured by mortgage would be to foreclose the mortgage and have the encumbered property sold to satisfy the outstanding indebtedness. If  the po poss sses essi sion on is tr tran ansf sfer erre red d to th the e mortgagee, it must not expressly be for purpo pur pose se of ap appl plyi ying ng the fr frui uits ts to th the e in inter teres estt then then to th the e pr prin inci cipa pall of the credit, for then it would be an antichresis.  It is not an essential requisite that the principal of the mortgage credit bears in inte terrest, est, or that hat the interes estt as compe pens nsa ati tio on for the use of th the e principal and enjoyment of its fruits be in the form of a certain percent thereof. Special Requisites (in addition to the common essential requisites): 1. It can co cove verr on only ly immov immovab able le prope propert rty y and alienable real rights imposed upon immovables (Art 2124);



CCIVIL  LAW COMMITTEE  HAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

 

San Beda College of Law 206

MEMORY  A  AID IN CIVIL LAW  2. It m must ust app appear ear in a pub public lic instrum instrument ent (Art. 2125); and 3. Registration in the registry of  property is necessary to bind third persons, but not for the validity of  the contract (Art 2125). An order for foreclosure cannot be refuse refused d on the grou ground nd tha thatt th the e mor mortg tgag age e had had no nott been been registered provided no innocent third parties are involved. NOTE: Where a mortgage is not valid or false,, the princ false principal ipal obligati obligation on which it guarantees is not rendered null and void. What is lost only is the right to foreclose the mortgage mortgage as a spe specia ciall rem remedy edy for satisf sat isfying ying or set settli tling ng the indebt indebtedne edness ss which is the principal obligation but the mortgage deed remains as evidence or pr proo ooff of a pe pers rson onal al oblig obligat atio ion n of th the e debt debto or and the amoun mountt due due to th the e 

creditor may be enforced in an ordinary personal action.

Kinds: 1. Voluntary – agreed to by the parties or co cons nsti titut tuted ed by th the e will will of the the owner of the property on which it is created 2. Lega Legall – one required by law to be executed in favour of certain persons The persons in whose favour the  law establishes establishes a mortg mortgage age have no other right than to demand the execution and the recording of th the e do docum cument ent in wh whic ich h the 

mortgage is formalized (Art 2125 par 2) 3. Equit quitab able le – one one wh whic ich, h, alth althou ough gh lacking the formalities of a mortgage, shows the intention of the pa part rtie iess to make make the the prop proper erty ty a security for a debt

PLEDGE 1. Constituted on movables 2. Property is delivered to pledgee or by common consent to a third

REAL MORTGAGE 1. Constituted on immovables 2. Delivery is not necessary

person 3. Not valid against third persons unless a description of the thing pledged and date of pledge appear in a public instrument

3. Not valid against third persons unless registered

Extent of Mortgage: Ab Abssent ent exp xprress ess stip stipul ula ati tio on to th the e  co contr ntrar ary y, th the e mort mortga gage ge in incl clud udes es th the e ac acces cessi sion ons, s, impr improv oveme ement nts, s, gr grow owing ing fruits and income of the property not ye yett re rece ceiv ived ed whe hen n th the e obl blig igat atio ion n becomes due and to the amount of the in inde demn mnit ity y gr gran ante ted d or owin owing g to th the e pr prop opri riet etor or fr from om the the in insu sure rers rs of the the pr prop oper erty ty mort mortga gage ged, d, or in vi virt rtue ue of  expropriation for public use (Art 2127) Object of Mortgage:   Future property cannot be an object of  a contr contract act of mortga mortgage ge (Art (Art 2085[2 2085[2]) ]) However, a stipulation subjecting to the mortgage lien, properties (impro (im provem vements ents)) which which the mortgag mortgagor or may subsequently acquire install, or use in connection with real property already mortgaged belonging to the mortgagor is valid (People’s (People’s Bank and Tru rust st Co. vs. Dahican Lumber Co., 20 SCRA 84) Special Rights: 1. Mor Mortga tgagor gor - To alienate the mortgaged property but the mortgage shall remain attached to the property. stipulati ation on forbid forbiddin ding g the owner owner NOTE OTE: A stipul from ali from aliena enating ting the immova immovable ble mortga mortgage ge shall sha ll be void void (Art (Art 2130) 2130) bei being ng contr contrary ary to public policy inasmuch as the transmission of  property should not be unduly impeded.

2. Mo Morrtg tga agee - To claim from a 3 rd  person in possession of the mortgaged property the payment of the part of the credit secured by the which said third person possesses (Art 2129)  NOTE: It is necessary that prior demand for pa paym ymen entt must must have have be been en made made on the the

CCIVIL  LAW COMMITTEE  HAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

 

San Beda College of Law 207

MEMORY  A  AID IN CIVIL LAW  debtor and the latter failed to pay (BPI ( BPI vs Concepcion & Hijos, Inc., 53 Phil 906) 906 )

Foreclosure The remedy available to the  mortgagee by which he subjects the mortgaged property to the sati satisf sfac acti tion on of the obli obliga gati tion on to secure that for which the mortgage was given

NOTES:  It denotes the procedure adopted by the the mo mort rtga gage gee e to te term rmin inat ate e the the rig ight htss of the the mor ortg tgag agor or on th the e property and includes the sale itself  (DBP vs Zaragoza, 84 SCRA 668) 668)  Foreclosure is valid where the debtor is in default in the payment of his obliga obl igatio tion n (Gob Gobons onseng eng,, Jr Jr.. vs CA, 246 SCRA 472) 472)

the judgment until order of confirmation 6. No need for a special power of attorney in the contract of mortgage

in inad adequ equac yth pr pric ice e nt is no not tbtor mate materi rial al be beca caus use eacy the eof judg ju dgme ment de debt or may ma y reacquire the property or else sell his rig right ht to redeem redeem and thus thus recover recover any loss he claims to have suffered by reason of the price obtained at the auction sale and conseq consequent uently ly not suf suffic ficient ient to set aside the the sale. Mere inadequac inadequacy y of the price obtained at the sheriff’s sale will not be sufficient to set aside the sale unless “the price is so inadequate as to shoc shock k the the co cons nsci cien ence ce of the the cour court” t” taking tak ing into consid considera eratio tion n the peculi peculiar ar circumstances attendant thereto. (Sulit (Sulit vs. CA, 268 SCRA 441)

Kinds: 1. Judicial – ordinary action for fore forecl clos osur ure e under under Rule Rule 68 of th the e Rules of Court 2. Ex Extr traj ajud udic icia iall – wh when en mo mort rtga gage gee e is given a special power of attorney to se sell ll the the mort mortga gage ged d pr prop oper erty ty by public auction, under Act No. 3135

There is court intervention 2. Decisions are

1.

appealable Order of court cuts off all rights of  the parties impleaded 4. There is equity of redemption except on banks which provides for a right of redemption 5. Period of redemption starts from the finality of

3.

Extrajudicial foreclosure No court intervention 2. Not appealable

1.

because it is immediately executory Foreclosure does 3. not cut off right of all parties involved There is right of redemption

4.

Period to redeem start from date of registration of

5.

Special power of attorney in favor of mortgagee is needed in the contract

6.

NOTES:  A foreclosure sale retroacts to the date of registration of the mortgage and that a person who takes a mortgage in good faith and for valuable consideration, the reco recorrd sho how win ing g clea clearr ti titl tle e to th the e mortga mor tgagor gor,, will will be protec protected ted agains againstt equitable claims on the title in favor of  third persons, of which he had no actual or co cons nstr truc ucti tive ve no noti tice ce (St. St. Do Domi mini nicc Corporation vs. IAC 151 SCRA 577 ). ).  Wh Wher ere e th ther ere e is a rig ight ht to redee edeem, m,



Judicial foreclosure

certificate of sale



Should there remain a balance due to the the mor mortgag tgagee ee aft fter er ap appl plyi ying ng the the proceeds of the sale, the mortgagee is entitled to recover the deficiency. This rule applies both to judicial and extrajudicial foreclosure real mortgage.  The action to recover recover a deficiency deficiency after forecl for eclosu osure re prescr prescribes ibes after after 10 yea years rs fr from om th the e ti time me the the ri righ ghtt of actio ction n accrues (Arts 1142 & 1144).   Stipulation of upset price or “tipo” It is a stipulation in a mortgage of real  property of minimum price at which the

CCIVIL  LAW COMMITTEE  HAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

 

San Beda College of Law 208

MEMORY  A  AID IN CIVIL LAW  property proper ty shall shall be sold, sold, to bec become ome operative in the event of a foreclosure sale at public auction. It is null and void for the property must be sold to the highest bidder. Parties cannot can not,, by agreem agreement, ent, con contra traven vene e the law and interfere with the lawful procedure of the courts (BPI vs Yulo, 31 Phil 476)

municipality or city where the property is si situa tuate ted, d, and and if th the e same same is wort worth h more than P400.00, that such notice has been published once a week for at least thr three (3) (3) con onse sec cut utiv ive e week weekss in a newspaper of general circulation in the

Extrajudicial foreclosure real property (Act No. 3135) Th The e law law cove covers rs on only ly real real es esta tate te  mortgages. mortg ages. It is in intended tended m merely erely tto o regulate the extrajudicial sale of the property prope rty mortgage mortgaged d if and when the mortgagee is given a special power of express authority to do so in the deed itself or in a document annexed thereto. The authority to sell is not 

city of municipality 3. The c cert ertifi ificat cate e of sale sale must must be appro approved ved by the Executive Judge 4. Where the application concerns ex exttra raju judi dici cial al fo fore recl clos osur ure e of re real al morrtga mo tgage gess in dif iffe ferrent ent loc ocat atio ions ns co cover verin ing g one one in indeb debted tedne ness ss,, only only one one fil filing ing fee corres correspon pondin ding g to such such debt debt shall be collected 5. The C Cler lerk k of Court Court shal shalll iss issue ue certif certifica icate te of payment payment indicati indicating ng the amount amount of  indebtedness, the filing fees collected, the mortgages sought to be foreclosed, the description of the real estates and their respective locations

exti exting ngui uish shed ed by th the e deat death h of th the e mortgagor (or mortgagee) as it is an essential and inseparable part of a bilateral agreement (Perez (Perez vs PNB, 17 SCRA 833). 833). No sale can be legally made outside the province in which the property sold sold is situ situat ated; ed; and in ca case se the the place within said province in which the sale is to be made is the subject of stip stipul ulat atio ion, n, such such sa sale le shal shalll be made in the said place in the municipal building of the municipality in which the property or part thereof is situated.

6. The n noti otice ce of of sale sale shall shall be be publis published hed in in a ne news wspa pape perr of ge gene nerral ci circ rcul ulat atiion pursuant to Section 1, PD No. 1079 7. The applicati tio on of shall be raffled among all sheriffs 8. After the redemption period has expired, the Clerk of Court shall archive the records. 9. No auc aucti tion on sale sale sh shal alll be hel eld d unle unless ss there are at least two (2) participating bi bidde dders rs,, other otherwi wise se th the e sale sale sh shal alll be postpo pos tponed ned to anoth another er dat date. e. If on the new date set forth for the sale there shall not be at least two bidders, the sale shall shall th then en proceed. proceed. The names names of 



Procedure for extrajudicial foreclosure of both real estate mortgage under Act No. 3135 and chattel mortgage under (A.M. M. No. 99-10 99-10-05 -05-0, -0, Act No. 1508 (A.  January 15, 2000) 1. Filing of applic ica ation ion be beffore the Executive Judge through the Clerk of  Court 2. Cl Cler erk k of Cou Court rt will will exam examin ine e whethe whetherr th the e re requ quir irem ement ent of the law law have have been complied with, that is, whether the notice of sale has been posted for not less than 20 days in at least three (3) publ ublic places of the the

the bi bidd sh re repo rted ed the e Sher Sherif iff f dder oers f s tshal healll Nbe otar otary y port Publ Pu blic ic,,to wth ho conducted the sale to the Clerk of Court before the issuance of the certificate of  sale.

NOTES:  The Mortgagor and Mortgagee have no right to waive the posting and publication requirements under Act. No. 313 3135. Not otic ices es ar are e gi give ven n to se sec cur ure e bidders and prevent a sacrifice of the property.  Cle lear arly ly,, th the e stat statut utor ory y requirements of posting and publication are mandated, not for the mortgagor’s

CCIVIL  LAW COMMITTEE  HAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

 

San Beda College of Law 209

MEMORY  A  AID IN CIVIL LAW  benefit, but for the public or third persons. Failure to comply with the sta tattuto utory requirem eme ents as to publication of notice of auction sale consti constitute tutess a jurisd jurisdict iction ional al def defect ect which whi ch invali invalidat dates es the sal sale.L e.Lack ack of  republication of notice of   foreclosur forec losure e sale made subseq subsequently uently after the original date renders such sale void (P (PNB NB vs vs.. Nepo Nepomu muce ceno no Productio Produ ctions ns Inc., G.R. No. 1394 139479. 79. December 27, 2002). 2002) .  Sec 3 of Act 3135 does not require personal or any particular notice on the the mort mortga gago gorr mu much ch less less on his his successors-in-interest where there is no contractual contractual stipulation stipulation theref therefor or.. Henc Hence, e, un unlless ess req equi uirred in th the e mortgage contract, the lack of such notice is not a ground to set aside a foreclosure sale.

an and, d, he henc nce, e, had had no ri righ ghtt to re rede deem em (Bonnevie vs. CA, 125 SCRA 122 122). ).

Kinds: 1. Equity of Redemption – right of   mort mo rtga gago gorr to redeem redeem th the e mort mortga gage ged d



pr pro opert erty after his default in the perfor per forman mance ce of the condit condition ionss of the mortgage within the 90-day period from the date of the service of the order of  fo fore recl clos osur ure e or even even ther therea eaft fter er bu butt befor bef ore e th the e co conf nfir irma mati tion on of th the e sale sale.. Applies App lies to judici judicial al forecl foreclosu osure re of real real morrtg mo tga age and chattel mortgage foreclosure.

NOTE:  Redemp empti tio on of the banki nking institutions is allowed within one year from confirmation of sale. 2. Ri Righ ghtt

 Neither does Sec 3 require posting of 

no noti tice ce of sale on the the mo morrtg tgag age e pr prop oper erty ty and and the the cert certif ific icat ate e of  posting pos ting is not req requir uired, ed, muc much h less less consid considered ered indisp indispens ensabl able, e, for the validity of a foreclosure sale.

Redemption It is th the e tr trans ansac acti tion on by wh whic ich h the  mortga mor tgagor gor reacqu reacquire iress or buy buyss back back the property which may have passed under the mortgage, or divests the pro proper perty of the the lien ien which hich th the e mortgage may have created. NOTES:  A sale by the mortgagor to a third pa part rty y of the mortg mortgag aged ed prop proper erty ty du duri ring ng th the e pe peri riod od for for re redem dempt ptio ion n transf tra nsfers ers onl only y the rig right ht to redeem redeem the property and the right to po poss sses ess, s, use use an and d enjo enjoy y th the e same same during said period. herre sale ale with ith as assu sump mpttion ion of   Whe mortga mor tgage ge not reg regist istere ered d and mad made e without the consent of the mortgagee, the buyer, thereof, was not not vali validl dly y subs substi titu tuted ted as de debt btor or

of

Rede Redemp mpti tion on  

–

right

of  

mortga mort gago gorr to redeem redeem th the e mort mortga gage ged d property within one year from the date of registration of the certificate of sale. Applies only to extrajudicial foreclosure of real mortgage.

NOTE: The right of redemption, as long as NOTE: wi with thin in the the pe peri riod od pr pres escr crib ibed ed,, may may be exercised irrespective of whether or not the mortgagee mortg agee has subsequently subsequently conveyed the property to some other party (Sta. ( Sta. Ignacia Rural Bank, Inc. vs. CA, 230 SCRA 513) 513) Period of Redemption 1. Ex Extr traa-ju judi dici cial al (A (Act ct #313 #3135) 5)

2.

a. reg natistrat ura uraration l ion persoofn the – oncertif e tifica yeicate ar tefroof  m regist cer sale with Registry of Deeds b. juri uridical person – same rule as natural person c. jur juridi idical cal per person son (mortg (mortgage agee e is bank) bank) - three months after foreclosure or before registration of certificate of  forecl for eclosu osure re which which eve everr is earlie earlierr (sec. 47, of General Banking Law) Judi Judici cial al – be befo fore re conf confir irma mati tion on of the the sale by the court

NOTE: Al Allo lowi wing ng a re redem dempt ptio ion n af afte terr th the e laps lapse e of th the e stat statuto utory ry pe peri riod od,, when when th the e

CCIVIL  LAW COMMITTEE  HAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

   

San Beda College of Law 210

MEMORY  A  AID IN CIVIL LAW  buyer at the foreclosure sale does not object but even consents to th the e redemption, will uphold the policy of the law which is to aid rather than defeat the right of redemption. There is nothing in the law which prevents a waiver of 

2. Formal Formal contract contract   – it must be in a sp spec ecif ifie ied d fo form rm to be vali valid, d, i. i.e. e.,, “i “in n writing.” (Art 2134)

th the e stat statuto utory ry peri period od for for re rede demp mpti tion on (Ramirez vs CA, 219 SCRA 598).

1. It can cover only the fruits of an immovable property; (Art 2132) 2. Del Deliv ivery ery of the im immo mova vabl ble e is neces necessa sary ry for the creditor to receive the fruits and not that the contract shall be binding; 3. Am Amou ount nt of princ princip ipal al and inte intere rest st must must be specified in writing (Art. 2134); and 4. Exp Expres resss agr agreeme eement nt that that debtor debtor will will give give posses pos sessio sion n of the proper property ty to credit creditor or and that the latter will apply the fruits to the the in inte tere rest st,, if any any, then then to the the principal of his credit. (Art 2132)

Amount of the redemption price: 1. Mo Morrtgag tgage ee is not not a bank bank (A (Ac ct No. No. 3135, in relation to Sec. 28, Rule 39 of Rules of Court) a. pur purcha chase se price price of the pro proper perty ty b. 1% interes erestt pe perr month on the purchase price c. taxes paid and amount of   purcha pur chaser ser’s ’s pri prior or lie lien, n, if any any,, with the same same rat rate e of intere interest st co comp mput uted ed fro rom m the da date te of  regist reg istrat ration ion of sal sale, e, up to the time of redemption 2. Mor Mortga tgagee gee is a ban bank k (G (GBL BL 200 2000) 0) a. am amou ount nt du due e und under er the the mo mort rtga gage ge deed b. interest c. cost cost and and ex expe pens nses es Redemptio ption n pri price ce in this NOTE: Redem case case is redu reduce ced d by the the inco income me received from the property



Special Requisites (in addition to the common essential requisites):

NOTE: The obligation to pay interest is not of the essence of the contract of   antichresis, there being nothing in the Code to show that antichresis is only applicable to securi sec uring ng the paymen paymentt of intere interestst-bea bearin ring g loan loans. s. On the the cont contra rary ry,, anti antich chre resi siss is susc suscep eptib tible le of guar guarant antee eeing ing all all ki kind ndss of  obligations, pure or conditional

Antichresis

Pledge

1. Refer erss to real property 2. Perfected by mere consent

1. Refers to personal property 2. Perfected by delivery of the thing pledged 3. Consensu Consensual al co contrac ntractt 3. R Real eal Contr Contract act

ANTICHRESIS (Articles 2132 -2139) 

A co contr ntrac actt wh wher ereb eby y th the e cr cred edit itor or ac acqu quir ires es th the e righ rightt to re rece ceiv ive e th the e fruits of an immovable of the debtor, with the obligation obligation to apply them to the the pa paym ymen entt of the the inte intere rest st,, if  owing, ng, and thereafter to th the e principal of his credit (Art 2132)

Characteristics 1.  Accessory contract contract   – it secures the performance of a principal obligation

Antichresis

Real Mortgage

1. Property is delivered to creditor

1. Debtor usually retains possession of the property 2. Creditor does not have any right to receive the fruits; but the mortgage creates a real right over the property 3. The creditor has no such obligation

2. Creditor acquires only the right to receive the fruits of the property, hence, it does not produce a real right 3. The creditor, unless there is stipulation to the

CCIVIL  LAW COMMITTEE  HAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

   

San Beda College of Law 211

MEMORY  A  AID IN CIVIL LAW  contrary, is obliged to pay the taxes and charges upon the estate 4. There is no such 4. It is expressly obligation on part of stipulated that the mortgagee creditor given possession of the property shall apply all the fruits thereof to the payment of interest, if owing, and thereafter to the principal Subject matter of both is real property

Obligations of antichretic creditor: 1 To pay pay taxes and charges on the estate, including necessary expenses Cred edit itor or ma may y avoi avoid d sa said id NOTE:  Cr obligation by: a. compelling debtor to reacquire reac quire enjoyment of the property or b. by stipulation to the contrary 2 To apply all the fruits, after receiving them, to the payment of  interest, if owing, and thereafter to the principal 3 To re rend nder er an an ac acco coun untt of th the e frui fruits ts tto o the debtor 4 To bea bearr the ex expe pens nses es nece necess ssar ary y for its preservation and repair Remedies Remedi es of credit creditor or in cas case e of non non-payment of debt 1. Bring an action for specific performance; or 2. Petit itio ion n for th the e sale of the real pr prop oper erty ty as in a fore forecl clos osur ure e of  mortgages under Rule 68 of the Rules of Court.(Art 2137)

NOTES:  The parties, however, may agree on an extraj ext rajudi udicia ciall forecl foreclosu osure re in the same same manner as they are allowed in contracts of mortgage and pledge (Tavera (Tavera vs. El Hogar Filipino, Inc., 68 Phil 712). 712).  A stipulation authorizing the antichretic credit cre ditor or to approp appropria riate te the proper property ty up upon on th the e no nonn-pa paym ymen entt of the the de debt bt with within in th the e ag agre reed ed pe peri riod od is void void (A (Art rt 2088). CHATTEL MORTGAGE (Articles 2140-2141) 

A contract by virtue of which personal pr prop oper erty ty is re reco cord rded ed in the the Ch Chat attel tel Mortgage Register as a security for the performance of an obligation (Art 2140).

Characteristics 1.  Accessory contract – it is for the purpose of sec ecur urin ing g th the e perf perfo orm rman anc ce of a principal obligation 2. Forma Formall contract contract   – re regi gist stra rati tion on in th the e Chattel Mortgage Register is indispensable for its validity 3. Uni Unilat latera erall contra contract ct – it pr prod oduc uces es only only obligations on the part of the creditor to free the thing from the encumbrance on fulfilment of the obligation. 

1.

2.

3.

4.

Special Requisites (in addition to the common essential requisites): It can co cove verr on only ly perso persona nall or mova movabl ble e pr prop oper erty ty in ge gene nera ral; l; ho howe weve verr, th the e parties may treat as personal property that which by its nature would be real property; Re Regi gist stra rati tion on of the the mort mortga gage ge wi with th th the e Chattel Cha ttel Mortga Mortgage ge Re Regis gister ter where where the mortgagor resides; if property is located in a different province, registration in both provinces required; Desc De scri ript ptio ion n of the pr prop oper erty ty as would would enable the parties or other persons to id iden enti tify fy the the same same af afte terr re reas ason onab able le investigation and inquiry; and Accompanied by an aff affida idavit vit of good  good   faith to  faith  to bind third persons, but not for the validity of the contract.

CCIVIL  LAW COMMITTEE  HAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

 

San Beda College of Law 212

MEMORY  A  AID IN CIVIL LAW  5. It c can an cove coverr only only ob oblig ligati ations ons e exis xisting ting at the time the mortgage is constituted. NOTE: A mort mortga gage ge co cont ntai aini ning ng a stip tipul ulat atiion in re rega gard rd to fu futu turre adva advanc nces es in the the cr cred edit it wi will ll take take effect only from the date the same are made and not from the date of  the mortgage ( Jaca  Jaca vs Davao Lumber  Lum ber  Co., 113 SCRA 107 )

Effect Eff ect of regist registra ratio tion: n: Cre Create atess a rea reall right Th The e regi regist stra rati tion on of the the ch chat atte tell  mortgage is an effective and binding no noti tice ce to ot othe herr cr cred edit itor orss of it itss existence and creates a real right or a lien which, being recorded, follows the chattel chattel wherever wherever it goes. goes. Th The e re regi gist stra rati tion on give givess the mo mort rtga gage gee e sy symb mbol olic ical al po poss sses essi sion on (Northern Motors Moto rs,, Inc. Inc. vs vs.. Co Coqu quia ia,, 68 SCRA SCRA 374). 374 ).

Effe Effect ct of fa fail ilur ure e to regi regist ster er chat chatte tell mort mo rtga gage ge in th the e chat chatte tell mo mort rtga gage ge registry Article 2140 makes the recording in  th the e Ch Chat atte tell Mort Mortga gage ge Regi Regist ster er an essen enttial requi equissite but if the the in inst stru rume ment nt is not not reco record rded ed,, the the mortgage is never neverthele theless ss bindi binding ng between the parties. parties. But the person in whose favour the law establishes a mortgage has no other right than to dema demand nd th the e ex exec ecut utio ion n and the the recording of the document.

Chattel Mortgage 1. Delivery of the personal property to the mortgage is not necessary 2. registration in the Chattel Mortgage Registry is necessary for its validity 3. If property is foreclosed, the

Pledge 1. Delivery of the thing pledged is necessary 2. registration not necessary to be valid

3. Debtor is not entitled to excess excess  

excess over the excess over amount due goes to the debtor 4. If there is deficiency  after  after

unless otherwise agreed or except in case of legal pledge 4. If there is deficiency , creditor

foreclosure, is not entitled to creditor is entitled recover to recover the notwithstanding deficiency from the any stipulation to debtor, except the contrary under Art. 1484 Subject matter of both is movable property

Affidavit of Good Faith Oath in a contract of chattel mortgage  wherein wher ein the partie partiess "sever "severall ally y swear swear that that th the e mort mortga gage ge is made made fo forr the the pu purp rpos ose e of secu securi ring ng the the ob obli liga gati tion on specified in the conditions thereof and for no other purposes and that the same is a just and valid obligation and one not entered into for the purpose of fraud.” (Sec. 5, Chattel Mortgage Law)

Effect of absence The special affidavit is required only for the purpose of transforming an already valid mortgage in into to “prefer eferrred mortgage.” Thus, it is not necessary for the vali validi dity ty of th the e chat chatte tell mort mortga gage ge its itsel elff bu butt only only to give give it a pr prefe eferr rred ed stat status us.. In oth other er word words, s, its abse absenc nce e vit vitiat iates es the mortga mortgage ge only only as agains againstt thir third d pers perso ons wit itho hout ut no noti tice ce li like ke creditors and encumbrancers.

subsequent

Foreclosure of Chattel Mortgage Foreclosure NOTES:   Foreclosure sale in chattel mortgage is by public auction under Act No. 1508, but the parties may stipulate that it be by private sale.  The mortga mortgagee gee may, may, after after thirty thirty (30) (30) dayss fr day from om the ti time me of th the e co cond ndit itio ion n broken,, cause the mortgaged broken mortgaged property to be sold at public auction by a public officer. The 30-day period is also a grace

CCIVIL  LAW COMMITTEE  HAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

   

San Beda College of Law 213

MEMORY  A  AID IN CIVIL LAW  period for the mortgagor to discharge disch arge the mortgage mortgage oblig obligation. ation. Afte Afterr the the sale sale of th the e chat chatte tell at public auction, the right of  redemption redemp tion is no longer avail available able to the mortgagor (Cabral vs. Evangelista, 28 SCRA 1000 ))..

Application of proceed of sale: 1. Cost Costss and and ex expe pens nses es of ke keep epin ing g and sale 2. Payment of the obligation secured by the mortgage 3. Claims of persons holding subsequ sub sequent ent mor mortga tgages ges in the their ir order 4. The b bala alance nce,, if any any,, shal shalll be pa paid id to the the mo morrtg tgag agor or or pers person on holding under him NOTES:  The creditor may maintain an action

for for the de defi fici cienc ency y, exce except pt if the chatte cha ttell mortga mortgage ge is con consti stitute tuted d as security for the purchase of personal property  payable in instalments (Art. 1484).  The The acti action on for for de defi fici cienc ency y may may be brought within ten (10) years from the time the cause of action accrues (Arts 1141 and 1142). equity of redem edemp ption is  Only avai availa labl ble e to the the mo mort rtga gago gor; r; the the latter latter can no lon longer ger redee redeem m aft after er the confirmation of the foreclosure sale.

Right of redemption When en the the co cond ndit itio ion n of a ch chat atte tell  Wh mort mo rtga gage ge is br brok oken en th the e foll follow owin ing g may redeem: a) mortgagor; b) pers person on ho hold ldin ing g a subs subseq eque uent nt mortgage; or c) subsequent attaching creditor creditor..  An attaching credito torr who so redeems shall be subrogated to the rights of the mortgagee and entitled to fore forecl clos ose e th the e mo mort rtga gage ge in the

same manner that the mortgagee could foreclose it.  The redemptio redemption n is made by paying paying or delivering deliver ing to the mortgagee the amount amount due on such mortgage and the costs, and expens exp enses es in incu curr rred ed by su such ch brea breach ch of  condition before the sale thereof (Sec 13, Act No. 1508).

Right to possession of foreclosed property 1. Re Real al mort mortga gage ge – Aft fter er the the re rede demp mpti tion on period has expired, the purchaser of the property has the right to a conveyance and to be placed in possession thereof. NOTES:  Purchaser is not obliged to bring a se sepa para rate te suit suit fo forr po poss sses essi sion. on. He mustt in mus invo voke ke the ai aid d of th the e co cour urts ts and ask for a WRIT OF POSSESSION.  Section 7 of Act No. 3135 allows the purchaser to take possession of the fo fore recl clos osed ed pr prop oper erty ty du duri ring ng th the e period of redemption upon filing of  an ex parte application and approval of a bond. 2. Cha Chattel ttel mortga mortgage ge – When When defa default ult occu occurs rs and the credito creditorr desire desiress to forecl foreclose ose,, the creditor has the right to take the proper pro perty ty as a prelim prelimina inary ry step step for its sale. NOTE: Where the debtor refuses to yield the property, the creditor’s remedy is to in inst stit itut ute e an acti action on ei eith ther er to ef effe fect ct judicial foreclosure directly or to secure possession posses sion (REPLEVIN) (REPLEVIN) as a preliminary preliminary to the sale contemplated in Section 14 or Act. No. 1508

CONCUR CONC URRE RENC NCE E AND PRE REF FEREN ERENCE CE CREDITS (Articles 2236 – 2251)

OF

Concurrence of Credits Possession by two or more creditors of   equal rights or privileges over the same property or all of the property of the debtor Preference of Credits

CCIVIL  LAW COMMITTEE  HAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

 

San Beda College of Law 214

MEMORY  A  AID IN CIVIL LAW  

ins insol olve venc ncy y, is no nott li liab able le fo forr th the e unsati uns atisfi sfied ed claims claims of his cre credit ditors ors with said property subject to certain excepti exc eptions ons exp expres ressly sly provid provided ed by law.. (Secs law (Secs.. 68, 69, 69, The Ins Insolv olvenc ency y Law [Act No. 1956])

Rig igh ht held by a credit edito or to be pr pref efer erre red d in th the e pa paym ymen entt of his his clai laim abov bove othe otherrs out of the the debtor’s assets.

NOTES:  rules es on pre prefer ferenc ence e of cre credits dits  The rul apply only when two or more creditors have separate and distinct claims against the same same debtor  debtor who has insufficient insufficient property.  Pref efer eren ence ce cr crea eate tess no lien lien on proper pro perty ty,, and and,, the theref refore ore,, giv gives es no in inter teres estt in pr prop oper erty ty,, spec specif ific ic or genera gen eral, l, to the prefer preferred red credit creditor or but a  preference in application application   of  the proceeds after the sale. (Molina (Molina vs. Somes, 31 Phil. 76) 76)  Th The e pr pref efer eren enti tial al righ rightt of cr cred edit it attain att ainss signif significa icance nce onl only y aft after er the properties theliquidated, debtor have inventoriedofand andbeen the claims held by his various creditors have have been been esta establ blis ishe hed. d. (DB DBP P vs vs.. NLRC, 183 SCRA 328) 328)

Preference of  Credit

Lien

Appl Applies ies on only ly to claims claims whi which ch do not atta tac ch to specific properties

Creates a charge on a part partic icul ular ar property

Liability Liabil ity of debto debtor’ r’ss prope property rty for his obligations GENERAL RULE: RULE:   Debtor is liable with  GENERAL all his property, present and future, for the fulfilm fulfilment ent of his obl obliga igatio tions. ns. (Art (Art 2236) EXEMPT  EXEMPT

PROPERTY: 1. Present property – those provided under Arts. 155 and 205 of the Family Code, Sec. 13, Rule 39 of th the e Rule Ruless of Co Cour urt, t, an and d Sec. 118 of the Public Land Act 2. Futu Future re pr prop oper erty ty – a de debt btor or who who ob obta tain inss a disc discha harg rge e from from his his debts on account of his

3. Prop oper erty ty unde underr le lega gall cust custod ody y and and those owned by municipal corporations necessary for governmental purposes

General Categories of Credit: General those e 1. Specia Spe ciall Pre Prefer ferred red Credit Creditss  - thos list listed ed in Art rts. s. 2241 2241 and and 2242 2242 shal shalll be considered as mortgages and pledges of real or per person sonal al pro proper perty ty or lie liens ns (Art. (Art. 2243). 2243). Hence, they are not included in the insolvent debtor's assets. NOTES:  Ar Arts ts.. 2241 2241 and and 2242 2242 do not gi give ve the or ord der of pref prefer eren enc ce or pri rio ori rity ty of  payment. They merely enumerate payment. enumerate the the cred credits its whic which h enjo enjoy y pref prefer erenc ence e with with respect to specif ifiic movabl ble es or immovables. immova bles. With respec respectt to the same spec specif ific ic mova movabl bles es or im immo mova vabl bles es,, cred credito itors rs,, with with th the e ex exce cept ptio ion n of the the State (No. 1), 1), merely concur. concur.  They only find application when there is a concurrence of credits, i.e., when the same specific property of the debtor is subj subjec ecte ted d to the the clai claims ms of seve severa rall creditors and the value of such property is in insu suff ffic icie ient nt to pay pay in full full all all the the cr cred edit itor ors. s. In such such a si situ tuat atio ion, n, the the question of preference will arise. Arti ticl cle e 2242 ma make kess no dis isti tinc ncti tion on  Ar between betw een regist registere ered d and unr unregi egiste stered red vendor’s lien (No. 2). Hence, any lien of  that kind enjoys enjoys the prefer preferred red credit credit status. Unlike the unpaid price of real property sold, mortgage credits (No. 5), in order to be given preference, should be recorded in the Registry of Property. But But a re reco cord rded ed mort mortga gage ge cr cred edit it is su supe perrio iorr to an unr unrec ecor orde ded d un unp pai aid d vendor’s lien (De Barretto vs. Villanueva, 1 SCRA 288) 288 )

CCIVIL  LAW COMMITTEE  HAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

 

San Beda College of Law 215

MEMORY  A  AID IN CIVIL LAW  always sol always solven vent. t. It is inconc inconceiv eivabl able e for th the e State to volunt untarily initiate in inso solv lven ency cy or ge gene nerral li liqu quid idat atio ion n proceedings or to be subjected to such proceedings under its own laws.

 The priority rule applies to credits

annotated in the Registry of  Property. As to credits mentioned in No. No. 7 of Arti tic cle 2242 42,, ther there e is preference prefer ence among the attac attachments hments or executions according to the order of the time they were levied upon the property property.. The  pro rata rata   rule rule in Articl icle 2249 does not apply; ot othe herw rwis ise, e, the the re resu sult lt wo woul uld d be absurd. The preference of a credit anno annota tate ted d by an atta attach chme ment nt or ex exec ecut utio ion n co coul uld d be defe defeat ated ed by simply obtaining a writ of   attachment or execution, no matter how much later (Manaba (Manabatt vs Laguna Fe Fede dera rati tion on of Fa Faco coma mas, s, In Inc. c.,, 19  SCRA 621). 621). The The last last pa para ragr grap aph h of Arti Articl cle e  2241 applies only when the right of  ownership in such property continues in the debtor, and, therefore, it is not applicabl applicable e to cas cases es whe where re the debtor has parted with his ownership therein, as where he has sold the property (Peña (Peña vs. Mitchell, 9 Phil 587 )

Ordinary Preferred Credits - those listed in Art. 2244 as amended by Art. 110 of the Labor Code. NOTES:  The provis provision ion not onl only y enumer enumerates ates the preferred credits with respect to other property, real and personal, of  the debtor, but also gives their order  of preference “in preference “in the order named”.  In con contra trast st wit with h Ar Artic ticles les 2241 2241 and 2242,, Art 2242 Article icle 2244 creates no liens on de dete term rmin inat ate e prop proper erty ty wh whic ich h follow follo w such property property.. What Article Article 22 2244 44 crea create tess ar are e si simp mply ly righ rights ts in favour of certain creditors to have the the cash cash and and ot othe herr asse assets ts of the the in inso solv lven entt app applied lied in a certa ertain in sequence or order of priority. priority.  Art Articl icle e 224 2244, 4, par partic ticula ularly rly par (14) (14) item (1) thereof, is not applicable to obli obliga gati tions ons of th the e St Stat ate e as it is a recognized doctrine that the State is 2.

Common Credits  – those listed under Art. 2245, which shall be paid pro rata regardless of dates. NOTE:  Or Ordi dina nary ry Prefe Preferr rred ed and and Comm Common on Credits Cre dits cover only only “free “free proper property” ty” of the debtor deb tor,, or those those not subjec subjected ted to Specia Speciall Preferred Credit. 3.

Effects of Article 110 of Labor Code to Art 2244: 1. Remo Remove ved d th the e oneone-ye year ar limit limitat atio ion n fo found und in No. 2 of Art. 2244 2. Mo Movi ving ng up the the claims claims for for unpa unpaid id wages wages (and other monetary claims) of laborers or work worker erss of insol insolve vent nt fr from om se seco cond nd priority to first priority in the order of  preference established by Art. 2244

NOTES:  In case of bankruptcy or liquidation of  the em empl ploy oyer er’s ’s bu busi sines ness, s, th the e unpa unpaid id wages and other monetary claims of the employees shall be given first pr pref efer erenc ence e an and d shal shalll be pa paid id in fu full ll before the claims of the government and other creditors may be paid. The terms, “dec “decla larratio ation” n” of bankr ankrup uptc tcy y, or “jud “judic icia ial” l” li liqu quid ida ati tion on hav have been been eliminated, elimina ted, nevert nevertheless heless,, acco according rding to the the SC, SC, bank bankrruptc uptcy y or li liqu quid idat atio ion n proceedings are still necessary for the operation of the preference accorded to work worker erss under under Art. Art. 110 110 of the La Labo borr Code. (DBP (DBP vs. NLRC 183 SCRA 328; RA No. 6715 Sec 10 )  In case of rehabilitation, the preference of credit granted to employees e mployees under Art 110 of the Labor Code is not applicable (Rubberworld [Phils.] vs CA, 305 SCRA 722). 722 ).

CCIVIL  LAW COMMITTEE  HAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

   

San Beda College of Law 216

MEMORY  A  AID IN CIVIL LAW  Refectionary Credit Indebtedness incurred in the repair  or re reco cons nstr truc ucti tion on of some someth thin ing g pr prev evio ious usly ly ma made de,, su such ch repa repair ir or reconstruction being made necessary by the deteri deteriorati oration on or destructio destruction n

other other li liqu quida idati tion on pr proc oceed eedin ings gs ex exce cept pt wher wh ere e th ther ere e ar are e not not more more than than on one e creditor.

of the thing as it formerly existed.

ORDER OF PREFERENCE OF CREDITS 

Ar Arts ts.. 22 2241 41 and and 22 2242 42,, jo join intl tly y with with Arts. Art s. 2246 to 2249 2249 est establ ablish ish a twotier order of preference: preference: 1. First tier   – inc includ ludes es taxes, dutie dutiess and fees due on specific movable or immovable property; 2. Se othe herr speci pecial al Seco cond nd ti tier  er   – all ot preferred (non-tax) credits shall be satisfied pro-rata, out of any resid esidua uall value alue of the the spec pecifi ific pr prop oper erty ty to whic which h su such ch cr cred edit itss relate.

NOTES:  The pro-rata pro-rata rule does not apply to credits annotated in the Registry of  Property by virtue of a judicial

order, by attachments and executions, execu tions, which are preferred as to “lat “later er cr cred edit its” s”.. In sa sati tisf sfyi ying ng seve everal credits dits annotated by attachments or executions, the rule is still preference according to the priority of the credits in the order of  time.  In or orde derr to ma make ke th the e pro pro rati rating ng provided in Art 2249 fully effective, the preferred creditors enumerated in Nos. Nos. 2 to 14 of Art Art 2242 2242 mus mustt necess nec essari arily ly be con conven vened, ed, and the importt of their claims ascertained. impor ascertained. There must be first some proceeding where the claims of all the preferred creditors may be bindingly ad adju jud dicat icated ed,, e.g e.g. ins insolv lven ency cy,, settlement of decedent’s estate, or

 Credits

which do not enjoy any pr pref efer erenc ence e with with re resp spec ectt to sp spec ecif ific ic proper pro perty ty becaus because e they they are not among among those mentioned in Arts. 2241 and 2242 and those while included in said articles ar are e unpa unpaid id be beca caus use e the valu value e of th the e property to which the preference refers is le less ss than than the the pr pref efer erre red d cr cred edit it or credits, shall be satisfied in the order established in Art. 2244 with reference to other real and/or personal property.  Com Common mon credits credits or those which do not fall under Arts. 2241, 2242, and 2244 do

CCIVIL  LAW COMMITTEE  HAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad

EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)

 

 

San Beda College of Law 217

MEMORY  A  AID IN CIVIL LAW  not enjoy any preference and shall be paid pro rata regardless of dates.

CIVIL LAW COMMITTEE 

CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS:  Christopher Rey Marasigan (Persons (Persons and Family Relation Relations), s), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Quiambao(P AT), Christopher Cabigao(Credit Transactions), Transactions), Ligaya Alipao(Torts Alipao(Torts and Damages), Anthony Purganan(LTD), Purganan(LTD), Ma. Ricasion Tugadi Tugadi (Conficts o Law)